<![CDATA[HALEY2024 - Blog on Haleynomics ]]>Sun, 19 Nov 2017 04:54:06 -0500Weebly<![CDATA[Who Should Control the Demand for Labor Hours?]]>Sat, 21 Oct 2017 03:23:40 GMThttp://haley2024.org/blog-on-haleynomics/who-should-control-the-demand-for-labor-hours
​In every type of economy, there are people that control labor hours.  In communism, fascism and socialism, herein called statism, the government leaders control where people work and what they do.  In capitalism, individuals control their own labor hours, creating a system of interdependence.  

Statism

​In statism, government leaders demand all the labor hours.  The percentage of labor hours controlled by government is the percentage level of statism.  Government spending is one measure of the level of statism, however regulations also means that government is controlling private spending and demonstrating the level of statism.  
Some spending heavily controls and other spending lightly controls labor hours.  Food stamps is an example of light control.  Food stamps allow people to buy whatever food they wish thus has low control over food producers’ labor hours.  Government schools are an example of heavy control by government.  Government administrates the vast majority of the education system, thus having major control of labor hours surrounding education.  
Some regulations heavily control and other regulations lightly controls labor hours.  Regulations around making t-shirts are few and non intrusive.  Regulations in medicine is highly controlling.  Some regulations state a few things a business cannot do, and others state things the business must do, thus eliminating all other options and often business models.    
​In statism, government officials control the labor hours, regardless of whether people felt that they were being serviced well.  It is one sided.  There is not a good system to let the government officials know if you were serviced well.  You were given bread and if you did not like it, you just did without.  
When government spends, it controls as many labor hours as the money will buy.  It does not matter whether it was taxed, borrowed or monetized, the spending is controlling a certain percent of total labor hours.  This demonstrates that spending is the true tax.  Taxes are not a two-sided agreement, you are forced to buy the services the government provides.  The higher the percentage of statism, the greater control the state has over your labor hours and your choices.  Your satisfaction of being served is reduced as statism increases.  

Free Enterprise

​The genius of free enterprise is that both sides must agree on a trade.  Both sides of the trade will be better off because of that two-sided agreement nature of this system.  If many people agree that you are serving them by turning over their money to you, then they will be able to continue demanding more labor hours compared to the business owner with few sales.     
​Under free enterprise, you must let others demand your labor hours in exchange for you demanding other’s labor hours.  Under simple barter, you exchange labor hours with another person.  Currency allows the buying and selling portions to be separated by many people and by time.  Currency allows for the division of labor of big projects where millions of people are involved at different levels.  Each person must agree to their portion with the two-sided agreement.   
​The smaller the percentage of statism, the more control you have over your life and the more people must serve you to your satisfaction.  In turn you must always be seeking to serve others in more efficient ways to their satisfaction.  Capitalism and free enterprise is a system where there is heavy competition to increase how well people are served.  This continuously increases your living standards.  

Why do the rich get to control so many people’s labor hours?  

If Taylor Swift serves 3,000 people by entertaining them with a few hours of work, those 3,000 people must serve her as well.  Most rich people became rich because they can take their talents and serve many thousands or millions of people at once.  In return, those thousands or millions will agree to serve the person that just served them.  They must agree that they were served by turning over money.
​One might cut her grass, one grows her food, one drives her and the other 2,997 people will serve her as well for several hours each.  Bill Gates provided hundreds of millions of people a great service of making their computers much more useful.  In exchange hundreds of millions are serving Bill Gates in every conceivable way.  Everyone has the option and opportunity to offer to serve millions at once, however those millions of people must accept your offer.   
If you earned a million dollars, does that mean that you serviced your fellow man more than the man making $50,000.  Yes, as defined by all those that decided to trade their service/currency for the millionaires’ service.  As long as both sides agree to the trade, the dollars ‘earned’, does demonstrate the value of your worth to others. 
Rarely, can someone serve thousands or millions without a team of people.  The athlete entertains millions; however, it takes team owners, stadium workers, trainers, broadcasting companies, advertisers, among many more to create the system that allows the athlete to entertain so many.  Tom Brady on his own does not have the talent to entertain so many, the division of labor is crucial and profound to pull off multi-billion-dollar companies. 
​ Key leaders get paid so much money because of their talents of directing that division of labor.  However, that money and that power to direct millions of labor hours is the result of dozens of high level two-sided trades and millions of smaller ones.  Those decisions comes from past results and confidence of people controlling capital.  Capital is the result of previous success in making great decisions on the control of labor hours as defined by those being served.     
​Few people can entertain on their own and make millions, however the business models surrounding YouTube and Facebook is changing that.  Some people are producing videos with just their labor and making millions, however these social media platforms are crucial in distributing these videos to the consumers with advertising business models.     
​Who controls the business leader’s labor hours? Who controls the rich?  A business leader’s hours are controlled by his customers.  If the business leader wants to control the labor hours of his employees to build a product that consumers do not want and will not buy, then that ‘rich guy' became less rich and unable to control as many labor hours in the future.  However, if consumers believe that they are being served by the business owner and pay him well, then that business owner will have the money to control more labor hours in the future.  

Buying a Home

​If you buy a house, you pay the labor hours of every laborer that is building the home and all those that shipped and supplied the material for the house.  It goes all the way to those that mined the Iron for the steel and collected sand to make the glass and so on.  If you paid $300,000 for the house, you paid for and justified the control $300,000 worth of labor hours.  
Only a few dozen people were paid over $1,000 or over 30 labor hours for their labor for that house.  The vast majority of the labor hours were under an hour per person.  The division of labor for a house is profound and often over a long period of time.  When you sign a contract to build a house, you set in motion a demand for about 5,000-10,000 labor hours.  That contract, connected to your mortgage contract is an agreement that you will work about that same 5,000-10,000 hours in exchange for those millions of people serving you for that total of 5,000-10,000 hours.            
​While the homeowner did not witness and was not included in the vast majority of the two-sided trades that decided who and the value of all the labor hours going into building the house, his decision on what house to buy and at what price, determines the full collective value of all those labor hours.  Of course, there are many buyers with different tastes, but without the final buyer for a house, labor hours cannot be demanded for long. 
​ A signal is sent of what works and what does not.  If the house does not fetch a price that pays for all the labor hours needed for that house, someone takes a loss and the business model needs to change.  If the profits were good, the signal is sent that the business model and how the builder demanded labor hours served people better than those taking a loss. Profits often mean that builder continues demanding labor hours and the builder taking a loss does not.      
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<![CDATA[The Future of Work with Increased Technology]]>Thu, 03 Aug 2017 18:22:27 GMThttp://haley2024.org/blog-on-haleynomics/the-future-of-work-with-increased-technology
​Future technology worries many people because they believe it will take a high percentage of jobs.  Let us all hope that is true.  While it is stressful to lose a job, the great benefits of lower prices to everyone outweighs those lost jobs.  Labor hours freed up in one industry creates opportunities to start or expand new or existing  industries.  While technology advancements over the centuries happened very slow, the last two centuries have shown rapid increases.  Going forward, the pace will increase and people need to learn to rapidly adjust with it.  
​In the 1980’s, I was told in high school that the job market was changing and we needed to prepare to have multiple jobs over our life time.  I suspect that was told to the youth since the 1800’s industrial age.  Most likely, through out history, there was this theme at some level.  Certainly since the 1990’s computer and internet boom, it became obvious that the pace of change was accelerating. Everyone is on full notice that it will take less labor hours to produce the same product or service every year.
As markets open up around the world, people also need to know the division of labor will take certain jobs outside America's borders.  People need to also know that overall this is good for everyone collectively; however change always comes with struggles for individuals.  Sometimes the change can be anticipated and others come suddenly without warning.     
​However without that change, we all would be much poorer and still doing back breaking hard labor just to survive.  Life expectancy would not have increased.   Over 50% of the people would still be on the farm or in food related businesses.  Currently there are fewer than 5%.  Those labor hours were freed up to do more things.  Over 50% of the products and services most of us currently enjoy today, we either did not have at all or only a small percentage of the people could afford it. 
​Technology might speed up that change and people will need to plan on changing with it and not putting all their human capital and hopes in one career.  Until everyone is getting weekly massages, personal chefs, personal live entertainment, chauffeurs, butlers, maids, pool boys, gardeners, landscapers among other services, additional job opportunities will not go away. Until everyone has 5,000 square foot homes loaded with everything they want and 5 luxury vacations a year, there is still a lot of bandwidth of job opportunities.  
​Too many people claim that all the benefits of technology will go to only a few people that own all the robots.  They need to learn better economics.  Technology always drives the cost down and that helps everyone, however the poor achieve the most benefits when they can enjoy more services and products due to the lower cost.  Some people claim that the rich will just keep all the money from the advancements.  While some of that is true for a short time frame, the rich are not benefited from money they just keep.  They have to offer that money to others so they can be served or acquire products.  
​Some people will claim that robots will take over all the possible jobs including making, programming, and servicing robots.  Those people need to realize if that happens then the cost of living will approach $0 a year and we would all have all our needs and wants met. That will not happen.  There will always be the desire from some to have a real person to interact with verses robots and that includes within business.  There is a strong desire among people to create new things, to start a career, be worthwhile to others.  People will always find a way to serve others.   A large part of a man's pride and worth is his career.        
​If a new discovery happened tomorrow that allowed a small box to safely generate enough electricity for your home with very little and inexpensive fuel. Cold fusion, capturing the pull of gravity, a way to capture the strong or weak force of the atom, converting gamma rays flying through space or some other way to capture energy that is out there, might happen.  That box could be put in a car to power the car. 
​ Let’s say the box can be manufactured in mass production at $300 apiece, would that make everyone in the world better off.  Yes, however that will cause dramatic changes in employment.  That will free up 6-12 million people in the USA to do other things.  That would also change many business practices that factor in energy cost.  Over a short time, the cost of everything would likely drop 5-20% with energy cost dropping over 99%.  ​That savings would create an increased demand for additional products services.    
​If this happened, the worst thing that government could do is to try to ‘fix it’ or ‘help’ those losing their jobs.  We would be wise to encourage government to transform welfare quickly so as not to trap a lot of these people in the means-tested welfare state.  It would be wise to let the invisible hand of prices and free enterprise, work out the major adjustments.  Current government regulations are a real problem and taking that monopoly away from government would be vital in transferring those labor hours to expand existing industries and starting new ones.   
​The economy has plenty of growth potential in industries that current exists.  Most people do not have the money or the willingness to earn the extra money to take advantage of 99% of what is out there.  They currently decide their leisure hours are more important than those things.  However, if the desire to put in 40 hours a week of labor, and those 40 hours of income can buy more things as productivity increases, they will choose to take advantage of more of what is out there.
How many people have the best furniture, the best vacations, the pool guy, the maid, the gardener, the clothes, the entertainment, the number and quality of nights on the town? The list of items that you would like, however the extra labor hours are not worth, is endless.  While there will always be new sectors products and services popping up as they are developed, the vast majority will be greater access to current products and services that also increase in quality. 
​This is where all the new jobs will come from to employ all the out of work energy workers, the displaced factory worker, the data entry employee that was replaced by an app.    
Let’s remember that if you replace a person with a robot, that that robot cost money.  That money is paying for labor to build, power, program and maintain that robot.  The money for the total cost of the robot is meant to be less than the money for the employee that was replaced, therefore saving money, however rarely taking over 50% of the cost to the business. 
That money saved is manifested in higher payroll for the remaining employees, lower cost to consumers, better work conditions, better benefits, and greater capital to reinvest in other ventures.  The companies that most effectively bring down cost to produce the product or service will gain market share and likely employ more people.  Yes, that does mean that other companies losing market share will loss employees for a net loss.  The magic of the free enterprise system is that poorly run businesses lose their ability to command labor hours to better run businesses.     
​As labor hours are saved with productivity gains, people are always trying to figure out what people might want to spend their extra money on.  This extra money came from increased pay or reduced cost of goods, due to productivity gains.  The reason for high business failures is because people often pick wrong.  The people who pick right, receive the money from sales to command more of the newly freed labor hours, those that pick wrong don’t get enough sales to command those labor hours.  Business failures are vital to free enterprise so that labor hours serve the highest desires of the people who put their money behind those desires.     

​Separating Employment from Benefits 

Whether someone is working in the gig economy or transitioning between many jobs over time, they should not be forced to switch health insurance and possibly their network of doctors every time they change jobs.  Pensions among other retirement plans should be transitioned to extra pay or just paying into private retirement plans.  It is vital that employees control these vital issues of retirement and health care planning.  
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<![CDATA[The Universal Basic Income: Issues to Consider]]>Thu, 27 Jul 2017 20:40:27 GMThttp://haley2024.org/blog-on-haleynomics/the-universal-basic-income-issues-to-consider
First what is the Universal Basic Income (UBI) and how does it work.  There are many variations of the UBI however the basics are that government gives everyone verses just the poor regular payments.  Although the idea is to make the payments high enough to live on, the amounts suggested are all over the board.  They are as low as $1,000 and as high as $30,000, a year per person in the USA.  Another basic concept is that it takes the place of current welfare programs; however that also varies widely from all to none.  It is unconditional cash verses currently government paid for services.   
The proponents from the Left of the universal Basic Income have economic theories that are erroneous and needs to be challenged.  The proponents from the Right concentrate on eliminating all the bad programs that the UBI will replace, however miss the major damaging effects of higher tax rates and the bad effects of giving people money they did not earn.  ​
Most welfare programs concentrate benefits to the bottom 5%-20% of income earners.  Expanding the benefit to 100% of the people greatly increases how much is needed so as not to spread the benefit too thin.   
​There are many that state the UBI will eliminate ALL government welfare programs, including those within the tax code.  To that ultimate end, we would end up with a head tax verses a tax rate.  In that case, it would not matter what the UBI was because the head tax would take 100% of the UBI to fund the UBI, plus administration costs. You could have a $1 million UBI per year and the only place to tax that much is a 100% UBI tax.  
​While that is not a real proposal, it shows the UBI cannot eliminate proposals that take from the rich to fund the poor.  However you try to look at it, you have to take the money from the people to give to the people.  The Left will always propose ways to make the tax code as progressive as possible, not realizing that ultimately does great harm to the poor.  
​The left will state that all the current welfare benefits will roll into the UBI, however they will see great need by some and add those welfare programs back in to the system.  The Left will claim that certain parents will feed their children and renew student lunches and food stamps.  Of course pregnant mothers and infants should not be denied good food and WIC will return.  The Left will claim that people will not have enough for medical insurance, deductibles or doctor visits and Medicaid will return.  The Left will see housing prices too high for the UBI and claim the need for the return of HUD.  Many will use the UBI for wants and the Left will demand the return of government provided needs.    
How Do You Pay For It?
It is an economic truth that people stop doing activity that is taxed when the tax rate increases to a certain level.  All taxable activity stops when the full amount is taxed at 100%, therefore the government revenue drops as well, reaching $0 at 100% tax rates.  The average proposal ranges from $2 -$3 trillion or roughly 10% -15% of GDP.  The Laffer Curve demonstrates that $1.5 -$5 trillion of GDP will be lost depending on many factors by trying to collect the $2-$3 trillion. 
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BLOG: Universal Basic Income and the Laffer Curve
If you give everyone money you first have to take if from them.  That fact is not totally absent in the proponent’s advocacy, however it is underappreciated.   The biggest tax is the economic activity not engaged in as stated above and that harms the poor the most.  Second, 100% of taxes collected from the business owner come from consumers, so at best; taxes are at even percentage rates.  
Those higher tax rates from businesses manifest in lower payroll budgets, more business failures, higher consumer prices, lower job opportunities and wages. 

Carbon taxes are a common additional tax that is proposed by advocates of the UBI.  That very directly adds to power bills and while the rich use more power on average they pay a smaller percentage of their income on power, thus making this tax harm the poor the most.  Carbon taxes also push high energy businesses outside the taxing authority thus pushing those businesses overseas.  A side note:  China has much lower environmental controls and creates much higher pollution per item compared to producing in the USA; therefore carbon taxes harm the environment as well as jobs.  

A big part of ‘paying for it’ is eliminating certain welfare programs.  That is a mixed bag and each program needs to be looked at and evaluated on its own merit.  Housing, cash welfare, food stamps are easy to transition, however transitioning medical would create many problems.  Transitioning education and Social Security are below.  
Is It Socialism?
The proponents try to stay away from the word socialism.  There are two parts to socialism if done in conjunction with the free enterprise system.  First acquiring the money and then providing for the people.  The UBI is socialistic in acquiring the money, yet not so much in providing. 
Socialism takes a certain amount of income.  That is certainly part the UBI.  Where it differs is the UBI does this with cash to everyone without requirements. Socialism tries to own, control, manage, produce and distribute what they give out.  The UBI’s cash system is better than the heavy control of socialism.        
Just Create More Money
Some proponents of the UBI call for creating money as part of the funding of a UBI.  That would be devastating to the economy and hitting the poor and low income elderly very hard.  Money can be understood as proof you did work for somebody else and you offer that dollar to somebody to do work for you.  Every time that dollar changes hands, service was done by the receiver of that dollar for the giver of the dollar.   The monetary system breaks down rapidly if people are just given new money without that needed element of service for another.  
Any product that is wanted by a high majority of the population can be used as money.  Even if you were not going to use that product yourself, you knew that others would take that product for what you wanted.  However that currency was backed up because you actually were holding the product you could use.  Once consumed, that currency is gone because the underlying value is no longer there.        
The value of new fiat currency that is created out of thin air takes its value from the existing currency.  Imagine if a small group of ten people brought their goods to trade every Saturday.  Everyone brought 10 items and had $10.  Every item was $1.  Everyone came with 10 items and left with 10 items.  If they gave all 10 people $1 from thin air when at the start of trade, everyone would have $11 thus 110 dollar bills will be trying to buy 100 items. 
​The following week, 120 dollar bills will be chasing those 100 items and so on.  if you do not raise your prices 10% a week then you will be bring 10 items and walking away with 9,8,7,6,5… items.  If you held that currency in saving, you would be losing value rapidly.  Capitalism takes capital, which is savings.  Nobody will want to save if the value is reduced every week.  Without saving, many bad things happen.  
Eliminating Means Testing 
One of the best parts of the UBI is the elimination of means-tested benefits.  However, those two things do not need to be linked.  Government can stop means testing without going to a UBI.  
Means testing creates high marginal ‘tax rates’ for the poor.  If you are receiving means tested welfare benefits and increase your earning over a certain point, you lose those benefits.  Many programs work in many ways from gradual loss to benefit cliffs.  However many poor get caught in this trap of not working to get the benefits and that lack of work harms future work hiring opportunities  
The Public School System
​Replacing the Public School System with a UBI would be a tremendous improvement.  Government control of education is one of the great harms done to the people.  Of course everyone should also be able to exempt themselves from the benefit side ANDthe tax side of education.  
​Colleges and other forms of higher education should also go in this direction with the option of being out of the tax AND benefit side of higher education.  Moving to a UBI for education would solve the control issue.  Allowing people to take care of education on their own would take care of the massive tax issue.  Yes, they would still have to pay for their education, however you eliminate the government taking the money from you and giving it back as part of the UBI.  
Social Security System 
Social Security should not go into a UBI.   Social Security is already very socialist.  Switching it to a UBI only makes it more socialist and creates many problems.  First, switching means that you pour the funding and the benefit in to the UBI.  The benefit will go from those in retirement to everybody thus thinning out the benefit or greatly increasing the taxes. ​​Means tested Social Security will be a disaster. People will not save for their own retirement so they can qualify for means tested benefits.
 Second, the benefit under the current Social Security System bases benefits to some extent to money taxed over the years, meaning the more money earned and taxed means higher social security payments.  The UBI gives the same amount to everybody, thus moving away from a program resembling a retirement plan.  More Problems With the Current System 

Future Technology  

Future technology worries many people because they believe it will take a high percentage of jobs.  Let us all hope that is true.  While it is stressful to lose a job, the great benefits of lower prices to everyone outweighs those lost jobs.  Labor hours freed up in one industry creates opportunities to start or expand new industries.  While technology advancements over the centuries happened very slow, the last two centuries have shown rapid increases.  Going forward, the pace will increase and people need to learn to rapidly adjust with it.  We should not give up on people by just giving them subsistence living.    ​The Future of Work with Increased Technology
Cash or Service 
​There are good reasons why some benefits are given in cash and others in services.  Cash works well in food aid, however in medical it does not.  Aid for medical given in cash without strings will lead to many issues.  
Not all will be responsible and will become burdens on society when there is a medical need.  The laws that disallow a hospital to deny care to someone needing emergency or really any other care is not going to be repealed.  If they get to garnish the UBI for services, those people relying on UBI will not have money to live defeating the purpose of the UBI. Very soon the benefits will be added back into the system in addition to the UBI.       
Living Off the UBI
​At $10,000 to $15,000 per person with roughly half that for children, innovative people will learn to live off that money.  A mother and father with four children will be receiving $40,000 to $60,000.  A lot of families are living of that amount right now.  
​Both parents staying home would allow many costs saving measure of no day care expenses, no work clothes, no work travel costs and couponing.  Many families could make that happen.  Four friends recently out of high school rent a small home easily on the UBI with plenty of money left for food and video games.  Pooling their money together could enable the youth to ‘waste’ the most valuable years of their lives.      
​A big part of the problems of welfare and the UBI is that it enables people to live a destructive lifestyle. The need of  free enterprise causes people to straighten-up their lives.  Charities within the Haley2024 system allows help to those on hard times or those doing the right things.  However the most important part of charity is the ability to say ‘NO’ to those going down wrong paths.  
Making It Easy to Quit a Job
​Many among the UBI advocates claim that that the UBI would allow people to quit low paying or unpleasant jobs.  They claim that those businesses would have to increase their wages to attract employees.  They are certainly correct, however they claim that is a good thing.  The negative consequences would be more damaging than some possible benefits.   
​Every product or service has a ‘going price’.  If you go much over it your sales drop off rapidly.  If you go under it, you can gain increased sales and market share.  Competition always puts downward pressure on prices.  Every company wants increased sales to fully utilize their fix overhead costs so they look at every aspect of their cost structure.  Labor costs are large on that list.  Most businesses have a percentage of their labor in low wage jobs
If wages are pushed up by any reason, that increased labor cost will push certain companies over the going price and become uncompetitive and ultimately out of business.   Depending on the product and the necessary going-price increase, the overall product demand will fall.  Less poor people will be able to afford the product.  While a percentage of these low wage employers will find a way to increase pay, many low wage job opportunities will be eliminated 
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<![CDATA[Why Are You (the Reader) Not Paying Them More]]>Thu, 27 Jul 2017 14:38:55 GMThttp://haley2024.org/blog-on-haleynomics/why-are-you-the-reader-not-paying-them-more
There are people that are not part of a trade stating that the trade is not ‘fair’.  That is fine if it is just your opinion, however when they want government to stop the trade, bad things happen.   First, if you are not part of the trade, keep out of it. 

Sure, you can give advice on how they might make a better deal or otherwise inform them of other options, however once advise is given, one should let others make a trade if they wish.  If you state that someone is not being paid high enough wages or that the employer should be paying for more benefits, you have to ask yourself if you are willing to pay the higher amount. 
Are you willing to start a business and hire that person at the wage you advise?  Are you willing to include all the benefits?  Are you going to include pay for all the safety features you command them to have? Are you going to give them paid time off?  Are you going to pay all the taxes, fees and other expenses involved in employing people? 
If the employee is really ‘worth’ the salary, benefits, and expenses that you claim other should pay them, then you should be able to get that worth out of them as well and pay all those expenses.  The excuse of ‘I don’t operate a business that can employ them’ is likely true, however it is likely their current employer cannot either.  
In fact, their current employer pays them more than any other employer in the city, in the state, in the country, and in fact more than anybody else in the world.  It is likely the employee is ignorant about better opportunities open to them; however that is a function of the great value of information about what opportunities are out there.  
It is often valuable to use your labor in searching for better jobs even when you have one.  There is great value in learning more about your opportunities.  You can compete with your current employer or search out for higher paying professions.  Are you learning how the business makes money?  Can you find ways to increase your company’s earnings and show your extra worth?
When somebody runs a business, they try their best to reduce their cost of every part of production, delivery, and sales of their product.  That means labor costs as well.  The employer must pay enough to acquire an employee that can accomplish the job. 
If they attempt higher wages than necessary, they risk becoming uncompetitive.   The employee’s needs are not relevant to the employer.  The employee certainly should concern themselves with earning enough to take care of their needs and can choose to set their own minimum wage.  They can set their own benefit requirements.  
They can inform the potential employer of their minimum requirements and the business will make the decision on whether to hire them.  That decision happens now with government labor law; however the employee is barred by law in bidding down their labor costs under the floor the government sets.    
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<![CDATA[Universal Basic Income and the Laffer Curve]]>Sun, 23 Jul 2017 05:03:42 GMThttp://haley2024.org/blog-on-haleynomics/universal-basic-income-and-the-laffer-curve
There are many variations of the UBI however the basic notion is that it is a government welfare program that adds to or replaces some current welfare programs.

One striking point is that it gives to everyone in the effort to rid the current system of the problems relating to means tested benefits.  Most proposals add tax money to the system so the same dollar figure is not spread thinly over all the people verses being concentrated on the poor.  
Seldom do the UBI proponents talk about where the extra taxes are being acquired. They are not silent on the issue; however most do not address the tax rate increases needed to achieve the needed funds.  Many concentrate on ending basic welfare cash payments, food stamps, housing allowance among others and transferring the money to the UBI.  The current system concentrates those benefits on a small percentage of the population 10%-30%.  Government would need to increase tax revenue greatly to keep the same amount per person and bring that percentage to 100% of the people.  
The basic notion of the Laffer curve is that as tax rates increase, peoples willingness to work the next hour is reduced.  The big point is economic activity is reduced when people choose not to work those extra hours, thus higher tax rates create disincentives from serving your fellow man. The Laffer Curve is demonstrated by the tax revenue not received by hours not worked.  Whether it is a faster loss of GDP, a steady loss or a quick loss, the end result is that taxable GDP needs to drop to zero as the tax rate reaches 100%.  It is an economic truth that as tax rates go up, taxable GDP goes down. 
 The Laffer Curve just tries to graph it out dealing with how the taxable GDP slopes down to $0. 
Marginal tax rates from means testing welfare means that welfare benefits are reduced as you earn money.  This means if you increase your earnings, you lose benefits, thus your work brings in the difference between earnings and the value of the benefit loss.  Taking the high marginal tax rates away from those with lower incomes by eliminating means testing welfare will be an increase in work from those with lower incomes.  Ending means testing is a positive idea. 
 It is hard to demonstrate or comprehend how powerful ending that destructive idea will be.  However, the UBI is not the only way to eliminate means testing. The UBI replaces a bad system with another bad system. Government giving money to everyone means that government needs to tax everyone to acquire that money.  The major disincentive of doing activity that is taxed, is the reduced overall economic activity, thus doing major harm.  
Universal Basic Income and the Laffer Curve
Most serious UBI plans put the price tag at about $2 Trillion which is about $10,000 per adult, and exclude those on Social Security.  While some money might be diverted from other welfare programs, I will use the full $2 trillion because all government spending raises tax rates.  That is 10.4% of GDP.  
I will use 19.1619 trillion GDP (mid 2017) at the current 36.4% government spending to GDP. Government spending going from 30% to 40% (factoring in about 60% welfare replacement) on my slow, average and fast loss of taxable GDP chart, shows that taxable GDP drops 7.7%, 14.3%, or 26.5% respectfully, because of the increased tax rates going up from 30% to 40%.  
These numbers comes with dozens of asterisks because all the changes come with human reactions to the change.  Government spending at 30% of GDP (meaning without the UBI or some of the current programs) would likely yield a GDP between $20.04 trillion to 22.2 trillion.  This increase would not be overnight, but would be demonstrated by higher economic growth rates over several years. 
Government spending at 40% of GDP would likely yield a GDP between $17.15 trillion to 18.4 trillion.  This decrease would not be overnight, but would be demonstrated by lower economic growth rates over several years and heavy inflation.  Government must lose about $1.5 to $5 trillion of GDP to tax the $2 trillion for the UBI.  
An important factor with the Laffer Curve is that when GDP drops, the tax rate needs to chase the rates up creating even higher GDP losses and again higher rates.  While the slow loss of GDP chart will likely stop at about 45%, the faster loss of GDP chart is likely to go over edge and down the bad side of the Laffer Curve, which means there is no reaching the amount needed.  
People will stay working even at higher tax rates if they really need to feed their families.  However, after needs are met and the choice of work is just to achieve wants, the higher tax rates will result in more people picking greater leisure hours over the next hour of work.  That yields less money because it results in lower taxable labor hours. The UBI's purpose is to take care of needs thus the more generous the UBI is, the more the Laffer Curve moves towards the faster loss of GDP chart. 

The elimination of means testing which lowers marginal tax rates for the poor is a help, however the UBI is not the only way to end means testing.   

Just to be clear, any changes of this magnitude will result in massive changes in behavior of everyone that is difficult to predict.   When doing the math, I used basic tax rates without additional exemptions, deductions or credits. 
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<![CDATA[Issues of income inequality: capitalism creates the most wealth and results in the most equal distribution of that wealth]]>Fri, 14 Jul 2017 00:01:59 GMThttp://haley2024.org/blog-on-haleynomics/issues-of-income-inequality-capitalism-creates-the-most-wealth-and-results-in-the-most-equal-distribution-of-that-wealth
Certainly, free enterprise has income inequality, however all other economic systems have more extreme inequality.  The more important issue is the greatest wealth production comes from free enterprise.  Not only does socialism produce much less wealth for everyone and more extreme poverty for the poor, it comes with the added bonus of lower control by the individual. 
 In the free enterprise system, it is helpful to understand how income is distributed.  Everyone distributes the money they have to the people they buy things from and money is distributed to you by you working for someone.  If you want more money distributed to you, then work more hours, add useful machine, work more productively, and examine different areas of work at higher pay rates. 
The wealthier among us usually find a way to make a high quality product that is in high demand and can be massed produced or replicated at lower costs than making one at a time. 

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If you are concerned about income inequality, are you examining how YOU distribute your money?  Do YOU distribute it, by way of spending it, evenly to everyone in your neighborhood, city, state, country or even the 7 billion people around the world?  Do you look for those earning nothing or very little and concentrate spending with them. 
Why do YOU distribute YOUR money to the Billionaires at Wal-Mart for milk, clothes, sporting goods and the thousands of other items they carry?  Why do YOU buy your car from companies that make Billions verses the common guy?
The guys making the largest incomes deserve that money because a lot of people are freely choosing to give them the money verses someone else for the service they are providing.  If you stop or tax heavily someone making ‘too much’, you are stopping or at least disincentivizing them from serving others.  
Many will try to play tricks with the tax code to try to partly even the inequality.  If government needs $100 X in a 100 person economy, they should take 1X from each person.  To try to even things they switch it to a percentage of income.  They further do tax deductions, exemptions and credits.  These do harm to the economy and the poor always do worse in a poorer economy.     
The rich have no power to make you serve them.  They have to offer you enough money that you take the deal.  If you serve them, then you have the money to offer others to serve you.  God warns us with the Tenth Commandment about the dangers of coveting.  
If you concentrate on your income and not covet the incomes of others, your attitude and life will improve.  It is perfectly fine to see what others with higher incomes are doing and learn from them, the bad part is the resentment of others, trying to take their money, or using law to punish them.  Remember the rich cannot make their money without serving you.  
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<![CDATA[Why Tax Deductions, Exemptions, and Credits Are Bad Economics  ]]>Mon, 03 Jul 2017 00:10:23 GMThttp://haley2024.org/blog-on-haleynomics/why-tax-deductions-exemptions-and-credits-are-bad-economics
Everyone should recognize the main lesson of the Laffer Curve.  That lesson is that higher tax rates create higher disincentives to do the taxable exchange.  Higher tax rates result in decreasing collective incomes.  A complete understanding of the Laffer Curve should compel everyone to keep the rates as low as possible.
Let’s look at a small community of 100 people of varying incomes, resulting in an $1,000 economy at a 20% tax rate.  If Government needs $200, they do not do a head tax of $2 per person, they do a 20% tax.  Now if government exempts $200 of the income and allow $200 of deductions and give everyone a $.50 tax credit (equaling $50) then the tax rate of 20% will only result in $70.  $200 is still needed so the tax rate would have to rise to 41.66% in the static analyze.
The Laffer Curve teaches that a 27% lower GDP would result and the 41.66% tax bringing in $87 of tax revenue. ($730 GDP minus $400 exempt and deductions equals $330 taxable income times 41.66% equals $137 minus $50 of credits equals $87.  Higher tax rates have worse results. 
Let’s look at the math on smaller deductions, exemptions, and credits.  Let’s half the previous example at $100, $100, and $25. At 20% rates, the results are $135 of tax revenue. ($1,000-200) x 0.20 = $160 -$25=$135 of tax revenue.  Doing the math with the Laffer Curve logic, the tax revenue maxes out at 40% with only $195 collected.  The 40% versus the 20% drops GDP by 25%. 
Let’s reduce the deductions and exemptions to a total of $125 and keep the credit at $25.  Doing the math, the tax rate needs to go up to 30% dropping the GDP 12.5% to $875.  The taxable income is now $750.  At 30% that is $225 then take away the $25 credit to equal the $200 needed for government. 

This means to just get 12.5% of GDP worth of deductions and exemptions and then 2.5% of GDP of a tax credit means a reduction of overall incomes (GDP) of 12.5%
To get the 20% of GDP worth of deductions and exemptions and then 2.5% of GDP of a tax credit means a reduction of overall incomes (GDP) of 25%.  (Tax rate increasing from 20% to 40%.) and we still were a little shy of the tax revenue needed. 


To get the 40% of GDP worth of deductions and exemptions and then 5% of GDP of a tax credit means never coming close to being able to raise rates enough to reach the $200 or the tax revenue at 20% without the deductions, exemptions, and credits.  
If government NEEDS a certain amount of money, the best practice is to take the amount needed and divide it by the greatest possible tax base.  That results in the lowest tax rates.  If there are current deductions, exemptions, or credits, eliminate them and lower the tax rates to match.  
Over time, the GDP growth rate will increase allowing further rate decreases. Certainly, we need some government, however after a 20% tax rate, the negatives of decreased GDP certainly outweigh the extra government revenue.  Total of all government tax rates, meaning spending should max out at 10% of GDP.
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<![CDATA[There are not any two jobs that are the same, likewise there are not two employees that are the same]]>Sun, 07 Aug 2016 22:06:15 GMThttp://haley2024.org/blog-on-haleynomics/there-are-not-any-two-jobs-that-are-the-same-likewise-there-are-not-two-employees-that-are-the-same
In the political discourse of the day, the arguments about equal pay for equal work are annoying.   No two jobs are the same, likewise no two employees are the same.  Sure some are very close, however never the same.  The differences matter.

When you go to work, your pay is one of many factors that keep you at your job.  Many would LOVE to work in a job where they saw their favorite pop star or athlete on a daily basis.  A young man would really enjoy a job assisting with a photo shoot for the sports Illustrated bikini edition.  The same pay as an assistant to a septic tank cleaner is not the same.
Nobody has the same coworkers as you do.  You do not have ‘you’ as a coworker, for the good or the bad.  Your coworkers and the general morale of your workplace can have you pleased or looking for other job opportunities.  This is all to say that no two jobs are the same.  Employers have long understood that bad morale requires higher pay to keep good employees.  Employees with higher morale are more productive, thus bring greater worth to the company.  
Understanding that no two employees are the same should be easy.  Everyone’s productivity is different.  Their contribution to morale, while subjective, is different.  Each employee brings a wealth of knowledge and experience that is different from others.  Knowledge and experience on issue outside of their current job could bring better ideas on improvements of their current jobs.  
Some people naturally are leaders and others followers.  Some are willing to go the extra mile and others are not.  Everyone has different lives outside of work that could affect work schedule flexibility.  Some are willing and able to train others and others are not.  Some are eager to be trained and others stuck in their ways.  

One could like one sports team while the workplace is overwhelmingly in favor of another, thus animosity can enter.  Some have strong personalities and others meek.  Some need to be managed and others, self-governing.  Some have greater aptitude for the job and others struggle.  
All this to state that no two employees are the same.  Government regulations that try to demonstrate discrimination misses the massive subjective determination necessary for a business owner to use the role of ‘price of labor’ to attract and retain better employees.    
Most employers find it helpful to have a pay structure that most will fall into, however often they find ways to promote or benefit those that bring more value to the business.  Often government labor law restricts beneficial trades of labor for currency.  Businesses often negotiate with employees to work around restrictions.   
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<![CDATA[What a Dollar Represents and those that possess million$]]>Fri, 22 Jul 2016 22:09:06 GMThttp://haley2024.org/blog-on-haleynomics/what-a-dollar-represents-and-those-that-possess-million
A dollar represents service (anything of worth) you did for another.  You can use that dollar to request services from others.  Whoever owns that dollar is due the other half of a trade of service for service.  You have that dollar because you already did your service.  When someone does service for you, you give up that dollar and the trade is complete.  
Both sides of a trade, the buyer and seller, must decide if the trade for the currency is WORTH IT, meaning, is your service worth the currency you are getting or is the currency you are giving up worth the service you want. 
If you earned a million dollars, does that mean that you serviced your fellow man more than the man making $50,000.  Yes, as defined by all those that decided to trade their service/currency for the millionaires’ service.  As long as both sides agree to the trade, the dollars ‘earned’, does demonstrate the value of your worth to others. 
Often times, to make millions, your services need to be bought by millions.  Also, to make millions, others in business make tens of millions.  As a million-dollar athlete, the others include many in the TV industry, those businesses that buy ads, those that build a stadium, those that maintain the arena among millions of dollars for others. 
A million-dollar CEO, of a multi-billion-dollar corporation, has the jobs of thousands directly and indirectly affected by his decisions.  Often, billions of dollars of the common man’s investments, are also greatly affected by the CEO’s decisions.  The skill, talent, experience, wisdom, humbleness and incredibly hard work of a CEO is SERVICE to millions.  The worth of a CEO is defined by the board of directors.     
Too often, people begrudge a millionaire’s wealth.  They don’t ‘think’ they earned it and covet the millionaires’ possessions and lifestyle.  If done in the free enterprise system and without fraud, the millions represent service done for millions and a business that produces hundreds of millions for others.

Every person has the right to offer their services for $1 million to take the place of a CEO that is making $10 million.  You could offer your Quarterback services to the Cowboys for $1 million instead of the $10 million star.  There are very good reasons why the board of directors or the owner of the team does not save $9 million on hiring you.  Unless you have profound talent in these areas, hiring you could lose billions of dollars for millions of people.    
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<![CDATA[Minimum Wage: the tale of two apple farmers]]>Fri, 20 May 2016 03:15:10 GMThttp://haley2024.org/blog-on-haleynomics/minimum-wage-the-tale-of-two-apple-farmers
Let’s say that there are two apple farmers in town.  One has a lot of education and experience.  He also is married; thus he can commit more responsibility to his apple business because the wife is taking on much of the other responsibilities.  This experienced and skilled farmer trims, fertilizes, harvests, plants, markets, stores among other business related duties with great skill.  
The other apple farmer makes many mistakes because of his inexperience, lack of education and he is a single dad that has major responsibilities outside his business.  The better farmer yields a larger harvest and far better looking and tasting apples.  His apples last longer and are generally preferred by the consumer.  
Let’s say they both set up shop every Saturday at the farmer’s market and both price their apples at $1 an apple.  At first, the skilled farmer’s apples sold much better, taking on $500 verses $50 for the other farmer.  The second Saturday, the less experienced farmer dropped his price to $0.80 so he did not have to take most of his apples back home. This time the better farmers sold $350 compared $150 for the other farmer.  The third week he dropped it to $0.70 per apple and this week the better farmer sold only $300 and the other farmer $200.      
The less experienced farmer did not like making less money than the skilled farmer, however he realized the other apples were better.  He could barely make it on $200 a week, however he knew he could learn better business practices, better growing skills and in time, increase his prices up, because his apples would be more valuable when he became better at trimming, fertilizing, harvesting, planting, marketing, storing among other skills.  
The forth week, the cop showed up at the farmer’s market and told the less skilled farmer that he needed to increase his prices to a minimum of $1 an apple.  The farmer said, "but I will only sell just a few apples that way, the other farmers apples are better than mine and all the shopper will just buy his."  He further stated that he needed to use price to compete for the customers.  He stated that over time he will be able to increase that price because his apple will be just as good as the skilled farmers’ apples, but at this time, he needed the lower price.  
The cop stated that the government needed to ‘protect him’ from low wages and therefore he needed to price his apples at $1 an apple.  The less skilled farmer stated that my income will only be about $50 a week instead of $200, so PLEASE STOP protecting me! Trial and error as I make only $200 a week is much better for me then for me not to make any and pay to go to school to learn the apple business.  Over time this is my best option.  The cop stated, that any apple he sold under $1, he would have an $100 fine.  
The next week the farmer stood before very ignorant, yet high and mightily arrogant politicians to plea for them to alow him to trade with consumers that would make both the consumer and he, the farmer, better off.   The politician stated that the more experienced farmer stood before them a few weeks back and told of your very hard life.  They stated that the experienced farmer claimed you were not making a living wage and felt very sorry for you.  
The politicians stated that they were convinced that you needed to make at least $1 per apple, so you could support your family, therefore we passed a law and you need to be grateful to us because we increased your income.  The less skilled farmer stated, that since I had to increase my price up to a $1 and apple, the skilled farmer sells out of his apples by noon and takes home over $500 where before he worked until 5 pm and took in only $300. 
 I, on the other hand, went from taking in $200 to barely $50 a week and now throwing away over half my apples.  The politicians now just realized why they received that campaign donation by the skilled farmer and comprehended that one of the best apple farming skills is politics.    
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