About the author
Mark Perry Tweets
Despite China’s new status as the world’s no. 1 economy by one IMF measure, the US is still 74 years ahead on a per-capita basis
View related content: Carpe Diem
Over at Marketwatch, Brett Arends is making a big deal about the fact that on a “purchasing power parity” (PPP) adjusted basis, the International Monetary Fund (IMF) projects that China will produce slightly more economic output (GDP) this year ($17.632 trillion) than the US ($17.416 trillion). These IMF estimates supposedly mean that the US has officially lost its status as the “world’s largest economy,” a position it has held for 142 years, going back to 1872 when the US economy first surpassed the size of the UK economy. Here’s a shortened version of Arends’ article “It’s official: America is now No. 2″:
Hang on to your hats, America. There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet. It just happened — and almost nobody noticed.
The International Monetary Fund (IMF) recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.
Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.
This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.
A few comments:
1. This really isn’t a new story, the IMF reported in early October that it expected China’s PPP-adjusted GDP to surpass US GDP this year, and Business Insider reported that on October 8. So it really didn’t “just happen,” and it’s really not true that “almost nobody noticed” – the Business Insider article was linked on the Drudge Report on October 9 and I posted about that article here the same day.
2. More importantly, this is not a “geopolitical earthquake” and there’s no reason that Americans need to “hold onto their hats” and feel bad about being No. 2. Reason? As I pointed out in my October post, the US is still almost 75 years ahead of China when we consider the more important measure of economic output per person. China and the US are both producing about the same amount of economic output this year, but China’s population is 4.25 times the size of the US population (1.355 billion vs. 319 million). Therefore, on a per-capita basis the IMF estimates that the US will produce $54,678 in economic output per person in 2014, which is more than four times the expected per-person GDP in China of only $12,893. The chart above shows that the US produced that amount of real GDP per person (about $13,000) back in 1940, almost 75 years ago!
3. Without making an adjustment for PPP and using market exchange rates, the IMF estimates that China’s economic output per person will be only $7,572 this year, equivalent to America’s GDP per person back in 1900 (see chart above).
4. It’s also important to note that without the adjustment for differences in purchasing power, China’s economic output this year will be only $10.355 trillion at current market exchange rates, or about 40% smaller than the size of the American economy. Realistically, it could take decades, if it ever does happen, before China would ever even come close to reaching the size of the US economy when measured traditionally at market exchange rates.
A recent Investor’s Business Daily article by Terry Jones (“No, China Hasn’t Overtaken U.S., And May Not Ever“) makes a similar point:
Not only has China not passed the U.S. [except on a PPP basis], but it’s quite possible it never will. China’s population growth is heading for a dramatic Japan-style collapse, which will slash economic growth dramatically in coming years. Growth has already slowed from 10% a year in the 1990s and 2000s to 7% — and it’s likely to fall further from there.
That’s not all. The real measure of a nation’s standard of living, productivity and, ultimately, the size of its economy is GDP per capita. What does that tell us about the difference between the U.S. and China?
This year, America will have per person output of $50,979 in real terms, China $5,947 [both in 2010 dollars using USDA data]. So the average American is nine times more productive than the average Chinese. So don’t panic. The U.S. isn’t No. 2, except in certain IMF statisticians’ minds. Nor will it be soon.
Bottom Line: China has made phenomenal economic gains over the last several decades to become the world’s largest economy on a PPP basis. It’s one of the most remarkable economic success stories in human history, and it only happened after China started adopting market-based reforms. China should certainly be congratulated for their rise to become the world’s largest economy by one measure. But before breaking out the champagne to celebrate China’s new No. 1 status and before Americans start to feel humbled about falling to No. 2, the chart above helps to put this all in perspective — on a per-capita basis the US is still 74 years ahead of China on a PPP basis and more than a century ahead of China at current market exchange rates.
Energy superpower ‘Saudi America’ has been the world’s largest petroleum producer for 22 months in a row
View related content: Carpe Diem
The Energy Information Administration (EIA) released new data yesterday on international energy production for the month of August, and here are some highlights of that update:
1. For the 22nd month in a row starting in November 2012, “Saudi America” took the top spot again in August as the No. 1 petroleum producer in the world. Also, for the 22nd straight month, total petroleum production (crude oil and other petroleum products like natural gas plant liquids, lease condensate, and refined petroleum products) in the US during the month of August at 14.16 million barrels per day (blue line in chart) exceeded petroleum production in No. 2 Saudi Arabia (11.66 million barrels per day, see red line in chart).
2. During the 2004-2008 period before America’s shale oil and gas boom started, Saudi Arabia routinely produced 2–3 million more barrels of petroleum products per day than the US (see blue arrow in chart). But since America’s shale revolution started around 2009 when America’s “petropreneurs” starting accessing oceans of shale oil and gas with revolutionary drilling and extraction technologies, there has been a surge of nearly 60% in the supply of petroleum produced in the US, and America surpassed Saudi Arabia at the end of 2012 to become the world’s No. 1 petroleum producer. In August, production of US petroleum products (14.16 million bpd) exceeded Saudi Arabia’s output (11.65 million bpd) by 2.5 million bpd (see red arrow in chart), which is the biggest difference in favor of the US during the 20-year history of international production data from the EIA (see chart).
Bottom Line: The EIA data on international petroleum production through August provides more evidence that America’s shale energy revolution is taking the US from “resource scarcity” to a new era of “resource abundance.” The shale revolution has remade the US into a formidable energy superpower and we now consistently produce a greater “total oil supply” than Saudi Arabia (by more than 2.5M bpd in August) and have led the world in total petroleum production for 22 straight months. This energy bonanza in the US — described as the “energy equivalent of the Berlin Wall coming down” — would have been largely unthinkable even six years ago. But then thanks to revolutionary drilling techniques that were developed by American “petropreneurs” and are “made in the USA,” vast oceans of shale oil and gas have been accessed across the country, making the US the world’s No. 1 petroleum producer for 22 months running.
Note: Based on the international oil production data released yesterday, Texas as a separate oil-producing country would have been the 6th largest oil-producing nation in the world for crude oil output in August at 3.24 million bpd – just behind No. 5 Canada’s production of 3.4 million bpd. In previous months, Texas would have ranked as the world’s No. 7 oil producer, but just moved up one place in the rankings in August when the Lone Star State surpassed Iran’s crude oil production for the first time.
Zenefits in Utah: A classic case of regulatory capture causing government to protect producers at the expense of the public interest
View related content: Carpe Diem
A recent ruling by the Utah Insurance Department to protect traditional brick-and-mortar insurance companies by banning online competition from innovative startup Zenefits provides a classic case study example of what Marc Andreessen described on Twitter as “regulatory capture causing government to penalize consumers for the benefit of incumbents.” Here are some background facts:
1. Zenefits offers a free, online HR platform for small businesses to manage payroll, hiring, and benefits like health insurance. Without any obligation, Zenefits also offers its users health insurance for a fee through its HR platform, and it has quickly become one of the fastest growing insurance brokers in the country.
2. Traditional health insurance brokers have complained to state regulators, arguing that Zenefits online platform is “unfair competition.” In three states – Texas, Wisconsin, and Washington – state insurance regulators have sensibly closed their investigations without taking action against Zenefits.
3. Unfortunately for small businesses in Utah, the state’s Insurance Department recently sided with the traditional insurance brokers against Zenefits. Utah’s insurance commissioner Todd E. Kiser (himself a former insurance broker with 25 years of experience) has issued a decision to shut down Zenefits in the state. In his ruling, Kiser cited the need to protect “fair competition,” and he argued that the “ease of using Zenefits” to purchase health insurance made it “unfair” to traditional insurance brokers.
In other words, it’s classic government-enforced protectionism that protects existing, incumbent high-cost industries from the competition of efficient, low-cost startup rivals. And it’s also a classic case of “regulatory capture” defined here as:
The process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public’s interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.
It turns out the Utah insurance community doesn’t like competing with free, and the commission there is pushing back as a result. The letter from Kiser (embedded below) states that by providing free, up-front services to all, Zenefits is violating Utah inducement and rebating laws for those who choose to have it manage their insurance as well.
For violating those laws, the department claims Zenefits can be assessed a penalty of $5,000 per violation and twice the profit gained from those violations. But the penalty itself is a small amount compared to the change in its business model if the local insurance department were to have its way. To comply with state laws, the department is urging Zenefits to stop advertising that it offers free HR cloud management services. More importantly, however, the regulator argues Zenefits should have to charge a “fair market value” for its services to ensure fair competition with other insurance licensees in the state.
That’s not something Zenefits wants to do, of course, and the company says it will fight the department’s ruling in the courts to ensure it isn’t shut down in the meantime. Zenefits is also urging Utah Governor Gary Herbert to intervene as part of his commitment to support tech innovation in the state.
This is a perfect opportunity to invoke the timeless wisdom of French economist Frederic Bastiat, who wrote this in 1850 four days before his death:
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.
Regrettably, Utah Insurance Commissioner Kiser has ruled against the interests of the human race and the citizens and businesses of Utah in favor of an entrenched special interest group, to the great overall detriment of his state. Hopefully, Governor Herbert will side with the public interest and with Bastiat.
An obvious, but overlooked reason for declining household income: the number of work hours per US household has been falling
View related content: Carpe Diem
In a recent CD post (“Have changing household composition and retirement caused the decline in median household income?“), I suggested that the decline in US median household income since around the turn of the century can be largely explained by demographic factors including: a) the significant increase in retired Americans as a share of the US adult population, and b) the changing composition of US households that increasingly includes more no-earner and single-earner households and fewer married and two-or-more-earner households. It’s an important point that most of the discussions and hand-wringing about declining US median household incomes completely ignore the demographic realities that the composition of American households is not static. US households in 2013 are significantly different from US households in 2000 in important ways (size, age, number of earners, hours worked, etc.) that affect household income, so we can’t accurately compare the $51,939 in median household income in 2013 to the much higher peak of $56,895 in median household income in 1999 (both median incomes are expressed in 2013 dollars).
In a recent Real Clear Markets op-ed (“The Obvious Reason for the Decline In Median Income”), economist Jeffrey Dorfman points out another very important demographic change that has significantly contributed to the decline in real median household income in the US over the last decade: the average number of hours worked per US household has been declining. So we would naturally and logically expect median and mean household incomes to decrease when average household work hours are falling. Here’s the opening of Jeffrey’s article:
Much has been made recently of the fact that real median household income has been stagnant over the past twenty years and falling for the past seven. While there are many problems with using median household income as a measure of the economic health of the middle class, it is still important to examine what is causing this middle-income stall. A major, and overlooked, part of the answer appears to be quite simple: Americans are working less.
As I pointed out previously (and as Jeff points out in his article), there’s been a significant demographic shift (along with the economic effects of the Great Recession) that has resulted in both smaller average households over time and a smaller percentage of Americans working in recent years, so that the average number of work hours per US household has naturally declined. And therefore, the very obvious, but overlooked conclusion reached by Dorfman is that: “When people and families work fewer hours, they earn less money.”
Following a procedure outlined by Dorfman in his article but using a slightly different dataset, the top chart above shows the relationship over time between annual US median household income (adjusted for inflation) and the average weekly work hours per US household in each year from 1980 to 2013. To calculate the average work hours per household, I used: a) the BLS series “Average Weekly Hours at Work in All Industries” (from Table 21 in this BLS report), b) the BLS series “Civilian Employment,” and c) the number of US households in each year from the US Census. Using the average weekly work hours and the number of Americans employed, the total number of hours worked annually were calculated and divided by the number of US households in each year to determine the average number of weekly work hours per household in each year from 1980 to 2013, and those values are represented by the red line in both charts above.
As can be seen in the top chart, the 8.7% decline in real US median household income between the 1999 peak ($56,895) and 2013 ($51,939) was accompanied by an even greater 9.25% decline in average household hours worked. As Dorfman points out, household work hours are calculated here and in his analysis as an average (mean) and not a median, “so it is not the perfect match to median household income, yet the insight revealed is still rather remarkable.” In fact, a simple linear regression reveals that almost 89% of the decline in median household income between 1999 and 2013 can be explained by the decline in average household work hours, so there is a very strong statistical relationship between median household income and average household hours worked, as expected.
The bottom chart above addresses the mis-match between median household income and average weekly household work hours by comparing average annual household income from 1980 to 2013 to the average number of work hours per US household. That chart shows that average household income has declined by 6% from the 2000 peak of $77,287 to $72,641 last year. During that same period, average weekly work hours per household declined by more than 10% from 48.3 to 43.3 hours. Like before, the results of a linear regression model show that 88% of the decline in average household income between 2000 and 2013 can be explained by the decline in average household work hours.
Further, about one-third of the 10.25% decline in average household work hours between 2000 and 2013 can be explained by the 3.1% decline in average household size during that time period from 2.62 to 2.54 persons. The remaining 7% of the decline in average household work hours since 2000 would be explained by other demographic changes including an aging US population with more Americans in retirement as a share of the population, and the shift towards more (fewer) single-earner (multiple earner) households. And there could also certainly be economic effects from the Great Recession that put downward pressure on average hours worked especially in 2008, 2009 and 2010, although that trend has reversed slightly in the last few years. There could also be a downward “Obamacare effect” on average hours worked that started in 2013 when many companies reduced workers’ hours below the 30-hour-per-week threshold to avoid the employer mandate to provide health insurance for full-time employees.
Here’s Jeffrey’s conclusion:
Middle class incomes are not growing as fast as most people would like because middle class families are working fewer hours. Possible policy prescriptions could include pro-business moves to increase hiring or pro-work moves such as making the social safety net somewhat less comfortable than it has become over the past five to ten years. Either way, it seems clear that the major problem restricting faster growth in household incomes is not income inequality, nor corporate greed, but a basic lack of people working.
And to that I would add that in addition to the economic factors that have contributed to a decline in average hours worked in recent years, e.g. involuntary part-time employment because workers can’t find full-time employment due in part to Obamacare, there are other important long-term demographic trends that can also explain declining household work hours and therefore declining household income. Specifically, the composition of US households is changing over time due to the natural consequences of an aging population and an increasing share of households with retirees, along with more (fewer) single-earner (multiple earner) households that reflects an ongoing trend of smaller US households dating back to at least WWII – and those factors can’t be ignored when discussing trends in US household income.
View related content: Carpe Diem
1. Chart of the Day I. Between January 2011 and 2014 (through October), there have been more single-family building permits issued in Houston (117,415) than in the entire state of California (117,291). That huge difference in home building at least partly explains the 2X difference in median home sales prices in October: $382,000 in California vs. $192,000 in Houston.
2. Chart of the Day II. Another US energy milestone: Crude oil production in November topped 9 million barrels per day (bpd) for the first time since March 1986. At the current pace, daily US oil output is on track to hit the 10 million barrel milestone by the fall of 2015 and surpass the previous all-time record high production of 10.04 million bpd in November 1970.
3. Economic Updates: a) Online Labor Demand Rose to a New All-Time Record High in November for Both Total Ads and New Ads (from the Conference Board), b) Staffing Employment for the Week of Nov. 17–23 climbed to an all-time record high of 106.96, according to the ASA Staffing Index, c) the Restaurant Performance Index Surged in October to the Highest Level Since 2004 (from the National Restaurant Association, see chart above), and d) US auto sales in November (17.2 million units at a SAAR) were the highest for the month since 2003.
4. Interesting Economic Facts: a) 300+ Hours of Video are Uploaded to YouTube Every Minute (source), b) the US has enough natural gas to provide the United States with electricity for 575 years and to fuel homes heated by natural gas in the United States for 857 years (source), and c) Nationwide, there are almost two unemployed workers per job opening, while in booming North Dakota at the heart of the US shale oil revolution, there are two job openings per unemployed worker (source).
5. Markets in Everything: a) Shortcut is an on-demand grooming service for men that brings a barber to your home, office or hotel room (“Uber for hair”), b) uberESSENTIALS delivers the everyday items you need in 10 minutes or less, c) uberPOOL launches today in NYC and the ride-sharing services says its new carpooling option could eventually take more than 1 million cars off the road, d) NYC bans cell phones in public schools, so there’s a booming cell phone storage business (via Marginal Revolution), and e) Cable-free elevators move you in any direction – vertical and horizontal (ht/Hitssquad).
6. Quotations of the Day, from Thomas Sowell:
a) It is amazing how many people think they are doing blacks a favor by exempting them from standards that others are expected to meet. (Source)
b) The time is long overdue to stop looking for progress through racial or ethnic leaders. Such leaders have too many incentives to promote polarizing attitudes and actions that are counterproductive for minorities and disastrous for the country. (Source)
7. New Wave of Creative Destruction. TV viewers are abandoning traditional broadcast and cable networks for online streaming services, and new devices in their living rooms are making it easier for them to cut the cord. (Source)
8. Street Car Craziness: a) Warren Meyer says, “I love the phrase ‘modern street car.’ Like an up-to-date stagecoach,” and “My best guess is that these kinds of projects have become prestige projects for government officials. This is the way they show off to each other and act as a portfolio for them to seek larger jobs in bigger cities,” and b) Steve Hayward writes, “After the fetish for renewable energy that’s expensive and intermittent, the greatest fixation of the utopian left is mass transit, especially light rail—a 19th century technology for 21st century mobility needs.”
9. Video of the Day I. The Mackinac Center reports below on several disturbing examples of how Michigan police confiscated the private property of innocent citizens and froze their bank accounts without ever making an arrest or charging them with a crime. These unconstitutional cases of civil asset forfeiture abuses come to us as a direct result of America’s senseless, expensive, and immoral War on
Drugs Otherwise Peaceful Americans.
10. Video of the Day II. Reason reports below that “When San Francisco Stopped Prosecuting Drug Users, Violent Crime Went Down.”
Texas oil topped 3M barrels per day again in September; as a separate nation it would be world’s 6th largest oil producer
View related content: Carpe Diem
The Energy Information Administration (EIA) released new state crude oil production data last week for the month of September, and one of the highlights of that monthly report is that oil output in America’s No. 1 oil-producing state – Texas – continues its phenomenal, eye-popping rise. Here are some details of oil output in “Saudi Texas” for the month of September and the economic impact that production is having on the state’s economy:
1. For the fourth straight month starting in May, oil drillers in Texas pumped out more than 3 million barrels of crude oil every day (bpd) during the month of September. The 3.25 million bpd in September was the highest daily oil output in the Lone Star State in any month since at least January 1981, when the EIA started reporting each state’s monthly oil production (see chart above). Texas reached the two million barrel per day oil production milestone in August 2012, and has since added a million more barrels of daily oil production in less than two years to reach the three million barrel milestone in May of this year. Compared to oil production a year ago, Texas posted a 22.8% increase in September marking the 41st straight month starting in May 2011 that the state’s oil output has increased by more than 20% on a year-over-year basis.
2. Remarkably, oil production in the Lone Star State has more than doubled in less than three years, from 1.59 million bpd in October 2011 to 3.25 million bpd in September of this year (see chart above), and that production surge has to be one of the most significant increases in oil output ever recorded in the US over such a short period of time. A 1.66 million bpd increase in oil output in only 35 months in one US state is remarkable, and would have never been possible without the revolutionary drilling techniques that just recently started accessing vast oceans of Texas shale oil in the Eagle Ford Shale and Permian Basin oil fields. As I have reported before on CD, the Eagle Ford and Permian Basin oil fields in Texas are now each producing crude oil at a rate of more than 1 million bpd, joining an elite international group of only ten super-giant oil fields in the world that have ever surpassed the one million barrel per day production milestone at their peak level of output.
3. The exponential increase in Texas oil output over roughly the last three years has completely reversed the previous, gradual 28-year decline in the state’s conventional oil production that took place from 1981 to 2009 (see arrows in chart) – thanks almost exclusively to the dramatic increases in the state’s output of newly accessible, unconventional shale oil.
4. As recently as mid-2009, Texas was producing less than 20% of America’s domestic crude oil. The recent gusher of unconventional oil being produced in the Eagle Ford Shale and Permian Basin oil fields of Texas, thanks to breakthrough drilling and extraction technologies, has recently pushed the Lone Star State’s share of domestic crude oil all the way up to more than 36% of America’s crude output for the last five months, and almost 37% in September.
5. Updated 12/4/2014 based on new EIA data: Oil output has increased so significantly in Texas in recent years that if the state were
considered as a separate oil-producing country, Texas would have been the 6th largest oil-producing nation in the world for crude oil output in August (most recent month available for international oil production data) at 3.24 million bpd – just behind No. 5 Canada’s production of 3.4 million bpd. In previous months, Texas ranked as the world’s No. 7 oil producer, and just moved up one place in the rankings in August, when it surpassed Iran’s crude oil production for the first time ever.
6. The dramatic increase in Texas’s oil and gas production is bringing jobs and economic prosperity to the state. For example, over the last 12 months through October, payroll employment in the state of Texas increased by 421,900 jobs – the largest 12-month job gain in state history – and that represented a 3.74% annual payroll increase, almost double the 1.93% increase in total US payrolls over that period. With only 8.4% of the US population, Texas created 16% of the new US payroll jobs over the last 12 months through October.
Every business day over the last year, more than 1,600 new jobs were created in the Lone Star State, and many of those jobs were directly or indirectly related to the state’s booming energy sector, which experienced an 7.8% increase in payrolls for oil and gas extraction jobs (8,200 new jobs) over the most recent 12-month period through September. Oil and gas companies in Texas hired nearly 32 new employees every business day over the last year just for extraction activities, or almost 4 new hires every hour!
MP: The significant increase in Texas’s oil production over the last several years is nothing short of phenomenal, and is a direct result of America’s “petropreneurs” who developed game-changing drilling technologies that have now revolutionized the nation’s production of shale oil. Thanks to those revolutionary technologies, Texas is now home to two of only ten super-giant oil fields in the world to ever produce more than 1 million barrels of oil per day – the Eagle Ford and Permian Basin.
For oil output in Texas to increase from 2 million to more than 3 million bpd in less than two years, and increase so dramatically that the state now produces almost 37% of US oil, is undoubtedly one of the most remarkable energy success stories in US history. At the current pace of annual increases of more than 20%, daily Texas oil production is on track to surpass the 4 million barrel milestone by August of next year. With those projected increases in Texas oil output, the state could soon surpass Iran and even Canada to move up in the international oil production rankings to become the world’s No. 5 oil producer in 2015.
“Saudi Texas” continues to be the shining star of The Great American Shale Boom.
View related content: Carpe Diem
We hear all the time that “the rich aren’t paying their fair share of taxes” (you’ll find more than 1,000,000 Google search results for that phrase). Early last year Obama reiterated his belief that the wealthiest Americans still aren’t paying their “fair share” of taxes. Here’s an analysis using recent IRS data that suggests otherwise.
1. In 2010 (most recent year available), the top 400 taxpayers based on Adjusted Gross Income earned $106 billion collectively, and they paid $19.1 billion in federal income taxes at an average tax rate of 18% (see chart above).
2. In 2010, the bottom 50% of taxpayers, a group totaling 67.5 million Americans, earned collectively almost $1 trillion and paid $22.4 billion in federal income taxes at average tax rate of 2.4% (see chart above).
Bottom Line: A small group of 400 of America’s most successful earners in 2010, about the number of residents living in a typical apartment building in Washington, D.C., paid almost as much in federal income taxes as the entire bottom half of America’s 135 million tax filers, which is a population equivalent to the combined number of residents living in America’s 29 least populated states, plus the District of Columbia. What makes this disparity possible is the fact that 41% of individual income tax returns filed in 2010 had a zero or negative tax liability, according to The Tax Foundation. And a recent CBO study (featured on CD here) found that the entire bottom 60% of American households are “net recipient households” and received more in government transfers than they paid in federal taxes in 2011.
When you have only 400 Americans paying almost as much in federal income taxes as the entire bottom 50% of Americans filing income tax returns, I think we can dismiss any notion of the rich not paying their “fair share” of taxes. In fact, maybe the IRS should publish the names and addresses of the Top 400 taxpayers (or provide a forwarding service to protect anonymity), so that we can all send them “Thank You” letters to express our gratitude for shouldering such a disproportionately large share of our collective tax burden.
Giving thanks for the invisible hand, the kaleidoscopic energy and productivity of the free market, and no turkey czar
View related content: Carpe Diem
This post has been an annual tradition at CD now for several years:
Like in previous years, most of you probably didn’t call your local supermarket ahead of time and order a Thanksgiving turkey this year. Why not? Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you showed up “unannounced” at your local grocery store and selected your Thanksgiving bird.
The reason your Thanksgiving turkey was waiting for you without an advance order? Because of the economic concepts of “spontaneous order,” “self-interest,” and the “invisible hand” of the free market. Turkeys appeared in your local grocery stores primarily because of the “selfishness” and “self-interest” (maybe even greed in some cases) of thousands of turkey farmers, truckers, and supermarket owners who are complete strangers to you and your family. But all of those strangers throughout the turkey supply chain co-operated on your behalf and were led by an “invisible hand” to make sure your family had a turkey on the table to celebrate Thanksgiving this year. The “invisible hand” that was responsible for your holiday turkey is just one of millions of everyday examples of the “miracle of the marketplace” where “individually selfish decisions must lead to a collectively efficient outcome,” as economist Steven E. Landsburg observed.
In a 2003 Boston Globe article titled “Giving Thanks for the Invisible Hand,” syndicated columnist Jeff Jacoby offered a wonderful tribute to the miracle of the invisible hand that makes affordable turkeys available so efficiently every year at Thanksgiving through the power of “spontaneous order” and without the need for any central planning or a “turkey czar”:
Isn’t there something wondrous — something almost inexplicable — in the way your Thanksgiving weekend is made possible by the skill and labor of vast numbers of total strangers?
To bring that turkey to the dining room table required the efforts of thousands of people — the poultry farmers who raised the birds, of course, but also the feed distributors who supplied their nourishment and the truckers who brought it to the farm, not to mention the architect who designed the hatchery, the workmen who built it, and the technicians who keep it running. The bird had to be slaughtered and defeathered and inspected and transported and unloaded and wrapped and priced and displayed. The people who accomplished those tasks were supported in turn by armies of other people accomplishing other tasks — from refining the gasoline that fueled the trucks to manufacturing the plastic in which the meat was packaged.
The activities of countless far-flung men and women over the course of many months had to be intricately choreographed and precisely timed, so that when you showed up to buy a fresh Thanksgiving turkey, there would be one — or more likely, a few dozen — waiting. The level of coordination that was required to pull it off is mind-boggling. But what is even more mind-boggling is this: No one coordinated it.
No turkey czar sat in a command post somewhere, consulting a master plan and issuing orders. No one forced people to cooperate for your benefit. And yet they did cooperate. When you arrived at the supermarket, your turkey was there. You didn’t have to do anything but show up to buy it. If that isn’t a miracle, what should we call it?
Adam Smith called it “the invisible hand” — the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many. Out of the seeming chaos of millions of uncoordinated private transactions emerges the spontaneous order of the market. Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance. Indeed, the more an economy is planned, the more it is plagued by shortages, dislocation, and failure.
It is commonplace to speak of seeing God’s signature in the intricacy of a spider’s web or the animation of a beehive. But they pale in comparison to the kaleidoscopic energy and productivity of the free market. If it is a blessing from Heaven when seeds are transformed into grain, how much more of a blessing is it when our private, voluntary exchanges are transformed – without our ever intending it – into prosperity, innovation, and growth?”
Bottom Line: As you celebrate Thanksgiving tomorrow with your family, make sure to express some thanks and gratitude to the thousands of “invisible” strangers who won’t be there in person, but who were led by the “invisible hand” of the market over the last several months to make sure your holiday feast was possible.