People who say it cannot be done should not interrupt those who are doing it. Welcome to From On High.

Tuesday, December 26, 2006

On That 'Shrinking Middle Class'

For those who have bought into Senator-elect Jim Webb's class warfare act and believe the middle class in this country to be disappearing, new statistics recently released blow his argument out of the water:

The Wages of Growth
The Wall Street Journal

The latest reports on wages and income have been rolling in, and with them we can discount one more canard about the current economic expansion--namely, that wages are stagnant and workers are doing far more poorly than they did in that second Age of Pericles known as the 1990s.

Over the past year, the real average wage for non-supervisory employees has risen 2.8%. That equates to about a $1,200 increase in purchasing power for the typical household this year. Last year, real median household income was also up 1.1% after inflation. This rise in take-home pay helps to explain how Americans have had the disposable income this Christmas shopping season to pay $600 for PlayStation 3 computer games and $150 for the Kid-Tough Digital Camera for three-year-olds. (link)

Facts of course have never gotten in the way of Jim Webb's fanciful (he is a novelist after all) view of the America he knows so little about. So expect him to continue his rant about the rich.

But as it turns out, we're doing quite well. Let the good times continue to roll.

On Tariffs

I consider myself to be as much a capitalist as the best of them, except where one particular topic is concerned. That has to do with targeted tariffs on imported goods. Whereas the concept is anathema to most modern-day economists, I consider it to be good strategy if dealt with carefully, considering the circumstances we have made for ourselves.

Two important facts to consider:

1) Chinese manufacturers pay no American corporate taxes.

2) The American corporate income tax rate is currently higher than the average global corporate tax rate. (It should come as no surprise that booming economies like that of Hong Kong at 17.5%, Singapore at 20%, and Ireland at 12.5% have rates far below that of the USA at 35%).

These facts alone, considering the exorbitant tax rates our corporations pay to the feds, to the states, to local governments, make for a seriously imbalanced playing field. Tariffs, if applied carefully (i.e., if they are targeted) balance that field.

The Wall Street Journal this morning takes the healthier approach to the problem. They just want the rate reduced:
The Wages of Growth
To lift worker incomes, cut the corporate tax rate.

We certainly agree with those who'd like to do more to lift worker paychecks, so ...

... slash the corporate income tax. A recent study for the American Enterprise Institute by economists Kevin Hassett and Aparna Mathur examined 72 nations over 22 years and found that "wages are significantly responsive to corporate taxation." In today's global economy, capital migrates across national borders away from high-tax nations to places where tax systems are less punitive. Workers suffer when capital flees, and job and wage growth slow.

Many political leaders have adapted to this reality, which is why the average corporate tax rate across the globe has fallen over the past 25 years to an average of about 30% from 50%. The AEI study finds that, if the U.S. were to cut its 35% corporate tax to the OECD average of 30%, American manufacturing workers would gain nearly a 10% pay raise dividend within five years, which is the equivalent of roughly a $3,500 a year pay boost. (link) [my emphasis]
In lieu of a sudden change of heart and gain of brain cells on the part of the Democrats who now control our government, which would necessarily reduce the egregious income tax rate burden on America's corporations, I support the alternative - that we level the playing field by setting and maintaining tariffs on goods imported by low-tax countries.

This is, after all, still the world's marketplace.

Black Gold

This is impressive news that will have a positive impact on prospects here in Southwest Virginia:
Coal power boon
By H. Sterling Burnett, The Washinghton Times

The United States will need more electric power in the coming years -- lots more -- and coal will be critical to meeting those power needs.

While coal is the lowest-cost source of reliable power, it is also a secure energy source. The U.S. contains more than a quarter of the world's recoverable reserves, equaling a 250-year supply at current consumption. As a result, coal-fired power plants generate 52 percent of U.S. electricity. Coal power's low cost, reliability and security are why more than 150 new coal-fired power plants are being built or proposed across the U.S. (link)
For those of you who still believe coal to be polluting the planet, there's this: "Fortunately for air quality, modern coal-fired power plants emit 90 percent less air pollution than previous generations and less carbon dioxide (CO2) per kilowatt produced."

Get those surface mines going. There's wealth in them there hills.