Hendrickson’s View

Mark W. Hendrickson

Mark Hendrickson is an economist who recently retired from the faculty of Grove City College, where he remains a Fellow for Economic & Social Policy for the College's Institute for Faith and Freedom. These articles are from The Epoch Times and The Institute for Faith and Freedom, an online publication of Grove City College.

AOC’s Ravings Against Billionaires

“No one ever makes a billion dollars. You take a billion dollars.”

That was the punch line of democratic socialist Rep. Alexandria Ocasio-Cortez (AOC) in a Martin Luther King, Jr., Day public interview with writer Ta-Nehisi Coates. The audience erupted into enthusiastic applause. This is a sad but vivid example of the woeful economic ignorance rampant in our society today.

Mr. Coates had asked AOC why he would be a bad guy if he became a billionaire by selling widgets. She replied that he really didn’t make them (shades of Barack Obama in 2012). Instead, she asserted, the billionaire sits

“. . . on a couch while thousands of people were paid modern-day slave wages. . . . You made that money off the backs of black and brown people [and] single mothers . . . who are literally dying because they can’t afford to live. And so no one ever makes a billion dollars. You take a billion dollars.”

There are many errors in AOC’s remarks, but let’s address a few.

First, let’s debunk the myth of the exploitative business owner lazily sitting around while others do all the work. Entrepreneurs are the wealth creators of society. They figure out how to combine the economic factors of production (land, labor, and capital) in new ways to create and provide new goods and services for others. Such endeavors require vision, stamina, energy, and hard work. If it were as easy as sitting on a couch, everyone would be a rich entrepreneur. Instead, entrepreneurial excellence is somewhat analogous to playing professional baseball, football, or basketball: Only a minority of people have enough talent to play professional sports competitively, and only a few of those are superstars. Not every human has what it takes to be an entrepreneur, and a Bill Gates or Jeff Bezos will be as rare as LeBron James or James Harden. Why do we admire star athletes but scorn star entrepreneurs (some of whom, AOC should acknowledge, are “black and brown people”)?

Second, AOC does not understand wealth creation. She seems to believe that billionaires extracted their billions by some dastardly process, leaving piles of victims in their wake. This is the old zero-sum view of the world that darkened human thought in the 16th century — the notion that one person’s gain is another’s loss. That is a fallacy.

In free markets based on private property, people only buy or sell if they anticipate they will be better off by doing so. We exchange what we value less for what we value more; otherwise, the trade wouldn’t happen. Thus, both parties to any voluntary transaction gain value. The billions earned by corporations are mirror images of the billions of dollars of value they have created and supplied to others.

The profits/benefits of consumer and producer are roughly comparable. But the economic value of the producer is simply more concentrated — that is, on one side you may have a corporation of 5,000 people having created billions of dollars of value for tens of millions of consumers. The total value exchanged between the corporation and its many customers is in the same ballpark, but on a per-capita basis, those billions are concentrated among a relatively small number of people on the producer side and diffused among a much larger number of people on the consumer side. But both sides are richer, not one side at the expense of the other, as AOC mistakenly believes.

It is morally perverse and economically stupid to demonize, persecute, and seek to eliminate billionaires, as Sen. Bernie Sanders desires. (See his wealth tax, among other obnoxious proposals. By the way, you can now get your very own “Billionaires Should Not Exist” bumper stickers by donating to the Sanders campaign.)

The continual denunciation of billionaires by demagogues is dangerous. Sanders has avoided saying we should hate billionaires, but in an interview with The Nation, he approvingly cited FDR’s explicit “hatred” for “economic royalists,” calling billionaires today’s royalists.

One of the consequences of the anti-capitalist fulminations of AOC, Sanders, et al. is that there are equally ignorant and self-righteous people out there who want to put words into action in some pretty vicious and violent ways. For example, Project Veritas recently recorded Sanders campaign staffer Martin Weissgerber making such revolting statements as “Guillotine the rich”; “What will help is when we send all the Republicans to re-education camps”; and “The Soviet Union was not horrible . . . [but was] the most progressive place to date in the world.” (Yes, he actually said those things.) Maybe you want to live in a society even more “progressive” than the USSR, but for the average American, this is an existential threat to our basic rights and our way of life.

We need more economic enlightenment in this country, and we need it now — not just because there is an election this fall, but because millions of Americans are in the grip of an extreme ideology that can only be described as warped and destructive.

Budget Deficit Capitulation: Our Spending Problem

During the week before Christmas, Congress rushed a spending bill into law.

Two spending bills were introduced that Monday, a flurry of political horse-trading ensued, numerous pork barrel favors were hastily added, and — presto — by Friday Congress had approved $1.4 trillion in discretionary spending. Treasury and budget officials acknowledge that future deficits will now rise more than earlier anticipated.

The American people responded to the new spending bill with a collective yawn. A deep national apathy toward the national debt has settled in. Few people care anymore. President Trump may care on a personal level, but as a political pragmatist, deficit spending is one battle he has chosen not to fight. Even those of us ashamed of how our youth are being progressively swindled by federal deficit spending have resigned ourselves to the fact that our government has a debt addiction.

The signs that Uncle Sam would further enlarge fiscal deficits had been unmistakable. As I wrote in November, the GOP-sponsored “Prevent Government Shutdown Act of 2019” was a sign of capitulation by former deficit hawks. It was clear then, if it hadn’t been before, that an expansion of deficit spending was virtually a done deal.

Now that the spending increase has happened, I’m not here to howl or protest. I emphatically think it was wrong, but what’s done is done. However, there are a couple of very important numbers that I wish to call to your attention now. I hope that you will remember them the next time President Trump or some other non-socialist president calls for lower tax rates and the left argues against them.

I’ll give the numbers to you in two forms, only the second of which I hope you will commit to memory:

In Fiscal Year 2018, President Trump’s first full year in office, federal revenues were $3,329 billion. In Fiscal Year 2019, the first full year during which Trump’s corporate and personal income tax cuts were in effect, federal receipts totaled $3,462 billion. To be more specific, federal revenues from income taxes decreased; however, the lower tax burden on the private sector contributed to an increase in the number of Americans working. That, in turn, increased federal revenues from FICA payroll taxes. Furthermore, increased economic activity boosted federal revenue from excise taxes.

Critics were too hasty to claim that tax cuts inevitably shrink federal revenues. Receipts may decline from some taxes while still rising overall. And even if overall government revenues fall, so what? All that means is that people get to keep more of their own income.

Now here is the set of numbers I hope you can remember: Federal revenue increased four percent last year over the previous year, while federal spending rose eight percent. This points to a simple, irrefutable arithmetical truth: The reason the federal deficit is rising is not because tax revenues are falling — they are not — but because spending is rising at a faster rate.

Back in the 1980s, critics on the Left claimed that President Reagan’s supply-side tax cuts caused deficits to rise. Not so. Then, as today, federal revenues actually increased substantially after the tax cuts (rising from roughly $600 billion to $1 trillion), but federal spending increased even more. Inevitably, then, deficits rose.

The bottom line remains: The federal deficit is a spending problem, not a revenue problem. Don’t ever let anyone tell you anything different.

Cheating in Baseball: Past, Present, and Future

The world of Major League Baseball (MLB) has been rocked by a major scandal. Several teams, most prominently (so far) the 2017 Houston Astros championship team, have been implicated in schemes to steal catchers’ signs to pitchers.

The Astros combined high-tech and low-tech means — television cameras and monitors to detect the signs and then banging on trash cans to alert batters to what kind of pitch to expect. That reduces a pitcher’s greatest advantage — the batter’s uncertainty about what kind of pitch he would face — and Astros’ batters feasted as a result.

Cheating in baseball (and indeed in all sports) is as old as sport itself. The desire to compete, excel, and win is part of human nature. Alas, so are baser tendencies, such as pride, envy, and greed that motivate some participants to cheat.

The good news is that Americans overwhelmingly despise cheating (except in politics, but that’s another story). They want their champions to win fair and square, admiring them for their goodness as well as their athletic accomplishments. Knowing this, the overseers of professional sports — league commissioners, team owners, and, by extension, corporate advertisers — strive to maintain the integrity and fundamental fairness of their “product” — their sport. They know they can’t afford to let some bad apples ruin the market for the sport for everyone.

MLB’s current cheating scandal is far from its first, and certainly won’t be its last. Coincidentally, this one has come exactly one century after MLB’s biggest scandal — the infamous Black Sox scandal, in which several Chicago White Sox players accepted bribes from gamblers to throw the World Series. To rescue MLB’s reputation, Commissioner Kenesaw Mountain Landis banned eight Chicago players for life, including the great “Shoeless Joe” Jackson, even though Jackson (as we are reminded in the great movie “Field of Dreams”) played flawlessly.

MLB has strictly prohibited players from getting involved in gambling ever since. This is why the sport’s all-time hits leader, Pete Rose (who bet on games, although he was never suspected of throwing a game), hasn’t been inducted into baseball’s Hall of Fame. As one who greatly admires Rose’s skill and considers him to be one of the top two hitters I ever saw bat in person (the other was Ted Williams), I agree with Rose being banned. The sport must be bigger than any individual player, and MLB can’t afford to send out the morally dubious message that one can get away with misdeeds if one is a star.

There have been all sorts of relatively minor episodes of cheating in MLB’s history. Some players have used corked bats. Pitchers have found sneaky ways to “doctor” the ball. But the biggest scandal between the Black Sox fiasco and today’s depressing news was the steroid/performance-enhancing drugs scandal that erupted early in the previous decade.

One of the great attractions of sports is the possibility of seeing prodigious feats of athleticism that are beyond the reach of ordinary human beings. One of the most impressive things I’ve ever seen in baseball happened in 1998. I was visiting a friend in St. Louis who happened to pitch BP (batting practice) for the Cardinals. That was the year the Cards’ Mark McGwire hit the astounding total of 70 home runs. My friend and I (along with 10,000 to 15,000 other fans) went to Busch Stadium two hours before the game to watch McGwire take BP. Watching him crush ball after ball, sending them speeding to the far reaches of the park, was breathtakingly awesome.

Alas, though, the stunning feats of certain sluggers and pitchers in the ’90s and early 2000s were tainted when it came to light that players were taking drugs that bulked up their musculature and strength. Players were no longer competing on a level field, and it left a bad taste in the mouths of baseball fans. While MLB seems to have suppressed the most flagrant performance-enhancing drug abuses, from time to time, players are still caught and punished.

The last thing MLB needed today was another cheating scandal, but here we are. Baseball fans are united in agreement that such cheating is wrong and unacceptable. The only debate is whether the penalties assessed to the Astros — suspension of their manager and general manager for the 2021 season, forfeiture of the team’s top two draft picks in the next two annual drafts, and MLB’s maximum allowable fine of $5 million — were harsh enough.

Should the commissioner strip the Astros of their 2017 World Series championship? That would certainly disincentivize such cheating. But what would MLB do — award the championship to the team that lost the series? But what if they cheated, but eluded detection? Have no champion at all? These are not attractive options. Plus, the full extent of the sign-stealing cheating isn’t yet known. Multiple teams have been implicated, including the Boston Red Sox, which won the 2018 World Series.

MLB is facing the grim possibility that more than one championship season has been tainted by cheating.

By the way, let me suggest a simple solution for the sign-stealing problem. Technology made the cheating possible, and technology can end it. Just have catchers wear a small device by which they can transmit their signal (encrypted, of course!) to a similar device worn by the pitcher.

And while I’m at it, let me do something very dangerous for an economist: make a prediction. Baseball may have a problem, and probably sooner than later, caused by advances in artificial intelligence (AI).

As shown in the movie “Moneyball,” MLB general managers are making increasing use of sophisticated quantitative analyses to assemble winning rosters at affordable prices. As such analyses become increasingly advanced, inevitably, AI is going to produce a blueprint for how to squeeze out a few more wins over the course of a season — the difference between qualifying for the playoffs or not.

Just as MLB is now looking at machines to take over the calling of balls and strikes from fallible human umpires, AI conceivably could produce a scenario in which a team’s human manager ends up being little more than a messenger boy from the AI program to the players. It could be AI, not a human being, determining which players to play against given opponents and at what times to make substitutions, bunt, throw a curve, steal a base, etc.

We live in an age of computers, so MLB can’t and won’t ban the use of computers. But what will happen if the team that has the most powerful, advanced AI wins championships? Ugh.

Ultimately, cheating is a moral problem. Cheaters are tempted to believe they will gain by their cheating, but then, when they get caught and disgraced, their glory turns to ashes. They see the respect of fans slip away like quicksilver, and they realize that their phantom “achievement” was nothing more than fool’s gold. Think of the shame that Joe Jackson (guilty or not) must have felt in that famous moment when a boy who was one of his fans mournfully pleaded with his hero, “Say it ain’t so, Joe.”

Perhaps, we as a society need to revisit more often those cautionary tales of making deals with the devil, of sacrificing one’s human legacy and immortal soul for short-term material gain. Faust, Mephistopheles, Dorian Gray — even Joe Hardy in Broadway theater’s paean to baseball, “Damn Yankees” — these and other fictitious stories teach us the great truth that doing wrong never ends well.

And so it is proving in baseball as in other areas of life.

The Real Christmas

Amidst this season of gift-giving and merry-making, let’s ponder three remarkable aspects of the nativity of the baby Jesus two millennia ago.

1) Birth to a Virgin — To atheistic materialism, this seems like a fairy tale. Spiritually, though, what could make more sense? God is supreme; therefore, the divine supersedes the human and the spiritual trumps the material in every way. Jesus’ birth, resurrection, and ultimate departure via ascension illustrate that fundamental point. (See Isa. 55:9.)

Indeed, throughout his earthly sojourn, Jesus repeatedly transcended material limits and so-called laws. He walked on water; transported a ship to shore instantaneously long before anybody dreamed of “Scotty, beam me up”; he instantaneously healed leprosy, a man born blind, and a withered hand; he fed thousands of people with a few loaves and fishes, and ended up with more food than he started with; he restored life to Lazarus after four days in the grave; Those are but a few examples, of course.

Skepticism doubts the historical authenticity of these occurrences, and instead claims that humans have evolved from a primordial ball of gas — that beautiful art, loving hearts, selfless giving, and feelings ranging from grief to joy are mere chemical reactions of no permanent significance. Question: Who/What created that ball of gas? No, my atheistic friends (I used to share your beliefs), I’ll trust Jesus’ assurances of eternal life given by a loving, all-wise Creator. That doesn’t seem nearly as superstitious to me as the ball-of-gas theory.

2) Mary and Joseph — What perfect models of parenthood are Jesus’ human parents: loving, nurturing, protective. Mary’s utter purity and her humble willingness to make her will subservient to God’s remain awesomely exemplary. Joseph, too, was spiritually receptive and humbly obedient. He accepted the angelic message about Mary’s miraculous conception, and was totally supportive and protective of his wife, even though the baby she carried was not his own, even as she was betrothed to him. Later, he heeded the angel’s warning about Herod’s deadly intent, and without delay took Mary and Jesus to safety in Egypt until the danger had passed.

3) The mission of Jesus — The Jewish people had been anticipating the Messiah/Christ/Anointed One to deliver them from Roman oppression. The name “Jesus” means “Joshua” — the same as Moses’ successor, a powerful military leader who vanquished the Jews’ enemies. But the child Jesus came to Earth with a higher mission.

Jesus came first to the Jewish people, because they were the only monotheists and it was the Hebrew prophets who had foretold His coming. However, Jesus did not come to save only Jews. His mission was not tribal, but universal. As the famous scriptural verse from John states, “God so loved the world that He gave His only begotten Son, that whosoever believes in Him shall not perish, but have everlasting life” (John 3:16). “Whosoever” — not just the genealogical descendants of Abraham.

Furthermore, Jesus’ mission wasn’t the limited goal of political liberation, but the boundless goal of everlasting salvation from all the enslaving enemies of all humankind: sin, sickness, sadness, and death. He came to replace mortality with eternal life and the woes of this world with the bliss of heaven.

The magnificent core of Jesus’ teachings is sublimely simple: Love God wholeheartedly and your neighbor as yourself. We humans — even self-professed Christians — haven’t completely mastered those rules yet, but we are gradually making progress. Certainly it is encouraging that the oppressive Roman Empire is long gone while billions of people have accepted the sovereignty of the Savior, Jesus Christ. As His message of love for one another warms more hearts and animates more lives, war will diminish. Jesus is indeed “the prince of peace.” Hallelujah! And thank you, Lord.     *