Archived Posts July 2012 - Page 6 of 12 | Acton PowerBlog

On Friday, President Obama, during a campaign event in Virginia, told the crowd that people with successful businesses couldn’t give themselves a bit of credit:

Look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart….Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.

There are a number of people who might be startled to hear this. In The Call of the Entrepreneur, three men describe how they did “get there on their own”. For instance, Brad Morgan, a dairy farmer from Michigan, had to figure out how to save his failing dairy farm. And he did. HE did: not a government program, not a nebulous “somebody”, but Mr. Morgan himself.

In his book The Entrepreneurial Vocation, Rev. Robert Sirico says this about the men and women who take financial risks to create jobs for themselves and others:

What is unique about the institution of entrepreneurship is that it requires no third-party intervention either to establish or to maintain it. It requires no governmental program or governmental manuals. It does not require low-interest loans, special tax treatment, or public subsidies. It does not even require specialized education or a prestigious degree. Entrepreneurship is an institution that develops organically from human intelligence situated in the context of the natural order of liberty.

To tell a person who has made personal and financial sacrifices to create wealth for themselves and others that he or she owes it all to someone else…well. Maybe that’s the way it plays in politics, but not in entrepreneurship. Certainly, there is always room to recognize those who have helped along the way: mentors, guides, partners and cheerleaders, but the creators of wealth and business know that the words of Frank Sinatra ring true: I did it my way.

When it comes to Swiss bank accounts, pop culture brings to mind wealthy people who hide assets from various groups, such as the IRS or their jilted family members. Our sympathies do not align with the type of people we imagine hold Swiss accounts. In fact, it is easy to get quite envious of the idea of holding a Swiss bank account, or possibly resentful that others can that are well off can avoid paying as much in taxes as possible.

Sadly, our perceptions lead us astray and throw up barriers to peaceful trade. Last year, a measure to go after tax avoiders who used Swiss (and other foreign) accounts was included in the jobs bill. Now, that law (known as FATCA) is harming Americans and Swiss workers alike. The New York Times has the story.

“Congress came in with a sledgehammer,” said H. David Rosenbloom, a lawyer at Caplin and Drysdale in Washington and a former international tax policy adviser for the Treasury Department. “The Fatca story is really kind of insane.”

Essentially, the law is so onerous to foreign banks that many say they do not want American business at all.  In fact, the law affects more than just Swiss banking. It actually imposes costs on virtually all foreign banking that deals with Americans. From the NYT:

“The Fatca legislation treats all Americans with overseas bank accounts as criminals, even though most of them are honest, hard-working individuals who happen to be living and working or retired abroad,” said Jacqueline Bugnion, a director of American Citizens Abroad.

This is incredibly inconvenient to Americans abroad, who may earn income in foreign denominations which would normally be easier to deposit in foreign banks. On the flip side, we have foreign based firms who operate in the United States. A Swiss firm is set to bring 150 jobs to Youngstown, Ohio in September. Do you think a Swiss firm might have Swiss bank accounts? Thankfully, the law does not seem to have scared off this investment, but it’s possible this was planned long before FATCA came to be.

We should be very wary of policy that is born of the rhetoric of envy. According to the NYT article, the treasury expects to take in about $8 billion from the new law, which may be much lower than the costs that foreign banking institutions face in complying with the new rules. As Jordan Ballor wrote last year, taxation should be primarily be about raising revenues. Can a law that causes more economic harm than it raises in revenue be a good law for revenue? The politics of envy and resentment seem to have clouded our judgement so badly that we are going to create a greater economic harm than the fiscal benefit to our country. Envy and resentment are natural, but we should recognize them for what they are: vices. It’s not surprising that vices lead to bad law.

H/T to Matt Welch

A major reason why the nation has historically prospered, says John B. Taylor, is because Americans worked within a policy framework that was predictable and based on the rule of law, with strong incentives emanating from a reliance on markets and a limited role for government. When we deviate from that standard—as we have for the past few years—we struggle. But we can find our way back if we’d follow Hayek’s recipe for recovery:

In implementing this new economic strategy, policymakers should be guided by Hayek, especially by his emphasis on the rule of law and the predictability of policy. As he wrote in The Road to Serfdom, “Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principles known as the Rule of Law. Stripped of all technicalities, this means that government in all its actions is bound by rules fixed and announced beforehand—rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.”

Rules-based policies produce more stable economies and stronger economic growth. When people make decisions, they look to the future. Prices that convey information and provide incentives reflect the future. So good decisions as well as the prices that guide them depend on the predictability of future policy—and thus on clear policy rules.

Read more . . .

Brian Fikkert, a Professor of Economics and Community Development at Covenant College and the Executive Director of the Chalmers Center for Economic Development, takes a look at Arthur Brooks’ The Road to Freedom: How to Win the Fight for Free Enterprise in this week’s edition of CPJ’s Capital Commentary.

I think it’s a pretty balanced review, and Fikkert rightly highlights some of the important strength’s of Brooks’ work. But he also highlights some specifically theological concerns that have animated my own engagement with “happiness” research:

At a fundamental level, Christians must reject Brooks’ ethical standard: human happiness as defined by autonomous human beings. Brooks’ ethics are rooted in Enlightenment humanism rather than the transcendent standards of God’s moral decrees. To determine if the free enterprise system is moral, Christians must determine if it satisfies biblical standards of justice, not autonomous humans’ notions of happiness.

It’s important to note, of course, that as the head of AEI Brooks is making a case to a much more heterogeneous audience than simply like-minded Christians. And he’s trained as a social scientist, not as a theologian. But I think it would be interesting to hear how Brooks would address some of these challenges not firstly as the president of the American Enterprise Institute but as a professing Christian.

The answer Arthur Brooks gave to Josh Good of Christians for a Sustainable Economy (CASE) at Dr. Brooks’ plenary at the most recent Acton University is a great place to start:

American Enterprise Institute president and 2012 Acton University plenary speaker Arthur Brooks has a recent column in The Washington Post that lists five myths about free enterprise. Brooks’ five myths address some of free enterprise’s most common critiques and do so by giving free enterprise a moral aspect. The five points are especially relevant this election season, he says, because the two candidates represent such different fiscal perspectives.  Here’s a look a myth #2:

2. Free markets are driven by greed.

I once asked Charles Schwab how he built the $16 billion investment company bearing his name. He never said a word about money. He spoke instead about accomplishing personal goals, creating good jobs for employees and the sacrifices along the way — including when he took a second mortgage on his home so he could make payroll.

Entrepreneurs are rarely driven by greed. According to Careerbuilder.com, in 2011, small-business owners made 19 percent less money per year than government managers. And as Northwestern University business professor Steven Rogers has shown, the average entrepreneur fails about four times before succeeding.

Free markets and entrepreneurship are driven not by greed but by earned success. For some people, earned success means business success, while for others, it means helping the poor, raising good kids, building a nonprofit, or making beautiful art — whatever allows people to create value in their lives and in the lives of others.

Earned success gets at the heart of “the pursuit of happiness.” The General Social Survey from the University of Chicago reveals that people who say they feel “very successful” or “completely successful” in their work lives are twice as likely to say they are very happy about their overall lives than people who feel “somewhat successful.” And it doesn’t matter if they earn more or less; the differences persist.

Those acquainted of Acton Institute president and co-founder Rev. Robert Sirico will recognize arguments such as these from Sirico’s recent title, Defending the Free Market: The Moral Case for a Free Economy. Sirico, like Brooks, argues that free enterprise is the economic system that best complements morality.

To listen to Brooks’ 2012 Acton University Lecture, click here.

Alex Avila

Professional baseball player. Starting catcher for the Detroit Tigers. Starting catcher in the 2011 All-Star Game. At only 25, Alex Avila has already created a terrific career. Yet, he is very mindful of what might have been.

In a recent interview, Avila notes that his Cuban roots could have led to a very different life for him and his family:

Both of my grandfathers actually fled from Cuba during the Communist Revolution in the 1950s, so it’s not surprising that they share in Tommy’s [Lasorda, former manager of the Los Angeles Dodgers] conservative political outlook. When your own government won’t allow you to participate in the most basic freedoms — freedom of religion, freedom of speech, freedom to own private property — then you want to come to a country where such things are allowed. We take those freedoms for granted, but they aren’t automatic anywhere, even here, unless we work to preserve them.

If my grandfathers hadn’t escaped from Cuba, they may not have survived, and the same is true with my parents, who were very young at the time.

Avila also credits his family’s strong Catholic faith and his father’s gentle support for his success.

Lord Acton said, “…at all times sincere friends of freedom have been rare…” It appears that Avila is one of those sincere friends.

Read the entire Avila interview here.

Blog author: jcarter
Monday, July 16, 2012
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Several years ago economist Walter Williams explained “How Not to Be Poor”:

Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And, finally, avoid engaging in criminal behavior.

Williams is right—it’s not rocket science. Yet many Americans are shocked to discover that life choices are often (though certainly not always) the most determinative factor in the financial security of both individuals and families. Some people, particularly on the political and cultural left, are even offended by the idea that promotion of bourgeois institutions like marriage might be the key to entering—and staying in—the middle class.

But the evidence has become so hard to ignore that even the New York Times is being forced to acknowledge the obvious. This weekend, Jason DeParle wrote a lengthy article highlighting how a primary cause of class division in this country is based on who gets—and stays—married:
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Franciscan University has launched the site Faith and Reason intended to be a hub for Catholic intellectual life. The Rev. Robert Sirico, along with others such as Cardinal Raymond Burke, prefect of the Supreme Tribunal at the Apostolic Signatura and Father Raniero Cantalamessa, OFM Cap, preacher to the Papal Household, are contributors to the site which focuses on issues concerning the Church, culture, politics, philosophy, morality and the marketplace.

Read more about Faith and Reason here.

Blog author: jcarter
Friday, July 13, 2012
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Readers of PowerBlog are already aware that Acton research fellow Anthony Bradley‘s ability to blend theology, ethics, and economics has made him on of the most intriguing public intellectuals in America. Now readers of Black Enterprise Magazine are finding what we’ve already known for years: “His writings and commentary on issues ranging from race and religion to politics and economics have led to his recognition as one of the most brilliant minds of the century.”

In a profile by Aisha M. Taylor, Bradley makes an important point about how even theologians need to network:
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Two Congressional representatives have introduced the Religious Freedom Tax Repeal Act, seeking to repeal the fine on faith the Obama administration’s abortion-inducing drug, contraception, and sterilization mandate imposes:

The Religious Freedom Tax Repeal Act would stop the Obama administration from levying this huge tax on religious employers,” Representative Black said.

“With the HHS mandate, the administration has set up an impossible choice for many religious affiliated institutions: either violate the law and pay a tax, or violate your conscience,” Black says. “This means some of the most respected parochial schools, hospitals, soup kitchens, and universities across our country will have to choose between violating their faith to keep their doors open or paying a potentially devastating tax.”

Read more . . .