Jeff  Carter

Harry Reid gave a speech during the debt debate on the Senate floor designed to placate Democrats that were upset over the outcome of the debt ceiling vote.

In the speech, Reid stressed some words that I find interesting. One was  “fairness”. He used “fair” or a derivative of the word at least ten times. He also said it was the role of government to create jobs.

What’s fair exactly? Fair is different depending on the individual. Economics professors call it “normative” economics. Normative economics places value judgments on policy. Those judgments are subject to change. In cases of income, you might call it the politics of envy.

Here is an example: How much is enough money? Depending on who you ask, and which geographical location, you will get a range of answers.

Pollsters have determined $250,000 per year is a lot of money to most of the public, and this is why Obama hammers on that number.

Here is another one: What’s a correct hourly wage? That all depends on a lot of factors. It’s subjective.

The bulk of government policies are all subjective. The government likes to pick and choose winners and losers. The power then doesn’t reside in the market, but with a person in a position of authority.

Contrast that with what’s known as “positive economics”. Positive economics are concepts that can be quantified and proven, just like a scientific method. Everyone meets the same minimum standard.

Here is an example: Raising the minimum wage increases unemployment.

This can be shown graphically:

And it can be shown anecdotally that raising the minimum wage creates unemployment.

It’s a simple statement of fact.

That’s why the only way to have a fair tax code is to set some standard, and have everyone regardless of income, class, gender, marital status or any other category you want to include, meet the same standard. A flat tax is ideal.

Is it fair to tax billionaires more than anyone else? Who creates more jobs, billionaires or government?

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.