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Thomas Sowell aims to debunk ideas on taxing the rich and government intervention in housing, energy

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Jeff Poor
Media Reporter

As unemployment rose to 9 percent on Friday, some scratched their heads and looked to Washington for answers.

However, on Thursday night’s “America’s Nightly Scoreboard” on the Fox Business Network, economist Thomas Sowell, the Rose and Milton Friedman senior fellow on public policy at Stanford University’s Hoover Institution and author of “Economic Facts and Fallacies,” explained why Washington doesn’t have the answer. FBN host David Asman listed symptoms of the sluggish economy, and Sowell explained why government intervention wasn’t the solution in each case.

On how government intervention in housing has messed up the market:

“A couple of ways. One in lots of localities of which northern California is just one, local government intervention has prevented housing from being built. Obviously when you cut back on the supply while the demand is growing, prices go up through the roof. Then the national politicians seen that these little pockets of extremely high prices here and there decide it’s a national problem and therefore they must intervene,” Sowell said.

“Now, the hard data say the very opposite of what the politicians are showing. What the market shows is that where the government has very little intervention, places like Houston and Dallas, the housing prices are a fraction of what they are for exactly the same kind of house in a place like San Francisco where there’s massive government intervention. So, the government is not necessary to bring down the housing costs – government are what drive up the housing costs.”

On taxing the rich to achieve economic prosperity:

“No. They’re rich are really a distraction and a red herring. And looking back at the actual taxes actually paid by people in high income brackets, it makes much less difference to them than it does to the economy because when the tax rates go very high, they simply put their money into the tax-exempt securities while they send the money overseas where it’ll create jobs in other countries. So that’s what hurts the economy. The rich themselves are seldom hurt by that and often when you bring down the tax rate — the start of 1920s, also under Kennedy and Reagan, and then later, George W. Bush — as we bring down the tax rate, they take their money out of the tax shelters, they bring their money home, back home from abroad and you create more jobs. But of course, and it’s not that the liberals don’t understand this, at least some of them, is that they understand that talking about tax cuts for the rich brings in votes for the politicians, even if it doesn’t bring in any revenue for the government,” Sowell said.

On whether or not government could bring down health-care costs:

“Theoretically it could. I’ve never seen a case where it did. What they call bringing down the cost of health care is refusing to pay the price of health care. You know, you can always bring down the cost of anything by not paying it, but of course, there are repercussions for that and you see this in countries where the government has taken over health care, you see deterioration. For example, the waiting time for an operation in most countries that have government-controlled health care can go on for months. You know, I can remember going to doctor here, he says, ‘You needed operation.’ I mean, like a week later I had already had the operation. If I lived in Canada or Britain and some of these other countries were the government controls the health care, I’d just have to suffer for months and maybe I would or would not still be alive when time came for them to do the operation.”

Watch:


On how a so-called windfalls profits tax on oil companies would raise energy prices:

“This talk about how they’re not going to tax people with incomes under $250,000 is such absolute nonsense. When you put huge taxes on electric utility companies, when you put taxes on everything that people buy, yes, they won’t be pay their higher taxes, they’ll be paying someone else’s higher taxes and the higher prices that they pay for everything from food to electricity to gasoline and so forth.”

And that leads to price controls, which is the gateway to failed centrally planned economies:

“Absolutely. You know, it’s one thing for conservatives to say the things like central planning, things like that don’t work, but when government’s controlled by communist and socialist, changed to a freer market. I mean, do you realize that the last study of free markets found that the number one free market in the world was in Hong Kong, in a communist country? So they’ve learned the lesson the hard way. We’re going back. We’re going to insist on learning the lesson the hard way for ourselves,” Sowell said.

  • Pingback: Thomas Sowell: Taxing the Rich, Government Intervention in Housing and Energy Simply do not Work | PEOPLEUNLIKEUS

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  • BrendanJParedes

    The comment about Hong Kong is obviously misunderstood by most Progressives… in fact by anyone who didn’t hear Friedman talk about in the early 80′s. Hong Kong was held out by Friedman then as the ultimate example of Capitalism and the Free Market system, especially when compared the the relative poverty of Red China all around it. It was and is dynamic, becoming a model that Red China has since attempted to replicate and adjust to fit its socialist/planned economic model with limited success.

    Where China has taken a more hands off approach, it has flourished and generated great wealth, where it hasn’t… The Chinese model now of partnerships with western firms, such as Johnson Controls, in joint ventures, they have been able to retain ownership while allowing the private western ventures to build and grow the business, assuming the lion’s share of the risk. This has allowed them to boot strap their industrial sector into the modern global economy while still maintaining the ability to shut out western firms by telling them to get lost when they want to. You see a similiar approach in the current administration’s take over of GM and Chrysler, in that they have ownership, but unlike China which still desperately needs that foreign investment and Market driven economic policy to make it work, it is more a political entity meant to be an instrument of their policy and feed their supporters, ie Organized Labor. China doesn’t have that. Nor do they particularly want to grab that tiger by the proverbial tail. They need growth, economic, industrial, and job, rather than maintenance of the political status quo and their power base. Essentially a patronage system. Economic value isn’t even a major concern save in selling it to the public.

    Hong Kong does not fit that model. It is essentially a free fire zone of capitalism and market economic practices. It’s also a cash cow to them, so they are wisely maintaining a hands off approach to it as was their part of the bargain at the turn over from the British. It is the fact that they are part of China that keeps Hong Kong from turning into a political nightmare for them.

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  • russ311

    “…the number one free market in the world was in Hong Kong, in a communist country? So they’ve learned the lesson the hard way. We’re going back. We’re going to insist on learning the lesson the hard way for ourselves,” Sowell said.

    That is the change the progressives hope for.

    The irony would be hilarious if it weren’t so tragic.

  • KGC

    Thomas Sowell is unquestionably the most articulate, intelligent voice on the theory of economic prosperity that this, or frankly any other, country has to offer. Ludwig von Mises would be proud.

  • SunnyJ

    And don’t forget how great it was to change from analog to digital TV, except for 90% of those in rural areas, especially the elderly, now have onging disrupted little square boxes jumping on the screens instead of a picture. Thanks so much controlling nanny staters for that upgrade. As a rural home health provider, I find home after home of the elderly cut off from communication now because of this poorly conceived and even more poorly implemented upgrade. What marxist/socialists never keep in mind, just two words: Unintended Consequences!

  • Joe Steel

    “…they send the money overseas where it’ll create jobs in other countries.”

    That’s right. We need tougher laws to make sure it doesn’t happen.

    • thephranc

      No you dumb tool we need less laws that make it so companies have to move over their to make a decent profit.

      You are, as always, economically retarded.

    • Dee2008

      Bad idea.

      It would much better to “attract” that investment here by creating a favorable environment, than to try to control investment through punishment. We’re supposed to be a free country, remember?

    • krjohnson

      Let’s force them to give it all to the government, who will undoubtedly waste it. Fantastic idea.

      Remember: Governments make political decisions, not economic decisions. Let the market work.

      • Joe Steel

        Relying on markets to be effective tools of public policy is foolish. Markets don’t do that well because they’re not supposed to. Markets are about greed. Public policy, ideally, is about overcoming greed to promote justice.

        • Supernatural Witness

          Actually, the free market is about individuals and businesses supplying a service or product for people’s benefit. If everyone buys your product like say, Facebook or iPod, then you become very wealthy.

          But let’s just concede the point to you and say businessmen go into business for greed. Public policy makers go into politics for power out of a desire to control other people.
          I trust greedy sinners more than power hungry control freak sinners.

        • bigsigh

          And………you continue to live in your little make believe, happy bubble where reality is of no interest.

        • hcrawford

          I hope that as you’re walking down the road to Hell, you’re admiring all the good intentions that paved that road.

  • goodinohio

    Anyone remember when they saved us from high cable tv bills? Cost went up for 90%.

    • thephranc

      I remember when the state of MD saved us from high electric bills and the cost went up 100% in a few years.