LearnLiberty Audio Podcast

As the U.S. debt and deficit grows, some politicians and economist have called for higher tax rates in order to balance the budget. The question becomes: when the government raises taxes, does it actually collect a larger portion of the US economy? Professor Antony Davies examines 50 years of economic data and finds that regardless of tax rates, the percentage of GDP that the government collects has remained relatively constant. In other words, no matter how high government sets tax rates, the government gets about the same portion. According to Davies, if we're concerned about balancing the budget, we should worry less about raising tax revenue and more about growing the economy. The recipe for growth? Lower tax rates and a simplified tax code.

Some politicians argue that raising the minimum wage helps the poor and disadvantaged. While this may appear to be the case on the surface, economics professor Antony Davies explains that the common view of the minimum wage overlooks one important detail: The minimum wage does not force employers to pay a particular wage to every worker; it forces employers to pay a particular wage to every worker they choose to keep. Using an example, Professor Davies shows that minimum wage increases may make the least productive workers too expensive for employers. Minimum wage increases do not help the worker at the expense of the employer; instead they help the most productive workers at the cost of the least productive workers. What's worse is that over time the more productive worker likely would have been rewarded for productivity anyway. The evidence is not just anecdotal. The data show that minimum wage increases have little effect on unemployment among college graduates. Minimum wage increases lead to higher unemployment among high school graduates, though, and significantly increase unemployment for the least skilled, least educated workers. The minimum wage may be a well-intentioned public policy, but it often hurts the workers most in need of help.

If the government can print money, why doesn't it just print some and hand it out? Economics professor Antony Davies explains that we can understand why printing money doesn't work by looking at why money was invented in the first place. Prior to the invention of money, people relied on bartering to exchange goods and services. Bartering has two problems. The first is what economists call the double incidence of wants problem. To exchange goods and services, you have to find someone who not only has what you want but who also wants what you have. The second problem with bartering is the retention of value problem. When bartering for goods and services, it is difficult to save up what you produce because items produced may not hold their value. Money solves both of these problems. Money is valuable only because people will give you goods and services in exchange for money. It derives its value from the goods and services. Printing more money will simply spread the value of the existing goods and services around a larger number of dollars. This is inflation. Ultimately, doubling the number of dollars doubles prices. If everyone has twice as much money but everything costs twice as much as before, people aren't better off. Having the government print money will not increase wealth.

The Trail of Tears shouldn't have happened. People at the time knew that it was wrong, that it was illegal, and that it was unconstitutional, but they did it anyway. Historian Amy Sturgis explains why the forced removal of the Cherokee Nation to 'Indian Territory' (modern-day Oklahoma) was wrong on both moral and legal grounds. It was morally wrong because of the loss of life. Somewhere between one-quarter and one-third of the Cherokee Nation was lost as a result of the Trail of Tears. It was morally wrong because the arguments used to justify the move were based on falsehood. It stripped property rights from a minority that lacked the means to defend itself and redistributed their property to people who wanted it for themselves. It was legally wrong on Constitutional and judicial grounds. It was based, in part, on an invalid treaty. How can the Trail of Tears provide lessons today? There were people who stood against the Trail of Tears at the time it happened. They were unable to change U.S. policy, but their words speak to us today. They suggest that we can't look aside and ignore the Trail of Tears as an example of something that was just part of the mid-19th century mindset. This is a story about how a group that had power gained at the expense of a minority unable to defend itself. The Trail of Tears set precedents we can only hope to avoid repeating.

In 2011, the federal government received $2.2 trillion from all revenue sources and spent 3.8 trillion, resulting in a $1.6 trillion deficit. To put federal government spending in perspective, economics professor Antony Davies shows how long it takes the government to run out of money and how much the government needs to cut to make it through the end of the year. Suppose that on January 1 the government received its revenue of $2.2 trillion and began spending. To spend $3.8 trillion in one year means the government spends at the rate of $434 million an hour, or more than $10 billion a day. With $2.2 trillion to spend, spending at a rate of $434 million an hour, the federal government runs out of money at 11:59 p.m. on July 31. To eliminate the deficit the government needs to cut five months' worth of spending. Professor Davies shows that perhaps just cutting programs is not going to be enough to balance the budget.

The U.S. federal government collected $2.2 trillion in 2011. This includes revenue from all sources. Also in 2011, the federal government spent $3.8 trillion and was $14.6 trillion in debt. These numbers are too big to comprehend, so economics professor Antony Davies presents the government's fiscal situation scaled down to the level of an average household. He shows what spending on debt would look like if the government's revenue were $50,000 instead of $2.2 trillion. If you spent the way the government does, you might be contemplating bankruptcy. What should be done to ensure the U.S. government gets its fiscal house in order before it becomes impossible to pay the bills?

Historian Amy Sturgis recounts history that seems made for the movies but hasn't made it to the big screen. It's a decades-long story of oppression and freedom fighting. Why hasn't there been more attention paid to John Horse and the Black Seminoles? Prof. Sturgis argues that John Horse and the Black Seminoles deserve to be remembered for a number of reasons: They created the largest haven in the U.S. South for runaway slaves. They led the largest slave revolt in U.S. history. They secured the only emancipation of rebellious slaves prior to the U.S. Civil War. The formed the largest mass exodus of slaves across the United States and, ultimately, to Mexico. Learn more about this remarkable story that has been overlooked by film makers, popular culture, and, importantly, historians of slavery. This story has fallen through the cracks, in part because it blends the history of Native Americans and of slaves and in part because it represents a blemish in U.S. history. But this group of freedom fighters-who ultimately found peace, liberty, and prosperity-is worth remembering.

The United States currently pays 3 percent interest on the government debt. Economics professor Antony Davies shows that this year the U.S. government owes $440 billion in interest alone. This is three times the annual operating expenses of the Iraq and Afghanistan wars. Using data, Professor Davies shows that the situation is likely to get worse. Today the interest rate is the lowest it's been since the 1960s. If the rate rises to 8 percent, which is what it was 20 years ago, interest payments on the debt will be larger than the annual cost of every war the United States has ever waged combined. The more money the government is spending on interest, the less money it has available to provide other services. So what should be done? The government should take advantage of today's low interest rate and pay off as much of the principle as possible now, before interest payments rise to unsustainable levels.

Economists and philosophers use the word 'value' differently. Philosophy professor Aeon J. Skoble points out that while economics discusses value as a subjective thing, philosophy tends to address value as objective. Rights, for example, are something everybody has to have. There's no such thing as 'human rights' unless every human has them. That's as objective as you can get. When economists talk of subjective value, they're speaking about the way the price system works. When economists say value is subjective, this means, in the philosopher's language, that people have different tastes and preferences and people value things differently. The way to know what something is worth is to say what it is worth to someone. If that's true, this explains why the philosopher's conception of objective value is a good one. If people have different tastes and preferences, we need an objective moral framework to live together in society. We have to have an objective way of knowing what to expect from each other and how to treat each other. Something like rights provides an objective framework for social living amongst people with different tastes and preferences.

Economics evidence has long demonstrated that free trade benefits all nations by increasing their standards of living and wealth. Professor Pavel Yakovlev argues that empirical evidence shows that free trade promotes peace. He provides the following reasons for this outcome: Trade makes countries more commercially interdependent and provides strong incentives to avoid war. This is known as the capitalist peace theory. Countries that trade a lot with each other have a lot to lose if war breaks out. Free trade and bargaining is the most cost effective way of resolving disputes and obtaining resources, while war is a costly way of doing the same things. Free trade brings more goods and ideas into a country and also promotes tolerance and understanding. Professor Yakovlev also discusses a few examples of evidence that supports this argument. Trade not only increases prosperity in countries, but it also has been shown to promote world peace.