What is the maximum income-tax rate that anyone should be expected to pay?

Some questions are never settled, in part because people often ignore the theoretical and empirical evidence, and history that can help answer the question. The question of what an optimum income-tax rate would look like is one of those questions.

Rather than attempt to answer it, political demagogues merely shout: "It is only fair that the rich pay more."

Back in 1971, a Scottish economist by the name of James A. Mirrlees wrote a groundbreaking paper, in which he attempted to answer the question of what an optimum income-tax regime would look like if one desired to reduce inequalities while at the same time not discouraging work and economic growth.

Up to the time of Dr. Mirrlees' work, no one had been able to figure out the optimum trade-off between equality and efficiency. Dr. Mirrlees was awarded the Nobel Prize in economics in 1996 for his work, and was knighted in 1998.  Here is what he won his Nobel and knighthood for.

One of the nicest and sharpest guys in the Senate is John Ensign of Nevada.  As the chairman of the National Republican Senatorial Committee, he's in a good position to handicap the Senate races for 2008.

He did just that at a small briefing on Capitol Hill this week, promising to do so without any Pollyannic varnish.  Judge for yourself. 

Currently, of 100 Senate seats, 51 are Democrat (counting Bernie Sanders and Joe Lieberman), 49 are Republican.  The odds seem slim that the GOP could gain the majority, but less slim that the Dems will expand theirs.  Thirteen months is an eternity on an election clock.  There will be surprises on both sides, count on it.

There are 22 Republican seats up, including five retirements, while the Dems have only 12.  Many GOP seats are vulnerable, but the Dems' main targets are:

We initiate this week a new feature in To The Point: the serialization of a novel I am writing entitled The Jade Steps.

Every week from now on until completion, there will be a successive chapter. We begin today with Chapter One: Casa Colorada. This is a historical novel, the true story of one of history’s most remarkable and influential women. Her life sounds like a fairy tale, but it’s history, it actually happened. Her name was Malinali.

The Jade Steps has a two-fold purpose. The first is to tell Malinali’s story, as fascinating as it is unknown. The second is to bring peace to the civil war raging in the soul of Mexico. I hope you all enjoy it. --- JW


Chapter One: CASA COLORADA

In a valedictory speech last weekend of characteristically Latin American duration - a mind-numbing three hours - the Argentine president, Cristina Fernandez de Kirchner, claimed that her country was the only one in the world to have reduced its national debt over recent years.

Only Kirchner could think this a matter of national pride - for reduction in the national debt via the mechanism of default is anything to boast of.  

Nonetheless, where Argentina treads, others will surely soon be following. The world is sinking under a sea of debt, private as well as public, and it is increasingly hard to see how this might end, except in some form of mass default.

This most certainly includes China, by the way.  China's total indebtedness has quadrupled since 2007 to $28 trillion, according to estimates by McKinsey. At 282% of GDP, China's debt burden is now bigger, relative to output, than the US.

It's so obvious who the HFR Heroes of the Week are that we need to dispense the suspense and laud them right out front. 

They are the six white men, three white women, two black women, and one black man who comprised the Saint Louis County Grand Jury that refused to indict Police Officer Darren Wilson.  We must add to them the St. Louis County prosecutor Bob McCulloch, whose statement announcing the grand jury decision on Monday (11/24) is here.

They all knew their lives could be at stake with the murderous anger and multitude of death threats against them, yet they opted for the truth straight in the face of it.  That's flat out American heroism.  We owe them a grave debt of gratitude...

There are good lessons to be learned from this Ferguson Lunacy, and benefits to be gained.  Here's the most important...

There was another major event that rivaled the Ferguson grand jury decision in importance this week.  For background, who is the GOP Congressional Establishment leader you most love to hate?

If you pay people not to work, what do you think they will do?

In a new staff paper published by the New York Federal Reserve Bank titled "Unemployment Benefits and Unemployment in the Great Recession," the researchers found "that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extension of unemployment-benefit eligibility."

The irony here is that President Obama and the congressional Democrats kept voting to extend the unemployment benefits, which had the effect of keeping unemployment far higher for a much longer time than if they had not done so.

As the Fed researchers explained: "Our results lead us to expect that the stimulative effect of higher spending by the unemployed is largely offset by the dramatic negative effect on employment."

The artificially induced higher unemployment caused economic growth and total output to be significantly lower. The high unemployment and slow growth are major issues in the upcoming election -- all working against the interest of the Democrats, who voted for this destructive policy.

Some Democrats voted for the extended unemployment benefits in the name of compassion for the unemployed without thinking through the consequences -- particularly to themselves.