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November 19th, 2009 6:09 pm
Pelosi-Nomics: Decrease Opportunities, Increase Costs

An opportunity cost is a term used in economics to identify the next-best-option you didn’t choose. For example, if a person has $20 and buys a book instead of a CD, the opportunity cost is the foregone CD. Of course, in order to have an opportunity cost, you need an opportunity to choose. One of the arguments against enhancing an already heavy tax burden on high-end earners is that many of them will move to other, less oppressive countries. If regulations of Wall Street pile up too high, the best and brightest will go to London or Hong Kong. In that scenario, the opportunity cost would be choosing not to live in America.

But where economists see rational behavior enabled by choices, Democrats usually see greed propelled by self-interest. Thus, House Speaker Nancy Pelosi is making it clear she intends to increase the costs of financial transactions by eliminating a financier’s opportunities to live and work in less taxed locales. How? By mandating a global tax that would remove any incentive for highly skilled workers to relocate overseas.

Any tax imposed on financial transactions would have to take effect internationally to prevent Wall Street jobs and related business moving overseas, U.S. House Speaker Nancy Pelosi said on Thursday.

“It would have to be an international rule, not just a U.S. rule,” Pelosi said at a news conference. “We couldn’t do it alone, we’d have to do it as an international initiative.”

True, bringing all financial transactions under a universal system of regulation would take care of the “problem” of people trying to avoid confiscatory taxation. On the other hand, it also decreases the likelihood that highly motivated people will be able to create wealth through the financial system. Once again, with one notable exception, the modern Democratic Party is about as anti-choice as a collection of policy makers can be.

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