Elon Musk and the Long Range Foundation

In Robert Heinlein’s 1956 novel, Time for the Stars, mankind’s most important scientific work is financed by an organization called the Long Range Foundation.  The Foundation invests in research so speculative, expensive, and slow that governments, corporations, and sensible people want nothing to do with it.

Naturally, the projects keep succeeding.  A sustained and diversified portfolio of research usually pays off in the long run, even though most individual research projects do not.

Weather control and other improbable ventures make enormous amounts of money, so the Foundation invests in even more improbable ventures.  Eventually, it becomes fabulously wealthy and can afford to finance interstellar spaceships, telepathy experiments, and anything else that strikes its directors as potentially useful to humanity.  It is the ultimate virtuous circle: invest vast sums of money on unlikely research, accidentally make a fortune, and use the fortune to investigate something even crazier.

This was science fiction when Heinlein wrote it.  Today, we call it the Elon Musk business plan.

Musk made his first serious money from Zip2 and, then, a much larger fortune from PayPal.  He could have purchased several islands, a respectable collection of yachts, and enough politicians to start his own congressional caucus.  Instead, he put much of his fortune into electric automobiles and rockets.

At the time, neither investment looked particularly sensible.

Electric cars were slow, unattractive little vehicles with limited range.  They were marketed chiefly to people who believed smugness should be classified as an alternative fuel.  Rockets, meanwhile, were built by governments and gigantic defense contractors.  Starting a private rocket company sounded approximately as reasonable as announcing that you intended to build your own aircraft carrier in the backyard.

Musk did both.

SpaceX was founded in 2002 with the modest objective of reducing launch costs, making rockets reusable, colonizing Mars, and saving the human race.  Most new businesses begin with more manageable goals, such as surviving until Friday.

The first three Falcon 1 launches failed.  Spectacularly.  SpaceX was running out of money, and Musk was simultaneously trying to keep Tesla alive.  Had the fourth launch failed, SpaceX probably would have collapsed.  It succeeded.

SpaceX subsequently developed the Falcon 9, Dragon spacecraft, and reusable booster systems.  Landing an orbital-class rocket vertically had long been considered technically possible but economically doubtful.  SpaceX turned it into something approaching routine.  Boosters now return to Earth and land upright on platforms at sea, looking like something Heinlein would have rejected as a little too theatrical.

SpaceX also created Starlink, which required launching thousands of satellites before the system could produce anything resembling an adequate return.  A conventional company would have balked at the cost.  A government program would have required years of hearings concerning orbital debris, rural broadband, environmental impact statements, minority contracting requirements, and whether the satellites were being launched from a politically equitable selection of congressional districts.

Musk ignored all of the problems and just launched them.

Tesla followed a similar path.  Musk did not create the original company, although he became its largest early investor and eventually its dominant executive. Tesla began with the Roadster, proved that an electric car did not have to resemble a golf cart with doors, and then gambled heavily on the Model S.

The company came close to failure more than once.  It nevertheless built factories, developed battery systems, established a charging network, and forced nearly every major automobile manufacturer to take electric vehicles seriously.  One need not believe that every Tesla is perfect—or that every prediction from Musk arrives on schedule—to recognize that he changed the automobile industry.

Then there is Neuralink.

Neuralink is attempting to produce a practical interface between the human brain and computers. Its current experimental implants have allowed people with severe paralysis to control computer cursors and other devices through thought.  The company is also developing Blindsight, an implant intended to create visual perception by stimulating the visual cortex directly.

Musk has suggested that Blindsight could eventually allow blind people to see and might someday provide vision extending into ultraviolet or infrared wavelengths.  For the moment, that portion remains a promise rather than an accomplishment. Musk’s predictions are frequently delivered according to a calendar that has only a casual relationship with the one hanging on everyone else’s wall.

Still, the research is real.  It requires neuroscientists, surgeons, engineers, custom electronics, experimental robots, regulatory approval, years of testing, and an astonishing amount of money. There is no guarantee of success. There may not even be a clearly defined path to success. That is precisely why ordinary investors are reluctant to finance it.

There are, of course, caveats.

Private capital did not accomplish all this by itself. SpaceX received hundreds of millions of dollars in NASA development payments and later billions in government contracts. NASA provided knowledge, facilities, technical standards, and—most importantly—a dependable customer.

Tesla received a $465 million Department of Energy loan that helped finance the Model S and its Fremont manufacturing plant.  Tesla repaid the loan early, but the government assumed a risk that private lenders were unwilling to accept.  Electric-vehicle tax credits also helped create a market.

Neuralink stands on decades of neuroscience and brain-computer-interface research conducted at universities, hospitals, and government laboratories, much of it financed by taxpayers.

Musk did not invent rocketry, electric motors, lithium-ion batteries, satellites, or brain implants.  What his companies have done exceptionally well is combine existing scientific knowledge, take it out of the laboratory, and force it through the long, expensive, humiliating process of becoming a useful product.

Nor does a large fortune automatically produce technological miracles.  Jeff Bezos has invested billions in Blue Origin without matching the accomplishments of SpaceX.  Musk’s Boring Company has yet to transform transportation, and the Hyperloop appears to have been placed in the same imaginary warehouse where we keep flying cars and household nuclear reactors.

Money is necessary, but it is not sufficient. It must be accompanied by technical judgment, disciplined management, persistence, and a willingness to look foolish for a very long time.  Musk exhibits a remarkable tolerance for failure, steadfastly continuing to financially support projects long after a board of directors would have cut their losses and pulled the plug.

Government certainly can conduct great research. The Manhattan Project, the Apollo program, the internet, GPS, jet engines, nuclear power, and much of modern medicine demonstrate that beyond dispute.  Government is particularly good at financing basic science because the benefits are widely dispersed and may not appear for decades.

The difficulty is not that government lacks money.  The difficulty is that government lacks patience under public observation.

Imagine a federal rocket program exploding three vehicles in succession.  The first explosion would produce an investigation. The second would produce televised hearings. After the third, members of Congress would demand resignations, refunds, criminal prosecutions, and perhaps a constitutional amendment prohibiting rockets.

No administrator would be rewarded for saying, “Yes, we destroyed $100 million today, but we learned a great deal.”

A private investor can call that research.  A newspaper calls it a scandal.

Government programs must survive elections, annual appropriations, changes of administration, hostile committees, inspectors general, environmental lawsuits, and the evening news.  A project that will require fifteen years of failure before producing a breakthrough must be defended repeatedly to people whose next election is never more than two years away.

Public pressure demands visible results, predictable schedules, and an explanation for every failure.  Genuine experimental research offers none of those things.  It advances through wrong turns, broken equipment, embarrassing mistakes, and discoveries that were not included in the original PowerPoint presentation.

A large pool of private capital provides something more important than money: insulation.  It gives researchers time to fail without having the project canceled by a congressional committee or converted into a campaign issue.  It allows one generation of profits to finance the next generation of speculation.

The ideal system is, therefore, neither government nor private enterprise. Government should finance basic research, absorb risks that society as a whole must bear, establish reasonable regulations, and become the first customer for valuable new technology.  Private capital should perform the frantic experimentation, integration, manufacturing, and cost reduction that government manages poorly.  There are some projects that are only feasible if large pools of capital are in the hands of relatively few people. 

Heinlein understood the essential point. The Long Range Foundation succeeded because it possessed enough money to ignore short-range thinking.

Musk has not created Heinlein’s Foundation and he certainly has not succeeded at everything he has attempted.  But he has demonstrated that civilization occasionally benefits from having an enormously wealthy eccentric willing to spend a fortune on ideas that respectable people consider ridiculous.

Some of those ideas remain ridiculous.

A few become the future.

The King Who Hated Tobacco—Right Up Until He Taxed It

You could call it royal hypocrisy.  You could call it cognitive dissonance.  You could even call it moral inconsistency—assuming, of course, that someone who claimed a divine right to rule over everyone else was expected to have morals in the first place.  Personally, I'll settle for economic opportunism on a truly royal scale, courtesy of King James I of England.

But before we get to James and his famous hatred of tobacco, we need to back up a few thousand years.

Actually...more than 12,000 years.

Long before Europeans had ever heard of tobacco, Native peoples in South America were cultivating and using it.  The plant probably originated somewhere in the Andes or nearby western South America before spreading throughout the Americas.  It was smoked, chewed, snuffed, and used in religious ceremonies from the Amazon to what is now Canada.  Contrary to popular belief, the earliest smokers probably weren't rolling cigars.  They were more likely smoking loose tobacco in primitive pipes or as wrapped leaves, while true cigars seem to have been developed much later, in the Caribbean.

Like every successful vice in history, tobacco traveled well.  Whether it spread because people enjoyed it, because they believed it had medicinal value, or because nicotine is one of the world's more persuasive chemicals is anyone's guess.  Archaeologists have found evidence that people were using wild tobacco in what is now Utah roughly 12,000 years ago. That does not  mean they were farming it, however.  Deliberate cultivation probably began somewhere between 5,000 and 8,000 years ago, making tobacco one of the oldest domesticated plants in the New World.

The first Europeans to encounter tobacco arrived with Christopher Columbus in 1492.  While exploring Cuba, two members of his expedition reported that the local Taíno people carried "firebrands and bundles of leaves" that they lit and inhaled.  The Europeans had just witnessed the world's first recorded cigar smokers.  Columbus himself wasn't particularly impressed, but one of his sailors, Rodrigo de Jerez, apparently acquired the habit and may have become the first European smoker.

The Taíno also gave Europe the word tobacco—or at least something close to it.  Historians still argue over whether the original word referred to the plant itself or to the Y-shaped tube used to inhale its smoke.  Either way, within little more than a century the strange New World weed would conquer Europe far more effectively than any Spanish conquistador ever could.

By the late 1500s, tobacco had become the latest must-have import for Europe's upper crust.  Spanish and Portuguese sailors carried it home first, and before long it had reached England.  Contrary to popular legend, Sir Walter Raleigh did not introduce tobacco to England.  English sailors and explorers had already encountered it and members of the ill-fated Roanoke Colony returned home smoking it.  Raleigh's real contribution was far more powerful: he made it fashionable.  As he was one of Queen Elizabeth I's favorite courtiers, anything Raleigh did instantly became more interesting.  If Sir Walter had shown up wearing a lobster on his head, half the nobility would have been shopping for crustaceans by week's end.

We are certain that Raleigh demonstrated his new fad at court, but whether the Virgin Queen ever sampled the weed is not recorded, but I like to think she got to enjoy at least one good vice.

Then, in 1603, Queen Elizabeth died and was succeeded by James VI of Scotland, who became James I of England.  James took one look at the growing number of Englishmen puffing away on clay pipes and reacted much the way a modern health crusader reacts to a teenager with a vape.

In 1604, he published his famous pamphlet, A Counterblaste to Tobacco.  It wasn't merely a criticism of smoking—it was a full-throated literary assault.  James described tobacco as:

"A custome lothsome to the eye, hatefull to the Nose, harmefull to the braine, dangerous to the Lungs..."

That is one of history's more memorable one-sentence product reviews, even if the King neglected to put it on Yelp. (That’s quite a contrast to the positive advertising by tobacco sellers some 360 years later—and those guys knew about the scientific evidence that backed up the claims made by the king!)

Given such strong feelings, you might expect James to outlaw tobacco entirely.

He didn't.

Instead, in that very same year, he imposed what amounted to one of the biggest "sin taxes" in English history.  The import duty on tobacco jumped from 2 pence per pound to 6 shillings and 10 pence per pound.  Since there are twelve pence in a shilling, that meant the tax soared from 2 pence to 82 pence per pound—a staggering forty-one-fold increase.

Apparently, tobacco was so vile, so disgusting, so offensive to God and man...that the Crown simply couldn't afford to let anyone stop buying it.

The plan worked—sort of.  The higher tax generated revenue, but it also generated smugglers, who quickly discovered that avoiding an eighty-two-penny tax could be a profitable line of work.  Eventually the government moderated the duty, not because James had softened his opinion of tobacco, but because confiscating contraband is considerably less profitable than collecting taxes on legal imports.

The irony only deepened over time.  England's American colony at Jamestown was struggling to survive until John Rolfe began growing a sweeter variety of tobacco that English smokers actually wanted to buy.  Suddenly, the "loathsome" weed became the economic engine that kept Virginia alive.  Before long, English ships were carrying ever-larger cargoes of tobacco across the Atlantic, customs officials were collecting ever-larger duties, and the Crown was becoming increasingly dependent on revenue from the very product its king had condemned as an abomination.

Walk into an English tavern in about 1700 and you'd likely be handed two things: a mug of ale and a long-stemmed white clay pipe.  The pipe wasn't yours, mind you—it belonged to the tavern, just like the tankard and (probably) the cat sleeping by the fireplace.  You smoked it, handed it back, and the innkeeper tossed it into the hottest part of the fire.  Before long it was hot enough to burn away every trace of tobacco—and quite possibly every germ within a hundred yards.  Centuries before anyone had heard of bacteria, publicans had accidentally invented a remarkably effective sterilization process.

The pipes themselves were so inexpensive that they were practically the disposable coffee cups of the seventeenth century.  Most cost only a fraction of a day's wages, and if one broke, nobody shed a tear.  Archaeologists have since repaid the favor by digging up millions of broken stems and using them to date old settlements with surprising accuracy.  It seems the humble tavern pipe, designed to be smoked, broken, and forgotten, has become one of history's most talkative little artifacts.

History has a wicked sense of humor.  Governments often discover that the fastest way to embrace a vice is to figure out how to tax it.  James I may have sincerely hated tobacco, but he also loved revenue.  Faced with choosing between his principles and his treasury, the treasury won by forty-one to one.

 

A New Presidential Coin?

It is almost impossible for me to tell a story without going to the very beginning.  When I taught the freshman course of Western Civilization, I started with Australopithecus and worked my way forward.  So, today we really have to begin with the Civil War.

The Civil War was, like all wars, far more costly than expected.  Congress responded in predictable fashion: it raised taxes, which is pretty much a reflex action, since the typical congressman will want to raise taxes if he sneezes.  Then, still short of funds, Congress borrowed money and when this also failed to raise enough money, Congress authorized the printing of currency that was not backed by anything but the faith that the government would eventually exchange the paper currency for gold or silver.  Within a very short time, it took $285 of currency to buy $100 in gold. 

Economists have a simple description for when any government has two types of official currency.  Called Gresham’s Law, it simply states, “Bad money chases out good.”  This means that, if the government has issued two types of money, people will hoard the “good” money—defined as the money they trust—so that only the “bad” money will be left in circulation.  This is exactly what happened during the Civil War:  as unbacked paper currency was introduced, people hoarded silver and gold.

Unfortunately, this also caused a scarcity of silver and gold coins.  Silver quarters, dimes, and half-dimes quickly became scarce.  (They were called half-dimes since the “nickel”—a coin made of 75% copper and 25% nickel—was not introduced until after the Civil War.).  This made regular commercial transactions difficult.  A single dollar at that time had the purchasing power of over $40 in today’s economy.  You can imagine the difficulty in trying to buy a pack of gum if the smallest bill in circulation today were a $50 bill.

Congress formally authorized the use of postage stamps for government payments in July 1862, but once again, Gresham’s Law kicked in and soon there was a severe shortage of postage stamps. 

To solve this problem, Congress turned—once again—to the printing press, and soon issued fractional notes worth 3, 5, 10, 25, and 50 cents each.  The government ultimately issued about $369 million in fractional notes between 1862 and 1876. 

In 1864, Congress authorized a new printing of 5-cent notes and requested that instead of putting the image of Washington or Jefferson on the note, they honor Clark of the famous Meriwether Lewis and William Clark expedition.  The order was sent to the National Currency Bureau, the predecessor of today’s Bureau of Engraving and Printing.  And here is where the wicket gets sticky.  The superintendent of the bureau was Spencer M. Clark, who promptly saw a golden opportunity—so he produced the new fractional notes with his image instead of that of the famous explorer.  Technically, he had done as ordered.

Maybe he thought no one would recognize him and notice the difference.

Congress was furious.  Representative Martin Thayer of Pennsylvania argued that Treasury officials were abusing their authority to select currency portraits.  On April 7, 1866, Congress enacted language providing that,

“No portrait or likeness of any living person hereafter engraved shall be placed” on federal bonds, securities, notes, or fractional currency.

Clark was not the first living official placed on currency—Salmon P. Chase, Francis Spinner, and William Fessenden had also appeared—but Clark’s audacity was the last straw.  Congress soon discontinued paper notes worth less than ten cents, and the new five-cent nickel replaced Clark’s paper five-cent bill.

Clark surprisingly kept his position until 1868. His little act of bureaucratic vanity, however, created a rule that supposedly governed American money from that point forward: if you wanted your portrait on U.S. currency, you ordinarily had to kick the bucket first.

Well, no… Reread that law; it does not actually prohibit living people from appearing on coins.  Its wording covered federal “bonds, securities, notes, fractional or postal currency”—in other words, paper obligations. 

In 1926, to commemorate the 150^th anniversary of American independence, Congress authorized a commemorative 50-cent coin portraying George Washington and then president Calvin Coolidge on the obverse and the Liberty Bell on the reverse.  Congress authorized up to one million half dollars, which the exposition commission bought at face value and resold for a dollar each.

As a fundraiser, it was a colossal flop—the public wasn’t interested in buying a half-dollar coin for twice the face value, and over 85% of the coins were returned to the mint and melted down.  If you can find an uncirculated coin today, it’s worth about a hundred dollars. 

Having been burned, Congress wanted to keep the nation’s coinage from becoming political advertising.  Allowing a sitting president to place his own portrait on government money smacks of kings, emperors, and assorted dictators who have traditionally regarded national mints as their personal publicity departments.  Restricting presidential coins to the dead keeps the currency historical and nonpartisan—or at least ensures that its subject is no longer running for office.

So Congress required presidents in the Presidential $1 Coin Program to have been dead for at least two years, providing a cooling-off period before the Mint begins polishing anyone’s reputation.  The idea was to honor presidents only after history had begun assessing them, rather than letting current popularity, party control, or presidential vanity determine whose face appeared in Americans’ pockets.

So, it might surprise you to learn that President Trump’s image is going to be on the new $1 coin.  He found a couple of loopholes.

Trump is not being added to the Presidential $1 Coin series created in 2005.  His coin is a separate, one-year issue authorized by the Circulating Collectible Coin Redesign Act of 2020 to celebrate America’s 250th anniversary in 2026.  Therefore, the Presidential-series requirement that its subjects be dead for two years does not apply.

The anniversary law prohibits portraits of living people on the reverse of its coins—but neglects to prohibit them on the obverse.  Treasury is exploiting that distinction: Trump’s portrait is on the front, while the Presidential Seal appears on the back.  Treasury says that makes it legal (although critics contend it violates the law’s obvious intent).  The Mint has begun production, with collector rolls and bags expected in late fall 2026.

And yes—there will be lawsuits.  And lawyers will mention Clark and Coolidge and the difference between obverse and reverse sides.  You have been warned.

JumpStart: How to Tax the Golden Goose, Then Wonder Why It Moved Across the Lake

There is a certain type of city government that looks at a successful private economy the way my cat looks at unattended fried chicken.  It does not think, “How did this get here?” It thinks, “How much of this can I eat before anyone notices?”

Seattle’s JumpStart payroll tax is a fine example of the genre.

JumpStart was sold as a progressive tax on big corporations with highly-paid employees.  It passed in 2020 and targeted large employers with big Seattle payrolls and workers earning above high compensation thresholds.  The theory was simple: Seattle had rich companies, rich workers, and not enough money for housing, homelessness, climate programs, and various other progressive civic ornaments.  Therefore, Seattle would tax the payroll of the successful firms and use the money to do good things.

This is the sort of idea that sounds marvelous in a city council chamber, where money arrives as “revenue,” not as something previously owned by someone else.

Katie Wilson, now Seattle’s mayor, was not some innocent passerby, who wandered into this mess carrying a sandwich board.  Her own campaign material says she played a “key role in designing and passing” the JumpStart payroll expense tax.  Seattle Magazine likewise described her as having played an instrumental role in designing and passing it.  So this is not a case of Mayor Wilson inheriting an alien machine from a previous civilization and wondering what all the smoke is about.  She helped build the machine. 

At first, the machine produced money…Lots of it.  JumpStart generated hundreds of millions of dollars, which allowed supporters to declare victory.  This is the standard first act in a tax drama.  Politicians pass a tax, money comes in, and everyone applauds as if they have discovered fire.

The second act begins when the people being taxed notice and in Seattle, they did notice.  More importantly, they noticed Bellevue.

Bellevue sits just across the city line—incorporated, convenient, and waiting.  As Seattle began taxing employers through JumpStart, some of those employers discovered that moving just beyond Seattle’s reach was not exactly a moonshot.  In less than six years since JumpStart was implemented, Bellevue’s city population has grown by only about 2,300 people, but the community has added more than 10,000 jobs and roughly 4,000,000 square feet of office space.  In other words, the people did not necessarily move, but the payrolls sure as hell did.

Seattle’s problem is that its tax was aimed at exactly the people and companies most able to leave.  A small restaurant owner cannot move his lunch counter to Bellevue without actually moving his life.  Amazon, Microsoft contractors, tech teams, consultants, software divisions, and professional-service firms are another matter.  Their workers do not need to be chained to a particular block of downtown Seattle.  They need laptops, managers, conference rooms, fiber optic cables, and nearby coffee.  Bellevue has all of those, plus the added virtue of not being Seattle.

Bellevue is not Mars: it is just across Lake Washington.  If Seattle makes it more expensive to employ highly-paid workers inside Seattle, a rational company does not need to issue a dramatic press release titled, “Goodbye, Ungrateful City.”  It simply lets leases expire, shifts teams, places new hires elsewhere, and tells the HR department to update the office map…which appears to be exactly the pattern.  Amazon is still in Seattle, but its Seattle headcount has fallen from its peak, while its Bellevue headcount has risen.  Broader reporting has described Bellevue as a major tech alternative to Seattle, with companies are citing taxes, downtown conditions, and quality-of-life issues as part of the attraction. 

Meanwhile, downtown Seattle’s office market has looked less like a triumphant progressive revenue laboratory and more like a partially abandoned corporate aquarium.  Axios reported that downtown Seattle’s central business district vacancy reached 30%, with availability at 34%.  The Wall Street Journal, summarizing the Bellevue boom, described prime Seattle office vacancy at 34.6%, the highest for a large city in the nation.

An analysis backed by Downtown Seattle Association says downtown Seattle lost roughly 30,000 jobs and that taxable office-building value fell dramatically, while Bellevue gained jobs and saw commercial values rise.  Since that is an advocacy-backed report, we should not treat it as holy scripture chiseled onto stone tablets.  But the general direction is not hard to believe.  Tax mobile jobs and some of the mobile jobs move. 

Let us put numbers on this.

If Seattle loses 30,000 jobs, and we assume an average compensation of only $100,000, that is:

30,000 × $100,000 = $3 billion in annual payroll.

If these are high-end tech and professional jobs, the real number could easily be much higher.  Even at the conservative figure, that is $3 billion a year in wages no longer circulating downtown in the same way.  That means fewer lunches, fewer coffee runs, fewer dry-cleaning tickets, fewer happy hours, fewer parking receipts, fewer office leases, fewer business-service contracts, fewer transit trips, and fewer reasons for the next company to locate there.

The office-value loss is even more dramatic.  If downtown office values fall by $10 billion, that is not just a sad day for landlords wearing expensive shoes.  It is a destruction of taxable wealth, collateral value, construction incentive, investment appetite, and long-term urban confidence.  Property-tax systems can disguise the loss for a while by shifting burdens and adjusting rates, but they cannot make dead office value rise from the grave by passing a resolution.

Then comes the truly comic part.  JumpStart was originally sold as dedicated money for housing, homelessness, climate, and equitable development.  But once the city got used to the money, it started using it to plug ordinary budget holes.  Axios reported that Seattle redirected $287 million in 2025 and $223 million in 2026 from JumpStart’s intended uses into general-fund needs. 

Let us add that:

$287 million + $223 million = $510 million.

That is more than half a billion dollars shifted into the general city budget because the city needed the money elsewhere.  In plain English: the tax that was supposed to fund special progressive priorities not only became a crutch for ordinary city spending but also created larger deficits.

And the hole is not gone.

Recent projections show Seattle facing deficits of $175 million in 2027, $164 million in 2028, and $149 million in 2029. 

Add those together:

$175 million + $164 million + $149 million = $488 million.

So Seattle has already shifted about $510 million of JumpStart money into general revenue for 2025 and 2026 and is looking at another $488 million in projected deficits from 2027 through 2029.

That gives us:

$510 million + $488 million = $998 million.

Call it a one-billion-dollar problem, give or take the usual municipal rounding error, which in Seattle seems to be measured in endangered coffee shops.

This is the great irony.  JumpStart was supposed to be a way to make big business pay for Seattle’s ambitions.  Instead, Seattle has become dependent on the tax while the new tax erodes the tax base, making income  less dependable.  And this will only get worse every year.

The city may have gotten the first check, but it seems to have lost the account.

The defenders of JumpStart can still point to money raised, which is true, but it is also something any robber can do.  The question is not whether the city raised money, but it is whether the city’s new tax is chasing off other revenue.  If the tax helped encourage highly-paid jobs, office demand, business investment, and future growth to migrate across the lake, then Seattle did not harvest wealth.  It harvested and ate their seed corn.

That is the part progressive tax designers so often miss.  Capital is not a statue, jobs are not fence posts, and payrolls are not geological formations:   they all move and adapt. Worse yet, they flee quietly—often without leaving a forwarding address.

JumpStart may have been a success in the narrowest possible bookkeeping sense: it produced revenue.  But since the price is a weaker downtown, emptier offices, fewer high-value jobs, lower property values, and a city budget still staring at nearly half a billion dollars in future deficits, then perhaps the name was more honest than intended.

The program actually did “jump-start” something.

It’s just apparently not Seattle.

Five Foolish Ideas from Economically Challenged Legislators

Every now and then a legislator comes up with an idea so pure, so compassionate, so utterly detached from reality that you almost have to admire it.  Not because it will work.  Good Lord, no.  But because it takes a special kind of mind to look at a grocery store, an apartment building, or a checkout lane and think, “You know what this needs?  A mandate from someone who has never had to make payroll.”

There is a particular type of modern politician who believes that prices, wages, rent, inventory, staffing, food waste, and profit margins are not economic facts.  They are moral failures.  If groceries cost too much, command them to cost less.  If food is thrown away, order it donated.  If rent is high, cap it.  If self-checkout annoys someone, regulate the scanner.  If billionaires have money, announce that you will take it and then act surprised when they begin browsing real estate in Florida.

This is economics by bumper sticker.  And, as usual, the bumper sticker fits neatly on the car because the actual explanation would require a trailer.

Let us consider five recent ideas from the economically challenged wing of the legislature.

1.  The Ten Percent Self-Checkout Discount

Some genius in New York has proposed that grocery stores should be required to give customers a ten percent discount for using self-checkout.  The theory seems to be that if you scan your own groceries, you are now an unpaid employee and deserve compensation.

This has the surface appeal of one of those arguments made by a sophomore who has just discovered injustice, marijuana, and sex in the same semester.  “Why should I scan my own soup and not get paid?”

The problem is that grocery stores do not have ten percent profit margins.  They do not have a secret room in the back where they roll around in canned-bean money.  Grocery retail is a low-margin business.  A ten percent mandatory discount is not a reward for the customer.  It is an instruction to sell the food at a loss.

So what would happen?  Exactly what any adult would expect.  Stores would raise prices, remove self-checkout machines, restrict their use, reduce staffing elsewhere, and build the cost into everything on the shelf.  The legislator imagines a shopper saving money.  The grocer sighs and makes more cuts to customer service while demanding more productivity from a shrinking labor force.

This is the recurring problem with economically challenged politicians: they think the first move is the whole game.  They pass the law, everyone claps, and the curtain falls.  In the real world, people respond.  Businesses respond.  The board changes after every move.

If you make self-checkout a guaranteed loss, you do not get cheaper groceries.  You get fewer self-checkout lanes, higher prices, and another small lesson in why arithmetic should be required before holding office.

2.  Mandatory Staffing Ratios for Self-Checkout

Not content with misunderstanding self-checkout once, some places are also considering rules that would require one employee for every few self-checkout machines, along with item limits and other helpful little instructions from the Ministry of Retail Wisdom.

Now, I will freely admit that self-checkout can be irritating.  There are few things in modern life more insulting than being accused by a machine of stealing bananas while a clerk with a magic key has to come pardon you.  The machine says “unexpected item in bagging area” with the moral certainty of Cotton Mather spotting a witch.

But stores already know this.  They know when customers hate the machines.  They know when theft is too high.  They know when one employee can monitor six kiosks and when three kiosks are too many.  These decisions depend on the store, the neighborhood, the product mix, the technology, the time of day, and the customers.

The legislature knows none of this.

A government-mandated staffing ratio is not consumer protection.  It is anti-automation policy with a little smiley-face sticker on it.  If lawmakers want to preserve cashier jobs, they should say so.  But then they should also admit the tradeoff: longer lines, higher labor costs, higher prices, and fewer stores willing to operate in marginal areas.

This is the old habit of pretending that the cost will be paid by “business,” as if business was a large anonymous creature living in a cave.  But the cost gets paid by everyone.  Customers pay it in prices.  Workers pay it in fewer hours elsewhere.  Stores pay it by closing locations or not opening new ones.

The law does not repeal cost.  It merely disguises the invoice.

3.  Paper Copies of Digital Coupons

Then we have the proposal that if a store offers a digital coupon, it must also provide a paper version of the same discount.

I have some sympathy for the complaint.  Digital coupons are often obnoxious.  You walk into a store and see that butter is $3.49, only to discover that this price is available only if you have downloaded the app, created an account, confirmed your email, remembered your password, sacrificed a goat, and allowed the store to track your movements until the Second Coming.

For older customers especially, that is a real problem.  A grocery discount should not require a technology support call from a grandson.

But turning every digital coupon into a mandatory paper coupon is how government turns an annoyance into a department.  Now the store has to print, stock, track, honor, explain, police, and audit the paper coupons.  Employees have to deal with fraud, confusion, arguments, expired coupons, missing coupons, duplicate coupons, and customers who saw the sign but did not bring the paper.

And the predictable result?  Fewer coupons.  There is no way to lower prices by raising costs.

The legislator thinks he has made the discount more accessible.  The store thinks, “Fine, we will offer fewer discounts.” Once again, the law assumes behavior will not change after the mandate.  Once again, this assumption has the life expectancy of a snow cone in Las Cruces.

A sensible rule would be simple: if a store advertises a digital price in the aisle, let the cashier apply it for customers who ask.  Done.  Problem mostly solved.  No paper-coupon bureaucracy.  No compliance circus.

But sensible rules lack the grandeur of a bill-signing ceremony.

4.  Mandatory Donation of Near-Date Food

This is the one that really sounds wonderful, right up until you think about it for twelve seconds.

Grocery stores throw away food.  Poor people need food.  Therefore, require grocery stores to donate food that is near its sell-by date instead of tossing it out.

At first glance, this sounds like kindness.  At second glance, it sounds like kindness written by someone who has never ordered lettuce.

The great mistake is the idea that “the food already exists.” Yes, it exists the first day.  But after the law is in place, the grocer is not making decisions about yesterday’s food.  He is making decisions about tomorrow’s order.

Before the mandate, the manager might order 100 units, expecting to sell 85 at full price, mark down 10, and lose 5.  That is not ideal, but it is part of the abundance customers demand.  We want full shelves.  We want ripe produce.  We want bread available at 6 p.m., not just a sign saying, “We sold the mathematically correct amount at 3:14.”

After the mandate, those last five units are not merely possible waste.  They are a compliance problem.  They must be sorted, stored, refrigerated, documented, separated, perhaps logged, maybe inspected, and coordinated with a charity that may or may not arrive on time with refrigerated transport.

That is not free.  It takes labor.  It takes space.  It takes management.  It takes training.  It creates risk.  It creates overhead.

So next week the manager orders 92.

The legislator sees less food in the dumpster and declares victory.  What he does not see is the food that was never ordered.  The produce that was never stocked.  The bread that was never baked.  The farmer who got a smaller order.  The distributor who handled less volume.  The customer who came late and found empty shelves.  The poor shopper who used to buy markdown meat and now finds there is none.  Everyone loses because of the loss of economy of scale.

This is the difference between physical surplus and economic surplus.  The food is physically there today.  But the legal obligation changes the cost of having surplus tomorrow.  And when you raise the cost of surplus, you get less surplus.

That may sound good until you realize that grocery abundance depends on tolerating some waste.  A perfectly efficient grocery store is one where the last apple is sold to the last customer just before closing.  It is also a store that exists only in the imagination of someone who has never met customers.

The better policy is obvious: make donation easy, voluntary, safe, and legally protected.  Encourage it.  Provide tax incentives if necessary.  Standardize date labels so people stop throwing away food that is still perfectly edible.  Help charities build cold-storage capacity.

But do not turn every unsold tomato into a legal obligation.  Once the government starts punishing inventory risk, the market responds by taking fewer risks.  That means fewer tomatoes and fewer choices in the store.

5.  Rent Control, Wealth Taxes, and the General War on Incentives

For the fifth foolish idea, I am going to cheat and include an entire category: laws based on the belief that incentives are optional.

Rent control is the classic example.  Rents are high, so government limits rent increases.  The current tenant benefits, at least for a while.  The politician takes a bow.  The newspaper runs a photo of grateful renters.

Then landlords stop building.  Maintenance declines.  Units disappear into other uses.  New renters get locked out.  The people already inside the system are protected; everyone outside gets to press his nose against the glass.

Rent control is not housing policy.  It is musical chairs with nicer slogans.

Then there are wealth taxes.  These usually begin with the discovery that billionaires have a lot of money, followed by the belief that they will remain politely seated while the state rummages through their pockets.

But billionaires are not fence posts.  They can move.  Their assets can move.  Their lawyers can move even faster.  Announce a “one-time” wealth tax and every affected person hears the words “first installment.” If the state says, “We will tax you because you were here on January 1,” the obvious lesson is: do not be here on January 1.

Politicians imagine the money sitting still.  Money does not sit still.  Capital has legs, wings, attorneys, accountants, and a deep personal relationship with Delaware.

The same error appears in all these ideas.  Legislators look at the current arrangement and assume it will remain unchanged after they impose new costs.  Grocers will order the same amount.  Stores will offer the same coupons.  Landlords will build the same apartments.  Billionaires will stay put.  Customers will pay less.  Workers will earn more.  Farmers will sell the same produce.  Everyone will behave exactly as before, except in the one narrow way the law commands.

That is not policy.  That is a snow globe.

Shake it, admire the flakes, and ignore the fact that nobody inside is real.

The recurring question in economics is not, “Wouldn’t it be nice?” Of course it would be nice.  It would be nice if groceries were cheaper, rent were lower, food were never wasted, checkout lines moved faster, and billionaires mailed checks to the treasury out of civic affection.

The real question is: and then what?

And then the grocer orders less.
And then the store raises prices.
And then the landlord stops building.
And then the billionaire moves.
And then the discount disappears.
And then the checkout line gets longer.
And then the farmer plants less.

And then everyone wonders why the compassionate law produced such uncompassionate results.

The economically challenged legislator never gets to “and then what?” He stops at the press release.

The rest of us live in the “and then.”