As explained in a great documentary film, she rejuvenated the U.K. economy with a wide range of good policies that addressed major impediments to national prosperity.
Slashing confiscatory tax rates
A reduced burden of government spending
Privatization of state-run companies
Reducing runaway inflation
Yet not everyone is a fan of Ms. Thatcher.
In an article for World Politics Review, Alexander Clarkson claims that the Conservative Party is in trouble because it is enthralled with Thatcherism.
…the collapse of support for the Tory Party…may also be the product of…efforts by successive governments since former Prime Minister Margaret Thatcher took power in 1979 to restructure the state along market-oriented lines. …When market-friendly, neoliberal approaches to governance failed to achieve expected outcomes, each new generation of Tory leaders convinced themselves that success would only be possible through doubling-down on ideological purity… Tory-led governments that followed under then-Prime Minister David Cameron in the 2010s were driven by a deeply held belief that shrinking the state was the only pathway to generating the economic growth needed… there are strong parallels between the former Soviet Union’s obsession with governing along supposedly “scientific” lines and the Thatcherite Tory Party’s belief that societies are shaped by rigidly predetermined laws of economic behavior. …it is no wonder that so much of the working-age population has turned against the political party whose ideological paradigms have dominated British governance since the 1970s.
This is nonsensical analysis.
Yes, various Tory leaders have paid lip service to Thatcher (much as U.S. Republicans in recent decades have said nice things about Reagan), but there’s a big difference between talking and doing.
And the various Conservative Party leaders this century (Cameron, May, Johnson, and Sunak) have not delivered Thatcher-type reform.
The chart at the start of this column shows how the U.K.’s score for economic freedom jumped significantly under Thatcher. Let’s now look at the same data, but for 1970-2021, not just 1970-2000.
Lo and behold, we see that recent Conservative Party leaders (the Tories have been in power since 2010) have not improved economic policy. At all. Indeed, there’s been a slight downward trajectory.
At the risk of understatement, Thatcher’s ghost must be very disappointed.
To be fair, it would have been very difficult for recent Tory leaders to produce dramatic improvements. After all, policy in 2010 was not nearly as bad as it was when Thatcher took office.
So I would have applauded modest improvement. But I will not cheer for modest decline.
Here’s another chart in defense of Thatchernomics. It shows per-capita GDP in the big economies of Western Europe starting in 1950.
You can see that the United Kingdom started with a big lead (presumably a legacy of WWII destruction on the European mainland).
Notice, though, how the U.K. economy grew faster under Thatchernomics and closed the gap.
Interestingly, while France and the U.K. have been close ever since, Germany opened up a lead (though recent missteps on fiscal and energy policy make me wonder whether the current gap will close.
The bottom line is that the United Kingdom still needs Thatcherism (just like the United States still needs Reaganism).
P.S. I can’t resist sharing one additional excerpt from Clarkson’s article.
Thatcher famously went from championing the deepening of the EU’s Single Market in the 1980s to espousing Euroskepticism.
P.P.S. I didn’t include Liz Truss in the list of Tory leaders this century because she was only in office 44 days and didn’t have a chance to implement any policies. It would have been interesting if she stayed in power since she wanted pro-growth tax policy, though I wrote back in 2022 that she “should have announced a spending cap, modeled on either the Swiss Debt Brake or Colorado’s TABOR.” I also noted that “In addition to worrying about whether Truss will copy Thatcher’s track record on spending, I’m also worried about her support for misguided energy subsidies.
You can see my entire interview on the Schilling Show by clicking here. If you do, you’ll notice I’m actually a mix of hope and fear.
The hope is based on Milei having the right ideas. I’m completely confident Argentina will enjoy an amazing economic renaissance if his policies are enacted.
The fear is based on the legislature still being controlled by the Peronists (the economic arsonists that drove Argentina’s economy into a ditch).
If you want to grasp how much damage was caused by the Peronists, check out these four visuals.
If you want a fifth visual, check out this chart showing Argentina’s economic volatility
This chart shows two things.
Keynesianism produces a boom-bust cycle.
Average growth is very anemic.
The chart comes from a column in the U.K.-based Telegraph by Matthew Lynn. Here’s some of what he wrote about Milei’s noble efforts.
Argentina has historically been a country of failed governments, economic collapses, and debt defaults. Yet incredibly there are signs that – against all the odds – the bold, free market reforms of its libertarian President Javier Milei are beginning to work. With inflation falling, interest rates coming down, and the peso on fire in one market, Milei is already proving the global Left-wing economic establishment – addicted to bigger government and endless deficits – wrong. Indeed, it may provide a template for other countries to escape from zero growth. …inflation has fallen to 11pc and Milei predicts it will fall further. While a monthly figure (this is Argentina after all), price rises may be coming back under control after soaring above 300pc annually. …the country had recorded its first quarterly budget surplus since 2008, a modest 0.2pc of GDP, but still an astonishing achievement in such a short space of time… The Ministry of Culture was axed, so was the anti-discrimination agency, and the state-owned news service. Only last month, he unveiled plans to fire another 70,000 state employees. …The president…tore up rent controls, price restrictions and state subsidies. …He ripped away fuel subsidies… He promotes freedom, liberalisation and a smaller state with a messianic zeal.
This is inspiring. A world leader that even Gary Johnson can admire.
P.S. Here’s one final excerpt from Mr. Lynn’s column.
The IMF…was too often a huge cheerleader for the failed Argentinian administrations of the past, extending the biggest loans in its history to the country.
In my humble opinion, the IMF wasn’t just a cheerleader for Argentina’s bad policy. It enabled those bad policies with more than 20 bailouts.
To be fair, however, the IMF is not trying to sabotage Milei’s efforts.
I guess the bureaucrats realize that their loans are more likely to be repaid if Milei can rescue the economy. And if they realize that, perhaps we can hope that the IMF goes back to the days of the Washington Consensus and starts pushing good advice rather than bad advice.
I’ve also written about leftists who have epiphanies on the issue, which means something has happened that causes them to become much more sympathetic to gun rights
Which is the focus of today’s column.
It seems that some people in California (though not the governor) are waking up on the issue.
Here are some excerpts from an article in the Los Angeles Times by James Queally.
Gun ownership has boomed in the U.S. over the last several years, including in California. Among those first-time gun owners are L.A. liberals, and more and more, those rookie shooters seek out Nguyen, who started teaching basic pistol courses in 2020 under the banner “L.A. Progressive Shooters.” …Nguyen says he’s also trying to dispel the inherent disgust some left-leaning friends have for firearms. …Nguyen did not invent the left-leaning gun group. The Pink Pistols, John Brown Gun Club and the Socialist Rifle Assn. have existed for decades. …Nguyen more occupies the role of the lefty gun instructor next door. …He’s neither surprised nor bothered when a student breaks down in tears the first time they pick up a gun. …Nguyen posted footage of their range visits to Instagram. …Nguyen received…a request for a lesson. The potential student was a musician who had just bought a gun for home defense following the at times violent street protests after the murder of George Floyd in 2020. “He grew up in Venice in the ’90s. Drive-by shootings. He absolutely hates guns. But he’s like: ‘Yo, I’m married now. Even though I don’t like ’em, I don’t wanna be the only one not to have one,’” Nguyen says…….Shrieves said she got serious about learning about firearms in 2020… “I want to know how to protect myself, to protect the community I live in,” she said. “I know [the police] are not out there to protect me or my community.” …Quezada said, adding that she enjoys “shattering the illusion” that all leftists are latte-sipping, gun-fearing academics. …“I’m a short, brown Latina who owns a gun, and I like making it known that there are people like me out there,” she said.
Interestingly, the author of the column is among those who now realize it is a bad idea to be vulnerable
I was among those new gun owners. In 2021 — after watching colleagues hide from the violent mob on Jan. 6 and remembering I have a habit of writing about angry men with access to weapons — I walked into a Burbank gun store to pick up my first handgun. …My foray into gun ownership is part of a larger trend. Last year, a national NBC/Wall Street Journal poll showed 52% of registered voters said someone in their household owned a gun, up from 46% in 2019. The share of Democrats who answered “yes” rose from 33% to 41%.
I’ll close with the observation that statism does not always win.
I wrote in 2014, 2017, and 2020 about how free markets and limited government have produced amazing results in Singapore.
Let’s revisit that country and we’ll start with this video from the Fraser Institute.
Since the video explains that Singapore emphasized growth, let’s compared the United States and Singapore over the past six decade based on Maddison data.
As you can see, Singapore did a great job of converging with America and now it’s doing an even-better job of diverging.
An article in this week’s Economist lauds Singapore amazing success.
Here are some excerpts.
Singapore has become a beacon of prosperity. In a part of the world where middle-income status is the norm, the city-state is now the richest country for many thousands of miles in any direction. At around $88,000, its GDP per person has doubled in real terms over the past 20 years. At the moment of its independence in 1965, the country was poorer on the same basis than South Africa or Jordan. …During the past two decades, the median wage for Singaporean residents in full-time work has risen by 43% in real terms, compared with an 8% rise in America. At around $46,000 in dollar terms, the median full-time wages of Singaporeans are now higher than those in Britain, the country’s former colonial boss, where they sit at around $44,000.
Since the article mentions that Singapore used to be poorer than South Africa and Jordan, I can’t resist pointing out that Singapore used to be as poor as Jamaica.
So why is Singapore now one of the world’s richest nations?
According to Economic Freedom of the World, it has the world’s most market-oriented policies, including total free trade and minuscule levels of red tape.
And more economic liberty is strongly correlated with more national prosperity.
Let’s close with some analysis of Singaporean fiscal policy. Notice that Singapore gets its worst score on size of government, ranking #49.
Yet IMF data shows that the burden of government spending in Singapore is impressively low, with the public sector consuming less than 14 percent of the economy’s output.
So how can Singapore only rank #49 on fiscal policy when it has a very small fiscal burden?
The answer is that the government owns non-trivial chunks of the economy. And even though the video explains that Singapore requires government-owned companies to be efficient, the Fraser Institute correctly lowers the nation’s score for that deviation from laissez-faire policy.
The bottom line is that even a very well-governed nation may have a slice of socialism!
P.S. Hong Kong has now fallen well behind Singapore.
According to the bureaucrats, we are supposed to believe that higher taxes are necessary because a bigger burden of government will increase growth.
I’m not joking. The Center for Freedom and Prosperity produced a video outlining – and debunking – this silly theory.
What’s especially galling is that international bureaucrats at places like the U.N. get tax-free salaries, so they are exempt from the negative impact of the bad policies they want for everyone else.
I’ve sometimes speculated that they might have a more sensible attitude if they had to pay tax.
Well, we now have a test case. In an article for ABC News, Deng Machol writes about the U.N. deciding that taxes are a bad idea.
Following an appeal from the United Nations, South Sudan removed recently imposed taxes and fees that had triggered suspension of U.N. food airdrops. Thousands of people in the country depend on aid from the outside. The U.N. earlier this week urged South Sudanese authorities to remove the new taxes, introduced in February. The measures applied to charges for electronic cargo tracking, security escort fees and fuel. …The U.N said the new measures would have increased the mission’s monthly operational costs to $339,000. The U.N. food air drops feed over 16,300 people every month. At the United Nations in New York, U.N. spokesman Stéphane Dujarric said the taxes and charges would also impact the nearly 20,000-strong U.N. peacekeeping mission in South Sudan, “which is reviewing all of its activities, including patrols, the construction of police stations, schools and centers, as well as educational support.”
What a revelation. The U.N. suddenly realizes that higher taxes decrease whatever is being taxed. The “philoso-raptor” won’t be surprised.
Maybe, just maybe, the bureaucrats will now realize that high taxes on the rest of us also are a bad idea.
But I won’t hold my breath. After all, some (untaxed) bureaucrats at the United Nation think it is a violation of human rights if the rest of us don’t pay more tax.
P.S. As you might suspect, the U.N. budget has plenty of waste.
P.P.S. I had the surreal experience of being a credentialed observer at a United Nations conference where it seemed like I was the only person who did not favor higher taxes.
The Social Security Administration has released the yearly forecast of the program’s long-run finances. Jut like I did in 2023, 2022, 2021, 2020, etc, it’s time to see what to expect in the future.
Based on the annual fiscal data in Table VI.G9 (which is adjusted for inflation), we can see that the fiscal burden of Social Security is expanding rapidly.
The spending burden is growing faster than the tax burden, which means ever-growing levels of red ink.
As I show in this next chart, annual deficits eventually will climb above $1 trillion and the total shortfall over the next 75 years is more than $61.7 trillion.
Sadly, neither Joe Biden nor Donald Trump are willing to address the program’s huge fiscal problems.
This is a matter of math, not ideology. The Washington Posteditorialized yesterday about their head-in-the-sand approach.
President Biden and former president Donald Trump don’t agree on much, but both have pledged not to touch Social Security benefits. …Financial reality, though, is that if the programs aren’t reformed, and run out of money to pay required benefits, cuts could become unavoidable. …The 2024 campaign is probably not going to feature much honest debate about this, but the conversation has to happen sooner or later. Saving Social Security and Medicare requires reform. …These won’t be popular or painless, but, as even dithering lawmakers often admit privately, the longer change is postponed, the more painful it will be in the end. Or, as the trustees’ report puts it, “significantly larger changes would be necessary if action is deferred.”
Kudos to the Washington Post for acknowledging the problem. That’s good news.
The bad news is that the editors think massive tax increases are the way to fix the problem.
The transition to such a system would not be easy, especially since we have been kicking the can down the road. But Australia, Chile, Switzerland, Hong Kong, Netherlands, the Faroe Islands, Denmark, Israel, and Sweden show that it is possible to fully or partially replace debt-based systems with savings-based systems.
Unfortunately, economic arguments don’t matter to the class-warfare crowd. They mistakenly think the economy is a fixed pie, so if Jeff Bezos and Elon Musk have a lot of money, then the rest of us have less money.
Or perhaps they simply resent people who are very successful. There’s certainly a good amount of evidence that folks on the left have a hate-and-envy mentality.
I don’t know Prof. Gabriel Zucman’s motives, but he’s a big advocate of a global wealth tax. Here are some passages from his recent column in the New York Times.
…the ultrawealthy consistently avoid paying their fair share in taxes. …Why do the world’s most fortunate people pay among the least in taxes, relative to the amount of money they make? The simple answer is that while most of us live off our salaries, tycoons like Jeff Bezos live off their wealth. In 2019, when Mr. Bezos was still Amazon’s chief executive, he took home an annual salary of just $81,840. But he owns roughly 10 percent of the company, which made a profit of $30 billion in 2023. …Unless Mr. Bezos, Warren Buffett or Elon Musk sell their stock, their taxable income is relatively minuscule. …There is a way to make tax dodging less attractive: a global minimum tax. …The idea is simple. Let’s agree that billionaires should pay income taxes equivalent to a small portion — say, 2 percent — of their wealth each year. …the proposal would allow countries to collect an estimated $250 billion in additional tax revenue per year, which is even more than what the global minimum tax on corporations is expected to add.
There are many problems with Zucman’s analysis.
One concern is that it’s a bad idea to finance bigger government, which is a goal of the class-warfare crowd.
Here are some excerpts from the Wall Street Journal‘s editorial on the topic.
In our new socialist age, the demand to tax and redistribute income is insatiable. The latest brainstorm arrives in a proposal by four countries in the G-20 group of nations to impose a 2% wealth tax on the world’s billionaires. …As you might expect, this would principally be a tax raid on Americans, who are the most numerous billionaires. It would also be taxation without representation, since it would be a body of global elites attempting to impose a tax without having passed Congress. …Once a global wealth tax is in place, you can be sure that billionaires won’t be the last target. …the G-20 is becoming a vehicle for the world’s left-wing governments to gang up on the U.S. …For this crowd, taxing American billionaires to redistribute income around the world is all too imaginable.
By the way, Zucman’s problem is not merely bad economics.
He also uses misleading numbers. Phil Magness of the Independent Institute exposes his dodgy manipulations in a thread on Twitter (now called X).
There are dozens of tweets in his thread, but here’s his summary if you don’t have time to read everything.
The common theme is that the richer nations have more economic liberty.
So even though convergence theory is generally true, it can go the other way if poorer nations are suffering from excessive government.
For today’s column, though, we’re going to look at an example of convergence rather than divergence. Here’s a chart, based on World Bank data, showing how Poland is catching up to the United Kingdom
This example of convergence is hardly a surprise. Poland’s economy was suppressed for decades because of communism.
So when the Soviet Empire finally collapsed, Poland’s per-capita economic output was only about one-third of gross domestic product in the United Kingdom.
Which raises the question of whether Poland will catch up – and perhaps even pass the United Kingdom.
That’s the focus of an article by James Crisp in the U.K.-based Telegraph. Here are some excerpts.
Poles will be richer than Britons in five years time because of Brexit, Donald Tusk, the prime minister of Poland, has said. …“A fierce debate is taking place in Great Britain, caused by the World Bank’s forecast that GDP per capita will be higher in Poland than in the UK in 2025,” said Mr Tusk on the 20th anniversary of Poland’s membership of the EU. …The World Bank data shows GDP per capita in 2021 was $44,979 (£35,935) in Britain and $34,915 (£27,894) in Poland, which has an average growth of 3.6 per cent annually. That would mean Poland would overtake the UK by 2030, according to the calculations.
Second, the article suggests that Poland will surpass the United Kingdom because of Brexit. That’s nonsense. If the United Kingdom falls behind, it will be in large part because that nation’s politicians failed to take advantage of Brexit. Instead of becoming “Singapore-on-Thames,” British politicians since Brexit have increased the burden of government.
Indeed, Poland now has a smaller burden of government spending, according to OECD data.
Of course, it’s never easy to define populism. My shorthand definition is that a populist is someone who exploits economic ignorance to push policies that sound appealing to voters in the short run (such as protectionism, industrial policy, or class warfare) but do economic damage in the long run.
So I was very interested to see that three German economists (Manuel Funke, Moritz Schularick, and Christoph Trebesch) authored some research about populism and economic policy for the Kiel Institute for the World Economy.
Just in case some readers are pressed for time, the biggest takeaway from their study is that populism leads to less prosperity – as captured by Figure 4.
Their study looks at both left-wing populists and right-wing populists. Both versions produce negative economic consequences.
Though Figure 6 shows that leftist populists seems to do more damage than rightist populists.
Here are some highlights from their findings.
A core empirical challenge is to identify populist leaders. Our database on populists in power is the most ambitious exercise to classify populist leaders to date, spanning more than 100 years and 60 large countries. …According to today’s workhorse definition, populism is defined as a political style centered on the supposed struggle of “people vs. the establishment”…Populists place the narrative of “people vs. elites” at the center of their political agenda… In the empirical analysis, we use a variety of different empirical strategies that all paint a similar picture: populism has large economic costs. Over 15 years, GDP per capita and consumption decline by more than 10% compared to a plausible non-populist counterfactual. Moreover, despite their claim to pursue the interests of the “common people” against the elites, the income distribution does not improve on average. …we also look at other outcomes and present evidence that economic disintegration, unsustainable macro policies, and the erosion of institutions typically go hand-in-hand with populism. Trade and financial integration falls, suggesting that populists often deliver on their promises of fostering economic nationalism and protectionism
If you’re wondering which politicians are populists, here’s their list.
I don’t have any objections to the politicians listed above, but if populists are politicians who gain power by whipping up antagonism against the “establishment” and the “elite,” then why isn’t Franklin Roosevelt on the list?
Or how about Brazil. I can understand Bolsonaro being included, but why not Rousseff or Lulu?
Moreover, why not include every socialist government, most of which usually gain power after campaigning on class-warfare agendas?
I could list other examples, but let’s return to the study and share more of the findings. Unsurprisingly, populist governments are associated with more debt and more inflation.
All of which confirms my shorthand definition that populists do things that seem popular in the short run (spend money and print money) but do damage in the long run.
Unfortunately, the answer is “a lot.” Here’s a chart from American Action Forum, tracking how much new red tape was imposed by the past three president.
Biden is winning on costs and paperwork, which means the American economy is losing.
Here’s some of the accompanying analysis from AAF.
As we have already seen from executive orders and memos, the Biden Administration will surely provide plenty of contrasts with the Trump Administration on the regulatory front. …Since the AAF RegRodeo data extend back to 2005, it is possible to provide weekly updates on how the top-level trends of President Biden’s regulatory record track with those of his two most recent predecessors. …This past week’s regulatory haul has pushed the Biden Administration’s final rule cost tally into truly uncharted territory. …For perspective, if “Biden Administration Regulatory Costs” were a country, its gross domestic product would rank 17th in the world, just behind Indonesia.
By creating barriers to economic efficiency (what I call an obstacle course), Biden’s regulatory onslaught means that workers receive less income and investors receive lower returns.
Just a few months ago, I wrote about Germany’s fiscal decay.
Over the past eight years, government spending has grown much faster than the private sector, thus violating the Golden Rule of fiscal policy.
Given the shift to bad policy in Germany, I was very interested to see that the New York Times has a report by Liz Alderman and Melissa Eddy that explains how Germany no longer is the economic engine in Europe.
Here are some excerpts.
Something extraordinary is happening to the European economy: Southern nations that nearly broke up the euro currency bloc during the financial crisis in 2012 are growing faster than Germany… In a reversal of fortunes, the laggards have become leaders. Greece, Spain and Portugal grew in 2023 more than twice as fast as the eurozone average. Italy was not far behind. …southern European countries made crucial changes that have attracted investors, revived growth and…reversed record-high unemployment. Governments cut red tape and corporate taxes to stimulate business and pushed through changes to their once-rigid labor markets, including making it easier for employers to hire and fire workers.
It’s encouraging to read about some pro-market reforms in Southern Europe.
It’s also encouraging that the New York Times seems to be acknowledging that free markets are the way to achieve more growth.
That being said, I’m not ready to declare that the PIGS (Portugal, Italy, Greece, and Spain) are the new role models for economic policy.
For instance, the NYT story is based on just one year of economic data. And I’ve warned that it is risky to draw big conclusions without seeing decades of evidence.
But a journey of a thousand miles begins with a first step. Given my interest in fiscal policy, I looked at the IMF data to see which countries have been most responsible over the past few years.
Lo and behold, Greece and Italy have been doing a decent job.
Three years of fiscal restraint may not seem like much, but it’s worth noting that the burden of government spending in Greece has declined by more than 10 percentage points of GDP.
And the spending burden in Italy has been reduced by nearly 7 percentage points of GDP.
Keep that up for 5-10 more years, and those countries could become Switzerland.
Do it for 10-20 years, and they can become Singapore or Taiwan.
Genuine material deprivation is almost nonexistent in rich nations such as the United States. This is a huge improvement compared to how people lived just 100 or 20o years ago.
Yet public policy fights about poverty will probably never end for the simple reason that people have different goals.
To elaborate on the second question, some of our friends on the left have blurred the distinction between poverty and inequality.
Let’s look at some excerpts from a Project Syndicatearticle by Teresa Ghilarducci of the New School for Social Research.
America’s retirement system isn’t working. It is failing older workers, pensioners, and would-be retirees, and if we don’t fix it soon, it will also fail future generations, lowering living standards and increasing the risk of poverty. …Already, America’s elderly suffer a far higher rate of poverty – defined as half the median income or lower – than their peers in other high-income countries. …the old-age poverty rate in the US is 23%, compared to about 15% in the United Kingdom, 12% in Canada, 4.4% in France, and just 3.1% in the Netherlands.
Notice, though, that she wrote that poverty is “defined as half the median income or lower.”
So if you were a millionaire and lived in a house with Jeff Bezos, Elon Musk, and Bill Gates, you would be poor based on this definition.
Needless to say, that’s crazy. Poverty should be a concrete number.
And it usually is. The World Bank (which is concerned about genuine material deprivation) measures poverty based on whether people are subsisting at very low levels, such as $1.90 per day. In the United States, the poverty rate is a specific calculation of what a household needs to subsist at a modest level.
Ms. Ghilarducci’s numbers, however, come from the left-leaning bureaucrats at the Paris-based Organization for Economic Cooperation and Development.
So congratulations to Ms. Ghilarducci, who is now a member of the Poverty Hucksters Club.
P.S. In fairness to Ms. Ghilarducci, her article does make some good points about overall retirement policy. I’m sure we disagree on many things, but she favorably cites nations with private Social Security systems, such as Denmark and the Netherlands.
I wrote a two-part series (here and here) in 2022 predicting that Italy was at risk of suffering a fiscal crisis.
If and when it occurs, it will be because investors decide that Italy’s government might default (i.e., be unable to make payments on its debt). Interest rates would spike, financial markets would get shaky, banks would be a risk, and there would be a lot of pressure for a Greek-style bailout.
Should that happen, my role will be to point out that the real problem is that the burden of government spending in Italy is excessive (same message I delivered a dozen years ago).
As shown by OECD data, it’s one of the most profligate nations in Europe.
And I suppose it’s worth mentioning that Italy’s demographic outlook is very grim, thus increasing medium- and long-run fiscal risks.
That’s the macro outlook.
Now let’s look at a specific example of why Italy is a fiscal mess. The Economist recently reported on a government giveaway that has become a nightmare.
…a home-improvements subsidy…has turned into the fiscal equivalent of King Kong: a monster running amok, wreaking havoc… Mr Giorgetti revealed that claims of the subsidy, known as the “superbonus”, made in the four years that the scheme has been running, together with claims of another that offsets the cost of renovating façades, would eventually drain the treasury of €219bn ($233bn). That is almost 10% of Italy’s GDP last year. …a left-populist coalition…introduced the superbonus in 2020… The idea was to stimulate the stricken economy… The government offered to pay homeowners 110% of the price of energy-saving renovations. …The cash was not to be reimbursed directly, but in the form of tax credits that could be sold on. …the superbonus has proved wildly popular. That should not have been a surprise: what is not to like about being repaid more than you have spent? Or not spent: since the tax credits are tradeable, many homeowners simply passed them on to their builders without having to part with a euro. A second reason is outright fraud. Last August Giorgia Meloni, Italy’s prime minister, said that contracts falsified to claim the subsidies constituted the biggest-ever rip-off of the Italian state. That was when they amounted to a mere €12bn; since then, the figure has risen to €16bn. A third problem is overpricing. Because the superbonus refund is greater than the outlay, actual or theoretical, it is in the interests of both the builder and the homeowner to inflate the cost of the work.
At the risk of understatement, this is one of the dumbest spending programs I’ve ever read about.
Here are some excerpts from a report in the National Post by Olivia Rumbell, which focuses on how the higher tax is prodding some people to sell homes before the tax is implemented.
The new capital gains tax proposed in the Liberal budget has led to speculation that there might be a flood of cottages entering the market or a push for earlier closing dates as sellers try to avoid a hefty tax bill. “I am seeing an increase in people wanting to list their properties now that this is going into effect,” said Beth Groom, a broker and owner of Cape Breton Realty. The capital gains tax, if it comes into effect, would tax profits on capital gains of more than $250,000 at almost 67 per cent, up from the prior rate of 50 per cent. It would result in an increased tax bill on capital gains for some sellers. …Groom speculated that if she was working for the buyer, she’d put in an offer for a certain amount, closing prior to the June 25 date when the capital gains tax will come into effect, communicating clearly so that the seller knows if they close before that day, they may save money.
For what it’s worth, I’m not overly worried about the impact on homeowners (though it’s unfair for them to be hit by an extra layer of tax).
What matters a lot for long-run prosperity is innovation and business investment. And Trudeau’s class-warfare grab for money is going to discourage those things.
Given the Tax Foundation’s comprehensive formula, I don’t know what it will do to the overall tax rate on capital income, but it definitely will move in the wrong direction.
Why is Trudeau pushing bad policy?
Given that a previous class-warfare tax hike backfired, he should have learned.
Want more confirmation from another left-of-center source?
Here are some excerpts from a column in the New York Times by Monica Prasad, a sociology professor at Northwestern.
We can learn from Sweden, but the lesson is not what many people think. Rich Swedes do get taxed at high rates, but so does everyone else: The average American worker’s total tax burden is 31.7 percent of earnings, compared with 42.9 percent for the average Swede. The Swedes actually tax corporations less… Estate tax? In the United States the average effective rate is 16.5 percent. In Sweden, it’s zero. Swedish national sales taxes, which fall disproportionately on the middle classes, are much higher than sales taxes in the United States. …Some scholars have drawn on this history to argue that the United States needs to give up its fixation with progressive taxation and adopt a national sales tax as every other advanced industrial country has done. …It’s hard to make a case for a big new tax in America on the middle classes and the poor…progressive taxation still has a role to play in the United States — but we do need to learn the larger lesson…the secret of the European welfare states.
Her view of the the “larger lesson” and “secret” is not the same as mine.
She wants an efficient welfare state and – to her credit – she acknowledges that means big tax burdens for lower-income and middle-class households.
I’ll close by emphasizing a point I made at the end of the above video. Our friends on the left like to argue that big government is popular and they’ll cite polling data to make that case.
But people have much different answers to polling questions when they are asked if they are willing to pay higher taxes to finance bigger government.
Last year, I warned that, “rich people are not sheep, patiently waiting to be sheared. If their fiscal torture is too extreme, they will leave.”
Norway is a powerful example. Here’s a chart showing the rate at which Norwegians are moving to Switzerland.
You may be wondering what caused the sudden change after 2022.
The above chart comes from a Bloomberg report by Ott Ummelas, and he explains what happened after Norway “increased the wealth tax burden by 55%.”
Steep increases in wealth and dividend taxes by Norway’s left-leaning government have prompted dozens of the Nordic nation’s rich to move to another prosperous, mountainous country to the south. …the small but significant migration by wealthy entrepreneurs could become permanent, bolstering Switzerland’s status as a low-tax haven. …Eighty-two rich Norwegians with a combined net wealth of about 46 billion kroner ($4.3 billion) left the country in 2022-2023, with 34 moving out last year alone, according to data from the Finance Ministry. More than 70 of those have moved to Switzerland… Swiss taxation varies by canton, but the overall effect is a significantly lower percentage of wealth and income than most other European nations. …Hollup said…”it’s a two-fold issue of losing tax revenue for Norway and the risk that a lot of brain capital has left the country.”
I started today’s column by observing that rich people are not sheep.
But I wrote two months ago that Milei was surprisingly successful in his first month. Thanks to his executive actions to reduce the burden of spending, Argentina achieved its first monthly balanced budget in more than 10 years.
That was a remarkable development.
But that was just the beginning. Here’s a chart showing that Argentina’s currency has dramatically strengthened since Milei took office.
The chart comes from a Bloomberg report by Ignacio Olivera Doll. Here’s some of what he wrote.
Four months into office, Argentine President Javier Milei has pulled off a critical feat in a country long ravaged by runaway inflation: He stabilized the currency. The peso has, in fact, not only stopped plunging day after day but in one key foreign exchange market…it’s actually rallying sharply. The peso has soared 25% against the dollar over the past three months in the market, known as the blue-chip swap… That’s more than the gains posted by any of the 148 currencies that Bloomberg tracks against the dollar. It’s a shocking statistic in a country where the currency is seemingly in a never-ending state of freefall. (The smallest annual decline in the past decade was 15%.) And it underscores the lengths that Milei has gone to to rein in bloated government spending…and tame inflation that’s skyrocketed to an annual pace of almost 300%. …The cuts he imposed add up to the equivalent of almost 4% of the country’s economic output, an adjustment so aggressive that central bank officials estimate it’s larger than 90% of all those carried out in the world over the last several decades.
Spending restraint has not only reduced inflation and strengthened the currency, it also produced a balanced budget in the first quarter of 2024.
Here are some details from an AFP report published by Yahoo!Finance.
Argentina’s spending-slashing new President Javier Milei has hailed his country’s first quarterly budget surplus since 2008 as an “historic achievement.” In the first quarter of 2024, the South American country recorded a budget surplus of about 275 billion pesos… This amounted to a surplus of 0.2 percent of GDP. …”If the state does not spend more than it collects and does not issue (money), there is no inflation. This is not magic,” the self-described “anarcho-capitalist” said. …Thousands of public servants have lost their jobs. “Don’t expect a way out through public spending,” Milei warned on Monday.
To give you an idea of what Milei has accomplished, a 4-percentage point reduction in the burden of government spending would be over $1 trillion in the United States. If we had a leader like Milei, we could almost immediately eliminate three-fourths of the deficit.
It’s only April, but I suspect Senator Elizabeth Warren, a doctrinairestatist from Massachusetts, is going to win Politician of the Year for 2024.
Which is noteworthy because she’ll be the first multi-year winner of the award, having previously won the prize in 2021 (and she deserved to win it in 2017 and 2019).
Most important, at least for purposes of today’s column, I also told the BBC that a corporate tax cartel would be very dangerous since politicians would quickly try to apply the same approach to other types of taxes.
Well, I was right.
As reported in Barron‘s, some of the world’s greediest governments are now pushing a global wealth tax cartel. Here are some excerpts from the story by Daniel Avis.
Brazil, which is chairing the G20 this year, has been pushing for the group of nations which together account for 80 percent of the world’s economy to adopt a shared stance… “Fair international taxation is not just a topic of choice for progressive economists, but a key concern at the very heart of macroeconomic management today,” Brazilian finance minister Fernando Haddad said during an IMF event in Washington. “Without international cooperation, there is a limit to what states can do, both rich and developing ones,” he added. …Sitting alongside Haddad at the IMF event, French finance minister Bruno Le Maire renewed his calls for a global minimum tax… “The future of the world cannot be a race to the bottom,” Le Maire said.
Haddad seems like a not-very-good person. He’s been a political science professor, according to Wikipedia, and he’s authored some publications that suggest he’s a leftist ideologue.
In Defense of Socialism
Theses on Karl Marx
Work and Language for the Renewal of Socialism
This crank is now trying to set tax policy for the entire world!
Marcela Ayres and Andrea Shalal of Reuters also reported on Haddad’s iniiative, and their article noted the predictably pernicious role of the International Monetary Fund.
Brazil’s proposal to tax the super-rich globally gained momentum among Group of Twenty members…with France’s finance minister and the head of the International Monetary Fund backing a coordinated push to generate new revenue… IMF chief Kristalina Georgieva said…ensuring that the richest paid their fair share would mobilize funds… She said IMF research…also estimated that setting a minimum floor for carbon pricing could boost revenue by $1.4 trillion a year. …Gabriel Zucman, director of the European Tax Observatory, …has proposed that very-high-net-worth individuals…pay at least the equivalent of 2% of their wealth in income tax each year. That would generate $250 billion per year.
I can’t resist pointing out that Ms. Georgieva (like all IMF bureaucrats) gets a very lavish salary that is exempt from taxation. Yet this hypocritical parasite agitates for higher taxes on everyone else.
Fortunately, at least one major government is skeptical of this money grab.
In a separate report from Reuters, Christian Kraemer and Maria Martinez note that Germany’s Finance Minister is not a fan.
German Finance Minister Christian Lindner rejected on Thursday Brazil’s proposal to tax the super-rich, indicating a challenging path for it to gain widespread G20 support. …Speaking after meeting U.S. Senator Bernie Sanders on Thursday, Brazil’s Finance Minister Fernando Haddad said of Lindner’s opposition to the proposal: “He will change (his mind).” Sanders said he “strongly” supports the proposal… But the Brazilian government is aware that other countries like Japan and Italy have shown resistance to the initiative, added the source. …Le Maire said that moving to tax the rich was the logical next step for a series of global taxation reforms launched in 2017, including agreement on a global corporate minimum tax.
Let’s hope Germany holds firm, and that Japan and Italy also are on the right side.
But I worry because the statist countries will be relentless.
Remember, the corporate tax cartel seemed crazy when it was first proposed about 10 years ago. But the left kept pushing and now it’s in the process of being implemented.
I worry the same thing will now happen with a global wealth tax cartel.
P.P.S. It was nice of Monsieur Le Maire to confirm what I told the BBC about the corporate tax cartel being the first step on the path to other tax cartels.
P.P.P.S. I have not bothered to make the economic case against the wealth tax in this column, but feel free to click here, here, here, and here for that type of analysis.
There’s going to be a big tax fight in Washington next year, regardless of who wins the House, the Senate, and/or the presidency. That’s because major portions of Trump’s 2017 Tax Cuts and Jobs Act will expire on December 31, 2025.
Will those tax cuts be extended? Will they be expanded? Will they be curtailed? Politicians will be forced to choose.
In general, I’m rather pessimistic about the outcome for the simple reason that there’s been a huge increase in the burden of government spending.
I wrote about that problem two days ago and highlighted how politicians used the pandemic as an excuse to permanently increase the cost of government.
One result of all that wasteful spending is that we now have enormous deficits. And even though I don’t worry much about red ink (the real problem is spending, not how it’s financed), the practical reality is that it is well nigh impossible to have good tax policy when there is bad spending policy.
But that doesn’t mean we shouldn’t try. In an article for Bloomberg, Stephanie Lai, Amanda L Gordon, and Enda Curran write about the advice Trump is getting on tax policy.
Donald Trump is under pressure from economists in his circle to embrace a flat tax rate… The efforts demonstrate how people around the former president are already lobbying for their preferred economic policies ahead of a potential second term where both taxes and tariffs will be top priorities. …Forbes said…he is advocating for Trump to support a flat 17% tax rate for all income brackets with “generous” exemptions… For a family of four, he said, he would suggest the first $54,000 of income be exempt from federal income tax. …Whoever wins the White House in November will be forced to negotiate a tax deal next year because key portions of Trump’s 2017 tax cuts — including individual rates — expire at the end of 2025. That will set up a complex negotiation — particularly if control of Washington is split between Republicans and Democrats… Trump has not detailed what his tax plan would look like.
I’m glad that people are pushing Trump to be bold on taxes, but that advice needs to be augmented by a big push to make him better on spending.
When asked about tax loopholes, my first reaction is to determine whether something is an actual tax preference or merely a mitigation of a tax penalty.
Today, let’s examine a different strange loophole. As reported by Politico‘s Joseph Spector, New York politicians are creating a special tax break for journalists.
The state budget, set to be finalized Saturday, includes the nation’s first payroll tax credit for local news organizations in a bid to encourage new hiring… Lawmakers and independent media companies praised the tax break, which will designate $30 million a year to the program, called the Local Journalism Sustainability Act. …New York spends more than $8 billion a year on tax incentives and grants to attract and retain businesses in the high-tax state, and advocates of the measure have for years sought to extend the largesse to the newspaper and local TV industry. The late addition to the $237 billion budget allows eligible outlets to receive a 50 percent refundable credit for the first $50,000 of a journalist’s salary, up to a total of $300,000 per outlet. …The money is largely focused on independently owned publications, but also can cover hiring journalists in print media outlets that “demonstrate a reduction in circulation or in the number of full-time equivalent employees of at least 20 percent over the previous five years.”
There are three things to understand about this proposal.
First, a “refundable credit” is actually government spending. So the new law would be a direct handout for media companies.
Second, it should be obvious why New York’s Democrats want to subsidize a sector that acts as cheerleaders for big government.
Third, the law is written in a way that big media firms like the New York Times theoretically could benefit.
All told, not a good idea. And not what I had in mind when I asked what should be done about media bias.
P.S. If you want to know the best way of dealing with tax loopholes (properly defined), click here and here.
That was bad news, but what’s far more worrisome is that politicians used the pandemic as an excuse to permanently increase the spending trendline.
Here’s a chart based on CBO’s historical data and future projections. I added a yellow line to show the trend line based on spending growth from 2000 to 2019.
As you can see, spending soared above the trend line during the pandemic, came down slightly in 2022 and 2023, but now is projected to stay way above pre-pandemic levels.
At the risk of understatement, this added spending burden is the main reason America is in fiscal trouble.
To get an idea of how much spending has exploded in recent years, it makes 2008-2010 (Bush’s corrupt TARP bailout and Obama’s failed stimulus) look like a tiny blip by comparison.
Now I’ll add a caveat. Even without the pandemic spending orgy, America’s budgetary was on track to deteriorate. The retirement of the baby boom generation, combined with poorly designed old-age entitlements, translates to a higher spending trend line.
That being said, Trump and Biden combined to make a bad situation much worse.
Another caveat is that the headline on this column is an exaggeration. I simply like using everything-you-need-to-know as a rhetorical device when I have a very compelling visual or example.
To show that living standards are much higher in the United States than they are in Europe, I periodically share OECD data on average individual consumption (2012, 2014, 2017, 2019, and 2022).
Today, let’s look at another example, courtesy of a tweet by Jeff Weniger.
For what it’s worth, I think the chart overstates the American advantage (unless I’m misreading, I don’t think the numbers are adjusted for purchasing power parity).
That being said, the trend lines are very consistent with other data showing faster growth in the United States.
To wrap up, let’s look at a specific example of how Americans enjoy higher levels of consumption.
In this case, for housing. Here’s a map of square feet per dwelling that was shared by Prof. Garett Jones of George Mason University.
A dramatic difference, to put it mildly.
When I share this type of data with some of my left-leaning friends, they sometimes tell me that Europeans simply choose to work less and consume less because they value a better quality of life.
Sadly, here’s a more up-to-date chart showing that the loss of economic freedom is a problem for the entire western world (the advanced nations of North America, Western Europe, and the Pacific Rim).
As you can see, a big increase in economic liberty during the era of the “Washington Consensus” followed by a decline since the turn of the century.
Sadly, only three nations – Israel, South Korea, and Taiwan – improved their economic freedom scores between 2000 and 2021. Every other country declined.
Moreover, it pains me to acknowledge that the United States suffered the biggest decline, dropping from 8.84 to 8.14.
The situation has become so bad that even the New York Times has noticed. Here are some excerpts from a story by Patricia Cohen.
More than 2,500 industrial policies were introduced last year, roughly three times the number in 2019, according to a new study. And most were imposed by the richest, most advanced economies — many of which could previously be counted on to criticize such tactics. …the trend is worrying some international leaders and economists who warn that such top-down economic interventions could end up slowing worldwide growth. …“There are different ways of shooting yourself in the foot,” M. Ayhan Kose, the deputy chief economist of the World Bank, said about the trend of rich countries pursuing industrial policies. “This is one way of doing it.” …The current wave of policies…is a stark contrast to the classic open markets, hands-off government ideology championed by the citadels of capitalism in recent decades. …After years of complaints about China’s subsidies of private and state-owned industries, the United States and Europe have increasingly copied Beijing’s playbook, undertaking multibillion-dollar industrial policies.
It’s rather strange that those mistakes were not mentioned. Or, perhaps not so strange since the reporter was talking to people at the annual meeting of the International Monetary Fund and World Bank. And the IMF this century has been controlled by political types who preach a dirigiste message of bigger government and higher taxes.
I’ll close by citing an additional passage that is very discordant.
…faith in the superiority of free-market policies was deeply shaken in recent years by a string of global jolts — the pandemic, supply chain meltdowns, soaring inflation and interest rates, Russia’s invasion of Ukraine, and rising tensions between the United States and China.
Why on earth did the reporter assert that faith in free enterprise was shaken by things that have nothing to do with capitalism?!?
To illustrate the importance of higher growth rates, I sometimes inform audiences that the United States today would be as poor as Mexico if the American economy had grown 1-percentage point slower over the past 130 years.
Needless to say, I then point out that we avoided that fate because we were fortunate enough to have decent economic policy.
But I also ask people to imagine how much richer we could be if we had great economic policy (sort of like Hong Kong before China’s crackdown) rather than decent economic policy.
I now have a new example to share. Here’s a fascinating tweet from Jason Furman, who was Chairman of President Obama’s Council of Economic Advisers.
As you can see, it does not seem like there has been a huge difference in per-capita economic growth between the United States and Argentina. But it turns out that 0.5 percentage points actually is enormous when looking at 100-plus years of data.
If you want even more evidence about why 0.5 percentage points of growth is important, the Economistreported a few years ago that Argentina was the world’s worst-performing economy over the past century.
The most important thing to understand is that a trade deficit is the same thing as a financial account surplus (formerly known as a capital surplus), which is easy to understand when reviewing this graph.
And that type of surplus occurs when foreigners obtain dollars (by selling to Americans) and then decide that the best use of that money is to invest in the U.S. economy.
That’s generally a sign of a country’s economic strength.
Unfortunately, some people don’t grasp this relationship. And that leads them to supporting misguided ideas, such as protectionist trade restrictions.
But sometimes they want an indirect approach. For instance, one of Trump’s main advisers wants to weaken the dollar. In a column for Forbes, Christine McDaniel explains why this is a very foolish idea.
Robert Lighthizer, a former U.S. trade negotiator and a potential Treasury Secretary pick for a second Trump administration, is reportedly discussing ways to devalue the dollar in order to reduce the U.S. trade deficit. But…a devaluation is a cut in a nation’s standard of living. …Currency devaluation might sound like an appealing way to trim the trade deficit: All else equal, weakening the U.S. dollar would make U.S. exports cheaper, imports more expensive, and potentially reduce the trade deficit. But all other things don’t remain constant in such scenarios, and devaluing your own currency ends up having the opposite intended effect. It makes the economy less competitive and less efficient. … Anything the United States would gain through a devaluation in terms of cheaper exports, it would lose through its relatively pricier imports. Raw materials, intermediate goods, and capital goods comprise over half of U.S. imports. …So, either American consumers and businesses would face higher prices here at home, U.S. exports would become less competitive, or a bit of both. …Currency devaluation is a race to the bottom that you can’t win. You might be able to get quick hits on the board in the immediate term, but within months, those are inevitably followed by punishing penalties.
Catherine Rampell of the Washington Post makes similar points in her column.
Trump’s policy team is reportedly scheming to devalue the U.S. dollar. …Trump’s objective…is to boost U.S. exports and reduce imports. Basically, if a dollar buys, say, fewer euros or Japanese yen than it currently does, that makes U.S.-made products look a little cheaper and potentially more attractive to European and Japanese customers (among others). …That is, until you consider everything else that might happen if we deliberately tried to weaken our currency… how would Team Trump weaken our currency? That’s not totally clear. He might try to force the Federal Reserve to cut interest rates. …a weaker dollar would likely lead to higher prices for American consumers… So much for Trump’s pledge to vanquish inflation.
Both of these columns make good points, but they’re understating the main argument. What everyone needs to realize is that devaluation is inflation.
And presumably there’s no need nowadays to explain why inflation is bad, considering the damage caused when central banks decided to devalue currencies during the pandemic.
Moreover, it’s a bad policy that won’t work. Because once the Fed’s easy-money policy leads to rising prices, that will boost the cost of American-produced goods.
So the long-run impact may be a higher trade deficit.
P.S. Ms. Rampell makes another observation that deserves attention.
Deliberately weakening the dollar, or even attempting to, also threatens its role as the world’s “reserve currency.”
If you want to know more about that issue, click here.
While in Sweden last week, I wrote several columns (here, here, and here) about that nation’s fiscal policy.
But I also had a discussion about American fiscal policy with one of the tax experts at the Confederation of Swedish Enterprise. That included a discussion of the value-added tax (VAT).
If you don’t want to spend a few minutes watching the video, I made two theoretical observations and two practical observations.
A VAT has the same “tax base” as a flat tax. The structural difference is that a flat tax takes a slice of your income as you earn and a VAT takes a slice of your income as you spend.
But we’ll never be given a chance to make that swap.
Instead, some people claim that we are facing a different type of choice. Should we finance our (baked-in-the-cake) expanding burden of government with class-warfare taxes or a value-added tax?
The right answer, needless to say, is to restrain spending. But if someone is holding a gun to your head and demanding that you choose a tax increase, which one do you pick?
Seems like a VAT would be the less-harmful approach, but this is a good opportunity to raise my two practical points.
In the real world, adoption of a VAT almost surely will lead to more class warfare taxes because politicians will want to balance the harm to lower-income people by also imposing taxes that hurt higher-income people.
And it doesn’t even capture the entire truth since very few taxpayers know that their payroll taxes are actually twice as high as what they see on their pay stubs and W-2 forms.
Perhaps because I grew up reading the Peanuts comic strip, this is today’s favorite item.
If only opting out of the tax code was this simple!
That being said, not every leftist is a hypocrite. Some do lead by example.
Here are some excerpts from a New York Timescolumn by Matthew Desmond, a Princeton sociologist.
Alejandro Narváez is OK taking less. …when it comes to paying taxes, he forgoes many deductions…filing his taxes with TurboTax, not to save money but to lose it. “I see it as my responsibility to pay my fair share of taxes,” Mr. Narváez, who is 70, told me. “I have so many opportunities to reduce my taxes, but I choose not to.” …this time of year also provides us the opportunity to ask ourselves: Is it ethical to take tax breaks that primarily make the rich richer? …Besides the occasional statement from liberal elites asking to be taxed more, many of the biggest beneficiaries of the government’s largess have done very little to bring about fair tax reform. Why do we keep waiting for Congress to act when we could effectively tax ourselves more by following Mr. Narváez’s example and refusing to take some deductions? …My family has struggled with this question. …I have criticized the mortgage-interest deduction… My family qualifies for this ridiculous deduction. But we don’t want it. …So we’ve decided to create that society in miniature form, and with full recognition that we have the privilege of doing so, by donating what we receive from the mortgage-interest deduction to affordable housing initiatives on top of our regular giving. …I honestly don’t know if it’s better to donate tax deductions or, like Mr. Narváez, refuse them outright. I only know that it feels unfair to keep it all for ourselves. …Imagine if we all came to view tax breaks not as entitlements but as money that is not rightfully ours.
Kudos to Mr. Narváez and Mr. Desmond for putting their money where their mouths are.
I think it’s crazy to give more money to the nation’s most venal and corrupt people, but at least they’re not hypocrites.
However, I can’t resist pointing out that Mr. Desmond made several inaccurate statements in his column.
Today, let’s look at another visual that captures what’s wrong with the Washington welfare state. As you can see, taxpayers are footing the bill for a system that spends more than twice what would be required to eliminate all poverty.
The chart comes from a new report by Matt Dickerson for the Economic Policy Innovation Center. And the purpose of the chart is to show that the welfare system is grotesquely inefficient.
Here’s some of what he wrote.
…the welfare bureaucracy is broken, making it more difficult for millions of people to achieve the American Dream. …It is demeaning to believe that many Americans are simply unable to be successful and should be relegated to a life of dependence on perpetual government subsidization of their basic needs. …the welfare bureaucracy undermines and discourages employment. Only 18% of able-bodied adults receiving Food Stamps, who are expected to meet work requirements, actually work 20 hours or more per week. …Many welfare programs undermine the institution of the family — and the benefits brought by stable two-parent households — by including marriage penalties. …The principle of subsidiarity dictates that the independent sector, communities, and local and state governments should be empowered rather than the distant and bureaucratic central government. …The welfare bureaucracy is also filled with duplication and overlapping programs. According to the Congressional Research Service, there are 15 different food aid, 13 housing, 12 health care, and five cash aid programs. …Welfare is one of the largest categories of the federal budget, comprising about 20% of annual spending. …the federal government spent more than $28,100 per person in poverty — providing benefits $15,000 above the poverty threshold for individuals
So why does it exist? This clever cartoon tells part of the answer.
But this is only a partial explanation.
Don’t forget all the bureaucrats, consultants, and contractors who make a lot of money administering the programs. Walter Williams called them “poverty pimps” and they have an obvious incentive to maintain the current system.
It may turn out to be Milei, depending on whether he ultimately can convince a hostile legislature to unshackle Argentina’s dirigiste economy.that success would only be possible through doubling-down on ideological purity… Tory-led governments that followed under then-Prime Minister David Cameron in the 2010s were driven by a deeply held belief that shrinking the state was the only pathway to generating the economic growth needed… there are strong parallels between the former Soviet Union’s obsession with governing along supposedly “scientific” lines and the Thatcherite Tory Party’s belief that societies are shaped by rigidly predetermined laws of economic behavior. …it is no wonder that so much of the working-age population has turned against the political party whose ideological paradigms have dominated British governance since the 1970s.
International Liberty 