If we have another decade of big government interventionism like we’ve endured for the past 10 years under Bush and Obama, this amusing parody might turn into reality.
Archive for February, 2011
Posted in Big Government, Europe, Fiscal Policy, Government Spending, Taxation, Value-Added Tax, VAT, Video, tagged Big Government, Europe, Fiscal Policy, Taxation, Value-Added Tax, VAT, Welfare State on February 28, 2011 | 17 Comments »
Sooner or later, there will be a giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a European-style social welfare state. But that’s exactly why the VAT is a terrible idea.
I explain why in a column for Reuters. The entire thing is worth reading, but here’s an excerpt of some key points.
Many Washington insiders are claiming that America needs a value-added tax (VAT) to get rid of red ink. …And President Obama says that a VAT is “something that has worked for other countries.” Every single one of these assertions is demonstrably false. …One of the many problems with a VAT is that it is a hidden levy. …VATs are imposed at each stage of the production process and thus get embedded in the price of goods. And because the VAT is hidden from consumers, politicians find they are an easy source of new revenue – which is one reason why the average VAT rate in Europe is now more than 20 percent! …Western European nations first began imposing VATs about 40 years ago, and the result has been bigger government, permanent deficits and more debt. According to the Economist Intelligence Unit, public debt is equal to 74 percent of GDP in Western Europe, compared to 64 percent of GDP in the United States (and the gap was much bigger before the Bush-Obama spending spree doubled America’s debt burden). The most important comparison is not debt, but rather the burden of government spending. …you don’t cure an alcoholic by giving him keys to a liquor store, you don’t promote fiscal responsibility by giving government a new source of revenue. …To be sure, we would have a better tax system if proponents got rid of the income tax and replaced it with a VAT. But that’s not what’s being discussed. At best, some proponents claim we could reduce other taxes in exchange for a VAT. Once again, though, the evidence from Europe shows this is a naive hope. The tax burden on personal and corporate income is much higher today than it was in the pre-VAT era. …When President Obama said the VAT is “something that has worked for other countries,” he should have specified that the tax is good for the politicians of those nations, but not for the people. The political elite got more money that they use to buy votes, and they got a new tax code, enabling them to auction off loopholes to special interest groups.
For further information on why the VAT is a horrible proposal, including lots of specific numbers and comparisons between the United States and Western Europe, here’s a video from the Center for Freedom and Prosperity.
For my latest electoral prediction, click here.
A lot of my Republican friends (yes, I admit to having some) are feeling very confident about the 2012 election. They’re not quite measuring the drapes in the Oval Office, but this electoral map seems to be their “worst-case” example of how the states will break in 2012.
Notwithstanding my reasonably accurate 2010 election predictions, I don’t think I’m an expert on politics. But that’s never stopped me from commenting on things beyond economics, so here’s why I think Republicans are prematurely giddy.
First, while I certainly agree that Obama is much less popular than he was in 2008, that’s not terribly important since the election is still more than 18 months away.
Second, we don’t know what the economy will be a net plus or net negative next year. There’s a lot of evidence that people vote on pocketbook issues, and it appears that disposable income is an important variable. If we manage to have any sort of growth, even sub-par growth of perhaps 2.5 percent annually, that may be enough to make people more comfortable and to bring unemployment down close to 8 percent. If that happens, Obama will claim he brought the nation back from the brink of a second Great Depression. The fact that his policies actually retarded the recovery will be overlooked.
Third, you can’t beat something with nothing. Barack Obama’s secret weapon is the names on this list.
I’m a lucky guy to work at the Cato Institute, and I’m especially happy to be at Cato’s Benefactor Summit in San Diego this weekend. One of our supporters, John Aglialoro, is the person most responsible for the movie version of Atlas Shrugged (he independently produced the film with his own money), and he let us see the movie yesterday.
Five stars. Two thumbs up. Whatever rating system you use, you need to see this movie. You don’t need to be a “Randroid” or objectivist to like the film. Heck, you probably don’t even need to like small government or have capitalist sympathies.
I realize I’m biased, but I genuinely think John did a fantastic job. The production quality is first rate, the musical score (I think that’s the term) is perfect, and the story is well told – a particularly challenging task since the 1000 page-plus book is actually being brought to the screen in three parts and this is just the first installment.
The movie is released to the public on April 15 (yes, that choice is deliberate).
If you want to see the trailer, click here.
I spoke at the Tea Party Patriots convention earlier today. Great people, great crowd.
My job was to debate on the side of the flat tax over the fair tax. Several people asked for more information, and I promised to put this video on the blog. Long-time readers probably will have seen it before, but it’s always good to be reminded why we need tax reform – and also reminded why we can’t trust politicians with a new source of revenue.
I’m awake at a completely uncivilized hour in San Diego so I can catch a plane to Phoenix for a presentation to the Tea Party Patriots conference.
Since it’s too early for me to say anything coherent, let’s start the weekend with some good jabs from the late-night comics.
Moammar Gadhafi said that Libyan protesters were all on drugs, and then he blamed it on al-Qaida. Now, he’s saying it’s the fault of the teachers unions. – Jay Leno
Sarah Palin is going to a political conference in India next month. Palin said she’s loved India ever since she saw “Hoosiers.” – Jimmy Fallon
People in Libya want Moammar Gadhafi to leave. The problem is, he’ll be replaced by his idiot son, Moammar W. Gadhafi. – David Letterman
Senate Majority Leader Harry Reid says he wants to outlaw prostitution in his home state of Nevada. He said he wants to keep prostitution where it belongs — in Washington, D.C. – Jimmy Fallon
I spent Presidents Day acting like a president. I took someone else’s money and spent it on something I don’t need. – Jay Leno
Posted in Big Government, Congress, Democrats, Fiscal Policy, Government Spending, Obama, Republicans, tagged Congress, Democrats, Government Shutdown, Government Spending, Obama, Republicans on February 25, 2011 | 57 Comments »
When existing spending authority expires on March 4, the “non-essential” parts of the federal government will shut down unless Republicans and Democrats reach an agreement. This is causing lots of agitation in Washington, both by Democrats who don’t want the money spigots in the off position and Republicans who fret that they will be blamed for (gasp) gridlock.
I have a new piece at National Review that explains how the GOP can win this fight. Indeed, I explain that Republicans actually did a pretty good job during the 1995 fight, even though they now have negative memories of the experience. This excerpt provides my basic assessment, but the full article has lots of additional information, including quotes from news accounts in 1995 showing that the GOP held the upper hand, as well as four specific recommendation of how advocates of limited government can do even better this year.
With the GOP-led House and the Democratic Senate and White House far apart on a measure to pay the federal government’s bills past March 4, Washington is rumbling toward a repeat of the 1995 government-shutdown fight (actually two shutdown fights, one in mid-November of that year and the other in mid-December). This makes some Republicans nervous. They think Bill Clinton “won” the blame game that year, and they’re afraid they will get the short end of the stick if there is a 1995-type impasse this year. A timid approach, though, is a recipe for failure. It means that President Obama and Senate Majority Leader Harry Reid can sit on their hands, make zero concessions, and wait for the GOP to surrender any time a deadline approaches. In other words, budget hawks in the House have no choice. They have to fight. But they can take comfort in the fact that this is not a suicide mission. The conventional wisdom about what happened in November of 1995 is very misleading. Republicans certainly did not suffer at the polls. They lost only nine House seats, a relatively trivial number after a net gain of 54 in 1994. They actually added to their majority in the Senate, picking up two seats in the 1996 cycle. More important, they succeeded in dramatically reducing the growth of federal spending. They did not get everything they wanted, to be sure, but government spending grew by just 2.9 percent during the first four years of GOP control, helping to turn a $164 billion deficit in 1995 into a $126 billion surplus in 1999. And they enacted a big tax cut in 1997. If that’s what happens when Republicans are defeated, I hope the GOP loses again this year.
One Chart that Tells You Everything You Need to Know about Whether State and Local Bureaucrats Are Over-Compensated
Posted in Big Government, Bureaucracy, Bureaucrats, Government Spending, Local government, States, Union Bosses, tagged Bureaucracy, Bureaucrats, Government Spending, Local government, States, Unions, Wisconsin on February 25, 2011 | 18 Comments »
The showdown in Wisconsin has generated competing claims about whether state and local government bureaucrats are paid too much or paid too little compared to their private sector counterparts.
The data on total compensation clearly show a big advantage for state and local bureaucrats, largely because of lavish benefits (which is the problem that Governor Walker in Wisconsin is trying to fix). But the government unions argue that any advantage they receive disappears after the data is adjusted for factors such as education.
This is a fair point, so we need to find some objective measure that neutralizes all the possible differences. Fortunately, the Bureau of Labor Statistics has a Job Openings and Labor Turnover Survey, and this “JOLTS” data includes a measure of how often workers voluntarily leave job, and we can examine this data for different parts of the workforce.
Every labor economist, right or left, will agree that higher “quit rates” are much more likely in sectors that are underpaid and lower levels are much more likely in sectors where compensation is generous.
Not surprisingly, this data shows state and local bureaucrats are living on Easy Street. As the chart illustrates, private sector workers are more than three times as likely to quit their jobs.
This helps explain why the unions are treating the Wisconsin debate as if it was Custer’s Last Stand. The bureaucrats know they have comfortable sinecures and they are fighting to preserve their unfair privileges.
This Center for Freedom and Prosperity video looks at all of the data and reveals a pecking order. Federal bureaucrats are at the kings and queens of compensation. State and local bureaucrats are like the nobility. And private sector taxpayers are the serfs that worker harder and earn less, but nonetheless finance the entire racket.
The video closes with a very important point that the right pay level for many bureaucrats is zero. This is because they work for programs, departments, and agencies that should not exist.
This is really remarkable. We’re supposed to go through porno strip machines at the airport so the bureaucrats can detect firearms. Yet the Keystone Cops at the TSA in Dallas failed when an undercover agent tested their awareness by hiding a gun in her undergarments. They didn’t just fail. They. Failed. Every. Single. Time.
An undercover TSA agent was able to get through security at Dallas/Fort Worth International Airport with a handgun during testing of the enhanced-imaging body scanners, according to a high-ranking, inside source at the Transportation Security Administration. The source said the undercover agent carried a pistol in her undergarments when she put the body scanners to the test. The officer successfully made it through the airport’s body scanners every time she tried, the source said. “In this case, where they had a test, and it was just a dismal failure as I’m told,” said Larry Wansley, former head of security at American Airlines. “As I’ve heard (it), you got a problem, especially with a fire arm.”
This story worries me. But not because a terrorist might smuggle a gun on board. Passengers are now the most effective line of defense against hijacking, along with hardened cockpit doors and armed pilots.
But I am worried that the TSA might over-react, demand more intensive scrutiny, and cause airport security lines to become even slower.
Actually, I better add an important qualifier to that title and instead say that we should listen to a specific Frenchwoman.
My friend Veronique de Rugy recently testified before a House Committee and she completely kicked you-know-what.
I haven’t commented on what’s been happening in Libya, Egypt, and the rest of the Arab world. This isn’t because I don’t care, but rather because I don’t have much knowledge about the area and I’m not sure what, if anything, the United States should do. Or could do.
I will say, however, that one of my concerns is that these countries will stumble from one form of oppression to another. And maybe the new form of oppression (post-1979 Iran) will be worse than the old form of oppression (pre-1979 Iran). I suspect President Obama and his team understand this, which is why the White House is being very cautious.
What I would like to see, of course, is genuine freedom and liberty. But this is not the same as democracy.
Democracy and liberty can overlap, to be sure, but democracy also can morph into untrammeled majoritarianism – what is sometimes known as tyranny of the majority.
Interestingly, even researchers at the International Monetary Fund share my concerns. A recent study from the IMF reported that, “economic freedom [is]… beneficial to growth, while democracy may have a small negative effect.” In other words, give people liberty, and good things happen. Give them democracy, and the outlook is not nearly as encouraging.
Walter Williams, as is so often the case, explains the real issue. This is a long excerpt, but every word is worth reading, especially the quotes from the Founding Fathers.
Like the founders of our nation, I find democracy and majority rule a contemptible form of government. …I’ll begin by quoting our founders on democracy. James Madison, in Federalist Paper No. 10, said that in a pure democracy, “there is nothing to check the inducement to sacrifice the weaker party or the obnoxious individual.” At the 1787 Constitutional Convention, Virginia Gov. Edmund Randolph said, “… that in tracing these evils to their origin every man had found it in the turbulence and follies of democracy.” John Adams said, “Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There was never a democracy yet that did not commit suicide.” Alexander Hamilton said, “We are now forming a Republican form of government. Real Liberty is not found in the extremes of democracy, but in moderate governments. If we incline too much to democracy, we shall soon shoot into a monarchy, or some other form of dictatorship.” The word “democracy” appears nowhere in the two most fundamental documents of our nation — the Declaration of Independence and the U.S. Constitution. …What’s the difference between republican and democratic forms of government? John Adams captured the essence when he said, “You have rights antecedent to all earthly governments; rights that cannot be repealed or restrained by human laws; rights derived from the Great Legislator of the Universe.” That means Congress does not grant us rights; their job is to protect our natural or God-given rights. For example, the Constitution’s First Amendment doesn’t say Congress shall grant us freedom of speech, the press and religion. It says, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press…” …In a democracy, the majority rules either directly or through its elected representatives. As in a monarchy, the law is whatever the government determines it to be. Laws do not represent reason. They represent force. The restraint is upon the individual instead of government. Unlike that envisioned under a republican form of government, rights are seen as privileges and permissions that are granted by government and can be rescinded by government. To highlight the offensiveness to liberty that democracy and majority rule is, just ask yourself how many decisions in your life would you like to be made democratically. How about what car you drive, where you live, whom you marry, whether you have turkey or ham for Thanksgiving dinner?
Here are a few of David Harsanyi’s sage comments, from an article he wrote for Reason. He makes many of the same points about the importance of protecting individual liberty, regardless of the sentiments of 51 percent of the general population.
…a number of anchors and talking heads have made a careless habit of using the words “democracy” and “freedom” as if they were interchangeable ideas. …Alas, it only takes 51 percent of you to ban a stiff energy drink or a decent light bulb—a crime against not only liberty but also decent luminosity. When liberals crusade to end electoral colleges or scoff at states’ rights, they are fighting for a more direct, centralized democracy in which liberty becomes susceptible to the temporary whims, ideological currents, and fears (rational and sometimes not) of the majority. When the tea party members talk about returning “power to the people”—as they’re apt to do on occasion—they’re missing the point, as well. We already defer too much power to other people. If you knew the people I do, you’d be chanting “power from the people.” …democracy is clearly a vast improvement over an autocracy. …Democracy without a moral foundation, economic freedom, or a respect for individual and human rights, though, has the potential not to be any kind of freedom at all. We all wish the Muslim world the best in shedding its dictatorships and theocracies and finding true liberty. But let’s not confuse two distinct ideas.
Five surgeons are talking.
#1 The first, a California surgeon, says: “I like to see accountants on my operating table, because when you open them up, everything inside is numbered.”
#2 The second, a Texas surgeon, responds: “Yeah, but you should try electricians. Everything inside of them is color coded.”
#3 The third, an Oklahoman surgeon, says: “No, I really think librarians are the best, everything inside of them is in alphabetical order.”
#4 The fourth, an Florida surgeon, chimes in: “You know, I like construction workers…. those guys always understand when you have a few parts left over.”
#5 But, the fifth, a Washington, D.C. surgeon, shut them all up when he observed: “You’re all wrong. Politicians are the easiest to operate on. There’s no guts, no heart, no balls, no brains, and no spine, — and the head and the ass are interchangeable.”
Posted in Big Government, Dependency, Poverty, Redistribution, Welfare, Welfare State, tagged Big Government, Dependency, Poverty, Redistribution, Welfare, Welfare State on February 22, 2011 | 4 Comments »
This story from the Manhattan Institute’s City Journal makes the point, excerpted below, that the welfare state subsidizes dysfunctional behavior. But read the story to understand how big government destroys lives, ruins families, and creates inter-generational poverty. A very powerful, albeit very depressing article. It’s basically the American version of this grim news report from England.
Connecticut is among the most generous of the states to out-of-wedlock mothers. Teenage girls like Nicole qualify for a vast array of welfare benefits from the state and federal governments: medical coverage when they become pregnant (called “Healthy Start”); later, medical insurance for the family (“Husky”); child care (“Care 4 Kids”); Section 8 housing subsidies; the Supplemental Nutrition Assistance Program; cash assistance. If you need to get to an appointment, state-sponsored dial-a-ride is available. If that appointment is college-related, no sweat: education grants for single mothers are available, too. Nicole didn’t have to worry about finishing the school year; the state sent a $35-an-hour tutor directly to her home halfway into her final trimester and for six weeks after the baby arrived. In theory, this provision of services is humane and defensible, an essential safety net for the most vulnerable—children who have children. What it amounts to in practice is a monolithic public endorsement of single motherhood—one that has turned our urban high schools into puppy mills. The safety net has become a hammock.
Posted in Big Government, Bush, Canada, Clinton, Debt, Deficit, Economics, Entitlements, Government Spending, Ireland, Obama, Reagan, Slovakia, Welfare State, tagged Big Government, Bush, Canada, Clinton, Debt, Deficit, Economics, Entitlements, Federal Budget, Fiscal Policy, Government Spending, Ireland, New Zealand, Obama, Reagan, Slovakia on February 22, 2011 | 83 Comments »
America faces a fiscal crisis. The burden of federal spending has doubled during the Bush-Obama years, a $2 trillion increase in just 10 years. But that’s just the tip of the proverbial iceberg. Because of demographic changes and poorly designed entitlement programs, the federal budget is going to consume larger and larger shares of America’s economic output in coming decades.
For all intents and purposes, the United States appears doomed to become a bankrupt welfare state like Greece.
But we can save ourselves. A previous video showed how both Ronald Reagan and Bill Clinton achieved positive fiscal changes by limiting the growth of federal spending, with particular emphasis on reductions in the burden of domestic spending. This new video from the Center for Freedom and Prosperity provides examples from other nations to show that good fiscal policy is possible if politicians simply limit the growth of government.
These success stories from Canada, Ireland, Slovakia, and New Zealand share one common characteristic. By freezing or sharply constraining the growth of government outlays, nations were able to rapidly shrinking the economic burden of government, as measured by comparing the size of the budget to overall economic output.
Ireland and New Zealand actually froze spending for multi-year periods, while Canada and Slovakia limited annual spending increases to about 1 percent. By comparison, government spending during the Bush-Obama years has increased by an average of more than 7-1/2 percent. And the burden of domestic spending has exploded during the Bush-Obama years, especially compared to the fiscal discipline of the Reagan years. No wonder the United States is in fiscal trouble.
Heck, even Bill Clinton looks pretty good compared to the miserable fiscal policy of the past 10 years.
The moral of the story is that limiting the growth of spending works. There’s no need for miracles. If politicians act responsibly and restrain spending, that allows the private sector to grow faster than the burden of government. That’s the definition of good fiscal policy. The new video above shows that other nations have been very successful with that approach. And here’s the video showing how Reagan and Clinton limited spending in America.
Since February is the 100th anniversary of Ronald Reagan’s birth and I still haven’t gotten over my man-crush on the Gipper, I figured it would be interesting to look at Reagan’s fiscal record, particularly to see whether he was successful in restraining the growth of domestic spending.
There is lots of good information in the Historical Tables of the Budget, which is produced by the Office of Management and Budget. I was particularly fascinated by the data on inflation-adjusted total domestic spending (discretionary and entitlements), which can be obtained by adding columns E and H of Table 8.2.
As you can see in this chart, Reagan managed to limit average domestic spending increases to less than one percent per year. These figures, which are adjusted for inflation, show that spending has grown more than five times as rapidly during the Bush-Obama years.
The comparison is even more dramatic if we examine the average annual increase in inflation-adjusted domestic spending. In other words, we’re looking at how much spending increased each year, not the percentage change. During the Reagan years, overall domestic spending grew less than $10 billion per year, while spending has soared more than $100 billion per year during the Bush-Obama era. Remember that we’re using inflation-adjusted dollars, so this is an apples-to-apples comparison.
The final chart maps annual domestic spending (in constant 2005 dollars) for Reagan’s eight fiscal years on the right vertical axis and the 10 fiscal years of Bush-Obama on the left vertical axis. Two things stand out. First, the bailout dramatically affected outlays in recent years, both because of a huge jump in fiscal year 2009 and an artificial dampening in the past two years (because repayments from banks and other bailed-out institutions count as “negative spending” rather than revenues).
Second, you can’t blame the poor record of Bush and Obama on bailouts. The chart axes are designed to give a similar starting point for Reagan’s spending and Bush-Obama spending, and it is obvious that Bush’s approach of so-called compassionate conservatism meant a bigger and more wasteful budget for domestic spending. Obama promised hope and change, of course, but he grabbed the big-spending baton from Bush and continued in the same direction, though TARP payments and repayments make it more challenging to discern the precise impact of the “stimulus” and other Obama initiatives (Tables 8.6 and 8.8 of the Historical Tables have program-by-program data for those who want the gory details).
Last but not least, don’t forget that FY2009 began October 1, 2008, nearly four months before Obama took office, and the bad numbers for that fiscal year generally should be attributed to Bush. Yes, Obama added to FY2009 spending with an omnibus appropriations bill and the faux stimulus, but I’ve estimated that 96 percent of that year’s spending was the result of Bush Administration decisions.
I got this joke from an English friend. I’m a bit leery about posting politically incorrect humor, but it is funny and I don’t think I can get in too much trouble for jokes about Europeans.
The English are feeling the pinch in relation to recent terrorist threats and have therefore raised their security level from “Miffed” to “Peeved.” Soon, though, security levels may be raised yet again to “Irritated” or even “A Bit Cross.” The English have not been “A Bit Cross” since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from “Tiresome” to “A Bloody Nuisance.” The last time the British issued a “Bloody Nuisance” warning level was in 1588, when threatened by the Spanish Armada.
The Scots have raised their threat level from “Pissed Off” to “Let’s get the Bastards.” They don’t have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.
The French government announced yesterday that it has raised its terror alert level from “Run” to “Hide.” The only two higher levels in France are “Collaborate” and “Surrender.” The rise was precipitated by a recent fire that destroyed France’s white flag factory, effectively paralyzing the country’s military capability.
Italy has increased the alert level from “Shout Loudly and Excitedly” to “Elaborate Military Posturing.” Two more levels remain: “Ineffective Combat Operations” and “Change Sides.”
The Germans have increased their alert state from “Disdainful Arrogance” to “Dress in Uniform and Sing Marching Songs.” They also have two higher levels: “Invade a Neighbor” and “Lose.”
Belgians, on the other hand, are all on holiday as usual; the only threat they are worried about is NATO pulling out of Brussels.
The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.
Australia, meanwhile, has raised its security level from “No worries” to “She’ll be alright, Mate.” Two more escalation levels remain: “Crikey! I think we’ll need to cancel the barbie this weekend!” and “The barbie is canceled.” So far no situation has ever warranted use of the final escalation level.
I have a non-partisan sense of humor. Over the years, I’ve enjoyed jokes about George W. Bush, Dan Quayle, and Bill Clinton. I’ve even laughed at jokes about Ronald Reagan.
So you won’t be surprised to learn that I found this worth sharing.
Posted in Big Government, Bureaucracy, Bureaucrats, Fiscal Policy, States, Union Bosses, tagged Bureaucracy, Bureaucrats, Fiscal Policy, Government Spending, Governor Walker, Scott Walker, Union Bosses, Unions, Wisconsin on February 19, 2011 | 18 Comments »
After dozens of posts about overpaid government employees, I’m sick of writing about the topic. But what’s happening in Wisconsin is critically important in the fight for long-run fiscal sanity, so I’m reluctantly wading back into this fight. Simply stated, bureaucrats have figured out how to manipulate the system and they are bankrupting state and local governments.
Chris Christie is the first governor in a long time to stand up to these thugs and now the new chief executive of Wisconsin, Scott Walker, has joined the fight. But unlike Christie, who must deal with a hostile state legislature, Governor Walker has a GOP-controlled Assembly and Senate. As such, he has a chance to take much bigger steps in the right direction.
The unions realize that their special privileges may disappear and they are engaged in a vicious fight to block reform. Other groups that get money and/or political support from the unions also are joining the battle against Wisconsin’s taxpayers. John Fund of the Wall Street Journal provides the key details.
Mr. Walker’s proposals are hardly revolutionary. Facing a $137 million budget deficit, he has decided to try to avoid laying off 5,500 state workers by proposing that they contribute 5.8% of their income towards their pensions and 12.6% towards health insurance. That’s roughly the national average for public pension payments, and it is less than half the national average of what government workers contribute to health care. Mr. Walker also wants to limit the power of public-employee unions to negotiate contracts and work rules—something that 24 states already limit or ban. …Democratic reactions to these proposals have been over the top. In addition to the thousands of protesters who descended on the Capitol building on Thursday to intimidate legislators, so many teachers called in sick on Friday that school districts in Milwaukee, Madison and Janesville had to close. …Why are national liberal groups treating Wisconsin as if it were their last stand? Partly for reasons of symbolism. Historically, Wisconsin “embraced the organized labor movement more heartily than any other [state],” notes liberal activist Abe Sauer. …Labor historian Fred Siegel offers further reasons why unions are manning the barricades. Mr. Walker would require that public-employee unions be recertified annually by a majority vote of all their members, not merely by a majority of those that choose to cast ballots. In addition, he would end the government’s practice of automatically deducting union dues from employee paychecks. For Wisconsin teachers, union dues total between $700 and $1,000 a year. “Ending dues deductions breaks the political cycle in which government collects dues, gives them to the unions, who then use the dues to back their favorite candidates and also lobby for bigger government and more pay and benefits,” Mr. Siegel told me.
Just in case you’re wondering why unions are being so intransigent, Instpundit has a link to a website explaining that state bureaucrats get twice as much compensation as the tax-paying serfs in Wisconsin’s private sector. I can’t vouch for the specific numbers, but I’m sure the gap in the state is enormous, as is the case all across the nation. This video explains.
Let me close with a caveat. There surely are thousands of Wisconsin government employees who disagree with the thuggish tactics and absurd demands of the union bosses. My criticisms obviously don’t apply to those folks, but I would ask them to stand up and be counted. Write op-eds and letters-to-the-editor. Attend today’s Tea Party rally. The union bosses are using your money to do bad things, but you can use your time to do the right thing.
There will be several pivotal fiscal policy battles this year and the fight over the debt limit may be the most crucial.
This is a “must-pass” piece of legislation, so it will be a rare opportunity for fiscal conservatives in the House to impose some much-needed spending restraint.
But it’s also a high-stakes game. If Obama (or Reid) refuse to accept the fiscal reforms approved by the House and there is a stalemate, the federal government ultimately would lose its ability to borrow from private credit markets. And while that notion has some appeal for many of us, it almost certainly would require more fiscal discipline than the political system is willing to accept (i.e., actual deep cuts rather than just restraining the growth of spending).
In a bit of reckless demagoguery, the Treasury Secretary even says it would mean default – which could cause instability in financial markets.
To preclude that possibility, Senator Toomey of Pennsylvania has a proposal to protect the “full faith and credit” of the United States by requiring the federal government to make interest payments a top priority. Writing for Bloomberg, I opine about the Senator’s proposal.
…the federal government is expected to collect more than $2.1 trillion of tax revenue this year, while interest payments on the publicly held debt will only be about $200 billion. So even without an increase in the debt limit, the Treasury Department will have more than enough revenue to cover its interest obligations and avoid a default. That being said, financial markets are sometimes spooked by uncertainty. And since Treasury Secretary Timothy Geithner began making some irresponsible statements about the risks of default, there is growing interest in legislation by Senator Pat Toomey, a Republican of Pennsylvania, to alleviate the market’s fears. Quite simply, Toomey’s bill would require the federal government to fulfill obligations to bondholders before making any other disbursements. …If the Toomey legislation is adopted, fiscal reformers will have a powerful weapon at their disposal. Secure in the knowledge that default no longer is a possibility, they can be much tougher in their negotiations with the politicians who favor the status quo. This explains the attacks against the Toomey plan. Some even argue that the law requires the government to pay Chinese bondholders (gasp!) before it pays Social Security recipients. This is demagoguery. The federal government will collect more than enough revenue to finance the majority of budgeted outlays. Social Security checks will be disbursed, unless the Treasury secretary decides otherwise. In any event, the attack is rather hollow since it’s almost always made by people who say that default would be a cataclysmic event. What they really mean, it seems, is that deficits, debt and default are bad, and only higher taxes are the solution. That’s what this debate is all about. We have a fiscal crisis caused by too much spending, not too little taxes. Restraining the size and scope of government is contrary to the interests of the iron quadrangle of politicians, interest groups, lobbyists and bureaucrats who benefit from ever- expanding government.
One of Milton Friedman’s great lines was his observation that people are more likely to be irresponsible when spending other people’s money.
Jay Leno must be a closet libertarian, because here’s one of his jokes from the other night.
First lady Michelle Obama told “Regis & Kelly” she was expecting jewelry on Valentine’s Day. She said it wouldn’t be anything extravagant because Barack tends to be responsible when he’s spending his own money.
Posted in Big Government, Debt, Deficit, Economics, Entitlements, Fiscal Policy, Government Spending, Health Reform, Keynes, Keynesian, News Appearance, Obama, stimulus, Taxation, Value-Added Tax, VAT, tagged Big Government, Debt, Deficit, Entitlements, Government Spending, Keynesian Economics, News Appearance, VAT on February 17, 2011 | 1 Comment »
I discuss taxes, spending, and other fiscal policy issues in three interviews at CPAC.
In this interview for PJTV, I mostly chat about taxes, including the fight over the 2001 and 2003 tax cuts, the threat of a value-added tax, and the potential for real tax reform.
In this podcast for the Institute for Liberty (beginning at the 8:55 mark), I explain why government spending undermines prosperity, whether it is short-run “stimulus” spending or long-run “investments,” and also talk about the debt limit and a potential government shutdown.
In this podcast for United Liberty, I pontificate about spending fights on Capitol Hill, including the “continuing resolution,” the debt limit, entitlements, repealing Obamacare, and the 2012 budget.
Posted in Capital Gains Tax, Competitiveness, Corporate income tax, Corporate tax, Fiscal Policy, Flat Tax, Tax Compliance, Tax Reform, Taxation, tagged Capital Gains, Corporate income tax, Corporate taxation, Dividends, Flat Tax, Tax Compliance, Tax Reform, Taxation on February 17, 2011 | 5 Comments »
Here’s a video arguing for the abolition of the corporate income tax. The visuals are good and it touches on key issues such as competitiveness.
I do have one complaint about the video, though it is merely a sin of omission. There is not enough attention paid to the issue of double taxation. Yes, America’s corporate tax rate is very high, but that is just one of the layers of taxation imposed by the internal revenue code. Both the capital gains tax and the tax on dividends result in corporate income being taxed at least two times.
These are points I made in my very first video, which is a good companion to the other video.
There is a good argument, by the way, for keeping the corporate tax and instead getting rid of the extra layers of tax on dividends and capital gains. Either approach would get rid of double taxation, so the economic benefits would be identical. But the compliance costs of taxing income at the corporate level (requiring a relatively small number of tax returns) are much lower than the compliance costs of taxing income at the individual level (requiring the IRS to track down the tens of millions of shareholders).
Indeed, this desire for administrative simplicity is why the flat tax adopts the latter approach (this choice does not exist with a national sales tax since the government collects money when income is spent rather than when it is earned).
But that’s a secondary issue. If there’s a chance to get rid of the corporate income tax, lawmakers should jump at the opportunity.
Forget the Magna Carta and the Constitution. Don’t pay attention to the end of slavery. Ignore the defeat of the Nazis or the collapse of the Soviet Empire.
If you want a real victory for humanity, European courts have ruled that people have the right to free soccer games on TV. Apparently, people are now “entitled” to anything that is “of major importance” to society.
Isn’t that just peachy? Europe is slowly collapsing under the weight of the welfare state. Nations such as Greece and Portugal already have reached the point of fiscal collapse. But rather than address these problems, the political elites at the European institutions have decided on a modern-day version of bread and circuses for the masses.
Here’s a blurb from the Financial Times.
European countries are entitled to ban the exclusive airing of World Cup and European football championship games on pay-TV in order to allow wider public viewing on free channels, one of Europe’s top courts has ruled. The ruling is a blow for Fifa, which organises the World Cup finals, and Uefa, which handles the European Football Championship finals. Both organisations depend heavily on the sale of broadcasting rights for much of their income and had challenged the extent to which games had to be shown more widely. But on Thursday the General Court in Luxembourg slapped down their arguments and ruled in favour of Belgium and the UK, which had included games organised by Fifa or Uefa on their lists of events they considered to be “of major importance” to society and so entitled to wider audiences.
Posted in Bailout, Big Government, Dependency, Europe, Government Spending, Greece, International Monetary Fund, Subsidies, Taxpayer Ripoff, Welfare State, tagged Bailouts, Dependency, Government Spending, Greece, Handouts, IMF, Subsidies, Welfare State on February 16, 2011 | 6 Comments »
On rare occasions, I dream about being a politician or high-level international bureaucrat. Not because I want to be a moocher (please put me out of my misery if that ever happens), but because I periodically read about some sleazy interest group making petulant demands for handouts and I think about how much fun it would be to tell them to go jump in a lake.
In some cases, the sleazy interest group is an entire nation. Greece recently took a bailout from both the European Union (i.e., European taxpayers) and the International Monetary Fund (i.e., all taxpayers). In exchange for getting a handout, Greek politicians agreed to implement a bunch of deficit-reduction policies.
But like many welfare recipients, the country of Greece has an entitlement mentality and is now whining and complaining about having to live up to its side of the bargain.
All I can think about is how rewarding and satisfying it would be to say, “okay, a__h___s, have it your way, we’re revoking your bailout. Have fun becoming Argentina on your way to becoming Zimbabwe, you bloodsucking leeches.”
Actually, if I had that power, Greece never would have received a bailout in the first place, but I think you know what I mean.
Here are some excerpts from the Reuters report about Greece’s chutzpah.
Greece accused the EU and IMF of interfering in its domestic affairs on Saturday after the international lenders said Athens must speed up reforms and sell more public assets. On Friday, EU and IMF inspectors visiting Greece to monitor the implementation of a bailout plan that saved Greece from bankruptcy, approved more aid for the country but adopted a more critical tone than on previous visits. In rare harsh words, the Greek government said the inspectors’ approach was unacceptable, after coming under fire from local media for not reacting to criticism of the pace of reforms and the call for privatizations. …Earlier in the day, government spokesman George Petalotis said: “We asked nobody to interfere in domestic affairs … We only take orders from the Greek people.”
Posted in Big Government, Debt, Deficit, Fiscal Policy, Government Spending, Obama, tagged Big Government, Debt, Deficits, Federal Budget, Fiscal Policy, Government Spending, Obama on February 16, 2011 | 29 Comments »
Fiscal policy wonks (like me, I’m forced to admit) sometimes miss the forest because we focus too much on individual trees.
So while I think my posts on the spending and revenue sides of Obama’s new budget contained lots of useful information, I didn’t pay any attention to the elephant in the room (I’m really going overboard with metaphors, huh?).
The most important number in Obama’s budget is that he is proposing $5.7 trillion of spending in 2021, about $2 trillion more than is being spent this year, according to table S-1 of the budget.
Here’s everything you need to know about Obama’s budget, in one chart.
It’s important to make three additional observations. First, Obama’s budget is based on all sorts of optimistic assumptions and rosy scenarios, as explained by Brian Riedl of the Heritage Foundation. When CBO produces a re-estimate of the President’s budget, it almost certainly will show hundreds of billions of dollars of additional spending.
Second, the slope of the line if the graph is very revealing. The first two years look very impressive, with almost no change in spending, but the goal of fiscal policy, to borrow a phrase from the health care debate, should be “bending the cost curve” of government. Short-run gimmicks, to put it mildly, don’t have any long-run impact. That’s why the most important number in Obama’s budget is the $5.7 trillion burden of spending in 2021. That’s a mark of fiscal failure, and it exists because Obama’s budget increases spending at twice the rate of inflation between 2013 and 2021.
Third, many people have appropriately criticized the White House for moving the fiscal goalposts (oops, another metaphor) and focusing on a technical budget concept known as “primary deficit” or “primary balance” instead of traditional budget measures. This is an arcane issue involving the difference between total spending compared to overall spending minus interest payments. Yes, the White House is being slippery, even earning a false rating from PolitiFact, but this is red herring (there I go again) issue. What really matters is the size of government, not regular deficits or primary deficits. Too many Republicans are fixating on the symptom of too much borrowing and paying insufficient attention to the underlying disease of too much spending. This video explains further.
I’ve commented before about the sub-par government-run healthcare system in the United Kingdom, including patients dying of malnutrition, patients suffering needless pain and discomfort, and patients dying from poor care (additional examples at this link).
I’ve even commented on the NHS wasting money on politically correct nonsense while letting patient care deteriorate.
Now we have another distasteful example showing why it is a big mistake to put bureaucrats in charge of health care. This BBC story is a sobering look at America’s future with a government-run healthcare system.
The NHS is failing to treat elderly patients in England with care, dignity and respect, an official report says. The Health Service Ombudsman came to the conclusion after carrying out an in-depth review of 10 cases. The ombudsman, which deals with serious complaints against the NHS, said the patients – aged over 65 – suffered unnecessary pain, neglect and distress. Charities said the findings were “sickening”, while the government admitted improvement was needed. …Several themes became clear from the ombudsman’s analysis. Half the people featured did not consume adequate food or water during their time in hospital. Some were left in soiled or dirty clothes. …In another case, a cancer patient wanted to be discharged to die at home. When his daughter arrived to collect him, she found him sitting behind a closed curtain in distress. He had been left for several hours in pain and desperate to go to the toilet. He was unable to ask for help because he was so dehydrated that he could not speak or swallow.
Posted in Big Government, Class warfare, Debt, Deficit, Fiscal Policy, Government Spending, Higher Taxes, Obama, Tax Increase, Taxation, tagged Big Government, Class warfare, Government, Government Spending, Higher Taxes, Obama, Tax Increases, Taxation on February 15, 2011 | 9 Comments »
I looked yesterday at the spending side of Obama’s budget and found some good news and bad news. The good news was the absence of any big new initiative to expand the burden of government. That’s a welcome relief since the past couple of years have featured budget busting proposals such as the so-called stimulus scheme and a government-run healthcare plan.
The bad news is that the budget does nothing to undo any of the damage of the past two years. Nor does it undo any of the damage of the previous eight years. And because the President’s budget refuses to address entitlement spending, it certainly doesn’t do anything to avert the damage of rapidly expanding budgets over the next several decades.
Now let’s look at the tax side of the fiscal equation. In large part, the White House is recycling class warfare ideas from last year’s budget. The President wants higher tax rates, including higher taxes on investors, entrepreneurs, and small business owners. He also wants to increase the tax burden of American companies that are competing for market share in global markets.
These are remarkably misguided proposals. But what’s especially disappointing is that the Administration stuck with these bad ideas when the President’s own fiscal commission proposed lower tax rates and base broadening. Those proposals would have increased the overall tax burden, so they definitely were not pure supply-side economics. And the Commission also proposed an increase in the double taxation of saving and investment, which also would be unfortunate.
But at least the Commission proposed to do the wrong thing in a good way. Yes, taxes would have increased, but the damage would have been ameliorated by a better tax structure. Obama’s budget, by contrast, does the wrong thing in the worst way – increasing the tax burden while also making the tax system more unfair.
It’s also worth noting that the President decided to punt on the issue of corporate tax reform. This is remarkable since even he acknowledged during his State-of-the-Union address that America’s corporate tax rate is far too high in a competitive global economy.
Last but not least, it’s worth noting that Obama’s budget shows that tax revenues will rise above their long-run average of 18 percent of GDP – even if taxes are not increased by one penny.
America’s budget problem is too much spending, period.
Posted in Big Government, Debt, Deficit, Economics, Fiscal Policy, Government Spending, Obama, Spending, Unemployment, Welfare State, tagged Big Government, Debt, Deficits, Federal Budget, Federal Spending, Government Spending, Obama, Welfare State on February 14, 2011 | 15 Comments »
President Obama’s proposed budget for fiscal year 2012 has been released and there is lots of rhetoric in Washington about “budget cuts.”
At first glance, this seems warranted. According to the just-released fiscal blueprint, the federal government is spending about $3.8 trillion this year and the President is proposing to spending a bit more than $3.7 trillion next year. In other words, the White House is going beyond a budget freeze and is actually proposing to spend $90 billion less next year than is being spent this year.
That certainly seems consistent with my proposal to solve America’s fiscal problems by restraining the growth of spending.
But you won’t find a smile on my face. This new budget may be better than Obama’s first two fiscal blueprints, but that’s damning with faint praise. The absence of big initiatives such as the so-called stimulus scheme or a government-run healthcare plan simply means that there’s no major new proposal to accelerate America’s fiscal decline.
But neither is there any plan to undo the damage of the past 10 years, which resulted in a doubling in the burden of government spending during a period when inflation was less than 30 percent.
Moreover, many of the supposed budget savings (such as nearly $40 billion of lower jobless benefits) are dependent on better economic performance. I certainly hope the White House is correct about faster growth and more job creation, but they’ve been radically wrong for the past two years and it might not be wise to rely on optimistic assumptions.
Some of the fine print in the budget also is troubling, such as Table 4.1 of OMB’s Historical Tables of the Budget, which shows that some agencies are getting huge increases, including:
o 17 percent more money for International Assistance Programs;
o 24 percent more money for the Executive Office of the President;
o 13 percent for the Department of Transportation; and
o 12 percent more for the Department of State.
But these one-year changes in outlays are dwarfed by the 10-year trend. Since 2001, spending has skyrocketed in almost every part of the budget. Even with the supposed “cuts” in Obama’s budget, there will be:
o 112 percent more spending for the Department of Agriculture;
o 100 percent more spending for the Department of Education;
o 154 percent more spending for the Department of Energy;
o 110 percent more spending for the Department of Health and Human Services;
o 175 percent more spending for the Department of Labor; and
o 82 percent for the Department of Transportation.
And remember that inflation was less than 30 percent during this period.
The budget needs to be dramatically downsized, yet the President has proposed that we tread water.
But even that’s too optimistic. America’s real fiscal challenge is that the burden of government spending will dramatically increase in coming decades, thanks largely to an aging population and poorly designed entitlement programs. Barring some sort of change, the United States will suffer the same problems that are now afflicting failed welfare states such as Greece and Portugal.
On the issue of entitlement reform, however, the President is missing in action. He’s not even willing to embrace the timid proposals of his own Fiscal Commission.
Tomorrow, we’ll look at the tax side of the President’s budget.