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Archive for May 18th, 2011

Not that we needed any additional evidence that the government wastes money in truly spectacular fashion, but this story from the Detroit Free Press is especially disgusting and outrageous.

A man who won $2 million on a Michigan lottery show has told a TV station that he still uses food stamps. Leroy Fick of Bay County admitted he still swipes the electronic card at stores, nearly a year after winning a jackpot on “Make Me Rich!” He told WNEM-TV in Saginaw that more than half the prize went to taxes. Fick says the Department of Human Services told him he could continue to use the card, which is paid with tax dollars. He told WNEM: “If you’re going to … try to make me feel bad, you aren’t going to do it.” The TV station says people have seen Fick driving a new Audi convertible.

Normally I fell sorry for people who have 50 percent of their money confiscated by the tax authorities, but in this case I’ll make an exception.

The real lesson is that the federal government should get out of the redistribution business. State and local governments are far less likely to be this profligate. And if they do waste money, migration is a feedback mechanism that will penalize them for excessive handouts.

(h/t: Amanda Carpenter)

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I certainly take second place to nobody in my utter contempt for Dominique Strauss-Kahn, the head of the International Monetary Fund. Who knew that forcing yourself (allegedly) on women could earn you a reputation as “the Great Seducer”? I guess my failure to understand means I’m just a backwards and provincial American.

I’m also a bit old-fashioned in my approach to economics. I don’t think people should use the coercive power of government take what they haven’t earned. That’s why I hold international bureaucracies in low esteem. Most of my efforts have focused on the OECD, a Paris-based (gee, what a surprise) bureaucracy that squanders American tax dollars on statist schemes such as their ongoing anti-tax competition campaign that persecutes countries with low tax rates.

But I’m also a big believer in kicking an enemy while he’s vulnerable, so let’s shift to the International Monetary Fund. Here are some passages from a new column by my Cato colleague Doug Bandow. He points out that the IMF has a horrible track record of promoting and facilitating big government.

…the rape charges against him symbolize the IMF: an institution of privilege that routinely acts to the disadvantage of the vulnerable. The IMF’s founding purpose vanished when the system of fixed exchange rates collapsed in the early 1970s. But instead of closing up shop (no jobs for international bureaucrats in that!), the IMF switched to promoting development. That is, it became a welfare program for Third World governments (and, more recently, for Eastern Europe and even Greece). The IMF spent decades subsidizing the world’s economic basket cases. Few, if any, advanced because of its programs. …the agency often got “wise” wrong. It often focused on narrow accounting data, with perverse consequences — such as forcing governments to raise taxes rather than cut spending. …Years ago, economist John Williamson pointed to the problem of the IMF feeling pressure “to lend money in order to justify having it.” Indeed, the IMF seems to measure success by making loans. As a result, its cash often acted as a general subsidy for collectivist economic policies. (Williamson once defended the organization against the criticism that it was too market-oriented by pointing to its loans to several unreconstructed communist states.) Indeed, the agency proudly disclaimed any bias against collectivist systems, pointing to “programs in all types of economies” which had “accommodated such nonmarket devices as production controls, administered prices and subsidies.” It sometimes seems to favor the most perverse policies. For instance, in the IMF’s first 40 years, India collected more money from it than any other developing state — at a time when India was pursuing a Soviet-style industrialization program.

Ironically, some people are arguing that it is unfortunate that Strauss-Kahn is in jail at such a critical time, with several European welfare states teetering on the edge of default.

But this is actually very good news. If there is any chance of saving Europe, it will be precisely because bailouts stop and nations are forced to finally fix the awful big-government policies that have crippled growth and bloated budgets, thus leading to fiscal crises. Doug makes this essential point in the conclusion to his column, and also makes the key argument that it’s time to stop the handouts to this corrupt and wasteful bureaucracy.

The IMF’s loans have often likely postponed reform — allowing governments to keep going without making the tough changes that lead to long-term growth. That appears to be happening in Greece now — where the Fund has pushed more lending and a bigger bail-out (to the consternation of Germany, which is picking up much of the bill). Strauss-Kahn may finally have done a true public service by focusing attention on the IMF. With America drowning in red ink, Washington should stop throwing good money at this pernicious institution.

P.S. For those who want to hoist Europeans on their own petard, Tessa Berenson has a great little column at the Frum Forum pointing out how many of the political elite on the other side of the Atlantic thought it was horrible and inexcusable when an American head of the World Bank arranged for a pay raise for his girlfriend. The Europeans were right at the time, but they now turn a blind eye at a far more odious episode today.

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