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Archive for August, 2011

In a perverse way (pun intended), I admire German politicians for their creativity. They will figure out ways to tax just about anything.

Their latest scheme is a plan that requires streetwalkers to put money in parking meters in exchange for a slip of paper that entitles them to…um…ply their trade for a specified period of time.

Here are some excerpts from the Daily Mail report.

German Parking and/or Prostitute Meter

Prostitutes working the streets of the former German capital are now having to pay £5.30 per night to a modified parking meter – to gain permission to ply their trade. Sex workers in Bonn face hefty fines for not forking out the new ‘income tax’ which has been brought in to try and regulate the outdoor aspect of the industry. It is to bring them into line with the country’s brothel workers who already pay out a percentage of their profits in tax, which varies depending on the region. …if caught without a valid ticket, offenders would be reprimanded. They would then face fines, and later a ban. The fee is a daily charge, and irrespective of how many punters are entertained. …specific quarters have been designated as sex work zones. City officials have created ‘consummation areas’, which are wooden parking garages where customers driving cars can retreat to with their prostitutes. Dortmund has a similar system where prostitutes buy tickets from petrol stations.

I suppose this is the point where I normally would make some snide comments about greedy politicians, or perhaps offer some analysis about the economic impact of taxation.

But this story is so bizarre that I can’t even get to that stage.

What happens if you’re just a regular motorist and you put money in the meter and press the wrong button?

And I know that most governments will put a boot on one of your tires to disable your car if you don’t pay your parking tickets. Does this mean hookers who don’t buy a street-walking pass will get a chastity belt?

Does the city government also charge for use of the garages in the “consummation areas”? And when did it become the responsibility of German taxpayers to finance something like that?!?

And for the hookers in Dortmund who get their passes at the petrol station, do the mechanics check “under the hood” if they use full service? (okay, pretty lame, but I couldn’t resist)

Most important, will the politicians take this idea to its logical conclusion and put prostitute meters in Parliament? In other words, require politicians to put money in a meter before  they try to buy support from interest groups by providing handouts and special preferences.

That’s one tax increase even I could support.

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I’m normally disappointed when religious figures comment on economics, particularly since they often turn the individual call to charity into a blank check for government-coerced redistribution. This runs contrary to individual choice, free will, and morality.

So I’m delighted that Ettore Gotti Tedeschi, writing for  L’Osservatore Romano, the quasi-official newspaper of the Vatican,  persuasively explains how higher taxes simply encourage a downward spiral of more spending, more debt, and economic despair. Here’s the key segment from his column.

…taxation in all its forms only permits further growth in public spending… During a prolonged crisis, inheritance taxes, new forms of taxation or similar alternatives reduce or wipe out resources for investments, discouraging the trust of investors, penalizing the cost of the public debt and the possibilities of its renewal at its expiration. In this context, imposing taxes on property and on income is equivalent to a suicidal anti-subsidiarity of the state to the citizen. Those who legally possess assets, on which they have paid the proper taxes, have contributed to creating wealth and, thanks precisely to these assets, continue to produce them with investments and consumption. Further forms of taxation would not be synonymous with solidarity but only with greater public spending and, perhaps, a higher debt and more widespread poverty. High taxes penalize saving, generate distrust in the ability to stimulate recovery, hit families and prevent the formation of new ones, as well as creating uncertainty and precariousness in employment. In short, they lay the foundations for another phase of unsustainable development.

What makes the editorial so remarkable is that Mr. Tedeschi not only understands economics – as illustrated by his discussion of how higher tax rates discourage productive behavior, but his grasp of real-world politics. He recognizes that higher taxes will simply lead to higher spending.

But maybe that’s an easier lesson for honest Europeans to grasp. For the past several decades, they have seen politicians – over and over again – play the bait-and-switch game of raising taxes, supposedly to reduce red ink, only to have the money used to expand already bloated public sectors.

The value-added tax, not surprisingly, has played a key role in Europe’s fiscal nightmare.

Forty years ago, southern European nations had medium-sized governments and large deficits and northern European nations had medium-sized governments and small deficits.

Today, southern European nations have had large-sized governments and large deficits and northern European nations have had large-sized governments and small deficits.

The only big change is that all these nations now have VATs and the burden of government spending is much higher. But the deficits generally have stayed the same, consistent with the political culture of the respective regions.

In other words, Milton Friedman was correct many years ago when he warned that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

And Mr. Tedeschi is correct today with a similar observation.

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There’s a very provocative article on the New York Times website that criticizes Steve Jobs for his supposed lack of charitable giving.

Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”

But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.

To give credit where credit is due, the article does present this counter-argument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”

This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion. Or do we want them to focus on creating more wealth and prosperity?

Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does.

Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”

None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent of private philanthropy.

But those of us who work at Cato understand that creating wealth – maximizing the size of the economic pie – is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.

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I wrote last year that, “I don’t think public policy should be based on polling data, but I always am happy when the American people are on the right side of an issue since it increases the possibility of good outcomes in Washington.”

One other thing to consider is that pollsters can manipulate results by changing how they word a question.

But even with those caveats, I feel good about two three new polls. First, from the folks at Gallup,we have two charts showing that the federal government isn’t winning any popularity contests.

And here’s some more data from the Gallup poll, showing that the federal government has the lowest net positive (or in this case, highest net negative) of any segment of the U.S. economy. It even ranks below lawyers and the oil/gas industry.

We also have some numbers from Rasmussen showing that voters are particularly dismayed by the power of the federal government.

A new Rasmussen Reports national telephone survey shows that 50% of Likely Voters believe the federal government has too much influence over state governments. Just 11% think the federal government does not have enough influence while 26% believe the balance is about right. Thirteen percent (13%) are not sure.  …These results come at a time when just 17% believe the federal government has the consent of the governed and only 14% believe the country is generally heading in the right direction.

I also like that only 17 percent think the federal government “has the consent of the governed.” Sounds like people have figured out that much of what happens in Washington is a racket for the benefit of insiders.

Numbers like these warm my heart – just as happened with recent polls on spending cuts, the VAT, and Social Security reform.

P.S. There’s a new Reason-Rupe poll showing that the American people understand that reducing the burden of government spending will boost the economy, whereas tax increases will just lead to bigger government.

…over 57 percent of Americans say reducing government spending will “mostly help” the economy, according to a new national Reason-Rupe Public Opinion Survey of 1,200 adults. Just 21 percent believe cutting spending will “mostly harm” the economy. …If taxes do go up, Americans don’t trust that the new revenue will be used to reduce the national debt.  When asked what they expect Congress would do with money generated by tax increases, 62 percent of Americans say Congress would spend that money on new programs. Only 27 percent of taxpayers believe Congress would actually use the money to pay down the national debt.

All these results demonstrate the wisdom of the American people (though I reserve the right to re-classify them as ignorant yokels when they disagree with me).

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In a decision that is overwhelmingly the result of the hard work and dedication of one person, Los Angeles is ending its revenue-generating red-light camera scheme.

Here’s Jay Beeber’s interview with Reason TV.

If you’re interested, this post has more information about how red-light cameras make intersections more dangerous.

It’s probably an exaggeration to say that Jay Beeber is an American hero, but he definitely deserves accolades of some kind.

Let’s not forget, though, that the voters of Houston also deserve some applause.

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The White House has announced that it is nominating Alan Krueger, a professor at Princeton, to be the new Chairman of the Council of Economic Advisers.

In a Freudian copy-editing slip, the Fox News story (at least as of 8:44 a.m.) says “Krueger’s job will be to provide policy prescriptions on ways to spur unemployment.”

That’s obviously tailor-made for a joke about the Obama Administration not needing any help when it comes to stimulating joblessness.

On a more serious note, though, I’m worried about Krueger’s sympathy for a value-added tax (VAT). Here’s what he wrote back in 2009.

…a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Many economists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy.

To be fair, Krueger was very careful to leave himself some wiggle room, even going so far as to write that, “I’m not sure it is the best way to go.”

But it seems rather obvious that Krueger, like other leftists, wants this giant new source of revenue. Heck, President Obama also has semi-endorsed a VAT, saying it is “something that has worked for other countries.”

The President’s assertion is especially foolish. After all, European nations imposed VATs about 40 years ago, which simply encouraged more spending and more debt – and now several nations are on the verge of bankruptcy.

If that’s “something that has worked,” I’d hate to see the President’s idea of failure.

The real lesson is that the United States should not copy Europe’s mistakes. This short video has the key arguments against this European-style national sales tax.

P.S. For a humorous perspective on the VAT, take a look at these clever cartoons (here, here, and here).

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I’m making the image a thumbnail, so click at your own risk.

You have only yourself to blame if you’re offended by juvenile humor.

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I generally try to avoid commenting on monetary policy. Not because I don’t have opinions, but for the simple reason that I don’t follow the issue closely enough to feel fully confident about what I say.

This doesn’t mean I’m happy with Fed Chairman Bernanke. But I’m most likely to be upset that he is making misguided statements about fiscal policy (endorsing the faux stimulus, endorsing bailouts, endorsing tax increases, and siding with Obama on the debt-limit fight).

On monetary policy, as I’ve previously explained, it’s possible that “easy money” is the right approach. I’m skeptical, but I admitted on CNBC that the TIPS data does suggest that future inflation is not a problem.

So with all these caveats out of the way, I don’t embrace everything in this video, which is very critical of the Fed, but it’s amusing and worth sharing.

If you find it even remotely interesting and/or amusing, then you definitely should watch the famous Ben-Bernank-quantitative-easing video.

And if you want to actually understand more about the Federal Reserve and monetary policy, then you should watch this video on the history of the Fed featuring Professor George Selgin.

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I’ve written before about the wussifcation of America, but we definitely haven’t sunk to the level of the United Kingdom.

Here are some excerpts from a National Review column about the Mayor of London (supposedly a conservative), who is barring children from watching Olympic shooting events.

…not all policies are created equal, and almost none are as silly or as counter-productive as the one that London mayor Boris Johnson announced on Wednesday: Children will be barred from watching shooting events at the 2012 London Olympics. The restriction is designed to help stem London’s rising gun-crime rate, and to prevent the “glorification” of firearms. …It is absurd and unsurprising in equal measure. Successive British governments have been nothing if not consistent in their asinine attitude toward firearms…official policy appears to have been to irritate the majority of the citizenry as much as is humanly possible, while leaving the source of gun crime — criminals who don’t follow the rules anyway — untouched. And so the British now have a country in which the national shooting team has to travel to France to practice its sport, pentathletes training for the Olympic games have had to waste time facing down a comical plan to replace their air rifles with laser guns… Meanwhile, the instances of gun violence on Britain’s streets have doubled in number in the last ten years, and rioters have recently proven that they can roam wild, striking blows against civilization with impunity. …Never fear, though; young people will still be allowed to watch the opening ceremony and the traditional lighting of the Olympic Flame. That is, unless the mayor of London has the torch-carrier arrested for arson.

I’d provide some additional commentary, but I can’t thing of anything to say. Some things are just too stupid for words.

It’s amazing, however, that a nation that does something this idiotic once ruled half the world.

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Whenever I find a story that involves a thorny issue of right vs wrong, I like to see what readers think.

Indeed, this has become a semi-regular feature of this blog. I’ve cited some tough cases in previous posts, dealing with difficult topics such as vigilante justice, brutal tax collection tactics, child molestation, Sharia law, healthcare, incest, jury nullification, and vigilante justice (again).

Today’s episode of “You Be the Judge” features a legal case in Florida involving whether motorists can be ticketed for warning other drivers about speed traps.

When the Florida Highway Patrol pulls someone over on the highway, it’s usually because they were speeding. But Eric Campbell was pulled over and ticketed while he was driving the speed limit. Campbell says, “I was coming up the Veterans Expressway and I notice two Florida Highway Patrol Cars sitting on the side of the road in the median, with lights off.” Campbell says he did what he always does: flashed his lights on and off to warn drivers coming from the other direction that there was speed trap ahead. According to Campbell, 60 seconds after passing the trooper, “They were on my tail and they pulled me over.” Campbell says the FHP trooper wrote him a ticket for improper flashing of high beams. Campbell says the trooper told him what he had done was illegal. But later Campbell learned that is not the case. He filed a class action suit which says “Florida Statue 316.2397″ — under which Campbell was cited — “does not prohibit the flashing of headlights as a means of communications, nor does it in any way reference flashing headlights or the use of high beams.” …Since 2005, FHP records show more than 10,429 drivers have been cited under the statute. …Campbell says FHP had no right to ticket him or anyone under the current law and he adds the agency is not being honest when it says it doesn’t write tickets to increase revenue or punish people, but rather to get the motorist to slow down on the highway. If that were true, Campbell says the FHP should be delighted with him, because drivers did slow down before troopers could give them a ticket.

I despise the use of speed traps, particularly since they always seem to be set up in places with inappropriately low speed limits, so it won’t surprise you that my gut instinct is to side with the motorists. And since there apparently isn’t any law in Florida against flashing your high beams, this is a slam-dunk issue.

But let’s take this to the next level: Should there be a law against flashing high beams?

Presumably not, but I confess this example raises broader issues. Let’s say the cops are doing something completely legitimate, such as searching for a murderer. I assume all of us would view it as wrong for an otherwise innocent person to warn the murderer the cops were about to search a certain area.

In cases like that, an obstruction-of-justice charge (or maybe aiding-and-abetting, I’m not a lawyer, so I’m guessing) seems appropriate. But where do you draw the line? If you know your friend is smoking pot, should you be liable for not ratting him out? Hopefully not, but what if your friend is a rapist? In that case, I hope we would all agree it would be right to inform the cops. But keep in mind the real issue is whether you should be subject to arrest if you don’t.

These are hard issues, and they underscore the importance of having laws that are just. It’s much easier to support strong enforcement if we know the government isn’t using the law to generate revenue or harass people engaged in victimless behavior.

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I’ve commented on the failure of Obamanomics, with special focus on how both banks and corporations are sitting on money because the investment climate is so grim. Not exactly flattering to the White House.

Using Minneapolis Federal Reserve data, I’ve compared the current recovery with the expansion of the early 1980s. Once again, not good news for the Obama Administration.

And I’ve shared a couple of cartoons – here and here - that use humor to show the impact of bad public policy.

But here’s a Bloomberg story that provides what may be the most damning evidence that the President’s big government agenda is a failure.

U.S. regulators have asked some banks to take more deposits from large investors even if it’s unprofitable, and lenders in return are seeking relief on insurance premiums and leverage ratios, according to six people with knowledge of the talks. Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably. …At least one firm, Bank of New York Mellon Corp., tried to recoup some of the costs by charging depositors 13 basis points, or 0.13 percent, for holding unusually high balances.

Let’s think about what this article is really saying. Banks normally make money by attracting deposits and then lending that money to people and businesses that have productive uses for the funds.

Yet the economy is so weak that banks are leery of taking more money. The story is complicated by other factors, including flight capital from Europe, taxes (or premiums) imposed by the Federal Deposit Insurance Corporation, and various regulatory issues.

But even with these caveats, it’s still remarkable that banks want to turn down money – or charge people for making deposits.

Sort of like McDonald’s turning away customers because they lose money by selling Big Macs and french fries. Or, better yet, like McDonald’s turning away free goods from suppliers because not enough people want to buy the final product.

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Welcome Instapundit readers. Some of you are asking what should be done instead of Obamanomics.

The honest answer is that there’s no silver bullet. Lower tax rates would help, as would a reduction in the burden of government spending. Free trade agreements also would be good, and let’s not forget the importance of reducing red tape and counterproductive regulations.

There are lots of such reforms that would boost economic performance and help make the economy more efficient. Any one of them might not make a big difference right away, but the cumulative impact would restore normal growth. And the most damning indictment of Obamanomics is not that we suffered a downturn, but that we haven’t bounced back.

This video, based on data from the Economic Freedom of the World Index, was released more than two years ago to show that there was an alternative to Obama’s failed stimulus. It’s still 100-percent relevant today.

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Last week, I wrote about an utterly reprehensible welfare mom in the United Kingdom who  had the gall to blame the government when one of her 11 kids was arrested for rioting.

Surely, I thought, she was the perfect symbol of the moral depravity caused by welfare state dependency.

But I may have been wrong. We now have a very strong entry, Alicia Bouchard, from the United States. Here’s an excerpt from a news report.

A woman encouraged her husband to have sex with a 12-year-old girl so that she would get pregnant and they could claim extra cash benefits. Alicia Bouchard even sat and watched while her 26-year-old husband had sex with the underage girl at their Florida home. According to an arrest warrant, the 41-year-old wanted the girl to fall pregnant so that she and her husband would have extra income from state benefits. …Her husband told authorities after his arrest on under age sex charges that it was his wife’s goal that a pregnancy would lead to more income for the household.

Even though I normally like the United States to prevail in international contests, there are times when it’s not good to come in first place. And this is one of those instances.

Nonetheless, I think the American welfare bum is far more despicable than the British welfare bum. With 11 kids, I suspect the British woman is a bigger burden on society. But, if there’s a 1-10 scale of depravity, the involvement of a 12-year old girl gets a score of 11.

What I want to know, though, is why she’s not in jail with her husband?

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I’ve seen a couple of jokes connecting the earthquake to what’s happening in Washington, but none of them have been overly funny (i.e., the “earthquake was caused by all the Founding  Fathers rolling over in their graves”).

But maybe it’s not easy to find humor in things such as earthquakes and hurricanes. Indeed, my only attempt at disaster humor was to mock Paul Krugman for claiming the threat of an attack by space aliens would stimulate the economy.

So I definitely need to give Mike Ramirez credit for this cartoon from Investor’s Business Daily.

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I enjoy mocking the French every so often, including posts about the nation’s absurd fiscal policy, its protesting government workers, its oddball laws against meanness, its penchant for high taxes, and its shallow attempts to redefine success.

Sometimes, I even criticize the French when they move policy in the right direction.

But it’s worth pointing out that my animosity is only directed at the French elite. After all, 84 percent of the French people support less government spending and 52 percent of them would be interested in escaping to (evil, bad, capitalistic) America. And how can you not admire a people who are so aggressive about escaping the tax net?

With that lengthy caveat now on the record, let me unload a wheelbarrow full of disgust and disdain on the aforementioned French elite. I’m motivated by a BBC story about (surprise) a French tax hike.

The French government is to impose an extra tax of 3% on annual income above 500,000 euros (£440,000; $721,000). …The tax increase came after some of France’s wealthiest people had called on the government to tackle its deficit by raising taxes on the rich. …Sixteen executives, including Europe’s richest woman, the L’Oreal heiress Liliane Bettencourt, had offered in an open letter to pay a “special contribution” in a spirit of “solidarity”. …It was signed by some of France’s most high-profile chief executives, including Christophe de Margerie of oil firm Total, Frederic Oudea of bank Societe Generale, and Air France’s Jean-Cyril Spinetta.

I obviously have little regard for the French politicians who are imposing this tax hike. You might think they would know better, particularly after they benefited from a Laffer Curve effect after lowering tax rates a few years ago.

It’s also worth pointing out that France’s deteriorating situation has nothing to do with inadequate tax receipts. Revenues consume the same share of economic output they did 10 years ago – about 50 percent of GDP. The problem, as you might expect, is that the burden of government spending has jumped to more than 55 percent of GDP, up from 51. 6 percent a decade ago.

Most of my scorn, however, is reserved for the rich people who are copying Warren Buffett and asking the government to seize more of their income.

The story cites a billionaire heiress, who presumably might sing a different tune if the politicians wanted to boost the tax burden on wealth rather than income. In any event, it’s rather odious for someone who inherited money to endorse a tax hike on people trying to make money.

And the other people cited in the story are top executives with three companies that are deeply dependent on favors from, and good relations with, the French government. They’re behavior is on the same level as a dog that is willing to roll over in exchange for some scraps from the dinner table.

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The Congressional Budget Office has just released the update to its Economic and Budget Outlook.

There are several things from this new report that probably deserve commentary, including a new estimate that unemployment will “remain above 8 percent until 2014.”

This certainly doesn’t reflect well on the Obama White House, which claimed that flushing $800 billion down the Washington rathole would prevent the joblessness rate from ever climbing above 8 percent.

Not that I have any faith in CBO estimates. After all, those bureaucrats still embrace Keynesian economics.

But this post is not about the backwards economics at CBO. Instead, I want to look at the new budget forecast and see what degree of fiscal discipline is necessary to get rid of red ink.

The first thing I did was to look at CBO’s revenue forecast, which can be found in table 1-2. But CBO assumes the 2001 and 2003 tax cuts will expire at the end of 2012, as well as other automatic tax hikes for 2013. So I went to table 1-8 and got the projections for those tax provisions and backed them out of the baseline forecast.

That gave me a no-tax-hike forecast for the next 10 years, which shows that revenues will grow, on average, slightly faster than 6.6 percent annually. Or, for those who like actual numbers, revenues will climb from a bit over $2.3 trillion this year to almost $4.4 trillion in 2021.

Something else we know from CBO’s budget forecast is that spending this year (fiscal year 2011) is projected to be a bit below $3.6 trillion.

So if we know that tax revenues will be $4.4 trillion in 2021 (and that’s without any tax hike), and we know that spending is about $3.6 trillion today, then even those of us who hate math can probably figure out that we can balance the budget by 2021 so long as government spending does not increase by more than $800 billion during the next 10 years.

Yes, you read that correctly. We can increase spending and still balance the budget. This chart shows how quickly the budget can be balanced with varying degrees of fiscal discipline.

The numbers show that a spending freeze balances the budget by 2017. Red ink disappears by 2019 if spending is allowed to grow 1 percent each years. And the deficit disappears by 2021 if spending is limited to 2 percent annual growth.

Not that these numbers are a surprise. I got similar results after last year’s update, and also earlier this year when the Economic and Budget Outlook was published.

Some of you may be thinking this can’t possibly be right. After all, you hear politicians constantly assert that we need tax hikes because that’s the only way to balance the budget without “draconian” and “savage” budget cuts.

But as I’ve explained before, this demagoguery is based on the dishonest Washington practice of assuming that spending should increase every year, and then claiming that a budget cut takes place anytime spending does not rise as fast as previously planned.

In reality, balancing the budget is very simple. Modest spending restraint is all that’s needed. That doesn’t mean it’s easy, particularly in a corrupt town dominated by interest groups, lobbyists, bureaucrats, and politicians.

But if we takes tax hikes off the table and somehow cap the growth of spending, it can be done. This video explains.

And we know other countries have succeeded with fiscal restraint. As is explained in this video.

Or we can acquiesce to the Washington establishment and raise taxes and impose fake spending cuts. But that hasn’t worked so well for Greece and other European welfare states, so I wouldn’t suggest that approach.

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Just last week, I made fun of Paul Krugman after he publicly said that a fake threat from invading aliens would be good for the economy since the earth would waste a bunch of money on pointless defense outlays.

Yesterday, there were rumors that Krugman stated that it would have been stimulative if the earthquake had been stronger and done more damage, but he exposed this as a prank (though it is understandable that many people – including me, I’m embarrassed to admit - initially assumed it was true since he did write that the 9-11 terrorist attacks boosted growth).

 But while Krugman is owed an apology by whoever pulled that stunt, the real problem is that President Obama and his advisers actually take Keynesian alchemy seriously.

And since President Obama is promising to unveil another “jobs plan” after his vacation, that almost certainly means more faux stimulus.

We don’t know what will be in this new package, but there are rumors of an infrastructure bank, which doubtlessly would be a subsidy for state and local governments. The only thing “shovel ready” about this proposal is that tax dollars will be shoveled to interest groups.

The other idea that seems to have traction is extending the current payroll tax holiday, which lowers the “employee share” of the payroll tax from 6.2 percent to 4.2 percent. The good news is that the tax holiday doesn’t increase the burden of government spending. The bad news is that temporary tax rate reductions probably have very little positive effect on economic output.

Lower tax rates are the right approach, to be sure (particularly compared to useless rebates, such as those pushed by the Bush White House in 2001 and 2008), but workers, investors, and entrepreneurs are unlikely to be strongly incentivized by something that might be seen as a one-year gimmick. Though I suppose if the holiday keeps getting extended, people may begin to think it is a semi-durable feature of the tax code, so maybe there will be some pro-growth impact.

In any event, we will see what the President unveils next month. I’ll be particularly interested in how his supposed short-run jobs proposal fits in with his long-run plan for dealing with red ink. He has been advocating for a “balanced approach” and “shared sacrifice” – but that’s Obama-speak for higher taxes, and we know that’s a damper on job creation and new investment.

As you can tell, I’m not optimistic. The best thing for growth would be to get the government out of the way. The Obama White House, though, thinks bigger government is good for the economy.

This stimulus video was produced last year and was designed for another jobs plan concocted by the Adminisration, but the message is still very appropriate.

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After World War II, some Germans tried to defend venal behavior by claiming that they were “just following orders” from their government.

Governments in America have never done anything nearly as awful as the Nazis, but there certainly are some very unpleasant blemishes in our past – and some very bad laws today.

This raises an interesting moral quandary. To what extent are we – as moral individuals – obliged to obey (or help enforce) bad law?

As is so often the case, Walter Williams has strong feelings and compelling analysis.

Decent people should not obey immoral laws. What’s moral and immoral can be a contentious issue, but there are some broad guides for deciding what laws and government actions are immoral. Lysander S. Spooner, one of America’s great 19th-century thinkers, said no person or group of people can “authorize government to destroy or take away from men their natural rights; for natural rights are inalienable, and can no more be surrendered to government — which is but an association of individuals — than to a single individual.” French economist/philosopher Frederic Bastiat (1801-50) gave a test for immoral government acts: “See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.” He added in his book “The Law,” “When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.”

I don’t pretend to know where to draw the line, but, as suggested by my posts about jury nullification, I fully subscribe to the libertarian principle that “not everything that’s illegal is immoral, and not everything that’s immoral should be illegal.”

So if you’re dodging taxes, cutting hair without a license, or smoking pot, the government better not put me on a jury if you get arrested. An if you have an expired registration sticker on your car, an unregistered gun, or a stockpile of normal light bulbs you plan on selling after the ban takes effect, you can safely confide in me.

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As a grumpy libertarian, I routinely get agitated about taxes, spending, and regulation. As far as I’m concerned, much of government is a racket that uses coercion to reward interest groups with unearned wealth.

But there are degrees of evil. So if you asked me to pick the most reprehensible thing that government does,  “asset forfeiture” might be in second place (hurting poor people to benefit rich people is at the top of my list).

Asset forfeiture occurs when government seizes property that is associated with a crime. That sounds reasonable – and it is reasonable if someone is convicted of, say, bank robbery and the government confiscates the stolen cash and any loot purchased with that money.

But it is not reasonable (or moral, or just, or appropriate) when government seizes assets without a conviction. And it is downright disgusting when the government steals (and I use that word deliberately) the assets of innocent parties.

I’ve already written about this issue (including an example from my county) and highlighted how asset forfeiture gives government bureaucracies a perverse incentive to steal.

Now we have a story from the Wall Street Journal that confirms our worst fears.

New York businessman James Lieto was an innocent bystander in a fraud investigation last year. Federal agents seized $392,000 of his cash anyway. An armored-car firm hired by Mr. Lieto to carry money for his check-cashing company got ensnared in the FBI probe. Agents seized about $19 million—including Mr. Lieto’s money—from vaults belonging to the armored-car firm’s parent company. He is one among thousands of Americans in recent decades who have had a jarring introduction to the federal system of asset seizure. Some 400 federal statutes—a near-doubling, by one count, since the 1990s—empower the government to take assets from convicted criminals as well as people never charged with a crime. …The forfeiture system has opponents across the political spectrum, including representatives of groups such as the American Civil Liberties Union on the left and the Heritage Foundation on the right. They argue it represents a widening threat to innocent people. “We are paying assistant U.S. attorneys to carry out the theft of property from often the most defenseless citizens,” given that people sometimes have limited resources to fight a seizure after their assets are taken, says David Smith, a former Justice Department forfeiture official and now a forfeiture lawyer in Alexandria, Va.

What’s really amazing is that government officials want to expand this reprehensible practice. The use of “civil forfeiture” is particularly worrisome, as illustrated by this passage.

Top federal officials are also pushing for greater use of civil-forfeiture proceedings, in which assets can be taken without criminal charges being filed against the owner. In a civil forfeiture, the asset itself—not the owner of the asset—is technically the defendant. In such a case, the government must show by a preponderance of evidence that the property was connected to illegal activity. In a criminal forfeiture, the government must first win a conviction against an individual, where the burden of proof is higher.

Here’s a really disgusting example.

Raul Stio, a New Jersey businessman, is caught up in the civil-forfeiture world. Last October, the Internal Revenue Service, suspicious of Mr. Stio’s bank deposits, seized more than $157,000 from his account. Mr. Stio hasn’t been charged with a crime. In a court filing in his pending civil case, the Justice Department alleges that Mr. Stio’s deposits were structured to illegally avoid an anti-money-laundering rule that requires a cash transaction of more than $10,000 to be reported to federal authorities. Mr. Stio made 21 deposits over a four-month period, each $10,000 or less, the filing said. Steven L. Kessler, Mr. Stio’s attorney, says there was no attempt to evade the law and that the deposits merely reflected the amount of cash his client’s businesses, a security firm and bar, had produced. Mr. Stio was saving to buy a house, he says.

I have no idea whether Mr. Stio is a good guy or a crook. But I know that the government shouldn’t be allowed to grab his money without convicting him of a crime. Especially for a supposed offense against absurdly foolish and ill-conceived anti-money laundering laws.

Our Founding Fathers gave us a presumption of innocence and no bureaucrat or politician should be allowed to cancel our constitutional rights.

Asset forfeiture should apply to people like Bernie Madoff. He’s been convicted of operating a Ponzi scheme, so by all means grab every penny he accumulated. But government should follow a simple rule: Convict first, seize second.

And here’s one final section from the story, highlighting how bureaucracies “earn” a profit by abusing forfeiture laws.

Part of the debate over seizures involves a potential conflict of interest: Under a 1984 federal law, state and local law-enforcement agencies that work with Uncle Sam on seizures get to keep up to 80% of the proceeds. Last year, under this “equitable-sharing” program, the federal government paid out more than $500 million, up about 75% from a decade ago. The payments give authorities an “improper profit incentive” to seize assets, says Scott Bullock of the Institute for Justice, a libertarian public-interest law firm in Arlington, Va. It’s a particular concern amid current state and local government budget problems, he contends. …Seeming abuses occasionally emerge. In 2008, federal Judge Joseph Bataillon ordered the return of $20,000 taken from a man during a traffic stop in Douglas County, Neb. Judge Battaillon quoted from a recording of the seizure, in which a sheriff’s deputy complained about the man’s attitude and suggested “we take his money and, um, count it as a drug seizure.” The judge’s order said the case produced “overwhelming evidence” that the funds were clean.

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Congressman Eric Cantor, the House Majority Leader, has a rather persuasive column in the Washington Post about the negative impact of President Obama’s big-government agenda.

… the Obama administration’s anti-business, hyper-regulatory, pro-tax agenda has fueled economic uncertainty and sent the message from the administration that “we want to make it harder to create jobs.” There is no other conclusion for policies such as the new Environmental Protection Agency regulations, including the “Transport Rule,” which could eliminate thousands of jobs, or the ozone regulation that would cost upward of $1 trillion and millions of jobs in the construction industry over the next decade. The administration’s new maximum achievable control technology standards for cement are expected to affect nearly 100 cement plants, setting over-the-top requirements resulting in increased costs and possibly thousands of jobs being offshored. There is the president’s silence as the National Labor Relations Board seeks to prevent Boeing from opening a plant in South Carolina that would create thousands of jobs. Such behavior, coupled with the president’s insistence on raising the top tax rate paid by individuals and small businesses, has resulted in a lag in growth that has added to the debt crisis, contributing to our nation’s credit downgrade.

The Congressman’s criticisms certainly are substantive and accurate, but I can’t help but wonder why he didn’t write this column years ago. Or, more important, why didn’t he object to big government when Bush was in the White House.

And, most important, why did he vote for all the wasteful spending and increased regulation of the Bush years. Such as:

Congressman Cantor voted for the no-bureaucrats-left-behind bill that further centralized education.

He voted for the Sarbanes-Oxley regulatory regime that dramatically raised the cost of red tape and drove business out of America.

He voted for the Medicare prescription drug entitlement that did more to increase long-term debt than Obamacare.

And he voted for the TARP bailout, exacerbating moral hazard and facilitating the corrupt mix of Wall Street and Washington.

I’m not trying to pick on Cantor. Most other GOPers were equally guilty of going along with big-government conservatism.

And I actually give Cantor a bit of credit for acknowledging that Republicans bear some of the blame for the current mess. The second sentence of his column refers to “decades of fiscal mismanagement by both political parties.”

All I’m really saying is that big government is the wrong approach, regardless of which party is in charge.

So while I’m glad Republicans are opposing Obama’s statist agenda, they would have more credibility if they also had opposed Bush’s statist agenda.

But the real purpose of this post is to wonder what will happen if we somehow wind up with a President Romney. Will congressional Republicans continue to do the right thing and oppose big government?

Or will they once again decide that the Washington cesspool is really a hot tub and join with Romney in making government even bigger and more wasteful? The experience of the Bush years does not give me much cause for optimism.

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I could write a lengthy post about why Obamanomics has been a failure, but this cartoon says it perfectly.

It has the same basic message as this classic cartoon – people are less likely to produce when government is too much of a burden.

If you want some empirical evidence about the impact of Obama’s statism, check out this picture of how much money companies are keeping on the sidelines and this one about loanable funds that banks have deposited at the Fed. Both are compelling signs that investors and entrepreneurs don’t trust the nonsense coming from Washington.

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Even though he’s widely seen as a clown and a buffoon, I’ve only had one Joe Biden joke on this blog (a two-parter you can find here and here).

Though I hasten to add that Biden has been mentioned in a few of the joke collections from the late-night comics (here, here, here, and here) and played a supporting role in this joke.

But he deserves some more love and attention, so here’s something that arrived in my inbox yesterday.

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I bought a new Ford F250 Tri-Flex Fuel Truck. Go figure. It runs on either hydrogen, gasoline, or E85.

I returned to the dealer yesterday because I couldn’t get the radio to work.

The service technician explained that the radio was “voice activated.”

“Nelson,” the technician said to the  radio.

The radio replied, “Ricky or Willie?”

“Willie!” he said, and “On The Road Again” came from the speakers.

Then he said, “Ray Charles!,” and in an instant “Georgia On My Mind” replaced Willie Nelson.

I drove away happy, and for the next few days, every time I’d say, “Beethoven,” I’d get beautiful classical music, and if I said, “Beatles,” I’d get one of their awesome songs.

Yesterday, some guy ran a red light and nearly creamed my new truck, but I swerved in time to avoid him.

I yelled, “F-ing Idiot!” Immediately the radio responded with a Joe Biden speech.

“Isn’t technology amazing,” I thought to myself.

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I took part in a thirty-minute online Skype debate for PBS on income inequality, and they boiled it down to the 4:44 youtube video embedded below.

You probably won’t be surprised to learn that I said economic growth was the key. I don’t want to re-slice the pie. I want to make it bigger.

I wish I had used my example of Chile v. Argentina v. Venezuela. Or my more recent post on Singapore’s remarkable growth.

One thing I did mention is that the poverty rate was falling for much of U.S. history, but then stopped falling once the so-called War on Poverty began. I pointed out that this was compelling evidence that spending $trillions on income redistribution was trapping people in poverty.

Unfortunately, this part was edited out, perhaps because the lefties at PBS didn’t want more people exposed to this inconvenient truth. Here’s what wasn’t left on the editing room floor.

I’m not sure how they formatted the video, but at least it makes me look skinny.

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Do not watch this if you disapprove of the F-word. But you’ll probably laugh if you click the video.

Even though I’m posting this video solely for the humor value, I feel compelled to nag everybody with a reminder that the balance-the-budget message is misguided. We should be striving to shrink the the burden of government.

And if you address the disease of too much spending, you automatically solve the symptom of too much red ink.

But I’m a fair-minded person and I’ll post political humor promoting non-libertarian perspectives. If it’s funny, it makes the cut.

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…Well, I’m not sure what it means. But it sure doesn’t make sense when you look at the big picture. A credit card company wouldn’t increase a deadbeat’s credit limit, so why is it a sign of fiscal prudence to give Uncle Sam more borrowing authority?

That being said, I never thought it was realistic to block a debt limit increase. Indeed, I fully expected an unsatisfactory result.

But this cartoon is a pretty good summary of how Washington thinks.

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Another American company has decided to expatriate for tax reasons. This process has been going on for decades, with companies giving up their U.S. charters (a form of business citizenship) and redomiciling in low-tax jurisdictions such as Bermuda, Ireland, Switzerland, Panama, Hong Kong, and the Cayman Islands.

The companies that choose to expatriate usually fit a certain profile (this applies to individuals as well). They earn a substantial share of their income in other countries and they are put at a competitive disadvantage because of America’s “worldwide” tax system.

More specifically, worldwide taxation requires firms to not only pay tax to foreign governments on their foreign-source income, but they are also supposed to pay additional tax on this income to the IRS – even though the money was not earned in America and even though their foreign-based competitors rarely are subject to this type of double taxation.

In this most recent example, an energy company with substantial operations in Asia moved its charter to the Cayman Islands, as reported by digitaljournal.com.

Greenfields Petroleum Corporation…, an independent exploration and production company with assets in Azerbaijan, is pleased to announce that the previously announced corporate redomestication…from Delaware to the Cayman Islands has been successfully completed.

Because it is a small firm, the move by GPC probably won’t attract much attention from the politicians. But “corporate expatriation” has generated considerable controversy in recent years when involving big companies such as Ingersoll-Rand, Transocean, and Stanley Works (now Stanley Black & Decker).

Statists argue that it is unpatriotic for companies to redomicile, and they changed the law last decade to make it more difficult for companies to escape the clutches of the IRS. In addition to blaming “Benedict Arnold” corporations, leftists also attack low-tax jurisdictions for “poaching” companies.

Libertarians and conservatives, by contrast, explain that expatriation is the result of an onerous tax system that imposes high tax rates and requires the double taxation of foreign-source income. Expatriation is the only logical approach if companies want a level playing field when competing in global markets.

I cover this issue (and also explain that the Obama Administration is trying to make a bad system even worse) in the video below.

My recommendation, not surprisingly, is that politicians fix the tax code. Unfortunately, politicians prefer the blame-the-victim game, so they attack the companies instead of solving the underlying problem (and then they wonder why job creation is anemic).

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I’ve already explained why the Department of Housing and Urban Development should be eliminated, but a superb column in the Wall Street Journal by my old friend Jim Bovard has my blood boiling.

After reading Jim’s piece, I no longer want to merely abolish HUD. I want to bulldoze the building, cover the ground with six feet of broken glass and rusty nails, and then add a foot of salt to make sure nothing can possibly spring forth again.

In the 1990s, the feds were embarrassed by skyrocketing crime rates in public housing—up to 10 times the national average, according to HUD studies and many newspaper reports. The government’s response was to hand out vouchers to residents…, dispersing them to safer and more upscale locales. Section 8′s budget soared to $19 billion this year from $7 billion in 1994. HUD now picks up the rent for more than two million households nationwide; tenants pay 30% of their income toward rent and utilities while the feds pay the rest. Section 8 recipients receive monthly rental subsidies of up to $2,851 in the Stamford-Norwalk, Conn., area, $2,764 in Honolulu and $2,582 in Columbia, Md. But the dispersal of public housing residents to quieter neighborhoods has failed to weed out the criminal element that made life miserable for most residents of the projects. “Homicide was simply moved to a new location, not eliminated,” concluded University of Louisville criminologist Geetha Suresh in a 2009 article in Homicide Studies. In Louisville, Memphis, and other cities, violent crime skyrocketed in neighborhoods where Section 8 recipients resettled. After a four-year investigation, the Indianapolis Housing Authority (IHA) in 2006 linked 80% of criminal homicides in Marion County, Ind., to individuals fraudulently obtaining federal assistance “in either the public housing program or the Section 8 program administered by the agency.”

In other words, the federal government decided that it wasn’t doing enough damage by being a slumlord. It then decided to directly subsidize rents (often at scandalously high levels), often for the benefit of criminals.

Not surprisingly, proponents of big government are playing the race card, claiming that opposition to rental subsidies is a form of discrimination since a disproportionate share of recipients are minorities. Yet this controversy actually pits law-abiding people, regardless of color, against social-engineering bureaucrats.

…middle-class blacks are the program’s least inhibited critics. Sheldon Carter of Antelope Valley, Calif., testified at a recent public hearing on local Section 8 controversies: “This is not a racial issue. It is a color issue. The color is green and it’s my dollars.” Shirlee Bolds told Iowa’s Dubuque Telegraph Herald in 2009: “I moved away from the city to get away from all this crap. Dubuque’s getting rough. I think it’s turning into a little Chicago, like they’re bringing the street rep here.” Remarkably, HUD seems bent on creating a new civil right—the right to raise hell in subsidized housing in nice neighborhoods.

The bureaucracy’s perverse definition of civil rights is not a recent development, as illustrated by this previous post critiquing HUD’s bean-counting mentality.

The moral of the story, though, is that the federal government has no business being involved in housing. Jim’s closing sentences are a pretty good summary of this outrageous situation.

The Obama administration is now launching a pilot program giving local housing authorities wide discretion to pay higher rent subsidies to allow Section 8 beneficiaries to move into even more affluent zip codes. Hasn’t this program helped wreck enough neighborhoods?

Heck, let’s also add arsenic, lead, and strychnine to the glass, nails, and salt. Maybe some radioactive material as well. No sense taking any chances.

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The latest issue of the World Economic Forum’s Global Competitiveness Report contains some rather damning information about government incompetence in the United States.

America ranks only 68th in the “Wastefulness of Government Spending” category (page 373) and 49th in the “Burden of Government Regulation” category (page 374).

Singapore, by contrast, ranks first in both of those categories. So is anyone surprised, then, by this chart showing that Singapore’s economy grew rapidly between 1950 and 2008?

Indeed, the World Bank’s 2010 data shows that Singapore has surpassed the United Stated, with per-capita GDP of $54,700 compared to $47,020 in America.

But the point of this post isn’t to decide whether Singapore is richer than the United States. Instead, the moral of the story is that small government and free markets are a recipe for strong growth and rising levels of prosperity.

By the way, the Global Competitiveness Report relies on survey data to prepare its rankings, so I’m a bit skeptical of the findings. American politicians are experts at wasting money and imposing senseless red tape, to be sure, but is America really worse than Ghana and Azerbaijan?

That being said, perceptions are important. And since the overall burden of government has rapidly climbed during the Bush-Obama  years, low scores of some kind are deserved.

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Paul Krugman recently argued that a fake threat from space aliens would be good for the economy because the people of earth would waste a bunch of money building unnecessary defenses.

That was a bit loopy, as I noted a few days ago, but other Keynesians also have been making really weird assertions. Obama’s Secretary of Agriculture (another department that shouldn’t exist) just said that food stamps are a great form of stimulus (video at the link, for those who think this can’t possibly be true).

Makes me wonder if they’re having some sort of secret contest for who can say the strangest thing on TV. And if that’s the case, Nancy Pelosi has to be in the running for her claim that you create jobs by subsidizing joblessness.

Appearing on Judge Napolitano’s show, I explained why the Keynesian theory is misguided.

Unfortunately, Keynesians are immune to evidence. No matter how bad an economy does when the burden of government increases, they just point to their blackboard equations and claim things would be even worse without the so-called stimulus.

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Every so often, I can’t resist condemning someone for grossly immoral behavior.

I beat up on Robert Murphy for stealing the value of someone else’s property.

I attacked Olga Stefou for symbolizing the looter-class mentality of Greece.

And I mocked Michael Wolfensohn for ratting out a couple of kids who were having an unlicensed (gasp!) bake sale.

We now have an addition to our rogue’s gallery of awful people. We don’t know her name, but she was interviewed on TV because one of her 11 children was in court for rioting. Here’s some of the Telegraph’s report (also a video at the link).

A 13-year-old boy has walked free from court after admitting smashing up a shop with a stolen golf club as his mother said the riots are because the government does “f*** all” for children. …She is on benefits, does not live with the boy’s father and has 10 other children, the court heard. …The boy had been caught on CCTV during the trouble at Salford Precinct spraying a fire extinguisher around before pulling down metal shutters from a Cash Converters shop. He then crawled inside and used a £100 golf club he had stolen to smash windows. The shop suffered £20,000 in damage. His mother described him as a ”good lad” who had never been in any trouble.

In addition to not knowing her name, we don’t know how long she has been on welfare (“benefits” to the Brits) or whether the boy’s father is also the father of the other ten kids.

Regardless, I imagine she gets a nice-sized check.

I may be wrong (indeed, I hope I am), but I suspect that this story is a tragic case study of a welfare system creating a dysfunctional household filled with people who have adopted an entitlement mentality.

We know this happens, as illustrated by this short interview.

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Advocates of limited government love to fantasize. But because we’re strange people, we don’t have ordinary fantasies about supermodels or playing pro baseball. We daydream about a libertarian nirvana, where the rights of individuals are protected, guided by a moral order based on freedom and responsibility, and the leviathan state is forever constrained.

Ayn Rand created a fictional version of this free society in Atlas Shrugged and called it Galt’s Gulch. But some advocates of liberty want to turn fiction into reality.

Here are some excerpts from a Yahoo story about the efforts of a libertarian entrepreneur.

Pay Pal founder and early Facebook investor Peter Thiel has given $1.25 million to an initiative to create floating libertarian countries in international waters, according to a profile of the billionaire in Details magazine. Thiel has been a big backer of the Seasteading Institute, which seeks to build sovereign nations on oil rig-like platforms to occupy waters beyond the reach of law-of-the-sea treaties. The idea is for these countries to start from scratch–free from the laws, regulations, and moral codes of any existing place. Details says the experiment would be “a kind of floating petri dish for implementing policies that libertarians, stymied by indifference at the voting booths, have been unable to advance: no welfare, looser building codes, no minimum wage, and few restrictions on weapons.” …The Seasteading Institute’s Patri Friedman says the group plans to launch an office park off the San Francisco coast next year, with the first full-time settlements following seven years later.

I think this is a great idea, though I have two concerns.

First and foremost, creating a Galt’s Gulch does not mean you necessarily escape oppressive laws. Places such as the Cayman Islands, Monaco, and Hong Kong are relatively free compared to the United States, but you can’t escape the IRS by moving your money to these fiscal havens.

The United States has a “worldwide” tax system, which necessitates a form of fiscal imperialism. And because America is the 800-pound gorilla of the world economy, almost all low-tax jurisdictions have been coerced into serving as deputy tax collectors for bad U.S. tax laws.

You may be thinking, “So what, Dan, we’re talking about physically redomiciling, not just moving our money.”

Unfortunately, it’s not that easy. Living outside the United States does not mean you escape the IRS. Unlike all other developed nations, America’s worldwide tax system applies even to non-residents.

So you can only get rid of the IRS by giving up American citizenship. But even that’s difficult. Politicians have adopted reprehensible anti-expatriation laws – disgustingly similar to the ones imposed by Nazi Germany and Soviet Russia – that don’t let people emigrate without first shaking them down for money.

So if you want to move to a new Galt’s Gulch floating island, you either have to do it before you achieve economic success or you have to pay a ransom to the thuggish clowns in Washington.

This certainly isn’t an argument against what the Seasteading Institute is trying to do, but it is a warning that there will be barriers imposed by uncompetitive nations with high taxes and excessive intervention.

Simply stated, governments don’t like competition. And they definitely hate anything that hinders their ability to collect tax revenue and buy votes. Indeed, this is why I spend so much of my time fighting to preserve tax competition (even if it means the possibility of getting thrown in a Mexican jail). If the crooks in Washington and other national capitals know that the geese with the golden eggs can fly away, they will be much less likely to impose bad policy.

All of this is explained in this video on the economic benefit of tax havens.

My other concern is a personal gripe. The Seasteading Institute is planning to put their prototype off the coast of San Francisco. That’s much too chilly. I vote for the Caribbean.

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