Let’s Thank President Obama for Reminding Americans that They Should Distrust the IRS

Last week, while writing about the latest IRS scandal, I noted that the IRS has a long record of abusive actions.

• It has thieving employees.
• It has incompetent employees.
• It has thuggish employees.
• It has brainless employees.
• And it has victimizing employees.

So I wasn’t surprised to learn that it also has politically biased employees.

But some Americans probably are shocked. So I want to be the first to publicly thank President Obama for – at the very least – presiding over a culture that gave IRS bureaucrats the green light to engage in this kind of misbehavior.

Why am I thanking Obama? For the simple reason that this scandal means that more Americans now understand that the IRS is a venal agency. And that presumably means that more Americans now realize we should junk the internal revenue code and implement a simple and fair flat tax.

Since I’m in an expansive and sharing mood, I think we also owe some appreciation to some of the good people who are helping to publicize the IRS’s despicable behavior.

Let’s start with George Will, who is predictably – and bitingly – critical.

…the nature of Barack Obama’s administration is being clarified as revelations about IRS targeting of conservative groups merge with myriad Benghazi mendacities. …we are told that a few wayward souls in Cincinnati, with nary a trace of political purpose, targeted for harassment political groups with “tea party” and “patriot” in their titles.  …Jay Carney, whose unenviable job is not to explain but to explain away what his employers say, calls the IRS’s behavior “inappropriate.” No, using the salad fork for the entree is inappropriate. Using the Internal Revenue Service for political purposes is a criminal offense.

I also like that Will took the opportunity to criticize the worst (or at least close-to-worst) President in American history.

Time was, progressives like the president 100 years ago, Woodrow Wilson, had the virtue of candor: He explicitly rejected the Founders’ fears of government. Modern enlightenment, he said, made it safe to concentrate power in Washington, and especially in disinterested executive-branch agencies run by autonomous, high-minded experts. Today, however, progressivism’s insinuation is that Americans must be minutely regulated because they are so dimwitted they will swallow nonsense. Such as: There was no political motive in the IRS targeting political conservatives.

How painfully true. Sheep are not famous for their intelligence. And as the American people learn to be passively dependent on government, presumably we will acquire more sheep-like characteristics.

But the firestorm of protest leads me to think we’re not at that stage. At least not yet.

The lawless and abusive IRS even got Michael Gerson agitated.

…most Americans, myself included, become libertarians when a policeman is rude and swaggering during a traffic stop. Give me that badge number. It is precisely because police powers are essential to the public good that abusing them is so offensive. The same holds for overzealous or corrupt airport-security agents. And it is doubly true with IRS personnel who misuse their broad and intimidating powers. It is enough to bring out the Samuel Adams in anyone.

And here’s what my colleague Gene Healy wrote about the IRS’s history of political shenanigans.

Past presidents have found the IRS an extremely useful piece of federal machinery for that purpose. A lot of what we know about that sordid history comes from the Senate Select Committee on intelligence abuses, chaired by Sen. Frank Church, D-Idaho, in the mid-’70s. As Chris Hayes wrote in the Nation in 2006, “Church and many Democrats…soon found that presidents of both parties were culpable: “Secret documents obtained by the committee even revealed that the sainted FDR had ordered IRS audits of his political enemies.” In “The Lawless State,” his account of the Church Committee revelations, Morton Halperin noted that “the first organized political ‘strike force’ was formed within the IRS in 1961, and was directed against right-wing political groups.” In this case, I doubt there was ever a JFK or Nixon-style direct command from on high to harass the Tea Party. It’s more likely to be a case of “proactive” bureaucrats inspired by presidential railing against the Tea Party and Citizens United: “Will no one rid me of these meddlesome right-wing freaks?”

Let’s close with a couple of good cartoons.

The first one reminds me of the joke that “Service” is part of the IRS’s name, but only in the way that a bull services a cow.

The humor is a bit darker in this cartoon, but the message is the same.

P.S. Since I’m in such a good mood,  I’ll share some of my other IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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Laughing at Obama’s Fumbled Attempt to Extort More Taxes with FAA Flight Delays

You don’t enjoy many victories when you fight for liberty, so I’m not averse to spiking the football on those rare occasions when we win.

That’s why I shared this very funny cartoon last week to celebrate Obama’s belly flop on gun control.

Now we have another cartoon, this one by Henry Payne, mocking the Administration’s shameful effort to force a tax increase by deliberately making air travel less convenient.

No wonder the President is behaving in such a petulant fashion. The sequester is an embarrassing defeat for Obama and other proponents of bigger government.

He thought he could bully Republicans into a class-warfare tax hike. Now he’s resorting to pathetic gimmicks.

And he lost on that issue now that Congress has made explicit that the FAA has authority to reallocate funds.

Let’s not just spike the football. Let’s do a dance in the end zone.

 

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Laughing at Obama’s Belly Flop on Gun Control

I’ve shared serious articles on gun control, featuring scholars such as John Lott and David Kopel.

I also posted testimonials from gun experts and an honest liberal.

But I haven’t specifically criticized Obama’s agenda.

And I’ve shared lots of gun control humor, such as this IQ test that I posted for liberals and criminals, this very effective neighborhood watch group, and several amusing videos linked at the end of this post. I’ve also shared clever pro-Second Amendment posters here, here, here, here, here, and here, and some amusing images of t-shirts and bumper stickers on gun control here, here, here, and here.

But with the possible exception of this poster, none of this humor has focused on Obama.

So let’s rectify this oversight, starting with the VFW sign that appeared in my inbox yesterday. Looks real, though I make no guarantees about its provenance.

Then we have a very good Lisa Benson cartoon celebrating President Obama’s legislative acumen on gun control.

By the way, my all-time favorite gun joke is the one explaining the difference between liberals, conservatives, and Texans.

Though the Alabama tan definitely gets honorable mention for obvious reasons.

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Barack Obama’s $8 Trillion Output Gap

I’m not a very exciting guy. It’s Saturday afternoon and I’m perusing the Budget and Economic Outlook from the Congressional Budget Office.

But sometimes it pays to be a nerd because I just found an interesting tidbit of information. Here’s what CBO says about the anemic economic output we’re experiencing compared to the growth we should be enjoying.

…output is likely to remain below its potential (or maximum sustainable) level until 2017—almost a decade after the recession started in December 2007. CBO estimates that real GDP in the fourth quarter of 2012 was below its potential level by about 5½ percent; that gap is only modestly smaller than the gap (of about 7½ percent) that existed at the end of the recession in mid-2009 because growth in output since then has been only slightly faster, on average, than growth in potential output.

Let’s translate this bit of jargon into English.

What CBO actually is saying is that the economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re still suffering from sub-par levels of output.

CBO specifically says that we were “about 5½ percent” below potential at the end of last year. That’s about $880 billion of lost output. Not exactly a ringing endorsement of Obamanomics.

But that’s just part of the story. CBO also looks at the cumulative output gap.

With such a large gap between actual and potential output persisting for so long, the cumulative loss of output relative to the economy’s potential between 2007 and 2017 will be equivalent to nearly half of the output produced last year.

Since output last year was $16 trillion, the cumulative output gap is $8 trillion. That’s a ton of money, even by Washington standards.

Here’s a chart from CBO showing this output gap.

By the way, I’m not sure I believe CBO’s estimate that we’ll get back to the trend line by 2017. Why expect good things when the economy is saddled by excessive taxation, wasteful spending, and burdensome regulation?

All that we know for sure is that the economy has been lagging, which is starkly evident if we simply look at actual data.

By the way, if you think I’m cherry picking numbers to make Obama look bad, my first reaction is to laugh since CBO leans way to the left and has zero reason to make Obama look bad. Remember, these are the clowns that tried to justify Obama’s Keynesian stimulus scheme.

But if you don’t want to believe the CBO data for inexplicable reasons, how about the Washington Post, which certainly is on the left side of the political spectrum? Surely they’re not part of the vast right-wing conspiracy, right?

Check out this chart they posted comparing the current recovery to a normal recovery, though you won’t be surprised to learn that they conveniently waited until after the election before sharing this vital bit of information.

Or what about the Minneapolis Federal Reserve, which has an interactive website enabling a reader to compare all the business cycles since the end of World War II.

These charts show both employment and output for every one of those business cycles. You can click to see larger versions, but all you need to know is that the current business cycle is the red line – and it happens to show that Obamanomics has generated the worst results whether we’re looking at jobs of GDP.

None of this is to suggest, by the way, that Obama’s policies caused the recession. That happened on Bush’s watch.

But I am stating that Obama’s big-government policies have played a role in keeping the economy from enjoying a strong recovery. That’s been no post-recession bounce.

Ronald Reagan also inherited a dismal economy. He had to deal with high interest rates and inflation rather than a banking crisis, so I don’t know which President was dealt a worse hand of cards. But I know that Reagan’s policies of free markets and smaller government helped trigger an economic boom.

Obama, by contrast, basically has continued Bush’s policies of intervention and bigger government. No wonder we’re suffering a multi-trillion dollar output gap.

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The Spirit of Reagan Is Still With Us: The Gipper Crushes Obama in Hypothetical Matchup

Barack Obama has stated that he wants to be like Reagan, at least in the sense of wanting to be a transformational figure.

But almost certainly he has failed.

Yes, Obama has increased the burden of government spending, raised tax rates, and created more dependency, but there’s nothing particularly special about Obama’s tenure that makes him different from other statist Presidents such as Nixon, Carter, and Bush.

Nor is there any evidence that he has fundamentally changed the attitudes of the American people.

That may sound like a bold – and overly optimistic – assertion, but check out the amazing results from a new poll. According to a survey of 1,000 adults, Reagan would kick the you-know-what out of Obama, winning a hypothetical contest by a staggering 58-42 margin.

By the way, the margin might be even bigger than I’m reporting. As you can see from this press excerpt, all we know is that 58 percent of respondents said they would vote for Reagan. I’m assuming that 42 percent would vote for Obama, but it’s possible there was also a “don’t know” or “other” category, so maybe Obama would be under 40 percent!

…just about everything about the era — from the politics, leaders and safety to the music, TV shows and blockbuster movies — are seen as being better than they are today. In fact, 3 in 4 Americans (74%) thought that our country was better off then and even safer (76%). The same amount (76%) believe that government ran better in the 1980s than it does today. And if a presidential election were held today, 58 percent would vote for Ronald Reagan over Barack Obama. Americans ages 18 to 34 were evenly split, with 51 percent favoring Reagan and 49 percent Obama.

Even young people preferred Reagan over Obama, which is remarkable since they didn’t experience the Reagan years and largely have learned about the Gipper from the media and schools, both of which are very hostile to Reagan.

We shouldn’t be too surprised by these polling results. Just take a look at this amazing infographic, which shows Obama’s horrible record on jobs compared to Reagan and other Presidents. Michael Ramirez makes the same point in this very funny cartoon.

Or look at these powerful charts based on Minneapolis Federal Reserve data, which compare the strong results of Reaganomics with the pathetic results of Obamanomics.

In other words, good policy leads to good outcomes, and good outcomes yield political rewards. That simple lesson has been lost on the weak gaggle of big-government GOPers who followed Reagan.

But our hypothetical polling results show that Americans today are still ready to rally behind a candidate who offers a compelling message of freedom and prosperity. That’s yet another reason why I’m still optimistic about the fight for liberty.

P.S. Here’s some snarky humor comparing the Gipper with Obama. And if you liked the story of what happens when you try socialism in the classroom, you’ll also enjoy this video of Reagan schooling Obama.

P.P.S. If you want to be inspired, click here and here to see two short clips of Reagan in action.

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I’ve Obtained a Secret Pre-Release Copy of Obama’s Budget

The President is supposed to release his FY2014 budget tomorrow, more than two months later than required by law.

Based on what it’s rumored to contain, I’ve already explained that nobody should be tricked into thinking that Obama is moving to the center. Though he may not be as far to the left as Senate Democrats.

Not that it would be easy to get to the left of that plan, as cartoonists have ably illustrated.

Anyhow, much of Washington is buzzing about what might be in the President’s proposal.

Well, time to sate your curiosity. I have a leaked copy of the budget for your enjoyment.

We won’t see actual numbers until tomorrow, but I’m guessing that I’ll be sharing something very similar to the analysis I provided last year and the year before.

P.S. If you enjoy political humor, the Glenn McCoy cartoon in this post is a pretty good summary of what Obama will say in his budget message.

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The Overlooked Jobs Tragedy

When the monthly job numbers are released, most people focus on the unemployment rate.

On many occasions, I’ve cited that number, usually to point out that the unemployment rate is far higher than the Obama Administration promised it would be if the so-called stimulus was enacted.

That episode should be additional proof that Keynesian economics is misguided.

But that’s not the issue we should be worrying about now. Instead, our concern should be what appears to be a permanent reduction in the share of the working-age population that is employed.

As I explain in this interview for Blaze TV, our ability to produce is governed by the quality and quantity of labor and capital in the economy. Unfortunately, it appears that the Bush-Obama policies of bigger government have had a negative impact.

To build upon that interview, here are the very latest numbers from the Bureau of Labor Statistics.

To be fair, the drop you see on the chart started before Obama took office. But he can be fairly blamed for the fact that there’s been no recovery.

The moral of the story is that bigger government is not a recipe for prosperity.

The burden of government spending is too high, the tax code is too punitive, red tape is hindering entrepreneurship, and various handouts are creating a dependency culture that discourages work.

Should we be surprised that the employment-population ratio is grim?

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Why Are Young Americans Supportive of Obama When His Policies Are So Bad for Them?

Young people voted for Obama in overwhelming numbers, but the question is why?

As I explain in this interview for Blaze TV, they are being hurt by his policies.

It’s not just that youth unemployment is high. Obama’s policies also are hurting those who found jobs. Simply stated, these “lucky” folks are getting below-average pay.

The Stepford Students?

I specifically explain that academics have determined that those entering the labor market in a weak economy will suffer a long-run loss of income.

Some of you may think I’m clutching at straws because I don’t like Obama, but perhaps you’ll believe the man who formerly served as the Chairman of President Obama’s Council of Economic Advisers.

Here’s some of what Austin Goolsbee wrote several years ago for the New York Times.

…starting at the bottom is a recipe for being underpaid for a long time to come. Graduates’ first jobs have an inordinate impact on their career path and their “future income stream,” as economists refer to a person’s earnings over a lifetime. The importance of that first job for future success also means that graduates remain highly dependent on the random fluctuations of the economy, which can play a crucial role in the quality of jobs available when they get out of school.

Goolsbee cites some research based on the career paths of Stanford MBAs.

Consider the evidence uncovered by Paul Oyer, a Stanford Business School economist… He found that the performance of the stock market in the two years the students were in business school played a major role in whether they took an investment banking job upon graduating and, because such jobs pay extremely well, upon the average salary of the class. That is no surprise. The startling thing about the data was his finding that the relative income differences among classes remained, even as much as 20 years later.

He also reports on what other scholars found for regular college students.

Dr. Oyer’s findings hold for more than just high-end M.B.A. students on Wall Street. They are also true for college students. A recent study, by the economists Philip Oreopoulos, Till Von Wachter and Andrew Heisz…finds that the setback in earnings for college students who graduate in a recession stays with them for the next 10 years. These data confirm that people essentially cannot close the wage gap by working their way up the company hierarchy. While they may work their way up, the people who started above them do, too. They don’t catch up.

Now think about today’s young people. They’re buried in debt, thanks to government programs that have caused a third-party payer crisis. Yet they are having a hard time finding jobs because Obama’s policies are stunting the economy’s performance.

And even if they do find a job, the research suggests they will get paid less. Not just today, but for the foreseeable future.

Yet they gush over Obama. Go figure.

P.S. Goolsbee’s recent columns have been less impressive, perhaps because he feels the need to defend Obama.

P.P.S. I’m not suggesting that young people should have gushed over McCain or Romney. Just that they should view almost all politicians with disdain.

P.P.P.S. I also say in the interview that the government should get out of the housing business – both on the spending side of the budget and the revenue side of the budget. And it goes without saying that I also explain the need to reduce the burden of government spending.

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Since the Sequester Has Been in Place for More than One Month, Shouldn’t We All Be Dead from Plane Crashes and Tainted Meat?

Let’s take a moment and enjoy how Obama made himself a laughingstock because of his anti-sequester hysteria.

In spite of his hyperbolic rhetoric, nothing bad has happened. Schools are still open, planes are still flying, and supermarkets aren’t poisoning us with tainted food.

I’ve already shared some very funny cartoons on this topic, which can be viewed here, here, here, here, and here.

Lower down in this post, we have a couple of additional cartoons that deserve a few chuckles, but I also want to share this interview to help make an important policy point about the need to reduce the burden of government spending.

Actually, the sequester was a double victory. Not only did we trim the growth of spending, we also avoided the tax hike that Obama wanted as a replacement.

No wonder he’s so unhappy!

This first cartoon, from Chip Bok, captures his sullen mood.

The second cartoon, by Jerry Holbert, has the same these, showing that the American people have learned to ignore Obama’s demagoguery.

Now the question is what comes next?

I wrote yesterday that Obama is likely to offer a bait-and-switch budget designed to impose more taxes and more spending.

It’s possible, though, that it won’t be as far to the left as the budget approved by the Senate (as cartoonists have ably illustrated).

In any event, there is no possible compromise with the House-approved budget. Or, to be more specific, there’s no possible compromise that would be good for the nation, so we’re looking at stalemate for the near future.

But stalemate is a lot better than moving in the wrong direction.

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Early Details Show Obama Will Propose a Bait-and-Switch Budget Plan Containing Higher Taxes and More Spending

Are we about to see a new kinder-and-gentler Obama? Has the tax-and-spend President of the past four years been replaced by a fiscal moderate?

That’s certainly the spin we’re getting from the White House about the President’s new budget. Let’s look at this theme, predictably regurgitated in a Washington Post report.

President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach…the document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R-Ohio) last December in the discussions over the “fiscal cliff” – which included $1.8 trillion in deficit reduction through spending cuts and tax increases. …unlike the Republican budget that passed the House last month, Obama’s budget does not balance within 10 years.

Since America’s fiscal challenge is the overall burden of government spending, I’m not overly worried about the fact that Obama’s budget doesn’t get to balance.

But I am curious whether Obama truly is proposing a “conciliatory” budget. Are the tax hikes smaller? Are the supposed spending cuts larger?

Actually, there are no genuine spending cuts since the President’s budget is based on dishonest baseline budgeting. At best, we’re simply talking about slowing the growth of government.

But since Mitchell’s Golden Rule is based on the very modest goal of having government grow slower than the private sector, it’s possible that Obama may be proposing something worthwhile.

But possible isn’t the same as probable. Indeed, it appears that the budget is predicated on a giant bait-and-switch since the beneficial spending restraint imposed by sequestration would be repealed!

Obama’s budget proposal, however, would eliminate sequestration.

This appears almost as an afterthought in the Washington Post article, but it should be the lead story. The White House wants to get rid of a policy that genuinely limits the growth of spending.

We won’t have the official numbers until the budget is released next Wednesday, but I’ll be very curious to see whether the supposed spending cuts elsewhere in his budget are greater than or less than the spending increases that will occur if sequestration is canceled. Particularly since the President also is proposing lots of new spending on everything from early child education to brain mapping.

Moreover, it seems as though Obama tax numbers are based on dodgy math as well. The White House is claiming that this is a “conciliatory” budget because he’s no longer proposing $1.6 trillion of tax hikes.

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.

Let’s try to disentangle the preceding passage. The President wants $580 billion of new taxes from “deductions” and “loopholes.” But he also wants an unknown pile of revenue from new tobacco taxes and from restricting IRAs. And keep in mind that he already got $600 billion as part of the fiscal cliff.

Until we get official numbers, we can’t say anything with certainty, but I’ll be checking on Wednesday to see how much revenue the President intends to grab as a result of the tobacco and IRA provisions. Suffice to say that I won’t be surprised if the net impact of all his tax hikes is close to $1.6 trillion. Especially since he’s also proposing to manipulate CPI data, a change that would generate another $100 billion in revenues.

In other words, the revenue side of his budget likely will be a bait-and-switch scam, just like the spending side is a joke once you understand that he wants to get rid of sequestration.

I hope I’m wrong, but I fear that my concerns will be validated next Wednesday and we’ll see another budget that has no real entitlement reform and more class-warfare tax hikes.

P.S. The budget approved by the House of Representatives avoided any tax increases and restrained spending to that it will grow by an average of 3.4 percent annually. Not exactly draconian, but that approach does balance the budget in 10 years.

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What Can We Learn by Comparing the Employment Situation in Texas vs. California?

One of the great things about federalism, above and beyond the fact that it both constrains the power of governments and is faithful to the Constitution, is that is turns every state into an experiment.

We can learn what works best (though the President seems incapable of learning the right lesson).

We know, for instance, that people are leaving high-tax states and migrating to low-tax states.

We also know that low-tax states grow faster and create more jobs.

I particularly enjoy comparisons between Texas and California. Michael Barone, for instance, documented how the Lone Star State is kicking the you-know-what out of the Golden State in terms of overall economic performance.

I also shared a specific example of high-quality jobs moving from San Francisco to Houston. And I was also greatly amused by this story (and accompanying cartoons) about Texas “poaching” jobs from California.

In this discussion with Stuart Varney of Fox News, we discuss how Texas is leading the nation in job creation.

But there’s another part of this discussion that is very much worth highlighting.

As illustrated by the chart, we are enduring the worst overall job performance in any business cycle since the end of World War II.

I note in the interview that Obama inherited a bad economy and that Bush got us in the ditch in the first place with all his wasteful spending and misguided intervention.

But Obama also deserves criticism for doubling down on those failed policies.

His so-called stimulus was a flop. Dodd-Frank is a regulatory nightmare. Obamacare is looking worse and worse every day.

No wonder job creation is so anemic.

The real moral of the story, though, is that the poor are the biggest victims of Obama’s statism. They’re the ones who have been most likely to lose jobs. They’ve been the ones to suffer because of stagnant incomes.

Sort of brings to mind the old joke that leftists must really like poor people because they create more of them whenever they’re in charge.

P.S. Speaking of jokes, here’s an amusing comparison of Texas and California. If you want some California-specific humor, this Chuck Asay cartoon is great. And to maintain balance, here’s a Texas-specific joke on how to respond to an attacker.

P.P.S. To close on a serious point, California would be deteriorating even faster if it wasn’t for the fact that the state and local tax deduction basically means that the rest of the country is subsidizing the high tax rates in the not-so-Golden State. Another good argument for the flat tax.

P.P.P.S. At the bottom of this post, you’ll find a great Kevin Williamson column dismantling some sloppy anti-Texas analysis by Paul Krugman.

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Apparently Learning Nothing from the Fannie Mae-Freddie Mac Disaster, the Obama Administration Wants to Subsidize Banks to Make More Dodgy Loans

Let’s assume you didn’t understand how a garbage disposal worked and, for whatever reason, you decided to stick your arm in one and turn it on. You would do some serious injury to your hand.

The rest of us would wonder what motivated you to stick your arm down the drain in the first place, but we would feel sympathy because you didn’t realize bad things would happen.

But if you then told us that you were planning to do the same thing tomorrow, we would think you were crazy. Didn’t you learn anything, we would ask?

Seems like a preposterous scenario, but something very similar is now happening in Washington. The Obama Administration is proposing to once again put the economy at risk by subsidizing banks to give mortgages to people with poor credit.

“Let’s party like it’s 2006!”

Even though we’re still dealing with the economic and fiscal damage caused by the last episode of government housing subsidies!

Here are some of the unbelievable details from a report in the Washington Post.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit…officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Brings to mind the famous saying from George Santayana that, “Those who cannot remember the past are condemned to repeat it.”

But what’s especially amazing – and distressing – about this latest scheme is that “the past” was only a couple of years ago. Or, to recall my odd analogy, one of our hands is still mangled and bleeding and we’re thinking about putting our other hand in the disposal.

Some people understand this is a nutty idea.

…critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars. “If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute.

What’s also discouraging is that the government already is deeply involved in the housing market – even though this is an area where there is no legitimate role for the federal intervention.

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

So I guess the goal is to have taxpayers on the hook for 100 percent of loans.

“Don’t worry, it’s not our money”

Anybody want to guess whether this will end well?

By the way, this is bad policy even if we somehow avoid a new bubble and big taxpayer losses. Even in a”best case” scenario, the federal government will be distorting the allocation of capital by discouraging business investment and subsidizing residential real estate.

And as shown in this powerful chart, that will have adverse consequences for wages and living standards.

The part of the article that most nauseated me was a quote from the head bureaucrat at the Federal Housing Administration.

“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”

Gee, isn’t that nice that Ms. Galante thinks there are lots of borrowers with good “totality” measures? But here’s an interesting concept. Why doesn’t she put her money at risk instead of making me the involuntary guarantor on these dodgy loans?

I’ve already said on TV that we should dump Fannie Mae and Freddie Mac in the Potomac River. And I’ve  argued that the entire Department of Housing and Urban Development should be razed to the ground.

But perhaps this cartoon best shows the consequences of the Obama Administration’s new subsidy scheme.

P.S. We also should get rid of housing preference in the tax code. Our economy should cater to the underlying preferences of consumers, not the electoral interests of politicians.

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The Pope’s Message to Obama

I’m not sure this would be a good idea, for a very obvious reason, but this photo-shopped image got me laughing.

But I’m sure my Republican friends will enjoy the visceral anti-Obama sentiment, just as they enjoyed this Pennsylvania joke, this Reagan-Obama comparison, this Wyoming joke, this Bush-Obama comparison, this sign, this video satire, this bumper sticker, and this message from a little girl.

But, to be fair, I think this pro-Obama picture may be the most effective piece of political satire I’ve seen in recent years.

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Obama Suffers a Painful Loss in the First Big Fiscal Battle of His Second Term

The statist agenda of ever-growing government requires more money going to Washington, which is why I think that proponents of limited government should do everything they can to block tax increases.

This is the “starve the beast” theory, and I’ve previously explained why I think it is a necessary part of any long-run strategy to restrain the burden of government spending.

He would never admit it, but Obama seems to agree, which is why he is dogmatically fixated on doing everything he can to seduce Republicans into supporting higher taxes.

But he miscalculated in thinking that the fiscal cliff tax hike somehow meant that he had permanently neutered the GOP, and he definitely goofed when he tried to use the sequester as a weapon to bully Republicans into another tax hike.

Ignoring the President’s hyperbole about the supposed catastrophic effects of a very modest reduction in the growth of the federal budget, Republicans have held firm.

And the President has suffered a painful political and policy defeat.

Here’s some of what was reported in The Hill about the President’s attitude.

The first months of President Obama’s second term are being built around a simple premise: No caving. …Obama is in an ultra-assertive mood, practically daring Republicans to defy his wishes. …Obama’s attitude is more akin to that of a general leading his forces into battle, confident that he can decimate the enemy. …On the sequester, for instance, Obama did little more than pay lip-service to the idea of a last-minute compromise to avert the package of cuts.

Well, Republicans did “defy his wishes” and it’s the worst possible outcome for the President. The growth of spending is being slowed and taxes are not going up.

Democrats on Capitol Hill also thought that the fiscal cliff tax hike would be a precedent for lots of future tax hikes. As reported by Politico, their analysis was misguided.

Democrats toasted the New Year’s fiscal cliff deal with the belief that they had set a crucial new precedent: Tax hikes would be part of any future deficit reduction package. Two months later, the champagne buzz is wearing off. …the exuberance expressed by many Democrats at the beginning of the year was misplaced. Efforts to avert the sequester never achieved liftoff, and Democrats are realizing that new tax revenues are off the table for the immediate future. …“We’ve tried everything we can,” Senate Majority Leader Harry Reid (D-Nev.) told reporters Thursday. “They will not budge on anything dealing with revenue.”

Byron York has the best analysis, explaining in his Washington Examiner column that Obama gambled and (at least so far) lost.

Nine months ago, Barack Obama likened his Republican opposition to an illness. If he could just defeat Mitt Romney, Obama said, then the illness might subside. “I believe that if we’re successful in this election — when we’re successful in this election — that the fever may break,” Obama told a fundraiser in Minneapolis last June. After Obama won re-election, there was extensive discussion among his supporters about whether the Republican “fever” would, in fact, break.

But this strategy appears to have boomeranged. Byron thinks that the White House is now in a weak position.

There was little speculation about whether something quite different might happen: Would determined GOP opposition break Obama’s fever?  That is, could Republicans weaken the president’s resolve to defeat the GOP and further raise taxes? That appears to be what has occurred, at least for the moment. …Friday morning, Obama seemed resigned to the possibility that he cannot win the further tax increases he seeks, and that after enlisting his entire administration in a campaign to frighten Americans about sequestration, the cuts have become a reality that he has to acknowledge.

While I’m glad the President goofed, I’m not under any illusion that winning a battle is the same thing as winning a war.

It’s quite possible that the modest sequester savings will be undone as part of the “continuing resolution” legislation to fund the federal government between March 27 and the rest of the fiscal year.

There will also be a debt limit fight later in the Spring, which will give proponents of bigger government another bite at the apple (though it’s a double-edged sword since advocates of limited government also can use the debt limit as a vehicle for reform).

And the President obviously won’t give up on his campaign for higher taxes. I worry that he’ll trick gullible GOPers into a tax hike at some point, either as part of a Trojan Horse tax reform or as part of a budget summit that produces something like Bowles-Simposon, a package of real tax hikes and illusory entitlement reforms.

But we can fight those battles down the road. Today, let’s enjoy the sweet smell of victory.

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Debunking Sequester Hysteria from the Big Spenders in Washington

I shared a couple of amusing sequester cartoons the other day, and I’ve previously written about the absurdity of anti-sequester hysteria in Washington when all it means is that the federal budget will grow by $2.4 trillion over the next 10 years rather than $2.5 trillion.

This Nate Beeler cartoon effectively captures the mindset of Washington’s big spenders.

Let’s take a serious look at this topic.

George Will is appropriately disgusted by the antics of the political class. Here’s some of his column on the topic.

The sequester has forced liberals to clarify their conviction that whatever the government’s size is at any moment, it is the bare minimum necessary to forestall intolerable suffering. At his unintentionally hilarious hysteria session Tuesday, Obama said: The sequester’s “meat-cleaver approach” of “severe,” “arbitrary” and “brutal” cuts will “eviscerate” education, energy and medical research spending. “And already, the threat of these cuts has forced the Navy to delay an aircraft carrier that was supposed to deploy to the Persian Gulf.”

Will elaborates on the Navy’s shameful  stunt.

“Forced”? The Navy did indeed cite the sequester when delaying deployment of the USS Truman. …the Navy is saying it cannot find cuts to programs or deployments less essential than the Truman deployment. The Navy’s participation in the political campaign to pressure Congress into unraveling the sequester is crude, obvious and shameful, and it should earn the Navy’s budget especially skeptical scrutiny by Congress. The Defense Department’s civilian employment has grown 17 percent since 2002. In 2012, defense spending on civilian personnel was 21 percent higher than in 2002. And the Truman must stay in Norfolk? This is, strictly speaking, unbelievable.

Will also comments on the Keynesian economic theory being used to fight against sequestration.

Obama, who believes government spends money more constructively than do those who earn it, warns that the sequester’s budgetary nicks, amounting to one-half of 1 percent of gross domestic product, will derail the economy. A similar jeremiad was heard in 1943 when economist Paul Samuelson, whose Keynesian assumptions have trickled down to Obama, said postwar cuts in government would mean “the greatest period of unemployment and industrial dislocation which any economy has ever faced.” Federal spending did indeed shrink an enormous 40 percent in one year. And the economy boomed.

Amen. I’ve already cited a Cato study on this topic, which shows that the Keynesians were wildly wrong in their predictions of post-war economic collapse.

And the Wall Street Journal also has opined on this topic, showing not only that lawmakers wisely rejected another round of Keynesian foolishness, but also that post-war tax cuts were one of the reasons why the economy quickly rebounded.

Let’s close with some more mockery of the clowns in Washington.

This Gary Varvel cartoon shows what’s happening, though I’ve would have drawn Chicken Little to resemble Obama.

But what about the second frame of the cartoon? If the sequester happens, will the statists be forced to admit that they were creating false fears in hopes of protecting their spots at the federal trough?

As reported in the Washington Post, one of them is very worried about this possible outcome.

“…The bad news is, the world doesn’t end March 2,” said Emily Holubowich, a Washington health-care lobbyist who leads a coalition of 3,000 nonprofit groups fighting the cuts. “The worst-case scenario for us is the sequester hits and nothing bad really happens. And Republicans say: See, that wasn’t so bad.”

Since the sequester takes effect on March 1, we’ll soon find out.

Some bureaucracies will deliberately try to make the sequester as inconvenient and painful as possible for the American people. As I said in this Larry Kudlow interview, the heads of those agencies should be fired.

Of course, Obama will probably try to reward them, but those who favor responsible fiscal policy should do everything possible to expose the shameful game being played by these political hacks.

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Corporate Jet Loopholes, Depreciation, and Common-Sense Tax Policy

I’m not a fan of loopholes in the tax code.

I’ve complained about the number of pages in the tax code, the number of provisions in the tax code, and I’ve even groused about the rising number of pages in the instruction manual for the 1040 tax form.

And I’ve specifically come out against tax preferences for ethanol, housing, municipal bonds, charity, and state and local taxes.

But just as you don’t necessarily know whether someone is tall or short without knowing the average height of a population, you can’t automatically identify loopholes without first defining an ideal tax system. In other words, you need a benchmark (referred to as “the tax base” or “taxable income”) in order to measure what’s a loophole.

Unfortunately, that’s not an easy task because there are two competing visions of the ideal benchmark. I’ve addressed this issue previously, in this post on the “tax expenditure con job,” but let’s dig into the weeds a bit.

1. Those on the left, including the Joint Committee on Taxation, use what is sometimes called the “Haig-Simons” definition of a tax base. Also known as the “comprehensive income tax base,” this system assumes that there should be double taxation of income that is saved and invested (as shown by this startling chart). Another way of saying this is that the Haig-Simons approach assumes the government should tax income plus changes in the value of assets. Moreover, the Haig-Simons system assumes “worldwide taxation” and that businesses can’t deduct investment costs as they occur.
2. Those on the right, by contrast, support what is generally called “consumption-based” taxation. This doesn’t mean a tax collected at the cash register (though a national sales tax is an example of a tax with a “consumption base”). Instead, it simply refers to a system where income is taxed only one time. So, for example, a flat tax is a consumption-base tax since income is taxed only one time as it is earned, just as a national sales tax is a consumption-base tax since income is taxed only one time as it is spent. Moreover, a consumption-base system assumes “territorial taxation” and that business expenses should be deductible in the year the money changes hands.

While some features of the tax code – such as the healthcare exclusion – are loopholes according to both the Haig-Simons system and the consumption-base system, you get a divergence of opinion in key areas.

a) In a consumption-base world, there’s no double taxation and the capital gains tax therefore doesn’t exist. But from the perspective of the Haig-Simons tax base, the fact that capital gains are taxed at 23.8 percent instead of 39.6 percent is characterized as a loophole.

b) In a consumption-base world, there’s no double taxation and all savings gets the equivalent of IRA or 401(k) treatment. But from the perspective of Haig-Simons tax base, IRAs and 401(k)s are loopholes.

c) In a consumption-base world, there’s territorial taxation and no attempt to impose tax on income earned (and subject to tax) in other countries. But the Haig-Simons tax base assumes “worldwide taxation,” which means that “deferral” is a loophole rather than a way of mitigating a discriminatory penalty.

So why am I getting into boring details on this wonky issue? In part, because it helps people understand that tax reform is not just a matter of having a low tax rate. It’s also very important to define income correctly.

But I also think some background knowledge is necessary to explain why the White House is blowing smoke when they relentlessly demagogue against “corporate jets” as part of their never-ending campaign for class-warfare tax policy.

Let’s examine some excerpts from an ABC News report.

Listening to the White House, you’d think the key to averting the across-the-board spending cuts (the dreaded “sequester”) set to in place on March 1 is closing the tax break for owners of private jets. …Carney has brought up the corporate jet tax break at every single briefing this week. Listening to the White House, you might think that the “balanced” Democratic plan to avert the spending cuts would close that loophole for private jets. But you would be wrong. The Senate Democratic plan – which has been endorsed by the White House and is, in fact, the only Democratic plan actively under consideration right now – doesn’t touch corporate jets. …The tax break…allows the owners of private jets to depreciate their airplanes over five years instead of the standard seven years for commercial airplanes.

I don’t want you to focus on the demagoguery or the potential hypocrisy. Instead, consider the final sentence of the excerpt.

It turns out that the supposed “loophole” is really a penalty from a consumption-base perspective. If a company purchases a jet for $20 million, they should be able to deduct – or expense – that $20 million when calculating that year’s taxable income (after all, what is profit other than total revenue minus total costs?).

A sensible tax system defines profit as total revenue minus total costs – including purchases of private jets

But today’s screwy tax code forces them to wait five years before fully deducting the cost of the jet (a process known as depreciation). Given that money today has more value than money in the future, this is a penalty that creates a tax bias against investment (the tax code also requires depreciation for purchases of machines, structures, and other forms of investment).

Anyhow, because the tax bias imposes a five-year wait rather than a seven-year wait, the Obama White House would like us to believe that companies are getting some sort of egregious loophole.

Nonsense. In a good tax regime, companies should be able to deduct expenses in the year they are incurred. The fact that they have to wait five years is a penalty. But the White House wants us to perceive this penalty as a loophole or subsidy because it could be even more onerous.

By the way, if we’re worried about actual subsidies that benefit corporate jets, Tim Carney’s already explained that we should focus on the cronyists at the Export-Import Bank. And I heartily agree.

P.S. Defining the right “tax base” doesn’t imply anything about tax rates. You can have a so-called progressive rate structure or a single rate with either the Haig-Simons system or a consumption-base system.

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Happy (Government) Valentine’s Day

This Henry Payne cartoon is satire, but it’s eerie how the “Valentine’s Fairness Act” seems quite similar to the litany of spending, regulation, and intervention we endured as part of the State of the Union address.

With a rising burden of government spending and more class-warfare tax policy, the only folks getting a real Valentine are the special interest groups. And we’re paying for it, whether we like it or not.

You can enjoy some of Payne’s best cartoons here, here, here, here, here, here, here, here, here, and here. My favorite is the one with Robin Hood.

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What’s the Difference Between Romneycare and Obamacare?

That’s a trick question, of course, as illustrated by this biting Henry Payne cartoon.

But let’s look at one of the commonalities of Romneycare and Obamacare – higher premiums, thanks to mandates and third-party payer.

Here’s a quick look at what’s been happening to premiums in Massachusetts.

The same thing is already happening with Obamacare, as explained in a Wall Street Journal column by Merrill Matthews and Mark Litow.

The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it. …Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.

How bad will it be? Well…

Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. …Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

Which is why 2014 is the “Year of the Snake” in more places than just China.

If you like Ramirez cartoons, you can see some of my favorites here, here, here, here, and here.

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What’s Slowing Down the Economy?

Using data from the Minneapolis Federal Reserve, I showed last week that job creation – depending on how one wants to measure the business cycle – is either the worst  or close to the worst for any period since World War II.

My argument is that Obama’s policies are impeding growth. Simply stated, higher tax rates, a heavier burden of government spending, and other forms of intervention are not exactly the right recipe for growth and prosperity.

But sometimes it’s easier to get that message across with a clever cartoon.

Payne’s cartoon has a similar theme to this Ramirez cartoon, which is the fourth-most-viewed post in the history of my blog.

And here’s another Ramirez cartoon with the same message, and one of my favorite Chuck Asay cartoons also shows what happens when you impose a lot of burdens on the economy’s productive sector.

At some point, though, the public sector becomes so demanding that slow growth becomes no growth. Here’s a very clever Asay cartoon about what happens when you reach that tipping point.

P.S. I suspect it was meant as sarcasm and to nail Obama for blame-shifting, but the “Republican fiscal flux capacitor” does deserve some of the blame. Just look at these charts to see what happened the last time the GOP was in charge.

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Is Anybody Surprised that the First Bottle of Tax Booze Didn’t Cure the Spendaholics?

Those of you old enough to remember the Cold War may remember something called the Brezhnev Doctrine. This was the rule concocted by the Soviet tyrants that basically said a nation could never regain freedom once it fell under communist rule.

In my simple way of looking at such matters, this rule translated into: “What’s mine is mine, what’s yours is negotiable.”

We have a somewhat similar situation with American fiscal policy. The proponents of bigger government have openly stated that their top goal – both from a policy perspective and political perspective – is higher taxes.

But what they haven’t told us is that there is no limit on the amount of additional revenue they want to confiscate from people in the productive sector of the economy.

In other words, “What’s yours is yours until they decide to grab more.”

So even though President Obama just got his class-warfare tax increase on the so-called rich (as well as a big tax hike on all American workers), is seems all that did is whet his appetite for even more of our money.

Here’s the key excerpt from The Hill.

President Obama insisted Sunday that additional tax revenue will need to be part of future deficit deals… “There is no doubt we need additional revenue…,” he said.

Gee, what a surprise. It appears you don’t cure an alcoholic by giving him more to drink. Likewise, you don’t rein in the spending demands of the political class by giving them more revenue.

Unsurprisingly, the Senate Majority Leader also thinks there should be more money in Washington and less in your pockets. Here are a couple of relevant passages from Politico.

Any budget deal in Congress must “without any question” include revenue, Senate Majority Leader Harry Reid said in an interview aired Sunday. …To lift the sequester, Reid said, the deal needs to include new revenue.

It’s worth noting that Obama and Reid aren’t randomly expressing their addiction to other people’s money. These statements are an explicit signal that they will not allow any changes to fiscal policy unless they get to further fleece the American people.

So what are the practical implications?

• Some lawmakers want to tinker with the sequester because the defense budget is disproportionately impacted. That can’t happen without giving Obama and Reid a tax hike. So the only solution is to go with the sequester.
• Some lawmakers want to reform entitlements to avert America’s long-run fiscal crisis. That can’t happen without giving Obama and Reid a tax hike. So the only solution is to wait for 2017 (particularly since Obama and Reid doubtlessly would insist on the wrong types of entitlement changes that would simply kick the can down the road).

But those are short-term considerations.

The real moral of the story is that we have a serious spending problem in Washington. In theory, higher taxes could be the price to get needed reforms to control the size of government. But in reality, higher taxes are always a substitute for good fiscal policy.

So accept the fact that gridlock is the best possible outcome for the next four years and don’t get seduced into a tax hike. Unless, of course, you want to make it easier for the crowd in Washington to increase the burden of government spending.

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From Employment to Savings, Bad Government Policy Is Undermining the U.S. Economy

First, some good news.

The United States is in much better shape than most other developed nations, particularly if you look at broad measures of prosperity and living standards.

And our economy is growing and the private sector is creating jobs.

That’s the glass-half-full way of looking at things.

But if you’re a glass-half-empty person, the news is not so cheerful. The economy is expanding and jobs are being created, but both at a slow rate.

In this interview, I share this dour perspective as I grouse about how Obama’s policies of higher taxes and bigger government are somewhat responsible for the weak job market. And I also explain that the anemic employment situation is partially to blame for low levels of saving for many households.

On the topic of the low savings rate, I should have explained that government policies undermine savings, both because of the tax code’s pro-consumption bias and because reasons to save are diminished thanks to government-provided subsidies for things such as housing, education, retirement, and health care.

In my second soundbite, I jump to a different topic. I assert that it’s a good thing that we’re going to have gridlock for the next couple of years – particularly if the alternative is the kind of damaging legislation such as the faux stimulus and Obamacare that we got in the President’s first two years.

But I do warn that permanent gridlock is not a good idea. We need genuine entitlement reform at some point in the not-so-distant future if we want to avoid becoming another Greece.

And don’t delude yourself. If policy is left on auto-pilot, the burden of government spending is going to skyrocket. Indeed, both the Bank for International Settlements and the Organization for Economic Cooperation and Development estimate that America’s long-run fiscal problems are more severe than those is most European welfare states.

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In a Continuing Indictment of Obamanomics, another Bad Jobs Number Showing the “New Normal” of High Unemployment

I almost feel sorry for the Obama Administration’s spin doctors. Every month, they probably wait for the unemployment numbers from the Bureau of Labor Statistics with the same level of excitement that people on death row wait for their execution date.

This has been going on for a while and today’s new data is another good example.

As this chart indicates, the White House promised that the unemployment rate today would be almost down to 5 percent if we enacted the so-called stimulus back in 2009. Instead, the new numbers show that the jobless rate is 7.9 – almost 3.0 percentage points higher.

I enjoy using this chart to indict Obamanomics, in part because it’s a two-fer. I get to criticize the Administration’s overall record, and I simultaneously get to take a jab at Keynesian spending schemes.

What’s not to love?

That being said, I don’t think the above chart is completely persuasive. The White House argues, with some justification, that this data simply shows that they underestimated the initial severity of the recession. There’s some truth to that, and I’ll be the first to admit that it wouldn’t be fair to blame Obama for a bleak trendline that existed when he took office (but I will blame him for continuing Bush’s policies of excessive spending and costly intervention).

That’s why I think the data from the Minneapolis Federal Reserve is more damning. It looks at all the recessions and recoveries in the post-World War II era, and presumably provides a more neutral benchmark.

As you can see from this chart of job creation during all post-World War II recoveries, there’s one period that stands out for having the worst performance. Take a wild guess which line includes the Obama years.

An Obama defender will argue that this chart is unfair because the recession began during the Bush years.

Since there’s no significant difference between Bush’s policies and Obama’s policies, I don’t think that’s a strong defense, but let’s bend over backwards and instead look at job creation during recovery periods.

These numbers are a bit more favorable (or less damning) to Obama, but you can see that job creation for this recovery has been far below the average. Indeed, it only surpasses Bush’s job numbers coming out of the 2001 recession.

But I’m not surprised that the job numbers for Bush and Obama are both dismal. As stated above, they both pursued a statist agenda (though a Bush defender doubtlessly will point out that unemployment didn’t drop that much in 2001, so it would have been impossible to have a strong post-recession bounce).

The real lesson to be learned is that we live in an era of higher taxes on productive activity, a heavier burden of government spending, and more costly government regulation and intervention. And since we’re now more like Europe, the “new normal” is to have weak European-style economic numbers.

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Let’s Be Thankful Obama Won’t Achieve His Dream of Being a Second FDR

Last year, I explained with considerable relief that President Obama would never be as bad as Franklin Roosevelt.

Yes, Obama has imposed a class-warfare tax hike, pushed through Obamacare, and squandered $billions on a faux stimulus (perfectly captured by this cartoon). But that’s trivial compared to the damage caused by FDR (and Hoover).

“I’ve tried, but it’s time for me to admit I’m not as bad as FDR”

Obama’s policies, to be sure, have contributed to an extremely weak expansion.

That’s bad, but FDR’s statism helped extend the Great Depression – by an additional seven years according to scholarly research! That’s a much worse track record.

But that doesn’t mean Obama doesn’t want to be as bad as FDR. Indeed, one of his top advisers seems very happy that the President’s second inaugural address was reminiscent of Roosevelt’s so-called Second Bill of Rights.

Here’s some of what Cass Sunstein wrote for Bloomberg.

Obama is updating Franklin Delano Roosevelt’s Second Bill of Rights. …Roosevelt announced the Second Bill of Rights in his State of the Union address in 1944. With the Great Depression over, and the war almost won, FDR declared that we “have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence.” …Then he listed them:

• The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.
• The right to earn enough to provide adequate food and clothing and recreation.
• The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.
• The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad.
• The right of every family to a decent home.
• The right to adequate medical care and the opportunity to achieve and enjoy good health.
• The right to adequate protection from the economic fears of old age, sickness, accident and unemployment.
• The right to a good education.

…the Second Bill was meant to specify the goals of postwar America… Obama took more such steps. …Obama’s second inaugural did not refer explicitly to the Second Bill of Rights, but it had an unmistakably Rooseveltian flavor. …Obama emphasized “that a great nation must care for the vulnerable, and protect its people from life’s worst hazards and misfortune.” …Having helped America to survive its greatest economic challenge since the 1930s, the current occupant of that office is giving new meaning to those commitments, and making them his own.

I guess we have to give Sunstein credit for chutzpah. We’re suffering through the weakest expansion since the end of World War II, and he wants us to be grateful for Obama’s policies since they supposedly “helped America to survive.”

Wow, I’d hate to see his idea of failure.

But here’s the good news. America will have gridlock for the next two years, and probably the next four years.

The bad news is that we won’t take necessary steps to reform entitlements, but the good news is that we won’t make things worse with the kind of statist policies outlined in FDR’s fake Bill of Rights.

Yes, I expect Republicans to screw up on some of the small issues and give the White House a few minor victories, but I can’t imagine them approving any big Obama initiatives, even if their opposition is driven only by partisanship rather than principle.

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Penn and Teller Explain Class Warfare

I’m fond of my video analyzing the problems with class warfare tax policy, and I’ve explained that higher tax rates on the rich will cause bad Laffer Curve effects because investors, entrepreneurs, and small business owners have considerable ability to change the timing, level, and composition of their income.

But if you want to enjoy a succinct video that captures the moral bankruptcy of Obama’s agenda of class warfare and redistribution, this Penn & Teller video is well worth watching. And sharing.

And if you want to see rich, pro-tax statists exposed as hypocrites, watch these ambush interviews by Michelle Fields (who also narrated a very good video explaining how government policy mistakes caused – and exacerbated – the Great Depression).

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Obama’s Vision of a Nation of Takers

If you don’t want to be depressed, you should stop reading right now.

You probably know that we’ve been suffering because of a rising burden of government spending. And you probably understand that much of the problem is the relentless growth of redistribution and transfer programs.

But you probably don’t realize how far America has traveled in the wrong direction.

In today’s Wall Street Journal, Nicholas Eberstadt of the American Enterprise Institute rips apart President Obama’s empty assertion that the welfare state is desirable.

…the president is tired of listening to critics of America’s entitlement programs, and as far as he is concerned, the discussion is now over. It is not over—and won’t be anytime soon, because the country’s social-welfare spending is generating severe and mounting hazards for the nation. These hazards are not only fiscal but moral.

Eberstadt shares a bunch of bullet points that should worry anybody who cares about the future of the nation, starting with an inverse version of Mitchell’s Golden Rule. Handouts have been growing twice as fast as overall personal income!

• Over the 50-plus years since 1960, according to the Bureau of Economic Analysis, entitlement transfers—government payments of cash, goods and services to citizens—have been growing twice as fast as overall personal income. Government transfers now account for nearly 18% of all personal income in America—up from 6% in 1960.

• According to the BEA, America’s myriad social-welfare programs (the federal bureaucracy apparently cannot determine exactly how many of these there are) currently dispense entitlement benefits of more than $2.3 trillion annually. Since those entitlements must be paid for—either through taxes or borrowing—the burden of entitlement spending now amounts to over $7,400 per American man, woman and child.

The $7400 figure for per-capita redistribution burden is astounding. Others have calculated that this is akin to $60,000 for every poor household.

And even though I’ve written about the 49 percent figure, I had no idea that such a small portion was due to the aging population.

• According to the latest data from the U.S. Census Bureau, nearly half (49%) of Americans today live in homes receiving one or more government transfer benefits. That percentage is up almost 20 points from the early 1980s. And contrary to what the Obama White House team suggested during the election campaign, this leap is not due to the aging of the population. In fact, only about one-tenth of the increase is due to upticks in old-age pensions and health-care programs for seniors.

A big problem is that many working-age people have decided not to work.

• As entitlement outlays have risen, there has been flight of men from the work force. According to the Bureau of Labor Statistics, the proportion of adult men 20 and older working or seeking work dropped by 13 percentage points between 1948 and 2008. …In December 2012, more than 8.8 million working-age men and women took such disability payments from the government—nearly three times as many as in December 1990. For every 17 people in the labor force, there is now one recipient of Social Security disability program payments.

The solution, of course, is entitlement reform.

But that’s just part of the answer. We also need to change the culture. If people decide it is okay to live off the government, even leftists have begun to admit that it is very hard to re-create a system of self reliance.

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Is Government a Repulsive Spouse or Spoiled Child?

Regular readers know that I get very excited when I see signs that more and more people are realizing that the real fiscal problem is big government. Even if the sound analysis comes from foreigners or international bureaucracies.

Deficits and debt are bad, to be sure, but they are best understood as symptoms of the underlying disease of excessive spending.

With that in mind, we have two cartoons that correctly identify the real threat to America’s future.

Here’s Lisa Benson showing the President enjoying a dance with his first love at the inaugural.

And here’s a Jerry Holbert cartoon capturing the rapacious appetite of a bloated public sector and the impact on society.

As you can see here and here, it’s quite similar to the theme used with great effectiveness by Eric Allie.

Except Holbert seems to emphasize deliberate destructiveness, rather than the blundering incompetence in the Allie cartoons.

But the net effect is still the same. Big government is counter-productive government.

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A Cartoon Summary of Obama’s Inaugural Comments on Collective Action

We’re supposed to believe that President Obama is some sort of expert on constitutional law.

Richard Epstein was not overly impressed by his track record as a lecturer at the University of Chicago, and here’s a good parody of the President’s selective view of the Bill of Rights.

Likewise, we now have a Michael Ramirez cartoon that captures the spirit of the President inaugural address earlier this week.

If you’re amused – in a tragic way – by cartoons showing the huge gap between Obama’s ideology and America’s founding principles, you’ll doubtlessly enjoy this and this.

And in the spirit of cooperation, I even drafted a new Declaration of Dependency to help Obama explain his vision.

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Is the AWNA Act Going to Be President Obama’s Top Second-Term Goal?

Back in 2009, I posted about a critical new scientific discovery that helps explain the functioning of government.

In the same spirit today, I reprint a notice that appeared in my inbox.

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The Americans With No Abilities Act

President Barack Obama and the Democratic Senate are considering sweeping legislation that will provide new benefits for many Americans. The Americans With No Abilities Act is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.

“Roughly 50 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society,” said California Sen. Barbara Boxer. “We can no longer stand by and allow People of Inability (POI) to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they have some idea of what they are doing.”

“This legislation is just a precaution in case either one of us is forced to look for a private-sector job”

In a Capitol Hill press conference, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U.S. Postal Service, which has a long-standing policy of providing opportunity without regard to performance. At the state government level, the Department of Motor Vehicles also has an excellent record of hiring Persons with No Ability (63 percent).

Under the Americans With No Abilities Act, more than 25 million mid-level positions will be created, with important-sounding titles but little real responsibility, thus providing an illusory sense of purpose and performance.

Mandatory non-performance-based raises and promotions will be given to guarantee upward mobility for even the most unremarkable employees. The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability (POI) into middle-management positions, and give a tax credit to small and medium-sized businesses that agree to hire one clueless worker for every two talented hires.

Finally, the Americans With No Abilities Act contains tough new measures to make it more difficult to discriminate against the non-abled, banning, for example, discriminatory interview questions such as, “Do you have any skills or experience that relate to this job?”

“As a non-abled person, I can’t be expected to keep up with people who have something going for them,” said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint , Mich. , due to her inability to remember righty tighty, lefty loosey. “This new law should be real good for people like me. I’ll finally have job security.” With the passage of this bill, Gertz and millions of other untalented citizens will finally see a light at the end of the tunnel.

Said Sen. Dick Durbin: “As a senator with no abilities, I believe the same privileges that elected officials enjoy ought to be  extended to every American with no abilities. It is our duty as lawmakers to provide each and every American citizen, regardless of his or her inadequacy, with some sort of space to take up in this great nation and a good salary for doing so.”

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While this bit of satire is amusing, the joke may be on us. Let’s keep in mind that a recruitment agency in the United Kingdom actually got in trouble because it placed an ad “for ‘reliable’ and ‘hard-working’ applicants.” According to the government, this was wrong because such language “could be offensive to unreliable people.”

Surely it’s just a matter of time before similar forms of government stupidity migrate to this side of the Atlantic Ocean.

What’s next? Government intervention on behalf of ugly people? Oops, forget I asked.

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New Chuck Asay Cartoon Mocks Obama’s Debt Limit Stance

As part of the silly budget debate in Washington, President Obama is claiming that an increase in the debt limit wouldn’t authorize higher spending.

That’s technically true, but it sure would enable higher spending.

This Chuck Asay cartoon offers an amusing perspective on the battle.

In the interest of accuracy, however, it should show President Bush having already gone through the checkout line with an equally big cart full of handouts.

After all, government spending imposes a heavy cost on the economy regardless of whether Republicans or Democrats are the ones in charge of policy.

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Debt Limit, Spending Bills, and Picking the Right Fight

In an ideal world, Congress would not raise the debt limit.

This would force – automatically and immediately – a balanced budget. More important, it would produce a meaningful reduction in the burden of government spending.

And contrary to hyperbole from defenders of the status quo, it doesn’t mean default since the federal government collects about ten times as much revenue as needed to pay interest on the debt.

But even though that seems like a fantasy outcome for people like me from the Cato Institute, I actually don’t think libertarians, fiscal conservatives, and other advocates of smaller government should make the debt limit a do-or-die battle.

As I say in this interview on Fox Business News, the “continuing resolution” is a much better vehicle.

To elaborate, my concern is that the White House will be able to whip up too much hysteria on the debt limit, particularly since the media will serve as an echo chamber and Bernanke will act as a lackey for the White House.

And if the Fed Chairman is able to rattle Wall Street and cause a big drop in the stock market, it’s quite likely that Republicans will buckle rather than run the risk of being blamed for causing a financial calamity.

But the Obama Administration has less leverage when the “CR” expires on March 27. Like the debt limit, the continuing resolution is a must-pass piece of legislation. Heck, it’s even important since it’s the only way of funding the non-entitlement portions of the federal government for the rest of the 2013 fiscal year.

This is where advocates of small government should draw a line and demand fiscal restraint. They should pass a CR, but only after eliminating some egregious waste from the federal budget.

Yes, the President can object to fiscal reforms. He can even veto such a bill. But the worst thing that happens under a stalemate is a “government shutdown.”

And not even a real shutdown. Things that actually have some value, like the military and the air traffic control system, continue operating. All that happens is that “non-essential” programs, agencies, and department are shuttered. The Department of Housing and Urban Development is a good example.

Let’s now think about leverage. Who will care more about reopening HUD and other non-essential parts of the government? The answer, quite obviously, is that bureaucrats and interest groups are the only ones who will care, and this means the pressure will be on the left.

Indeed, this is exactly what happened in 1995 when Newt Gingrich and Bill Clinton had their famous shutdown battle. The Democrats were anxious to cut a deal to get the gravy train rolling again, and Republicans used that leverage to achieve a significant policy victory.

This doesn’t mean a CR fight and potential government shutdown is free of political risk. Indeed, Newt Gingrich lost popularity as a result of that fight. But that was probably more a reflection of his political style.

In any event, a CR battle definitely has less downside risk than a debt limit battle. So if folks on Capitol Hill actually want to fight to save the country from becoming Greece, why not pick the battle that’s easier to win?

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