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Archive for the ‘Redistribution’ Category

I don’t like coerced redistribution. When the government uses the threat of force to take from Person A to give to Person B, it simultaneously reduces Person A’s incentives to produce while also luring Person B into dependency.

But not all coerced redistribution and government intervention is created equal.

I don’t like welfare programs, for instance, in part because taxpayers are writing huge checks to support a plethora of programs, but also because there is very strong evidence that the modern welfare state has caused more poverty.

Nonetheless, I understand that there are well-meaning people who support these programs. Their motives are pure in that they simply want to alleviate perceived suffering. And since they’ve never learned about the adverse indirect effects of government intervention and presumably haven’t given any thought to the ethics of government coercion, I don’t think of these people as being bad or immoral. Just uninformed.

But there are some forms of redistribution and intervention that are so self-evidently odious and corrupt that you can’t give supporters the benefit of the doubt. Simply stated, there’s no justifiable argument for using government coercion to hurt poor people in order to benefit rich people.

Let’s look at two examples.

First, the Export-Import Bank is a quintessential example of corporate welfare. The program forces taxpayers to guarantee the contracts of big corporations and foreign buyers, and there’s now a fight over whether it should be extended.

Needless to say, ordinary voters don’t want their money being used enrich big companies.

So if you were one of the beltway insiders who benefited from this corrupt institution, how would you try to get the program extended? Would you be upfront and argue that big companies like Boeing deserve tax dollars? Would you argue that politicians are really smart and wise and that they should interfere with the free market?

That would be the honest way of supporting the Ex-Im Bank. But you won’t be surprised to learn that advocates instead have resorted to lies. Here are some excerpts from a Reuters story.

The U.S. Export-Import Bank has mischaracterized potentially hundreds of large companies and units of multinational conglomerates as small businesses, a flaw in its record keeping that could undermine the export lender’s survival strategy. …A comparison of some 6,000 businesses characterized by Ex-Im as “small” with information supplied by corporate data collector Dun & Bradstreet, which Ex-Im also uses to vet applicants, and other sources turns up some 200 companies that appear to be mislabeled and many more whose classification is uncertain.

Um… I would say they lied rather than characterize it as a “flaw in its record keeping.” But let’s set that aside and look at some of the “small businesses” that had their snouts in the Ex-Im trough.

…analysis showed companies owned by billionaires such as Warren Buffet and Mexico’s Carlos Slim, as well by Japanese and European conglomerates, were listed as small businesses and Ex-Im acknowledged errors in its data in response to those findings.  …A division of Austria’s Swarovski jewelers shows up, as does North Carolina’s Global Nuclear Fuels, which is owned by General Electric and Japan’s Toshiba and Hitachi. …The list of small businesses in Texas, for example, includes engineering and construction company Bechtel, which has 53,000 employees.

Gee, Warren Buffet and foreign conglomerates don’t exactly sound like my idea of small businesses.

Hopefully this will provide more ammunition of those fighting to wean big companies from the public teat.

Bank officials and supporters have used the Ex-Im’s support for American small business as a first line of defense against a campaign by conservatives to shut it down as an exponent of “crony capitalism.” …“Rarely does Ex-Im miss a (public relations) opportunity to claim that it primarily helps small business, but Ex-Im is again playing fast and loose with the facts,” said Representative Jeb Hensarling, a Texas Republican who chairs the House Financial Services Committee. “The bulk of Ex-Im’s help indisputably goes to large corporations that can finance their own operations without putting it on the taxpayer balance sheet.”

For our second example, we have the absolutely horrifying spectacle of the Obama Administration trying to shut down Wisconsin’s school choice system.

Why? Well, because currying favor with union bosses is more important than improving educational opportunities for students from disadvantaged communities.

George Will explains what’s happening in his Washington Post column.

It is as remarkable as it is repulsive… Eager to sacrifice low-income children to please teachers unions, the Justice Department wants to destroy Wisconsin’s school choice program. Feigning concern about access for disabled children, the department aims to handicap all disadvantaged children by denying their parents access to school choices of the sort affluent government lawyers enjoy. …Wisconsin’s school choice program was pioneered by an American hero, Mississippi-born Annette Polly Williams, who died Nov. 9 at age 77. During her three decades in Wisconsin’s legislature, she overcame the opposition of fellow Democrats to offering education choices to low-income parents. At the end of her life, however, she saw an African American attorney general, serving an African American president, employing tortured legal reasoning in an attempt to bankrupt private schools that enlarge the education options of disadvantaged children. …Closing the voucher program is the obvious objective of the teachers unions and hence of the Obama administration. Herding children from the choice schools back into government schools would swell the ranks of unionized teachers, whose union dues fund the Democratic Party as it professes devotion to “diversity” and the downtrodden.

By the way, you probably won’t be surprised (given the White House’s cavalier approach to the rule of law) to learn that the Obama Administration is using is utterly nonsensical legal theory.

…federal lawyers argue that because public funds, in the form of tuition vouchers empowering parents to make choices, flow to private schools, the schools become “public entities.” …this is like arguing that when food stamps are used for purchases at Wal-Mart, America’s largest private employer ceases to be private — it becomes an extension of the government. Inconveniently for the Justice Department, the U.S. Supreme Court has said the fact that a “private entity performs a function which serves the public does not make its acts state action.”

The preposterous legal reasoning is a farce, but that doesn’t get me overly upset.

What does bother me is the way the White House is acting like the modern-day equivalent of George Wallace, standing in the schoolhouse door to prevent low-income (and largely minority) students from getting an opportunity for better education.

I guess that a black President (who sends his own kids to private school) consigning black children to the back of the proverbial bus shouldn’t surprise me too much. After all, some divisions of the NAACP also have decided that being politically allied with union bosses is more important that educational opportunity for minority kids.

But that doesn’t make it morally acceptable. Put yourself in the shoes of a low-income parent. Wisconsin’s school choice programs gives you some hope that your kids can break free of poverty. Imagine what it feels like, then, when some of the politicians who claim to be on your side then decide that your children are expendable pawns. How disgusting.

Since we’re talking about things that are disgusting, let’s shift back to the Ex-Im Bank. I’ve actually had some Republican types tell me that corporate welfare is okay because it “helps to offset” some of the redistribution from rich to poor.

I confess that I’m dumbstruck by such arguments. It’s sort of like hearing someone say it’s okay to murder, rape, and steal because other people are doing it.

This is why it’s not easy being a libertarian. Yes, we believe in small government for utilitarian reasons such as faster growth, higher living standards, and more jobs. But we’re also motivated by morality, by the belief that there’s right and wrong and that good people should strive to uphold the former and fight the latter.

That’s not a popular view in Washington, which is best characterized as an incestuous racket for the benefit of interest groups, politicians, cronyists, lobbyists, bureaucrats, contractors, and other insiders.

P.S. On a completely separate (and non-political) issue, I can’t resist seeking some sympathy after what happened to me this morning. I took two of my cats to the vet for their spay and neuter appointments. Some of you pet owners already know that most cats don’t like car rides, so you might have some inkling of what I’m about to report.

In happier times

About five minutes into the drive, one of the cats vomits in the little cat carrier. That obviously wasn’t a happy development, particularly since it left me with an unpleasant choice of enduring a very unpleasant smell or having the window open and enduring a very bitter chill. But then, a few minutes later, the other cat…um, how should I phrase this…loses control of her bowels.

Which means that the next 20 minutes was almost as unbearable as watching a state-of-the-union address. I was running late for the appointment, so I couldn’t stop someplace and try to deal with the mess. And the two cats kept moving around in their carrier, making things worse. Trying to breathe through my mouth, even with the window down, was at best a pitiful attempt to mitigate my suffering.

An utterly miserable situation. Almost 1/10th as bad as an IRS audit.

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I wrote the other day about the importance of “social capital,” which is a catch-all phrase for a society’s attitudes about things such as the work ethic, a sense of self-reliance, and the spirit of independence.

Today we’re going to look at the flip side of social capital. I’m not sure whether this is an example of “anti-social capital” or “social anti-capital,” but our newest entrant in the Moocher Hall of Fame is symbolic of what’s wrong with the mental attitude of too many people in today’s welfare states.

Here are some details from a story about Christina in the U.K.-based Daily Mail. As you read the story, keep in mind that a “stone” is 14 pounds and £20,000 equals more than $31,000.

An obese mother-of-two who lives on benefits says she needs more of taxpayers’ money to overhaul her unhealthy lifestyle. Christina Briggs, 26, from Wigan, says she hates being 25 stone but she can’t do anything about it because she can only afford junk food. Meanwhile, exercise is out of the question because she doesn’t have the funds to join a gym. …’I tried swimming but it cost £22 a month and it meant I had to cut back on my favourite pizza and Chinese takeaways.’ Unemployed Christina gets £20,000 in benefits a year and lives in a council house with her two children by different fathers, Helena, 10, and Robert, two. …The family feast everyday on takeaways, chocolate and crisps as Christina says they can’t afford low fat foods. As a result, the mother is currently a dress size 26. …But she insists ‘it’s not my fault – healthy food is too expensive’. She feels her only hope is for the government to give her more money so she can afford to buy fruit and vegetables and join a gym. …She told the magazine: ‘I need more benefits to eat healthily and exercise. It would be good if the government offered a cash incentive for me to lose weight. I’d like to get £1 for every pound I lose, or healthy food vouchers…” She added that she can’t get a job to gain more money because she’s needed at home to care for her children… She explained: ‘There’s no way I could get a job. I don’t feel bad about the taxpayer funding my life…because I don’t treat myself or buy anything excessive.

Wow. Maybe we should add gym memberships to our satirical list of government-manufactured “human rights.”

But the bigger issue is that this story shows the destructive impact of the welfare state. From the perspective of taxpayers, redistribution programs are a rip-off.

However, even from the perspective of recipients, the welfare state is bad news. Christina is not a sympathetic character, to be sure, but one can’t help but think that she would have become a much better person if she hadn’t been seduced into a life of government dependency.

In other words, big government is causing an erosion of social capital.

Just as it has for other British members of the Moocher Hall of Fame, such as  NatailijaTraceyAnjem, Gina, and Danny.

Heck, there’s even a TV show called “Benefits Street” on British TV. Though “poverty porn” would be a better description.

P.S. The Princess of the Levant gets credit for today’s blog post since she sent me the story about Christina.

And she also sent me this cartoon, which is a very good advertisement for the libertarian philosophy.

Sort of like this cartoon, but even better since it accurately identifies the hypocrisy that is found with some left wingers and some right wingers.

By the way, you may recognize the woman on the left. She’s already appeared in one of my posts mocking the statist mentality on gun control.

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I’ve always objected when leftists engage in moral preening about how they supposedly are more compassionate.

Europeans statists, for instance, claim to be more compassionate because their governments have greater levels of coercive redistribution. But I ask them why they think it’s compassionate to give away other people’s money. Then I shame them by showing data on how Americans are far more generous in terms of trying to help others with their own money.

I have the same debate in America. Take the issues of unemployment benefits. My leftist friends say that compassionate people should favor extended benefits. To which I reply by asking them why it’s good to pay people to not work and assert instead that genuine compassion should be defined by policies that enable people to find jobs and become self reliant.

I raise this topic because the Pope recently made news by urging more compassion for the less fortunate, and he specifically said that raising the issue will lead some to think he’s a communist.

Here are some excerpts from a news report in the U.K.-based Independent.

In one his longest speeches as Pope, the Holy See outlined his views on a wide range of issues– from poverty and the injustices of unemployment to the need to protect the environment. …Anticipating how his letter would be received by his critics, Francis declared that “land, housing and work are increasingly unavailable to the majority’ of the world’s population,” but said “If I talk about this, some will think that the Pope is communist.” “They don’t understand that love for the poor is at the centre of the Gospel,” he said. “Demanding this isn’t unusual, it’s the social doctrine of the church.”

Several people have asked my opinion about what the Pope said.

My initial instinct was to be very critical. After all, various news reports interpreted the Pope’s statement as an attack on capitalism and an embrace of the welfare state.

But since I know that the establishment media is biased and would want to portray the Pope’s comments as being supportive of statism, I didn’t want to make any unwarranted assumptions. So I tracked down a transcript of the speech. That’s the good news. The bad news is that it’s only available (at least as of this writing) in Portuguese, Spanish, Italian, and French.

But with the help of Google Translate, I looked at what the Pope actually said. And if the translation software is accurate, I can now offer my opinion about the Pope’s views: To be succinct, I have no idea what he thinks. And if you want me to elaborate, all I can say is that he calls for lots of action to help the poor, but he doesn’t endorse government coercion to make it happen

On the other hand, he doesn’t say that government shouldn’t be involved. And the tone of the speech certainly seems left wing, but that may simply be a result of me hearing a lot of statists making similar remarks and then calling for government-coerced redistribution policies.

The bottom line, as I suggested above, is that the Pope may be wrong…or he may be right. Which seems inconsistent but accurate. After all, the Vatican sometimes has been very good on economic issues and at times very disappointing.

But I will say something definitive. If anybody, including the Pope, thinks that bigger government is the way to help the poor, they are very misguided.

I’ve already shared some powerful data to show that poverty was falling in America after World War II, but then the progress came to a halt once the federal government launched a “War on Poverty” and dramatically expanded the welfare state.

Let’s augment that data today with a specific look at what happened when the federal government decided to “help” folks in Appalachia. Here are some excerpts from a very compelling National Review column.

Appalachian whites suffer from many of the same social ills as working-class blacks: broken families, substance abuse, poor health, and high poverty. …Early anti-poverty efforts focused largely on the white population. …It was, as Ira Katznelson argued in an explosive book, a type of affirmative action — for white people. …Two federally chartered organizations — the Depression-era Tennessee Valley Authority (TVA) and Johnson’s Appalachian Regional Commission (ARC) — pumped millions of development dollars into predominantly white rural locales. …The aid came not just in the form of direct welfare payments, but also as government jobs. The country-music anthem “Song of the South” tells a familiar tale: “Papa got a job with the TVA; we bought a washing machine and then a Chevrolet.” …From 1965 until 1981, when the federal government began to scrutinize the cash flowing to Appalachia, federal appropriation to the ARC exceeded $1 billion (in today’s dollars) every single year. Even today, Congress sends about $80 million to the ARC; no other regionally focused entity spends more. As late as 2000, Appalachians received more federal money per capita than average, despite their minimal cost of living and the low number of federal employees in the region.

So has all this federal largesse helped?

Well, not exactly.

…there are now precious few jobs in Tennessee valleys and too few drivers on those wide mountain roads. If Papa bought a washing machine and then a Chevrolet, Junior is buying oxy or meth: West Virginia leads the nation in drug-overdose deaths, with Kentucky third and Tennessee eighth. …Today, the inheritors of Katznelson’s affirmative action for whites occupy the lowest rungs of the socioeconomic ladder. West Virginia, Kentucky, northern Georgia, and South Carolina all nabbed more than their fair share of federal aid, but now they are among the poorest parts of the country. …Residents of these states suffer the worst consequences. In many Appalachian counties, inhabitants can expect to live only 67 years, more than a decade less than the average American. …Alongside the grim statistics is a spiritual poverty more difficult to measure but easier to see. There’s the high-school teacher who has only once had a class without a pregnant student. …Young students in eastern Kentucky sometimes tell their teachers that they hope to “draw” when they grow up. But they’re not talking about a career as an artist; they’re talking about drawing a government check. These kids weren’t programmed like that at birth; they were taught something destructive by their communities.

There are some lessons to be learned.

…the failure of the effort gives us ample reason to question the wisdom of federally led development efforts no matter the intended beneficiaries. Government cannot create a sustainable economy, no matter how hard it tries. And traditional welfare, while defensible as a way of alleviating immediate deprivation, too often fails to place people on the road to self-sufficiency. …encouraging family stability — or at least not discouraging it through the tax code or needless incarceration — promotes upward mobility more effectively than transfer payments…if the failures of Appalachia are any guide, a narrower policy agenda might actually serve the poor — white and black alike.

Amen. If you want to help the poor, push for economic growth rather than redistribution.

There are even some honest liberals who now admit that big government promotes long-run dependency.

P.S. Since the first part of this post dealt with religion and compassion, it’s time to share Libertarian Jesus as well as the thoughts of Cal Thomas on whether Jesus was a socialist.

P.P.S. Since the last part of this post dealt with Appalachia, I guess it’s appropriate to share this redneck joke.

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Back in 2010, I shared some wise words from Walter Williams and Theodore Dalrymple about how society can become unstable when people figure they can “vote themselves money.”

On a related note, I shared the famous “riding in the wagon” cartoons in 2011 and the “Danish party boat” image in 2014. Both of these posts highlighted the danger that exists when societies reach a tipping point, which occurs when too many people vote themselves into dependency and expect (and vote) for never-ending handouts.

Indeed, this is why I’m very pessimistic about the future of welfare states such as Greece.

And, depending what happens in an upcoming run-off election, I probably won’t be very optimistic about Brazil.

Investor’s Business Daily has shared some fascinating – and disturbing – data from that country’s recent election.

A Brazilian economist has shown a near-exact correlation between last Sunday’s presidential election voting choices and each state’s welfare ratios. Sure enough, handouts are the lifeblood of the left. …Neves won 34% of the vote, Rousseff took 42% and green party candidate Marina Silva took about 20% — and on Thursday, Silva endorsed Neves, making it a contest of free-market ideas vs. big-government statism. But what’s even more telling is an old story — shown in an infographic by popular Brazilian economist Ricardo Amorim. …Amorim showed a near-exact correlation among Brazil’s states’ welfare dependency and their votes for leftist Workers Party incumbent Rousseff. Virtually every state that went for Rousseff has at least 25% of the population dependent on Brazil’s Bolsa Familia welfare program of cash for single mothers… States with less than 25% of the population on Bolsa Familia overwhelmingly went for Neves and his policies of growth. …Fact is, the left cannot survive without a vast class of dependents. And once in, dependents have difficulty getting out.So Brazil’s election may come down to a question of whether it wants to be a an economic powerhouse — or a handout republic.

Here’s the map from IBD showing the close link between votes for the left-wing candidate and the extent of welfare dependency.

It’s not a 100 percent overlap, but the relationship is very strong.

Sort of like the maps I shared on language and voting in Ukraine.

That being said, I’m a policy wonk who wants economic liberty, not a political hack with partisan motives. So let’s look at the implications of growing dependency.

As IBD explains, the greatest risk is that people get trapped in dependency. We see that in advanced nations like the United States and United Kingdom (and the Nordic nations) so is it any surprise that it’s also a problem in a developing country like Brazil (or South Africa)?

Problem is, “some experts warn that a wide majority cannot get out of this dependence relationship with the government,” as the U.K. Guardian put it. And whether it’s best for a country that aspires to become a global economic powerhouse to have a quarter of the population — 50 million people — dependent on welfare and producing nothing is questionable.

I especially appreciate the last part of this excerpt. Economic output is a function of how capital and labor are productively utilized.

In other words, a welfare state imposes a human cost and an economic cost.

Now let’s consider possible implications for the United States. A few years ago, I put together a “Moocher Index” to show which states had the highest percentage of non-poor households receiving some form of redistribution.

Do the moocher states vote for leftists? Well, it we use the 2012 presidential election as a guidepost, 7 of the top 10 moocher states voted for Obama.  That suggests that there is a relationship.

But if you look at the states with the lowest levels of dependency, they were evenly split, with 5 for Obama and 5 for Romney. So perhaps there aren’t any big lessons for America, though Obama’s margins in Ohio, Florida, Virginia, Colorado, and Nevada were relatively small.

For what it’s worth, I’m far more worried about these economic numbers, not the aforementioned political numbers.

P.S. I probably shouldn’t assume that a leftist victory automatically means more statism in Brazil. After all, keep in mind that we got more economic freedom during the Clinton years and bigger government during the Bush years. Moreover, it was a left-leaning Brazilian president who had the wisdom to acknowledge that you can’t redistribute unless someone first produces.

P.P.S. At least one honest leftist admits there is a heavy cost to government dependency.

P.P.P.S. If you live in a nation that already has passed the tipping point of too much dependency and you want to live more freely, you can always escape. As reported by the U.K.-based Independent.

Up to 2.5 million French people now live abroad, and more are bidding “au revoir” each year. …the “lifeblood” of France are leaving because of “the impression that it’s impossible to succeed”… There is “an anti-work mentality, absurd fiscal pressure, a lack of promotion prospects, and the burden of debt hanging over future generations,” he told Le Figaro. …while the figure of 2.5 million expatriates is “not enormous”, what is more troubling is the increase of about 2 per cent each year. “Young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad,” she says. France’s unemployment rate is hovering around 10 per cent. As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year.

The good news is that some people escape. The bad news is that the political environment becomes even worse for those remaining.

P.P.P.P.S. And don’t forget that the Obama campaign celebrated dependency during the 2012 campaign.

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Why is President Obama so fixated on a class-warfare agenda of higher taxes on the rich and government dependency for the poor?

Is it because a tax-the-rich agenda is good politics, as determined by clever pollsters who have tapped into the collective mind of American voters (and as demonstrated by this cartoon)?

Or is the President ideologically committed to a redistributionist mindset, meaning that he will pursue class-warfare policies even if they rub voters the wrong way?

Since I can’t read the President’s mind, I’m not sure of the answer. I suspect he’s a genuine ideologue, but your guess is as good as mine.

But I can say with more confidence that his pursuit of class-warfare doesn’t resonate with voters.

Or, to be more specific, the American people aren’t susceptible to the politics of hate and envy so long as they’re offered a better alternative.

Let’s look at some new polling data on this topic.

Writing for the Wall Street Journal, William Galston explains that anemic growth is making it harder and harder for households to increase their living standards.

Over the next decade, there is one overriding challenge—recreating an economy in which growth works for everyone, not just a favored few.  …Recent reports underscore the extent of the challenge. …long-term trends continued to point in the wrong direction. The employment-to-population ratio is lower than it was at the official end of the Great Recession in mid-2009. The labor-force participation rate dropped to 62.8%, the lowest since the late 1970s. …from 2010 to 2013 median family income corrected for inflation declined by 5%, even as average family income rose by 4%. Only families at the very top of the income distribution saw gains during this period. Family incomes between the 40th and 90th percentiles stagnated, while families at the bottom experienced substantial declines.

That’s the bad news.

The good news is that the American people understand that class warfare and redistribution is not a route to a better life.

They are much more supportive of policies that increase the size of the economic pie.

Americans have strong views about the economic course policy makers should pursue. Surveys of 3,000 Americans conducted between January and March of 2014 by the Global Strategy Group found that fully 78% thought that it was important for Congress to promote an agenda of economic growth that would benefit all Americans. …Strategies to spread wealth more evenly and reduce income inequality received the least support; 53% believe that fostering economic growth is “extremely important,” compared with only 30% who take that view about narrowing income inequality. …These views have political consequences. By 59% to 37%, Global Strategy Group found that Americans prefer a candidate who focuses on economic growth to one who emphasizes economic fairness. By a remarkable margin of 64 percentage points (80% to 16%), they opt for a candidate who focuses on more economic growth to one who emphasizes less income inequality.

What makes these results especially notable, as pointed out by another WSJ columnist, is that the Global Strategy Group is a Democrat-connected polling firm.

Here’s some of what James Freeman wrote.

Now here’s something you don’t see every day. A prominent Democratic polling firm has found that voters don’t view reducing income inequality as a top priority. Instead, they want economic growth. …The results were released in April but until now have received almost no attention in the press. No doubt the findings would have rudely interrupted the months-long media celebration of Thomas Piketty and his error-filled and widely unread book on income inequality. And the survey data suggest that the core message of President Obama and his political outfit Organizing for Action is off target.the Obama economic message is all about redistributing wealth, not creating it. But as the liberals at Global Strategy Group felt compelled to observe, “Growth-focused candidates appeal to many more voters.”

I’m very encouraged by these numbers.

For decades, I’ve been telling folks in Washington that growth trumps fairness. And I’ve made that argument based on policy and politics.

The policy part is easy. All you have to do is compare, say, France to Hong Kong if you want evidence that pro-growth policy is how you help the less fortunate.

But since I worry that America’s social capital is eroding, I’m also concerned that people might be more sympathetic to redistribution. In other words, maybe a growth message no longer is effective when trying to get votes.

According the Global Strategy Group data, though, voters still understand that it’s better for politicians to focus on growing the pie.

In this same spirit, here’s an interview I did earlier in the week for Blaze TV. The early part of the discussion is about a new Harvard report on the economy. But since the report didn’t say anything, skip to the relevant part of the interview, which starts at about 3:15. I explain that economic growth is the only viable way of boosting the well being of lower-income Americans.

And if you want more information on why growth is better for the poor than redistribution, click here.

P.S. For a humorous explanation of why the dependency agenda is so destructive, here’s the politically correct version of the fable of the Little Red Hen.

And the socialism-in-the-classroom example, which may or may not be an urban legend, makes a similar point.

But I think this pizza analogy may be the best way of showing that redistribution doesn’t help the poor.

P.P.S. I still think Margaret Thatcher has the best explanation of why the left is wrong on inequality. And if you want to see a truly disturbing video of a politicians with a different perspective, click here.

P.P.P.S. We have yet another update (updating yesterday’s update, which updated previous stories) on horrific IRS abuse.

Take a look at this video, which features the big Democratic donor who was made head of the IRS by Obama, and get a load of his cavalier attitude about the IRS obeying the law.

If you watch the entire exchange, I think it’s fair to say that Mr. Koskinen wasn’t saying that the IRS shouldn’t obey the law. But his flippant response, combined with the Obama Administration’s repeated decisions to arbitrarily ignore and/or change existing law, certainly shows that the ruling class isn’t very serious about the rule of law.

And that’s not a good sign for America’s future.

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Why do statists make so many mistakes with data? Paul Krugman, for instance, has butchered numbers when writing about fiscal policy in nations such as France, Estonia, Germany, and the United Kingdom.

But Krugman isn’t alone. We also have Thomas Piketty, who was lionized by the left after publication of Capital in the Twenty-First Century.

Ever since his book was published, various experts have called into question the veracity of Piketty’s numbers. Most recently, here’s some of what Alan Reynolds, my colleague at the Cato Institute, wrote about his data for the Wall Street Journal.

Thomas Piketty…remains a hero on the left, but the honeymoon may be drawing to a sour close as evidence mounts that his numbers don’t add up. …data are so misleading as to be worthless. They attempt to estimate top U.S. wealth shares on the basis of that portion of capital income reported on individual income tax returns—interest, dividends, rent and capital gains. This won’t work because federal tax laws in 1981, 1986, 1997 and 2003 momentously changed (1) the rules about which sorts of capital income have to be reported, (2) the tax incentives to report business income on individual rather than corporate tax forms, and (3) the tax incentives for high-income taxpayers to respond to lower tax rates on capital gains and dividends by realizing more capital gains and holding more dividend-paying stocks.

Alan lists some of specific problems that exist when you try to make sweeping assertions based on tax return data.

For example, interest income from tax-exempt municipal bonds was unreported before 1987—so the subsequent reporting of income created an illusory increase in top incomes and wealth. Since 1997, by contrast, most capital gains on home sales have disappeared from the tax returns of middle-income couples, thanks to a $500,000 tax exemption. …since the mid-1980s, most capital income and capital gains of middle-income savers began to vanish from tax returns by migrating into IRAs, 401(k)s and other retirement and college savings plans. Balances in private retirement plans rose to $12.4 trillion in 2012 from $875 billion in 1984. …When individual tax rates dropped from 70% in 1980 to 28% in 1988, this provoked a massive shift: from retaining private business income inside C-corporations to letting earnings pass through to the owners’ individual tax returns via partnerships, LLCs and Subchapter S corporations. …Although more frequent asset sales showed up as an increase in capital income, realized gains are no more valuable than unrealized gains so realization of gains tells us almost nothing about wealth. Similarly, a portfolio shift from municipal bonds, coins or cash into dividend-paying stocks after the tax on dividends fell to 15% in 2003 might look like more capital income when it was merely swapping an untaxed asset for a taxable one.

So what’s the bottom line?

Mr. Piketty’s premonition of soaring U.S. wealth shares for the top 1% finds no credible support in his book or elsewhere.

But let’s now conduct a thought experiment. What if Piketty’s data was right? Would that justify punitive class-warfare tax rates?

I’ve already explained that this would be the wrong approach.

And Diana Furchtgott-Roth of the Manhattan Institute cites some new academic research to make a similar point.

Meltzer and Richard show that using redistribution to ameliorate income inequality is not only ineffective, but worsens the problem that policy makers seek to cure. …Since workers’ productivity levels increase with the more they produce, and because higher taxes create disincentives to working, taxes lead to lower economic growth. …Higher tax rates that fund transfer payments hamper economic growth. That’s because they increase the number of people who depend on these payments and find it preferable not to work. There also is less learning-by-doing among those who work. …As taxes and transfers rise, hours of work and acquired skills decline, reducing economic growth. …it is this decline in hours worked for low-productivity workers that leads to more economic inequality — not the growth of technology nor the rent-seeking privileges of the rich, two causes cited by Piketty. Reduced effort by the rich in reaction to higher taxes comes at the expense of economic growth, which has the potential to raise everyone’s living standards and increase economic opportunity. …Meltzer and Richard show that the growth of government is the true driver behind inequality.

In other words, the supposed solution of ever-higher tax rates from folks such as Piketty (and Obama) would be harmful to the overall economy and be especially damaging to those with lower incomes.

If we want to help the poor, the goal should be to achieve faster economic growth by enabling capitalism and entrepreneurship.

In other words, copy Hong Kong and Singapore, not France.

Here’s the video I narrated for the Center for Freedom and Prosperity explaining why class-warfare tax policy is so misguided.

P.S. This isn’t the first time that Alan Reynolds has debunked Piketty.

P.P.S. These two pizzas tell you everything you need to know about how the left would define success.

P.P.P.S. And Margaret Thatcher exposed why their definition of success is absurd.

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Back in 2012, I shared a sadly amusing image about how the modern political process has degenerated into two wolves and a sheep voting what to have for lunch.

I was making an argument in that column against majoritarianism (and that is a critical issue, as explained in this video), but there’s also a very important moral component to this debate.

Walter Williams addresses this issue in his latest column. He starts by asking a hypothetical question.

Suppose I saw a homeless, hungry elderly woman huddled on a heating grate in the dead of winter. To help the woman, I ask somebody for a $200 donation to help her out. If the person refuses, I then use intimidation, threats and coercion to take the person’s money. I then purchase food and shelter for the needy woman. My question to you: Have I committed a crime? I hope that most people would answer yes. It’s theft to take the property of one person to give to another.

In other words, it doesn’t matter how Person A wants to spend money, it’s wrong for Person A to steal from Person B.

Walter than asks some critical follow-up questions, all of which are designed to make readers realize that theft doesn’t magically become acceptable simply because several people want to take Person B’s money.

Would it be theft if I managed to get three people to agree that I should take the person’s money to help the woman? What if I got 100, 1 million or 300 million people to agree to take the person’s $200? Would it be theft then? What if instead of personally taking the person’s $200, I got together with other Americans and asked Congress to use Internal Revenue Service agents to take the person’s $200? The bottom-line question is: Does an act that’s clearly immoral when done privately become moral when it is done collectively and under the color of law? Put another way, does legality establish morality?

Amen. Walter is exactly right.

And this is a point I need to internalize.

I’m often writing about the economic evidence for smaller government, but I suspect advocates of economic liberty and smaller government won’t win the debate unless we augment our arguments by also making the moral case against government-sanctioned theft.

And perhaps one way of getting this point across is to educate people about the fact that we used to have a very small federal government with little or no redistribution. Walter elaborates.

For most of our history, Congress did a far better job of limiting its activities to what was both moral and constitutional. As a result, federal spending was only 3 to 5 percent of the gross domestic product from our founding until the 1920s… James Madison, the acknowledged father of our Constitution, said, “Charity is no part of the legislative duty of the government.” In 1794, when Congress appropriated $15,000 to assist some French refugees, Madison stood on the floor of the House of Representatives to object, saying, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”

Here’s the bottom line according to Professor Williams.

We’ve become an immoral people demanding that Congress forcibly use one American to serve the purposes of another. Deficits and runaway national debt are merely symptoms of that larger problem.

Though I would slightly disagree with the way Walter phrased it.

I would argue that a bloated government is the symptom of growing immorality. Deficits and debt are then symptoms of that problem.

P.S. I want to quickly address another issue.

When I quote Art Laffer, I’m almost always going to be in agreement with what he says.

But, as I wrote last year, we’re in disagreement on the issue of whether states should be allowed to tax sales that take place outside their borders.

And now Art has a short video that rubbed me the wrong way.

He endorses legislation that would create a sales tax cartel and says – right at the start of this video – that this is because “states should have the right to be able to tax whatever they want to within their state.”

I agree, but this is why I’m against the so-called Marketplace Fairness Act. That legislation would allow state governments to tax outside their borders.

Simply stated, a merchant in one state should not be forced to collect taxes for a government in another state.

P.P.S. This also explains why FATCA is such horrible legislation. It is an effort by the U.S. government to coerce banks in other nations to enforce bad IRS law.

If we care about liberty, we should make sure the power of government is constrained by borders.

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