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Archive for the ‘United States’ Category

To put it mildly, I’m not a fan of the so-called Tax Justice Network. In a moment of typical understatement, I referred to the U.K.-based group as “…a bunch of crazy Euro-socialists.”

And to give you an idea of why I don’t like them, here’s some of what I wrote about them two years ago.

…the Tax Justice Network [is] closely allied with governments in left-wing nations such as France, and they share the same goals as statist international bureaucracies such as the Paris-based Organization for Economic Cooperation and Development. If they succeed in crippling tax competition and setting up some sort of global network of tax police, more politicians will raise tax rates, causing more misery, and bringing more nations one step closer to Greek-style fiscal collapse.

With this bit of background, it goes without saying that I very rarely agree with TJN.

But just as a stopped clock is right twice daily, the Tax Justice Network on rare occasions will produce some worthwhile research. For example, here are some passages from my article in the latest issue of the Cayman Financial Review (where I’m a member of the Editorial Board).

…would anybody, if asked to list the world’s 10 biggest tax havens, put together a list that includes Germany, Japan and the United States? Sounds absurd, but that’s precisely what the ideologues at the Tax Justice Network (TJN) asserted in the Financial Secrecy Index (FSI) released last November. …To be fair, though, the methodological approach used in the FSI report is not wholly objectionable. The TJN is seeking to come up with a measure that combines both the degree to which a jurisdiction has “secrecy” laws and the extent to which that jurisdiction attracts global capital. In other words, the TJN’s philosophical leanings are extreme and the organization obviously is motivated by a desire to hinder tax competition and fiscal sovereignty, but the FSI report provides an interesting way of seeing which so-called tax havens play the biggest role in the world economy.

And one of the biggest tax havens – number 6 according to TJN – is the United States.

TJN FSI 2013I have no objection to their choice.

It makes sense to include the United States because there are several attractive policies for global investors, including the non-taxation and non-reporting of certain types of capital income. Moreover, several states have very friendly incorporation laws.

When I’m talking about “friendly incorporation laws,” I’m referring to the fact that states such as Delaware, Nevada, Wyoming, and others make it easy for everyone – particularly foreigners – to set up companies. This is a good thing for business and investment, but it irks statists because many American states don’t require the collection and sharing of information that foreign governments want for purposes of enforcing bad tax law.

So the United States is a de facto tax haven.

But that’s just part of the story. When I discuss the “non-taxation and non-reporting of certain types of capital income,” I’m referring to the fact that the internal revenue code generally does not impose tax on interest and capital gains paid to  foreigners (specifically nonresident aliens). And because we don’t tax those payments, there’s no requirement to report that information to any government. As you can imagine, this irks the left because it means there’s no information to share with foreign governments that want to track – and tax – flight capital.

To reiterate, this makes the United States is a de facto tax haven.

These laws are extremely beneficial to the American economy. To get an idea of why the United States is a big winner from being a “tax haven,” look at this chart showing historical data on the amount of money foreigners have invested in stocks, bonds, and other forms of indirect (sometimes called passive) investment in America.

By any standard, $13 trillion is a lot of money. Those funds boost our financial markets, enable job creation, and increase economic performance. We don’t know how much of that money is invested in the United States because we have a friendly and confidential tax system for nonresident aliens, but it surely helps to explain why there’s so much foreign investment in America.

Private Foreign-Owned Indirect Investment in the US

Let’s be thankful that the United States is a so-called tax haven. Those pro-growth policies help to offset Obama’s bad policies. Indeed, two Canadian economists found that tax havens actually are economically beneficial for high-tax nations.

But that’s not the moral of the story. Yes, I like that America is a tax haven for foreigners, but the real moral of the story is that we should apply the same good policies to Americans.

Let’s get rid of the corrupt internal revenue code and adopt a simple and fair flat tax. That means a low tax rate, of course, but it also means no double taxation of income that is saved and invested.

Which means Americans would get the same pro-growth treatment now reserved for foreigners.

For more information, here’s my video on the economic argument for tax havens.

P.S. You won’t be surprised to learn that hypocritical leftists love using tax havens to protect their money even though they want to deny that freedom to the rest of us.

P.P.S. I’m such an avid defender of tax havens that I almost wound up in a Mexican jail. That’s dedication!

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There’s an old joke about two guys camping in the woods, when suddenly they see a hungry bear charging over a hill in their direction. One of the guys starts lacing up his sneakers and his friend says, “What are you doing? You can’t outrun a bear.” The other guys says, I don’t have to outrun the bear, I just need to outrun you.”

That’s reasonably amusing, but it also provides some insight into national competitiveness. In the battle for jobs and investments, nations can change policy to impact their attractiveness, but they also can gain ground or lose ground because of what happens in other nations.

The corporate tax rate in the United States hasn’t been changed in decades, for instance, but the United States has fallen further and further behind the rest of the world because other nations have lowered their rates.

Courtesy of a report in the UK-based Telegraph, here’s another example of how relative policy changes can impact growth and competitiveness.

The paper looks at changes in the burden of welfare spending over the past 14 years. The story understandably focuses on how the United Kingdom is faring compared to other European nations.

Welfare spending in Britain has increased faster than almost any other country in Europe since 2000, new figures show.  The cost of unemployment benefits, housing support and pensions as share of the economy has increased by more than a quarter over the past thirteen years – growing at a faster rate than in most of the developed world. Spending has gone up from 18.6 per cent of GDP to 23.7 per cent of GDP – an increase of 27 per cent, according to figures from the OECD, the club of most developed nations. By contrast, the average increase in welfare spending in the OECD was 16 per cent.

This map from the story shows how welfare spending has changed in various nations, with darker colors indicating a bigger expansion in the welfare state.

Welfare Spending - Europe

American readers, however, may be more interested in this excerpt.

In the developed world, only the United States and the stricken eurozone states of Ireland, Portugal and Spain – which are blighted by high unemployment – have increased spending quicker than Britain.

Yes, you read correctly. The United States expanded the welfare state faster than almost every European nation.

Here’s another map, but I’ve included North America and pulled out the figures for the countries that suffered the biggest increases in welfare spending. As you can see, only Ireland and Portugal were more profligate than the United States.

Welfare Spending - NA + WE

Needless to say, this is not a good sign for the United States.

But the situation is not hopeless. The aforementioned numbers simply tell us the rate of change in welfare spending. But that doesn’t tell us whether countries have big welfare states or small welfare states.

That’s why I also pulled out the numbers showing the current burden of welfare spending – measured as a share of economic output – for countries in North America and Western Europe.

This data is more favorable to the United States. As you can see, America still has one of the lowest overall levels of welfare spending among developed nations.

Welfare Spending - NA + WE -Share GDP

Ireland also is in a decent position, so the real lesson of the data is that the United States and Ireland must have been in relatively strong shape back in 2000, but the trend over the past 14 years has been very bad.

It’s also no surprise that France is the most profligate of all developed countries.

Let’s close by seeing if any nations have been good performers. The Telegraph does note that Germany has done a good job of restraining spending. The story even gives a version of Mitchell’s Golden Rule by noting that good policy happens when spending grows slower than private output.

Over the thirteen years from 2000, Germany has cut welfare spending as a share of GDP by 1.5 per cent… Such reductions are possible by increasing welfare bills at a lower rate than growth in the economy.

But the more important question is whether there are nations that get good scores in both categories. In other words, have they controlled spending since 2000 while also having a comparatively low burden of welfare outlays?

Welfare Spending - The Frugal FiveHere are the five nations with the smallest increases in welfare spending since 2000. You can see that Germany had the best relative performance, but you’ll notice from the previous table that Germany is not on the list of five nations with the smallest overall welfare burdens. Indeed, German welfare spending consumes 26.2 percent of GDP, so Germany still has a long way to go.

The nation that does show up on both lists for frugality is Switzerland. Spending has grown relatively slowly since 2000 and the Swiss also have the third-lowest overall burdens of welfare spending.

Hmmm…makes you wonder if this is another sign that Switzerland’s “debt brake” spending cap is a policy to emulate.

By the way, Canada deserves honorable mention. It has the second-lowest overall burden of welfare spending, and it had the sixth-best performance in controlling spending since 2000. Welfare outlays in our northern neighbor grew by 10 percent since 2000, barely one-fourth as fast as the American increase during the reckless Bush-Obama years.

No wonder Canada is now much higher than the United States in measures of economic freedom.

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When I’m in Europe giving speeches and participating in conferences, it’s quite common that folks on the left will attempt to discredit my views by asserting that Americans are selfish and greedy.

Since I’m generally sympathetic to Ayn Rand’s writings, I don’t see anything wrong with people striving to make themselves better off. Moreover, Adam Smith noted back in 1776 that the desire to earn more money leads other people to make our lives better. One of his most famous observations is that, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.”

But, for the sake of argument, let’s accept the premise of my statist friends in Europe and simply look at whether their assertion is correct. Are Americans more selfish and greedy that their counterparts across the ocean?

The most obvious way of testing this proposition is to compare rates and levels of voluntary charity. Selfish and greedy people presumably will cling to their money while compassionate and socially conscious people will share their blessings with others.

So how does the United State compare to other nations? Well, I’m not a big fan of the Organization for Economic Cooperation and Development, but the bureaucrats in Paris are quite good at collecting statistics from member nations and producing apples-to-apples comparisons.

And if you look at rates of “voluntary private social expenditure” among nations, it turns out that Americans are easily the most generous people in the developed world.

Voluntary Social Expenditure in OECD Nations

Wow, people in the United States are so generous that their voluntary giving amounts to 10.2 percent of gross domestic product. The only other nations that even crack 5 percent of GDP are the Netherlands, Canada, and the United Kingdom.

Most of the supposedly compassionate welfare states have dismal levels of charitable giving. Voluntary social expenditure in major European nations such as France, Germany, Italy, and Spain averages less than 2 percent of GDP.

It’s also worth noting that these numbers actually understate the charity gap between Americans and folks from other nations. Economic output in the United States is about 30 percent higher than it is in the rest of the developed world, so charitable giving by Americans actually represents a much bigger slice of a much bigger pie.

Statists might respond by asserting that Europeans express their generosity through the public sector. I reject that comparison since – as I explained when criticizing a Michael Gerson column – it’s wrong to equate government coercion with private charity.

But even if you have the European mindset that government should be a vehicle for redistribution, the OECD numbers show that there’s not much difference between the United States and other developed nations. According to the OECD data, government redistributes 20 percent of GDP in America compared to an average of 21.9 percent of GDP for all OECD nations. And since there’s strong evidence that government redistribution undermines progress in the fight against poverty, I actually wish there was a big gap between America and other nations!

And don’t forget, by the way, that 20 percent of U.S. GDP is a lot more money than 21.9 percent of GDP in other nations, so government in the United States spends more on redistribution, on average, than other OECD governments. Indeed, I’ve already shared healthcare numbers making that same point.

P.S. It’s also worth sharing the data showing that proponents of small government in the United States are far more generous than those who favor a big welfare state.

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A reader from New York has a follow-up question for me.

Referencing a “Question of the Week” from last month, in which I expressed guarded optimism that America could be saved, she wants to know what I would do if things go the wrong way.

In other words, what if things go really wrong and America suffers a Greek-style fiscal collapse? And imagine how bad that might be since there wouldn’t be an IMF or European Central Bank capable of providing bailouts to the United States.

Perhaps because of an irrational form of patriotism, I’m fairly certain that I will always live in the United States and I will be fighting to preserve (or restore) liberty until my last breath.

But I probably would want my children someplace safe and stable, so I’ll answer the question from that perspective.

The obvious first choice is a zero-income tax jurisdiction like the Cayman Islands that is prosperous and reasonably well governed.

But I’m not sure about the long-run outlook for the Cayman Islands, in part because the politicians there have flirted with an income tax and in part because the jurisdiction inevitably would suffer if the United States was falling apart.

So what’s a place that is stable and not overly tied to the American economy.

Then the obvious choice is Switzerland. That nation’s long-run fiscal outlook is relatively favorable because of  modest-sized government and a very good spending control mechanism.

But while Switzerland is not dependent on the U.S. economy, it is surrounded by European welfare states. And I’m fairly certain that nations such as France, Italy, and (perhaps) Germany will collapse before America.

And even though most Swiss households have machine guns and the nation presumably can defend itself from barbarian hordes in search of a new welfare check, Switzerland’s probably not the ideal location.

Estonia is one of my favorite countries, and they’ve implemented some good reforms such as the flat tax. But I worry about demographic decline. Plus, I’m a weather wimp and it’s too chilly most of the year.

Another option is a stable nation in Latin America, perhaps Chile, Panama, or Costa Rica. I haven’t been to Chile, but I’m very impressed by the nation’s incredible progress in recent decades. I have been to Panama many times and it is one of my favorite nations. I’ve only been to Costa Rica two times, but it also seems like a nice country.

The bad news is that I don’t speak Spanish (and my kids don’t speak the language, either). The good news is that Hispanics appear to be the world’s happiest people, so that should count for something.

“G’day mate, we’ve privatized our social security system!”

This brings me to Australia, the country that probably would be at the top of my list. The burden of government spending in Australia is less than it is in the United States.

But the gap isn’t that large. The reason I like Australia is that the nation has a privatized Social Security system (called Superannuation) and the long-run fiscal outlook is much, much better than the United States.

Plus the Aussies are genuinely friendly and they speak an entertaining form of English.

So if America goes under, I recommend going Down Under.

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I’ve shared several horror stories of government incompetence and bureaucratic nonsense as part of my series comparing stupid policies in the United States and United Kingdom.

This has been a neck-and-neck battle, with the United Kingdom recently throwing down the gauntlet with a decision to take kids away from their foster family because the mom and dad didn’t believe in unlimited immigration.

The United States responded by paying to have a bunch of bureaucrats attend a conference so they could learn how to respond to a zombie attack.

I’m not sure which of those decisions wins the prize for government stupidity, but today’s story suggests that it’s time to start chanting “U-S-A, U-S-A.”

After all, surely the United Kingdom can’t surpass the moronic decision by Maryland school bureaucrats to suspend a little boy for pretending his hand was a gun and “shooting” another child.

Here’s all you need to know, as reported by the Washington Examiner, about this laughable – yet nauseating – example of nanny-state political correctness.

Child Hand-Gun

I guess he should play with dolls instead

A Montgomery County elementary school student was suspended for a pretend gunshot… The 6-year-old, who attends Roscoe R. Nix Elementary School in Silver Spring, made a gun with his hands, pointed it at another student and said “pow,” according to Robin Ficker, the boy’s attorney. He was given a one-day suspension, with a conference on the matter planned for Jan. 2, the day students return to school from winter break.

This is not an isolated incident. There are other examples of embarrassing stupidity in America.

Seems like the United States wins this contest for government stupidity.

But, wait, maybe I was blinded by patriotism. Perhaps I wanted America to win and that caused me to overlook equally inane decisions in the United Kingdom.

Indeed, that was the case. Showing that stupidity can reign supreme on both sides of the Atlantic, it turns out that two boys in England were reprimanded for make gun shapes were their hands.

But that’s not all. There have been other idiotic episodes of anti-gun lunacy in the United Kingdom.

And let’s not forget the woman who got in trouble with the police for trying to scare away some thugs by brandishing a knife in her own home.

So I guess that means we still have a tie. In the contest for government stupidity, the United States and the United Kingdom are both winners.

And the citizens of both nations are losers, but let’s not allow that pesky little fact take away from this exciting contest.

P.S. You probably won’t be surprised to learn that Montgomery County is a suburb of Washington, DC. And, as you can see from this map, it is filled with overpaid bureaucrats and lobbyists. Since these are the people imposing so much bad policy on the rest of the nation, at least they’re being consistent and subjecting themselves to foolishness as well.

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Every year, I look forward to the annual releases of both Economic Freedom of the World and the Index of Economic Freedom. With their comprehensive rankings, these two publications enable interested parties to compare nations and see which countries are moving in the right direction.

As an American, I’m ashamed to say that these publications also show which nations are moving in the wrong direction. And the United States ranks poorly by this metric, having dropped from 3rd place to 10th place since 2000 according to Economic Freedom of the World.

The U.S. also has dropped to 10th place in the Index of Economic Freedom, and is now ranked only as a “mostly free” nation.

Some people dismiss these pieces of data because the two rankings are considered to reflect a pro-free market bias.

But the folks at the World Economic Forum surely can’t be pigeonholed as a bunch of small-government libertarians, and the WEF’s Global Competitiveness Report shows the same trend.

The United States took the top spot in the WEF’s Global Competitiveness Index as recently as 2007 and 2008, but then dropped to 2nd place in 2009.

I think Bush bears the full blame for that unfortunate development. But the decline has continued in recent years, and Obama deserves a good part of the blame for the drop to 4th place in 2010.

The U.S. then fell to 5th place last year, in part because of horrible scores for “Wastefulness of Government Spending” (68th place) and “Burden of Government Regulation” (49th place).

Given this dismal trend, I opened the just-released 2012 Report with considerable trepidation. And my fears were justified. The United States has now dropped to 7th place.

Here is some of what was said about America.

The United States continues the decline that began a few years ago, falling two more positions to take 7th place this year. Although many structural features continue to make its economy extremely productive, a number of escalating and unaddressed weaknesses have lowered the US ranking in recent years. …some weaknesses in particular areas have deepened since past assessments. The business community continues to be critical toward public and private institutions (41st). In particular, its trust in politicians is not strong (54th), perhaps not surprising in light of recent political disputes that threaten to push the country back into recession through automatic spending cuts. Business leaders also remain concerned about the government’s ability to maintain arms-length relationships with the private sector (59th), and consider that the government spends its resources relatively wastefully (76th). A lack of macroeconomic stability continues to be the country’s greatest area of weakness (111th, down from 90th last year).

For people who like to look at the glass as being 1/10th full, the U.S. does beat Portugal (116ht place) in the score for macroeconomic stability.

Here are a few additional highlights. Or lowlights might be a better word.

  • The U.S. scores 42nd in property rights, behind Namibia and Uruguay.
  • The U.S. ranks 59th in government favoritism, behind Guinea and Bolivia.
  • The U.S. scores 76th in wastefulness in government spending, behind Mali and Nicaragua.
  • The U.S. also is 76th in the burden of government regulation, behind Kenya and Thailand.
  • The U.S. scores 69th in extent of taxation, behind Gambia and Ethiopia.
  • The U.S. ranks 103rd for total tax rate, behind Greece (!) and Philippines.

Now time for some caveats. The WEF report is based on survey results, for better or worse, and it also probably is best characterized as a measure of the attitudes of the business community rather than an estimate of economic freedom.

Regardless of limitations, though, it is a good publication. As such, it is downright embarrassing to see the U.S. fare so poorly in key indices – particularly when third-world nations score better.

We know that small government and free markets are the keys to prosperity. Bush took us in the wrong direction, however, and Obama is repeating his mistakes.

So don’t be surprised to see the American score decline further as additional reports are issued.

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Welcome Instapundit readers. Thanks, Glenn. Since the declining score in the U.S. is partly due to poor fiscal policy, you may want to peruse this video primer on the size of government.

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Last year, I held an unofficial contest to see whether the United Kingdom or the United States had the dumbest bureaucrats and/or most absurd examples of political correctness.

Since that time, I’ve posted additional examples of gross government stupidity from both sides of the Atlantic. From the United Kingdom, we have these gems.

But American officials have been busy as well, with impressive displays of incompetence and stupidity.

Now it’s time to revisit this contest. The United Kingdom has decided to arrest a man for the horrific crime of shooting some thugs that broke into his home. Here are some details from a column in the Telegraph.

A farm tenant and his wife who were arrested after two suspected burglars were shot at their isolated home had been the victims of a number of robberies. …The man is believed to have grabbed a legally owned gun after they were disturbed by the break-in early yesterday. He is understood to have fired at the intruders who then fled the isolated house at Melton Mowbray, Leics, before calling the police. …The arrested man’s mother said: “This is not the first time they have been broken into. “They have been robbed three or four times. One of them was quite nasty. …the businessman and his wife were arrested on suspicion of causing grievous bodily harm. Four men, understood to be the suspected burglars, were also arrested.

“Arrested on suspicion of causing grievous bodily harm”? Isn’t that the point when confronting criminals?!?

Though I guess we should be happy that the burglars also were arrested. And given the country’s oppressive gun control laws, I’m pleasantly surprised that there are still a few legal guns in the United Kingdom.

But that’s about the only silver lining I can find to this dark cloud.

Moreover, it turns out that the U.K. has a track record of persecuting the innocent. The column mentions outrageous examples.

The case will reignite the debate over a householder’s right to defend his property, which began in the late 1990s after the farmer Tony Martin shot two burglars at his remote Norfolk home. In 1999, Martin fired at Brendan Fearon, 29, and Fred Barras, 16, after they broke into the house in Emneth Hungate. Three shots were fired, Barras was hit in the back and despite escaping through a window died moments later. Martin was convicted of murder and jailed for life, which was reduced on appeal to manslaughter and five years’ jail. In 2009, the millionaire businessman Munir Hussain fought back with a metal pole and a cricket bat against a knife-wielding burglar who tied up his family at their home in Buckinghamshire. Hussain was jailed for two and a half years, despite his attacker being spared prison. Appeal judges reduced the sentence to a year’s jail, suspended. The case prompted David Cameron to announce that home owners and shopkeepers would have the right to protect themselves against burglars and robbers.

I’m glad to see, by the way, that David Cameron is at least saying supportive things about people having the right to self defense. I’ve hammered Cameron for undermining the U.K.’s system of personal retirement accounts, giving taxpayer money to statist environmental groupsincreasing the capital gains taxincreasing the burden of government spending, and whining that it is wrong for people to minimize their tax burdens.

But I also believe in giving credit where it’s due, so I’m glad he wants to change the law. I hope that includes the right to shoot burglars.

That would put the U.K. ahead of Illinois, though that’s a very low bar to clear.

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I’m not a big fan of international bureaucracies, particularly the Paris-based Organization for Economic Cooperation and Development. The OECD, funded by American tax dollars, has become infamous for its support of statist pro-Obama policies.

But I’m a policy wonk, so I’ll admit that I often utilize certain OECD’s statistics. After all, if numbers from a left-wing organization help to advance the cause of liberty, that makes it harder for opponents to counter our arguments.

With that being said, let’s look at some truly remarkable statistics from the OECD website on comparative living standards in industrialized nations. This chart shows average levels of individual consumption (AIC) for 31 OECD countries. There are several possible measures of prosperity, including per-capita GDP. All are useful, but AIC is thought to best capture the well-being of a people.

As you can see from this chart, the United States ranks far ahead of other nations. The only countries that are even close are Luxembourg, which is a tiny nation that also serves as a tax haven (a very admirable policy, to be sure), and Norway, which is a special case because of oil wealth.

At the risk of making an understatement, this data screams, “THE U.S. SHOULD NOT BECOME MORE LIKE EUROPE.”

For all intents and purposes, Americans are about 40 percent better off than their European counterparts, in part because we have less government and more economic freedom.

Yet Obama, with his plans to exacerbate class-warfare taxation and further expand the burden of government spending, wants America to be more like nations that have lower living standards.

And don’t forget European living standards will presumably fall even further – relative to the U.S. – as the fiscal crisis in nations such as Greece, Spain, and Italy spreads to other welfare states such as France and Belgium

Here’s another chart that looks at the G-7 nations. Once again, the gap between the U.S. and the rest of the world is remarkable.

Maybe, just maybe, the United States should try to copy nations that are doing better, not ones that are doing worse. Hong Kong and Singapore come to mind.

Getting there is simple. Just reduce the size and scope of government.

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Normally, I get pessimistic about the future when I think about wasteful spending programs that will drive almost all developed nations into bankruptcy. And America is on that list, by the way, because of our poorly designed entitlement programs.

But sometimes my despair is the result of idiotic political correctness and bone-headed bureaucracy. And for some reason, as shown by these examples, the United Kingdom seems to have a disproportionate share of morons who want to impose bad policy on their fellow citizens.

But I don’t know if any of those horror stories can match this baffling story reported in the Telegraph.

Public Enemy No. 1?

When the chief starter at the London Olympics agreed to fire his pistol to start the races at a school sports day, parents thought it was a wonderful treat for their children. But they did not count on the intervention of health and safety officials from their local council, who ruled that the noise from Alan Bell’s starting pistol would be too frightening for the youngsters. Bizarrely, the local authority instead suggested playing a recording of a starting pistol on an iPod before agreeing to let Mr Bell start the races by sounding a klaxon. …One parent, who did not wish to be named, told a Sunday newspaper: “It was ridiculous. We were told that the children would be distressed by Mr Bell firing his starting pistol. “Anyone who believes they would be frightened by a starting pistol has never experienced the noise at a typical three-year-old’s birthday party. …Norman Gardiner, president of the Pitreavie Amateur Athletics Club in Dunfermline, said the decision was “health and safety gone mad.”

It’s amazing to think that the United Kingdom once ruled half the world, but now produces pencil-neck bureaucrats who think starting pistols are a menace to society.

But we Americans shouldn’t feel superior. We’re traveling down the same path.

My initial instinct is that we should fire the over-paid bureaucrats who generate this kind of nonsense. I admit that such as step might only address the symptom of a politically correct world, but it would be a good start.

(hat tip to my fellow Bulldog Charles Oliver)

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I’ve mocked France on several occasions, and I thought Sarkozy was so bad that I figured (in the long run) the election of Hollande was a step in the right direction.

But in certain ways, France isn’t as bad as the United States.

The New York Times has a big story about French entrepreneurs and investors looking to escape looming class-warfare tax hikes. Here are a few excerpts

Benoît Pous-Bertran de Balanda, the descendant of a French general who fought for the Americans, is trying to help his wealthy countrymen escape what he calls the tyranny of a new Socialist government primed to severely tax the rich. …Well-heeled French citizens are scouring real estate opportunities in neighboring countries like Britain and Switzerland. The United States — particularly New York and Miami— is also drawing French investors looking to pick up rental properties or pieds-à-terre, brokers say. The French buyers most active in recent months are generally looking at properties between $500,000 and $5 million, brokers say. What the French are so concerned about is Mr. Hollande’s campaign vow to tax income over 1 million euros at a 75 percent rate. …it will also raise the tax rate on capital gains to the same level as the tax on ordinary income.

Normally, this type of story would be an excuse for me to write about the Laffer Curve and the foolishness of penalizing success.

But I want to focus instead on the right to emigrate. Specifically, there are two ways in which France has better policy than the United States.

1. France, like almost every other civilized nation, does not have worldwide taxation. So when French citizens move to Switzerland, Hong Kong, or the United States, they pay tax to those nations. But they’re no longer subject to French taxes on this foreign-source income. Sadly, that is not true for overseas Americans, who are subject to tax in the nations where they live AND the IRS. Their only choice, if they want to escape this punitive and unfair form of double taxation, is to give up U.S. citizenship.

2. But when Americans like Eduardo Saverin decide to surrender their passports, they are hit by punitive exit taxes. This is the type of policy normally associated with some of the world’s most odious regimes, such as Nazi Germany and the Soviet Union. France, I am told, is not perfect in this regard, but the tax treatment of people re-domiciling in another country is not nearly so onerous (especially if they go to another EU nation).

I want good tax policy, like the flat tax, regardless of what’s happening in other nations. But it says a lot (and none of it good) when one of the world’s most statist nations has better policy than America.

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Singapore has been in the news because one of the Facebook billionaires has decided to re-domicile to that low-tax jurisdictions.

Some American politicians reacted by blaming the victim and are urging tax policies that are disturbingly similar to those adopted by totalitarian regimes such as the Soviet Union and Nazi Germany.

Maybe they should go on one of their fancy junkets instead and take a visit to Hong Kong and Singapore. Even with first-class airfare and 5-star hotels, taxpayers might wind up benefiting if lawmakers actually paid attention to the policies that enable these jurisdictions to grow so fast.

They would learn (hopefully!) some of what was just reported in the Wall Street Journal.

Facebook  co-founder Eduardo Saverin’s recent decision to give up his U.S. citizenship in favor of long-term residence in Singapore has drawn fresh attention to the appeal of residing and investing in the wealthy city-state and other parts of Asia, where tax burdens are significantly lighter than in many Western countries. …Some 100 Americans opted out of U.S. citizenship in Singapore last year, almost double the 58 that did so in 2009, according to data from the U.S. Embassy in Singapore. …The increase of Americans choosing to renounce their citizenship comes amid heated tax debates in the U.S. Many businesses and high-income individuals are worried…[about]…tax increases in future years.

It’s not just that America is moving in the wrong direction. That’s important, but it’s also noteworthy that some jurisdictions have good policy, and Hong Kong and Singapore are always at the top of those lists.

The Asian financial hubs of Singapore and Hong Kong, on the other hand, have kept personal and corporate taxes among the lowest in the world to attract more foreign investment. Top individual income-tax rates are 20% in Singapore and 17% in Hong Kong, compared with 35% at the federal level in the U.S., according to an Ernst & Young report. The two Asian financial centers have also been praised by experts for having simpler taxation systems than the U.S. and other countries. …The tax codes are also more transparent so that many people don’t require a consultant or adviser.

Keep in mind that Hong Kong and Singapore also avoid double taxation, so there’s nothing remotely close to the punitive tax laws that America has for interest, dividends, capital gains, and inheritances.

One reason they have good tax policy is that the burden of government spending is relatively modest, usually less than 20 percent of economic output (maybe their politicians have heard of the Rahn Curve!).

No wonder some Americans are shifting economic activity to these pro-growth jurisdictions.

“The U.S. used to be a moderate tax jurisdiction compared with other countries and it used to be at the forefront of development,” said Lora Wilkinson, senior tax consultant at U.S. Tax Advisory International, a Singapore-based tax services firm that specializes in U.S. taxation laws. Now “it seems to be lagging behind countries like Singapore in creating policies to attract business.” She said she gets at least one query per week from Americans who are interested in renouncing their citizenship in favor of becoming Singaporeans. …Asian countries offer a business climate and lifestyle that many find attractive: “America is no longer the Holy Grail.”

That last quote really irks me. I have a knee-jerk patriotic strain, so I want America to be special for reasons above and beyond my support for good economic policy.

But the laws of economics do not share my sentimentality. So long as Hong Kong and Singapore have better policy, they will grow faster.

To get an idea of what this means, let’s look at some historical data from 1950-2008 on per-capita GDP from Angus Maddison’s database. As you can see, Hong Kong and Singapore used to be quite poor compared to the United States. But free markets, small government, and low taxes have paid dividends and both jurisdictions erased the gap.

Wow, America used to be 4 times richer, and that huge gap disappeared in just 60 years. But now let’s look at the most recent data from the World Bank, showing Gross National Income for 2010.

It’s not the same data source, so the numbers aren’t directly comparable, but the 2010 data shows that the United States has now fallen behind both Hong Kong and Singapore.

These charts should worry us. Not because it’s bad for Hong Kong and Singapore to become rich. That’s very good news.

Instead, these charts are worrisome because trend lines are important. Here’s one final chart showing how long it takes for a nation to double economic output at varying growth rates.

As you can see, it’s much better to be like Hong Kong and Singapore, which have been growing, on average, by more than 5 percent annually.

Unfortunately, the United States has not been growing as fast as Hong Kong and Singapore. Indeed, last year I shared some data from a Nobel Prize winner, which showed that America may have suffered a permanent loss in economic output because of the statist policies of Bush and Obama.

What makes this so frustrating is that we know the policies that are needed to boost growth. But those reforms would mean less power for the political class, so we face an uphill battle.

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I’m glad that China has taken some steps away from communism. According to Economic Freedom of the World, China was one of 10-worst nations for economic liberty back in 1980 and they’ve since climbed to 92nd place out of 141 nations.

I’ve even offered a small bit of praise for China’s shift to a more business-friendly environment, and I was greatly amused when the head of China’s sovereign wealth fund mocked the Europeans for destructive welfare state policies.

That being said, 92nd place is still a very anemic rank, far below the first- and second-place jurisdictions, Hong Kong and Singapore.

So I was flabbergasted when Andy Stern, a former union boss and long-time Obama ally, wrote a column for today’s Wall Street Journal praising the efficiency and vitality of China’s planned economy.

You probably think I’m pulling your leg and/or deliberately misrepresenting what he wrote, but his article was titled “China’s Superior Economic Model.”

And just in case you think that’s the fault of editors and he couldn’t possible say such a thing, let’s look through the piece.

He starts off praising the goals of China’s latest five-year plan.

The aims: a 7% annual economic growth rate; a $640 billion investment in renewable energy; construction of six million homes; and expanding next-generation IT, clean-energy vehicles, biotechnology, high-end manufacturing and environmental protection—all while promoting social equity and rural development. Some Americans are drawing lessons from this. Last month, the China Daily quoted Orville Schell, who directs the Center on U.S.-China Relations at the Asia Society, as saying: “I think we have come to realize the ability to plan is exactly what is missing in America.”

Gee, that sounds so uplifting and inspirational. But there’s one tiny problem. China is still a very poor country. Here’s a chart showing the 2010 data from the World Bank.

Maybe I’m a crazy free-market ideologue, but I’d rather copy the Singapore or Hong Kong economic model.

But if I can’t choose one of those Asian tigers, I’ll stick with the U.S. system. Americans, after all, are about six times better off than the Chinese. Heck, China is still behind Albania.

Mr. Stern then writes about the supposed failures of “free-market extremism” in the United States.

The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic. …This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism. As painful and humbling as it may be, America needs to do what a once-dominant business or sports team would do when the tide turns: study the ingredients of its competitors’ success.

Since this is a pro-family blog, I won’t repeat the inappropriate words that came out of my mouth upon reading these passages.

Instead, I’ll simply call your attention to this post, which shows how America’s score in the Economic Freedom of the World ranking declined during the past decade. Indeed, the United States was among the five nations with the biggest declines over that 10-year period and the United States dropped from 3rd to 10th during those years.

If that was a period of “free-market fundamentalist” policies, then I guess I need to start cheering for socialism.

I’ll conclude by doing one of my favorite things – quoting myself. Here’s a bit of what I wrote last year.

China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom – which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. And the growth they have experienced certainly has not been enough to overtake other nations based on measures that compare living standards. …This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. …But China still has a long way to go if the goal is a vibrant and rich free-market economy.

I’ve probably exhausted everyone’s interest in this topic, but if anyone’s a glutton for punishment, I was part of a debate on English-language Russian TV about Chinese and American economic policy.

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At a basic level, my attitude on patriotism is captured by this t-shirt. And hold the snarky comments. My view is not influenced by the woman modeling it.

Or, if you want something with more substance, this Penn & Teller routine is very instructive.

But this polling data, taken from a recent report from the Pew Research Center, captures what is great about American exceptionalism.

When I periodically express my patriotic feelings, I am celebrating my happiness that I live in a nation where a majority of people still favor liberty over dependency.

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Even though the unwashed masses decided that I didn’t win my stimulus debate in New York City, I continue my fight for the hearts and minds of the American people.

I’m now taking part in a debate for U.S. News & World Report on “Who Is Handling Its Debt Crisis Better: United States or Europe?”

This was a tough question. I asked the organizer whether I could vote none of the above, but I was told I had to pick an option.

As you can see, I said the United States was doing a better job – but only by default.

Our long-run outlook is grim, but at least we still have time to reform the entitlement programs and save America… The only major difference is that European nations are farther down the path to fiscal collapse. The welfare state was adopted earlier in Europe and government spending among euro nations now consumes a staggering 49 percent of economic output. This heavy fiscal burden, especially when combined with onerous tax systems, helps explain why growth is anemic. …the United States still can turn things around. Greece, Italy, and other welfare states have probably passed the point of no return, but it’s still possible for American lawmakers to fix the entitlement crisis by turning Medicaid over to the states , modernizing Medicare into a premium-support system, and transitioning to a system of personal retirement accounts for younger workers. If those reforms don’t take place, the consequences won’t be pleasant. To be blunt, there won’t be an IMF to bail out the United States.

For all intents and purposes, I contend that America can be saved if something like the Ryan budget is approved.

You can vote on this page on whether you like or dislike what I said, as well as what the other participants said.

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I’ve previously blogged about the declining status of the United States, as measured by objective sources such as the Economic Freedom of the World Index and the World Economic Forum’s Global Competitiveness Report.

My attitude about these developments is to sarcastically say, “Thanks for nothing, Bush and Obama.”

But the real insult to injury is that America is dropping even according to indices created by left-wing groups.

The Tax Justice Network is a bunch of crazy Euro-socialists (no snarky comments about redundancy, please), and they specialize in seeking to undermine tax competition in order to make it easier for government to impose class-warfare taxes and expand the burden of government.

One of their projects in a “Financial Secrecy Index,” in which they identify the supposedly bad jurisdictions that have strong human rights policies on financial privacy. The TJN crowd hates privacy since it makes it difficult for greedy governments to track – and tax – flight capital.

Anyhow, these statists issued their first Index in 2009 and I’m proud to say the United States came in first place, presumably because of our pro-growth policies to attract foreign investment and the business-friendly incorporation laws in states such as Delaware and Nevada.

But now, as you can see, we’ve dropped to 5th place in the 2011 Index.

I confess, though, that I didn’t bother to read the accompanying report, so perhaps changes in methodology account for America’s decline in the rankings.

Regardless, it can’t be a positive sign that the United States is losing its status – particularly when we need more investment to counter the negative impact of the Bush-Obama policies.

One can only hope that there will be changes that lead to America claiming the top spot when the next Index is released.

By the way, for more information about the value of tax competition and financial privacy, click this link.

And here’s a link to a British politician, Dan Hannan, who understands what is at stake.

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

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

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

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

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

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

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

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Last week, we compared a bone-headed display of incompetence by the German government with a perverse form of harassment by a local government in the United States.

We have another America-v-Europe contest, but the roles are reversed. This time, the buffoons in Washington get dinged for a spectacular screw-up, and it is a local government in England that earns ridicule for a brainless decision.

Let’s start in America, where a Virginia newspaper has the gory details, including this excerpt.

They are the two ships no one wanted, almost constantly embroiled in one dispute or another for the past 25 years. The two Navy behemoths have never gone on a mission, were never even completed, yet they cost taxpayers at least $300 million. Now the vessels, the Benjamin Isherwood and the Henry Eckford, are destined to leave Virginia waters for good and be scrapped at a Texas salvage yard, with no money coming back to the U.S. Treasury.

Isn’t that wonderful. A $600 million disbursement of tax dollars, getting absolutely nothing in exchange. Though I suppose that’s better than some other federal expenditures that have negative rates-of-return.

Now let’s turn to the United Kingdom, where a local government put a keep-off-the-grass sign on a plot of grass so small that it would be a challenge for two people to stand in it. Here are the key passages from a Daily Mail story.

It’s a patch of scruffy grass barely big enough to sit down on – but that hasn’t stopped one town hall making a great deal of fuss about it. The verge measures only 3ft by 2ft but has its own ‘Keep Off The Grass’ sign. The warning has appeared as officials plan £70million of cuts. Resident Tom Beardmore, 29, said he was ‘flabbergasted’ when he saw it in Raynes Park, south-west London. …A council spokeswoman said the matter was being looked into but was unable to confirm how much the sign had cost or why it was placed there.

Maybe I’m just being jingoistic, but I think the Brits win this contest. Yes, the American government flushed a lot more money down the toilet, but there is something truly breathtaking about what happened in London.

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Somebody just sent me a story from the UK-based Daily Telegraph about two little boys who got in trouble for playing army at school. You may think I’m joking, but here’s a blurb from the report.

Staff at Nathaniel Newton Infant School in Nuneaton, Warwickshire, reprimanded the two boys after they were seen making pistol shapes with their fingers. Teachers broke up the imaginary classroom shoot-out and contacted the youngsters’ parents, warning them that such behaviour would not be tolerated. …Parenting groups condemned the school’s reaction to the children’s game of soldiers… Margaret Morrissey, founder of the family lobby group Parents Outloud, said: “It is madness to try to indoctrinate children aged seven with political correctness in this way. “Children have played cowboys and Indians like this for generations and it does them absolutely no harm whatsoever.” …The case follows a string of similar incidents in which children’s playtime activities have been curbed by overzealous staff over health and safety concerns. Earlier this year, a Liverpool school banned youngsters from playing football with anything other than sponge balls amid fears youngsters might get hurt. Research last month also found that one in six British schools had banned conkers over concerns of pupils being hit in the face. Other traditional playground games such as British bulldog and even leapfrog are prohibited at 30 per cent 10 per cent of schools respectively, a study by the Association of Teachers and Lecturers union found.

This is mind-boggling stupidity and jaw-dropping political correctness, and my first instinct was to wonder how a nation that once ruled much of the world has descended to such a pathetic level.

Then I wondered whether, as an American, I was guilty of throwing stones in a glass house. There certainly have been lots of dumb examples of political correctness in the UK.

These surely are laughable examples of bureaucracy run amok. But is the United States any better, given these examples?

I’m not sure which country produces more stupidity, but we can safely conclude that governments do stupid things in all countries.

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Greetings from Montreux, Switzerland, on the shores of Lake Geneva. There aren’t many places where palm trees are framed by snow-capped mountains. Heck, even I managed to take a decent photo.

But let’s shift back to the world of public policy. Every time I’m in Switzerland, my admiration for the country increases. Here are five ways Switzerland is better than the United States.

1. The burden of government spending is lower in Switzerland. According to OECD, the public sector consumes only 33.1 percent of economic output in Switzerland, compared to 41.1 percent of GDP in the United States.

2. Switzerland has genuine federalism, with the national government responsible for only about one-third of government spending. The United States used to be like that, but now more than two-thirds of government spending comes from Washington.

3. Because of a belief that individuals have a right to control information about their personal affairs, Switzerland has a strong human rights policy that protects financial privacy. In the United States, the government can look at your bank account and does not even need a search warrant.

4. Switzerland has a positive form of multiculturalism with people living together peacefully notwithstanding different languages and different religions. In the United States, by contrast, the government causes strife and resentment with a system of racial spoils.

5. Gun ownership is pervasive in Switzerland, and the Swiss people value this freedom. Moreover, how can one not admire a nation where all able-bodied males have fully automatic rifles in their homes? To be sure, the United States is very good by world standards in protecting this freedom, so the  Swiss don’t really have an advantage on this issue, but it’s still worth mentioning.

Notwithstanding my admiration for Switzerland, there are five reasons why I don’t plan on expatriating.

1. I’m not rich and don’t particularly see how I will get rich anytime soon. Switzerland is not a cheap place to live.

2. It would be very time-consuming and expensive to go to Georgia Bulldog games, and I doubt the games would be on TV.

3. Speaking of sports, the Swiss share the disturbing European propensity to follow soccer.

4. It’s not warm enough.

5. Even though it’s considered a bit uncouth among some libertarians, I do have certain patriotic impulses. I’m not about to surrender my nation to the plundering thieves from Washington.

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I prefer the Fraser Institute’s Economic Freedom of the World over the Heritage/WSJ Index of Economic Freedom, not because I’m an expert on the methodology of the two publications, but for the simple reason that I assume Economic Freedom of the World must be slightly more accurate because, unlike the Heritage Index,  it showed the U.S. score declining during the Bush years.

That being said, the Index of Economic Freedom is my favorite Heritage Foundation publication. It is a first-rate collection of data and analysis on international economic policy trends. Today, however, the latest version of the Index was released and it brings us bad news about the United States.

America’s score dropped by 0.2. Combined with what happened to other nations, that dropped the United States down to 9th place. Lots of fascinating material in the report. The very solid scores for Chile and Estonia (both just outside the top 10) are especially noteworthy. And a special shout out to North Korea for easily beating Cuba and North Korea for the last prize honor.

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Thanks to decades of reckless spending by European welfare states, the newspapers are filled with headlines about debt, default, contagion, and bankruptcy.

We know that Greece and Ireland already have received direct bailouts, and other European welfare states are getting indirect bailouts from the European Central Bank, which is vying with the Federal Reserve in a contest to see which central bank can win the “Most Likely to Appease the Political Class” Award.

But which nation will be the next domino to fall? Who will get the next direct bailout?

Some people think total government debt is the key variable, and there’s been a lot of talk that debt levels of 90 percent of GDP represent some sort of fiscal Maginot Line. Once nations get above that level, there’s a risk of some sort of crisis.

But that’s not necessarily a good rule of thumb. This chart, based on 2010 data from the Economist Intelligence Unit (which can be viewed with a very user-friendly map), shows that Japan’s debt is nearly 200 percent of GDP, yet Japanese debt is considered very safe, based on the market for credit default swaps, which measures the cost of insuring debt. Indeed, only U.S. debt is seen as a better bet.

Interest payments on debt may be a better gauge of a nation’s fiscal health. The next chart (2011 data) shows the same countries, and the two nations with the highest interest costs, Greece and Ireland, already have been bailed out. Interestingly, Japan is in the best shape, even though it has the biggest debt. This shows why interest rates are very important. If investors think a nation is safe, they don’t require high interest rates to compensate them for the risk of default (fears of future inflation also can play a role, since investors don’t like getting repaid with devalued currency).

Based on this second chart, it appears that Italy, Portugal, and Belgium are the next dominos to topple. Portugal may be the best bet (no pun intended) based on credit default swap rates, and that certainly is consistent with the current speculation about an official bailout.

Spain is the wild card in this analysis. It has the second-lowest level of both debt and interest payments as shares of GDP, but the CDS market shows that Spanish government debt is a greater risk than bonds from either Italy or Belgium.

By the way, the CDS market shows that lending money to Illinois and California is also riskier than lending to either Italy or Belgium.

The moral of the story is that there is no magic point where deficit spending leads to a fiscal crisis, but we do know that it is a bad idea for governments to engage in reckless spending over a long period of time. That’s a recipe for stifling taxes and large deficits. And when investors see the resulting combination of sluggish growth and rising debt, eventually they will run out of patience.

The Bush-Obama policy of big government has moved America in the wrong direction. But if the data above is any indication, America probably has some breathing room. What happens on the budget this year may be an indication of whether we use that time wisely.

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After being in 1st place in 2007 and 2008, America dropped behind Switzerland in the World Economic Forum’s Global Competitiveness Report in 2009. The 2010 ranking was just released, and the United States has tumbled two more spots to 4th place, behind Switzerland, Sweden, and Singapore. I’m not a complete fan of the World Economic Forum’s methodology (the Economic Freedom of the World rankings are the best measure of sound economic policy), but it’s almost surely a bad sign when a country moves down in the rankings.  The timing of the fall will lead some to blame Barack Obama, and I certainly agree that his policies are making America less competitive, but Bush also deserves blame for increasing the burden of government and compromising America’s economic vitality. Here’s a blurb from the Associated Press.
The U.S. has slipped down the ranks of competitive economies, falling behind Sweden and Singapore due to huge deficits and pessimism about government, a global economic group said Thursday. Switzerland retained the top spot for the second year in the annual ranking by the Geneva-based World Economic Forum. It combines economic data and a survey of more than 13,500 business executives. Sweden moved up to second place while Singapore stayed at No. 3. The United States was in second place last year after falling from No. 1 in 2008.

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The news that China has surpassed Japan as the world’s second-largest economy has generated a lot of attention. It shouldn’t. There are roughly 10 times as many people in China as there are in Japan, so the fact that total gross domestic product in China is now bigger than total gross domestic product in Japan is hardly a sign of Chinese economic supremacy. Yes, China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom – which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. And the growth they have experienced certainly has not been enough to overtake other nations based on measures that compare living standards. According to the World Bank, per capita GDP (adjusted for purchasing power parity) was $6,710 for China in 2009, compared to $33,280 for Japan (and $46,730 for the U.S.). If I got to choose where to be a middle-class person, China certainly wouldn’t be my first pick.

This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. Better to have $6,710 of per capita GDP than $3,710. But China still has a long way to go if the goal is a vibrant and rich free-market economy. The country’s nominal communist leadership has allowed economic liberalization, but China is still an economically repressed nation. Economic Freedom of the World ranks China 82 out of 141, just one spot above Russia, and the Index of Economic Freedom has an even lower score, 140 out of 179 nations.

Hopefully, China will continue to move in the right direction. As Jonah Goldberg notes in his Townhall column, it is good for America to have China become a more prosperous nation.

Yes, technically, China’s gross domestic product is now slightly ahead of Japan’s. But GDP is a gross statistic. It doesn’t tell you nearly as much as you might think. In a very real way, China is still poorer than Japan. It’s also poorer than Tunisia, Ecuador, Gabon, Kazakhstan and Namibia. …China still has enormous problems, many of which aren’t reflected in its GDP growth rates, and without democracy, a free press and the rule of law, we can’t know what all of the problems are until they explode (and neither can the Chinese). But all of this misses the most important point. Economic “competitiveness” is a con. It assumes that when other countries prosper, America loses. That’s nonsense. If the average Chinese worker were as rich as the average Japanese worker, it would be an economic windfall for the United States. Conversely, if China’s economy imploded tomorrow, we would “gain” competitively but suffer economically. The cult of competitiveness is just a ruse used to justify the ambitions of economic planners and the pundits who worship them.

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A writer for the Atlantic (or perhaps an editor in charge of headlines) is so clueless about world affairs that he lists America as one of the world’s most-authoritarian nations. As someone who is constantly criticizing government, I certainly have no objection to strong rhetoric when describing the misguided policies of the federal government. But I also like to put everything in context and recognize that the United States is still one of the best places for people who value freedom. That may be damning with faint praise, but relative rankings matter. And so when someone at the Atlantic asserts that we are more authoritarian than Libya, Russia, Venezuela, and Cambodia, I don’t know whether to laugh or cry.


The fundamental problem with the article is that it uses some maps put together by Esquire that simply show nations that impose the death penalty and nations that allows gays to serve in the military. It is quite reasonable to argue that the United States has the wrong approach on those issues. To argue that the American position on those two issues someone makes us worse than 178 other countries is borderline nuts. The Atlantic writer basically acknowledges that point in the article, which brings us back to who was in charge of the headline?

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Barack Obama and Angela Merkel are the two main characters in what is being portrayed as a fight between American “stimulus” and European “austerity” at the G-20 summit meeting in Canada. My immediate instinct is to cheer for the Europeans. After all, “austerity” presumably means cutting back on wasteful government spending. Obama’s definition of “stimulus,” by contrast, is borrowing money from China and distributing it to various Democratic-leaning special-interest groups.
 
But appearances can be deceiving. Austerity, in the European context, means budget balance rather than spending reduction. As such, David Cameron’s proposal to boost the U.K.’s value-added tax from 17.5 percent to 20 percent is supposedly a sign of austerity even though his Chancellor of the Exchequer said a higher tax burden would generate “13 billion pounds we don’t have to find from extra spending cuts.”
 
Raising taxes to finance a bloated government, to be sure, is not the same as Obama’s strategy of borrowing money to finance a bloated government. But proponents of limited government and economic freedom understandably are underwhelmed by the choice of two big-government approaches.
 
What matters most, from a fiscal policy perspective, is shrinking the burden of government spending relative to economic output. Europe needs smaller government, not budget balance. According to OECD data, government spending in eurozone nations consumes nearly 51 percent of gross domestic product, almost 10 percentage points higher than the burden of government spending in the United States.
 
Unfortunately, I suspect that the “austerity” plans of Merkel, Cameron, Sarkozy, et al, will leave the overall burden of government relatively unchanged. That may be good news if the alternative is for government budgets to consume even-larger shares of economic output, but it is far from what is needed.
 
Unfortunately, the United States no longer offers a competing vision to the European welfare state. Under the big-government policies of Bush and Obama, the share of GDP consumed by government spending has jumped by nearly 8-percentage points in the past 10 years. And with Obama proposing and/or implementing higher income taxes, higher death taxes, higher capital gains taxes, higher payroll taxes, higher dividend taxes, and higher business taxes, it appears that American-style big-government “stimulus” will soon be matched by European-style big-government “austerity.”
 
Here’s a blurb from the Christian Science Monitor about the Potemkin Village fiscal fight in Canada:

This weekend’s G-20 summit is shaping up as an economic clash of civilizations – or at least a clash of EU and US economic views. EU officials led by German chancellor Angela Merkel are on a national “austerity” budget cutting offensive as the wisest policy for economic health, ahead of the Toronto summit of 20 large-economy nations. Ms. Merkel Thursday said Germany will continue with $100 billion in cuts that will join similar giant ax strokes in the UK, Italy, France, Spain, and Greece. EU officials say budget austerity promotes the stability and market confidence that are prerequisites for their role in overall recovery. Yet EU pro-austerity statements in the past 48 hours are also defensive – a reaction to public statements from US President Barack Obama and G-20 chairman Lee Myung-bak, South Korea’s president, that the overall effect of national austerity in the EU will harm recovery. They are joined by US Treasury Secretary Tim Geithner, investor George Soros, and Nobel laureate and columnist Paul Krugman, among others, arguing that austerity works against growth, and may lead to a recessionary spiral.

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Americans should not get too smug about the troubles in Europe because the Bush-Obama policies of wasteful spending are bringing us down the same path. The latest evidence comes from a well-researched article about personal income in USA Today showing that the share from private paychecks fell to a record low and the share from government handouts reached a record high. As Veronique de Rugy of the Mercatus Center points out in her quote, this is the pattern that led to fiscal disaster in Greece:

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds. At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010. …The result is a major shift in the source of personal income from private wages to government programs. The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says. …Economist Veronique de Rugy of the free-market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs. Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism. “People are paid for being rather than for producing,” he says.

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I think it is very nice when left-wing groups help make the case for pro-market policies A recent example is a report from the Center for International Policy, which wants to demonize so-called tax havens, but their report shows that the United States is actually the biggest beneficiary of tax haven policies, with more than $2 trillion of non-resident deposits in American financial institutions (the Cayman Islands is in second place, with $1.55 trillion of deposits compared to $2.18 trillion in the U.S.). This augments a report from another left-wing group, which found that Delaware is the world’s best tax haven. In other words, America’s tax haven policies (sadly, only available to non-resident aliens) are enormously beneficial to U.S. financial markets, which means capital that boosts investment and job creation. It’s also worth noting that even non-U.S. tax havens benefit the American economy. As this Treasury Department chart illustrates, Caribbean banking centers have about $2 trillion invested in the U.S. economy. The left-wing groups would like to destroy tax competition and set up a global tax cartel, sort of an “OPEC for politicians,” but the numbers they report underscore how important it is for American policymakers to preserve the open flow of capital and why tax havens are great news for the U.S. economy. Which is exactly what we argued in our video on the Economic Case for Tax Havens.

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Saw this very encouraging CNN story linked on Hotair.com. According to a new poll, a comfortable majority of Americans recognize that the federal government is an immediate threat to the rights and freedoms of ordinary people. My only quibble is that we’re way past the threat stage. Between an oppressive tax system and a dependency-creating morass of spending programs, the federal government already is undermining our liberties. Our Founding Fathers would be very disappointed to see what has happened to our nation:

A majority of Americans think the federal government poses a threat to rights of Americans, according to a new national poll. Fifty-six percent of people questioned in a CNN/Opinion Research Corporation survey released Friday say they think the federal government’s become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens. …According to CNN poll numbers released Sunday, Americans overwhelmingly think that the U.S. government is broken – though the public overwhelmingly holds out hope that what’s broken can be fixed.

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Since many of the politicians want America to be more like Europe (including full government-run healthcare), it’s worth contemplating what that would mean for the economy. America today is richer than Western Europe. Indeed, per-capita living standards are about 30 percent higher in the United States – and that’s according to the statists at the Paris-based Organization for Economic Cooperation and Development (see page 6 of this report). And we have been growing faster, which presumably should not be the case according to convergence theory (see Annex Table No. 1 of this OECD database). It also seems that Europe’s economy is more likely to endure a double-dip recession. Bloomberg reports:

Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending. After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. …“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” …“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” Nelson said in a Feb. 23 report… “The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.

Irwin Stelzer, meanwhile, writes in the Washington Examiner about the same topic:

Europeans are comparing their close-to-zero growth rate in the last quarter of 2009 with our almost-6 percent growth. …We are growing and they are not. …Large numbers of shops in London are shuttered, students see no prospect of work when they graduate, and businessmen are groaning under rising tax burdens.

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The United States may not have the freest economy in the world. And America may not be the best place to live. But we do have the most hotties, at least according to a poll of British travelers that was linked on Instapundit. Having done a bit of travel myself, I’d put Estonia at the top of the list for those who prefer blondes and Montenegro for those who prefer brunettes. But what do I know? Here’s a report on the survey from the Daily Telegraph:

The United States, home to George Clooney and Jessica Simpson, came top in a poll of more than 5,000 globe-trotting Britons. In second place was Brazil while Spain, which boasts Hollywood actress Penelope Cruz as one of its natives, was third. Blonde, tanned surfers of Australia saw it voted into fourth place, while Italy came fifth. Sexy Swedes, such as model Victoria Silvstedt, helped it into sixth spot, but England only made it into seventh place in the poll. India was eighth, France ninth, and Canada finished off the top 10. …A spokeswoman for www.OnePoll.com, which carried out the study, said: ”America has got a lot on offer and boasts some of the sexiest people on the planet.

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