But neither one of those policies are popular, so the President largely ignored them during his state-of-the-union address and instead focused on using the tax code to promote “fairness.”

But fairness doesn’t mean treating everyone equally by adopting a flat tax. Instead, it means a class-warfare policy of higher tax rates.

The President’s home state of Illinois is a good test case of this approach. The politicians rammed through a big tax increase early last year, supposedly to stabilize state finances.

Unfortunately, Obamanomics isn’t working very well in Illinois. The state just got downgraded by Moody’s and ranks below even California.

The most damning evidence, though, is what’s happened to the job market. Unemployment is still far too high across the nation, but the vast majority of states are seeing at least modest improvement.

But a tiny handful of states, led by Illinois, are moving in the wrong direction. Here’s a very powerful chart produced by the Illinois Policy Institute. The tax hike is about one-year old, and we’re already seeing strong evidence that jobs are fleeing the state.

Now close your eyes and envision a different map. Instead of American states, imagine a map of the world. And think what it will look like if Obama succeeds in imposing all the tax increases he had endorsed.

I suppose it won’t look as bad as this map because there are plenty of other nations engaging in suicidal tax policy. But it doesn’t take a vivid imagination to understand that Obama’s class-warfare approach would drive jobs and investment to the nations with better tax policies.

This is the Laffer Curve in action, and it’s happening again in France, only this time because the government reduced the wealth tax.

Here’s part of the story at Tax-news.com.

France’s solidarity tax on wealth (l’impôt de solidarité sur la fortune – ISF), which was radically reformed by the government in June last year, has served to yield much greater fiscal revenues for the state than initially predicted. …the government agreed that the solidarity tax on wealth would in future comprise of only two tax brackets: a 0.25% tax rate imposed on individuals with net taxable wealth in excess of EUR1.3m (USD1.7m), and a 0.5% tax rate levied on individuals with net taxable assets above EUR3m. Previously, the entry threshold at which wealth tax was applied was EUR800,000, with the rates varying between 0.55% and 1.8%. To alleviate any threshold effects, a discount mechanism was also instated applicable to wealth of between EUR1.3m and EUR1.4m, as well as to wealth of between EUR3m and EUR3.2m. Although the new provisions provide for lower tax rates and for the abolition of the first tax bracket, effectively exempting around 300,000 taxpayers from the tax, according to latest government figures, the tax yielded around EUR4.3bn in 2011, almost EUR60m more than originally forecast in the collective budget.

This is not to say that France is an example to follow. There shouldn’t be any wealth tax, and income tax rates are still far too high.

And it’s also worth remembering that tax policy is just one of many factors that determine economic performance.

That being said, nations that shift from terrible tax policy to bad tax policy will enjoy better economic performance, just as nations that go from good policy to great policy also will reap benefits.

In other words, incremental changes make a difference. That’s even the case when the politicians impose a “Snooki tax” on indoor tanning services.

The most dramatic Laffer Curve effects, though, occur when there are big changes in policy. This video looks at some of the evidence.

This video is part of a three-part series, by the way. Click here if you want to see the entire set.

I was disgusted when he criticized Paul Ryan’s entitlement reforms.

But I’m not sure what my reaction is to Newt’s latest brain fart. For lack of anything clever, let’s just say I’m bemused by his proposed galactic boondoggle.

Here are some of the absurd details for a Politico report.

Newt Gingrich wants to colonize the moon. …“By the end of my second term, we will have the first permanent base on the moon and it will be American,” Gingrich said… It’s just the kind of Gingrich big-think for which he has been ridiculed by others in the GOP field, including Mitt Romney. But Wednesday’s speech — which Gingrich himself called “grandiose” — could actually resonate politically in Florida, where space exploration is good politics… Gingrich even envisions a moon state. “When we have 13,000 Americans living on the moon, they can petition to become a state,” he said, drawing laughter from the crowd. …But Gingrich’s space fantasies don’t stop at the moon. He wants to see trips to Mars by 2020. “By the end of 2020, we will have the first continuous propulsion system in space capable of getting to Mars in a remarkably short time because I am sick of being told we have to be timid and I am sick of being told we have to be limited in technologies that are 50 years old,” he said.

But I’m not just bemused. To use Newt’s rhetoric, I am sick of politicians coming up with new ways to spend my money and I am sick of being told by the clowns in Washington that my wallet is a pinata to fund their grandiose dreams.

If Newt likes space travel and wants a base on the moon and trips to Mars, then he should take some of the money he “earned” as Freddie Mac’s “historian” and invest it in a space company.

About 10 days ago, I was in the British Virgin Islands, speaking at a conference that was keynoted by Sir Richard Branson of the Virgin empire. Branson is doing what Newt wants, but in an ethical fashion. He’s using private money to set up a profit-making space-travel business.

Too bad politics and ethics are mutually exclusive concepts.

With that taken care of, let’s look at some new political humor.

The Ron Paul people win the award for the most intensity. So even though this almost surely isn’t real, it’s funny because it could be true.

Speaking of photos, here’s one that probably is real, featuring the Secretary of State. I dug it out of my voluminous collection of political humor.

And if you like poking fun at members of the Obama Administration, here’s one last bit of satire for you.

But I can’t help but get agitated that this behemoth global bureaucracy wants more money when it has a dismal track record of promoting, enabling, and subsidizing bigger government.

Here’s a brief blurb from the Wall Street Journal, which shares my skepticism.

The IMF’s Christine Lagarde delivered a speech in Berlin Monday warning that, without dramatic action, the world risked another Great Depression. …”We estimate a global potential financing need of $1 trillion,” she said. “To play its part, the IMF would aim to raise up to $500 billion in additional lending resources.” …Perhaps an IMF managing director with sound ideas about what makes an economy grow might deserve a raise. The first thing such a director would demand would be to cut the Fund’s size in half, not double it.

The WSJ’s editors are right to criticize the IMF. The folks in charge at the international bureaucracy, depending on the circumstances, have a nasty habit of supporting Keynesian spending and class-warfare tax hikes.

Let’s look at two very recent news reports to prove this point.

Our first example is from Europe, where there’s a discussion of how to address the fiscal crisis. Remarkably, the IMF has staked out a position to the left of Germany, arguing that more government spending will boost growth in Europe. Consider these excerpts from a Washington Post article.

Germany, the economic engine of Europe, is afraid it could get stuck paying much of the cost to bail out its weaker European neighbors. It is pushing instead for budget cuts, which the IMF says could weaken growth further and undermine market confidence. The IMF is already lending to the region’s bailout fund and has a lead role in monitoring the progress that nations such as Greece make in reducing their government deficits. Germany, meanwhile, is also a large contributor to the bailout fund. …If Europe doesn’t take several steps recommended by the IMF, such as reducing its emphasis on budget cuts, the 17 nations that share the euro could contract at a much faster pace, the fund said. That could possibly plunge the rest of the world into recession.

This is remarkable. One would think that the past three years have proven, once and for all, that Keynesian spending is a sedative rather than a stimulus. Yet the IMF thinks recessions are caused by smaller government.

We have another story that is equally upsetting. IMF bureaucrats get tax-free salaries, yet they frequently urge governments to impose higher taxes. And they have a very troubling habit of undermining tax reform.

Here’s a blurb from a Bloomberg report.

The International Monetary Fund may require Hungary to change its flat personal income tax as part of a bailout agreement, according to a person familiar with the Washington-based lender’s preparations for the talks. The flat tax will be an important part in any program discussion, said the person, who declined to be identified because official talks haven’t started. The IMF is in general opposed to flat-tax systems.

I’ll confess that I’m not overly sympathetic to Hungary’s plight. The government is in a mess because it keeps overspending.

But if the IMF is going to foolishly provide a bailout, wouldn’t it be better if the bureaucrats made the money contingent on implementing good policy rather than bad policy?

Unfortunately, the IMF has a bad track record on tax reform, as I’m constantly reminded when talking to officials in Eastern Europe. Indeed, one of my early posts on this blog was about the IMF’s attempt to sabotage the Latvian flat tax.

People have a right to be statist, but the question we have to decide is whether American taxpayers should subsidize that destructive mindset. Not surprisingly, I say no. Indeed, the IMF may even be worse than the OECD, another international bureaucracy that promotes a statist agenda.

I’m biased, of course, so I’ll understand if you discount what I say. But I hope you’ll agree that my colleagues have put together an excellent video response to the President’s state-of-the-union speech.

As part of my contribution to the video, beginning around 6:35, I debunk the President’s class-warfare tax agenda by citing IRS data from the 1980s to explain that higher tax rates don’t necessarily mean higher tax revenue.

After a night’s sleep, here are a few additional observations on the President’s remarks.

• I was disappointed, but not surprised, that he repeated the economically foolish assertion that Warren Buffett pays a lower tax rate than his secretary.
• I also was not surprised that he didn’t say much about jobs and the economy. These four charts show he doesn’t have much to brag about.
• It was also noteworthy that he didn’t spend much time talking about Obamacare, which suggests that White House pollsters understand that government-run healthcare isn’t very popular.
• It was equally revealing that he didn’t spend much time on the so-called income inequality issue. Redistribution was implicit in what he said, to be sure, but the Occupy-Wall-Street crowd is probably disappointed that he didn’t explicitly embrace their agenda. More evidence that the pollsters played a big role in this speech.
• I’m definitely not surprised that he talked about eliminating Osama bin Laden. Kudos to the Commander-in-Chief.
• I was amazed that he had the gall to say “no bailouts,” particularly given his support for TARP, the Dodd-Frank bailout bill, and the giveaway to GM and the auto unions. And if the GM bailout is supposed to be a success, I’d hate to see his definition of failure.
• And I was stunned that he could talk about the housing meltdown and mortgage crisis without mentioning the Federal Reserve, Fannie Mae, or Freddie Mac. Sort of like analyzing World War II and pretending Germany and Japan didn’t exist.

Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax?

I even was a bit disappointed in Governor Daniels’ remarks. He focused a lot on means-testing for entitlements, but that’s the wrong way of reforming the programs. Such policies impose higher implicit marginal tax rates on people who save and invest during their working years.

If we’re going to reform entitlements, do it the right way.

As I’ve previously explained, that pledge is a necessary tool in our battle to restrain the burden of government spending.

But the people at ATR also have a good sense of humor, the latest example of which is the Bingo game they’ve developed for tonight’s State-of-the-Union speech.

They’ve put together five cards, each containing buzzwords that Obama is almost sure to use in his remarks. As you can see from the example I’ve included, don’t be surprised if someone wins within the first five minutes of the speech.

On a more serious note, I’ll be live-blogging the President’s address tonight, along with several of my colleagues. You can follow along at Cato-at-Liberty, starting about 9:00 EST.

We don’t know, of course, what the President will say tonight. But based on press reports, this would be my response.

During a discussion about tax reform, he attacked Newt Gingrich for the supposed crime of not wanting to double tax capital gains. Here’s how Politico reported the exchange.

Newt Gingrich joked about Romney’s 15 percent tax rate, saying: “I’m prepared to describe my flat tax as the Mitt Romney flat tax.” Romney jumped in to ask: Do you tax capital gains at 15 percent or zero percent? Gingrich’s answer: Zero. “Under that plan, I’d have paid no taxes in the last two years,” Romney said, alluding to the fact that all his income is from investments.

Romney’s remarks are amazingly misguided. Getting rid of the capital gains tax doesn’t result in a tax rate of zero. It simply means that there is no second layer of tax on top of the punitive 35 percent corporate income tax.

I’ve had to correct Warren Buffett when he makes this mistake. One would think, though, that GOP presidential candidates would have a better understanding of taxation.

In addition to being wrong on policy, Romney also is politically tone deaf. By demagoguing against Gingrich’s tax plan, he lends credibility to the dishonest claims that his personal tax rate is “too low.”

In a column for today’s Wall Street Journal, John Berlau and Trey Kovacs of the Competitive Enterprise Institute explain how the GOP candidates should deal with this issue.

The former Bain Capital CEO and Massachusetts governor caused a brouhaha last week when he estimated the tax rate on his investment income at 15%. “How unfair!” pundits exclaimed, noting that the top marginal rate for wage income is more than 30%. The tax rate on investors is unfair, but for the opposite reason. Our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges is one of the highest in the world. …This double taxation brings the effective tax rate on investment income to as much as 44.75%. In other words, after the combined top tax rates hit $100 of corporate income, $55.25 remains for the investor. And this figure doesn’t even include various state and local taxes, or the death tax. Moreover, like the rest of us, Mr. Romney paid income taxes before investing… Mr. Romney and other presidential candidates should use the opportunity of releasing their tax returns to make an important policy statement. They should include not only their individual returns, but information about the taxes their corporations pay. …In this way the candidates can help explode the myth of the U.S. as a low-tax nation. As Cato Institute tax experts Chris Edwards and Daniel J. Mitchell write in their book, “Global Tax Revolution,” while the U.S.’s “overall tax burden . . . is lower than in many other nations,” the country “imposes more punishing taxes on savings and investment than many advanced economies.” The most popular tax reforms—from the “9-9-9 plan” of former candidate Herman Cain to flat tax proposals—all have in common the reduction or elimination of double taxation on investment. …If the traditional disclosure of tax returns is elevated into a “teachable moment” about the burdens of double taxation, all Americans could be winners.

The authors are very kind to reference the book Chris and I wrote, but I mostly like this article because it does such a good job of explaining double taxation.

I made many of the same points in my video on capital gains taxation.

And keep in mind that the capital gains tax isn’t indexed for inflation, so the rate of double taxation in many cases is far higher than these estimates suggest.

As illustrated by this chart, double taxation is a serious self-inflicted barrier to American growth and competitiveness. Too bad Republicans are too short-sighted to address this issue intelligently.

I posted this video making fun of libertarians, for instance, because it is genuinely funny. People like me, I will confess, sometimes are so allergic to government that we do things that make us easy targets for satire.

Well, here’s a video parody of Mitt Romney and the Cayman Islands, obviously designed to resemble the Corona beer commercials. I’m not impressed.

My tepid reaction is not because I recently defended Romney’s use of Cayman-based investment vehicles.

Indeed, here’s an old video attacking tax havens, and I think it’s sufficiently amusing that I just uploaded it onto my Youtube channel because it’s worth sharing and I couldn’t find it online.

Both of these leftist videos make silly and inaccurate points, but the anti-Romney video is simplistic and the entire premise is false. He’s not hiding anything. Intelligent satire uses the truth as a starting point. This video doesn’t.

The anti-Cheney video, by contrast, has some big mistakes, but at least it is based on the accurate premise that companies legally try to reduce their taxes. Moreover, the Jimmy Buffett music is a nice touch.

Since I’ve share a couple of anti-tax haven videos, I feel compelled to post one of mine for some balance. And since I recently posted my video on the economic case for tax havens, here’s my video on the moral case for tax havens.

And if you want to really understand these issues, I humbly suggest you look at the paper I wrote for the UK-based Adam Smith Institute.

Last month, for instance, I made fun of the Post for asserting that Germany was “fiscally conservative.”

I also mocked the Post last March, when a reporter hysterically claimed that a proposal to trim $6 billion from a $3,600 billion budget would “slash” government.

Today, I want to analyze a column by Jonathan Alter.

Entitled “Five Myths about Barack Obama,” it’s in the opinion section, where people are supposed to present a point of view.

So I’m not going to complain about bias, but I am going to disagree about some of his judgments. Here are the five supposed myths, along with my two cents on whether Alter is correct.

Myth 1. Obama is a socialist.

I basically agree with Alter. As I explained two years ago, a true socialist wants “government ownership of the means of production.” To be sure, most self-avowed socialists today have given up on that goal and instead focus on redistribution. And since Obama also is a redistributionist, I understand why people call him a socialist. Nonetheless, it is much more accurate to call him a statist or corporatist.

Myth 2. Obama is a tool of Wall Street.

Alter is right and wrong. Obama is pursuing policies that Wall Street doesn’t like, such as class-warfare tax hikes. On the other hand, he supported the TARP bailout and pushed for the Dodd-Frank bailout legislation that was supported by Goldman-Sachs and the other big players on Wall Street.

Myth 3. Obama is an effective public speaker.

I’m not sure what to say about this assertion. I don’t find his pedantic ramblings effective or persuasive, but I’m not the target audience.

Myth 4. Obama’s stimulus failed.

This is Alter’s most absurd assertion. To bolster his claim, he cites a handful of institutions that have Keynesian models, including the laughably inaccurate crowd at the Congressional Budget Office. Wow, what a revelation. Keynesians support Keynesianism. What’s next, a poll of Obama campaign staff showing that people support the President’s reelection? Read this post for a good explanation of how Keynesianism has failed.

Myth 5. Obama is a weak leader.

This isn’t my area of expertise, but I mostly agree with Alter’s assessment. For better or worse (and you know how I feel), the President put everything on the line to enact Obamacare. That was bad for the nation, but I suppose it required effective leadership.

In closing, the Washington Post does deserve some credit for having diversity on the opinion page. Yes, Alter’s column has a leftist perspective, but the paper routinely carries people like George Will, Robert Samuelson, and Charles Krauthammer.

That doesn’t excuse the Post for displaying bias in news articles, as I mentioned above, but I think it’s better than the New York Times (damning with faint praise).

Lastly, it’s worth noting that the Post’s editorials are dogmatically statist (though it does support Postal Service privatization, perhaps because that affects the paper’s bottom line).

The economic illiterates in the press sometimes say the fight in Europe is between austerity and Keynesianism, but that’s not accurate. It’s really a battle between those who think big government should be financed by taxes and those who think big government should be funded by taxes and debt.

And it doesn’t help that the supposedly conservative governments in places such as Spain, Germany, France, and the United Kingdom are run by statists.

The good news is that some people understand the real problem. The bad news is that they generally don’t live in Europe. Writing for the Australian, Professor Judith Sloan cites the Rahn Curve as she explains the need to reduce the size and scope of the public sector.

Here’s some of what she included in her article.

The real question that a number of European and other countries should be asking themselves is this: what should be the role of government in terms of providing an environment for economic prosperity and security? There is absolutely no doubt that the size of the public sector and the intrusion of government have grown to excessive proportions in a number of these countries. A pervading sense of entitlement – on the part of retirees, welfare recipients, parents, university students, public servants and others – has been encouraged by these governments, but now threatens to block reform. …What is required is a complete rethink of the role of government. …According to the Rahn curve, the rate of economic growth initially increases with government spending (as a proportion of gross domestic product). Establishing and funding a quality judicial system, defending a country, ensuring the safety of citizens, funding (but not necessarily providing) some basic services: these are legitimate functions of government. But beyond a certain point (about 20-25 per cent of GDP) long-term economic growth tends to fall as government spending rises. This is the zone – well above 25 per cent in most instances – in which EU countries find themselves. …There are a number of reasons why the size of government really matters. After all, government spending has to be paid for by taxes, and almost all taxes reduce rewards for effort. …Moreover, government spending is often not subject to rigorous cost-benefit analysis in the same way private spending is.

To be fair, some people in Europe understand this issue, including economists at the European Central Bank who recently produced a study finding that, “…using a long time span running from 1970-2008, and employing different proxies for government size… Our results show a significant negative effect of the size of government on growth.”

And Swedish economists also have acknowledged the negative relationship between government spending and economic performance, writing that, “…there is a negative correlation between total government size and growth. It appears fair to say that an increase in total government size of ten percentage points in tax revenue or expenditure as a share of GDP is on average associated with an annual lower growth rate of between one-half and one percentage point.”

But these are lonely voices in Europe.

I’ve also weighed in on the topic from this side of the Atlantic, having produced this paper when I worked at the Heritage Foundation, and I also narrated this video for the Center for Freedom and Prosperity.

Unfortunately, all this research isn’t having much impact. Only the Baltic nations have done the right thing and reduced spending. The Germans also have been semi-responsible in the past couple of year, though that’s not saying much. And the Swiss were smart enough not to go overboard for big government in the first place.

What about the other European countries? Well, even though their economies are falling behind, their governments are going bankrupt, and their societies are becoming unstable, the politicians in the rest of Europe don’t seem to care about all the real-world evidence.

They’re still spending like there’s no tomorrow. I just hope American politicians won’t be foolish enough to provide a bailout when the house of cards comes tumbling down.

• Using food stamps to buy luxury coffee at Starbucks.
• Buying steaks and lobster with food stamps.
• The Obama Administration rewarding states that sign up more food stamp recipients.
• Proposals to make it easier to use food stamps at fast food restaurants.
• College kids scamming the program for handouts.
• New York City giving food stamps to newly released prisoners and running foreign-language ads encouraging more people to sign up for the program.

As a taxpayer, I get upset about these examples. But as a public policy economist, I’m much more worried about the fiscal and economic impact of the program.

As a human being, though, my primary concern is the way redistribution saps the spirit of self reliance and traps people into lives of dependency. That’s the very first point I make in this debate on CNBC.

By the way, my opponent in the debate is Jared Bernstein, who is infamous for being the co-author of the Obama Administration claim that enacting the s0-called stimulus would keep the unemployment rate from rising above 8 percent.

I’ve had lots of fun mocking that claim. Every couple of months I post Jared’s predictions and compare them to the real-world results.

But it’s important to understand that I’m not blaming him for making bad predictions. After all, economists are lousy forecasters. I blame him for peddling the silly Keynesian theory that bigger government boosts economic performance.

More specifically, I warned that giving more money to government exacerbates fiscal problems because politicians respond to the expectation of more revenue by spending more than otherwise would be the case. And since they usually over-estimate how much revenue a tax hike will generate, that creates an even bigger fiscal mess.

Not surprisingly, I cited Europe to bolster my case. The tax burden has increased enormously in Europe over the past several decades, but that obviously hasn’t prevented a fiscal crisis in nations such as Greece and Portugal. And tax hikes haven’t precluded deteriorating conditions in countries such as Belgium and France.

But I also cited Illinois, which just got downgraded by Moody’s – even though state politicians just imposed a record tax hike.

This caused some angst for a lefty blogger in Illinois, who wrote that, “Operational spending is down since the Illinois tax hike.”

I gather he thinks this is some sort of gotcha moment, but two sentences later he admits that, “If Illinois hadn’t increased its taxes, it would’ve had to cut $7 billion more from spending to balance its budget.”

In other words, his post confirms my point about higher taxes translating into higher spending. He openly admits that the tax hike was a substitute for spending restraint.

What makes his concession so remarkable is that my argument wasn’t even based on one-year fiscal decisions. I”m much more concerned with trend lines, and you can see from the chart that Illinois politicians have been promiscuously profligate in recent years.

Indeed, I developed “Mitchell’s Golden Rule” to underscore the importance of restraining the burden of government so that, over time, it grows slower than the private economy. That obviously hasn’t been happening in Illinois in recent decades – and it’s not likely to happen in future decades if politicians figure out ways of grabbing more revenue.

Speaking of revenue, my accidental friend from Illinois also tries to debunk my point about the Laffer Curve by writing that, “The Commission on Government Forecasting and Accountability has repeatedly said this year that revenues from the tax increase are coming in as the ‘politicians’ expected.”

Well, I don’t know about you, but this is not exactly a rigorous rebuttal. He doesn’t provide a revenue forecast from the pre-tax-hike era or a more recent forecast from the post-tax-hike era, so we can’t make any comparisons. Instead, we’re supposed to blindly accept vague assurances from some Commission.

This doesn’t mean that forecasts don’t exist or that the bureaucrats were wrong about their short-run projections. But that’s not the main issue. The key question is what will happen to revenue over a period of years, particularly once entrepreneurs, investors, and businesses have time to adjust their behavior in response to the more onerous tax regime.

The changes can be enormous, as demonstrated in this post showing how rich people paid five times as much federal income tax after Reagan cut the top tax rate from 70 percent to 28 percent.

It will take a few years before we have a decent idea about the consequences of the Illinois tax hike. But since Illinois is copying European-style fiscal policy, don’t be too surprised if the result is European-style economic malaise.

Some of the obvious ideas include:

• Lowering tax rates to boost incentives for productive behavior.
• Reducing the burden of government spending to allow more efficient allocation of labor and capital.
• Cutting back regulation and red tape to boost market efficiency.

But those are only obvious ideas if you want a growth plan that actually leads to…(drum roll, please)…more growth.

Merkel and Sarkozy must have some other objective in mind, because they’ve proposed a plan comprised of new taxes, higher taxes, and tax harmonization.

This is beyond satire. Even if I was trying to make fun of the French and Germans (perish the thought), I wouldn’t be able to make up something this absurd.

Here’s some of what the EU Observer reported.

A six-point plan drafted by France and Germany has suggested corporate tax “co-ordination,” an EU financial transactions tax and the re-deployment of EU funds in troubled countries as ways to spur growth and jobs. …Paris and Berlin have teamed up once more and drafted a six-page paper called “Ways out of the crisis – strengthen growth now!” …The financial transactions tax – a pet project of French President Nicolas Sarkozy ahead of his re-election bid in April – features among the six proposals under “efforts to reinforce the framework of financial market.” …plans for “tax co-ordination” and another Franco-German proposal to be put forward by end of February on the “convergence of their corporate tax.” “European institutions and member states should accelerate the process of tax coordination in order to foster growth” …Apart from the Tobin tax, both leaders want to speed up EU legislation on an energy tax and a “common consolidated corporate tax base.”

Even Obama is not this blind to reality. He’s a big fan of higher taxes, of course, but at least the President realizes you don’t pass the laugh test if you tell people that higher taxes will “spur jobs and growth.”

Returning to Merkel and Sarkozy, the dynamic duo of statism also have some bizarre ideas on the spending side of the fiscal ledger. Here are a couple of additional passages from the story.

…proposal would have 25 percent of unspent EU regional funds in countries under a bail-out program or under serious economic difficulties redirected to a special “fund for growth and competitiveness.”  …As for employment-boosting measures, one of Sarkozy’s make-or-break campaign themes, the document asks governments to instruct employment agencies to make an offer to every unemployed person – be it for a job, an apprenticeship or further training.

The notion that bureaucrats and politicians can boost prosperity with some sort of “fund for growth and competitiveness” is hardly worth a rebuttal. I’ll just wish them luck as they create European versions of Solyndra.

The other idea, though, is worth a bit more analysis. If the article is correct, the Merkozy twins are going to wave a magic wand and direct employment agencies to make an offer to everybody.

Gee, isn’t that wonderful. While they’re at it, why don’t they turbo-charge the wand and insist that all the offers be for jobs making twice the national wage. With this kind of magical thinking, it’s just a matter of time before 90 percent of the population is part of the top-10 percent.

You may be thinking the previous sentence doesn’t make sense, but that’s probably because you’re one of those crazy libertarians who doesn’t understand how higher taxes boost economic performance.

In previous posts, I’ve expressed some pessimism about the future of Europe. After considerable reflection, I want to retract those statements and instead say that the outlook is hopeless. If you’re reading this from Europe, get out while you still can.

======================================================

P.S. I’ve been reminded that Merkel and Sarkozy are not alone in their crazy theory that higher taxes are good for growth. The geniuses at the Congressional Budget Office have written that higher taxes are good for long-run growth, even to the point of implying that 100 percent tax rates would maximize economic performance.

P.P.S. I’m further reminded that the Congressional Research Service also seems to think that higher taxes increase economic growth. Perhaps German and French spies have taken over Washington?

Every so often, though, I come across a story that is so absurd that it demands attention. Some bureaucrats in Utah, for instance, have decided that it would be inappropriate to use cougars as a school mascot. I’m not joking. Here’s an excerpt.

One Utah school district believes a cougar mascot would be insensitive to women. The Canyons School District overrode the students top choice of a cougar mascot for their high school that is to be completed in 2013. Would-be Corner Canyon High School students chose the Cougars as their mascot — a name principal Mary Bailey said carries an ugly connotation that is disrespectful to women.

My first though was to wonder whether these morons will now assert that Brigham Young University has to change the name of its football team. After all, the BYU Cougars could send the wrong message about inter-generational relationships.

My second thought was to wonder why “cougar” is a disrespectful term. I don’t pretend to know what women think, regardless of their age, but I’m guessing that women in the relevant age ranges would be at least somewhat flattered that young guys find them sexually appealing.

I suppose this is a rather benign form of political correctness, sort of on the same level as the Senate Subcommittee that investigated whether it was insensitive to give Osama bin Laden the code name Geronimo, or the Canadian soccer league that decided that teams with too many goals would lose games.

If we’re going to get upset about PC nonsense, it should be because of actions that actually cause damage to others, such as the school in Florida that suspended a little kid for two years because of a toy gun, or the San Francisco politician who pushed a ban on toys in Happy Meals.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that they weren’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls, but they say it’s the right thing to do because of red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying that higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

But we don’t need to look overseas for examples. Look at what’s happened in Illinois, where politicians recently imposed a giant tax hike.

The Wall Street Journal opined this morning on the results. Here are the key passages.

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois. …Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. …This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that. …And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.

Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind.

1. Higher taxes encourage more government spending.

2. Higher taxes don’t raise as much money as politicians claim.

The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.

The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.

Heck, I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more of our income?

And readers have made this cartoon the most-viewed post in the history of this blog.

Nonetheless, this is definitely worth sharing.

The last line, though, is exactly right. For all intents and purposes, government is legalized plunder.

Sure enough, like the swallows returning to Capistrano, it’s happened. Two hacks at ABC News, Brian Ross and Megan Chuchmach, revealed (brace yourself for a real scoop) that Mitt Romney is a rich guy and some of his investments are based in funds domiciled in the Cayman Islands (gasp!).

Wow, what a revelation! This must be Pulitzer Prize material. Pray tell, what wrongdoing did the story uncover? Well, let’s excerpt the key passages from the article.

Mitt Romney has millions of dollars of his personal wealth in investment funds set up in the Cayman Islands, a notorious Caribbean tax haven. A spokesperson for the Romney campaign says Romney follows all tax laws and he would pay the same in taxes regardless of where the funds are based.  …Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.  …Romney campaign officials and those at Bain Capital tell ABC News that the purpose of setting up those accounts in the Cayman Islands is to help attract money from foreign investors, and that the accounts provide no tax advantage to American investors like Romney. Romney, the campaign said, has paid all U.S. taxes on income derived from those investments. …Bain officials called the decision to locate some funds offshore routine, and a benefit only to foreign investors who do not want to be subjected to U.S. taxes.

You’re probably thinking you missed something, because there’s nothing to the story. But that’s because the reporters don’t have anything. And if you think I excerpted unfairly, feel free to read the whole article.

The only thing you’ll discover is that Ross and Chuchmach are biased hacks. Because not only did they write a story about nothing, they also quoted two left-wingers, Jack Blum and Rebecca Wilson, and failed to give the other side even an inch of column space.

Blum is a former John Kerry staffer who is most famous for making unsubstantiated claims (which he later admitted were fabricated) that tax havens resulted in $100 billion of lost revenue to the Treasury each year.

And Rebecca Wilson works for Citizens for Tax Justice, a union-funded group so radical that even congressional Democrats usually are reluctant to work with them.

But what about the other side of the story?

1. Did the article quote me, since I’ve been working on these issues for more than a decade? No.
2. Did the article quote anybody from the Center for Freedom and Prosperity, the organization most active in the fight to defend low-tax jurisdictions? No.
3. Did the article quote Richard Rahn, the Cato Institute Fellow who was a Board Member of the Cayman Islands Monetary Authority? No.
4. Did the article quote any of the academic scholars who have written about so-called tax havens, such as Jim Hines of the University of Michigan or Andrew Morriss of the University of Alabama? No.
5. Did the article quote Bob Bauman, the former Congressman and offshore expert who serves as Legal Counsel of the Sovereign Society? No.

Fair and competent journalists would have done those things, but not the dynamic duo from ABC News.

Instead, they quote two hard-core lefts. And in a gross display of editorializing, they also referred to the Cayman Islands as a “notorious tax haven.”

Yet what is “notorious” about being a prosperous multiracial society with living standards considerably above American levels?

Moreover, Cayman has a tax treaty with the United States and an overwhelming share of the investment in the jurisdiction is completely legal institutional money – just like the Romney investment funds.

But I guess a place like the Cayman Islands must be bad, at least to biased people from the press. After all, a place with no income taxes, no capital gains taxes, no payroll taxes, and no death taxes must be condemned.

I’m not a Romney fan, as you can see by reading this post, but I believe in honest and intelligent debate. Too bad ABC doesn’t.

Someone has to take the tough assignments

I’m currently in the British Virgin Islands to speak at a conference. As you can see from this photo (taken from my satellite office), I’m having to endure hardship conditions.

But I’m willing to suffer because I believe in making personal sacrifices in the battle for liberty.

As you can probably guess, I’m speaking about tax competition. But I write about that issue so much that there’s no need for me to reiterate my remarks.

Instead, I want to focus on the speech given this morning by Sir Richard Branson, founder and head of the Virgin business empire.

Why does Branson get higher billing than me?!?

Sir Richard is a tax resident of BVI (which is a smart step since there’s no income tax here and the top tax rate in the U.K. is 50 percent), and most of his speech focused on business and development advice for his adopted home.

But he also spent several minutes talking about the damaging and destructive impact of the War on Drugs. And I’m proud to say that he cited data from a Cato Institute report on the successful decriminalization policy in Portugal.

This isn’t the first time he’s mentioned Cato’s work on the issue, by the way. As my colleague Tim Lynch noted last year, Branson also cited the Portugal study in a strong message against the failed War on Drugs that he posted on the Virgin.com website.

I suspect Branson isn’t willing to give up his day job running the Virgin Group, but we’re happy to have him as a volunteer publicist for our studies and the cause of liberty.

Incidentally, he’s not the only one who has commented on this development. The Economist also has noted the positive impact of Portugal’s pro-liberty policy.

And if you want general information on the failed Drug War, check out this story on the complete mis-match between the costs and benefits of prohibition. And here’s a speech by Gov. Gary Johnson on the issue, as well as a video exposing how the War on Drugs is completely ineffective – or even counterproductive.

But at least some U.K. elected officials are willing to stand up for tax competition and fiscal sovereignty by defending low-tax jurisdictions. In previous posts, I’ve applauded Dan Hannan and Godfrey Bloom for great speeches at the European Parliament.

There are also some sensible people in the U.K. Parliament, most notably Mark Field.

Here are some excerpts from an article in the U.K.-based Telegraph.

A conservative MP has spoken out in defence of tax havens and against what he called “a one-sided debate that demonstrates a fundamental lack of understanding of their role in the global financial market”. …In an attempt to balance the “one-sided” debate on international finance centres (IFCs), Mr Field…advised the UK government to think twice before imposing more regulation on these jurisdictions. …In a bid to dismiss the age-old belief that tax havens attract investors purely because of their tax regimes, Mr Field argued that it is a combination of their political stability, familiar legal systems, quality of service, lack of foreign exchange controls, and tax and legal neutrality that make them ideal locations to deposit money.The current financial crisis, he continued, had more to do with poor regulation and mistakes made onshore rather than offshore, and if the EU pressed ahead with its intention to harmonise tax systems across international borders “it could potentially represent the end for healthy tax competition… Tax harmonisation and cooperation, added Mr Field, was simply Brussels-speak for exporting high tax models on continental Europe to low tax jurisdictions.

These issues are just as relevant for the United States, but how many American politicians stand up and defend free markets and jurisdictional competition as a means of restraining the political predators in Washington?

I’m re-posting my video on The Economic Case for Tax Havens below, for those who haven’t seen it. But I also want to call your attention to this chart from the Treasury Department.

You’ll have to click and enlarge it. You’ll see that it shows the amount of capital invested in America from various parts of the world. The “C” category shows that more money is invested in America via Caribbean banking centers such as the Cayman Islands than from any other source.

And this is just one type of foreign investment. As I’ve explained elsewhere, foreigners have more than $10 trillion invested in the U.S. economy, in part because the United States is a tax haven for foreign investors.

So when Obama climbs into bed with the Europeans to push a global network of tax police, he’s pushing policies that ultimately will do great damage to American competitiveness.

Let’s close by returning to the original theme of wise and astute Englishmen. If you want a good defense of tax competition and tax havens, read what Allister Heath wrote last year.

Or maybe I could have used it during the Greek riots, since it captures the entitlement mentality of that nation’s looters and moochers.

But why limit ourselves. In the spirit of togetherness and unity, let’s say it applies to all statists.

All you need to realize is that these people think that somebody else will always be there to pick up the tab.

Which is why these class-warfare cartoons (here, here, here, and here) are funny, in a tragic sort of way.

As is this cartoon if you want to understand the economics of redistribution.

My arguments have included:

• Explaining that this onerous regulatory scheme will result in capital fleeing to other nations, needlessly harming the financial sector and putting American banks at risk.
• Explaining why the proposal is a threat to human rights since many foreigners keep money in the United States because they live in nations with unstable and/or repressive governments.
• Explaining that the IRS action is a gross abuse of the regulatory process since an executive branch agency does not have the authority to overturn laws enacted as part of the democratic process.
• Explaining that this proposed regulation is just the beginning, and that proponents hope to issue follow-up rules that would cripple policies making America a haven for global capital.

But these points don’t seem to matter to the Obama Administration, which is ideologically committed to the anti-tax competition agenda of Europe’s welfare states. This is why the White House supports all sorts of destructive policies, including not only this misguided regulation, but also the creation of something akin to a world tax organization that will have power to block free-market tax policy.

A new article in the Weekly Standard explains what’s at stake.

Early last year the Treasury Department published its “Guidance on Reporting Interest Paid to Nonresident Aliens,” which would require banks to report to the Internal Revenue Service the interest paid to foreign depositors with a U.S. bank account. While the Treasury and the regulatory apparatus insist that the cost and inconvenience of adhering to this regulation is next to nothing, the rule may cost the U.S. banking system hundreds of billions of dollars in lost deposits, in turn costing our economy billions of dollars, while providing no discernible benefit to banks, depositors, taxpayers, or the U.S. economy. …a much bigger problem—for banks and the economy—than the compliance costs is the threat of a massive capital flight. The United States is a very popular place for foreigners to park their savings, for a variety of reasons. For starters, we offer a stable government that can be trusted to keep its hands off deposits—something that appeals greatly to residents of Venezuela, Argentina, Ecuador, and any number of other unstable countries. …As a result, a staggeringly large amount of savings from abroad is currently held in U.S banks. While the Treasury asserts that “deposits held by nonresident alien individuals are a very small percentage of the [total] deposits held by U.S. financial institutions,” that very small percentage amounts to more than $3.7 trillion, according to a 2011 Bureau of Economic Analysis report, hardly a pittance. The massive amount of foreign savings here is a boon to the U.S. economy. Banks lend against these deposits, mainly to companies here in the United States. Jay Cochran, an economist at George Mason University, studied the impact that the more limited 2002 reporting requirements would have had on the banking system, estimating that it would have resulted in nearly $100 billion in deposits leaving the U.S. banking system. A reporting regulation that covers all foreign accounts would likely result in two to three times more capital flight. The impact would be harmful not just for the banks but for the broader economy. The decline in profits in the banking sector alone from a roughly quarter-trillion-dollar capital flight would be in the range of $5-10 billion—which makes a mockery of the notion that the costs of the regulation are under $100,000.

For more information about this wretched proposal, here’s a video I narrated on the topic.

To put it bluntly, the Obama Administration is pushing this regulation because it thinks the anti-tax competition agenda of Europe’s welfare states is so important that it is willing to risk the health of the American economy, undermine the soundness of U.S. financial institutions, disregard the rule of law, and abuse the regulatory process.

Indeed, this proposal is even worse than the increasingly infamous Foreign Account Tax Compliance Act.

And that’s saying something, because with each passing day, it is more and more obvious that FATCA is a destructive law that will significantly harm the American economy. But at least it’s a law, one that was approved by Congress and signed by the President. And the costly FATCA regulations being developed by the IRS are for the purpose of enforcing the law.

The interest-reporting IRS regulation is also costly and destructive, to be sure, but what makes it so perverse is that it is – at best – completely gratuitous. It is being advanced solely for reasons of ideology, regardless of the law and consequences be damned.

One of my key points was that the VAT is a money machine for big government.

But don’t believe me. Look at Japan, where the politicians see increases in the VAT as a way of financing a much larger burden of government spending. Here’s some of what is being reported by Bloomberg.

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015… Japan’s finances are “getting worse and worse every day, every second,” Takahira Ogawa, Singapore-based director of sovereign ratings at S&P… Japan’s aging population is also weighing on Noda’s struggle to achieve fiscal health. Social-security expenses have more than doubled in two decades and will account for 52 percent of general spending for the year starting in April, according to a budget proposal the cabinet approved last month.

The key point in this excerpt is that the VAT is a substitute for entitlement reform. Without the VAT, politicians might actually reform the welfare state. But because of the VAT, they want to take the easy (but extremely destructive) route and boost the tax burden.

This is why I get so agitated about the threat of a VAT in America, as illustrated by this recent appearance on Larry Kudlow’s show.

By the way, you won’t be surprised to know that the fiscal pyromaniacs at the International Monetary Fund support a bigger tax burden in Japan. Here’s another passage from the Bloomberg story.

The International Monetary Fund has said a gradual increase of Japan’s sales tax to 15 percent “could provide roughly half of the fiscal adjustment needed to put the public-debt ratio on a downward path.”

Isn’t it nice that we give these international bureaucrats big tax-free salaries so they can run around the world pushing for bailouts and higher taxes.

I almost didn’t write that post. Some things, after all, presumably don’t require a response. Would I waste my time, for instance, responding to someone who claimed that Milton Friedman was a communist?

But sometimes it’s necessary to counter absurd arguments, precisely so they don’t gain a foothold among otherwise sensible people.

That’s why it’s time to write about the economics of a wealth tax.

And I’m doing this because Ronald McKinnon, an economics professor at Stanford University, recently wrote a column for the Wall Street Journal entitled “The Conservative Case for a Wealth Tax.”

I could make this post very short and simply note that there is no conservative (or libertarian) case for higher taxes, period. But let’s use this opportunity to explain the economic impact of taxing wealth.

Professor McKinnon starts out with a very sensible point about the foolishness of higher income tax rates.

…any attempt to impose higher marginal tax rates on even moderately high income earners—as President Obama wants for families earning more than $200,000 per year—can lead to losses in economic efficiency and even to losses in sorely needed government revenue if high earners work less or seek out more loopholes and tax shelters.

I particularly like his point about potential revenue losses. For all intents and purposes, he is saying the Laffer Curve is very strong for those with high income – a point I have made in previous blog posts.

Unfortunately, he then forgets this good analysis and urges a tax on wealth.

In order to have a fairer tax system, we should implement a new federal wealth tax in addition to the federal income tax. Unlike the current income tax, the wealth tax would not rely on how income is defined. Rather, it would require that households list all their domestic and foreign assets on, say, Dec. 31 in the relevant tax year. …If on Dec. 31 a household declares total net assets of $5 million, and the “standard” wealth tax exemption is $3 million, then its wealth tax is $60,000 ($2 million x 0.03). Because wealth will generally present a much larger tax base than income, tax rates can be kept low and still raise substantial revenue. The incentive for tax avoidance is minimal—unlike the incentive created by a high marginal income-tax rate of 40% or more for earners paying both federal and state income taxes.

There are two big problems with McKinnon’s analysis. First, he wants us to believe a 3 percent tax on wealth won’t hurt the economy, but he apparently doesn’t understand that a wealth tax is actually a tax on the returns to capital.

Do we want rich people to create future growth with investment, or do we want to encourage them to engage in lavish consumption instead?

Let’s use a simple example. Imagine that I’m a rich person with $100 million that I’ve accumulated over the years. And let’s further assume that I’m a savvy investor. Even though the economy is weak, I manage to get a 5 percent return on my capital, so my $100 million is now worth $105 million.

But Uncle Sam wants to grab $3 million because of a new wealth tax. That is akin to a 60 percent tax rate on my new wealth!

And don’t forget that the IRS will probably be grabbing some portion of that additional wealth because of income taxes, capital gains taxes, and double taxation of dividends.

Here’s the bottom line: The wealth tax is really a tax on saving and investment. And the tax rates are likely to be very high.

Indeed, if the economy is sour and portfolios are growing at less than 3 percent, the tax rate can be more than 100 percent!

You don’t have to be a wild-eyed supply sider to conclude that there may be some negative effect on incentives to save and invest.

Heck, even if there is a bull market and portfolios are expanding at 15 percent, the tax rate is still 20 percent. And keep in mind all the other layers of tax that would still exist, so the effective marginal tax rate will still be punitive.

The second problem with McKinnon’s analysis is that he acknowledges big evasion and avoidance problems caused by 40 percent income tax rates, but he somehow assumes those problems will disappear if we impose a wealth tax.

Indeed, he even references the infamous FATCA legislation. But that legislation is a disaster, imposing crippling burdens on overseas Americans and driving investment out of the American economy. If that’s an indication of how a new wealth tax would be enforced, then we can all look forward to a turbo-charged IRS with even more powers to wreck our lives and disrupt our economy.

In reality, evasion, avoidance, and punitive economic costs are inevitable when taxes become too onerous. Professor McKinnon wants us to think that the costs can be reduced with a wealth tax. He’s right that some forms of taxation do less damage than others, but his proposal would make things worse, not better.

The only potentially good thing about his plan (and I admit that I’m motivated by pettiness) is that it would tax hypocritical leftists such as Warren Buffett, who argue for higher income tax rates, secure in the knowledge that they will be largely unaffected.

But I’m not willing to hurt the economy just to go after a handful of rich and dishonest statists. My goal is to create a more prosperous economy to help the less fortunate.

============================================

Cows and Government

Socialism

Is this the hope or the change?

You have two cows. The government takes one and give one to your neighbor.

Communism

You have two cows. The government takes them both and promises you milk but you starve.

Fascism

You have two cows. The government takes them and sells you the milk.

Bureaucracy

You have two cows. The government takes them both, shoots one, milks the other, pays you for the milk, and then pours it down the drain.

Capitalism

You have two cows. You sell one and buy a bull.

Bain Capitalism

You have two cows. You sell one, force the other to produce the milk of four cows and then act surprised when it drops dead.

Redistributionism

You have two cows. The government taxes you to the point that you must sell them both in order to support someone else who already got a free cow from the government.

==============================================

As you can imagine from my previous posts, I think the Romney dig was a good touch.

Here’s a different version.

==============================================

A CHRISTIAN:

You have two cows. You keep one and give one to your neighbor.

A SOCIALIST:

You have two cows. The government takes one and gives it to your neighbor.

A REPUBLICAN:

You have two cows. Your neighbor has none. So what?

A DEMOCRAT:

You have two cows. Your neighbor has none. You feel guilty for being successful. You vote people into office who tax your cows, forcing you to sell one to raise money to pay the tax. The people you voted for then take the tax money and buy a cow and give it to your neighbor. You feel righteous.

A FASCIST:

You have two cows. The government seizes both and sells you the milk. You join the underground and start a campaign of sabotage.

A CAPITALIST:

You have two cows. You sell one, buy a bull, and build a herd of cows.

==============================================

Here’s a final version. It’s perhaps mildly un-PC, like this joke about terrorism alerts.

==============================================

A FRENCH CORPORATION:

You have two cows. You go on strike because you want three cows.

A JAPANESE CORPORATION:

You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.

A GERMAN CORPORATION:

You have two cows. You re-engineer them so they live for 100 years, eat once a month, and milk themselves.

AN ITALIAN CORPORATION:

You have two cows but you don’t know where they are. You break for lunch.

A RUSSIAN CORPORATION:

You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 12 cows. You stop counting cows and open another bottle of vodka.

A SWISS CORPORATION:

You have 5000 cows, none of which belongs to you. You charge for storing them for others.

A TALIBAN CORPORATION:

You have two cows. You turn them loose in the Afghan “countryside” and they both die. You blame the godless American infidels and the Jews.

AN INDIAN CORPORATION:

You have two cows. You worship them.

============================================

Last but not least, this joke about bureaucracy is a good way to close.

• President Obama says he wants higher tax rates for fairness, even if the government doesn’t collect any revenue.
• Rich leftists say they want higher taxes because they can afford to pay, but then refuse when offered a chance to cough up some cash.
• Elizabeth Warren supports higher taxes because government made it possible for rich people to succeed.
• Warren Buffett wants a big tax hike because…well, because he’s bad at math.
• Some leftists support higher taxes because they assume that rich people obtained money dishonestly.
• The New York Times wants higher taxes on the rich in order to enable higher taxes on the middle class.
• The President said higher tax rates are acceptable because sometimes “you have made enough money.”

I suppose leftists deserve credit for being adaptable. Just about anything is an excuse for soak-the-rich tax hikes. The sun is shining, raise taxes! The sky is cloudy, increase tax rates!

But if there was an award for the strangest argument in favor of higher taxes, it would probably belong to a group of academics who have concluded that “progressive” tax systems make people happier.

I’m not kidding. There’s a new study making that assertion. Here are some passages from an announcement by the Association for Psychological Science.

…a new study comparing 54 nations found that flattening the tax risks flattening social wellbeing as well. “The more progressive the tax policy is, the happier the citizens are,” says University of Virginia psychologist Shigehiro Oishi, summarizing the findings, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science. …Well-being was expressed in people’s assessments of their overall life quality, from “worst” to “best possible life,” on a scale of 1 to 10; and in whether they enjoyed positive daily experiences (such as smiling, being treated with respect, and eating good food) or suffered negative ones, including sadness, worry, and shame. …The degree of progressivity was measured by the difference between the highest and lowest tax rates, corrected for such confounding factors as family size, social security taxes paid, and tax benefits received by individuals. The results: On average, residents of the nations with the most progressive taxation evaluated their own lives as closer to “the best possible.”

The actual study isn’t available yet, but the release from APS screams junk science – especially since a study of American states found that high taxes lead to unhappiness.

But we should be skeptical of all this research. There are myriad pitfalls, including cultural differences.

But the most obvious problem is causality. Even if we assume it’s possible to make accurate cross-border comparisons of happiness, is there any reason to think that progressive tax rates are a causal factor, one way or the other? Heck, we may as well assume that crowing roosters cause the sun to appear.

Here’s one very obvious guess about what may cause the APS results. I’m guessing that people in Sweden and Denmark say they are happy. That’s not too surprising. They live in rich countries. But those countries became rich before the welfare state began and before high tax rates became the norm. So does it make sense to say they are happy because of high tax rates?

People in Mongolia and Bulgaria, by contrast, probably aren’t as happy as people in the Scandinavian nations. They live in relatively poor nations that suffered from decades of communist enslavement. In recent years, though, both nations implemented flat taxes in hopes of spurring growth and catching up to the rest of the world. But progress doesn’t happen overnight. So does it make sense to say that they are unhappy because the tax system isn’t “progressive”?

Ironically, the APS release does include the following results.

Higher government spending per se did not yield greater happiness, in spite of the well-being that was associated with satisfaction with state-funded services. In fact, there was a slight negative correlation between government spending and average happiness.

Since we do have good evidence that economic growth suffers as government expands, this conclusion makes a lot more sense.

But I’m still skeptical about happiness studies. Seems like they might suffer from the credibility issues associated with global warming research.

Actually, I retract that statement. Happiness research may be imprecise and susceptible to bias, but I doubt people in that field would ever make a claim as absurd as global warming causes AIDS. And I doubt they would try to do something as stupid as rationing toilet paper or create something as silly as a hand-cranked vibrator.

These posts tend to be popular with a lot of readers, you can read more of them here, here, here, here, here, here, here, here, and here.

Jay Leno

• You know the difference between Michele Bachmann, Rick Perry, and Tim Tebow? When God tells Tim Tebow to run, he wins.
• Mitt Romney says he understands the middle class, and that he knows it’s not easy keeping a roof over your family’s heads — as well as vacation roofs in San Diego, New Hampshire, and Park City, Utah.
• In Saturday night’s Republican debate, Jon Huntsman spoke Chinese. Why Chinese? If you want to reach the American people, you’ve got to speak Spanish.
• According to National Enquirer, John Edwards has proposed to his mistress, Rielle Hunter. He gave three reasons for wanting to marry her: He loves her, she’s the mother of his child, and of course, a wife can’t testify against her husband.
• Mitt Romney says President Obama’s promises are like Kim Kardashian’s wedding vows. President Obama shot back. He said Romney’s positions last about half as long as a Kim Kardashian wedding.
• Experts say traffic deaths are down because the bad economy means more cars are being repossessed, and all the unemployment means we don’t have as many people driving to work. So you know what that means? The White House economic plan is also their highway safety plan.
• When Rick Perry was told about Kim Jong Il, he said, “I never heard of him, but then again, I don’t listen to that rap.”

Conan

• Fidel Castro declared that a robot would do a better job as president than Barack Obama. After hearing this, Mitt Romney thanked Castro for his endorsement.
• Mitt Romney is saying his comments about liking to fire people were taken out of context. Yeah, what he actually said was he likes to set poor people on fire.
• Tonight is the new season of “Jersey Shore.” It promises to have all of the name calling, sex scandals, and backstabbing of the Republican primaries.
• Presidential candidate Rick Santorum is under fire for a remark he made in Iowa about black people. The remark has sparked outrage among Iowa’s black community, otherwise known as Steve.
• Mitt Romney has come under fire for his pledge to eliminate federal funding for PBS. Romney said, “When I’m president, the only operated puppet speaking to kids will be me.”

Letterman

• Mitt Romney said that he liked to fire people. Well, there’s a pretty good message to send to Middle America.
• When Rick Perry heard that, he said, “Well that’s nothing. I like to execute people.”
• Jon Huntsman is surging in New Hampshire. And if it lasts longer than four hours, he’d better call a doctor.
• Mitt Romney said that he enjoyed firing people. Way to connect with the middle class there, Mitt.
• Newt Gingrich had a horrible week in the Iowa caucuses. Only 13 percent of his ex-wives voted for him.
• I was at the airport and it is so cold out there that to keep warm, the TSA agents were actually putting their hands in their own pants.
• Newt Gingrich is demanding that judges be arrested. I thought, “Whoa, that’s what two divorces will do for you.”

Craig Ferguson

• I watched the Republican debate. At one point, the candidates said there are no classes in America, a point then hotly debated by all six rich white guys that were there.

Jimmy Fallon

• The national debt has reached $15 trillion — the size of the entire U.S. economy. Yeah, I don’t wanna say President Obama is out of solutions for the debt, but today he tried handing it off to Tim Tebow.
• President Obama met with the Dallas Mavericks to congratulate them on their 2011 NBA Championship. While Joe Biden met with the Globetrotters to congratulate them on that episode of “Scooby-Doo” they did.
• France apparently passed a new law that makes it harder to become a French citizen. Most people just get lazy and give up. At which point they’re named a French citizen.

Jimmy Kimmel

• Herman Cain is back. He’s planning to tour the country in a bus, which sounds like his wife has kicked him out of the house.

And if this doesn’t exhaust your interest in political humor, you can enjoy some good cartoons here, here, here, and here.

Well, the company has backed down. We won. It’s only symbolic, but let’s enjoy a small victory.

Here are some excerpts from a Foxnews.com story.

Daimler AG, the German company that manufactures Mercedes-Benz luxury cars, called its promotional use of an image of Marxist revolutionary Ernesto “Che” Guevara a “thoughtless” and “stupid” decision that was not intended to offend people. …In a statement sent to FoxNews.com, Daimler said it “was not condoning the life or actions of this historical figure or the political philosophy he espoused.”

That’s probably not the most heartfelt and sincere apology ever issued, but it will have a positive impact. Somewhere at Daimler AG, there’s a marketing executive that is going to lose a bonus (and maybe even a job). Other people in the fields of advertising and public relations will have seen the backlash and be much less likely to make similar mistakes.

And perhaps a few people who were ignorant will actually learn a bit about history and begin to understand the evil nature of communism.

I doubt this will have any impact on the empty-headed kids who wear Che t-shirts, but you can’t have everything.

From a personal perspective, the best thing about this episode is that I’ve been attacked by a water-carrying apologist for totalitarianism.

In my line of work, one way to measure whether you’re doing a good job is the degree to which you get criticized by bad people.

Being called a “dickhead” by this tool may be even better than the time a left-wing British columnist called me a “high priest of light tax, small state libertarianism.”

But I welcome converts, even ones that are insincere, so I’m happy he’s at least pretending to want to deal with waste and duplication in the federal budget.

Here’s a blurb from the Daily Beast about his new idea.

President Barack Obama is seeking the power to merge agencies in a bid to shrink the federal government in a sweeping move. Obama will ask Congress to give him authority to consolidate six trade and commerce agencies that have overlapping programs, cutting up to 2,000 jobs and saving $3 billion over 10 years. He’ll call for a vote by Congress within 90 days.

But I’ll definitely wait to see the fine print. After all, the President claimed in 2009 that he was directing his Cabinet to find $100 million of budget cuts.

"I hate pretending to be a fiscal conservative"

But even that trivial gesture (almost immeasurably small compared to t a$3.6 trillion budget) turned out to be empty rhetoric.

And even if he’s serious about this latest plan, $3 billion of saving over 10 years is chicken feed compared to all of his new spending.

But if you allow me to modify an old saying, a journey of tens of trillions of dollars begins with the first $3 billion.

Now we can add something else to the list. He wants to cut off the bottom rungs of the economic ladder and hurt low-skilled workers.

Here are a couple of passages from a report in the Oregonian.

Mitt Romney…continues to be a supporter of indexing the minimum wage for inflation. Oregon and Washington were among the first states to index their own minimum wages to inflation – nine states now do so – and it’s a favorite of liberals… Romney campaigned in favor of indexing the minimum wage when he ran for governor in 2002.  However, ABC News noted in 2007 that he wasn’t sure he supported indexing the federalminimum wage (which is lower than the minimum wage in several states).  In this new video, you could quibble that he doesn’t explicitly say he’s talking about the federal minimum — but that sure seems to be the tenor of his comments.

In other words, Romney is willing to condemn lower-skilled workers to unemployment, in hopes that he will gain some sort of short-term political advantage. In this regard, he will be just like Bush.

For a good explanation of why the government should not try to dictate wages, here’s a video narrated by one of my former interns.

It’s also worth noting that the minimum wage imposes disproportionate damage on the African-American community, as Walter Williams has explained.