My New Sports Hero, Evan Mathis

When I was a little kid, my sports idol was Mickey Mantle.

When I went to college, Herschel Walker was my guy.

Now, I may have to add Evan Mathis to that distinguished list.

Who is Evan Mathis, you ask?

Well, he’s an offensive lineman for the Philadelphia Eagles who played in college for the Crimson Tide of Alabama.

Since I’m a Georgia Bulldog, I wouldn’t normally hold someone from ‘Bama in high esteem – especially since I haven’t stopped sulking since the SEC Championship Game. but when someone does something that merits high praise, I’m willing to be ecumenical.

And Evan Mathis passes that test, as explained by NBC Sports.

Already the least popular of the federal governmental agencies, the IRS has taken a significant hit in recent days amid news confirming longstanding beliefs that the U.S. tax department exercised its discretion to conduct audits and generally give folks a hard time with politics in mind. Like most if not all Americans, Eagles offensive lineman Evan Mathis doesn’t like it.  Unlike most if not all Americans, Mathis has opted to make his views known, in an entertaining way. Mathis posted on Instagram a photo of himself in the universal standing pee position by an IRS sign, with the message “Audit this.”

So what message was Mathis trying to send? It’s unclear, but there are many reasons why the IRS deserves scorn.

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

No wonder I thanked President Obama for unleashing this new scandal and reminding many new people that they should listen to those “voices” who warn about unchecked power in Washington.

P.S. I’m not sure how I’ll react when the IRS resorts to the novel tax-collection tactic that’s being tried in Pakistan.

P.P.S. Maybe Mathis can become a national spokesman for tax reform after he retires from football.

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Grim News from Greece about Grasping Government

I’m in Europe as part of a six-nation speaking tour, participating in the Free Market Road Show.

My first speech was yesterday in Greece, which is infamous for a government that is insanely wasteful, even to the point of subsidizing pedophiles and requiring stool samples from folks applying to set up online companies.

But I don’t want to share anything about my remarks, which would be rather familiar to regular readers of this blog.

Instead, I want to share a couple of slides from Professor Aristides Hatzis of the University of Athens.

Let’s start with a look at the number of bureaucrats over time in Greece. You don’t need to read Greek to see that featherbedding exploded over the past 35-plus years.

As you can see, it’s an expanded version of this grim chart.

Now let’s look at another slide from Professor Hatzis.

When you see these numbers (or read this information), it’s a surprise that Greece didn’t collapse earlier.

One reason that I liked the presentation from Professor Hatzis is that he included a couple of amusing cartoons, one of which he borrowed from the United States. Here’s the Gary Varvel cartoon he shared with the Greek audience.

Varvel, by the way, was part of my political cartoonist contest. His cartoon on Social Security and Bernie Madoff was my favorite, but the above cartoon would have been a good addition to the list.

Speaking of cartoons, you can see good cartoons about Obama and Greece here and here.

And here’s a cartoon about Greece and the euro.

I’ll close be recommending this very funny video from a Greek comedian and this non-PC map of how the Greeks view the rest of Europe.

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Let’s Fix the Real Obesity Problem in Washington

Whenever someone proposes that we need more intervention from the federal government, I always go to the Constitution and check Article I, Section VIII.

This is because I’m old fashioned and I actually think the Founding Fathers weren’t joking when they granted only a few enumerated powers to the federal government.

And when I check that list, I don’t see anything about steroid investigations, housing, or disaster relief. Nor do I see anything about childhood obesity.

Which is what makes this cartoon from Ken Catalino amusing. At least in a morbid way.

I would have labeled the guy “Washington” instead of “Congress,” but that’s nitpicking. The point I’m trying to make is that we have a bloated federal government that is sapping the economy’s vitality and undermining social capital.

We should be trying to rein in that behemoth, not allowing it to get involved in other areas of life.

This doesn’t mean we don’t have a problem with overweight children. It simply means that it’s absurd to think the answer will come from a bunch of politicians and bureaucrats in Washington.

P.S. I very much enjoy cartoon that portray Washington as a flat slob. For other examples, see here, here,here, here, here and here.

P.P.S. Here’s another Ken Catalino cartoon that I like, even though it perpetuates an inaccurate portrayal of Robin Hood as a redistributionist.

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How Bureaucrats and Politicians Conspire to Rip Off Taxpayers

I can say with great confidence that government bureaucrats are overpaid compared to people in the productive sector of the economy.

Why am I sure that this is true, particularly when the so-called Federal Salary Council claims bureaucrats are underpaid?

For the simple reason that the “job opening and labor turnover” data from the Department of Labor is the best way to measure whether a group of workers is overpaid or underpaid.

And you probably won’t be surprised to learn from this data that bureaucrats at the federal, state, and local level are only about 1/3rd as likely to quit their jobs as workers in the private sector.

They’re less likely to leave their jobs, needless to say, because they generally get paid more than they’re worth.

But just in case you think this data is unconvincing, let’s look at some additional research.

Sita Slavov of the American Enterprise Institute explores this topic in an article for U.S. News & World Report.

…studies show that, while the salaries of public sector workers are roughly in line with those paid in the private sector, public sector workers receive substantially more generous fringe benefits, such as pensions, health benefits, vacation and job security. …Why are public sector workers so highly compensated? And, why is their compensation so heavy on benefits? Workers certainly value benefits, such as access to group health insurance, and many benefits are tax advantaged. But do public sector workers really value these benefits more than private sector workers? Edward Glaeser and Giacomo Ponzetto have attempted to address these questions in a recent National Bureau of Economic Research working paper entitled “Shrouded Costs of Government: The Political Economy of State and Local Public Pensions.” The authors present a formal model in which public sector compensation is determined by a political process that pits politicians against each other in a competition for votes. They show that this political process results in a public sector compensation package with generous benefits.

In other words, bureaucrats are over-compensated, and much of their excess compensation is in the form of generous fringe benefits.

The new study cited by Sita looks at why this happens.

Public sector workers have an information advantage over other voters. In particular, they are better informed about their own compensation packages. Moreover, this information advantage is more pronounced for benefits than salary. This is plausible because information about public sector salaries is available to the general public… In contrast, information about public sector pensions is less widely available, and because of complications involved in valuing future pension benefit promises, it is also more difficult to interpret. As a result, politicians propose generous public sector compensation that is tilted towards benefits rather than salary. A politician who tries to scale back public sector benefits will lose support from public sector voters (who are hurt by the benefit cut) without gaining much support from other voters (who gain from lower taxes but are poorly informed).

My interpretation of these findings is that politicians and bureaucrats basically conspire to rip off taxpayers.

In exchange for campaign contributions and other forms of political support, the politicians give the bureaucrats excessive compensation. But they make it difficult for taxpayers to figure out how they’re getting robbed by concentrating a big share of the excess in harder-to-measure fringe benefits.

Another advantage of that approach, by the way, is that the bill for all the retiree benefits doesn’t come due until some point in the future, by which time the politicians who put taxpayers on the hook often have retired or moved on to some other position.

But these promises do translate into real costs sooner or later, as taxpayers have painfully learned in places such as diverse as California and Greece.

Though, to be fair, governments get into fiscal trouble because they also make irresponsible commitments to all workers, including those in the private sector. America’s long-term fiscal crisis, for instance, is because of poorly designed entitlement programs.

Bu this isn’t an excuse to do nothing. It just means we have to reform entitlements and also trim back the excessive compensation for the bureaucracy. This video elaborates.

P.S. If you still aren’t convinced that bureaucrats are overpaid, look at this remarkable map.

P.P.S. You probably won’t be surprised to learn that bureaucrats also don’t work as hard as the rest of us.

P.P.P.S. I’m more concerned about the overall size of government than I am about the pay levels of bureaucrats. I’d much rather focus on shutting down the Department of Housing and Urban Development, for instance, instead of simply trying to reduce the pay of HUD bureaucrats.

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Preposterous Waste, Pentagon Style

National defense is one of the few legitimate functions of the federal government, but that doesn’t mean the military should get a blank check to spend unlimited amounts of money.

To make sure taxpayers get the best bang for the buck (no pun intended), there should be a sober assessment of threats to national security and a plan to defend against those threats without adding superfluous expenditures.

That being said, America already accounts for close to 50 percent of world military spending, with another 25 percent of the global total coming from nations that are allied to the United States, so I’m fairly confident that we’re not under-spending on the Pentagon.

That’s one of the reasons I don’t worry that much about the sequester, particularly since military spending actually climbs by about $100 billion over the next 10 years.

But I would like the Defense Department to have some flexibility to reallocate funds so that we spend money on national security rather than boondoggles.

And there are some absurd examples of waste at the Pentagon, including “green” jet fuel that costs 15 times as much as regular fuel. Here are some of the mind-boggling details from the Washington Examiner.

Defense Secretary Chuck Hagel recently warned that sequestration would cause “suspension of important activities, curtailed training, and could result in furloughs of civilian personnel” but the spending cuts haven’t killed the green fuels program, as the Pentagon has continued purchasing renewable fuel at $59 per gallon. “In March, Gevo entered into a contract with the Defense Logistics Agency to supply the U.S. Army with 3,650 gallons of renewable jet fuel to be delivered by the second quarter of 2013,” Gevo announced this week in its first quarter financial report. “This initial order may be increased by 12,500 gallons.

This is even worse than the bizarre $600,000 frog statue than the Defense Department selected to adorn a new $700 million office building.

I realize that the $700 million office building should be the bigger issue, but I can’t help but be irked by the thought that taxpayers are being raped and pillaged for the frog.

In any event, the $700 million for the office building is pocket change compared to the amount of money we misallocate to subsidize Western Europe to protect against a Warsaw Pact military alliance that no longer exists!

Yes, it’s true that America’s main fiscal problem is entitlement spending. And, yes, domestic discretionary spending is a bigger problem than the defense budget.

But wasting money in those areas is not a reason to also have waste at the Pentagon.

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Where Are the European Spending Cuts?

Paul Krugman recently tried to declare victory for Keynesian economics over so-called austerity, but all he really accomplished was to show that tax-financed government spending is bad for prosperity.

More specifically, he presented a decent case against the European-IMF version of “austerity,” which has produced big tax increases.

But what happens if nations adopt the libertarian approach, which means “austerity” is imposed on the government, rather than on taxpayers?

In the past, Krugman’s also has tried to argue that European nations have erred by cutting spending, but this has led to some embarrassing mistakes.

• He asserted that “British growth has stalled” because of “spending cuts,” but he overlooked the elementary fact that government spending in the U.K. was growing twice as fast as inflation.
• And in the case of Estonia, where there actually were genuine spending cuts, he wanted people to somehow think that those cuts in 2009 were responsible for an economic downturn that occurred in 2008.

Now we have some additional evidence about the absence of spending austerity in Europe. A leading public finance economist from Ireland, Constantin Gurdgiev, reviewed the IMF data and had a hard time finding any spending cuts.

…in celebration of that great [May 1] socialist holiday, “In Spain, Portugal, Greece, Italy and France tens of thousands of people took to the streets to demand jobs and an end to years of belt-tightening”. Except, no one really asked them what did the mean by ‘belt-tightening’. …let’s check out expenditure side of Europe’s ‘savage austerity’ story… The picture hardly shows much of any ‘savage cuts’ anywhere in sight.

As seen in his chart, Constantin compared government spending burdens in 2012 to the average for the pre-recession period, thus allowing an accurate assessment of what’s happened to the size of the public sector over a multi-year period.

Here are some of his conclusions from reviewing the data.

Of the three countries that experienced reductions in Government spending as % of GDP compared to the pre-crisis period, Germany posted a decline of 1.26 percentage points (from 46.261% of GDP average for 2003-2007 period to 45.005% for 2012), Malta posted a reduction of just 0.349 ppt and Sweden posted a reduction of 1.37 ppt.

No peripheral country – where protests are the loudest – or France et al have posted a reduction. In France, Government spending rose 3.44 ppt on pre-crisis level as % of GDP, in Greece by 4.76 ppt, in Ireland by 7.74 ppt, in Italy by 2.773 ppt, in Portugal by 0.562 ppt, and in Spain by 8.0 ppt.

Average Government spending in the sample in the pre-crisis period run at 44.36% of GDP and in 2012 this number was 48.05% of GDP. In other words: it went up, not down.

…All in, there is no ‘savage austerity’ in spending levels or as % of GDP.

I’ll add a few additional observations.

Sweden and Germany are among the three nations that have reduced the burden of government spending as a share of GDP, and both of those nations are doing better than their European neighbors.

Switzerland isn’t an EU nation, so it’s not included in Constantin’s chart, but government spending as a share of economic output also has been reduced in that nation over the same period, and the Swiss economy also is doing comparatively well.

The moral of the story is that reducing the burden of government spending is the right recipe for sustainable and strong growth. Growth also is far more likely if lawmakers refrain from class-warfare tax policy and instead seek to collect revenue in ways that minimize the damage to prosperity.

Unfortunately, that’s not happening in Europe…and it’s not happening in the United States.

A few countries are moving in the right direction, such as Canada, but with still a long way to travel.

The best role models are still Hong Kong and Singapore, and it’s no coincidence that those two jurisdictions regularly dominate the top two spots in the Economic Freedom of the World rankings.

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Barack Obama’s $8 Trillion Output Gap

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

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

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

Let’s translate this bit of jargon into English.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Stepford Students?

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

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

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

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

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

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

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

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

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

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

Yet they gush over Obama. Go figure.

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

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

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

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The Fuse Is Burning Brightly on France’s Fiscal Time Bomb

It’s been more than three weeks since I targeted French fiscal policy for abuse and more than one week since I wrote something negative about the French fiscal system.

I must be slowing down as I get older, so it’s time of rectify this oversight.

My fundamental problem with the French system is that the burden of government spending is excessive and the politicians seem to think the answer is additional increments of class-warfare tax policy.

If you think I’m exaggerating, just check out this chart on government spending. The public sector in France is more bloated than the ones that exist in Italy, Sweden, and Greece!

That’s quite an achievement.

And then remember that the new French President is imposing a new top income tax rate of 75 percent. Though, to be fair, President Hollande generously says he doesn’t want the overall tax burden on any taxpayer to exceed 80 percent. All hail Francois the Merciful!

Notwithstanding this magnanimous gesture, some taxpayers have the gall (no pun intended) to object to this level of fleecing. Famous actors and successful entrepreneurs are among those saying Au Revoir and moving to jurisdictions that have less punitive tax laws.

What most amuses me about this exodus is the way France’s political elite is throwing a temper tantrum. How dare our victims run away!

The situation is so grim in France that The Economist wrote up a special report warning that France is Europe’s “time-bomb.”

Which raises an interesting question. How brightly is the fuse burning, and how much longer until the bomb detonates?

The honest answer is that I don’t know, but here are two stories worth noting.

First, you have to figure the tax burden is a bit too onerous if even high-ranking officials from a socialist government are utilizing tax havens to protect themselves. Here are details from a BBC report.

Jean-Jacques Augier, who managed Mr Hollande’s campaign funds, told the daily Le Monde that there was “nothing illegal” in his tax haven affairs. Meanwhile, ex-budget minister Jerome Cahuzac has been charged with fraud. Ministers are under pressure to reveal what they knew about his tax evasion. On Wednesday President Hollande addressed the scandal on national television, saying that in future all ministers and MPs would have to declare fully their personal finances.

Gee, don’t these members of the political elite understand that Hollande wants them to be able to keep 20 percent of their earnings? What a bunch of ingrates!

Our next story shows that French politicians are so greedy that they’re even willing to undermine their own national sport.

Prime Minister Jean-Marc Ayrault’s office issued a statement today confirming that a 75 percent surcharge on salaries above 1 million euros ($1.3 million) will apply to soccer clubs. “This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.” …Many soccer players would already be taxed at France’s top marginal rate of 49 percent, which kicks in at 500,000 euros a year. Teams would then pay a surcharge to bring the effective tax rate on salaries above 1 million euros to 75 percent.

Mon Dieu! The government “will lose its best taxpayers.” Sounds like the Laffer Curve effects may be so large that the government actually loses tax revenue.

“Follow me. We can escape in this direction”

And since even left-leaning economists have confirmed that tax rates have a big impact on the decisions of such athletes, I hope French sports fans won’t mind if all the best players decide to take their talents elsewhere.

With policy this bad, no wonder Obama will probably never achieve his goal of turning America into another France. But he can take comfort in the fact that the French people overwhelmingly support what he’s trying to do.

But they also must be schizophrenic. As of 2010, an overwhelming majority of them also acknowledged that it was necessary to lower the burden of government spending to boost growth. And an astounding 52 percent of them might move to evil capitalistic America if given the opportunity.

The key thing is not to import French economic policy. Having escaped from her former country, Veronique de Rugy explains why that would be a mistake.

You can also watch Veronique explain the basics of fiscal policy in this testimony to a congressional committee.

P.S. This Chuck Asay cartoon captures the French mentality. Makes you wonder what they’ll do when the house of cards comes tumbling down. All I can say for sure is that the ones who put their money in tax havens will be much happier than the ones who thought they could trust government.

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California’s Golden Bureaucrat Snags $400K of Yearly Compensation – for the Rest of Her Life!

A regular feature of this blog used to be a “taxpayers vs bureaucrats” series, which featured outrageous examples of government employees getting wildly overcompensated.

I even narrated a video on the topic of excessive pay and benefits for bureaucrats.

But I stopped the series because it was too depressing. How often can read stories like this, after all, and not feel glum about America’s future?

• The chief bureaucrat of a low-income California city getting almost $800,000 per year.
• Cops in Oakland getting average compensation of $188,000.
• A school superintendent in New York raking in more than $500 thousand of annual compensation.
• A California government official raking in $822,000 of taxpayer-financed loot in just one.
• A Philadelphia bureaucrat, after working only 2-1/2 years, nailing down a guaranteed pension of $50,000 per year.
• A New York school bureaucrat simultaneously getting a $225,000 salary and $300,000 pension.
• California taxpayers being forced to pay a fired bureaucrat $550,000 for unused vacation time.
• An employee of the New Jersey Turnpike system raking in annual compensation of $320,000.

But I must lack willpower because I can’t resist writing about the latest scandal involving bureaucratic bloat.

Check out some of the ridiculous details about the woman who has earned the title of California’s Golden Bureaucrat.

Alameda County supervisors have really taken to heart the adage that government should run like a business — rewarding County Administrator Susan Muranishi with the Wall Street-like wage of $423,664 a year. For the rest of her life. …Muranishi’s annual pension will be equal to the dollar total of her entire yearly package — $413,000. She also has a separate executive private pension plan, for which the county chips in $46,500 a year.

Yes, you read correctly. She’ll be ripping off taxpayers “for the rest of her life.”

But if you want to get even more upset, check out how she’s bilking the people.

…in addition to her $301,000 base salary, Muranishi receives:

• $24,000, plus change, in “equity pay’’ to guarantee that she makes at least 10 percent more than anyone else in the county.
• About $54,000 a year in “longevity” pay for having stayed with the county for more than 30 years.
• An annual performance bonus of $24,000.
• And another $9,000 a year for serving on the county’s three-member Surplus Property Authority, an ad hoc committee of the Board of Supervisors that oversees the sale of excess land.

Like other county executives, Muranishi also gets an $8,292-a-year car allowance.

I’m relieved she’s getting a car allowance. The poor thing otherwise would have to rely on public transit. And isn’t it nice that she automatically gets a “performance bonus”? Sort of defeats the purpose, though, if it’s automatic. But what do I know, I’m just a taxpayer.

Even though I obviously lack the special insight needed to justify bloated compensation packages for California bureaucrats, I have enough common sense to know that the over-burdened taxpayers of California are being stretched beyond the breaking point – especially now that the looters and moochers have imposed a new 13.3 percent top tax rate on the state’s dwindling supply of high earners.

It’s no surprise that lots of high-paying jobs are relocating to states like Texas with better tax policy. Nor is it a surprise when pro golfers like Phil Mickelson warn they may leave the state. But when even a certified leftist like Bill Maher says he’s thinking about escaping, you know the situation is serious.

So for the umpteenth time, I will predict that the combination of bloated government and punitive taxation will lead to fiscal crisis in California.

Too much government spending and the Laffer Curve are not a good combination.

When you lure too many people into riding in the wagon and penalize those pulling the wagon, bad things happen. Doesn’t matter whether you’re looking at France or California.

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Good News: We’re Heading in the Wrong Direction at a Slower Pace

In recent months, people have asked me why I’m acting all giddy and optimistic. Am I hooked on cocaine? Have I fallen in love? Did I inherit several million dollars?

These questions started after I said the fiscal cliff was a smaller loss than I expected. Then people wondered what was going on when I wrote that we should celebrate the sequester victory. The questions got more intense when I opined that the Tea Party had made a positive difference. And people were even more nonplussed when I wrote that we should enjoy a win over the IMF.

But I’m not the only person thinking that things may be heading in the right direction.

Conn Carroll explains his optimism in the Washington Examiner. He starts by noting how bad Congress was back in 2009 and 2010.

…its liberal predecessor passed a trillion-dollar stimulus, enacted a government takeover of health care and institutionalized the power of Wall Street’s Too Big To Fail banks by passing the Dodd-Frank financial regulation law.

Then he explains that the new Tea Party Congress has changed the fiscal outlook.

…if you look at the hard numbers — if you look at the tax-and-spending trajectory that the United States was on before the 112th Congress was sworn into office, and then look at the path the U.S. is on now — you’d see that Republicans in Congress have made tremendous progress in shrinking the size and scope of the federal government.

But is there any proof?

Conn points out that the CBO “baselines” from early 2011 showed government growing very rapidly.

…the nonpartisan Congressional Budget Office released its annual Budget and Economic Outlook for fiscal years 2011 through 2021. That document showed the federal government was on track to spend…a total of almost $50 trillion ($49.8 trillion to be exact) through 2021. At the same time, tax revenues were set to rise from just 14.8 percent of GDP in 2011 to 20.8 percent in 2021.

The same estimates from early this year, by contrast, show government growing at a slower pace.

The CBO’s Budget and Economic Outlook for fiscal years 2013 through 2023 shows just how much House Republicans have actually accomplished. The federal government is now on track to spend just $46.2 trillion through 2021. That is a $3.6 trillion spending cut. And instead of taxes eating up 21 percent of the U.S. economy in 2021, now the government is set to take in just 18.9 percent.

Here are the respective baselines from those CBO publications. Let’s start by looking at how spending is projected to grow at a slower pace for the rest of the decade.

That’s $3.5 trillion of savings. Not genuine spending cuts, of course, but it’s real progress if government doesn’t grow as fast.

Here are the revenue numbers.

This data basically shows that the tax burden will be much smaller than projected because about 98 percent of the Bush tax cuts were made permanent as part of the fiscal cliff deal.

And if you believe in the Starve-the-Beast theory (and you should), this will make it harder for politicians to increase the burden of government spending in the future.

Conn also notes that the unemployment rate has fallen.

Despite all of this supposedly economy-killing “austerity,” unemployment has steadily fallen, too. When Republicans took control of the House in 2011, the nation’s unemployment rate was 9 percent. Today, it has fallen to 7.7 percent.

If this seems like a familiar point, it’s because I share his assessment. I wrote back in February of last year that gridlock was a positive thing for the economy since it reduced the likelihood of new bad policies.

What’s remarkable about these developments, as Conn notes, is that folks were expecting Obama to have momentum as his second term began.

Just three months ago, many in Washington were predicting Obama would steamroll Republicans into accepting higher taxes for millions of earners, undoing the sequester and maybe even passing new stimulus spending. Instead, Republicans have stayed unified, outfoxed Obama, preserved and made permanent most of last decade’s tax cuts (including permanent indexing of the Alternative Minimum Tax) and let the sequester cuts occur on schedule. As a result, Obama’s approval ratings have tumbled, and his entire second-term agenda is in jeopardy.

The final sentence in that excerpt explains why I’m feeling semi-optimistic. Obama’s agenda of more taxes and more spending is being thwarted.

To be sure, that doesn’t mean we’re seeing good policies of tax reform and fiscal restraint. And we still face a very dour fiscal future unless entitlements are reformed.

But we’re going in the wrong direction at a slower pace, and that beats the alternative.

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Cartoonists React to the Senate Democratic Budget

I didn’t take Patty Murray’s budget very seriously. Indeed, I would have completely ignored the plan by Senate Democrats if it wasn’t for the fact that I felt compelled to debunk her mythology about the 1990s.

America’s political cartoonists are similarly underwhelmed.

Here’s Lisa Benson’s analysis.

A great cartoon because it recognizes that the problem is bloated government, not red ink.

Steve Breen also is not impressed.

As you can imagine, this might be my favorite of the group because I’m a sucker for cartoons portraying government as an obese slob (see here, here, here, and here).

Last but not least, thisJerry Holbert cartoon also is worth sharing.

Again, this cartoon correctly focuses on the main problems of punitive taxation and excessive spending, not the lesser symptom of too much borrowing.

It will be very interesting to see what we get (from both a substance perspective and humor perspective) when the White House finally decides to issue its budget.

That budget was legally required back on the first Monday in February. Based on what we saw last year and the year before that, I’m not holding my breath expecting anything more than another tax-and-spend blueprint.

And as this Michael Ramirez cartoon illustrates, we know where that will lead. Or take a look at this Glenn Foden cartoon. Different theme, but same restult.

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The Ryan Budget: Is Returning to Clinton-Era Levels of Fiscal Restraint Really Asking too Much?

It can be very frustrating to work at the Cato Institute and fight for small government.

Consider what’s happened the past couple of days.

Congressman Paul Ryan introduces a budget and I dig through the numbers with a sense of disappointment because government spending will grow by an average of 3.4 percent annually, much faster than needed to keep pace with inflation.

But I don’t even want government to grow as fast as inflation. I want to reduce the size and scope of the federal government.

“Can’t they shut down even one department?”

I want to shut down useless and counterproductive parts of Leviathan, including the Department of Housing and Urban Development, the Department of Education, the Department of Energy, the Department of Transportation, the Department of Agriculture, etc, etc…

I want to restore limited and constitutional government, which we had for much of our nation’s history, with the burden of federal spending consuming only about 3 percent of economic output.

So I look at the Ryan budget in the same way I look at sequestration – as a very modest step to curtail the growth of government. Sort of a rear-guard action to stem the bleeding and stabilize the patient.

But, to be colloquial, it sure ain’t libertarian Nirvana (though, to be fair, the reforms to Medicare and Medicaid are admirable and stem in part from the work of Cato’s healthcare experts).

But my frustration doesn’t exist merely because the Ryan budget is just a small step.

I also have to deal with the surreal experience of reading critics who assert that the Ryan budget is a cut-to-the-bone, harsh, draconian, dog-eat-dog, laissez-faire fiscal roadmap.

If only!

To get an idea of why this rhetoric is so over-the-top hysterical, here’s a chart showing how fast government spending is supposed to grow under the Ryan budget, compared to how fast it grew during the Clinton years and how fast it has been growing during the Bush-Obama years.

I vaguely remember taking the SAT test in high school and dealing with questions entitled, “One of these things is not like the others.”

Well, I would have received a perfect score if asked to identify the outlier on this chart.

Bush and Obama have been irresponsible big spenders, while Clinton was comparatively frugal.

And all Paul Ryan is proposing is that we emulate the policy of the Clinton years.

Now ask yourself whether the economy was more robust during the Clinton years or the Bush-Obama years and think about what that implies for what we should do today about the federal budget.

At the very least, we should be copying what those “radical” Canadians and other have done, which is to impose some genuine restraint of government spending.

The Swiss debt brake, which is really a spending cap, might be a good place to start.

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Everything You Need to Know about the Ryan Budget

Sigh. Even when they’re sort of doing the right thing, Republicans are incapable of using the right argument.

Paul Ryan, Chairman of the House Budget Committee, has unveiled his proposed budget and he and other Republicans are bragging that the plan will balance the budget in 10 years.

That’s all fine and well, but good fiscal policy is achieved by reducing the burden of government spending, and that means that restraining the budget so that federal outlays grow slower than the private sector.

It’s good to balance the budget, of course, but that should be a secondary goal.

Now for the good news. The Ryan Budget does satisfy the Golden Rule of fiscal policy. As you can see in the chart, federal spending grows by an average of 3.4 percent annual, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023.

It’s also good news that the Ryan Budget calls for structural reform of entitlement programs, including Medicaid block grants and Medicare premium support. The budget also assumes the repeal of the costly Obamacare program.

And there’s also some good tax policy. Not bold tax reform like a flat tax, but top tax rates would be reduced to 25 percent and many forms of double taxation like the death tax and capital gains tax presumably would be reduced or eliminated.

Let’s be clear, though, that this is not a libertarian budget. Federal spending will still be far too high. Indeed, the budget will consume a larger share of the economy than it did when Bill Clinton left office.

And while Republicans do a good job of restraining spending in the first couple of years of the new Ryan Budget, outlays rise far too rapidly beginning around 2016.

Moreover, there’s no Social Security reform.

Equally worrisome, the budget assumes that the federal tax burden should remain about 19 percent of GDP, higher than the long-run average of 18 percent of GDP and – for all intents and purposes – permanently enshrining Obama’s fiscal cliff victory.

And it’s depressing to see that the Ryan budget has gotten weaker each year.

• Two years ago, he put forth a budget that limited spending so that it grew 2.8 percent per year.
• Last year, he put forth a budget that limited spending so that it grew 3.1 percent per year.
• Now, spending will climb 3.4 percent per year.

At this rate, it won’t be that long before the GOP budget and Obama budget converge.

Okay, that’s an exaggeration. But the moral of the story is that the Ryan Budget is a step in the right direction, but much more will be needed to restore limited, constitutional government.

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Sequestration’s Impact on HUD: Just 358 More Days and Mission Accomplished

As part of my “Question of the Week” series, I had to decide which department of the federal government was most deserving of abolition.

With a target-rich environment of waste, fraud, and abuse in Washington, that wasn’t an easy question to answer. But I decided to pick the Department of Housing and Urban Development, and I had some good reasons for that choice.

• HUD engages in racism and social engineering.
• Urban renewal projects destroy neighborhoods and foment corruption.
• HUD subsidies are grotesquely wasteful.
• There are epidemic levels of waste, fraud, and abuse at HUD.

Well, thanks to the sequester, we can say that we’ve achieved 1.9 percent of our goal. Here are some blurbs from a Reuters report.

The U.S. Department of Housing and Urban Development on Monday said it plans to shut its doors for a total of seven days between May and September due to budget cuts and will furlough more than 9,000 employees on those days. …The agency will determine the exact shutdown dates at a later time.

The motto of special interests

This is what I call a good start.

You won’t be surprised to learn, though, that the bureaucracy is whining that these tiny cutbacks will have horrible effects.

In cataloging the impact of sequestration to a Senate panel last month, HUD Secretary Shaun Donovan warned lawmakers that the government spending cuts would have harsh consequences for housing programs and could threaten Superstorm Sandy recovery efforts in the U.S. Northeast. “The ripple effects are enormous because of how central housing is to our economy,” Donovan told lawmakers.

Well, I hope that the “cuts” will have “harsh consequences for housing programs.” I’ve read Article I, Section VIII, of the Constitution, and nowhere does it say that housing is a function of the federal government.

And I’ve also explained that disaster relief is not Washington’s responsibility.

Most worthless department in Washington?

Last but not least, I agree that housing is important to our economy. But that’s precisely why I don’t want the federal government involved.

Didn’t we learn from the Fannie Mae/Freddie Mac debacle that bad things happen when the federal government tries to subsidize that sector.

Heck, I don’t even want tax preferences for housing.

No wonder I picked the Department of Housing and Urban Development for the background for my video on bloated and wasteful bureaucracy.

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My Heart Breaks and Tears Flow When I Read about Sequestration Being a Big Defeat for Lobbyists

I believe in the First Amendment, so I would never support legislation to restrict political speech or curtail the ability of people to petition the government.

That being said, I despise the corrupt Washington game of obtaining unearned wealth thanks to the sleazy interaction of lobbyists, politicians, bureaucrats, and interest groups.

So you can imagine my unfettered joy when reading about how this odious process is being curtailed by sequestration. Here are some cheerful details from story in Roll Call.

…sequester cuts…reflect not only Washington’s political paralysis but a bitter lobbying failure for K Street interests across the board. From university professors and scientists to cancer victims, defense contractors and federal workers, hundreds of advocacy, trade and labor groups have lobbied aggressively for months to head off the cuts. They’ve run ads, testified on Capitol Hill, staged demonstrations and hounded lawmakers, all to no avail. …the path forward could be a lobbying nightmare.

Reading the story, I recalled a Charles Addams cartoon from my childhood. Thanks to the magic of Al Gore’s Internet, I found it.

Slightly modified to capture my spirit of elation, here it is for you to enjoy.

Except I like to think I’m a bit more prepossessing than the Uncle Fester character, but let’s not get hung up on details.

What matters is that sequestration was a much-needed and very welcome victory for taxpayers. Obama suffered a rare defeat, as did the cronyists who get rich by working the system.

To be sure, all that we’ve achieved is a tiny reduction in the growth of federal spending (the budget will be $2.4 trillion bigger in 10 years rather than $2.5 trillion bigger). But a journey of many trillions of dollars begins with a first step.

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As Humorously Explained by Henry Payne, the World Amazingly Didn’t End When Uncle Sam Got Put on a Sequester Diet

When I last checked, Henry Payne was winning the bronze medal in the contest to identify the best political cartoonist.

You can see why by checking out this cartoon about Washington’s reaction to sequestration, which (gasp!) slightly slows the growth of the federal budget so that it is only $2.4 trillion bigger 10 years from now rather than $2.5 trillion bigger.

What makes the cartoon so effective is not just the humor, but also the fact that it makes clear that government is too big and it also debunks the Keynesian notion that bad things will happen if we have even an itsy-bitsy degree of fiscal discipline.

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Wise – and Amusing – Words on Government from Ron Swanson

I’m not a TV watcher. I don’t even have cable. So I’m only vaguely aware that there’s a program called “Parks and Recreation.”

Based on these clips, though, it seems that Ron Swanson would be my favorite character.

Let’s start with his inside assessment of government efficiency. This is the snarkiest clip I’ve seen about local government, rivaling this brutal video on overpaid firefighters.

Makes my video on overpaid bureaucrats pale in comparison.

But is he right about local government? Well, read this, this, this, this, this, this, this, this, this, this, this, this, and this and decide for yourself.

Oh, and don’t forget what our feckless local school officials are doing to America’s children.

Swanson also has an amusing take on the general topic of bloated government.

I’d apply the same level of skepticism to the defense budget, of course, but Swanson’s character is on to something. Sort of the same theme of government being bloated and overweight that can be found in cartoons here, here, here, and here.

Then there’s this gem.

The piglet comparison, needless to say, made me think of this famous Chuck Asay cartoon.

I’m curious, by the way, whether Swanson’s character on the program is unappealing. In other words, is this an example of Hollywood seeking to mock libertarianism?

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The European Light at the End of the Tunnel

Too bad I didn’t have this Glenn Foden masterpiece when I did the political cartoonist contest last week.

I think it’s better than my previous favorite of his (about the “private sector doing fine”), and it’s thematically quite similar to the famous “European lemming” cartoon from Ramirez.

One tiny correction, though. The Europeans aren’t socialists anymore. It’s more accurate to describe the policy in France, Italy, and elsewhere as cronyism, corporatism, or statism.

Though Thomas Sowell prefers to use an even harsher adjective when analyzing Obama’s approach.

What about providing some evidence that Obama’s making America more like Europe? Well, just check out the data from the latest Economic Freedom of the World annual report.

There are now six European nations that score above the United States, including two of my favorite places – Switzerland and Estonia!

It doesn’t justify his bad policies, but it’s worth noting that Obama’s merely continuing a bad trend that started under Bush.

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Let’s Shed a Tear for those Under-Appreciated Bureaucrats Who Get Lavish Pensions and Live in $700K Homes

When I first read this story in the Washington Post about supposedly under-appreciated federal bureaucrats, I was tempted to focus on the sentence referring to “the sledgehammer of budget cuts scheduled to hit today.”

Is the Washington Post so biased and/or clueless that reporters really think that a 1.2 percent reduction in overall spending for the current fiscal year (which means the federal budget would still be larger than it was last year) represents a “sledgehammer of budget cuts”?

But I just mocked the New York Times last week for its reporting about supposed “deep spending cuts” and I also nailed the Washington Post back in 2011 for using the term “slash” for a budget plan that would have shaved a miniscule $6 billion from a budget of $3,800 billion.

So instead I want to focus on the part of the story featuring self-pitying remarks of federal bureaucrats. Here’s a good sampling.

…federal workers in Mantua say…having “United States Treasury” atop their paycheck [now] means having to defend yourself against arguments, from strangers and even from your own relatives, that you’re an overpaid and underworked leech. …many federal workers are…bothered by the growing sense that the careers they chose may now seem unattractive, even unworthy. …on a recent visit to Missouri, he got fed up with ritual denunciations of federal workers… Won, a federal worker for 31 years, resents the notion, now commonplace on talk radio and Web sites devoted to bashing the government, that federal workers carry a lighter load than their for-profit counterparts. …older government workers…are concerned about their pensions but even more anxious about why politicians are so willing to make federal employees the target of popular rage.

Excuse me while I wipe away the tears and compose myself. There are so many stories of unbearable hardship.

• It’s absolutely heartbreaking to read about those unfortunate, oppressed, and under-appreciated bureaucrats who live in “a leafy section of Fairfax County where houses sell in the $700,000 range.”
• And you can understand my tears of sympathy for folks who, as one bureaucrat admitted, had jobs where the “pay was guaranteed and you couldn’t get laid off.”
• Moreover, we all share the pain of bureaucrats who must deal with uncomfortable comparisons, such as the fact that “pensions, once considered routine, have become a wild luxury in the private sector, so when many Americans hear that public employees still get retirement pay, they can get frustrated.”

Perhaps we can create a civilian version of the Medal of Honor, given to the bureaucrat who suffers the most because of the “sledgehammer” cuts and those mean people on “web sites.”

Indeed, I think we have our first recipient. But brace yourself before you read this passage. The anguish and suffering may haunt you for the rest of your life. This bureaucrat is enduring unimaginable hardship.

..has already cut back in anticipation of the forthcoming budget slashing: He told a carpenter who was going to build bookshelves in the living room that the $5,000 job will have to be put off, and he told his doggie day care provider that he’ll have to go without that service when the furloughs kick in.

Oh my God! Not only are we failing to appreciate government bureaucrats, but the “budget slashing” will lead to neglected pets as well. What sort of cruel and heartless society have we become?!?

And imagine the Keynesian death spiral that will occur when the carpenter and dog walker then have to cut back on their purchases? Maybe we need to take Bastiat’s advice and go break some windows!

To make matters worse, there are mean-spirited people such as Chris Edwards at places such as the Cato Institute that have the nerve to point out that federal bureaucrats get about twice the overall level of compensation as those in the productive sector of the economy.

How can that man sleep at night after making such an invidious comparison?

But there’s another cad at the Cato Institute who actually had the nerve to narrate this video, which unfairly uses facts and data to show that the federal workforce is over-compensated.

Worst of all, he actually suggests at the end of the video is that the real problem is that the federal government is far too large. What sort of place would employ such unreasonable folks?

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Excellent Sequester Cartoons

I shared some sequester cartoons last month, but I didn’t think they hit the nail on the head.

As regular readers know, I want the message to be focused.

1. The problem is spending, not deficits.
2. Government is too big.
3. The sequester is a good thing, albeit too small.
4. Obama and the other politicians are engaging in hysterical hyperbole to protect special-interest spending.

I think that message is slowly sinking in, which is why I was much happier about the next batch of sequester cartoons.

Now we have an embarrassment of riches. Enjoy (and widely share) this set of cartoons.

We’ll start with Michael Ramirez, who uses pie charts to show how much bigger government is today and how the sequester is just crumbs.

And here’s one from Ed Gamble showing the President engaging in fear tactics, though both Ramirez and Gamble are wrong about the “cuts.” The sequester cuts $85 billion of “budget authority,” but that translates into only $44 billion of “budget outlays.”

That’s just 1.2 percent of FY2013 spending. And remember that this means spending will still go up compared to FY2012 – as I explained in my most recent interview.

Here’s a cartoon from Gary Varvel, which is quite similar to an excellent cartoon he produced last year.

Here’s one from Glenn McCoy, poking fun at Obama for taking everything in stride…except when something happens to threaten the amount of waste in Washington.

I’m especially fond of this Glenn Foden cartoon since I’m sick and tired of the absurd hyperbole from the interest groups in DC.

Makes me wish I could bop a few Chicken Little characters on the head.

Here’s one from A.F. Branco, which I also like because it simultaneously mocks Obama’s Keynesian mindset while showing that the real danger is an ever-rising burden of government spending.

Last but not least, Lisa Benson makes fun of Obama for his never-ending efforts to instill panic.

Let’s keep our fingers crossed that the sequester happens on March 1. Then, even if the Obama Administration deliberately tries to cause inconvenience for the American people, we’ll see that the world doesn’t come to an end.

Who knows, maybe that will even lead lawmakers to think they can impose some real fiscal restraint, as we’ve recently seen in countries like Estonia and in the 1990s by nations such as Canada and New Zealand.

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Slaying the Make-Believe Sequester Monster

I’m normally not a fan of the media, but every so often you find examples of real journalism. Here are some powerful, well-done stories from local TV stations.

1. Exposing the plethora of benefits available to those who want government-subsidized idleness.
2. Exposing how eminent domain laws are used to screw poor people out of their property.
3. Exposing local government officials engaged in a witch hunt against an innocent man.

Newspapers also sometimes speak truth to power.

1. A Michigan newspaper exposing how motorists were getting ripped off by illegal speed limits.
2. A Pennsylvania newspaper exposing how a local bureaucrat  union tried to stop a boy scout from improving a local park.
3. A New York newspaper exposing the education establishment for giving teachers $100,000-plus salaries for doing nothing.

Now I can add another story to the list. A local TV station in Washington, DC (with a viewing audience of countless overpaid bureaucrats) had the courage to run a story debunking sequester hysteria.

I’m partial to this report for the obvious reason that it featured me.

But even if this story didn’t use any of my soundbites, it would still be worth sharing because it’s not often that you see a reporter explain Washington’s dishonest way of measuring “spending cuts.”

I’ve complained about that sleazy tactic while appearing with John Stossel and Judge Napolitano, but I didn’t think a regular journalist would ever expose the scam.

The latter part of the report focuses on the potential impact of sequestration on the defense budget.

I’ve previously explained that the defense budget is disproportionately impacted, but I’ve also cited Cato’s military experts when arguing that our national security will not be endangered.

Indeed, military spending will be higher at the end of the 10-year period than it is today.

Now I want to share this amazing info-graphic prepared by Zach Graves, another Cato colleague.

A thorough and compelling collection of data. It belongs in the visual-impact Hall of Fame with these gems.

• The crippling fiscal cost of the welfare state – but how little of the money trickles down to the poor.
• Exposing Obama’s miserable jobs performance.
• The importance of saving and investment if we want workers to enjoy higher wages.
• The TSA’s Orwellian (and incompetent) approach to airline security.
• Showing how the burden of government spending has exceeded the growth of the economy’s productive sector.

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Virginia’s RINO Infestation Results in Higher Taxes and More Spending

The number one goal for fiscal policy is to reduce the burden of government spending.

The simple way to achieve this goal is to adhere to Mitchell’s Golden Rule and and make sure the private sector grows faster than the public sector.

But when politicians fail to exercise that modest amount of fiscal restraint, bad things happen.

Consider my state of Virginia, which is largely controlled by Republicans. Except party labels apparently don’t mean much because state spending has been growing at twice the rate of inflation.

And when politicians engage in profligacy on the spending side of the fiscal ledger, it’s just a matter of time before they engage in greed on the other side of the fiscal ledger.

That’s certainly happened in Virginia, where the interest groups, lobbyists, bureaucrats, and politicians just achieved a major victory over taxpayers.

The Wall Street Journal is appropriately disappointed.

“I hope you’re not upset that I’m copying your fiscal policy, Mr. President”

There’s one thing uglier than a Democratic tax-and-spend spree. A Republican one. On Friday Virginia Governor Bob McDonnell and a GOP-run legislature approved a five-year, $6 billion transportation bill financed almost entirely with higher sales and car taxes.

Here are some of the grim details.

The sales tax rises to 6% from 5% in Hampton Roads and populous Northern Virginia and to 5.3% everywhere else. The hated car tax (which Republicans once vowed to eliminate) rises to 4.3% from 3%, meaning a new $30,000 car or truck will come with a $1,290 tax bill. Then there’s a new 0.25% sales tax on homes in Northern Virginia, plus a new hotel tax.

More taxes, not surprisingly, will mean more spending.

Mr. McDonnell even cut an 11th-hour deal with Democrats over the expansion of Medicaid under ObamaCare. …Mr. McDonnell says the commission means Virginia won’t expand Medicaid as long as Republicans control the legislature, but wait until the hospital lobby gets done working the same Republicans who raised taxes.

The governor doubtlessly has made lots of friends with the interest groups that dominate Richmond, so he’ll have plenty of opportunities to cash in when he leaves office.

The state’s taxpayers, by contrast, won’t be so lucky. And now the GOP is now divided and dispirited and will face an uphill battle in this November’s elections.

This fiasco will haunt Republicans in a state that holds elections in November. Probable Democratic nominee for Governor Terry McAuliffe endorsed the bill knowing it erases any GOP advantage on taxes and spending. Mr. Cuccinelli, the likely Republican nominee, opposed the bill but must now find a way to rally a splintered GOP and demoralized conservatives. At least Republicans can erase Mr. McDonnell’s name as a national candidate or VP choice in 2016.

I don’t lose a lot of sleep worrying about Republican political prospects, but I am irked that politicians are taking more of my money for their vote-buying schemes.

To add insult to injury, I’m not rich, so I don’t have the ability to directly benefit from tax competition by moving to a zero-income-tax state such as Florida or Texas.

And moving to Maryland or DC would be jumping out of the fiscal frying pan and into the tax fire, so that’s also not an option.

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Earth to New York Times: Please Show Us these “Deep Spending Cuts” You Keep Writing About

Sigh. I feel like a modern-day Sisyphus. Except I’m not pushing a rock up a hill, only to then watch it roll back down.

Compared to educating journalists about fiscal policy, this is an easy task

I have a far more frustrating job. I have to read the same nonsense day after day about “deep spending cuts” even though I keep explaining to journalists that a sequester merely means that spending climbs by $2.4 trillion over the next 10 years rather than $2.5 trillion.

The latest example comes from the New York Times, which just reported about “deep automatic spending cuts that will strike hard” without bothering to provide a single concrete number about spending levels in any fiscal year.

Yes, you read correctly. A story about budget cuts did not have any numbers for spending in FY2013, FY2014, or any other fiscal year.

So, for the umpteenth time, here are the actual numbers from the Congressional Budget Office showing what will happen to spending over the next 10 years if we have a sequester.

I don’t mean to pick on the New York Times. Yes, the self-styled paper of record has been guilty in the past of turning budget increases into spending cuts, but the Washington Post is guilty of the same sin, having actually written in 2011 that reducing a $3.8 trillion budget by $6 billion would “slash spending.”

And the NYT story actually has some decent reporting on how Republicans so far have (fingers crossed) avoided the tax-increase trap that Obama thought the sequester would create.

But one would still like to think that Journalism 101 teaches reporters to include a few hard facts when writing stories. Particularly if they’re going to use dramatic adjectives to describe what supposedly will happen.

Anyhow, this is just part of a larger problem. As I explained in these John Stossel and Judge Napolitano interviews, the politicians and interest groups have given us a budget process that assumes ever-increasing spending levels, which then allows them to make hysterical claims about “savage” and “draconian” cuts whenever spending doesn’t rise as fast as some hypothetical baseline.

This is why almost nobody understands that it’s actually relatively simple to balance the budget with a modest bit of spending restraint. My goal is reducing the burden of government spending, not fiscal balance, but it’s worth noting that we’d have a balanced budget in just 10 years if spending grew by “only” 3.4 percent annually.

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Question of the Week: Who Am I Cheering for in the Italian Elections?

This is an easy question and a hard question.

It’s an easy question because the obvious answer is to say “none-of-the-above.”

After all, voters in Italy have four horrible choices.

1. Silvio Berlusconi, who is an Italian version of George W. Bush. He’ll occasionally dish out some good rhetoric and promise tax relief, but he’s shown zero desire to reduce the burden of government spending and intervention.
2. Mario Monti, an apparatchik who is first and foremost a creature of the calcified bureaucracy in Brussels. He would be a sober hand on the helm, but seems content that the ship is heading in the wrong direction. He’s sort of the Mitt Romney of Italy.
3. Beppe Grillo, a comedian/entertainer/blogger who has a populist (albeit incoherent) agenda. He’s a strange cross of Jesse Ventura, Arnold Schwarzenegger, Ross Perot, and Bernie Sanders, so don’t even think about that petri dish.
4. Pier Luigi Bersani, a run-of-the-mill social democrat who started his political life in the Communist Party but now is best described as a career politician who wants to preserve the status quo of statism. Sort of the Harry Reid of Italy.

So far as I’m aware, there is no good political party in Italy. Classical liberals, conservatives, and libertarians seem to be endangered species. That’s why I answered none-of-the-above.

But what if my kids were being held hostage and I had to choose from this unpalatable quartet?

Go ahead and shoot them…no, just kidding. Let’s see, what should I do…?

Part of me wants to cheer for a Bersani-Monti coalition government for the same reason that I wanted Hollande to win in France. When there’s no good alternative, let the above-board statists prevail so there’s hope of a backlash when things fall apart.

And if the polling data is accurate, that’s probably going to happen.

But part of me wants Grillo to do well just for the entertainment value. And maybe he would blow up the current system, which unquestionably has failed, though one wonders whether any system will work now that a majority of Italians are riding in the wagon of government dependency.

Indeed, it’s a bit of serendipity that a former Cato intern who came from Italy drew this famous set of cartoons about the rise and fall of the welfare state.

While I’m largely uncertain about what should happen in this election, let me close with a few thoughts on public policy in Italy. In particular, I want to disagree with some of my right-leaning friends who argue that the euro should be blamed for Italy’s woes.

I’m not a fan of the single currency, largely because it is part of the overall euro-federalist campaign to create a Brussels-based superstate.

That being said, the euro has been a good thing for Italy and other Club Med nations. As I explained last July, it means that countries such as Italy, Spain, and Greece can’t augment the damage of bad fiscal and regulatory policy with inflationary monetary policy.

In other words, it is good news that Italy can’t use inflation as a temporary narcotic to offset the pain caused by too much red tape and an excessive burden of government spending.

This doesn’t mean that politicians will ever choose the right approach of free markets and small government, but at least there’s a 2 percent chance of that happening if they stay with the euro. If Italy goes back to the lira, the odds of good reform drop to .00003 percent.

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Debunking Sequester Hysteria from the Big Spenders in Washington

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

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

Let’s take a serious look at this topic.

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

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

Will elaborates on the Navy’s shameful  stunt.

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

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

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

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

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

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

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

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

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

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

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

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

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

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Will GOP Fumble Away Guaranteed Sequester Victory?

Notwithstanding hysterical rhetoric from the White House, the bureaucracies, and the various pro-spending lobbies in Washington, the sequester does not mean “vicious” or “draconian” spending cuts.

I wish that was the case.

All it does is restrain spending so that it grows by $2.4 trillion over the next 10 years rather than $2.5 trillion. We need a much greater degree of fiscal discipline to address the long-term spending crisis – including some real entitlement reform.

But the sequester is certainly better than doing nothing.

My concern, though, is that feckless and incompetent Republicans will fumble away victory. I explain in this Larry Kudlow interview that “doing nothing” is the right approach since the sequester happens automatically, but I’m worried that this very modest step in the right direction will be eroded as part of subsequent spending bills.

On a related note, Byron York of the Washington Examiner is rather perplexed by the GOP’s sequester strategy, which is based on the inconsistent message that it should happen, but that it’s bad.

Boehner calls the cuts “deep,” when most conservatives emphasize that for the next year they amount to about $85 billion out of a $3,600 billion budget.  Which leads to another question: Why would Boehner adopt the Democratic description of the cuts as “deep” when they would touch such a relatively small part of federal spending? The effect of Boehner’s argument is to make Obama seem reasonable in comparison. After all, the president certainly agrees with Boehner that the sequester cuts threaten national security and jobs.  The difference is that Obama wants to avoid them.  At the same time, Boehner is contributing to Republican confusion on the question of whether the cuts are in fact “deep” or whether they are relatively minor. Could the GOP message on the sequester be any more self-defeating?

My two cents is that fiscal conservatives should argue that sequestration isn’t the ideal way to trim the burden of government spending, but that it’s the only option since President Obama is refusing to look at any alternatives unless they are based on class-warfare tax hikes and phony entitlement gimmicks.

What really matters, though, is in the driver’s seat in this battle. They can win…but only if they want to.

Every so often, I issue imperious edicts about things that Republicans should do to demonstrate that they genuinely support limited government.

1. No tax increases, since more money for Washington will encourage a bigger burden of government and undermine prosperity.
2. To stop bailouts for Europe’s decrepit welfare states, no more money for the International Monetary Fund.
3. Reform the biased number-crunching methodology at the Congressional Budget Office and Joint Committee on Taxation.
4. No more money from American taxpayers to subsidize the left-wing bureaucrats at the Paris-based Organization for Economic Cooperation and Development.
5. Defund the crony capitalists at the Export-Import Bank.

I’m not naive enough to think that GOPers actually care about my demands, but I certainly think the sequester is a “gut-check” moment for Republicans.

If they capitulate to Obama in the short run, or if they wipe out the sequester savings as part of subsequent spending bills, that will be a very dismal sign that the folks who came to DC thinking it was a cesspool have instead decided that it’s really a hot tub.

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The Corrupt Nexus of Big Business and Big Government

I did a video several years ago on the link between big government and big corruption, and I periodically revisit the issue by citing disgusting examples of sleaze and cronyism ranging from the Export-Import Bank to the racial spoils scam in Alaska.

The folks at Learn Liberty also have a great video on this topic, explaining how big government creates all sorts of unfair and corrupt advantages for politically connected large corporations.

Amen. Whether we’re talking about TARP bailouts, our loophole-ridden 72,000-page tax code, Obamacare favoritism, or green-energy scams, it seems like the federal government is a giant favor factory.

So why, then, are some people in favor of big government. Is it naiveté or are they part of the racket?

In any event, I highly recommend some other Learn Liberty videos.

• What’s better, free trade or protectionism?
• How government subsidies increase the cost of higher education.
• Is Obamacare constitutional?
• Examining how excessive federal spending is America’s real fiscal problem.

I especially like the last video since it echoes many of the points I made in my video series on the economics of fiscal policy.

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Defending Cato from the Predictably Inaccurate Ramblings of Paul Krugman

Writing for the New York Times, Paul Krugman has a new column promoting more government spending and additional government regulation. That’s a dog-bites-man revelation and hardly noteworthy, of course, but in this case he takes a swipe at the Cato Institute.

The financial crisis of 2008 and its painful aftermath…were a huge slap in the face for free-market fundamentalists. …analysts at right-wing think tanks like…the Cato Institute…insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.

Upon reading this, my first reaction was a perverse form of admiration. After all, Krugman explicitly advocated for a housing bubble back in 2002, so it takes a lot of chutzpah to attack other people for the consequences of that bubble.

He likes cats, so he’s not all bad

But let’s set that aside and examine the accusation that folks at Cato had a Pollyanna view of monetary and regulatory policy. In other words, did Cato think that “deregulated markets were doing just fine”?

Hardly. If Krugman had bothered to spend even five minutes perusing the Cato website, he would have found hundreds of items by scholars such as Steve Hanke, Gerald O’Driscoll, Bert Ely, and others about misguided government regulatory and monetary policy. He could have perused the remarks of speakers at Cato’s annual monetary conferences. He could have looked at issues of the Cato Journal. Or our biennial Handbooks on Policy.

The tiniest bit of due diligence would have revealed that Cato was not a fan of Federal Reserve policy and we did not think that financial markets were deregulated. Indeed, Cato scholars last decade were relentlessly critical of monetary policy, Fannie Mae, Freddie Mac, Community Reinvestment Act, and other forms of government intervention.

Heck, I imagine that Krugman would have accused Cato of relentless and foolish pessimism had he reviewed our work  in 2006 or 2007.

I will confess that Cato people didn’t predict when the bubble would peak and when it would burst. If we had that type of knowledge, we’d all be billionaires. But since Krugman is still generating income by writing columns and doing appearances, I think it’s safe to assume that he didn’t have any special ability to time the market either.

Krugman also implies that Cato is guilty of historical revisionism.

…many on the right have chosen to rewrite history. Back then, they thought things were great, and their only complaint was that the government was getting in the way of even more mortgage lending; now they claim that government policies, somehow dictated by liberals even though the G.O.P. controlled both Congress and the White House, were promoting excessive borrowing and causing all the problems.

I’ve already pointed out that Cato was critical of government intervention before and during the bubble, so we obviously did not want government tilting the playing field in favor of home mortgages.

It’s also worth nothing that Cato has been dogmatically in favor of tax reform that would eliminate preferences for owner-occupied housing. That was our position 20 years ago. That was our position 10 years ago. And it’s our position today.

I also can’t help but comment on Krugman’s assertion that GOP control of government last decade somehow was inconsistent with statist government policy. One obvious example would be the 2004 Bush Administration regulations that dramatically boosted the affordable lending requirements for Fannie Mae and Freddie Mac, which surely played a role in driving the orgy of subprime lending.

And that’s just the tip of the iceberg. The burden of government spending almost doubled during the Bush years, the federal government accumulated more power, and the regulatory state expanded. No wonder economic freedom contracted under Bush after expanding under Clinton.

But I’m digressing. Let’s return to Krugman’s screed. He doesn’t single out Cato, but presumably he has us in mind when he criticizes those who reject Keynesian stimulus theory.

…right-wing economic analysts insisted that deficit spending would destroy jobs, because government borrowing would divert funds that would otherwise have gone into business investment, and also insisted that this borrowing would send interest rates soaring. The right thing, they claimed, was to balance the budget, even in a depressed economy.

Actually, I hope he’s not thinking about us. We argue for a smaller burden of government spending, not a balanced budget. And we haven’t made any assertions about higher interest rates. We instead point out that excessive government spending undermines growth by undermining incentives for productive behavior and misallocating labor and capital.

But we are critics of Keynesianism for reasons I explain in this video. And if you look at current economic performance, it’s certainly difficult to make the argument that Obama’s so-called stimulus was a success.

But Krugman will argue that the government should have squandered even more money. Heck, he even asserted that the 9-11 attacks were a form of stimulus and has argued that it would be pro-growth if we faced the threat of an alien invasion.

In closing, I will agree with Krugman that there’s too much “zombie” economics in Washington. But I’ll let readers decide who’s guilty of mindlessly staggering in the wrong direction.

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Government Diets Are Hazardous to Fiscal Health

Remember when Obama claimed that there wasn’t a spending problem in Washington?

Cartoonists had a field day, portraying the President as an in-denial spendaholic.

But perhaps Obama was right. Not in the way he thinks, to be sure, but perhaps it’s better to categorize Washington’s spending binges as an eating disorder.

Or, to be more charitable, as a form of gluttony.

We’ve already explored that theme in this cartoon about redistribution, as well as this cartoon about the VAT.

And that’s the point of this new Lisa Benson cartoon.

As you can probably guess, I wish the plus-sized lady was labeled “big government” or “government spending,” but it’s still a good cartoon.

Henry Payne has a similar message in his cartoon, and I like it even better because it’s obvious that the problem is that government is too big.

If you like the gluttony genre but prefer monsters instead of people, this cartoon about spending and the fiscal cliff is worth sharing, as is this cartoon about class-warfare taxes and the deficit.

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