Great Moments in Foreign Government

In my writings about “Great Moments in Foreign Government,” I’ve come across amazing examples of bone-headed and incompetent behavior by politicians and bureaucrats in other nations.

• The British government giving welfare to people with multiple wives.
• The German government having a jihadist working in one of its intelligence agencies.
• The Italian government appointing the wrong person for a job that shouldn’t exist.
• The Norwegian government financing friends for a mass murderer.
• The Greek government turning tourists into snoops for the tax police.
• The French government ordering trains that were too wide for railway stations.
• The Japanese government persecuting people for the horrible crime of giving unlicensed coffee enemas.
• The British government providing welfare payments for foreigners living in other countries.
• The German government spending more to administer a tax than it gets from collecting the tax.

Let’s add to this collection with three new stories about failures by foreign governments.

Our first example is from the United Kingdom, where the Times reports that spending on “sex education” actually increased teen pregnancy rates.

Teenage pregnancy rates have been reduced because of government cuts to spending on sex education and birth control for young women, according to a study that challenges conventional wisdom. The state’s efforts to teach adolescents about sex and make access to contraceptives easier may have encouraged risky behaviour rather than curbed it, the research suggests. In 1999, faced with some of the highest teenage pregnancy rates in Europe, ministers paid councils tens of millions of pounds a year to tackle the problem. Some local authorities made the morning-after pill freely available through pharmacies, while most hired teenage pregnancy “co-ordinators”, opened sexual health clinics in schools, and funded sex and relationship education (SRE) classes. The number of pregnancies, however, has fallen at a significantly faster rate since the grants were scrapped in 2010, in spite of critics’ dire prophecies to the contrary. David Paton, of the Nottingham University Business School, and Liam Wright, of the University of Sheffield, found that the decline was steepest in areas where councils slashed their teenage pregnancy budgets most aggressively. …Analysis of 149 local authorities from 2009 to 2014 adds to a body of evidence that suggests that when the government involves itself in teenagers’ sex lives it often winds up achieving the opposite of what was intended.

A government policy backfiring? Perish the thought!

Reminds me of the story about students who took driver education classes from the government in Indiana being more likely to have accidents than the students who didn’t take classes.

Our second example is from Sweden, where a local governments wants to create an entitlement for on-the-clock sex breaks.

Workers in Sweden could soon be allowed to take paid “sex breaks” during the day… A councillor in the northern town of Overtornea presented a motion asking that the area’s workers be given an hour during the day to go home and be intimate with their partners. …Muskos admitted there was no way to check whether workers would actually use the hour for its intended purpose. “You can’t guarantee that a worker doesn’t go out for a walk instead,” he said, adding that employers needed to trust their employees. …”This means that childbirth should be encouraged,” his motion states, as reported by Swedish newspaper Kuriren. …He said single people should also be allowed to take the hour to spend time improving their own well-being.

I wonder if the government will hire additional bureaucrats to monitor current bureaucrats to ensure that they are having sex on their breaks.

But what about those without spouses or significant others? Will the government pay to get them a partner? Don’t laugh, that’s something the British government already has done.

Speaking of which, we return to the United Kingdom for our third and final example. It seems lemonade cops don’t just exist in California, Georgia, and Oregon, they also patrol the mean streets of London.

A five-year-old girl selling lemonade to revellers heading to a festival in east London had her stand shut down by council officers who slapped her and her father with a £150 fine. Andre Spicer said his daughter burst into tears and told him “I’ve done a bad thing” after enforcement officers read out a lengthy legal letter before issuing him the notice. The five-year-old and Mr Spicer, a professor at City University, were given the fine for “trading without a permit” after they set up the make-shift stall near their home in Mile End. …Mr Spicer branded the enforcements officers’ decision an “over-zealous way of applying the rules,” after the pair set out to refresh festival goers heading to Lovebox in Victoria Park on Saturday. He said: “It’s not like she was trying to make a massive profit, this is just a five-year-old kid trying to sell lemonade. …Mr Spicer said he tried to tell his distraught daughter they would set up another stand to sell their homemade pop once they had a permit, but she replied: “No. It’s too scary.”

At least Canada tries to be unique. They bust kids who sell worms instead of lemonade.

But perhaps harassing kids is the best we can expect from the British government. After all, this is the place that is sometimes too incompetent to give away money. Though our cousins across the Atlantic are remarkably effective at producing pointless signs and road markings.

Two Reasons Why Policy Stability Means Economic Decline for Italy

I’m rather pessimistic about Italy.

Simply stated, it’s economy is moribund. If you peruse the OECD’s economic database, you’ll see that both inflation-adjusted GDP and inflation-adjusted private consumption expenditure (in some ways a more accurate measure of actual quality of life) have grown by an average of just slightly over one percent annually this century.

And even though Italy’s population growth has been anemic, there are more people. And when you add a larger population to the equation, you get per-capita changes in output and living standards that are even less impressive.

But not everyone shares my dour outlook. I recently exchanged views with someone who said that Italy hasn’t increased the burden of government in recent years.

And that person is right. Sort of.

Here’s a chart showing Italy’s score from Economic Freedom of the World since the start of the 21st century. As you can see, it’s been remarkably stable.

But I have two reasons why I think policy stability is a recipe for economic decline.

First, you don’t win a race by standing still if others are moving forward. If you look closely at the above chart, you will see that Italy used to be ranked #36 in the world for economic freedom but it now ranks #69. In other words, Italy’s absolute level of economic freedom barely changed over the period, but its relative position declined significantly because other nations engaged in reforms and leapfrogged Italy in the rankings.

Second, Italy is in the middle of dramatic demographic changes that will have a huge impact on fiscal policy. People are living longer and having fewer children, but Italy’s welfare state was set up on the assumption that there would be lots of working-age taxpayers to finance old-age beneficiaries. In other words, policy stability will lead to fiscal crisis thanks to changes in the composition of the population. Think Greece, but on a bigger scale.

And when I refer to Greece on a bigger scale, I’m thinking another fiscal crisis.

Demond Lachman of the American Enterprise Institute is pessimistic about Italy and warns that high levels of red ink could cause a big mess.

We’ve got an Italian economy that is categorized by extremely high public debt. Their public debt level is now something like 132% of GDP, they’ve got a banking system that is bust, that banks have something like 18% of their loans non-performing, that is a huge amount, the economy is completely sclerotic, that the level of Italian GDP today is pretty much the same as it was some fifteen years ago. There’s been practically no growth, declining living standards… What also makes Italy very important from a global point of view is that we’re now not talking about a small country like Greece which doesn’t have that much systemic significance. We’re talking about the third largest country in the Eurozone. We’re talking about a country that has the world’s third largest sovereign bond market with something like two and a half trillion dollars of debt.

And don’t forget that these grim fiscal numbers probably mean even higher taxes on Italy’s young workers.

But those taxpayers aren’t captives. Cristina Odone, in a column for CapX, points out that young people are getting the short end of the stick.

Gerontocracy, stifling regulations and huge unemployment have hindered Italy’s prosperity for decades now. The country hailed for its economic miracle and famed for its creative and industrious entrepreneurs (at the helm, usually, of family-run businesses such as Gucci, Prada, and Ferrero) today comes second only to Greece (among EU countries) for the size of its national debt. …Italy’s unemployed youngsters, who constitute 40 per cent of under-24-year-olds, gnash their teeth at the unfairness of national life, where fossils control the levers of power while flouting their sinecures. A quarter of under-30-year-olds classify as NEETS, young people who are not in education, work or training. Contrast this with the UK, where only one in 10 under the age of 30 is in the same position. …Labour laws continue to blight young people’s prospects. …This sclerosis risks turning Italy into the sick man of Europe.

No wonder many young Italians are migrating to nations with more economic opportunity. AFP has a story on the dour outlook in Italy.

With the country struggling to kick an economic slump, some 40,000 Italians between 18 and 34 years old set out to seek greener pastures elsewhere in 2015, according to the Migrantes Foundation. “Just talking with people (in Italy) it’s clear going away might be the only solution,” said D’Elia, 26, who has spent the last five years in London, where he currently works as a barman, and intends to stay for now despite high living costs. …most of Italy’s youths are unwilling to return — and the country is seen as offering little to attract foreign graduates. …GDP is forecast to inch up just 1.3 percent this year. The jobless rate hovers at over 11 percent, well above the euro area average of 9.3 percent. Among 15 to 24-year olds it leaps to 37 percent, compared with a European average of 18.7 percent. …Sergio Mello, who set up a start-up in Hong Kong before moving to San Francisco, said Italy “does not offer a fertile environment to develop a competitive business”. …Mello says there are other problems: “The bureaucracy wastes a lot of time”, the red tape “drives you crazy”.

Unfortunately, rather than ease up on government burdens so that young people will have some hope for the future, some Italian politicians want new mandates, new spending, new taxes, and new restrictions.

I’ve previously written about new destructive tax policies that shrink the tax base. And I’ve written about wasteful new spending schemes, like a €500 “culture bonus.”

And now there’s something equally silly on the regulatory front being proposed by politicians. Here are excerpts from a report by Heat Street on the initiative.

Italy could soon become the first Western country to offer paid “menstrual leave” to female workers. …If passed, it would mandate that companies enforce a “menstrual leave” policy and offer three paid days off each month to working women who experience painful periods. …The Italian version of Marie Claire described it as “a standard-bearer of progress and social sustainability.” But the bill also has critics, including women who fear this sort of measure could backfire and end up stigmatizing them. Writing in Donna Moderna, another women’s magazine, Lorenza Pleuteri argued that if women were granted extra paid leave, employers would be even more reluctant to hire women, in a country where women already struggle to integrate the workforce. …Miriam Goi, a feminist writer, …fears that rather than breaking taboos about women’s menstrual cycle, the measure could end up perpetuating the idea that women are more emotional than men and require special treatment.

It’s unclear if this policy was actually enacted, but it’s a bad sign that it was even considered. Simply stated, making workers more expensive is not a good way to encourage more job creation. Even a columnist for the New York Times acknowledged that feminist-driven economic policies backfire against women.

The bottom line is that Italy needs sweeping reductions in the burden of the public sector. Yet the nation’s politicians are more interested in expanding the size and scope of government. Perhaps now it’s easy to understand why I fear the country may have passed the tipping point. You can be in a downward spiral even if policy doesn’t change.

The Top-100 Libertarians

I’m in Las Vegas for FreedomFest, which is sort of like summer camp for libertarians, small-government conservatives, and others who don’t like a bloated and intrusive state.

I’ll be talking about tax reform, the sharing economy, and strategies to constrain big government.

One of the features of this 10th-anniversary meeting of FreedomFest is that the world’s top-100 libertarians will be feted. You can see the entire list at NewsMax, but here’s the top 10. A very impressive collection.

You’ll notice that Cato’s founder and former president is in the Top 10, but he’s not the only representative from the organization.

The Cato Institute is justly recognized for being a principled and effective organization.

So it’s no surprise that several of us are listed in the Top 100.

I’m honored to be on the list, though I wonder if I’m there because I’m noisy rather than competent. That being said, given the expansion of government under both Bush and Obama, I guess nobody would be on the list if it was based on achievements. We obviously need to do a better job as a movement.

Here’s a photo from a casual dinner last night that included David Boaz (#15), Richard Rahn (#61), Barbara Kolm (#64), Veronique de Rugy (#84), and Deirdre McCloskey (#87). And yours truly (#38), of course.

A rogue’s gallery of dissidents, for sure.

Let’s close with some libertarian humor, courtesy of a future Top-100 libertarian who also is in Vegas for FreedomFest.

I’ll have to add this to my collection of pro-and-con libertarian humor.

In One Story, Everything You Need to Know about Government

Every so often, I run across a chart, cartoon, or story that captures the essence of an issue. And when that happens, I make it part of my “everything you need to know” series.

I don’t actually think those columns tell us everything we need to know, of course, but they do show something very important. At least I hope.

And now, from our (normally) semi-rational northern neighbor, I have a new example.

This story from Toronto truly is a powerful example of the difference between government action and private action.

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. …Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. …Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. …Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year.

There are actually two profound lessons to learn from this story.

Since I’m a fiscal wonk, the part that grabbed my attention was the $550 cost of private action compared to $65,000 for government. Or maybe $150,000. Heck, probably more considering government cost overruns.

Though we’re not actually talking about government action. God only knows how long it would have taken the bureaucracy to complete this task. So this is a story of inexpensive private action vs. costly government inaction.

But there’s another part of this story that also caught my eye. The bureaucracy is responding with spite.

The city is now threatening to tear down the stairs because they were not built to regulation standards. …City bylaw officers have taped off the stairs while officials make a decision on what to do with it. …Mayor John Tory…says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. …“We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

But there is a silver lining. With infinite mercy, the government isn’t going to throw Mr. Astl in jail or make him pay a fine. At least not yet.

Astl has not been charged with any sort of violation.

Gee, how nice and thoughtful.

One woman has drawn the appropriate conclusion from this episode.

Area resident Dana Beamon told CTV Toronto she’s happy to have the stairs there, whether or not they are up to city standards. “We have far too much bureaucracy,” she said. “We don’t have enough self-initiative in our city, so I’m impressed.”

Which is the lesson I think everybody should take away. Private initiative works much faster – and much cheaper – than government.

P.S. Let’s also call this an example of super-federalism, or super-decentralization. Imagine how expensive it would have been for the national government in Ottawa to build the stairs? Or how long it would have taken? Probably millions of dollars and a couple of years.

Now imagine how costly and time-consuming it would have been if the Ontario provincial government was in charge? Perhaps not as bad, but still very expensive and time-consuming.

And we already know the cost (and inaction) of the city government. Reminds me of the $1 million bus stop in Arlington, VA.

But when actual users of the park take responsibility (both in terms of action and money), the stairs were built quickly and efficiently.

In other words, let’s have decentralization. But the most radical federalism is when private action replaces government.

The Libertarian Hypocrisy Test

I’ve shared several quizzes that people can take to see whether they are libertarian, some of which are very simple and some of which are very nuanced and complex.

• The Definitive Political Orientation test.
• The Circle test.
• The Libertarian Purity test.
• The 8 Values test.
• The world’s smallest political quiz.

I’ve also shared many examples of statist hypocrisy.

• Six examples from 2014.
• Leonardo DiCaprio’s giant carbon footprint.
• John Kerry’s money in tax havens.
• Rich leftists with kids in private school while fighting school choice for poor kids.
• Celebratory leftists dodging their tax obligations.

So I guess I shouldn’t be surprised to see that someone on the left wants to play this game by combing the concept of quizzes and hypocrisy. I don’t know R.J. Eskow, but he has a quiz on a left-wing website that’s designed to ostensibly measure libertarian hypocrisy.

Though it’s hard to treat the exercise seriously since it is prefaced by some rather silly rhetoric.

Libertarian…political philosophy all but died out in the mid- to late-20th century, but was revived by billionaires and corporations that found them politically useful. …They call themselves “realists” but rely on fanciful theories… They claim that selfishness makes things better for everybody, when history shows exactly the opposite is true. …libertarianism, the political philosophy whose avatar is the late writer Ayn Rand. It was once thought that this extreme brand of libertarianism, one that celebrates greed and even brutality, had died in the early 1980s… There was a good reason for that. Randian libertarianism is an illogical, impractical, inhumane, unpopular set of Utopian ravings. …It’s only a dream. At no time or place in human history has there been a working libertarian society which provided its people with the kinds of outcomes libertarians claim it will provide.

I’m not an ideological enforcer of libertarianism, but I can say with great confidence that Randians are only a minor strain of the libertarian movement. Many of us (including me) enjoyed one or more of her books, and some of us even became libertarians as a result of reading tomes such as Atlas Shrugged, but that’s the extent of her influence.

I also find it odd that Eskow didn’t do his homework when conspiracy-mongering about the Kochs or mentioning Cato. We get almost no funds from corporations. Indeed, I’m willing to bet that major left-wing think tanks get a much higher share of their budget from businesses.

…political libertarianism suddenly had pretensions of legitimacy. This revival is Koch-fueled, not coke-fueled… Exxon Mobil and other corporate and billionaire interests are behind the Cato Institute, the other public face of libertarianism.

Though Eskow gives us a bit of credit.

…the unconventionality of their thought has led libertarians to be among this nation’s most forthright and outspoken advocates for civil liberties and against military interventions.

Gee, thanks. What a magnanimous concession!

But I’ve spent enough time on preliminaries. Let’s get to the test.

Though I have to warn you that it’s just a rhetorical test. You can’t click on answers. There’s not even an answer key where you can calculate any results.

For all intents and purposes, the test is just a series of “gotcha” questions. Eskow probably hopes that libertarians will get flustered when confronted by this collection of queries.

But I’m always up for a challenge. So I decided to give my two cents in response to each question.

Are unions, political parties, elections, and social movements like Occupy examples of “spontaneous order”—and if not, why not?

The term “spontaneous order” refers to the natural tendency of markets to produce efficient and peaceful outcomes without any sort of centralized design or command. I’m not sure how this is connected to government and politics, however. Perhaps Eskow is asking whether political pressure groups can arise without centralized design and command. If so, then I’ll say yes. But if the question is designed to imply that market forces are akin to government actions and/or political activity, I’ll say no.

Is a libertarian willing to admit that production is the result of many forces, each of which should be recognized and rewarded?

Admit it? That’s an inherent part of our approach to economics. The famous “I, Pencil” essay celebrates this principle, and this video is a modern version that captures many of the same concepts. For what it’s worth, I’m guessing Eskow thinks that the market allocation of recognition and reward is somehow deficient, so he’s making some sort of weird argument that intervention is needed.

Is our libertarian willing to acknowledge that workers who bargain for their services, individually and collectively, are also employing market forces?

Yes, we think workers should be able to use any non-coercive tactic to get the maximum pay, including joining unions. And we also recognize the right of employers to use non-coercive tactics to keep costs down. But note that I include “non-coercive” in my analysis. That’s because no employee should be forced to remain at a company that doesn’t pay enough, and no employer should be forced to hire any particular worker or deal with any particular union. Market forces should determine those choices.

Is our libertarian willing to admit that a “free market” needs regulation?

Admit it? We view the private economy in part as a giant network of mutually reinforcing regulation. But Eskow probably doesn’t understand how private regulation operates. And besides, I’m sure his question is about command-and-control government regulation. And if that’s the focus of the question, am I a hypocrite for saying yes in some circumstances, but accompanied by rigorous cost-benefit analysis?

Does our libertarian believe in democracy?

Most libertarians will avoid the hypocrite label on this question because we are not fans of “democracy.” At least, we don’t believe in democracy if that means untrammeled majoritarianism. Indeed, the U.S. Constitution was created in part to protect some minority rights from “tyranny of the majority.” The bottom line is that we believe in a democratic form of government, but one where the powers of government are tightly constrained.

Does our libertarian use wealth that wouldn’t exist without government in order to preach against the role of government?

This question is based on the novel left-wing theory that wealth belongs to government because the economy would collapse without “public goods.” This might be an effective argument against an anarcho-capitalist, but I don’t think it has any salience when dealing with ordinary libertarians who simply want the federal government to stay within the boundaries envisioned by the Founding Fathers. Small-government libertarians are willing to give government 5-10 percent on their income to finance these legitimate activities. But, yes, we will preach when the burden of government expands beyond that point.

Does our libertarian reject any and all government protection for his intellectual property?

I’ll admit this is a tough question. I’ve never written on this issue, but libertarians are split on whether governments should grant and enforce patents and copyrights. Though I suspect both camps are probably intellectually consistent, so I doubt hypocrisy is an issue.

Does our libertarian recognize that democracy is a form of marketplace?

The “public choice” school of economics was created to apply economic analysis to political action, and most libertarians would agree with that approach. So the obvious answer is that, yes, we recognize that democracy is a type of marketplace. Once again, though, I think Eskow has an ulterior agenda. He probably wants to imply that if we accept market outcomes as desirable, then we must also accept political decisions as desirable. Yet he should know, based on one of the questions above, that we’re not huge fans of majoritarianism. The key distinction, from our perspective, is that market choices don’t involve coercion.

Does our libertarian recognize that large corporations are a threat to our freedoms?

Since libertarians are first in line to object when big companies lobby for bailouts, subsidies, and protectionism, the answer is obviously yes. Libertarians opposed Dodd-Frank, unlike the big companies on Wall Street. Libertarians opposed Obamacare, unlike the big insurance companies and big pharmaceutical companies. Libertarians oppose the Export-Import Bank, unlike the cronyists at the Chamber of Commerce. We are very cognizant of the fact that businesses are sometimes the biggest enemies of the free market.

Does he think…that historical figures like King and Gandhi were “parasites”?

This question is a red herring, based on Ayn Rand’s hostility to selflessness. As I noted above, very few libertarians are hard-core Randians. We have no objection to people dedicating their lives to others. And if that means fighting for justice and against oppression, we move from “no objection” to “enthusiastic support.”

If you believe in the free market, why weren’t you willing to accept as final the judgment against libertarianism rendered decades ago in the free and unfettered marketplace of ideas?

Since we don’t have any pure laissez-faire societies, we libertarians have to admit that we still have a long way to go. But our views aren’t right or wrong based on whether they are accepted by a majority. Heck, I would argue for libertarianism in France, where I’d have several thousand opponents for every possible ally.

I’ll close today’s column by briefly expanding on this final question, especially since Eskow also made similar claims in some of the text I excerpted above.

If you look around the world, you won’t find a Libertopia or Galt’s Gulch (egads, a Rand reference!). That being said, there is a cornucopia of evidence that nations with comparatively small and non-intrusive governments are much more prosperous than countries with lots of taxes, spending, and intervention.

Yes, voters do have an unfortunate tendency to elect more bad politicians (in place likes France and Greece) than sensible politicians (in places such as Switzerland and New Zealand), but that’s not the real test. What ultimately matters is that there’s a very strong relationship between liberty and prosperity. Libertarians pass that test with flying colors.

Bad Federalism Is Better than No Federalism

I don’t like the income tax that’s been imposed by our overlords in Washington. Indeed, I’ve speculated whether October 3 is the worst day of the year because that’s the date when the Revenue Act of 1913 was signed into law.

I don’t like state income taxes, either.

And, as discussed in this interview about Seattle from last week, I’m also not a fan of local income taxes.

From an economic perspective, I think a local income tax would be suicidally foolish for Seattle. Simply stated, this levy will drive some well-heeled people to live and work outside the city’s borders. And when revenues fall short of projections, Seattle politicians likely will compensate by increasing the tax rate and also extending the tax so it is imposed on those with more modest incomes. And that will drive more people out of the city, which will lead to an even higher rate that hits even more people.

Lather, rinse, repeat.

Though I pointed out that this grim outcome may be averted if the courts rule that Seattle doesn’t have the legal authority to impose an income tax.

But I also explained in the discussion that a genuine belief in federalism means that you should support the right of state and local governments to impose bad policy. I criticize states such as California and Illinois when they expand the burden of government. And I criticize local entities such as Hartford, Connecticut, and Fairfax County, Virginia, when they expand the burden of government.

But I don’t think that Washington should seek to prohibit bad policy. If some sub-national governments want to torment their citizens with excessive government, so be it.

There are limits, however, to this bad version of federalism. State and local governments should not be allowed to impose laws outside their borders. That’s why I’m opposed to the so-called Marketplace Fairness Act. And they shouldn’t seek federal handouts to subsidize bad policy, such as John Kasich’s whining for more Medicaid funding.

Moreover, a state or local government can’t trample basic constitutional freedoms, for instance. If Seattle goes overboard with its anti-gun policies, federal courts presumably (hopefully!) would strike down those infringements against the 2nd Amendment. Likewise, the same thing also would (should) happen if the local government tried to hinder free speech. Or discriminate on the basis on race.

By the way, it’s worth pointing out that these are all examples of the Constitution’s anti-majoritarianism (which helps to explain why the attempted smear of James Buchanan was so misguided).

The bottom line is that I generally support the rights of state and local governments to impose bad policy, so long as they respect constitutional freedoms, don’t impose extra-territorial laws, and don’t ask for handouts.

And I closed the above interview by saying it sometimes helps to have bad examples so the rest of the nation knows what to avoid. Greece and France play that role for the industrialized world. Venezuela stands alone as a symbol of failed statism in developing world. Places like Connecticut and New Jersey are poster children for failed state policy. And now Seattle can join Detroit as a case study of what not to do at the local level.

Social Security’s Creeping Fiscal Crisis

Since it is the single-largest government program, not only in the United States but also the entire world, it’s remarkable that Social Security isn’t getting much attention from fiscal policy wonks.

Sure, Obamacare is a more newsworthy issue because of the repeal/replace fight. And yes, it’s true that Medicare and Medicaid are growing faster and eventually will consume a larger share of the economy.

But those aren’t reasons to turn a blind eye toward a program that will soon have an annual budget of $1 trillion. Especially since the tax-and-spend crowd in Washington is actually arguing that the program should be expanded. I’m not kidding.

If nothing else, the just-released Trustees Report from the Social Security Administration demands attention. As I do every year, I immediately looked at Table VI.G9, which shows the annual inflation-adjusted budgetary impact of the program.

Here’s a chart showing how the program has grown since 1970 and what is expected in the future. Remember, these are inflation-adjusted numbers, so the sharp increase in outlays over the next several decades starkly illustrates that Social Security will be grabbing ever-larger amounts of money from the economy’s productive sector.

It’s also worth noting that the program already is in the red. Social Security outlays began to exceed revenues back in 2010.

And the numbers will get more out of balance over time.

By the way, some people say that the program is in decent shape since the “Trust Fund” isn’t projected to run out of money until 2034. That’s technically true, but utterly meaningless since it is nothing but a pile of IOUs.

You don’t have to believe me. A few years ago, I quoted this passage from one of Bill Clinton’s budgets.

These balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.

Amen.

This is why annual cash flow into and out of the program is what matters, at least if we care about the Social Security’s economic impact.

And for those who want to know about the gap between the inflow and outflow, here’s a chart showing how deficits are going to explode in coming decades. Again, keep in mind these are inflation-adjusted numbers.

That’s not a typo in the chart. The total shortfall between now and 2095 is a staggering $44.2 trillion. Yes, trillion.

Remarkably, there’s an even bigger long-run problem with Medicare and Medicaid. Which helps to explain I relentlessly push for genuine entitlement reform.

But let’s focus today on Social Security. The answer to this looming fiscal nightmare is to copy one of the many nations that have shifted to “funded” retirement systems based on real savings. I’m a big fan of the Australian approach. Chile also has a great system, and Switzerland and the Netherlands are good role models as well. Hong Kong and Singapore also rely on private savings for retirement, and both jurisdictions demonstrate that aging populations and falling birthrates aren’t necessarily a fiscal death sentence. Heck, even the Faroe Islands and Sweden have jumped on the bandwagon of private retirement accounts.

P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.