In a column for Human Progress, Neil Monnery compares the two jurisdictions.
As the world entered the turbulent 1960s, two men, half a world apart, one a doctor and the other a classicist, both foreigners far from home, were charged with bringing human progress to their adopted countries. …One, Che Guevara, the well-known Argentinean revolutionary, was the architect of Cuba’s communist economic system. The other, Sir John Cowperthwaite, was born in Britain and is largely unknown today. He was central to Hong Kong’s post-war recovery and to its unique laissez-faire, free-market economic policy. …Hong Kong and Cuba had similar GDP per capita in 1960. Since then, Hong Kong’s has grown 14-fold, Cuba’s just twice, leaving Hong Kong seven times more prosperous than Cuba. In 1960, Hong Kong’s GDP per capita was a third of its old mother country, Britain. Now, it is 40 percent higher, matching the United States and Switzerland. …Cuba and Hong Kong demonstrate the compound effect over six decades of state planning versus market forces.
Some folks on the left, when presented with this data, will admit that Cuba has fallen behind in terms of economic development.
But cranks like Bernie Sanders claim that’s okay because Castro and his cronies instead focused on human development.
But that’s a very weak argument. In an article for the Foundation for Economic Education, Hans Bader analyzes Cuba’s track record on education and health.
Castro did not give Cubans literacy. Cuba already had one of the highest literacy rates in Latin America by 1950, nearly a decade before Castro took power, according to United Nations data… Cuba has made less educational progress than most Latin American countries over the last 60 years. …Cuba led virtually all countries in Latin America in life expectancy in 1959, before Castro’s communists seized power. But by 2012, right after Castro stepped down as Communist Party leader, Chileans and Costa Ricans lived slightly longer than Cubans. Back in 1960, Chileans had a life span seven years shorter than Cubans, and Costa Ricans lived more than two years less than Cubans on average. …Today, life spans are virtually the same in Cuba as more prosperous Chile and Costa Rica—if you accept the rosy official statistics put out by Cuba’s communist government, which many people do not.
There are good reasons to doubt official numbers from Cuba.
People who visit the island have sad stories to tell.
For instance, in a column last year for the Wall Street Journal, Andy Laperriere explains what he saw on his church-sponsored trips to Cuba.
It’s astonishing some people still cling to a romanticized version of Cuban life under communism. It bears no resemblance to reality. …people who don’t have children’s Tylenol and cheap reading glasses probably aren’t getting world-class medical care. Another striking feature of Cuba is the pervasive idleness. Everywhere you look, people are standing around. They aren’t working, because they get paid almost nothing. …Even the buildings a few blocks from the seat of government in Havana are crumbling. It’s obvious to a visitor that Cubans live in abject poverty. …there are three classes of people in Cuba. The governmental elite live in gated communities and enjoy what Americans would regard as middle-class living standards. The average person who relies on his own income lives in desperate Third World conditions. In between are people with generous relatives in the U.S. They have more disposable income, but their living conditions are comparable to those of the poorest Americans.
What a depressing analysis.
I wrote a few days ago that Cuba may have done a good job of eliminating inequality, but only because everyone was poor.
But that wasn’t right. Like in many socialist regimes, there’s a tiny sliver of the population that enjoys decent living standards.
Or, if you’re the dictator, you live like a king. Here are some excerpts from a 2014 report in the U.K.-based Guardian.
Fidel Castro lived like a king with his own private yacht, a luxury Caribbean island getaway complete with dolphins and a turtle farm, and travelled with two personal blood donors, a new book claims. In La Vie Cachée de Fidel Castro (Fidel Castro’s Hidden Life), former bodyguard Juan Reinaldo Sánchez, a member of Castro’s elite inner circle, says the Cuban leader ran the country as his personal fiefdom like a cross between a medieval overlord and Louis XV. …the vast majority of Cubans were unaware their leader enjoyed a lifestyle beyond the dreams of many Cubans and at odds with the sacrifices he demanded of them. …In 2006 Forbes magazine listed the Cuban leader in its top 10 richest “Kings, Queens and Dictators”, citing unnamed officials who claimed Castro had amassed a fortune.
Let’s close by addressing the argument that Cuba is only poor because of the U.S. trade embargo.
Professor Art Carden addressed that argument in a column for the American Institute for Economic Research.
I think the embargo…should be lifted immediately, as it has given Cuban communists a convenient scapegoat for their country’s problems. The embargo, however, is not what causes Cuba’s woes, and people blaming the embargo overlook the fact that Cuba trades pretty extensively with the rest of the world–how else do you think Canadian and Mexican merchants get the Cuban cigars they hawk to American tourists? It’s not because a Cuban Rhett Butler is smuggling them past a blockade. It’s because Cuba trades freely with the entire world.
You may be thinking that’s just one economist’s opinion.
But it turns out that Art’s view is widely shared by other economists, as you can see from this tweet from Professor Jeremy Horpedahl.
Wow, these results are even stronger than the survey showing that economists disagreed with Thomas Piketty’s class-warfare hypothesis.
P.S. Let’s enjoy some Cuba-themed humor. First, our friends on the left sometimes claim free trade exploits developing nations. But, it that’s true, why do they claim Cuba is hurt be an absence of trade with the United States?
Back in 2009, there was strong and passionate opposition to Bush’s corrupt TARP scheme and Obama’s fake stimulus boondoggle – both of which had price tags of less than $1 trillion.
Today, Biden has already squandered $1.9 trillion on his version of “stimulus” and has asked Congress to expand the federal government’s budgetary burden by another $3.5 trillion (plus about $600 billion for so-called infrastructure).
Yet there doesn’t seem to be the same intensity of opposition, even though Biden is proposing policies that are far more costly.
Is this simply because Republicans were corrupted by Trump’s profligacy and are now comfortable with big government?
Or are they distracted by cultural battles over issues such as critical race theory?
I don’t know, but I’m very worried that insufficient opposition may result in Biden’s dependency agenda getting enacted.
And I’m even more worried because we now know that the left intends to increase the spending burden by a lot more than $3.5 trillion. Especially since Bernie Sanders is Chairman of the Senate Budget Committee.
The Wall Street Journalopined on this topic a couple of days ago.
Democrats have provided few details of what they plan to include in Sen. Bernie Sanders’s $3.5 trillion budget proposal, and now we know why. The real cost is $5 trillion or more… Their plan is to include every program but start small and pretend they’re temporary. This will let them skirt the budget-reconciliation rule that spending can’t add to the deficit outside a 10-year budget window without triggering a 60-vote threshold to pass. The nonprofit Committee for a Responsible Federal Budget examined the budget outline… Assuming the major provisions will be made permanent and continue through the 10-year budget window, the group says, the “policies under consideration could cost between $5 trillion and $5.5 trillion over a decade.” …All of this false accounting will let Democrats pretend the overall cost of their budget spending is lower than it really is… Any way you add it up, Democrats are attempting to pass the biggest expansion of government since the 1960s with narrow majorities and no electoral mandate. No wonder they want to disguise its real cost.
By the way, it’s not just Democrats who play this game. Some provisions of the Trump tax cut expire in 2025 because Republicans also finagled to get around restrictions that govern the 10-year budget process.
That being said, I don’t think there’s moral equivalency between proposals to let people keep their own money and the Biden-Bernie scheme to buy votes with other people’s money.
Anyhow, here’s the relevant table from the Committee for a Responsible Federal Budget’s report.
P.S. This battle is not just an issue of dollars and cents. Some of the Biden-Bernie proposals, such as per-child handouts, would increase dependency by undoing Bill Clinton’s welfare reform.
P.P.S. Don’t forget all the debilitating taxes that will accompany all the new spending.
P.P.P.S. But at least we’ll “catch up” with Europe if Biden-Bernie agenda is enacted.
It’s presumably not controversial to point out that the Washington Post (like much of the media) leans to the left. Indeed, the paper’s bias has given me plenty of material over the years.
As you can see, what really irks me is when the bias translates into sloppy, inaccurate, or misleading statements.
In 2011,the Post asserted that a plan to trim the budget by less than 2/10ths of 1 percent would “slash” spending.
Later that year, the Post claimed that the German government was “fiscally conservative.”
Ms. Warren’s version of the wealth tax, which calls for 2 percent annual levies on net wealth above $50 million, and 3 percent above $1 billion, very rich people would face large tax bills even when they had little or negative net income, forcing them to sell assets to pay their taxes. …huge chunks of private wealth tied up in real estate, rare art and closely held businesses are more difficult — sometimes impossible — to assess consistently. …Such problems help explain why national wealth taxes yielded only modest revenue in the 11 European countries that levied them as of 1995, and why most of those countries subsequently repealed them.
I’m disappointed that the Post overlooked the biggest argument, which is that wealth taxation would reduce saving and investment and thus lead to lower wages.
But I suppose I should be happy with modest steps on the road to economic literacy.
The Post‘s editorial also echoed my argument by pointing out that ProPublica was very dishonest in the way it presented data illegally obtained from the IRS.
ProPublica muddied a basic distinction, which, properly understood, actually fortifies the case against a wealth tax. The story likened on-paper asset price appreciation with actual cash income, then lamented that the two aren’t taxed at the same rate. …ProPublica’s logic implies that, when the stock market goes down, Elon Musk, whose billions are tied up in shares of Tesla, should get a tax cut.
Amen (this argument also applies to the left’s argument for taxing unrealized capital gains).
Now that I’ve presented the sensible portions of the Post‘s editorial, let’s shift to the bad parts.
First and foremost, the entire purpose of the editorial was to support more class-warfare taxation.
Fortunately, legitimate goals of a wealth tax can be achieved through other means… This would require undoing not only some of the 2017 GOP tax cuts, but much previous tax policy as well… The higher capital gains rate should be applied to a broader base of investment income… President Biden’s American Families Plan calls for reform of this so-called “stepped-up basis” loophole that would yield an estimated $322.5 billion over 10 years.
The editorial also calls for an expanded death tax, one that would raise six times as much money as the current approach.
…simply reverting to estate tax rules in place as recently as 2004 could yield $98 billion per year, far more than the $16 billion the government raised in 2020.
Last but not least, it argues for these tax increases because it wants us to believe that politicians will wisely use any additional revenue in ways that will increase economic opportunity.
The public sector could use new revenue from stiffer capital gains and estate taxes to expand opportunity.
Proponents argue that if we give politicians more money, we’ll somehow get more prosperity.
At the risk of understatement, this theory isn’t based on empirical evidence.
Which is the message of a 2017 video from the Center for Freedom and Prosperity. And it’s also the reason I repeatedly ask the never-answered question.
P.S. To make the argument that capital gains taxes and death taxes are better than wealth taxation, the Post editorial cites research from the Paris-based Organization for Economic Cooperation and Development. Too bad the Post didn’t read the OECD study showing that class-warfare taxes reduce overall prosperity. Or the OECD study showing that more government spending reduces prosperity.
In my four-part series on inequality (here, here, here, and here), I argue that that it is more important to instead focus on reducing poverty – especially since we know the policies needed to achieve that latter goal.
In this discussion, I contemplate why some folks don’t understand that message.
One reason is that some of them don’t care.
As explained by the Eighth Theorem of Government, they are motivated first and foremost by a desire for bigger government.
And it doesn’t matter whether they are driven by ideology or “public choice.” The bottom line is that helping people climb the economic ladder is – at best – a secondary concern.
But what about the well-meaning folks on the left? Is there a way of convincing them to channel their compassion in a better direction?
As mentioned in the interview, these are the people who generally believe that the economy is a fixed pie. As such when someone like Jeff Bezos is rich, they think it means other people are poor.
So it should be simple to show them that this isn’t true. There is a wealth of data showing how good (or even just decent) policies create more prosperity.
Looking specifically at the United States, we’re much richer today than we were in the past. And that’s true whether you go back 200 years or if you simply compared today’s economy with where America was after World War II.
But here’s what frustrates me. When I share this data with my left-leaning friends, they seem to have some sort of mental block that prevents them from reaching the obvious conclusion.
A few of them will pivot, acknowledge that broad-based growth happens, but then argue that growth is unaffected by policy.
In other words, nations can become more prosperous whether government is big or government is small.
Needless to say, there’s also a wealth of data showing that this isn’t true.
At which point the honest and intelligent folks on the left will explicitly or implicitly embrace Arthur Okun’s argument that it’s okay to have less growth if there’s more equality.
That’s when I point out that even small differences in growth make a big difference to income levels over just a few decades. Which means poor people ultimately will be richer if there’s more economic liberty.
So if they really care about the well-being of the less fortunate, they should be the biggest advocates of free markets and limited government.
The economic argument against capital gains taxation is very simple. It is wrong to impose discriminatory taxes on income that is saved and invested.
It’s bad enough that government gets to tax our income one time, but it’s even worse when they get to impose multiple layers of tax on the same dollar.
Even worse, he wants to expand the capital gains tax so that it functions as an additional form of death tax.
And that tax would be imposed even if assets aren’t sold. In other words, it would a tax on capital gains that only exist on paper (a nutty idea associated with Sens. Ron Wyden and Elizabeth Warren).
I’m not joking. In an article for National Review, Ryan Ellis explains why Biden’s proposal is so misguided.
The Biden administration proposes that on top of the old death tax, which is assessed on estates, the federal government should add a new tax on the deceased’s last 1040 personal-income-tax return. This new, second tax would apply to tens of millions of Americans. …the year someone died, all of their unrealized capital gains (gains on unsold real estate, family farms and businesses, stocks and other investments, artwork, collectibles, etc.) would be subject to taxation as if the assets in question had been sold that year. …In short, what the Biden administration is proposing is to tax the capital gains on a person’s property when they die, even if the assets that account for those gains haven’t actually been sold. …to make matters worse, the administration also supports raising the top tax rate on long-term capital gains from 23.8 percent to 43.4 percent. When state capital-gains-tax rates are factored in, this would make the combined rate at or above 50 percent in many places — the highest capital-gains-tax rate in the world, and the highest in American history.
This sounds bad (and it is bad).
But there’s more bad news.
…that’s not all. After these unrealized, unsold, phantom gains are subject to the new 50 percent double death tax, there is still the matter of the old death tax to deal with. Imagine a 50 percent death tax followed by a 40 percent death tax on what is left, and you get the idea. Karl Marx called for the confiscation of wealth at death, but even he probably never dreamed this big. …Just like the old death tax, the double death tax would be a dream for the estate-planning industry, armies of actuaries and attorneys, and other tax professionals. But for the average American, it would be a nightmare. The death tax we have is bad enough. A second death tax would be a catastrophic mistake.
Hank Adler and Madison Spach also wrote about this topic last month for the Wall Street Journal.
Here’s some of what they wrote.
Mr. Biden’s American Families Plan would subject many estates worth far less than $11.7 million to a punishing new death tax. The plan would raise the total top rate on capital gains, currently 23.8% for most assets, to 40.8%—higher than the 40% maximum estate tax. It would apply the same tax to unrealized capital gains at death… The American Families Plan would result in negative value at death for many long-held leveraged real-estate assets. …Scenarios in which the new death tax would significantly reduce, nearly eliminate or even totally eliminate the net worth of decedents who invested and held real estate for decades wouldn’t be uncommon. …The American Families Plan would discourage long-term investment. That would be particularly true for those with existing wealth who would begin focusing on cash flow rather than long-term investment. The combination of the new death tax plus existing estate tax rates would change risk-reward ratios.
P.S. Keep in mind that there’s no “indexing,” which means investors often are being taxed on gains that merely reflect inflation.
P.P.S. Rather than increasing the tax burden on capital gains, we should copy Belgium, Chile, Costa Rica, Czech Republic, Hungary, Luxembourg, New Zealand, Singapore, Slovenia, Switzerland, and Turkey. What do they have in common? A capital gains tax rate of zero.
Last year, I weighed in on the debate about whether companies should be operated for the benefit of owners (shareholders) or for the broader community (stakeholders).
Unsurprisingly, I sided with Milton Friedman and argued that businesses have a responsibility to maximize profits – assuming, of course, ethical behavior.
Moreover, I cited research showing how this is the approach that actually produces the maximum benefits for the rest of us (i.e., stakeholders).
But some people are not convinced by these insights.
David Gelles of the New York Times has a glowing profile of a former CEO, Hubert Joly, largely because of his apparent hostility to free markets.
Hubert Joly took over Best Buy in 2012… Since stepping down as chief executive in 2019, Mr. Joly has taken up a post teaching at Harvard Business School… In his book, on the speaking circuit and in meetings with other executives, Mr. Joly has taken up a campaign against the capitalist st atus quo. “…on the top of my F.B.I. most wanted list…is Milton Friedman, with his shareholder primacy — the excessive, obsessive focus on profits as the key thing that matters.”
Mr. Joly’s overt disdain for Friedman’s position seems noteworthy.
But it also seems hypocritical.
Why?
Because Joly did exactly what Friedman recommended. He is viewed as a successful CEO because he made changes that had the effect of making shareholders richer.
…the electronics retailer was struggling… Sales and profits were sagging, and the stock price had cratered. …Eschewing the conventional wisdom — that Best Buy should slash wages and cut costs in a bid to jack up profitability — Mr. Joly began investing in the company. He gave workers better perks… The strategy worked, and Best Buy shares soared during his tenure.
So why, then, is Mr. Joly so hostile to Friedman when he followed his approach?
Beats me, but I’m guessing he somehow thinks Friedman’s maxim means that a CEO should “slash wages” and close stores. And that sounds mean and heartless.
But Joly showed that Friedman’s maxim could be fulfilled in a different way. He figured out how to please consumers so that it was possible to expand the business and make workers better off.
Sometimes that happens because a poorly run company contracts (the seemingly heartless process of creative destruction) and sometimes that happens because a well-run company expands.
P.S. There’s one more quote from Mr. Joly that I want to address. As part of his interview with the NYT, he seemingly played the role of a guilt-ridden rich guy.
“I’m on the record saying that the more taxes I pay, the happier I am.”
To be fair, he didn’t actually say that he supported tax increases, either on himself or anyone else. It’s possible that he was really saying that he likes earning more money, which then results in a higher tax bill.
Ms. Hannah-Jones said that Cuba’s results are because of socialism.
On that point, I’ll agree, though I think it shows why that collectivist ideology is so destructive.
Let’s look at some comparisons based on the Maddison data. This first chart shows how Cuba has fallen far behind Panama and the Dominican Republic, two other multi-racial nations in the region.
The key thing to realize is that Cuba was equal to (or richer than) those countries when the communists took power in Cuba.
But socialist policies have caused Cuba’s economy to stagnate and now Panama is almost three times richer and the Dominican Republic is nearly two times richer (and you can click here is you also want to see comparisons with Chile and Costa Rica).
In other words, Cuba is a role model, but not for anything positive.
Let’s drive that point home with another chart comparing three nations – Cuba, Singapore, and Taiwan – that were roughly equal back in 1959.
What makes this comparison especially instructive is that Cuba went for socialism and Singapore and Taiwan became pro-market reformers. So it should be no surprise that the latter two have far surpassed Cuba.
Over the past couple of years, one of the most disturbing – and also revealing – things to happen in Washington is when Congresswoman Alexandria Ocasio-Cortez proposed giving more money to people “unwilling to work.”
As discussed in this interview, the left seems to want more dependency.
This is a very unfortunate development. Just four years ago, Joe Biden rejected no-strings-handouts such as “basic income.”
Let’s address one of the specific issues from the interview.
Regarding bonus unemployment benefits. I warned that we should be careful about over-interpreting short-run data. And that’s especially true because the states providing extra payments for joblessness are generally the states that also had the most onerous lockdown policies during the pandemic.
So, if unemployment is dropping in a state, is it because extra benefits have been cancelled, or is it a result of relaxed lockdown policies? Or is it something else, like lower tax rates?
One obvious way of trying to answer these questions is to ask people why they’re not working.
Here are the results of a recent poll, as reported by Λxios.
About 1.8 million out-of-work Americans have turned down jobs because of the generosity of unemployment insurance benefits, according to Morning Consult poll results released Wednesday. …U.S. businesses have been wrestling with labor supply shortages as folks capable of working have opted not to work for a variety of reasons. … Morning Consult surveyed 5,000 U.S. adults from June 22-25, 2021. Of those actively collecting unemployment benefits, 29% said they turned down job offers during the pandemic. In response to a follow-up question, 45% of that group said they turned down jobs specifically because of the generosity of the benefits.
So our friends on the left tell us that bigger handouts have no adverse economic consequences while the people getting the payments openly admit that they aren’t working because they can live off the taxpayers.
P.P.S. Since the interview also included some discussion of basic income, here’s a recent study showing how those universal handouts would cripple work incentives.
But there’s another positive trend at the state level. As indicated by this map from the Tax Foundation, tax rates have been reduced in several jurisdictions.
But stopping something bad is an achievement, regardless.
What about other states? The Tax Foundation’s article has all the details you could possibly want, including phase-in times and presence (in some states) of revenue triggers.
For purposes of today’s column, let’s simply focus on what’s happening to top tax rates. Here’s a table with the key results, ranked by the size of the rate reduction.
Kudos to Arizona, of course, but Iowa and Louisiana also deserve praise for significantly dropping their top tax rates.
As these states move in the right direction, keep in mind that some states are shifting (or trying to shift) in the wrong direction.
This means Joe Biden and Democrats need to make a choice: What matters most, their desire to make government bigger, or their promise not to impose higher taxes on families making less than $400K per year?
We now have the answer to that question, and I hope nobody is surprised to learn that they picked government over taxpayers.
Here are some excerpts from a report by the New York Times.
Democrats have agreed to include a tax on imports from nations that lack aggressive climate change policies as part of a sweeping $3.5 trillion budget plan… The move to tax imports was made public Wednesday, the same day that the European Union outlined its own proposal for a similar carbon border tax, a novel tool that is designed to protect domestic manufacturing. …skeptics caution that a carbon border tax, which has yet to be implemented by any country, would be difficult to carry out, and could anger trading partners and face a challenge at the World Trade Organization. Unlike the Europeans, who outlined their plan in a 291-page document, Democrats released no details about their tax proposal on Wednesday. Calling it simply a “polluter import fee,” the framework does not explain what would be taxed, at what rate or how much revenue it would expect to generate. …verifying the amount of carbon…produced by foreign manufacturing is tricky, experts say.
It’s always a bad idea to give politicians a new source of revenue.
But it’s a worse idea to give them a new source of revenue that will require bureaucrats to measure the amount of carbon produced by every imported good. As I pointed out a few days ago when discussing the European Union’s version of this protectionist scheme, that’s a huge recipe for cronyism and favoritism.
P.S. I’ll be very curious to see how different international bureaucracies react to these anti-trade proposals. The OECD and IMF, while usually bad on fiscal issues, historically have favored unfettered trade. And the World Trade Organization exists specifically to protect global commerce. But will these organizations now change their position to curry favor with the nations that control their purse strings?
The theory of “public choice” suggests we shouldn’t be optimistic.
Here’s the segment where I explain why it would be bad for developing nations.
At the risk of stating the obvious, Joe Biden is pushing this policy because he wants more tax revenue to fund his misguided plan for a bigger welfare state in the United States.
And the same is true for politicians in other big nations such as France, Japan, and Germany.
So as negotiations continue and rules are decided, rest assured that those countries will look after themselves and politicians from developing nations will be lucky to get a few crumbs from the table.
This discussion gives me a good excuse to put together this list of the potential winners and losers from a global tax cartel.
Since I slapped this together in five minutes, I won’t pretend it’s comprehensive.
But it’s hopefully more complete than a simple statement that politicians are the winners and people in the private sector are the losers.
Speaking of losers, my list includes “Nations with sensible tax policy,” and that’s a good reason to share this story from the New York Times. It’s about Janet Yellen’s efforts to convince Irish politicians to sacrifice their nation’s economic advantage.
The United States is hopeful that Ireland will drop its resistance to joining the global tax agreement… The agreement, which gained the support of the Group of 20 nations on Saturday, would usher in a global minimum tax of at least 15 percent. It would also change how taxing rights were allocated, allowing countries to collect levies from large, profitable multinational firms based on where their goods and services were sold. …Ms. Yellen held high-stakes meetings in Brussels this week with Paschal Donohoe, Ireland’s finance minister… She needs Mr. Donohoe’s support because the European Union requires unanimity among its members to formally join the deal.
So you may be wondering what Ms. Yellen said? Did she have some clever and insightful argument of how Ireland would benefit (or at least not be hurt) if politicians create a global tax cartel?
Nope. The best she could come up with is that Ireland’s tax system wouldn’t be as bad as the one she wants for the United States.
Ms. Yellen told her Irish counterpart that Ireland’s economic model would not be upended if it increased its tax rate from 12.5 percent…it would still have a large gap between its rate and the 21 percent tax rate on foreign earnings that the Biden administration has proposed.
The bottom line is that Ireland has reaped enormous benefits from its decision to enact a low corporate tax rate. But if a global tax cartel is imposed, it would simply be a matter of time before that country gets relegated to being an economic backwater on the periphery of Europe.
P.S. Part of the discussion in the video was about developing nations having the right to copy the economic model (no income tax and no welfare state) that enabled North American and Western Europe to become rich in the 1800s. Sadly, I don’t think many politicians in the developing world are interested in that approach nowadays, but rich nations shouldn’t make it impossible.
Part I of this series looked at socialism’s track record of failure, while Part II pointed out that greater levels of socialism lead to greater levels of misery.
I’ve wondered whether sub-par government schools are part of the problem. Are they mis-educating kids?
I don’t know if that was a problem in the past, but Richard Rahn warns in the Washington Times that it will probably be a problem in the future.
Recent polls have shown rising support for socialism and an increasingly negative view of capitalism, particularly among the young. …Most of those who say they support socialism are probably unaware that it has failed every place and time that it has been tried. …They may also not be aware that socialism relies on coercion to function… By contrast, capitalism relies on the voluntary exchange of goods and services… Last week at the NEA’s annual meeting, the delegates demanded that the union issue a study criticizing, among many things, “capitalism.” Has anyone thought through the alternatives – a system based on slavery or serfdom…? Under capitalism, investment and productive labor are allocated by individual consumer choice. …Under socialism, there is no good mechanism for meeting consumer demand; the socialist leaders decide what the people should have. There is no mechanism for creating and encouraging innovation – that is why socialist states normally only produce something new after it has already been produced in a capitalist country… So why then are the teachers’ unions advocating that capitalism be attacked, and socialism be applauded? The answer is simple, willful ignorance.
I’ve always supported school choice because I want better educational outcomes, especially for poor and minority students.
In recent months, I’ve wondered we also need school choice because of what teacher unions are doing on issues such as critical race theory and school re-openings.
Now it seems we need choice simply to protect kids from the risk of being propagandized.
Over the next four years (and beyond), it’s quite likely that the biggest threat to global trade will be the European Union.
More specifically, politicians and bureaucrats in Brussels want to toss a hand grenade into cross-border commerce by imposing trade taxes on nations that don’t impose carbon taxes.
The Wall Street Journal has a must-read editorial about this threat to world commerce.
Western politicians have failed to persuade their own voters to commit economic suicide by banning fossil fuels, and forget about China, Russia or India. The climate lobby’s fallback, which is starting to emerge, is to punish the foreigners and their own consumers with climate tariffs. Bureaucrats at the European Commission are due to unveil the proposed Carbon Border Adjustment Mechanism (CBAM) later this month… Brussels wants to impose tariffs to bring the cost of carbon-dioxide emissions tied to an imported good into line with what a European producer would pay to produce the same good. …a carbon tariff would impose an enormous burden on companies seeking to sell to the EU—even the low-emitting firms—and as a result probably will trigger a trade war. …Under the leaked plan, foreign firms would have to undertake detailed carbon audits to report emissions to EU regulators, and then would have to work out what proportion of the emissions attributable to goods shipped to the EU already were covered by carbon taxes elsewhere. …The choice between costly compliance or a punitive default tariff risks deterring smaller foreign companies from trying to navigate this system.
Needless to say, the so-called carbon audits will create big openings for cronyism and favoritism.
Lobbyists will be fat and happy while businesses and consumers will get hit with higher costs.
The editorial’s conclusion wisely warns that it would be a big mistake for Europeans to trigger a trade war.
Western elites haven’t convinced their voters to pay the price of their climate obsessions. Like Donald Trump, they now want to blame foreigners. In the process they’ll force their consumers to pay more for imports and domestic goods, and they’ll harm their own exporters if countries retaliate. The last thing the world economy needs as it recovers from a pandemic is a climate-change trade war.
Writing for Forbes, Tilak Doshi speculates whether the United States will copy the Europeans.
…the European Parliament overwhelmingly endorsed the creation of a “carbon border adjustment mechanism” (CBAM) that would shield EU companies against cheaper imports from countries with “weaker” climate policies. …Now that the Biden administration has elevated climate change to its highest priority across the whole of government, it would seem that the EU and the US working together with like-minded governments in Canada and the UK would be in a position to set up a “trans-Atlantic climate club” and thereby impose a global cost on carbon emissions. …Australian Trade Minister Dan Tehan labelled carbon tariffs “a new form of protectionism.” …For most developing countries, “worries of an increasing carbon footprint generated by economic growth are second to worries that growth many not happen at all.” …What sets off this new protectionism from its predecessors is the sheer scope of its application.
I’m actually hopeful on this issue.
Biden and his team doubtlessly are sympathetic to the E.U.’s initiative, but I don’t think Congress will approve a carbon tax on the American people.
And if the U.S. doesn’t have a carbon tax, there wouldn’t be any reason to impose discriminatory taxes on other nations that also don’t have that levy.
That being said, the Biden Administration would have some leeway to cause problems. For instance, would they push for the World Trade Organization to accept the E.U.’s attack on free trade?
When dealing with politicians, I always hope for the best, but assume the worst.
Is it possible, though, that “capitalism” is a tarnished word?
That may be the case, according to new polling data from the United Kingdom.
Edward Malnick recently wrote about Frank Luntz’s research, which is finding knee-jerk hostility to the “C” word.
Dr Frank Luntz is testing public opinion in Britain to find an alternative to “capitalism”, after 170 years of use, because he fears it is becoming a “bad word”. …Capitalism itself is already a “bad word” in the US and is fast becoming so in the UK too, he says, adding: “It’s one of the key things I’m trying to figure out … does this country need an alternative to the word capitalism? I think it does. We’re about to find out.” Questions on capitalism, and voters’ approach to it, form part of a giant survey Dr Luntz has put together as part of a project for the Centre for Policy Studies (CPS) think tank, at which he has based himself for the summer.
Nick King of the Centre for Policy Studies suggests we use something other than “capitalism” when describing an agenda of limited government.
…language matters. Capitalism is unpopular. But to many of capitalism’s advocates, terms like free enterprise and open markets can be used interchangeably with it – and other polling suggests these concepts are more favourably received. If aphrase is more appealing than capitalism to those who reject it as a concept, then it makes sense for those who believe in the benefits of this system to adopt the language which people more readily accept.
I’m perfectly happy to talk about “free enterprise” rather than “capitalism.”
But perhaps I need to be more disciplined. Especially if I want my message to be heard by young people.
Kristian Niemietz of London’s Institute of Economic Affairs has a very depressing assessment of what millennials are thinking.
Surveys show that there is a lot of truth in the cliché of the ‘woke socialist Millennial’. Younger people really do quite consistently express hostility to capitalism, and positive views of socialist alternatives of some sort. For example, around 40 per cent of Millennials claim to have a favourable opinion of socialism and a similar proportion agree with the statement that ‘communism could have worked if it had been better executed’. …67 per cent of younger people say they would like to live in a socialist economic system. Young people associate ‘socialism’ predominantly with positive terms, such as ‘workers’, ‘public’, ‘equal’ and ‘fair’. Very few associate it with ‘failure’ and virtually nobody associates it with Venezuela, the erstwhile showcase of ‘21st Century Socialism’. Capitalism, meanwhile, is predominantly associated with terms such as ‘exploitative’, ‘unfair’, ‘the rich’ and ‘corporations’. …When presented with an anti-capitalist statement, the vast majority of young people agree with it… However, when presented with a diametrically opposed pro-capitalist statement, we often find net approval for that statement too. This suggests that when young people embrace a socialist argument, this is often not a deeply-held conviction.
I’m tempted to conclude that young people are simply stupid and we shouldn’t allow them to vote.
But I realize that’s not a constructive sentiment. So perhaps instead we should send them to live for a year in Greece, Argentina, or Italy. And if that doesn’t sober them up, they can spend a second year in Venezuela, North Korea, or Cuba.
President Biden pushed through $1.9 trillion of new spending earlier this year, but that so-called stimulus plan was mostly for one-time giveaways. As I warn in this recent discussion on Denver’s KHOW, we should be much more worried about his proposals to permanently expand the welfare state.
When I first got to Washington, I would be upset that politicians wanted to add billions of dollars to the burden of government.
John Cogan and Daniel Heil of the Hoover Institution warned about the consequences of this dependency agenda in a column for the Wall Street Journal.
The federal government’s system of entitlements is the largest money-shuffling machine in human history, and President Biden intends to make it a lot bigger. His American Families Plan—which he recently attempted to tie to a bipartisan infrastructure deal—proposes to extend the reach of federal entitlements to 21 million additional Americans, the largest expansion since Lyndon B. Johnson’s Great Society. …more than half of working-age households would be on the entitlement rolls if the plan were enacted in its current form. …57% of all married-couple children would receive federal entitlement benefits, and more than 80% of single-parent households would be on the entitlement rolls.
Many of the handouts would go to people with middle-class incomes.
And higher.
…The American Families Plan proposes several new entitlement programs. One promises students the government will pick up the entire cost of community-college tuition; another promises families earning 1.5 times their state’s median income that Washington will cover all daycare expenses above 7% of family income for children under 5; still another promises workers up to 12 weeks of federally financed wage subsidies to take time off to care for newborns or sick family members. …Two-parent households with two preschool-age children and incomes up to $130,000 would qualify for federal cash assistance for daycare. Single parents with two preschoolers and incomes up to $113,000 would qualify. And some families with incomes over $200,000 would be eligible for health-insurance subsidies. Other parts of the plan, such as paid leave and free community college, have no income limits at all.
The Wall Street Journalopined on this issue last month. Here are the key passages from their editorial.
The entitlements are by far the biggest long-term economic threat from the Biden agenda. …entitlements that spend automatically based on eligibility are nearly impossible to repeal, or even reform, and they represent a huge tax-and-spend wedge far into the future. …We’d highlight two points. First is the dishonesty about costs. Entitlements always start small but then soar. The Biden Families Plan is even more dishonest than usual. For example, it pretends the child tax credit ends in 2025, so its cost is $449 billion over the 10-year budget window that is used for reconciliation bills that require only 51 votes to pass the Senate. But a future Congress will never repeal the credit. …Second, these programs aren’t intended as a “safety net” for the poor or those temporarily down on their luck. They are explicitly designed to make the middle class dependent on government handouts.
The editorial explicitly warns that the United States will economically suffer if politicians copy Europe’s counterproductive redistributionism.
…on present trend the U.S. is falling into the same entitlement trap as Western Europe. Entitlement spending requires higher taxes, which grab 40% or more of GDP. Economic growth declines as more money flows to transfer payments instead of investment. The entitlement state becomes too large to afford but also too politically entrenched to reform. …Only a decade ago the Tea Party fought ObamaCare. Now most Beltway conservatives worry more about Big Tech than they do Big Government. If the Biden Families Plan passes, these conservatives will find themselves spending the rest of their careers as tax collectors for the entitlement state.
Amen. I’m baffled when folks on the left argue that we should “catch up” with Europe.
Are they not aware that American living standards are far higher? Do they not understand that low-income people in the United States often have more income than middle-class people on the other side of the Atlantic Ocean?
P.S. As I mentioned in the interview, the 21st century has been bad news for fiscal policy, with two big-government Republicans and two big-government Democrats.
American taxpayers have coughed up hundreds of billions of dollars in recent decades for various government-to-government handouts, and the total is far higher when you include the aid payments of other nations and the activities of international bureaucracies.
Yet rather than helping, these handouts most likely have reduced prosperity in recipient nations.
And it’s not just economists who recognize this problem. A column in the New York Times by Maria Abi-Habib explores how foreign aid has backfired for Haiti.
Almost every time Haitians think their circumstances cannot get any worse, it seems the nation takes another ominous turn, and it is now teetering on the verge of a political void… In the shadow of the richest country in the world, people wonder: How could this happen to Haiti? …Haiti’s failures have not occurred in a vacuum; they have been assisted by the international community, which has pumped $13 billion of aid into the country over the last decade. But instead of the nation-building the money was supposed to achieve, Haiti’s institutions have become further hollowed out in recent years. …the money has served as a complicating lifeline — leaving the government with few incentives to carry out the institutional reforms necessary to rebuild the country, as it bets that every time the situation worsens, international governments will open their coffers… The aid has propped up the country and its leaders… The nation-building exercises that the United States and its international partners have embarked upon in Haiti and around the world have done little to create functioning states, instead creating a system where questionable actors with little national support…are propped up.
I’m tempted to say that the headline should be changed to “Haiti Still Despairs Because of $13 Billion in Foreign Aid.”
But I’ll instead make the more modest point that the Ms. Abi-Habib is correct about Haiti needing state capacity (properly defined, of course).
But that’s just part of the solution. Haiti also needs more economic liberty.
According to the most-recent edition of Economic Freedom of the World, the country has a bad score of 6.58 on a 1-10 scale, which places it #104 out of 162 nations.
And that’s actually an exaggeration because Haiti gets a misleadingly good score (#15) for fiscal policy.
Yes, the overall level of taxes and spending is modest, but that’s not a policy choice. It’s because the government is too incompetent to administer a tax system.
The data from the most-recent edition of the Index of Economic Freedom also shows that Haiti has bad policy, with an overall score of 50.8 on a 0-100 scale, which means the country is #155 out of 178 nations
That’s not quite as bad as Venezuela, but it’s still a horrible score.
The obvious takeaway is that foreign aid is bad for taxpayers and bad for recipient nations.
Ross Kaminsky of KHOW and I discussed how this is already happening.
I hate being right, but it’s always safe to predict that politicians and bureaucrats will embrace policies that give more power to government.
Especially when they are very anxious to stifle tax competition.
For decades, people in government have been upset that the tax cuts implemented by Ronald Reagan and Margaret Thatcher triggered a four-decade trend of lower tax rates and pro-growth tax reform.
That’s the reason Biden and his Treasury Secretary proposed a 15 percent minimum tax rate for businesses.
And it’s the reason they now want the rate to be even higher.
Though even I’m surprised that they’re already pushing for that outcome when the original pact hasn’t even been approved or implemented.
Treasury Secretary Janet Yellen will press G20 counterparts this week for a global minimum corporate tax rate above the 15% floor agreed by 130 countries last week…the global minimum tax rate…is tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said. The Biden administration has proposed doubling the U.S. minimum tax on corporations overseas intangible income to 21% along with a new companion “enforcement” tax that would deny deductions to companies for tax payments to countries that fail to adopt the new global minimum rate. The officials said several countries were pushing for a rate above 15%, along with the United States.
Other kleptocratic governments naturally want the same thing.
A G7 proposal for a global minimum tax rate of 15% is too low and a rate of at least 21% is needed, Argentina’s finance minister said on Monday, leading a push by some developing countries… “The 15% rate is way too low,” Argentine Finance Minister Martin Guzman told an online panel hosted by the Independent Commission for the Reform of International Corporate Taxation. …”The minimum rate being proposed would not do much to countries in Africa…,” Mathew Gbonjubola, Nigeria’s tax policy director, told the same conference.
Needless to say, I’m not surprised that Argentina is on the wrong side.
And supporters of class warfare also are agitating for a higher minimum rate. Here are some excerpts from a column in the New York Times by Gabriel Zucman and Gus Wezerek.
In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. …it was a golden period. …President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough. …the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. …With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.
I can’t resist making two observations about this ideological screed.
Even the IMF and OECD agree that the so-called race to the bottom has not led to a decline in corporate tax revenues, even when measured as a share of economic output.
Since companies legally avoid rather than illegally evade taxes, the headline of the column is utterly dishonest – but it’s what we’ve learned to expect from the New York Times.
The only good thing about the Zucman-Wezerek column is that it includes this chart showing how corporate tax rates have dramatically declined since 1980.
P.S. For those interested, the horizontal line at the bottom is for Bermuda, though other jurisdictions (such as Monaco and the Cayman Islands) also deserve credit for having no corporate income taxes.
P.P.S. If you want to know why high corporate tax rates are misguided, click here. And if you want to know why Biden’s plan to raise the U.S. corporate tax rate is misguided, click here. Or here. Or here.
P.P.P.S. And if you want more information about why Biden’s global tax cartel is bad, click here, here, and here.
When I first looked at the issue of “basic income,” back in 2013, my gut reaction was deep skepticism.
That’s because I feared many people would drop out of the labor force if they could live off government handouts (as illustrated by this Wizard-of-Id parody).
And now we have some U.S.-focused research. Four economists from the University of Chicago (Mikhail Golosov, Michael Graber, Magne Mogstad, and David Novgorodsky) investigated this topic in a new study from the National Bureau of Economic Research.
Here’s a description of their methodology, which used lottery winnings as a proxy for the effect of government handouts.
HowdoAmericansrespondtoidiosyncraticandexogenouschangesinhouseholdwealthandunearned income?Economistsandpolicymakersarekeenlyinterestedinthisquestion.…theearnings responsestosuchshocksareimportant…toassesstheeffectsof public policy such as…universal basic income.However,givingacredibleanswertothisquestionhasprovendifficult. …We analyze a wide range of individual and household responses to lottery winnings and explore the economic implications of these responses for a number of key questions. …our analyses are based on a population-level panel data set which is constructed by combining the universe of worker tax records with third-party-reported lottery winnings.
And here are some of their results.
We find that Americans respond to an exogenous increase in household wealth by significantly reducing their employment and labor earnings.For an extra 100 dollars in wealth, households reduce their annual earnings by approximately 2.3 dollars on average. …theintroductionofaUBIwillhavealargeeffectonearningsandtaxrates.Forexample,evenifone abstracts from any disincentive effects from higher taxes that are needed to finance this transfer program, each dollar of UBI will reduce total earnings by at least 52 cents.
At the risk of understatement, this data should be the death knell for this bad idea.
Especially when you consider the impact of the higher tax rates that would be necessary to fund the basic income.
As illustrated by Figure 5.1 from the study, tax-financed handouts would be bad news for America’s economy.
P.P.S. Interestingly, Joe Biden expressed skepticism about the idea back in 2017, but he obviously has had a change of heart, given his current support for big, per-child handouts.
I’ve written nearly 6,100 columns for International Liberty, but only one of those columns has focused on Lebanon.
That was back in 2018, when I explained how the nation could have avoided a fiscal crisis with a spending cap.
Now it’s time to once again write about Lebanon, though maybe today’s column is actually more about media bias.
That’s because this story in the Washington Post, authored by Sarah Dadouch, shows how journalists have far too little understanding of economics.
Lebanon’s worsening financial meltdown has been accompanied by a dire shortage of imported fuel. Roads in cities like Beirut and Tripoli are now lined with cars queuing for hours to get their allotted amount of gasoline, at most a third of a tank. …smugglers have discovered there’s good money to be made by buying gasoline in Lebanon at the heavily subsidized price and then selling it on the black market in Syria, which has a debilitating fuel crisis of its own. …Many Lebanese politicians blame the gasoline crisis partly on smuggling… In April, Lebanon’s caretaker energy minister said the disparity in gasoline prices between Lebanon and Syria means smugglers can make huge profits next door. …The Lebanese army, which has received more than $2.5 billion in aid from the United States since 2006, has made concerted efforts to curb the illicit commerce.
The smugglers aren’t the cause of Lebanon’s energy crisis. They’re merely a symptom of the real problem, which is that the country’s politicians buy votes from motorists by subsidizing gasoline.
Get rid of those subsidies and smuggling will disappear overnight.
The moral of the story is that bad things happen when politicians interfere with prices. We have forty centuries of evidence showing price controls don’t work. When politicians try to curry favor by rigging prices, bad things happen.
And the second moral of the story is that journalists don’t understand the first moral of the story (not that I’m surprised, given the shaky track record of the Washington Post).
P.S. I’m flabbergasted that American taxpayers have sent $2.5 billion of foreign aid to Lebanon’s army, which gives the government fiscal leeway to pursue bad policies such as gasoline subsidies!
P.P.S. While gasoline subsidies are an insanely foolish policy for a nation enduring a fiscal crisis, fiscal policy isn’t even Lebanon’s biggest problem. As noted in this video, the country does even worse on trade policy, regulatory policy, and rule of law.
P.P.P.S. The post-war German economic miracle was triggered by the removal of price controls.
Programs such as Medicare and Medicaid, along with the tax code’s healthcare exclusion, have created a system where consumers directly pay for only about 10 percent of the care they receive.
We think it’s normal and appropriate for either the government or an insurance company to foot the bill.
Is it possible, though, to put the toothpaste back in the tube? Can we unwind the bad government policies that have undermined market forces?
There are certainly big-picture reforms that would be helpful. Genuine entitlement reform could address the problems with Medicare and Medicaid, and fundamental tax reform could get rid of the healthcare exclusion.
But progress is possible even without major policy change.
Reason interviewed a doctor, Lee Gross, who decided to set up a practice based on “direct primary care,” which means no involvement from government or insurance companies. Just health consumers and health providers directly buying and selling.
Here’s some of what he said about this market-based approach.
When I was in the fee-for-service system, I felt like I was playing a game of Whac-A-Mole with Medicare. …Eventually we just said, “No more.” …the epiphany was “Why are we inserting so many people at the primary care level between the doctor and the patient? Why are we insuring primary care?” The more people that you insert between the doctor and patient, the more expensive it gets, the more cumbersome it gets…we created one of the first direct primary care practices in the country. …essentially it’s a membership-based primary care program. …Once a patient is a member of our practice, anything that we can do within the four walls of our office is included at no additional charge. …Insurance is good for the big stuff. It’s not good for the little stuff. It’s too complicated. What we do in direct primary care is we make the predictable things affordable for everybody. We take the stuff that you’re going to need on an everyday basis and we put affordable price tags on it, and we say you don’t need your insurance for this. In fact, the insurance makes it more expensive. …You need your homeowners insurance if your house burns down. You don’t need it to mow the lawn.
The good news is that Dr. Gross’ practice is part of a growing movement.
Direct primary care is absolutely a growing movement. …There’s well over 1,500 practices around the country… There are some regulatory barriers that get in the way of expanding this model. …if we’re looking for the ideal health care system, we want to see three pillars. We want to see lower cost, better quality, and more choices. You cannot have all three of those in a government-run system. You can only have those in a free market capitalist system.
Indeed, I’ve shared previous examples of this phenomenon from Maine and North Carolina.
And it even works for surgery, as you can see from this must-watch video from Reason.
Let’s now circle back to some analysis of what’s wrong with the current system.
John Stossel explained a few years ago how government-encouraged over-insurance causes problems.
Someone else paying changes our behavior. We don’t shop around. We don’t ask, “Do I really need that test?” “Is there a place where it’s cheaper?” Hospitals and doctors don’t try very hard to do things cheaply. Imagine if you had “grocery insurance.” You’d buy expensive foods; supermarkets would never have sales. Everyone would spend more. Insurance coverage—third-party payment—is revered by the media and socialists (redundant?) but is a terrible way to pay for things. Today, 7 in 8 health care dollars are paid by Medicare, Medicaid or private insurance companies. Because there’s no real health care market, costs rose 467 percent over the last three decades. By contrast, prices fell in the few medical areas not covered by insurance, like plastic surgery and LASIK eye care. Patients shop around, forcing health providers to compete.
The final couple of sentences are extremely important.
As illustrated by this data from Mark Perry, there are a few parts of the health care system where there’s little or no third-party payer.
And what do we find? Prices go down rather than up.
For all intents and purposes, the goal should be to make health insurance more like homeowners insurance or auto insurance.
Speaking of the latter, David Graham compared market-driven auto insurance and government-subsidized health insurance.
There are…similarities between health care and car ownership… We can go for many years with predictable spending on both cars and medical care until — out of the blue — something terrible happens. For that reason, we value insurance for both. But there’s a key difference… Car insurance, while not a trivial expense, is a relatively small share of the total cost of owning a car. According to the AAA, the average premium was $1,023, just under 12 percent of the total cost of ownership. Even excluding depreciation, insurance is just one-fifth of the total cost. In other words, we do not expect auto insurers to pay claims for most of the cost of operating and maintaining a car. Health care is completely the opposite. …Insurance adds administrative costs and bureaucratic interference. …Left to our own devices, we would never buy coverage for every single medical expense.
The moral of the story is that government intervention has made America’s health system a mess.
Unsurprisingly, many politicians say the answer it to have even more government (which is how we got Obamacare).
P.S. In less than eight minutes, I explain the economics of third-party payer in this speech.
Since this is America’s Independence Day, I’m going to continue my tradition (see 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, and 2020) of authoring a July 4-themed column.
What will make this year special, though, is that we’re going to tackle the heavy topic of whether the United States lives up to its own ideals.
Two years ago, the New York Times unveiled the “1619 Project,” which largely argues that slavery and racism are part of the nation’s DNA. The NYT states that the project “aims to reframe the country’s history by placing the consequences of slavery…at the very center of our national narrative.”
As a libertarian, I don’t believe our government is good and pure today, and I also don’t believe it was good and pure in the past. So I have no problem with a skeptical assessment of American history.
That being said, I have a positive view of America’s founding and consider the Declaration of Independence in 1776 and the unveiling of the Constitution in 1787 as victories for liberty.
But only partial victories. What happened in the late 1700s should be viewed as the beginning of a process that slowly but surely has extended the blessings of liberty to the broader population.
Just as Martin Luther King stated back in 1964, “the arc of the moral universe…bends toward justice.”
At the risk of oversimplifying, the 1619 Project has people fighting about two sides of the same coin.
Some people say the story of the United States is bad because of a legacy of slavery, segregation, and racism.
Other people say the story of the United States is good because of progress against slavery, segregation, and racism.
But the battle is about more than whether we have a glass-half-full or glass-half-empty view of history.
It’s also about fanciful claims, such as the assertion that the War of Independence was fought to preserve slavery. In an article for Quillette, Phillip Magness points out that historians almost universally reject that interpretation.
Critics on both the Left and Right took issue with the paper’s declared intention of displacing 1776 with the alternative date… For several months after the 1619 Project first launched, its creator and organizer Nikole Hannah-Jones doubled down on the claim. “I argue that 1619 is our true founding,” she tweeted the week after the project launched. …the historical controversies around the 1619 Project intensified in late 2019 and early 2020. A group of five distinguished historians took issue with Hannah-Jones’s lead essay, focusing on its historically unsupported claim that protecting slavery was a primary motive of the American revolutionaries when they broke away from Britain in 1776. …a historian who the Times recruited to fact-check Hannah-Jones’s essay revealed that she had warned the paper against publishing its claims about the motives of the American Revolution on account of their weak evidence. The 1619 Project’s editors ignored the advice.
Indeed, Magness’ article discusses how the New York Times has largely conceded it made a mistake and has “stealth edited” the 1619 website.
Magness also has criticized the way supporters of the 1619 Project are attempting to promote statist economic policies.
Here’s some what he wrote for the American Institute for Economic Research.
When I first weighed in upon the New York Times’ 1619 Project, I was struck by its conflicted messaging. …certain 1619 Project essayists infused this worthy line of inquiry with a heavy stream of ideological advocacy. Times reporter Nikole Hannah-Jones announced this political intention openly, pairing progressive activism with the initiative’s stated educational purposes. …A historical discussion about the Constitution’s notoriously strained handling of slavery quickly drifted into a list of partisan grievances against the tax and health care policy views of congressional Republicans in the twenty-first century. …The 1619 Project, it seemed, could serve as both an enduring long-term curriculum for high school and college classrooms and an activist manual… This tendency finds its most visible display in…Matthew Desmond’s essay on the relationship between slavery and modern American capitalism. …Lurking beneath it all was a long list of Desmond’s own modern progressive political causes—economic inequality…and a general disdain for deregulation and free market thought. In short, Desmond was weaponizing the history of slavery to attack modern capitalism.
If you want to spend 79 minutes learning about why Desmond is wrong, this Reason interview with Magness is very informative.
I’ll simply add that it’s absurd to link slavery with capitalism. In a laissez-faire society, government’s legitimate role is to protect the “negative rights” of life, liberty, and property.
Yet slavery is based on government laws that allow one person to own another person.
Let’s wrap up today’s column by looking at the future rather than the past.
In a book review for the Wall Street Journal, Jason Riley discusses Robert Woodson’s concerns that the 1619 Project may promote a victim mentality and discourage upward mobility.
Mr. Woodson is a veteran community activist who broke with the traditional civil-rights leadership in the 1970s after realizing that the agenda of “racial grievance groups” like the NAACP was increasingly at odds with the actual wants and needs of the black underclass. …After the New York Times published its “1619 Project”…he became incensed. …Mr. Woodson responded by initiating his own project, “1776 Unites,” which enlisted a group of black scholars, journalists and social activists “who uphold the true origins of our nation and the principles through which its founding promise can be fulfilled.” …Mr. Woodson released “Red, White and Black: Rescuing American History from Revisionists and Race Hustlers.” The book is a collection of essays by 1776 Unites participants, and its publication is a public service. …In the book’s introduction, Mr. Woodson writes that his goal is not to offer point-by-point rebuttals. Rather, he wants to “debunk the myth that present-day problems are related to our past . . . specifically, debunking the myth that slavery is the source of present-day disparities and injustice.” Mr. Woodson understands that pointing out the moral shortcomings of others might prove cathartic, but it will do little if anything to facilitate black upward mobility. And he flatly rejects the notion that “the destiny of black Americans is determined by what whites do—or what they have done in the past,” which is otherwise known as critical race theory.
As I wrote a few days ago, critical race theory can be a helpful way to understand history, but it also can be harmful if it labels everyone as either a victim or an oppressor.
I much prefer how Walter Williams viewed race-related issues.
Most people say the key feature of capitalism is competition. Hard to argue with that characterization, but I would go one step further and say that it is one of the consequences of competition – “creative destruction” – that best captures why free markets make it possible for entrepreneurs to deliver mass prosperity.
I wasn’t aware, however, that businesses resorted to big concrete edifices to get around Vermont’s billboard ban (though I have read, in a classic case of baptists and bootleggers, that big companies such as hotel chains sometimes try to thwart competition from small businesses by teaming up with environmentalists to ban billboards).
In the world of fiscal policy, there are many example of unintended consequences.
And rather than hit the brakes, Biden wants to step on the gas with new giveaways, especially his plan to gut Bill Clinton’s welfare reform by creating new per-child handouts that would subsidize idleness and family dissolution.
But that doesn’t mean the problems can’t be fixed. We simply need to replace fiscal profligacy with spending restraint.
To set the stage for this discussion, here’s a look at what’s happened to the budget over the past several decades. You can see how the burden of federal spending has steadily increased, with noticeable one-time bumps in 2008-2009 (TARP and Obama’s so-called stimulus) and 2020-2021 (coronavirus).
The chart also includes projections between 2021 and 2031, based on new numbers from the Congressional Budget Office.
For today’s column, I want to focus on the next 10 years and show how the current fiscal mess can be averted with some modest spending restraint.
This second chart shows that spending actually drops over the next two years as coronavirus-related spending comes to an end. But once we get to 2023, the orange line shows that “baseline” spending (what happens to the budget if things are left on autopilot) climbs rapidly, more than twice the rate needed to keep pace with inflation.
But if there’s any sort of fiscal restraint (a freeze or some sort of spending cap), then the numbers look much better.
More specifically, a freeze or a 1-percent spending cap would actually produce a budget surplus by the year 2031.
But I’m not fixated on getting to a balanced budget. What’s more important is that the burden of government spending shrinks when the budget grows slower than the private sector.
In other words, we get good results when policy makers follow fiscal policy’s Golden Rule.
P.S. While it’s difficult to convince politicians to support spending restraint, it’s worth noting that the nation enjoyed a five-year spending freeze between 2009-2014.
But I would argue that tax increases that produce more revenue also are a bad idea.
Sometimes they are even a terrible idea. For instance, there are tax increases that would destroy $5 of private income for every $1 of revenue they collect.
That would not be a good deal, at least for those of us who aren’t D.C. insiders.
Heck, according to research from economists at the University of Chicago and Federal Reserve, there are some tax increases that would destroy even greater levels of private income for every additional dollar that politicians got to spend.
The simple way of thinking about this is that you don’t want to be at the revenue-maximizing point of the Laffer Curve.
Because the closer you get to that point, the greater the damage to the private sector compared to any revenue collected.
To help understand this key point, let’s review a new study from Spain’s central bank. Authored by Nezih Guner, Javier López-Segovia and Roberto Ramos, it investigates the impact of higher tax rates.
They first look at what happens when progressivity (τ) is increased.
In the first experiment, we…change…the entire tax schedule, so that all householdsbelow the mean labor income face lower average taxes, while those above the mean income facehigher average taxes. Since…richer individuals face higher taxes, all else equal, thegovernment collects more taxes. All else, however, is not equal since more progressive taxes lower incentives to work and save. As a result, a higherτmight result in lower, not higher, revenue. Thequestion is where the top of the Laffer curve is. We find that the tax revenue from labor income is maximized withτ= 0 .19. The increase in tax collection is, however, very small: the tax revenue from labor income increases only by 0.82% (or about 0.28% of the GDP).The tax revenue from labor income is, however, only one part of the total tax collection. There are also taxes on capital and consumption. Withτ= 0 .19, while the tax collection from laborincome is maximized, the total tax collection declines by 1.55%. This happens since with a higher τ, the aggregate labor, capital and output decline significantly. Indeed, the total tax collection falls for any increase inτ, and the level ofτthat maximizes total tax revenue is much lower, τ= 0 .025, than its benchmark value.
The key takeaway is that more progressivity puts Spain on the wrong (downward-sloping) side of the Laffer Curve.
Here’s Table 6, which shows big declines in output, labor supply, and investment as progressivity increases.
Here’s some of the accompanying explanation.
The upper panel of Table 6 shows that capital, effective labor and output decline monotonically withτ. Hence, as the economy moves fromτ= 0 .1581 toτ= 0 .19, the government is collecting higher taxes from labor, but the aggregate labor supply and output decline. Forτhigher than 0.19, the decline in labor supply dominates and tax collection from labor income is lower. …The level of τ that maximizes the total tax collection is 0.025, which implies significantly less progressive taxes than in the benchmark economy. …In the economy with τ = 0 .025, the aggregate capital, labor and output increase significantly. The steady state output, for example, is almost 11 percentage points higher than the benchmark economy. As a result, the government is able to collect higher taxes despite lowering taxes on the top earners.
The authors also put together an estimate of Spain’s Laffer Curve, with the red-dashed line showing total tax revenue.
The authors also looked at what happens if politicians simply increase top tax rates.
They found that there are scenarios that would enable the Spanish government to collect more revenue.
We find that it is possible to generate higher total tax revenue by increasing taxes on thetop earners. …The main message of our quantitative exercises is that…the extra revenue is not substantial. Higher progressivityhas significant adverse effects on output and labor supply,which limits the room for collectinghigher taxes. As a result, the only way to generate substantial revenue is with significant increasesin marginal tax rates for a large group
But notice that those higher taxes would have “significant adverse effects on output and labor supply.”
Which brings us back to the earlier discussion about the desirability of causing a lot of damage to the private economy in order to give politicians a bit more money to spend.
The authors have a neutral tone, but the rest of should be able to draw the logical conclusion that higher taxes would be a big mistake for Spain.
And since the underlying economic principles apply in all nations, we also should conclude that higher taxes would be a big mistake for the United States.
Today, we’re going to add to this list by considering the current controversy over whether “critical race theory” should be taught in schools.
I won’t bother trying to put forth my own definition of CRT.
But, for what it’s worth, I think it’s a good thing if kids learn that the United States (like all nations) has an imperfect history, while it’s wrong if kids are brainwashed into believing that they are either oppressors or victims simply because of skin color.
But what about people who think differently? Should I decide what schools teach, or should other people make those choices?
The right answer is that we don’t need a one-size-fits-all approach. Either mine or anyone else’s.
In a column for Reason, J.D. Tuccille says school choice is a way of letting parents pick the schools that best reflect their values.
…some states are banning the teaching of CRT—an approach that threatens to turn advocates of the ideology into free speech martyrs fighting the entrenched establishment. …families that choose how their children learn—my own included—rather than defaulting to government-run institutions…have largely escaped these battles. By homeschooling, or micro-schooling, or picking private or charter schools, we can avoid curricula permeated with ideas we find toxic… Parents that…support CRT also have alternatives to battling over the content of schoolroom lessons. They can introduce their tykes to Ibram X. Kendi’s Antiracist Baby Picture Book, marinate their kids in CRT-infused homeschooling, or send them to one of many private schools that offer willing families an education steeped in the ideology. …if that’s what they want their kids to learn, let them do so in peace, and without zero-sum arguments about what children are taught in shared institutions.
Amen.
Critical race theory won’t be nearly so controversial if we let parents choose the type of education that’s best for their kids.
And the same is true for other contentious issues, ranging from phonics to prayer.
The worst referendum result of 2020 was when the people of Arizona voted for a class-warfare tax scheme that boosted the state’s top tax rate from 4.5 percent to 8 percent.
In one fell swoop, Arizona became a high-tax state for investors, entrepreneurs, innovators, and business owners. That was a very dumb choice, especially since there are zero-income tax states in the region (Nevada, Texas, and Wyoming), as well as two flat-tax states (Utah and Colorado).
You can see Arizona’s problem in this map from the Tax Foundation. It’s great to be grey and good to be yellow, but bad to be orange (like Arizona), red, or maroon.
That’s the bad news.
The good news is that lawmakers in have just approved a plan that will significantly lower tax rates and restore the state’s competitiveness.
The Wall Street Journalopined this morning about this positive development.
Arizona currently taxes income under a progressive rate structure, starting at 2.59% up to 4.5%. The ballot last November carried an initiative to add a 3.5% surtax on earnings above $250,000 for single filers. It narrowly passed, meaning the combined top rate was set to hit 8%, higher than all of Arizona’s neighbors except California. …Mr. Ducey’s budget will cut rates for all taxpayers. The Legislature can’t repeal the voter-approved surtax, so above the 2.5% flat rate, there will still be a second bracket on income over $250,000. But the budget also has a provision adjusting the flat tax downward for those Arizonans, so no one will pay a top rate above 4.5%. …the same as today. …No Arizonan will have to pay the threatened 8% rate, since the provisions forestalling it are immediate. …“Every Arizonan—no matter how much they make—wins with this legislation,” Mr. Ducey said. “It will protect small businesses from a devastating 77 percent tax increase…and it will help our state stay competitive so we can continue to attract good-paying jobs.” That’s worth celebrating.
A story from the Associated Press gave the development a much more negative spin.
After slashing $1.9 billion in income taxes mainly benefiting upper-income taxpayers and shielding them from higher taxes approved by voters in an initiative last year, the Republican-controlled House returned Friday and passed more legislation targeting Proposition 208. The House approved the creation of a new tax category for small business, trusts and estates that will eliminate even more of the money that the measure approved by voters in November was designed to raise for schools. The proposal passed despite unified opposition from minority Democrats. …The governor has expressed disdain for the voter-approved tax, saying it would hurt the state’s economy and vowing in March to see it gutted either though Legislation or the courts. …The budget-approved tax cuts set a flat 2.5% tax on all income levels that will be phased in over several years once revenue projections are met, with those subject to the new education tax paying 4.5% at most.
If nothing else, an amusing example of bias from AP.
I have two modest contributions to this discussion.
First, it’s not accurate to say that Arizona adopted a flat tax. Maybe I’m old fashioned, but a flat tax has to have only one rate. Arizona’s reform is praiseworthy, but it doesn’t fulfill that key equality principle.
Second, the main takeaway is not that lawmakers did something good. It’s more accurate to say that they protected the state from something bad.
I’ve updated this 2018 visual to show how the referendum would have pushed Arizona into Column 5, which is the worst category, but the reform keeps the state in column 3.
P.P.S. Since Arizona voters made a bad choice and Arizona lawmakers made a wise choice, this is evidence for Prof. Garett Jones’ hypothesis that too much democracy is a bad thing.
Everyone agrees that shareholders get hurt. After all, they’re the owners of the businesses. Higher corporate taxes directly reduce the amount of money available to be paid as dividends.
But we also should recognize that higher corporate taxes can be passed along to consumers, so they also lose. Even more important, we should recognize that higher tax burdens also reduce incentives for business investment, and this can have a negative impact on worker compensation.
A 2017 study from the Tax Foundation, authored by Steve Entin, thoroughly explored this question and included a table summarizing the academic research.
Alex Durante updated the Tax Foundation’s summary of the research in a just-released report.
Here are the results of two new studies.
In a large study of German municipalities over a 20-year period, Fuest et al. (2018) find that slightly more than half of the corporate tax burden falls on workers. …Baker et al. (2020) find that consumers could also be impacted by corporate tax changes. Looking at specific product prices with linked survey and administrative data at the state level, the authors found that a 1 percentage-point increase in the corporate tax rate increased retail prices by 0.17 percent. Combining this estimate with the wage response estimated in Fuest et al., the authors calculated that 31 percent of the corporate tax incidence falls on consumers, 38 percent on workers, and 31 percent on shareholders.
If you want more information about the German study, I wrote about it a couple of years ago. Solid research.
Here’s my two cents on the issue: Shareholders pay 100 percent of the direct costs of the corporate tax. But we need to also consider the indirect costs, most notably who bears the burden when there’s less investment and slower wage growth.
If you ask five economists for their estimates of indirect costs, you’ll probably get nine different answers. So it’s no surprise that there’s no agreement about magnitudes in the academic research cited above.
But they all agree that workers lose when corporate rates increase, and that’s a big reason why we can confidently state that Biden’s class-warfare agenda is bad for ordinary people.
The bottom line is that the person (or business) writing a check to the IRS isn’t the only person who suffers because of a tax.
But did it also help the economy? In other words, did the pandemic spending “stimulate” the private sector, as Keynesian economists have long claimed?
In a new study, Veronique de Rugy of the Mercatus Center and Professor Garett Jones of George Mason University examined whether government spending has a “multiplier effect” that leads to additional prosperity.
Here’s the issue they investigated.
Since March 2020, Congress and two successive administrations have passed and signed into law five COVID-19 pandemic relief bailouts… That adds up to almost $6 trillion in “emergency” federal spending… designed to save jobs that would have been lost or create jobs that would have gone uncreated otherwise. …this perspective fails to acknowledge the limits that this type of government intervention has in achieving the goal of pulling the economy out of recession. …According to the best available evidence, there are no realistic scenarios where the short-term benefit of stimulus is so large that the government spending pays for itself. In fact, even when government spending crowds in some private-sector activity, the positive impact is small, and much smaller than economic textbooks suggest. …the COVID-19 recession was driven by supply constraints on growth, not a lack of aggregate demand. …Both history and Keynesian-influenced economic theory teach that extra government spending per se cannot do much to overcome the effects of a supply shock.
And here are some of their conclusions.
The possibility that higher government spending, rather than increasing the size of the private sector, results in the private sector shrinking, is often omitted from the Keynesian theories that students learn in textbooks. Nevertheless, this kind of result turns up routinely in recent data-driven research. …evidence from the past few decades has seriously weakened (though not entirely defeated) the argument that expanding the government is a path to growing the private sector. …The outpouring of academic interest into Keynesian fiscal multipliers has ultimately led researchers to the view that those effects are even smaller than earlier supposed. …So even during recessions, even during times of high unemployment, high-quality statistical analysis of US economic history shows that extra government spending shrinks the private sector, at least a little. …The Keynesian idea that short-term government spending can reboot a crashed economy has not proven useful. …it is more like a myth.
And it’s a myth with a history of failure in the real world.
It’s also worth pointing out that Keynesians have been consistently wrong with predicting economic damage during periods of spending restraint.
They were wrong about growth after World War II (and would have been wrong, if they were around at the time, about growth when Harding slashed spending in the early 1920s).
We’ll start with a guy who must have raided his friend’s “jewelry box.”
Next, libertarians were in favor of Juneteenth, and not just because slavery was an awful policy of government.
For our third item, the Babylon Bee has an amusing story about nine warning signs that your kid is becoming a libertarian. Here are the ones I especially liked.
You should be closely involved in your teen’s life to make sure he doesn’t suddenly start believing in freedom and personal responsibility. Make sure to constantly check for these…warning signs: …2. He asks for his allowance in Bitcoin. – Dogecoin can also be a red flag. …4. You check under his mattress and sure enough, he’s been hiding the worst thing imaginable: a copy of Basic Economics by Thomas Sowell. – Talk to your kids about Sowell before it’s too late. …6. You catch him texting girls “Taxation is theft.” – Always check your kids’ electronic devices so you can be alerted to these telltale signs of libertarianism. …8. You get a call from school that he got thrown out of economics class again for arguing with his teacher about the unsustainability of the U.S. Dollar and the failure of Keynesian economics. – Trouble at school might mean he’s been radicalized by the Austrian school of economics. …9. He has no friends. – This is perhaps the surest sign of all.
Next, here’s why people who pay taxes should be libertarians.
By the way, this isn’t satire. I actually wrote about this example of foolish government back in 2017.
The only good news – at least for American readers – is that this example of waste is from Canada.
As usual, I’ve saved the best for last. Here’s a worried left-wing parent dealing with a potentially rebellious child.
There is a debate about Rand’s contribution to the cause of liberty. I’m not an Objectivist or a Randian, but I think everyone should read Atlas Shrugged.
In this clip from a recent panel hosted by the Austrian Economics Center in Vienna, I speculated on whether the plan would become reality.
I encourage you to watch the 4-minute video, but all you really need to know is that there are lots of obstacles to a cartel. Most notably, countries with pro-growth business tax regimes (such as Ireland, Estonia, and Switzerland in Europe) have big incentives to say no.
And if legislation is required in the United States, I assume that won’t be an easy sell, at least for GOP members.
But, as I warn in the video, the other side has hundreds of bureaucrats at the OECD and various finance ministries and treasury departments. And these taxpayer-financed mandarins have both the time and patience to chip away until they achieve their goals.
Which is why people should read this column by Veronique de Rugy of the Mercatus Center. Here are some key excerpts.
For several decades now, politicians around the world have tried to curtail tax competition to make it easier for them to increase the tax burdens on their citizens without them fleeing to other lower-tax jurisdictions. The best way to achieve their goal is to create a global high-tax cartel. …It’s no mystery why politicians don’t like tax competition. …The ability to shift residences and operations from country to country puts pressure on governments to keep taxes on income, investment, and wealth lower than politicians would like. Politicians in each country fear that raising taxes will prompt high-income earners and capital to move away. …Academic research shows that the imposition of higher corporate taxes is a highly destructive way to collect revenue because it lowers investment and, in turn, workers’ wages. It also increases consumer prices. Also, let’s face it, no nation has ever become wealthier and better through higher taxes and wealth redistribution.
This column for Prof. Bruce Yandle also is very informative. Here’s some of what he wrote.
It was with a feeling of deep disappointment…that I read Treasury Secretary Janet Yellen is…pushing to form an international cartel of governments that would implement a minimum corporate income tax rate across borders. …Efforts to cartelize taxation among nations will…, all else equal, lead to a higher-cost world economy. …Instead of searching high and low for ways to raise costs in the hope that more federal revenue and spending will follow, we should hope that our national leaders work harder to find better, more efficient ways to govern and serve the people. Doing so will give more people a much better chance at prosperity.
Amen. Tax harmonization was most accurately described by a former member of the European Parliament, who said it was a “thieves’ cartel.”
P.S. One of the worst aspects of the proposed tax cartel is that it will make it more difficult for poor countries to use good policy to improve living standards for their people.
P.P.S. Click here for my primer on tax competition.
One of the most dramatic examples is Cuba vs. Hong Kong.The other, Sir John Cowperthwaite, was born in Britain and is largely unknown today. He was central to Hong Kong’s post-war recovery and to its unique laissez-faire, free-market economic policy. …Hong Kong and Cuba had similar GDP per capita in 1960. Since then, Hong Kong’s has grown 14-fold, Cuba’s just twice, leaving Hong Kong seven times more prosperous than Cuba. In 1960, Hong Kong’s GDP per capita was a third of its old mother country, Britain. Now, it is 40 percent higher, matching the United States and Switzerland. …Cuba and Hong Kong demonstrate the compound effect over six decades of state planning versus market forces.
…Cuba led virtually all countries in Latin America in life expectancy in 1959, before Castro’s communists seized power. But by 2012, right after Castro stepped down as Communist Party leader, Chileans and Costa Ricans lived slightly longer than Cubans. Back in 1960, Chileans had a life span seven years shorter than Cubans, and Costa Ricans lived more than two years less than Cubans on average. …Today, life spans are virtually the same in Cuba as more prosperous Chile and Costa Rica—if you accept the rosy official statistics put out by Cuba’s communist government, which many people do not.
They aren’t working, because they get paid almost nothing. …Even the buildings a few blocks from the seat of government in Havana are crumbling. It’s obvious to a visitor that Cubans live in abject poverty. …there are three classes of people in Cuba. The governmental elite live in gated communities and enjoy what Americans would regard as middle-class living standards. The average person who relies on his own income lives in desperate Third World conditions. In between are people with generous relatives in the U.S. They have more disposable income, but their living conditions are comparable to those of the poorest Americans.
a member of Castro’s elite inner circle, says the Cuban leader ran the country as his personal fiefdom like a cross between a medieval overlord and Louis XV. …the vast majority of Cubans were unaware their leader enjoyed a lifestyle beyond the dreams of many Cubans and at odds with the sacrifices he demanded of them. …In 2006 Forbes magazine listed the Cuban leader in its top 10 richest “Kings, Queens and Dictators”, citing unnamed officials who claimed Castro had amassed a fortune.
