The Federal Government Should Get Out of Infrastructure

I’ve called for the abolition of the Department of Transportation. On more than one occasion.

So I was very excited to see this new video about infrastructure from Johan Norberg.

Very well put. As Johan says (channeling Bastiat), we should remember that jobs are destroyed when money is taken out of the private sector to build infrastructure.

So it behooves us to make sure that any new project isn’t a boondoggle and instead will increase the economy’s productive capacity.

Which is why we should strive for decentralization and shrink Washignton’s footprint. If a state or local government is paying for its own projects, presumably it’ll have a greater incentive to avoid wasteful pork. When the federal government pays, by contrast, that’s a recipe for waste.

Veronique de Rugy explains the issue in a column for Reason. She starts with some economic analysis.

Economists have long recognized that roads, bridges, airports, and canals are the conduits through which goods are exchanged, and as such, infrastructure can play a productive role in economic growth. But not all infrastructure spending is equal. Ample literature shows, in fact, that it’s a particularly bad vehicle for stimulus and does not, in practice, boost short-term jobs or economic growth. …Publicly funded infrastructure projects often aren’t good investments in the long term, either. Most spending orchestrated by the federal government suffers from terrible incentives that lead to malinvestment—resources wasted in inefficient ways and on low-priority efforts. Projects get approved for political reasons and are either totally unnecessary or harmed by cost overruns and corruption.

And she concludes by arguing for market forces rather than federal involvement.

[Trump] should put an end to the whole idea that infrastructure should be centrally planned, taxpayer-funded, and the responsibility of the federal (as opposed to state or local) government. The current system obliterates the discipline that comes from knowing a project needs to pay for itself to survive. User fees should become our preferred option for funding infrastructure. That change kills two birds with one stone: It lessens the need for massive federal expenditures, and it gives the private sector an incentive to spend money on crucial but not exactly sexy maintenance tasks. …If Trump wants the United States to have “world-class” infrastructure, the surest way is through market-based reforms that increase competition while reducing subsidies and regulations. Embrace real privatization, not federally directed private investments.

Writing for U.S. News & World Report, Tracy Miller similarly argues that decentralization is the best approach.

Highways as well as public transportation are currently funded with money from the federal Highway Trust Fund, and by state and local governments. …Money from the fund has strings attached that raise costs and limit state and local governments’ ability to choose which projects have priority. These strings include prevailing wage laws, which require contractors receiving federal money to pay unionized wages even if they could attract qualified workers willing to work for less. High-profile projects chosen by politically powerful congressmen can easily take priority over projects that would generate greater benefits for their constituents. From an administrative standpoint, it would not be very difficult to reduce or eliminate the federal government’s role in highway and transit funding. Instead of gas taxes going to the federal government before being returned to the states, as is presently the case, each state could collect all taxes on fuel sold within its borders and decide how best to spend it. This would make it possible to downsize the U.S. Department of Transportation, saving taxpayers billions of dollars.

He explains why reform will lead to better – and cheaper – transportation.

Local governments – with greater awareness of the local needs of metropolitan areas, small towns or rural areas – can do a better job of funding and managing roads, highways and public transportation that serve primarily local residents. State governments or private firms, meanwhile, can best manage interstate and other major highways that cater mostly to long-distance travelers, especially if they could cover expenses with user fees. …Many drivers object to the idea of paying tolls for the use of currently “free” interstate highways, whether they are managed by private firms or state governments. But highways aren’t free – the costs are hidden within our fuel taxes. If mileage-based user fees are applied to all highways and set at the correct levels, they can become a much more efficient (and ultimately cheaper) replacement for fuel taxes.

Professor Edward Glaeser of Harvard summarizes the issue nicely in an article for CNBC.

Our current system of federal funding for transportation means that taxpayers in New York fund highways in Montana and drivers in Utah pay for New York’s airports. If President Trump wants to seriously improve American infrastructure spending, he should champion a new federalism for transportation, in which infrastructure is funded by states, localities and especially the users themselves. …The best decisions are made when decision-makers bear the costs and reap the benefits. When companies invest, they agonize about whether future customers will pay enough to cover the production costs. …Having lived through Boston’s Big Dig, I am well aware of how the promise of federal funding skews local decision-making. Local leaders stop asking themselves whether the benefits cover the costs because it’s somebody else’s nickel. …Detroit would have never built its absurd People Mover Monorail without federal encouragement and funding.

He elaborates on some of the implications for different types of infrastructure.

If new automotive infrastructure is meant to be self-financing, then the decision to build is a straightforward business investment and there is little need for large-scale federal funding. …The beneficiaries of metro systems are the businesses and commuters within a state. They could be funded with local property or sales taxes. My favorite metro funding model is in Hong Kong, where the city’s private mass transit system funds itself by building high-rises atop new train stops. …More federal funding for dysfunctional airports just perpetuates the status quo. They would be far healthier if they were split apart from the larger agency and allowed to operate, compete and charge higher landing fees, either as independent self-funding public airports, as in the U.K., or as private entities.

Amen. I’m not surprised to see Hong Kong as a role model. And I’ve already written about the U.K.’s success with privatization.

Speaking of privatization, a column in the Wall Street Journal points out that this is the way to improve airports in America.

Why do American passengers pay so much to get so little? Because their airports, by global standards, are terribly managed. Cities from London to Buenos Aires have sold or leased their airports to private companies. To make a profit, these firms must hold down costs while enticing customers with lots of flights, competitive fares and appealing terminals. The firm that manages London’s Heathrow, currently eighth in the international ranking, was so intent on attracting passengers that it built a nonstop express train to the city’s center. It’s also seeking to add another runway, as is the rival firm running Gatwick Airport. American airports are typically run by politicians in conjunction with the dominant airlines, which help finance the terminals in return for long-term leases on gates and facilities. The airlines use their control to keep out competitors; the politicians use their share of the revenue to reward unionized airport workers. No one puts the passenger first.

The author cites the San Juan airport as an example of what can happen under privatization.

If you want to see how much better American airports could be, take a plane to Puerto Rico. Until four years ago, the main airport in San Juan was run, and neglected, by an unwieldy bureaucracy, the Puerto Rico Ports Authority. The terminal was a confusing jumble of dim corridors. On rainy days, the ceilings leaked; on hot days, the air conditioning faltered. The stores were tacky and the restaurants greasy spoons, often rented at bargain rates to politicians’ friends or relatives. …Airlines switched operations to other Caribbean hubs. In 2013 the Ports Authority leased the airport for 40 years to Aerostar, a partnership operating airports in Cancún and other Mexican cities. The new managers agreed to make capital improvements, reduce landing fees and pay the Ports Authority $1.2 billion—half up-front. The result, three years later, is an airport nobody would call Third World. The redesigned concourses are sleek and airy, and revenue from new retail and restaurants has doubled. …Airlines no longer control the gates, but they’re reaping other benefits. “We’re paying lower fees for a much better airport,” says Michael Luciano, who runs Delta’s operations in San Juan. “Almost every area has been renovated. You go into any restroom, and it’s bright and clean—things like that are really important to our customers.” Passenger volume has been growing 4% annually, well above the industry average.

I can personally vouch for this. Because of all my travel in the Caribbean, I’ve used the San Juan airport extensively over the years, including just last week for the Liberty International conference.

The difference between today’s airport and the dump that used to exist is like the difference between night and day.

By the way, let’s also dismiss the notion that there’s some sort of infrastructure crisis.

I’ve already shared data from the World Economic Forum’s Global Competitiveness Report, which shows that the United States actually ranks relatively high compared to other nations.

And I’ve also shared solid numbers making the same point from Chris Edwards, one of my colleagues at the Cato Institute. Michael Sargent of the Heritage Foundation has a tweet that nicely shows that there isn’t a crisis.

Oh, and let’s also consider the example of Japan, which thought infrastructure spending was some sort of economic elixir. That didn’t work so well, as pointed out by the Wall Street Journal.

The U.S. economy isn’t growing at merely 2% because of potholes or airports… The prime illustration is Japan, which since the 1980s has tried to build its way out of stagnation. The country now boasts perhaps the world’s most spectacular suspension bridges, maglev trains, elevated highways and man-made islands, but the cost was trillions of yen of debt (now 230% of GDP) and no better growth. Nor could a monorail save Detroit. Projects make economic sense only to the extent they clear rigorous cost-benefit tests.

And if you want to know the infrastructure that is least likely to pass a cost-benefit test, just look at mass transit.

A good place to start is the Wall Street Journal‘s recent editorial on a subway line in New York City.

New York City opened a new subway line—about a century after the project was proposed and merely decades after ground-breaking in 1972…by far the most expensive train track in the history of the world. The story is an example of what not to do… This first phase of the new line—amounting to 1.6 miles in a single neighborhood, with three new stations and a renovated stop—cost some $4.451 billion. …The next leg of the Second Avenue subway, which would extend the train 29 blocks north into Harlem starting in 2020, is projected to cost an astonishing $6 billion, and that is surely an underestimate.

Gabriel Roth, writing for the Washington Examiner, has the right idea.

…abolish the subsidies. The federal government forces road users to spend some $10 billion a year on non-road assets of little or no benefit to them. Those payments are not only wasteful in themselves; they also encourage states and local governments to squander money on mass transit, whose costs users are not prepared to cover — not even the operating costs. If local communities consider such expenditures important, they should pay for them themselves.

By the way, just to show my libertarian bona fides, I think decentralization is just part of the answer. In my fantasy world, the private sector plays a bigger role.

And the good news, as I wrote back in 2014, is that my fantasy is reality in some instances.

Here’s another example from Hawaii.

Their livelihood was being threatened, and they were tired of waiting for government help, so business owners and residents on Hawaii’s Kauai island pulled together and completed a $4 million repair job to a state park — for free. …The state Department of Land and Natural Resources had estimated that the damage would cost $4 million to fix, money the agency doesn’t have, according to a news release from department Chairwoman Laura Thielen. …So Slack, other business owners and residents made the decision not to sit on their hands and wait for state money that many expected would never come. Instead, they pulled together machinery and manpower and hit the ground running March 23. And after only eight days, all of the repairs were done, Pleas said. It was a shockingly quick fix to a problem that may have taken much longer if they waited for state money to funnel in. “We can wait around for the state or federal government to make this move, or we can go out and do our part,” Slack said. “Just like everyone’s sitting around waiting for a stimulus check, we were waiting for this but decided we couldn’t wait anymore.” …”We shouldn’t have to do this, but when it gets to a state level, it just gets so bureaucratic, something that took us eight days would have taken them years,” said Troy Martin of Martin Steel, who donated machinery and steel for the repairs. “So we got together — the community — and we got it done.”

Reminds me of the guy who built some stairs at a park for $550 because the Toronto government was taking too long and planned to spend $65,000 to do the same thing.

And here’s another case study from Portland.

Portland Anarchist Road Care (PARC) is a community collaboration of skilled workers who volunteer their services to fix the damaged roads around Portland, Oregon. Citing concerns about governmental bureaucracy, the current political climate, a lack of funds and a seeming lack of care, the members of PARC decided to take things into their own very capable hands.

I have no idea whether these people are libertarian-minded anarcho-capitalists or deeply confused left-wing nihilist anarchists, but kudos to them for steeping up and doing a job cheaply and efficiently. The very opposite of what we expect from government.

P.S. Since Nazis are in the news and since I’m writing about infrastructure, here are some blurbs from an academic study on how Germany’s National Socialists used autobahn outlays to generate political support.

The idea that political support can effectively be bought has a long lineage – from the days of the Roman emperors to modern democracies, `bread and circus’ have been used to boost the popularity of politicians. A large literature in economics argues more generally that political support can be ‘bought’. …In this paper, we analyze the political benefits of building the worldʹs first nationwide highway network in Germany after 1933 – one of the canonical cases of government infrastructure investment. We show that building the Autobahn was highly effective in reducing opposition to the Hitler regime. …What accounts for the Autobahn’s success in winning “hearts and minds”? We discuss the economic and transport benefits. In the aggregate, these have been shown to be minimal (Ritschl 1998; Vahrenkamp 2010). …we argue that the motorways…increased support because they could be exploited by propaganda as powerful symbols of competent, energetic government. …Our results suggest that infrastructure spending can indeed create electoral support for a nascent dictatorship – it can win the “hearts and minds” of the populace. In the case of Germany, direct economic benefits of pork‐barrel spending in affected districts may have played a role.

Seems that politicians, whether motivated by evil or run-of-the-mill ambition, love spending other people’s money to build political support. Is it any wonder that we hold them in such low esteem?

P.P.S. Fans of “public choice” doubtlessly will be amused by the IMF’s 2014 flip-flop on infrastructure.

Because Protecting the Environment Is Important, Capitalism Should Play a Bigger Role

Over the years, I’ve had fun mocking the silly extremism of the environmental movement.

• Some environmentalists don’t believe in bathing,
• How about the environmentalists who sterilize themselves to avoid carbon-producing children,
• Or consider the environmentalists who produce/use hand-cranked vibrators to reduce their carbon footprint.
• There are also environmentalist who claim that climate change causes AIDS.
• Environmentalists assert that you’re racist if you oppose their agenda.
• And environmentalists put together a ranking implying that Cuba is better than the United States.
• The environmentalists who choose death to lower their carbon footprints.

That being said, protecting the environment is a worthy and important goal.

And that’s why some of us want to give the private sector a bigger role.

John Stossel, for instance, has a must-watch video on how capitalism can save endangered rhinos.

Professor Philip Booth expands on the lesson in the video and urges broad application of market forces to preserve the environment.

Especially well-enforced property rights.

…what is needed for better husbandry of ecological resources is more widespread and deeper establishment of property rights together with their enforcement. The cause of environmentalism is often associated with the Left. This is despite the fact that some of the worst environmental outcomes in the history of our planet have been associated with Communist governments. …a great deal of serious work has been produced by those who believe in market or community-based solutions to environmental problems, and a relatively small role for government. For example, Ronald Coase and Elinor Ostrom are two Nobel Prize winners in economics who have made profound contributions to our understanding of how markets and communities can promote environmental conservation. Indeed, the intellectual and moral high ground when it comes to environmentalism ought to be taken by those who believe in private property, strong community institutions and a free economy.

Philip explains why private ownership produces conservation.

If things are owned, they will tend to be looked after. The owner of a lake will not fish it to near extinction (or even over-fish the lake to a small degree) because the breeding potential of the fish would be reduced.

He then explains the downside of public ownership.

On the other hand, if the lake is not owned by anybody, or if it is owned by the government and fishing is unregulated, the lake will be fished to extinction because nobody has any benefit from holding back. Local businesses may well also pollute the lake if there are no well-defined ownership rights. The much-cited work here is Hardin’s Tragedy of the Commons (1968), though, in fact, Hardin was simply referring back to a pamphlet by William Forster Lloyd which was written in 1833. In that pamphlet, a situation was described whereby common land was open to grazing by all. The land would then be over-grazed because a person would get the benefit of putting additional cattle on the land without the cost that arises from over-grazing which would be shared by all users.

He points out that one advantage of Brexit is that the U.K. can implement a fisheries system based on property rights.

Now that fishing policy has been repatriated, the UK should establish property rights in sea fisheries. Few would seriously question private property when it comes to the land. For example, it is rare these days to find people who would suggest that farms should be nationalised or collectivised or returned to an unregulated commons where anybody can graze their animals without restriction. It would be understood that this would lead to chaos, inefficiency and environmental catastrophe.

And since we have real-world evidence that fisheries based on property rights are very successful, hopefully the U.K. government will implement this reform.

So what’s the bottom line on capitalism and the environment?

If we want sustainable environmental outcomes, the answer almost never lies with government control, but with the establishment and enforcement of property rights over environmental resources. This provides the incentive to nurture and conserve. Where the government does intervene it should try to mimic markets. When it comes to the environment, misguided government intervention can lead to conflict and poor environmental outcomes. The best thing the government can do is put its own house in order and ensure that property rights are enforced through proper policing and courts systems. That is certainly the experience of forested areas in South America.

Let’s close by noting one other reason to give the market a bigger role. Simply stated, environmentalists seem to have no sense of cost-benefit analysis. Instead, we get bizarre policies that seem motivated primarily by virtue signalling.

• The environmentalist-driven war on high-quality light bulbs.
• The environmentalist-driven rule against working toilets.
• The environmentalist-driven prohibition against washing machines that actually clean.
• The environmentalist-driven campaign to eliminate effective showerheads.
• The environmentalist-driven pointless recycling mandates.

And don’t forget green energy programs, which impose heavy costs on consumers and also are a combination of virtue signalling and cronyism.

No wonder many of us don’t trust the left on global warming, even if we recognize it may be a real issue.

P.S. There is at least one employee at the Environmental Protection Agency who deserves serious consideration for the Bureaucrat Hall of Fame.

Republicans Embrace Bad Economics and Bad Policy

To be blunt, Republicans are heading in the wrong direction on fiscal policy. They have full control of the executive and legislative branches, but instead of using their power to promote Reaganomics, it looks like we’re getting a reincarnation of the big-government Bush years.

As Yogi Berra might have said, “it’s deja vu all over again.”

Let’s look at the evidence. According to the Hill, the Keynesian virus has infected GOP thinking on tax cuts.

Republicans are debating whether parts of their tax-reform package should be retroactive in order to boost the economy by quickly putting more money in people’s wallets.

That is nonsense. Just as giving people a check and calling it “stimulus” didn’t help the economy under Obama, giving people a check and calling it a tax cut won’t help the economy under Trump.

Tax cuts boost growth when they reduce the marginal tax rate on productive behavior such as work, saving, investment, or entrepreneurship. When that happens, people have an incentive to generate more income. And that leads to more national income, a.k.a., economic growth.

Borrowing money from the economy’s left pocket and then stuffing checks (oops, I mean retroactive tax cuts) in the economy’s right pocket, by contrast, simply reallocates national income.

Indeed, this is one of the reasons why the economy didn’t get much benefit from the 2001 Bush tax cut, especially when compared to the growth-oriented 2003 tax cut. Unfortunately, Republicans haven’t learned that lesson.

Republicans have taken steps in the past to ensure that taxpayers directly felt the benefits of tax cuts. As part of the 2001 tax cuts enacted by President George W. Bush, taxpayers received rebate checks.

The article does include some analysis from people who understand that retroactive tax cuts aren’t economically beneficial.

…there are also drawbacks to making tax changes retroactive. …such changes would add to the cost of the bill, but would not be an effective way to encourage new spending and investments. “It has all of the costs of the tax cuts but none of the economic benefits,” said Committee for a Responsible Federal Budget President Maya MacGuineas, who added that “you don’t make investments in the rear-view mirror.”

I’m not always on the same side as Maya, but she’s right on this issue. You can’t encourage people to generate more income in the past. If you want more growth, you have to reduce marginal tax rates on future activity.

By the way, I’m not arguing that there is no political benefit to retroactive tax cuts. If Republicans simply stated that they were going to send rebate checks to curry favor with voters, I’d roll my eyes and shrug my shoulders.

But when they make Keynesian arguments to justify such a policy, I can’t help but get upset about the economic illiteracy.

Speaking of bad economic policy, GOPers also are pursuing bad spending policy.

Politico has a report on a potential budget deal where everyone wins…except taxpayers.

The White House is pushing a deal on Capitol Hill to head off a government shutdown that would lift strict spending caps long opposed by Democrats in exchange for money for President Donald Trump’s border wall with Mexico, multiple sources said.

So much for Trump’s promise to get tough on the budget, even if it meant a shutdown.

Instead, the back-room negotiations are leading to more spending for all interest groups.

Marc Short, the White House’s director of legislative affairs, …also lobbied for a big budget increase for the Pentagon, another priority for Trump. …The White House is offering Democrats more funding for their own pet projects.

The only good news is that Democrats are so upset about the symbolism of the fence that they may not go for the deal.

Democrats show no sign of yielding on the issue. They have already blocked the project once.

Unfortunately, I expect this is just posturing. When the dust settles, I expect the desire for more spending (from both parties) will produce a deal that is bad news. At least for those of us who don’t want America to become Greece (any faster than already scheduled).

Republican and Democratic congressional aides have predicted for months that both sides will come together on a spending agreement to raise spending caps for the Pentagon as well as for nondefense domestic programs.

So let’s check our scorecard. On the tax side of the equation, we’ll hopefully still get some good policy, such as a lower corporate tax rate, but it probably will be accompanied by some gimmicky Keynesian policy.

On the spending side of the equation, it appears my fears about Trump may have been correct and he’s going to be a typical big-government Republican.

It’s possible, of course, that I’m being needlessly pessimistic and we’ll get the kinds of policies I fantasized about in early 2016. But I wouldn’t bet money on a positive outcome.

Great Moments in State Government

When I write about the actions of state governments, it’s usually to highlight a specific bad policy. As you can imagine, states like California, Connecticut, Illinois, New York, and New Jersey give me a never-ending amount of material.

But I frequently run across things that are happening in the states that don’t really merit an entire column, but they nonetheless are worthy of attention since they symbolize the venality and incompetence of politicians.

So I’ve decided that it’s time for a series on “great moments in state government” to augment my already well-developed series on “great moments in local government.”

Let’s start by looking at a truly bizarre example of occupational licensing from Tennessee.

A decade ago, Martha Stowe founded True Equine, an equine-services company, a few miles south of Nashville, Tenn., in Williamson County. After earning a certificate in equine myofascial release, a massage technique that releases tension and pain in a horse’s body, Martha soon acquired a large clientele. …In April 2016, however, Stowe’s well-established business was upended when she received a threatening letter from the Board of Veterinary Medical Examiners, a board within Tennessee’s Department of Health. Only licensed veterinarians are permitted to massage horses, the board’s attorney explained, and if Stowe continued to practice myofascial release, she could be fined up to $500 and receive a six-month jail sentence. …The board also sent the letter to fellow Williamson County resident Laurie Wheeler, a professional jazz musician and licensed massage therapist who, like Stowe, is certified in equine myofascial release. …Upon receiving the veterinary board’s letter, Wheeler was stunned — after all, she was certified, and not only that, she had never even accepted money for her services. But, she says, the government threatened to “fine me and put me in jail for voluntarily working on animals.” For Wheeler, helping horses is more than a volunteer position or an occupation; it’s a call to duty.

But there is some good news.

A pro-market think tank is helping the women fight back.

Both women disregarded the veterinary board’s warnings and subsequently looked to the Beacon Center of Tennessee, a free-market think tank, for legal representation. According to Braden Boucek, director of litigation for the Beacon Center, the board’s decision to allow only licensed veterinarians to massage horses is a violation of the U.S. Constitution’s equal-protection clause. Moreover, because the Constitution protects private property, which in turn protects the right to acquire property and the right to earn a living, the board’s decision violates the 14th Amendment. …Threatening to jail an individual for massaging a horse is absurd. These women aren’t giving medical advice to owners, or surgically operating on horses, or doing anything that only a licensed veterinarian could do. Remember, this kind of massage is not even taught in veterinary school. Under Tennessee’s logic, why shouldn’t massage therapists who practice exclusively on people be required to hold a medical degree? The veterinary board ought to take the necessary steps to begin updating this illogical statute. If it doesn’t, it will need to explain in court why it’s permissible to deprive Stowe and Wheeler of their fundamental constitutional rights.

Amen. I admire Tennessee for not having an income tax. It’s time, though, for the Volunteer State to extend economic freedom to horse masseurs.

Now let’s shift to Wisconsin, where we have another example of cronyism.

State lawmakers may be brave when it comes to curtailing special privileges for government employees, but they like special protections for private industry.

Wisconsin state regulators…[are]…banning state grocery stores from selling one of the Emerald Isle’s most popular (and tasty) products: Kerrygold butter. Never mind that Wisconsinites have been buying Kerrygold for years with no problems. Or that it remains legal in the 49 other states. Badger State bureaucrats, trying to protect the state dairy industry, are suddenly enforcing a 1970 law that requires all butter sold in the state to go through a complicated evaluation by a state panel. This is the same state that once banned margarine because it was a competitive threat to local dairies. …as a result of the ban, Kerrygold-loving Wisconsinites have been forced to make butter runs across the state border, bringing back suitcases stuffed with the import. In Ireland, meanwhile, the ban is leading to headlines such as this in the Irish Mirror: “Shopkeepers in Wisconsin could face JAIL if they sell Kerrygold butter.”

Maybe butter consumers in Wisconsin can fly to Norway and learn how to get around misguided policies that make butter a black-market commodity.

Remember, if you outlaw butter, only outlaws will have butter.

Now let’s look at some onerous government intervention in my state of Virginia. And this one is personal since I don’t like the hassle of annual vehicle inspections.

…my annual Virginia motor vehicle safety inspection was due in a month. I knew my car wouldn’t pass and that I wouldn’t be allowed to stay on the road with that light on. Never mind that the light has nothing to do with the safe operation of the vehicle. And also never mind that in a 2015 study the Government Accountability Office “examined the effect of inspection programs on crash rates related to vehicle component failure, but showed no clear influence.” AAA Public Affairs Vice President Mike Wright said, “Nobody can prove with any degree of certainty that spending the money, suffering the inconvenience of getting your vehicle inspected, actually produces desired results.” …Virginia has a personal vehicle safety program overseen by the state police that cannot be shown to enhance public safety. The people who perform inspections are often the same people who fix any identified deficiencies. …A government program that requires the purchase of a good or service in return for a nonexistent public benefit is illiberal and anti-consumer. Two-thirds of states see no need to impose the burden of annual personal vehicle safety inspections on their citizens; Virginia should end its inspection requirement.

For what it’s worth, the People’s Republic of the District of Columbia doesn’t have this requirement. Kind of embarrassing that Virginia is more interventionist.

Our final example come from Illinois, where a local newspaper has a superb editorial on a sordid example of wasteful sleaze in the state budget.

Let’s eliminate the Illinois Arts Council Agency from the state budget. They must have taken lessons on government efficiency from our local townships, spending $1 million on staff and overhead in 2016 to hand out $834,900 in grants. The council is chaired by Shirley Madigan, who has been in that position since 1983. Funny, her husband, Mike, has been Illinois House Speaker since then, too. …guess who gets the money? Their well-heeled friends. Madigan’s alma mater received $95,100, another board member’s employer received $165,650 and yet another board member’s pet opera company received $503,000. Surprise! …Illinois Gov. Bruce Rauner has an opportunity to let someone else be a matron of the arts and appoint a majority of board members dedicated to either eliminating the council or at least making it a transparent organization that helps local artists rather than makes your taxes a minor revenue source for well-connected, large arts institutions.

Needless to say, the first option (eliminating the council) is the superior choice, just like we should shut down the National Endowment for the Arts in D.C.

But let’s set that aside. I’m still scratching my head about a bureaucracy that spends $1 million to give away $834.9 thousand. Though that’s actually efficient if you compare it with the German tax that resulted in €30 euros of government expense for every €1 collected.

To conclude, there’s a common thread in these four stories. In each case, politicians at the state level have policies to enable unearned wealth to flow to the pockets of their friends and allies.

In other words, the First Theorem of Government doesn’t just apply to what’s happening in Washington.

P.S. I’ve only had a few previous “great moments” for state governments. One from Florida involved a felony arrest of some luckless guy who was simply trying to impress his girlfriend by releasing some balloons, and the other from Virginia involved three misdemeanors for the horrid crime of rescuing a wounded deer.

Some Uplifting News about Race in America

The racist march in Charlottesville, VA, was awful news. The vehicular murder of a woman by one of the racists is even worse news.

The good news is that almost everyone in the nation is united in condemning the marchers.

I especially like what Senator Ben Sasse said about how America isn’t an ethnic identity, but rather a nation of ideals.

It’s also good news is that the free market punishes racism. That’s because people who make decisions based on irrational hatred are less efficient and productive and therefore lose market share.

Indeed, here’s the abstract of an encouraging study on that topic.

Economic theory has long maintained that employers pay a price for engaging in racial discrimination. According to Gary Becker’s seminal work on this topic and the rich literature that followed, racial preferences unrelated to productivity are costly and, in a competitive market, should drive discriminatory employers out of business. …This research pairs an experimental audit study of racial discrimination in employment with an employer database capturing information on establishment survival, examining the relationship between observed discrimination and firm longevity. Results suggest that employers who engage in hiring discrimination are less likely to remain in business six years later.

Indeed, another academic study showed that racist managers result in a less-productive workforce.

Examining the performance of cashiers in a French grocery store chain, we find that manager bias negatively affects minority job performance. In the stores studied, cashiers work with different managers on different days and their schedules are determined quasi-randomly. When minority cashiers, but not majority cashiers, are scheduled to work with managers who are biased (as determined by an Implicit Association Test), they are absent more often, spend less time at work, scan items more slowly, and take more time between customers. Manager bias has consequences for the average performance of minority workers: while on average minority and majority workers perform equivalently, on days where managers are unbiased, minorities perform significantly better than do majority workers. This appears to be because biased managers interact less with minorities, leading minorities to exert less effort.

Writing for Capitalism, Richard Ebeling explains how markets punish racism.

…one of the most important aspects of the free market is precisely that it tempers irrational action. The market ultimately rewards producers by one test and only one test: can a producer deliver the desired goods and services more cheaply and with better quality than another producer who is competing for the same consumer business? Any employer who fails to judge the usefulness of the resources he can buy or hire — including labor — according to the standards of cost and quality efficiency will run the risk of losing business he otherwise could gain. The market, therefore, penalizes those who judge prospective employees on the basis of their race rather than on the talents and expertise they could contribute to the production of a commodity desired by the consuming public. Why? Because the profit motive acts as an incentive for some businessmen to set aside their racial prejudices for the sake of maximizing their net revenues. And, over time, this puts pressure on an increasing number of prospective employers to do the same — if they are to avoid losing out to their market rivals. …The free market…is the great destroyer of racial prejudices and the great liberator of the individual from the bondage of racial barriers.

But let’s move beyond academic analysis.

Given the horrid events in Charlottesville, I want to share some uplifting stories, sort of like the heartwarming story from Ferguson, MO, that I wrote about in 2014.

I have four examples of racial progress from both blacks and whites

Here’s an example from the New York Times of how people should think and behave.

What the black state trooper saw was a civilian in distress. Yes, this was a white man, attending a white supremacist rally in front of the South Carolina State House. And yes, he was wearing a black T-shirt emblazoned with a swastika. But the trooper concentrated only on this: an older civilian, spent on the granite steps. Overcome, it appeared, by an unforgiving July sun… The trooper motioned for help from the Columbia fire chief, who is also black. Then, with a firm grip, he began walking the wilted white man up the steps toward the air-conditioned oasis of the State House. …The meaning of this image — of a black officer helping a white supremacist, both in uniform — depends on the beholder. You might see a refreshing coda to the Confederate flag controversy… But what does the trooper see? His name is Leroy Smith, and he happens to be the director of the South Carolina Department of Public Safety. …Mr. Smith said he was taken aback by the worldwide attention but hoped the image would help society move past the recent spasms of hate and violence… Asked why he thinks the photo has had such resonance, he gave a simple answer: Love. “I think that’s the greatest thing in the world — love,” said the burly, soft-spoken trooper, who is just shy of 50. “And that’s why so many people were moved by it.”

I have to imagine that Mr. Smith experienced more than enough racism as he grew up.

Yet not only did he become a successful professional, he developed an attitude that should inspire people of every color.

Here’s a story that’s also amazing. It’s about a black guy who has a mission of saving Klan members.

When someone Daryl Davis has befriended leaves the Ku Klux Klan, he often gives Davis the robe he wore as a member of that group. Over the years, Davis, by his own account, has amassed dozens of these retired jerseys of hate. …Davis goes to Klan rallies. He has invited Klansmen to his home and visited them. He calls some of them “friend” even as they call him inferior. In one moving segment, the film recounts how Davis met the daughters of an incarcerated Klan member at the airport and drove them to the prison so that they could visit their father. Eventually the family noticed that none of the man’s Klan colleagues were serving or loving them as much as Davis was. Their ideology of hate collapsed in the face of undeserved compassion. …Part of what makes him so effective at talking to the Klan is that he has read every book he can find on the subject. He asks questions. He gathers information. He listens. …“I never set out to convert anyone,” he says in the film. Through a mix of diplomacy and Socratic questioning, he will sometimes see a racist begin to think about his ideology rather than simply proclaim it. Eventually, “they end up converting themselves.” …Davis believes we will be better and stronger and healthier and happier together as one nation than as a segregated one. …Ornstein asks Davis what he is feeling as he watches a video profile of former racists who have left the Klan. What Davis says next was both profound and powerful, a message of hope to a nation… “These are my fellow Americans.”

Wow. I hope some day to be half as good a person as Mr. Davis.

The Washington Post has a heartwarming story about a kid who was raised to be racist and ultimately discarded that poisonous form of collectivism.

Derek Black was already hosting his own radio show. He had launched a white nationalist website for children…He was not only a leader of racial politics but also a product of them. His father, Don Black, had created Stormfront, the Internet’s first and largest white nationalist site, with 300,000 users and counting. His mother, Chloe, had once been married to David Duke, one of the country’s most infamous racial zealots, and Duke had become Derek’s godfather. They had raised Derek at the forefront of the movement, and some white nationalists had begun calling him “the heir.”

Then he went to college.

Derek finished high school… He decided he wanted to study medieval European history, so he applied to New College of Florida, a top-ranked liberal arts school with a strong history program. …New College was in Sarasota, three hours across the state, and it was the first time Derek had lived away from home. …He watched zombie movies with students from his dorm, a group that included a Peruvian immigrant and an Orthodox Jew.Maybe they were usurpers, as his father had said, but Derek also kind of liked them, and gradually he went from keeping his convictions quiet to actively disguising them.

But then he was outed.

He left after one semester to study abroad in Germany, because he wanted to learn the language. He kept in touch with New College partly through a student message board, known as the forum, whose updates were automatically sent to his email. One night in April 2011, Derek noticed a message posted to all students at 1:56 a.m. It was written by someone Derek didn’t know — an upperclassman who had been researching terrorist groups online when he stumbled across a familiar face. “Have you seen this man?” the message read, and beneath those words was a picture that was unmistakable. The red hair. The cowboy hat. “Derek black: white supremacist, radio host…new college student???” the post read. “How do we as a community respond?”By the time Derek returned to campus for the next semester, more than a thousand responses had been written to that post. …He returned to Sarasota, applied for permission to live outside of required student housing and rented a room a few miles away.A few of his friends from the previous year emailed to say they felt betrayed, and strangers sometimes flipped him off from a safe distance on campus.

  Here’s the part of the story that’s really great.

One of Derek’s acquaintances from that first semester decided he might have an idea. He started reading Stormfront and listening to Derek’s radio show. Then, in late September, he sent Derek a text message. “What are you doing Friday night?” he wrote. …Matthew had spent a few weeks debating whether it was a good idea. He and Derek had lived near each other in the dorm, but they hadn’t spoken since Derek was exposed on the forum. Matthew, who almost always wore a yarmulke, had experienced enough anti-Semitism in his life to be familiar with the KKK, David Duke and Stormfront. He went back and read some of Derek’s posts on the site from 2007 and 2008: “Jews are NOT white.” “Jews worm their way into power over our society.” “They must go.” Matthew decided his best chance to affect Derek’s thinking was not to ignore him or confront him, but simply to include him. “Maybe he’d never spent time with a Jewish person before,” Matthew remembered thinking.

And here’s what happened.

It’s a long excerpt, but very much worth reading.

Nobody mentioned white nationalism or the forum, out of respect for Matthew. Derek was quiet and polite, and he came back the next week and then the next, until after a few months, nobody felt all that threatened… On the rare occasions when Derek directed conversation during those dinners, it was about the particulars of Arabic grammar, or marine aquatics, or the roots of Christianity in medieval times. He came across as smart and curious, and mostly he listened. He heard a Peruvian immigrant tell stories about attending a high school that was 90 percent Hispanic. He asked Matthew about his opinions on Israel and Palestine. They were both still wary of each other: Derek wondered whether Matthew was trying to get him drunk so he would say offensive things that would appear on the forum; Matthew wondered whether Derek was trying to cultivate a Jewish friend to protect himself against charges of anti-Semitism. But they also liked each other, and they started playing pool at a bar near campus. Some members of the Shabbat group gradually began to ask Derek about his views, and he occasionally clarified them in conversations and emails throughout 2011 and 2012. …Derek was becoming more and more confused about exactly what he believed. Sometimes he looked through posts on Stormfront, hoping to reaffirm his ideology, but now the message threads about Obama’s birth certificate or DNA tests for citizenship just seemed bizarre and conspiratorial. He stopped posting on Stormfront. He began inventing excuses to get out of his radio show, leaving his father alone on the air each morning to explain why Derek wouldn’t be calling in. …“Get out of this,” one of his Shabbat friends emailed a few weeks after Derek’s graduation in May 2013, urging Derek to publicly disavow white nationalism. “Get out before it ruins some part of your future more than it already irreparably has.” Derek stayed near campus to housesit for a professor after graduation, and he began to consider making a public statement. He knew he no longer believed in white nationalism, and he had made plans to distance himself from his past by changing part of his name and moving across the country for graduate school. His instinct was to slip away quietly, but his advocacy had always been public — a legacy of radio shows, Internet posts, TV appearances, and an annual conference on racial tactics.

But Derek decided he needed a public break.

He took out his computer and began writing a statement. “A large section of the community I grew up in believes strongly in white nationalism, and members of my family whom I respect greatly, particularly my father, have long been resolute advocates for that cause. I was not prepared to risk driving a wedge in those relationships. “After a great deal of thought since then, I have resolved that it is in the best interests of everyone involved to be honest about my slow but steady disaffiliation from white nationalism. I can’t support a movement that tells me I can’t be a friend to whomever I wish or that other people’s races require me to think of them in a certain way or be suspicious at their advancements. “The things I have said as well as my actions have been harmful to people of color, people of Jewish descent, activists striving for opportunity and fairness for all. I am sorry for the damage done.”

If you read the whole story, you’ll get fascinating details on how Derek’s family dealt with his epiphany.

You’ll also learned that he became a Hillary voter, which is disappointing since he should have become a libertarian.

But that’s a minor detail. The main thing is that he cast aside the collectivism of racism and group-think.

Here’s another story about a white guy that did the right thing.

Ten years after getting a tattoo, the expression on a stranger’s face changed a man’s heart and mind about his tattoo. …A man, who declined KVUE’s request for an interview, recently called Texas Bob’s asking Barr for a cover up. “He’s got an old tattoo of a skull with a rebel flag bandana around his head,” he said. An expression on a woman’s face changed his heart. “An older black lady saw him and saw the tattoo and her expression changed as she saw it,” Barr said. “That seemed like it just broke his heart a little bit and he decided that day that it was time to do something about it.” Barr blacked out the rebel flag bandana on the man’s tattoo. “He seemed like a little weight had been lifted from him,” Barr said.

By the way, it’s very possible that the guy didn’t have any racist motive when he first got the tattoo. He may simply have been from the south and didn’t think beyond that. Or maybe he just thought it was cool, or edgy.

But it is heartwarming that he changed his mind – not because he was forced to – but because he saw that it hurt someone else’s feelings. That’s a very good type of empathy.

And this isn’t a one-off story, at least if this report from the Washington Post is any indication.

Randy Stiles learned the hard way: Having a Confederate flag tattoo that reads “Southern Pride” with a noose hanging off it isn’t a path to success. “A lot of public ridicule came from it,” Stiles, 25, said this month as he waited to get the flag on his right forearm removed. “I’ve got to get it gone.” Eliminating a tattoo like that takes hours under the needle and usually costs as much as $500. But Southside Tattoo in Brooklyn Park, Md., is removing the hate for free, covering up racist and gang-related tattoos as part of its mission.

I realize that these stories are just anecdotes, but I suspect that 90 percent-plus of Americans have the right aspirations when it comes to race.

Professor Glenn Reynolds wrote about this positive sentiment back in 2015.

…if you leave the politicians, the pundits and the crazies aside, ordinary Americans are behaving quite differently. Maybe we should be paying more attention to that bit of good news. And maybe so should the politicians and pundits. After the Charleston shooting, citizens of South Carolina, both black and white, joined hands, and more than 15,000 of them marched in a show of love and friendship. …20,000 people show up for a multiracial “All Lives Matter” march in Birmingham, Ala. It could be the largest such march there since MLK. Glenn Beck and Chuck Norris were there, but that’s not all. …“Alveda King, a niece of civil rights activist the Rev. Martin Luther King Jr., marched in the front row. Bishop Jim Lowe, pastor of the predominantly black Guiding Light Church in Birmingham, co-organized the march with Beck and marched with him at the front. As a child, Lowe attended Sixteenth Street Baptist Church, where the march started, a headquarters church for the civil rights movement in Birmingham. Lowe and his sisters were in the church when a KKK bomb blew up the church and killed four little girls on Sept. 15, 1963.” …Once again the national news media, noted Washington Post blogger David Weigel, “was largely absent.” No time for positivity where race is concerned, I guess. Meanwhile, in Houston, more than a thousand people of all races gathered at an impromptu memorial for murdered Sheriff’s Deputy Darren Goforth. As station KHOU reported, “Those gathered lit candles and gave hugs, hoping to turn the murder from hate to healing.” From hate to healing: That’s what’s bubbling up from the American people, even as our political leadership sows division. Which will win out? That depends on what we all do next, doesn’t it? The American people have a strong spirit of egalitarianism and kindness, one that shows over and over again. But our political class sees more gain in promoting hatred and division. Who will win? If we’re lucky, our “leaders” will follow the people on this.

Incidentally, we obviously have some problems still to solve in America, but we should be proud of how far we’ve come.

Especially compared to the rest of the world, as illustrated by this map.

Courtesy of the American Enterprise Institute, here’s some more evidence of societal progress.

Opinions about interracial dating and marriage on a personal level have…evolved significantly. In 1971, 48 percent nationally said they would not approve of their own children dating someone of another race, while 28 percent said they would approve. In 2014, nearly eight in ten Americans said it wouldn’t matter at all if someone in their family was going to marry someone of another race. Nine percent said they would be happy about it, while 11 percent said they would be unhappy. Today, a majority of whites (54 percent) say they would neither favor nor oppose a close relative marrying a black person. Blacks are slightly less ambivalent, with 42 percent of them giving that response about a close relative marrying a white person. Fifty-two percent favor the idea compared to 30 percent of whites. Along with these changes in public opinion, interracial marriage is also becoming more common in the United States. Pew Research Center analysis of the 2013 American Community Survey found that 6.3 percent of all marriages that year were between people of different races, compared to less than 1 percent in 1970.

And progress isn’t just about attitudes.

Thomas Edsall of the New York Times wrote an encouraging column about economic progress among African-Americans.

…the black upper middle class is ascending the economic ladder at a faster rate than its white counterpart. … William Julius Wilson, a sociologist at Harvard and the author of “The Truly Disadvantaged,”…wrote…”One of the most significant changes in recent decades is the remarkable gains in income among more affluent blacks. When we adjust for inflation to 2014 dollars, the percentage of black Americans earning at least $75,000 more than doubled from 1970 to 2014, to 21 percent. Those making $100,000 or more almost quadrupled to 13 percent (in contrast white Americans saw a less striking increase, from 11 to 26 percent).” In an NBER paper issued in November 2016, Patrick Bayer, an economist at Duke, and Kerwin Charles, a professor of public policy at the University of Chicago, published comparable findings, reporting that “higher quantile black men have experienced substantial gains in both relative earnings levels and their positional rank in the white earnings distribution.”

Jason Riley of the Wall Street Journal also opined about black progress.

During a period of legal discrimination and violent hostility to their advancement, blacks managed to make unprecedented gains that have never been repeated. Black poverty fell to 47% from 87% between 1940 and 1960—before the implementation of Great Society programs that receive so much credit for poverty reduction. The percentage of black white-collar workers quadrupled between 1940 and 1970—before the implementation of affirmative-action policies that supposedly produced today’s black middle class. In New York City, the earnings of black workers tripled between 1940 and 1950, and over the next decade the city saw a 55% increase in the number of black lawyers, a 56% increase in the number of black doctors and a 125% increase in the number of black teachers.

Let’s hope all this progress continues.

In part, this means public policy reforms such as school choice and welfare reform. Another part of the answer is for government to simply get out of the way since even policies designed to help minorities can backfire.

But mostly this is a question of individual morality. We should all try to be like Daryl Davis and the rest of the people in the above stories.

The Bizarre Allure of Socialism, Part II

Back in June, I wrote about the bizarre allure of socialism and said that advocates (who generally don’t even know what socialism really means) were some of the most anti-empirical people in the world.

…even though the real-world evidence against big government is so strong, it’s rather baffling that many young people are drawn to that coercive ideology and disturbing that a non-trivial number of voters favor this failed form of statism. …Socialism has a technical definition involving government ownership of the means of production and central planning of the economy. But most people today think socialism is big government, with business still privately owned but with lots of redistribution and intervention (I’ve argued, for instance, that even Bernie Sanders isn’t a real socialist, and that there are big differences between countries like Sweden, China, and North Korea). For what it’s worth, that’s actually closer to the technical definition of fascism.

Now let’s update that column.

It seems that the cancer of socialism is spreading, at least if this story in The Week is any indication.

Things are looking up for the Democratic Socialists of America. With a membership of 25,000, it is now the largest socialist group in America since the Second World War. And last weekend in Chicago, it held its largest convention, by a considerable margin, in its history. …Membership has more than tripled in a year, gaining a large boost from the candidacy of Bernie Sanders… That sharp surge in new recruits — most of whom are fairly young — has created a fairly stark age bifurcation among members. Somewhat akin to Sanders campaign, there is an old guard of people who have been carrying the left-wing torch for years, and a recent surge of new members…most of the major proposals were adopted with large majorities. Among other things, delegates voted to…endorse the Boycott, Divestment, and Sanctions movement (directed at ending the Israeli occupation of the West Bank and Gaza), …and to endorse Medicare for all as a major priority.

I’m guessing that the bifurcated conference meant a handful of old people who are genuine socialists and a bunch of young people who think socialism is just a bunch of government-coerced redistribution and intervention.

Both groups, however, deserve scorn for favoring a system that elevates the state over individuals. That approach is grossly immoral.

Not to mention that it’s never worked. Nobody has ever provided a good answer to my two-part challenge.

There is no example of a successful socialist nation anywhere in the world. Cuba? No. North Korea? No. The Soviet Empire? Don’t make me laugh. Venezuela? You must be joking.

Denmark or Sweden? Umm…, they’re not socialist, though their economies have been hurt by excessive redistribution. Greece? Give me a break.

I could continue, but no sense beating a dead horse.

Let’s close with a bit of humor. A friend in Australia sent me this clever image. I gather it’s a parody of an actual left-wing gathering Down Under. Regardless, I found it rather amusing.

P.S. If you like visuals mocking socialism, I’ve amassed a very nice collection. Click here, here, here, here, here, here, here, here, here, here, here, and here for examples.

Debt Limit Should Be an Opportunity rather than a Crisis

There are some charming traditions, like the swallows returning every year to the Mission of San Juan Capistrano.

But other traditions are far less impressive, most notably the make-believe hysteria that occurs every time the federal government approaches its “debt limit.”

High-level government officials will publicly fret that a failure to increase the limit will produce an unprecedented calamity because the Treasury Department will be forced to default on U.S. government debt, thus triggering a global panic.

And this triggers anxiety in predictable quarters.

A story in USA Today is representative of the sky-is-falling mentality.

Congress will confront a potentially devastating financial crisis in September as lawmakers scramble to…prevent the nation from defaulting on its debt for the first time in history. …The debt limit, set by Congress, is the legal amount the U.S. Treasury can borrow to pay the government’s existing bills, including Social Security and Medicare benefits, military salaries, tax refunds, interest on the national debt, and other obligations. The government has never defaulted on its debt before, and no one knows for sure what the impact would be. However, economists warn that it could plunge the U.S. back into recession and spark a global economic crisis.

Paul Krugman is predictably hysterical about the prospect.

The odds of a self-inflicted US debt crisis now look pretty good: hard-line Republicans are eager to hold the economy hostage… So it looks fairly likely that by October or so there will come a day when the U.S. government stops paying some of its bills, including interest on debt. How bad will that be? The truth is that we don’t know.. Until now, US debt has played a special role in the world economy, because it is — or was — the ultimate safe asset, the thing people can use to secure transactions with no questions about it retaining its value. …Taking away that role could be very nasty.

Even some establishment voices are fanning the flames, including Maya MacGuineas of the Committee for a Responsible Federal Budget.

Our economic standing is too sterling and the global economy too important to imperil over the disagreements of American domestic politics — as fundamental as they may be. It is the height of recklessness — a view held for decades reflected in the fact that raising the debt ceiling was once a mundane piece of housekeeping that garnered no attention. It was practically automatic.

And Professor Edward Kleinbard of the University of Southern California also thinks the apocalypse is nigh.

Sometime in October, the United States is likely to default on its obligation to pay its bills as they come due, having failed to raise the federal debt ceiling. This will cost the Treasury tens of billions of dollars every year for decades to come in higher interest charges and probably trigger a severe recession. …almost all economists and policy makers agree on the enormous fiscal, economic and reputational costs of default. That’s why, in the past, we’ve always managed to avoid it.

Sounds ominous, right?

And I agree that it would be very bad news if the U.S. government didn’t pay all interest and principal to bondholders, as scheduled.

But here’s the good news. The odds of that happening are about the same as the odds of me being the keynote speaker at the next convention of the Socialist Party.

As I’ve said over the years in television interviews, at press conferences, and in congressional testimony (on more than one occasion), there won’t be a default for the simple reason that the federal government collects far more money than needed to pay all bondholders without any delay.

And nothing has happened to the budget numbers to change that analysis.

Here are the latest CBO projections on major budget aggregates. I’ve circled total tax receipts for the next three years, as well as annual net interest payments. As you can see, the Treasury will be collecting more than 10 times as much revenue as needed to fulfill obligations to the folks who have lent money to Uncle Sam.

By the way, some of you may be thinking I’m a cranky libertarian who is blind to the danger of default.

Well, I am a libertarian, and I do get cranky about the various shenanigans in Washington, so let me engage in what’s known as an “appeal to authority.”

Here’s what the Congressional Budget Office said in its recent report on the debt limit.

When Would the Extraordinary Measures and Cash Run Out, and What Would Happen Then? If the debt limit is not increased above the amount that was established on March 16, 2017, the Treasury will not be authorized to issue additional debt that increases the amount outstanding. …That restriction would ultimately lead to delays of payments for government programs and activities, a default on the government’s debt obligations, or both.

In other words, the government can choose to pay interest on the debt and defer other bills. As I’ve repeatedly said in all my public pronouncements, a default will occur only if an administration wants it to occur.

But that’s not going to happen. Just as Obama’s various Treasury Secretaries would have “prioritized” payments to bondholders, Trump’s Treasury Secretary will do the same thing if push comes to shove.

Some budget experts on the left know this is true so they try to blur the issue by stating that it is “default” to postpone payment on any type of government spending. Here’s some of what Kleinbard wrote in his column.

…some conservative policy makers besides Mr. Mulvaney have convinced themselves that crashing into the debt ceiling won’t be a big deal because the government can “prioritize” its bill payments, so that interest on Treasury debt will be paid on a current basis, while other bills sit unpaid. Understanding the false allure of prioritization requires a little background. …there are profound doubts as to whether the Treasury could even implement prioritization, beyond ring fencing interest payments, because its payment systems are designed to pay all claims as they are due, regardless of their origin. More important, prioritization is default by another name. The consequences are the same, regardless of which i.o.u.s Treasury chooses to dishonor. All valid claims against the United States are backed by the credit of the United States… The deliberate nonpayment of billions of dollars of uncontested claims every month thus constitutes default, even if the Treasury is paying some of its other debts.

The last sentence in the above excerpt is bunk. Postponing or deferring bills is not good budget policy. It’s basically what happens in poorly governed places like Greece and Illinois. But it’s not default. There wouldn’t be any risk to financial markets if the Treasury Department was late in disbursing farm subsidy checks or Medicaid reimbursements.

Let’s close by indulging one of my fantasies. If Donald Trump wanted to force good policy from Congress, he could threaten to veto any debt limit that wasn’t accompanied by something desirable such as a spending cap or entitlement reform. The politicians on Capitol Hill would balk of course, but Trump could shrug his shoulders and start “prioritization” once the debt limit was reached. So long as all bondholders received promised payments, there would be no danger to financial markets. By contrast, however, the various interest groups feeding at the federal trough would begin to squeal once their checks started slowing down. At some point, Congress would be forced to capitulate.

In other words, Trump has the capacity to score a big victory on the debt limit, just like he has the unilateral ability to score a big victory on Obamacare repeal and/or the 2018 spending bills.

I’m not holding my breath for this to happen, but it’s nice to dream. Especially since a big fight over the debt limit today (if successful) could save us from something far worse in the future.