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The bad news is that federalism has declined in the United States as politicians in Washington have expanded the size and scope of the national government.

The good news is that some federalism still exists and this means Americans have some ability to choose the type of government they prefer by “voting with their feet.”

  1. They can choose states that tax a lot and spend a lot.
  2. They can choose states with lower fiscal burdens.

You won’t be surprised to learn that people generally prefer option #2.

Researchers have found a significant correlation between state fiscal policy and migration patterns.

And it’s still happening.

In a column for the Wall Street Journal a few days ago, Allysia Finley and Kate LaVoie discuss some research based on IRS data about taxpayer migration patterns.

Here’s some of what they wrote.

New IRS data compiled by research outfit Wirepoints illustrate the flight from high- to low-tax states. …Retirees in the Midwest and Northeast are flocking to sunnier climes. But notably, states with no income tax (Florida, Nevada, Tennessee and Wyoming) made up four of the 10 states with the largest income gains. On the other hand, five of the 10 states with the greatest income losses (NY, Connecticut, New Jersey, Minnesota, California) ranked among the top 10 states with the highest top marginal income tax rates. …Florida gained a whopping $17.7 billion in AGI including $3.4 billion from New York, $1.2 billion from California, $1.9 billion from Illinois, $1.7 billion from New Jersey and $1 billion from Connecticut. California, on the other hand, lost $8.8 billion including $1.6 billion to Texas, $1.5 billion to Nevada, $1.2 billion to Arizona and $700 million to Washington.

Here’s a very informative visual, showing the share of income that either left a state (top half of the chart) or entered a state (bottom half of the chart).

Our friends on the left say that this data merely shows that retirees move to states with nicer climates.

That is surely a partial explanation, but it doesn’t explain why California – the state with the nation’s best climate – is losing people and businesses.

Heck, I even have a seven-part series (March 2010February 2013April 2013October 2018June 2019, December 2020, and February 2021) on the exodus from California to Texas.

Let’s return to the Finley-LaVoie column, because there’s some additional data that deserves attention. They point out that states with better policy are big net winners when you look at the average income of migrants.

The average taxpayer who moved to Florida from the other 49 states had an AGI of $110,000… By contrast, the average taxpayer who left Florida had an AGI of just $66,000. In sum, high-tax states aren’t just losing more taxpayers—they are losing higher-income ones. Similarly, low and no income states are generally gaining more taxpayers who also earn more. …When blue states lose high earners, their tax base shrinks, but their cost base continues to grow due to rich government employee pay, pensions and other benefits. …The result is that low-tax states are getting richer while those that impose higher taxes are getting poorer.

As you can see, Florida is a big beneficiary.

And I shared data a few years ago showing that states such as Illinois are big net losers.

Let’s conclude by asking why some politicians, such as the hypocritical governor of Illinois, don’t care when they’re on the losing side of these trends?

I don’t actually know what they’re thinking, of course, but I suspect the answer has something to do with the fact that departing taxpayers probably are more libertarian and conservative. So if you’re a big-spending politician, you probably are not very upset when migration patterns mean your state becomes more left-leaning over time.

That’s a smart political approach.

Until, of course, those states no longer have enough productive people to finance big government.

In other words, every government is limited by Margaret Thatcher’s famous warning.

Socialism Humor

Socialism has a track record of failure.

And that’s true whether we’re using the technical definition of socialism (government ownership of the means of production), the fascist version (nominal private ownership but government control), or the Bernie/AOC version (confiscatory taxation and pervasive redistribution).

But the silver lining to the policy disaster is that we get some amusing memes to augment our collection.

Such as this observation on voting habits.

And here’s a good depiction of those who realize government doesn’t do a good job at anything, but nevertheless think it should have more power.

Since socialism and big government have never produced a single example of success, I think this meme is spot on.

I almost didn’t include this joke because the idiots holding the sign incorrectly equate Trump with capitalism, but the applause from Mao and Stalin makes it worthwhile.

This next meme is also a good way of describing Keynesian economics.

I don’t know if this next claim is completely true since there are example of defecting spies, but it’s safe to say that the entire flow of ordinary people is away from socialism and toward (relative) capitalism

I mentioned at the start of this column that there are different definitions of socialism, at least from a policy perspective.

Well, here’s the common theme for all of them.

As usual, I’ve saved the best for last.

This one strikes home for me since I’ve dated some left-of-center women over the past couple of decades.

I confess I generally don’t try to convert them, especially early in a relationship.

Though I have eventually shared copies of Atlas Shrugged in hopes of turning them into future Margaret Thatchers.

Between March 2020 and January 2021, I authored a five-part series (see here, here, here, here, and here) on how big government hindered a quick and effective response to the coronavirus pandemic.

In this discussion with Brad Polumbo, I summarize some of my key points.

While I criticized the dismal performance of the FDACDC, and WHO, I also explained that there are costs and benefits to any approach.

I largely focus on the deleterious impact of government regulation and intervention, but I mentioned in the discussion that a laissez-faire approach has potential downsides.

My argument is simply that markets, on balance, will produce better outcomes.

For instance, Brad and I discussed how government regulators at the Food and Drug Administration did something good many decades ago by prohibiting thalidomide (which led to birth defects), but we also mentioned that academic research shows that our regulatory apparatus – on net – leads to bad outcomes because of lengthy delays in life-saving and live-improving drugs.

And we shouldn’t forget that the current system makes drugs far more expensive.

There are two other parts of the interview that merit special attention.

  • First, I mention that private companies should be allowed to require “vaccine passports.” I’m not saying they should, but I believe in property rights so it’s not the role of politicians to interfere in that choice.
  • Second, politicians should have adopted a more hands-off approach to mandatory lockdowns. This is not an argument against social distancing, masking, and other prudent behaviors, but mandates were largely unnecessary (and, in the case of what stores were allowed to operate, pointlessly discriminatory).

And I should have mentioned that politicians often didn’t follow the rules that they imposed on the rest of us.

P.S. The silver lining to the pandemic’s dark cloud is that we got some clever humor (see here, here, here, here, here, here, here, here, here, and here).

P.P.S. Actually, there’s a second silver lining. There’s been a lot of progress on school choice this year, which is partly a response to the self-serving actions of the government school monopoly during the pandemic.

P.P.P.S. There may even be a third silver lining. As mentioned in the discussion, I’m slightly hopeful that politicians and bureaucrats have learned that we need to set aside regulations and red tape, at least during emergencies. Heck, maybe they’ll even apply that lesson more broadly!

Sometimes Bill Maher, the host of Real Time on HBO, says smart things and sometimes he says not-so-smart things.

His recent monologue on the “college scam” was an example of the former. It’s almost as if he was channeling Professor Daniel Lin.

Maher makes great points about how government subsidies for higher education are a backwards form of redistribution, taking money from lower-income people and giving it to higher-income people.

And I love what he says about credentialism, where people can’t climb the job ladder without getting useless degrees like masters in education.

But his monologue wasn’t perfect. He mentioned how tuition costs have exploded, but he didn’t make the should-be-obvious connection between rising costs and government subsidies.

To be more explicit, tuition expenses have skyrocketed because colleges and universities have raised prices to capture all the extra loot politicians are dumping into the system.

Which, by the way, is what happens in every sector of the economy (health care being an obvious example) where government tries to make things more affordable.

By the way, if you don’t want to trust Maher’s comments because he’s an entertainer rather than a policy expert, you may want to read a column in the Wall Street Journal by Tomas Philipson, an economics professor at the University of Chicago.

Here’s some of his analysis.

The student-loan crisis is rooted in government policy… The Biden administration’s American Families Plan is designed to perpetuate the cycle. The student-loan crisis has a long history but accelerated dramatically in 2010, when lawmakers moved the portfolio onto the Education Department’s balance sheet to “pay” for ObamaCare. …But Education Department bureaucrats, not experts in lending, didn’t bother with prudent practices, such as underwriting, that are routine in private credit markets. The result: A lender with the lowest cost of capital on the planet is now about $500 billion in the red. …And federal student loans are highly regressive. …The Brookings Institution found in April 2019 that Sen. Elizabeth Warren’s loan-forgiveness proposal would mainly help the rich, with families with income in the top 40% receiving about two-thirds of the benefits. …These policies reward professors and administrators who can then raise the price of their services. …Tuition rising as loan subsidies expand is no different. It isn’t a coincidence that education and health care, the industries in which government subsidies are most pervasive, took the highest price increases over the past 15 years—3.7% and 3.1% a year, compared with the 1.8% average across industries.

Amen, especially with regards to the final sentence. Student loans and other subsidies are the reason colleges and universities can get away with never-ending tuition increases.

And Joe Biden wants to make matters worse, as Bill Maher noted. Not that we should be surprised since that’s what Barack Obama wanted and what Hillary Clinton wanted.

The left is in favor of just about anything, other than the policy that would solve the problem.

P.S. There’s even academic research showing that government spending on higher education has a negative impact on economic performance.

Back in 2016, I created a 2×2 matrix to illustrate the difference between redistributionism (tax Person A and give to Person B) and state planning (politicians and bureaucrats trying to steer the economy, either through direct ownership or industrial policy).

The main point of that column was to show that countries should try to be in the top-left section, where there is less redistribution and less government control.

But I also wanted to help people understand that redistributionism and socialism are not the same thing.

For instance, Sweden (in the bottom-left box) is a capitalist economy with a big welfare state, whereas China (in the top-right box) doesn’t have much redistribution but government has substantial control over economic activity.

From an American perspective, the good news is that the U.S. currently is in the top-left box.

The bad news is that President Biden wants the country in the bottom-left box. So, if we want to be technically accurate, we should not accuse him of socialism.

Instead, as Antony Davies and James Harrigan explained in a column for the Foundation for Economic Education, the real threat to the nation is “transferism.”

Socialism is state control of the means of production. …By contrast, capitalism is simply private ownership of the means of production. …more than four in ten Americans think “some form of socialism” is a good thing. But what is “some form of socialism?” A society is either socialist or it isn’t. The state either owns the means of production or it doesn’t. There is no middle ground. …It appears that what Americans really have in mind when they think about socialism is not an economic system but particular economic outcomes. …they are advocating what we should really call “transferism.” Transferism is a system in which one group of people forces a second group to pay for things that the people believe they, or some third group, should have. Transferism isn’t about controlling the means of production. It is about the forced redistribution of what’s produced.

Davies and Harrigan are correct.

Moreover, they deserve credit for predicting the future since they wrote the column in 2019!

Now let’s consider whether redistributionism (or transferism) is a good idea.

I’ve previously explained that a big welfare state causes economic damage, even if a nation otherwise is very pro-capitalist.

Consider, for instance, the remarkable data showing how Swedish-Americans and Danish-Americans generate much more prosperity than Swedes and Danes who still live in Scandinavia.

Or consider the income data showing how average Americans enjoy much higher living standards than their European counterparts (either in Nordic nations or elsewhere).

What’s worrisome is that Biden wants a much bigger welfare state and he doesn’t seem to understand that European-sized government means anemic European-style economic performance.

This is the message that Bret Stephens shared in one of his recent columns for the New York Times.

He starts by describing Biden’s agenda.

President Biden charts a course toward the largest expansion of government since Lyndon Johnson’s Great Society. After signing a $1.9 trillion Covid-19 relief bill in March and proposing a $1.5 trillion discretionary budget in April (a 16 percent increase from this year, on top of what’s likely to be at least $3 trillion in mandatory spending on programs like Medicare and Medicaid), the president wants $2.3 trillion more for infrastructure and $1.8 trillion for new social programs. That’s $7.5 trillion in discretionary spending. To put the number in perspective, we spent $4.1 trillion in inflation-adjusted dollars over nearly four years to wage and win the Second World War. What will America get for the money?

He then points out the potential consequences.

…before the U.S. takes this leap into a full-blown American social-welfare state, moderates in Congress like Senator Joe Manchin or Representative Jim Costa ought to ask: What’s the catch? …The real catch is that massive government spending has hidden costs that are difficult to capture in numbers alone. Take another look at Europe. Why does R&D spending in the European Union persistently lag that in the U.S. …Why does Europe’s tech start-up scene…so notably lag its competitors…? Perhaps…social safety nets typically come at the expense of risk-taking and economic dynamism. And why is France, which, according to the Organization for Economic Cooperation and Development, spends more on social welfare than any other nation in the developed world, such an unhappy place, with chronically high unemployment, endless labor unrest, a decades-old brain drain, rising political extremism, a wealth tax that failed and a medical system that was on the brink of collapse long before Covid struck? …Beyond the gargantuan cost, Congress should think very hard about the real catch: transforming America into a kinder, gentler place of permanent decline.

Amen.

Biden’s agenda inevitably will erode societal capital, leading to less work (because of lavish freebies such as per-child handouts) and lower levels of entrepreneurship (because of tax penalties on investment and risk-taking).

And this can lead to a tipping point, which is illustrated by my Theorem of Societal Collapse.

I sometimes try to go easy on the IRS. After all, our wretched tax system is largely the fault of politicians, who have spent the past 108 years creating a punitive and corrupt set of tax laws.

But there is still plenty of IRS behavior to criticize. Most notably, the tax agency allowed itself to be weaponized by the Obama White House, using its power to persecute and harass organizations associated with the “Tea Party.”

That grotesque abuse of power largely was designed to weaken opposition to Obama’s statist agenda and make it easier for him to win re-election.

Now there’s a new IRS scandal. In hopes of advancing President Biden’s class-warfare agenda, the bureaucrats have leaked confidential taxpayer information to ProPublica, a left-wing website.

Here’s some of what that group posted.

ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. …ProPublica undertook an analysis that has never been done before. We compared how much in taxes the 25 richest Americans paid each year to how much Forbes estimated their wealth grew in that same time period. We’re going to call this their true tax rate. …those 25 people saw their worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years, the IRS data shows. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%.

Since I’m a policy wonk, I’ll first point out that ProPublica created a make-believe number. We (thankfully) don’t tax wealth in the United States.

So Elon Musk’s income is completely unrelated to what happened to the value of his Tesla shares. The same is true for Jeff Bezos’ income and the value of his Amazon stock.*

And the same thing is true for the rest of us. If our IRA or 401(k) rises in value, that doesn’t mean our taxable income has increased. If our home becomes more valuable, that also doesn’t count as taxable income.

The Wall Street Journal opined on this topic today and made a similar point.

There is no evidence of illegality in the ProPublica story. …ProPublica knows this, so its story tries to invent a scandal by calculating what it calls the “true tax rate” these fellows are paying. This is a phony construct that exists nowhere in the law and compares how much the “wealth” of these individuals increased from 2014 to 2018 compared to how much income tax they paid. …what Americans pay is a tax on income, not wealth.

Some journalists don’t understand this distinction between income and wealth.

Or perhaps they do understand, but pretend otherwise because they see their role as being handmaidens of the Biden Administration.

Consider these excerpts from a column by Binyamin Appelbaum of the New York Times.

Jeff Bezos…added an estimated $99 billion in wealth between 2014 and 2018 but reported only $4.22 billion in taxable income during that period. Warren Buffett, who amassed $24.3 billion in new wealth over those years, reported $125 million in taxable income. …some of the wealthiest people in the United States essentially live under a different system of income taxation from the rest of us.

Mr. Appelbaum is wrong. The rich have a lot more assets than the rest of us, but they operate under the same rules.

If I have an asset that increases in value, that doesn’t count as taxable income. And it isn’t income. It’s merely a change in net wealth.

And the same is true if Bill Gates has an asset that increases in value.

Now that we’ve addressed the policy mistakes, let’s turn our attention to the scandal of IRS misbehavior.

The WSJ‘s editorial addresses the agency’s grotesque actions.

Less than half a year into the Biden Presidency, the Internal Revenue Service is already at the center of an abuse-of-power scandal. …ProPublica, a website whose journalism promotes progressive causes, published information from what it said are 15 years of the tax returns of Jeff Bezos, Warren Buffett and other rich Americans. …The story arrives amid the Biden Administration’s effort to pass the largest tax increase as a share of the economy since 1968. …The timing here is no coincidence, comrade. …someone leaked confidential IRS information about individuals to serve a political agenda. This is the same tax agency that pursued a vendetta against conservative nonprofit groups during the Obama Administration. Remember Lois Lerner? This is also the same IRS that Democrats now want to infuse with $80 billion more… As part of this effort, Mr. Biden wants the IRS to collect “gross inflows and outflows on all business and personal accounts from financial institutions.” Why? So the information can be leaked to ProPublica? …Congress should also not trust the IRS with any more power and money than it already has.

And Charles Cooke of National Review also weighs in on the implications of a weaponized and partisan IRS.

We cannot trust the IRS. “Oh, who cares?” you might ask. “The victims are billionaires!” And indeed, they are. But I care. For a start, they’re American citizens, and they’re entitled to the same rights — and protected by the same laws — as everyone else. …Besides, even if one wants to be entirely amoral about it, one should consider that if their information can be spilled onto the Internet, anyone’s can. …A government that is this reckless or sinister with the information of men who are lawyered to the eyeballs is unlikely to worry too much about being reckless or sinister with your information. …The IRS wields an extraordinary amount of power, and there will always be somebody somewhere who thinks that it should be used to advance their favorite political cause. Our refusal to indulge their calls is one of the many things that prevents us from descending into the caprice and chaos of your average banana republic. …Does that bother you? It should.

What’s especially disgusting is that the Biden Administration wants to reward IRS corruption with giant budget increases, bolstered by utterly fraudulent numbers.

Needless to say, that would be a terrible idea (sadly, Republicans in the past have been sympathetic to expanding the size of the tax bureaucracy).

*Financial assets such as stocks generally increase in value because of an expectation of bigger streams of income in the future (such as dividends). Those income streams are taxed (often multiple times) when (and if) they actually materialize.

I’ve spent several decades trying to convince people that we should have free markets and small government in order to increase national prosperity.

Indeed, I’ve even pointed out how very small increases in annual growth can lead to big improvements in living standards over just a couple of decades.

But some folks on the left are not very receptive to this argument. They genuinely (but incorrectly) seem to think the economy is a fixed pie (which also explains, at least in part, why they are so focused on redistribution).

So let’s share some hard data in hopes of getting them to understand that more prosperity is possible.

We’ll start will this chart of inflation-adjusted per-capita economic output in the United States, which comes from Oxford University’s Our World in Data.

The obvious takeaway from this data is that Americans are much richer today than they were after World War II. Adjusted for inflation, we’re now about four times richer than our grandparents.

Some of our friends on the left may be thinking these numbers are distorted, that average output has only increased because the rich have gotten so much richer.

Well, it is true that the rich have gotten richer. But it’s also true that the rest of us have become richer as well.

Which is why I shared data earlier this year showing median living standards rather than mean (average) living standards.

Folks on the left may also suspect that the post-1950 data is an anomaly. In other words, maybe I’m guilty of cherry-picking data.

That’s a common practice in the world of policy, so I don’t blame people for being suspicious.

So take a look at this chart, which I also first shared earlier this year. It shows that the increase in living standards has been even more dramatic if you look at changes since 1820.

By the way, none of these observations are new. Back in 1997, Micahel Cox and Richard Alm wrote a must-read article for the Dallas Federal Reserve Bank’s Annual Report.

Here are some of their findings.

What really matters…isn’t what something costs in money; it’s what it costs in time. Making money takes time, so when we shop, we’re really spending time. The real cost of living isn’t measured in dollars and cents but in the hours and minutes we must work to live. …A pair of stockings cost just 25¢ a century ago. This sounds wonderful until we learn that a worker of the era earned only 14.8¢ an hour. So paying for the stockings took 1 hour 41 minutes of work. Today a better pair requires only about 18 minutes of work. …In calculating our cost of living, a good place to start is with the basics—food, shelter and clothing. In terms of time on the job, the cost of a half-gallon of milk fell from 39 minutes in 1919 to 16 minutes in 1950, 10 minutes in 1975 and 7 minutes in 1997. A pound of ground beef steadily declined from 30 minutes in 1919 to 23 minutes in 1950, 11 minutes in 1975 and 6 minutes in 1997. Paying for a dozen oranges required 1 hour 8 minutes of work in 1919. Now it takes less than 10 minutes, half what it did in 1950.

These two visuals from the article are very informative.

First, look at how consumer products went from rare luxuries early in the 20th century to everyday products by the end of the century.

Equally important, these products have become cheaper and cheaper over time.

As illustrated by this second visual from the article.

All the data in the Cox-Alm article is more than 20 years old, so the numbers would be even more impressive today.

Indeed, you can see some more up-to-date data from Mark Perry, Steve Horwitz, and James Pethokoukis.

Professor Don Boudreaux put these numbers in context a few years ago in a column for the Foundation for Economic Education. Here’s some of what he wrote.

What is the minimum amount of money that you would demand in exchange for your going back to live even as John D. Rockefeller lived in 1916? …Think about it. …If you were a 1916 American billionaire you could, of course, afford prime real-estate.  You could afford a home on 5th Avenue or one overlooking the Pacific Ocean…  But when you traveled from your Manhattan digs to your west-coast palace, it would take a few days, and if you made that trip during the summer months, you’d likely not have air-conditioning in your private railroad car. …You could neither listen to radio (the first commercial radio broadcast occurred in 1920) nor watch television. …Obviously, you could not download music. …Your telephone was attached to a wall.  You could not use it to Skype. …Even the best medical care back then was horrid by today’s standards: it was much more painful and much less effective. …Antibiotics weren’t available. …Dental care wasn’t any better. …You were completely cut off from the cultural richness that globalization has spawned over the past century. …I wouldn’t be remotely tempted to quit the 2016 me so that I could be a one-billion-dollar-richer me in 1916.  This fact means that, by 1916 standards, I am today more than a billionaire.  It means, at least given my preferences, I am today materially richer than was John D. Rockefeller.

The bottom line is that we have become richer and we can continue to become richer.

But how fast things improve is partly a function of government policy. If we can impose some restraints on the size and scope of government, that will give the private sector some breathing room to grow and prosper.

In other words, we don’t need perfect policy, but it is important to at least have good policy.

During the Obama years, I shared a cartoon strip that cleverly makes the point that some people will choose not to work if they can get enough goodies from the government.

That Wizard-of-Id parody has been viewed more than 56,000 times, which suggests many readers also thought it was worth sharing.

But it obviously hasn’t been shared often enough with the crowd in Washington. Politicians have created a welfare state that penalizes work and rewards dependency.

Especially now that there are bonus payments for staying unemployed. Which makes it hard to businesses to find workers.

Our friends on the left, however, think there’s a solution to this problem.

In his column for the New York Times, David Leonhardt says there is not a labor shortage because employers can simply raise wages.

The idea that the United States suffers from a labor shortage is fast becoming conventional wisdom. But before you accept the idea, it’s worth taking a few minutes to think it through. Once you do, you may realize that the labor shortage is more myth than reality. …one of the beauties of capitalism is its mechanism for dealing with shortages. In a communist system, people must wait in long lines when there is more demand than supply for an item. That’s an actual shortage. In a capitalist economy, however, there is a ready solution. …When a company is struggling to find enough labor, it can solve the problem by offering to pay a higher price for that labor — also known as higher wages. More workers will then enter the labor market. Suddenly, the labor shortage will be no more. …Sure enough, some companies have responded to the alleged labor shortage by doing exactly this. …companies that have recently announced pay increases include Amazon, Chipotle, Costco, McDonald’s, Walmart, J.P. Morgan Chase and Sheetz convenience stores.

Leonhardt is correct that businesses can lure workers back into the job market by boosting wages. I’m glad he recognizes how the price system works.

But he completely ignores the issue of whether some jobs will simply disappear because they’re not worth the amount of money that would be required to out-compete government handouts.

That’s the key argument from the Wall Street Journal‘s editorial on the topic.

…the U.S. labor market turned in its second disappointing result in a row in May, according to Friday’s Labor Department report. That’s what happens when government pays Americans not to work. Employers created 559,000 net new jobs in the month, which sounds great until you notice that 1.5 million fewer workers in May said they were unable to work because their employer closed or lost business due to the pandemic. …The civilian labor force shrank in May by 53,000, and the number of men over age 20 who were employed fell by 8,000. …What gives? The Occam’s razor explanation is that in March the Biden Administration and Congress ladled out another mountain of cash to Americans—work not required. The extra $300 a week in enhanced jobless benefits is one problem, since millions of Americans can make more staying on the couch. …This is on top of regular jobless benefits, plus new or extended cash payments such as the $3,000 per child tax credit, additional ObamaCare subsidies, and the $1,400 checks to individuals. Again, no work required.

For all intents and purposes, politicians in DC have been undoing the great achievement of welfare reform. That 1996 law was designed to push people from idleness into employment, and it was largely successful.

But over the past couple of decades, laws like Obamacare have given people goodies without any conditionality, which has resulted in many people deciding once again that they don’t need to work.

And if Biden’s per-child handouts are made permanent, expect the problem to get even worse.

Since we started with a cartoon, let’s close with another cartoon.

This gem from Henry Payne captures the problem facing many small businesses.

Big companies have enough financial depth that they can adapt. They have considerable ability to get rid of low-skilled jobs, invest in labor-saving technologies, and even give some raises to employees they retain.

Many small businesses, however, are simply out of luck. That’s one group of victims.

The other victims are the people who get goodies from politicians. Yes, the various handouts make their lives easier in the short run, but once they get trapped in the quicksand of government dependency, it’s very difficult to escape.

P.S. Because he said some sensible things about “basic income” back in 2017, I had hoped Biden would be better on this issue. I should have known better based on his track record.

Biden’s tax agenda – especially the proposed increase in the corporate rate – would be very bad for American competitiveness.

We know this is true because the Administration wants to violate the sovereignty of other nations with a scheme that would require all nations to impose a minimum corporate tax rate of 15 percent.

Indeed, the White House openly says it wants to export bad policy to other nations “so that foreign corporations aren’t advantaged and foreign countries can’t try to get a competitive edge.”

Other big nations (the infamous G-7) just announced they want to participate in the proposed tax cartel.

I was just interviewed on this topic by the BBC World Service and I’ve extracted my most important quotes.

But I encourage you to listen to the full discussion, which starts with (predictably awful) comments from the French Finance Minister, followed by a couple of minutes of my sage observations.

For what it’s worth, “reprehensible” doesn’t begin to capture my disdain for what the politicians are trying to achieve.

What’s particularly irritating is that politicians want us to think that companies are engaging in rogue tax avoidance. Yet, as I noted in the interview, national governments already have the ability to reject overly aggressive forms of tax planning by multinational firms.

Here’s some of what was reported about the proposed cartel by the Associated Press.

The Group of Seven wealthy democracies agreed Saturday to support a global minimum corporate tax of at least 15%… U.S. Treasury Secretary Janet Yellen said the agreement “provides tremendous momentum” for reaching a global deal that “would end the race-to-the-bottom in corporate taxation…” The endorsement from the G-7 could help build momentum for a deal in wider talks among more than 135 countries being held in Paris as well as a Group of 20 finance ministers meeting in Venice in July. …The Group of 7 is an informal forum among Canada, France, Germany, Italy, Japan, the UK and the United States. European Union representatives also attend. Its decisions are not legally binding, but leaders can use the forum to exert political influence.

As you just read, the battle is not lost. Hopefully, the jurisdictions with good corporate tax policy (Ireland, Bermuda, Hong Kong, Cayman Islands, Switzerland, etc) will resist pressure and thus cripple Biden’s cartel.

I’ll close by emphasizing that the world needs tax competition as a necessary check on the greed of politicians. Without any sort of constraint, elected officials will over-tax and over-spend.

Which is why they’re trying to impose a tax cartel. They don’t want any limits on their ability to buy votes with other people’s money.

And we can see from Greece what then happens.

P.S. The Trump Administration also was awful on the issue of tax competition.

P.P.S. Here’s my most-recent column about the so-called “race to the bottom.”

P.P.P.S. As noted in the interview, both the IMF and OECD have research showing the destructive impact of higher corporate tax burdens.

Biden campaigned for higher taxes and a bigger welfare state, so I haven’t been surprised by his misguided fiscal agenda.

That being said, I was modestly hopeful that he would move trade policy in the right direction after four years of Trump’s protectionism.

To be sure, I didn’t think he would do the right thing because of some long-hidden belief in sound economics. But I figured he might reduce trade barriers simply to do the opposite of his predecessor.

We should be so lucky. Regardless of the policy, we’ve been getting statism.

Catherine Rampell of the Washington Post is not impressed by Biden’s protectionism.

Several months after he left office, some of President Donald Trump’s most foolish economic policies remain in place: his sweeping trade restrictions. …Trump began waging a series of trade wars three years ago — not primarily with U.S. adversaries, mind you, but with friends. Among the dumbest and most self-sabotaging measures were global tariffs levied on nearly $50 billion of imported steel and aluminum. …the countries most affected by Trump’s move were our close economic and military allies, including the European Union, Canada and Japan. …Despite Trump’s claims otherwise, the cost of the tariffs was primarily passed through to American consumers and companies. Downstream firms that use steel or inputs made of steel, which employ about 80 times more workers than the steel industry does, faced higher costs. One estimate found that Trump’s steel tariffs alone cost U.S. consumers and businesses about $900,000 for every job created or saved.

Getting rid of taxes on imported steel and aluminum would be a positive step for the economy.

But the real goal should be getting rid of all Trump’s taxes on global trade. Garrett Watson from the Tax Foundation recently shared estimates of how this would benefit the American economy.

…repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth. …About $460 billion worth of goods were subject to the tariffs, raising prices for consumers. In fact, we estimated the tariffs were about an $80 billion annual tax increase, reducing consumer purchasing power. …According to the Tax Foundation model, repealing tariffs imposed since 2018 would raise long-run GDP by 0.1 percent, long-run incomes (gross national product) by 0.2 percent, and create about 83,000 full-time equivalent jobs. This growth would boost after-tax incomes by about 0.3 percent for people across the income spectrum, helping low-income and middle-class taxpayers. …Repealing the tariffs would be a simple option to boost growth because it can be done without congressional authorization by President Biden, and would provide timely relief to businesses and households.

The last sentence is key. Trump had lots of unilateral authority to impose bad trade policy, and Biden has lots of unilateral authority to undo bad trade policy.

The fact that he hasn’t exercised that authority makes him just as guilty of anti-market trade policy as Trump.

The next thing to watch for is whether he continues Trump’s bad policy of sabotaging the World Trade Organization.

While Paul Krugman sometimes misuses and misinterprets numbers for ideological reasons (see his errors regarding the United States, France, Canada, the United States, Estonia, Germany, the United States, and the United Kingdom), he isn’t oblivious to reality.

At least not totally.

He’s acknowledged, for instance, that there is a Laffer Curve and that tax rates can become so onerous that tax revenues actually decline.

Now he’s had another encounter with the real world.

In a column that was mostly a knee-jerk defense of Biden’s class-warfare tax policy, Krugman confessed yesterday that big government ultimately means big tax increases for lower-income and middle-class people.

…is trying to “build back better” by taxing only the very affluent feasible? Is it wise? …There’s a good case that the kind of society progressives want us to become, with a very strong social safety net, can’t be paid for just by taxing the rich. A country like Denmark, for example, does have a high top tax rate… But Denmark also has very high middle-class taxation, in particular a 25 percent value-added tax, effectively a national sales tax. …the fact that even the Nordic countries feel compelled to raise a lot of money from the middle class suggests that there are limits…to how much you can raise just by taxing the rich. So if you want Medicare for all, Nordic levels of support for child care and families in general, and so on, just raising taxes on the 400K-plus elite won’t get you there.

It may not happen often, but Krugman is completely correct.

European-sized government requires European-style taxes on everyone. And that means a big value-added tax, as Krugman notes. And it almost certainly also means big energy taxes, higher payroll taxes, and much higher income tax rates on middle-class taxpayers.

This chart from Brian Riedl shows that government spending already was on track to become a bigger burden for the American economy, and Biden is proposing to go even faster in the wrong direction.

The growing gap between the blue lines and red lines implies giant tax increases. At the risk of understatement, there’s no way to finance that ever-expanding government by just pillaging upper-income taxpayers.

By the way, Krugman is right about big government leading to higher taxes on ordinary people, but he’s wrong about the desirability of that outcome.

He wants us to think that big government means a “better America,” but all the economic data tells a different story. A bigger fiscal burden means much lower living standards.

P.S. If you want another example of Krugman being right on a fiscal issue, click here.

How should Nazism be classified, particularly when compared to socialism? Are these ideologies at opposite ends of a spectrum, or are they simply different sides of the same collectivist coin?

In my humble opinion, both views are correct, which is why I think this triangle is the best way to classify various ideologies.

Nazis are motivated by race hatred and the socialists are motivated by class hatred, so they basically are at opposite ends at the bottom of the triangle.

But both ideologies are against free markets and both put the state over the individual, so they are far away from libertarianism (or classical liberalism) when looking from top to bottom.

These different ways of looking at the issue explain why Glenn Kessler of the Washington Post created a controversy when he decided to “fact check” this statement from gadfly Congresswoman Marjorie Taylor Greene.

According to Kessler, Greene deserved “four Pinocchios” for asserting that Hitler and the Nazis were socialists.

The full name of Hitler’s party was Nationalsozialistische Deutsche Arbeiterpartei. In English, that translates to National Socialist German Workers’ Party. But it was not a socialist party; it was a right-wing, ultranationalist party dedicated to racial purity, territorial expansion and anti-Semitism — and total political control. …the 1920 Nazi party platform…there are…passages denouncing banks, department stores and “interest slavery.” That could be seen as “a quasi-Marxist rejection of free markets. But these were also typical criticisms in the anti-Semitic playbook …Hitler adamantly rejected socialist ideas, dismantled or banned left-leaning parties and disapproved of trade unions. …We suggest Greene brush up on her history… She earns Four Pinocchios.

This is remarkable. The Nazis called themselves socialists, yet Kessler says Greene is lying for saying the same thing.

I’m not the only one to notice this bizarre example of media bias.

Professor Hannes Gissurarson from Iceland debunked Kessler’s hack analysis.

A ‘fact-checker’ at Washington Post, Glenn Kessler, asserts that a Republican Member of the House of Representatives is wrong in a recent comment on Hitler’s national socialism. It is not, as she had said, a branch of socialism. Kessler writes that the German Nazi Party, despite its name (the National-Socialist Workers’ Party), ‘was not a socialist party…’ In support of his case, Kessler quotes the first eight of the 25 points in the 1920 Nazi political programme… He lukewarmly concedes that in the Nazi programme there were also passages denouncing capitalism. But why does he not quote them as well? …It is hard not to discern the socialist overtones in these points. Why did the Washington Post fact-checker not quote them in full like the first eight? …according to Hayek national socialism could be considered to be the rebellious socialism of the lower middle class… Traditional socialists, democrats as well as communists, shared with Hitler’s national socialists the belief that conscious organisation had to replace the spontaneous order… Hayek is certainly right that there are strong family resemblances between traditional socialism and national socialism. Both are totalitarian creeds.

Professor David Henderson also eviscerated Kessler’s sloppy column.

Glenn Kessler, the Post‘s official fact checker, …analyzes various statements and claims to determine whether they are true. If he finds them false, he awards them Pinocchios, with the number of Pinocchios depending on the degree of falsehood. The highest number of Pinocchios he awards is 4. On May 29, Glenn Kessler earned his own Pinocchios. …Nazis…really were a socialist party. …Kessler attempts to buttress his case by listing the first 8 of 25 planks in the 1920 Nazi Party platform. Those planks do help his case that the Nazis were anti-Semitic (duh) and nationalists (ditto duh). But what about the other 17 planks? …pretty socialistic.

Here are some of those planks that Kessler conveniently omitted.

11. Abolition of unearned (work and labour) incomes. Breaking of rent-slavery. …

13. We demand the nationalization of all (previous) associated industries (trusts).

14. We demand a division of profits of all heavy industries.

15. We demand an expansion on a large scale of old age welfare. …

17. We demand a land reform suitable to our needs, provision of a law for the free expropriation of land for the purposes of public utility, abolition of taxes on land and prevention of all speculation in land.

Henderson also zings Kessler for using a misleading quote from Martin Niemoller.

By the way, the Nazis didn’t merely advocate for socialism in an early platform. They also implemented statist policies once they took power.

Back in 2007, Michael Moynihan wrote about the Nazi welfare state in a book review for Reason.

…the Nazis maintained popular support—a necessary precondition for the “final solution”—not because of terror or ideological affinity but through a simple system of “plunder,” “bribery,” and a generous welfare state. …Requisitioned Jewish property, resources stolen from the conquered, and punitive taxes levied on local businesses insulated citizens from shortages and allowed the regime to create a “racist-totalitarian welfare state.” …To understand Hitler’s popularity, …”it is necessary to focus on the socialist aspect of National Socialism.” …Adolf Eichmann viewed National Socialism and communism as “quasi-siblings,” explaining in his memoirs that he “inclined towards the left and emphasized socialist aspects every bit as much as nationalist ones.” As late as 1944, Propaganda Minister Josef Goebbels publicly celebrated “our socialism,” reminding his war-weary subjects that Germany “alone [has] the best social welfare measures.” Contrast this, he advised, with the Jews, who were the very “incarnation of capitalism.” …Hitler implemented a variety of interventionist economic policies, including price and rent controls, exorbitant corporate taxes, frequent “polemics against landlords,” subsidies to German farmers…and harsh taxes on capital gains, which Hitler himself had denounced as “effortless income.”

The bottom line is that the Nazis are justifiably hated for reasons that have nothing to do with economic policy.

But it’s also true that their economic policy was a version of socialism (fascism involves government control rather than government ownership, but the result is the same).

Here are two videos from Prager University for those who want more information. First, we can learn about communism and Nazism.

Second, we can learn about the history of fascism.

Let’s wrap up by quoting George Will on the interrelated ideas of fascism, Nazism, and socialism.

Fascism…was a recoil against Enlightenment individualism: the idea that good societies allow reasoning, rights-bearing people to define for themselves the worthy life. …Mussolini, a fervent socialist until his politics mutated into a rival collectivism, distilled fascism to this: “Everything within the state, nothing outside the state, nothing against the state.” The Nazi Party — the National Socialist German Workers’ Party — effected a broad expansion of socialism’s agenda…

Last, but not least, here’s a reminder that we should be very wary of demagogues who promise goodies.

P.S. Kessler should have “fact checked” the last part of Rep. Greene’s statement. As much as I dislike “democratic socialism,” today’s Democrats are not trying to impose a totalitarian system.

Looking at the dismal performance of the FDA, CDC, and WHO, the obvious takeaway from the pandemic is that big government doesn’t work very well.

Indeed, that was the point of a five-part series (see here, here, here, here, and here) on the topic.

One implication of all this analysis is that it’s almost always a good idea to let the private sector take the lead.

Which is why businesses rather than governments should decide whether to impose vaccine requirements.

Today’s column is motivated by two stories, the first of which is from ABC News. It involves a Texas hospital that is getting sued because it requires employees to be vaccinated.

Over 100 employees have joined a lawsuit against Houston Methodist hospital in Texas for requiring all employees to get the COVID-19 vaccine. The network, which oversees eight hospitals and has more than 26,000 employees, gave workers a deadline of June 7 to get the vaccine. If not, staffers risk suspension and termination, according to the lawsuit. …The complaint cited that forcing employees to get the vaccine violates Nuremberg Code, a medical ethics code which bans forced medical experiments and mandates voluntary consent. …Houston Methodist…released a statement in response to the lawsuit Friday, saying 99% of the network’s employees have been vaccinated. “It is unfortunate that the few remaining employees who refuse to get vaccinated and put our patients first are responding in this way.”

Our second story is from Florida.

Here are some excerpts from a Washington Post column about whether cruise ships operating out of Florida can exclude non-vaccinated passengers.

Cruise lines see vaccine requirements as their quickest path back to sailing from the United States. But Florida, home to the largest operators and busiest cruise ports in the world, has passed a law saying those companies are not allowed to ask passengers for proof of vaccination status. …Jim Walker, a maritime attorney..called the vaccine law “singularly the greatest impediment to the resumption of cruising in the state of Florida.” …DeSantis told reporters that he wanted cruise lines to operate and be able to make decisions about how they want to handle health and safety rules — within certain parameters. …he said even if some people were okay with the idea of having to prove that they were vaccinated to take a cruise, “it will not stop at that.”

Simply stated, I believe in property rights. The hospital should have the liberty to require vaccinations as a condition of employment and cruise ship companies should have the liberty to require vaccinations as a condition of taking a cruise.

It doesn’t matter, buy the way, whether I think the hospital or the cruise ship companies are making wise choices. I’m not a shareholder, so my opinion is irrelevant.

I do have the right, of course, to decide whether to seek a job at the hospital, or to choose to be a patient there. Likewise, I also have the right to choose whether go on a cruise, or whether to seek a job on a cruise ship.

In both cases, I can make my choices based on whether I like their vaccine policy. Or for any other reason.

I’m a free person and the people running companies also have freedom. If we don’t mutually agree to a transaction, it doesn’t happen.

It’s called “freedom of association,” and it’s a principle of a free society.

The bottom line is that there should be no philosophical objection to “vaccine passports” in the private sector.

In the world of public finance, Ireland is best known for its 12.5 percent corporate tax rate.

That’s a very admirable policy, as will be momentarily discussed, but my favorite Irish policy was the four-year spending freeze in the late 1980s.

I discussed that fiscal reform in a video about 10 years ago, and I subsequently shared data on how spending restraint reduced the overall burden of government in Ireland and also lowered red ink.

It’s a great case study showing the beneficial impact of my Golden Rule.

Spending restraint also paved the way for better tax policy, and that’s a perfect excuse to discuss Ireland’s pro-growth corporate tax system. The Wall Street Journal opined last week about that successful supply-side experiment.

Democrats want a high global minimum tax that would end national tax competition and reduce the harm from their huge tax increase on U.S. business. But tax competition has been a boon to global growth and investment, as Ireland’s famous low-tax policy makes clear. Far from a “race to the bottom,” Ireland adopted policies that were ahead of their time and helped its economy grow from a backwater into a Celtic tiger. …in the late 1990s …an EU mandate led Dublin to…pioneer…a new strategy: Apply the same low tax rate to every business. Policy makers settled on 12.5%, which was a tax increase for some companies but a cut for others. This was a classic flat-tax reform… Ireland has reaped the benefits. Between 1986 and 2006, the economy grew to nearly 140% of the EU average from a mere two-thirds. Employment nearly doubled to two million, and the brain drain of the 1970s and 1980s reversed. …Oh and by the way: After Ireland slashed its rate and broadened the corporate-tax base, tax revenue soared. Except for the post-2008 recession and its aftermath, corporate-profits taxes in some years account for about 13% of total revenue and exceed 3% of GDP. That’s up from as low as 5% of revenue and less than 2% of GDP before the current tax rate was introduced.

That’s a lot of great information, particularly the last couple of sentences about how Ireland collected more revenue when the corporate tax rate was slashed.

Indeed, I discussed that remarkable development in Part II of my video series on the Laffer Curve (and it’s not just an Irish phenomenon since both the IMF and OECD have persuasive global data on lower corporate tax rates and revenue feedback).

Though higher revenue is not necessarily a good thing.

I complained back in 2011, for example, about how Irish politicians began to spend too much money once a booming economy began to generate a lot of tax revenue.

Which is a good argument for a Swiss-style spending cap in Ireland.

Let’s wrap up by considering some fiscal lessons from Ireland. Here are four things everyone should know.

  1. Spending restraint is a powerful tool to achieve smaller government..
  2. Lower tax rates on productive behavior lead to jobs and prosperity.
  3. Lower corporate tax rates can generate substantial revenue feedback.
  4. A spending cap is needed to maintain long-run fiscal discipline.

Good rules for Ireland. Good rules for any nation.

P.S. Ireland has definitely prospered in recent decades, but GNI data gives a more accurate picture than GDP data.

Charles Blow is a doctrinaire left-wing columnist for the New York Times. But I applauded him late last year for expressing sympathy for black gun ownership.

He’s certainly not a full-blown supporter of the Second Amendment.

And I don’t think he realizes that many of the first gun control laws had racist motivations.

But I’m not going to nit pick. I welcome converts, even half-hearted ones.

Which is why today’s column will cheer another newcomer to the cause.

In a column for the Washington Post, Danielle King describes her decision to become a gun owner.

I never thought I’d own a gun. But there I was, in Hazard, Ky., in the middle of a pandemic on a Saturday, buying a .38 snub-nosed revolver. I’m not your stereotypical gun owner…as a Black woman, I am a statistical rarity… But I had come to believe that I had two choices: take steps to protect myself, or become a victim. I decided I needed to be armed. …it wasn’t until one night last April at my Kentucky home that I decided to become a gun owner myself. The brightness of the living room light startled me from my sleep. …The rustling sounds confirmed that we had an intruder. …The invader eventually made his way to the bedroom door. …The intruder slammed against the door like a battering ram in an attempt to take it down. He nearly succeeded, shattering the frame, but my husband held the rest of the door shut while I hid on the balcony and called the police.It took officers more than 45 minutes to arrive… I realized we needed protection. …Three days after the break-in, with my husband’s encouragement, I went to the gun store and purchased my revolver and some hollow-point bullets.

Ms. King notes that many other blacks are joining her and becoming gun owners.

The National Shooting Sports Foundation reported a 58 percent surge in gun purchases by Black men and women in the first six months of 2020 compared with the same period in 2019, citing a survey of gun retailers. Of all purchasers, 5.4 percent were Black women. I strongly support private gun ownership and the Second Amendment… To be honest, I am still afraid of having guns in my home — and even of having one in my possession. But we are products of a violent nation, and ultimately, I don’t feel like the police can or want to protect me. …My first practice shot was a couple of feet from my backyard, bordering the woods. My husband created a target for me to practice on. …Terrified, my hands trembling, drenched in sweat, I anxiously grasped the revolver’s handle while searching for the trigger. Then, lining up the target while calming my breath, I pressed the trigger to hear a POP. Now, I thought, we are protected.

By the way, I hope what she wrote about the police isn’t true. I’d like to think they want to protect her and her family.

But Ms. King is definitely correct to fear that the police may not have the ability to protect her. Just consider the fact that it took 45 minutes for cops to arrive when her family was threatened by an intruder.

And it would be especially foolish to rely on the government for safety during a pandemic. Or during a period of civil strife.

If you read Ms. King’s full column, it’s clear that she hasn’t embraced the full libertarian view on gun ownership. But just as was the case with Charles Blow, I welcome her shift in the correct direction.

P.S. Here are the other columns celebrating folks on the left who have had epiphanies on gun rights.

  • In 2012, I shared some important observations from Jeffrey Goldberg, a left-leaning writer for The Atlantic. In his column, he basically admitted his side was wrong about gun control.
  • Then, in 2013, I wrote about a column by Justin Cronin in the New York Times. He self-identified as a liberal, but explained how real-world events have led him to become a supporter of private gun ownership.
  • In 2015, I shared a column by Jamelle Bouie in Slate, who addressed the left’s fixation on trying to ban so-called assault weapons and explains that such policies are meaningless.
  • More recently, in 2017, Leah Libresco wrote in the Washington Post that advocates of gun control are driven by emotion rather empirical research and evidence.
  • Last but not least, Alex Kingsbury in 2019 acknowledged the futility of gun control in a column for the New York Times.

P.P.S. Here’s a column on race and gun control.

P.P.P.S. If you want unintentional comedy, here’s a column by a British leftist who equates gun ownership and slavery.

There are some very serious moral, practical, and constitutional arguments against gun control.

But I’m a big believer in also using satire to make the case for the 2nd Amendment.

And that’s the purpose of today’s column, which starts with this reminder – as Ron Swanson told us – that bad guys don’t care about laws.

Our second item involves a woman who obviously never studied logic or history.

Makes me wonder if she’s also the woman holding the Trump sign in this column?

Our third item also pokes fun at the logic (or lack thereof) of our leftist friends.

Next, the clever folks at Babylon Bee explain various home-defense strategies for a gun-free world.

Guns are on their way out. And thank goodness! We can’t wait to return to the utopian paradise we lost when guns were invented… Still, once in a great while, you might need to defend yourself against a ne’er-do-well. When those ruffians come kicking your door down, you need to be ready. Here are seven great ways to defend your home against an armed burglar when your guns have all been confiscated.

Here are a few of those options.

Option #3 surely is the best, just as demonstrated in this video.

Yet never forget that there are people who think gun-free zones are a real answer.

Our next item is for guys, especially libertarian guys.

Reminds me of Barbie for Men.

As usual, I’ve saved the best for last. This meme is a helpful reminder that the Bill of Rights wasn’t limited to the technology of 1787.

By the way, this is an encore appearance for the man and woman in the above meme.

P.S. The full collection of gun control satire is available here.

When I debate public policy with leftists, I frequently stump them by asking for an example of a country where their ideas have worked.

They get flummoxed for the simple reason that no nation has ever become rich with big government.

There are some rich nations that have big governments, to be sure, but they all became rich in the 1800s and early 1900s, back when government was a tiny burden (and there often were no income taxes).

That’s true for the United States. And it’s true for Western Europe.

It’s also worth noting that places that have become rich in the modern era, such as Hong Kong and Singapore, have small governments and low tax burdens.

I’m making these points because Jim Tankersley of the New York Times has a thorough article on the Biden Administration’s budgetary philosophy.

And that philosophy is based on a completely different perspective. Indeed, the headline and subtitle are a very good summary of the entire article.

Here are some passages that further capture the Biden approach.

President Biden’s $6 trillion budget bets on the power of government to propel workers, families and businesses to new heights of prosperity…by redistributing income and wealth from high earners and corporations to grow the middle class. …it sets the nation on a new and higher spending path, with total federal outlays rising to $8.2 trillion by 2031… That spending represents an attempt to expand the size and scope of federal engagement in Americans’ daily lives… Mr. Biden also seeks to expand the government safety net in an effort to help Americans — particularly women of all races and men of color — work and earn more, rather than relying on corporate America to funnel higher wages to workers. …Mr. Biden is pushing what amounts to a permanent increase in the size of the federal footprint on the U.S. economy. Since 1980, annual federal spending has been, on average, about one-fifth the size of the nation’s economic output; under Mr. Biden’s plans, that would grow to close to one-fourth.

The article is definitely correct about one thing. As I wrote yesterday, Biden wants a big expansion of government spending.

But is he correct about the consequences? Will bigger government “help Americans” and allow more of them to “enjoy prosperity”?

If the evidence from Europe is any indication, adopting bigger welfare states is not a recipe for more prosperity.

For instance, OECD data on “actual individual consumption” show that people in the United States enjoy much higher living standards than their counterparts on the other side of the Atlantic Ocean.

There’s also very powerful data showing that poor Americans (those at the 20th percentile) have higher living standards than most middle-class Europeans.

There’s even data showing that very poor Americans (those at the 10th percentile) have living standards equal to most middle-class Europeans.

The bottom line is that Biden wants higher taxes and more redistribution, but that’s been a big failure in the part of the world that has tried that approach.

Not that we should be surprised. Both theory and evidence tell us that bigger government is bad for prosperity.

P.S. There’s a very sobering example of what happens when a rich nation decides to dramatically curtail economic liberty.

There are many things to dislike about President Biden’s budget plan to expand the burden of government.

There will be ample opportunity to write about these issues in the coming weeks. For today, however, let’s identify and highlight the biggest problem.

Simply stated, Biden wants to permanently and significantly increase the burden of government spending. Here’s a chart, based on data from Table S.1 of the President’s budget, augmented by data from Table 1.3 of the Budget’s Historical Tables.

The budget had reached $4 trillion before the pandemic. It then skyrocketed for coronavirus-related spending.

But now that the emergency is receding, Biden is not going to let the burden of government fall back to prior levels. Instead, he’s proposing a $6 trillion budget for the upcoming fiscal year.

And that’s just the starting point. He wants spending to then climb rapidly – at almost twice the rate of inflation – up to $8 trillion by 2031.

By the way, this horrifying data doesn’t tell the entire story.

Biden’s budget doesn’t include some of his new spending giveaways. Brian Riedl addressed this fiscal gimmickry in a column for today’s New York Post.

…this budget does not even include additional spending and debt proposals that are coming later. …They account only for the recently-enacted “stimulus,” a massive discretionary spending hike, and the trillions in (creatively-defined) “infrastructure” spending proposed by the President over the past two months. However, during last fall’s campaign, Biden also proposed trillions in new spending for health care, Social Security, Supplemental Security Income, climate change, college aid, and other priorities. The White House has signaled that these new spending initiatives are still in the pipeline. Including these forthcoming proposals, the President would push spending and deficits far above any levels that have ever been sustained.

And don’t forget all this spending, both proposed and in the pipeline, is in addition to all the entitlement spending that is going to burden the economy over the next several decades.

Here’s one final point to underscore and emphasize the radical nature of Biden’s budget.

I’ve taken the previous chart and added a trendline showing what spending would be if Biden has simply followed the trajectory based on the actual spending levels of every President from Carter to Trump.

In other words, we’re looking at trillions of dollars of additional money being diverted from the productive sector of the economy and being put under the control of politicians and bureaucrats.

That does not bode well for American prosperity. Even the Congressional Budget Office recognizes this means lower living standards for our nation.

The bottom line is that if you adopt European-style fiscal policy, you get anemic European-style levels of income.

Back in 2013, the Tax Foundation published a report that reviewed 26 academic studies on taxes and growth.

That scholarly research produced a very clear message: The overwhelming consensus was that higher tax rates were bad news for prosperity.

Especially soak-the-rich tax increases that reduced incentives for productive activities such as work, saving, investment, and entrepreneurship.

That compilation of studies was very useful because then-President Obama was a relentless advocate of class-warfare tax policy.

And he partially succeeded with an agreement on how to deal with the so-called “fiscal cliff.”

Well, as Yogi Berra might say, it’s “deju vu all over again.” Joe Biden is in the White House and he’s proposing a wide range of tax increases.

It’s unclear whether Biden will gain approval for his proposals, but I’ve already produced a four-part series on why they are very misguided.

  • In Part I, I showed that the tax code already is biased against upper-income taxpayers.
  • In Part II, I explained how the tax hike would have Laffer-Curve implications, meaning politicians would not get a windfall of tax revenue.
  • In Part II, I pointed out that the plan would saddle America with the developed world’s highest corporate tax burden.
  • In Part IV, I shared data on the negative economic impact of higher taxes on productive behavior.

The bottom line is that the United States should not copy France by penalizing entrepreneurs, innovators, investors, and business owners.

Particularly since the rest of us are usually collateral damage when politicians try to punish successful taxpayers.

So it’s serendipity that the Tax Foundation has just updated it’s list of research with a new report looking at seven new high-level academic studies.

Here’s some of what the report says about class-warfare tax policy.

With the Biden administration proposing a variety of new taxes, it is worth revisiting the literature on how taxes impact economic growth. …we review this new evidence, again confirming our original findings: Taxes, particularly on corporate and individual income, harm economic growth. …We investigate papers in top economics journals and National Bureau of Economic Research (NBER) working papers over the past few years, considering both U.S. and international evidence. This research covers a wide variety of taxes, including income, consumption, and corporate taxation.

And here’s the table summarizing the impact of lower tax rates on economic performance, so it’s easy to infer what will happen if tax rates are increased instead.

Some of these findings may not seem very significant, such as changes in key economic indicators of 0.2%, 0.78%, or 0.3%.

But remember that even small changes in economic growth can lead to big changes in national prosperity.

P.S. In an ideal world, Washington would be working to boost living standards by adopting a flat tax. In the real world, the best-case scenario is simply avoiding policies that will make America less competitive.

Last year, I compared the economic performance of red states and blue states.

My big takeaway from that column is that we should pay attention to the data on internal migration. More specifically, there’s a reason why Americans have been moving from high-tax states to low-tax states.

Today’s let’s follow up on that discussion.

Today’s Wall Street Journal has an editorial on the gap between blue states and red states. This accompanying illustration shows that there is a clear relationship between joblessness and the degree to which states pursue big-government policies.

And here’s how the WSJ explained the big differences.

The unemployment rate in April nationwide was 6.1%, but this obscures giant variations in the states. With some exceptions, those run by Democrats such as California (8.3%) and New York (8.2%) continued to suffer significantly higher unemployment than those led by Republicans such as South Dakota (2.8%) and Montana (3.7%). It’s rare to see differences that are so stark based on party control in states. But the current partisan differences reflect different policy choices over the length and severity of pandemic lockdowns and now government benefits such as jobless insurance. Nine of the 10 states with the lowest unemployment rates are led by Republicans. The exception is Wisconsin whose Supreme Court last May invalidated Democratic Gov. Tony Evers’s lockdown. …Most states in the Midwest, South and Mountain West aren’t far off their pre-pandemic employment peaks. One obstacle to a faster recovery may be the $300 federal unemployment bonus, which many GOP governors are rejecting. Meantime, states with Democratic governments continue to reward workers for sitting on the couch. The longer that workers stay unemployed, the harder it will be to get them to return to work.

For what it’s worth, I’m more upset about the subsidized unemployment than the differences in lockdown policies, particularly because the former is more indicative of economic illiteracy.

P.S. One of the worst parts of Biden’s waste-filled stimulus plan is that it gave a big bailout for states, based on a formula that actually rewarded them for having bad numbers.

P.P.S. Click here and here if you want to peruse comprehensive measures of state economic policy.

As a libertarian, I don’t care if couples have zero children or 10 children.

But as an economist, I’m horrified that big changes in demographics are going to lead to fiscal crises thanks to poorly designed entitlement programs.

Simply stated, modest-sized welfare states are sustainable if more and more new taxpayers enter the system to finance benefits for a burgeoning population of old people.

But that’s not happening any more. In most nations, traditional population pyramids are becoming population cylinders because of falling birthrates and increasing longevity.

That’s the bad news.

The good news is that there is growing awareness the demographic changes are happening. Indeed, Damien Cave, Emma Bubola and have a big article on population decline in the New York Times.

All over the world, countries are confronting population stagnation and a fertility bust, a dizzying reversal unmatched in recorded history that will make first-birthday parties a rarer sight than funerals, and empty homes a common eyesore. Maternity wards are already shutting down in Italy. Ghost cities are appearing in northeastern China. Universities in South Korea can’t find enough students, and in Germany, hundreds of thousands of properties have been razed, with the land turned into parks. …Demographers now predict that by the latter half of the century or possibly earlier, the global population will enter a sustained decline for the first time. …The strain of longer lives and low fertility, leading to fewer workers and more retirees, threatens to upend how societies are organized — around the notion that a surplus of young people will drive economies and help pay for the old. …The change may take decades, but once it starts, decline (just like growth) spirals exponentially. With fewer births, fewer girls grow up to have children, and if they have smaller families than their parents did — which is happening in dozens of countries — the drop starts to look like a rock thrown off a cliff. …according to projections by an international team of scientists published last year in The Lancet, 183 countries and territories — out of 195 — will have fertility rates below replacement level by 2100.

Plenty of interesting data, though remarkably little focus on the fiscal implications. Sort of like writing about 1943 France with almost no reference to World War II.

In any event, the article takes a closer look at the challenges in certain nations., including South Korea.

To goose the birthrate, the government has handed out baby bonuses. It increased child allowances and medical subsidies for fertility treatments and pregnancy. Health officials have showered newborns with gifts of beef, baby clothes and toys. The government is also building kindergartens and day care centers by the hundreds. In Seoul, every bus and subway car has pink seats reserved for pregnant women. But this month, Deputy Prime Minister Hong Nam-ki admitted that the government — which has spent more than $178 billion over the past 15 years encouraging women to have more babies — was not making enough progress.

I was struck by the statement from the Deputy Prime Minister that his nation “was not making enough progress”?

That’s a strange way of describing catastrophic decline in birthrates, as noted in the article.

South Korea’s fertility rate dropped to a record low of 0.92 in 2019 — less than one child per woman, the lowest rate in the developed world. Every month for the past 59 months, the total number of babies born in the country has dropped to a record depth.

Maybe, just maybe, government handouts are not the way to boost birthrates.

I’ll conclude by noting that the real problem is tax-and-transfer entitlement programs, not low birth rates.

Both Singapore and Hong Kong have extremely low birth rates, for instance, but they aren’t facing a huge fiscal crisis because they have very small welfare states and workers are obliged to save for their own retirement.

Other Asian jurisdictions, however, made the mistake of copying Western nations, meaning entitlement programs that become mathematically impossible when populations pyramids become population cylinders (or even upside-down pyramids!).

In addition to South Korea, Japan also faces a major challenge.

And the situation is very grim in Europe, even though birth rates haven’t fallen to the same degree (though the numbers is some Eastern European nations are staggeringly bad).

P.S. The United States isn’t far behind.

P.P.S. We know the answer to this crisis, but far too many politicians are focused on trying to make matters worse rather than better.

P.P.P.S. You can read my two-part series on this topic here and here.

As explained here, here, here, and here, I don’t like Biden’s class-warfare tax policy.

I’m especially concerned about his approach to business taxation.

  1. He wants to penalize American-based companies with the highest corporate tax rate among all developed nations.
  2. He wants to export that bad policy to the rest of the world with a “global minimum tax” – sort of an OPEC for politicians.
  3. He wants to handicap American multinational companies with taxes that don’t apply to foreign-based firms.

Regarding the third point, I wrote a column on that topic for the Orange County Register.

Here’s how I described Biden’s proposal.

Biden has proposed several tax increases that specifically target American firms that compete in world markets. Most notably, the Administration has proposed to double the tax rate on “global intangible low-tax income” (GILTI) from 10.5 percent to 21 percent. Translated from tax jargon to English, this is largely a tax on the income American firms earn overseas from intellectual property, most notably patents and royalties. Keep in mind, by the way, that this income already is subject to tax in the nations where it is earned. Most other nations do not handicap their companies with similar policies, so this means that American firms will face a big competitive disadvantage – especially when fighting for business in low-tax jurisdictions such as Hong Kong, Ireland, Singapore, Switzerland, and most of Eastern Europe.

And here are some additional reasons why it is very bad news.

…let’s simply look at the bottom-line impact of what Biden is proposing. The Tax Foundation estimates that, “The proposal would impose a 9.4 percent average surtax on the foreign activities of U.S. multinationals above and beyond the taxes levied by foreign governments” and “put U.S. multinationals at a competitive disadvantage relative to foreign corporations.” …a stagging $1.2 trillion tax increase on these companies. …This is not just bad for the competitiveness of American-based companies, it is also bad policy. Good fiscal systems, such as the flat tax, are based on “territorial taxation,” which is the common-sense notion that countries only tax economic activity inside their borders. …Many other nations follow this approach, which is why they will reap big benefits if Biden’s plan to hamstring American companies is approved. The key thing to understand is that the folks in Washington have the power to raise taxes on American companies competing abroad, but they don’t have the ability to raise taxes on the foreign companies in those overseas markets.

The Wall Street Journal‘s editorial page has been sounding the alarm on this issue as well.

Here are some excerpts from an editorial back in April.

…the tax on global intangible low-tax income, known as Gilti, which was created by the 2017 tax reform. …Gilti was flawed from the start…but Mr. Biden would make it worse in every respect. …The 2017 tax law set the statutory Gilti rate at…10.5%. Mr. Biden would increase that to 21%… the effective rate companies actually pay is higher. This is because Gilti embedded double taxation in the tax code. …Gilti allows a credit of only 80% of foreign taxes, with no carry-forwards or carry-backs. …Raising the statutory rate to 21% increases that effective rate to 26.25%. This new Biden effective minimum tax would be higher than the statutory tax rates in most countries even in Western Europe… The Biden plan would further increase the effective Gilti rate by expanding the tax base on which it’s paid. …A third Biden whammy would require companies to calculate tax bills on a country-by-country basis. …Requiring companies to calculate taxable profits and tax credits individually for every country in which a company operates will create a mountain of compliance costs for business and work for the Internal Revenue Service. …The Biden Administration and its progressive political masters have decided they don’t care about the global competitiveness of American companies.

Let’s close with some international comparisons.

According to the most-recent International Tax Competitiveness Index, the United States ranks #21 out of 35 nations, which is a mediocre score.

But the United States had been scoring near the bottom, year after year, before the Trump tax reform bumped America up to #21. So there was some progress.

If the Biden plan is approved, however, it is a near-certainly that the U.S. will be once again mired at the bottom. And this bad policy will lead to unfortunate results for American workers and American competitiveness.

Since I’ve recently shared two examples (here and here) of “statism in pictures,” it’s time for a libertarian version.

Our first image is near and dear to my heart.

Sadly, the Supreme Court sometimes doesn’t fulfill its job of keeping government within the Constitution. Especially with regard to enumerated powers.

Next, this cartoon does a great job of capturing how libertarians think.

It’s not that we’re all anarcho-capitalists, but we definitely need a lot of evidence before overcoming our instinctive aversion to government.

Our third item is from the clever folks at Babylon Bee.

Helps to explain why libertarians (like most Americans) are not big supporters of foreign aid.

Next, if libertarians have a reputation for being dorky, it’s probably because of examples like this.

Needless to say, we’re fans of cryptocurrency even if we don’t trade any of them.

I’ve saved the best for last, as usual. Our fifth item deals with a real story about some fun-loving Arkansas rednecks, followed by the libertarian reaction to their arrest.

If libertarians believe in legalizing drugs, gambling, and prostitution, then why have laws against testing out bulletproof vests while drinking?

Though it’s not an activity I would recommend, so perhaps this belongs in my collection of libertarian quandaries.

P.S. For other examples of libertarianism-themed images, click here, here, here, and here.

I’ve shared all sorts of online quizzes that supposedly can detect things such as whether you’re a pure libertarian.

Or even whether you’re a communist.

Today, courtesy of the folks at the Committee for a Responsible Budget, you can agree or disagree with 24 statements to determine your “budget personality.”

I have some quibbles about some of the wording (for instance, I couldn’t answer “neither” when asked to react to: “The government should spend more money on children than on seniors”).

But I can’t quibble with the results. Given the potential outcomes, I’m glad to be a “Minimalist” who is “in favor of smaller government.”

Though I’m disappointed that I apparently didn’t get a perfect score on “Size of Government.”

And I need to explain why I got a mediocre score on the topic of “Fiscal Responsibility.”

The budget geeks at the Committee for a Responsible Federal Budget (CRFB) have a well-deserved reputation for rigorous analysis. I regularly cite their numbers and appreciate the work that they do.

That being said, they mistakenly focus on deficits and debt when the real problem is too much government.

I agree with Milton Friedman, who wisely observed that ““I would rather have government spend one trillion dollars with a deficit of a half a trillion dollars than have government spend two trillion dollars with no deficit.”

The folks at CRFB would disagree.

Indeed, they are so fixated on red ink that they would welcome tax increases.

At the risk of understatement, that would be a very bad approach.

The evidence from Europe shows that higher taxes simply lead to higher spending. And more debt.

Indeed, Milton Friedman also commented on this issue, warning that, “History shows that over a long period of time government will spend whatever the tax system raises plus as much more as it can get away with.”

The bottom line is that CRFB not only has the wrong definition of “Fiscal Responsibility,” but they also support policies that would make matters worse – even from their perspective!

When I was first learning about economics in the 1970s and 1980s, Arthur Okun’s equality-efficiency tradeoff was part of just about any discussion of public policy.

Folks on the left acknowledged that their policies would lead to less prosperity, but they argued that result was acceptable because the benefits of a more-equal society would offset the cost of reduced economic output.

Needless to say, there were vigorous debates about how much additional equality could be achieved and how much economic damage might be caused by any particular policy, but few if any economists pretended that more government was actually good for growth.

Unfortunately, that has changed. A growing number of people on the left (especially those with tax-free jobs at international bureaucracies) now claim that bigger government actually is the way to get more growth.

Here’s their theory.

This illogical hypothesis is so absurd and so anti-empirical that I now get excited when I find economists who still use Okun’s framework when analyzing various reforms.

For instance, there is a new study from the European Central Bank that looks at whether a pro-growth policy (free trade) leads to less equality.

The working paper, authored by Roland Beck, Virginia Di Nino, and Livio Stracca, specifically measures the impact of membership in so-called “globalisation clubs.”

The mounting criticisms against globalisation…have sparked a lively debate about whether the narrative of the benefits of free trade and capital flows is still intact. …In this paper, we reconsider the effects of globalisation on income and inequality studying the consequences of quasi-natural experiments like accessions to “Globalisation Clubs”.Our list of Globalisation Clubs includes the World Trade Organisation (WTO), the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD), which all require their members to pursue some form of either liberal trade or investment policies or a combination of both. …The main purpose of our study is to shed light on the hypothesis that globalisation leads to an efficiency-equity trade-off which is a fundamental concern in economics dating at least back to Okun (1975). In other words, is the hypothesis that globalisation increases economic efficiency to the detriment of cohesion and equality supported by the data?

Here are the key results.

The analysis leads to three main findings. First, with the exception of financial liberalisation we find that all our “globalisation shocks” lead to a significant increase in trade openness – a prerequisite for considering them globalisation shocks in the first place. Second, the effects on per capita income are mixed; positive for WTO accessions and trade openness shocks, insignificant for OECD accessions and even negative for EU accessions and financial liberalisations. …Finally, we find little evidence that globalisation shocks lead to more inequality. The Gini coefficients (market and net) tend not to change or even to fall, and the labour share of income to be unchanged or even rise, in the wake of a globalisation shock.Taken together, our results point to mostly positive effects for countries following globalisation shocks and challenge the view that globalisation is necessarily an efficiency-equity trade-off.

I’m not surprised by these findings.

There’s no reason to think that OECD membership will lead to better policy and there are good reasons to think EU membership might push policy in the wrong direction.

The WTO, by contrast, has a good track record of trade liberalization. So these results from the study make sense.

The primary takeaway from this research is that free trade is good for prosperity. Not only does it lead to more growth, but low-income people enjoy above-average gains.

Though I would argue that free trade would be just as desirable if rich people were the ones who enjoyed above-average gains. The key point is that all groups benefit when there are reforms to shrink the size and scope of government, and we shouldn’t get worked up if some people benefit more than others.

But there’s a secondary takeaway. This European Central Bank study also is an example of methodologically sound research (i.e., recognizing that more government is not a free lunch).

P.S. While I applaud the honesty of left-leaning economists who use Okun’s framework, that doesn’t stop me from criticizing some of their crazy conclusions.

About one week ago, I shared some fascinating data from the Tax Foundation about how different nations penalize saving and investment, with Canada being the worst and Lithuania being the best.

I started that column by noting that there are three important principles for sensible tax policy.

  1. Low marginal tax rates on productive behavior
  2. No tax bias against capital (i.e., saving and investment)
  3. No tax preferences that distort the economy

Today, we’re going to focus on #1, specifically the tax burden on the average worker.

And, once again, we’ll be citing some of the Tax Foundation’s solid research. Here are their numbers showing the tax burden on the average worker in OECD nations. As you can see, Belgium is the worst place to be, followed by Germany, Austria, and France.

Colombia has the lowest tax burden on average workers, though that’s mostly a reflection of low earnings in that relatively poor nation.

Among advanced nations, Switzerland has the lowest tax burden when value-added taxes are part of the equation, while New Zealand is the best when looking just at income taxes and payroll taxes.

Here’s some of what the Tax Foundation wrote in its report, which was authored by Cristina Enache.

Average wage earners in the OECD have their take-home pay lowered by two major taxes: individual income and payroll (both employee and employer side). …The average tax burden among OECD countries varies substantially. In 2020, a worker in Belgium faced a tax burden seven times higher than that of a Chilean worker. …Accounting for VAT and sales tax, the average tax burden on labor in 2020 was 40.1 percent, 5.5 percentage points higher than when only income and payroll taxes are considered. …The tax burden on labor is referred to as a “tax wedge,” which simply refers to the difference between an employer’s cost of an employee and the employee’s net disposable income. …Tax wedges are particularly high in European countries—the 23 countries with the highest tax burden in the OECD are all European. …Chile and Mexico are the only countries that do not provide any tax relief for families with children but they keep the average tax wedge low.

Here’s a look at which countries in the past two decades that have made the biggest moves in the right direction and wrong direction. Kudos to Hungary and Lithuania.

And you can also see why I’m not overly optimistic about the long-run outlook for Mexico and South Korea.

The report also has a map focusing on tax burdens in Europe. The darker the nation, the more onerous the tax (notice how Switzerland is a light-colored oasis surrounded by dark-colored tax hells).

The report also notes that average tax wedges only tell part of the story. If you want to understand a tax system’s impact on incentives for productive behavior, it’s important to look at marginal tax rates.

The average tax wedge is…the combined share of labor and payroll taxes relative to gross labor income, or the tax burden. The marginal tax wedge, on the other hand, is the share of labor and payroll taxes applicable to the next dollar earned and can impact individuals’ decisions to work more hours or take a second job. The marginal tax wedge is generally higher than the average tax wedge due to the progressivity of taxes on labor across countries—as workers earn more, they face a higher tax wedge on their marginal dollar of earnings. …a drastic increase in the marginal tax wedge…might deter workers from pursuing additional income and working extra hours.

And here’s Table 1 from the report, which shows that marginal tax rates can be very high, even at relatively modest levels of income.

In what could be a world record for understatement, this data led Ms. Enache to conclude that Italy’s tax system “might” deter workers.

In 2020 an Italian worker making €38,396 (US $56,839) faced a marginal tax wedge as high as 117 percent on a 1 percent increase in earnings. Such marginal tax wedges might deter workers from pursuing additional income and working extra hours.

Though that’s not the most absurd example of over-taxation. Let’s not forget that thousands of French taxpayers have had tax bills that were greater than their entire income.

Sort of like an Obama-style flat tax, but in real life rather than a joke.

P.S. As I’ve previously noted, Belgium is an example of why a country can’t simultaneously have a big government and a good tax system.

The United States has a big economic advantage over Europe in part because the burden of welfare spending is lower.

This means fewer people trapped in government dependency in America. And it means a smaller tax burden in America.

But some of our friends on the left think it is bad news that the United States isn’t more like Europe.

They want more redistribution in America and they may get their wish if Congress approves Biden’s so-called American Families Plan.

The Economist has an article about Biden’s radical proposal, which would, as they correctly note, “Europeanise the American welfare state.”

President Joe Biden is proposing an ambitious reweaving of the American safety-net, which the White House says will cost $1.8trn. The American Families Plan has bits of the European welfare state that have long been missing in the country—a child allowance, paid family leave, universal pre-school, subsidised child care and free community college—but contains no reference to work requirements. …So how did Democrats go from Clintonism—which implicitly conceded the Reaganite critique that too much governmental assistance is a very bad thing—to its present-day unconcern about (even relish for) deficit-financed expansions of the safety-net?

Here are some of the specific details from the story, including discussion of Biden’s plan for per-child handouts.

This would bring America more in line with the rest of the developed world: the average government spending on benefits such as child allowances, family leave and early education is 2.1% of GDP in the OECD club of mostly rich countries. In America, it is just 0.6%. …A generous child allowance is the main anti-poverty tool in most rich countries—and also one that America lacks. One such scheme was created this year as part of the covid-19 relief bill that the president signed in March. It will pay most families $3,000 per year per child ($3,600 for young children)… The president’s plan proposes to extend these payments until 2025. Some Democrats think they should simply be made permanent.

The Wall Street Journal opined about Biden’s plan last month.

It’s more accurate to call this the plan to make the middle class dependent on government from cradle to grave. The government will tell you sometime later, after you’re hooked to the state, how it will force you to pay for it. We’d call the price tag breathtaking, but by now what’s another $2 trillion? …But the cost, while staggering, isn’t the only or even the biggest problem. The destructive part is the way the plan seeks to insinuate government cash and the rules that go with it into all of the major decisions of family life. The goal is to expand the entitlement state to make Americans rely on government and the political class for everything they don’t already provide. …This is now about mainlining benefits to middle-class families so they become addicted to government—and to the Democratic Party that has become the promoting agent of government.

I agree with the WSJ. Biden wants to create more dependency, even if that means eviscerating Bill Clinton’s very successful welfare reform.

For my contribution to this discussion, I want to make two points about the practical implications of Biden’s plan to “Europeanise” the United States.

First, it is impossible to have a European-sized government without massive tax increases. And since there aren’t enough rich people to finance big government, that inevitably means low-income and middle-class taxpayers will have to be hit with much bigger fiscal burdens. Which is exactly what has happened in Europe (and lots of honest people on the left openly admit a bigger welfare state would require similar policies in the United States).

Second, it is impossible to have a European-sized government and still maintain a big economic advantage over Europe. Higher spending and higher taxes will combine to reduce work, saving, investment, and entrepreneurship. Simply stated, European fiscal policy will lead to European economic results, and that will be very bad news for ordinary Americans since living standards are 30 percent-40 percent lower on the other side of the Atlantic Ocean.

It’s also worth noting that the United States ranks very high in societal capital, and that presumably will erode if more people are lured into government dependency.

P.S. Biden used to oppose a government-guaranteed income, correctly realizing it would undermine the work ethic.

P.P.S. The United States already faces a huge long-run challenge because of entitlement spending, so it’s remarkable – in a bad way – that Biden wants to step on the gas rather than hit the brakes.

Government breeds corruption by giving sleazy people a way of obtaining unearned wealth. Politicians and special interests are the winners and workers, consumers, and taxpayers are the losers.

It’s easy to find examples. Simply look at tax policy, spending policy, regulatory policy, energy policy, industrial policy, agricultural policy, foreign policy, health policy, trade policy, drug policy, and bailout policy. Or anything else involving politicians and their cronies.

Hmmm…, I wonder if there’s a lesson to be learned from that list?

But just in case some people are slow learners, let’s consider some new scholarly research from the Federal Reserve.

The study, authored by Joonkyu Choi, Veronika Penciakova, and Felipe Saffie, explores whether companies that give cash to politicians are then rewarded with cash from taxpayers.

The American Recovery and Reinvestment Act (ARRA) was enacted in the midst of the Great Recession, and over one-fourth of the funds were channeled directly to firms with the primary goal of saving and creating jobs. These stimulus funds were sizable and valuable to firms, with the average grant awarded exceeding $500,000. With hundreds of thousands of dollars on the line, firms may have incentive to exert political influence… Are firms successful in influencing the allocation of stimulus spending? …This paper provides empirical answers… We find that firms’ campaign contributions to state politicians before the enactment of ARRA have a positive and significant impact on the probability of winning ARRA grants… We find that firms that contribute to winning candidates are 64 percent more likely to secure an ARRA grant and receive 10 percent larger grants. …The allocative distortion caused by political connections is sizable. Although only 6 percent of grant recipients contribute during local elections, they account for21 percent of total ARRA grants.

I feel like I need to take a shower after reading those results. Maybe I’m a political prude, but it galls me that politicians and interest groups have so much ability to fleece the rest of us.

And now you know what I refer to Washington as America’s “wretched hive of scum and villainy.”

The obvious takeaway from this research is that we’ll have less corruption if we have less government.

Which was my message in this video.

While I obviously like my video on the topic, I very much recommend this video interview with Andrew Ferguson.

P.S. Speaking of videos, here’s some satire about government corruption.

P.P.S. We shouldn’t be surprised that Obama’s so-called stimulus produced lots of corruption. The same was true with regards to Obamacare and green energy, which were his other main initiatives.

P.P.P.S. In the future, I’m sure we’ll see studies finding lots of corruption in Biden’s recent “stimulus” plan.

Why do folks on the left support punitive policies such as high tax rates and a bigger burden of government?

Some of them are motivated by resentment against those who have achieved success. These are the people who support the hate-and-envy message of politicians such as Bernie Sanders and Elizabeth Warren.

Others folks on the left, by contrast, are motivated by sympathy for the less fortunate.

That’s a noble sentiment. Where they go wrong is in thinking that the economy is a fixed pie. This leads them to the mistaken conclusion that some people are poor because other people are rich.

Maybe I’m overly optimistic, but I think these people can be convinced to support good policy if they learn the facts about how free markets and limited government are a proven recipe for prosperity.

This is why I shared data earlier this year showing how per-capita economic output jumped dramatically once capitalism was allowed starting a couple of hundred years ago.

Today, let’s look at how poor people have been the biggest winners. Professor Max Roser of Oxford University recently shared a profoundly important tweet about the dramatic reduction in global poverty. We see not only that poverty rates have plummeted, but also that falling poverty rates are correlated with increases in per-capita GDP.

In other words, everyone is getting richer. There’s no fixed pie.

As you might expect, regions that are friendlier to capitalism have enjoyed bigger increases in prosperity and bigger reductions in poverty.

The bottom line is that people who care about the poor should be the biggest advocates of free enterprise.

P.S. It’s worth noting that, according to both U.S. data and global data, the big reduction in poverty occurred before welfare states were created.

One week ago, I shared five images that capture the essence of government.

Today, we have another collection, starting with a reminder of, in the words of Ronald Reagan, the most terrifying words in the English language.

Next, we have warning signs about all sorts of things, but not about the the biggest threat we face.

Our third item captures what happens over time as a small government becomes medium-sized government and then evolves into big government.

Here’s a succinct explanation of how government and organized crime are similar (though here’s a cartoon reminding us how they are different).

Here’s my favorite, though given the spending proclivities of many Republicans, it should simply read “politicians promising everything for ‘free’.”

You get the same message from this Glenn McCoy cartoon and this Michael Ramirez cartoon.

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