Gun Control Humor

Donald Trump has his share of flaws and he wasn’t the type of Republican I like, but that doesn’t prevent me from acknowledging that he was good on some important issues. He moved tax policy in the right direction, for instance, and also began to reverse the tide of red tape.

I fully expect the Biden White House to be much worse on those issues. And I’m sure Biden will also try to move policy in the wrong direction on other issues as well, including a push for gun control (an issue where Biden is both wrong and clownish).

It’s therefore likely that the upcoming years will require some columns about why his anti-gun agenda would undermine the Constitution, increase crime, and diminish freedom.

Before having to wrestle with those serious topics, though, let’s enjoy another edition of satire about gun control. We’ll start with this item that definitely elicited a chuckle from me.

If you want some serious discussion of armed teachers, click here and here.

But I want to stick with humor, so let’s go to this item about the difference between conservatives and libertarians.

Reminds me of the difference between liberals, conservatives, and Texans.

This following item compares Maine and Chicago.

Very reminiscent of “research” on the difference between Houston and Chicago.

Here’s some diversity that everyone can support.

Next we have a reminder that the 2nd Amendment is not about hunting.

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

This final image is amusing, particularly as I imagine my left-leaning friends spluttering as they try to argue with its logic.

As you might suspect, those friends also haven’t been able to get a passing grade on the gun control IQ test.

P.S. For those interested, I have an entire collection of gun control humor.

Bureaucrat(s) of the Year

The most-common complaint about bureaucrats is that they’re lazy.

Though it’s probably more accurate to say that bureaucracies have very little incentive to care about citizens.

After all, the rest of us are captive customers, whether we’re dealing with the federal government’s postal service, a state motor vehicles department, or a local government’s education bureaucracy.

So it would be naive to expect the kind of attentiveness and hustle you find when dealing with many private merchants.

But one thing we can say is that bureaucrats aren’t sluggish when they have an opportunity to defraud taxpayers.

For instance, a report in the New York Times by Benjamin Weiser exposes a jaw-dropping overtime scam by transit bureaucrats in New York.

Thomas Caputo, a senior track worker for the Long Island Rail Road, put in for 15 hours of overtime for work he said he had done at the West Side Yard in Manhattan. His shift began at 4 p.m. and ended at 7 o’clock the next morning. But, the authorities say, Mr. Caputo was somewhere else that evening: at a bowling alley in Patchogue, N.Y., more than 55 miles away, where he bowled three games, averaging a score of 196. He took home an overtime payment of $1,217. …Mr. Caputo, 56, who retired in 2019 after three decades with the railroad, was listed in 2018 as the highest paid M.T.A. employee with total pay of more than $461,000, including about $344,000 in overtime. …In 2018, according to a criminal complaint unsealed on Thursday, Mr. Caputo claimed to have worked 3,864 overtime hours, on top of 1,682 regular hours. If he had worked every single day that year (which he did not), the complaint said, his claims would average about 10 hours of overtime each day for the entire year, beyond his regular 40-hour workweek.

But Mr. Caputo was just the tip of the iceberg.

Caputo was one of five current and former employees of the Metropolitan Transportation Authority charged on Thursday with participating in an overtime fraud scheme that allowed them to become among the highest-paid employees at the agency… All five defendants each earned more than the salary of the M.T.A. chairman or Gov. Andrew M. Cuomo, who oversees the agency.

Another bureaucrat was very creative in milking the system.

Michael Gundersen, 42, a maintenance-of-way supervisor at New York City Transit, was accused of reporting he had worked long shifts in March 2018, for which he was paid $2,481. But evidence showed that at the same time, he had hotel reservations in Atlantic City and tickets for concerts there on successive nights, a second complaint charged. During other periods that Mr. Gundersen was paid thousands of dollars for claimed overtime, he was on vacation in Williamsburg, Virginia, participating in a 5K footrace in New Jersey, and on a family vacation at a resort in the Hudson Valley.

By the way, you probably won’t be surprised to learn that the M.T.A. has serious financial problems (one of the few entities to get bailout money as part of pandemic relief).

The charges come at a time when the authority is confronting its worst financial crisis because of the pandemic and a stalemate over federal aid. Without a financial bailout, the agency has said that it will have to slash subway and bus service and that more than 9,000 workers could lose their jobs. …The huge overtime payments made to Mr. Caputo and other M.T.A. employees were revealed a month earlier by the Empire Center for Public Policy, a conservative think tank in Albany. Its research showed that 33 M.T.A. employees earned more than $300,000 in 2018, with almost all receiving large amounts of overtime pay. …The charges come more than a decade after the Long Island Rail Road was caught up in a scandal over disability payments. A New York Times investigation had found that nearly every career employee who retired received a disability pension.

In other words, not only are bureaucrats overpaid in general, but they also are very adept at cheating the system to pad their paychecks.

We’ll close with by explaining that this type of scam is common with government employment.

Why? For the simple reason – as illustrated by the cartoon – that politicians are bureaucrats tend to be on the same side with negotiating new contracts.

Nobody represents the interests of taxpayers.

In any event, I’m sure we can all agree that Mr. Caputo, Mr. Gunderson, and the rest of the crooks deserve membership in the Bureaucrat Hall of Fame.

P.S. Here’s a new element discovered inside the bureaucracy, and a letter to the bureaucracy from someone renewing a passport.

P.P.S. And this satirical video actually does a very good job of capturing how bureaucracy actually operates.

P.P.P.S.  Here’s a great top-10 list from Letterman about bureaucrats.

Walter Williams, RIP

One of America’s leading public intellectuals, Walter Williams, has passed away.

In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.

I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club”  with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.

I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.

But there’s so much more to say. When I learned yesterday of Walter’s death, I wondered what sort of tribute I should write, especially since so many thoughtful essays already have been published (Don Boudreaux, Thomas Sowell, Veronique de Rugy, Alex Tabarrok, Mark Perry, and Nick Gillespie, to list just a few).

Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.

This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.

Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.

Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”

And here’s some of what he wrote about his assignment to South Korea.

We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.

Here’s a passage from his time as a Ph.D. student at UCLA.

My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian  said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”

I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.

He appreciated that his professors didn’t relax their standards because of his race.

Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.

Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.

Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.

Many years later, he wrote a very insightful column on racial and sexual profiling.

Here’s a final excerpt showing how he enjoyed shocking people.

At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.

Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.

The bottom line is that Walter was a man, not a victim. He fought and achieved.

Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.

P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.

 

Great Moments in International Bureaucracy

A couple of days ago, I criticized officials at the United Nations for advocating higher taxes and bigger government.

Fortunately, that bureaucracy is so sclerotic and inefficient that its efforts to promote statism are not very effective

But it still galls me that international bureaucrats who receive lavish, tax-free salaries spend their days trying to promote higher taxes on everyone else.

And that’s also my view of the tax-loving bureaucrats at the International Monetary Fund, as well as their counterparts at the Organization for Economic Cooperation and Development.

Perhaps the logical takeaway is that international bureaucracies are inherently problematic, pushing misguided policy on their bad days and wasting money on their good days.

Here are some additional examples, starting with with the “Eurocrats” in Brussels. The U.K.-based Telegraph reports that they’ve been naughty hypocrites.

An MEP tried to escape through a window after police raided a 25-strong sex party in Brussels’ city centre for breaking Belgium’s coronavirus rules. …Police raided the flat after neigbours complained about the noise. …Belgian media reported two EU diplomats at the sex party… Police fined the 25 people, who were mostly naked men, at the orgy £225 each before releasing them. They broke rules limiting gatherings to groups of four. …A European Parliament source said: “There is nothing wrong to participate in a sex party of any kind. However, …parliamentary immunity does not exempt you from obeying the law.” Brussels hosts the major EU institutions, including one of the European parliament’s two seats.

Next, let’s take a look at the World Health Organization.

That bureaucracy is infamous for its bungled and politicized response to the coronavirus.

So maybe it’s a bit of karma that the bureaucracy is now suffering its own outbreak. Here are some excerpts from a story in the Las Angeles Times.

The World Health Organization has recorded 65 coronavirus cases among staff members based at its headquarters, despite the agency’s public assertions that there has been no transmission at the Geneva site, an internal email obtained by the Associated Press shows. …32 were found in staff who had been working at the headquarters building, suggesting that the health agency’s strict hygiene, screening and other prevention measures were not sufficient to spare it from the pandemic. …On Nov. 2, the WHO’s technical lead for the COVID-19 response, Maria Van Kerkhove, told reporters that there had been no transmission or clusters at headquarters.

Let’s wrap up by looking at the North Atlantic Treaty Organization (NATO).

You may have assumed this bureaucracy no longer exists since the Soviet Union (thankfully) no longer exists.

But not only is NATO still there, the Washington Free-Beacon reported that it built itself an opulent Taj Mahal-style headquarters.

…the new NATO headquarters…building cost an astounding $1.23 billion, according to a budget released by the North Atlantic Treaty Organization. Architecture, design, and quality management cost the alliance $129 million alone. Audio visual installations ran $29 million, while construction ran $514 million, the document states. …The alliance bragged that the structure is also a “green building for the future.” “The environment and sustainability have played a major role in the design process. The new building’s energy consumption has been optimized through the use of geothermal and solar energy and advanced lighting systems. …the buildings short wings will have green roofs,” the document states.

Lots of moral preening about being a “green building,” but nothing about whether this monument to extravagance will make NATO more effective as a fighting force.

Then again, as Mark Steyn observed many years ago, NATO nowadays is about as useful as “keeping forts in South Dakota to defend settlers against hostile Indians.”

In a perverse way, I almost have to admire NATO.

It takes special bureaucratic skills to survive the collapse of the Soviet Union and the end of the Warsaw Pact. And it takes super-special bureaucratic skills to then get a $1.23 billion headquarters when the organization’s reason for existing disappeared nearly three decades ago.

Ronald Reagan obviously would not be surprised.

Positive Rights vs Negative Rights

Back in 2017, I compared the welfare state vision of “positive rights” with the classical liberal vision of “negative rights.”

To elaborate, here’s a video from Learn Liberty that compares these visions.

For what it’s worth, I don’t like the terms “positive rights” and “negative rights” for the simple reason that an uninformed person understandably might conclude that “positive” is good and “negative” is bad.

Needless to say, I don’t think it’s good for people to think they have a right to other people’s money.

That’s why I prefer Professor Skoble’s use of the terms “liberties” and “entitlements,” which we also find in this slide from Professor Imran Ahmad Sajid of the University of Pakistan.

As you might expect, there are plenty of politicians who try to buy votes with an agenda of “positive rights.” Bernie Sanders, for instance, constantly argued that people have a “right” to all sorts of goodies.

But he wasn’t the first to make the case for unlimited entitlements.

Franklin Roosevelt was one of America’s worst presidents, in part because his policies deepened and lengthened the Great Depression. But also because he pushed the idea that people have the right to get all sorts of taxpayer-financed handouts.

Let’s see what some other people have to say about this topic.

In his National Review column, Kevin Williamson looks at the logical fallacy of positive rights.

Positive rights run into some pretty obvious problems if you think about them for a minute, which is why so much of our political discourse is dedicated to moralistic thundering specifically designed to prevent such thinking. Consider, in the American context, the notion that health care is a right. Declaring a right in a scarce good such as health care is intellectually void, because moral declarations about rights do not change material facts. If you have five children and three apples and then declare that every child has a right to an apple of his own, then you have five children and three apples and some meaningless posturing — i.e., nothing in reality has changed, and you have added only rhetoric instead of adding apples. In the United States, we have so many doctors, so many hospitals and clinics, so many MRI machines, etc. This imposes real constraints on the provision of health care. If my doctor works 40 hours a week, does my right to health care mean that a judge can order him to work extra hours to accommodate my rights? For free? If I have a right to health care, how can a clinic or a physician charge me for exercising my right? If doctors and hospitals have rights of their own — for example, property rights in their labor and facilities — how is it that my rights supersede those rights?

And here’s what he says about “negative rights.”

A negative right is a right to not be constrained. The right to free speech, for example, implies only non-interference. The right to freedom of the press doesn’t mean the government has to give you a press. The good of negative freedom is, in the economic sense, not rivalrous — your exercise of free speech doesn’t leave less freedom of speech out there for others to enjoy

And Larry Reed opines on the issue for the Foundation for Economic Education.

America is a nation founded on the notion of rights. …Despite the centrality of rights in American history, it’s readily apparent today that Americans are of widely different views on what a right is, how many we have, where rights come from, or why we have any in the first place. …if you need something, does that mean you have a right to it? If I require a kidney, do I have a right to one of yours? Is a right something that can or should be granted or denied by majority vote?

He helpfully provides a list of negative rights (a.k.a., liberties).

And he argues that positive rights (a.k.a., entitlements) are not real rights.

The bottom line, he explains, is that so-called positive rights impose obligations on other people.

Indeed, they can only be provided by coercion.

The first list comprises what are often called both “natural rights” and “negative rights”—natural because they derive from our essential nature as unique, sensate individuals and negative because they don’t impose obligations on others beyond a commitment to not violate them. The items in the second are called “positive rights” because others must give them to you or be coerced into doing so if they decline. …while I believe neither you nor I have a right to any of those disparate things in the second list, I hasten to add that we certainly have the right to seek them, to create them, to receive them as gifts from willing benefactors, or to trade for them. We just don’t have a right to compel anyone to give them to us or pay for them.

There’s not much I can add to this issue, given the wisdom contained in the video and in the articles by Williamson and Reed.

So I’ll close with the should-be-obvious point that a system based on entitlements only works if there are enough people pulling the wagon to support all the people riding in the wagon.

But that kind of society contains the seeds of its own downfall (think Greece or Venezuela) because it subsidizes dependency and penalizes production.

Which means, as Margaret Thatcher warned us, that positive rights can’t be provided when politicians run out of other people’s money.

Young People and Anti-Capitalism Mentality

I’ve written a couple of times about a disturbingly large share of young people support statist economic policies.

A good example can be seen in this polling data from the Pew Research Center (relevant data circled in red).

Christopher Ingraham wrote about this survey in the Washington Post.

According to the Pew Research Center, 39 percent of adults younger than 30 support the view that people whose personal fortunes exceed $1 billion “is a bad thing,” while 16 percent say billionaires are good for society. …These attitudes were likely sharpened by the Democratic presidential campaign, which at one point pitted a multibillionaire (Mike Bloomberg) against a socialist senator who says that billionaires shouldn’t exist (Bernie Sanders)…the Pew data…suggest that young Americans are concluding that billionaires have amassed their wealth “through their rigging of the tax code, through legal political bribery, through their tax avoidance in shelters like the Cayman Islands, and through lobbying for public policy that benefits them privately.” …“The billionaire class is ‘up there’ because they are standing on our backs pinning us down,” Giridharadas said. …Among respondents 50 and older, just 15 percent say billionaires are a bad thing.

This is depressing data, just like the views of America’s young people in the GIEM survey I wrote about recently.

Some of them don’t like capitalism and wealth even when they’re beneficiaries.

The New York Times has a report on “socialist-minded millennial heirs” who want to use the money they inherited to undermine free enterprise.

“The wealth millennials are inheriting came from a mammoth redistribution away from the working masses, creating a super-rich tiny minority at the expense of a fleeting American dream that is now out of reach to most people,” said Richard D. Wolff, a Marxist and an emeritus economics professor at University of Massachusetts Amherst…he has been professionally arguing against capitalism’s selling points since his teaching career began, in 1967, but that his millennial students “are more open to hearing that message than their parents ever were.” …an individual act of wealth redistribution does not, on its own, change a system. But these heirs see themselves as part of a bigger shift, and are dedicated to funding its momentum. …In short, this means using their money to support more equitable economic infrastructures. This includes investing in or donating to credit unions, worker-owned businesses, community land trusts, and nonprofits aiming to maximize quality of life through democratic decision making, instead of maximizing profits through competition.

Here are three examples from the story.

Sam Jacobs has been…trying to gain access to more of his $30 million trust fund. At 25, he…wants to give it all away. “I want to build a world where someone like me, a young person who controls tens of millions of dollars, is impossible,” he said. A socialist since college, Mr. Jacobs sees his family’s “extreme, plutocratic wealth” as both a moral and economic failure. He wants to put his inheritance toward ending capitalism.

Rachel Gelman, a 30-year-old in Oakland, Calif., who describes her politics as “anticapitalist, anti-imperialist and abolitionist.” …“My money is mostly stocks, which means it comes from underpaying and undervaluing working-class people, and that’s impossible to disconnect from the economic legacies of Indigenous genocide and slavery,” Ms. Gelman said.

Pierce Delahunt, a 32-year-old “socialist, anarchist, Marxist, communist or all of the above,” has a trust fund that was financed by their former stepfather’s outlet mall empire. (Mx. Delahunt takes nongendered pronouns.) “…I think about intersectional oppression,” Mx. Delahunt said. There’s the originally Indigenous land each mall was built on, plus the low wages paid to retail and food service workers, who are disproportionately people of color, and the carbon emissions of manufacturing and transporting the goods. With that on their mind, Mx. Delahunt gives away $10,000 a month, divided between 50 small organizations, most of which have an anticapitalist mission.

There’s certainly nothing wrong with giving away one’s inheritance.

Since I’ve (sadly) never inherited any money, I haven’t had any reason to ponder the issue, but one of my dreams would be to use a windfall of money to help finance school choice so poor kids could escape failing government schools.

Needless to say, I wouldn’t finance anti-capitalist groups, like the folks described above.

But I’m digressing. Let’s return to the issue of misguided young people.

In a column for Law & Liberty, Professor John McGinnis offers suggestions about how to rescue them from statism.

…young voters are America’s future, and even if a few years in the workforce brings some greater political wisdom, many people still stick with their youthful paradigms unless some political shock disrupts them. For those who would try to change the mind of this generation (and the following one), it is important to understand how our education, occupational licensing, and entitlement policies are driving them to socialist views which break sharply with America’s political traditions of liberty. …It is not surprising that this structure prompts some young people to demand that the government pony up money for them… More generally, why not vote for radicals in the hope of shaking up the system on the assumption that it can’t get worse for them than it is now? …The classical liberal alternative is clear: reduce the transfers from the young to the old and eliminate those unnecessary barriers to career entry that privilege incumbents.

Here are the reforms that Prof. McGinnis believes would make young people more favorable to liberty.

Reform of the universities thus must be a priority. But it is very difficult. …they are getting worse by the decade if not by the year. Alternative institutions are probably the only answer. …Online education will allow for new challengers to rise, ones who are not as likely to be wedded to political correctness as the incumbents.

…our entitlement structure is currently designed to take from the younger generation and give to the elderly. Social security is a pay-as-you-go system. And given that social security is not actuarially sound, most of the current elderly will get more than they pay in. It is the payment of the young that makes up the difference. Medicare too is a government program from which the elderly benefit at the expense of the young.

The costs of occupational licensing also fall disproportionately on the young. Of course, that burden occurs in part because their elders already have their licenses. But more importantly, the barriers to entering many occupations have grown more expensive over the years.

Since I’ve written about the failures of higher education, the need for entitlement reform, and the downsides of licensing, I obviously have no reason to disagree with any of his suggestions.

But there’s something else that’s needed, especially when you contemplate the Pew data cited at the start of today’s column.

Supporters of free enterprise need to go after cronyism. And not just because the economy will perform better, but also because it’s morally offensive for people to line their pockets thanks to government coercion.

Indeed, half of the main message to young people (and everyone else) should be that honestly earned wealth is great, because that means (as Walter Williams sagely observed) someone accumulated lots of money by serving the needs of others.

And the other half of the main message is that it’s bad to have rich people who obtain loot with subsidies, handouts, protectionism, and other forms of cronyism.

P.S. Before giving up and wondering if young people are simply too stupid to vote, watch this video showing that young people reject socialism when they understand the implications.

Socialism Humor

Whether we’re looking at the technical definition of socialism (government ownership, central planning, and price controls) or the casual definition of socialism (punitive tax rates, welfare state, intervention), the ideology has a track record of failure.

That’s the bad news.

The good news is that it is easy to mock socialism.

And that’s the focus of today’s column.

We’re going to start with a cartoon strip that exposes the silly notion that government can give us “free” goodies.

Next we have Crazy Bernie telling us that “democratic socialism” is much better than Marx’s original version (he’s actually correct, but this image is still funny).

Our third item compares socialism in theory and socialism in reality.

We’ll close with my favorite item, though it applies to millennials as well as teenagers. Heck it applies to almost everyone who thinks there is some magic source of money for endless government-provided goodies.

Some of you may ask why I didn’t write “everyone” rather than “almost everyone”?

I included a qualifier because I think many leftists are guilty of well-meaning naivete. Basically they think like Chris Hayes of MSNBC, who infamously tweeted that we can afford bigger government because, “We’re a very rich country. We’ll figure it out.”

But some folks on the left actually do understand Thatcher was right, but they still push endless redistribution because they care more about short-run political power rather than the long-run interests of the nation.

Should the United Nations Decide that Low Taxes Are a Violation of Human Rights?

Professor James Buchanan won a Nobel Prize for developing the theory of “public choice,” which looks at how politicians, bureaucrats, and voters seek to maximize their self interest, generally in ways that lead to an ever-expanding burden of government.

Some people wonder why Buchanan’s analysis was prize-worthy when the unseemly nature of government has long been understood (as illustrated by the quote from Thomas Jefferson).

But it was a revelation for most academic economists, who – when they did policy analysis – naively assumed that people in government were motivated only by a desire to improve society.

I’m starting today’s column with this bit of background because I want to remind people that government has a natural tendency to expand. Often in an economically suicidal fashion, as we see from nations such as Greece and Venezuela.

Indeed, that’s the reason for my theorem on “Goldfish Government.”

But awful policy doesn’t have to be the outcome. The final part of the theorem says that bad results can be averted if there’s some sort of external constraint on rapacious government.

In the United States, our Founders gave us a Constitution that was explicitly designed to constrain the power of government. And it worked, at least up until FDR’s Supreme Court decided to put ideology above the law.

“Tax competition” is another constraint on government greed. This is the premise that the “stationary bandit” of government won’t tax and spend as much when politicians know that people and businesses can move across borders to escape bad policy.

And tax competition works. In recent decades, politicians have faced pressure to lower tax rates. Even for groups that they normally target, such as corporations and upper-income taxpayers.

Needless to say, politicians don’t like this development. Interest groups don’t like this development. International bureaucracies don’t like this development. And folks on the left don’t like this development.

Indeed, the non-profit groups on the left are vociferous opponents of tax competition, precisely because they understand it is a threat to their agenda.

I’ve previously written about the dodgy work of Oxfam. Today, let’s look at the agenda of Christian Aid (they obviously believe in Socialist Jesus rather than Libertarian Jesus).

Sorley McCaughey is with the Irish branch of that organization and he argues in the Irish Times that low taxes are a violation of human rights, as defined by the United Nations.

I’m not joking. Here are some excerpts from his column.

…the United Nations General Assembly adopted the Convention on the Rights of the Child. …Ratified by Ireland and more than 120 countries, signatory states are bound by the obligations within the treaty and compliance is assessed by the UN Committee on the Rights of the Child every five years. In a landmark decision earlier this month, the committee confirmed that their current review of Ireland will, for the first time, consider the country’s role in facilitating tax avoidance and whether it undermines the ability of developing countries to raise revenue and guarantee the rights of children. …The decision…has the potential to change the way tax competition between countries is assessed. …Justice demands a reorientation of tax policy that puts principles of international cooperation, equality and human rights – including those of children – at its core.

As you might expect, there are plenty of people in the United Nations who also are pushing an anti-tax competition agenda.

And it’s been going on for a while. Here are some excerpts from a 2016 story.

A United Nations human rights expert has urged the…UN secretary-general to make the elimination of tax havens a priority to ensure that corporations, billionaires and ‘kleptocrats’ pay their fair share of taxes. …American law professor Alfred de Zayas also urged Antonio Guterres…to call a world conference on phasing out the offshore havens. …De Zayas urged the General Assembly to draft a convention to outlaw tax havens worldwide.

And here are passages from another report that year.

Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights, and two members of the Human Rights Council Advisory Committee, Obiora Okafor and Jean Ziegler, stressed the importance of establishing a UN body designated specifically to target and eliminate tax heaven secrecy. …countries lose hundreds of billions of dollars every year…funds that could and should be used to fund public services such as health care, schools, housing, social security… “States must set uniform minimum taxation floors, to prevent individuals and business entities from shopping for the lowest possible tax rates,” experts stated.

The following year, in 2017, I took part in a meeting of the U.N.’s so-called Committee of Experts on International Cooperation in Tax Matters, as well as the Special Meeting of ECOSOC on International Cooperation in Tax Matters.

At the risk of understatement, it was an eye-opening experience as participant after participant discussed ways of extracting more money from the productive sector of the economy (very similar to what I observed when participating in conferences at the U.N. in 2012 and 2019).

And I’ve written over the years about various U.N. proposals for global taxes on financial transactions, energy, wealth, tobacco, air travel, and the Internet.

All of these proposals are based on the flawed theory that bigger government can promote development. And all of the proposals also are hypocritical since U.N. bureaucrats, like their counterparts at other international bureaucracies, are exempt from tax.

Maybe the moral of the story is that we should tighten belts at the United Nations rather than allow the bureaucrats to push policies that tighten the belts of people who actually pay taxes?

P.S. James Buchanan was the target of a despicable smear by a taxpayer-funded academic hack.

P.P.S. If it’s even possible, the work the United Nations does on poverty is even worse than its work on taxation.

Will Mississippi Join the No-Income-Tax Club?

When examining state public policy, big jurisdictions such as California, Texas, New York, and Florida get a lot of attention.

But what about Mississippi? It has mediocre scores for overall economic policy.

• It’s #29 according to the American Legislative Exchange Council.
• It’s #39 according to the Fraser Institute.
• It’s #35 according to Freedom in the 50 States.

And the Magnolia State also isn’t winning any prizes when looking specifically at tax policy.

• It’s #32 according to the Tax Foundation.
• It’s #22 for sales tax burden.
• It’s in the next-to-last quintile in my ranking of income tax systems.

But the state may be about to take a big step in the right direction.

The governor wants to get rid of his state’s progressive income tax and instead join the no-income-tax club.

The Associated Press reports on the proposal.

Mississippi Gov. Tate Reeves said Monday that the state should phase out its individual income tax by 2030 to attract new residents and businesses that could boost economic growth. …Mississippi’s population has grown slowly this year after declining in recent years. Florida, Texas and Tennessee, which do not have an individual income tax, have grown rapidly. “Let’s eliminate the income tax, which is one huge speed bump to long-term economic growth and recovery for Mississippi,” Reeves said.

Analyzing the proposal for the Tax Foundation, Katherine Loughead points out a big logistical challenge.

The income tax currently generates a big chunk of revenues for the state’s budget, so abolition of that levy will require serious spending restraint and/or offsetting tax increases.

Mississippi Governor Tate Reeves (R), in his budget proposal for fiscal year (FY) 2022, has announced his goal of phasing out the state’s income tax by 2030. Mississippi’s income tax currently has three marginal rates of 3 percent, 4 percent, and 5 percent. …Under legislation adopted in 2016, the first marginal rate is already being phased out. …Gov. Reeves’ proposal seeks to build upon the ongoing phaseout of the 3 percent rate by also eliminating the 4 percent rate within five years. Then, subject to revenue availability, the governor hopes to eliminate the 5 percent rate so that, by 2030, Mississippi will join the ranks of the states with no income tax. …Mississippi’s income tax generated nearly 43 percent of the state’s total tax collections in FY 2019, with nearly $1.9 billion coming from the individual income tax and $644 million from the corporate income tax. The state will need to see continued revenue gains over the next decade to phase out the income tax without increasing other taxes. …Even if full income tax repeal is out of reach, however, the state could certainly reduce tax liability, particularly for lower-income residents, by continuing to increase the amount of income that is exempt from taxation, eliminating the first two brackets so a single-rate tax remains, and then reducing the rate below 5 percent.

A flat tax would be a step in the right direction, but state lawmakers should be aggressive and push for total elimination of the income tax. Which probably means the state will need a TABOR-style spending cap to make the numbers work.

The bottom line is that Mississippi is a relatively poor state by American standards (roughly akin to the United Kingdom or New Zealand, for those who prefer international comparisons) and needs bold reforms to catch up to the rest of the nation.

Abolishing the income tax definitely would qualify as a big move. Revisiting the chart from above, which I created in 2018, abolishing the income tax would vault the state to the top quintile of tax policy.

P.S. I also modified the chart to show that Arizona will drop from the middle quintile to the bottom quintile because voters foolishly voted for a class-warfare tax hike earlier this month.

P.P.S. The last southern governor to propose total repeal of the income tax didn’t make any progress.

P.P.P.S. Even though the people of Mississippi are the least likely of any state to read my columns, I hope they soon enjoy the benefits of living in a no-income-tax jurisdiction.

P.P.P.P.S. There’s also a proposal to get rid of the Nebraska state income tax.

Happy Thanksgiving from America’s Hypocritical Politicians

I’m going to break tradition.

Normally, I use Thanksgiving as an opportunity to explain how the Pilgrims almost starved to death because they initially used a socialist system for farming, but then began to prosper once the colony shifted to a property rights-based approach (the same thing happened at the Jamestown settlement in Virginia as well).

If you want to learn about the failure of socialism in the early 1600s, watch this video from Reason, or these videos from John Stossel and Prager University.

Today’s topic, though, is about Thanksgiving hypocrisy by the political elite.

In his column for the Wall Street Journal, Jason Riley excoriates do-as-I-say-not-as-I-do politicians.

…politicians have always believed that they deserve special treatment, that the ordinary rules don’t apply to them. They have pushed for limits on school choice for the poor while sending their own children to private schools. They have advocated for gun control and defunding the police while being protected by armed security guards. …there could be as many as 50 million Thanksgiving travelers this year, only 10% less than in 2019. This is a form of mass civil disobedience like nothing the country has seen since the 1960s. Some of it is born of Covid fatigue, to be sure. But the endless parade of politicians flouting their own rules surely has also played a role. It began shortly after the spring lockdowns and if anything has become more commonplace, even farcical. …There’s a widespread assumption among liberal elites that the rest of us are incapable of calculating risks and taking necessary precautions to ride out the pandemic, and it’s insulting. …The decision of so many millions of Americans to buck public-health warnings, trust their common sense, and spend Thanksgiving with loved ones is a welcome indication that people may be tiring of all this condescension.

Meanwhile, NBC News reports on the two-faced actions of Mayor Michael Hancock of Denver.

Denver’s mayor is explaining himself and offering an apology after he traveled to Mississippi for Thanksgiving, though he had urged others to stay home if possible because of the coronavirus pandemic. …The mayor’s trip comes as officials in Colorado have warned about a steep increase in Covid-19 cases that threatens to stress the hospital system, and after warnings from the governor and others to keep Thanksgiving gatherings small and safe. …The station reported he traveled to Houston for the Mississippi trip, and that his account tweeted the guidance to stay home about 30 minutes before his flight.

Last but not least, Bill McGurn of the Wall Street Journal is not impressed with the hypocritical behavior of politicians, but he focuses on the big-picture lesson to be learned.

Californians live under some of the tightest Covid-19 restrictions in the nation. So when Gov. Gavin Newsom was recently caught without a mask at a crowded table for 12 at a posh Napa Valley eatery, he instantly became the poster boy for the “Do as I Say, Not as I Do” crowd. …No doubt Thanksgiving will bring fresh examples. While many citizens dutifully inform grandma there’s no room for her at the table because of new Covid-19 restrictions, someone inevitably will be caught enjoying the holiday with dozens of friends and second cousins… And it’s easy to mock these pols for their blatant hypocrisy when they are caught. But maybe the more important lesson to be learned here is that hypocrisy is guaranteed when we impose one-size-fits-all mandates that are rigid and unworkable.

Amen.

I wrote back in May about the two-faced behavior of politicians in the coronavirus era, and nothing has changed in the past six months.

They genuinely think that they should be exempt from all the nonsensical policies that they impose on everyone else.

They’re hypocrites on coronavirus. They’re hypocrites on education. They’re hypocrites on taxes. And they’re hypocrites on global warming.

A Genuine Quality-of-Life Achievement from the Trump Administration

Last year, I shared this video from the Competitive Enterprise Institute to help explain how government bureaucrats are making it harder for Americans to clean their plates, bowls, and silverware.

Washington’s dishwasher mandate is just one example of how red tape diminishes the quality of life.

Bureaucrats have concocted other ways of spreading misery and frustration.

• Inferior light bulbs
• Substandard toilets
• Inadequate washing machines
• Dribbling showers
• Dysfunctional gas cans

Call me crazy, but I don’t like spending extra time in the shower, flushing more than once, and risking self-immolation when I refill my lawnmower.

But there is a bit of good news. The Trump Administration wants to make it easier for us to clean up after dinner.

The Wall Street Journal’s editorial is a good summary of the issue.

For years American homes have been stuck with dishwashers that take forever and still don’t get the job done. A new Department of Energy rule…will help change that. …Regulations on energy and water usage—tightened in 2013 by the Obama Administration—mean that dishwashers now take at least two hours to complete a full wash cycle. Dishes may still emerge with pieces of last night’s lasagna baked on. …CEI petitioned the Energy Department to allow dishwashers that would reduce the average cycle to one hour from two, while also giving better performance. CEI argued that if the aim of the regulation was to conserve water and energy, it’s unlikely they achieved their purpose. People responded to poor dishwasher performance by pre-rinsing each dish before putting it through their washers, wasting more water… The revised DOE rule is…an example of how common-sense deregulation can deliver real benefits for the public.

And Sam Rutzick of Reason explains this latest development in the battle for clean dishes.

Trump’s Department of Energy finalized a rule establishing a new product class for residential dishwashers that will have a normal cycle time of up to one hour and that can use five gallons of water per cycle. Those rules effectively roll back an Obama-era rule limiting standard dishwashers to use no more than 3.1 gallons of water per cycle. That limit forced dishwasher companies to adjust their products’ cycle lengths. And the supposedly more efficient but less useful dishwashers have been a punchline…the average dishwasher cycle time has jumped from the one-hour cycle that was common a decade ago to more than two hours today. The tighter rules didn’t lead to energy savings for customers. …they actually increased water consumption by 63 billion gallons, as households would have to run their dishwashers multiple cycles, or pre-rinse their dishes by hand, in order to get dishes actually clean.

But Rutzick’s column contains a very important caveat.

Joe Biden may reverse this important bit of deregulation.

Unfortunately, the new rules may not last. While the incoming administration has been vague about which deregulatory efforts they intend to undo, they have spoken in favor of tightening environmental regulations—and the new dishwasher rules could be a casualty. If so, that’ll be bad news for consumers. 

For what it’s worth, while he embraced some very bad policies during the campaign, I don’t think Joe Biden is a Bernie Sanders-style nutjob.

But I fear environmentalism is an area where he will push policy significantly to the left.

So I’m not overly optimistic that we’ll have better dishwashers in the future.

The only good news is that Americans, every time they do the dishes, will have an irritating reminder that government is the problem rather than the solution.

P.S. Yes, I realize better dishwashers are not as important as better tax policy (or as important as worse trade policy), but I don’t think politicians should be undermining our quality of life.

Big Government Enables Big Corruption

Most readers care about economic developments and economic comparisons involving the United States.

Some readers also care about what’s happening in other major nations, such as China, Germany, Italy, France, Japan, and the United Kingdom.

Relatively few readers, by contrast, care about economic developments in nations with comparatively small economic footprints, such as Peru.

That’s understandable, but I want to cite Mary Anastasia O’Grady’s recent column in the Wall Street Journal because she focuses attention on the very important – and very unsavory – relationship between big government and corruption.

Her column is about political turmoil in Peru, but what she writes applies everywhere in the world.

…it’s hard to see how an electorate that so often votes for populism at the polls can extricate itself from the grasp of crooked politicians. The hard left’s solution, which is to rewrite the 1993 constitution and give the state a larger role in the economy, would make things worse. …Peruvians are frustrated. They have been told that by voting they can secure an honest government. But elected officials repeatedly turn out to be self-interested and corrupt. …Yet as fast as they throw the bums out and bring in new ones, more scandals arise. At the core of this dysfunction is a state with vast powers to redistribute wealth. …Even voters who say they want less corruption may find that change conflicts with their self-interest. The siren song of populism draws them to politicians who can hand out plenty of government jobs and other goodies in a world of weak institutional checks.

Amen.

I made the same point, for instance, in this 2009 video from the Center for Freedom and Prosperity. And I was focusing on the United States.

Simply stated, when politicians have more power over the allocation of a nation’s resources, the greater their incentive to abuse that power.

To be sure, it’s not a linear relationship.

A country’s political culture also matters. Some nation’s have developed very low levels of tolerance for corruption, so there’s not a strong relationship between corruption and the size of government.

As you can see from Transparency International’s Corruption Perceptions Index, the Nordic nations are among the countries that are especially good in this regard.

But nation’s from the developing world, including the perennial bottom-dweller Venezuela, tend to get poor scores.

The moral of the story is that it’s especially important to limit government (and therefore limit opportunities for corruption) in countries that don’t have high scores.

I’m including this data because Peru, unfortunately, is in the bottom half of nations.

Not a terrible score when compared to Venezuela, but weak compared to Chile.

That being said, I want to close with a dose of optimism about Peru.

Today’s final visual is a chart showing how economic freedom in the country dramatically increased starting in the mid-1980s when the “Washington Consensus” was ascendant. And, just as Prof. William Easterly found in his research, this eventually kick-started much better economic performance.

P.S. It is worrisome that Peruvian economic policy stopped improving beginning about 2005. And based on Ms. O’Grady’s column, it seems unlikely that policy will get better in the near future.

P.P.S. Chile remains (at least for now) the big economic success story of Latin America, though Panama deserves a bit of attention as well.

Fiscal Fights with Friends: A Value-Added Tax Would Worsen America’s Fiscal Problems

Public finance experts sometime differ in how to describe a value-added tax.

• Is it a hidden form of a national sales tax, imposed at each stage of the production process?
• Is it a hidden withholding tax on income, imposed at each stage of the production process?

Both answers are actually correct. The VAT is both a tax on consumption and a tax on income because – notwithstanding its other flaws – it has the right “tax base.”

In other words, like the flat tax, a VAT taxes all economic activity, but only one time (i.e., no double taxation of income that is saved and invested). And it usually has a single rate, which is another feature of a flat tax.

That’s why a VAT (in theory!) would be acceptable if it was used to finance the complete abolition of the income tax.

But that’s not a realistic option. Heck, it’s not even an unrealistic option.

Instead, many politicians in the United States want to keep the income tax and also impose a VAT so they can finance a bigger burden of government – which is exactly what’s been happening in Europe.

Unfortunately, they’re getting some support from the American Enterprise Institute. Alan Viard, a resident scholar at AEI, has a new column urging the adoption of a VAT.

Let’s review what he wrote and explain why he’s wrong.

The U.S. faces a large long-term imbalance between projected federal tax revenue and federal spending… To narrow the fiscal imbalance, we should follow the lead of 160 other countries by adopting a value-added tax (VAT), a consumption tax that is economically similar to a retail sales tax. …Adopting a VAT would significantly curb the debt buildup.

I’ve never been impressed with the argument that the U.S. should adopt a policy simply because other nations have done the same thing.

The United States is much richer than other countries in large part because we haven’t replicated their mistakes. So why start now?

But let’s deal with Viard’s assertion that a VAT would “significantly curb the debt buildup.”

I recently showed the opposite happened in Japan. They adopted a VAT (and have repeatedly increased the VAT rate), but debt has increased.

But I think the strongest evidence is from Europe since we have several additional decades of data. Those nations started imposing VATs in the late 1960s and they now all have very high VAT rates.

And what’s happened to debt?

Well, as you can see from the chart, big increases in the tax burden were matched by even bigger increases in government debt.

The moral of the story is that Milton Friedman was right when he warned 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.”

So why would Viard support a VAT when the evidence overwhelmingly shows that a big tax increase will worse a nation’s fiscal outlook?

He argues that a VAT would be the least-worst way to finance bigger government.

Although tax increases on the affluent place the burden on those with the most ability to pay, they impede long-run economic growth by penalizing saving and investment and distorting business decisions. The economic costs become larger as tax rates are pushed higher. …The VAT is more growth-friendly than high-income tax increases because it does not penalize saving and investment and poses fewer economic distortions.

He’s right that a VAT doesn’t do as much damage as class-warfare tax, but he’s wildly wrong to assert that it is “growth-friendly.”

Simply stated, a VAT will drive a further wedge between pre-tax income and post-tax consumption. That not only will discourage work. It also will discourage saving and investment.

The only positive thing to say is that a VAT doesn’t discourage those good things as much as some other types of tax increases.

But that’s sort of like saying that it’s better to lose your hand in an accident instead of losing your entire arm. Call me crazy, but I think the best outcome is to avoid the accident in the first place.

In other words, the bottom line is that we shouldn’t have any tax increase. Especially since 100 percent of America’s fiscal problem is the consequence of excessive government spending.

I’ll close by debunking the notion that a VAT is a simple tax.

As you can see from this European map, VATs can impose huge complexity burdens on businesses.

Yes, the map shows that some nations have relatively simple VATs, but American politicians already have shown with the income tax that they can’t resist turning a tax system into a Byzantine nightmare. Of course they would do the same with the VAT, creating special loopholes and penalties to please their donors.

P.S. Here’s my video from 2009, which explains how a VAT works and why it would be a bad idea.

Everything I said back then is even more true today.

P.P.S. The clinching argument is that one of America’s best presidents opposed a VAT and one of America’s worst presidents supported a VAT. That tells you everything you need to know.

P.P.P.S. You can enjoy some amusing – but also painfully accurate – cartoons about the VAT by clicking here, here, and here.

Student Loan Forgiveness = Redistribution from the Poor to the Rich

There’s a lot of speculation that we’re in the midst of a political realignment, with Democrats becoming the party of the rich and the Republicans becoming the party of the working class.

I don’t pretend to know whether this realignment is happening or what form it will take, but there is plenty of evidence that Democrats are focusing on policies that disproportionately benefit those with high incomes.

And those policies often are at the expense of ordinary people, which is an especially repugnant form of redistribution.

Their efforts to restore the state-and-local tax deduction are an obvious example, but they also favor other tax breaks that are utilized overwhelmingly by rich people.

They also favor big subsidies for higher education, which mostly benefit kids from well-to-do families (and well-paid college bureaucrats).

And now they want to provide another windfall for the college crowd.

Jonah Goldberg opines on this perverse form of redistribution in a column for the New York Post.

…a coalition of 236 progressive groups led by teachers unions called on Biden to cancel student debt on his first days in office. Biden himself has already urged Congress to cancel $10,000 as part of a pandemic relief package. Sens. Bernie Sanders and Elizabeth Warren have called for even greater debt forgiveness. Sanders’ plan would cost an estimated $1.6 trillion dollars. …Most Americans, especially most poor Americans, don’t have student debt, because most didn’t go to college in the first place. Moreover, most people who did go to college have no or very little student debt. …only 6 percent of borrowers owe more than $100,000. Virtually all of them borrowed so much because they attended graduate school. …do they deserve help more than truck drivers, mechanics or short-order cooks? One reason teachers unions — a huge source of donations and political organizing for the Democratic Party — want loan forgiveness is that teachers and administrators can boost their pay by going back to school to get advanced degrees. Other municipal and federal workers — another major constituency for Democrats — have similar rules. Using the pandemic as an excuse to reward workers who are far less likely to lose their jobs and more likely to find new employment if they do, seems awfully self-serving.

Writing last year for the Washington Examiner, Brad Polumbo argues for the principle of individual responsibility.

College is way too expensive, but nonetheless, most young people who are buried in student loans or struggling to pay off their debt only have themselves to blame. The average student is now graduating with $30,000 in debt…the median monthly payment is just $222. If you can’t afford that, as a college graduate, it’s probably your own fault. …If you chose to major in gender studies, French, or anything similarly impractical, it’s your own fault that you’re stuck with a lower starting salary and might struggle to make payments. That’s unfortunate, but it’s no justification for shirking your responsibility to pay back what you owe or asking taxpayers to bear the burden of your mistakes. …people who find themselves buried in hundreds of thousands in student loan debt have their own decisions to blame. …They chose expensive dream schools… To bail them out at taxpayer expense is to punish people who made responsible decisions and encourage recklessness from future generations. …to the millions of borrowers who’ve made terrible decisions, don’t ask for a bailout — it’s your own damn fault.

Some of you may be thinking that Polumbo’s argument made sense last year, but we’re now struggling with coronavirus-caused economic turmoil and perhaps debt forgiveness would help the economy.

But that’s not the case according to the number crunchers at the Committee for a Responsible Federal Budget. They show that loan forgiveness isn’t “stimulus” even if one uses discredited Keynesian analysis.

…loan forgiveness…is the not the equivalent of sending $1.5 trillion of cash to households. …because borrowers often pay back their loans over 10, 15, or even 30 years, debt cancellation will increase their available cash by only a fraction of the total loan forgiveness. …Not only would loan cancellation provide relatively little spendable cash to households, but the cash it does offer would be poorly targeted from a stimulus perspective. …The majority of those most affected by the current economic crisis likely have little or no student debt. Over 70 percent of current unemployed workers do not have a bachelor’s degree, including 43 percent who did not attend college at all. …Indeed, about two-fifths of all student debt is held by households with graduate degrees. 

So if loan forgiveness isn’t the answer, are there any desirable policies?

Mike Riggs, writing for Reason, explains we need less government rather than more government.

…subsidies have…driven up the cost of education at a rate multiple times higher than inflation. …The most libertarian policy preference in my view is two-pronged: get the federal government out of the lending and guaranteeing game, and make student loan debt reasonably dischargeable in bankruptcy. These two policies would realign the incentives of colleges, lenders, and students to bring down prices and saddle fewer potential students with loans they are unlikely to repay.

Amen.

I don’t like loan forgiveness, but I do sympathize with many indebted students because when Uncle Sam started dispensing grants and loans, colleges and universities responded with dramatic tuition increases and then used the money to create fat, waste, and inefficiency.

Let’s end this column with some satire.

First, the geniuses at Babylon Bee produced this gem, which could be based on Jonah Goldberg’s column.

One local plumbing contractor, Sam Caughorn, is really looking forward to paying the tab on his neighbor’s $89,000 gender studies degree. …According to studies, there are millions of white girls working at coffee shops across the country while struggling under the crushing student debt they acquired by irresponsibly obtaining college degrees that gave them no marketable job skills. Benevolent politicians have proposed transferring all the wealth from trade workers and minority business owners to help indebted white girls with their student loans so they can still afford their daily latte and cat food expenses. Local gender studies major Amber White is looking forward to having all her debt forgiven, thanks in part to the contributions of plumbers like Sam Caughorn. …According to sources, Sam Caughorn owns a successful business he started right after high school. He also has 5 kids, a nice house, and serves as a deacon at his church. “I guess I can spare some change for poor disadvantaged girls like Amber,” he said. 

Second, here’s a cartoon that could be based on the column I cited from Brad Polumbo.

P.S. The way federal intervention has screwed up higher education is very similar to the way federal intervention has also made the health sector expensive and inefficient.

Will Biden Resuscitate Obama’s Reprehensible “Operation Choke Point”?

Some policies will improve with Biden in the White House, most notably trade, but also government spending (not because Biden is good, but rather because Republicans will go back to pretending to be fiscally conservative).

But some policies will move in the wrong direction. Biden is awful on tax policy, for instance, though I expect Republicans in the Senate will block his class-warfare agenda.

Biden is also very bad on regulatory issues. Unfortunately, this is an area where the new President (and his appointees) will have plenty of authority to shift policy in the wrong direction.

I’m especially worried that Biden will resuscitate an Obama-era policy of strong-arming banks so they won’t do business with unpopular industries. This video, which I first shared back in 2016, explains this reprehensible policy.

Norbert Michel of the Heritage Foundation, in a column for Forbes, provides some additional background on the policy.

Choke Point consisted of bureaucrats in several independent federal agencies taking it upon themselves to shut legal businesses – such as payday lenders and firearms dealers – out of the banking system. Given the nature of the U.S. regulatory framework, this operation was easy to pull off. Officials at the Federal Deposit Insurance Corporation (FDIC), for instance, simply had to inform the banks they were overseeing that the government considered certain types of their customers “high risk.” The mere implication of a threat was enough to pressure banks into closing accounts, because no U.S. bank wants anything to do with extra audits or investigations from their regulator, much less additional operating restrictions or civil and criminal charges. Banks are incredibly sensitive to any type of pressure from federal regulators, and they know that the regulators have enormous discretion.

In a column for the Wall Street Journal earlier this year, Phil Gramm and Mike Solon elaborated on the left’s campaign to politicize the banking system.

Banking was used as a weapon against legal, solvent businesses by the Obama administration during Operation Choke Point, a program to deny the disfavored access to banking services. The Federal Deposit Insurance Corp. labeled certain businesses “high risk,” including firearms and ammunition dealers, check-cashers, payday lenders and fireworks vendors. Unelected regulators, not Congress or courts, marked these industries as “dirty business” and made it “unacceptable for an insured depository institution” to offer them banking services. …With Democrats unable to ban guns legislatively, Rep. Carolyn Maloney admonished banks at a recent hearing to not “finance gun slaughter.” When she urged JPMorgan to deny credit for legal firearm sales as other banks had done, the CEO responded, “We can certainly consider that. Yes.” At the same hearing, Rep. Rashida Tlaib challenged bank CEOs: “Will any of your banks make a commitment to phase out your investments in fossil fuels and dirty energy?” The CEOs declined to defend fossil fuels… Letting political intimidation dictate the availability of private credit endangers freedom and stifles productivity growth and job creation. …The use of political intimidation to allocate capital is an assault on economic efficiency and freedom.

There is, however, a bit of good news.

The Trump Administration ended Operation Choke Point back in 2017.

And, although it is happening at the last minute, the Trump Administration is now trying to strengthen the rule of law so banks won’t feel pressured to discriminate against certain industries in the future.

In a column published yesterday by the Wall Street Journal, Brian Brooks and Charles Calomiris of the Office of the Comptroller of the Currency (OCC) explain the new rule that their agency has unveiled.

…there have been too many allegations of banks cutting off vital services, credit and capital that legal businesses rely on to create jobs, meet community needs and support the economy. The Office of the Comptroller of the Currency, where we serve as acting comptroller and chief economist, respectively, on Friday proposed a rule to prevent banks from discriminating against legal businesses and individuals. The rule would require bankers to do what they do best: assess risk and underwrite credit decisions. …politically driven discrimination against particular industries has threatened fairness in banking. Under the Obama administration, Operation Choke Point, in which the OCC did not take part, involved regulators discouraging banks from serving legal and constitutionally protected businesses such as payday lenders and gun and ammunition sellers. …the Dodd-Frank Act of 2010 added to the OCC’s traditional mission of safety and soundness the obligation to ensure fair access to financial services… Banks may not exclude entire parts of the economy for reasons unrelated to objective, quantifiable risks specific to an individual customer.

Sadly, if Biden has the same attitude as Obama about the rule of law, a future OCC can reverse anything Trump’s people adopt.

I’ll close with a libertarian-minded observation.

Because I believe in freedom of association, I think banks should have the liberty to discriminate against specific businesses, or even entire industries.

But there’s a big difference between banks choosing to discriminate and being coerced into such behavior by government regulators.

So it was disgusting that Obama’s regulators went after industries they didn’t like, such as gun dealers.

But it would be equally reprehensible if a Republican Administration went after an industry it didn’t like, such as legal marijuana.

P.S. The broader lesson to learn from Operation Choke Point is that regulatory power for governments is a vehicle for corruption and malfeasance.

The Case for Capitalism, Part IV

Previous editions of the case for capitalism (Part I, Part II, and Part III) have focused on big-picture analyses of markets vs statism. Today, let’s look at a specific product that free enterprise has delivered.

Younger readers may take smartphones for granted, but I was born during the Eisenhower Administration and grew up with no Internet, no cell phones, and clunky government-sanctioned telephone monopolies.

So I’m still sometimes amazed at how quickly smartphones have evolved. As shown by this image, dozens of bulky products now exist in the a device not much bigger than a checkbook (younger readers may not even be familiar with those!).

In an article for the American Enterprise Institute, Bret Swanson explains what has happened.

“What would an iPhone have cost in 1991?” The purpose is to measure — at least in a rough way — the progress of technology by looking at the components and features integrated in smartphones owned by billions of people. In past years we’ve focused on the three most basic (and easily measurable) components: computation, digital storage, and communications bandwidth. This time, we will also look at another revolutionary facet of smartphones: their cameras. …The iPhone 12, unveiled last month, has three 12-megapixel cameras, which is 36 times the number of pixels of the original DCS 100. At $15,000 per megapixel, circa 1991, that’s $540,000 worth of photographic power in every smartphone. Of course, this most basic measure doesn’t begin to account for the radical improvements in image quality and a hundred other features that make today’s smartphone cameras far superior in many ways to the very best cameras of the past. …Building today’s iPhone in 1991 would thus have cost at least $51 million, with $540,000 worth of cameras thrown in for free.

Maybe I’m too much of a cheerleader for free enterprise, but it seems very impressive that people can now buy, for less than $1,000, something that would have cost $51 million less than 30 years ago.

Not to mention that you don’t need to hire someone to carry around dozens of pieces of equipment.

If you want to peruse the details, here’s Swanson’s chart.

And here’s a timeline showing the prices of phones starting in the 1980s.

Keep in mind, by the way, that a smartphone today is far, far superior to a cell phone in the past.

Now think about sectors of our economy run by the government (Postal Service, air traffic control, etc) or heavily regulated and controlled by government (health care, agriculture, etc).

Call me crazy, but I’ll pick capitalism. It’s an ethical system that delivers prosperity and reduces poverty,

Money Laundering Policy: Another Pointless and Costly Step by Uncle Sam

More than ten years ago, I narrated this video in hopes of convincing politicians and bureaucrats that anti-money laundering laws (and associated regulations) were a costly and intrusive failure.

Sadly, my efforts to bring sanity to so-called AML policy (sometimes known as know-your-customer rules, or KYC) have been just as much of a failure as my efforts to get a flat tax. Or my campaign for a spending cap.

I can’t event get my left-leaning friends to care about this issue, even though poor people are disproportionately harmed when governments impose AML mandates on financial institutions.

Worst of all, not only is AML policy not getting better, there are constant efforts to make it more onerous.

The most-recent example is a proposed regulation, which Andrea O’Sullivan discusses in an article for Reason.

…the Federal Reserve and Treasury Department have proposed expanding what is called the “travel rule” to capture international funds transfers above $250. Currently, financial institutions are required to make certain reports on customers when they send international transactions in excess of $3,000. This has been the threshold since the travel rule was first adopted in the U.S. in 1996… surveilled people are suspected of no crime, nor are they given any opportunity to opt out of this data collection. Still, the government preemptively requires that their transactions be tagged and tracked as if they had done something wrong. …it’s worrying that government agencies don’t even consider personal privacy when proposing new regulations. …By law, federal agencies must issue cost-benefit analyses that weigh the trade-offs of a proposed new rule to industry and society. The travel rule analysis only considers the costs that would be imposed on banks on regulators. The extreme cost to privacy for millions of Americans is not even an afterthought… America’s financial surveillance system…creates compliance and hacking risks for institutions that must store this data. And it doesn’t even work very well. Criminals are routinely able to get the finance they need despite this web of data tracking. Meanwhile, innocent people may have trouble making transactions or get caught in the hassle of some overzealous agent. It’s a big mess.

This is an absurd proposal. The odds of any criminal being caught by added red tape are trivially small. Yet the bureaucrats at the Federal Reserve and Treasury are pushing this new regulation because they don’t care about costs that are borne by others.

Ideally, the entire reporting regime should be scrapped. As an interim measure, the $3,000 figure should be adjusted for the inflation that’s occurred since 1996, which would push the reporting limit to about $5,000.

Since we’re on the topic of inflation and reporting requirements, Prof. Randall Holcombe wrote an article for the Foundation for Economic Education about the anti-privacy reporting rules for other financial transactions.

…the Currency and Foreign Transactions Reporting Act of 1970 requires that financial institutions must keep records of cash transactions summing to more than $10,000 in one day and report suspicious transactions to the federal government. …because the limit is stated as a dollar amount ($10,000), inflation lowers the real value of that limit year after year. Adjusting for inflation, $10,000 in 1970, when the Act was passed, would be $65,000 today. …it appears to me the Act violates the Fourth Amendment, which states in part, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”

Let’s close with a story in the Wall Street Journal that highlights how ordinary people are victimized by AML laws.

Mary Ann Liegey, a retired teacher in Manhasset, N.Y., was shocked in March when she received a letter from her local parish: “Your $20 check payable to St. Mary’s Church…was returned due to Frozen/Blocked Account.” The 75-year-old Ms. Liegey discovered that Citigroup Inc. had blocked her checking and trust accounts after she didn’t respond to a notice asking her for personal information to verify the accounts—part of the bank’s efforts to comply with government-mandated rules referred to as “know your customer,” or KYC. The rules are designed to make it harder for money launderers, terrorists and other criminals to finance illicit activities, hide funds or move dirty money around the globe. …The difficulty and complexity of these reviews are exacerbated by advances in technology that have fundamentally changed the ways people interact with banks. More customers are opening accounts or interacting through mobile apps rather than by walking into a branch and presenting physical identification.

Ms. Liegey isn’t the only victim.

There’s also Mr. Laderer.

Bill Laderer, who owns a landscaping business in Sea Cliff, N.Y., groused that Capital One Financial Corp. suddenly cut off his credit card because he hadn’t provided an employee identification number for his business, which has operated since 1941.

And Ms. Griffit.

Donna Griffit has had a Citigroup account for her California-based business, which helps startups craft pitches, for more than a decade. At the beginning of February, she got a letter saying the bank needed unspecified information from her by month’s end or her account could be closed. When she called the bank a few days later, no one could figure out what was needed, and the bank said it would get back to her, she recalled. She thought it was resolved. But in June, she discovered her account had been frozen.

I’ll close with this excerpt, which shows that all of us are actually victims because banks are spending lots of money to comply with AML/KYC laws.

Needless to say, those costs are passed along to customers.

…the average spending on KYC-related procedures for corporate and asset-manager clients by financial institutions with more than $10 billion in revenue grew to $150 million last year, with each having about 300 employees directly involved, up from just 68 a year prior.

What makes these laws so perverse is that they impose high costs on both individuals and businesses.

Yet they don’t reduce crime.

They don’t reduce terrorism.

They don’t stop drug dealers.

They don’t stop the mafia.

The bottom line is that you don’t help law enforcement by creating haystacks of data and then expect them to find needles.

Nonetheless, politicians support these laws because they can tell their constituents that they’re fighting bad people.

P.S. A recent aspect of AML/KYC laws is that there are proposals to ban cash (including the $100 bill).

P.P.S. In my campaign to be a global money launderer, I have one victory and one defeat.

P.P.P.S. Statists frequently demagogue against so-called tax havens for supposedly being hotbeds of dirty money, but take a look at this map put together by the Institute of Governance and you’ll find only one low-tax jurisdiction among the 28 nations listed.

P.P.P.P.S. You probably didn’t realize you could make a joke involving money laundering, but here’s one starring President Obama.

Is Gridlock a Good Outcome?

Most Republicans and Democrats have a self-interested view of divided government.

They obviously prefer if their party controls everything. After all, that’s how Republicans got tax reform in 2017 and it’s how Democrats got Obamacare in 2010.

But they also like gridlock if that’s the only way of stopping the other party from wielding all the power.

Which is why Democrats liked gridlock after the 2018 election (they won the House of Representatives) and Republicans are going to like gridlock after the 2020 election (assuming they hold the Senate).

But what about those of us who want more economic liberty? Is gridlock good or bad?

As a matter of political economy, gridlock is good because it is harder for politicians to do anything when there’s divided government. Indeed, America’s Founders created a “separation of powers” system precisely because they wanted “checks and balances” to limit the power of politicians.

That’s the theory.

So how has it worked in practice?

First, we can look at international evidence by comparing the United States and Europe. We know two things.

• European nations have a larger burden of government spending than the United States and generally have lower levels of economic liberty when compared to America.
• European nations have parliamentary systems of government (the party that controls the legislature, by definition, controls the entire government), which means no checks and balances that can produce gridlock.

It’s certainly possible – or even quite likely – that those two points are interconnected. In other words, government has expanded faster in Europe precisely because there was no effective way of slowing or blocking statist legislation (and, as we know from the Second Theorem of Government, it’s difficult to take away goodies once voters get used to dependency).

Second, we can look at domestic evidence by comparing what’s happened in recent decades when there’s been gridlock in Washington.

Professor Steve Hanke crunched the numbers a couple of years ago. Here’s the chart he prepared showing that we got the most spending restraint (shaded in green) when there was divided government.

Steve’s data is persuasive, but I think it’s even more instructive to focus on the next column, which shows changes in non-defense spending.

By this measure, the only good results (i.e., a falling burden of spending) occurred during the Reagan and Clinton years. Since I did a video on exactly this issue, I concur that we got good results during their presidencies.

But notice that we now see very bad numbers when there was divided government during the Eisenhower and Nixon years. And the numbers for the first President Bush moved further in the wrong direction.

The bottom line is that divided government can be good, but it may actually produce the worst-possible results when you combine weak-on-spending Republican presidents with profligate Democratic Congresses.

P.S. There’s strong evidence that gridock following the 2010 election produced better results for the nation.

P.P.S. Here’s my more advanced breakdown of what happened to government spending for every president since LBJ.

Is Japan a Role Model for the United States?

Japan is an interesting country to examine if you want insights about public policy.

• We can study the impact of population aging on fiscal outcomes.
• We can learn about the utter failure of Keynesian economics.
• We can understand why it’s a very bad idea to impose a value-added tax.
• We can find out that a higher tax burden is bad news.
• We can determine that higher spending is bad news.

Overall, I have a pessimistic view of Japan, but not because it has terrible policy by world standards (it’s currently ranked #20 for economic liberty).

Instead, my concern is that it is drifting in the wrong direction (it was ranked in the top 10 for economic freedom in the mid-1950s) and the country is dealing with grim demographics.

But not everyone shares my view. Indeed, some people even think Japan is a role model. Here are some excerpts from a column in the Japan Times by Jesper Koll of Wisdomtree Investments.

U.S. President-elect Joe Biden can learn a lot from Japan. …the overall result generated by the Japanese economic system is extremely positive. Japan is the global best-in-class for balancing both income growth and income distribution. …an economy must both grow and distribute the spoils of wealth creation in a fair and equitable way.

So why does Mr. Koll think Japan does a good job?

Mostly because of economic outcomes for lower-income people.

At the end of last year, the median net financial wealth — all financial assets minus liabilities — for households in Japan stood at $104,000. In the United States, it was $62,000. …Japan does have an underbelly of poor people, but compared to America, relatively few are truly left behind financially. …America has more than two times more very wealthy people than Japan, but it also has more than five times more poor people. …In the past eight years, the bottom 10% of income earners saw a $15,000 rise in earnings in Japan, from $17,000 to $32,0000. In contrast, their American counterparts got only $10,000 more income, from $18,000 to $28,000.

For what it’s worth, I’m a bit skeptical of whether the experiences of ethnically homogeneous Japan are directly applicable to an ethnically heterogeneous society such as the United States.

I also think it’s strange that Koll compares the last eight years, which mixes the stagnation of the Obama years with the somewhat better performance of the Trump years.

But it’s interesting that he concludes by observing that you help low-income people with tight labor markets rather than the kind of class-warfare tax policy that Biden has been advocating.

How did Japan successfully bring up the poor? Not by taxing the rich, but by…positive demographic dynamics…because the growing scarcity of labor is forcing steadfast improvement in the type of employment contracts offered, i.e., not just part-time, but full-time as well as solid pay increases at the bottom end of the employment attractiveness spectrum.

But what about Koll’s point about lower-income people being better off in Japan than in the United States?

On that issue, I’m very skeptical.

His article doesn’t include links to data sources, so I can’t comment on the accuracy of his numbers.

But here’s a chart that I first shared earlier this year, which I’ve augmented in red to highlight how the bottom 10 percent of people in the United States are at the same level of middle-income people in Japan.

Call me crazy, but the above data don’t suggest that the United States should copy Japan.

Or what about this chart, which I originally shared back in 2019. It shows that the bottom 20 percent of people in the United States are doing better than the average person in Japan (highlighted in red).

Once again, these numbers don’t lead me to think that America should be copying Japan.

I won’t bother with another chart, but I also invite readers to peruse the OECD’s AIC data, which shows the average person in the United States being way ahead of the average person in Japan.

The bottom line is that I’m all in favor of Joe Biden using other nations as role models. But I would go with Singapore before Japan. Or perhaps he could adopt an a la carte approach, picking the best of the best from around the world (Switzerland’s fiscal rule, Monaco’s tax system, Chile’s private pension regime, etc).

P.S. Japan only ranks in the middle third when looking at the societal capital of nations.

P.P.S. I used to assume that Japan had a competent government sector, stories like this and this have changed my perspective.

The Case Against Biden’s Class-Warfare Tax Policy, Part II

In Part I of this series, I expressed some optimism that Joe Biden would not aggressively push his class-warfare tax plan, particularly since Republicans almost certainly will wind up controlling the Senate.

But the main goal of that column was to explain that the internal revenue code already is heavily weighted against investors, entrepreneurs, business owners and other upper-income taxpayers.

And to underscore that point, I shared two charts from Brian Riedl’s chartbook to show that the “rich” are now paying a much larger share of the tax burden – notwithstanding the Reagan tax cuts, Bush tax cuts, and Trump tax cuts – than they were 40 years ago.

Not only that, but the United States has a tax system that is more “progressive” than all other developed nations (all of whom also impose heavy tax burdens on upper-income taxpayers, but differ from the United States in that they also pillage lower-income and middle-class residents).

In other words, Biden’s class-warfare tax plan is bad policy.

Today’s column, by contrast, will point out that his tax increases are impractical. Simply stated, they won’t collect much revenue because people change their behavior when incentives to earn and report income are altered.

This is especially true when looking at upper-income taxpayers who – compared to the rest of us – have much greater ability to change the timing, level, and composition of their income.

This helps to explain why rich people paid five times as much tax to the IRS during the 1980s when Reagan slashed the top tax rate from 70 percent to 28 percent.

When writing about this topic, I normally use the Laffer Curve to help people understand why simplistic assumptions about tax policy are wrong (that you can double tax revenue by doubling tax rates, for instance). And I point out that even folks way on the left, such as Paul Krugman, agree with this common-sense view (though it’s also worth noting that some people on the right discredit the concept by making silly assertions that “all tax cuts pay for themselves”).

But instead of showing the curve again, I want to go back to Brian Riedl’s chartbook and review his data on of revenue changes during the eight years of the Obama Administration.

It shows that Obama technically cut taxes by $822 billion (as further explained in the postscript, most of that occurred when some of the Bush tax cuts were made permanent by the “fiscal cliff” deal in 2012) and raised taxes by $1.32 trillion (most of that occurred as a result of the Obamacare legislation).

If we do the math, that means Obama imposed a cumulative net tax increase of about $510 billion during his eight years in office

But, if you look at the red bar on the chart, you’ll see that the government didn’t wind up with more money because of what the number crunchers refer to as “economic and technical reestimates.”

Indeed, those reestimates resulted in more than $3.1 trillion of lost revenue during the Obama years.

I don’t want the politicians and bureaucrats in Washington to have more tax revenue, but I obviously don’t like it when tax revenues shrink simply because the economy is stagnant and people have less taxable income.

Yet that’s precisely what we got during the Obama years.

To be sure, it would be inaccurate to assert that revenues declined solely because of Obama’s tax increase. There were many other bad policies that also contributed to taxable income falling short of projections.

Heck, maybe there was simply some bad luck as well.

But even if we add lots of caveats, the inescapable conclusion is that it’s not a good idea to adopt policies – such as class-warfare tax rates – that discourage people from earning and reporting taxable income.

The bottom line is that we should hope Biden’s proposed tax increases die a quick death.

P.S. The “fiscal cliff” was the term used to describe the scheduled expiration of the 2001 and 2003 Bush tax cuts. According to the way budget data is measured in Washington, extending some of those provisions counted as a tax cut even though the practical impact was to protect people from a tax increase.

P.P.S. Even though Biden absurdly asserted that paying higher taxes is “patriotic,” it’s worth pointing out that he engaged in very aggressive tax avoidance to protect his family’s money.

New Zealand’s Risky Wage-Rigging Gamble

I’m a big fan of New Zealand because the nation is a great example of how sweeping free-market reforms lead to very good results.

• The Kiwis got rid of all agriculture subsidies and farmers benefited.
• The Kiwis put the clamps on government spending, both in the 1990s and 2010s.
• The Kiwis used private property rights to rescue ocean fisheries.

Perhaps most impressive, New Zealand has very high levels of societal capital, ranking #1 in the new Global Index of Economic Mentality.

And the country also gets very high scores from Economic Freedom of the World and the Index of Economic Freedom.

But that doesn’t mean policy is perfect. The current Primer Minister already has demonstrated she has a very limited understanding of economics, and now she’s proving her lack of knowledge by imposing a version of “comparable worth.”

In a column for the New York Times, Anna Louie Sussman lavishes praise on this misguided scheme, which would give politicians and bureaucrats the power to decide that certain professions are systematically underpaid based on the share of female workers.

…a New Zealand law aimed at eliminating pay discrimination against women in female-dominated occupations…provides a road map for addressing the seemingly intractable gender pay gap. …Instead of “equal pay for equal work,” supporters of pay equity call for “equal pay for work of equal value,” or “comparable worth.” They ask us to consider whether a female-dominated occupation such as nursing home aide, for instance, is really so different from a male-dominated one, such as corrections officer… What is at stake is…a societywide reckoning with the value of “women’s work.” How much do we really think this work is worth? But also: How do we decide? …In effect, New Zealand is engaged in a countrywide effort to…fundamentally rethink the value of the work typically done by women. But where equal pay processes are relatively straightforward, pay equity, when done properly, challenges us to think deeply and objectively about a job and its components. …To negotiate the New Zealand social workers’ settlement, for instance, a working group composed of union officials, delegates from the Ministry of Children, social workers and employer representatives undertook a comprehensive assessment… Unions in New Zealand are currently pursuing over a dozen public sector claims, covering, among others, library assistants, clerical workers and customer-facing roles.

Ms. Sussman writes about an “intractable gender pay gap,” but the academic evidence suggests that this concept is nonsensical.

Simply stated, if women were systematically underpaid, investors and businesses would reap enormous profits by by setting up female-only firms to take advantage of pay differentials.

Heck, it’s worth noting that even a member of Obama’s Council of Economic Advisors refused to support similar arguments in the United States.

For what it’s worth, the New Zealand legislation mostly seems to be a back-door way to funnel more pay to bureaucrats.

New Zealand has, so far, been able to take the steps it has because the government pays for these wages. It’s not yet clear when, or whether, these efforts will work their way into the private sector. The vast majority of New Zealand’s businesses are small, with some 95 percent of firms employing fewer than 20 people. …proponents of pay equity say arguments about affordability miss the point. “Employers are not entitled to make even small profits on the backs of underpaid women,” said Linda Hill, a member of the Coalition for Equal Value, Equal Pay, a group of feminists who have worked in different fields on this issue for years. “Businesses that can’t pay fair wages aren’t viable businesses.”

Wow, Ms. Hill must be the New Zealand version of Hillary Clinton (who, when asked about the potential impact of the 1993 Hillarycare legislation, infamously and dismissively said that “I can’t be responsible for every undercapitalized entrepreneur in America”).

By the way, Ms. Sussman likes the idea of imposing comparable worth in the United States, which she explicitly acknowledges is the opposite of free markets.

In America, where state support for gender equality has never been less robust, pay equity’s financial obligation will likely fall on individuals. Are we willing to pay more, say, at the grocery store, or to the home health aides who look after our elderly? Are we willing to re-examine the assumptions embedded in what we have been told are “free markets” for labor?

The bottom line is that comparable worth is a form of government-imposed price controls, in this case dictating the price of labor.

And, as explained in videos from Marginal Revolution, Learn Liberty, and Russ Roberts, it’s a very bad idea to let politicians interfere with prices.

P.S. For those who want to fully understand the economics of “comparable worth,” read this superb report by one of my colleagues from grad school, Professor Deb Walker.

P.P.S. New Zealand was not included in the study I wrote about last week, so it’s unclear how much bureaucrats already are overpaid.

A Dismal Future for China?

China is a success if you consider how economic freedom increased after Mao’s death and hundreds of millions of people were lifted out of unimaginable poverty. But I explain in this interview that China is also a failure because the reforms were too limited and the country may now be drifting in the wrong direction.

All you really need to know is that China only ranks #124 in the Fraser Institute’s Economic Freedom of the World. To be sure its score is much higher than it was back in the 1970s, but it’s still way behind even nations such as Greece.

And China is paying a price for excessive government. This chart shows data on economic freedom and economic prosperity for Taiwan, South Korea, Japan, and China – and you can see how China’s growth isn’t so impressive when compared to the more market-oriented nations of East Asia.

I wrote way back in 2010 that Americans don’t need to fear the “Chinese Tiger, and it seems I’m not the only one to peruse the data and express skepticism about China’s economic outlook.

In an article for the Atlantic, Michael Schuman explains that China is unlikely to catch the United States.

Can China do better? Sure, it will almost certainly continue to gain wealth and influence. But to become No. 1, Beijing must overcome hurdles…the U.S. has retained a host of advantages that are often overlooked or underappreciated. …The total output of the U.S. economy was $20.5 trillion in 2018, significantly larger than China’s $13.6 trillion. Calculated on a per-person basis, the gap is even more glaring. …a much better comparison is of national wealth… By this metric, Americans remain significantly richer than the Chinese. In one estimate, U.S. household wealth was $106 trillion in mid-2019…compared with an estimated $64 trillion for China. …China is vulnerable to falling into the “middle-income trap.” That’s where many high-growth, emerging economies tend to end up: After reaching a comfortable level of income, they stall and struggle to leap into the ranks of the world’s most advanced economies… Only a small handful of developing nations, including South Korea and Singapore, have managed that jump in recent times. …China could get stuck in this snare. The heavy hand of the state in China’s economy—a source of envy for many U.S. policy makers—may be dragging it down. Bureaucrats direct bank loans, subsidies, and other resources to notoriously bloated and inefficient state-owned enterprises, loss-making “zombie” companies, and useless infrastructure projects, amassing a potentially destabilizing mountain of debt and killing off much-needed productivity gains.

In a column for the Wall Street Journal, former Secretary of State George Shultz opines on China’s challenges.

People are justifiably worried about China. It is wrecking Hong Kong… Xi Jinping’s statist economic strategy has returned to the Maoist model, putting private enterprise under the thumb of the Communist Party… China’s next 20 years are unlikely to repeat its past 20. Take the labor force. Growth in gross domestic product is a factor of a country’s labor-force and productivity growth. …But the labor force of Mr. Xi’s China is now declining… local governments and businesses are now swamped in contingent debts, often off-book. An example is high-speed rail. State-owned China Railway took on nearly $1 trillion in debt… we should recall…Ronald Reagan and Margaret Thatcher’s calls for markets and personal freedom as engines of human prosperity… Mr. Xi’s campaign to stamp out intellectual discourse in China has threatened…the country’s economic prospects.

In another piece for the Wall Street Journal‘s editorial page, Kevin Rudd (former Prime Minister of Australia) and Daniel Rosen also paint a less-than-optimistic picture of what’s happening in China.

Despite repeated commitments from Chinese authorities to open up and address the country’s overreliance on debt, the China Dashboard has observed delayed attempts and even backtracking on reforms. …An honest look at the forces behind China’s growth this year shows a doubling down on state-managed solutions, not real reform. State-owned entities, or SOEs, drove China’s investment-led recovery. In the first half of 2020, according to China’s National Bureau of Statistics, fixed-asset investment grew by 2.1% among SOEs and decreased by 7.3% in the private sector. …Perhaps the most significant demonstration of mistrust in markets is the “internal circulation” program first floated by President Xi Jinping in May. …expect more subsidies to producers and other government interventions, rather than measures that empower buyers. Dictating to markets and decreeing that consumption will rise aren’t the hallmarks of an advanced economy. …For years, the world has watched and waited for China to become more like a free-market economy…the multiple gauges of reform we have been monitoring through the China Dashboard point in the opposite direction. China’s economic norms are diverging from, rather than converging with, the West’s. …Though Beijing talks about “market allocation” efficiency, it isn’t guided by what mainstream economists would call market principles. The Chinese economy is instead a system of state capitalism in which the arbiter is an uncontestable political authority.

The most impressive evidence comes from an article in the Journal of Applied Corporate Finance.

Authored by Professor Michael Beckley from Tufts University, it’s a comprehensive explanation of why China is lagging.

China’s economy is big but inefficient. It produces vast output but at enormous expense. Chinese businesses suffer from chronically high production costs… The United States, by contrast, is big and efficient. American businesses are among the most productive in the world… China’s economy is barely keeping pace as the burden of propping up loss-making companies and feeding, policing, protecting, and cleaning up after one-fifth of humanity erodes China’s stocks of wealth. …To become an economic superpower, a country needs to amass a large stock of wealth—and to do that it must be big and efficient. It must not only mobilize vast inputs, but also produce significant output per unit of input. …How productive is China’s economy? Remarkably, nearly all of China’s economic growth since 2007 can be attributed to inputs: hiring workers and spending money. China’s productivity growth has not only been unspectacular; it has been virtually nonexistent.5 By contrast, productivity improvements have accounted for roughly 20% of U.S. economic growth over the past decade, as it has for most of the past 100 years.

Here’s some additional data on problems with China’s state-driven economic system.

China’s private sector is relatively efficient, but it is shackled to a bloated state sector that destroys nearly as much value as it creates. Private firms generate roughly two-thirds of China’s wealth and an estimated 80% of its innovations, but the Chinese government prioritizes political control over economic efficiency and thus funnels 80% of loans and subsidies to state-owned enterprises. As a result, state zombie firms are propped up while private companies are starved of capital. All told, more than one-third of China’s industrial capacity goes to waste and nearly two-thirds of China’s infrastructure projects cost more to build than they will ever generate in economic returns. Total losses from this waste are difficult to calculate, but the Chinese government estimates that it blew nearly $7 trillion on “ineffective investment” between 2009 and 2014. …At $40 trillion and counting, China’s debt is not only the largest ever recorded by a developing country, it has risen faster than any country’s, nearly quintupling in absolute size between 2007 and 2019. …the U.S. stock of human capital is several times greater than China’s. China has four times the population of the United States, but the average American worker generates seven times the output of the average Chinese worker. …China also loses 400,000 of its most highly educated workers every year to foreign countries in net terms, including thousands of scientists, engineers, and “inventors” (people that have registered at least one patent). The United States, by contrast, nets one million workers annually from all foreign countries, including roughly 20,000 inventors and 15,000 scientists and engineers, 5,000 of whom come from China. …The United States generates roughly 40% more wealth per unit of energy than China.

We’ll close with this chart from Professor Beckley’s article.

The bottom line is that China is not close to the United States. It’s not even catching up.

P.S. I want China to liberalize and prosper. That would be good for the people of China and it would be good for the world. I’m simply pointing out we won’t get that happy outcome if China persists is following bad ideas such as central planning and industrial policy.

P.P.S. Sadly, China will move further in the wrong direction if it takes awful fiscal advice from the International Monetary Fund or Organization for Economic Cooperation and Development.

P.P.P.S. If you want an example of sloppy and/or malignant media bias, check out how the New York Times tried to blame free markets for the failure of China’s government-run health system.

The Case Against Biden’s Class-Warfare Tax Policy, Part I

During the campaign, Joe Biden proposed a massive tax increase, far beyond what either Barack Obama or Hillary Clinton put forth when they ran for the White House.

Some people speculate that Biden isn’t actually that radical, and that his class-warfare agenda was simply a tactic to fend off Bernie Sanders, so it will be interesting to see how much of his political platform winds up as actual legislative proposals in 2021.

That being said, we can safely assume three things.

1. Biden will propose higher taxes.
2. Those tax increases will target upper-income taxpayers such as entrepreneurs, investors, and business owners.
3. Those tax increases will be a very bad idea.

The main argument that Biden and his supporters will use to justify such a plan is that “rich” taxpayers are not paying their fair share.

More specifically, we’ll be told that upper-income households are not pulling their weight thanks to the cumulative impact of the Reagan tax cuts, the Bush tax cuts, and the Trump tax cuts.

There’s just one problem with this argument. As shown by this multi-decade data from Brian Riedl’s chartbook, it’s wildly, completely, and utterly inaccurate. The richest 20 percent are now shouldering a much greater share of the tax burden.

Every other group, by contrast, is now paying a smaller share of the tax burden.

Some folks on the left assert that the above chart is misleading. They say the chart merely shows that the rich have been getting richer and everyone else is falling behind.

The solution, they argue, is to catch up with the rest of the world by making the tax system more “progressive.”

Their assertions about income trends are wrong, but let’s leave that for another day and focus on so-called progressivity.

Once again, Riedl’s chartbook is the go-to source. As shown in this chart, it turns out that rich people pay a higher share than their counterparts in every other developed nation.

Please notice, by the way, the additional explanation in the lower-left portion of the chart, The numbers displayed do not include the value-added taxes that are imposed by every other nation, which are regressive or proportional depending on the time horizon. This means that the overall American tax code is far more tilted against the rich than shown by this chart.

But the key point to understand, as I’ve noted before, is that difference between Europe and the United States is not the taxation of the rich. The real reason that America has the most progressive tax system is that European nations impose much heavier taxes on lower-income and middle-class taxpayers.

P.S. At the risk of stating the obvious, this is not desirable since class-warfare taxes generally cause the most economic damage on a per-dollar-collected basis.

P.P.S. It’s also worth remembering that higher tax rates on the rich don’t necessarily lead to higher tax revenues.

Ranking Societal Capital: USA Is #4, but the Long-Run Outlook Isn’t Encouraging

I’m a voracious consumer of publications that rank economic liberty and national competitiveness. Simply stated, these apples-to-apples rankings tell us which countries have policies that are friendly to growth (and thus the places that will enjoy rising living standards).

I’m also very interested in “societal capital,” which is the degree to which the people of a nation believe in values such as self reliance, work, individual initiative, and personal responsibility.

In some sense, societal capital may be more important for a nation’s long-run prosperity than how it scores in any particular index.

That’s because it’s probably just a matter of time before a country with low levels of societal capital winds up adopting bad policy.

That being said, other than occasional examples of cross-country polling data, I’ve never seen a good way of ranking nations based on societal capital.

But that’s now changed, thanks to a new report called the Global Index of Economic Mentality.

In an article for National Review, Professor Steve Hanke of Johns Hopkins University summarizes the key findings.

GIEM scores measure the public’s embrace of the idea of economic freedom. A high GIEM score indicates that citizens in a particular country support the idea that their government should not play a major role in directing or regulating economic activity or in redistributing income. Citizens of high-scoring countries typically back an institutional framework that prioritizes private initiative, free competition, and personal responsibility — in short, a system of free enterprise. …The GIEM study found that countries that embrace a free-market mentality have more efficient economic institutions and higher per capita GDP than those who support socialist, interventionist mentalities.

New Zealand is in first place and United States is in fourth place.

New Zealand comes out on top with the highest score on the inaugural Global Index of Economic Mentality, followed by the Czech Republic, Sweden, the United States, and Denmark. This year’s lowest scorer is Bosnia, preceded by Bangladesh, Myanmar, Montenegro, and Azerbaijan.

There’s some very bad news for Chile, which may explain why people in that nation just voted to potentially replace the constitution which has delivered unimaginable prosperity.

Rather surprisingly, Chile is the lowest GIEM scorer in Latin America, even a notch below Argentina, and 64th overall. These data suggest that while the Chicago Boys…accomplished innumerable free-market reforms — reforms that have led to a great improvement in prosperity and the second-highest GDP per capita of any country in South America — they have failed to convince the Chilean public of the benefits of the free-market system that has lifted them out of poverty.

And there’s bad news for the United States because young people have very worrisome views.

If we look at country-by-country demographics, there is not much difference between the economic mentality of those over 40 years old and under 40 years old for most countries. But there are notable exceptions. The countries with the most significant difference in economic mentality between the two age groups are the United States, New Zealand, and Australia. In these countries, the younger generations possess a significantly weaker attachment to free-market ideas than do older generations, with the U.S. as the most extreme case. It makes one wonder what brand of economics is being peddled in high schools and universities in the United States.

For what it’s worth, if only young people were counted, America would rank #14 rather than #4. Not horrible, but definitely a shift in the wrong direction.

Let’s close by looking at some data from a PowerPoint presentation about this new index.

First we have the methodology.

Second, here are the scores for the 74 nations.

Last but not least, here’s the U.S. score compared to the average score in other regions.

As you can see, Americans have very good attitudes about preferring markets and disliking redistribution, but we score quite poorly on the issue of personal responsibility.

P.S. I’m not surprised to see good scores for the Nordic nations, and it’s also good to see high scores for Georgia and Estonia, though I’m somewhat shocked that Switzerland is in the middle of the pack. But I’m not surprised to see poor scores for China and Italy.

State and Local Governments Should Not Get a Bailout – either from Congress or the Federal Reserve

For years, public finance experts have been warning about fiscally irresponsibility by state and local governments.

Many of those governments have been spending too much money and making overly expensive promises to interest groups such as government employees. Combined with the fact that these jurisdictions are driving away taxpayers, this leaves them vulnerable to potential crisis if the economy falters.

Which, of course, is exactly what happened with the coronavirus.

As is so often the case, Washington responded in an imprudent manner. As part of multi-trillion dollar emergency legislation (the CARES Act), Congress directly funneled hundreds of billions of dollars to state and local governments.

That legislation also gave the nation’s central bank, the Federal Reserve, the authority to steer money to those same governments.

Notwithstanding all this generosity, state and local politicians are now asking for even more money. In part, this is a fight over the provisions of a potential new “stimulus” bill from Congress.

But it’s also a battle over the fate of the Federal Reserve’s ability to interfere with the allocation of capital by directing money to state and local governments.

In a report for the New York Times, Jeanna Smialek and Alan Rappeport explain what’s happening.

A political fight is brewing over whether to extend critical programs that the Federal Reserve rolled out to help keep credit flowing to…municipalities amid the pandemic-induced recession. …Those programs expire on Dec. 31, and it is unclear whether the Trump administration will agree to extend them. The Federal Reserve chair, Jerome H. Powell, and Treasury secretary, Steven Mnuchin, must together decide whether they will continue the programs — including one that buys state and local bonds, another purchasing corporate debt and another that makes loans to small and medium-size businesses. …Mnuchin…has signaled that he would favor ending the one that buys municipal bonds. And he is under growing pressure from Republicans to allow all five of the Treasury-backed programs to sunset. …The financial terms for buying state and local debt…are not generous enough to compete in a market functioning well… Their main purpose has been to reassure investors that the central bank is there as a last-ditch option if conditions worsen.

However, economic conditions have dramatically improved since the coronavirus first hit, so there’s no longer any argument that financial markets are dealing with crisis conditions.

But that doesn’t seem to matter to politicians who want to subsidize bad fiscal policy at the state and local level.

Some Democrats had begun eyeing the municipal program as a backup option in the event that state and local government relief proved hard to pass through Congress. While the program’s terms are unattractive now, they could in theory be sweetened under a Biden administration Treasury Department. …If a coronavirus vaccine is rolled out in the coming weeks, the Treasury Department may be less inclined to extend the programs. Mr. Trump could also block a reauthorization by pressuring Mr. Mnuchin, leaving Mr. Biden with fewer economic stimulus tools at his disposal. …state and local governments are facing budget shortfalls, albeit smaller ones than some had initially projected.

Nick Timiraos reports on the issue for the Wall Street Journal.

Divisions over their future are being amplified by partisan gridlock in Congress over whether to provide more economic stimulus. Democrats, looking ahead to President-elect Joe Biden’s inauguration in January, see the programs as a potential tool to deliver more aid if Congress doesn’t act, while some Republicans are worried about relying on central bank lending powers as a substitute for congressional spending decisions. …A decision not to renew the programs…could also deprive some…governments of access to low-cost credit if market conditions worsen. …If the Trump administration decides not to extend the programs, Mr. Biden’s Treasury Department could determine whether to reactivate them in some fashion after the new administration takes office Jan. 20.

The bottom line is that a Biden Administration likely will be able to give states and localities a bailout, even if Congress doesn’t approve a new “stimulus,” and even if the Trump Administration doesn’t extend the Federal Reserve’s authority. But at least the incoming Biden people would have to jump through a few hoops.

Which is very unfortunate since it will reward the jurisdictions that behaved recklessly. A classic example of “moral hazard.”

I’ll close with this critical bit of data from Chris Edwards. As you can see, state and local governments actually have profited from the coronavirus since they got far more money from the CARES Act than they lost because of diminished tax revenue.

P.S. For what it’s worth, the Federal Reserve has always had the ability to steer money to state and local governments, both as part of normal monetary policy operation and because of its vast emergency powers. The good news is that it has not gone down that path.

And the best way to make sure it doesn’t go down that path in the future is to eliminate or restrict such powers. Private markets, which reflect the preferences of consumers, should determine the allocation of capital. We don’t want to copy the mistakes of China and have government making those choices.

Libertarianism in Three Pictures

While there’s still some ongoing election drama, it’s time to remind ourselves that politics is merely the means to an end. The goal of public policy should be to promote freedom and prosperity.

I don’t particularly care whether people call this agenda libertarianism, small-government conservatism, or classical liberalism.

Heck, call it Reaganism.

Whatever you call it, this philosophy is nicely captured by this image.

I mostly focus on the economic arguments for liberty.

But maybe this cartoon will make libertarianism more appealing to some people.

I was thinking about saving this final image for July 4, 2021, but I think it’s a nice reminder that Americans historically have had- and hopefully still have – a rebellious spirit.

This is why I periodically share stories about civil disobedience.

And I hope to come across many more examples, on issues ranging from red tape to gun control.

P.S. Many Americans try to avoid jury duty. If I knew I could be a juror on a case like this, I would relish the opportunity to practice jury nullification, which is a judicial version of civil disobedience.

Cross-Country Comparisons on the Relative Attractiveness of Government vs Private Employment

For those still fixated on last week’s election, my analysis can be found here, here, here, here, and here.

I’m now returning to my normal pattern of pontificating on public policy.

Today we’re going to look at which nations that make it more lucrative to be a bureaucrat rather than take a job in the productive sector of the economy.

I sort of wrote about this topic back in 2013 when I looked at cross-country data on the overall cost of bureaucrat salaries, as well as the number of bureaucrats as a share of the labor force.

But that’s hardly a perfect measure since it doesn’t tell us how much bureaucrats are compensated compared to workers in the private sector.

So I was very interested to see a fascinating report that investigates this issue from the European Data Journalism Network.

The first couple of charts in the report basically replicate the data I shared back in 2013, but then we get some data showing how much bureaucrats get paid compared to per-capita GDP in each country.

Here are some of the highlights (keep in mind that “liberal” in Europe actually refers to pro-market “classical liberals“).

…liberals are always complaining that there are too many employees in the public sector. So, from country to country, what is the scale of public employment in Europe? …by deploying a number of indicators it becomes possible to paint a fairly complete portrait of the situation. …To…better quantify public sector salaries, there are many indicators at our disposal. The first is provided by the ratio of public sector salaries to GDP per capita. This brings into relief the countries where public employees come out rather poorly compared to the rest of the population (notably in the Nordic countries and the UK) and the countries where public employees on the whole are better off (first and foremost the countries of southern Europe).

Here’s the relevant chart, which shows that it’s very lucrative to be a bureaucrat in Greece, Italy, and Spain, but it’s more lucrative to be in the private sector in Nordic nations.

I view this as more proof for my argument that the Nordic countries are much more market oriented than most people think.

But what about America?

The U.S.A. wasn’t mentioned in the EDJN report, but if you go to the French-language study that was the main source for the EDJN report, you’ll find that there is data for America.

As you can see from this graph, the United States (États-Unis) isn’t as bad as the Mediterranean nations of Southern Europe, but American bureaucrats definitely are overpaid compared to their counterparts in many other countries.

By the way, I have a video that specifically examines the American data and it has lots of supporting data on how government bureaucrats are overpaid.

It’s 10 years old, but more-recent data further confirms that bureaucrat compensation is excessive.

P.S. Even research from the International Monetary Fund finds negative results from too much bureaucracy.

P.P.S. Why are there negative results if bureaucrats are overpaid? For the simple reason that an economy’s output is a function of the quality and quantity of labor and capital. So it stands to reason that economic performance will suffer if excessive compensation lures people out of the productive sector and into the government workforce.

In 2021 and Beyond, Will the GOP be a Reagan Party or a Trump Party?

Even though my 2020 prediction for the presidential race was much more accurate than my 2016 prediction, I’m definitely a policy wonk rather than a political pundit.

That being said, I’m very interested in elections because voting patterns eventually can translate into policy changes.

And some of the voting patterns from Tuesday were rather surprising. For instance, I was shocked at the data that compared 2016 exit poll data with 2020 exit poll data and found that Trump got more votes in 2020 from every group other than white men.

And I was also shocked to learn that Trump did a much better job of attracting non-white votes than any other Republican candidate in recent history.

GOP share of non-white vote, presidential elections (%)

1952: 21
1956: 39
1960: 32
1964: 6
1968: 12
1972: 13
1976: 15
1980: 10
1984: 13
1988: 18
1992: 11
1996: 12
2000: 9
2004: 17
2008: 10
2012: 11
2016: 21
2020: 26 (preliminary)

— Adrian Gray (@adrian_gray) November 4, 2020

My pro-Trump friends tell me that this is evidence that a Trumpian approach is capable of attracting new voters, particularly minorities. Indeed, they tell me that Trumpism should be the model for all the politicians who may think about going for the Republican nomination in 2024.

So, as part of my post-election analysis (see here, here, here, and here), let’s explore whether the GOP will be (or should) a Trump party.

We’ll start with an article that Sean Trende authored for Real Clear Politics.

The Democratic playbook against Republicans had remained more or less the same since 1992. You could portray the GOP candidate as someone who wanted to gut Medicare and Social Security. Or, you could portray him as a closet theocrat. …Every major GOP candidate was vulnerable to at least one of these attacks, and usually both. As for Trump? Neither of those attacks landed. He famously opposed entitlement reform, and ran as a big-spending Republican. And the closet theocrat charge? Needless to say, that mantle is hard to hang on Trump. …there’s no going back for Republicans. …it is a “NeverTrump” delusion that the old GOP coalition is going to be resurrected. The political demand isn’t there, and whomever is nominated in 2024 will likely have an agenda that more closely resembles Trump’s than Mitt Romney’s. …The successful Republican candidates over the past 50 years have all had a cultural connection to what some jokingly call ’Murica.  …Reagan spoke the language of Middle America. To be sure, Donald Trump’s vulgarity contrasts sharply with Reagan’s class, and that has limited his opportunities for political success substantially, but he nevertheless connects with a group of voters.

Elaina Plott, in a piece for the New York Times, explains that the GOP is now a Trumpist party, even if that simply means being more willing to fight.

…for all the attention paid to what Trump represents in American politics, the most salient feature of his ascent within the Republican Party might be what he doesn’t represent. When Ronald Reagan overthrew the old order of the Republican Party in the 1980 election, he did so as the figurehead of a conservative movement… Trump’s takeover, by contrast, has been as one-dimensional as it has been total. In the space of one term, the president has co-opted virtually every power center in the Republican Party… But though he has disassembled much of the old order, he has built very little in its place. …That this is no longer Paul Ryan’s party is clear. What Trump has turned it into, though, is less so. …“The party right now is just Trump, right?” said one senior Senate G.O.P. aide. “So when you take him out of it, what do we have left?” …The difficulty with engineering a new paradigm that builds on Trump’s 2016 win is that the president himself is not especially committed to it. …the one thing that truly unified the Republican base in its support of Trump was a belief that he was a “fighter.” …the Republican base today is willing to bend more on policy in service of what it believes to be a more existential war.

Interestingly, even ardent anti-Trumpers seem to think Trump-style politics will outlast Trump.

In a column for the Chicago Tribune, Eric Zorn frets that post-Trump Trumpism will be very effective.

Trumpism — an unapologetically coarse, swaggering and nasty brand of politics — has been vindicated. Forget competence. Forget dignity. Forget class. Even forget policy (remember Trump’s health care plan that was always just two weeks away from unveiling?). Tribalism is king. Fear clobbers hope. Truth is optional. Character doesn’t count. The guardrails are down. …The GOP looks likely to hold the Senate, which means Republicans can put a brick on any legislation a President Joe Biden would want to pass. Trump has already given the GOP three U.S. Supreme Court justices and conservative control of the judicial branch of government for at least a generation… a Democratic President Biden, flailing impotently against a recalcitrant Republican Senate, would likely boost the GOP’s fortunes in the 2022 midterms and position the party well for the presidential race two years later. With Trump and his family safely on the sidelines, Republicans could nominate a candidate who inspires their base with shameless bluster and schoolyard insults, but who actually knows a thing or two about governing. Trumpism without Trump. An even more frightening thought in some ways than Trumpism with Trump.

Meanwhile, Jonathan Last of the never-Trumper Bulwark writes that there will be a battle for the GOP’s soul and that the Trumpists will prevail.

If Donald Trump loses, there is going to be a civil war inside the Republican party and the conservative movement. On one side will be the Trumpists, who believe all of white nationalism and authoritarian stuff. On the other side will be the Vichycons, who never liked Trump, but who went along with Trumpism because they were partisans… Here is how the civil war will play out. …After the inauguration, all three of these groups will join together to oppose anything and everything the Biden administration does and it will look like comity. …Once it becomes clear that Trump plans on being the one to choose the 2024 nominee, he’ll have a large base of support and the Republican party will be faced with the same decision matrix it had in mid-2016. …if Republican primary voters want more Trumpism, then the Republican party will continue down this path, no matter what the Vichycons say. The Vichycons will have the magazines and op-ed pages, and a handful of elected Republicans. The Trumpists will have an active former president of the United States, his family, Fox, …and a floor of probably 30 million voters. I know which side I would bet on.

Last but not least, in a must-read article for New Yorker, Nicholas Lemann writes about how Trump won in 2016, how he governed, and what will happen after he leaves.

…is there a future in Trumpism? …An ambitious Republican can’t ignore Trumpism. …But is it possible to address it without opening a Pandora’s box of virulent rage and racism? …The Republican Party has long had a significant nativist, isolationist element. In the Party’s collective memory, this faction was kept in check by “fusionism,” a grand entente between this element and the Party’s business establishment. …Trump…didn’t talk about the need for limited government or for balancing the federal budget. …He didn’t extoll free trade. He didn’t court the Koch brothers. He did not sign the no-new-tax pledge… Trump was opposed by more officials in his own Party (the Never Trumpers of their title) than any Presidential nominee in recent American history. …Trump’s key insight in 2016 was that the Republican establishment could be ignored, and his primary campaign pitched only to the Republican base, which no longer believed in the free-market gospel, if it ever had. …the difference between Trump as a candidate and Trump as the President goes back to fusionism. …appointees without previous connections to Trump but with deep connections to the Party’s libertarian wing have put in place an enhanced version of the standard Republican program. The result has been an odd mix of traditional Republican policies and Trumpian rhetorical flourishes. …As Trump has outsourced economic policy to the establishment, he has outsourced social policy to the evangelicals. …Steven Hayward, a well-connected conservative who has written the two-volume history “The Age of Reagan,” told me, “The biggest surprise about Trump is that he has turned out to govern as a conservative. …That raises the question of where the Republican Party will go after he leaves office. …there are three competing predictions about the future of the Party over the coming years. Let’s call them the Remnant, Restoration, and Reversal scenarios.

And here are those three camps, starting with the “Remnant” crowd, who are the heirs to Trumpism.

Could somebody else use the Trump playbook to win a Presidential election? Those who believe in the Remnant scenario think so. …The obvious candidate to carry out a high Trumpist strategy in 2024 would be Donald Trump, Jr… Several other potential Republican candidates, most notably Senators Tom Cotton, of Arkansas, and Josh Hawley, of Missouri, have demonstrated that they see Trump’s success as instructive.

Next we have the “Restoration” group, who want the GOP to be a Reagan-style party.

Under the Restoration scenario, …Republicans, as if waking from a bad dream, could recapture their essential identity for the past hundred years as the party of business. They could revive a Reagan-like optimistic rhetoric of freedom and enterprise… Many Never Trumpers would feel comfortable again in a Restorationist Republican Party. Restoration could entail a conventionally positioned Presidential candidate, such as Mike Pence… But the most discussed Restorationist candidate is Nikki Haley, the former governor of South Carolina and a former U.N. ambassador.

Then we have the “Reversal” folks, who want the GOP to be the anti-capitalism party.

The Reversal scenario, though perhaps the least plausible, is the most threatening to the Democratic Party. The parties would essentially switch the roles they have had for the past century: the Republicans would replace the Democrats as the party of the people, the one with a greater emphasis on progressive economic policies… today poorer districts are far more likely to vote Republican and richer districts are far more likely to vote Democratic. …People in this camp talk about the failures of “neoliberalism,” “financialization,” and “market fundamentalism,” and condemn “zombie Reaganism.” …The favored Presidential candidate for 2024 among the Reversalists is Senator Marco Rubio, of Florida.

Now for my two cents.

Since I prefer Reagan over Trump, that presumably puts me in the “Restoration” camp.

But I don’t think many people care what I prefer, so I’ll wrap up by giving my prediction of what will happen.

In the post-Trump environment, I think Republicans will revert to their normal behavior (i.e., the “Restoration” folks will prevail), but only if they absorb two Trump-style flourishes.

• From a stylistic perspective, I think the desire for “a fighter” is what many voters found appealing about Trump (as was mentioned above in Elaina Plott’s article from the New York Times). My guess is that a lot of Republicans will copy that aspect of Trump’s behavior, but obviously without the silly tweets and insults. I hope that means no tax-hiking budget deals.
• From a policy perspective, I think the biggest change will be less sympathy for trade and immigration. To the extent I have any influence with Republicans, I’ll try to convince them to at least protect and promote free trade with other democratic nations. And I’ll also remind them that high-skill immigration (such as the people we attract with the EB-5 program) is worth preserving.

So which Republican can best mix Reaganism with those two bits of Trumpism?

Beats me.

P.S. For what it’s worth (and I don’t think it’s worth much since it’s far too early), here’s some polling data on Republican preferences for the the 2024 nomination.

Keep in mind that this poll took place last year, when the economy was booming and voters presumably had a more positive view of President Trump. I suspect the Trump children would not do as well if the poll was repeated today.

P.P.S. My nightmare scenario is that GOP politicians decide the lesson of Trumpism is that they should copy his approach of being weak-kneed on the issue of genuine entitlement reform.

President Joe Biden Will Be Bad, but a President Kamala Harris Would Be Worse

Joe Biden has a very misguided economic agenda. I’m especially disturbed by his class-warfare tax agenda, which will be bad news for American workers and American competitiveness.

The good news, as I wrote earlier this year, is that he probably isn’t serious about some of his worst ideas.

Biden is a statist, but not overly ideological. His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party. The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

But what if Joe Biden’s health deteriorates and Kamala Harris – sooner or later – winds up in charge?

That’s rather troubling since her agenda was far to the left of Biden’s when they were competing for the Democratic nomination.

And it doesn’t appear that being Biden’s choice for Vice President has led her to moderate her views. Consider this campaign ad, where she openly asserted that “equitable treatment means we all end up at the same place.”

The notion that we should strive for equality of outcomes rather than equality of opportunity is horrifying.

For all intents and purposes, Harris has embraced a harsh version of redistributionism where everyone above average is punished and everyone below average is rewarded.

This goes way beyond a safety net and it’s definitely a recipe for economic misery since people on both sides of the equation have less incentive to be productive.

I’m not the only one to be taken aback by Harris’ dogmatic leftism.

Robby Soave, writing for Reason, is very critical of her radical outlook.

Harris gives voice to a leftist-progressive narrative about the importance of equity—equal outcomes—rather than mere equality before the law. …Harris contrasted equal treatment—all people getting the same thing—with equitable treatment, which means “we all end up at the same place.” …This may seem like a trivial difference, but when it comes to public policy, the difference matters. A government should be obligated to treat all citizens equally, giving them the same access to civil rights and liberties like voting, marriage, religious freedom, and gun ownership. …A mandate to foster equity, though, would give the government power to violate these rights in order to achieve identical social results for all people. 

And, in a column for National Review, Brad Polumbo expresses similar reservations about her views.

Whether she embraces the label “socialist” or not, Harris’s stated agenda and Senate record both reveal her to be positioned a long way to the left on matters of economic policy. From health care to the environment to housing, Harris thinks the answer to almost every problem we face is simply more government and more taxpayer money — raising taxes and further indebting future generations in the process. …Harris…supports an astounding $40 trillion in new spending over the next decade. In a sign of just how far left the Democratic Party has shifted on economics, Harris backs more than 20 times as much spending as Hillary Clinton proposed in 2016. …And this is not just a matter of spending. During her failed presidential campaign, Harris supported a federal-government takeover of health care… The senator jumped on the “Green New Deal” bandwagon as well. She co-sponsored the Green New Deal resolution in the Senate that called for a “new national, social, industrial, and economic mobilization on a scale not seen since World War II and the New Deal era.” …she supports enacting price controls on housing across the country. …The left-wing group Progressive Punch analyzed Harris’s voting record and found that she is the fourth-most liberal senator, more liberal even than Massachusetts senator Elizabeth Warren. Similarly, the nonpartisan organization GovTrack.us deemed Harris the furthest-left member of the Senate for the 2019 legislative year. (Spoiler alert: If your voting record is to the left of Bernie Sanders, you might be a socialist.)

To be fair, Harris is simply a politician, so we have no idea what she really believes. Her hard-left agenda might simply be her way of appealing to Democratic voters, much as Republicans who run for president suddenly decide they support big tax cuts and sweeping tax reform.

But whether she’s sincere or insincere, it’s troubling that she actually says it’s the role of government to make sure we all “end up at the same place.”

Let’s close with a video clip from Milton Friedman. At the risk of understatement, he has a different perspective than Ms. Harris.

Since we highlighted Harris’ key quote, let’s also highlight the key quote from Friedman.

Amen.

P.S. It appears Republicans will hold the Senate, which presumably (hopefully?) means that any radical proposals would be dead on arrival, regardless of whether they’re proposed by Biden or Harris.

P.P.S. Harris may win the prize for the most economically illiterate proposal of the 2020 campaign.

A Victory for Biden, a Defeat for the Left

The day after the election, I wrote that “left-wing goals are now very unlikely” because Republicans almost certainly will retain control of the Senate.

But perhaps I should have been ever bolder and argued that the election was a rejection of the left-wing agenda.

An editorial from the Wall Street Journal points out that voters did not vote for bigger government or more statism.

…the closer we inspect the nationwide election returns, the more the result looks like a defeat…for the progressive agenda. …Democrats lost seats in the House, giving up some of the suburban gains they made in 2018 while continuing to struggle in rural areas. …A GOP Senate may compromise with Mr. Biden around centrist ideas, but the aggressive House agenda of the last two years would die again. This result is all the more remarkable given that Democrats had nearly all of the media, Silicon Valley billionaires, and all of the leading cultural figures and institutions helping them. …The lack of coattails was also evident in the states, where Democrats spent heavily to flip legislatures. …The GOP flipped both legislative bodies in New Hampshire, despite Mr. Trump’s loss in the Granite State, and Republicans protected their advantage nearly everywhere else. …There was no blue wave, and certainly no mandate for progressive change. …in their considerable wisdom, the voters may have elected Mr. Biden but they left his party and its radical ideas behind.

Some readers may think that the Wall Street Journal‘s editors are engaging in spin. In other words, because of their pro-market views, they’re trying to make it seem like a defeat wasn’t really a defeat.

But what about Helaine Olen, a reliably left-wing columnist for the Washington Post, who reached the same conclusion when opining about election results from California.

Proposition 22 — which would allow gig-economy companies such as Uber, Lyft and DoorDash to continue treating drivers as independent contractors — passed handily. On the other hand, Proposition 16, which would have restored affirmative action to California’s public college and university admissions, has gone down in defeat. …Let’s take Proposition 22. Activists have been unhappy with the tech giants of the sharing economy for years, pointing out repeatedly that they are using venture capital to subsidize an unprofitable industry and that, moreover, they offer almost nothing in either the way of labor or consumer protection. The entire business model is designed to get around government regulations. …Voters did not appear particularly concerned that allowing a major employer to override state regulation and effectively set its own working conditions is a terrible precedent — not when a few extra dollars per ride was at stake. When it came down to worker welfare vs. short-term convenience and financial gain, it wasn’t even a contest. …Proposition 16…supporters roundly outspent opponents and hoped the increased attention to issues of systemic racial inequities in the wake of the killing of George Floyd would help them garner support. …The biggest obstacle might have been the traditional antipathy toward affirmative action reasserting itself — a survey last year found that 3 out of 4 Americans opposed using race or ethnicity as a factor in college admissions.

And the New York Times isn’t exactly a bastion of right-wing thinking, yet an article by Thomas Fuller, Shawn Hubler, Tim Arango and Conor Dougherty also acknowledges that the election results were not great for the left.

…the nation’s most populous state put up mammoth numbers for the Democrats. But dig a little deeper into the results and a more complex picture of the Golden State voter emerges, of strong libertarian impulses and resistance to some quintessentially liberal ideas. In a series of referendums, voters in California rejected affirmative action, decisively shot down an expansion of rent control and eviscerated a law that gives greater labor protections for ride-share and delivery drivers, a measure that had the strong backing of labor unions. A measure that would have raised taxes on commercial landlords to raise billions for a state that sorely needs revenue also seemed on track for defeat. …said Bob Shrum, a former Democratic strategist…“California is a very liberal state that is now resistant to higher taxes.” …For all their liberal leanings on issues like the environment, California voters have long been less welcoming to new taxes… Proposition 15, would have removed the Proposition 13 tax limits on commercial properties like office buildings and industrial parks, continuing to shield homeowners while raising an estimated $6.5 billion to $11.5 billion a year for public schools and local governments. The measure was trailing on Thursday.. More than $100 million was also spent on another hot-button measure, rent control. Polls showed that the housing crisis was the No. 1 concern for state voters… And yet voters up and down the state resoundingly rejected efforts to expand tenants’ rights and rent control. …What do voters think about voting for Democrats and at the same time not supporting Democratic-led initiatives? José Legaspi, a Los Angeles resident…voted for Mr. Biden and did not think twice about opposing the measure that would raise taxes on commercial properties. “I truly believe in paying taxes,” he said. “However there is a point at which one should limit how much more in taxes one should personally pay.”

The bottom line is that Joe Biden won the White House (barring some dramatic and unexpected developments), but not because of his statist agenda.

It’s more accurate to say that voters wanted to end the sturm and drang of Trump, but without embracing bigger government.

P.S. I’m not going to pretend that voters are rabid libertarians who are clamoring for my preferred policies (such as shutting down departments, genuine entitlement reform, etc). But I also think that it’s safe to say that they don’t want the left’s agenda (class warfare, Medicare for all, green new deal, etc) of bigger government and more dependency.