When Regulators Attack

No, that’s not the name of a new TV series. We should be so lucky. Instead, it’s a good description of the government’s approach to tobacco. Instead of letting adults make up their own minds about costs and benefits of risky choices (which includes most things in life, such as crossing a street and eating a cheeseburger), nanny-state officials have decided to investigate menthol-flavored cigarettes. And since the Food and Drug Administration has been given authority over the tobacco industry and since the FDA’s supposed purpose is to ensure drugs are “safe and effective,” that almost certainly means this latest campaign will lead to either further restrictions on free speech or outright bans. Here’s a blurb from the Wall Street Journal:

Congress last year added the tobacco industry to the FDA’s regulatory mix and today a panel of health experts making up the agency’s new Tobacco Products Scientific Advisory Committee is kicking off a two-day meeting. First on the agenda: how menthol flavoring in cigarettes affects smokers’ habits. Small wonder that menthol is getting early attention, says the New York Times, which notes menthol butts account for almost a third of the $70 billion U.S. cigarette market. After more meetings, the advisory panel will send recommendations to the FDA, which could eventually decide to ban menthol products or take steps to curtail their marketing.

One can only wonder how far down the slope we will slide. There already are attacks against fatty foods and sugary soft drinks. Both provide pleasure to many people, but that no longer means much in Washington. Will regulators, either at the FDA or elsewhere, eventually decide that anything linked to obesity must be regulated and/or taxed? And now that government is going to pick up the tab for an even larger share of health costs, how long before the politicians use obesity-related costs as a major justification for further efforts to control our private lives? Maybe some day we will have a Federal Health Police to enforce daily exercise mandates? I better stop now before I give them any ideas.

Read Full Post »

Talking about Overpaid Bureaucrats on CNBC

It’s only a two-minute clip, but Larry and I cover the key reasons why excessive government pay in bad for taxpayers and bad for the economy.

By contrast, Ben Stein has a video defending bureaucrats, but he never addresses whether they are overpaid or whether there are too many of them. His argument isn’t very focused, but he cleverly selects the handful of categories (cops, firefighters, etc) where government workers perform useful services, and wants us to have positive feelings for all bureaucrats. He also implies that the term “bureaucrat” is some sort of slur, which is a surprise to me. Anyhow, if this is the best the other side can do, I feel confident that they have no legitimate defense.

Read Full Post »

Excellent Video Channeling Bastiat

June 12 2020 Addendum: The original video from this post, as you will notice at the end of this column, is no longer on YouTube. So here is a similar video narrated by Professor Art Carden.

==================================

Tom Palmer of the Atlas Network has a very concise – yet quite devastating – video exposing the Keynesian fallacy that the destruction of wealth by calamities such as earthquakes or terrorism is good for economic growth. Tom cites the work of Bastiat, who sagely observed that, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” As you can see from the video, many who pontificate about economic matters today miss this essential insight:

I can’t resist the opportunity to also plug a couple of my own videos that touch on the same issues. Here’s one of Keynesian economics, one on the failure of Obama’s faux stimulus, and another on the policies that actually promote prosperity.

Read Full Post »

Taxpayers vs. Bureaucrats, Part XX

There’s been a bit of buzz about a recent story in Politico revealing a huge increase in the number of congressional staff receiving six-figure salaries.  Some of the details are eye-openers, including a 39 percent increase in the past four years in the number of staffers earning at least $163,358:

Nearly 2,000 House of Representatives staffers pulled down six-figure salaries in 2009, including 43 staffers who earned the maximum $172,500 — or more than three times the median U.S. household income. …But while these top earners are a small percentage of the overall congressional work force, their numbers are growing at a rapid rate under the Democratic Congress. The number of staffers earning within the upper 3 percent of House salaries — currently $163,358 or more — has increased by nearly 39 percent in the past four years, according to LegiStorm data. …“These are people who could be making a lot more money in the private sector, but they choose to work here,” said Pelosi spokesman Brendan Daly, who also makes $172,500. …There are approximately 10,000 House staffers, including district office workers, according to the chief administrative officer.

Even though I’m a former Hill staffer, I’m certainly not going to defend these salaries (especially since I was nowhere near the top of the pay structure!). But excessive pay is actually a secondary problem. The real issue is the explosion in the number of staff. The image below, taken from a 1993 congressional report, shows the increase in the number of staff for each member of the House of Representatives. This doesn’t include, incidentally, the increase in committee staff and the growth in auxiliary institutions such as the Congressional Budget Office (the folks who just told us that a giant new entitlement program would reduce red ink).

It’s a chicken-and-egg issue whether this bloated congressional staff structure is a result of bigger government, or whether it contributes to bigger government. In either case, it would be a good idea to go back to the number of staff — and size of government — we had in the past.

Read Full Post »

Great Moments in Government Waste and Stupidity

This Associated Press story really bolsters my confidence in the public sector. I can’t wait for geniuses like this to be in charge of determining what health care procedures are acceptable:

Fifteen phony products – including a gasoline-powered alarm clock – won a label from the government certifying them as energy efficient in a test of the federal “Energy Star” program. Investigators concluded the program is “vulnerable to fraud and abuse.” A report released Friday said government investigators tried to pass off 20 fake products as energy efficient, and only two were rejected. Three others didn’t get a response. The program run by the Energy Department and Environmental Protection Agency is supposed to identify energy-efficient products to help consumers. Tax credits and rebates serve as incentives to buy Energy Star products. But the General Accountability Office, Congress’ investigative arm, said Energy Star doesn’t verify claims made by manufacturers – which might explain the gasoline-powered alarm clock, not to mention a product billed as an air room cleaner that was actually a space heater with a feather duster and fly strips attached, and a computer monitor that won approval within 30 minutes of submission.

Read Full Post »

Amusing Cartoon on the Value-Added Tax

Saw this on Redstate yesterday. Funny, but it will be sad when it becomes reality.

Read Full Post »

Is America Becoming a Nation of Moochers?

This story from the Daily Caller about colleges helping kids sign up for food stamps, got me completely depressed. It’s not so much that this is indicative of a bloated, out-of-control government, though it is. It’s more that this symbolizes how the social capital of the nation is being eroded by the moocher mentality. Welfare should have social stigma, it should not be overly generous, and it should not be part of the federal government. As you can see from this excerpt, I’m batting 0-3:

About 20,000 people sign up for food stamps every day, and college students across the country are the newest demographic being encouraged to enlist. Portland State University devotes a page on its Web site to explaining the ease with which students can receive benefits, along with instructions on how to apply. The school says food stamps are not charity but rather a benefit all honest taxpaying citizens can afford. …Traditionally food stamps are for the working poor and single parents, but colleges are trying to make it as easy as possible for students to obtain federal assistance, no matter their socio-economic background. Oregon has a state-wide non-profit which includes a special focus on food stamps for students… The Grand Views, a college newspaper from Grand View University in Des Moines, Iowa, featured a story on students who apply for food stamps because they claim they don’t have time to hold down a job between classes and basketball practices. …Adam Sylvain, a sophomore at Virginia’s George Mason University, recounted a recent conversation with friends in his dorm room. “My roommate told me he applied for food stamps, and they told him he qualified for $200 a month in benefits,” Sylvain said. “He’s here on scholarship and he saves over $5,000 each summer in cash.” “A few of our other friends who were in the room also said if there were able to, they would get food stamps … They think that if they’re eligible it’s the government’s fault, so they might as well,” Sylvain said. …President Obama’s latest budget included $72.5 billion for food stamps — nearly double the amount from 2008. Approximately 38 million people, or 13 percent of the U.S. population is on food stamps. It’s a trend that seems on the rise — Salon recently reported on young, broke hipsters using federal assistance to buy high-end organic food. “I’m sort of a foodie, and I’m not going to do the ‘living off ramen’ thing,” one young man said, fondly remembering a recent meal he’d prepared of roasted rabbit with butter, tarragon and sweet potatoes. “I used to think that you could only get processed food and government cheese on food stamps, but it’s great that you can get anything.”

Read Full Post »

The Flat Tax: Good for America, Bad for Washington

America’s biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly and produced by the Center for Freedom and Prosperity, explains how a flat tax would work and why it would promote growth and fairness.

There are two big hurdles that must be overcome to achieve tax reform. The first obstacle is that the class-warfare crowd wants the tax code to penalize success with high tax rates. That issue is addressed in the video in a couple of ways. I explain that fairness should be defined as treating all people equally, and I also point out that upper-income taxpayers are far more likely to benefit from all the deductions, credits, exemptions, preferences, and other loopholes in the tax code. The second obstacle, which is more of an inside-the-beltway issue, is that the current tax system is very rewarding for the iron triangle of lobbyists, politicians, and bureaucrats (or maybe iron rectangle if we include the tax preparation industry). There are tens of thousands of people who make very generous salaries precisely because the tax code is a playground for corrupt deal making. A flat tax for these folks would be like kryptonite for Superman. But more than two dozen nations around the world have implemented a flat tax, so hope springs eternal.

Read Full Post »

The American People Describe Congress – both Funny and True

Someboy sent me a link to this American Thinker article, which includes the following word cloud of a Pew Research Center poll on the “One word that best describes your impression of Congress.” Enjoy.

Read Full Post »

Should Babies Born in America to Illegal Immigrants Get Automatic U.S. Citizenship?

George Will argues that the answer should be no. I’m not a lawyer, but I think he makes a compelling case regardless of how one feels about immigration in general or the specific issue of how to deal with illegals:

A simple reform…would bring the interpretation of the 14th Amendment into conformity with what the authors of its text intended, and with common sense, thereby removing an incentive for illegal immigration. To end the practice of “birthright citizenship,” all that is required is to correct the misinterpretation of that amendment’s first sentence: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside.” From these words has flowed the practice of conferring citizenship on children born here to illegal immigrants. A parent from a poor country, writes professor Lino Graglia of the University of Texas law school, “can hardly do more for a child than make him or her an American citizen, entitled to all the advantages of the American welfare state.” …If those who wrote and ratified the 14th Amendment had imagined laws restricting immigration — and had anticipated huge waves of illegal immigration — is it reasonable to presume they would have wanted to provide the reward of citizenship to the children of the violators of those laws? Surely not. …Congress has heard testimony estimating that more than two-thirds of all births in Los Angeles public hospitals, and more than half of all births in that city, and nearly 10 percent of all births in the nation in recent years, have been to mothers who are here illegally. Graglia seems to establish that there is no constitutional impediment to Congress ending the granting of birthright citizenship to those whose presence here is “not only without the government’s consent but in violation of its law.”

Read Full Post »

California May Do the Right Thing on Drugs for the Wrong Reason

There’s going to be a referendum on marijuana prohibition this November in the (not so) Golden State. The good news is that it is ahead in the polls. But the bad news is that this is not a reflection of libertarian sentiment. Instead, voters are sympathetic to the notion that pot could be a new source of tax revenue (which presumably means a smaller risk of other tax increases). The AP reports:

When California voters head to the polls in November, they will decide whether the state will make history again – this time by legalizing the recreational use of marijuana for adults. The state was the first to legalize medicinal marijuana use, with voters passing it in 1996. Since then, 14 states have followed California’s lead, even though marijuana remains illegal under federal law. “This is a watershed moment in the decades-long struggle to end failed marijuana prohibition in this country,” said Stephen Gutwillig, California director for the Drug Policy Alliance. “We really can’t overstate the significance of Californians being the first to have the opportunity to end this public policy disaster.” …The California secretary of state’s office certified the initiative for the general election ballot Wednesday after it was determined that supporters had gathered enough valid signatures. The initiative would allow those 21 years and older to possess up to one ounce of marijuana, enough to roll dozens of marijuana cigarettes. Residents also could grow their own crop of the plant in gardens measuring up to 25 square feet. The proposal would ban users from ingesting marijuana in public or smoking it while minors are present. It also would make it illegal to possess the drug on school grounds or drive while under its influence. Local governments would decide whether to permit and tax marijuana sales. Proponents of the measure say legalizing marijuana could save the state $200 million a year by reducing public safety costs. At the same time, it could generate tax revenue for local governments. A Field Poll taken in April found a slim majority of California voters supported legalizing and taxing marijuana to help bridge the state budget deficit.

Read Full Post »

Government Corruption Watch, Part II

Sleazy political behavior does not necessarily require a bag of money being handed to a politician in a deserted parking garage. Sometimes it is blatantly visible. A good example is the European version of “cap-and-trade” climate legislation. While the legislation produced lots of criminal activity, it also enabled big European companies to game the system, pocketing lots of unearned money thanks to their lobbying power. The House-passed version of the “cap-and-trade” bill in America makes many of the same mistakes, with favors to various campaign contributors and special interests. The Wall Street Journal editorial excerpted below is a good indication of the type of nonsense that will happen in the United States if the bill is approved by the Senate:

Democrats are promising to apply themselves to the task of imposing legislative curbs on carbon. So it’s a good time to see how a prototype cap-and-trade scheme, the European Union’s Emission Trading System, is faring. …Last week, spot trading on the ETS ground to a complete halt for three days after a scandal erupted over players gaming the system. In this case, the government of Hungary admitted to reselling “certified emission reduction” credits that companies had already relinquished, or “spent.” …This is just the latest in a string of embarrassments that have plagued the system almost from the beginning. European authorities admitted last year that in certain countries, 90% of the trading volume was taken up by value-added tax fraud. Sandbag, a British advocacy group, reported in February that metals firms ArcelorMittal, Salzgitter, U.S. Steel, and Corus were just a few of the companies that had been granted more emission permits than they needed. In ArcelorMittal’s case, according to Sandbag, those spare permits amounted to €202 million in asset value in 2008. Last year, Corus announced it was closing a steel plant in Britain and laying off 1,700 workers, for which the company reaped a windfall in carbon allowances. …the ETS is a cautionary tale in how quickly environmental policy engineering degrades into rent-seeking for the fortunate few.

Read Full Post »

Americans Will Pay More and Get Less, but at Least Castro Is Happy with Obamacare

I actually think this it is unfair to highlight Fidel Castro’s endorsement of Obamacare, but I’m in a grumpy mood because I’ve started a diet, so I’ll simply twist the knife a bit by noting that we probably could improve American healthcare by imposing Cuban-style rationing. I imagine many of our obesity-related health problems would disappear if we were limited to one pound of beef and 12 eggs per month. Ah, the joy of socialism! Solidarity in malnutrition. But I better stop lest I give Obama some new ideas. Here’s an excerpt from the AP report about Castro’s endorsement:

Cuban revolutionary leader Fidel Castro on Thursday declared passage of American health care reform “a miracle” and a major victory for Obama’s presidency, but couldn’t help chide the United States for taking so long to enact what communist Cuba achieved decades ago. “We consider health reform to have been an important battle and a success of his (Obama’s) government,” Castro wrote in an essay published in state media… “It is really incredible that 234 years after the Declaration of Independence … the government of that country has approved medical attention for the majority of its citizens, something that Cuba was able to do half a century ago,” Castro wrote.

Read Full Post »

Great Moments from the IRS

Everyone’s favorite bureaucracy really stepped in it recently, when they harassed a car wash owner for an upaid tax bill of (drumroll please) four cents. But since we’re talking about the Internal Revenue Service, the bureaucrats also tacked on an extra $200 to the bill – even though the owner had never been notified of any unpaid balance and even had a letter from the IRS stating that he was completely up to date with his obligations. The Sacramento Bee reports:

It was every businessperson’s nightmare. Arriving at Harv’s Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. “They were deadly serious, very aggressive, very condescending,” says Harv’s owner, Aaron Zeff. The really odd part of this: The letter that was hand-delivered to Zeff’s on-site manager showed the amount of money owed to the feds was … 4 cents. Inexplicably, penalties and taxes accruing on the debt – stemming from the 2006 tax year – were listed as $202.31, leaving Harv’s with an obligation of $202.35. Zeff…finds the situation a bit comical. “It’s hilarious,” he says, “that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities.” Now he’s trying to figure out how penalties and interest could climb so high on such a small debt. He says he’s never been told he owes any taxes or that he’s ever incurred any late-payment penalties in the four years he’s owned Harv’s. In fact, he provided us with an Oct. 22, 2009, letter from the IRS that states Harv’s “has filed all required returns and addressed any balances due.”

Read Full Post »

Taxpayers vs. Bureaucrats, Part XIX

Here’s a story to warm the hearts of struggling taxpayers around the nation. Washington, DC, is one of the few spots in the nation where income is climbing. According to the Wall Street Journal, “Personal income in 42 states fell in 2009, the Commerce Department said Thursday. Nevada’s 4.8% plunge was the steepest, as construction and tourism industries took a beating. Also hit hard: Wyoming, where incomes fell 3.9%. Incomes stayed flat in two states and rose in six and the District of Columbia.” Serfs in flyover country will also be delighted to learn that a new survey finds that a majority of America’s 10-richest communities are now suburbs of Washington, DC. To be fair, not all of the wealth in places such as Loudoun County is because of a bloated and overpaid bureaucracy. Some of it is because of the fat-cat lobbyists who work with the bureaucrats to funnel your tax dollars to special interest groups. I’m not sure if that will make you feel better, but here are the details from the Forbes survey:

…most Americans still aren’t ready to brag about their paychecks. Except, perhaps, in Loudoun County, Va., where median household incomes are higher than anywhere else in the country. This affluent suburb of Washington, D.C., where families take home a median $110,643 annually, tops our list of America’s 25 richest counties. …It’s not surprising that workers in Loudoun do well. The federal government generates a wealth of jobs, keeping unemployment in the D.C. metro area at a low 6.2% (the national average is still near 10%). The best-paid workers from D.C. take their money home to Loudoun, where jobs have grown 4% between the second quarter of 2007 and the second quarter of 2009… Like Loudoun, a number of the country’s wealthiest households are tightly concentrated in counties around the nation’s capital. Six of the richest counties lie on the outskirts of Washington: Fairfax County, Va., Arlington County, Va., Stafford County, Va., Prince William County, Va., Charles County, Md., and Alexandria City, Va.

Read Full Post »

Regardless of the Problem, the European Political Elite Thinks More Centralization and Bigger Government Is always the Answer

Greece is in trouble for a combination of reasons. Government spending is far too excessive, diverting resources from more efficient uses. The bureaucracy is too large and paid too much, resulting in a misallocation of labor. And tax rates are too high, further hindering the productive sector of the economy. Europe’s political class wants to bail out Greece’s profligate government. The official reason for a bailout, to protect the euro currency, makes no sense. After all, if Illinois or California default, that would not affect the strength (or lack thereof) of the dollar.

To understand what is really happening in Europe, it is always wise to look at what politicians are doing and ignore what they are saying. Political union is the religion of Europe’s political class, and they relentlessly use any excuse to centralize power in Brussels and strip away national sovereignty. Greece’s fiscal crisis is simply the latest excuse to move the goalposts. The Daily Telegraph reports that Germany and France are now conspiring to create an “economic government” for the European Union. Supposedly this entity would only have supervisory powers, but it is a virtual certainty that a European-wide tax will be the next step for the euro-centralizers.

Germany and France have [proposed] controversial plans to create an “economic government of the European Union” to police financial policy across the continent. They have put Herman Van Rompuy, the EU President, in charge of a special task force to examine “all options possible” to prevent another crisis like the one caused by the Greek meltdown. …The options he will consider include the creation of an “economic government” by the by the end of the year. “We commit to promote a strong co-ordination of economic policies in Europe,” said a draft text expected to be agreed by EU leaders last night. “We consider that the European Council should become the economic government of the EU and we propose to increase its role in economic surveillance and the definition of the EU’s growth strategy.” …Mr Van Rompuy, the former Prime Minister of Belgium, is an enthusiastic supporter of “la gouvernement économique” and last month upset many national capitals by trying impose “top down” economic targets. Angela Merkel, the German Chancellor, has called for the Lisbon Treaty to be amended in order to prevent any repetition of the current Greek crisis, which has threatened to tear apart the euro.

Read Full Post »

Tax Haven Policies Attract $Trillions of Job-Creating Investment to the U.S. Economy

I think it is very nice when left-wing groups help make the case for pro-market policies A recent example is a report from the Center for International Policy, which wants to demonize so-called tax havens, but their report shows that the United States is actually the biggest beneficiary of tax haven policies, with more than $2 trillion of non-resident deposits in American financial institutions (the Cayman Islands is in second place, with $1.55 trillion of deposits compared to $2.18 trillion in the U.S.). This augments a report from another left-wing group, which found that Delaware is the world’s best tax haven. In other words, America’s tax haven policies (sadly, only available to non-resident aliens) are enormously beneficial to U.S. financial markets, which means capital that boosts investment and job creation. It’s also worth noting that even non-U.S. tax havens benefit the American economy. As this Treasury Department chart illustrates, Caribbean banking centers have about $2 trillion invested in the U.S. economy. The left-wing groups would like to destroy tax competition and set up a global tax cartel, sort of an “OPEC for politicians,” but the numbers they report underscore how important it is for American policymakers to preserve the open flow of capital and why tax havens are great news for the U.S. economy. Which is exactly what we argued in our video on the Economic Case for Tax Havens.

Read Full Post »

Raising My Daughter Right

I got her this t-shirt at the New Hampshire Liberty Forum. Am I a doting father, or what?

Read Full Post »

Subsidized Viagra for Sex Offenders: A Fitting Conclusion to the Obamacare Nightmare

I don’t seem to be as depressed as everyone else about Obamacare, in part because our system is already so distorted and controlled by government that (this is my rough guess, to be sure) all we did was move from a system that is 68 percent run by government to a system that is 79 percent run by government. Nonetheless, any movement in the wrong direction is terrible. But there is one group that will celebrate the passage of the reconciliation portion of Obamacare. As noted by an Oklahoma newspaper, the Senate of the United States voted to kill an amendment that would deny subsidies for erectile dysfunction drugs for convicted child molesters, rapists, and other sex offenders.

The Senate on Wednesday killed a proposal by Sen. Tom Coburn to prevent convicted sex offenders from getting Viagra or similar prescriptions in the insurance markets to be established under the new health reform law. …Coburn, R-Muskogee, called the new health reform law “the greatest assault on liberty this country has ever had,” as he put Democrats in the position of voting down his proposal to prevent convicted child molesters, rapists and other sex offenders from getting federal drug coverage for erectile dysfunction drugs. The amendment was killed by a vote of 57-42. …”This amendment will prohibit prescriptions for recreational drugs for rapists and child molesters,” Coburn said. “Nobody can disagree with that … If this bill goes through without this amendment, your tax dollars are going to be paying for Viagra for child molesters. That’s what’s going to happen.”

Read Full Post »

Government Corruption Watch, Part I

I realize that the “Taxpayers vs. Bureaucrats” series is rather depressing, with only two tiny pieces of good news out of 18 installments, so I’m almost reluctant to unveil a new series. But odious and corrupt deal-making is a fundamental – and probably unavoidable – feature of government, and we need to shine a spotlight on the way government really works. This is especially important since the bigger the government, the more rampant the sleaze. Our first post in the series highlights a Wall Street Journal column exposing how one Congressman is funneling some of the loot from a new government monopoly to a campaign contributor:

President Obama and Congressional Democrats have been criticized for being antibusiness. But Washington is about to bestow a huge gift upon one particular type of business—the type that doesn’t pay taxes. Despite bipartisan opposition, this week the Democrats hope to use budget reconciliation in the Senate to ram through changes to the health-care bill the House passed on Sunday. Coming along for the legislative ride is a federal takeover of the student-loan market. …All such loans will now come directly from the U.S. Department of Education. …But while Democrats are eliminating a revenue stream at for-profit companies, they are simultaneously creating another one for a handful of favored nonprofit companies. Currently, for loans that the government makes directly to students, the Department of Education conducts competitive bidding and hires private companies to service the loans. But in the pending bill, several dozen nonprofit firms will be eligible to receive no-bid servicing contracts on up to 100,000 student accounts for each firm. Which nonprofit organizations will qualify? California’s ALL Student Loan looks to be a big winner, thanks to language written by Representative George Miller of California. ALL Student Loan may have helped its cause by retaining the services of Vincent Reusing, a lobbyist whom the Chronicle of Higher Education has described as a “personal friend” of Mr. Miller. …According to OpenSecrets.org, Mr. Reusing has contributed more than $80,000 to various Democratic campaigns, including Mr. Miller’s.

Read Full Post »

Taxpayers vs. Bureaucrats, Part XVIII

I thought it was an outrage when it was reported that the unfunded liability for state government pension plans was about $500 billion, or perhaps even $1 trillion. I’m not even sure what to say about this item. Writing in the Wall Street Journal, Andrew Biggs from the American Enterprise Institute estimates that the shortfall for overly-generous pensions for state government bureaucrats is about $3 trillion:

Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. …In a recent AEI working paper I’ve shown that the typical state employee public pension plan has only a 16% chance of solvency. More public pensions have a zero probability of solvency than have a probability in excess of 50%. When public pension assets fall short, taxpayers are legally obligated to make up the difference. The market value of this contingent liability exceeds $3 trillion.

Read Full Post »

Great Moments in Foreign Government

Or maybe this belongs in the “great moments in international bureaucracy” series since it relates to European Union law. Regardless, we have another sign of Europe’s fiscal nightmare. A court in the United Kingdom has given a big green light to welfare tourism by ruling that a foreign citizen can get handouts based on children living in another country.I realize, of course, that there is welfare tourism in the United States, but surely no state would give money for children living elsewhere (at least I hope). The Daily Express reports on the latest lunacy from the other side of the Atlantic:

A landmark ruling that allows jobless migrants to claim benefits in Britain for their children living in their home country sparked outrage last night. Critics warned the judgment could “open the door” to thousands of benefits tourists abusing generous payouts in Britain. In yesterday”s High Court ruling ” showing how EU law is taking precedence over the UK”s ” a Portuguese national living in Britain won a legal battle for child benefit for his two daughters in his home country despite no longer working and claiming incapacity benefit here. …three top judges blocked an appeal by HM Revenue and Customs to prove he was not eligible for the money. Lawyers for Mr Ruas argued EU rules allowed any worker from an EU country who was employed or who received “social assistance” to claim child benefits even if the child lives abroad. Matthew Elliott, chief executive of the TaxPayers” Alliance, said: “This opens the door to a huge bill for taxpayers which is utterly unjustified. “Now there are even greater incentives for people to come to Britain trying to take advantage of the benefits system. Time and again it seems these judgments go against the best interests of hard-pressed British taxpayers.”

Read Full Post »

My Big Fat Greek Budget

Since we’re already depressed by the enactment of Obamacare, we may as well wallow in misery by looking at some long-term budget numbers. The chart below, which is based on the Congressional Budget Office’s long-run estimates, shows that federal government spending will climb to 45 percent of GDP if we believe CBO’s more optimistic “baseline” estimate. If we prefer the less optimistic “alternative” estimate, the burden of federal government spending will climb to 67 percent of economic output. These dismal numbers are driven by two factors, an aging population and entitlement programs such as Medicare, Medicaid, and Social Security. For all intents and purposes, America is on a path to become a European-style welfare state.

If these numbers don’t depress you enough, here are a couple of additional observations to push you over the edge. These CBO estimates were produced last year, so they don’t count the cost of Obamacare. And as Michael Cannon repeatedly has observed, Obamacare will cost much more than the official estimates concocted by CBO. And speaking of estimates, the long-run numbers in the chart are almost certainly too optimistic since CBO’s methodology naively assumes that a rising burden of government will have no negative impact on the economy’s growth rate. Last but not least, the data above only measures federal spending. State and local government budgets will consume at least another 15 percent of GDP, so even using the optimistic baseline, total government spending will be about 60 percent of GDP, higher than every European nation, including France, Greece, and Sweden. And if we add state and local spending on top of the “alternative” baseline, then we’re in uncharted territory where perhaps Cuba and North Korea would be the most appropriate analogies.

So what do we do? There’s no sure-fire solution. Congressman Paul Ryan has a reform plan to reduce long-run federal spending to less than 20 percent of GDP. This “Roadmap” plan is excellent, though it is marred by the inclusion of a value-added tax. Bill Shipman of CarriageOaks Partners put forth a very interesting proposal in a Washington Times column to make the federal government rely on states for tax revenue. And I’ve been an avid proponent of tax competition as a strategy to curtail the greed of the political class since it is difficult to finance redistribution if labor and capital can escape to jurisdictions with better tax law. Any other suggestions?

Read Full Post »

Walter Williams Decimates Obamacare

Walter Williams correctly summarizes what it means to make healthcare a “right.”

And he also dusts off that quaint document, long forgotten in Washington, called the U.S. Constitution.

Read Full Post »

The Not-Safe-for-Work Version of Obamacare

Click at your own risk. I now know how to properly embed images, but this one requires additional action just in case any readers don’t like R-rated humor.

Read Full Post »

Great Moments in International Bureaucracy

Greece’s fiscal disarray is a visible manifestation of Europe’s future, but the most appropriate symbol of what’s wrong with the continent comes from Brussels, where there are three “presidents” fighting over the right to represent Europe at international gatherings. The contestants include the President of the European Commission, the President of the European Council, and the European Union President (which rotates every six months among different national leaders). While these three personalities fight over who gets to sit where and shake hands first, the real problem is that they all agree that government should be bigger, taxes should be higher, and power should be more centralized as part of the effort to create a superstate in Brussels. Inside this gilded cage, insulated from actual voters, Europe’s technocratic elite is content to enjoy a parasitical existence while the welfare states of member nations slowly but surely collapse and lead to social chaos. Here’s an excerpt from the UK-based Express about the fight between the the philosophical descendants of Louis XVI (or would Nero be a better analogy?):

Promises by EU leaders that the Lisbon Treaty would herald a new era of clarity have been shattered after attempts to settle a major internal power feud resulted in a typical Brussels fudge. Bureaucrats have decided to send not just one president and his entourage to global summits but a tax-draining three. Only four months after the fanfare of Herman Van Rompuy’s appointment as European Council president, his most jealous and powerful rival in Brussels has persuaded allies to allow him to muscle in too. José Manuel Barroso, president of the European Commission, has succeeded in his demands that he should also go to diplomatic summits, such as the G20, after insisting only he has the expertise to deal with specific policy matters. At certain summits there will even be a third representative – the leader of the country holding the EU’s rotating presidency. This seems to justify criticism that the Lisbon Treaty would add to the EU’s murky waters and not be a move towards transparency. …Since the Lisbon Treaty came into force at the end of last year, arguments have raged in Brussels over which department does what. Mr Van Rompuy, the former Belgian prime minister dismissed last month by Ukip MEP Nigel Farage as a “damp rag” and a “low-grade bank clerk”, is the permanent president of the European Council.

Read Full Post »

Taxpayers vs. Bureaucrats, Part XVII

Finally, some good news to report in the battle between the people pulling the wagon and those riding in the wagon. Ireland may be in a recession (caused in large part by misguided housing subsidies), but there are two things worth admiring about the Emerald Isle’s public policy. Many wonks already know about the first policy, the 12.5 percent corporate tax rate that helped transform Ireland from the “sick man of Europe.” But it seems that Irish policymakers are reading Chris Edwards, because the second admirable policy is that lawmakers actually cut civil service compensation by 13.5 percent. And these are real cuts, not the type of phony gimmick you find in Washington, where something is called a “cut” simply because it didn’t increase as fast as previously planned. A columnist writing in the UK-based Times wonders why Irish bureaucrats did not go nuts with public protests and speculates that maybe they actually understand that they have a sweetheart deal compared to their brethren in the productive sector of the economy:

Because of the budget deficit, shrinking economy and untenable level of national debt, all public service salaries will be cut by an average of 13.5 per cent, with immediate effect. The charges will appear on your payslip as “government levy”, and will apply to frontline public workers in health, education, transport and local services and also to MPs, Ministers of State and the Attorney-General. …Couldn’t happen, could it? Actually it has, and close to home. …public sector pay in the Republic has been cut. Not frozen, sharply cut. …although the payslips have been changed for many months now, the schools are open, the hospitals treat the sick, rubbish is collected and paper pushed around briskly enough in public organisations. Belts are tight all right and pips are squeaking; but the country whose public pay once led the EU league has not imploded into the chaos of suicidal strikes, unburied bodies, closed schools and garbage mountains, which the UK or France would expect as a matter of course if a government did any such thing. …Yet the pay cuts — I say again, 10 to 15 per cent cuts in pay, real and immediate holes in the family budget — have not caused the enraged citizenry to pull down the pillars of the temple around their own heads and everybody else’s. They just haven’t. Why? …unlike the self-righteous whiners who speak for British public service unions, middle-Ireland still knows that a secure and pensionable job is a privilege: that working in the public sector is not an altruistic gift to the nation, but a damn lucky break. I saw a spirited, self-mocking sketch performed by 12-year-olds in a village hall entertainment the other night about “Marty Matchmaker O’Donoghue, where every ould stocking will find an ould shoe”. The girl being advertised to the men is talked up by the matchmaker as having “a Government Job! A clerk at the council office — I tell ye, she’s a laying hen!” Friends confirm that it’s an old saying: “Marry a teacher or a nurse, you’ve got a laying hen.” It does not seem that way in boom times, but even in the UK it is becoming true.

Read Full Post »

Fulminating on CNBC: Obama’s Plan Is Centrist…on the French Political Spectrum

I don’t get to talk for the first three minutes, but I then kick the you-know-what out of Obama’s statist healthcare scheme.

Read Full Post »

Bureaucrats vs. Taxpayers, Part XVI

This topic seems very pedestrian since we just took another in a long series of steps in the wrong direction on health care, but the bloated civil service is a major reason why we are heading toward a Greece-style fiscal meltdown. This story from California is shocking. More than 30,000 teachers, including about 1,000 that are failures, yet over a 10-year period the school district was able to fire four teachers. No wonder California schools do such a bad job. Here’s the relevant part of an expose from LA Weekly:

Los Angeles Unified School District, with its 885 schools and 617,000 students, educates one in every 10 children in California. It also mirrors a troubled national system of teacher evaluations and job security… Recent articles in the Los Angeles Times have described teachers who draw full pay for years while they sit at home fighting allegations of sexual or physical misconduct. But the far larger problem in L.A. is one of “performance cases” — the teachers who cannot teach, yet cannot be fired. Their ranks are believed to be sizable — perhaps 1,000 teachers, responsible for 30,000 children. But in reality, nobody knows how many of LAUSD’s vast system of teachers fail to perform. Superintendent Ramon Cortines tells the Weekly he has a “solid” figure, but he won’t release it. In fact, almost all information about these teachers is kept secret. But the Weekly has found, in a five-month investigation, that principals and school district leaders have all but given up dismissing such teachers. In the past decade, LAUSD officials spent $3.5 million trying to fire just seven of the district’s 33,000 teachers for poor classroom performance — and only four were fired, during legal struggles that wore on, on average, for five years each. Two of the three others were paid large settlements, and one was reinstated. The average cost of each battle is $500,000. During our investigation, in which we obtained hundreds of documents using the California Public Records Act, we also discovered that 32 underperforming teachers were initially recommended for firing, but then secretly paid $50,000 by the district, on average, to leave without a fight.

Read Full Post »

What Now? Four Guiding Principles for Health Care

So where do we go from here now that Obama has succeeded in pushing through a corrupt and bloated healthcare bill?

Let’s start with some good news. This is not the end of the world. If this was 1920, Obamacare would be a paradigm-shifting expansion in the size and scope of Washington. But we do not have a free-market healthcare system today. Government already directly finances nearly one-half of all health expenditures, and the ostensibly private part of our healthcare system is immensely distorted by regulations and tax policy (particularly the exclusion of fringe benefits in the tax code).

We have deviated so far from a free market that only 12 percent of healthcare costs are paid for out-of-pocket by consumers. And health insurance, rather than being based on risk and protecting against catastrophic expenses, has morphed into a grossly inefficient form of pre-paid health care.

So what does this mean? The way to think of Obamacare is that we are shifting from a healthcare system 68 percent controlled/directed by government to one that (when all the bad policies are phased in) is 79 percent controlled/directed by government. Those numbers are just vague estimates, to be sure, but they underscore why Obamacare is just a continuation of a terrible trend, not a profound paradigm shift. Yes, it is very bad news. Yes, it will cost more than politicians claimed. Yes, it will reduce the quality of care. All those things are true, but we are going 79 mph in the wrong direction instead of 68 mph.

By the way, the 2008 elections did not make that much difference. Republicans often are just as bad as Democrats when it comes to feckless vote buying. Our healthcare system took a big step in the wrong direction with the passage of the Medicare prescription drug entitlement under Bush. This horrible piece of legislation had the support of almost all the congressional Republicans who were railing against Obamacare last night (where was John Boehner’s “Hell no” speech in 2003?). And Senator McCain’s healthcare plan would have expanded the role of government, so if he won (and then did one of his infamous “bipartisan” compromises) we probably would have wound up with a healthcare system 73 percent controlled/directed by government.

What matters now is our next steps. There is no magic formula, but we should be guided by these principles:

1. Promote genuine free market principles. The only way to fix healthcare is to restore the free market. That means going back to a system where people pay out-of-pocket for most healthcare and use insurance to protect against genuine risk and catastrophic expenses. The time has come to reduce the size and scope of government.

2. Say no to RINO-style compassionate conservatism. When Republicans do the wrong thing, they are usually motivated by political fear (“if we don’t pass a new prescription drug entitlement, the Democrats will accuse us of not caring about seniors”). This approach ultimately fails. The Democrats take power and have an easier time expanding the burden of government because Republicans have already done much of the work for them.

3. Change Medicare into a system based on personal health accounts and shift all means-tested spending to the states. Congressman Paul Ryan’s Roadmpap plan has some good components, but check out Michael Cannon’s work at Cato to get the details.

4. Adopt a flat tax. There are many reasons to implement real tax reform, but the flat tax is ideal from a healthcare perspective since it gets rid of the healthcare exclusion in the tax code as part of a shift to a tax system with low rates and no double taxation.

Read Full Post »