A Wide-Ranging Interview Covering Everything from the Gold Standard to the Value-Added Tax

The Free Market Mojo site asked me a number of interesting questions about public policy. I’m not sure all of my answers were interesting, but here are some snippets that capture my curmudgeonly outlook.

I think it’s important to divide the topic into two issues, the policies that cause short-run fluctuations and the policies that impact long-run growth. Generally speaking, I try to avoid guessing games about what is happening today and tomorrow (or even yesterday), and instead focus on the policies that will boost the economy’s underlying productive capacity. …the Fed’s easy-money policy was a mistake. If the central bank had behaved appropriately, we presumably would not have suffered a financial crisis and recession. And if we go back in history, we find the Fed’s fingerprints whenever there is an economic meltdown. …I would not want the government to impose a gold standard. Competitive markets should determine the form of money and/or what backs up that money. Perhaps gold would emerge in such a competitive system, but a gold standard should not be imposed. …I don’t trust politicians. They would pass a bill to impose a VAT while simultaneously phasing out the income tax over a five-year period. But inevitably there would be some sort of “emergency” in year three and the income tax would be “temporarily” extended. When the dust settled, temporary would become permanent and we would be a decrepit European-style welfare state. …There are many great economists, but for my line of work, Milton Friedman has to be at the top of the list. He had an incredible ability to explain the benefits of liberty and the costs of statism in a way that reached average people.

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Lifestyles of the Rich and Shameless

The gilded nobility otherwise known as politicians get lavish compensation packages, particularly when fringe benefits are part of the equation. But that doesn’t include their first class travel to exotic overseas locations. And even that doesn’t count the walking-around money they get – sometimes as much as $300 per day. But they’re supposed to actually spend their “per diem” money, not keep it, and this has gotten some of them in trouble. Here’s an excerpt from a Wall Street Journal report on the issue.

Congressional investigators are questioning a half-dozen lawmakers for possibly misspending government funds meant to pay for overseas travel, according to people familiar with the matter. …Congressional rules say the daily travel funds, called a per diem, must be spent on meals, cabs and other travel expenses. But when lawmakers travel, many of their meals and expenses are picked up by other people, such as foreign government officials or U.S. ambassadors. That can leave lawmakers with leftover money. Lawmakers routinely keep the extra funds or spend it on gifts, shopping or to cover their spouses’ travel expenses, according to dozens of current and former lawmakers. The cash payments vary according to the cost of living and range from about $25 a day in Kabul to more than $250 a day in one part of Japan. Lawmakers also usually request and receive an additional $50 a day. Leftover funds can add up to more than $1,000 a trip for longer visits to expensive regions. …The travel inquiry is the latest in a string of ethics investigations in the House that could hurt Democrats at the polls in November by undermining the party’s message that it has “drained the swamp” of ethics abuses in Washington. The House ethics committee is also pursuing high-profile cases against Democratic Reps. Charles Rangel of New York and Maxine Waters of California. Both lawmakers could face public proceedings in coming weeks that would be the congressional equivalent of a trial.

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Record Levels of Dependency Are Nothing to Celebrate

One of the big problems with statists is that they define compassion incorrectly. They think they are being compassionate when they take other people’s money and give it to somebody that they define as being less fortunate. But genuine compassion occurs when you spend your own money. Another problem is that they define compassion by the number of people getting handouts from the government. A truly compassionate person, however, should strive for a society where the less fortunate are able to climb the economic ladder and no longer are dependent on redistribution programs. So it is definitely bad news that a record number of people – one out of six – now are on the dole in some form or fashion. Part of this growth in dependency is due to the economic downturn, but USA Today also notes that politicians have expanded eligibility and lured more people into dependency.

Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand. More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That’s up at least 17% since the recession began in December 2007. …More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years. Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits. …Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. …As caseloads for all the programs have soared, so have costs. The federal price tag for Medicaid has jumped 36% in two years, to $273 billion. Jobless benefits have soared from $43 billion to $160 billion. The food stamps program has risen 80%, to $70 billion. Welfare is up 24%, to $22 billion. …The steady climb in safety-net program caseloads and costs has come as a result of two factors: The recession has boosted the number who qualify under existing rules. And the White House, Congress and states have expanded eligibility and benefits.

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