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Archive for October, 2010

Conservatives and libertarians supposedly agree with each other on economic issues, but disagree to some extent on social issues and foreign policy.

This is generally accurate. Principled conservatives (as opposed to the Bush/Rove variety) believe in limited government and free enterprise, so there is agreement on the economic side.

And there is disagreement on social issues, at least in terms of victimless crimes such as drugs, gambling and prostitution (though I actually think the disagreement could be bridged if libertarians went out of their way to explain that legalizing the aforementioned activities is not the same as personally approving of their abuse and if conservatives went out of their way to do a cost-benefit analysis to see whether criminalization makes matters worse rather than better).

But there may be a more fundamental difference between conservatives and libertarians (notice I said difference, which is not the same as disagreement). A column in yesterday’s Wall Street Journal looks at the Tea Party movement and uses survey data to conclude that the protests against big government are driven by moral concerns.

…the passion of the tea-party movement is, in fact, a moral passion. It can be summarized in one word: not liberty, but karma. The notion of karma comes with lots of new-age baggage, but it is an old and very conservative idea. It is the Sanskrit word for “deed” or “action,” and the law of karma says that for every action, there is an equal and morally commensurate reaction. Kindness, honesty and hard work will (eventually) bring good fortune; cruelty, deceit and laziness will (eventually) bring suffering. No divine intervention is required; it’s just a law of the universe, like gravity.

So what does this have to do with libertarians and conservatives? Well, according to this research, there are some big differences between the two groups.

Last year my colleagues and I placed a nearly identical statement on our research site, YourMorals.org: “Everyone should be free to do as they choose, so long as they don’t infringe upon the equal freedom of others.” Responses from 3,600 Americans showed that self-described libertarians agreed with the statement most strongly, but liberals were right behind them. Social conservatives, who, according to national polls, make up the bulk of the tea party, were more tepid in their endorsement. …In our survey for YourMorals.org, we asked Americans how much they agreed with a variety of statements about fairness and liberty, including this one: “Ideally, everyone in society would end up with roughly the same amount of money.” Liberals were evenly divided on it, but conservatives and libertarians firmly rejected it. On more karmic notions of fairness, however, conservatives and libertarians begin to split apart. Here’s a statement about the positive side of karma: “Employees who work the hardest should be paid the most.” Everyone agrees, but conservatives agree more enthusiastically than liberals and libertarians, whose responses were identical. And here’s a statement about the negative side of karma: “Whenever possible, a criminal should be made to suffer in the same way that his victim suffered.” Liberals reject this harsh notion, and libertarians mildly reject it. But conservatives are slightly positive about it. …Libertarians are closer to conservatives on two of the five main psychological “foundations” of morality that we study—concerns about care and fairness (as described above). But on the other three psychological foundations—group loyalty, respect for authority and spiritual sanctity—libertarians are indistinguishable from liberals and far apart from conservatives. …When you think about morality as a way of binding individuals together, it’s no wonder that libertarians (who prize individual liberty above all else) part company with conservatives. …The tea-party movement is a blend of libertarians and conservatives, but it is far from an equal blend, and it’s not clear how long it can stay blended. …The rank-and-file tea partiers think that liberals turned America upside down in the 1960s and 1970s, and they want to reverse many of those changes. …they want to live in a country in which hard work and personal responsibility pay off and laziness, cheating and irresponsibility bring people to ruin. Give them liberty, sure, but more than that: Give them karma.

This is all quite interesting, but I think it overstates the potential for disagreement between libertarians and conservatives. Unless I’m missing something, varying opinions on group loyalty, respect for authority, and spiritual sanctity shouldn’t be a hindrance to a coalition against subsidies, handouts, and bailouts.

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Here are a handful of the posters being used in the United Kingdom to fight the perversely-destructive proposal to increase tax rates on capital gains. (for an explanation of why the tax should be abolished, see here)

Which one is your favorite? I’m partial to the last one because of my interest in tax competition.

By the way, “CGT” is capital gains tax, and “Vince” and “Cable” refers to Vince Cable, one of the politicians pushing this punitive class-warfare scheme.

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Regular readers know I’m not a big fan of the Transportation Security Administration, though I confess I don’t know whether the inane policies are the result of dumb laws, foolish political appointees, or home-grown bureaucratic stupidity.

Regardless, I mock the TSA (here and here). I criticize their thuggish/overbearing approach (here, here, here, here, and here). And I highlight serious proposals to make the system better (here and here).

With my biases on the table, now I have a question. Can anyone tell me why you have to go through security after landing in the United States from overseas?

I’m not asking why you have to go through customs and immigration. I’m wondering what purpose it serves (other than more jobs for bureaucrats) to make people go through security when they already went through security before boarding a flight in another country.

I hope there’s a logical reason for this. Someone please tell me that this isn’t another example of government stupidity.

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Sean Penn for President? How about George Clooney? Or what would you think of President Ed Anser? (assuming he’s still alive)

Hollywood is filled with collectivists, probably because of a combination of guilt over immense wealth and a shallow desire to be trendy and chic.

Well, here’s a video of an actor campaigning for statist politicians. Do you think you could vote for him if he ran for office at some point in the future?

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I’m mystified that some conservatives and libertarians are sympathetic to the idea that Mitch Daniels, the governor of Indiana, might be a good candidate in 2012. The main challenge for our nation is the growing burden of government, so it seems that this would disqualify anybody who served as Budget Director for President George W. Bush.

It’s possible, to be sure, that Daniels didn’t want the no-bureaucrat-left-behind education bill, the corrupt farm bill, the pork-filled transporation bill, or any of the other big-spending bills that became law during the early years of the Bush Administration. But there certainly is no evidence that he used his position as Director of OMB to resist these terrible ideas. And he certainly hasn’t gone out of his way to disavow any of the fiscal excesses that occurred during his tenure.

Indeed, it’s quite likely that Governor Daniels is a supporter of big government, just like President Bush. Is there any other explanation that fits? And if you need any additional evidence, Daniels has indicated that he is open to a value-added tax (and energy taxes as well). A VAT would be a fiscal catastrophe for America, paving the way for European-style statism. Here’s an excerpt from Politico.

Indiana Gov. Mitch Daniels opened the door Thursday to supporting both a value added tax and a tariff on imported oil, bold proposals that could cause trouble for him with conservatives as he flirts with a long-shot bid for the presidency.  …The so-called VAT, common in European economies which have stagnated, is a toxic acronym to fiscally conservative activists… Daniels also suggested support for increasing gasoline taxes. …These comments come on the heels of a September profile in Newsweek, in which Daniels said tax increases might be necessary… Daniels has previously clashed with Norquist over the former’s refusal to sign the “No New Taxes” pledge. …In a brief interview after his speech, Daniels downplayed the significance of his comments. He stressed that he would support a VAT “under only the right circumstances,” reiterating his desire for it to be paired with a flat income tax.
Governor Daniels doubtlessly would defend himself by reiterating his “under only the right circumstances” line from the article, but there are no “right circumstances” for a VAT other than getting rid of he 16th Amendment and replacing it with something so airtight that even Justice Sotomayor would be unable to rule that an income tax is constitutional. Suffice to say that this is not what Daniels has in mind.
  

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It’s tempting to say Ronald Reagan is the best President of the past century, and I’ve certainly demonstrated my man-crush on the Gipper, but earlier today at the Mont Pelerin Society (it’s currently Friday night in Australia) I had the privilege of listening to Amity Shlaes of the Council on Foreign Relations make the case for Calvin Coolidge.

So I dug around online and found an article Amity wrote for Forbes, which highlights some of the attributes of “Silent Cal” that she mentioned in her speech. As you can see, she makes a persuasive case.

… the Coolidge style of government, which included much refraining, took great strength and yielded superior results. …Coolidge and Mellon tightened and pulled multiple times, eventually getting the top rate down to 25%, a level that hasn’t been seen since. Mellon argued that lower rates could actually bring in greater revenues because they removed disincentives to work. Government, he said, should operate like a railroad, charging a price for freight that “the traffic will bear.” Coolidge’s commitment to low taxes came from his concept of property rights. He viewed heavy taxation as the legalization of expropriation. “I want taxes to be less, that the people may have more,” he once said. In fact, Coolidge disapproved of any government intervention that eroded the bond of the contract. …More than once Coolidge vetoed what would later be called farm allotment–the government purchase of commodities to reduce supply and drive up prices. …Today our government has moved so far from Coolidge’s tenets that it’s difficult to imagine such policies being emulated.

But if you don’t want to believe Amity, here’s Coolidge in his own words. This video is historically significant since it is the first film (with sound) of an American President. The real value, however, is in the words that are being said.

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I’ve periodically put up gun control posters that have been very popular (here, here, here, here, and here). I’ve also posted amusing images of t-shirts and bumper stickers on gun control (here, here, and here). And I’ve posted three different videos on gun control (here, here, and here). If you liked those posts, you’ll really like this powerpoint presentation.

Firearms and the Second Amendment.

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I recently posted data showing how companies are sitting on lots of cash, presumably in part because the business climate is not conducive to investment and job creation. I also showed a cartoon that makes the same point in an amusing – yet insightful – manner.

Now let’s look at data from the Federal Reserve, showing the amount of “excess reserves” that banks are holding at the Fed. This is money that is available for loans, but financial institutions apparently don’t see many profitable opportunities to put that money to work. This is perhaps the biggest indictment of Obamanomics since banks exist to make money issuing loans.

Just as I warned in my previous post, there presumably are many factors that are causing banks to keep more reserves than necessary with the Fed. Having been burned during the financial crisis, banks probably would be more cautious, even if Obama was pursuing good policy. Nonetheless, it certainly seems like Obamanomics is just as much of a failure as Bushnomics – which makes sense since both mean bigger government and more intervention.

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My previous post looked at some Federal Reserve data and suggested some reasons why businesses are keeping money on the sidelines.

But there’s a famous line about how “a picture says a thousand words,” and this cartoon is a good example.

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There certainly are logical reasons to think that Obama’s policies are dampening economic growth. Investors and entrepreneurs have little reason to produce and take risks, after all, when they know the burden of government is going to climb. Especially when you add uncertainty to the mix.

Here’s a chart showing Federal Reserve data on the cash holdings of non-financial corporations. As you can see, there’s been a big jump in recent years. That’s certainly an indication that people are keeping money on the sidelines.

On the other hand, there’s been a long-term upward trend in the amount of cash companies are holding, so it’s a good idea to be cautious about drawing any sweeping conclusion from the recent jump. All we can say for sure is that bad policy reduces incentives for productive behavior. This is why bigger burdens of government are associated with slower growth.

And if there is a lot of very bad policy, a nation can suffer a lengthy period of stagnation or decline. Roosevelt and Hoover in the 1930s would be a good (or should we say bad?) example of this worst-case result.

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For the umpteenth time, a Washington Post columnist has a turgid piece urging the Republican Party to embrace big government. Normally this type of column is written by a graybeard establishmentarian like David Broder or E.J. Dionne, but Ruth Marcus has decided to play the I-wonder-if-my-enemies-are-so-stupid-that-they’ll-accept-my-suggestion-to-commit-suicide game.

Marcus bases her argument on the fact that David Cameron and the U.K. Conservative Party are raising taxes and (supposedly) slashing spending. I have no idea whether Marcus is being deliberately dishonest, but I’ve already posted the unvarnished data showing U.K. government spending will rise by about twice the rate of inflation this year. If that’s a 25 percent cut, then I play centerfield for the New York Yankees.

Marcus is right about the Tory love affair with higher taxes. Indeed, her poorly researched column doesn’t go far enough. She failed to point out that Cameron is leaving in place the new 50 percent top tax rate, even though it almost certainly will result in less tax revenue.

To put it simply, Ruth Marcus wants Republicans to be like the Tories. But I’m guessing that she wants this result because it means bigger government under the guise of fiscal responsibility.

If Republicans had any brains (always a risky assumption), they will ignore this pre-scripted suicide note and actually do their jobs by saying no to higher taxes and saying yes (finally!) to real spending restaint.

I endured the Ruth Marcus column and it was paintful, so I don’t suggest you go through the trouble of reading it. If you’re curious about what she wrote, here’s an excerpt:

…instead of conjuring up sugarplum visions of pain-free change, the Conservatives are addressing their fiscal crisis with seriousness and specificity. Osborne is about to unveil an austere deficit-reduction plan that will cut most departmental budgets by 25 percent over several years. This is not some dead-on-arrival presidential budget; the parliamentary system means that these are for-real cuts. …Second, the Conservatives call for shared sacrifice, starting in a place Republicans seem never to look: at the top. “It’s fair that those with broader shoulders should bear a greater load,” Cameron said. …”Believe me, I understand that most higher rate taxpayers are not the super-rich,” Osborne said. “These days we’ve really got to focus the resources where they are most needed.” Here in the United States, when Democrats dare to propose higher taxes for households making more than $250,000 a year, Republicans shout “class warfare.” …the Conservatives do not embrace the Tea Party vision of government as malevolent force. “I don’t believe in laissez-faire,” Cameron said. …Cameron’s Conservatives do not suffer from the Republicans’ anaphylactic allergy to taxes. While Republicans insist on extending the Bush tax cuts for the wealthiest Americans, the Conservatives have endorsed tax increases. Yes, you read that right — even though the tax burden is already significantly higher in the United Kingdom. …The value-added tax will go from 17.5 percent to 20 percent. The capital gains tax will increase from 18 percent to 28 percent for high earners because, as Osborne said, sounding more like Warren Buffett than Margaret Thatcher, the rich are “paying less tax than the people who clean for them.”

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Here’s a great one-liner from Craig Ferguson, one of the late-night TV talk show hosts.

Bedbugs were also found in government buildings in Washington D.C. I can’t believe they have to deal with those blood-sucking pests. Poor bedbugs.

I’m not sure if he’s referring to politicians, bureaucrats, or both. Regardless, his jab is right on the mark.

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There’s an encouraging new poll from Gallup which reveals that 72 percent of Americans say something negative when asked for a one-word description of the federal government. Here’s the “word cloud” showing the results. As you can see, this is very similar to the results for a similar poll on how people describe Congress. Not surprisingly, “corrupt” and “incompetent” are prominent in both polls.

Here’s how Gallup describes the results:

A Sept. 20-21 USA Today/Gallup poll asked respondents what they would say “if someone asked you to describe the federal government in one word or phrase.” The accompanying chart shows the results in graphic form, with the words or phrases displayed according to how frequently they are mentioned. …Overall, 72% of responses about the federal government are negative, touching on its inefficiency, size, corruption, and general incompetence, with the most common specific descriptions being “too big,” “confused,” and “corrupt.” …The generally negative top-of-mind images of the federal government are consistent with the poor ratings the government receives in Gallup’s annual update on the images of business and industry sectors. In the most recent update, from August, 58% rated the federal government negatively and 26% positively.

A word of caution is appropriate at this point. I don’t have the link handy, but I recall recently reading that negative views about government don’t necessarily translate into support for smaller government. If my memory is correct, people apparently want more government-provided security in an environment where there is less faith in the competence of government. Doesn’t make sense to me, but I guess it means that all of us need to do a better job of helping people draw logical conclusions.

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I saw this on the Powerline blog. Here are some excerpts from Hal Lewis’ resignation letter from the America Physical Society. In a nutshell, he exposes how scientists have been corrupted by government money. Amazing. And powerful.

For reasons that will soon become clear my former pride at being an APS Fellow all these years has been turned into shame, and I am forced, with no pleasure at all, to offer you my resignation from the Society. It is of course, the global warming scam, with the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist. …The appallingly tendentious APS statement on Climate Change was apparently written in a hurry by a few people over lunch, and is certainly not representative of the talents of APS members as I have long known them. So a few of us petitioned the Council to reconsider it. One of the outstanding marks of (in)distinction in the Statement was the poison word incontrovertible, which describes few items in physics, certainly not this one. In response APS appointed a secret committee that never met, never troubled to speak to any skeptics, yet endorsed the Statement in its entirety. …This scheming at APS HQ is so bizarre that there cannot be a simple explanation for it. Some have held that the physicists of today are not as smart as they used to be, but I don’t think that is an issue. I think it is the money, exactly what Eisenhower warned about a half-century ago. There are indeed trillions of dollars involved, to say nothing of the fame and glory (and frequent trips to exotic islands) that go with being a member of the club. Your own Physics Department (of which you are chairman) would lose millions a year if the global warming bubble burst. When Penn State absolved Mike Mann of wrongdoing, and the University of East Anglia did the same for Phil Jones, they cannot have been unaware of the financial penalty for doing otherwise. As the old saying goes, you don’t have to be a weatherman to know which way the wind is blowing. Since I am no philosopher, I’m not going to explore at just which point enlightened self-interest crosses the line into corruption, but a careful reading of the ClimateGate releases makes it clear that this is not an academic question.

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One of the fascinating discussions at the Mont Pelerin Society conference has been about the role of evolutionary psychology and its role in shaping public thinking about economic issues. Paul Rubin of Emory University spoke on this issue at the conference and, coincidentally, also had a column about the topic last week in the Wall Street Journal. As seen in the excerpt below, he discusses Hayek’s insight about our “biological constitution” and then proceeds to discuss the unfortunate tendency of many people to think that the economy is a fixed pie. This point resonates with me. If asked to identify one common characteristic of the leftists I know,  my response would be that they incorrectly think one person must become poor for another person to become rich. Even when I show them data proving that this is false, their brains are hard-wired to think that total wealth is limited and that redistribution is the only way to improve the living standards of the less fortunate.

While Hayek is perhaps best known for his 1944 critique of government economic planning, “The Road to Serfdom,” he also was a pioneer in realizing that the evolutionary history of the human species was a factor for understanding current political and economic beliefs. In “The Fatal Conceit” (1988), Hayek wrote that “man’s instincts . . . were not made for the kinds of surroundings, and for the numbers, in which he now lives. They were adapted to life in the small roving bands or troops in which the human race and its immediate ancestors evolved during the few million years while the biological constitution of homo sapiens was being formed.” His insight anticipated the modern field of study called evolutionary psychology, which explains current belief systems as being based in part on our evolutionary history. …humans tend towards zero-sum thinking. That is, we do not intuitively understand the possibilities of economic growth or the benefits of trade in achieving it. Our ancestors lived in a static world with little intertribal trade and virtually no technological advance. That is the world our minds understand. This doesn’t mean that we can’t grasp the crucial concept that trade benefits both parties to a transaction—but it does mean that we must learn it. Positive-sum thinking doesn’t come naturally. By analogy, we learn to speak with no teaching, but we must be taught to read. Understanding the mutual benefits of exchange is like reading, not speech.

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By every possible metric, one would expect corporate tax rates to be higher in Europe. The burden of government spending is higher across the Atlantic, so that presumably would lead to pressure for a higher corporate tax rate. The affinity for class warfare and anti-business policies is more pronounced in Europe, so that should mean more punitive policies in the Old World.

Yet the corporate tax rate is Europe has now dropped, on average, to less than 25 percent, and the American corporate tax remains at more than 39 percent (including the average of state tax burdens). The latest development in Europe, according to Tax-news.com, is that the Netherlands is reducing its rate to 25 percent.

Dutch Finance Minister Jan Kees de Jager has unveiled key details of the country’s 2011 tax plan, containing a number of fiscal measures designed to encourage entrepreneurship and innovation… The 2011 tax plan includes plans to reduce corporation tax in 2011 to 25%. The government also plans to make permanent the reduced rate 20% corporate tax rate on the first EUR200,000 in profit, announced last year and retroactive to 2008. In addition, companies will significantly benefit from the extension by one year of the temporary three-year loss carry-back facility (previously losses could be carried back for just one year) as well as the extension of the temporary accelerated depreciation scheme, which allows certain capital assets to be depreciated at 50% per year, to investments made in 2011 as well as those made in 2009 and 2010.

So why is Europe moving in the right direction on this issue and America lagging? The simple (and accurate) answer is tax competition. Governments are lowering tax rates because politicians think that is their only option if they want to attract jobs and investment. Europe’s economies are so interconnected and cross-border mobility of jobs and investment is so large that politicians are being forced to do the right thing, even though all their normal impulses are the opposite. This video explains, followed by a video showing why corporate tax rates should be lower.

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Blogging will be at irregular hours for the next week. I am in Sydney for the Mont Pelerin Society conference. The MPS was founded in 1947 by Friedrich Hayek, “…to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems.” Home to several Nobel laureates, the MPS is an oasis of freedom-loving individuals in a world that seems to reward statism and conformity. Belonging to this organization is one of the great honors of my life.

And perhaps I will have to travel overseas more often. When I landed in Sydney, I discovered that order had been restored to the universe. By that, I mean that the beloved Bulldogs had thrashed the Tennessee Volunteers 41-14.

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The Economist has a fascinating webpage that allows you to look at all the world’s nations and compare them based on various measures of government debt (and for various years).

The most economically relevant measure is public debt as a share of GDP, and you can see that the United States is not in great shape, though many nations have more accumulated red ink (especially Japan, where debt if much higher than it is in Greece).  As faithful readers of this blog already understand, the real issue is the size of government, but this site is a good indicator of nations that finance their spending in a risky fashion.

By the way, keep in mind that these figures do not include unfunded liabilities. For those who worry about debt, those are the truly shocking numbers (at least for the United States and other nations with government-run pension and health schemes).

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Even though he’s allowing the budget to grow twice as fast as inflation, some people seem to think the new U.K. Prime Minster is a fiscal conservative. I’m skeptical. Not only is spending rising much too fast (there are promises of more restraint in the future, but I’ll believe it when it happens), but Cameron and the Tory/Liberal coalition government are increasing the value-added tax and increasing the capital gains tax. Perhaps worst of all, they are leaving in place the new 50 percent tax rate that former Labor Prime Minister Gordon Brown imposed in hopes that class-warfare policy would help him get elected. But as this Daily Telegraph story suggests, it is quite likely that the higher tax rate will lose revenue as productive people escape to Switzerland and other jurisdictions not influenced by the politics of hate and envy.
One-in-four hedge fund employees has already left London to move to Switzerland, which is said to have a more stable tax regime, according to consultancy Kinetic partners. Calculations by the company claim the UK could have already forgone about £500m in tax revenues, based on the 1,000 or so hedge fund managers it says have already left the country. …High-profile departures this year include Alan Howard, founder of Brevan Howard, and Mike Platt, founder of BlueCrest Capital.
This story shows both the power of the Laffer Curve and the importance of tax competition. The greedy politicians in England doubtlessly resent the “brain drain” to Switzerland. Like their U.S. counterparts, politicians view taxpayers as serfs who are supposed to blindly produce more income for the ruling class to expropriate and redistribute.
 
While I’m obviously not a big fan of British fiscal policy, America is worse in one important way. At least British taxpayers have the liberty to leave without being raped by the U.K. tax authority. Once they leave the United Kingdom and make their home in Switzerland, they are no longer British taxpayers. Americans who want to move, by contrast, are unable to escape the punitive internal revenue code. Indeed, the United States is one of the few nations in the world to have exit taxes, an odious approach generally associated with loathsome regimes such as the Soviet Union and Nazi Germany.

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Here’s a story I got from the Advice Goddess twitter feed. It seems airlines are upset that federal air marshals almost always grab first class seats. This isn’t good for airlines, since it uses up seats that they need for paying customers. It’s not good for security since the main threat in on-board explosives carried by terrorists who want to sit over the wings. And it’s not good for Dan Mitchell since it means he’s less likely to get upgraded when the good seats are occupied by bureaucrats. Since I’m waiting for a flight to Australia, you can guess which upsets me the most. Here’s a blurb from the Wall Street Journal story.
To protect the nation’s air travelers, federal air marshals deployed after the 2001 terrorist attacks try to travel incognito, often in pairs, and choose flights identified with the potential to fall under threat. And they almost always fly first class—something some airlines would like to change. With cockpit doors fortified and a history of attackers choosing coach seats, some airline executives and security experts question whether the first-class practice is really necessary—or even a good idea. It could weaken security by isolating marshals or making them easier for terrorists to identify, airline executives say. With more threats in the coach cabin now, first-class clustering may not make as much security sense. Security experts say bombers are a bigger threat today than knife-wielding attackers trying to get through secure cockpit doors, and Transportation Security Administration checkpoints are heavily focused on explosives, whether hidden in shoes, liquids or under clothes. Some believe bombers try to target areas over the wing—a structurally critical location and also the site of fuel storage—to cause the most damage to the aircraft. …By law, airlines must provide seats to marshals at no cost in any cabin requested. With first-class and business-class seats in particular, the revenue loss to airlines can be substantial because they can’t sell last-minute tickets or upgrades, and travelers sometimes get bumped to the back or lose out on upgrade opportunities. When travelers do get bumped, airlines are barred from divulging why the first-class seat was unexpectedly taken away.

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Here’s a chart from Veronique de Rugy’s new article in The American. Amazing how the problem becomes obvious when you look at real numbers and don’t get trapped into using “baseline” math (as I explain in my latest video).

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The new unemployment data has been released and it’s not a pretty picture. Literally and figuratively. This image is all we need to know about the success of President Obama’s big-government policies. The lower line is from a White House report in early 2009 and it shows the level of unemployment the Administration said we would have if the so-called stimulus was adopted. The darker dots show the actual monthly unemployment rate. At what point will the beltway politicians concede that making government bigger is not a recipe for prosperity?

They say the definition of insanity is doing the same thing over and over again while expecting a different result. The Obama White House imposed an $800-billion plus faux stimulus on the economy (actually more than $1 trillion if additional interest costs are included). They’ve also passed all sorts of additional legislation, most of which have been referred to as jobs bills. Yet the unemployment situation is stagnant and the economy is far weaker than is normally the case when pulling out of a downturn.

But don’t worry, Nancy Pelosi said that unemployment benefits are stimulative!

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I received this joke today. It’s definitely worth passing on. I don’t want to spoil the punch line, so I’ll just say it would be more amusing if there actually was a choice two years ago.  
=============
Guy goes into a bar, there’s a robot bartender.  
 
The robot says, “What will you have?”  
 
The guy says, “Martini.”  
 
The robot brings back the best martini ever and says to the man, “What’s your IQ.
The guy says, “168.” 
 
The robot then proceeds to talk about physics, space exploration and medical technology. 
 
The guy leaves, but he is curious… So he goes back into the bar. 
 
The robot bartender says, “What will you have?” 
 
The guy says, “Martini.”
 
Again, the robot makes a great martini gives it to the man and says, “What’s your IQ?”
 
The guy says, “100.”
 
The robot then starts to talk about Nascar, Budweiser and John Deere tractors.
 
The guy leaves, but finds it very interesting, so he thinks he will try it one more time.
 
He goes back into the bar.
 
The robot says, “What will you have?”
 
The guy says, “Martini,” and the robot brings him another great martini.
 
The robot then says, “What’s your IQ?”
 
The guy says, “Uh, about 50.”
 
The robot leans in real close and says, “So, are you still happy you voted for Obama?”

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As indicated by my post on how to handle prisoners with AIDS, I periodically run into issues where I’m not sure about the right answer. Here’s another case. Politicians in New York have a proposal to prohibit people from using food stamps to buy sugary drinks. Part of me is irritated by paternalistic, nanny-state busybodies who want to tell other people how to live. On the other hand, maybe this proposal will make people less willing to mooch off taxpayers by accepting food stamps (though I suspect they’ll just bring two carts to the checkout line, one with things that can be purchased with food stamps, and the other filled with sodas, booze, and other items that would require cash). The ideal answer, of course, is to get rid of the federal food stamp program and let states and communities experiment with the best way of handling these issues. Here’s an excerpt from the AP report.
New Yorkers on food stamps would not be allowed to spend them on sugar-sweetened drinks under an obesity-fighting proposal being floated by Mayor Michael Bloomberg and Gov. David Paterson. …If approved, it would be the first time an item would be banned from the federal program based solely on nutritional value. The idea has been suggested previously, including in 2008 in Maine, where it drew criticism from advocates for the poor who argued it unfairly singled out low-income people and risked scaring off potential needy recipients. And in 2004 the USDA rejected Minnesota’s plan to ban junk food, including soda and candy, from food stamp purchases, saying it would violate the Food Stamp Act’s definition of what is food and could create “confusion and embarrassment” at the register. The food stamp system…does not currently restrict any other foods based on nutrition. Recipients can essentially buy any food for the household, although there are some limits on hot or prepared foods. Food stamps also cannot be used to buy alcohol, cigarettes or items such as pet food, vitamins or household goods. …There still are many unhealthful products New Yorkers could purchase with food stamps, including potato chips, ice cream and candy.

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In a previous post, I commented on a Wall Street Journal column by former Senator Phil Gramm, calling attention to evidence that the economy is under-performing compared to what happened after previous recessions. This is an important issue, particularly when you compare the economy’s tepid performance today with the strong recovery following the implementation of Reaganomics. But there was another part of the column that also is worth highlighting. Much of what we are seeing from the Obama Administration is disturbingly reminiscent of the anti-growth policies of Hoover and Roosevelt, particularly the punitive class-warfare mentality. Here’s how Senator Gramm characterizes the similarities.

Today’s lagging growth and persistent high unemployment are reminiscent of the 1930s, perhaps because in no other period of American history has our government followed policies as similar to those of the Great Depression era. …The top individual income tax rate rose from 24% to 63% to 79% during the Hoover and Roosevelt administrations. Corporate rates were increased to 15% from 11%, and when private businesses did not invest, Congress imposed a 27% undistributed profits tax. In 1929, the U.S. government collected $1.1 billion in total income taxes; by 1935 collections had fallen to $527 million. …The Roosevelt administration also conducted a seven-year populist tirade against private business, which FDR denounced as the province of “economic royalists” and “malefactors of great wealth.” … Churchill, who was generally guarded when criticizing New Deal policies, could not hold back. “The disposition to hunt down rich men as if they were noxious beasts,” he noted in “Great Contemporaries” (1939), is “a very attractive sport.” But “confidence is shaken and enterprise chilled, and the unemployed queue up at the soup kitchens or march out to the public works with ever growing expense to the taxpayer and nothing more appetizing to take home to their families than the leg or wing of what was once a millionaire. . . It is indispensable to the wealth of nations and to the wage and life standards of labour, that capital and credit should be honoured and cherished partners in the economic system. . . .” The regulatory burden exploded during the Roosevelt administration, not just through the creation of new government agencies but through an extraordinary barrage of executive orders—more than all subsequent presidents through Bill Clinton combined. Then, as now, uncertainty reigned. …Henry Morgenthau summarized the policy failure to the House Ways and Means Committee in April 1939: “Now, gentleman, we have tried spending money. We are spending more than we have ever spent before and it does not work . . . I say after eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt, to boot.”

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Keynesian economic theory is the social-science version of a perpetual motion machine. It assumes that you can increase your prosperity by taking money out of your left pocket and putting it in your right pocket. Not surprisingly, nations that adopt this approach do not succeed. Deficit spending did not work for Hoover and Roosevelt is the 1930s. It did not work for Japan in the 1990s. And it hasn’t worked for Bush or Obama.

The Keynesians invariably respond by arguing that these failures simply show that politicians didn’t spend enough money. I don’t know whether to be amused or horrified, but some Keynesians even say that a war would be the best way of boosting economic growth. Here’s a blurb from a story in National Journal.
America’s economic outlook is so grim, and political solutions are so utterly absent, that only another large-scale war might be enough to lift the nation out of chronic high unemployment and slow growth, two prominent economists, a conservative and a liberal, said today. Nobelist Paul Krugman, a New York Times columnist, and Harvard’s Martin Feldstein, the former chairman of President Reagan’s Council of Economic Advisers, achieved an unnerving degree of consensus about the future during an economic forum in Washington. …Krugman and Feldstein, though often on opposite sides of the political fence on fiscal and tax policy, both appeared to share the view that political paralysis in Washington has rendered the necessary fiscal and monetary stimulus out of the question. Only a high-impact “exogenous” shock like a major war — something similar to what Krugman called the “coordinated fiscal expansion known as World War II” — would be enough to break the cycle. …Both reiterated their previously argued views that the Obama administration’s stimulus was far too small to fill the output gap.
Two additional comments. First, if Martin Feldstein’s views on this issue represent what it means to be a conservative, then I’m especially glad I’m a libertarian. Second, Alan Reynolds has a good piece eviscerating Keynesianism, including a section dealing with Krugman’s World-War-II-was-good-for-the-economy assertion.

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We’ve already identified kids and low-income workers as groups that are being hurt by the new scheme for government-run healthcare. Now we can add retirees to the list. Gee, I wonder what happened to that promise about being able to keep your existing health plan? Here’s an excerpt from a story in the Wall Street Journal.

3M Co. confirmed it would eventually stop offering its health-insurance plan to retirees, citing the federal health overhaul as a factor. The changes won’t start to phase in until 2013. But they show how companies are beginning to respond to the new law… 3M illustrates that others may not opt to retain such plans over the next few years… The company didn’t specify how many workers would be impacted. It currently has 23,000 U.S. retirees. …Sen. Charles Grassley, an Iowa Republican, said that “for all the employees who were promised they’d be able to keep their current benefits after the health-care law passed, I’m worried that the recent changes we’ve heard about…are just the beginning.”

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I’ve avoided this topic in recent weeks because it’s too depressing, but this story is too outrageous to ignore. The County of Los Angeles has 199 bureaucrats who “earned” more than $250,000 last year. According to Census Bureau data for 2008, the median household income in the county was 55,000, Here’s a blurb from the L.A.Times about incomes of the bureaucratic gilded class.

Nearly 200 Los Angeles County employees earned more than a quarter of a million dollars in 2009, according to a list of the county’s top earners released late Monday in response to a Public Records Act request from The Times. The highest earners list was dominated by physicians and other medical personnel, but also included county firefighters and a handful of top sheriff’s employees. Some of the best-known names on the list belong to elected officials — although none of the five county supervisors, who make $178,789 a year, qualified. …The Times requested the base salary, overtime and “other earnings” for county employees whose total annual pay exceeded $250,000. “Other earnings” can include bonuses for special skills or responsibilities or unused benefits cashed out as taxable income, among other things. …Overtime played a big role, with only 65 people making the list on base salary alone. Thirty workers made more than $80,000 in overtime. Twenty-two of them work for the county Fire Department, four work for public hospitals, two were psychiatrists for the Mental Health Department, and two were physician specialists for the Sheriff’s Department.

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I hate taxes more than anyone, but other policies matter as well, so if I had the choice of replacing current government policies with the ones that existed at the end of the Clinton years, I would gladly make that trade. Yes, it would mean higher tax rates, but it also would mean slashing government spending from 24 percent of GDP down to 18 percent of GDP. It would mean no sleazy TARP bailout, no Sarbanes-Oxley red tape, and no added power and authority for the federal government.

This is the argument that I made in this interview on CNBC, though my opponent tried to do his version of the Brezhnev Doctrine (what’s mine is mine, what’s yours is negotiable), so I concluded the interview by stating that in the real world higher taxes are completely unacceptable.

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Former Senator Phil Gramm had a column last week in the Wall Street Journal that deserves two blog posts. This first post highlights Gramm’s analysis showing that the U.S. has been very Keynesian compared to Europe, with numerous efforts to jump start the economy with deficit spending. But Senator Gramm hits the nail on the head, comparing America’s tepid recovery with the better performance across the Atlantic.

During the average recovery since World War II, gross domestic product (GDP) surpassed the pre-recession high five quarters after the recession began. It has never taken longer than seven quarters. Yet today, after 11 quarters, GDP is still below what it was in the fourth quarter of 2007. The economy is growing at only about a third of the rate of previous postwar recoveries from major recessions. Obama administration officials such as Treasury Secretary Tim Geithner have argued that without their policies the economy would be worse, and we might have fallen “off a cliff.” While this assertion cannot be tested, we can compare the recent experience of other countries to our own. …There are 4.6% fewer people employed in the U.S. today than at the start of the recession. Euro zone countries have lost 1.7% of their jobs. …This simple comparison suggests…that American economic policy has been less effective in increasing employment than the policies of other developed nations. …While the most recent quarterly growth figures are just a snapshot in time, it is hardly encouraging that economic growth in the U.S. (1.7%) is lower than in the euro zone (4%), U.K. (4.8%), G-7 (2.8%) and OECD (2%).

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