The “Tax Expenditure” Con Job

For both political and policy reasons, the left is desperately trying to maneuver Republicans into going along with a tax increase. And they are smart to make this their top goal. After all, it will be very difficult – if not impossible – to increase the burden of government spending without more revenue coming to Washington.

But how to make this happen? President Obama is mostly arguing in favor of class-warfare tax increases, but that’s a non-serious gambit driven by 2012 political considerations. Moreover, there’s presumably zero chance that Republicans would surrender to higher tax rates on work, saving, and investment.

The real threat is back-door hikes resulting from the elimination and/or reduction of so-called tax breaks. The big spenders on the left are being very clever about this effort, appealing to anti-spending and pro-tax reform sentiments by arguing that it is important to get rid of “tax expenditures” and “spending in the tax code.”

I recently warned, however, that GOPers shouldn’t fall for this sophistry, noting that “If legislation is enacted that results in more money coming into Washington, that is a tax increase.” I also explained that tax breaks are not spending, stating that “When politicians tax (or borrow) money from one person and give it to another, that’s government spending. But if politicians allow a person keep more of their own money, that’s a tax cut.”

To be sure, the tax code is riddled with inefficient and corrupt loopholes. But those provisions should be eliminated as part of fundamental tax reform, such as a flat tax. More specifically, every penny of revenue generated by shutting down tax preferences should be used to lower tax rates. This is a win-win situation that would make America more prosperous and competitive.

It’s also important to understand what’s a loophole and what isn’t. Ideally, you determine special tax breaks by first deciding on the right benchmark and then measuring how the current tax system deviates from that ideal. That presumably means all income should be taxed, but only one time.

So what can we say about the internal revenue code using this neutral benchmark? Well, there are lots of genuine loopholes. The government completely exempts compensation in the form of employer-provided health insurance, for instance, and everyone agrees that’s a special tax break. There’s also the standard deduction and personal exemptions, but most people think it’s appropriate to protect poor people from the income tax (though perhaps we’ve gone too far in that direction since only 49 percent of households now pay income tax).

Sometimes the tax code goes overboard in the other direction, however, subjecting some income to double taxation. Indeed, because of the capital gains tax, corporate income tax, personal income tax, and death tax, it’s possible for some types of income to be taxed as many of three or four times.

Double taxation is a special tax penalty, which is the opposite of a special tax break. The good news is that there are some provisions in the tax code, such as IRAs and 401(k)s, that reduce these tax penalties.

The bad news is that these provisions get added to “tax expenditure” lists, and therefore get mixed up with the provisions that provide special tax breaks. This may sound too strange to be true, but here’s a list of the biggest so-called tax expenditures from the Tax Policy Center (which is a left-leaning organization, but their numbers are basically the same as the ones found at the Joint Committee on Taxation).

Since this post already is too long, I’ll close by simply noting that items 2, 4, 7, 8, 11, and 12 are not loopholes. They are not “tax expenditures.” And they are not “spending in the tax code.” Every one of those provisions is designed to mitigate a penalty in the tax code.

So even if lawmakers have good motives (i.e., pursuing real tax reform such as the flat tax) when looking to get rid of special tax breaks, they need to understand what’s actually a loophole.

But since politicians rarely have good motives, there’s a real threat that they will take existing tax penalties and make them even worse. That’s another reason why tax increases should be a non-starter.

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Words I Never Thought Would Cross My Lips: “Government Is even More Incompetent than I Thought”

Regular readers know that I don’t have high regard for government. I’m willing to believe just about anything bad about politicians and bureaucrats, and I am not the least bit surprised when I hear horror stories about counterproductive government programs riddled with waste, fraud, and abuse.

So you can imagine that it takes something truly mind-boggling to make me lower my opinion of government.

Well, that’s happened. Apparently, a woman drowned in a government-run pool and it took two days for the bureaucrats to notice her dead body. Here are some excerpts from a Boston news report.

The body of a Fall River woman was discovered floating in a state run pool late Tuesday night, two days after she apparently drowned in that same pool. Police say lifeguards were on duty and people were swimming in the Veterans Memorial pool at Lafayette Park Sunday, Monday and Tuesday and it appears no one noticed the dead body. …Police say Joseph was watching her 9-year-old neighbor at the pool on Sunday when she apparently had an accident sliding down a waterside. Family friends tell FOX25 the little boy told lifeguards that she did not come up from above water but no action was taken.

I actually hope this story is somehow false. Sure, I enjoy mocking the incompetence of government, but I would hate to think that lifeguards, other staff, and supervisors (not to mention other swimmers) could overlook a dead body for two days.

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Three Simple Rules to Keep Republicans from Being Seduced by Dishonest and Orwellian Word Games from the Left on Tax Reform and Tax Increases

Those who had the misfortune of seeing President Obama go after “tax breaks for corporate jets” as part of his press conference may be wondering why he was attacking a provision that was in his so-called stimulus and enacted by a Democratic-controlled Congress in 2009.

But that’s just routine politics. The folks in the White House are probably laughing about screwing jet builders after collecting campaign money from them in exchange for that provision two years ago.

The more important thing to focus on is the way that the big spenders in the White House and elsewhere are trying to build support for a big tax increase by characterizing tax breaks as “spending in the tax code.” The left obviously hopes Republicans are so stupid that Orwellian word games are all that is needed to get them to acquiesce to legislation that would increase the amount of revenue going to Washington.

To be sure, Republicans are known as the “Stupid Party,” so anything is possible. But if GOPers can simply remember these three simple concepts, they will be in good shape.

1. Tax reform is when you get rid of special tax breaks and use the revenue to finance lower tax rates.
Under a flat tax, for instance, all the loopholes and distortions in the tax system are eliminated, and every single penny is used to finance lower tax rates. The politicians don’t get any additional revenue to waste.

But if the crowd in Washington gets rid of the tax preferences without lowering tax rates, that’s just a tax increase. It’s a less-destructive way of raising revenue, at least compared to higher tax rates, but it’s still a tax increase.

2. A tax increase is when politicians impose legislation that increases the overall burden on taxpayers and results in more revenue in Washington.

If legislation is enacted that results in more money coming into Washington, that is a tax increase. It doesn’t matter if the additional revenue is generated by eliminating a special tax break (such as for ethanol). If politicians wind up having more money to waste, that is a tax increase.

The only exception is if the additional revenue is from some sort of Laffer Curve effect – i.e., a lower tax rate that generates higher tax receipts.

3. Government spending is when politicians give you other people’s money, not when you’re allowed to keep your own money.

When politicians tax (or borrow) money from one person and give it to another, that’s government spending. But if politicians allow a person keep more of their own money, that’s a tax cut. The tax cut may be pro-growth, such as a lower tax rate. Or the tax cut may be inefficient and distorting, such as an expanded tax loophole for healthcare.

From a moral perspective (at least if one believes in the right of self-ownership), there’s a big difference between taking what someone else has produced or keeping what you have produced. Politicians want to blur that difference, but that doesn’t change reality.

I’ve already explained that left has one fiscal policy goal. They want to seduce Republicans into a tax hike. Orwellian dishonesty about tax reform is just another scheme to accomplish that goal.

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Why Are Some Countries Rich and Others Poor?

Here’s a new video, less than 2-1/2 minutes, pointing out some of the key differences between rich nations and poor nations. Not surprisingly, small government, free markets, and sound institutions are critical.

I narrated a similar video, released more than two years ago, that makes similar points. The production values are not as high, but I had six minutes to play with, so it gave me an opportunity to elaborate on the various factors that contribute to growth. I think the videos are good complements.

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The Libertarian Paradise of Argentina???

Okay, the title of this post is a huge overstatement. I’ve already noted here that Argentina is not a good role model and warned here how that Obama is repeating many of the mistakes that undermined Argentinian prosperity.

But I’m nonetheless impressed that Argentina actually allows people at the Lujan Zoo to freely choose whether to enter cages with potentially deadly animals.

Here at the Lujan Zoo near Buenos Aires visitors can ride lions, cuddle bears, stroke tigers and feed cheetahs. Cages are accessible to everyone who paid $50 and signed the paper saying that if you are eaten, the Zoo is not responsible. Lujan Zoo is about 50 miles from from Buenos Aires, has an entrance fee of just £5. Visitors can even pick up the smaller animals and manhandle them at risk to themselves and the creatures. Shockingly there doesn’t appear to be much in the way of safety regulations.

I would probably be a wimp if I went to this zoo, so I would limit myself to the lion cubs or something like that. But I support the right of other people to engage in risky behavior

(h/t: Marginal Revolution)

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Tom Sowell’s Latest Column Is a Good Birthday Present for Me

As far as I can tell, everything that Thomas Sowell writes is worth reading, but I especially like how he is so effective at linking his arguments to the underlying principles of a free society.

And when he writes a column focused on those underlying principles, I can’t help but get inspired. He reminds me why I’m at the Cato Institute and why the fight for liberty is so important.

Indeed, what he says about the Constitution in his latest column is so good that I sort of view it as a birthday present for me. But the rest of you should enjoy it as well.

The American Revolution was not simply a rebellion against the King of England, it was a rebellion against being ruled by kings in general. That is why the opening salvo of the American Revolution was called “the shot heard round the world.” Autocratic rulers and their subjects heard that shot — and things that had not been questioned for millennia were now open to challenge. As the generations went by, more and more autocratic governments around the world proved unable to meet that challenge. Some clever people today ask whether the United States has really been “exceptional.” You couldn’t be more exceptional in the 18th century than to create your fundamental document — the Constitution of the United States — by opening with the momentous words, “We the people…” Those three words were a slap in the face to those who thought themselves entitled to rule, and who regarded the people as if they were simply human livestock, destined to be herded and shepherded by their betters. Indeed, to this very day, elites who think that way — and that includes many among the intelligentsia, as well as political messiahs — find the Constitution of the United States a real pain because it stands in the way of their imposing their will and their presumptions on the rest of us. More than a hundred years ago, so-called “Progressives” began a campaign to undermine the Constitution’s strict limitations on government, which stood in the way of self-anointed political crusaders imposing their grand schemes on all the rest of us. That effort to discredit the Constitution continues to this day, and the arguments haven’t really changed much in a hundred years. …A constitution exists to create a framework for government — and the Constitution of the United States tries to keep the government inside that framework. …Does the Constitution matter? If it doesn’t, then your Freedom doesn’t matter.

The column was written to debunk and mock a vacuous piece by the Managing Editor of Time magazine. If today is the opposite of your birthday, and you deserve to suffer for some reason, then you might want to track down and read that article. I wouldn’t recommend that level of masochism.

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Two Examples of Reprehensible and Outrageous TSA Behavior…and Senator Rand Paul Speaks Up for Common Sense

I’ve largely stopped beating up on the TSA because it seems like a dog-bites-man or sun-rises-in-the-east issue. Do we really learn anything by repetitively discussing the stupidity on one bureaucracy?

But sometimes the idiocy reaches such an extreme level that it can’t be ignored.

Here are the nauseating details of how TSA bureaucrats confiscated a toy hammer – made out of plastic – that a mentally retarded man had used as a sort of security blanket for 20 years.

The Mandy family says they were on their way to the happiest place on earth (Disney), but had to go through hell to get there. …The family was going through security when two TSA agents singled Drew Mandy out for a special pat down. Drew is severely mentally disabled. He’s 29, but his parents said he has the mental capacity of a two-year-old, which made the experience that followed at metro Detroit’s McNamera Terminal that much harder to deal with. …The TSA agents saw Drew holding a six-inch plastic hammer. “My son carries his ball and his hammer for security. He goes everywhere with (them),” said Mandy. The TSA it seems saw the toy as a weapon. “He took the hammer and he tapped the wall. ‘See, it’s hard. It could be used as a weapon,'” Mandy explained. …”It just killed me to have to throw it away because he’s been carrying this like for 20 years,” Mandy said.

That’s a disgusting example of bureaucratic stupidity, but I don’t know whether it’s better or worse than what happened in Florida, where the Keystone Cops of the TSA made a 95-year old cancer patient remove her adult diaper as part of the screening process.

The Transportation Security Administration doesn’t think its agents did anything wrong in asking an elderly woman with cancer to remove her adult diaper during an airport security screening. The agency came under fire after Florida woman Jean Weber claimed her 95-year-old mother was forced to take off her diaper for a pat down at the Destin-Fort Walton Beach Airport last weekend. “It’s something I couldn’t imagine happening on American soil,” Weber told the Northwest Florida Daily News. …Weber says watching her mother, who is battling leukemia, be subjected to the security screening drove her to tears.

Plastic hammers and soiled diapers are deadly weapons to be sure, especially in the hands of retarded people and senior citizens. We should be mighty proud that the TSA is on the job!!

Not surprisingly, Senator Rand Paul has the right assessment, believing in common sense and individual liberty. I’ve already shared a video of him mocking an Obama appointee for imposing inferior, toxic light bulbs. Now here’s a video of him grilling the head TSA bureaucrat.

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Block-Granting Medicaid Is a Long-Overdue Way of Restoring Federalism and Promoting Good Fiscal Policy

This new video from the Center for Freedom and Prosperity explains why Medicaid should be shifted to the states. As I note in the title of this post, it’s good federalism policy and good fiscal policy. But the video also explains that Medicaid reform is good health policy since it creates an opportunity to deal with the third-party payer problem.

One of the key observations of the video is that Medicaid block grants would replicate the success of welfare reform. Getting rid of the federal welfare entitlement in the 1990s and shifting the program to the states was a very successful policy, saving billions of dollars for taxpayers and significantly reducing poverty. There is every reason to think ending the Medicaid entitlement will have similar positive results.

Medicaid block grants were included in Congressman Ryan’s budget, so this reform is definitely part of the current fiscal debate. Unfortunately, the Senate apparently is not going to produce any budget, and the White House also has expressed opposition. On the left, reducing dependency is sometimes seen as a bad thing, even though poor people are the biggest victims of big government.

It’s wroth noting that Medicaid reform and Medicare reform often are lumped together, but they are separate policies. Instead of block grants, Medicare reform is based on something akin to vouchers, sort of like the health system available for Members of Congress. This video from last month explains the details.

In closing, I suppose it would be worth mentioning that there are two alternatives to Medicaid and Medicare reform. The first alternative is to do nothing and allow America to become another Greece. The second alternative is to impose bureaucratic restrictions on access to health care – what is colloquially known as the death panel approach. Neither option seems terribly attractive compared to the pro-market reforms discussed above.

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When Politicians Make Lots of Money in Financial Markets, Should We Assume Corruption?

A new study revealed that politicians are very good investors, earning significantly above-average returns when they put their own money in financial markets. CNBC interviewed me about this research and asked whether it was a sign of something akin to insider trading.

Regular readers know I’m a big foe of political corruption and have repeatedly made the point that big government facilitates sleazy behavior, but I try to be fair. As such, I warn in the interview that something doesn’t smell right, but that’s not proof of criminal activity.

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Should American Taxpayers Finance another Big Fat Greek Bailout?

The notion that American taxpayers are about to subsidize another Greek bailout (via the Keystone Cops at the IMF) is way beyond economically foolish. It is also morally offensive.

To turn Winston Churchill’s famous quote upside down: “Never have so many paid so much to subsidize such an undeserving few.”

Let’s start with a few facts:

o Greece’s GDP is roughly equal to the GDP of Maryland.

o Greece’s population is roughly equal to the population of Ohio.

o Despite that small size, in both terms of population and economic output, Greece already has received a bailout of about $150 billion (actual amount fluctuates with the exchange rate).

o Don’t forget the indirect bailout resulting from purchases of Greek government bonds by the European Central Bank.

o Now Greece is angling for another bailout of about $150 billion.

Is there any possible justification for throwing good money after bad with another bailout. Well, if you’re a politician from Germany or France and your big banks (i.e., some of your major campaign contributors) foolishly bought lots of government bonds from Greece, the answer might be yes. After all, screwing taxpayers to benefit insiders is a longstanding tradition in Europe.

But from a taxpayer perspective, either in Europe or the United States, the answer is no. Or, to be more technical and scientific, the answer is “Hell no, are you friggin’ out of your mind?!?”

Consider these fun facts from a recent column by John Lott and then decide whether the corrupt politicians of Greece (and the special interest groups that receive handouts and subsidies from the Greek government) deserve to have their hands in the pockets of American taxpayers.

Despite Greece’s promises, government spending is up over last year’s already bloated levels, the deficit is bigger than ever, and it has utterly failed to meet the promised sell-off of some government assets. Not a single public bureaucrat has been laid off so far. …Greece can pay off €300 of the €347 billion debt by selling off shares the government owns in publicly traded companies and much of its real estate holdings. The government owns stock in casinos, hotels, resorts, railways, docks, as well as utilities providing electricity and water. But Greek unions fiercely oppose even partial privatizations. Rolling blackouts are promised this week to dissuade the government from selling of even 17 percent of its stake in the Public Power Corporation. …Greeks apparently believe that they have Europe and the world over a barrel, that they can make the rest of the world pay their bills by threatening to default. Greece’s default would be painful for everyone, but for Europe and the United States, indeed for the world, the alternative would be even worse. If politicians in Ireland, Portugal, Spain, Italy, and other countries think that their bills will be picked up by taxpayers in other countries, they won’t control their spending and they won’t sell off assets to pay off these debts. Countries such as Greece have to be convinced that they will bear a real cost if they don’t fix their financial houses while they still have the assets to cover their debts. …The real problem is the incentives we are giving to other countries. We have to make sure that “Kicking the can down the road” isn’t an option.

Just for good measure, here are a few more interesting factoids in a Wall Street Journal column by Holman Jenkins.

[Greece is] one of the most corrupt, crony-ridden, patronage-ridden, inefficient, silly economies in Christendom. …The state railroad maintains a payroll four times larger than its ticket sales. When a military officer dies, his pension continues for his unwed daughter as long as she remains unwed. Various workers are allowed to retire with a full state pension at age 45.

To be blunt, Greek politicians have miserably failed. Wait, that’s not right. You can’t say someone has failed when they haven’t even tried. Let’s be more accurate and say that Greek politicians have succeeded. They have scammed money from taxpayers in other nations to prop up a venal and corrupt system of patronage and spoils. Sure, they’ve made a few cosmetic changes and trimmed around the edges, but handouts from abroad have enabled them to perpetuate a bloated state. And now they’re using a perverse form of blackmail (aided and abetted by big banks) to seek even more money.

Let’s now re-ask the earlier question: Should American taxpayer finance the corrupt big-government policies of Greece?

Or perhaps we should think like economists, so let’s rephrase the question: Should we misallocate capital so that funds are diverted from private investment to corrupt Greek politicians?

Or maybe we should think like parents who have to worry about spoiling a child and the signal that sends to the other kids, so let’s ask the question this way: Should we encourage bad behavior in Spain, Italy, Portugal, etc, by giving another bailout to Greece’s corrupt politicians?

Or should we think about this issue from the perspective of addiction counselors and rephrase the question: Should we reward self-destructive behavior by providing more money to corrupt political elites in Greece?

Or how about we think like moral human beings, and ask the real question: Should we take money from people who earned it and give it to people who think they are entitled to live at the expense of others?

Since we paraphrased Churchill earlier, let’s answer these questions by butchering Shakespeare: “A bailout from every angle would smell to high Heaven.”

I wrote back in February of 2010 that a Greek bailout would be a mistake and every development since that time has confirmed that initial commentary.

But that doesn’t matter. Politicians have a different way of looking at things. They look at a policy and wonder whether it increases their power and generates campaign contributions. And when you understand their motives, you begin to realize why they will answer yes to the previous set of questions.

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Mean and Unfair, but Funny

This barely fits into the category of political humor, and that’s only if you want to engage in unfair stereotyping of vegans as effete left wingers.

That’s inappropriate, I’m sure, but I laughed, so I’m going to share with the rest of the class.

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The Continuing Wussification of America

Life is filled with risk. We can deal with that two ways. The first option is to allow people to make educated choices, thus promoting individual responsibility. The second option is to have politicians micro-manage our decisions, thus promoting passivity.

Not surprisingly, America is drifting in the wrong direction, allowing busybodies to regulate every aspect of our lives.

Here’s an excerpt from the Seattle newspaper about an example of what I call the wussification of America. But it’s really more the infantalization of America.

People who hope to beat the summer heat by swimming, floating or boating on rivers in King County must wear a life vest or face an $86 fine. …”This council sometimes thinks it’s everybody’s mom,” said Councilwoman Kathy Lambert, who voted “no.” …The law appears to be the first of its kind in the state. …it didn’t appear any other county required swimmers to wear the devices. …Opponents who spoke before the Council said sheriff’s deputies had better things to do than to write tickets for people on waterways and would be better off focusing on people engaging in dangerous behavior. …Current state law requires that kids 12 and under must wear a live vest when on a boat that is less than 19 feet long. The new county law says everybody must wear the vests when they are on rivers… It applies to people tubing, rafting, using a surfboard, canoe or kayak. Swimmers or people wading more than 5 feet from shore or in water more than 4 feet deep would also have to wear life vests.

I suppose it would be appropriate to mention that this kind of intervention has costs. When government creates the illusion that there is little or no risk, it lures people into behaving more recklessly. The housing mess is a good example. Government subsidies and guarantees caused a boom-bust cycle largely by making it seem like housing was a risk-free investment.

Mandatory life jackets are a different situation, to be sure. Maybe they would encourage people to behave more recklessly, thus offsetting the presumed benefits, but that’s an empirical matter. I’m more worried about the signal sent by such interventions – i.e., that people no longer should think for themselves and instead we can rely on Big Brother to safely guide us through life.

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The IMF: An Equal-Opportunity Purveyor of Bad Advice

As a general rule, the bureaucrats at the International Monetary Fund are not awful people or fire-breathing leftists. But they are voices for the establishment. And, at the upper levels, IMF staff seem overly solicitous of the views of the big nations, which means that they are indirectly attentive to interest groups (such as big banks) that have political power in those big nations.

This helps explain why the IMF is so intent on providing bailouts to Greece when it would be far better in the long run to cut the country loose and force the Greek people to realize that there is not a never-ending supply of subsidies to support statism.

But it’s not just in Greece where the IMF peddles bad policy. I wrote back in 2009 about the IMF’s efforts to repeal the flat tax in Latvia. And I’ve posted about the IMF’s support for anti-tax competition schemes that would enable bigger government.

I guess we need to give the bureaucrats credit for being consistent. The IMF is now pushing Albania to increase its flat tax rate. Here’s an excerpt from the Albanianeconomy.com website.

“The flat tax can be raised to 12-15 per cent, [from the current 10 per cent] as a way to cut the deficit and the stock of public debt,” IMF representative Gerwin Bell said on Thursday in a joint press conference with Albania’s Minister of Finance Ridvan Bode and the Governor of Albania’s Central Bank, Ardian Fullani.

To reiterate my earlier point, however, the IMF produces muddled advice, not bad advice. The bureaucrats also are recommending some budgetary restraint for Albania. The problem, of course, is that politicians often accept the suggestions for higher taxes and never bother with fiscal restraint. Indeed, IMF bailout funds for places such as Greece are substitutes for fiscal restraint.

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Time to Shut Down the Department of Agriculture

I have a confession to make: I have a hard time making up my mind. At times, I am overcome by indecision. To be more specific, I can’t figure out which department of the federal government should be shut down first.

In the past, I’ve written about the squalid waste and corruption at the Department of Housing and Urban Development and argued that HUD should be shuttered.

But I’ve also written about the grotesque inefficiency and bloat at the Department of Transportation and urged that the building be razed to the ground.

Today, I can’t resist turning my attention to the Department of Agriculture. This is another part of the federal behemoth that specializes in taking money from productive taxpayers and dispensing it to well-connected agri-businesses to maintain a system of subsidies and central planning so Byzantine that it would probably make a North Korean Commissar shake his head with bemusement.

If you want to share my anger, read this column by Victor David Hanson. Here’s an excerpt to get your blood boiling.

The Department of Agriculture…is a vast, self-perpetuating postmodern bureaucracy with an amorphous budget of some $130 billion — a sum far greater than the nation’s net farm income this year. …This year it will give a record $20 billion in various crop “supports” to the nation’s wealthiest farmers — with the richest 10 percent receiving over 70 percent of all the redistributive payouts. …Then there is the more than $5 billion in ethanol subsidies that goes to the nation’s corn farmers to divert their acreage to produce transportation fuel. That program has somehow managed to cost the nation billions, to send worldwide corn prices sky-high, and to distort global trade in ethanol at the expense of far cheaper sugarcane. …About every 10 years or so, public outrage forces Congress to promise to curtail the subsidy programs. But when the deadline arrives, our elected officials always find a trendy excuse like “green energy” or “national security” to continue welfare to agribusiness. …In a brilliantly conceived devil’s bargain, the Department of Agriculture gives welfare to the wealthy on the one hand, while on the other sending more than $70 billion to the lower income brackets in food stamps. Originally, the food stamp program focused on the noble aim of supplementing the income of only the very poor and the disabled. But now eligibility is such that some members of the middle class find a way to manipulate such grants. In fact, 2011 could be another sort of record year for the Agriculture Department, as it may achieve an all-time high in subsidizing 47 million Americans on food stamps — nearly one-sixth of the country. …The multilayered Department of Agriculture has no real mission, much less a methodology other than to provide cash to congressional pet constituencies.

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A “Right” to Stolen Property? A Great Day for Human Rights!

I’m often amazed at how the political class concocts new rights that can only be fulfilled by trampling on genuine freedoms.

In a previous post, I mocked Finland for deciding that broadband access was a human right (which presumably means Finns were being oppressed before Al Gore invented the Internet).

Another post sarcastically noted that European courts decided that free soccer broadcasts were a fundamental right (meaning Europeans were being oppressed before TV was invented).

But these two posts might lead people to think that only Europeans are stupid enough to create non-existent rights. Rest assured, this is not the case. Politicians from all part of the world are perfectly capable of making decisions that are economically foolish and morally depraved.

Consider President Evo Morales of Bolivia. His government decided to grant amnesty to people who purchased stolen cars. You may think I’m exaggerating, but here’s an excerpt from a news service report.

According to Bolivian Customs in the first ten days of the amnesty, effective until next July first, a total of 70.248 “chuto” cars (as illegal vehicles are called in Bolivia) have been presented for legalization to which another 6.000, with the wrong paperwork, must be added. …President Morales justified the legalization of contraband cars arguing that the ‘chutos’ are purchased by “poor people” who want “to improve their status” and prefer them because they are ‘cheaper’. “We all have a right to have a car” said President Morales.

In a just society, of course, there is no such thing as a “right” that can only be provided by stealing another person’s property. And that’s true even when the government is the middleman in the transaction.

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Arguing about Class-Warfare Taxation with Robert Reich

I was on Larry Kudlow’s CNBC show recently, where I debated against Robert Reich. I made (what I hope are) good points about the Laffer Curve and the big-government policies of both Bush and Obama.

The bad news, as least from a personal perspective, is that the last half of the interview became a debate between Reich and Kudlow. I’ve been doing this long enough that I should have known to force myself back into the discussion. I did get in a final warning about the value-added tax, but this was not my best performance.

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I Fantasize about a World with No Income Tax, but…

Most people fantasize about supermodels (at least most guys, I have no clue about females). But I’m different. I dream about a world with limited government, sort of like what America’s Founding Fathers had in mind.

One of the best things about this fantasy world is that we would not need an income tax. Indeed, with the exception of brief periods during the Civil War and 1894-1895, America did just fine without an income tax all the way ’til 1913.

But even though I like the idea of a society where none of us is burdened by an income tax, it does not automatically follow that I’m happy about the growing number of people that are now exempted from the tax.

My concern revolves around the fact that if government is “free” for a growing number of people, that may lead them to support policies that make government even bigger. More generally, this could be another step toward becoming a failed state like Greece, with too many people riding in the wagon and not enough people pulling the wagon.

Here’s a chart, showing the most-recent breakdown of taxpayers vs. non-taxpayers, from the Ways & Means Committee.

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Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion

Even though he’s become rather partisan in recent years, I still enjoy an occasional visit to Andrew Sullivan’s blog. But I was rather amused last night when I read one of his posts, in which he was discussing whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulated growth, and criticized those who wanted to reduce the burden of government spending, snarkily observing that, “The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.”

Since I’m one of those “reality-challenged” people who prefer smaller government, I obviously disagreed with his analysis. But his reference to Hoover set off alarm bells. As I have noted before, Hoover increased the burden of government during his time in office.

But maybe my memory was wrong. So I went to the Historical Tables of the Budget and looked up the annual spending data. As you can see from the chart, it turns out that Hoover increased government spending by 47 percent in just four years (if you adjust for falling prices, as Russ Roberts did at Cafe Hayek, it turns out that Hoover increased government spending by more than 50 percent).

I suppose I could make my own snarky comment about being “reality-challenged,” but Sullivan’s mistake is understandable. The historical analysis and understanding of the Great Depression is woefully inadequate, and millions of people genuinely believe that Hoover was an early version of Ronald Reagan.

I will say, however, that I agree with Sullivan’s conclusion. He closed by saying it would be “bonkers” to replicate Hoover’s policies today. I might have picked a different word, but I fully subscribe to the notion that making government bigger was a mistake then, and it’s a mistake now.

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Is Government Really this Stupid?…and a True Confession from My Sordid Past (Maybe)

I realize this questions answers itself, but I’m continuously amazed at the bone-headed decisions made by politicians and bureaucrats.

Indeed, I wish I had this example for my recent post comparing incompetent officials in the United States with their counterparts in the United Kingdom.

A kid in Indiana played a prank involving a blow-up doll in the women’s bathroom at his high school. Sounds like a couple of afternoons of detention, right? Think again. Here’s an excerpt from a local news report.

A Rushville High School senior faces a felony charge after bringing a blow-up doll to school as part of what he claims was a prank. School officials called police May 31 after a package was found in a girls’ bathroom. A deflated blow-up doll was later found inside the box. Tyell Morton, 18, was arrested on a preliminary charge of felony criminal mischief after he admitted to bringing the doll to school. …The family’s attorney, Robert Turner, said the charge is excessive. “It’s interesting that had he gone to school with a gun, there would’ve been a lesser charge. It would’ve been a Class D felony with up to three years,” he said.

I’m glad I went to school before this type of nonsense became commonplace, because I was once an immature punk (most people would say I’m now an immature grownup, but that’s a separate issue). Not that I’m admitting anything, because I have no idea what the statute of limitations is on these matters, but I may have once set off a string of 400 firecrackers in a school stairwell. And I may have once let a snake loose in the school library.

Back then, I might have gotten suspended for a couple of days if I had been caught. Today, I’d be at Gitmo. Okay, that might be an exaggeration, but you know what I mean.

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IMF Recommendation for Europe: Double Down on the Approach that Caused the Sovereign Debt Crisis

Many European nations face a sovereign debt crisis because of excessive spending caused by too much redistribution. The obvious – and only – solution to this crisis is to reverse the policies that caused the problem.

So take a wild guess about what the International Monetary Fund recommended: Did the international bureaucracy recommend that nations such as Greece and Portugal impose serious fiscal discipline, such as the spending freezes that worked so successfully in New Zealand and Canada in the 1990s?

Of course not. That would make sense. Instead, the IMF is urging more centralization and redistribution in order to facilitate “economic governance” and “fiscal transfers.”

I’m not a fan on international bureaucracies, and I wasn’t expecting good advice, but even I’m stunned. Here are some excerpts from a story in the EU Observer.

The International Monetary Fund has bluntly warned the European Union…it must integrate faster and more deeply in order to stop a global disaster. …Saying Europe is at a “crossroads”, the IMF’s acting director, John Lipsky, in Luxembourg for a meeting with EU finance ministers, declared: “The euro area needs to strengthen economic governance and may need to be more intrusive in terms of national structures.” …the IMF said that still “more economic and financial integration” and EU intervention in national economies is necessary. …Specifically, the report mentioned that “without political union” and fiscal transfers, “stronger governance of the euro area is indispensable.”

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Obama’s Green Energy Scam

I chat with Neil Cavuto about the “perfect storm” of bad government policy.

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FATCA Law is an International Version of Obamacare’s 1099 Provision, a Nightmare for Cross-Border Economic Activity that Is Undermining Investment in America

One of the tax increases buried in Obamacare was an onerous and intrusive “1099” scheme that would have required businesses to collect tax identification numbers for just about any vendor and then send paperwork to the IRS whenever they did more than $600 of business.

o Send one of your sales people to New York for a couple of nights? They would have to get the tax ID for the hotel and submit a form to the IRS.

o Buy a printer for the office? The printer company would need to provide a tax ID and the purchaser would have to submit a form to the IRS.

o Have a retirement dinner for somebody in the accounting department? Get the restaurant’s tax ID and submit another form to the IRS.

This system was seen as a nightmare, even leading to rather amusing cartoons mocking the law and showing how it would expand an already abusive IRS. And in a rare fit of common sense, the 1099 requirement was repealed earlier this year.

That’s the good news. The bad news is that an international version of Obamacare’s 1099 scheme also was enacted early last year. But since the burden is largely falling on foreigners, there’s no groundswell among voters to repeal the law – even though it will impose far more damage on the American economy.

Known as the FATCA (the acronym for the Foreign Account Tax Compliance Act), this law was included as a revenue-raising provision to pay for one of Obama’s failed stimulus bills.

But while the bill didn’t create jobs, it has created a giant nightmare for all sorts of people and firms – including foreign financial institutions that may now decide that it’s no longer worth the trouble to invest in America.

Consider these excerpts from a shocking story in the Financial Times.

…one of Asia’s largest financial groups is quietly mulling a potentially explosive question: could it organise some of its subsidiaries so that they could stop handling all US Treasury bonds? Their motive has nothing to do with the outlook for the dollar. …Instead, what is worrying this particular Asian financial group is tax. In January 2013, the US will implement a new law called the Foreign Account Tax Compliance Act. …the new rules leave some financial officials fuming in places such as Australia, Canada, Germany, Hong Kong and Singapore. …implementing these measures is likely to be costly; in jurisdictions such as Singapore or Hong Kong, the IRS rules appear to contravene local privacy laws. …Terry Campbell, head of Canada’s banking association, points out, the rules are essentially akin to “conscripting financial institutions around the world to be arms of US tax authorities”. …the IRS is threatening to impose a withholding tax of up to 30 per cent on sales of US assets by groups that it deems to be “non-compliant” – and the assets could include US shares or US Treasury bonds. Hence the fact that some non-US asset managers and banking groups are debating whether they could simply ignore Fatca by creating subsidiaries that never touch US assets at all. “This is complete madness for the US – America needs global investors to buy its bonds,” fumes one bank manager. “But not holding US assets might turn out to be the easiest thing for us to do.” …“Right now my board is probably as concerned about political risk in America as Indonesia, from a business perspective – perhaps more so,” says the head of one large global bank. It is a complaint that American politicians ignore at their peril.

Many people, when hearing about foreign banks resisting demands by the IRS, might automatically assume the issue involves jurisdictions with strong human rights laws with regards to financial privacy, such as Switzerland or the Cayman Islands.

There are plenty of those stories, to be sure, but American tax law has become so bad that the IRS is causing headaches and anger even in nations with high taxes and weak protection of client data.

Here’s an excerpt from an article from the Financial Post in Canada.

Toronto-Dominion Bank is putting up a fight against a new U.S. regulation that would compel foreign banks to sort through billions of dollars of deposits to find U.S. citizens who might be hiding money. According to Bloomberg News, TD has complained that the proposed IRS rule is unreasonable because it would require the bank to make US$100-million investment in new software and staff. Other lenders resisting the effort include Allianz SE of Germany, Aegon NV of the Netherlands and Commonwealth Bank of Australia, Bloomberg said. Now the Canadian Bankers association has joined the fray. In an emailed statement the CBA called the requirement “highly complex” and “very difficult and costly for Canadian banks to comply with.” …According to the New York-based Institute of International Bankers, major global banks would end up spending US$250 million or more to comply with the regulation in terms of new technology employee training.

The vast majority of Americans are very fortunate that they don’t have any personal interactions with the IRS’s onerous international tax rules. But that doesn’t mean they shouldn’t care. The tax treatment of cross-border economic activity can have enormous implications for America’s prosperity, as I’ve already explained in my discussions of a reckless IRS regulation that could drive more than $100 billion of capital out of American banks.

But that’s just the tip of the iceberg. FATCA is far more onerous and extensive, so the damage will be much greater. Not surprisingly, the law utterly fails to satisfy any sort of cost-benefit analysis.

From the perspective of politicians, the “benefit” is more tax revenue. So how does FATCA score on this basis? During the 2008 campaign, Obama claimed this policy would generate $100 billion of additional revenue every year. When it came time to score the legislation, however, the Joint Committee on Taxation predicted that the law will generate only $870 million per year. That’s a big drop-off, even by the shoddy standards of Washington.

Yet for this tiny amount of revenue, the law imposes a giant regulatory burden on all individuals, companies, and institutions that meet two criteria: 1) They have some form of cross-border economic activity, and 2) They have a business or citizenship relationship with the United States.

Americans living overseas are one of the groups that will be severely penalized. Simply stated, foreign financial institutions are treating U.S. citizens like lepers because they don’t want to deal with the IRS and be deputy enforcers of terrible American law. Here are comments from some of Americans living in other nations (all of whom wish to remain anonymous because they fear being targeted by a thuggish IRS).

o  From an American with a spouse working in Germany – “…when he went to create an account, he discovered that the bond fund could not be sold to US citizens.”

o  From a non-profit group operating in Europe – “…we received notification from [bank redacted] that they were terminating our account.”

o  From an American working in Switzerland – “I’m in the process of having my…accounts with [bank redacted] forced closed, except for the mortgage. I’ve been unable to open an account with any other Swiss bank.”

o  From an American living in Belgium – “…my portfolio of investments held at their bank was blocked. …He advised me that as of that
date, I could no longer trade, but could only hold, sell or transfer my portfolio. I was banned from trading in either US stocks or all others.”

o  From a retired teacher in Germany – “I was denied the policy because I am an American citizen. My agent very clearly said that he could sell the policy that I wanted to any other nationality, except me-because I was American!”

o  From an American working in Saudi Arabia – “As a resident of Saudi Arabia, I have twice been rejected as a customer, purely on the basis of my US citizenship. In both instances, I was told that increased administrative and compliance burdens imposed by US authorities have led the banks in question to refuse to open securities accounts for American citizens.”

o  From an American in Japan – “All of these banks and institutions are cutting me off from participation in any but the most simple of basic bank account. Why? Because they do not want to take the time and instill the systems and carry the cost of reporting the income of each of their US citizen clients to the US government.”

o  From an American married to a European – “I have been unable to gain legal advice in Switzerland regarding US Wills and Guardianships because [bank redacted] lawyers are ‘not permitted to speak to Americans about legal, tax or banking matters in specific terms.'”

o  From an American married to a European – “The company who has been holding my modest UK share portfolio wrote to me in September 2010 saying they were closing my account. They were removing all US persons from their client base due to the increased reporting and audit costs placed on them by the Fatca legislation.”

o  From an American in Europe with a foreign spouse – “They sent me a letter saying: Our records show that you are an American citizen. Because of various strict new American rules regarding securities accounts held by American shareholders, we are closing such accounts including yours.”

o  From an American assigned overseas by his company – “I was extremely surprised and outraged by the fact that not one bank (including foreign branches of US banks!) would allow me to open a simple savings account to pay my rent and bills. All of the banks cited my US citizenship and the difficulties they experience with the US government.”

o  From an American in Spain – “I have been forced to close a U.S. bank account due to being an overseas citizen and cannot open new bank or brokerage accounts in the U.S. I am also being denied the opening of new brokerage accounts in Spain.”

Last but not least, another set of victims are foreigners who legally reside in the United States. That makes them tax residents according to American tax law, which means that they also are lepers from the perspective of foreign financial institutions.

Let’s close this lengthy post by including this letter from a Danish bank to a Danish citizen living in the United States. Once again, identifying information is redacted because the person did not want to suffer IRS persecution (it should disturb all of us, by the way, that there is such universal fear of IRS thuggery).

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“…maintaining NATO is like keeping forts in South Dakota to defend settlers against hostile Indians.”

That line is from a great column by Steve Chapman, who wonders why NATO still exists. If you read this column and Mark Steyn’s recent National Review article (which I blogged about here), you will have a good grasp of what makes libertarian foreign policy very compelling.

Defense Secretary Robert Gates went to Europe recently to announce that the North Atlantic Treaty Organization may have a “dismal future” and that before long, American leaders “may not consider the return on America’s investment in NATO worth the cost.” Why does he make that sound like a bad thing? “Watch out! We may have to stop spending so much money protecting countries that can protect themselves!” …Its entire purpose was to protect Western Europe from the Soviet and Warsaw Pact forces in Eastern Europe, which were a plausible threat to invade and conquer. But at this point, maintaining NATO is like keeping forts in South Dakota to defend settlers against hostile Indians. The Western alliance won the Cold War, and in the absence of some major, general threat, Gates would do better to ask why it needs to be preserved. …Ever since the end of the Cold War, NATO has been an answer in search of a question. It validates what Ronald Reagan is credited with saying: “Nothing is so permanent as a temporary government program.” Everyone understood why we kept huge forces in (West) Germany a generation ago. But today, it’s a puzzle. Who are they supposed to fight? The Finns? Missions like Libya are an attempt to justify an organization that has outlived the problem it was created to solve. …The defense secretary fumes that too many countries “enjoy the benefits of membership” but “don’t want to share the risks and costs.” Of course they do. If you let people join a nice club without paying dues, how many would turn it down? And if you later asked them to mop the floors, how many would grab a bucket? Our allies are behaving rationally, and we keep wondering why. Gates may enjoy continually pounding his head against a brick wall. But the rest of us might find it feels really good to stop.

I suppose it would be appropriate to acknowledge that the NATO example is very simple and straightforward. It’s much more challenging for libertarians (and everyone else) to figure out how to respond to something like Islamic terrorism. Ending the nation-building projects in Iraq and Afghanistan would be a good start, to be sure, but I strongly doubt whether that would have any significant effect on the threat of attacks. I don’t pretend to know the answer, but perhaps the drone attacks are the least-worst approach. Simply stated, keep cutting the heads off the snakes.

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When Will Obama Have an Epiphany on the Road to Greece?

After reading a story about economic liberalization in Cuba, I wondered (somewhat tongue in cheek) whether we should trade Obama for Castro.

I also blogged about the former socialist president of Brazil, who seemed to have more sense than Obama because he recognized that you can’t redistribute unless people first produce.

We now have another example of a foreign statist who has had an epiphany. Here’s an excerpt from a Canadian Press story about the President of Russia recognizing that big government is a recipe for stagnation.

Russian President Dmitry Medvedev on Friday challenged the legacy of his powerful predecessor, Vladimir Putin, condemning the state’s heavy role in the economy and the centralization of power at the Kremlin… “The proposition that the government is always right is manifested either in corruption or benefits to ‘preferred’ companies,” he said. “My choice is different. The Russian economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation.” …Medvedev said that the country must begin to tackle the problem immediately to avoid “the point of no return from the (economic) models that are moving the country backwards.” “Corruption, hostility to investment, excessive government role in the economy and the excessive centralization of power are the taxes on the future that we must and will scrap,” he said.

There’s a serious point to all this, of course, and it’s the fact that we know we are on a road that will lead to a Greek-style economic collapse. Yet Obama’s response is to step on the accelerator.

(h/t: Powerline)

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Which Nation Has Dumber Bureaucrats and More Political Correctness, the United States or United Kingdom?

Somebody just sent me a story from the UK-based Daily Telegraph about two little boys who got in trouble for playing army at school. You may think I’m joking, but here’s a blurb from the report.

Staff at Nathaniel Newton Infant School in Nuneaton, Warwickshire, reprimanded the two boys after they were seen making pistol shapes with their fingers. Teachers broke up the imaginary classroom shoot-out and contacted the youngsters’ parents, warning them that such behaviour would not be tolerated. …Parenting groups condemned the school’s reaction to the children’s game of soldiers… Margaret Morrissey, founder of the family lobby group Parents Outloud, said: “It is madness to try to indoctrinate children aged seven with political correctness in this way. “Children have played cowboys and Indians like this for generations and it does them absolutely no harm whatsoever.” …The case follows a string of similar incidents in which children’s playtime activities have been curbed by overzealous staff over health and safety concerns. Earlier this year, a Liverpool school banned youngsters from playing football with anything other than sponge balls amid fears youngsters might get hurt. Research last month also found that one in six British schools had banned conkers over concerns of pupils being hit in the face. Other traditional playground games such as British bulldog and even leapfrog are prohibited at 30 per cent 10 per cent of schools respectively, a study by the Association of Teachers and Lecturers union found.

This is mind-boggling stupidity and jaw-dropping political correctness, and my first instinct was to wonder how a nation that once ruled much of the world has descended to such a pathetic level.

Then I wondered whether, as an American, I was guilty of throwing stones in a glass house. There certainly have been lots of dumb examples of political correctness in the UK.

o A job-placement center that got in trouble for discriminating against incompetent people by seeking “reliable” and “hard-working” candidates.

o A women who was being threatened by thugs got in trouble with the police for brandishing a knife in her own home.

o A man got arrested for finding a gun in his yard and turning it over to the police.

o The government wanted to require “competency tests” for pet owners.

These surely are laughable examples of bureaucracy run amok. But is the United States any better, given these examples?

o A Rhode Island boy getting in trouble for bringing toy soldiers to school.

o A student in San Diego who got in trouble for making a motion detector for a science project, simply because someone decided it resembled a bomb.

o The military was criticized for giving Osama bin Laden an Indian code name (Geronimo) as part of the operation to exterminate the al Qaeda leader.

o A Florida student was expelled for having a toy gun on school property.

o And how can we omit the politicians in San Francisco, who decided that banning happy meal toys was an appropriate use of government coercion.

I’m not sure which country produces more stupidity, but we can safely conclude that governments do stupid things in all countries.

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Weiner Is a Perfect Symbol of the Permanent Political Class (Scientific Name: Leechus Profligus)

Michelle Malkin hits the nail on the head, explaining that ex-Congressman Anthony Weiner is a wretched (but not unusual) example of the modern politician – a life spent mooching from the public, lining his pockets while making life harder for people in the productive sector of the economy. And every time people like Weiner (including many GOPers) expand the burden of government, that further enriches and empowers the political elite at the expense of real America.

Weiner’s life has been nothing but Congress. Nothing but government. Nothing but taxpayer-subsidized self-perpetuation. In other words: the life of a pathetic public leech. …Last year, the now-jobless Weiner joked on former roommate Jon Stewart’s cable comedy show that he didn’t “have a lot of marketable skills.” It’s one of Weiner’s rare truthful utterances over the past year. A protege of fossilized New York Sen. Charles Schumer, Weiner has spent the past 20 years in politics — straight out of college to the present. Through seven consecutive congressional terms, he has stridently advocated job-killing policies in the name of the working class, about which this ruling-class elitist knows nothing. …Weiner served faithfully as one of liberalism’s loudest mouths opposing entitlement and debt reform. Meanwhile, he locked in his public pension and racked up hefty private credit-card bills. (Financial disclosure forms show he owes some $15,000 on an annual salary of less than $200,000.) He married another career political servant, Clinton intimate Huma Abedin, who has worked in government since taking on a White House internship in 1996. Now, they are expecting a child — and he is counting on the Beltway/Big Apple revolving door to put food on the table. History, alas, is on his side. The incumbency racket eternally rewards big spenders and big redistributors of collective wealth. Among all the other sordid lessons Weiner-gate has taught us, it has reminded us that the progressive notion of “public service” is really private-job protectionism on the public’s dime.

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The War on Drugs Is as Foolish as the War on Poverty

I’ve written before about how the War on Poverty has likely resulted in more poverty.

I don’t know if the War on Drugs results in more drug use, but I have posted about how it is a costly failure that increases overall crime.

The good folks at Reason TV have just released a video about no-knock raids. This isn’t a typical policy video, but that may make it even more persuasive.

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The Economy Will Suffer if Republicans Sell Out on Taxes

News reports indicate that the left is putting enormous pressure on Republicans to sell out as part of the “Biden Group” negotiations between Congress and the Vice President.

I explained the other day why the left is so anxious to get GOPers to surrender on the tax issue. Simply stated, the left’s fiscal agenda requires more revenue coming to Washington. And they also want Republicans to commit political suicide.

If GOP politicians surrender on the tax issue, they deserve to lose. But the American people don’t deserve the negative consequences, which is what I discuss in this interview with Neil Cavuto.

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Why on Earth Should We Consider Tax Increases When Politicians and Bureaucrats Allow Multi-Billion Dollar Losses of Taxpayer Money Because of Waste, Fraud, and Abuse?

Maybe I’m just old fashioned, or maybe I’m a bit stiff-necked, but I will never relent in my opposition to tax increases so long as the crowd in Washington is spending money on things that are not appropriate functions of the federal government.

But that’s just one obstacle that has to be overcome. I will also be dogmatic in my fight against higher taxes so long as there is massive waste, fraud, and abuse in federal programs.

And sometimes, to really get me upset, we have massive waste, fraud, and abuse for programs that are not legitimate functions of the federal government.

Here’s an excerpt from a story in Time magazine, but don’t read it if you have high blood pressure.

The Social Security Administration made $6.5 billion in overpayments to people not entitled to receive them in 2009, including $4 billion under a supplemental income program for the very poor, a government investigator said Tuesday. In all, about 10 percent of the payments made under the agency’s Supplemental Security Income program were improper, said Patrick P. O’Carroll Jr., the Social Security inspector general. …Throughout the federal government, improper payments totaled $125 billion last year, up from $110 billion in 2009, O’Carroll said. In 2009, only two other agencies — the Departments of Health and Human Services, and Labor — had more improper payments than Social Security, he said.

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Nobel Prize Winner Analyzes the Obama Growth Gap

I’ve explained before that one of the most damning pieces of evidence against Obamanomics is that the economy is suffering from sub-par growth, something that is particularly damning since normally one expects to see faster-than-average growth following an economic downturn.

In a recent presentation, Robert Lucas of the University of Chicago included a couple of graphs that illustrate this phenomenon. This first chart shows the history of U.S. economic growth over the past 140 years. As you can see, the growth rate was remarkably constant over time, and there were always periods of rapid growth following economic downturns.

Lucas, who won the Nobel Prize in economics in 1995, then looks at the data for the recent downturn and recovery. As you can see, we have been struggling to get back to average growth rates and we have not enjoyed any of the above-average growth that normally follows a recession.

The key question, of course, is why growth has been anemic, resulting in (what seems to be) a permanent loss of output. In his presentation, Lucas warns that bad government policy is playing a big role. He says that “the problem is government is doing too much,” and he specifically highlights the “likelihood of much higher taxes, focused on ‘the rich'” and a “large increase in the role of government” in the healthcare sector.

In his conclusion, Professor Lucas is not overly optimistic about recovering lost output. He doesn’t make any flamboyant claims, but he does note that “European economies have larger government role and 20-30% lower income level than US.”

The obvious connection, as I’ve pointed out on many occasions, is that America is becoming a European-style welfare state and it is unavoidable that we will suffer from European-style economic malaise.

P.S. It should be noted that America’s anemic economic performance in recent years is not solely Obama’s fault. As the White House repeatedly points out, he inherited a downturn. That is completely accurate. My complaint, however, is that Obama promised hope and change but instead has exacerbated the big government policies of his predecessor.

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