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Archive for June, 2011

Ben Bernanke is definitely trying hard to overtake Arthur Burns and G. William Miller (those wonderful guys who helped give us the 1970s) as the worst Fed Chairman of the modern era. But unlike Burns and Miller, who “earned” their poor reputations with bad monetary policy, Bernanke is trying to cement his place in history by being a stooge for the big-government policies of the Washington establishment (he also is getting lots of criticism for QE2 and other monetary policy actions, but let’s give Bernanke the benefit of the doubt and assume all those decisions will somehow work out for the best).

Bernanke frequently pontificates about the supposed horrors of deficits and debt (I write “supposed” because the real problem is spending, with red ink being a symptom of a government that is far too large). Yet he endorsed Obama’s failed stimulus. He’s also asserted that reducing the burden of government spending would hurt the economy. And he was an avid supporter of the TARP bailout.

Now he’s trying to discourage GOPers from seeking budgetary savings as part of a proposed increase in the debt limit. Here’s a blurb from the AP report.

Federal Reserve Chairman Ben Bernanke on Tuesday urged Republicans to support raising the nation’s borrowing limit. He said threatening to block the increase to gain deeper federal spending cuts could backfire and worsen the economy. Even a short delay in making payments on the nation’s debt would cause severe disruptions in financial markets, damage the dollar and raise serious doubts about the nation’s creditworthiness, Bernanke said.

By the way, I’ve previously debunked Bernanke’s demagoguery about disrupted financial markets. The federal government this year will collect 10 times as much revenue as needed to service the national debt.

Let’s close with a thought experiment. What do you think Bernanke would say if Senate Republicans got suckered into a tax increase and that tax hike was attached to a debt limit, but House GOPers were refusing to go along? It’s just a guess, of course, but I’m quite confident that Bernanke would completely reverse his position about the debt limit and suddenly say something like “it is critical to include such a measure to demonstrate seriousness about fixing the fiscal mess in DC.”

What it would actually demonstrate, though, is that Bernanke is a tool for big government.

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The main political goal of the left is to seduce Republicans into supporting higher taxes. Bluntly stated, all of their fiscal policy goals require more tax revenue coming to Washington.

The most important factor (from their perspective) is that they can’t make government much bigger than it is right now without a major tax increase. Sure, they can finance spending with borrowing, but it appears that we’ve finally gotten to a point – both politically and economically – where higher deficits are no longer an option.

But here’s the problem for the left. Higher taxes generally are not popular with voters and politicians who campaign for higher taxes do not fare very well. This is why Democrats, if they want to get more tax revenue and avoid political fallout, need to somehow convince GOPers to be part of the process (indeed, The Hill has reported that “the Democratic playbook has changed, with a key goal: get Republicans to violate the Americans for Tax Reform (ATR) pledge not to raise taxes.”

It’s easy to understand why the left wants the GOP to give up the no-tax-increase pledge. Voters today think Democrats want to raise their taxes and Republicans want to protect them. That’s political gold for the GOP.

But if dumb Republicans can be convinced to sell out, then the political dynamics get completely reversed. All of a sudden, voters have a big incentive to make sure they’re not the ones who get hit, so they are prone to support higher taxes on the rich. This is where the Democrats have a home-field advantage.

Democrats already are willing to endorse higher tax rates on upper-income taxpayers, to be sure, even without getting cover from Republicans. But it’s much better to lure the GOP into a tax deal. After all, even soak-the-rich tax hikes generate a lot of opposition. Simply stated, voters wisely suspect that higher taxes on the so-called rich eventually will translate into higher taxes on everybody else.

But even if they could unilaterally impose class-warfare taxes on upper-income taxpayers, that still doesn’t solve the left’s problem. They would never admit it publicly, but smart left wingers understand that there are two very powerful reasons why soak-the-rich tax increases won’t raise much revenue.

    1. There are not enough rich people to finance big government. According to the latest IRS data (from 2008), there are only about 321,000 households with income greater than $1 million of annual income. And they have aggregate taxable income of only about $1 trillion. That’s a lot of money, of course, but it wouldn’t balance the budget even if the government confiscated every penny (which would have catastrophic consequences on the incentives of rich people to earn and report income in future years).

    2. Rich taxpayers will change their behavior to avoid the tax increases. This is the “Laffer Curve” effect, and it basically means that higher tax rates don’t raise as much revenue as expected because people respond to incentives and reduce the amount of income they are willing to earn and report. The Laffer Curve is especially strong for upper-income taxpayers because rich people have much greater access to lawyers, lobbyists, and accountants. Moreover, rich people are far more likely to earn capital income (interest, dividends, capital gains, etc), and it is much easier to control the timing, level and composition of capital income.

This doesn’t mean the left won’t push for class-warfare tax increases. They will. But their main motive will be politics, not raising revenue.

This is why, looking at the long-run fiscal situation, the left needs a value-added tax. The VAT is the only realistic way to collect the huge amount of revenue that would be necessary to finance promised entitlement benefits. As I’ve noted before, the VAT is a giant source of tax revenue, so the left no longer would have to worry about financing a European-sized welfare state. After all, a VAT would give America a European-style tax system.

But a VAT would generate a firestorm of opposition. The Democrats would be committing political suicide to push such a tax scheme, especially since it would be a huge burden for the poor and middle class. This is why the left desperately needs to trick gullible Republicans into going along with a tax hike.

Enacting a VAT would be a win-win situation for the left. The torrent of new revenue would make it much easier to preserve the welfare state, so it’s easy to understand why they want to make it happen from a policy perspective. But the political benefits for the left are equally large. Here are a couple of inevitable consequences if GOPers get tricked into participating in a budget summit and wind up getting seduced into supporting a VAT.

    1. There will be civil war inside the Republican Party. The vast majority of GOP politicians have pledged to vote against higher taxes. Some of them are insincere, of course, but many of them genuinely believe if defending taxpayers. A tax-increase deal would create a divisive fight, similar to what happened in 1990. This is a very nice fringe benefit for the left.

    2. Conservative voters will rebel against the GOP establishment. When Republicans do the wrong thing, “base” voters get disillusioned. Some inside-the-beltway GOPers say this doesn’t matter because these voters have “no other options.” But they have the option of staying home, like they did in 2006 and 2008. Or sometimes they have a third party option, like in 1992. This is a very nice fringe benefit for the left.

    3. Putting a VAT on the table will give the left a perfect opportunity to impose additional class warfare taxes. Because of the zero-sum mindset on Capitol Hill, there is strong bias to maintain the existing “distribution” of the tax burden. This means that a VAT, which is perceived as discriminating against the poor and middle class, almost surely will be married with some punitive taxes that target the nation’s most productive taxpayers. This is a very nice fringe benefit for the left.

To summarize, the VAT would be a fiscal policy disaster. It would single-handedly guarantee that the United States would turn into a Greek-style welfare state. And for those who care about the political future of the GOP, it would cripple the party in the eyes of voters.

Fortunately, there is a very simple way of stopping this horrible outcome. Republicans merely need to say no. At the risk of stating the obvious, there is no way that a VAT would be imposed without the GOP giving political cover to the Democrats. Indeed, it is highly unlikely that any significant tax increase, from this point forward, could be enacted without Republicans providing the margin of victory.

They may be the “Stupid Party,” but it’s an open question whether they are that self-destructively foolish. Especially when there is no legitimate argument for higher taxes.

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The libertarian position is that government should be totally neutral whenever there is a conflict between labor and management.

Unfortunately, politicians usually tilt the playing field in favor of unions, largely in response to big campaign contributions.

This issue has been in the news because of the Obama Administration’s thuggish move to block Boeing from building a factory in South Carolina, so this is a good time to post this debate I had with one of the guys at the Brookings Institution.

The fight in Wisconsin was the starting point for the discussion, and if you’ve been following that debate, you’ll very much enjoy this cartoon.

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Larry Summers served as Chairman of the National Economic Council for Barack Obama, so it is rather remarkable that he is admitting that the economy is in deep trouble and that America may be on the verge of long-term, Japanese-style stagnation. Here’s part of what he wrote.

From the first quarter of 2006 to the first quarter of 2011, the U.S. economy’s growth rate averaged less than 1 percent a year, similar to Japan in the period its bubble burst. During that time, the share of the population working has fallen from 63.1 to 58.4 percent, reducing the number of those with jobs by more than 10 million. …Traditionally, the American economy has recovered robustly from recession as demand has been quickly renewed. Within a couple of years after the only two deep recessions of the post-World War II period — those of 1974-75 and 1980-82 — the economy was growing in the range of 6 percent or more, rates that seem inconceivable today. Why?

So what does Summers propose as a solution? Well, there’s good news and bad news.

The good news is that he wants a tax cut. Indeed, he wants a fairly large tax cut. And while his column does contain a few throwaway lines in favor of government spending, he doesn’t have a laundry list of new programs that he wants to fund, so he’s not calling for a repeat of the failed stimulus from 2009.

The bad news is that he wants a Keynesian tax cut. More specifically, he wants a temporary payroll tax cut. As a knee-jerk advocate of lower taxes, it seems that I should be happy, but I want the right tax cuts for the right reason. More specifically, I want proposals that permanently reduce marginal tax rates on productive behavior – i.e., supply-side tax cuts.

Summers, by contrast, wants a tax cut that will encourage people to spend more money. But that’s the Keynesian approach, and it fails to realize that economic growth is when people earn more money. In other words, we need to produce before we consume.

A temporary payroll tax cut would reduce a marginal tax rate on employment, so there is some merit to Summers’ proposal. But it’s difficult to imagine businesses making permanent decisions to boost jobs and output on the basis of temporary tax policy. My main concern is that we would get very little bang for the buck from this proposal.

Here’s more of the oped.

Without the payroll tax cuts and unemployment insurance negotiated by the president and Congress last fall, we might well be looking at the possibility of a double-dip recession. Substantial withdrawal of fiscal support for demand at the end of 2011 would be premature. Fiscal support should, in fact, be expanded by providing the payroll tax cut to employers as well as employees. Raising the share of the payroll tax cut from 2 percent to 3 percent would be desirable as well. At a near-term cost of a little more than $200 billion, these measures offer the prospect of significant improvement in economic performance over the next few years translating into significant increases in the tax base and reductions in necessary government outlays.

I suppose I should be happy that Summers is moving in the right direction. This plan is much better than the 2009 stimulus. But if it gets enacted (and it is part of the discussions between Biden and congressional Republicans), don’t expect an economic renaissance.

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In a column about the revolving door between big government and the lobbying world, here’s what the irreplaceable Tim Carney wrote about the waiver process for folks trying to escape the burden of government-run healthcare.

Congress imposes mandates on other entities, but gives bureaucrats the power to waive those mandates. To get such a waiver, you hire the people who used to administer or who helped craft the policies. So who’s the net winner? The politicians and bureaucrats who craft policies and wield power, because this combination of massive government power and wide bureaucratic discretion creates huge demand for revolving-door lobbyists. It’s another reason Obama’s legislative agenda, including bailouts, stimulus, ObamaCare, Dodd-Frank, tobacco regulation, and more, necessarily fosters more corruption and cronyism.

This seemed so familiar that I wondered whether Tim was guilty of plagiarism. But he’s one of the best journalists in DC, so I knew that couldn’t be the case.

Then I realized that there was plagiarism, but the politicians in Washington were the guilty parties. As can be seen in this passage from Atlas Shrugged, the Obama Administration is copying from what Ayn Rand wrote – as dystopian parody – in the 1950s.

Nobody professed to understand the question of the frozen railroad bonds, perhaps, because everybody understood it too well. At first, there had been signs of a panic among the bondholders and of a dangerous indignation among the public. Then, Wesley Mouch had issued another directive, which ruled that people could get their bonds “defrozen” upon a plea of “essential need”: the government would purchase the bonds, if it found proof of the need satisfactory. there were three questions that no one answered or asked: “What constituted proof?” “What constituted need?” “Essential-to whom?” …One was not supposed to speak about the men who, having been refused, sold their bonds for one-third of the value to other men who possessed needs which, miraculously, made thirty-three frozen cents melt into a whole dollar, or about a new profession practiced by bright young boys just out of college, who called themselves “defreezers” and offered their services “to help you draft your application in the proper modern terms.” The boys had friends in Washington.

This isn’t the first time the Obama Administration has inadvertently brought Atlas Shrugged to life. The Administration’s top lawyer already semi-endorsed “going Galt” when he said people could choose to earn less money to avoid certain Obamacare impositions.

So if you want a glimpse at America’s future, I encourage you to read (or re-read) the book. Or at least watch the movie.

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I don’t know if Mark Steyn would agree with my characterization, but his new National Review column presents a very powerful case for libertarian foreign policy.

As is so often the case with Steyn’s writing, it’s very clever and often funny, but it’s also a remarkable indictment of interventionism and international bureaucracies. It’s only available for subscribers, but here’s an excerpt.

Thanks to American defense welfare, NATO is a military alliance made up of allies that no longer have militaries. In the Cold War, that had a kind of logic: Europe was the designated battlefield, so, whether or not they had any tanks, they had, very literally, skin in the game. But the Cold War ended and NATO lingered on, evolving into a global Super Friends made up of folks who aren’t Super and don’t like each other terribly much. At the beginning of the Afghan campaign, Washington invested huge amounts of diplomatic effort trying to rouse its allies into the merest gestures of war-making: The 2004 NATO summit was hailed as a landmark success after the alliance’s 26 members agreed to commit an extra 600 troops and three helicopters. That averages out at 23.08 troops per country, plus almost a ninth of a helicopter apiece. Half a decade of quagmire later, Washington was investing even larger amounts of diplomatic effort failing to rouse its allies into the most perfunctory gestures of non-combat pantywaist transnationalism: We know that, under ever more refined rules of engagement, certain allies won’t go out at night, or in snow, or in provinces where there’s fighting going on, so, by the 2010 NATO confab, Robert Gates was reduced to complaining that the allies’ promised 450 “trainers” for the Afghan National Army had failed to materialize. Supposedly 46 nations are contributing to the allied effort in Afghanistan, so that would work out at ten “trainers” per country. Imagine if the energy expended in these ridiculous (and in some cases profoundly damaging) transnational fig leaves had been directed into more quaintly conventional channels — like, say, identifying America’s national interest and pursuing it. …Transnational do-gooding is political correctness on tour. It takes the relativist assumptions of the multiculti varsity and applies them geopolitically: The white man’s burden meets liberal guilt. No wealthy developed nation should have a national interest, because a national interest is a selfish interest. …in an era of Massively Applied Desultoriness, we spend a fortune going to war with one hand tied behind our back. The Forty-Three Percent Global Operating Industrial Military Complex isn’t too big to fail, but it is perhaps too big to win — as our enemies understand. So on we stagger, with Cold War institutions, transnational sensibilities, politically correct solicitousness, fraudulent preening pseudo–nation building, expensive gizmos, little will, and no war aims . . . but real American lives.

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There are lots of things that are important for a good life and a prosperous, well-functioning society, including family and community. But something else that belongs on the list, at least if you want more growth, is individualism.

Here’s an excerpt from a new study by two scholars at the University of California at Berkeley.

The model shows that individualism has a dynamic advantage leading to a higher economic growth rate… We provided empirical evidence of a causal effect of individualism on measures of long run growth (output per capita, productivity) and innovation by instrumenting individualism scores with the frequency of blood types which are neutral genetic markers and plausibly satisfy the exclusion restriction. Parents transmit their culture as well as their genes to their children so that genetic data can serve as proxies for vertical cultural transmission and it is unlikely that there is a direct feedback from e.g. output per capita to genes. Since that research shows a powerful effect of culture on long run growth, the key question is what dimensions of culture other than individualism/collectivism matter for long run growth. In this paper, we look at the main existing cross-country measures of culture and analyze their effect on output per capita. We find essentially that only individualism has a robust effect. …We conclude from this exercise that the individualism-collectivism dimension is the central cultural variable that matters for long run growth.

(h/t: Garett Jones)

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It doesn’t get much attention, but one of the most interesting economic experiments in American history occurred right after World War II. Despite warnings of Armageddon from Keynesian economists, government spending was slashed as the United States demobilized from the war.

This was the opposite of the failed Keynesian experiment of the 1930s, when massive increases in government spending failed to boost economic growth.

So how did this experiment is smaller government work? Well, here’s some of what Jeff Jacoby wrote on the subject.

Writing last year in the Cato Policy Report, economists Jason Taylor and Richard Vedder showed that the great post-World War II economic boom was ushered in by the swift rollback of what had been the largest economic “stimulus” in US history. At the time, leading Keynesians cautioned that the abrupt withdrawal of federal dollars would plunge the economy into a new depression. Their warnings were ignored. “Government canceled war contracts, and its spending fell from $84 billion in 1945 to under $30 billion in 1946,” Taylor and Vedder wrote. “By 1947, the government was . . . running a budget surplus of close to 6 percent of GDP. The military released around 10 million Americans back into civilian life. Most economic controls were lifted, and all were gone less than a year after V-J Day. In short, the economy underwent . . . the ‘shock of de-stimulus.'” Fearful predictions of massive unemployment — 14 percent, Business Week said — never materialized. Far from collapsing, “labor markets adjusted quickly and efficiently once they were finally unfettered.” Even with millions of demobilized soldiers re-entering the workforce, “unemployment rates . . . remained under 4.5 percent in the first three postwar years.” Workers who lost government-funded jobs quickly replaced them in the surging private sector. “In fact,” Taylor and Vedder add, “civilian employment grew, on net, by over 4 million between 1945 and 1947 when so many pundits were predicting economic Armageddon. Household consumption, business investment, and net exports all boomed as government spending receded.” America’s postwar experience indicates that vibrant growth is generated not by massive government interference in the economy, but by the reverse. The way to revive a gasping private sector is for government to get out of its way, not to choke it with trillions of dollars in new spending.

Not surprisingly, Reagan understood this issue, as he said in this video. Also, here’s one of my videos, which looks more broadly at the issue of whether government spending is a help or hindrance to economic growth.

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Here’s another news appearance from my new youtube channel. I chat about the importance (or lack thereof) of a possible ratings downgrade for the United States government.

You’ll see that I’m not overly impressed by Moody’s and the rest of the rating agencies.

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I’m a bit disappointed in the selection of jokes I’ve seen about Weinergate. One can only wonder if they’re going easy on him (and John Edwards) because of bias.

But several of these are worth a chuckle.

From Conan:

    Democrats and Republicans are calling for Congressman Anthony Weiner to resign. Late night comedians are asking him to hang in there.

    The women who Weiner communicated with were a college student, a single mom, a blackjack dealer, and a porn star. Or, as we call that here in Los Angeles, the circle of life.

    Comedy people sit around for years hoping for a scandal called “Weinergate.” And then it happens.

    Fifty-one percent of New York voters think Weiner should keep his seat. The other 49 percent think he should disinfect it.

    It turns out that one of the women Congressman Anthony Weiner was communicating with was a porn star. When asked how it was possible to get involved with someone in such a sleazy business, the porn star said, “I don’t know.”

From Letterman:

    There’s a word for people that take pictures of their privates and send them out: “stupid.”

    If Weiner resigns, they’re already talking about replacing him with Ashton Kutcher.

From Kimmel:

    There’s a heat wave over half of the country. It got so hot in New York, a congressman took off his pants and tweeted a picture of himself.

    Many of Anthony Weiner’s Democratic colleagues are calling for him to resign to preserve his dignity, but that ship sailed a long time ago.

From Leno:

    Congressman Weiner has admitted that he did carry on explicit online relationships with six different women. Well, he thought they were women. Turns out three were woman, one was a guy pretending to be a woman, and the other two were congressmen.

From Fallon:

    Lawmakers here in New York have proposed a new program to teach teenagers about the dangers of sexting. Seriously? How about a program to teach New York lawmakers about the dangers of sexting?

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I chatted with über-blogger Glenn Reynolds about the budget, the race for the White House, and other economic issues.

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Here’s the kind of story that makes me fear for the future of the nation. It is a disturbing example of both government stupidity and soft tyranny.

The police may not be ticketing for smoking in the parks, but they are still ticketing parker visitors for crimes like…eating a doughnut in a playground. Yup, this weekend the police gave two young women in Bed-Stuy summonses for eating doughnuts in a playground while unaccompanied by a minor. Tickets for being an adult in or around a playground have been popping up fairly frequently lately—see the Inwood chess players—but instead of giving the offending citizens a warning and urging them to leave, the NYPD’s M.O. appears to be to hand out a ticket. Here’s how our reader, an anthropology graduate student, describes her experience this weekend:

    As we were getting ready to move on, two officers approached us. Amongst themselves they debated whether the children’s toy next to us meant that we were there with a child. Then they asked us, “Are you here with a child?” We told them no. One of the cops moved on to the couple on a bench nearby, also ostensibly childless, while the other one asked for our IDs. We handed them over and soon we were being guarded by this cop as his partner took our IDs to their police car. My friend and I were confused. We had seen parks with gates that had a sign clearly stating that adults without children were not allowed in. This park had no such sign. …I got really angry and asked the officer if he honestly believed he was helping this community by giving us these summonses. His response only made me more angry. “I don’t believe in anything,” he said. “You don’t believe in anything? In helping people? Then you probably shouldn’t be a cop,” …His partner returned. He had written two of the summons. We had been there for over twenty minutes now. He handed over our IDs to the cop that had been guarding us. Of course, they each had their own numbers to maintain so they were splitting the violations. This cop attempted to be sympathetic. He proceeded to tell us that he was trying to be a gentleman by just giving us summonses instead of taking us in for questioning, because that was what “they” wanted him to do. If he just gave us warnings and told us to leave, he would get in trouble for “doing nothing all day.” …Because we hadn’t been drinking alcohol or urinating in public, we do not have the option of pleading guilty by mail. Not that I am planning on pleading guilty. But either way, we have to show up in court or a warrant will be issued for our arrest. My friend does not live in New York and I am out of the country all summer, so this is going to be an ordeal in itself, given that the summons has no information on how to contact the court. Nor do we know how much we owe. Because the cops had no idea about that, either. They were just “doing their jobs,” in the most mindless sense of that phrase.

Presumably, the ban on adults near playgrounds is supposed to hinder child molesters. But does anyone really think a child molester will be deterred by a summons? And does anybody think two women eating doughnuts are the people likely to molest kids (I presume 99 percent of such crimes are committed by men)? And is anyone else outraged that the cops were basically filling a quota of tickets so they could show their supervisor that they weren’t “doing nothing all day.”

I’d like to say this is stupidity, but that doesn’t quite capture the essence of this story. I’m also tempted to say this is the nanny state, but that’s not quite right either. Another option is that this is incompetence, but the cops actually followed the policy as written.

The best I can come up with is that this is a classic example of modern government, a loathsome entity that at best is a nuisance and often becomes a tyrant.

(h/t: Amy Alkon)

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I’ve finally set up a youtube page for my TV interviews. Here’s my discussion with Judge Napolitano about crony capitalism, General Motors, and the bizarre case of a car company CEO endorsing an increase in the gas tax.

The most important point of the interview, at least I hope, is that companies get corrupted and housebroken when they receive handouts, subsidies, and bailouts. And since this is becoming more common, it means America is in danger of becoming another Argentina.

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This is rather remarkable. According to a story in the UK-based Daily Mail, a man was left to die, on a hospital floor, over a period of 10 hours.

I’m not sure whether this is the worst example of government-run healthcare (or non-healthcare, to be more precise). I’ve commented before about the sub-par government-run healthcare system in the United Kingdom, including patients dying of malnutrition, patients suffering needless pain and discomfort, and patients dying from poor care.

Or sometimes the bureaucracy waits for you to die over nine months rather than 10 hours.

But this story is a rather sobering example of what happens is a bureaucratic system. I guess the staff at the hospital decided to be an unofficial death panel. And if you don’t treat people, that is one way of keeping costs down. Here are the grim details from the report.

Nurses casually stepped over a patient as he lay dying on a hospital floor. Peter Thompson, 41, was left in a corridor for ten hours before someone noticed he had passed away. In a final act of indignity, hospital auxiliaries pulled his lifeless body across the floor in a manner his family described as like ‘dragging a dead animal’. The scenes which shame the NHS were all captured on CCTV. Staff thought Mr Thompson was merely drunk and left him to ‘sleep it off’. Yesterday a coroner condemned the death as ‘wholly preventable’. …The hospital’s accident and emergency department was just 200 yards away. Last night it emerged that three nurses face a disciplinary inquiry over their inaction. Mr Thompson’s parents Alan and Rene labelled his treatment ‘inhumane’ and accused nurses of ‘disgusting neglect’. His father, 71, a retired production line worker, said: ‘Seeing your own flesh and blood being dragged across the floor like a dead animal is heartbreaking. ‘It was just inhumane what they did a …Mr Thompson’s daughter Carly, 23, added: ‘He went to them for help and they left him out in the corridor to die cold, wet and lonely with nothing.’

If you read the entire story, you will discover that Mr. Thompson is not the most sympathetic character. He was on drugs and booze and I can understand that the staff may have concluded that he was merely drunk. But to leave him alone for 10 hours?!?

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Here’s some completely depressing news. CNBC is reporting that President Obama is putting American taxpayers on the chopping block to bail out Greece’s corrupt politicians. But, to show he doesn’t discriminate, he also encouraged the German Chancellor to rape her nation’s taxpayers for the same purpose.

President Barack Obama on Tuesday…pledged U.S. support to help tackle the country’s debt crisis. …After a meeting with German Chancellor Angela Merkel, he stressed the importance of German “leadership” on the issue – a hint that he expects Berlin to help – while expressing sympathy for the political difficulties European Union countries face in helping a struggling member state.

The story doesn’t have much detail, but it appears that Obama is willing to brutalize American taxpayers directly (which is what he means by “on a bilateral basis”) and indirectly (i.e., the reference to “international and financial institutions like the IMF”).

…”we have pledged to cooperate fully in working through these issues, both on a bilateral basis but also through international and financial institutions like the IMF.”

What makes this development so unpleasant is that this new bailout (Greece already has been bailed out several times, with both direct and indirect handouts) will make things worse. Another bailout will be a case of throwing good money after bad. And it will exacerbate the economic damage by delaying the economic reforms that are needed to put Greece’s economy in better shape.

And to make matters worse, the other insolvent European welfare states will look at what’s happening in Greece and conclude that they also can avoid necessary reforms and wait for handouts from American and German taxpayers.

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I’m sure I will surrender to temptation and do a couple of posts with Weinergate jokes, but I want to begin on a higher note and make a serious point about Washington’s latest scandal.

Big government means that politicians have a lot of power over the lives of ordinary people. This is bad for all sorts of reasons, but one of the problems is that it means that people who like to wield control over others are drawn to Washington.

And to add injury to insult, these people who like to boss around the rest of us don’t seem to have positive characteristics that offset their personality flaws. I’ve joked during TV interviews that I wouldn’t trust politicians to mow my lawn, so why would we want to give these buffoons more power over our lives and our economy?!?

Here’s what the always-quotable Mark Steyn said in National Review.

…by its nature Big Government will attract strange people drawn to “public service” for the boundless opportunities it offers the otherwise untalented for unearned perquisites and gratifications of one kind or another. …The bigger the state gets, the more the modus operandi of its princelings will tend to the Weinerian.

And here’s part of what my Cato colleague Gene Healy wrote for the Washington Examiner.

There’s nothing wrong with enjoying a good old-fashioned political sex scandal. They’re entertaining, and they may even be edifying — reminding us that self-styled “public servants” are often less responsible, more venal, and just plain dumber than those they seek to rule. …Maybe it’s Weiner’s onetime status as a rising left-wing star that’s made liberal journalists queasy about the pile-on. When sex scandals and partisan loyalties collide, partisans get pious and prissy, lecturing us about America’s “unserious” political culture. But one of the few perks of being a libertarian is that you get to enjoy twice as many scandals. Politics is one big smorgasbord of schadenfreude, and I feel sorry for my Republican friends who root, root, root for the Red Team so ardently that it hampers their enjoyment of the wonderful GOP sex scandals of recent years. …H.L. Mencken thought government as practiced in these United States was “dishonest, insane, and intolerable.” But that never stopped the sage of Baltimore from enjoying what he called “incomparably the greatest show on earth.” In Mencken’s version of American exceptionalism, this great nation had elevated politics to “the plane of undiluted comedy” because “we have clowns in constant practice among us who are as far above the clowns of any other great state as a Jack Dempsey is above a paralytic.” So have a guilt-free laugh about Weinergate. Not only are political sex scandals great fun, they serve an important social purpose. They remind us that we should think twice before we cede more power to these clowns.

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Here’s a stomach-turning story from the Chicago Sun Times about how the political class uses special insider deals to get rich (or richer). What’s remarkable is that there may be nothing technically illegal in this story of crony capitalism and government contracts. But does anyone doubt that being the Mayor’s son was not a relevant (if not the key) consideration?

For years, City Hall maintained that Mayor Richard M. Daley’s son, Patrick Daley, had no financial stake in the deal that brought wireless Internet service to city-owned O’Hare Airport and Midway Airport. But it turns out that the younger Daley still reaped a windfall of $708,999 when Concourse Communications was sold in 2006, less than a year after the Chicago company signed the multimillion-dollar Wi-Fi contract with his father’s administration, company documents obtained by the Chicago Sun-Times show. …Exactly how the deal was structured isn’t clear. Neither Patrick Daley nor his father replied to interview requests. But the amount that Patrick Daley was paid was linked to the sale price of the company, a source with knowledge of the arrangement said: The more the company was sold for, the more Patrick Daley would be paid. The elder Daley — who left office May 16 after deciding not to seek re-election — is now in business with his son. The two Daleys are working out of offices on Michigan Avenue on international business deals. Patrick Daley’s Wi-Fi windfall was part of $1.2 million he was paid as a result of deals he had with Cardinal Growth, a Chicago venture-capital firm that invested in Concourse and other businesses. Among those businesses was a sewer-inspection company that got millions of dollars in no-bid city-contract extensions. In addition to Patrick Daley, Cardinal Growth also has had business dealings in which it made payments to two of his cousins, Robert G. Vanecko and Richard J. “R.J.” Vanecko. …In addition to the $708,999 from those payments linked to the Concourse sale, Cardinal Growth made numerous other payments to Patrick Daley, totaling $543,127, between July 10, 2002, and Oct. 31, 2009, company records show. It isn’t clear what those payments were for.

Chicago has a reputation for this kind of corruption, and I suppose I could make a snarky comment about Obama learning how to be a politician in that environment, but I have little doubt that there are untold versions of this story in every part of government, at all levels of government.

The moral of the story is that big government is the mother’s milk of cronyism, sleaze, unearned wealth, and other forms of corruption. I posted my video on this topic just a few weeks ago, but this is a perfect opportunity to include it again for those who didn’t see it.

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This is the most depressing – but revealing – thing I have read in a long time: “the health-care sector has twice as many clerical workers as nurses and nine times as many as doctors.”

That passage is from a very good column by Robert Samuelson, in which he covers a lot of ground. He starts by expressing contempt for the demagogues attacking Congressman Ryan’s budget plan.

This predictably partisan reaction — preying upon the anxieties of retirees — must depress anyone who cares about the country’s future. It is only a slight exaggeration to say that unless we end Medicare “as we know it,” America “as we know it” will end. Spiraling health spending is the crux of our federal budget problem. In 1965 — the year Congress created Medicare and Medicaid — health spending was 2.6 percent of the budget. In 2010, it was 26.5 percent.

Demagoguery is part of politics, however, which is why I think proponents of reform are making a mistake by allowing the left to characterize this issue as a fight between the status quo and the Ryan plan. As Samuelson notes, there is no alternative to change. The only question is whether we will get consumer-oriented reform as proposed by Ryan or top-down rationing, as would be the case with Obama’s “death panel” approach.

Samuelson’s column also noted that the Congressional Budget Office is hardly a reliable source for cost estimates. I had a post yesterday discussing how the bureaucrats dramatically underestimate costs for new entitlement programs. Well, Samuelson points out that they also have a history of overestimating costs when looking at the impact of reforms that involve giving consumers some control over their health care spending.

CBO may be wrong. When a voucher system was adopted for Medicare’s new drug benefit, the CBO overestimated its costs by a third; the Centers for Medicare and Medicaid Services’ overestimate was 42 percent. When fundamental changes are made to a program, the green-eyeshade types can’t easily predict the results. Moreover, as health expert James Capretta notes, “managed care” plans in the Medicare Advantage program in 2010 did not have higher costs than Medicare’s fee-for-service for similar coverage. Under Ryan’s plan, incentives would shift. Medicare would no longer be an open ATM; the vouchers would limit total spending. Providers would face pressures to do more with less.

I don’t pretend to be an expert on healthcare, but I am firmly convinced that third-party payer is one of the big reasons for rising costs and pervasive inefficiency in the healthcare sector. When we buy goods and services with our own money, we try to get maximum value, and producers respond by trying to be efficient as possible.

In the healthcare sector, by contrast, we shop with other people’s money. Or, to be more technical, we shop in an environment where government policies result in us bearing very little out-of-pocket cost for each additional increment of health care.

As a result, we tend to be unconcerned with price. And producers respond accordingly. Here’s a rather long excerpt from a study mentioned in Samuelson’s column. Published by the National Bureau of Economic Research, it offers a neutral and dispassionate analysis of the healthcare market, but I think the information presented helps make the case that government intervention is a major problem.

In most industries, higher quality is associated with higher prices. That is not true in medical care, however, largely because of the public sector. Medicare accounts for 25 percent of physician and hospital services, and Medicaid accounts for another 13 percent. Since the 1960s, Medicare has paid providers on a fee-for-service basis, without reference to the quality of care delivered. Medicaid reimbursements are more flexible, but they are so low that many providers view Medicaid patients as effectively uninsured. As a result, about 40 percent of the market transmits incentives to provide more care but not more efficient care (Medicare) or to avoid patients who are sick (Medicaid). With so much of compensation pegged to volume, not value, inefficient care is the natural outcome. …The low level of service quality in health care is ironic given the enormous investment in non-clinical personnel. There are 9 times more clerical workers in health care than there are physicians, and twice as many clerical workers as registered nurses. This investment has not paid off in superior outcomes or better customer service, however. …Every analysis of medical care that has been done highlights the significant waste of resources in providing care. Consider a few examples: one study found that physicians spent on average of 142 hours annually interacting with health plans, at an estimated cost to practices of $68,274 per physician (Casalino et al., 2009). Another study found that 35 percent of nurses’ time in medical/surgical units of hospitals was spent on documentation (Hendrich et al., 2008); patient care was far smaller. …The obvious question about health care is why the market has not evolved to become more efficient. …who is the appropriate customer when payers consider care management. In retail trade, the customer is the individual shopper. If Wal-Mart finds a way to save money, it can pass that along to consumers directly. In health care, in contrast, the situation is more complex, since patients do not pay much of the bill out-of-pocket. Rather, costs are passed from providers to insurers to employers (generally) and on to workers as a whole. If this process is efficient, the system will act as if the individual is the real customer, since they are ultimately paying the bill. It may be, however, that the incentives get lost in the process, and efforts to innovate are not sufficiently rewarded. …About one-third of medical spending is not associated with improved outcomes, significantly cutting the efficiency of the medical system and leading to enormous adverse effects.

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My good friend Veronique de Rugy of the Mercatus Center at George Mason University did a very illuminating interview with Bloomberg about the serial inaccuracy of government fiscal forecasts.

Veronique uses health care as an example, giving particular attention to the Medicare program. One obvious implication is that we should have zero faith in the White House’s estimates for the cost of Obamacare.

Indeed, that was the main point of a video I did, which tore apart the Administration’s absurd claim that a giant new entitlement program would lower costs.

Also keep in mind that the same principles operate on the tax side of the fiscal ledger. This Laffer Curve tutorial has all the details.

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I used to have lots of posts about TSA inefficiency and stupidity, but then I got discouraged and stopped. It seemed pointless to discuss the issue when there was no hope for improvement.

I still think that’s the case, at least so long as Obama is in the White House and acting as a toady for the union bosses, but I’m somewhat encouraged by a new study from the House Transportation Committee. Here’s part of a report from KTVU.

The federal government could save $1 billion in the next five years without sacrificing security by replacing federal airport screeners with private screeners, Rep. John Mica, R-Florida, said Friday. …a four-month study by his staff showed that private screeners are 65 percent more efficient then government screeners and could save taxpayers “at least 42 percent.” …Currently, 16 airports have opted out of the federal airport screening system and use private screeners who work under federal supervision. …Mica’s study, released Friday, compares checkpoint operations at Los Angeles International Airport, which uses federal screeners, with those at San Francisco International Airport, which uses private screeners. It concludes that the government spends $4.22 screening each passenger in Los Angeles, versus $2.42 at San Francisco. San Francisco screeners were 65 percent more efficient, screening 16,113 passengers on average last year, compared with 9,765 in Los Angeles. San Francisco also had significantly lower recruiting costs, training costs and attrition.

You won’t be surprised to find out, however, that the Administration is blocking more airports from using more efficient private screeners. Here’s another passage from the article.

In January, Pistole firmly sided with those favoring government employees in the screener role. Pistole put the brakes on expansion of privatization of the screener work force, saying he did not see “any clear or substantial advantage” to allowing other airports to privatize their screener work force. But Mica and several airports are contesting that decision, saying that private screeners are more effective and provide better service. “TSA employees frequently have no concern for customer service,” Shawn Schroeder, acting director of aviation at Springfield-Branson National Airport in Missouri, wrote to the House committee. “We feel participating in the (private screening program) will increase screening efficiency and flexibility, and improve the customer service experience.”

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I’ve beaten up on Newt Gingrich for his views on global warming and his attack on the Ryan budget plan, but I’m completely on his side in the faux controversy about whether it is racist to call Barack Obama the “food stamp president.”

This story from ABC News should worry everybody, regardless of whether the people getting trapped in government dependency are white, black, brown, yellow, or green with yellow polka dots.

Congress is under pressure to cut the rapidly rising costs of the federal government’s food stamps program at a time when a record number of Americans are relying on it. The House Appropriations Committee today will review the fiscal year 2012 appropriations bill for the Department of Agriculture that includes $71 billion for the agency’s “Supplemental Nutrition Assistance Program.” That’s $2 billion less than what President Obama requested but a 9 percent increase from 2011, which, critics say, is too large given the sizeable budget deficit. A record number of Americans — about 14 percent — now rely on the federal government’s food stamps program and its rapid expansion in recent years has become a politically explosive topic. More than 44.5 million Americans received SNAP benefits in March, an 11 percent increase from one year ago and nearly 61 percent higher than the same time four years ago.

Most people focus on the huge burden that the food stamp program imposes on taxpayers, which surely is significant, but there is another economic cost that is equally worrisome, and it applies to all income redistribution programs. Whenever the government gives people money simply because their incomes are below a certain level, that creates a poverty trap. More specifically, because people lose benefits for earning more income, they are penalized with very onerous implicit marginal tax rates for climbing the economic ladder.

This isn’t intuitive, so here’s a back-of-the-envelope hypothetical example. Let’s assume you are a low-income person who wants a better life and you have a chance to earn an additional $1,000. How much better off will you be, and will it be worth the costs you might incur (non-pecuniary costs such as the loss of leisure and pecuniary costs such as commuting and child care)?

To answer that question, let’s assume your official tax burden on that additional income is 10 percent for federal income tax, 15 percent for payroll tax, and 5 percent for state income tax. You may not even be aware of the employer portion of the payroll tax, so let’s drop that to 7.5 percent (actually 7.65 percent, but let’s keep this simple). And while state taxes are deductible, the vast majority of people with modest incomes don’t utilize itemized deductions. So the marginal tax rate on this additional income, depending on what assumptions you want to make, is between 20 percent and 25 percent.

So if you earn an additional $1,000, your disposable income only increases by about $750-$800. Is that worth it? Maybe, but maybe not, depending on the costs you incur to earn that income. In any event, the marginal tax rate is rather steep for a low-income person, you may be thinking.

But it gets worse. Let’s say that you lose $15 of government handouts for every $100 of additional income your earn. So when you earn $1,000 of income, you only keep $750-$800, but you also have to give up $150 of goodies from the government – meaning your effective disposable income only rises by $600-$650.

This means that your implicit marginal tax rate on earning more money is actually somewhere between 35 percent and 40 percent. In other words, your marginal tax rate is at least as high as the tax rate on rock stars and professional athletes.

Here’s a chart showing the number of food stamp recipients. It certainly looks like America is becoming a food stamp nation. But if you want to see an even more disturbing image, look at the second chart in this article from the Mises Institute. You’ll see that my hypothetical example dramatically understates the marginal tax rate on people trying to join the middle class. As a taxpayer, I don’t like the cost of the food stamp program. As an economist, I hate the high marginal tax rates caused by income redistribution programs.

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Welcome Instapundit readers. Thanks Glenn! And speaking of international bureaucracies, readers may want to read this post about the Greek bailout.

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Regular readers know that I’m not a big fan of the international bureaucracies. I don’t like the International Monetary Fund because it encourages bad policy by bailing out nations such as Greece. I don’t like the Organization for Economic Cooperation and Development because it promotes bigger government with its anti-tax competition campaign. And I don’t like the United Nations because it is a wasteful and corrupt bureaucracy, though at least it is ineffective so we don’t have to worry too much about the bad ideas it generates (such as global taxes – see here, here, and here).

If I had to pick my “least despised” international bureaucracy, it would be the World Bank. Yes, it engages in lots of counterproductive income transfers, and yes, it has a long track record of wasting money with foreign aid boondoggles. But unlike other international bureaucracies, at least the World Bank doesn’t try to act like some sort of global economic policymaker.

Moreover, it occasionally is a force for good. The World Bank for years has been actively involved in helping nations develop and implement private Social Security systems. And the bureaucracy’s “Doing Business Index” and “Governance Indicators” help promote market-friendly reforms by publicizing which nations have bloated and inefficient public sectors.

And since I’m feeling temporarily warm and fuzzy about the World Bank, I should acknowledge that their researchers sometimes produce good research. I’m particularly impressed by a new study showing that economic freedom is the key to prosperity. The abstract of the paper summarizes the results.

Reviewing the economic performance—good and bad—of more than 100 countries over the past 30 years, this paper finds new empirical evidence supporting the idea that economic freedom and civil and political liberties are the root causes of why some countries achieve and sustain better economic outcomes. For instance, a one unit change in the initial level of economic freedom between two countries (on a scale of 1 to 10) is associated with an almost 1 percentage point differential in their average long-run economic growth rates. In the case of civil and political liberties, the long-term effect is also positive and significant with a differential of 0.3 percentage point. In addition to the initial conditions, the expansion of freedom conditions over time (economic, civil, and political) also positively influences long-run economic growth. In contrast, no evidence was found that the initial level of entitlement rights or their change over time had any significant effects on long-term per capita income, except for a negative effect in some specifications of the model. These results tend to support earlier findings that beyond core functions of government responsibility—including the protection of liberty itself—the expansion of the state to provide for various entitlements, including so-called economic, social, and cultural rights, may not make people richer in the long run and may even make them poorer.

Let’s apply these finding to the United States. Under Bush and Obama, the United States has suffered an expansion in the burden of government and a loss of economic freedom. This means our economy will grow at a slower rate, our incomes will not climb as fast, and our future will be less prosperous. There are real consequences to bad policy.

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Welcome Instapundit readers. Notwithstanding my next-to-last paragraph full of caveats, some people are saying I’m too soft on the Aussies. This previous post should disabuse people of that notion.

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The Economist magazine has a couple of good articles about Australia’s increasingly enviable economic status. Here’s a blurb from the first article, which outlines the pro-market reforms that enabled today’s prosperity.

Only a dozen economies are bigger, and only six nations are richer—of which Switzerland alone has even a third as many people. Australia is rich, tranquil and mostly overlooked, yet it has a story to tell. Its current prosperity was far from inevitable. Twenty-five years ago Paul Keating, the country’s treasurer (finance minister), declared that if Australia failed to reform it would become a banana republic. Barely five years later, after a nasty recession, the country began a period of uninterrupted economic expansion matched by no other rich country. It continues to this day. This special report will explain how this has come about and ask whether it can last. …With the popular, politically astute Mr Hawke presiding, and the coruscating, aggressive Mr Keating doing most of the pushing, this Labor government floated the Australian dollar, deregulated the financial system, abolished import quotas and cut tariffs. The reforms were continued by Mr Keating when he took over as prime minister in 1991, and then by the Liberal-led (which in Australia means conservative-led) coalition government of John Howard and his treasurer, Peter Costello, after 1996. …By 2003 the effective rate of protection in manufacturing had fallen from about 35% in the 1970s to 5%. Foreign banks had been allowed to compete. Airlines, shipping and telecoms had been deregulated. The labour market had been largely freed, with centralised wage-fixing replaced by enterprise bargaining. State-owned firms had been privatised. …the double taxation of dividends ended. Corporate and income taxes had both been cut.

This chart (click for a larger image), from Economic Freedom of the World, presents a more rigorous look at this period. It shows how Australia’s economic freedom ranking had dropped to as low at 19 (out of 72 nations measured) and now is up to 8 (out of 114 nations measured). This is akin to moving from the 74th percentile to the 94th percentile.

There is also an accompanying article about Australia’s private Social Security system. Called superannuation, these personal accounts have generated tremendous results.

…most Australian workers, over 8m in total, now have a private nest-egg for their old age. No tax is paid when members withdraw from their fund; they can take all they want as a lump sum, subject to a limit, or buy an annuity. Aussies are now a nation of capitalists. At the same time the state pension system, and therefore the taxpayer, is being progressively relieved of most of the burden of retirement provision, since eligibility for the state pension depends on both assets and income. As supers take over, the provision for old folks’ incomes will be almost entirely based on defined contributions, not defined benefits. So Australia is in the happy position of not having to worry too much about the pension implications of an ageing population… The supers…have created a pool of capital in Australia that might not otherwise have existed. Collectively worth about $1.3 trillion—much the same as GDP—they have made Australia the world’s fourth-largest market for pension savings.

Australia is not exactly Hong Kong. Marginal tax rates are still far too high. The burden of government spending is lower than in the United States, but is still far too onerous. Nonetheless, the Aussies have made impressive strides in reducing the overall size, scope, and level of government interference and intervention. And this has translated into much better economic performance.

This video uses the Economic Freedom of the World index to explain why comprehensive free market reforms (like Australia) generate the best results.

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I’ve written before about how I get especially upset when rich people use the coercive power of government to screw poor people. There’s an equally offensive corollary to this principle, and that’s when powerful people use big government to impose hardship on helpless people.

And that’s exactly what’s happening in New York City, where the NAACP is siding with the teachers union to deny black children a chance to escape failing government schools. I genuinely wonder how people like that live with themselves. Do they ever feel shame or guilt? Do they have trouble sleeping at night? When they use their comfortable incomes to buy luxuries, do they feel a twinge of unease that they support policies that will make it much harder for others to enjoy a better life?

Here are the key passages from the Wall Street Journal’s editorial on the issue.

Thousands of American blacks held a rally in Harlem last week to protest . . . the NAACP. The New York state chapter of the civil rights organization and the United Federation of Teachers, the local teachers union, have filed a lawsuit to stop the city from closing 22 of Gotham’s worst schools. The lawsuit also aims to block the city from giving charter schools space to operate in buildings occupied by traditional public schools. Protesters at the rally, which included parents and charter school operators like Geoffrey Canada of the Harlem Children’s Zone, urged the NAACP to withdraw from the suit. …The teachers union wants to keep these abysmal schools open to preserve jobs for their members. This is bad enough. But the union and NAACP also want to limit better educational options for low-income families who can’t afford private schools and can’t afford to move to an affluent neighborhood with decent public schools. The union knows that in a place like New York City, where space is at a premium, blocking charters from operating in public buildings will hamper charter growth. If the lawsuit succeeds, the awful schools will remain open to damage another generation of children. If you want to know why the NAACP has become irrelevant to the lives of African-Americans, this typical display of moral indifference to the plight of minority children is Exhibit A.

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The line between political truth and literary fiction is getting very blurry. One of the main features of Ayn Rand’s Atlas Shrugged was the choice of productive people to withdraw their talents from the economy to deprive the statists of a source of loot.

Who would have guessed, more than 50 years later, that the Solicitor General of the United States would be making the same argument in a legal case about Obamacare.

Here’s the relevant segment from the Washington Examiner.

President Obama’s solicitor general, defending the national health care law on Wednesday, told a federal appeals court that Americans who didn’t like the individual mandate could always avoid it by choosing to earn less money. Neal Kumar Katyal, the acting solicitor general, made the argument under questioning before the U.S. Court of Appeals for the Sixth Circuit in Cincinnati, which was considering an appeal by the Thomas More Law Center.

As is so often the case, Glenn Reynolds already made this connection. It’s very thoughtful of the Obama White House to promote Rand’s work.

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Based on this morning’s numbers, I’ve updated my chart showing what the Obama Administration said would happen with the so-called stimulus compared to what actually has happened. As you can see, the unemployment rate is about 2.5 percentage points higher than the White House claimed it would be at this point.

Since I just did an I-told-you-so post about Greece, I may as well pat myself on the back again (albeit for another completely obvious prediction). Here’s the video I narrated a couple of years ago on the Obama faux stimulus.

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In the past, I’ve joked about “limousine liberals,” which is a phrase for elitist left wingers who pretend to identify with average people while living the good life. I’ve even mocked these folks on TV.

But I always thought the term was symbolic. Not anymore. Here’s a segment of a news report, based on a General Services Administration survey.

Limousines, the very symbol of wealth and excess, are usually the domain of corporate executives and the rich. But the number of limos owned by Uncle Sam increased by 73 percent during the first two years of the Obama administration, according to an analysis of records by iWatch News. …a watchdog group says the abundance of limos sends the wrong message in the midst of a budget crisis. The increase in limos comes to light on the heels of an executive order from President Obama last week that charges agencies to increase the fuel efficiency of their fleets. According to General Services Administration data , the number of limousines in the federal fleet increased from 238 in fiscal 2008, the last year of the George W. Bush administration, to 412 in 2010.

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I’m depressed about the global network of tax police being organized by the OECD and high-tax governments. If successful, it will lead to much bigger, more oppressive government. But maybe there’s a way of fighting back. Here’s a video from the folks at Reason TV about something that governments would hate – anonymous, digital money.

And here’s a video from the bitcoin people. I have no way of knowing how well this system will work and how insulated it will be from government interference, but I very much hope it will be successful. Governments will never behave if they think people have no escape options.

If anybody has an informed opinion about this, I’d welcome some feedback.

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All I can say is that I’m thankful the United States is not part of the European Union, at least if this little tidbit from the UK-based Telegraph is true. American politicians waste a lot of money, but even I doubt they ever spent tax dollars on something that is simultaneously so idiotic and so oozing with liberal paternalistic racism.

Cash to train teenagers in Burkina Faso and Mali, two of the world’s poorest countries, in “therapeutic dancing” because Africans find that “expression of feelings through the spoken word is often difficult and complicated”.

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I’ve been battling the Organization for Economic Cooperation for years, ever since the Paris-based bureaucracy unveiled its “harmful tax competition” project in the late 1990s. Controlled by Europe’s high-tax welfare states, the OECD wants to prop up the fiscal systems of nations such as Greece and France by hindering the flow of jobs and capital to low-tax jurisdictions.

Guided by a radical theory known as Capital Export Neutrality, the OECD wants to impose global tax rules that would prevent taxpayers from ever having the ability to benefit from better tax law in other jurisdictions. This is why, for instance, the international bureaucrats are anxious to undermine national tax laws – such as America’s favorable treatment of bank deposits from overseas – that enable foreigners to escape onerous tax regimes.

Bolstered by support from the Obama Administration, the OECD now is taking its campaign to the next level. At its Global Tax Forum in Bermuda, which ends later today, the bureaucrats unveiled a new scheme that effectively would result in the creation of something akin to a World Tax Organization.

The vehicle for this effort is a Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This may sound dry and technical, but the OECD wants all nations to participate in this pact, which has existed for a couple of decades but was radically expanded last year to give high-tax governments sweeping new powers to impose bad tax law on income generated in low-tax jurisdictions.

But the real smoking gun is that the OECD has put itself in charge of a “co-ordinating body” that will have enormous powers to interpret the agreement, modify the pact, and resolve disputes – thus giving itself the ability to serve as judge, jury, and executioner.

This is a profoundly dangerous development with all sorts of very troubling implications. Since I’m in Bermuda trying to destabilize this effort, I don’t have time for extensive analysis, but here’s a press release from the Center for Freedom and Prosperity and here are some of my immediate concerns.

    1. Higher tax burdens. If high-tax governments succeed is imposing this Multilateral Convention (insert “World Tax Organization” whenever you see that term), tax competition will be undermined and politicians will respond by increasing tax burdens. This is why nations such as France have been pushing this scheme, of course, and why left-wing academics have long dreamed of this type of arrangement.

    2. Risk to human rights. Amazingly, the Multilateral Convention is open to repressive regimes, which then would have access to all sorts of sensitive and confidential taxpayer information. Already, the thuggish dictatorship of Azerbaijan has signed up, as well as the unstable nation of Moldova and the corrupt government of Mexico. The implications are grim, including the sale of private data to criminal gangs, the loss of sensitive information to hackers, and the direct misuse of American tax returns.

    3. Loss of sovereignty. For all intents and purposes, the Multilateral Convention outlaws certain pro-growth tax policies and discourages others. Equally worrisome, it creates a system allowing foreign tax collectors to cross borders. The Obama Administration has specifically acquiesced to this provision, so perhaps we will soon see corrupt Mexican tax authorities harassing businesses and individuals on American soil.

    4. Outlawing tax avoidance. The OECD historically has tried to portray its efforts as a fight against tax evasion, but the Multilateral Convention explicitly talks about “combating tax avoidance.” This should not be a surprise since the Capital Export Neutrality ideology is based on the notion that taxpayers should have zero ability to lower their tax burdens. This means we can fully expect an assault on all forms of tax planning, with American companies almost sure to be among the first to be in the OECD’s crosshairs.

The final insult to injury is that American taxpayers are the biggest funders of the OECD, providing nearly one-fourth of the bureaucracy’s bloated budget. So our tax dollars are being used by OECD bureaucrats (who receive tax-free salaries!) to dream up new ways of increasing our tax burdens. In case you need any additional reasons to despise this bureaucracy, here’s a video detailing its anti-free market activities.

And since I’m recycling some videos, here’s one explaining why tax competition is so important.

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