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Archive for December, 2011

Every so often (about 362 days per year), I come to the conclusion that government is a racket for the benefit of special interests.

Greece  would be an example. And if we limit ourselves to the United States, California is probably the poster child for a kleptocracy masquerading as a government.

Here are some absurd details, from a Bloomberg report, about bureaucrats ripping off taxpayers.

Manglicmot is one of 42 state nurses who each made more than $1 million in those six years, mostly by tapping overtime, according to payroll data compiled by Bloomberg News. Together, those nurses collected $47.5 million. In 2008, Manglicmot was paid $331,346, including $211,257 in overtime. The extra pay that allows some nurses to triple their regular compensation underscores a broader trend in California, where government workers are paid more than in other states for similar duties and civil-service job protections hamper efforts to close budget gaps. Governor Jerry Brown said this week that revenue will fall short of expectations, triggering $1 billion in cuts to school busing, libraries and care for children, the elderly and the disabled, among other programs. “California taxpayers should be outraged,” said Lanny Ebenstein, an economics lecturer at the University of California at Santa Barbara and president of the California Center for Public Policy, a research institution critical of public-sector compensation. …California is home to city managers whose compensation is higher than the governor’s, prison doctors who make more than counterparts elsewhere, Los Angeles firefighters who collect twice the national mean and state workers who reaped $1.7 billion more than their regular salaries last year, from overtime and unused vacation pay to physical-fitness incentives.

I can only imagine how horrible it would feel to be a California taxpayer, particularly since the story just cited is merely the tip of the iceberg.

This video from Reason TV is a good explanation of how bloated bureaucracy has helped to cause a deteriorating situation in the Golden State.

And here’s my video on the overall topic of overpaid bureaucrats.

Last but not least, don’t forget the video from the folks at Government Gone Wild.

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After the poll I shared the other day, this cartoon seems appropriate.

Maybe the better lesson to be learned, thought, isn’t that we should fear big government (though we should, as this t-shirt makes clear), but that statism destroys the human spirit.

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It’s obviously quite disappointing that Congressman Paul Ryan has teamed up with Senator Ron Wyden, a Democratic from Oregon, to put forth a significantly watered down version of his Medicare reform plan.

Ben Domenech of the Heartland Institute and Peter Suderman of Reason have good summaries of why the new plan is a less-than-exciting development.

I’m not happy, but I’m not surprised. Having read a lot of the commentary flowing back and forth today, I have two initial observations.

1. Blame Romney and Gingrich. Republican House members are very nervous about getting demagogued during next year’s election because of their courageous vote this year for the Ryan budget. And since the two frontrunners for the GOP nomination are very squishy on the issue (and likely to become even worse once one of them gets the nomination), this leaves House GOPers in a risky position.

2. Ryan-Wyden may be “Obamacare for Seniors,” but that’s still better than the current system, which is sort of a “UK-single-payer-for-seniors” plan. In other words, Ryan-Wyden isn’t a good plan, but it’s not as bad as the current system. It would be a small step in the right direction. But it’s hard to get excited about a small step when lawmakers earlier this year voted for a big step.

But here’s the problem. America needs leadership to make the changes that are necessary to save the U.S. from a Greek-style fiscal crisis. Given the weak set of candidates running for President, I can understand why Ryan and other congressional Republicans are trimming their sails. But that doesn’t change the fact that America needs something bolder.

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Earlier this year, I wrote about how the person Obama put in charge of Medicare made some very interesting observations about prices, competition, and markets, but then drew exactly the wrong conclusion about what was needed to solve the third-party payer problem in health care.

We now have another example of someone producing very good information and then failing to learn the obvious lesson. Catherine Rampell of the New York Times wrote about how politicians used to be much more willing to increases taxes.

She obviously wants readers to conclude that bad, mean, wicked Republicans are being too dogmatic because they won’t agree to big tax hikes. But the chart she prepared tells a completely different story. The only budget agreement that actually produced a balanced budget was the 1997 deal, and that deal contained tax cuts rather than tax increases!

But don’t believe me. Look at her chart.

I suppose I also should say that her chart is misleading because it accepts the dishonest Washington definition that a “spending cut” occurs any time politicians increase spending by less than previously planned.

And even if one uses that dishonest definition, the make-believe spending cuts usually evaporate very rapidly. The tax increases, unfortunately, are far more durable. And the net result is higher spending and oftentimes more red ink.

But even with those two big methodological shortcomings, her chart is a strong argument that tax increases don’t work.

Two final points. First, anybody who thinks the 1993 tax hike was successful should read this post and you’ll see that the Clinton White House admitted it was a failure in early 1995.

Second, it wasn’t really the 1997 budget deal that produced the budget surplus. The deficit disappeared because we had a period, beginning a couple of years earlier, during which politicians followed Mitchell’s Golden Rule and restrained government spending so that it grew slower than the private economy. The 1997 agreement played a role, but it’s quite likely that red ink would have disappeared anyhow.

Last but not least, the reason we’re in a fiscal ditch today is mostly because Bush abandoned good fiscal policy and let the burden of government spending climb much faster than the productive sector of the economy.

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I posted some polling data a couple of weeks ago that showed how the dependency mindset (as captured by these cartoons) is far worse in Europe than it is in the United States.

Now let’s look at some additional public opinion research from Gallup that illuminates American exceptionalism. Here is how voters responded to a question on the biggest threat to America’s future.

Though I don’t want to get too optimistic. Given what’s happening in Europe and the fact that politicians so far have failed to enact genuine entitlement reform, the 64 percent should be 94 percent.

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I’m not a big fan of Senator Schumer of New York. As I’ve noted before, he’s a doctrinaire statist who wants the government to have control over just about every aspect of our lives.

But that describes a lot of people in Washington. I guess what also bothers me is his willingness to say anything, regardless of how divorced it is from reality, to advance his short-run political agenda (sort of a Democrat version of Karl Rove).

For example, here’s part of what the clownish Empire State  Senator recently had to say about fiscal policy, as reported by a Washington Post columnist.

Schumer said, “…Republicans came in and said, `We can solve your problem by shrinking government’…We tried their theory…The American people resent government paralysis, but most of them would say that government is doing too little to help them, not too much.”

What’s remarkable about this statement is that it’s so inaccurate that we can’t even decipher what he means. I’ve come up with three possible interpretations of what he might have been trying to say, and they’re all wrong.

1. He’s referring to GOP actions this year. This interpretation might make partial sense because the House Republicans have made a few semi-serious efforts to shrink government, but how can Schumer say “we tried their theory” when every Republican initiative was blocked by the Senate and Obama?

The Ryan budget died of malign neglect since the Senate didn’t even bother to produce a budget, and Republican efforts on the 2011 spending levels and the debt limit also were stymied, resulting at best in kiss-your-sister deals.

2. He’s referring to GOP actions during the Bush Administration. This interpretation might make some sense because the GOP did control the House, the Senate, and the Presidency, but does Schumer understand that “shrinking government” was not part of the Republican agenda during those years?

But don’t believe me. The numbers from the Historical Tables of the Budget unambiguously show that the federal budget almost doubled during the Bush years because of huge increases in domestic spending.

3. He’s referring to GOP actions during the 1990s. This interpretation actually does make sense because the burden of the public sector did shrink as a share of GDP during the Clinton years when Republicans controlled Congress, so it would be accurate to say “we tried their theory.”

But what was so bad about the era of spending restraint during the 1990s? The economy expanded and people were better off, in large part because, to quote Schumer, government was “doing too little to help them.”

Heck, the Clinton-GOP Congress years were so good that I even offered, during a debate on national TV, to go back to Clinton’s higher tax rates if it meant we also could undo all the reckless spending of the Bush-Obama years.

This doesn’t mean I’ve stopped caring about low marginal tax rates. It just means that I understand that the ultimate tax is the burden of the public sector. This video explains more, in case you’re wondering why I’d like to go back to the 1990s.

It goes without saying (but I’ll say it anyhow) that it would be even better to combine Clinton’s spending levels with Reagan’s tax rates.

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I’ve written before about the perverse impact of the unemployment insurance program, and I’ve even cited how left-wing economists such as Paul Krugman and Larry Summers admit that you get more joblessness when you pay people for not working.

I’ve even shared a very good cartoon making the same point. And who can forget Nancy Pelosi’s mindless comments about unemployment benefits being a great way to stimulate job creation.

But sometimes it helps to have real-world anecdotes, and this letter-to-the-editor from a newspaper in Ohio is very educational. Here are key excerpts.

Little did I know that attempting to hire the employees needed, which I had thought to be the easiest part, would turn out to be a nightmare if not impossible. …Before 2009 if our company advertised for an open position, on average we would get 20 to 30 applications, interview six to eight of the applicants, and hire one or two, based on the quality and potential of the candidates. This process has been deteriorating dramatically since 2009 and now at the end of 2011 it has completely hit bottom. Of all the applications that we have received this year, when asked why they were seeking a job with us, one out of three answered: my unemployment is running out and I have to go back to work. Earlier this year after I hired two new full-time employees, went through our company’s orientation process, fitted them with our work clothing and booked them to start within a week, they both quit. One called ahead of the start date to apologize but wanted to inform us he would not be coming in because the government had just extended unemployment benefits again. The second one just did not show on his first day and when I called him he said he couldn’t come in now because unemployment had been extended and he was making almost as much as we were planning to start him out with.  …Our government is considering extending unemployment benefits again soon. The final absurdity might be that extending unemployment is the only thing that both the Democratic and Republican majorities both agree on.

By the way, here’s a post with a similar real-world story from Detroit.

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I’m not even sure why this is funny. Maybe it’s the context.

Was it put together by somebody in the United Kingdom, who is irritated by the he way Sarkozy and Merkel are turning a bad fiscal crisis into a worse fiscal crisis and trying to blame England? That’s possible, and we know the Brits have a good sense of humor.

Or was it put together by a German, who is feeling sanctimonious about his country’s relatively strong position (at least compared to other European welfare states) and is tired of having to deal with the French.

Or is it funny simply because it’s amusing to mock the French?

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In this interview for Newsmax TV, I was asked about the frontrunners for the GOP presidential race. As you can see, I bend over backwards to avoid being too mean to either Mitt Romney or Newt Gingrich.

I do make a meaningless prediction that Paul Ryan or Marco Rubio would jump to the top of the polls if they entered the race (I think my prediction is correct, but there’s no chance of anyone entering the contest this late).

Last but not least, I briefly talk about the payroll tax fight and the prospects (or lack thereof) for real entitlement reform.

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I’ve commented many times about the misguided big-government policies of both Hoover and FDR, so I can say with considerable admiration that this new video from the Center for Freedom and Prosperity packs an amazing amount of solid info into about five minutes.

Perhaps the most surprising revelation in the video is that America suffered a harsh depression after World War I, with GDP falling by a staggering 24 percent.

But we don’t read much about that downturn in the history books, in large part because it ended so quickly.

The key question, though, is why did that depression end quickly while the Great Depression dragged on for a decade?

One big reason for the different results is that markets were largely left unmolested in the 1920s. This meant resources could be quickly redeployed, minimizing the downturn.

But this doesn’t mean the crowd in Washington was completely passive. They did do something to help the economy recover. As Ms. Fields explains in the video, President Harding, unlike Presidents Hoover and Roosevelt, slashed government spending.

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Since the Clinton Administration turned out to be much more market-oriented than either his GOP predecessor or successor, this isn’t quite a man-bites-dog story.

Nonetheless, it is still noteworthy that Elaine Kamarck, a high-level official from the Clinton White House, has a column on a left-of-center website arguing in favor of a pro-growth, supply-side corporate tax reform.

Here’s some of what she wrote.

Not only have the OECD countries reduced their corporate tax rates over the years to an average of 25 percent — members of the OECD are starting in on yet another round of cuts. Canada and Great Britain, two of our closest trading partners, are moving in this direction. America has the second highest corporate tax rate of any of the developed nations. We can’t sit by while our competition is changing. A 2008 report by economists at the OECD found that the corporate income tax is the most harmful tax for long-term economic growth. A 2010 World Bank study demonstrated that corporate tax rates have a “large and significant adverse” effect on investment. And investment and economic growth equals jobs. Wage data from 65 countries over 25 years shows that every one percent increase in corporate tax rates leads to a 0.5 to 0.6 percent decrease in wages.

There are things in the rest of the article that rub me the wrong way, but I agree with everything in the above passage, as I explain in this video.

The thing that’s most striking about Ms. Kamarck’s article is that she acknowledges the link between corporate tax rates and workers’ wages, thus agreeing with me – at least implicitly – about “trickle-down economics” and the deleterious impact of double taxation.

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Europe is in the midst of a fiscal crisis caused by too much government spending, yet many of the continent’s politicians want the European Central Bank to purchase the dodgy debt of reckless welfare states such as Spain, Italy, Greece, and Portugal in order to prop up these big government policies.

So it’s especially noteworthy that economists at the European Central Bank have just produced a study showing that government spending is unambiguously harmful to economic performance. Here is a brief description of the key findings.

…we analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size… Our results show a significant negative effect of the size of government on growth. …Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).

There are two very interesting takeaways from this new research. First, the evidence shows that the problem is government spending, and that problem exists regardless of whether the budget is financed by taxes or borrowing. Unfortunately, too many supposedly conservative policy makers fail to grasp this key distinction and mistakenly focus on the symptom (deficits) rather than the underlying disease (big government).

The second key takeaway is that Europe’s corrupt political elite is engaging in a classic case of Mitchell’s Law, which is when one bad government policy is used to justify another bad government policy. In this case, they undermined prosperity by recklessly increasing the burden of government spending, and they’re now using the resulting fiscal crisis as an excuse to promote inflationary monetary policy by the European Central Bank.

The ECB study, by contrast, shows that the only good answer is to reduce the burden of the public sector. Moreover, the research also has a discussion of the growth-maximizing size of government.

… economic progress is limited when government is zero percent of the economy (absence of rule of law, property rights, etc.), but also when it is closer to 100 percent (the law of diminishing returns operates in addition to, e.g., increased taxation required to finance the government’s growing burden – which has adverse effects on human economic behaviour, namely on consumption decisions).

This may sound familiar, because it’s a description of the Rahn Curve, which is sort of the spending version of the Laffer Curve. This video explains.

The key lesson in the video is that government is far too big in the United States and other industrialized nations, which is precisely what the scholars found in the European Central Bank study.

Another interesting finding in the study is that the quality and structure of government matters.

Growth in government size has negative effects on economic growth, but the negative effects are three times as great in non-democratic systems as in democratic systems. …the negative effect of government size on GDP per capita is stronger at lower levels of institutional quality, and ii) the positive effect of institutional quality on GDP per capita is stronger at smaller levels of government size.

The simple way of thinking about these results is that government spending doesn’t do as much damage in a nation such as Sweden as it does in a failed state such as Mexico.

Last but not least, the ECB study analyzes various budget process reforms. There’s a bit of jargon in this excerpt, but it basically shows that spending limits (presumably policies similar to Senator Corker’s CAP Act or Congressman Brady’s MAP Act) are far better than balanced budget rules.

…we use three indices constructed by the European Commission (overall rule index, expenditure rule index, and budget balance and debt rule index). …The former incorporates each index individually whereas the latter includes interacted terms between fiscal rules and government size proxies. Particularly under the total government expenditure and government spending specifications…we find statistically significant positive coefficients on the overall rule index and the expenditure rule index, meaning that having these fiscal numerical rules improves GDP growth for these set of EU countries.

This research is important because it shows that rules focusing on deficits and debt (such as requirements to balance the budget) are not as effective because politicians can use them as an excuse to raise taxes.

At the risk of citing myself again, the number one message from this new ECB research is that lawmakers – at the very least – need to follow Mitchell’s Golden Rule and make sure government spending grows slower than the private sector. Fortunately, that can happen, as shown in this video.

But my Golden Rule is just a minimum requirement. If politicians really want to do the right thing, they should copy the Baltic nations and implement genuine spending cuts rather than just reductions in the rate of growth in the burden of government.

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The joke reprinted below deserves a chuckle.

And if you like the theme of Washington vs. the rugged individualists of rural America, you’ll probably also like this joke.

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A man is sitting in the Bull Moose Saloon in Alpine, Wyoming, and was far from home when Barack Obama comes on TV. The man looks at the TV and says, “Obama is a horse’s ass.”

Out of nowhere, a local jumps up and punches him in the face, knocking him off his bar stool, then stomps out.

He gets back up, rubbing his cheek and orders another beer.

Shortly after, Michelle Obama appears on the TV. He looks at the TV and says “She is a horse’s ass too!”

Out of nowhere, another local punches him in the other side of the face, knocking him off his bar stool again.

He gets back up and looks at the bartender, “I take it this is Obama country?”

“Nope.” replies the bartender. “Horse country.”

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I’m not sure why, but this also reminds me of this great bedbug joke from Craig Ferguson.

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There’s always been a simple and desirable solution to Europe’s fiscal crisis, but nobody in Europe wants to do the right thing because it means admitting the failure of big government and it would result in less power for the political elite.

So we get the spectacle of never-ending emergency summits as the political class blindly searches for some magical solution. Not surprisingly, the “solution” concocted by the latest gathering is not getting good reviews.

Here’s what Ambrose Evans-Pritchard wrote in the Daily Telegraph.

What remarkable petulance and stupidity. The leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure. …There is no shared debt issuance, no fiscal transfers, no move to an EU Treasury, no banking licence for the ESM rescue fund, and no change in the mandate of the European Central Bank.

And here’s what Felix Salmon wrote for Reuters.

It all adds up to one of the most disastrous summits imaginable. A continent which has risen to multiple occasions over the past 66 years has, in 2011, decided to implode in a spectacle of pathetic ignominy. …Europe’s leaders have set a course which leads directly to a gruesome global recession, before we’ve even recovered from the last one. Europe can’t afford that; America can’t afford that; the world can’t afford that. But the hopes of arriving anywhere else have never been dimmer.

So why is everybody upset? For the simple reason that the supposed “solution” doesn’t address the immediate problem.

Europe’s short-run crisis is that the fear of default. Simply stated, governments have squandered so much money that they are now deeply in debt. As a result, investors no longer trust that they will get paid back (either on time or in full) if they buy bonds from various governments.

This is why interest rates on government debt are climbing and nations such as Greece, Ireland, and Portugal already have received direct bailouts. Moreover, the European Central Bank has been engaging in indirect bailouts of other welfare states such as Spain and Italy.

But these direct and indirect bailouts have simply made the debt bubble bigger.

Yet the new agreement from Europe’s political elite doesn’t deal with this crisis. Simply stated, there is no short-run bailout strategy, not even one that kicks the can down the road.

There are only four ways of dealing with the mess in Europe, one good and three bad.

1. No bailouts, thus forcing nations to do the right thing (like the Baltics) or letting them default. This imposes the costs on the people who created the mess, addresses the short-run crisis, and promotes good long-run policy.

2. Crank up the proverbial printing presses and have the European Central Bank buy up most of Europe’s dodgy debt. This imposes the costs on all consumers, addresses the short-run crisis, and promotes bad long-run policy.

3. Have the Germans (and some other northern Europeans) guarantee the debt of the less-stable welfare states, either through Euro-bonds or some other mechanism. This imposes the costs on taxpayers in Germany and other nations that have been more prudent, addresses the short-run crisis, and promotes bad long-run policy.

4. Have the Americans and the rest of the world bail out Europe’s welfare states via the International Monetary Fund. This imposes the costs on the entire world (with U.S. taxpayers picking up the biggest part of the tab), addresses the short-run crisis, and promotes bad long-run policy.

In a remarkable display of ignoring the elephant in the middle of the room, none of these options was selected.

Some people claim that the third option was used, but that’s whistling past the graveyard. Yes, there will be a €500 billion bail-out fund called the European Stability Mechanism at some point next year, but that simply replaces the current €440 billion European Financial Stability Facility. And nobody thinks the third option will be successful unless there is a multi-trillion euro bailout fund.

So if Europe’s politicians didn’t agree to deal with the problem, either with good policy or bad policy, what exactly did they do?

The agreement uses the short-run fiscal crisis as an excuse to propose permanent changes that will erode national sovereignty and impose more centralization, more harmonization, and more bureaucratization.

One can argue, though not very persuasively, that these changes will reduce the likelihood of fiscal crises in the future. But that’s not the same thing as coming up with a policy – good or bad – to deal with the immediate problem.

I’m not an expert on investing money, but I definitely won’t be surprised if financial markets (including the investors who want bad policy so they can be bailed out) react negatively to this latest faux agreement.

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Much of the “stimulus” debate has revolved around macroeconomic issues. Obama squandered about $800 billion, supposedly to “jolt” the economy, but growth has been anemic and the employment situation has been miserable.

But it’s equally instructive to look at the microeconomic impact. And that’s exactly what the folks at Reason TV did with this expose of how money was wasted in a suburb of Washington, DC.

While the video is a damning indictment of how the faux stimulus failed, it actually is too generous in its analysis.

It looks at how much money was misallocated in Silver Spring, MD, and shows how few jobs were created, but it also should have asked what would have happened if the so-called stimulus never happened and the $800 billion was left in the productive sector of the economy.

In other words, As I wrote back in September, how much stronger would the economy be if the government had not diverted all that money to Washington?

..to paraphrase Bastiat, we want to look not only as the “seen” of government spending, but we also want to look at the “unseen” of how the money otherwise would have been allocated. What modern economists sometimes refer to as the “opportunity cost” …The relevant question, from an economic perspective, is whether the government can utilize resources more efficiently and productively than the private sector. Needless to say, there are not many types of government spending that meet this test.

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By European standards, Germany is in pretty good shape.

There’s a very large welfare state and the tax burden is quite onerous, both of which hinder growth, but Germany has been more responsible than the United States in recent years. And while this may be damning with faint praise, this modest bit of fiscal discipline is helping the nation survive as many other European welfare states are on the verge of collapsing.

Moreover, Germany (sort of like Denmark) partially offsets the damaging impact of bad fiscal policy by being free market-oriented in other policy areas, such as trade, regulation, and rule of law.

Knowing all this information, how would you describe Germany’s economic policy? Would you say it was a semi-responsible welfare state? Would you say it had left-wing fiscal policy combined with a social market economy?

I’m not sure about the best description, but I know that only a crack-addicted nitwit would put it in the same category as Hong Kong.

Yet, in an otherwise unremarkable article about the fiscal crisis in Europe, the Washington Post referred to ” fiscally conservative Germany.”

Rather than go through a lengthy explanation of why this is absurd, I figure this chart demonstrates why the folks at the Washington Post are clueless (though, in fairness, perhaps Germany is “conservative” compared to the ideology of the reporters and editors in the newsroom).

Keep in mind that this is a country that has parking-meter taxes for prostitutes and a nation with a supposedly conservative Chancellor who is leading the charge for a global tax on financial transactions.

If Germany is “fiscally conservative,” I’m a socialist.

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I’ve been a relentless critic of Obama’s policies of redistributionism, class warfare, and cronyism, so I didn’t feel I had anything new to say after Obama gave what’s being called his “Teddy Roosevelt speech” in Kansas earlier this week.

But David Harsanyi has an insightful column at Reason that is worth sharing. Here’s my favorite passage.

Obama’s mimicking Teddy Roosevelt’s end-of-career hard left turn tells us a lot about the president’s worldview. In his speech in Osawatomie, Kan., Obama dropped almost all pretenses and made the progressive case against an American free market system, which he called “a simple theory…one that speaks to our rugged individualism and our healthy skepticism of too much government….And that theory fits well on a bumper sticker. But here’s the problem: It doesn’t work.” Obama, after all, is such a towering economic mind that in Osawatomie, he once again blamed ATMs (and the Internets) for job losses. This is a man we can trust. “Less productivity! More jobs!”

The only part that of the excerpt that might not be accurate is the jab about Obama’s  “towering economic mind.”

It’s not that I object to insults and name calling, especially if the target is someone who routinely demonizes his opponents and questions their motives.

But I do think there’s another interpretation. Instead of assuming Obama is clueless, might it not be more reasonable to think he simply doesn’t care?

Let’s do a thought experiment. Imagine you are President and you want to curry favor with special interest groups and buy support from various voting blocs. Wouldn’t that explain a lot of Obama’s policies?

In other words, maybe Obama’s making government bigger in response to the same short-term political pressures that motivated the Bush Administration to make government bigger.

This doesn’t excuse the bad policy, to be sure. It just means politicians do the wrong thing because they are often guided by something other than what’s best for America.

By the way, this is also why I disagree with those who think Obama is trying to deliberately destroy the nation. Why make such a radical assumption? Do you also think Bush was trying to wreck America? Do you think Greek politicians have been trying to cripple their nation? Or French politicians, Spanish politicians, and Japanese politicians?

As a general rule, I think politicians are contemptible, self-serving, corrupt, and hypocritical. But that doesn’t mean they’re stupid and/or deliberately destructive.

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To be blunt, I’m not a big fan of the Organization for Economic Cooperation and Development. But my animosity isn’t because OECD bureaucrats threatened to have me arrested and thrown in a Mexican jail.

Instead, I don’t like the Paris-based bureaucracy because it pushes a statist agenda of bigger government. This Center for Freedom and Prosperity study has all the gory details, revealing that OECD bureaucrats endorsed Obamacare, supported the failed stimulus, and are big advocates of a value-added tax for America.

And I am very upset that the OECD gets a giant $100 million-plus subsidy every year from American taxpayers. For all intents and purposes, we’re paying for a bunch of left-wing bureaucrats so they can recommend that the United States adopt that policies that have caused so much misery in Europe. And to add insult to injury, these socialist pencil pushers receive tax-free salaries.

And now, just when you thought things couldn’t get worse, the OECD has opened a new front in its battle against America. The bureaucrats from Paris have climbed into bed with the hard left at the AFL-CIO and are pushing a class-warfare agenda. Next Wednesday, the two organizations will be at the union’s headquarters for a panel on “Divided We Stand – Tackling Growing Inequality Now.”

Co-sponsoring a panel at the AFL-CIO’s offices, it should be noted, doesn’t necessarily make an organization guilty of left-wing activism and mis-use of American tax dollars. But when you look at other information on the OECD’s website, it quickly becomes apparent that the Paris-based bureaucracy has launched a new project to promote class-warfare.

For instance, the OECD’s corruption-tainted Secretary-General spoke at the release of a new report on inequality and was favorable not only to higher income tax rates, but also expressed support for punitive and destructive wealth taxes.

Over the last two decades, there was a move away from highly progressive income tax rates and net wealth taxes in many countries. As top earners now have a greater capacity to pay taxes than before, some governments are re-examining their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden. This aim can be achieved in several different ways. They include not only the possibility of raising marginal tax rates on the rich but also…reassessing the role of taxes on all forms of property and wealth.

And here’s some of what the OECD stated in its press release on income differences.

The OECD underlines the need for governments to review their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden. This can be achieved by raising marginal tax rates on the rich.

Like Obama, the folks at the OECD like to talk about “fair share.” These passages sounds like they could have been taken from one of Obama’s hate-and-envy speeches on class warfare.

But the fact that a bunch of Europeans support Obama’s efforts to Europeanize America is not a surprise. The point of this post is that the OECD shouldn’t be using American tax dollars to promote Obama’s class-warfare agenda.

Here’s a video showing some of the other assaults against free markets by the OECD. This is why I’ve written that the $100 million-plus that American taxpayers send to Paris may be – on a per dollar basis – the most destructively wasteful part of the entire federal budget.

One last point is that the video was produced more than one year ago, which was not only before this new class-warfare campaign, but also before the OECD began promoting a global tax organization designed to undermine national sovereignty and promote higher taxes and bigger government.

In other words, the OECD is far more destructive and pernicious than you think.

And remember, all this is happening thanks to your tax dollars being sent to Paris to subsidize these anti-capitalism statists.

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Last month, I shared a video about bloated bureaucracy from a group called Government Gone Wild.

That generated a big response, so here’s another video from the same group, only this one looks at egregious examples of government waste.

If you like videos on wasteful spending, but prefer a more attractive narrator, click here.

And if you want a video that looks at the economic cost of excessive government spending, watch this mini-documentary on the Rahn Curve.

We’ve reached a point where even economists from the welfare state of Sweden are producing studies showing there’s a negative relationship between government spending and economic performance.

One can only hope this message seeps through the thick skulls of the political class before it’s too late.

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Even though leftist economists such as Paul Krugman and Larry Summers have admitted that unemployment insurance benefits are a recipe for more joblessness, the White House is arguing that Congress should enact legislation to further subsidize unemployment.

It’s understandable that the Obama Administration is concerned about the issue. These four charts show that the labor market is in terrible shape.

But how can we convince the President that more government is just making a bad situation even worse? What will it take to educate him about the need to reduce government-imposed barriers to job creation?

Perhaps this cartoon will do the trick

And if statists learn from this cartoon, then maybe we should show them another cartoon showing the link between unemployment insurance benefits and joblessness.

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While I’m usually a pessimist about public policy, there are a handful of issues where I think there’s positive momentum. School choice is one example and another is putting an end to the misguided war on drugs.

I’m somewhat optimistic on the drug war because more and more people, including conservatives, are realizing that government intervention isn’t working and is actually making things worse.

For example, here are some excerpts from a Mona Charen column, in which she praises Ron Paul for his leadership position on the issue.

Friedman was for legalization of all drugs, not just marijuana. It’s a position embraced by only one candidate for president, Ron Paul. …Paul deserves full credit for endorsing drug legalization. Friedman would approve. Governments in the United States, federal and state, spend an estimated $41.3 billion annually to prevent people from ingesting substances we deem harmful, though many unsafe ingestibles — you know the list — remain legal. Half of all federal prisoners are serving sentences for drug offenses, along with 20 percent of state prisoners. In 2009, there were 1.7 million drug arrests in the U.S. Half of those were for marijuana. As David Boaz and Timothy Lynch of the Cato Institute noted, “Addicts commit crimes to pay for a habit that would be easily affordable if it were legal. Police sources have estimated that as much as half the property crime in some major cities is committed by drug users.” Drug money, such as booze money during Prohibition, has corrupted countless police, Drug Enforcement Administration agents, border patrol agents, prosecutors and judges. Drug crime has blighted many neighborhoods. America’s appetite for drugs has encouraged lawlessness and violence in many neighboring countries, most recently in Mexico, where its drug violence is spilling north. Because illegal drugs are unregulated, their purity is unknowable — accounting for thousands of overdose deaths and injuries. Since we maintain drug prohibition to protect people from their own foolish decisions, those overdose deaths must weigh in the balance, too. Drug prohibition, Milton Friedman pointed out, keeps the price of drugs artificially inflated and amounts to a favor by the government to the drug lords. …Harvard economics professor Jeffrey Miron estimates that if drugs were legal and taxed, the U.S. and state treasuries would receive $46.7 billion in added revenue, while saving $41.3 billion in expenditures.

My only disagreement with Charen’s column is that Gary Johnson also wants to end the War on Drugs, so he should share some of the praise with Ron Paul.

And I suppose I should say that I don’t want the government to collect an additional $46.7 billion of revenue, but that’s a separate fiscal policy issue.

Ms. Charen continues with some very sensible cost-benefit analysis of legalization.

What is the downside to legalization? Friedman acknowledged the possibility that legalization might result in some increase in drug addiction. There was, after all, an uptick in alcoholism after Prohibition was repealed. But not all victims are created equal. The child, Friedman notes, who is killed in a drive-by shoot-out between drug gangs is a total victim. The adult who decides to take drugs is not. Let’s stipulate that some unknown number of Americans will become addicts after legalization, who otherwise would not have. We must ask whether the terrible price we are now paying — in police costs, international drug control efforts, border security, foregone tax revenue, overdose deaths, corruption and violence — is worth it.

This utilitarian argument is important. Libertarians traditionally rely on the moral argument that people should be free from government coercion so long as they’re not hindering the rights of others, and I certainly agree with that sentiment. But we could probably make more progress on this issue by also explaining that the costs of the drug war far outweigh any benefits.

And I suspect it also would help if we explained that legalization does not necessarily mean approval.

Ending the war on drugs does not mean endorsing drug use, any more than ending prohibition meant one had to be in favor of alcohol consumption.

Heck, you can be like me and be personally opposed to drug use and favor legalization. You can also favor private-sector sanctions against drug use and favor legalization.

When all is said and done, there are lots of reasons to favor legalization. Prohibition didn’t work in the 1920s and it isn’t working today. Too bad Ron Paul and Gary Johnson are the only candidates on the right side of this issue.

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I don’t mind sharing political humor that includes not-safe-for-work words and images, but I try to give fair warning and turn images into thumbnails so that nobody can grouse that they’ve been inadvertently exposed to something inappropriate.

So with that caveat, feel free to enjoy this image.

Obama’s the target of this joke, but don’t be surprised if you get the same result if Romney or Gingrich win the election.

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Even though Paul Krugman has told us that horror stories about government-run healthcare in Britain “are false,” we keep getting reports about substandard care and needless deaths (see here, here, here, here, here, here, here, here, and here).

Well, let’s add another chilling report to the list. Here’s some of what the UK-based Telegraph just reported.

Tens of thousands of patients with terminal illnesses are being placed on a “death pathway”, almost double the number just two years ago, a study published today shows.Health service guidance states that doctors should discuss with relations whether or not their loved one is placed on the scheme which allows medical staff to withdraw fluid and drugs in a patient’s final days. In many cases this is not happening, an audit has found. As many as 2,500 families were not told that their loved ones had been put on the so-called Liverpool Care Pathway, the study disclosed.In one hospital trust, doctors had conversations with fewer than half of families about the care of their loved one. In a quarter of hospital trusts, discussions were not held with one in three families.

Remind me not to get sick on my next trip to London.

But horror stories about government-run healthcare are not limited to the United Kingdom. Here’s part of a remarkable story from an English-language Swedish news agency.

A man from Nyköping in eastern Sweden has been denied a power wheelchair despite having had both of his legs amputated as the local health authority remained “uncertain if the impairment was permanent”. The man had his legs amputated after a long struggle with diabetes, but despite being unable get about, his application for a power wheelchair has been denied.

I realize I’m a typical guy, but the first thing that came to my mind after reading this story were a couple of funny bits from Monty Python and the Search for the Holy Grail – the “I got better” scene and the “just a flesh wound” scene.

In the real world, however, there’s nothing humorous about whether amputated legs are a “permanent” impairment.

Both of these stories show the downside of letting bureaucrats have power over health care.

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About a week ago, I wrote that people in western nations need the freedom to own guns just in case there are riots, chaos, and social disarray when welfare states collapse.

Much to my surprise and pleasure, this resulted in an invitation to appear on the National Rifle Association’s webcast to discuss the issue.

As I noted in the interview, I’m just a fiscal policy wonk, but the right to keep and bear arms should be a priority for anyone who believes in freedom and responsibility. And even though I only have a couple of guns, you can see that I’m raising my kids to have a proper appreciation for the Second Amendment.

I don’t think we’ll ever get to the point where we suffer societal breakdown, but I won’t be too surprised if it happens in some European countries. We’ve already seen the challenges faced by disarmed Brits during recent riots in the United Kingdom.

In the NRA interview, I pointed out that law enforcement is one of the few legitimate functions of government, so it is utterly despicable when politicians fail to fulfill that responsibility and also deprive households from having the ability to protect themselves.

Last but not least, watch this video if you want to be inspired about protecting the Second Amendment. Pay close attention around the five-minute mark.

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I’ve explained on many occasions how the financial crisis was largely the result of government-imposed mistakes, and I’ve paid considerable attention to the role of easy money by the Federal Reserve and the perverse subsidies provided by Fannie Mae and Freddie Mac.

But I’ve only once touched on the role of the Basel regulations on capital standards.

So I’m delighted that the invaluable Peter Wallison just authored a column in the Wall Street Journal, in which he explains how regulators created systemic risk by replacing market forces with bureaucratic edicts.

Europe’s banks, like those in the U.S. and other developed countries, function under a global regulatory regime known as the Basel bank capital standards. …Among other things, the rules define how capital should be calculated and how much capital internationally active banks are required to hold. First decreed in 1988 and refined several times since then, the Basel rules require commercial banks to hold a specified amount of capital against certain kinds of assets. …Under these rules, banks and investment banks were required to hold 8% capital against corporate loans, 4% against mortgages and 1.6% against mortgage-backed securities. …financial institutions subject to the rules had substantially lower capital requirements for holding mortgage-backed securities than for holding corporate debt, even though we now know that the risks of MBS were greater, in some cases, than loans to companies. In other words, the U.S. financial crisis was made substantially worse because banks and other financial institutions were encouraged by the Basel rules to hold the very assets—mortgage-backed securities—that collapsed in value when the U.S. housing bubble deflated in 2007.

What’s amazing (or perhaps frustrating is a better word) is that the regulators didn’t learn from the financial crisis. They should have disbanded in shame, but instead they continued to impose bad rules on the world.

And now we find their fingerprints all over the sovereign debt crisis. Here’s more of Peter’s column.

Today’s European crisis illustrates the problem even more dramatically. Under the Basel rules, sovereign debt—even the debt of countries with weak economies such as Greece and Italy—is accorded a zero risk-weight. Holding sovereign debt provides banks with interest-earning investments that do not require them to raise any additional capital. Accordingly, when banks in Europe and elsewhere were pressured by supervisors to raise their capital positions, many chose to sell other assets and increase their commitments to sovereign debt, especially the debt of weak governments offering high yields. …In the U.S. and Europe, governments and bank supervisors are reluctant to acknowledge that their political decisions—such as mandating a zero risk-weight for all sovereign debt, or favoring mortgages and mortgage-backed securities over corporate debt—have created the conditions for common shocks.

This is not to excuse the reckless behavior of national politicians. It is their destructive spending policies that are leading both the United States and Europe in a race to fiscal collapse.

But banks wouldn’t be quite as likely to finance that wasteful spending if regulators didn’t put their thumbs on the scale.

It’s almost enough to make you think that regulation is a costly burden that hurts the economy.

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More than two years ago, I explained in a TV interview that the looters and moochers should be careful that they don’t kill the geese that lay the golden eggs. After all, parasites need a healthy host.

The collapse of Europe’s welfare states should be a wake-up call for these people, but that hasn’t stopped the demands for more redistribution in Washington. As Michael Barone noted, the folks on the left assume that there will always be someone to plunder.

But at least the piglets in this Chuck Asay cartoon are finally waking up to reality.

Unfortunately, I don’t expect the crowd in Washington to change. Most politicians don’t think more than a couple of years into the future, so they will continue to lure more people into riding in the wagon and continue to penalize those who pull the wagon.

This won’t end well.

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I’ve had some fun mocking the bureaucrats from the Transportation Security Administration, including stories such as:

o Confiscating a plastic hammer from a mentally retarded man.

o Detaining a woman for carrying breast milk.

o Hassling a woman for the unexplained red flag of having sequentially numbered checks.

o Demanding that a handicapped 4-year old boy walk through a metal detector without his leg braces.

o Putting an 8-year old cub scout on the no-fly list.

Keep in mind that these are the geniuses who still fail to catch guns and box cutters – even when using the body-scan equipment!

With this track record of incompetence, this next story probably won’t be too surprising. Here are some excerpts from a report showing a freaky combination of brainless stupidity and idiotic political correctness.

Dangerous Weapon?!?

Vanessa Gibbs, 17, claims the Transportation Security Administration stopped her at the security gate because of the design of a gun on her handbag. Gibbs said she had no problem going through security at Jacksonville International Airport, but rather, when she headed home from Virginia. …her preference for the pistol style didn’t sit well with TSA agents at the Norfolk airport. Gibbs said she was headed back home to Jacksonville from a holiday trip when an agent flagged her purse as a security risk. “She was like, ‘This is a federal offense because it’s in the shape of a gun,'” Gibbs said. “I’m like, ‘But it’s a design on a purse. How is it a federal offense?'” After agents figured out the gun was a fake, Gibbs said, TSA told her to check the bag or turn it over. By the time security wrapped up the inspection, the pregnant teen missed her flight, and Southwest Airlines sent her to Orlando instead, worrying her mother, who was already waiting for her to arrive at JIA. …TSA isn’t budging on the handbag, arguing the phony gun could be considered a “replica weapon.” The TSA says “replica weapons have prohibited since 2002.” It’s a rule that Vanessa feels can’t be applied to a purse. “Common sense,” she said. “It’s a purse, not a weapon.”

The moral of the story, needless to say, is that we should listen to Steve Chapman and shut down this counterproductive bureaucracy.

And then listen to Arnold Kling and Nick Schulz, so we can allow the private sector to do a better job at much lower cost.

(h/t: Instapundit)

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There’s a rather simple solution to Europe’s fiscal crisis, but politicians will never do the right thing unless every other option is exhausted.

That’s why American taxpayers should not be involved in any sort of European bailout, either directly or indirectly.

This cartoon captures my sentiment.

At the risk of being picky, however, I would replace “Fed” with “USA/IMF” or something like that.

As I explained a few days ago, the Federal Reserve’s recent announcement that it will provide dollar liquidity to Europe is not necessarily objectionable. After all, the Europeans have to pay us back if they borrow dollars, with interest, at current exchange rates.

Yes, I worry European politicians may interpret the Fed’s actions as a signal that they can defer long-overdue reforms, and I also worry that it might be a precursor for easy-money policies in the future.

But the real threat to American taxpayers is that the International Monetary Fund may provide more bailouts to Europe.

I keep explaining that the only solution is for Europe’s welfare states to copy the Baltic nations and actually cut spending, but that will never happen if European politicians think that they can get an IMF handout (and thus shift some of their bad fiscal policy onto the backs of American taxpayers).

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Apologies to Charlton Heston for butchering his line about the Second Amendment, but I’m increasingly disgusted and irate about the looming light-bulb ban.

For more than a century, incandescent light bulbs have brightened our world.

But the 100-watt bulb doesn’t provide enough light to compensate for the dark and malignant impact of politicians. In less than one month, stores no longer will be allowed to sell these bulbs – and will force us to use toxic bulbs instead.

So let’s bid a fond farewell to quality lighting – and part of our liberty – with this new video from Reason TV.

Speaking of videos, here’s a good speech on the issue by Congressman Poe of Texas.

By the way, this idiotic idea is another dismal legacy of the statist Bush presidency.

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I periodically write posts about “Great Moments” in government. These usually feature some absurd example of stupidity and incompetence that only is possible when the world’s least competent people have power to coerce.

Examples include:

EU rules banning the selling of items by quantity (can’t have people buying a dozen eggs, for instance);

EEOC rules hindering trucking companies from weeding out drunk drivers (after all, alcoholism is a disability);

European courts ruling that the ability to watch free soccer broadcasts is a human right (if it’s already the job of government to provide you with housing, healthcare, and employment, why not?);

A local politician in Maryland wanting a licensing process to be a bum (I’m at a loss for words), and;

Virginia bureaucrats making it a crime to rescue injured wildlife (better to let Bambi suffer at the side of the road).

If you like high blood pressure, there are more examples here, here, here, here, here, here, here, and here.

But here’s an example from Italy that may be even more astounding.

First, some background. The political elite in Europe is celebrating because the former Italian Prime Minister has been forced from office and replaced with Mario Monti, a former member of the European Commission who supposedly is one of the “best and brightest” and thus can bring technocratic efficiency to Italy.

So what do we see from this new government of allegedly competent technocrats? Well, you won’t believe me, so read this excerpt from the UK-based Guardian.

Italy’s new, “technocratic” government of highly qualified bankers, admirals and professors was missing a minister today after he vanished into a fog of misunderstanding. Earlier this week, agriculture expert Francesco Braga, a professor at the University of Guelph in Ontario, Canada, was surprised, if flattered, to be told from Rome that he had been named junior agriculture minister in the new Italian administration. He had, after all, spent the last 28 years living outside his native land. Whatever doubts the professor may have had were swept away in what he called an “avalanche of congratulations”. Among the first to express delight was the Parmesan cheese manufacturers’ association. Back in Rome, the agriculture minister, Mario Catania, declared in irreproachably technocratic fashion that his new deputy would “bring value added”. He admitted that he had not actually spoken to the distinguished Italo-Canadian professor, but added: “I know him by reputation.” All of which must have been pretty confusing for Altero Matteoli, the infrastructure minister in Italy’s last government, who had warmly recommended for a post in the new government one Franco Braga, also a professor, but of construction engineering at Rome’s Sapienza University. “To tell the truth,” Matteoli was quoted as saying in the daily Corriere della Sera: “I recommended him for infrastructure, but they put him in agriculture.” Only they – whoever they were – found a professor with a similar name who would have known something about farming. Which perhaps explains why Franco Braga, an expert on anti-seismic building techniques, was refusing either to answer his telephone, or be sworn in to a job for which he is wholly unqualified.

There are several levels of jaw-dropping incompetence in this story, including the fact that the job at the Agriculture Ministry was offered to the wrong person and the supposed right person was recommended for a different job at the Infrastructure Ministry .

But the real moral to the story isn’t that the technocratic geniuses screwed up an appointment. It’s that Italy is suffering from too much government and a genuinely competent group of technocrats would abolish useless government bureaucracies.

But that’s not happening, so don’t expect a turnaround. Heck, Italy should sack the new government and give the job of Prime Minister to the former porn star who used to be in the Parliament. At least that would provide entertainment value.

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