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Archive for February, 2012

With apologies to the original Superman TV show…

Given what’s happened to the First Amendment, Fourth Amendment, and Fifth Amendment in recent years, and considering what the President would like to do to the Second Amendment, let’s enjoy some humor.

Faster than a writ of habeas corpus! More powerful than the Tenth Amendment! Able to leap the enumerated powers clause in a single bound! (“Look! Up in the sky!” “It’s a bird!” “It’s a plane!” “It’s SuperPresident!”)… Yes, it’s SuperPresident … strange visitor from corrupt Chicago, who came to Washington with powers and hubris far beyond those of the Founding Fathers! SuperPresident … who can change the course of the Constitution, bend the Bill of Rights in his bare hands, and who, disguised as Barack Obama, mild-mannered uniter who stops the rise of the oceans and heals the planet, fights a never-ending battle for redistribution, statism, and the French way! And now, another exciting episode, in The Adventures of SuperPresident!

And look what SuperPresident is doing now!

In the interests of full disclosure, I can’t take credit for the image, which showed up in my inbox. But I did concoct the parody of the opening of the Superman show, so I’ll take 10 percent credit for any humor in this post.

What isn’t funny, though, is how far we’ve drifted from the system created by our Founding Fathers.

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As discussed yesterday, the most important number in Obama’s budget is that the burden of government spending will be at least $2 trillion higher in 10 years if the President’s plan is enacted.

But there are also some very unsightly warts in the revenue portion of the President’s budget. Americans for Tax Reform has a good summary of the various tax hikes, most of which are based on punitive, class-warfare ideology.

In this post, I want to focus on the President’s proposals to increase both the capital gains tax rate and the tax rate on dividends.

Most of the discussion is focusing on the big increase in tax rates for 2013, particularly when you include the 3.8 tax on investment income that was part of Obamacare. If the President is successful, the tax on capital gains will climb from 15 percent this year to 23.8 percent next year, and the tax on dividends will skyrocket from 15 percent to 43.4 percent.

But these numbers understate the true burden because they don’t include the impact of double taxation, which exists when the government cycles some income through the tax code more than one time. As this chart illustrates, this means a much higher tax burden on income that is saved and invested.

The accounting firm of Ernst and Young just produced a report looking at actual tax rates on capital gains and dividends, once other layers of tax are included. The results are very sobering. The United States already has one of the most punitive tax regimes for saving and investment.

Looking at this first chart, it seems quite certain that we would have the worst system for dividends if Obama’s budget is enacted.

The good news, so to speak, is that we probably wouldn’t have the worst capital gains tax system if the President’s plan is enacted. I’m just guessing, but it looks like Italy (gee, what a role model) would still be higher.

Let’s now contemplate the potential impact of the President’s tax plan. I am dumbfounded that anybody could look at these charts and decide that America will be in better shape with higher tax rates on dividends and capital gains.

This isn’t just some abstract issue about competitiveness. As I explain in this video, every single economic theory – even Marxism and socialism – agrees that saving and investment are key for long-run growth and higher living standards.

So why is he doing this? I periodically run into people who are convinced that the President is deliberately trying to ruin the nation. I tell them this is nonsense and that there’s no reason to believe elaborate conspiracies.

President Obama is simply doing the same thing that President Bush did: Making bad decisions because of perceived short-run political advantage.

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President Obama’s budget proposal was unveiled today, generating all sorts of conflicting statements from both parties.

Some of the assertions wrongly focus on red ink rather than the size of government. Others rely on dishonest Washington budget math, which means spending increases magically become budget cuts simply because outlays are growing at a slower rate than previously planned.

When you strip away all the misleading and inaccurate rhetoric, here’s the one set of numbers that really matters. If we believe the President’s forecasts (which may be a best-case scenario), the burden of federal spending will grow by $2 trillion between this year and 2022.

In all likelihood, the actual numbers will be worse than this forecast.

The President’s budget, for instance, projects that the burden of federal spending will expand by less than 1 percent next year. That sounds like good news since it would satisfy Mitchell’s Golden Rule.

But don’t believe it. If we look at the budget Obama proposed last year, federal spending was supposed to fall this year. Yet the Obama Administration now projects that outlays in 2012 will be more than 5 percent higher than they were in 2011.

The most honest assessment of the budget came from the President’s Chief of Staff, who openly stated that, “the time for austerity is not today.”

With $2 trillion of additional spending (and probably more), that’s the understatement of the century.

What makes this such a debacle is that other nations have managed to impose real restraints on government budgets. The Baltic nations have made actual cuts to spending. And governments in Canada, New Zealand, Slovakia, and Ireland generated big improvements by either freezing budgets or letting them grow very slowly.

I’ve already pointed out that the budget could be balanced in about 10 years if the Congress and the President displayed a modest bit of fiscal discipline and allowed spending to grow by no more than 2 percent annually.

But the goal shouldn’t be to balance the budget. We want faster growth, more freedom, and constitutional government. All of these goals (as well as balancing the budget) are made possible by reducing the burden of federal spending.

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I’m getting very frustrated. I  spend too much time reminding my supposed allies that America’s fiscal problem is too much government. Deficits and debt, I constantly explain, are best understood as symptoms, whereas a bloated public sector is the underlying disease.

Even people who are very solid on fiscal policy make the mistake of sometimes focusing too much on red ink rather than the size of government, including Senator Jim DeMint, Mark Steyn of National Review, Representative Paul Ryan, and my old friends at the Heritage Foundation.

So I’ve decided to create a new award. But unlike my other awards, which are exercises in narcissism (Mitchell’s Law, Mitchell’s Golden Rule), I’m naming this award after former Senator Bob Dole.

The message is very simple. Whenever people complain about red ink, even if they are genuine advocates of small government, they give leftists an opportunity to say that higher taxes are a solution.

That’s bad politics and bad policy. And since Bob Dole excelled in both those ways, you can understand why his name is linked to the award.

Naming the award after Bob Dole also is appropriate since he was never a sincere advocate of limited government. The Kansas lawmaker was a career politician who said in his farewell speech that his three greatest achievements were a) creating the food stamp program, b) increasing payroll taxes, and c) imposing the Americans with Disabilities Act (no wonder I wanted Clinton to win in 1996).

For all of these reasons, and more, no real conservative should want to win an award linked to Bob Dole.

So I’m putting the policy world on notice. If you say the wrong thing – even if your heart is in the right place, you may win this booby prize.

This video has further information on why the real fiscal problem is excessive government spending. Deficits also are bad, the video explains, but they are best understood as a bad consequence of big government (with high taxes being the other bad consequence).

One last point, for those who are still fixated on red ink, is that nations that do the right thing on spending also tend to be the ones who reduce deficits and debt.

Not that this should come as a surprise. The best way to get rid of symptoms is to cure the disease that causes them.

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President Obama, echoed by the establishment media, routinely trumpets Warren Buffett’s support for higher taxes.

If this rich guy is willing to pay more, the story goes, then surely the rest of us peasants should just roll over and acquiesce to the President’s class-warfare tax policy.

Well, one reason we shouldn’t surrender is that Buffett is either stupid or dishonest. In previous posts, I’ve exposed his fiscal innumeracy and explained that he is understating his own tax rate.

I also posted a video exposing the hypocrisy of rich leftists, who refuse to write checks to Uncle Sam notwithstanding their self-proclaimed willingness to pay more. As far as I’m aware, this also describes Buffett.

But maybe all this tax talk is a distraction. Perhaps the real story is that Buffett is a clever political manipulator and that his support for higher taxes is a way for him to pay back the politicians who have enacted policies to line his pockets.

Here are some very revealing passages from a new Reason column by Peter Schweizer. We start with the image that Buffett is creating for himself.

He frequently takes to the nation’s op-ed pages with populist-sounding arguments, such as his August 2010 plea in The New York Times for the government to stop “coddling” the “super-rich” and start raising their taxes.

Schweizer than puts forth an alternative hypothesis.

Warren Buffett is very much a political entrepreneur; his best investments are often in political relationships. In recent years, Buffett has used taxpayer money as a vehicle to even greater profit and wealth. Indeed, the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and “coddling” with taxpayer money.

Buffett’s self-interested behavior during the Wall Street bailout is especially revealing.

…on September 23 that he became a highly visible player in the drama, investing $5 billion in Goldman Sachs, which was overleveraged and short on cash. Buffett’s play gave the investment bank a much-needed cash infusion, making a heck of a deal for himself in return: Berkshire Hathaway received preferred stock with a 10 percent dividend yield and an attractive option to buy another $5 billion in stock at $115 a share. Wall Street was on fire, and Buffett was running toward the flames.

What’s remarkable is that Buffett basically admitted he was investing money in the expectation that Uncle Sam was going to make his investment profitable.

 But he was doing so with the expectation that the fire department (that is, the federal government) was right behind him with buckets of bailout money. As he admitted on CNBC at the time, “If I didn’t think the government was going to act, I wouldn’t be doing anything this week.”

According to Schweizer’s analysis, Buffett very much needed a pipeline to the Treasury because of his investments in Goldman Sachs and other financial institutions.

Buffett needed the bailout. In addition to Goldman Sachs, which was not as badly leveraged as some of its competitors, Buffett was heavily invested in several other banks, such as Wells Fargo and U.S. Bancorp, that were also at risk and in need of federal cash. So it’s no surprise that Buffett began campaigning for the $700 billion Trouble Asset Relief Program (TARP) that was being hammered out in Washington. …Buffett received better terms for his Goldman investment than the government got for its bailout. His dividend was set at 10 percent, while the government’s was 5 percent. Had the bailout not gone through, and had Goldman not been given such generous terms under TARP, things would have been very different for Buffett. As it stood, the arrangement with Goldman Sachs earned Berkshire about $500 million a year in dividends. “We love the investment!” he exclaimed to Berkshire investors.

The same was true for his investment with General Electric.

The General Electric deal also was profitable. As Reuters business columnist Rolfe Winkler noted on his blog in August 2009: “Were it not for government bailouts, for which Buffett lobbied hard, many of his company’s stock holdings would have been wiped out.” …Buffett did very well with Goldman Sachs and GE too after they received their bailout money. His net gain from General Electric as of April 2011 was $1.2 billion. His profits from the Goldman deal by then had exceeded the gains of July 2009, reaching as high as $3.7 billion. He had bet on his ability to help secure the bailout, and the bet paid off.

I don’t know whether the $1.2 billion and $3.7 billion profits were for Berkshire Hathaway of for Buffett, but he still would be accumulating lots of additional wealth even if it was the former.

It also seems that Buffett’s support for the faux stimulus may have been for pecuniary reasons, or at least has a self-interested component.

In late 2009, Buffett made his largest investment ever when he decided to buy Burlington Northern Santa Fe Railway (BNSF). It was not just an endorsement of the railroad industry’s financials; it was also a huge bet on the budget priorities of his friend Barack Obama. …the railroad industry saw Buffett’s involvement as very helpful, precisely because he was so politically connected. “It’s a positive for the rail industry because of Buffett’s influence in Washington,” Henry Lampe, president of the short-haul railroad Chicago South Shore & South Bend, told the Journal. …After Buffett took over the railroad company, he dramatically increased spending on lobbyists. Berkshire spent $1.2 million on lobbyists in 2008, but by 2009 its budget had jumped to $9.8 million, where it more or less remained. Pouring money into lobbying is perhaps the best investment that Buffett could make. …Buffett also owns MidAmerican Energy Holdings, which received $93.4 million in stimulus money. General Electric, in which he owns a $5 billion stake, was one of the largest recipients of stimulus money in the country.

By the way, Bloomberg reported that the President’s decision to kill the Keystone Pipeline was a boon to Burlington Northern.

Was it part of a quid pro quo? We don’t know, but Schweizer’s conclusion is right on the mark.

Warren Buffett is a financial genius. But even better for his portfolio, though worse for the rest of us, he is a political genius.

And if you want more info on Buffett’s unseemly connections with Washington, the invaluable Tim Carney has a column about how the political elite coddles Warren Buffett and another looking at how Buffett profits from bailouts.

The bottom line is simple. When people get rich by providing goods and services in a competitive market, that’s capitalism. When they get rich because of subsidies, bailouts, preferences, and handouts provided by the ruling class, that’s Argentina.

I have no idea whether Buffett is corrupt, but I know he is benefiting from a corrupt system. So it’s understandable that people like me suspect that his endorsement of higher taxes is not because of a mistaken view of fiscal policy, but rather because he wants to do something nice for the politicians who rig the rules to give him more wealth.

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The Obama Administration is in a bit of hot water because it wants to coerce just about everyone – including a lot of religious institutions –  to provide health insurance policies that cover the cost of birth control and certain abortion-inducing drugs.

The White House already has tried to defuse the controversy by shifting the coverage mandate from insurance buyers to the insurance companies, but everyone with an IQ above room temperature realizes that is a meaningless cosmetic change.

Regardless of how one feels about abortion or birth control (or even how one feels about religion), this is a bad policy. Decisions about what  sort of insurance to provide shouldn’t be the result of a one-size-fits-all government mandate.

Yes, the Administration’s religious intolerance is unseemly, but it is also symptomatic of why government intervention in the health sector is the underlying problem.

John Cochrane, an economist at the University of Chicago (and an Adjunct Scholar at Cato!) addresses the economic issues in a Wall Street Journal column. Here are some key passages.

Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill. Insurance is a bad idea for small, regular and predictable expenses. There are good reasons that your car insurance company doesn’t add $100 per year to your premium and then cover oil changes, and that your health insurance doesn’t charge $50 more per year and cover toothpaste. You’d have to fill out mountains of paperwork, the oil-change and toothpaste markets would become much less competitive, and you’d end up spending more. …Doubling the number of wellness visits and free pills sounds great, but who’s going to pay for it? There is a liberal dream that by mandating coverage the government can make something free. Sorry. Every increase in coverage means an increase in premiums. If your employer is paying for your health insurance, he could be paying you more in salary instead.

For all intents and purposes, Professor Cochrane is explaining the economics of third-party payer, which occurs when government intervention undermines the ability of markets to promote efficiency and low prices.

He also delves into the moral issues and explains that the only solution is to get the government out of health care.

Our nation is divided on social issues. The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society. The critics fell for a trap. By focusing on an exemption for church-related institutions, critics effectively admit that it is right for the rest of us to be subjected to this sort of mandate. They accept the horribly misnamed Patient Protection and Affordable Care Act, and they resign themselves to chipping away at its edges. No, we should throw it out, and fix the terrible distortions in the health-insurance and health-care markets. Sure, churches should be exempt. We should all be exempt.

I’ve explained four principles that should guide policy makers as they try to put the toothpaste back in the tube and restore free markets to healthcare.

And I’ve cited a real-world example of how the system would work if the third-party payer crisis was fixed.

We can implement free-market reforms, though they won’t be easy. Or we can keep on the current path, lose more of our freedom, and eventually have life-and-death decisions controlled by bureaucrats.

Should be an easy choice.

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It’s not often that I get to use the word “penis” on a public policy blog. But with my juvenile sense of humor, I exploit such opportunities whenever they arise.

And I also managed to produce a couple of posts with the word “penile.”

These are such good examples that you may be wondering what I could do for an encore.

Well, when the federal government spends about $4 trillion per year, much of it pissed away (pun intended) on useless and counterproductive programs, it’s just a matter of time before we find another example.

In this instance, we return to the world of taxpayer-financed penis pumps. Here are the relevant parts of an AP report.

An Illinois man was sentenced Friday by a federal judge in Rhode Island to more than three years in prison for shipping unwanted penis enlargers to diabetes patients as part of a larger fraud scheme that prosecutors say bilked $2.2 million from Medicare over four years. …Winner purchased penis enlargers for an average of $26 each from online sex shops and then repackaged and shipped them to patients… Winner targeted Medicare beneficiaries…and persuaded patients to provide their Medicare information by offering free medical equipment and supplies, prosecutors said. …Winner then charged Medicare an average of $284 each for a total of $370,305, authorities said.

I cite this story not because I’m shocked that somebody bilked the government, but rather because it should irritate all taxpayers that it takes so long for the bureaucrats to figure out what’s happening.

My credit card company periodically will block my account, especially when I’m traveling, because of unusual transactions. But the federal government will blindly reimburse fraudsters for years.

The most powerful part of the story, though, is the way that Mr. Winner justified his crimes.

When employees confronted Winner about sending out supplies regardless of need, authorities allege he responded: “It doesn’t cost the client anything as the government is paying for it, and that the government would just print more money, so order more.”

He managed to combine the ills of third-party payer, government dependency, fiscal profligacy, and irresponsible monetary policy in one sentence.

This guy belongs in Washington. Heck, he’s qualified to be a member of the Obama cabinet!

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About this time last year, with the White House about to release a new budget, the press was filled with stories about President Obama being a tough-minded budget cutter.

Once the budget was released, I looked at the real numbers and explained how the burden of government spending would jump by $2 trillion in just 10 years if the President’s plan was enacted.

So why is there such a disconnect? Why does the establishment media report about “cuts” that would “slash” the budget, when actual spending is rising?

I explain this scam to John Stossel.

I made similar points last year in this interview with Judge Napolitano.

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There’s a big behind-the-scenes fight inside Republican circles about the military budget. GOP hawks are so concerned about the possibility of a sequester (automatic reductions in projected spending) that some of them are willing to capitulate to a tax hike.

Others are pursuing a more productive approach, as explained in this story. They want to cancel the defense sequester and replace the savings by restraining pay levels for federal bureaucrats.

This is an excellent idea since domestic programs are overwhelmingly to blame for America’s fiscal problems, and those programs employ hundreds of thousands of unnecessary and over-compensated bureaucrats.

Regardless of how that effort plays out, though, George Will explains in a new column that Republicans hawks can ease up on the overheated rhetoric. Simply stated, there is no risk to America’s military supremacy.

The U.S. defense budget is about 43 percent of the world’s total military spending — more than the combined defense spending of the next 17 nations, many of which are U.S. allies. Are Republicans really going to warn voters that America will be imperiled if the defense budget is cut 8 percent from projections over the next decade? In 2017, defense spending would still be more than that of the next 10 countries combined. Do Republicans think it is premature to withdraw as many as 7,000 troops from Europe two decades after the Soviet Union’s death? About 73,000 will remain, most of them in prosperous, pacific, largely unarmed and utterly unthreatened Germany. Why do so many remain? …GOP critics say that Obama’s proposed defense cuts will limit America’s ability to engage in troop-intensive nation-building. Most Americans probably say: Good. …Osama bin Laden and many other “high-value targets” are dead, the drone war is being waged more vigorously than ever, and Guantanamo is still open, so Republicans can hardly say that Obama has implemented dramatic and dangerous discontinuities regarding counterterrorism. …even with his proposed cuts, the defense budget would increase at about the rate of inflation through the next decade.

The last point is similar to something I wrote last year. Even with a sequester, defense outlays will climb by about $100 billion over the next 10 years.

And I very much agree with Will’s point about defending Germany, which is part of the broader discussion of why NATO still exists about 20 years after the Warsaw Pact dissolved.

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Today’s entry is in the running for the all-time best political humor. It surpasses the GM Obummer car, though it probably doesn’t quite beat out the Iowahawk video of the Pelosi GTxi SS/RT.

Think about the image below as part III of the anti-libertarian humor series, with Parts I and II here and here.

If we number the images so that the first row is 1-4, the second row is 5-8, etc, my favorites are 1, 7, 15, 16, 22, and 23.

If I had to identify myself, I’ll admit to 16 and 22.

The person who put this together obviously knows libertarians, though I think 4 and 13 don’t apply to libertarians any more than they apply to other political/philosophical groupings.

I also think 12 is wrong because libertarians are frugal in that they want to keep their own money and reduce the burden of government, so there’s nothing selective about their frugality.

And 19 is wrong because libertarians generally agree that one of the few legitimate roles of government is to protect life, liberty, and property. They’ll disagree about whether abortion is the taking of a life, but there’s nothing hypocritical about some libertarians being pro-life.

But other than that nitpicking, I’ll admit this is very funny.

One last thing. If there are libertarians who fit into category 11, I hope there are more people like this Spanish mother.

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When Ronald Reagan said that big government undermined the economy, some people dismissed his comments because of his philosophical belief in liberty.

And when I discuss my work on the economic impact of government spending, I often get the same reaction.

This is why it’s important that a growing number of establishment outfits are slowly but surely coming around to the same point of view.

This is remarkable. It’s beginning to look like the entire world has figured out that there’s an inverse relationship between big government and economic performance.

That’s an exaggeration, of course. There are still holdouts pushing for more statism in Pyongyang, Paris, Havana, and parts of Washington, DC.

But maybe they’ll be convinced by new research from the World Bank, which just produced a major report on the outlook for Europe. In chapter 7, the authors explain some of the ways that big government can undermine prosperity.

There are good reasons to suspect that big government is bad for growth. Taxation is perhaps the most obvious (Bergh and Henrekson 2010). Governments have to tax the private sector in order to spend, but taxes distort the allocation of resources in the economy. Producers and consumers change their behavior to reduce their tax payments. Hence certain activities that would have taken place without taxes, do not. Workers may work fewer hours, moderate their career plans, or show less interest in acquiring new skills. Enterprises may scale down production, reduce investments, or turn down opportunities to innovate. …Over time, big governments can also create sclerotic bureaucracies that crowd out private sector employment and lead to a dependency on public transfers and public wages. The larger the group of people reliant on public wages or benefits, the stronger the political demand for public programs and the higher the excess burden of taxes. Slowing the economy, such a trend could increase the share of the population relying on government transfers, leading to a vicious cycle (Alesina and Wacziarg 1998). Large public administrations can also give rise to organized interest groups keener on exploiting their powers for their own benefit rather than facilitating a prosperous private sector (Olson 1982).

In other words, government spending undermines growth, and the damage is magnified by poorly designed tax policies.

The authors then put forth a theoretical hypothesis.

…economic models argue that the excess burden of tax increases disproportionately with the tax rate—in fact, roughly proportional to its tax rate squared (Auerbach 1985). Likewise, the scope for self-interested bureaucracies becomes larger as the government channels more resources. At the same time, the core functions of government, such as enforcing property rights, rule of law and economic openness, can be accomplished by small governments. All this suggests that as government gets bigger, it becomes more likely that the negative impact of government might dominate its positive impact. Ultimately, this issue has to be settled empirically. So what do the data say?

These are important insights, showing that class-warfare tax increases are especially destructive and that government spending undermines growth unless the public sector is limited to core functions.

Then the authors report their results.

Figure 7.9 groups annual observations in four categories according to the share of government spending in GDP during that year. Both samples show a negative relationship between government size and growth, though the reduction in growth as government becomes bigger is far more pronounced in Europe, particularly when government size exceeds 40 percent of GDP. …we provide new econometric evidence on the impact of government size on growth using a panel of advanced and emerging economies since 1995. As estimates can be biased due to problems of omitted variables, endogeneity, or measurement errors, it is necessary to rely on a broad range of estimators. …They suggest that a 10 percentage point increase in initial government spending as a share of GDP in Europe is associated with a reduction in annual real per capita GDP growth of around 0.6–0.9 percentage points a year (table A7.2). The estimates are roughly in line with those from panel regressions on advanced economies in the EU15 and OECD countries for periods from 1960 or 1970 to 1995 or 2005 (Bergh and Henrekson 2010 and 2011).

These results aren’t good news for Europe, but they also are a warning sign for the United States. The burden of government spending has jumped by about 8-percentage points of GDP since Bill Clinton left office, so this could be the explanation for why growth in America is so sluggish.

Last but not least, they report that social welfare spending does the most damage.

Governments are big in Europe mainly due to high social transfers, and big governments are a drag on growth. The question is whether this is because of high social transfers? The answer seems to be that it is. The regression results for Europe, using the same approach as outlined earlier, show a consistently negative effect of social transfers on growth, even though the coefficients vary in size and significance (table A7.4). The result is confirmed through BACE regressions. High social transfers might well be the negative link from government size to growth in Europe.

The last point in this passage needs to be emphasized. It is redistribution spending that does the greatest damage. In other words, it’s almost as if Obama (and his counterparts in places such as France and Greece) are trying to do the greatest possible damage to the economy.

In reality, of course, these politicians are simply trying to buy votes. But they need to understand that this shallow behavior imposes very high costs in terms of foregone growth.

To elaborate, this video discusses the Rahn Curve, which augments the data in the World Bank study.

As I argue in the video, even though most of the research shows that economic growth is maximized when government spending is about 20 percent of GDP, I think the real answer is that prosperity is maximized when the public sector consumes less than 10 percent of GDP.

But since government in the United States is now consuming more than 40 percent of GDP (about as much as Spain!), the first priority is to figure out some way of moving back in the right direction by restraining government so it grows slower than the private sector.

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I’ve criticized centralization of power in Washington, and I’ve condemned efforts for global “economic governance.”

The simple message is that bureaucrats shouldn’t try to control our lives, regardless of whether those pencil-pushers reside in Washington or the United Nations.

These are points I made in this interview for Fox Business News.

The specific topic is a boondoggle project know as the White House Rural Council, but we also discuss a troubling U.N. scheme called Agenda 21.

Both are similar in that they are based on the idea that far-away bureaucracies (like this one) should have power over local communities.

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When Obama argued the other day that he favored higher taxes and more redistribution because of his Christian beliefs, I was tempted to repeat something I wrote last year to draw the distinction between private charity and government coercion.

I’m glad I resisted temptation, because I received a much more entertaining response in my inbox today. Enjoy this rewrite of Psalm 23.

====================================================

Psalm 2012

Obama Is the shepherd I did not want.
He leadeth me
Beside the still factories.

He restoreth my faith in the Republican party.
He guideth me in the path of unemployment for his party’s sake.

Yea, Though I walk through the valley of the bread line,
I shall fear no hunger, for his bailouts are with me.

He has Anointed my income with taxes,
My expenses runneth over.

Surely, poverty and hard living will follow me all the days of my life,
And I will live in a mortgaged home forever.

=========================================================

Given the shortcomings of Newt GingrichRick Santorum, and Mitt Romney, I don’t like the part of about restoring “faith in the Republican Party.”

But that’s nit-picking. Kudos to the person who put this together. Very well done.

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I’ve written before about the importance of getting rid of the Department of Transportation, and I’ve also written about Republicans getting in bed with big government.

So you can imagine how agitated I was to read this article about transportation spending at National Review. Written by Andrew McCarthy, it shows that the GOP still has a long way to go before cleansing themselves of the big-government corruption of the Bush-Rove years. Here are some nauseating passages.

The problem is not the GOP infighting. The problem is the GOP. Republicans are simply not interested in limiting government or addressing our death spiral of spending. …The federal government should not be in the transportation business at all. A federal role was rationalized in the mid-Fifties to finance the construction of interstate highways. As National Review’s editors observed in 2005, that project was completed in the early Eighties, at which time the fuel tax that funded it should have been repealed and the upkeep of highways left to the states. “Instead,” they wrote, “Congress morphed the program into a slush fund for some of its most indefensible pork-barrel spending.” …see how easily a “highway system” morphs into a “transportation system.” The taxes that Leviathan confiscates from drivers, purportedly for road construction and maintenance, are actually redistributed to subsidize other forms of transit preferred by progressives — including walking. For that, you can thank Republicans. With a compassionate wink from President Bush, the Republican Congress enacted an obscene $286.5 billion transportation bill in 2005… SAFETEA-LU featured all the uglies that outraged voters into telling the GOP to take a hike in the 2006 and 2008 elections. These included Alaska’s infamous $250 million “Bridge to Nowhere,” one of the bill’s 6,376 earmarks totaling $24 billion — you know, the sorts of budget-busting recklessness Republicans promised us they’d sworn off in order to get elected in 2010. …And now that the “Pledge to America” crowd that promised to stop the madness is back in charge, what do you suppose the plan is? Why, to persist in the madness. Team Boehner, whose “pledge” to voters explicitly promised “to stop out-of-control spending and reduce the size of government,” proposes to continue funding transportation at “current levels” for the next five years, which translates to an additional budget shortfall of about $60 billion dollars. So much for decrying “Washington Democrats [who] refuse to listen to the American people and eliminate, restrain, or even budget for their out-of-control spending spree.” …Naturally, conservatives who expected Republicans to do what they promised are apt to go ballistic. So, just as in the debt-ceiling fiasco, the establishment’s plan is to dazzle the rubes with some smoke-and-mirrors. On the debt ceiling, it was phantom cuts that would occur, um, someday. This time around it is a commitment to ramp up oil and gas production, the additional revenues from which, we’re told, will alleviate the transportation burden. …The brute fact is that today’s Republican establishment does not believe in limited government. “Limited government” is a slogan reserved for campaigns and fund-raising drives. The idea is not to rein in big government; it’s to hold the reins of big government.

Amen. Every time someone posts a comment or sends an email to complain that I’m too mean to GOPers, they should read this column. Principles should come first, not the self interest of a political party filled with corrupt hacks.

Yes, I realize that “corrupt hacks” is a bit unfair and over the top. After all, these are the folks who voted last year for real entitlement reform, so I need to remind myself that politicians are combinations of good and bad.

But this transportation bill shows what happens when the bad part is running amok.

And it teaches us a lesson that it is not progress to replace big-spending Democrats with big-spending Republicans.

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I’ve mentioned before how I’m proud and lucky to work for the Cato Institute, first and foremost because my colleagues are scrupulously non-partisan. We promote the ideals of freedom and liberty and we’ll work with any politician of any party who happens to be on the right side. Likewise, we’ll attack statism, regardless of what political party is in charge.

But I’m also proud to be at Cato because of the high-quality research. The latest example is a study looking at examples of defensive gun use. It’s a fascinating look at real-world anecdotes, augmented by references to other scholarly work.

If you’ve seen the Powerpoint presentation on the Second Amendment that I posted, you’ll understand why I like this new research. Here are some key excerpts.

If policymakers are truly interested in harm reduction, they should pause to consider how many crimes—murders, rapes, assaults, robberies—are thwarted each year by ordinary persons with guns. …This paper uses a collection of news reports of self-defense with guns over an eight-year period to survey the circumstances and outcomes of defensive gun uses in America. …the study by Gary Kleck and Marc Gertz…found that there were somewhere between 830,000 and 2.45 million defensive gun uses per year in the United States. …The National Survey of Private Ownership of Firearms (NSPOF) was performed in 1994. It…found approximately 1.5 million defensive gun uses. …The high-end figures on defensive gun uses may well suffer from exaggeration or outright lies. …Since the survey data has severe limitations with respect to defensive gun uses, collecting accounts of self-defense as they are reported in news outlets may be a better method of assessing the frequency and nature of self-defense with firearms. The data set supporting this paper is derived from a collection of news stories published between October 2003 and November 2011. …after Colorado’s 2003 concealed carry law was enacted, Colorado State University decided to allow concealed carry,while the University of Colorado prohibited firearms. The former observed a rapid decline in reported crimes, while the latter, under the gun ban they claimed was for safety,observed a rapid increase in crime. Crime at the University of Colorado has risen 35 percent since 2004, while crime at Colorado State University has dropped 60 percent in the same time frame. …Many people support gun control regulations because they are convinced that the average citizen is either incapable of using a gun in self-defense or will use the gun in a fit of anger over some petty matter. Those assumptions are false. The evidence on this point has grown so strong that even President Obama has had to chide gun safety advocates to accept the proposition that“almost all gun owners in America are highly responsible.”And, as the scores of incidents described in this study show, gun owners stop a lot of criminal mayhem—attempted murders, rapes, assaults, robberies—every year. …Policymakers interested in harm reduction should thus refrain from treating ordinary gun owners as hoodlums or loose cannons and adopt policies that respect the ownership and carrying of arms by responsible individuals.

By the way, the last sentence is inadequate. Regardless of what policy makers decide, responsible and prudent people should own guns, even if it means breaking the law. Self defense is a fundamental right, whether for the purpose of thwarting crime, fighting oppression, or (as I explain in my appearance on NRA-TV) protecting against societal breakdown.

If you’re a fan of the Second Amendment, let’s close with some great links. Here are some anti-gun control posters that have been very popular (here, hereherehere, and here). Here are some amusing images of t-shirts and bumper stickers on gun control (herehere, and here). And here are three different videos on gun control (herehere, and here). Feel free to share all of these widely.

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Is it April Fool’s Day? Has somebody in Paris hacked the website at the Organization for Economic Cooperation and Development? Have we been transported to a parallel dimension where up is down and black is white?

Please forgive all these questions. I’m trying to figure out why any organization – even a leftist bureaucracy such as the OECD – would send out a press release entitled, “Rising tax revenues: a key to economic development in Latin American countries.”

Not even Keynesians, after all, think higher taxes are a recipe for growth.

Ah, never mind. I just remembered that the OECD is a hotbed of statism, so the press release makes perfect sense. After all, the US-taxpayer-funded organization has become infamous for reflexively advocating big government.

With this dismal track record, it’s hardly a surprise that the Paris-based bureaucracy is now pushing to undermine prosperity in Latin America. Here’s some of what the OECD said in its release.

Additional tax revenues enable governments to simultaneously improve their competitiveness and promote social cohesion through increased spending on education, infrastructure and innovation. Latin American countries have made great strides over the past two decades in raising tax revenues.

You won’t be surprised when I tell you that the Paris-based bureaucrats do not bother to provide even the tiniest shred of proof to support the silly claim that higher taxes improve competitiveness. But that shouldn’t be surprising since even Keynesians don’t believe something that absurd.

And the claim about social cohesion also is a bit of a stretch given the riots, chaos, and social disarray in many European nations.

The only accurate part of the passage is that Latin American nations have increased tax burdens over the past 20 years. To the tax-free bureaucrats at the OECD, that is making “great strides.”

Let’s see what else the OECD had to say.

Despite these improvements, significant gaps between Latin America and OECD countries remain. The average tax to GDP ratio in OECD countries is much higher than in Latin American countries (33.8% compared to 19.2% in 2009, respectively). As the countries in the region still find themselves in relatively strong economic conditions, now is the time to consider reforms that generate long-term, stable resources for governments to finance development.

Wow. The OECD is implying that Latin American nations should mimic OECD nations. In other words, the bureaucrats in Paris apparently think it makes sense to tell nations to copy the failed high-tax, welfare-state model of countries such as Greece, Italy, and Spain.

Is that really the lesson they think people should learn from recent fiscal history? Are they really so oblivious and/or blinded by ideology that they issued the release as these European nations are in the middle of a fiscal crisis?

To further demonstrate their bias, the folks at the OECD even acknowledged that the Latin American nations, with their less oppressive tax regimes, are enjoying “relatively strong economic conditions.” Normal people would therefore conclude that the failed high-tax European nation should copy Latin America on fiscal policy, not the other way around. But not the geniuses at the OECD.

Now that we’ve addressed the awful policy advice of the OECD, let’s take a moment to look at the real policy challenges facing Latin America.

The Fraser Institute, in cooperation with dozens of other research organizations around the world, produces every year a comprehensive survey measuring Economic Freedom of the World.

The report ranks 141 nations based on dozens of variables that are used to construct scores for five key measures of economic freedom. Of those five categories, the Latin nations have the highest average ranking on…you guessed it…fiscal policy.

Yet the OECD wants policies that will undermine the competitiveness of the Latin nations, hurting them in the area where they are doing a halfway decent job.

If the bureaucrats actually wanted to boost economic performance in Latin America, they would be pressuring those nations to make reforms in the two areas where the burden of government is most severe – legal structure/property rights and regulation.

But that would make sense, which is contrary to the OECD’s mission of promoting statism.

The only semi-positive thing to say about the OECD is that it is consistent. As this video explains, the Paris-based bureaucrats are advocating bigger government in the United States. And to add insult to injury, they’re using American tax dollars to push that agenda.

What a scam. Politicians from various nations send taxpayer money to Paris. The bureaucrats at the OECD then issue reports and studies saying the politicians in those countries should raise taxes and increase the burden of government. Everybody wins…except for taxpayers and the global economy.

Per dollar spent, OECD subsidies may be the most destructively wasteful part of the federal budget. And that says a lot.

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People often ask why I put so much political humor on this site. The easy answer is that I like a good joke.

But I also find that some cartoons and jokes do a very good job of helping people understand economics. I’ve always liked this cartoon, for instance, because it cleverly illustrates the impact of government handouts on the labor market. And looking at that cartoon is a lot quicker than taking a class about labor economics.

Well, you can also skip the class about public finance. Here’s a cartoon that shows the economic burden of government “stimulus” spending.

Very funny and very intellectually sound. Indeed, the only thing that would have made the cartoon even better would have been showing that the jockey became bloated by eating the horse’s food. But I reckon it’s not easy making multiple points with one picture.

Anyhow, I’m disappointed that I didn’t notice it at Reason.com a couple of years ago when the debate on the faux stimulus was taking place. It probably would have helped more people understand that you don’t boost economic performance by draining resources from the productive sector of the economy to finance a larger government.

By the way, if you want to understand in greater detail why the cartoon is accurate, this video on Keynesian economics is helpful, as is this video explaining the failure of Obama’s $1 trillion boondoggle.

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Happy Birthday President Reagan

Ronald Reagan was born 101 years ago today, so let’s celebrate the great man with some videos.

But since I’ve already shared a video highlighting Reagan’s deep understanding of both economics and history, let’s watch a few clips showing his sense of humor.

We’ll start with a look at his use of humor while President.

And if we go back further in time, here are three videos of him participating in Dean Martin roasts.

We’ll start with the show where he was roasted. Here’s his response.

And here he is on the other side, doing roasts of Frank Sinatra and George Burns.

Last but not least, here’s Reagan on the Sonny and Cher Show.

And if you still haven’t gotten enough Reagan, you can look at several policy-related videos at this link, including Reagan’s famous Goldwater speech in 1964, the “tear down this wall” speech at the Brandenburg Gate in Berlin, and the two most memorable lines from his debates with Jimmy Carter and Walter Mondale.

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November 20, 2019 Addendum: The videos originally linked in this column are no longer on YouTube. So I’ve added this Reason TV discussion with Richard Vedder, which addresses the same issues.

Other than my affection for the Georgia Bulldogs, I’m not a big fan of higher education.

Colleges and universities are hotbeds of political correctness, but that’s actually a minor issue.

The big problem is that higher education consumes a huge amount of resources and provides inadequate value.

In these two videos, Richard Vedder documents staggering levels of inefficiency.

And here’s another portion of Rich’s remarks, given at the Pope Center in North Carolina.

A big problem in higher education is the existence of third-party payer, which is also what’s screwing up the healthcare system. More on that issue – as it relates to higher education – later this week.

P.S. Rich also is a co-author of an article for the Cato Policy Report documenting how spending cuts helped restore growth after World War II.

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Lots of people were amused by the cartoon I posted yesterday, and I also got further appreciative comments about the video portraying Somalia as some sort of libertarian nirvana.

And since readers are sending in lots of good material, I’ll continue to share the really good jokes and cartoons.

Is this latest cartoon a false reading of libertarianism? Of course. But it’s funny since it takes a core truth (individual responsibility is good) and turns it into a caricature (you’re on your own, regardless).

And just to show that I’m not becoming a soft-headed statist, here are links to some of my favorite jokes mocking leftists.

I figure that nobody can question my philosophical bona fides if I provide eight anti-leftist jokes for every anti-libertarian joke.

Addendum: A reader reminds me of this real-world example of government lifeguards.

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What’s the worst policy idea that would cause the most damage to society?

I’m tempted to say the value-added tax since our hopes of restraining the federal government will be greatly undermined if we give the buffoons in Washington a new source of revenue. Indeed, this is one of the reasons why Mitt Romney may be an ever greater long-term threat to American exceptionalism than Barack Obama.

But even though the VAT is fiscal poison, it’s not the most dangerous policy proposal.

At the top of my list is global taxation.

I wrote in 2010 about some of the awful global tax schemes being pushed by the United Nations. And I also noted that unrepentant statists such as George Soros are pimping for global taxation.

I even wrote a paper back in 2001 to explain why global taxes are such a bad idea.

The details of the tax don’t matter. It’s the principle.

A supra-national taxing authority inevitably would mean bigger government and more statism. As such, it doesn’t matter whether the new global tax is imposed on financial transactions, carbon emissions, tobacco, the Internet, munitions, foreign exchange, pollution permits, energy, or airline tickets.

And the statists are not giving up. Here are passages from a news report on their latest scheme.

…civil society leaders demanded a basic level of social security as they promoted a “social protection floor” at a preparatory forum for the Commission on Social Development, which began Feb. 1. The focus of the forum was “universal access to basic social protection and social services.” “No one should live below a certain income level,” stated Milos Koterec, President of the Economic and Social Council of the United Nations. “Everyone should be able to access at least basic health services, primary education, housing, water, sanitation and other essential services.” These services were presented at the forum as basic human rights equal to the rights of “life, liberty and the pursuit of happiness.” The money to fund these services may come from a new world tax. “We will need a modest but long-term way to finance this transformation,” stated Jens Wandel, Deputy Director of the United Nations Development Program. “One idea which we could consider is a minimal financial transaction tax (of .005 percent). This will create $40 billion in revenue.” “It is absolutely essential to establish controls on capital movements and financial speculation,” said Ambassador Jorge Valero, the current Chairman of the Commission on Social Development. He called for “progressive policies of taxation” that would require “those who earn more to pay more taxes.” Valero’s speech to the forum focused on capitalism as the source of the world financial problems.

This is unfettered statism, class warfare, and redistributionism, which is what you might expect from proponents of global taxation. But the part that really stands out is the assertion that government should guarantee a “certain income level” with freebies for things such as healthcare and housing.

If this sounds familiar, you probably saw the post about Franklin Roosevelt’s authoritarian proposal for a “Second Bill of Rights” that would guarantee “rights” to jobs, recreation, housing, good health, and security.

Remember, though, that whenever a leftist asserts the right to be given something, that person simultaneously and necessarily is demanding a right to take from someone else. This is why I deliberately chose to call the proposal authoritarian.

But I’m digressing. Let’s get back to the issue of global taxation.

The most important thing to understand is that leftists want global taxation. To get the ball rolling, they’ll take any tax for any purpose. They simply want to get the camel’s nose under the tent.

Once the precedent of global taxation has been established, then it’s a relatively simple matter for politicians to augment the first levy with additional taxes. Perhaps the camel analogy would be more accurate if we referred to some other part of the animal and warned that taxpayers won’t be happy when they learn where it’s going to be inserted.

The bad news is that some American politicians already have endorsed this scheme, most notably Nancy Pelosi, the former Speaker of the House.

But the good news is that global taxation is a toxic issue, which means politicians who have to get votes from non-crazy people are very reluctant to support taxing powers for the United Nations or any other entity. President Obama, for instance, already has rejected some global tax proposals and his Administration has been resisting other European proposals for global taxation.

But don’t be deluded into thinking the White House actually is good on these issues. This is the Administration, after all, that avidly supports a scheme from an American-funded Paris-based bureaucracy that would result in something akin to an international tax organization. Same bad concept, but different approach.

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Most of the political humor that reaches my inbox is somewhat partisan, which is not what I want. My goal is to mock leftists and statists, not Democrats (though I couldn’t resist sharing this anti-Obama joke from a Republican friend).

But I also enjoy genuinely clever political humor, which is why I’m more than happy to share jokes on a non-ideological basis. And I hope that’s apparent in the one-liners I share from the late-night talk show hosts.

To demonstrate my non-partisan bona fides, I asked the other day for readers to send in jokes and cartoons, particularly ones that don’t necessarily target the big-government crowd.

Ask and ye shall receive. Here’s a very worthy contribution.

Is it an accurate portrayal of libertarianism? Of course not. But effective humor takes something that is true and applies it in an absurd fashion. Which is why I’ve always enjoyed this video mocking libertarianism.

So keep sending me political humor.

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This generated a smirking laugh from me, so I’m sharing it for the benefit of others. Very similar to the joke about the Texas police exam.

I’m happy to share good anti-Republican humor as well, so don’t hesitate to pass along any good political jokes.

Indeed, just to show I’m balanced (at least in my appreciation for material that irritates either Republicans or Democrats), here’s a link to some very clever pro-Obama humor.

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The new unemployment numbers show a joblessness rate of 8.3 percent.

From a political perspective, this is good news for the White House. Even though the Obama Administration projected that the unemployment rate today would be about 2-percentage points lower if the so-called stimulus was adopted, most people aren’t looking at the numbers analytically.

Instead, what matters most is the trend. And since there’s been steady movement in the right direction, the President can say it’s somehow because of his policies.

Whether that’s true or not doesn’t matter. Politics is about perception. And since I began predicting, back in 2010, that Obama would win reelection if the joblessness rate was 8 percent or below, the folks at the White House should be smiling.

But there’s another group of people who should be happy. Republicans can argue that the improvement began almost precisely at the moment they took control of the House of Representatives.

Here are the monthly numbers, beginning in November 2010.

But I’m not here to spin a happy story for either Obama or House Republicans. The real story is that gridlock works, just as our Founding Fathers envisioned.

Once Republicans took control of the House, it meant that there was almost no chance that Obama would be able to impose more of his agenda.

This means no possibility of cap-and-trade industrial policy. It means no big new spending initiatives. It means no threat of a value-added tax.

And this means that the private sector finally has some degree of comfort that things won’t get worse in the future. This is not a trivial matter. Indeed, the Great Depression lasted so long and was so deep in part because Hoover and Roosevelt kept expanding the burden of taxes, spending, regulation, and intervention. The productive sector of the economy kept getting knocked to the canvas, so there’s was never an opportunity to adjust to the new burdens.

This isn’t to say gridlock, by itself, solves problems. Necessary reforms such as the Ryan budget can’t be implemented if we have gridlock forever, and that means America eventually would become another Greece.

But if the choice is between moving in the wrong direction and treading water, then the latter is better. It means the economy can adjust and slowly recover.

Yes, the potential long-run growth rate won’t be as high because of the bad policies implemented in Obama’s first two years, but gridlock means that nothing really bad will happen in the near future. As such, we can at least expect continued improvement in the jobs market and decent – albeit not impressive – growth.

Ironically, that’s good news for Obama. If he wins reelection, he should send a bouquet of roses to John Boehner.

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I sometimes get a bit pessimistic about America’s future, especially when I see numbers showing record levels of dependency.

But sometimes looking at big-picture data doesn’t quite capture what’s really happening.

If you want a glaring sign of American decline, here’s part of a grim story from NBC in New York.

Economic woes have forced at least one city agency into a hiring spree — adding more workers to process the demand for food stamps and other assistance. The Human Resources Administration added more than 100 workers last July and plans to hire another 100 to serve the burgeoning number of New Yorkers applying for food stamps and rent assistance at their offices… About 1.8 million New Yorkers are now on food stamps, which marks nearly a 65 percent increase from four years ago, according to city records.

If this seems familiar, that’s probably because you know about game called Greece-o-rama. The rules are simple. The politicians buy votes by expanding the number of people who live off the government. In some cases, they’re bureaucrats administering programs. In some cases, they’re the folks getting handouts.

But they’re both part of the same crowd if you divide society into those riding in the wagon and those pulling the wagon – as this cartoon aptly demonstrates.

Speaking of cartoons, here’s one that mocks Obama by linking the poor jobs situation with his decision to block the Keystone pipeline.

Last but not least, this is a good opportunity to share the video from last year showing how the so-called War on Poverty has created a dependency trap. The chart at 3:15 is a stunningly powerful powerful piece of evidence.

This system is good for bureaucrats (Walter Williams calls them Poverty Pimps) and good for politicians, but it’s been bad news for poor people.

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On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh…not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

  • Bush increased government spending. Obama has been increasing government spending.
  • Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
  • Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
  • Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
  • Bush created a new healthcare entitlement. Obama created a new healthcare entitlement.
  • Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies – up to this point – haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

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I’ve debated Robert Reich on issues such as tax havens, class warfare, and oil companies.

Those interactions apparently aren’t enough, though, since several people have asked me to debunk this Reich video.

But I had no desire to address Reich’s demagoguery, in part because I’ve already put together videos that deal with most of his basic points.

He wants higher taxes on investors, entrepreneurs, small business owners, and other “rich” taxpayers, but I’ve explained why he’s wrong on that issue in this video.

He claims to want a stronger middle class, but I’ve explained the keys to economic growth and Reich is on the wrong side of almost all of them.

He argues that spending has been cut back, but that’s factually wrong – and a strange argument since Reich was in the cabinet of the last President who actually did reduce the burden of federal spending.

So I hope you can understand why I didn’t want to spend time countering Reich’s video. But he has attracted more than 1 million views, which means it would be a good idea for someone to specifically debunk what he said.

Fortunately, Don Boudreaux of George Mason University has stepped up to the plate with this excellent video.

And if you want even more, here’s something I wrote on income inequality and here’s a debate I did on income mobility. Even better, here’s what Margaret Thatcher said about these topics.

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Never let it be said I back down from a fight, even when it’s the other team’s game, played by the other team’s rules, and for the benefit of the wrong person.

And that definitely went through my mind when U.S. News & World Report asked me to contribute to their “Debate Club” on the topic of “Should Mitt Romney pay higher taxes?”

I’m not a Romney fan, and it irks me to defend good tax policy on behalf of someone who is incapable and/or unwilling to make the same principled arguments.

But my job is to do the right thing and bring truth to the economic heathens, so I agreed to participate. And I’m glad I did, because it gave me a chance to try out a new argument that I hope will educate more people about the perverse impact of double taxation.

Let me know what you think of this approach, which asks people whether they would think it would be fair if they couldn’t take credit for withheld taxes when filling out their 1040 tax return.

Capital gains taxes and dividend taxes are both forms of double taxation. That income already is hit by the 35 percent corporate income tax. So the real tax rate for people like Mitt Romney is closer to 45 percent. And if you add the death tax to the equation, the effective tax rate begins to approach 60 percent.  Here’s a simply analogy. Imagine you make $50,000 per year and your employer withholds $5,000 for personal income tax. How would you feel if the IRS then told you that your income was $45,000 and you had to pay full tax on that amount, and that you weren’t allowed to count the $5,000 withholding when you filled out your 1040 form? You would be outraged, correctly yelling and screaming that you should be allowed to count those withheld tax payments.  Welcome to the world of double taxation.

By the way, if you like my argument, feel free to vote for my entry, which you can do on this page.

I won my previous debate for U.S. News, so I’m hoping the keep a good thing going. As they say in Chicago, vote early and vote often.

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