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Archive for June, 2012

Unemployment is too high and growth is anemic, but President Obama says the “private sector is doing fine.”

This is a gift to political cartoonists, and they’ve taken advantage of Obama’s daft remark.

As best as I can recall, this is my first Glenn Foden cartoon, but it’s a good one.

I wrote the other day about the debate on whether Obama’s a socialist. I concluded that it’s best to describe him as a statist, corporatist, or cronyist, but Chip Bok adds another term that might be most appropriate.

If you like Chip Bok’s work, I recommend this class-warfare cartoon and this gem about union thuggery in Wisconsin.

And Eric Allie makes the very good point that Obama not only screws up the diagnosis, but also offers the wrong prescription.

Eric Allie is relatively new to me, but he’s on the right track as you can see from  this cartoons about Obama’s counting skills.

P.S. If Obama actually wants to fix the economy, I suggest he watch this video tutorial so he can learn that the private sector is suffering because too many resources are being diverted to unproductive uses by the public sector.

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Spain’s received a bailout, Greece is having another election tomorrow, and the European political elite is pushing for more centralization.

In other words, business as usual in the continent where voters think you can get nothing for nothing (this satirical cartoon is now European reality) and politicians think every problem can be solved by more borrowing.

Regarding the Spanish bailout, here’s an amusing video of Nigel Farage, head of the United Kingdom Independence Party, commenting on this latest European “success.”

Farage is an entertaining speaker, as you can see in other videos here and here. Indeed, the Brits serving in Brussels all seem to have a way with words, as you can see from these videos of Dan Hannan and Godfrey Bloom.

While England’s euro-skeptics make good points, what matters most is whether Germany agrees to endless subsidies for its profligate neighbors. There are signs that patience is wearing thin, as seen by these excerpts from a Frankfurt-based Bloomberg columnist.

Germany is feeling more and more like the rich uncle in a poor family. Its spendthrift relatives in the euro area are lining up to shake down their wealthier kin for loans that they may never be able to repay. Actually it’s worse than that: Those poor relatives seem to have forgotten that their uncle has already given them a lot of money. …Hans-Werner Sinn, a government adviser, …noted in a New York Times op-ed that Greece has already received the equivalent of 29 Marshall Plans from Germany… But how can a case be made for even more support when Germany’s biggest neighbor wants to put his feet up at the age of 60 — as French President Francois Hollande is planning by reversing the increase in retirement age — while Germans are expected to keep working until 67 before they get their (steadily declining) state pensions? Let’s not even talk about Greek pensions, which until recently had been paid to many dead people.

But the centralizers in Europe seem oblivious to these concerns. The clowns in the European Parliament think it would be great to have a fiscal union, which is basically a means of having German taxpayers subsidize Italian moochers.

The European Parliament on Wednesday (13 June) approved draft laws that would strongly increase Brussels’ power over eurozone countries’ budgets. …”This is the core of a fiscal union,” said Austrian MEP and socialist leader Hannes Swoboda. …They want a European Debt Redemption Fund that would bring together the debt of eurozone countries that is greater than 60 percent of GDP, allowing it to be repaid in the long term at lower interest rates. The draft would bind the commission to proposing a “roadmap” for establishing eurobonds (the mutualising of eurozone debt) once the legislation comes into place.

Not to be outdone, the buffoons in the European Commission want political union as well, which also is a mechanism for letting Spanish looters pilfer the German taxpayers.

European Commission President Jose Manuel Barroso has said member states must agree to a big common budget, a future banking union and – ultimately – political union in order to save the EU. …Barroso’s final step – fiscal and political union – would see EU countries issue joint bonds, co-ordinate tax policy and co-ordinate national spending on everything from healthcare to schools and social welfare. …Belgian liberal Guy Verhofstadt said the summit paper should be a legal proposal for creating a “federal union” and that commission budget plans should call for “own resources” – direct taxation of EU citizens by Brussels.

It’s not terribly surprising that the deadbeats of Europe want access to the money of German taxpayers, but it is rather shocking that German politicians are willing to play this no-win game. Indeed, Frau Merkel actually is an advocate of political union. Sort of like a sheep voluntarily joining two wolves in a debate over what to have for lunch.

And keep in mind that “co-ordinate tax policy” is nothing more than a deceptive way of saying tax harmonization, which would mean an end to tax competition, thus achieving a long-held goal of Europe’s political elite.

In other words, the mess in Europe is a steroid-fueled example of Mitchell’s Law, as each government-caused screw-up is used as an excuse for the next government-caused blunder.

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Since I’ve written several times that the United States will face a fiscal crisis if entitlement programs aren’t reformed, you won’t be surprised to see that I repeat those points in this CNBC debate.

But I’m not happy with my performance.

Not because my leftist opponent grabbed more air time (mostly because the host started challenging him, which also happens periodically when I’m on Kudlow’s show), but because he gave me a giant opening to completely destroy his arguments and I failed to seize the opportunity.

He kept arguing that America is more dynamic and innovative than Europe, which generally is true, but then he argued that we should copy Europe’s fiscal policy by increasing the burden of government spending.

I think the points I made to wrap up the debate were fine, but I would be much happier with my performance if I had pointed out this huge hole in his position.

As shown in this amusing and clever poster, you don’t solve the problems created by government with more government.

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In my efforts to promote liberty, I’ve noticed that some people seem impervious to logical arguments and empirical evidence.

Since they have a child-like faith in government, perhaps the best way to reach them is with updated versions of children’s stories and fables.

I’ve already shared the PC version of the story about the ant and the grasshopper, as well as the modern fable about bureaucracy, featuring an ant and a lion. Now it’s time for a revised version of Green Eggs and Ham.

I do not like this Uncle Sam,
I do not like his health care scam.

I do not like these dirty crooks,
or how they lie and cook the books.

I do not like when Congress steals,
I do not like their secret deals.

I do not like ex-speaker Nan,
I do not like this ‘YES, WE CAN!’

I do not like this spending spree —
Even a fool knows that nothing’s free.

I do not like the smug replies,
when we complain about their lies.

I do not like this kind of hope.
I do not like it, I’m not a dope!

If your left-wing friends understand this fable, then you can see if they’re ready for more advanced stories, such as the one about using beer to explain the tax system, the joke about using two cows to explain various economic and political systems.

At some point, after years of therapy and education, maybe they’ll even be ready for grown-up analysis!

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Even though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax increase.

But I then pointed out that all of those scenarios were total fantasies and that it would be more realistic to envision me playing center field for the New York Yankees.

The fundamental problem is that politicians never follow through on promises to reduce spending – even if you use the dishonest Washington definition that a spending cut occurs whenever the budget doesn’t rise as fast as previously planned.

And to make matters worse, they always seem to want class-warfare tax hikes that do heavy economic damage rather than the loophole closers that at least get rid of some of the inefficient corruption in the tax code.

That’s why I like the anti-tax pledge of Americans for Tax Reform. You don’t solve America’s fiscal problems by saying no to all tax increases, but at least you don’t move in the wrong direction at a faster rate.

Notwithstanding the principled and pragmatic arguments against putting tax increases on the table, some Republicans – in a triumph of hope over experience – are preemptively acquiescing to tax hikes.

Here’s what Jeb Bush said.

Jeb Bush, the former Florida governor, said Friday that he could back a broad deficit plan that increased taxes, a stance that puts him at odds with other prominent Republicans. Bush told a House panel he could get behind a plan that combined 10 dollars in spending cuts for every dollar of new revenue… “The problem is the 10 never materializes,” [Congressman Paul] Ryan said after Bush said he could support a revenue-increasing deficit deal. Norquist also has criticized deficit deals crafted in 1982 and 1990 – the latter agreed to by then-President George H.W. Bush, Jeb’s father – for failing to deliver on the spending side.

Kudos to Paul Ryan for making the obvious point about make-believe spending cuts. And Grover is correct about the failure of previous budget deals.

Indeed, I cited a New York Times column that inadvertently revealed that the only budget deal that worked was the 1997 pact that cut taxes rather than raised them.

Jeb Bush isn’t the only apostate. Here’s what Senator Graham had to say.

Sen. Lindsey Graham (R-S.C.) said Tuesday he believed Republicans should consider eliminating loopholes in the tax code even if they aren’t replaced by additional tax cuts, a move that would break with an anti-tax pledge many GOP lawmakers have signed with activist Grover Norquist. “When you eliminate a deduction, it’s OK with me to use some of that money to get us out of debt. That’s where I disagree with the pledge,” Graham told ABC News. …”I’m willing to move my party, or try to, on the tax issue. I need someone on the Democratic side being willing to move their party on structural changes to entitlements.” Graham said, for instance, he would support a plan that included $4 in spending cuts for every $1 in tax increases. During a Republican debate last August, all eight Republican candidates in attendance said they would reject a proposal to trade $10 in spending cuts for even $1 in tax increases.

In some sense, Senator Graham’s comments are reasonable. With real spending cuts and less-damaging forms of tax hikes, an acceptable deal is possible. But only in Fantasia, not in Washington.

In the real world, all that Senator Graham has done is to move the debate slightly to the left.

I’ve noted that tax increases are political poison for the Republican Party, but I don’t lose sleep worrying about the GOP.

But I do have nightmares about government getting even bigger, and that’s why I don’t want tax increases on the table. I don’t even want them in the room. Or the house. Or the neighborhood.

That’s why Jeb Bush and Lindsey Graham are the newest winners of the Charlie Brown Award. They’ve put blood in the water. I wonder if they’ll act surprised when hungry sharks show up looking for a meal?

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It seems that any argument about the economy eventually boils down to the core issue of whether government spending acts as a stimulus or whether it is – in the words of Thomas Sowell – a sedative that undermines prosperity.

So when Robert Reich and I went on Erin Burnett’s CNN show to discuss Obama’s stumbling economic performance, much of our discussion focused on whether to further expand the burden of the public sector.

Here are a couple of observations about the interview.

  1. Reich admitted that spending is a problem and in the “long term” needs to be reduced. I suspect “long term” never arrives in Reich’s world, but this is nonetheless a startling concession on his part.
  2. Reich claimed World War II was an example of successful Keynesian stimulus, but if he wants to make that argument, then he needs to explain why we didn’t fall back into the Great Depression after the war – which is what all the Keynesians warned would happen.
  3. For reasons outlined in my beat-down of Krugman, I’ve become a cheerleader for Estonia and used the interview to promote that country’s fiscal restraint.

If you want to understand more about Keynesian economics and why it doesn’t work, this video will be more instructive than my food fight with Reich.

P.S. Obama is monotonously repetitive in his claim that the economy is facing headwinds. As this Ramirez cartoon illustrates, he’s right, but not in the way he thinks.

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A couple of weeks ago, I debunked the myth that Obama is a fiscal conservative by showing how TARP masks his real record.

I then followed up that post by showing that Obama is a traditional leftist who spends on social welfare programs, but also did a final post showing that Bush was similarly profligate.

Now we have some additional research confirming these points. Art Laffer and Steve Moore investigate Obama’s claim in today’s Wall Street Journal.

They start with an acknowledgement that the burden of spending declined during the Clinton years.

Here’s the picture. In the chart nearby we’ve plotted federal government spending on a National Income and Product Accounts (NIPA) basis as a share of total U.S. GDP from 1990 to the present. …The stories the chart tells are amazing. …The first is how much government spending fell during President Bill Clinton’s eight years in office and how low it was when he left office. When he became president in 1992, government spending was 23.5% of GDP, and when he left in 2001 it was 19.5% of GDP. President Clinton, in conjunction with a solid Republican Congress, cut government spending by more than any other president in modern times, and oversaw one of the greatest periods of economic growth and prosperity in U.S. history.

Since I’ve done a video highlighting the good fiscal record of both Reagan and Clinton, this is music to my ears.

Unfortunately, policy moved in the wrong direction once Bush got to the White House – and Laffer and Moore specifically highlight the negative impact of Nancy Pelosi and Harry Reid.

 …the biggest surge in government spending came during the last two years of President George W. Bush’s eight years in office (2007-2008). A weakened Republican president dealing with a strident Democratic Congress, led by then-House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, resulted in an orgy of spending. Mr. Bush and Republicans in Congress capitulated to and even promoted each and every government bailout and populist redistribution canard put before them. It’s a long list, starting with the 2003 trillion-dollar Medicare prescription drug benefit and culminating with the actions taken to stem the 2008 financial meltdown—the $700 billion Troubled Asset Relief Program, the bailout of insurance giant AIG and government-sponsored lenders Fannie Mae and Freddie Mac, the ill-advised 2008 $600-per-person tax rebate, the stimulus add-ons to 2007’s housing and farm bills, etc.

Needless to say, Obama decided to double down on Bush’s failed policies.

After taking office in 2009, with spending and debt already at record high levels and the deficit headed to $1 trillion, President Obama proceeded to pass his own $830 billion stimulus, auto bailouts, mortgage relief plans, the Dodd-Frank financial reforms and the $1.7 trillion ObamaCare entitlement (which isn’t even accounted for in the chart).

Adding injury to injury, the so-called stimulus didn’t work. And the authors are right about the looming fiscal nightmare of Obamacare.

It’s also worth noting that Keynesian spending didn’t work for Hoover and Roosevelt back in the 1930s, and Laffer and Moore also explain how those two supporters of statism exacerbated the damage with class-warfare tax policy.

Like President Obama, President Hoover proposed massive tax increases. Unlike Mr. Obama, Hoover was successful. The highest marginal income tax rate jumped to 63% from 24% on Jan. 1, 1932. That November, Hoover lost the election to Franklin D. Roosevelt in a landslide. As if Hoover’s tax increases weren’t enough, on Jan. 1, 1936, FDR raised the highest marginal income tax rate to 79% with further rate increases up to 83% coming later. Estate and gift taxes, taxes on retained earnings, state and local taxes were also raised. This is why the Great Depression was the Great Depression—massive deficit spending and tax rate increases.

But that’s a separate issue. The key takeaway from the Laffer/Moore column is that government spending undermines prosperity.

…the most amazing feature of the nearby chart, which is rarely ever noted, is that when spending declined sharply the economy boomed under President Clinton, and when spending soared under Presidents Bush and Obama, the economy tanked.

P.S. For those who appreciated a more humorous look at Obama’s record, here are two amusing cartoons.

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A couple of years ago, Newt Gingrich accused Obama of being a socialist, causing some squawking and grousing about incivility from the more sensitive types in Washington.

I jumped to the President’s defense, pointing out that Obama is a different type of statist.

I’m gratified that Thomas Sowell of Stanford University’s Hoover Institution agrees with me.

It bothers me a little when conservatives call Barack Obama a “socialist.” He certainly is an enemy of the free market, and wants politicians and bureaucrats to make the fundamental decisions about the economy. But that does not mean that he wants government ownership of the means of production, which has long been a standard definition of socialism. What President Obama has been pushing for, and moving toward, is more insidious: government control of the economy, while leaving ownership in private hands. That way, politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector. Politically, it is heads-I-win when things go right, and tails-you-lose when things go wrong. This is far preferable, from Obama’s point of view, since it gives him a variety of scapegoats for all his failed policies… Thus the Obama administration can arbitrarily force insurance companies to cover the children of their customers until the children are 26 years old. Obviously, this creates favorable publicity for President Obama. But if this and other government edicts cause insurance premiums to rise, then that is something that can be blamed on the “greed” of the insurance companies.

So what is the right technical description of what Obama is proposing? Well, if you allow nominal private property, but impose government control, it’s called fascism. Sowell agrees, and also adds some history for the unenlightened.

One of the reasons why both pro-Obama and anti-Obama observers may be reluctant to see him as fascist is that both tend to accept the prevailing notion that fascism is on the political right, while it is obvious that Obama is on the political left. Back in the 1920s, however, when fascism was a new political development, it was widely — and correctly — regarded as being on the political left. Jonah Goldberg’s great book “Liberal Fascism” cites overwhelming evidence of the fascists’ consistent pursuit of the goals of the left, and of the left’s embrace of the fascists as one of their own during the 1920s.Mussolini, the originator of fascism, was lionized by the left, both in Europe and in America, during the 1920s. Even Hitler, who adopted fascist ideas in the 1920s, was seen by some, including W.E.B. Du Bois, as a man of the left. …What socialism, fascism and other ideologies of the left have in common is an assumption that some very wise people — like themselves — need to take decisions out of the hands of lesser people, like the rest of us, and impose those decisions by government fiat. …Only our own awareness of the huge stakes involved can save us from the rampaging presumptions of our betters, whether they are called socialists or fascists. So long as we buy their heady rhetoric, we are selling our birthright of freedom.

All this being said, I want to reiterate something else that I wrote back in 2010. It is counterproductive to call Obama a fascist because that term is now linked to the specific form of evil produced by Hitler and the National Socialist Party.

So if you disapprove of Obama’s policies, call him a statist or a corporatist. Heck, you can say he believes in cronyism or maybe even collectivism. Those terms get across that he wants more government without causing needless controversy that distracts from the main message.

But make sure you apply the same term to Republicans who impose the same types of policies, such as Bush and Nixon.

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Every time some class-warfare Democrat or Charlie Brown Republican says we need higher taxes, I think of all the ways the government wastes money and I get angry because the political elite is ripping off the American people.

Should we send more money to Washington when the federal government is:

And those are just examples of nickel-and-dime programs. The bigger outrage is that politicians have created costly, inefficient, and bankrupt entitlement programs that threaten our fiscal future.

But the small examples have symbolic value, and now I have something new to add to the list. The idiots at the State Department thought it was just fine and dandy to pay 35 times the market price for some Kindles.

“Hey, let’s stimulate the economy by paying 35 times the retail price!”

IPads are too fancy, Nooks aren’t fancy enough, but Kindles are just right for teaching English, the State Department thinks, which is why it bought 2,500 of them from Amazon in a $16.5 million no-bid contract, NextGov’s Dawn Lim reports. That works out to $6,600 per Kindle Touch — a lot more than the $189 retail price. The plan, according to Kim, is to send the e-readers to “designated libraries and U.S.-friendly educational centers around the world.”

Since your paying for this ripoff, you might be a tad bit irritated. But that’s only because you’re an unsophisticated taxpayer. According to PR hacks, we really are getting a good deal because of all the extras in the agreement. Put down your coffee or soda before reading this passage from the report because I don’t want to be responsible for liquid on your computer screen.

Amazon is responsible for shipping the Kindles, providing 24-7 customer service, sharing data on how the Kindles are used to access content and pushing serialized content to the Kindles regularly. Amazon is also responsible for disabling “standard features, as as [sic.] requested by DoS, for the device such as individual purchasing ability.”

Wow, free shipping. That’s worth a lot. And the customer service surely adds a couple of bucks per unit, not to mention the extra pennies it must cost to disable features and provide electronic updates.

But let’s not be too hard on clueless bureaucrats. Maybe they just don’t understand high tech. After all, moronic government officials paid more than $22,000 each for big institutional Internet routers hooked up to just a handful of computers.

It’s almost enough to make you think government spending is the problem rather than the solution.

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The Obama campaign’s “Life of Julia” ad is a disturbing sign. It suggests that political strategists, pollsters, and campaign advisers must think that the people living off government are getting to the point where they can out-vote the people paying for government.

If that’s true, America is doomed to become another Greece – which would be an appropriate fate since, for all intents and purposes, Julia is the fictional twin of a real-life Greek woman who thought it was government’s job to give her things.

In general, I think the best response to Julia is mockery, which is why I shared this Iowahawk parody and this Ramirez cartoon.

But we also need a serious discussion of why dependency is a bad thing, which is why I’m glad the Center for Freedom and Prosperity has produced this new “Economics 101” video.

It’s narrated by Emily O’Neill, who contrasts the moocher mentality of Julia with how she wants her life to develop. To give away the message, she wants the kind of fulfillment that only exists when you earn things.

Emily’s view could be considered Randian libertarianism, conventional conservatism, or both. That’s because there’s a common moral belief in both philosophies that government-imposed coercion and redistribution erode the social capital of a people.

This is perhaps the key issue for America’s future, which is why I hope you’ll share this video widely. Otherwise, we my face a future where this Chuck Asay cartoon becomes reality. Speaking of Asay, this cartoon is a pretty good summary of what the Julia ad is really saying.

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Sweden must be a schizophrenic country. Something strange is happening, after all, if a statist like Jeffrey Sachs and a rabid libertarian like yours truly both cited it as a role model in our remarks last month at the United Nations.

So who’s right? Well, it depends what you care about.

In a column for Bloomberg, Anders Aslund elaborates on Sweden’s efforts to reduce the size of the state.

Not so long ago, Sweden could claim world leadership in unmitigated Keynesian economics, with a 90 percent marginal tax rate and a welfare state second to none. …but in the last two decades the country has been reformed. Public spending has fallen by no less than one-fifth of gross domestic product, taxes have dropped and markets have opened up. …no turnabout has been as dramatic as Sweden’s. From 1970 until 1989, taxes rose exorbitantly, killing private initiative, while entitlements became excessive. Laws were often altered and became unpredictable. As a consequence, Sweden endured two decades of low growth. In 1991-93, the country suffered a severe crash in real estate and banking that reduced GDP by 6 percent. Public spending had surged to 71.7 percent of GDP in 1993, and the budget deficit reached 11 percent of GDP. …Sweden’s traditional scourge is taxes, which used to be the highest in the world. The current government has cut them every year and abolished wealth taxes. Inheritance and gift taxes are also gone. Until 1990, the maximum marginal income tax rate was 90 percent. Today, it is 56.5 percent. That is still one of the world’s highest, after Belgium’s 59.4 and there is strong public support for a cut to 50 percent. The 26 percent tax on corporate profits may seem reasonable from an American perspective, but Swedish business leaders want to reduce it to 20 percent.

Interestingly, the Swedish people and the Swedish elite (just like the Estonians, as I discussed in my takedown of Paul Krugman) seem to understand that there’s no going back to the statist era of the 1970s and 1980s.

Where are the left-wing intellectuals to challenge this new order? They have disappeared. The old socialist research organizations have closed down. The Center for Labor Market Studies was a state institution that generated propaganda, not research, and the government closed it. The Trade Union Confederation had a sophisticated research institute, which it eliminated for not being sufficiently political. The union economists, who dominated Swedish economic debate in the 1970s and ’80s, have been replaced by bank economists. The free-market right has influential research centers in Stockholm. After many years of absence from the debate, I attended a conference on the Swedish economy in the southern city of Malmo last month. …the 180 speakers represented the full range of Swedish views. I was amazed to hear how far the consensus had moved to the free- market right, even among Social Democrats and trade-union leaders. …The Social Democrats haven’t only joined the free-market consensus, but seem to attack the current government from the right, pushing for a better business environment. Gone are demands for the restoration of social benefits. Opinion polls have rewarded the Social Democrats for their right turn with sharply improved ratings.

In other words, Sweden is a lot like Canada – a nation that took a misguided turn to the left but since then has moved significantly in the right direction.

I’m not willing to trade places with either nation, but that may change at some point. The Bush-Obama policies of bigger government and more intervention have made America less attractive, while other nations have learned from their mistakes.

If Sweden adopts a flat tax and figures out how to cancel winter, I may have to move there.

P.S. Sweden’s government-run healthcare system can be quite emasculating.

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If there was a contest for the best political cartoon about what’s been happening in Wisconsin, I would pick either this “fake negotiation” cartoon by Ramirez or this “coach class” cartoon by Payne.

But here’s a new entry from Bok that also deserves some consideration.

If you like humor about the Wisconsin fight, check out this Hitler parody about the recall.

And if you enjoy humor about overpaid government employees, regardless of where they’re located, here’s a great top-10 list from Letterman and here’s a cartoon about the relationship of bureaucrats and taxpayers.

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Back in 2010, I cited the superb work of Christina Hoff Summers as she explained that we should let markets determine wages rather than giving that power to a bunch of bean-counting bureaucrats.

She wrote that article because leftists at the time were pushing a so-called Paycheck Fairness Act that would have given the government powers to second guess compensation levels produced by the private marketplace.

For all intents and purposes, proponents were arguing that employers were deliberately and systematically sacrificing profits by paying men more than they were worth (which is the unavoidable flip side of arguing that women were paid less than they were worth).

Well, bad ideas never die and the Senate recently took up this statist proposal.

That’s the bad news. The good news is that it didn’t get enough votes to overcome a procedural objection.

Writing for U.S. News & World Report, Christina Hoff Summers explains why we should be happy about that result.

Groups like the National Organization for Women insist that women are being cheated out of 24 percent of their salary. The pay equity bill is driven by indignation at this supposed injustice. Yet no competent labor economist takes the NOW perspective seriously. An analysis of more than 50 peer-reviewed papers, commissioned by the Labor Department, found that the so-called wage gap is mostly, and perhaps entirely, an artifact of the different choices men and women make—different fields of study, different professions, different balances between home and work. …The misnamed Paycheck Fairness Act is a special-interest bill for litigators and aggrieved women’s groups. A core provision would encourage class-action lawsuits and force defendants to settle under threat of uncapped punitive damages. Employers would be liable not only for intentional discrimination (banned long ago) but for the “lingering effects of past discrimination.” What does that mean? Employers have no idea. …Census data from 2008 show that single, childless women in their 20s now earn 8 percent more on average than their male counterparts in metropolitan areas.

At the risk of sounding extreme (perish the thought), let me take Ms. Summers argument one step farther. Yes, it would be costly and inefficient to let trial lawyers and bureaucrats go after private companies for private compensation decisions.

But what’s really at stake is whether we want resources to be allocated by market forces instead of political edicts.

This should be a no-brainer. If we look at the failure of central planning in the Soviet Union and elsewhere, a fundamental problem was that government officials – even assuming intelligence and good intentions – did not have the knowledge needed to make decisions on prices.

And in the absence of a functioning price system, resources get misallocated and growth suffers. So you can imagine the potential damage of giving politicians, bureaucrats, and courts the ability to act as central planners for the wage system.

But that didn’t stop the economic illiterates in Washington from pushing a vote in the Senate.

Here’s some of what Steve Chapman wrote for the Washington Examiner.

President Barack Obama said it would merely mandate “equal pay for equal work.” Senate Democratic Leader Harry Reid of Nevada warned beforehand that failing to pass the bill would send “the message to little girls across the country that their work is less valuable because they happened to be born female.” …This is a myth resting on a deception. …The gap reflects many benign factors stemming from the choices voluntarily made by women and men. …Women, on average, work fewer hours and are more likely than men to take time off for family duties. A 2009 report commissioned by the U.S. Labor Department concluded that such “factors account for a major portion and, possibly, almost all of the raw gender wage gap.” “The gender gap shrinks to between 8 percent and 0 percent when the study incorporates such measures as work experience, career breaks and part-time work,” Baruch College economist June O’Neill has written. …What the alleged gender pay gap reflects is the interaction of supply and demand in a competitive labor market. Even in a slow economy, companies that mistreat women can expect to lose them to rival employers.

Regular readers know that I’m very critical of Republicans for their propensity to do the wrong thing, particularly since they presumably know better.

But I also believe in giving praise when it’s warranted. That’s why I’ve written nice things about Bill Clinton and also why I praised House Republicans for supporting entitlement reform.

Well, here’s a case where a very bad idea was blocked because every single GOPer in the Senate held firm and voted for economic rationality. Those Senate Republicans did the right thing and prevailed, just as they were victorious when they did the right thing on taxes a couple of years ago.

Mitt Romney, on the other hand, refused to take a position on the issue, showing that he is trying very hard to be the Richard Nixon of 2012.

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Back in 2009, I wrote about various schemes to impose taxes on unhealthy food. At the time, I was primarily concerned about the risks of giving politicians a new source of revenue that would be used to increase the burden of government spending.

The folks at Reason TV look at the issue from a different angle and explain how government anti-obesity efforts won’t achieve their supposed goals.

One of the frustrating aspects of this debate is that failure will be used to justify even more intervention (aka, Mitchell’s Law). Politicians in New York City have already banned bake sales, for instance, yet that didn’t stop Mayor Bloomberg from unleashing a nutty new plan to prohibit large sodas.

And as explained in the video, the statists will respond to the failure of current anti-obesity efforts by arguing they need even more power to control and tax. And when those new efforts fail, they’ll argue for additional authority. Lather, rinse, repeat.

P.S. I assume this cartoon was designed to show why a value-added tax is a bad idea, but it’s very appropriate for this topic as well.

P.P.S. This issue helps explain the dangers of government-subsidized healthcare. Politicians make taxpayers pick up the tab for other people’s medical expenses and then claim that they should have the power to regulate private behavior in order to reduce costs.

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While most of my disdain is focused on the clowns in Washington, I enjoy poking fun at the policies adopted by the various nitwits and thugs that can be found in other governments.

But this story from Norway may be the worst example of government stupidity. The taxpayers apparently are going to pay money to provide friends for a piece of human refuse who murdered 77 people.

The Norwegian prison where Anders Behring Breivik may be locked up for massacring 77 people last year will hire people with whom he can socialise, to keep him away from other inmates, media reported Thursday. …To avoid keeping the confessed killer in total isolation, the high security prison, northwest of Oslo, could let him play sports with the guards and hire someone to play chess with him, among other things, he added. “We are planning a professional community around him, with employees and hired personnel,” he told the paper. Bjarkeid did not way how much the measures would cost. Norwegian law forbids keeping prisoners in total isolation for long periods of time because it is considered an unduly cruel punishment.

I would think “unduly cruel” is a grossly inadequate description of what he did when he killed dozens of teenagers, but I’m old fashioned. So forgive me if I’m not overwhelmed by grief at the thought of Mr. Breivik living an isolated life in prison.

But I guess the Norwegians are running out of other ways to waste their oil revenue, so why not squander some of it on a buy-a-friend program for a killer.

P.S. If you like outrageous examples of government stupidity, check out this post comparing nutty policies in the United States and United Kingdom.

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I have a confession to make. I’m enjoying the Greece debacle and I like the Greek people.

Sure, there are lots of moochers in Greece. And yes, the government is insanely wasteful, even to the point of subsidizing pedophiles and requiring stool samples from folks applying to set up online companies.

But at least there’s high entertainment value, such as the altercation in this video between one of the national socialists in the Golden Dawn party and a regular socialist from the Syriza party and one of the international socialists from the Communist party.

Of course, I hope that all of these strains of socialism lose at the polls, just as I hope that the Keynesians and tax-increasers fight each other to the death in the rest of Europe.

Until that point, though, I want more entertainment.

I also have a certain fondness for the Greeks because of their disdain for the tax authorities. These people have an amazing expertise when it comes to not paying taxes (their Italian and Irish counterparts also seem less than enthused about giving more money to government).

To be sure, I suspect most of them are motivated by getting something for nothing rather than libertarian principles. But even if they’re dodging taxes for the wrong reasons, these anecdotes from the New York Times are quite amusing.

An essential element of Greece’s recovery plan has been to collect more taxes from a population that has long engaged in tax avoidance. The government is owed 45 billion euros in back taxes, tax officials in Athens said, only a fraction of which will ever be recovered. To understand the difficulty, just talk to Nikos Maitos, a longtime official in Greece’s financial crimes investigation unit. When he and a team of inspectors recently prowled the recession-hit island of Naxos for tax evaders, a local radio station broadcast his license plate number to warn residents. …“After two and a half years of austerity, it’s really a difficult time to bring in revenue,” said Harry Theoharis, a senior official in the Greek Finance Ministry who helps oversee the country’s tax payment system. “You can’t keep flogging a dead horse.” …Income expected from a higher, 23 percent value-added tax required by the bailout agreement has fallen short by around 800 million euros in the first four months of 2012. That is partly because cash-short businesses that were once law-abiding have started hiding money to stay afloat, tax officials said. …the government started enforcing a 1995 law that gives them access to bank accounts of suspected tax evaders. But Nikos Lekkas, a top official at the financial crimes agency where Mr. Maitos works, said Greek banks had obstructed nearly 5,000 requests for account data since 2010. “The banks delay sending the information for 8 to 12 months,” he said. “And when they do, they send huge stacks of documents to make it confusing. By the time we can follow up, much of the money has already fled.” …During a surveillance trip on the resort island of Santorini, Mr. Maitos said he and two colleagues observed a gas station owner insisting on cash-only transactions to avoid declaring taxes. When confronted, the man lashed at them with a bullwhip while cursing the state for taking his money.

Pretty impressive. Not only are taxpayers getting help from radio stations and banks, but they even use bullwhips to defend themselves.

It’s also worth noting that the “flogging a dead horse” comment and the shortfall in VAT receipts are further evidence for the Laffer Curve.

But I don’t want to focus too much on policy in this post. I just want to enjoy the spectacle. In later posts, we’ll look to see whether American statists have learned any lessons about reforming entitlements so we avoid a future Greek-style fiscal crisis in America.

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I thought this cartoon about overpaid bureaucrats in Wisconsin was amusing, but this Hitler parody about the recall result is an instant classic.

Speaking of Hitler parodies, here’s a good one about the European downgrade.

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I have great fondness for Estonia, in part because it was the first post-communist nation to adopt the flat tax, but also because of the country’s remarkable scenery.

Most recently, though, I’ve been bragging about Estonia (along with Latvia and Lithuania, the other two Baltic nations) for implementing genuine spending cuts. I’ve argued that Estonia is showing how a government can reignite growth by reducing the burden of government.

Not surprisingly, some people disagree with my analysis. Paul Krugman of the New York Times criticized Estonia yesterday, writing that the Baltic nation suffered a “Depression-level slump” in 2008 and has only managed an “incomplete recovery” over the past few years.

He blames this supposedly weak performance on “austerity.”

I have a positive and negative reaction to Krugman’s post. My positive reaction is that he’s talking about a nation that actually has cut spending, so there’s real public-sector austerity (see Veronique de Rugy’s L.A. Times column to understand the critical difference between public-sector and private-sector austerity).

This is a sign of progress. In the past, he launched a silly attack on the U.K. for a “government pullback” that never happened, so what he wrote about Estonia at least is based on real events.

My negative reaction is that Krugman is very guilty of cherry-picking data. If you look at the chart that accompanies his post, Estonia’s economic performance isn’t very impressive, but that’s because he’s only showing us the data from 2007-present.

The numbers are accurate, but they’re designed to mislead rather than inform (sort of as if I did a chart showing 2009-present).

But before exposing that bit of trickery, there’s another mistake worth noting. Krugman presumably wants us to think that the downturn coincided with spending cuts. But his own chart shows that the economy hit the skids in 2008 – a year in which  government spending in Estonia soared by nearly 18 percent according to EU fiscal data!

It wasn’t until 2009 that Estonian lawmakers began to reduce the burden of spending. So I guess Professor Krugman wants us to believe that the economy tanked in 2008 because of expectations of 2009 austerity. Or something like that.

Returning now to my complaint about cherry picking data, Krugman makes Estonia seem stagnant by looking only at data starting in 2007. But as you can see from this second chart, Estonia’s long-run economic performance is quite exemplary. It has doubled its economic output in just 15 years according to the International Monetary Fund. Over that entire period – including the recent downturn, it has enjoyed one of the fastest growth rates in Europe.

This doesn’t mean Estonia is perfect. It did experience a credit/real estate bubble, and there was a deep recession when the bubble burst. And the politicians let government spending explode during the bubble years, almost doubling the budget between 2004 and 2008.

But Estonia reacted to the overspending and the downturn in a very responsible fashion. Instead of using the weak economy as an excuse to further expand the burden of government spending in hopes that Keynesian economics would magically work (after failing for Hoover and Roosevelt in the 1930s, Japan in the 1990s, Bush in 2008, and Obama in 2009), the Estonians realized that they needed to cut spending.

And now that spending has been curtailed, it’s worth noting that growth has resumed.

What makes Krugman’s rant especially amusing is that he wrote it just as the rest of the world is beginning to notice that Estonia is a role model. Here’s some of what CNBC just posted.

Sixteen months after it joined the struggling currency bloc, Estonia is booming. The economy grew 7.6 percent last year, five times the euro-zone average. Estonia is the only euro-zone country with a budget surplus. National debt is just 6 percent of GDP, compared to 81 percent in virtuous Germany, or 165 percent in Greece. Shoppers throng Nordic design shops and cool new restaurants in Tallinn, the medieval capital, and cutting-edge tech firms complain they can’t find people to fill their job vacancies. It all seems a long way from the gloom elsewhere in Europe. Estonia’s achievement is all the more remarkable when you consider that it was one of the countries hardest hit by the global financial crisis. …How did they bounce back? “I can answer in one word: austerity. Austerity, austerity, austerity,” says Peeter Koppel, investment strategist at the SEB Bank. …that’s not exactly the message that Europeans further south want to hear. …Estonia has also paid close attention to the fundamentals of establishing a favorable business environment: reducing and simplifying taxes, and making it easy and cheap to build companies.

Good policy makes a difference. But it also helps to have rational citizens (unlike France, where people vote for economic illiterates and protest against reality).

While spending cuts have triggered strikes, social unrest and the toppling of governments in countries from Ireland to Greece, Estonians have endured some of the harshest austerity measures with barely a murmur. They even re-elected the politicians that imposed them. “It was very difficult, but we managed it,” explains Economy Minister Juhan Parts. “Everybody had to give a little bit. Salaries paid out of the budget were all cut, but we cut ministers’ salaries by 20 percent and the average civil servants’ by 10 percent,” Parts told GlobalPost. …As well as slashing public sector wages, the government responded to the 2008 crisis by raising the pension age, making it harder to claim health benefits and reducing job protection — all measures that have been met with anger when proposed in Western Europe.

It’s worth noting, by the way, that government is still far too big in Estonia. The public sector consumes about 39 percent of economic output, almost double the burden of government spending in Hong Kong and Singapore.

But, unlike certain American politicians, at least the Estonians understand the problem and are taking steps to move in the right direction. I hope they continue.

P.S. The President of Estonia, a Social Democrat named Toomas Hendrik Ilves, used his twitter account to kick the you-know-what out of Krugman yesterday. For amusement value, check out this HuffingtonPost article.

P.P.S. A few other nations, such as Canada and New Zealand, also imposed genuine spending restraint in recent decades and they also got good results.

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Even though Chuck Asay is one of my favorite cartoonists (see herehereherehere, and here), I was not a big fan of one of his recent two-frame cartoons.

But he has more than made up for that slight transgression with this new gem.

I’m biased, of course, since I’ve already written about California being the Greece of America, but there’s plenty of evidence to justify Asay’s cartoon.

It’s hard to see how a state survives, in the long run, with such a burdensome government. While the cartoon is designed to be funny, it also make a valid point since the Golden State is copying the mistakes that are causing Greece to collapse.

That being said, California can be saved. I already mentioned this morning that voters in San Diego and San Jose voted overwhelmingly to trim the excessive benefits promised to government bureaucrats. But I also should have mentioned that California voters rejected a statewide referendum to boost tobacco taxes.

But the real test will be this November, when voters will be asked whether to vote for a huge income tax increase so that Governor Jerry Brown and the crowd in Sacramento can keep the gravy train rolling along for a few more years.

If voters resist the Washington-Monument-Syndrome demagoguery of the political elite and reject the class-warfare tax hike, then it’s possible that lawmakers will finally do the right thing and reduce the size and scope of California’s government.

I don’t think there’s any chance that California will become another Texas. But there’s a greater-than-zero chance that the state can pull itself back from the Grecian Abyss.

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Since I’m a policy wonk and not a political prognosticator, I’m not sure why people keep asking me what will happen in the November elections. But since I got lucky with my 2010 predictions, I may as well throw in my two cents.

The election is now exactly five months away, so here’s my first cut at what will happen.

At this point, I am predicting an Obama victory, albeit by a much narrower margin than in 2008.

Given the weak economy and unpopularity of Obamacare, one might think Romney should be the favorite. However, the establishment media is completely in the tank for Obama and Romney is not exactly the strongest candidate, and I think those factors will tip the scales in November.

That being said, Obama has dropped from being a 60 percent-plus favorite on Intrade to just a 52.3 percent favorite in recent weeks, so GOP partisans have reasons to be hopeful.

Since all I care about is policy, I confess I’m not sure whether to be happy about my prediction. It all boils down to whether the “Richard Nixon Disinfectant Rule” applies to Romney. As of right now, we don’t know the answer. Here’s what I told ABC News earlier this week.

“The negative spin is that he’s said all these things to basically get past a conservative-leaning Republican Party electorate and that he’s really the Massachusetts moderate that some of his opponents tried to make him out to be,” said Dan Mitchell, a Cato economist… The flip side, Mitchell said, is that if Romney does stick to his promises to conservatives, they’ll be pleased when he gives support to Paul Ryan’s budget, takes steps to lower the spending-to-GDP ratio significantly, and offers states flexibility on spending Medicaid money.

We’ll have plenty of time between today and November 6 to analyze the presidential election, so let’s leave the national stage and take a look at what happened yesterday in Wisconsin and California.

We’ll start with California, because there were two very important – but largely overlooked – votes in San Diego and San Jose about curtailing lavish pensions for bureaucrats. The results were shocking, particularly since California is a left-wing state. Here’s part of the AP report.

Voters in two major California cities overwhelmingly approved cuts to retirement benefits for city workers in what supporters said was a mandate that may lead to similar ballot initiatives in other states and cities that are struggling with mounting pension obligations. Supporters had a simple message to voters in San Diego and San Jose: Pensions for city workers are unaffordable and more generous than many private companies offer… In San Diego, 66 percent voted in favor of Proposition B, while 34 percent were opposed. Nearly 97 percent of precincts were tallied by early Wednesday. The landslide was even bigger in San Jose, the nation’s 10th-largest city. With all precincts counted, 70 percent were in favor of Measure B and 30 percent were opposed.

Since I’ve written repeatedly about excessive compensation for government employees, these results are encouraging. Perhaps the gravy train has finally been derailed

Yesterday’s big election, though, was in Wisconsin. Republicans took control of the state in 2010 and enacted laws to restrain the power of union bureaucracies, which led to a counterattack by the left. First, there was a recall effort against Republicans in the State Senate and that failed. Then there was a recall against one of the GOP judges on the state’s Supreme Court, and that failed.

The climactic battle yesterday was to recall Governor Scott Walker. So how did that turn out? Let’s enjoy these excerpts from the Washington Post.

Wisconsin Gov. Scott Walker won a vote to keep his job on Tuesday, surviving a recall effort that turned the Republican into a conservative icon…That made Walker the first governor in U.S. history to survive a recall election; two others had failed. …the night provided a huge boost for Walker — as well as Republicans in Washington and state capitals who have embraced the same energetic, austere brand of fiscal conservatism as a solution for recession and debt. In a state known for a strong progressive tradition, Walker defended his policies against the full force of the labor movement and the modern left. And he won, again.

By the way, the final result in the Badger State was 53 percent-46 percent and I predicted 54 percent-46 percent, so I somewhat atoned for my awful guess on the Iowa caucuses.

P.S. This cartoon accurately shows what was at stake in Wisconsin.

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Writing in today’s Washington Post, former Obama economist Larry Summers put forth the strange hypothesis that more red ink would improve the federal government’s long-run fiscal position.

This sounds like an excuse for more Keynesian spending as part of another so-called stimulus plan, but Summers claims to have a much more modest goal of prudent financial management.

And if we assume there’s no hidden agenda, what he’s proposing isn’t unreasonable.

But before floating his idea, Summers starts with some skepticism about more easy-money policy from the Fed.

Many in the United States and Europe are arguing for further quantitative easing to bring down longer-term interest rates. …However, one has to wonder how much investment businesses are unwilling to undertake at extraordinarily low interest rates that they would be willing to undertake with rates reduced by yet another 25 or 50 basis points. It is also worth querying the quality of projects that businesses judge unprofitable at a -60 basis point real interest rate but choose to undertake at a still more negative rate. There is also the question of whether extremely low, safe, real interest rates promote bubbles of various kinds.

This is intuitively appealing. I try to stay away from monetary policy issues, but whenever I get sucked into a discussion with an advocate of easy money/quantitative easing, I always ask for a common-sense explanation of how dumping more liquidity into the economy is going to help.

Maybe it’s possible to push interest rates even lower, but it certainly doesn’t seem like there’s any evidence showing that the economy is being held back because today’s interest rates are too high.

Moreover, what’s the point of “pushing on a string” with easy money if it just means more reserves sitting at the Fed?

After suggesting that monetary policy isn’t the answer, Summers then proposes to utilize government borrowing. But he’s proposing more debt for management purposes, not Keynesian stimulus.

Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more, not less, and investing in improving their future fiscal position, even assuming no positive demand stimulus effects of a kind likely to materialize with negative real rates. They should accelerate any necessary maintenance projects — issuing debt leaves the state richer not poorer, assuming that maintenance costs rise at or above the general inflation rate. …Similarly, government decisions to issue debt, and then buy space that is currently being leased, will improve the government’s financial position as long as the interest rate on debt is less than the ratio of rents to building values — a condition almost certain to be met in a world with government borrowing rates below 2 percent. These examples are the place to begin because they involve what is in effect an arbitrage, whereby the government uses its credit to deliver essentially the same bundle of services at a lower cost. …countries regarded as havens that can borrow long term at a very low cost should be rushing to take advantage of the opportunity.

Much of this seems reasonable, sort of like a homeowner taking advantage of low interest rates to refinance a mortgage.

But before embracing this idea, we have to move from the dream world of theory to the real world of politics. And to his credit, Summers offers the critical caveat that his idea only makes sense if politicians use their borrowing authority for the right reasons.

There is, of course, still the question of whether more borrowing will increase anxiety about a government’s creditworthiness. It should not, as long as the proceeds of borrowing are used either to reduce future spending or raise future incomes.

At the risk of being the wet-blanket curmudgeon who ruins the party by removing the punch bowl, I have zero faith that politicians would make sound decisions about financial management.

I wrote last month that eurobonds would be “the fiscal version of co-signing a loan for your unemployed alcoholic cousin who has a gambling addiction.”

Well, giving politicians more borrowing authority in hopes they’ll do a bit of prudent refinancing is akin to giving a bunch of money to your drug-addict brother-in-law in hopes that he’ll refinance his credit card debt rather than wind up in a crack house.

Considering that we just saw big bipartisan votes to expand the Export-Import Bank’s corporate welfare and we’re now witnessing both parties working on a bloated farm bill, good luck with that.

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I share lots of political humor, but try to limit myself to jokes and cartoons that have some sort of policy angle (like this gem about Keynesian economics).

But sometimes I can’t resist pure mockery. Not surprisingly, Obama is sometimes the target as you can see in this Pennsylvania joke, this Reagan-Obama comparison, this Wyoming joke, this Bush-Obama comparison, this video satire, and this bumper sticker.

Now we have a t-shirt to add to the list.

The presidency isn’t Obama’s first job, of course. Heck, this blog has a post featuring Richard Epstein reminiscing about his time with Obama at the University of Chicago Law School.

But the underlying message (I’m guessing) is that the President has zero experience in the private sector.

This may explain why he is willing to pursue misguided policies such as class-warfare taxation and wasteful government spending.

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Back in April, responding to an article written by Ann Hollingshead for the Task Force on Financial Integrity and Economic Development, I wrote a long post defending so-called tax havens.

I went through the trouble of a point-by-point response because her article was quite reasonable and focused on some key moral and philosophical issues (rather than the demagoguery I normally have to deal with when people on the left reflexively condemn low-tax jurisdictions).

She responded to my response, and she raised additional points that deserve to be answered.

So here we go again. Let’s go through Ann’s article and see where we agree and disagree.

A couple of weeks ago, I wrote a blog post criticizing the philosophies of Dan Mitchell, a libertarian scholar from the Cato Institute. I asked for a “thoughtful discussion” and I got it—both from the comments section of our blog and from Dan himself.  On his own blog, Dan replied with a thought-provoking point-by-point critique of my piece.

It has been a polite discussion, which is good because readers get to see that we don’t really disagree on facts. Our differences are a matter of philosophy, as Ann also acknowledges.

Dan made several interesting points in his rebuttal. As much as I’d like to take on the whole post right now, my reply would be far too long and I don’t think our readers would appreciate a blog post that approaches a novella. Rather I’ll focus on a couple of his comments that I find interesting on a philosophical level (there were many) and which demand a continued conversation because, I believe, they are the basis of our differences. We’ll start with a rather offhand remark in which Dan indirectly refers to financial privacy as a human right. This is an argument we’ve heard before. And it is worth some exploration.Unless I am very much mistaken, Dan’s belief that financial privacy is a human right arises out of his fundamental value of freedom. My disagreement with Dan, therefore, does not arise from a difference in the desire to promote human rights (I believe we both do), but rather in the different relative weights we each place on the value of privacy, which Dan (I’m supposing) would call an extension of freedom.

I wouldn’t argue with her outline, though I think it is incomplete. I’m a big fan of privacy as a principle of a civil and just society, but I also specifically support financial privacy as a means to an end of encouraging better tax policy. Simply stated, politicians are much more likely to reduce or eliminate double taxation if they feel such taxes can’t be enforced and simply put a country in a much less competitive position.

Okay, so on to [my] answer of the subject of this post. Privacy—and financial privacy by extension—is important. But is it a human right? That’s a big phrase; one which humanity has no business throwing around, lest it go the way of “[fill in blank]-gate” or “war on [whatever].” And as Dan himself points out, governments have a way of fabricating human rights—apparently some European courts have ruled that free soccer broadcasts and owning a satellite dish are a human rights—so it’s important that we get back to [philosophical] basics and define the term properly. The nearly universally accepted definition of “human rights” was established by the Universal Declaration of Human Rights, which the United Nations adopted in 1948. According to the UN, “human rights” are those “rights inherent to all human beings,” regardless of “nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status.” The Declaration includes 30 Articles which describe each of those rights in detail. “Financial privacy” per se is not explicitly a human right in this document, but “privacy” is, and I think it’s reasonable to include financial privacy by extension. But privacy is defined as a fundamental, not an absolute, human right. Absolute rights are those that there is never any justification for violating. Fundamental freedoms, including privacy and freedom from detention, can be ethically breached by the government, as long as they authorized by law and not arbitrary in practice. The government therefore has the right to regulate fundamental freedoms when necessary.

I’m not sure how to react. There are plenty of admirable provisions in the U.N.’s Universal Declaration of Human Rights, but there are also some nonsensical passages – some of which completely contradict others.

Everyone hopefully agrees with the provisions against slavery and in favor of equality under law, but Article 25 of the U.N. Declaration also includes “the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.”

That sounds like a blank check for redistributionism, similar to the statism that I experienced when I spoke at the U.N. last month, and it definitely seems inconsistent with the right of property in Article 17.

I guess what I’m trying to say is that I don’t care that the U.N. Universal Declaration of Human Rights includes a “right to privacy” because I don’t view that document as having any legal or moral validity. I don’t know whether it’s as bad as the European Union’s pseudo-constitution, but I do know that my support for privacy is not based on or dependent on a document from the United Nations.

As an aside, I can’t help noting that Articles 13 and 15 of the U.N. Declaration guarantee the right to emigrate and the right to change nationality, somethings leftists should keep in mind when they demonize successful people who want to move to nations with better tax law.

Getting back to Ann’s column, she confirms my point that you can’t protect property rights for some people while simultaneously giving other people a claim on their output.

That’s important because it means, that when it comes to freedom and privacy, we need to make choices. We can’t always have them all at once. To use a hideously crude example that gets back to the issue of tax evasion, in a developing country, a rich person’s right to financial privacy might be at odds with a poor person’s right to “a standard of living adequate for the health and well-being of himself and of his family.”

For those who are not familiar with the type of discussion, it is the difference between “negative rights” promoted by classical liberals, which are designed to protect life, liberty, and property from aggression, and the “positive rights” promoted by the left, which are designed to legitimize the redistributionist state.

Tom Palmer has a good discussion of the topic here, and he notes that “positive rights” create conflict, writing that, “…classical liberal ‘negative’ rights do not conflict with each other, whereas ‘positive’ rights to be provided with things produce many conflicts. If my ‘right to health care’ conflicts with a doctor’s ‘right to liberty,’ which one wins out?”

Continuing with Ann’s article, she says values conflict with one another, though that’s only if true if one believes in positive rights.

I started this post with a discussion of values, because at the core that’s what we’re talking about. Values are relative, individual, and often in conflict with one another. And they define how we rank our choices between human rights. Dan values freedom, perhaps above most else. He might argue that economic freedom would lead to an enrichment of human rights at all levels, but he probably wouldn’t disagree that that thesis remains untested. My views are a little more complicated because I don’t get to enjoy the (albeit appealing and consistent) simplicity of libertarianism.

I’m tempted to say, “C’mon in, Ann, the water’s fine. Libertarianism is lots of fun.” To be a bit more serious, libertarianism is simple, but it’s not simplistic. You get to promote freedom and there’s no pressure to harass, oppress, or pester other people.

As my colleague David Boaz has stated, “You could say that you learn the essence of libertarianism — which is also the essence of civilization –  in kindergarten: don’t hit other people, don’t take their stuff, keep your promises.”

The world would be a lot better if more people rallied to this non-coercive system.

One more point. Dan mentioned he does “fully comply” with the “onerous demands imposed on [him] by the government.” But as Dan insinuates, irrespective of an individual’s personal values, those demands are not optional. In the United States, we have the luxury of electing a group of individuals to represent our collective values. Together those people make a vision for the country that reflects our ideals. And then, we all accept it. If our country got together and decided to value freedom above all else, we would live in a world that looks a lot like Dan’s utopia. But, frankly, it hasn’t. So we respect our tax code out of a respect for the vision of our country. Dan has the right to try to shape that vision, as do I. Neither of us has the right to violate it.

What Ann writes is true, but not persuasive. Libertarians don’t like untrammeled majoritarianism. We don’t think two wolves and a sheep should vote on what’s for lunch.

We like what our Founding Fathers devised, a constitutional republic where certain rights were inalienable and protected by the judicial system, regardless of whether 90 percent of voters want to curtail our freedoms.

Ann, as you can see from her final passage, does not agree.

That, at is heart, is my problem with both tax evasion and tax avoidance. Neither lines up with the spirit of our collective compact; although the latter is not necessarily reflected in the official laws on the books. I’m not saying tax avoiders should be thrown in jail; they’ve done nothing illegal. I’m saying the regulations that confine us should line up with the vision we’ve created and the values we’ve agreed upon. If that vision is Dan’s, I’ll accept it. But I’m glad he’ll (begrudgingly) accept ours too.

I’m not automatically against having a “collective compact.” After all, that’s one way of describing the American Constitution. But I will return to my point about America’s founders setting up that system precisely because they rejected majoritarianism.

So what does all this mean? Probably nothing, other than the less-than-remarkable revelation that Ann and I have different views on the legitimate role(s) of the federal government.

Since I want to restrain the size and scope of government (not only in America, but elsewhere in the world) and avert future Greek-style fiscal nightmares, that means I want tax competition. And, to be truly effective, that means tax havens.

If that appeals to you (or at least seems like a reasonably hypothesis), I invite you to read some writings by Allister Heath of the United Kingdom and Pierre Bessard of Switzerland.

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I wrote last week about the destructive and self-defeating impact of high state taxes. Simply stated, when states such as California, Illinois, and New York get too greedy, the geese with the golden eggs fly across the border.

And that was one of my main points in this CNBC debate about state governments and class-warfare tax policy with Jared Bernstein.

Since you never get the opportunity to make all your points in an interview, here are a few additional thoughts.

  • Jared admits that tax rates can get too high, but then he claims that the Laffer Curve only exists “in the heads of people like Dan and Arthur Laffer.” Those are mutually inconsistent statements.
  • Jared seems to think it’s important that big business is siding with big government in Oklahoma and supporting the income tax. But that’s hardly a surprise since large companies often prefer corporatism.
  • Jared actually cited Massachusetts and New Jersey as low-tax states, a point that even the host thought was a bit kooky. I guess this means France is a low-tax country in Jared’s fantasy world.

But I also think I made a mistake. When asked how states can get rid of their income taxes, I mentioned that sales taxes do less damage – per dollar raised – than income taxes. That’s true, but I should have stated first and foremost that states should reduce the burden of government spending.

One final point. This cartoon shows what eventually happens in a tax-and-spend society.

P.S. Jared was the co-author of the infamous study claiming that Obama’s so-called stimulus would keep the unemployment rate below 8 percent. Look at this chart and draw your own conclusions.

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Government bureaucrats are significantly overpaid compared to folks in the productive sector of the economy.

So you would think I’d support cuts, especially the kind that get rid of excess blubber in the government workforce.

But not when it means higher costs for taxpayers, and that’s exactly what’s happening in New York, where Buffalo taxpayers cough up more money every time some bureaucrat goes under the knife for cosmetic procedures such as liposuction.

Here are some excerpts from a report in the UK-based Daily Mail.

Teachers in Buffalo are getting plastic surgery on the tax payer’s buck, it has been revealed. Tummy tucks, liposuction and Botox are all part of the controversial one of a kind health plan. …it is a perk that comes with a price tag. Last year Buffalo schools paid $5.9 million for its teachers to have plastic surgery. In 2010 the figure was up at $9 million. …60 teachers spent $30,000 each on procedures in 2011, an investigation by the school board revealed, and because the schools are self-insured, tax payers foot the bill. …The policy to pay for teachers to have surgery started out innocently enough – it was intended for accident and burns victims in need of reconstructive surgery. But in the age of cosmetic surgery the rider extends to arm lifts, face lifts and breast enhancements, with surgeons advertising their services in the teacher’s union newsletter.

Wow. It’s bad enough that government workers get excessive salaries and gold-plated benefits. But this takes it to a new level.

At least we see an example of economics in action. How likely is it that plastic surgeons would be advertising in the union’s newsletter in the absence of taxpayer financing?

P.S. Here’s David Letterman’s top-10 list of how to tell you’re a unionized government bureaucrat. Liposuction isn’t on the list, but wait ’til next year.

P.P.S. Just in case you think I’m exaggerating about overpaid government employees, take a look at this map showing 10 of the 15 richest counties in America.

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Mayor Bloomberg is a wretched human being. He’s an ultra-rich limousine liberal who wants to impose his views on ordinary people.

I’ve previously written about his statist efforts to ban bake sales, and I’ve noted with mixed feelings his proposal to tell food stamp recipients what they’re allowed to buy.

Now he wants to criminalize large sodas. Holman Jenkins writes about this silly idea in the Wall Street Journal.

Mike Bloomberg’s move to regulate the size of sodas sold in his city illustrates why it’s a good thing he is a mayor of New York and not the czar of all the Russias. American big cities tend to be one-party states to begin with, but at least their totalitarian impulses end up being merely cute because they’re so easy to evade. Under the Bloomberg plan, any cup or bottle of sugary drink larger than 16 ounces at a public venue would be verboten, beginning early next year. You’ll still be able to buy as much Coke as you want in a supermarket. Go home and pour yourself a bucketful. As Mr. Bloomberg himself was the first to note, you’ll also still be free to buy two medium drinks in place of today’s Big Gulp at ballgames, theaters, delis and other venues where the ban would be in effect.

But Mr. Jenkins doesn’t just mock Bloomberg for being a food nanny. He also makes an important point about public policy.

Here is the ultimate justification for the Bloomberg soft-drink ban, not to mention his smoking ban, his transfat ban, and his unsuccessful efforts to enact a soda tax and prohibit buying high-calorie drinks with food stamps: The taxpayer is picking up the bill. Call it the growing chattelization of the beneficiary class under government health-care programs. Bloombergism is a secular trend. Los Angeles has sought to ban new fast-food shops in neighborhoods disproportionately populated by Medicaid recipients, Utah to increase Medicaid copays for smokers, Arizona to impose a special tax on Medicaid recipients who smoke or are overweight. …So perhaps the famous “broccoli” hypothetical during the Supreme Court ObamaCare debate was not so fanciful after all. It flows naturally from the state’s fiscal responsibility for your health that it will try to regulate your behavior, even mandating vegetable consumption.

Or, to summarize, the view of politicians is that the government can tell you how to live because it is paying for your healthcare. This is Mitchell’s Law on steroids! One bad government policy leading to another awful government policy.

And it’s not just Mayor Bloomberg pushing these policies. Other politicians have similar proposals, though it’s quite likely that their main motive is to collect more tax revenue since they are focused on how to tax various “bad” foods.

But let’s try not to be overly depressed. Here’s an amusing cartoon on the topic.

I’m glad that people are mocking Mayor Bloomberg and the rest of the Food Nazis. And it’s good to see that the soft drink industry is fighting back, as seen by this Super Bowl commercial.

Maybe some day we’ll get to the point where people have to smuggle food past government agents. This may sound absurd, but it’s already happening in Norway.

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I spend much of my time focusing on the dangers of a bloated federal government. And if you’ve ever paid attention to the name of this blog, you know I have a special interest in monitoring the ill-advised actions of foreign governments.

But that doesn’t mean I have a Pollyanna view about state governments or local governments. Malfeasance, waste, abuse, fraud, and corruption exist at all levels of government and should be condemned at all levels of government.

And few governments are more deserving of our contempt at this moment in time than the state of North Carolina.

You’ll understand when you watch this video.

The folks at the Institute for Justice do a remarkable job, as you already know if you’ve seen these videos about their fights against the IRS, their battles in defense of property rights, and their campaign against abusive asset forfeiture policies.

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I’m guilty of usually seeing the world through a rigid prism of right vs wrong. But I think that’s understandable since I’m often writing about clear-cut issues such as the corrupting nature of big government or the foolishness of class-warfare tax policy.

But I periodically come across topics where I’m not sure about the right answer. So I throw these topics out there to see what other people think.

Previous editions of “you be the judge” include: Putting politicians on trial, vigilante justice, brutal tax collection tactics, child molestation, sharia law, healthcare, incest, speed traps, jury nullification, and vigilante justice (again).

Now I’ve come across another example. Over in France, the socialist government says it wants to impose pay caps on corporate executives. That seems like a very bad idea, but there’s a catch. The proposal applies to government-owned companies.

Here’s a description from the Financial Times.

France’s new socialist government has launched a crackdown on excessive corporate pay by promising to slash the wages of chief executives at companies in which it owns a controlling stake, including EDF, the nuclear power group. …According to Jean-Marc Ayrault, prime minister, the measure would be imposed on chief executives at groups such as EDF’s Henri Proglio and Luc Oursel at Areva, the nuclear engineering group. Their pay would fall about 70 per cent and 50 per cent respectively… The government also wants to pressure other companies in which it owns a stake to follow its lead, even though it has no legal power to force such a change. France is unusual in that it still owns large stakes in many of its biggest global companies, ranging from GDF Suez, the gas utility; to Renault, the carmaker; and EADS, parent group of passenger jet maker Airbus. Mr Ayrault said he “believed in the patriotism” of company leaders and their willingness to share the country’s economic pain.

The analogy that pops into my mind is Fannie Mae and Freddie Mac. Those government-created entities (before the crash) were used as piggy banks by members of the political elite, who would take a break from climbing the ladder in Washington and spend a couple of years raking in millions of dollars by overseeing subsidized mortgages.

Or what about Government Motors? Or companies like Solyndra that are part of the green energy scam?

So even though I’m completely opposed to salary controls on the private sector, I don’t view government-owned and government-subsidized companies as being part of the free market.

But I also worry a lot about slippery slopes, so here’s my thought process.

  1. I fully support pay caps for government-owned entities, such as the Postal Service. Indeed, I assume those already exist.
  2. And I like the idea of pay caps for government-subsidized entities, such as Fannie Mae and Freddie Mac. I don’t know if there is a limit now, but if one exists, it’s way too generous if this story is any indication.
  3. But I get nervous about subsidies being an excuse for government regulation of executive pay, even when I’m disgusted when big business gets in bed with big government. This is why I was so conflicted in this interview about pay caps for banks getting TARP bailouts.
  4. Moreover, I’m instinctively opposed to pay caps on companies that have contracts with government, though obviously my views are affected by whether a contract deals with a legitimate function of government (buying a tank) or whether it’s a festering waste of money (paying a politically connected PR firm to boost the image of the IRS).
  5. Last but not least, I get very scared that politicians inevitably will take a good idea and turn it into a bad idea. In other words, if we give them the power to do something reasonable, like regulate pay at Fannie Mae and Freddie Mac, they’ll probably get intoxicated by power and decide they should be able to control compensation levels at genuinely private companies.

So what’s the right answer? If we’re allowed to fantasize, the obvious decision is to shrink government to its legitimate size so there aren’t any government-owned or government-subsidized companies.

But if we’re forced to deal with the world as it is today, then the choice is much more difficult. If we oppose pay caps, then political insiders can use cronyism to get undeserved payouts. But if we endorse pay caps, then we’re giving politicians power that almost surely will be abused.

If you put a gun to my head, I guess I would oppose pay caps. But I hate saying that since few things are as outrageous as rich people using the coercive power of government to take money from those with less.

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The continuing weakness in the job market, which I wrote about this morning, means that the debate over unemployment benefits will get more heated.

I’ve already noted that even left-wing academics like Paul Krugman and Larry Summers have admitted that you get more unemployment when you subsidize joblessness.

And I’ve cited some good research on the topic from the San Francisco Federal Reserve Bank, as well as other studies by academic economists.

But none of this evidence seems to matter, as I discovered in this debate with a former Obama Labor Department official.

To better understand the points I was making, here are two good anecdotes from Ohio and Michigan.

Last but not least, this cartoon does a very good who of teaching about the economics of unemployment insurance. And if you want to understand the absurdity of the left, this post shows Nancy Pelosi is a train wreck of economic illiteracy.

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The Labor Department just released its monthly employment report and the White House is probably not happy.

There are several key bits of data in the report, such as the unemployment rate, net job creation, and employment-population ratio.

At best, the results are mediocre. The unemployment rate generally gets the most attention, and that was bad news since the joblessness rate jumped to 8.2 percent.

What makes that number particularly painful is that the Obama Administration claimed that the unemployment rate today would be less than 6 percent if the so-called stimulus was adopted. But as you can see from the chart, squandering $800 billion on a Keynesian package hasn’t worked.

While that chart is probably embarrassing to the White House, I think the most revealing numbers come from the Minneapolis Federal Reserve Bank’s interactive website, which allows users to compare employment data and GDP data for different business cycles.

I looked at those numbers a couple of months ago, so I could compare Reaganomics and Obamanomics, and the difference is startling. The Reagan policies of lower tax rates, spending restraint, deregulation, and tight money generated much better results than the statist policies of Obama.

The most recent numbers, shown below, aren’t any better for the Obama Administration.

But I suppose the good news is that the United States is not Europe. Government is even bigger on the other side of the Atlantic and many of those nations are in the middle of a fiscal crisis and the unemployment rate averages 11 percent.

Sort of makes you wonder whether there’s a lesson to be learned. Maybe, just maybe, bigger government means weaker economic performance.

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