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Archive for August, 2012

Republicans are despicable people.

Some of you may be wondering why I would say such a thing. After all, I periodically express my profound admiration for Ronald Reagan (as well as my appreciation for the only other good President of the past 100-plus years).

Moreover, I just wrote a Wall Street Journal editorial saying nice things about the Ryan budget.  And I also have done a couple of TV interviews explaining how that plan would do a good job of controlling the burden of government spending.

But these are the exceptions. What really matters is what Republicans do when they actually hold power. By that standard, most GOPers are terrible.

Bush was a reckless big spender, for instance, and I’ve compiled a list of examples that make me think Romney would be equally disappointing.

And now I have something new for my list of Romney transgressions. Take a look at this awful campaign commercial.

Several things about this commercial make me nauseous.

  • First, current seniors did not pay for Medicare. The Medicare payroll tax only covers about one-third of projected costs. To be fair, the ad doesn’t claim that seniors completely self-financed their benefits, but it clearly promotes the entitlement mindset – particularly with the nonsense about “guaranteed healthcare.”
  • Second, while I agree that Obamacare is a “massive new government program,” it’s downright pathetic to run an ad defending an even more massive old government program.
  • Third, Obama did not cut Medicare. He merely reduced the program’s rate of growth. Republicans correctly complain when leftists demagogue about non-existent spending cuts, but they lose all credibility when they use the same dishonest tactics.

You might be thinking that Romney was out of the loop when some campaign consultants went rogue and put together a deeply flawed commercial.

Don’t kid yourself. Here’s what Romney just said, as reported by the L.A. Times.

At a campaign fundraiser in Charlotte on Wednesday, Romney told NASCAR team owners and other donors that Obama “cut Medicare funding for current Medicare retirees” to pay for his healthcare overhaul. “That came out of the Medicare trust fund,” Romney told supporters at Duke Mansion, a colonial-style banquet hall. “He raided that trust fund to pay for Obamacare. And as seniors hear this, they’re going to be angry.” …Restoring the cuts, as Romney advocated Wednesday in a CBS interview, would swell the federal deficit in kind. Romney, who has named deficit reduction as a top priority, said nothing about how he would cover the expense.

In other words, Romney not only is criticizing Obama for restraining the growth of Medicare spending, he’s also promising to increase outlays on the program if he gets to the White House.

By the way, none of this should be interpreted as an endorsement of what Obama did. As you can see from these two charts (from Medicare’s Chief Actuary), the reductions in the rate of growth of Medicare spending basically were used to finance higher spending in other areas such as Medicaid.

But Romney’s basically promising to do nothing more than reverse these two charts. And that’s assuming we can trust his campaign promise to undo Obamacare. This cartoon shows why I’m not going to hold my breath waiting for that to happen.

I don’t care whether politicians are Republicans or Democrats. I care whether they are going to increase economic freedom so that we can enjoy more liberty and prosperity.

Based on his approach to Medicare, Romney at best wants to rearrange the deck chairs on the Titanic.

If Romney actually cared about taxpayers and the economy, he would promise to repeal the costly Obamacare program and then build upon that small first step with a commitment to reform the other unaffordable entitlement programs.

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Even though I’ve already made clear that I am less-than-overwhelmed by the thought of Mitt Romney in the White House, I worry that people will become to think I’m a GOP toady.

That’s because I’ve been spending a lot of time providing favorable analysis and commentary on the relative merits of the Ryan budget (particularly proposed reforms to Medicare and Medicaid) compared to President Obama’s statist agenda of class warfare and bigger government.

I’ve already done a couple of TV interviews on Ryanomics vs Obamanomics and the Wall Street Journal this morning published my column explaining the key features of the Ryan budget.

Here are some highlights. In one of my early paragraphs, I give Ryan credit for steering the GOP back in the right direction after the fiscal recklessness of the Bush years.

…the era of bipartisan big government may have come to an end. Largely thanks to Rep. Paul Ryan and the fiscal blueprint he prepared as chairman of the House Budget Committee earlier this year, the GOP has begun climbing back on the wagon of fiscal sobriety and has shown at least some willingness to restrain the growth of government.

I probably should have also credited the Tea Party, but I’ll try to make up for that omission in the future.

These next couple of sentences are the main point of my column.

The most important headline about the Ryan budget is that it limits the growth rate of federal spending, with outlays increasing by an average of 3.1% annually over the next 10 years. …limiting spending so it grows by 3.1% per year, as Mr. Ryan proposes, quickly leads to less red ink. This is because federal tax revenues are projected by the House Budget Committee to increase 6.6% annually over the next 10 years if the House budget is approved (and this assumes the Bush tax cuts are made permanent).

Some conservatives complain that the Ryan budget doesn’t balance the budget in 10 years. I explain how that could happen, but I then emphasize that what really matters is shrinking the burden of government spending.

To balance the budget within 10 years would require that outlays grow by about 2% each year. …There are many who would prefer that the deficit come down more quickly, but from a jobs and growth perspective, it isn’t the deficit that matters. Rather, what matters for prosperity and living standards is the degree to which labor and capital are used productively. This is why policy makers should focus on reducing the burden of government spending as a share of GDP—leaving more resources in the private economy. The simple way of making this happen is to follow what I’ve been calling the golden rule of good fiscal policy: The private sector should grow faster than the government.

Actually, I’ve been calling it Mitchell’s Golden Rule, but I couldn’t bring myself to be that narcissistic and self-aggrandizing on the nation’s most important and influential editorial page.

One final point from the column that’s worth emphasizing is that Ryan does the right kind of entitlement reform.

One of the best features of the Ryan budget is that he reforms the two big health entitlements instead of simply trying to save money. Medicaid gets block-granted to the states, building on the success of welfare reform in the 1990s. And Medicare is modernized by creating a premium-support option for people retiring in 2022 and beyond. This is much better than the traditional Beltway approach of trying to save money with price controls on health-care providers and means testing on health-care consumers. …But good entitlement policy also is a godsend for taxpayers, particularly in the long run. Without reform, the burden of federal spending will jump to 35% of GDP by 2040, compared to 18.75% of output under the Ryan budget.

The last sentence of the excerpt is critical. If the Golden Rule of fiscal policy is to have the private sector grow faster than government, then the Golden Goal is to reduce government spending as a share of GDP.

I’ve commented before how America will become Greece in the absence of reform. Well, that’s basically the Obama fiscal plan, as illustrated by this amusing cartoon.

What makes the Ryan budget so impressive is that it includes the reforms that are needed to avoid this fate.

No, it doesn’t bring the federal government back down to 3 percent of GDP, so it’s not libertarian Nirvana.

But we manage to stay out of fiscal hell, so that counts for something.

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Although this line is attributed to many people, Wikiquote says that Gideon Tucker was the first to warn us that “No man’s life, liberty, or property are safe while the legislature is in session.”

This cartoon about Keynesian economics sort of makes the same point, but not with the same eloquence.

But that’s not the point of this post. Instead, I want to focus on this grossly misleading headline in USA Today: “This Congress could be least productive since 1947.”

I don’t think it’s a case of media bias or inaccuracy, as we saw with the AP story on poverty, the Brian Ross Tea Party slur, or the Reuters report on job creation and so-called stimulus.

But it does blindly assume that it is productive to impose more laws. Was it productive to enact Obamacare? What about the faux stimulus? Or the Dodd-Frank bailout bill?

Wouldn’t the headline be more accurate if it read, “This Congress could be least destructive since 1947”?

Here are the relevant parts of the USA Today report.

Congress is on pace to make history with the least productive legislative year in the post World War II era. Just 61 bills have become law to date in 2012 out of 3,914 bills that have been introduced by lawmakers, or less than 2% of all proposed laws, according to a USA TODAY analysis of records since 1947 kept by the U.S. House Clerk’s office. In 2011, after Republicans took control of the U.S. House, Congress passed just 90 bills into law. The only other year in which Congress failed to pass at least 125 laws was 1995. …When Democrats controlled both chambers during the 111th Congress, 258 laws were enacted in 2010 and 125 in 2009, including President Obama’s health care law.

To be sure, not all legislation is bad. Now that the Supreme Court has failed in its job, Congress would have to enact a law to repeal Obamacare. Laws also would need to be changed to reform entitlements, or adopt a flat tax.

And some laws are benign, such as the enactment of Dairy Goat Awareness Week or naming a federal courthouse.

But I’m guessing that the vast majority of substantive laws are bad for freedom and result in less prosperity.

So let’s cross our fingers that future Congresses are even less productive (and therefore less destructive) than the current one.

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While most people in Washington are focused on the political implications of adding Paul Ryan to the GOP ticket, my only concern is trying to limit the size and scope of government so we can enjoy more freedom and prosperity.

In this debate for PBS, I explain that the Ryan budget would boost the economy – but only if Republicans actually followed through on their rhetoric and did the right thing after obtaining power.

A few comments on the debate. I channel the wisdom of Mitchell’s Golden Rule by saying the most important goal is restraining the growth of federal spending.

I fully agree with Jared that the GOP economic plans won’t work if Republicans get squeamish about doing what’s best for America. If Romney wins, and does a repeat of the statist Bush years, the GOP will deserve to be cast out of power for decades.

At the end of our interview, I obviously disagreed with Jared’s embrace of the Keynesian fantasy that more government spending magically increases growth. If I was feeling mean, I could have pointed out that he was the co-author of the infamous report claiming that Obama’s so-called stimulus would keep unemployment below 8 percent.

I also appeared on Bloomberg TV to comment on Ryan’s economic plan.

It won’t surprise regular readers of this blog that I emphasized the importance of restraining the growth of government so that the burden of the public sector shrinks as a share of overall economic output.

In my second soundbite, I make a simple point about the Laffer Curve. As we saw in the 1980s, lower tax rates don’t automatically mean lower tax revenues.

I also point out the similarities between what Paul Ryan is proposing today with what was achieved in the 1990s during the Clinton Administration.

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I’ve been against the auto bailout from the very beginning because it was a corrupt payoff to lazy corporate fat-cats and an ossified union.

And when folks on the left say the bailout is a success, I explain that any industry can be propped up with a sufficiently large injection of other people’s money.

Now we have new data on how much “other people’s money” has been diverted. It’s a big number, and it seems to get bigger each time there’s a new estimate. Here’s part of a Reuters report.

The U.S. Treasury Department has said the auto industry bailout will cost taxpayers $3.4 billion more than previously thought. Treasury now estimates the 2009 bailout will eventually cost the government $25.1 billion, according to a report sent to Congress on Friday. That is up from the last quarterly estimate of $21.7 billion.

Sort of reminds me of the old joke about the lousy businessman who says he loses money on every sale, but he makes up for it with high volume.

Well, that incompetent businessman has a kindred spirit in the White House. Here’s some of what Politico reported.

President Obama, while villifying Mitt Romney for opposing the auto industry bailout, bragged about the success of his decision to provide government assistance… he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry…”

Well, we can’t say we haven’t been warned. He wants to do the same thing in “every industry.” Well, according to the Bureau of Economic Analysis, there are 60 industries in America. At $25 billion each, that means $1.5 trillion.

Stimulus in action

By the way, Mickey Kaus explains that the government’s numbers are incomplete and that the actual damage is significantly higher. And this Reason TV video exposes some of the government’s chicanery.

P.S. If you’re in the mood for some satire, here’s a bailout form showing how you can become a deadbeat and mooch off the government.

P.P.S. Just in case you’re new to this blog and don’t know my history, rest assured that I’m also against Wall Street bailouts.

P.P.P.S. Ethical people should boycott GM and Chrysler, particularly since these companies are now handmaidens of big government.

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Beginning with the very first policy-oriented post on this blog, I’ve been criticizing Keynesian economics, usually with lots of cheering and support from the GOP. Indeed, more than 98 percent of Republicans in the House and Senate voted against Obama’s so-called stimulus.

They understood – or at least seemed to understand – that you don’t create jobs by diverting money from the private sector so it can be spent by politicians in Washington.

And they have the satisfaction of seeing history justify their votes. Unemployment rose after the faux stimulus was enacted and the joblessness rate has stayed above 8 percent.

But some Republicans are now sounding like born-again Keynesians. They object to the automatic budget savings – known as sequestration – that are scheduled to take effect next year, and they are warning that less government spending means fewer jobs. Here’s a small sampling of their statements.

I would have no objection to these lawmakers arguing against a sequester if they based their concerns on national security, even if I think those concerns are exaggerated.

And I would understand if they objected to a sequester because defense is disproportionately impacted (the Pentagon accounts for only about one-fourth of the budget, yet it absorbs one-half of the sequester).

And I wouldn’t even complain if they claimed that a sequester is painful because of short-term economic dislocation and transition costs. Heck, I even said that might be a legitimate excuse when Mitt Romney said something that sounded suspiciously Keynesian.

But it doesn’t seem like those caveats apply.

Let’s close with some good news and bad news. The good news is that I don’t actually think any of the anti-sequestration lawmakers are genuine Keynesians.

The bad news is that they are genuine politicians, so they think there is nothing wrong with using the coercive power of government to take as much from the rest of the country as possible and redistribute those resources to their states or districts.

They may vaguely understand that big government undermines economic performance, but that’s a secondary concern. They’re main goal is buying votes with other people’s money.

P.S. You can peruse some good cartoons about Keynesian economics by clicking here, here, here, and here.

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I don’t give the issue much attention on this blog, but I’m very interested in Social Security reform. I wrote my dissertation on Australia’s very successful system of personal retirement accounts, for instance, and I narrated this video on Social Security reform in the United States.

So I was very interested to see that the Associated Press put out a story warning about the dismal state of the program’s finances.

Here’s some of what the AP reported.

For nearly three decades Social Security produced big surpluses, collecting more in taxes from workers than it paid in benefits to retirees, disabled workers, spouses and children. The surpluses also helped mask the size of the budget deficit being generated by the rest of the federal government. Those days are over. Since 2010, Social Security has been paying out more in benefits than it collects in taxes… The projected shortfall in 2033 is $623 billion, according to the trustees’ latest report. It reaches $1 trillion in 2045 and nearly $7 trillion in 2086, the end of a 75-year period used by Social Security’s number crunchers because it covers the retirement years of just about everyone working today. Add up 75 years’ worth of shortfalls and you get an astonishing figure: $134 trillion. Adjusted for inflation, that’s $30.5 trillion in 2012 dollars, or eight times the size of this year’s entire federal budget.

First of all, kudos to the AP. I criticized them for a sloppy and biased report on poverty last month, so it behooves me to mention that their story on Social Security is mostly fair and accurate.

My only complaint is that the story does include some analysis of the Social Security Trust Fund, even though that supposed Fund is nothing but a pile of IOUs – money that one part of the government promises to give to another part of the government.

But let’s set that aside. Another interesting tidbit from the story is this quote from one of the kleptocrats at the American Association of Retired Persons. Note that he implicitly rules out any changes other than those that enable the government to “pay the benefits we promised.”  But that shouldn’t be a surprise. AARP is part of the left-wing coalition.

“I’m not suggesting we need to wait 20 years but we do have time to make changes to Social Security so that we can pay the benefits we promised,” said David Certner, AARP’s legislative policy director. “Let’s face it. Relative to a lot of other things right now, Social Security is in pretty good shape.”

But I will say that Mr. Certner is sort of correct about Social Security being in better shape than Medicare and Medicaid. But that’s like saying the guy with lung cancer who is 75 lbs overweight is in better shape than the two guys with brain tumors who are both 150 lbs overweight.

If you have to engage in fiscal triage, it would be smart to first address Medicare and Medicaid, but Social Security also needs reform. And not the kind of statist reform the folks at AARP would like to see.

By the way, you probably won’t be surprised to learn that President Obama’s approach is similar to the left-wingers at AARP. Here’s a video I narrated about his preferred policy.

It seems that the question doesn’t matter with this administration. The answer is always to impose more class-warfare tax policy.

P.S. If you need to be cheered up after reading this post, here’s a good cartoon showing the difference between Social Security and a Ponzi scheme, and here’s another cartoon showing what inspired Bernie Madoff to steal so much money.

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The burden of federal spending in the United States was down to 18.2 percent of gross domestic product when Bill Clinton left office.

But this progress didn’t last long. Thanks to George Bush’s reckless spending policies, the federal budget grew about twice as fast as the economy, jumping by nearly 90 percent in just eight years This pushed federal spending up to about 25 percent of GDP.

President Obama promised hope and change, but he has kept spending at this high level rather than undoing the mistakes of his predecessor.

This new video from the Center for Freedom and Prosperity Foundation uses examples of waste, fraud, and abuse to highlight President Obama’s failed fiscal policy.

Good stuff, though the video actually understates the indictment against Obama. There is no mention, for instance, about all the new spending for Obamacare that will begin to take effect over the next few years.

But not everything can be covered in a 5-minute video. And I suspect the video is more effective because it closes instead with some discussion of the corrupt insider dealing of Obama’s so-called green energy programs.

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Every so often, I’ll be critical of cops. Usually it’s because they’re tasked with the unenviable responsibility of enforcing bad laws, but sometimes they do things that are needlessly wrong.

But these are rare examples of bone-headed behavior by individual cops. I’m much more concerned about bad laws issued by politicians, such as asset forfeiture laws that give cops incentives to harass people who aren’t a threat to society.

Having made a semi-serious point, now let’s enjoy a good joke about cops.

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HOW TO CALL THE POLICE WHEN YOU WANT RESULTS

George Phillips , an elderly man, from Meridian, Mississippi, was going up to bed, when his wife told him that he’d left the light on in the garden shed, which she could see from the bedroom window. George opened the back door to go turn off the light, but saw that there were people in the shed stealing things.

He phoned the police, who asked “Is someone in your house?”

He said “No,” but some people are breaking into my garden shed and stealing from me.

Then the police dispatcher said “All patrols are busy. You should lock your doors and an officer will be along when one is available.”

George said, “Okay.”

He hung up the phone and counted to 30.

Then he phoned the police again.

“Hello, I just called you a few seconds ago because there were people stealing things from my shed. Well, you don’t have to worry about them now because I just shot them.” and he hung up.

Within five minutes, six Police Cars, a SWAT Team, a Helicopter, two Fire Trucks, a Paramedic, and an Ambulance showed up at the Phillips’ residence, and caught the burglars red-handed.

One of the Policemen said to George, “I thought you said that you’d shot them!”

George said, “I thought you said there was nobody available!”

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For those of you who appreciate police humor, you’ll enjoy this Texas police exam and this example of compassionate state troopers.

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For years, I’ve been warning that a value-added tax (VAT) would be a terrible idea. Simply stated, politicians would have no reason to control spending or reform entitlements if they had a new source of tax revenue.

In this video, I explain why this European-style national sales tax is a money machine for bigger government.

Japan’s politicians are confirming my argument. Here are some details from a new report in the Wall Street Journal.

Japan’s parliament passed a landmark tax bill Friday, finalizing the legal framework to double the nation’s sales tax by 2015 as a step toward fiscal reconstruction. The upper house enactment of the contentious bill marks the end of Prime Minister Yoshihiko Noda’s tortuous 12-month road to raise the tax to 8% in April 2014 and 10% in October 2015. …The sales tax hike will be the first since 1997, when the rate was raised to the current 5% from 3%.

Wow, more than tripling the tax between 1997 and 2015. I wonder how long it will take Japan’s political class to boost the rate to 20 percent?

But that’s only part of the story.

Mr. Noda also had to promise to dissolve the lower house “in the near term” in exchange for…endorsement of the bill in the opposition-controlled upper house.

Wow, if I’m reading that passage correctly, it sounds like Prime Minister Noda is willing to lose power in order to impose this new tax. This shows an amazing amount of greed for new revenue.

I’m surprised, though, that his party didn’t kick him out and elect a new leader. They must be as politically incompetent as the supposedly right-wing party in Slovakia that surrendered power to the socialists in order to get support for the Greek bailout.

However, the WSJ article also suggests that the tax is not a done deal.

The bill includes a provision making an “economic upturn” a condition for implementing the rate hike. The government refused to specify in the bill exactly what an upturn entails, and lawmakers have different interpretations. DPJ tax policy chief Hirohisa Fujii told Dow Jones that only an economic shrinkage of 3% or more should prevent the tax increase from taking place.

Isn’t that remarkable. This onerous tax hike can only go into effect if there’s an “economic upturn,” and one of the sleazy politicians from the ruling party is defining an economic contraction of -2.99 percent as meeting that test.

Sound like Mr. Fujii should become friends with the Obama Administration officials who relied on Keynesian economic theory to concoct an infamous prediction that unemployment would never rise above 8 percent if Washington squandered more than $800 billion on a faux stimulus.

But if he’s smart, Mr. Fujii will grab as much loot as possible and emigrate. Japan’s long-term finances are a disaster, and the VAT increase is a pretty good sign that politicians have no intention of turning the ship of state before it rams the fiscal iceberg.

And now you’ll understand even more why I’m worried about the pro-VAT sympathies of Mitt Romney and Paul Ryan.

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The honest answer is that it probably means nothing. I don’t think there’s been an election in my lifetime that was impacted by the second person on a presidential ticket.

And a quick look at Intrade.com shows that Ryan’s selection hasn’t (at least yet) moved the needle. Obama is still in the high 50s.

Moreover, the person who becomes Vice President usually plays only a minor role in Administration policy.

With those caveats out of the way, the Ryan pick is mostly good news.

Here are the reasons why I’m happy.

Here are two reasons why I’m worried.

  • Both Romney and Ryan are somewhat sympathetic to a value-added tax. My worst-case scenario is they win the election, but then can’t get a good budget approved because of some squishy Republican senators who put self interest above national interest. Romney and Ryan then decide that this European-style national sales tax is the only way – on paper – of making the budget balance. In reality, of course, we’ll suffer the same fate as Europe since the VAT revenues will be used to finance ever-larger government.
  • Ryan has some very bad votes in his past, including support for TARP, the auto bailout, the no-bureaucrat-left-behind education legislation, and the reckless Medicare prescription drug entitlement. Everyone says to ignore those votes because Ryan knew he was voting the wrong way, but if he’s already made some deliberately bad decisions for political reasons, what’s to stop him from making more deliberately bad decisions for political reasons?

But as I said above, don’t read too much into Ryan’s selection. if Republicans win, Romney will be the one calling the shots.

Though this does give Ryan a big advantage the next time there’s an open contest for the GOP nomination – either 2016 or 2020.

P.S. I suspect putting Ryan on the ticket will shift Wisconsin into the GOP column. Based on my last prediction, that would be enough to defeat Obama. But I’ll have to contemplate whether the pick hurts Romney’s chances in another state. You’ll have to wait until September 6 for my updated election prediction.

P.P.S. For those who care about politics, some are saying that selecting Ryan was risky because it gives Obama and his allies an opportunity to demagogue the GOP ticket about entitlement reform. I disagree. Even if Romney picked Nancy Pelosi, that demagoguery was going to happen. Heck, they’ve already accused Romney of causing a woman’s death, so I hardly think they’ll be bashful about throwing around other accusations.

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In previous posts, I put together tutorials on the Laffer Curve, tax competition, and the economics of government spending.

Today, we’re going to look at the issue of tax reform. The focus will be the flat tax, but this analysis applies equally to national sales tax systems such as the Fair Tax.

There are three equally important features of tax reform.

  1. A low tax rate – This is the best-known feature of tax reform. A low tax rate is designed to minimize the penalty of work, entrepreneurship, and productive behavior.
  2. No double taxation of saving and investment – All major tax reform plans, such as the flat tax and national sales tax, get rid of the tax bias against income that is saved and invested. The capital gains tax, double tax on dividends, and death tax are all abolished. Shifting to a system that taxes economic activity only one time will boost capital formation, thus facilitating an increase in productivity and wages.
  3. No distorting loopholes – With the exception of a family-based allowance designed to protect lower-income people, the main tax reform plans get rid of all deductions, exemptions, shelters, preference, exclusions, and credits. By creating a neutral tax system, this ensures that decisions are made on the basis of economic fundamentals, not tax distortions.

All three features are equally important, sort of akin to the legs of a stool. Using the flat tax as a model, this video provides additional details.

One thing I don’t mention in the video is that a flat tax is “territorial,” meaning that only income earned in the United States is taxed. This common-sense rule is the good-fences-make-good-neighbors approach. If income is earned by an American in, say, Canada, then the Canadian government gets to decide how it’s taxed. And if income is earned by a Canadian in America, then the U.S. government gets a slice.

It’s also worth emphasizing that the flat tax protects low-income Americans from the IRS. All flat tax plans include a fairly generous “zero-bracket amount,” which means that a family of four can earn (depending on the specific proposal) about $25,000-$35,000 before the flat tax takes effect.

Proponents of tax reform explain that there are many reasons to junk the internal revenue code and adopt something like a flat tax.

  • Improve growth – The low marginal tax rate, the absence of double taxation, and the elimination of distortions combine to create a system that minimizes the penalties on productive behavior.
  • Boost competitiveness – In a competitive global economy, it is easy for jobs and investment to cross national borders. The right kind of tax reform can make America a magnet for money from all over the world.
  • Reduce corruption – Tax preferences and penalties are bad for growth, but they are also one of the main sources of political corruption in Washington. Tax reform takes away the dumpster, which means fewer rats and cockroaches.
  • Promote simplicity – Good policy has a very nice side effect in that the tax system becomes incredibly simple. Instead of the hundreds of forms required by the current system, both households and businesses would need only a single postcard-sized form.
  • Increase privacy – By getting rid of double taxation and taxing saving, investment, and profit at the business level, there no longer is any need for people to tell the government what assets they own and how much they’re worth.
  • Protect civil liberties – A simple and fair tax system eliminates almost all sources of conflict between taxpayers and the IRS.

All of these benefits also accrue if the internal revenue code is abolished and replaced with some form of national sales tax. That’s because the flat tax and sales tax are basically different sides of the same coin. Under a flat tax, income is taxed one time at one low rate when it is earned. Under a sales tax, income is taxed one time at one low rate when it is spent.

Neither system has double taxation. Neither system has corrupt loopholes. And neither system requires the nightmarish internal revenue service that exists to enforce the current system.

This video has additional details – including the one caveat that a national sales tax shouldn’t be enacted unless the 16th Amendment is repealed so there’s no threat that politicians could impose both an income tax and sales tax.

Last but not least, let’s deal with the silly accusation that the flat tax is a risky and untested idea. This video is a bit dated (some new nations are in the flat tax club and a few have dropped out), but is shows that there are more than two dozen jurisdictions with this simple and fair tax system.

P.S. Fundamental tax reform is also the best way to improve the healthcare system. Under current law, compensation in the form of fringe benefits such as health insurance is tax free. Not only is it deductible to employers and non-taxable to employees, it also isn’t hit by the payroll tax. This creates a huge incentive for gold-plated health insurance policies that cover routine costs and have very low deductibles. This is a principal cause (along with failed entitlement programs such as Medicare and Medicaid) of the third-party payer crisis. Shifting to a flat tax means that all forms of employee compensation are taxed at the same low rate, a reform that presumably over time will encourage both employers and employees to migrate away from the inefficient over-use of insurance that characterizes the current system. For all intents and purposes, the health insurance market presumably would begin to resemble the vastly more efficient and consumer-friendly auto insurance and homeowner’s insurance markets.

P.P.S. If you want short and sweet descriptions of the major tax reform plans, here are four highly condensed descriptions of the flat tax, national sales tax, value-added tax, and current system.

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I’m reluctant to disagree with two excellent economists, but I’m rather disappointed that Gary Becker and James Heckman have a piece in today’s Wall Street Journal arguing that the federal government should subsidize economic research.

With the burden of government spending at record levels, every beneficiary of federal largesse should be willing to back away from the trough.

They obviously have a different perspective. Let’s look at some excerpts from their column.

…the great majority of economists have long agreed that the federal government should have an important role in the sponsorship of basic research. …Yet recent actions by Congress have threatened to restrict funding for basic research that focuses on economics. We believe such actions are misplaced… We cannot expect the market alone to support basic economic and social research, including data collection, since they are public goods that are difficult to appropriate privately. In cutting out the considerable fat from the public diet we should not cut the muscle that has helped make our economy the largest and strongest in history.

Much of their column is dedicated to examples of academic research that have yielded benefit for the rest of society. But even if we assume their examples are completely accurate, that doesn’t necessarily mean that federal subsidies generate a good rate of return.

I’m sure there must be examples of people who took welfare money, managed to avoid the trap of dependency, and then went on to live very productive lives. That doesn’t mean that welfare programs, on net, have a positive impact on the economy.

Likewise, there must be tens of thousands of people who became entrepreneurs, investors, and business owners after getting government grants and other subsidies to attend college. But that doesn’t mean that those success stories aren’t outweighed by costs such as diversion of capital, tuition hikes driven by third-party payer, and excessive student debt.

Should you pay higher taxes to subsidize me?

This doesn’t mean that spending on economic research is necessarily counterproductive, but it does mean that a few positive examples are not enough to settle the debate. Likewise, if I had an intern find examples of government-funded economic research that was either frivolous or destructive, that wouldn’t prove such spending is automatically wasteful.

Let’s close this post by suggesting where there could be consensus. As I noted in my Rahn Curve video, there are some forms of government spending that are associated with better economic performance. Examples of such “public goods” include expenditures to maintain the rule of law, uphold property rights, and enforce contracts.

I’m skeptical about whether economic research is a public good that requires government subsidies, but Becker and Heckman are right in the column when they note that our fiscal problems are due to the “growth of entitlement spending.”

So let’s all agree that we should reform entitlements and shut down useless federal departments.

Then we can have a good debate about spending for “major public physical capital investment” and “conduct of research and development,” which I’ve previously explained amount to less than 10 percent of the federal budget.

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While I disagree with statists, I sometimes admire their discipline. They are very good at staying “on message.”

I am 100 percent confident, for instance, that they intend big tax hikes on the middle class, even though they would piously swear an oath to the contrary. Indeed, I suspect more than 90 percent of them secretly would like a value-added tax.

It’s not that they necessarily dislike ordinary people, but privately they understand that you can’t finance big government by taxing rich people.

Simply stated, there aren’t enough of the “1 percent.” Moreover, rich people have significant control over the timing, composition, and level of their income, so class-warfare tax hikes inevitably will fail to generate much revenue (yes, the Laffer Curve exists).

So it makes sense that they want to screw the middle class, but it’s also obvious that they don’t want to admit this is their goal. As such, it’s always interesting and revealing when folks on the left slip up and admit their true intentions.

In recent days, more leftists have come out of the we-only-want-to-tax-the-rich closet.

Here’s some of what Jared Bernstein, former economist for Vice President Biden, just wrote for the U.K.’s Financial Times.

That plan will have to include tax increases beyond just the wealthiest households, although that is the right place to start. But what should happen next? …The best thing to do, once the economic recovery is solidly under way, is to simply let the Bush tax cuts expire and return to the tax structure that prevailed under Bill Clinton. …I’d urge Democrats to be forthright with the fact that we’re way below where we need to be in terms of revenue collection.

Bernstein, by the way, was a co-author of the infamous prediction that enacting Obama’s stimulus would keep the unemployment rate below 8 percent.

The Washington Post also is on board with the idea of big tax hikes on ordinary folks.

…it’s impossible to tackle the federal debt by taxing only the wealthy. …the middle class is going to have to pay more…the only way to achieve tax reform with a reasonable increase in revenue is to reset everyone’s rates at Clinton-era levels.

Keep in mind, by the way, that these proposals are just the tip of the iceberg. Once tax rates are pushed back to 2000 levels, then the drumbeat will sound for additional tax hikes.

“The middle class is an easy target”

And, sooner or later, the left will push for its big goal of a value-added tax.

This is not a trivial threat. Obama, for instance, already has expressed support, saying that the VAT is “something that has worked for other countries.” Romney’s also untrustworthy on the issue, having left the door open to this European-style national sales tax.

But the main point of this post is to explain that class-warfare taxes on the rich are a real threat, but they’re also just the camel’s nose under the tent. The left’s real goal is to fleece the middle class.

There’s no way to boost the burden of government spending to European levels without mimicking European tax policies.

And the dirty little secret about European tax policy is that taxes on the rich are about the same on both sides of the Atlantic. The reason government is so much bigger in Europe is that they ransack the middle class.

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I appeared on CNBC a couple of days ago to discuss a new report which claims that some big U.S. companies “only” paid 9 percent of their income to the government.

While I’m a bit skeptical of the numbers (did it include the taxes paid to foreign governments, for instance, which can be substantial for multinational firms?), I confess I didn’t read the report.

So I focused on the best way of getting rid of corrupt loopholes while simultaneously boosting the competitiveness of America companies.

In other words, I said we should rip up the wretched internal revenue code and implement a simple and fair flat tax.

As is my habit, allow me to emphasize a few points from the interview.

  1. It’s good to keep money in the productive sector of the economy because we shouldn’t feed the spending addiction in DC.
  2. If tax rates are low, there’s much less incentive for companies to lobby for loopholes.
  3. The only feasible and desirable tax reform is to simultaneously eliminate tax breaks while lowering tax rates.
  4. The marginal tax rate is what determines incentives for new investment and job creation, which is why America’s highest-in-the-world 35 percent corporate tax rate is a major problem even if average tax rates are much lower.

Sadly, I’m not holding my breath expecting improvements.

Even though tax reform should appeal to well-meaning liberals, Obama seems committed to the class-warfare approach . Romney, meanwhile, mostly wants to tinker with the current system (when he’s not saying worrisome things about a value-added tax).

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Venturing into R-rated territory, I zinged Romney a few days ago.

Now it’s time to hit Obama. This bit of satire is very clever, largely because it’s true (and I say that as someone who agrees that he shouldn’t be blamed for the first year or so of his  tenure).

Sort of reminds me of this Socialism-for-Kids poster.

But I actually prefer this Obama-modified Bill of Rights since perhaps some honest leftists will realize it’s time to get worried about what this Administration is doing.

P.S. I have no idea who put this together the funny image above. All I know is that it showed up in my inbox, which is the case for much of the humor I share. But feel free to assign (or take) credit in the comments if you know any details.

P.P.S. To close with a serious point, Obama did inherit a mess from Bush, who got the country in trouble with too much government spending and too much government intervention. The indictment against Obama is that he doubled down on that approach, further expanding the burden of government spending and further expanding the web of government regulation, even though he promised hope and change.

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If you saw my speech to Capitol Hill staff on the topic, you know I’m strongly opposed to schemes that would allow greedy state politicians to impose taxes on online sales that occur outside their borders.

I reiterated these sentiments in a debate that was posted today by U.S. News & World Report. Here’s some of what I wrote.

The debate over the so-called Marketplace Fairness Act is not about a level playing field. It is an attempt by politicians to grab more tax revenue to facilitate bigger government. …they want to create an elaborate and intrusive system to force out-of-state merchants to act as tax collectors. …To understand why this is a radical step, imagine if you took a trip to Las Vegas and played blackjack, but then got arrested when you returned home because your state doesn’t allow gambling. That would be an outrage because a state only has sovereign power to enforce laws (good ones or bad ones) on things that take place within its borders. And it would be equally outrageous if state governments tried to force Las Vegas casinos to discriminate against non-Nevada residents.

I also explain why this type of system is bad news for reasons other than fiscal policy.

This legislation also has very troubling implications for privacy. It can only work by creating a massive database that matches online purchases with the state and local sales tax rates for every consumer. I don’t know about you, but I’m not confident that this type of untested system will be secure. We’ve already seen major leaks of confidential data from both government and private companies. This database will be a magnet for identity thieves and other hackers looking for credit card information.

If you agree, feel free to give me an “up” vote on this U.S. News page featuring all the debate participants.

I’ve had good luck in these debates, coming in first place in debates on double taxation, European fiscal policy, flat tax, and Obamanomics, so I don’t want to break the streak.

Otherwise I may have to cry and sulk, like I did after Richard Epstein and I lost the Keynesian stimulus debate in New York City (you can click here to see why we should have prevailed!).

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In what will almost surely be the nastiest campaign ad of the political season, a pro-Obama super PAC basically accuses Mitt Romney and Bain Capital of causing a woman’s death.

Viewers are supposed to hold Romney responsible because the woman’s husband lost his job, and the resulting lack of insurance prevented her from getting health care in time to stop her cancer.

The ad has been debunked for several reasons, including the fact that the woman apparently had her own job with her own insurance for two years after her husband lost his job and her cancer wasn’t even discovered until seven years after Romney left Bain, but let’s set those issues aside, assume all the facts are true, and contemplate what it means if we apply the same standard of accountability to the Obama Administration.

Here’s a simple chain of reasoning.

1. There’s a well-established relationship between a nation’s prosperity and the lifespan of its people (see Figures 1 and 2 in my 1992 article in the Journal of Regulation and Social Cost).

2. Obama’s policies have dampened growth in the United States (according to data from the Congressional Budget Office and the St. Louis Federal Reserve Bank, actual GDP (in today’s dollars) is $836.6 billion below potential GDP).

3. Based on these two simple facts, we can conclude that the foregone growth is causing needless premature deaths.

But how many deaths are being caused? Do we have to make a wild guess?

It turns out that there’s a considerable amount of academic research on this topic. It doesn’t make for exciting reading, unless you like learning about concepts such as “usable income” and “value of a statistical life.” Or how about “valuation of statistical mortality risk” and “implicit income gains.”

But the academics find ways of measuring the relationship between economic performance and mortality.

To make sure we’re being fair, we’ll first look at the research compiled by Cass Sunstein, who served as President Obama’s Administrator of the Office of Information and Regulatory Affairs. Writing back in 1997, he compiled 11 studies from the late 1980s and early 1990s that estimated that a premature death was caused when income fell by some amount between $1.8 million and $12.4 million (roughly between $3.3 million and $22.9 million in today’s dollars).

There’s also a very thorough study by Ralph Keeney of the University of Southern California. He found that an additional fatality was linked to income losses (adjusted to today’s dollars) of between $8.42 million and $23.59 million.

“This is more fun than a death panel!”

Looking over much of this research, it appears that $14 million is a reasonable middle-ground estimate of how much foregone income is associated with a needless death.

Now let’s do some simple math to get an estimate of the total number of preventable deaths caused by the economy’s sub-par performance during Obama’s reign. Going by the lofty standards of Priorities USA super PAC, we’ll call this number the “Obamanomics Death Toll.”

So let’s divide $836.6 billion (our earlier estimate of foregone growth) by $14 million and we get an estimate that Obama’s policies have caused 59,757 deaths.

I wouldn’t put much faith in my back-of-the-envelope calculations. Experts in the field doubtlessly could point out several methodological mistakes, so I have no idea if the weak economy has caused 10,000 premature deaths or ten times that amount.

But I can say with complete certainty that if you took all the experts and gave them a month to work on the answer, the final number would be far higher than Romney’s supposed death toll.

And I’m also quite confident that my analysis – however inadequate – is far more defensible than the garbage from the pro-Obama super PAC.

Now let’s be serious. It’s ridiculous to hold Romney personally responsible for the unfortunate death of the woman mentioned in the super PAC commercial. And it’s also absurd to hold Obama personally responsible for the 59,757 people who may have prematurely died because of the weak economy.

Wouldn’t it be nice if we could actually have an open and honest debate about real issues, such as entitlement reform? Or how best to fix our corrupt tax system?

P.S. If you want to heap scorn on people who genuinely are responsible for deaths, think of the 62 million butchered by the dictators of the Soviet Union and the 76 million killed by the communist tyrants in China.

Gee, isn’t communism just wonderful? Something to think about the next time you see some jackass with a Che Guevara t-shirt.

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I like sequestration. Automatic budget cuts might not be the best way of reducing the burden of government spending, but a sequester is better than leaving the federal budget on autopilot.

Particularly since the “cuts” are mostly just reductions in already-scheduled increases.

The only exception, at least in the short run, is the defense budget. I point out in this Cato Institute video that the defense budget absorbs 50 percent of the sequester even though the Pentagon accounts for only about 25 percent of federal outlays.

But even with a sequester, the defense budget ten years from now will be $100 billion higher than it is today.

And since the United States accounts from more than 45 percent of global military spending (and our allies represent another 24 percent of total defense outlays), two of my Cato colleagues explain in the video that it is silly to think that a sequester will leave America helpless.

Many Republicans want to cancel the sequester in order to protect the defense budget, and some of them are even willing to surrender to Obama’s demands and implement a tax increase to make that happen.

Before doing something that is both economically and politically misguided, they should take a few minutes and read George Will’s sober analysis.

While they’re at it, that may want to also peruse some writings by Mark Steyn and Steve Chapman. A defense sequester might be an especially good result if it leads to some long-overdue thinking about misguided overseas commitments.

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I almost feel sorry for the ideologues and partisan hacks who feel obliged to defends Obama’s miserable economic performance.

Keynesian spending policies and class-warfare tax policies have produced dismal economic performance, with unemployment stuck above 8 percent – even though the White House promised the joblessness rate by this point would be about 5.5 percent if we squandered $800 billion-plus on the so-called stimulus.

Yet Keith Boykin gamely tries to put perfume on this hog in our debate on CNBC.

Notice that I began this post by saying I “almost feel sorry” for the spin-meisters who defend Obamanomics. But “almost” is the key word in that sentence. I reserve my genuine sympathy for the millions of people who can’t find jobs because of the President’s destructive policies.

Let me add a few comments.

Boykin tries to disavow the Romer-Bernstein report and pretend that the President didn’t highlight and promote its claims when pushing for the faux stimulus. That’s a remarkable bit of revisionist history and I think I was effective at tying that rotting fish around his neck.

Keith also highlights the relatively good performance of the Clinton years. As I’ve done before, I announce that we’d be much better off with the Clinton tax rates – but only if we also get rid of all the reckless spending and regulation of the Bush and Obama years. I thinks that’s an effective point to make, but I confess I don’t have any feedback one way or the other to indicate that it’s a persuasive argument.

The most revealing point of the interview is when the host incredulously remarked to Keith that “you think we should have bigger government.”

But if anybody thinks that it’s a good idea to increase the burden of government spending, then they need to explain why America will be better off if we make our country more like Greece and France.

Last week, I shared some numbers from the left-wing OECD which showed that living standards are much higher in the United States than they are in Europe’s welfare states. That is what this fight is all about.

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Every so often I find some political humor that is worth sharing, but also not exactly appropriate for all audiences.

So I create thumbnails of the images and let readers decide whether to look. Examples include:

We can now augment that list with some humor that someone posted as a comment on my Facebook page. It definitely will appeal to leftists and other Romney critics.

And it’s very timely since my previous post mentioned that Jenna Jameson, a famous porn star, just endorsed the presumptive GOP nominee.

By the way, I’m more than willing to share humor that is not in line with my philosophy. I’ve shared many examples of anti-libertarian humor, for instance, and I also posted this very clever pro-Obama image.

So if you see something good, feel free to send it my direction.

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Two months ago, I predicted that Obama would win reelection with 297 electoral votes, 27 more than needed.

Last month, I shifted Virginia to Romney’s column and predicted Obama would still win, but with 284 votes.

Today, with just three months to go, I’m guessing the election will be even closer. In my latest electoral map, I’m moving Colorado from the lean-Obama category to the lean-Romney category. This leaves Obama with a lead of just 275-263 in the electoral college.

Now let me preemptively deal with some complaints and criticisms.

Some people ask why I’m so pro-Obama. After all, the unemployment rate is above 8 percent and I’ve told audiences that Obama won’t win unless the joblessness rate drops under that level. Surely I must have my thumb on the scale for Obama.

Other people ask why I’m so pro-Romney. After all, Real Clear Politics gives Obama 332 electoral votes and Intrade gives Obama a 58 percent chance of winning (up from 56 percent last month). Surely I must have my thumb on the scale for Romney.

Folks, I don’t have a dog in this fight. I’m just giving you my best guess as to the map we’ll see early in the morning of November 7.

Now let’s move to the really interesting political news. I noticed on Twitter that people seemed to think it was somehow important that Jenna Jameson endorsed Romney. I’m not sure that her profession and her endorsement are all that helpful, but judge for yourself.

Porn star Jenna Jameson chose a familiar stage to make her endorsement for the 2012 presidential election Thursday night. At a San Francisco strip club, the former adult actress and stage performer said she was ready for a Romney presidency. “I’m very looking forward to a Republican being back in office,” Jameson said while sipping champagne in a VIP room at Gold Club in the city’s South of Market neighborhood. “When you’re rich, you want a Republican in office.”

For what it’s worth, Obama has porn star supporters as well. Ron Jeremy says nice things about Romney, but he’s supporting the incumbent.

In an interview with the Boston Herald, Jeremy said he’s voting for President Barack Obama in November. But he told the paper he still gives Romney “credit.” “I think he means well, I think he’s a good man,” Jeremy told the Herald. “I think the fact that he’s such an amazing father proves a lot. I give him a lot of credit. He’s raised some good sons. When a man is a really, really good father, that’s very important… It’s a good race.”

The presumptive Republican nominee wins the tiebreaker, though, with support from Michael Lucas, one of the world’s leading gay porn stars.

Lucas, who grew up in the former Soviet Union and immigrated to the United States in 1997 after working in Europe as a male prostitute, founded Lucas Entertainment in 1998, which flourished into a mega-enterprise that produces some of the most lavish gay porn films in the industry. …Lucas, by the way, considers himself a conservative, votes Republican and donates generously to several libertarian and right-wing causes. …”I would support Romney of course,” the director of “Men in Stockings” and “Hunt & Plunge” told Yahoo News. “There is nobody else to support.”

For some reason, I don’t think we’ll see this endorsement featured in any of Romney’s commercials, but you never know.

P.S. Never forget that economists are lousy forecasters.

P.P.S. Like all good libertarians, I don’t want the government trying to outlaw porn when it involves consenting adults. But I’m mystified that it makes so much money. It’s the same thing over and over again, and it’s dull. But maybe this is just my inner social conservative speaking.

P.P.P.S. I’ll be in Colorado later this month for a visit to the High Lonesome Ranch and to speak at the Steamboat Institute’s Freedom Conference. I reserve the right to change my prediction for the Centennial State after meeting with folks on that trip.

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Centuries from now, I’m sure historians won’t bother teaching about the Magna Carta, the Constitution, the end of slavery, or the collapse of communism.

Instead, people who want to know about human rights will learn about these great European developments.

Now the Italians have taken the next step with a crucial legal decision that will enshrine an important basic freedom. What are we talking about, the right to free speech, the free exercise of religion, or the right to emigrate?

Don’t be silly, Italian courts have focused on something far more important.

Is this a hate crime?

Italy’s highest court has ruled that telling a man he has “no balls” as an insult is a crime punishable with a fine because it hurts male pride… The case was brought to the supreme court by a lawyer named only as Vittorio against his cousin Alberto, a justice of the peace, for the phrase uttered during a heated courtroom exchange in the southern Italian city of Potenza. “Apart from the vulgarity of the term used, the expression definitely also has an injurious quality,” the male judge, Maurizio Fumo, said in his ruling yesterday as quoted by Italian news agency ANSA. …Vittorio’s lawyer had argued that the expression implied that his client was “worth less than other men because he did not have the attributes.” A judge will now rule on the fine that Alberto should pay to Vittorio. The ruling, which comes after years of legal dispute, did not specify whether any insults against women should now also be considered crimes.

I wonder, based on the story, whether the court ruled against Alberto because of what he said, or because Vittorio actually is lacking certain…well, as the article says…”attributes.”

In any event, I suppose we should close with a more serious point. A big problem in Europe is that politicians and courts keep creating “rights” that require the erosion of other people’s liberties.

These so-called positive rights can only be fulfilled by taking away the freedom of other people. Not that the United States is immune to such nonsense. Here’s a horrifying video showing President Franklin Roosevelt discussing various “rights” to jobs, housing, healthcare, and education.

Contrast that awful video with the wise comments made in this video by another President.

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I’ve written posts revealing horror stories of government abuse and argued that people should become libertarian.

I’ve commented on research ostensibly showing that conservatives and libertarians don’t necessarily share moral premises.

And I’ve even speculated on whether libertarianism and patriotism are somehow inconsistent (this Penn & Teller video gives the right answer).

But I’ve never done a poll to gauge libertarian sentiment, so let’s do an experiment. Here’s an excerpt from a BBC report.

A farmer in the US state of Vermont who was facing a minor drugs charge is now in more serious trouble after driving a tractor over seven police cars. Roger Pion crushed the county sheriff’s cruisers on Thursday before making his getaway on the farm vehicle. The 34-year-old was stopped by police in Newport city, northern Vermont, not far from the crime scene. Sheriff’s deputies were unaware of the destruction in their department car park until a resident called 911. Orleans County Sheriff Kirk Martin said they were initially unable to give chase as their cars had been wrecked.

Now share your anonymous reaction.

If you’re so disposed, feel free to augment your vote in the comments section.

You won’t be surprised to learn that I’m torn between the third and fourth options.

When I think about it logically and dispassionately, I know I should pick the third choice. But my rebellious inner child wants to cheer for somebody who fights back, so I’m tempted to take the last option. That same inner child, by the way, was quite amused that the cops couldn’t even give chase because their cars were totaled.

Maybe this makes me a libertarian chicken hawk. I cheer for people who fight back even though I wouldn’t do the same thing.

Sort of like my attitude toward tax evasion. I applaud people who take that risk (assuming they live in nations with unjust governments), but am too cowed by the IRS to do it myself.

But I’m not a complete coward. I almost got thrown in a Mexican jail for opposing the tax-hungry bureaucrats at the OECD. That has to count for something.

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The all-time, most-viewed post on this blog is this set of cartoons showing how the welfare state begins and how it eventually becomes an unsustainable mess.

The great Chuck Asay has a cartoon that takes the next step, showing what happens when the looters and moochers who ride in the wagon get pitted against those who are pulling the wagon.

Since I’m not a Romney fan (for a bunch of reasons outlined here), I would have preferred if the cartoon didn’t imply anything about the current election and instead focused on the rhetorical question of what happens to a society when those living off the government outnumber those who get stuck picking up the tab.

It also would have been more accurate to have the two slave drivers somehow identified as “politicians” and the “IRS.”

But it’s a very clever cartoon, so it’s worth sharing even if I’m nitpicking.

You can see my favorite Asay cartoons here, here, herehere, here, here, here, here, here, here, herehereherehere, and here.

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Normally this blog focuses on big issues such as the economic damage of government spending and the self-defeating foolishness of high tax rates.

Today, though, it’s time for another edition of “You Be the Judge.”

In this game, we look at stories and issues that require us to balance common sense, the principles of a free society, and justice.

Previous editions of this game include: Putting politicians on trial, vigilante justice, brutal tax collection tactics, child molestation, pay levels at government-owned firms, sharia law, healthcare, incest, speed traps, jury nullification, and vigilante justice (again).

Our latest example comes from Alaska, where someone with very questionable judgement was busted for floating down a river while consuming vast quantities of alcohol. Here’s some of the story from the Fairbanks Daily News.

A Juneau man faces a rare DUI charge for allegedly having a 0.313 breath-alcohol content as he floated through Fairbanks on an inflatable raft Sunday night. Alaska’s driving under the influence law applies to people operating motor vehicles, water craft and airplanes. …when Alaska State Troopers received a report of a “heavily intoxicated” man floating down the Chena River near the Parks Highway bridge at 6:40 p.m. Sunday, a wildlife trooper boat responded and arrested 32-year-old William Modene. …At 0.313, Modene’s breath-alcohol content was almost four times the legal limit for operating a vehicle, 0.08. …Under Alaska’s DUI law, operating a water craft means to “navigate a vessel used or capable of being used as a means of transportation on water for recreational or commercial purposes on all waters, fresh or salt, inland or coastal, inside the territorial limits or under the jurisdiction of the state.”

So here’s the issue we have to decide: Mr. Modene doesn’t sound like a model citizen, and he may be swimming in the shallow end of the gene pool, but the question on the table is whether the government should have arrested him for DUI?

From a legal perspective, is it accurate to say that he was “operating” a water craft or “navigating” a vessel?

I’m not an expert on such matters, but it seems to me that he was doing nothing more than floating down a river. There’s nothing in the story, for instance, to indicate he had a motor on his raft.

From what we know, Mr. Modene posed zero danger to other people. He was merely a drunk, minding his own business as he floated along.

My gut instinct is that this case should be tossed. The government would be in a much stronger position if it had charged him with “being drunk in public” or something like that. But even in that case, floating down a river may not meet the test of being “in public.”

There’s a separate issue, of course, about whether the government can and should intervene if someone is engaging in self-destructive behavior. If there’s a report that someone has just taken a bottle of sleeping pills, most of us presumably would agree that it would be okay for the government to break down his door and tote him to a hospital to have his stomach pumped.

But the self-destructive behavior has to pose an immediate danger. We’d hopefully all reject, for instance, the notion of some Bloomberg-esque ban on unhealthy food because people sometimes shorten their lives by overeating.

Since I probably average one beer a month, I’m not competent to make sweeping statements about alcohol, but it’s my understanding that a blood alcohol level of .4 is when people begin to die. Since Mr. Modene was already above .3, perhaps there’s some argument for police intervention.

But set that aside. Pretend you’re on the jury and you have to vote on whether Modene is guilty of DUI. What’s your verdict? And if you also want to weigh in on whether the government had a right to interfere with his raft trip, don’t be bashful.

For me, that second question is more challenging. That’s why I like sticking with simple questions of right vs. wrong, such as whether I side with Switzerland or France on the issue of whether fiscal sovereignty and financial privacy should be undermined to help high-tax nations impose their bad tax laws on an extraterritorial basis.

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My friends at Americans for Tax Reform have received a bunch of attention for a new report entitled “Win Olympic Gold, Pay the IRS.”

In this clever document, they reveal that athletes could face a tax bill – to those wonderful folks at the IRS – of nearly $9,000 thanks to America’s unfriendly worldwide tax system.

The topic is even getting attention overseas. Here’s an excerpt from a BBC report.

US medal-winning athletes at the Olympics have to pay tax on their prize money – something which is proving controversial in the US. But why are athletes from the US taxed when others are not? The US is right up there in the medals table, and has produced some of the finest displays in the Olympics so far. … But not everyone is happy to hear that their Olympic medal-winning athletes are being taxed on their medal prize money. Athletes are effectively being punished for their success, argues Florida Senator Marco Rubio, a Republican, who introduced a bill earlier this week that would eliminate tax on Olympic medals and prize money. …This, he said, is an example of the “madness” of the US tax system, which he called a “complicated and burdensome mess”.

It’s important to understand, though, that this isn’t a feel-good effort to create a special tax break. Instead, Senator Rubio is seeking to take a small step in the direction of better tax policy.

More specifically, he wants to move away from the current system of “worldwide” taxation and instead shift to “territorial” taxation, which is simply the common-sense notion of sovereignty applied to taxation. If income is earned inside a nation’s borders, that nation gets to decided how and when it is taxed.

In other words, if U.S. athletes earn income competing in the United Kingdom, it’s a matter for inland revenue, not the IRS.

Incidentally, both the flat tax and national sales tax are based on territorial taxation, and most other countries actually are ahead of the United States and use this approach. The BBC report has further details.

The Olympic example highlights what they regard as the underlying problem of the US’ so-called “worldwide” tax model. Under this system, earnings made by a US citizen abroad are liable for both local tax and US tax. Most countries in the world have a “territorial” system of tax and apply that tax just once – in the country where it is earned. With the Olympics taking place in London, the UK would, in theory, be entitled to claim tax on prize money paid to visiting athletes. But, as is standard practice for many international sporting events, it put in place a number of tax exemptions for competitors in the Olympics – including on any prize money. That means that only athletes from countries with a worldwide tax system on individual income are liable for tax on their medals. And there are only a handful of them in the world, says Daniel Mitchell, an expert on tax reform at the Cato Institute, a libertarian think tank – citing the Philippines and Eritrea as other examples. But with tax codes so notoriously complicated, unravelling which countries would apply this in the context of Olympic prize money is a tricky task, he says. Mitchell is a critic of the worldwide system, saying it effectively amounts to “double taxation” and leaves the US both at a competitive disadvantage, and as a bullyboy, on the world stage. “We are the 800lb (360kg) gorilla in the world economy, and we can bully other nations into helping enforce our bad tax law.”

To close out this discussion, statists prefer worldwide taxation because it undermines tax competition. This is because, under worldwide taxation, individuals and companies have no ability to escape high taxes by shifting activity to jurisdictions with better tax policy.

Indeed, this is why politicians from high-tax nations are so fixated on trying to shut down so-called tax havens. It’s difficult to enforce bad tax policy, after all, if some nations have strong human rights policies on privacy.

For all intents and purposes, a worldwide tax regime means the government gets a permanent and global claim on your income. And without having to worry about tax competition, that “claim” will get more onerous over time.

P.S. Just because a nation has a right to tax foreigners who earn income inside its borders, that doesn’t mean it’s a good idea to go overboard. The United Kingdom shows what happens if politicians get too greedy and Spain shows what happens if marginal tax rates are reasonable.

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Can we finally all agree that Keynesian economics is a flop? The politicians in Washington flushed about $800 billion down the toilet and we got nothing in exchange except for anemic growth and lots of people out of work.

Indeed, we’re getting to the point where the monthly employment reports from the Labor Department must be akin to Chinese water torture for the Obama Administration. Even when the unemployment rate falls, it gives critics an opportunity to recycle the chart below showing how bad the economy is doing compared to what the White House said would happen if the so-called stimulus was enacted.

But for the past few months, the joblessness rate has been rising, making the chart look even worse.

I never watch TV, so I’m not in a position to know for sure, but I haven’t seen any articles indicating that the Romney campaign is using this data in commercials to criticize Obama.

This seems like a missed opportunity.

But since it’s not clear to me that Romney would actually do anything different than Obama (check out this post if that seems like an odd assertion), I don’t focus on the political implications.

Instead, I’m hoping the American people will learn an important long-run lesson. If you want more growth and prosperity, the recipe is smaller government and free markets.

In other words, our economic policy should be more like Hong Kong and Singapore, but Obama has been making us more like France.

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I’ve written occasionally about how the Founding Fathers wanted to limit the federal government’s powers by providing a list of enumerated powers in Article I, Section VIII, of the Constitution.

Sadly, the Supreme Court decided about 70 years ago to no longer uphold that part of the Constitution (sounds familiar, huh?).

But we should never give up on trying to restore our fundamental liberties, so I am very impressed that Senator Coburn raised this important issue while talking to one of the empty suits at MSNBC.

It’s somewhat amusing, by the way, to see that the MSNBC host didn’t have the slightest clue about the existence or meaning of Article I, Section VIII.

Having praised Senator Coburn, now let’s turn our attention to something very disappointing.

Here’s what the Oklahoma lawmaker recently said, as reported by a home-state newspaper, about a possible budget deal that would increase America’s fiscal burden.

They’re happy as loyal Americans to pay more taxes. And they will under any plan that I put forward.

WTF? He’s equating loyalty with being happy to give more money to the dysfunctional and corrupt political class in Washington! If he knows about Article I, Section VIII, then surely he understands that America’s birth was – in part – a tax revolt.

Dr. Jekyll or Mr. Hyde?

If Coburn’s quote sounds eerily familiar, it’s because a couple of other politicians have said similar things. But this is why the Senator’s remarks strike such a discordant note. He’s echoing the words of Joe Biden and Francois Hollande, two of the world’s most reprehensible statists.

Moreover, if the federal government actually obeyed the Constitution, as outlined in Article I, Section VIII, the federal budget easily would be reduced by more than 50 percent and the federal government would have a giant surplus. So why, then, is Senator Coburn willing to raise taxes?

And even if we pretend the Constitution doesn’t exist, why put taxes on the table when experience teaches us that politicians will simply spend any new revenue that materializes?

Last but not least, why agree to a tax hike when the budget can be balanced in just 10 years if politicians take the very modest step of restraining spending so it grows by 2 percent each year?

Taxpayers generally should be glad that Tom Coburn is in the Senate. I’m guessing that he does the right thing 90 percent of the time, which is more than can be said for most of his colleagues. But his comment about “loyal Americans” reveals an unfortunate blind spot on taxes and budget deals.

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Iowahawk has done it again.

He’s already famous for his spoof of GM’s new car, the Pelosi GTxi SS/RT, his parody of Julia the Moocher, and his video about Obama’s teleprompter.

Now he’s unveiled the Obama Bible. Here’s a sampling, but read the whole thing here.

And if you like the Book of Barack, you may also appreciate this inside look at Obama’s college transcript.

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