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Archive for March 28th, 2013

Sometimes I myopically focus on fiscal policy, implying that the key to prosperity is small government.

But I’ll freely admit that growth is maximized when you have small government AND free markets.

That being said, our goal should be to expand freedom, not merely to have the largest possible GDP.

Which is why the Freedom Index is a good complement to Economic Freedom of the World.

It shows, for instance, that Singapore may be ranked #2 for economic freedom, but it is only #39 when you look at all freedoms.

We also have a comprehensive ranking of economic and personal freedom for the 50 states.

Here are the full rankings from the newly released Freedom in the 50 States from the Mercatus Center, showing North Dakota as the state with the most freedom, with South Dakota (#2), Tennessee (#3), New Hampshire (#4), and Oklahoma (#5) also deserving praise for high scores.

Mercatus State Freedom Ranking

What makes Freedom in the 50 States so interesting is that you can mix and match variables based on your own preferences.

I checked the “fiscal” and “tax burden” categories, and South Dakota (no state income tax!) jumped to #1 for both of those measures.

You won’t be surprised to learn that New York is the worst state, not only overall, but also for various fiscal policy measures.

Who would have guessed, by the way, that there’s a “bachelor party” category based on laws governing alcohol, marijuana, prostitution, and fireworks. Interesting, Massachusetts is ranked #1, though I suspect most guys will still opt for #3-ranked Nevada.

P.S. I must be learning. I grew up in New York, which is #50 in the rankings of freedom in the states, and then in Connecticut, which ranks only #40. But I went to college in Georgia, which is #9 in the rankings, and I now live in the Virginia, which is #8. But I somehow doubt that I’ll ever wind up in North Dakota.

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If asked to name my least-favorite international bureaucracy, the easy answer would be the Organization for Economic Cooperation and Development.

After all, it was only a few days ago that I outlined different ways that the Paris-based bureaucracy is seeking to expand statism and reduce freedom around the world.

Our tax money at the OECD, UN, and IMF

I’m particularly nauseated by the OECD’s support for value-added taxes and their ridiculous assertion that poverty is higher in America than Greece or Turkey.

But we can’t forget the United Nations, which pushes a plethora of bad policies, including a push for regulatory control over the Internet, support for global taxation, supranational gun control schemes, attacks on sovereignty of American states, and support for a “right” to taxpayer-financed birth control (though at least they had the good sense to invite me to speak at last year’s “High Level Thematic Debate on the State of the World Economy”).

For today, though, my least favorite bureaucracy is the International Monetary Fund. I recently listed many of the ways that this gold-plated institution of over-paid and un-taxed paper pushers supports bigger government, but this story from today’s Washington Post is the icing on the cake of statism.

The report on a new IMF study started on a very positive note.

Government subsidies of gasoline, electricity and other energy sources amount to about $1.9 trillion a year and should be ended.

I’m against subsidies, so what’s not to like about a proposal to end handouts?

Well, it turns out that the IMF has a very strange way of defining subsidies. For logical people, a subsidy occurs when the government takes money from Person A and gives it to Person B.

In the la-la land of the IMF, however, a “subsidy” occurs if the government doesn’t tax as much from Person A as the bureaucrats would like. I’m not joking.

In the developed world, the IMF says the subsidies are even larger but less overt, reflecting that government tax policies do not capture the costs of pollution and other externalities. Using economic models and other studies performed as part of the larger global warming debate, the IMF puts those indirect subsidies at $1.4 trillion — $25 for each ton of carbon dioxide produced — and suggests they be offset through an “efficient” tax that makes energy users pay the full cost of the product.

To be fair, private behavior can impose costs on other people (“externalities”), so there’s nothing automatically wrong with looking at these indirect costs.

The problem is that the IMF used discredited global warming ideology to concoct an absurd $1.4 trillion estimate of “subsidies.”

IMF Stick UpAnd guess what that means?

For the United States, the IMF estimated that would require a $1.40 levy per gallon of gas and other fees totaling more than $1,400 per person each year — around $500 billion in total.

Wow, that’s more than $5,500 for a family of four.

Remember that these bureaucrats get extremely generous tax-free salaries, yet they apparently don’t see any hypocrisy in recommending huge tax increases for the peasantry.

“It is time for subsidies to end and carbon taxation to be put in place,” IMF First Deputy Managing Director David Lipton said in an interview Tuesday.

Amazing. I’m sure this leech is driven around in a private limousine, flies around the world in first class, and enjoys the services of the private chefs in the IMF’s elite dining room – all at our expense. Yet he wants the rest of us to pay higher tax.

P.S. You’ll be happy to know that the IMF study deliberately “did not look at government support for the alternative energy industry.” So Obama’s corrupt “green energy” programs got a free pass. Gee, how convenient.

P.P.S. I realize that I forgot the mention the World Bank, the folks who put together a fiscal report card giving nations higher grades if they imposed harsher tax burdens.

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