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Archive for April, 2013

Remember the Spending Quiz from 2010, which asked people to guess whether absurd examples of government waste were true or false?

Well, we have a new video on government waste, though bureaucrats and politicians have become so profligate it doesn’t even bother to trick people with fake examples.

While very well done, I do have two small complaints about the video.

First, it asks whether we should cut spending or raise taxes to deal with the national debt. I think that’s too narrow. We shouldn’t be wasting money even if the budget was balanced and there wasn’t a penny of debt.

In other words, the problem isn’t deficits. Red ink is just a symptom. The real problem is that government is too big.

Second, the video sort of acquiesces to the dishonest Washington terminology by asking whether we should cut spending or raise taxes, implying those are the only two options. I favor genuine spending cuts, of course, but the most accurate way of phrasing the question is to ask whether we should cut spending, restrain spending, or let government grow on auto-pilot.

As I explained earlier this year, we can balance the budget in just 10 years if spending grows “only” 3.4 percent per year. When people understand that detail, there’s almost no support for higher taxes.

But I’m nitpicking. Overall, a very good video.

P.S. If the examples of pork-barrel spending in the video get you angry, you’ll probably have a stroke if you also watch the waste video from the folks at Government Gone Wild.

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Citing the analysis of America’s former Ambassador to the United Nations, I wrote last year about a treaty being concocted at the United Nations that would threaten our right to keep and bear arms.

Well, with the aid of the Obama Administration, this new treaty has been approved. Fortunately, there probably are not 67 votes in the Senate to ratify the measure.

And that’s a good thing. The Wall Street Journal has a column by John Bolton and John Yoo explaining why the new U.N . treaty is so misguided and dangerous.

…the new treaty also demands domestic regulation of “small arms and light weapons.” The treaty’s Article 5 requires nations to “establish and maintain a national control system,” including a “national control list.” …Gun-control advocates will use these provisions to argue that the U.S. must enact measures such as a national gun registry, licenses for guns and ammunition sales, universal background checks, and even a ban of certain weapons. The treaty thus provides the Obama administration with an end-run around Congress to reach these gun-control holy grails.

But doesn’t the Second Amendment protect our rights, regardless?

Unfortunately, that’s not clearly the case, as Bolton and Yoo note.

The Constitution establishes treaties in Article II (which sets out the president’s executive powers), rather than in Article I (which defines the legislature’s authority)—so treaties therefore aren’t textually subject to the limits on Congress’s power. Treaties still receive the force of law under the Supremacy Clause, which declares that “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land.” …this difference in language between laws and treaties allows the latter to sweep more broadly than the former.

One thing we can state with certainty is that opponents of individual rights will use the treaty to push an anti-gun agenda inside the United States. And since the Supreme Court has upheld the Second Amendment by only one vote, I’m not overly confident that we can rely on the judiciary anyhow.

Ultimately, our fundamental rights to protect ourselves and our families only exist because politicians are scared of getting voted out of office and losing the best job most of them will ever have.

And remember that the “slippery slope” is a very relevant concern. Many anti-gun activists think only government should have the right to possess guns, and they view incremental gun control measures as building blocks to that ultimate goal.

Even though government monopolies on gun possession have been associated with some of the world’s most brutal dictatorships!

I’m not worried that the United States is going to turn into some Venezuelan-style anti-gun totalitarian regime, so I actually disagree with the results of my poll on the biggest reason to oppose gun control.

If I was asked to give my worst-case scenario for why we need private gun ownership, it would involve fiscal and societal breakdown because of an ever-growing welfare state.

But regardless of why you believe in the Second Amendment, this U.N. treaty would be a very bad development.

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I don’t think the federal government should be in the business of redistribution income. Simply stated, the welfare state has been a disaster for both taxpayers and recipients.

But our system, with whatever flaws it might have now or in the future, presumably will never be as crazy as the system in the United Kingdom.

A reader sent a story that blows my mind. Our cousins across the ocean give big welfare handouts to terrorist agitators. Here are some excerpts from The Sun.

British taxpayers subsidize this hate-filled moocher

…hate preacher Anjem Choudary has told fanatics to copy him by going on benefits — urging: “Claim your Jihad Seeker’s Allowance.” He cruelly ridiculed non-Muslims who held down 9-to-5 jobs all their lives and said sponging off them made plotting holy war easier. …Father-of-four Choudary, who has praised terrorist outrages, pockets more than £25,000 a year in benefits — £8,000 more than the take-home pay of some soldiers fighting the Taliban in Afghanistan. He laughed as he told supporters:  “You find people are busy working the whole of their life. They wake up at 7 o’clock. They go to work at 9 o’clock. They work for eight, nine hours a day. They come home at 7 o’clock, watch EastEnders, sleep, and they do that for 40 years of their life. That is called slavery.

This dirtbag is right about one thing. It is a form of slavery to involuntarily confiscate money from the hard-working taxpayers of the United Kingdom and give the money to scroungers such as Choudary.

Choudary may be a despicable worm, but he’s clever enough to bilk the system.

Figures obtained by The Sun in 2010 showed the extremist cleric received £15,600 a year in housing benefit to keep him in a £320,000 house in Leytonstone, East London. He also got £1,820 council tax allowance, £5,200 income support and £3,120 child benefits — equivalent to a taxed salary of £32,500.

A £320,000 house?!? That’s about $500,000! That’s probably more valuable than the average home of the people paying punitive taxes to support this deadbeat.

For all intents and purposes, Choudary is like Natailija, Tracey, and Gina and Danny – but far worse since he sponges off the taxpayers and also advocates for terrorism. All subsidized by tax dollars.

P.S. You probably won’t be surprised to learn that the French government gives welfare handouts to terrorists. But I’m surprised the Australian government also allows mooching by pro-Jihad activists.

P.P.S. The good news is that at least some leftists are beginning to realize that the welfare state cripples people by creating government dependency.

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Did Cyprus become an economic basket case because it is a tax haven, as some leftists have implied?

Did it get in trouble because the government overspent, which I have suggested?

The answers to those questions are “no” and “to some degree.”

The real problem, as I explain in this interview for Voice of America, is that Cypriot banks became insolvent because they made very poor investment decisions, particularly their purchases of Greek government bonds.

A few additional points.

1. The mess in Cyprus won’t cause problems in other nations, but it may lead investors in other nation to pay closer attention to whether there are problems with the government and/or banking sector.

2. There is not a “European problem” or “euro problem.” Some nations, such as Switzerland and Estonia, have made sound decisions. Others, such as Sweden, Denmark, and Germany, are in decent shape.

3. The final outcome in Cyprus was bad, but probably less bad than other options. The final result surely was better than the corrupt TARP regime in the United States.

4. It is utterly absurd to blame tax havens for the financial crisis. That disaster was caused by mistaken decisions by politicians in Washington.

So what happens now? I fear that Cyprus is going to be like Ireland, a nation that used to have a few attractive policies but now will have a bleak future.

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If America descends into Greek-style fiscal chaos, there’s no doubt that entitlement programs will be the main factor. Social Security, Medicare, Medicaid, and Disability are all fiscal train wrecks today, and the long-run outlook for these programs is frightful.

Just look at these numbers from the Bank for International Settlements and OECD to see how our fiscal future is bleaker than many of Europe’s welfare states.

If we don’t implement the right kind of entitlement reform, our children and grandchildren at some point will curse our memory.

But that doesn’t mean we shouldn’t worry about other parts of the budget, including the so-called discretionary programs that also have been getting bigger and bigger budgets over time.

That’s why I was a bit perturbed to read Veronique de Rugy’s piece in National Review Online, which implies that these programs are “shrinking” and being subject to a “Big Squeeze.”

…there is another number to look at in that budget. It’s the shrinking share of the budget consumed by discretionary spending (spending on things like defense and infrastructure) to make space for mandatory spending and interest. This is the Big Squeeze. …in FY 2014 mandatory spending plus interest will eat up 67 percent of the budget, leaving discretionary spending with 33 percent of the budget (down from 36 percent in FY 2012). Now by FY 2023, mandatory and interest spending will consume 77 percent of the total budget. Discretionary spending will be left with 23 percent of the budget.

But all that’s really happening here is that entitlement outlays are growing faster than discretionary spending.

Here’s some data from the Historical Tables of the Budget, showing what is happening to spending for both defense discretionary and domestic discretionary. And these are inflation-adjusted numbers, so the we’re looking at genuine increases in spending.

Discretionary Spending FY62-14

As you can see, defense outlays have climbed by about $100 billion over the past 50 years, while outlays for domestic discretionary programs have more than tripled.

If that’s a “Big Squeeze,” I’m hoping that my household budget experiences a similar degree of “shrinking”!

To be fair, Veronique obviously understands these numbers and is simply making the point that politicians presumably should have an incentive to restrain entitlement programs so they have more leeway to also buy votes with discretionary spending.

But I’d hate to think that an uninformed reader would jump to the wrong conclusion and decide we need more discretionary spending.

Particularly since the federal government shouldn’t be spending even one penny for many of the programs and department that are part of the domestic discretionary category. Should there be a federal Department of Transportation? A federal Department of Housing and Urban Development? A federal Department of Agriculture?

No, NO, and Hell NO. I could continue, but you get the idea.

The burden of federal government spending in the United States is far too high and it should be reduced. That includes discretionary spending and entitlement spending.

P.S. Since I don’t want to get on Veronique’s bad side, let me take this opportunity to call attention to her good work on properly defining austerity,. And if you watch her testimony to a congressional committee, it’s also quite obvious that she also understands that the real problem is bloated and wasteful government spending.

P.P.S. For those who don’t have the misfortune of following the federal budget, “entitlements” are programs that are “permanently appropriated,” which simply means that spending automatically changes in response to factors such as eligibility rules, demographic shifts, inflation, and program expansions. Sometimes these programs (such as Social Security, Medicare, Medicaid, etc) are referred to as “mandatory spending.”

The other big part of the budget is “discretionary spending” or “appropriations.” These are programs funded by annual spending bills from the Appropriations Committees, often divided into the two big categories of “defense discretionary” and “nondefense discretionary.”

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Barack Obama has stated that he wants to be like Reagan, at least in the sense of wanting to be a transformational figure.

But almost certainly he has failed.

Yes, Obama has increased the burden of government spending, raised tax rates, and created more dependency, but there’s nothing particularly special about Obama’s tenure that makes him different from other statist Presidents such as Nixon, Carter, and Bush.

Nor is there any evidence that he has fundamentally changed the attitudes of the American people.

That may sound like a bold – and overly optimistic – assertion, but check out the amazing results from a new poll. According to a survey of 1,000 adults, Reagan would kick the you-know-what out of Obama, winning a hypothetical contest by a staggering 58-42 margin.

Reagan Obama Poll

By the way, the margin might be even bigger than I’m reporting. As you can see from this press excerpt, all we know is that 58 percent of respondents said they would vote for Reagan. I’m assuming that 42 percent would vote for Obama, but it’s possible there was also a “don’t know” or “other” category, so maybe Obama would be under 40 percent!

…just about everything about the era — from the politics, leaders and safety to the music, TV shows and blockbuster movies — are seen as being better than they are today. In fact, 3 in 4 Americans (74%) thought that our country was better off then and even safer (76%). The same amount (76%) believe that government ran better in the 1980s than it does today. And if a presidential election were held today, 58 percent would vote for Ronald Reagan over Barack Obama. Americans ages 18 to 34 were evenly split, with 51 percent favoring Reagan and 49 percent Obama.

Even young people preferred Reagan over Obama, which is remarkable since they didn’t experience the Reagan years and largely have learned about the Gipper from the media and schools, both of which are very hostile to Reagan.

We shouldn’t be too surprised by these polling results. Just take a look at this amazing infographic, which shows Obama’s horrible record on jobs compared to Reagan and other Presidents. Michael Ramirez makes the same point in this very funny cartoon.

Or look at these powerful charts based on Minneapolis Federal Reserve data, which compare the strong results of Reaganomics with the pathetic results of Obamanomics.

In other words, good policy leads to good outcomes, and good outcomes yield political rewards. That simple lesson has been lost on the weak gaggle of big-government GOPers who followed Reagan.

But our hypothetical polling results show that Americans today are still ready to rally behind a candidate who offers a compelling message of freedom and prosperity. That’s yet another reason why I’m still optimistic about the fight for liberty.

P.S. Here’s some snarky humor comparing the Gipper with Obama. And if you liked the story of what happens when you try socialism in the classroom, you’ll also enjoy this video of Reagan schooling Obama.

P.P.S. If you want to be inspired, click here and here to see two short clips of Reagan in action.

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When I think of the disability program, I think of the bum who is collecting a check so he can be an “adult baby” and indulge his fetish of wearing diapers. Though I guess that’s not as bad as the situation in Greece, where you can get a disability payment for being a pedophile.

But this is a much bigger and more serious issue. Earlier this morning, I took part in a joint Brooking Institution/American Enterprise Institute/Secretary’s Innovation Group conference on the disability insurance program.

I only had a minor role, posing question to Mark Duggan of the University of Pennsylvania and Stephen Goss of the Social Security Administration, but it was a very useful exercise because I was exposed to some sobering details about the program.

Let’s review a couple of Professor Duggan’s charts, starting with a look at how the disability rate has exploded in the past 22 years.

Disability Slide 2

And here is some very disturbing data showing that much of the increase is in the areas that are most subject to abuse because of subjective judgements about “bad backs” and “depression.”

Disability Slide 1

Hmmm…, I’m a bit depressed about the ever-rising burden of government. Maybe I should get a check from the government!

Joking aside, I briefly touched on this issue in a recent CNBC interview. Here’s the segment dealing with the disability program and the disturbing rise in dependency.

I’m not overly impressed by the counter-argument from Christian Weller. Does he really want us to believe that the service sector jobs of today are more disabling than the manufacturing jobs of 20-plus years ago?

This is a depressing topic, so let’s close with a couple of cartoons, starting with this gem from Chip Bok.

Disability Cartoon 1

It’s amusing, but keep in mind that we have an unusually high joblessness rate right now, but it would be even higher if we counted the people who shifted to this other form of unemployment dependency.

And here’s a Chuck Asay cartoon that I really like because he augments my argument in the interview that it hurts the economy when you lure workers out of the job market and make them wards of the state.

Disability Cartoon 2

Asay takes it one step farther and shows the lifeboat sinking. That’s basically what will happen if we don’t adopt the entitlement reforms that are needed to rein in the welfare state.

P.S. If you want some jokes referencing the disability program, we have the politically correct version of The Little Red Hen, as well as two very similar jokes about Jesus performing miracles and how liberals differ from conservatives and libertarians.

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I could only use 428 words, but I highlighted the main arguments for tax havens and tax competition in a “Room for Debate” piece for the New York Times.

NYT Tax Haven Room for DebateI hope that my contribution is a good addition to the powerful analysis of experts such as Allister Heath and Pierre Bessard.

I started with the economic argument.

…tax havens are very valuable because they discourage anti-growth tax policy. Simply stated, it is very difficult for governments to impose and enforce confiscatory tax rates when investors and entrepreneurs can shift their economic activity to jurisdictions with better tax policy. Particularly if those nations have strong policies on financial privacy, thus making it difficult for uncompetitive high-tax nations to track and tax flight capital. Thanks to this process of tax competition, with havens playing a key role, top personal income tax rates have dropped from an average of more than 67 percent in 1980 to about 42 percent today. Corporate tax rates also have plummeted, falling from an average of 48 percent to 24 percent. …Lawmakers also were pressured to lower or eliminate death taxes and wealth taxes, as well as to reduce the double taxation of interest, dividends and capital gains. Once again, tax havens deserve much of the credit because politicians presumably would not have implemented these pro-growth reforms if they didn’t have to worry that the geese with the golden eggs might fly away to a confidential account in a well-run nation like Luxembourg or Singapore.

Since I didn’t have much space, here’s a video that elaborates on the economic benefits of tax havens, including an explanation of why fiscal sovereignty is a big part of the debate.

My favorite part of the video is when I quote OECD economists admitting the beneficial impact of tax havens.

I also explain for readers of the New York Times that there’s a critical ethical reason to defend low-tax jurisdictions.

Tax havens also play a very valuable moral role by providing high-quality rule of law in an uncertain world, offering a financial refuge for people who live in nations where governments are incompetent and corrupt. …There are also billions of people living in nations with venal and oppressive governments. To cite just a few examples, tax havens offer secure financial services to political dissidents in Russia, ethnic Chinese in Indonesia and the Philippines, Jews in North Africa, gays in Iran and farmers in Zimbabwe.

To elaborate, here’s my video making the moral case for tax havens.

By the way, many of the issues in this video may not resonate for those of us in “first world” nations, but please remember that the majority of people in the world live in countries where basic human rights are at risk or simply don’t exist.

But that doesn’t mean we shouldn’t worry about the stability of our nations. I close my contribution to the New York Times by warning that the welfare state may collapse.

With more and more nations careening toward fiscal collapse, raising the risk of social chaos and economic calamity, it is more important than ever that there are places where people can protect themselves from bad government. Tax havens should be celebrated, not persecuted.

I didn’t have space to cite the BIS and OECD data showing that most of the world’s big nations – including Germany, the United States, and the United Kingdom – face fiscal problems more significant that Greece is dealing with today. Assuming these nations don’t implement desperately needed entitlement reform, the you-know-what is going to hit the fan at some point. Folks with funds in a tax haven will be in much better shape if, or when, that happens.

For more background information on tax competition, here’s a video explaining the ABCs of the issue.

It’s galling, by the way, that the bureaucrats at the OECD pushing for a global tax cartel get tax-free salaries.

And here’s my video debunking some of the common myths about tax havens.

My favorite part of this video is the revelation that a former John Kerry staffer fabricated a number that is still being used by anti-tax haven demagogues.

And speaking of demagogues misusing numbers, you’ll notice the current resident of 1600 Pennsylvania Avenue has a starring role in this video.

I’ve probably exhausted your interest in videos, but if you’re game for one more, click here to learn more about the Paris-based Organization for Economic Cooperation and Development, a statist international bureaucracy that is active in trying to undermine tax havens as part of it’s efforts to create a global tax cartel to prop up Europe’s welfare states.

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The previous edition of “you be the judge” asked whether restrictions on aggressive panhandling are justified.

I thought that was a bit of a quandary, but I’m more conflicted by today’s question about the bizarre episodes of the Hakken family.

As explained in this CNN story, they have kidnapped their own children and fled to Cuba. Is that a good thing or a bad thing?

The Hakkens have been on the lam after they allegedly snatched the two boys from their grandmother’s home in Florida. The couple lost custody of their children last year. There is an international manhunt for this family, and here they are, blending in among the other boats.

So why would parents have to kidnap their own kids and flee to what most people would consider a socialists hellhole?

…the police department in Slidell, Louisiana, issued its own statement offering background on the Hakkens and why the boys were taken from the parents last year. In June of 2012, Slidell police responded to a disturbance report at a hotel where Josh and Sharyn Hakken were staying with their sons, the police statement said. “When police arrived, both Mr. and Mrs. Hakken were acting in a bizarre manner that alarmed officers. They were talking about ‘completing their ultimate journey’ and were traveling across the country to ‘take a journey to the Armageddon’,” the Slidell police statement said, adding, “Let it be noted that both of their children were present in the hotel room at the time.” Because of the parents’ behavior and “the fact that narcotics and weapons were located inside of the hotel room,” the children were taken by child welfare officers, and Joshua Hakken was arrested on drug charges, the statement said.

Which brings us to recent events.

At some point over the past few months, the children were sent to live with their grandmother, Patricia Hauser, the mother of Sharyn Hakken. Sheriff’s investigators say Josh Hakken entered Hauser’s home at 6:30 a.m. last Wednesday. She told police that he tied her up and fled with the children… Those investigators told CNN they believe Hakken joined up with his wife, who was waiting in their pickup truck, and the family drove to a parking garage. A short time later, investigators said, Hakken is believed to have taken a sailboat out of a private slip in nearby Madeira Beach.

And, as you already know, they wound up in Cuba.

I first saw this story in the Miami Airport, and it referred to the Hakkens as being anti-government. Naturally, I immediately took their side.

Unfit parents?

But as I’ve learned more details, I’m conflicted. There’s nothing wrong with the parents having firearms, though one hopes they took steps to make sure the young kids didn’t have access to the guns.

On the other hand, I think there is something wrong with drug use, particularly in front of the children. Nonetheless, that’s not a sufficient reason in my mind for the government to seize someone’s kids unless there’s some evidence of genuine endangerment.

I am weirded out, though, with regards to their alleged language about taking an “ultimate journey” to “the Armageddon.” Are they suicidal nutcases? Are they mentally unstable? Those would be reasons for intervention.

Assuming, of course, that we can trust that the cops and other government officials provided an accurate rendition of events.

But assuming that’s the case, do you think the state had the right to take the kids from the Hakkens?

And if you want more challenging examples of “you be the judge,” peruse this list.

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Early in the year, I shared a powerful video about the right to keep and bear arms. It featured the Sheriff of Milwaukee County in Wisconsin, who made a public service announcement advising citizens that gun ownership was important for self defense.

That’s such a common-sense point that it presumably shouldn’t have merited any comment, but it was newsworthy because the establishment press frequently tries to promote the narrative that law enforcement officials are opposed to the Second Amendment.

But in virtually every instance, the “officials” are big-city police bosses who are parroting the views of the political masters who appointed them to their positions.

So what do regular cops think about gun control?

I’ve always assumed they favored the right to keep and bear arms. Simply stated, cops have a practical understanding that there are bad people in the world. Moreover, they know it’s impossible for them to be everywhere at once, so armed citizens are the first line of defense.

And the cops that I know are strong defenders of private gun ownership, but I haven’t wanted to extrapolate from that anecdotal evidence.

So I’m not surprised that police officers are against gun control, but I had no idea that cops were so overwhelmingly solid on the Second Amendment until I saw the polling data from this survey of 15,000 law enforcement officials.

Here are two of the most startling findings, beginning with a question on whether magazine limits will be effective in reducing crime. An astounding 95.7 percent of respondents say no.

Gun Survey 2

Makes you wonder whether Andrew Cuomo and other sleazy politicians understand that they’re pushing policies that will have no positive impact? Or whether they even care?

Perhaps all lawmakers should be required to read Larry Correia’s article on the real-world impact of such policies.

But what about “assault weapons”?

Well, 91.5 percent of cops said a ban on these semi-automatic weapons would either be useless or the policy would have a negative impact on fighting crime.

Gun Survey 1

Indeed, almost three times as many cops said the effect would be negative compared to those who thought a ban on these guns would have a moderate or significant positive effect!

In other words, cops understand instinctively and through practical experience what scholars such as John Lott have discovered through research.

Interestingly, it appears cops are even better on the Second Amendment than ordinary Americans. According to this polling data I shared back in January, “only” 58 percent of Americans understood that more guns would reduce crime.

But I’m still proud of these ordinary Americans. An overwhelming 65 percent of them said they would disobey laws designed to confiscate their guns.

P.S. While I’m very glad that police officers support the Second Amendment, there are some cops who deserve scorn because of what they do to me and what they do to innocent 10-year old kids.

P.P.S. If you enjoy anti-gun control humor, here are lots of amusing images and funny videos.

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If you include all the appendices, there are thousands of pages in the President’s new budget.

But the first thing I do every year is find the table showing how fast the burden of government spending will increase.

That’s Table S-1 of the budget, and it shows that the President is proposing $41 trillion of spending over the next 10 years.

But perhaps most relevant, he wants the federal budget to be $2 trillion higher in 2023 than it is today.

Obama FY2014 Budget

And this is based on the White House’s dodgy assumptions. The numbers almost certainly will look a bit worse when the Congressional Budget Office re-estimates the President’s budget.

By the way, there’s a reason the above chart looks familiar. It almost identical to the ones I put together last year and the year before. So give Obama points for consistency. Rain or shine, year in and year out, he proposes that government spending should rise by $2 trillion every time he proposes a budget.

He’s also consistent in that he demands higher taxes. Americans for Tax Reform has a list of the “Top 10” tax hikes in the President’s budget. Most of them are based on the President’s class-warfare ideology, though he also wants to hit lower-income people with a big hike in the tobacco tax.

Another example of unfortunate consistency is that the President whiffs on entitlement reform. Unlike the House of Representatives, there’s no proposal to fix Medicare or Medicaid.

He does have a “chained CPI” proposal that would slightly reduce cost-of-living adjustments for Social Security, but that would be a substitute for the reforms that are needed to both control costs and give workers the option to boost retirement income with personal accounts.

Moreover, chained CPI is a huge tax hike, as explained by my colleague Chris Edwards.

So what’s the bottom line? Well, there isn’t one. We’re going to have gridlock for the foreseeable future. The House has passed a decent budget with some modest entitlement reform, but there’s no way that the Senate will accept that plan.

Similarly, there’s no way (knock on wood!) that the House will acquiesce to the President’s raise-taxes-but-leave-spending-on-autopilot proposal. Or the big-government plan from Senate Democrats.

So neither side will move the ball.

We’ll have some fiscal skirmishes, to be sure, with the debt limit and the FY2014 appropriations bills being obvious examples.

But nothing big will happen until either 2015 (if the Democrats win control of the House) or 2017 (if Republicans win the White House and control of the Senate).

By then, we’ll be two or fours years closer to being the next Greece.

P.S. Actually, I think many other nations are in a position to be the next Greece, though it’s discouraging that some estimates indicate that our long-run fiscal status is worse than basket cases such as Italy and France.

P.P.S. As these cartoons suggest, maybe our real fiscal problem is that the President refuses to admit there’s a problem?

P.P.P.S. But I think this cartoon more accurately shows our real challenge.

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I’m going to make an assertion that seems utterly absurd.

The enactment of Obamacare may have been good news.

Before sending a team of medical attendants to cart me off to a sanitarium, allow me to elaborate. I’m not saying Obamacare is good policy. After all, I’ve written over and over again that it is a budget-busting boondoggle that will exacerbate our real healthcare crisis of third-party payer.

What I am saying, though, is that Obamacare may turn out to be a major political mistake for the left, one that sets the stage for sweeping free market reforms.

Here’s my six-part hypothesis.

  1. Our healthcare system as a mess before Obamacare. Normal market forces were crippled by government programs such as Medicare and Medicaid and also undermined by government intervention in the tax code that resulted in pervasive over-insurance that exacerbated the third-party payer problem.
  2. These various forms of intervention led to all sorts of problems, such as rising prices and indecipherable complexity, and most people blamed that the “free market” and “private” healthcare.Health Freedom Meter before Obamacare
  3. Obamacare was enacted in 2010, and it was perceived to be a paradigm-shifting change in the healthcare system, even though it was just another layer of bad policy on top of lots of other bad policy. Immediately after the legislation was approved, I offered a rough estimate that we went from a system that was 68 percent dictated by government to one that was 79 percent dictated by government.Health Freedom Meter after Obamacare
  4. Not surprisingly, all of the same problems still exist, but now they’re exacerbated by the mistakes in Obamacare.
  5. But because people think we’ve had a paradigm shift and government now is in charge (pay attention, since this is my key argument), they will be much more likely to blame “Obamacare” and “government” for all the warts and inefficiencies of the healthcare system.
  6. This means the public will be more receptive to pro-market policies, such as Obamacare repeal, tax reforms to reduce over-insurance, as well as the Medicaid and Medicare reforms in the Ryan budget.

All this will be much easier said than done, of course, and it is disconcerting that we’ll probably have to rely on feckless Republicans to implement these reforms.

But at least there’s a plausible scenario for systemic reform, and that wasn’t the case before Obamacare was enacted. In other words, the President’s signature achievement may turn out to be a Pyrrhic victory for the left.

P.S. Watch this excellent video from Reason TV to see how a genuine free market could deliver health care at lower cost and with greater efficiency. For another example, here’s a report from North Carolina on free-market healthcare in action.

P.P.S. This post is part of my let’s-be-optimistic series. Previous editions include:

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The President is supposed to release his FY2014 budget tomorrow, more than two months later than required by law.

Based on what it’s rumored to contain, I’ve already explained that nobody should be tricked into thinking that Obama is moving to the center. Though he may not be as far to the left as Senate Democrats.

Not that it would be easy to get to the left of that plan, as cartoonists have ably illustrated.

Anyhow, much of Washington is buzzing about what might be in the President’s proposal.

Well, time to sate your curiosity. I have a leaked copy of the budget for your enjoyment.

Leaked Obama Budget Cartoon

We won’t see actual numbers until tomorrow, but I’m guessing that I’ll be sharing something very similar to the analysis I provided last year and the year before.

P.S. If you enjoy political humor, the Glenn McCoy cartoon in this post is a pretty good summary of what Obama will say in his budget message.

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When the monthly job numbers are released, most people focus on the unemployment rate.

On many occasions, I’ve cited that number, usually to point out that the unemployment rate is far higher than the Obama Administration promised it would be if the so-called stimulus was enacted.

That episode should be additional proof that Keynesian economics is misguided.

But that’s not the issue we should be worrying about now. Instead, our concern should be what appears to be a permanent reduction in the share of the working-age population that is employed.

As I explain in this interview for Blaze TV, our ability to produce is governed by the quality and quantity of labor and capital in the economy. Unfortunately, it appears that the Bush-Obama policies of bigger government have had a negative impact.

To build upon that interview, here are the very latest numbers from the Bureau of Labor Statistics.

To be fair, the drop you see on the chart started before Obama took office. But he can be fairly blamed for the fact that there’s been no recovery.

Obama Jobs Legacy

The moral of the story is that bigger government is not a recipe for prosperity.

The burden of government spending is too high, the tax code is too punitive, red tape is hindering entrepreneurship, and various handouts are creating a dependency culture that discourages work.

Should we be surprised that the employment-population ratio is grim?

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Whether they’re banning bake sales, federalizing school lunch menus, or criminalizing Big Gulps, the nanny-staters feel they have some special wisdom that gives them the right to tell other people how to live their lives.

This irks libertarians since we value human liberty, even if it means people sometimes make foolish choices. But so long as you’re not interfering with someone else’s rights, we don’t think government should dictate your private behavior.

Parternalists obviously disagree. For a very reasonable explanation of this mindset, here’s some of Cass Sunstein’s work, as excerpted by The New Republic.

What seems to unify paternalistic approaches, however diverse, is that government does not believe that people’s choices will promote their welfare, and it is taking steps to influence or alter people’s choices for their own good.

In other words, people are sometimes dumb and the government at the very least needs to nudge them in the right direction.

Sunstein outlines the objections to this approach, largely focusing on the fact that the market process will discourage bad behaviors.

To the committed antipaternalist, government should not short-circuit the valuable process of learning by doing. If people make mistakes about diets, drinks, love, or investments, they can obtain valuable lessons, and those lessons can make their lives a lot better. …In a market economy, companies compete with one another, and people are free to choose among a wide range of options. If a car has terrible fuel economy, and if it costs a lot of money to operate, fewer people will buy it. As a result, companies will produce more fuel-efficient cars. Some consumers may be fooled or tricked, but in the long run, free competition and open markets will help. On this view, paternalism presents a major risk, because it may freeze the process of competition.

Not surprisingly, Sunstein argues that the market process is sometimes inadequate.

…even if we are inclined to think that individuals are generally the best judges of how to make their own lives go well, the word generally is important. With that qualification, we can see that the objections to paternalism depend on some empirical judgments. …The relationship between freedom of choice and welfare is being tested, with complex results. Sometimes people’s means do not promote their own ends. Behavioral economists have identified a number of reasons that people’s choices do not always promote their welfare. …sometimes we fail to take steps that really are in our interest. Human beings often procrastinate, and the long-term may not be so salient to us. We can be tempted by emotional appeals. Sometimes we do not take steps that would make our lives go a lot better. If welfare is our guide, means paternalism might be required, not forbidden.

To be fair, Sunstein recognizes that many antipaternalists are motivated by freedom, not some abstract measure of human welfare.

Suppose that we are not so focused on welfare and that we believe that freedom of choice has a special and independent status. We might think that people have a right to choose, even if their choices cause harm, and that government cannot legitimately intrude on that right, even if it does in fact know best. …Many of the most deeply felt objections to paternalism are based on an intuition or judgment of this kind. They often take the form of a question: By what right can government legitimately interfere with the choices of free adults?

This passage captures my view.

I actually agree with paternalists in that there are lots of people who make bad choices. I think a major problem is that these people over-value the positive feelings they get from “bad” behaviors today and under-value the harm  that those behaviors will cause in the future.

At the risk of making a sweeping judgement, I even think the biggest barrier to upward mobility is that some people don’t have a properly developed sense of deferred gratification.

So I think paternalists often are right, but I disagree with the notion that government should coerce people and impose “good” choices. Simply stated, freedom and liberty matter to me.

To butcher a very important quote, “I may disagree with your decision to smoke cigarettes and guzzle 32 oz. sodas, but I will defend to the death your right to do so.”

Actually, to be perfectly honest, I won’t defend to the death your right to be foolish. But I’ll surely write a snarky blog post.

Let’s close by acknowledging there are some gray areas. What about the idea that government can “nudge” us to make better choices? A classic example is a government rule to automatically sign new workers up for things such as 401(k) plans, but then give them the ability to opt out.

I don’t want government to interfere with private employment contracts, but that type of policy is obviously not nearly as objectionable as banning Big Gulps.

And you can come up with other proposals that might even pass muster with rabid libertarians. If a high school has a consumer finance class that teaches people about compounding and present value, that presumably will nudge them to be more pro-saving.

Is there anything wrong with that? Probably not, though we hard-core libertarians would argue that such lessons presumably would be part of the market-based education system.

In other words, there’s a reason why our answer to just about every question is “less government.” Not only is that a good philosophy, it’s also the way of getting the best results.

P.S. If Sunstein’s name sounds familiar, it may be because I have criticized him for endorsing more redistribution based on FDR’s awful Economic Bill of Rights.

On the other hand, I have favorably cited his research to show that too much regulation can cause needless deaths.

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The woman who saved the United Kingdom has died.

A Great Woman

I got to meet Margaret Thatcher a couple of times and felt lucky each time that I was in the presence of someone who put her nation’s interests first and was not guided by political expediency.

Such a rare trait for someone in public life.

The best tribute I can offer is to share some of her remarks that capture both her strong principles and her effective communication skills.

Here’s a clip from her famous speech stating that there’s “no such thing as public money.”

Can you imagine today’s spineless Tory politicians making such statements. Hardly, they’re too busy criticizing taxpayers for not voluntarily paying extra tax!

And here’s her powerful performance in the House of Commons exposing the left for being willing to impoverish the poor if it meant those with higher incomes suffered even more.

I’ve said the same thing in some of my interviews, but she obviously said it much more effectively.

P.S. If you weren’t sufficiently inspired by Thatcher’s words, here’s Reagan’s tribute to Coolidge and also a memorable passage from his inaugural address.

P.P.S. Let’s not forget that Thatcher was an indispensable ally with Reagan in the fight against the barbarity of communism.

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Using data stolen from service providers in the Cook Islands and the British Virgin Islands, the Washington Post published a supposed exposé of Americans who do business in so-called tax havens.

Cayman April 2013

Another Research Trip to Cayman – One of the Sacrifices I Make in the Fight for Freedom

Since I’m the self-appointed defender of low-tax jurisdictions in Washington, this caught my attention. Thomas Jefferson wasn’t joking when he warned that “eternal vigilance is the price of liberty.” I’m constantly fighting against anti-tax haven schemes that would undermine tax competition, financial privacy, and fiscal sovereignty.

Even if it means a bunch of international bureaucrats threaten to toss me in a Mexican jail or a Treasury Department official says I’m being disloyal to America. Or, in this case, if it simply means I’m debunking demagoguery.

The supposedly earth-shattering highlight of the article is that some Americans linked to offshore companies and trusts have run afoul of the legal system.

Among the 4,000 U.S. individuals listed in the records, at least 30 are American citizens accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct.

But the real revelation is that people in the offshore world must be unusually honest. Fewer than 1 percent of them have been named in a lawsuit, much less been involved with a criminal case.

This is just a wild guess, but I’m quite confident that you would find far more evidence of misbehavior if you took a random sample of 4,000 Americans from just about any cross-section of the population.

We know we would find a greater propensity for bad behavior if we examined 4,000 politicians. And I assume that would be true for journalists as well. And folks on Wall Street. And realtors. And plumbers. Perhaps even think tank employees. Anyhow, you get the point.

Citing a couple of anecdotes, the reporter then tries to imply that low-tax jurisdictions somehow lend themselves to criminal activity.

 Fraud experts say offshore bank accounts and companies are vital to the operation of complex financial crimes. Allen Stanford, who ran a $7 billion Ponzi scheme, used a bank he controlled in Antigua. Bernard Madoff, who ran the largest Ponzi scheme in U.S. history, used a series of offshore “feeder funds” to fuel the growth of his multibillion-dollar house of cards.

The Allen Stanford case was a genuine black eye for the offshore world, but it’s absurd to link Madoff’s criminality to tax havens. The offshore funds that invested with Madoff were victimized in the same way that many onshore funds lost money.

Moreover, there’s no evidence in this article – or from any other source to my knowledge – suggesting that financial impropriety is more likely in low-tax jurisdictions.

We then get some “hard” numbers.

Today, there are between 50 and 60 offshore financial centers around the world holding untold billions of dollars at a time of historic U.S. deficits and forced budget cuts. Groups that monitor tax issues estimate that between $8 trillion and $32 trillion in private global wealth is parked offshore.

So we have offshore wealth of somewhere “between $8 trillion and $32 trillion”? With that level of precision, or lack thereof, perhaps you now understand why the make-believe numbers about alleged tax evasion are about as credible as a revenue estimate from the Joint Committee on Taxation.

Speaking of make-believe numbers, the article mentions one of Washington’s worst lawmakers, a Senator who pushed through a law that has united the world against the United States.

Sen. Carl M. Levin (D-Mich.) has been holding hearings and conducting investigations into the offshore world for nearly three decades. In 2010, Congress passed the Foreign Account Tax Compliance Act requiring that U.S. taxpayers report foreign assets to the government and foreign institutions alert the IRS when Americans open accounts.

He justifies bad policy by claiming that there’s a pot of gold at the end of the tax haven rainbow.

“We can’t afford to lose tens of billions of dollars a year to tax-avoidance schemes,” Levin said. “And many of these schemes involve the shift of U.S. corporate tax revenues earned here in the U.S. to offshore tax havens.”

But FATCA is predicted to collected less than $1 billion per year, and it probably will lose revenue once you include Laffer Curve effects such as lower investment in the American economy from overseas.

The most interesting part of the article, as least from a personal perspective, is that the Center for Freedom and Prosperity is listed as one of the “powerful lobbying interests” fighting to preserve tax competition.

The efforts by Levin and other lawmakers have been opposed by powerful lobbying interests, including the banking and accounting industries and a little-known nonprofit group called the Center for Freedom and Prosperity. CF&P was founded by Daniel J. Mitchell, a former Senate Finance Committee staffer who works as a tax expert for the Cato Institute, and Andrew Quinlan, who was a senior economic analyst for the Republican National Committee before helping start the center. …The center argues that unfettered access to offshore havens leads to lower taxes and more prosperity.

Having helped to start the organization, I wish CF&P was powerful. The Center has never had a budget of more than $250,000 per year, so it truly is a David vs. Goliath battle when we go up against bloated and over-funded bureaucracies such as the IRS and the Paris-based Organization for Economic Cooperation and Development.

The reporter somehow thinks it is big news that the Center has tried to raise money from the business community in low-tax jurisdictions.

According to records reviewed by The Post and ICIJ, the organization’s fundraising pleas have been circulated to offshore entities that make millions by providing anonymity for wealthy clients, many of them U.S. citizens.

Unfortunately, even though these offshore entities supposedly “make millions,” I’m embarrassed to say that CF&P has not been able to convince them that it makes sense to support an organization dedicated to protecting tax competition, financial privacy, and fiscal sovereignty.

But maybe that will change now that the OECD has launched a new attack on tax planning by multinational firms.

Let’s close by returning to the policy issue. The article quotes me defending the right of jurisdictions to determine their own fiscal affairs.

Mitchell, the co-founder of CF&P, added that nations shouldn’t be telling other countries how to conduct their affairs and noted that the United States is one of the worst offenders in the world when it comes to corporate secrecy.

My only gripe is that the reporter mischaracterizes my position. Yes, there are several states that are “tax havens” because of their efficient and confidential incorporation laws, but that means America is “one of the best providers,” not “one of the worst offenders.”

This is something to celebrate. I’m glad the United States is a safe haven for the oppressed people of the world. That’s great news for our economy. I just wish we also were a tax haven for American citizens.

“The United States is one of the biggest tax havens in the world,” Mitchell said. “In general, the United States is impervious to fishing expeditions here, and then the United States turns around and says, ‘Allow us to do fishing expeditions in your country.’”

But I’m not a hypocrite. Other nations should have the sovereign right to maintain pro-growth tax and privacy laws as well.

Other nations shouldn’t feel obliged to enforce bad American tax law, any more than we should feel obliged to enforce any of their bad laws.

P.S. You probably won’t be surprised to learn that “onshore” nations are much more susceptible to dirty money than “offshore” jurisdictions. Which is why you have a hard time finding any tax havens on this map showing the nations with the most money laundering.

P.P.S. On the topic of tax havens, you won’t be surprised to learn that Senator Levin is not the only dishonest demagogue in Washington. If you pay close attention around 1:25 and 2:25 of this video, you’ll see that the current resident of 1600 Pennsylvania Avenue also has an unfortunate tendency to play fast and loose with the truth.

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A reader from overseas wonders about my views on immigration, particularly amnesty.

I confess that this is one of those issues where I’m conflicted.

On the general topic of immigration, I think the United States has benefited in the past – and can benefit in the future – from newcomers. And I express that position in this interview for Fox Business News.

But the real issue, which isn’t addressed in the interview, is magnitude. I assume almost nobody wants zero immigration. On the other hand, I also assume that very few people favor totally open borders.

So where do we draw the line? I think we should welcome lots of immigration, particularly people with skills, education, and money. This is the approach that is used to varying degrees by nations such as Australia, Canada, and Switzerland, and I wrote favorably about a similar proposal by Congressman Jared Polis, a Democrat from Colorado.

And I think substantial numbers of low-skilled people who want to work also should be welcome, but I don’t think everybody in the world who wants to come to America should have that right. I haven’t met more than a tiny handful of folks who disagree with Walter Williams’ assertion that, “not…everyone on the planet had a right to live in the U.S.”

Particularly since politicians have redistribution systems that can lure people into a life of dependency. Which is presumably why Milton Friedman warned, to the dismay of some other libertarians, “You cannot simultaneously have free immigration and a welfare state.”

Even the Wall Street Journal, which is a leading voice for both increased immigration and amnesty for existing illegals, also is concerned that a growing welfare state could attract immigrants for the wrong reasons.

Speaking of amnesty, I suppose I should answer the question of how I would deal with people who are in the country illegally? And my response probably depends whether I answer with my heart or my head.

My heart tells me to give these people the benefit of the doubt. Every illegal I’ve met seems to be a good person. And I know if I lived someplace like Mexico, Somalia, or Honduras, I almost certainly would want to improve my family’s position by getting to America, legally or illegally.

On the other hand, I believe in the rule of law and I’m a bit uncomfortable rewarding those who jumped the line at the expense of those who followed the rules.

And to be perfectly honest, I also worry about the political implications of any policy that increases the number of people who – on net – will vote for redistribution. I could do without the partisan implications, but this Chuck Asay cartoon captures my concerns.

Immigration Cartoon

I also think that people respond to incentives. Another round of amnesty almost surely will encourage further illegal immigration. Putting myself in the position of a poor person in the developing world, I would logically conclude that it would just be a matter of time, so I would sneak across the border in order to take advantage of that future amnesty.

That doesn’t strike me as a good approach. Far better to figure out how to genuinely reform the system.

By the way, a senior staffer on Capitol Hill floated to me the idea of a new status that enables illegals to stay in the country, but bars them from citizenship unless they get in line and follow the rules. I’m definitely not familiar with the fault lines on these issues, but perhaps that could be a good compromise.

And it goes without saying that I want the strictest possible limits on access to welfare programs and other government handouts for immigrants, regardless of their status.

So, like everybody else, I want border security and some form of legalization as part of a new system that brings people to America for the right reason. See, I’m the epitome of reasonableness.

P.S. If you want to enjoy some immigration-related humor, we have a video about Americans migrating to Peru and a story about American leftists escaping to Canada.

P.P.S. On the issue of birthright citizenship, I’ve shared some interesting analysis from Will Wilkinson and George Will.

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Young people voted for Obama in overwhelming numbers, but the question is why?

As I explain in this interview for Blaze TV, they are being hurt by his policies.

It’s not just that youth unemployment is high. Obama’s policies also are hurting those who found jobs. Simply stated, these “lucky” folks are getting below-average pay.

The Stepford Students?

I specifically explain that academics have determined that those entering the labor market in a weak economy will suffer a long-run loss of income.

Some of you may think I’m clutching at straws because I don’t like Obama, but perhaps you’ll believe the man who formerly served as the Chairman of President Obama’s Council of Economic Advisers.

Here’s some of what Austin Goolsbee wrote several years ago for the New York Times.

…starting at the bottom is a recipe for being underpaid for a long time to come. Graduates’ first jobs have an inordinate impact on their career path and their “future income stream,” as economists refer to a person’s earnings over a lifetime. The importance of that first job for future success also means that graduates remain highly dependent on the random fluctuations of the economy, which can play a crucial role in the quality of jobs available when they get out of school.

Goolsbee cites some research based on the career paths of Stanford MBAs.

Consider the evidence uncovered by Paul Oyer, a Stanford Business School economist… He found that the performance of the stock market in the two years the students were in business school played a major role in whether they took an investment banking job upon graduating and, because such jobs pay extremely well, upon the average salary of the class. That is no surprise. The startling thing about the data was his finding that the relative income differences among classes remained, even as much as 20 years later.

He also reports on what other scholars found for regular college students.

Dr. Oyer’s findings hold for more than just high-end M.B.A. students on Wall Street. They are also true for college students. A recent study, by the economists Philip Oreopoulos, Till Von Wachter and Andrew Heisz…finds that the setback in earnings for college students who graduate in a recession stays with them for the next 10 years. These data confirm that people essentially cannot close the wage gap by working their way up the company hierarchy. While they may work their way up, the people who started above them do, too. They don’t catch up.

Now think about today’s young people. They’re buried in debt, thanks to government programs that have caused a third-party payer crisis. Yet they are having a hard time finding jobs because Obama’s policies are stunting the economy’s performance.

And even if they do find a job, the research suggests they will get paid less. Not just today, but for the foreseeable future.

Yet they gush over Obama. Go figure.

P.S. Goolsbee’s recent columns have been less impressive, perhaps because he feels the need to defend Obama.

P.P.S. I’m not suggesting that young people should have gushed over McCain or Romney. Just that they should view almost all politicians with disdain.

P.P.P.S. I also say in the interview that the government should get out of the housing business – both on the spending side of the budget and the revenue side of the budget. And it goes without saying that I also explain the need to reduce the burden of government spending.

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Let’s take a moment and enjoy how Obama made himself a laughingstock because of his anti-sequester hysteria.

In spite of his hyperbolic rhetoric, nothing bad has happened. Schools are still open, planes are still flying, and supermarkets aren’t poisoning us with tainted food.

I’ve already shared some very funny cartoons on this topic, which can be viewed here, here, here, here, and here.

Lower down in this post, we have a couple of additional cartoons that deserve a few chuckles, but I also want to share this interview to help make an important policy point about the need to reduce the burden of government spending.

Actually, the sequester was a double victory. Not only did we trim the growth of spending, we also avoided the tax hike that Obama wanted as a replacement.

No wonder he’s so unhappy!

This first cartoon, from Chip Bok, captures his sullen mood.

Cartoon Sequester 1

The second cartoon, by Jerry Holbert, has the same these, showing that the American people have learned to ignore Obama’s demagoguery.

Cartoon Sequester 2

Now the question is what comes next?

I wrote yesterday that Obama is likely to offer a bait-and-switch budget designed to impose more taxes and more spending.

It’s possible, though, that it won’t be as far to the left as the budget approved by the Senate (as cartoonists have ably illustrated).

In any event, there is no possible compromise with the House-approved budget. Or, to be more specific, there’s no possible compromise that would be good for the nation, so we’re looking at stalemate for the near future.

But stalemate is a lot better than moving in the wrong direction.

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Statists are in a tough position. For years, they’ve been saying the United States should be more like Europe.

And, as shown in these very funny cartoons by Michael Ramirez and Bob Gorrell, President Obama is a cheerleader for that effort.

But now Europe’s welfare states are collapsing, so the left is scrambling to come up with some way of rationalizing their support for ever-growing levels of taxation and spending

Paul Krugman’s been doing what he can to square this circle, complaining that Europe is in trouble because governments aren’t spending enough. Sounds preposterous, but at least he provides some comfort for the don’t-confuse-us-with-the-facts-we’re-Keynesians crowd.

But for those who prefer to look at real data, one of my Cato Institute colleagues has sorted through the numbers to see whether Krugman’s hypothesis has any validity. Here’s some of what Alan Reynolds wrote for Investor’s Business Daily, reprinted by Real Clear Politics, starting with a quick look at some nations that experienced growth during periods when the burden of government spending was falling.

In Iceland, which didn’t throw taxpayer money at the banks, government spending was slashed from 57.6% of GDP in 2008 to 46.5% in 2012. The deficit fell from 12.9% of GDP to 3.4%. The economy began to recover in 2011. Iceland’s economic boost from fiscal frugality was neither unorthodox nor unique. After all, the U.S. economy boomed in the late 1990s when federal spending was cut from 22.3% of GDP in 1991 to 18.2% in 2000. In Canada, total federal and provincial spending was deeply slashed from 53.2% of GDP in 1992 to 39.2% in 2007 with only salubrious effects.

But what about Krugman’s argument that spending cuts have hurt growth in nations such as Portugal, Ireland, Italy, Greece, Great Britain, and Spain?

Well, Alan points out that these nations haven’t reduced spending.

The PIIGGS imposed no austerity at all on the public sector in the past five years. Government spending on bailouts, subsidies, grants, salaries and entitlements commands a much larger share of these economies than it did just a few years ago.

If you break down the data on an annual basis, some of these nations have been forced by the financial crisis to finally reduce their budgets, but the cuts in the past year or two aren’t nearly enough to make up for the huge spending increases in earlier years.

But these governments have shown no reluctance to raises taxes. I’ve already discussed their unfortunate propensity to hike value-added tax rates. Alan explains that they’re doing the same thing for income tax rates.

European austerity has been focused on the private sector — namely, taxpayers with high incomes. That is the second thing the PIIGGS have in common. The highest income tax rate was recently increased in every one of the troubled PIIGGS except Italy (where it was already too high at 43%). The top tax rate was hiked from 40 to 46.5% in Portugal, from 41 to 48% in Ireland, from 40 to 45% in Greece, from 40 to 50% in Great Britain, and from 48 to 52% in Spain.

In other words, Veronique de Rugy is correct. The “austerity” in Europe generally has been in the form of higher taxes, squeezing the productive sector to prop up the public sector.

Though I would point out that there are a few bright spots. Switzerland has been doing quite well, thanks to a “debt brake” that limits how much the budget can grow each year.

And the Baltic nations deserve credit for imposing genuine budget cuts several years ago, a policy that has yielded big dividends since they’re now growing while most other European nations are mired in economic stagnation.

And they kept their flat tax systems, showing some appreciation for the common-sense insight that you don’t get more growth by punishing investors, entrepreneurs, and small business owners.

By the way, Alan’s column isn’t completely depressing. He writes that the burden of government spending is reasonable (at least compared to Europe’s bankrupt welfare states) in some of the major emerging economies.

And they’ve focused more on lowering tax rates rather than making them more punitive.

It is enlightening to compare the depressing performance of these tax-and-spend countries to the rapidly-expanding BRIC (Brazil, Russia, India and China) and MIST economies (Mexico, Indonesia, South Korea and Turkey). Government spending is frugal in these countries, averaging 32.1% of GDP in the BRICs and 27.4% for the MIST group. Rather than raising top tax rates, all but one of the BRIC and MIST countries slashed their highest individual income tax rates in half; sometimes lower. Brazil cut the top tax rate from 55 to 27.5%. Russia replaced income tax rates up to 60% with a 13% flat tax. India cut the top tax rate to 30% from 60%. Similarly, the top tax rate was cut from 55 to 30% in Mexico, from 50 to 30% in Indonesia, from 89 to 38% in South Korea, and from 75 to 35% in Turkey. In China, statutory income tax rates can still reach 45% on paper, but that is only for high salaries and is widely evaded. Investment income is subject to a flat tax of 20%, the corporate tax is 15-25%, and China’s extremely low payroll tax adds almost nothing to labor costs.

This doesn’t mean the BRIC and MIST nations deserve high praise. Many of them still get poor scores from Economic Freedom of the World, largely because the regulatory burden is excessive and also because more needs to be done to uphold the rule of law and protect property rights.

But at least most of them aren’t compounding those mistakes with Keynesian spending schemes and class-warfare tax policy.

For more information about nations that have benefited from spending restraint, here’s my video looking at Ireland in the 1980s, New Zealand and Canada in the 1990s, and Slovakia last decade.

The moral of the story, needless to say, is that good things happen when governments comply with Mitchell’s Golden Rule.

P.S. Paul Krugman received some much-deserved abuse when he made false attacks on Estonia’s admirable fiscal policy.

P.P.S. For some humor about the European fiscal mess, here are some laughable quotes from European leaders. This Robert Ariail cartoon also gets a laugh, as do these videos on a Greek view of Germans and a romantic conflict between Northern Europe and Southern Europe. My favorite, for what it’s worth, is this map showing how Greeks view the rest of Europe, with this Dave Barry column a close runner-up.

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Are we about to see a new kinder-and-gentler Obama? Has the tax-and-spend President of the past four years been replaced by a fiscal moderate?

That’s certainly the spin we’re getting from the White House about the President’s new budget. Let’s look at this theme, predictably regurgitated in a Washington Post report.

President Obama will release a budget next week that proposes significant cuts to Medicare and Social Security and fewer tax hikes than in the past, a conciliatory approach…the document will incorporate the compromise offer Obama made to House Speaker John A. Boehner (R-Ohio) last December in the discussions over the “fiscal cliff” – which included $1.8 trillion in deficit reduction through spending cuts and tax increases. …unlike the Republican budget that passed the House last month, Obama’s budget does not balance within 10 years.

Since America’s fiscal challenge is the overall burden of government spending, I’m not overly worried about the fact that Obama’s budget doesn’t get to balance.

But I am curious whether Obama truly is proposing a “conciliatory” budget. Are the tax hikes smaller? Are the supposed spending cuts larger?

Actually, there are no genuine spending cuts since the President’s budget is based on dishonest baseline budgeting. At best, we’re simply talking about slowing the growth of government.

But since Mitchell’s Golden Rule is based on the very modest goal of having government grow slower than the private sector, it’s possible that Obama may be proposing something worthwhile.

But possible isn’t the same as probable. Indeed, it appears that the budget is predicated on a giant bait-and-switch since the beneficial spending restraint imposed by sequestration would be repealed!

Obama’s budget proposal, however, would eliminate sequestration.

This appears almost as an afterthought in the Washington Post article, but it should be the lead story. The White House wants to get rid of a policy that genuinely limits the growth of spending.

We won’t have the official numbers until the budget is released next Wednesday, but I’ll be very curious to see whether the supposed spending cuts elsewhere in his budget are greater than or less than the spending increases that will occur if sequestration is canceled. Particularly since the President also is proposing lots of new spending on everything from early child education to brain mapping.

Moreover, it seems as though Obama tax numbers are based on dodgy math as well. The White House is claiming that this is a “conciliatory” budget because he’s no longer proposing $1.6 trillion of tax hikes.

The budget is more conservative than Obama’s earlier proposals, which called for $1.6 trillion in new taxes and fewer cuts to health and domestic spending programs. Obama is seeking to raise $580 billion in tax revenue by limiting deductions for the wealthy and closing loopholes for certain industries like oil and gas. Those changes are in addition to the increased tobacco taxes and more limited retirement accounts for the wealthy that are meant to pay for new spending.

Let’s try to disentangle the preceding passage. The President wants $580 billion of new taxes from “deductions” and “loopholes.” But he also wants an unknown pile of revenue from new tobacco taxes and from restricting IRAs. And keep in mind that he already got $600 billion as part of the fiscal cliff.

Until we get official numbers, we can’t say anything with certainty, but I’ll be checking on Wednesday to see how much revenue the President intends to grab as a result of the tobacco and IRA provisions. Suffice to say that I won’t be surprised if the net impact of all his tax hikes is close to $1.6 trillion. Especially since he’s also proposing to manipulate CPI data, a change that would generate another $100 billion in revenues.

In other words, the revenue side of his budget likely will be a bait-and-switch scam, just like the spending side is a joke once you understand that he wants to get rid of sequestration.

I hope I’m wrong, but I fear that my concerns will be validated next Wednesday and we’ll see another budget that has no real entitlement reform and more class-warfare tax hikes.

P.S. The budget approved by the House of Representatives avoided any tax increases and restrained spending to that it will grow by an average of 3.4 percent annually. Not exactly draconian, but that approach does balance the budget in 10 years.

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It’s been more than three weeks since I targeted French fiscal policy for abuse and more than one week since I wrote something negative about the French fiscal system.

I must be slowing down as I get older, so it’s time of rectify this oversight.

My fundamental problem with the French system is that the burden of government spending is excessive and the politicians seem to think the answer is additional increments of class-warfare tax policy.

If you think I’m exaggerating, just check out this chart on government spending. The public sector in France is more bloated than the ones that exist in Italy, Sweden, and Greece!

That’s quite an achievement.

And then remember that the new French President is imposing a new top income tax rate of 75 percent. Though, to be fair, President Hollande generously says he doesn’t want the overall tax burden on any taxpayer to exceed 80 percent. All hail Francois the Merciful!

Notwithstanding this magnanimous gesture, some taxpayers have the gall (no pun intended) to object to this level of fleecing. Famous actors and successful entrepreneurs are among those saying Au Revoir and moving to jurisdictions that have less punitive tax laws.

What most amuses me about this exodus is the way France’s political elite is throwing a temper tantrum. How dare our victims run away!

The situation is so grim in France that The Economist wrote up a special report warning that France is Europe’s “time-bomb.”

Which raises an interesting question. How brightly is the fuse burning, and how much longer until the bomb detonates?

The honest answer is that I don’t know, but here are two stories worth noting.

First, you have to figure the tax burden is a bit too onerous if even high-ranking officials from a socialist government are utilizing tax havens to protect themselves. Here are details from a BBC report.

Jean-Jacques Augier, who managed Mr Hollande’s campaign funds, told the daily Le Monde that there was “nothing illegal” in his tax haven affairs. Meanwhile, ex-budget minister Jerome Cahuzac has been charged with fraud. Ministers are under pressure to reveal what they knew about his tax evasion. On Wednesday President Hollande addressed the scandal on national television, saying that in future all ministers and MPs would have to declare fully their personal finances.

Gee, don’t these members of the political elite understand that Hollande wants them to be able to keep 20 percent of their earnings? What a bunch of ingrates!

Our next story shows that French politicians are so greedy that they’re even willing to undermine their own national sport.

Prime Minister Jean-Marc Ayrault’s office issued a statement today confirming that a 75 percent surcharge on salaries above 1 million euros ($1.3 million) will apply to soccer clubs. “This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.” …Many soccer players would already be taxed at France’s top marginal rate of 49 percent, which kicks in at 500,000 euros a year. Teams would then pay a surcharge to bring the effective tax rate on salaries above 1 million euros to 75 percent.

Mon Dieu! The government “will lose its best taxpayers.” Sounds like the Laffer Curve effects may be so large that the government actually loses tax revenue.

“Follow me. We can escape in this direction”

And since even left-leaning economists have confirmed that tax rates have a big impact on the decisions of such athletes, I hope French sports fans won’t mind if all the best players decide to take their talents elsewhere.

With policy this bad, no wonder Obama will probably never achieve his goal of turning America into another France. But he can take comfort in the fact that the French people overwhelmingly support what he’s trying to do.

But they also must be schizophrenic. As of 2010, an overwhelming majority of them also acknowledged that it was necessary to lower the burden of government spending to boost growth. And an astounding 52 percent of them might move to evil capitalistic America if given the opportunity.

The key thing is not to import French economic policy. Having escaped from her former country, Veronique de Rugy explains why that would be a mistake.

You can also watch Veronique explain the basics of fiscal policy in this testimony to a congressional committee.

P.S. This Chuck Asay cartoon captures the French mentality. Makes you wonder what they’ll do when the house of cards comes tumbling down. All I can say for sure is that the ones who put their money in tax havens will be much happier than the ones who thought they could trust government.

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I’m normally reluctant to write about “depreciation” because I imagine eyes glazing around the world. After all, not many people care about the tax treatment of business investment expenses.

But I was surprised by the positive response I received after writing a post about Obama’s demagoguery against “tax loopholes” for corporate jets. So with considerable trepidation let’s take another look at the issue.

First, a bit of background. Every economic theory agrees that investment is a key for long-run growth and higher living standards. Even Marxist and socialist theory agrees with this insight (though they foolishly think government somehow is competent to be in charge of investments).

Let’s look at two remarkable charts, starting with one that shows the very powerful link between total investment and wages for workers.

As you can see (click the chart to see a larger version), if we want people to earn more money, it definitely helps for there to be more investment. More “capital” means that workers have higher productivity, and that’s the primary determinant of wages and salary.

Our second chart shows how the internal revenue code treats income that is consumed compared to how it penalizes income that is saved and invested. Simply stated, the current system is very biased against capital formation because of the combined impact of capital gains taxes, corporate income taxes, double taxes on dividends, and death taxes.

Indeed, one of the reasons why the right kind of tax reform will generate more prosperity is that double taxation of saving and investment is eliminated. With either a flat tax or national sales tax, economic activity is taxed only one time. No death tax, no capital gains tax, no double tax on dividends in either plan.

All of this background information helps underscore why it is especially foolish for the tax code to specifically penalize business investment. And this happens because companies have to “depreciate” rather than “expense” their investments.

Here’s how I described depreciation in my post on corporate jets.

If a company purchases a jet for $20 million, they should be able to deduct – or expense – that $20 million when calculating that year’s taxable income… A sensible tax system defines profit as total revenue minus total costs – including purchases of private jets. But today’s screwy tax code forces them to wait five years before fully deducting the cost of the jet (a process known as depreciation). Given that money today has more value than money in the future, this is a penalty that creates a tax bias against investment (the tax code also requires depreciation for purchases of machines, structures, and other forms of investment).

And I also addressed the issue when writing about the economic illiteracy in one of the Obama-Romney debates.

Now let’s see what some experts on the topic have to say.

Here’s some very sage analysis from Alan Viard of the American Enterprise Institute.

…a deal that cuts the corporate rate could end up doing more harm than good. The problem is that Congress and the Obama administration are thinking of pairing the rate cut with a slow-down of companies’ depreciation deductions. That’s a bad combination. A key goal of corporate tax reform should be to reduce the tax penalty on business investment. Investments in equipment, factories, and other forms of capital help power the long-run economic growth that boosts wages and living standards for American workers. …If depreciation is slowed down enough to offset the full revenue loss from the rate cut, then there’s no reduction in the investment penalty, on balance. The depreciation changes take back with the left hand everything that the rate cut gives with the right hand. …In fact, the policy makes the tax penalty on new investments bigger. …Why is this bad combination being considered? Maybe because the rate cut is easy to understand and the harm of slower depreciation is easy to overlook. …Yes, let’s cut the corporate tax rate. But, let’s not slow down depreciation to pay for it.

Amen. Proposals to lower America’s destructively high corporate tax rate are needed, but I don’t want politicians “paying for” the change with other policies that are similarly harmful to growth and competitiveness.

Margo Thorning of the American Council for Capital Formation adds some wisdom with her column in today’s Wall Street Journal.

…proposals that would increase the tax burden on capital-intensive industries—which are contributing to U.S. economic growth and employment—should be viewed with caution. …stretching out depreciation allowances reduces a company’s annual cash flow and raises the “hurdle rate” that new investments would have to meet before they are approved. For capital-intensive firms in sectors such as energy, manufacturing, utilities and transportation, the trade-off between delayed cash flow and lower corporate income-tax rates may result in cutbacks in capital spending. …Each additional $1 billion in investment is associated with 23,000 new jobs, according to data from the Department of Commerce and the Bureau of Labor Statistics. …Rather than drawing out depreciation schedules, a better, pro-growth approach to corporate tax reform would be to allow all investment to be expensed—in other words, deducted from income in the first year.

I share Margo’s concerns, which is why I’m very suspicious when the President says he wants to lower the corporate tax rate and “reform” the system.

Last but not least, Matt Mitchell (no relation) of the Mercatus Center recently added his two cents to the discussion.

The idea that “accelerated” depreciation is a loophole can be traced back to Stanley Surrey, the Harvard law professor whose work in the 1950s, 60s, and 70s influenced many…, including Senator Bill Bradley. …immediate expensing would mean abandoning “the attempt to tax business income.” That’s because it would essentially turn the corporate income tax into a corporate consumption tax. And that may be a good thing. Capital taxation is notoriously inefficient. This is one reason why Robert Hall and Alvin Rabushka permitted immediate 100 percent expensing in their famous flat consumption tax.

You should realize, by the way, that the distorted view of what’s a loophole doesn’t just apply to depreciation. The Joint Committee on Taxation (the same folks who basically assume that the revenue-maximizing tax rate is 100 percent) also tells lawmakers that it’s a loophole if you don’t double-tax capital gains, or if you allow people to avoid double taxation by utilizing IRAs.

With advice like that, no wonder the tax code is a mess.

Anyhow, congratulations are in order. If you’ve made it this far, you almost surely know more about depreciation than every single politician in Washington. Though, to be sure, that’s not exactly a big achievement.

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One of the great things about federalism, above and beyond the fact that it both constrains the power of governments and is faithful to the Constitution, is that is turns every state into an experiment.

We can learn what works best (though the President seems incapable of learning the right lesson).

We know, for instance, that people are leaving high-tax states and migrating to low-tax states.

We also know that low-tax states grow faster and create more jobs.

I particularly enjoy comparisons between Texas and California. Michael Barone, for instance, documented how the Lone Star State is kicking the you-know-what out of the Golden State in terms of overall economic performance.

I also shared a specific example of high-quality jobs moving from San Francisco to Houston. And I was also greatly amused by this story (and accompanying cartoons) about Texas “poaching” jobs from California.

In this discussion with Stuart Varney of Fox News, we discuss how Texas is leading the nation in job creation.

But there’s another part of this discussion that is very much worth highlighting.

As illustrated by the chart, we are enduring the worst overall job performance in any business cycle since the end of World War II.

I note in the interview that Obama inherited a bad economy and that Bush got us in the ditch in the first place with all his wasteful spending and misguided intervention.

But Obama also deserves criticism for doubling down on those failed policies.

His so-called stimulus was a flop. Dodd-Frank is a regulatory nightmare. Obamacare is looking worse and worse every day.

No wonder job creation is so anemic.

The real moral of the story, though, is that the poor are the biggest victims of Obama’s statism. They’re the ones who have been most likely to lose jobs. They’ve been the ones to suffer because of stagnant incomes.

Sort of brings to mind the old joke that leftists must really like poor people because they create more of them whenever they’re in charge.

P.S. Speaking of jokes, here’s an amusing comparison of Texas and California. If you want some California-specific humor, this Chuck Asay cartoon is great. And to maintain balance, here’s a Texas-specific joke on how to respond to an attacker.

P.P.S. To close on a serious point, California would be deteriorating even faster if it wasn’t for the fact that the state and local tax deduction basically means that the rest of the country is subsidizing the high tax rates in the not-so-Golden State. Another good argument for the flat tax.

P.P.P.S. At the bottom of this post, you’ll find a great Kevin Williamson column dismantling some sloppy anti-Texas analysis by Paul Krugman.

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Let’s assume you didn’t understand how a garbage disposal worked and, for whatever reason, you decided to stick your arm in one and turn it on. You would do some serious injury to your hand.

The rest of us would wonder what motivated you to stick your arm down the drain in the first place, but we would feel sympathy because you didn’t realize bad things would happen.

But if you then told us that you were planning to do the same thing tomorrow, we would think you were crazy. Didn’t you learn anything, we would ask?

Seems like a preposterous scenario, but something very similar is now happening in Washington. The Obama Administration is proposing to once again put the economy at risk by subsidizing banks to give mortgages to people with poor credit.

“Let’s party like it’s 2006!”

Even though we’re still dealing with the economic and fiscal damage caused by the last episode of government housing subsidies!

Here are some of the unbelievable details from a report in the Washington Post.

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit…officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default. Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Brings to mind the famous saying from George Santayana that, “Those who cannot remember the past are condemned to repeat it.”

But what’s especially amazing – and distressing – about this latest scheme is that “the past” was only a couple of years ago. Or, to recall my odd analogy, one of our hands is still mangled and bleeding and we’re thinking about putting our other hand in the disposal.

Some people understand this is a nutty idea.

…critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars. “If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute.

What’s also discouraging is that the government already is deeply involved in the housing market – even though this is an area where there is no legitimate role for the federal intervention.

Deciding which borrowers get loans might seem like something that should be left up to the private market. But since the financial crisis in 2008, the government has shaped most of the housing market, insuring between 80 percent and 90 percent of all new loans, according to the industry publication Inside Mortgage Finance. It has done so primarily through the Federal Housing Administration, which is part of the executive branch, and taxpayer-backed mortgage giants Fannie Mae and Freddie Mac, run by an independent regulator.

So I guess the goal is to have taxpayers on the hook for 100 percent of loans.

“Don’t worry, it’s not our money”

Anybody want to guess whether this will end well?

By the way, this is bad policy even if we somehow avoid a new bubble and big taxpayer losses. Even in a”best case” scenario, the federal government will be distorting the allocation of capital by discouraging business investment and subsidizing residential real estate.

And as shown in this powerful chart, that will have adverse consequences for wages and living standards.

The part of the article that most nauseated me was a quote from the head bureaucrat at the Federal Housing Administration.

“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”

Gee, isn’t that nice that Ms. Galante thinks there are lots of borrowers with good “totality” measures? But here’s an interesting concept. Why doesn’t she put her money at risk instead of making me the involuntary guarantor on these dodgy loans?

I’ve already said on TV that we should dump Fannie Mae and Freddie Mac in the Potomac River. And I’ve  argued that the entire Department of Housing and Urban Development should be razed to the ground.

But perhaps this cartoon best shows the consequences of the Obama Administration’s new subsidy scheme.

P.S. We also should get rid of housing preference in the tax code. Our economy should cater to the underlying preferences of consumers, not the electoral interests of politicians.

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Even though I’m a staunch libertarian, I’m not under any illusion that everyone is open to our ideas. Particularly since, as I wrote a couple of weeks ago, we get falsely stereotyped as being heartless, hedonistic, anti-social, and naively isolationist.

That’s why I’m willing to accept incremental reforms. Compared to my libertarian dream world, for instance, the entitlement reforms in the Ryan budget are very modest. But they may be the most we can achieve in the short run, so I don’t make the perfect the enemy of the good.

But I do make the bad the enemy of the good. Politicians who expand the size and scope of government get on my wrong side, regardless of whether they are Republicans or Democrats.

Which explains why I haven’t approved of any Republican presidential candidate since Ronald Reagan.

With this in mind, you can imagine my shock when I read Robert Patterson’s recent column that blames recent GOP presidential woes on…you guessed it, “far-right libertarians.”

…in the political big leagues, …the GOP strikes out with the popular vote in five of the past six presidential elections… That familiar lineup shares one big liability: libertarian economics, which has been undermining the Republican brand… That message represents the heart and soul of a party that started sleeping with far-right libertarians in 1990. …In the libertarian universe, “economic freedom” trumps everything: civilization, nation, statecraft, patriotism, industry, culture and family. This “economic freedom,” however, diverges greatly from the liberty that transformed the United States into an industrial, financial and military colossus.

What the [expletive deleted]!

Let’s go down the list of  recent GOP presidential candidates and assess whether they were captured by “far-right libertarians” and their dangerous philosophy of “economic freedom.”

  • George H.W. Bush – He increased spending, raised tax rates, and imposed costly new regulations. If that’s libertarian, I’d hate to see how Patterson defines statism.
  • Do you see any libertarians? Me neither.

    Robert Dole – All you need to know is that he described his three proudest accomplishments as the creation of the food stamp program, the imposition of the costly Americans with Disabilities Act, and the Social Security bailout. I don’t see anything on that list that’s remotely libertarian.

  • George W. Bush – I’ve written several times about Bush’s depressing record of statism. Yes, we got some lower tax rates, but that policy was easily offset by new spending, new intervention, new regulation, and bailouts. No wonder economic freedom declined significantly during his tenure. Not exactly a libertarian track record.
  • No libertarians here, either

    John McCain – His track record on spending is somewhat admirable, but he was far from libertarian on key issues such as tax rates, global warming, bailouts, and healthcare.

  • Mitt Romney – He was sympathetic to a VAT. He criticized personal retirement accounts. He supported corrupt ethanol subsidies. And he said nice things about the TARP bailout. And I don’t need to remind anybody about Obamacare’s evil twin. Is that a libertarian agenda?

I also disagree with several of the policies that Patterson advocates, such as protectionism and industrial subsidies.

But that’s not the purpose of this post. Libertarians already face an uphill battle. The last thing we need is to be linked to a bunch of big-government Republicans when we share almost nothing in common on economic policy.

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I’ve never been a big Shakespeare fan, but that may need to change. It seems the Bard of Avon may be the world’s first libertarian.

Some of you are probably shaking your heads and saying that this is wrong, that Thomas Jefferson or Adam Smith are more deserving of this honor.

The first freedom fighter?

Others would argue we should go back even earlier in time and give that title to John Locke.

But based on some new research reported in Tax-news.com, Shakespeare preceded them all.

Uncertainty over the likely future success of his plays led William Shakespeare to do “all he could to avoid taxes,” new research by scholars at Aberystwyth University has claimed. The collaborative paper: “Reading with the Grain: Sustainability and the Literary Imagination,”…alleges that, in his “other” life as a major landowner, Shakespeare avoided paying his taxes, illegally hoarded food and sidelined in money lending. …According to Dr Jayne Archer, lead author and a lecturer in Renaissance literature at Aberystwyth: “There was another side to Shakespeare besides the brilliant playwright – a ruthless businessman who did all he could to avoid taxes, maximize profits at others’ expense and exploit the vulnerable – while also writing plays.”

In that short excerpt, we find three strong indications of Shakespeare’s libertarianism.

1. What does it mean that Shakespeare did everything he could to avoid taxes? His actions obviously would have upset the United Kingdom’s current bloodsucking political elite, which views tax maximization as a religious sacrament, but it shows that Shakespeare believed in the right of private property. Check one box for libertarianism.

2. What does it mean that the Bard “illegally hoarded food”? Well, such a law probably existed because government was interfering with the free market with something like price controls. Or there was a misguided hostility by the government against “speculation,” similar to what you would find from the deadbeats in today’s Occupy movement. In either event, Shakespeare was standing up for the principle of freedom of contract. Check another box for libertarianism.

3. Last but not least, what does it mean that Shakespeare “sidelined in money lending”? Nations used to have statist “usury laws” that interfered with the ability to charge interest when lending money. Shakespeare apparently didn’t think “usury” was a bad thing, so he was standing up for the liberty of consenting adults to engage in voluntary exchange. Check another box for libertarianism.

To be sure, it appears that Shakespeare was more of an operational libertarian rather than a philosophical libertarian.

And now that I’m giving it more thought, perhaps that doesn’t qualify him for the honor of being the world’s first libertarian.

After all, does the former Treasury Secretary, Tim Geithner, deserve to be called a libertarian for evading taxes? Does the new Treasury Secretary, Jack Lew, somehow become a libertarian simply because he utilized the Cayman Islands?

Or what about lawmakers such as John Kerry, Bill Clinton, John Edwards, and others on the left who have utilized tax havens to boost their own personal finances? I very much doubt that any of them deserve to be called libertarian (though the burden of government shrank under Bill Clinton, so maybe we can consider him an unintentional libertarian).

But maybe with a bit of literary license, we can make Shakespeare a full-fledged libertarian.

“O  liberty, liberty! Wherefore art thou liberty?”

“Double, double, statism and trouble;
Taxes burn, and regulations bubble!”

Hmmm… perhaps instead of my budding second career as a movie star, I should become a playwright instead?

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Even though I appreciate clever humor, I’ve never shared any April Fool’s Day jokes.

Indeed, the only time I even referenced April Fool’s Day came on the following day, when I stated that America’s high corporate tax rate meant that every day was April Fool’s Day for American companies.

So it’s time for me to remedy my oversights by sharing four good examples of April Fool’s Day humor.

Our first contribution is from Senator Ted Cruz. He takes a jab at President Obama for the budget-busting Obamacare legislation.

Cruz April Fool's

Our next contribution comes from Americans for Tax Reform. They’ve issued a press release announcing that America’s leading crony capitalist will voluntarily subject himself to the higher taxes he advocates for other Americans.

As you can see from this video, don’t hold your breath waiting for that to happen.

ATR Press Release

Then we have some mockery of Chris Matthews from the Media Research Center. There are a bunch of absurd, yet mostly believable, quotes.

Since I’m a fan of entitlement reform, here’s the one I’m highlighting.

MRC Chris Matthews

But the most implausible April Fool’s Day joke comes from CNS.

America’s Spender-in-Chief wants to be a role model of fiscal rectitude.

CNS April Fool's

Hey, maybe the President can give every teenager an unlimited credit card and tell them that more spending is good for the economy according to Keynesian economics. Though I’m not sure whether who that joke will hurt the most, the kids, the parents, the economy, or the nation?

Feel free to add any good April Fool’s Day humor in the comments section.

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It’s both difficult and easy to be a libertarian.

It’s difficult because the corrupt Washington establishment of politicians, lobbyists, bureaucrats, and interest groups almost always is allied against us.

But it’s easy since you have strong moral principles that put liberty over statism, so at least you don’t need a lot of time to figure out whether class-warfare tax policy is desirable, whether the federal government is too big, or whether government should be throwing people in jail for victimless crimes.

But not every issue is black and white.

About two years ago, I made fun of the bureaucrats in Montgomery County, MD, for proposing a plan to require that bums and panhandlers get government permits.

Afterwards, someone from that community told me that the goal wasn’t more bureaucracy, but rather to give local authorities a legal excuse to take action against vagrants who supposedly harass other people.

I don’t know if that was an accurate assessment, but it does raise an interesting question of whether the government should have any laws to limit panhandling and discourage people from becoming bums.

The local government in Houston seems to use this approach. As reported by the Daily Mail, you’re not supposed to feed vagrants, and it’s also against the law for bums to rummage through garbage.

A homeless man has been given a ticket for rummaging through a trash can in the downtown area of one of America’s biggest cities. …The summons he was issued cites his violation as: ‘disturbing the contents of a garbage can in downtown central business district.’ …the city’s laws which ban the feeding of homeless people… In most other cities homeless people are able to rely on the kindness of strangers for food and those who have fallen on hard times are free to dive through the garbage at will, but in Houston even that source of food is banned.

By the way, this issue isn’t limited to government actions. Some business owners in normally liberal California have become so irritated by aggressive mooching that they have distributed stickers saying “Please don’t feed our bums.”

So what’s the right policy? Is there an unlimited right for people to be bums and aggressively pester others for money? Does that include a right to sleep on the sidewalk, even if that undermines local businesses?

I confess that my gut instinct is to oppose such laws. On the other hand, I don’t like being harassed by able-bodied men who don’t want to get jobs. And I would be very irritated if I owned a small business and was losing money because bums were driving away customers and causing property values to decline.

If you like these “you be the judge” quandaries, here are other examples of difficult-to-decide issues.

I tend to be guided by the sentiments in this amusing poster, but many of these questions defy easy answers.

P.S. If you want a good chuckle, check out this entrepreneurial bum.

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