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Archive for November, 2014

When people ask me why I mock government for being a slovenly, bloated, and malicious entity, I’m sometimes not sure what to say.

Do I give them examples of corrupt corporate welfare?

Do I share instances of government thuggery?

Do I direct them to preposterous examples of waste?

Do I show them details about an insanely complex tax code?

Do I enlighten them about sleazy insider behavior by the political elite?

The short answer is that I’m never sure what to say, which is why I oftentimes resort instead to utilitarian arguments in which I show that nations with smaller public sectors out-perform countries with larger levels of taxation, spending, regulation, and intervention.

I figure many people will probably never share my instinctive libertarian outrage about abusive government, but they presumably will be susceptible to the argument that it’s better to enjoy the prosperity of jurisdictions like Hong Kong and Singapore rather than suffer the stagnation of nations such as France and Greece.

And perhaps if I also share enough stories about foolish government policy, they’ll eventually realize that 2+2=4 and also decide to become libertarians (or at least small-government conservatives).

With that in mind, let’s look at three episodes of brain-addled government policy, one about taxes, one about spending, and the other about regulation.

For our tax story, let’s look at the so-called “Snooki tax.” Here are some excerpts from a column by Erik Telford published in The Hill.

…architects of the Affordable Care Act thought they found a winning funding formula. Create a “sin tax” on vanity businesses and use it to help pay for massive increase in government healthcare spending. Proposals to hit Botox sparked strong reaction from the dermatologist lobby, so legislators went to plan B–go after a weaker industry and tax tanning beds. …They called it the “Snooki Tax” after the oft-criticized reality TV star and tried to put a shallow celebrity face on a tax that would harm thousands of small businesses. The Congressional Joint Committee on Taxation crowed that the tax would raise $2.7 billion in nine years, all to offset the estimated $1 trillion price tag of the ACA. Each business would have to tack on a 10 percent excise tax on each tanning experience for every customer.

You won’t be surprised to learn that the JCT’s estimate was wrong and the tax isn’t collecting as much revenue as forecast.

But you might be shocked to learn that the levy is incredibly inefficient.

…roughly 19,000 “mom and pop” small businesses may have  been affected by the new tax — and those businesses likely spent an average of $74 an hour to comply with federal tax paperwork burdens… the taxes collected might not even pay for the efforts to reap them. Enforcement requires heavy investments in training and employee hours to catch businesses offering services “under the table.” An agent trying to audit a business that offers tanning must observe a business in operation, compare subjective observations about customer flow to the businesses’ bookkeeping, take into account “weak internal accounting systems,” then “request trial balance (if any), summary sheets, work papers and determine the audit trail either for manual or automated record keeping systems, for all transactions.”

I don’t know if the tanning tax is worse than the infamous German coffee tax, but it’s probably a close race.

Now let’s look at a report about wasteful government spending.

I’ve written that the federal government shouldn’t be in the disaster business since that’s a recipe for the blame-shifting, mis-management, and inefficiency we saw after Katrina.

But I realize some folks may think my approach is “too radical,” even though I think it’s common sense that affected communities are far more likely to effectively plan and respond to disasters rather than bureaucrats in Washington.

So let’s look at what happens when those bureaucrats make decisions. Here are some blurbs in a report from the National Center for Policy Analysis.

Houses that are built according to FEMA guidelines suffer more property damage during hurricanes than homes built prior to the guidelines, write Carolyn Dehring, professor at the University of Georgia Terry College of Business, and Martin Halek, senior lecturer at the University of Wisconsin’s School of Business, for the Cato Institute. The National Flood Insurance Program (NFIP) provides flood insurance to homeowners in communities participating in the program. Those communities are required to adopt the NFIP building code, which uses minimum building standards established by the Federal Emergency Management Agency (FEMA). …The study found that buildings in the A-Zone constructed after the NFIP code was implemented were much more likely to sustain damage, and have a greater extent of damage, than other structures in the area built prior to the NFIP code. Of buildings that were damaged, buildings constructed post-NFIP incurred 57 percent more damages than similarly situated property.

So federal regulations designed to “help” actually led to more damage. Go figure.

By the way, the costs weren’t borne by the actual property owners or even the local communities of states. Uncle Sugar (meaning you and me) picked up the tab.

NFIP has paid $3.7 billion in losses in Florida alone since 1978.

This is sort of the government’s version of biblical miracles. But instead of turning water into wine, Washington turns tax dollars into mud.

Now for our example of brainless regulation. The Hill reports that the bureaucracy is about to impose a big pile of red tape on the food industry.

The menu-labeling rule, due out any day, is expected to be one of the most expensive regulations to hit the food industry in recent years, business groups said. Not only does it take aim at restaurants, but, depending on its final language, the rule could also apply to grocery stores, convenience stores, gas stations and movie theaters that sell prepared food. The nation’s eateries are faced with the costly prospect of having to calculate the number of calories in the various meals they serve. “Not every steak is exactly the same,” says Scott DeFife, executive vice president of policy and government affairs at the National Restaurant Industry. “The slightest variation in how I cut the steak and serve it can affect the nutritional content.”

This costly and intrusive bit of red tape is “a requirement of ObamaCare.” And like many other parts of that odious law, it imposes onerous burdens on the economy’s productive sector.

…restaurants and grocery stores are concerned they’ll be required to recount the number of calories in a meal every time they tinker with a recipe, which they say would be nearly impossible to do considering the endless number of food combinations they sell. At McDonald’s, for instance, a Big Mac is usually 550 calories, but it could be more for a customer who orders extra cheese. It’s even more complicated for pizza joints. Domino’s says there are 34 million potential combinations of its pizza that go well beyond a customer deciding between toppings like pepperoni and sausage. They also must factor in whether it’s a large, medium, or small pizza, deep dish or thin crust, and any extra ingredients. …Grocery stores are experiencing the same concerns, facing what they say is $1 billion in compliance costs in the first year alone. They say 95 percent of the food they sell — like breakfast cereal, potato chips, milk — already lists nutritional information including the number of calories. But the menu labeling requirements would target their delis, bakeries and any fresh fruit they slice up and put in containers to sell. …That could push many grocery stores to close up their delis and bakeries and stop offering fresh fruit.

Amazingly, some interest groups and politicians want the proposed regulation to be even more sweeping.

Wootan would also like to see movie theaters included in the menu labeling requirements. She seems to have support from the congressional authors of the menu labeling requirements, Sen. Tom Harkin (D-Iowa) and Rep. Rosa DeLauro (D-Conn.), who not only believe restaurants and grocery stores should be covered, but also movie houses, miniature golf courses, amusement parks and any other venue that serves prepared food. The two lawmakers have written numerous letters to the FDA saying they are disappointed with how “narrow” the rule is.

Heck, maybe they can assign a bureaucrat to every household in America and require calorie counts for every home-cooked meal as well.

Though I shouldn’t joke. Some statist will think I’m being serious and run with the idea.

Meanwhile, I’ll make a very simple prediction. If this regulation is implemented, it will have zero measurable impact on American waistlines.

So even if you believe in government coercion, this won’t work. And the types of coercion that would work – such as mandatory exercise and criminalizing carbs – are incompatible with a a free (or even semi-free) society.

Remember the message of this poster: If government is the answer, you’ve asked a very silly question. Or a misguided question. Or a dangerous question.

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We’ve had too many serious and weighty columns recently, so let’s take a break and enjoy some laughs about our bloated and unwieldy federal government.

Here’s a cartoon that arrived in my inbox. I can’t decipher who the author is, so feel free to provide the answer in the comments section. Whoever the person is, he or she did a great job capturing both the essence of arrogant and abusive government and the way that government growth generally comes at the expense of the private sector.

By the way, I’ve even created a special page for cartoons that characterize government as a bloated, out of shape, and semi-malicious entity. This cartoon has been added to that collection.

And here’s a cartoon from Gary Varvel.

You’ll notice this cartoon basically has the same theme as this Henry Payne cartoon, this Lisa Benson cartoon, this Chuck Asay cartoon, and these cartoons (here, here, and here) from Michael Ramirez.

And they all do a great job of capturing how big government holds back the productive sector of the economy.

Now let’s look at the best 10 seconds in cinematic history (at least if you’re a curmudgeonly libertarian who frets about bloated government).

And don’t forget that Ghostbusters was presumably the only movie ever made where an EPA bureaucrat was one of the bad guys, much to the dismay of some leftists (though I’ve definitely made them the bad guys here and here).

Which is why I’m shocked it’s not anywhere on this list of libertarian movies.

P.S. Let’s close on a serious point. I haven’t written anything on the events in Ferguson for the simple reason that I wasn’t there and don’t have any special insight or knowledge. So I don’t know if the cop should have been indicted.

But I did see a very powerful and fair analysis of the situation. It wasn’t from a sociologist, a criminologist, or any social scientist. It was written by Ben Watson, a tight end for the New Orleans Saints.

Here’s a brief excerpt, but I urge you to read the entire thing.

I’M HOPELESS, because I’ve lived long enough to expect things like this to continue to happen. I’m not surprised and at some point my little children are going to inherit the weight of being a minority and all that it entails.

I’M HOPEFUL, because I know that while we still have race issues in America, we enjoy a much different normal than those of our parents and grandparents. I see it in my personal relationships with teammates, friends and mentors. And it’s a beautiful thing.

And I can’t resist pointing out that Ben was a Georgia Bulldog and he was involved in one of the greatest plays in NFL history (a play that also featured another former UGA player).

P.P.S. And since we’ve stumbled into the thorny thicket of race, Walter Williams has some very wise words about the best way of reducing racism.

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I generally don’t feel a special degree of animosity for the internal revenue service. After all, it’s the politicians who have created the 74,000-plus page monstrosity of a tax code. Blaming the IRS for enforcing that system is like blaming the police for the drug war.

This isn’t to say the IRS is blameless. Just as cops sometimes take misguided laws and enforce them is bad ways, the IRS periodically will go beyond its legal mandate because of an enforcement-über-alles mentality.

But what gets me most upset is when the IRS allows itself – either with glee or reluctance – to become politicized.

For instance, the Washington Times reveals that the IRS may have violated taxpayer privacy by giving confidential taxpayer data to the political operatives in the White House.

The Internal Revenue Service may have given thousands of confidential filings from private taxpayers to the White House to review, a lawsuit against the Treasury Department just revealed. …“[T]he Treasury Inspector General for Tax Administration informed Cause of Action that there exist nearly 2,500 potentially confidential documents relating to investigations of improper disclosures of confidential taxpayer information by the IRS to the White House,” Cause of Action told The Daily Caller.

One possible example deals with the Obama Administration’s attack on the Koch brothers. As the Washington Examiner reported, Obama’s top economist at the time was the subject of an investigation.

The investigation by the Treasury Department Inspector-General for Tax Administration was sparked by Goolsbee’s remarks during an Aug. 27, 2010, White House news briefing in which he appeared to possess confidential tax information on Koch Industries, the private conglomerate controlled by the Koch brothers, Charles and David. …It is illegal for government officials to make public confidential tax information. Goolsbee was chief White House economist at the time. …senators requested the IG probe to determine if confidential tax records of individuals viewed by Obama as enemies were being passed around among senior staffers in the White House. …neither the report itself nor a summary of its findings have ever been made public.

Never made public? Gee, that’s mighty convenient.

It’s worth noting, by the way, that this isn’t the first White House to get in trouble for using the IRS as a political weapon.

…Section 6103 of the Internal Revenue Commission’s criminal code, which Congress enacted following revelations of President Nixon’s abuse of private tax information during the Watergate scandal. The second article of impeachment against Nixon in the House Judiciary Committee was based on those abuses.

So the ghost of Richard Nixon may approve of Obama, as suggested by this cartoon.

But this isn’t the only IRS scandal we need to monitor. Remember Lois Lerner, who became infamous for targeting the President’s opponents and then apparently losing her emails?

Well, we have an update. The Wall Street Journal opines on the latest development in the IRS targeting scandal.

…the IRS never “lost” emails after all. …Treasury Department Inspector General Russell George recently informed Congress that his forensic investigation has turned up as many as 30,000 emails from the account of former IRS Exempt Organizations Director Lois Lerner—emails the IRS has insisted were destroyed. The emails cover the crucial period from January 2009 through June 2011 when the IRS was ramping up its targeting… We can only imagine Mr. Koskinen’s shock in September when the Treasury IG said it had found 760 tapes that might hold Lerner emails. Or his further surprise when it took only a few weeks to identify and extract the specific Lerner documents—out of 250 million backup emails. And we can only imagine Mr. Koskinen’s apology for his agency’s email failure—since he hasn’t given one.

What can we learn from this episode?

Either the IRS didn’t bother to investigate these tapes or, more alarming, it did and chose not to produce the results. The IG is turning over the emails to the IRS, which is supposed to redact sensitive tax information before sending them to Congress. Mr. Koskinen needs to end the IRS stonewalling and turn the records over with dispatch without covering up incriminating evidence.

Indeed. One can’t help but wonder whether the delay in finding the emails and now the delay in turning them over to investigators is simply to allow time for smoking guns to be hidden.

With all this rampant corruption and abuse, you would think the IRS is the lowest-ranked government bureaucracy.

But don’t forget there’s lots of competition for that honor. The Washington Post reports on polling data from Gallup regarding which agencies are perceived to be “good” or “excellent.” Both the Federal Reserve and the Veterans Administration rank below the IRS.

I guess I’m not surprised that the Veterans Administration is rated so poorly. After all, that bureaucracy created secret waiting lists and denied care to veterans (and then the bureaucrats awarded themselves bonuses!).

Though the Fed’s low rating surprises me, simply because I assumed many people wouldn’t be sufficiently familiar to give a grade, whether positive or negative.

And I’m baffled that the Postal Service has a high ranking. Have people never waited in line at a post office?!?

But let’s stick with the topic of the IRS. If we look at a comparison of 2013 and 2014 ranking, you can see that the IRS actually enjoyed a bump as the targeting scandal receded from the headlines.

By the way, I’m glad to see the EPA gets a relatively low score.

Let’s close with a good cartoon about the IRS, though it’s not terribly funny when you realize that many people in Washington actually have this perspective.

By the way, if you enjoy anti-IRS cartoons, click here, here, and here for more examples.

P.S. Just in case anybody thinks I was giving the IRS a free pass because of my comments that politicians deserve the lion’s share of the blame for the scandals, allow me to bolster my libertarian bona fides.

I’ve certainly done my part to explain why the IRS bureaucracy deserves scorn.

P.P.S. I don’t want to end on a sour note, so here’s more examples of IRS humor from my archives, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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I’ve written about the success of Hong Kong (particularly when compared to nations such as Cuba, France, and China), but haven’t paid as much attention to Singapore.

But it’s time to correct that oversight. I’m motivated to write about Singapore because of a story that reveals one of the unique features of that jurisdiction: The bureaucracy gets monetarily rewarded if the economy prospers.

Here are some passages from a Bloomberg report.

In Singapore, civil-servant bonuses rise and fall with the economy’s performance… The nation…links civil servants’ bonuses to how well the $298 billion economy does. …Civil servants are typically paid a variable incentive twice a year, on top of a fixed one-month bonus. The mid-year payment was skipped in 2009, when the economy contracted during the global recession. …“Singapore may be one of the few countries that explicitly pegs bonuses to growth,” said Vishnu Varathan, an economist in Singapore at Mizuho Bank Ltd.

Wow. Think of what that might mean if applied in the United States. Would we get as many crazy growth-sapping regulations from bureaucracies such as the EPA, IRS, and EEOC if the paper pushers knew they would lose bonuses?

To be honest, I’m not actually sure that this system makes much difference in Singapore or, if it does work there, whether it would work the same way in the United States (where bureaucrats seem to get bonuses based on bad behavior!).

But one thing we can say with certainty is that Singapore is an economic success story.

Look at the rankings for per-capita gross national income from the World Bank. You’ll notice a few trends, such as it’s good to be a tax haven (Monaco, Liechtenstein, Bermuda, Switzerland, Luxembourg, Isle of Man, etc) or to have a lot of oil (Qatar, Kuwait, Norway, UAE, etc).

But you’ll also notice that Singapore is one of the world’s most prosperous jurisdictions, regardless of which methodology is used.

So why is Singapore so rich?

Well, there aren’t many natural resources other than ocean access, so the only reasonable explanation is that the country has good economic policy.

And if you look at the latest data from Economic Freedom of the World, you’ll see that Singapore ranks second for economic liberty.

I’m particularly impressed by the nation’s fiscal policy. The corporate tax rate is just 17 percent and the top tax rate for households is only 20 percent. In other words, there’s no Obama-Hollande class warfare against successful taxpayers.

Equally important, the burden of government spending is very small by world standards, averaging less than 20 percent of economic output since 1990 according to the IMF.

And the one time government spending climbed significantly about 20 percent of GDP (during the Asian financial crisis), the government then did a remarkable job of implementing the Golden Rule of spending restraint.

Singapore’s fiscal discipline between 1998 and 2003 was particularly impressive as spending was cut (genuine cuts, not the make-believe cuts you find in Washington) by an average of 9 percent each year.

But the statistic that matters most is that the burden of government spending dropped to 12 percent of GDP by 2007, a reduction of almost 16 percentage points (even larger than Sweden’s budget cutting between 1992 and 2001).

Government spending in Singapore has since 2007 slowly climbed back to about 18 percent of economic output, but that’s still quite good by modern standards (though much larger than government was in America back in the 1800s and early 1900s).

Let’s close by preemptively dealing with the statist argument that relatively small government somehow prevents the provision of genuine public goods.

Earlier this month, I shared some remarkable data from a study published by the European Central Bank. That research showed that “countries with small public sectors report the ‘best’ economic performance” and also receive the highest scores for providing public goods in a cost-efficient manner (referred to as “public sector efficiency”).

Looking at country groups, “small” governments post the highest efficiency amongst industrialised countries. Differences are considerable as “small” governments on average post a 40 percent higher scores than “big” governments. …This illustrates that the size of government may be too large in many industrialised countries, with declining marginal products being rather prevalent.

But as part of that post, I groused that the researchers were only looking at OECD member nations. Yet none of those countries have small public sectors.

I can’t help but wonder what the results would have been if Hong Kong and Singapore also were added to the mix. After all, I don’t consider the United States to have a “small” government. Same for Japan, Switzerland, and Australia. Those are simply nations where government isn’t as big and bloated as it is in France, Italy, Sweden, and Greece.

Well, I’m happy to report that I found another study from the European Central Bank that broadens the net to include some nations from Asia, Eastern Europe, and Latin America.

Singapore was one of the nations in the study and you won’t be surprised to learn that it received the highest score for “public sector efficiency.” But not merely the highest score, Singapore’s 2.39 was dramatically higher than the scores in the earlier study for the nations that supposedly had “small” governments (even though the actual burden of government spending in those countries is almost two times larger than it is in Singapore).

So what’s the bottom line?

The first ECB study clearly concluded that “small” government is more efficient and productive than either “medium” government or “big” government.

Based on the second ECB study, we can conclude that it’s even better if government is…well, I guess we’ll have to use the term “smaller than small.”

So congratulations to Singapore for readjusting the rankings. Now if we can find a jurisdiction where government consumes just 5 percent of GDP, we’ll be able to complete the research and finally figure out the “correct” size of government.

P.S. As I noted back in 2009, Singapore is a multi-ethnic (like Bermuda) and multi-religious society, yet diversity isn’t a problem when government doesn’t practice favoritism.

P.P.S. By the way, I’m not claiming Singapore is an ideal society. It is only #39 in a ranking of total freedom, which includes measures of personal liberty. And Singapore’s version of privatized Social Security is far from perfect since government controls the investment of private savings. In other words, Singapore isn’t libertarian Nirvana. But it is reaping the rewards of being more pro-market than almost all other nations.

P.P.P.S. If you read this far, you deserve a reward. Here are a couple of Thanksgiving-themed cartoons.

We’ll start with Henry Payne’s look at another example of Obama governing by “executive order.”

And here’s Rick McKee’s contribution. But since I’m not partisan, I’ll simply say that McKee has identified the first member of the Moocher Hall of Fame.

P.P.P.P.S. At this time last year, there were a bunch of great Thanksgiving-themed cartoons about the Obamacare disaster.

P.P.P.P.P.S. And if you want some serious Thanksgiving-themed policy analysis, I strongly recommend this video on how the Pilgrims were saved by property rights.

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Early this year, I shared an amusing but accurate image that showed an important difference between capitalism and socialism.

And in 2012, I posted a comparison of Detroit and Hiroshima to illustrate the damage of big government.

Well, if you combine those concepts, you get this very pointed look at the evolution of Cuban socialism and Hong Kong capitalism.

Some might dismiss these photos as being unrepresentative, and it’s reasonable to be skeptical. After all, I’m sure it would be easy to put together a series of photos that make it seem as if the United States is suffering from decay while France is enjoying a boom.

So let’s go to the data. In previous posts, I’ve shared comparisons of long-run economic performance in market-oriented nations and statist countries. Examples include Chile vs. Argentina vs. VenezuelaNorth Korea vs. South Korea, Cuba vs. Chile, Ukraine vs. Poland, Hong Kong vs. ArgentinaSingapore vs. Jamaica, and the United States vs. Hong Kong and Singapore.

Now let’s add Cuba vs. Hong Kong to the mix.

Wow, this is amazing. Through much of the 1950s, Hong Kong and Cuba were economically similar, and both were very close to the world average.

Then Hong Kong became a poster child for capitalism while Cuba became an outpost of Soviet communism. And, as you might expect, the people of Hong Kong prospered.

What about the Cubans? Well, I suppose a leftist could argue that they’re all equally poor and that universal deprivation somehow makes Cuban society better Hong Kong, where not everybody gets rich at the same rate.

But even that would be a lie since Cuba’s communist elite doubtlessly enjoys a very comfortable lifestyle. So while the rest of the country endures hardships such as a toilet paper shortage, the party bosses presumably drink champagne and eat caviar.

The bottom line is that statists still don’t have an acceptable answer for my two-part challenge.

P.S. If you prefer stories rather than images or data, this updated version of the fable of the ant and the grasshopper makes a key point about incentives and redistribution. And you get a similar message from the PC version of the Little Red Hen.

P.P.S. Cuba’s system is so wretched that even Fidel Castro confessed it is a failure. So maybe there’s hope that Obama will have a similar epiphany about American-style statism!

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I generally focus on the profligate habits and abusive tactics of the federal government in Washington, but that doesn’t mean other levels of government are well behaved.

In a column for the Washington Post, Catherine Rampell outlines some of the reprehensible ways that state and local governments extract money from the citizenry.

Think of recent, infuriating stories on civil asset forfeiture, in which law enforcement seizes cash and other property from people who are never charged with crimes. Often the departments that do the seizing get to keep the proceeds, which leads to terrible incentives. …Onerous traffic fees and court fines — which have been blamed for long-simmering tensions in places like Ferguson, Mo. — often have a similarly mercenary motive.

She’s right to be infuriated.

Policies like asset forfeiture are disgusting ways of stealing money, particularly from the less fortunate. Indeed, it’s worth noting that the two first leaders of the Justice Department’s asset forfeiture office now say the practice should be ended because of rampant abuses.

But other revenue-raising policies also are objectionable.

…states and cities are also increasingly trying to monetize other behaviors seen as sinful or wayward, like marijuana use, strip club patronage, and gambling. Hence the explosion of state-sponsored lotteries, which prey on (mostly poor) people’s mathematical illiteracy… States have also been jockeying to expand casinos and other venues for legalized gambling, which voters seem to see as generating free money. …Then there are the expensive occupational licensure requirements for jobs that don’t seem to require state-level gatekeeping, like hair-braiding.

At this point, after reading various examples of greedy governments pillaging citizens, you may be thinking Ms. Rampell is a good libertarian.

Unfortunately, that doesn’t seem to be the case.

Her anger is misdirected. Instead of holding politicians accountable, she blames voters for their unwillingness to acquiesce to tax hikes as a way of dealing with “widespread budget crunches.”

If the political toxicity of spending and tax hikes encourages obfuscation at the federal level, it has led to far more destructive and distortionary policies at the state and local levels. Voters hate taxes and will punish any politician who threatens to raise them (or, in many cases, does not accede to cutting them). But schools, roads, police forces, garbage collection, firefighters, jails and pensions still cost money, even when you cut them back as much as voters will tolerate. So instead of raising taxes, state and municipal governments have resorted to nickel-and-diming constituents through other kinds of piecemeal, non-tax revenue raisers, an outcome that is less transparent, and likely to worsen the economy, inequality and social injustice. …It’s time to take off the fiscal blinkers and start rewarding politicians who have the courage to advocate raising revenues the old-fashioned way: through taxes.

Reward a politician for raising taxes? Isn’t that like rewarding a mosquito for taking your blood?

But I shouldn’t be snarky. After all, maybe Ms. Rampell is right and that budgets for state and local governments have been cut as much as possible.

That being said, I noticed she didn’t include any figures on the trends in spending by state and local governments.

So I went to the Office of Management and Budget’s historical tables, specifically Table 15-2 which includes state and local government expenditures. And after adjusting the data for inflation, based on the composite deflator in Table 1-3, I put together a graph to determine whether there was a “budget crunch” for state and local government.

Um…not so much.

As you can see, state and local government spending has jumped dramatically, even when looking at inflation-adjusted dollars.

Indeed, the 164 percent increase in outlays since 1980 is four times greater than the 40 percent increase in the nation’s population over the same period.

In other words, the only “budget crunch” is the one being imposed on long-suffering taxpayers by state and local politicians.

Those officials are the folks who deserve Ms. Rampell’s ire.

P.S. Since this column corrects a big oversight in a Washington Post column, I suppose this would be a good time to point out other mistakes or misstatements I’ve noticed in that newspaper.

Such as the time it asserted in a news report that Germany is “fiscally conservative.”

Or the time the newspaper claimed a 0.158 percent cut would “slash” the federal budget.

And how about the time the Post said the tiny sequester would impose a “sledgehammer of budget cuts.”

P.P.S. On the other hand, the Washington Post has produced genuinely good editorials on school choice and postal service privatization, so it isn’t all bad.

P.P.P.S. And it presumably is better than the New York Times, which has a bigger list of preposterous stories (and I’m not even counting Paul Krugman’s mistakes, some of which can be seen here, here, here, here, here, here, here, and here).

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Since I’ve accused the Congressional Budget Office of “witch doctor economics and gypsy forecasting,” it’s obvious I’m not a big fan of the organization’s approach to fiscal analysis.

I’ve even argued that Republicans shouldn’t cite CBO when the bureaucrats reach correct conclusions on policy (at least when such findings are based on bad Keynesian methodology).

So nobody should be surprised that I think the incoming Republican majority should install new leadership at CBO (and the Joint Committee on Taxation as well).

So why, then, are some advocates of smaller government – such as Greg Mankiw, Keith Hennessey, Alan Viard, and Michael Strain – arguing that Republicans should keep the current Director, Doug Elmendorf, who was appointed by the Democrats back in 2009?

Before answering that question, let’s look at some of what was written today for the Washington Post’s Wonkblog.

After a series of highly-regarded conservatives voiced their support for Doug Elmendorf, the director of the Congressional Budget Office whose term is up in January, Elmendorf haters fired back on Friday, urging Republicans to jettison the Democratic appointee as soon as possible. …This argument is advanced most forcefully in an open letter to GOP congressional leaders by Grover Norquist of Americans for Tax Reform, who…is most famous as the author of the anti-tax pledge that binds virtually every Republican in Congress never to vote to raise taxes. So why is Norquist against Elmendorf? For one thing, because CBO, under Elmendorf, has not demonized higher taxes. Instead, the agency promotes a “Failed Keynesian Economic Analysis,” Norquist says, that asserts that “higher taxes are good for the economy, even to the point of implying that growth is maximized when tax rates are 100 percent.”

And where did Grover get the idea that CBO believes that ever-higher taxes lead to more growth?

Umm…well, from something I wrote.

As evidence, Norquist points to a 2010 post by the Cato Institute’s Dan Mitchell, titled “Congressional Budget Office Says We Can Maximize Long-Run Economic Output with 100 Percent Tax Rates.” “I hope the title of this post is an exaggeration,” Mitchell writes, “but it’s certainly a logical conclusion based on” CBO’s claim that paying down the national debt — regardless of whether it’s through higher taxes or lower government spending — would be a good thing for the economy. “There’s nothing necessarily wrong with CBO’s concern about deficits,” Mitchell goes on. But “what’s missing from CBO’s analysis is any recognition or understanding that the real problem is excessive government spending.” In other words, what’s missing is conservative ideology about fiscal policy.

I have two reactions, one minor and one major.

My minor point is that the author of the piece is supposed to be a neutral, even-handed reporter, yet she refers to opponents of Elmendorf as “haters” and she implies that we’re simply upset because CBO’s analysis is missing “conservative ideology about fiscal policy.”  Given that she was writing for Wonkblog, which is more akin to an editorial page, there’s nothing wrong with being opinionated. But ask yourself whether someone with such hostility can be impartial when doing straight news stories.

My major point is about policy. Why is my concern about the size of government characterized as “ideology” while we’re supposed to believe CBO’s analysis is “scrupulously impartial” even though it produced analysis which implies you maximize growth with 100 percent tax rates?!?

If my views are blind ideology, then why is there research showing the economic damage of excessive government from international bureaucracies such as the World Bank and European Central Bank? And why are there studies about the harmful economic impact of government spending from the International Monetary Fund and the Organization for Economic Cooperation and Development? Nobody has ever accused these institutions of being hotbeds of libertarian thought.

But perhaps I’m not being fair to CBO. Did the bureaucrats really imply, as part of their analysis on what would happen to the economy if the Bush tax cuts were allowed to expire, that you maximize growth with 100 percent tax rates?

You can read my original post, which holds up very well four years later. And here’s some of what I wrote yesterday to someone who asked me to justify my views on the issue.

…let’s focus on the “subsequent years,” when CBO projectst that GDP would be lower with extended tax cuts. …I’m happy to be corrected, but my reading is that CBO was stating that fiscal balance is the tail that wags the economic dog. The extended tax cuts cause larger deficits, and CBO says that these larger deficits will divert national saving from productive investment and lead to lower output. But if the tax burden is higher, as in the baseline forecast, then deficits are lower and more saving is available for productive investment and output is higher. As far as I’m aware, CBO didn’t have any limiting language back then to suggest that higher tax rates led to growth, but only up to X point. So I think I was on solid ground in asserting the CBO’s analysis implied that ever-higher tax rates led to ever-higher growth.

Seems reasonable. Moreover, I strongly suspect the Wonkblog reporter would have found several people to condemn me had I over-stated the implications of CBO’s analysis.

Now let’s return to the issue of whether Mr. Elmendorf should be re-appointed. Which fiscal conservatives are correct, the ones who want to keep him or the ones who want him replaced?

I’m in the latter category, as explained here, but Elmendorf’s defenders make plenty of good points.

The bottom line is that he is a nice guy (based on my limited interactions), a thoughtful economist, and he has been a big improvement over his predecessor. Indeed, he’s almost certainly the best CBO Director ever appointed by Democrats.

Here’s an analogy that may help make sense of this issue. Elmendorf’s predecessor was a doctrinaire leftist named Peter Orszag. If Orszag’s policy views were a country, they would be France or Greece. By contrast, I’m guessing that Elmendorf would be like Sweden or Germany.

In other words, he wants more government than I do, but at least Elmendorf basically understands that there’s no such thing as a free lunch. He realizes 2+2=4, and he’s aware that there are tradeoffs. And since his arrival, CBO has been much better on issues such as the adverse impact of higher marginal tax rates and the debilitating effect of higher transfer payments.

That being said, while it’s much better to be Sweden rather than Greece, I obviously would prefer to be Hong Kong (or, even better, pre-1913 America).

Though, to continue the analogy, the best I can probably hope for is that Republicans appoint someone akin to Australia or Switzerland.

P.S. For more information about the economics of deficits and fiscal balance, here’s a video I narrated for the Center for Freedom and Prosperity.

P.P.S. The Congressional Research Service made the same argument about higher taxes being pro-growth, asserting in 2010 that “The expiration of the tax cuts would nevertheless reduce the budget deficit, absent other policy changes, which economic theory predicts would have a positive effect on the economy in the long run.”

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