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Archive for December, 2014

Exactly one year ago, we looked at the best and worst policy developments of 2013.

Now it’s time for a look back at 2014 to see what’s worth celebrating and what are reasons for despair.

Here’s the good news for 2014.

1. Gridlock – I’ve been arguing for nearly three years that divided government is producing better economic performance. To be sure, it would have been difficult for the economy to move in the wrong direction after the stagnation of Obama’s first two years, but heading in the wrong direction at a slower pace is better than speeding toward European-style statism.

Indeed, the fact that policy stopped getting worse even boosted America’s relative competitiveness, so there’s a lot to be thankful for when politicians disagree with each other and can’t enact new laws.

David Harsanyi explains the glory of gridlock for The Federalist.

Gross domestic product grew by a healthy 5 percent in the third quarter, the strongest growth we’ve seen since 2003. Consumer spending looks like it’s going to be strong in 2015, unemployment numbers have looked good, buying power is up and the stock market closed at 18,000 for the first time ever. All good things. So what happened? …the predominant agenda of Washington was doing nothing. It was only when the tinkering and superfluous stimulus spending wound down that fortunes began to turn around. …spending as a percent of GDP has gone down. In 2009, 125 bills were enacted into law. In 2010, 258. After that, Congress, year by year, became one of the least productive in history. And the more unproductive Washington became, the more the economy began to improve. …Gridlock has caused an odd, but pervasive, stability in Washington. Spending has been static. No jarring reforms have passed — no cap-and-trade, which would have artificially spiked energy prices and undercut the growth we’re now experiencing. The inadvertent, but reigning, policy over the past four years has been, do no harm.

Amen. Though I should hasten to add that while gridlock has been helpful in the short run (stopping Obama from achieving his dream of becoming a second FDR), at some point we will need unified government in order to adopt much-needed tax reform and entitlement reform.

The key question is whether we will ever get good politicians controlling both ends of Pennsylvania Avenue.

2. Restrained Spending – This is the most under-reported and under-celebrated news of the past few years, not just 2014.

Allow me to cite one of my favorite people.

In fiscal year 2009, the federal government spent about $3.52 trillion. In fiscal year 2014 (which ended on September 30), the federal government spent about $3.50 trillion. In other words, there’s been no growth in nominal government spending over the past five years. It hasn’t received nearly as much attention as it deserves, but there’s been a spending freeze in Washington. …the fiscal restraint over the past five years has resulted in a bigger drop in the relative size of government in America than what Switzerland achieved over the past ten years thanks to the “debt brake.” …The bottom line is that the past five years have been a victory for advocates of limited government.

And this spending restraint is producing economic dividends, though Paul Krugman somehow wants people to believe that Keynesian economics deserves the credit.

3. Limits on Unemployment Benefits – Although the labor force participation rate is still disturbingly low, the unemployment rate has declined and job creation numbers have improved.

The aforementioned policies surely deserve some of the credit, but it’s also worth noting that Congress wisely put a stop to the initiative-sapping policy of endlessly extending unemployment benefits. Such policies sound compassionate, but they basically pay people not to work and cause more joblessness.

Phil Kerpen of American Commitment elaborates, citing recent research from the New York Fed.

According to empirical research by the Federal Reserve Bank of New York: “most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.” Those benefits finally ended at the end of 2013, triggering a sharp rise in hiring… Specifically, they found that the average extended unemployment benefits duration of 82.5 weeks for four years had the impact of raising the unemployment rate from 5 percent to 8.6 percent. …Good intentions are not enough in public policy.  It might seem kind and compassionate to spend billions of taxpayer dollars on “emergency” unemployment benefits forever, but the effect is to keep millions of people unemployed.  Results matter.

Phil’s right. If you pay people not to work, you’re going to get foolish results.

But the three above stories are not the only rays of sunshine in 2014. Honorable mention goes to North Carolina and Kansas for implementing pro-growth tax reforms.

I’m also pleased that GOPers passed the first half of my test and told the Democrat appointee at the Congressional Budget Office that he would be replaced. Now the question is whether they appoint someone who will make the long-overdue changes that are needed to get better and more accurate assessments of fiscal policy. That didn’t happen when the GOP had control between 1995 and 2007, so victory is far from assured.

And another honorable mention is that Congress has not expanded the IMF’s bailout authority.

Now let’s look at the three worst policy developments of 2014.

1. Obamacare Subsidies – Yes, Obamacare has been a giant albatross for the President and his party. Yes, the law has helped more and more people realize that big government isn’t a good idea. Those are positive developments.

Nonetheless, 2014 was the year when the subsidies began to flow. And once handouts begin, politicians get very squeamish about taking them away.

This is why I wrote back in 2012 that Obamacare may have been a victory (in the long run) for the left, even though it caused dozens of Democrats to lose their seats in the House and Senate.

I think the left made a clever calculation that losses in the last cycle would be an acceptable price to get more people dependent on the federal government. And once people have to rely on government for something like healthcare, they are more likely to vote for the party that promises to make government bigger. …This is why Obamacare – and the rest of the entitlement state – is so worrisome. If more and more Americans decide to ride in the wagon of government dependency, it will be less and less likely that those people will vote for candidates who want to restrain government.

Simply stated, when more and more people get hooked on the heroin of government dependency, I fear you get the result portrayed in this set of cartoons.

2. Continuing Erosion of Tax Competition – Regular readers know that I view jurisdictional competition as a very valuable constraint on the greed of the political class.

Simply stated, politicians will be less likely to impose punitive tax policies if the geese with the golden eggs can fly away. That’s why I cheer when taxpayers escape high-tax jurisdictions, whether we’re looking at New Jersey and California, or France and the United States.

But this also helps to explain why governments, either unilaterally or multilaterally, are trying to prevent taxpayers from shifting economic activity to low-tax jurisdictions.

And 2014 was not a good year for taxpayers. We saw further implementation of FATCA, ongoing efforts by the OECD to raise the tax burden on the business community, and even efforts by the United Nations to further erode tax competition.

Here’s an example, from the Wall Street Journal, of politicians treating taxpayers like captive serfs.

Japan could become the latest country to consider taxing wealthy individuals who move abroad to take advantage of lower rates. The government and ruling party lawmakers are considering an “exit tax”… Such a rule would prevent wealthy individuals moving to a location where taxes are low–such as Singapore or Hong Kong… some expats in Tokyo are concerned the rule could make companies think twice about sending senior professionals to Japan or make Japanese entrepreneurs more reluctant to go abroad.

My reaction, for what it’s worth, is that Japan should reduce tax rates if it wants to keep people (and their money) from emigrating.

3. Repeating the Mistakes that Caused the Housing Crisis – A corrupt system of subsidies for Fannie Mae and Freddie Mac, combined with other misguided policies from Washington, backfired with a housing bubble and financial crisis in 2008.

Inexplicably, the crowd in Washington has learned nothing from that disaster. New regulations are being proposed to once again provide big subsidies that will destabilize the housing market.

Peter Wallison of the American Enterprise Institute warns that politicians are planting the seeds for another mess.

New standards were supposed to raise the quality of the “prime” mortgages that get packaged and sold to investors; instead, they will have the opposite effect. …the standards have been watered down. …The regulators believe that lower underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. …low underwriting standards — especially low down payments — drive housing prices up, making them less affordable for low- and moderate-income buyers, while also inducing would-be homeowners to take more risk. That’s why homes were more affordable before the 1990s than they are today. … The losers, as we saw in the financial crisis, are borrowers of modest means who are lured into financing arrangements they can’t afford. When the result is foreclosure and eviction, one of the central goals of homeownership — building equity — is undone.

Gee, it’s almost as if Chuck Asay had perfect foresight when drawing this cartoon.

Let’s end today’s post with a few dishonorable mentions.

In addition to the three developments we just discussed, I’m also very worried about the ever-growing red tape burden. This is a hidden tax that undermines economic efficiency and enables cronyism.

I continue to be irked that my tax dollars are being used to subsidize a very left-wing international bureaucracy in Paris.

And it’s very sad that one of the big success stories of economic liberalization is now being undermined.

P.S. This is the feel-good story of the year.

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I’m tempted to feel a certain degree of sympathy for Paul Krugman.

As a leading proponent of the notion that bigger government stimulates growth (a.k.a., Keynesian economics), he’s in the rather difficult position of rationalizing why the economy was stagnant when Obama first took office and the burden of government spending was rising.

And he also has to somehow explain why the economy is now doing better at a time when the fiscal burden of government is declining.

But you have to give him credit for creativity. Writing in the New York Times, he attempts to square the circle.

Let’s start with his explanation for results in the United States.

…in America we haven’t had an official, declared policy of fiscal austerity — but we’ve nonetheless had plenty of austerity in practice, thanks to the federal sequester and sharp cuts by state and local governments.

If you define “austerity” as spending restraint, Krugman is right. Overall government spending has barely increased in recent years.

But then Krugman wants us to believe that there’s been a meaningful change in fiscal policy in the past year or so. Supposedly there’s been less so-called austerity and this explains why the economy is doing better.

The good news is that we…seem to have stopped tightening the screws: Public spending isn’t surging, but at least it has stopped falling. And the economy is doing much better as a result. We are finally starting to see the kind of growth, in employment and G.D.P., that we should have been seeing all along… What held us back was unprecedented public-sector austerity…now that this de facto austerity is easing, the economy is perking up.

But where’s his evidence? Whether you look at OMB data, IMF data, or OECD data, all those sources show that overall government spending has been steadily shrinking as a share of GDP ever since 2009.

And deficits also are shrinking as a share of economic output according to all these measures, so there’s still “austerity” regardless of whether we’re looking at the underlying disease of government spending or the symptom of red ink.

I sliced and diced the data to see if there was some way of justifying Krugman’s hypothesis and the only numbers that are (vaguely) supportive are the ones from the IMF that show total government spending (federal, state, and local) has increased by an average of 2.3 percent annually over the past two years, after increasing by 1.3 percent per year over the prior three years.

On that basis, one could sort of argue that Krugman is right and “austerity is easing.”

But if that’s his definition of victory, then I’m more than willing to let him be the winner. If we can constrain the public sector so that it grows at 2.3 percent annually, we’ll be complying with my Golden Rule and the burden of government spending will continue to slowly but surely shrink as a share of GDP.

And we’ll definitely have much better fiscal policy than we had between 2002-2009, when overall government spending rose by an average of 7.1 percent annually.

So does this mean Krugman and I are on the same page? During the Los Angeles riots in 1992, Rodney King famously asked, “Can we all get along?” Assuming Krugman is being serious, the answer in late 2014 is yes. It’s time to join hands and sing Kumbaya!

But you may sense a slight tone of sarcasm in my remarks, and that’s because Krugman surely doesn’t want government to “only” grow by 2.3 percent annually. He simply wants to justify his hypothesis that the economy’s improving performance is somehow due to less austerity. Even if that means he’s implicitly endorsing genuine spending restraint.

In other words, Krugman actually is being slippery and misleading in his analysis of American austerity.

But that’s nothing compared to his analysis of so-called austerity on the other side of the Atlantic Ocean. Here’s some of what he wrote about fiscal policy in the United Kingdom.

…in 2010 Britain’s newly installed Conservative government declared that a sharp reduction in budget deficits was needed to keep Britain from turning into Greece. Over the next two years growth in the British economy, which had been recovering fairly well from the financial crisis, more or less stalled. In 2013, however, growth picked up again — and the British government claimed vindication for its policies. Was this claim justified? No, not at all.

Krugman then claims that there was better economic performance because U.K. politicians decided against “further cuts.”

What actually happened was that the Tories stopped tightening the screws — they didn’t reverse the austerity that had already occurred, but they effectively put a hold on further cuts. …And sure enough, the nation started feeling better.

So is he right?

Well, the IMF numbers show that overall government spending has been growing, on average, by 2 percent annually since 2009. By today’s standards, that’s a decent record of spending restraint.

But what if we dissect the numbers? Did spending grow very slowly between 2010-2012, followed by a relaxation of restraint beginning in 2013? In other words, is Krugman’s argument legitimate, even if it requires him to implicitly endorse (as in the American example) decent fiscal discipline over the past two years?

Nope. Instead, the numbers show just the opposite. Between 2010-2012, the burden of government spending expanded by an average of 2.3 percent per year.

But over the past two years, the “austerity” has become tighter and the budget has grown by 1.5 percent annually.

In other words, it seems that Krugman is either sloppy or mendacious.

Though I’m going to give him an escape hatch, a way of justifying his assertions. When the Tories took over in the United Kingdom, they quickly imposed a series of tax hikes (in addition to the tax hikes imposed by the outgoing Labor government). But since that time, the government has implemented some tax cuts, most notably reductions in corporate tax rates and lower tax rates on personal income.

So if Krugman wants to argue that tax increases retarded the British economy for a few years and that tax cuts are now helping to boost growth, I’m willing to give him a probationary membership in the supply-side club.

But I don’t expect him at the next meeting.

P.S. This isn’t the first time Krugman has mangled numbers when analyzing U.K. fiscal policy.

P.P.S. He’s also butchered data when writing about fiscal policy in nations such as France, Estonia, and Germany,

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Many people fantasize about supermodels, but not me. I’m a bit of an oddball.

In my fantasy world, I want to shrink the federal government back to the size envisioned by the Founding Fathers. I can’t stop myself from wistfully dreaming about the expanded freedom and increased growth we would enjoy if the federal government only consumed about 5 percent of economic output.

But I’m not expecting my fantasies to become reality anytime soon.

So in the real world, I have much more modest goals and expectations. I simply want to move policy in the right direction rather than the wrong direction. That’s why I developed my Golden Rule, which is designed to show that progress is possible so long as we simply make sure the private sector grows faster than the government.

And, as I explained a few weeks ago, that’s been happening. There’s been zero growth in nominal levels of federal government spending since 2009. And because there’s been some growth, that translates into a smaller fiscal burden when measured as a share of economic output.

To be sure, this doesn’t mean we should break out the champagne. The long-run fiscal outlook is still very grim. And the post-2009 progress was possible in part because reckless policies such as the faux stimulus and TARP pushed spending to unprecedented levels in the first place.

That being said, I’m still glad that we at least stopped government from getting even bigger after 2009. That’s a genuine victory.

Let’s look at some more evidence.

Here’s a chart put together by Veronique de Rugy at Mercatus. It shows what’s been happening to total spending, but adjusts the numbers for inflation plus population. As you can see, the burden of government spending has declined over the past five years.

The lesson from this chart is simple. If you have no growth in nominal government spending and there’s some inflation and population growth, then the actual burden of spending is going to decline.

Which is exactly what we see after 2009.

Now let’s look at federal spending compared to economic output. Here’s a chart that’s been circulating on Twitter which shows that the burden of government spending (measured on a quarterly basis) has been falling rapidly over the past few years.

.

This is very good news.

Though it’s not great news because the burden of federal spending is still significantly higher than it was when Bill Clinton left office.

All we’ve achieved is that some of the damage of the big-spending Bush-Obama years has been reversed.

That being said, it’s obviously better to reverse some damage if the alternative is even more damage.

And that’s why this next chart (also making the rounds on Twitter) is important. It shows what the Congressional Budget Office predicted would happen to spending (blue bars) when they released their forecast in early 2011 compared to what actually happened (red bars).

The lesson from this chart is that all the battles of the past few years have generated big dividends. Federal spending is about $500 billion lesson that CBO projected.

So be happy about the shutdowns, debt-limit battles, earmark fights, and sequestration.

And it’s also worth noting that the economy has been performing better as the burden of federal spending has been falling, which is further evidence that Keynesian economics doesn’t make sense.

Heck, even leftists have acknowledged this point, albeit accidentally.

Let’s close by making a very important observation. We’ve made progress over the past five years by restraining government spending, but the key question is whether that success will continue over the next five years.

This will be a key test for Republicans. Starting in a few days, they will have total control of the House and Senate. And if they can enforce even a modest bit of spending discipline, it’s amazing to see how quickly progress can be achieved.

And without any tax increases.

P.S. There’s also some fiscal progress on the other side of the Atlantic Ocean.

Here are some excerpts from a report by CNBC.

President Francois Hollande unveiled a “super-tax” on the rich in 2012…the damage to France’s appeal as a home for top earners has been great, and the pickings from the levy paltry. …Hollande first floated the 75-percent super-tax on earnings over 1 million euros ($1.2 million) a year in his 2012 campaign to oust his conservative rival Nicolas Sarkozy. It fired up left-wing voters and helped him unseat the incumbent. Yet ever since, it has been a thorn in his side.

Or, to be more accurate, a thorn in the side of the French economy.

So, in a remarkable development, Monsieur Hollande is letting the tax expire.

Prime Minister Manuel Valls — alongside Macron the main reformer in Hollande’s cabinet — chose a visit to London in October to confirm that the super tax would not be renewed.

This has to be a kick in the gut to the class-warfare crowd. Even a total statist like Hollande is unfurling the white flag and admitting that it makes no sense to impose policies that are so punitive that some entrepreneurs even left the country.

P.P.S. Spending is falling the U.S. and tax rates are dropping in France, so leftists must be feeling very glum. Heck, they’re probably almost as sad as they were when the Berlin Wall fell. So if you have any statist friends, try to cheer them up. Remind them that Venezuela is still a role model.

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We have some good news to share.

A government has just announced that it is going to end the unfair practice of giving government bureaucrats pension benefits that are far greater than those available for workers in the economy’s productive sector.

Can you guess which jurisdiction took this important step, notwithstanding the greed, political sophistication, and power of government bureaucracies?

Is it the federal government in Washington, which provides bureaucrats with much higher levels of overall compensation than workers in the private sector?

Is it Ireland, which a few years ago actually cut bureaucrat salaries by more than 13 percent?

Is it California, which is infamous for over-compensated bureaucrats?

Is it Denmark, which has the world’s most expensive bureaucracy?

Is it Italy, which has some of the most coddled government bureaucrats in the world?

Is it New Jersey, where it’s possible for a bureaucrat to have six government jobs at the same time?

Is it the Cayman Islands, which actually contemplated the imposition of an income tax to finance its bloated bureaucracy?

Is it Portugal, which overpays bureaucrats more than any other nation?

Those jurisdictions are all be good guesses. Or, to be more accurate, that’s a good list of jurisdictions where reform is desperately needed.

But all those guesses are wrong. The nation that is ending special pension privileges for government bureaucrats is the People’s Republic of China.

Yes, you read correctly. A communist-run nation is implementing this pro-market reform. Here are some of the details from CNTV.

China will reform its public sector pension system to reduce disparity between the public and private sectors, Vice-Premier Ma Kai said Tuesday… Under China’s dual pension system, civil servants and employees in state agencies do not need to pay for their pensions — the government provides full support for them. But employees of private enterprises have to pay 8 percent of their salary to a pension account. After retirement, private urban employees usually get a pension equal to about half of their final salary, but civil servants get much more without making any financial contribution. …now the reform is coming. The aim is to build a system for Party, government and public institution staff that is similar to the one used by the private sector. This move will affect around 37 million people: 7 million civil servants and 30 million public institution staff.

Wow, bureaucrats will have to live under the same rules as folks in the private sector.

What a radical concept! Maybe we could even try it in the United States at some point.

By the way, one additional indirect feature of the story is worth a mention. China actually has the beginnings of a private Social Security system.

Because the system is still developing, I don’t put it on my list of nations with private Social Security (though it is on the Social Security Administration’s list), but the goal is to slowly but surely shift to a funded system.

Assuming that actually happens, China could mitigate the fiscal consequences of a very large demographic crisis caused by that nation’s barbaric one-child policy.

In any event, China’s at least moving in the right direction (see here, here, and here for more information), which is more than can be said for the United States.

P.S. While China has moved in the right direction in recent decades, it still gets a relatively low score from Economic Freedom of the World. Which helps to explain why I think it’s silly for people to fear the supposed Chinese Tiger.

P.P.S. If you want to see far more striking examples of Chinese people being successful, check out Hong Kong and Taiwan.

P.P.P.S. Though at least some Chinese government officials have a very perceptive understanding of the European welfare state.

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Like the good people of Arizona, I despise speed cameras.

But not because I want reckless driving. Instead, my disdain is based on the fact that governments set up cameras where speed limits are preposterously low in order to generate revenue. And I speak from personal experience.

Like the good people of Houston, I also despise red-light cameras.

But once again, this isn’t because I want jerks racing through red lights and endangering innocent people. Instead, my opposition is based on the fact that greedy governments – operating recklessly – use such cameras as tools to fleece drivers.

Holman Jenkins has a column in today’s Wall Street Journal, explaining how the industry was supposed to operate.

A promising industry betrayed by the behavior of its customers—that’s the story of the red-light camera business. …Redflex Traffic Systems, leading practitioner of the once-sparkling business of setting up automatic traffic-enforcement systems for municipalities. The company and its industry were set to grow. The product improved traffic safety, freed up officers for more important work, and paid for itself. Towns and cities didn’t even have to budget a dime upfront because Redflex assumed the costs and risks of setting up cameras at designated intersections.

But in the real world, that’s not what happened. Politicians all over the nation used cameras as revenue-generating devices.

…serial revelations by the Chicago Tribune about the city’s buccaneering ways—running its camera system for profits rather than safety. …New York state conspicuously authorized cameras at various upstate locations in 2010 to close a budget gap. When New Jersey last week let a five-year experiment lapse amid a voter backlash, Moody’s called the decision a “credit negative” for local treasuries. In California, public acceptance steadily eroded as politicians kept piling on “surcharges” that turn a hundred-dollar traffic offense into a $500 fine in the mail. …the Trib cited the city’s “long-standing reliance on using the lowest possible yellow light time” to maximize revenues even at the cost of encouraging more accidents. …a universal peeve of motorists, being fined for a harmless rolling right on red.

At this point, some people may be thinking that this is no big deal. After all, they might argue, at least the cameras make the roads safer.

But according to research commissioned by the Chicago Tribune, the cameras simply replace one type of accident with another, at least in part because the city government rigged the system to maximize revenue rather than safety.

Here are some excerpts from a report published by Reason.

Chicago’s red light camera program hasn’t made driving in the city any safer and has replaced one type of car crash for another. The cameras are there obviously to make money for the city, not for the benefit and safety of the residents. The Chicago Tribune commissioned a study to break down the city’s claims that cameras have reduced right-angle crashes at intersections by 47 percent and calls the number nonsense. They calculate that it actually dropped the rate of crashes that caused injuries by only 15 percent. That wouldn’t be such a terrible number if engineers hadn’t also calculated that their cameras didn’t also cause a 22 percent increase in rear-end collisions that caused injuries. …the Tribune story makes sure to point out how much revenue the city has gotten from the program—$500 million over 12 years. The Tribune also reminds readers of the many, many, many scandals and issues the program has faced, like tickets handed out for lights that had yellow signal times below the national standard, unexplained ticket surges, and outright bribes from a company operating the cameras to city officials.

By the way, this data from Chicago isn’t an anomaly. Radley Balko has reported on similar accident-causing scams all over the nation.

So now, perhaps, you’ll understand why I wrote more than three years ago that Jay Beeber is a hero.

And why I expressed admiration for England’s NoToMob.

But I confess I’m nonetheless conflicted about cameras. Simply stated, I don’t want morons driving 60 miles per hour on residential streets. And I don’t want narcissistic jerks zipping through intersections a couple of seconds after a light has turned red.

Cameras, if properly operated, could discourage genuinely dangerous behavior.

So here’s the libertarian quandary (actually it’s a quandary for everyone who wants a sensible society). How can you give government the power to enforce legitimate laws without simultaneously giving government the power to abuse people?

This is the puzzle that America’s Founding Fathers tried to solve with a set of rules that limited the power of government. As Thomas Jefferson wrote, “ let no more be heard of confidence in man, but bind him down from mischief by the chains of the constitution.”

Unfortunately, courts haven’t done a good job in recent decades of constraining the federal government. And the only halfway decent constraint on state and local governments is jurisdictional competition, and that’s a necessary but far from sufficient condition for good policy.

Returning to the narrow issue of cameras, part of the solution is to reduce government’s role in transportation. We already have lots of privately built and privately operated highways in America (and even in the United Kingdom). And private developers also build and operate some local roads. So why not let them set – and enforce – the traffic rules?

Such a system wouldn’t be perfect, of course, but I’m guessing we would have better rules than the ones imposed by politicians.

Or we can let politicians use new technologies to further monitor and control our lives (and empty our pockets).

P.S. If some brave citizen got arrested for busting a bunch of revenue cameras and I somehow wound up on the jury that decided the case, you can probably guess what I would do.

P.P.S. I shared a chart back in 2010 to show that economists are terrible forecasters.

Now we have more evidence. But instead of looking at growth predictions versus reality, here’s what economists predicted about interest rates compared to what actually happened.

This chart helps to show that economists shouldn’t try to make short-run predictions, which good economists already understand.

Whereas the bad ones are easily confused with con artists.

No wonder it’s so easy to make fun of us.

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It’s time to correct a sin of omission.

In five-plus years of blogging, I haven’t given nearly enough attention to the wisdom of the late (and great) Milton Friedman.

Yes, I did say he was at the top of my list of great economists in a 2010 interview, and I’ve cited what he said about the correct goal of fiscal policy being smaller government rather than fiscal balance.

Moreover, I’ve quoted him many times (here, here, here, here, here, and here) to help explain why higher taxes simply lead to more government spending rather than deficit reduction.

But I’ve never once shared an interview of Friedman, which is a big oversight because of his incredible ability to advocate for economic liberty.

So let’s rectify this mistake. A reader emailed me this video, which purports to show Professor Friedman jousting with a young Michael Moore (yes, supposedly that Michael Moore, though I don’t know if it’s actually him).

But the identity of the questioner isn’t what’s important. Listen to Friedman explain the merits of cost-benefit analysis and consumer choice.

Amen. I love what he said about letting people make their own decisions about how much risk they wish to accept given relative prices.

If you want more Friedmanesque wisdom, I’ve also quoted him on issues ranging from immigration to “temporary” government programs, and from Swedish poverty to tax competition.

He also explained that there are four different ways of spending money, only one of which yields real efficiency (Jay Leno channeled some of Friedman’s wisdom when commenting on Obama shopping for Michelle)

And I’ve even noted that he helped guide the development of Economic Freedom of the World.

P.S. I do have one small disagreement with Milton Friedman. He supported the notion of a negative income tax/guaranteed annual income. His goal was noble, to replace the plethora of counterproductive welfare programs run from Washington, but I think a better approach is to get the federal government totally out of the business of income redistribution.

P.P.S. As I already stated, I don’t know if that was the (in)famous Michael Moore jousting with Friedman, but I can say that the Michael Moore of today is a big hypocrite when it comes to inequality.

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Yesterday, as part of a column about the burden of regulation, I shared a couple of Christmas-themed videos, as well as a tragic story of Santa Claus getting arrested by the IRS.

During previous Christmas seasons, there’s been other topical humor.

There’s more, but let’s focus on augmenting our list with some new cartoons.

Here’s Robert Gorrell equating Christmas with the federal government.

Very amusing, but I’ll defend Christmas for the simple reason that the whole thing is voluntary. Government redistribution, by contrast, is based on coercion.

Which is sort of the theme of this Eric Allie cartoon.

Though we need to remember that sometimes the statists bribe voters with their own money, but in other cases the statists buy votes from those who don’t pay any taxes (as illustrated by this Chuck Asay cartoon).

Next we have a contribution from Glenn McCoy that I find very appealing because it focuses on the ticking time bomb of poorly designed entitlement programs.

Very similar to this Lisa Benson cartoon.

Last but not least, let’s stop with the cartoons and try to answer the age-old question of whether Santa Claus is liberal or conservative.

The person who put this together says Santa is a conservative by a 6-5 margin.

Though the anarcho-capitalists may want to claim Santa since he’s from a land with no government.

P.S. If you have had your fill of Christmas-themed humor…

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