The Global Edition of More Guns = Less Crime

Back in 2013, I shared a snarky post comparing murder rates in Chicago and Houston. What made the data amusing is that any sensible person would look at Chicago’s high murder rate and strict gun control and conclude that perhaps, just maybe, such policies don’t work.

But the post speculated that a left-wing social scientist would instead conclude that “cold weather causes murder.”

Today, let’s take a more serious look at the issue.

Here’s a great video, narrated by Bill Whittle, that looks at gun ownership rates and murder rates. As you can see, America is the number one nation for gun ownership, but we’re nowhere near the top in murder rates.

Having had many arguments with leftists, I can tell you that their response to this video will be to point out that America has one of the highest murder rates if you look solely at developed nations.

That’s true, but this is why the most persuasive data in the video comes near the end when Bill looks at murder rates by major metropolitan areas.

He shows that pro-gun control cities have very high murder rates, whereas heavily armed, pro-gun places such as Plano, TX, have murder rates lower than some of the most tranquil places on the planet.

And although Bill doesn’t make the connection, it’s very much worth noting that Switzerland is one of the world’s most heavily armed nations, yet the murder rate is extremely low.

Moreover, there were no murders in the most recent years for which data are available in Monaco and Liechtenstein, yet I’ve been told during visits to both principalities that there is widespread private gun ownership.

Gee, maybe John Lott is right about more guns leading to less crime.

P.S. Since we’re sharing good news on guns, here’s a heartwarming story about civil disobedience. But this isn’t about civil disobedience solely by gun owners, as we’ve seen in Connecticut.

This is a story about civil disobedience sanctioned by a law enforcement officer!

J.D. Tuccille of Reason reports on the principled behavior of a sheriff in New York.

Fulton County Sheriff Thomas J. Lorey is already known as a supporter of the Second Amendment… Despite the Empire State’s fame as a jurisdiction unfriendly to private gun ownership—or, really, any activity beyond the reach of government officials—Lorey isn’t alone in his views. The New York State Sheriffs Association and individual sheriffs are already on record opposing tightened gun laws and suing the governor to block their enforcement. But Lorey goes a step further, and urges his constituents to defy the state’s handgun permit law. …”I’m asking everyone that gets those invitations to throw them in the garbage because that is where they belong,” says Lorey in the video below. “They go in the garbage because, for 100 years or more, ever since the inception of pistol permits, nobody has ever been required to renew them.”

Makes me proud to be an American when I read things like this.

Though I guess we shouldn’t be surprised to see law enforcement officers express skepticism about gun control. A poll of cops found that they overwhelmingly reject the left’s anti-gun ideology.

And let’s not forget about the poll showing an overwhelming majority of regular citizens would engage in civil disobedience if the government tried to confiscate guns.

P.P.S. Since it’s Super Bowl weekend, here’s a depressing reminder of the NFL’s anti-gun bias.

P.P.P.S. If you like pro-Second Amendment videos, here’s a great collection.

• Ted Nugent talking about gun ownership and the right of self defense.
• A look at Switzerland’s strong gun culture and the importance of self defense as a protection against oppression.
• And some very powerful testimony to some weasels on Capitol Hill (make sure to pay attention around the 5:00 mark).
• Ice-T talking about the real reason to defend and support the 2nd Amendment.
• A Reason TV video with five facts for Vice President Biden’s task force.
• A look at how a young woman can defend herself.
• Debunking the left’s “black NRA” parody.
• A 15-year old speaking truth to power.

And if you want gun control videos that are both funny and on the right side, here’s my collection.

• A revealing look at how leftists think about gun control.
• A heartwarming adoption story.
• An amusing cartoon conversation between an anti-gun ideologue and a supporter of the Constitution.
• Joe Biden’s self-defense advice.

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The Wisdom of Bastiat, as Revealed by Great Moments in Federal, State, and Local Government

I’ve periodically cited the great 19th-century French economist, Frederic Bastiat, for his very wise words about the importance of looking at both the seen and the unseen when analyzing public policy.

Those that fail to consider secondary or indirect effects of government, such as Paul Krugman, are guilty of the “broken window” fallacy.

There are several examples we can cite.

A sloppy person, for instance, will think a higher minimum wage is good because workers will have more income. But a thoughtful analyst will think of the unintended consequence of lost jobs for low-skilled workers.

An unthinking person will conclude that government spending is good for growth because the recipients of redistribution have money to spend. But a wiser analyst will understand that such outlays divert money from the economy’s productive sector.

A careless person will applaud when government “creates” jobs. Sober-minded analysts, though, will wonder about the private jobs destroyed by such policies.

It’s time, though, to give some attention to another important contribution from Bastiat.

He also deserves credit for the pithy and accurate observation about government basically being a racket or a scam.

And what’s really amazing is that he reached that conclusion in the mid-1800s when the burden of government spending – even in France – was only about 10 percent of economic output. So Bastiat was largely limited to examples of corrupt regulatory arrangements and protectionist trade policy.

One can only imagine what he would think if he could see today’s bloated welfare states and the various ingenious ways politicians and interest groups have concocted to line their pockets with other people’s money!

Which brings us to today’s topic. We’re going to look at venal, corrupt, wasteful, incompetent, and bullying government at the federal, state, and local level in America.

We’ll start with the clowns in Washington, DC.

Remember when the unveiling of the Obamacare turned into a cluster-you-know-what of historic proportions?

Well, the Daily Caller reports that the IRS has just signed an Obamacare-related contract with an insider company that recently became famous for completely botching its previous Obamacare-related contract.

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. …IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database. The IRS contract is worth $4.46 million, according to the FPDS data.

Just one more piece of evidence that Washington is a town where failure gets rewarded.

And CGI is an expert on failure.

A joint Senate Finance and Judiciary Committee staff report in June 2014 found that Turning Point Global Solutions, hired by HHS to review CGI’s performance on Healthcare.gov, reported they found 21,000 lines of defective software code inserted by CGI. Scott Amey, the general counsel for the non-profit Project on Government Oversight, which reviews government contracting, examined the IRS contract with CGI. “CGI was the poster child for government failure,” he told The Daily Caller. “I am shocked that the IRS has turned around and is using them for Obamacare IT work.” Washington was not the only city that has been fed up with CGI on healthcare. Last year, CGI was fired by the liberal states of Vermont and Massachusetts for failing to deliver on their Obamacare websites. The Obamacare health website in Massachusetts never worked, despite the state paying $170 million to CGI.

For a company like this to stay in business, you have to wonder how many bribes, pay-offs, and campaign contributions are involved.

Now let’s look at an example of state government in action.

Kim Strassel of the Wall Street Journal has a column about a blatantly corrupt deal between slip-and-fall lawyers and the second most powerful Democrat in the Empire State.

New York Assembly Speaker Sheldon Silver was last week arrested and accused by the feds of an elaborate kickback scheme. …Mr. Silver is alleged to have pocketed more than $5 million in a set-up in which he directed state funds to the clinic of an asbestos doctor, who in turn provided him with patients who could be turned into jackpot plaintiffs. Weitz & Luxenberg, a class-action titan, paid Mr. Silver huge referral fees for these names, off which the firm stands to make many millions. …when the Silver headlines broke, Weitz & Luxenberg founder Perry Weitz said he was “shocked”… The firm quickly put the Albany politician on “leave.”

A logical person might ask “on leave” from what? After all, he didn’t do anything.

But he did do something, even if it was corrupt and sleazy.

…here’s the revealing bit. Queried by prosecutors as to what exactly the firm did hire Mr. Silver to do—since he performed no legal work—Weitz & Luxenberg admitted that he was brought on “because of his official position and stature.” In other words, this was transactional. Weitz & Luxenberg gave Mr. Silver a plum job, and Mr. Silver looked out for the firm—namely by blocking any Albany bills that might interfere with its business model.

So workers, consumers, and businesses get screwed by a malfunctioning tort system, while insider lawyers and politicians get rich. Isn’t government wonderful!

Just one example among many of how state governments are a scam. Perhaps now folks will understand why I’m not very sympathetic to the notion of letting them take more of our money.

Last but not least, let’s look at a great moment in local government.

As we see from a report in USA Today, a village in New Jersey is dealing with the scourge of…gasp…unlicensed snow removal!

Matt Molinari and Eric Schnepf, both 18, also learned a valuable lesson about one of the costs of doing business: government regulations. The two friends were canvasing a neighborhood near this borough’s border with Bridgewater early Monday evening, handing out fliers promoting their service, when they were pulled over by police and told to stop. …Bound Brook, like many municipalities in the state and country, has a law against unlicensed solicitors and peddlers. … anyone selling goods and services door to door must apply for a license that can cost as much as $450 for permission that is valid for only 180 days. …Similar bans around the country have put the kibosh on other capitalist rites of passage, such as lemonade stands and selling Girl Scouts cookies.

Though, to be fair, it doesn’t seem like the cops were being complete jerks.

Despite the rule, however, Police Chief Michael Jannone said the two young businessmen were not arrested or issued a ticket, and that the police’s concern was about them being outside during dangerous conditions, not that they were unlicensed. “We don’t make the laws but we have to uphold them,” he said Tuesday after reading some of the online comments about the incident. “This was a state of emergency. Nobody was supposed to be out on the road.”

But the bottom line is that it says something bad about our society that we have rules that hinder teenagers from hustling for some money after a snowstorm.

Just like these other examples of local government in action also don’t reflect well on our nation.

Let’s close with my attempt to re-state Bastiat’s wise words. Here’s my “First Theorem of Government.”

And if you think what I wrote, or what Bastiat wrote, is too cynical, then I invite you to check out how politicians are bureaucrats are squandering money on Medicare, the Veterans Administration, the Agriculture Department, Medicaid, the Patent and Trademark Office, the so-called Consumer Financial Protection Bureau, the National Institutes of Health, Food Stamps, , the Government Services Administration, unemployment insurance, the Pentagon…

Well, you get the idea.

Which is why this poster is a painfully accurate summary of government.

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White House Surrender on Plan to Tax College Savings: A Victory that Underscores Importance of No-Tax-Hike Pledge

The Obama Administration has already announced a bunch of tax increases that will be part of the President’s soon-to-be-released budget.

But, in a remarkable development, the White House has preemptively thrown in the towel and said that it will no longer pursue a proposed tax hike on 529 plans (IRA-type vehicles that allow parents to save for college education without being double taxed).

It’s obviously good news any time a tax hike is very unpopular, but this victory over Obama’s 529 plan has enormous implications.

Simply stated, it underscores a point I’ve been making for a long time about why opposing all tax hikes – particularly levies on the middle class – is critical if we want to have any chance of reforming and restraining the welfare state.

The Washington Examiner explores this development.

Obama’s abandonment of this relatively minor middle class tax-hike proposal suggests that liberals lack the spine to pursue their own long-term vision for America. …They have supported tax hikes on the wealthy to make deficits a bit smaller, but there are not enough wealthy people in America to fill the gap, nor can they be taxed at a high enough rate to pay for all the entitlement and social spending the Democrats want. Thus, Obama Democrats need large middle class tax hikes to sustain their vision for America’s future. Nothing else will work. And so if Obama is too scared to touch the favorite deductions of the middle class — whether it be the mortgage interest deduction or the 529 plan — then he is too scared to make his own long-term worldview a reality.

In other words, so long as we don’t give Washington any new sources of revenue, the left won’t be able to turn the United States into a European-style welfare state.

Peter Suderman of Reason has a similar assessment. Indeed, the title of his article is “How Obama’s 529 College Tax Plan Debacle Proves the Welfare State is Doomed.”

Here are some relevant passages.

…this is the sort of plan than inevitably follows from the long-term fiscal logic of the welfare state. …the existing welfare state is unaffordable. Either it will have to be cut, or reformed, or paid for—by someone, somehow. The administration and its allies would like to reassure you that the someones who will pay for all of this will be limited to the richest of the rich, but in practice there’s only so much money that can be squeezed out of the extremely wealthy. Which means that eventually, anyone looking for ways to keep the welfare state afloat will have to go after the middle class.

Writing for The Federalist, Robert Tracinski echoes these sentiments.

…this is a desperate move by those who need to finance ever bigger government and are simply going where the money is: the vast American middle class. …There have already been trial balloons about raiding 401(k)s and IRAs. The truly committed leftist looks upon our private savings as a vast reserve of capital unfairly withheld from its proper function of servicing the needs of the state.

By the way, just in case you think Tracinski is exaggerating, just look at how governments in nations such as Poland and Argentina have seized private pension assets.

Returning to the topic at hand, here’s some of what Megan McArdle wrote for Bloomberg.

…the administration has started scraping the bottom of the barrel when seeking out money to fund new programs. …We are simply running out of room to pay for generous new programs with higher taxes on the small handful of people who make many hundreds of thousands of dollars a year. I’m not saying that it’s impossible, politically or otherwise, to further raise their tax rates. I’m just saying that there’s not all that much money there left to get. …politicians will need to reach further down the income ladder in order to fund new spending — indeed, to fund the spending we’ve already done, in the form of entitlement promises. Where will they go for that money? Once you’ve hit your fiscal capacity to tax the rich,  a few big sources of tax revenue are left: 1) A value-added tax.  …2) Raising income taxes on the middle class. …3) Tax the savings of the middle class.

Last but not least, Ramesh Ponnuru of National Review reiterated his view that the welfare state desperately needs tax money from the middle class.

…everyone who has looked at the budget projections for the next few decades understands that, absent a sudden reduction in Americans’ life expectancy or other shocking development, middle-class -benefits are going to have to be cut, middle-class taxes are going to have to be raised, or both. The war between liberals and conservatives over the future of the welfare state is largely a matter of how much of each will be done. …government cannot realistically make up much of its long-term financing gap by raising taxes on the rich. A tax-heavy solution to that gap will eventually have to rely on much higher taxes on the middle class. That’s how they finance large welfare states in other developed countries. European social democracies don’t generally have much higher taxes on corporations or high earners than the United States. The chief difference between their tax policies and ours is that they levy value-added taxes that hit consumption.

Having cited several astute writers, let’s now draw the appropriate conclusion.

Without question, the moral of the story is that anybody who genuinely and seriously favors limited government should be unalterably opposed to any and all tax hikes.

And if you don’t believe all the folks cited above, perhaps because most of them lean to the right, then maybe you’ll be convinced by the fact that many leftists agree that you can’t finance big government without big tax hikes, particularly on the middle class.

The one big difference is that they want those tax hikes because of their support for bigger government.

Which should be added evidence about the importance of resisting all tax increase. Heck, the no-tax-hike pledge is an IQ test for Republicans.  Those that fail – such as Jeb Bush – should not be promoted to positions where they can cause damage.

Here’s what I wrote about this issue earlier this month. I was commenting on proposals for a new energy tax, but my analysis applies to any scheme for more revenue.

…the left understands very well that their spending agenda requires more revenue. That’s why Obama is relentless in urging more revenue. It’s why the leftists at the Paris-based OECD endlessly urge higher taxes in America (even to the point of arguing that tax-financed redistribution is somehow good for growth). And it’s why the DC establishment is so enamored with “bipartisan” tax-hiking budget deals, which inevitably lead to bigger government and more debt. Honoring the no-tax-hike pledge isn’t a sufficient condition to rein in big government, but it sure is a necessary condition. Amazingly, top Democrats even admit that their top political goal is to seduce Republicans into supporting higher taxes.

Let’s close with some thought experiments.

American needs genuine entitlement reform. But how likely is it that we’ll see the right kind of changes to programs such as Medicare and Medicaid if politicians instead manage to impose a value-added tax? What incentive would they have to do the right thing if they instead have the option of constantly increasing the VAT rate, as we’ve seen in Europe?

Or what are the odds of good Social Security reform if politicians enact some sort of energy tax. Why improve America’s retirement system, after all, if they have a new source of revenue and they have the option of continuously tweaking the rate upwards to prop up the current system?

What are the chances of getting a good spending cap, something akin to the Swiss debt brake, if politicians succeed in getting some sort of financial transactions tax? Why deal with the problem of excessive government if there’s a new revenue source that can be periodically increased.

The left certainly understand that new revenue is necessary for their agenda. But does the right grasp the obvious implications?

This post already is very long, so I’m going to stop here. But those who are interested in more information should check out the postscripts below.

P.S. Some folks argue that Bill Clinton’s 1993 tax hike is “evidence” that higher taxes can lead to deficit reduction rather than higher spending, but Clinton’s own Office of Management and Budget produced data in early 1995 showing that assertion is false.

P.P.S. In my lifetime, there’s been a Democratic President with sensible views on tax policy.

P.P.P.S. It’s theoretically possible to put together a good fiscal deal involving more revenue, but only in the sense that it’s theoretically possible that I’ll be offered a $5-million contract to play for the Yankees next year.

P.P.P.P.S. The only exception to my no-tax-hike views is that I’m willing to allow higher taxes that are targeted solely on people who endorse higher taxes.

P.P.P.P.P.S. It’s nice to see that lots of people now agree with my starve-the-beast hypothesis. Even if some of them (including Republicans!) learn the wrong lesson and endorse higher taxes for the explicit purpose of financing bigger government.

P.P.P.P.P.P.S. Cartoonists have a good understanding of the tax-hike issue.

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Prediction: Gridlock for the Next Two Years, but that’s Better than the Alternative of Expanding Government

There’s a lot of navel-gazing analysis in Washington about whether to expect some sort of bipartisanship over the next two years.

I find such discussions very irritating because they assume that you automatically get good results when Republicans and Democrats both agree on a policy. My reaction, to put it mildly, is “these people are f@*&#^@g crazy!!!”

Was it progress when Republicans and Democrats conspired to bail out their contributors on Wall Street with TARP?

Was it progress when Republicans and Democrats joined hands to impose Bush’s no-bureaucrat-left-behind education scheme?

Was it progress when the first President Bush broke his read-my-lips promise and sided with Democrats to boost taxes and spending in 1990?

So you can see why I instinctively like gridlock. Simply stated, it’s better to do nothing if the alternative is to have more bad laws that expand the burden of government.

But perhaps I’m being too cynical. After all, sometimes bipartisanship accidentally produces good policies. Like when we got the Budget Control Act as part of the 2011 debt limit fight, which then led to the sequester.

Though I’m not holding my breath expecting similar good results over the next two years.

Why? Because as I said in my first comments during last week’s John Stossel show, the President is simply too far to the left to expect any progress.

I do acknowledge in the interview that you have to give Obama credit for ideological consistency, but his agenda of bigger government and more dependency doesn’t lead me to think we’ll get any good policy in the near future.

Here are a few additional points from the interview that are worth highlighting.

*This is still a weak recovery, perhaps most compelling illustrated by comparing what happened under Reagan with what’s been happening under Obama.

*But things have improved in the past couple of years, in part because there’s been progress in restraining the burden of government spending.

*Ironically, the President bragged that America’s been creating more jobs than Europe even though he wants to copy European policies.

*It’s also galling that the President says he wants to make America more competitive even though he’s pushing class-warfare taxation.

*Republicans also deserve criticism since some of them are advocating for higher gas taxes rather than the federalist approach of decentralization.

*On tax reform, if you give politicians a new tax, it’s very likely they will use the money to finance bigger government instead of abolishing an existing tax.

*My final comment from the interview brings us back to the central point of today’s post. Simply stated, bipartisanship isn’t good if it means more government.

P.S. I goofed last week when I wrote that median household income fell every year under Obama, and I repeated that mistake in the Stossel interview, which took place before I discovered that there was a very small increase in 2013. Well, I also made another mistake in the interview. I said that Kate Upton was the daughter of Congressman Fred Upton. That’s wrong. She’s actually his niece. Alas, yet another sign that I’m clueless about popular culture. I guess that means Kate won’t date me after the PotL finds another boyfriend.

P.P.S. Since we’re still debating over the issues Obama raised in his speech, I may as well call attention once again to my contribution to the U.S. News and World Report online debate on whether the State of the Union is strong. I’m doing okay in the overall reader rankings, but (as I write these words) I do have the third-highest number of “down” votes, so I gather that some of our leftist friends must not like what I wrote. So feel free to go to the article and click on the “up” arrow if you want to help me out.

P.P.P.S. Shifting to a less narcissistic topic, I wrote in 2013 that the Ohio Governor should be known as John “Barack” Kasich because he chose to expand Obamacare in his state. Now, as explained by Philip Klein of the Washington Examiner, we have Mike “Barack” Pence from Indiana.

…on Tuesday, he betrayed taxpayers when he embraced an expansion of Medicaid through President Obama’s healthcare law. …Pence buckled under pressure from hospital lobbyists who are eager to receive more federal money… Myopic Republican governors think they can fool conservatives by gaining token concessions on what remains a government-run healthcare program and calling it “free market reform.” But the Obama administration is playing the long game, realizing that if it keeps adding beneficiaries to the books, big government liberalism wins.

How disappointing. Yes, GOP governors are getting pressured by in-state lobbyists because of the lure of “free” federal money, but that’s no excuse for adopting a policy that will hurt federal taxpayers in the short run and state taxpayers in the long run.

This is yet another reason why we need to replace the federal Medicaid entitlement with a block grant.

P.P.P.P.S. I don’t want to close on a dour note, so let’s shift to sequestration, which was one of the topics in the Stossel interview. That was not only an unambiguous victory over big government, but it also resulted in some great political humor. You can see some of my favorite cartoons on the topic by clicking here, here, here, here, here, and here.

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Overly Generous Fringe Benefits for Government Retirees Threaten Fiscal Survival of States and Localities

As a taxpayer, I don’t like the fact that government employees get paid more than folks in the private sector.

But the big difference between bureaucrats and regular workers isn’t so much the pay, it’s the fringe benefits.

And perhaps the  biggest difference of all is that government bureaucrats get far more  lavish retiree benefits.

Sounds like a sweet deal, at least if you get a coveted job (or even six jobs!) with a state or local government.

It’s not a good deal for taxpayers, though, and the entire system is rather unstable because politicians and union bosses have conspired to create huge unfunded liabilities that threaten to create a death spiral for state and local governments.

Simply stated, why should productive taxpayers continue to live, work, and pay taxes in places where a huge chunk of money is diverted to pay off past promises rather than to deliver goods and services (education, parks, trash pickup, police, etc) that have some value?

Indeed, this is a big reason why places such as Detroit already have collapsed. And I fear it is just a matter of time before other local government (as well as some states such as California and Illinois) reach the tipping point.

But perhaps you think I’m being too dour? Yes, I’m prone to pessimism because of my low level of faith in the political elite. In this case, however, any sensible person should be very worried.

Let’s look at what some experts have to say about these issues.

Here are some passages from Steve Malanga’s Wall Street Journal column from earlier this month.

He starts by explaining that Jerry Brown’s big tax hike for education actually has very little to do with helping kids to learn (not that more money is the recipe for better education, as shown by this jaw-dropping chart, but that’s a separate issue).

Instead, the money is being diverted to finance the lavish pension system.

California Gov. Jerry Brown sold a $6 billion tax increase to voters in 2012 by promising that nearly half of the money would go to bolster public schools. …Last June Mr. Brown signed legislation that will require school districts to increase funding for teachers’ pensions from less than $1 billion this year in school year 2014-15, which started in September, to $3.7 billion by 2021, gobbling up much of the new tax money. With the state’s general government pension fund, Calpers, also demanding more money, California taxpayer advocate Joel Fox recently observed that no matter what local politicians tell voters, when you see tax increases, “think pensions.” …When California passed its 2012 tax increases, Gov. Brown and legislators promised voters the new rates would expire in 2018. But school pension costs will keep increasing… Public union leaders and sympathetic legislators are already trying to figure out how to convince voters to extend the 2012 tax increases and approve “who knows what else” in new levies

Sounds grim, but Mr. Malanga warns that “Californians are not alone.”

Decades of rising retirement benefits for workers—some of which politicians awarded to employees without setting aside adequate funding—and the 2008 financial meltdown have left American cities and states with somewhere between $1.5 trillion and $4 trillion in retirement debt. …the tab keeps growing, and now it is forcing taxes higher in many places.

Such as Pennsylvania.

A report last June by the Pennsylvania Association of School Administrators found that nearly every school district in that state anticipated higher pension costs for the new fiscal year, with three-quarters calculating their pension bills would rise by 25% or more. Subsequently, 164 school districts received state permission to raise property taxes above the 2.1% state tax cap. Every one of the districts cited rising pension costs.

And West Virginia.

In West Virginia, where local governments also face big pension debts, the legislature recently expanded the state’s home rule law—which governs how municipalities can raise revenues—to allow cities to impose their own sales taxes. The state’s biggest city, Charleston, with $287 million in unfunded pension liabilities, has already instituted a $6 million-a-year local sales tax devoted solely to pensions, on top of the $10 million the city already contributes annually to its retirement system. At least five more cities applying to raise local sales taxes, including Wheeling, also cited pension costs.

The column also has lots of material on the mess in Illinois.

Here’s just a sampling.

The city of Peoria’s budget illustrates the squeeze. In the early 1990s it spent 18% of the property-tax money it collected on pensions. This year it will devote 57% of its property tax to pension costs. Reluctant to raise the property levy any more, last year the city increased fees and charges to residents by 8%, or $1.2 million, for such items as garbage collection and sewer services. Taxpayers in Chicago saw the first of what promises to be a blizzard of new taxes. The city’s public-safety retirement plans are only about 35% funded, though pension costs already consume nearly half of Chicago’s property-tax collections.

All this sounds depressing, but it’s actually worse than you think.

We also have to look at the promises that have been made to provide health benefits for retired government employees.

Robert Pozen of Brookings has some very sobering data.

Public-pension funds have garnered attention in recent years for being underfunded, but a more precarious situation has received much less notice: health-care obligations for public retirees. …only 11 states have funded more than 10% of retiree health-care liabilities, according to a November 2013 report from the credit-rating agency Standard & Poor’s. For example, New Jersey has almost no assets backing one of the largest retiree health-care liabilities of any state—$63.8 billion. Only eight out of the 30 largest U.S. cities have funded more than 5% of their retiree health-care obligations, according to a study released last March by the Pew Charitable Trust. New York City tops the list with $22,857 of unfunded liabilities per household. …Total U.S. unfunded health-care liabilities exceeded $530 billion in 2009, the Government Accountability Office estimated, but the current number may be closer to $1 trillion, according to a 2014 comprehensive study released by the National Bureau of Economic Research.

By the way, these retired government workers are covered by Medicare, but Pozen explains that the unfunded liabilities exist because so many of them retire before age 65.

And their health plans sometimes cover Medicare premiums once they turn 65.

State and local governments typically pay most of the insurance premiums for employees who retire before they are eligible for Medicare at age 65. That can be a long commitment, as many workers retire as early as 50. Many governments also pay a percentage of Medicare premiums once retired workers turn 65.

But there is some good news.

States are trying to deal with this healthcare-driven fiscal Sword of Damocles.

Since 2010 more than 15 states have passed laws to reduce health-care cost-of-living adjustments—automatic benefit increases linked to the consumer-price index. Courts in eight states upheld these reductions on grounds that cost-of-living adjustments should not be considered a contractual right. Only Washington’s law was struck down in 2011, and the case is now on appeal. Some state and local governments—Nevada and West Virginia, for example—have increased deductibles and scaled back premium subsidies. Others like Ohio and Maine have reduced the health-care benefits provided to retirees. Several years ago Pennsylvania changed early retirement eligibility to 20 years of service from 15.

In many cases, though, I fear these reforms are a case of too little, too late.

So long as the fiscal burden of providing pensions and healthcare expands at a faster rate than the private economy, states and localities will push for more and more taxes to prop up the system.

But people won’t want to live in places where a big chunk of their tax payments are diverted to fringe benefits. So they’ll move out of cities like Detroit and Chicago, and they’ll move out of states like New Jersey and Illinois.

So the bottom line is that politicians and government employee unions engineered a great scam, but one that ultimately in many cases will self destruct.

And the lesson for the rest of us is that government bureaucrats should not get special goodies, particularly when they are financed by nothing other than promises to screw future taxpayers.

Pensions for government workers should be based on the defined-contribution model, and healthcare promises should be more limited and in the form of health savings accounts.

But how do you get these much-needed reforms when the government unions finance the politicians who are on the opposite side of the negotiating table?!?

P.S. Here’s a good joke about government bureaucracy. Here’s a similar joke in picture form. And we find the same humor in this joke, but with a bit more build up. And now that I’ve given it some thought, there’s more bureaucrat humor here, here (image near bottom), and here.

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Continued Spending Restraint Can Quickly Balance the Budget

Just like the swallows return each year to Capistrano, I eagerly await the Congressional Budget Office’s release of its annual Economic and Budget Outlook.

But not just because I’m a fiscal wonk. I also like perusing this publication to find CBO’s “baseline” forecast for government revenue over the next 10 years.

And once I have that data, it’s then a simple matter to figure out the degree of spending restraint that will reduce red ink and balance the budget.*

Let’s conduct that exercise.

We’ll start by going to page 2 of the report, which reveals that federal tax revenue (assuming there are no changes in law) will grow from $3,189 billion this year to $5,029 billion in 2025. Over that ten-year period, revenues will grow each year by an average of 4.67 percent.

So, at the risk of stating the obvious, this means that red ink will increase if yearly spending increases by more than 4.67 percent, but it also means that the deficit will fall if the burden of federal spending grows by less than 4.67 percent each year.

Indeed, we can easily calculate how easy it is to achieve fiscal balance. Simply take CBO’s estimate of federal spending for the 2015 fiscal year, $3,656, and then look at what happens based on various assumptions for future spending growth.

A spending freeze means the budget balances in 2018.

If federal spending increases by 1 percent each year, we balance the budget in 2019.

If federal spending climbs by 2 percent each year, we balance the budget in 2020.

And if federal spending jumps by 3 percent each year, we balance the budget in 2024.

Here’s a chart showing these options.

Now let’s explore three implications of this data.

First, there is no need to cut spending. It would be good to impose genuine spending cuts, to be sure, but progress is possible so long as spending grows slower than revenue. And the real goal should be to make sure that spending grows slower than the private sector.

Second, there is no need to raise taxes. A lot of beltway types would like voters to believe that our fiscal problems are so huge that tax increases are both necessary and desirable. That’s obviously wrong. Indeed, tax hikes almost surely enable more spending rather than deficit reduction.

Third, when Washington insiders assert that tax increases are needed to preclude “savage” and “draconian” spending cuts, they’re using the dishonest DC definition of a “cut,” which is when spending doesn’t rise as fast as previously forecast.

 At this point, you may be wondering, “Gee, if it’s so simple, why don’t we already have a balanced budget?”

The main problem is that politicians generally don’t like spending restraint. Between 2000 and 2009, for instance, they let spending grow nearly four times faster than revenue.

That being said, we’ve actually made progress over the past five years thanks to a nominal spending freeze.** And as outlined above, we can make more progress in the near future with a few more years of modest spending restraint.

The real key is whether we can maintain fiscal discipline. In the long run, there’s very little hope of spending restraint unless there’s genuine entitlement reform.

And getting that type of reform probably won’t be possible if politicians think they can just raise taxes instead. Particularly a value-added tax, which the European evidence shows is a money machine for bigger government.

Probably the best way of getting good policy would be some sort of long-run spending control process, akin to the Swiss Debt Brake. If politicians know they can only increase spending by, say, two percent each year, that will encourage them to finally prioritize the budget and make some long-overdue reforms.

*As I have written, over and over again, restraining the size and scope of the federal government should be the main goal of fiscal policy. Deficits and debt are undesirable, of course, but they’re best viewed as symptoms of the real problem, which is too much spending.

** The good news is that spending grew very slowly beginning in 2010. The bad news is that spending rose so fast last decade (particularly in 2009) that the burden of federal spending is still much larger than it was when Bill Clinton left office.

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Ronald Reagan’s Most Under-Appreciated Triumph

It’s no secret that I’m a huge fan of Ronald Reagan.

He’s definitely the greatest president of my lifetime and, with one possible rival, he was the greatest President of the 20th century.

If his only accomplishment was ending malaise and restoring American prosperity thanks to lower tax rates and other pro-market reforms, he would be a great President.

He also restored America’s national defenses and reoriented foreign policy, both of which led to the collapse of the Soviet Empire, a stupendous achievement that makes Reagan worthy of Mount Rushmore.

But he also has another great achievement, one that doesn’t receive nearly the level of appreciation that it deserves. President Reagan demolished the economic cancer of inflation.

Even Paul Krugman has acknowledged that reining in double-digit inflation was a major positive achievement. Because of his anti-Reagan bias, though, he wants to deny the Gipper any credit.

Robert Samuelson, in a column for the Washington Post, corrects the historical record.

Krugman recently wrote a column arguing that the decline of double-digit inflation in the 1980s was the decade’s big economic event, not the cuts in tax rates usually touted by conservatives. Actually, I agree with Krugman on this. But then he asserted that Ronald Reagan had almost nothing to do with it. That’s historically incorrect. Reagan was crucial. …Krugman’s error is so glaring.

Samuelson first provides the historical context.

For those too young to remember, here’s background. From 1960 to 1980, inflation — the general rise of retail prices — marched relentlessly upward. It went from 1.4 percent in 1960 to 5.9 percent in 1969 to 13.3 percent in 1979. The higher it rose, the more unpopular it became. …Worse, government seemed powerless to defeat it. Presidents deployed complex wage and price controls and guidelines. They didn’t work. The Federal Reserve — custodian of credit policies — veered between easy money and tight money, striving both to subdue inflation and to maintain “full employment” (taken as a 4 percent to 5 percent unemployment rate). It achieved neither. From the late 1960s to the early 1980s, there were four recessions. Inflation became a monster, destabilizing the economy.

The column then explains that there was a dramatic turnaround in the early 1980s, as Fed Chairman Paul Volcker adopted a tight-money policy and inflation was squeezed out of the system much faster than almost anybody thought was possible.

But Krugman wants his readers to think that Reagan played no role in this dramatic and positive development.

Samuelson says this is nonsense. Vanquishing inflation would have been impossible without Reagan’s involvement.

What Reagan provided was political protection. The Fed’s previous failures to stifle inflation reflected its unwillingness to maintain tight-money policies long enough… Successive presidents preferred a different approach: the wage-price policies built on the pleasing (but unrealistic) premise that these could quell inflation without jeopardizing full employment. Reagan rejected this futile path. As the gruesome social costs of Volcker’s policies mounted — the monthly unemployment rate would ultimately rise to a post-World War II high of 10.8 percent — Reagan’s approval ratings plunged. In May 1981, they were at 68 percent; by January 1983, 35 percent. Still, he supported the Fed. …It’s doubtful that any other plausible presidential candidate, Republican or Democrat, would have been so forbearing.

What’s the bottom line?

What Volcker and Reagan accomplished was an economic and political triumph. Economically, ending double-digit inflation set the stage for a quarter-century of near-automatic expansion… Politically, Reagan and Volcker showed that leaders can take actions that, though initially painful and unpopular, served the country’s long-term interests. …There was no explicit bargain between them. They had what I’ve called a “compact of conviction.”

By the way, Krugman then put forth a rather lame response to Samuelson, including the rather amazing claim that “[t]he 1980s were a triumph of Keynesian economics.”

Here’s what Samuelson wrote in a follow-up column debunking Krugman.

As preached and practiced since the 1960s, Keynesian economics promised to stabilize the economy at levels of low inflation and high employment. By the early 1980s, this vision was in tatters, and many economists were fatalistic about controlling high inflation. Maybe it could be contained. It couldn’t be eliminated, because the social costs (high unemployment, lost output) would be too great. …This was a clever rationale for tolerating high inflation, and the Volcker-Reagan monetary onslaught demolished it. High inflation was not an intrinsic condition of wealthy democracies. It was the product of bad economic policies. This was the 1980s’ true lesson, not the contrived triumph of Keynesianism.

If anything, Samuelson is being too kind.

One of the key tenets of Keynesian economics is that there’s a tradeoff between inflation and unemployment (the so-called Phillips Curve).

Yet in the 1970s we had rising inflation and rising unemployment.

While in the 1980s, we had falling inflation and falling unemployment.

But if you’re Paul Krugman and you already have a very long list of mistakes (see here, here, here, here, here, here, here, here, and here for a few examples), then why not go for the gold and try to give Keynes credit for the supply-side boom of the 1980s

P.S. Since today’s topic is Reagan, it’s a good opportunity to share my favorite poll of the past five years.

P.P.S. Here are some great videos of Reagan in action. And here’s one more if you need another Reagan fix.

P.P.P.S. And let’s close with some mildly risqué Reagan humor that was sent to me by a former member of Congress.

If you want more Reagan humor, click here, here, and here.

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The Need for Social Security Reform, as Illustrated by Cartoons

Political cartoons, if done correctly, are remarkably effective tools for teaching about economics and public policy.

In this post from last year, for instance, I put together some of my favorite examples on topics such as Keynesian economics, labor supply incentives, minimum wage, and the welfare state.

Today, we’re going to try something different. Using a series of cartoons, we’re going to explain the need for Social Security reform.

First, let’s establish that there is a problem. I’ve shared data on America’s long-run fiscal crisis from international bureaucracies such as the IMF, BIS, and OECD. And I’ve explained that demographics are a big part of the problem.

Simply stated, tax-and-transfer entitlement programs don’t work very well with aging populations.

But that point is made with humor in this Michael Ramirez cartoon.

And as there are more and more old people, that means an ever-growing burden on younger workers.

I’ve shared lots of data from the Social Security Administration on the depth of the problem, but this cartoon puts it in stark terms.

Since I’m a baby boomer, I’m not sure I like the implication that we’re all spoiled brats.

But the way Social Security is designed, younger workers will face a huge burden as the bills come due in the 2020s and 2030s.

And this Gary Varvel cartoon is a close-up look at one of those younger workers.

Politicians sometimes try to assure us that the long-run fiscal shortfall isn’t a big problem because there is a Social Security Trust Fund.

And they’re right.

That’s the good news. But the bad news, as I’ve previously noted, is that the Trust Fund is filled with IOUs.

But this Henry Payne cartoon puts it in a more blunt and entertaining fashion.

In other words, there are no assets.

To be blunt, Social Security is nothing more than a Ponzi scheme.

It only works if there are more and more new participants joining the system every single year.

This produces revenue that can be used to pay off the older participants, but also creates pressure to find more new victims in the future.

This type of arrangement is illegal in the private sector. Heck, there are people sitting in jail right now for such scams.

But as Michael Ramirez points out, it’s just fine for the government to operate this kind of scheme.

So is there any alternative?

Are we really stuck with an unstable system that will require a never-ending series of tax hikes?

I have no idea if it will ever happen, but there are proposals to shift away from the current tax-and-transfer entitlement regime and into a system of personal retirement accounts.

Such “funded” accounts already exist in nations such as Australia, Chile, and the Netherlands, but some critics say that there’s too much risk in that kind of system.

But as this cartoon shows, it would be just about impossible to design a system riskier than Social Security.

By the way, this list of cartoons is incomplete. It would have been nice to have one showing that Social Security is an increasingly bad deal for workers since they have to pay more and more over time, yet they are promised rather meager benefits.

It also would have been nice to share a cartoon showing that personal accounts promote national savings, whereas government-run systems lead to debt (check out these two charts for an example).

To close, here’s my video on the case for personal retirement accounts.

P.S. You can enjoy some previous Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

P.P.S. You probably don’t want to know how Obama would like to “fix” the Social Security shortfall.

P.P.P.S. While cartoons can be great teaching tools. parables also make insightful and educational points about economics. And they tend to be very popular. This story on “the tax system explained in beer” is my second-most-viewed post. And the “socialism in the classroom” example about the perils of redistribution is my fifth-most-viewed post.

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Are Easy-Money Policies an Obstacle to Genuinely Needed Pro-Growth Reforms?

Everyone, it seems, is worried about global economic stagnation.

And there is good reason to be concerned. Europe is in the doldrums. Japan is stagnant. The developing world is hampered by intervention, corruption, and absence of property rights. And the United States is stumbling through an abnormally weak recovery.

But what’s the solution to this economic malaise?

The international economic policymaking elite seems to think easy money is the right elixir. The Wall Street Journal editorial page is underwhelmed by this approach.

European Central Bank President Mario Draghi announced a plan to buy what amounts to €50 billion ($56.84 billion) a month in government bonds and other assets at least through September 2016 on top of the €10 billion the ECB already was buying through various programs. …This QE program is more a political than economic triumph. …someone has to point out—since the QE cheering section among the political and investor classes won’t—that Mr. Draghi himself warned in his press conference Thursday that quantitative easing by itself won’t revive stalling eurozone economies… Reforms that would displace entrenched interests, whether domestic businesses or unions, are hard for politicians to enact, while demanding easier money from the central bank is easy.

Unfortunately, the ECB’s easy-money policy will probably give politicians in national capitals further leeway to avoid real reforms.

Politicians should now get serious about reforms on the theory that the central bank has done what they want. Smaller, sicker European economies have no more monetary excuses for their failure to reform. Or at least we can dream. The likelier outcome is that to the extent quantitative easing drives down bond yields, it will reduce market pressure for reforms until another economic crisis or deflationary blip spurs calls for a QE expansion.

Even folks that lean more to the left don’t think dumping more money into the economy will solve underlying problems.

Here are some excerpts from a David Ignatius column in the Washington Post.

A sign of the concern among business and political leaders here about sluggish economic growth is that one of the World Economic Forum sessions this week was titled “Avoiding a Centennial Slump” — meaning a downturn that lasts a hundred years. …The European Central Bank did the equivalent of pushing the panic button Thursday, announcing a bond-buying program of 1.1 trillion euros meant to lower interest rates and encourage investment. …But rates are already rock-bottom, and although the ECB’s “quantitative easing,” as it’s known, will flood Europe with cash, there’s no guarantee that it will be used to cure the region’s structural impediments to growth. Indeed, persistent low rates are one of the attributes of a deflationary economy, rather than a cure.

I largely disagree with the policies that Ignatius then proposes, but at least we generally agree that the European economy isn’t in the dumps because of inadequate liquidity.

The problem isn’t just in Europe. Like the ECB, the Federal Reserve also has tried to goose growth with easy-money policies.

But that’s like pushing on a string. Maybe there are times that the financial system needs more liquidity, but folks shouldn’t labor under the impression that printing more money solves the structural problems caused by too much spending, too high taxes, and too onerous levels of regulation.

And it’s quite possible, of course, that easy-money policies actually undermine long-run prosperity by creating bubbles.

Though as this Chip Bok cartoon illustrates, Wall Street enjoys bubbles, at least when they’re expanding.

P.S. Since I cited a Washington Post columnist who’s attending the World Economic Forum in Davos, Switzerland, this is a good opportunity to share some excerpts from a column Dan Hannan wrote for CapX.

As you can see, he’s not a big fan.

Davos is a place where powerful people pick up consultancies and directorships and international posts. Left-wingers rightly resent this. What they see, in Marxist terms, is a gang of rentiers coming together to devise new means to live off the sweat of the workers. …Yet, when it comes to free markets, Davos Man is often on the same side as the Lefties. He derives most of his income, directly or indirectly, from state patronage. If he is in the private sector – and he is more likely to be a lobbyist, politician or bureaucrat than a businessman – he’ll be an instinctive monopolist, keen to persuade ministers and officials to raise barriers against his potential rivals.

Since I’ve never been to one of these meetings and have never perused an attendance list, I don’t know if Hannan is being overly dour.

But I do worry that folks who are already rich and powerful are probably more focused on maintaining the status quo than on needed reforms.

As such, they’re susceptible to wanting to manage the economy rather than allow unfettered markets.

All right, you say, but surely it’s useful for powerful people to exchange ideas and learn from each other’s mistakes. Well, yes; but this lot rarely seem to learn. Whatever the problem, their preferred solution is always to establish a global bureaucracy staffed by people like themselves. Obviously, they don’t put it like that. “The stability of the global economy” is a much prettier phrase than “a juicy public sector post for me”. It’s like an Ayn Rand novel, where lobbyists reach cosy arrangements with each other in elliptical language. Remember the way she described members of a company board? “Men whose careers depended on keeping their faces bland, their remarks inconclusive and their clothes immaculate”. That’s Davos.

There’s also a bit of hypocrisy at Davos.

One of the big agenda items is the supposed horror of climate change.

So you would think participants would be taking every possible step to reduce their carbon footprints, right?

But according to CNN, not so much.

Look to the skies this week in Switzerland and you’ll see the heavens are cluttered with private jets. Billionaires and world leaders from across the globe are flying en masse to the annual World Economic Forum in Davos, Switzerland — and they insist on traveling in style. Roughly 1,700 private flights are expected over the course of the week.

The problem isn’t that some rich people use private jets. But if they fly in luxury and then pontificate on how the rest of us should accept lower living standards, they open themselves to some well-deserved abuse.

Speaking of Davos, climate change, and hypocrisy, here’s a perfect example of an empty poseur.

Al Gore is teaming up with rapper and producer Pharrell Williams to promote ‘climate change’ awareness through a series of concerts called “Live Earth,” which will take place on June 18th across six continents. The concerts will help “build support for a U.N. climate pact in Paris among more than 190 nations in December,” ABC reports. The announcement was made at the World Economic Forum on Wednesday where Pharrell said he wants “to have a billion voices with one message–to demand climate action now.”

Sounds noble, right? But Mr. Williams isn’t exactly the poster child for energy asceticism.

…when he’s not fighting to decrease your carbon footprint, Pharrell is flying across the planet on his private jet, sailing the seas on fossil fuel-burning yachts, and driving around in his pollution pumping luxury cars. …Pharrell owns a Mercedes-Benz SLR, which gets about 12 miles to the gallon. He has a McLaren Roadster, which gets him about 13 miles per gallon. Pharrell also owns a Rolls Royce Phantom and a Porsche Spyder 550, which both get about 10 and 20 miles per gallon.

Hmmmm…, sounds like another multi-millionaire hypocrite from the entertainment industry.

P.S. Returning to the issue of monetary policy, don’t forget that there are very strong arguments for getting governments out of the business of money.

P.P.S. And on the issue of boosting growth, there’s no substitute for free markets and limited government.

P.P.P.S. Yet most European nations are traveling in the opposite direction. Even more absurd, Obama wants to copy their failures, as captured by these cartoons from Michael Ramirez, Glenn Foden, Eric Allie and Chip Bok.

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Social Capital, the Welfare State, and the Threat to American Exceptionalism

There’s a famous quote, commonly  attributed to Alexis de Tocqueville, about the American character.

America is great because America is good. If America ever stops being good, it will stop being great.

What makes this quote so popular (even though Wikipedia says it’s not actually from de Tocqueville) is the instinctive understanding that a society’s success is at least in part driven by the moral character of its people.

And even if the quote is incorrectly attributed, it clearly is something that could have come from de Tocqueville. In his writings, he openly acknowledged that good laws were only part of what’s needed for a successful society.

The best laws cannot make a constitution work in spite of morals; morals can turn the worst laws to advantage.

This is spot on. A nation is far more likely to be successful if people have the right attitudes, what’s variously referred to as social capital, national character, cultural capital, civics, or tradition.

Here’s what I wrote about the topic last year.

…social capital…refers to the attitudes of a country’s people….Do the people of a nation believe in the work ethic? Or would they be comfortable as wards of the state, living off others? Are they motivated by the spirit of self-reliance? Would they be ashamed to go on welfare? Do they think the government is obligated to give them things? The answers to these questions matter a lot because a nation can’t prosper once you reach a tipping point of too many people riding in the wagon and too few people producing.

I fear that many nations, such as France and Greece, have already reached the point of no return. And I’m worried America is on the same path.

That’s the main reason I created the Moocher Hall of Fame. Yes, taxpayers should get outraged how their money is being wasted, but the far bigger problem is the mentality, present is an ever-growing number of people, that there’s nothing wrong with living off the government.

Sort of as depicted by this Lisa Benson cartoon.

Though it would be more accurate to say that too many people are opting to live off the work of others. After all, the government doesn’t have money to redistribute unless it is taxed or borrowed from those who earned it.

But enough of my amateur commentary, which only scratches the surface of this issue. For those who want deep expertise and knowledge on the topic, I’m delighted (in a very pessimistic and dour sense of the word) to share some excerpts from a superb article in National Affairs by Nicholas Eberstadt, who is a scholar at the American Enterprise Institute.

He starts by explaining that an ever-growing share of the population is receiving handouts and that this pattern is a threat to American exceptionalism.

Asking for, and accepting, purportedly need-based government welfare benefits has become a fact of life for a significant and still growing minority of our population: Every decade, a higher proportion of Americans appear to be habituated to the practice. If the trajectory continues, the coming generation could see the emergence in the United States of means-tested beneficiaries becoming the majority of the population. …nearly half of all children under 18 years of age received means-tested benefits (or lived in homes that did). For this rising cohort of young Americans, reliance on public, need-based entitlement programs is already the norm — here and now. It risks belaboring the obvious to observe that today’s real existing American entitlement state, and the habits — including habits of mind — that it engenders, do not coexist easily with the values and principles, or with the traditions, culture, and styles of life, subsumed under the shorthand of “American exceptionalism.” Especially subversive of that ethos, we might argue, are essentially unconditional and indefinite guarantees of means-tested public largesse.

For those who prefer hard numbers, here is a chart from his article.

There’s so much interested data and analysis in the article, that it’s difficult to choose only a few things to highlight. But these passages are particularly depressing.

The corrosive nature of mass dependence on entitlements is evident from the nature of the pathologies so closely associated with its spread. Two of the most pernicious of them are so tightly intertwined as to be inseparable: the breakdown of the pre-existing American family structure and the dramatic decrease in participation in work among working-age men. When the “War on Poverty” was launched in 1964, 7% of children were born outside of marriage; by 2012, that number had grown to an astounding 41%, and nearly a quarter of all American children under the age of 18 were living with a single mother. …As for men of parenting age, a steadily rising share has been opting out of the labor force altogether. Between 1964 and early 2014, the fraction of civilian men between the ages of 25 and 34 who were neither working nor looking for work roughly quadrupled, from less than 3% to more than 11%. In 1965, fewer than 5% of American men between 45 and 54 years of age were totally out of the work force; by early 2014, the fraction was almost 15%. …mass gaming of the welfare system appears to be a fact of modern American life. The country’s ballooning “disability” claims attest to this. Disability awards are a key source of financial support for non-working men now, and disability judgments also serve as a gateway to qualifying for a whole assortment of subsidiary welfare benefits. Successful claims by working-age adults against the Social Security Disability Insurance (SSDI) program rose almost six-fold between 1970 and 2012 — and that number does not include claims against other major government disability programs, such as SSI.

Ugh. It’s almost as if this Chip Bok cartoon is becoming a depiction of American reality.

To close, here are some excerpts that put the issue of dependency in broader context.

The burning personal ambition and hunger for success that both domestic and foreign observers have long taken to be distinctively American traits are being undermined and supplanted by the character challenges posed by the entitlement state. The incentive structure of our means-based welfare state invites citizens to accept benefits by showing need, making the criterion for receiving grants demonstrated personal or familial financial failure, which used to be a source of shame. …The entitlement state appears to be degrading standards of citizenship in other ways as well. For example, …The late senator Daniel Patrick Moynihan once wrote, “It cannot too often be stated that the issue of welfare is not what it costs those who provide it, but what it costs those who receive it.” The full tally of those costs must now include the loss of public honesty occasioned by chronic deception to extract unwarranted entitlement benefits from our government…collusive bipartisan support for an ever-larger welfare state is the central fact of politics in our nation’s capital today, as it has been for decades. Until and unless America undergoes some sort of awakening that turns the public against its blandishments, or some sort of forcing financial crisis that suddenly restricts the resources available to it, continued growth of the entitlement state looks very likely in the years immediately ahead.

So what’s the answer to this mess?

Without question, the first step is to get Washington out of the business of imposing a one-size-fits-all system on the country.

Simply stated, take the money in Washington that is spent on all redistribution programs, lump those funds into a block grant, and then turn the money over to the states and give them free rein to decide how best to alleviate poverty without creating discomfort.

Republicans, to their credit, already have proposed that solution for Medicaid. But they need to expand that legislation to other means-tested programs.

The real key to success, though, is slowly but surely phasing out the block grant. It’s good to give states flexibility in spending money, but you won’t get responsible decisions unless states – at some point – are also responsible for raising the money.

In other words, the answer is federalism. And because this means jurisdictional competition, we’re quite likely to get better policy. After all, if crazy states such as California, New York, and Illinois want to impose high tax rates to fund overly generous handout, they’ll quickly learn why that’s a bad idea since productive people will emigrate and welfare recipients will immigrate.

Ideally, state lawmakers will decide that welfare programs should focus on people with genuine material deprivation and not ….

Writing about Eberstadt’s article, George Will highlights the fact that you no longer have to be poor to get freebies from federal anti-poverty programs.

Between 1983 and 2012, the population increased by almost 83 million — and people accepting means-tested benefits increased by 67 million. So, for every 100-person increase in the population there was an 80-person increase in the recipients of means-tested payments. Food stamp recipients increased from 19 million to 51 million — more than the combined populations of 24 states. What has changed? Not the portion of the estimated population below the poverty line (15.2 percent in 1983; 15 percent in 2012). Rather, poverty programs have become untethered from the official designation of poverty: In 2012, more than half the recipients were not classified as poor but accepted being treated as needy.

And as you read that passage, keep in mind that the poverty line in America is well above the average level of income in most parts of the world.

But the left wants to redefine poverty in ways that enable redistribution to people who aren’t poor.

P.S. Here’s a great video on differences between the United State and Europe. And here’s a video that is best described as the result of an affair between Dr. Seuss and a think tanker.

P.P.S. Here’s a superb Chuck Asay cartoon on how government undermines social capital. And here’s a Michael Ramirez cartoon making the same point.

P.P.P.S. If you enjoy satire, here’s a book of left-wing nursery rhymes.

P.P.P.P.S. And if you want to know one of my fantasies (which deals with the entitlement mindset), click here.

P.P.P.P.P.S. Last but not least, here’s the famous set of cartoons showing the rise and (inevitable) fall of the welfare state.

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The State of the Union is Not Strong

Watching politicians give speeches, such as Obama’s State of the Union address, is an occupational hazard when you work at a think tank.

Which is why, in the past, I’ve heartily recommended the State-of-the-Union Bingo game developed by Americans for Tax Reform.

But I was in New York City for a television program about the President’s address, so I had to pretend I was an adult and pay attention to the speech.

That being said, the silver lining to that dark cloud is that the folks at U.S. News and World Report gave me an opportunity to add my two cents to an online debate on whether the President was correct to assert that the state of the union is strong.

In my contribution, I combined some dismal economic indicators and bad policy developments to argue that America could – and should – be doing much better.

Here are the bullet points from my article.

• Economic growth has been anemic. Normally there are several years of above-average growth after a recession. These post-recession booms are very important since they help people recover lost income. But there’s been no boom during the supposed Obama recovery. We haven’t even climbed back up to the long-run average of 3 percent growth.

• When the economy suffers from slow growth, it hurts the living standards of ordinary people. Probably the most damning statistic is that median household income has declined every year that Obama has been in the White House.

• Another very grim piece of data is that America’s labor force participation rate has dropped to the lowest level in decades. Yes, it’s good news that the official unemployment rate has fallen, but it would be much better if it fell because of strong job creation instead of people giving up on finding work.

• Since we’re talking about the unemployment rate, it’s worth noting that the jobless rate only started falling after the so-called stimulus ended and the burden of government spending began to decline. In other words, the good news was in spite of the president’s policies.

• And since we mentioned government spending, let’s debunk one of the president’s big claims. He bragged about a falling deficit (not that a $400 billion-plus deficit is anything to brag about), but red ink has only declined because of policies that the president opposed, such as sequestration.

• In his speech, Obama talked about the importance of making American more competitive, yet he wants to extract more money from the U.S. business sector even though we already have the world’s highest corporate tax rate. He also wants to boost the capital gains tax rate, which will be bad news for job-creating investment.

• One reason for all these dismal numbers is that there’s been a dramatic increase in rules, regulations and red tape from Washington. That’s not good for economic dynamism, particularly since a growing regulatory burden imposes a disproportionate burden on small businesses.

By the way, I need to make one correction. I didn’t realize the 2013 data on median household income had been released, and it turns out that there was a slight increase that year. So while the average household is more than $2000 poorer than when Obama took office, it’s not true that there’s been a decline every single year.

But that goof notwithstanding, I think my concluding remarks are spot on.

The bottom line is that the State of the Union is not strong. We’re suffering from anemic growth and income stagnation because of an ever-rising burden of taxes, spending and regulation. Yes, the president was right when he noted that we’ve created more jobs than Europe and Japan, but that’s hardly a big achievement since those nations have traveled even further in the wrong direction with statist policies.

In other words, what matters most, in terms of prosperity, is our long-run growth rate. And this is where Obama’s policies (like Bush’s policies) have hurt the country.

P.S. If you agree with my analysis, feel free to vote in the online debate and give me an “up arrow.” If you disagree with what I wrote, by contrast, I’m sure you have more important things to do than casting a vote.

P.P.S. I realize I’m being pedantic, but the two cartoons included in this post may be amusing, but they should have focused on the underlying disease of too much spending (particularly the problem of entitlement programs) rather than highlighting the symptom of red ink.

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Obama’s Class-Warfare Tax Plan Targets the So-Called Rich, but Workers Will Bear the Burden

The most compelling graph I’ve ever seen was put together by Andrew Coulson, one of my colleagues at the Cato Institute. It shows that there’s been a huge increase in the size and cost of the government education bureaucracy in recent decades, but that student performance has been stagnant.

But if I had to pick a graph that belongs in second place, it would be this relationship between investment and labor compensation.

The clear message is that workers earn more when there is more capital, which should be a common-sense observation. After all, workers with lots of machines, technology, and equipment obviously will be more productive (i.e., produce more per hour worked) than workers who don’t have access to capital.

And in the long run, worker compensation is tied to productivity.

This is why the President’s class-warfare proposals to increase capital gains tax rates, along with other proposals to increase the tax burden on saving and investment, are so pernicious.

The White House claims that the “rich” will bear the burden of the new taxes on capital, but the net effect will be to discourage capital investment, which means workers will be less productive and earn less income.

Diana Furchtgott-Roth of Economics 21 has some very compelling analysis on the issue.

President Obama will propose raising top tax rates on capital gains and dividends to 28 percent, up from the current rate of 24 percent. Prior to 2013, the rate was 15 percent. Mr. Obama seeks to practically double capital gains and dividend taxes during the course of his presidency, a step that would have negative effects on investment and economic growth. …the middle class would be harmed by higher capital gains tax rates, because capital would be more likely to go offshore. …[a] higher rate would have negative effects on the economy by reducing U.S. investment or driving it overseas. If firms pay more in capital gains taxes in America, they would make fewer investments — especially in the businesses or projects that most need capital — and they would hire fewer workers, many of them middle-class. Higher capital gains taxes would reduce economic activity, especially financing for private companies, innovators, and small firms getting off the ground. Taxes on U.S. investment would be higher compared with taxes abroad, so some investment capital is likely to move offshore.

At this point, I want to emphasize that the point about higher taxes in America and foregone competitiveness isn’t just boilerplate.

According to Ernst and Young, as well as the Organization for Economic Cooperation and Development, the United States has one of the highest tax rates on capital gains in the entire developed world.

The only compensating factor is that at least these destructive tax rates aren’t imposed on foreign investors. Yes, it’s irritating that our tax code treats U.S. citizens far worse than foreigners, but at least we benefit from all the overseas capital being invested in the American economy.

By the way, Diana also points out that higher capital gains tax rates may actually lose revenue for the simple reason that investors can decide to hold assets rather than sell them.

Here’s some of what she wrote, accompanied by a chart from the Tax Foundation.

…higher capital gains tax rates rarely result in more revenue, because capital gains realizations can be timed.  When rates go up, people hold on to their assets rather than selling them, expecting that rates will go down at some point. …Capital gains tax revenues rose after 1997, when the rate was reduced from 28 percent to 20 percent, and again after 2003, when rates were reduced further to 15 percent… The decline in rates resulted in higher tax receipts from owners of capitals, as they sold assets, giving funds to Uncle Sam.

Yes, the Laffer Curve is alive and well.

Not that Obama cares. If you pay close attention at the 4:20 mark of this video, you’ll see that he wants higher capital gains tax rates for reasons of spite.

But I don’t care about the revenue implications. I care about good tax policy. And in an ideal tax system, there wouldn’t be any tax on capital gains.

It’s a form of double taxation with pernicious effects, as the Wall Street Journal explained back in 2012.

…the tax on the sale of a stock or a business is a double tax on the income of that business. When you buy a stock, its valuation is the discounted present value of the earnings. …If someone buys a car or a yacht or a vacation, they don’t pay extra federal income tax. But if they save those dollars and invest them in the family business or in stock, wham, they are smacked with another round of tax. Many economists believe that the economically optimal tax on capital gains is zero. Mr. Obama’s first chief economic adviser, Larry Summers, wrote in the American Economic Review in 1981 that the elimination of capital income taxation “would have very substantial economic effects” and “might raise steady-state output by as much as 18 percent, and consumption by 16 percent.” …keeping taxes low on investment is critical to economic growth, rising wages and job creation. A study by Nobel laureate Robert Lucas estimates that if the U.S. eliminated its capital gains and dividend taxes (which Mr. Obama also wants to increase), the capital stock of American plant and equipment would be twice as large. Over time this would grow the economy by trillions of dollars.

John Goodman also has a very cogent explanation of the issue.

…why tax capital gains at all? …The companies will realize their actual income and they will pay taxes on it. If the firms return some of this income to investors (stockholders), the investors will pay a tax on their dividend income. If the firms pay interest to bondholders, they will be able to deduct the interest payments from their corporate taxable income, but the bondholders will pay taxes on their interest income. …Eventually all the income that is actually earned will be taxed when it is realized and those taxes will be paid by the people who actually earned the income. ……why not avoid all these problems by reforming the entire tax system along the lines of a flat tax? The idea behind a flat tax can be summarized in one sentence: In an ideal system, (a) all income is taxed, (b) only once, (c) when (and only when) it is realized, (d) at one low rate.

And if you want to augment all this theory with some evidence, check out the details of this comprehensive study published by Canada’s Fraser Institute.

For more information, here’s the video I narrated for the Center for Freedom and Prosperity, which explains why the capital gains tax should be abolished.

P.S. These posters were designed by folks fighting higher capital gains taxes in the United Kingdom, but they apply equally well in the United States. And since we’re referencing our cousins on the other side of the Atlantic, you’ll be interested to know that Labor Party voters share Obama’s belief in jacking up tax rates even if the economic damage is so severe that the government doesn’t collect any revenue.

P.P.S. Don’t forget that the capital gains tax isn’t indexed for inflation, so the actual tax rate almost always is higher than the statutory rate. Indeed, for folks that have held assets for a long time, the effective tax rate can be more than 100 percent. Mon Dieu!

P.P.P.S. In the past 20-plus years, I’ve seen all sorts of arguments for class-warfare taxation. These include:

• President Obama says he wants higher tax rates for fairness, even if the government doesn’t collect any revenue.
• Rich leftists say they want higher taxes because they can afford to pay, but then refuse when offered a chance to cough up some cash.
• Elizabeth Warren supports higher taxes because government made it possible for rich people to succeed.
• Warren Buffett wants a big tax hike because…well, because he’s bad at math.
• Some leftists support higher taxes because they assume that rich people obtained money dishonestly.
• The New York Times wants higher taxes on the rich in order to enable higher taxes on the middle class.
• The President said higher tax rates are acceptable because sometimes “you have made enough money.”

I suppose leftists deserve credit for being adaptable. Just about anything is an excuse for soak-the-rich tax hikes. The sun is shining, raise taxes! The sky is cloudy, increase tax rates!

Or, in this case, Obama is giving a speech, so we know higher tax rates are on the agenda.

P.P.P.P.S. You deserve a reward if you read this far. You can enjoy some amusing cartoons on class-warfare tax policy by clicking here, here,here, here, here, here, and here.

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European Jews and the Missing Right of Self Defense

Over and over again, I’ve shared evidence showing that gun ownership deters crime.

As I pointed out in my IQ test for criminals and liberals, even stupid criminals don’t want to get shot, so they are less likely to go after victims who may be armed (if you don’t believe me, check out this feel-good story from Ferguson, Missouri).

But what if the bad guys don’t care if they get shot? What if they’re these crazies who want to shoot up schools or movie theaters, fully expecting to kill themselves or get shot when police eventually arrive?

Even in that case, gun ownership by innocent people presumably has a positive impact. Research on mass shootings reveals that these nut jobs gravitate to “gun-free zones.” That way, they figure there won’t be any immediate resistance and they’ll be able to maximize casualties.

Let’s take our analysis to the next level. What if the bad guys are lunatic Islamofascists who think they get a bunch of virgins in paradise if they butcher so-called infidels?

These evil scum presumably aren’t deterred by the possibility of death, but it’s also logical to assume that they want to maximize the carnage they inflict before that happens.

So if potential victims are armed, that presumably will have a positive impact. After all, terrorists generally don’t try to take on Israeli soldiers. Instead, they go after people with far more limited ability to fight back.

In a humane and just world, lawmakers would agree that these folks should have some ability to defend themselves. But that’s not how the real-world works, at least in European nations that impose severe gun control.

Maybe it’s time to change that misguided policy, which is exactly what some European Jews are proposing.

Here are some excerpts from a story in the U.K.-based Daily Mail.

One of Europe’s largest Jewish associations has written a letter to EU ministers asking for gun laws to be relaxed to allow Jews to arm themselves to protect against terror attacks. Rabbi Menachem Margolin, the head of the European Jewish Association, made the request in the wake of the Paris attacks in which four Jews were killed inside a deli in the French capital. …The letter speaks about the need for protection after Islamist Amedy Coulibaly gunned down four Jewish shoppers in cold blood in a Paris deli last Friday before he was shot by armed police. …Police later found he had maps showing the locations of Jewish schools in Paris. …Nobody from the European Council of Ministers was immediately available for comment on the letter when contacted by Mail Online this afternoon.

Needless to say, I’m not expecting European politicians to give the right answer to this request.

Instead, they’ll offer platitudes and assure people that the government will protect synagogues and Jewish schools.

That better than nothing, of course, but why not let individuals have the right to self defense?

John Hinderaker of Powerline adds his two cents to the issue.

The recent terrorist attacks in Paris shed some light on this question. In the case of the Charlie Hebdo murders, two armed guards were present, but were quickly overwhelmed by the well-trained (and no doubt better armed) terrorists. It is unlikely that civilians armed with pistols would have fared better. The kosher grocery attack was quite different. It was carried out by a single terrorist and, rather than being executed rapidly and with military precision, the terrorist held something like 30 people hostage for a matter of hours. This is a good example of a situation where civilians armed with concealed weapons could likely make a difference. If one of the hostages had a gun (or better yet, two or three hostages had guns) he could well have had an opportunity to get off a clean shot and kill or disable the terrorist.

Very well stated, though I’ll disagree in one respect. It’s quite possible that well-armed terrorists would have prevailed in their attack on Charlie Hebdo even if some of the employees were armed.

But if I worked at that magazine, I would still want the option of self defense. Far better to go down fighting than to cower under a desk.

I suspect John would agree, so we probably don’t have any real disagreement.

In any event, John’s has more good information and analysis in his blog post.

…a critical mass of armed civilians can change criminals’ behavior dramatically. In the United Kingdom, burglars generally look for homes that are occupied so that they can force the occupants to direct them to the family’s valuables–and, in the process, commit a rape or other heinous crime. In the United States, burglars almost always seek out unoccupied homes, because if the homeowner is present there is a possibility the burglar could be shot. The American experience suggests that as the citizenry becomes armed, street crime declines. The causes are hotly debated, but violent crime rates have steadily gone down in tandem with liberalized gun carry laws and broader ownership of handguns. …In parts of Europe, it is common for Jews to be attacked by gangs of young Muslims when they are out in public. Such attacks would decline rapidly if it were known that Jews are arming themselves, and if, in only a few instances, thugs attempting to perpetrate such attacks were shot in self-defense. In my view, deterring street attacks would be the largest potential benefit of wider firearms ownership. …if I were a European Jew would I arm myself to the maximum extent permitted by law, and seek legal changes to make self-defense more effective? Absolutely.

Actually, I’ll disagree with another minor aspect of John’s post.

If I were a European Jew, I would arm myself regardless of the law. My family’s protection would matter more than the foolish/evil laws of politicians.

P.S. Don’t forget that Jews were victimized by the Nazi’s gun control laws, visual depictions of which can be seen here, here, here, and here.

P.P.S. On a less somber note, here are two very amusing Chuck Asay cartoons (here and here) about so-called gun-free zones. And here are some more amusing images on that issue.

P.P.P.S. Sticking with the humor theme, here’s an interview featuring a well-deserved lesson for a left-wing journalist (presumably an urban legend, but still funny). And here a post on the difference between conservatives, liberals, and Texans. Last but not least, I hope these are the virgins waiting in paradise to greet the terrorists.

P.P.P.P.S. To end on a serious note, I will continue my tradition of sharing the very powerful testimony of a true gun expert, as well as the admissions of two leftists (here and here) who admit that gun control is grossly misguided. All three of these links should be widely shared.

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The Moocher Hall of Fame Is Getting Crowded

If the Moocher Hall of Fame ever moves from the virtual world to brick-and-mortar reality, it’s going to need a lot of space.

That’s because, to use a politically correct term, many of the featured freeloaders are plus-sized.

Stanley looks like a rather robust eater, which is somewhat disturbing on more than one level since he gets disability checks that allow him to fulfill his fantasy of wearing diapers and being an “adult baby.”

Lazy Robert doesn’t look like he misses many meals, and he obviously has plenty of time to enjoy fine dining in Copenhagen since he proudly brags that he’s been living off Danish taxpayers for about 15 years.

Christina’s handouts are so generous that she’s had enough money to eat her way into a size-26 dress, yet she has the gall to complain that taxpayers won’t subsidize a gym membership.

 Now we have another plus-sized honoree. Or, in this case, honorees.

That’s because the U.K.-based Telegraph is reporting on a mother-daughter team that is living large at taxpayer expense.

A mother and daughter who get £34,000 a year in handouts because they are too fat to work say they’d rather be happy and on benefits than depressed and thin. Janice and Amber Manzur weigh a total of 43 stone and are so overweight they have to use mobility scooters to get around.But both women refuse to diet… Ms Manzur lives in a three-bedroom house that has been customised by the council to accommodate her disability and drives a Fiat Quibo disability car worth around £15,000. …The two women, from Kirkcaldy, Fife, jointly receive close to £33,600 benefits a year. That’s the equivalent of a £46,000 salary before tax. …She gets £400 Employment and Support Allowance a month and £430 to cover the rent on her flat. Miss Manzur also gets disability allowance because she is obese and has recurring problems with her leg.

The entitlement mentality is what makes this pair special.

She said: “People shouldn’t judge me or my mum for how big we are because it’s in our genes. “I’ve never been on a diet or to a gym and I don’t even eat that much junk food. It’s my natural build to be this big and I’m happy to not work anymore. We can’t help it, so why bother fighting it?” …Ms Manzur started claiming benefits in 2006 when she left her job as a manager in a call centre because of weight-related health problems. She was forced to argue her case for disability pay after a tribunal claimed if she wanted to work she could lose weight. Ms Manzur won and now gets £620 Employment and Support Allowance and £320 Disability Living Allowance a month. …Miss Manzur’s council-paid flat has been modified to cater for her disability. It has no stairs, a low front door so she can drive her disability scooter inside and a bath with a seat for easy access. The two women are able to spend much of their free time together. Janice said: “We live less than a mile apart. I have the car, so I drive round to her or pick her up. We spend a lot of time together and often go out on our matching mobility scooters. “I watch telly a lot and I also like reading and I recently brought a Kindle with my benefits.”

I’m sure British taxpayers are happy that they’re subsidizing matching scooters, kindles, special cars, redesigned flats, and other goodies that enable the Manzurs to live an unhealthy lifestyle.

By the way, my concern isn’t that the Manzurs eat a lot. As far as I’m concerned, people should eat as much or as little as they like and be whatever size floats their boat. Moreover, I’m in no position to throw stones since I should drop at least 15 pounds.

But I do get very agitated when bad government policies subsidize bad behavior. And the bad behavior I’m referring to is indolence, not over-eating.

Though it’s easy to see why the Manzurs got sucked into a welfare lifestyle. They’re getting the equivalent of more than $50,000 per year to “watch telly” and eat.

But if they chose productive behavior, they would get hit with punitive taxes and have less disposable income (we have the same self-destructive policy in America, and it’s getting worse thanks to Obamacare).

In other words, the Manzurs are responding to bad incentives. You get to live a better lifestyle if you goof off all day.

P.S. The Brits actually have a reality-TV program called Benefits Street, which shows how redistribution ruins lives and creates inter-generational dependency.

P.P.S. British taxpayers at least can be thankful that the U.S. government wasn’t in charge of procuring the kindle for Ms. Manzur.

P.P.P.S. And British taxpayers can also be thankful that the government has recently implemented some welfare reforms that are encouraging work over dependency.

P.P.P.P.S. Though to end on a grim note, the government-run healthcare system in the United Kingdom remains unchanged and is the source of numerous horror stories.

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Economic Lessons from Scandinavia

In my younger years, I oftentimes would have arguments with statists who wanted me to believe that countries in Northern Europe like Sweden “proved” that generous welfare states were compatible with economic prosperity.

That doesn’t happen as often today because the Nordic nations in recent decades have not enjoyed rapid growth. Moreover, some of the nations – such as Sweden in the early 1990s and Iceland last decade – suffered from serious financial downturns.

So I stand by my position that free markets and small government are the recipe for prosperity.

That being said, there are still some interesting lessons to be learned from these countries.

As I’ve previously argued, the Nordic countries demonstrate that a big welfare state is “affordable” so long as countries are willing to accept less growth and so long as they are willing to compensate for high taxes and high spending with very pro-market policies in other areas.

And that’s definitely the case. If you examine the Economic Freedom of the World data, you see that Nordic nations get fairly decent scores because they have very laissez-faire policies for regulation, trade, monetary policy, and property rights.

Yes, the fiscal burden of the welfare state slows growth and drags down their rankings, but they still do far better than other European countries that have big governments and a lot of intervention. Just think of France (#58), Italy (#79), and Spain (#51).

With this bit of background, let’s now look at two new and interesting articles about the extent to which the Nordic nations should be role models.

Our first story is from the Washington Post, and it’s authored by a British journalist who lives in Denmark. He starts by noting the inordinate amount of praise these countries receive.

The United States is in the midst of an episode of chronic Scandimania, brought on in part by the habitually high placing of Sweden and its similarly prosperous, egalitarian, collectivist neighbors — Denmark, Norway, Iceland and Finland — in global rankings of everything from happiness to lack of corruption.

But he then points out that these is trouble in the Nordic paradise.

The Washington Post is not immune to Scandinavia’s charms, recently marveling at how Danish branches of McDonald’s manage to pay their employees 2.5 times U.S. McDonald’s workers’ wages (clue: When about 75 percent of earnings disappear as income and consumption taxes, higher wages are more necessity than choice). …and last month the Times assured us that “A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia.” (*Cough* unemployment is 5.6 percent in the United States, vs. 8.1 percent in Sweden, 8.9 percent in Finland and 6.4 percent in Denmark.) …And global and domestic events are conspiring to make life a little more uncertain for these former high achievers. …the Scandinavian model’s structural fissures are coming under increasing stress. …the Norwegians seem to have lost their parsimonious, workaholic, Lutheran mojo. Norwegians treat Friday as a “free day” and take more sick leave than anyone else in Europe, if not the world — a law enshrines their right to claim sick days even while on holiday.

The author continues, pointing out some serious warts.

Sweden’s political establishment was subverting the democratic process. This has distracted from the slowing economy, increasing state and household debt levels, and one of the highest youth unemployment rates in Europe. …Denmark took a bigger hit than its neighbors following the 2008 global economic crisis, which increased pressure on its massive welfare state, funded by the highest taxes in the world. Household debt is the highest in Europe (any connection there, I wonder?). …along with the Norwegians they work among the fewest hours a year of any Europeans. …In Iceland, …ultra-Nordic social cohesion…led to the near-bankruptcy of the entire country.

And here are some more details that also don’t sound so encouraging.

These countries that do so well in life-satisfaction surveys also record the highest consumption of antidepressants in the world, and despite their reputation for gender equality, they have the highest rates of violence against women in Europe. …few Americans would truly embrace a Scandinavian-style society. The tax rates alone would likely be a sufficient deterrent. Though I’m a freelance journalist, I essentially work until Thursday lunchtime for the state. And it’s not as if the money that is left in my pocket goes all that far: These are fearfully expensive countries in which to live.

Here’s the bottom line from a balanced story.

Scandinavia is not the utopia that American liberals or the 11 million Americans of Nordic descent often make it out to be, just as it is not the quasi-commie, statist gulag that those on the right would often have us believe. …I’m not saying the Nordic miracle is over, but it was never a miracle. And it’s over.

Now let’s look at our second story, which was published by the New York Post.

The tone is more negative, but it basically has the same message.

In the American liberal compass, the needle is always pointing to places like Denmark. Everything they most fervently hope for here has already happened there.

But there’s bad news in the land of the Northern Lights.

Here’s what he writes about Denmark.

Visitors say Danes are joyless to be around. Denmark suffers from high rates of alcoholism. In its use of antidepressants it ranks fourth in the world. (Its fellow Nordics the Icelanders are in front by a wide margin.) Some 5 percent of Danish men have had sex with an animal. Denmark’s productivity is in decline, its workers put in only 28 hours a week, and everybody you meet seems to have a government job. …Danes operate on caveman principles — if you find it, share it, or be shunned. Once your date with Daisy the Sheep is over, you’d better make sure your friends get a turn.

Though Daisy is lucky that she’s not on the tax rolls. The tax system in that nation is so oppressive that I’ve joked birthers should accuse Obama of having been born in Denmark.

In addition to paying enormous taxes — the total bill is 58 percent to 72 percent of income — Danes have to pay more for just about everything. Books are a luxury item. Their equivalent of the George Washington Bridge costs $45 to cross. …Health care is free — which means you pay in time instead of money. Services are distributed only after endless stays in waiting rooms. (The author brought his son to an E.R. complaining of a foreign substance that had temporarily blinded him in one eye and was turned away, told he had to make an appointment.) Pharmacies are a state-run monopoly, which means getting an aspirin is like a trip to the DMV.

But the author doesn’t just pick on Denmark.

Iceland’s famous economic boom turned out to be one of history’s most notorious real estate bubbles. …The success of the Norwegians — the Beverly Hillbillies of Europe — can’t be imitated. Previously a peasant nation, the country now has more wealth than it can spend: Colossal offshore oil deposits spawned a sovereign wealth fund that pays for everything. Finland, which tops the charts in many surveys (they’re the least corrupt people on Earth, its per-capita income is the highest in Western Europe and Helsinki often tops polls of the best cities), is also a leader in categories like alcoholism, murder (highest rate in Western Europe), suicide and antidepressant usage. …Booze-related disease is the leading cause of death for Finnish men, and second for women. …“Dark” doesn’t just describe winter in the Arctic suburbs, it applies to the Finnish character.

Sweden gets a lot of attention.

Immigration is associated in the Swedish mind with welfare (housing projects full of people on the dole) and with high crime rates (these newcomers being more than four times as likely to commit murder). Islamist gangs control some of the housing projects. Friction between “ethnic Swedes” and the immigrants is growing. Welfare states work best among a homogeneous people, and the kind of diversity and mistrust we have between groups in America means we could never reach a broad consensus on Nordic levels of social spending. Anyway, Sweden thought better of liberal economics too: When its welfare state became unsustainable (something savvy Danes are just starting to say), it went on a privatization spree and cut government spending from 67 percent of GDP to less than half.

And then there’s this excerpt about the Swedes, which makes me think it might be better to cohabit with a sheep in Copenhagen.

…a poll in which Swedes were asked to describe themselves, the adjectives that led the pack were “envious, stiff, industrious, nature-loving, quiet, honest, dishonest and xenophobic.” In last place were these words: “masculine,” “sexy” and “artistic.”

And here’s his conclusion.

Scandinavia, as a wag in The Economist once put it, is a great place to be born — but only if you are average.  …That’s Scandinavia for you, folks: Bland, wholesome, individual-erasing mush. But, hey, at least we’re all united in being slowly digested by the system.

Indeed, the Nordic focus on equality is so pervasive that it leads to unbelievably stupid policies.

P.S. There are some really creepy examples of failed government-run health care in Sweden.

• A man who had his penis amputated because he was first misdiagnosed and then forced to wait five months for a follow-up examination.
• Another man was forced to stitch up his own leg after a lengthy wait for medical treatment – and he then had to deal with insult added to injury when the bureaucrats reported him violating rules.
• And another man with no legs was denied a motorized wheelchair because the government ruled that he didn’t necessarily have a permanent condition.

P.P.S. Though Sweden has wised up in many regards. After the crisis of the early 1990s, the country was a role model of spending restraint. Here’s a video on some of Sweden’s pro-market reforms in recent decades.

P.P.P.S. The single-most compelling piece of evidence about the superiority of the American system is that Swedes in America earn far more than Swedes in Sweden.

P.P.P.P.S. The second-most compelling piece of evidence about the limits of Nordic statism is that these nations became prosperous before big welfare state were imposed. I call this the paradox of Wagner’s Law.

P.P.P.P.P.S. Even Denmark is trying to cut back on the welfare state. Though that will be bad news for Lazy Robert.

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More Evidence against Big-Spending Keynesian Economics

Keynesian economics is a perpetual-motion machine for statists. The way to boost growth, they argue, is to have governments borrow lots of money from the economy’s productive sector and then spend it on anything and everything.

Even if the money is squandered on global defense against a make-believe alien attack, according to Keynesians like Paul Krugman!

Krugman also has argued that a real war is good would be good for growth since the goal is simply more spending.

Heck, Krugman even asserted the 9-11 attacks were good for the economy because governments then spent more money.

And Nancy Pelosi actually argued that paying people not to work was a great way of creating jobs. I’m not joking.

Amazing. It’s almost as if these people are secret libertarians and they’re saying crazy things to discredit Keynesianism.

But they’re actually serious. This makes it difficult to tell the difference between satire and reality (though this collage is a good example of the latter).

I’ve explained (over and over again) why the Keynesian theory is misguided, and even narrated a video on the topic.

But I suspect most people are more convinced by real-world evidence, which is why I’ve used data from nations such as Germany, Japan, Switzerland, Canada, the United Kingdom, and the United States to show that bigger government generally hampers prosperity.

Now let’s add to this wealth of evidence, but this time focus on developing economies.

Ruchir Sharma, head of emerging markets for Morgan Stanley Investment Management, has a column in the Wall Street Journal that reviews the track record of so-called stimulus in developing nations.

He starts by noting that some of the usual suspects are pushing for more Keynesianism.

…expect more big names to join the chorus calling for increased government spending to enliven the flailing global recovery. President Obama and Treasury Secretary Jack Lew are among the voices urging European leaders to spend more. The International Monetary Fund and former Treasury Secretary Larry Summers —who wrote in the Financial Times in October that “there is for once a free lunch”—have even been arguing that government borrowing to build roads or airports would more than pay for itself. If only governments in the developed world would start spending more, this refrain goes, the global economy’s future would be brighter.

But Mr. Sharma explains that many countries in the developing world just had a very bad experience with Keynesian economics.

…it is worth noting that the big emerging nations—China, Russia and Brazil—have just tried a full-throttle experiment in stimulus spending, and it failed….Their experiment began in late 2008. …the leaders of these nations turned to the ideas of John Maynard Keynes… The emerging economies embarked on a spending campaign that dwarfed its counterparts in the U.S. and Europe….The emerging ones spent more than half again as much, 6.9% of GDP. And that figure does not include the money that many big emerging nations continued to pump into their economies by ordering state banks to ramp up lending. These directives vastly boosted the scale of the stimulus, particularly in China… Keynesians everywhere let out a cheer.

Here’s some of the data.

Since 2010, the growth rate in China has fallen by a third and is headed below 7%. Brazil is in recession. Russia, which spent a staggering 10% of GDP on stimulus, is now contracting sharply. What happened? Emerging nations borrowed from the future to produce that flash of growth in 2010, and now they face the bills. Their government budgets have fallen into the red…public debt has risen significantly, throwing the books out of balance. …the IMF and others are lowering forecasts for emerging-world GDP growth for the rest of this decade to 4% or less—a return to the pace of the crisis-ridden 1990s.  …The message: When the state spends in haste, it will repent at leisure.

But there is some good news.

Many leaders in emerging nations now recognize that bigger government is not a recipe for prosperity.

…emerging-world leaders admit that their own stimulus experiments backfired. In May, Chinese Premier Li Keqiang warned that using stimulus to generate growth is “not sustainable” and “creates new problems.” …Agustín Carstens, the president of Mexico’s central bank, recently told me that in the long run “fiscal and monetary policy cannot create growth.” And former Indian finance minister P. Chidambaram admitted that his government “lost control of the economy” because of a stimulus campaign that led to higher deficits and inflation.

I guess we can add these officials to the list that already includes leaders from Portugal and Finland, who also have acknowledged that economic growth is undermined when the burden of government spending is increased.

Unfortunately, the lesson isn’t being learned in America, at least not in the rudimentary reading class that is otherwise known as the Obama Administration.

P.S. You can enjoy some good anti-Keynesian humor by clicking here, here, here, and here.

P.P.S. There are some Republican Keynesians, so this is a bipartisan problem.

P.P.P.S. Happy Birthday to the Princess of the Levant. We’re celebrating in the Cayman Islands, where there’s warm sunshine, clear ocean, and zero income tax.

P.P.P.P.S. Returning to the unpleasant topic of Keynesian economics, it’s very discouraging that Obama Administration officials seem so intent on pushing bad policy in other nations.

P.P.P.P.P.S. The New York Times publishes a lot of Krugman’s diatribes, but they also make room for other fact-challenged Keynesians.

P.P.P.P.P.P.S. For those of us who try to educate policy makers, Keynesian economics is like a Freddy Krueger movie.

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Minimum-Wage Laws Are a Triumph of Emotion over Logic

It’s very frustrating to write about the minimum wage. How often can you make the elementary observation, after all, that you’ll get more unemployment if you try to make businesses pay some workers more than they’re worth?

But it’s my mission to promote economic liberty, so I’ve written on why government-mandated wages can create unemployment by making it unprofitable to hire people with low work skills and/or poor work histories. And I’ve attacked Republicans for going along with these job-killing policies, and also pointed out the racist impact of such intervention.

Heck, just about everything sensible that needs to be said about the topic is contained in this short video narrated by Orphe Divougny

But I guess I’m the Sisyphus of the free-market movement because once again I’m going to try to talk some sense into those who think emotion can trump real-world economics.

Let’s start by citing some new reasearch.

States are allowed to increase minimum wages above the federal level. This creates interesting opportunities to measure what happens to employment when the national minimum wage is increased, since the change presumably doesn’t impact states that already are at or above that level.

Two economists from the University of California at San Diego took advantage of this natural experiment and examined employment changes in states that were “bound” and “unbound” by the law.

…we find that minimum wage increases significantly reduced the employment of low-skilled workers.  By the second year following the $7.25 minimum’s implementation, we estimate that targeted workers’ employment rates had fallen by 6 percentage points (8%) more in ‘bound’ states than in ‘unbound’ states.  …Over the late 2000s the average effective minimum wage rate rose by nearly 30% across the United States.  Our best estimate is that these minimum wage increases reduced the employment of working-age adults by 0.7 percentage points.  This accounts for 14% of the employment rate’s total decline over this time period and amounts to 1.4 million workers.  A disproportionate 45% of the affected workers were young adults (aged 15 to 24).

Gee, what a surprise. Fewer jobs.

But the mandated hike in wages didn’t just reduce employment.

There were also negative effects on income.

We find that binding minimum wage increases reduced low-skilled individuals’ average monthly incomes.  Targeted workers’ average incomes fell by an average of $100 over the first year and by an additional $50 over the following two years. …We provide direct evidence that such losses translate into meaningful reductions in upward economic mobility.  Two years following the minimum wage increases we study, low-skilled workers had become significantly less likely to transition into higher-wage employment in bound states than in unbound states. 

This evidence on income is particularly important because some statists make a rather utilitarian argument that it’s okay for some people to lose jobs because others will benefit.

Jared Bernstein is Exhibit A, as you can see in this debate we had for CNBC.

But let’s not just focus on numbers. There are painful human costs when low-skilled workers are priced out of the labor market.

Here are some excerpts from a column in the Wall Street Journal about a real-world example of people losing their jobs.

It’s well-established in the economic literature, if not in the minds of proponents of these laws, that the result will be job losses. Yet this empirical reality fails to capture the emotional reality of the employees who are let go, or of the business owners who had no choice but to let them go. …Michigan’s minimum wage rose in September to $8.15 an hour from $7.40 (the minimum wage for tipped employees rose 17%, to $3.10 an hour). The wage will rise to $9.25 by January 2018.

Now let’s look at the impact on a non-profit restaurant that helped disadvantaged people.

The staff at Tastes of Life was made up of recovering addicts, recently incarcerated individuals and others who would have a hard time landing a job elsewhere. Mr. Mosley explained that on-the-job offenses for which an employee would have been “gone that day” in a traditional work setting were instead used as training opportunities at Tastes of Life. …Mr. Mosley’s financial goal was to break even and use any excess funds to subsidize Life Challenge participants. After more than two years of operation on Beck Road, 2½ miles from the center of town, Tastes of Life had a steady flow of loyal customers, but rising food costs presented a challenge. …Mr. Mosley and Ms. Tucker had planned to print new menus with higher prices to cover the food costs, but the September wage hike complicated those plans, in particular because the increase covered both tipped and non-tipped employees. …“If we had a $10 menu item, it would have to be $14,” Mr. Mosley said. The restaurant’s customer base of seniors on a fixed income and Hillsdale locals made this option a nonstarter. The restaurant also had to find roughly 250 new customers a month, unrealistic in a small town of about 8,300.

So the inevitable happened.

The increased minimum wage, he told me, was “the straw that broke that camel’s back,” forcing him to close his doors and lay off his 12-person staff. …with the higher wage costs, the arrangement was no longer feasible, and Tastes of Life closed on Sept. 28. …Four former employees have been able to leverage their restaurant experience to find new employment, but Mr. Mosley told me that eight are still out of work. …the loss of Tastes of Life cuts deep, because the benefit for Life Challenge participants was both valuable and is not easily attained elsewhere. These unintended consequences of a minimum wage hike aren’t unique to small towns in south-central Michigan. Tragically, they repeat themselves in locales small and large each time legislators heed the populist call to “raise the wage.”

Understanding “unintended consequences” is a key characteristic of a good economist.

Indeed, Bastiat’s wise words about the “seen” and “unseen” help to explain why Krugman makes so many mistakes.

But that’s a topic for another column (actually, a whole series of columns).

Today, the goal is simply to understand that it is pointlessly destructive to make low-skilled labor less affordable.

P.S. Given all the evidence that minimum-wage laws destroy jobs, why do some people persist in supporting such a destructive policy? In this post, I provide six possible reasons.

P.P.S. No wonder I get so frustrated on this topic.

P.P.P.S On the lighter side, here are some good cartoon on the minimum wage from Steve Breen, Lisa Benson and Henry Payne.

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Building on Success of Clinton-Era Reforms, Let’s Eliminate all DC-Based Income Redistribution

The modern welfare state is a disaster. But rather than go into lengthy details, let’s simply look at some very powerful images (click for enlarged view).

Probably the most damning evidence is that the poverty rate in America was steadily falling after World War II. But then Lyndon Johnson declared a “war on poverty” and got Washington more involved in the business of income redistribution. So what happened? The poverty rate stopped falling.

But it’s also sobering to see how much money is being spent on income-redistribution programs. Taxpayers at the federal, state, and local level are coughing up more than $1 trillion every year to subsidize poverty. To give an idea of how much inefficiency and waste permeates the system, this is enough to give every poor household $60,000.

Poor people are among the biggest victims of the welfare state. Redistribution programs create a dependency trap because of very high implicit tax rates on productive behavior. Simply stated, handouts are so generous that poor people who enter the labor force generally will have lower living standards than those who remain wards of the state.

 So what’s the solution to this mess?

Fortunately, we have a case study that points us in a productive direction.

The Bill Clinton-era welfare reforms, pushed through by Republicans in Congress, were a big success. Here are some excerpts from an article written by an expert at the Brooking Institution.

Between 1994 and 2004, the caseload declined about 60 percent, a decline that is without precedent. The percentage of U.S. children on welfare is now lower than it has been since at least 1970. …More than 40 studies conducted by states since 1996 show that about 60 percent of the adults leaving welfare are employed at any given moment and that, over a period of several months, about 80 percent hold at least one job. …Again, these sweeping changes are unprecedented. …Equally important, with earnings leading the way, the total income of these low-income families increased by more than 25 percent over the period (in constant dollars). Not surprisingly, between 1994 and 2000, child poverty fell every year and reached levels not seen since 1978. In addition, by 2000, the poverty rate of black children was the lowest it had ever been.

This is an older article from 2006, so there was obviously some movement in the wrong direction after the recent recession.

Nonetheless, the big message from welfare reform in the 1990s is that blank-check welfare entitlements are greatly inferior to a federalism-based approach that allows states to innovate and experiment to see what works best.

That’s the good news.

The bad news is that the Clinton welfare reforms only addressed a minor part of the welfare state. Moreover, the Obama Administration has undermined some of the modest progress that was achieved in the 1990s.

So we need a new offensive to deal with the broader deficiencies of the current system, which is a disaster for both taxpayers and poor people.

But if we use Clinton’s welfare reforms as a model, there is considerable progress that can be achieved. Diana Furchtgott-Roth of Economics 21 has a new study on precisely this topic.

She identifies some of the major redistribution programs in Washington.

This paper examines the evolution of major U.S. welfare programs since 1998—shortly after the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), the 1996 federal welfare reform signed into law by President Clinton, went into effect. The paper chronicles the average amount of aid provided, as well as length of time on public assistance, focusing on the following programs: SNAP; Temporary Aid to Needy Families, or TANF (established by PRWORA); Medicaid; and Section 8 Housing Choice Vouchers (HCV).

And she points out these programs are an expensive failure, but proposes a way to address the problem.

…while the U.S. economy has since improved, participation in such programs has generally not declined. This paper concludes that there is ample scope for states to reform welfare, and it proposes two substantial changes: (1) cap welfare spending at the rate of inflation and the number of Americans in poverty; and (2) allow states to direct savings from welfare programs to other budget functions. …this paper finds that federal savings through 2013 would, after accounting for inflation and the number of Americans in poverty, total $1.3 trillion had welfare funding remained at 1998 levels.

The key is federalism.

States should have the freedom to experiment to see what policies are most effective. Under such conditions, successful states would serve as models for other states—and, possibly, models for further federal welfare reform. Indeed, successful welfare reforms have already been observed in North Carolina, New York, Indiana, and Rhode Island. …Providing states increased flexibility to adjust resource levels between welfare programs offers numerous advantages. For instance, states with low food prices but high housing costs might shift resources from SNAP to housing programs. In addition, states could divert funding from existing programs to new ones, such as community-based programs that prove successful.

Her bottom line is that the status quo is a failure.

Antipoverty programs should be judged by how successfully they help lift people out of poverty. By this measure, the country’s welfare programs performed poorly during the Great Recession and its aftermath: welfare costs and eligibility have, as this paper has documented, largely expanded, with few gains in poverty reduction. …The status quo is plainly unacceptable. New solutions, not more funding, are the answer. …empower states to choose welfare policies that best serve their most vulnerable families, as well as those that best fit their political demands.

An excellent study and a very sound proposal.

Though I would make one very important modification.

It’s clearly a step in the right direction if the federal government turns all income-redistribution programs into a block grant so that states can decide how to allocate the money and address poverty.

But the long-run goal should be to eliminate any role for Washington, even as a provider of block grants.

In an ideal world, the block grant should be immediately capped and then gradually phased out. Let state and local governments decide how to tax and spend in this arena.

P.S. Some folks on the right want to replace the current welfare state with a government-guaranteed minimum income. But that approach is very inferior to genuine federalism.

P.P.S. The bureaucrats at the OECD (subsidized by our tax dollars) are pushing a new definition of poverty that is really a stalking horse for more income redistribution.

P.P.P.S. In the spirit of political correctness, here’s the modern version of the Little Red Hen and the modern version of the fable about the ant and the grasshopper.

P.P.P.P.S. For American readers, click here to see the extent to which your state makes welfare more attractive than work.

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Our Healthcare Policy Problem Is Much Bigger than Obamacare

Way back in 2010, immediately after Obamacare was rammed down our throats, I put together four guiding principles for a counter-offensive.

One of my goals was to help people understand that the problem was far greater than Obamacare. Indeed, the so-called Affordable Care Act was merely another step on a long (and very bad) journey to healthcare statism.

The way to think of Obamacare is that we are shifting from a healthcare system 68 percent controlled/directed by government to one that (when all the bad policies are phased in) is 79 percent controlled/directed by government. Those numbers are just vague estimates, to be sure, but they underscore why Obamacare is just a continuation of a terrible trend, not a profound paradigm shift.

Two years ago, I elaborated on this thesis and even put together a couple of charts to emphasize the point.

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. …all of the same problems still exist, but now they’re exacerbated by the mistakes in Obamacare.

My numbers were just vague approximations, of course, but I think the basic premise was spot on.

And my theory is still accurate. But you don’t have to believe me.

Writing for the Washington Examiner, Philip Klein makes the critical point that repealing Obamacare wouldn’t result in a free-market system.

Instead, we’d be stuck with the pre-Obamacare system that was decrepit because of already-existing programs, mandates, regulations, and other forms of intervention.

…repeal is not enough. Even if simple repeal were politically obtainable, Americans would still be left with a broken healthcare system. Government regulations would still be stifling competition and individual choice and government healthcare programs would still be driving the nation’s unsustainable long-term debt problem. If Republicans achieved repeal without agreeing on a way to reform healthcare along free market lines, it’s inevitable that Democrats would eventually lead another overhaul of the system that would grant even more power to the federal government.

Philip is totally correct.

Before Obamacare, we had a system that didn’t work very well because of government. But in a horrifying example of Mitchell’s Law, many people decided that more government was the solution to the problems already caused by government.

Hence, we got so mis-named Affordable Care Act.

But if Obamacare is repealed, we’ll simply be back in the same unstable situation. And Philip is right that the statists will then simply argued for a different type of government expansion. Probably single payer, notwithstanding all the horror stories from places such as the United Kingdom.

Some may argue at this point that it doesn’t really matter because Obama is in the White House with a veto pen, so critics have a couple of years to figure out their next step.

Maybe, but it’s also possible that the Supreme Court will (for a change of pace) make the right ruling on a key Obamacare case later this year. And this would probably force policy makers to re-open the law.

…a Supreme Court decision expected by late June could invalidate Obamacare subsidies for millions of Americans. If Republicans don’t have an alternative ready, congressional leaders will be under tremendous pressure to pass a simple “fix” that would allow the subsidies to continue to flow, thus further entrenching Obamacare before a Republican president theoretically is able to act in 2017. For these reasons and many others it’s important for Republicans to unite around an alternative to Obamacare.

Philip (who has an entire book on this issue) then proceeds to categorize Obamacare critics as being in three different camps on the issue of how to proceed.

The first approach comes from those who believe that fully repealing Obamacare is probably unrealistic, but who still see an opening to reform the overall healthcare system in a more market-oriented direction. I call this the Reform School. The second approach comes from a crowd that believes full repeal is a necessity, but can only occur if opponents of the law create a market-friendly alternative with enough financial assistance to make health insurance widely available to those Americans who want to purchase it. I call this the Replace School. And finally, there is a third approach, which advocates repealing the law, returning to pre-Obamacare levels of taxes and spending, and then using that clean slate as the basis to overhaul the system in a free market manner to bring down costs. I call this the Restart School.

Since I focus on fiscal policy issues rather than healthcare, I don’t know if there are substantive – or merely strategic – differences among these three groups.

But I will say (assuming you actually want to solve the problem) that at some point you have to deal with the government programs and interventions that have given us a third-party payer crisis.

So I will reiterate what I wrote back in 2010 as part of my proposed counter-offensive.

The only way to fix healthcare is to restore the free market. That means going back to a system where people pay out-of-pocket for most healthcare and use insurance to protect against genuine risk and catastrophic expenses. The time has come to reduce the size and scope of government. …Change Medicare into a system based on personal health accounts and shift all means-tested spending to the states. …the flat tax is ideal from a healthcare perspective since it gets rid of the healthcare exclusion in the tax code as part of a shift to a tax system with low rates and no double taxation.

This video, narrated by Julie Borowski for the Center for Freedom and Prosperity, looks at the Obamacare/third-party payer issue.

And if you want to examine some of the component issues of healthcare reform, we have videos on Medicaid, Medicare, and tax reform.

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If You Want to Gauge the Health of the Job Market, Focus on Employment rather than Unemployment

For the past several years, on the issue of jobs, I’ve focused more on the employment-population ratio rather than the official unemployment rate.

Both figures are important, of course, but I think the employment-population ratio has more economic meaning since our prosperity ultimately is based on how many people are productively employed.

To put this in wonkish terms, our national economic output is a function of the efficient allocation of labor and capital.

The reason I bring this up is that many people think the job market is now in great shape because the unemployment rate has dropped to 5.6 percent.

To be sure, that’s good news when compared to the much higher rates of joblessness that plagued the nation a few years ago. But one of the reasons the unemployment rate has dropped is that many people have left the labor force.

Here’s a chart based on data from the Bureau of Labor Statistics showing how many people have jobs compared to the working-age population. As you can see, there’s been scant improvement in this important indicator.

The problem isn’t that the ratio plummeted during the downturn. That always happens.

What’s worrisome is the fact that there wasn’t a bounce back in the right direction after the economy started to improve.

Indeed, it’s become such a problem that the establishment media has started to notice.

Here’s some of what Reuters reported on Fridays good news/bad news jobs report.

…wages posted their biggest decline in at least eight years in a sign the tightening labor market has yet to give much of a boost to workers. …The jobless rate fell 0.2 percentage point to a 6-1/2-year low of 5.6 percent, but that was mainly because people left the labor force. The drop in labor participation and a surprise five-cent, or 0.2 percent, decrease in average hourly earnings…the labor force participation rate, the percentage of the working age population who either have a job or are looking for one, dropped back to the 36-year low of 62.7 percent reached in September.

The labor force participation rate, which is mentioned in the Reuters article, is another set of data that is rather similar to the employment-population rate.

Here’s a chart that’s been circulating on Twitter, based on data from the St. Louis Federal Reserve. You can see that the labor force participation rate jumped significantly between 1970 and 1990, in large part because more women were entering the job market. But in recent years, the trend has been in the wrong direction.

And if you parse the data, you can see that the big problem is among those without a college degree.

Now that we’ve cited lots of data, let’s speculate on why we have fewer and fewer people productively employed.

There are several possible answers, including the big increase in people scamming the disability system.

There’s also the jump in tax and regulatory burdens, though that presumably impacts all economic statistics.

Obamacare deserves its own special mention since it imposes a significant penalty on work.

And, until recently, the government had a policy of endless unemployment benefits that made work relatively less attractive.

So the bottom line, as you might expect, is that the problem is too much intervention and bloated government. Which means the answer is free markets and less government.

P.S. Some readers will have noticed that this piece cites both the employment-population ratio and the labor force participation rate. These two data series are sometimes used interchangeably, though I prefer the former for reasons explained in this article for the BLS’s Monthly Labor Review.

P.P.S. If you want a humorous take on labor economics, I recommend this Wizard-of-Id parody, as well as this Chuck Asay cartoon and this Robert Gorrell cartoon.

P.P.P.S. To end on a glum note, Obama wants to increase the minimum wage. You don’t need to be a rocket scientist to know whether that’s going to help or hurt the job market.

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The Stupid Party Strikes Again: GOP Flirts with Gas Tax Hike

One of the very first “accomplishments” of the new GOP majority in Congress was to approve a piece of corporate welfare to subsidize terrorism insurance for big companies.

But I tried to overlook that development since there were a few modest reforms included with the legislation. After all, you shouldn’t make the perfect the enemy of the good (even if the good, in this case, was rather anemic).

There won’t be any excuse, however, if Republicans move forward with a plan to hike the gas tax and further centralize transportation decisions in Washington.

And that’s exactly what seems to be brewing. Senator Corker of Tennessee (an otherwise generally sensible lawmaker) has put forward a specific plan.

Corker, R-Tenn., is drafting something most conservatives avoid at all costs — a tax bill. The Tennessee senator, along with Sen. Chris Murphy, D-Conn., wants the 18.4-cents per-gallon federal gasoline tax and the 24.4-cents per-gallon federal diesel tax to each increase by 12 cents over the next two years — and then be indexed to inflation.

And there are several other senior GOPers who have expressed sympathy.

“I just think that option is there, it’s clearly one of the options,” said Sen. Inhofe (R-Okla.), new chairman of the Senate Committee on Environment and Public Works. Senate Finance Chairman Orrin Hatch (R-Utah) and Sen. John Thune (R-S.D.), the third-ranking Senate Republican, also said they were open to the possibility of raising the tax.

Wow. This is so bad and so discouraging that I’m not even sure where to start.

So let’s make three observations.

1. Bad character. Every single Republican Senator cited in the two stories has pledged to the people of their states that they will oppose all net tax hikes.

For those of us with old-fashioned views on personal integrity, this is rather troubling.

Other than reminding me why I often have disdain for Republicans, this brings back bad memories of the “Read my lips, no new taxes” fiasco.

2. Bad politics. It is remarkably foolish for Republicans to tarnish and undermine the GOP brand as an anti-tax party.

When the issue is “should there be a tax hike?”, Republicans are more trusted by voters. But if the debate shifts to “Who should pay more tax?”, then the Democrats have an advantage.

So by putting a gas tax increase on the table, these Republicans are saying they want their opponents to have a home-field advantage.

3. Bad policy. Higher gas taxes at the national level are the wrong approach for several reasons.

But rather than reinvent the wheel, let me cite the wise words of my friends Larry Kudlow and Chris Edwards.

Here’s some of what Larry wrote for Townhall.

What can Sen. Bob Corker be thinking? On his first Sunday-news-show appearance of the year, right at the beginning of a new Republican Senate era, does Corker communicate a new GOP message of growth and reform? …Does he talk about rolling back Obamacare or regulations in general?  …No. His first Republican message is: Raise the federal gasoline tax.

He explains why this is a foolish idea.

American consumers and businesses finally get a break with plunging oil and gasoline prices. Main Street finally has something to cheer about. And then Mr. Corker weighs in with a wet-blanket proposal to raise federal gasoline and diesel taxes by 12 cents a gallon over two years from the current 18.4 cents. …Why not lead the way for a complete reform of the Highway Trust Fund, transportation spending and the Federal Highway Administration? …If states like California want to build $100 billion speed trains to nowhere, let them. But people in the rest of the country shouldn’t have to pay for it with gas and diesel taxes. …A quarter of HTF spending today is for non-highway purposes. …Federal rules like Davis-Bacon raise building costs for state and local infrastructure by at least 20 percent. Federal aid breeds cronyism, political connections and bureaucratic power in Washington D.C.

The point about gas taxes being diverted is important. Even if we keep the status quo, we don’t need Washington squandering road money of things such as mass transit or high-speed rail boondoggles.

Larry closes his column with a special plea.

Please, Sen. Corker, with the new Republican Congress in place, don’t turn the GOP into the dumb party.

And here are some excerpts from what Chris wrote for Cato.

He starts by debunking the notion that there is an infrastructure crisis.

…our highways and bridges appear to be improving, not getting more “troubled.” Federal Highway Administration (FHWA) data show that of the nation’s 600,000 bridges, the share that is “structurally deficient” has fallen from 22 percent in 1992 to 10 percent in 2013. The share that is “functionally obsolete” has also fallen. Meanwhile, the surface quality of the interstate highways has steadily improved. A study by Federal Reserve economists examining FHWA data found that “since the mid-1990s, our nation’s interstate highways have become indisputably smoother and less deteriorated.”

But even if we had a growing number of “troubled” and “deficient” bridges and highways, that shouldn’t matter.

As Chris explained in testimony to the Senate Finance Committee, these issues shouldn’t be handled by Washington.

One option would be to reduce spending and downsize the federal role in transportation. That approach would encourage state governments to pursue their own innovative solutions for highways and transit, such as new types of user charges, public-private partnerships, and privatization. Federal aid programs for highways and transit have many shortcomings. Aid redistributes transportation funds between the states in ways that are unfair and inefficient. Aid can get misallocated to low-value projects, and it distorts efficient decisionmaking by state and local governments. Also, federally funded projects are known for mismanagement and cost overruns.

Bingo. Chris is exactly right.

Which is why the right approach to transportation is to repeal the gas tax, not raise it.

As I argued in this debate with former Pennsylvania Governor Ed Rendell, we need to get Washington out of the business of determining state and local transportation issues.

P.S. Here’s an interesting example of “public choice” economics. Ask yourself why the CEO of a car company would endorse a big tax hike on gasoline. I give my answer in this discussion with Judge Napolitano.

P.P.S. Don’t forget that the politicians in Washington also are considering a tax on miles driven, so they’d be able to squeeze more money out of motorists even if they have fuel-efficient vehicles.

P.P.P.S. Just in case you’re tempted to acquiesce to more power and money for Washington, never forget the lesson of this poster.

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India’s Amazing No-Show Civil Servant Wins Membership in the Bureaucrat Hall of Fame

I’m impressed, in a dark and gloomy way.

I thought the Italian healthcare official who showed up for work only 15 days in a nine-year period set the record for bureaucratic loafing.

Based on longevity of laxity, he definitely out-did the San Francisco paper pusher who didn’t work at all in 2012 yet still got paid $333,000.

And while it’s remarkable that a New Jersey bureaucrat simultaneously got paid for six different jobs, he presumably actually went to work every day.

But all these bureaucrats will probably be ashamed to learn that one of their counterparts in India makes the rest of them seem like workaholics.

Here are some excerpts from a report in England’s Daily Telegraph.

Even in India, where government jobs are considered to be for life, A.K. Verma was pushing it. Verma, an executive engineer at the Central Public Works Department, was fired after last appearing for work in December 1990. …Even after an inquiry found him guilty of “wilful absence from duty” in 1992, it took another 22 years and the intervention of a cabinet minister to remove him, the government said. India’s labour laws, which the World Bank says are the most restrictive anywhere, make it hard to sack staff for any reason other than criminal misconduct.

Needless to say, Mr. Verma deserves election to our Bureaucrat Hall of Fame.

And I suppose there are two broader public policy lessons to this story.

1. If you’ve ever wondered why Indians in America are so successful in America while Indians in India are relatively impoverished, bad policy is to blame, with restrictive labor laws being just one example. Yes, India has implemented some reforms, but if you check the data from Economic Freedom of the World, you can see there’s still a long way to go.

2. There’s nothing wrong with unions if they’re operating in a non-coercive setting. But when the governments tilt the playing field with pro-union legislation, bad results are almost inevitable. And the greatest problem isn’t necessarily above-market wages, but rather inefficient work practices such as an inability to fire bad performers.

P.S. If you like bureaucracy humor, here’s a message from the California public works department.

This Michael Ramirez cartoon shows how taxpayers get squeezed when politicians and bureaucrats negotiate.

We also have this flowchart on bureaucratic operations which was probably developed at DHS or HUD.

And this anecdote shows how congressional budgeting and bureaucracy intersect.

Here’s the famous satirical video on overpaid firefighters in California.

Last but not least, here are two very good posters that capture bureaucrats in action, as well as link to other amusing bureaucrat humor.

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One Good Result and One Bad Result of Obamacare

One of the good things about working at the Cato Institute is that there’s never any pressure to put your thumb on the scale to help any political party.

Our loyalties are to libertarian principles, many of which are reflected in the Constitution, so we’re free to criticize or praise politicians based on their ideas rather than their partisan affiliation.

That’s why we criticized President Bush’s pro-centralization No Child Left Behind education scheme just as much as President Obama’s pro-centralization Common Core education scheme.

It’s also why I criticized Bush for being a big spender like Obama (indeed, Bush was a bigger spender, even for domestic programs!).

I’m giving this background because today I’m going to say something nice about Obamacare.

Not because I like the overall law, but because honesty is the best policy.

Regular readers know that our healthcare system is screwed up by bad government policy. More specifically, spending programs such as Medicare and Medicaid, combined with tax preferences and regulations that encourage over-insurance, have created a giant third-party payer problem.

Only 11 percent of health care spending in America is directly financed by consumers. The rest is paid for by taxpayers, insurance companies, and other third parties.

This has eviscerated the normal working of a competitive market. When people are spending their own money, they are careful and prudent. When they spend other people’s money, however, they are not overly concerned about cost.

As a result, we have a needlessly expensive system. And because third-party payer requires lots of administration and paper work, bad government policies also have caused absurd levels of inefficiency.

Well, there’s one small piece of Obamacare that actually is helping to mitigate this problem. The law includes a so-called Cadillac tax that caps the special tax preference for fringe benefits (if your employer provides you a health insurance policy as part of your compensation, that type of income isn’t taxed, unlike your cash wages).

And that reform is having a positive impact. Here are some passages from a Bloomberg story.

Large employers are increasingly putting an end to their most generous health-care coverage as a tax on “Cadillac” insurance plans looms closer under Obamacare. Employees including bankers at JPMorgan Chase & Co. (JPM) and college professors at Harvard University are seeing a range of moves to shift more costs to workers. …The tax takes effect in 2018, and employers are already laying the groundwork to make sure they don’t have to pay the 40 percent surcharge on health-insurance spending that exceeds $27,500 for a family or $10,200 for an individual. Once envisioned as a tool to slow the nation’s growing health-care tab, the tax has in practice meant higher out-of-pocket health-care costs for workers.

The last sentence in the excerpt, by the way, is economically illiterate.

The Cadillac tax will restrain health spending because it means higher out-of-pocket costs for consumers. They are going to have more authority and responsibility of how to spend their own money.

Think of this analogy. Will you eat more if I give you $25 to buy a meal or if I give you a pre-paid voucher for a $25 all-you-can-eat buffet?

If you’re a normal person, you’ll take the $25 cash, buy a meal for less than that amount, and save the extra money for something else.

But if you’re given a pre-paid voucher for the buffet, you’ll pig out because there’s no additional cost for consuming more items.

And the Bloomberg story includes evidence that giving consumers more control over their income is having the predicted positive effect.

The tax on Cadillac plans — named after the luxury vehicle to denote their lavishness — is one reason the growth in health-care premiums has slowed since the Patient Protection and Affordable Care Act took effect in 2010. …The tax “is having the effect that was intended, which is the cost of these plans are being reduced,” Christopher Condeluci, a former Senate Republican aide who helped design it, said in a phone interview. …Premium increases for employer-provided health insurance, which covers about 48 percent of Americans, “slowed markedly” in 31 states since 2010, the year the Affordable Care Act became law, the New York-based Commonwealth Fund reported today. Nationally, premium growth fell by about a percentage point after the law, to 4.1 percent a year on average, the report said.

By the way, I should hasten to add that I’m not happy about the way the Cadillac tax was adopted, for a major reason and a minor reason.

The major reason is that it was part of a law that is otherwise a very expensive disaster.

The minor reason is that, for reasons of both good tax policy and good health policy, I want to eliminate loopholes and tax preferences only if we can use every penny of revenue to finance lower tax rates.

And that’s exactly what you get with a flat tax, which is a system where you don’t even need a Cadillac tax because there’s no healthcare exclusion.

Under Obamacare, by contrast, the Cadillac tax limits the healthcare exclusion, but politicians used the money to finance bigger government.

Now let’s say something bad about Obamacare.

John Goodman of the Independent Institute has a column in today’s Wall Street Journal. He points out that the law is hurting many of the people it was supposed to help.

…the law is already hurting some of the people it was intended to help. By this time next year, we may find that many workers who earn within a few dollars of the minimum wage have less income and less insurance coverage (as a group) than they did before the mandate began to take effect.

How does John justify these assertions?

Because he did some real-world research, surveying 136 fast-food restaurants with 3,500 employees.

The results are not encouraging, at least for the workers.

Before 2014 about half the employees were “full time” as defined by ObamaCare; that is, they worked 30 hours or more a week. The potential cost to the employers of providing mandated health insurance to their full-time staff would have been about $7 million a year. But by the time the employers took advantage of all their legal options they were able to reduce their cost to less than 1% of that amount. The first step was to make all hourly workers part time. …workers in the survey whose hours were reduced to part time…can get subsidized insurance through an exchange, but they will be asked to pay up to 9.5% of their income for what is unattractive coverage. Some of them previously had mini-med plans, but this kind of insurance is no longer available to them. …Those few remaining full-time employees will get mini-med insurance for themselves, but they are unlikely to be able to afford coverage for any dependents they have. They will not get an ObamaCare bronze plan unless they fork over about one-tenth of their take-home pay, and they won’t be able to get bronze coverage for other family members unless they forfeit more than half their income. Out of 3,500 employees, only one that we know of got the kind of insurance that the architects of the Affordable Care Act wanted everyone to have.

One out of 3,500? Sounds like the typical success rate for a government program.

But we shouldn’t joke. It’s not funny that low-income workers are being hurt. Just like it’s not funny that young adults, retirees, and kids are being disadvantaged by Obamacare as well (on the other hand, it is somewhat amusing that politicians, IRS agents, and Harvard professors are upset about the law).

The bottom line is that an overwhelming percentage of Obamacare provisions make the healthcare system more expensive and less effective.

Yes, there are some positive effects of the Cadillac tax, but those are easily offset by all the features of the law that increase the size and scope of government.

P.S. Since I mentioned that third-party payer has messed up our healthcare system and caused prices to rise, I should point out that there are a few sectors where consumers are still in charge. And in those areas, such as cosmetic surgery and abortion, prices are falling in relative terms.

P.P.S. The folks at Reason TV put together a must-watch video on how a hospital can be more efficient and affordable in the absence of third-party payer.

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There Are some Bad Cops, but the Real Problem Is Bad Laws

It’s probably not a fun time to be a police officer. The deaths of Michael Brown in Missouri and Eric Garner in New York have led some – including the Mayor of New York City – to explicitly or implicitly accuse cops of systemic racism.

And then you have folks like me, who grouse about cops for reprehensible abuse of citizens as part of the drug war, as well as disgusting examples of theft using civil asset forfeiture.

Heck, any decent person should get upset about some of the ways law enforcement officials abuse their powers. Consider these excerpts from a nightmarish story out of Houston.

Chad Chadwick has something many citizens can only covet – a spotless record. …But on the night of September 27th, 2011 Chadwick’s commitment to living within the law did him no good at all. It started when a friend concerned for Chadwick’s emotional well-being called Missouri City police to Chad’s Sienna apartment where he’d been distraught, drinking and unknown to anyone, had gone to sleep in the bathtub. A SWAT team was summoned.

I’m not sure why a SWAT team was needed in this case, but that’s not the horrific part of the story.

Here’s what then happened.

“They told a judge I had hostages. They lied to a judge and told him I had hostages in my apartment and they needed to enter,” said Chadwick. …Chadwick’s firearm possession apparently prompted SWAT to kick in his door, launch a stun grenade into the bathroom and storm in, according to Chadwick, without announcing their identity. “While I had my hands up naked in the shower they shot me with a 40 millimeter non-lethal round,” said Chadwick. A second stun grenade soon followed. “I turned away, the explosion went off, I opened my eyes the lights are out and here comes a shield with four or five guys behind it. They pinned me against the wall and proceeded to beat the crap out of me,” said Chadwick. That’s when officers shot the unarmed Chadwick in the back of the head with a Taser at point blank range. …And it wasn’t over. “They grabbed me by my the one hand that was out of the shower and grabbed me by my testicles slammed me on my face on the floor and proceeded to beat me more,” said Chadwick. Chadwick, who hadn’t broken a single law when SWAT burst through his door, was taken to the Ft. Bend County Jail with a fractured nose, bruised ribs and what’s proven to be permanent hearing loss. He was held in an isolation cell for two full days.

Did Mr. Chadwick then get a profuse apology when it was determined that he hadn’t broken any laws?

Not exactly.

Ft. Bend County District Attorney John Healy sought to indict Chadwick on two felony counts of assaulting a police officer, but a Grand Jury said no law was broken. …but Healy’s prosecutors tried misdemeanor charges of resisting arrest, calling more than a dozen officers to testify. Those charges were dropped as well.

The government eventually did figure out a way to get Mr. Chadwick into court, but it didn’t turn out so well.

A month ago, three years after the SWAT raid, a jury found Chad Chadwick not guilty of interfering with police. With tears in their eyes members of the jury offered the exonerated defendant comforting hugs. “They tried to make me a convict. It broke me financially, bankrupted me. I used my life savings, not to mention, I lost my kids,” said Chadwick.

This is one of these cases where I hope Mr. Chadwick sues and gets generously compensated (and I would want any damages to be financed out of the budgets of the officials who misbehaved).

Defenders of the police will argue, quite correctly, that we shouldn’t smear entire police forces or the overall justice system simply because there are some bad cops and unethical prosecutors.

That’s certainly the right attitude, though it’s worth noting that sometimes the “culture” of a police force can get so poisonous that wholesale dismissal is the only way to get better performance.

Here are some passages from a New York Times report about a city in New Jersey that got far better results by firing its entire police force.

It has been 16 months since Camden took the unusual step of eliminating its police force and replacing it with a new one run by the county. …the old force had all but given up responding to some types of crimes. Dispensing with expensive work rules, the new force hired more officers within the same budget — 411, up from about 250. It hired civilians to use crime-fighting technology it had never had the staff for. …Average response time is now 4.4 minutes, down from more than 60 minutes, and about half the average in many other cities. …In June and July, the city went 40 days without a homicide — unheard-of in a Camden summer. …And while the unrest in Ferguson, Mo., has drawn attention to long-simmering hostilities between police departments and minority communities, Camden is becoming an example of the opposite. “We’re not going to do this by militarizing streets,” Chief Thomson said. Instead, he sent officers to knock on doors and ask residents their concerns. He lets community leaders monitor surveillance cameras from their home computers to help watch for developing crime.

 An even more dramatic example comes from Georgia, a country of 5 million people wedged between Russia and Turkey.

As part of a series of reforms to create free markets and honest government, all 15,000 cops from the State Traffic Inspection Office were fired.

Georgian authorities chose a radical method of reforming the police structures which were not working. …The State Traffic Inspection was one of the most corrupt units in the Georgian government. It was almost totally self-financed, fleecing both local and foreign drivers as they traveled Georgian roadways. According to estimates, 80 percent of the money extorted from drivers was distributed along the chain of command all the way up to the minister. …In early summer of 2004, Merabishvili eliminated the State Traffic Inspection, firing all fifteen thousand employees in a single day! Two months later, in August 2004, the force was replaced by competitive hiring of employees for the newly formed US-style highway patrol. During the two-month transition period there was no policing of the roads, and yet the number of car accidents did not increase. There were no riots.

The part about nothing bad happening when there were no cops is especially revealing.

Sort of like how nothing bad happened during the sequester, even though President Obama warned of terrible consequences (humorously captured by these cartoons).

Or when we got welfare reform in the 1990s and poverty went down instead of increasing as the left predicted.

But now let’s defend cops, who actually help fulfill one of the few legitimate functions of government. And there are two reasons they deserve defending.

First, the vast majority of them almost certainly are good and decent people who simply want to help others by fighting and deterring crime. That’s a real value.

Second, almost all of the bad stories about cops exist because politicians have enacted bad laws. I’ve made this point about the drug war. I’ve made this point about asset forfeiture. And I’ve made this point in the case of Eric Garner.

If politicians didn’t criminalize victimless behavior, most horror stories would disappear.

And if politicians didn’t treat police departments as backdoor vehicles for taking money from citizens, there would be no need for some of the unfortunate interactions that now occur between cops and citizens.

Now let’s defend the police from a very incendiary charge. Are cops racists, as some protesters (and government officials) would like us to believe?

Well, I’m sure there are some racist cops (of all colors), just as there are racist accountants, truck drivers, bureaucrats, and even economists. But the real issue is whether racism is a pervasive problem.

And when looking at one of today’s hot-button issues, the answer seems to be no. Kevin Hassett of the American Enterprise Institute has some compelling evidence that the police do not disproportionately kill blacks.

…understanding the relationship between African-American communities and law enforcement requires a deeper analysis than a single headline… One simple way to check for bias is to see whether the number of violent crimes needed to explain one police-related death is different depending on one’s race. …We divide the number of violent crimes by the arrest-related deaths for each race. The quotient tells us, on average, how many violent crimes it takes, by race, to produce one arrest-related death. If police are unambiguously racist, then it should take fewer violent crimes to induce one death in the African-American community. As the chart shows, according to our data, African Americans and white Americans have roughly the same proportion of violent crimes to police-related deaths. …These numbers are strikingly similar. The difference between them is small, and not statistically significant. …police appear to be treating the races the same.

But that hasn’t stopped the Obama Administration from subsidizing a group that produced a video that seemingly condones cop killing.

The Obama administration’s Justice Department funneled at least $1.5 million in grants to a New York legal-aid group featured in a new rap video that depicts two young black men aiming handguns at a white police officer. …The video for  “Hands Up,” which also shows a white police officer gunning down a black motorist wearing a hoodie, contains lyrics suggesting revenge for much-publicized deaths of black men in confrontations with police. …The organization, which was founded in 1997 and boasts some high-powered corporate lawyers on its board, has enjoyed a steady flow of taxpayer dollars since President Obama took office in 2009.

This is disgusting.

Accusing cops of systemic racism without evidence is bad enough, but to subsidize a group that glorifies cop killing is downright evil.

But the bottom of line of this post is that our main problem is too many laws that are either designed to collect revenue or to dictate private behavior.

That’s where reforms should focus, not on vilifying the average cop.

P.S. I can’t resist sharing an amusing anecdote about cops. Several years ago, I spoke at the Liberty Forum in New Hampshire, a conference connected with the Free State Project. Many of the participants were avid practitioners of “open carry,” which meant they had handguns strapped to their sides. At one point, I was riding with several of these folks down the elevator at the conference hotel and a family got in. A young boy noticed all their weapons and asked “Are you guys cops?” One of them cheerfully responded, “No, we’re the good guys.”

P.P.S. On the other hand, I also have a less-than-amusing anecdote.

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The Left Is Salivating for a New Energy Tax on American Consumers

Because of the need to control the size and scope of government, it’s critically important to reject all tax hikes. Simply stated, once politicians think there’s a possibility of more revenue coming to DC, any commitment to spending restraint and entitlement reform will quickly evaporate.

It’s especially important not to let politicians get new sources of revenue. That’s why, for instance, the value-added tax would be a terrible idea. Politicians might promise to use the revenue to lower or eliminate other taxes, but the European evidence shows that the long-run impact is to finance a much larger burden of government spending.

And you also get more red ink, for what it’s worth.

It also would be a bad idea to give politicians a big, new energy tax. They’ve been salivating for something like this ever since Bill Clinton unsuccessfully proposed a BTU tax back in 1993.

But like other bad ideas (i.e., Keynesian economics), the notion of a national energy tax refuses to die.

President Obama’s former Chief Economist (as well as a Treasury Secretary for Bill Clinton) wants an energy tax imposed on America. Here is some of what Larry Summers wrote for the Washington Post.

With the recent steep fall in oil prices and associated declines in other energy prices…there should be no doubt that, given the current zero tax rate on carbon, increased taxation would be desirable. …While the recent decline in energy prices is a good thing in that it has, on balance, raised the incomes of Americans, it has also exacerbated the problem of energy overuse. The benefit of imposing carbon taxes is therefore enhanced.

In other words, he wants government to benefit from falling energy prices, not consumers.

And he also wants tax harmonization as part of an ideological crusade on global warming.

A U.S. carbon tax would contribute to efforts to combat climate change in other ways. It would be a hugely important symbolic step ahead of the global climate summit in Paris late this year. It would shift the debate toward harmonized measures to raise the price of carbon use.

You also won’t be surprised to learn that Summers wants a big tax.

What size levy is appropriate? Here there is more danger of doing too little than too much. Once the principle of taxation is accepted, its level can be adjusted. A tax of $25 a ton would raise more than $100 billion each year and seems a reasonable starting point.

A $100 billion tax is a “reasonable starting point”?!? I’m afraid to ask him for his definition of a “reasonable concluding point.” Probably with government consuming all the nation’s output.

But you have to give Summers credit for honesty. Most politicians would pretend that a new tax would be used for deficit reduction. But Summers is honest enough to say the money would be used to finance a new spending spree by Washington.

How should the proceeds be used? …An additional $50 billion a year in infrastructure spending would be a significant contribution to closing America’s investment gap in that area. The same sum devoted to pro-work tax credits could finance a huge increase in the earned-income tax credit, a meaningful reduction in the payroll tax or some combination of the two.

Gee, what wonderful ideas. More pork-barrel spending out of Washington and more income redistribution laundered through the tax code with the EITC.

I talked with Neil Cavuto about the merits (and lack thereof) of this proposed energy tax.

To elaborate on the interview, the left understands very well that their spending agenda requires more revenue. That’s why Obama is relentless in urging more revenue. It’s why the leftists at the Paris-based OECD endlessly urge higher taxes in America (even to the point of arguing that tax-financed redistribution is somehow good for growth). And it’s why the DC establishment is so enamored with “bipartisan” tax-hiking budget deals, which inevitably lead to bigger government and more debt.

Honoring the no-tax-hike pledge isn’t a sufficient condition to rein in big government, but it sure is a necessary condition.

Amazingly, top Democrats even admit that their top political goal is to seduce Republicans into supporting higher taxes, yet some GOPers seem willing to walk into this trap.

No wonder Republicans are sometimes known as the Stupid Party (as cleverly illustrated by Michael Ramirez).

P.S. Here’s an excellent video outlining seven reasons to oppose higher taxes.

P.P.S. The bureaucrats at the International Monetary Fund have proposed a massive energy tax on American consumers (in addition to all the other tax hikes advocated by that international bureaucracy).

P.P.P.S. An energy tax would be a levy on consumption, which is less destructive than higher income tax rates and more double taxation. But just as I wrote about the value-added tax, the issue isn’t whether we replace a horrible tax with a less-horrible tax. The debate is whether we add a less-horrible tax on top of the current horrible system.

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Another Strong Entry in the Least-Sympathetic-Victim-of-Obamacare Contest

Shortly after Obamacare was enacted, I began to maintain a list of groups that were victimized by the law. But after listing kids, low-income workers, and retirees, I quickly realized this was a senseless exercise because virtually everyone in the country was going to be hurt by this expansion of government power and control.

So I then began to put together a different type of list. I call it the “least sympathetic victims” of Obamacare. These are groups that are being hurt by the law, but I think you’ll agree with me that they don’t deserve tears of support. At least not real ones.

Some politicians and staffers of Capitol Hill are very upset about the prospect of being subjected to the law that they inflicted on the rest of the country.

The bureaucrats at the IRS are agitated about the possibility of living under Obamacare, even though the IRS got new powers as a result of the law.

We now have a new group to add to the list. It appears that the faculty of Harvard University aren’t happy about some of the changes imposed by Obamacare. Even though many Harvard professors helped Obama design and promote the law!

Here are some passages from a New York Times report.

Members of the Faculty of Arts and Sciences, the heart of the 378-year-old university, voted overwhelmingly in November to oppose changes that would require them and thousands of other Harvard employees to pay more for health care. The university says the increases are in part a result of the Obama administration’s Affordable Care Act, which many Harvard professors championed. …“Harvard is a microcosm of what’s happening in health care in the country,” said David M. Cutler, a health economist at the university who was an adviser to President Obama’s 2008 campaign. …In Harvard’s health care enrollment guide for 2015, the university said it “must respond to the national trend of rising health care costs, including some driven by health care reform,” in the form of the Affordable Care Act. …Mary D. Lewis, a professor who specializes in the history of modern France and has led opposition to the benefit changes, said they were tantamount to a pay cut. …The president of Harvard, Drew Gilpin Faust, acknowledged in a letter to the faculty that the changes in health benefits — though based on recommendations from some of the university’s own health policy experts — were “causing distress” and had “generated anxiety” on campus.

Distress and anxiety on campus? Oh, the horrors.

I guess it’s perfectly acceptable to impose harm on the peasants in flyover country, but these Harvard elitists obviously don’t want to live under the policies that they recommend for the rest of us.

P.S. I gather Harvard and Massachusetts Institute of Technology view each other as rivals. Well, since Jonathan Gruber (the guy who was caught on tape admitting that Obamacare was based on lies) is a professor at M.I.T. and Harvard professors are the ones getting very agitated, maybe we should simply view Obamacare as a really clever school-against-school prank? It’s just unfortunate that the rest of the country is suffering collateral damage.

P.P.S. By the way, one of the reasons that Harvard professors are unhappy is because of the so-called Cadillac tax, which actually is one of the few parts of Obamacare that may have some positive effect since it’s designed to reduce over-insurance and mitigate the third-party payer problem.

P.P.P.S. Let’s close with some political humor.

This Michael Ramirez cartoon captures President Obama as a precocious school kid.

You can see why readers voted Ramirez as the best political cartoonist.

P.P.P.P.S. And here’s a very clever video about terrorists and the Transportation Security Administration.

For more TSA humor, see this, this, this, this, and this. And if you want more terrorist humor, click here, here, here, and here (at the end of the post).

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Another Nauseating Example of Government Thuggery

According to Gallup, Americans now identify “government” as the most important problem facing the United States.

That doesn’t surprise. Gallup also found last year that big government is considered a far greater danger to the nation that big business or big labor.

Moreover, a poll from NPR earlier this year found that government was the leading cause of stress in people’s lives.

And Gallup discovered earlier this year that a record number of Americans think that government is corrupt.

So why do Americans have such a dour view of officialdom?

Well, let’s look at one example. The Wall Street Journal has a devastating editorial about dishonest and unethical behavior by federal and state bureaucracies.

The column starts with a strong assertion.

Prosecutorial misconduct has become an ugly commonplace of modern government, manipulating the legal system to attack easy political targets. 

It’s one that many people recognize is accurate, and probably helps to explain why pollsters now find the kinds of results cited above.

But if you think the WSJ is exaggerating or that people are misguided for being hostile to government, just check out how Andy Johnson, Anthony Smelley, Charlie Engle, Tammy Cooper, Nancy Black, Russ Caswell, Jacques Wajsfelner, Jeff Councelller, Eric Garner, Martha Boneta, Carole Hinders, Salvatore Culosi, and James Lieto were victimized by bureaucrats run amok.

But I’m digressing. Let’s get to this newest case. It deals with a forest fire in California and subsequent efforts for federal and state bureaucracies to blame a private company and extort some of the firm’s cash and land.

The story began in 2007 with the Moonlight Fire in California that burned some 65,000 acres, about two-thirds on federal land. Within 48 hours and while the flames were still burning, the state’s department of forestry and fire protection, known as Cal Fire, and the U.S. Forest Service blamed the disaster on Sierra Pacific, a Redding-based company that owns some 1.2 million acres of timberland. In 2009 a federal-state task force brought official complaints against the company and nearby landowners. California officials filed an action in state court while prosecutors sued for $1 billion in federal court. Sierra Pacific has insisted it didn’t start the fire but, faced with an open-ended legal fight, the company in 2012 settled the federal case for $55 million and a deed of some 22,500 acres to the U.S. government.

So far, so good, at least from the federal government’s perspective.

But there was still the case that was filed in state court, which presumably represented another attempt to extort more money from Sierra Pacific.

And this is where the government screwed up, whether through greed or incompetence (probably both). The WSJ has some of the sordid details that have been unearthed.

…the state case continued, and it has exposed a fiasco of fraud and corruption… Among other problems, government investigators and prosecutors doctored reports, misrepresented facts and retaliated against employees whose questions threatened their strategy. …According to the theory implicating the company, the fire started when the blade of a Sierra Pacific bulldozer hit a rock and created a spark. Government investigators pinpointed a location and claimed they had confirmation from a bulldozer driver. Problem was, both the fire’s alleged point of origin and the scenario to buttress it were fraudulent. When the company questioned the bulldozer driver, he denied having made the statement and admitted he couldn’t have confirmed the statement prosecutors had him sign because he didn’t know how to read. Prosecutors were also dishonest about where the fire started. Overhead videos have shown that the point of origin marked by the government was well outside the visual boundaries of the burning forest nearly an hour after the fire started.

I’m tempted at this point to make some snarky joke, but this issue is far too serious. When the government prevaricates in legal proceedings, that undermines the rule of law and call into question the integrity of the entire system.

And the column reveals that there was corruption and mendacity at both the state and federal level.

A second federal prosecutor, Eric Overby, joined the case in 2011, only to withdraw promptly on discovering what he called prosecutorial abuse directed squarely at raising revenue. He told defense counsel that in “my entire career, I have never seen anything like this. Never.” In February 2014, California state Judge Leslie Nichols assailed the federal and state government for abuses of discovery so “reprehensible” and “egregious” that they “threatened the integrity of the judicial process.” He threw out the case and awarded Sierra Pacific $30 million in sanctions against Cal Fire.

There are still reverberations from the case as Sierra Pacific is seeking to void the agreement that was made (based on lies) with the federal government. Needless to say, one hopes the company will win.

But there’s something else that needs to happen. The corrupt government officials need to be penalized, ideally with criminal sanctions including jail time. The government’s lawyers also should be disbarred and lose their jobs.

Punishment is the right approach, both because it is deserved and because it’s the only way of sending an effective signal to other bureaucrats that there is a personal risk to government malfeasance.

I also think Sierra Pacific, like any other victimized party, deserves compensation. Unfortunately, that money would come from taxpayers when it should be deducted from the budgets of the misbehaving bureaucracies (and the salaries of the bureaucrats).

P.S. I noted at the end of last year that President Hollande in France has decided to get rid of his class-warfare 75 percent top tax rate.

That’s a sign of progress, to be sure, but I wasn’t nearly as eloquent on the issue as Dan Hannan. The British MEP has some very wise words in today’s Washington Examiner.

I was living in Brussels when François Hollande, the President of France, introduced his 75 percent top rate tax in 2012. Immediately, my quartier began to fill with French exiles, who could commute to Paris in just over an hour.  …Three years on, President Hollande is shame-facedly scrapping the 75 percent rate, having forcibly re-learned an ancient truth: Wealth taxes don’t redistribute wealth; they redistribute people. Thousands of well-off Frenchmen made the easy journey north, including the country’s richest man, Bernard Arnault. …Hollande’s tax, levied on incomes above one million euros, has been a miserable failure. Over its lifespan, it raised around $500 million, a tiny fraction of the original projections. Why? Well, the Paris bureaucrats who made those projections overlooked something rather important. Rich people don’t sit around waiting to be taxed. They have all sorts of ways of beating the system… A lot of politicians don’t want to hear this. Instead of accepting international competition, they legislate against it — by, for example, imposing international rules on tax harmonization.

Amen to all these excerpts. Hollande’s class-warfare scheme was an economic failure and a revenue failure.

I also like what Hannan wrote about tax competition, and you can watch two very brief speeches he made on that topic by clicking here.

P.S. If you enjoy short Dan Hannan speeches, here’s one about the European bureaucracy racket and here’s one on the hypocrisy of European politicians.

P.P.S. My favorite item from Hannan, though, is his column about the socialist part of Germany’s National Socialists.

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The Left’s Position on the Laffer Curve and Dynamic Scoring: Being Exactly Wrong Is Better than Being Inexactly Right

Since I’m a big advocate of the Laffer Curve, that means I favor dynamic scoring. This is the common-sense observation that you can’t figure out the effect of tax changes on revenue without first estimating the impact on taxable income.

And I’ve shared some very persuasive data and analysis in favor of the Laffer Curve and dynamic scoring.

The huge increase in taxes paid by upper-income taxpayers after Reagan slashed the top income tax rate.

The fact that the overwhelming majority of CPAs believe in significant feedback effects.

Even left-wing economists admit that you lose revenue if tax rates get too high.

International bureaucracies even admit that there are “Laffer Curve” limits that make some tax hikes self-defeating.

Notwithstanding all this evidence, we have a system in Washington that is based on static scoring, which simplistically assumes a linear relationship between tax rates and tax revenue.

The Joint Committee on Taxation makes the revenue estimates, and reformers argue the status quo is biased in favor of higher tax and have long urged the system to be modernized to get more accurate numbers.

Needless to say, establishment leftists don’t want to see any changes.

Edward Kleinbard, a former Staff Director for the Joint Committee on Taxation, writes with disapproval in the New York Times that Republicans want to change the existing methodology for estimating the revenue impact of changes in tax policy.

…at the top of their to-do list is changing how the government measures the impact of tax cuts on federal revenue: namely, to switch from so-called static scoring to “dynamic” scoring. While seemingly arcane, the change could have significant…consequences.

Here’s his description of the issue, which is reasonably fair.

…conventional estimates do not…incorporate macroeconomic behavioral changes. Dynamic scoring does. Proponents point out, correctly, that if a tax proposal is large enough, then those sorts of feedback effects can aim the entire economy on a slightly different path. Such proponents argue that conventional projections are skewed against tax cuts, because they do not consider that cutting taxes could lead to higher economic output, which would make up at least some of the lost revenues. They maintain that dynamic scoring will, therefore, be both more neutral and more accurate than current methodologies.

He then gives two reasons why he doesn’t like dynamic scoring.

First, he argues that a modernized system will be imprecise.

Economists disagree on the answers, and different models’ predicted feedback effects vary wildly, depending on the values selected for those uncertain assumptions.  …Consider the nonpartisan scorekeepers’ estimates of the consequences of a tax-reform bill proposed last year by Representative Dave Camp, Republican of Michigan. Using different models and plausible inputs, the scorekeepers estimated that, under the bill, total gross domestic product might rise between 0.1 percent and 1.6 percent over the next decade — a 16-fold spread in projected outcomes. Which result should be the basis of congressional scorekeeping?

He’s certainly right that economic models will generate a range of predictions.

And I’ll be the first to admit that models are woefully inadequate in their attempts to measure millions of people making billions of decisions. Heck, I’ve even pointed out that economists are terrible forecasters.

But Kleinbard is basically arguing that it’s better to be exactly wrong than inexactly right.

Under the current system, for instance, the JCT will simplistically calculate that a doubling of tax rates will lead to a near-doubling of tax revenue.*

That’s very precise, but it’s also very wrong. In reality, a doubling of tax rates would have a very large and very negative impact on economic performance. Shouldn’t lawmakers have a system that at least gives them an estimate, or a range of estimates, to suggest the possible real-world consequences?

This video explains what is wrong with the Joint Committee on Taxation’s methodology.

Kleinbard’s second argument against dynamic scoring is based on his assumption that bigger government is good for the economy since the government spends money wisely.

I’m not joking.

Federal deficits are on an unsustainable path (as it happens, because of undertaxation, not excessive spending). Simply cutting taxes against the headwind of structural deficits leads to lower growth, as government borrowing soaks up an ever-increasing share of savings. …these models are political statements. They show the biggest economic effects by assuming that tax cuts are financed by unspecified future spending cuts. The smaller size of government, not the tax cuts by themselves, largely drives the models’ results. …the models are not a step toward more neutral revenue estimates, because they assume that, while individuals make productive investments, government does not. In reality, government spending contributes significantly to economic output. …When revenues do in fact decline and deficits rise, those same proponents will push for steep cuts in government insurance or investment programs, because they will claim that the models demand it.

Wow. I hardly know where to start. So many wrong assertions in so little space.

I guess I’ll begin by pointing out that it’s absurd to argue America’s fiscal problems are the result of taxes being too low. But if you don’t believe me, just look at the White House’s own numbers.

But the most important point to address is that Kleinbard thinks government spending is more efficient than private spending.

That arguably might be true if government was consuming only 2 percent of GDP and certain core “public goods” weren’t being provided.

But that’s hardly the case today, or at any time in recent history.

The burden of government spending is well beyond the growth-maximizing level in the United States. This video elaborates.

The evidence strongly indicates we need less government rather than more. Unless, of course, you think the United States would grow faster if we were more like France or Greece.

* There are some “micro-economic” feedback effects in the current system, so even the JCT wouldn’t assert that revenues would double if tax rates rose by 100 percent.

P.S. Here’s my debunking of the straw-man debunking of the Laffer Curve and dynamic scoring.

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Debating the “American Dream”

What is the American Dream?

I suspect it’s a bit like beauty, in the eye of the beholder, but here’s the Wikipedia definition:

…a national ethos of the United States, a set of ideals in which freedom includes the opportunity for prosperity and success, and an upward social mobility for the family and children, achieved through hard work in a society with few barriers.

That sounds reasonable. My view, for what it’s worth, is that people will prosper in a system of free markets and limited government.

Now let’s ask a tougher set of questions. Is the American Dream a myth or reality? And if it’s real, does it still exist?

Perhaps most important, what’s needed for the Dream to be a reality?

Writing for the New York Times, I added my two cents on this issue, taking part in a “Room for Debate” on the issue of “Is the Modern American Dream Attainable?”

As you can see, I’m cautiously optimistic.

…the American Dream is still a reality. Even with relatively sub-par economic performance in recent years, our economy’s overall level of output, as well as the annual growth rate, is still the envy of the developed world.  …The burden of government in the United States is smaller than it is in Europe, and our markets are more open and deregulated than they are in Latin America, Asia and Africa. These features mean that poor people have considerable opportunity to climb the ladder, limited only by their talents, abilities and willingness to work hard. But things could be even better. There’s been a big expansion of government intervention under both President George W. Bush and Obama. And when government gets more power to dictate who wins and who loses in the marketplace, powerful and politically well-connected incumbents almost always reap the benefits on this cronyism. …if we can restrain the size and scope of government, there’s every reason to believe that the America Dream will be strong for the rest of the 21st century.

If the editors had allowed me more room, I would have included very powerful data showing that people in the United States have much higher living standards than their European counterparts, augmented by data from the rest of the world showing the relationship between small government and economic growth.

There were five other participants in the debate, and I’ll share their main points followed by my reactions.

Erin Currier of Pew was somewhat pessimistic. She cited figures on relative mobility and argued that too few people climb out of poverty.

Forty-three percent of those raised in the bottom fifth of the income ladder remain there a generation later, and 40 percent of those raised at the top stay there. Just 4 percent raised at the bottom rung of the income ladder make it to the top a generation later. …Americans feel increasingly financially insecure, perhaps in part because of this lack of mobility out of the bottom rung of the economic ladder.

Maybe I’m a glass-half-full guy, but I’m wondering whether it’s actually a sign of social mobility that only 40 percent of people stay in the quintile of their parents.

Though I suppose we can’t really draw big conclusions without seeing historical patterns, adjusted for changing demographics.

Stephanie Coontz of the Council on Contemporary Families was even more pessimistic, arguing that there were positive effects from the New Deal and the Civil Rights era, but that those have now faded.

Americans are right to believe the American Dream is fading. But that dream only became a possibility for white men as a result of the labor struggles and reforms of the New Deal, and it began to extend to minorities and women only after the civil rights and women’s movements of the 1960s and 1970s. If we want to revive and achieve the American Dream, we need to change a situation in which the people whose hard work makes this country run cannot earn a living wage, while bankers, speculators and corporate elites – the real “takers” in today’s society – skim off far more than their fair share.

I largely disagree.

First, if you look at the amazing historical story in this video, you’ll see that prosperity soared in the United States because of economic liberty. And you’ll see the same pattern in certain other parts of the world in this video and this video.

Moreover, the New Deal unquestionably retarded prosperity.

Professor Robin Fretwell Wilson of the University of Illinois Law School makes a good – and I assume relatively uncontroversial – point about the value of family stability.

Ask young people about their hopes, marriage and family top the list. Ask them why they cannot marry now, they say they need financial security first — to finish school, pay-off spiraling debt, get that first big job. They want a stable family life, and marriage is key. The upper class knows this; they marry in droves. For Dad, the military cleared a path to the middle class and a stable married family. What will provide that pathway now for the next generation of young men…?

I agree, at least to the degree that she’s embracing the value of social capital.

Professor Lester Spence of Johns Hopkins University focuses on some challenges for the African-America community.

The best data we have suggests that over the last 40 years upward mobility has stagnated significantly. Further, this data suggests that America fares far worse than other developed nations. …Americans in general and African-Americans in particular then have a right to be pessimistic… Even as it became painfully clear that the city of Ferguson’s policy of using policing as a municipal revenue generator is partially to blame for conditions there, city officials recently decided to increase police fines to bolster revenue shortfalls.

I don’t know the data, so I don’t know if Spence is right about stagnating mobility.

Regardless of the veracity of that data, I think the black community has been especially harmed by the initiative-sapping and family-destroying welfare state and the failings of the government school monopoly. That’s where significant gains could be achieved.

And he makes a very good point about the dangers of law enforcement being turned into a revenue-generating machine. I touched on that issue here, but read this Radley Balko article if you really want to understand how low-income people suffer as a result of greedy local governments.

Last but not least, Professor Steven Bender of Seattle University Law School uses the example of a Mexican immigrant family to highlight the challenge of home ownership.

Homeownership is a marker for many of attainment of the American Dream. With the primacy of family wellbeing at its core, Latinos are especially motivated to become homeowners — a 2002 study found 90 percent of Latino homeowners strongly agreed that owning a home is better than renting for raising a family. …Their factory employer paying them just $7.75 despite almost 20 years of experience signals how challenging it is to grasp the brass ring of homeownership, and to repair that home, if you are a Latino immigrant family, and increasingly for anyone fighting the strong current of our swiftly rising wage and wealth inequality.

Bender makes some valid points, particularly about the importance of protecting vulnerable people from fraud, but I have a slightly more optimistic take on his story.

The couple from Mexico may face challenges, but I’m guessing that their living standards are much higher as a result of their decision to emigrate.

In other words, they’re an example of the American Dream.

No, it’s not perfect, as I acknowledged in my contribution to the debate, but it’s still real.

Let’s close with some polling data. Here’s a look at whether people believe that the American Dream exists.

The good news is that almost everybody agrees with the concept. The bad news is that many people believe it’s a thing of the past.

P.S. Shifting to another topic, I can’t resist offering a contrarian perspective on a recent Mona Charen column.

She said Jonathan Gruber wins the undesirable prize of having had the “worst year.”

Gruber…may well have had the worst year in American public life. His repeated demonstrations of arrogance, contempt for the American people and smug self-satisfaction brought mortification to his party and president. …all hail the verbally incontinent Gruber for revealing the truth underlying Obamacare: It would not have passed if it had been presented honestly. …Obamacare was unpopular when proposed and despised when passed, and it remains disliked to this day. Gruber’s contribution was to put a frame around its essential deception.

I don’t disagree with any of that, but I actually think Gruber had a pretty good year.

Sure, he was exposed as a despicable fraud, but he also “earned” millions of dollars as an Obamacare consultant.

In other words, he was yet another corrupt insider who used the law to line his own pockets. I suspect he’s laughing all the way to the bank.

P.P.S. Shifting gears again, I’m a big fan of political humor, even when libertarians get victimized.

And I also can appreciate clever leftist humor. And here’s a good example.

Kudos to Mr. Rogers, at least in this case. His cartoon reminds me of this Scott Stantis gem in that both rely on inadvertent responses.

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What’s a “Fair Share” for Upper-Income Taxpayers?

Barack Obama and the rest of the class-warfare crowd act as if “tax the rich” is an appropriate answer to every question about fiscal policy.

I’m not joking. Here are some of the President’s main tax hikes that have been enacted or proposed.

Obama imposed higher income tax rates on upper-income taxpayers as part of the fiscal cliff deal.

Obama also succeeded in increasing the double-taxation of dividends and capital gains for successful taxpayers.

Obamacare was a budget-busting nightmare with lots of tax increases, but the biggest tax hike targeted rich taxpayers.

Obama’s proposed solution for Social Security’s huge unfunded liability is a large tax increase on taxpayers making more than $100,000 per year.

Obama also has proposed big tax hikes for American companies trying to compete in global markets.

This list could continue, but I think you get the point. American leftists are like malfunctioning Chatty Cathy Dolls. No matter how many times you pull the string, all that comes out is “tax the rich.”

Needless to say, that’s both tiresome and empty.

At some point, it would be nice for Obama and other statists to actually identify how much is enough.

1. For instance, should any taxpayer ever have to give more than 40 percent of their income to government? More than 50 percent? Perhaps over 100 percent, like the 8,000 French household that had every penny of earnings confiscated in 2012?
2. And what’s the “fair share” for the rich? Should they pay 40 percent of the tax burden? Or 50 percent? Or more?
3. Heck, it might not be a bad idea to actually identify the rich. Is a household “rich” if annual income climbs above $200,000? Or do we simply define rich people as being anyone in the top 10 percent, or top 20 percent?

For what it’s worth, I don’t care about the answers to these questions because I favor a simple and fair flat tax that doesn’t punish people for contributing more to the economy’s output. I simply want the government to treat everyone equally and collect revenue in the least-destructive manner.

That being said, I imagine that Obama and other leftists would hem and haw if any reporters actually acted like journalists and asked tough questions. In their hearts, the class-warfare types probably want to go back to the 70 percent-plus top tax rates of the Jimmy Carter era. But they presumably wouldn’t want to openly confess those views.

Just in case Obama (or Pelosi, Reid, etc) ever are pressed to answer these questions, here are numbers that should help put their answers in context.

First, here’s a chart from the experts at the Tax Foundation and it reveals that the top-10 percent of taxpayers finance about 70 percent of the federal income tax.

The typical left-wing response to this kind of data is to complain that it doesn’t include the Social Security payroll tax and other levies.

That’s a semi-fair point, and it’s true that the so-called “FICA” tax (at least the part that goes to Social Security) is not “progressive.” Instead, it’s a flat-rate levy. Moreover, the portion of the payroll tax used to fund Social Security is only imposed on income up to $118,500, which leads many leftists to say the system is regressive.

That’s inaccurate for the simple reason that Social Security’s benefit formula is far more generous to lower-income taxpayers. It’s also worth pointing out that the program is supposed to be a form of social insurance, not a redistribution scheme (though it’s actually both).

And that point is a perfect segue for the next chart. Mark Perry of the American Enterprise Institute used numbers from the Congressional Budget Office to measure the net effect (taxes and spending) of fiscal policy for the five income quintiles.

As you can see, the bottom 60 percent are net recipients and the top 20 percent are basically pulling the wagon for everyone.

Remember, this chart doesn’t mean that the bottom 60 percent don’t pay any tax. It just means that they get more money from the government, on average, than they put into the system.

Now that I’ve shared some numbers, let’s close with some economic analysis.

Obama’s class-warfare agenda is wrong because it’s unfair and discriminatory. But it’s also terribly misguided because high tax rates are bad for growth and competitiveness.

Besides, there is a point at which high tax rates don’t generate much, if any, additional revenue. Simply stated, rich taxpayers have considerable control over the timing, level, and composition of their income. And that means they can reduce their taxable income when tax rates increase.

My video on class warfare has more information. Make sure to pay extra-close attention at the 4:35 mark.

P.S. If you don’t believe my argument about rich people having the ability to alter their taxable income, check out the IRS data from the 1980s.

P.P.S. Only a fool (or a malicious person) wants to be at the revenue-maximizing point of the Laffer Curve. The right goal is to set tax rates at the growth-maximizing level.

P.P.P.S. For what it’s worth, a poll in 2012 found that 75 percent of Americans think the top tax rate should be no higher than 30 percent. That can’t be very comforting data for the hate-and-envy crowd.

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