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Archive for April, 2015

Economists generally like competition because it promotes economic efficiency, more prosperity, lower prices, and higher wages.

But some types of competition can be misguided.

For instance, Americans used to dominate membership in the Bureaucrat Hall of Fame.

Now, however, government employees in other nations have risen to the challenge and shown they can be just as spectacularly unproductive and wasteful as their American counterparts.

Maybe even more so.

Consider the doctor for Italy’s government-run healthcare system who only worked 15 days over a nine-year period.

Even more impressive, how about the bureaucrat in India who managed to go 24 years without showing up for work.

Now we have another foreign honoree.

Here are some blurbs from a BBC report about one French bureaucrat who went above and beyond the call of duty.

A top French civil servant has been forced to resign after spending more than €40,000 (£29,000; $44,000) on taxis in 10 months. Agnes Saal stepped down as head of France’s TV and radio archives at the demand of the culture minister. She had previously argued she needed to travel by taxi, despite having a chauffeur as well as a private car. But she admitted her son was responsible for €6,700 of the bill… She said giving him her reservation number was a “silly mistake”.

Yes, there was a “silly mistake,” but that mistake took place when France decided to create a Ministry of Culture.

Then another “silly mistake” was creating a sub-bureaucracy to be in charge of archives.

And then an additional “silly mistake” was to give the head bureaucrat of that useless division a credit card.

And perhaps the biggest “silly mistake” was to assign a chauffeur to a person holding a job that shouldn’t even exist.

All that being said, Ms. Saal deserves to be in the Bureaucrat Hall of Fame because it takes a special sense of entitlement to have a chauffeur yet still run up a $44,000 taxi bill in just 10 months.

That’s nearly $145 per day she foisted on overburdened French taxpayers, which doesn’t even count the cost of the car and chauffeur!

And I suppose we should give an “honorable mention” award to Ms. Saal’s predecessor. In his new position, he has also demonstrated an unwavering commitment to waste, fraud, and abuse.

She replaced Mathieu Gallet, who is now head of French public radio and is himself at the centre of a scandal after reportedly spending €100,000 on renovating his office and hiring a €90,000 PR consultant, just as he was preparing a cost-cutting plan.

Oh, and will anybody be surprised to learn that the over-paid bureaucrats at France’s taxpayer-subsidized radio network just finished a record-long strike?

Employees at Radio France ended their longest ever strike earlier this month, after walking out for 28 days.

Sigh. I can’t wait for the day when France will be forced to reconsider whether state-run and state-financed media networks are a proper function of government (like has already happened in Greece).

P.S. On another topic, I wrote a few days ago about the types of policies that lead to more “SuperEntrepreneurs” in a nation.

Well, the World Economic Forum has published related research about the impact of taxes on “superstar inventors.”

They start by looking at some of the research about taxation and labor mobility.

There is currently heated public debate about whether higher top tax rates will cause an exodus of valuable, high income and highly skilled economic agents. …Kleven et al. (2014) study a Danish tax reform that temporarily reduced top tax rates on high income foreigners and they find very strong effects on the inflow of migrants. In another recent paper Kleven, Landais, and Saez (2013) show that highly paid football players react to top tax rates when choosing in which country to work. …A group of highly valuable economic agents that policymakers perhaps might worry about is inventors, the creators of innovations and potential drivers of technological progress. Inventors may well be important factors for a country’s development and competitiveness – highly skilled migration has been shown to be both beneficial for a receiving country’s economy and to disproportionately contribute to innovation (Kerr 2013).

Then they focus specifically on highly productive inventors and how they migrate to places where the tax burden is less onerous.

…the average top 1% inventor has hundreds of times more citations. Among top inventors, some are highly successful migrants. In general, higher quality inventors are more mobile than lower quality inventors. …In recent research (Akcigit, Baslandze, and Stantcheva 2015) we study the international migration responses of superstar inventors to top income tax rates for the period 1977-2003 using data from the European and US Patent offices, as well as from the Patent Cooperation Treaty (Miguelez and Fink 2013). …From outside survey evidence, we know that superstar inventors are highly likely to be in the top tax bracket and, hence, directly subject to top tax rates. …There has is a strong and significant correlation between top tax rates and those inventors who remain in their home countries. The relation is strongest for superstar inventors. Figures 2 and 3 show that superstar inventors are highly sensitive to top tax rates. The elasticities imply that for a ten percentage point reduction of top tax rates from 50% to 40%, a country would be able to retain on average 3.3% more of its top 1% superstar inventors. …our results suggest that, given a ten percentage point decrease in top tax rates, the average country would be able to…attract 38% more foreign superstar inventors.

Here’s the bottom line.

The loss of highly skilled agents such as inventors might entail significant economic costs, not just in terms of tax revenues lost but also in terms of reduced positive spillovers from inventors and, ultimately, less innovation in a country.

In other words, class-warfare tax policy ultimately is very destructive for the jurisdictions that practice the politics of hate and envy.

P.P.S. I wrote a few years ago about legal tank ownership in America.

But there’s a catch. You theoretically have to disarm the gun, which would take away part of the fun.

Well, maybe you can make up for that loss of firepower by owning a flamethrower, which apparently is legal in 48 states.

Not sure I would want one of these, but I bet the answers to my IQ test for criminals and liberals would be even more interesting if homeowners added some their arsenals.

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I wrote back in 2010 that riots in Europe were a harbinger of future unrest in the United States.

Given the chaos in Baltimore, I’m tempted to claim profound wisdom and great foresight.

But I’ll reluctantly confess that my main point five years ago was to warn about the long-run consequences of poorly designed entitlement programs and unfavorable demographics (leading to the outcome illustrated by this set of cartoons).

Simply stated, Margaret Thatcher was right when she warned that the problem with big government is that “eventually you run out of other people’s money.”

The riots in Baltimore, by contrast, are a short-run phenomenon exacerbated by factors such as a loss of social capital and potential police misconduct.

But we can still learn something by looking at the dysfunctional consequences of big government in Baltimore and other big cities in America.

Here’s some of what’s been written by my colleague, Michael Tanner.

…there are lessons to be learned about the failures of government and how those failures can create a climate of anger and frustration that just awaits a spark to ignite the flames of violence and destruction. …the powder keg was put in place by decades of big-government liberalism, both in the city of Baltimore and in the state of Maryland. …Maryland has one of the most generous welfare systems in the nation. A mother with two children participating in seven common welfare programs — Temporary Assistance for Needy Families (TANF), food stamps (SNAP), Medicaid, housing assistance, Supplemental Nutrition for Women, Infants, and Children (WIC), energy assistance (LIHEAP), and free commodities — could receive benefits worth more than $35,000. Yet, nearly a quarter of the people in Baltimore still live in poverty. In 1960, Baltimore’s poverty rate was just 10 percent. …while Baltimore’s high welfare benefits haven’t reduced poverty, they may well have exacerbated other social problems. For example, some studies have long shown that high welfare benefits correlate with high out-of-wedlock birth rates. It should not come as a surprise, then, that two-thirds of births in the city are to unmarried mothers, and almost 60 percent of Baltimore households are headed by single parents.

While the politicians subsidize bad things in Maryland, they penalize good things.

…while Baltimore’s high welfare benefits haven’t reduced poverty, they may well have exacerbated other social problems. For example, some studies have long shown that high welfare benefits correlate with high out-of-wedlock birth rates. It should not come as a surprise, then, that two-thirds of births in the city are to unmarried mothers, and almost 60 percent of Baltimore households are headed by single parents. …if that were not bad enough, the city of Baltimore adds one of the highest property taxes among comparable cities…a tax rate more than twice the rate of most of the rest of the state.

Mike has lots of additional information, including revelations about bad education policies, dangerous anti-gun laws, and counterproductive drug prohibition.

But let’s now shift to a Wall Street Journal editorial on the same subject.

…what went up in flames in Baltimore Monday night was not merely a senior center, small businesses and police cars. Burning down was also the blue-city model of urban governance. …let’s not forget who has run Baltimore and Maryland for nearly all of the last 40 years. The men and women in charge have been Democrats, and their governing ideas are “progressive.” This model, with its reliance on government and public unions, has dominated urban America as once-vibrant cities such as Baltimore became shells of their former selves. …the main failures are three: high crime, low economic growth and failing public schools that serve primarily as jobs programs for teachers and administrators rather than places of learning. …of late the progressives have been making a comeback, led by Bill de Blasio in New York and the challenge to sometime reform Mayor Rahm Emanuel in Chicago. This week’s nightmare in Baltimore shows where this leads. It’s time for a new urban renewal, this time built on the ideas of private economic development, personal responsibility, “broken windows” policing, and education choice.

One would think that Detroit – and now Baltimore – show the dangers for cities of big government and dependency.

Unfortunately, the election of Mayor de Blasio in New York City suggest many voters are incapable of learning any lessons from the real world.

Last but not least, here’s some of Kevin Williamson’s column for National Review.

American cities are by and large Democratic-party monopolies, monopolies generally dominated by the so-called progressive wing of the party. The results have been catastrophic, and not only in poor black cities such as Baltimore and Detroit. …Would any sentient adult American be shocked to learn that Baltimore has a corrupt and feckless police department enabled by a corrupt and feckless city government? …While the progressives have been running the show in Baltimore, police commissioner Ed Norris was sent to prison on corruption charges (2004), two detectives were sentenced to 454 years in prison for dealing drugs (2005), an officer was dismissed after being videotaped verbally abusing a 14-year-old and then failing to file a report on his use of force against the same teenager (2011), an officer was been fired for sexually abusing a minor (2014), and the city paid a quarter-million-dollar settlement to a man police illegally arrested for the non-crime of recording them at work with his mobile phone. There’s a good deal more.

And who should be blamed for this horrible track record?

No Republican, and certainly no conservative, has left so much as a thumbprint on the public institutions of Baltimore in a generation. Baltimore’s police department is, like Detroit’s economy and Atlanta’s schools, the product of the progressive wing of the Democratic party enabled in no small part by black identity politics. This is entirely a left-wing project, and a Democratic-party project. …Community-organizer — a wretched term — Adam Jackson declared that in Baltimore “the Democrats and the Republicans have both failed.” Really? Which Republicans? Ulysses S. Grant? Unless I’m reading the charts wrong, the Baltimore city council is 100 percent Democratic. …The evidence suggests very strongly that the left-wing, Democratic claques that run a great many American cities…are incompetent, they are corrupt, and they are breathtakingly arrogant. Cleveland, Philadelphia, Detroit, Baltimore — this is what Democrats do.

My one contribution to the wise words in the three articles excerpted above is to point out that the troubles in Baltimore are somewhat similar to riots we’ve seen in Greece and the United Kingdom. There’s no racial or ethnic component to the chaos we’ve seen in most of the European riots, so the analogy is far from exact, but the events are alike in that a big part of the problem is a failure of government and a concomitant erosion of social or cultural capital.

Simply stated, too many people on both sides of the Atlantic now think they are entitled to a life based on freebies from government. This almost surely erodes any sense of self worth and breeds anger and resentment.

Putting the toothpaste of self-reliance back into the societal tube doubtlessly will not be easy. Here’s some of what Jay Nordlinger wrote today.

The young rioters have…been brought up to regard themselves as entitled and victimized, at the same time. In truth, they are among the luckiest people in the whole world: to have been born American. Millions, probably billions, would be happy to trade places with them. The rioters are free to make of life what they will. Their shackles are mental and spiritual. …These young people have been grossly mistaught — misled — by the “grievance industry” (to use shorthand). Just about the worst thing you can do to a child is tell him he’s a victim — when it’s not true. Even when it is true, it may be unwise. It is surely damnable when it’s not true.

While I’m sometimes pessimistic about certain societal trends, one part of the answer is easy.

Stop creating new entitlements (such as Obamacare) that alter the already perverse tradeoff between work and leisure. Then people might feel a greater incentive to get jobs.

And stop imposing punitive taxes, particularly on the investors and entrepreneurs that are willing to put capital at risk to create jobs and wealth for the rest of us.

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Notwithstanding the title of this post, I’m not going to make an ultra-libertarian argument that all taxation is theft (see the P.P.P.S. below if you want my thoughts on that issue).

Instead, today’s topic is about a more specialized version of theft by government, which technically is called civil asset forfeiture but more accurately should be referred to as policing for profit.

It occurs when the government seizes cash or other property even though the victimized citizen has never been convicted – or in many cases even charged – with a crime.

I wish I was joking. But as you can see from these excerpts from a recent report, this is horrifyingly real.

Simply carrying a large amount of cash in a grocery sack in your car is now sufficient grounds for a police officer to seize your money, a US circuit court has ruled. A panel of the Eighth US Circuit Court of Appeals found that all a deputy has to do to seize cash from a person is say it is drug money. The court refused to return the $63,530 that Deputy Dave Wintle seized from a disabled veteran named Mark A. Brewer during a traffic stop in 2011. Brewer was never charged with a crime or even given a traffic ticket. Yet the decorated Air Force veteran lost his savings when a drug-sniffing dog smelled marijuana on it, even though no cannabis was found in Brewer’s car or his home. …Brewer saved the money from disability payments and his Air Force pay — as documents deputies found in the car indicated.

Since much of our currency contains traces of marijuana and cocaine, there was no way to determine if Mr. Brewer had “drug money” simply on the basis of what the dog smelled.

What’s especially disturbing is that a court agreed that there was no evidence of a crime, but the Judge decided to “assume” the money was criminal.

“The record here does not make clear whether the seized currency constitutes property used to facilitate a drug offense or proceeds from a drug offense,” Judge Bobby E. Shepherd wrote in a March 23 opinion upholding the seizure. “For the purposes of analysis, however, we will assume that the currency facilitated a drug offense and is thus subject to [to be seized].” It was taken through a legal mechanism called civil forfeiture.

And to add injury to injury, the court case will apply to several states.

Even more tragic: The ruling will have a wide impact. “This court case will be the ‘law of the circuit’ for Arkansas, Iowa, Minnesota, Missouri and North and South Dakota as well, creating even more barriers for Americans to fight back against unjust seizures in court,” Sibilla wrote.

But we do have a sliver of good news.

Meanwhile, New Mexico has become the second state to effectively eliminate the use of civil forfeiture and seizure by law enforcement. …It still will allow the criminal forfeiture of property, although that legal barrier is much higher for the government. …“This is the first time in decades that a state legislature has taken the bold but necessary step to put an end to the perverse financial incentive in civil forfeiture laws,” Scott Bullock, the attorney in charge of the Institute for Justice’s battle against the practice, stated in a press release. “Thankfully, Governor Martinez and the New Mexico legislature recognized that no one should lose their property without being first convicted of a crime.”

Kudos to Governor Martinez and New Mexico lawmakers.

Now we need action in Washington.

P.S. Here are some other cases of “policing for profit” that should distress all decent people.

*Such as when the government wanted to steal someone’s truck because a different person was arrested for drunk driving.

*Such as when the government tried to steal the bond money a family has collected to bail out a relative.

*Such as when the government seized nearly $400,000 of a business owner’s money because it was in the possession of an armored car company suspected of wrongdoing.

*Such as when the government sought to confiscate an office building from the owner because a tenant was legally selling medical marijuana.

*Such as when the government killed a man as part of an anti-gambling investigation undertaken in hopes of using asset forfeiture to steal other people’s cash.

*And you can read several other outrageous examples by clicking here.

All I can say is that our Founding Fathers must be rolling over in their graves. They gave us a marvelous Constitution precisely to protect citizens from government abuse.

Yet now courts routinely allow governments at all levels to run roughshod over our civil liberties.

P.P.S. It surely must say something that the first two directors of the Justice Department’s asset forfeiture office now say the law is riddled with abuse and should be repealed.

P.P.P.S. For what it’s worth, here’s my two cents on the issue of taxation and theft. Supreme Court Justice Potter Stewart famously opined, when seeking to define pornography, that “I know it when I see it.” That’s not exactly a firm legal definition, but I’ve always liked his reasoning. When I look at a jurisdiction such as Hong Kong, with a relatively small and honest government, I think of taxes as an unfortunate but acceptable price to pay. But when I think of nations with bloated public sectors and maliciously destructive tax regimes, then there’s little doubt in my mind that taxation is theft. And that’s true if the government is sinisterly malign, such as Venezuela, or a failing welfare state, such as France.

Especially when tax rates exceed 100 percent!

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A nation’s prosperity is determined by the quantity and quality of labor and capital that are productively utilized.

Which means that it doesn’t make sense to have policies that penalize either saving and investment or working.

Yet that seems to be the favorite hobby of the political class.

And there are real consequences. A new study by a pair of economists, published by the National Bureau of Economic Research, has some interesting findings on the link between redistribution programs and labor supply.

It’s a bit wonky, given the way academics write, but they produce some important data on the negative unintended consequences of government dependency.

…we find that the decline in desire to work since the mid-90s lowered the unemployment rate by about 0.5 ppt and the participation rate by 1.75 ppt. This is a large effect… Our estimates imply that changes in the provision of welfare and social insurance (notably disability insurance) explain about 50 percent of the decline in desire to work, which suggest a possible role for the major welfare reforms of the 90s – the 1993 Earned Income Tax Credit (EITC) expansion and the 1996 reform of the Aid to Families with Dependent Children (AFDC) program…the possibility that changes in the provision of social transfers can affect desire to work and thereby the aggregate unemployment and participation rates echoes Juhn, Murphy and Topel (2002) and Autor and Dugan (2003) who argue that the growing attractiveness of disability benefits relative to work increased the number of individuals outside the labor force. …Most strikingly, receiving…disability insurance substantially reduces the probability to want to work by 17 percentage points (ppt), consistent with the fact that an impairment should preclude any work activity and thus lower desire to work.

The authors openly warn that it’s difficult to separate out the effects of various redistribution programs.

The mid-1990s welfare reform apparently helped labor supply by pushing recipients to get a job.

Disability programs, by contrast, strongly discourage productive behavior, while wage subsidies such as the earned-income credit ostensibly encourage work but also can discourage workforce participation for secondary earners in a household.

Here are more of their findings.

…the Earned-Income Tax Credit (EITC) program, a program aimed at o§setting the social security payroll tax for low-income families with children, was expanded in order to encourage work effort (Rothstein and Nichols, 2014). …After controlling for characteristics, we find that the EITC explains 71 percent of the decline in low-educated married mothers’ desire to work between 1988-1993 and 1994-2010. …While the “welfare to work” reform was designed to do bring welfare recipients into the labor force, the reform could have had the opposite effect on the “weaker” nonparticipants by shifting them from a program with some connection to the labor force (welfare) to a program with no connection to the labor force (disability insurance). …Our cross-sectional estimates imply that changes in the provision of welfare and social insurance explain about 60 percent of the decline in desire to work among prime-age females, while the difference-in-difference estimates attribute between 50 and 70 percent of the decline in mothers’ desire to work to the welfare reforms. We conjecture that two mechanisms could explain these results. First, the EITC expansion raised family income and reduced secondary earners’ (typically women) incentives to work.

For non-academic readers, these two charts from the NBER study will be easier to understand.

The first chart shows what should be good news. Welfare reforms in the 1990s led to a big drop in dependency.

But now it’s time for the bad news.

Welfare reform reduced one type of dependency, but other redistribution programs have ballooned.

So no wonder there’s now research showing unfortunate results.

Writing for Investor’s Business Daily, John Merline addresses the same issue, but looking at different redistribution programs.

…the share of 25- to 54-year-olds who are active in the labor market has steadily fallen, to the point where just over 80% of this age group is either working or looking for work. …University of Chicago economics professor Casey Mulligan…posits that the root cause was an attempt by Congress to help people displaced by the recession. Democrats who controlled Congress at the time made several changes to anti-poverty subsidies, adding things like mortgage assistance programs, the benefits of which are phased out as income rises. ObamaCare provides still another one, by offering insurance subsidies that also phase out. …these programs…add to what is already a steep effective marginal tax rate for those in the phase-out range.

In other words, the redistribution programs alter incentives to work since people implicitly calculate the costs and benefits of productive behavior.

Mulligan figures the top rate for these families eligible for various federal aid programs went from 40% to 48% in the immediate aftermath of the recession. In other words, for every extra dollar someone eligible for various aid programs makes, they lose 48% from taxes and benefit reductions. …Mulligan says. “The more you help low-income people, the more low-income people you’ll have. The more you help unemployed people, the more unemployed people you’ll have.”

John is right to cite Prof. Mulligan’s work.

I cited his work last year showing how Obamacare undermined incentives to work. And other academics have reached the same conclusion.

Regarding the broader issue of redistribution and dependency, I argue that federalism is the best approach, both because states will face competitive pressure to avoid excessively generous benefits and because states will learn from each other about the best ways to help the truly needy while minimizing the negative impact of handouts on incentives for productive behavior.

Or we could just keep the current system, which is bad for both poor people and taxpayers.

P.S. This Wizard-of-Id parody contains a lot of insight about labor supply and incentives. As does this Chuck Asay cartoon and this Robert Gorrell cartoon.

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

P.P.P.S. Switching to a different topic, the IRS is whining that it needs to a bigger budget to better “service” taxpayers.

The Washington Examiner has a great editorial on the topic. Here are some of the better passages.

Oh, those poor dears at the IRS. They wasted $50 million on 225 conferences between 2010 and 2012, including a single $4.1 million conference in Anaheim, Calif. They wasted $50,000 creating bad videos on the clock, including one of the worst Star Trek parodies in the history of the Internet. They gave raises and bonuses to employees who hadn’t paid their own taxes. They were caught targeting applicants for nonprofit status based on their ideology and potential opposition to President Obama. They lied to Congress about being unable to recover emails from those involved.

Yet the bureaucracy still wants more money.

IRS Commissioner John Koskinen warned that taxpayers would suffer… But according to a new report by the House Ways and Means Committee, these inconveniences were the result of IRS malingering – of budgetary choices made within the agency itself….“Spending decisions entirely under the IRS’s control led to 16 million fewer taxpayers receiving IRS assistance this filing season,” said the report. “Other spending choices, including prioritizing employee bonuses and union activity on the taxpayer’s dime, used up resources that otherwise could have been used to assist another 10 million taxpayers.” This is a classic example of how federal bureaucrats take revenge when their budgets are cut. Instead of prioritizing limited resources in order to fulfill their agencies’ missions, they find ways to transfer the maximum amount of pain directly to taxpayers, so as to teach the country a lesson about how indispensable they are.

In other words, a classic example of the “Washington Monument ploy.”

Though not as outrageous as the crass behavior of the politicized National Park Service.

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It must be fun to be a leftist.

You get to spend other people’s money. But that’s just for starters. Using the power of majoritarianism, you also get to tell the rest of the country what to do, how to behave, and even what to eat.

Best of all, you can be a complete hypocrite. Even if you’re in the public eye, like Hillary Clinton, that’s apparently no obstacle to behaving in one way and then insisting that the rest of us do the opposite.

I’m particularly impressed that statists feel no guilt about dodging taxes while insisting that the rest of us pay more. That’s true even if you’re Barack Obama’s first Treasury Secretary or his current Treasury Secretary.

And it’s definitely true if you’re part of the statist chattering class.

Jillian Kay Melchoir of National Review reveals that the pro-tax crowd at MSNBC must think they’re working at the OECD.

How else to explain that so many of them have unpaid tax bills?

Touré Neblett, co-host of MSNBC’s The Cycle, owes more than $59,000 in taxes, according to public records reviewed by National Review. In September 2013, New York issued a state tax warrant to Neblett and his wife, Rita Nakouzi, for $46,862.68. Six months later, the state issued an additional warrant to the couple for $12,849.87. …MSNBC’s hosts and guests regularly call for higher taxes on the rich, condemning wealthy individuals and corporations who don’t pay their taxes or make use of loopholes. But recent reports, as well as records reviewed by National Review, show that at least four high-profile MSNBC on-air personalities have tax liens or warrants filed against them.

And why is this hypocritical?

Because, as illustrated by this video from Washington Free Beacon, so many of them urge higher taxes on the rest of us and argue that paying taxes is a wonderful experience.

I guess the MSNBC hosts forget to mention that higher taxes are only good for other people, not for themselves.

Now let’s look at another example.

Though I confess I’m merely assuming hypocrisy in this case. It deals with actors, the vast majority of which almost surely would want to impose a higher minimum wage on, say, the fast-food industry.

But, writing for Investor’s Business Daily, Larry Elder points out that these actors in Los Angeles don’t want to be covered by the minimum wage because they understand it means less work for themselves.

In Los Angeles County, the minimum wage is $9 per hour. Theater actors, however, can be paid as little as $7 a performance, and an actor can even work long rehearsal hours with no pay. Three decades ago, L.A. County actors sued their union for an exception to union wages for theaters with 99 seats or fewer seats. Why do these stage actors work for so little? They want to work. By working, they improve their skills, stay sharp and or perhaps have a chance to get spotted by an agent. Some say simply having something to do is better than just sitting around and waiting for a casting agent to call. Actors Equity, the national union, wants to change this. …But then a very Republican thing happened — 66% of the union members voted against a higher minimum wage. Their rationale was simple: A higher minimum wage means fewer plays get performed. Fewer plays mean fewer opportunities for actors and therefore fewer opportunities to gain experience, stay in practice or get discovered. …When it comes to their own lives, these actors understand the law of economics: Artificially raise the cost of a good — in this case the price of an actor in a stage play — and you reduce the demand for actors.

Unfortunately, this episode of economic enlightenment doesn’t have a happy ending.

But the union’s national council ignored this advisory vote and ordered, with some exceptions, a $9 per hour minimum wage.

Mr. Elder also includes a very perceptive quote from a Hollywood celebrity.

Pat Sajak, host of “Wheel of Fortune,” recently offered a different perspective on the minimum wage. “When I had minimum wage jobs,” he tweeted, “my goal was to better myself, not to better the minimum wage.”

Kudos to Mr. Sajak. Too bad there are so many politicians (including many Republicans) who don’t understand that higher minimum wages mean fewer jobs for the less vulnerable.

Though, to be fair, maybe supporters do understand the harsh impact and simply don’t care.

P.S. I wrote yesterday about the impact of tax reform on the 2016 election, and I included a postscript about a healthcare issue that has resonance with voters.

Well, Philip Klein of the Washington Examiner makes the case for another healthcare issue that he hopes will motivate Republican primary voters to reject Ohio Governor John Kasich.

…not only did Kasich decide to participate in Obamacare’s fiscally destructive expansion of Medicaid, in doing so he also displayed a toxic mix of cronyism, dishonesty and executive overreach. …despite campaigning on opposition to Obamacare, Kasich crumbled under pressure from hospital lobbyists who supported the measure, and endorsed the expansion. When his legislature opposed him, Kasich bypassed lawmakers and imposed the expansion through a separate panel — an example of executive overreach worthy of Obama. Kasich cloaked his cynical move in the language of Christianity, and, just like a liberal demagogue, he portrayed those with principled objections to spending more taxpayer money on a failing program as being heartless. …Republican voters made a terrible miscalculation when they chose so-called compassionate conservative George W. Bush as their nominee, as he went on as president to push the largest expansion of entitlements since the Great Society in the form of the Medicare prescription drug plan. …During this presidential primary season, Republican voters will have much better options than they did last time. They don’t have to settle for another champion of big government. By punishing Kasich for expanding Medicaid, conservative primary voters would be sending the message to state-level Republicans everywhere that if they choose to advance big government healthcare solutions, there will be consequences — and they will have no chance of rising to higher office.

It’s not my role to comment on which candidates deserve support, but I definitely agree that Kasich’s Obamacare expansion was very bad policy.

And it’s particularly galling that he made a religious argument for bigger government. I don’t think Libertarian Jesus would be amused.

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I’m a huge fan of a simple and fair flat tax.

Simply stated, if we’re going to have some sort of broad-based tax, it makes sense to collect revenue in the least-damaging fashion possible.

And a flat tax achieves that goal by adhering to the principles of good tax policy.

  1. A low tax rate – This is the best-known feature of the flat tax. A low tax rate is designed to minimize the penalty on work, entrepreneurship, and other forms of productive behavior.
  2. No double taxation of saving and investment – The flat tax gets rid of the tax bias against income that is saved and invested. The capital gains tax, double tax on dividends, and death tax are all abolished. Shifting to a system that taxes economic activity only one time will boost capital formation, thus facilitating an increase in productivity and wages.
  3. No distorting loopholes – With the exception of a family-based allowance designed to protect lower-income people, the flat tax eliminates all deductions, exemptions, shelters, preference, exclusions, and credits. By creating a neutral tax system, this ensures that decisions are made on the basis of economic fundamentals, not tax distortions.

All three features are equally important, sort of akin to the legs of a stool. And if we succeeded with fundamental reform, it would mean an end to the disgraceful internal revenue code.

But just because an idea is good policy doesn’t necessarily mean that it’s also good politics.

So let’s delve into the debate over whether the flat tax is a winning political issue as well as a pro-growth reform.

Writing for the Weekly Standard, Steve Moore of the Heritage Foundation thinks the flat tax has political legs.

…the flat tax is again the rage in a presidential primary. A number of GOP candidates, including Rand Paul, Rick Perry, Ted Cruz, and Scott Walker, are looking to go flat with a radically simplified postcard tax return. …Ripping up the 70,000-page tax code has visceral appeal to voters.The way to sell the flat tax is as the ultimate Washington versus America issue. The only people who benefit from a complicated, barnacle-encrusted 70,000-page tax code are tax attorneys, accountants, lobbyists, IRS agents, and politicians who use the tax code as a way to buy and sell favors. The belly of the beast of corruption in American politics is the IRS tax code. The left keeps saying it wants to end the corrupting influence of big money in politics. Fine. By far the best way to do that is enact a flat tax and D.C. becomes the Sahara Desert.

I like what Steve is saying.

And I specifically agree that the best way of selling tax reform is to point out that it’s a Washington-versus-America issue.

When I first started giving speeches about the flat tax in the 1990s, I focused on the pro-growth and pro-competitive impact of lower marginal tax rates and reductions in double taxation.

People largely agreed with those points, but they didn’t get excited.

I soon learned that they instinctively liked the flat tax because they saw it as a way of cleaning out the stables of a corrupt system. In other words, they wanted tax reform mostly for reasons of fairness.

But with fairness properly defined, meaning all taxpayers playing by the same rules. Not the left’s definition, which is based on punishing success with high marginal tax rates.

Steve concurs.

So can the flat tax catch the populist tide of voter rage and angst over an economy that has squeezed the middle class for nearly a decade? Who knows? What seems certain is Democrats will run a class warfare campaign of raising tax rates on the rich. But envy isn’t an economic revival policy. Republicans can win this debate by going on the offensive and reminding voters that the best way to grow the economy, create jobs, and increase tax payments by the rich is to flatten the code. Flat is the new fair.

So does this mean the flat tax is a slam-dunk issue?

Ramesh Ponnuru of National Review is unconvinced. Here’s some of what he wrote about the candidates pushing fundamental reform.

They may have some creative ideas to get around problems with previous flat-tax proposals. But I have my doubts about whether a flat tax could be…as politically attractive as Moore suggests.

Ramesh is particularly skeptical whether the flat tax can be more appealing than the Lee-Rubio tax plan.

I have my doubts about whether a flat tax could be free from the objections Moore raises against Lee-Rubio… A 15 percent flat tax could also expose many more millions of people to tax increases than Lee-Rubio does; and it seems highly unlikely to reduce tax bills for as many people as Lee-Rubio does.

At the risk of sounding like a politician, I agree with both Steve and Ramesh.

Taking them in reverse order, Ramesh is correct that a flat tax faces an uphill battle. He specifically warns that a flat tax might result in higher fiscal burdens for millions of middle-class taxpayers.

Ultimately, that would depend on the tax rate, the size of the family-based allowance, and whether tax reform also was a tax cut. And those choices could be easier to make if Republicans actually demonstrated some political acumen and modernized the revenue-estimating system at the Joint Committee on Taxation.

And Ramesh also points out, quite appropriately, that the flat tax will create strong opposition from interest groups that benefit from provisions in the current system.

But Steve is correct that people want bold reform, which is a proxy for ending tax-code corruption. I’ve already praised the Lee-Rubio plan, which Ramesh likes, but I have a hard time imagining that such a plan will seize the public imagination like a flat tax.

Moreover, the Lee-Rubio plan is a huge tax cut. Since I think good reform is more likely if a plan lowers the overall tax burden, I consider that to be a feature rather than a bug.

But it does mean you have to fight a two-front war, battling both those who benefit from the current system as well as those who don’t want to reduce the flow of revenue to Washington.

These are big obstacles, whether we’re talking about an incremental plan like Lee-Rubio or big-picture reform like a flat tax.

Which is why, regardless of what happens with elections, I’m not overly optimistic about making progress. Unless, of course, we figure out some way of dealing the growing burden of federal spending. Which necessarily requires genuine entitlement reform.

P.S. Don’t forget that Barack Obama reportedly will be introducing a very simple tax reform plan.

P.P.S. Since we’re talking about the impact of policies on the election, my colleague Michael Cannon points to some very low-hanging fruit.

For more than five years, the executive branch has been issuing illegal subsidies that personally benefit the most powerful interest group in the nation’s capital: members of Congress and their staffs. …executive-branch agencies have broken the law, over and over, to protect ObamaCare. …The longest-running and perhaps most significant way the administration has broken the law to protect ObamaCare is by issuing illegal subsidies to members of Congress.

What’s Michael talking about?

When congressional Democrats passed the Patient Protection and Affordable Care Act (ACA), they were so desperate to pass a health care law that the ACA did not receive the scrutiny most bills do. Many members of Congress and their staffs were therefore surprised to learn that, as of the moment the president signed the ACA, that very law threw them out of their health plans. The ACA prohibits members of Congress and their staffs from receiving health coverage through the Federal Employees’ Health Benefits Program. They remained free to purchase health insurance on their own, but they would have to do so without the $10,000 or so the federal government “contributed” to their FEHBP premiums.

But who cares what the law says.

Rather than risk Congress reopening the ACA to restore their lost health coverage — because who knows what other changes Congress might make in the process — the administration simply pretended that that part of the law didn’t exist. The Office of Personnel Management announced that members of Congress and their staffs could remain in the FEHBP until the ACA’s Exchanges launched in 2014.  …That still didn’t solve the president’s problems, however. The ACA says that as of 2014, the only coverage the federal government can offer members of Congress in connection with their employment is coverage created under the Act. In effect, that means Exchange coverage. But the law still cut off that $10,000 “employer contribution” to their health benefits. According to Politico, “OPM initially ruled that lawmakers and staffers couldn’t receive the subsidies once they went into the exchanges.” After the president intervened, OPM just ignored that part of the law and started issuing (illegal) subsidies on the order of $10,000 to hundreds of individual members of Congress and thousands of individual congressional staffers.

So what does all this have to do with the 2016 elections?

Well, as Michael points out, the GOP could make a lot of hay by going after the Obama Administration’s illegal favor for Capitol Hill.

Ending Congress’ special ObamaCare exemption — i.e., the bribes individual members of Congress and their staffs are receiving not to reopen ObamaCare — polls off the charts. More than 90 percent of voters believe this exemption is unfair.

The goal, of course, isn’t to deny the folks on Capitol Hill from getting pre-Obamacare subsidies for their health plans.

Instead, Michael is saying that these subsidies have to be restored in the proper fashion, which means amending the law, which will also open the door to other changes.

Which might mean actually addressing the real problems in our healthcare system.

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I have a Bureaucrat Hall of Fame to recognize government workers who have demonstrated special skills in ripping off taxpayers.

And I’ve created a Moocher Hall of Fame to highlight deadbeats and scroungers who best illustrate the entitlement mentality.

But maybe it’s now time to create Victims of Government Thuggery Hall of Fame (though I need to figure out a more concise title). Charter members would include  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, as well as the Sierra Pacific Company.

And I would want to include the Meitiv family as well. Check out these horrifying details about the kidnapping of children by government, as reported by Reason.

The kids, ages 10 and 6, were supposed to come home at 6:00 p.m. from playing. At 6:30 p.m, Danielle says, she and her husband Sasha were pretty worried. By 8:00 p.m., they were frantic. Only then did someone from the CPS Crisis Center call the parents and tell them that the police had picked the children up. …Husband Sasha Meitiv, raised in the Soviet Union under complete state control, told his wife he was less surprised. “He said, ‘You don’t understand how cruel bureaucracy can be,'” said Danielle. I think we all are beginning to understand just how insane, paranoid, and vindictive the state can be when it comes to respecting human rights—in this case, the right of parents who love their kids to raise them the way they see fit. And the right of kids, all kids, to be outside, part of the world, without having to worry about police snatching them off the street and holding them for hours without even letting them make a phone call. …the children were released back into the Meitiv’s custody but were required to sign a “temporary safety plan,” which prohibits them from letting the kids go outside by themselves

For additional information about this horrifying intrusion into a family’s life, you can click here.

The bottom line is that it’s disgustingly insane for government bureaucrats to steal children just because they disagree with parenting decisions that have been (and still should be) routine.

And we also need to allow group membership in this new Hall of Fame.

Consider the plight of some Wisconsin citizens who were subjected to Putin-style oppression and harassment because of their political views.

David French has the surreal details in a must-read National Review column.

Cindy Archer…was jolted awake by yelling, loud pounding at the door, and her dogs’ frantic barking. The entire house — the windows and walls — was shaking. She looked outside to see up to a dozen police officers, yelling to open the door. They were carrying a battering ram. …“I was so afraid,” she says. “I did not know what to do.” She grabbed some clothes, opened the door, and dressed right in front of the police. The dogs were still frantic. …multiple armed agents rushed inside. Some even barged into the bathroom, where her partner was in the shower. The officer or agent in charge demanded that Cindy sit on the couch, but she wanted to get up and get a cup of coffee. “I told him this was my house and I could do what I wanted.” Wrong thing to say. “This made the agent in charge furious. He towered over me with his finger in my face and yelled like a drill sergeant that I either do it his way or he would handcuff me.” …They wouldn’t let her speak to a lawyer. She looked outside and saw a person who appeared to be a reporter. Someone had tipped him off.

Cindy wasn’t the only victim. We also have the case of “Ann.”

Someone was pounding at her front door. It was early in the morning — very early — and it was the kind of heavy pounding that meant someone was either fleeing from — or bringing — trouble. “It was so hard. I’d never heard anything like it. I thought someone was dying outside.” She ran to the door, opened it, and then chaos. “People came pouring in. For a second I thought it was a home invasion. It was terrifying. They were yelling and running, into every room in the house. One of the men was in my face, yelling at me over and over and over.” …It was indeed a home invasion, but the people who were pouring in were Wisconsin law-enforcement officers. Armed, uniformed police swarmed into the house. Plainclothes investigators cornered her and her newly awakened family. Soon, state officials were seizing the family’s personal property…next came ominous warnings. Don’t call your lawyer. Don’t tell anyone about this raid. Not even your mother, your father, or your closest friends.

There were other victims.

For the family of “Rachel” (not her real name), the ordeal began before dawn — with the same loud, insistent knocking. Still in her pajamas, Rachel answered the door and saw uniformed police, poised to enter her home. When Rachel asked to wake her children herself, the officer insisted on walking into their rooms. The kids woke to an armed officer, standing near their beds. The entire family was herded into one room, and there they watched as the police carried off their personal possessions, including items that had nothing to do with the subject of the search warrant — even her daughter’s computer. And, yes, there were the warnings. Don’t call your lawyer. Don’t talk to anyone about this. Don’t tell your friends.

So who are these people? Suspected bank robbers? Kidnappers? Alleged murderers?

Not exactly.

…they were American citizens guilty of nothing more than exercising their First Amendment rights to support Act 10 and other conservative causes in Wisconsin. …For dozens of conservatives, the years since Scott Walker’s first election as governor of Wisconsin transformed the state…into a place where conservatives have faced early-morning raids, multi-year secretive criminal investigations, slanderous and selective leaks to sympathetic media, and intrusive electronic snooping. Yes, Wisconsin…was giving birth to a new progressive idea, the use of law enforcement as a political instrument, as a weapon to attempt to undo election results, shame opponents, and ruin lives. …This was the on-the-ground reality of the so-called John Doe investigations, expansive and secret criminal proceedings that directly targeted Wisconsin residents because of their relationship to Scott Walker, their support for Act 10, and their advocacy of conservative reform.

There’s no good news in this story, but at least the systematic harassment and oppression may come to an end if courts do their job.

…this traumatic process, however, is now heading toward a legal climax, with two key rulings expected in the late spring or early summer. The first ruling, from the Wisconsin supreme court, could halt the investigations for good, in part by declaring that the “misconduct” being investigated isn’t misconduct at all but the simple exercise of First Amendment rights. The second ruling, from the United States Supreme Court, could grant review on a federal lawsuit brought by Wisconsin political activist Eric O’Keefe and the Wisconsin Club for Growth, the first conservatives to challenge the investigations head-on. If the Court grants review, it could not only halt the investigations but also begin the process of holding accountable those public officials who have so abused their powers.

The article has lots of additional information and I strongly recommend you read the entire piece (at least if you’re not susceptible to high blood pressure).

By the way, you won’t be mistaken if you’re thinking that the Wisconsin story has a similarity to what happened with the IRS targeting of the Tea Party.

In both cases, the bureaucracy and the left (that’s a Venn Diagram with a big overlap) have manipulated government policy and power for solely political ends.

If that sounds like Putin’s Russia or today’s Venezuela, there’s an old saying about “if the shoe fits.” I don’t think we’re anywhere close to that level, fortunately, but if statist politicians and bureaucrats get away with the misdeeds shared above, we’ll take a big step in the wrong direction.

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