But there is reason for hope. The political elite may be a bunch of self-serving statists, but ordinary citizens still have a core belief in liberty.
The folks at Gallup, for instance, asked Americans about the biggest threat to America’s future. As you can see, they wisely and astutely named big government. By an overwhelming margin.
In another poll, CNN reports that Americans generally are not happy with Washington.
Heading into the final year of Barack Obama’s presidency, the American public…expresses broad dissatisfaction with government and anger about the way things are going in the nation generally. According to a new CNN/ORC Poll, 75% of Americans say they are dissatisfied with the way the nation is being governed, and 69% are at least somewhat angry with the way things are going in the U.S., both metrics about as negative as they were in fall 2014.
Though I suppose I shouldn’t be too encouraged by this data. After all, what if they’re dissatisfied because government isn’t giving them enough goodies?
But I’m reasonably hopeful that the unhappiness is for the right reasons.
For example, here’s some encouraging polling data from Pew that was shared by James Pethokoukis of the American Enterprise Institute. Strong support for free enterprise as a generic principle doesn’t automatically translate into support for free markets on every issue, of course, but I’m glad people in the United States at least have good instincts (unlike the misguided citizens of Argentina).
By the way, I can’t help grousing about the way the folks at Pew presented this data. Notice how the subheading starts with “despite the global financial crisis,” which implies that it was the fault of free markets.
Anyhow, back to polling data. While I’m encouraged by some of the polling data above, I’m not under any illusion that people always have the right instincts. Or that they even have consistent views.
Here’s some polling data that was put together for the Legatum Institute.
On the other hand, the good news is that perhaps people already have watched these videos. That because they also strongly believe that free enterprise is the best way of improving life for the poor.
And here’s some pro-Trump humor (depending on your perspective.
It arrived in my inbox with the heading: “Trump and his national security team arriving in Saudi Arabia.”
He’s not my cup of tea, but you have to give Trump credit for dominating the election. Whether he’s making dumb statements or smart statements, he knows how to work the media.
For what it’s worth, my preferred candidate isn’t available this election, though the fact that he wins this poll (and also this poll) is yet another sign that the American people still have very sensible instincts.
P.P.S. Here aresome great videosof that candidate in action. And here’sone moreif you those weren’t enough.
For those of us worried (with good reason!) about excessive regulation and red tape, 2015 was not a good year.
As you can see from the headline of this story in the Washington Examiner, federal bureaucrats were very busy imposing new mandates and restrictions on the economy. Indeed, President Obama now has the cumulative record for red tape.
And to put the numbers in context, here’s a chart from the folks at the Competitive Enterprise Institute. On the left side, it shows the biggest red-tape year for every President before Obama. And then on the right side, it shows how Obama is consistently meeting or exceeding prior records.
All this bad news might be somewhat bearable if there was some reason to think we were turning a corner and that the worst was behind us.
Unfortunately, that’s not the case. Let’s now share another headline, this time from a report in The Hill.
The bottom line is that the Obama Administration is openly excited about the prospect of building upon the President’s dubious red-tape record.
Though I guess we shouldn’t be surprised. If you read the story, you’ll see that next year will be a perfect storm of pro-regulation bureaucrats being egged on by Obama’s regulatory appointees who see 2016 as their last chance to impose additional red tape on the economy’s productive sector.
But the private sector will become less dynamic as we become more like Greece. Here are some very depressing bits of information I’ve shared in the past.
For every bureaucrat at a regulatory agency,100 jobs are destroyedin the economy’s productive sector.
A World Bank studydetermined thatmoving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”
P.S. While the regulatory burden in the United States is stifling, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.
When I get my daily email from the editorial page of the New York Times, I scroll through to see whether there’s anything on economic issues I should read.
As a general rule, I skip over Paul Krugman’s writings because he’s both predictable and partisan. But every so often, his column will grab my attention, usually because the headline will include an assertion that doesn’t make sense.
The bad news is that this is usually a waste of time since most of his columns are ideological rants. But the good news is that I periodically catch Krugman making grotesque errors when he engages in actual analysis. Here are a few examples:
Earlier this year, Krugman asserted that America was outperforming Europe because our fiscal policy was more Keynesian, yet the data showed that the United States had bigger spending reductions and less red ink.
Last year, he asserted that a supposed “California comeback” in jobs somehow proved my analysis of a tax hike was wrong, yet only four states at the time had a higher unemployment rate than California.
And here’s my favorite: In 2012, Krugman engaged in the policy version of time travel by blaming Estonia’s 2008 recession on spending cuts that took place in 2009.
And if you enjoyed those examples, you can find more of the same by clicking here, here, here, here, here, here, here, and here.
But perhaps he’s (sort of) learning from his mistakes. Today, we’re going to look at Paul Krugman’s latest numbers and I’ll be the first to say that they appear to be accurate.
But accurate numbers don’t necessarily lead to honest analysis. Krugman has a post featuring this chart, which is supposed to show us that GOP presidential candidates are wrong to pursue “Bushonomics.”
In looking at this chart and seeing how Krugman wants it to be interpreted, I can’t help but think of the famous zinger Reagan used in his debate with Jimmy Carter: “there you go again.”
Let’s consider why he’s wrong.
First, he asserts the chart is evidence that GOP candidates shouldn’t follow Bushonomics.
I actually agree. That’s because the burden of government spending jumped significantly during the Bush years and the regulatory state became more oppressive. All things considered, Bush was a statist.
Krugman, however, would like readers to believe that Bush was some sort of Reaganite. That’s where we disagree. And if you want to know which one of us is right, just check what happened to America’s rating in Economic Freedom of the World during the Bush years.
Second, Krugman would like readers to think that Presidents have total control over economic policy. Yet in America’s separation-of-powers system, that’s obviously wrong. You also need to consider what’s happening with the legislative branch.
So I added a couple of data points to Krugman’s chart. And, lo and behold, you can just as easily make an argument that partisan control of Congress is the relevant variable. As you can see, Republican control of Congress boosted job growth for Obama, whereas the Democratic takeover of Congress led to bad results during the Bush years.
By the way, I don’t actually think congressional control is all that matters. I’m simply making the point that it is misleading to assert that control of the White House is all that matters.
What is important, by contrast, are the policies that are being implemented (or, just as important, not being implemented).
And since the economic policies of Bush and Obama have been largely similar, the bottom line is that it’s disingenuous to compare job creation during their tenures and reach any intelligent conclusions.
Third, since Krugman wants us to pay attention to job creation during various administrations, we can play this game – and actually learn something – by adding another president to the mix.
Krugman doesn’t identify his data source, but I assume he used this BLS calculation of private employment (or something very similar).
So I asked that website to give me total private employment going back to the month Reagan was nominated.
And here’s what I found. As you can see, good private-sector job growth under Reagan and Clinton, but relatively tepid job growth this century.
Now let’s take a closer look at the total change in private employment for the first 81 months of the Reagan, Bush, and Obama Administrations. And you’ll see that Krugman was sort of right, at least in that Obama has done better than Bush.
And if there’s no recession before he leaves office, he’ll look even better than Bush than he does now. But Obama doesn’t fare well when compared against Reagan.
So does this mean Krugman will now argue GOP candidates should follow Reaganomics rather than Obamanomics or Bushonomics?
I’m not holding my breath waiting for him to make a correction. By the way, keep in mind what I said before. Presidents (along with members of Congress) don’t have magical job-creation powers. The best you can hope for is that the overall burden of government diminishes a bit during their tenure so that the private sector can flourish.
But it’s not easy to find the truth if you put partisanship above analysis. Krugman erred by making a very simplistic Bush-Republican-bad/Obama-Democrat-good argument.
P.S. Paul Krugman’s biggest whopper was about healthcare rather than fiscal policy. In 2009, he said “scare stories” about government-run healthcare in Great Britain “are false.” But you can find lots of scary stories here.
One example of the organization’s perfidy is the OECD’s so-called Base Erosion and Profit Shifting (BEPS) initiative, which is basically a scheme to extract more money from companies (which means, of course, that the real cost is borne by workers, consumers, and shareholders).
I’ve written (severaltimes) about the big-picture implications of this plan, but let’s focus today on some very troubling specifics of BEPS.
Doug Holtz-Eakin, in a column for the Wall Street Journal, explains why we should be very worried about a seemingly arcane development in BEPS’ tax treatment of multinationals. He starts with a very important analogy.
Suppose a group of friends agree to organize a new football league. It would make sense for them to write rules governing the gameplay, the finances of the league, and the process for drafting and trading players. But what about a rule that requires each team to hand over its playbook to the league? No team would want to do that. The playbook is a crucial internal-strategy document, laying out how the team intends to compete. Yet this is what the Organization for Economic Cooperation and Development wants: to force successful global companies, including U.S. multinationals, to hand over their “playbooks” to foreign governments.
Here’s specifically what’s troubling about BEPS.
…beginning next year the BEPS rules require U.S.-headquartered companies that have foreign subsidiaries to maintain a “master file” that provides an overview of the company’s business, the global allocation of its activities and income, and its overall transfer pricing policies—a complete picture of its global operations, profit drivers, supply chains, intangibles and financing. In effect, the master file is a U.S. multinational’s playbook.
And, notwithstanding assurances from politicians and bureaucrats, the means that sensitive and proprietary information about U.S. firms will wind up in the wrong hands.
Nothing could be more valuable to a U.S. company’s competitors than the information in its master file. But the master file isn’t subject to any confidentiality safeguards beyond those a foreign government decides to provide. A foreign government could hand the information over to any competitor or use it to develop a new one. And the file could be hacked.
Doug recommends in his column that Congress take steps to protect American companies and Andy Quinlan of the Center for Freedom and Prosperity has the same perspective.
It is…time for Congress to take a more assertive role in the ongoing efforts to rewrite global tax rules. …(BEPS) proposals drafted by the Organization for Economic Cooperation and Development…threaten the competitiveness of U.S.-based companies and the overall American economy. …We know the Paris-based OECD’s aim is to raid businesses – in particular American businesses – for more tax revenue… The fishing expeditions are being undertaken in part so that bureaucrats can later devise new and creative ways to suck even more wealth out of the private sector. …American companies forced to hand proprietary data to governments – like China’s – that are known to engage in corporate espionage and advantage their state-owned enterprises will be forced to choose between forgoing participation to vital markets or allowing competitors easy access to the knowledge and techniques which fuel their success.
You would think that the business community would be very alarmed about BEPS. And many companies are increasingly worried.
But their involvement may be a too-little-too-late story. That’s because the business group that is supposed to monitor the OECD hasn’t done a good job.
The Business and Industry Advisory Committee…has been successfully co-opted by the OECD bureaucracy. At every stage in the process, those positioned to speak on behalf of the business community told any who wished to push back against the boneheaded premise of the OECD’s work to sit down, be quiet, and let them seek to placate hungry tax collectors with soothing words of reassurance about their noble intentions and polite requests for minor accommodations. That go-along-to-get-along strategy has proven a monumental failure. Much of the blame rests with BIAC’s chair, Will Morris. Also the top tax official at General Electric – whose CEO Jeffrey Immelt served as Obama’s “job czar” and is a dependable administration ally – and a former IRS and Treasury Department official, Morris is exactly the kind of business representative tax collectors love.
I’m not saying that GE wants to pay more tax, but I wouldn’t be surprised if the top brass at the company decided to acquiesce to BEPS as an implicit quid pro quo for all the subsidies and handouts that the firm receives.
In any event, I’m sure the bureaucrats at the OECD are happy that BIAC didn’t cause any problems, so GE probably did earn some brownie points.
And what about the companies that don’t feed at the public trough? Weren’t they poorly served by BIAC’s ineffectiveness?
Yes, but the cronyists at GE presumably don’t care.
But enough speculation about why BIAC failed to represent the business community. Let’s return to analysis of BEPS.
Jason Fichtner and Adam Michel of the Mercatus Center explain for U.S. News & World Report that the OECD is pushing for one-size-fits-all global tax rules.
The OECD proposal aims to centralize global tax rules and increase effective tax rates on international firms. U.S. technology firms such as Google, Facebook, Amazon and Apple will likely be harmed the most. …the OECD as a special interest group for tax collectors. Over the past 25 years, they have built an international tax cartel in an effort to keep global tax rates artificially high. The group persistently advocates for increased revenue collection and more centralized control. The OECD has waged a two-decade campaign against low tax rates by blacklisting sovereign countries that don’t comply with OECD directives.
Like the others, Fichtner and Michel worry about the negative consequences of the BEPS plan.
The centralization of tax information through a new international country-by-country reporting requirement will pressure some countries to artificially expand their tax base. A country such as China could increase tax revenue by altering its definition of so-called value creation… Revenue-hungry states will be able to disproportionately extract tax revenue from global companies using the newly centralized tax information. …while a World Bank working paper suggests there is a significant threat to privacy and trade secrets. Country-by-country reporting will complicate international taxation and harm the global economy.
…the United States should focus on fixing our domestic corporate tax code and lower the corporate tax rate. The U.S. [has] the single highest combined corporate tax rate in the OECD. …Lower tax rates will reduce incentives for U.S. businesses to shift assets overseas, grow the economy and increase investment, output and real wages. Lowering tax rates is the most effective way policymakers can encourage innovation and growth. The United States should not engage in any coordinated attempt to increase global taxes on economic activity. …The United States would be better off rejecting the proposal to raise taxes on the global economy, and instead focus on fixing our domestic tax code by substantially lowering our corporate tax rate.
By the way, don’t forget that BEPS is just one of the bad anti-tax competition schemes being advanced by the bureaucrats in Paris.
David Burton of the Heritage Foundation has just produced a new study on the OECD’s Multilateral Convention, which would result in an Orwellian nightmare of massive data collection and promiscuous data sharing.
Read the whole thing if you want to be depressed, but this excerpt from his abstract tells you everything you need to know.
The Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters will lead to substantially more transnational identity theft, crime, industrial espionage, financial fraud, and the suppression of political opponents and religious or ethnic minorities by authoritarian and corrupt governments. It puts Americans’ private financial information at risk. The risk is highest for American businesses involved in international commerce. The Protocol is part of a contemplated new and extraordinarily complex international tax information sharing regime involving two international agreements and two Organization for Economic Co-operation and Development (OECD) intergovernmental initiatives. It will result in the automatic sharing of bulk taxpayer information among governments worldwide, including many that are hostile to the United States, corrupt, or have inadequate data safeguards.
The bottom line is that the OECD wants this Multilateral Convention to become a World Tax Organization, with the Paris-based bureaucracy serving as judge, jury, and executioner.
That’s bad for America. Indeed, it’s bad for all nations (though it is in the interest of politicians from high-tax nations).
I wrote yesterday that governments want to eliminate cash in order to make it easier to squeeze more money from taxpayers.
But that’s not the only reason why politicians are interested in banning paper money and coins.
They also are worried that paper money inhibits the government’s ability to “stimulate” the economy with artificially low interest rates. Simply stated, they’ve already pushed interest rates close to zero and haven’t gotten the desired effect of more growth, so the thinking in official circles is that if you could implement negative interest rates, people could be pushed to be good little Keynesians because any money they have in their accounts would be losing value.
I’m not joking.
Here’s some of what Kenneth Rogoff, a professor at Harvard and a former economist at the International Monetary Fund, wrote for the U.K.-based Financial Times.
Getting rid of physical currency and replacing it with electronic money would…eliminate the zero bound on policy interest rates that has handcuffed central banks since the financial crisis. At present, if central banks try setting rates too far below zero, people will start bailing out into cash.
And here are some passages from an editorial that also was published in the FT.
…authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”…even a little physical currency can cause a lot of distortion to the economic system. The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy.
Citi’s Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. …the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction? Cash therefore gives people an easy and effective way of avoiding negative nominal rates. …Buiter’s solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether.
So are they right? Should cash be abolished so central bankers and governments have more power to manipulate the economy?
There’s a lot of opposition from very sensible people, particularly in the United Kingdom where the idea of banning cash is viewed as a more serious threat.
Allister Heath of the U.K.-based Telegraphworries that governments would engage in more mischief if a nation got rid of cash.
Many of our leading figures are preparing to give up on sound money. The intervention I’m most concerned about is Bank of England chief economistAndrew Haldane’s call for a 4pc inflation target, as well as his desire to abolish cash, embrace a purely electronic currency and thus make it easier for the Bank to impose substantially negative interest rates… Imagine that banks imposed -4pc interest rates on savings today: everybody would pull cash out and stuff it under their mattresses. But if all cash were digital, they would be trapped and forced to hand over their money. …all spending would become subject to the surveillance state, dramatically eroding individual liberty. …Money is already too loose – turning on the taps would merely further fuel bubbles at home and abroad.
As for negative interest rates, do we really want those? Or have we concluded that central bankers are doing more harm than good with their attempts to manipulate the economy? …a banknote is an incredibly efficient way to handle small transactions. It is costless, immediate, flexible, no one ever needs a password, it can’t be hacked, and the system doesn’t ever crash. More importantly, cash is about freedom. There are surely limits to the control over society we wish to hand over to governments and central banks? You don’t need to be a fully paid-up libertarian to question whether…we really want the banks and the state to know every single detail of what we are spending our money on and where. It is easy to surrender that freedom – but it will be a lot harder to get back.
Merryn Somerset Webb, a business writer from the U.K., is properly concerned about the economic implications of a society with no cash.
…at the beginning of the financial crisis, there was much talk about financial repression — the ways in which policymakers would seek to control the use of our money to deal with out-of-control public debt. …We’ve seen capital controls in the periphery of the eurozone… Interest rates everywhere have been at or below inflation for seven years — and negative interest rates are now snaking their nasty way around Europe… This makes debt interest cheap for governments…and it and forces once-prudent savers to move their money into the kind of risky assets that are supposed to drive growth (and tax receipts).
Last but not least, Chris Giles wrote a column for the FT and made one final point that is very much worth sharing.
Mr Haldane’s proposal to ban cash has all the hallmarks of a public official confusing what is convenient for the central bank with what is in the public interest.
Especially since the central bankers are probably undermining long-run economic prosperity with short-run tinkering.
Moreover, the option to engage in Keynesian monetary policy also gives politicians an excuse to avoid the reforms that actually would boost economic performance. Indeed, it’s quite likely that an easy-money policy exacerbates the problems caused by bad fiscal and regulatory policy.
Let’s conclude by noting that maybe the right approach isn’t to give politicians and central bankers more control over money, but rather to reduce government’s control over money. That’s one of the arguments I made in this video I narrated for the Center for Freedom and Prosperity.
P.S. By the way, Ryan McKaken at the Mises Institute identifies a third reason why politicians would prefer a cash-free society.
…the elimination of physical cash makes it easier for the state to keep track of private persons, and it assists central banks in efforts to punish saving and expand the money supply by implementing negative interest rate schemes. A third advantage of the elimination of physical cash would be to more easily control people and potential dissidents through the freezing of their bank accounts.
And they hate cash because it gives consumers an anonymous payment mechanism.
Let’s explore the animosity to cash.
It’s basically because a cashless society is an easier-to-tax society, as expressed by an editorial from the U.K.-based Financial Times.
…unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence. …Value added tax, for example, could be automatically levied. …Greece, in particular, could make lemonade out of lemons, using the current capital controls to push the country’s cash culture into new habits.
And some countries are actually moving in this direction.
J.D. Tuccille looks at this issue in an article for Reason.
Peter Bofinger of the German Council of Economic Experts…wants to abolish the use of cash… He frets that old-fashioned notes enable undeclared work and black markets, and stand in the way of central bank monetary policy. So rather than adjust policy to be more palatable to the public, he’d rather leave no shadows in which the public can hide from his preferred policies. The idea is to make all economic activity visible so that people have to submit to control. Denmark, which has the highest tax rates in Europe and a correspondingly booming shadow economy, is already moving in that direction. …the Danmarks Nationalbank will stop internal printing of banknotes and minting of coins in 2016. After all, why adjust tax and regulatory policy to be acceptable to constitutents when you can nag them and try to reinvent the idea of money instead?
By the way, some have proposed similar policies in the United States, starting with a ban on $100 bills.
Notwithstanding my attempt to be clever, the tide is moving in the wrong direction. Cash is beginning to vanish in Sweden, as reported by the New York Times.
…many of the country’s banks no longer accept or dispense cash. Bills and coins now represent just 2 percent of Sweden’s economy, compared with 7.7 percent in the United States and 10 percent in the euro area. This year, only a fifth of all consumer payments in Sweden have been made in cash, compared with an average of 75 percent in the rest of the world, according to Euromonitor International. …Cash machines, which are controlled by a Swedish bank consortium, are being dismantled by the hundreds
Though the article notes that there is some resistance.
Not everyone is cheering. Sweden’s embrace of electronic payments has alarmed consumer organizations and critics who warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes. …The government has not sought to stem the cashless tide. If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem. Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution.
What matters, by the way, is not the degree to which consumers prefer to use alternatives to cash.
That’s perfectly fine, and it explains much of what we see on this map.
The problem is when governments use coercion to limit and/or abolish cash so that politicians have more power. And (gee, what a surprise) this is why the French are trying to crack down on cash.
Writing for the U.K.-based Telegraph, Matthew Lynn mentions the new policy and France and also explores some worrisome implications of this anti-cash trend.
France is banning the use of cash for transactions worth more than €1,000…part of a growing movement among academics and now governments to gradually ban the use of cash completely. …it is a “barbarous relic”, as some publications loftily dismiss it. The trouble is, cash is also incredibly efficient. And it is a crucial part of a free society. There is no convincing case for abolition. …When it comes to creeping state control, it is no surprise to find the French out in front. …A cashless economy would be far easier to both tax and control. But hold on. Is that something we really want? In reality, cash is far too valuable to be given up lightly. In truth, the benefits of abolition are largely oversold. While terrorists and criminals may well use cash to buy weapons, or deal in drugs, it is very hard to believe that they would not find some other way of financing their operations if it was abolished. Are there really any cases of potential jihadists being foiled because they couldn’t find two utility bills (less than three months old, of course) in a false name to open an account?
Amen. Banning cash to stop terrorists is about as foolish as thinking that gun control will thwart jihadists.
In any event, we need to consider trade-offs. Chris Giles highlighted that issue in a piece for the Financial Times.
…an unfortunate rhetorical echo of Maoist China. It is illiberal… Some argue there would be beneficial side effects from abolishing notes and coins through the regularisation of illegal activities. Really? …Cash would have to be abolished everywhere and the BoE does not have those powers, thankfully. The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty.
Though I suppose we should grudgingly give politicians credit for cleverly trying exploit fear to expand their power.
But never forget we’re talking about a bad version of clever. If they succeed, that will be bad news for freedom. J.D. Tuccille of Reasonexplains in a second article why a growing number of people prefer to use cash.
Many Americans happily and quietly avoid banks and trendy purchasing choices in favor of old-fashioned paper money. Lots of business gets done that way…the Albuquerque Journal pointed out that over a third of households in the city either avoid banks entirely (the “unbanked”) or else keep a checking account but do much of their business through cash, check-cashing shops, pawn shops, money orders, and other “alternative financial products” (the “underbanked”). A few weeks earlier, the Kansas City Star reported a similar local situation… In both cities, the phenomenon is growing. …Twenty-six percent cite privacy as a reason for keeping clear of banks – bankers say that increased federal reporting and documentation requirements drive many customers away. “A lot of people are afraid of Uncle Sam,” Greg Levenson, president and CEO of Southwest Capital Bank, told the Albuquerque Journal. …It’s a fair bet that those who “have managed to earn income in the shadow economy” and want to keep their income unreported to the feds and undiminished by fees are heavily overrepresented among the unbanked. …most people aren’t idiots. When they avoid expensive, snoopy financial institutions, it’s because they’ve decided the benefits outweigh the costs.
Very well said, though I’d augment what he wrote by noting that some of these folks probably would like to be banked but are deterred by high costs resulting from foolish government money-laundering laws.
More on that later.
Let’s stay with the issue of whether cash should be preserved. A business writer from the U.K. is very uneasy about the notion of a society with no cash.
…tax authorities have become increasingly keen on tracking everything and everyone to make absolutely certain that no assets slip under their radars. The Greeks have been told that, come 2016, they must begin to declare all cash over €15,000 held in safes or mattresses, and all precious stones, gold and the like worth more than €30,000. Anyone else think there might be a new tax coming on all that stuff? …number-crunchers…are maddened by the fact that even as we are provided with lots of simple digital payment methods we still like to use cash: the demand for £20 and £50 notes has been rising. …They are maddened because “as untraceable bearer instruments, it is not possible to locate where banknotes are being held at any one time”… Without recourse to physical cash, we are all 100% dependent on the state-controlled digital world for our financial security. Worse, the end of cash is also the end of privacy: if you have to pay for everything digitally, every transaction you ever make (and your location when you make it) will be on record. Forever. That’s real repression.
She nails it. If politicians get access to more information, they’ll levy more taxes and impose more control.
And that won’t end well.
Last but not least, the Chairman of Signature Bank, Scott Shay, warns about the totalitarian temptations that would exist in a cash-free world. Here’s some of what he wrote in a column for CNBC.
In 2010,VisaandMasterCard, bowed to government pressure — not even federal or state law — and banned all online-betting payments from their systems. This made it virtually impossible for these gambling sites to continue operating regardless of their jurisdiction or legality. It is not too far-fetched to wonder if the day might come when the health records of an overweight individual would lead to a situation in which they find that any sugary drink purchase they make through a credit or debit card is declined. …You might think then that the person can always pay cash and remain outside the purview of these technologies. This may be the case for the moment, but we are well on the road to becoming a cashless society. …there is…a sinister risk…a cashless society would certainly give governments unprecedented access to information and power over citizens.
And, he warns, that information will lead to mischief.
Currently, we have little evidence to indicate that governments will refrain from using this power. On the contrary, the U.S. government is already using its snooping prowess and big-data manipulation in some frightening ways. …the U.S. government is becoming very fond of seizing money from citizens first and asking questions later via “civil forfeiture.” Amazingly, the government is permitted by law to do this even if it is only government staff members who have a suspicion, not proof, of wrongdoing. …In recent years, it made it increasingly difficult for companies to operate or individuals to transact by adding compliance hurdles for banks wishing to deal with certain categories of clients. By making it too expensive to deal with certain clients or sending the signal that a bank should not deal with a particular client or type of client, the government can almost assuredly keep that company or person out of the banking system. Banks are so critically dependent on government regulatory approval for their actions… It is easy to imagine a totalitarian regime using these tools to great harm.
Some folks will read Shay’s piece and downplay his concerns. They’ll say he’s making a slippery slope argument.
But there are very good reasons, when dealing with government, to fear that the slope actually is slippery.
Let’s close by sharing my video on the closely related topic of money laundering. These laws and regulations have been imposed supposedly to fight crime.
P.P.S. If politicians want to improve tax compliance in a non-totalitarian fashion, there is a very successful recipe for reducing the underground economy.
Today, though, let’s be momentarily serious and enjoy a Christmas present to the nation from an unexpected source. The Obama Administration has announced that the odious practice of asset forfeiture is going to be curtailed.
Here are some excerpts from a Washington Postreport.
The Department of Justiceannounced this weekthat it’s suspending a controversial program that allows local police departments to keep a large portion of assets seized from citizens under federal law and funnel it into their own coffers. The “equitable-sharing” program gives police the option of prosecuting asset forfeiturecases under federal instead of state law. Federal forfeiture policies are more permissive than many state policies, allowing police to keep up to 80 percent of assets they seize — even if the people they took from are never charged with a crime. …Criminal justice reformers are cheering the change. “This is a significant deal,” said Lee McGrath, legislative counsel at the Institute for Justice.
But don’t get too excited. This almost certainly is not a sign of genuine libertarian thinking inside the Obama Administration.
Indeed, the story suggests that the Justice Department made this change at least in part because it didn’t want to share money with state and local governments.
The DOJ is suspending payments under this program due to budget cuts included in therecent spending bill. “While we had hoped to minimize any adverse impact on state, local, and tribal law enforcement partners, the Department is deferring for the time being any equitable sharing payments from the Program,” M. Kendall Day, chief of the asset forfeiture and money laundering section,wrote in a letterto state and local law enforcement agencies. In addition to budget cuts last year, the program has lost $1.2 billion, according to Day’s letter. “The Department does not take this step lightly,” he wrote. “We explored every conceivable option that would have enabled us to preserve some form of meaningful equitable sharing. … Unfortunately, the combined effect of the two reductions totaling $1.2 billion made that impossible.”
Now that we’ve been serious, let’s get back into the Christmas spirit.
An article in The Atlantic looks at Christmas cards, as designed by economists. Mostly they showed why we’re not at the top of people’s invite lists for holiday parties. Here are my two favorites.
Yup, only economists could describe things like love and family in this fashion!
I don’t even know how to characterize this card, but this sometimes is how economists think.
Last but not least, here are a couple of great Christmas-themed cartoons from two years ago, both by Michael Ramirez.
We’ll start with a Christmas wish that Santa hopefully granted.
After perusing that data, some of us may not be feeling like our statist friends deserve any holiday cheer. But this is Christmas, so let’s try to feel love and joy. So if you see some of your government worshipping friends and family today, we even have a Christmas greeting that’s appropriate for leftists.
Of course, that’s not where the story really ends. The cartoon needs a few more frames to commemorate the 100 million-plus people butchered by communism.
This isn’t because of any special animus, but rather because the unintended consequences of government intervention are almost always harmful.
Consider the issue of higher education. Politicians start with the warm and fuzzy notion that it would be good to help more people go to college. So they create loans and grants to help them pay for tuition.
Sounds nice and noble, right? And just think of the votes that can be harvested from grateful parents!
So is this a win-win situation for both politicians and students? Well, let’s look at the real-world results.
As explained in this video, there’s a lot of evidence that these loans and grants are the reason that higher education is now far more expensive (just as there is powerful data showing that subsidies lead to higher costs in other areas as well).
And additional research is confirming this concern. A new study by Professor Grey Gordon of Indiana University and Professor Aaron Hedlund of the University of Missouri finds that government subsidies for higher education wind up benefiting colleges and universities and hurting students.
Here are the key findings.
We develop a quantitative model of higher education to test explanations for the steep rise in college tuition between 1987 and 2010. …We measure how much changes in underlying costs, reforms to the Federal Student Loan Program (FSLP), and changes in the college earnings premium have caused tuition to increase. All these changes combined generate a 106% rise in net tuition between 1987 and 2010, which more than accounts for the 78% increase seen in the data. Changes in the FSLP alone generate a 102% tuition increase.
Robby Soave of Reason reports on the new research.
…skyrocketing college tuition costs are the result of all-too-generous student loan policies. The study, authored by Grey Gordon and Aaron Hedlund, used a computer model to measure the effects of various economic forces on college costs. According to the model, no factor had more to do with rising tuition prices than loan subsidies. “Looking at individual factors, we find that expansions in borrowing limits drive 40% of the tuition jump and represent the single most important factor,” wrote the study’s authors. In fact, the “Bennett hypothesis”—the idea, first proposed by President Ronald Reagan’s Education Secretary William Bennett, that increasing student aid encourages colleges to jack up prices—fully explains all the tuition increases between 1987 and 2010, according to the study. …A recent study by the New York Federal Reserve reached asimilar, albeit less dramatic, conclusion regarding the link between loans and tuition.
Regarding the study from the N.Y. Fed, here’s Robby’s report on that research.
The bottom line is that politicians want us to believe that subsidies are needed because college is getting more expensive. But what’s really happening is that college is getting more costly because of the subsidies!
Now let’s move to a separate question. We know that colleges and universities are getting a big windfall as a result of students loans and other subsidies. So how are they spending the money?
And that’s probably because much of this money is mostly being wasted on more bureaucracy. Here’s a chart showing trends in recent years.
Even more depressing, the research also shows that all this spending doesn’t improve human capital, so there’s a negative impact on overall economic performance.
P.P.S. Speaking of which, Hillary Clinton’s plan for higher education is a recipe to enable even higher costs for colleges and universities.
P.P.P.S. Some folks hope that there’s a soon-to-pop bubble in higher education, which means that tuition will soon become more affordable. But I’m worried that higher education is more like health care rather than housing, which means that prices will climb even higher over time.
Moreover, the longer we wait, the more difficult reform will be. I don’t always agree with the policy prescriptions of the Committee for a Responsible Budget, but they are very sober-minded in their analysis. And this chart from one of their recent publications shows that waiting until 2026 or 2034 will require more radical changes.
So it should be obvious we need reform, but now the question is what kind of reform.
Instead, the goal should be creating a freer society and smaller footprint for government. And that’s why I think personal retirement accounts are the right goal.
And to understand the implications, consider these excerpts from a column in today’s Wall Street Journal. Professor Jeremy Siegel of the University of Pennsylvania explains how the Social Security system has made his retirement less comfortable.
Last month I turned 70 and, thanks to my earnings, became entitled to Social Security’s maximum benefit, currently $3,500 a month, or $42,000 a year. And so, if I live to 90, I will receive $840,000 worth of (inflation-adjusted) benefits. Over the past 50 years, according to the Social Security Administration, the combined taxes paid into the system by me and my employers equaled $329,640. This sounds like a good deal… But the benefits are only about one-third the $2.27 million I would have accumulated had the taxes instead been invested, over time, in a stock index fund. …the benefits I would collect are even less than the $1.28 million I would have accumulated if my “contributions,” as Social Security taxes are euphemistically called, had been placed in U.S. Treasury bonds. …are affluent seniors making out like bandits? Not at all. The bandit is the federal government, which provides benefits that are millions of dollars short of what anyone whose earnings are at or above the tax cap easily could have accumulated on his own.
In effect, Professor Siegel has been forced to pay for a steak and he’s getting a hamburger. Which is a good description of how all entitlement programs operate.
Moreover, everyone will pay more for their steak and get even less hamburger if politicians deal with the program’s giant shortfall by imposing the wrong type of reform.
But it’s not just that Social Security is bad for individuals. It’s also a burden on the overall economy.
Andrew Biggs of the American Enterprise Institute looks at how private savings is impacted by government-run retirement schemes
…fixing Social Security by raising taxes – or, going further, expanding Social Security as many progressives favor – won’t increase retirement income so much as shift it from households to government. …Anew reportfrom Canada’s Fraser Institute looks at how Canadian households’ personal saving habits responded to increases in the tax rates used to finance the Canada Pension Plan (CPP). …The Fraser study, authored by Charles Lammam, François Vaillancourt, Ian Herzog and Pouya Ebrahimi, found that for each dollar of additional CPP contributions, Canadian households reduced their personal saving by around 90 cents. As a result, total saving – and thus total future retirement income – would increase by a lot less than you’d think. Households would receive more income from the CPP but less from their own saving.
These results are similar to what’s been found in other nations.
I found asimilar resultacross OECD countries: when a country’s government provided an additional dollar of retirement benefits, retirees provided for themselves about 93 cents less in income from savings and work in retirement. …a2003 analysisby Suzanne Rohwedder and Orazio Attanasio which found that, for the United Kingdom’s earnings-related pension system, individuals reduced personal saving by 65 to 75 cents for each dollar of benefits they expected to receive from the government.
Here’s a very powerful chart on the relationship between private savings and government retirements benefits from another one of Andrew’s articles.
Wow, that’s a powerful relationship. And Biggs isn’t the only expert to produce these results.
All of which underscores why I think we should have a system similar to what they have in Australia or Chile (or even the Faroe Islands).
Here’s my video making the case for personal retirement accounts.
P.S. Two economists at the Federal Reserve produced a study examining why Social Security was first created. It might seem obvious that it was a case of politicians trying to buy votes by creating dependency, but they actually go through the calculations in order to explain how it made sense (from the perspective of people alive at the time) to create a program that now undermines the well-being of the nation.
A well-established result in the literature is that Social Security tends to reduce steady state welfare in a standard life cycle model. However, less is known about the historical effects of the program on agents who were alive when the program was adopted. …we estimate that the original program benefited households alive at the time of the program’s adoption with a likelihood of over 80 percent, and increased these agents’ welfare by the equivalent of 5.9% of their expected future lifetime consumption. …Overall, the opposite welfare effects experienced by agents in the steady state versus agents who experienced the program’s adoption might offer one explanation for why a program that potentially reduces welfare in the steady state was originally adopted.
Gee, what a shocker. Ponzi schemes benefit people who get in at the beginning of the scam.
P.P.S. Speaking of Ponzi schemes, here’s the case for reform, as captured by cartoons. And you can enjoy other Social Security cartoonshere,here, andhere, along with a Social Security jokeif you appreciate grim humor.
Based on my writings, some people may think I’m 100 percent against higher taxes.
But that’s not exactly true. In some cases, I like punitive taxation. Or, to be more precise, I sometimes take pleasure when punitive tax policy backfires on bad people.
Here’s an example. An interesting article in Slate, authored by Adam Chodorow of Arizona State University Law School, looks at how a terrorist group’s attempt to form a government is being stymied by an inability to collect taxes.
Revolution is easy. Governing is hard. And there are few things more difficult than taxes. Operating a country requires money, and that typically requires taxes. … The population in this area is estimated to be between 7 million and 8 million, aboutthe same as the population of Washington state. While ISIS currently collects about $1 billion annually,countries of similar size collect about $16 billion, suggesting that ISIS has a long way to go if it wants to operate like a real state.
Instead, the terror group is discovering that people don’t like giving their money to politicians and bureaucrats, even ones motivated by Islamic fundamentalism.
…taxes aren’t a great way to ingratiate oneself with the governed. …More than one government has fallenbecause of its tax policy. ISIS must face these challenges just as any emerging polity does… ISIS may have displayed prowess on the battlefield, but it has revealed that it is as stymied and constrained by the complexities of taxation as the rest of us. …ISIS’s taxes appear to be…no more popular in the territory it controls than they would be here in the U.S. As theTimesreported, ISIS’s taxes are now so onerous that large numbers of people, who were apparently willing to tolerate ISIS’s religious authoritarianism, are fleeing Syria and Iraq to escape them. At some point people will either rise up or leave, threatening ISIS’s internal revenue source.
So taxes are becoming so onerous that taxpayers (and taxable income) are escaping.
Hmmm…, excessive taxation leading to less taxable economic activity. That seems like a familiar concept.
ISIS is…constrained by a lack of administrative resources and the simple realityonce sketched on the back of a cocktail napkin by the economist Arthur Laffer: that tax rates can only get so high before they actually drive down government revenues. Given current conditions, ISIS may be near or at the limits of its ability to tax, even if it can recruit jihadi tax accountants to its cause. Thus, …it’s not clear how much room the group has to grow internal revenues. More important, its efforts to do so may do more to damage its prospects than outside forces can accomplish.
This sounds like the tax equivalent of War of the Worlds, the H.G. Wells’ classic in which alien invaders wreak havoc on earth until they are felled by bacteria.
Tom Cruise was the star of a 2005 movie adaptation of this story, but I’m thinking I could rekindle my acting career and star in a movie of how the Laffer Curve thwarts ISIS!
But to have a happy ending, ISIS has to be defeated. And Professor Chodorow closes his article with a very helpful suggestion.
Rather than send in ground troops, …view our tax code as a weapon of mass destruction… We could make full use of it in the war on ISIS, perhaps by translating it into Arabic in the hopes that the group adopts it.
Sounds like the advice I gave about threatening Assad with Obamacare.
P.S. If they do decide to make a movie about the Laffer Curve and ISIS, maybe Obama could star as tax adviser for ISIS. At least if he’s not too busy in some of the other movie roles people have envisioned.
P.P.S. I like excessive taxes when they lead to the downfall of terrorist thugs. But I also take perverse pleasure when class-warfare tax hikes backfire in places such as France and the United Kingdom. I feel sorry for the taxpayers of those nations, to be sure, but it sometimes helps to have examples of what not to do.
Normally I’m very happy to work for the Cato Institute, both because it is a principled and effective organization.
But I wondered about my career choices last night because I was stuck with the very unpleasant task of live-tweeting the Democrat presidential debate. Cleaning out septic tanks would have been a more enjoyable way to spend my time.
Of all the crazy things that were discussed (you can see my contemporaneous reactions on my Twitter feed), the Clinton-Sanders-O’Malley support for so-called Paycheck Fairness legislation would be at the top of my list.
Yes, I was irked by the myopic fixation on income inequality, the support for class-warfare taxation, and the reflexive advocacy for more government spending, but messing around with the price system – because of an assertion that women are paid 77 cents for every $1 received by men – is an entirely different level of foolishness.
Here’ssome of what I wrote in 2012, for instance, when discussing proposals to give politicians power over wage levels.
…what’s really at stake is whether we want resources to be allocated by market forces instead of political edicts. This should be a no-brainer. If we look at the failure of central planning in the Soviet Union and elsewhere, a fundamental problem was that government officials – evenassuming intelligence and good intentions– did not have the knowledge needed to make decisions on prices. And in the absence of a functioning price system, resources get misallocated and growth suffers. So you can imagine the potential damage of giving politicians, bureaucrats, and courts the ability to act as central planners for the wage system.
In other words, higher taxes and more spending will dampen growth, and that’s no good, but pervasive intervention in the price system can screw up an entire economy. Indeed, I suspect only bad monetary policy is capable of inflicting a greater level of damage.
Moreover, the left’s theory is based on the assumption that greedy businesses and investors are deliberately sacrificing profits by choosing to pay men more when they could hire equally qualified women for less money.
To use a highly technical economic phrase, that’s friggin’ nuts.
Yet our leftist friends want to replace market-based compensation with coercion-based wages.
Consider, for instance, a report from the Pew Charitable Trusts about initiatives on the state level.
…the California Legislature…sent Democratic Gov. Jerry Brown a “pay equity” bill… California isn’t alone in acting. …the governors of Connecticut, Delaware, Illinois, North Dakota and Oregon have signed equal pay laws this year. New York legislators unanimously passed a bill that Democratic Gov. Andrew Cuomo has indicated he will sign. And Massachusetts has two bills pending. Equal pay bills also were introduced in 21 other states.
The article cited my unflattering remarks on the issue.
…some critics, such as Daniel Mitchell of the Cato Institute, a libertarian think tank in Washington, said that the new legislation would put a “catastrophic burden” on businesses. “The notion that there’s some widespread discrimination in the marketplace, there’s just no real-world evidence for it,” Mitchell said. “They’re trying to give the government widespread authority to make very abstract judgments about the value of a job in the private sector.”
And I’m not the only critic.
Here are some excerpts from a recent column in the Wall Street Journal by Sarah Ketterer.
When it comes to economically foolish laws, California is second to none. A good example is the California Fair Pay Act… Like its national counterpart, it is an aggressive attempt to eradicate a wage gap between men and women that is allegedly due to discrimination in the workplace. But this wage gap is illusory, and the legislation will have unintended consequences, including for women.
She’s right. Policy that is bad when implemented by a state can cause widespread damage if imposed nationally.
Ms. Ketterer elaborates on why the proposal is misguided.
The Bureau of Labor Statistics (BLS) notes that its analysis of wages by gender does “not control for many factors that can be significant in explaining earnings differences.” What factors? Start with hours worked. …Men are significantly more likely than women to work longer hours, according to the BLS. And if we compare only people who work 40 hours a week, BLS data show that women then earn on average 90 cents for every dollar earned by men. Career choice is another factor. …Of the 10 lowest-paying majors—such as “drama and theater arts” and “counseling psychology”—only one, “theology and religious vocations,” is majority male. Conversely, of the 10 highest-paying majors—including “mathematics and computer science” and “petroleum engineering”—only one, “pharmacy sciences and administration,” is majority female. Eight of the remaining nine are more than 70% male. Other factors that account for earnings differences include marriage and children, both of which cause many women to leave the workforce for years.
It’s unclear whether Clinton-Sanders-O’Malley know (or even care) that the number is garbage. But what is clear is that legislation based on this dishonest data could cause massive economic distortions.
Though, to be fair, Ms. Ketterer points out that trial lawyers will enjoy more business.
What California’s Fair Pay Act willdo, however, is make the state, already notorious for regulation and red tape, a more difficult place to do business. Companies must now ensure that every penny of wage differential between the men and women they employ is attributable to bona-fide differences in education, training, experience, quantity or quality of work, and so on. …even attempting to do so will only add to companies’ already substantial regulatory-compliance budgets. Some of these factors—quality of work, for instance—are inevitably subjective, yet trial lawyers will swoop in to turn every conceivable pay difference into a lawsuit.
A bunch of lawsuits would actually be the least-worst outcome.
What scares me far more is pervasive controls on wages, which is what our leftist friends ultimately prefer.
P.S. You probably won’t be surprised, given their history of mendacity, to learn that the left-wing bureaucrats at the Paris-based OECD also are peddling dishonest numbers to advance this ideological agenda.
On rare occasions, our government-loving friends let their guard down and say things that reveal the true nature of leftism as a punitive philosophy that subjugates the individual to the state.
An English leftist named Richard Murphy, for instance, actually argued that private income is the “rightful property” of government.
An American statist named Matt Yglesias openly expressed a desire for ultra-high tax rates solely for reasons of spite rather than to finance bigger government.
We now have another leftist who deserves recognition for openly embracing the notion that people should be pawns of government. The Governor of California, Jerry “Moonbeam” Brown, has bragged that coercion is the core of modern leftism.
Here are some excerpts from a recent Los Angeles Timesstory.
Gov.Jerry Brownhas been…been making an explicit case for the power of government. …Brown said politicians need to be willing to use the blunt force of government intervention… “You need the coercive power of government to say, do this,” the governor said during a panel discussion… “Never underestimate the coercive power of a central state…,” he said.
Kudos to Gov. Brown. He didn’t use fatuous rhetoric about “government is just a word for things we do together.”
He openly acknowledges that statism is force, backed up by men with guns, based on what politicians want other people to do.
Now let’s look at another politician who deserves credit for honesty.
Though, rather ironically, we’re talking in this case about a politician who generally is known for mendacity and prevarication, so this belongs in the stopped-clock-is-right-twice-a-day category.
That’s because the Daily Callerreports that Hillary Clinton accidentally stumbled into a bit of honesty when discussing the economic impact of Obamacare.
Democratic Party front-runner Hillary Clinton inadvertently slammed President Barack Obama’s signature piece of domestic legislation, the Affordable Care Act, as a full-time job killer. …a women stood up and asked, “I just want to know why there’s like discrimination against the part-time workers… Clinton said. “That…Affordable Care Act.” …Clinton continued, “…we have built in some unfortunate incentives that discourage full-time employment.”
But these excerpts from the story don’t fully capture what Hillary said.
Watch this short video and it will be very clear that she’s admitting that Obamacare has undermined full-time work.
Though we shouldn’t be overly impressed that Hillary recognize a problem since it’s quite possible – indeed, probably nearly certain – that her solution will be to expand the size and scope of government and make the situation even worse.
In other words, she’ll probably combine the sentiments in this poster with the sad reality of Mitchell’s Law.
After all, we have lots of real world evidence that limits on the growth of government spending – if sustained for multi-year periods – can quickly shrink the burden of government and reduce red ink.
So the real key is figuring how to impose rules that ensure long-run spending restraint. That’s why, for instance, the Swiss Debt Brake is attracting so much positive attention.
But what’s really remarkable is that there’s also growing support for spending caps (sometimes called “expenditure limits”) from establishment organizations that normally lean to the left.
By the way, these international bureaucracies are not motivated by a desire for limited government. Instead, they focus on fiscal balance. In other words, they want to control deficits and debt, which I think is a misguided focus since red ink is merely the symptom of the real problem of excessive spending.
Yet regardless of their focus, research from the IMF and OECD has shown that spending caps are the only approach that works (hardly a surprise since symptoms go away if underlying problems are addressed).
Now we can add another establishment voice to the chorus. The European Central Bank (ECB) has just published a study on the efficacy of fiscal rules for countries in the European Union. Let’s look at some excerpts to see what was found.
First, it was discovered that balanced budget rules aren’t very effective since they allow too much spending when the economy is growing and generating lots of tax revenue. Moreover, such rules are difficult to sustain during downturns when revenues fall.
…during a boom phase fiscal rules do not prevent fiscal policy from turning expansionary, while at times of a recession fiscal policy is potentially restrictive as governments need to comply with the rules’ requirements. This effect is assumed to be particularly pronounced in periods of limited fiscal space, while it might be less obvious in an environment of high fiscal space.
By the way, “fiscal space” refers to the maneuvering room politicians have. A government with a budget surplus, for instance, has “fiscal space” under a balanced-budget requirement.
But if a budget is balanced, then a government doesn’t have “fiscal space” if something happens (like a downturn) that causes lower revenues and higher spending.
Anyhow, the ECB study found that expenditure rules were the most effective.
We find strong evidence for fiscal rules being associated with higher fiscal space, i.e. the fiscal room for manoeuvre is higher in those countries which have established fiscal rules. This may not be surprising as fiscal rules are implemented to keep primary balances under control… When splitting the results by different types of fiscal rules, we find significant coefficients for expenditure and, to a lesser extent, balanced budget rules, but none for debt rules.
Here are some of the details about spending caps.
Regarding the different types of fiscal rules, we find particularly strong coefficients for expenditure rules, possibly reflecting the fact that expenditure rules are easier to monitor and are thereby more credible. …If a country had a fiscal rule in place for the past ten years the average fiscal space for those years is around 22% of GDP higher. The coefficient is proportional to the number of years in which a fiscal rule has been in place.
All this makes sense. The longer a spending cap is in place, the better the results. Which may be why more and more nations are moving in this direction.
The study highlights a very important reason why spending caps are successful. They make it difficult for politicians (as we’ve seen in Greece,Alberta,Puerto Rico, California, andAlaska) to increase spending when there is fiscal space (i.e., extra revenue).
…if governments have fiscal rules in place, the results suggest that governments can no longer fully use their fiscal space and (on average) are even forced to reduce their current expenditures.
Last but not least, the study also generated some findings that should be of considerable interest to fans of Keynesian economics. These are the folks who think an extra burst of government spending can stimulate an economy, so they are strongly opposed to balanced budget rules that are perceived to be “procyclical” since they require belt-tightening when there’s a recession and revenues shrink (while also allowing more spending when the economy is strong and revenues are growing).
But as you can see, spending caps generally avoid this problem.
…an increase in fiscal space indeed seems to be associated with fiscal policy being more procyclical. Yet if fiscal rules are in place, this positive link seems to be significantly smaller. …balanced budget rules…and expenditure rules…are correlated with a lower coefficient for fiscal space on procyclicality. This is in line with our findings above that expenditure rules might restrict discretionary expenditures.
This makes perfect sense. If you look at what’s happened with the Swiss Debt Brake (which is actually a spending cap), government spending has increased about 2 percent annually. That’s a frugal approach when the economy is growing and revenues are increasing, so advocates of small government can applaud.
But when the economy is weak and revenues are flat, Keynesians can applaud because government is still allowed to grow by 2 percent each year.
And since spending grows by less than the private sector over the long run, the net result is not only a smaller burden of government spending, but also shrinking debt levels, which is why we’re also getting applause from the OECD, IMF, and now the ECB.
P.S. Not all spending caps are created equal. There are very successful spending caps in places such as Switzerland and Hong Kong, in large part because these caps are explicitly designed to keep government from consuming ever-larger shares of economic output.
But I was recently in Texas as part of a program to discuss spending caps, organized by the Texas Public Policy Foundation.
Texas has a spending cap, but as you can see from this slide presented by State Senator Van Taylor, it’s not exactly working as well as the Swiss Debt Brake.
You can watch a video of the event by clicking here.
My message was that a spending cap is like a speed limit in a school zone. If the limit is 90 MPH, it doesn’t do any good.
The goal – at the very least – should be to prevent government from consuming ever-larger shares of economic output. This is the giant challenge in the developed world.
As you can see from this interview, I get rather frustrated by the minimum wage debate. I’m baffled that some people don’t realize that jobs won’t be created unless it’s profitable to create them.
So even though we have lots of evidence already that wage mandates cause joblessness (especially for minorities), let’s add to our collection.
Here are some excerpts from a Wall Street Journal column by Professor David Neumark from the University of California Irvine.
Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired. Among the many studies supporting this conclusion isonecompleted earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years”… An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase. …let’s not pretend that a higher minimum wage doesn’t come with costs, and let’s not ignore that some of the low-skill workers the policy is intended to help will bear some of these costs.
The column also exposes some of the methodological flaws in studies that claim high minimum wages don’t lead to job losses, so the entire piece is worth reading.
Since we’re on this topic, here’s a great table prepared by Mark Perry of the American Enterprise Institute. Is anyone shocked to learn that countries with minimum wage mandates have higher unemployment levels, particularly for young people?
I have two big observations and two minor comments in response to this data.
The first big observation is the caveat that minimum wage mandates are just one piece of the economic puzzle. The numbers if Greece, for instance, are miserable for many reasons. The minimum wage mandate is just another straw on the camel’s back. Moreover, it’s possible for a nation to have a decent-performing economy with a minimum wage (see Luxembourg) and a decrepit economy without one (see Italy). It’s the overall burden of government that matters, which is why the rankings from Economic Freedom of the World are the first place to look when determining if a nation is market-oriented or statist.
That being said, Mark’s data certainly shows a correlation between joblessness and minimum wage mandates. Part of the reason for this link is that higher minimum wages are bad for employment, and part of the reason for the correlation is that governments foolish enough to impose minimum wages are probably foolish enough to impose other bad policies as well.
The second big observation is that I periodically encounter leftists who say a minimum wage is needed because employers have all the leverage and would pay workers starvation wages in the absence of a mandate. To which I always respond by asking them, “Then why don’t employers use that leverage to reduce the wages of the 98 percent of workers who make more than the minimum wage?” That shuts down the conversation very quickly.
But now I’ll also ask these folks, “And why aren’t workers in Austria and Sweden paid starvation wages?” Their responses will be amusing.
For my minor comments, I’ll start by noting that Switzerland is a uniquely sensible nation. Voters recently rejected a minimum wage mandate by an overwhelming 3-1 margin. I fear American voters would not be nearly as sensible if we had a national referendum.
My second minor comment is to share this amusing report about Belgian politicians whining that the lack of a minimum wage in Germany (at least as of 2013) was causing “unfair” competition. Oh, the horror!
Last but not least, let’s recycle this great video from the Center for Freedom and Prosperity.
If you have friends and colleagues who lean left but nonetheless are open-minded, please share this video with them.
And let them know that even Janet Yellen of the Federal Reserve has acknowledged that minimum wage mandates are recipe of joblessness.
P.S. I wrote a few days ago to identify several statist policies that cause inequality. Well, I’ve added to that list because it turns out that red tape also can unjustly line the pockets of the rich at the expense of the poor. Make sure to check out the updated version of that post.
Whenever I pontificate about the health of the American economy, I feel like Goldilocks. Instead of arguing that the economic porridge is too hot or too cold, or that the economic bed is too hard or too soft, I conclude that we’re stuck in the middle.
But while Goldilocks always liked the middle option, I obviously think we should be more like Hong Kong and Singapore.
With this bit a background, let’s look at some supposedly really bad news that actually is modestly good news.
The folks at the Pew Research Center just issued a major report on income trends over the past 40-plus years. Based on their headline, you would think it’s filled with horrible news. Sort of like saying the economic porridge is way too cold.
So is it true that the middle class is “losing ground” and “falling behind”?
Michael Fletcher, writing for the Washington Post, seems to accept that spin. He opened his column by portraying the report’s findings as a sign of dystopian inequality.
After more than four decades of economic realignment and creeping inequality, the U.S. middle class is no longer the nation’s majority.
Yet even he was forced to acknowledge that this supposed “tipping point” is primarily the result of more households earning more money.
The nation has arrived at this tipping point in part because more Americans are moving up the income ladder. In 1971, just 14 percent of Americans were in the upper income tier, which Pew defined as more than double the nation’s median income. Now, 21 percent of American households are in that upper earning category — at least $126,000 a year for a three-person household.
Though he does his best to find a dark lining to this silver cloud, using loaded language to imply that those with modest incomes are disadvantaged because income is being “captured” by the rich.
…at the same time, many Americans are falling behind…. In 1971, a quarter of American households fell into the bottom earning tier, which Pew defined as less than two-thirds of the nation’s median income. By 2015, 29 percent of American households fell into that category. …The decline of the middle class has been accompanied by growing inequality, as a growing share of the nation’s income has been captured by those at the top.
But the Pew Report confirmed that the economy is not a fixed pie. Yes, the rich have become richer, but even Mr. Fletcher concedes that their income gains are not at the expense of the less fortunate. This is because the rest of us are becoming richer as well.
…Americans of all income levels have grown more prosperous, Pew found. Middle class families have seen their income grow by 34 percent in inflation-adjusted dollars since 1970, while lower-income Americans have experienced income growth of 28 percent.
He also reports that African-Americans have enjoyed above-average income growth.
…black Americans have made more economic gains than others in recent decades. Between 1971 and 2015, for example, the share of black Americans in the upper income tier more than doubled to 12 percent.
Here’s a chart from the Pew report. Note that these numbers are not based on changes in actual income, but instead measure how each group is faring relative to other slices of the population.
Maybe I’m just a naive Pollyanna, but the numbers in the Pew Report, even as characterized by the Washington Post, don’t seem like a damning indictment of American society.
Indeed, they sort of validate my view that things are getting better over time, albeit not as quickly as they would be improving if we followed the right recipe and had smaller government and less intervention.
In other words, we may not have hot, Hong Kong-style porridge, but it’s at least room temperature.
But Scott Winship of the Manhattan Institute is the real expert on these issues, so I was happy to see that he wrote an article on the Pew study for National Review.
Here are some of his key observations, starting with the essential insight that it’s much better to focus on income trends rather than income distribution.
Pew’s definition of “middle income” isn’t anchored to any fixed standard of living. In fact, it represents a rising standard of living over time. Imagine that the incomes of the poor, middle, and rich all increase by 50 percent over time. The Pew measure would indicate that the share of adults who are “middle income” would be no higher than it was initially. It is not obvious why we should care that the middle class, in this example, is no larger over time.
We should care about whether living standards for ordinary people are increasing, not whether rich people are getting richer.
Scott then looks at those income trends and finds good news.
…between 1969 and 2007, the household income of the median adult rose by 52 percent. …the 25th percentile (the income of the person poorer than 75 percent of adults) rose by 40 percent from 1969 to 2007. …While middle-income adults, by Pew’s definition, have shrunk by 11 percentage points as a share of the population since 1970, 7 points of that decline is due to more Americans’ being in the upper-income group. …Using the Pew measure of household income, the middle fifth grew richer by 53 percent from 1969 to 2007. My preferred measures showed a rise between 54 percent and 64 percent, depending on whether one adjusts for declining household size. …poor and middle-class Americans are both substantially better off than 45 years ago.
If they can convince people that the economy is a fixed pie, and combine that falsehood with rhetoric about higher incomes earned by the rich, that bolsters their case for ostensibly saving the middle class with soak-the-rich tax policies and greater levels of redistribution.
And that probably explains why the folks at Pew (along with certain journalists) decided to imply that the glass is 90 percent empty when it’s actually 60 percent full.
Winship hits the nail on the head in his conclusion.
A policy agenda designed with a crumbling middle class in mind is not only inappropriate, but it could actually hurt the living standards of the middle class in the process.
He’s exactly right.
Nations such as Greece and France have pursued the policies favored by American leftists and the net result – at best – is anemic growth and stagnant living standards.
To conclude, here’s a video that I saw on Ted Frank’s Twitter feed. I couldn’t figure out how to embed it, but was able to download it and put it on YouTube.
You’ll notice a big jump over time in the amount of households earning above $200,000 per year. Call me crazy, but I want there to be more rich people, so this is a good development.
But if you play close attention, the other big takeaway from this data (and the one that merits some celebration) is that more and more people are earning higher and higher levels of income over time. And remember, these are inflation-adjusted dollars.
So let’s be happy that ordinary people in America are climbing the economic ladder. But let’s recommit ourselves to fight harder for pro-growth policies such as tax reform and entitlement reform so their ascent up the ladder will be faster.
P.S. Here are some examples of how statist policies increase inequality.
P.P.P.S. And I never get tired of sharing this Margaret Thatcher video because she succinctly explains that many leftists would rather hurt the rich than help the poor.
Of course not. You would understand that a lot of your patrons would simply dine elsewhere. And if they didn’t have other restaurants available, many of them would simply eat at home.
But now imagine you’re a politicians and you want more tax revenue so you can try to buy more votes and redistribute more money to the special interests that fund your campaign.
Would you assume that doubling a tax rate would lead to twice as much revenue?
Based on the shoddy methodology of the Joint Committee on Taxation (JCT), which is in charge of the revenue-estimating process on Capitol Hill, the answer is yes.
To be fair, the bureaucrats at the JCT probably wouldn’t say that tax revenue would double, but their model basically assumes that tax policy doesn’t affect the economy’s overall performance. So even if there’s a huge increase in the tax burden, they assume overall economic output won’t be affected.
This obviously is an absurd assumption. You don’t have to be a rocket scientist to realize that taxes impact economic performance. Low-tax economies like Hong Kong and Singapore, for instance, routinely outperform medium-tax economies like the United States. Similarly, differences in tax policy are one of the reasons why the United States generally grows faster than (or doesn’t grow as slowly as) Europe’s high-tax welfare states.
The lesson that should be learned is that the JCT should not estimate the revenue impact of a change in tax policy simply by looking at the change in the tax rate and the current trendline for taxable income. To get a more accurate answer, the bureaucrats also should try to estimate the degree to which taxable income will change.
This is the essential insight of the Laffer Curve. You can’t calculate changes in tax revenue simply by looking at changes in tax rates. You also have to consider the resulting changes in taxable income.
So it’s an empirical question whether a shift in a tax rate will cause revenues to change a little or a lot, just as it’s an empirical issue whether revenues will go up or down.
It depends on how sensitive taxpayers are to changes in tax rates. Some types of taxpayers are very responsive, while other aren’t.
Second, you definitely don’t want to be on the revenue-losing side of the Laffer Curve. That means households are losing so much income that politicians actually have less money to spend, a lose-lose scenario.
Politicians, though, often can’t resist the temptation to raise tax burdens all the way to the short-run revenue-maximizing point.
But what’s really amazing is that some of them are so short-sighted and greedy that they raise the tax burden by so much that revenues actually fall.
And that’s what is happening in New York, where the tax burden on cigarettes has become so high that tax revenues are falling. Here are some excerpts from a story in the Syracuse newspaper.
The number of state-taxed cigarette packs sold in New York has plummeted by 54 percent in the past decade. …more smokers are buying cigarettes in ways that avoid New York’s $4.35 per pack tax, the highest in the nation. They cross state lines, shop from black market vendors and travel to Native American outlets to save $6 per pack or more, experts say. New York is losing big. In the past five years, the state’s cigarette tax collections have dropped by about $400 million…off-the-tax-grid shopping options add up to as much as $1.3 billion in uncollected state cigarette taxes each year, according to a study by the National Academies of Sciences, Engineering, and Medicine.
And the article notes that Oklahoma’s non-compliance rate is even higher.
About 35 percent of smokers in Oklahoma buy cigarettes in ways that avoid state taxes, compared with about one-third of smokers in New York who do the same, experts said.
Needless to say, politicians hate it when the sheep don’t willingly line up to be fleeced. So they’re trying to change policy in ways that divert more money into their greedy hands.
That’s the bad news. The good news is that they’re not very successful.
a federal court in 2011 ruled in the state’s favor and paved the way for Gov. Andrew Cuomo to tryto collect the state tax from Native American nationsby making their wholesalers pick up the cost. Instead, many nations abandoned the wholesale route andstopped selling name-brand cigarettes. They beganstocking their stores with significantly cheaper onesmade by Indian-owned manufacturers, experts said, like Seneca-brand cigarettes.
And even when policy changes are “successful,” that doesn’t necessarily translate into more loot that politicians can use to buy votes.
When taxes become extortion, people will evade when they can’t avoid.
…the illegal trade of cigarettes has grown, especially in New York City where smokers are supposed to pay an extra $1.50 per pack on top of the state tax. A recent study by New York University estimatedas many as 15 percent of New York City cigarettessales avoided the state tax.
The Germans call it Schadenfreude when you take pleasure from another person’s misfortune. Normally, I would think people who feel this way have a character flaw.
But not in this case. I confess that get a certain joy from this story because politicians are being punished for their greed. I like the fact that they have less money to waste.
P.S. Years ago, the JCT actually estimated that a 100 percent tax rate would generate more tax revenue. I realize it’s only a small sign of progress, but I don’t think the bureaucrats would make that assertion today.
P.P.S. Here’s my as-yet-unheeded Laffer Curve lesson for President Obama, based on the fact that rich taxpayers paid five times as much tax after Reagan reduced the top tax rate from 70 percent to 28 percent.
P.P.P.S. And here’s something that’s downright depressing. Some leftists are so resentful of successful people that they want higher tax rates even if the result is less revenue. And you’ll notice at the 4:20 mark ofthis video that President Obama is one of those people.
P.P.P.P.S. Speaking of leftists, here’s my response when one of them argued against the Laffer Curve.
They keep trying to convince themselves that people are on their side, but schemes to restrict the 2nd Amendment keep getting defeated on Capitol Hill.
The New York Times just released polling data showing that a majority of Americans are against banning so-called assault weapons. Look at the bottom line and see how the numbers have dramatically moved in the right direction.
These results are especially remarkable because many non-gun owners probably think “assault weapon” refers to a machine gun.
In reality, the types of guns that some politicians want to ban operate the same as other rifles (one bullet fired when the trigger is pulled), and they’re actually less powerful than ordinary hunting rifles. I imagine if people had that information, support for these weapons would be even higher than what we see in the poll.
Another reason I almost feel sorry for our leftist friends is that they must be going crazy that terrorist attacks and mass shootings aren’t swaying public opinion in their direction.
But they’re underestimating the wisdom of the American people. Most Americans may not have strongly held philosophical views on gun issues, but they’re smart enough to realize that bad people almost certainly will be able to obtains guns, even if they have to do so illegally (as is the case in Europe).
So the net result of gun-free zones and gun control is more danger to the public since evil people will have greater confidence that victims will be disarmed. And that rubs people the wrong way because they’re smart enough to pass the IQ test that causes such angst for our left-wing friends.
Moreover, I think folks are getting tired of the dishonest propaganda from the White House.
Normally the establishment media is a willing co-conspirator with the Administration, but – as you can see from this footage from a White House press briefing (h/t: Michelle Malkin) – one reporter actually committed an act of journalism and the net result is that the White House’s spin doctor was forced to confess that 1) none of Obama’s proposed policies would have stopped a single mass shooter from getting weapons, and 2) not a single mass shooter is on the Administration’s no-fly list or terrorist watch list. Enjoy.
You can tell, by the way, that the White House has done some polling on how to sell its approach, referring over and over again to buzz phrases such as “common sense” and “gun safety.”
You may remember that I wrote last week about the White House’s attempt to deny 2nd-amendment rights to people who get unilaterally placed on the no-fly list without any due process legal rights.
Well, that topic came up at a hearing held by the House Committee on Oversight and Government Reform. Congressman Trey Gowdy took the opportunity to ask one of Obama’s appointees whether they intend to preemptively infringe on other freedoms in the Bill of Rights.
On one level, this video is very amusing. The Obama official is like a deer in the headlights and eventually confesses that she doesn’t have an answer.
But if you think about the issue more deeply, it’s really worrisome that we have a president and an administration that treat the Constitution and Bill of Rights as something that can be cavalierly discarded whenever there’s a conflicting short-term political objective.
So let’s make something completely clear. The 5th Amendment constitutionally guarantees that American citizens can’t be deprived of their rights in the absence of some sort of legal process.
Which is precisely the point that Congressman Gowdy was making. The Obama Administration wants to preemptively curtail 2nd Amendment freedoms based on the arbitrary whims of bureaucrats.
Here’s the relevant language.
So the bottom line is that the White House is so ideologically rigid on guns that it is willing to run roughshod over the Constitution even though it admits that its gun control proposals would not have stopped a single mass shooter.
But I guess you have to give them credit for being consistent.
Though I guess this is where I confess to once again feeling sorry for statists. Imagine having to defend this approach!
Let’s close with some humor.
Here’s a very clever video featuring a burglar’s perspective on gun control.
P.S. Here’s my collection of other humorous videos mocking the gun grabbers.
P.P.S. Last but not least, I’ll share an amusing joke.
Participating in a gun buy-back program because you think that criminals have too many guns is like having yourself castrated because you think your neighbors have too many kids.
And if you want even more gun control humor, click here.
Though in some cases of spectacular and inexplicable ineptitude by government, you reach a stage where the answers might even be “preposterous” or “comical.”
Unfortunately, today we’re going to look at an example of bone-headed government behavior that can only be described as “deadly.”
That’s because the New York Times just revealed that there were very obvious red flags about one of the San Bernardino terrorists, yet federal bureaucrats apparently were too stupid, lazy, or incompetent to check sites such as Facebook and Twitter.
Tashfeen Malik, who with her husband carried out the massacre in San Bernardino, Calif., passed three background checks by American immigration officials as she moved to the United States from Pakistan. None uncovered what Ms. Malik had made little effort to hide — that she talked openly on social media about her views on violent jihad. She said she supported it. And she said she wanted to be a part of it. …The discovery of the old social media posts has exposed a significant — and perhaps inevitable — shortcoming in how foreigners are screened when they enter the United States, particularly as people everywhere disclose more about themselves online. …In an era when technology has given intelligence agencies seemingly limitless ability to collect information on people, it may seem surprising that a Facebook or Twitter post could go unnoticed in a background screening.
But you’ll be happy to know that the Keystone Cops in the bureaucracy are now contemplating whether to even look at the barn door now that we know the horses keep escaping.
…a debate is underway at United States Citizenship and Immigration Services, the agency that approves visas and green cards, over whether officers conducting interviews should be allowed to routinely use material gathered from social media for interviews where they assess whether foreigners are credible or pose any security risk.
What makes this story so aggravating is that national security is one of the few legitimate functions of the federal government.
For another example of government incompetence in the area of national security, let’s go to the Middle East, where ABC Newsreported that a program to train supposedly moderate fighters in Syria achieved remarkable levels of inefficiency.
…only “four or five” of the first 54 U.S.trained moderate Syrian fighters remain in the fight against ISIS. …there are currently between 100 and 120 fighters in a program that was slated to have trained 5,400 fighters in its first 12 months. …So far, $42 million has been spent to develop the $500 million program which began training in April.
Wow. If my math is right, that’s about $10 million per fighter. I’m tempted to joke about getting fighters for a lot cheaper by placing an advertisement in Solider of Fortune.
But a more serious point is that the fact that the program surely has been a huge success for the bureaucrats and contractors. After all, they got lots of taxpayer money, so who cares about actual results.
But the more serious point is why the US is involved in Syria in the first place? Writing for Reason, Steve Chapman argues for nonintervention and even makes the point that the U.S. should instead welcome Russia’s involvement.
Vladimir Putin…has sent Russian planes to bomb rebels in Syria. …he reaffirmed his commitment to Syrian President Bashar al-Assad. …Republicans regard this as a calamity. But what’s the downside? There are two main ways this gambit could go. …The first possibility is that he will inflict significant damage on Islamic State. In that case, one of our most vicious enemies would be weakened—at little cost or risk to Americans. The only thing better than defeating Islamic State is getting someone to do it for us. …The second possibility is that Putin will fail… He could find himself in a costly, bloody war. Or he might decide the prize is not worth the effort and pull back, which would dash his dreams of regional power and discredit him at home. Either way, he’s worse off, and we’re not.
Now let’s shift to a story that goes beyond routine government incompetence and deserves a special category.
Because when you read about military bureaucrats turning a blind eye to child rape in Afghanistan, words like “evil” and “soulless” are far more appropriate.
Rampant sexual abuse of children has long been a problem in Afghanistan, particularly among armed commanders who dominate much of the rural landscape and can bully the population. The practice is called bacha bazi, literally “boy play,” and American soldiers and Marines have been instructed not to intervene — in some cases, not even when their Afghan allies have abused boys on military bases, according to interviews and court records. …soldiers and Marines have been increasingly troubled that instead of weeding out pedophiles, the American military was arming them in some cases and placing them as the commanders of villages.
Unsurprisingly, as reported by the Washington Examiner, the Obama Administration is leading from behind.
The White House dodged questions…about allegations that U.S. military officials are ordering U.S. soldiers to ignore child abuse in Afghanistan committed by Afghan militia, military and police, and instead indicated that those orders reflect Defense Department policy.
Not exactly a proud moment for the United States.
To be sure, you have to make compromises with right and wrong during wartime. Heck, we were allies in World War II with one of the world’s most murderous and sinister regimes.
But surely we can disallow child rape on American military bases!
Let’s return to a more mundane example of bad policy, one that shows the U.S. government can waste money overseas just as effectively as it wastes money at home.
U.S. taxpayers footed the bill for a $43 million natural-gas filling station in Afghanistan, a boondoggle that should have cost $500,000 and has virtually no value to average Afghans… A Pentagon task force awarded a $3 million contract to build the station in Sheberghan, Afghanistan, but ended up spending $12 million in construction costs and $30 million in “overhead” between 2011 and 2014.
Wow. Reminds me of being in a meeting last decade and a representative of the Bush Administration was arguing that its nation-building exercise (I forget whether it was Iraq or Afghanistan) was going well because we had successfully built so many schools and sewer systems.
I was being a curmudgeonly libertarian and made myself unpopular by pointing out that I didn’t think it was the responsibility of the federal government to fund those projects in the United States, much less overseas.
Let’s end where we started, with an example of government incompetence that could have deadly consequences.
Hillary Clinton’s “reset” with Russia was a miserable failure and the United States increasingly is worried about Putin’s adventurism. Yet the federal government didn’t exercise sufficient oversight to make sure that citizens of a potential enemy didn’t get to work on classified computer code.
The Pentagon was tipped off in 2011 by a longtime Army contractor that Russian computer programmers were helping to write computer software for sensitive U.S. military communications systems…the software they wrote had made it possible for the Pentagon’s communications systems to be infected with viruses. …the work had been done in Moscow and elsewhere in Russia.
Doesn’t exactly leave one with a great feeling of confidence.
So there are two lessons from today.
First, politicians and bureaucrats and wasteful and incompetent, and that applies even in areas where there is a legitimate role for government.
Second, we’ll have a better chance of getting sensible and competent decisions if government is a lot smaller. After all, it will be a lot easier to have oversight when government is doing 100 things instead of 10,000 things.
There are some legitimate functions of government and I want those to be handled efficiently. But I worry that effective government is increasingly unlikely because politicians are so busy intervening in areas that should be left to families, civil society, and the private sector.
I don’t like the inequality debate because it’s a distraction from the far more important issue of how to generate more growth.
Nonetheless, I feel compelled to once again address the topic. Let’s start with a moral observation: There’s nothing wrong with the kind of inequality that results from honest exchange.
Bill Gates earns far more money than me, but his earnings and wealth are the result of voluntary exchange (at least as far as I know). Consumers voluntarily give him money because they value the goods and services produced by Microsoft.
So it would be nothing but self-destructive envy for me to grouse and complain. And it would be immoral for me to steal his money, either acting on my own or using the coercive power of government.
Dennis Prager elaborated on this principle in National Review.
…what most matters…is whether the wealthiest class has attained its wealth honestly or corruptly. If the wealthy have attained their wealth morally and legally, then the income gap is not a moral problem. In a free society, wealth is not a pie — meaning that when a slice of pie is removed, there is less of the pie remaining.
For what it’s worth, I don’t even think it’s wrong that leftists like Michael Bloomberg and Barbara Streisand earn more money in a year than I could earn in 10 lifetimes. So long as they earn their money honestly (i.e., not via government favoritism like some statists), their financial success is admirable.
But I do have the right to complain about the way some leftists spend their money. That’s because they promote and support policies that make it hard for lower-income people to climb the economic ladder.
But I’m not just talking about left-wing support for statist policies that dampen growth and hurt all income classes. In some cases their preferred policies result in the transfer of income and wealth from the poor to the rich.
And that creates the wrong kind of inequality. Not just wrong. Grotesquely unethical.
Let’s look at some examples.
Andrew Lundeen of the Tax Foundation found that the poor are hurt and some rich folks benefit when reviewing the impact of class-warfare taxes.
When fewer people are willing to invest, two things happen. First, the capital stock (i.e. the amount of computers, factories, equipment) shrinks over time, which makes workers less productive and decreases future wages. Second, because there is less capital available the available capital is more valuable, which causes the return to capital to rise. The effect of this over time is that wage earners make less and capital owners make more. Our current tax code exacerbates this problem significantly through its non-neutral bias towards consumption over future consumption (i.e. saving).
Now let’s look at what Professor Jeffrey Dorfman wrote about the Federal Reserve’s easy-money policy for Forbes.
…the Fed’s low interest rates have been responsible for inflating stock market values. By reducing the returns to savings accounts, certificates of deposit and bonds, the Fed has intentionally driven ordinary investors to increase their investment allocation to the stock market, thereby boosting stock returns. Because people with more wealth tend to own more stock, those higher stock prices have led the rich to gain much more than the poor and middle class. Low interest rates have meant low borrowing costs for large corporations with direct access to capital markets. This low-cost borrowing has boosted corporate profits which also flow mostly to the wealthy.
He’s right. The rich disproportionately benefit from rising asset values, while the rest of us suffer because of low interest rates on our savings accounts (though the rich may regret such policies if the result is a bubble that eventually bursts).
Dorfman also points out that statist policies, broadly speaking, penalize labor relative to capital. And this is not good for workers in general, but it’s especially harmful for low-income workers.
…the low interest rates set by the Fed combined with the additional labor costs thanks to the Obama Administration (Obamacare and its associated taxes) are changing the relative prices of labor and capital. …This also increases economic inequality because the poor and middle class earn most (or all) of their money from labor income, while the rich collect a significant share of their income in various forms of returns to capital (dividends, interest, capital gains and business profits). Purposely tilting the economy in favor of capital and against labor is pretty close to taking from the poor and giving to the rich, the exact reverse of normal government attempts to redistribute income.
Even the left-leaning Urban Institute recognizes the big government sometimes helps the rich at the expense of the poor. Here’s some of what Leigh Franke wrote about land-use restrictions.
Restrictive land-use regulations, including zoning laws, are partially to blame for the stagnant growth… Land-use regulations may be intended to protect the environment or people’s health and safety, and even to enhance the supply of affordable housing, but in excess, they restrict housing supply, drive up home prices, and limit mobility. …More and more zoning restrictions meant less construction, fewer permits, and a restricted housing supply that drove up prices even further. …cities often have stringent zoning laws, a restricted housing supply, and high prices, making it nearly impossible for lower-income residents and newcomers, who would likely benefit most from the opportunities available, to find affordable housing.
The minimum wage is another example of a left-wing policy that causes the wrong type of inequality, as explained by Robert Graboyes of the Mercatus Center.
The $15-an-hour minimum wage is a superb tool if your goal is increasing inequality. To the least-advantaged Americans, its logic is simple: “You lose your jobs and access to jobs so your wealthier neighbors might enjoy small wage increases and greater protection from competitors like you.” …Other than wealthier employees, who benefits from a $15 minimum wage? Income is likely to soar for a CEO whose company buildsrobots to replace low-wage workers. …instigators and beneficiaries of minimum wages are often labor unions who benefit from eliminating potential competitors…harsh restrictions on job-seekers can do damage that lasts a lifetime. A teenager shut out of employment by an exorbitant minimum wage will fail to learn job skills and establish a track record that impresses future prospective employers. And the effects will not fall evenly: Children of wealth and privilege have many routes to circumvent such restrictions. The inner-city teen, striving for a better life, has no such good fortune.
I could keep adding to that list, but let’s got to today’s lesson: Our friends on the left say they want to help the poor and reduce inequality. But their policies often target the kind of inequality that we shouldn’t worry about while exacerbating the form or inequality that is a problem.
Actually, to be fair, they want economic growth. They just don’t support the recipe that produces that outcome. I’m not sure why, but maybe Margaret Thatcher was right and they want bad outcomes for the rich (other than their cronies) more than they want good outcomes for the poor.
December 17 Addendum: Let’s add regulation to our list of statist policies that cause inequality by unjustly lining the pockets of higher-income people.
A. Barton Hinkle explains for Reason. Here are a few excerpts from his column.
…doctors, who make up a good part of America’s richest 1 percent, extract rents from the public through other government policies. One of those is licensure: “The law specifies tasks that only licensed doctors can perform, even though nurses are capable of performing them.” …Health care is an extreme example, but upward redistribution of wealth through government action affects nearly every sector of the economy. In most states,direct sales of new automobilesto consumers are forbidden–you have to buy through a dealership. Roughly a third of all occupations nowrequire a government license–up from only 5 percent of all occupations a few decades ago.
We already knew that regulation hurts poor people, so the fact that some regulations help rich people is a very perverse form of symmetry.
The Bureaucrat Hall of Fame, created to highlight government workers who go above and beyond the call of duty, is apparently such a prestigious honor that there’s been a strong competition between Americans and foreigners to engage in behavior that merits this great award.
Consider the U.S. bureaucrats who have earned membership so far in 2015.
As I look at these 2015 honorees, I feel like the system is a bit unfair. Maybe it’s just me, but it appears that the foreign bureaucrats are more deserving than their American counterparts.
And I’m guessing that a senior-level bureaucrat at the Department of Veterans Affairs felt the same way. So he decided to take matters into his own hands.
Literally.
Here are some excerpts from a report in the Daily Caller.
…the Department of Veterans Affairs’ former top watchdog, resigned after being caught masturbating in the agency’s all-glass conference room in full view of people across the street, including school teachers at an education conference. …investigators confronted him with detailed instances of public masturbation in multiple states, according to a previously undisclosed report by the Department of the Interior inspector general and obtained by The Daily Caller News Foundation.
Obviously a very deserving member of the of the Bureaucrat Hall of Fame. And he’s definitely upped the ante on what it take to become a member.
For all intents and purposes, he’s thrown down the gauntlet to foreign bureaucrats: What can they do to…um…beat this?
But let’s set aside the U.S. vs. foreigners aspect of this issue and look more closely at our new honoree.
He apparently had lots of time on his hands (so to speak) because his office decided that it was okay for the Department to operate de facto death panels.
It was during Wooditch’s tenure as deputy inspector general that the VA IG first uncovered — then all but ignored — dozens of clues of the widespread patient wait-list manipulation that contributed to the deaths of dozens of veterans.
It’s also impressive that he got a promotion shortly after getting caught with porn on his computer.
He was caught with porn on his work computer in 2003, but VA officials only “counseled” him. Not long afterward, he was promoted to the top job.
Wooditch retired with a federal pension without ever facing administrative discipline or criminal charges.
Though I don’t want to think what he’ll be doing with all this extra time on his hands.
And here’s a final excerpt.
IG agents also learned during their investigation of a separate incident…they were told, he made an “inappropriate advance” on his next-door neighbor as she was grieving her husband’s death. …“…she said Wooditch began to pose nude and masturbate in front of a window that was only viewable from her house” repeatedly, the report said. The woman…did have police warn him to stop. Wooditch lectured the police that he was a “high-level government employee.”
P.S. Shifting to a different topic, I can’t resist an I-told-you-so moment.
There was a disagreement last year among advocates of smaller government about whether Doug Elmendorf, the then-Director of the Congressional Budget Office, should be replaced since Republicans were in full control of Capitol Hill.
Elmendorf’s predecessor was a doctrinaire leftist named Peter Orszag. If Orszag’s policy views were a country, they would beFranceorGreece. By contrast, I’m guessing that Elmendorf would be likeSwedenor Germany. In other words, he wants more government than I do, but at least Elmendorf basically understands that there’s no such thing as a free lunch. …That being said, while it’smuch better to be Sweden rather than Greece, I obviously would prefer to beHong Kong(or, even better,pre-1913 America).
The GOP leadership ultimately decided to replace Elmendorf.
Instead, I want to pat myself on the back for being right about Elmendorf. Now that he’s no longer at CBO, he’s come out of the closet and is openly pushing statist policies.
…the incomes of people across most of the income distribution have risen quite slowly, while incomes at the high end have risen rapidly. …There are a variety of ways to increase tax revenue for Social Security by imposing a payroll tax on income above the current-law taxable maximum. …this approach…does not offer a free lunch. …would reduce people’s incentives to work and save.
So the bottom line is that he recognizes his preferred policy (which is what Obama has endorsed) will hurt the economy, but his ideological support for redistribution and his myopic fixation on income distribution leads him to the wrong conclusion.
And here’s something else. The Hillreports he’s urging class-warfare tax policy.
Former Congressional Budget Office Director Doug Elmendorf on Thursday said the tax code should be changed so that the wealthy pay higher taxes…in a video released Thursday by the left-leaning Bookings Institution, where he is a visiting fellow.
Instead, I feel obliged to issue somewhat of a retraction for my assertion that Obama care is a job killer.
Some of you may be scratching your heads, particularly if you read these passages from an article earlier this week in The Hill.
ObamaCare will force a reduction in American work hours — the equivalent of 2 million jobs over the next decade, Congress’s nonpartisan scorekeeper said Monday. The total workforce will shrink by just under 1 percent as a result of changes in worker participation because of the new coverage expansions, mandates and changes in tax rates, according to a 22-page report released by the Congressional Budget Office (CBO). …the law changes incentives over the years for the workers themselves both in part-time and full-time positions.
So why, then, am I issuing a mea culpa on Obamacare and jobs?
Well, some readers may have concluded from my writings that Obamacare is an absolute job killer.
Yet, as we see from this story in the Kansas City Star, there may be some jobs being created because of the so-called Affordable Care Act. Here are some relevant excerpts.
H&R Block expects more customers to feel the impact of the Affordable Care Act when they do their taxes early next year, providing a source of growth for the Kansas City-based business. A year ago, Block invested in marketing and training its tax preparers… “We think we’re going to start to reap the benefits of that investment,” Block chief executive Bill Cobb said Tuesday during a strategy session with analysts. …the company said an early effort will be aimed at getting back customers the company lost last year.
To be sure, H&R Block isn’t explicitly saying that it will have additional employees, but I think we can infer that some new positions will be created as the company takes advantage of the fact that many taxpayers will be overwhelmed by the complexities and penalties that are part of Obamacare.
With this in mind, I’m going to be very careful in the future to state that the President’s law is a net job killer or a relative job killer.
After all, I wouldn’t want anyone to accuse me of being unfairly or inaccurately critical of government-run healthcare. Even in cases when the jobs being created are evidence of bad legislation rather than a good economic climate.
P.S. I’m not a big fan of H&R Block. Assuming they didn’t support Obamacare, I don’t blame them for enjoying the extra profits they’ll earn because of the law. But the company has supported government rules to block competition in the tax-compliance industry. And I remember many years ago being part of a debate in Louisiana where a representative from H&R Block argued against the flat tax. Gee, I wonder why?
Here’s a simple rule. When a politicians says a new program will cost X, hide your wallet because it actually will cost three or four times as much. Or even more.
Simply stated, politicians and bureaucrats routinely under-estimate costs because they figure once a project or program is underway, voters can be tricked into throwing good money after bad.
And even though I’m a fan of decentralization, that doesn’t mean I’m oblivious to the fact that state and local governments are very capable of similar behavior.
Consider, for example, the streetcar project in our Washington, DC. The main problem is that taxpayers are getting reamed. The current price tag, according to a report in the Washington Times, is about $3 billion.
And what are taxpayers getting for that “investment”?
So far, based on a story in one of the city’s other newspapers, the Washington Post, they’re getting long delays.
In the early 2000s, an ambitious band of city officials set out to cut through the bureaucratic mire and launch a vast streetcar network that would be a model for the nation, eventually running 20 to 40 miles or more. The first leg was supposed to open in 2006. But as 2015 comes to a close, officials are scrambling toward their latest goal of opening a diminished, 2.2-mile streetcar line.
But major delays are just the tip of the iceberg.
The Post‘s report highlights how one small part of the project – a maintenance facility for the streetcars – has become symbolic of grotesque cost overruns and waste.
The District is spending three or four times what other cities have to build a maintenance facility for its fledging streetcar system… The “Car Barn” project was originally designed as a simple garage and rail yard for light repairs and storage, with some offices for staff. But it has ballooned in ambition and nearly tripled in cost — to $48.8 million. It will now include a number of pricey and unusual features, including grass tracks for parking the fleet of six streetcars and a cistern for washing them with rainwater. …The District says it…is projected to open in 2017 after long delays. Tucson spent $13 million. Cincinnati’s was $11.5 million. Seattle’s came in at $11.1 million.
I’m sure local taxpayers (plus taxpayers around the nation that also subsidized this farce) will be happy to know they paid for a solar roof and other useless quirks.
Here are some of the details on why costs exploded.
…the building has…become a teaching tool for how public projects can be saddled with immense new costs. The historic designation “prompted an immediate six-month stop-work order,” DDOT said, and required, along with the green building rules, numerous upgrades. Those included using stone and brick materials; adding a saw-toothed roof with skylights; and hiding a streetcar power supply under photovoltaic cells and behind “green screen walls.” …Among the other major additions was an intricate system of turf tracks and paving stones that allow rainwater to drip into an underground vault for storage and filtering before flowing toward the city’s storm-water pipes.
Though taxpayers may think the “drip” is the sound of their money being flushed down a toilet.
In 2011, under Mayor Vincent C. Gray (D), the District estimated it would spend $6.2 million on a maintenance yard and a temporary shelter — basically, a big tent. Then, with the temporary tuneup location in place, the permanent building, additional track and other work in the yard would be finished for an additional $10.7 million. …The yard-and-tent total grew to $10.4 million, DDOT said, including environmental work and hundreds of thousands of dollars to keep some Dean-Facchina workers on the job 12 hours a day, six days a week to speed things up. By last year, estimates for the second phase, including the permanent Car Barn, had risen to $24 million. In July, the city agreed to spend $38.4 million on this phase, bringing the total to $48.8 million. Among the unforeseen costs listed by DDOT are $1 million in storm drainage and $824,000 in “indirects.”
So what’s the bottom line?
Well, the late former Mayor of DC, Marion Barry, is not normally a credible source. And I’m not sure I trust any numbers that came out of his mouth.
But I suspect he ventured very close to the truth when he was quoted in a Washington Timesstory from 2014.
…the late former Mayor Marion Barry said D.C. taxpayers would be spending $2,000 to subsidize each ride, calling it “a streetcar to nowhere.”
In other words, it would have been cheaper to hire chauffeured limousines for the handful of people who will use the streetcar. Assuming, of course, it ever gets opened.
By the way, there must be something in the local water, because there’s a similar example of grotesque waste on the other side of the Potomac River.
But let’s not just pick on profligate local governments.
Never forget that the federal government is the real expert at waste.
National Review has a very depressing list of ways that Uncle Sam has been squandering our tax dollars.
Federal spending gets more ridiculous every year, and a new congressional report details 100 of the most egregious examples. Following in the footsteps of chronic-waste chronicler Tom Coburn, Oklahoma senator James Lankford published “Federal Fumbles” late on Monday afternoon. …Here are NR’s top-ten favorite — which is to say, most scoff-worthy and absurd — examples of how the government wastes your time, energy, and hard-earned cash.
Here are some of the highlights, though lowlights might be a better term.
…the Department of Defense…approved a $283,500 grant to monitor the day-to-day life of baby gnatchatchers. …the U.S. National Institutes of Health…announced it would grant some hapless grad student $48,500 to pen the definitive history of smoking in Russia over the past 130 years. …the National Science Foundation…gave Massachusetts Institute of Technology more than $400k to ponder the burning question: “Does media choice cause polarization, or does polarization cause media choice?” …five federal agencies alone spent $3.1 billion on workers placed on administrative leave in a two-year timespan. A lot of that cash — $775 million, to be exact — went to public employees banned from their desks for more than a month. …The National Park Service forked over $5,000 to Mars Hill University so it could make a documentary film about a local musician. …$65,473 to figure out what bugs do near a lightbulb…$35,000 for solar-powered beer.
To be sure, these items are just a drop in the bucket compared to entitlement spending.
And these examples of pork-barrel waste also are minor compared to all the supposedly non-controversial outlays that are part of the discretionary budget that funds various agencies and departments.
In 2012, I shared some important observations from Jeffrey Goldberg, a left-leaning writer for The Atlantic. In his column, he basically admitted his side was wrong about gun control.
Then, in 2013, I wrote about a column by Justin Cronin in the New York Times. He self-identified as a liberal, but explained how real-world events have led him to become a supporter of private gun ownership.
Kudos to both gentlemen for putting accuracy ahead of ideology (just like I applauded the honest liberal who wrote how government programs subsidize dependency).
Well, we can add another person to our list of honest liberals. Jamelle Bouie, chief political correspondent for Slate, just authored a piece that says it is downright silly to fixate on so-called assault weapons and to try to deny people their 2nd-Amendment rights based on the TSA’s no-fly list.
Although well-meaning—supporters genuinely want to keep military-style weapons “off the streets” and guns out of the hands of suspected threats—both measures are wrongheaded.
Here’s some of what he wrote about scary-looking rifles.
…assault weapons—there’s no official definition for the term, which makes identifying them for prohibition difficult, if not impossible—are scary to many Americans, especially with their presence in high-profile shootings like the massacre at Sandy Hook Elementary in Newtown, Connecticut, or the theater killings in Aurora, Colorado.But out of 73 mass killers from 1982 to 2015, just 25 used rifles of any kind, including military-style weapons. Most used revolvers, shotguns, and semi-automatic handguns. Which gets to a related point: We mightfeelsafer if we ban “assault weapons,” but we won’tbesafer.Of the 43,000 Americanskilled with guns since 2010, just a fraction—3.5 percent—were killed with rifles.
Mr. Bouie points out that almost all murders are with handguns, but – to his credit – he says you can’t try to confiscate those weapons because “A ban would be unconstitutional.”
He then addresses the use of the no-fly list as a means of imposing gun control.
…civil libertarians—and liberals, at least during the Bush administration—think it’s constitutionally dubious. They’re right. …If you’re on these lists, you’re presumed guilty until proven innocent, with no due process and little recourse. The list is conceptually flawed, and using it to deny gun ownership is wrong on its face. Addracial and religious profilingto the mix—the people on the list, including Americans, are disproportionately Arab or from Muslim countires—and you have an anti-gun measure with deep disparate impact.
Bouie isn’t actually a supporter of gun rights, as you can see from some of his concluding thoughts, but he at least recognizes that much of what we’re getting from Barack Obama and Hillary Clinton is empty posturing.
The sooner Democrats abandon ineffectual gun control measures, the sooner they can turn their attention to ideas that would actually limit gun accidents, suicides, and murders. …In all of this, however, gun control supporters should keep one fact in mind: The United States is saturated with guns, and barring confiscation or mandatory buybacks, there’s no way to end mass shootings. …You can read that as futility, but it’s not. It’s a recognition of reality and a plea for perspective.
I wonder if “a recognition of reality” is the first step on the path to being libertarian.
By the way, I can’t resist adding my two cents on the topic of Obama wanting to deny constitutional rights to folks who wind up on a list.
I recognize that there are plenty of people who should not be allowed on planes (and since I have to fly a lot, I have an interest in keeping nutjobs on the ground), but government lists leave a lot to be desired.
Consider, for instance, this tidbit from an article in the Washington Free Beacon.
Rep. Stephen Lynch (D., Mass.) disclosed that a congressional investigation recently found that at least 72 people working at DHS also “were on the terrorist watch list.”
Does this mean the federal government is so brain-dead that it has terrorists on the payroll?
Maybe, but another item from an editorial in the New York Times should make us wonder about the quality of these lists.
A 2007 audit found that more than half of the 71,000 names then on the no-fly list were wrongly included.
And I remember several years ago when – on multiple occasions – I wasn’t allowed back in the country until bureaucrats had taken me into windowless room for interrogation.
I never learned why this happened. Was there another Dan Mitchell with a sketchy pattern of behavior? Did the bureaucrats actually target me for unknown reasons?
More important, what if I had bitched and whined during one of these episodes and some spiteful bureaucrat decided to put me on one of the government’s lists?
And most important of all, can any of us trust that President Obama (or perhaps a President Hillary Clinton) wouldn’t misuse and/or expand these lists to arbitrarily deny constitutional rights?
By the way, Reason exposes some dishonest and hypocritical leftists.
Even thoughthe ACLU opposes the no-fly list—and is suing the federal government for violating the due process rights of several people on it—the civil liberties advocacy group is theoretically okay with depriving people on the list of their gun rights.
But I’m digressing. Today’s topic is supposed to be how some honest liberals acknowledge the silliness of gun control efforts.
P.S. Let’s close with some good news on guns. It’s from a liberal who is reflexively hostile to the 2nd Amendment, but is quasi honest in that she’s willing to discuss polling data she dislikes.
Here’s some of what Catherine Rampell wrote in the Washington Post.
…millennials seem to have neither the desire nor the willpower to pressure our political leaders… Which does not bode well for liberals hoping that the arc of history will eventually bend toward greater gun control. …statements about protecting gun rights generally elicit at least as much support from younger Americans as from older ones. …This is a bit puzzling, given that younger Americans are less Republican in their political leanings than older people are and are also less likely to own a gun — two factors that are usually strong predictors of opposition to gun restrictions. These survey data suggest, then, that younger people might be especially predisposed to oppose gun-control measures, after controlling for these variables. …for the most part, young people reveal themselves to be at least as pro-gun-rights as their elders, if not more so.
I’m a skeptic of polling on this issue, largely because the questions often seem designed to elicit pro-gun control answers.
That being said, it’s good to see young people being more rational. Particularly since – as explained in this video – millennials have been at times hopelessly naive about the downside of bigger government.
P.P.S. If you want good news about public opinion and gun rights, click here, here, and here.
P.P.P.S. The best polls are the ones on election days.
With all of the GOP presidential candidates proposing varying plans to reduce the tax burden and reform the tax system, I’m constantly asked which one is best.
But that’s hard to answer because all of the proposals have features I like…as well as some features that leave me underwhelmed, or perhaps even worried.
The bad news is that there hasn’t been a stampede by candidates to embrace this type of fundamental tax reform. But the good news is that they all want to move in that direction.
The best site for seeing what the various candidates are proposing is the Tax Foundation, and you can click here to learn everything that you need to know about their plans. There’s less detail, but the Committee for a Responsible Federal Budget also has a helpful summary that can be perused here.
Conservative Reviewput together some useful graphs to compare the major plans. Here’s the tax rate structure for households.
Though this is not very accurate since the value-added taxes in the plans put forth by Rand Paul and Ted Cruz mean the real tax rates on labor income would actually be 29 percent and 26 percent, respectively.
And here’s the degree of double taxation in the major plans.
What stands out in this chart is the fact all the candidates want to reduce double taxation, but Marco Rubio’s plan gets rid of that pernicious practice completely.
There are lots of additional metrics. Most of the candidates abolish the death tax, which is a very damaging form of double taxation.
To summarize, the plans have lots of good features, but none of them are perfect. Which is why they all get similar grades. Here’s my back-of-the-envelope assessment (with apologies to John Kasich, Rick Santorum, Mike Huckabee, Carly Fiorina, etc, since I imposed my own arbitrary cutoff on which candidates merited close consideration).
Ben Carson gets the best grade because he says he wants a pure flat tax. But he doesn’t get an A because there are no details. In theory, you don’t need a lot of details because the plan is so simple, but the fact that he hasn’t even pinned down the rate (it was 10 percent, but is now 15 percent) leaves me uncertain. Moreover, he hasn’t put forth many details on how to reduce the burden of government spending, which would be necessary to make a low-rate flat tax viable.
By the way, Carly Fiorina would probably get a grade similar to Carson since she’s talked generically about a pure flat tax, and Rick Santorum’s more detailed support for a not-quite-pure flat tax also merits applause.
Jeb Bush and Chris Christie are almost identical (and John Kasich probably would be in the same category) because they make good progress (but not great progress) in almost all areas of the tax code.
Rand Paul and Ted Cruz are more aggressive taking big steps in the right direction, but the value-added tax is a very worrisome feature of their plans.
Donald Trump has the biggest net tax cut, but seems to have no interest in controlling the burden of government spending. He also is the only candidate (to my knowledge) who doesn’t want to replace America’s anti-competitive worldwide tax system with a territorial tax regime.
And Marco Rubio is unique in that his plan is great on double taxation, but is a bit of a dud with regards to tax rates.
Last but not least, Mike Huckabee’s support for replacing the income tax with a national sales tax is theoretically appealing, but it’s either impractical (because there aren’t enough votes to repeal the 16th Amendment) or too risky (because the crowd in Washington would adopt a sales tax without completely repealing the income tax).
P.S. For those who really care about these issues, there’s a debate tomorrow morning (December 8th) between representatives of the Cruz, Paul, Bush, Rubio, and Kasich campaigns.
Now it’s time to add to that collection. We’ll start with a great video from the folks at Reason. They have a parody trailer for a libertarian version of Star Wars.
Excellent job. I’m surprised this video doesn’t already have 100K-plus views. Please share it.
Also, for those who may have missed the reference, the “Free to Chewbacca” segment at the end is based on Milton Friedman’s great Free to Choose program. You can see Chewbacca’s part within the first five minutes of Episode One. But you should watch the entire series.
Our next video could be considered a follow-up to the Hayek love song I posted five years ago. It warns that faith in government and politicians puts a nation on a road to serfdom (I’ve argued that the VAT does the same thing!).
Quite amusing and clever.
To be sure, the Hayek videos that everyone should watch are the rap versions about his debates with Keynes. Part I and Part II are both superb and very economically sound.
Now let’s switch to a short video about shopping in Texas. Sort of reminiscent of this joke about the difference between conservatives, liberals, and Texans.
For inexplicable reasons, you can’t actually watch the embedded version of this next video featuring Ron Swanson. You’ll have to click through and watch it on Youtube (at least that’s what I have to do on my computer), but it’s worth that extra step.
There’s also another great Ron Swanson at the end of this post, though once again you’ll have to click through and watch it on Youtube.
P.S. Here’s a different version of the how-the-world-sees-libertarians poster I shared in early 2012.
And if you like this type of humor, you’ll enjoy seeing whether you (or libertarians you know) belong in one or more of these 24 categories.
To cite a truly horrifying statistic, the redistribution of money from America to Washington has made it the nation’s richest metropolitan region.
And it’s getting worse.
Let’s look at what Tim Carney just wrote in the Washington Examiner about Christmas on K Street.
It’s that magical season when Republicans and Democrats come together to look after the needs of corporate America, K Street lobbyists, and the U.S. Chamber of Commerce. …The highway measure is a huge win for industry while a loss for good governance. Far worse, however, is the…provision reviving the defunct Export-Import Bank, a corporate-welfare agency…K Street lobbied incessantly to revive Ex-Im, backed by President Obama, Hillary Clinton and nearly every Democratic lawmaker. …As a corporate cherry on top, the bill repeals a recent minor cut in federal crop insurance subsidies, a program that benefits financial firms… Congressional leaders are currently negotiating another year-end legislative package, the notorious annual tax extenders bill. …the bill will extend (at least for a short-time) green-energy subsidies: The Production Tax Credit for wind and the Investment Tax Credit for solar. …Almost all of them are crucial for some special interest and the revolving-door lobbyists they employ.
Tim points out that the feeding frenzy is bipartisan, which some people think is a measure of good policy.
Like me, though, Tim isn’t impressed when the Evil Party and the Stupid Party both conspire to produce bad policy.
As this legislation — the highway bill, the energy bill, the tax extenders, plus the omnibus spending bill—pass through both houses, expect hosannas to the “bipartisanship” and “compromise” involved. …there’s one common theme here: Corporate lobbyists win in almost every case.
But catering to the interests of K Street lobbyists is probably not a good strategy for Republicans.
Republican leaders are probably confused about why all their accomplishments and imminent accomplishments, including the highway bill, tax extenders and appropriations, haven’t dragged Congress’s approval out of the gutter—after all, everyonetheytalk to thinks Congress is doing a bang-up job.
Now let’s look at what Kevin Williamson recently wrote for National Review. His article is primarily about corruption in Chicago, but his observations apply just as well to how Washington operates.
Bill and Hillary Clinton, Barack Obama, Rahm Emanuel, Al Gore, and the rest of that sorry lot aren’t trying to get rich — they’re already rich, some of them wildly rich. They are building a patronage society. And building a patronage society costs a lot of money… The horrifying fact is that Barack Obama can make you a rich man — if you’re the right kind of man. If you operate a politically connected business, the government can direct the better part of $1 billion straight into your coffers… At the other end of the spectrum, a federal tormenter can be the end of your enterprise: Ask those Tea Party groups illegally targeted by Barack Obama’s IRS. Ask a voting-reform advocate who was targeted by the ATF in spite of not being in any business related to A, T, or F.
The Clintons’ game isn’t enjoying the $100 million in their checking account — it’s making use of the $44 trillion in American-owned assets as if they owned them themselves. Barack Obama doesn’t want a garage full of Rolls Royces — he wants a world in which Rolls Royce has to ask his permission before building a car or selling one.
In effect, a nation slowly but surely becomes Greece as more and more people either rely on benefits or have jobs in the bloated bureaucracies that dispense goodies.
…you cannot build a patronage society on patrons alone: You need clients. And that’s where the ever-growing public sector comes in. …There is effectively no one working at your local DMV, public school, police station, or IRS office who could earn even 80 percent of his government compensation in a private-sector job. …the really nefarious dependency agenda isn’t focused on the people who cash welfare checks, but on the people who write them, the vast bureaucracies of overpaid functionaries… Get enough of those and you have effective control over the entire economy — Chávez-style socialism without the nasty business of formal expropriation.
By the way, it’s not just libertarian types who worry about bloated government and cronyism.
Here’s an excerpt from a recent column by Robert Samuelson that succinctly captures an inherent problem with government. Writing about the reasons for diminishing productivity growth, he cites the work of Mancur Olson.
Olson revolutionized thinking about the political power of interest groups. …conventional wisdom held that large groups were more powerful than small groups in pursuing their self-interest — say, a government subsidy, tax preference or a protective tariff. …Just the opposite, Olson said in his 1965 book “The Logic of Collective Action.” With so many people in the large group, the benefits of collective action were often spread so thinly that no individual had much of an incentive to become politically active. The tendency was to “let George do it,” but George had no incentive either. By contrast, the members of smaller groups often could see the benefits of their collective action directly. They were motivated to organize and to pursue their self-interest aggressively.
Samuelson continues, elaborating on Olson’s insight about concentrated benefits and dispersed costs.
Here’s an example: A company and its workers lobby for import protection, which saves jobs and raises prices and profits. But consumers — who pay the higher prices — don’t create a counter-lobby, because it’s too much trouble and the higher prices are diluted among many individual consumers. Gains are concentrated, losses dispersed. This was Olson’s great insight, and it had broad implications, he said. In a 1982 book, “The Rise and Decline of Nations,” he argued that the proliferation of special-interest concessions could reduce a society’s economic growth. “An increase in the payoffs from lobbying . . . as compared with the payoffs from production, means more resources are devoted to politics and cartel activity and fewer resources are devoted to production,” he wrote.
If you’re not already sufficiently depressed, my colleague Chris Edwards has a very good description of the lawmaking process. You should read the whole thing, but here are a few excerpts as a teaser.
In a romantic view of democracy, legislators act with the interests of the general public in mind. They grapple with policy issues, work toward a broad consensus, and pass legislation that has strong support. To ensure that funds are spent wisely, they frequently reevaluate existing programs and prune the low-value and harmful ones. They put citizens first and carefully limit their actions to those allowable under the U.S. Constitution. The problem with this “public interest theory of government” is that it has little real-world explanatory power. …we can better understand congressional actions by looking at incentives.
And when you look at how the process really works, you learn it is dominated by “rent seeking,” which is academic jargon for interest groups obtaining undeserved benefits via government coercion.
Members…seek federal benefits for their states because most of the costs will fall on other states. This is a major factor causing federal failure. The structure of Congress leads members to support programs that benefit their states but that are losers for the nation as a whole. …There is no built-in check—no invisible hand, as in markets—to guide members to make value-added decisions… Special-interest groups dominate policy discussions. Most witnesses to congressional hearings favor the programs being examined, and they focus on program benefits, not the costs. Most visitors to member offices on Capitol Hill are there to plead for special benefits. …Washington is teaming with lobbyists seeking special benefits—subsidies, regulations, trade protections—that come at the expense of the general public. …rent seeking is a two-way street. Jonathan Rauch of Brookings noted, “In the public’s mind, the standard model of lobbying in Washington involves special interests buying influence, in a sort of legalized bribery. In fact, the process more often involves politicians shaking down special interests.”
If you’ve read this far, you probably want to go take a shower and wash away the stench of Washington corruption.
But there’s one tiny glimmer of hope. If we can somehow figure out how to shrink the size and scope of government, we can reduce the problem. That’s the message of this video.
While we know the solution, our real challenge is that we can only shrink government by convincing politicians to change policy. Yet asking politicians to reduce government is like asking burglars to be in favor of armed homeowners.
And based on everything I wrote above, we know politicians generally have bad incentives.
But it’s not hopeless. While I certainly enjoy mocking politicians, they’re not totally immoral or even amoral people. Many of them do understand there’s a problem. Indeed, I would argue that recent votes for entitlement reform are an example of genuine patriotism – i.e., doing the right thing for the country.
So is there a potential solution?
Maybe. Let’s use an analogy from Greek mythology. Many politicians generally can’t resist the siren song of a go-along-to-get-along approach. But like Ulysses facing temptation from sirens, they recognize that this is a recipe for a bad outcome. So they realize that some sort of self-imposed constraint is desirable. And that’s why I’m somewhat hopeful that we can get them to impose binding spending caps.
We know there are successful reforms by looking at the evidence. And we know there is growing support from fiscal experts. And we even see that normally left-leaning international bureaucracies such as the OECD and IMF acknowledge that spending caps are the only effective fiscal rule.
So if Ulysses can bind himself to the mast and resist the sirens, perhaps we can convince politicians to tie their own hands with a Swiss-style spending cap.
That’s troubling, particularly since the biggest share of the OECD’s budget comes from American taxpayers. So we’re subsidizing a bureaucracy that uses our money to advocate policies that will result in even more of our money being redistributed by governments.
Adding insult to injury, the OECD’s shift to left-wing advocacy has been accompanied by a lowering of intellectual standards. Here are some recent examples of the bureaucracy’s sloppy and/or dishonest output.
Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers… “Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. “The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added taxes and income taxes. This underlines the urgency of efforts to ensure that corporations pay their fair share.” These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.
And what evidence does the OECD have to justify this assertion?
Here’s what the bureaucracy wrote.
Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.
Those are relatively small shifts in tax receipts as a share of GDP, so one certainly could say that the OECD bureaucrats are trying to make a mountain out of a molehill.
But that would mean that they’re merely guilty of exaggeration.
The much bigger problem is that the OECD is disingenuously cherry-picking data, the kind of methodological mendacity you might expect from an intern in the basement of the White House, but not from supposed professionals.
If you go to the OECD’s website and click on the page where the corporate tax data is found, you’ll actually discover that corporate tax receipts have been slowly climbing as a share of GDP.
Yes, receipts are slightly lower than they were at the peak of the financial bubble.
However, honest analysts would never claim that those numbers were either sustainable or appropriate to use as a bennchmark.
Sadly, “honest” and “OECD” are words that don’t really belong together any more.
The bureaucrats in Paris also are being mendacious in their portrayal of what’s happening with individual income tax revenues.
Monsieur Saint-Amans wants us to think that falling corporate tax receipts are being offset by a rising burden on individuals, but check out this table from the OECD’s Revenue Statistics. As you can see, he wants us to look at one tree (what’s happened in the past few years) and ignore the forest (the fact that the burden of the personal income tax today is lower than it was in 1980, 1990, or 2000).
By the way, the real story is that the OECD wants higher tax burdens, period. Anytime, anywhere, and on everybody.
All of what you might expect from an organization filled with overpaid officials who realize their cosseted lifestyle is dependent on producing output that will generate continuing subsidies from statist politicians such as Obama and Hollande.
P.S. If you want an amazing example of the OECD’s ideology-over-analysis approach, here’s what the bureaucrats recently wrote about achieving more growth in Asia.
Increasing tax revenues and ensuring sustainable domestic resource mobilisation will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards. …Comparable and consistent tax statistics facilitate transparent policy dialogue and provide policy makers with an important tool to assess alternative tax reforms. …Continued reforms will be necessary to help these tax administrations raise additional tax revenues in the future.
Yup, you read correctly (at least if you understand that “domestic resource mobilisation” is OECD-speak for higher taxes). The bureaucrats think generating more tax revenue to finance bigger government actually is a recipe for more prosperity.
For all intents and purposes, they’re advising nations in the region to copy France and Italy instead of seeking to be more like Hong Kong and Singapore.
A couple of radical Islamists murdered a bunch of people in California and, even before any details were available, some politicians sought – once again – to exploit a tragedy.
Here’s a short excerpt from USA Today about Hillary Clinton’s response.
Democratic presidential front-runner Hillary Clinton took to Twitter on Wednesday to…call for stricter gun control measures.
And Huffington Postreports that President Obama also seized the opportunity to push his gun control agenda.
President Barack Obama commented Wednesday on the shooting in San Bernardino, California… “there’s some steps we could take, not to eliminate every one of these mass shootings, but to improve the odds that they don’t happen as frequently, common-sense gun safety laws, stronger background checks,”
This is nonsense. Terrorists obviously don’t care whether there are laws against guns.
Heck, just look at the evidence from Europe, where there are very restrictive laws, yet radical Islamists obviously are able to get weapons on the black market.
So the net effect of these laws is to make it just about impossible for law-abiding people to defend themselves. Even if they are being targeted by the terrorists!
Fortunately, there’s a growing recognition that it is absurd to disarm good people and make it easier for evil people to wreak havoc. And the government officials who are in charge of stopping mass shootings are among those who are now pushing for a common-sense approach.
The Detroit Newsreports that the city’s police chief has a very sensible attitude about how to discourage bad people.
The city’s police chief said he believes violent extremists would be reluctant to target Detroit, as they had Paris last month, for fear armed citizens would shoot back. “A lot of Detroiters have CPLs (concealed pistol licenses), and the same rules apply to terrorists as they do to some gun-toting thug,” Chief James Craig said. “If you’re a terrorist, or a carjacker, you want unarmed citizens.”
A local professor also has the same sensible viewpoint.
Oakland University criminal justice professor Daniel Kennedy agreed that terrorists would be reluctant to attack armed citizens.
I hope Prof. Kennedy already has tenure since he may get targeted by leftist students who might accuse him of common sense, which is a “microagression” that makes them feel “unsafe.”
In any event, terrorists surely would have an incentive (if they’re capable of passing my IQ test for criminals and liberals) to seek out a “gun-free zone” if launching an attack in Detroit.
More than 30,000 Detroit residents are legally armed, according to Michigan State Police. There were 6,974 concealed-pistol licenses issued to residents in 2013, more than double those in 2009, and 7,584 issued in 2012, the state police said. …Starting Tuesday, Michigan is making it easier for citizens to get concealed gun permits. …The National Rifle Association has said the new rules will eliminate licensing delays and arbitrary denials. Craig praised the new state law, and said they will help citizens fight back against criminals and terrorists. …“If you’re sitting in a restaurant, and you aren’t allowed to have a gun, what are you supposed to do if someone comes in there shooting at you? Throw a fork at them?”
Which, of course, is why gun-free zones are so foolish. The only people who obey are the law-abiding people. Yet those are precisely the people who could be helpful if some nutjob launched an attack.
After all, terrorists wouldn’t get the chance to do much damage if they tried to shoot up this neighborhood.
So kudos to Chief Craig.
But he’s not the only senior law-enforcement official who recognizes that it’s time to put aside empty political correctness.
Amazingly, the Chief of Police in Washington, DC, also has decided that common sense should triumph. Here’s some of what was reported by the Washington Post.
D.C. Police Chief Cathy L. Lanier is urging that civilians confronted by an active shooter in some cases try to stop the gunman before law enforcement authorities arrive, saying quick action could save lives. …“I always say if you can get out, getting out’s your first option, your best option. If you’re in a position to try and take the gunman down, to take the gunman out, it’s the best option for saving lives before police can get there.” …“For a major city police chief to say that is breaking new ground,” said Chuck Wexler, who runs the Police Executive Research Forum… “if you’re dealing with suicide bombers or terrorists, it’s a completely different dynamic,” Wexler said. “I think that because so much can happen in so few seconds, intervention by citizens can make a big difference.”
Remember, though, that an effective response by citizens is only possible if they’re armed.
So the top cop in DC is basically acknowledging that gun control empowers the bad guys.
The chief acknowledged that advising confrontation is “kind of counterintuitive to what cops always tell people.” Cooper said, “You’re telling them that now though?” Lanier answered: “We are.”
By the way, the Sheriff of Milwaukee County in Wisconsin also believes armed citizens are necessary and desirable.
And regular cops overwhelmingly agree that gun control doesn’t deter bad people.
For further information, I invite you to peruse some serious articles on gun control, featuring scholars such asJohn Lottand David Kopel, along with some very persuasive information from an actual firearms expert.
Most of all, though, I recommend you read what Jeffrey Goldberg and Justin Cronin wrote about guns. They’re both self-confessed leftists, but they also decided that rationality and common sense should take precedence over anti-2nd Amendment ideology.
And to bolster the case for reform, we’re going to look at three new examples of how government intervention makes the healthcare system worse rather than better.
For our first example, let’s look at a new report from the National Center for Policy Analysis, which compares what happens when the federal government decides to build a hospital with a similar project constructed by a local government with private-sector involvement.
We’ll start with a look at Veterans Administration project.
…the VA hospital in Denver, Colorado, was run-down, crowded and outdated. …the VA considered renovating the medical facilities of the Fitzsimons Army Medical Center at a cost of $30 million. Then, the University of Colorado Hospital offered to open jointly-operated facilities for $200 million. VA officials passed on both ideas due to cost concerns. Instead, officials sought and received approval for a stand-alone facility.
That decision was very costly for taxpayers.
The VA failed to produce a design that could be built for its budget of $604 million, ultimately causing a budget-busting $1 billion overrun. …Soon, the plan to build an affordable replacement morphed into the most extravagant and expensive hospital construction project in VA history.
And, as is typical of government projects, the cost to taxpayers was far higher than initial estimates used to justify the project.
Now let’s look at another project, this one in Dallas, Texas.
…the original Parkland Hospital was built in Dallas to serve the young city’s indigent population. …its aging facilities could no longer meet the demand of 1 million patients admitted each year. …The project to rebuild Parkland, split roughly 60/40 in revenue sources, was accountable to both the public and its private donors. …Project managers hired an independent auditor to monitor all project transactions. Budget progress reports were made available to both Parkland’s Board and the public.
The final outcome was far from perfect (after all, local governments are also quite capable of wasting money). But the involvement of the private sector, combined with the fact that the local government was spending its own money, created incentives for a much better outcome.
On the first day of construction, Parkland’s project team was $100 million over budget. But a flexible design, and a willingness to balance needs and wants, allowed the team to deliver a larger, more cost-effective hospital than originally conceived for a mere 6 percent increase in budget.
And here’s a chart from the NCPA report that perfectly captures the difference between the federal government and a project involving a local government and the private sector.
Can you think of a better argument for local private-public partnerships over the federal government?
Yet policy keeps moving in the wrong direction in Washington.
The Obamacare boondoggle was all about increasing the federal government’s control and intervention in the healthcare sector.
And this brings us to our second not-so-great example of government-run healthcare.
The New York Times has a story with a real-world example showing how the President’s failed legislation is hurting small businesses.
LaRonda Hunter…envisioned…a small regional collection of salons. As her sales grew, so did her business, which now encompasses four locations — but her plans for a fifth salon are frozen, perhaps permanently.
And why can’t she expand her business and create jobs?
Because Obamacare makes it impossible.
Starting in January, the Affordable Care Act requires businesses with 50 or more full-time-equivalent employees to offer workers health insurance or face penalties that can exceed $2,000 per employee. Ms. Hunter, who has 45 employees, is determined not to cross that threshold. Paying for health insurance would wipe out her company’s profit and the five-figure salary she pays herself from it, she said.
And Ms. Hunter is just the tip of the iceberg.
For some business owners on the edge of the cutoff, the mandate is forcing them to weigh very carefully the price of growing bigger. “There’s kind of a deer-in-headlights moment for those who say, ‘I have this new potential client, but if I bring them on, I have to hire five additional people,’” said Philip P. Noftsinger, the payroll unit president at CBIZ, a financial services provider for businesses. “They’re really trying to assess how much the 50th employee is going to cost. …Added to that cost are the administrative requirements. Starting this year, all companies with 50 or more full-time workers — even those not yet required to offer health benefits — must file new tax forms with the Internal Revenue Service that provide details on employee head count and any health insurance offered. Gathering the data requires meticulous record-keeping. “These are some of the most complex informational returns we’ve ever seen,” said Roger Prince, a tax lawyer.
Here’s another real-world example.
The expense and distraction of all that paperwork is one of the biggest frustrations for one business owner, Joseph P. Sergio. …He is reluctant to go over the 50-employee line and incur all of the new rules that come with it. That makes bidding for new jobs an arduous and risky exercise. …”If you ramp up, and it pushes you over 50, there’s all these unknown costs and complicated rules. Are we really going to be able to benefit from going after that opportunity? It freezes you at a time when you need to be moving fast.”
That’s the kind of two-for-one special that’s only possible with big government!
Now that we’ve cited examples of bad policy from the Veterans Administration and Obamacare, let’s turn to Medicare for our third example.
Veronique de Rugy of the Mercatus Center writes about rampant Medicare fraud in her syndicated column.
Medicare is rife with fraud, and every year, billions of dollars are improperly paid out by the federal government’s giant health care bureaucracy. According to the government’s latest estimates, Medicare fee-for-service (parts A and B) made $46 billion in improper payments last year. And Medicare Advantage (Part C) and Medicare Prescription Drug Coverage (Part D) combined for another $15 billion in improper payments. Even more disturbing is the possibility that these numbers underestimate the annual losses to taxpayers from fraud and bureaucratic bungling. According to the work of Harvard University’s Malcolm Sparrow, fraud could account for as much as 20 percent of total federal health care spending, which would be considerably higher than what the government’s figures indicate.
But there is a glimmer of good news. There’s actually a program to identify and recover wasted funds.
The RAC program is geared toward correcting improper payments… The auditors thus pay for themselves with the money they recoup instead of simply being handed a lump-sum check. That the RAC program has an incentive to reduce wasteful spending and save taxpayers money makes it fairly unusual among government initiatives.
Unfortunately, no good deed goes unpunished in Washington.
…bureaucrats are set to greatly diminish the program’s effectiveness in 2016. Rather than empower these fraud hunters, they are drastically reducing the number of paid claims that auditors can review every 45 days (from 2 percent down to just 0.5 percent). The new limits will make it that much harder for auditors — whose cost already amounts to just a drop in the bucket — to recoup taxpayer losses.
I’ve also written about this absurd effort to curtail the RAC program, but Veronique makes a critically important observation that has widespread applicability to so much of what happens with government.
Agency failure is routinely rewarded in Washington with bigger budgets and greater authority, but here success will not be.
This, in a nutshell, is the difference between the private sector and the government.
In my speeches, I sometimes point out that people in the private economy make mistakes all the time, but I also explain that the incentive to earn profits and avoid losses creates a powerful incentive structure to quickly learn from mistakes.
That means resources quickly get reallocated in ways that are more likely to boost economic efficiency and increase growth and living standards.
In government, by contrast, this process is reversed. Bureaucrats and politicians reflexively argue that failure simply means that budgets should be expanded.
All of which explains why these cartoons are such perfect depictions of government.
he knows how to work the media.
International Liberty 