So let’s escape the dismal reality of American politics and enjoy some laughs about Britain’s glorious decision to escape the sinking ship of the European Union.
We’ll start with a parody video featuring the head of the National Socialist Workers Party (PG-13 warning that there are some naughty words).
Very well done.
Not let’s enjoy some more clever satire.
We’ll start with this depiction of what was supposed to happen according to the statist practitioners of Project Fear.
Speaking of Project Fear, here’s some related humor.
And I very much enjoy this cartoon showing that Obama’s attempt to convince Britons to remain in the EU was about as successful as his efforts to convince Americans to like the failed Obamacare program.
Last but not least, I can’t resist sharing this image since I’ve repeatedly used the escape-from-a-sinking-ship metaphor.
P.S. If you enjoyed the Hitler parody, other examples of this genre include:
But mostly it’s impossible to know what he really thinks for the simple reason that he probably doesn’t have deep thoughts about public policy (look at his flailing response to the question of debt). Even when he’s been specific, does anyone think he’s philosophically committed to what he has said while campaigning?
So my assessment, as explained in this interview with Neil Cavuto, is that Trump is a grenade that will explode in an unpredictable fashion.
So if you’re a libertarian and you choose to vote for Trump, just be forewarned that you’ll probably be standing next to the grenade when it explodes.
So what about the alternative? Is there a libertarian argument for Hillary Clinton (other than the fact that she’s not Trump)? Can a politician who has spent decades promoting cronyism and redistributionism actually deliver good policy?
Her husband actually did a good job when he was in the White House, but you can probably sense from this debate with Juan Williams on the Stossel show, I’m not overflowing with optimism that she also would preside over a shift to better policy.
Here are a few additional thoughts on my debate with Juan.
Keynesian economics doesn’t work, either in theory or in reality. And it’s laughable that the excuse for Keynesian failure is always that politicians should have spent more money.
Entitlements will cripple America’s economy if left on auto-pilot. I’ve repeatedly made the point that we’re like Greece 10 or 15 years ago. By claiming at the time that there was no crisis, Greek politicians ensured that a crisis eventually would occur. The same thing is happening here.
Last but not least, I was rhetorically correct but technically wrong about welfare dependency in Hong Kong. I said fewer than 3 percent of Hong Kong residents get public assistance when I should have said that Hong Kong spends less than 3 percent of GDP on redistribution. That’s an amazingly small welfare state, but it does ensnare about 5.5 percent of the population. Which if far lower than the share of the population getting handouts in America, so my point was still very much correct.
Not that any of this matters in the short run since there’s a 99.9 percent probability that America’s next President will be perfectly content to let the country sink further into the swamp of statism.
While I dismiss conspiracy theories that presume there’s a plan in Washington to strip away our rights, I do think there’s a natural “public choice” explanation for ever-growing, ever-more powerful government. And that can lead to ever-expanding examples of abusive mistreatment of citizens.
Here’s something else to worry about, especially considering the way citizens are increasingly mistreated by callous officials.
Former Senator Tom Coburn, along with Adam Andrzejewski of OpenTheBooks.com, wrote a column for the Wall Street Journal about the militarization of the bureaucracy.
Special agents at the IRS equipped with AR-15 military-style rifles? Health and Human Services “Special Office of Inspector General Agents” being trained by the Army’s Special Forces contractors? The Department of Veterans Affairs arming 3,700 employees? The number of non-Defense Department federal officers authorized to make arrests and carry firearms (200,000) now exceeds the number of U.S. Marines (182,000). In its escalating arms and ammo stockpiling, this federal arms race is unlike anything in history. Over the last 20 years, the number of these federal officers with arrest-and-firearm authority has nearly tripled to over 200,000 today, from 74,500 in 1996. …During a nine-year period through 2014, we found, 67 agencies unaffiliated with the Department of Defense spent $1.48 billion on guns and ammo. Of that total, $335.1 million was spent by agencies traditionally viewed as regulatory or administrative, such as the Smithsonian Institution and the U.S. Mint.
Here are some of the strange example of militarized bureaucracy, along with my speculation as to why the paper pushers ostensibly need heavy weapons.
The Internal Revenue Service, which has 2,316 special agents, spent nearly $11 million on guns, ammunition and military-style equipment. That’s nearly $5,000 in gear for each agent.
The Department of Veterans Affairs, which has 3,700 law-enforcement officers guarding and securing VA medical centers, spent $11.66 million. It spent more than $200,000 on night-vision equipment, $2.3 million for body armor, more than $2 million on guns, and $3.6 million for ammunition. The VA employed no officers with firearm authorization as recently as 1995.
The Animal and Plant Health Inspection Service spent $4.77 million purchasing shotguns, .308 caliber rifles, night-vision goggles, propane cannons, liquid explosives, pyro supplies, buckshot, LP gas cannons, drones, remote-control helicopters, thermal cameras, military waterproof thermal infrared scopes and more.
I don’t even know what propane cannons and LP gas cannons are, but they sound almost as awesome as a tank, so why not get them if taxpayers are footing the bill?
The Environmental Protection Agency spent $3.1 million on guns, ammunition and military-style equipment. The EPA has put nearly $800 million since 2005 into its “Criminal Enforcement Division.”
The University of California, Berkeley acquired 14 5.56mm assault rifles and Yale University police accepted 20 5.56mm assault rifles from the Defense Department. Texas Southern University and Saddleback College police even acquired Mine Resistant Vehicles (MRVs).
There are rumors that very dodgy characters sometimes show up on campuses, so who am I to question the need for heavy weapons?
And there are other bureaucracies to add to this list, which doesn’t make Corburn and Andrzejewski very happy.
Other paper-pushing federal agencies with firearm-and-arrest authority that have expanded their arsenals since 2006 include the Small Business Administration, Social Security Administration, National Oceanic and Atmospheric Administration, Education Department, Energy Department, Bureau of Engraving and Printing, National Institute of Standards and Technology and many others. …the federal government has become a gun show that never adjourns. Taxpayers need to tell Washington that police powers belong primarily to cities and states, not the feds.
By the way, I have no objection to armed guards stationed at federal buildings. There are wackos out there. And I’m completely in favor of armed Energy Department officials guarding nuclear facilities.
But do we really need armed regulators interacting with the public?
Yes, bureaucrats occasionally have to deal with potentially dangerous people. And even if they’re enforcing rules that shouldn’t exist, I think they have every right to be protected. But in those rare instances, why not simply call up the local cops and ask for an escort? Would that really be asking too much?
Jeff Jacoby is similarly irked by the militarization of the bureaucracy. Here’s some of what he wrote for the Boston Globe.
…consider one domestic organization’s fearsome arsenal of military-style equipment. In the space of eight years, the group amassed a stockpile of pistols, shotguns, and semiautomatic rifles, along with ample supplies of ammunition, liquid explosives, gun scopes, and suppressors. In its cache as well are night-vision goggles, gas cannons, plus armored vests, drones, and surveillance equipment. Between 2006 and 2014, this organization spent nearly $4.8 million to arm itself. Yet its aggressive weapons buildup has drawn almost no public attention. …It is the Animal and Plant Health Inspection Service, an agency of the US Department of Agriculture, that has built up such a formidable collection of munitions. And far from being an outlier, it is one of dozens of federal agencies that spends lavishly on guns, ammunition, and military-style equipment.
I guess the APHIS bureaucrats must run into ISIS terrorists. Or something like that.
But the more serious point, which Jeff astutely addresses, is whether militarized bureaucrats send the wrong message.
Between 2006 and 2014, the report shows, 67 federal bureaus, departments, offices, and services spent at least $1.48 billion on ammunition and materiel one might expect to find in the hands of SWAT teams, Special Forces soldiers — or terrorists. …the arms race has metastasized to federal agencies with strictly regulatory or administrative functions. The Internal Revenue Service, for example, now spends more than $1 million annually on firearms, ammunition, and military gear, double what it was spending a decade ago. Since 2006, the Department of Veterans Affairs — which has been sharply criticized for episodes of fatal incompetence in patient care — has poured nearly $11.7 million into guns and ammo. …Incredibly, there are now fewer US Marines than there are officers at federal administrative agencies with the authority to carry weapons and make arrests. …this federal arsenal alarms Adam Andrzejewski, the head of American Transparency’s OpenTheBooks.com, which researched and assembled the new report. “Just who,” he asks, “are the feds planning to battle?”
As I said at the start of this column, I don’t think bureaucrats are “planning to battle” anyone.
But I am concerned that a bloated government with vast and growing powers is a recipe for an ugly and unfortunate encounters.
Especially when we have a tax code and regulatory apparatus that make all of us criminals even when we’re trying to obey.
The United Kingdom is getting a lot of attention because voters just chose to leave the European Union.
I think this was the smart choice. Yes, there will be some short-run economic volatility, but the long-run benefits should make it worthwhile. Sort of like chemotherapy being painful, but still being much better than the alternative of cancer.
Consider France. The country is so statist that even some folks from the establishment media have warned that government has too much power. Heck, even some of the people at the European Commission have complained that taxes are too high.
Perhaps most miraculously, there was even a column in the New York Times last month explaining how bad government policy is killing France’s job market.
It’s obvious that the current system isn’t working. …business owners are reluctant to hire employees, because it’s so complicated and expensive to fire them when times are bad. …times are pretty bad: France has 10 percent unemployment, roughly twice the levels in Germany and Britain. For young people, it’s around 24 percent. …While many other European countries have revamped their workplace rules, France has barely budged.
The most important thing to understand is that employers are extremely reluctant to hire full-time workers because it’s nearly impossible to fire them if they don’t do a good job or if the company hits hard times. And that translates into temporary jobs combined with lots of unemployment.
The Hollande government has proposed to tinker with this system.
The new labor bill — weakened after long negotiations — wouldn’t alter the bifurcated system, in which workers either get a permanent contract called a “contrat à durée indéterminée,” known as a C.D.I., or a short-term contract that can be renewed only once or twice. Almost all new jobs have the latter.
But even though the reforms are very timid, the French are protesting.
…it isn’t just unions that oppose the bill. So do more than 60 percent of the population, who fear the bill would strip workers of protections without fixing the problem. Young people took to the streets to oppose it, demanding C.D.I.s, too. Why are the French so wedded to a failing system? …they believe that a job is a basic right — guaranteed in the preamble to their Constitution — and that making it easier to fire people is an affront to that. Without a C.D.I., you’re considered naked before the indifferent forces of capitalism. …young protesters held a banner warning that they were the “génération précaire.”
Here’s the most amazing part of the story. The protesters think that a government-protected job is a rite of passage into adulthood. They want the “right to grow up,” even though their version of adulthood involves complete blindness to economic reality.
They were agitating for the right to grow up. …getting a permanent work contract is a rite of adulthood. Without one, it’s hard to get a mortgage or car loan, or rent an apartment. Mainstream economic arguments can’t compete. “Basic facts of economic science are completely dismissed,” said Étienne Wasmer, a labor economist at Sciences Po. “People don’t see that if you let employers take risks, they’ll hire more people.” Instead, many French people view the workplace as a zero-sum battle between workers and bosses.
The obvious answer is to dramatically reduce government intervention in labor markets. But since that’s a near impossibility in France, high levels of joblessness almost surely will continue and short-term employment contracts will be the norm for those who do manage to find work.
By the way, the system doesn’t even work that well for the workers with the government-protected positions.
Many workers here have permanent contracts that make it very hard to fire them. So some companies resort to an illegal strategy: They try to make someone so miserable, he’ll quit. “What happens next is, I’ll lose my team and my staff, and therefore I’ll have nothing to do,” the man predicted. “You still have to come to work every day, but you have no idea why.” …those lucky enough to have C.D.I.s can struggle at work. In one study, workers with C.D.I.s reported more stress than those with short-term contracts, in part because they felt trapped in their jobs. After all, where else would they get another permanent contract?
No wonder so many people in France want to work for the government. That way they can get lavish pay and benefits with very little pressure to perform.
In any case, the net result is that the French economy is stagnant. Potentially valuable labor (one of the two factors of production) is being sidelined or misallocated.
Writing for Market Watch, Diana Furchtgott-Roth shares her analysis of crazy French labor law.
…reforms are vital because the French economy is stagnant. GDP growth for the latest quarter was 0.6%. Over the past decade, growth has rarely risen above 1%. The unemployment rate is over 10% and the youth unemployment is 25%. Clearly tax and regulatory reform, including more labor flexibility, are needed to encourage employers to hire. …a French court this week ruled that Société Générale rogue trader Jérôme Kerviel, who lost $5.5 billion of the bank’s assets in 2008 and almost caused its bankruptcy, had been unfairly dismissed. Société Générale was ordered to pay Kerviel $511,000 because it decided he was dismissed “without cause.” …When employers cannot fire workers, they are less likely to hire them, leading to a sclerotic labor market and high unemployment. This is what the left-wing Hollande is trying to repair. …Some view France as a worker’s paradise where the government protects workers from abusive employers. The reality is that France is a worker’s nightmare where jobs are scarce and work ethic is prohibited by law.
Ambrose Evans-Pritchard is even more negative in his column for the U.K.-based Telegraph.
An intractable economic crisis has been eating away at the legitimacy of the French governing elites for much of this decade. This has now combined with a collapse in the credibility of the government, and mounting anger… The revolt comes as Paris battles a wave of protest against labour reform, a push that has come close to rupturing the Socialist Party. The measures were rammed through by decree to avoid a vote. Scenes of guerrilla warfare with police on French streets have been a public relations disaster… Rail workers are demanding a maximum 32-hour week. Eric Dor from the IESEG School of Management in Lille says powerful vested interests have made France almost unreformable. …Dor said the labour reforms have been watered down and are a far cry from the Hartz IV laws in Germany in 2004, which made it easier to fire workers and screw down wages.
He points out that the damage of labor-market intervention is exacerbated by a wretched tax system (I’ve written that the national sport of France is taxation rather than soccer).
France’s social model is funded by punitively high taxes on labour. The unintended effect is to create a destructive ‘tax wedge’ that makes it too costly to hire new workers. It protects incumbents but penalizes outsiders, leading to a blighted banlieu culture of mass youth unemployment. There are 360 separate taxes, with 470 tax loopholes. The labour code has tripled… Public spending is 57pc of GDP, a Nordic level without Danish or Swedish levels of labour flexibility. Unemployment is still 10.2pc even at this late stage of the global cycle.
Given the various ways that government discourages employment, is anyone surprised that the French work less than any other nation in Europe? Here’s a blurb from a report in the EU Observer.
French put in the least working hours in the EU, according to the bloc’s statistical office Eurostat. Full-time workers in France clocked up 1,646 hours of labour last year.
By the way, there’s a tiny possibility of change.
There’s an election next year and one of the candidates has a platform that sounds vaguely like he wants to be the Ronald Reagan or Margaret Thatcher of France.
Here are some of the details from a report by Reuters.
French presidential hopeful Alain Juppe, the frontrunner in opinion polls 20 years after serving as a deeply unpopular prime minister, said on Tuesday he would roll back France’s iconic 35-hour working week and scrap a wealth tax if elected next year. In the mid-1990s Juppe triggered France’s worst unrest in decades because he would not budge on pension reforms. He eventually had to drop them after weeks of strikes and protests. …”The French are being kept from working by excessive labor costs. I want to cut those costs,” Juppe told hundreds of supporters as he outlined his economic platform. …Juppe said he would raise the retirement age to 65 from 62 while cutting both taxes and state spending. Juppe said he would aim to cut public spending by 80-100 billion euros over five years and to reduce payroll taxes by 10 billion euros and corporate taxes by 11 billion euros. …Juppe also said he would cap welfare subsidies.
Amazingly, Juppe is the favorite according to the polling data.
P.S. My “Frexit” title simply recognizes the reality – as shown in this video – that productive people already are fleeing France. Hollande’s punitive tax policy has driven many of them to other nations. French entrepreneurs in particular have flocked to London.
P.P.S. Watch Will Smith’s reaction after being told France has a top tax rate of 75 percent.
P.P.P.P.S. The big puzzle is why the French put up with so much statism. Polling data from both 2010 and 2013 shows strong support for smaller government, and an astounding 52 percent of French citizens said they would consider moving to the United States if they got the opportunity. So why, then, have they elected statists such as Sarkozy and Hollande?!?
P.P.P.P.P.S. In my humble opinion, the most powerful comparison is between France and Switzerland.
Which is what I did in this interview on Fox Business.
It wasn’t a long interview, but I had the opportunity to touch on four very important issues.
First, I explained that the Social Security Trust Fund is nothing but a pile of IOUs. It’s money the government owes itself, which means that the bonds in the Trust Fund can only be turned into real money by taking more from the private sector.
But if you don’t trust me, perhaps you’ll believe the Clinton Administration, which admitted back in 1999 (see page 337) that the Trust Fund is just a bookkeeping gimmick.
These balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.
In other words, the Trust Fund is like putting IOUs to yourself in a college fund. When it’s time for junior to start his freshman year, you’ll have to find the money to cash those IOUs.
Second, Social Security already is in the red and the rising burden of spending for the program will lead to huge fiscal shortfalls.
Here’s a chart, based directly on the data from Table VI.G9 of the Trustees Report, showing the annual deficit in the program based on today’s dollars.
Andrew Biggs of the American Enterprise Institute weighed in on this issue earlier this year. Here’s some of what he wrote in a column for the Wall Street Journal.
Mrs. Clinton would raise retirement payments for widows as well as provide Social Security credits for individuals who take time out of the workforce to care for a child or an infirm adult.
Andrew points out that Hillary also has expressed support for increases in the payroll tax rate and letting the government impose the tax on a greater share of income.
Mrs. Clinton…has recently spoken in favor of both approaches.
By the way, the latter option is especially dangerous for the economy, as explained in this video.
Fourth, Social Security is in bad shape, but the main long-run entitlement challenge comes from health-related programs such as Medicare, Medicaid, and Obamacare.
But sometimes I wind up feeling deflated when there’s a lot of discussion about tax reform and the final result is a milquetoast plan that simply rearranges the deck chairs on the Titanic. For instance, back in 2014, the then-Chairman of the House Ways and Means Committee unveiled a proposal that – at best – was underwhelming. Shifts in the right direction in some parts of the plan were largely offset by shifts in the wrong direction in other parts of the plan. What really doomed the plan was a political decision that the tax code had to raise just as much money (on a static basis) as the current system and that there couldn’t be any reduction in the amount of class warfare embedded in the current system (i.e., the “distribution” of the tax burden couldn’t change).
Well, we have some good news. Led by the new Chairman of the Ways and Means Committee, Kevin Brady, House Republicans have unveiled a new plan that it far, far better. Instead of being hemmed in by self-imposed constraints of static revenue and distributional neutrality, their two guidelines were dynamic revenue neutrality and no tax increase for any income group.
With those far more sensible constraints, they were able to put together a plan that was almost entirely positive. Let’s look at the key features, keeping in mind these theoretical principles that should guide tax reform.
The lowest possible tax rate – High tax rates on work and entrepreneurship make no sense if the goal is faster growth and more competitiveness.
No double taxation – It is foolish to penalize capital formation (and thereby wages) by imposing extra layers of tax on income that is saved and invested.
No loopholes or special preferences – The tax code shouldn’t be riddled with corrupt deductions, exemptions, exclusions, credits, and other goodies.
What’s Great
Here are the features that send a tingle up my leg (apologies to Chris Matthews).
No value-added tax – One worrisome development is that Senators Rand Paul and Ted Cruz included value-added taxes in their otherwise good tax plans. This was a horrible mistake. A value-added tax may be fine in theory, but giving politicians another source of revenue without permanently abolishing the income tax would be a tragic mistake. So when I heard that House Republicans were putting together a tax plan, I understandably was worried about the possibility of a similar mistake. I can now put my mind at rest. There’s no VAT in the plan.
Death tax repeal – Perhaps the most pure (and therefore destructive) form of double taxation is the death tax, which also is immoral since it imposes another layer of tax simply because someone dies. This egregious tax is fully repealed.
No state and local tax deduction – If it’s wrong to subsidize particular activities with special tax breaks, it’s criminally insane to use the tax code to encourage higher tax rates in states such as New York and California. So it’s excellent news that House GOPers are getting rid of the deduction for state and local taxes.
No tax bias against new investment – Another very foolish provision of the tax code is depreciation, which forces companies to pretend some of their current investment costs take place in the future. This misguided approach is replaced with expensing, which allows companies to deduct investments when they occur.
What’s Really Good
Here are the features that give me a warm and fuzzy feeling.
A 25 percent small business tax rate – Most businesses are not traditional corporations. Instead, they file using the individual portion of the tax code (using forms such as “Schedule C”). Lowering the tax rate on business income to 25 percent will help these Subchapter-S corporations, partnerships, and sole proprietorships.
Territorial taxation – For a wide range of reasons, including sovereignty, simplicity, and competitiveness, nations should only tax economic activity within their borders. The House GOP plan does that for business income, but apparently does not extend that proper treatment to individual capital income or individual labor income.
Here are the features that I like but don’t go far enough.
Slight reduction in top tax rate on work and entrepreneurship – The top tax rate is reduced to 33 percent. That’s better than the current top rate of 39.6 percent, but still significantly higher than the 28 percent top rate when Reagan left office.
Less double taxation of savings – The plan provides a 50-percent exclusion for individual capital income, which basically means that there’s double taxation of interest, dividends, and capital gains, but at only half the normal rate of tax. There’s also some expansion of tax-neutral savings accounts, which would allow some saving and investment fully protected from double taxation.
Simplification – House GOPers assert that all their proposed reforms, if enacted, would create a much simpler tax system. It wouldn’t result in a pure Hall-Rabushka-style flat tax, with a 10-line postcard for a tax return, but it would be very close. Here’s their tax return with 14 lines.
In an ideal world, there should be no double taxation of income that is saved and invested, so line 2 could disappear (in Hall-Rabushka flat tax, investment income/capital income is taxed once and only once at the business level). All savings receives back-ended IRA (Roth IRA) treatment in a pure flat tax, so there’s no need for line 3. There is a family-based allowance in a flat tax, which is akin to lines 4 and 9, but there are no deductions, so line 5 and line 6 could disappear. Likewise, there would be no redistribution laundered through the tax code, so line 10 would vanish. As would line 11 since there are no special preferences for higher education.
But I don’t want to make the perfect the enemy of the good. The postcard shown above may have four more lines than I would like, but it’s obviously far better than the current system.
What’s Bad but acceptable
Increase in the double taxation of interest – Under current law, companies can deduct the interest they pay and recipients of interest income must pay tax on those funds. This actually is correct treatment, particularly when compared to dividends, which are not deductible to companies (meaning they pay tax on those funds) while also being taxable for recipients. The House GOP plan gets rid of the deduction for interest paid. Combined with the 50 percent exclusion for individual capital income, that basically means the income is getting taxed 1-1/2 times. But that rule would apply equally for shareholders and bondholders, so that pro-debt bias in the tax code would be eliminated. And the revenue generated by disallowing any deduction for interest would be used for pro-growth reforms such as a lower corporate tax rate.
What’s Troublesome
No tax on income generated by exports and no deduction for cost of imported inputs for companies – The House GOP proposal is designed to be “border adjustable,” which basically means the goal is to have no tax on exports while levying taxes on imports. I’ve never understood why politicians think it’s a good idea to have higher taxes on what Americans consume and lower taxes on what foreigners consume. Moreover, border adjustability normally is a feature of a “destination-based” value-added tax (which, thankfully, is not part of the GOP plan), so it’s not completely clear how the tax-on-imports portion would be achieved. If I understand correctly, there would be no deduction for the cost of foreign purchases by American firms. That’s borderline protectionist, if not over-the-line protectionist. And it’s unclear whether this approach would pass muster with the World Trade Organization.
To conclude, the GOP plan isn’t perfect, but it’s very good considering the self-imposed boundaries of dynamic revenue neutrality and favorable outcomes for all income groups.
And since those self-imposed constraints make the plan politically viable (unlike, say, the Trump plan, which is a huge tax cut but unrealistic in the absence of concomitant savings from the spending side of the budget), it’s actually possible to envision it becoming law.
What an amazing vote. The people of the United Kingdom defied the supposed experts, rejected a fear-based campaign by advocates of the status quo, and declared their independence from the European Union.
Here are some takeaway thoughts on this startling development.
2. Brexit is a vote against centralization, bureaucratization, and harmonization. It also is a victory for more growth, though the amount of additional long-run growth will depend on whether the UK government seizes the opportunity for lower taxes, less red tape, and a smaller burden of government.
3. President Obama once again fired blanks. Whether it was his failed attempt early in his presidency to get the Olympic Games in Chicago or his feckless attempt in his final year to get Britons to remain in the EU, Obama has a remarkably dismal track record. Maybe I can get him to endorse the Boston Red Sox, thus ensuring the Yankees make it to the World Series?
4. Speaking of feckless foreign leaders, but I can’t resist the temptation to point out that the Canadian Prime Minister’s reaction to Brexit wins a prize for vapidity. It would be amusing to see Trudeau somehow justify this absurd statement, though I suspect he’ll be too busy expanding government and squandering twenty-five years of bipartisan progress in Canada. Potential mea culpa…I can’t find proof that Trudeau actually made this statement. Even with the excuse that I wrote this column at 3:00 AM, I should have known better than to believe something I saw on Twitter (though I still think he’s vapid).
5. Nigel Farage and UKIP have voted themselves out of a job. A common joke in Washington is that government bureaucracies never solve problems for which they were created because that would eliminate their excuse for existing. After all, what would “poverty pimps” do if there weren’t poor people trapped in government dependency? Well, Brexit almost surely means doom for Farage and UKIP, yet they put country above personal interest. Congratulations to them, though I’ll missFarage’sacerbic speeches.
6. The IMF and OECD disgracefully took part in “Project Fear” by concocting hysterical predictions of economic damage if the U.K. decided to get off the sinking ship of the European Union. To the extent there is some short-term economic instability over the next few days or weeks, those reckless international bureaucracies deserve much of the blame.
7. As part of his failed effort to influence the referendum, President Obama rejected the notion of quickly inking a free-trade agreement with the UK. Now that Brexit has been approved, hopefully the President will have the maturity and judgement to change his mind. Not only should the UK be first in line, but this should be the opportunity to launch the Global Free Trade Association that my former Heritage Foundation colleagues promoted last decade. Unfettered trade among jurisdictions with relatively high levels of economic freedom, such as the US, UK, Australia, Switzerland, New Zealand, Chile, etc, would be a great way of quickly capturing some of the benefits made possible by Brexit.
8. David Cameron should copy California Governor Jerry Brown. Not for anything recent, but for what he did in 1978 when voters approved an anti-tax referendum known as Proposition 13. Brown naturally opposed the referendum, but he completely reversed himself after the referendum was approved. By embracing the initiative, even if only belatedly, he helped his state and himself. That would be the smart approach for Cameron, though there’s a distinct danger that he could do great harm to himself, his party, and his country by trying to negotiate a deal to somehow keep the UK in the EU.
9. Last but not least, I’m very happy to be wrong about the outcome. I originally expected that “Project Fear” would be successful and that Britons would choose the devil they know over the one they don’t know. Well, I’m delighted that Elizabeth Hurley and I helped convince Britons to vote the right way. We obviously make a good team.
Joking aside, the real credit belongs to all UK freedom fighters, even the disaffected Labour Party voters who voted the right way for wrong reasons.
It sounds arcane and pedantic, but the United States has a democratic system of government but is not (or at least was not) designed to be a democracy.
A democracy implies that 51 percent of the people have the power to elect a government with unlimited powers to exploit 49 percent of the people.
The laughable news (in a sad way) is that some politicians are willing to openly display their ignorance on these matters.
The Washington Examinerreports on (what has to be) the year’s most remarkable example of historical and legal illiteracy.
A House Democrat said Wednesday that it “really bothers me” when people claim the U.S. Constitution was designed to limit the federal government’s power. …Rep. Jerrold Nadler, D-N.Y., said the founding document of the U.S. was designed for the “opposite” purpose. …”The Constitution was enacted to strengthen government power to enable central government to lay taxes and to function effectively…” said Nadler.
Wow.
Talk about claiming that night is day and up is down.
Let’s look at the actual document. Article II of the Constitution makes the President the nation’s Commander-in-Chief, which obviously is important, but otherwise limits the office to an administrator role.
All law-making power is granted to Congress.
And if you read Article 1 of the Constitution, specifically the enumerated powers in Section 8, you’ll see the areas where Congress has the right to make laws. You get a very clear view that the Founding Fathers wanted very firm limits on the central government.
Those “enumerated powers” include fewer than 20 specific items, such as “coin money” and “maintain a navy.”
To be fair, there’s a tiny sliver of truth to Congressman Nadler’s argument.
Compared to the Articles of Confederation (in effect from 1781-1789), the Constitution did give more power to the central government.
But that simply meant that the central government had a very small amount of power compared to a tiny amount of power.
Since I’m a thoughtful and helpful guy, here’s something I created to help Congressman Nadler understand constitutional restraints on the power of government.
This is just a back-of-the-envelope estimate, so I openly admit that I don’t know where to place the current system on this spectrum. We’ve unfortunately traveled a long way on the path to untrammeled majoritarianism in the United States. But voters and politicians haven’t chosen to translate their ability into an all-powerful central government.
In other words, majoritarianism can lead to pervasive statism (i.e., voluntarily electing a communist or fascist government).
Likewise, monarchies can be benign, such as in the United Kingdom or the Netherlands. Or they can be forms of absolute rule akin to communism and fascism.
For purposes of today’s discussion, though, all that really matters is that both the Articles of Confederation and the Constitution were explicitly designed to limit the powers of the central government.
The American economy is in the doldrums. And has been for most this century thanks to bad policy under both Obama and Bush.
So what’s needed to boost growth and create jobs? A new video from Learn Liberty, narrated by Professor Don Boudreaux (who also was the narrator for Learn Liberty’s superb video on free trade vs. protectionism), examines how to get more people employed.
A very good video. There are three things that grabbed my attention.
First, there’s a very fair compilation of various unemployment/labor force statistics. Viewers can see the good news (a relatively low official unemployment rate) and the bad news (a lowest-in-decades level of labor force participation)
Second, so-called stimulus packages don’t make sense. Yes, some people wind up with more money and jobs when politicians increase spending, but only at the expense of other people who have less money and fewer jobs. Moreover, Don correctly notes that this process of redistribution facilitates cronyism (the focus of another Learn Liberty video) and corruption in Washington (an issue I’ve addressed in one of my videos).
Third, free markets and entrepreneurship are the best routes for more job creation. And that requires less government. Don also correctly condemns occupational licensing rules that make it very difficult for people to get jobs or create jobs in certain fields.
The entire video was very concise, lasting less than four minutes, so it only scratched the surface. For those seeking more information on the topic, I would add the following points.
Businesses will never create jobs unless they expect that new employees will generate enough revenue to cover not only their wages, but also the cost of taxes, regulations, and mandates. This is why policies that sometimes sound nice (higher minimum wages, health insurance mandates, etc) actually are very harmful.
Let’s augment Don’s video by looking at some excerpts from a recent column in the Wall Street Journal by Marie-Joseé Kravis of the Hudson Institute.
In economics, as far back as Joseph Schumpeter, or even Karl Marx, we have known that the flow of business deaths and births affects the dynamism and growth of a country’s economy. Business deaths unlock resources that can be allocated to more productive use and business formation can boost innovation and economic and social mobility. For much of the nation’s history, this process of what Schumpeter called “creative destruction” has spread prosperity throughout the U.S. and the world. Over the past 30 years, however, with the exception of the mid-1980s and the 2002-05 period, this dynamism has been waning. There has been a steady decline in business formation while the rate of business deaths has been more or less constant. Business deaths outnumber births for the first time since measurement of these indicators began.
Why has entrepreneurial dynamism slowed? What’s happened to the creative destruction described in a different Learn Liberty video?
Unsurprisingly, government bears a lot of the blame.
Many studies have also attributed the slow rate of business formation to the regulatory fervor of the past decade. …in a 2010 report for the Office of Advocacy of the U.S. Small Business Administration, researchers at Lafayette University found that the per employee cost of federal regulatory compliance was $10,585 for businesses with 19 or fewer employees.
Wow, that’s a powerful real-world example of how all the feel-good legislation and red tape from Washington creates a giant barrier to job creation.
And it’s worth noting that low-skilled people are the first ones to lose out.
Ever since a bubble popped about 25 years ago, Japanese politician have adopted one so-called stimulus scheme after another.
Lots of additional government spending. Plenty of gimmicky tax cuts. All of which were designed according to the Keynesian theory that presumes that governments should borrow money and somehow get those funds into people’s pockets so they can buy things and supposedly jump-start the economy.
Japanese politicians were extraordinarily successful, at least at borrowing money. Government debt has quadrupled, jumping to way-beyond-Greece levels of about 250 percent of economic output.
But all this Keynesian stimulus hasn’t helped growth.
The Financial Timesreports on the latest episode of this Keynesian farce, aided and abetted by the hacks at the IMF.
Japan must redouble economic stimulus…the International Monetary Fund has warned in a tough verdict on the world’s third-largest economy. Prime minister Shinzo Abe needs to “reload” his Abenomics programme with an incomes policy to drive up wages, on top of monetary and fiscal stimulus, the IMF said after its annual mission to Tokyo. …David Lipton, the IMF’s number two official, in an interview with the Financial Times…argued that Japan should adopt an incomes policy, where employers — including the government — would raise wages by 3 per cent a year, with tax incentives and a “comply or explain” mechanism to back it up. …Mr Lipton and the IMF gave a broad endorsement to negative interest rates. The BoJ sparked a political backlash when it cut rates to minus 0.1 per cent in January.
I now feel that I should apologize to the now-departed suicide doctor.
After all, Dr. Kevorkian probably never did something as duplicitous as advising governments to boost tax burdens and then publishing a report to say that the subsequent economic damage was evidence against the free-market agenda.
P.S. The IMF is not the only international bureaucracy that is giving Japan bad advice. The OECD keeps advising the government to boost the value-added tax.
P.P.P.P.S. By the way, here’s another example of the IMF in action. Sri Lanka’s economy is in trouble in part because of excessive government spending.
So the IMF naturally wants to do a bailout. But, as Reutersreports, the bureaucrats at the IMF want Sri Lanka to impose higher taxes.
Sri Lanka will raise its value added tax and reintroduce capital gains tax…ahead of talks on a $1.5-billion loan it is seeking from the International Monetary Fund. …The IMF has long called on Sri Lanka to…raise revenues… These are likely to be the main conditions for the grant of a loan, economists say.
P.P.P.P.P.S. On a separate topic, the British will have a chance to escape the European Union this Thursday.
I explained last week that Brexit would be economically beneficial to the United Kingdom, but independence also is a good idea simply because the European Commission and European Parliament (and other associated bureaucracies) are reprehensible rackets for the benefit of insiders.
Though I wonder whether the goodies for EU bureaucrats can possibly be as lavish as those provided to OECD employees. I don’t know if the bureaucrats at the OECD get free Viagra, but they pay zero income tax, which surely must be better than the special low tax rate that EU bureaucrats have arranged for themselves.
I shared yesterday a remarkable TV show about Estonia’s entrepreneurial miracle.
Today, let’s look at the Chilean version in the series. It shows how the South American nation, which now is ranked very high for economic freedom, is a shining example of how small government and free markets are a recipe for good results.
I don’t follow Chile as closely as Estonia, so instead of five good and bad policy developments (or lack thereof) in the nation, we’ll focus on three favorable items and one unfortunate feature.
Here are the three most positive policy lessons from Chile
First, Chile is the world champion for personal retirement accounts. It shifted from a failed pay-as-you-go tax-and-transfer to a funded system of personal accounts. Workers were given the opportunity to stay in the old system, but more than 95 percent realized it was better to have private savings rather than empty promised from politicians.
Second, Chile’s shift to free trade and away from protectionism has been enormously beneficial for the economy. Openness has produced big benefits for consumers, and also created big markets for exports.
Third, Chile shows the value of monetary stability. If you look at the big increase in the country’s economic freedom since 1975 and break it down by the major sub-categories, there have been impressive improvements in fiscal policy, regulatory policy, trade policy, and rule of law/property rights. But the biggest jump was for monetary policy. The nation went from hyperinflation and instability to a more sensible monetary regime.
Here’s the one thing that worry me about Chile.
Chile has enjoyed reasonably stable and practical leaders since suffering the chaos and brutality of Marxist and military governments in the 1970s and 1980s. Even left-leaning governments have been reasonable, recognizing that it would be a mistake to undermine the goose that has been laying golden eggs. That’s the good news. The bad news is that some recent politicians have adopted strident anti-market views. And the nation’s economic freedom score and ranking have both marginally declined in recent years.
By the way, you’ll have noticed in the above video that Peru also got some positive attention for its economic reform. It isn’t ranked nearly as high as Chile, but the progress has been enormous. Particularly when you consider how other nations in the region such as Venezuela are total basket cases of statism.
It also erodes the social capital of a people, telling them that individual initiative and success are somehow exploitative and evil.
So when such a system ultimately collapses after being in place for decades, one would not expect a fast rebound. After all, it’s presumably difficult to restore the characteristics of a free society such as a work ethic, personal responsibility, and a spirit of entrepreneurship.
This is why Estonia is such an improbable success. It was under the heel of Soviet communism from World War II until the early 1990s.
Yet as illustrated by this television program about Estonia, which recently aired across the country, there’s been a remarkable recovery and renaissance in this small Baltic republic.
The program mostly focuses on the entrepreneurial success of Estonia, so I want to augment the policy discussion.
There are five big reasons why Estonia is a role model for post-communist societies.
First, Estonia is a leader in the global flat tax revolution. It has a simple and fair system with a relatively reasonable rate of 20 percent.
Second, the flat tax rate has been continuously lowered from the original 26 percent rate when the system was adopted in the early 1990s.
Third, the business tax system is remarkably benign with a rate of 20 percent that is imposed only on dividends.
Fourth, the combination of these factors helps give Estonia the most attractive tax system of all OECD nations according to the Tax Foundation.
Estonia currently has the most competitive tax code in the OECD. Its top score is driven by…positive features of its tax code. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income.
Fifth, there are other pro-market policies. Estonia is ranked #22 in Economic Freedom of the World, putting it in the “most free” category. That’s only six spots behind the United States.
But good policy is not the same as perfect policy.
So while there’s much to admire about Estonia, here are five things about the country that could be improved.
First, the burden of government spending is excessive in Estonia. According to the most recent OECD figures (see annex table 25), 38.5 percent of economic output is diverted to the state, leading to substantial misallocation of labor and capital.
Second, like other nations in the former Soviet Bloc, there’s a demographic challenge. The welfare state may be modest by European standards, but in the long run it is very unaffordable in part because of a fertility rate of 1.59, which ranks 183 out of 224 jurisdictions.
Third, there was a very impressive burst of liberalization after escaping Soviet tyranny, but the commitment to economic reform has since stagnated. Estonia’s EFW score peaked at 7.90 in 2005, 9th-highest in the world, and is now down to 7.61, which puts Estonia in 22nd place.
Though it’s worth noting some of the erosion in economic liberty is the result of European Union rules that require trade barriers on non-EU products (which is the same reason why the UK may enjoy higher trade over time if it votes to leave the EU).
Fourth, the social insurance tax rate is a stifling 33 percent, driving a significant wedge between what an employer must pay and what an employee actually receives. The only mitigating factor is that a small portion of that money goes to a funded pension system (i.e., a partially privatized Social Security system).
Fifth, it is too cold and dark for much of the year. To be sure, that’s not a complaint about policy. But it’s one of the reasons why I recommend Australia for people seeking a haven from bad U.S. policy.
All things considered, Estonia deserves a lot of praise. The problems that remain are modest compared to the nation’s major achievements.
P.S. Lest I forget, one of the admirable things about Estonia was the way the government cut spending in response to the economic crisis at the end of last decade. And I’m talking genuine reductions in spending, not the make-believe we-didn’t-increase-spending-as-fast-as-we-planned “cuts” that often take place in Washington.
In reality, Estonia’s relative spending discipline has paid dividends. The economy quickly recovered and is out-performing other European nations that chose either tax increases or Keynesian spending binges.
There are many reasons why I don’t like the Paris-based Organization for Economic Cooperation and Development, an international bureaucracy that ostensibly represents the developed world but in reality is controlled by European welfare states.
The main problem is that the OECD is financed by mostly left-leaning governments and supports policies that reflect the ideology of those governments. As such, the bureaucracy routinely advocates more statism. Oftentimes with shoddy and dishonest data manipulation.
Adding insult to injury, even though the US is only one of 34 member nations and even though OECD policies frequently are designed to undermine US competitiveness, American taxpayers finance the largest share of the organization’s lavish budget.
That bureaucracy’s new Economic Survey of the United States is a typical example of the OECD’s bias.
Here are the challenges identified by the bureaucrats and their recommendations. Since I’m a helpful person, I’ve added a column to summarize what the OECD is actually suggesting.
For those keeping score at home, the OECD is advocating 10 bad policies, one good policy, and has empty rhetoric on a few others.
By the way, my favorite part of the report is on page 29, where the OECD has a box showing “Past OECD recommendations on fiscal policy.” One of the recommendations from the 2014 survey was for the US to have more consumption taxation, which is their way of urging a value-added tax on top of the income tax. I’m glad to share that the OECD glumly reports that “No action taken.”
And I suppose it’s good news that the OECD didn’t even bother to include that recommendation this year, or any suggestions for higher income tax rates (though there are other suggestions to boost the overall tax burden).
My next favorite part of the report is where the OECD inadvertently showed that America’s more market-oriented (or less-statist) policies put us ahead of other member nations that generally have bigger burdens of government.
Yet notwithstanding the fact that Americans enjoy much higher living standards than people in nations with more government, the report is an awful compilation of statist proposals to make America more like France.
In America’s sprawling intelligence network, costing tens of billions of dollars, who got fired after the 9-11 terror attacks for failing to connect the dots?
And who in the government will get fired after the Orlando terrorist massacre for failing to connect the dots?
If you answered “nobody” in response to all these questions, don’t expect special congratulations. Failure in government is both pervasive and without consequences, so any other answer would have required a degree of near-malicious naiveté normally found at Bernie Sanders’ rallies.
And there are lots of dots that should have been connected in Orlando.
Jim Geraghty of National Reviewgathered several examples.
…on Sept. 11, 2001. As classmates looked on in shock, Mateen celebrated the terrorist attacks that day… At a barbecue in the spring of 2007, Mateen…told the class he ought to kill all of them…
…he was a security guard at the St. Lucie County Courthouse, often manning the metal detectors at the front of the building.Sheriff Ken Mascara said that in 2013 his staff requested Mateen be transferred from the courthouse because he made inflammatory comments. Mateen’s supervisor notified federal agents, after which, the sheriff said, the FBI investigated the guard.
And here is some amazing evidence from a report by Fox2:
A Florida gun store owner says his employees refused to sell to the Orlando nightclub gunman before the attack. The Florida gun store owner noticed several red flags right away — and alerted the FBI. But, there was never an investigation, and Omar Mateen slipped through the cracks.
It may turn out, of course, that some of these reports are wrong. But most of them, if not all of them, are presumably accurate.
Yet the hordes of paper pushers in the federal government decided that this dirtbag didn’t belong on the no-fly list (though somehow the feds decided an eight-year old cub scout shouldn’t be on planes)?!?
And the bureaucrats didn’t think additional investigations of Mateen were warranted given all the above information, which they had before the attack?
I realize I’m venting because of my anger at the senseless slaughter. Yes, I admit that even an efficient government isn’t going to be able to stop all terrorism. And maybe our government quietly thwarts many attacks and actually does a lot better job than we realize.
But in this case and others, mistakes obviously were made. Shouldn’t there be any consequences for that incompetence?
By the way, other governments are equally feckless. If you recall the terrorist bombing of the Brussels Airport, the Belgian government demonstrated unbelievable and near-malignant levels of stupidity.
The Daily Callerhas some of the disturbing details.
Turkey detained one of the Brussels suicide bombers, Ibrahim el-Bakraoui, in June 2015 on charges of being a foreign fighter. …Turkish Prime Minister Tayyip Erdogan said Belgium ignored Turkey’s “warning that this person is a foreign fighter.” …Erdogan said…“We reported the deportation to the Belgian Embassy in Ankara on July 14, 2015, but he was later set free.” …El-Bakraoui, 30, was sentenced to nine years in prison in 2010 for a shootout with police officers. He was released early but subsequently violated his parole and was supposed to be back in prison.
Wow, this is like a perfect storm of government incompetence. First, the Belgian government is told the guy is a foreign fighter in Syria. Second, the Belgian government knew he was a bad guy. Third, they let him out of jail early. And fourth, he violated the conditions of his parole but wasn’t thrown back in jail.
But I guess we shouldn’t be surprised. After all, this is the same nation where an official claimed that it was difficult to fight terrorism because of “the small size of the Belgian government” even though the public sector in that country consumes a greater share of economic output than it does even in Italy and Sweden.
So what’s the moral of the story?
There are three. First, the federal government has become such a sprawling and bloated mess that incompetence seems inevitable.
And it doesn’t matter whether it’s on purpose or by accident. We have a government that does a bad job, even when we want good performance.
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.
But there’s a second point that needs to be made about the lack of consequences.
If nobody is ever fired for mistakes, it’s obviously much harder to get good performance. The success of any organization depends in part on the carrots and sticks that are employed.
But in the federal government, there are no sticks.
From the perspective of bureaucrats, this is a win-win situation. If you do something bad, there are no consequences.
And if you allow something bad, there are no consequences.
For the third and final point, I’m going to partially absolve bureaucrats because some of the problem is the result of politicians misallocating law-enforcement resources.
Think of all the money, time, energy and manpower that is squandered for the War on Drugs. Wouldn’t it be better if the crowd in Washington shifted those resources to stopping people who want to kill us?
And what about the multi-billion cost of anti-money laundering laws. For all intents and purposes, the government is requiring banks to spy on everybody, which results in a haystack of information, thus making it impossible for law enforcement to find any needles. Call me crazy, I’d rather have law enforcement concentrate on actual criminals.
I’m not expecting perfection from Washington. Or even great performance. But it sure would be nice if the government was semi-effective.
The Constitution and Bill of Rights exist to protect our civil liberties from government. And that’s true whether the attack on our rights is legislative or bureaucratic. For instance:
Our 1st Amendment rights to participate in the political process are – or at least should be – inviolate, even if some politicians think they can magically legislate away our rights to political speech.
Our 2nd Amendment right to keep and bear arms is – or at least should be – inviolate, even though many politicians want to curtail our ability to defend ourselves.
Our 4th Amendment right to block the government from spying on us without a search warrant is – or at least should be – inviolate, even though it has been unfortunately narrowed.
Our 5th Amendment rights against the government taking our life, liberty, and property without due process are – or at least should be – inviolate, notwithstanding politicians who want more power for government.
As a lawyer, Hillary Clinton should these simple facts about the Bill of Rights.
But if this tweet is any indication, she must have slept through those lectures while at law school.
It's absurd that people with suspected terrorist links can buy a gun in America, no questions asked. pic.twitter.com/y0yVjO1k1K
Yup, her position is that you lose your constitutional rights if some bureaucrat puts you on a secret list. Sort of like the Department of PreCrime from Minority Report.
Though it’s important to note that this isn’t – or shouldn’t be – a partisan or ideological issue. There are some honest folks on the left who very much support the right to due process and are very critical of the White House’s agenda.
For what it’s worth, at least some pro-gun control politicians admit that the Constitution is an obstacle.
As reported by the Washington Examiner, Senator Manchin of West Virginia is honest about his desire to run roughshod over the Bill of Rights.
Sen. Joe Manchin, D-W.Va., said Thursday that due process is one of the “big problems” standing in the way of lawmakers passing legislation that would keep suspected terrorists from purchasing firearms, and argued that the Fifth Amendment is “killing us right now.” “The problem we have, and really the firewall we have right now, is due process. It’s all due process,” he said Thursday on MSNBC’s “Morning Joe.”
Then again, if Hillary and her supporters think that merely being a suspect of wrongdoing is sufficient to take away people’s rights, then perhaps this sarcastic response to Mrs. Clinton should be a serious proposal.
It’s absurd that people under investigation for mishandling classified state secrets can run for president. https://t.co/TULqKcUIU6
By the way, the Orlando terrorist apparently wasn’t on the no-fly list, according to Bloomberg, so Obama, Clinton, and others don’t even have a factual basis for this latest assault on the Bill of Rights.
Interestingly, the White House admitted late last year that no mass shootings would have been stopped by any of the Administration’s anti-gun proposals, and it appears that is still the case today.
Now let’s look at the practical case against more gun control, especially with regards to the campaign against so-called assault weapons (which, other than some cosmetic features, are the same as traditional rifles).
John Lott and Larry Correia already have produced very powerful evidence in defense of these weapons.
Now here’s a video on the topic from a former Navy Seal.
Hillary Clinton and other Democrats have called for reinstating Bill Clinton’s ban on “assault weapons.” If her version works as well as her husband’s did, the terrorists will have won. From 1994 to 2002 Congress barred the sale of 18 types of rifles and shotguns that had “military style” attributes. This definition was purely political…the ban had a negligible impact on gun crime. So-called assault rifles accounted for about 2% of gun crimes prior to the ban, and the percentage of murders committed with rifles today (2% in 2014) is less than the 3% in the last year of the ban. …numerous studies, including one commissioned by the Department of Justice, …found no link to the ban and reduced crime.
For what it’s worth, places with lots of gun control (such as Europe) don’t get good results.
The media this week are full of stories about gun-death rates, without bothering to note that most of the surge is occurring in cities like Chicago that have the strictest gun laws. …As for stopping terrorism, California is among the states that continued to ban assault weapons after the federal version expired. But that didn’t stop the San Bernardino killers, who used modified rifles that violated the law. France’s strict gun laws also didn’t stop the Paris assailants.
Also writing for the Wall Street Journal, a lawyer from Florida, Ms. Ashley Lukis, is understandably irked by those who want to use terrorism as an excuse for gun control.
Instead of blaming the perverse militants who have formed a “caliphate” in Iraq and Syria, who are burning people alive, who are raping and murdering women and children, and who are engaging in an aggressive global propaganda campaign to encourage precisely the murderous behavior that we saw in Orlando, in San Bernardino, in Brussels and in Paris—many Americans are attacking other law-abiding citizens who happen to hold a different interpretation of the Constitution. …We are dealing with terrorism. We are talking about evil individuals who will happily strap bombs to their bodies or hijack a commercial airliner or set off homemade explosives in the middle of a crowded street. And the best solution you can come up with is domestic gun control? …The solution to terrorism is not to pass imperfect laws that will palliate the masses until next time. Nor is the solution to look inward, to make speeches, to tweet about your grief or start a hashtag. The solution to terrorism is not to blame the gun lobby.
Amen.
But let’s not stop there, because there are some people who deserve to be blamed.
Kevin Williamson’s National Reviewcolumn is must reading. He starts by dismissing the left’s proposals.
The Democrats’…proposal — having police agencies compile secret lists of possible subversives and revoking their legal rights with nothing resembling due process — is plainly unconstitutional, and wouldn’t withstand five minutes’ legal examination. …they’re talking about: keeping a list of people who have been identified by police agencies as possible threats, but who never have been charged with, much less convicted of, any crime, and rescinding their ordinary constitutional rights without so much as a court hearing. We cannot prohibit people from buying guns with no due process for the same reason we cannot subject them to arbitrary incarceration or hunt them for sport. …Study after study after study has shown that the assault-weapon ban had zero effect on violent crime when it was in effect, and it almost certainly wouldn’t have one now, either. …Democrats keep saying that they don’t want to take away our guns, but that is, in fact, what this policy would demand.
But what we can do – but don’t – is actually enforce existing laws.
Such as those against “straw buyers.”
These cases are lots of work and generally don’t ensnare big-time criminals, but rather the idiot nephews, girlfriends, and grandmothers of big-time criminals. Putting those people in federal penitentiaries for ten years isn’t going to win anybody any friends. But they are the people who render our current background-check laws ineffective against the criminals who have turned parts of Chicago into a free-fire zone. Putting a few dozen of them away for a few dozen years might provide a strong disincentive for other would-be straw buyers, particularly those who (as is not uncommon) engage in straw buying as a commercial endeavor.
Or when the government botches the background check.
In tens of thousands of cases each year, the FBI discovers, after the fact, that the sale should not have proceeded. At this point, it issues an alert to the ATF, which in most cases then . . . does nothing at all. In a study of the 2000 data, there were about 45,000 sales that the FBI wrongly allowed to proceed, and in about 38,000 of those cases, no effort was made to recover the firearm. …Picking up wrongly sold guns isn’t that big a chore. In fact, since most of these prohibited buyers have committed a serious crime in buying a gun (though many of them may not have known it — otherwise, why go to a licensed dealer?) a strongly worded letter (“Return your gun to the dealer or go to federal prison”) and a bit of follow-up ought to do the trick.
And that gets us to Kevin’s main point.
The government does a crappy job of stopping bad guys for the simple reason that government does a crappy job of doing anything.
…killers and future killers are on the street committing their crimes because our criminal-justice system, with its vast resources, does not do its job. The police, the prosecutors, the jailers, and the parole-and-probation authorities all must answer for the fact that such a large share of our murders are committed by people already well known to law enforcement. …a fair number of crimes that could be prevented, if the people we pay to prevent them were willing to do the old-fashioned police work necessary: running down criminals, prosecuting unglamorous cases, properly managing parolees. But those jobs are entrusted to government employees, whose unions are irreplaceable benefactors of Democratic political campaigns. …expecting the generously compensated and gorgeously pensioned employees of the public sector to do their goddamned jobs…is, if you’re a scheming, opportunistic lowlife like Chuck Schumer, unthinkable.
Exactly. As Mark Steyn has noted, what’s the point of having a bloated and sclerotic public sector if it doesn’t even do the small handful of things that are legitimate functions of government?
P.S. In addition to the gentleman cited above, there are other honest folks on the left.
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.
P.P.S. If you like pro-Second Amendment videos, here’s a great collection.
And these are just the ones with some derivation of “Keynes” in the title. I guess subtlety isn’t one of my strong points.
That being said, there are some elements of Keynesian economics that are reasonable.
I’ve written, for instance, that reductions in government spending can be temporarily painful because labor and capital don’t get instantaneously reallocated.
And I don’t object to the notion of shifting government outlays so they take place when the economy is weak (assuming, of course, that the spending is for a sensible and constitutional purpose).
So I was very interested to see that Tyler Cowen and Alex Tabarrok of George Mason University have a new video on fiscal policy and the economy as part of their excellent series at Marginal Revolution University.
Interestingly, “Keynes” is mentioned only once, and then just in passing, even though the discussion is about discretionary Keynesian fiscal policy.
Here are my thoughts on the video.
Near the beginning, Alex discusses how an economic shock can lead to a downturn as households cut back on their normal expenditures. That’s quite reasonable, but I wish there had been some acknowledgement that negative shocks are often the result of bad government policy (i.e., the mistakes that caused and/or exacerbated the recent financial crisis or the Great Depression) .
There was no discussion of how government can put money into the economy without first taking the money out of the economy via taxes or borrowing (see cartoon below, or my video on the topic). One can argue, of course, that Keynesian policy leads to more consumer spending by borrowing money from credit markets and giving it to people, but doesn’t that simply lead to less investment spending? Perhaps there’s an implicit hypothesis that banks will just sit on the money in a weak economy, or maybe the assumption is that the government can artificially boost overall spending in the short run by borrowing money from overseas. Analysis of these issues, including the tradeoffs, would be valuable.
Because of my concerns about government inefficiency, I enjoyed the discussion about targeting vs timeliness, but Keynesians only care about having the government somehow dump money into the economy. And they’ll use any excuse, even a terrorist attack.
Tyler point out that the textbook view of Keynesian economics is that governments should run deficits when there’s a downturn and surpluses when the economy is strong, but he is understandably concerned that politicians only pay attention to the former and ignore the latter.
Raising unemployment benefits is not the win-win situation implied by the conversation since academic research shows that longer periods of joblessness when people get money for not working.
I’m not convinced that adjusting the payroll tax will have significant benefits. What’s the evidence that companies will make long-run hiring decisions based on short-run manipulations of the tax?
The discussion at the end about fiscal rules got me thinking about how Keynesians should support a spending cap since it means spending can still climb during a recession (even if revenues fall). Of course, the tradeoff is that they would have to accept modest spending increases when the economy is strong (and revenues are surging).
Here’s an amusing cartoon strip on Keynesian stimulus from the same artist who gave us gems on the minimum wage and guaranteed income.
On June 23, the people of the United Kingdom will have the opportunity to restore sovereignty and protect democracy by voting in a national referendum to leave the European Union.
They should choose “leave” over “remain.”
The European Union’s governmental manifestations (most notably, an über-powerful bureaucracy called the European Commission, a largely powerless but nonetheless expensive European Parliament, and a sovereignty-eroding European Court of Justice) are – on net – a force for statism rather than liberalization.
A vote to leave, by contrast, would create uncertainty and anxiety in some quarters, but the United Kingdom would then have the ability to make decisions that will produce a more prosperous future.
Leaving the EU would be like refinancing a mortgage when interest rates decline. In the first year or two, it might be more expensive because of one-time expenses. In the long run, though, it’s a wise decision.
From an American perspective, George Will has been especially insightful and eloquent. Here are some excerpts from a recent column in the Washington Post.
Lord Nigel Lawson… is impatient with the proposition that it is progress to transfer to supra-national institutions decisionmaking that belongs in Britain’s Parliament. …The Remain camp correctly says that Britain is richer and more rationally governed than when European unification began. The Leave camp, however, correctly responds that this is largely in spite of the E.U. — it is because of decisions made by British governments, particularly Margaret Thatcher’s, in what is becoming a shrinking sphere of national autonomy. In 1988, Thatcher said: “We have not successfully rolled back the frontiers of the state in Britain, only to see them reimposed at a European level with a European super-state exercising a new dominance from Brussels.”
Here’s a good visual of what’s happening. What began as a good idea (free trade under the Treaty of Rome) has become a bad idea (economic union under the Maastricht and Lisbon treaties) and may become an even worse idea (common government).
Here’s what Dan Hannan, a British Member of the European Parliament, wrote on the issue. He’s very pro-Europe, but understands that does not mean European-wide governance is a good idea.
I’m emotionally drawn to Europe. I speak French and Spanish and have lived and worked all over the Continent. I’ve made many friends among…committed Euro-federalists. …they are also decent neighbours, loyal companions and generous hosts. I feel twinges of unease about disappointing them, especially the anglophiles. But, in the end, the head must rule the heart.
Dan identifies six reasons why it is sensible to leave.
Here are relevant portions of his arguments, starting with the fact that the EU is becoming a super-state..
The EU has acquired, one by one, the attributes and trappings of nationhood: a president and a foreign minister, citizenship and a passport, treaty-making powers, a criminal justice system, a written constitution, a flag and a national anthem. It is these things that Leavers object to, not the commerce and co-operation that we would continue to enjoy, as every neighbouring country does.
Second, it is only pro-trade for members, not the wider world.
The EU is not a free-trade area; it is a customs union. The difference may seem technical, but it goes to the heart of the decision we face. Free-trade areas remove barriers between members and, economists agree, tend to make participants wealthier. Customs unions, by contrast, erect a common tariff wall around their members, who surrender the right to strike individual trade deals. …Britain is one of only two of 28 member states that sell more to the rest of the world than to the EU. We have always been especially badly penalised by the EU’s Common External Tariff. Unlike Switzerland, which enjoys free trade with the EU at the same time as striking agreements with China and other growing economies… It’s a costly failure. In 2006, the EU was taking 55 per cent of our exports; last year, it was down to 45 per cent. What will it be in 2030 — or 2050?
Third, the advocates of common government are candid about their ultimate goals.
The Five Presidents’ Report sets out a plan for the amalgamation of fiscal and economic policies… The Belgian commissioner Marianne Thyssen has a plan for what she calls ‘social union’ — i.e. harmonisation of welfare systems. …These are not the musings of outlandish federalist think tanks: they are formal policy statements by the people who run Brussels.
Fourth, Europe is stagnant.
…in 1973, the states that now make up the EU accounted for 36 per cent of the world economy. Last year, it was 17 per cent. Obviously, developing economies grow faster than advanced ones, but the EU has also been comprehensively outperformed by the United States, Canada, Australia and New Zealand. …Why tie ourselves to the world’s slowest-growing continent?
Fifth, there are examples of very successful non-EU nations in Europe.
…we can get a better deal than…Switzerland…and Norway…; on the day we left, we’d become the EU’s single biggest export market. …They trade freely with the EU…they are self-governing democracies.
And last but not least, a decision to remain will be interpreted as a green light for more centralization, bureaucratization, and harmonization.
A Remain vote will be…capitulation. Look at it from the point of view of a Euro-federalist. Britain would have demanded trivial reforms, failed to secure even those, and then voted to stay in on unchanged terms. After decades of growling and snarling, the bulldog would have rolled over and whimpered. …With the possibility of Brexit off the table, there will be a renewed push to integration, on everything from migrant quotas to a higher EU budget.
Dan’s bottom line is very simple.
We have created more jobs in the past five years than the other 27 states put together. How much bigger do we have to be, for heaven’s sake, before we can prosper under our own laws?
…the 1970s turned out to be an odd period where many things that seemed like good ideas at the time turned out not to be. …While there may have been an element of truth about EEC membership in the 1970s that seduced many subsequent sceptics…our timing for joining “the club” could not have been worse. …globalisation was beginning to eat into the logic of a political European Union at the very point it was striding towards statehood with a single euro currency. …the European single market is being rapidly eclipsed. …The EU is therefore increasingly becoming a pointless middleman as a vast new global single market takes over.
Here’s a chart from the article showing the European Union’s rapidly falling share of global economic output.
Mr. Smith does not think it’s smart to link his country’s future to a declining bloc of nations.
We are now less dependent than ever on our closest trading partners in Europe and this trend is marching relentlessly onward. For the first 40 years of our membership, the majority — over 60% — of UK exports went to the EU. But in 2012, for the first time, that figure dropped below 50%. It is now at 45% and continues to sink. …The demographics of the European continent, alongside the dysfunctional euro and its insidious effects across Europe have also played a large part in this change… This situation and these trends are not going to change.
Here’s his conclusion.
This Brexit vision is therefore a global, outward-looking and ambitiously positive one. It eschews the inward-looking outlook of…the Remain lobby… So a parochial inward-looking “little Europe” and a demographically declining one, ranged against an expansive, liberal and global outlook. …The crux of the matter is that we in Britain want trade and cooperation; our EU partners want merger and a leashed hinterland.
These are strong arguments, so why does Prime Minister David Cameron want to remain?
And why is he joined by the hard-left leader of the Labour Party (actually, that’s easy to answer given the shared leftist orientation of both Jeremy Corbyn and EU officials), along with most big companies and major unions?
Most of them, if asked, will argue that a vote to leave the EU will undermine the economy. They’ll cite estimates of lower economic output from the International Monetary Fund, the Organization for Economic Cooperation and Development, the British Treasury, and other sources.
To be blunt, these numbers lack credibility. A pro-centralization, pro-EU Prime Minister asked for numbers from a bureaucracy he controls. As critics have pointed out, the goal was to produce scary numbers rather than to produce real analysis.
Indeed, the palpable mendacity of these numbers has probably boomeranged on supporters of the EU. Polls show that voters don’t believe these hysterical and overwrought numbers.
Instead, they laugh about “Project Fear.”
Yet, as reported by John Fund of National Review, the EU crowd is doubling down in their panic to frighten people.
…the organizers of Project Fear have gone into overdrive. European Council President Donald Tusk said in an interview with the German newspaper Bild that radical anti-European forces will be “drinking champagne” if Brexit passes. …Tusk said. “As a historian I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety.”
End of western civilization? Seriously?
Gee, why not also predict a zombie apocalypse?
These chicken little predictions are hard to take seriously when Britons can look at other nations in Europe that are prospering outside the European Union.
Consider Norway. Advocates of the EU claimed horrible results if the country didn’t join. Needless to say, those horrible results never materialized.
This doesn’t mean there aren’t honest people who sincerely think it would be a mistake to leave the European Union.
Indeed, a survey by the Centre for Macroeconomics found very negative views.
Almost all panel members thought that a vote for Brexit would lead to a significant disruption to financial markets and asset prices for several months, which would put the Bank of England on high alert. On top of the risk of a financial crisis in the near future, an unusually strong majority agree that there would be substantial negative long-term consequences.
Other economists seem to agree.
Four of them produced an article for VoxEU, and here’s some of what they wrote.
The possibility of the UK leaving the EU has generated an unusual degree of consensus among economists. …analysis from the Bank of England, to the OECD, to academia has all shown that Brexit would make us economically worse off. The disagreement is mainly over the degree of impoverishment… The one exception is…Professor Patrick Minford of Cardiff University, who argues that Brexit will raise the UK’s welfare by 4% as a result of increased trade… Minford’s policy recommendation is that following a vote for Brexit, the UK should not bother striking new trade deals but instead unilaterally abolish all its import tariffs… we know of no cases where an industrialised country has ever implemented full unilateral liberalisation – and for good reason. Persuading other countries to reduce their trade barriers is easier if you can also say you’re going to reduce your own as part of the deal. If we’re committed to going naked into the world economy, other countries are unlikely to follow suit voluntarily. …In reality, the UK will still continue to trade extensively with our closest geographical neighbours, it’s just that the higher trade barriers mean that we will do less of it.
Other establishment voices are convinced that the United Kingdom would be crazy to leave the EU.
Robert Samuelson, in his Washington Postcolumn, views it as a form of national suicide because of existing economic ties to continental Europe.
Countries usually don’t knowingly commit economic suicide, but in Britain, millions seem ready to give it a try. …Leaving the E.U. would be an act of national insanity. It would weaken the U.K. economy, one of Europe’s strongest. The E.U. absorbs 44 percent of Britain’s exports; these might suffer because trade barriers, now virtually nonexistent between the U.K. and other E.U. members, would probably rise. Meanwhile, Britain would become less attractive as a production platform for the rest of Europe, so that new foreign direct investment in the U.K. — now $1.5 trillion — would fall. Also threatened would be London’s status as Europe’s major financial center, home (for example) to 78 percent of E.U. foreign exchange trading. With the U.K. out of the E.U., some banking activities might move to Frankfurt or other cities. …Brexit is an absurdity. But it is a potentially destructive absurdity. It creates more uncertainty in a world awash in uncertainty.
Allister Heath of the Daily Telegraphdisagrees with these proponents of the status quo.
David Cameron and George Osborne have been claiming, over and again, that those of us who support Brexit have lost the economic argument. …utter nonsense. …The free-market, cosmopolitan, pro-globalisation economic case for leaving is stronger than ever… The hysterical studies claiming that Brexit would ruin us are grotesque caricatures, attempts at portraying a post-Brexit Britain as a nation that suddenly decided to turn its back on free trade and foreigners. …a Brexit would almost certainly mean the UK remaining in the European Economic Area (EEA), like Norway: we would be liberated from much political interference, be allowed to forge our own free-trade deals while retaining the single market’s Four Freedoms. Europe’s shell-shocked corporate interests would demand economic and trade stability of its equally traumatised political classes, and they would get it. …with supply-side reforms at home, the UK would become more, rather than less, attractive to global capital. The Treasury, OECD and IMF’s concocted Armageddon scenarios wouldn’t materialise. Remain has only won the economic argument in the sense that most economists and the large institutions that employ them support their side.
And Allister points out that the supposed consensus view of economists has been wildly wrong in the past.
Time and time again, the majority of economists make spectacularly wrong calls, and it is a small, despised minority that gets it right. In 1999, The Economist wrote to the UK’s leading academic practitioners of the dismal science to find out whether it would be in our national economic interest to join the euro by 2004. Of the 165 who replied, 65 per cent said that it would. Even more depressingly, 73 per cent of those who actually specialised in the economics of the EU and of monetary union thought we should join – the experts among the experts were the most wrong. Britain would have gone bust had we listened… The vast majority of economists did not foresee or predict the financial crisis or the Great Recession or the eurozone crisis. Yet they now have the chutzpah to behave as if they should be treated like philosopher kings… Remember the Twenties? The economics profession overwhelmingly failed to see the great bubble and subsequent crash and depression. The Thirties? It messed up on just about everything. …In the Sixties and subsequently, Paul Samuelson’s best-selling, dominant economics textbook was predicting that the Soviet Union’s GDP per capita would soon catch up with America’s. The Seventies? Most economists didn’t know how stagflation could even be possible. The Eighties? The profession opposed Thatcherism and the policies that saved the UK; infamously, 364 economists attacked Thatcher’s macroeconomic policies in the 1981 Budget and then kept getting it wrong. …The problem this time around is that Remain economists assume that leaving the EU would mean reducing globalisation and halting most immigration. They assume that there are only costs and no benefits from leaving the EU…the EU’s anti-democratic institutions are unsustainable and thus pose a great threat to the liberal international economic order its UK supporters claim to be defending.
The debate among economists is mostly focused on trade.
With that in mind, this television exchange is very enlightening.
In other words, nations all over the world trade very successfully without being in the European Union, so this view that somehow the United Kingdom can’t do likewise is a triumph of theory over reality.
It’s way past time to wrap this up, but there are a few additional items I can’t resist sharing.
A British parliamentarian (akin to a member of Congress in the U.S.) is understandably unhappy that some Americans, most notably President Obama, are interfering in the Brexit election.
Here are parts of Chris Grayling’s column in the Washington Post.
Imagine if you were told that the United States should join an American Union bringing together all the nations of North and South America. It would have its own parliament — maybe in Panama City, a place on the cusp of the two halves of the Americas. That American Parliament would have the power to make the majority of your laws. A Supreme Court of the Americas in Panama would outrank the U.S. Supreme Court and take decisions that would be mandatory in the United States. …That is, more or less, where Britain finds itself today.
Sensible Americans obviously wouldn’t like that state of affairs.
And we would be even more unhappy if that Superstate of the Americas kept grabbing more power, which is exactly what’s happening across the Atlantic.
It decrees that any citizen of any European country can come and live and work in Britain — and that if they do, we must give them free health care and welfare support if they need it. Millions have done so. …it is moving closer and closer to becoming a single government for Europe, and indeed many of its key players — leaders such as Germany’s Angela Merkel and France’s François Hollande — have that as a clear goal. Britain has a small minority of the voting rights, and loses out almost every time.
He’s especially mystified by those who think the EU is a force for liberalization.
Bizarrely, given the EU’s appalling record, these folk see Brussels as the last guardian of enlightenment values; the only way to save the project, they believe, is rule by a transnational nomenklatura. …Remainians are petrified that the British public would…vote the wrong way: for protectionism, nationalisation, xenophobia and stupidity. We would…support idiotic, growth-destroying and socially unacceptable policies. Astonishingly, given the Continent’s collectivist history, such folk equate membership of the EU with free trade and Britain’s Leave camp with protectionism. It’s a breathtaking error of judgement… They cannot grasp that there are other, better ways of opening markets than from within the EU, and that in any case it is just about as far from a libertarian project as it is possible to imagine. …pro-EU Left and Right agree that the people are dangerous, that they must be contained and that, slowly but surely, entire areas of public policy should be hived off beyond the reach of the British electorate. The strategy is to impose top-down restraints and to subcontract decision-making to external bodies… European institutions are actually the antithesis of true liberalism.
Let’s end with some passages from another George Will column.
Michael Gove, secretary of justice and leader of the campaign for Brexit — Britain’s withdrawal from the E.U. — anticipates a “galvanizing, liberating, empowering moment of patriotic renewal.” …American conservatives would regard Britain’s withdrawal from the E.U. as the healthy rejection of political grandiosity. …If Britons vote to remain in the E.U., this might be the last important decision made at British ballot boxes because important decisions will increasingly be made in Brussels. The E.U.’s “democracy deficit” is…the point of such a state. …Under Europe’s administrative state, Gove says “interest groups are stronger than ever” and they prefer social stasis to the uncertainties of societies that welcome the creative destruction of those interests that thrive by rent-seeking. …most of binding law in Britain — estimates vary from 55 percent to 65 percent — arises not from the Parliament in Westminster but from the European Commission in Brussels. The E.U. has a flag no one salutes, an anthem no one sings, a president no one can name, a parliament that no one other than its members wants to have more power (which must be subtracted from national legislatures), a capital of coagulated bureaucracies that no one admires or controls, a currency that presupposes what neither does nor should exist (a European central government administering fiscal policy), and rules of fiscal behavior (limits on debt-to-gross domestic product ratios) that few if any members obey and none have been penalized for ignoring. …the 23rd of June can become Britain’s Fourth of July — a Declaration of Independence. If Britain rejects continuing complicity in the E.U. project — constructing a bland leviathan from surrendered national sovereignties — it will have…taken an off-ramp from the road to serfdom.
Well said.
If I lived in the United Kingdom, I would vote to leave the European Union.
Simply stated, the European project is controlled by statists and the one good thing it provides (free trade between members) is easily overwhelmed by the negative things it imposes (protectionism against outsiders, tax harmonization, horrible agriculture subsidies, bad fisheries policy, etc).
Moreover, the continent is demographically dying.
The bottom line is that the European Union is a sinking ship. This cartoon is a bit flamboyant, but it captures my overall sentiments.
If I had lots of money and was confident of the outcome, I would learn the words to this song and fly to London so I could sing in celebration on June 23rd.
When programs such as Social Security and Medicare (and equivalent systems in other nations) were first created, there were lots of young people and comparatively few old people.
And so long as a “population pyramid” was the norm, reasonably sized welfare states were sustainable (though still not desirable because of the impact on labor supply, savings rates, tax policy, etc).
In most parts of the world, however, demographic profiles have changed. Because of longer life expectancy and falling birth rates, population pyramids are turning into population cylinders.
This is one of the reasons why there is a fiscal crisis in Southern European nations such as Greece. And there’s little reason for optimism since the budgetary outlook will get worse in those countries as their versions of baby-boom generations move into full retirement.
But while Southern Europe already has been hit, and while the long-run challenge in Northern European nations such as France has received a lot of attention, there’s been inadequate focus on the problem in Eastern Europe.
The fact that there’s a major problem surprises some people. After all, isn’t the welfare state smaller in these countries? Haven’t many of them adopted pro-growth reforms such as the flat tax? Isn’t Eastern Europe a success story considering that the region was enslaved by communism for many decades?
To some degree, the answer to those questions is yes. But there are two big challenges for the region.
First, while the fiscal burden of government may not be as high in some Eastern European countries as it is elsewhere on the continent (damning with faint praise), those nations tend to rank lower for other factors that determine overall economic freedom, such as regulation and the rule of law.
Looking at the most-recent edition of Economic Freedom of the World, there are nine Western European nations among the top 30 countries: Switzerland (#4), Ireland (#8), United Kingdom (#10), Finland (#19), Denmark (#22), Luxembourg (#27), Norway (#27), Germany (#29), and the Netherlands (#30).
For Eastern Europe, by contrast, the only representatives are Romania (#17), Lithuania (#19), and Estonia (#22).
Second, Eastern Europe has a giant demographic challenge.
Eastern Europe’s population is shrinking like no other regional population in modern history. …a population drop throughout a whole region and over decades has never been observed in the world since the 1950s with the exception of…Eastern Europe over the last 25 consecutive years.
Here’s the chart that accompanied the article. It shows the population change over five-year periods, starting in 1955. Eastern Europe (circled in the lower right) is suffering a population hemorrhage.
By the way, it’s not like the trend is about to change.
If you look at global fertility data, these nations all rank near the bottom. And they also suffer from brain drain since a very smart person, even from fast-growing, low-tax Estonia, generally can enjoy more after-tax income by moving to an already-rich nation such as Switzerland or the United Kingdom.
So what’s the moral of the story? What lessons can be learned?
There are actually three answers, only two of which are practical.
First, Eastern European nations can somehow boost birthrates. But nobody knows how to coerce or bribe people to have more children.
The good news is that there’s been some movement in that direction. But the bad news is that reform has taken place only in some nations, and usually only partial privatization, and in some cases (like Poland and Hungary) the reforms have been reversed.
And even if full pension reform is adopted, there’s still the harder-to-solve issue of government-run healthcare.
Eastern Europe has a very grim future.
P.S. I’m a great fan of the reforms that have been adopted in some of the nations in Eastern Europe, but none of them are small-government jurisdictions. Yes, the welfare state in Eastern European countries is generally smaller than in Western European nations, but it’s worth noting that every Eastern European nation in the OECD (Czech Republic, Estonia, Hungary, Poland, Slovakia, and Slovenia) has a larger burden of government spending than the United States.
It’s happened again. A nut went to a gun-free zone and engaged in a mass killing.
In this example, the perpetrator apparently was an Islamic fanatic upset about gay people.
But let’s set aside the question of motive and ask the important question of why politicians and bureaucrats don’t want innocent people to have any ability to defend themselves (they’ve even adopted policies prohibiting members of the military from being armed!).
The invaluable Crime Prevention Research Center has already weighed in on the issue.
Since at least 1950, only slightly over 1 percent of mass public shootings have occurred where general citizens have been able to defend themselves. Police are extremely important in stopping crime, but even if they had been present at the time of the nightclub shooting, they may have had a very difficult time stopping the attack. Attackers will generally shoot first at any uniformed guards or officers who are present (the Charlie Hebdo attack in Paris last year illustrates that point). …In this particular case the police only arrived on the scene after the attack occurred. That illustrates another point: it is simply impossible for the police to protect all possible targets. It is hard to ignore how these mass public shooters consciously pick targets where they know victims won’t be able to defend themselves.
By the way, if you think that allowing guns in bars is somehow a recipe for carnage, consider the fact that it’s already legal in many states to have concealed carry or open carry where alcohol is served, yet we never read stories about mass shootings in these states.
Among the recent states that allow permitted concealed handguns in places that get more than 50 percent of their revenue from alcohol are:Georgia (2014), Louisiana (2014), North Dakota (2015), North Carolina(2014), Ohio (2011), South Carolina (2014), and Tennessee (2009). Besides Florida, other states that prohibit them are: Illinois, Kentucky, Nebraska,New Mexico, Oklahoma, South Dakota, Texas, Washington and Wyoming. Many of the states that allow one to carry a gun in a bar still prohibit you to consume alcohol. Here are some other state laws: Alaska, Idaho, Michigan (allows you to open carry if you have a concealed handgun permit), and Montana (allows you to openly carry a gun into a bar), and Oregon.
To be sure, it’s possible at some point that some moron with a gun will do something wrong in one of these states, so it’s not as if there’s no possible downside to having guns legally in places where alcohol is served.
But the really bad people are far more dangerous, and their evil actions are enabled and facilitated by gun-free zones.
For my safety and the protection of my children, I want there to be more well-armed law-abiding people, whether in bars or anyplace else in society.
Including schools.
Professor Nelson Lund of George Mason University Law School explains in the New York Times that gun-free zones on campuses simply don’t work.
…colleges pretend that disarming responsible adults makes their students safer. The university at which I work, for example, forbids faculty, staff and students to bring their weapons to school, even if they have a concealed-carry permit issued by the government. …The university police are unable to prevent violent crimes, and it is heartlessly arrogant to disarm potential victims, leaving them and those they could protect at the mercy of rapists and other predators. Armed citizens frequently save lives and prevent violent crimes, often without firing a shot. Nearly all mass shootings occur in “gun-free zones,” and some of these massacres have been stopped by civilians who intervened after retrieving a gun.
He points out that the evidence favoring concealed carry is overwhelming.
…states have adopted laws allowing law-abiding adults to carry a concealed handgun in public. About 13 million Americans now have concealed-carry permits, and 11 states do not even require a permit. As the number of armed citizens has skyrocketed, violent crime has gone down, not up, and permit holders almost never abuse their rights. In Florida, for example, where permits have been available for almost thirty years, they have been revoked for firearm misuse at an annual rate of 0.0003 percent; even the police have higher rates of firearms violations (and higher overall crime rates) than permit holders.
So what’s the bottom line?
Professor Lund has an understandably low opinion of the “callous” school bureaucrats who think grief counselors are better than self defense.
When murders and even massacres occur, …university bureaucrats will undoubtedly absolve themselves of guilt, wash the blood from their demonstrably unsafe spaces, and call in the grief counselors. Some state legislatures have put a stop to these callous disarmament policies.
The moral of the story is that lawful people should have the right to defend themselves and others.
The police play an important role, of course, but they generally show up after bad things have happened. Which is why the vast majority of cops oppose gun control (and even a growing number of police chiefs, who often are corrupted by being political appointees, now say private gun ownership is important to deter bad guys).
That’s why legal gun ownership is important, particularly for communities that are targeted for violence, such as European Jews, or for people such as teachers who could be in a position to protect others who have no ability to defend themselves.
The good news on this sad day is that more and more states are moving policy in the right direction. Hopefully something good will come out of this tragedy and there will be further moves to help law-abiding people defend themselves from evil.
Of course, I won’t be surprised if the people who can’t pass this IQ test argue instead for more gun control.
Fortunately, some libertarians are capable of generating anti-government humor.
Such as Libertarian Jesus, which has been my most-popular example of pro-libertarian humor.
And here’s a new addition to my collection. We can all relax because Los Angeles is dealing the crisis of…GASP…driving past the same spot twice in a 6-hour period! And somebody at Reddit decided this merited some sarcastic applause.
Huh?!? I’m trying to imagine what could motivate such a law.
Does Los Angeles actually have a problem with people driving past the same point every six hours?
What victims are being saved thanks to this law?
Do cops in the city really have nothing better to do with their time?
If this street is between you and your local supermarket, do you have to…ahem…cruise the produce section for six hours before heading home?
Being a diligent researcher, I tried to find the answer to these question. Lo and behold, here’s the relevant passage from the underlying law establishing L.A.M.C. 80.36.10.
This Ordinance is urgently necessary for the preservation of the public health and safety. Cruising has resulted in the congregating of persons in certain areas engaging in destructive activities. It has also resulted in traffic congestion.
The law doesn’t tell us what “destructive activities” are being facilitated by driving past the same spot more than once in a six-hour period.
Though I’m guessing it must have something to do with the drug trade or prostitution.
Like most liberty-minded people, I don’t think the government should make it illegal for people to do stupid things to themselves. I believe in being tough on crime, but a real crime has to have a real victim.
But let’s set aside my libertarian grousing and focus on a practical issue.
If I’m a random idiot looking to buy some drugs or sex, what’s to prevent me from driving to the relevant part of town and conducting that transaction without circling past the same spot more than one time?
Since I don’t consume drugs and don’t consort with prostitutes (other than the non-sexual ones that are so common in Washington), maybe there’s something about those markets that I don’t understand. So perhaps a no-cruising rule will have a genuinely disruptive effect.
I’m guessing though, that this is akin to money-laundering laws, which were passed – at least in theory – to discourage crime by making it harder for crooks to get their loot into the financial system.
When I was younger, my left-wing friends said conservatives unfairly attacked them for being unpatriotic and anti-American simply because they disagreed on how to deal with the Soviet Union.
And just today, in a story in the Washington Post about the Center for Freedom and Prosperity (I’m Chairman of the Center’s Board of Directors), former Senator Carl Levin has accused me and others of “trading with the enemy” because of our work to protect and promote tax competition.
Here’s the relevant passage.
Former senator Carl Levin (D-Mich.)…said in a recent interview that the center’s activities run counter to America’s values and undermine the nation’s ability to raise revenue. “It’s like trading with the enemy,” said Levin, whose staff on a powerful panel investigating tax havens regularly faced public challenges from the center. “I consider tax havens the enemy. They’re the enemy of American taxpayers and the things we try to do with our revenues — infrastructure, roads, bridges, education, defense. They help to starve us of resources that we need for all the things we do. And this center is out there helping them to accomplish that.”
Before even getting into the issue of tax competition and tax havens and whether it’s disloyal to want limits on the power of governments, I can’t resist addressing the “starve us of resources” comment by Levin.
He was in office from 1979-2015. During that time, federal tax receipts soared from $463 billion to $3.2 trillion. Even if you only count the time the Center for Freedom and Prosperity has existed (created in late 2000), tax revenues have jumped from $2 trillion to $3.2 trillion.
At the risk of understatement, Senator Levin has never been on a fiscal diet. And he wasn’t bashful about spending all that revenue. He received an “F” rating from the National Taxpayers Union every single year starting in 1993.
Let’s now address the main implication of the Washington Post story, which is that it’s somehow wrong or improper for there to be an organization that defends tax competition and fiscal sovereignty, particularly if some of its funding comes from people in low-tax jurisdictions.
The Post offer[s] an inside look at how a little-known nonprofit, listing its address as a post office box in Alexandria, became a persistent opponent of U.S. and global efforts to regulate the offshore world. …the center met again and again with government officials and members of the offshore industry around the world… Quinlan and Mitchell launched the center in October 2000. …The center had two stated goals. Overseas, the center set out to persuade countries on the blacklist not to cooperate with the OECD, which it derided as a “global tax cartel.” In Washington, the center lobbied the Bush administration to withdraw its support for the OECD and also worked to block anti-tax haven legislation on Capitol Hill. To spread the word, the center testified before Congress, published reports and opinion pieces in leading financial publications, and drafted letters to lawmakers and administration officials. Representatives of the center crisscrossed the globe and sponsored discussions in 2000 and 2001, traveling to London, Paris, the Cayman Islands, the Bahamas, Panama, Barbados and the British Virgin Islands.
To Senator Levin and other folks on the left, I guess this is the fiscal equivalent of “trading with the enemy.”
In reality, this is a fight over whether there should be any limits on the fiscal power of governments. On one side are high-tax governments and international bureaucracies like the OECD, along with their ideological allies. They want to impose a one-size-fits-all model based on the extra-territorialdouble-taxation of income that is saved and invested, even if it means blacklisting and threatening low-tax jurisdictions (the so-called tax havens).
And, yes, that means we sometimes side with Switzerland or Panama rather than the Treasury Department. Our patriotism is to the ideals of the Founding Fathers, not to the bad tax policy of the U.S. government.
In any event, I’m proud to say that the Center’s efforts have been semi-successful.
In May 2001, the center claimed a key victory. In a dramatic departure from the Clinton administration, Paul O’Neill, the incoming Treasury Secretary appointed by Bush, announced that the United States would back away from the reforms pushed by the OECD. …fewer than half of the nations on the OECD blacklist pledged to become more transparent in their tax systems, a victory for anti-tax forces such as the center.
Even the other side says the Center is effective.
…said Elise Bean, former staff director and chief counsel of Levin’s Homeland Security Permanent Subcommittee on Investigations, which started investigating tax havens in 2001. “They travel all around the world and they have had a tremendous impact.” …“They were very effective at painting the OECD’s work as end-times are here for tax competition, and we’re going to have European tax rates imposed upon the whole world if the OECD’s work continued,” said Will Davis, the former head of OECD public affairs in Washington.
What’s most impressive is that all this was accomplished with very little funding.
Tax returns for the center and a foundation set up in its name reported receiving at least $1.4 million in revenue from 2003 to 2010.
In other words, the Center and its affiliated Foundation managed to thwart some of the world’s biggest and most powerful governments with a very modest budget averaging about $175,000 per year. And I don’t even get compensation from the Center, even though I’m the one who almost got thrown in a Mexican jail for opposing the OECD!
So while Senator Levin had decades of experience spending other people’s money in a promiscuous fashion, I work for an organization, the Cato Institute, that is ranked as the most cost-effective major think tank, and I’m on the Board of a small non-profit that has a track record of achieving a lot with very little money.
Yet another example of why we should be thankful that tax competition makes it more difficult for politicians to extract more revenue from the economy’s productive sector.
P.S. I mentioned to the Post reporters that the world’s biggest tax haven is the United States, but that important bit of information was omitted from the article. Which is a shame since it would have given me a chance to laud Senator Rand Paul for blocking a very dangerous agreement that would undermine America’s attractive tax laws for overseas investors.
P.P.P.S. All things considered, I think the reporters who put together the story were reasonably fair, though there was a bit of editorializing such as referring to one low-tax jurisdiction as a “notorious tax haven.” When they write about France, do they ever refer to it as a “notorious tax hell”?
Also, when writing about trips the Center arranged for congressional staff to low-tax jurisdictions, the article stated, “The staffers reported receiving from $900 to $2,360 for the trips”, which makes it sound as if the staffers got paid. That’s wrong. The sentence should have read, “The staffers reported that the Center’s travel and lodging expenses ranged from $900 to $2,360 for the trips.”
But it’s somewhat understandable behavior because government in many cases makes dependency more attractive than self-sufficiency.
Here’s a chart showing the implicit marginal tax rates that apply if a poor household tries to climb out of poverty. The bottom line is that handouts are so generous that it’s very difficult for a poor person to be better off by working instead of mooching.
Some folks say the solution to this problem is to reduce the “phase-out” of benefits, but that’s a recipe for making the welfare state vastly more expensive and giving handouts to people who are not poor. That’s the approach in some European nations and it hasn’t worked.
Here’s another chart that basically makes the same point about the upside-down incentive structure created by redistribution programs. It shows that a poor household can enjoy a much higher standard of living with low earnings than with high earnings.
And this video is an excellent introduction to that topic.
But let’s focus on the GOP anti-poverty plan. They put together a powerful indictment of what we have now, but what are they proposing as a solution?
Here’s where we get good news and bad news. The good news is that there is a focus on work, as explained in a column for Forbes by Scott Winship of the Manhattan Institute.
…the report declares that “Our welfare system should encourage work-capable welfare recipients to work or prepare for work in exchange for benefits, and states should be held accountable for helping welfare recipients find jobs and stay employed.” The blueprint points toward greater use of work requirements and time limits for food stamp recipients and beneficiaries of federal housing benefits who are able to work. …This emphasis on work generalizes the experience from the landmark 1996 welfare reform legislation, which increased work among single-parent families, reduced welfare receipt and (most importantly) lowered poverty.
So far so good, and Scott also notes that the key to work is reducing the appeal of being on the dole.
Most of the success of welfare reform in encouraging work can be attributed to the ways that it has made receipt of benefits less attractive relative to work. People largely left welfare or chose not to enroll independently of state work promotion efforts.
But here’s the problem. There’s no big attempt to reduce benefits in the GOP proposal.
Indeed, it doesn’t even turn programs over to the states, which presumably would lead to better policy since sub-national governments wouldn’t want to be overly generous lest they attract welfare migration.
But the dog that didn’t bark in the new agenda is the consolidation and block granting proposed in Speaker Ryan’s Budget Committee discussion draft from 2014. Rather, the blueprint appears to envision increased use of state waivers in the various programs… It is worth recalling that in the 2014 discussion draft, the “opportunity grants” that would have combined a dozen federal programs and funded them at a fixed level were proposed as a pilot program in a few states.
The antipoverty blueprint mentions the Earned Income Tax Credit (EITC)…only in passing. On the one hand, the report points out that an expanded EITC would be one way to reduce some of the high marginal tax rates that recipients of federal aid face when they contemplate working. On the other, the program’s high rate of improper payments is also emphasized, rightfully, as a problem that must be addressed.
Scott also points out that the Republican plan also foresees a much more aggressive attempt to measure what works and doesn’t work. Which is good, though hardly necessary since we already know that a one-size-fits-all approach from Washington is a recipe for ever-higher costs and ever-increasing dependency.
From the left, Jordan Weissman of Slate is predictably unimpressed.
As part of his effort to convince Americans that the Republican Party is [not] a band of nihilistic anti-government lunatics—House Speaker Paul Ryan unveiled…an anti-poverty plan. Which is a laugh riot. …Most of the agenda is a rehash of, or at least a variation on, material Ryan has trotted out before. Inspired by the welfare reforms of the 1990s, the speaker still wants to push more safety net beneficiaries to go to work, devolve more program control down to state and local officials, and yet somehow increase accountability and carefully monitor results… There’s also some talk about increasing the Earned Income Tax Credit for low-wage workers—which is one of those nice, liberal-conservative consensus positions that never seems to go anywhere.
From the right, Kevin Williamson sympathizes with the GOP/Ryan approach, but also makes a more important point in his National Review column.
Paul Ryan has just introduced a welfare-reform proposal… We already knew what was going to be in it — work requirements and time limits for able-bodied adults — because there are only so many meaningful avenues of reform. We also know what the Left’s response is going to be: that this is cruel, callous, punitive, etc. But there are really only two choices: Get people moving toward economic self-sufficiency or sustain them forever in the soul-killing state of dependency. There isn’t a third option. Not really. This is only partly about money. We are a very, very rich society, and we can afford to provide decently for people who cannot care for themselves, including children and those who are physically or mentally disabled. But that isn’t our problem: Our problem isn’t people who are physically disabled but people who are morally disabled, people who wouldn’t take a bus 15 minutes to work at a gas station, much less walk 15 miles to do so.
My view, for what it’s worth, is that the only good welfare reform is one that shifts all programs to the states as part of a block grant. But since funding redistribution is not a function of the federal government, that block grant should then disappear over time.
Last but not least, we need to understand that economic growth is easily the most powerful and effective anti-poverty program. That’s why the poverty rate fell from 90 percent to 15 percent in America before we had a welfare state.
P.S. On the topic of poverty, it’s worth remembering that the White House has tried to redefine poverty as part of a dishonest campaign to promote class warfare policies. And the leftist bureaucrats at the OECD are pushing the same disingenuous approach.
P.P.S. If you want to know which states have the highest welfare benefits, click here. And if you want to know which ones have the highest overall levels of redistribution, click here.
But for ordinary people, what probably matters most is household income. And if you look at the median household income numbers for the United States, Obamanomics is a failure. According to the Census Bureau’s latest numbers, the average family today has less income (after adjusting for inflation) than when Obama took office.
In an amazing feat of chutzpah, however, the President is actually arguing that he’s done a good job with the economy. His main talking point is that the unemployment rate is down to 4.7 percent.
Yet as discussed in this Blaze TV interview, sometimes the unemployment rate falls for less-than-ideal reasons.
But he can be blamed for the fact that the numbers haven’t recovered, as would normally happen as an economy pulls out of a recession. This is a rather damning indictment of Obamanomics.
By the way, I can’t resist commenting on what Obama said in the soundbite that preceded my interview. He asserted that “we cut unemployment in half years before a lot of economists thought we could.”
In effect, the President airbrushed history and then tried to take credit for something that happened, at least in part, because of policies he opposed.
Wow.
One final point. I was asked in the interview which policy deserves the lion’s share of the blame for the economy’s tepid performance and weak job numbers.
I wasn’t expecting that question, so I fumbled around a bit before choosing Obamacare.
Wow, this may be the all-time winner for most economically illiterate statement ever uttered by a politician. At the risk of stating the obvious, the reason the drug trade is so lucrative is because it’s illegal.
Here’s some evidence resulting from the fact that some states have decriminalized marijuana.
The L.A. Timesreports on a side effect of these sensible state-based reforms.
“I’ve always liked this business, producing marijuana,” the 50-year-old farmer said wistfully. He had decided that this season’s crop would be his last. The reason: free-market economics. The loosening of marijuana laws across much of the United States has increased competition from growers north of the border, apparently enough to drive down prices paid to Mexican farmers. Small-scale growers here in the state of Sinaloa, one of the country’s biggest production areas, said that over the last four years the amount they receive per kilogram has fallen from $100 to $30. The price decline appears to have led to reduced marijuana production in Mexico and a drop in trafficking to the U.S., according to officials on both sides of the border… “Changes on the other side of the border are making marijuana less profitable for organizations like the Cartel de Sinaloa,” said Antonio Mazzitelli, the representative in Mexico for the United Nations Office on Drugs and Crime.
So the unintended consequence of drug liberalization in the United States is to weaken sinister cartels in Mexico.
Speaking of unintended consequences, let’s contemplate what lessons we can learn about prohibition from this story about some new research on drugs and alcohol in the Washington Post.
In the state of Kentucky, some counties (“dry”) prohibit alcohol sales completely. Others allow it only within certain municipalities (“moist,”) or don’t place restrictions on alcohol sales at all (“wet”). The Louisville researchers noticed that dry counties had higher rates of meth lab busts, as well as higher rates of meth crimes overall. And the effect is significant: “if all counties were to become wet, the total number of meth lab seizures in Kentucky would decline by about 25 percent,” they found. …the researchers found that this is more than just a simple correlation… In other words: people who buy alcohol in places where it’s illegal become accustomed to dealing with the black market. If you’re going to get punished whether you trade in booze or trade in meth, why not give meth a spin?
Here’s an accompanying chart, showing that counties with no alcohol had considerably more problems with meth.
By the way, the evidence presented above is just one piece of a larger puzzle.
This research fits in with other findings showing harmful effects of localized alcohol prohibitions. A 2005 paper in the Journal of Law and Economics found that when Texas counties changed from dry to wet, their incidences of drug-related mortality decreased by 14 percent as people substituted alcohol for other drugs. Records from the Kentucky State Police show that dry counties tend to have higher rates of DUI-related car crashes than wet ones — presumably because when you live in a dry county, you have to drive farther to get your booze. A 2010 report from the Robert Wood Johnson Foundation found that binge drinking rates were often higher in Alabama’s dry counties than its wet ones.
In other words, drugs and alcohol unambiguously can cause people to make stupid decisions.
But there are more stupid decisions and worse consequences when these products are criminalized.
Let’s close with a very clever Venn Diagram from Mark Perry at the American Enterprise Institute.
Hopefully my conservative friends will recognize the inconsistency in their views. And at the very least they should be strongly opposed to U.N. efforts to interfere with American sovereignty on the issue.
At the risk of oversimplifying, libertarians want to minimize the level of government coercion is society. That’s why we favor both economic liberty and personal liberty. Simply stated, you should have the right to control your own life and make your own decisions so long as you’re not harming others or interfering with their rights.
That’s a philosophical or moral argument.
There’s also the utilitarian argument for liberty, and that largely revolves around the fact societies with more freedom tend to be considerably more prosperous than societies with lots of government.
Let’s look at some new evidence. Based in Lausanne, Switzerland, the Institute for Management Development is a highly regarded educational institution that publishes an annual World Competitiveness Yearbook that basically measures whether a nation is a good place to do business.
So it’s not a measure of economic liberty, at least not directly. And the quality of governance matters for the IMD rankings (presumably based on something akin to the European Central Bank’s measure of “public sector efficiency“).
But you’ll notice a clear link between economic liberty and competitiveness.
Here are the top-10 nations. (you can look at the rankings for all nations by clicking here).
As you might suspect, there’s a strong correlation between the nations that are competitive and those that have smaller governments and free markets.
And I’m happy to see that the United States also scores very highly, even if we only rank 17 out of 157 for economic freedom.
Indeed, every country in IMD’s top 10 other than Sweden is ranked in the top quartile of EFW.
You also probably won’t be surprised by the countries getting the worst scores from IMD.
Congratulations to Venezuela for being the world’s least competitive nation. Though that might be an overstatement since IMD only ranks 61 jurisdictions. If all the world’s countries were included, Venezuela presumably would beat out North Korea. And maybe a couple of other squalid outposts of statism, such as Cuba.
It’s also worth noting that Greece gets consistently bad scores. And I’m not surprised that Argentina is near the bottom as well (though it has improved since last year, so hopefully the new government will continue to move in the right direction).
By the way, it’s worth noting that economic freedom is a necessary but not sufficient condition for competitiveness. Jordan, for instance, ranks in the top 10 for economic freedom but gets a low score from IMD, presumably because the advantages of good policy don’t compensate for exogenous factors such as geopolitical risk and access to markets.
The moral of the story, though, is that free markets and small government are the recipe for more prosperity. And those policies are probably even more important for nations that face exogenous challenges.
Voters were asked today to decide whether every adult should automatically receive more than $2,500 per month as part of a guaranteed basic income.
Sounds like a nice free lunch, right? That offer might be very attractive in a place like France, but Swiss voters apparently understand that government can’t give all that money to people without first taking that amount of money from people. They rejected Bernie-nomics by an overwhelming margin.
In Switzerland, there don’t appear to be left-wing blue states and right-wing red states. Instead, the entire nation favors limited government. Even the French-speaking parts of the country voted against the scheme.
I’d like to take credit for these results. I was in Switzerland early last month to discuss and debate this plan. Here’s what I said (click here to watch the entire panel discussion).
In reality, I’m sure my remarks didn’t have any impact on the outcome. Nonetheless, it’s nice to be on the winning side.
Though you may have noticed that I said some nice things about a guaranteed basic income in my presentation. That’s because, as I wrote back in 2013, these plans also would get rid of the current dysfunctional welfare state.
Writing in the Wall Street Journal a couple of days ago, Charles Murray of the American Enterprise Institute makes the best possible case for an automatic government-provided income.
The UBI has brought together odd bedfellows. Its advocates on the left see it as a move toward social justice; its libertarian supporters (like Friedman) see it as the least damaging way for the government to transfer wealth from some citizens to others. Either way, the UBI is an idea whose time has finally come… First, my big caveat: A UBI will do the good things I claim only if it replaces all other transfer payments and the bureaucracies that oversee them. If the guaranteed income is an add-on to the existing system, it will be as destructive as its critics fear.
Here are the highlights of Murray’s plan.
…the system has to be designed with certain key features. In my version, every American citizen age 21 and older would get a $13,000 annual grant deposited electronically into a bank account in monthly installments. …The UBI is to be financed by getting rid of Social Security, Medicare, Medicaid, food stamps, Supplemental Security Income, housing subsidies, welfare for single women and every other kind of welfare and social-services program, as well as agricultural subsidies and corporate welfare. As of 2014, the annual cost of a UBI would have been about $200 billion cheaper than the current system. By 2020, it would be nearly a trillion dollars cheaper. …Under my UBI plan, the entire bureaucratic apparatus of government social workers would disappear.
And while he acknowledges that some people will stop working and live off their handouts, he makes a reasonably persuasive argument that some people will be encouraged to enter the labor force.
Under the current system, taking a job makes you ineligible for many welfare benefits or makes them subject to extremely high marginal tax rates. Under my version of the UBI, taking a job is pure profit with no downside until you reach $30,000—at which point you’re bringing home way too much ($40,000 net) to be deterred from work by the imposition of a surtax. Some people who would otherwise work will surely drop out of the labor force under the UBI, but others who are now on welfare or disability will enter the labor force.
Sounds good, but then consider all the leftists who support a basic income scheme and imagine how such a system would work if they were in charge.
That’s what worries me. If Charles Murray was economic czar and there was never a risk of his plan being modified, I’d be sorely tempted to say yes.
But that’s not a plausible scenario. In the real world, a guaranteed basic income might start small and the current welfare state might be curtailed as part of the original deal, but I would be very worried about subsequent reforms that would expand the size of the handout (much as the EITC has been expanded in America) and reinstate misguided redistribution programs.
Perhaps this is why, in a column for the Financial Times, John Kay is not very sanguine about the numbers.
Bernie Sanders, a candidate for the Democratic presidential nomination, has expressed sympathy for basic income while stopping short of endorsement. Yanis Varoufakis, the former finance minister of Greece, is a proponent. …Yet simple arithmetic shows why these schemes cannot work. Decide what proportion of average income per head would be appropriate for basic income. Thirty per cent seems mean; perhaps 50 per cent is more reasonable? The figure you write down is the share of national income that would be absorbed by public expenditure on basic income. The Swiss government reckoned spending on social welfare would approximately double. To see the average tax rate implied, add the share of national income taken by other public sector activities — education, health, defence and transport. Either the basic income is impossibly low, or the expenditure on it is impossibly high.
Exactly.
P.S. On a separate topic, the death of Mohamed Ali, the larger-than-life superstar boxer, has generated a lot of reminiscing.
P.P.S. Speaking of athletic superstars (at least in our fantasies), the Beltway Bandits finally prevailed in a 2016 softball tournament. Here’s our team photo after winning the Crabtown Classic.
P.P.S. Returning to the main topic of today’s column, here’s an amusing cartoon strip on the notion of a basic income.
It’s from the same person who put together the “magic boats” cartoon strip about the minimum wage.
I thought this effort was useful because it shows, for instance, that the United States, France, and Hong Kong are all on the right side, but that there are nonetheless obvious differences in the amount of economic freedom for those three jurisdictions. Likewise, it’s not good to be Mexico, China, or North Korea, but there are degrees of statism and it’s worse to be farther to the left.
Speaking of left, not all advocates of bigger government are the same. So earlier this year I created another spectrum showing that there are various strains of statism, especially among true believers.
The value of this spectrum is that it shows the differences between totalitarians, genuine socialists, and run-of-the-mill hard-core leftists like Bernie Sanders.
And both of these spectrums were implicit in my interview yesterday about Venezuela. I pointed out that Venezuela technically isn’t socialist, but also suggested that doesn’t matter because the country is definitely on the wrong part of the statism spectrum.
And Venezuela definitely is proof that being on the wrong side of the spectrum is a recipe for collapse (or, in the case of North Korea, a recipe for never getting off the ground in the first place).
Since we’re discussing statism, let’s close with some really good news. Matt Yglesias of Vox likes big government. A lot. But he’s also capable of dispassionately analyzing what works and doesn’t work for his side. And he writes that “socialism” is a bad word for those who want to expand the size and scope of government.
Bernie Sanders refers to his ideology — which I would characterize as social democracy or even just welfare state liberalism — as democratic socialism, a politically loaded term that seems to imply policy commitments Sanders hasn’t made to things like government ownership of major industries. …the socialist branding seems to have offered Sanders some upside…earning him enthusiastic support from a number of politically engaged people who seem to really be socialists… Against this, though, one has to weigh the reality that socialism is really unpopular in the United States.
How unpopular? Yglesias shares some new polling data from Gallup.
This is great news. Not only is socialism unpopular, but it ranks below the federal government (which traditionally gets low marks from the American people). And the supposed Sanders revolution hasn’t even translated into a relative improvement. This poisonous ideology is actually slightly more unpopular than it was in 2010 and 2012.
Here’s what Yglesias wrote about these numbers.
Any form of left-of-center politics in the United States, frankly, is going to have a problem with the fact that “the federal government” is viewed so much less favorably than cuddly targets like “small business,” “entrepreneurs,” and “free enterprise.” Even big business does better than the federal government. And both big business and capitalism do far better than socialism.
As I said, this is excellent news.
A few closing thoughts.
First, Yglesias and I don’t agree on very much (he’s referred to me as insaneandirrational), but we both think that a socialist is someone who believes in government ownership of the means of production, not simply someone who believes in bigger government.
Second, the Gallup data reinforces what I wrote back in April about “free enterprise” being a much more appealing term than “capitalism.”
The bottom line is that economic liberty works while left-wing ideologies (all based on coercion) don’t work, so let’s use whatever words are most capable of disseminating this valuable message.
It’s even been bad for some of the special interest groups that backed the legislation. The big insurance companies supported the law, for instance, because they thought it would be good to have the government force people to buy their products.
And these corrupt firms even got a provision in the law promising bailouts from taxpayers if the Obamacare system didn’t work.
But the companies mistakenly assumed their sleazy pact with Obama, Pelosi, and Reid was permanent. Fortunately, their Faustian bargain appears to be backfiring.
Senator Marco Rubio has led the fight to stop bailouts for the big insurance companies.
Here are some excerpts from his recent column in the Wall Street Journal.
Six years after being signed into law, ObamaCare is a costly and unsustainable disaster. …ObamaCare is also bringing out corporate America’s worst crony-capitalist impulses. The health-insurance lobby has teamed up with trial lawyers to sue the federal government—through individual lawsuits and a $5 billion class action—for not following through on a sweetheart bailout deal buried in the law. This provision of ObamaCare would have required taxpayers to bail out insurers.
But in a rare victory for taxpayers, the Florida Senator got the law changed to restrict bailouts.
My conservative colleagues and I sounded the alarm about the likelihood of a taxpayer-funded bailout of health insurers (and were mocked as Chicken Littles for it). …When it came time to pass a spending bill at the end of 2014, we succeeded in making it the law of the land that the ObamaCare bailout program could not cost taxpayers a single cent—which ended up saving taxpayers $2.5 billion. In December of last year, we came back and repeated the feat. Now I am urging leaders in both the House and Senate to make this a priority and stop the bailout a third time.
As you might imagine, there’s a counterattack by the corrupt insurance companies that conspired with the White House to impose Obamacare on the nation.
…the health-insurance companies are suing to try to get their bailout…professional attorneys from the Congressional Research Service…said that the administration’s practice of making other payments to insurers under the ObamaCare reinsurance program “would appear to be in conflict with the plain text” of the law. …Health insurers can hire all the high-paid trial lawyers they want, but they will run into a constitutional buzz saw: America’s founding document grants Congress the power of the purse… Health-insurance companies need to wake up to the reality that this…money they are fighting for, and that the Obama administration is trying to weasel a way to somehow give them, belongs to taxpayers. Taxpayers get to decide—through me and others in Congress—whether to bail them out. And the people have spoken: No, we will not bail out health insurance companies for ObamaCare’s failures.
Amen to Senator Rubio.
Let’s hope Congress continues to oppose bailouts, and let’s also hope the White House isn’t successful in somehow giving our money to the big insurance companies.
Speaking of which, here’s what Investor’s Business Dailywrote about the bailout controversy.
Right when you think Washington can’t get any worse, it does. That much was evident at a recent U.S. House of Representatives committee hearing into the Obama administration’s bailout of private health insurance companies. It’s a textbook case of government officials ignoring federal law to put special interests before the interests of American taxpayers and families.
Here’s how the mess was created…and how the Obama White House chose to respond.
Thanks to the Affordable Care Act’s labyrinthine mandates, health insurance companies have collectively lost billions of dollars on the exchanges, leading to an increasing number of them limiting their participation in or exiting the exchanges altogether. As a result, many insurers have demanded larger subsidy payments. …responding to insurance industry demands — in November the Obama administration promised to “explore other sources of funding” for payments to insurers. Yet rather than work with Congress, the administration flouted the law entirely — and in this case, that means using tax dollars to bail out insurers left on the exchanges. CMS simply decided to ignore the law.
Unfortunately, ordinary people don’t have that option.
They simply pay more to get less.
Meanwhile, Americans rightly wonder who’s looking out for them. Premiums have actually risen faster in the five years after passage of the Affordable Care Act than in the five years before, while deductibles average nearly $3,000 for the most popular exchange plans.
Speaking of special deals, let’s look at another Obamacare rescue for a privileged group.
Bob Moffit of the Heritage Foundation explains the contortions needed to keep health insurance subsidies flowing to Capitol Hill.
…one scandal is truly bipartisan: How key administration and congressional officials connived to create, under cover of the Affordable Care Act, also known as Obamacare, special health insurance subsidies for members of Congress.
Here’s the background.
Rushing to enact the giant Obamacare bill in March 2010, Congress voted itself out of its own employer-sponsored health insurance coverage—the Federal Employees Health Benefits Program. …But in pulling out of the Federal Employees Health Benefits Program, they also cut themselves off from their employer-based insurance contributions.
Subjecting themselves and their staff to Obamacare may have been smart politics, if only to avoid the charge of hypocrisy, but that created a different problem.
Obamacare’s insurance subsidies for ordinary Americans are generous, but capped by income. No one with an annual income over $47,080 gets a subsidy. That’s well below typical Capitol Hill salaries. Members of Congress make $174,000 annually, and many on their staff have impressive, upper-middle-class paychecks. …Realizing what they had done, congressional leaders sought desperately to get fatter taxpayer subsidies in the Obamacare exchange system. …The standard excuse was that, without a special “sweetener,” a Capitol Hill “brain drain” would ensue; the best and brightest would flee to the private sector to get more affordable employment-based coverage.
Gee, it would have been a shame if the people who have screwed up public policy had to get jobs in the private sector (or, more likely, the parasitic lobbying sector).
But the law oftentimes is not an obstacle when the Obama White House wants something to happen.
…at a July 31 closed-door meeting with Senate Democrats, President Barack Obama had promised he would “fix” the mess they made of their health coverage. So, on Aug. 7, 2013, just as Congress was getting out of town for the August recess, the Office of Personnel Management ruled that members of Congress and staff enrolled in the exchange program would get Federal Employees Health Benefits Program subsidies, even though they were no longer in the program.
But how exactly did the White House evade the law?
…the Office of Personnel Management declared that Congress and staff were eligible to enroll in the Washington, D.C., “SHOP” Exchange, a health insurance exchange reserved for small businesses with fewer than 50 employees. The exchange offers special insurance subsidies to participating small businesses. The problem was, of course, that Congress is not a “small business,” at least under any clinically sane definition of the term, and no section of the Affordable Care Act provided for any congressional exemption from the ban on large employer participation in the SHOP exchanges.
By the way, as a former staffer on Capitol Hill, I do have some sympathy for the lower-level folks who didn’t create the Obamacare mess and would suddenly be in a position of having to pay all their health costs out of pocket if the law was obeyed.
But that’s not a reason to engage in legal chicanery.
The top rate was only 7 percent when Woodrow Wilson approved the income tax, and the tax only applied to the very richest Americans. But as is so often the case, taxes on the wealthy are a precursor to taxes on the rest of us.
But it doesn’t have to be this way. I’ve been at a conference in Monaco for the past few days and I’ve seen firsthand how a nation with zero income tax can be a prosperous Mecca (and I’ve also noticed that the Princess of the Levant is far more likely to accompany me on a trip when she has an opportunity to show off a new dress).
No income tax, by the way, means no income tax. Nothing. No capital gains tax, either. The main source of revenue is a value-added tax, generally about 20 percent, along with a tax on business income, but only if a substantial share is earned outside Monaco.
So is this benign tax regime actually conducive to prosperity?
By the way, Monaco’s good policy doesn’t just generate domestic prosperity.
It also means some spin-off employment for France.
Every day some 41,000 people come from outside to go to work and all these non-Monegasque nationals, most of whom are French, depend on our economic success. …commerce and the manufacturing also employ significant numbers; over 3,000 workers are, for instance, taken up by the latter.
While Monaco’s per-capita GDP numbers are very impressive, the numbers on per-capita wealth are even more astounding. The average person has more than $1.5 million of assets.
By the way, the unluckiest people in the world are the residents of Roquebrune and Menton in France. That’s because those towns were part of Monaco until the mid-1800s. Now they’re part of a tax hell rather than a tax haven.
So what’s the bottom line? What can we say about Monaco?
Today we’re going to look at a new example of FDR’s destructive statism. Something so malicious that he may actually beat Wilson for the prize of being America’s most worst Chief Executive.
Wilson, after all, may have given us the income tax. But Roosevelt actually proposed a top tax rate of 99.5 percent and then tried to impose a 100 percent tax rate via executive order! He was the American version of Francois Hollande.
These excerpts, from an article by Professor Burton Folsom of Hillsdale College, tell you everything you need to know.
Under Hoover, the top rate was hiked from 24 to 63 percent. Under Roosevelt, the top rate was again raised—first to 79 percent and later to 90 percent. In 1941, in fact, Roosevelt proposed a 99.5 percent marginal rate on all incomes over $100,000. “Why not?” he said when an adviser questioned him. After that proposal failed, Roosevelt issued an executive order to tax all income over $25,000 at the astonishing rate of 100 percent. Congress later repealed the order, but still allowed top incomes to be taxed at a marginal rate of 90 percent. …Elliott Roosevelt, the president’s son, conceded in 1975 that “my father may have been the originator of the concept of employing the IRS as a weapon of political retribution.”
Note that FDR also began the odious practice of using the IRS as a political weapon, something that tragically still happens today.
For more detail about Roosevelt’s confiscatory tax policy, here are some blurbs from a 2011 CBS Newsreport.
When bombers struck on December 7, 1941, taxes were already high by historical standards. There were a dizzying 32 different tax brackets, starting at 10% and topping out at 79% on incomes over $1 million, 80% on incomes over $2 million, and 81% on income over $5 million. In April 1942, just a few short months after the attack, President Roosevelt proposed a 100% top rate. At a time of “grave national danger,” he argued, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year.” (That’s roughly $300,000 in today’s dollars). Roosevelt never got his 100% rate. However, the Revenue Act of 1942 raised top rates to 88% on incomes over $200,000. By 1944, the bottom rate had more than doubled to 23%, and the top rate reached an all-time high of 94%.
And here are some excerpts from a column that sympathized with FDR’s money grab.
FDR proposed a 100 percent top tax rate. …Roosevelt told Congress in April 1942, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year.” That would be about $350,000 in today’s dollars. …lawmakers would quickly reject FDR’s plan. Four months later, Roosevelt tried again. He repeated his $25,000 “supertax” income cap call in his Labor Day message. Congress shrugged that request off, too. FDR still didn’t back down. In early October, he issued an executive order that limited top corporate salaries to $25,000 after taxes. The move would “provide for greater equality in contributing to the war effort,” Roosevelt declared. …lawmakers…ended up attaching a rider repealing the order to a bill… FDR tried and failed to get that rider axed, then let the bill with it become law without his signature.
Regarding FDR’s infamous executive order, here are the relevant passages.
In order to correct gross inequities…, the Director is authorized to take the necessary action, and to issue the appropriate regulations, so that, insofar as practicable no salary shall be authorized under Title III, Section 4, to the extent that it exceeds $25,000 after the payment of taxes allocable to the sum in excess of $25,000.
And from the archives at the University of California Santa Barbara, here is what FDR wrote when Congress used a debt limit vote to slightly scale back the 100 percent tax rate.
…there is a proposal before the Ways and Means Committee to amend the Public Debt Bill by adding a provision which in effect would nullify the Executive Order issued by me under the Act of Oct. 2, 1942 (price and wage control), limiting salaries to $25,000 net after taxes. …It is my earnest hope that the Public Debt Bill can be passed without the addition of amendments not related to the subject matter of the bill.
When the Act of October 2, 1942, was passed, it authorized me to adjust wages or salaries whenever I found it necessary “to correct gross inequities…” Pursuant to this authority, I issued an Executive Order in which, among other things, it was provided that in order to correct gross inequities and to provide for greater equality in contributing to the war effort no salary should be authorized to the extent that it exceeds $25,000 net after the payment of taxes.
Even though Congress was overwhelmingly controlled by Democrats, there was resistance to FDR’s plan to confiscate all income.
So Roosevelt had a back-up plan.
If the Congress does not approve the recommendation submitted by the Treasury last June that a flat 100 percent supertax be imposed on such excess incomes, then I hope the Congress will provide a minimum tax of 50 percent, with steeply graduated rates as high as 90 percent. …If taxes are levied which substantially accomplish the purpose I have indicated, either in a separate bill or in the general revenue bill you are considering, I shall immediately rescind the section of the Executive Order in question.
And, sadly, Congress did approve much higher tax rates, not only on the so-called rich, but also on ordinary taxpayers.
Indeed, this was early evidence that tax hikes on the rich basically serve as a precedent for higher burdens on the middle class, something that bears keeping in mind when considering the tax plans of Bernie Sanders and Hillary Clinton (or, tongue in cheek, the Barack Obama flat tax).
Let’s close by considering why FDR pushed a confiscatory tax rate. Unlike modern leftists, he did have the excuse of fighting World War II.
That hurt the economy and resulted in less money to fight Nazi Germany and Imperial Japan.
So what motivated Roosevelt? According to Burton and Anita Folsom, it was all about class warfare.
Why “soak the rich” for 100 percent of their income (more or less) when they already face rates of 90 percent in both income and corporate taxes? He knew that rich people would shelter their income in foreign investments, tax-exempt bonds, or collectibles if tax rates were confiscatory. In fact, he saw it happen during his early New Deal years. When he raised the top rate to 79 percent in 1935, the revenue into the federal government from income taxes that year was less than half of what it was six years earlier when the top rate was 24 percent. …First, FDR, as a progressive, believed…that “swollen fortunes” needed to be taxed at punitive rates to redistribute wealth. In fact, as we can see, redistributing wealth was more important to FDR than increasing it. …Second, high taxes on the rich provided excellent cover for his having made the income tax a mass tax. How could a steelworker in Pittsburgh, for example, refuse to pay a new 24 percent tax when his rich factory owner had to pay more than 90 percent? Third, and possibly most important, class warfare was the major campaign strategy for FDR during his whole presidency. He believed he won votes when he attacked the rich.
In other words, FDR’s goal was fomenting resentment rather than collecting revenue.
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