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Archive for March, 2018

As far as I’m concerned, everything you need to know about capitalism vs. statism is captured in this chart comparing per-capita economic output in Chile and Venezuela.

Ask yourself which country offers more opportunity, especially for the poor? The obvious answer is Chile, where poverty has rapidly declined ever since the country shifted to free enterprise. In Venezuela, by contrast, poor children die of malnutrition thanks to pervasive interventionism.

Indeed, having shared several horrifying stories of human suffering and government venality from Venezuela (including 28 separate examples in April 2017 and 28 different separate examples in December 2017), I’ve reached the point where nothing shocks me.

So now I mostly wonder whether leftist apologists feel any shame when they see grim news from that statist hellhole.

For instance, what does Joe Stiglitz think about this report from the Miami Herald?

At 16, Liliana has become the mother figure for a gang of Venezuelan children and young adults called the Chacao, named after the neighborhood they’ve claimed as their territory. The 15 members, ranging in age from 10 to 23, work together to survive vicious fights for “quality” garbage in crumbling, shortage-plagued Venezuela. Their weapons are knives and sticks and machetes. The prize? Garbage that contains food good enough to eat. …A year ago, the gang was “stationed” around a supermarket at a mall called Centro Comercial Ciudad Tamanaco that generates tons of garbage. But a feared rival gang from the neighborhood Las Mercedes also wanted the garbage.

And what does Bernie Sanders think about this story from NPR?

The Pharmaceutical Federation of Venezuela estimates the country is suffering from an 85 percent shortage of medicine amid an economic crisis… The entire Venezuelan health care system is on the verge of collapse, says Francisco Valencia, head of the public health advocacy group Codevida. Some hospitals lack electricity, and more than 13,000 doctors have left Venezuela in the past four years in search of better opportunities. “They don’t give food to the patients in the hospital…” Government data shows infant mortality rose by 30 percent in 2016… The International Monetary Fund predicts inflation will soar to 13,000 percent this year and the economy will shrink by 15 percent. …The monthly minimum wage for many Venezuelans is now equal to $3, according to the AP. …Maduro blames the country’s growing crisis on…the U.S…leading an effort to wipe out socialism in Venezuela.

I’d be curious to know what Michael Moore thinks about this news from CNN?

Venezuela’s devastating food crisis means wheat flour has become a rare commodity in the country. Some churches have run out of the ingredient needed to make the sacramental bread that is central to celebrating the Holy Eucharist… So, members of the Catholic diocese of Cúcuta, Colombia, braved heavy rain this week to deliver the wafers over a bridge that connects the two countries… Venezuela’s economic crisis, fueled by a decline in oil production, shows no signs of improvement.People are starving because of routine food shortages. They are dying in hospitals because basic medicine and equipment aren’t available.

And what does Jeremy Corbyn think about this Bloomberg report?

Ruiz’s weekly salary of 110,000 bolivares — about 50 cents at the black-market exchange rate — buys him less than a kilo of corn meal or rice. His only protein comes from 170 grams of canned tuna included in a food box the government provides to low-income families. It shows up every 45 days or so. “I haven’t eaten meat for two months,” he said. …Hunger is hastening the ruin of Venezuelan’s oil industry as workers grow too weak and hungry for heavy labor. With children dying of malnutrition and adults sifting garbage for table scraps, food has become more important than employment, and thousands are walking off the job. …Venezuela, a socialist autocracy that once was South America’s most prosperous nation, is suffering a collapse almost without precedent.

Or how about getting Sean Penn‘s reaction to this story from the New York Times?

For the past three weeks, Wilya Hernández, her husband and their daughter, 2, have been sleeping on the garbage-strewn streets of Cúcuta, a sprawling and chaotic city on Colombia’s side of the border with Venezuela. Though Antonela, the toddler, often misses meals, Ms. Hernández has no desire to return home to Venezuela. …“I sold my hair to feed my girl,” Ms. Hernández said, pulling back her locks to reveal a shaved head underneath, adding that wigmakers now walk the plazas of Cúcuta where many Venezuelans congregate, wearing signs advertising that they give cash for hair. …“If I can’t afford to go the bathroom, I’ll go on the street,” Ms. Hernández added. “That’s when guys walking by say creepy things.”

I wonder if Noam Chomsky has any comments about this Washington Post story?

A friend recently sent me a photograph…, just a blurry cellphone shot of trash… And yet I can’t stop thinking about it, because strewn about in the trash are at least a dozen 20-bolivar bills, small-denomination currency now so worthless even looters didn’t think it was worth their time to stop and pick them up. …according to the “official” exchange rate, …each of those bills is worth $2. In fact, as Venezuela sinks deeper…into…hyperinflation…, bolivar banknotes have come to be worth basically nothing: Each bill is worth about $0.0001 at the current exchange rate… It’s easy to see why the thieves left them behind.

Last but not least, I wonder what Jesse Jackson thinks about this news from the U.K.-based Guardian?

More than half of young Venezuelans want to move abroad permanently, after food shortages, violence and a political crisis escalated to new extremes in 2017, according to a new survey. Once Latin America’s richest country, Venezuela’s economy is now collapsing… One of the most painful effects of the current crisis has been widespread hunger. In 2015, when inflation and food shortages were well below current levels, nearly 45% of Venezuelans said there were times when they were unable to afford food; in the latest study, that figure had risen to 79% – one of the highest rates in the world. …Norma Gutiérrez, a radiologist in eastern Caracas, is one of those…would-be migrants. Acute shortages in the hospital where she works depress her, and she says the idea of emigrating crosses her mind at least once a week.

By the way, in an example of unintended humor, the Socialist Party of Great Britain has a ready-made answer to all those questions. The misery is the fault of capitalism. I’m not kidding.

And folks on the establishment left occasionally try to imply that it’s all the result of falling oil prices.

Two years ago, I concocted a visual showing the “Five Circles of Statist Hell” and speculated that Venezuela was getting close to the fourth level. Though I still don’t think it’s nearly as bad as North Korea.

P.S. Since I mentioned unintentional humor, you’ll be amused to know a “Happy Planet Index” created by radical environmentalists places Venezuela above the United States.

P.P.S. And here’s some intentional dark humor about hunger in Venezuela.

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I don’t own an AR-15. I’m not a “gun person,” whatever that means. I hardly ever shoot. And I never hunt.

But I’m nonetheless a big supporter of private gun ownership. In part, this is because I have a libertarian belief in civil liberties. In other words, my default assumption is that people should have freedom (the notion of “negative liberty“), whereas many folks on the left have a default assumption for that the state should determine what’s allowed.

I also support private gun ownership because I want a safer society. Criminals and other bad people are less likely to engage in mayhem if they know potential victims can defend themselves. And I also think that there’s a greater-than-zero chance that bad government policy eventually will lead to periodic breakdowns of civil society, in which case gun owners will be the last line of defense for law and order.

I’m sometimes asked, though, whether supporters of the 2nd Amendment are too rigid. Shouldn’t the NRA and other groups support proposals for “common-sense gun safety”?

Some of these gun-control ideas may even sound reasonable, but they all suffer from a common flaw. None of them would disarm criminals or reduce gun crime. And I’ve detected a very troubling pattern, namely that when you explain why these schemes won’t work, the knee-jerk response from the anti-gun crowd is that we then need greater levels of control. Indeed, if you press them on the issue, they’ll often admit that their real goal is gun confiscation.

Though most folks in leadership positions on the left are crafty enough that they try to hide this extreme view.

So that’s why – in a perverse way – I want to applaud John Paul Stevens, the former Supreme Court Justice, for his column in the New York Times that openly and explicitly argues for the repeal of the 2nd Amendment.

…demonstrators should…demand a repeal of the Second Amendment. …that amendment…is a relic of the 18th century. …to get rid of the Second Amendment would be simple and would do more to weaken the N.R.A.’s ability to stymie legislative debate and block constructive gun control legislation than any other available option. …That simple but dramatic action would…eliminate the only legal rule that protects sellers of firearms in the United States.

The reason I’m semi-applauding Stevens is that he’s an honest leftist. He’s bluntly urging that we jettison part of the Bill of Rights.

Many – if not most – people on the left want that outcome. And a growing number of the are coming out of the pro-confiscation closet. In an article for Commentary, Noah Rothman links to several articles urging repeal of the 2nd Amendment.

They’re talking about repealing the Second Amendment. It started with former Supreme Court Justice John Paul Stevens and George Washington University Law Professor Jonathan Turley. …Turley and Stevens were joined this week by op-ed writers in the pages of Esquire and the Seattle Times. Democratic candidates for federal office have even enlisted in the ranksvvvvvvvv of those calling for an amendment to curtail the freedoms in the Bill of Rights. …anti-Second Amendment themes…have been expressed unashamedly for years, from liberal activists like Michael Moore to conservative opinion writers at the New York Times.  Those calling for the repeal of the right to bear arms today are only echoing similar calls made years ago in venues ranging from Rolling Stone, MSNBC, and Vanity Fair to the Jesuit publication America Magazine.

But others on the left prefer to hide their views on the issue.

Indeed, they even want to hide the views of their fellow travelers. Chris Cuomo, who has a show on MSNBC, preposterously asserted that nobody supports repeal of the 2nd Amendment.

It’s also worth noting that Justice Stevens got scolded by a gun-control advocate at the Washington Post.

One of the biggest threats to the recovery of the Democratic Party these days is overreach. …But rarely do we see such an unhelpful, untimely and fanciful idea as the one put forward by retired Supreme Court justice John Paul Stevens. …Stevens calls for a repeal of the Second Amendment. The move might as well be considered an in-kind contribution to the National Rifle Association, to Republicans’ efforts to keep the House and Senate in 2018, and to President Trump’s 2020 reelection bid. In one fell swoop, Stevens has lent credence to the talking point that the left really just wants to get rid of gun ownership. …This is exactly the kind of thing that motivates the right and signals to working-class swing voters that perhaps the Democratic Party and the political left doesn’t really get them.

The bottom line is that the left’s ultimate goal is gutting the 2nd Amendment. Not much doubt of that, even if some leftists are politically savvy enough to understand that their extremist policy is politically suicidal.

But let’s set aside the politics and look at the legal issues. There’s another reason why I’m perversely happy about the Stevens oped. Even though he was on the wrong side of the case, he effectively admits that the 2008 Heller decision enshrined and upheld the individual right to own firearms.

And the five Justices who out-voted Stevens made the right decision. I’m not a legal expert, so I’ll simply cite some people who are very competent to discuss the issue. Starting with what Damon Root wrote for Reason.

One problem with Stevens’ position is that he is dead wrong about the legal history. …For example, consider how the Second Amendment was treated in St. George Tucker’s 1803 View of the Constitution of the United States, which was the first extended analysis and commentary published about the Constitution. For generations of law students, lawyers, and judges, Tucker’s View served as a go-to con-law textbook. …He observed the debates over the ratification of the Constitution and the Bill of Rights as they happened. And he had no doubt that the Second Amendment secured an individual right of the “nonmilitary” type. “This may be considered as the true palladium of liberty,” Tucker wrote of the Second Amendment. “The right of self-defense is the first law of nature.” In other words, the Heller majority’s view of the Second Amendment is as old and venerable as the amendment itself.

Well stated.

Though the real hero of this story is probably Joyce Lee Malcolm, the scholar whose work was instrumental in producing the Heller decision. John Miller explains for National Review.

Malcolm looks nothing like a hardened veteran of the gun-control wars. Small, slender, and bookish, she’s a wisp of a woman who enjoys plunging into archives and sitting through panel discussions at academic conferences. Her favorite topic is 17th- and 18th-century Anglo-American history… She doesn’t belong to the National Rifle Association, nor does she hunt. …She is also the lady who saved the Second Amendment — a scholar whose work helped make possible the Supreme Court’s landmark Heller decision, which in 2008 recognized an individual right to possess a firearm.

Ms. Malcolm started as a traditional academic.

For her dissertation, she moved to Oxford and Cambridge, with children in tow. …Malcolm’s doctoral dissertation focused on King Charles I and the problem of loyalty in the 1640s… The Royal Historical Society published her first book.

But her subsequent research uncovered some fascinating insights about the right to keep and bear arms.

At a time when armies were marching around England, ordinary people became anxious about surrendering guns. Then, in 1689, the English Bill of Rights responded by granting Protestants the right to “have Arms for their Defence.” Malcolm wasn’t the first person to notice this, of course, but as an American who had studied political loyalty in England, she approached the topic from a fresh angle. “The English felt a need to put this in writing because the king had been disarming his political opponents,” she says. “This is the origin of our Second Amendment. It’s an individual right.” …Fellowships allowed her to pursue her interest in how the right to bear arms migrated across the ocean and took root in colonial America. “The subject hadn’t been done from the English side because it’s an American question, and American constitutional scholars didn’t know the English material very well,” she says. …The Second Amendment, she insisted, recognizes an individual right to gun ownership as an essential feature of limited government. In her book’s preface, she called this the “least understood of those liberties secured by Englishmen and bequeathed to their American colonists.”

And it turns out that careful scholarship can produce profound results.

…in 2008, came Heller, arguably the most important gun-rights case in U.S. history. A 5–4 decision written by Scalia and citing Malcolm three times, it swept away the claims of gun-control theorists and declared that Americans enjoy an individual right to gun ownership. “…it gave us this substantial right.” She remembers a thought from the day the Court ruled: “If I have done nothing else my whole life, I have accomplished something important.” …the right to bear arms will not be infringed — thanks in part to the pioneering scholarship of Joyce Lee Malcolm.

Let’s close with a video from Prager University, narrated by Eugene Volokh, a law professor at UCLA. He explains the legal and historical meaning of the 2nd Amendment.

In other words, the bottom line is that the Justice Stevens and other honest leftists are right. The 2nd Amendment would need to be repealed in order to impose meaningful gun control.

And I suppose it’s also worth mentioning that it won’t be easy to ban and confiscate guns if they ever succeeded in weakening the Bill of Rights. But hopefully we’ll never get to that stage.

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What’s the best argument against statism?

As a libertarian, my answer is that freedom is preferable to coercion. Freedom also ranks higher than prosperity. For instance, the government might be able to boost economic output by requiring people to work seven days a week, but such a policy would be odious and indefensible.

As an economist, I have a more utilitarian perspective. The best argument against statism is that it simply doesn’t work. Nations with bigger government and more intervention routinely under-perform compared to otherwise-similar countries with small government and free markets.

That’s why I often present my leftist friends with my two-question challenge. I ask them to name a country, anywhere on the planet and at any point in history, that either become rich with statist policies or has experienced superior levels of growth with statist policies.

They never have an answer. Or, to be more specific, they never have an accurate answer since Sweden (their reflex response) became rich when government was small and has stumbled ever since a large welfare state was imposed.

And if they are willing to have an extended discussion, my next step is to compare the long-run performance of market-friendly jurisdictions with statist jurisdictions. Whether we’re looking at Chile vs. Venezuela, North Korea vs. South Korea, or Hong Kong vs. Argentina, the results always show that economic liberty is the recipe for growth and prosperity.

When I ask them to show a statist nation with decades of good results, they don’t have an answer. Or, to be more specific, they never have an accurate answer since China (their reflex response) only started to grow once the economy was partially liberalized.

I’m pontificating on this topic because a reader sent me this very stark contrast between market-friendly Botswana and the statist hellhole of Zimbabwe. I can’t vouch for the specific numbers, though it appears some of them are from the Heritage Foundation’s Index of Economic Freedom.

The obvious lesson is that good policy is producing vastly superior results in Botswana.

But I wanted independent confirmation since not everything one sees on the Internet is true (shocking!).

So I checked Human Progress, the invaluable data portal created by Marian Tupy, and downloaded more than 50 years of data for inflation-adjusted ($2010) per-capita GDP in Botswana, Zimbabwe, and South Africa.

The results, to put it mildly, are stunning. Botswana has enjoyed much faster growth than South Africa and Zimbabwe has suffered horrible stagnation.

South Africa’s anemic performance doesn’t surprise me.

And I guess the gap between Botswana and Zimbabwe shouldn’t surprise me, either. After all, Marian wrote about the difference between Botswana and Zimbabwe back in 2008.

How different, I thought, was Zimbabwe from Botswana, the latter of which is safe and increasingly prosperous. But what accounts for such striking differences between the two neighbors? It turns out that much of the difference stems from the degree of freedom that each populace enjoys.

Here’s some of what he wrote about Botswana.

As Robert Guest of The Economist noted in his 2004 book, The Shackled Continent, “In the last 35 years, Botswana’s economy has grown faster than any other in the world…” According to Scott Beaulier, an economist at Beloit College, “Khama adopted pro-market policies on a wide front. His new government promised low and stable taxes to mining companies, liberalized trade, increased personal freedoms, and kept marginal income tax rates low to deter tax evasion and corruption.” …Economic openness served Botswana well. Between 1966 and 2006, its average annual compound growth rate of GDP per capita was 7.22 percent — higher than China’s 6.99 percent. Its GDP per capita (adjusted for inflation and purchasing power parity) rose from $671 in 1966 to $10,813 in 2005.

And here are some of his observations about Zimbabwe.

…almost all of the country’s 4,000 white-owned farms were invaded by state-organized gangs. Some of the farmers who resisted the land seizures were murdered, while others fled abroad. …The agricultural sector soon collapsed, and with it most of Zimbabwe’s tax revenue and foreign currency reserves. …the government ordered the Reserve Bank of Zimbabwe (RBZ) to print more money, sparking the first hyperinflation of the 21st century. …Mugabe’s answer to the falling economy was to increase state patronage and the intensity of the looting.

Needless to say, nothing has changed in the decade since that article was published. Though hopefully Mugabe’s recent ouster may lead to better policy in Zimbabwe (it would be difficult to move in the wrong direction, though Venezuela is evidence that further deterioration is possible).

Let’s conclude with a video I shared three years ago, but it’s worth a second look since we’re considering Botswana’s comparative success.

By the way, none of this suggests Botswana is perfect. Indeed, it’s not even close.

According to the Fraser Institute’s Economic Freedom of the World, it is ranked #50, which means it isn’t even in the top quartile. And its latest score of 7.37 (out of 10) is well below top-ranked Hong Kong’s score of 8.97.

But you don’t have to be fast to win a race. You simply need to be quicker than your competitors. And, on the continent of Africa, Botswana has the most economic freedom.

P.S. I fully expect South Africa to move in the wrong direction, at least in relative terms if not absolute terms.

P.P.S. If you liked the “story of two neighbors” comparison of Botswana and Zimbabwe at the beginning of this column, you’ll probably enjoy this comparison of Detroit and Hiroshima and this comparison of Hong Kong and Havana.

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Given Social Security’s enormous long-run financial problems, the program eventually will need reform.

But what should be done? Some folks on the left, such as Barack Obama and Hillary Clinton, support huge tax increases to prop up the program. Such an approach would have a very negative impact on the economy and, because of built-in demographic changes, would merely delay the program’s bankruptcy.

Others want a combination of tax increases and benefit cuts. This pay-more-get-less approach is somewhat more rational, but it means that today’s workers would get a really bad deal from Social Security.

This is why I frequently point out that personal retirement accounts (i.e., a “funded” system based on real savings) are the best long-run solution. And to help the crowd in Washington understand why this is the best approach, I explain that dozens of nations already have adopted this type of reform. And I’ve written about the good results in some of these jurisdictions.

Now it’s time to add Sweden to the list.

I actually first wrote about the Swedish reform almost 20 years ago, in a study for the Heritage Foundation co-authored with an expert from Sweden. Here’s some of what we said about the nation’s partial privatization.

Swedish policymakers decided that both individual workers and the overall economy would benefit if the old-age system were partially privatized. …Workers can invest 2.5 percentage points of the 18.5 percent of their income that they must set aside for retirement. …the larger part-16 percent of payroll-goes to the government portion of the program. …What makes the government pay-as-you-go portion of the pension program unique, however, is the formula used for calculating an individual’s future retirement benefits. Each worker’s 16 percent payroll tax is credited to an individual account, although the accounts are notional. …the government uses the money in these notional accounts to calculate an annuity (annual retirement benefit) for the worker. …the longer a worker stays in the workforce, the larger the annuity received. This reform is expected to discourage workers from retiring early… There are many benefits to Sweden’s new system, including greater incentives to work, increased national savings, a flexible retirement age, lower taxes and less government spending.

While that study holds up very well, let’s look at more recent research so we can see how the Swedish system has performed.

I’m a big fan of the fully privatized portion of the Swedish system (the “premium pension”) funded by the 2.5 percent of payroll that goes to personal accounts.

But let’s first highlight the very good reform of the government’s portion of the retirement system. It’s still a tax-and-transfer scheme, but there are “notional” accounts, which means that benefits for retirees are now tied to how much they work and how much they pay into the system.

A new study for the American Enterprise Institute, authored by James Capretta, explains the benefits of this approach.

Sweden enacted a reform of its public pension system that combines a defined-contribution approach with a traditional pay-as-you-go financing structure. The new system includes better work incentives and is more transparent to participants. It is also permanently solvent due to provisions that automatically adjust payouts based on shifting demographic and economic factors. …A primary objective…in Sweden was to build a new system that would be solvent permanently within a fixed overall contribution rate. …pension benefits are calculated based on notional accounts, which are credited with 16.0 percent of workers’ creditable wages. …The pensions workers get in retirement are tied directly to the amount of contributions they make to the system. …This design improved incentives for work… To keep the system in balance, this rate of return is subject to adjustment, to correct for shifts in demographic and economic factors that affect what rate of return can be paid within the fixed budget constraint of a 16.0 percent contribution rate.

The final part of the above excerpts is key. The system automatically adjusts, thus presumably averting the danger of future tax hikes.

Now let’s look at some background on the privatized portion of the new system. Here’s a good explanation in a working paper from the Center for Fiscal Studies at Sweden’s Uppsala University.

The Premium Pension was created mainly for three purposes. Firstly, funded individual accounts were believed to increase overall savings in Sweden. …Secondly, the policy makers wanted to allow participants to take account of the higher return in the capital markets as well as to tailor part of their pension to their risk preferences. Finally, an FDC scheme is inherently immune against financial instability, as an individual’s pension benefit is directly financed by her past accumulated contributions. The first investment selections in the Premium Pension plan took place in the fall of 2000, which is known as the “Big Bang” in Sweden’s financial sector. …any fund company licensed to do business in Sweden is allowed to participate in the system, but must first sign a contract with the Swedish Pensions Agency that specifies reporting requirements and the fee structure. Benefits in the Premium Pension Plan are paid out annually and can be withdrawn from age 61.

And here’s a chart from the Swedish Pension Agency’s annual report showing that pension assets are growing rapidly (right axis), in part because “premium pension has provided a 6.7 percent average value increase in people’s pensions per year since its launch.” Moreover, administrative costs (left axis) are continuously falling. Both trends are very good news for workers.

Let’s close by citing another passage from Capretta’s AEI study.

He looks at Sweden’s long-run fiscal outlook to other major European economies.

According to European Union projections, Sweden’s total public pension obligations will equal 7.5 percent of GDP in 2060, which is a substantial reduction from the…8.9 percent of GDP it spent in 2013. …In 2060, EU countries are expected to spend 11.2 percent of GDP on pensions. Germany’s public pension spending is projected to increase…to 12.7 percent of GDP in 2060. …The EU forecast shows France’s pension obligations will be 12.1 percent of GDP in 2060 and Italy’s will be 13.8 percent of GDP.

I think 8.9 percent of GDP is still far too high, but it’s better than diverting 11 percent, 12 percent, or 13 percent of economic output to pensions.

And the fiscal burden of Sweden’s system could fall even more if lawmakers allowed workers to shift a greater share of their payroll taxes to personal accounts.

But any journey begins with a first step. Sweden moved in the right direction. The United States could learn from that successful experience.

P.S. Pension reform is just the tip of the iceberg. As I wrote two years ago, Sweden has implemented a wide range of pro-market reforms over the past few decades, including some very impressive spending restraint in the 1990s. If you’re interested in more information about these changes, check out Lotta Moberg’s video and Johan Norberg’s video.

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As a policy wonk, I mostly care about the overall impact of government on prosperity. So when I think about the effect of red tape, I’m drawn to big-pictures assessments of the regulatory burden.

Here are a few relevant numbers that get my juices flowing.

  • Americans spend 8.8 billion hours every year filling out government forms.
  • The economy-wide cost of regulation reached $1.75 trillion in 2010.
  • For every bureaucrat at a regulatory agency, 100 jobs are lost in the economy’s productive sector.
  • A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”
  • Regulatory increases since 1980 have reduced economic output by $4 trillion.
  • The European Central Bank estimated that product market and employment regulation has led to costly “misallocation of labour and capital in eight macro-sectors,” and also found that reform could boost national income by more than six percent.

But one thing I’ve learned over the years is that I’m not normal.

Most people don’t get excited about these macro-type calculations.

Instead they’re far more likely to get agitated by regulations that make their daily lives a hassle. Such as:

I certainly can sympathize. It’s galling that the clowns in Washington have made our existence less pleasant.

Most people also are quite responsive to anecdotes about red tape. Simply stated, big-picture numbers are like a skeleton, while real-world examples put meat on the bones.

Today, let’s look at some absurd examples of the regulatory state in action.

We’ll start with bone-headed pizza regulation, as explained by the Wall Street Journal.

FDA released guidance for posting calorie disclosures at restaurants with more than 20 locations, and the ostensible point is to help folks choose healthier foods. The regulations…are an outgrowth of the 2010 Affordable Care Act… The reason some restaurants have spent years fighting these rules is not because executives lay awake at night plotting how to make Americans obese. It’s because the rules are loco. …Take pizza companies, which have to display per slice ranges or the number for the entire pie. Calories vary based on what you order—the barbarians who put pineapple on pizza are consuming fewer calories than someone who chooses pepperoni and extra cheese. But the number of pepperonis on a pizza depends on the pie’s size and whether someone also adds onions and sausage. ..The rules are so vague that companies could face a crush of lawsuits, which will be abetted by this “nonbinding” FDA guidance.

By the way, you won’t be surprised to learn that academic researchers have found these types of rules have no effect on consumer choices.

A systematic review and meta-analysis determined the effect of restaurant menu labeling on calories and nutrients…were collected in 2015, analyzed in 2016, and used to evaluate the effect of nutrition labeling on calories and nutrients ordered or consumed. Before and after menu labeling outcomes were used to determine weighted mean differences in calories, saturated fat, total fat, carbohydrate, and sodium ordered/consumed… Menu labeling resulted in no significant change in reported calories ordered/consumed… Menu labeling away-from-home did not result in change in quantity or quality, specifically for carbohydrates, total fat, saturated fat, or sodium, of calories consumed among U.S. adults.

Shocking, just shocking. Next thing you know, somehow will tell us that Obamacare didn’t lower premiums for health insurance!

For our second example, we have a surreal story out of California.

A farmer faces trial in federal court this summer and a $2.8 million fine for failing to get a permit to plow his field and plant wheat in Tehama County. A lawyer for Duarte Nursery said the case is important because it could set a precedent requiring other farmers to obtain costly, time-consuming permits just to plow their fields. “The case is the first time that we’re aware of that says you need to get a (U.S. Army Corps of Engineers) permit to plow to grow crops,” said Anthony Francois, an attorney for the Pacific Legal Foundation. “We’re not going to produce much food under those kinds of regulations,” he said. …The Army did not claim Duarte violated the Endangered Species Act by destroying fairy shrimp or their habitat, Francois said. …Farmers plowing their fields are specifically exempt from the Clean Water Act rules forbidding discharging material into U.S. waters, Francois said.

Wow, sort of reminds me of the guy who was hassled by the feds for building a pond on his own property. Or the family persecuted for building a house on their own property.

Last but not least, our third example contains some jaw-dropping tidbits about red tape in a New York Times story.

Indian Ladder Farms, a fifth-generation family operation near Albany, …sells homemade apple pies, fresh cider and warm doughnuts. …This fall, amid the rush of commerce — the apple harvest season accounts for about half of Indian Ladder’s annual revenue — federal investigators showed up. They wanted to check the farm’s compliance… Suddenly, the small office staff turned its focus away from making money to placating a government regulator. …The investigators hand delivered a notice and said they would be back the following week, when they asked to have 22 types of records available. The request included vehicle registrations, insurance documents and time sheets — reams of paper in all. …the Ten Eyck family, which owns the farm, along with the staff devoted about 40 hours to serving the investigators, who visited three times before closing the books. …This is life on the farm — and at businesses of all sorts. With thick rule books laying out food safety procedures, compliance costs in the tens of thousands of dollars and ever-changing standards from the government…, local produce growers are a textbook example of what many business owners describe as regulatory fatigue. …The New York Times identified at least 17 federal regulations with about 5,000 restrictions and rules that were relevant to orchards. …Mr. Ten Eyck…fluently speaks the language of government compliance, rattling off acronyms that consume his time and resources, including E.P.A. (Environmental Protection Agency), OSHA (Occupational Safety and Health Administration), U.S.D.A. (United States Department of Agriculture) and state and local offices, too, like A.C.D.O.H. (Albany County Department of Health).

And here’s an info-graphic that accompanied the article.

Wow. No wonder a depressingly large share of the population prefers to simply get a job as a bureaucrat.

Needless to say, this is not a system that encourages and enables entrepreneurship.

Which is why deregulation is a good idea (and Trump deserves credit for making a bit of progress in this area). We need some sensible cost-benefit analysis so that bureaucracies are focused on public health rather than mindless rules.

And it also would be a good idea in many cases to rely more on mutually reinforcing forms of private regulation.

Since I’m a self-confessed wonk, I’ll close by sharing this measure of the ever-growing burden of red tape. I realize it’s not as attention-grabbing as anecdotes and horror stories, but it is very relevant if we care about long-run growth and competitiveness.

P.S. On the topic of regulation, I admit that this example of left-wing humor about laissez-faire dystopia is very clever and amusing.

P.P.S. I’ve used an apple orchard as an example when explaining why a tax bias against saving and investment makes no sense. I’ll now have to mention that the beleaguered orchard owner also has to deal with 5,000 regulatory restrictions.

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I’m not a fan of conspiracy theories. When people ask me whether there is some sinister, behind-the-scenes cabal running Washington, I tell them that petty corruption, self interest, and “public choiceare much better explanations for the nonsensical policies being imposed on the country.

So you won’t be surprised that rhetoric about the “deep state” rubs me the wrong way. If the term simply was used to describe D.C.’s bloated, self-interested, and left-leaning bureaucracies, that would be okay. But is seems that the phase also implies some sort of secret master plan on the part of shadowy insiders.

To be blunt, the people in Washington don’t have the competence to design, implement, and enforce any type of master plan. Yes, we have a Leviathan state, but it’s much more accurate to think of Uncle Sam as a covetous, obese, and blundering oaf (as illustrated by my collection of cartoons).

That being said, that oaf is not a friend of liberty, as explained in an article published by the Federalist.

…to make a government job more like the ones the rest of us have will require the president and Congress to undo more than a century of misguided, anti-democratic, and unconstitutional laws governing the civil service. …the bulk of the civil service—2.8 million bureaucrats—has become a permanent class of powerbrokers, totally unaccountable to the winds of democratic change. …incompetence and corruption are the least of the problems with the modern civil service. With 95-99 percent of political donations from government employees going to Hillary Clinton in the last election, it looks less like a system of apolitical administrators and more like an arm of the Democratic Party. …Civil service protections…have created a system that grows government and advances left-wing causes regardless of who the people elect.

Moreover, there is a structural feature of the Washington bureaucracy that gives it dangerous powers.

John Tierney’s column in the Wall Street Journal explains the problem of the “administrative state.”

What’s the greatest threat to liberty in America? …the enormous rogue beast known as the administrative state. Sometimes called the regulatory state or the deep state, it is a government within the government… Unelected bureaucrats not only write their own laws, they also interpret these laws and enforce them in their own courts with their own judges. All this is in blatant violation of the Constitution… Mr. Hamburger, 60, a constitutional scholar…says, sitting in his office at Columbia Law School… “The government can choose to…use an administrative proceeding where you don’t have the right to be heard by a real judge or a jury and you don’t have the full due process of law…” In volume and complexity, the edicts from federal agencies exceed the laws passed by Congress by orders of magnitude. “The administrative state has become the government’s predominant mode of contact with citizens,” Mr. Hamburger says. …“The framers of the Constitution were very clear about this,” Mr. Hamburger says…”Congress cannot delegate the legislative powers to an agency, just as judges cannot delegate their power to an agency.”

George Will elaborates, noting that “administrative law” is an affront to the Constitution’s principle of “rival branches.”

…the administrative state distorts the United States’ constitutional architecture…Clarence Thomas…is urging the judicial branch to limit the legislative branch’s practice of delegating its power to the executive branch. …This subject is central to today’s argument between constitutionalists and progressives. …Today, if Congress provides “a minimal degree of specificity” in the instructions it gives to the executive, the court, Thomas says, abandons “all pretense of enforcing a qualitative distinction between legislative and executive power.” …the principles Thomas has articulated “attack the very existence of the modern administrative state.” This state, so inimical to conservatism’s aspiration for government limited by a constitutional structure of rival branches… Woodrow Wilson…became the first president to criticize America’s founding, regretted the separation of powers because he thought modern government required a clerisy of unfettered administrators. …Today we are governed by Wilson’s clerisy, but it does not deliver what is supposed to justify the overthrow of James Madison’s constitutional system — efficient, admirable government.

Peter Wallison of the American Enterprise Institute adds some cogent analysis.

Although the Constitution places the federal legislative power in Congress, it is now increasingly — and alarmingly — flowing to administrative agencies that, unlike Congress, are not directly accountable to the public affected by their decisions. Unless we can find a solution to this problem—a way to curb and cabin the discretionary power of administrative agencies —decentralization and individual self-determination will eventually be brought to an end. …The framers believed that the tripartite structure of the federal government would be enough to prevent any one of the three branches from consolidating the power of government and becoming a danger to liberty. But with the growth of the administrative state, we may now be seeing exactly the consolidation of powers that Madison feared. …the judicial branch is supposed to be the final interpreter of the Constitution and thus the objective protector of the framework the Constitution ordains. But unfortunately, modern courts have generally failed to perform this role… America is an exceptional country in part because its constitutional framework has, until relatively recently, limited the government’s ability to centralize its control and restrain the nation’s diversity. If we are to avoid a dramatic over-centralization of power, the growth of the administrative state must be restrained.

In an article for National Review, Stanley Kurtz delves into the topic.

the gist of the growing conservative critique of the administrative state…focuses on a runaway bureaucracy’s threat to constitutional government. Congress has improperly delegated much of its law-making power to bureaucrats, who in turn have abusively expanded this authority. The courts, for their part, have turned a blind eye to the administrative power-grab. Meanwhile, agencies staffed by unelected bureaucrats now operate de facto courts. In effect, these agencies negate the separation of powers by simultaneously exercising legislative, executive, and judicial functions, the very definition of authoritarian rule. …governors and state legislators can be unaware of policy end-runs imposed by federal agreements with a state’s own bureaucrats. At both the state and federal levels, then, bureaucracy has broken loose and effectively turned into a national fourth branch of government. …The Founders designed our federalist system to secure liberty by dividing and disbursing power, and by ensuring that local and state governments would remain more accountable to citizens than a distant federal government ever could. In fundamental ways, however, the modern practice of conditioning federal grants on state acceptance of federal dictates undermines the Founders’ intent. …

Robert Gebelhoff of the Washington Post points out that this fight has major implications.

One of the legal issues that’s less often discussed is the role that the next Supreme Court justice will play in conservatives’ long-running legal fight to limit the size of the federal government. For decades, conservatives on the bench have been losing that war, giving way to a system of administrative law that is written, for the most part, by bureaucratic agencies. …it’s a really big deal. Over the past half century, agencies have exploded in size and power, so this debate really is about how much power the federal government should have. …Conservatives, fearful that bureaucracies are becoming an unchecked “fourth branch of government,” have decried agency deference. Just last month, Justice Clarence Thomas argued that the doctrine “has metastasized,” as if it were a cancer. And back in 2013, Chief Justice John Roberts warned of the “danger posed by the growing power of the administrative state…” Both Roberts and Thomas frame the issue as a threat to the separation of powers: We’re letting agencies in the executive branch dip into the powers reserved for the judicial and legislative branches. …And by allowing bureaucrats the ability to define the scope of their own jurisdiction, we let them answer questions meant to be left up to the courts. This, they argue, is at odds with the Constitution. …Conservatives fearing a powerful bureaucratic state have few legal weapons to fight it. The future of a small-government Supreme Court is bleak, and the march toward greater agency control of the law will probably continue forward.

I’ll close with some recent polling data about the “deep state” from Monmouth University.

Here’s a question asking whether there’s a conspiratorial version of the “deep state.”

I’m not sure what to think of the answers.

I like people to be suspicious of the federal government. But I’d much prefer them to be concerned because they’re reading my daily columns, not because they think there’s a sinister plot.

I prefer the answers to this next question. Most people presumably have never heard of “administrative law” or the “administrative state,” but they do have a healthy skepticism of bureaucratic rule.

Most of the authors cited today correctly want federal judges to fix the problem by limiting the power of bureaucrats to make and enforce law.

That would be desirable, but I’d go much further. We should eliminate almost all of the agencies, programs, and departments that clutter Washington. Then the problem of the administrative state automatically disappears.

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If you were exempted from taxation, you’d presumably be very happy. After all, even folks on the left do everything they can to minimize their tax payments.

Now imagine that you are put in charge of tax policy.

Like Elizabeth Warren, you obviously won’t volunteer to start paying tax, but what would you recommend for other people?

Would you want them to also enjoy tax-free status, or at least get to experience a smaller tax burden? Or would you take a malicious approach and suggest tax increases, comforted by the fact that you wouldn’t be affected?

In this theoretical scenario, I hope most of us would choose the former approach and seek tax cuts.

But not everybody feels the same way. The bureaucrats at the International Monetary Fund actually do receive tax-free salaries. Yet instead of seeking to share their good fortune with others, they routinely and reflexively urge higher taxes on the rest of us. Here are some articles, all from the past 12 months, that I’ve written about the IMF’s love affair with punitive taxation.

  • Last June, I wrote about the IMF pushing a theory that higher taxes would improve growth in the developing world.
  • Last July, I wrote about the IMF complaining that tax competition between nations is resulting in lower corporate tax rates.
  • Last October, I wrote about the IMF asserting that lower living standards are desirable if everyone is more equally poor.
  • Also in October, I wrote about the IMF concocting a measure of “fiscal space” to justify higher taxes across the globe.
  • Last November, I wrote about the IMF publishing a study expanding on its claim that equal poverty is better than unequal prosperity.
  • This February, I wrote about the IMF advocating more double taxation of income that is saved and invested.

Needless to say, I especially don’t like it when the IMF urges higher taxes in America.

But I think everybody should have more freedom and prosperity, so I also don’t like it when the IMF pushes tax hikes elsewhere. I don’t like it when the tax-free bureaucrats advocate higher taxes on an entire region. I don’t like it when they push a high-tax agenda on big countries. I don’t like it when they urge tax increases on small countries.

What upsets me most of all, however, is that the IMF is trying to punish very poor nations is sub-Saharan Africa.

This came to my attention when I saw a Bloomberg report about the IMF recommending policy changes in Ivory Coast. At first glance, I thought the IMF was doing something sensible, supporting faster growth and higher income.

Ivory Coast must improve its tax system if the world’s biggest cocoa producer wants to maintain economic growth of at least 7 percent, the International Monetary Fund said. Jose Gijon, the resident representative for the Washington-based lender, said in an interview in the commercial capital of Abidjan Wednesday. “…if it wants to become an emerging country and for that, it needs higher income.”

But I found out that the bureaucrats wanted higher income for the government.

“The key for Ivory Coast is revenue…The government needs to create sufficient fiscal space…”

Unsurprisingly, local politicians like the idea of getting more loot.

The government seeks to gradually increase its tax revenue to 20 percent of gross domestic product from 15.9 percent now, Prime Minister Amadou Gon Coulibaly said in 2017.

How sad. Ivory Coast (now usually known as Côte d’Ivoire) is a very poor country, with living standards akin to those of the United States in 1860. Yet rather than recommend the policies that allowed the United States and other western nations to become rich, such as no income tax and very small government, the IMF wants to fatten the coffers of a corrupt and ineffective public sector.

Here’s something else that is sad. This seems to be the advice the IMF gives to all nations in sub-Saharan Africa.

Consider this story from Kenya.

Kenyans should brace themselves for higher taxes after the Government caved in to the International Monetary Fund’s (IMF) demands. …It made the commitment to the IMF in a letter of intent that spells out a raft of measures that are likely to eat into consumers’ pockets. …The sectors to be hit include agriculture, manufacturing, education, health, tourism, finance, social work, and energy. …The Government hopes to squeeze an extra Sh40 billion in taxes from these sectors. This is likely to have a ripple effect by pushing up the cost of goods and services… The Government intends to increase income tax by over Sh100 billion in the financial year 2018/19.

We also have the IMF’s perverse approach to “tax reform” in Nigeria.

The International Monetary Fund (IMF) has advised Nigeria to embark on a full Value Added Tax (VAT) reform. …The lender’s Mission Chief for Nigeria, African Department, Mr Amine Mati, …said government must raise taxes… In addition, government should also increase taxes on alcohol and tobacco and broaden VAT.

The bureaucrats also want more tax revenue in Tanzania.

The International Monetary Fund (IMF) Deputy Managing Director, Tao Zhang has hailed Tanzania for managing to boost tax collection… The visiting IMF leader said it was vital to mobilise more…public resources by strengthening tax collection… “it is crucial to mobilise more…public resources within Tanzania, especially by strengthening tax collection…” he said at a public lecture he gave in Dar es Salaam yesterday.

The IMF is even using a $190 million bribe to advocate higher taxes in Ghana.

Ghana needs to improve revenue collection…to achieve its fiscal targets, the International Monetary Fund said. …“Fiscal consolidation has to be revenue-based,” Koliadina told reporters in the capital, Accra. …A positive outcome of the fifth and sixth reviews of the program will lead to the IMF disbursing $190 million to Ghana, Koliadina said.

Last but not least, let’s look at the IMF’s misguided advice for Botswana.

The Government of Botswana should seek to strengthen its revenue base…, the International Monetary Fund has said. …”The authorities agreed that there is a significant potential to boost domestic revenues through tax administration and tax policy reforms that could…provide additional funding for future fiscal expenditures,” the report stated.

Higher taxes to finance bigger government? Wow, talk about economic malpractice.

Since Botswana has been one of the few bright spots in Africa, I hope lawmakers tell the IMF to get lost. But I worry that politicians will be happy to take the IMF’s bad advice.

How tragic.

These are the only nations I investigated, so I guess it’s possible that there’s a sub-Saharan nation where the IMF hasn’t recommended higher taxes. Heck, it’s even theoretically possible that the bureaucrats may have suggested lower taxes somewhere on the continent (though that’s about as likely me playing pro football next season).

I’ll simply note that the IMF openly admits that it wants higher taxes all across the region.

Tax revenues play a critical role for countries to create room in their budgets to increase spending on social services…raising tax revenues is the most growth-friendly way to stabilize debt. More broadly, building a country’s tax capacity is at the center of any viable development strategy…we see potential in many countries of sub-Saharan Africa to raise tax revenues by about one percent of GDP per year over the next five or so years. …Since building the capacity to collect more from personal income taxes takes time, in the next few years VAT and excise taxes likely offer the biggest potential for additional revenue. For example, recent studies by the IMF indicate a revenue potential of about 3 percent of GDP from VAT in Cape Verde, Senegal, and Uganda, and ½ percent of GDP from excises for all countries in sub-Saharan Africa. …It is also important to consider newer sources of revenue, such as property taxes. …Raising revenues is often a politically difficult task. But the current economic junction in sub-Saharan Africa together with sustained development needs creates an imperative for action now.

I’m almost at a loss for words. It’s mind-boggling that anybody could look at policy in sub-Saharan Africa and conclude that the recipe for growth is giving more money to politicians.

And I’m equally flabbergasted that the IMF openly claims that bigger government is good for growth. Unsurprisingly, the bureaucrats never try to justify that bizarre and anti-empirical assertion.

For those who are interested in genuinely sensible information on how poor nations can become rich nations, I strongly recommend this video from the Center for Freedom and Prosperity.

P.S. Back in 2015, to mock the pervasive statism at the Organization for Economic Cooperation and Development, I created a fake fill-in-the-blanks/multiple-choice template. A similar exercise for the IMF would only require one short sentence: “The nation of __ should raise taxes.”

P.P.S. In other words, this cartoon is very accurate.

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