Is the United States a Horrible Place for Women?

Over the years, I’ve shared some rankings that are utterly preposterous.

• A writer for the Atlantic actually claimed that America was one of the world’s 17 most authoritarian nations.
• The statists at the OECD put together a ranking asserting that poverty is a bigger problem in the United States than in Greece, Portugal, or Turkey.
• In a 2010 ranking of influence in the world of global finance, the FCI 500 placed me higher than either George Soros or Paul Krugman (I wish that was true).
• A group called the New Economics Foundation published a “Happy Planet Index” that ranked miserably poor places such as Bangladesh and Venezuela above the United States.
• Jeffrey Sachs scores basket-case countries such as Cuba, Belarus, Greece, and Argentina above the United States in achieving the U.N.’s so-called sustainable development goals.

Needless to say, none of these ranking pass the laugh test. You know the people involved are either deluded or dishonest.

Well, we have a new addition to this disreputable collection, as reported by CBS.

The United States has been ranked for the first time among the 10 nations deemed to be the most dangerous for women by experts in the field. A survey by the Thomson Reuters Foundation of about 550 experts in women’s issues around the globe labeled the U.S. the 10th most dangerous nation in terms of the risk of sexual violence, harassment and being coerced into sex. …According to the survey, which was last carried out in 2011 and did not then rank the U.S. among the top 10 most dangerous nations, India is the most perilous country for women… Most of the other countries in the top-10 determined by the foundation’s survey are countries with ongoing military conflicts or insurgencies, or where long-held religious and political views have kept women on an unequal footing in terms of law enforcement and treatment in society generally. …The foundation asked the experts which five of the 193 United Nations member states they felt were “most dangerous for women and which country was worst in terms of health care, economic resources, cultural or traditional practices, sexual violence and harassment, non-sexual violence and human trafficking,” according to the foundation.

And here’s their list of the supposed 10-worst countries for women.

I’m assuming that the top-9 countries are not good places for women, but think about what sort of person would put the United States at #10.

• Do they really think the United States is worse for women than Egypt, where about 90 percent of females are subject to the horrifying practice of female genital mutilation?
• Do they really think the United States is worse for women than South Africa, where the rape rate is five times higher?
• Do they really think the United States is worse for women than Nepal, where per-capita income is just 1.3 percent of American levels?
• Do they really think the United States is worse for women than Angola, where the average woman dies nearly three decades sooner?
• Do they really think the United States is worse for women than China, where girl children are much more likely to be aborted or subject to infanticide?

In other words, the list is a joke. And the 550 supposed “experts” in women’s issues beclowned themselves.

By the way, my criticisms have nothing to do with ideology. There are many lists from left-wing groups that are intellectually rigorous. I strongly disagree with the folks at the Tax Justice Network, for instance, but their Financial Secrecy Index is methodologically honest and sound.

I also should point out that my objections have nothing to do with the USA looking bad. I don’t like it when the United States doesn’t crack the top-10 in measures of rule of law, tax competitiveness, or economic liberty, yet I share such data with no hesitation.

Shame on the Thomson Reuters Foundation is a joke for publishing such a list.

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What’s Happening with the Economy, Strong Growth or False Boom?

During the Obama years, I used data from the Minneapolis Federal Reserve to explain that the economic recovery was rather weak. And when people responded by pointing to a reasonably strong stock market, I expressed concern that easy-money policies might be creating an artificial boom.

Now that Trump’s in the White House, some policies are changing. On the plus side, we got some better-than-expected tax reform. Moreover, the onslaught of red tape from the Obama years has abated, and we’re even seeing some modest moves to reduce regulation.

But there’s also been bad news. Trump’s bad protectionist rhetoric is now turning into bad policy. And his track record on spending is very discouraging.

What’s hard to pin down, though, is the impact of monetary policy. The Federal Reserve apparently is in the process of slowly unwinding the artificially low interest rates that were part of its easy-money approach. Is this too little, too late? Is it just right? What’s the net effect?

Since economists are lousy forecasters, I don’t pretend to know the answer, but I think we should worry about the legacy impact of all the easy money, which is the point I made in this clip from a recent interview.

James Pethokoukis from the American Enterprise Institute has similar concerns.

Here’s some of what he recently wrote on the topic.

…this supposed “boom” looks more like same-old, same-old. First quarter GDP, for instance, was just revised down two ticks to 2% and monthly job growth is a bit weaker than under President Obama’s final few years. …What’s more, pretty much every recession for a century has been accompanied by some magnitude of explicit Fed tightening. And, of course, the Fed is now well into a tightening cycle. …Another complicating factor is the Trump trade policy, which seems to be a market suppressant right now, if not yet a significant economic one.

Those are all good points, though we still don’t know the answer.

I’ll close with two observations.

• First, our main concern should be boosting the economy’s long-run growth rate, and that’s why we need lower tax rates, less government spending, open trade, and less red tape. As I’ve noted already, Trump has a mixed track record.
• Second, a short-run concern is whether the Federal Reserve’s easy-money policy in recent years has created a bubble that is poised to burst. If it does, Trump will take the blame simply because he happens to be in the White House.

And that second issue gives me an excuse to re-emphasize that Keynesian monetary policy is just as foolish as Keynesian fiscal policy. You may enjoy a “sugar high” for a period of time, but eventually there’s a painful reckoning.

P.S. For what it’s worth, we’d have more growth and stability if policymakers learned from the “Austrian School” of economics.

P.P.S. Moreover, it’s a good idea to be skeptical about the Federal Reserve.

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The Western World’s Most Depressing Chart

Last week, I shared a graph showing that there are more guns than people in the United States, and I wrote that it was the “most enjoyable” chart of the year, mostly because it gets my leftist friends so agitated.

But I’m more likely to share gloomy visuals.

• The “most depressing” chart about Denmark, which shows a majority of the population lives off government.
• A “very depressing” chart about the United States, which shows how big business profits from cronyism.
• The “most depressing” chart about Japan, which shows that the tax burden has nearly doubled since 1965.

Now it’s time to add to that list. There’s a website called “Our World in Data,” which is a great resource if you’re a policy wonk who likes numbers. But some numbers are quite depressing.

For instance,if you peruse the “public spending” page, you’ll find a chart showing the dramatic expansion of redistribution spending as a share of economic output.

These numbers are very similar to the table I shared from Vito Tanzi back in 2013, which isn’t surprising since Professor Peter Lindert is the underlying source for both sets of data.

While the above chart is depressing to a libertarian, it’s nonetheless instructive because it confirms my argument that the western world became rich when government was very small and redistribution was tiny or even nonexistent.

For instance, nations in North America and Western Europe largely made the transition from agricultural poverty to middle-class prosperity during the “golden century” between the Napoleanic wars and World War I. And that was a period when redistribution spending basically didn’t exist and most nations didn’t even have income taxes (the U.S. didn’t make that mistake until 1913).

And even as recently as 1960, welfare states were very small compared to their current size. Indeed, redistribution spending in western nations averaged only about 10 percent of economic output, about half the size of today’s supposedly miserly American welfare state.

These points are important because some folks on the left misinterpret Wagner’s Law and actually try to argue that bigger government is good for growth.

P.S. South Korea has been a great success story for the past five decades, but that redistribution trendline is very worrisome.

P.P.S. The trendline for Greece helps to explain why that nation is bankrupt.

P.P.P.S. The chart shows that Canada is better than the United States, though that may not last since Canada’s current Prime Minister is seeking to undermine his nation’s competitive advantage.

P.P.P.P.S. While fiscal trends in the western world have been unfavorable, that bad news has been offset by positive trends for trade liberalization. Whether we see a big step backwards because of Trump remains to be seen.

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In One Chart, Everything You Need to Know about America’s Long-Run Fiscal Problem

I wrote yesterday about the continuing success of Switzerland’s spending cap.

Before voters changed the Swiss constitution, overall expenditures were growing by an average of 4.6 percent annually. Ever since the “debt brake” took effect, though, government spending has increased by an average of just 2.1 percent.

For all intents and purposes, Switzerland is getting good results because it is now complying with fiscal policy’s Golden Rule.

Unfortunately, the same cannot be said for the United States. The Congressional Budget Office just released its new long-run forecast of the federal budget.

The most worrisome factoid in the report is that the overall burden of federal spending is going to expand significantly over the next three decades, jumping from 20.6 percent of the economy this year to 29.3 percent of economic output in 2048.

And why will the federal budget consume an ever-larger share of economic output? The chart tells you everything you need to know. Our fiscal situation is deteriorating because government is growing faster than the private sector.

Actually, the chart doesn’t tell you everything you need to know. It doesn’t tell us, for instances, that tax increases simply make a bad situation worse since politicians then have an excuse to avoid much-need reforms.

And the chart also doesn’t reveal that entitlement programs are the main cause of ever-expanding government.

But the chart does a great job of showing that our fundamental problem is growth of government. Which presumably makes it obvious that the only logical solution is a spending cap.

The good news is that there already is a spending cap in Washington.

But the bad news is that it only applies to “appropriations,” which are a small share of the overall federal budget.

And the worse news is that politicians voted to bust that spending cap in 2013, 2015, and earlier this year.

The bottom line is that we know spending restraint works, but the challenge is figuring out a system that actually ties the hands of politicians. Switzerland and Hong Kong solved that problem by making their spending caps part of their national constitutions.

Sadly, there’s little immediate hope of that kind of reform in the United States.

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The Continuing Success of Switzerland’s Spending Cap

There are many threats to prosperity, both in the short run and long run.

• A tit-for-tat global trade war that would repeat the mistakes of the 1930s.
• Punitive class-warfare taxes stifling investment and entrepreneurship.
• Financial bubbles fueled by the easy-money policies of central banks.

Those are all things we should worry about. But here’s the issue that worries me the most.

• More government spending resulting from demographic change and entitlements.

Fortunately, there’s a solution. Governments should copy Switzerland and impose a spending cap. I explained this system in a column for the Wall Street Journal back in 2012.

…85% of its voters approved an initiative that effectively requires its central government spending to grow no faster than trendline revenue. The reform, called a “debt brake” in Switzerland, has been very successful. Before the law went into effect in 2003, government spending was expanding by an average of 4.3% per year. Since then it’s increased by only 2.6% annually. …politicians aren’t able to boost spending when the economy is doing well and the Treasury is flush with cash. Equally important, it is very difficult for politicians to increase the spending cap by raising taxes.

By the way, I just updated the calculations using IMF data. Looking at the numbers from 2003-2018, government spending has grown by an average of 2.1 percent per year since the debt brake went into effect.

In other words, the policy is becoming more successful over time.

Some argue, by the way, that spending restraint is bad for an economy. The Keynesians think that more government is “stimulus.” And many of the international bureaucracies (including the IMF) argue that more government is an “investment.”

There’s lots of evidence that smaller government is the right route for prosperity. But for today’s purposes, let’s focus just on the United States and Switzerland.

Both nations are prosperous by world standards, though the United States generally enjoyed a small advantage in terms of per-capita economic output according to the Maddison database. But in the past 15 years, Switzerland has jumped ahead.

Time for a big caveat. There are dozens of policies that help determine a nation’s prosperity, so it would be improper to claim that Switzerland overtook the United States solely because of the spending cap.

Switzerland ranks above the United States in Economic Freedom of the World, so many factors doubtlessly contributed to the nation’s superior performance. Both theory and evidence, however, suggest that fiscal discipline is good for prosperity.

But what about government debt? Did the spending cap in the debt brake succeed in controlling red ink?

The answer is yes, an emphatic yes.

Here are two charts, based on data from the International Monetary Fund’s World Economic Outlook database for the years since the debt brake went into effect. We can see that both gross debt and net debt increased in advanced countries and euro countries. In Switzerland, however, debt levels fell.

In other words, while debt levels have jumped in other industrialized nations, the level of red ink in Switzerland has declined. While other European nations have experienced fiscal crisis and ever-increasing amounts of debt, Switzerland has been an island of budgetary tranquility.

By the way, I can’t resist pointing out that Switzerland relies on spending restraint, and red ink fell. Other nations have adopted lots of tax increases, and red ink rose.

Hmmm…, maybe there’s a lesson to be learned?

P.S. Hong Kong also has a spending cap.

P.P.S. You can watch short presentations about their respective spending caps from Swiss and Hong Kong diplomats at an event I organized for staffers on Capitol Hill.

P.P.P.S. That event also included a speech about the very successful spending cap (TABOR) in Colorado.

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Protectionism, Obamacare, and Atlas Shrugged

I very much suspect Obama partisans and Trump partisans won’t like this column, but the sad reality is that both Obamacare and Trump’s protectionism have a lot in common.

• In both cases, government is limiting the freedom of buyers and sellers to engage in unfettered exchange.
• In both cases, the fiscal burden of government increases.
• In both cases, politicians misuse statistics to expand the size and scope of government.

Today, let’s add another item to that list.

• In both cases, the Washington swamp wins thanks to increased cronyism and corruption.

To see what I mean, let’s travel back in time to 2011. I wrote a column about Obamacare and cited some very persuasive arguments by Tim Carney that government-run healthcare (or, to be more accurate, expanded government control of healthcare) was creating a feeding frenzy for additional sleaze in Washington.

Congress imposes mandates on other entities, but gives bureaucrats the power to waive those mandates. To get such a waiver, you hire the people who used to administer or who helped craft the policies. So who’s the net winner? The politicians and bureaucrats who craft policies and wield power, because this combination of massive government power and wide bureaucratic discretion creates huge demand for revolving-door lobbyists.

I then pointed out that the sordid process of Obamacare waivers was eerily similar to a passage in Atlas Shrugged.

Wesley Mouch…issued another directive, which ruled that people could get their bonds “defrozen” upon a plea of “essential need”: the government would purchase the bonds, if it found proof of the need satisfactory. …One was not supposed to speak about the men who…possessed needs which, miraculously, made thirty-three frozen cents melt into a whole dollar, or about a new profession practiced by bright young boys just out of college, who called themselves “defreezers” and offered their services “to help you draft your application in the proper modern terms.” The boys had friends in Washington.

Well, the same thing is happening again. Only this time, as reported by the New York Times, protectionism is the policy that is creating opportunities for swamp creatures to line their pockets.

The Trump administration granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products. …several companies whose applications were denied faced objections from American steel makers. …companies that have applied for the exclusions criticized the exercise as both long and disorganized. “This is the most screwed-up process,” said Mark Mullen, president of Griggs Steel, a steel distributor in the Detroit area. “This is a disservice to our industry and the biggest insult to our intelligence that I have ever seen from the government.”

From an economic perspective, it certainly is true that this new system is “disorganized” and “a disservice” and an “insult to our intelligence.” Those same words could be used to describe the welfare state, the EEOC, farm subsidies, the tax code, and just about everything else the government does.

But there’s one group of people who are laughing all the way to the bank, The lobbyists, consultants, fixers, and other denizens of the swamp are getting rich. Whether they’re preparing the applications, lobbying for the applications, or lobbying against the applications, they are getting big paychecks.

And the longer this sordid protectionist process continues, we will see a repeat of what happened with Obamacare as senior-level people in government move through the revolving door so they can get lucrative contracts to help clients manipulate the system (yes, Republicans can be just as sleazy as Democrats).

Washington wins and we lose.

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Libertarianism in Five Pictures

I often share quizzes and tests to help people determine whether they are libertarian. Though I wonder if these two sentences are all people need to know.

But maybe the right approach is to use pictures. So here are five images that summarize libertarianism.

Let’s start by looking at the one group of people who don’t instinctively appreciate the non-aggression principle of libertarianism.

Now let’s look at a quote from the great Thomas Sowell.

This resonates with me because I’m not a lifestyle libertarian. I personally don’t like drugs, gambling, cigarettes, and prostitution, but it would never occur to me to support government coercion to prevent others from making their own decisions with their own bodies, property, and money. I just wish other people shared my tolerance.

This third image nicely illustrates the libertarian view that politicians like to create and exploit divisions in society to help distract from the reality that the real enemy is big government.

We don’t need everyone to love everyone, but we definitely should learn tolerance and adopt by a live-and-let-live mindset.

Here’s a uncomfortably accurate image from Reddit‘s libertarian page. Our ideas are great, but we often tend to be quirky and unconventional (or even “autistic dorks“), which makes it more challenging to win new converts.

The above image reminds me of the the Mel Gibson comparison I shared back in April.

Last but not least, here’s an image from the libertarian meme page on Reddit. A very apt summary of how the country operates.

Amen. This image should be paired with this poster. I imagine these kids would agree.

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The United Nations Disseminates Absurd Lies about Poverty in America

When writing about the statist agenda of international bureaucracies, I generally focus my attention on the International Monetary Fund and the Organization for Economic Cooperation and Development.

Today, let’s give some attention to the United Nations.

Based on this story from the Washington Post, the bureaucrats at the UN have concluded that America is a miserable and awful nation.

…a new United Nations report that examines entrenched poverty in the United States…calls the number of children living in poverty “shockingly high.” …the report, written by U.N. special rapporteur on extreme poverty and human rights Philip Alston, says the United States tops the developed world with the highest rates of youth poverty… The results of the report are not out of line with a number of others…in recent years by different organizations in which the United States has turned up at or near the top on issues such as poverty rates.

But I’ve learned from personal experience (see here and here) that the United Nations is guided by statist ideology and I should be extremely skeptical of any of its findings.

For instance, when it intervenes in policy (global warming and gun control, for instance, as well as the Internet, the War on Drugs, monetary policy, and taxpayer-financed birth control), the UN inevitably urges more power and control for government.

So let’s take a jaundiced look at some of the assertions in this new report, starting with that dramatic claim of record child poverty in America.

The United States…has the highest youth poverty rate in the Organization for Economic Cooperation and Development (OECD)… The consequences of neglecting poverty… The United States has one of the highest poverty…levels among the OECD countries… the shockingly high number of children living in poverty in the United States demands urgent attention. …About 20 per cent of children live in relative income poverty, compared to the OECD average of 13 per cent.

So is it true that poverty is very high in the USA and is it also true that America has the highest rate of child poverty of all OECD countries? Even higher than Mexico, Greece, and Turkey? And what is the source of this remarkable assertion?

If you look at footnote #51, you’ll see reference to an OECD publication that contains this supposedly damning chart.

But if you look at the fine print at the bottom, you’ll discover that the chart on child poverty doesn’t actually measure child poverty. Instead, the bureaucrats at the OECD have put together a measure of income distribution and decided that “relative poverty” exists for anyone who has less than 50 percent of the median level of disposable income.

In other words, the United States looks bad only because median income is very high compared to other nations.

Which is the same dishonest data manipulation that the OECD uses when exaggerating America’s overall poverty rate (other groups that have used this deliberately dishonest methodology include the Equal Welfare Association, Germany’s Institute of Labor Economics, and the Obama Administration).

The bottom line is that the key finding of the UN report is based on a bald-faced lie.

By the way, I’m not surprised to see that the UN report also cites the IMF to justify statist policies.

In a 2017 report, the International Monetary Fund (IMF) captured the situation…, stating that the United States economy “is delivering better living standards for only the few”, and that “household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy” …A much-cited IMF paper concluded that redistribution could be good for growth, stating: “The combined direct and indirect effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.”

For what it’s worth, the IMF’s research on growth and inequality is embarrassingly bad.

Here’s another big takeaway from the UN report.

The United States…has the highest…infant mortality rates among comparable OECD States. …The infant mortality rate, at 5.8 deaths per 1,000 live births, is almost 50 per cent higher than the OECD average of 3.9.

I’m not an expert on infant mortality. Indeed, I’ve never looked at infant mortality data. But given the UN’s reliance on dodgy and dishonest numbers in other areas, I’m skeptical whether these numbers are true.

And, according to Johan Norberg, the numbers about high levels of infant mortality in the United States are false.

The UN report contains many other ideologically motivated attacks on the United States.

For instance, America is a bad country because taxes supposedly are too low.

The United States has the highest rate of income inequality among Western countries. The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy and worsened inequality. …The tax cuts will fuel a global race to the bottom, thus further reducing the revenues needed by Governments to ensure basic social protection and meet their human rights obligations. …There is a real need for the realization to sink in among the majority of the American population that taxes are not only in their interest, but also perfectly reconcilable with a growth agenda.

While the above passage is remarkable for the level of economic illiteracy, I confess that I chortled with glee when I read the part about how the recent tax reform “will fuel a global race to the bottom.”

As I wrote last year and this year, the fact that other governments will face pressure to reduce tax rates is something to celebrate.

Here’s one final excerpt. The UN report also bashes the United States because we don’t view dependency as a human right.

Successive administrations, including the current one, have determinedly rejected the idea that economic and social rights are full-fledged human rights, despite their clear recognition not only in key treaties that the United States has ratified… But denial does not eliminate responsibility, nor does it negate obligations. International human rights law recognizes a right to education, a right to health care, a right to social protection for those in need and a right to an adequate standard of living.

Needless to say, a problem with this vision of “positive rights” is that it assumes there will always be a supply of chumps willing to work hard so the government can tax away their money to finance all the goodies. But Greece shows us that it’s just a matter of time before that games ends with disaster.

In other words, Thomas Sowell is right and Franklin Roosevelt was wrong.

Let’s close with some good news. As the Washington Post just reported, the UN’s dishonest anti-American screed apparently will prove costly to that bloated bureaucracy.

Alston arrived in Washington last fall on a mission from the U.N. Human Rights Council to document poverty in America. …he was told by a senior State Department official that his findings may influence the United States’ membership in the human rights body. …“I think I was being sent a message.” Two other people at the meeting, speaking on the condition of anonymity, confirmed Alston’s account. …Nikki Haley announced this week that the United States would withdraw from the Human Rights Council.

Good for Ambassador Haley.

Her actions stand in stark contrast to some of her predecessors, who apparently believed in taxpayer-financed self-flagellation.

Alston said he was initially invited by the U.S. government under President Barack Obama to study poverty in America. The invitation was extended again by U.S. officials under then-Secretary of State Rex Tillerson in 2017, he said. “We look forward to welcoming Mr. Alston to the United States for a country visit this December,” Flacelia Celsula, part of the U.S. delegation at the United Nations, said in a meeting of the Human Rights Council on June 8, 2017.

It goes without saying that Mr. Alston should have the freedom write leftist reports. He also should have the freedom to spread lies in those reports. But I don’t want American tax dollars to finance his ideological bilge.

Which brings us to the obvious takeaway. As seems to be the case with all international bureaucracies, the United Nations wastes money at a prodigious pace. With any luck, Alston’s nonsense will convince American policymakers that deep budget cuts for the UN are long overdue.

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The Most Enjoyable Graph of 2018

I don’t think I’m a glass-half-empty kind of person, but I realized that I have a habit of sharing “depressing” charts.

• The “most depressing” chart about Denmark.
• A “very depressing” chart about the United States.
• The “most depressing” chart about Japan.

Well, as the Monty Python folks advised, it’s time to look on the bright side of life.

So here’s the most enjoyable chart of 2018, courtesy of the Washington Post.

By the way, it’s not “enjoyable” because it shows more gun ownership.

Yes, I believe in private gun ownership, because I respect the Constitution, because I want to discourage crime, because I support liberty, and because I believe in the right of self-defense in case society goes off the rails. But those reasons don’t bring a smile to my face.

The reason the chart is so enjoyable is that it nicely captures Obama’s total failure to impose gun control. Heck, he didn’t just fail to change policy, he actually wound up being the best thing that ever happened to gun manufacturers. And I confess that makes me feel warm and fuzzy.

But let’s set that aside and actually take a closer look at gun ownership numbers. The data in the chart come from a global survey. Here’s some of the coverage of those numbers from the Associated Press.

The Small Arms Survey says 393 million of the civilian-held firearms, 46 percent, are in the United States, which is “more than those held by civilians in the other top 25 countries combined.” …the report’s author, Aaron Karp, said at a news conference. “American civilians buy an average of 14 million new firearms every year, and that means the United States is an overwhelming presence on civilian markets.” …The estimate of over 1 billion firearms worldwide at the end of 2017 also includes 133 million such weapons held by government military forces and 22.7 million by law enforcement agencies, it said. …The Small Arms Survey released its study to coincide with the third U.N. conference to assess progress on implementing a 2001 program known as Prevent, Combat and Eradicate the Illicit Trade in Small Arms… According to the report, the countries with the largest estimated number of civilian-held legal and illegal firearms at the end of 2017 were the United States with 393.3 million, India with 71.1 million, China with 49.7 million, Pakistan with 43.9 million and Russia with 17.6 million. …Americans, who own 121 firearms for every 100 residents. They are followed by Yemenis at 53, Montenegro and Serbia with 39, Canada and Uruguay about 35, and Finland, Lebanon and Iceland around 32.

Given America’s status, I’m tempted to start chanting “USA, USA, USA,” but there are some very important factoids buried in the AP report.

Anna Alvazzi del Frate, the institute’s program director, said that “the countries with the highest level of firearm violence — they don’t rank high in terms of ownership per person.” “So what we see is that there is no direct correlation at the global level between firearm ownership and violence,” she said.

Wow, that’s a remarkable admission. It turns out that more guns don’t lead to more crime. But we already knew that.

Now let’s look at some excerpts from the aforementioned story about the same report from the Washington Post.

There are more than 393 million civilian-owned firearms in the United States, or enough for every man, woman and child to own one and still have 67 million guns left over. Those numbers come from the latest edition of the global Small Arms Survey… The report, which draws on official data, survey data and other measures for 230 countries, finds that global firearm ownership is heavily concentrated in the United States. In 2017, for instance, Americans made up 4 percent of the world’s population but owned about 46 percent of the entire global stock of 857 million civilian firearms. …the United States stands out among the world’s wealthiest nations, with an ownership rate more than three times higher than the rate in the next-highest country, Canada. …Measured in rates or in raw terms, the United States is the civilian gun capital of the world.

Since I already shared the chart about the U.S. having more guns than people, here’s another chart from the story showing how Americans are far better armed than their counterparts in other advanced countries.

I’m surprised Switzerland isn’t in second place, but I’m glad to see good numbers from the Nordic nations (Bernie Sanders may have to reconsider his affection for those countries).

P.S. Thinking about whether to create a collection of “enjoyable charts,” the obvious choice would be the one from 2014 that showed how effectively the Tea Party-influenced GOP stymied Obama’s spending plans (that was back when Republicans were in favor of smaller government, unlike 2018).

P.P.S. The AP story mentioned that the United Nations has a pact to restrict private gun ownership. I explained in 2013 why that’s an awful scheme. The good news is that Trump’s new National Security Adviser is very solid on that issue.

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Dishonest and Deceptive Budget Analysis from the Washington Post

I try not to get too agitated about media bias, but I sometimes get “triggered” when the deliberate inaccuracies involve economic issues. And I get really irked when reporters write about non-existent spending cuts.

I’ve previously mocked the New York Times on this topic, so today let’s go after the Washington Post, based on this story which was republished by the Boston Globe.

House Republicans released a budget proposal Tuesday that would balance in nine years — but only by making large cuts to entitlement programs, including Medicare and Social Security… Along with other changes, the budget proposes to squeeze $537 billion out of Medicare over the next decade. …Changes to Medicaid and other health programs would account for $1.5 trillion in savings.

As a libertarian, this sounds like good news.

I want “large cuts” in government. I would like to go back to what America’s Founders envisioned, with a very tiny central government.

But it turns out that the reporter is peddling garbage. There are no cuts. And the story’s headline is especially inaccurate.

If you look at the 10-year details, you find that Social Security spending will climb by more than $700 billion, Medicare spending will increase by $500 billion, and spending on other health programs such as Medicaid will rise by $115 billion. Here are the numbers from the House GOP’s proposed budget.

 

Now let’s look at total spending. That’s the grey row at the bottom of the aforementioned table.

And let’s put those numbers into a 10-year chart.

As you can see, we still can’t find any “large cuts” for the simple reasons that none exist. Total spending is projected to climb by almost $1.5 trillion. Indeed, the House Republican budget would let spending grow much faster than projected inflation.

When confronted by this data, budget wonks on the left will quickly say that there are “budget cuts” when comparing the GOP numbers to what would happen if government policy was left on autopilot.

But if a budget doesn’t grow as fast as previously planned, that’s still not a cut.

I tell my leftist friends that it’s perfectly legitimate for them to argue that spending should increase rapidly because politicians in the past made promises to various interest groups. But it’s wrong for them to say that an increase is a cut simply because outlays don’t grow as fast as they would prefer.

Which is the point I made in interviews with Judge Napolitano and John Stossel.

P.S. The House GOP budget certainly is better than the status quo, especially since it assumes genuine reform of Medicaid and Medicare. But I prefer Rand Paul’s budget, which actually cuts spending in the first year (gasp!) and then limits spending in subsequent years so it grows by 1 percent annually.

P.P.S. For those who think modest spending restraint is impossible, don’t forget that we actually had a de facto five-year nominal spending freeze during the Obama years.

P.P.P.S. Here’s a previous example of budget inaccuracy in the Washington Post.

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What’s the Best Way of Boosting Tax Compliance, Lower Tax Rates or More Oppressive Enforcement?

My long-running feud with the Paris-based Organization for Economic Cooperation and Development could be categorized as a fight over tax compliance.

The bureaucrats at the OECD say that financial privacy must be eviscerated and the fiscal sovereignty must be wiped out so that high-tax governments can track and tax money around the world.

My view is that pro-growth reforms like the flat tax would be a much better approach. With a simple and fair tax code that doesn’t impose extra layers of tax on saving and investment, the IRS no longer would need to know about our bank accounts or investment funds – regardless of whether they are based in Geneva, Illinois, or Geneva, Switzerland.

Though I view better compliance as a secondary benefit. My main goal is to have a tax system that doesn’t impose needlessly high levels of economic damage.

But let’s stick with the compliance issue. Writing for E21, Daniel Di Martino explains that the Italian government makes evasion and avoidance a preferable option because tax rates are too onerous.

Italy’s problem, similar to many of its southern-European neighbors, is an oppressively high tax burden, irresponsible welfare programs that encourage high measured unemployment and increase the debt, and high levels of regulation. …the share of average wages collected by the Italian government via income and social security taxes is among the highest in the OECD at 48 percent. In addition, Italy imposes a value-added tax of 22 percent on most goods and services, one of the highest in Europe. Plus, Italy’s corporate, capital gains, gift, and myriad other taxes are passed on to individuals and borne directly by workers. These high taxes lead to a growing shadow economy, where people underreport work to avoid paying taxes. …many estimates point to more than  $175 billion (€150 billion) in lost tax revenue.

So what’s the best way of addressing that nation’s huge shadow economy?

Simple, less government.

Instead of cracking down on tax evasion and the shadow economy, Italy’s new government needs to rethink long-standing policies to bring a real economic recovery. Taxes need to be lowered so more businesses open and already-existing businesses and individuals come out of the shadows, broadening the tax base and raising revenue. This would allow those in the shadow economy to expand their businesses. Additionally, the welfare state should be trimmed so that people do not have an incentive to stay unemployed and young Italians are less burdened by government debt. Moreover, Italy needs to become more competitive by slashing the number of regulations.

The Institut Economique Molinari in Belgium took a look at the same issue, but included data for all European Union nations.

Economic reasoning and international experience point invariably to common causes that consistently create obstacles to dealings in the official economy: prohibitions, compulsory levies and specific tax measures, as well as fastidious and complex regulations. …As noted by two specialists, “In almost all studies, one of the most important causes (…) is the rise of the tax and social security burdens.” The higher these burdens on labour relations and dealings in the official economy, the less profitable these dealings become and the greater the incentive to trade on the black market. …As long as taxes account for a high share of the final price, opportunities for profit are provided in the underground economy, which moves in on a long‐term basis and comes to account for a significant share of countrywide sales. …Increasing this tax burden can only increase the disconnection between the real production cost of goods and their price on the official market, to such a degree that consumers begin abandoning the official market on a larger scale.

So what’s the answer?

Definitely not more government.

Given the scope of the underground economy, public authorities generally suggest toughening the means of repression so as to collect more tax revenues. The justification for this repression remains the same: it would promote the transfer of all under ground activity to the legal market, thereby creating new tax revenues. Beyond the cost of this repression in terms of resources and bureaucratisation of the economy, this reasoning and the resulting forecasts are erroneous. Though certain activities may no longer be undertaken in the underground economy, they will not be undertaken in the official economy either — in part or even in whole, depending on the specific case — because of the burden of compulsory levies and regulations. …Increased repression by the public authorities, without any change in regulatory and tax frameworks, risks simply destroying economic activities and the associated revenues. The only long‐lasting solution for ending the underground economy consists of dealing with the causes that give rise to it and thus to free the official market from its fiscal and regulatory burdens. …there is no other choice but to lighten tax and regulatory burdens.

Let’s now cross to this side of the Atlantic Ocean.

In an editorial about the current and former Treasury Secretary and their Cayman investments, the Wall Street Journal highlighted hypocrisy. But the best part was the conclusion about bad government policy driving money away from America.

Mr. Mnuchin served as director of Dune Capital, an investment firm he said he registered in the Caymans primarily to “accommodate nonprofits and pensions that want to invest through these off-shore entities.” By contrast, Mr. Lew was personallyinvested in the Citigroup Venture Capital International Growth Partnership II. You know, like that evil profiteer Mitt Romney, the subject of a now infamous Barack Obama campaign ad scoring Mr. Romney for profiting from money in offshore havens such as the Caymans. Mr. Lew’s Cayman company even used the same Ugland House building in the Caymans that President Obama so famously trashed as an “outrage” and “tax scam.” …The Democratic goal…seemed to be to get Mr. Mnuchin to admit that investors go to the Caymans to avoid American taxes. Mr. Mnuchin denied it but needn’t have been so shy. The Caymans have no corporate tax rate. The way to deal with the Caymans is not to punish investors who go there but to get rid of the regulations and high tax rates that send capital offshore.

But it’s not just market-friendly organizations that realize high tax burdens bolster the underground economy.

The International Monetary Fund released a study earlier this year on the shadow economy, which is defined as legal activities that are hidden from government.

The shadow economy includes all economic activities which are hidden from official authorities for monetary, regulatory, and institutional reasons. Monetary reasons include avoiding paying taxes and all social security contributions, regulatory reasons include avoiding governmental bureaucracy or the burden of regulatory framework, while institutional reasons include corruption law, the quality of political institutions and weak rule of law. For our study, the shadow economy reflects mostly legal economic and productive activities that, if recorded, would contribute to national GDP.

And what causes people to hide legal activity from government?

Here are some of the factors that drive the shadow economy according to the IMF.

In other words, people are less likely to comply when they have to endure bad government policy.

…in most cases trade openness, unemployment rate, GDP per capita, size of government, fiscal freedom and control of corruption are highly statistically significant.

And the number one bad government policy is high tax rates.

Let’s close by looking at the other side’s arguments.

Earlier this month, I revealed that the OECD finally admitted that it’s anti-tax competition project was motivated by a desire for class warfare and bigger government.

That’s terrible policy, but I give the bureaucrats in Paris credit for finally being honest.

By contrast, I’m not sure what to say about the bureaucrats in Brussels. The European Commission’s idea of an argument is this vapid video, which attempts to convince viewers that 20 percent of what they like is missing because government isn’t collecting more tax revenue.

In reality, of course, the money isn’t “missing.” It’s still in the private sector, where it actually is providing things that people like, rather than financing the stuff politicians like.

P.S. Speaking of vapid arguments from the European Commission, the bureaucrats actually created an online game designed to brainwash kids into supporting higher tax burdens.

P.P.S. The Wall Street Journal’s editorial mentioned Ugland House in the Cayman Islands. That’s the building that featured in some of Barack Obama’s dishonest demagoguery.

P.P.P.S. I’m still mystified that Republicans continue to send our tax dollars to Paris to subsidize the OECD. Actually, I’m not mystified. This is actually a good example of why they’re called the Stupid Party.

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Trade Wars and Trump’s Risky “Destructionism”

Back in January, I compared Reagan’s pro-trade views with Trump’s cramped protectionism.

Well, here’s another video of the Gipper talking about trade. I especially like how he used “destructionism” to describe protectionism.

And let’s consider exactly the kind of destruction that may occur.

ScotiaBank in Canada has crunched numbers on the possible consequences to North America in a world of Trump-style tariffs. The “good news” is that the United States suffers the least amount of damage.

The bad news (actually the worse news) is that the American people will suffer a significant and sustained loss of economic growth. And that has very negative implications for long-run prosperity.

But this isn’t just about macroeconomic aggregates.

Here’s an example from the Wall Street Journal of how protectionism backfires.

Lyon Group Holding…is struggling to survive as Donald Trump’s steel tariff gives his Chinese competitors an unfair advantage. Meet the law of unintended tariff consequences with arbitrary harm to the innocent. …Steel has long accounted for 45% of the cost of making lockers at Lyon and Republic, the single biggest expense. Mr. Trump’s 25% tariff has driven up the price of foreign steel and given domestic steel the chance to raise prices. American hot-rolled steel coil recently sold for $900 per short ton…up 38%, or $248 per ton, since the beginning of January. …Raising locker prices isn’t an option. Even before the tariffs, Lyon and Republic’s clients were paying a 10% premium for the convenience of buying American instead of Chinese, and they can’t afford to go any higher, Mr. Altstadt says. …foreign manufacturers are benefiting from Mr. Trump’s steel protectionism.

And here are some of the real-world costs.

If the tariffs remain in place, Mr. Altstadt says he’ll have no choice but to buy foreign-made locker components. Reluctantly, he’s visited factories in China to consider his options. But if Lyon and Republic outsource locker parts from abroad, Mr. Altstadt says he’ll have to lay off at least one-fourth of his American workforce and perhaps shutter and sell one of his metalworking factories. …he is haunted by “the devastating effect on real people.” Two-thirds of his workforce is unskilled.

I feel sorry for Mr. Altstadt, but I won’t lose sleep about his plight. I assume he’s at least in the top-5 percent for income and wealth.

The real victims of Trump’s protectionism are the ordinary workers at the company. These people may not have high skills, but they are playing by the rules and doing the right thing instead of living off the government. Yet now many of them may lose their jobs because the President doesn’t like America’s system of free enterprise.

Disgusting. Protectionism isn’t just bad economics. It’s immoral as well.

P.S. Reagan’s rhetoric on trade was perfect, but not his policy. As I explained last year, his generally strong economic record was marred by some protectionist initiatives.

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Entrepreneurship, Growth, and Capital Gains Taxation

I wrote last month about a new book from the Fraser Institute about demographics and entrepreneurship.

My contribution was a chapter about the impact of taxation, especially the capital gains tax.

At a panel in Washington, I had a chance to discuss my findings.

If you don’t want to watch an 11-minute video, my presentation can be boiled down to four main points.

1. Demographics is destiny – Other authors actually had the responsibility of explaining in the book about the importance of demographic change. But it never hurts to remind people that this is a profound and baked-in-the-cake ticking time bomb.

So I shared this chart with the audience and emphasized that a modest-sized welfare state may have been feasible in the past, but will be far more burdensome in the future for the simple reason that the ratio of taxpayers to tax-consumers is dramatically changing.

And it goes without saying that big-sized welfare states are doomed to collapse. Think Greece and extend it to Italy, France, Japan, and other developed nations (including, I fear, the United States).

2. Entrepreneurship drives growth – Capital and labor are the two factors of production, but entrepreneurs are akin to the chefs who figure out news ways of mixing those ingredients.

For all intents and purposes, entrepreneurs produce the creative destruction that is a prerequisite for growth.

3. The tax code discourages entrepreneurship – The bulk of my presentation was dedicated to explaining that double taxation is both pervasive and harmful.

I shared my flowchart showing how the American tax code is biased against income that is saved and invest, which discourages entrepreneurial activity.

And then showed the capital gains tax burden in developed countries.

The U.S. is probably even worse than shown in the above chart since our capital gains tax is imposed on inflationary gains.

4. The United States need to be more competitive – Last but not least, I pointed out that America’s class-warfare tax policies are the fiscal equivalent of an “own goal” (soccer reference for World Cup fans).

And this chart from my chapter shows how the United States, as of mid-2016, had the highest combined tax rate on capital gains when including the effect of the capital gains tax.

That’s the bad news. The good news is that the Trump tax cuts did produce a lower corporate rate. So in the version below, I’ve added my back-of-the-envelope calculation of where the U.S. now ranks.

But the bottom line is still uncompetitive when looking at the tax burden on investment.

And never forget that this ultimately backfires against workers since it translates into lower pay.

P.S. The Wall Street Journal produced an excellent description of why capital gains taxation is very destructive.

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Higher Taxes on Imported Autos Will Kill Jobs and Undermine National Security

On the issue of trade, Donald Trump is wallowing in the swamp of special interest favoritism instead of defending the interests of taxpayers and consumers.

• He’s wrong on NAFTA.
• He’s wrong on dealing with China.
• He’s wrong on steel and aluminum.

And it appears that he is determined to be wrong on automobiles.

The Administration has launched a “Section 232” case at the cronyist Commerce Department, which is the first step toward a big tax increase – which would be unilaterally imposed – on imported vehicles.

By the way, Section 232 is supposed to be limited to issues involving national security. And since American consumers don’t buy cars from countries that are enemies (or even potential enemies) of the United States, the entire case is a farce.

Yet the protectionists in the Administration get to act as judge and jury.

Unfortunately, when a sentence is imposed, it will fall on Americans. The trade experts at the Peterson Institute for International Economics have analyzed the issue and they are not impressed by Trump’s proposed protectionism.

A new PIIE analysis shows that…production in these industries would fall 1.5 percent and cause 195,000 US workers to lose their jobs over a 1- to 3-year period or possibly longer. …If other countries retaliate in-kind with tariffs on the same products, production would fall 4 percent, 624,000 US jobs would be lost… This second scenario would also hurt US exports of these products more than imports. …Both scenarios demonstrate how reliant the domestic industries are on imported parts, or intermediate inputs, that are not produced in the United States or that have no easy US-made substitute. Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and abroad. … nearly 98 percent of the targeted car and truck imports by value would hit key US allies: the European Union, Canada, Japan, Mexico, and South Korea.

Here’s a table from the PIIE study (click to enlarge).

Unfortunately, the second line is the most relevant since other nations will respond with their own destructive trade taxes.

But let’s not rely on just one source. The Hill reported on some additional research about the potential job losses from higher taxes on auto imports.

President Trump‘s proposed tariffs on imported automobiles and parts would cost the U.S. economy 157,000 jobs, according to a report by the Trade Partnership, a trade policy consultancy. “We find that the tariffs would have a very small positive impact on high-skilled workers in the motor vehicle and parts sectors, but very large negative impacts on workers — both high- and lower-skilled — in other sectors of the economy,” the study says. …the tariff policy would boost jobs in the auto sector by 92,000, but then destroy 250,000 jobs in the rest of the economy, according to the study. The price of foreign vehicles would rise from $30,000 to $36,400, a 21 percent increase. All in all, the economy would lose 0.1 percent of its value. Those effects don’t take into account any potential retaliation by American trade partners for the tariffs.

The Tax Foundation looked at the impact of higher taxes on imported autos and discovered that they would wipe a big chunk of the recent tax cuts.

 increasing tariffs on automobile imports would reduce the gain in after-tax income for households in 2018 derived from the Tax Cuts and Jobs Act while making the tax code less progressive. In 2017, the United States imported nearly $293 billion worth of vehicles for consumption, while paying about $3.4 billion in duties on those imports. If we assume that import levels will remain the same…the new tariff would amount to a $73 billion tax increase. …Using the assumptions mentioned above, we estimate that the new tariffs on automobiles would reduce after-tax incomes for all taxpayers by 0.47 percent in 2018 while making the distribution of the tax burden less progressive. These tariffs would fall harder on those taxpayers in the bottom 80 percent, reducing their after-tax income by 0.49 percent.

Here’s a chart from the report showing – for various income groups – how the trade tax hikes are offsetting the reductions from last year’s tax reform.

The Wall Street Journal opined on the economic harm to ordinary Americans.

The tariffs shave gains in all income brackets, but no one is hurt more than the poor and middle class. …Tariffs are inherently regressive because low-income Americans spend more of their income on household goods. Commerce Secretary Wilbur Ross has argued that no one will notice price increases—what’s a few cents more for a can of soup? But people in Mr. Ross’s income strata are not the Trump base. The Commerce Department is still looking at whether a muffler is a national security threat under Section 232 of the Trade Expansion Act of 1962. President Trump should abandon the idea lest Americans wonder if they really benefitted from that tax cut.

What about the White House’s claim that there should higher taxes on foreign cars because of national security?

Well, I rarely agree with Paul Krugman on fiscal policy, but there’s a good reason why he won a Nobel Prize for his work on international economics. His analysis on this topic is spot on.

…there have been only a handful of Section 232 investigations over the past half century — and most of them ended with a presidential determination that no action was warranted. But Trump is different. He has already imposed tariffs on steel and aluminum in the name of national security, and he is now threatening to do the same for autos. The idea that imported cars pose a national security threat is absurd. We’re not about to refight World War II, converting auto plants over to the production of Sherman tanks. And almost all the cars we import come from U.S. allies. Clearly, Trump’s invocation of national security is a pretext, a way to bypass the rules that are supposed to limit arbitrary executive action.

Showing this is a big tent, the Chamber of Commerce also concurs.

The U.S. Chamber strongly opposes the administration’s threat to impose tariffs on auto imports in the name of national security. If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war. In fact, the U.S. auto industry is prospering as never before. Production has doubled over the past decade, it exports more than any other industry, and it employs nearly 50 percent more Americans than it did in 2011. These tariffs risk overturning all of this progress. This isn’t about national security. The administration has already signaled its true objective is to leverage this tariff threat in trade negotiations with Mexico, Canada, Japan, the European Union, and South Korea. These allies provide nearly all U.S. auto imports and are among America’s closest partners. Neither they nor these imports endanger our national security in any way. The president’s Section 232 authorities should not be abused in this way, and doing so only encourages other nations to do likewise.

As does the Business Roundtable.

The Section 232 tariffs on steel and aluminum imports have harmed the U.S. economy, resulting in higher costs on U.S. businesses and consumers, and exposing U.S. exporters to foreign retaliation. Imposing such tariffs on automobile and automotive parts imports would only make things worse. Using ‘national security’ arguments under Section 232 to investigate and potentially impose tariffs on auto imports doubles down on a bad precedent for U.S. trade policy. It undermines our nation’s credibility in the global community, weakens the international trading system, and emboldens other countries to use ‘national security’ to limit U.S. goods and services exports to their markets.

Even the auto industry – including some American manufacturers – is opposed, as reported by ABC.

Two Washington D.C.-based automaker groups are slamming President Donald Trump’s decision to launch an investigation into auto imports, which could lead to tariffs on foreign-made vehicles. “To our knowledge, no one is asking for this protection. If these tariffs are imposed, consumers are going to take a big hit,” said John Bozella, President of Global Automakers, a trade group representing foreign manufacturers doing business in the U.S. …The legal mechanism for the investigation “has rarely been used and traditionally has not focused on finished products,” said Gloria Bergquist, spokeswoman for Auto Alliance, a group that represents foreign automakers like Volkswagen and BMW in addition to U.S. manufacturers like GM and Ford. “We are confident that vehicle imports do not pose a national security risk to the U.S.,” Bergquist said. …”Last year, 13 domestic and international automakers manufactured nearly 12 million vehicles in the U.S. The auto sector remains the leading exporter of manufactured goods in our country,” Bergquist said.

And the Financial Times notes that the rest of the world isn’t happy, either.

Donald Trump’s threat to impose tariffs on automotive imports in the name of national security has drawn condemnation from US trading partners around the world and warnings that it would disrupt global supply chains and put the international trading system at risk. …The European Commission…said it was “far-fetched” to invoke a national security consideration for car imports. That sets the stage for a possible challenge to any US tariffs at the World Trade Organization. …Japan also responded in unusually strong terms. “If they were to go ahead with such wide-ranging trade restrictions, it would throw the global market into confusion,” said Hiroshige Seko, minister of economy, trade and industry. “There could be a negative effect on the WTO multilateral trading system. It is extremely regrettable.”

In my humble opinion, “extremely regrettable” is the understatement of the century. As Walter Williams observed, protectionism is a punitive form of government intervention. Politicians and bureaucrats decide that their prejudices should take priority over consumer preferences.

That’s morally offensive, but it’s also economically self-destructive since the research unambiguously demonstrates that protectionism is a net job destroyer.

Yet politicians don’t care, either because they are motivated by “public choice” or because they lack the cognitive skills to realize that the “seen” jobs that are saved by trade barriers are easily offset by the “unseen” jobs that are destroyed (h/t: Bastiat).

I suspect Trump is part of the second group, but I’ll reserve judgement until I have the opportunity to ask him these eight questions.

Let’s close by making the elementary observation that national security is easier to finance with a strong economy. Yet protectionism reduces economic vitality. All the more reason why Section 232-instigated trade barriers are so senseless and illogical. And all the more reason why I wish Trump was serious when he proposed zero trade barriers with American allies.

P.S. Here’s a bit of trade history. The United States already imposes a 25 percent tax on imported light trucks. So why did American politicians decide to hurt American truck buyers with this tax? As explained in this video, it’s because European politicians decided to hurt their consumers with taxes on American chickens.

So if the Trump Administration moves forward with a big tax hike of foreign cars, video makers in the future will have new stories to tell about how reciprocal protectionism hurt various American industries, workers, and consumers. Maybe politicians will take the sugar program and extend that moronic approach to other sectors of the economy.

Gee, isn’t government wonderful?

P.P.S. This is yet another reason why I miss Reagan.

P.P.P.S. Here’s the only acceptable argument for import taxes.

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An Amusing Examination of Socialism

I’m a big believer that some images do a great job of capturing an issue.

• The essential insight of supply-side economics.
• The Washington welfare morass.
• America’s inescapable demographic challenge.
• The ever-more-confusing tax code.
• How the swamp beat Trump on the budget.
• The left’s view of how insurance should work.
• The one-way street toward liberty.
• The economic incentives of socialism.

Speaking of socialism, let’s look at some more images that reveal the essence of that bankrupt ideology.

Here’s a cartoon from Libertarian Reddit that does a great job of showing the real difference between capitalism and socialism.

Perfectly stated. Reminds me of the insights offered by Thatcher and Churchill.

Sadly, if you provide the statists with real-world evidence, many of them still prefer the world in top-right frame rather than the bottom-right frame.

Heck, the IMF actually publishes studies supporting equal levels of poverty.

As you might suspect, there are plenty of socialists who enjoy the benefits of capitalism while urging statism for everyone else. Think, for instance, about all the leftists who use tax havens.

Or this hipster millennial.

Maybe he could have a ménage à trois with Pajama Boy and Julia? Though only if everyone is guaranteed equal levels of disappointment.

Next is a helpful reminder from Bernie Sanders about the very thin line between socialism and communism.

Though I’m not sure there’s a meaningful difference.

Last but not least, this gem from Libertarian Reddit appealed to my juvenile sense of humor.

Basically the same message you find in the last item in this collection of socialism humor.

P.S. Here’s my two-part series (here and here) on the bizarre allure of socialism.

P.P.S. For additional examples of socialism humor, click here, here, here, here, and here.

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To Protect Non-Profit Donors from Government Persecution, Limit IRS Data Collection

It’s a judgement call, of course, but I think the IRS’s suppression of the Tea Party was the worst of all the Obama-era scandals.

Some people say the green-energy scams like Solyndra should be at the top of the list, but steering taxpayer money to campaign donors was just routine corruption. And the fast-and-furious scandal at the BATF was reprehensible, but did not have systemic impact on society.

Lois Lerner and the other hacks at the IRS, however, did something profoundly worse. They actively used the coercive power of government to suppress political speech.

The bad news is that Lois Lerner didn’t get punished. She’s now enjoying a fat taxpayer-financed pension. And other IRS officials successfully stonewalled with no adverse consequences.

Heck, Republicans actually rewarded the IRS with a bigger budget. And the Trump Administration so far has been AWOL on curtailing IRS abuses.

But that may be about to change. One of the President’s appointees has expressed support for protecting donors to nonprofit organizations.

The Wall Street Journal recently opined on this topic.

….a Congressional hearing this week offered potentially good news to nonprofits whose donors are under political threat. …Montana Republican Steve Daines asked Acting IRS Commissioner David Kautter whether the agency is considering the necessity of IRS 990 Schedule B. These are the forms that nonprofits must supply to the IRS listing donors who contribute more than $5,000. Schedule Bs are supposed to remain confidential, but AGs in New York and California have sought to require nonprofits to file them at the state level. Many Democrats see the form as a gift-wrapped list of donors to target, and a way to chill donations to conservative nonprofits. …Mr. Kautter acknowledged that he was “actively involved” along with Treasury Secretary Steve Mnuchin at offering more donor protection. …Nonprofits would still be required to keep their donor details, and if the IRS or other authorities had valid reason to suspect fraud they could demand to see the records. But requiring nonprofits to provide names each year to partisan AGs or tax bureaucrats is an invitation to repeat the scandal of the Obama years when Lois Lerner and the IRS targeted conservative nonprofits.

Brian Garst of the Center for Freedom and Prosperity also weighed in on the issue, pointing out that government has a sorry track record of persecuting political dissent.

…robust protections for speech were listed first among the Bill of Rights and have long been a cornerstone of our republic. …Like the secret ballot, respecting donor privacy and thus anonymous speech and association is essential to prevent majoritarian abuse and intimidation that subverts democracy. This was a lesson learned in the civil rights era after the shameful attacks on the NAACP and its supporters. …Lois Lerner was found to have illegally shared confidential Form 990 taxpayer information with the Federal Election Commission.

The solution is to not let the government get the information in the first place, especially since it isn’t needed to enforce any tax laws.

Unfortunately, invasive donor reporting requirements instituted by the Internal Revenue Service threaten to chill this critical democratic tool. …Schedule B requires 501(c) organizations to include certain contributors’ names and addresses with their annual Form 990 reports. Yet the IRS has acknowledged that this information has no enforcement value. Instead, its collection creates opportunities for abuse and chills speech and civic participation. …there’s good reason to question the ability of the government to protect sensitive taxpayer information given the history of inadvertent disclosures and information leaks at the IRS. …For minority viewpoints, public exposure can lead to intimidation… Several years ago, the IRS was said to be considering dropping the unnecessary Schedule B reporting requirement, which it was never required by statute to collect in the first place. Unfortunately, the agency did not follow through under President Barack Obama… The Trump administration should do what the Obama administration would not and ensure the right of Americans to participate in the political process without fear that they will be made vulnerable to targeting based on their political views.

Well said.

Though I think both Brian and the WSJ should have gone even farther and called for the abolition of the charitable deduction in the tax code as part of a shift to a simple and fair flat tax.

Then there would be zero rationale for the government to know about our donations. And since there’s plenty of evidence that nonprofits would prosper without a special preference in the tax code, this would be a win-win reform.

P.S. Privacy is an under-appreciated benefit of fundamental tax reform. Not only would donors and nonprofits no longer have to share information with the IRS under a flat tax, we also wouldn’t need to tell the government anything about our homes since the mortgage interest deduction would vanish. And since the death tax and capital gains tax are abolished, the government would have no need to know about our assets. And since all capital income is taxed at the business level, we wouldn’t have to tell the government about any stocks, bonds, or bank accounts we own.

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Help Workers and the Economy with Lower Employment Taxes

One of the core principles of economics is that prices are determined by supply and demand. That includes the price of labor – i.e., the wages received by workers.

Another core principle is that taxes create distortions by reducing demand and supply. Which is why it’s not a good idea to impose high tax rates on behaviors that contribute to prosperity, such as work, saving, investment, and entrepreneurship.

That’s the theory. Now let’s consider some real-world implications of taxes on work.

Here are some excerpts from new research by the European Central Bank.

Several reforms can be enacted to reduce the unemployment rate in the euro area. Among them is a permanent reduction in the labour tax. Typically, a decrease in labour taxes reduces labour costs to employers and increases the net take-home pay of employees, positively impacting both labour demand and labour supply. Reducing taxes on labour can contribute to increase employment and activity rates in the EA, by increasing incentives to hire, to look for, and take up, work. …In this paper we contribute to the debate on those issues by evaluating the macroeconomic effects of a fiscal reform in the EA countries.

The study look at what happens with employment-related taxes are lowered at either the employer level or the employee level.

Permanently reducing labour tax rates paid by Home firms would have stimulating effects on economic activity and employment, and would permanently reduce the unemployment rate. The same is true when tax rates paid by Home households are reduced.

Here are some of the specific estimates of the positive impact of lower labor taxes at the firm level.

The tax rate is reduced by almost 2 p.p. (trough level). The reduction of labour taxes paid by firms reduces the gross wage bill of firms and hence increases the value of having a worker. Workers are able to obtain part of the increase in firms’ surplus in the bargaining process, which results in a real wage increase. Nevertheless, the wage increase is not sufficient to undo the increase in the value of having a worker for firms, which leads to an increase in labour demand through vacancy posting. The number of matches increases as well and, consistently, the probability of finding a job and that of filling a vacancy increases and decreases, respectively. Employment increases (and unemployment rate decreases) by roughly 0.3 p.p. after two years and 0.4 p.p. in the medium and in the long run, respectively. …Home GDP increases by 0.5% after two years. Both consumption and investment increase. Consumption increases because of households’ larger permanent income, associated with the increase in employment, hours and production. Investment increases because firms augment physical capital to accompany the rising employment.

I’ve combined some of the key results from Figures 3 and 4, all of which show the benefits over time of lower tax rates on work (the horizontal axis is quarters, so 20 quarters equals five years).

And here are the specific estimates of the good outcomes when labor tax are reduced at the household level.

Qualitatively, results are similarly expansionary as those obtained when reducing labour taxes paid by firms. Hours worked, employment, matches, and the probability of finding a job increase, while the probability of filling a vacancy decreases. …hours worked now increase by 0.4% (0.3% in the previous simulation), employment by almost 0.5% (0.35% in the previous simulation), while the unemployment rate falls by almost 0.5 p.p. (0.4 p.p. in the previous simulation). …Home GDP increases by around 0.7% after two years.

Once again, let’s look at some charts showing the benefits over time of lower tax rates on workers.

Interestingly, it appears that there are slightly better outcomes if labor taxes are reduced for workers rather than employers, but the wage numbers are better if the tax cuts take place at the business level.

I’ll take either approach, for what it’s worth.

Let’s close with one additional excerpt. The study incorporated the impact of government employment, which can have a very distorting effect on private employment given the excessive size of the bureaucracy and above-market compensation for bureaucrats.

…we allow for public sector employment and for the possibility of directed search between the private and public sector labour market… In fact, a proper assessment of the impact of the labour market reforms on private-sector employment should take into account that a common characteristic of the EA labour market is the important share of the public employment in total employment, which is, according to OECD (2015), around 20% in France, 15% in Spain, Italy and Portugal, and 13% in Germany. Thus, this component is important to understand the labour market dynamics in the EA, given also that, during a crisis period, public and private labour markets tend to be more inter-related (when the unemployment rate is high, the number of applicants to the public sector is larger).

P.S. I’m periodically asked whether I’m exaggerating when I assert that something (such as taxes distorting the supply and demand for labor) is a “core principle” in economics. But I don’t think left-leaning economists (and there are plenty) would disagree about taxes impacting supply and demand. But they presumably would quibble about the “elasticity” of supply and demand curves (in other words, how sensitive are people to changes in tax rates). Moreover, they surely would claim in some instances that any “deadweight loss” would be offset by supposed economic benefits of government spending (and pro-market people acknowledge that’s possible, at least when government is small). And, when push comes to shove, some folks on the left would openly argue that it’s okay to have less prosperity if there’s more equality.

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Trump’s Zero-Tariff Proposal: Throwaway Line or Serious Offer?

At the risk of understatement, I’ve been very critical of President Trump’s trade policy.

I pointed out that he was just as bad as Bernie Sanders before the election. And I didn’t change my tune once he got to the White House. I’ve written several columns bemoaning his protectionist approach, including a piece just two days ago where I criticized the President for blowing up the G7 summit for the wrong reason.

That being said, he put forth a very attractive proposal in his post-G7 press conference.

President Donald Trump told foreign leaders at the Group of Seven summit that they must dramatically reduce trade barriers with the United States… Trump, in a news conference before leaving for Singapore, described private conversations he held over two days with the leaders of Britain, France, Germany, Italy, Japan and Canada. He said he pushed them to consider removing every single tariff or trade barrier on American goods, and in return he would do the same for products from their countries.

Part of me thinks this was just a throwaway line. But I’m always willing to look at the glass as being half-full.

Here’s what I said when Dana Loesch asked me about Trump’s offer.

Let’s treat Trump’s statement as a serious offer. Or as something that could evolve into a serious offer.

And I’ll start by observing that mutual disarmament on trade among G7 countries would be good for America, especially from a Trump-ish perspective. That’s because the U.S. currently is slightly better on trade according to the Fraser Institute’s measures of both tariff and non-tariff barriers, so other G7 countries would have to do more if we had complete trade liberalization.

In reality, that simply means that those other countries have even more to gain if trade barriers disappear, but I’m trying to imagine how Trump would see things.

And here’s a map from the World Trade Organization, showing average MFN tariffs. The good news is that the United States is in the top category, with trade taxes that average only 3.48 percent. The other G7 nations also have relatively low tariffs, but not quite as low as the United States. So they would have to do more if there was an agreement, which presumably would appeal to Trump.

Incidentally, my analysis assumes that the average tariff rates that apply generally also apply to trade between G7 nations. If that’s not the case, then I’ll have to go back to the drawing board since I very much doubt Trump can be convinced to support liberalization because of traditional free-market reasons.

To be honest, I’m skeptical about Trump supporting free trade among G7 nations, regardless of how much liberalization other nations would be willing to embrace.

The fundamental problem is that Trump genuinely seems to believe that a “trade deficit” is evidence that a nation is somehow losing or being mistreated. In reality, a trade deficit is simply the flip side of a capital surplus. And that’s generally evidence of a nation’s economic strength.

So while I think it’s good news that Trump floated a zero-trade-barrier offer, I’m not holding my breath it will ever happen.

P.S. Technically, a free trade agreement among the G7 isn’t even possible since Germany, France, Italy, and the United Kingdom (until Brexit is complete) are all part of the European Union, which is basically a single nation for purposes of trade rules.

P.P.S. The nation of Georgia wins the prize for lowest average tariffs (1.51 percent) according to the WTO. New Zealand (2.04 percent), Peru (2.44 percent), and Australia (2.52 percent) also deserve praise for having very low taxes on trade.

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Colorado’s Taxpayer Bill of Rights (TABOR) Should Be a Role Model for the Nation

A balanced budget requirement is neither necessary nor sufficient for good fiscal policy.

If you want proof for that assertion, check out states such as Illinois, California, and New Jersey. They all have provisions to limit red ink, yet there is more spending (and more debt) every year. There are also anti-deficit rules in nations such as Greece, France, and Italy, and those countries are not exactly paragons of fiscal discipline.

The real gold standard for good fiscal policy is my Golden Rule. And the best way to make sure government doesn’t grow faster than the private sector is to have a constitutional rule limiting the growth of government.

That’s why I’m a big fan of the “debt brake” in Switzerland’s constitution and Article 107 in Hong Kong’s constitution.

And it’s also why the 49 other states, assuming they want an effective fiscal rule, should look at Colorado’s Taxpayer Bill of Rights (TABOR) as a role model.

Colorado’s Independence Institute has a very informative study on how TABOR works and the degree to which it has been effective. Here’s a good description of the system.

Colorado voters adopted The Taxpayer’s Bill of Rights in 1992. TABOR allows government spending to grow each year at the rate of inflation-plus-population. Government can increase faster whenever voters consent. Likewise, tax rates can be increased whenever voters consent. …The Taxpayer’s Bill of Rights requires that excess government revenues be refunded to taxpayers, unless taxpayers vote to let the government keep the revenue.

And here are the headline results.

Cumulatively, TABOR refunds have been over $800 per Coloradan, or $3,200 for a family of four. …If Colorado government had continued growing at the same high rate (8.56% compound annual rate) as in 1983-92, the average Coloradan would have paid an additional $442 taxes in 2012. The cumulative two-decade savings per Coloradan are $6,173—or more than $24,000 for a family of four.

However, the study notes that TABOR was most effective during its first 10 years. It was less effective in its second decade because voters acquiesced to a “TABOR time-out” as part of referendum C in 2005.

The final decade included the largest tax increase in Colorado history, enacted as Referendum C in 2005. Decade-2 was also marked by increasing efforts to evade TABOR by defining nearly 60% of the state budget as “exempt” from TABOR. …Rapid government growth resumed in Decade-2, mainly because of Referendum C.

This chart from the study shows that outcomes were much better during the first decade of TABOR.

But a weakened TABOR is better than nothing. Here’s the conclusion of the report.

The Taxpayer’s Bill of Rights Amendment has worked well to achieve its stated intention to “slow government growth.” Although government has still continued to grow significantly faster than the rate of population-plus-inflation, the Taxpayer’s Bill of Rights did partially dampen excess government growth. …In terms of economic vitality, Colorado’s Decade-1 was best for Colorado. Unlike in the pre-TABOR decade, or in TABOR Decade-2 with its record increase in taxes and spending, because of Referendum C. Colorado’s first TABOR decade saw the state economy far outperform the national economy.

But keep in mind that the economic gains occurred in the first decade.

The bottom line is that spending caps are like speed limits in school zones. If they’re set too high, that defeats the purpose.

And in Colorado, the vote for Referendum C allowed a spending surge that made a mockery of TABOR.

But only temporarily, which is why that period was known as the “TABOR time-out.” The rules once again limit spending growth to population plus inflation.

For instance, TABOR made it difficult for state politicians to spend the additional tax revenues produced by marijuana legalization.

Needless to say, the political crowd hates having their hands tied. Which is why the pro-spending lobbies are agitating to once again gut TABOR. Here’s a clip from a local news report that does a good job of describing the current fight.

The battle actually started a couple of years ago. Here are some excerpts from a 2016 report by the Associated Press.

By 2030, Colorado’s population will grow from 5 million to 7 million people, thanks in part to a strong and diverse economy, the state’s famed Rocky Mountain quality of life, and its constitutionally-mandated low taxes. …The state’s Democratic governor, John Hickenlooper, is trying to find ways to squeeze more revenue for roads from the budget, while Republicans don’t want to tamper with the fabled 1992 constitutional amendment known as TABOR that keeps a tight limit on those taxes. …Under TABOR, voters must approve any state and local tax hike. Democrats are still stung by a resounding defeat of a 2013 ballot initiative to raise $1 billion for schools.

I’m amused by the fact that the above passage starts by noting the state has a “strong” economy. Too bad the reporter didn’t put 2 and 2 together and recognize that TABOR deserves some of the credit.

Likewise, this next passage cites a leftist who acknowledges growth in the state, but pretends that it’s exogenous, like the weather.

Liberals think that’s a recipe for disaster, especially in a growing state. “What we have to stop doing is pitting necessary priorities like roads against other necessary priorities like schools and colleges,” said Tim Hoover, spokesman for the Colorado Fiscal Institute, which favors dismantling the amendment. “TABOR forces us to do that.” So far the low-tax crowd is winning. Even Hickenlooper acknowledges there isn’t a popular appetite to raise taxes, and his hopes of changing the classification of an arcane fee in the budget to free up revenue are opposed by Republicans… Republicans say the real problem is growing Medicaid spending. Colorado, which expanded the program under the Affordable Care Act, is spending about $2.5 billion on the health care plan.

Note that TABOR critics object to various interest groups having to compete for money.

But that’s exactly why a spending limit is so desirable. Politicians are forced to abide by the rules that apply to every household and business in the state. In other words, they have to (gasp!) prioritize.

Let’s conclude by reviewing some passages from a pro-TABOR column published last week in the Steamboat newspaper.

Colorado’s  has grown by nearly two-thirds since 1992, one of the fastest increases in the country. If you are part of the more than two million new residents who have arrived over this time, there are a few things you should know…the Taxpayer’s Bill of Rights is responsible for much of the state’s economic success, which likely drew you here in the first place. Between 1992 and 2016, median household income in Colorado grew by 30 percent, adjusted for inflation. …TABOR helped end years of economic stagnation and laid the groundwork for the state’s future success by keeping resources in the hands of Colorado residents who could put them to their highest valued use and checking overzealous government spending. …Its requirement that excess revenues must be refunded to taxpayers has also resulted in more than $2 billion being returned to the private economy… TABOR has empowered voters to reject roughly a dozen advocacy-backed tax hike proposals.

My favorite part is when they cite critics, who confirm that TABOR is successful.

A Denver Post editorial last year complained, “TABOR’s powerful check on government spending in reality has been a padlock on the purse-strings of the General Assembly.” The check on spending is exactly the point, and it still allows spending to grow in-line with inflation and population growth. If government wants more money, all it has to do is ask. Requiring consent is hardly a “padlock.”

Amen. We could use some more padlocks in the rest of the country. TABOR should be nationally emulated, not locally emasculated.

P.S. Enjoy this amusing video from the Independence Institute. It shows politicians in a group therapy session about TABOR.

P.P.S. By the way, there is a spending cap in Washington, though it only applies to a small portion of the budget (appropriated outlays). Sadly, that very modest example of fiscal restraint has not been very effective. The group therapy session in Washington, otherwise known as Congress, voted to bust those spending caps in 2013, 2015, and earlier this year. Sort of D.C.’s lather-rinse-repeat version of Referendum C.

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Trump and the G-7: Right Outcome, Wrong Reason

Back in 2015, I wrote about the scandal involving former House Speaker Dennis Hastert and said we got the right result (legal trouble for Hastert) for the wrong reason (government spying on financial transactions).

Something similar happened over the weekend with the G-7 meeting.

Largely because of his misguided protectionist views, Donald Trump refused to sign a joint statement with the other G-7 leaders (Germany, France, Italy, Canada, Japan, and the United Kingdom).

Trump’s protectionism is deeply troubling. It threatens American prosperity and could lead to tit-for-tat protectionism that caused so much damage to the global economy in the 1930s.

That being said, we shouldn’t shed any tears because a G-7 Summit ended in failure or that Trump didn’t sign the communique.

To be sure, the vast majority of the language in these statements is anodyne boilerplate. Sort of the international equivalent of “motherhood and apple pie.”

But it’s not all fuzzy rhetoric about “inclusive growth” and “clean water.” The bureaucrats who craft these statements for their political masters regularly use the G-7 to endorse statist policies.

It’s all very reminiscent of what Adam Smith wrote about how people in the same profession would like to create some sort of cartel to extract more money from consumers.

But Smith went on to explain that such efforts can’t succeed in the private sector unless there is some sort of government intervention to prohibit competition.

Unfortunately, when politicians meet to craft cartel-type policies to extract more money from their citizens, they rely on the power of government to enforce their anti-market policies.

Let’s look at some of the dirigiste language in the communique from this weekend, starting with the ever-present embrace of class warfare tax policy and support for tax harmonization.

…support international efforts to deliver fair, progressive, effective and efficient tax systems. We will continue to fight tax evasion and avoidance by promoting the global implementation of international standards and addressing base erosion and profit shifting. …We welcome the OECD interim report analyzing the impact of digitalization of the economy on the international tax system.

Keep in mind that “international standards” is their way of stating that low-tax jurisdictions should have to surrender their fiscal sovereignty and agree to help enforce the bad tax laws of uncompetitive nations (such as G-7 countries).

And the BEPS project and the digitalization project are both designed to help other governments skim more money from America’s high-tech companies.

The G-7 communique also endorsed the anti-empirical view that more foreign aid and higher taxes are necessary to generate more prosperity in the developing world.

Public finance, including official development assistance and domestic resource mobilization, is necessary to work towards the achievement of the Sustainable Development Goals of the 2030 Agenda.

The statement also recycled the myth of a big gender wage gap, even though even the female head of Obama’s Council of Economic Advisers admitted the wage gap numbers are nonsense.

Our path forward will promote women’s full economic participation through working to reduce the gender wage gap.

And there was the predictable language favoring more government intervention in energy markets, along with a threat that the hypocritical ideologues at the United Nations should have power over the global economy.

We reaffirm the commitment that we have made to our citizens to reduce air and water pollution and our greenhouse gas emissions to reach a global carbon-neutral economy over the course of the second half of the century. We welcome the adoption by the UN General Assembly of a resolution titled “Towards a Global Pact for the Environment” and look forward to the presentation of a report by the Secretary-General in the next General Assembly.

Given the G-7’s embrace of one-size-fits-all statism and government cartels, let’s look at how Professor Edward Prescott (awarded the Nobel Prize in economics in 2004) modified Adam Smith’s famous quote.

I’ll close by reporting that I asked several experts in international economics, mostly from the establishment (and therefore instinctively sympathetic to the G-7), whether they could tell me a single pro-growth accomplishment since these meetings started in the 1970s.

They couldn’t identify a single concrete achievement (several said it was good for politicians from different countries to develop relationships and some speculated that useful things may get done in so-called side meetings, but all agreed those things could – and would – happen without the G-7).

So why spend lots of money just so a bunch of politicians can have an annual publicity photo? And why give their retinues of hangers-on, grifters, hacks, and bureaucrats a taxpayer-financed annual vacation?

Needless to say, I’d much rather focus on defunding the OECD or defanging the IMF. But if Trump’s nonsensical protectionism somehow leads to the disintegration of annual G-7 schmooze-fests, I’ll view that as a silver lining to an otherwise dark cloud.

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Trump’s Energy Socialism

During the Obama years, I criticized the President for various green-energy scams that squandered money and produced scandals such as Solyndra.

And I also noted that many Republicans were happy to support corrupt subsidies to inefficient sources of energy so long as their voters got a slice of the loot.

Sadly, the same thing is happening with Trump in the White House. All that’s changed is that there are different groups sucking at the federal teat.

Catherine Rampell’s column points out how Trump wants the government to pick winners and losers in energy markets.

The GOP…definition of free markets turns out to be pretty confusing… It apparently includes allowing the president to personally dictate what companies must buy, from whom, and at what price; what products they should sell; which employees they should hire and fire; where they should locate… The Trump administration has taken action or raised questions in all these areas… And President Trump’s supposedly laissez-faire co-partisans in Congress have barely said boo. …If that doesn’t count as “picking winners and losers,” it’s hard to say what would. Efforts to prop up inefficient coal-fired plants are…a terrible idea from an economic perspective. The reason these plants are struggling, after all, is that they can’t compete with cheaper natural gas and renewables. Trump is wielding the power of the state to keep uncompetitive companies in business, and costing taxpayers and consumers lots of money in the process.

And remember that this intervention will destroy more jobs than it saves, just as was the case with Obama’s interventions.

This sordid story also is a perfect example of why politicians should never be granted open-ended power.

Trump is now defiantly claiming that “national security” requires bailing out his political allies in the coal industry. It’s the same absurd rationale he has lately invoked for other unfree-market interventions — including, ironically, our military-alliance-straining steel and aluminum tariffs and, perhaps soon, automobile tariffs. …Leave it to Trump to try to strong-arm the invisible hand.

The Wall Street Journal has a hard-hitting editorial castigating the Trump Administration for considering back-door bailouts and special subsidies.

…all of a sudden the Administration wants to do a Barack Obama imitation and play energy favorites. …The supposed problem is that the U.S. is producing an abundance of cheap natural gas thanks to the shale fracking revolution. As a result, national electric wholesale prices for natural gas have plunged by half since 2008… Meanwhile, government subsidies such as the 30% federal investment tax credit have boosted solar and wind production while driving down the wholesale cost. Many nuclear and coal plants unable to compete with renewables and natural gas may have to shut down over the next few years. …Thus, the rescue plan—er, regulatory bailout. According to the Trump memo, Section 202 of the 1920 Federal Power Act lets the Energy Secretary mandate the delivery or generation of electricity during an emergency. It also suggests that the President could use his authority under the 1950 Defense Production Act to “construct or maintain energy facilities” to protect national defense. …Mandating that grid operators buy more expensive coal and nuclear power would raise consumer prices and could reduce natural gas production that has been a boon to many states. And note to Mr. Trump: Energy is one of the biggest costs for steel and aluminum manufacturers. The government rescue for coal and nuclear is as politically abusive as Mr. Obama’s lawless policy to punish fossil fuels. A better way to make coal and nuclear more competitive is to keep chipping away at renewable subsidies and cutting regulation.

The editorial concludes with a very appropriate observation.

As Governor of Texas, Mr. Perry often visited our offices to explain why the U.S. government shouldn’t pick energy winners and losers. He’s still right even if he has moved to Washington.

Amen. Intervention in energy markets is bad when “green” groups get the handouts, and intervention also is bad when coal gets the goodies. That’s true in America and it’s true in other nations.

The Washington Post also correctly opined against this heavy-handed government intervention.

President Trump is preparing what could be the most astonishing and counterproductive instance of central planning the nation has seen in decades.

Mr. Trump last Friday ordered Energy Secretary Rick Perry to recommend ways to prop up struggling coal and nuclear power plants. …One option would require the purchase of electricity from coal and nuclear plants under a law meant to keep power flowing during emergencies, such as hurricanes. Another scheme would hijack the 1950 Defense Production Act, which allows presidential intervention to secure critical goods when national security is at stake. …Americans could pay hundreds of millions, and perhaps billions, more every year for energy. Wholesale electricity markets could collapse as efficient power plants failed to compete with subsidized dinosaurs.

The editorial wisely notes that Trump’s intervention will create a bad precedent that will be abused by a future Democrat president (actually, he’s building on Obama’s bad precedent, but it doesn’t help that Trump is making intervention a pattern).

If Mr. Trump proceeds and the courts somehow allow such a perversion of the law, it would be hard to stop the next Democratic president from, say, using emergency powers to force the purchase of renewables at the expense of coal, oil and natural gas. The president’s latest turn toward economic statism should be no surprise; it has been an animating principle of his presidency. …Mr. Trump is in the midst of picking unnecessary and increasingly costly trade fights with once-close allies, while assuring U.S. farmers that he will use state power — and, presumably, everyone else’s tax dollars — to preserve their margins. Now he is on the verge of asserting dictatorial control over energy markets, using powers meant to be reserved for real emergencies.

Call me crazy, but I want consumers to have the power. And that means allowing competitive markets to allocate resources and determine profitability.

Trump, by contrast, doesn’t seem to have any guiding principles. Yes, he sometimes supports good policy, but he’s also just as likely to favor intervention.

By the way, the Washington Post picked the wrong word in the title of its editorial. At least in theory, socialism means government ownership of the “means of production.” Trump doesn’t want the government to own energy companies. Instead, he wants to control them.

As Thomas Sowell observed when writing about Obama-era intervention, that’s technically fascism.

But since that term is now associated with other nasty attributes, let’s call Trump’s policy statism, corporatism, or cronyism. Or, if you like oxymorons, call it state-led capitalism.

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Jordan Gets in Debt Trouble Because of a Spending Binge, IMF Predictably Says Higher Taxes Are the Answer

I’ve half-joked in the past that spending restraint is the answer to every fiscal problem.

But I wouldn’t be surprised if it’s the right answer to 98 percent of fiscal problems. Some fiscal discipline is what we need in America, for instance, and it’s certainly an approach that works whenever and wherever it is tried.

Could it also be the answer in Jordan, which has stumbled into a fiscal crisis and is now facing domestic unrest?

The trouble began in January when the government announced a big IMF-supported tax increase. Here’s some of what was reported by Reuters.

Jordans cabinet announced on Monday a major package of IMF-guided tax hikes… The package announced on state media includes removing exemptions on general sales tax and unifying low 4 to 8 percent rates on a large number of items at 10 percent while leaving it at 16 percent ceiling for others, alongside raising special taxes on tobacco, premium gasoline and streamlining customs duties.

Interestingly, the article acknowledged that the country got in a fiscal mess because of too much spending.

The debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector, and by lavish subsidies for bread and other staple goods. …Economists said Jordans ability to maintain a costly subsidy system and a large state bureaucracy was increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.

But politicians almost always prefer tax hikes rather than spending restraint (even though – or perhaps because – higher taxes are not an effective way of controlling red ink).

The victims of those tax increases are not happy. As reported earlier this month, they took to the streets.

Jordanians took to the streets of the capital Amman on Sunday in a fourth day of nightly protests against IMF-backed price increases that have shaken the kingdom, witnesses said. …demonstrators who converged near the cabinet office chanted slogans calling for the sacking of Prime Minister Hani Mulki and saying they would disband only if the government rescinded a tax bill it sent to parliament last month which critics say worsens living standards. …Public anger over IMF-driven government policies has grown since a steep general sales tax hike earlier this year… The government says it needs more funds for public services and argues that tax reforms reduce social disparities by placing a heavier burden on high earners.

And the protests worked.

The New York Times has the cheerful news.

The government of Jordan announced on Thursday that it would withdraw a divisive tax bill after nationwide protests rocked the country, leading to the resignation of the prime minister and his cabinet. The newly appointed prime minister, Omar Razzaz, said in a statement that he had consulted members of both houses of Parliament, and that there was a consensus that the tax bill should be withdrawn. …The decision to withdraw the bill, which proposed increasing the tax rate on workers by at least five percentage points and on businesses by 20 to 40 percentage points, was lauded by many in Jordan.

Incidentally, taxpayers in the United States have been subsidizing Jordanian profligacy.

In 2015, the Obama administration and Jordan signed a three-year agreement in which the United States pledged $1 billion in assistance annually, subject to the approval of Congress. More recently, Washington pledged $6.3 billion in aid through 2022, making Jordan one of the top recipients of American foreign assistance.

These three news reports were interesting, but I wondered if they told the full story.

Maybe, just maybe, the IMF is right and tax increases are necessary because there is no leeway to reduce the burden of government spending. Perhaps the government already has been complying with Mitchell’s Golden Rule and has slashed the budget, meaning that higher revenues are the only feasible option still on the table.

So I decided to check the IMF’s World Economic Outlook database. Lo and behold, I discovered that the budget has soared from 2 billion dinar in 2000 to more than 9 billion dinar this year. What’s especially remarkable is that government spending has grown far faster than needed to keep pace with inflation.

In other words, what happened in Jordan is exactly what happened in Greece. Government grew too fast. But not just Greece. The mess in Jordan is a repeat of what happened in Western Australia. In Puerto Rico as well. And don’t forget Alberta and Alaska. The list could go on and on.

It’s sort of like the sun rising in the east and setting in the west. Or the swallows returning to Capistrano.

And for those who value predictability, it’s no surprise to once again see the IMF pushing for higher taxes. Those bureaucrats are the Dr. Kevorkian of the global economy and there’s only one medicine they prescribe.

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Offshore Finance and Onshore Economics

Since I consider myself the world’s biggest advocate for tax competition and tax havens (even when it’s risky), I’m always on the lookout for new material to share.

So I was delighted to see a new monograph from the London-based Institute of Economic Affairs on the benefits of “offshore” financial centers. Authored by Diego Zuluaga, it explains why low-tax jurisdictions are good news for those of us laboring in less-enlightened places.

Offshore finance serves several purposes, the most salient of which is the efficient allocation of capital. Some of this activity is tax-related, aimed at raising after-tax investment returns. If it were not for offshore jurisdictions, much foreign investment would be vulnerable to double or triple taxation. Because, under such punitive rates of tax, some of this investment would not take place, the existence of offshore centres has real positive effects on economic activity alongside the (plausibly) negative impact on the tax revenue of individual countries. These welfare gains have been amply documented… Beyond their impact on aggregate investment, research shows that the existence of an OFC is associated with better economic outcomes in neighbouring countries. Contrary to the popular narrative, these jurisdictions are well-governed and peaceful. Who, after all, would wish to use intermediaries in places where investors were regularly expropriated or harassed? …It is difficult to imagine the process of globalisation that has taken place over the last fifty years, bringing hundreds of millions of people out of poverty, happening without the robust financial and legal framework which offshore jurisdictions provide for investment. It would be counterproductive, for both the developing and the rich world, to undermine their essential functions. …Clamping down on offshore centres…would make societies less productive and prosperous, and this effect would compound over time.

He provides some fiscal history, including the fact that government used to be very small in the industrialized world (indeed, that’s one of the big reasons why today’s rich nations got that way).

And he notes that low-tax jurisdictions became more important to global commerce as governments adopted dirigiste policies.

Before World War I, governments played only a small role in economic activity, rarely taking up shares of national income in excess of 15 per cent during peacetime. After the Great War, they took upon themselves ever larger fiscal and administrative functions, notably trade restrictions and capital controls. …In a context of punitive marginal tax rates, constrained capital movements…, OFCs were vital to the revival of cross-border trade and investment after World War II. Without stable intermediary jurisdictions with robust rule of law and low taxation, much international investment would have been too costly, whether because of the associated tax burden or the risks of expropriation and inflation.

Zuluaga notes that tax competition ties the hands of politicians.

Theory and evidence suggest that countries may have any two of free capital mobility, an independent tax policy and no tax competition (Figure 2). But they cannot have all three.

And here is the aforementioned Figure 2 from the report.

I wrote about a version of the tax trilemma two years ago and noted that there’s only a problem if a country has high taxes.

So I made the following correction.

Returning to the article, Zuluaga points out that low-tax jurisdictions have a much better track record in the fight against bad behavior than high-tax nations.

OFCs are neither the original source nor the ultimate destination of illegal financial flows. So long as there remain corrupt politicians, drug users and people willing to engage in terrorist acts, history suggests that some illegal financial activity will take place to make it possible. Furthermore, as we saw above, OFCs are as a rule far more compliant and transparent in their prevention of unlawful activities than onshore jurisdictions, including the United States and the United Kingdom.

Zuluaga concludes with a warning about how the attack on tax havens is really an attack on globalization. And the global economy will suffer if the statists prevail.

…an ominous alliance of revenue-greedy politicians, ideological campaigners and rent-seekers has emerged in recent years. Gradually, but relentlessly, they aim to dismantle the liberal financial order of which free capital movement is a fundamental component. …the alliance’s real goal: to eliminate tax competition and constrain the movement of capital in order to bring it under their control. The consequences of this effort would be long-standing and go far beyond a few tiny offshore financial centres.

Excellent points. I strongly recommend reading the entire publication.

Though I’m not sure Zuluaga and I agree on everything. His article notes, seemingly with approval, that offshore jurisdictions largely have agreed to help enforce the bad tax laws of onshore nations. Yet that’s a recipe for the application of more double taxation on income that is saved and invested, which he acknowledges is a bad thing.

In other words, I think financial privacy is a good thing since predatory governments are less likely to misbehave if they know taxpayers have safe (and confidential) places to put their money. Now that privacy has been weakened, however, anti-tax competition folks at the OECD are openly chortling that there can be higher taxes on capital.

The bottom line is that tax competition without privacy is not very effective. I wonder if Zuluaga understands and agrees.

Another IEA author, Richard Teather, got that key point.

In a 2005 monograph, he explained the vital role of financial privacy.

Although the country of residence may theoretically impose taxes on foreign income, it can only do so practically if its tax authorities have knowledge of that income. It is therefore common for tax havens to have strong privacy laws that protect investors’ personal information from enquirers (including foreign tax authorities). The best-known of these was Switzerland, which introduced banking secrecy to protect Jewish customers from Nazi confiscation, and there remains a genuine strong feeling in many of these countries that privacy is about more than just tax avoidance.

But I’m digressing. Since we’ve looked at one U.K.-based defense of low-tax jurisdictions, let’s also look at some excerpts from a column by Matthew Lynn in the London-based Spectator.

He makes a very interesting point about how so-called tax havens are basically the financial equivalent of free zones for goods.

…in a globalised economy, offshore finance plays an important role, enabling money to move across borders relatively easily. Rather oddly, a lot of the media seem to have decided that while it is fine for people and goods to move around the world, having a bank account or an investment in a different country makes you virtually a criminal. …The world already has an extensive network of free ports, tax-free zones where goods in transit can be processed or temporarily stored without having to pay local tariffs. There are an estimated 3,500 of them across 135 countries, facilitating the movement of goods around the world. They have helped trade grow hugely over the past couple of decades. Offshore centres…are now mainly financial ‘free ports’ — places where cash can easily be parked and transferred as it moves around the world.

He also makes a very important observation about how the theft of data leading to the Panama Papers and Paradise Papers revealed very little illegal behavior.

…one of the interesting things about the leaks is not how much wrongdoing they expose, but how little. Take last year’s Panama Papers scandal, for example. …For all the drama, it was pretty small beer. The reason? All the data revealed might have been interesting, and made for some lurid headlines, but very few people turned out to be breaking any laws. In only a handful of cases were taxes being evaded or money-laundered.

Which is a point I’ve made as well.

And here’s his conclusion.

…it turns out that offshore centres are used by just about everyone. Most pension funds use them, including those looking after the savings of the politicians queuing up to condemn them. They are part of the infrastructure of globalisation, as much as the container ships, airports and fibre optic cables. It is ironic that many of the same people who proudly describe themselves as citizens of the world think that applies to everything except money.

Amen. Once again, this is really a fight about globalization. Or, to be more accurate, a fight between good globalism and bad globalism.

To wrap up, here’s the video I narrated for the Center for Freedom and Prosperity on the economic benefits of tax havens.

P.S. I’ve previously cited other tax haven-related research and analysis from the United Kingdom, most notably from Allister Heath, Dan Hannan, Philip Booth, Godfrey Bloom, and Mark Field.

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Trump’s Protectionism and the Danger of a 1930s-Style Tit-for-Tat Trade War

The good news is that Donald Trump is not imitating all of Herbert Hoover’s statist policies.

The bad news, as I explain in this interview, is that his protectionist mistakes could trigger a repeat of Hoover’s beggar-thy-neighbor protectionism that wreaked havoc in the global economy during the 1930s.

George Santayana is famous for warning that “Those who cannot remember the past are condemned to repeat it.”

Well, this is why I’m so agitated about what Trump is doing. It’s true that the economy will not be wiped out by the trade taxes he’s imposing today. But what happens when other nations retaliate, and then Trump doubles down with additional taxes on global commerce?

That’s a potential recipe for a big reduction in worldwide liberty. Which is exactly what happened in the 1930s, as illustrated by this chart from an academic study.

At the risk of understatement, that would not be good for American prosperity. And blue-collar workers would be among the victims since protectionism always destroys more jobs than it saves.

So what can be done about this?

The Washington Post reports on some bipartisan legislation that would curtail Trump’s authority to unilaterally destabilize world trade.

Sen. Bob Corker (R-Tenn.) introduced a bipartisan bill Wednesday that would give Congress new authority to check the president’s trade moves… Corker’s bill would require congressional approval when the president enacts tariffs under the auspices of national security, as Trump did last week in imposing levies on aluminum and steel imports from Canada, Mexico and the European Union. The legislation, which Corker released with a total of nine Democratic and Republican co-sponsors, is the most forceful congressional response to date to Trump’s protectionist trade agenda. …The bill’s prospects are unclear. Corker acknowledged that some Republicans are unwilling to cross the president, and Majority Leader Mitch McConnell (R-Ky.) has ruled out bringing up the measure as a stand-alone bill. But Corker’s bill appeared to be gaining traction on and off Capitol Hill on Wednesday. The U.S. Chamber of Commerce announced its support, as did Koch Industries. …Corker’s legislation would require the president to submit to Congress any proposal to adjust imports in the interest of national security. The legislation would qualify for expedited consideration for a 60-day period. …The co-sponsors are Republican Sens. Patrick J. Toomey (Pa.), Lamar Alexander (Tenn.), Mike Lee (Utah), Ron Johnson (Wis.) and Jeff Flake (Ariz.), along with Democrats Heidi Heitkamp (N.D.), Mark R. Warner (Va.), Brian Schatz (Hawaii) and Chris Van Hollen (Md.).

I’m sympathetic to such legislation, not only to thwart Trump’s protectionism, but also because I don’t think any White House should have so much unilateral power. In other words, I’m philosophically consistent. I didn’t think it was right for Obama to have the authority to arbitrarily change provisions of Obamacare and I don’t think it is right for Trump to have the authority to arbitrarily change provisions of trade law.

But let’s stick to the trade issue. Lower taxes on global commerce are one of the great achievements of post-World War II era. Policy makers around the world have lowered barriers and allowed the free market more breathing room.

That’s been a very successful policy.

By the way, politicians from developing nations deserve special credit. They’ve been especially aggressive in lifting the burden of trade taxes. Here’s a chart prepared by the Confederation of British Industry.

I started today’s column by warning that Trump shouldn’t emulate Hoover. I’ll end the column by pointing out that Reagan is a better role model.

And if that doesn’t work, maybe we can educate the President on why it’s good to have a capital surplus, which is the flip side of having a trade deficit.

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The Ever-Expanding Fiscal Burden of Social Security

Writing a column every day can sometimes be a challenge, in part because of logistics (I have to travel a lot, which can make things complicated), but also because I want to make sure I’m sharing interesting and relevant information.

My task, however, is very easy on certain days. When Economic Freedom of the World is published in the autumn, I know that will be my topic (as it was in 2017, 2016, 2015, etc). My only challenge is to figure out how to keep the column to a manageable size since there’s always so much fascinating data.

Likewise, I know that I have a very easy column about this time of year (2017, 2016, 2015, etc) since that’s when the Social Security Administration releases the annual Trustees Report.

It’s an easy column to write, but it’s also depressing since my main goal is to explain that the program already consumes an enormous pile of money and that it will become an every bigger burden in the future.

Here are the 1970-2095 budgetary outlays from the latest report, adjusted for inflation. As you can see, the forecast shows a huge increase in spending.

The good news, as least relatively speaking, is that we’ll also have inflation-adjusted growth between now and 2095, so the numbers aren’t quite as horrifying as they appear. That being said, Social Security inexorably will consume a larger share of the private economy over time.

Now let’s examine a second issue. Most news reports incorrectly focus on the year the Social Security Trust Fund runs out of money.

But since that “Trust Fund” is filled with nothing but IOUs, I think that’s an utterly pointless piece of data. So every year I show the cumulative $43.7 trillion cash-flow deficit in the system. Using inflation-adjusted dollars, of course.

Assuming we don’t reform the program, think of these numbers as a reflection of a built-in future tax hike.

You won’t be surprised to learn, by the way, that politicians such as Barack Obama and Hillary Clinton already have identified their preferred tax hikes to fill this gap.

Let’s wrap up.

Veronique de Rugy of Mercatus accurately summarizes both the problem and the solution.

The single largest government program in the United States will soon have an annual budget of $1 trillion a year. …The program is Social Security, and our national pastime seems to be turning a blind eye to its dysfunctions. …Since 2010, it has been running a cash-flow deficit—meaning that the Social Security payroll taxes the government collects aren’t enough to cover the benefits it’s obliged to pay out. …

Veronique punctures the myth that there’s a “Trust Fund” that can be used to magically pay benefits.

Prior to 2010, the program collected more in payroll taxes than was needed to pay the benefits due at the time. The leftovers were “invested” into Treasury bonds through the so-called Old Age Trust Fund, which is now being drawn down. …In fact, the Treasury bonds are nothing but IOUs. …Treasury…doesn’t have the money: It has already spent it on wars, roads, education, domestic spying, and much more. So when Social Security shows up with its IOUs, Treasury has to borrow to pay the bonds back. …Did you catch that? Past generations of workers paid extra payroll taxes to bulk up the Social Security system. But the government spent that additional revenue on non-retirement activities, so now your children and grandchildren will also have to pay more in taxes to reimburse the program.

So what’s the solution?

Veronique explains we need to reform the system by allowing personal retirement accounts. She was even kind enough to quote me cheerleading for the Australian system.

Congress should shift away from Social Security into a “funded” system based on real savings, much as Australia and others have done. The libertarian economist Daniel J. Mitchell notes that, starting in the ’80s and ’90s, that country has required workers to put 9.5 percent of their income into a personal retirement account. As a safety net—but not as a default—Australians with limited savings are guaranteed a basic pension. That program has generated big increases in wealth. Meanwhile, Social Security has generated big deficits and discouraged private saving. Who would you have emulate the other?

Though I’m ecumenical. I also have written favorably about the Chilean system, the Hong Kong system, the Swiss system, the Dutch system, the Swedish system. Heck, I even like the system in the Faroe Islands.

The bottom line is that there’s been a worldwide revolution in favor of private savings and the United States is falling behind.

P.S. If you have some statist friends and family who get confused by numbers, here’s a set of cartoons that shows the need for Social Security reform.

P.P.S. As I explain in this video, reform does not mean reducing benefits for current retirees, or even older workers.

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Gay Marriage, Wedding Cakes, and Freedom of Association

There’s a big controversy about whether business owners with traditional religious beliefs should be coerced by government into doing business with gay couples who want to get married.

Back in 2015, I explained that the real issue is freedom of association, not whether gay marriage is right or wrong (I’ve always wondered why government should have any role in marriage, but that’s a separate topic).

It’s time to revisit this issue now that the Supreme Court has released its decision on the case involving a Colorado baker who didn’t want to decorate a cake for a gay wedding. The Wall Street Journal opines that the decision was in favor of the baker, but on very narrow grounds.

The Supreme Court ruled 7-2 Monday for a baker who refused to custom-bake a cake for a same-sex wedding out of sincere religious belief. …this apparent victory for religious freedom may be short-lived. …While seven Justices on the High Court held for Mr. Phillips, the majority decision could have gone the other way had some facts been different. Writing for the majority, Justice Kennedy notes that Mr. Phillips was “entitled to a neutral decision-maker.” …As is his wont, Justice Kennedy strains to avoid a clear and decisive ruling. While “religious and philosophical objections [to same-sex marriage] are protected, it is a general rule that such objections” don’t allow the denial of services “under a neutral and generally applicable public accommodations law,” he writes. Perhaps the best that can be said is that florists, make-up artists, photographers and other people of faith have lived to fight another day. A ruling against Mr. Phillips would have been catastrophic for religious liberty, but the majority’s muddle provides only gossamer protection. …The message is that governments can punish religious beliefs as long as they keep their animus toward religion in the closet.

Since I’m not a lawyer, I’m not sure what to think about the Court’s contorted decision.

But as a libertarian, I think the government should not be involved.

Jeff Jacoby of the Boston Globe understands what the issue is all about. Here’s some of what he wrote shortly before Trump’s inauguration.

Freedom of association is a vital human right. …I support…the singers who refuse to sing for Trump, the fashion designers who refuse to design, the landlords who refuse to rent, the dancers who refuse to dance. No one should be forced to play a role in a celebration they want nothing to do with, or to hire themselves out to clients they would prefer not to serve. …if a caterer turns down a request to prepare the meals for Trump’s inauguration? Or a florist declines to provide the floral arrangements? Or a calligrapher says “thanks but no thanks” to addressing the invitations? I’d back them, too, and for reasons having nothing to do with Trump or Republicans or inaugurations — and everything to do with freedom of association. The right to discriminate — to choose with whom we will and won’t associate — is vital to human liberty. A dressmaker who can’t say no to a commission to design a gown isn’t free, and it doesn’t matter whether the gown is for a first lady or for the brides in a lesbian wedding. A liberal baker who declines to create a lavish cake decorated with the words “Congratulations, President Trump” is entitled to as much deference as a black baker who declines to decorate a cake with the Confederate flag, or a Muslim baker who declines to decorate a cake with the message “No Muslim Immigrants.” …Tolerance and pluralism are important values in a free society. So are choice and association. Your choices may not be mine; my preferred associations may not be yours. In a diverse, live-and-let-live culture, our differences are manageable — as long as government doesn’t interfere.

This controversy should have nothing to do with sexual preference. One of my former interns is gay, but does not want to force others to associate with him.

Being a gay libertarian…you are a pariah among your peers. …So-called civil rights groups like the American Civil Rights Union…say…that “when businesses are open to the public, they’re supposed to be open to everyone.” …Well, folks, I am gay myself – I am even married – and I stand by Philipps’ right to discriminate against whoever he wants. That, of course, makes me a traitor, a turkey voting for Thanksgiving – and if I were African American, it would also make me an Uncle Tom. …many liberals stand by the ACLU’s faulty reasoning… Faulty because it implies that, once you start selling a product or service, you automatically lose your right to freely and voluntarily interact with other people. It’s opened to the public, so it suddenly becomes public “property”… Following that logic, a Muslim baker would be forced to make a cake with Mohammed’s face on it – an unspeakable moral crime in Islam – Hooters would have to hire anyone as a server and gay bathhouses would have to welcome female patrons. …the infamous Jim Crow laws not only maintained an apartheid-like state for African Americans, but they also dictated how private businesses needed to interact with these people. …instead of having government force businesses to serve anyone, I want it to let them discriminate in the open. This way, I know exactly where not to do business. Because even if I were heterosexual, I would very likely boycott businesses that discriminate on arbitrary traits like sexual orientation or skin color. It’s not a crime – no one’s life or property is endangered by this refusal of doing business – but it goes against my moral standards of treating every human being as an equal.

Excellent analysis. Indeed, I’d like to take partial credit. Except Pierre already was a solid libertarian when he started working for me.

Here’s another column with the same perspective, which appeared in the Federalist.

…it should be simple to appreciate why religious people who deeply oppose socially changing marriage to include same-sex couples would not wish to endorse or participate in a same-sex wedding. …Masterpiece Cakeshop, as with many caterers, florists, and photographers, has merely declined to participate in an event or associate their brand with that event. Why do LGBT activists perceive this as a direct attack on the validation of their relationships? …I would not seek employment or request a table at a Planned Parenthood event and expect them to accommodate me. Why would I help them raise money or support their business model? If I encountered an individual morally uncomfortable with participating in an activity with me and my boyfriend, such as couple photos or planning a party, it would be uncomfortable for me to force her. …I would be taken aback by a rejection, I would feel it is my responsibility to choose another photographer rather than force another person to violate her faith for my satisfaction.

Interestingly, some folks on the left openly express their affinity for discrimination. Here’s Michael Moore exercising his right not to do business with theaters in North Carolina, along with a comment by someone who wants Moore to be philosophically consistent.

Ouch, that retort had to leave a mark. Though Moore isn’t bothered by hypocrisy, so he probably doesn’t care.

And speaking of hypocrisy, I wonder what my friends on the left think of the following examples of discrimination.

Here’s freedom of association in action, as reported by the Washington Times.

A boy whose letter to President Trump made national headlines last month reportedly wanted a pro-Trump cake for his birthday party, but his mother was unable to find a baker willing to fulfill the order. …his mother “made him one herself, because she couldn’t find a bakery willing and able to do it.” Michael P. Farris is president, CEO and general counsel of the Alliance Defending Freedom, …wondered why bakers are allowed to decline to make birthday cakes supporting Mr. Trump, but not wedding cakes supporting same-sex marriage. …“The fact is that these cake shops have freedom of speech,” he continued. “They have the right to decline to use their artistic talents to celebrate events or promote messages that violate their beliefs, even if it offends a nice little kid.”

Kudos to Mr. Farris. He wants sauce for the goose to be sauce for the gander. But more important, he wants the right sauce, i.e., nobody should be coerced by government to associate with others.

The New York Post highlights another example of how freedom of association works.

Bartenders at a West Village hot spot served up discrimination — with a liberal twist — refusing to serve a customer because he was wearing a “Make America Great Again” hat, according to a lawsuit. …Greg Piatek, 30, an accountant from Philadelphia, claims he was snubbed…by workers at The Happiest Hour on West 10th Street over his conservative fashion statement… “Anyone who supports Trump — or believes what you believe — is not welcome here! And you need to leave right now because we won’t serve you!” Piatek claims he was told as he was shown the door by a manager. …Piatek’s lawyer Paul Liggieri called the incident “humiliating,” saying it was his client’s “saddest hour.”

I think Mr. Piatek is being a snowflake. If some establishment didn’t want to serve me because of my libertarian values, I would shrug my shoulders and find a place that did value my cash.

I just wish folks on the left had the same perspective. Moreover, I wonder if they’ve considered the implication of their approach. This humorous item from Libertarian Reddit could become reality if the government had the power to force all of us to do business with each other.

Who needs free will when your government can get involved instead?
byu/RealAuridus inLibertarian

And here’s another story showing how people choose to discriminate.

Brian Ashworth…was in the office when one of his employees walked back to tell him that a woman and four or five men…were in the dining room of Ace Biscuit & Barbecue… One wore a “Make America Great Again” shirt, and another had a shirt promoting the British white nationalist punk band, Skrewdriver. A third man sported a shirt that said, “Pinochet Helicopter Company,” a reference to former right-wing Chilean dictator Augusto Pinochet, accused of tossing Communists and other political opponents from aircraft. …the group was behaving, minding its own business. …”One employee said to me, ‘Brian, be cool. Let them eat,'” the restaurant owner recalled. …Suddenly, the young man in the Skrewdriver shirt threw up a Nazi salute, which the others reciprocated, he said. “That was it. Oh my God, are you kidding me? ‘Get out of here. You’ve got to go,'” Ashworth told them, admittedly in unkind words. …They countered that they had rights, and Ashworth conceded they had rights but said, as a business owner, …he reserves the right to deny service to other groups. His employees don’t have to serve them, he said.

Amen.

I imagine most of my leftist friends will agree with the restaurant owner’s decision, but there’s part of the story that may cause them heartburn.

“I got a round of applause from the customers who saw me throw them out,” he said. “A round of applause is good, but it doesn’t keep anybody safe.” …He decided to close for the day, for the safety of his staff and customers. …Ashworth brought his two .45-caliber pistols to work… He supposes he’ll keep bringing them to work until he feels safe again.

Last but not least, Marissa Mayer explains for FEE how she doesn’t think government should get involved solely because someone does not want to do business with her.

This week I was denied a service because the company’s values are at odds with the values that Alliance Defending Freedom stands for — values I personally hold. And guess what? I’m okay with that. …Using my work information, I signed up for an online course created by Moceanic, a team of talented fundraisers who have created a coaching and training business to help writers better connect with donors. …What I didn’t know when I signed up for the course, however, is that Moceanic does a lot of work with organizations such as the ACLU, Planned Parenthood, and LGBT activist organizations. …ADF and these organizations don’t exactly share the same values. …I received an email notifying me that they had refunded the cost of the course with no explanation as to why. I was a little perplexed by the email… That’s when I starting digging deeper into the brains behind Moceanic, and it didn’t take long for me to discover the values statement on their website. …”we reserve the right to choose not to train people working directly for, or on behalf of, organisations whose missions or values do not align with ours.” …I get it… Moceanic shouldn’t be forced to coach me on how to speak in a way that generates excitement and engagement for a cause that they disagree with any more than Jack should have to create a cake celebrating a marriage that conflicts with his beliefs.

Marissa is intellectually consistent and practices tolerance.

Too bad the same can’t be said for many other people.

I’ll close by noting that we all discriminate. We discriminate in the foods we buy, the friends we choose, the people we love, and the businesses we patronize. And I don’t think the government should coerce us to make different choices.

That being said, we also should recognize that some choices are fine and some choices are bad.

Because I have the taste buds of a child, I discriminate against restaurants with spicy food. Plenty of my friends tease me for my limited tastes, but I can’t imagine anyone (other than my mother when I was a kid) wanting to force me to eat foods I don’t like.

But what if I wanted to discriminate against people simply because of their race or religion? In that case, I would hope my friends would cease to be my friends and instead would upbraid me for my moral failings (I also hope some of them would be like Daryl Davis or Matthew Stevenson and try to rescue me from such odious forms of collectivism).

However, I wouldn’t want them to enlist government coercion. Believing in free speech also means allowing reprehensible forms of free speech. Believing in a free press also means allowing awful viewpoints. Believing in freedom of association means allowing disgusting forms of discrimination.

So bake a cake or don’t bake a cake. But if you have a bad reason for not baking a cake, you won’t be getting my business (even if your discrimination is economically rational).

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Are the Trump Tax Cuts Working?

Better economic performance is the most important reason to adopt pro-growth reforms such as the Tax Cuts and Jobs Act of 2017.

Even small increases in economic growth – especially if sustained over time – can translate into meaningful improvements in living standards.

But there are several reasons why it won’t be easy to “prove” that last year’s tax reform boosted the economy.

• It takes time for investment to increase, so the resulting improvements in productivity and wages don’t occur immediately.
• Other policy changes (most notably, growth-stifling trade barriers) can partially or fully offset the beneficial impact of tax reforms.

And there are probably other factors to mention as well.

The takeaway is that the nation will enjoy good results from the 2017 tax changes, but I fully expect that the class-warfare crowd will claim that any good news is for reasons other than tax reform. And if there isn’t good news, they’ll assert this is evidence against “supply-side economics” and totally ignore the harmful effect of offsetting policies such as Trump’s protectionism.

That being said, some of the benefits of tax reform are already evident and difficult to dispute.

Let’s start by looking at what’s happening Down Under, largely driven by American tax reform.

The Australian government announced Monday that the Senate will vote in June on cutting corporate tax rates after an opinion poll suggested the contentious reform had popular public support. …Prime Minister Malcolm Turnbull’s conservative coalition wants to cut the corporate tax rate by 5 percent to 25 percent by 2026-27… Cormann said the need to reduce the tax burden on businesses had become more pressing for future Australian jobs and investment since the 2016 election because the United States had reduced its top corporate tax rate from 35 percent to 21 percent. “Putting businesses in Australia at an ongoing competitive disadvantage deliberately by imposing higher taxes in Australia … puts Australian workers at an oncoming disadvantage and that is clearly the point that more and more Australians are starting to fully appreciate,” Cormann told reporters. Cormann was referring to a poll published in The Australian newspaper on Monday that showed 63 percent of respondents supported company tax cuts.

Wow.

What’s remarkable is not that Australian lawmakers are moving to lower their corporate rate. The government, after all, has known for quite some time that this reform was necessary to boost wages and improve competitiveness.

The amazing takeaway from this article is that ordinary people understand and support the need to engage in tax competition and other nations feel compelled to also cut business tax burdens.

All last year, I kept arguing that this was one of the main reasons to support Trump’s proposal for a lower corporate rate. And now we’re seeing the benefits materializing.

Now let’s look at a positive domestic effect of tax reform, with a feel-good story from New Jersey. It appears that the avarice-driven governor may not get his huge proposed tax hike, even though Democrats dominate the state legislature.

Why? Because the state and local tax deduction has been curtailed, which means the federal government is no longer aiding and abetting bad fiscal policy.

New Jersey’s new Democratic governor is finding that, even with his party in full control of Trenton, raising taxes in one of the country’s highest-taxed states is no day at the beach. Gov. Phil Murphy…has proposed a $37.4 billion budget. He wants to raise $1.7 billion in new taxes and other revenue… But some of his fellow Democrats, who control the state legislature, have balked at the governor’s proposals to raise the state’s sales tax and impose a millionaires tax. State Senate President Steve Sweeney has been particularly vocal. …Mr. Sweeney previously voted for a millionaire’s tax, but said he changed his mind after the federal tax law was passed in December. The law capped previously unlimited annual state and local tax deductions at $10,000 for individual and married filers, and Mr. Sweeney said he is concerned an additional millionaire’s tax could drive people out of the state. “I think that people that have the ability to leave are leaving,” he said.

Of course they’re leaving. New Jersey taxes a lot and it’s the understatement of the century to point out that there’s not a correspondingly high level of quality services from government.

So why not move to Florida or Texas, where you’ll pay much less and government actually works better?

The bottom line is that tax-motivated migration already was occurring and it’s going to become even more important now that federal tax reform is no longer providing a huge de facto subsidy to high-tax states. And that’s going to have a positive effect. New Jersey is just an early example.

This doesn’t mean states won’t ever again impose bad policy. New Jersey probably will adopt some sort of tax hike before the dust settles. But it won’t be as bad as Governor Murphy wanted.

We also may see Illinois undo its flat tax after this November’s election, which would mean the elimination of the only decent feature of the state’s tax system. But I also don’t doubt that there will be some Democrats in the Illinois capital who warn (at least privately) that such a change will hasten the state’s collapse.

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Defend the Market Economy, Defund the OECD

Though it gets strong competition from the International Monetary Fund, the Organization for Economic Cooperation and Development wins the prize for being the worst international bureaucracy.

The Paris-based organization is infamous for pushing a statist agenda on a wide range of issues, including class-warfare taxation, energy taxation, business taxation, value-added taxes, Keynesian spending, green energy, and government-run healthcare.

And it relies on dodgy, dishonest, and misleading data when pushing big-government policies regarding poverty, pay equity, inequality, and comparative economics.

But what gets me most agitated is the OECD’s attempt, beginning in the late 1990s, to prop up decrepit welfare states by undermining tax competition.

I elaborated on my concerns in this interview last June.

To make matters worse, American taxpayers finance the lion’s share of the OECD’s statist agenda. Eliminating subsidies for the OECD arguably would be the budget cut with the greatest value per dollar saved.

Which is the point of some new research from the Heritage Foundation. James Roberts and Adam Michel make a strong case that the OECD is using handouts from American taxpayers to push policy that are contrary to U.S. interests.

The Organization for Economic Cooperation and Development (OECD)…has transformed itself into a dunning agency for European mega-welfare states that are straining to fund the generous but unsustainable pension, health care, and other government programs they have over-promised to their constituents. One need only undertake a cursory examination of research over the past five years to see that tax-related work by the OECD’s Centre for Tax Policy and Administration and by other OECD directorates (for example, on carbon taxes) has been focused almost entirely on studies that buttress political arguments for higher taxes and implementation of more intrusive ways to collect them. …high-taxing European members of the OECD have pushed the organization toward an almost obsessive research focus on international tax avoidance and evasion. These manifest through its base erosion and profit shifting (BEPS) project, and a proposed protocol amending the Multilateral Convention on Mutual Assistance in Tax Matters. …The BEPS project also complements a disproportionate OECD focus on income inequality…that, in the eyes of OECD’s international civil servants, could be addressed best by international wealth redistribution schemes… The Trump Administration should consider whether U.S. taxpayers should continue to subsidize an organization that increasingly acts contrary to the expressed wishes of a significant number of Americans, who voted into office in 2016 a government with a mandate to cut government spending and reduce taxes. It could decide to withdraw the United States completely from the OECD.

I normally would exclaim “amen” at this point, except the folks at Heritage are being far too nice, writing that the White House “should consider” whether to subsidize the OECD and noting that the U.S. “could” withdraw from the Paris-based bureaucracy.

I’m in no mood for diplomatic niceties when dealing with an organization that is pervasively hostile to economic liberty. The OECD is beyond salvage. If Republicans had any brains (yes, I realize that the GOP is known as “the stupid party” for good reason), handouts would have ended last decade.

I’ll close with an example of the OECD’s perfidy.

From the moment the bureaucracy’s anti-tax competition project began about 20 years ago, I explained that the OECD was seeking to destroy financial privacy so that uncompetitive governments could track capital and impose high tax rates on income that is saved and invested. In effect, the battle over “tax havens” and “tax competition” were a proxy for whether there should be more double taxation and more extra-territorial taxation.

OECD bureaucrats and others scoffed at such assertions and said the project was simply about closing off options for tax evasion so that nations could afford to lower tax rates.

I viewed that explanation as laughably dishonest. After all, did oil-producing nations create OPEC so they could reduce petroleum prices?

Were my suspicions warranted? Well, see what the bureaucrats just wrote.

…opportunities may exist…to increase progressivity in the…taxation of capital income as a result of major changes to the international tax environment. …the recent move towards the automatic exchange of financial account information between tax administrations is likely to make it harder…for taxpayers to evade tax by hiding income and wealth offshore… This may present a particular opportunity for countries that previously moved away from progressive taxation of capital income (due to concerns regarding such tax evasion) to reintroduce a degree of progressivity.

In other words, now that the OECD has succeeded in greatly weakening financial privacy, the bureaucrats openly admit that the real goal was to make it possible for uncompetitive welfare states to impose higher tax burdens on saving and investment. I’m shocked, shocked.

Here’s my video on the OECD. It was released in 2010, but nothing has changed other than there’s even more evidence against the parasitical bureaucracy.

P.S. To add more insult to all the injury, the tax-loving bureaucrats at the OECD get tax-free salaries. Must be nice to be exempt from the bad policies they support.

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The “Khaldun Curve”

I’ve written dozens of columns about the Laffer Curve and its implications.

My favorite may be the one that pointed out why it generally is misguided to raise tax rates even if the government would collect more revenue (i.e., don’t give politicians $1 if it means reducing the private economy by $5).

And I’m always reminding people that the goal is to maximize growth rather than revenue.

I’ve even written about how the Laffer Curve relates to issues as diverse as sex and ISIS.

But I haven’t paid much attention to the history of the issue. Now, thanks to some great research from Nima Sanandaji, we can investigate that topic.

…the Laffer Curve has been used by supporters of low taxes around the world to reinforce their ideas. …it has helped to inspire a downward shift in taxation. Ronald Reagan’s administration introduced massive changes, which dropped the marginal tax rate to 28 percent. …even the proponents of high tax policy are aware of Laffer’s warnings: there is a limit to how high taxes can be raised.

All that’s true.

Reagan’s lower tax rates did produce a windfall of tax revenue from the rich.

And even folks on the left admit that the revenue-maximizing tax rate is below 100 percent, so they acknowledge the Laffer Curve is real.

But what many people don’t know is that the concept of the Laffer Curve existed long before Art drew his famous curve on a napkin.

Nima points to the example of Ibn Khaldun.

…Laffer’s theory was far from new. …Laffer has himself explained that he didn’t invent the curve, but took it from Ibn Khaldun, a 14th-century Muslim, North African philosopher. …Born in 14th-century Tunisia, Khaldun was a prominent scholar and one of the founders of economics and social sciences. Khaldun believed that a just government should only, in accordance with Islamic law, impose low taxes. …However, rulers tend to increase the tax to benefit themselves. High taxes hurt commerce and trade. When tax rates are raised to pay for a bloated government, it will finally cause the tax base to shrink so much that the government cannot meet its obligations. …at this point the state would often implode under its own weight, leading to a period of chaos and the rise of a new state.

Here’s Khaldun’s most famous statement on tax rates and tax revenue.

By the way, there were plenty of people between Khaldun and Laffer who understood why punitive tax rates are foolish, including Alexander Hamilton and John Maynard Keynes(!).

P.S. Perhaps because they’re exposed to the real-world impact, America’s CPAs also understand the Laffer Curve is very real.

P.P.S. Nima has just written a fascinating new book, The Birthplace of Capitalism – The Middle East, which can be ordered here.

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Is Asset Forfeiture Disgusting, Nauseating, Reprehensible, Despicable, or Awful?

On several occasions, I’ve shared horror stories of government brutality and asserted that all decent people should be libertarians.

If you still are not convinced, today we’re going to look at seven stories about so-called civil asset forfeiture, which is a sanitized term. Most people call it stealing.

Or “policing for profit.”

Let’s look at how this third-world scam operates, starting with a disgusting example of asset forfeiture from Reason.

Rustem Kazazi, an American citizen, was just trying to get on a plane to return to his native Albania last October, from Cleveland Hopkins International Airport. He was initially flying to Newark where he’d catch a connection to Albania. …Given facts about the Albanian banking and finance system and the advantages of cash there, he chose to turn his life savings into U.S. dollars and bring them with him to cover expenses related to the above house needs and his long stay rather than deal with bank transfers… Kazazi ran his carry-on luggage through the x-ray machine, like we all must. In that luggage was his life savings in cash, $58,100. There was zero attempt to be clandestine or smuggle-y about it. It was divided into three labeled and marked stacks of $100 bills, all in one envelope with $58,100 written on the outside.

Here’s how despicable bureaucrats reacted.

TSA agents noticed the money. …They called Customs and Border Patrol (CBP) on Kazazi, who took him off to a private room to grill him, as well as strip him naked… They kept his money, without telling him why, then tried to get him to just get on his flight without it. The receipt they handed him made no reference to the specific amount they’d confiscated. When he refused initially to just go on with his day as if he hadn’t just suffered a horrible crime, they escorted him out of the airport. …In December CBP finally formally informed him via a “Notice of Seizure” that they’d taken $57,330 from him, $770 less than he insists was actually taken. The Kazazis filed all the officially required forms and notices to proceed with trying to get their money back… CBP agents tried to finagle the Kazazis into withdrawing their demand for federal court action, but failed.

The good news is that the invaluable Institute for Justice has intervened.

Kazazi and his family today filed a formal motion for return of property…with the assistance of consistent civil-forfeiture-justice fighters from the Institute for Justice… Let’s hope the courts do the right, and legal, thing, demand CBP obey the law and return the stolen money.

And here’s a nauseating example of theft-by-government from Texas.

For nearly a decade, Anthonia Nwaorie dreamed of starting a medical clinic in her hometown in Southern Nigeria. Last October, the 59-year-old nurse was boarding a plane in Houston with medical equipment, supplies, and about $41,000 in cash — which had taken her years to save — when Customs and Border Protection officials stopped her. …Nwaorie said she was detained for hours. She missed her flight to Nigeria and the customs officers seized all her money. …CBP took the money because Nwaorie, a U.S. citizen since 1994 who lives in Katy, had not declared that she was taking more than $10,000 out of the country — a technical requirement that her lawyers say is not well-publicized…six months after her money was taken, Nwaorie has not been charged with a crime.

Once again, the great people at IJ are involved.

Lawyers at the Institute for Justice, an Arlington, Virginia-based public interest law firm, say her case demonstrates just how abusive the practice of civil forfeiture — which allows the government to take property that is believed to be tied to a crime — can be. ….the Institute for Justice filed a class-action lawsuit against the agency on Nwaorie’s behalf, demanding that CBP return her money without forcing her to sign any written agreement. They’re also asking a federal court in Houston to void all such agreements that might have been signed by others trying to get seized property back.

George Will opined about another reprehensible example from Texas.

On Sept. 21, 2015, Serrano drove to the Eagle Pass, Tex., border crossing, intending to try to interest a Mexican cousin in expanding his solar panel installation business in the United States. …they searched his truck — this was unusual for a vehicle leaving the country — and one agent said, “We got him!” …Having found five .380-caliber bullets in the truck’s center console — he has a concealed-carry permit but had no weapon with him — they handcuffed him and seized his truck under civil forfeiture, saying it had been used to transport “munitions of war.”

The heroes at IJ are on the case.

Assisted by litigators from the Institute for Justice (IJ), whose appearance on the West Texas horizon probably panicked the government into pretending to be law-abiding, Serrano wants to make the government less larcenous and more constitutional when it is enriching itself through civil forfeiture. …Serrano is suing for restitution but also seeking a class-action judgment on behalf of others who have been similarly mistreated. …Robert Everett Johnson is one of the IJ lawyers… Johnson says: “Imagine being detained at an airport checkpoint because you innocently forgot to take a tube of toothpaste out of your luggage. But rather than asking you to throw it out or put it in a plastic bag, the TSA agents told you they were seizing all of your luggage, including the toothpaste tube.” That happened to Serrano at the hands of a government — the one north of the border — that felt free to say, “You have no rights here.”

Here’s an example of this despicable practice from Wyoming.

Phil Parhamovich…had spent years restoring and selling houses, cars, and musical instruments, often clocking 12-hour workdays, to save up more than $91,000. And now it was all going to pay off: He would buy a music studio in Madison, Wisconsin… Then came the police stop… By the time it was over, police in Wyoming would take all of Parhamovich’s money — the full $91,800. Parhamovich, who has no criminal record, was not accused of or charged with a serious crime; he only got a $25 ticket for improperly wearing his seat belt and a warning for “lane use.” …state officials said they consider the cash “abandoned.” The state has even moved to forfeiture the money without notifying Parhamovich of the relevant court hearing until after it happened.

You won’t be surprised to learn who got involved to protect Parhamovich’s rights.

According to Parhamovich and his attorneys with the advocacy group, the Institute for Justice, this is another classic example of policing for profit and the problems it causes. Police initiated the stop for a minor traffic violation, but quickly escalated it further and further until they took a man’s life savings — all to use that money for their own law enforcement purposes.

This story has a happy ending (except for the fact that the cop isn’t in jail for stealing).

Wyoming lawmakers, citing this story, have now banned the roadside waivers that police used to wrongly take Phil Parhamovich’s $91,800. Previously, Parhamovich…got…his money back during a court hearing.

The IRS also participates in this thuggish racket, as reported by the Washington Post.

Oh Suk Kwon, who left South Korea for America in 1976, served as a fleet mechanic in the U.S. Army. After four years in the military, decades of working in an electrical plant and as an auto mechanic, after raising the kids and seeing them off to their adult lives, Kwon finally bought a gas station in Ellicott City in 2007. It meant everything to him. Just a few years after he opened it, zealous government investigators…seized all of the station’s money on a hunch — and wiped the family out. No, they weren’t money launderers or terrorists or mobsters or tax evaders. The government found no evidence of criminal activity. …the gas station went under, and Kwon’s wife died amid the stress of it all…the agency won’t give Kwon his money back. …He’s heartbroken that the country he loves is treating him this way.

The story has additional examples.

…fervent investigations targeted scores of small businesses in Maryland. The best known of these was South Mountain Creamery… the creamery was accused of structuring — farmer Randy Sowers also said his bank teller told him to keep the deposits under $10,000 to cut paperwork — the farm’s entire operating budget was seized. …The government eventually found out that the cows weren’t drug mules and the chickens weren’t gangsters and allowed Sowers to sign a settlement agreement to get back half of about $60,000 that the IRS took. Sowers did it because he needed that money to keep the farm going. Another Maryland farmer, Calvin Taylor, had about $90,000 seized in 2011 after the government snagged him in a similar investigation. He couldn’t take the time to fight the charge, either, and agreed to a settlement where the government returned about $41,000.

Once again, the IJ people are fighting to protect people from rapacious government.

The farmers didn’t walk away from the fight. Backed by the libertarian Institute for Justice, Sowers, Taylor and others testified before Congress, petitioned and fought for three years to get their cash back.

The awful thugs at the IRS also stole money in Connecticut.

David Vocatura watched $68,000 disappear. He was at his family’s bakery in Norwich, Connecticut, when a squad of armed IRS agents filed into the store. The agents wanted to know if Vocatura and his brother Larry were trafficking drugs or running a prostitution ring. The brothers had no idea what they were talking about. …the IRS refused to believe Vocatura’s Bakery was operating on the up and up. Agents said the business raised red flags because of a series of cash deposits in sums under $10,000, the amount at which banks are required to report transactions to the federal government. …The agents had no evidence of other wrongdoing, but thanks to a controversial law enforcement tool known as civil asset forfeiture, they didn’t need any to seize every penny in the Vocaturas’ bank account… The IRS has…[been] subjecting David, 53, and his brother Larry, 69, to a series of increasingly aggressive legal maneuvers — including threats of significant prison time and additional fines — in an attempt to strong-arm them into permanently forfeiting their assets.

Naturally, IJ is riding to the rescue.

…the Institute for Justice, a libertarian public interest law firm, filed a lawsuit in U.S. District Court for the District of Connecticut on behalf of Vocatura’s Bakery, demanding that the IRS promptly return their money. …Hours after the suit was filed, the IRS said it would finally give the Vocaturas their money back.

But the jackboots in government are vindictively going after the family.

Peter S. Jongbloed, assistant U.S. attorney for the District of Connecticut, served the Vocaturas a grand jury subpoena calling for them to turn over every financial record from the six years between March 2007 and April 2013, so the agency could finally begin investigating the business’s tax and regulatory compliance. …“At this point, the government is in so deep, they’ve put these guys through three years of hell — and held onto their money for three years — and so they feel like they need to justify it,” said Robert Everett Johnson, an attorney for the Institute for Justice who is representing the Vocaturas. “So now they’re going to conduct this investigation into the bakery in some effort to try to find something that will make it look like they were doing the right thing all along.”

Let’s review one final example of banana-republic law enforcement, this time from Alabama.

The morning of June 29, 2010, began much like any other at FAR Computers in Ensley. Frank Ranelli, who has owned the computer repair business for more than two decades, was doing some paperwork in his windowless office when he heard loud banging on the front door. When he answered it, he was unaware that about 20 officers with the Homewood and Mountain Brook police departments were surrounding his store, some wearing flak jackets and carrying assault rifles. Within moments, a Homewood police sergeant had declared a room full of customers’ computers, merchandise and other items “stolen goods,” Ranelli recalled. …The police proceeded to confiscate more than 130 computers – most of which were customers’ units waiting to be repaired, though some were for sale – as well as the company’s business servers and workstations and even receipts and checkbooks. …Nothing ever came of the case. The single charge of receiving stolen goods was dismissed after Ranelli demonstrated that he had followed proper protocol in purchasing the sole laptop computer he was accused of receiving illegally. Yet none of the property seized by police that summer morning more than seven years ago has been returned to him.

The article references the stellar work of IJ.

Alabama’s laws, however, still provide the state’s citizens with few protections from the practices, earning the state a “D- for its civil asset forfeiture laws” in a November 2015 report by the Institute for Justice, a Virginia nonprofit advocacy law firm. Alabama laws stack the deck against victims of asset forfeiture by establishing a “low bar to forfeit” and not requiring a conviction to do so; offering “limited protections for innocent third-party property owners”; and letting “100% of forfeiture proceeds go to law enforcement,” the report stated. …In a time of increasingly tight budgets for many law enforcement agencies, seizing property offers an opportunity for them to increase revenue without politicians having to raise taxes.

The good news (relatively speaking) is that some states are trying to curtail this evil practice.

The bad news is that cops in some states have figured out how to steal regardless.

In theory, New Hampshire has reformed its asset forfeiture laws. The state passed a bill in June 2016 to keep police from seizing and keeping people’s property unless those people have been convicted of a crime. And yet New Hampshire Public Radio reports this week that the state’s cops are still trying to keep stuff seized from people who have been accused but not actually convicting of criminal behavior. …when the reforms were passed…there was a big loophole. The U.S. Justice Department’s “Equitable Sharing” program allows local law enforcement agencies to partner with the feds for busts, then funnel the forfeiture through the looser federal program, which doesn’t require convictions, back into the local police budgets. Doing this allows them to skirt any state-level restrictions on asset forfeiture.

In other states, the establishment is going nuts trying to preserve their shady scam.

…a local prosecutor and police officer say the state will be welcoming violent drug cartels if a Republican lawmaker gets his way. State Sen. Kyle Loveless has been trying to muster support this year for a bill that would reform a controversial law enforcement tool known as civil asset forfeiture. …Loveless sees this as a fundamental violation of people’s rights to due process and property and says the lax standards have gotten innocent people in Oklahoma caught in the civil asset forfeiture net. On Thursday, he sparred with Tulsa County District Attorney Steve Kunzweiler and Eric Dalgleish, a major at the Tulsa Police Department, over the merits of his bill to require a criminal conviction to permanently take someone’s property. …Kunzweiler, the district attorney, said the extra level of protection was unnecessary and that raising the bar for forfeiture would effectively roll out a welcome mat to ruthless drug traffickers from Mexico. …Dalgleish later said that cartels were keeping a close eye on Loveless’ legislation and even lobbying for its passage.

Shame on Kunzweiler and Dagleish. What reckless and dishonest demagoguery.

And three cheers for Sen. Loveless, who deserves a lot of love for putting the principles of the Constitution first.

Sadly, the Trump Administration is on the side of theft-by-government, which is especially disappointing since there was a small move in the right direction during the Obama years.

P.S. Just like intrusive and ineffective money-laundering laws, wretched asset forfeiture laws are largely the result of the foolish War on Drugs. One bad policy generates another bad policy. Lather, rinse, repeat.

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