Feeds:
Posts
Comments

Archive for March, 2019

There are some remarkable stories of the private sector showing initiative when governments fail to maintain infrastructure.

  • In response to dithering by government, residents and businesses in Hawaii put up $4 million to fix an important community road.
  • Smugglers in Russia repaired a road to facilitate untaxed trade between Russian and Belarus.
  • I also wrote about a guy in England who was fed up with the slow pace of road repairs and built a private toll road.

Regarding the final example, here’s a video on his project.

I’m particularly amused that this example of practical libertarianism (I’m guessing without the cost overruns that are inevitable with government) was made possible because zoning laws (normally an obstacle to sensible land use) basically allowed the organizer to ask for forgiveness afterward rather than permission beforehand.

To be sure, these isolated examples are hardly a sign that infrastructure is going to be privatized in the United States.

But maybe we can at least learn a lesson on whether we should have more centralization and control from Washington, versus more decentralization and private-sector involvement.

Regarding the former, Chris Edwards explained for FEE that the federal gas tax should not be increased since politicians impose taxes for the ostensible purpose of building and maintaining roads, but then they divert the money to other programs that buy more votes.

…a federal gas tax increase makes no sense. State governments own America’s highways, and they are free to raise their own gas taxes whenever they want. Indeed, 19 states have raised their gas taxes just since 2015, showing the states are entirely capable of raising funds for their own transportation needs. …Also consider that gas taxes used to be a more pure user charge for highways, but these days gas tax money is diverted to inefficient nonhighway uses such as transit. …About 20 percent of those funds (about $8 billion) are diverted to transit and other nonhighway uses. …In 2016, state governments raised $44 billion from fuel taxes, and they diverted 24 percent—14 percent to transit and 10 percent to other activities. …The states also raised $38 billion from vehicle fees. They diverted 34 percent of those funds—13 percent to transit and 21 percent to other activities.

Regarding the latter, the City Manager of Milford, Delaware, wrote a column for the Washington Post about benefiting from private financing for road repairs.

…when I heard that a Domino’s marketing campaign was paying municipalities to repair potholes in return for credit for the work, I quickly responded. …Our role was easy. In exchange for a $5,000 check, Domino’s wanted its logo and a tag­line saying “Oh yes we did” in spray chalk on the road next to each repair. …In two weeks, they fixed more than 40 potholes of different sizes — about 20 to 25 percent of the potholes that appeared after the winter. …The program has elicited some complaints about what it means that a pizza chain is funding basic government projects. …But we saw this as a great idea for our community. …In many communities, there’s a constant competition between paying for police and paying for everything else. …if we demonstrate good stewardship of our resources, then hopefully fewer people will complain about paying taxes. …sometimes that means letting Domino’s pick up the tab.

Incidentally, sometimes “anarchists” decide to fix potholes without even waiting for permission.

Let’s close with some libertarian-themed humor.

Some people apparently thing that roads wouldn’t exist in the absence of government. This is an anti-empirical sentiment since many of the first main arteries in America were private roads. And we still have private highways being built today.

Not to mention plenty of neighborhood developments and office parks (or even stairs) that are examples of privately financed and privately maintained infrastructure.

Yet there are still doubters, so this sarcastic image is for them.

Speaking of sarcasm, this next image is a clever combination of two concepts.

First, politicians have an insatiable appetite to tax us over and over again.

Second, they don’t fulfill the responsibilities that they claim only government can handle.

The bottom line is that Washington should have no role in infrastructure. And even if you think infrastructure should be handled by state and local government, that definitely does not (or should not) imply a large public sector.

P.S. Here’s some more libertarian-themed infrastructure humor.

P.P.S. To be balanced, libertarians can be mocked because of our disdain for public goods.

Read Full Post »

Redistribution has a corrosive impact on both ends. Recipients are harmed because they get trapped in dependency, and workers are harmed because taxes discourage productive behavior.

Yet young people seem susceptible to this ideology, even when they are among the main victims.

While it might be tempting to shrug and assume they’re hopelessly clueless, this video shows young people are quite capable of grasping why redistribution is a bad idea.

I’ve previously shared a similar video, as well as a couple of written versions of this redistribution challenge.

In this case, though, we have some additional analysis.

Here are some excerpts from the accompanying article.

…for the first time ever, more young people say they’d prefer to live in a socialist country over a capitalist one. Whether it’s free healthcare, free college tuition, or universal basic income, students around America increasingly support higher taxes on the wealthy in order to pay for these progressive policies.  But would they support similar policies if they had skin in the game? …Campus Reform‘s Cabot Phillips went to Florida International University in Miami to test the waters on a “Socialist GPA” policy in which students with higher GPAs would be forced to “spread the wealth” and give some of their GPA points to students with lower GPAs. Despite the overwhelming number of students who initially said they’d support socialist policies, few agreed to go along with such a plan.

Interestingly, the students actually are quite perceptive when they apply incentives in their own lives.

“I’ve lost a lot of sleep so I don’t know if that would be fair,” one student said, while another answered no because “I like, study all day for my grades.” Yet another student, after expressing her support for socialism in America conceded, “I guess it would be kind of hypocritical for me to say no.” Another student, trying to justify his refusal to abide by such a policy, said, “you study for your grades, and they reflect how much time you’re studying.”

As a wonky economist, the first thing I wondered about is how young people would react if they were asked about a small amount of redistribution (say 1/10th of a point of a GPA) compared to a large amount of redistribution (a full point of GPA).

I’m guessing they would realize that the damage of the latter would be more than 10 times the damage of the former – which is exactly the same thing you find when you examine the deadweight losses of ever-higher tax rates.

Two final points.

  • First, many young people don’t understand socialism. They think it’s just a proxy for caring. Or even for being sociable. It’s incumbent on advocates of freedom to help them understand the adverse implications (i.e., redistributing money is just as bad as redistributing GPAs).
  • Second, it won’t be easy to make an ethical appeal to young people if they perceive (and many do) that capitalism is the same as cronyism. Which is why self-styled conservatives (or Trumpians) who support favors for special interests do a lot of damage to the cause of freedom.

P.S. Since they are huge net losers from the current system, young people should be very amenable to a message of genuine entitlement reform.

Read Full Post »

Today is the 10th anniversary of International Liberty, and I was initially tempted to commemorate the day with another introspective column.

But I decided on a different focus because I just read a story that combines two things – wasteful spending and Washington dishonesty – that I don’t like.

Let’s look at the article, which was published in The Hill.

The Senate Budget Committee on Thursday approved a GOP-backed budget resolution that would allow for draconian spending cuts by reducing both defense and nondefense spending for 2020. …The Senate’s budget sticks to the legal caps for defense — falling from $716 billion to $643 billion, including off-book funds — and nondefense, which would drop from $640 billion to $542 billion. …The spending blueprint also would decrease spending on Medicaid, children’s health insurance and Affordable Care Act subsidies by $281 billion, and on Medicare by $77 billion. “…this is a disastrous budget for the middle class and working families of this country,” said Sen. Bernie Sanders (I-Vt.), the panel’s ranking member.

I was initially semi-excited when I read the story.

After all, we desperately need “draconian spending cuts” in Washington.

But I was only “semi-excited” because I feared – based on past experience – that these supposed reduction were fake.

So I decided to look at the actual numbers in the Senate’s proposed budget.

Lo and behold, my skepticism was warranted. There are zero genuine cuts. Instead, spending increases by an average of 3.5 percent annually under the Senate’s “draconian” budget plan.

Politicians claim there are “cuts” because spending levels in the Senate plan (orange line) don’t rise as fast as what would happen if spending was left on autopilot (blue line).

But this simply means that the burden of government spending won’t grow as fast as previously planned. I’ve exposed this scam in discussions with John Stossel and Judge Napolitano.

And I’ve condemned the Washington Post for playing this dishonest game as well. You also won’t be surprised that Obama used this dodgy approach.

The political elite like this dodgy game because they can pretend they are fiscally responsible while simultaneously making government bigger.

The bottom line is that politicians should be honest. If they want to argue that spending should grow 3.5 percent yearly (or even more), they should explain why Washington deserves more money.

But don’t lie to us about supposed spending cuts when the budget is expanding.

P.S. Remember the “sequester”? Politicians and interest groups squealed that the world was going to end because of an automatic spending cut that wasn’t even a cut.

Read Full Post »

It’s not easy to identify the worst international bureaucracy.

Some days, I’m tempted to pick the Organization for Economic Cooperation and Development. After all, the Paris-based bureaucracy is infamous for pushing bigger government and higher taxes.

Other days, I want to select the International Monetary Fund, which leverages its bailout authority to relentlessly coerce governments into imposing higher taxes to finance bigger budgets.

At least for today, I’m going to argue that the IMF wins the dubious prize of being the worst.

That’s because the bureaucracy is doubling down on its ideological zeal for bigger government. Here are some excerpts from a speech earlier this week by the organization’s top bureaucrat, Christine Lagarde (who, incidentally, receives a lavish tax-free salary).

Our issue today is international corporate taxation. …I believe we need new rules in this area. …reasons why a new approach is urgent. …the three-decade long decline in corporate tax rates, undermines faith in the fairness of the overall tax system. …New IMF research published two weeks ago analyzes various options in…better addressing profit-shifting and tax competition.

Ms. Lagarde wants to boost the tax burden on business, and she complained about the fact that corporate tax rates have come down in recent decades.

What she cleverly didn’t acknowledge, though, is that the IMF’s own research shows that lower rates have not resulted in less revenue.

But you have to give Lagarde and her minions credit. They act on their beliefs.

The IMF has been pushing for big tax increases in Bahrain.

The International Monetary Fund (IMF) has called on the Bahrain government to take further action to shore up its shaky financial position, saying a large package of revenue and expenditure measures – including new taxes – is “urgently needed”. …the IMF set out a number of policy ideas – including the controversial tax proposal – in a statement… Bikas Joshi, the official who led the IMF team that visited Bahrain…went on to say that a “large fiscal adjustment is a priority” for the country…he said. “The implementation of a value-added tax, as planned, would be important. Additional revenue measures—including consideration of a corporate income tax—would be welcome.”

The IMF has been warning against tax cuts and instead pushing for tax increases in Ireland.

The International Monetary Fund (IMF) has urged the Government not to cut taxes in the upcoming budget, warning it risked “over-stimulating” Ireland’s fast-growing economy. …The fund recommended boosting housing supply through State-backed social housing projects… It recommended the Government pursues a small budget surplus in 2019… To achieve this, it advised broadening the tax base. One way this could be done was by increasing the tax on diesel… In addition, the IMF recommended getting rid of various tax exemptions and preferential rates such as the lower 9 per cent VAT rate for the hospitality sector.

The IMF has urged so many taxes that it created a backlash in Jordan.

Thousands of Jordanians heeded a strike call…to protest at major, IMF-guided tax rises they say will worsen an erosion in living standards. …warning the government that sweeping tax amendments…would impoverish employees already hit by unprecedented tax hikes implemented earlier this year. …tens of thousands of public and private sector employees accused the government of caving in to International Monetary Fund (IMF) demands and squeezing a middle class… The amendments, which would double the income tax base, are a key condition of a three-year IMF economic program that aims to generate more state revenue… Jordan earlier…raised taxes on hundreds of food and consumer items.

The examples are part of a pattern. I’ve also written about the IMF pimping for higher taxes in big countries, in small countries, and even entire continents.

Needless to say, the IMF also agitates for tax increases in the United States.

And it’s even specifically targeted poor nations for tax increases! Maybe now you’ll understand why I joked about nations not allowing IMF bureaucrats to visit.

I want to close today’s column by returning to Lagarde’s speech because there was another part of her speech that belies belief. She actually wants people to think that higher taxes and bigger government are a recipe for more growth.

…the current situation is especially harmful to low-income countries, depriving them of much-needed revenue to help them achieve higher economic growth.

Yes, your eyes are not deceiving you. The IMF’s top bureaucrat made the absurdly anti-empirical argument that higher taxes are good for growth.

Even though that’s directly contrary to evidence on the factors that enabled North America and Western Europe to become rich.

Sadly, this is now a common rhetorical tactic by international bureaucracies. The OECD does the same thing, as does the United Nations.

I guess they all think if they repeat nonsense often enough, people will somehow conclude up is down and black is white.

For what it’s worth, I’ll wait for them to name a single country that ever became rich by imposing higher taxes and bigger government.

P.S. There are some good economists working in the research division of the IMF, and they periodically publish good research on topics such as spending caps, debt, decentralization, the size of government, demographics, government spending, and taxation. Too bad the bureaucrats working on policy never read those studies.

P.P.S. My favorite IMF study was the one that accidentally provided very compelling evidence against the value-added tax.

P.P.P.S. My least favorite IMF studies were the ones that actually suggested that it would be desirable if everyone had lower living standards so long as rich people disproportionately suffered. Disgusting.

Read Full Post »

Iceland is a tiny little country with just 338,000 people (about the population of Santa Ana, CA), but that doesn’t mean it can’t teach us lessons about public policy.

I wrote about the nation’s approach to fisheries in 2016, and explained that the property rights-based system is the best way of protecting fish stocks from over-harvesting.

And in 2013, I wrote about how modest spending restraint was helping to solve fiscal problems created by the financial crisis.

Today, I want to further explore Iceland’s fiscal policy, largely because of this remarkable chart that accompanied a Bloomberg report on the country’s budget strategy.

As you can see, debt skyrocketed during the financial crisis and has since plummeted at a very rapid rate.

This shows debt reduction is possible. Indeed, there can be huge reductions in a very short period of time.

So there may be hope for nations that are in the midst of fiscal crisis (such as Greece), nations that are about to suffer fiscal crisis (Italy is a prime candidate), and nations that will suffer a crisis if there isn’t reform (most developed nations, including the United States).

But what are the specific policy lessons?

Here are some excerpts from the accompanying article, which basically tells us that the government is focused on spending restraint.

Iceland will continue to reduce public debt and sustain a budget surplus even as it lowers taxes in the next five years, Finance Minister Bjarni Benediktsson said. The plan is part of a financial road map… The balancing act between austerity and the proposed fiscal concessions means less room for the government to…step up other spending… “We will need to impose certain measures of restriction,” Benediktsson said. The government may have to seek cost savings of as much as 5 billion kronur ($42 million), he said. …The financial plan projects a decrease in taxes as well as the Treasury’s debt levels and interest burden. It also expects the bank tax to be lowered in four steps.

But the article didn’t tell us why Iceland’s debt fell so quickly.

So I dug into the IMF’s World Economic Outlook database and crunched some numbers. I specifically wanted to find out why debt fell, both before and after the 2008 crisis.

And I focused on three sets of numbers.

  • Annual inflation rate
  • Annual growth of government spending burden
  • Annual increase in nominal gross domestic product

Here are those numbers, both for the years leading up to the 2008 crisis, as well as what happened starting in 2009.

For both the 2001-07 period and 2009-19 period, Iceland followed my Golden Rule. Government spending (the orange bars) grew slower than the economy (the grey bars).

So it shouldn’t be a surprise that debt fell during both eras.

But debt fell much faster starting in 2009 for the simple reason that the gap between spending growth and GDP growth was very significant over the past 10 years. This is the reason for the big reduction in debt.

And this spending restraint also generated some data that’s even more important – the burden of government spending has dropped from more than 48 percent of economic output in 2009 to less than 41 percent of GDP this year.

During the 2001-2007 period, by contrast, Iceland only barely satisfied the Golden Rule. Indeed, one could argue that spending was growing much too fast since the economy was in an unsustainable boom (Ireland was similarly profligate during the same period).

P.S. I recently shared an excellent IMF study showing three examples of big debt reductions in the pre-World War I era.

P.P.S. Unsurprisingly, the OECD has been pushing for higher taxes in Iceland.

P.P.P.S. If you want to read about all of Iceland’s pro-market economic, Prof. Hannes Gissurarson has a must-read article in Econ Journal Watch.

P.P.P.P.S. Voters in Iceland had an opportunity to vote on bank bailouts and 93 percent said no.

Read Full Post »

I’ve written about how totalitarian ideologies such as communism and Nazism have a lot in common. Both subordinate the individual to the state and both give the state power over the economy.

And both slaughter millions of people.

My buddy from grad school, Matt Kibbe, has a great video on this issue.

Needless to say, I agree with Matt’s characterization.

The battle is not right vs. left. It’s statism vs. individualism.

Let’s look at some writings on this issue.

We’ll start with an article by Bradley Birzer, published by Intellectual Takeout. He worries that totalitarianism on the left is making a comeback.

In 1936, you had three choices: National Socialism, international socialism, or dignity. In 2018, we find ourselves in similar circumstances… Why is this happening now…?  First, we scholars have failed to convince the public of just how wicked all forms of communism were and remain. …Almost all historians ignore the most salient fact of the 20th century: that governments murdered more than 200 million innocents, the largest massacre in the history of the world. Terror reigned in the killing fields, the Holocaust camps, and the gulags. …Second, an entire generation has grown up never knowing such things as the Soviet gulags or even the Berlin Wall. …most younger defenders of communism buy into the oldest propaganda line of the Left—that real communism has never been tried.

He explains that fascism and socialism are two sides of the same coin.

That the National Socialists embraced socialism is factually accurate. …they did nationalize very vital industry in Germany, even if by outright intimidation rather than through the law. In his personal diaries, Joseph Goebbels wrote in late 1925: “It would be better for us to end our existence under Bolshevism than to endure slavery under capitalism.” Only a few months later, he continued, “I think it is terrible that we and the Communists are bashing in each other’s heads.” Whatever the state of the rivalry between the two camps, Goebbels claimed, the two forces should ally and conquer. …The Italian fascists had even closer ties to the Marxists, with Mussolini having begun his career as a Marxist publicist and writer. A few Italian fascists even held positions in the Comintern.

Richard Mason makes similar points in a piece he wrote for the Foundation for Economic Education.

…how do we react to the hammer and sickle? I don’t have to write an article explaining the millions of deaths that occurred at the hands of communist regimes; like the Holocaust, the gulags of the Soviet Union and killing fields of Cambodia are widely known. Yet journalists in the UK openly and proudly advocate communism. Statues of Karl Marx are erected. …there is no justifiable way a fascist could argue ‘That wasn’t real Nazism.’ The same is not true for communism. …Since Karl Marx never implemented communism himself, the leaders of communist states always have that get-out-of-jail-free card. Any shortcomings, tragedies, or crises a communist regime faces can always be blamed on a misapplication of Marx’s infallible roadmap… The communist ideology in its purest form might be separated from its implementations, but at what point does its awful track record discredit any attempts to advocate it? …The history of communism is as bloodstained as that of Nazism; much more so, actually. It’s time we treated it as such.

Amen. I’ve weighed in on that issue, and I strongly recommend what Jeff Jacoby wrote on the issue as well.

And Sheldon Richman expands on this theme.

…fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax… Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. …Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically.

He explains the vast gulf between capitalism and fascist economics.

…Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions. …Fascism is to be distinguished from interventionism, or the mixed economy. Interventionism seeks to guide the market process, not eliminate it, as fascism did. …Under fascism, the state, through official cartels, controlled all aspects of manufacturing, commerce, finance, and agriculture. Planning boards set product lines, production levels, prices, wages, working conditions, and the size of firms. Licensing was ubiquitous; no economic activity could be undertaken without government permission. …“excess” incomes had to be surrendered as taxes or “loans.” …since government policy aimed at autarky, or national self-sufficiency, protectionism was necessary: imports were barred or strictly controlled…fascist governments also undertook massive public-works projects financed by steep taxes, borrowing, and fiat money creation.

These are not new observations. Here’s what Ludwig von Mises wrote on this topic back in the 1940s.

The Marxians have resorted to polylogism because they could not refute by logical methods the theories developed by “bourgeois” economics, or the inferences drawn from these theories demonstrating the impracticability of socialism. As they could not rationally demonstrate the soundness of their own ideas or the unsoundness of their adversaries’ ideas, they have denounced the accepted logical methods. …The German nationalists had to face precisely the same problem as the Marxians. They also could neither demonstrate the correctness of their own statements nor disprove the theories of economics and praxeology. Thus they took shelter under the roof of polylogism, prepared for them by the Marxians. Of course, they concocted their own brand of polylogism. …Neither Marxian nor Nazi polylogism ever went further than to declare that the logical structure of mind is different with various classes or races. …Polylogism is not a philosophy or an epistemological theory. It is an attitude of narrow-minded fanatics.

And those fanatics are motivated by hate. The Nazis hate people of different races and religions, while the Marxists hate people of different incomes and classes.

Given the various articles cited above, this meme from The Matrix is spot on.

Well, we now know what happens when someone learns about the common characteristics of statist ideologies. The Daily Caller has a report on a student who got very upset after learning that the National Socialist Workers Party was…yes, socialist.

Social justice warrior and history major Shelby Shoup was arrested for throwing chocolate milk at a fellow student and College Republican tabling at Florida State University while saying “nazis weren’t socialists.” She has been charged with battery.

Since we’ve detoured into humor, this is a good opportunity to share this satire from the clever folks at the Babylon Bee.

At a press conference on Thursday, American Nazi Party leader Emmett Scoggins told reporters that his group is not trying to instate full-on Nazism, but a much better system called “democratic Nazism.” …Scoggins was questioned about the use of the word “democratic” and how democratic Nazism was any different from plain-old Nazism. “The main difference is we add the word ‘democratic’ on there because people like that word a lot more than just plain ‘Nazi,’” Scoggins said. …The conference ended with a long speech from Scoggins about…how “real” Nazism has never been tried.

I’ll close with my amateur attempt to classify various ideologies.

In the above video, Matt used a circle.

I’m wondering if a triangle makes more sense, with freedom at the top and totalitarianism at the bottom.

Here are a couple of additional observations on the triangle.

  • Back in 2017, I differentiated between liberal socialism and Marxist socialism. The same is true across the board. We could add a line right above authoritarian, collectivism, and socialism and assert that ideologies above the line are democratic and that ideologies below that line are dictatorial.
  • Given the difference between the technical definition of socialism (government ownership, central planning, price controls) and the everyday definition (lots of redistribution), I’m wondering whether I should use “welfare state” rather than “democratic socialism”? The end result isn’t pretty, regardless.
  • If we just focus on economic policy, I think my “statism spectrum” suffices.
  • If we just focus on the left, my Bernie-inspired classification system still holds up.

P.S. I like to think that there aren’t any civilized people willing to tolerate the Nazi ideology. But I do worry the same can’t be said about communism. The head of the European Commission recently helped celebrate Marx’s birthday, companies like Mercedes-Benz glorify racist murderers in their advertising (part of the Che death cult), and even symphonies use communist symbols.

How high does the death toll need to get before people realize that communism, like its sister ideology of Nazism is despicably evil?

Read Full Post »

I have this quaint notion that the Constitution guarantees economic liberty by limiting the power of Washington. Needless to say, parental leave is not one of the enumerated powers in Article 1, Section 8.

Sadly, many people (include the Chief Justice of the Supreme Court) don’t share my view.

So let’s set aside that objection and focus on the policy implications of a new entitlement program.

I’ve already explained why the federal government shouldn’t have a policy on parental leave, but the topic isn’t going away so let’s look at the issue again.

The first thing to realize is that the fight over “parental leave” involves several competing options.

Here are the four alternatives.

  1. A “conservative” plan to allow new parents to finance time off by tapping into the bankrupt Social Security system.
  2. A plan from the left to make parental leave an entitlement financed by payroll taxes.
  3. A plan from the left to mandate that employers provide paid leave.
  4. The libertarian notion that it’s none of the government’s business.

Let’s address Option #1.

Writing for National Review, Alexandra DeSanctis argues for an expansion of government’s role.

Joni Ernst of Iowa and Mike Lee of Utah recently introduced the Child Rearing and Development Leave Empowerment (CRADLE) Act, the latest conservative effort to develop a paid-leave policy that enables parents to stay home with their newborns. …It would amend the Social Security Act to allow parents to take up to three months off from work by drawing on their retirement benefits early in exchange for delaying their benefits after retiring.

You can read my concerns about this approach in this column from last March, so I don’t want to reinvent the wheel.

But Ms. DeSanctis makes some new arguments that cry out for rebuttal.

Starting with the notion that we should be ashamed that we’re not copying Europe’s decrepit welfare states.

The United States is the only country in the Organization for Economic Cooperation and Development (OECD) — an intergovernmental economic alliance of 36 member countries — that doesn’t have a national paid-leave program.

Wow, I never expected to see this type of argument in National Review. William F. Buckley must be spinning in his grave.

Heck, I made that argument a punchline in my recent collection of anti-Bernie Sanders satire.

She also wants to water down the definition of conservatism so that it means whatever is convenient for certain politicians.

The conservative argument against the proposal is intriguing as a matter of principle, but it is worth noting that the Republican politicians offering these paid-family-leave bills in recent years are also some of the most conservative policymakers in the Senate. …This new proposal is an effort not to expand the government but to protect and cultivate family life, which ought to be the chief goal of any country that cares about its future. …as the Right grapples with populist arguments for greater government prioritization of the needs of working-class Americans negatively affected by globalization, conservatives should embrace efforts to incentivize family growth and offer parents more flexibility in caring for their newborns.

I’m also less than impressed by her argument that Congress should “cultivate family life.”

Indeed, it’s precisely because strong families are good that Washington shouldn’t be involved.

Which is why I prefer what Rachel Greszler wrote for the Heritage Foundation. Here are some excerpts.

…a new national entitlement…could expand as other federal entitlements have, potentially costing hundreds of billions of dollars per year. …the role for the federal government is to remain neutral with regard to parents’ decisions to stay home or work outside the home. The government can, however, make it easier and less costly for workers to take family leave by reducing marginal tax rates so that workers have larger paychecks, supporting, instead of impeding, flexible work arrangements between employees and employers, and cutting costly regulations so that businesses can afford to provide paid leave.

And I definitely like articles that make the principled case against more government.

For instance, here are excerpts from a column by Veronique de Rugy.

Even if we pretend that it doesn’t change the size of government because the increased spending in the beginning will perfectly offset a few decades later with delayed benefit payments and increases in revenue (i.e., parents delay retirement and hence continue to send taxes to Uncle Sam), the plan increases the scope of the government immediately. You can’t wish away the fact that it drags the government into an area where it played no role before.

And George Leef, writing for Forbes, has similar concerns.

The notion that the government should help cover the costs of having a child springs naturally from the “progressive” mindset that government should be there to provide in case anyone needs (or merely prefers) assistance. It also dovetails with the liberal political mentality that many votes are to be won by giving people stuff. …But the big problem with this idea is not the dollars and cents one. Rather, it is the way it perpetuates and spreads the idea that the purpose of the federal government is to provide for our needs. …Kindly old Uncle Sam will be there to help when you need it. …This is the sort of thing Thomas Jefferson had in mind when he warned against ‘wasting the labors of the people under the pretense of taking care of them.’

What about other ways to address the issue?

Regarding Option #2 (an entitlement funded by payroll taxes), Vanessa Brown Calder’s article in National Review is must-reading on the issue.

…government-supported paid leave is costly. Paid-leave proposals such as the FAMILY Act would result in new payroll taxes on all current workers, whether or not they intend to use benefits. …realistic assumptions based on the national use of the federal unpaid FMLA program…suggest the FAMILY Act would result in costs of around $450 per year in taxes for the average worker. …the program is likely to expand, as similar programs have in other OECD countries. For example, the average length of paid maternity, parental, and home-care leave available to mothers in OECD-30 countries in 1970 was 17.2 weeks. In 2016 that number had tripled, to an average of 52.5 weeks, or over a year in benefits. Large expansions of programs are accompanied by large expansions in program costs. For example, Norway expanded leave from 18 to 35 weeks between 1987 and 1992, which nearly doubled the cost to taxpayers from $12,354 to $24,022 per eligible birth.

Imposing taxes to finance that much new spending isn’t very popular, even in left-wing states.

For instance, the New York Times reports that politicians in California want to impose a paid-leave mandate, but they are having a hard time figuring out how to make the numbers work.

The United States has long been the only industrialized country not to offer paid leave to new parents. Instead of waiting for the federal government, the incoming governor of California intends to change that… What’s unclear is how California would pay for it. The proposal, which the governor-elect, Gavin Newsom, is expected to include with his budget after he is sworn in on Monday, would be the most generous state policy in the nation, at a time when federal paid leave proposals have stalled. Yet it does not include a plan to finance it… California’s existing paid leave program is financed by a 1 percent payroll tax. Increasing that tax would require the approval of two-thirds of the Legislature, not assured despite Democratic control.

Interestingly, folks on the left are making the same argument that Ms. DeSanctis used in National Review.

“…we’re falling behind our economic competitors,” said Heather Boushey, the executive director of the Washington Center for Equitable Growth, who advised Hillary Clinton on economic issues during her 2016 presidential campaign.

I’ll merely add that “we’re falling behind” only in the race to impose more government.

We’re way ahead in the race for more prosperity.

I also found this passage to be laughable.

California has a history of fervent opposition to taxes. Democrats now have supermajorities in both the Senate and the House, but many of them have embraced fiscally conservative policies.

You almost have to assume that the reporter who wrote this piece never visited the state.

California has the nation’s most onerous state income tax. And it ranks very low in measures of fiscal policy.

Yes, there is a supermajority requirement to raise taxes, but politicians in Sacramento have been very successful in overcoming that barrier.

Let’s shift to Option #3 (mandating the employers provide leave).

Vanessa Brown Calder authored a comprehensive study on parental leave last year. She included a section on how this approach would harm female workers.

Economist Lawrence Summers studied the effects of mandating government benefits and concluded that women’s wages would be reduced to reflect the cost. Summers states that “if wages could freely adjust, these differences in expected costs would be offset by differences in wages.” If not, “there will be efficiency consequences as employers seek to hire workers with lower benefit costs.” …Economist Jonathan Gruber studied maternity-benefit mandates in Illinois, New York, and New Jersey, and his findings “consistently suggest” women’s wages were reduced to reflect the cost of benefits. The estimated reduction in wages was around 100 percent of the cost of benefits. Government-mandated leave has similar effects internationally. A study of 16 European countries over a period of around 20 years found that “parental leave is associated … with reductions in [women’s] relative wages at extended durations.” Other researchers have noted that “work-family policies … have also contributed to … lower wage-levels for women relative to men.”

This data is especially noteworthy since there is additional evidence that women get hurt when government intervenes on their behalf.

To conclude, let’s look at how her research supports Option #4 (no interference from Washington).

Here are her main findings.

…ample data show that the private market provides paid leave at rates about 30 to 50 percentage points higher than proponents claim. Private paid leave provision has grown three- or fourfold over 50 years and continues to grow. This trend indicates industry is responsive to employee demands. …Government intervention is also unlikely to correct gender or labor-market inequality in ways proponents desire. For example, families may respond to the policy by increasing women’s household work contributions relative to men’s. Redistributive effects of government intervention are likely to harm workers.

This chart shows how markets are naturally responsive when government doesn’t intervene.

And this chart from her study shows that women do better in the United States than in other nations.

In other words, benign neglect is the policy that produces the best outcomes.

Sadly, this is one of the many issues where the Trump Administration is on the wrong side.

The bottom line is that Option #4 is the only choice that is good for freedom, good for women, and good for the economy.

Option #1 is not as bad as Options #2 and #3, but it is still a step in the wrong direction (as I noted last year, supporters “are proposing to do the wrong thing in the best possible way”).

Read Full Post »

Older Posts »

%d bloggers like this: