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Archive for December, 2019

Time for my annual column highlighting the “Best” and “Worst” policy developments of the year, a tradition I sort of started in 2012 and definitely did in 2013, 2014, 2015, 2016, 2017, and 2018.

I’m trying to be a glass-half-full kind of guy, so we’ll start with the best policy developments for 2019.

Boris Johnson’s landslide victory – I was in London for the recent U.K. election and was pleasantly surprised when Boris Johnson won a surprising landslide. That’s not a policy development, of course, but it’s first on my list because it presumably will lead to a genuine Brexit. And when the United Kingdom escapes the sinking ship of the dirigiste European Union, I have some hopes for pro-market policies.

TABOR wins in Colorado – Without question, the best fiscal system for a jurisdiction is a spending cap that fulfills my Golden Rule. Colorado’s constitution has such a policy, known as TABOR (the Taxpayer Bill of Rights). Pro-spending lobbies put an initiative on the ballot to eviscerate the provision, but voters wisely rejected the measure this past November by a nearly 10-point margin.

Macroeconomic strength – A strong economy also isn’t a policy, but it’s partially the result of good tax reforms and much-needed regulatory easing. This has pushed up the value of stocks (though I worry we may be experiencing a bubble), but I’m much happier that it’s led to a tight labor market and increased wages for lower-skilled workers.

Now let’s look at the worst developments of 2019.

An ever-increasing burden of government spending – The federal government is far too big, and it keeps growing in size. Entitlements are the main problem, but Trump added to the mess by capitulating to another budget deal that increases the burden of discretionary spending.

Missed opportunity on China trade – Because he foolishly focused on the bilateral trade deficit, Trump missed a great opportunity to pressure China to eliminate (or at least reduce) various cronyist policies that actually do distort and undermine trade.

Repeal of the Cadillac tax – I never imagined I would be in a position of stating that it was a mistake to repeal a tax increase, but the recent repeal of the tax on high-end health plans is such bad policy in terms of health care (contributing to third-party payer) that it more than offsets my long-standing desire to deprive Washington of revenue.

I’ll close by noting my most-read and least-read columns of the year.

We’ll start with the popular items.

  1. My most-read column from 2019 discussed a very impressive (and very understandable) example of tax avoidance from France.
  2. In second place was my piece that lauded a columnist for the New York Times who admitted gun control is foolish policy.
  3. Winning the bronze medal was my column from last week celebrating the dissolution of the Soviet Union.

By the way, my most-read article in 2019 was actually a quiz about political philosophy I shared back in 2015. Those must be popular items, because other quizzes (from 2014 and 2013) were actually the third-most and fourth-most popular columns for the year.

And here are the biggest duds.

  1. The column with the least clicks (perhaps because it was only posted a couple of days ago) revolved around the technical issues of economic sanctions, extraterritoriality, and the strength of the dollar.
  2. The second-worst-performing column was from late November and discussed the International Monetary Fund’s cheerleading for higher taxes in Japan.
  3. Next on the list is my discussion from a few days ago about how Washington imposes policies that encourage households to make short-sighted financial choices.

P.S. About 80 percent of readers are from the United States, and that’s been relatively constant over the years. But it’s been interesting (at least to me) to observe where other readers reside. In the very beginning, Canada provided the second-biggest group of readers, but then the United Kingdom took over for several years, only to be dethroned by Australia in 2017 and 2018. For 2019, though, the United Kingdom reclaimed second place, presumably because I kept writing about Brexit. If we go by readers as a share of the population, I’m actually most popular in small tax havens.

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When I wrote yesterday’s column, which augmented my collection of satire about gun control, I had no idea I would feel compelled 24 hours later to address the issue from a serious perspective.

But two tragic events over the weekend underscore why the individual right of gun ownership is such an important part of the Constitution.

First, an anti-Semitic nutjob attacked Jews Saturday night.

At least five people have been stabbed in an attack at a synagogue in New York’s Rockland County. That attacker is now reportedly in custody after fleeing the scene. …The suspect has been identified as 37-year-old Grafton Thomas, of Greenwood Lake, New York, in Orange County. Thomas, covering his face with a scarf, reportedly entered the building and pulled out a machete to attack the victims during a Chanukah celebration. Thomas reportedly chased after and stabbed victims as they fled the synagogue before running off and escaping in a gray Nissan Sentra. …This incident happened amid a rash of anti-Semitic attacks this week. …“We will NOT allow this to become the new normal. We’ll use every tool we have to stop these attacks once and for all. The NYPD has deployed a visible and growing presence around Jewish houses of worship on the streets in communities like Williamsburg, Crown Heights and Boro Park,” New York City Mayor Bill de Blasio added in a tweet.

Needless to say, Mayor de Blasio is being dishonest when he claims he will “use every tool…to stop these attacks.”

Like politicians in Europe, he’s a dogmatic opponent of private gun ownership and believes Jews shouldn’t be allowed to defend themselves.

Fortunately, Jews who live outside New York City still enjoy some civil liberties and are now prepared to thwart attackers.

More power to these people, who are the Orthodox Jewish versions of these good ol’ boys from Texas.

For what it’s worth, I suspect dirtbags will be less likely to target the Jews in Rockland Country.

There was another attack at a house of worship over the weekend.

Though this report from Texas has a happy ending.

Police said they received a call shortly before 10 a.m. local time about gunshots at the West Freeway Church of Christ, in a suburb a less than an hour from downtown Fort Worth. After the suspect entered the church and fired a weapon, “a couple of members of the church returned fire,” killing the alleged shooter, state officials said at a news conference. …Gov. Greg Abbott (R) condemned the “evil act of violence” in a statement, adding: “Places of worship are meant to be sacred, and I am grateful for the church members who acted quickly to take down the shooter and help prevent further loss of life.” …New laws that took effect in 2019 allow Texans with concealed-carry permits to bring guns to places of worship unless a sign is posted prohibiting it.

The happy ending is that the bad guy was killed by armed members of the congregation, presumably minimizing the death toll.

I’ve joked before about Texans and guns, but we have a real-world case of how lives are saved. And what happened over the weekend wasn’t the first time.

Let’s now shift from anecdotes to data.

A few years ago, John Lott looked at the evidence about gun-free zones, armed citizens, and mass shootings.

…not one of the mass shootings since at least 2000…would’ve been stopped by these laws. Nor would renewing the federal “assault weapons” ban solve the problem; even research paid for by Bill Clinton’s administration found no evidence the ban reduced any type of crime. …a young ISIS sympathizer planned a shooting at one of the largest churches in Detroit. An FBI wire recorded him explaining why he had picked the church as a target: “It’s easy, and a lot of people go there. Plus people are not allowed to carry guns in church.” …PoliceOne, a private organization with 450,000 members (380,000 full-time active law enforcement and 70,000 retired), polled its members in 2013 shortly after the Newtown, Conn., massacre. Eighty percent of respondents said allowing legally armed citizens to carry guns in places such as Newtown and Aurora would have reduced the number of casualties. …According to police and prosecutors, there have been dozens of cases of permit holders clearly stopping what would have been mass public shootings. It’s understandable these killers avoid places where they can’t kill a large number of people. Research I have conducted with economist Bill Landes looked at 13 different types of gun-control laws. Right-to-carry laws were the only type that made a difference in the rate and severity of these mass public shootings. …even the most ardent gun-control advocate would never put “Gun-Free Zone” signs on their homes. Let’s finally stop putting them elsewhere.

Amen.

John Lott is an invaluable resource on these issues, as is Jacob Sullum.

Though it’s really an issue of common sense.

Mass shooters are evil, but they’re calculatingly evil. Even if they’re willing to die, they want a high body count. Armed citizens make that less likely.

The bottom lines is that we can save lives by making sure law-abiding people have the right to keep and bear arms.

What happened this past weekend simply provides us with more evidence.

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I haven’t added to the collection of gun control humor since way back in August.

So let’s rectify that oversight, starting with this sarcastic tweet about the logic of gun control.

Quite similar to this cartoon about stupid and illogical ways of fighting rape.

This cartoon strip zings both sides. While the left is sadly right that evil people won’t be stopped by “thoughts and prayers,” it’s also true that they are wildly wrong in thinking that gun control will succeed.

Indeed, advocates of gun control will make society less safe if they succeed in disarming law-abiding people.

Here’s some satire on both gun buy-backs and so-called red flag laws.

I’m skeptical about red flag laws, but I haven’t studied the issue enough to offer any commentary.

Though it’s definitely true that governments historically have the worst track record of violence.

But since this is a humor column, I’ll steer clear of serious analysis and instead note that the government of Baltimore was at least kind enough to provide some unintentional humor on the issue of buy-backs.

Since my left-leaning friends need plenty of tutoring on guns, here’s a helpful guide.

And we’ll close with some much-needed wisdom on being armed.

If you think this is an empty slogan, I very much recommend this article by someone who leans left but had an epiphany on the importance of self defense.

P.S. I have a collection of columns dealing with honest leftists on the issue of gun control. For other examples, click here, here, here, and here.

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In this interview on Fox Business, I repeated my oft-stated concern that the Federal Reserve’s easy-money policy of artificially low interest rates (avidly supported by Trump) may have created the conditions for a boom-bust cycle.

For today’s column, though, I want to focus on the part of the interview where I fret about structural rather than cyclical factors.

More specifically, whenever there is angst and concern about household debt, I get rather frustrated because some folks want to blame the American people for not saving enough.

That may be true, but I point out that the real problem is that the federal government lures people into being short-sighted.

Given all these policies, I’m actually surprised that the national savings rate isn’t much lower.

By the way, I should emphasize that there’s nothing necessarily wrong with debt. It’s perfectly sensible for many households to borrow to buy a house, a car, or to finance education.

As I noted in the interview, what matters is keeping a sound ratio of debt to assets, and a sound ratio of interest expense to income.

It’s not easy for people to be sensible, however, when there are so many anti-savings policies from Washington.

I’ll close with a bit of good news.

Because the United States is a quasi-tax haven for foreigners, we do attract an immense amount of money from overseas. So even though the federal government discourages us from saving, we have access to capital from all over the world.

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In order to protect against “Goldfish Government,” it’s very important to make sure that the powers of government are constrained by national borders.

This is the reason why I’m a passionate defender of tax competition and fiscal sovereignty (even if it means being subjected to slurs, attacks, and imprisonment!).

And it’s why I oppose extraterritorial tax laws such as FATCA.

The fight against extraterritoriality isn’t limited to fiscal issues. It’s also become a big problem in the area of financial regulation.

In a new study for the Center for Freedom and Prosperity, Bruce Zagaris addresses the over-use of sanctions and how they produce undesirable unintended consequences.

The widespread use of economic sanctions constitutes one of the paradoxes of contemporary American foreign policy. Although sanctions are often criticized, even derided, they are simultaneously and quickly becoming the policy mechanism of choice for the United States. The U.S. has economic sanctions against dozens of countries. Even though the success rate of sanctions is unimpressive, sanctions are so popular that they are being introduced by many states and municipalities. …In a global economy, unilateral sanctions tend to impose greater costs on U.S. businesses than on the target, which can usually find substitute sources of supply and financing. …As the U.S. is increasingly resorting to unilateral sanctions, they are inadvertently mobilizing a club of countries and international organizations, including U.S. allies, to develop ways to circumvent U.S. sanctions. …Sanctions are criticized due to their lack of effectiveness, adverse humanitarian effects, and adverse public health effects. Sanctions foment criminalization both during and after the sanctions as a way to circumvent sanctions. Sanctions also result in unintended negative effects on neighbor countries… The excessive use of economic sanctions, especially when U.S. allies oppose them and become targets, produces diplomatic tension, and damages the U.S.’s economy and reputation abroad. The growing number of countries in the club of targets has caused countries to develop innovative means to circumvent the use of the dollar.

I’ve previously written about how the dollar’s role as the world’s reserve currency could be threatened by extraterritoriality, so I fully agree with the concerns in Bruce’s study.

Interestingly, even the U.S. Treasury Secretary acknowledges that there is a problem.

The issue also has been featured on the op-ed page of the Wall Street Journal.

Sahil Mahtani of Investec Asset Management opined that excessive sanctioning by Obama and Trump creates risks for the dollar.

Will the U.S. dollar soon lose its status as the world’s pre-eminent currency? …Developments in foreign-exchange markets during the past 18 months point toward dedollarization. …The increasing use of economic sanctions under Presidents Obama and Trump is the immediate cause of dedollarization. …the change in posture among the trans-Atlantic democracies is noteworthy. …the emergence of a genuinely multipolar world means the coming market cycle is likely to be different. The U.S. dollar may finally be knocked off its pedestal.

Other experts also have warned about how sanctions can backfire on the American economy.

 

The Economist also has highlighted how promiscuous use of sanctions is both wrong and could backfire against America.

The United States…has increasingly punished foreign firms for misconduct that happens outside America. Scores of banks have paid tens of billions of dollars in fines. In the past 12 months several multinationals, including Glencore and ZTE, have been put through the legal wringer. …America has taken it upon itself to become the business world’s policeman, judge and jury. …as the full extent of extraterritorial legal activity has become clearer, so have three glaring problems. …Facing little scrutiny, prosecutors have applied ever more expansive interpretations of what counts as the sort of link to America that makes an alleged crime punishable there; indirect contact with foreign banks with branches in America, or using Gmail, now seems to be enough. …Second, the punishments can be disproportionate. In 2014 BNP Paribas, a French bank, was hit with a sanctions-related fine of $8.9bn, enough to threaten its stability. …Third, America’s legal actions can often become intertwined with its commercial interests. …American banks have picked up business from European rivals left punch-drunk by fines. Sometimes American firms are in the line of fire—Goldman Sachs is being investigated by the DOJ for its role in the 1MDB scandal in Malaysia. But many foreign executives suspect that American firms get special treatment and are wilier about navigating the rules. …escalating use of extraterritorial legal actions will ultimately backfire. It will discourage foreign firms from tapping American capital markets. It will encourage China and Europe to promote their currencies as rivals to the dollar… Far from expressing geopolitical might, America’s legal overreach would then end up diminishing American power.

To be sure, not every issue should be decided solely on the basis of economics. More GDP is good, but not at the cost of sacrificing honor and dignity.

Some nations might be so evil that sanctions are justified.

But policy makers should be fully aware that there are costs when sanctions are imposed.

Those costs include foregone trade, which would be bad for American consumers, workers, and businesses.

Most important, those costs could mean the dollar gets weakened or dethroned as the world’s reserve currency and the U.S. loses its “exorbitant privilege.”

And that could mean less investment in America, which translates into fewer jobs and lower wages.

P.S. The study by Bruce Zagaris is the third in a series on why extraterritoriality is a bad idea. The first study focused on extraterritorial taxation. The second study analyzed extraterritorial financial regulation.

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Yesterday, most of us celebrated Christmas.

Today, all of us should celebrate the dissolution of the Soviet Union, which officially happened on this date in 1991 (aided and abetted by a Texas grocery store).

A 2016 FEE column by Richard Ebeling documents the relentless evil of Soviet communism.

…the curtain was lowered on the 75-year experiment in “building socialism” in the country where it all began following the Bolshevik Revolution in Russia, led by Vladimir Lenin in November 1917. Some historians have estimated that as many as 200 million people worldwide may have died as part of the 20th century dream of creating a collectivist “paradise on earth.” The attempt to establish a comprehensive socialist system in many parts of the world over the last 100 years has been one of the cruelest and most brutal episodes in human history. …as many as 68 million innocent, unarmed men, women, and children may have been killed in Soviet Russia alone over those nearly 75 years of communist rule in the Soviet Union. …This murderous madness never ended. In the 1930s, during the time of the Great Purges instituted by Soviet dictator Josef Stalin to wipe out all “enemies of the revolution” through mass executions, millions were sent to the Gulag prisons that stretched across all of the Soviet Union to be worked to death as slave labor to “build socialism.” …Soviet central planning even had quotas for the number of such enemies of the people to be killed in each region of the Soviet Union, as well as the required numbers to be rounded up to be sent to work in the labor camps in the frigid wastelands of the Siberia and the Arctic Circle… The nightmare of the socialist experiment, however, did not end with Stalin’s death in 1953. Its form merely changed in later decades. As head of the KGB in the 1970s, Yuri Andropov (who later was General Secretary of the Communist Party of the Soviet Union after Leonid Brezhnev’s death in 1982), accepted a new theory in Soviet psychiatry which said opposition to the socialist regime was a sign of mental illness.

Based on the sheer number of victims, Stalin understandably has the worst reputation of all Soviet dictators.

But let’s not forget that Lenin was a horrible human being as well.

Lenin’s streak of cruelty began long before he came to power. By his early 20s, his zealous dedication to Marxism led him to believe that anything justified revolution. When a famine broke out in the Volga region in 1891—one that would kill 400,000 people—Lenin welcomed the event, hoping that it would topple the Czarist regime. …Later, in 1905, when Czarist forces killed hundreds of striking workers and 86 children in Moscow, Lenin refused to mourn for the dead and, instead, hoped the event would further enflame class antagonisms. In his eyes, human lives were expendable… While in exile, Lenin railed against the imperial government for its oppressive ways—for instance, its censorship of the opposition and dismissal of parliament. Of course, once in power, Lenin repeated these policies and usually exceeded their cruelty, imprisoning and confiscating the property of his opponents. …Lenin appointed the homicidal Felix Dzerzhinsky to head up the Cheka (the secret police)… In less than a year, hundreds, if not thousands, were executed… He marked wealthy peasants, or kulaks, as enemies of the revolution and encouraged violence against them. He imposed fixed grain prices at low rates, straining peasants who already were living on the margins, seized their grain, and left them to starve. When the peasants began resisting, Lenin ordered government officials to torture them or apply poison gas.

By the way, it’s not directly relevant to the dissolution of the Soviet Union, but I can’t resist sharing this story from the BBC.

Karl Marx’s Grade I-listed memorial in Highgate Cemetery has been “mindlessly vandalised”. The marble plaque on the imposing sculpture’s base has been attacked, seemingly with a hammer. A cemetery spokesman said they did not know when it had happened, but believed it was within the last couple of days. No witnesses have come forward. …Ian Dungavell, chief executive of Friends of Highgate Cemetery Trust, said: “This is mindless vandalism, not political commentary. …This is not the first time the monument has been damaged. In 1970 a pipe bomb blew up part of the face, swastikas have been painted on it and emulsion paint has been thrown at it.

My only comment it that the memorial wasn’t “mindlessly vandalised.” There were 100 million reasons why it was defaced.

Now let’s look at the economic performance of the Soviet Union.

I’ll start with the simple and near-tautological observation that there’s no longer a Soviet Union in large part because its economy became so anemic.

Yet some people believed that the Soviet Union’s version of socialism could be economically successful. I wrote about their naivete as part of my collection of essays on the 100th anniversary of the Bolshevik revolution.

I suppose we can partially forgive them because much of the economic misery in the Soviet Union was hidden from outsiders.

What’s less forgivable is that some people still make absurd claims about the Soviet economy. Consider this screenshot of the first paragraph of the Wikipedia entry on the economy of the Soviet Union. I’ve highlighted in red the parts that are laughable.

Though, to be fair, there wasn’t a problem with unemployment and job security in the Soviet Union. Just like slaves in Alabama in 1830, Soviet workers were victims of state coercion. They were forced to show up at the collective farms and state-run industries.

And state coercion was the basis of a failed system. Contrary to whoever authored that Wikipedia entry, the Soviet Union did not enjoy high growth rates.

A 1994 World Bank study by William Easterly and Stanley Fischer exposed the Soviet Union’s very poor track record.

Soviet growth from 1960 to 1989 was the worst in the world after we control for investment and human capital; the relative performance worsens over time. …The declining Soviet growth rate from 1950 to 1987 can be accounted for by a declining marginal product of capital with a constant rate of growth of total factor productivity. The Soviet reliance on extensive growth (rising capital-to-out-put ratios) was no greater than that of market economies, such as Japan and the Republic of Korea, but a low elasticity of substitution between capital and labor implied especially acute diminishing returns to capital compared with the case in market economies.

“Worst in the world” is quite an achievement.

Not that any sentient being should be surprised. Politicians are bureaucrats don’t do a good job of allocating labor and capital.

If you want prosperity, it’s not a good idea to have central planning and other features of socialism.

Here’s a fascinating look at the world’s largest economies (by overall size, not on a per-capita basis) from 1961-1989.

Here’s a chart based on the Maddison database, so we can make comparisons based on per-capita economic output.

As you can see, even though convergence theory says poor countries should grow faster than rich countries, the gap between the United States and the Soviet Union grew ever larger.

Last but not least, here’s a chart that compares the Soviet Union’s claims about growth (blue) with both CIA estimates (red) and later revisions from a Russian economist (green).

There are two lessons to be learned.

That latter point may be relevant for people who think China is an economic powerhouse.

P.S. The Soviet Union is gone, but most of the countries that emerged from the wreckage are still struggling with a legacy of statism and intervention.

P.P.S. In addition to celebrating today, we also should celebrate November 9.

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Merry Christmas, even for my left-leaning friends and politically correct friends.

The good news is that – contrary to reports – Santa Claus did not get arrested last night.

And that’s good news because he does many things each year that could land him in prison.

In a column for FEE, David Rosenthal addresses the same topic of overcriminalization.

While most people know Jolly Old Saint Nick as a friendly figure, he too is not immune from the perils of administrative overreach and overcriminalization. …here is a list of some of the potential crimes and violations of federal law… Under the Reindeer Act, signed into law by President Franklin D. Roosevelt in 1937, only Alaska Natives are allowed to own reindeer in Alaska. …Even if Santa gets around the Reindeer Act, he may face civil and criminal penalties under the Lacey Act if his purchase, sale, possession, or use of reindeer—or any other flora or fauna— violates any state or federal law or the law of any foreign nation, no matter what language or code that foreign law is written in. …Despite Santa’s many years of experience, there is no Mr. Claus listed in the Federal Aviation Administration’s pilot certificates database. If Santa is piloting his sleigh without an airman’s certificate, he is in violation of 49 U.S.C. § 46317. …Any white lie that falls within the jurisdiction of the U.S. government could be a federal crime. …A government agent need only ask Santa if he committed burglary, trespass, or larceny, or ask him, “Are you really Santa Claus?” In that case, Santa really would need a Miracle on 34th Street to stay out of the slammer for lying. …Under IRS gift tax rules, the giver of gifts above a certain threshold is taxed at a rate up to 40 percent of the value of the gift. …Willful failure to file a gift tax return can land Santa in prison for up to one year under 26 U.S.C. § 7203.

Regarding whether Santa Claus is real, there is a downside to people being too gullible.

In the past, I’ve looked at the debate over whether Santa Claus is right wing or left wing, as well as the debate over whether Jesus is libertarian or socialist.

Here’s an amusing 2×2 matrix that builds on those themes.

Whoever created this put Jesus in the anti-capitalism camp, which irks me, but it’s still clever (just like this pro-socialism Christmas humor).

If you liked this adoption video, I imagine you’ll like these Christmas songs.

Speaking of songs, here are some economic-themed Christmas carols.

And if you like videos, Remy has two of them (here and here) showing how the TSA hurts the Christmas spirit.

Needless to say, I also have to share these libertarian-themed Christmas videos.

P.S. If you like Christmas cartoons, here are some featuring President Obama.

P.P.S. And this Jay Leno joke is always amusing.

P.P.P.S. If you’re doing some last-minute shopping for libertarians, check out this video. If you’re shopping for a taxpayer, this household item might be a good present. And if you’re shopping for an environmentalist, you can’t go wrong with this low-carbon gift.

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