If We Want Better Policing, We Need to Curtail Police Unions

Since I’m a “right libertarian” according to the political compass test, it’s no surprise that I’m generally sympathetic to cops (notwithstanding my undesired encounters).

But with important caveats.

• I want fewer foolish laws so police can concentrate on protecting life, liberty, and property.
• I favor oversight so that good cops aren’t tarnished by the behavior of bad cops.
• I want local governments to control budgets so cops aren’t pressured to generate revenue.
• I favor civil disobedience and jury nullification as safety valves to guard against bad behavior.
• I want to get rid of horrific policies such as asset forfeiture that incentivize bad behavior.

And it goes without saying that I want a range of reactions – from scorn to punishment – when individual police officers make dumb choices (examples here, here, here, here, here, and here).

But there’s one issue that I haven’t addressed, and it’s very relevant considering the civil unrest and rioting caused by George Floyd’s death in Minnesota – and that issues is the degree to which overly powerful police unions enable bad behavior.

Professor Alex Tabarrok explains how police officers who misbehave get special privileges not available to the rest of us.

…union contracts and Law Officer “Bill of Rights” give police legal privileges that regular people don’t get. In 50 cities and 13 states, for example, union contracts “restrict interrogations by limiting how long an officer can be interrogated, who can interrogate them, the types of questions that can be asked, and when an interrogation can take place.” In Virginia police officers have a right to at least a five-day delay before being interrogated. In Louisiana police officers have up to 30 days during which no questioning is allowed and they cannot be questioned for sustained periods of time or without breaks. In some cities, police officers can only be interrogated during work hours. Regular people do not get these privileges. …how do you think complainants feel knowing that the police officer they are complaining about “must be informed of the names of all complainants.” I respect and admire police officers but frankly I think this rule is dangerous. …In the United States if you are arrested–even for a misdemeanor or minor crime, even if the charges are dropped, even if you are found not guilty–you will likely be burdened with an arrest record that can increase the difficulty of getting a job, an occupational license, or housing. But even in the unlikely event that a police officer is officially reprimanded many states and cities require that such information is automatically erased after a year or two. The automatic erasure of complaints makes it difficult to identify problem officers or a pattern of abuse.

In an article for National Review, Theodore Kupfer has a searing indictment of police unions.

Public-sector employees who belong to unions are used to special treatment, and police officers, apparently, are no different. There are little or no private alternatives to the services schoolteachers, air-traffic controllers, police officers, and prison guards provide. Their unions negotiate directly with politicians, and can demand policies that benefit them — if not the taxpayers who foot the bill — because no elected official wants to risk a catastrophic strike. The result is a tacit, unsavory bargain in which politicians and civil servants join together to direct public funding and exclusive privileges to the most favored of all interest groups: politicians and civil servants. …This is a shame. Law-enforcement unions shape our criminal-justice policies for the worse and encourage irresponsible public spending to achieve their own ends. …police unions…insist that their members have special “bills of rights” that shield them from accountability for misconduct. With a voting base that traditionally respects first responders, such concessions can be a political winner for Republicans. But they also have pernicious effects which ought to worry conservatives not comfortable with increasing the power of the state at the expense of the citizenry. …Researchers at the University of Chicago have even found that allowing law-enforcement officials collective-bargaining rights increases the risk of misconduct.

Let’s look at an astounding example of how powerful police unions generate absurd results.

This tweet tells you everything you need to know.

Great moments in public employee unionism. https://t.co/vrln9wy31x

— Walter Olson 😷 (@walterolson) May 14, 2020

If you want more information about that tragic debacle, Robby Soave is a must-read writer for Reason, and here’s some of what he wrote about the reactions of law enforcement.

It’s the story of catastrophic failure at every level of law enforcement, beginning with a corrupt and incompetent sheriff’s office warned on multiple occasions about the specific threat posed by Cruz. The Broward County sheriff’s office received at least 18 tips between 2008 and 2017 concerning Cruz. A November 2017 caller described him as a “school shooter in the making.” Despite knowing that Cruz was in possession of a cache of weapons, the sheriff’s office passed the buck… On the day of the shooting, …Officer Scot Peterson, an employee of the sheriff’s office, refused to enter the school and confront Cruz, as did three Broward County Sheriff’s deputies who had arrived on scene. These were stunning indictments of Broward County Sheriff Scott Israel, a man who responded to accusations of corruption by comparing himself to Abraham Lincoln, Ghandi, and Martin Luther King. …law enforcement’s spectacular failure before, during, and after the Parkland shooting should be a more pressing topic of discussion. …many of these agencies prove themselves to be wildly incompetent for reasons ranging from arrogant leadership and individual cowardice, to toxic workplace culture and shoddy internal systems.

In other words, the problem was government, not a lack of gun control.

But I’m digressing.

Let’s close with a final observation about the perverse effect of collective bargaining for cops.

I disapprove when police unions conspire with local politicians to get excessive pay and special protections (a very common outcome for other types of government employees).

And I definitely don’t like it when cops are turned into overly aggressive deputy tax collectors because of greedy local governments.

But it’s presumably far worse for society when police officers use excessive force against citizens like George Floyd and Eric Garner because unions shield them from adverse consequences.

P.S. My limited collection of police-related humor can be found here, here, and here.

P.P.S. Here’s my two cents on how to most effectively protest for better police behavior.

P.P.P.S. And here’s my quiz to gauge everyone’s reaction to a unique form of protest.

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Economic Liberty and the Constitution

In this interview from last March, I groused that the Supreme Court – largely thanks to statist Justices appointed by one of America’s worst presidents – basically decided, starting in the 1930s, that it would no longer be bound by the Constitution’s provisions that protect economic liberty.

I’m not a lawyer, much less an expert on the Constitution, but I know how to read.

The Constitution very clearly is a document to constrain rather than enable government. It was designed to produce what I’ve referred to as Madisonian constitutionalism.

When Justices ignore their responsibility to protect our rights, however, they’re basically acting like this satirical image of President Obama.

Let’s look at two very tragic legal cases from that era.

Professor John McGinnis, writing for Law & Liberty, discusses the wretched Supreme Court case that undermined the Constitution’s Contract Clause.

…the Contract Clause…was the most litigated provision of the Federal Constitution in the 19th century, but today it has become a shadow of its former self because the Court has abandoned its original meaning. …The Contract Clause provides: “No State shall… pass any… Law impairing the Obligation of Contracts.” …in The Federalist, Madison argued that the Clause was a “bulwark in favor of… private rights.” …It is designed to protect an important aspect of the rule of law: a prohibition on the government changing specific plans that autonomous individuals have made. …For the 19th and early 20th centuries, the Supreme Court was relatively faithful in interpreting the Clause. In Home Building & Loan Association v. Blaisdell, however, the Court departed from its role as a faithful agent of the Constitution. …influenced by the Depression and the growing discontent with the jurisprudence of substantive due process with which it confused the clear command of the Contract Clause, the Court upheld the law. It is true that times were hard, but as Justice George Sutherland’s dissent noted, legislation protecting debtors against creditors is passed precisely at such times, and yet such legislation was exactly the kind of evil which the Clause was designed to prohibit. The case is striking as an example of one of the most express rejections of originalism. Chief Justice Hughes stated explicitly that the Court was not bound by the original understanding of the Clause.

Writing for FEE, Professors Antony Davies and James Harrigan explain the terrible 1942 decision by the Supreme Court to remove any meaningful restriction on the power of the central government.

They start by pointing out that the 18th Amendment (imposing prohibition) was an example of how to expand the power of government in the proper way.

The Constitution creates a government of enumerated powers, which means the federal government is only authorized to do things that are specifically listed in the Constitution. And that list is relatively short. The list appears in Article One, Section Eight and enumerates the proper objects of congressional legislation.  …Consider the United States’ ill-advised flirtation with Prohibition—which was enacted almost exactly 100 years ago. Nowhere in the Article One, Section Eight powers does one see the authority to “ban the manufacture, transport, or sales of alcohol within the United States.” When Americans decided that they wanted a coast-to-coast ban on alcohol, they amended the Constitution to give the federal government this authority. Fourteen dry years later, Americans came to their senses and revoked this authority by amending the Constitution again.

Alcohol prohibition was a mistake, of course, just like today’s drug prohibition, and the American people went through the proper process of adopting the 21st Amendment (to repeal the 18th Amendment).

Davies and Harrigan then explain that it was about that time that the Supreme Court decided that it would no longer uphold the Constitution’s restrictions on the powers of the central government.

As of 1933, when the 21st Amendment was ratified, Americans still had a constitutionally limited federal government and what Justice Louis Brandeis famously called “laboratories of democracy” in the states. …But who ended up being tasked with deciding what Article One, Section Eight actually meant? Herein lies the wrinkle that enables all manner of constitutional mischief in the United States. The institution that ended up deciding what the federal government is empowered to do is itself a branch of the federal government. And it should come as no surprise that when push comes to shove, the Supreme Court routinely finds in favor of empowering the federal government.

One of the most horrifying examples of judicial failure occurred in 1942.

In 1942, the Supreme Court decided a case, Wickard v. Filburn, in which farmer Roscoe Filburn ran afoul of a federal law that limited how much wheat he was allowed to grow. …A careful reader might, and should, ask where the federal government’s right to legislate the wheat market is to be found—because the word “wheat” is nowhere to be found in the Constitution. …The Agricultural Adjustment Act of 1938 put an upper limit on how much wheat farmers were allowed to grow, which would serve to keep prices high by limiting supply. Roscoe Filburn had grown 12 more acres of wheat than the law allowed. But not only did he not sell the excess wheat outside of his home state, but he also didn’t sell it at all. He used the wheat from those 12 acres to feed his cattle. …yet the Supreme Court found (unanimously) that because Congress had the authority to regulate interstate commerce, Congress also had the authority to prohibit Filburn from growing those 12 acres of wheat for his own use. …Filburn’s non-commercial activity was, according to the Supreme Court, interstate commerce. …Filburn’s non-commercial activity was, according to the Supreme Court, interstate commerce.

And here’s the result.

A century ago, we amended the Constitution when we wanted the federal government to exercise a new authority—that of banning alcohol. Today, we allow Congress to exercise almost any authority it likes. …We have progressed so far down the path of reinterpreting the Constitution as a document that empowers government, rather than one that limits it… The sad result has been a government nearly limitless in its power.

By the way, the Obamacare case may be as odious as Wickard v. Filburn since it marked another unfortunate expansion of Washington’s ability to control our lives, in violation of the clear language in Article 1, Section 8.

Though I don’t want to be too glum. The good news is that the Supreme Court occasionally does defend economic liberty, as the Wall Street Journal recently opined.

One goal of the U.S. Constitution was to form a union that allowed interstate commerce unencumbered by state protectionism. The Supreme Court reinforced that principle on Wednesday by striking down a two-year residency requirement to get a liquor license in Tennessee. …a business lobby known as Tennessee Wine and Spirits Retailers Association argued that the 21st Amendment that repealed Prohibition also gave the states broad authority to regulate alcohol. The association knows that if people can move to a state and open up liquor stores, it means more potential competition for those who already have licenses. The law is commercial protectionism and thus violates the Constitution’s Commerce Clause, the High Court ruled in Tennessee Wine and Spirits Retailers Assn. v. Thomas. “Because Tennessee’s 2-year residency requirement for retail license applicants blatantly favors the State’s residents and has little relationship to public health and safety, it is unconstitutional,” wrote Justice Samuel Alito for a 7-2 majority… the 21st Amendment doesn’t override the rest of the Constitution’s principles. As recently as 2005 (Granholm v. Heald), the Court ruled that New York state couldn’t discriminate against out-of-state wineries.

Some judges resent any protections against government power.

In an article for Reason, Damon Root properly castigates a judge for objecting to the economic liberties guaranteed by the 14th Amendment.

Does the U.S. Constitution protect economic liberty, such as the right to work in an occupation of one’s choosing free from unreasonable government regulation? Pennsylvania Supreme Court Justice David Wecht thinks not. …in Ladd v. Real Estate Commission of the Commonwealth of Pennsylvania, Wecht faulted his colleagues in the majority for their “judicial intrusion into the realm of legislative value judgments” after that court allowed a legal challenge to proceed against a state occupational licensing scheme. “I cannot endorse a constitutional standard that encourages courts,” he declared, “to second-guess the wisdom, need, or appropriateness” of duly enacted economic regulations. …”For many years, and under the pretext of protecting ‘economic liberty’ and ‘freedom of contract,’ the Supreme Court routinely struck down laws that a majority of the Court deemed unwise or improvident,” Wecht wrote of Lochner and several related cases. …I would encourage Justice Wecht to read some more legal history. …Rep. John Bingham (R–Ohio)…served as the principal author of Section One of the 14th Amendment… As Bingham told the House of Representatives, “the provisions of the Constitution guaranteeing rights, privileges, and immunities” includes “the constitutional liberty…to work in an honest calling and contribute by your toil in some sort to the support of yourself, to the support of your fellow men, and to be secure in the enjoyment of the fruits of your toil.” …even those who opposed the passage of the 14th Amendment agreed that it was designed to protect economic liberty from overreaching state regulation… The “right to contract” was of course later secured by the Supreme Court in Lochner.

Let’s close by detouring into the world of fantasy and contemplating how we should amend the Constitution today?

Rory Magraf lists five ideas in a piece for the Foundation for Economic Education, one of which I find especially tempting.

…the conversation always gets the cerebral juices flowing for legal enthusiasts; the idea of amending the US Constitution, something done only twenty-seven times in history, is about as close as one will get to actually sitting among the Founders in Philadelphia. With that in mind, here are some ideas.

The Sixteenth Amendment to the Constitution of the United States is hereby repealed.

In short, abolish the income tax. This is usually a crowd-pleaser among libertarians and probably a handful of Republicans during an election year, but it is also a bit of a challenge, on the same level as chasing the moon. Still, it would be worthwhile to have the conversation.

Since I’m definitely not a fan of the income tax, I certainly endorse this notion.

However, I think we would need much stronger language. The key 1895 case that struck down the income tax was decided by a the narrow margin of 5-4, and that was back when Justices presumably cared more about the Constitution.

I fear that a similar case today would not lead to the right result (which is one of the reasons I’m skeptical of a national sales tax).

In any event, the federal government’s broad power to tax does not translate into a broad power to spend. At least if we care about the Constitution.

And that means much of the federal government is (or, to be more precise, should be) unconsitutional.

P.S. Here’s some of what Thomas Sowell wrote about Wickard v Filburn.

P.P.S. Here’s some of what Walter Williams wrote about the Constitution’s limits of Washington.

P.P.P.S. If you want to read more, the Constitution was designed to protect against majoritarianism and to ensure “negative liberty.”

P.P.P.P.S. Readers may also be interested in this discussion of whether libertarians should prefer Hamilton or Jefferson.

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Will Biden’s Class-Warfare Tax Plan Lead to an Exodus of Job Creators?

After Barack Obama took office (and especially after he was reelected), there was a big uptick in the number of rich people who chose to emigrate from the United States.

There are many reasons wealthy people choose to move from one nation to another, but Obama’s embrace of class-warfare tax policy (including FATCA) was seen as a big factor.

Joe Biden’s tax agenda is significantly more punitive than Obama’s, so we may see something similar happen if he wins the 2020 election.

Given the economic importance of innovators, entrepreneurs, and inventors, this would be not be good news for the American economy.

The New York Times reported late last year that the United States could be shooting itself in the foot by discouraging wealthy residents.

…a different group of Americans say they are considering leaving — people of both parties who would be hit by the wealth tax… Wealthy Americans often leave high-tax states like New York and California for lower-tax ones like Florida and Texas. But renouncing citizenship is a far more permanent, costly and complicated proposition. …“America’s the most attractive destination for capital, entrepreneurs and people wanting to get a great education,” said Reaz H. Jafri, a partner and head of the immigration practice at Withers, an international law firm. “But in today’s world, when you have other economic centers of excellence — like Singapore, Switzerland and London — people don’t view the U.S. as the only place to be.” …now, the price may be right to leave. While the cost of expatriating varies depending on a person’s assets, the wealthiest are betting that if a Democrat wins…, leaving now means a lower exit tax. …The wealthy who are considering renouncing their citizenship fear a wealth tax less than the possibility that the tax on capital gains could be raised to the ordinary income tax rate, effectively doubling what a wealthy person would pay… When Eduardo Saverin, a founder of Facebook…renounced his United States citizenship shortly before the social network went public, …several estimates said that renouncing his citizenship…saved him $700 million in taxes.

The migratory habits of rich people make a difference in the global economy.

Here are some excerpts from a 2017 Bloomberg story.

Australia is luring increasing numbers of global millionaires, helping make it one of the fastest growing wealthy nations in the world… Over the past decade, total wealth held in Australia has risen by 85 percent compared to 30 percent in the U.S. and 28 percent in the U.K… As a result, the average Australian is now significantly wealthier than the average American or Briton. …Given its relatively small population, Australia also makes an appearance on a list of average wealth per person. This one is, however, dominated by small tax havens.

Here’s one of the charts from the story.

As you can see, Australia is doing very well, though the small tax havens like Monaco are world leaders.

I’m mystified, however, that the Cayman Islands isn’t listed.

But I’m digressing.

Let’s get back to our main topic. It’s worth noting that even Greece is seeking to attract rich foreigners.

The new tax law is aimed at attracting fresh revenues into the country’s state coffers – mainly from foreigners as well as Greeks who are taxed abroad – by relocating their tax domicile to Greece, as it tries to woo “high-net-worth individuals” to the Greek tax register. The non-dom model provides for revenues obtained abroad to be taxed at a flat amount… Having these foreigners stay in Greece for at least 183 days a year, as the law requires, will also entail expenditure on accommodation and everyday costs that will be added to the Greek economy. …most eligible foreigners will be able to considerably lighten their tax burden if they relocate to Greece…nevertheless, the amount of 500,000 euros’ worth of investment in Greece required of foreigners and the annual flat tax of 100,000 euros demanded (plus 20,000 euros per family member) may keep many of them away.

The system is too restrictive, but it will make the beleaguered nation an attractive destination for some rich people. After all, they don’t even have to pay a flat tax, just a flat fee.

Italy has enjoyed some success with a similar regime to entice millionaires.

Last but not least, an article published last year has some fascinating details on the where rich people move and why they move.

The world’s wealthiest people are also the most mobile. High net worth individuals (HNWIs) – persons with wealth over US$1 million – may decide to pick up and move for a number of reasons. In some cases they are attracted by jurisdictions with more favorable tax laws… Unlike the middle class, wealthy citizens have the means to pick up and leave when things start to sideways in their home country. An uptick in HNWI migration from a country can often be a signal of negative economic or societal factors influencing a country. …Time-honored locations – such as Switzerland and the Cayman Islands – continue to attract the world’s wealthy, but no country is experiencing HNWI inflows quite like Australia. …The country has a robust economy, and is perceived as being a safe place to raise a family. Even better, Australia has no inheritance tax

Here’s a map from the article.

The good news is that the United States is attracting more millionaires than it’s losing (perhaps because of the EB-5 program).

The bad news is that this ratio could flip after the election. Indeed, it may already be happening even though recent data on expatriation paints a rosy picture.

The bottom line is that the United States should be competing to attract millionaires, not repel them. Assuming, of course, politicians care about jobs and prosperity for the rest of the population.

P.S. American politicians, copying laws normally imposed by the world’s most loathsome regimes, have imposed an “exit tax” so they can grab extra cash from rich people who choose to become citizens elsewhere.

P.P.S. I’ve argued that Australia is a good place to emigrate even for those of us who aren’t rich.

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Coronavirus and Gun Ownership

Back in March, I explained that the coronavirus pandemic showed why it’s so valuable for people to have the right of gun ownership.

Let’s revisit the topic and we’ll start with the bad news. As illustrated by this Reason video, Senator Elizabeth Warren wants to exploit the crisis by imposing sweeping limits on our civil liberties guaranteed by the 2nd Amendment.

The good news is that the Trump Administration has been working to make it easier for people to exercise their right to gun ownership.

Licensed gun stores can do drive-thru sales of firearms or sell them out of their parking lots, the Trump administration said…in new guidance designed to facilitate purchases without forcing buyers to enter confined establishments during the coronavirus pandemic. …The only demand is that the required records from transactions still be stored safely inside the building. …Firearms sales have been one of the flashpoints of the crisis. A number of liberal jurisdictions have deemed gun stores to be “non-essential” businesses, which makes them subject to the same shutdown orders as shopping malls, theaters and hair salons. …Lawsuits have been filed against a number of those shutdown orders, arguing they violate the Second Amendment right to keep and bear arms. Gun owners say they can’t exercise that right if they can’t purchase a firearm or ammunition. Those complaints got a boost from the Homeland Security Department, which has issued guidance deeming firearms dealers essential.

And the best news is that many Americans have responded to the coronavirus by stocking up on weapons.

Here are some excerpts from a report by the U.K.-based BBC.

With the death toll climbing every day and most of the country under some form of lockdown, many Americans seem to be turning to guns as part of their response. …The FBI conducted 3.7m background checks in March 2020, the highest total since the instant background check programme began in 1998. …Gun shops across the country report that they are unable to re-stock shelves quickly enough to cope with the rush. …According to Georgia State University law school professor Timothy Lytton, …most new gun sales are being motivated by two factors that have been spurred on by the coronavirus crisis. The first is the concern that civil society – fire, police and health services – could be severely “eroded” someday, leading to a breakdown in law and order. In such a case, a gun can be viewed as a “self-help” survival tool, he says. The second reason is concerns over so-called big government infringing on American freedoms such as gun ownership, which is enshrined in the US constitution. “Many of the public health measures, such as shelter-in-place, restricting peoples’ movements, restricting what people can buy,” Mr Lytton says, “raises fears among many groups of the potential for government takeover and tyranny.”

Here’s a tweet from March showing long lines at a gun store.

A local TV station in the state of Washington reported on the surge in gun sales.

Local firearm stores have been all but emptied out. The response we got from several gun stores in numerous counties showed how overwhelmed they are with business. Many said they barely had time to take our call and compared the demand to that of toilet paper. …We heard from several employees of local gun shops who say it’s undeniable that the massive surge is attributed to people’s fear during this time. Jason Cazes, owner of Low Price Guns in Bellevue, says three weeks ago, the boom in business hit like a ton of bricks. …Cazes found himself flooded with new customers with an urgent request. “Hey I need a hand gun, I need a shot gun. All the sudden they’re interested in having something for protection,” he said. …”It’s a lot of first time buyers,” says Cazes

A newspaper in Pittsburgh reported on the same phenomenon.

After standing in line at a Pittsburgh-area sporting goods store for more than an hour, not knowing what he would say to the sales clerk, the self-described “liberal Democrat from New York City” bought a gun. …His purchase last week occurred during a nationwide rash of firearm sales to people who had never considered gun ownership until becoming rattled by concerns about COVID-19’s impact on America’s social infrastructure. …On Wednesday at Keystone Shooting Center in Mars, Butler County, owner Ty Eggemeyer said the percentage of customers buying their first gun was “extremely high.” “Most of what’s selling is for self-defense and protection,” he said. “Mostly handguns. Our home-defense shotguns, wiped out.”

Stephen Gutowski writes for the Washington Free Beacon about the potential political implications of expanded gun ownership.

Scott Kane went 38 years without ever touching a gun. That streak would have continued had it not been for the coronavirus. In March, fearful of the harassment his wife and child experienced over their Asian ancestry, Kane found himself in a California gun shop. His March 11 purchase of a 9mm would have been the end of the story, were it not for a political standoff over shutdown orders and background checks. Now Kane, a former supporter of gun-control measures and AR-15 bans, is frustrated by the arduous process that has denied his family a sense of security. The pandemic has made the soft-spoken software engineer an unlikely Second Amendment supporter. …Kane is not alone. An influx of new gun owners has the potential to permanently alter the politics surrounding guns in the United States. …Brian, a 40-year-old Floridian, used his savings to buy a Smith & Wesson M&P Shield in March after being laid off—the experience changed his entire approach to Second Amendment issues. …Andrew, a federal contractor who, along with his wife, bought a Heckler & Koch VP9 on March 21 in Virginia, said the state’s Democrat-controlled legislature pursuing a package of gun-control laws this winter in the face of unprecedented opposition directly contributed to his purchase.

And Kira Davis, in a column for Red State, also suggests that the coronavirus has led to new-found appreciation for the 2nd Amendment of the Bill of Rights.

My friend’s father owns a gun range near me and she said he’s seen a huge amount of liberals coming in to purchase weapons in recent weeks. How does he know they’re liberals? “They’re shocked to discover they can’t just walk out of the store with a gun.” …Not only are many liberals suddenly learning to love their Second Amendment rights, many of them are finding out that the gun control narrative in this country — as repeated loudly and often by Hollywood and the mainstream media — is a complete lie. …As a gun-owner who formerly abhorred the Second Amendment, …I find this whole situation fascinating. …There are a lot of people like me out there right now — first-timers and Second Amendment haters who feel like a hypocrite for wanting a gun for protection. …now they are navigating our convoluted gun laws for themselves… As these revelations begin to spread among our liberal brethren in the state of California, will we see a shift in gun laws and support for anti-Second Amendment legislators? Only time will tell

Aaron Tao, in an article published by the Foundation for Economic Education, summarizes the case for gun ownership.

In the United States, depending where you live, police response time ranges from nine minutes to over an hour. Right now, one in five New York police officers are currently out sick due to COVID-19. Police in multiple states have announced they will no longer respond to theft, burglary, and break-ins. Given the current climate, it’s not unreasonable to assume police will take much longer to arrive, if they do at all, should someone dial 911. Furthermore, Americans need to understand there is no legal obligation for the police to protect you, which is affirmed by the Supreme Court and multiple lower courts. (See Castle Rock v. Gonzales, Warren v. District of Columbia, and Lozito v. New York City). Should the police fail to arrive or protect you when needed, you can’t even sue for neglect. …Should an even deadlier natural or man-made catastrophe take place, if the authorities haven’t been incapacitated, displaced, or destroyed completely, whatever personnel and resources are left will be prioritized to protect high-ranking government officials, their inner-circle, and critical government facilities and infrastructure. …ruling elites will be evacuated to a secure bunker in some undisclosed location while John Q. Public will be left to fend for himself. …Many Americans, especially minorities, have realized the need for self-protection in times of social upheaval and breakdown. It is unfortunate that it took a tragedy as extreme as the COVID-19 pandemic to remind people that we should never take peace, prosperity, and freedom for granted. But millions have now taken the first steps to defend themselves and their loved ones.

I don’t pretend to know whether the new surge in gun ownership will change the political landscape, but I know it’s good news when more people learn about the issue. Especially folks on the left. Not only the ones mentioned in the stories above, but also these articles that I’ve shared.

• In 2012, I shared some important observations from Jeffrey Goldberg, a left-leaning writer for The Atlantic. In his column, he basically admitted his side was wrong about gun control.
• Then, in 2013, I wrote about a column by Justin Cronin in the New York Times. He self-identified as a liberal, but explained how real-world events have led him to become a supporter of private gun ownership.
• In 2015, I shared a column by Jamelle Bouie in Slate, who addressed the left’s fixation on trying to ban so-called assault weapons and explains that such policies are meaningless.
• In 2017, Leah Libresco wrote in the Washington Post that advocates of gun control are driven by emotion rather empirical research and evidence.
• Last but not least, in 2019, Alex Kingsbury confessed in the New York Times that his long-held dream of gun confiscation was utterly impractical.

P.S. If you want some humor that combines coronavirus and guns, click here (next-to-last item), here (third item), and here (first item).

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Margaret Thatcher’s Message to Washington’s Big Spenders

Margaret Thatcher was the British version of Ronald Reagan, a leader who resuscitated a nation by rolling back the size and scope of government.

She also is famous for one of the most accurate observations ever made about fiscal policy.

Her warning proved prophetic when the Soviet Bloc collapsed.

Her wise words also could be applied to what happened about a decade ago in Greece. And what’s about to happen in Italy.

But let’s not forget that the United States isn’t immune to the problem of excessive government. The Wall Street Journal has a sobering editorial on the pro-spending sentiment that dominates the nation’s capital.

…in Washington the politicians are debating how to spend another few trillion dollars in the name of virus relief. …Mrs. Pelosi’s House bill promises another $3 trillion for her various constituencies on top of the $2.7 trillion or so Congress has already spent on the pandemic. The goal is income redistribution… This political strategy may work since Republicans, as usual, are divided and defensive. …Mr. Trump…seems torn about what to support and is thinking only as far as November. This is a recipe for another deal on Democratic terms… Sooner or later the pandemic will end. The question is what kind of economy will be left. A second Cares Act would leave a legacy of vastly larger government that would mean slower growth and take years to overcome.

Yes, the spending binge will mean slower growth.

But I’m even more worried about what will happen in the future. Here are three things to keep in mind.

1. Largely because of Bush, Obama, and Trump, the federal budget has tripled since 1980 (Reagan and Clinton were comparatively frugal). Keep in mind that the increase in the accompanying chart shows the growth in spending after adjusting for inflation.
2. The burden of federal spending is projected to skyrocket in future years because of the combination of demographic changes and poorly designed entitlement programs. In other words, our fiscal outlook is grim even if politicians don’t approve an additional penny of new spending.
3. However, politicians are spending more money. A lot more.  As shown in the accompanying chart, this has caused a huge spike in per-capita outlays. And the crowd in Washington wants to make the red portion much bigger.

Given all this bad news, does Thatcher’s warning about running out “of other people’s money” apply to the United States?

As bad as the numbers are, my two cents is that the U.S. won’t suffer a fiscal crisis anytime soon. As I noted at the end of this interview, Washington can probably continue with business-as-usual fiscal policy for several more decades (Adam Smith observed that it usually takes a lot of bad policy over a long period of time to cause economic ruin).

But that doesn’t mean it’s a good idea to travel down that path.

Here’s an analogy. Smoking three packs of cigarettes a day presumably won’t kill someone within the first 10 years, but it’s definitely not a recipe for long-run health and vitality. Sooner or later, there will be consequences.

A mature and sensible people (like the Swiss) take steps to avoid the fiscal version of those bad consequences.

For what it’s worth, similar reforms have been proposed for the United States. Unfortunately, too many American politicians and consumed by self-interest and don’t think past the next election.

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The Economic Future of Hong Kong

I have applauded the incredible economic success of Hong Kong, which has long been ranked as the world’s most economically free jurisdiction.

Well, given China’s recent decision to impose more controls on Hong Kong, I want to share this interview I did last October.

At the risk of patting myself on the back, I think everything I said still applies.

Especially when compared to what some others are saying. Writing for Bloomberg last October, Shirley Zhao and Bruce Einhorn seemingly want readers to think that low tax rates somehow are the cause of Hong Kong’s challenges.

Hong Kong has remained the world’s freest economy, thanks partly to low taxes and the rule of law. But widening inequality has also fueled the worst unrest the city has seen since the former British colony returned to China in 1997. …The combined net worth of the territory’s 20 richest people…is pegged at $210 billion… the city’s income inequality, as expressed in Gini coefficient, was the most for any developed economy in 2016… About 1 in 5 residents lives below the poverty line. …Lam is under pressure to soothe tensions and find ways to ease the housing crisis in the least-affordable market without rocking a tax regime that made Hong Kong Asia’s financial hub.

I disagree with much of their analysis.

As I noted in the interview, the problem with housing is caused by government ownership of land.

Moreover, I can’t resist pointing out that the assertion about 20 percent of the population living in poverty has been shown to be utter nonsense. That figure comes from “poverty hucksters” who deliberately conflate inequality with poverty (an example of the “Eighth Theorem of Government“).

And, speaking of inequality, Hong Kong historically has been a great place to be poor for the simple reason that it’s a great place to climb out of poverty.

Or, to be more precise, it’s been a great place to climb out of poverty. Whether that will still be true in the future depends on China.

I have no idea what Beijing will do, but I explained in the interview that it would be good for everyone if China took a hands-off approach to Hong Kong.

Why? This chart, based on the Maddison database, shows that Hong Kong’s rapid growth rate has slowed ever since Hong Kong was transferred from British rule to Chinese rule. Since China has wisely not interfered with Hong Kong’s pro-growth economic policy, the most logical explanation for the slowdown is that entrepreneurs and investors are worried about what may happen in the future.

Needless to say, the best way to rejuvenate rapid growth is for Beijing to somehow display a commitment to economic liberty in Hong Kong (consistent with the one-country-two-systems approach).

P.S. As I warned in the interview, the United States should not goad China into any sort of crackdown, either political or economic.

P.P.S. The best-case scenario is a Singapore-style evolution in China, meaning sweeping economic liberalization and gradual political liberalization.

P.P.P.S. The worst-case scenario is backsliding by China on previous economic liberalization, combined with unfriendly relations with the western world.

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Coronavirus and the Two Americas

Earlier this month, Neil Ferguson was awarded membership in the Bureaucrat Hall of Fame after he and his mistress were caught violating lockdown rules that Ferguson – in his role as a supposed public health expert – demanded for the entire United Kingdom.

This was a stunning display of hypocrisy, perhaps even to the extent that Joe Biden or Elizabeth Warren might be shocked.

But I want to focus on a different point, which is the degree to which the coronavirus has exposed the fault line between those who are subsidized by government and those who pay for government.

In her Wall Street Journal column, Peggy Noonan opines about how the “protected” don’t have to worry about the consequences of economic shutdowns.

There is a class divide between those who are hard-line on lockdowns and those who are pushing back. We see the professionals on one side—those James Burnham called the managerial elite, and Michael Lind, in “The New Class War,” calls “the overclass”—and regular people on the other. The overclass are highly educated and exert outsize influence as managers and leaders of important institutions—hospitals, companies, statehouses. …Since the pandemic began, the overclass has been in charge—scientists, doctors, political figures, consultants—calling the shots for the average people. But personally they have less skin in the game. The National Institutes of Health scientist won’t lose his livelihood over what’s happened. Neither will the midday anchor. I’ve called this divide the protected versus the unprotected. …Here’s a generalization based on a lifetime of experience and observation. The working-class people who are pushing back have had harder lives than those now determining their fate. They haven’t had familial or economic ease. No one sent them to Yale. …they look at these scientists and reporters making their warnings about how tough it’s going to be if we lift shutdowns and they don’t think, “Oh what informed, caring observers.” They think, “You have no idea what tough is. You don’t know what painful is.”

Fareed Zakaria’s column for the Washington Post acknowledges that it is a problem when a bunch of cossetted elites make policy for everyone else.

…there is a broader distrust that we need to understand. …Social power exists in three realms — government, the economy, and the culture. …In all three, leaders tend to be urban, college-educated professionals, often with a postgraduate degree. That makes them quite distinct from much of the rest of the country. …And yet, the top echelons everywhere are filled with this “credentialed overclass.” …many non-college-educated people…see the overclass as enacting policies that are presented as good for the whole country but really mostly benefit people from the ruling class… Let’s look at the covid-19 crisis through this prism. Imagine you are an American who works with his hands — a truck driver, a construction worker, an oil rig mechanic — and you have just lost your job… You turn on the television and hear medical experts, academics, technocrats and journalists explain that we must keep the economy closed — in other words, keep you unemployed — because public health is important. All these people making the case have jobs, have maintained their standards of living… The covid-19 divide is a class divide.

Writing for USA Today, Professor Glenn Reynolds observes that the self-anointed experts are not the ones paying the price for coronavirus policies.

…it’s hard not to notice a class divide here. As with so many of America’s conflicts, the divide is between the people in the political/managerial class on the one hand and the people in the working class on the other. And as usual, the smugness and authoritarianism are pretty much all on one side. …in Los Angeles — where less than half the county is working now — radio journalist Steve Gregory asked the L.A. County Board of Supervisors whether any of them were willing to take voluntary pay cuts during this crisis. He was told by the chair that his question was “irresponsible,” which is to say embarrassing and inconvenient. (By contrast, New Zealand’s senior officials, including the prime minister, are taking a 20% pay cut.) …There really are two Americas here: Those still getting a paycheck from government, corporations or universities, and those who are unemployed, or seeing their small businesses suffer due to shutdowns. …Then there are the hypocritical gestures, like Chicago Mayor Lori Lightfoot’s illicit haircut… People don’t appreciate being lectured and condescended to and bossed around. They especially don’t appreciate being urged to sacrifice by people who make no sacrifices themselves.

I’m tempted to focus on Glenn’s point about how American politicians should follow the lead of New Zealand lawmakers and accept a pay cut as a gesture of solidarity.

Heck, all levels of bureaucracy should take a haircut. Bureaucrats already have a significant advantage in compensation compared to the private sector, and that gap surely will grow now that so many businesses have been shuttered and so many workers have been forced into unemployment.

But I want to focus on a different point, which is the inherent unfairness of the elite having consequence-free power and authority over ordinary people.

In part, it’s the point that Thomas Sowell makes in the accompanying quote.

But it goes beyond that. The problem with the “overclass” or “protected class” is that they also don’t pay any price when they’re totally right, somewhat right, or only partly right.

In other words, the people who live off the government, either directly or indirectly, have relatively comfortable lives – all financed by the people who deal with much greater levels of hardship and uncertainty.

At the risk of understatement, that’s not right.

P.S. This gap is exacerbated when government officials display thuggery rather than empathy.

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The 10th and Final Edition of Coronavirus Humor

I started sharing politically-themed coronavirus humor back in March and that’s now been a tradition for nine consecutive weekends (see here, here, here, here, here, here, here, here, and here).

This will be the final edition.

We’ll start with a clever video from Kevin James. It could be entitled, Revenge of the Karens.

Next we have a helpful suggestion from the practitioners of coronavirus thuggery.

The clever folks at Babylon Bee have a story about disappointed governors.

Democrat governors across the nation have urged states to continue their lockdowns, saying if they end prematurely, their time in the limelight will be over. …said California Governor Gavin Newsom. “I can’t let this $500 hair cut go to waste. I spend thousands on hair gel alone every month. If I can’t give a press conference every night, it’s all for nothing!” Governor Andrew Cuomo of New York agreed. “We must continue this crisis as long as possible so that people will know who I am,”… A study confirmed the governors’ worst fears, showing that in states with no COVID-19 restrictions, people don’t think about the government much at all and just go about their daily lives. “We can’t let that happen,” said Michigan Governor Gretchen Whitmer.

The people who think that Bill and Hillary Clinton somehow had Jeffrey Epstein killed will like this bit of satire.

For what it’s worth, I always remind conspiracy-minded people that routine government incompetence is usually a better explanation for why things happen.

Next, we have a reminder that the climate alarmists must be very disappointed and jealous that they’ve been displaced by a crisis that actually does kill people.

I wrote recently about Florida’s economic success. Now, let’s look at another story from Babylon Bee, this one about how the Sunshine State is in trouble for its reaction to the virus.

Science says Florida should have seen skyrocketing deaths from COVID-19, but instead Florida — despite its large elderly population — has not seen anywhere near the number of problems faced by states like New York and New Jersey. This has been ruled to be in complete defiance of Science. …Washington Post columnist Jennifer Rubin… “Florida is undermining our trust in Science by not dying. We cannot tolerate this. More Floridians need to die. To die for Science.” California Governor and Science believer Gavin Newsom agreed. “Ron DeSantis is a witch! Burn him!” …There is now a movement by Science-believing Democrats to actively try to infect Floridians to try to get their death count to match projections.

As usual, I’ve saved my favorite for the end.

I’ve acknowledged that there’s much we don’t know about the virus and how to react. But I feel very confident in stating that the most bone-headed decision by politicians has been to endanger ordinary people by releasing criminals while at the same time arresting ordinary people and exposing them to the supposedly coronavirus-spreading justice system.

Which is the message of this Chip Bok cartoon.

If you find this cartoon amusing, I highlighted my favorite Bok creations as part of a contest to identify the best political cartoonist.

P.S. I wish some of the ways that politicians have reacted to the virus – such as this, this, this, and this – were satire rather than reality.

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Are there Innate Differences between Right and Left (and Where Do Libertarians Fit)?

I sometimes wonder why libertarians aren’t more persuasive given that there’s so much evidence for our economic and social views.

The answer may have something to do with matters such as psychology. Let’s take a closer look at this issue, starting with a video from Johan Norberg.

Johan’s point is that the real gap is between classical liberals (i.e., libertarians) and statists.

Though most of the research and analysis is based on potential differences between conservatives and liberals, as conventionally defined.

For instance, in a column for the U.K.-based Guardian, Arlie Hochschild writes about differences in awareness on the right and left.

…what’s startling is the further finding that higher education does not improve a person’s perceptions – and sometimes even hurts it. In their survey answers, highly educated Republicans were no more accurate in their ideas about Democratic opinion than poorly educated Republicans. For Democrats, the education effect was even worse: the more educated a Democrat is, according to the study, the less he or she understands the Republican worldview. “This effect,” the report says, “is so strong that Democrats without a high school diploma are three times more accurate than those with a postgraduate degree.” …Even more than their Republican counterparts, highly educated Democrats tend to live in exclusively Democratic enclaves. The more they report “almost all my friends hold the same political views”, the worse their guesses on what Republicans think. …Although in principle more tolerant of political diversity, highly educated – and mostly urban – Democrats live, ironically, with less of it.

And here’s a tweet about educated folks on the left being more likely to live in a bubble.

Regarding the issue of how different ideologies respond to external threats (supposedly a major driver of philosophical differences), Ross Douthat analyzed how conservatives responded to coronavirus in a column for the New York Times.

…an influential body of literature has attempted to psychologize the partisan divide — to identify conservative and liberal personality types, right-wing or left-wing minds or brains… In its crudest form this literature just amounts to liberal self-congratulation, with survey questions and regression analyses deployed to “prove” with “science” that liberals are broad-minded freethinkers and conservatives are cramped authoritarians. But…Haidt argues that conservatives actually have more diverse moral intuitions than liberals, encompassing categories like purity and loyalty as well as care and fairness, and that the right-wing mind therefore sometimes understands the left-wing mind better than vice versa. …the political responses to the pandemic have put these psychological theories to a very interesting test.

He then applies this analysis to the coronavirus.

If there was ever a crisis tailored to the conservative mind-set, surely it would be this one, with the main peril being that conservatives would wildly overreact to such a trigger. …As the disease spread and the debate went mainstream, liberal opinion mostly abandoned its anti-quarantine posture and swung toward a reasonable panic, while conservative opinion divided, with a large portion of the right following the lead of Trump himself, who spent crucial weeks trying to wish the crisis away. …figures like Rush Limbaugh and Sean Hannity manifested a conservatism of tribal denial, owning the libs by minimizing the coronavirus threat. …one might say that the pandemic illustrates the power of partisan mood affiliation over any kind of deeper ideological mind-set. Or relatedly, it illustrates the ways in which under the right circumstances, people can easily swing between different moral intuitions. (This holds for liberals as well as conservatives: A good liberal will be as deferential to authority as any conservative when the authority has the right academic degrees…) …what we call “American conservatism” is probably more ideologically and psychologically heterogeneous than the conservative mind-set that social scientists aspire to measure and pin down. In particular, it includes an incredibly powerful streak of what you might call folk libertarianism… This mentality, with its reflexive Ayn Randism and its Panglossian hyper-individualism, is definitely essential to understanding part of the American right. But…I’m doubtful that it corresponds to any universal set of psychological tendencies that we could reasonably call conservative.

By the way, a new study by four social scientists, published in Nature, casts doubt on the earlier research regarding ideological differences in threat perception

About a decade ago, a study documented that conservatives have stronger physiological responses to threatening stimuli than liberals. This work launched an approach aimed at uncovering the biological roots of ideology. Despite wide-ranging scientific and popular impact, independent laboratories have not replicated the study. We conducted a pre-registered direct replication (n = 202) and conceptual replications in the United States (n = 352) and the Netherlands (n = 81). Our analyses do not support the conclusions of the original study, nor do we find evidence for broader claims regarding the effect of disgust and the existence of a physiological trait.

And another study by three social scientists in the Personality and Social Psychology Bulletin also casts doubt on the earlier research.

One consistent finding is that conservatives show higher disgust sensitivity than liberals. This finding, however, is predominantly based on assessments of disgust to specific elicitors, which confound individuals’ sensitivity and propensity to the experience of disgust with the extent to which they find specific elicitors disgusting. Across five studies, we vary specific elicitors of disgust, showing that the relations between political orientation and disgust sensitivity depend on the specific set of elicitors used. We also show that disgust sensitivity is not associated with political orientation when measured with an elicitor-unspecific scale. Taken together, our findings suggest that the differences between conservatives and liberals in disgust sensitivity are context dependent rather than a stable personality difference.

So maybe there’s not a meaningful difference between right and left with regards to matters such as disgust and threats.

But there seems to be plenty of evidence that there are differences in other areas.

Depending on political affiliation, Americans shop differently, as reported by Suzanne Kapner and Dante Chinni in the Wall Street Journal.

Consumer research data show Democrats have become more likely to wear Levi’s than their Republican counterparts. The opposite is true with Wrangler, which is now far more popular with Republicans. There is no simple explanation behind those consumer moves. Some of it is due to social and political stances companies are taking, such as Levi’s embrace of gun control. …the country is becoming more polarized along political lines, which is having an effect on brands that choose to stay out of the political fray. …Nearly 60% of 1,000 Americans surveyed by Edelman last year said they would choose, switch, avoid or boycott a brand based on its stand on societal issues. That is up from 47% in 2017.

Some of this makes sense to me. I have dramatically reduced my purchases at Dick’s, for example, because of the company’s opposition to the 2nd Amendment.

Here’s a graphic from the story. The self-selection of Fox and CNN viewers is especially noteworthy.

Folks on the right and left may even sleep differently, according to research published in the Journal of Politics by Aleksander Ksiazkiewicz at the University of Illinois.

This article proposes that chronotype (a person’s time-of-sleep preference) is a previously unidentified psychological correlate of political ideology. Chronotype may lead to political ideology through a motivated social cognitive process, ideology may shape sleep patterns through a desire to align with social norms, or ideology and chronotype may arise from common antecedents, such as genetics, socialization, or community influences. Analyses demonstrate a link between a morningness and conservatism in seven American samples and one British sample. This relationship is robust to controls for openness, conscientiousness, and demographics, including age, sex, income, and education.

Last but not least, Justin Lehmiller of the Kinsey Institute, in a column for Politico, says Republicans and Democrats have different fantasies.

I surveyed 4,175 adult Americans from all 50 states about what turns them on…one of the more intriguing things I uncovered was the political divide in our fantasy worlds. While self-identified Republicans and self-identified Democrats reported fantasizing with the same average frequency—several times per week—I found that Republicans were more likely than Democrats to fantasize about a range of activities that involve sex outside of marriage. Think things like infidelity, orgies and partner swapping… By contrast, self-identified Democrats were more likely than Republicans to fantasize about almost the entire spectrum of BDSM activities, from bondage to spanking to dominance-submission play. The largest Democrat-Republican divide on the BDSM spectrum was in masochism, which involves deriving pleasure from the experience of pain. …What connects Republicans and Democrats, I believe, is that their fantasies are at least partly driven by what they can’t have. …Interestingly, the single most commonly fantasized-about politician among both parties was the same: Sarah Palin (though Republicans were much more likely to have Palin fantasies than Democrats). Following Palin, the next most frequently mentioned politicians in Republicans’ fantasies were John F. Kennedy, Bill Clinton and Nikki Haley. While, after Palin, Democrats fantasized about Barack Obama, Bill Clinton and Hillary Clinton.

Maybe I’m strange, but I’ve never met or seen an American politician that piqued my interest.

Though I will confess to occasionally having quirky libertarian fantasies, one of which does involve sex.

Speaking of quirky, folks on the left appear to have more issues with mental health.

Among white liberals under 30, nearly half have a mental health condition, compared to 21-26 % among centrists and conservatives. H/t @ZachG932 https://t.co/iG9saHtvRR

— Eric Kaufmann (@epkaufm) April 12, 2020

Since I’ve asserted that folks on the left are “neurotic” and “guilt-ridden,” part of me agrees with these findings.

Though, to be fair, maybe they’re just more likely to visit healthcare providers.

I’ll conclude with what I will conveniently characterize as the most insightful research.

Three scholars, in an article for Current Psychology, find that libertarians are the smartest.

Previous studies consistently showed that analytic cognitive style (ACS) is negatively correlated with social conservatism, but there are mixed findings concerning its relation with economic conservatism. Most tests have relied on a unidimensional (liberal-conservative) operationalization of political orientation. Libertarians tend not only to identify themselves as conservative on this scale but also to score higher on ACS than liberals and conservatives.

Here’s the relevant chart from the study, courtesy of Rolf Degen.

Liberals can take some solace in that they score above conservatives, though there’s not much that can be said for self-identified moderates.

P.S. I started this column by noting that I want to understand how to be a more persuasive advocate for liberty. I don’t know if that will ever happen, but at least I can take comfort in that I will never be as deluded as this columnist who thinks he has discovered a way of becoming a more persuasive advocate for statism.

P.P.S. If you like this type of research, my previous columns on supposedly innate differences across ideologies can be found here, here, and here.

P.P.P.S. And here’s the research on the differences between libertarians and conservatives.

P.P.P.P.S. Here’s a humorous look at the difference between conservatives, liberals, and Texans.

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The Boring but Important Topic of Carry Forwards and Net Operating Losses

In the world of tax policy, big-picture issues such as tax reform can capture the public’s attention (should we junk the IRS, instance, and adopt a flat tax?).

People also get very interested if politicians are threatening to grab more of their money.

But many tax issues are tedious and boring, even if they involve important issues.

• Depreciation vs. expensing for new business investment.
• International tax rules and the choice of worldwide taxation vs territorial taxation.
• The debate on consumption-base taxation vs. Haig-Simons taxation.

Today, we’re going to discuss another one of the sleep-inducing tax issues – how to account for business losses.

This arcane issues has been attracting a bit of attention because the big coronavirus-driven emergency package included some changes to the tax treatment of such losses (making it easier to reduce overall tax liabilities by balancing losses in some years with profits in other years).

That upset two left-leaning members of Congress, Rep. Lloyd Doggett (D-TX) and Sen. Sheldon Whitehouse (D-RI), who editorialized in USA Today about the changes.

…tucked into its 880 pages were Republican-inserted tax provisions…that..allow certain investors…to cut their tax bills by shifting losses to prior tax years. …Large corporations were also authorized to convert losses from two years before the pandemic into immediate tax refunds. Businesses with losses when the economy was growing are rewarded for poor management or adverse market conditions that had absolutely nothing to do with the pandemic. …let’s reverse the damage. We are offering legislation to unwind this massive tax giveaway, to recover the lost revenues… Giant special interest tax breaks were not needed before and certainly have no place during a pandemic.

Is this right? Did a handful of GOP politicians insert a special favor for their friends in the business community?

For what it’s worth, I’m sure the answer to both questions is yes. Politicians are a very self-interested group and I’m sure there were dozens of provisions in the legislation that qualified for that type of criticism.

I’m interested, however, in whether the provisions moved policy in the right direction or the wrong direction.

Kyle Pomerleau with the American Enterprise Institute explains why the changes were desirable.

The liberalized treatment of losses is not a bailout and does not provide special treatment of certain industries. Loss deductions are an essential part of a well-functioning income tax. Businesses typically make multi-year investments. Those investments may lose money in some years make money in other years. The ability to either carry back losses to offset previous years’ taxes or carry forward losses to offset future taxes ensures that the tax system accurately measures income. Without loss deductions, a tax system would be biased against risky investment. …In the future, lawmakers should consider permanently liberalizing the treatment of losses.

Nicole Kaeding made similar arguments for the National Taxpayers Union.

The provision at hand, a loosening of net operating loss rules, isn’t cronyism. Instead, it reflects Congress’s priority of helping affected individuals and businesses weather our economic crisis by smoothing out “lumpy” tax burdens over time. Net operating losses (NOLs) are key features of the tax code. Tax years, calendar years, and business profitability don’t always align. Net operating loss provisions help smooth profits and losses across tax years to ensure that businesses are taxed on their economic income, not an accounting byproduct. …many have argued that it made little sense for Congress to revise loss rules for 2018 and 2019, when the virus wasn’t a consideration. In the abstract, that concern makes sense but policymakers were concerned about providing immediate liquidity to firms. A 2020 NOL doesn’t help a firm until they file their 2020 tax return in 2021. But allowing carrybacks for 2018 or 2019 allows firms to access capital quickly by amending their previous returns and claiming a refund.

For what it’s worth, I addressed this topic back in 2016 because it became a controversy in that year’s presidential campaign.

I didn’t pretend to know whether Trump was doing the right thing or wrong thing with his tax returns, but I made the argument that a fair and neutral tax system should have carry-forward rules.

Indeed, the business side of the flat tax expressly includes such provisions.

For what it’s worth, households used to have the option for “income-averaging,” which basically meant they could lower their overall tax rate by spreading a spike in income over several years.

A difference between households and businesses, though, is that businesses can suffer losses, while the worst thing that happens to a household is when income drops to zero.

The bottom line is that income averaging for people would be a helpful provision in the tax code, but carry-forward rules for businesses are a necessary provision.

P.S. That last sentence assumes goal is a tax system that is designed to extract money while imposing the smallest-possible amount of damage on economic efficiency.

At the risk of stating the obvious, a simple and fair tax system is not the goal of most politicians. In public, they prefer using the tax code as a tool for class-war demagoguery, and in private, they use it as a vehicle for auctioning off special provisions to their cronies.

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The Economic Consequences of Expanding Pay-as-You-Go Social Security Systems

Despite the fact that Social Security is an ever-increasing fiscal burden with a 75-year cash-flow deficit of nearly $45 trillion, many politicians in Washington have been trying to buy votes with proposals to expand the program (Barack Obama, Hillary Clinton, Bernie Sanders, Elizabeth Warren, etc).

A new working paper from the European Central Bank gives us some insights on what will happen if they succeed.

Authored by Daniel Baksa, Zsuzsa Munkacsi, and Carolin Nerlich, the study look at the long-run impact of related policies in Europe, using Germany and Slovakia as examples.

Here’s their description of the study.

In view of the adverse macroeconomic and fiscal implications of ageing, many European countries have implemented significant pension reforms… More recently, however, the reform progress has stalled, and despite an unchanged demographic outlook, several European countries reversed, or plan to do so, parts of their previously adopted pension reforms. In this paper we offer a framework that allows us to evaluate the macroeconomic and fiscal costs of pension reform reversals. …By using a general equilibrium model with overlapping generations we can account for feedback effects between changes in pension parameters, pension expenditures and macroeconomic variables. …The model is calibrated for Germany and Slovakia.

Before sharing their findings, here’s a look at how demographics are a ticking time bomb for Europe.

The yellow dots are the 2016 numbers for the old-age dependency ratio (the number of people over 65 compared to the 15-64 working-age population) and the red dots show how that ratio will deteriorate by 2070 (the numbers for the United States are similarly grim).

These bad numbers mean that Europe’s economic outlook will worsen over time.

…population ageing has adverse macroeconomic and fiscal implications. …the results show an increase in the public debt-to-GDP ratio by around 100 percentage points until 2070, compared to the initial period, for both Germany and Slovakia. Moreover, real GDP per capita is projected to decline by almost 14% in Germany and 9% in Slovakia, compared to the initial period.

But it’s possible for the numbers to get better or worse, depending on changes to public policy.

…similar to other studies we find evidence that pension reforms help to contain the adverse implications of ageing… In particular, increases in the retirement age appear to help to alleviate ageing pressures most. …we find strong evidence for the presumption that reversals of pension reforms are potentially very costly. In fact, reform reversals would not only result in higher aggregate pension expenditure and public debt-to-GDP ratios, but would in most cases also exacerbate the adverse macroeconomic impact of ageing.

Unfortunately, public policy is now trending in the wrong direction. Here’s what’s been happening in Germany and Slovakia.

Germany recently decided to cap the decline in the benefit ratio and the increase in the contribution rate until 2025 at certain levels, and is considering whether to extend this cap even until 2040. Slovakia decided to break the automatic link between changes in life expectancy and retirement age, by capping the retirement age at 64 years. …in the reversal scenario for Germany we freeze the benefit ratio at its current level of 48% and assume that the contribution rate would not exceed the threshold of 20% until 2040. With this reform reversal scenario we assume that the agreed freeze of the benefits ratio and contribution rate until 2025 will be ex-tended until 2040. In Slovakia, we assume the retirement age to stop increasing from the year 2045 onwards.

And what do they find when countries backtrack on reform?

Here’s what they estimated in Germany.

For Germany, we find that the reform reversal would imply sizeable costs (see Table 6, column “reform reversal”). Specifically, by 2070, the increase in the public debt-to-GDP ratio can be expected to be ceteris paribus almost 60 percentage points higher than under the baseline scenario, as a result of higher pension expenditures, adverse feedback effects and lower contribution rates.

For those interested, here’s Table 6, which I’ve augmented by highlighting in red the most relevant changes. Yes, the debt increases compared to the baseline, but I think it’s equally important (if not more important) to see how young people are hurt and how the burden of government spending goes up.

Now let’s see what the authors found for Slovakia.

…we quantify the fiscal costs of the reform reversal in Slovakia by comparing the debt impact under the reform reversal scenario with that under the baseline scenario. Our results show that such a reform reversal would be very costly. In fact, the increase in the public debt-to-GDP ratio would be more than 50 percentage points higher than the estimated increase of around 100 percentage points of GDP under the baseline scenario (see Table 7).

Here’s Table 7, and again I have highlighted in red the increase in debt as well as the data showing additional harm to young people and a much bigger increase in the burden of government spending.

So what do these findings mean for the United States?

Let’s explain using a homemade infographic. I’ve put four options for Social Security on a spectrum. Here’s what they mean.

• “Expand Social Security” means more taxes and spending in pay-as-you-go systems that are already costly and out of balance.
• The “Status Quo” is a typical pay-as-you-go-system (where the United States is now and where Germany and Slovakia were before their reforms).
• “Conventional Reform” means trying to stabilize a pay-as-you-go system by demanding that workers pay more while promising to give them less (what Germany and Slovakia did).
• The most market-friendly position is “Personal Retirement Accounts,” which transforms creaky pay-as-you-go systems into real individual savings.

Here’s the infographic, including arrows to indicate that some options mean more government and others mean more prosperity.

What Germany and Slovakia did was move from “Status Quo” to “Conventional Reform.” But now they’re backtracking on those reforms and shifting back to the old version of the “Status Quo.”

In other words, a move in the direction of “More Government” and the European Central Bank’s study shows such a step will have negative consequences.

In the United States, by contrast, some folks on the left want America to move from “Status Quo” to “Expand Social Security.”

Like Germany and Slovakia, we’d be moving in the wrong direction. But the damage for the U.S. presumably would be worse because we didn’t first take a step in the right direction.

P.S. If you want to learn more about the best option, Australia, Denmark, Chile, Switzerland, Hong Kong, Netherlands, Faroe Islands, and Sweden are a few of the many jurisdictions that have fully or partially shifted to systems based on real savings.

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Using Coronavirus as an Excuse for More E.U. Centralization and Redistribution

I wrote earlier this month about coronavirus becoming an excuse for more bad public policy.

American politicians certainly have been pushing all sorts of proposals for bigger government, showing that they have embraced the notion that you don’t want to let a “crisis go to waste.”

But nothing that’s happening in the United States is as monumentally misguided as the effort to create a new method of centralized redistribution in the European Union.

Kai Weiss of the Vienna-based Austrian Economic Center explains what is happening in a column for CapX.

…‘never let a good crisis go to waste’ seems to have become the mantra of both the European Commission a number of national leaders. The coronavirus has become a justification for…‘more Europe’ (which tends to actually mean more EU, to the detriment of Europe). The clearest sign of this renewed Euro-fervour is the plan cooked up by Angela Merkel and Emmanuel Macron earlier this week… Seasoned Brussels observers will be shocked to learn that their proposals have very little to do with the pandemic, and everything to do with deepening the centralisation of EU power and top-down policymaking. While Germany has traditionally…opposed the idea of eurobonds or similar debt collectivisation instruments, it is now advocating for precisely those policies. A €500 billion Recovery Fund… the initial plan is for the European Commission to raise the money on the financial markets. It would subsequently be paid back by the member states and through increased “own resources” – i.e., new taxes levied directly by Brussels… The good news is that none of these policy proposals are yet set in stone. There are some big legal questions, particularly on the Recovery Fund, and national parliaments would need to agree to this expansion of Brussels’ writ. Already countries like the Netherlands, Austria, Denmark, and Sweden have voiced criticism… But for all these obstacles, the direction of travel looks alarmingly clear. The consensus among the EU’s power brokers, as with pretty much any major world event, is that the answer is ‘more Europe’. ..For Macron  Merkel and their allies, this is far too good a crisis to pass up.

A story in the New York Times has additional details, including a discussion of potential obstacles.

Ms. Merkel this week agreed to break with two longstanding taboos in German policy. Along with the French president, Emmanuel Macron, Ms. Merkel proposed a 500 billion euro fund… It would allow the transfer of funds from richer countries… And it would do so with money borrowed collectively by the European Union as a whole. …Whatever emerges from the European Commission will be followed by tough negotiations… Chancellor Sebastian Kurz of Austria has raised objections to the idea of grants rather than loans, saying that he has been in contact with the leaders of Sweden, the Netherlands and Denmark. “Our position remains unchanged,’’ he said. …opposition may also come from member states in Central and Eastern Europe. …Those countries are going to be reluctant…to see so much European aid — for which they will in the end have to help pay — skewed to southern countries that are richer than they are. …in northern countries, moves for collective debt to bail out poorer southern countries may feed far-right, anti-European populists like the Alternative for Germany or the Sweden Democrats. They are angry at the idea of subsidizing southerners who, they believe, work less hard and retire much earlier.

What’s depressing about this report is that it appears the battle will revolve around whether the €500 billion will be distributed as grants or loans.

The real fight should be whether there should be any expansion of intra-E.U. redistribution.

For what it’s worth, Germany used to oppose such ideas, especially if funded by borrowing. But Angela Merkel has decided to throw German taxpayers under the bus.

Let’s close with some analysis from Matthew Lynn of the Spectator.

Die-hard European Union federalists have plotted for it for years. …The Greeks and Italians have pleaded for it. And French presidents have made no end of grand speeches, full of references to solidarity and common visions, proposing it. The Germans have finally relented and agreed, at least in part, to share debt within the EU and the euro-zone, and bail-out the weaker members of the club. …The money will be borrowed, based on income from the EU’s future budgets, but it will in effect be guaranteed by the member states, based on the EU’s ‘capital key’. …the rescue plan is completely unfair on all the EU countries outside the euro-zone. …why should they pay for it? Poland…will still be expected to pay in five per cent (or 25bn euros (£22bn)) to bail-out of far richer Italy (Polish GDP per capital is $15,000 (£12,000) compared with $34,000 (£27,000) for Italy).

Pro-centralization politicians are claiming this fund is needed to deal with the consequences of the coronavirus, but that’s largely a smokescreen. It will take many months for this proposal to get up and running – assuming, of course, that Merkel and Macron succeed in bullying nations such as Austria and the Netherlands into submission.

By that time, even the worst-hit countries already will have absorbed temporary health-related costs.

The bottom line is that this initiative is really about the long-held desire by the left to turn the E.U. into a transfer union.

The immediate losers will be taxpayers in Germany, as well as those in Austria, Sweden, the Netherlands, Finland, and a few other nations.

But all of Europe will suffer in the long run because of an increase in the continent’s overall fiscal burden.

And keep in mind that this is just the camel’s nose under the tent. It’s just a matter of time before this supposedly limited step becomes a template for further expansions in the size and scope of government.

Yet another reason why E.U. membership is increasingly an anchor for nations that want more prosperity.

P.S. As suggested by Mr. Lynn’s column, countries in Eastern Europe should fight this scheme. After all, these countries are relatively poor (a legacy of communist enslavement) and presumably don’t want to subsidize their better-off cousins in places like Spain and Italy. But that argument also implies that they should have resisted the Greek bailout about ten years ago, yet they didn’t. Sadly, Eastern European governments acquiesce to bad ideas because their politicians are bribed with “structural adjustment funds” from the European Union.

P.P.S. The luckiest Europeans are the British. They wisely opted for Brexit so they presumably won’t be on the hook for this costly new type of E.U.-wide redistribution (indeed, my main argument for Brexit, which now appears very prescient, was that the E.U. would morph into a transfer union).

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New York vs. Florida, Round #4

Politicians from New York want states to get a big bailout from Uncle Sam. I explained earlier this month that this would be a bad idea.

Simply stated, the Empire State is in big trouble because it has a bloated government, not because of the coronavirus.

Probably the strongest piece of evidence is that New York is ranked #50 for fiscal policy according to Freedom in the 50 States.

If you want to understand how New York’s politicians have created a fiscal disaster, let’s compare the Empire State to Florida, which is ranked #1.

I’ve already done that three times (Round #1, Round #2, and Round #3), so this will be Round #4.

The Wall Street Journal compared the two states in an editorial two days ago.

…let’s do the math to consider which state has managed its economy and finances better over the last decade. …Democrats in Albany are claiming to be victims of events that are out of their control. But they have increased spending by $43 billion since 2010—about $570,000 for each additional person. Florida’s budget has increased by $28 billion while its population has grown 2.7 million—a $10,400 increase per new resident. New York has a top state-and-local tax rate of 12.7%, while Florida has no income tax. Yet New York has a growing budget deficit, while Mr. Scott inherited a large deficit but built a surplus and paid down state debt. The difference is spending. …Blame New York’s cocktail of generous benefits, loose eligibility standards and waste. New York spends about twice as much per Medicaid beneficiary and six times more on nursing homes as Florida though its elderly population is 20% smaller. …The rate of private job growth in Florida has been about 60% higher than in New York from January 2010 to January 2020. Finance jobs expanded by 25% in Florida compared to 9.7% in New York. …The policy question is why taxpayers in Florida and other well-managed states should pay higher taxes to rescue an Albany political class that refuses to restrain its tax-and-spend governance. Public unions soak up an ever-larger share of tax dollars, but Albany refuses to change.

If you want further details on the difference between the two states, Chris Edwards takes a close look at the burden of government spending.

New York and Florida have similar populations of 20 million and 21 million, respectively. But governments in New York spent twice as much as governments in Florida, $348 billion compared to $177 billion. On some activities, spending in the two states is broadly similar… But in other budget areas, New York’s excess spending is striking. New York spent $69 billion on K-12 schools in 2017 compared to Florida’s $28 billion. Yet the states have about the same number of kids enrolled—2.7 million in New York and 2.8 million in Florida. New York spent $71 billion on public welfare compared to Florida’s $28 billion. Liberals say that governments provide needed resources to people truly in need. Conservatives say that generous handouts induce high demand whether people need it or not. Given that New York’s welfare costs are 2.5 times higher than Florida’s, the latter effect probably dominates. …New York governments employed 1,196,632 workers in 2017 compared to Florida’s 889,950 (measured in FTEs). …Most New York residents do not benefit from bloat in government payrolls, inefficient transit, excessive welfare, and deficit spending. To them, the high taxes are disproportionate to the government services received. That is why they are moving to better‐​managed states with lower taxes.

Here’s the accompanying chart.

And he also compares the level of bureaucracy in both states.

New York’s excess includes spending more on handouts such as welfare. Another cause of New York’s high spending is employment of more government workers and paying them more than in Florida. …New York governments employ 34 percent more workers than Florida governments. …The two states have similar K-12 school enrollments of 2.7 million in New York and 2.8 million in Florida. But New York employs 31 percent more teachers and administrators than Florida. Do the 111,000 extra staff in New York generate better school outcomes? Apparently not…study puts Florida near the top and New York in the middle on school quality. Does New York really need two times more highway workers than Florida and three times more welfare workers? …Government workers in New York make 42 percent more in wages than government workers in Florida, on average.

Here’s the accompanying chart.

The bottom line is that New York is a great place to be an over-paid bureaucrat in an over-staffed bureaucracy.

But if you’re a taxpayer, Florida is the easy winner – which may explain why so many productive people are leaving the Empire State and permanently migrating to the Sunshine State.

P.S. The same pattern exists all across the United States. Taxpayers are escaping the poorly managed states and fleeing to low-tax states. Especially ones with no income taxes.

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Coronavirus, Federal Spending, and Media Innumeracy

When I write enough columns with the same underlying point, I sometimes create a special page to highlight the theme, such as the “Bureaucrat Hall of Fame” and “Poverty Hucksters.”

I may have to do something similar for people who assert that America’s response to the coronavirus has been hampered because the federal government is too small.

For instance, Dana Milbank wrote in the Washington Post last month that “anti-government conservatism…caused the current debacle with a deliberate strategy to sabotage government.”

Ironically, the nations he cited for their successful approach – Singapore, South Korea, and Taiwan – all have a much smaller burden of government spending than the United States.

Which actually supports my argument that bigger governments are less effective and competent.

But evidence doesn’t seem to matter to some journalists.

One of Milbank’s colleagues, Dan Balz, has just authored a long article that regurgitates the assertion that there’s been “underinvestment” in the federal government.

The government’s halting response to the coronavirus pandemic represents the culmination of chronic structural weaknesses, years of underinvestment and political rhetoric that has undermined the public trust… The nation is reaping the effects of decades of denigration of government and also from a steady squeeze on the resources needed to shore up the domestic parts of the executive branch. This hollowing out has been going on for years as a gridlocked Congress preferred continuing resolutions and budgetary caps… The question is whether the weaknesses and vulnerabilities exposed by the current crisis will generate a newfound interest among the nation’s elected officials — and the public — in repairing the infrastructure of government. …“We don’t want to invest in the capacity of government to get the job done,” Kettl said. …said David E. Lewis, a political science professor at Vanderbilt University…“We’re seeing a government that is suffering now from a long period of neglect that began well before this administration. And that neglect has accelerated during this administration.”

What’s especially remarkable is that the article cites the government’s lack of testing capacity as evidence of “underinvestment.”

Over these years, there have been a series of major government breakdowns that helped shake confidence in government’s competence. …The pandemic has forced another critical look at government’s competence. …more tests might have helped contain the spread. It is the case now as businesses look to reopen but cannot assure safety for workers or their communities without the widespread availability of tests, which so far does not exist.

Yet the bureaucracies with responsibility for testing – the FDA and CDC – have received big budget increases.

Was that money well spent?

Hardly. Not only have they failed in their mission, their red tape and inefficiency have hindered the private sector’s ability to develop and deploy tests.

Notwithstanding all this evidence, Balz wants readers to believe that people don’t have faith in government because of hostile rhetoric from politicians.

Marc Hetherington, a professor at the University of North Carolina, said the public conversation about government began to shift with the election of Ronald Reagan in 1980. …“What changed with Reagan and the decades since is that the conversation moves away from what government ought to do to government is incompetent to do things,” he said. …Democratic politicians have engaged in some of the same kind of thing. “Every candidate has campaigned on a bureaucracy-bashing theme,” Nabatchi said. “That message has gotten through to affect people’s confidence in government.”

The alternative explanation, needless to say, is that people don’t have confidence in the public sector because government has a long track record of mistakes and incompetence.

But I guess that’s merely my opinion.

So let’s instead close today’s column with some hard data.

Here’s a chart I shared last month while debunking an article by George Packer for the Atlantic (he claimed we have “a federal government crippled by years of…steady defunding”).

It shows that federal spending has tripled since 1980. And that’s after adjusting for inflation!

Which led me to observe that, “The bottom line is that I can’t figure out whether to be more dismayed that journalists are innumerate or that major publications apparently don’t have fact checkers.”

That same sentiment obviously applies to Dan Balz and the Washington Post.

P.S. While Balz and Milbank were guilty of avoiding numbers, the Washington Post doesn’t have a great track record when its journalists try to use numbers. In other words, maybe the problem is bias rather than innumeracy.

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Coronavirus Humor

Continuing with an unfortunate tradition, here’s our eighth weekend collection of satire about the mix of public policy and coronavirus.

We’ll start with one of Remy’s Reason videos, which are always worth watching.

I wrote last year about superior education outcomes for home-schooled kids.

Apparently there are other benefits to being away from government schools.

Since we’re on the topic of education, America’s top satire site, Babylon Bee, reports that teachers in government school actually want an end to the lockdown.

Teachers at government schools have raised their concerns that the recent closure of their institutions will have a damaging effect on students. …”We must reopen as soon as possible — before they regain their ability to have independent thoughts,” said New York 4th-grade teacher Ms. Jenny Mudd. “…we have to do our part to prevent the spread of the virus, but we must also prevent the spread of unapproved ideas. There’s a balance there.” …Sure enough, studies have already shown a strong correlation between everyone being homeschooled and a concerning spike in independent thought. …a shocking increase in the ability to form thoughts and ideas not approved by the government. …said Portland kindergarten teacher Ms. Pinkerton. “Parents just don’t have the experience of stuffing kids’ heads full of a statist worldview seven hours a day like I do.”

Speaking of statist worldviews, I laughed out loud when I saw this mockery of CNN.

Another story from Babylon Bee reminds home-bound Americans that going outside makes them very bad people.

Many Americans are growing tired of the lockdown and want to once again leave their homes and go do things. As many historians note, this is similar to the attitude of genocidal maniac Adolf Hitler. …There are many photos of Hitler outside, providing ironclad proof that Hitler also liked to leave his house. It’s not certain, though, what the connection is between hateful bigotry and not wanting to be trapped in one’s own home. “We can’t know what’s motivating these people who want to get out of their houses,” said California Governor Gavin Newsom, “but is genocide next? History says yes.” In Hitler’s final days, though, he did dutifully shelter in place — living in a bunker — despite wanting to go outside, so historians note that people who actually do go outside are in fact “worse than Hitler.”

Next we have a Branco cartoon with an interesting take on the saves-lives-no-matter-the-cost argument.

Here’s some satire from our friends on the left.

Not as clever as this little collection, but still worth sharing.

The dark cloud of coronavirus does have a silver lining for fans of socialism.

As the Babylon Bee reports, fewer workers are being exploited.

The pandemic has been troublesome for many, but one group is celebrating a victory: socialists. “Capitalism is all about exploiting workers,” said Alexandria Ocasio-Cortez, a congressional representative from New York and the world’s smartest socialist. “But now there’s, like, nobody working, so they can’t exploit anyone. Take that, billionaires!” …As the capitalist engine of having people work grinds to a halt, billionaires should be hit even harder, some of them plummetting from being billionaires to being just multi-millionaires as millions and millions of Americans go unemployed. “Yay! We’re winning!” Ocasio-Cortez exclaimed. She hoped even more people would leave jobs — except for the people whose job it is to print money.

I’ve pointed out that there are inescapable real-world tradeoffs.

But here’s the one-sided algorithm that some politicians are using.

My tradition is to save the best for last.

I imagine Michigan’s governor, Gretchen Whitmer, based her approach on this very biting example of satire.

You can enjoy previous versions of coronavirus humor by clicking here, here, here, here, here, here, here, and here.

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Restoring Fiscal Sanity, Post-Coronavirus

The good news is that there will be a record reduction next year in the burden of government spending. Unfortunately, the bad news is that this reduction will only occur because of gigantic spending increases this year.

In this webinar, I explain how fiscal policy is being affected by coronavirus, and then explain why a spending cap is the way to restore fiscal sanity.

You can watch the full webinar, organized by Lebanon’s Modern University for Business and Science, by clicking here.

But if you don’t want to watch the entire event, or even my 11-minute presentation, all you really need to understand is that red ink is exploding this year. Not just in the United States, but in other nations as well.

The fiscal wreckage, as illustrated in this chart I shared for the audience, is greater than the world experienced during the financial crisis/great recession.

For what it’s worth, I wish the chart specified how much of the debt is caused by additional spending and how much is caused by declining tax revenues.

It’s also worth noting that these numbers will probably deteriorate even further over the next few months. Politicians are likely to approve more handouts and subsidies. And if there’s not a rapid economic recovery (I express doubt about that outcome in my remarks), tax revenue will continue to fall far short of baseline estimates.

The sad reality is that we don’t know the full degree of the coronavirus-caused fiscal wreckage. That being said, it’s safe to assume that – sooner or later – there will be a big debate in Washington over how to reverse the damage. And in other nations as well.

In my presentation, I explained why a Swiss-style spending cap is the right approach. In other words, simply impose a limit so that government grows slower than the private economy – i.e., fiscal policy’s Golden Rule.

I’d like to be able to specifically show how a spending cap would undo the current mess, but that’s not possible because we can only make wild guesses about the full extent of the fiscal fallout.

That being said, I’ll share two pieces of evidence to show the value of a spending cap.

First, here’s an estimate I prepared earlier this year to show how America’s fiscal situation would have been much stronger today if a spending cap had been imposed back in 2000.

Needless to say, it would have been nice if the U.S. had big surpluses when the coronavirus hit.

Our second piece of evidence is the experience of the U.S., France, and the U.K. in the decades before World War I.

All three nations had enormous debt burdens as a result of previous conflicts.

And all three countries dramatically reduced debt by using the same strategy of long-run spending restraint.

The bottom line is that spending restraint has worked in the past and it can work in the future.

Unfortunately, I doubt that either Donald Trump or Joe Biden is interested in that approach.

P.S. One thing we can say for certain is that responding with tax increases almost surely will make a bad situation even worse.

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The WTO Should Be Preserved, but Bilateral Free-Trade Pacts Are the Way Forward for Future Liberalization

Last year, I released this video to help explain why the World Trade Organization has been a good deal for the United States.

My argument was – and still is – very straightforward, and it’s based on two simple propositions.

1. Free trade is good because societies are more prosperous with free markets and open competition.
2. The WTO has helped nations move in that direction by reducing import taxes and other trade barriers.

This outcome is particularly beneficial for the United States since other countries tend to be more protectionist.

But not everyone agrees with this position.

President Trump is a notorious critic of the WTO, for instance, which isn’t surprising since he doesn’t understand trade.

There are also plenty of opponents on the left, which also isn’t surprising since they don’t like capitalism and competition.

What is somewhat surprising, however, is that some Republican lawmakers also have decided to oppose the WTO.

In a column last week for the New York Times, Senator Josh Hawley of Missouri actually argued that it’s time to get rid of the World Trade Organization. Here’s his argument against the Geneva-based body.

The global economic system as we know it is a relic; it requires reform, top to bottom. We should begin with one of its leading institutions, the World Trade Organization. We should abolish it. …Its mandate was to promote free trade, but the organization instead allowed some nations to maintain trade barriers and protectionist workarounds, like China, while preventing others from defending themselves, like the United States. …Meanwhile, the W.T.O. required American workers to compete against Chinese forced labor but did next to nothing to stop Chinese theft of American intellectual property and products. …too many jobs left America’s borders for elsewhere. As factories closed, workers suffered, from small towns to the urban core. …Enough is enough. The W.T.O. should be abolished, and along with it, the new model global economy. The quest to turn the world into a liberal order of democracies was always misguided.

And here’s what he wants as a replacement.

The only sure way to confront the single greatest threat to American security in the 21st century, Chinese imperialism, is to rebuild the U.S. economy and to build up the American worker. And that means reforming the global economic system. …The United States must seek new arrangements and new rules, in concert with other free nations, to restore America’s economic sovereignty and allow this country to practice again the capitalism that made it strong. …For nearly 50 years before the W.T.O.’s founding, the United States and its allies maintained a network of reciprocal trade that protected our national interests and the nation’s workers. We can do it again …It means striking trade deals that are truly mutual and truly beneficial for America and walking away when they are not. It means building a new network of trusted friends and partners to resist Chinese economic imperialism.

Since Hawley doesn’t seem to appreciate the benefits of trade, the simple approach would be to criticize him for wanting politicians and bureaucrats to have the power to interfere with voluntary exchange across borders.

Such criticism is warranted, of course, but I want to take this opportunity to make four points about how there may be hope for the future.

1. Hawley is actually endorsing the status quo. After World War II, the US took the lead in creating the General Agreement on Tariff and Trade (GATT), a multilateral system of agreements which produced successive rounds of trade liberalization. The US then took the lead in creating the WTO so there would be a system (dispute resolution) to encourage nations to comply with their GATT commitments. But the dispute resolution process is now toothless because there are no longer enough judges for the system to operate (Trump has blocked the appointment of new judges). For all intents and purposes, the world is now operating under the pre-WTO rules – which seems to be what Hawley is calling for in his column.

2. The WTO no longer is a vehicle for global trade liberalization. The WTO is a consensus-based organization, which means unanimity is required for additional GATT-style reductions in global trade barriers. But since membership has expanded to include a number of countries with a protectionist mindset (most notably India, but China and Brazil also are a problem), it’s extremely unlikely that we’ll ever see another multilateral agreement for additional tariff reductions. This doesn’t change the fact that GATT was a big past success, and it doesn’t change the fact that it would be nice if the WTO’s dispute-resolution mechanism was back in operation. It simply means that we won’t be able to build on that progress.

3. Hawley is also endorsing, practically speaking, the best path forward. Another round of multilateral trade liberalization is off the table, but that doesn’t prevent nations from moving forward with bilateral free-trade agreements (FTAs are consistent with WTO rules). Interestingly, Hawley seems to support that approach. The U.S. already has nearly 20 of these pacts and is engaged in major negotiations with the United Kingdom for a new FTA that hopefully will be a template for future FTAs with other market-friendly nations.

4. Beware of the regulatory-harmonization wolf in FTA clothes. While bilateral trade pacts are desirable, it’s important to pay attention to the fine print. The European Union wants to hijack FTAs and make them vehicles for regulatory harmonization (meaning other nations have to agree to the EU’s onerous approach to red tape). If the goal is to have more trade, more competition, and more dynamism, the United States and other pro-market countries should make “mutual recognition” the foundation of future free-trade pacts.

The bottom line is that Hawley is wrong about the WTO, but he may actually be right about the best way of achieving future trade liberalization. Assuming, of course, that he actually means what he wrote about striking new deals.

In an ideal world, needless to say, these new bilateral FTAs (or even multi-nation FTAs) should be in addition to the WTO.

P.S. An under-appreciated aspect of the WTO is that it gives nations like the US a more-effective way of pressuring China to eliminate subsidies and other trade-distorting practices.

P.P.S. I’m normally very skeptical of international organizations. But the WTO encourages globalization rather than global governance, a key distinction.

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Coronavirus and the Failure of Big Government: A Closer Look at the CDC

I’ve written four columns (here, here, here, and here) on the general failure of government health bureaucracies to effectively respond to the coronavirus.

The pattern was so pronounced that it even led me to unveil a Seventh Theorem of Government.

I’m not surprised at this outcome, of course, given the poor overall track record of the public sector.

But I was negatively surprised to learn how red tape from these bureaucracies prevented the private sector from quickly reacting to the crisis.

Today, let’s take a closer look at one of those bureaucracies, the Atlanta-based Centers for Disease Control (CDC).

Eric Boehm, writing for Reason, has a nice summary of the CDC’s failures.

Over the past three decades, the Centers for Disease Control (CDC) has seen its taxpayer-funded budget doubled. Then doubled again. Then doubled again. And then nearly doubled once more. But spending nearly 14 times as much as we did in 1987 on the agency whose mission statement says it “saves lives and protects people from health threats” did not, apparently, help the CDC combat the emergence of the biggest disease threat America has faced in a century. In fact, …inflating the CDC’s budget may have weakened the agency’s ability to handle its core responsibility by giving rise to mission creep and bureaucratic malaise. …the CDC’s budget has ballooned from $590 million in 1987 to more than $8 billion last year. If the agency had grown with inflation since 1987, it would have a budget of about $1.3 billion today. …Has all that extra funding made America safer? …hindsight now suggests that the CDC should have spent more time and money researching emergent influenza-like infectious diseases, a project that received just $185 million in funding… Instead, the CDC was doing things like spending $1.75 million on the creation of a “Hollywood liaison”.

A big problem with bureaucracies is that they engage in mission creep. They concoct new roles and responsibilities in hopes of justifying bigger budgets and more staff.

The CDC certainly is no exception. In its early years, the bureaucracy had a targeted mission, focusing on diseases posing a major threat to public health, such as malaria, plague, and tuberculosis.

Over the years, though, it has lost focus and become involved with social issues.

Daniel Greenfield opines on the CDC’s foolish diversions on issues such as obesity.

The Centers for Disease Control has…one job which it messes up every time. The last time the CDC had a serious workout was six years ago during the Ebola crisis. Back then CDC guidelines allowed medical personnel infected with Ebola to avoid a quarantine and interact with Americans… There were no protocols in place for treating the potentially infected resulting in the further spread of the disease inside the United States. …Meanwhile, CDC personnel had managed to mishandle Ebola virus samples, accidentally sending samples of the live virus to CDC labs. …During the Ebola crisis, the CDC had been spending…$2.6 million on gun violence studies. But the CDC has a history of wasting money on everything from a $106 million visitor’s center with Japanese gardens, a $200K gym, a transgender beauty pageant, not to mention promoting bike paths. …the CDC’s general incompetence…, like that of other government agencies, just ticks along wasting money. In 1999, the CDC announced a plan to end syphilis in 5 years…an unserious social welfare proposal that wanted to battle racism and was such a success that by 2018, syphilis rates had hit a new record high. … The CDC’s fight against the “obesity epidemic” is even sillier. That includes…giving LSU over a million bucks to work with farmers’ markets. Obesity obviously can kill people, but it’s not something that the CDC can or should be trying to fix. …Unfortunately, the CDC, like every federal agency, has drifted from its core mission into social welfare. …No one thinks about the CDC until we need it and discover it doesn’t work. And then the same story repeats itself a few years later while the CDC goes back to battling obesity and racism. …We don’t need a CDC that changes people’s minds about eating chocolate or engaging in unprotected sex. There are already multiple redundant parts of the government that are trying and failing there.

In a column for Forbes, Larry Bell reviewed the history of the CDC’s politicized campaigning against gun ownership.

In 1996, the Congress axed $2.6 million allocated for gun research from the CDC out of its $2.2 billion budget, charging that its studies were being driven by anti-gun prejudice. …There was a very good reason for the gun violence research funding ban. Virtually all of the scores of CDC-funded firearms studies conducted since 1985 had reached conclusions favoring stricter gun control.  This should have come as no surprise, given that ever since 1979, the official goal of the CDC’s parent agency, the U.S. Public Health Service, had been “…to reduce the number of handguns in private ownership”… Sociologist David Bordura and epidemiologist David Cowan characterized the public health literature on guns at that time as “advocacy based upon political beliefs rather than scientific fact”. …Dr. Katherine Christoffel, head of the “Handgun Epidemic Lowering Plan”, a CDC-funded organization…said: “guns are a virus that must be eradicated…”

Michelle Minton of the Competitive Enterprise Institute wrote for Inside Sources about the CDC’s senseless efforts to restrict vaping.

Our health agencies had the information and the resources, so they should have been planning for this, but they weren’t. The problem isn’t because they’re underfunded, it’s that they are bloated and mismanaged. …a close look at how CDC spends its budget reveals it has strayed from this mission of protecting Americans from communicable diseases, turning more toward influencing people’s lifestyle choices. …Indeed, prior to the COVID-19 pandemic, CDC and other agencies were busy sounding the alarm about the nonexistent “epidemic” of youth vaping. Collectively, they spent billions on anti-vaping advertisements, biased research and lobbying, wasted countless hours of congressional hearing time, and squandering public trust. Had they remained focused on infectious disease, might have been prepared to fight real epidemics, like the COVID-19. …there’s nothing new about exploiting a crisis to expand budgets and score political points. Similar claims of inadequate funding were made during the 2014 outbreak of Ebola, for which various health agencies got an additional $5.4 billion. And what do we have to show for it now?

Let’s wrap up by noting that squandering money should be viewed as the CDC’s indirect failure.

The direct failure was how the bureaucracy bungled its one legitimate function of fighting infectious disease.

Jacob Sullum, writing for the New York Post, explains what happened.

The grand failure of federal health bureaucrats foreclosed the possibility of a more proactive and targeted approach… At first, the Centers for Disease Control and Prevention ­monopolized COVID-19 tests. When the CDC began shipping test kits to state laboratories in early February, they turned out to be defective. The CDC and the Food and Drug Administration initially blocked efforts by universities and businesses to develop and conduct tests… The CDC still insists that “not everyone needs to be tested for COVID-19.” But without testing everyone — or at least representative samples — for both the virus itself and the antibodies to it, we can do little better than guess its prevalence, its lethality and the extent of immunity among the general public. …Our ignorance about COVID-19 will have profound consequences, potentially leading to an overreaction that wrecks the economy while saving relatively few lives… You can thank the same agencies on which we are relying to guide us through this crisis.

Veronique de Rugy of the Mercatus Center summarizes the issue, noting that the CDC is a monumental failure.

The lack of preparedness at every level of government (federal, state, and local) has nothing to do with a lack of funding or inadequate staffing. Instead, it has everything to do with governments’ bloat, mismanagement, cronyism, and poor focus. That’s particularly true of the Centers for Disease Control (CDC). …it is no secret how much the CDC is to blame for the country’s lack of preparedness to take on the coronavirus (followed very closely in ineptitude by the Food and Drug Administration). …By now, every major newspaper has reported on the incredible failure of the CDC during this crisis. …Messing up is not a new thing for the CDC. However, unlike what its employees and political allies like to claim, the agency’s poor record and its lack of preparedness has nothing to do with a lack of funding. …For instance, funding for its National Center for Emerging and Zoonotic Infectious Diseases—which aims to prevent diseases like Ebola—received only $514 million in 2018, a tiny sliver (less than 5%) of total CDC funding. And less than half of that $514 million went to emerging diseases like COVID-19. The rest of that budget is spent on stuff like chronic fatigue. Meanwhile, funding…to prevent smoking, alcohol consumption, and poor diets…received nearly $1 billion over that same time, almost double the funding for infectious-disease prevention.

Here’s a look (courtesy of Chris Edwards) at what’s happened to the CDC budget over time.

As you can see, the bureaucrats got more and more funding. Yet when America needed competence, they didn’t deliver.

P.S. The bureaucrats are not the only ones to blame. A big reason for the CDC’s lack of focus is that headline-seeking and vote-buying politicians created new roles and responsibilities. The CDC was happy to get more power, staff, and money, of course (just as it will be happy to get more power, staff, and money as a reward for its failure to deal with the coronavirus).

P.P.S. It’s almost as if there’s a lesson to be learned.

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What Lessons Can the Country Learn from California’s Red-Tape Nightmare?

From the perspective of lifestyle (factors such as climate, scenery, and recreational opportunities), there’s probably no better state in which to live than California.

But if you want to be an entrepreneur, start a business, and create jobs, the Golden State is one of the worst places in America.

I’ve already written about the state’s punitive tax system. The 13.3 percent tax rate is far higher than any other state. That’s an acceptable burden to rich folks in Silicon Valley since they amass their wealth in the form of unrealized (and untaxable) capital gains.

But it’s a crippling burden for regular business owners.

California also has a very unfriendly regulatory regime, ranking a lowly 48 out of 50 according a comprehensive study.

What does that mean, in practical terms?

Let’s look at a few examples to understand the state’s hostile business environment.

We’ll start with the high-profile case of Elon Musk, who is openly rebelling against government red tape by restarting production in his Tesla factory.

Tesla CEO Elon Musk confirmed Monday he’s flouting county rules by reopening a Northern California plant amid concerns over safety during the coronavirus crisis, tweeting: “I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.” …Musk tweeted, “Tesla is restarting production today against Alameda County rules. …all other auto companies in US are approved to resume. Only Tesla has been singled out. This is super messed up!” …The county later responded in a statement: “We have notified Tesla that they can only maintain Minimum Basic Operations until we have an approved plan…and we hope that Tesla will likewise comply without further enforcement measures.” …a frustrated Musk wrote that he was filing a lawsuit to halt the local restrictions and predicted relocating Tesla’s Palo Alto, Calif., headquarters to Texas or Nevada.

To be sure, this is a very unusual example, one where the battle is complicated by the very difficult issue of how to deal with a serious virus.

So let’s zoom out and consider other examples that existed well before the pandemic.

Andy Quinlan of the Center for Freedom and Prosperity explains for Townhall that California has a long history of policies that discourage entrepreneurship and job creation.

To climb out of the massive pit the economy has been thrown into, it will take not just the release of workers from their homes, but also entrepreneurs and innovators capable of adapting to a new economic environment. Unfortunately, innovators are often treated very poorly by all levels of government. And the worst offender is arguably California… Consider last year’s passage of AB 5. It upended California’s gig economy by requiring that contractors be reclassified as employees, even against their will, when certain thresholds were met. The arbitrary caps were set so low that self-employed freelancers have been devastated by a loss of work as many companies suddenly stopped working with California workers. …The state’s regulators are also unfairly attacking an innovative hotel business. OYO Hotels…focuses on the small hotels ignored by the large chains, offering them proprietary technology and marketing assistance to dramatically improve their ability to reach and attract customers, along with capital to ensure their rooms are up to the company’s standards… But California’s regulators have other ideas. They…claim that OYO’s activities make it a franchise, and therefore it was required to seek approval before ever operating in the state.

John Moorlach, a senator in California’s legislature, wrote a column for the Orange County Register about the Golden State’s anti-growth mentality.

If you were a corporate manager looking to build or lease a plant and hire workers, where would you look first? California, with a $13 minimum wage rising to $15 in 2022? …Then there’s the state income tax. During times of plenty, maybe it’s worthwhile to put up with California’s 13.3% top state personal income tax rate… But during tough times? …If you needed that 13.3 percent to re-invest in your company, instead of going to a poorly run state government, where would you go? …Companies that play by the rules, paying all the taxes and observing every labor regulation, will be at a disadvantage… The cost structure will just be too high. So many of these honest firms will go out of business, join the underground economy or move to Texas. …Every state needs a healthy economy in order to survive. …over-burdening its entrepreneurial sector…becomes an abuse.

Now you know why many people are “voting with their feet” and leaving the state.

Let’s close with my home-made visual that illustrates what red tape means for entrepreneurs.

Yes, there are some entrepreneurs who can make it all the way, but many others don’t have the time, money, energy, or expertise the navigate the entire course.

And others can get through eventually, but only at the cost of shrinking their businesses and hiring fewer workers.

Here’s the bottom line: This isn’t a binary no-regulation-vs-all-regulation choice. The states with the best scores for regulation (the top 5 are Kansas, Nebraska, Idaho, Iowa, and Indiana) have red tape, but it’s a question of degree.

Sensible jurisdictions give entrepreneurs more “breathing room” to start businesses and create jobs. Which is why the scholarly evidence shows that less regulation is good for prosperity.

P.S. The good news is that entrepreneurs can escape California’s red tape by moving across the border. The bad news is that this strategy doesn’t solve the problem of federal rules and mandates.

P.P.S. Since I’m always asked about this comparison, you can review data comparing Texas and California by clicking here, here, here, and here.

P.P.P.S. Here’s my favorite California vs Texas joke.

P.P.P.P.S. Libertarian readers will appreciate the argument for private regulation.

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Taxes and Growth

I’ve explained the economics of taxation, which is based on the common-sense notion that you get less productive economic activity when taxes drive a bigger wedge between pre-tax income and post-tax consumption.

Simply stated, the more you tax of something, the less you get of it, and this applies to taxes on labor and taxes on capital.

Today, let’s examine some empirical evidence. I’ve done that before (see here, here, here, here, here, here, here, here, and here), but it’s always good to expand the collection.

Three Italian professors, in a new working paper for the Centre for Economic and International Studies, investigated the relationship between taxes and growth.

We’ll start with a description of the methodology.

In this paper, we revisit a traditional issue in the empirics of growth and economic policy: whether taxation has long-lasting effects on real GDP dynamics. …we focus on the impact that taxes may have on the rates of physical and human capital accumulation. …our main departure from the existing literature is the use of a semi-parametric technique, which allows for countries’ unobserved heterogeneity in the input effects on per capita GDP. …we test our model, using a sample of 21 OECD countries over the period 1965-2010.

Here are the key findings.

Our main finding is that taxation negatively affect per capita GDP growth rates, both directly and indirectly, via physical and human capital saving rates. …Our cross-country analysis makes a clear point on this, at least for our sample of OECD countries: on average, tax cuts produce a beneficial impact on GDP dynamics but of modest size. In our baseline specification, a cut by 10% in personal income tax rate generates an change in the real per capita GDP growth rate of +1% while a cut by 10% in corporate income tax rate increases the rate of growth of real per capita GDP by 0.9%. …The main message of our empirical exercise is that, across various samples and specifications, taxes are harmful for growth.

These are very strong results.

Though I find it very interesting that the authors say they are “of modest size.”

I guess that depends on expectations and perspective. I’ll simply repeat the point I made two years ago about the importance of even small increases in the long-run growth rate.

The bottom line is that future Americans would enjoy significantly greater prosperity with better tax policy.

That’s a desirable outcome at any point in time, and it’s even more important today as we consider how to recover from the economic wreckage caused by the coronavirus.

Interestingly, the study ends with some interesting estimates on the impact of lower tax rates on labor and capital.

Table 10 reports the results of a “what if”exercise, in which we compute the change in GDP growth rate generated by a ceteris paribus cut by 10 % in τw and τk.

And here is the aforementioned Table 10 (“τw” is the tax rate on labor and “τk” is the tax rate on capital).

There are two big takeaways from this research.

First, it’s further evidence that Trump’s tax reform, which lowered the corporate tax rate from 35 percent to 21 percent, was a very good step for the American economy.

Second, it’s further evidence that it’s a big mistake for Biden and other folks on the left to push for higher tax rates, including big increases in tax rates on personal income.

P.S. Just in case those last two sentences sound overly favorable to Trump, I’ll remind people that reckless spending increases – sooner or later – will lead to punitive tax increases. In other words, if Biden wins and there are big tax hikes, Trump will deserve some of the blame (just as Bush’s irresponsible policies set the stage for some of Obama’s irresponsible policies).

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The Bizarre Attack on Vaping

Since I’ve never smoked or vaped, I have no personal interest in the the regulatory battle over vaping and e-cigarettes.

That being said, I started writing about this issue back in 2016 because it involves several important principles.

1. The libertarian argument that people should be free to do what they want with their own bodies
2. Whether the “administrative state” should be able to unilaterally grab more regulatory power.
3. The degree to which “harm reduction” or “zero tolerance” should guide government policies.

From a public health perspective, the third point is most important.

It’s a fight between those who want the Food and Drug Administration to use its self-anointed regulatory authority to ban e-cigarettes (because vaping is worse than not vaping) and those who explain that e-cigarettes are helpful (because vaping is far less risky than smoking).

This fight has a September 9 deadline. The Food and Drug Administration decided several years ago that its power to regulate tobacco somehow meant it also has the power to regulate vaping. The bureaucrats then created a system requiring future approval for marketing and sale of e-cigarettes and related products (originally to be unveiled in 2022 but a federal judge has ordered an earlier deadline).

The FDA has basically given itself the power to prohibit these products, and if you’re interested in that aspect of the battle, here are two short articles (pro and con) about that effort.

I want to focus today on whether it makes sense to impose prohibition, and it’s a simple matter of cost-benefit analysis. Some people want to enjoy nicotine, so is it better for them to vape or to smoke?

Writing for the American Enterprise Institute, Roger Bate points out that smoking is far worse.

…there is an increasing amount of evidence to support it over smoking. As Michael Siegel — a public health Professor at Boston University — says “there is overwhelming evidence that smoking is more hazardous than vaping. One of the most compelling lines of evidence is a series of studies showing that when smokers switch to e-cigarettes, they experience immediate and dramatic improvement in both their respiratory and cardiovascular health, measured both subjectively and objectively.” Cancer rates are at an all-time low partially due to the introduction of vaping and subsequent reduction in smoking.

And if people can’t vape, that leads to more smoking.

Six scholars, in a new study for the National Bureau of Economic Research, found that higher taxes on vaping led to more cigarette consumption.

We explore the effect of e-cigarette taxes enacted in eight states and two large counties on e-cigarette prices, e-cigarette sales, and sales of other tobacco products. …We then calculate an e-cigarette own-price elasticity of -1.5 and a positive cross-price elasticity of demand between e-cigarettes and traditional cigarettes of 0.9, suggesting that e-cigarettes and traditional cigarettes are economic substitutes. We simulate that for every one standard e-cigarette pod (a device that contains liquid nicotine) of 0.7 ml no longer purchased as a result of an e-cigarette tax, the same tax increases traditional cigarettes purchased by 6.4 extra packs.

If you don’t want to read an academic study, a press release from Georgia State University (home to one of the scholars) summarizes the key findings.

Increasing taxes on e-cigarettes in an attempt to cut vaping may cause people to purchase more traditional cigarettes according to a new study funded by the National Institutes of Health. For every 10 percent increase in e-cigarette prices, e-cigarette sales drop 26 percent while traditional cigarette sales jump by 11 percent. …“Vaping-related illnesses are a public health concern. However, cigarettes continue to kill nearly 480,000 Americans each year, and several research reviews support the conclusion that e-cigarettes contain fewer toxicants and are safer for non-pregnant adults,” said co-author Erik Nesson of Ball State University. …Michael F. Pesko from Georgia State University. “We estimate that for every 1 e-cigarette pod no longer purchased as a result of an e-cigarette tax, 6.2 extra packs of cigarettes are purchased instead,” he said. “The public health impact of e-cigarette taxes in this case is likely negative.”

Needless to say, if higher taxes on vaping lead to more smoking, one can only imagine how much additional cigarettes will be consumed if vaping is outlawed.

And that means more cancer, more heart disease, and other illnesses.

The folks who support anti-vaping policies respond by arguing that vaping enables nicotine consumption by some young people and may even be a gateway to smoking.

That’s probably true, but it’s also true that some of those young people would opt for smoking if they didn’t have the option to vape.

From a utilitarian perspective, the bottom line is that vaping saves lives.

The anti-vaping crowd might even admit that’s true, but they presumably would then argue in favor of banning cigarettes.

But why stop there? Obesity also is a major threat to health, so why not ban cakes, pies, pasta, and french fries? And big gulps (oh, wait, that’s already happening)?

And mandate broccoli consumption as well, along with a government-required five-mile jog on days that end in “y”.

At the risk of understatement, the right solution is to let adults make their own decisions. The FDA should quit its harassment campaign against vaping.

P.S. If FDA bureaucrats actually want to save lives, they should focus on their onerous rules and silly regulations that have hampered the private economy’s ability to respond to the coronavirus.

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Another Weekly Edition of Coronavirus Humor

As a policy wonk, I wish people would get excited about my columns about topics such as “tax depreciation” and “trade data” and my missives about issues such as “budget concepts” and “cost-benefit analysis.”

Instead, I notice that my humor-oriented columns generate a lot more traffic, which is somewhat humbling since I’m not contributing anything. All I’m doing is sharing items that have appeared in my inbox or that I’ve seen on social media.

With that grudging confession out of the way, time for another edition of politically-themed coronavirus satire.

And we’ll start with a repeat appearance by Bill Clinton, though I don’t think he realizes that the debate is about a different type of Swedish model.

For what it’s worth, this meme first showed up on this site back in 2012.

Next, a satire site from Ireland reminds us about the real heroes of the coronavirus.

Dublin clamper Joseph Culleton will not hear any talk of him being labeled a ‘hero’. …“Honestly, we’re just doing our bit. Actually, I’m kind of embarrassed by all the praise we’re getting, it’s the nurses and doctors who are the real heroes,” confirmed Culleton as he clamped a nurse’s car. …the eagle eyed clamper…admitted to having a tear in his eye when reading news reports that children in their thousands, inspired by the selfless work by front line workers, want to become clampers when they’re older.

Sounds like he belongs in the Bureaucrat Hall of Fame!

Let’s now travel to Sesame Street to see how the goal posts have been moved.

A very helpful message from Count von Count, but it doesn’t change my mind about eliminating his taxpayer subsidies.

Next, we have a contribution from Babylon Bee, America’s best satire site.

When the lockdowns started and stay-at-home orders were issued, the Bill of Rights was taken out of the National Archives and put somewhere for safekeeping since it wasn’t really needed at the time and no one wanted it to get damaged. Now that states are starting to open things up again, no one can seem to find it. “It’s probably under a couch or something,” said President Trump. “We’ll find it eventually.” …Now that it has been lost, many are unsure what to do, though some think we can make do without it. “I think most of us remember what was in it,” said Senator Bernie Sanders. “There was stuff about health care and not letting anyone have way more money than you.”

By the way, the quote from Crazy Bernie is only partly satirical. Some folks on the left genuinely want to create a “right” to other people’s money.

This image is real life, so truth is stranger than fiction.

This next image is satire, of course, but it makes a very real point about how safety concerns can be taken too far.

Here’s another story from the Babylon Bee, though I’ve pared down the number of steps for reasons of brevity. I think it’s satire, but it could be reality in states such as Michigan and New York.

One state governor is enjoying universal acclaim after unveiling his own innovative plan for getting his state reopened. The new plan is called ‘Our Vision for Health, Safety, Virtue, and Eternal Peace’ and is a 37-step, 10-year plan for slowly opening up sections of the state economy. It reads as follows:

• Form an exploratory committee to consult various experts on reopening things
• Create a panel of experts to explore the recommendations recommended by the exploratory committee
• Build a brand new website to post exploratory committee recommendations for public comment
• Take away all the guns
• Announce a 12-phase reopening of the economy, starting with the businesses with the best lobbyists
• Form a new committee to review the effectiveness of Phase 1 before moving on to Phase 2
• Order drones from China and post them in front of every hair salon
• Draft legislation allowing people to eat squirrels and possums
• Strengthen the security of governors mansion with sniper towers and tiger pits
• (redacted)
• (Super-secret surprise to be determined later)
• Open the rest of the economy

Other states have announced they will wait 10-15 years to judge the effectiveness of this 37 part plan before releasing their own plans. The only exception is Texas, whose governor simply said, “We’re open, y’all!”

Yes, Texas is different than other states. And other continents as well.

This tweet won’t be funny to readers who like Trump.

We'll reopen the economy and let you try to earn money again when:

w̶e̶ ̶f̶l̶a̶t̶t̶e̶n̶ ̶t̶h̶e̶ ̶c̶u̶r̶v̶e̶
w̷e̷ ̷i̷n̷c̷r̷e̷a̷s̷e̷ ̷t̷e̷s̷t̷i̷n̷g̷
w̶e̶ ̶f̶i̶n̶d̶ ̶a̶ ̶v̶a̶c̶c̶i̶n̶e̶
n̴o̴ ̴o̴n̴e̴ ̴i̴s̴ ̴s̴i̴c̴k̴
the election is over and you welcome our new green socialist utopia

— Razor (@hale_razor) April 22, 2020

Following tradition, I’ve saved the best for last.

You can enjoy previous versions of coronavirus humor by clicking here, here, here, here, here, and here, and here.

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Coronavirus Is Worsening America’s Grim Fiscal Outlook

I’ve warned that the budgetary impact of the coronavirus may trigger another fiscal crisis in Europe.

Especially Italy.

But what about the United States? Will we reach a point, as Margaret Thatcher famously warned, of running out of other people’s money?

We probably still have a couple of decades before that happens, as I speculated at the end of a recent interview, but that doesn’t mean we should continue down our current path.

The Wall Street Journal opined on this topic yesterday, citing newly released estimates from the Congressional Budget Office.

Friday’s Congressional Budget Office report on the federal fisc for April…usually a surplus month as tax payments roll in, but the Treasury postponed tax day this year until July 15. We are grateful for such small government favors. Spending more than doubled in April from the year before and revenue fell by 55%. …we are all apparently supposed to be converts to Modern Monetary Theory. This is the view that governments can spend whatever they like because the Federal Reserve can monetize it without economic harm. We may get to test this proposition. …the damage from so much spending will come in two ways. First, in resources misallocated to government rather than into private hands to invest. Second, in the tax increases that the political class will eventually impose, perhaps starting as early as 2021.

As is so often the case, the WSJ is correct in its analysis.

The fiscal crisis won’t be too much red ink. That’s merely the symptom of the real disease, which is that government is getting far too big.

As the editorial warns, this undermines prosperity because resources get diverted from the economy’s productive sector.

And as that spending burden increases, it means more and more pressure for tax increases, which further penalize growth. I’ve already noted that politicians will try to exploit the crisis by imposing a wealth tax, but I think the real prize – in the mind of statists – is a money-gobbling value-added tax.

I’ll close by sharing a chart from Brian Riedl of the Manhattan Institute, which estimates the per-capita burden of inflation-adjusted federal spending in the United States.

The red portion of the chart is coronavirus-related spending, plus future interest payments on the additional borrowing for all that spending, and the blue portion is spending in prior years plus estimates of future spending (already on an upward trajectory because of poorly designed entitlement programs).

That chart does not paint a pretty picture, but Brian’s numbers may be too optimistic. He assumes that the coronavirus-related emergency spending is just temporary and that additional interest on a bigger debt is the only long-run impact.

But if politicians make some of that spending permanent (which will be in their self-interest), then we’ll be traveling even faster in the wrong direction.

All the more reason to impose a spending cap, which is the only major fiscal reform with a track record of success.

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A Real-World Depiction of Life under Socialism

When making the case against socialism, I’ve pointed out how that coercive ideology is an evil and immoral failure.

But maybe the best argument is contained in this very short video that was shared by a group of Tory activists in the United Kingdom.

Ms. Badenoch is now a member of the United Kingdom’s Parliament, and she was describing what it was like to grow up in Nigeria, a country where capitalism was not allowed to flourish.

Given the upside-down incentive system created by socialism, it’s no surprise that she endured hardship.

And while her story is just an anecdote, there is overwhelming evidence that nations with more economic liberty generate much better outcomes for ordinary people.

If you’re interested in learning more Ms. Badenoch, the U.K.-based Daily Mail profiled her back in 2017.

Kemi Badenoch is black; although British-born, she was raised in Nigeria by African parents, returned to England when she was 16 and rose from impoverished first-generation immigrant to parliamentarian in just 21 years. …Kemi, 37, married with two young children, won her safe seat in rural Essex with a 24,966-seat majority after Sir Alan Haselhurst, 80, stood down after 40 years. …What’s more, she was chosen ahead of Theresa May’s special adviser Stephen Parkinson, a Cambridge-educated white male. Kemi’s maiden Commons speech…marked her as a rising star. She spoke of her African childhood, saying: …‘Unlike many colleagues born since 1980, I was unlucky enough to live under socialist policies. It is not something I would wish on anyone, and it is just one of the reasons why I am a Conservative.’ …Kemi has a refreshing view of politics. …She supports Brexit — ‘the greatest ever vote of confidence in the project of the United Kingdom’ — and her heroes are Winston Churchill, Margaret Thatcher…she made a last-minute decision in favour of Leave. ‘And since, I’ve felt more and more confident that it was the right one,’ she says. ‘Many people who voted Brexit warmed to me because they felt I wasn’t a typical Leave voter. I’ve no time for those who say, “Brexit is all about racism.” That’s offensive. ‘It’s about sovereignty, bureaucracy and how we make our laws. …Kemi is fired up by the patriotism of the emigre who chose to live in Britain. ‘I’m Conservative because of the experiences I’ve had,’ she says. ‘I know what it’s like to live in a Third World country run by a regime with Socialist principles. It shaped my outlook and helped me appreciate how great Britain is.’

She was on the correct side on Brexit and Thatcher was one of her heroes. And she got the seat after beating out an ally of Theresa May, who was on the wrong side of Brexit.

That’s a very nice combination, but I want to zoom out and make a big-picture observation about how Ms. Badenoch’s move to the United Kingdom is part of a global pattern.

Simply stated, people vote with their feet against socialism.

People didn’t try to escape from West Germany to East Germany.

There are no caravans marching toward Venezuela (notwithstanding this satire).

Refugees aren’t in ramshackle boats trying to go from Florida to Cuba.

By the way, people also vote with their feet against big government inside the United States.

Needless to say, there’s a lesson to be learned from these migratory patterns.

P.S. If you like first-hand accounts of what it’s like to live under socialism, I recommend these videos from Gloria Alvarez, Thomas Peterffy, and two Venezuelans.

P.P.S. Ms. Badenoch’s video is only 37 seconds, but you can also learn about socialism in videos that last 10 seconds or less.

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Recognizing the Deadly Impact of Economic Lockdowns

Last October, before coronavirus became the world’s dominant issue, I shared this clever Remy video to help make the point that policies designed to save lives can go too far. Indeed, if they do enough harm to the economy, they can actually cause additional death.

I’ve written about this tradeoff in the context of the coronavirus, pointing out that policymakers should look at total deaths, not just deaths from the virus.

In a column for the Philadelphia Inquirer, Professors Antony Davies and James Harrigan elaborate on these tradeoffs.

In times of crisis, people want someone to do something, and don’t want to hear about tradeoffs. This is the breeding ground for grand policies driven by the mantra, “if it saves just one life.” …Rational people understand this isn’t how the world works. …Unfortunately, even mentioning tradeoffs in a time of crisis brings the accusation that only heartless beasts would balance human lives against dollars. …Five-thousand Americans die each year from choking on solid food. We could save every one of those lives by mandating that all meals be pureed. Pureed food isn’t appetizing, but if it saves just one life, it must be worth doing. …Legislating…these things would be ridiculous, and most sane people know as much. How do we know? Because each of us makes choices like these every day that increase the chances of our dying. …The uncomfortable truth is that no policy can save lives; it can only trade lives. Good policies result in a net positive tradeoff. But we have no idea whether the tradeoff is a net positive until we take a sober look at the cost of saving lives. …It’s time we took a sober look at what this shutdown is costing us.

Opining for the Wall Street Journal, Joseph Sternberg warns that all options are bad, but herd immunity may be the least-worst approach.

The experts might have been right the first time. …The stated goal was not to vanquish the virus but merely to try to control its spread so as not to overwhelm health-care systems. …Those opinions now are widely derided, often in insulting terms. Yet subsequent events suggest they’re mainly correct. …The trouble started in mid-March when “herd immunity,” previously the tacit or acknowledged endgame for most of the world, became a toxic phrase. Critics pointed out that allowing the virus to spread in a controlled manner would cost lives. …But if those experts have a more plausible plan than taking a controlled path to herd immunity, the world is waiting to hear it. …A vaccine is a year or more in the future, if one ever emerges. An effective mass test-and-trace regime would require a level of competence and focus that typically eludes modern governments.

The tradeoffs are especially important in poor countries.

A new report in South Africa, largely prepared by actuaries, finds that the health costs of the lockdown could be 29 times greater than the health costs of the virus. Here are some details in a story published by the Financial Mail.

The lockdown will lead to 29 times more lives lost than the harm it seeks to prevent from Covid-19 in SA, according to…a new model developed by local actuaries. …They have sent a letter…to President Cyril Ramaphosa…they call for an end to the lockdown, a focus on isolating the elderly and allowing children to go back to school, while ensuring the economy restarts so that lives can be saved. …The actuaries used a model comparing “years of lives lost” from Covid-19, to “years of lives lost” from the lockdown. …their model translated into a minimum of 26,800 “years of lives lost” due to Covid-19, and a maximum of 473,500 years. …The actuaries then used the figures predicted by the National Treasury to model the impact on poverty. … their model showed that the number of years lost owing to the economic contraction caused by lockdown lies between 14-million and 24-million.

I have no idea, of course, whether these numbers are correct. Especially since even the world’s biggest experts are still learning about the disease.

But the underlying methodology is sensible. Policies that cause a weaker economy (and South Africa already has plenty of those) will make a country poorer and its people poorer.

And poorer people in poorer nations will die at younger ages.

Somebody sent me this image, which helps to capture the health costs of lockdowns.

P.S. Back in 2012, I pointed out that the economy’s sub-par performance under Obama would lead to almost 60,000 premature deaths. I openly acknowledged that this back-of-the-envelope calculation was very speculative, but what’s not speculation is that richer societies are healthier societies.

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English Hypocrite Joins the Bureaucrat Hall of Fame

One of the most-nauseating features of government is how politicians and bureaucrats impose lots of restrictions on ordinary people, yet then officially or unofficially create exemptions for themselves.

• Bill and Hillary advocating for higher death taxes, but then rigging the system so they could avoid that unfair levy.
• Elizabeth Warren sending her kid to private school while seeking to restrict better education for other people’s children.
• Bureaucrats at the OECD getting tax-free salaries while urging ever-higher taxes for people in the private sector.

The coronavirus pandemic has created a new opportunity for the political class to flaunt its privileged status while stepping on the rights of ordinary people.

The Wall Street Journal opined on this issue today and noted plenty of elected officials have decided to exempt themselves from lockdown rules.

A good sign that a government policy is misconceived is that its most energetic promoters can’t abide by it. The coronavirus outbreak has exposed this sort of hypocrisy more than a few times. Mayor Bill de Blasio famously visited his favorite YMCA for a workout even as his office was telling the rest of New York City to stay home. In Chicago, salons and barbershops were shut down while Mayor Lori Lightfoot allowed herself a haircut. Beaumont, Texas, Mayor Becky Ames flouted her city’s shelter-in-place order to have her nails done.

But these examples are trivial compared to the actions of Neil Ferguson, the officious British government employee who has been publicly hectoring his countrymen to follow stay-at-home orders, but decided those rules didn’t apply to his f*buddy.

Neil Ferguson, the epidemiologist at Imperial College,…led the researchers who predicted that, absent a forceful governmental response on movement and commerce, Covid-19 could cause more than 500,000 deaths. That modeling was soon scaled back, but Mr. Ferguson has since become a familiar figure in Britain for urging the government to impose strict shelter-in-place orders. It appears Mr. Ferguson wasn’t sheltering in place. Or, rather, he was but his paramour, Antonia Staats, wasn’t. …Ms. Staats had crossed London at least twice since citywide lockdowns were imposed in March—a clear violation of government rules. He has resigned from his position as government adviser.

I’m not surprised Ferguson is a hypocrite. It goes with the territory.

But I do wonder how he became a government adviser with the Conservative Party supposedly in charge? I thought Republicans were the “stupid party.”

In any event, the U.K.-based Sun is famous for its clever headlines (sort of like the New York Post), and this latest scandal is no exception.

Let’s conclude that Ferguson deserves to be the second Brit in the Bureaucrat Hall of Fame (joining the chap who worked in law enforcement while moonlighting as a jihadist).

P.S. For what it’s worth, Ms. Staats is a left-wing activist, so she’s part of a long tradition of statists who want more power for government, but conveniently don’t think they should be subject to the rules imposed on the rest of us.

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Does Sweden Have the Right Response to the Coronavirus?

Having already written several dozen columns on public policy and the coronavirus, it’s time to add my two cents to the debate over Sweden’s (comparatively) laissez-faire approach to the pandemic.

If nothing else, it’s remarkable that the nation Bernie Sanders praised for socialism (albeit incorrectly) is now the poster child for (some) libertarians.

What makes Sweden special, as depicted in this graphic from CNN, is a more lenient attitude about letting ordinary life continue.

Did Sweden make the right choice?

Let’s review several analyses, starting with Hilary Brueck’s article for Business Insider.

In Sweden, bars and restaurants are open to the public, you can go get a haircut, and primary school is in session. …life goes on. …If anyone can have success with such a low-enforcement disease-fighting strategy, it may be Sweden. …The Swedish prerogative asks citizens to act like adults, and then trusts that, left to their own devices, people will. …The Swedes are also seriously weighing concerns that have been taken as inevitable, if unfortunate, collateral damage in other countries, such as the mental health risks of being stuck inside, rising rates of abuse, and substance use disorders. …Other countries, including the UK and the Netherlands, originally toyed with the idea… Both were accused of heartlessness: sacrificing the old and vulnerable… But Sweden has persevered. …The economy has…taken a hit. …8% of the country is now unemployed, a figure that’s projected to continue to rise, possibly hitting 10% by this summer.

Writing for Reason, Johan Norberg explains his nation’s strategy.

The Swedish government has declared no state of emergency and no orders to shelter in place. …Those who want to show how great Sweden is doing have produced charts comparing us to countries like Britain, Belgium, France, Spain, and Italy. Those who want to prove the opposite replace those countries with Norway, Denmark, and Finland, all of which have fewer deaths. …Sweden has had more COVID-19 deaths per capita than our Nordic neighbors. But that is an obvious result of those countries’ decisions to postpone cases and deaths by locking down whole societies for a period of time. The thing to watch is what happens when they begin to open up again and will face a new wave of COVID-19. …A Harvard model projects that a 60 percent suppression of the disease will result in a higher peak later on and a higher number of total deaths than a mitigation strategy like the one Sweden used, where the spread is reduced by no more than 20 or 40 percent, so that the disease can pass through the population to create herd immunity during a period when the vulnerable are protected. Other models come to other conclusions, of course… We just don’t know yet, and only time will tell. Herd immunity might yet beat herd mentality. …our economy still hurts… But losing two-thirds of your revenue rather than 100 percent might mean the difference between life and death for many entrepreneurs. …Perhaps Sweden will do worse long term… Or perhaps Sweden is the one place that is succeeding in limiting long-term damage, caring for the sick, and protecting the vulnerable, all while working toward herd immunity. …What we do know is that Sweden has not cracked down on basic liberties like others have, and has not wrecked society and the economy to the same extent.

In a column for the New York Times, Ian Bremmer, Cliff Kupchan, and Scott Rosenstein cast doubt on Sweden’s approach.

In Sweden, business is not actually proceeding as usual. …But restrictions from government are considerably less severe than many other countries. …The results have been mixed. Sweden has the highest fatalities and case count per capita in Scandinavia, but is lower than some of its neighbors to the south. Economic disruption has been significant but not as debilitating as other countries. …the nation’s top infectious disease official recently estimated that approximately 25 percent of the population has developed antibodies. …But if immunity is short-lived and only present in some individuals, that already uncertain 25 percent becomes even less compelling. We also still don’t know what total population percentage would be necessary to reach the herd immunity goal. …there are huge risks with copying the strategy in a country like the United States. The American people are far less healthy than Swedes.

The Wall Street Journal opined this morning about Sweden’s strategy.

While its neighbors and the rest of Europe imposed strict lockdowns, Stockholm has taken a relatively permissive approach. It has focused on testing and building up health-care capacity while relying on voluntary social distancing, which Swedes have embraced. The country isn’t a free-for-all. Restaurants and bars remain open, though only for table service. Younger students are still attending school, but universities have moved to remote learning. …the country’s strategy…is to contain the virus enough to not overwhelm its health system. …Sweden has been clear it is aiming for a “sustainable” strategy that it can practice until there is a vaccine or cure while also being economically tolerable. The lockdown countries have held the virus in relative check for now, though probably with less broad immunity in the population. They appear to be delaying some deaths but at the risk of a larger outbreak once they open up if there is no cure. …No one knows which mitigation strategy will save the most lives while doing the least economic harm. But the rush to condemn Sweden isn’t helpful.

In a column for National Review, John Fund and Joel Hay argue for the Swedish approach.

With a death rate significantly lower than that of France, Spain, the U.K., Belgium, Italy, and other European Union countries, Swedes can enjoy the spring without panic or fears of reigniting a new epidemic as they go about their day in a largely normal fashion. …Dr. Anders Tegnell, the chief epidemiologist of Sweden, …heroically bucked the conventional wisdom of every other nation and carefully examined the insubstantial evidence that social-isolation controls would help reduce COVID-19 deaths over the full course of the virus. …Tegnell has looked at other nations that are loosening their lockdowns. “To me it looks like a lot of the exit strategies that are being discussed look very much like what Sweden is already doing,” he told Canada’s Globe & Mail. …Jan Albert, a professor in the Department of Microbiology, Tumor, and Cell Biology at Sweden’s Karolinska Institute, told CNN that strict lockdowns “only serve to flatten the curve, and flattening the curve doesn’t mean that cases disappear — they are just moved in time.” …Initially, the main justification for the global lockdowns was that they were necessary to prevent a crush of patients from overwhelming hospital intensive-care units. …Despite no lockdowns and few social-isolation controls other than proper spacing in restaurants and a ban on gatherings of more than 50 people, the Swedish hospital system never experienced anything remotely like the crush of ICU patients in Italy, Spain, and New York City. …Of course, Sweden paid a price during the pandemic. …they will tell you it was worth it. And it is easy to figure out that price. They never cratered their economy… Now many countries and U.S. states are beginning to follow Sweden’s lead.

So who is right, the optimists or the pessimists?

The honest answer is that we don’t know, though it probably depends on how quickly (if ever) someone develops either a vaccine or a cure.

Here’s my back-of-the-envelope comparison of Sweden’s laissez-faire approach and the lock-down approach in the United States.

In the short run, Sweden has more cases and less economic damage.

But what really matters is how things evolve in the long run. If no vaccine or treatment materializes, then other nations will eventually be forced to copy Sweden’s approach. That presumably will mean a similar number of cases over time, so all the additional short-run economic damage will have been pointless.

But if a vaccine or treatment appears relatively soon, then people presumably will conclude that Sweden made the wrong choice (though even that will be a matter for debate depending on the degree to which people understand the long-run relationship between health outcomes and national prosperity).

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Coronavirus and the Future of Public Policy

I spoke last week about the “Economic Consequences of the Crisis” for a webinar organized by the Estonian Business School.

My remarks focused on the severity of the downturn, the likelihood of a new fiscal crisis in Europe, and how to balance the costs and benefits of re-opening the economy.

The full program, which was part of the Digital Free Market Road Show, can be viewed by clicking here.

For today’s column, I want to focus on my final slide, which asks whether politicians will use the crisis to permanently expand the size and scope of government.

I didn’t make any sweeping predictions when discussing this slide, though my tone was somewhat pessimistic. Simply stated, I fear we’ll have a bigger burden of government when the coronavirus crisis abates.

This doesn’t necessarily have to be the outcome. As I wrote two years ago, it’s possible for a crisis to produce either more statism or more liberalization.

Robert Higgs and Don Boudreaux, writing about this topic for Reason, fear that politicians will succeed in using the crisis to move the needle in the wrong direction.

Although everyone seems to agree that these measures are to be employed only in the short run, until the incidence of the disease has been reduced either by herd immunity or by new medical treatments, no one at the start put together an exit strategy from these extraordinary increases in governments’ size, scope, and power. Everything was done on a piecemeal basis from day to day, on the assumption that when an endgame came into view the governments would terminate their crisis actions. This assumption runs counter to how crisis-borne increases in government’s size, scope, and power have played out in the past. …the growth of government that attends national emergencies is not surrendered fully when the crisis ends. Instead, a ratchet effect operates whereby much of the crisis-borne growth of government becomes institutionalized in agencies and practices and, more important, in the dominant ideology of political elites and the general public.

Higgs and Boudreaux use insights from “public choice” to describe the process that produces ever-larger government.

As crisis followed crisis—World War I, the Great Depression, World War II, the multifaceted turmoil of the Johnson-Nixon years, the 9/11 attacks, the Great Recession that began in 2008—the ratchet effect ensured that government’s growth trajectory was displaced upward, time after time. …People sometimes regretted actions taken hastily during a crisis but found that reversing them was diabolically difficult. …The ratchet effect operates because of incentives and constraints built into the political and economic structure. …To disable the ratchet effect, people must rouse themselves to think more seriously about the long-run consequences of actions taken hastily in response to national emergencies—and about whether they want to keep their remaining economic freedoms and civil liberties or be content to surrender them one crisis at a time.

It’s hard to argue with their analysis, but I’ll close with a bit of optimism.

Here’s a chart based on data from Economic Freedom of the World, including research extending estimates back to 1950. It shows that – notwithstanding various crises – there has not been a decline in liberty for the United States since World War II.

This suggests that Higgs and Boudreaux are too gloomy.

I wonder, however, when going as far back as the 1950s-1970s, if the data is good enough to produce reliable estimates of economic liberty.

How can it be true, for instance, that overall economic liberty increased during the 1970s, when we had Nixon’s awful statism?

Though maybe I have tunnel vision because of my focus on fiscal policy. A Spanish scholar who put together long-run data on non-fiscal policy (going all the way back to 1850) found that economic liberty has been increasing.

In any event, let’s hope that economic liberty doesn’t shrink in the future. Assuming, of course, we care about national prosperity and poverty reduction.

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Coronavirus Humor, Part VII

For this seventh edition of coronavirus humor (previous versions here, here, here, here, here, and here), let’s start with a clever video from Reason.

There are many reasons why the Founding Fathers are rolling in their graves.

The coronavirus is merely the most-recent example.

While law-abiding people are worried about crime and societal breakdown, it appears that criminals also have something to worry about.

Meanwhile, the Babylon Bee satirizes vapid celebrities.

No matter how they expressed their emotions, everyone agreed that the scene off the Malibu coast Monday morning was exactly what America needed to get through this pandemic. Celebrities gathered their multi-million-dollar yachts on the waters of the Pacific Ocean and spelled out “WE’RE ALL IN THIS TOGETHER.” “We’re just like you,” said Ellen DeGeneres on her Instagram as her servants sailed her yacht into position to form the apostrophe. …”Stay home, save lives — it’s not that hard,” said Patton Oswalt, whose fleet of yachts made up several of the letters. “Look, poor people, it’s not worth risking your life just to go to Fuddruckers or work a job or whatever it is you peasants do all day.” …”All of humanity is fighting this together and we’re all as one,” said Lady Gaga, who was wearing a bathing suit made out of gold bricks. “Though, I mean, don’t try to get on my yacht. My guards will literally shoot you. That’s not a metaphor.”

Since we’ve seen many examples of thuggery by local governments, this next item obviously belongs in today’s collection.

Here’s some satire for people who don’t like Trump.

And here’s one for pro-Trump readers.

Given knee-jerk libertarianism, it’s easy to understand why this is my favorite item in today’s collection

Politicians using a crisis to expand their power and control? Surely you jest.

Or, maybe not.

Though, unlike in previous crises, at least in this instance they didn’t cause the crisis in the first place (though their policies have hindered an effective response).

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Seattle Suicide

What’s the most poorly governed city in the United States?

• San Francisco, where there are “poop patrols“?
• Chicago, which is spending itself into oblivion?
• New York City, home of America’s worst mayor?

Those are all good options, but Seattle may deserve this award. Following municipal elections last November, the City Council is controlled by hard-left members who want to impose the local version of “democratic socialism.”

In a National Review article from February, Christopher Rufo describes their agenda.

Seattle has effectively become the nation’s laboratory for socialist policies. Since the beginning of the year, the socialist faction on the Seattle City Council has proposed a range of policies on taxes, housing, homelessness, and criminal justice that put into practice the national democratic-socialist agenda. In the most recent session, socialist councilwoman Kshama Sawant and her allies have proposed massive new taxes on corporations, unprecedented regulations on landlords (including rent control and a ban on “winter evictions”), the mandated construction of homeless encampments, and the gradual dismantling of the criminal justice system, beginning with the end of cash bail. …In order to consolidate their newfound power, the progressive-socialists have begun to manipulate the democratic process in their own favor: first, by providing all Seattle voters with $100 in taxpayer-funded “democracy vouchers,” which are easily collected by unions, activists, and socialist groups; and second, by implementing a ban on corporate spending in local elections… the progressive-socialists are no longer interested in gaining reasonable concessions; they intend to overthrow capitalism itself.

The Wall Street Journal opined this week on the latest development in Seattle’s suicidal approach.

The economy is on life support, but that isn’t stopping the Seattle City Council from trying to soak employers with a new tax on hiring. …The proposal is a reprise of the council’s 2018 tax on each new hire that was repealed amid public opposition. The new proposal “is 10 times larger than the 2018 version, and it’s also in an economy that’s about 1,000 times worse,” says James Sido of the Downtown Seattle Association…a 1.3% payroll tax on most Seattle businesses with $7 million or more in payroll. …Businesses would be assessed based on the prior year’s payroll, but revenue has cratered this year amid the pandemic. …businesses on the margin that have been forced to lay off or furlough employees may not bring them back if it means crossing that $7 million payroll threshold. The tax would discourage smaller companies from growing in Seattle. …Seattle is the hardest hit city in the U.S., with unemployment rising 105.92% between January and March. Only a socialist would think now is the time to further punish job creation.

Good points.

Though I would add that it’s never a good time to raise taxes and punish job creation.

Here’s what the greedy members of the City Council don’t understand (or pretend not to understand):

It’s complicated and difficult to move out of a country.

It’s a potentially expensive hassle to move out of a state.

It’s relatively easy to move out of a city.

And that’s why Seattle’s experiment with socialism is bound to fail.

If the socialists on the City Council impose this tax, there inevitably will be an out-migration of entrepreneurs and businesses to surrounding suburbs. That will be bad for ordinary people in the city (a point that workers in the economy’s productive sector already understand).

And when that happens, I wonder if they’ll learn that it is possible to run out of other people’s money?

P.S. Seattle’s politicians already have destroyed jobs and ruined businesses with a big increase in the minimum wage.

P.P.S. The constitution of the state of Washington prohibits an income tax, so there’s an ongoing debate whether Seattle’s tax grab – if enacted – would survive a court challenge.

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