The Best and Worst of 2020

One of my traditions, which started in 2013, is to share the year’s best and worst policy outcomes of the past 365 days.

For instance, last year I celebrated Boris Johnson’s landslide victory in the United Kingdom and also was very happy that Colorado voters preserved TABOR. But I bemoaned Trump’s protectionism and fretted about the ever-rising burden of government spending.

So what can we say about 2020?

The big news of the year was the pandemic, of course, but my best-and-worst list focuses on public policy.

In other words, this column will highlight the positive or negative actions of politicians (or voters) rather than the vindictiveness of Mother Nature.

So let’s look at major developments in 2020, and we’ll start with the good news.

Illinois voters preserve the flat tax – The only good feature of Illinois fiscal policy is that the state’s constitution mandates a flat tax. The big spenders in Springfield despise that policy, but they can’t get rid of it without permission from voters. So, led by the state’s hypocritical governor, they put an initiative on the ballot to allow discriminatory tax rates. Fortunately, the people of Illinois rejected the class-warfare measure by a comfortable 53.3 percent-46.7 percent margin.

An acceptable Brexit deal – The people of the United Kingdom wisely voted to leave the European Union back in 2016, but a genuine escape from Brussels did not seem likely until Boris Johnson’s landslide victory in 2019. Even then, it wasn’t clear that the European Union’s spiteful officials would agree to unfettered trade in a post-Brexit environment. Fortunately, there is now an agreement that – while far from perfect – does allow the U.K. to escape the sinking ship of the E.U.

Voters reject the War on Drugs – I’ve never liked drugs and I recognize that there will be social harms with legalization. That being said, the social harm from prohibition is much greater, so I’m pleased that voters all over the nation approved ballot initiatives to give people more freedom to get high.

Now for the bad news of 2020.

Washington’s bungled response to the pandemic – As indicated above, the existence of the coronavirus doesn’t count as bad policy, but the federal government’s incompetent response certainly belongs on this list. We learned, over and over and over and over again, that bloated bureaucracies do not deliver good results. Heck, we’re still learning that lesson.

China clamps down on Hong Kong – As a long-time admirer of Hong Kong’s market-driven economic vitality, I’m saddened that China is increasing its control. So far, Beijing is focusing on ways of restricting Hong Kong’s political autonomy, but I fear it is just a matter of time before economic freedom is negatively impacted. For what it’s worth, I’m also distressed that economic policy seems to be moving in the wrong direction in Mainland China as well.

Chilean voters put the nation’s prosperity at risk – One of the world’s biggest success stories during my lifetime has been Chile’s shift from authoritarian statism to capitalist prosperity. Poverty has dramatically declined and Chile is now the richest nation in Latin America. Sadly, voters approved an initiative that could result in a new constitution based on the welfare state vision of “positive rights.”

I’ll close with a bonus section, so to speak.

2020 election – If you care about trade and spending, then Biden’s victory may turn out to be good news. If you care about taxes and red tape, then Biden’s victory may turn out to be bad news.

But I thought the biggest election takeaway is that the left did not do well in congressional races or state races.

And I suppose I should add that it’s good news that Democratic voters ultimately opted not to nominate some of the awful politicians who ran for president, most notably Bernie Sanders and Elizabeth Warren.

And I’m tempted to add that they also wisely rejected Kamala Harris, but that backfired since she’s now going to be a heartbeat away from the presidency.

P.S. I’ve already cited my 2013 and 2019 editions. If you’re curious, here are my best and worst for 2018, 2017, 2016, 2015, and 2014.

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Once Again, Everything You Need to Know about Government in a Single Story

Ronald Reagan hit the nail on the head when he warned that government is usually the problem rather than the solution.

It’s not just that the economy suffers when there is too much spending, regulation, and taxing, we also have far too many politicians and bureaucrats who behave as if they’re motivated by personal interest rather than the national interest.

Not that we need any more evidence, but there’s an editorial in today’s Wall Street Journal that perfectly captures what’s wrong with Washington.

Indeed, I’ve even recycled the title that I used just three days ago because the WSJ column is such a powerful example.

Read these excepts about a legal attack against Walmart and ask yourself whether the federal government is acting like mobsters conducting a shakedown operation.

…the Justice Department’s new suit..claims that Walmart “failed to detect and report at least hundreds of thousands of suspicious orders” and that as a pharmacy it “unlawfully filled thousands upon thousands of invalid controlled-substance prescriptions.” …The complaint…is really a 160-page exercise in scapegoating a company because it is well-known and has deep pockets. Walmart doesn’t push pills on opioid addicts. Its pharmacists fill valid prescriptions written by doctors who are licensed by their states and registered with the Drug Enforcement Administration (DEA). …Walmart says it has passed tens of thousands of leads about suspicious prescriptions to state and federal law enforcement. It’s the job of the DEA and state medical boards to investigate and revoke doctors’ licenses and prescribing privileges if there’s wrongdoing.

For all intents and purposes, the company is in a no-win situation.

When pharmacists have refused to fill questionable prescriptions, doctors have sometimes sued for defamation and patients have sometimes sued for discrimination. Several states have prohibited pharmacists from interfering with the doctor-patient relationship by second-guessing valid prescriptions. No federal law supersedes these state laws. …the DEA has suggested that some combinations of opioids never have a legitimate medical purpose and should never be filled. Yet the Centers for Medicare & Medicaid Services continues to cover these opioid combinations… In effect DOJ is asking the federal court to overrule state law in favor of informal federal guidance and a vague notion of pharmaceutical best practices. This harassment was typical of the Obama era.

This issue reminds me of the federal government’s policy on money laundering. In that case, the government not only orders banks to spy on customers, but also to read their minds to somehow figure out if a financial transaction is connected to criminal behavior.

The net result is a very costly and intrusive system that has utterly failed to achieve its purpose of reducing criminal behavior.

But that doesn’t stop Uncle Sam from periodically imposing heavy fines on banks for nit-picking violations, just like the federal government today wants to extort a bunch of money out of Walmart.

It’s almost enough to make you think there’s a pattern.

P.S. I have a .500 batting average in my experiences as a global money launderer.

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2020’s Tweet of the Year

Every so often, I highlight tweets that deserve attention because they say something important, usually in a clever and succinct fashion.

• Best-ever tweet about inequality.
• Best tweet about capitalism vs socialism.
• The most depressing tweet.
• Trump’s worst-ever tweet.
• The best-ever counter-tweet.

Today, I’m highlighting what I consider to be the year’s best tweet.

The tweet is from Matthew Lesh of the Adam Smith Institute in London and it shows the big difference between private sector results and government incompetence.

Some readers may wonder if he is being unfair? Is the tweet merely libertarian-style grousing?

Well, consider this recent story from the Washington Post, which details how government incompetence at the Centers for Disease Control (CDC) greatly delayed testing capacity.

On Jan. 13, the World Health Organization had made public a recipe for how to configure such a test, and several countries wasted no time getting started: Within hours, scientists in Thailand used the instructions to deploy a new test. The CDC would not roll out one that worked for 46 more days. …The agency squandered weeks as it pursued a test design far more complicated than the WHO version and as its scientists wrestled with failures… The CDC’s response to what became the nation’s deadliest pandemic in a century marked a low point in its 74-year history. …Without tests to identify the early cases, health authorities nationwide were unable to isolate the infected and trace the rapid spread among their close contacts. …120 public health labs were without a government-approved test of their own and, with few exceptions, depended wholly on getting the CDC’s kits. …companies had no incentive to navigate regulatory hurdles and mass-produce kits.

The above story describes how the CDC screwed up at the start of the pandemic.

In her December 27 column for the Washington Post, Megan McArdle highlights a new example of CDC incompetence.

…the now-infamous November meeting of the CDC’s Advisory Committee on Immunization Practices…unanimously agreed that essential workers should get vaccinated ahead of the elderly, even though they’d been told this would mean up to 6 percent more deaths. This decision was supported in part by noting that America’s essential workers are more racially diverse than its senior citizens. …the discussion of whether to prioritize essential workers was anything but robust. …not one of those 14 intelligent and dedicated health professionals suggested adopting the plan that kills the fewest people. …for the past nine months, public health experts have insisted that minimizing deaths should override other concerns, even quite important ones. So how, in this case, did equity conquer death?

Let’s close with some excerpts from Aaron Sibarium’s article on the same issue for the Washington Free Beacon.

The committee openly acknowledged that its initial plan would result in more deaths than “vaccinating older adults first.” But, the panel said, the plan would reduce racial disparities—something they deemed more important than saving lives… The result was an explicitly race-conscious plan that would have prioritized shrinking the case gap between races over saving the most lives. …All of this—the exclusions, the contradictions, the moral redundancies—helped disguise the agenda that it justified, giving unscientific value judgments an air of scientific assuredness.

The really amazing aspect of this story is that there almost surely would be more minority deaths if this this approach was implemented.

But the “woke” bureaucrats though that would have been okay since there would have been an even-greater increase in white deaths.

This is healthcare version of their warped view that it’s okay to support policies that reduce income for poor people so long as the rich incur even greater losses.

Anyhow, I guess we should “congratulate” the CDC for showing it can compete with the WHO in the contest to see which bureaucracy had the worst response to the coronavirus (we already had plenty of evidence that the FDA is incompetent).

We can add this column to my series (here, here, here, and here) on how government blundering magnified the coronavirus pandemic.

P.S. If I had the flair for self-promotion that you often find in D.C., I would have been tempted to claim that my tweet from earlier today deserves some sort of recognition.

But I don’t need attention and affirmation. I simply want people to understand that it’s reprehensible that we have cossetted international bureaucrats (who get lavish, tax-free salaries!) pushing sloppy and ideological nonsense that will make the world less prosperous.

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Economic Growth and the “Size of the Pie”

My recent three-part series (here, here, and here) explained why policy makers should seek to reduce poverty rather than inequality.

I want to expand on that point today by showing why growing the pie is more important than how it is sliced.

I’ve previously opined on why economic growth is important, showing that the United States today would be almost as poor as Mexico if our rate of economic growth since 1895 was just one-percentage point less than it actually was.

Moreover, I also showed in that 2017 column how much smaller increments of additional growth over time can mean thousands of dollars of additional income for an average household.

And, the previous year, I shared two excellent videos from Marginal Revolution University while writing about Hong Kong’s remarkable jump from poverty to prosperity.

For today’s column, I want to expand on this point using the economic growth page from Max Roser’s great site, Our World in Data. We’ll start with this chart showing how per-capita economic output dramatically increased a few hundred years ago.

This kind of data won’t be news to regular readers. I’ve already shared great videos from Deirdre McCloskey and Don Boudreaux that make the same point about the explosion of prosperity in the modern era.

And if anyone somehow thinks this growth doesn’t matter, Roser’s page shows that there are countless ways of graphing the relationship between economic output and good outcomes, such as how long we live, child mortality, access to electricity, hunger, and literacy.

The bottom line is that we are unimaginably rich compared to prior generations, largely thanks to the rule of law, expanded trade, and limited government.

That recipe for growth and prosperity works anywhere and everywhere it is tried. Here’s another chart showing how other parts of the world are being to prosper thanks to economic liberalization.

I want to cite two additional charts from Roser’s page.

First, here’s a chart showing productivity rates in selected nations. Why is this important? Because economic prosperity is basically driven by how much we work and how productive we are.

There are all sorts of interesting things embedded in the above chart.

• Productivity is vitally important, which is why it is so misguided to have tax systems that punish saving and investment.
• Nations such as China still way behind the western world, a point I’ve been making for a long time.
• The United States has a big income advantage over European nations, but it’s driven by hours worked rather than productivity.

Our final chart shows the importance of convergence.

Once again, there are some important observations embedded in the above chart.

• Very poor nations such as Botwsana and China can enjoy meaningful gains with partial economic liberalization.
• Western nations can enjoy more prosperity over time, but they won’t catch the United States so long as they are burdened with too much government.
• Singapore shows that full convergence is not only possible, but also that laissez-faire countries can even surpass the United States.

P.S. I can’t resist recycling my “never-answered question” in hopes of getting any of my left-leaning friends to cite a single example of their policies producing mass prosperity.

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Everything You Need to Know about Government in a Single Story

When I write an everything-you-need-to-know column, I’m inevitably guilty of hyperbole.

All that I’m really doing is highlighting a very compelling example of how politicians make a mess of just about anything they touch.

That’s even true in the rare cases when they’re trying to enact policies I prefer.

The crux of the problem is that politicians like having some level of power and control over various sectors of the economy, for the simple public choice-driven reason that they can then extort bribes, campaign cash, and other goodies.

Which is good news for donors, crooks, and cronies, as P.J. O’Rourke wisely noted.

But it’s bad news for those of us who don’t like sleaze. Yet sleaze is almost inevitable when politicians have power to interfere with private market transactions.

Check out these excerpts from a Politico report.

In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption. Almost all the states that legalized pot either require the approval of local officials – as in Massachusetts — or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures – the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. …They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists. …It’s not just local officials. Allegations of corruption have reached the state level in numerous marijuana programs, especially ones in which a small group of commissioners are charged with dispensing limited numbers of licenses.

Needless to say, what’s happening in the marijuana industry happens wherever and whenever politicians have power.

“All government contracting and licensing is subject to these kinds of forces,” said Douglas Berman, a law professor at Ohio State University who authors a blog on marijuana policy. …“There’s a lot of deal-making between businesses and localities that creates the environment of everyone working their way towards getting a piece of the action,” Berman said. Whether it’s city or county officials that need to be appeased, local control is “just another opportunity for another set of hands to be outstretched.”

The report concludes by noting that corruption can be avoided very simply. Just make sure politicians and other people in government have no power or authority.

States that have largely avoided corruption controversies either do not have license caps — like Colorado or Oklahoma — or dole out a limited number of licenses through a lottery rather than scoring the applicants by merit — like Arizona. Many entrepreneurs, particularly those who lost out on license applications, believe the government shouldn’t be in the business of picking winners and losers and should just let the free market do its job.

Amen.

I’ll conclude by noting that politicians are doing the right thing in the worst way.

I want to end the War on Drugs because it is a costly failure. It’s not that I think drug use is a good idea. But I recognize that the social harm of prohibition is greater than the social harm of legalization.

And, as a libertarian, I believe people should be free to make their own decisions (consistent with the libertarian non-aggression principle, of course), even if I happen to disapprove.

Sadly, politicians are not legalizing pot for libertarian reasons.

Instead, they see it as a way of having a new product to tax (and they’re botching that). And, as illustrated by today’s story, they see it as a way of lining their own pockets.

I’m almost tempted to say we’d be better off if marijuana was criminalized so it could be sold on the black market instead.

But the real moral of the story is that government power is a recipe corruption.

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Another Leftist Has an Epiphany on Guns

I’m (unfortunately) not a rich person, but that doesn’t stop me from opposing punitive taxes on successful entrepreneurs, investors, and small business owners.

Likewise, I’m not a gun aficionado, but that doesn’t stop me from opposing efforts to restrict the rights of law-abiding people to own and bear arms.

In part, my views on guns are driven by cost-benefit analysis. Simply stated, the evidence is fairly clear that there is less crime when bad people have to worry that potential victims have the ability to defend themselves.

But I also very much agree with the constitutional argument for gun ownership, as well as the “societal disarray” argument.

Interestingly, it seems that more folks on the left are coming to their senses on the issue of gun control, generally for practical reasons rather than philosophical reasons.

• 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.
• More recently, 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, Alex Kingsbury in 2019 acknowledged the futility of gun control in a column for the New York Times.

Today, we’re going to add to the collection.

Charles Blow of the New York Times recently wrote about how he has become more understanding of why fellow blacks want to own guns.

Growing up in rural northern Louisiana, everyone I knew, at least every household, seemed to have guns. …Gun ownership was the norm in those parts, including in the Black community. It was not associated with danger but with safety. …Indeed, one could argue that the right to bear arms in this country has never been so brazenly and openly abridged as it has against Black people. Many state codes prohibited Black gun ownership before the Civil War and allowed for the disarmament of Black people after. …When I moved north, first to Detroit and then to New York, I moved into a mental space of more stringent gun control. …city dwellers simply didn’t have the same need for weapons as the people in the rural community where I was raised… I, like many, were convinced that fewer guns in the Black community would make it safer. But, for many Black people, that sentiment has turned. …gun sales to Black people are surging. …I, as much as anyone, would like to live in a society in which all citizens felt safe without the need of personal firearms. America could have created such a society. However, it chose not to. …many Black people feel the need to defend themselves from their own country.

To be sure, Mr. Blow can’t be considered a full convert to the 2nd Amendment. That being said, I think it’s nonetheless remarkable that even a committed, hard-core leftist has (partially) seen the light.

Though I can’t resist quibbling with one point in his column. He wrote, “America could have created” a society where gun control would be desirable because no guns would be needed, but “it chose not to.”

I would replace “it chose not to” with “our government is not sufficiently competent.”

Heck, I would probably add “or trustworthy” as well. Given the unsavory history of gun control, Mr. Blow should be among the first to appreciate that argument.

P.S. In 2018, I shared the story of Ryan Moore, another leftist who changed his mind on gun control. But since he also evolved away from being a leftist, I don’t include him

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Merry Libertarian Christmas

Since even I’m not wonky enough to write about serious topics on Christmas, I have an annual tradition (2019, 2018, 2017, etc, dating back to 2009) of sharing libertarian-themed holiday humor.

Here’s this year’s version, starting with a cartoon that also belongs in my collection of socialism humor.

Next we have evidence that Santa Claus is real.

Though perhaps not as likeable as we thought, so this belong in my collection of cartoons that symbolize government.

This next item probably belongs with my collection of anti-libertarian humor because only Randian types can turn Scrooge into the hero of the story.

And this gem from Michael Ramirez would definitely be applicable if I was still sharing coronavirus-themed humor.

For what it’s worth, Santa seems to have an ongoing problem with law enforcement.

I’m sure there will be bipartisan agreement on our next item.

As usual, I save my favorite item for the end.

This great cartoon from Gary Varvel is very timely considering what’s happening in Washington (and also with a similar message to this 2014 Eric Allie cartoon).

Though, to be fair, politicians like playing Santa Claus 365 days a year.

P.S. As usual, I didn’t get what I wanted for Christmas.

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The Poisonous Economics of Wealth Taxation

I don’t like higher taxes, whether looking at levies on income, capital gains, payroll, death, or consumption. But if asked to identify the worst way of hiking taxes, the wealth tax might lead the list because of the economic damage caused per dollar collected.

If you don’t want to spend two minutes watching the video, which is excerpted from an online debate organized by my left-leaning friends at TaxCOOP, everything I said can be boiled down to the following four points.

1. A wealth tax might reduce inequality, but only because the rich would suffer even greater losses than the poor.
2. Punishing saving and investing is a bad idea since all economic theories agree capital formation is key to long-run prosperity.
3. A wealth tax is a huge tax increase on saving and investment, perhaps equal to a 50 percent or 100 percent marginal tax rate.
4. A wealth tax would be an administrative nightmare, requiring a bigger IRS, since many assets are difficult to measure.

I first addressed the issue back in 2012 and 2014, but I’m now writing more often about the wealth tax because it’s evolved from being a bad idea to being a real threat.

Joe Biden didn’t include a wealth tax in his class-warfare campaign manifesto, but Bernie Sanders and Elizabeth Warren both pushed for the idea. And there are plenty of other Democrats in Congress who also support this punitive levy.

So let’s add to our arguments.

In a report for the Manhattan Institute, Allison Schrager and Beth Akers summarize why a wealth tax is misguided.

Wealth taxes are inefficient and ineffective because wealth is inherently more difficult to measure. Privately held companies, for example, are not traded in public markets, which means that there are no stock prices by which one can objectively gauge their value. Also, financial assets can be hidden or moved abroad with the click of a mouse or converted into other assets that are hard to value. A dozen European countries had a wealth tax in 1990, but most abandoned them because they were ineffective and expensive to administer. In part, the taxes failed to raise much revenue because wealthy individuals easily moved their assets across borders to avoid taxation. …Wealth taxes distort behavior in a way that is harmful to economic growth and national prosperity. By taking a fraction of people’s wealth each year, the tax reduces the return to investing and discourages saving. This can reduce growth because investing and capital accumulation are critical to innovation. …think of it as a tax on capital income. And when you put the tax in income terms, 2% can be enormous. For example, if your assets return 4%, a 2% wealth tax is equivalent to a 50% tax on capital income! 

Writing for National Review, Philip Cross highlights why a wealth tax is economic malpractice.

The temptation to adopt a wealth tax will grow in the aftermath of record budget deficits resulting from the pandemic-induced recession. …However, the case for a wealth tax rests on questionable or unfounded assumptions. …Proponents argue that wealth taxes generate substantial net revenues… However, Europe’s experiment with wealth taxes yielded little revenue. …wealth taxes raised only 1.0 percent of GDP in Spain and Switzerland, 0.4 percent in Norway, and 0.2 percent in France in 2017, not enough to significantly affect either government finances or wealth distribution. As a result, most European nations abandoned wealth taxes years ago. …A wealth tax is rife with administrative problems because it creates the incentive to minimize reported wealth. …Besides, taxpayers can easily circumvent a wealth tax. Canada’s former Prime Minister Jean Chretien warned that “there is nothing more nervous than a million dollars — it moves very fast, and it doesn’t speak any language.” …Compounding the mobility of capital is the willingness of people to move to avoid or minimize taxes. One study of estate taxes found that 21.4 percent of the 400 richest Americans moved from states levying an estate tax to a state without one, while only 1.2 percent did the reverse. …A wealth tax also distorts economic incentives, encouraging consumption while penalizing the savings and investments that foster higher long-term growth. This is especially true when wealth taxes are layered on top of taxes on the capital income that wealth generates.

Even folks who might otherwise be sympathetic are throwing cold water on the idea of a wealth tax.

In a column for Bloomberg, Ferdinando Giugliano points out that it would be foolish to impose big taxes on coronavirus-weakened economies.

A growing number of economists are recommending a one-off wealth tax… In its latest World Economic Outlook, the International Monetary Fund has…recommended higher taxes on richer individuals — including taxing high-end property, capital gains and wealth — to reduce public debt. …I can see why a government would want to introduce a one-off levy on the rich after an extraordinary shock such as a pandemic or a war. …The main problem right now is that it’s too soon to be talking about a wealth tax. …A wealth tax would simply depress spending at a time of shrinking economic output. …There will be a time for redistribution. But…governments must focus on…growth now — and come back to that wealth tax later.

Mr. Giugliano is wrong, of course, to imply or think that there’s ever a good time for a wealth tax.

And he’s also wrong to make the Keynesian argument (that a wealth tax would depress spending), when the correct argument is that it would depress savings and investment, which then leads to foregone wages and lower living standards.

But I wanted to cite his column largely to give me an excuse to criticize the International Monetary Fund.

It galls me that a bunch of bureaucrats recommend tax increases on the rest of us – particularly since they are not only lavishly compensated, but also because they get tax-free salaries.

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Part III: Poverty Is a Problem, not Inequality

Ethical people, regardless of ideology, should be motivated by an empathetic desire to help the poor rather than a spiteful thirst to punish the rich.

That was the message in Part I and Part II of this series. That’s also today’s message, and we’ll start with this video.

There’s a lot of information in this video, broken down into five thematic points.

1. Profit (earned through voluntary exchange) is good, while plunder (obtained through government coercion) is bad.
2. Because people are different, it is important to distinguish between equality of opportunity and equality of outcomes.
3. People don’t understand inequality, and that leads many of them to overlook the important problem of poverty.
4. We are getting richer over time, meaning that the middle class is only disappearing because some are becoming rich.
5. Thanks to the spread of pro-market policies, the entire world is becoming more prosperous with better life outcomes.

For today’s column, let’s focus on item #3 and I want to specifically take this opportunity to explain why we should be aware of how a type of data known as the “Gini coefficient” is used (and sometimes misused).

By way of background, the Gini coefficient measures the distribution of income in a society. As seen in this illustration from Wikipedia, a high coefficient means some people have a lot more income than others and a low coefficient means most people have similar levels of income.

I’ve never been a big fan of the Gini coefficient for three reasons.

First, it’s often used by folks on the left who want higher taxes and more redistribution. Though that’s actually an indictment of how the coefficient is misused.

Second, it doesn’t tell us whether inequality is the result of something good (some people getting rich by providing especially valuable goods and services) or the result of something bad (some people grabbing undeserved loot thanks because of bailouts, subsidies, protectionism, industrial policy, and cronyism).

Third, it does not tell us whether a society is poor or prosperous.

Regarding that final point, Professor Davies pointed out in the video that the most equal nations in the world are Sweden and Afghanistan.

But having similar Gini coefficients is utterly meaningless because it turns out that the similar scores are for radically different reasons – i.e., people in Afghanistan are equally impoverished and people in Sweden are equally prosperous.

And I can’t resist pointing out that Sweden’s superior results are surely correlated with the fact that Swedes enjoy far higher levels of economic liberty (Sweden is #22 and Afghanistan is #136 according to the Heritage Foundation’s Index of Economic Freedom).

You could also do a comparison between nations with very different Gini coefficients.

The United States, for instance, is much more “unequal” than Afghanistan. But I can’t imagine anyone in America wanting to trade places. After all, almost everyone in the U.S. is far richer than almost everyone in Afghanistan.

Or, if you prefer comparing developed nations, I’ve previously noted that poor people in the United States have the same amount of income as middle-class people in nations with lower levels of inequality.

I’ll close with one final bit of data that shows why Gini coefficients should be viewed with caution. Here’s another visual from the Wikipedia page, this one showing how world inequality increased substantially between 1820 and 2002.

Was that increase in inequality a bad outcome?

Of course not. It was simply a result of the Western world becoming rich because of limited government and the rule of law.

And now that developing nations are finally shifting to market-oriented policies, their incomes also are increasing (which, as a side effect, means global inequality is decreasing).

In other words, we should pay attention to the recipe for growth and prosperity, not the Gini coefficient.

P.S. While I’m not a fan of the Gini coefficient, the so-called trade deficit will always be my least favorite statistic.

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Part II: Poverty Is a Problem, not Inequality

I began yesterday’s column with a short clip of me explaining why we should focus on reducing poverty, not reducing inequality.

Here’s a more thorough discussion of the same topic.

The video makes three central points, all of which are very sound.

1. The economy is not a fixed pie, the rest of us don’t become poor when someone else becomes rich.
2. In a free society, there will be unequal outcomes because we have all make different choices in life.
3. Fixating on the irrelevant issue of inequality distracts from addressing the real problem of poverty.

I want to focus on #3 because it’s very distressing that some folks on the left are more interested in hurting the rich rather than helping the poor.

Indeed, some of them are so motivated by spite that they even advocate for policies that will hurt poor people so long as rich people are hurt even more.

I normally try to avoid sounding judgemental, but that’s morally reprehensible.

The decent thing to do is figure out the policies that will help people climb the economic ladder.

With that in mind, here are some highlights from a recent FEE column by Gonzalo Schwarz. He begins with the common-sense observation that it’s best to focus on upward mobility.

…economic mobility, poverty, and income inequality…are not the same, and the policy responses to address them vary. …the income inequality narrative has come to dominate our current public policy discourse, especially in the United States. …The rich are getting richer, but the poor are getting richer too… Policies that aim to remove the barriers faced by people looking to climb the income ladder should be rigorously discussed and pursued.

He then points out that policies to reduce inequality often backfire.

Schwarz cites the minimum wage as an obvious example since it is a recipe for joblessness when politicians mandate pay levels that exceed the value of many low-skill workers.

But my interest in public finance leads me to share this excerpt.

Policy solutions aimed at reducing income inequality will not necessarily positively impact those looking to escape poverty… Quite often, these goals can come into conflict. …A…popular public policy “solution” to address income inequality is to raise the corporate income tax (CIT) and use the proceeds to fund government programs… A recent Harvard Business School working paper…find that a reduction in state corporate income taxes increases real investment, a key driver of economic growth. This is consistent with data from the Organisation for Economic Cooperation and Development (OECD), which published a wide-ranging 2008 paper that found that taxes on income tend to hamper economic growth significantly more than other tax instruments.

Schwarz’s conclusion is spot on.

Pursuing an agenda focused on boosting upward social mobility is more conducive to the discovery of the barriers in the way of human flourishing and wealth creation. Breaking down these barriers, both artificial and natural, is the best way to ensure that each and every person has the opportunity to achieve their American Dream. Certainly, we don’t need more income inequality to achieve broader prosperity but chasing the inequality red herring puts that goal at risk.

I’ll add my two cents to this discussion by noting that President John F. Kennedy was right to observe that a rising tide lifts all boats.

Data from the Census Bureau shows that all income groups tend to rise and fall together.

In other words, if you’re hurting the rich, you’re probably hurting the poor as well. And vice-versa.

And if you’re enacting policies that help the rich, then incomes for everyone else are probably rising as well.

P.S. Regular readers already know this, but I’ll make the should-be obvious point for any new readers that there are some types of government policy (bailouts, subsidies, protectionism, industrial policy, cronyism, etc) that produce unjust forms of inequality.

In other words, it’s good when people become rich by providing the rest of us with goods and services we value, but it’s not good for them to get rich by climbing into bed with politicians.

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Part I: Poverty Is a Problem, not Inequality

I have a couple of cameos in a new left-leaning documentary film, Race to the Bottom. I shared a clip two day ago with my views on corporate tax and the Laffer Curve.

Today, here’s what I said about the left’s mistaken views on inequality.

The fundamental problem is that I think some of our friends on the left are primarily motivated by disdain for the rich.

Indeed, their envy and resentment is so strong that they’re happy to support policies that hurt the poor, so long as the rich suffer a disproportionate amount of harm.

Consider this sarcastic visual.

I hope this visual greatly exaggerates the problem, but I’ve previously shared substantive research suggesting that the folks on the left are fixated on punishing success.

That agenda does not produce good results.

In a thorough article for Reason, David Henderson of the Hoover Institution explores the issues of poverty and inequality.

Most of what is framed as a problem of inequality is better conceived as either a problem of poverty or a problem of unjustly acquired wealth. …It’s important to distinguish the concepts of inequality and poverty. …Many people who worry about income inequality want to tax higher-income people more. Given what economists know about the harmful effects from raising already high marginal tax rates even higher, tax increases could certainly reduce measured inequality—because they would cause higher-income people to reduce their taxable income by working less, by taking more pay in the form of untaxed fringe benefits, or by investing more in municipal bonds, whose interest is not taxable by the feds. Of course, none of this would make lower-income people better off. Indeed, to the extent that higher taxes discourage capital accumulation, they slow the growth of worker productivity. One of the main ways to increase worker productivity is to increase the amount of capital per worker. With a slower growth rate of capital, worker productivity will grow more slowly—and so will real wages. This makes lower-income people worse off than they would have been.

Henderson uses Lydon Johnson as an example of how some people use government favoritism to line their pockets.

But he wisely notes that any inequality that arises from “unjustly acquired wealth” is a symptom of the real problem of cronyism.

Great wealth, meanwhile, is a problem only to the extent that it is unjustly extracted. Government favoritism to politically powerful people may increase income and wealth inequality, as it did in the case of Lyndon Johnson and his wife. But it is the government favoritism, not inequality per se, that is the true problem.

As a quick aside, Lyndon Johnson almost certainly ranks as one of America’s worst presidents (along with failures such as Hoover, Roosevelt, Nixon, and Wilson).

And, having read Henderson’s article, I now have an additional reason to despise LBJ.

I’ll close by recycling my Eighth Theorem of Government, which is simply another way of expressing my oft-made point that we should try to improve life for the poor rather than worsen life for the rich.

Indeed, I sometimes think this theorem is a good way of discerning who is a good person and who is a bad person.

Regarding the latter, we should recognize that some people are simply misguided. These are the folks who actually think that there’s a fixed amount of income and wealth, so they mistakenly believe that if someone like Bill Gates gets rich, the rest of us somehow lose.

Smart folks on the left know that’s not true, so I give them credit for that, but I also think they are reprehensible for being motivated by a desire to hurt the rich, even when that means the rest of us suffer as well.

The bottom line is that market-driven growth is good for everyone, especially the poor.

P.S. The most accurate political analysis of inequality came from Margaret Thatcher.

P.P.S. Here’s the world’s best-ever tweet about inequality.

P.P.P.S. For more wonky readers, I suggest this data and this data about China and this data about the world.

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The Pro-Growth Impact of Deregulation

Regulatory policy is one of the five ingredients in the recipe for growth and prosperity.

Ideally, there should be a minimal amount of red tape, and it should be governed by sensible cost-benefit analysis (i.e., so it deals with genuine externalities such as pollution).

Unfortunately, politicians rarely favor this light-touch approach, in part because of unseemly “public choice” incentives and in part because they focus only on the benefit side of the cost-benefit equation.

But the cost is very real.

And that means that there are substantial benefits when governments reduce the regulatory burden.

Let’s look at some research published by Italy’s central bank. Sauro Mocetti, Emanuela Ciapanna, and Alessandro Notarpietro investigated the impact of liberalization last decade. Here’s what they looked at.

…the importance of structural reforms, aimed at promoting sustainable and balanced growth, has been at the center of the economic debate, in Italy… Structural reforms are measures designed for modifying the very structure of an economy; they typically act on the supply side,i.e. by removing obstacles to an efficient (and equitable) production of goods and services, and by increasing productivity, so as to improve a country’s capacity to increase its growth potential… The aim of this paper is to assess the macroeconomic impact of three major structural reforms carried out in Italy over the last decade. They include (i)liberalization of services, (ii) incentives to “business innovation” (included in the so-called “Industry 4.0” Plan) and (iii) several measures in the civil justice system aimed at increasing the courts efficiency.

And here are their results.

Our results indicate that the three reforms, introduced in different years and with different timing, starting in 2011 and up to 2017, have already begun to produce their effects on the main macroeconomic variables and on Italy’s potential output. In particular, and taking into account the uncertainty surrounding our micro-econometric estimates, by 2019 GDP was between 3 and 6% higher than it would otherwise have been in the absence of these reforms, with the largest contribution being attributable to the liberalizations in the service sector. A further increase of about 2 percentage points would be reached in the next decade, due to the unfolding of the effects of all the reforms considered here. Therefore, the long-run increase in Italy’s potential output would lie in between 4% and 8%. We also detect non-negligible effects on the labor market: employment would increase in the long term by about 0.4%, while the unemployment rate would be reduced by about 0.3 percentage points.

More output and more jobs. Hard to argue with that outcome.

Here are some charts from the study. Figure 7 shows the impact on some macroeconomic aggregates.

And Figure 8 shows the estimated improvement in the labor market.

These results are good news, but Italy still has a long way to go. It’s only ranked #51 according to Economic Freedom of the World, and it’s score for regulation has only improved by a slight margin over the past decade.

P.S. I shared some research earlier this year about the positive impact of another type of deregulation in Italy.

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Corporate Taxes and the Laffer Curve

In a new documentary film, Race to the Bottom, I had an opportunity to pontificate briefly about corporate tax and the Laffer Curve.

At the risk of understatement, I represented a minority viewpoint in the documentary. Most of the people interviewed had a negative view of tax competition, considering it to be (as suggested by the title) a “race to the bottom.”

By contrast, I view tax competition as a way of constraining the “stationary bandit” so that we don’t wind up with “goldfish government.”

For purposes of today’s column, though, I want to focus on the narrower issue of the relationship between corporate tax rates and corporate tax revenue.

In the above video, I asserted that lower rates did not result in lower revenue. Indeed, I even made the bold statement that revenues increased.

Is that correct?

Fortunately, I don’t need to do any elaborate calculations to prove my point. I’ll simply direct readers to the work of two left-leaning international bureaucracies.

Back in 2017, I cited an article form the International Monetary Fund that included a graph clearly illustrating that the drop in tax rates has not been accompanied by a drop in tax revenue.

This was a remarkable admission considering that the article argued in favor of higher tax burdens.

Likewise, last year I cited a study from the Organization for Economic Cooperation and Development that also acknowledged that falling tax rates on companies did not translate into lower revenues.

Given that the OECD has a big project to increase business tax burdens, that also was a startling admission.

None of this means, by the way, that lower rates always lead to more revenue.

Indeed, most tax cuts cause revenue to decline (though not as much as predicted by static estimates).

The bottom line is that lower tax rates are good for economic performance and my friends on the left shouldn’t get too worried about disappearing tax revenue.

P.S. There’s also some 2017 OECD data and 2018 OECD data about business tax rates and business tax revenues.

P.P.S. Earlier this year, I cited OECD data that also included personal income tax rates and tax revenue.

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The Most Economically Free State Is…

According to the Fraser Institute’s Economic Freedom of North America, the most economically free jurisdiction in North America used to be the Canadian province of Alberta.

But Alberta then slipped and New Hampshire claimed the top position. And, according to the the 2020 edition of Economic Freedom of North America, the Granite State is still the best place to live.

But since most of my readers are from the United States, let’s focus just on American states, and specifically look at how they rank based on the policies they control.

On this basis, you can see that New Hampshire is in first place, followed by Florida, Virginia, Texas, and Tennessee (if you’re looking for a common thread, four of the five have no state income tax).

Here are some highlights from the Fraser Institute’s summary.

Economic Freedom of North America 2020…measures the extent to which…individual provinces and states were supportive of economic freedom… There are two indices: one that examines provincial/state and municipal/local governments only and another that includes federal governments as well. …The all-government index includes data from Economic Freedom of the World… The top jurisdiction is New Hampshire at 8.16, followed by Florida and Idaho at 8.10 , then Wyoming (8.09) and Utah (8.08). Alberta is the highest ranking Canadian province, tied for 9th place with a score of 8.06. The next highest Canadian province is British Columbia in 27th at 7.98. …The highest-ranked Mexican state is Jalisco with 6.70… The lowest-ranked states in the United States are Delaware at 7.72 in 56th place, following Rhode Island (7.76 in 54th) and New York (7.77 in 53rd).

As I noted above, I think it’s especially instructive to see how jurisdictions compare when looking at the policies they control.

Here’s what the study says about the subnational index.

For the subnational index, Economic Freedom of North America employs 10 variables for the 92 provincial/state governments in Canada, the United States, and Mexico in three areas: 1. Government Spending; 2. Taxes; and 3. Labor Market Freedom. …There is a separate subnational index for each country. In Canada, the most economically free province in 2018 was again Alberta with 6.61, followed by British Columbia with 5.98… The least free by far was Quebec at 2.84… In the United States, the most economically free state was New Hampshire at 7.84, followed by Florida at 7.73. …(Note that since the indexes were calculated separately for each country, the numeric scores on the subnational indices are not directly comparable across countries.) The least-free state was New York at 4.25… In Mexico, the most economically free state was Jalisco at 6.57.

One obvious takeaway is to avoid Quebec and New York.

And almost all of Mexico as well.

One of the many great things about the Fraser Institute is that they are very good at sharing their data.

And, because I was curious to know what states are moving in the right direction and wrong direction, I downloaded the excel file so I could make the relevant calculations.

Here are the numbers, showing the both the overall shift since 1981 as well as the data for 1981-2000 and 2000-2018.

The good news is that every single state has more economic freedom today that it had in 1981. Michigan and Massachusetts enjoyed the biggest increases over the past four decades, though both of them still plenty of room for upward improvement.

Looking at the 1981-2000 and 2000-2018 periods, there was much more reform at the end of last century than there has been at the beginning of this century. So maybe the “Washington Consensus” influenced American states as well as foreign nations.

I realize I’m a dork about such things, but I was especially interested to see that some states (Delaware, Illinois, Maryland, New Jersey, New York, and Colorado) were very good performers in 1981-2000, but fell to the bottom group in 2000-2018.

By contrast, other states (Montana, North Dakota, Washington, and New Mexico) jumped from the bottom 10 to the top 10.

P.S. Texas ranked #1 in 1981, and by a comfortable margin, so even though it was among the bottom-10 performers for 1981-2018, it still ranks #4 overall for good economic policy.

P.P.S. Colorado dropped from #8 in 1981 to #23 in 2018, which may be a sign that the pro-growth impact of TABOR is more than offset the anti-growth impact of all the Californians that have moved to the state.

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Another Initiative to Improve the Quality of Life from the Trump Administration

Even though I agree with the “nanny state” crowd on a few issues (sugary soda and cigarettes are not healthy, for instance), I oppose their efforts to impose their preferences using government coercion.

Especially when their initiatives lower our quality of life.

• Inferior light bulbs
• Substandard toilets
• Inadequate washing machines
• Dribbling showers
• Dysfunctional gas cans
• Crummy dishwashers

Call me crazy, but I don’t like having to flush a toilet more than once.

And I really don’t like modern gas cans that spill gas all over the place as I’m trying to refill a hot lawnmower (immolation doesn’t seem like it would be a pleasant experience).

But what’s really annoying is going to a hotel that has installed low-flow showerheads, or visiting with someone who has that type of showerhead in their home. At the very least, it means you will spend at least twice as much time as normal to get clean.

Well, we have a bit of good news.

The Trump Administration wants consumers to have the option of enjoying better showers. Here are some excerpts from a CNN story by Sam Fossum and Paul LeBlanc.

The US Department of Energy on Tuesday finalized a pair of new rules rolling back water efficiency standards on showerheads… The new showerhead rule goes after the two-and-a-half-gallon-per-minute maximum flow rate set by Congress in the 1990s. Under current federal law, each showerhead in a fixture counts toward that limit collectively — but the Energy Department’s new rule means each showerhead individually can reach the limit set by Congress. …”Today the Trump Administration affirmed its commitment to reducing regulatory burdens and safeguarding consumer choice,” Secretary of Energy Dan Brouillette said in a statement. “With these rule changes, Americans can choose products that are best suited to meet their individual needs and the needs of their families.” The rollbacks were quickly rebuked by environmental advocates and consumer and appliance standards groups.

If I understand correctly, we’ll still have inadequate showerheads, but we’ll be allowed to have showers that use more than one of them.

Not the ideal outcome, to be sure, but definitely better than the status quo.

But don’t get too excited. It’s very likely that the incoming Biden Administration will propose and then adopt a new regulation to overturn what just happened.

So refurbish your shower now while the opportunity exists.

Or, if you live in a grandfathered home that still has decent amenities, don’t sell.

P.S. I’m normally not in favor of more laws, but I would strongly favor legislation mandating that all politicians and bureaucrats have to retrofit their residences any time some idiotic new regulation is imposed. In other words, no grandfathering for the ruling class. They should live by the rules they want to impose on the rest of us, whether we’re looking at showerheads, taxes, coronavirus, or education.

P.P.S. The Trump Administration also has a new rule that would allow a return to better-quality dishwashers.

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Krugman’s Failed Attack on Reaganomics

In my humble opinion, Ronald Reagan was the only president in my lifetime who deserves praise for both believing in liberty and delivering good results.

His sound policies help to explain why the economy boomed after his policies were implemented, which is in stark contrast to the economy’s anemic performance during the Obama years.

There’s really no comparison between the two.

But not everyone appreciates Reagan’s accomplishments.

In his recent newsletter, Paul Krugman of the New York Times asserts that the Gipper’s economic record doesn’t merit praise.

…the legend of the Reagan economy…plays an outsized role in conservative economic doctrine to this day. …the core of modern conservative economic doctrine is the assertion that cutting taxes, especially on the wealthy, does wonderful things for the economy. And they hold up Reagan’s economic record as proof of that doctrine’s truth. …The truth is that Reagan doesn’t deserve blame for the 1981-2 recession — but he doesn’t deserve credit for the subsequent recovery, either. Instead, it was all about the Federal Reserve. …tax-cutting conservatives have been falsely claiming credit for that growth ever since.

I give Krugman credit for realizing that it would be preposterous to blame Reagan for the 1981-82 recession (I don’t know if Krugman understands that the downturn was baked into the cake by the Carter-era inflation, but he probably knows that it began before Reagan’s tax cut was even enacted, much less implemented).

But he then makes two mistakes, neither of which is trivial.

First, Krugman overlooks all of Reagan’s other accomplishments. Not only the impact of the tax cuts and tax reform, but also the spending restraint and deregulation.

Second, he wants to give all the credit to the Federal Reserve, yet central banks, while ostensibly independent, don’t operate in a vacuum. One of Reagan’s great accomplishments – as recognized by unbiased establishment types – was to support the temporarily painful shift to a non-inflationary monetary policy.

Krugman raises several additional points in his newsletter.

Since 1990 claims that tax cuts will generate huge booms — and that tax hikes will lead to disaster — have belly-flopped again and again. President Bill Clinton’s tax increases in 1993 didn’t cause the recession just about everyone on the right predicted; President George W. Bush’s tax cuts didn’t produce a “Bush boom.” The Trump tax cut didn’t deliver anything like the promised results. In 2011 Gov. Sam Brownback of Kansas cut taxes sharply, promising that this would lead to a surge in growth. It didn’t. At the same time, California raised taxes; conservatives declared that this would be “economic suicide.” It wasn’t.

I’ll begin by (sort of) agreeing with Krugman that folks on the right can be guilty of acting as if all that matters is tax policy (in other words, the notion that all tax cuts are a guaranteed elixir for growth and that all tax increases lead to economic collapse).

That’s obviously not true. Indeed, fiscal policy only accounts for about 20 percent of a nation’s score in Economic Freedom of the World. And since fiscal policy also includes the burden of government spending, that means tax policy may only explain about 10 percent of economic performance.

And when you understand that, it’s easy to see that Krugman is attacking a straw man.

For instance, nobody should be surprised that the economy didn’t do well under Bush because his one good policy (the 2003 tax cut) was more than offset by all of his bad policies (more spending, more regulation, entitlement expansion, education centralization, TARP, etc).

Likewise, nobody should be surprised that the economy prospered under Clinton because his one bad policy (the 1993 tax hike) was more than offset by all the good policies adopted in the 1990s (spending restraint, welfare reform, deregulation, etc).

The bottom line is that good tax policy is important, but you also have to pay attention to all the other policies that also impact economic performance.

And when you do, Reagan’s performance looks even more impressive.

P.S. Reagan did engage in some protectionism, unfortunately, which is why America’s score on trade declined during the 1980s. In his defense, I’ll point out that Reagan believed in free trade and he was the one who started the negotiations that led to both NAFTA and the WTO. So I would argue that, in the long run, his tenure was a net plus for trade.

P.P.S. When I write about Reagan’s policies, I can’t resist pointing out that his policies resulted in big increases in tax revenue from upper-income taxpayers (in other words, powerful evidence of the Laffer Curve).

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Happy 229th Anniversary to the 2nd Amendment

When I write about gun control, it’s normally to make wonky points about how gun ownership reduces crime by changing the cost-benefit analysis of potential bad guys.

Today, in honor of Bill of Rights Day, let’s change the focus and celebrate the ratification of the 2nd Amendment. It was on this day, back in 1791, that the right to keep and bear arms was added to the Constitution.

To celebrate that freedom, here are some wise observations by some of America’s Founders. We’ll start with Thomas Jefferson.

Next is Samuel Adams.

Here’s what George Mason had to say.

Thomas Paine had the right perspective.

And we’ll finish up by sharing some wisdom from James Madison.

P.S. I feel quite confident that all of these quotes are genuine (not an easy task when perusing the Internet).

P.P.S. Maybe I’m being a Pollyanna, but it does seem that more folks on the left are coming to their senses on the issue of gun control.

• 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.
• More recently, 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, Alex Kingsbury in 2019 acknowledged the futility of gun control in a column for the New York Times.

P.P.P.S. Feel free to enjoy this collection of satire on the topic of gun control.

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Libertarian Humor

Yesterday’s column featured anti-libertarian humor. Normally, I don’t believe in providing equal time (you’ll never find me writing about the benefits of higher taxes or more spending), but clever political humor is exempt from that rule.

So enjoy pro-libertarian humor, starting with this anthem from Dominic Frisby.

What’s especially clever is that Frisby used the music from the Russian national anthem. That’s a very good example of repurposing.

It goes without saying that Liberland should adopt this song.

Our next item is this meme, which is especially amusing to me since I’ve made this exact argument.

Heck, we’re crazy enough to like the idea of private roads, so there wouldn’t be any point of a government car registry in our libertarian fantasy world.

Let’s shift to politics, where there’s been a lot of over-heated rhetoric about whether divisions in American society will lead to insurrection and strife.

If so, this clever meme warns both Democrats and Republicans they should be careful what they wish for.

This next item appealed to me for the obvious reason.

Last but not least, here’s Ron Swanson initiating a helpless victim into libertarianism.

Needless to say, he’s right about Franklin Roosevelt.

P.S. Dominic Frisby also deserves applause for his video about Brexit.

P.P.S. The entire collection of pro-and-con libertarian humor is available here.

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Anti-Libertarian Humor

The good thing about being a libertarian is that governments around the world are constantly doing things that reinforce the wisdom of our ideas.

The bad thing about being a libertarian is that politicians very rarely care about – or act upon – our ideas for better policy (thank you, public choice).

To add insult to injury, we also get mocked, usually for being doctrinaire and/or dorky.

Today’s column will feature new examples of anti-libertarian satire. We’ll start with a story about a Libertarian Doofus.

This clever jab would be even better if the person who put it together understood the difference between commensurate and consummate, but let’s not get hung hung up on details.

The point is that libertarians have a reputation for dorkiness, particularly when it comes to romance. Indeed, Garth Tundrell is actually the fifth iteration of Libertarian Doofus (see Part I, Part II, Part III, and Part IV).

Our next item isn’t satire. It’s a real-life report, by Sean Illing at Vox, about the failure of a libertarian community in New Hampshire.

But I’m sharing it today because libertarians are definitely the target of some mockery.

Every ideology produces its own brand of fanatics, but there’s something special about libertarianism. …they…tend to be cocksure about core principles in a way most people aren’t. If you’ve ever encountered a freshly minted Ayn Rand enthusiast, you know what I mean. And yet one of the things that makes political philosophy so amusing is that it’s mostly abstract. You can’t really prove anything — it’s just a never-ending argument about values. Every now and again, though, reality intervenes in a way that illustrates the absurdity of particular ideas. Something like this happened in the mid-2000s in a small New Hampshire town called Grafton. …The experiment was called the “Free Town Project” (it later became the “Free State Project”), and the goal was simple: take over Grafton’s local government and turn it into a libertarian utopia. The movement was cooked up by a small group of ragtag libertarian activists who saw in Grafton a unique opportunity to realize their dreams of a perfectly logical and perfectly market-based community. Needless to say, utopia never arrived, but the bears did!

For the article, Mr. Illing interviewed Matthew Hongoltz-Hetling, author of a new book titled A Libertarian Walks Into a Bear. Here’s some of what Mr. Hongoltz-Hetling said about the Grafton experiment.

…a bunch of loosely affiliated national libertarians…chose a town in rural New Hampshire called Grafton that already had fewer than 1,000 people in it. And they just showed up and started working to take over the town government and get rid of every rule and regulation and tax expense that they could. …so all of a sudden the people in Grafton woke up to the fact that their town was in the process of being invaded by a bunch of idealistic libertarians. …They tried unsuccessfully to withdraw from the school district and to completely discontinue paying for road repairs, or to declare Grafton a United Nations free zone, some of the outlandish things like that. But they did find that a lot of existing Grafton residents would be happy to cut town services to the bone. And so they successfully put a stranglehold on things like police services, things like road services and fire services and even the public library. …Basically, Grafton became a Wild West, frontier-type town. …the bears in the area started to take notice… Free Towners…just threw their waste out how they wanted. They didn’t want the government to tell them how to manage their potential bear attractants. …So they started aggressively raiding food and became less likely to run away when a human showed up. …more bear attacks will come. Luckily, no one’s been killed, but people have been pretty badly injured.

The moral of this story, I guess, is that libertarianism leads to bear attacks.

But that’s presumably better than the supposed libertarian policies contained in this cartoon (some of my lefty friends actually believe this).

For what it’s worth, this mimics the satire about Ron Paul’s breakfast, but isn’t nearly as clever and funny.

We’ll close with this look at how libertarians perceive themselves vs what they actually are.

Ouch. Since I spend much of my time in front of a computer, this one hurts.

Sort of like the final two images in this collage.

But I guess that’s better than being some of these libertarians.

P.S. You can peruse the entire collection of libertarian humor, including pro-libertarian items, by clicking here.

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The Benefits of Dollarization

I’m not a fan of the European Union, which has morphed from something good (a free-trade pact) to something bad (a pro-centralization,wannabe United States of Europe that exacerbates the continent’s tax-and-spend mentality).

Indeed, that’s why I’m a huge fan of Brexit. The United Kingdom is wise to escape the sinking ship.

But notwithstanding all my critiques of the E.U., I’ve never blamed or condemned the euro currency.

Why? Because many of the nations that joined that common currency did a lousy job when they had national currencies. Italy and Greece, for instance, routinely used their central banks as printing presses to help finance bloated budgets.

And that inflation exacerbated all the other economic problems that existed.

The bottom line is that many nations would benefit if they took monetary policy away from their politicians and instead adopted the currency of a nation with a better track record.

That happened in Europe when the euro was adopted since it means – for all intents and purposes – that Mediterranean nations use a currency that is controlled by Germany.

This lesson should be applied elsewhere in the world, which is why “dollarization” can be a good idea.

Professor Steve Hanke of Johns Hopkins University wrote a good description of this concept for National Review.

Before the rise in central banking (monetary nationalism), the world was dominated by unified currency areas, or blocs, the largest of which was the sterling bloc. As early as 1937, the great Austrian economist and Nobel winner Friedrich von Hayek warned that the central banking fad, if it continued, would lead to currency chaos and the spread of banking crises. …Indeed, for most emerging‐​market countries with central banks, hot money flows are frequent and so are exchange‐​rate and domestic banking crises. What to do? The obvious answer is for vulnerable emerging‐​market countries to do away with their central banks and domestic currencies, replacing them with a sound foreign currency.  Today, 32 countries are “dollarized” and rely on a foreign currency as legal tender. …Panama, which was dollarized in 1903, illustrates the important features of a dollarized economy. …The results of Panama’s dollarized money system and internationally integrated banking system have been excellent when compared with other emerging-market countries… Emerging-market countries should follow Panama’s lead and “dollarize.” Most central banks in emerging countries produce junk currencies, banking crises, instability, and economic misery. These central banks should have been mothballed and put in museums long ago.

And there are many nations that would benefit if they used the U.S. dollar.

Back in 2018, Mary Anastasia O’Grady opined in the Wall Street Journal that Argentina should dollarize.

Another currency crisis is roiling Argentina… The question that seems to be on everyone’s lips: Why is this happening again… The answer: Because Argentina still has a central bank. To fix the problem once and for all, it should dollarize. …an IMF package can’t cure what ails the peso. This is a long-term political problem that has manifested itself in repeated economic crises since the mid-20th century. The government lives beyond its means while taxes and regulations, particularly on labor, make many businesses uncompetitive. The net effect is always the same: ballooning debt and a lethargic economy followed by devaluation or default or both. …The fastest way to restore confidence would be to put an end to the misery caused by the peso and to adopt the dollar. Argentines could then get on with the business of saving and investing in their beautiful country.

The Wall Street Journal has editorialized in favor of dollarization in Argentina.

Dollarizers face resistance from the Peronist party, which relies on the inflation tax to fund its populism when revenues run low. Yet demand for dollars suggests…popular backing for adopting the greenback as the national currency. …Panama has used the dollar as legal tender since 1904, and El Salvador and Ecuador dollarized in 2000. Ecuador did it to resolve a banking crisis and El Salvador did it to bring down interest rates. El Salvador and Panama now have the lowest domestic borrowing rates in Latin America and the longest maturities. Ecuador has price stability not seen in at least a half century.

Here’s the real shocker. As reported by Reuters, Venezuela is on the verge of dollarizing.

Venezuelan President Nicolás Maduro embraced the currency of his bitter rival the United States on Sunday, calling it an “escape valve” that can help the country weather its economic crisis… The official currency, the bolivar, has depreciated more than 90% this year, while hyperinflation in the first nine months of the year clocked in at 4,680%… “I don’t see it as a bad thing … this process that they call ‘dollarization,’” Maduro said in an interview broadcast on the television channel Televen. “It can help the recovery of the country, the spread of productive forces in the country, and the economy … Thank God it exists,” the socialist leader said.

Writing for National Review, Professor Steve Hanke explains that Maduro has no choice but to move in the right direction.

Maduro, in a rare display of good judgment, is taking a necessary step toward what I have been advocating for many years: official dollarization in Venezuela. …Venezuela’s bolivar is worthless, and its annual inflation rate is the world’s highest…2,156 percent per year. Not surprisingly, Venezuelans get rid of their bolivars like hot potatoes and replace them with U.S. dollars. So, Venezuela is, to a large extent, unofficially dollarized. Official “dollarization” is a proven elixir. I know because I operated as a state counselor in Montenegro when it dumped the worthless Yugoslav dinar in 1999 and replaced it with the Deutsche mark. I also watched the successful dollarization of Ecuador in 2001… Countries that are officially dollarized produce lower, less variable inflation rates and higher, more stable economic growth rates than comparable countries with central banks that issue domestic currencies. There is a tried-and-true way to stabilize the economy…since more than 80 percent of transactions in Venezuela take place in U.S. dollars, it doesn’t seem unreasonable to think that the approval rating would now exceed 80 percent. So, it’s not surprising that Maduro has embraced the dollarization idea. After all, the public already does.

In another column for National Review, Steve Hanke and Craig Richardson cite what’s been happening in Zimbabwe.

They begin by pointing out that part of that nation has avoided problems by using the dollar.

Zimbabwe’s economy has gone through the wringer. In just 20 short years, it has witnessed two episodes of hyperinflation. And, if that wasn’t bad enough, Zimbabwe’s real GDP per capita has plunged by 21 percent over that same period. …But,…when you enter the town of Victoria Falls, it’s as if you have walked into an alternative African economic universe. Victoria Falls is an island of stability in Zimbabwe, a country that has descended into monetary and fiscal chaos. How could this be? …Victoria Falls…has long operated under very different monetary rules. …the glue that holds Victoria Falls together is the U.S. dollar. It’s the coin of the realm in Victoria Falls. Yes, Victoria Falls is officially dollarized. It only accepts U.S. dollars for payment of property taxes and keeps its books in U.S. dollars as well.

But they also note that the entire nation enjoyed the benefits of dollarization, at least until venal politicians opted out because they wanted the power to finance more spending by printing money.

…in February 2009, a unity government was formed. …In one of its first acts, the unity government scrapped the Zimbabwe dollar and officially dollarized the country. In so doing, the printing presses were shut down; the U.S. dollar became legal tender, taxes were required to be paid in dollars, and government accounts were kept in dollars. With the imposition of a hard budget constraint, the fiscal deficit disappeared, and the economy boomed. That rebound persisted during the term of the national unity government, which lasted until July 2013. Indeed, during this period, real GDP per capita surged at an average annual rate of 11.2 percent. Zimbabwe’s period of stability was short lived, however. With the collapse of the unity government and the return of Mugabe’s ZANU-PF party, government spending and fiscal deficits surged, resulting in economic instability. To finance its deficits, the government created a “New Zim dollar,” and Zimbabwe de-dollarized. …The money supply exploded, as did inflation.

This column has focused on dollarization, but there are other currencies that are serve the same role. And there are currency boards/pegs as well.

This map from Wikipedia provides a helpful summary.

P.S. Some people will point out that the dollar doesn’t have a great track record and the the Federal Reserve has behaved imprudently. I certainly won’t argue against those observations. But if I’m a Venezuelan or Argentinian, I’d still prefer the dollar over a currency controlled by my politicians.

P.P.S. It’s probably in the interests of the United States to have more nations dollarize, which is an argument against extraterritorial policies that discourage use of the dollar.

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The Humor Version of Left-Wing Hypocrisy

I’ve written about how our friends on the left represent the rich, and pointed out how big parts of their agenda are designed to help people with above-average incomes.

Today, let’s have some fun with that issue.

Bernie Sanders has three houses, yet complains about the supposed excesses of capitalism. I wonder if he applies that analysis to his Mini-Me, Congresswoman Alexandria Ocasio-Cortez?

But that $3,500-plus ensemble is chump change compared to what she wore for Vanity Fair‘s obsequious cover story.

AOC on the cover of Vanity Fair. The clothes are estimated to cost $14,000. So happy that AOC is upholding the long established hypocritical tradition of Socialists who believe Socialism is for poor while they enjoy the fruits of Capitalism. pic.twitter.com/g8iTa1my1q

— Sunanda Vashisht (@sunandavashisht) October 29, 2020

Next, we have the irony of “AOC” augmenting her financial status by selling $58 “tax the rich” t-shirts.

By the way, just in case you think I’m making this up, here’s AOC’s tweet.

In other words, we have one rich person selling over-priced products to other rich people so they can virtue-signal about how awful it is that some people are rich.

The Babylon Bee has some satire on other products AOC could sell.

In an Instagram live video recorded in her posh D.C. apartment, Alexandria Ocasio-Cortez announced today she is now selling Tax the Rich Caviar for just $10,000 a can. “Show everyone how bad the rich people are with this delicious caviar,” the website reads. “All our Tax the Rich caviar is responsibly sourced, with all proceeds going to help Alexandria Ocasio-Cortez tax the rich.” …Many people are criticizing the products as tone-deaf and out of touch, but Ocasio-Cortez says she is making a list of these people for some future purpose.

Let’s close with Crazy Bernie, joined by fellow millionaires (and fellow hypocrites) Elizabeth Warren and Michael Moore.

I don’t know if they were actually discussing inequality when that photo was snapped, but all three of them definitely enjoy the blessings of capitalism while pushing policies that would prevent other people from becoming similarly wealthy

 

P.S. Let’s not forget about other left-wing millionaires, such as Joe Biden, John Kerry, Bill and Hillary Clinton, and the Governor of Illinois, all of whom want to atone for their wealth by raising taxes on the rest of us.

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Time to Surrender on Entitlement Reform?

Back in 2015, just five years ago, it seemed like entitlement reform might happen.

Republicans in the House and Senate voted for budgets based on much-needed changes to Medicare and Medicaid. That was only a symbolic step with Obama in the White House, to be sure, but the presumption was that actual reform would be possible if Republicans controlled both the White House and Congress after the 2016 election.

The good news is that the GOP did wind up in control of Washington.

The bad news is that Donald Trump was in the White House.

Given his unfortunate views on government spending, that killed entitlement reform for the past four years.

And now Biden will be in the White House, and he wants to expand those programs, so that presumably kills reform for the next four years.

But does that change the fact that the programs should be reformed?

In a column for National Review, Fred Bauer asserts that Republicans should give up on trying to control big government.

Republicans…risk being lured toward a pivot back to 2010s-style austerity politics during the Biden administration, with a renewed focus on the federal deficit and entitlement reform. …Trying to push party-line entitlement reform has backfired on the GOP again and again in the recent past. George W. Bush’s 2005 Social Security–privatization proposal kneecapped his second term from the start. In 2012, Republicans got bogged down defending their position on Medicare reform… retreating to austerity politics could cost Republicans a chance to promote other kinds of reforms that would strengthen workers and families: fixing the medical marketplace (by reducing cartelization, revising medical licensing, etc.), passing a 21st-century infrastructure program, trying to secure a strategic industrial base, enacting smarter regulation of Big Tech that addresses market concerns and serves the public welfare, offering Americans family tax credits, and so on.

Also writing for National Review, Yuval Levin of the American Enterprise Institute explains that we have no choice but to grapple with entitlements.

The Republican Party has styled itself the party of fiscal restraint for the better part of a century… But there hasn’t been much action, or much willingness to expend political capital or make some painful deals to achieve a meaningful change in the trajectory of the government’s finances. …the willful blindness of the Trump era…means the underlying fiscal problems have grown worse… the costs of fiscal irresponsibility have more to do with constraints on future growth… Fiscal reform will need to involve changes to these programs.

Levin even suggests that entitlement reform is so important that it might be worth ceding ground in other areas.

Repub­licans should be willing to make bargains that involve leaving discretionary spending untouched, or even on a path of modest growth, if that allows for some reforms of entitlements. They should also be willing to contemplate tax increases and reforms that move the burden of federal revenue upward on the income scale, provided such changes do not unduly undermine growth.

My two cents is that Levin is right and Bauer is wrong.

To be sure, I don’t agree with everything Levin wrote (it’s theoretically possible to make a tax increase acceptable, for instance, but that won’t happen in the real world). But at least he recognizes the long-run spending outlook is so dour that entitlement reform is absolutely necessary.

Bauer, by contrast, argues that we should throw in the towel because reform is politically difficult.

I think he misreads the evidence.

Regarding Social Security, Bush got elected twice while supporting personal accounts, but the issue never went anywhere in his second term in large part because the White House never proposed a plan. Moreover, the public continued to be supportive of the idea of personal accounts, even after Bush left office.

Likewise, I think Bauer is wrong on Medicare and Medicaid. Republicans easily maintained control of the House in 2012, 2014 and 2016, notwithstanding Democratic attacks that they wanted to “push granny off a cliff.” And they still control the Senate after years of similar attacks.

But even if Bauer was right about the politics, he’s wrong about policy.

America will become another Greece if we don’t reform entitlements. That will be bad for the nation. It will be bad for our economy. It will be bad for our children and grandchildren. It will be bad for the fabric of our society.

The bottom line is that entitlement reform is the patriotic thing to do.

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Debt, Deficits, and Goldilocks

At the risk of oversimplification and exaggeration, these six principles tell you everything you need to know about fiscal policy.

For purposes of today’s column, let’s focus on Principle #3, which is that “Deficits and debt are symptoms of the underlying problem” of excessive spending.

I’ve been making that point over and over and over and over and over again, but I feel motivated to address the issue again after reading two columns about government debt.

First, here’s some of what Paul Krugman wrote on the topic for his column in the New York Times.

…we’ve learned a lot about the economics of government debt over the past few years — enough so that Olivier Blanchard, the eminent former chief economist of the International Monetary Fund, is talking about a “shift in fiscal paradigm.” And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do. …It made some sense, nine or 10 years ago, to worry that the financial crisis in Greece was a harbinger of potential debt crises in other countries. …What briefly seemed like a spread of Greek-style problems across southern Europe turned out to be a temporary investor panic, quickly ended by a promise from the European Central Bank that it would lend money to cash-short governments if necessary. …We weren’t and aren’t anywhere close to that kind of crisis, and probably never will be. …But what about the longer term? …The important point for current discussion is that government borrowing costs are now very low and likely to stay low for a long time. …given what we’ve learned and where we are, it’s clear that the U.S. government should be investing heavily in the nation’s future, and that it’s OK, indeed desirable, to borrow the money we need to make those investments.

Second, Brian Riedl of the Manhattan Institute provides a different perspective in a column for today’s Washington Post, .

The election of Joe Biden to the presidency has prompted liberal calls to set aside pesky budget deficit concerns and go deeper into debt to finance large new spending initiatives… All these writers share the view that the persistence of low interest rates — currently about 1 percent for a 10-year Treasury bill — means the rules of the fiscal game have fundamentally changed. …But…deficit advocates must face two fundamental realities: First, the debt is already set to soar in the absence of any new spending. And second, these bloated debt levels will mean that any future rise in interest rates could bring a full-scale debt crisis. …Deficit doves are essentially gambling the future of the U.S. economy on the expectation that interest rates never again exceed 4 percent or 5 percent. …they are wrong to assume that state of affairs will continue. …Exceeding the projections by two or three points would mean annual interest costs consuming all projected tax revenue, leaving no taxes to finance normal federal programs. These debt spirals become nearly impossible to escape, as rising interest costs necessitate more borrowing, which in turn brings higher interest costs… Deficit doves would gamble America’s economic future on the hope that interest rates will never again top 4 or 5 percent. Are you feeling lucky?

At the risk of sounding like a muddle-headed, finger-in-the-wind moderate, I’m going to disagree with both of them (I’m like Goldilocks, who doesn’t want the porridge too hot or too cold).

I have a fundamental disagreement with Krugman because he’s overtly arguing for a bigger burden of government. Based on his past writings, he is willing to use higher taxes to finance some additional spending.

But the aforementioned column confirms that he’s in favor of a big amount of additional debt-financed spending as well.

He presumably wants to move the country into the lower-right quadrant of this 2×2 matrix, but doesn’t mind getting there by detouring through the lower-left quadrant.

My disagreement with Brian is probably more a matter of rhetoric. Based on his past writings, I think he wants to be in the upper-left quadrant, but he has an unfortunate tendency to fixate on the symptom of debt and deficits when he should be focusing on the underlying disease of excessive government spending.

My bottom line if that bigger government is a bad idea when it’s financed by debt, but it’s an equally bad idea if it’s financed by taxes.

Moreover, I worry when well-meaning people grouse about red ink because that creates an opening for not-so-well-meaning people to say, “I agree with you, so let’s raise taxes.”

P.S. In the real world of Washington (as opposed to blackboard theorizing), higher taxes lead to higher deficits and more debt.

P.P.S. Assuming they’re both sincere and guided by empiricism, people who care about red ink should support a spending cap.

P.P.P.S. Maintained for a sufficient period of time, spending restraint can even eliminate huge debt burdens.

 

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Policing for Profit Is Morally Offensive

Since I’m an economist specializing in public finance, I get very upset about punitive tax policy and wasteful government spending.

But what really gets my blood boiling is reading about the horrific policy of civil asset forfeiture, which literally allows government to steal your property even if you haven’t been convicted of a criminal offense. Or, in many cases, even charged with any wrongdoing!

I’ve decided to revisit this issue because of a recent tweet reminding us that the people who are supposed to protect us actually take more of our property than burglars.

What’s particularly nauseating is that this policy gives law enforcement an incentive to misbehave.

Consider, for instance, these details from a 2014 story in the New York Times.

…civil asset forfeiture…allows the government, without ever securing a conviction or even filing a criminal charge, to seize property suspected of having ties to crime. The practice, expanded during the war on drugs in the 1980s, has become a staple of law enforcement agencies because it helps finance their work. …The practice…has come under fire…amid a spate of negative press reports and growing outrage among civil rights advocates, libertarians and members of Congress who have raised serious questions about the fairness of the practice, which critics say runs roughshod over due process rights. …Much of the nuts-and-bolts how-to of civil forfeiture is passed on in continuing education seminars for local prosecutors and law enforcement officials… In the sessions, officials share tips on maximizing profits, defeating the objections of so-called “innocent owners” who were not present when the suspected offense occurred, and keeping the proceeds in the hands of law enforcement…seized money has been used by the authorities, according to news reports, to pay for sports tickets, office parties, a home security system and a $90,000 sports car. …forfeitures were highly contingent on the needs of law enforcement. …Flat screen televisions…“are very popular with the police departments.”

This is why asset forfeiture is accurately described as “policing for profit.”

There was some good news on this issue last year in South Carolina, as reported by the Greenville News.

A South Carolina circuit court judge in Horry County has ruled the state’s civil asset forfeiture law unconstitutional, in violation of the U.S. Constitution’s Fourth, Fifth and 14th amendments. …Earlier this year The Greenville News published coverage from a two-year investigation into civil asset forfeiture in South Carolina. …Nearly 800 times when police seized money or property, no related criminal charge was filed. In another 800 cases, someone was charged with a crime but not convicted. …About 65% of the cases involved black men though black men make up just 13% of the state’s population. …John’s written decision found that South Carolina’s forfeiture laws violate both the federal and state constitutional protections against excessive fines by allowing the government to seize unlimited amounts of cash and property that aren’t proportionate to the alleged crime. …The judge’s ruling signals how he would approach forfeiture cases in his court in the future but doesn’t set precedent across the state.

What we really need, of course, is a ruling from the U.S. Supreme Court that civil asset forfeiture violates the Constitution (violates the presumption of innocence, excessive punishment, etc), and there are some reasons to hope that may soon happen.

It’s also good news that conservatives have joined with libertarians (such as the great people at the Institute for Justice) in opposing this egregious practice.

Here are some excerpts from a National Review article by Isaac Schorr.

The process is broken. …the government brings charges against the property itself without leveling any against the property owner. On a federal level, criminal behavior need not be proven for law enforcement to initiate civil-asset-forfeiture proceedings; mere suspicion is considered reason enough. It’s worth noting that as California’s attorney general, Democratic vice-presidential nominee Kamala Harris strongly supported handing this same power to local law enforcement — for the people, of course. …Why has civil-asset forfeiture, which flies in the face of American expectations of due process and the presumption of innocence, been allowed to persist in its current form? It’s all about the Benjamins. …This practice…provides local authorities with perverse incentives. …they can move to forfeit property under federal law and take up to 80 percent of what the property is worth,” which gives them “a direct financial stake in forfeiture encourag[ing] profiteering and not the pursuit of justice.” What police department would not take advantage of such a profitable opportunity, particularly when those profits are not subject to the same oversight as taxpayer dollars?

When cops lose access to this loot, they naturally complain.

Here are some passages from a story in the Mercury News.

While the value of property seized in California has skyrocketed, the state’s share of the booty — which has traditionally helped fund local police agencies — has plunged. That’s largely because of a new state law seeking to protect personal property, allowing local agencies to keep proceeds from asset seizures only when people are convicted of a crime, rather than simply when they’re arrested. …California…passed laws — more stringent than the federal government — restricting when state and local police could seize private property. So local agencies worked around them by partnering directly with the U.S. Department of Justice in asset-forfeiture cases, bypassing the rules in state laws. SB 443 closes that loophole for state and local agencies — but not for the federal government, which can continue to seize property without criminal convictions. …The Golden State is trying to set a good example and do the principled thing, even as the federal government goes in the opposite direction, said Gregory Chris Brown, associate professor of criminal justice at Cal State Fullerton.

In other words, fixing this problem involves all levels of government.

Local law enforcement needs to stop policing for profit.

State government needs to stop policing for profit.

And Uncle Sam needs to get out of the racket as well.

Speaking of the federal government, the Obama Administration took a tiny step in the right direction, but the Trump Administration has been very unhelpful.

And what about the incoming Biden Administration? I haven’t seen any indication, but I’m not brimming with optimism given Biden’s generic desire for Washington to have more money, as well as his unpalatable record as a booster of the failed War on Drugs.

But hopefully he’ll surprise me.

In the meantime, let’s keep our fingers crossed for further reforms at the state level.

Let’s close by recycling a great video on this issue from the folks at Reason.

P.S. It’s worth noting that the first two people in charge of asset forfeiture for the federal government have since come out against this odious practice.

P.P.S. Here’s some sauce-for-the-goose-sauce-for-the-gander humor involving asset forfeiture.

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The Six-Triangle Test of Political Philosophy

Even if these things are simply click-bait, I can’t resist taking online tests and quizzes that ostensibly reveal a person’s philosophical outlook.

• The Political Compass test (I’m a “right libertarian”).
• The Definitive Political Orientation Test (Once again, I’m a “right libertarian”).
• The Circle Test (I’m a “minarchist”).
• The Libertarian Purity test (I’m a “hard-core libertarian”).
• The 8 Values test (I’m a “libertarian capitalist”).
• The World’s Smallest Political Quiz (I’m a “100-percent libertarian”).
• The 5-Dimensional quiz (I’m a “conservative libertarian total-isolationist nationalist traditionalist”).
• The Political Sextant Quiz (I’m 92 percent for “minarchism”)
• The Communism Test (thankfully, with a score of 6 percent, I’m “not communist”).

Today, I’m writing about another version. It’s called the Six-Triangle Test and it’s supposedly special because you get three-dimensional analyses of your approach to various issues.

You can take a 72-question test or a 144-question test, depending on how much time you have (or your tolerance level).

As is often the case, I think some of the questions are poorly worded. For instance, there are people in Bangladesh who presumably work much harder than any of us, yet they don’t make much money because what actually matters is productivity per hour worked. So this question left me with mixed feelings. I assume I should answer “strongly agree,” but that’s not technically accurate.

Likewise, I wanted to answer “strongly disagree” on this next statement because I assume that would be the most pro-free market answer. That being said, while I view capitalism as a system that generates mass prosperity, doesn’t the existence of “public goods” suggest that it’s not the answer to everything?

I also wasn’t sure how to respond to this statement about international cooperation. Does that mean open trade? If so, my response is “strongly agree.” But if cooperation means a global tax cartel, my answer is “strongly disagree.”

Here’s one more example. Does free education mean dumping kids into sub-par government schools? Or does it mean comprehensive school choice? Needless to say, there are wildly different answers depending on how the statement is interpreted (for what it’s worth, I’m assuming “strongly agree” is interpreted as a left-wing answer).

I realize that I’m being somewhat pedantic, but I figure I should share my concerns.

In any event, before giving my results, I want to nit-pick one other aspect of the test.

It’s designed to measure your ideology on six different issues – economics, personal freedom, culture, equality, government, and foreign policy. And it uses three different ways of measuring those six issues.

In many cases, such as the approach to economics, I think this makes a lot of sense. Your answers determine whether you want socialism (“control”), laissez-faire (“markets”), or a mixed approach (“regulation”).

That being said, I don’t like how they measure responses to equality. More specifically, “burden” implies that if you oppose redistribution, then you somehow don’t want others to succeed.

At the risk of stating the obvious, redistribution tends to trap people in poverty and dependency. At the very least, the description is misguided.

With that final bit of grousing out of the way, here are my results.

But that doesn’t tell you much unless you know what the symbols mean.

So here are my results for each category, based on the three variables.

Other than my already-discussed qualms about the way equality is measured, I’m happy with the results. I am a fanatic for markets over government, I have a minarchist view of government as opposed to statism (or anarcho-capitalism), and otherwise believe in freedom.

Regarding the results for equality, I am pleased that I got 0% for equality of outcomes. In other words, nobody can accuse me of having Kamala Harris’ warped point of view.

P.S. Here’s the link again to the test if you want to take it. Feel free to share your results in the comments section, along with any analysis.

P.P.S. I don’t object to “moderate isolationism” as a summary of my views on foreign policy, but don’t understand why I got 31.3 percent for “imperialism” and also wonder whether they use the right definition of globalism (i.e., globalization rather than global governance).

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Texas vs. California, Part VI

I asked a couple of years ago, “How long can California survive big government?”

Based on migration patterns, the answer is “Not much longer.” Simply stated, bad fiscal and regulatory policy have produced a long-run decline for the Golden State. So we shouldn’t be surprised that people are fleeing.

And it appears Californians like escaping to Texas, a state with no personal or corporate income tax.

I’ve written several times about the divergent performance of the two states.

• March 2010
• February 2013
• April 2013
• October 2018
• June 2019

So let’s make today’s column the sixth edition of Texas vs. California.

We’ll start with a column in the Wall Street Journal by Joe Lonsdale, a venture capitalist who explains why he and his company are moving to Texas.

I love California…and have spent most of my adult life in the San Francisco Bay Area, founding technology companies like Palantir and Addepar and investing in many others. In 2011 I founded 8VC, a venture-capital firm that today manages more than $3.6 billion in committed capital. …I am moving myself and dozens of my 8VC colleagues to a new land of opportunity: Texas. The harsh truth is that California has fallen into disrepair. Bad policies discourage business and innovation, stifle opportunity and make life in major cities ugly and unpleasant. …That’s not all. The California government is beholden to public-employee unions and spending is out of control. A broken environmental review process means it takes a decade of paying lawyers to build anything. Legislation makes it impossible for businesses to hire contractors without an exemption—granted by friends in the legislature, as with the music industry, or won by spending hundreds of millions on a referendum, as gig-economy companies with drivers just did. This isn’t how business is done in developed countries. …It’s tragic that California is no longer hospitable to that mission, but beautiful that Texas is. Our job as entrepreneurs and investors is to build the future, and I know of no better place to do so than Texas.

In a report for CNBC, Ari Levy and Lora Kolodny write about Elon Musk’s looming escape to the Lone Star State.

Tesla CEO Elon Musk put his California houses on the market this year while he was sparring with state lawmakers over Covid-19 restrictions. He’s simultaneously been expanding operations in Texas and cozying up to Republican Gov. Greg Abbott. Now, several of his close friends and associates say that Musk has told them he’s planning to move to the Lone Star State. …California, often condemned by the super rich for its high tax rates and stiff regulations, has seen an exodus of notable tech names… In May, as businesses across California were forced to remain closed because of the pandemic, Musk tweeted that he was moving Tesla’s headquarters and future development from California to Texas and Nevada. Getting out of California, with the highest income tax in the country, and into Texas, which has no state income tax, could save Musk billions of dollars.

Meanwhile, Hewlett Packard already has made the move, as reported by the Associated Press.

Tech giant Hewlett Packard Enterprise said it is moving its global headquarters to the Houston area from California, where the company’s roots go back to the founding of Silicon Valley decades ago. …”As we look to the future, our business needs, opportunities for cost savings, and team members’ preferences about the future of work, we are excited to relocate HPE’s headquarters to the Houston region,” CEO Antonio Neri said in a written statement… moving out of Northern California is a loss, at least symbolically, for the tech industry that electronics pioneers William Hewlett and David Packard helped start in a Palo Alto garage in 1939. A plaque outside the home where they worked on their first product, an audio oscillator, calls it the birthplace of Silicon Valley, the “world’s first high-technology region.”

To be sure, the three stories shared above are anecdotes.

But if you look at comprehensive data on both people and income, there’s a very clear pattern. Simply stated, Texas is winning and California is losing.

No, this doesn’t mean Texas is perfect. Or that California is always bad (it’s much better than Texas with regards to asset forfeiture, for instance).

But it’s hard to feel much optimism about the Golden State.

P.S. My favorite California-themed jokes (not counting the state’s elected officials) can be found here, here, here, and here. And here’s some tongue-in-cheek advice for California from the recently departed Walter Williams.

P.P.S. If you prefer comparisons of New York and Florida, click here, here, here, and here.

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Gun Control Humor

Donald Trump has his share of flaws and he wasn’t the type of Republican I like, but that doesn’t prevent me from acknowledging that he was good on some important issues. He moved tax policy in the right direction, for instance, and also began to reverse the tide of red tape.

I fully expect the Biden White House to be much worse on those issues. And I’m sure Biden will also try to move policy in the wrong direction on other issues as well, including a push for gun control (an issue where Biden is both wrong and clownish).

It’s therefore likely that the upcoming years will require some columns about why his anti-gun agenda would undermine the Constitution, increase crime, and diminish freedom.

Before having to wrestle with those serious topics, though, let’s enjoy another edition of satire about gun control. We’ll start with this item that definitely elicited a chuckle from me.

If you want some serious discussion of armed teachers, click here and here.

But I want to stick with humor, so let’s go to this item about the difference between conservatives and libertarians.

Reminds me of the difference between liberals, conservatives, and Texans.

This following item compares Maine and Chicago.

Very reminiscent of “research” on the difference between Houston and Chicago.

Here’s some diversity that everyone can support.

Next we have a reminder that the 2nd Amendment is not about hunting.

As usual, I’ve saved the best for last.

This final image is amusing, particularly as I imagine my left-leaning friends spluttering as they try to argue with its logic.

As you might suspect, those friends also haven’t been able to get a passing grade on the gun control IQ test.

P.S. For those interested, I have an entire collection of gun control humor.

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Bureaucrat(s) of the Year

The most-common complaint about bureaucrats is that they’re lazy.

Though it’s probably more accurate to say that bureaucracies have very little incentive to care about citizens.

After all, the rest of us are captive customers, whether we’re dealing with the federal government’s postal service, a state motor vehicles department, or a local government’s education bureaucracy.

So it would be naive to expect the kind of attentiveness and hustle you find when dealing with many private merchants.

But one thing we can say is that bureaucrats aren’t sluggish when they have an opportunity to defraud taxpayers.

For instance, a report in the New York Times by Benjamin Weiser exposes a jaw-dropping overtime scam by transit bureaucrats in New York.

Thomas Caputo, a senior track worker for the Long Island Rail Road, put in for 15 hours of overtime for work he said he had done at the West Side Yard in Manhattan. His shift began at 4 p.m. and ended at 7 o’clock the next morning. But, the authorities say, Mr. Caputo was somewhere else that evening: at a bowling alley in Patchogue, N.Y., more than 55 miles away, where he bowled three games, averaging a score of 196. He took home an overtime payment of $1,217. …Mr. Caputo, 56, who retired in 2019 after three decades with the railroad, was listed in 2018 as the highest paid M.T.A. employee with total pay of more than $461,000, including about $344,000 in overtime. …In 2018, according to a criminal complaint unsealed on Thursday, Mr. Caputo claimed to have worked 3,864 overtime hours, on top of 1,682 regular hours. If he had worked every single day that year (which he did not), the complaint said, his claims would average about 10 hours of overtime each day for the entire year, beyond his regular 40-hour workweek.

But Mr. Caputo was just the tip of the iceberg.

Caputo was one of five current and former employees of the Metropolitan Transportation Authority charged on Thursday with participating in an overtime fraud scheme that allowed them to become among the highest-paid employees at the agency… All five defendants each earned more than the salary of the M.T.A. chairman or Gov. Andrew M. Cuomo, who oversees the agency.

Another bureaucrat was very creative in milking the system.

Michael Gundersen, 42, a maintenance-of-way supervisor at New York City Transit, was accused of reporting he had worked long shifts in March 2018, for which he was paid $2,481. But evidence showed that at the same time, he had hotel reservations in Atlantic City and tickets for concerts there on successive nights, a second complaint charged. During other periods that Mr. Gundersen was paid thousands of dollars for claimed overtime, he was on vacation in Williamsburg, Virginia, participating in a 5K footrace in New Jersey, and on a family vacation at a resort in the Hudson Valley.

By the way, you probably won’t be surprised to learn that the M.T.A. has serious financial problems (one of the few entities to get bailout money as part of pandemic relief).

The charges come at a time when the authority is confronting its worst financial crisis because of the pandemic and a stalemate over federal aid. Without a financial bailout, the agency has said that it will have to slash subway and bus service and that more than 9,000 workers could lose their jobs. …The huge overtime payments made to Mr. Caputo and other M.T.A. employees were revealed a month earlier by the Empire Center for Public Policy, a conservative think tank in Albany. Its research showed that 33 M.T.A. employees earned more than $300,000 in 2018, with almost all receiving large amounts of overtime pay. …The charges come more than a decade after the Long Island Rail Road was caught up in a scandal over disability payments. A New York Times investigation had found that nearly every career employee who retired received a disability pension.

In other words, not only are bureaucrats overpaid in general, but they also are very adept at cheating the system to pad their paychecks.

We’ll close with by explaining that this type of scam is common with government employment.

Why? For the simple reason – as illustrated by the cartoon – that politicians are bureaucrats tend to be on the same side with negotiating new contracts.

Nobody represents the interests of taxpayers.

In any event, I’m sure we can all agree that Mr. Caputo, Mr. Gunderson, and the rest of the crooks deserve membership in the Bureaucrat Hall of Fame.

P.S. Here’s a new element discovered inside the bureaucracy, and a letter to the bureaucracy from someone renewing a passport.

P.P.S. And this satirical video actually does a very good job of capturing how bureaucracy actually operates.

P.P.P.S.  Here’s a great top-10 list from Letterman about bureaucrats.

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Walter Williams, RIP

One of America’s leading public intellectuals, Walter Williams, has passed away.

In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.

I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club”  with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.

I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.

But there’s so much more to say. When I learned yesterday of Walter’s death, I wondered what sort of tribute I should write, especially since so many thoughtful essays already have been published (Don Boudreaux, Thomas Sowell, Veronique de Rugy, Alex Tabarrok, Mark Perry, and Nick Gillespie, to list just a few).

Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.

This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.

Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.

Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”

And here’s some of what he wrote about his assignment to South Korea.

We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.

Here’s a passage from his time as a Ph.D. student at UCLA.

My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian  said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”

I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.

He appreciated that his professors didn’t relax their standards because of his race.

Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.

Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.

Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.

Many years later, he wrote a very insightful column on racial and sexual profiling.

Here’s a final excerpt showing how he enjoyed shocking people.

At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.

Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.

The bottom line is that Walter was a man, not a victim. He fought and achieved.

Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.

P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.

 

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Great Moments in International Bureaucracy

A couple of days ago, I criticized officials at the United Nations for advocating higher taxes and bigger government.

Fortunately, that bureaucracy is so sclerotic and inefficient that its efforts to promote statism are not very effective

But it still galls me that international bureaucrats who receive lavish, tax-free salaries spend their days trying to promote higher taxes on everyone else.

And that’s also my view of the tax-loving bureaucrats at the International Monetary Fund, as well as their counterparts at the Organization for Economic Cooperation and Development.

Perhaps the logical takeaway is that international bureaucracies are inherently problematic, pushing misguided policy on their bad days and wasting money on their good days.

Here are some additional examples, starting with with the “Eurocrats” in Brussels. The U.K.-based Telegraph reports that they’ve been naughty hypocrites.

An MEP tried to escape through a window after police raided a 25-strong sex party in Brussels’ city centre for breaking Belgium’s coronavirus rules. …Police raided the flat after neigbours complained about the noise. …Belgian media reported two EU diplomats at the sex party… Police fined the 25 people, who were mostly naked men, at the orgy £225 each before releasing them. They broke rules limiting gatherings to groups of four. …A European Parliament source said: “There is nothing wrong to participate in a sex party of any kind. However, …parliamentary immunity does not exempt you from obeying the law.” Brussels hosts the major EU institutions, including one of the European parliament’s two seats.

Next, let’s take a look at the World Health Organization.

That bureaucracy is infamous for its bungled and politicized response to the coronavirus.

So maybe it’s a bit of karma that the bureaucracy is now suffering its own outbreak. Here are some excerpts from a story in the Las Angeles Times.

The World Health Organization has recorded 65 coronavirus cases among staff members based at its headquarters, despite the agency’s public assertions that there has been no transmission at the Geneva site, an internal email obtained by the Associated Press shows. …32 were found in staff who had been working at the headquarters building, suggesting that the health agency’s strict hygiene, screening and other prevention measures were not sufficient to spare it from the pandemic. …On Nov. 2, the WHO’s technical lead for the COVID-19 response, Maria Van Kerkhove, told reporters that there had been no transmission or clusters at headquarters.

Let’s wrap up by looking at the North Atlantic Treaty Organization (NATO).

You may have assumed this bureaucracy no longer exists since the Soviet Union (thankfully) no longer exists.

But not only is NATO still there, the Washington Free-Beacon reported that it built itself an opulent Taj Mahal-style headquarters.

…the new NATO headquarters…building cost an astounding $1.23 billion, according to a budget released by the North Atlantic Treaty Organization. Architecture, design, and quality management cost the alliance $129 million alone. Audio visual installations ran $29 million, while construction ran $514 million, the document states. …The alliance bragged that the structure is also a “green building for the future.” “The environment and sustainability have played a major role in the design process. The new building’s energy consumption has been optimized through the use of geothermal and solar energy and advanced lighting systems. …the buildings short wings will have green roofs,” the document states.

Lots of moral preening about being a “green building,” but nothing about whether this monument to extravagance will make NATO more effective as a fighting force.

Then again, as Mark Steyn observed many years ago, NATO nowadays is about as useful as “keeping forts in South Dakota to defend settlers against hostile Indians.”

In a perverse way, I almost have to admire NATO.

It takes special bureaucratic skills to survive the collapse of the Soviet Union and the end of the Warsaw Pact. And it takes super-special bureaucratic skills to then get a $1.23 billion headquarters when the organization’s reason for existing disappeared nearly three decades ago.

Ronald Reagan obviously would not be surprised.

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