He’s certainly not a full-blown supporter of the Second Amendment.
And I don’t think he realizes that many of the first gun control laws had racist motivations.
But I’m not going to nit pick. I welcome converts, even half-hearted ones.
Which is why today’s column will cheer another newcomer to the cause.
In a column for the Washington Post, Danielle King describes her decision to become a gun owner.
I never thought I’d own a gun. But there I was, in Hazard, Ky., in the middle of a pandemic on a Saturday, buying a .38 snub-nosed revolver. I’m not your stereotypical gun owner…as a Black woman, I am a statistical rarity… But I had come to believe that I had two choices: take steps to protect myself, or become a victim. I decided I needed to be armed. …it wasn’t until one night last April at my Kentucky home that I decided to become a gun owner myself. The brightness of the living room light startled me from my sleep. …The rustling sounds confirmed that we had an intruder. …The invader eventually made his way to the bedroom door. …The intruder slammed against the door like a battering ram in an attempt to take it down. He nearly succeeded, shattering the frame, but my husband held the rest of the door shut while I hid on the balcony and called the police.It took officers more than 45 minutes to arrive… I realized we needed protection. …Three days after the break-in, with my husband’s encouragement, I went to the gun store and purchased my revolver and some hollow-point bullets.
Ms. King notes that many other blacks are joining her and becoming gun owners.
The National Shooting Sports Foundation reported a 58 percent surge in gun purchases by Black men and women in the first six months of 2020 compared with the same period in 2019, citing a survey of gun retailers. Of all purchasers, 5.4 percent were Black women. I strongly support private gun ownership and the Second Amendment… To be honest, I am still afraid of having guns in my home — and even of having one in my possession. But we are products of a violent nation, and ultimately, I don’t feel like the police can or want to protect me. …My first practice shot was a couple of feet from my backyard, bordering the woods. My husband created a target for me to practice on. …Terrified, my hands trembling, drenched in sweat, I anxiously grasped the revolver’s handle while searching for the trigger. Then, lining up the target while calming my breath, I pressed the trigger to hear a POP. Now, I thought, we are protected.
By the way, I hope what she wrote about the police isn’t true. I’d like to think they want to protect her and her family.
But Ms. King is definitely correct to fear that the police may not have the ability to protect her. Just consider the fact that it took 45 minutes for cops to arrive when her family was threatened by an intruder.
If you read Ms. King’s full column, it’s clear that she hasn’t embraced the full libertarian view on gun ownership. But just as was the case with Charles Blow, I welcome her shift in the correct direction.
P.S. Here are the other columns celebrating folks on the left who have had epiphanies on gun rights.
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.
Our third item also pokes fun at the logic (or lack thereof) of our leftist friends.
Next, the clever folks at Babylon Beeexplain various home-defense strategies for a gun-free world.
Guns are on their way out. And thank goodness! We can’t wait to return to the utopian paradise we lost when guns were invented… Still, once in a great while, you might need to defend yourself against a ne’er-do-well. When those ruffians come kicking your door down, you need to be ready. Here are seven great ways to defend your home against an armed burglar when your guns have all been confiscated.
Here are a few of those options.
Option #3 surely is the best, just as demonstrated in this video.
Yet never forget that there are people who think gun-free zones are a real answer.
When I debate public policy with leftists, I frequently stump them by asking for an example of a country where their ideas have worked.
They get flummoxed for the simple reason that no nation has ever become rich with big government.
There are some rich nations that have big governments, to be sure, but they all became rich in the 1800s and early 1900s, back when government was a tiny burden (and there often were no income taxes).
It’s also worth noting that places that have become rich in the modern era, such as Hong Kong and Singapore, have small governments and low tax burdens.
I’m making these points because Jim Tankersley of the New York Times has a thorough article on the Biden Administration’s budgetary philosophy.
And that philosophy is based on a completely different perspective. Indeed, the headline and subtitle are a very good summary of the entire article.
Here are some passages that further capture the Biden approach.
President Biden’s $6 trillion budget bets on the power of government to propel workers, families and businesses to new heights of prosperity…by redistributing income and wealth from high earners and corporations to grow the middle class. …it sets the nation on a new and higher spending path, with total federal outlays rising to $8.2 trillion by 2031… That spending represents an attempt to expand the size and scope of federal engagement in Americans’ daily lives… Mr. Biden also seeks to expand the government safety net in an effort to help Americans — particularly women of all races and men of color — work and earn more, rather than relying on corporate America to funnel higher wages to workers. …Mr. Biden is pushing what amounts to a permanent increase in the size of the federal footprint on the U.S. economy. Since 1980, annual federal spending has been, on average, about one-fifth the size of the nation’s economic output; under Mr. Biden’s plans, that would grow to close to one-fourth.
The article is definitely correct about one thing. As I wrote yesterday, Biden wants a big expansion of government spending.
But is he correct about the consequences? Will bigger government “help Americans” and allow more of them to “enjoy prosperity”?
If the evidence from Europe is any indication, adopting bigger welfare states is not a recipe for more prosperity.
For instance, OECD data on “actual individual consumption” show that people in the United States enjoy much higher living standards than their counterparts on the other side of the Atlantic Ocean.
There’s also very powerful data showing that poor Americans (those at the 20th percentile) have higher living standards than most middle-class Europeans.
There’s even data showing that very poor Americans (those at the 10th percentile) have living standards equal to most middle-class Europeans.
There will be ample opportunity to write about these issues in the coming weeks. For today, however, let’s identify and highlight the biggest problem.
Simply stated, Biden wants to permanently and significantly increase the burden of government spending. Here’s a chart, based on data from Table S.1 of the President’s budget, augmented by data from Table 1.3 of the Budget’s Historical Tables.
The budget had reached $4 trillion before the pandemic. It then skyrocketed for coronavirus-related spending.
But now that the emergency is receding, Biden is not going to let the burden of government fall back to prior levels. Instead, he’s proposing a $6 trillion budget for the upcoming fiscal year.
And that’s just the starting point. He wants spending to then climb rapidly – at almost twice the rate of inflation – up to $8 trillion by 2031.
By the way, this horrifying data doesn’t tell the entire story.
Biden’s budget doesn’t include some of his new spending giveaways. Brian Riedl addressed this fiscal gimmickry in a column for today’s New York Post.
…this budget does not even include additional spending and debt proposals that are coming later. …They account only for the recently-enacted “stimulus,” a massive discretionary spending hike, and the trillions in (creatively-defined) “infrastructure” spending proposed by the President over the past two months. However, during last fall’s campaign, Biden also proposed trillions in new spending for health care, Social Security, Supplemental Security Income, climate change, college aid, and other priorities. The White House has signaled that these new spending initiatives are still in the pipeline. Including these forthcoming proposals, the President would push spending and deficits far above any levels that have ever been sustained.
And don’t forget all this spending, both proposed and in the pipeline, is in addition to all the entitlement spending that is going to burden the economy over the next several decades.
Here’s one final point to underscore and emphasize the radical nature of Biden’s budget.
I’ve taken the previous chart and added a trendline showing what spending would be if Biden has simply followed the trajectory based on the actual spending levels of every President from Carter to Trump.
In other words, we’re looking at trillions of dollars of additional money being diverted from the productive sector of the economy and being put under the control of politicians and bureaucrats.
And he partially succeeded with an agreement on how to deal with the so-called “fiscal cliff.”
Well, as Yogi Berra might say, it’s “deju vu all over again.” Joe Biden is in the White House and he’s proposing a wide range of tax increases.
It’s unclear whether Biden will gain approval for his proposals, but I’ve already produced a four-part series on why they are very misguided.
In Part I, I showed that the tax code already is biased against upper-income taxpayers.
In Part II, I explained how the tax hike would have Laffer-Curve implications, meaning politicians would not get a windfall of tax revenue.
In Part II, I pointed out that the plan would saddle America with the developed world’s highest corporate tax burden.
In Part IV, I shared data on the negative economic impact of higher taxes on productive behavior.
The bottom line is that the United States should not copy France by penalizing entrepreneurs, innovators, investors, and business owners.
Particularly since the rest of us are usually collateral damage when politicians try to punish successful taxpayers.
So it’s serendipity that the Tax Foundation has just updated it’s list of research with a new report looking at seven new high-level academic studies.
Here’s some of what the report says about class-warfare tax policy.
With the Biden administration proposing a variety of new taxes, it is worth revisiting the literature on how taxes impact economic growth. …we review this new evidence, again confirming our original findings: Taxes, particularly on corporate and individual income, harm economic growth. …We investigate papers in top economics journals and National Bureau of Economic Research (NBER) working papers over the past few years, considering both U.S. and international evidence. This research covers a wide variety of taxes, including income, consumption, and corporate taxation.
And here’s the table summarizing the impact of lower tax rates on economic performance, so it’s easy to infer what will happen if tax rates are increased instead.
Some of these findings may not seem very significant, such as changes in key economic indicators of 0.2%, 0.78%, or 0.3%.
P.S. In an ideal world, Washington would be working to boost living standards by adopting a flat tax. In the real world, the best-case scenario is simply avoiding policies that will make America less competitive.
Today’s Wall Street Journal has an editorial on the gap between blue states and red states. This accompanying illustration shows that there is a clear relationship between joblessness and the degree to which states pursue big-government policies.
And here’s how the WSJ explained the big differences.
The unemployment rate in April nationwide was 6.1%, but this obscures giant variations in the states. With some exceptions, those run by Democrats such as California (8.3%) and New York (8.2%) continued to suffer significantly higher unemployment than those led by Republicans such as South Dakota (2.8%) and Montana (3.7%). It’s rare to see differences that are so stark based on party control in states. But the current partisan differences reflect different policy choices over the length and severity of pandemic lockdowns and now government benefits such as jobless insurance. Nine of the 10 states with the lowest unemployment rates are led by Republicans. The exception is Wisconsin whose Supreme Court last May invalidated Democratic Gov. Tony Evers’s lockdown. …Most states in the Midwest, South and Mountain West aren’t far off their pre-pandemic employment peaks. One obstacle to a faster recovery may be the $300 federal unemployment bonus, which many GOP governors are rejecting. Meantime, states with Democratic governments continue to reward workers for sitting on the couch. The longer that workers stay unemployed, the harder it will be to get them to return to work.
Simply stated, modest-sized welfare states are sustainable if more and more new taxpayers enter the system to finance benefits for a burgeoning population of old people.
But that’s not happening any more. In most nations, traditional population pyramids are becoming population cylinders because of falling birthrates and increasing longevity.
That’s the bad news.
The good news is that there is growing awareness the demographic changes are happening. Indeed, Damien Cave, Emma Bubola and Choe Sang-Hun have a big article on population decline in the New York Times.
All over the world, countries are confronting population stagnation and a fertility bust, a dizzying reversal unmatched in recorded history that will make first-birthday parties a rarer sight than funerals, and empty homes a common eyesore. Maternity wards are already shutting down in Italy. Ghost cities are appearing in northeastern China. Universities in South Korea can’t find enough students, and in Germany, hundreds of thousands of properties have been razed, with the land turned into parks. …Demographers now predict that by the latter half of the century or possibly earlier, the global population will enter a sustained decline for the first time. …The strain of longer lives and low fertility, leading to fewer workers and more retirees, threatens to upend how societies are organized — around the notion that a surplus of young people will drive economies and help pay for the old. …The change may take decades, but once it starts, decline (just like growth) spirals exponentially. With fewer births, fewer girls grow up to have children, and if they have smaller families than their parents did — which is happening in dozens of countries — the drop starts to look like a rock thrown off a cliff. …according to projections by an international team of scientists published last year in The Lancet, 183 countries and territories — out of 195 — will have fertility rates below replacement level by 2100.
Plenty of interesting data, though remarkably little focus on the fiscal implications. Sort of like writing about 1943 France with almost no reference to World War II.
In any event, the article takes a closer look at the challenges in certain nations., including South Korea.
To goose the birthrate, the government has handed out baby bonuses. It increased child allowances and medical subsidies for fertility treatments and pregnancy. Health officials have showered newborns with gifts of beef, baby clothes and toys. The government is also building kindergartens and day care centers by the hundreds. In Seoul, every bus and subway car has pink seats reserved for pregnant women. But this month, Deputy Prime Minister Hong Nam-ki admitted that the government — which has spent more than $178 billion over the past 15 years encouraging women to have more babies — was not making enough progress.
I was struck by the statement from the Deputy Prime Minister that his nation “was not making enough progress”?
That’s a strange way of describing catastrophic decline in birthrates, as noted in the article.
South Korea’s fertility rate dropped to a record low of 0.92 in 2019 — less than one child per woman, the lowest rate in the developed world. Every month for the past 59 months, the total number of babies born in the country has dropped to a record depth.
Both Singapore and Hong Kong have extremely low birth rates, for instance, but they aren’t facing a huge fiscal crisis because they have very small welfare states and workers are obliged to save for their own retirement.
Other Asian jurisdictions, however, made the mistake of copying Western nations, meaning entitlement programs that become mathematically impossible when populations pyramids become population cylinders (or even upside-down pyramids!).
In addition to South Korea, Japan also faces a major challenge.
And the situation is very grim in Europe, even though birth rates haven’t fallen to the same degree (though the numbers is some Eastern European nations are staggeringly bad).
Regarding the third point, I wrote a column on that topic for the Orange County Register.
Here’s how I described Biden’s proposal.
Biden has proposed several tax increases that specifically target American firms that compete in world markets. Most notably, the Administration has proposed to double the tax rate on “global intangible low-tax income” (GILTI) from 10.5 percent to 21 percent. Translated from tax jargon to English, this is largely a tax on the income American firms earn overseas from intellectual property, most notably patents and royalties. Keep in mind, by the way, that this income already is subject to tax in the nations where it is earned. Most other nations do not handicap their companies with similar policies, so this means that American firms will face a big competitive disadvantage – especially when fighting for business in low-tax jurisdictions such as Hong Kong, Ireland, Singapore, Switzerland, and most of Eastern Europe.
And here are some additional reasons why it is very bad news.
…let’s simply look at the bottom-line impact of what Biden is proposing. The Tax Foundation estimates that, “The proposal would impose a 9.4 percent average surtax on the foreign activities of U.S. multinationals above and beyond the taxes levied by foreign governments” and “put U.S. multinationals at a competitive disadvantage relative to foreign corporations.” …a stagging $1.2 trillion tax increase on these companies. …This is not just bad for the competitiveness of American-based companies, it is also bad policy. Good fiscal systems, such as the flat tax, are based on “territorial taxation,” which is the common-sense notion that countries only tax economic activity inside their borders. …Many other nations follow this approach, which is why they will reap big benefits if Biden’s plan to hamstring American companies is approved. The key thing to understand is that the folks in Washington have the power to raise taxes on American companies competing abroad, but they don’t have the ability to raise taxes on the foreign companies in those overseas markets.
The Wall Street Journal‘s editorial page has been sounding the alarm on this issue as well.
Here are some excerpts from an editorial back in April.
…the tax on global intangible low-tax income, known as Gilti, which was created by the 2017 tax reform. …Gilti was flawed from the start…but Mr. Biden would make it worse in every respect. …The 2017 tax law set the statutory Gilti rate at…10.5%. Mr. Biden would increase that to 21%… the effective rate companies actually pay is higher. This is because Gilti embedded double taxation in the tax code. …Gilti allows a credit of only 80% of foreign taxes, with no carry-forwards or carry-backs. …Raising the statutory rate to 21% increases that effective rate to 26.25%. This new Biden effective minimum tax would be higher than the statutory tax rates in most countries even in Western Europe… The Biden plan would further increase the effective Gilti rate by expanding the tax base on which it’s paid. …A third Biden whammy would require companies to calculate tax bills on a country-by-country basis. …Requiring companies to calculate taxable profits and tax credits individually for every country in which a company operates will create a mountain of compliance costs for business and work for the Internal Revenue Service. …The Biden Administration and its progressive political masters have decided they don’t care about the global competitiveness of American companies.
Let’s close with some international comparisons.
According to the most-recent International Tax Competitiveness Index, the United States ranks #21 out of 35 nations, which is a mediocre score.
But the United States had been scoring near the bottom, year after year, before the Trump tax reform bumped America up to #21. So there was some progress.
If the Biden plan is approved, however, it is a near-certainly that the U.S. will be once again mired at the bottom. And this bad policy will lead to unfortunate results for American workers and American competitiveness.
I’ve saved the best for last, as usual. Our fifth item deals with a real story about some fun-loving Arkansas rednecks, followed by the libertarian reaction to their arrest.
If libertarians believe in legalizing drugs, gambling, and prostitution, then why have laws against testing out bulletproof vests while drinking?
Though it’s not an activity I would recommend, so perhaps this belongs in my collection of libertarian quandaries.
P.S. For other examples of libertarianism-themed images, click here, here, here, and here.
Today, courtesy of the folks at the Committee for a Responsible Budget, you can agree or disagree with 24 statements to determine your “budget personality.”
I have some quibbles about some of the wording (for instance, I couldn’t answer “neither” when asked to react to: “The government should spend more money on children than on seniors”).
But I can’t quibble with the results. Given the potential outcomes, I’m glad to be a “Minimalist” who is “in favor of smaller government.”
Though I’m disappointed that I apparently didn’t get a perfect score on “Size of Government.”
And I need to explain why I got a mediocre score on the topic of “Fiscal Responsibility.”
The budget geeks at the Committee for a Responsible Federal Budget (CRFB) have a well-deserved reputation for rigorous analysis. I regularly cite their numbers and appreciate the work that they do.
I agree with Milton Friedman, who wisely observed that ““I would rather have government spend one trillion dollars with a deficit of a half a trillion dollars than have government spend two trillion dollars with no deficit.”
The folks at CRFB would disagree.
Indeed, they are so fixated on red ink that they would welcome tax increases.
At the risk of understatement, that would be a very bad approach.
The evidence from Europe shows that higher taxes simply lead to higher spending. And more debt.
Indeed, Milton Friedman also commented on this issue, warning that, “History shows that over a long period of time government will spend whatever the tax system raises plus as much more as it can get away with.”
Folks on the left acknowledged that their policies would lead to less prosperity, but they argued that result was acceptable because the benefits of a more-equal society would offset the cost of reduced economic output.
Needless to say, there were vigorous debates about how much additional equality could be achieved and how much economic damage might be caused by any particular policy, but few if any economists pretended that more government was actually good for growth.
Unfortunately, that has changed. A growing number of people on the left (especially those with tax-free jobs at international bureaucracies) now claim that bigger government actually is the way to get more growth.
For instance, there is a new study from the European Central Bank that looks at whether a pro-growth policy (free trade) leads to less equality.
The working paper, authored by Roland Beck, Virginia Di Nino, and Livio Stracca, specifically measures the impact of membership in so-called “globalisation clubs.”
The mounting criticisms against globalisation…have sparked a lively debate about whether the narrative of the benefits of free trade and capital flows is still intact. …In this paper, we reconsider the effects of globalisation on income and inequality studying the consequences of quasi-natural experiments like accessions to “Globalisation Clubs”. …Our list of Globalisation Clubs includes the World Trade Organisation (WTO), the European Union (EU) and the Organisation for Economic Co-operation and Development (OECD), which all require their members to pursue some form of either liberal trade or investment policies or a combination of both. …The main purpose of our study is to shed light on the hypothesis that globalisation leads to an efficiency-equity trade-off which is a fundamental concern in economics dating at least back to Okun (1975). In other words, is the hypothesis that globalisation increases economic efficiency to the detriment of cohesion and equality supported by the data?
Here are the key results.
The analysis leads to three main findings. First, with the exception of financial liberalisation we find that all our “globalisation shocks” lead to a significant increase in trade openness – a prerequisite for considering them globalisation shocks in the first place. Second, the effects on per capita income are mixed; positive for WTO accessions and trade openness shocks, insignificant for OECD accessions and even negative for EU accessions and financial liberalisations. …Finally, we find little evidence that globalisation shocks lead to more inequality. The Gini coefficients (market and net) tend not to change or even to fall, and the labour share of income to be unchanged or even rise, in the wake of a globalisation shock.Taken together, our results point to mostly positive effects for countries following globalisation shocks and challenge the view that globalisation is necessarily an efficiency-equity trade-off.
I’m not surprised by these findings.
There’s no reason to think that OECD membership will lead to better policy and there are good reasons to think EU membership might push policy in the wrong direction.
The WTO, by contrast, has a good track record of trade liberalization. So these results from the study make sense.
The primary takeaway from this research is that free trade is good for prosperity. Not only does it lead to more growth, but low-income people enjoy above-average gains.
Though I would argue that free trade would be just as desirable if rich people were the ones who enjoyed above-average gains. The key point is that all groups benefit when there are reforms to shrink the size and scope of government, and we shouldn’t get worked up if some people benefit more than others.
But there’s a secondary takeaway. This European Central Bank study also is an example of methodologically sound research (i.e., recognizing that more government is not a free lunch).
About one week ago, I shared some fascinating data from the Tax Foundation about how different nations penalize saving and investment, with Canada being the worst and Lithuania being the best.
I started that column by noting that there are three important principles for sensible tax policy.
Today, we’re going to focus on #1, specifically the tax burden on the average worker.
And, once again, we’ll be citing some of the Tax Foundation’s solid research. Here are their numbers showing the tax burden on the average worker in OECD nations. As you can see, Belgium is the worst place to be, followed by Germany, Austria, and France.
Colombia has the lowest tax burden on average workers, though that’s mostly a reflection of low earnings in that relatively poor nation.
Among advanced nations, Switzerland has the lowest tax burden when value-added taxes are part of the equation, while New Zealand is the best when looking just at income taxes and payroll taxes.
Here’s some of what the Tax Foundation wrote in its report, which was authored by Cristina Enache.
Average wage earners in the OECD have their take-home pay lowered by two major taxes: individual income and payroll (both employee and employer side). …The average tax burden among OECD countries varies substantially. In 2020, a worker in Belgium faced a tax burden seven times higher than that of a Chilean worker. …Accounting for VAT and sales tax, the average tax burden on labor in 2020 was 40.1 percent, 5.5 percentage points higher than when only income and payroll taxes are considered. …The tax burden on labor is referred to as a “tax wedge,” which simply refers to the difference between an employer’s cost of an employee and the employee’s net disposable income. …Tax wedges are particularly high in European countries—the 23 countries with the highest tax burden in the OECD are all European. …Chile and Mexico are the only countries that do not provide any tax relief for families with children but they keep the average tax wedge low.
Here’s a look at which countries in the past two decades that have made the biggest moves in the right direction and wrong direction. Kudos to Hungary and Lithuania.
And you can also see why I’m not overly optimistic about the long-run outlook for Mexico and South Korea.
The report also has a map focusing on tax burdens in Europe. The darker the nation, the more onerous the tax (notice how Switzerland is a light-colored oasis surrounded by dark-colored tax hells).
The report also notes that average tax wedges only tell part of the story. If you want to understand a tax system’s impact on incentives for productive behavior, it’s important to look at marginal tax rates.
The average tax wedge is…the combined share of labor and payroll taxes relative to gross labor income, or the tax burden. The marginal tax wedge, on the other hand, is the share of labor and payroll taxes applicable to the next dollar earned and can impact individuals’ decisions to work more hours or take a second job. The marginal tax wedge is generally higher than the average tax wedge due to the progressivity of taxes on labor across countries—as workers earn more, they face a higher tax wedge on their marginal dollar of earnings. …a drastic increase in the marginal tax wedge…might deter workers from pursuing additional income and working extra hours.
And here’s Table 1 from the report, which shows that marginal tax rates can be very high, even at relatively modest levels of income.
In what could be a world record for understatement, this data led Ms. Enache to conclude that Italy’s tax system “might” deter workers.
In 2020 an Italian worker making €38,396 (US $56,839) faced a marginal tax wedge as high as 117 percent on a 1 percent increase in earnings. Such marginal tax wedges might deter workers from pursuing additional income and working extra hours.
Though that’s not the most absurd example of over-taxation. Let’s not forget that thousands of French taxpayers have had tax bills that were greater than their entire income.
But some of our friends on the left think it is bad news that the United States isn’t more like Europe.
They want more redistribution in America and they may get their wish if Congress approves Biden’s so-called American Families Plan.
The Economist has an article about Biden’s radical proposal, which would, as they correctly note, “Europeanise the American welfare state.”
President Joe Biden is proposing an ambitious reweaving of the American safety-net, which the White House says will cost $1.8trn. The American Families Plan has bits of the European welfare state that have long been missing in the country—a child allowance, paid family leave, universal pre-school, subsidised child care and free community college—but contains no reference to work requirements. …So how did Democrats go from Clintonism—which implicitly conceded the Reaganite critique that too much governmental assistance is a very bad thing—to its present-day unconcern about (even relish for) deficit-financed expansions of the safety-net?
This would bring America more in line with the rest of the developed world: the average government spending on benefits such as child allowances, family leave and early education is 2.1% of GDP in the OECD club of mostly rich countries. In America, it is just 0.6%. …A generous child allowance is the main anti-poverty tool in most rich countries—and also one that America lacks. One such scheme was created this year as part of the covid-19 relief bill that the president signed in March. It will pay most families $3,000 per year per child ($3,600 for young children)… The president’s plan proposes to extend these payments until 2025. Some Democrats think they should simply be made permanent.
The Wall Street Journalopined about Biden’s plan last month.
It’s more accurate to call this the plan to make the middle class dependent on government from cradle to grave. The government will tell you sometime later, after you’re hooked to the state, how it will force you to pay for it. We’d call the price tag breathtaking, but by now what’s another $2 trillion? …But the cost, while staggering, isn’t the only or even the biggest problem. The destructive part is the way the plan seeks to insinuate government cash and the rules that go with it into all of the major decisions of family life. The goal is to expand the entitlement state to make Americans rely on government and the political class for everything they don’t already provide. …This is now about mainlining benefits to middle-class families so they become addicted to government—and to the Democratic Party that has become the promoting agent of government.
For my contribution to this discussion, I want to make two points about the practical implications of Biden’s plan to “Europeanise” the United States.
First, it is impossible to have a European-sized government without massive tax increases. And since there aren’t enough rich people to finance big government, that inevitably means low-income and middle-class taxpayers will have to be hit with much bigger fiscal burdens. Which is exactly what has happened in Europe (and lots of honest people on the left openly admit a bigger welfare state would requiresimilar policies in the United States).
Second, it is impossible to have a European-sized government and still maintain a big economic advantage over Europe. Higher spending and higher taxes will combine to reduce work, saving, investment, and entrepreneurship. Simply stated, European fiscal policy will lead to European economic results, and that will be very bad news for ordinary Americans since living standards are 30 percent-40 percent lower on the other side of the Atlantic Ocean.
Hmmm…, I wonder if there’s a lesson to be learned from that list?
But just in case some people are slow learners, let’s consider some new scholarly research from the Federal Reserve.
The study, authored by Joonkyu Choi, Veronika Penciakova, and Felipe Saffie, explores whether companies that give cash to politicians are then rewarded with cash from taxpayers.
The American Recovery and Reinvestment Act (ARRA) was enacted in the midst of the Great Recession, and over one-fourth of the funds were channeled directly to firms with the primary goal of saving and creating jobs. These stimulus funds were sizable and valuable to firms, with the average grant awarded exceeding $500,000.…With hundreds of thousands of dollars on the line, firms may have incentive to exert political influence… Are firms successful in influencing the allocation of stimulus spending? …This paper provides empirical answers… We find that firms’ campaign contributions to state politicians before the enactment of ARRA have a positive and significant impact on the probability of winning ARRA grants… We find that firms that contribute to winning candidates are 64 percent more likely to secure an ARRA grant and receive 10 percent larger grants. …The allocative distortion caused by political connections is sizable. Although only 6 percent of grant recipients contribute during local elections, they account for21 percent of total ARRA grants.
While I obviously like my video on the topic, I very much recommend this video interview with Andrew Ferguson.
P.S. Speaking of videos, here’s some satire about government corruption.
P.P.S. We shouldn’t be surprised that Obama’s so-called stimulus produced lots of corruption. The same was true with regards to Obamacare and green energy, which were his other main initiatives.
Others folks on the left, by contrast, are motivated by sympathy for the less fortunate.
That’s a noble sentiment. Where they go wrong is in thinking that the economy is a fixed pie. This leads them to the mistaken conclusion that some people are poor because other people are rich.
Maybe I’m overly optimistic, but I think these people can be convinced to support good policy if they learn the facts about how free markets and limited government are a proven recipe for prosperity.
Today, let’s look at how poor people have been the biggest winners. Professor Max Roser of Oxford University recently shared a profoundly important tweet about the dramatic reduction in global poverty. We see not only that poverty rates have plummeted, but also that falling poverty rates are correlated with increases in per-capita GDP.
In other words, everyone is getting richer. There’s no fixed pie.
As you might expect, regions that are friendlier to capitalism have enjoyed bigger increases in prosperity and bigger reductions in poverty.
The bottom line is that people who care about the poor should be the biggest advocates of free enterprise.
P.S. It’s worth noting that, according to both U.S. data and global data, the big reduction in poverty occurred before welfare states were created.
That’s a very worrisome prospect. If Biden succeeds, the United States could wind up toppling Canada for the dubious honor of having the world’s highest tax burden on saving and investment.
But are Biden’s media cheerleaders correct? Are tax increases popular?
According to a new scholarly working paper from the Federal Reserve (authored by Andrew C. Chang, Linda R. Cohen, Amihai Glazer, and Urbashee Paul), the answer is no.
At least if we judge politicians by what they do in election years. Here’s part of the study’s abstract.
We use new annual data on gasoline taxes and corporate income taxes from U.S.states to analyze whether politicians avoid tax increases in election years. These data contain 3 useful attributes: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes.Using a pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions.
For wonkier readers, Figure 7 has some of the major results of their statistical analysis. I’ve highlighted (in red) the most important conclusion of the research.
For regular readers, the main takeaway is that politicians almost always want more tax revenue. That’s what gives them the ability to distribute goodies and buy votes.
But notwithstanding their never-ending hunger to grab more money, they are very likely to reject tax increases in election years. They even reject higher corporate taxes, which are supposed to be popular (at least according to some in the establishment media).
Yet if tax increases were politically popular, we should see the opposite result.
I’ll close with the somewhat depressing observation that these results do not imply that voters want libertarian policy. It’s probably more accurate to say that people want goodies from the government, but they don’t want to pay for them. Politicians simply respond to those preferences (which brings to mind Garett Jones’ hypothesis that we have too much democracy).
Which countries imposes the heaviest tax burdens on capital? According to a new report from the Tax Foundation, Canada is the worst of the worst (somewhat surprising), followed by Denmark (no surprise) and France (also no surprise).
The nations of Eastern Europe, along with Ireland, win the prize for the lowest tax burdens on capital.
The authors of the report, Jacob Lundberg and Johannes Nathell, make a much-needed point about why governments should not penalize saving and investment.
…capital should not be taxed at all. Taxing capital distorts individuals’ savings decisions. By reducing the return on savings, capital taxes penalize those who postpone their consumption rather than consuming their income as it is earned. Due to compounding interest, capital taxation penalizes saving more the longer the saving horizon is. For long saving horizons, the distortion is very large. This leads to lower saving, a lower capital stock, and lower GDP. Therefore, not taxing capital is in the interest of everyone, even those who spend everything they earn.
The report also contains this fascinating map comparing capital taxation in European nations.
At the risk of stating the obvious, it’s better to be a lighter-colored nation.
This is fascinating data for tax wonks, but it might not perfectly capture the relative attractiveness (or unattractiveness) of various countries. I think two caveats are warranted.
First, it’s quite likely that some Western European nations accumulated lots of capital and generated lots of wealth back in the 1800s and early 1900s when the burden of government was very small and taxes were very low. If some of the capital from that period is still generating returns (and thus tax revenue), it may overstate the tax burden on current saving and investment.
Second, the methodology looks at capital revenues as a percentage of capital income. This perfectly reasonable approach overlooks the fact that tax rates have an effect on the amount of income that is both earned and reported. This is the core insight of the Laffer Curve and it could mean that some countries show high levels of revenue in part because tax burdens are modest (and vice-versa).
That being said, I wouldn’t expect major changes in the rankings, even if there was a way to address these concerns.
I wrote two days ago about subsidized unemployment, followed later in the day by this interview.
This controversy raises a fundamental economic issue.
I explained in the interview that employers only hire people when they expect a new worker will generate at least enough revenue to cover the cost of employment.
People decide to take jobs when they expect the additional after-tax income they earn will compensate them for the loss of leisure and/or the unpleasantness of working.
Which is why many people are now choosing not to work since the government has increased the subsidies for idleness (a bad policy that began under Trump).
The Wall Street Journaleditorialized about this issue a couple of days ago.
White House economists say there’s no “measurable” evidence that the $300 federal unemployment bonus is discouraging unemployed people from seeking work. They were rebutted by Tuesday’s Bureau of Labor Statistics’ Jolts survey, which showed a record 8.1 million job openings in March. …But these jobs often pay less than what most workers could make on unemployment. That explains why the number of job openings in many industries increased more than the number of new hires in March. …The number of workers who quit their jobs also grew by 125,000. …some quitters may be leaving their jobs because they figure they can make more unemployed for the next six months after Democrats extended the bonus into September.
Dan Henninger also opined on the issue for the WSJ. Here’s some of what he wrote.
President Biden said, “People will come back to work if they’re paid a decent wage.” But what if he’s wrong? What if his $300 unemployment insurance bonus on top of the checks sent directly to millions of people (which began during the Trump presidency) turns out to be a big, long-term mistake? …Mr. Biden and the left expect these outlays effectively to raise the minimum wage by forcing employers to compete with Uncle Sam’s money. …Ideas have consequences. By making unemployment insurance competitive with market wage rates in a pandemic, the Biden Democrats may have done long-term damage to the American work ethic. …The welfare reforms of the 1990s were based on the realization that transfer payments undermined the work ethic. The Biden-Sanders Democrats are dropping that work requirement for recipients of cash payments.
Amen.
I made similar arguments about the erosion of the work ethic last year when discussing this issue.
We can use this shortcut today because the OECD has just churned out a report embracing the death tax. So all we need to do is fill in the blanks and we have an appropriate intro:
The bureaucrats at the Paris-based OECD, working in cooperation with greedy politicians, have released a new study urging more power for governments in order to increase death taxes.
This paragraph is a summary of the bureaucracy’s main argument, which is basically an envy-driven cry for more tax revenue.
The report explores the role that inheritance taxation could play in raising revenues, addressing inequalities and improving efficiency in the future. …taxes on wealth transfers – including inheritance, estate, and gift taxes – are levied in 24 of the 36 OECD countries… In 2018, only 0.5% of total tax revenues were sourced from those taxes on average across the countries that levied them. …Overall, the report finds that there is a good case for making greater use of well-designed inheritance and gift taxation… There are strong equity arguments in favour of inheritance taxation..
Here’s some more of the OECD’s dirigiste analaysis.
The report finds that well-designed inheritance taxes can raise revenue and enhance equity… There are strong equity arguments in favour of inheritance taxation… From an equality of opportunity perspective, inheritances and gifts can create a divide between the opportunities that people face. Wealth transfers might give recipients a head start… By breaking down the concentration of wealth…, inheritance and gift taxation can contribute to levelling the playing field… ‘The recent progress made on international tax transparency…is greatly increasing countries’ ability to tax capital… Progressive tax rates have several advantages compared to flat tax rates. …Taxing unrealised gains at death may be the most efficient and equitable approach.
As you can see, the OECD’s argument revolves around class warfare. They think it’s unfair that some parents want to help their children.
Interestingly, the OECD admits this happens. Here’s Figure 2.4 from the OECD report, showing how death taxes (combined with annual income taxes) reduce saving and investment over five generations.
And the above charts don’t even show the true impact because there’s no line showing how much saving and investment would exist with no death tax and no double taxation.
For what it’s worth, the OECD report does acknowledge some practical and economic problems with death taxes.
An inheritance tax directly reduces wealth accumulation over generations. …inheritance taxes may also affect wealth accumulation prior to being levied by encouraging changes in donors’ behaviours. …Susceptibility to tax planning is one of the most common criticisms levelled against inheritance taxes. …There is evidence of widespread inheritance tax planning… Inheritance taxes might lower entrepreneurship by heirs… Inheritance taxes may also jeopardise existing businesses when they are transferred if business owners do not have enough liquid assets to pay the tax. …Double taxation is a popular objection to inheritance taxes…wage earnings, savings, or personal business income…will have in many cases already been taxed. …There might be challenges associated with estimating fair market value for some assets.
If you wade through the report, you’ll notice that the OECD doesn’t have good answers for these problems.
Instead, the basic message is, “yeah, there are a bunch of downsides, but we want to finance bigger government and we resent successful people.”
The only good news is that the report gives us a list of nations that have eliminated (or never adopted) death taxes.
Among the OECD countries that do not levy inheritance or estate taxes, nine have abolished them since the early 1970s. …Austria, Czech Republic, Norway, Slovak Republic, ans Sweden have abolished their inheritance or estate taxes since 2000. Israel and New Zealand abolished these taxes between 1980 and 2000. Australia, Canada, and Mexico abolished these taxes before 1980, and Estonia and Latvia have never levied inheritance or estate taxes. …This is consistent with evidence that inheritance and estate taxes tend to be unpopular.
Here’s the part of Table 3.1 that shows when these taxes were implemented and when they were repealed.
Needless to say, I’d like to see the United States on this list at some point (we were there for one year!).
The OECD closed with some cheerleading and strategizing on how to overcome popular opposition.
…this section considers ways in which governments may enhance the public acceptability of inheritance tax reform… Reframing reforms aiming to raise more revenue.around notions of equality of opportunity and inequality reduction may help increase their public acceptability. …packaging may also be helpful. …If the introduction of an inheritance tax or an increase in existing inheritance or estate taxes…goes hand-in-hand with a decrease in other taxes, especially in labour taxes, which a majority of people are subject to, it may be more acceptable politically.
I can’t resist pointing out that it’s utter nonsense to think that governments would use revenue from a death tax to lower other taxes.
The goal of politicians is always to finance bigger government. That’s true with the death tax. It’s true with the carbon tax. It’s true with the value-added tax. It’s true with the financial transactions tax.
We’re debating this issue again today, but it’s an even bigger problem because politicians in Washington have added a special bonus payment for people who stay unemployed.
So we’re naturally finding that people are more reluctant to work, which is a rational choice for many of them since they’re getting more money for sitting on their butts.
So if Krugman recognized back in 2009 that regular-sized unemployment benefits lead to more joblessness, he must be even more worried about today’s super-sized unemployment benefits.
But there’s a catch. Krugman made his sensible observations on this issue in a textbook when he was still an academic economist, back when he felt some professional obligation to be rational and pay attention to the academic evidence and empirical research.
Today, he’s an ideologue and polemicist. So we get nonsense like this column in the New York Times.
…the Bureau of Labor Statistics announced that the U.S. economy added only 266,000 jobs in April, far short of consensus expectations that we’d gain around a million new jobs. Was this evidence that the economy really is being held back because we’re “paying people not to work”? No. For one thing, you should never make much of one month’s numbers, especially in an economy still distorted by the pandemic. …Also, if unemployment benefits were holding job growth back, you’d expect the worst performance in low-wage industries, where benefits are large relative to wages. …on the face of it the data don’t support an unemployment-benefits story. So what actually happened? We don’t know. Maybe it was a statistical aberration.
For what it’s worth, I prefer the sober-minded analysis available in editorials from the Wall Street Journal.
Employers nationwide have complained for months that Washington’s $300-a-week bonus has made it harder to find willing workers. Yet Mr. Biden brushed aside the complaints, saying he and his staff “don’t see much evidence” that the payments are a “major factor.” …The perverse incentive of the bonus is clear, and the evidence goes beyond the anecdotes from tens of thousands of employers. …Bank of America economist Joseph Song notes that any worker earning less than $32,000 annually would get a raise by going on unemployment… The President intended his remarks to depict his Administration as the driver of job growth instead of its main hindrance. It was a tall order. But the bright side is that his urgent appearance showed that more Americans are figuring out that when the government pays people not to work, millions choose not to.
The good news is that some governors are opting out.
Here are some excerpts from a report in the Washington Post.
An unexpected slowdown in hiring nationwide has prompted some Republican governors to start slashing jobless benefits in their states, hoping that the loss of generous federal aid might force more people to try to return to work. …Arkansas on Friday became the latest to announce plans to cancel the extra benefits, joining Montana and South Carolina earlier in the week… Indiana Gov. Eric Holcomb signaled to local reporters that the state could soon follow suit, while Arizona Gov. Doug Ducey is considering the same.
I’m tempted to comment about the Post‘s usual bias (saying GOP governors want to “slash” when they’re simply proposing to return to regular-sized benefits).
But let’s stick to the topic.
Here’s another interview on the issue, but it’s about the current fight rather than the Obama-era fight.
I’m especially concerned, as I noted in the interview, that bad government policy may erode the work ethic.
I’ll close with a comment about the fight we had during the Obama years. Back then, the battle revolved around extended unemployment benefits rather than turbo-charged benefits.
Republicans eventually prevailed in blocking the extended benefits. So what happened? As you might expect, there was an increase in employment.
P.S. I imagine this story from Michigan and this example from Ohio will ring a bell with many people because they have some relative or buddy who also has used government benefits as an excuse to stay unemployed.
The United States conducted an experiment in the 1980s. Reagan dramatically lowered the top tax rate on households, dropping it from 70 percent to 28 percent.
Folks on the left bitterly resisted Reagan’s “supply-side” agenda, arguing that “the rich won’t pay enough” and “the government will be starved of revenue.”
Fortunately, we can look at IRS data to see what happened to tax payments from those making more than $200,000 per year.
As I’ve previously written, this was the Laffer Curve on steroids. Even when you consider other factors (population growth, inflation, other reforms, etc), there’s little doubt that we got a big “supply-side effect” from Reagan’s tax reforms.
Based on basic economics, his approach won’t succeed. But let’s augment theory by examining what actually happened when Hoover and Roosevelt raised tax rates in the 1930s.
Alan Reynolds reviewed tax policy in the 1920s and 1930s, but let’s focus on what he wrote about the latter decade. He starts with some general observations.
Large increases in marginal tax rates on incomes above $50,000 in the 1930s were almost always matched by large reductions in the amount of high income reported and taxed… An earlier generation of economists found that raising tax rates on incomes, profits, and sales in the 1930s was inexcusably destructive. In 1956, MIT economist E. Cary Brown pointed to the “highly deflationary impact” of the Revenue Act of 1932, which pushed up rates virtually across the board, but notably on the lower‐and middle‐income groups.
He then gets to the all-important issue of higher tax rates leading to big reductions in taxable income.
In Figure 1, the average marginal tax rate is an unweighted average of statutory tax brackets applying to all income groups reporting more than $50,000 of income. After President Hoover’s June 1932 tax increase (retroactive to January) the number of tax brackets above $50,000 quadrupled from 8 to 32, ranging from 31 percent to 63 percent. The average of many marginal tax rates facing incomes higher than $50,000 increased from 21.5 percent in 1931 to 47 percent in 1932, and 61.9 percent in 1936. One of the most striking facts in Figure 1 is that the amount of reported income above $50,000 was almost cut in half in a single year—from $1.31 billion in 1931 to $776.7 million in 1932.
Here’s the aforementioned Figure 1. You can see that taxable income soared when tax rates were slashed in the 1920s.
But when tax rates were increased in the 1930s, taxable income collapsed and never recovered.
What’s the lesson from this chart? As Alan explained, the lesson is that high tax rates lead to rich people earning and declaring less taxable income (they still have that ability today).
In the eight years from 1932 to 1939, the economy was in cyclical contraction for only 28 months. Even in 1940, after two huge increases in income tax rates, individual income tax receipts remained lower ($1,014 million) than they had been in the 1930 slump ($1,045 million) when the top tax rate was 25 percent rather than 79 percent. Eight years of prolonged weakness in high incomes and personal tax revenue after tax rates were hugely increased in 1932 cannot be easily brushed away as merely cyclical, rather than a behavioral response to much higher tax rates on additional (marginal) income. Just as income (and tax revenue) from high‐income taxpayers rose spectacularly after top tax rates fell from 1921 to 1928, high incomes and revenue fell just as spectacularly in 1932 when top tax rates rose.
One big takeaway is that Hoover and FDR were two peas in a pod.
Both imposed bad tax policy.
From 1930 to 1937, unlike 1923–25, virtually all federal and state tax rates on incomes and sales were repeatedly increased, and many new taxes were added, such as the Smoot‐Hawley tariffs in 1930, taxes on alcoholic beverages in December 1933, and a Social Security payroll tax in 1937. Annual growth of per capita GDP from 1929 to 1939 was essentially zero. …To summarize: all the repeated increases in tax rates and reductions of exemptions enacted by presidents Hoover and Roosevelt in 1932–36 did not even manage to keep individual income tax collections as high in 1939–40 (in dollars or as a percent of GDP) as they had been in 1929–30. The experience of 1930 to 1940 decisively repudiated any pretense that doubling or tripling marginal tax rates on a much broader base proved to be a revenue‐maximizing plan.
Alan closes with an observation that should raise alarm bells.
It turns out that the higher tax rates on the rich were simply the camel’s nose under the tent. The real agenda was extending the income tax to those with more modest incomes.
The most effective and sustained changes in personal taxes after 1931 were not the symbolic attempts to “soak the rich,” but rather the changes deliberately designed to convert the income tax from a class tax to a mass tax. The exemption for married couples was reduced from $3,500 to $2,500 in 1932, $2,000 in 1940, and $1,500 in 1941. Making more low incomes taxable quadrupled the number of tax returns from 3.7 million in 1930 to 14.7 million in 1940… The lowest tax rate was also raised from 1.1 percent to 4 percent in 1932, 4.4 percent in 1940, and 10 percent in 1941.
But since I’ve never grown up, I also appreciate humor that mocks government.
So let’s enjoy a new collection of memes that target our overlords in Washington (these also apply to the politicians and bureaucrats in other national capitals, as well as those in state capitals and local government).
We’ll start with this four-frame summary of government.
For our second item, we have a cartoon that shows how government creates a big wedge between gross pay and take-home pay.
Needless to say, workers have less incentive to be productive in this system, which is why I often write boring columns about “deadweight loss.”
Next we have some of the warning signs of an abusive relationship, and some clever person added a bit of wisdom underneath.
At first, I thought this was an exaggeration, but then I realized it wasn’t difficult to think of a program or government activity that matches all 15 categories.
Our fourth item will make most sense to geology majors, but the rest of us can certainly understand the message in the final frame.
I first wrote about allowing markets for body parts back in 2009 and 2010.
Let’s revisit that issue today, starting with John Stossel’s case for legal organ sales in a video for Reason.
This should be a slam-dunk issue.
I want drugs to be legal, even though I personally disapprove of drug use.
I want prostitution to be legal, even though I’ve never swapped sex for money (no matter what women offer me).
I want gambling to be legal, even though I find that activity to be very boring.
I want alcohol to be legal, even though I generally find booze to be distasteful.
So it should go without saying that I want organ sales to be legal. Indeed, the case for legalizing organ sales is far stronger because I can’t think of a legitimate argument against a policy that creates no downsides for third parties and unambiguously benefits both sides (sick people and organ donors) of the transaction.
Professor Ilya Somin of George Mason University’s law school has been a long-time advocate of saving lives with organ sales.
Many Americans die every year because they need kidney transplants, but cannot find one in time, in large part due to federal laws banning organ sales. A recently published article finds that the number of such deaths is likely to be much greater than previous estimates indicate. It finds that over the 30 years between 1988 and 2017, an average of over 30,000 Americans have died each year, because the ban on organ sales prevented them from getting transplants in time. …even if the true figure is only, say, half as high, it still represents a vast amount of unnecessary suffering that could largely be prevented simply by allowing financial compensation for organ donors, thereby increasing the supply of available kidneys to the point where it can meet the demand.
Writing for the American Enterprise Institute, Sally Satel has a very personal interest in encouraging organ sales.
…there have never been enough kidneys, livers, hearts, and other organs. Kidneys, the organ most in need and most easily donated by the living, can be given by living friends and relatives and even the occasional “good Samaritan donor.” But, by law, they must be given for free, in the spirit of “altruism.” Altruism is a beautiful sentiment, and I have personally benefited: two magnificent friends have donated kidneys to me; one in 2006 and then again in 2016. Thousands others in the U.S., where I live, and elsewhere around the world, are not so lucky – they die waiting. …Compensating donors as a way to recruit people who would like to be rewarded for saving the life of another is long overdue. …Objections…ring hollow. The most common is that compensation “commodifies the body.” We already commodify the body, speaking strictly, every time there is a transplant: The doctors get paid to manipulate the body. So does the hospital. Why, then, object to enriching the donor — the sole individual in this entire scenario who gives the precious item in question and assumes all the risk?
In an article for CapX, Sam Dumitriu and Samuel Hammond make the case for pro-market reforms in the United Kingdom.
…increasing the number of living donors is becoming a major imperative for healthcare systems worldwide. For better or worse, altruism alone won’t fill the gap. Britain needs to change the law to give organ donors, particularly kidney donors, a financial incentive to donate. Rewards for donors are currently illegal… While the average time patients spend on the kidney waiting list has declined, it still routinely takes over three years before a match is found. In contrast, it’s clear from markets where financial rewards for donors are permitted that they are effective at increasing supply. …Kidney donors not only save lives and allow patients to come off dialysis, they also save the NHS money. According to the National Kidney Federation, each kidney transplant saves the NHS over £200,000 by reducing the need for expensive dialysis treatment. That’s significantly more than $40,000 price the Nobel Laureate Gary Becker and his co-author Julio Elias estimated would be necessary to eliminate the kidney shortage altogether.
In a column for the Federalist, Liz Wolfe makes the case that she should be allowed to help others by selling a kidney.
Four thousand dollars is my price, I think. … But I can’t do any of this because the government says it’s wrong. You know what else is wrong? Having 43,000 people die annually due to the current kidney shortage in our country. I’d love to help, but I don’t currently have a huge incentive to do so. …kidney-selling should be a person’s choice to make. …the naysayer might argue, isn’t autonomy undermined by desperation? Can consent truly take place if someone is debating between a set of imperfect options—selling an organ and profiting handsomely versus starving to death? …That would be more compelling if we didn’t already allow poor people to work in horribly dangerous industries for money. …Commercial fishing has a very high mortality rate and relatively low median wages. Roofers, garbage collectors (and recyclables collectors), construction workers, iron and steel workers, electricians, and truck drivers all have high mortality rates as well. Government does not intervene to protect these people from working in these industries… Either desperation undermines autonomy and invalidates consent or it doesn’t, but we should be more consistent. …Since we’re failing at pure altruism, maybe it’s time we turn to cold, hard cash as a better way to save lives.
In a column for the Foundation for Economic Education, Hans Bader looks specifically at kidney transplants.
Kidney failure shouldn’t be a death sentence. But for thousands of people, it is, thanks to federal laws banning organ sales. Those laws radically shrink the supply of kidneys and other organs that people desperately need to stay alive. …a recent study in the Journal of the American Society of Nephrology, titled “The Terrible Toll of the Kidney Shortage”…notes that the “106,000” people “who do not receive a transplant” due to the current kidney shortage “are fated to live an average of 5 years on dialysis therapy before dying prematurely.” …kidney donor Alexander Berger…predicted that allowing kidney donors to be compensated would save countless lives by giving people an incentive to donate their kidneys, resulting in a vast increase in kidney donations. …the taxpayers would save money, too. The government would be able to simply pay for kidney transplants for poor and elderly people…rather than paying for years and years of costly dialysis treatment through Medicare and Medicaid.
The bottom line is that paying donors would be good for sick people and good for taxpayers (Medicaid and Medicare are two of the most burdensome programs in the budget).
Sadly, politicians are standing in the way. But one potential seller has launched a court case.
John Bellocchio is suing the federal government to gain the freedom to sell his organs, as reported in the New York Post by Priscilla DeGregory.
A New Jersey man is suing the federal government for the right to sell his own organs — challenging a US law that bans the practice, new court papers show. John Bellocchio, 37, of Oakland filed the suit against United States Attorney General Merrick Garland in Manhattan federal court Thursday. He says in the suit that he struggled financially and looked into offloading some of his organs — perhaps a kidney — only to find out it’s illegal to make a buck on your body parts. Bellocchio, a career academic who now owns a business that helps connect people with service dogs, argues that the law contravenes his constitutional right to freedom of contract in determining what can be done with his own personal property — or, more specifically, his own body.
Christian Britschgi wrote about this legal challenge for Reason, but also made lots of strong arguments for why organ sales should be legal.
…the 1984 National Organ Transplant Act (NOTA)…makes it a crime for anyone to “acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce.” Violators of this ban face a maximum fine of $50,000 and up to five years in prison. That prohibition has left the 90,000 patients in need of a kidney on the national transplant list…it’s estimated that between 5,000 and 10,000 people die for want of a kidney transplant each year. Many more are left to undergo expensive, draining dialysis treatment. Medicare, which covers kidney patients of all ages, spent $81 billion on patients with chronic kidney disease in 2018. Medicare-related spending on patients with end-stage renal disease totaled $49.2 billion that same year.
As you probably figured out, most of the opposition to organ sales is from people who inexplicably feel squeamish or uncomfortable with the notion of using money to save lives.
But you know what’s even more important for life than a kidney? Food.
Yet that doesn’t stop us from utilizing private farms, private food processors, and private grocery stores in order to get lots of food at very cheap prices.
And even the limited intervention in this sector (farm subsidies and food stamps, for instance) have nothing to do with qualms about private provision of food.
As an economist, I strongly oppose the wealth tax (as well as other forms of double taxation) because it’s foolish to impose additional layers of tax that penalize saving and investment.
That being said, there are also administrative reasons why wealth taxation is a fool’s game. One of them, which I mentioned as part of a recent tax debate, is the immense headache of trying to measure wealth every single year.
Yes, that’s not difficult if someone has assets such as stock in General Motors or Amazon. Bureaucrats from the IRS can simply go to a financial website and check the value for any given day.
But the value of many assets is very subjective (patents, royalties, art, heirlooms, etc), and that will create a never-ending source of conflict between taxpayers and the IRS if that awful levy is ever imposed.
Let’s look at a recent dispute involving another form of destructive double taxation. The New York Times has an interesting story about a costly dispute involving the death tax to be imposed on Michael Jackson’s family.
Michael Jackson died in 2009… But there was another matter that has taken more than seven years to litigate: Jackson’s tax bill with the Internal Revenue Service, in which the government and the estate held vastly different views about what Jackson’s name and likeness were worth when he died. The I.R.S. thought they were worth $161 million. …Judge Mark V. Holmes of United States Tax Court ruled that Jackson’s name and likeness were worth $4.2 million, rejecting many of the I.R.S.’s arguments. The decision will significantly lower the estate’s tax burden… In a statement, John Branca and John McClain, co-executors of the Jackson estate, called the decision “a huge, unambiguous victory for Michael Jackson’s children.”
I’m glad the kids won this battle.
Michael Jackson paid tax when he first earned his money. Those earnings shouldn’t be taxed again simply because he died.
But the point I want to focus on today is that a wealth tax would require these kinds of fights every single year.
Given all the lawyers and accountants this will require, that goes well beyond adding insult to injury. Lots of time and money will need to be spent in order to (hopefully) protect households from a confiscatory tax that should never exist.
P.S. The potential administrative nightmare of wealth taxation, along with Biden’s proposal to tax unrealized capital gains at death, help to explain why the White House is proposing to turbo-charge the IRS’s budget with an additional $80 billion.
So you won’t be surprised that I agree with the message in this video
To elaborate, one of the big lessons of the Trump era is that he undermined his good policies – such as tax reform – by imposing higher taxes on global trade.
To state the obvious, it’s not a bad thing when foreigners decide they want to invest in the United States economy. Heck, it’s a good thing, a sign of economic strength.
Professor Douglas Irwin of Dartmouth made the same point, and many additional points, in a column for the Wall Street Journal late last year.
After four years, what have we learned? Many things, but especially that old economic truths still have value: Tariffs don’t reduce the trade deficit. …Economists have long pointed out that the trade deficit is driven by macroeconomic factors, particularly international capital flows. …The merchandise trade deficit was $864 billion in 2019, more than $100 billion higher than in 2016. …Tariffs are paid by consumers, destroy jobs and hurt the economy. Mr. Trump insisted that China would pay for the 15% to 25% duties that he imposed on $300 billion of its exports. In fact, the tariffs were passed on to American consumers, who paid more… Take steel. Higher prices might have saved some jobs in the steel industry, but..steel protection is a job-destroying policy. Economists at the Federal Reserve found that the steel and aluminum tariffs reduced overall employment in manufacturing by 75,000 workers.
But destroying jobs was just one negative effect of protectionism.
We also got more corruption, as the Wall Street Journalopined.
…it’s time to point out one unsightly effect of the Trump tariffs: expanding the D.C. swamp. …As Mr. Trump’s tariffs began to bite, Congress sent hundreds of letters to the USTR, supporting specific tariff exclusions. …Rep. Steny Hoyer signed a letter, “on behalf of the Congressional Fire Services Caucus,” asking for an exclusion on smoke alarms. North Carolina Senator Thom Tillis sought one for Honda’s lawn mower flywheels. For Sen. Sheldon Whitehouse, it was BedJet’s “ultra-thin adjustable bed ‘device.’” For Congressman Doug Collins, Home Depot’s light fixtures. For Sen. Patty Murray, empty coffee K-cup pods. Some of these exclusions were granted, and many weren’t. It’s difficult to know if lobbying by Congress made a difference… One substantial downside is more political interference in the economy. Pretty swampy.
We saw something very similar when President Obama was granting waivers for Obamacare. That was just one of the ways insiders got rich lobbying politicians for special treatment under government-run healthcare.
Let’s wrap this up.
Writing for the Wall Street Journal in March, Senator Pat Toomey and former Senator Phil Gramm conclude Trump’s protectionism was a failure.
In his first two years as president, Mr. Trump lifted regulatory burdens and pushed through a major tax cut, which triggered a broad-based rise in income and employment. He then turned to his protectionist agenda, which reduced economic growth and failed to deliver Michigan, Pennsylvania or Wisconsin in the 2020 election. Protectionism failed both as economic policy and political strategy. …As Mr. Trump found when he imposed tariffs on steel and aluminum, the resulting increase in jobs in those industries was small. …Jobs gained in the steel and aluminum industries after the tariffs were dwarfed by jobs lost in industries that use steel and aluminum in their manufacturing process, not to mention the jobs lost due to foreign trade retaliation. …Innovation, technological development and the capacity of a market economy to adapt to change provide our only sure path to job creation and prosperity. This is a lesson all politicians, but especially Republicans, need to learn from the economic and political failure of protectionism in the Trump era.
Amen.
Protectionism didn’t work. It didn’t create jobs, and it didn’t even buy votes.
The bottom line is that “Tariff Man” hurt himself and hurt the economy.
P.S. Sadly, Biden has not reversed many of Trump’s protectionist policies. But that’s not a surprise given his support for statism.
P.P.S. Though I hold out some hope that Biden will utilize the World Trade Organization as a tool to expand trade, thus reversing one of Trump’s mistakes.
Other people, however, muted their views on policy because of their partisan or personal feelings about Trump.
I was very disappointed, for instance, that some Republicans abandoned (or at least downplayed) their support for free trade to accommodate Trump’s illiteracy on that issue.
But those people look like pillars of stability and principle compared to the folks who decided to completely switch their views.
Max Boot, for instance, is a former adviser on foreign policy to Republicans such as John McCain and Marco Rubio, who has decided that being anti-Trump means he should now act like a cheerleader for high taxes and big government.
Here’s some of what he wrote in a column for today’s Washington Post.
Republicans accuse President Biden of pursuing a radical agenda that will turn the United States into a failed socialist state. …It’s true that Biden is proposing a considerable amount of new spending… But those investments won’t turn us into North Korea, Cuba, Venezuela or the Soviet Union — all countries with government ownership of industry. …with proposals such as federally subsidized child care, elder care, family leave and pre-K education — financed with modest tax increases on corporations and wealthy individuals — Biden is merely moving us a bit closer to the kinds of government services that other wealthy, industrialized democracies already take for granted. …That’s far from radical. It’s simply sensible.
Part of the above excerpt makes sense. Biden is not proposing socialism, at least if we use the technical definition.
But he does think it’s good that Biden wants to copy Europe’s high-tax welfare states.
…by most indexes we are an embarrassing international laggard. …the United States spends nearly twice as much on health care as a percentage of gross domestic product than do other wealthy countries… The United States is also alone among OECD nations in not having universal paid family leave. …Our level of income inequality is now closer to that of developing countries in Africa and Latin American than to our European allies. …it’s possible to combine a vibrant free market with generous social welfare spending. In fact, that’s the right formula for a more satisfied and stable society. In the OECD quality-of-life rankings — which include everything from housing to work-life balance — the United States ranks an unimpressive 10th.
Mr. Boot seem to think that it’s bad news that the United States ranks 10th out of 37 nations in the OECD’s so-called Better Life Index.
But the real problem is that Boot seems oblivious to most important data, which shows that Americans enjoy far more prosperity than Europeans.
And he could have learned that with a few more clicks on the OECD’s website. He could have found the data on average individual consumption and discovered the huge gap between U.S. prosperity and European mediocrity.
P.S. I can’t resist nit-picking four other points in Boot’s column.
As show by this Chuck Asay cartoon, you don’t magically make government spending productive simply be calling it an “investment.”
Like beauty, the interpretation of “modest” may be in the eye of the beholder, but it certainly seems like “massive” is a better description of Biden’s proposed tax hikes.
It’s worth noting that Europe became a relatively prosperous part of the world before governments adopted punitive income taxes and created big welfare states.
P.P.S. I’ve wondered whether the OECD (subsidized by American taxpayers!) deliberately used dodgy measures when compiling the Better Life Index in part because of a desire to make the U.S. look bad compared to the European welfare states that dominate the organization’s membership? That certainly seems to have been the case when the OECD put together a staggeringly dishonest measure of poverty that made the U.S. seem like it had more destitution than poor countries such as Greece, Portugal, and Turkey.
Another contentious issues is the degree to which society should accept less growth in order to achieve more equality, with Arthur Okun – author of Equality and Efficiency: The Big Tradeoff – being the most famous advocate for prioritizing equity.
Let’s take a closer look at this issue in today’s column.
We’ll start by perusing a working paper, published by Spain’s central bank, that explores the optimal tax rate for that nation. The author, Dario Serrano-Puente, concludes that society will be better off if tax rates are increased.
Many modern governments implement a redistributive fiscal policy, where personal income is taxed at an increasingly higher rate, while transfers tend to target the poorest households. …In Spain there is an intense debate about…so-called “fiscal justice”, which is putting on the table a tax rate increase for the high-income earners… once the theoretical framework is defined, a bunch of potential progressivity reforms are assessed… Then a Benthamite social planner, who takes into account all households in the economy by putting the same weight on each of them, discerns the optimal progressivity reform. The findings suggest that aggregate social welfare is maximized when the level of progressivity of the Spanish personal income tax is increased to some extent. More precisely,in the optimally reformed scenario (setting the optimal level of progressivity), welfare gains are equivalent to an average increase of 3.08% of consumption.
I have a fundamental problem with the notion of government acting as a “Benthamite social planner,” but I don’t want to address that issue today.
Instead, I want to applaud Senor Serrano-Puente because he openly acknowledges that higher tax rates and more redistribution will lead to less growth.
Here’s some of what he wrote about that tradeoff.
For each reformed economy evaluated in the progressivity gridτ={0.00, …,0.50}, the main macroeconomic aggregates are calculated. …the evolution of these magnitudes on progressivity is depicted in Figure 4. …Broadly speaking, it is clear that aggregate capital and output are decreasing in progressivity in a (almost) linear pathway, with the drop in capital being more pronounced than in output. …aggregate consumption and aggregate labor are also decreasing in progressivity.
Here’s a look at the aforementioned Figure 4, and it is easy to see that the economy suffers as progressivity increases.
Kudos, again, to the author for acknowledging the tradeoff between equity and efficiency. But applauding the author for honesty is not the same as applauding the author’s judgement.
Simply stated, he is trying to justify a policy that will hurt poor people in the long run. That’s because even small differences in growth can have a big effect over time.
Let’s illustrate how this works with a chart showing the life-time earnings of a hypothetical low-income Spaniard.
The orange line shows how much money the workers gets if he starts with an extra 3.08 percent of income thanks to higher taxes and additional redistribution, but the economy grows 2.0 percent per year.
The blue line shows income for the same worker, which starts at a lower level because tax rates have not been increased to fund additional redistribution, but the economy grows 2.2 percent per year..
As you can see, that low-income worker is a net beneficiary of bigger government for about 10 years. But as time goes on, the worker would be far better off with smaller government and faster growth.
Different assumptions will lead to different results, of course. My goal is simply to help readers understand two things.
P.S. To illustrate the high cost of big government, let’s shift from hypothetical examples to real-world data. Most relevant, OECD data shows that the average low-income person in the United States is better off than the average middle-class person in Spain.
P.P.S. The study cited above considers what happens if Spanish politicians raise taxes on the rich. That would be a mistake, as illustrated by the chart, but let’s not forget that Spanish politicians also over-tax low-income people.
Actually, there’s another thing everyone should understand. As illustrated by this summary from the Washington Post, it’s not really an infrastructure plan. It’s a spend-money-on-anything-and-everything plan, presumably to reward various interest groups.
Though I guess we have to give the Biden Administration points for consistency. The President’s COVID relief plan from earlier this year had very little to do with the pandemic, so we shouldn’t be surprised to see that the infrastructure plan has very little to do with infrastructure.
The Wall Street Journaleditorialized about this bait-and-switch scam.
Most Americans think of infrastructure as roads, highways, bridges and other traditional public works. That’s why it polls well… Yet this accounts for a mere $115 billion of Mr. Biden’s proposal. There’s another $25 billion for airports and $17 billion for ports and waterways that also fill a public purpose. The rest of the $620 billion earmarked for “transportation” are subsidies for green energy and payouts to unions for the jobs his climate regulation will kill. …The magnitude of spending is something to behold. There’s $85 billion for mass transit plus $80 billion for Amtrak, which is on top of the $70 billion that Congress appropriated for mass transit in three Covid spending bills. The money is essentially a bailout for unions… Then there’s $174 billion for electric vehicles, including money to build 500,000 charging stations and for consumer “incentives” on top of the current $7,500 federal tax credit to buy an EV. …Mr. Biden is also redefining infrastructure as social-justice policy and income redistribution. …His plan also includes $213 billion for affordable housing, $100 billion for retrofitting public schools, $25 billion for child-care facilities and $400 billion for increasing home-health care.
Michael Boskin, a professor at Stanford, is not optimistic that Biden’s plan will generate good results.
Joe Biden’s $2.3 trillion infrastructure plan would be many times larger than previous such bills, only about one-third of it would meet even a broad definition of “infrastructure.” …What could possibly go wrong? A lot. …federal spending would crowd out private and local government spending, with a substantial risk of boondoggles piling up along the way. …The Biden plan is rife with opportunities for earmarked pork-barrel projects (bridges to nowhere) and crony capitalist corporate welfare (next-generation Solyndras). Consider California High-Speed Rail, an infrastructure train wreck that will soon be begging for a bailout from the Biden administration. It originally used a grant from President Barack Obama’s 2009 “stimulus” package to pay, six years later, for a tiny initial rail line. Yet, because the project’s projected total San Francisco to Los Angeles cost has tripled to $100 billion.
And even if the plan was nothing but real infrastructure, that wouldn’t be a cause for optimism.
Kenneth Rogoff, a professor at Harvard, wrote late last year that governments have a terrible track record with cost overruns.
…perhaps the biggest obstacle to improving infrastructure in advanced economies is that any new project typically requires navigating difficult right-of-way issues, environmental concerns, and objections from apprehensive citizens… The “Big Dig” highway project in my hometown of Boston, Massachusetts was famously one of the most expensive infrastructure projects in US history. The scheme was originally projected to cost $2.6 billion, but the final tab swelled to more than $15 billion… The construction of New York City’s Second Avenue Subway was a similar experience, albeit on a slightly smaller scale. In Germany, the new Berlin Brandenburg Airport recently opened nine years behind schedule and at three times the initial estimated cost.
Amen. I wrote a column about the infamous Second Avenue Subway, and I’ve also repeatedlyopined about how government projects always wind up costing much more than initial projections.
Let’s wrap up by looking at an economic analysis of Biden’s plan by the University of Pennsylvania’s Penn Wharton Budget Model.
The overall macroeconomic effects of enacting the AJP, including both its spending and tax provisions, are shown in Table 4. …After the AJP’s new spending ends in 2029, however, its tax increases persist—as a result, federal debt ends up 6.4 percent lower by 2050, relative to the current law baseline. Despite the decline in government debt, the investment-disincentivizing effects of the AJP’s business tax provisions decrease the capital stock by 3 percent in 2031 and 2050. The decline in capital makes workers less productive despite the increase in productivity due to more infrastructure, dragging hourly wages down by 0.7 percent in 2031 and 0.8 percent in 2050. Overall, GDP is 0.9 percent lower in 2031 and 0.8 percent lower in 2050.
Here’s Table 4, which I’ve augmented by circling the two most important statistics.
The immediate lesson from all of this is that Biden’s plan is a boondoggle waiting to happen (just as would have been the case with Trump).
Today, we’re going to venture into “consolation humor.” At least that’s the best term I can think of for the following two memes, both of which show what happens when leftists suddenly grasp reality.
He’s certainly not a full-blown supporter of the Second Amendment.…it wasn’t until one night last April at my Kentucky home that I decided to become a gun owner myself. The brightness of the living room light startled me from my sleep. …The rustling sounds confirmed that we had an intruder. …The invader eventually made his way to the bedroom door. …The intruder slammed against the door like a battering ram in an attempt to take it down. He nearly succeeded, shattering the frame, but my husband held the rest of the door shut while I hid on the balcony and called the police.It took officers more than 45 minutes to arrive… I realized we needed protection. …Three days after the break-in, with my husband’s encouragement, I went to the gun store and purchased my revolver and some hollow-point bullets.
International Liberty 