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Archive for December, 2023

Time for the annual “best and worst” column, which has been a long-standing tradition (2022, 2021, 202020192018etc).

We actually saw some major good news in 2023. Here are my top 3 developments.

President Milei in Argentina – The most important election of the year took place in the long-suffering nation of Argentina, which amazingly elected a hard-core libertarian in its presidential election.

School choice revolution – The past few years have been great for education policy, with state after state adopting some form of universal or near-universal school choice.

Landslide victory for TABOR in Colorado – If Milei’s victory was the best global election news of 2023, the defeat of Proposition HH was the best domestic election news of the year. Pro-spending lobbies have repeatedly tried to get rid of the TABOR spending cap.

Honorable mention goes to the state tax-cutting wave.

Now for the three worst developments of 2023. And they are all related. Simply stated, I’m very worried about deterioration of global economic liberty and the failure to address festering problems.

Slouching toward fiscal crisis in the United StatesPoliticians in the United States generally care more about buying votes than in preserving or enhancing the economic well-being of citizens. Given demographic changes, that’s very bad news for the future.

Slouching toward fiscal collapse in EuropePoliticians in Europe generally care more about buying votes than in preserving or enhancing the economic well-being of citizens. Given demographic changes, that’s very bad news for the future.

Reverting to failing statism in China – China’s totalitarian ruler doesn’t have to worry about vote buying, but he nonetheless is moving policy in a bad direction. A very sad development since China reaped big benefits when it moved from awful policy to bad-but-not-quite-as-awful policy.

For dishonorable mention, the economic illiteracy of CNN, the IMF, and the head of the ECB left me shaking my head.

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I sometimes joke about living in a libertarian fantasy world, maybe even a libertarian nation with a libertarian anthem.

Amazingly, that is basically what Argentina’s new president, Javier Milei, is trying to create.

At least the libertarian nation part. He has all sorts of proposals that I like, including smaller government, deregulation, and free trade.

But Articulo 209 is my favorite. He wants to prohibit the government from saying that goodies from the government are “free.”

Here’s a tweet describing his proposal.

I’ve talked to friends in Argentina. Articulo 209 has been proposed rather than passed.

Nonetheless, I’m tremendously impressed that President Milei is pushing the idea.

Truth in government would be an amazing development.

Maybe it could eventually spread to the United States!

P.S. I’ve had no success in trying to convince Washington politicians that they shouldn’t lie about the definition of a budget cut, so it’s probably a lost cause to get them to copy Milei.

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As explained by public intellectuals such as Milton Friedman, Johan Norberg, John Stossel, and Orphe Divougny, the argument against minimum wage requirements is very simple.

If politicians dictate that people can’t be employed unless they receive, say, $15 per hour, then workers who are worth less than than amount (because of low skills, no experience, etc) won’t get hired.

And if a worker is worth $17 per hour and a government now says that worker must get $20 per hour, that’s a recipe for getting laid off.

Which is exactly what is happening in California. Here are some excerpts from a Wall Street Journal editorial.

California’s $20 an hour minimum wage for fast-food workers doesn’t take effect until April, but the casualties are already piling up. Pizza Hut franchises this week told more than 1,200 delivery drivers that they’ll lose their jobs before the higher wage kicks in. …it defies economics and common sense to think that businesses won’t adapt by laying off workers. Some may try to pass on their higher labor costs to customers. McDonald’s and Chipotle Mexican Grill have said that they plan to raise prices. But how many people will pay $8 for a Big Mac? Restaurants will probably deploy more automation to the extent they can, but fewer workers will mean longer waits in the drive-through. Pizza Huts are shaving their costs by out-sourcing delivery service to apps like DoorDash and GrubHub—ironic given how unions have fought against gig work. …Employment in California has fallen by 77,700 in the last year. Yet Democrats continue to impose higher costs and other burdens on business, oblivious to the lost jobs and services.

Why do politicians impose bad laws?

The simple answer is that they are kowtowing to unions.

So you may then ask why unions support bad laws?

I’ve previously noted that unions are willing to screw workers so long as the union benefits. And now we have more evidence for that view.

Why Do Labor Unions Advocate for Minimum Wage Increases?

By the way, here’s some new research showing that minimum wages are bad for workers and the economy.

Just as economists have long understood.

High minimum wages even lead to more homelessness!

Let’s close with a bit of good news.

Professor Bryan Caplan explains that inflation (thanks, Federal Reserve!) is making the minimum wage less and less relevant.

But note that Bryan is only talking about the federal minimum wage. States and cities still have the power to throw people out of jobs.

P.S. If you want to see me ranting and raving about the minimum wage, click here, here, and here.

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As I wrote just two days ago, the establishment media often alternates between bias and inaccuracy.

An example from earlier this year is when the press referred to Javier Milei, a presidential candidate in Argentina, as a “Mini-Trump.”

That was an absurd depiction. Milei is an out-of-the-closet libertarian who ran – and won – on a platform of radical (and necessary) ideas such as slashing the public sector and dollarization.

And, as illustrated by this tweet, he has wasted little time in trying to reduce the size and scope of government.

At the risk of understatement, that’s the opposite of Trump, who increased spending at a faster rate than Barack Obama.

By the way, Trump was more profligate than Obama even when looking only at domestic spending (and I didn’t even count all the money wasted during the pandemic when I did that comparison).

Now we have another example of President Milei being the opposite of Trump.

Like all sensible people (and unlike Trump and Biden), Milei is pushing for free trade.

Here are some excerpts from a story which was written for Bloomberg by Ignacio Olivera Doll.

Argentina’s government lifted import restrictions Tuesday…, advancing President Javier Milei’s free trade agenda. The tax authority replaced a red-tape import system Tuesday that forced many companies to seek manual approval for every shipment with a more data-based version. …Economy Minister Luis Caputo wrote on social media. “Government bureaucracy will no longer have the power to decide who does or doesn’t import goods.” …Import shortages damaged the real economy in recent months with hospitals saying they couldn’t bring in essential equipment made abroad. Even major international players, such as General Motors Co., temporarily suspended production at its car plant in October due to auto part shortages.

Here’s one other passage from the story that warmed my heart.

While Milei advances his free trade agenda, he took another austerity measure Tuesday, cutting by decree thousands of government jobs for people who started working earlier this year. Milei’s spokesman said the measure affects about 5,000 state employees but a labor union representing public sector workers put the figure at over 7,000.

Amen. Argentina desperately needs smaller government and Milei is on the right track.

And it also desperately needs free trade, and today’s column shows that he’s starting strong on that issue as well.

Argentina also desperately needs sound money, and I expect we’ll soon see inflation moving in the right direction.

P.S. I realize I’m over-using “desperately,” but that’s a very appropriate word when considering the mess that Milei has inherited.

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Time for the final segment of my five-part series for 2023 on blue-to-red tax migration (previous versions here, here, here, and here).

We’ll start with this table showing what has happened in America’s 10-largest states.

You should notice a pattern.

The table comes from a column for National Review written by Dan McLaughlin. He explains what these numbers mean.

The Census Bureau has announced its year-end estimates of state population changes… They once again show the continuing trend of America’s population shifting out of its bluest states and into red states… The biggest boom states in the past year? In terms of raw numbers, Texas and Florida dwarf everyone else, followed by North Carolina and Georgia… In percentage terms, South Carolina was the biggest winner… Eight states lost population. New York was by far the biggest loser, dropping over 100,000 people, 0.5 percent of its population in a single year. Five of the eight states have been governed by Democratic trifectas for this entire decade.

The Wall Street Journal editorialized a few days ago about this internal migration. Here are some excerpts.

The U.S. population increased by 1.6 million between July 2022 and July 2023, with states in the South accounting for about 1.4 million of the growth. Leading the boom were Texas (473,453), Florida (365,205)… Eight states saw population declines, with the biggest in New York (-101,984), California (-75,423) and Illinois (-32,826). …what these states have in common: High taxes, burdensome business regulation and inflated energy and housing prices. ….An interesting natural experiment has been Washington state, which gained tens of thousands of people from other states on net each year in the last decade. But since enacting a 7% capital-gains tax on higher earners in 2021, Washington has been losing residents to other states at an accelerating pace—15,276 this past year. …A big problem for Democratic-run states is that their affluent residents are leading the exodus, and they pay the majority of income tax that supports their expansive welfare programs.

By the way, the WSJ‘s editorial explains that there are political implication of America’s internal migration.

State migration has long-tail political consequences. California, New York, Illinois, Minnesota and Rhode Island and Oregon on present trend would lose a combined 12 House seats in the 2030 reapportionment, which is as many as Florida, Georgia, Texas, Tennessee, North Carolina, Utah and Idaho would collectively gain.

And the National Review column includes a map for those of us who like visuals.

I’ll close by noting that blue states aren’t just losing political power. They’re also losing lots of taxable income.

P.S. I think taxes are a major factor in driving internal migration, but there are other factors as well (see here, hereherehere, and here).

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Writing about the economic tragedy of Argentina, I’ve explained that one major problem is inflation, thanks to that country’s version of “modern monetary theory.”

This is not a trivial problem. Here’s a chart, from a recent report by Reuters, showing how prices have been rising for nearly 10 years and skyrocketing for the past three years.

I’m sharing this chart because the New York Times published a story a few days ago about inflation in Argentina.

What’s remarkable about this report is that the authors, Daniel Politi and

I’m not joking. It’s in both the headline and the story. Here are a few excerpts.

In Argentina, a country synonymous with galloping inflation, people are used to paying more for just about everything. But under the country’s new president, life is quickly becoming even more painful. …since Mr. Milei took office on Dec. 10…, prices have soared at such a dizzying pace that many in this South American country of 46 million are running new calculations on how their businesses or households can survive the far deeper economic crunch the country is already enduring. …“Since Milei won, we’ve been worried all the time,” said Fernando González Galli, 36, a high school philosophy teacher in Buenos Aires.

In other words, the reporters want readers to believe that President Milei, who has been in office less than three weeks, somehow is responsible for high inflation, which has been bad – and getting worse – for a decade.

To understand the absurdity of that argument, here’s another look at the Reuters chart, with a notation on when Milei took office.

Blaming Milei for today’s inflation in Argentina would be like blaming Reagan for the double-digit inflation in the United States in January and February of 1981, right after Reagan was inaugurated.

In the real world, it takes a while for bad monetary policy to create inflation. For instance, the Federal Reserve’s irresponsible monetary expansion that began with the pandemic in 2020 didn’t trigger big price increases until the middle of 2021.

Similarly, it takes a while for good monetary policy to tame inflation.

Will Milei be as successful as Reagan, both with regards to inflation and overall economic rejuvenation? I hope so, though Milei has an even bigger challenge.

I’ll close by noting that the article did have a bit of sensible and honest analysis. Here are a few sentences that accurately describe how Milei is trying to undo the damage caused by the prior government.

The previous leftist government had used complicated currency controls, consumer subsidies and other measures to inflate the peso’s official value and keep several key prices artificially low, including gas, transportation and electricity. Mr. Milei vowed to undo all that, and he has wasted little time. Two days after taking office, Mr. Milei began cutting government spending, including consumer subsidies. He also devalued the peso by 54 percent, putting the government’s exchange rate much closer to the market’s valuation of the peso.

Milei needs to engage in what has been called “daredevil economics,” though it’s really just the common-sense policies that used to be called the “Washington consensus.”

Not that folks in the media understand what’s happening. Or if they do understand, they don’t discuss the issue honestly and accurately.

The bottom line is that the New York Times report is a grotesque example of media bias and media sloppiness. Perhaps even worse than this example or this example.

So the next time someone asks whether there is media bias, you know the answer. Though dealing with this problem should be left to the market.

P.S. Click here to understand the left’s analysis of Argentina.

P.P.S. And click here if you want to understand that “dollarization” is the best long-run answer for Argentinian monetary policy.

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Per tradition (2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, etc), today is for some humor.

We’ll start by trying to figure out Santa’s ideology.

Next we have Biden playing Santa Claus with other people’s money.

Our next item shows that environmentalists are willing to kill more than birds.

For our next item, different philosophers give their two cents on the meaning of Christmas.

Last but not least, we have a Bidenomics Christmas.

If you want something serious but also Christmas-themed, here’s an analysis of the economics of Scrooge.

P.S. It goes without saying that I didn’t get what I wanted for Christmas.

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Since governments have a terrible tendency to waste money, I’m a big fan of tax avoidance.

For instance, even though I don’t like itemized deductions for things like charitable contributions and home mortgage interest, I am glad when taxpayers are able to use those tax preferences to reduce the amount of money going to the “wretched” people in Washington.

And I also applaud clever and unusual ways of reducing tax liabilities, both in America and around the world.

Now I have a new example to applaud.

As reported by The Athletic, Shohei Ohtani has figured out how to keep nearly $100 million out of the clutches of despicable California politicians

…the unique structure of Ohtani’s heavily deferred $700 million contract with the Los Angeles Dodgers has opened the eyes of other high earners. …Ohtani this month agreed to play for the Dodgers for a decade at $70 million per season, but from 2024-33, he’ll draw just $2 million per season. Ohtani is deferring $680 million — more than 97 percent of his earnings — until after his 10-year deal with the Dodgers expires, when that money comes back to him in equal annual payments from 2034-43. …the structure of the contract appears likely to save Ohtani between $90 and $100 million in state taxes, so long as he lives outside of California when the deferred money is paid out. …A 1996 federal law forbids states from taxing retirement income on out-of-state residents when payments are made in “substantially equal periodic” amounts over at least 10 years.

I’m a Yankees fan, but I’ll also be cheering for Ohtani. Especially between 2034 and 2043 when he’ll be getting $680 million and living in a state with no income tax.

And I’ll cheer even more boisterously if other successful Californians figure out ways to mimic his successful strategy.

P.S. I’m guessing Dwight Howard and Phil Mickelson are upset their tax advisors didn’t think of this strategy.

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Following up on columns from March and July, let’s enjoy a third and final collection of socialism mockery for 2023.

Our first item shows what happens when some socialists realize they are the same as some other socialists.

Next we have a socialist admitting his true motive.

Our third item shows the difference between voluntary exchange (which produces a growing pie) and government coercion (which is a zero-sum game).

Next, we have a Venn Diagram about the intersection of socialism with various societal goals.

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

I’ve written serious columns about young people and their foolish dalliance with socialism, but I’ve never come up with a solution. A year in Venezuela would probably work wonders.

P.S. There’s another approach that might get young socialists (at least the studious ones) to realize the error of their ways. It’s depicted in this video and this video.

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Spending caps are the only fiscal rule with a good track record.

I’ve repeatedly written about Switzerland’s spending cap, known as the “debt brake,” which has limited annual spending growth to an average of just 2.2 percent over the past two decades.

That’s very impressive, especially compared to the irresponsible 4.9 percent average annual spending growth in the United States.

I’ve also written several times about Colorado’s spending cap, known as the Taxpayer Bill of Rights (TABOR), including a column earlier this year showing that state taxpayers have received $8.2 billion of tax relief.

Today, let’s look at more pro-TABOR evidence. Americans for Tax Reform has a “Sustainable Budget Project” to monitor and track state budgets. Here’s their chart showing the results for Colorado.

As you can see, Colorado government spending between 2013 and 2022 was below population plus inflation.

And that’s true when looking at the money that Colorado collected and spent (“state funds budget), and also when looking at total spending  (“all funds budget”), which includes spending financed by the federal government.

None of this, however, means that TABOR is perfect.

Vance Ginn just wrote an article on strengthening Colorado’s spending cap for National Review. Here are some highlights.

TABOR recently had its 30th birthday. Voters approved the constitutional amendment in 1992, establishing the strongest tax and expenditure limit in the country. It’s been the gold standard for a sound spending limit ever since. …When adopted, the limit covered about two-thirds of state spending. It requires voter approval for tax increases and mandates refunds to taxpayers if tax revenue exceeds the limit. …Unfortunately, courts and politicians have eroded the strength of TABOR over time, primarily because of politicians’ lack of fiscal restraint. The result has been that TABOR now covers less than half of state spending… The…Sustainable Colorado Budget..will help reinforce the original intent of TABOR, by broadening the spending limit to all state funds. The plan would limit nearly two-thirds of state spending each year, as when voters first adopted TABOR. Doing so will result in larger surpluses to reduce income-tax rates yearly until they’re zero.

Several times in recent years (2013, 2019, 2023), proponents of good fiscal policy have had to fight against referendums to weaken TABOR. As Vance wrote, it’s time to go on offense and push to make the spending cap even more effective.

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When making the case for spending caps, the best domestic example is Colorado and the best international example is Switzerland.

What makes the Swiss example especially persuasive is a comparison over the past 20 years between spending growth in Switzerland and the United States.

To use an education analogy, Switzerland is a star student (2.2 percent annual spending growth) and the United States is flunking (4.9 percent annual spending growth).

What’s particularly disappointing, as I wrote a couple of years ago, is that America’s current fiscal mess wouldn’t exist if politicians had been constrained by a spending cap.

In a column for the Wall Street Journal back in October, Grover Norquist and Vance Ginn discussed how national (and state) politicians have dug deep fiscal holes.

Left-wing politicians assert that Americans are undertaxed, but the data show that the government spends too much. …Between 2013 and 2022, aggregate annual spending by the 50 state governments, excluding federal funds, increased 51.7%. Total annual federal spending rose 69.4% during the decade, more than three times as fast as the 21.6% increase in the rate of population growth plus inflation. …Had the federal government limited the growth in spending to a maximum of the population growth rate plus inflation during that decade, in 2022 the federal government would have spent $1.6 trillion less than it did, resulting in at least a $200 billion surplus. If the federal government had done this over the past two decades, the national debt would have increased by less than $500 billion instead of $19 trillion. If state governments had limited spending growth to the rate of population growth plus inflation during the last decade, they would have spent $1.39 trillion in 2022, $344 billion less than the $1.74 trillion they actually spent.

Amen. Spending caps are the gold standard of fiscal policy.

There are many reasons the United States should copy Switzerland (decentralization, private pension system, trade liberalization, quality governance, etc), and the Swiss spending cap is at the top of the list.

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Fixing entitlement programs is the the most pressing fiscal need in Washington.

In a discussion with the Club for Growth Foundation, I explain that we also need federalism – i.e., shifting programs to the state and local level.

At the risk of oversimplifying, the vast majority of Washington programs should be shut down.

Some of those activities should be left totally to the private sector (agriculture, housing, etc) while others could be picked up by state and local governments (education, transportation, etc).

As I mentioned in the discussion, Switzerland is a good role model.

It’s arguably the world’s best-governed nation. And I don’t think it’s a coincidence that it’s also the most-decentralized nation.

There are only three major exception (unless you’re an anarcho-capitalist, in which case everything is abolished).

My former colleague Chris Edwards wrote about the need for federalism in a column for National Review. Here are some highlights of his article.

The nation is headed toward a fiscal crisis. …there is a…way to avert fiscal disaster: phase out $1.3 trillion a year in federal subsidies for state and local activities such as K–12 education, low-income housing, welfare, urban transit, and Medicaid. Devolving funding for state and local activities would slash federal deficits and stabilize the debt. As the federal government cut subsidies, the states could downsize programs or they could fill the funding void with their own resources. In the latter case, the states would do so with current revenues — not debt — because they have extensive constitutional, statutory, and economic restraints limiting debt issuance. …states are steered toward fiscal responsibility by competitive pressures. Credit-rating agencies examine state finances and make assessments that affect interest rates on state debt. The process encourages fiscal prudence… We should slash federal aid to the states to invert that structure and aim for the fiscal structure of Switzerland, where just one-third of government spending is federal. …By funding their own programs, the states could design programs to match local preferences without one-size-fits-all federal mandates. Such a decentralized fiscal structure would also boost democracy and political accountability because decision-making would move from unelected federal bureaucrats to elected state and local officials.

I would add two points to Chris’ list.

First, federalism is consistent with the Constitution (whereas most of what now happens in Washington is not).

Second, federalism would mean more national harmony (let Texans be Texans and let Californians be…whatever they are).

Actually, a third point is that federalism is not only good policy, but also smart politics.

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I like to think that my four-part video series on trade (here, here, here, and here) has a lot of useful facts and analysis.

But I overlooked a very persuasive argument.

Here are the world’s more protectionist and most pro-trade jurisdictions, according to the latest data from Economic Freedom of the World.

Why are these two lists persuasive?

Because IMF data shows that the average per-capita GDP of the protectionist nations is $3,212 while the per-capita GDP of the free-trade nations is $46,550.

More than 14 times higher!

At the risk of understatement, there are plenty of reasons why there is a big income gap between those two lists. The protectionist countries tend to have lots of other bad policies (weak rule of law, monetary instability, excessive red tape, etc), while the free-trade nations are likely to have good policies in those areas.

So the most accurate thing to say is that protectionism contributes to the poor performance of countries on the left list while trade freedom contributes to the prosperity of the nations on the right list.

Unfortunately, the leading presidential candidates in the United States want to be on the wrong side.

That’s a mistake. Andy Kessler of the Wall Street Journal explains that the Biden-Trump approach makes no sense.

…tariffs impose costs on all Americans to subsidize a few jobs. …You’re going to hear a lot about tariffs this election cycle. …Mr. Trump has proposed 10% tariffs on all imports. That sounds strong but it’s actually a weakling move, especially with U.S. industrial capacity already near an all-time high. …Should we put tariffs on search engines and social networks? Of course not. China blocks ours to force its citizens to use inferior products. Tariffs denote weakness, not strength. With tariffs, you get false price signals and less innovation. They misallocate capital and human resources by having entrepreneurs chase fake opportunities. Domestic manufacturers love tariffs, which allow them to raise prices, but the rest of us have to overpay for goods while manufacturers become lazy. …Tariffs steal the opportunity cost of doing something better. …The government is awful at picking winners and losers. …We have the world’s strongest economy. Tariffs are a sign of weakness. Let markets, not vote-buying politicians, decide which industries will bloom from the ground up. Tariffs and industrial policy are for losers.

Amen.

I would also add that protectionism is a playground for corruption.

I’ll close by asking anti-trade readers if they can identify a successful protectionist nation. Anywhere in the world. Just as is the case with my never-answered question, I won’t be holding my breath waiting for responses.

P.S. The United States in the 1800s is not a correct answer.

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I narrated this video in 2019, hoping that it would help people understand why free trade is good and protectionism is bad.

Sadly, American politicians don’t appreciate that message. Trump was a protectionist and Biden has followed the same approach.

To make matters worse, we may see even more protectionism in the future, not only in the United States, but also from the European Union.

But there is a country where lawmakers are moving in the right direction and lowering trade taxes.

It is, predictably, a very sensible nation.

Yes, I’m referring to Switzerland, arguably the world’s best-governed country.

As reported by Sonja Wind for Bloomberg, the Swiss are putting taxpayers and consumers first.

Switzerland is making a bold move in the era of trade protectionism that should make things a little cheaper: saying goodbye to industrial tariffs. Starting in January, 95% of all imports will enjoy duty-free status, promising more affordable goods like cars, household appliances and clothes. …it’s expected to boost competitiveness and moderate the elevated prices for everyday items. …The Swiss Federal Council touts an estimated welfare gain of 860 million francs ($981 million)… “It’s a good message to the world at a time when many countries are questioning the benefits of international trade and increase barriers to trade,” said Stefan Legge, head of tax and trade policy at University of St. Gallen, citing the US as an example. …From the producer’s standpoint, however, even a 1% reduction in the cost of goods sold would be welcomed, as would the reduced burden of complying with tariff schedules.

Since there will still be some taxes on agricultural imports, this isn’t quite unilateral free trade.

But it is pretty close to the very successful approach used by the United Kingdom in the 1840s and New Zealand in the 1990s.

And maybe someday in the United States (though not soon given the two leading candidates for the White House).

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I shared some gun control satire a few days ago.

Today, it’s time for a serious column about the right of private gun ownership.

I wrote a few years ago about how European Jews should have the right of gun ownership.

Especially since anti-Semitic terrorists never seem to have any trouble getting access to weapons.

And I included a very appropriate poster from Jews for the Preservation of Firearms Ownership to emphasize how gun control often has been a go-to policy for the world’s most despicable tyrants.

What’s now happening in Israel underscores that message.

In a report from the Washington Post, Claire Parker, Jon Gerberg, Judith Sudilovsky, and John Hudson explain that October 7 was a wake-up calls for both lawmakers and citizens.

Since Hamas rampaged through Israeli communities on Oct. 7, the government here has promoted a simple message: Guns save lives. Using rhetoric redolent of gun rights advocates in the United States, hard-right national security minister Itamar Ben Gvir has pushed to loosen strict firearm licensing requirements and create more civilian “standby teams” to harden communities against a repeat of the deadly surprise attack. …Under an expedited processing system, Ben Gvir’s ministry in the past two months has received more than 256,000 applications to carry private firearms… Jewish Israeli volunteers across Israel and West Bank settlers are arming themselves, training and forming groups to patrol the streets… Private gun ownership was rising before the war. But since Oct. 7, interest has exploded… Before the war, to be considered for a gun license civilians had to live or work in an area deemed to be under heightened security risk, be interviewed in person, submit a health declaration signed by a physician, undergo training and demonstrate they knew how to use a gun safely. The license limited bearers to one gun and 50 bullets. Now residents of more cities have been made eligible. They can be interviewed by telephone. It’s easier to renew licenses that have lapsed. And licensees are permitted 100 bullets.

The article also notes that armed Jews saved many lives on October 7.

The army took hours to respond, leaving men, women and children largely defenseless against the militants. In the aftermath, accounts emerged of volunteer security teams in some kibbutzim fending off Hamas attackers and saving lives. The teams, known in Israel as “kitat konenut,” have long been active in Jewish settlements in the West Bank and in Israeli communities near the Gazan border, where they act as first responders to security threats. For advocates of wider access to gun ownership, the accounts served as vindication of their cause — and helped build support for lowering barriers to firearms access.

In the New York Times, Aaron Boxerman and

…in the aftermath of Oct. 7, Israelis have submitted at least 256,000 applications for gun licenses, including many who had never before considered owning a weapon. Israel’s current far-right national security minister, Itamar Ben-Gvir, has long pushed for an expansion of gun ownership, and in mid-October, lawmakers signed off on eased gun ownership regulations promulgated by his office. Young adults with assault rifles slung over their shoulders are a common sight in Israel, where hundreds of thousands are soldiers on active duty or reservists with weapons stashed at home. But despite decades of insecurity, private gun ownership never approached the levels seen in the United States, where surveys show about one-third of adults own firearms. …national security minister, Itamar Ben-Gvir, has long pushed for an expansion of gun ownership…told a meeting…“If there had been more guns in the Gaza border area, more emergency response teams, more lives could have been saved.”

This passage is especially relevant.

Maayan Rosenberg-Schatz, said that like so many other Israelis, she no longer believed the Israeli military — which took hours to arrive at some embattled communities on Oct. 7 — would reach them in time in a crisis…said Ms. Rosenberg-Schatz, 42, who applied for a gun license along with her husband. “But in the end, there’s no replacement for having a weapon.”

P.S. Some American Jews also understand this issue. In a column for the Daily Wire, written nearly four years before the October 7 Hamas attack, Josh Hammer wrote about gun ownership among American Jews.

A Jew who is trained, armed, and proficient in the use of firearms is necessarily a Jew who the anti-Semites fear the most — which makes this Jew the very best kind of Jew. This is a Jew who is ready, willing, and able, if need be, to heed the Talmudic principle that one must rise to take the life of someone who is trying to take his/her own life. …This is a Jew who is physically capable and emotionally prepared to take down an active shooter, if need be. …I live in Texas, and it is hardly the least bit unusual for Jews here to pack heat while attending synagogue or attending any other kind of Jewish-themed event. …Why on Earth would Jews, the most systemically persecuted group of humans to have ever lived, delegate responsibility for their own lives to third-party actors?

The bottom line is that Jews should be more like Texans.

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Inexplicably, I’ve only shared one column this year mocking politicians. So let’s rectify that oversight with five new examples of satire.

We’ll start with this cartoon. I think Crazy Bernie is the one yelling, but it could be Biden.

Our second item is a headline from the Babylon Bee, though the entire story is worth reading.

Movie buffs will appreciate our next item, which sort of copies the message from my series about the “wretched hive of scum and villainy.”

Speaking of which, here’s a typical denizen of that wretched hive.

As usual, I’ve saved the best for last. In this case, though, it’s a written joke rather than a cartoon or meme.

Only weeks after leaving office on January 20, 2017, former President Barack Obama discovers the AC in one of his mansions is not cooling so he calls Troy the Serviceman to come out and fix it.

Troy drives to President Obama’s new house, which is located in a very exclusive, gated community near Washington where all the residents have a net income of way more than $250,000 per year.

Troy arrives and takes his tools into the house. He is led to the guest house that isn’t cooling. Troy assesses the problem and tells President Obama that it’s an easy repair that will take less than 10 minutes.  President Obama asks Troy how much it will cost.  Troy checks his rate chart and says, “$9,500.

“What?! $9,500?!” Obama asks, stunned, “But you said it’s an easy repair.  Michelle will whip me if I pay an AC mechanic that much!” Troy says, “Yes, but what I do is charge those who make more than $250,000 per year a much higher amount so I can fix the air conditioning of poorer people for free. This has always been my philosophy.

As a matter of fact, I lobbied the Democrat Congress, who passed this philosophy into law. Now all AC techs must do business this way. It’s known as the ‘Affordable Heating and Air Conditioning Act of 2014’. I’m surprised you haven’t heard of it.”  In spite of that, Obama tells Troy there’s no way he’s paying that much for a small repair, so Troy leaves.

Obama spends the next hour flipping through the phone book calling for another AC company but he finds that all other AC service businesses in the area have gone out of business. Not wanting to pay Troy’s price, Obama does nothing and the AC goes un-repaired for several more days. A week later the heat is so bad President Obama has had to put a wet towel on  Michelle and she is not happy as she has Oprah and guests arriving the next morning.

Obama calls Troy and pleads with him to return. Troy goes back to President Obama’s house, looks at the AC unit, checks his new rate chart and says, “Let’s see, this will now cost you $21,000.”

President Obama quickly fires back, “What? A few days ago you told me it would cost $9,500!”

Troy explains, “Well, because of the ‘Affordable Heating and Air Conditioning Act,’ a lot of wealthier people are learning how to maintain and take care of their own units so there are fewer payers in the AC exchanges. As a result, the price I have to charge wealthy people like you keeps rising. Not only that, but for some reason the demand for AC work by those who get it for free has skyrocketed! There’s a long waiting list of those who need repairs, but the amount we get doesn’t cover our costs, especially paperwork and record-keeping. This unfortunately has put a lot of my fellow AC mechanics out of business, they’re not being replaced, and nobody is going into the Air Conditioning business because they know they can’t make any money at it. I’m hurting too, all thanks to greedy rich people like you who won’t pay their ‘fair share’.

On the other hand, why didn’t you buy HVAC insurance last December?  If you had bought HVAC insurance available under the ‘Affordable Heating and Air Conditioning Act,’ all this would have been covered by your policy.”

“You mean I wouldn’t have to pay anything to have you fix my AC problem?” asks Obama.

“Well, not exactly,” replies Troy. “You would have had to buy the insurance before the deadline, which has passed now. And, because you’re rich, you would have had to pay $34,000 in premiums, which would have given you a ‘silver’ plan, and then, since this would have been your first repair, you would have to pay up to the $21,000 deductible, and anything over that would have a $7,500 co-pay, and then there’s the mandatory maintenance program, which is covered up to 17.5%, so there are some costs involved. Nothing is for free.”

“WHAT?!” exclaims Obama. “Why so much for a small AC unit?

With a bland look, Troy replies, “Well, paperwork, mostly, like I said.  And the internal cost of the program itself. You don’t think a program of this complexity and scope can run itself, do you?  Besides, there are millions of folks with lower incomes than you, even many in the ‘middle class’, who qualify for subsidies that people like you must support. That’s why they call it the ‘Affordable Heating and Air Conditioning Act’! Only people who don’t make much money can afford it. If you want affordable Air Conditioning you’ll have to give away most of what you have accumulated and cut your and Michelle’s income by about 90%.  Then you can qualify to GET your ‘Fair Share’ instead of GIVING it.” “But who would pass a crazy act like the ‘Affordable Heating and Air Conditioning Act’?!” exclaims the exasperated Obama.

After a sigh, Troy replies, “Congress… because they didn’t read it.”

Now you understand how the health care system works thanks not only to Obamacare, but also because of lots of other policies (Medicare, Medicaid, the healthcare exclusion, etc) that distort prices and create perverse incentives.

P.S. If you want another Obama-specific joke, click here.

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I’m a fan of the no-tax increase pledge for the simple reason that our greatest economic threat is the rising burden of government spending.

And since there are only three ways that politicians can finance spending (taxes, borrowing, and money-printing), I’m in favor of making those options more difficult.

Sadly, some GOP politicians don’t understand – or don’t care – about restraining the burden of government spending.

Using global warming as an excuse, they want a big tax on some imported goods.

The Wall Street Journal editorialized against the pro-tax wing of the Republican Party.

Too many Republicans these days have lost their economic bearings. Look no further than a GOP Senate bill that would enact a carbon tariff—i.e., a new tax. …The Foreign Pollution Fee Act, sponsored by Louisiana’s Bill Cassidy and South Carolina’s Lindsey Graham, could well have been written by the Sierra Club and AFL-CIO. …The bill would expand the administrative state by creating a new bureaucracy with sweeping powers that would be hard for future Congresses to rein in. …the bill defines “pollution” as “greenhouse gas emissions.” This is a gift to Democrats who have been trying to codify the Supreme Court’s misconceived Massachusetts v. EPA (2007) ruling that let the Environmental Protection Agency regulate greenhouse gases as pollutants. This is the Administration’s legal justification for its back-door ban on gas-powered cars. …The bill’s unstated purpose is to protect American businesses from foreign competition as they face rising energy costs at home owing to the government’s force-fed green-energy transition. Mr. Cassidy..’s right that rising energy prices could discourage U.S. manufacturing investment and undercut Washington’s industrial policy. But layering a carbon tax on top of sundry green-energy subsidies would raise U.S. manufacturers’ costs and create a Rube Goldberg contraption of economic distortions. …Senate Democrats last Congress introduced two carbon tariff bills, which have the added virtue for progressives of raising revenue they can spend.

Daren Bakst of the Competitive Enterprise Institute opined about this issue in a column for the Hill.

…new taxes, higher prices, punishing energy use, and giving foreign countries leverage over how the U.S. regulates. …a handful of Republicans are promoting a policy idea that will lead to those very outcomes. A carbon tariff is a tax on imported goods. It would result in American businesses and consumers paying higher prices. …There are actually two taxes of concern with these bills: the tax on imports and a domestic carbon tax. Once an emissions measuring scheme for domestic and foreign products has been established to impose a carbon tariff, it will also put in place the structure necessary for domestic carbon tax advocates to impose this new tax on Americans. It would be naïve to think otherwise. In fact, a domestic carbon tax would likely be required in order to impose a carbon tariff that complies with our international trade obligations. …a carbon tariff is a tax on the energy that makes modern life possible and keeps billions of people alive every winter. Put more simply, it’s a tax on modern life. It would, among other things, make medical care, housing, communications, and transportation less affordable, especially for people who already struggle to pay their bills. …Policymakers, regardless of party, should reject anything connected to carbon tariffs. After all, higher taxes and higher prices are terrible policy and will undermine the economic wellbeing of all Americans.

I don’t like carbon taxes, but I don’t want to focus on that issue (you can read my thoughts here).

I don’t like carbon protectionism, but I don’t want to focus on that issue (you can read my thoughts here).

I don’t like any type of protectionism, but I don’t want to focus on that issue (you can read my thought here).

Instead, I want to stress a very simple point. The Republicans pushing this new tax could have made their plan fiscally legitimate – and perhaps even defensible – by including an offsetting tax cut.

In other words, if their proposed tax would generate X billion dollars, their legislation should also include provisions reducing other taxes by X billion dollars.

Depending on the size of their tax increase, it might generate enough revenue to get rid of the capital gains tax. Or the death tax.

There are many attractive and much-needed tax cuts. The fact that supporters did not propose offsetting tax cuts is a giant red flag.

P.S. Some supporters have tried to justify this tax increase by claiming that it’s just a way of punishing China.

But Daren Bakst debunked that claim in his column.

…if Cassidy is really concerned with China’s emissions, he should develop legislation that is specifically targeted at China, which doesn’t simultaneously torpedo America’s well-being. …There is something far more direct that Cassidy could do to address China’s emissions: propose that China no longer be considered a developing country in environmental agreements. China’s current designation as a developing country means that China doesn’t have the same emissions reduction obligations as the U.S.

P.P.S. Even though I said I wouldn’t address the issue of carbon taxes, I can’t resist making one final observation. Some of the supporters of carbon-based tariffs claim they are against carbon taxes. But this reminds me of the fight back in 2017 when some Republicans were pushing a “destination-based cash-flow tax” that would have set the stage for a value-added tax. The one big difference is that at least supporters of the DBCFT proposed offsetting tax cuts. So their hearts were in the right place. Too bad we can’t say the same for Republicans who are pushing for carbon protectionism today.

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Public-finance economists generally agree about three principles of good tax policy.

  1. Avoid high marginal tax rates on productive behaviors such as work.
  2. Don’t have extra layers of tax on income that is saved and invested.
  3. Eliminate tax loopholes that cause harmful economic distortions.

For what it’s worth, I would add a fourth bullet point about limiting the overall tax burden (in hopes of making it harder for politicians to increase the spending burden), and that’s somewhat important for purposes of today’s column.

George Callas, a former senior Republican tax staffer on Capitol Hill, recently authored a column for the Wall Street Journal on indefensible tax preferences that benefit big businesses and upper-income taxpayers. Here are some excerpts.

The Limit, Save, Grow Act would have cut trillions of dollars in spending and raised $515 billion in revenue by ending many of the Inflation Reduction Act’s green-energy subsidies. By raising revenue in a way that advanced conservative principles, the party showed it could promote deficit reduction… House and Senate Republicans should seize every opportunity to end tax loopholes incongruent with conservative values and direct the revenue to repairing our nation’s balance sheet. Here are five such fixes. …First, eliminate the deduction for state and local taxes. …Second, revisit tax exemptions for large nonprofits that generate billions in revenue. …Third, close the so-called round-tripping loophole that allows multinational corporations to route profits from sales to the U.S. through foreign tax havens. …Fourth, treat corporate stock buybacks more like dividends for tax purposes. …Fifth, repeal the preferential qualified small-business-stock exemption for venture-capital profits. …These proposals are consistent with free-market governance.

There is a lot to like in the above analysis. But there is also a glaring problem. He writes that “raising revenue” would be a way to “promote deficit reduction.”

In other words, he thinks Republicans should support tax increases. That’s wrong.

  • It’s wrong because we have a spending problem in Washington and replacing debt-financed spending with tax-financed spending would not solve the problem.
  • It’s also wrong because giving politicians more money inevitably means they will spend more money. In other words, it’s futile to think tax increases will be used to reduce red ink.

The willingness to give politicians more money to waste is a fundamental mistake.

That being said, I also think Mr. Callas missed the mark somewhat in his list of so-called tax loopholes. In part, this is because I think he is wrong to target stock buybacks.

But I think the bigger sin of omission is that he missed out on a couple of major tax preferences that each could finance $1 trillion or more of pro-growth changes over the next 10 years.

Municipal bond interest – Under current law, there is no federal tax on the interest paid to owners of bonds issued by state and local governments. This “muni-bond” loophole is very bad tax policy since it creates an incentive that diverts capital from private business investment to subsidizing the profligacy of cities like Chicago and states like California.

Healthcare exclusion – Current law also allows a giant tax break for fringe benefits. When companies purchase health insurance plans for employees, that compensation escapes both payroll taxes and income taxes. Repealing – or at least capping – this exclusion could raise a lot of money for pro-growth reforms (and it would be good healthcare policy as well).

The bottom line is that we need real tax reform, such as a flat tax. That means getting rid of all loopholes to generate trillions of dollars of revenue…so long as every penny of that money is used to finance good things like lower tax rates and less double taxation.

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The Food and Drug Administration has a rather dismal track record.

In other words, the FDA does a bad job and thus is a typical Washington bureaucracy.

It’s also a typical bureaucracy in that it wants more power and authority.

Here are some excerpts from a column by Joel Zinberg for National Review.

…the FDA’s proposed rule…explicitly asserts its long-claimed authority to regulate laboratory-developed tests (LDTs) as medical devices. …LDTs are performed billions of times a year in approximately 12,000 CLIA certified high-complexity laboratories… Despite the FDA’s claims to the contrary, there is little evidence that LDTs are less reliable or accurate than FDA-approved tests. And awaiting the FDA’s review and clearance of new tests can delay critical testing with disastrous results. Early in the Covid-19 pandemic, the FDA ceased its usual exercise of enforcement discretion… Unfortunately, the only EUA the FDA initially granted was for the Centers for Disease Control and Prevention’s test. Despite evidence that the CDC test was unreliable, the FDA persisted in requiring test EUAs that it seemed unwilling to grant. Testing was essentially unavailable during February 2020 as Covid-19 spread around the country.

Zinberg also explains that the FDA is ignoring the law as part of its campaign to impose billions of dollars of costs the industry.

It is doubtful that the FDA has statutory authority to regulate LDTs. The 1976 Medical Device Amendments to the FDCA do not mention laboratories, laboratory tests, or laboratory-testing services. …The FDA acknowledges that its rule will impose significant compliance costs on laboratories that offer LDTs — $35.5 billion over the multi-year phase-in and additional recurring costs of $4.2 billion — leading some laboratories to exit the market or discontinue certain LDTs they offer. Ninety percent of the laboratories offering LDTs are small businesses.

By the way, take a wild guess who will bear this multi-billion-dollar cost.

If you answer consumers, congratulations for being brighter than 98 percent of the people in Washington (admittedly that doesn’t say much).

Professor Alex Tabarrok of George Mason University was very blunt about the FDA’s proposal in a post for Marginal Revolution.

I have been warning about the FDA’s power grab over lab developed tests. Lab developed tests have never been FDA regulated except briefly during the pandemic emergency when such regulation led to catastrophic consequences. Catastrophic consequences that had been predicted in advanced by Paul Clement and Lawrence Tribe. Despite this, for reasons I do not understand, the FDA plan is marching forward.

Actually, based on this video, I bet Professor Tabarrok does understand why FDA bureaucrats are marching forward.

But he is expressing understandable frustration that they may get away with their bureaucratic power grab.

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For today, let’s enjoy a final 2023 version of gun control humor (previous columns in May and September).

We’ll start with how politicians want to protect us from dangerous cutlery.

Next, a reminder that the single biggest killer in world history is government.

So maybe, just maybe, it’s not a good idea to let politicians disarm citizens.

Our third item is a reminder that cops are only minutes away when danger is seconds away.

The next bit of satire is for my leftist friends who don’t worry about intellectual consistency.

Per tradition, I’ve saved the best for last. Our fifth item is why leftists fail the IQ test on guns and crime.

Even when they get to do a make-up test, they still fail.

P.S. The full collection of gun control satire can be viewed here.

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I wrote yesterday about the huge problems facing Argentina’s new libertarian president.

Javier Milei appears to be fully aware of what is needed to rejuvenate his nation, and is also being very honest about what will be required. But also very optimistic about the benefits.

During his inaugural address, he bluntly told the country that, “We are going to take all the necessary decisions to fix the problem left by 100 years of waste by the political class, even if it is hard in the beginning. We know that in the short term, the situation will worsen, but then we will see the fruits of our efforts.”

I like that message. The last part of it is basically the first two steps in my Fourth Theorem of Government.

But does it apply in a nation – like Argentina – that needs “shock therapy“?

Critics call this approach “disaster capitalism” and they think it is a terrible outcome.

In an article published last month, the U.K.-based Economist calls it “Daredevil Economics” and presents evidence that it produces good outcomes. Here are some excerpts, starting with the observation that there was a lot of pro-growth reform in the last 1900s..

We analysed data from the Fraser Institute, a free-market think-tank, which measures “economic freedom” on a ten-point scale. We considered cases where a country improves by 1.5 points or more—a quarter of the gap between Switzerland and Venezuela—within a decade, indicating that bold, liberalising reforms have been undertaken. In the 1980s and 1990s such “daredevil economics” was common… Politicians changed foreign-trade rules, fortified central banks, cut budget deficits and sold state-owned firms.

That’s the good news.

The bad news is that the “Washington Consensus” no longer exists.

Daredevil economics has declined in popularity… Books such as Joseph Stiglitz’s “Globalisation and its Discontents”, published in 2002, and Naomi Klein’s “The Shock Doctrine”, in 2007, fomented opposition to the free-market “Washington consensus”.

This anti-market evolution is very unfortunate. At least if you care about people having better lives.

The article cites academic research showing that bold reforms produce good results, even if there is short-run pain.

…the view that daredevil economics failed does not stand up to scrutiny, even if projects often produced short-term pain. …a growing body of research suggests that daredevil economics has largely achieved its aims. A paper by Antoni Estevadeordal of the Georgetown Americas Institute and Alan Taylor of the University of California, Davis studies the effect of liberalising tariffs on imported capital and intermediate goods from the 1970s to the 2000s, finding that the policy raises gdp growth by about one percentage point. …a paper published in 2021 by Anusha Chari of the University of North Carolina, Chapel Hill and Peter Blair Henry and Hector Reyes of Stanford University finds positive impacts from a wide variety of reforms in emerging markets, from stabilising high inflation to opening capital markets. …Daredevil economics may be disruptive, but it pays off.

The article also cites research from two European Central Bank economists, which I wrote about back in 2018.

Their findings are very much in line with what President Milei said in his inaugural address.

Our main findings are as follows: on average, reforms had a negative but statistically insignificant impact in the short term. This slowdown seems to be connected to the economic cycle, and the tendency to implement reforms during a downturn, rather than an effect of reforms per se. Reforming countries however experienced a growth acceleration in the medium-term. As a result, ten years after the reform wave started, GDP per capita was roughly 6 percentage points higher than the synthetic counterfactual scenario.

I’ll close by observing that there is research showing that politicians who enact pro-market reforms are rewarded during elections.

It will be very interesting to see if President Milei can a) implement his reforms, and b) reap the rewards when the economy adjusts and grows faster. If so, that will confirm the third sentence of the Fourth Theorem of Government.

P.S. If nothing else, Milei is being very bold.

Wow, this makes the best American president in my lifetime seem like a big-spending leftist by comparison.

P.P.S. On the other side of the Andes from Argentina, Chile already has shown that shock therapy produces great results. But there weren’t elections when those reforms happened. If market reforms are successfully implemented in Argentina, following a democratic election, that will be even more impressive.

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My trip to Argentina last year motivated me to write Part I of this series, which focused on whether things might get better in that tragic country for the simple reason that they couldn’t possibly get any worse.

In Part II of this series, I analyzed whether a libertarian candidate’s surprisingly strong performance in Argentina’s presidential primary was a sign that voters realized they had “run out of other people’s money“?

Well, that libertarian candidate, Javier Milei, then shocked the world by winning the presidency last month.

And today is inauguration day in Argentina, so let’s ask the question once again of whether the country can be rescued? Will President Milei make a difference?

Michael Stott of the U.K.-based Financial Times wrote two days ago about this challenge.

He shared this chart, which identifies the country’s biggest problem.

Here are a few excerpts from the report.

Argentina’s new president, the self-styled anarcho-capitalist Javier Milei, takes on one of the world’s toughest economic challenges on Sunday. The country…used to be one of the wealthiest nations in the developing world, but decades of mismanagement have wrecked the economy and created a web of artificial price and exchange rate controls that have produced huge distortions. A libertarian economist whose beloved pet dogs are named after ideological heroes such as Milton Friedman, Milei campaigned on promises of taking a chainsaw to the state… As Milei’s first day in office approaches, what are the main economic challenges that he will inherit? At the root of Argentina’s problems is the government’s chronic overspending. The size of the state has almost doubled over the past two decades, with the government expanding the public sector payroll, handing out hefty fuel and electricity subsidies and boosting welfare programmes. Public sector employment rose 34 per cent between 2011 and 2022, while private sector jobs increased only 3 per cent in the same period.

The article also addressed other problems, especially inflation.

But it’s worth noting that inflation is largely a problem because Argentinian governments have a terrible habit of using the proverbial printing press to finance a big chunk of the government’s budget.

So if President Milei can impose some spending discipline, that presumably would remove any pressure on the central bank to engage in reckless money creation.

In other words, there are two big reasons to get control of government spending.

  1. Argentina has a bloated and inefficient public sector, and shrinking the nation’s fiscal burden will enable faster growth by leaving more resources in the productive sector of the economy.
  2. Argentina suffers from chronic inflation because politicians tax as much as they can and borrow as much as they can and then use modern monetary theory to finance even more spending.

Actually, there’s a third reason to restrain the spending burden. As noted in the FT article, Argentina has “tax levels that are well above the Latin American average.”

A responsible spending policy could enable better tax policy. With any luck, Argentina might even lose its status as a “tax hell.”

But any good results will depend on whether President Milei can reduce the burden of government spending. And maybe even address the long-run problem by enacting a spending cap. That’s what will determine whether the country gets rescued.

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Two months ago, I wrote about a remarkable example of the Laffer Curve, involving Ireland’s low 12.5 percent corporate tax rate.

According to the New York Times, Ireland was collecting so much corporate tax revenue that the government was having a hard time figuring out what to do with all the money (as you might expect, I suggested that politicians lower other taxes).

Today, let’s look at a different story about Ireland’s corporate tax policy.

Only we’ll be talking about jealousy and bitterness rather than how to dispose of extra tax revenue.

Sarah Collins reports that some of the world’s best-known left-wing economists are upset that Ireland is so successful.

Three leading economists – including France’s Thomas Picketty and former IMF official Ashoka Mody – have accused Ireland of “siphoning” other countries’ tax revenues and operating a “parasitic” corporation tax policy. …Princeton professor Ashoka Mody, the former International Monetary Fund economist…, said Ireland’s policy was “parasitic”. …French economist Thomas Picketty, professor at France’s school for advanced studies in social studies (EHESS)…, said Ireland is “siphoning” taxes off other countries. …Their comments follow a tweet on Wednesday by French economist Gabriel Zucman, head of the EU Tax Observatory and author of a recent EU-funded report that called Ireland a tax haven. …It comes the same week corporation tax receipts were revealed to be up more than a quarter in November compared with the same month last year, boosting overall revenues and putting the State on track to beat last year’s record tax take.

What makes this story amusing (above and beyond the whining) is that left-wing economists should be happy with Ireland.

The OECD’s annual Revenue Statistics was just released and the data show that Ireland is collecting much more tax revenue from corporations.

What makes these numbers so remarkable is that there is more than five times as much GDP in Ireland today as there was in 1990.

So the government is collecting more than twice as much revenue from a pie that is more than five times larger.

You would think lefty economists would applaud.

Here’s some more data from the OECD report. It shows corporate tax revenue as a share of overall tax revenue.

This is another chart that the left should applaud. They complain that big companies don’t pay their “fair share.”

Yet when there’s an example of a country where corporate tax revenues have soared, they are not happy.

There are three reasons for their unhappiness.

  1. They don’t like Ireland’s low corporate tax rate because it shows that supply-side tax policy generates prosperity and it shows that the Laffer Curve is real.
  2. They don’t like Ireland’s low corporate tax rate because they are mostly motivated by envy and they like punitive tax rates even more than they like tax revenue.
  3. They don’t like Ireland’s low corporate tax rate because it puts pressure on other countries to lower their corporate rates to become more competitive.

Let’s look at a favorable article about Ireland.

Lawrence Reed wrote earlier this year that the Emerald Isle is a case study for economic freedom Here are some excerpts.

Though fewer people today live in Ireland than did almost two centuries ago, they’re busy teaching the world that economic freedom works. The Heritage Foundation’s Index of Economic Freedom ranks the Irish economy as the third freest in the world, behind Singapore and Switzerland. …In 2022, the Irish economy grew at the astonishing rate of 12.2 percent, the fastest on the European continent. (By comparison, the US economy grew by 2.1 percent in 2022.) If you think there’s no connection between Irish freedom and Irish prosperity, contact your economics teachers and demand a refund. …Ireland ranks high because property rights and contracts are well protected. The business climate is friendly because regulations aren’t nutty and intrusive, while tax rates are competitive. …It’s freedom, not the “luck of the Irish,” that explains Ireland’s remarkable economic success.

I agree that Ireland is a success story, but I also warn that it is not quite as successful as some people think.

Way back in 2011, I explained that the presence of so many companies created a distorted picture of Irish prosperity and that it’s better to use gross national income rather than gross domestic product.

Ireland is still a success story with GNI numbers, to be sure, but you won’t find 12.2 percent annual growth.

For wonky readers, I recommend this thread on Irish economic data.

And if you want to understand how Ireland wound up enacting a good corporate tax system, here’s another very illuminating thread.

I’ll close with a couple of negative observations about Ireland. First, Ireland does not get a good score on the Tax Foundation’s International Tax Competitiveness Index, so it definitely should be using any extra tax revenue to finance lower personal income tax rates.

Second, it appears that Ireland has a relatively low burden of government spending (see the chart in Thursday’s column), but those numbers would look much worse if we used GNI rather than GDP. And Ireland has gotten in trouble before because of excessive spending.

The bottom line is that Ireland has an admirably low corporate tax rate, but other fiscal policies often leave much to be desired.

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For decades (literally), I’ve maintained that make-believe budget cuts are the biggest form of budgetary dishonesty in Washington. But this John Stossel video discusses another scam politicians use to squander more money.

So-called emergency spending is not a trivial problem.

Here’s a chart from Romina Boccia and Dominik Lett, which documents $12 trillion of supposed emergency spending over the past three decades.

At the risk of understatement, that huge amount of money is a big reason Washington is a fiscal disaster.

Veronique de Rugy of the Mercatus Center wrote about the emergency scam in a column for the New York Sun. Here are some excerpts.

Remember…the debt-ceiling deal… Well, it took less than two months for politicians to start evading the caps with an old trick: emergency spending. …politicians shamelessly abuse the emergency label to push through non-emergency spending that would otherwise violate budget constraints. …If legislators believe more is needed, they should debate and allocate that money through the regular budget process. …putting the “emergency” label on anything important — or not-so important — but not unforeseen makes a mockery of budget rules and the debt-ceiling caps and, indeed, of the very concept of emergency spending. …There is always an excuse. …It’s time to fix the current process and stop an abuse that only further weakens the government’s fiscal condition. The best option would be to stop exempting emergency spending from budget rules. That would mean that supplemental spending, emergency or otherwise, must be offset with spending cuts on other programs.

Let’s look at a very recent example of the emergency-spending scam.

Kimberley Strassel of the Wall Street Journal opined two months ago about Biden playing this fraudulent game.

Congress is trickling back from summer recess, and Senate Majority Leader Chuck Schumer intends to move swiftly to pass a giant “supplemental aid” package that funds Ukraine assistance, disaster relief and border security (for starters). The goal is to jam House Speaker Kevin McCarthy, forcing him to forgo whatever spending restraint was negotiated in the June debt-ceiling agreement… The White House bait—or cudgel—is “crisis” disaster-relief funding. The Federal Emergency Management Agency warned in April that its disaster fund could be out of money by July. Yet somehow the administration didn’t make a priority of this “critical” FEMA funding during the May debt ceiling talks, unwilling as it was then to cede any of its other domestic pork, such as green subsidies and its $80 billion IRS blowout. Only after next year’s spending levels were set did it cry poverty, asking for an “emergency” $16 billion for FEMA.

The bottom line is that the misuse of emergency spending is a serious problem. Politicians routinely slap an emergency label on things that are not emergencies. And, when there is an actual emergency, they use that as an excuse to include lots of non-emergency spending (as we saw during the TrumpBiden COVID spending spree).

But is there a solution? There are sometimes real emergencies, so banning supplemental spending bills presumably is not the answer.

The best answer is to adopt an American version of Switzerland’s spending cap.

Having a spending cap is good overall fiscal policy, of course, but a very relevant feature of the Swiss spending cap is that there is a provision for emergency spending, but any extra spending has to be offset by additional spending restraint in the future.

Which helps to explain why American politicians were nearly four times as profligate as Swiss politicians during the pandemic.

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Back in April, I warned that European governments were spending too much, sewing the seeds of another fiscal crisis (aided and abetted by the European Commission).

Let’s expand on that issue today, focusing specifically on the eurozone (the European nations that use the euro currency).

Here’s some OECD data on the burden of government spending in the major eur0-using countries.

That’s a depressing chart. All of those nations are far above the growth-maximizing size of government.

But a fiscal crisis doesn’t happen simply because a country has too much government. It also matters how much of the spending burden is financed by borrowing. And much existing debt there already is.

Speaking of which, here’s some OECD data on existing government debt in those nations.

Greece and Italy have the biggest debt burdens, but France, Spain, Portugal, and Belgium also have debt levels above 100 percent of GDP.

By the way, the future outlook also matters.

On that basis, Europe is in even greater danger, largely thanks to entitlements and demographics.

The OECD does not have country-specific projections of future debt, but here’s a chart from that bureaucracy’s recent Economic Outlook. It shows a 60 percent increase in debt for OECD governments over the next two decades.

I’m guessing a chart for eurozone nations would also show a big increase in debt levels (just like we saw a big jump last decade).

It is very likely that all the new spending and all the new debt will produce bad results.

Here are some excerpts from Desmond Lachman’s article in National Review.

Some 25 years after launching the euro, there has been continued divergence between the public finances and economic performances of the euro zone’s northern members and its southern periphery. While Germany and the other northern member countries have enjoyed prosperity and generally pursued responsible budget policies, income levels today in countries like Greece and Italy are practically unchanged from where they were some 15 years ago. Meanwhile, public-debt levels in the euro zone’s economic periphery have risen to record highs. …there is every reason to think that economic divergences will be exacerbated. That will raise new questions about the euro’s survivability once the European Central Bank (ECB) finally ends its bond-buying activities.

He’s right about the pernicious role of the European Central Bank.

That bureaucracy enabled more spending and more debt, and that means an ever bigger bubble that will cause more damage when it bursts.

And Lachman writes that it’s a matter of when, not if.

Up until last year, high public-debt levels were not of much concern when interest rates were low and when the ECB was buying massive amounts of bonds to support the euro zone economy. However, those days are long gone. In the wake of the recent inflation spike, the ECB…is about to finally end its bond-buying program. That will substantially increase the cost of rolling over the large amount of public debt that will come due next year. All of this makes it all too likely that it is a question of when — and not if — we will have another round of the European sovereign-debt crisis.

For what it’s worth, I think he’s right about another debt crisis.

And Italy will probably be where it starts.

P.S. While the European Central Bank has contributed to the problem, the European Commission also has enabled more profligacy.

As originally envisaged…, the euro zone contained no provisions allowing for rescues financed from within the currency union. This was designed to stop the historically less fiscally responsible members from free-riding… But it did not work out… To avoid taking the currency union into territory where one or more of its members might default, the euro zone (after adopting various ad hoc financing mechanisms and participating in a number of bailouts) now has institutionalized an emergency-funding regime.

P.P.S. The Maastricht criteria failed in part because they targeted the wrong variable.

In an effort to ensure responsible budget policies, the euro zone adopted the so-called Maastricht criteria, which were meant to guide each country’s budget policy. Members were supposed to restrain their budget deficits to no more than 3 percent of GDP. They were also supposed to bring their public-debt levels down to 60 percent of GDP. It would be an understatement to say that the Maastricht criteria have been observed in the breach. …Greece, Italy, Portugal, and Spain…all had budget deficits in excess of 3 percent of GDP and public-debt-to-GDP ratios exceeding 100 percent.

The right solution is a Swiss-style spending cap, and even the German government seems to understand that’s the right approach. And if some nations don’t want to adopt this solution, they should be allowed to default.

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Even though I added to the collection of economics humor just last month (as well as in August and March), I have more items that are worth sharing.

I’ve written serious critiques of Biden’s fiscal plan – both the original version (which fortunately did not get approved) and the watered-down version (which sadly did get enacted) – but today’s first bit of satire is a much more succinct depiction of why it was a bad proposal.

I’ve also written about young people and their disturbing infatuation with socialism.

Our next item summarize their mental disconnect.

Our third item is very appropriate for those who draw the wrong conclusions from Wagner’s Law.

I’ve written about how governments are very incompetent when dealing with infrastructure.

Here’s the visual version of those columns.

If you want more infrastructure-themed humor, click here.

Per tradition, I’ve saved the best for last, though this one only makes sense when you understand that “neoliberal” is a term for classical liberalism (i.e., libertarianism), especially outside the United States.

If you want more economics-themed humor, click here, here, here, here, and here.

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The United States is in fiscal trouble because of over-spending by Washington. And the problem will get worse in the future because of poorly designed entitlement programs.

But it also will get worse because Washington is filled with politicians who knowingly lie and simply don’t care.

To illustrate, here’s a viral tweet from Congressman Ro Khanna of California, which received 4.5 million views, followed by two correcting tweets (here and here) from Brian Riedl of the Manhattan Institute.

Sadly, neither of Brian’s tweets received much attention (less than 10,000 views compared to 4,500,000 views for Khanna’s nonsense).

Yet every honest person (including some honest leftists) knows Brian’s analysis is correct and Congressman Khanna is doing nothing but providing vapid and fraudulent clickbait.

Megan McArdle wrote about this for the Washington Post. Here are some excerpts.

Khanna’s assertions about the debt are simply not true, not even in the low, Washington sense of facially correct, yet wildly misleading. And I assume Khanna knows better. …everyone in Washington is playing the same damned game, a noxious hybrid of “let’s pretend” and “not it.” The budget hawks in the GOP have been effectively vanquished by the Trump faction, and the days when Democrats strove to claim the mantle of fiscal responsibility are long gone. …there is no excuse for failing to balance the books, except that the political trade-offs are hard, and — contra Khanna — almost certainly involve making changes to Social Security and Medicare. Together, these programs account for about one-third of spending, and that share is growing.This is America’s real budget crisis. And yet it pales in comparison with the biggest problem of all: politicians who keep trying to pretend our troubles away, rather than face up to what needs to be done.

Megan is right about Khanna, and she’s also right about Trump pushing aside fiscally rational Republicans.

So we have two parties in Washington controlled and led by people who are doing bad things, probably know they are doing bad things, but they simply don’t care (just in case anyone wonders why I think politicians are disgusting and reprehensible).

P.S. Megan’s column is wrong in that she also wrote that Ronald Reagan was “the most profligate of the bunch” in part because of his “failure to restrain spending.” That’s wildly wrong. A comprehensive study on fiscal history from the Mercatus Center showed LBJ and Nixon were the worst of the worst, while Reagan got the best marks. If you want to understand Reagan’s track record on spending, click here, here, here, and here.

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What’s the best way of helping poor countries achieve faster growth so they can converge with rich nations?

Sensible people respond with a range of good answers.

Unfortunately, the world has plenty of people who are not sensible (or who have a self-interested reason to make senseless arguments). And some of them have congregated at the International Monetary Fund.

That bureaucracy recently published its recipe for economic development and – keeping with long-standing IMF tradition – endorsed massive tax increases for poor nations. Here’s their main recommendation.

You may be wondering why IMF bureaucrats want to make life more difficult for people in developing nations.

Here’s some of what was written by Vitor Gaspar, Mario Mansour, and Charles Vellutini.

Emerging markets and developing economies need $3 trillion annually through 2030 to finance their development goals … That amounts to about 7 percent of these countries’ combined 2022 gross domestic product and poses a formidable challenge… Our new research finds that many countries have the potential to increase their tax-to-GDP ratios—enabling them to provide critical government services—by as much as 9 percentage points… Countries have considerable room to collect more revenue based on their tax potential… We find that low-income countries could raise their tax-to-GDP ratio by as much as 6.7 percentage points on average. …The total revenue-raising potential, at 9 percentage points of GDP—a staggering two-thirds increase relative to their tax-to-GDP ratio in 2020… Similarly, emerging market economies can raise their tax-to-GDP ratio by 5 percentage points on average.

There are two things to address in the above excerpt.

First is it possible that developing nations, with sufficient “tax effort,” can increase their tax burdens by an average of 9 percentage points of GDP? Perhaps.

Second (and far more important), would that be a good idea? For people who care about empirical reality, definitely not.

Allow me to briefly elaborate on this second point. Bureaucrats at the IMF want readers to blindly accept the assertion that $3 trillion of additional tax revenue will help achieve development goals.

But notice that the IMF does not provide any supporting evidence. And neither do any of the other international bureaucracies making similar arguments.

Why don’t they offer any evidence? Why have not responded to my repeated requests to provide at least one example of a country that got rich by increasing fiscal burdens?

For the simple reason that every rich country in the world got rich when it had small government and low taxes.

In other words, the nations that achieved “development goals” took the opposite approach of what the IMF is recommending.

P.S. If the world truly is suffering from inadequate tax revenue, you would think that IMF bureaucrats would give up their special perk of tax-free salaries. But don’t hold your breath waiting for that to happen.

P.P.S. To give the IMF credit, the bureaucrats don’t discriminate. Yes, they push for bad fiscal policy in relatively poor parts of Africa, Asia, and Latin America, but they also argue for higher taxes and bigger government in relatively rich places, like Japan, Europe, and the United States.

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Because of misguided government policies, health care in America is expensive and inefficient.

But it’s always possible to have a system that is even worse. I have often cited the United Kingdom, which has genuine socialism (government employs the doctors and runs the hospitals).

However, as part of an ongoing series about “great moments in government-run healthcare,” today we’re going to look north to Canada

Here are some excerpts from a news report about a massive failure by Canada’s system, which may be even worse than the one in the United Kingdom.

Authored by Amy Judd and Kylie Stanton, the article explains how a woman from British Columbia named Allison Ducluzeau traveled to the United States to save her life.

It all started last year at Thanksgiving when Ducluzeau said she started to feel pain in her abdomen. …She started doing tests, an ultrasound, and a CT scan, but she said everything would take weeks to get an appointment. …the results of the CT scan indicated it looked like it might be something called peritoneal carcinomatosis, which is abdominal cancer.” …her doctor referred her to the BC Cancer Agency. …She said she didn’t even see an oncologist with BC Cancer until two-and-a-half months later but at that point, she had already received treatment somewhere else. …Ducluzeau decided to get treatment with Sardi in Baltimore. …Before she left, Ducluzeau said she called BC Cancer to ask how long it might be to see the oncologist was told it could be weeks, months, or longer, they had no idea. …No word at all from (BC Cancer) until after I flew to Baltimore, had my surgery and got home.”

You may be thinking that there is nothing surprising about this story. Especially if you remember the Hypocrite of the Year from 2010.

But here’s the shocking part.

Ducluzeau said the surgeon told her. “…I suggest you talk to your family, get your affairs in order, talk to them about your wishes, which was indicating, you know, whether you want to have medically assisted dying or not.”

Yes, you read correctly. The government’s helpful suggestion was that she should kill herself.

I guess that would have been a cost savings for taxpayers, but hardly an ideal approach since Canada already has demonstrated a better way of dealing with fiscal policy (though Paul Krugman missed the boat).

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Assuming that income and wealth are honestly earned (rather than from government favoritism), I don’t worry or object to some people being rich. Indeed, I celebrate their success.

Some friends on the left, however, mistakenly think the economy is a fixed pie. They want us to believe that if Person A gets more income, then Person B gets less.

That’s wrong. Wildly wrong.

Other people on the left are simply motivated by envy. A few of them are so spiteful that they would gladly lower everyone’s incomes so long as rich people suffered the biggest drop.

That’s despicable. Utterly despicable.

Regardless of motive, advocates of class warfare often point to the data produced by left-leaning economists such as Thomas Piketty, along with others such as Gabriel Zucman and Emmanuel Saez.

But it turns out that Piketty, et al, have concocted bad numbers.

Phil Magness of the American Institute for Economic Research and Vincent Geloso of George Mason University have a new article summarizing the latest scholarly research. They start by noting that Piketty is beloved by the media for his “U-curve” that supposedly shows “US inequality today is higher than it was in 1929.”

Thomas Piketty is well-known for his work on estimating income and wealth inequality. That work made him an “economics rockstar” in the eyes of the media… The main culprit behind rising inequality, according to his story, is a series of tax cuts beginning with the Reagan administration. …academic articles — often co-authored with Gabriel Zucman and Emmanuel Saez — are deemed as novel and important contributions to the scholarly literature on inequality.

Magness and Geloso then document some of their mistakes.

What if Piketty and his team got the numbers wrong though? …There would no longer be an empirical case for hiking taxes or expanding government redistribution. …In a recent working paper, we…looked at the ways that Piketty and his coauthors handled the underlying tax statistics. …errors pervade the entire Piketty-Saez series. After correcting for these problems, we found that Piketty and his co-authors tend to underestimate total personal income earnings, thereby artificially pumping up the income shares of the richest earners. They do so inconsistently though… In earlier works published in The Economic Journal and Economic Inquiry, we also found other signs of carelessness by Piketty and his acolytes… When we corrected all of these issues, we found that inequality was far lower… As the study and measurement of inequality progresses, Piketty’s (and his team’s) main estimates have become obsolete and might be properly consigned to the field of the history of economic thought. …Piketty’s own data are deeply suspect and open to challenges that he simply does not want to answer.

The authors cite other scholarly research, including this chart from David Splinter and Gerald Auten in the Journal of Political Economy.

They discuss that paper, as well as other academic articles.

Auten and Splinter revisited many of the data construction assumptions made by Piketty and his acolytes in dealing with data from 1960 to 2020. Most notably, they made sure that income definitions were consistent over time, that the proper households were considered… After accounting for transfers and taxes (something that Piketty and Saez fail to do), Auten and Splinter find virtually no changes since 1960. …Other works have confirmed these points differently. A small list of these suffices to show this. Miller et al. in an article in Review of Political Economy showed that most of the increase from 1986 onward is due to tax shifting behavior linked to the 1986 Tax Reform. Armour et al. in an article in the American Economic Review showed that properly measuring capital gains eliminates all the increase since 1989. In subsequent work in the Journal of Political Economy, Armour et al. confirmed this finding. Finally, a National Bureau of Economic Research by Smith et al. confirmed that all of these findings also apply to wealth inequality. Moreover, work by Sylvain Catherine et al. from the University of Pennsylvania shows that Piketty and his team failed to properly consider the role of social security.

The whole AIER article is worth reading.

I also recommend this thread from one of the authors.

Today’s column already is too long, but there are many other articles that debunk Piketty and the rest of the class-warfare crowd.  To see the views of other authors, click here, here, here, here, here, here, here, here, here, here, here, and here.

My views, for what it’s worth, are summarized here.

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