No, Washington politicians did not get rid of a significant bureaucracy.
But a journey of a million miles begins with the twitch of a first step. So I’m happy to annouce that our Lords and Masters were finally convinced to get rid of…(drum roll, please)…the Federal Tea Board.
Eric Boehm wrote about this (underwhelming) victory in Reason. But if you don’t have a subscription, here’s an excerpt from the official notice from the Federal Register last September.
The Food and Drug Administration (FDA or the Agency) is announcing the termination of the Board of Tea Experts by the Federal Tea Tasters Repeal Act of 1996. This document removes the Board of Tea Experts from the Agency’s list of standing advisory committees. FDA is also updating the statutory citation to the Federal Advisory Committee Act to reflect recodification. This technical change aligns with the desire of Congress to incorporate various provisions that were enacted separately over a period of years.
I’ll add one final detail to this story, something that will illustrate the breakneck speed of bureaucratic action.
Here are some excerpts from a 2017 article published by Smithsonian, and pay close attention to the final sentence.
For 99 years, the United States government employed a group of people to check the quality of incoming tea by tasting it. …The Board of Tea Experts, as they were called, was created as part of the Tea Importation Act of 1897. …thus the Board of Tea Experts, a group of men with finely-tuned tongues on the lookout for bad teas. “Tea tasters, working in FDA offices around the country, examined every lot of imported tea, using standard teas selected by the Board for comparison,” the FDA writes. …At the time the office was closed, it employed a head tea taster, chemist Robert H. Dick, an assistant tea taster, Faith Lim, both based in Brooklyn, and two further tasters at the ports in Boston and San Francisco. Its total annual cost: $253,500, or about $400,000 in today’s money. …It wasn’t until 1996 that the government passed the Federal Tea Tasters Repeal Act.
Amazing. A low is enacted in 1996 and we have to wait until 2023 for the Federal Register to put the final nail in the coffin.
Moreover, because the tax burden is projected to gradually increase (largely because of “real bracket creep“), it is accurate to say that more than 100 percent of America’s fiscal problem is excessive government spending. And it’s been that way for a long time.
This is one reason why tax increases would be bad public policy. Why increase the burden on American families when the problem is excessive spending by politicians?
Unfortunately, some Republicans get seduced into thinking that if they surrender on the tax issue, Democrats may get serious about spending restraint.
These are members of what I call the Charlie Brown Club.
The latest example is Congressman Jodey Arrington of Texas. Here are some excerpts from a Semafor report by Kadia Goba.
The chair of the House Budget Committee has a message for his fellow Republicans: If they ever want to fix Washington’s finances, they’ll have to talk about raising taxes. “It’s only fair to have both revenue and expenditures on the table,” Rep. Jodey Arrington, R-Texas recently told Semafor… The fiscal commission he’s championed would be charged with crafting a plan to stabilize the federal debt as a share of the economy… Washington has seen versions of this movie before. The blue ribbon Simpson-Bowles commission famously failed to approve its own plan in 2010… Arrington argues…pressure for a bipartisan budget solution… “Without discussing the revenue side, you will never have a commission and you will never have Democrats show up for a consensus solution,” he said.
I’ve already explained why Arrington is wrong. We have a spending problem, not a revenue problem.
But the Texas Congressman obviously is convinced we have a deficit problem, and this misplaced focus leads him to think Republicans need to surrender on the tax issue.
Today, I won’t to show why he’s wrong. And we’ll start by accepting his misguided premise that America’s fiscal challenge is too much red ink.
There are two scenarios for how to reduce deficits and debt:
With divided government, have a bipartisan budget deal based on higher taxes and spending restraint.
Wait for GOP control and resuscitate something akin to the Ryan budget, based on entitlement reform.
From a practical perspective, even if the only goal is controlling red ink, the second option is the way to go. Republicans were pushing such an approach last decade.
This is because tax-hiking budget deals have a terrible track record. Simply stated, they don’t reduce red ink. There are three big reasons why that happens.
Once tax increases are part of the discussion, any hope of genuine spending restraint goes out the window. Indeed, politicians usually respond with spending increases.
Needless to say, the odds of getting any of these four things from Joe Biden or Chuck Schumer are the same as the odds of me playing centerfield this year for the New York Yankees.
I’m tempted to say the third group is the worst. And Gov. Roy Cooper of North Carolina and Gov. Andy Beshear of Kentucky deserve to be on the list because of what they recently wrote.
Here are some excerpts from their column in USA Today.
We’re proud public school graduates… That’s why we’re so alarmed that legislators want to loot our public schools to fund their private school voucher scheme. …In North Carolina, the Republican legislature passed a voucher program with no income limit, no accountability and no requirement that children can’t already go to a private school. This radical plan will cost the state $4 billion over the next 10 years, money that could be going to fully fund our public schools. In Kentucky, legislators are trying to amend our constitution to enshrine their efforts to take taxpayer money from public schools and use it for private schools. …The future of our nation goes to class in public schools, and all Americans must be on guard for lobbyists and extremist politicians bringing similar plans to their states. …We are going to keep standing up for our public school students to ensure that they have the funding they need, and that teachers are paid like the professionals they are. It’s what’s best for our children, our economy and our future.
There are many things to criticize about their editorial, such as the fact that they are kowtowing to teacher unions.
Or the fact that they ignore all the evidence about school choice producing better results for students.
So there are lots of reasons to condemn the editorial.
But the best critique is from Phil Kerpen. Here’s his response on Twitter (now X). Brief, but to the point.
It’s worse than disgusting.
P.S. In my list of hypocrites above, I should have included politicians in other countries who praise government-run healthcare but then run to the United States for their own treatment. And also bureaucrats at places like the IMF and OECD who get tax-free salaries yet promote higher taxes for everyone else.
This short video from the Fraser Institute is a good tutorial on the topic.
The core message is that entrepreneurs improve our lives by coming up with new ideas, new technologies, and new products.
That’s the good news.
The bad news is that this process unavoidably can have a very negative effect on sectors of the economy that get displaced.
That being said, the bad news for people like blacksmiths and carriage makers hopefully is only temporary since the economy creates other jobs.
This is a point I’ve made when looking at global trade, but the lesson would apply even if the United States was the world’s only nation.
For today’s column, I don’t need to provide any additional analysis. Instead, I’m simply going to share four tweets that illustrate the power of creative destruction.
First, I’ve explained that big companies can get toppled. This tweet shows have fast it can happen.
Mar 1998: "How Yahoo! Won the Search Wars" (Fortune) Sep 1998: Google founded
Feb 2004: Facebook founded Feb 2007: "Will MySpace ever lose its monopoly?" (Guardian)
Jun 2007: iPhone released Nov 2007: "Nokia. One Billion Customers—Can Anyone Catch the Cell Phone King? (Forbes) pic.twitter.com/uGKcovNSvO
The moral of the story is that the rise and fall of different industries, different companies, and different professions can be messy.
But the long-run result is much higher living standards for families. As I explained in this video, even the children and grandchildren of people who lost their jobs because of creative destruction are much better off.
P.S. Understanding creative destruction also helps to explain why industrial policy is so misguided, along with protectionism. Politicians and special interests are motivated by a desire to save jobs in declining sectors. Instead, they should adopt policies that lower barriers to investment and entrepreneurship. That’s the recipe to hasten the creation of new jobs.
Yet there is near-unanimity in the profession that rent control is a failure. Here’s the data, courtesy of Professor Jeremy Horpedahl.
Yet politicians on the west coast don’t care about economic reality, as explained by David Chen in a report for the New York Times.
…thousands of Washington residents…have converged in recent weeks on Olympia, the state capital, to lobby legislators about one of the most closely watched housing bills in the country: A measure that would cap residential rent increases at 7 percent a year. Deemed a priority by the Democratic leaders who control the State Legislature, the bill has cleared the House of Representatives and is now in the Senate. If it is enacted, Washington would become the third state in the country to adopt statewide rent regulations, after Oregon and California… The state of Washington…would protect tenants throughout the state, including those in towns that may be unable or unwilling to take their own action.
Actually, such legislation would not “protect tenants.”
As always happens with price controls, shortages will appear.
Speaking of politicians who ignore reality, here are some excerpts from a Wall Street Journaleditorial last year.
Democrats in Congress are now pressing the President to impose rent control nationwide…a pretext to nationalize local housing policy. Fifty Democrats in Congress…sent a letter urging Mr. Biden “to pursue all possible strategies to end corporate price gouging in the real estate sector and ensure that renters and people experiencing homelessness across this country are stably housed this winter.” …Democrats want the Federal Housing Finance Agency (FHFA), which supervises government-sponsored enterprises Fannie Mae and Freddie Mac, to establish “anti-price gouging protections” and “just cause eviction standards” in rental properties with government-backed mortgages. These are their euphemisms for rent control and eviction bans.
Let’s close with some evidence from a recent rent-control mistake in Germany. Two German scholars, Pekka Sagner and Michael Voigtländer , investigated the impact of a rent freeze in Berlin.
The Berlin rent freeze was an unprecedented market intervention in the German housing market. We analyse how the rent cap part of the legislation which fixed rents at below market levels affected the supply side in the short term. We find rent decreases accompanied by decreases in supply five times as large. …We make use of a rich dataset of real estate advertisements and employ hedonic difference-in-difference and triple-difference estimation strategies.
Maybe it’s just me, but “decreases in supply five times as large” seems like a bad thing.
It’s almost as if Berlin politicians were a bunch of economic illiterates. Or, they knew the likely result but didn’t care because they were focused on short-term political benefits for themselves.
Since economic principles don’t change when you cross national borders, one might expect to see similar patterns in other countries.
And we do. Here’s a chart from Matthew Lesh of the Institute for Economic Affairs in London. As you can see, overall inflation in the United Kingdom since 2000 has been 80 percent.
But prices have risen much faster in the sectors with lots of government intervention.
And prices have fallen, or risen at a slower-than-average pace, in the sectors where market forces dominate.
Here’s some of what he wrote to accompany the chart.
Prices have risen significantly faster than wages in the United Kingdom over recent years. The result has been a falling quality of life and significant hardship for tens of millions of households. Real household disposable incomes are now expected to be 3.5% lower in 2024-25 than their pre-pandemic levels… A useful starting point is considering which products have, and which have not, risen in price over recent years. …There have also been significant price increases in services and costs the government more directly controls, such as rail transport (+143%) – where the government sets around half the fares and heavily controls the sector – and council rates (+139%). …The products that have gone up most rapidly in cost include electricity (+425%), housing (+254%), and childcare (193%). Notably, these are sectors that have extensive state intervention through regulation and subsidies. …governments can and should change their approach to regulation. Cutting red tape in areas such as housing, energy, and financial services could reduce business costs and increase supply, resulting in lower costs for consumers.
Today, let’s look at an example. Here are some excerpts from David Brooks’ most-recent New York Timescolumn.
…in 2020…Joe Biden won the White House and immediately pursued an ambitious agenda to support the working class. The economic results have been fantastic. During Biden’s term the U.S. economy has created 10.8 million production and nonsupervisory jobs, including nearly 800,000 manufacturing jobs and 774,000 construction jobs. Wages are rising faster for people at the lower ends of the wage scale than for people at the higher ends. …But what have been the political effects? …Biden’s economic policies have done little to help the Democratic Party politically. In fact, the party continues to lose working-class support. …Some of the loss of support is happening among some the party’s historically most loyal constituencies. …the Democrats’ lead among Black Americans has shrunk by 19 points. Among Hispanics, the Democratic lead shrunk by 15 points. …Franklin Roosevelt built the New Deal majorities by using government to support workers. Biden tried to do the same. While his policies have worked economically, they have not worked politically. What’s going on?
Brooks is basically saying that Biden is doing a great job and that he is befuddled that workers somehow don’t appreciate the good news.
As he wrote, “What’s going on?”
I’ll answer that question for him. Here’s the latest data from the Labor Department on total compensation. As you can see, the Biden years have not been good for workers.
To be fair, workers in 2023 actually gained a bit of ground after the terrible numbers from 2021 and 2023.
But, to paraphrase one of Reagan’s campaign lines from 1980, “are they better off than they were four years ago?”
Doesn’t look that way to me.
The purpose of this column is not to argue that people should vote for Biden or against Biden. Rather, I want people to understand that Biden’s tax-and-spend policies have not been good for ordinary workers.
In other words, good policy is good politics. And, in Biden’s case, the reverse is true.
I was very optimistic about the United Kingdom less than five years ago. The Conservative Party had just won a landslide election and that presumably would lead to an acceptable form of Brexit, followed by some form of Singapore-on-Thames.
Well, the Tories did deliver on Brexit, but everything else want awry.
Instead of restraining spending and lowering tax rates, the Conservative Party went in the opposite direction: Higher taxes and a bigger spending burden.
But good news for “wet” Tories has been bad news for the people of the United Kingdom. Making Britain more like France has produced economic anemia.
And that means the Labour Party probably wins the next election in a landslide – which means even more bad policy.
The Wall Street Journal has an editorial about the envervating statism of the Conservative Party.
…the Tories have no one to blame but themselves. At least their predicament is a warning for others. ….Prime Minister Rishi Sunak…and Chancellor of the Exchequer Jeremy Hunt…rode into office promising a more “responsible” path to economic growth built around balancing the government budget. This became a plan by Mr. Hunt to tax the economy back into growth, which is the sort of nonsense voters expect from parties of the left. …Now British voters are stuck with high taxes and slow or no growth. Tax revenue at 36% of GDP is the highest since the immediate aftermath of World War II. ….The Tories have squandered former Prime Minister Boris Johnson’s 2019 majority because they fell for the idea that tax-and-spend policies and onerous climate regulation would appeal to a coalition of working-class voters in the north and urban Tory wets. …They have earned their looming political demise.
That’s a very grim assessment.
However, writing for the U.K.-based Telegraph, Allister Heath is even more pessimistic.
We are an increasingly impoverished and indebted nation… We crave French-style levels of “free” public services… We have lost interest in working hard, in deferred gratification, in getting up in the morning even when we don’t feel like it, but want to retain our triple-locked pension, subsidised public transport and generous welfare state, policies backed by Tories and Labour alike. …we feel able to spend even more on the NHS and constantly hike the minimum wage. We want to spend and spend and spend yet more, encouraged by demagogic politicians who tell us that we can have it all, but have forgotten that the world doesn’t owe us a living. With no economic growth, and a dire outlook caused by 25 years of social-democratic idiocy, …The tax take is already at its highest level since the late 1940s, and yet the state is incapable of delivering its core functions. …Meanwhile, billions are being spent on the rush to net zero, on “free” museums for the middle classes, on rocketing benefits bills and on endless woke madness. …In 1972, there were 4.5 workers per pensioner, today, it’s 3.3 and by 2072 there will only be 1.9 workers per pensioner.
As you can see, Allister isn’t just worried about bad policy.
I realize that some readers may not care about the future of the United Kingdom. That being said, there are some ominous parallels with the United States.
P.S. Some Tory apologists argued that at least you get managerial competence when the Conservative Party is in charge. If you read this, this, and this, you’ll be disabused of that notion. The failure of the NHS, after being showered with more tax dollars, is a perfect (in a bad way) example.
P.P.S. Those apologists also say that bad policy is sometimes necessary for political reasons. But it appears that Tories will suffer a giant defeat in the next election, so perhaps they should have tried good policy rather than claiming that the era of “free-market fundamentalism” was over.
Almost exactly six years ago, I shared a column with this video of a member of the European Parliament explaining the principle of mutual recognition.
But that column was mostly about the benefits of jurisdictional competition and I only mentioned mutual recognition as a side issue.
So let’s examine today why mutual recognition is a good principle for cross-border economic relations.
Let’s start with a definition. Mutual recognition happens when two of more jurisdictions agree to have open trade and to respect each other’s laws.
So that means (as noted in the video) that, for example, Brits can buy food and other products from Germany and Germans can buy food and other products from the United Kingdom – regardless of the laws that govern production in the two nations.
For my American readers, here are three very real examples of why mutual recognition is a good idea.
As even AOC recognizes, it would allow Americans to buy superior sunscreens from Europe that our sluggish FDA bureaucrats have not approved.
It would prevented the 2022 baby formula crisis because American families could have purchased safe and nutritious European varieties.
Another reason to support mutual recognition is that it would make trade agreements much simpler. I wrote in 2019 that the ideal free trade agreement is one simple sentence prohibiting trade barriers.
But that’s only possible with a system of mutual recognition. Ryan Young and Kent Lassman of the Competitive Enterprise Institute recently wrote on this issue for National Review.
Here are some excerpts.
The core concept behind a simple FTA is mutual recognition of one another’s regulations. Under mutual recognition, if American regulators approve a product, then it is automatically approved in partner countries, and vice versa. With that sort of regulatory trade barrier lowered, consumers can quickly benefit from wider selection, more affordable prices, and faster access to new innovations. Producers would benefit from faster approval times and lower regulatory costs for pharmaceuticals, appliances, agricultural products, electronics, and countless other industries, while gaining access to new markets and new customers. Regulators would benefit by avoiding redundant approvals in each partner country, saving agency resources. …Mutual recognition is appropriate for strong allies in developed countries… Our regulations may not be identical but will be similar enough for trade purposes. …A mutual-recognition agreement with Switzerland or another close ally could set a precedent that can lead to larger agreements that would boost economies around the world while strengthening alliances against Russia and China.
Amen.
Simple trade agreements with allied nations should be based on mutual recognition.
I quoted Professor Michael Greve many years ago and he’s worth quoting again.
…the origin principle…is commonly called the principle of “mutual recognition.” …it is the only principle that is consistent with both a common economic market and political decentralization. Mutual recognition integrates member states without central intervention. …Mutual recognition, then, liberates commerce by eliminating the cost of complying with different, conflicting, and often incomprehensible rules. Beyond that, mutual recognition institutionalizes jurisdictional competition. …The ability of individuals and firms to vote with their feet, modems, and pocketbooks will liberate markets and discipline politicians. …Trade unions, environmental interests, and any other interest group whose agenda rests on redistribution consistently oppose mutual recognition: they cannot rob Peter to pay Paul if Peter is allowed to escape to more hospitable climes.
By the way, the United Kingdom seems to have some very sensible people with regards to mutual recognition, as illustrated by this Alex Tabarrok article and this tweet.
The UK has announced unilateral recognition for medicines approved overseas.
If Japan or the US approves a drug, you will be able to prescribe it in the UK.
Aiming to create fastest route to market in the world for new medicines.
P.S. The good news is that the European Union was founded in part on the principle of mutual recognition. The bad news is that politicians are increasingly replacing that sensible approach with the dirigiste model of harmonization. Bad globalism in action.
The Argentine government in January saw its first monthly budget surplus in nearly 12 years, as new President Javier Milei continues to push for strong spending cuts, the Economy Ministry announced. January was the first full month in office for Milei, a far-right libertarian who took office in December, and it ended with a positive balance for public-sector finances of $589 million at the official exchange rate, the government said late Friday. The figure includes payment of interest on the public debt. …Milei, an economist, has advocated sharp cuts in spending and a reduction of public debt on the way to a dollarization of the economy. ..The year 2023, the final year of the center-left government of Alberto Fernandez, ended with a 211 percent inflation rate. With poverty affecting 45 percent of the population, Milei has predicted an economic rebound within three months.
Now for some bad news. What you just read is a report on the initial skirmish in a long war.
Given my unfamiliarity with Argentina’s fiscal system, I don’t know how much progress he’s made. But I’m guessing he only solved 5-10 percent of the problem with his executive actions.
The main battle will involve whether Milei can now somehow convince a hostile legislature to approve structural reforms. And that won’t be easy.
That being said, he presumably has some ability to veto budgets (do they have “government shutdowns” in Argentina?).
We started today’s collection with a look at the enviro-idiots who glue themselves to streets. Here’s a look at someone who worried he ran over a dog instead.
P.S. I did have some one-off examples of environmental humor back in 2010 and 2011. And this serious column in 2015 has an amusing cartoon at the end. Here’s another cartoon from 2015. Lastly, this 2018 column has some clever memes about California banning plastic straws.
Adam Michel of the Cato Institute recently wrote an in-depth study on the OECD’s proposed business tax cartel and explained why the United States should not participate.
I recommend that people read that report. But for those who have limited time, I’m going to share some excerpts from his new column for National Review, which addresses the same topic.
To protect their businesses from facing competition, the European Union and the Organization for Economic Co-operation and Development (OECD) have concocted an international tax cartel to weaken America’s most successful international businesses. The new tax rules discourage international investment by imposing tens of billions of dollars in compliance and economic costs. …Instead of endorsing the European plan, Congress should double down on America’s successful tax cuts by further cutting business rates and simplifying other tax rules. A low enough corporate-tax rate would break the OECD’s tax cartel, benefit domestic workers, and attract new businesses. …Republicans have raised concerns about the OECD plan and proposed retaliatory measures in response to the OECD taxes. But, as is too often the case, they are being too timid. …Supporters of the OECD plan will argue that the new world-order tax cartel is here to stay, so it’s time for the United States to get on board. They dubiously claim that United States will benefit from new tax revenue… Fortunately, the agreement is more fragile than they let on. Cartels are inherently unstable. Instead of ceding tax sovereignty and encouraging businesses to conduct their activity elsewhere, Congress should increase the attractiveness of the United States as an investment destination and reject the OECD’s tax tyranny.
The simple – and accurate – way of summarizing the OECD’s plan is that some governments win and almost everyone else loses.
Note that only some governments win.
Countries with very sensible business tax systems (Ireland, Estonia, etc) will lose, as will jurisdictions with good overall tax policy (Bermuda, Cayman Islands, etc).
Workers and businesses lose everywhere, of course.
P.S. November’s election may not make a difference. The Trump Administration was bad on tax competition issues between 2017-2020, so it would be putting hope over experience to expect good policy if Trump wins a second term.
George Will has a new column in the Washington Post about the bureaucracy’s war against dishwashers that…well…actually clean dishes.
The Energy Department’s busy beavers, with their unsleeping search for reasons to boss us around for our own good, decided that dishwashers use too much water and energy… Responding to the Biden administration…, a slew of states sued the Energy Department… This dispute reached the U.S. Court of Appeals for the 5th Circuit, which, in its Jan. 8 ruling,swatted away what it tartly called the department’s “government-always-wins” argument…the court said, not only has the Energy Department acted in excess of statutory authority, but the record also contains “ample evidence” that the department’s new rules reduced efficiency in both energy and water use because “purportedly ‘energy efficient’ appliances do not work.” People “may use more energy and more water to preclean, reclean, or handwash their stuff before, after, or in lieu of using DOE-regulated appliances.” …DOE itself estimated in 2011 that handwashing consumes 350% more water and 140% more energy than machine washing.
The Wall Street Journaleditorialized about this issue last year.
…the Energy Department dropped a sweeping proposal for “efficiency” mandates on dishwashers. Did you enjoy last night’s spaghetti, still crusted on the plate? Now you can taste it twice. …Americans have learned the hard way that stricter efficiency rules on already efficient appliances translate into higher costs, inconvenience, and ultimately waste. The Obama Administration’s dishwasher regulations raised the average price of a machine nearly $100, while producing a new norm of dirty forks and smelly glasses. …Machines can only meet much higher efficiency standards by recirculating water in longer cycles, meaning run times of two or three hours. Yet if the dishes aren’t clean, owners run them again, undermining the argument about conservation. The U.S. Energy Information Administration says that in 2020 nearly 20% of American households that owned a dishwasher never used it. That means they hand washed, which is as inefficient as it comes. The Biden …Energy Department plan gives manufacturers only until 2027 to produce the miracle of costlier washers that do a worse job.
This issue is ridiculous. I’m not sure what’s worse, the fact that bureaucrats are making our lives less pleasant, or that they’re making our lives less pleasant in a way that doesn’t actually save water or energy.
I’ll close on a related note. I was in Mexico City last week and was happily surprised at the quality of the hotel’s shower.
But then I realized that I was enjoying strong water pressure because Mexico presumably does not impose (or does not enforce) the stupid water-flow regulations we have in the United States.
This type of red tape is supposed to save water, but I wonder if that happens since you have to spend twice as long in the shower?
We’ll start with the big-picture comparison based on data from the IMF, Maddison, the UN, and World Bank. As you can see, Americans are far richer than their Russian counterparts.
The IMF and Maddison data are based on purchasing power parity, so they adjust for the fact that some things are less expensive in Russia (and the Maddison data is based on 2011 dollars, so those numbers would look more like the IMF numbers if based on today’s dollars).
The bottom line is that Americans should not envy the Russian economy, regardless of which data source one prefers.
This does not mean, by the way, that the U.S. economy is perfect. Or that America should be immune from criticism. Most of my professional life has been devoted to trying fix bad U.S. policies. Or trying to prevent new mistakes from happening!
But I’m very grateful that I live in a nation where policy is inadequate rather than a country where policy is terrible.
And even though I’m an economist, I’m also very aware that the United States is also much better when comparing basic political and social freedoms.
Is the U.S. perfect in those areas? My Victims-of-Government page confirms that we have some problems. That being said, we are far better than Russia (where 47-year old political dissidents mysteriously die in Siberian prisons).
Before concluding, let’s return to economic comparisons. Here’s a tweet that captures the difference between a rich country and a struggling country.
And I’ll also cite a few sentences from a 2022 column in the Washington Post by AEI’s Nicholas Eberstadt.
Putin is flailing against the history of modern economic development. The wealth of modern nations is overwhelmingly generated by human beings and their capabilities. Natural resources (land, energy and all the rest) have accounted for a shrinking share of global output for the past two centuries, with no end in sight. …for all its vaunted oil and gas riches, Russia’s export earnings last year were actually lower than Belgium’s. Like other Western democracies, Belgium manages to augment and unlock the economic value residing in human beings. Putin’s petro-kleptocracy is woefully inept on both counts. …Since the invasion of Ukraine, some of Russia’s best talent has been voting with its feet, heading abroad any way it can. …the Russian system produces remarkably little private wealth. According to Credit Suisse, total private wealth in Russia in 2020 amounted to $3 trillion: one-ninth of Japan’s, one-sixth of Germany’s, and scarcely more than Sweden’s (a country with a population 14 times smaller).
The bottom line is that Russia is way behind the United States.
Anyone who says otherwise is ignorant or dishonest. Even those who assert equivalence are wildly wrong.
Our fourth item involves the repulsive thief and Democratic mega-donor Samuel Bankman-Fried, who looked much better in his courtroom sketch than in reality.
Sort of like the way the establishment media covers policy issues.
As usual, I’ve saved the best for last.
I’m not sure this guy was smart to admit he spends time looking at porn, but he was spot in his assessment of trustworthiness (or lack thereof).
I’ll stick with my answer, which is that gas station sushi is more trustworthy than government.
Inflation is having an effect on everything, even policy analysis.
Back in 2013, I wrote that Phil Mickelson was “California’s One-Man Laffer Curve” because he wanted to escape the Golden State to save about $1.2 million per year in taxes.
According to this story by CNBC, Jeff Bezos saved more than $600 million by moving from Seattle to Miami. That’s the steroid-fueled version of a one-man Laffer Curve.
Here are some excerpts from the report, which was authored by Robert Frank.
Jeff Bezos’ $2 billion stock sale last week came with an added perk: no state taxes. Last year, Bezos announced on Instagram that he was leaving Seattle after nearly 30 years to move to Miami. He said the move was to be closer to his parents and his rocket launches at Blue Origin. The timing also suggested another reason: taxes. In 2022 Washington state imposed a new, 7% capital gains tax on sales of stocks or bonds of more than $250,000. Washington state doesn’t have a personal income tax, so the new levy marked the first time Bezos would face state taxes on his stock sales. …In 2022, when the tax took effect, Bezos stopped selling. He didn’t sell any Amazon stock in 2022 or 2023… After his move to Miami, Bezos made up for lost time. Last week, a filing with the SEC revealed that Bezos launched a pre-scheduled stock-selling plan to unload 50 million shares before Jan. 31, 2025. At today’s price, that would total more than $8.7 billion. Florida has no state income tax or a tax on capital gains. So on the $2 billion sale last week, he saved $140 million that he would have paid to Washington state. On the entire sale of 50 million shares over the next year, he will save at least $610 million. …he’s more than paid for his 417-foot yacht, Koru, with just his Florida tax savings.
I have two reactions to this report, one analytical and one visceral.
My analytical reaction is that this story is good news because it keeps money in the private sector where it will be used more productively and also because it sends a powerful signal to the proponents of a state suicide pact that it is foolish to overtax people who can easily move.
P.S. I wonder about the revenue implications of the state capital gains tax in Washington. Notwithstanding Bezos moving out, I’m sure there will be some revenue collected from this misguided levy. But that doesn’t mean the tax will be a net plus for politicians. You also need to consider that the exodus of successful taxpayers will lead to less revenue from sales taxes, property taxes, and other levies.
For instance, if tax rates increase, people may decide to earn and/or report less taxable income. When that happens, revenue won’t increase by as much as politicians hope.
And the reverse is true (in some cases, dramatically true) if tax rates decrease.
For today’s column, let’s look at a real-world example of the Laffer Curve.
Joshua Rauh of Stanford and Ryan Shyu of Amazon have new research that looks at what happened after California voters approved a big class-warfare tax increase in 2012.
Here are some excerpts from their study.
In this paper we study the question of the elasticity of the tax base with respect to taxation…on the universe of California taxpayers around the implementation of major 2012 ballot initiative, Proposition 30. …The Proposition 30 ballot initiative increased marginal income tax rates…by 3 percentage points for singles with over $500,000 in taxable income (married couples with over $1 million)…, the highest state-level marginal tax rate in the nation. …We…document a substantial onetime outflow of high-earning taxpayers from California in response to Proposition 30. …For those earning over $5 million, the rate of departures spiked from 1.5% after the 2011 tax year to 2.125% after the 2012 tax year, with a similar effect among taxpayers earning $2-5 million in 2012. …California top-earners on average report $522,000 less in taxable income in 2012, $357,000 less in 2013, and $599,000 less in 2014; this is relative to a baseline mean income of $4.15 million amongst our defined group of California top-earners in 2011. Compared to counterfactuals in similarly high-tax states, California top-earners on average report $352,000 less in taxable income in 2012, $373,000 less in 2013, and $481,000 less in 2014.
So some upper-income taxpayers moved and others (unsurprisingly) earned/reported less taxable income.
Did that have an impact on tax revenue?
The answer is yes.
…we assess the implications of our estimates for tax revenue in the context of California Proposition 30. A back of the envelope calculation based on our econometric estimates finds that the intensive and extensive margin responses to taxation combined to undo 45.2% of the revenue gains from taxation that otherwise would have accrued to California in the absence of behavioral responses within the first year and 60.9% within the first two years.
Wow, more than 60 percent of projected revenue evaporated within two years.
By the way, these estimates are based on data only through the middle of last decade. And something significant happened after that: The state and local tax deduction was curtailed as part of the Trump tax package.
The authors speculate that this will have very important implications.
…the “Tax Cuts and Jobs Act” (TCJA). Under this law, the top rate is 37% for single and head-of-household filers earning over $500,000, and for married filers earning over $600,000. Despite this nominal cut to top rates, the legislation on net increased rates on top earners because it capped state and local deductions at $10,000 total. … we use our top line intensive margin elasticity estimate to provide a ballpark quantification of the federal tax revenue implications of TCJA for the particular set of California high earners in our treatment group. …Consider a married California taxpayer earning $4.15 million of wage income. In 2017, this taxpayer pays a federal tax bill of $1,431,305. In 2018, incorporating the 8.6% income decrease, this taxpayer pays a federal tax bill of $1,333,946. This amounts to a 6.8% decrease in tax revenue, putting the TCJA on the wrong side of the Laffer Curve for high-earning individuals in California. … the TCJA increased incentives (in terms of the level of the average tax rate gap) to leave California for zero-tax states by 2.15 times the amount of Proposition 30 for those earning over $5 million, and by a factor of 2.43 for those earning from $2-5 million. Based on these scaling factors, we would predict an out-migration effect of 1.46% of those earning $2-5 million, and 1.51% of those earning $5 million.
None of this should be a surprise.
Indeed, I wrote back in 2012 that bad things would happen when Proposition 30 was approved.
I feel safe in stating that this measure is going to accelerate California’s economic decline. Some successful taxpayers are going to tunnel under the proverbial Berlin Wall and escape to states with better (or less worse) fiscal policy. …It goes without saying, of course, that California’s politicians…will act surprised when revenues fall short of projections because of the Laffer Curve.
To be fair, I don’t know if California politicians are genuinely surprised. I suspect many of them privately understand the adverse consequences of class-warfare tax policy. But they nonetheless support bad policy because they are motivated by a selfish desire to maximize votes.
There are plenty of problems, but this image reminds me that there are not necessarily government solutions.
Indeed, it is quite likely that government created the problems in the first place and that additional government intervention will simply make bad situations even worse.
For instance, I’m a frequent flyer, mostly for work but sometimes for more important reasons. So I’m very interested in three things:
Cheap flights
Convenient flights
Comfortable flights
But I’m very skeptical about the ability of government to deliver those goals. Let’s see what two columnists for the Washington Post recently wrote on this topic.
We’ll start with some excerpts from an article by Bina Venkataraman.
…flying is broken. …Little about the experience of modern flying is acceptable. …That’s where Ganesh Sitaraman, a professor at Vanderbilt University Law School…comes in. I cornered him on a recent evening while he was visiting D.C. to ask whether he really thinks there’s a way to end our misery — one that doesn’t just involve paying higher prices. His answer: …Ask more of the country’s airlines. The U.S. airline industry, Sitaraman points out, …is not being required by policymakers to deliver adequate service to the American public. …airlines should be forced to have consistent fares based on distances traveled, not based on when you book your ticket… Sitaraman also advocates disallowing any one airline from dominating a hub such as Dallas, Chicago or Atlanta… airlines should be required to return to the practice of honoring passengers’ tickets from other carriers’ flights when a cancellation or missed connection occurs… I largely agree…that air travel should be treated more as a public utility. …the FAA or Congress could set a minimum size for legroom in economy-class travel.
The big takeaway is that she thinks the market produces bad results and that politicians and bureaucrats would do a better job.
For a different perspective, here are some excerpts from Megan McArdle’s column about airlines.
Every argument about airline customer policy is essentially the same one: “I should be entitled to cheaper and more pleasant flights, and airlines should charge someone else more or make their flight less pleasant to give me what I deserve.” …Politicians are an exception, however. When they weigh in, the argument they’re making is “vote for me.” …Parents understandably…want a guarantee that their kids can sit with them. Unfortunately, the only way to offer such a guarantee would be to toss people without children out of seats they chose in advance, perhaps even paid for… Some might say…passengers shouldn’t have to pay to choose their seats. Fair enough — as long as you understand that the people who pay more for specific seats subsidize the folks who don’t. Stop the practice and the cost of the cheapest tickets will rise. …folks who instinctively feel that the ability to choose your seat or check a bag ought to be included with the price. But if airlines bundled all those things into one standard fare, that fare would be considerably higher than the budget fares the complainers are currently buying. …There is no way to make everyone, or even most people, better off. There is only the Hobbesian scramble for the inherently scarce resources that can be crammed into an aluminum tube flying 35,000 feet above the ground.
Megan also points out that airlines are one of the nation’s least-profitable industries, so it’s absurd to accuse them of successfully pillaging customers.
As explained above, they are simply trying to please consumers, who seem to value low prices over everything else.
The good news is that they are getting low prices thanks to airline deregulation enacted during the Carter Administration.
The bad news is that prices will go back up if Ms. Venkataraman and her allies succeed in pushing through more government control.
The bottom line is that there’s no such thing as a free lunch. There are only tradeoffs. That’s true when looking at the airline market, just like it’s true when looking at everything from the labor market to the nicotine market.
P.S. Ordinary consumers value low prices over conveniences. The main reason is that ordinary consumers are paying out of their own pockets. The people who complain the loudest about airlines are usually the people (such as politicians and journalists) who fly with other people (such as taxpayers and employers) paying for the tickets. For what it’s worth, I’m actually similar to politicians and journalists in that my flight costs rarely come out of my own pocket. But I nonetheless oppose government intervention because I’m not as dumb as Bernie Sanders.
For purposes of today’s column, I want to build on the second point.
Here are two charts based on data from the Congressional Budget Office.
The first chart shows what has happened to federal spending over the past six decades. It shows a steadily increasing burden, punctuated with one-time spending sprees for the financial crisis (2008-2009) and the pandemic (2020-2021).
The second chart adds CBO’s projections for spending over the next 10 years, assuming the budget is left on autopilot.
As you can see, a bad situation will get much worse.
These are sobering charts.
But not necessarily frightening charts. If you adjust the numbers for inflation, the spending increase doesn’t look quite as bad.
And if you measure spending relative to the economy (share of GDP), the upward trend is further muted.
So the budget numbers are grim, but we have not passed a point of no return.
Heck, I wrote back in 2015 that Greece’s problems were solvable. And it that’s the case, then the same must be true in the United States.
We just need to spendaholics in Washington to comply with the Golden Rule.
But that rosy scenario assumes politicians will try to solve the problem with spending restrain rather than making it worse with new spending burdens.
Sometimes I feeloptimistic about achieving the former. But then I look at who is running for president (the Tweedledum and Tweedledee of big government) and it is much more realistic to expect the latter.
At the risk of stating the obvious, a bad person who is thinking of committing a crime with a gun surely isn’t going to care that the government has posted a sign prohibiting guns.
I’ve already cited some examples of this. Today, let’s look at another.
With considerable publicity, New York City decided to make Times Square a gun-free zone. They even spent taxpayer money to post signs.
How did that work out? Did the criminals obey the signage?
According to an Associated Press report from Jake Offenhartz and Michael Sisak, the signs are ineffective.
A 15-year-old accused of shooting a Brazilian tourist in the leg in Times Square Thursday night, then firing at a police officer while fleeing, was arrested just outside of New York City on Friday, police officials said. The teenager was taken into custody at a residential house that police believe may be linked to a family member in Yonkers nearly 24 hours after the shooting that began in a sporting goods store and spilled out onto the bustling streets of Midtown Manhattan. …police identified the suspect as a resident of a migrant shelter in Manhattan… He is also considered a suspect in an armed robbery in the Bronx and a separate shooting in Times Square last month, police said.
To be fair, it’s possible that the suspect does not understands English, so he may have not have been able to read the signs about Times Square being a gun-free zone.
However, does anybody think that he would have been deterred if there were Spanish signs?
P.S. Criminals, like taxpayers, respond to incentives. So if you actually want to reduce crime, increase the chance of getting caught and/or increase the severity of punishment.
I wrote three columns about occupational licensing in 2017 (here, here, and here), but have since neglected the issue.
It’s time to revisit the issue, and we’ll start with this John Stossel video.
One of the reasons I’m writing about the issue is that the Archbridge Institute issued a report last year that ranked states based on the degree to which they required workers to get permissions slips from government in order to work.
The report was written by Noah Trudeau of Saint Francis University and Edward Timmons of West Virginia University, and it includes a very helpful map. Light blue states are the best and red states are the worst.
Here are some of the findings from their overview.
Occupational licensing affects more than 20 percent of workers in the United States. The extent of occupational licensing greatly differs across states. From both a research and public policy standpoint, it is important to have a comprehensive measure of occupational licensure across states and occupations. The purpose of the State Occupational Licensing Index (SOLI) is to help fill in this gap. The report contains four main sections: an introduction to the index, an overview of our methodology, a comparison to other database rankings, and state profiles for all 50 US states plus DC. …In 2023, the state with the highest occupational licensing burden is Arkansas (#1), followed by Texas (#2), Alabama (#3), Oklahoma (#4), and Washington (#5); the state with the lowest occupational licensing burden is Kansas (#51), preceded by Missouri (#50), Wyoming (#49), Indiana (#48), and Colorado (#47).
Congratulations to Kansas for having the most laissez-faire approach. Arkansas, by contrast, deserves scorn.
Why scorn for Arkansas? Let’s look at some additional analysis.
In 2018, Morris Kleiner and Evgeny Vorotnikov authored a study for the Institute for Justice about occupational licensing. Here are some of their results.
…licensing is frequently wasteful. In preventing people from working in the occupations for which they are best suited, licensing misallocates people’s human capital. In forcing people to fulfill burdensome licensing requirements that do not raise quality, licensing misallocates people’s human capital, money and time. And with its promise of economic returns over and above what can be had absent licensing, licensing encourages occupational practitioners and their occupational associations to invest resources in rent-seeking instead of more productive activity. Taking these misallocated resources into account, we find potential costs to the economy that far exceed those from deadweight losses…we find licensing costs the American economy $183.9 billion in misallocated resources… Assuming the 15 percent national returns, we find licensing costs the American economy $197.3 billion in misallocated resources.
That’s the economic cost to the country.
But don’t forget that hundreds of thousands of Americans lose employment opportunities because of their restrictive regulations.
Let’s close with a bit of good news. Veronique de Rugy wrote a few years ago that there are reform efforts.
The beauty of American federalism is that it allows states to try out different policies and see what works well and what does not. The state of Arizona is putting this flexibility to good use. After implementing a moratorium on occupational-licensing requirements in 2015, the state passed legislation to recognize occupational licenses from other states last year. Going against special-interest groups in various industries whose members would prefer to face as little competition as possible, Arizona is saying that it is open for all business and welcomes competition. As a result, Arizona is effectively launching a healthy competition for workers among the states themselves. …Faced in part with this competition from Arizona, other states are finally getting serious about reforming their own occupational-licensing requirements. …Shoshana Weissmann and Jarrett Dieterle write that many other states are following in Arizona’s footsteps, as evidenced by the fact that in 2020 alone “universal recognition bills are being pursued in Virginia, West Virginia, California, Ohio, Missouri, Georgia, New Hampshire, Indiana, and New Jersey.” …Let’s hope that all the states will follow Arizona’s lead and catch the reform bug so they, too, will free their workers, consumers, and economies from ridiculous licensing requirements.
And other states are catching up, as Veronique hoped.
Marc Joffe has an article about positive developments in Ohio and Nevada.
And here are some excerpts from a Forbes column by Patrick Gleason.
…there is another policy trend emerging that, like income tax relief and greater educational choice, is making states more attractive to workers and employers. That trend is the push by policymakers to remove or mitigate the barriers to employment that state occupational licensing requirements have become. …Universal License Recognition (ULR)…Nearly half of the states now have a ULR law. But four years ago, zero did, underscoring how quickly the ULR movement has grown. Former Governor Doug Ducey (R) made Arizona the first state to enact ULR back in 2019, with positive results observable in the subsequent years. …by also making occupational licensing requirements less taxing for new residents to comply with, both in terms of time and money, reform-minded governors and state lawmakers have honed in on a new way, like with rate-reducing tax reform, to make their states more attractive places to live, work, do business, and support a family.
Way back in 2010, and then over and over again in subsequent years, I have showed that it is very simple to balance the budget.
All that is necessary is some reasonable spending restraint, sort of like what happened during the Tea Party era in the early part of last decade.
Today, let’s see if that’s still true. The Congressional Budget Office just released its Economic and Budget Outlook, which includes a 10-year forecast of what will happen if spending and revenue are left on autopilot.
As I almost always do when that happens, I calculate what amount of spending restraint would be necessary to balance the budget over 10 years.
As you can see in the chart, limited spending so it grows by 1.4 percent yearly is all that is needed to balance the budget.
The budget can be balanced much quicker with a spending freeze. And the deficit can be largely eliminated if spending grows by 2 percent annually.
By the way, CBO projects that inflation will average close to 2 percent over the next decade.
So the main takeaway is that we can basically eliminate red ink if the federal budget grows slightly less than the rate of inflation.
There are two points worth mentioning.
There is no need for any tax increases. Revenues already are projected to grow by 4.2 percent yearly, nearly twice the estimated rate of inflation. Plus, tax increases would surely give politicians an excuse to increase spending.
Spending restraint is a simple concept, but it would not be politically easy. Interest groups want to leave spending on autopilot, or have it grow even faster. Plus, some entitlement reform almost surely would be necessary.
One further point is that the CBO baseline assumes that the Trump tax cuts expire at the end of 2025. Extending those tax cuts would lower the revenue baseline, thus requiring additional spending restraint to achieve a balanced budget over the 10-year window.
P.S. Balancing the budget is a good idea, but spending restraint should be the main goal of fiscal policy. Fortunately, the evidence shows that spending restraint is the only effective way of achieving fiscal balance (whereas tax increases have a track record of failure).
Since I’m currently in Mexico City doing some meetings and research about Mexico’s economic policy, time to make up for that lack of attention.
The first thing I did when preparing for my trip was the check the IMF’s database to see what’s been happening to the burden of government spending.
Sadly, policy has moved in the wrong direction ever since leftist/populist President Andrés Manuel López Obrador (AMLO) was elected in 2018.
That’s the bad news.
If you’re waiting for me to share some good news, that’s not going to happen.
Instead, I’ll augment the bad news with some worse news.
Mark Stevenson of the Associated Pressreported two days ago that “AMLO” has a new vote-buying scheme that would be economically ruinous.
Mexico’s president said Monday he will propose guaranteeing people pensions equal to their full salaries at the time they retire, something done by no other country, not even those much richer than Mexico. It…has almost no hope of getting passed in the eight months he has left in office, but which could be part of a bid to attract voters in the June 2 presidential elections. …In announcing the measures Monday, the president claimed it was an attempt “to recover holy rights, guaranteed to Mexicans by God.” It was among a package of reforms that included guaranteed annual increases in payments to the elderly and increases in the minimum wage and above the rate of inflation. …To cover the whole population with something approaching a ‘full wage,’ López Obrador’s program would have to increase the Afore pension fund by 2.5 times to meet the median wage, and then double it again to cover informal workers.
AMLO, however, cares about buying votes rather than about Mexico’s economic future.
P.S. As you might expect, the tax-free bureaucrats at the Organization for Economic Cooperation and Development have been recommending huge tax increases in Mexico. But if AMLO’s proposal is ever enacted, even the pro-tax bureaucrats in Paris would be hard pressed to propose enough tax hikes to keep pace with that radical expansion in the burden of government.
Perhaps the greatest living public intellectual is Thomas Sowell and one of his famous quotes asks our leftist friends to quantify how much of other people’s money they supposedly deserve.
I’m asking these questions because I just read a column for the U.K.-based Guardian by Atossa Araxia Abrahamian.
She frets that the world may soon have a trillionaire, and she has a crazy idea to stop that from happening.
Oxfam…reported that, within a decade, the world will probably see its first trillionaire. …reported that, within a decade, the world will probably see its first trillionaire… Raising taxes, bolstering democratic institutions and seeking to redistribute resources to those who need them are all excellent initiatives worthy of widespread public support. And they should be envisioned not just nationally, but globally: inequality between countries and peoples matters, too. But governments shouldn’t rule out more radical measures, such as limitarianism – that is, capping how much wealth a person can legally have. Once you reach a certain number of zeros, …time to knock a few of them off.
The good news, relatively speaking, is that the author only wants the government to confiscate wealth about $1 trillion.
But confiscatory tax rates are a terrible idea at any level. What Ms. Abrahamian does not understand is that super-successful entrepreneurs make the rest of us better off.
Indeed, if Yale Professor William Nordhaus is correct, someone who amasses $1 trillion of wealth will have created tens and tens of trillions of dollars of wealth for everyone else in society.
I’ll take that deal in a nanosecond.
There are two other comments from her article that cry out for correction.
First, she wants readers to believe that people who take risks by investing money in the economy somehow benefit from “unearned income.”
The earnings of the ultra-rich are literally unearned..money made through “investment-type income such as taxable interest, ordinary dividends and capital gain distributions”.
Amazing. She obviously has never talked to anyone who created a business or invested in a company. And she clearly doesn’t realize how the rest of us benefit when people are willing to save and invest (there is a cartoon version if she needs a very simple explanation).
Second, she seems to think that billionaires control the media and are using that control to push a right-wing agenda.
The billionaire class…skews the balance of power in the marketplace, in politics and in society. Its members own newspapers that shape public opinion.
I don’t know the control structure of media companies, other than Jeff Bezos owning the Washington Post. Suffice to say that anyone who thinks the media in general, or the Postin particular, are pushing a right-of center agenda needs psychiatric help.
I explained the benefits of a flat tax in a video 14 years ago. And I’ve since shared two videos (here and here) of Steve Forbes arguing for a flat tax.
If those are not enough, here’s a recent presentation I made about tax reform for Argentina’s Fundacion Internacional Bases.
I’ve written many times on all of those topics, especially the first two.
So, for today’s column, let’s focus on the third point.
And I don’t even need to do a lot of writing because the most persuasive evidence about our complicated and unfair tax code can be found on this IRS webpage.
As of today, 2,883 forms are needed to theoretically comply with America’s nightmarish internal revenue code.
The recipe for prosperity is actually very simple, as Adam Smith wrote centuries ago.
Sadly, most governments don’t follow that recipe, largely because politicians have the wrong incentives. They lose power and control if a nation has free markets and limited government.
Given the importance of this issue, I was very interested to see that the U.K.-based Economist had an article about plans for faster growth in India, Indonesia, and Saudi Arabia.
The good news is that these nations recognize that it is vital to be part of the global economy. The bad news is that they foolishly think protectionism and industrial policy will produce good results.
…many developing countries’ ideas for growth are staggeringly ambitious. India and Indonesia hope to become high-income countries within 25 years. …Refreshingly, such plans are more outward-looking than many development strategies of old. …That is a welcome shift. …serving foreign markets plays a vital role in development. It keeps firms honest, by forcing them to compete in markets that their governments do not control. …Nonetheless, today’s development strategies also hold dangers. In many countries governments are running the risk of warping the economy in the name of nurturing it. Saudi Arabia’s onslaught of industrial policy, mainly disbursed as handouts from the Public Investment Fund, exceeds the spending even of America’s Inflation Reduction Act. …India is seeking to fence off its high-tech manufacturers behind tariffs and subsidies. Indonesia’s all-in bet on nickel leaves it perilously exposed… The rich world’s new-found zeal for protectionism may make it tempting for poorer countries to follow suit.
It is possible that India, Indonesia, and Saudi Arabia can compensate for bad trade policy and bad industrial policy by having very good policies in other areas?
Maybe, but don’t hold your breath. According to Economic Freedom of the World, all three nations have very mediocre scores for economic liberty. Both overall and in most of the five categories.
The bottom line is that these nations need growth. So it’s good that politicians say they want to make that happen.
But none of those countries will become another Singapore or (pre-China-takeover) Hong Kong unless there are radical reductions in the size and scope of government.
The first indication of bias is that every answer was the one that made Biden look good (or less bad).
Sort of like a quiz asking if communists killed 1 billion people, 500 million people, or 100 million. The fact that the right answer is that they “only” killed 100 million is hardly a ringing endorsement of Marx’s evil ideology.
But another problem is that some of the questions also were steroid-fueled examples of grading on a curve. For instance, based on Question #1, we’re supposed to be impressed that the United States has grown faster than Europe’s decrepit welfare states.
For what it’s worth, growing faster than France, Italy, and Greece is not exactly something to celebrate, as you might imagine.
Question #4 also is designed to make Biden look good by comparing job creation during his tenure to what happened under Trump and Obama.
Yet beating Obama is hardly a major achievement, and the Trump numbers are very distorted because Trump and Fauci shut down the economy during the pandemic.
Suffice to say, Biden would not look good if his job numbers were compared were compared to market-friendly presidents like Ronald Reagan and Bill Clinton.
There were two other questions, which also were biased but not to the absurd level as the ones described above.
Question #2 implies that Biden has done a good job because gas prices have only increased by 75 cents a gallon rather than going up by $1 or $2. Sort of like saying a diet is successful if you’re gaining two pounds a week rather than five pounds.
Question #3 implies that Biden has done a good job because wages have almost risen as fast as inflation. Needless to say, the fact that there as been zero inflation-adjusted wage growth is actually a damning indictment of Bidenomics.
Here’s how the Post described the quiz.
The past few years have been tumultuous, with a deadly pandemic, a recession, an inflation spike and overseas wars. Perhaps unsurprisingly, Americans give President Biden low marks on the economy. How bad are things? This quiz will help you calibrate your level of concern, and it will show you how your knowledge of economic reality stacks up against other Americans we asked and other Post readers.
The Post obviously wants readers to conclude that Biden deserves good marks for the economy. The fact that the paper had to engage in contortions tells you what you really need to know.
Then, to add insult to injury, the IMF pushes for higher taxes even when countries don’t need bailouts.
The IMF repeatedly has urged higher taxes in the United States. And now the bureaucrats are pushing for higher taxes in the United Kingdom.
In an article for the BBC, Faisal Islam and Jonathan Josephs describe the IMF’s assertions and the British government’s response.
The International Monetary Fund (IMF) has “advised the UK against further tax cuts”… It said preserving public services and investment implied higher spending than was reflected in the government’s current plans. The IMF suggested the Treasury’s pencilled-in spending cuts from this year were unrealistic. …Commenting on the IMF’s advice, Mr Hunt said: “The IMF expect growth to strengthen over the next few years, supported by our introduction of the biggest capital investment tax reliefs anywhere in the world, alongside National Insurance cuts to improve work incentives. “It is too early to know whether further reductions in tax will be affordable in the Budget, but we continue to believe that smart tax reductions can make a big difference in boosting growth.”
I have two reactions.
First, the United Kingdom is in trouble because of excessive spending and it is (predictably) disappointing that the IMF actually wants an even bigger burden of government financed by even higher taxes.
Second, I have zero sympathy for the U.K.’s supposedly conservative government, which is only contemplating tax cuts as an election-year stunt in hopes voters will forget its track record of bad fiscal policy.
Indeed, a squabble between the IMF and the current British government reminds me of the fight more than 10 years ago between the IMF and the European Commission. The best that can be hoped for is plenty of casualties on both sides.
P.S. I can’t resist sharing one additional excerpt.
…economic forecasters are not always right when it comes to predicting the future. The IMF has previously stated its forecasts for most advanced economies, such as the UK’s, have more often than not been within about 1.5 percentage points of what actually happens.
This document removes the Board of Tea Experts from the Agency’s list of standing advisory committees. FDA is also updating the statutory citation to the Federal Advisory Committee Act to reflect recodification. This technical change aligns with the desire of Congress to incorporate various provisions that were enacted separately over a period of years.
“Tea tasters, working in FDA offices around the country, examined every lot of imported tea, using standard teas selected by the Board for comparison,” the FDA writes. …At the time the office was closed, it employed a head tea taster, chemist Robert H. Dick, an assistant tea taster, Faith Lim, both based in Brooklyn, and two further tasters at the ports in Boston and San Francisco. Its total annual cost: $253,500, or about $400,000 in today’s money. …It wasn’t until 1996 that the government passed the Federal Tea Tasters Repeal Act.
International Liberty 