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Archive for the ‘Big Government’ Category

I listed the collapse of Venezuela’s socialist dictatorship as one of my “hopes” for 2018.

That didn’t happen, so I included the same hope in my list for 2019.

But will it happen? David Asman seems very confident in this clip from a recent interview.

I was a bit less hopeful. Or at least more guarded in my ability to predict.

But one thing I can state with full certainty is that I hope it happens as soon as possible.

Though I have become a bit jaded. I no longer share lengthy compilations of everything that is going awry in the country.

As far as I’m concerned, the real debate is now whether a new government will adopt the right policies when Maduro is finally evicted (in other words, is there any hope for Chilean-style economic liberation?).

But there are a couple of stories and columns about the ongoing crisis that caught my eye.

Especially ones written by Venezuelans.

Andres Malave wrote for Investor’s Business Daily about what has happened to his country.

Hugo Chavez took power, promising to usher in shared prosperity for all with his “21st century socialism.” …So, when Teen Vogue tweeted recently, “Can’t #endpoverty without ending capitalism!” my initial reaction was, “Let them come to Venezuela.” Venezuela was once the most prosperous country in Latin America, but today almost 90% of its population lives in poverty. Venezuela’s economy is in shambles. …Venezuela’s misery means that it is not uncommon to see children rummaging through the garbage for food. And as basic medical supplies and medicine run dangerously low, newborns and the elderly die unattended in Venezuelan hospitals. …In a 2006 column, Sen. Sanders wrote: “These days, the American Dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina,” all practitioners of 21st century socialism. …What’s particularly galling about Sen. Sanders waxing poetic about the virtues of socialism is that he looks the other way as socialist leaders live in opulence while the masses starve.

A retired professor who still lives in Venezuela explained the wrenching descent of his nation in the U.K.-based Spectator.

The descent began in the early 2000s when the Hugo Chavez government began to take control of…private companies, the judiciary and the police. The descent turned into a nosedive when Nicolas Maduro came to power and the state tightened its grip on oil production, our country’s main source of revenue. Investors fled and skilled workers emigrated. As living standards plummeted, the response was to print more money. Hyperinflation has been the result. …my friends and relatives have lost a lot of weight. We call it the ‘Maduro diet’. …Not so long ago, I lived as you do. I would have thought it impossible that my country, with its hard-won progress, could fall so quickly into the abyss. The wrong politicians with the wrong ideas can have a bigger effect than anyone can imagine.

I don’t want to discriminate against non-Venezuelans, so let’s look at excerpts from some other authors.

In a column for CapX, Kristian Niemietz points out that Venezuela was supposed to be an example of modern “democratic socialism.”

Chávez fans frequently emphasised the many ways in which Venezuela differed from the old Eastern Bloc. They were especially proud of the fact that there was no apparent conflict between socialist economics and political democracy. They also pointed out that the Chavez government, rather than just nationalising lots of big companies like the socialists of yore, was experimenting with lots of different models of social ownership, looking for alternatives to both private enterprise and conventional state-owned enterprises. And they were right. Chávez and Maduro never tried to imitate the former Soviet Union or any of its allies. They tried, really hard, to build something new. And look how that turned out. …Previous socialist experiments have gone through the same honeymoon period as Venezuela, during which they were widely and enthusiastically praised by Western intellectuals.

Notwithstanding, I’m sure we’ll still hear about how “real socialism hasn’t been tried.”

Actually, I’m open to the argument that what happened in Venezuela was a different form of statism.

Though the end result is always the same.

In the case of Venezuela, it’s like Atlas Shrugged in real life.

Francisco Toro opined in the Washington Post about the recent collapse of Venezuela’s power system.

In a country already trudging through a serious humanitarian crisis, the collapse of the electric grid is a final catastrophe. Venezuelans were already chronically hungry, with large numbers reportingthey lost weight because they could not afford enough food. …The stories coming out of hospitals up and down the country have been harrowing. Only some had working back-up generators, and virtually none were designed to carry a whole hospital over many days. A video of a nurse using a hand pump to try to keep an infant alive has been circulating on social media. Thousands of kidney dialysis patients, unable to receive treatment, may face a slow and agonizing death. …the Maduro government has blamed U.S. sabotage for the power crisis. …sabotage accusations against the United States lack any semblance of credibility: Venezuela’s power grid has been in gradual decline for over a decade. …over the past 12 years, the government has run the grid into the ground. After nationalizing the utility companies, the government simply stopped investing in routine maintenance of power stations or transmission lines, setting off a slow deterioration that has made the grid unstable for years.

A story from Fox looks at the wretched circumstances of ordinary Venezuelans.

Thousands upon thousands of Venezuelans pour into Colombia over the crowd cross-country bridge, their faces gaunt, carrying little more than a backpack. Rail-thin women cradle their tiny babies, and beg along the trash-strewn gutters. Teens hawk everything from cigarettes to sweets and water for small change. …the Venezuelans – many with university degrees or decent jobs in what was once the wealthiest nation in Latin America – are now resorting to whatever it takes to survive. …Women sell their locks to local wigmakers in Colombia for around $10-30, depending on length and quality. Other women sell their bodies. Girls as young as 14 line the Cucuta streets available “for hire,” earning around seven dollars “per service.” …more than 55 percent of the healthcare professionals – doctors, nurses, and others – have left the country. Resident doctors who have stayed in Venezuela earn the equivalent of $24 a month, while specialists make just a little more, at $30.

I’ve saved the worst for last.

BBC reports that Venezuela has become such a basket case that graves are being robbed.

At Caracas’s largest cemetery, Cementerio del Sur, most of the graves have been looted, for jewellery, gold teeth, or even bones, which can be sold for use in rituals. For grieving relatives like Eladio Bastida, who checks on his wife’s grave every week to make sure it’s not been looted, the situation is a metaphor for that of embattled Venezuela as a whole.

As far as I know, Venezuela has yet to experience cannibalism, so I suppose things can still get worse.

But that begs the question. Why did Bernie Sanders and other leftists and socialists lavish so much praise on Venezuela?

And now that the chickens have come home to roost and the economy has collapsed, why are they dodging questions about their past support?

Most important of all, why do they want similar policies for the United States?!?

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Today is the 10th anniversary of International Liberty, and I was initially tempted to commemorate the day with another introspective column.

But I decided on a different focus because I just read a story that combines two things – wasteful spending and Washington dishonesty – that I don’t like.

Let’s look at the article, which was published in The Hill.

The Senate Budget Committee on Thursday approved a GOP-backed budget resolution that would allow for draconian spending cuts by reducing both defense and nondefense spending for 2020. …The Senate’s budget sticks to the legal caps for defense — falling from $716 billion to $643 billion, including off-book funds — and nondefense, which would drop from $640 billion to $542 billion. …The spending blueprint also would decrease spending on Medicaid, children’s health insurance and Affordable Care Act subsidies by $281 billion, and on Medicare by $77 billion. “…this is a disastrous budget for the middle class and working families of this country,” said Sen. Bernie Sanders (I-Vt.), the panel’s ranking member.

I was initially semi-excited when I read the story.

After all, we desperately need “draconian spending cuts” in Washington.

But I was only “semi-excited” because I feared – based on past experience – that these supposed reduction were fake.

So I decided to look at the actual numbers in the Senate’s proposed budget.

Lo and behold, my skepticism was warranted. There are zero genuine cuts. Instead, spending increases by an average of 3.5 percent annually under the Senate’s “draconian” budget plan.

Politicians claim there are “cuts” because spending levels in the Senate plan (orange line) don’t rise as fast as what would happen if spending was left on autopilot (blue line).

But this simply means that the burden of government spending won’t grow as fast as previously planned. I’ve exposed this scam in discussions with John Stossel and Judge Napolitano.

And I’ve condemned the Washington Post for playing this dishonest game as well. You also won’t be surprised that Obama used this dodgy approach.

The political elite like this dodgy game because they can pretend they are fiscally responsible while simultaneously making government bigger.

The bottom line is that politicians should be honest. If they want to argue that spending should grow 3.5 percent yearly (or even more), they should explain why Washington deserves more money.

But don’t lie to us about supposed spending cuts when the budget is expanding.

P.S. Remember the “sequester”? Politicians and interest groups squealed that the world was going to end because of an automatic spending cut that wasn’t even a cut.

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In the absence of genuine entitlement reform, the United States at some point is going to suffer from a debt crisis.

But red ink is merely a symptom. I used numbers from Greece in this interview to underscore the fact that the real problem is government spending.

The discussion was triggered by comments from the Chairman of the Federal Reserve.

Federal Reserve Chairman Jerome Powell said Wednesday that reducing the federal debt needs to return to the forefront of the agenda, warning that the government’s finances are unsustainable. “I do think that deficits matter and do think it’s not really controversial to say our debt can’t grow faster than our economy indefinitely — and that’s what it’s doing right now,” Powell said.

As I noted in my comments, Powell is right, but he’s focusing on the wrong variable.

The real crisis is that spending is growing faster than the private sector (Powell needs to learn the six principles to guide spending policy).

To be more specific, politicians are violating my Golden Rule.

Spending grew too fast under Bush. It grew too fast under Obama (except for a few years when the “Tea Party” was in the ascendancy). And it’s growing too fast under Trump.

Most worrisome, the burden of spending is expected to grow faster than the private sector far into the future according to the long-run forecast from the Congressional Budget Office.

That doesn’t mean we’ll have a crisis this year or next year. We probably won’t even have a crisis in the next 10 years or 20 years.

But I cited Greek data in the interview to point out that excessive spending eventually does create a major problem.

Here’s the data from International Monetary Fund’s World Economic Outlook database. To make matters simple (I should have done this for the interview as well), I adjusted the numbers for inflation.

So how can America avoid a Greek-style fiscal nightmare?

Simple, just impose a spending cap. At the end of the interview, I added a plug for the very successful system in Switzerland, but I’d also be happy if we copied Hong Kong’s spending cap. Or the Taxpayer Bill of Rights from Colorado.

The bottom line is that spending restraint works and a constitutional spending cap is the best way to achieve permanent fiscal discipline.

P.S. By contrast, proponents of “Modern Monetary Theory” argue governments can finance ever-growing government by printing money. For what it’s worth, nations that have used central banks to finance big government (most recently, Venezuela and Zimbabwe) are not exactly good role models.

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I relentlessly mock socialism, in part because it’s such a target-rich environment. But I’m also hoping that humor is a way of debunking this wretched ideology. I’m worried, after all, that socialism may triumph thanks to a combination of “public choice” and diminishing societal capital.

Today, let review the case against socialism. We’ll start with this short clip from a recent interview, where I recycled my argument that greater levels of socialism produce greater levels of economic misery.

I now have some new evidence on my side, thanks to the just-released Economic Report of the President.

Here are some excerpts from the socialism chapter (begins on page 381), including some analysis about how to define the term.

…economists generally agree about how to define socialism, and they have devoted enormous time and resources to studying its costs and benefits. …we review the evidence from the highly socialist countries showing that they experienced sharp declines in output, especially in the industries that were taken over by the state. We review the experiences of economies with less extreme socialism and show that they also generate less output, although the shortfall is not as drastic as with the highly socialist countries. …Whether a country or industry is socialist is a question of the degree to which (1) the means of production, distribution, and exchange are owned or regulated by the state; and (2) the state uses its control to distribute the country’s economic output without regard for final consumers’ willingness to pay or exchange (i.e., giving resources away “for free”). …we find that socialist public policies, though ostensibly well-intentioned, have clear opportunity costs that are directly related to the degree to which they tax and regulate.

The chapter looks at totalitarian forms of socialism.

…looking closely at the most extreme socialist cases, which are Maoist China, the USSR under Lenin and Stalin, Castro’s Cuba… Food production plummeted, and tens of mil-lions of people died from starvation in the USSR, China, and other agricultural economies where the state took command. Planning the nonagricultural parts of those economies also proved impossible. …Venezuela is a modern industrialized country that elected Hugo Chávez as its leader to implement socialist policies, and the result was less output in oil and other industries that were nationalized. In other words, the lessons from socialized agriculture carry over to government takeovers of oil, health insurance, and other modern industries: They produce less rather than more. …A broad body of academic literature…finds a strong association between greater economic freedom and better economic performance, suggesting that replacing U.S. policies with highly socialist policies, such as Venezuela’s, would reduce real GDP more than 40 percent in the long run, or about $24,000 a year for the average person.

For what it’s worth, the International Monetary Fund published some terrible research that said dramatically reduced living standards would be good if Americans were equally poor.

So I guess it makes sense that Crazy Bernie endorsed Venezuelan economic policy.

But I’m digressing. Let’s get back to the contents of the chapter, including this table that shows the collapse of agricultural output in Cuba following nationalization.

The chapter also looks at what is sometimes referred to as “democratic socialism” in the Nordic nations.

These countries don’t actually practice socialism since there is no government ownership of the means of production, no central planning, and no government-dictated prices.

But they do have bigger government, and the report echoes what I said in the interview about this leading to adverse consequences.

…the Nordic countries’ policies now differ significantly from policies that economists view as characteristic of socialism. …Nordic taxation overall is greater… Living standards in the Nordic countries, as measured by per capita GDP and consumption, are at least 15 percent lower than those in the United States. …a monopoly government health insurer to provide healthcare for “free” (i.e., without cost sharing) and to centrally set all prices paid to suppliers, such as doctors and hospitals. We find that if this policy were financed through higher taxes, GDP would fall by 9 percent, or about $7,000 per person in 2022.

The report notes that Nordic nations have cost sharing, so the economic losses in that excerpt would apply more to the British system, or to the “Medicare for All” scheme being pushed by some Democrats.

But Nordic-style fiscal policy is still very expensive.

It means higher taxes and lower living standards

I’ve previously shared AIC data, so regular readers already know this data.

And regular readers also won’t be surprised at this next chart since I wrote about Nima Sanandaji’s work back in 2015.

Here’s the bottom line from the report.

Highly socialist countries experienced sharp declines in output, especially in the industries that were taken over by the state. Economies with less extreme forms of socialism also generate less output, although the shortfall is not as drastic as with the highly socialist countries.

In other words, lots of socialism is really bad while some socialism is somewhat bad.

Let’s close by citing some other recent publications, starting with this editorial from the Wall Street Journal.

Democrats are embracing policies that include government control of ever-larger chunks of the private American economy. Merriam-Webster defines socialism as “any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.” …consider the Democratic agenda that is emerging from Congress and the party’s presidential contenders. …Bernie Sanders’ plan, which has been endorsed by 16 other Senators, would replace all private health insurance in the U.S. with a federally administered single-payer health-care program. Government would decide what care to deliver, which drugs to pay for, and how much to pay doctors and hospitals. Private insurance would be banned. …The Green New Deal…, endorsed by 40 House Democrats and several Democratic presidential candidates, would require that the U.S. be carbon neutral within 10 years. …this would mean a complete remake of American electric power, transportation and manufacturing. …as imagined by Rep. Alexandria Ocasio-Cortez, all of this would be planned by a Select Committee For a Green New Deal. Soviet five-year plans were more modest.

The column also mentions government-guaranteed jobs, Washington imposing controls on businesses, and confiscatory tax rates, all of which are terrible policies.

Whether this is technically socialist can be debated.

What can’t be debated is that this agenda would make the U.S. – at best – akin to Greece in terms of economic liberty.

Here’s a look at some excerpts from a column in the Weekly Standard.

…more and more people, particularly young people, tell pollsters they’re open to the idea of voting for a socialist. In a poll this summer, Democrats by a 10-point margin said they prefer socialism to capitalism. …The tide has certainly shifted against free enterprise, an economic system that has lifted countless masses out of abject poverty, and toward socialism, whose track record is far worse, to put it charitably. …The younger generation also seems curiously unwilling to credit capitalism with the creation of modern conveniences they hold so dear. There’s a reason text messaging and Netflix didn’t emerge from Cuba or North Korea. Socialism is traditionally defined as the government owning the means of production, and it just as traditionally leads to authoritarianism. …With a body count in the millions, you’d think “socialism” would be hard to rebrand. But thanks to Bernie, being a socialist is in vogue. …The Sandernistas say that “democratic socialism” is a more benign variant, akin to what is practiced in Scandinavia. Yes, Sweden, Norway, and Denmark are clean, prosperous, and beautiful countries…and not particularly socialist. Their tax rates may be high, but they have thriving private sectors and no minimum wage laws. Their economies rank as “mostly free,” the same category as the United States

Most interesting, we also have a column by Cass Sunstein, a former Obama appointee.

President Donald Trump was entirely right to reject “new calls to adopt socialism in our country.” He was right to add that “America was founded on liberty and independence — not government coercion,” and to “renew our resolve that America will never be a socialist country.” …socialism calls for government ownership or control of the means of production. By contrast, capitalism calls for private ownership and control — for a robust system of property rights. In capitalist systems, companies and firms, both large and small, are generally in private hands. In socialist systems, the state controls them. …Socialist systems give public officials a great deal of authority over prices, levels of production and wages. …Whether we are speaking of laptops or sneakers, coffee or candy bars, umbrellas or blankets, markets establish prices, levels of production and wages on the basis of the desires, the beliefs and the values of countless people. No planner can possibly do that. …Those who now favor large-scale change should avoid a term, and a set of practices, that have so often endangered both liberty and prosperity.

Last but not least, here’s a video about socialism.

Narrated by Gloria Alvarez, it looks at the grim evidence from Cuba and Venezuela.

And she also points out that Nordic nations are not socialist.

Indeed, most of them would be closer to the United States than to France on this statism spectrum.

In other words, the real lesson is not that socialism is bad (that should be obvious), but rather that there’s a strong relationship between national prosperity and economic liberty.

Simply stated, the goal of policy makers should be to reject all forms of collectivism (including communism and fascism) and instead strive to minimize the footprint of government.

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I wrote a couple of weeks ago about how New York is committing slow-motion fiscal suicide.

The politicians in Illinois must have noticed because they now want (another “hold my beer” moment?) to accelerate the already-happening collapse of their state.

The new governor, J.B. Pritzker, wants to undo the state’s 4.95 percent flat tax, which is the only decent feature of the Illinois tax system.

And he has a plan to impose a so-called progressive tax with a top rate of 7.95.

Here are some excerpts from the Chicago Tribune‘s report., starting with the actual plan.

Democratic Gov. J.B. Pritzker embarked on a new and potentially bruising political campaign Thursday by seeking to win public approval of a graduated-rate income tax that he contended would raise $3.4 billion by increasing taxes for the wealthy…for his long-discussed plan to replace the state’s constitutionally mandated flat-rate income tax. Currently, all Illinois residents are taxed at 4.95 percent… Pritzker’s proposal is largely reliant on raising taxes significantly on residents making more than $250,000 a year, with those earning $1 million and up taxed at 7.95 percent of their total income. …The corporate tax rate would increase from the current 7 percent to 7.95 percent, matching the top personal rate. …The governor’s proposal would give Illinois the second-highest top marginal tax rate among its neighboring states.

And here’s what would need to happen for the change to occur.

Before Pritzker’s plan can be implemented, three-fifths majorities in each chamber of the legislature must approve a constitutional amendment doing away with the flat tax requirement. The measure would then require voter approval, which couldn’t happen until at least November 2020. …Democrats hold enough seats in both chambers of the legislature to approve the constitutional amendment without any GOP votes. Whether they’ll be willing to do so remains in question. Democratic leaders welcomed Pritzker’s proposal… voters in 2014 endorsed the idea by a wide margin in an advisory referendum.

The sensible people on the Chicago Tribune‘s editorial board are not very impressed, to put it mildly.

…how much will taxes increase under a rate structure Pritzker proposed? You might want to cover your eyes. About $3.4 billion annually… That extraction of dollars from taxpayers’ pockets would be in addition to roughly $5 billion raised annually in new revenue under the 2017 income tax hike. …How did Springfield’s collection of all that new money work out for state government and taxpayers? Here’s how: Illinois remains deeply in debt, continues to borrow to pay bills, faces an insurmountable unfunded pension liability and is losing taxpayers who are fed up with paying more. The flight of Illinoisans to other states is intensifying with 2018’s loss of 45,116 net residents, the worst of five years of consistent, dropping population. …Illinois needs to be adding more taxpayers and businesses, not subtracting them. When politicians raise taxes, they aren’t adding. A switch to a graduated tax would eliminate one of Illinois’ only fishing lures to attract taxpayers and jobs: its constitutionally protected flat income tax. …Pritzker’s proposal, like each tax hike before it, was introduced with no meaningful reform on the spending side of the ledger. This is all about collecting more money. …In fact, the tax hike would come amid promises of spending new billions.

And here’s a quirk that is sure to backfire.

For filers who report income of more than $1 million annually, the 7.95 percent rate would not be marginalized; meaning, it would be applied to every dollar, not just income of more than $1 million. Line up the Allied moving vans for business owners and other high-income families who’ve had a bellyful of one of America’s highest state and local tax burdens.

The Tax Foundation analyzed this part of Pritzker’s plan.

This creates a significant tax cliff, where a person making $1,000,000 pays $70,935 in taxes, while someone earning one dollar more pays $79,500, a difference of $8,565 on a single dollar of income.

That’s quite a marginal tax rate. I suspect even French politicians (as well as Cam Newton) might agree that’s too high.

Though I’m sure that tax lawyers and accountants will applaud since they’ll doubtlessly get a lot of new business from taxpayers who want to avoid that cliff (assuming, of course, that some entrepreneurs, investors, and business owners actually decide to remain in Illinois).

While the tax cliff is awful policy, it’s actually relatively minor compared to the importance of this table in the Tax Foundation report. It shows how the state’s already-low competitiveness ranking will dramatically decline if Pritzker’s class-warfare plan is adopted.

The Illinois Policy Institute has also analyzed the plan.

Unsurprisingly, there will be fewer jobs in the state, with the losses projected to reach catastrophic levels if the new tax scheme is adjusted to finance all of the Pritzker’s new spending.

And when tax rates go up – and they will if states like Connecticut, New Jersey, and California are any indication – that will mean very bad news for middle class taxpayers.

The governor is claiming they will be protected. But once the politicians get the power to tax one person at a higher rate, it’s just a matter of time before they tax everyone at higher rates.

Here’s IPI’s look at projected tax rates based on three different scenarios.

The bottom line is that the middle class will suffer most, thanks to fewer jobs and higher taxes.

Rich taxpayer will be hurt as well, but they have the most escape options, whether they move out of the state or rely on tax avoidance strategies.

Let’s close with a few observations about the state’s core problem of too much spending.

Steve Cortes, writing for Real Clear Politics, outlines the problems in his home state.

…one class of people has found a way to prosper: public employees. …over 94,000 total public employees and retirees in Illinois command $100,000+ salaries from taxpayers…former Chicago Mayor Richard M. Daley, who earned a $140,000 pension for his eight years of service in the Illinois legislature. …Such public-sector extravagance has fiscally transformed Illinois into America’s Greece – only without all the sunshine, ouzo, and amazing ruins.

So nobody should be surprised to learn that the burden of state spending has been growing at an unsustainable rate.

Indeed, over the past 20 years, state spending has ballooned from $34 billion to $86 billion according to the Census Bureau. At the risk of understatement, the politicians in Springfield have not been obeying my Golden Rule.

And today’s miserable fiscal situation will get even worse in the near future since Illinois is ranked near the bottom when it comes to setting aside money for lavish bureaucrat pensions and other retirement goodies.

Indeed, paying off the state’s energized bureaucrat lobby almost certainly is the main motive for Pritzker’s tax hike. As as happened in the past, this tax hike is designed to finance bigger government.

Yet that tax hike won’t work.

Massive out-migration already is wreaking havoc with the state’s finances. And if Pritzker gets his tax hike, the exodus will become even more dramatic.

P.S. Keep in mind, incidentally, that all this bad news for Illinois will almost certainly become worse news thanks to the recent tax reform. Restricting the state and local tax deduction means a much smaller implicit federal subsidy for high-tax states.

P.P.S. I created a poll last year and asked people which state will be the first to suffer a fiscal collapse. Illinois already has a big lead, and I won’t be surprised if that lead expands if Pritzker is able to kill the flat tax.

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Socialism is a joke. It doesn’t work. And it is so often a gateway to totalitarianism.

But that doesn’t mean it won’t happen. In this interview, I express my concern that the United States has passed a tipping point.

In the discussion, I included my usual caveat about the meaning of socialism.

I prefer the technical definition, which involves government ownership of the means of production, central planning, and government-dictated prices. But most people assume it simply means big government, in which case it’s hard to find nations that don’t qualify.

Regardless of the best definition, the reason for my pessimism is simple. It’s a combination of changing demographics and poorly designed entitlement programs.

For all intents and purposes, we’re on a trajectory (the “most predictable crisis in history“) to become another Greece.

The good news is that we probably have a couple of decades before the crisis occurs. The bad news is that our political class seems to have no interest in the reforms that would be necessary to avert the crisis.

Though maybe the crisis will occur sooner than we think. I wrote back in 2015 that the debate between Hillary Clinton and Bernie Sanders was merely a discussion over how fast we should drive in the wrong direction.

Well, Crazy Bernie didn’t get the nomination, but he seems to have won the war for the soul of the party. As I point out in this second clip, the radicals are now in the ascendancy on the left.

By the way, here’s the interview with Thomas Sowell that was used as a lead-in to my interview. He may be even more pessimistic than I am.

Though you’ll notice that Professor Sowell included a caveat, speculating that maybe there will be some unforeseeable development that saves the western world (or perhaps just the United States) from gradual decay.

Let’s close this column with some optimism on that point.

I’m old enough to remember the malaise of the 1970s, which wasn’t just based on the economic mess caused by Nixon-style and Carter-style statism. Many people also thought capitalism was no better than communism and that we needed to find some sort of middle ground (and some economists were horribly guilty of this sin).

Thankfully, Reagan had a different approach (including mockery rather than moral equivalence) and the western world won the Cold War.

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Back in January, I wrote about the $42 trillion price tag of Alexandria Ocasio-Cortez’s Green New Deal.

To pay for this massive expansion in the burden of government spending, some advocates have embraced “Modern Monetary Theory,” which basically assumes the Federal Reserve can finance new boondoggles by printing money.

I debated this issue yesterday on CNBC. Here’s a clip from that interview.

Wow, this Modern Monetary Theory (MMT) reminds me of the old joke about “I can’t be out of money. I still have checks in my checkbook.”

I don’t know how far Ms. Kelton would go with this approach. I know from previous encounters that she’s a genuine Keynesian and thus willing to borrow lots of money to finance a larger public sector. But her answer at 2:45 of the interview also suggests she’s okay with using the Federal Reserve to finance bigger government.

In either case, our debate is really about the size of government.

And anybody who wants a bigger burden of government is at least semi-obliged to say how it would be financed. The MMT crowd stands out because they basically say the Federal Reserve can print money.

To help understand the various options, I’ve created a helpful flowchart.

It’s possible, of course, for my statist friends to say “all of the above,” so these are not mutually exclusive categories.

Though the MMT people who select “Print money!” are probably the craziest.

And I hope that they are not successful. After all, nations that have used the printing press to finance big government (most recently, Venezuela and Zimbabwe) are not exactly good role models.

I noted in the interview that MMT is so radical that it is opposed by conventional economists on the right and left.

For instance, Michael Strain of the right-leaning American Enterprise Institute opines that the theory is preposterous and nonsensical.

…modern monetary theory…freshman Democratic Representative Alexandria Ocasio-Cortez spoke favorably about it earlier this month. …MMT is…sometimes a theory of money. MMT is also being discussed in the context of a political program to justify huge increases in social spending. Finally, there is its role as a prescription for macroeconomic policy. …The bedrock observation of MMT is correct: Any government that issues its own currency can always pay its bills. …this is about all that can be said favorably regarding modern monetary theory. …it is in its ideas about macroeconomic policy that MMT fully earns its place on the fringe. …what does MMT have to say about inflation when it does materialize? …it falls to the institution with authority over tax and budget policy — the U.S. Congress — to make sure prices are stable by raising taxes… MMT seems to call for tax increases in order to restrain inflation. …Modern monetary theory…if enacted it could cause great harm to the U.S. economy.

From the left side of the spectrum, here’s some of what Joseph Minarik wrote on the topic.

MMT rests on simplistic observations that have just enough truth to take in those who need to believe. Believers in MMT see crying societal needs… By common reckoning, government lacks the resources to address all of those needs immediately. MMT solves that problem with a simple and (literally) true observation: The federal government can just print the money. …And that is what willing policymakers choose to hear: Anything. Without limit. It is so convenient —  “too good to check.” …to MMT adherents, the Federal Reserve and all other inflation “Chicken Littles” are and forever have been totally wrong. There has not been rapid inflation for 20 years or so. Therefore, there never will be inflation again. …Yes, inflation is low. But it always is before it rises. And once inflation begins, slowing it is hard and painful. MMT is the perfect theory for the video game generation, which never saw the 1960s economic miscalculations so much like what MMT advocates today, and apparently believes that such mistakes can be reversed painlessly by just hitting the reset button. …the consequences could be catastrophic.

Catastrophic indeed.

Letting the inflation genie out of the bottle is not a good idea. And the policies of the MMT crowd presumably would lead to something far worse than what America experienced in the 1970s.

Rescuing the economy from that inflation was painful, so it’s not pleasant to imagine what would be needed to salvage the country if the MMT people ever got their hands on the levers of power.

Let’s wrap this up. Earlier this week, I presented a guide to fiscal policy based on six core principles.

If Modern Monetary Theory gains more traction, I may have to add a postscript.

P.S. If ever imposed, I suspect MMT would be very good news for people with a lot of gold and/or a lot of Bitcoin.

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