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Archive for the ‘Brexit’ Category

I’m glad that Boris Johnson is Prime Minister for the simple reason that “Brexit” is far and away the most important issue for the United Kingdom.

Whether it’s called a Clean Brexit or Hard Brexit, leaving the European Union is vital. It means escaping the transfer union that inevitably will be imposed as more EU nations suffer Greek-style fiscal chaos. And a real Brexit gives the UK leeway to adopt market-friendly policies that currently are impossible under the dirigiste rules imposed by Brussels.

But just because Johnson appears to be good on Brexit, this doesn’t mean he deserves good grades in other areas. For instance, the UK-based Times reports that the Prime Minister is on a spending spree.

Boris Johnson is planning to spend as much on public services as Jeremy Corbyn promised at the last election and cannot afford the tax cuts he pledged in the Tory leadership campaign, a think tank has warned. The prime minister’s proposed spending spree would mean Sajid Javid, the chancellor, overshooting the government’s borrowing limit by £5 billion in 2020-21, according to the Institute for Fiscal Studies, which said that the government was “adrift without any fiscal anchor”.

Ugh, sounds like he may be the British version of Trump. Or Bush, or Nixon.

In a column for CapX, Ben Ramanauskas warns that more spending is bad policy.

…with Sajid Javid making a raft of spending announcements, it would seem as though the age of austerity really is over. …So it would be useful to look back over the past decade and answer a few questions. Does austerity work? …As explained in the excellent new book Austerity: When it Works and When it Doesn’t  by Alberto Alesina, Carlo Favero, and Francesco Giavazzi, it depends what you mean by austerity. …The authors analyse thousands of fiscal measures adopted by sixteen advanced economies since the late 1970s, and assess the relative effectiveness of tax increases and spending cuts at reducing debt. They show that…spending cuts are much more successful than tax increases at reducing the growth of debt, and can sometimes even result in output gains, such as in the case of expansionary austerity. …Which brings us onto our next question: did the UK actually experience austerity? …the government’s programme was a mild form of austerity. …Then there is the politics of it all. It’s important to remember that fiscal conservatism can be popular with the electorate and it worked well in 2015 and to a lesser extent in 2010. The Conservatives should not expect to win the next election by promising massive increases in public spending.

Moreover, good spending policy facilitates better tax policy.

Or, in this case, the issue is that bad spending policy makes good tax policy far more difficult.

And that isn’t good news since the U.K. needs to improve its tax system, as John Ashmore explains in another CapX article.

…the Tax Foundation…released its annual International Tax Competitiveness Index. The UK came 25th out of 36 major industrialised nations. For a country that aims to have one of the world’s most dynamic economies, that simply will not do. …Conservatives…should produce a comprehensive plan for a simpler, unashamedly pro-growth tax system. And it should be steeped in a political narrative about freedom… Rates are important, but so is overall structure and efficiency. …a more generous set of allowances for investment, coupled with a reform of business rates would be a great place to start. We know the UK has a productivity problem, so it seems perverse that we actively discourages investment. …As for simplicity, …it’s possible to drastically reduce the number of taxes paid by small businesses without having any effect on revenue. Accountants PwC estimate it takes 105 hours for the average UK business to file their taxes… Another area the UK falls down is property taxes, of which Stamp Duty Land Tax is the most egregious example. It’s hard to find anyone who thinks charging a tax on people moving house is a good idea…in the longer term there’s no substitute for good, old-fashioned economic growth – creating the world’s most competitive tax system would be a fine way to help deliver it.

To elaborate, a “more generous set of allowances for investment” is the British way of saying that the tax code should shift from depreciation to expensing, which is very good for growth.

And simplicity is also a good goal (we could use some of that on this side of the Atlantic).

The problem, of course, is that good reforms won’t be easy to achieve if there’s no plan to limit the burden of government spending.

It’s too early to know if Boris Johnson is genuinely weak on fiscal issues. Indeed, friends in the UK have tried to put my mind at ease by asserting that he’s simply throwing around money to facilitate Brexit.

Given the importance of that issue, even I’m willing to forgive a bit of profligacy if that’s the price of escaping the European Union.

But, if that’s the case, Johnson needs to get serious as soon as Brexit is delivered.

Let’s close by looking at recent fiscal history in the UK. Here’s a chart, based on numbers from the IMF, showing the burden of spending relative to economic output.

Margaret Thatcher did a good job, unsurprisingly.

And it’s not a shock to see that Tony Blair and Gordon Brown frittered away that progress.

But what is surprising is to see how David Cameron was very prudent.

Indeed, if you compared spending growth during the Blair-Brown era with spending growth in the Cameron-May era, you can see a huge difference.

Cameron may not have been very good on tax issues, but he definitely complied with fiscal policy’s golden rule for spending.

Let’s hope Boris Johnson is similarly prudent with other people’s money.

P.S. If you want some Brexit-themed humor, click here and here.

P.P.S. If you want some unintentional Brexit-themed humor, check out the IMF’s laughably biased and inaccurate analysis.

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I was interviewed yesterday about the economy. That meant talking about new jobs numbers, as well as speculating on what’s happening with the Federal Reserve.

For today’s column, though, I want to share the part of the interview that focused on the United Kingdom’s vote to leave the European Union.

If “Brexit” actually happens, there will be diminished trade between the United Kingdom and the European Union. That will be bad for both sides.

That being said, I pointed out that the United Kingdom is better positioned to prosper after Brexit. That’s definitely the case in the long run, but I think it could be true even in the short run.

By the way, at the end of this clip, I should have stated that the European Union doesn’t want to strike a mutually beneficial deal.

The crowd in Brussels was more than happy with the Brexit-in-Name-Only pact they imposed on the hapless Theresa May.

But the bureaucrats are so upset with Brexit that they won’t agree to a free trade agreement that would be good for both parties.

Since we’re on the topic of Brexit, here’s a radio interview I did with KABC, one of the big stations in Los Angeles. I had much more time to explore nuances, including the fact that the opposition parties don’t want an election since they fear it will produce a strong majority in favor of a Clean Brexit.

There are three things about the interview worth highlighting.

  • First, as I explain starting about 3:15, Brexit is like refinancing a mortgage. It might cost a bit in the short run, but it makes sense because of the long-run savings. Indeed, that was my main argument when I wrote “The Economic Case for Brexit” back in 2016, before the referendum.
  • Second, as I explain starting about 6:15, the same people who oppose Brexit were also the ones who wanted the U.K. to be part of the euro (the European Union’s common currency). Given what’s happened since, including bailouts, joining the euro would have been a big mistake.
  • Third, starting about 11:50, I put forth an analogy – involving a hypothetical referendum to repeal the income tax in the United States – to illustrate why the issue is arousing so much passion. This is basically the last chance Britons have to reclaim self-government.

By the way, returning to the second point, the anti-Brexit crowd were the ones who tried to scare voters (“Project Fear”) by claiming a vote for Brexit would tip the U.K. into recession.

They were wrong on the euro, they were wrong on the economic response to the Brexit vote, and they’re wrong about actual Brexit.

In America, we say three strikes and you’re out.

P.S. If you want Brexit-themed humor, click here and here.

P.P.S. There’s academic evidence that E.U. membership undermines prosperity.

P.P.P.S. The International Monetary Fund has consistently put out sloppy and biased research in hopes of deterring Brexit.

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Back in 2016, I wrote “The Economic Case for Brexit.”

My argument was based on the fact the European Union was a slowly sinking ship, both because of grim demographics and bad public policy.

Getting in a lifeboat can be unnerving, but Brexit was – and still is – better than the alternative of continued E.U. membership.

But not everyone shared my perspective.

The BBC reported that year that Brexit would produce terrible consequences according to the International Monetary Fund.

Christine Lagarde said she had “not seen anything that’s positive” about Brexit and warned that it could “lead to a technical recession”. …The IMF said in a report on the UK economy that a leave vote could have a “negative and substantial effect”. It has previously said that such an outcome could lead to “severe regional and global damage”. The Fund said a Brexit vote would result in a “protracted period of heightened uncertainty” and could result in a sharp rise in interest rates, cause volatility on financial markets and damage London’s status as a global financial centre.

Yet none of these bad predictions were accurate.

Not right away and not in the three years since U.K. voters opted for independence.

Not that we should be surprised. The IMF has a very bad track record on economic forecasting. And the forecasts are probably especially inaccurate when the bureaucrats, given the organization’s statist bias, are trying to influence the outcome (the IMF was part of “Project Fear”).

But a history of bias and inaccuracy hasn’t stopped the IMF from continuing to interfere with British politics. Here are some excerpts from a story earlier this week.

Boris Johnson has been warned that a No Deal Brexit is one of the biggest risks facing the global economy. In a broadside against the new Prime Minister’s ‘do or die’ pledge to leave the European Union at the end of October with or without a deal, the International Monetary Fund said a chaotic departure could cause havoc across the world. …No Deal is one of the gravest threats to international economic performance, the IMF said. …Eurosceptics have long criticised the IMF for anti-Brexit rhetoric and it has been one of the loudest opponents of No Deal, saying in April that it could trigger a lengthy UK recession.

I was both disgusted and upset when I read this story.

I don’t like when the IMF subsidizes bad policy with bailouts, and I also don’t like when it promotes bad policy with analysis.

Fortunately, I don’t need to do any substantive number crunching because Professor Steve Hanke of Johns Hopkins University has a superb Forbes column on this exact issue.

No sooner than Boris Johnson put his foot over the threshold of 10 Downing Street, the International Monetary Fund (IMF) offered its unsolicited advice… In a preemptive strike, the Philosopher Kings threw cold water on the idea of a no deal, asserting that it would be a disaster. …such meddling is nothing new for the IMF. Indeed, a bipartisan Congressional commission (The International Financial Advisory Commission, known as the Meltzer Commission) concluded in 2000 that the IMF interferes too much in the domestic politics of member countries.

Professor Hanke is perplexed that anyone would listen to IMF bureaucrats given their awful track record.

…the IMF’s ability to…thrive…is quite remarkable in light of the IMF’s performance. As Harvard University’s Robert Barro put it, the IMF reminds him of Ray Bradbury’s Fahrenheit 451 “in which the fire department’s mission is to start fires.” Barro’s basis for that conclusion is his own extensive research.  His damning evidence finds that: A higher IMF loan participation rate reduces economic growth. IMF lending lowers investment. A greater involvement in IMF programs lowers the level of the rule of law and democracy. And if that’s not bad enough, countries that participate in IMF programs tend to be recidivists. In short, IMF programs don’t provide cures, but create addicts.

This is why I’ve referred to the IMF as the “dumpster fire” of the world economy and also called the bureaucracy the “Dr. Kevorkian” of international economic policy.

By the way, here’s Professor Hanke’s table of the IMF’s main addicts.

I wrote just two weeks ago about the IMF’s multiple bailouts of Pakistan, the net effect of what have been to subsidize bigger government.

Let’s close with more of Professor Hanke’s analysis.

The original reason for its creation has completely vanished.

The IMF, which was born in 1944, was designed to provide short-term assistance on the cheap to countries whose currencies were pegged to the U.S. dollar via the Bretton Woods Agreement. …But, in 1971, when President Richard Nixon closed the gold window, the Bretton Woods exchange-rate system collapsed. And, with that, the IMF’s original purpose was swept into the dustbin. However, since then, the IMF has used every rationale under the sun to reinvent itself and expand its scope and scale. …And, in the process of acquiring more power, it has become more political.

Sadly, he is not optimistic about shutting down this destructive – and cossetted – bureaucracy.

The IMF should have been mothballed and put in a museum long ago. After all, its original function was buried in 1971, and its performance in its new endeavors has been less than stellar. But, a museum for the IMF is not in the cards. …About all we can do is realize that the IMF is a political hydra with an agenda to serve the wishes of the political elites who allow it to grow new heads.

P.S. Here’s my explanation of how the U.K. can prosper in a post-Brexit world.

P.P.S. Here’s some academic research explaining how E.U. membership has undermined prosperity for member nations.

P.P.P.S. If you want Brexit-related humor, click here and here.

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The Conservative Party in the United Kingdom is in the process of selecting a new leader to replace the disastrous Theresa May as Prime Minister.

The most important goal for the Tories is to find someone who will deliver a clean Brexit and thereby extricate the country from a decrepit and declining European Union.

But once Brexit does happen, adopting pro-growth policies will be very important – especially if the European Union petulantly tries to make the transition painful by rejecting a free trade agreement.

The good news is that the United Kingdom is ranked #9 for overall economic liberty according to the latest edition of Economic Freedom of the World, so it has a strong foundation for competitiveness.

The bad news is that the U.K. is only ranked #120 for fiscal policy.

Since that’s the weak spot, let’s see what can be done to move in the right direction.

Let’s look at the tax side of the fiscal equation. According to the Tax Foundation’s International Tax Competitiveness Index, the U.K. is in the bottom half (almost in the bottom third). And I’ve circled the country’s dismal ranking for individual taxes.

By the way, I don’t think this Index is a perfect measure. As I pointed out back in 2016, it needs to include a size-of-government variable.

Nonetheless, it’s a great place to start.

Now let’s consider the fiscal plans of various candidates for Tory leader.

The U.K.-based Mirror has a helpful summary.

Frontrunner Boris Johnson has promised a massive income tax cut for Britain’s richest people – by raising the 40p threshold from £50,000 to £80,000. …Meanwhile Home Secretary Sajid Javid has said he would partially reverse swingeing Tory cuts to the police and recruit 20,000 police officers. He also planned a tax cut for the richest 1% of taxpayers in the UK by removing the 45p rate of income tax, if it pays off overall. …Michael Gove has pledged to scrap VAT replacing it with a simpler sales tax. …Meanwhile Esther McVey has vowed to cut taxes – without saying which – and slash £7billion from the foreign aid budget and spend it on school and police. …Former Brexit Secretary Dominic Raab…promised to shrink the state and slash public spending by reducing the basic rate of income tax from 20p to 15p over time – including a 1p drop “straight away”. …Foreign Secretary Jeremy Hunt wants to cut corporation tax further to 12.5%. That would make the UK’s tax rate by far the lowest in the G20 and turn the country into a tax haven. …Rory Stewart has himself already said he would double spending on climate change and the environment as he warned the UK must do more in the face of an “environmental cataclysm”. Former Leader of the House Andrea Leadsom…is committed to “low taxes, incentives for enterprise and strong employment opportunities”.

A mixed bag.

Rory Stewart seems to have the most statist mindset (he’s also very weak on Brexit), but it’s not clear who has the best fiscal plan.

Let’s look at more data. The Wall Street Journal opined this morning on this topic.

The editorial starts with an indictment of the current system.

Britain’s Byzantine tax system still drags on investment, productivity and growth despite important recent improvements. The top corporate rate has fallen to 19% from 30% since 2007 and is due to hit 17% next year. But the top personal rate, paid on incomes above £150,000, has fallen only to 45% from 50%. Coupled with abrupt income cutoffs in eligibility for allowances and credits, British taxpayers in practice can experience a marginal rate as high as 60% for each additional pound of income between £100,000 and £124,000, and 65% for families with three children earning between £50,000 and £60,000, according to the Institute for Fiscal Studies. Add taxes on pension contributions at higher incomes and some workers pay marginal rates above 100% on parts of their income—paying more than a pound in tax for each additional pound they earn. …Social-insurance and property taxes add more burdens.

And this doesn’t even include the fact that the U.K. has above-average death taxes and higher-than average levels of double taxation.

How do Tory candidates propose to deal with these problems?

The best Conservative leadership proposals so far come from Foreign Secretary Jeremy Hunt and Home Secretary Sajid Javid.Mr. Hunt pledges to reduce the corporate rate to 12.5% to match Ireland’s low rate… Mr. Javid would cut the top individual rate to 40%. …Frontrunner Boris Johnson promises to increase the threshold at which the 40% rate kicks in, to £80,000 from £50,000. The 4.2 million people estimated to see their taxes reduced won’t complain. But tweaking brackets does nothing to fix the current tax code’s bad rate incentives for top earners—the entrepreneurs and investors post-Brexit Britain needs to attract. …Brexit hardliner Dominic Raab would cut the lower personal rate for earners between £12,500 and £50,000 to 15% from 20%. Any rate cut is welcome, but this would help many households that already receive more in benefits than they pay in tax. Environment Secretary Michael Gove would replace the 20% value-added tax with a lower-rate U.S.-style sales tax, which would be a boon to low-income households. But neither would fix broken incentives to work and invest as incomes rise.

As you can see, it’s a mix of mediocre-to-good ideas.

Much like when Republicans generated a bunch of plans when competing for the nomination in 2016.

Of course, let’s also keep in mind that Jeremy Corbyn of the Labour Party also has a tax plan, which is a poisonous collection of class-warfare provisions that would make the U.K. less attractive for jobs and investment.

Which means it is especially important, as the WSJ concludes, to have a compelling case for growth instead of redistribution.

…the only way Britain can prosper post-Brexit is by becoming a magnet for investment and human talent. If voters want the party of income redistribution, they’ll choose Labour. Tories have to be the credible party of growth, with a leader willing and able to make the reform case.

In other words, is there another Margaret Thatcher somewhere in the mix?

P.S. If you want to enjoy some Brexit-themed humor, click here and here.

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By refusing to implement a Clean Brexit and instead pursuing a Brexit-in-Name-Only, Prime Minister Theresa May has dramatically reduced support for the Conservative Party in the United Kingdom.

The poll numbers are now so bad that it is conceivable to imagine that Jeremy Corbyn could win the next election.

That would be horrible news. The leader of the Labour Party is an unreconstructed hard-core socialist. A real socialist who would move the country toward government ownership, central planning and price controls.

In other words, like Crazy Bernie, only crazier.

Theodore Dalrymple aptly summarizes for City Journal what a Labour government would mean for the U.K.

Thanks to the current imbroglio over Brexit, Britain could soon be Venezuela without the oil or the warm weather. The stunning incompetence of the last two Tory prime ministers, David Cameron and Theresa May, might result in a Labour government, one led by Jeremy Corbyn, a man who has long admired Hugo Chavez… Corbyn’s second in command, John McDonnell, would, as Chancellor of the Exchequer, be in charge of the economy. Only five years ago, he said that the historical figures he most admired were Marx, Lenin, and Trotsky… he argued for the nationalization of land. He also favors nationalizing railways and public utilities, which can be done only through rates of taxation so high that they would amount to the nationalization of everything—with a resultant economic collapse—or by outright confiscation… The arrival in power of such men will produce an immediate crisis, which they will blame on capitalism, the world economic system, the Rothschilds, and so forth. They will use the crisis to justify further drastic measures. …None of this is inevitable, but thanks to the bungling of Brexit, it is considerably closer.

This video tells you everything you need to know.

Let’s look at a couple of specific topics.

Writing for CapX, Eamonn Ives explains what’s wrong with the Labour Party’s agenda for more government spending.

…what Jeremy Corbyn and John McDonnell are arguing for is a long way from Keynesian doctrine. They propose a massive injection of government spending in the economy, despite the UK experiencing unprecedented levels of employment and (admittedly rather anaemic) growth. Keynes, by contrast, argued for counter-cyclical fiscal policy. …Of course, the money would have to be found from somewhere: either in existing budgets, or levying new or higher taxes, or through quantitative easing, or additional borrowing. …this model only makes sense if governments are more strategic in deploying resources than private firms and individuals. And, as failed socialist experiment after failed social experiment has shown, there is no evidence to suggest that is the case. …It’s often remarked that if something’s too good to be true, then it probably is. Labour’s voodoo economics are no exception to this. If they really want to stimulate the economy, they should be celebrating, not denigrating the real way to foster genuine economic growth: tax cuts and other supply-side reforms.

Andrew Lilco opines for CapX on an Elizabeth Warren-type scheme that’s been proposed by John McDonnell, the guy would be Chancellor of the Exchequer (what Americans would call a Treasury Secretary) in a Labour government.

John McDonnell…proposed that businesses should be required to share profits with workers either in the form of bonuses or share distributions. He said he wants to “transform the economy”… Indeed, he says the “overthrow of Capitalism” is now his “job”. …What would be the economic effects? Many firms already pay bonuses to staff if the they make higher-than-expected profits, and other firms offer key staff bonuses in the form of shares. …But problems arise if one mandates that all firms should be run that way or attempts to cap returns at some state-set “fair” level. …The essential definitive feature of capitalism is that it is a system of opportunity for those without money to have their projects funded. …If we…cap their rates of return to a “fair” level, that will…mean that only certain sorts of investment occur. In particular, it means an end to high risk investment, where very high rates of return when a project is successful make up for all the losses in other less successful ventures when projects are not successful. …That would have fairly clear implications for the sort of economy the UK would have. …New technologies and new products would come in gradually, but only from abroad and only later than other countries had them. …That in turn will, over time, drag the state into a wider and wider role in the economy.

Speaking of McDonnell, what sort of politician is willing to be part of an event that celebrates brutal communist dictators?

This guy may be even worse than Corbyn.

Let’s wrap up with a look at how Labour Party bigwigs have been infatuated with the thuggish dictatorship in Venezuela.

Just as bad as Michael Moore, Joseph Stiglitz, and Bernie Sanders.

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I’ve been waiting anxiously to write about Brexit, either to celebrate a “Clean Brexit” or to castigate Theresa May and the other politicians for a “Brexit in Name Only.”

Except Members of Parliament can’t make up their collective mind. They’ve been voting against good options and also voting against bad options.

So while we’re waiting for some sort of resolution, I’m going to augment our 2016 collection of Brexit-themed humor with some new items. We’ll start with this nice meme about the Queen deciding it’s time for a royal coup de grâce.

Next we have a new word for everyone’s dictionary.

One of the options being discussed in London is having another vote, which would be very consistent with the European tradition of requiring people to vote over and over again until they give the result desired by the elites.

At which point, as shown below, there are no more votes.

 

And I’ve saved the best for last, A satirist put together a clever song about the message British voters sent to the elite back in 2016 (warning: PG-13).

I especially like the references to the establishment’s hysterical doom-and-gloom predictions about what would happen (“Project Fear”) if voters opted for independence.

P.S. The supposed Conservative government in the United Kingdom is doing a terrible job of delivering Brexit, even though they should be embracing independence so they can reduce the burden of government.

P.P.S. Here’s my 2016 pre-vote column on the economic case for Brexit, and here’s my post-vote column on the hoped-for implications of the upset victory.

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My views on Brexit haven’t changed since I wrote “The Economic Case for Brexit” back in 2016.

It’s a simple issue of what route is most likely to produce prosperity for the people of the United Kingdom. And that means escaping the dirigiste grasp of the European Union.

The European Union’s governmental manifestations (most notably, an über-powerful bureaucracy called the European Commission, a largely powerless but nonetheless expensive European Parliament, and a sovereignty-eroding European Court of Justice) are – on net – a force for statism rather than liberalization. Combined with Europe’s grim demographic outlook, a decision to remain would guarantee a slow, gradual decline….Leaving the EU would be like refinancing a mortgage when interest rates decline. In the first year or two, it might be more expensive because of one-time expenses. In the long run, though, it’s a wise decision.

But if I was rewriting that column today, I would change the title to “The Economic Case for Hard Brexit.”

That’s because Prime Minister Theresa May and other opponents are pushing for a watered-down version of Brexit. Sort of Brexit in Name Only.

Indeed, Dan Hannan, a member of the European Parliament, explains in the Washington Examiner that the deal negotiated by Theresa May is the worst possible outcome.

This is the sort of deal that a country signs when it has lost a war. Under its terms, Britain will remain subject to all the costs and obligations of EU membership, but will give up its vote, its voice and its veto. …EU exporters will enjoy privileged access to the world’s fifth-largest economy. They won’t need to worry about world competition. …In the two-and-a-half years since the referendum, civil servants, politicians, financiers and politically-connected business cartels have worked assiduously to overturn to result. …Some, including George Soros and Tony Blair, sought to overturn the result outright with a new referendum. Others, more craftily, sought instead to ensure that, while something technically called Brexit may happen, nothing actually changes. Sadly, they have achieved something far worse than no change. Their deal — Theresa May’s deal — will leave Britain in a more disadvantageous place than either leaving cleanly or staying put. It keeps the burdens of EU membership but junks the advantages.

Brian Wesbury and Bob Stein, both with First Trust Advisors, point out that Hard Brexit is the best option. Trade would continue, but based on WTO rules instead of the EU’s free trade agreement.

Some analysts and investors are concerned about a “Hard Brexit,” in which the U.K. supposedly plunges into chaos as it crashes out of the EU without an agreement. …Count us skeptical. …Any harm to the U.K.’s economy would be relatively mild… It’s not like there would be no trade between the U.K. and the EU after a Hard Brexit. Trade rules would simply shift to the ones that apply between the EU and other countries under the World Trade Organization, like those that apply to EU-U.S. trade.

While WTO rules are quite good, they’re not as good as complete free trade.

But there would be pressure to move in that direction under a Hard Brexit.

…the EU would be under enormous pressure to lower tariffs and cut a new deal with the U.K. In 2017, the rest of the European Union ran a roughly $90 billion trade surplus with the U.K. So if a Hard Brexit makes it tougher for the rest of the EU to export to the U.K., every national capital in the EU would be flooded with lobbyists asking to cut a deal. Meanwhile, leaving the EU means the U.K. would have the freedom to make free trade deals with the U.S. and Canada, and any other country it wanted, without having to wait for the EU. Yes, a Hard Brexit risks some financial jobs, but the same argument was used when the U.K. decided not to join the Euro currency bloc, after which London kept its role as Europe’s financial center.

For what it’s worth, I’m more interested in whether we can get a really good trade deal between the US and UK following a Hard Brexit.

Regardless, any possible slippage on trade between the UK and EU would be more than offset by the likelihood of better policy in other areas.

…there’s another basic reason why a Hard Brexit would be in the long-term interests of the U.K….any organization powerful enough to overrule the democratic process in the U.K. regarding economic laws and regulations…is also powerful enough to impose anti-free market policies… And, over time, since men are not angels and power corrupts, any international body with such power would gravitate toward policies that aggrandize the international political elite… In fact, the EU has already issued rules that stifle competition, like setting a standard minimum Value-Added Tax rate.

Felix Hathaway from London’s Institute of Economic Affairs, debunks Project Fear in an article just published by Cayman Financial Review.

…the only option ahead with a clear path, and requiring no new legislation in parliament, is some form of ‘Hard Brexit.’ …By Hard Brexit I mean the U.K. leaving the EU on March 29 without a withdrawal agreement. Unlike most other options, this does not require the cooperation of the EU to proceed. In this scenario, the U.K. leaves both Single Market and Customs Union of the European Union at 11 p.m. on March 29, 2019, along with leaving the various political institutions of the EU and the jurisdiction of the Court of Justice of the EU. …many of the more alarming warnings of no cooperation at all can be dismissed as fanciful. A more believable ‘no deal’ Brexit might look as follows. …the Commission is doing all it can to publicly rule out this sort of “managed no deal,” yet in doing so has stated that it would unilaterally extend agreements in selected sectors, including for financial services, following a WTO exit. …one could reasonably expect further agreements, possibly at the 11th hour in March… These would likely cover citizens’ rights, road haulage, and facilitated customs checks for certain classes of goods, and would be negotiated with the member states with which the U.K. does the most business.

For what it’s worth, I think vindictive EU bureaucrats probably want to inflict some needless harm, even though it will hurt them as much – and maybe more – than it would hurt the UK.

But Felix is right that common sense – sooner or later – will lead to agreements to smooth over any bumps in the transition. Indeed, he just wrote another article demonstrating how this is already happening.

Here’s the most important part of his article, which I like because it echoes my arguments about the pressure for better policy in an independent United Kingdom.

Ultimately, the most significant factor will be domestic policy decisions by the U.K. government, particularly in areas of taxation and housing. This may be fairly unexciting news at the end of an article about Brexit, but if the U.K. is to succeed as a “free trading, buccaneering nation,” such success will depend in large part on the ability of companies to attract investment through low corporate taxes, and the ability of workers to move to where they will be most productive through further housebuilding in key areas. …perhaps as an unexpected consequence of the conversation surrounding Brexit,… A recent ComRes poll found that, although divided on almost every other aspect, a clear two thirds of voters agree that when Brexit is complete, “the U.K. should try to become the lowest tax, business-friendliest country in Europe, focused on building strong international trade links.”

And keep in mind that bureaucrats in Brussels are pushing to make the European Union more statist (which, sadly, is contrary to the continent’s historical tradition), so it’s becoming ever-more important to escape.

This is why what happens with Brexit is among my greatest hopes and fears for 2019.

Let’s close with a bit of humor.

The Cockburn column in the Spectator mocks the New York Times for its anti-Brexit fanaticism.

The Times usually supports democracy in backward and violent states, but it hates Brexit. No news is too fake for the Times to print when it comes to Brexit. This week, the Times hit new heights of fantasy. ‘Roads gridlocked with trucks. Empty supermarket shelves. An economy thrown into paralysis,’ a would-be novelist named Scott Reyburn wrote earlier this week. His story, ‘As Brexit Looms, the Art World Prepares for the Fallout’, was recycled as a front-page item on the Times’s international edition. …Britain is in a ‘crazed Brexit vortex’, adds Roger Cohen, holder of the Tom Friedman Chair in Applied Chin-Stroking. …Yes, the British government are useless. But nobody in London is stockpiling food. Nobody is fighting in the streets, as the French are every weekend. The markets factored in their Brexit uncertainty two years ago. The supermarkets and roads are as jammed as ever. …The economy is doing much better than the Eurozone, which is slipping into recession. Polls show the British, who the Times characterize as sliding down a neofascist vortex, to be more welcoming of immigration than any other European people.

Bad journalism from the New York Times is hardly a surprise.

I’m mostly sharing his column because this satirical paragraph got me laughing.

The scene that met Cockburn’s eyes upon exiting the terminal at Heathrow reminded him of his days as a foreign correspondent during the Lebanese civil war, or a night out in south London. A dog was eating the innards of a corpse, because supplies of Romanian dog food have broken down. A naked fat man had carved off a slice of his own buttock and was roasting it over a burning tyre, because imports of Bulgarian lamb are held up at Calais. A woman offered to prostitute herself for an avocado, and to sell both of her blank-eyed children for a packet of French butter. There were no black taxis either, because London’s notoriously pro-Brexit taxi drivers had all joined one nationalist militia or other. Finally, a black-market cheese dealer with a rocket launcher affixed to the back of his pickup agreed to take Cockburn into the city. They bribed their way through the checkpoints with wedges of brie. Or not.

Speaking of laughs, Hitler parody videos have become a thing.

Here’s a new Brexit-related installment in the series.

Not as clever as the first Hitler parody I shared as part of my collection of Brexit humor, but it has some funny moments.

And if you have time, this Brexit tapestry is quite amusing.

P.S. There are some anti-Brexit people who support free markets, which is rather baffling since I can’t imagine why they would want the U.K. to be part of a bureaucracy that tries to brainwash children in favor of higher taxes. Indeed I was only semi-joking when I wrote that Brussels was “the most statist place on the planet.”

P.P.S. Though there are many reasons to question whether U.K. politicians can be trusted to adopt good policy.

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