Archive for the ‘Competitiveness’ Category

It’s been a challenge to assess Donald Trump’s fiscal policies since they’ve been an eclectic and evolving mix of good and bad soundbites.

Though I did like what he said about wanting to pay as little tax as possible because the government wastes so much of our money.

On the other hand, some of his comments about raising tax burdens on investors obviously rubbed me the wrong way.

But now “The Donald” has unveiled a real plan and we have plenty of details to assess. Here are some of the key provisions, as reported by the Wall Street Journal. We’ll start with the features that represent better tax policy and/or lead to lower tax burdens, such as somewhat lower statutory tax rates on households and a big reduction in the very high tax rate imposed on companies, as well as a slight reduction in the double tax on capital gains.

…no federal income tax would be levied against individuals earning less than $25,000 and married couples earning less than $50,000. The Trump campaign estimates that would reduce taxes to zero for 31 million households that currently pay at least some income tax. The highest individual income-tax rate would be 25%, compared with the current 39.6% rate. …Mr. Trump also would cut the top capital gains rate to 20%, from the current 23.8%. And he would eliminate the alternative minimum tax. …For businesses, Mr. Trump’s 15% rate is among the lowest that have been proposed so far.

But there are also features that would move tax policy in the wrong direction and/or raise revenue.

Most notably, Trump would scale back certain deductions as taxpayers earn more money. He also would increase the capital gains tax burden for partnerships that receive “carried interest.” And he would impose worldwide taxation on businesses.

To pay for the proposed tax benefits, the Trump plan would eliminate or reduce deductions and loopholes to high-income taxpayers, and would curb some deductions and other breaks for middle-class taxpayers by capping the level of individual deductions, a politically dicey proposition. Mr. Trump also would end the “carried interest” tax break, which allows many investment-fund managers to pay lower taxes on much of their compensation. …The Trump plan would raise revenues in at least a couple of significant ways. It would limit the value of individual deductions, with middle-class households keeping all or most of their deductions, higher-income taxpayers keeping around half of theirs, and the very wealthy losing a significant chunk of theirs. It also would wipe out many corporate deductions. …The plan also proposes capping the amount of interest payments that businesses can deduct now, a change phased in over a long period, and would impose a corporate tax on future foreign earnings of American multinationals.

Last but not least, there are parts of Trump’s plan that leave current policy unchanged.

Which could be characterized as “sins of omission” since many of these provisions in the tax code – such as double taxation, the tax bias against business investment, and tax preferences – should be altered.

…the candidate doesn’t propose to end taxation of individuals’ investment income… Mr. Trump would not…allow businesses to expense all their new equipment purchases, as some other Republicans do. …All taxpayers would keep their current deductions for mortgage-interest on their homes and charitable giving.

So what’s the net effect?

The answer depends on whether one hopes for perfect policy. The flat tax is the gold standard for genuine tax reform and Mr. Trump’s plan obviously falls short by that test.

But the perfect isn’t the enemy of the good. If we compare what he’s proposing to what we have now, the answer is easy. Trump’s plan is far better than the status quo.

Now that I’ve looked at the good and bad policies in Trump’s plan, I can’t resist closing with a political observation.  Notwithstanding his rivalry with Jeb Bush, it’s remarkable that Trump’s proposal is very similar to the plan already put forth by the former Florida Governor.

I’m not sure either candidate will like my interpretation, but I think it’s flattery. Both deserve plaudits for proposing to make the internal revenue code less onerous for the American economy.

P.S. Here’s what I wrote about the plans put forth by Marco Rubio and Rand Paul.

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Last month, I cited data from Economic Freedom of the World to explain that the United States was becoming less competitive because of creeping protectionism and reductions in the rule of law and property rights.

Now I have more bad news to share.

Last year, the United States ranked #12 for economic liberty.

But according to the new rankings released yesterday, the United States now has dropped to #16. Here are the new rankings (based on a 0-10 scale), with Hong Kong and Singapore once again leading the pack.

Why did the United States drop? In part, because our score fell from 7.81 to 7.73, but also because of what happened to the scores of other nations.

The bottom line is that Georgia, Taiwan, Qatar, Ireland, and the United Kingdom jumped ahead of the United States, while Finland fell behind America.

Now let’s get more depressed.

If you dig through the archives and get the rankings for 2000, you can see that the latest fall from #12 to #16 is part of a very disturbing pattern. The United States used to be #3 in the world, with a score of 8.5.

Wow, falling from 8.5 to 7.73. That’s definitely an indictment of statist policy during the Bush and Obama years.

But I’m going to share even more depressing data.

The folks at the Fraser Institute who put together Economic Freedom of the World retroactively alter scores and rankings as they get more data (sort of the way the U.S. government periodically revises GDP and employment data).

So if you look at their big excel spreadsheet, you’ll see that the United States actually wound up ranked #2 in 2000 with a score of 8.65, marginally ahead of Singapore, which had a score of 8.61.

So we’ve actually dropped from #2 to #16 in the rankings, and our score has plunged from 8.65 to 7.73.

I’ve saved the worst for last. I crunched the numbers to see which nations suffered the biggest declines since 2000. As you can see, the United States has the unfortunate distinction of being on a list with basket case economies such as Venezuela and Argentina.

To make matters worse, at least the U.K. has been moving in the right direction in recent years, with a slight increase from 7.80 to 7.87 between 2010 and 2013. And Iceland also has been trying to improve. Its score has jumped from 6.43 to 6.87 over the past three years.

The United States, by contrast, has downward momentum.

P.S. The nation with the biggest improvement since 2000 is Romania. Thanks to reforms such as the flat tax, its score has skyrocketed from 5.31 to 7.69, an increase of 2.38 points. At this rate, they’ll easily pass the United States in next year’s rankings.

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In my 2012 primer on fundamental tax reform, I highlighted the three biggest warts in the current system.

1. High tax rates that penalize productive behavior such as work and entrepreneurship.

2. Pervasive double taxation that undermines saving and investment.

3. Corrupt loopholes and cronyism that lure people into using resources inefficiently.

These problems all need to be addressed, along with additional problems with the internal revenue code, such as worldwide taxation and erosion of constitutional freedoms and civil liberties.

Based on these criteria, I’ve already reviewed the tax reform plan put forth by Marco Rubio. And I’ve analyzed the proposal introduced by Rand Paul.

Now let’s apply the same treatment to the “Reform and Growth Act of 2017” that former Florida Governor Jeb Bush has unveiled in today’s Wall Street Journal.

Bush identifies three main goals, starting with lower tax rates.

First, I want to lower taxes and make the tax code simple, fair and clear. …We will cut individual rates from seven brackets to three: 28%, 25% and 10%. At 28%, the highest tax bracket would return to where it was when President Ronald Reagan signed into law his monumental and successful 1986 tax reform.

This is a positive step, effectively wiping out the tax-rate increases imposed by Presidents George H.W. Bush, Bill Clinton, and Barack Obama.

Then Governor Bush takes aim at tax loopholes.

Second, I want to eliminate the convoluted, lobbyist-created loopholes in the code. For years, wealthy individuals have deducted a much greater share of their income than everyone else. We will retain the deductibility of charitable contributions but cap the deductions used by the wealthy and Washington special interests, enabling tax-rate cuts across the board for everyone.

This also is a step in the right direction, though it’s unclear what Bush is proposing – if anything – for other big tax loopholes such as the mortgage interest deduction, the healthcare exclusion, the state and local tax deduction, and the municipal bond exemption.

The final big piece of Jeb’s plan deals with America’s punitive treatment of business income.

Third, I believe that the tax code should no longer be an impediment to the nation’s competitiveness with China, Europe and the rest of the world. …To stop American companies from moving out of the country, I will cut the corporate tax rate from 35%—the highest in the industrial world—to 20%, which is five percentage points below China’s. We will end the practice of world-wide taxation on U.S. businesses, which fosters the insidious tactic called corporate “inversions.” …We will also allow businesses to fully and immediately deduct new capital investments—a critical step to increase worker productivity and wages.

All of these reforms are very good for growth.

A lower corporate tax rate, particularly combined with territorial taxation and “expensing” of investment expenditures, will make American companies far more competitive.

More important, these reforms will fix flaws in the tax code that reduce capital formation. And that will mean more investment and higher wages for American workers.

There are other positive features mentioned in the column that are worth celebrating. Governor Bush’s plan eliminates the death tax, which is an especially punitive form of double taxation.

His proposal also gets rid of the alternative minimum tax (AMT), which is a convoluted part of the tax code seemingly designed to grab more money from taxpayers in a very complicated fashion.

Now let’s move to a part of Bush’s plan that seems bad, but arguably is good. He’s proposing to get rid of interest deductibility for companies, which will increase double taxation (remember, investors who buy corporate bonds pay tax on the interest payments they receive from firms).

…we will eliminate most corporate tax deductions—which is where favor-seeking and lobbying are most common—and remove the deduction for borrowing costs. That deduction encourages business models dependent on heavy debt.

So why is this feature arguably good when one of the key goals of tax reform is eliminating double taxation?

For two reasons. First, we already have double taxation of dividends (i.e., equity-financed investment), so imposing double taxation on borrowing (i.e., debt-financed investment) creates a level playing field and addresses the bias for debt in the tax code.

To be sure, it would be best to level the playing field by having no double taxation of any kind, but presumably the Bush team also was paying attention to revenue constraints.

And this is the second reason why this portion of the plan arguably is good. The revenue implications of this change are non-trivial, so one could argue that it is helping to finance pro-growth changes such as a lower corporate tax rate and immediate expensing of business investment.

Let’s close by highlighting some unambiguously worrisome features of the Bush plan.

According to his column, an additional 15 million Americans no longer will have any income tax liability, largely because the plan almost doubles the standard deduction. It’s good for people not to have to pay tax, of course, but we already have a system where almost half of all households are exempt from the income tax. So the concern is that we have a growing share of the population that perceives government as a no-cost dispenser of goodies.

And one of those goodies is the Earned Income Tax Credit, which is a form of income redistribution operated through the tax code. And Bush is proposing to expand the EITC, though there aren’t any details about this part of his plan.

Presumably Bush is including these provisions to somewhat fend off the class-warfare attack that his plan provides big tax cuts for the “rich” while not doing enough for the rest of the population. Yet upper-income taxpayers already pay the lion’s share of the income tax.

Even the IRS has acknowledged that the top 3 percent pay more than half the burden!

So a fair tax cut, by definition, will benefit the rich since they’re the ones who are carrying the load.

In any event, the purpose of good tax policy is to generate faster growth by improving incentives for work, saving, investment, and entrepreneurship, and that’s where you get the big benefits for lower- and middle-income taxpayers.

Simply stated, the close you get to a Hong Kong-style flat tax, the closer you get to robust Hong Kong-type growth rates.

The bottom line is that Bush’s tax plan isn’t a touchdown. Like the Rubio plan and Paul plan, it’s not a Hall-Rabushka flat tax, which is the gold standard for tax reform. But it’s a big step in that direction. Bush takes the ball from the wrong side of the field and puts it on the right side of the field.

If implemented (and accompanied by the spending restraint needed to make the plan sustainable), Bush’s proposal would be a significant boost for the American economy and American taxpayers.

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Here’s a quiz for readers.

When politicians increase taxes, the result is:

This is a trick question because the answer is (j), all of the above.

But let’s look at some of the evidence for (d), which deals with the fact that the geese with the golden eggs sometimes choose to fly away when they’re mistreated.

The Internal Revenue Service has a web page where you can look at how many taxpayers have left or entered a state, as well as where they went or where they came from.

And the recently updated results unsurprisingly show that taxpayers migrate from high-tax states to low-tax states.

Let’s look at some examples, beginning with Maryland. Here are some excerpts from a report in the Daily Caller.

Wealthy taxpayers and job-creating businesses fled Maryland at an accelerating rate as then-Gov. Martin O’Malley implemented a long list of tax hikes during his first five years in the state capital. More than 18,600 tax filers left Maryland with $4.2 billion in adjusted gross income from 2007 – O’Malley’s first year as governor — through 2012, according to a Daily Caller News Foundation analysis of the most recently available Internal Revenue Service state-level income and migration data. …Nearly 5,600 state-tax filers left Maryland in 2012 and took $1.6 billion with them, more than double the 2,300 who departed with $732 million in 2011. The fleeing 5,600 filers had average incomes of nearly $291,900. …Most of 2012’s departing residents moved to the more business-friendly Virginia, according to the data. …Florida was the third most common destination for Marylanders.

Here’s a chart looking at the income that moved into the state (green) compared to the much greater amount of income that left the state (red).

The story then makes a political observation.

O’Malley’s economic record may partially explain why his campaign for the 2016 Democratic presidential nomination has yet to gain traction among voters outside of Maryland.

Though I wonder whether this assertion is true. Given the popularity of Bernie Sanders, I can’t imagine many Democrat voters object to politicians who impose foolish tax policies.

Now let’s shift to California.

A column in the Sacramento Bee (h/t: Kevin Williamson) explores the same IRS data and doesn’t reach happy conclusions.

An unprecedented number of Californians left for other states during the last decade, according to new tax return data from the Internal Revenue Service. About 5 million Californians left between 2004 and 2013. Roughly 3.9 million people came here from other states during that period, for a net population loss of more than 1 million people. The trend resulted in a net loss of about $26 billion in annual income.

And where did they go?

Many of them went to zero-income tax states.

About 600,000 California residents left for Texas, which drew more Californians than any other state.

Here’s a map from the article and you can see other no-income tax states such as Nevada, Washington, Tennessee and Florida also enjoyed net migration from California.

Last but not least, let’s look at what happened with New York.

We’ll turn again to an article published by the Daily Caller.

More taxpaying residents left New York than any other state in the nation, IRS migration data from 2013 shows. During that year, around 115,000 New Yorkers left the state and packed up $5.65 billion in adjusted gross income (AGI) as well. …Although Democrat Governor Andrew Cuomo acknowledged that New York is the “highest tax state in the nation” and it has “cost us dearly,” he continues to put forth policies that economically cripple New York residents and businesses.

Once again, much of the shift went to state with no income taxes.

New York lost most of its population in 2013 to Florida — 20,465  residents ($1.35 billion loss), New Jersey — 16,223 residents ($1.1 billion loss), Texas — 10,784 residents ($354 million loss).

Though you have to wonder why anybody would move from New York to New Jersey. That’s like jumping out of the high-tax frying pan into the high-tax fire.

At this point, you may be wondering why the title of this column refers to lessons for Hillary when I’m writing about state tax policy.

The answer is that she wants to do for America what Jerry Brown is doing for California.

Check out these passages from a column in the Wall Street Journal by Alan Reynolds, my colleague at the Cato Institute.

Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years. This is known as a “tapered” capital-gains tax, and it isn’t new. Mrs. Clinton is borrowing a page from Franklin D. Roosevelt, who trotted out this policy during the severe 1937-38 economic downturn, dubbed the Roosevelt Recession.

FDR had so many bad policies that it’s difficult to pinpoint the negative impact of any specific idea.

But there’s certainly some evidence that his malicious treatment of capital gains was spectacularly unsuccessful.

In the 12 months between February 1937 and 1938, the Dow Jones Industrial stock average fell 41%—to 111 from 188.4. That crash presaged one of the nation’s worst recessions, from May 1937 to June 1938, with GDP falling 10% and industrial production 32%. Unemployment swelled to 19% from 14%. Harvard economist Joseph Schumpeter, in his 1939 opus “Business Cycles,” noted that “the so-called capital gains tax has been held responsible for having accentuated, if not caused, the slump.” The steep tax on short-term gains, he argued, made it hard for small or new firms to issue stock. And the surtax on undistributed profits, Schumpeter wrote, “may well have had a paralyzing influence on enterprise and investment in general.” …A 2011 study from the Federal Reserve Bank of St. Louis reported…“The 1936 tax rate increases,” they concluded, “seem more likely culprits in causing the recession.” …A 2012 study in the Quarterly Journal of Economics attributes much of the 26% decline in business investment in the 1937-38 recession to higher taxes on capital.

So what’s Alan’s takeaway?

Hillary Clinton’s fix for an economy suffering under 2% growth is resuscitating a tax scheme with a history of ushering in recessions. The economy would be better off if the idea remained buried.

Maybe we should ask the same policy about her that we asked about FDR: Is she misguided or malicious?

P.S. Some folks may argue that Hillary has more leeway than governors to impose class-warfare tax policy because it’s harder to emigrate from America than it is to move across state borders.

That’s true.

The United States has odious exit taxes that restrict freedom of movement. And even though record numbers of Americans already have given up their passports, it’s still a tiny share of the population.

Likewise, not that many rich Americans have taken advantage of Puerto Rico’s status as a completely legal tax haven.

But while it’s true that it’s not easy for an American to escape the jurisdiction of the IRS, that doesn’t mean they’re helpless.

There are very simple steps that almost all rich people can take to dramatically lower their tax liabilities. So Hillary and the rest of the class-warfare crowd should think twice before repeating FDR’s horrible tax mistakes.

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At the risk of stereotyping, the Chinese people are remarkably productive when given the chance. Hong Kong and Singapore are dominated by ethnic Chinese, and those jurisdictions routinely rank among the world’s top economies.

Taiwan is another high-performing economy with an ethnic Chinese population.

Ironically, the only place where Chinese people don’t enjoy high average incomes is China. And that’s because there’s too much statism. If you peruse the indispensable Economic Freedom of the World from Canada’s Fraser Institute, you’ll see that China is ranked #115 out of 152 jurisdictions, which is even below nations such as Greece, Haiti, and Vietnam.

As I explain in this interview, China’s politicians are undermining prosperity with a system based on cronyism rather than capitalism.

China’s in the news, of course, because of recent instability in its financial markets. And I’ve taken advantage of the opportunity to give my two cents on this issue (see here and here).

But I was making the same criticisms even when China’s economy was perceived as a big success. I wrote in 2010 that America didn’t need to fear the supposed Chinese economic tiger. I pointed out in 2011 that China was way behind the United States.

And I was at least somewhat prescient when I warned about a bubble in the Chinese economy in this 2011 debate.

Though plenty of folks on the left actually argued that China’s state-controlled economy was something to mimic. Writing for Reason, Ronald Bailey cites some of their silly statements.

As the world watches China’s Communist Party leaders try to order markets around, my mind turned to those pundits who earnestly recommended that the United States emulate the brilliant beneficient Chinese planners in running our economy. The most fulsome China booster was New York Times columnist Tom Friedman. …So enamored of China’s industrial policy was Friedman that in 2010 he likened Chinese economic planning boldness to making “moon-shots.” …And then there is the inevitable Robert Reich. Reich, who is a former Clinton Secretary of Labor, has never been right about anything when it comes to economic policy prescriptions. For example, Reich was convinced in the 1980s the Japan would bury the United States due to the planning acumen of that country’s savvy bureaucrats. …Just shy of 30 years later Reich sang the same stale tune in 2011, only instead of Japanese planners, he was praising the wonders of Chinese industrial planning… As late as 2012, Richard D’Aveni, a Professor of Strategy at Tuck School of Business at Dartmouth College, declared in The Atlantic that “The U.S. Must Learn From China’s State Capitalism to Beat It.”

Actually, Professor D’Aveni is right for the wrong reason. We can learn a lot from statist economies. But we should learn what to avoid, not what to copy.

To conclude, this post shouldn’t be perceived as being anti-China. I want there to be more prosperity in that country, which is why I defended China from an absurd attack by the IMF.

Moreover, I commend China for reforms that move policy in the right direction. And as I pointed out in the interview embedded above, China’s reforms in the 1980s and 1990s may have been limited, but they did help lift hundreds of millions of people out of abject poverty.

Since I mentioned the interview, one of the quirky parts of the discussion was whether politicians should be held criminally responsible for economic mismanagement. Here’s what I wrote a few years ago about an example of that happening in Iceland.

P.S. You probably didn’t realize that it was possible to see dark humor in communist oppression.

P.P.S. But at least some communists in China seem to understand that the welfare state is a very bad idea.

P.P.P.S. Some business leaders say China is now more business-friendly than the United States. That’s probably not good news for America, but my goal is to have a market-friendly nation, not a business-friendly nation.

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This century has not been good news for economic liberty in the United States.

According to Economic Freedom of the World, America has dropped from being the 3rd-freest economy of the world in 2001 to the 12th-freest economy in the most recent rankings.

Perhaps more important, our aggregate score has fallen from 8.20 to 7.81 over the same period.

So why has the U.S. score dropped? Was it Bush’s spending binge? Obama’s stimulus boondoggle? All the spending and taxes in Obamacare? The fiscal cliff tax hike?

I certainly think all those policies were mistaken, but if you dig into the annual data, America’s score on “size of government” only fell from 7.1 to 7.0 between 2001 and 2012.

Which means economic freedom in the United States mostly declined for reasons other than fiscal policy. In other words, our score dropped because of what happened to our scores for trade policy, monetary policy, regulatory policy, and property rights and rule of law.

That triggered my curiosity. If America is #12 in the overall rankings, how would we rank if fiscal policy was removed from the equation?

Here are the results, showing the top 25 jurisdictions based on the four non-fiscal policy factors. As you can see, the United States drops from #12 to #24, which means we trail 14 European nations in these important measures of economic freedom.

If you look in the second column, you’ll notice how many of those European nations have double-digit increases when you look at their non-fiscal rankings compared to their overall rankings.

This is for two reasons.

First, their fiscal scores are terrible because of high tax rates and a stifling burden of government spending.

Second, these same nations are hyper-free market on issues such as trade, regulation, money, rule of law and property rights.

In other words, the data back up points I’ve made about policy in nations such as Denmark and Sweden.

In an ideal world, countries should have free markets and small government. In Northern Europe, they manage to get the first part right. Which is important since non-fiscal factors account for 80 percent of a nation’s overall grade.

Now let’s return to the issue of America’s decline.

Here are the non-fiscal rankings from 2001. As you can see, the United States was #5 at the time, scoring higher than even Singapore and Hong Kong. And the U.S. was behind only three European nations back in 2001.

For what it’s worth, America’s score has fallen primarily because of a significant drop in the trade category (from 8.7 to 7.7) and a huge drop for rule of law and property rights (from 8.7 to 7.0).

In other words, it’s not good for prosperity when a nation begins to have problems such as protectionism and politicized courts.

P.S. The erosion of America’s score for non-fiscal factors is particularly disappointing since improvements in those factors have played a big role in protecting the world from the negative economic consequences of more spending and taxes.

P.P.S. I think this is an example of correlation rather than causation, but the above rankings for non-fiscal economic liberty seem somewhat similar to the rankings I shared last week looking at overall societal freedom.

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Bernie Sanders, Vermont’s pseudo-socialist senator, thinks that America can learn from Europe.

He’s right.

But he’s also wrong. That’s because he thinks that Europe is a role model to emulate rather than a warning signal of mistakes to avoid. Needless to say, that’s borderline crazy.

Heck, even President Obama has pointed out that the United States out-performs our European counterparts.

In his Washington Post column, Robert Samuelson warns that it would be a mistake to follow the European model of more taxes and additional regulation. He starts with (what should be) an obvious point about businesses responding to incentives.

We can learn from Europe about job creation, but many Americans may reject the underlying lesson. It is: If you price labor too high — pay workers more than they produce — businesses will slow or stop hiring.

He then points out that bad incentives in Europe are leading to bad results.

Europe’s economy is in the doldrums. Growth in the eurozone (the 19 countries using the euro) is weak… Eurozone unemployment is 11.1 percent, barely down from the peak of about 12 percent. This contrasts with the United States, where the jobless rate has dropped from 10 percent in October 2009 to 5.3 percent now.

And what exactly are the bad incentives in Europe?

Simply stated, governments are imposing too many burdens on the economy’s productive sector.

In a fascinating article in the latest “Journal of Economic Perspectives,” economist Christian Thimann — a former top adviser at the European Central Bank and now at the French investment bank AXA — argues that Europe’s debt crisis and the weak recovery both stem from high wage and compensation costs. “Jobs fail to be created in a number of [eurozone] countries not because of a ‘lack of demand’ as often claimed,” Thimann writes,” but mainly because wage costs are high relative to productivity, social insurance and tax burdens are heavy, and the business environment is excessively burdensome.”

Which brings us back to the point Samuelson made earlier.

If the costs of new workers exceed the likely benefits in higher sales and profits, companies will hire less or not at all.

And just in case the implications aren’t obvious, he spells it out.

…we should not ignore the implications for the United States. …it’s tempting to load the costs of social policies onto business. …The Affordable Care Act (aka Obamacare) requires firms to provide health insurance for workers; a $15 minimum wage would raise labor costs sharply for many firms; and there are proposals mandating paid maternity and sick leave. All these seem worthy causes, but we need to be alert to unintended consequences. If we make hiring too expensive, there will be less hiring.

Amen. As I’ve already noted, businesses aren’t charities. They won’t hire new workers if that means lower profits!

But Europe has a lot of these policies, so unemployment is higher. And we have politicians in America who want to copy Europe’s mistakes.

The problem is not just that politicians are making it more expensive to hire workers. Bad government policy also is making it more expensive to do almost anything.

The U.K.-based Telegraph has a story looking at how some European governments are making other business activities needlessly costly and difficult.

…doing business in Portugal, Ireland, Italy, Greece and Spain is more difficult, expensive and slower than in stronger, neighbouring countries. …Looking at the average time it takes to get construction permits, electricity connected, contracts enforced and goods exported shows the disparity.

This chart shows that the problem is especially acute in Southern Europe.

Let’s close by making a very important point about differences within Europe. While it’s sometimes useful and interesting to look at big-picture comparisons (such as average unemployment in the EU vs US or average income in the EU vs US), it’s also important to realize that European nations (notwithstanding pressures for harmonization, centralization, and bureaucratization from the European Commission) still have considerable leeway to determine their own economic policies.

And if you peruse Economic Freedom of the World, you’ll see that Northern European nations such as Finland (#10), Denmark (#19), Germany (#28), and the Netherlands (#34) are all considered market-friendly, while Southern European countries such as Spain (#51), France (#58), Italy (#79), and Greece (#84) are much lower in the rankings.

The Nordic nations are especially interesting. They have large welfare states, but they have very pro-market policies in other areas. So to elaborate on what Senator Sanders asserted, we actually could learn some good lessons from Scandinavian nations in areas other than fiscal policy.

P.S. Since we picked on Bernie Sanders already, let’s create some balance by also mocking Hillary Clinton.

Here’s a clever satirical video about her email scandal.

And if that doesn’t satisfy your craving, click here for more Hillary humor.

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