The Case for Gridlock

My views on gridlock were fully captured in the title of a 2015 column, which stated that divided government was “Better than the Alternative of Expanding Government.”

And I followed up with a 2020 column that showed that spending restraint was more likely when the two parties were forced to share power.

To be sure, divided government also can produce very bad results (the country suffered a big expansion in the burden of government during the Nixon years, for instance).

But J.D. Tuccille from Reason explains why Americans should feel happy about gridlock starting in 2023.

…the election results stand as an expression of overwhelming lack of confidence in the major parties, with a resulting breather for the country resulting from the split decision’s ensuing, and quite welcome, gridlock. …The Wall Street Journal‘s Brody Mullins and John D. McKinnon noted last week. “…Washington overall isn’t expected to do much for the next two years.” That’s good news for Americans baffled by Democrats’ insistence on treating the U.S. economy as something between a laboratory experiment and a toy train set, with lawmakers indulging their whims through serial rounds of life-altering policy moves. …Republicans didn’t exactly convince the country that they were the cavalry riding to the rescue. Their main selling point seems to have been that they weren’t Democrats. …gridlock, with all of its faults and instability, is what we have, and we should be thankful for that. …gridlock can give us a bit of a national breather, and that may be the best we can hope for from a destructive political system.

Amen. I’m in favor of more breathing room for the economy’s productive sector. That’s when we get better outcomes.

But there are two reasons why gridlock is not a long-run solution.

First, Tuccille points out that we now have presidents claiming autocratic powers.

The gridlock…isn’t total. The increasingly autocratic nature of the presidency allows enormous room for the nation’s chief executive to act unilaterally. Through executive orders and memoranda, presidents enact policy changes that should go through Congress (if they’re permissible at all) in a manner befitting elective monarchs. The only real check on that power is the willingness of the courts to remind the country that, while rule-by-decree is a form of government, it’s not one permitted by the Constitution.

Second, we have very serious problems (an awful tax system, runaway entitlement spending, the administrative state, etc) that can only be solved by legislative action.

I’ll close with a depressing observation about what to expect from politics. Simply stated, politicians generally have incentives to maximize their short-run status, not to maximize the nation’s long-run health.

So, whether we have gridlock or not, it’s not easy to be optimistic.

Unless, of course, we can figure out ways to reincarnate the very rare Republican and very rare Democrat who did the right thing.

Until and unless that happens, I want politicians to be “unproductive.”

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Republican Warfare, Part I: The Trump Problem

I’ve never been a fan of Donald Trump, though my criticism has always focused on his support for bad policies such as wasteful spending, foolish protectionism, and corrupt cronyism.

Today I’m going to change hats and pretend to be a political pundit so I can offer some unsolicited advice to my Republican friends.

If they like to win elections, they need to realize that Donald Trump is bad news.

Yes, he beat a very unpopular Hillary Clinton in 2016, but every subsequent election has produced Republican disappointment.

• The 2018 midterm elections.
• The 2020 presidential election.
• The 2022 midterm elections.

What should most upset the GOP is that Trump has given Democrats control of the Senate twice. First, by depressing Republican turnout in the two Georgia runoff contests with his sore-loser routine about stolen elections in the 2020 cycle. Second, by convincing Republican voters to nominate inferior candidates in the 2022 cycle.

But the fault is not entirely with Trump.

As illustrated by this cartoon, a significant share of Republican voters like Trump and this gives him enormous power over the GOP.

The interesting question to answer is why many rank-and-file Republicans feel so loyal to Trump – even though he often supported bad policies and has helped Democrats gain power in Washington.

I actually answered that question early last year. Here’s some of that column.

One thing that surprised me over the past four yeas is that I found strong support for Trump from grassroots conservative Republicans. Yes, they didn’t like his fiscal profligacy and they mostly didn’t like his protectionism, but they did like the fact that he was a “fighter,” unlike so many (but not all) Republican politicians who get cozy with the DC establishment. They also figured he was worth supporting because he was so reviled by the establishment media (i.e., the enemy of my enemy is my friend).

I think that analysis still applies, but let’s dig deeper. Another problem is that Republican voters think anti-Trump GOP politicians must be bad (closet Democrats, or something like that).

That may be true in some cases, with Mitt Romney being an obvious example.

But that binary analysis – the Trump camp vs the every-other-Republican camp – is woefully inadequate.

I think it’s more accurate (though obviously simplified) to look at the Republican Party as having three camps. And here’s a Venn diagram with my amateur depiction of what unites and divides them.

I’m sure many of you already know my conclusion, which is that the Republican Party should opt for Reaganism.

That’s the approach that reflects good policy and good politics.

I’ve written many times why it is good policy, so I’ll conclude by elaborating on why it is good politics.

Simply stated, Trump voters don’t trust establishment Republicans. They view them as proponents of things they don’t like such as bailouts, globalism, and amnesty.

And establishment Republicans obviously don’t like Trump and Trumpie candidates, even if only for stylistic reasons.

Reaganism, by contrast, can unite all the factions. And when I say Reaganism, I’m not just talking about tax cuts. What we need is the full market-friendly Reagan agenda of spending restraint, deregulation, trade expansion, and sound money.

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The Six Most Important Ballot Initiatives of 2022

Most election watchers are focused on whether Republicans will take control of the House and/or the Senate in today’s midterm election in the United States.

That’s an interesting topic, and I’ll close today’s column with my predictions, but I’m going to continue my long-standing tradition (2010, 2012, 2016, 2018, 2019, 2020, 2021) of highlighting the year’s most important initiatives and referendums.

1. Regular readers already know that the class-warfare initiative in Massachusetts is at the top of my list. The left-controlled state legislature has placed an initiative on the ballot to replace the state’s 5 percent flat tax with a class-warfare system with a top rate of 9 percent. The Wall Street Journal recently warned, “A proposed millionaire tax would accelerate the exodus of wealth to New Hampshire and Florida” and National Review added that “The Bay State’s economic future is on the ballot.”

2. It has not attracted much attention, but my sentimental favorite is Proposition 132 in Arizona, which would strengthen the state’s constitution by requiring a 3/5ths vote to approve any ballot initiative to increase the tax burden. This would augment the 2/3rds supermajority that already exists for legislatively enacted tax increases.

3. Speaking of taxes, I can’t imagine that anyone is surprised to learn that there’s an initiative to (further) increase California’s top tax rate. The Tax Foundation explained that, “California Proposition 30 would create a 1.75 percentage point surtax on income above $2 million, which would bring the top marginal rate to 15.05 percent. (Separately, the scheduled uncapping of a 1.1 percent payroll tax in 2024, combined with the passage of Proposition 30, would yield a 16.15 percent top rate on wage income.)” This is so extreme that I’m predicting even California’s crazy voters will vote no.

4. Sticking to taxes, there’s a referendum in Colorado, Proposition 121, to lower the state’s flat tax. The Tax Foundation summarizes what’s at stake: “Colorado Proposition 121 would reduce the state’s flat statutory income tax rate from 4.55 percent to 4.4 percent, effective retroactively for tax year 2022.” Not a huge reduction, but a welcome step in the right direction.

5. For those who follow labor issues, there are two initiatives that merit attention. In Illinois, Amendment 1 would further empower and entrench the power of government bureaucrats. As noted by the Illinois Policy Institute, “Amendment 1 would allow government unions to pass their most unpopular demands at the bargaining table, and voters would have no way to hold them accountable.” By contrast, Tennessee voters will get to vote on whether to enshrine “right-to-work” in the state’s constitution.

6. Last but not least, voters in a couple of California communities will have the opportunity to demonstrate whether they understand economics. To be more specific, an article in Reason explains, “The most sweeping rent control initiative up for a vote next Tuesday is Measure H in Pasadena, California. It would cap rent increases at 75 percent of inflation as measured by the Consumer Price Index…A handful of other California cities have ballot initiatives that would tighten pre-existing rent caps.”

P.S. My predictions for Congress (which occasionally are accurate) are for Republicans to take the Senate by a 52-48 margin and the House by a 246-189 margin.

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The Most Important Ballot Referendum of 2022

While most people pay attention to which political party enjoys success when there’s an election, I think it’s also important to look at ballot initiatives.

• In 2021, voters in the left-leaning state of Washington overwhelmingly registered their opposition to capital gains taxation.
• In 2020, voters in the deep-blue state of Illinois said no to the big spenders by voting to preserve the state’s flat tax.
• In 2019, voters in left-leaning Colorado also said no to the big spenders by voting to protect the state’s spending cap.

But, as we’ve seen in California and Oregon, not every referendum produces a sensible result.

Today, we’re going to look at the most important ballot initiative of 2022. But before looking at the details, here’s a map showing the states gaining and losing population when Americans move across borders.

You’ll notice that Massachusetts is one of the top states for outbound migration, which means people are “voting with their feet” against the Bay State.

But bad news can become worse news. And that will definitely be the case if voters in Massachusetts approve a referendum next month to junk the state’s flat tax and replace it with a class-warfare system that has a top rate of 9 percent.

Jeff Jacoby wrote last year about the idea in a column for the Boston Globe.

A century-old provision of the Massachusetts Constitution commands that if the commonwealth taxes income, it must do so at a “uniform rate.” Five times in the modern era — in 1962, 1968, 1972, 1976, and 1994 — tax-and-spend liberals have invited voters to discard that rule and make it legal to soak the rich at higher tax rates. Five times voters have said no. …There is considerable arrogance in the way advocates of the surtax blithely disregard the voters’ repeated refusal to overturn the constitutional ban. Their attitude seems to be that no matter how many times the people uphold the uniform-rate rule, there is no reason to take them seriously. …more than 150 Massachusetts businesses representing almost 16,000 workers sent lawmakers an open letter imploring them not to hobble the state’s economy with a stiff new tax, and expressing “alarm” at the proposed constitutional amendment. They…know that a surtax aimed at millionaires is bound to injure countless people who will never earn anywhere close to a million bucks.

The Wall Street Journal has editorialized against the proposal.

…progressives in Boston want to join New York and other nearby states in a high-tax arms race. …Bay State ballots in November will give voters the choice to place a 4% surtax on incomes above $1 million, bringing the top rate to 9% from 5%. The proposal would amend the state constitution to remove its flat-tax mandate. Passing the measure would rocket Massachusetts to seventh from 31st on the list of states with the highest marginal income-tax rates. …A $2.3 billion revenue surplus shows that the state is already taxing more than it needs. This year’s tax haul was so big it triggered a largely forgotten state law that caps revenue. Residents may soon receive checks that refund a portion of last year’s taxes. …Approving the tax would speed up a wealth exodus already under way. The Pioneer Institute last year noted that Massachusetts’ tax base has been eroding, and there’s no surprise about where the escapees are going. The top two destinations are Florida and New Hampshire, both of which lack an income tax. …The constitution’s flat rate mandate is a crucial limit on the demands of interest groups for ever-more spending. If tax rates rise and the revenue cap goes away, spending will soar to snatch the new revenue and soon the politicians will return to seek even higher rates, as they always do.

The economic consequences of class-warfare taxation are never positive.

And that will be true in Massachusetts. A study from the Beacon Hill Institute in Massachusetts estimates the economic damage that the surtax would cause.

…we find, using our in-house computer model (MA-STAMP) that the effects on the economy will be as follows: In its first year of implementation, the amendment will cause the state to lose 4,388 working families due to outmigration. This outmigration plus a reduction in labor hiring and labor-force participation will cause a loss of 9,329 jobs. …the state economy, real (inflation-adjusted) gross domestic product, will shrink by $431 million… Advocates of the measure claim that it will make possible a $2 billion annual in state spending. …Instead, we find that the revenue yield of the tax will be far less, the result of the expected shrinkage in economic activity. (See Table E-2.) In its first year of implementation, combined state and local revenues will rise by only about $1.2 billion.

Here’s a table showing some of the negative effects.

Alex Brill of the American Enterprise Institute also estimated that revenues would be lower than expected once the effects of the Laffer Curve are incorporated into the analysis.

Here are some excerpts from his article in the Hill.

Modifying the revenue forecast to incorporate evidence from the academic literature about likely behavioral changes yields a significantly lower estimated revenue pickup. I estimate that about 400 of the 22,000 taxpayers affected by the surtax would exit the state and many others would reduce work or shift and relabel their income to avoid the tax. By my estimate, the surtax would generate approximately $1.5 billion in 2023, since these behavioral responses would offset 32 percent of the revenue gain that would occur if taxpayers kept their behavior unchanged. Using a similar approach, Tufts University’s Center for State Policy Analysis recently estimated that the proposed surtax would generate only $1.3 billion in 2023.

Last but not least, the Tax Foundation crunched the numbers and also found the surtax would cause significant economic damage.

…while no one would mistake Massachusetts for a low-tax state, it has carved out a place as a competitive area to live and work within the Northeast corridor. …but consider the Commonwealth’s ranking on the Tax Foundation’s State Business Tax Climate Index…in 2022, the Bay State still ranked 34th overall on the Index—well below the median. …Massachusetts’ competitive tax advantage in New England is primarily due to its individual income and sales tax systems, which rank 11th and 12th on the Index, respectively. With regard to its neighbors, only New Hampshire has a better overall Index ranking than Massachusetts. …In 2007, Christina Romer and David Romer, professors of economics at the University of California Berkeley, conducted a study to determine the impact of legislated tax changes on the economy. …The study found that a tax increase equal to 1 percent of gross domestic product (GDP) resulted in an estimated 3 percent decline in GDP after three years. …If the Romer and Romer study were applied to the Massachusetts surtax it would result in a 0.942 percent decline in GDP after three years. In other words, the Commonwealth’s total economic output could contract by $5.98 billion by the end of 2025.

Here’s a table from the report, showing that zero-income tax New Hampshire and Florida already are big winners when people escape Massachusetts.

If the referendum is approved, we can easily predict that future versions of this chart will show much bigger numbers.

Simply stated, some of the geese with the golden eggs will fly away (while the ones that stay will decide to produce fewer eggs – as well as figure out ways to protect the eggs that remain).

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Best Political News of 2022

When I shared the best and worst news of 2021, I expressed happiness about how school choice is spreading across the nation.

But it’s not spreading as fast as it should because some establishment Republican state legislators would rather kowtow to teacher unions rather than promote better educational opportunities for the kids in their districts.

But parents are beginning to notice.

In a closely watched primary contest yesterday in Iowa, the Republican Chairmen of the House Education Committee (and a lackey of the teacher unions) was being challenged by a supporter of school choice.

Needless to say, it’s very difficult to defeat an incumbent politician. But, as Corey DeAngelis shared in a tweet, the challenger prevailed in a stunning outcome.

And if you peruse the press release from the American Federation for Children, that was just one of many victories in the Hawkeye State.

Indeed, it’s just one of many victories in primaries across the country.

Corey wrote an article last week for National Review, co-authored by Jason Bedrick, that analyzed primary results in other states this year.

They start with some good news.

DeSantis made school choice a centerpiece of his campaign, and voters rewarded him. In a race decided by fewer than 40,000 votes, his unusually high level of support among black women (18 percent, or about 100,000 votes), who chose him over an anti–school choice black Democrat, Andrew Gillum, proved decisive. …Republicans began wrapping themselves in the mantle of parental rights and school choice, but the fulfillment of their promises has been mixed. States such as West Virginia and New Hampshire enacted bold new education-choice policies in 2021, while Florida, Indiana, and more than a dozen other states expanded existing choice policies.

They then share some bad news.

Nevertheless, choice initiatives stalled this year in Georgia, Idaho, Iowa, Oklahoma, and Utah, with some Republicans casting the deciding votes.

But they close with the best news of all.

In recent primaries, GOP voters threw their support to candidates who supported choice, even if it meant tossing out otherwise conservative incumbents. …Representative Phil Stephenson, an incumbent backed by the teachers’ union, lost to school-choice supporter Stan Kitzman, who secured 58 percent of the vote despite spending less than half of what his opponent spent… Likewise, school-choice champions Ellen Troxclair and Carrie Isaac both defeated candidates who were endorsed by the Texas affiliate of Randi Weingarten’s American Federation of Teachers. In all, eleven of 14 Texas House of Representatives candidates endorsed by the pro-school choice Texas Federation for Children PAC won their primary runoffs. …in Kentucky, an incumbent known to be the leading opposition to school choice in the Republican caucus, Representative Ed Massey, suffered a devastating primary defeat by school-choice champion Steve Rawlings, who garnered 69 percent of the vote despite being significantly outspent. Candidates endorsed by American Federation for Children Action Fund and its affiliates won their primaries or advanced to runoffs in 38 of 48 races in Texas, Arkansas, Idaho, Georgia, and Nebraska so far this year.

Actually, the best news of all is not what happens in elections. Instead, the best news is when legislation is approved that expands school choice. Like we saw last year in West Virginia and other states.

I’ll close with some political analysis.

I’m a big fan of the no-tax-pledge organized by Americans for Tax Reform.

Why? Because it is a way of targeting politicians who are sympathetic to tax increases.

Signing the pledge does not guarantee that a candidate is good (they can vote for debt-financed spending without violating the pledge).

But a candidate who does not sign the pledge almost certainly is bad. And voters now have a way of identifying – and rejecting – those politicians.

We need something similar for school choice. Maybe that’s a pledge. Maye it’s simply endorsements by the American Federation for Children.

All that matters is that politicians learn that there are negative consequences if they side with teacher unions instead of children.

P.S. Politicians who oppose school choice often are reprehensible hypocrites, as noted by Democratic state senator Justin Wayne of Nebraska.

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Chile Election Week, Part VI: Wrecking the Constitution?

Now that a socialist has been elected (with open support from the Communist Party), what comes next for Chile?

Lots of bad policy, for sure, but Axel Kaiser warns that the left also wants to replace the country’s pro-liberty constitution.

Axel, who is President of Fundación para El Progreso and also a Senior Fellow for the Atlas Center for Latin America, just scratches the surface in this short video. He told me that there are many other desirable provisions, including school choice.

So it shouldn’t be surprising that the left in Chile is so determined to replace it with a document that empowers politicians.

I wrote about this issue last year, citing experts (including folks on the left) who all agreed that giving politicians new powers over the economy was the clear purpose of a new constitution.

This is basically a fight about whether to replace rights with entitlements (or, in the language of philosophers, whether to replace “negative rights” with “positive rights”).

By the way, there’s research showing that a society based on liberties is the best way of generating the prosperity needed for higher living standards (i.e., the access to goods and service that proponents of positive rights claim to support).

And, earlier this year, I showed how that works conceptually.

But you don’t need empirical research or theoretical analysis. Just open your eyes and look around the world. The nations based on socialism and so-called positive rights have produced economic misery and deprivation.

By contrast, there’s a much better track record – especially for ordinary people – in countries where government plays a smaller role.

It’s tragic that Chilean voters chose the redistribution approach in Sunday’s election. If they opt for a new constitution next year, the nation will be doomed.

P.S. By the way, here are some excerpts from today’s Wall Street Journal‘s editorial about the election.

Latin America, or much of it, is moving to the populist left, and Chile became the latest example by electing socialist Gabriel Boric… He’s the most leftist politician to win in Chile since Salvador Allende in the 1970s. His major theme was reducing economic inequality, which he proposes to do through state power. Mr. Boric wants to raise taxes, eliminate the country’s highly successful private pension system and increase government spending and regulation. He supports the constituent assembly now rewriting the constitution, and his goal is to give government more control over just about everything. …Foreign investors and Chileans with money and property are nervous. From the end of 2019—when the left launched riots demanding a new social contract—until August 2021, Chile’s central bank says some $50 billion (15% of Chilean GDP) fled the country. About half was investment capital and half from businesses and households. …on Monday the Chilean peso fell 2% against the U.S. dollar while the broader stock market plunged 10%. …The world is watching closely to see if the new president will…take Chile in the direction of such failing Latin states as Argentina or Peru, or worse.

Amen.

The best case scenario is that Chile is copying Argentina. The worst case is that it is copying Venezuela.

P.P.S. There was a president in the United States who wanted to remake society on the basis of “positive rights.” Fortunately, he did not succeed.

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Chile Election Week, Part V: Another “Leftist Savior”

I warned a few days ago that Gabirel Boric would be bad news if he won Chile’s presidential election. Well, he won, and now we’re going to find out whether he will repeal the policies that made the country successful.

He definitely seems to be another “leftist savior,” as described in this video.

At best, Chile has elected someone as bad as Kirchner in Argentina.

The worst-case scenario is that Boric will be an utter disaster, like Chavez or Maduro from Venezuela.

If you want more details about the election results, Las Últimas Noticias put together this helpful graphic.

I had predicted a 54-46 Boric victory, but these results are even worse.

But what’s really depressing is that Latin America – and the world – is going to lose a role model.

Chile was already declining because of the soft leftism of two recent presidents, Michelle Bachelet and Sebastián Piñera, and it seems almost certain that this degeneration will accelerate as Boric pushes a hard-left agenda.

I’m especially worried about damage to the nation’s system of personal retirement accounts.

I’ll close with a personal observation that people sometimes challenge me to point out successful libertarian nations.

I have traditionally responded by stating that there’s no such thing as a pure libertarian country, but that we have some great success stories if we focus on comparative policy.

Sadly, I can’t really use Hong Kong as an example any more, and now it looks like I’ll have to drop Chile off my list. So my fingers are crossed that nothing bad happens to Switzerland, Estonia, New Zealand, or Singapore!

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Chile Election Week, Part IV: What’s at Stake in Today’s Vote?

Greetings from Santiago. Chileans vote today for a new president and there’s a risk that a Venezuelan-style leftist, Gabriel Boric, will prevail.

And that puts at risk the economic progress described in this video.

The video has a good discussion of Chile’s very successful system of private pensions (which will be in danger if Boric wins).

But it also points out how free trade helped create the prosperity of modern Chile.

And that narrative is confirmed by looking at Chile’s score from the Fraser Institute’s Economic Freedom of the World.

I’m always happy to sing the praises of free trade and condemn protectionism, but let’s keep the focus on today’s election in Chile and why it matters.

That’s why this tweet tells you everything you need to know.

Notice how Chile began to prosper after it began to shift to free markets around 1980 and notice how Venezuela began to fall after it shifted to statism starting around 2000.

Chile and Venezuela. Two countries with very different economic trajectories in recent decades. This animation shows per capita income from 1970 to 2017. Source: https://t.co/XzW3Xhtig4 pic.twitter.com/EWGhMIAMKB

— Simon Kuestenmacher (@simongerman600) February 26, 2020

Notwithstanding all this evidence, Boric is favored to win today’s election. Which would be a vote for national economic suicide – perhaps akin to the British people voting for the pro-nationalization Labour Party after World War II (described in this video, for those interested).

I hope I’m wrong, both about the results of the election and the potential changes to economic policy if Boric prevails.

P.S. If you’ve enjoyed my Chilean election coverage, I did the same thing a couple of years ago in the United Kingdom (see here, here, here, here, and here).

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Chile Election Week, Part III: Death Knell for the Private Pension System?

One reason I’m interested in Chile’s election is that the leftist candidate, Gabriel Boric, wants to eviscerate the nation’s successful private pension system.

Bettina Horst of Libertad Y Desarrollo gave me her analysis.

As an economist and Executive Director of the nation’s pro-market think tank, Ms. Horst understands that Chile’s system has helped workers by giving them real ownership of real assets.

And that’s much better than “pay-as-you-go” systems, like we have in the United States.

Chile’s private retirement accounts have enabled workers to build nest eggs, and the system has also provided a valuable source of capital for the nation’s economy.

So why would Chile’s voters consider a candidate like Boric, who wants to wreck that system?

We’ll find out Sunday night after the votes are counted, but a Boric victory would indicate that Chile’s workers decided to trust the free-lunch promises of a politician.

In a column earlier this year for the Wall Street Journal, another Chilean weighed in on this issue.

Axel Kaiser of the Atlas Research Network wrote that the left has a (long-standing) ideological agenda.

In 1981 Chile became the first country to privatize social security, ending the pay-as-you-go system that had been in place since 1924 and had collapsed. Now Chile’s left wants to resurrect it. …Last year a group of senators even introduced a bill to nationalize the pension funds, as Argentina did in 2008. An expropriation of workers’ savings looks increasingly likely, as the radical left dominates Chile’s recently elected constitutional convention. “The destruction of the AFP system is under way,” a far-left lawmaker recently said. …The attack on the AFP system is all about ideology and power. …Its destruction has long been a goal of the radical left. With the AFP out of the picture, politicians will recover the power they once had over retirees.

That’s Mr. Kaiser’s political analysis.

His column also includes some analysis of the economic benefits of the private system.

The state-run pension system was plagued by corruption and rent-seeking… Pension privatization reversed this perverse dynamic. Instead of taxing active workers to pay pensioners through the bureaucracy, the new system, created by former Labor Minister José Piñera, established that 10% of the employee’s salary is transferred automatically to an account under his name at one of the Administradoras de Fondos de Pensiones, or AFP. These private pension funds compete to attract workers and invest their pensions for a fee. …By subsequently relying on workers’ own savings to fund their pensions instead of taxing younger workers, privatization of social security ended dependency across generations. …Average pensions are also 41% higher in the AFP system than in the old one, according to the Libertad y Desarrollo research center, even as workers contribute a smaller fraction of their salaries. Between 1981 and 2019, the savings accumulated in workers’ accounts at the AFP reached $218 billion, or around three-quarters of GDP. About 70% of these funds weren’t contributions made by workers but profits generated for them by AFP investments. This accumulation of capital contributed an extra 0.5% of GDP a year to economic growth between 1981 and 2001.

As mentioned in the column, Jose Pinera created Chile’s system of personal retirement accounts.

You can click here to see him describing the case for private accounts, both in Chile and the United States.

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Chile Election Week, Part II: The Threat of Boricnomics

I explained a few days ago that Sunday’s presidential runoff in Chile should be viewed as the most important election of 2021.

This is because the left’s candidate, Gabriel Boric, wants to turn Chile into Venezuela, as I mention in this radio interview with Ross Kaminsky.

For some reason, you only hear my voice during this Zoom discussion, which means I don’t even have a face good enough for radio.

But let’s set aside that technical glitch and focus on Mr. Boric’s agenda.

Here’s a flyer that a campaign worker gave me as I was walking around Santiago yesterday.

It’s in Spanish, but one of my Chilean friends translated. Here are Boric’s economic proposals.

• Government-run health care (not a good idea).
• Repealing the private pension system (not a good idea).
• 40-hour work week (not a good idea).
• Higher minimum wage (not a good idea).
• Industrial policy (not a good idea).

There was one attractive proposal. He’s proposing to cut the pay of politicians. But that will yield trivial savings if it happens and the odds of it actually happening are laughably small.

Also, he says he wants to fight crime, which is good (in theory).

His worst idea, though, is not on this flyer. If you go to his website, you’ll find this passage in his economic plan (as translated by Google): “The tax reform will collect on the order of 8% of GDP under the regime.”

He is not overly specific on how he will collect so much additional money, but the website mentions higher income taxes, green taxes, and the imposition of a wealth tax.

All of which sounds like a recipe to drive entrepreneurs and investors (and/or their money) out of the country.

To understand the radical nature of his plan, tax revenues in Chile currently grab about 21 percent of the country’s economic output according to the OECD – so Boric is advocating a 38-percent increase.

By comparison, Biden’s tax plan in the U.S. is awful, but he’s “only” proposing a 4-percent increase in the tax burden (about 1 percent of GDP).

P.S. Since Ross and I were comparing Argentina and Chile, here’s a chart I put together using the Maddison database.

P.S. Given that Chile’s free-market reforms have been especially beneficial to poor people (see here, here, here, and here), I wonder if they understand how Boric’s election would threaten their upward mobility.

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The Most Important Election of 2021

If you want visual proof of Chile’s “improbable success,” this chart tells you everything you need to know.

Thanks to free-market reforms in the 1980s and 1990s, growth exploded, Chile became the Latin Tiger and poverty plummeted.

It’s remarkable how quickly per-capita GDP has increased compared to the average of other major Latin American economies (Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru, Paraguay, Uruguay, and Venezuela).

Some folks on the left (including editors at the New York Times) bizarrely think Chile’s “neoliberal experiment” has been a failure. Given their upside-down perspective, they probably think Venezuela is a smashing success.

But today’s column is not about what’s happened in the past. It’s about what may happen in the future because of an upcoming presidential election.

Let’s start with this article from the Economist, which expressed concern back in November that the first round of the presidential election would lead to a stark ideological choice between the hard left and hard right.

…stable Chile disappeared two years ago, in an explosion of massive and sometimes violent protests…In a vote for the constitutional convention in May (in which only 43% turned out), support surged for the hard left while drying up for mainstream parties. As a result, the convention has become a theatre of wokeness, with calls to wage war against pivotal industries…, alongside…for a bigger role for the state in pensions, health care and green regulation. …pessimists fear a Utopian list of unaffordable rights and anti-capitalism. …Gabriel Boric, the candidate of the hard left, has seemed poised to win the presidential election. A former student leader, …some of his allies…include the Communist Party… Mr Boric wants to expand tax revenues by 8% of gdp over six to eight years (impossible, say many economists) and review trade agreements in order to engage in industrial policy. …That is why support has grown for José Antonio Kast of the hard right. …Whereas Mr Boric promises the most left-wing government since the chaotic Socialist-Communist administration of Salvador Allende, Mr Kast offers the most right-wing one since the dictatorship of General Augusto Pinochet.

Sure enough, the November election put Boric and Kast in a runoff, which is scheduled for December 19.

I don’t know if it would be accurate to say this is akin to a hypothetical Rand Paul-Bernie Sanders contest, but a report in the Wall Street Journal suggests that are very big economic implications.

After years of protests and political upheaval that seemed certain to shift Chile’s politics sharply to the left, voters in the first round of a presidential election largely backed candidates who support the country’s free-market economy… More than half of the ballots in the Sunday vote went to three right-wing candidates who support the market economy, led by first-place finisher José Antonio Kast with 28% of the vote. Gabriel Boric, the leftist candidate who backs dismantling a private pension system and creating a state-run lithium company, finished second with 26% of the votes… “People didn’t buy the idea that Chile needs to dismantle the market-friendly model, they just want a stronger social safety net,” said Patricio Navia, a Chilean political scientist at New York University. …The future of Chile’s once-lauded economic model that bolstered foreign trade and slashed poverty over the last three decades has been in doubt since mass protests erupted two years ago… Mr. Kast, a 55-year-old former lawmaker…, says he is a democrat who is offering Chileans economic prosperity and freedom.

By the way, the presidential election isn’t the only big thing that’s about to happen in Chile.

The article also acknowledges something I wrote about last year, which is the possibility of a new constitution based on entitlements rather than liberties (i.e., positive rights vs negative rights).

The election is being held as a special assembly made up of mainly leftist delegates is writing a new constitution, which could weaken investor protections and expand social rights. The constitution is expected to be finished next year when it will be put to a referendum.

A Washington Post column published yesterday by Professor Michael Albertus summarizes what’s at stake.

Chile’s presidential runoff election on Dec. 19 is the country’s most important election since its return to democracy in 1990. …Chile’s election pits José Antonio Kast, a bombastic far-right politician whom many liken to Donald Trump and Jair Bolsonaro, against Gabriel Boric, a far-left lawmaker and former student organizer. …The stakes couldn’t be higher. Chile’s ongoing constitutional convention is poised to propose next year the biggest overhaul to the country’s political system since the Pinochet dictatorship.

Prof. Albertus points out that the election isn’t just about economics.

There are big fights about immigration, law and order, abortion, and indigenous rights.

For those of us who care a lot about prosperity, Mary Anastasia O’Grady of the Wall Street Journal opined two days ago on the implications of Chile’s upcoming choice.

The stakes are high in Chile’s Dec. 19 runoff presidential election pitting the free-market former Congressman José Antonio Kast against socialist Congressman Gabriel Boric. The country has been trending left for years. But Mr. Kast’s surprise first-place finish in the election’s first round—with 28% of the vote—and the center-right’s strong showing in legislative elections suggests that Chileans are reconsidering national suicide. …If the vote goes left, Chileans can expect policy geared toward greater redistribution of the existing wealth-and-income pie—higher taxes, nationalization of pensions, populism, etc. If the vote goes right, there will be a chance to restore the fast growth of the 1990s by deepening the liberal economic agenda. …there’s something much bigger at stake. That is the survival of the democratic institutions protecting the pluralism, property rights and public order that have made Chile one of Latin America’s richest countries. Mr. Boric is backed by a coalition—Approved Dignity—heavily influenced by the Communist Party and other hard-left groups. …If Mr. Boric wins the runoff, you can bet they will demand their pound of flesh.

Ms. O’Grady’s column notes that Chile’s free-market reforms dramatically reduced poverty (for more details, see here, here, and here).

The market economy has been enormously successful in Chile. The share of Chileans living in poverty fell to 8.6% in 2017 from 68.5% in 1990, according to official data. Extreme poverty over the same period dropped to 2.3% from 48.8%. It’s a development record that few countries in the world have achieved.

Last but not least, she makes a very important point that Chile’s recent performance has not been very impressive.

…the clamor for change isn’t irrational. According to Chilean economist and investor José Luis Daza, …In the five years before the pandemic in 2020, the country grew at an average annual rate of 1.9%, less than half that of the world economy. “After 2000,” he told me in a phone interview from Santiago last week, “there has been zero productivity growth. In fact, it has been marginally negative.” …It was in the midst of this economic malaise in October 2019 that extreme-left militants burst onto the scene in Santiago. …Mr. Daza recently put his work in New York on hold to join Mr. Kast’s economic advisory team with a focus on growth.

I’m not surprised. There has not been any meaningful pro-growth reform this century. Indeed, the opposite is true. Policy has actually drifted in the wrong direction.

But if Boric wins this weekend, a drift in the wrong direction could become a tidal wave, washing away the Chilean Miracle.

The last thing Latin America needs is another Venezuela. Milton Friedman will be rolling over in his grave.

P.S. I’m especially concerned that a victory for the left could lead to the repeal of some of Chile’s best policies, including social security personal accounts and nationwide school choice.

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Politician Humor

Last October, I wrote a two-part series about America’s venal political class (see here and here).

Today’s collection of political satire makes the same point.

We’ll start with some wisdom from Charlie Brown.

Next, we have a two-frame cartoon. The top frame shows where we were three months ago and the bottom from shows where we are today.

Now let’s share some humor about Nancy Pelosi, which a special cameo appearance by Hillary Clinton.

Last Saturday afternoon in Washington, D.C., an aide to Nancy Pelosi visited the Bishop of the Catholic Cathedral. He told the Cardinal that Nancy Pelosi would be attending Sunday’s Mass and asked if the Cardinal would kindly point out Pelosi to the congregation and say a few words that would include calling her a saint.

The Cardinal replied, “No. I don’t really like the woman, and there are issues of conflict with the Catholic Church over most of Pelosi’s views.”

Pelosi’s aide said, “Look, I’ll write a check here and now for a donation of $100,000 if you’ll just tell the congregation you see Pelosi as a saint.”

The Cardinal thought about it and said, “Well, the Church can use the money, so I’ll work your request into tomorrow’s sermon.”

As Pelosi’s aide promised, Nancy appeared for the Sunday worship and seated herself prominently at the forward left side of the center aisle. As promised, at the start of his sermon, the Cardinal pointed out that Ms. Pelosi was present.

The Cardinal went on to explain to the congregation, “While Ms. Pelosi’s presence is probably an honor to some, the woman is not numbered among my personal favorite personages. Some of her most egregious views are contrary to tenets of the Church, and she tends to flip-flop on many other issues. Nancy Pelosi is a petty, self-absorbed hypocrite, a drunken thumb-sucker, and a nit-wit. Nancy Pelosi is also a serial liar, a cheat, and a thief. I must say, Nancy Pelosi is the worst example of a Catholic I have ever personally witnessed. She married for money and is using her wealth to lie to the American people. She also has a reputation for evading her Representative obligations both in Washington and in California. Just look at the streets in her district! Feces everywhere. The woman is simply not to be trusted.”

The Cardinal concluded. “But, when compared with Hillary Clinton, Ms. Pelosi is a saint.”

The following cartoon should appeal to everyone, right, left, or center.

Amen. Perhaps every Senator and Representative should get honorary membership in the Moocher Hall of Fame.

Here’s a cartoon strip that succinctly explains the difference between a politician and a statesman.

Here’s something that’s not directly humorous, but it’s funny to think what would happen if Congress worked like Survivor and one of them was “voted off the island” every so often.

In ancient Athens, the world’s first democracy, they had a process called ostracism, where once a year the people could vote on the politician they thought was most destructive to the democratic process. The “winner” was banished from Athens for 10 years.#MythAndFact pic.twitter.com/yeBDRxfb7W

— MYTH AND FACT (@MythAndFact) October 23, 2020

This next cartoon strip is for afficianados of “public choice,” which is he school of thought that studies how politicians care primarily about advancing their own interests rather than what’s best for the nation.

The strip seems like it goes too far. Surely politicians aren’t this bad, right?

But then contemplate the utter sleaze and corruption involved with giveaways such as export subsidies, agriculture programs, bailouts, and protectionism.

In other words, politicians may be even worse than we think.

As usual, I’ve saved the best for last. This meme is especially apt since I just wrote a column about how Republicans will now revert to being (or pretending to be) in favor of small government now that a Democrat is in the White House.

P.S. If you want more political humor, click here, here, here, and here. I also have satirical columns about selected politicians (Biden, Trump, Sanders, Bill and Hillary Clinton, and Obama).

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The Best and Worst of 2020

One of my traditions, which started in 2013, is to share the year’s best and worst policy outcomes of the past 365 days.

For instance, last year I celebrated Boris Johnson’s landslide victory in the United Kingdom and also was very happy that Colorado voters preserved TABOR. But I bemoaned Trump’s protectionism and fretted about the ever-rising burden of government spending.

So what can we say about 2020?

The big news of the year was the pandemic, of course, but my best-and-worst list focuses on public policy.

In other words, this column will highlight the positive or negative actions of politicians (or voters) rather than the vindictiveness of Mother Nature.

So let’s look at major developments in 2020, and we’ll start with the good news.

Illinois voters preserve the flat tax – The only good feature of Illinois fiscal policy is that the state’s constitution mandates a flat tax. The big spenders in Springfield despise that policy, but they can’t get rid of it without permission from voters. So, led by the state’s hypocritical governor, they put an initiative on the ballot to allow discriminatory tax rates. Fortunately, the people of Illinois rejected the class-warfare measure by a comfortable 53.3 percent-46.7 percent margin.

An acceptable Brexit deal – The people of the United Kingdom wisely voted to leave the European Union back in 2016, but a genuine escape from Brussels did not seem likely until Boris Johnson’s landslide victory in 2019. Even then, it wasn’t clear that the European Union’s spiteful officials would agree to unfettered trade in a post-Brexit environment. Fortunately, there is now an agreement that – while far from perfect – does allow the U.K. to escape the sinking ship of the E.U.

Voters reject the War on Drugs – I’ve never liked drugs and I recognize that there will be social harms with legalization. That being said, the social harm from prohibition is much greater, so I’m pleased that voters all over the nation approved ballot initiatives to give people more freedom to get high.

Now for the bad news of 2020.

Washington’s bungled response to the pandemic – As indicated above, the existence of the coronavirus doesn’t count as bad policy, but the federal government’s incompetent response certainly belongs on this list. We learned, over and over and over and over again, that bloated bureaucracies do not deliver good results. Heck, we’re still learning that lesson.

China clamps down on Hong Kong – As a long-time admirer of Hong Kong’s market-driven economic vitality, I’m saddened that China is increasing its control. So far, Beijing is focusing on ways of restricting Hong Kong’s political autonomy, but I fear it is just a matter of time before economic freedom is negatively impacted. For what it’s worth, I’m also distressed that economic policy seems to be moving in the wrong direction in Mainland China as well.

Chilean voters put the nation’s prosperity at risk – One of the world’s biggest success stories during my lifetime has been Chile’s shift from authoritarian statism to capitalist prosperity. Poverty has dramatically declined and Chile is now the richest nation in Latin America. Sadly, voters approved an initiative that could result in a new constitution based on the welfare state vision of “positive rights.”

I’ll close with a bonus section, so to speak.

2020 election – If you care about trade and spending, then Biden’s victory may turn out to be good news. If you care about taxes and red tape, then Biden’s victory may turn out to be bad news.

But I thought the biggest election takeaway is that the left did not do well in congressional races or state races.

And I suppose I should add that it’s good news that Democratic voters ultimately opted not to nominate some of the awful politicians who ran for president, most notably Bernie Sanders and Elizabeth Warren.

And I’m tempted to add that they also wisely rejected Kamala Harris, but that backfired since she’s now going to be a heartbeat away from the presidency.

P.S. I’ve already cited my 2013 and 2019 editions. If you’re curious, here are my best and worst for 2018, 2017, 2016, 2015, and 2014.

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In 2021 and Beyond, Will the GOP be a Reagan Party or a Trump Party?

Even though my 2020 prediction for the presidential race was much more accurate than my 2016 prediction, I’m definitely a policy wonk rather than a political pundit.

That being said, I’m very interested in elections because voting patterns eventually can translate into policy changes.

And some of the voting patterns from Tuesday were rather surprising. For instance, I was shocked at the data that compared 2016 exit poll data with 2020 exit poll data and found that Trump got more votes in 2020 from every group other than white men.

And I was also shocked to learn that Trump did a much better job of attracting non-white votes than any other Republican candidate in recent history.

GOP share of non-white vote, presidential elections (%)

1952: 21
1956: 39
1960: 32
1964: 6
1968: 12
1972: 13
1976: 15
1980: 10
1984: 13
1988: 18
1992: 11
1996: 12
2000: 9
2004: 17
2008: 10
2012: 11
2016: 21
2020: 26 (preliminary)

— Adrian Gray (@adrian_gray) November 4, 2020

My pro-Trump friends tell me that this is evidence that a Trumpian approach is capable of attracting new voters, particularly minorities. Indeed, they tell me that Trumpism should be the model for all the politicians who may think about going for the Republican nomination in 2024.

So, as part of my post-election analysis (see here, here, here, and here), let’s explore whether the GOP will be (or should) a Trump party.

We’ll start with an article that Sean Trende authored for Real Clear Politics.

The Democratic playbook against Republicans had remained more or less the same since 1992. You could portray the GOP candidate as someone who wanted to gut Medicare and Social Security. Or, you could portray him as a closet theocrat. …Every major GOP candidate was vulnerable to at least one of these attacks, and usually both. As for Trump? Neither of those attacks landed. He famously opposed entitlement reform, and ran as a big-spending Republican. And the closet theocrat charge? Needless to say, that mantle is hard to hang on Trump. …there’s no going back for Republicans. …it is a “NeverTrump” delusion that the old GOP coalition is going to be resurrected. The political demand isn’t there, and whomever is nominated in 2024 will likely have an agenda that more closely resembles Trump’s than Mitt Romney’s. …The successful Republican candidates over the past 50 years have all had a cultural connection to what some jokingly call ’Murica.  …Reagan spoke the language of Middle America. To be sure, Donald Trump’s vulgarity contrasts sharply with Reagan’s class, and that has limited his opportunities for political success substantially, but he nevertheless connects with a group of voters.

Elaina Plott, in a piece for the New York Times, explains that the GOP is now a Trumpist party, even if that simply means being more willing to fight.

…for all the attention paid to what Trump represents in American politics, the most salient feature of his ascent within the Republican Party might be what he doesn’t represent. When Ronald Reagan overthrew the old order of the Republican Party in the 1980 election, he did so as the figurehead of a conservative movement… Trump’s takeover, by contrast, has been as one-dimensional as it has been total. In the space of one term, the president has co-opted virtually every power center in the Republican Party… But though he has disassembled much of the old order, he has built very little in its place. …That this is no longer Paul Ryan’s party is clear. What Trump has turned it into, though, is less so. …“The party right now is just Trump, right?” said one senior Senate G.O.P. aide. “So when you take him out of it, what do we have left?” …The difficulty with engineering a new paradigm that builds on Trump’s 2016 win is that the president himself is not especially committed to it. …the one thing that truly unified the Republican base in its support of Trump was a belief that he was a “fighter.” …the Republican base today is willing to bend more on policy in service of what it believes to be a more existential war.

Interestingly, even ardent anti-Trumpers seem to think Trump-style politics will outlast Trump.

In a column for the Chicago Tribune, Eric Zorn frets that post-Trump Trumpism will be very effective.

Trumpism — an unapologetically coarse, swaggering and nasty brand of politics — has been vindicated. Forget competence. Forget dignity. Forget class. Even forget policy (remember Trump’s health care plan that was always just two weeks away from unveiling?). Tribalism is king. Fear clobbers hope. Truth is optional. Character doesn’t count. The guardrails are down. …The GOP looks likely to hold the Senate, which means Republicans can put a brick on any legislation a President Joe Biden would want to pass. Trump has already given the GOP three U.S. Supreme Court justices and conservative control of the judicial branch of government for at least a generation… a Democratic President Biden, flailing impotently against a recalcitrant Republican Senate, would likely boost the GOP’s fortunes in the 2022 midterms and position the party well for the presidential race two years later. With Trump and his family safely on the sidelines, Republicans could nominate a candidate who inspires their base with shameless bluster and schoolyard insults, but who actually knows a thing or two about governing. Trumpism without Trump. An even more frightening thought in some ways than Trumpism with Trump.

Meanwhile, Jonathan Last of the never-Trumper Bulwark writes that there will be a battle for the GOP’s soul and that the Trumpists will prevail.

If Donald Trump loses, there is going to be a civil war inside the Republican party and the conservative movement. On one side will be the Trumpists, who believe all of white nationalism and authoritarian stuff. On the other side will be the Vichycons, who never liked Trump, but who went along with Trumpism because they were partisans… Here is how the civil war will play out. …After the inauguration, all three of these groups will join together to oppose anything and everything the Biden administration does and it will look like comity. …Once it becomes clear that Trump plans on being the one to choose the 2024 nominee, he’ll have a large base of support and the Republican party will be faced with the same decision matrix it had in mid-2016. …if Republican primary voters want more Trumpism, then the Republican party will continue down this path, no matter what the Vichycons say. The Vichycons will have the magazines and op-ed pages, and a handful of elected Republicans. The Trumpists will have an active former president of the United States, his family, Fox, …and a floor of probably 30 million voters. I know which side I would bet on.

Last but not least, in a must-read article for New Yorker, Nicholas Lemann writes about how Trump won in 2016, how he governed, and what will happen after he leaves.

…is there a future in Trumpism? …An ambitious Republican can’t ignore Trumpism. …But is it possible to address it without opening a Pandora’s box of virulent rage and racism? …The Republican Party has long had a significant nativist, isolationist element. In the Party’s collective memory, this faction was kept in check by “fusionism,” a grand entente between this element and the Party’s business establishment. …Trump…didn’t talk about the need for limited government or for balancing the federal budget. …He didn’t extoll free trade. He didn’t court the Koch brothers. He did not sign the no-new-tax pledge… Trump was opposed by more officials in his own Party (the Never Trumpers of their title) than any Presidential nominee in recent American history. …Trump’s key insight in 2016 was that the Republican establishment could be ignored, and his primary campaign pitched only to the Republican base, which no longer believed in the free-market gospel, if it ever had. …the difference between Trump as a candidate and Trump as the President goes back to fusionism. …appointees without previous connections to Trump but with deep connections to the Party’s libertarian wing have put in place an enhanced version of the standard Republican program. The result has been an odd mix of traditional Republican policies and Trumpian rhetorical flourishes. …As Trump has outsourced economic policy to the establishment, he has outsourced social policy to the evangelicals. …Steven Hayward, a well-connected conservative who has written the two-volume history “The Age of Reagan,” told me, “The biggest surprise about Trump is that he has turned out to govern as a conservative. …That raises the question of where the Republican Party will go after he leaves office. …there are three competing predictions about the future of the Party over the coming years. Let’s call them the Remnant, Restoration, and Reversal scenarios.

And here are those three camps, starting with the “Remnant” crowd, who are the heirs to Trumpism.

Could somebody else use the Trump playbook to win a Presidential election? Those who believe in the Remnant scenario think so. …The obvious candidate to carry out a high Trumpist strategy in 2024 would be Donald Trump, Jr… Several other potential Republican candidates, most notably Senators Tom Cotton, of Arkansas, and Josh Hawley, of Missouri, have demonstrated that they see Trump’s success as instructive.

Next we have the “Restoration” group, who want the GOP to be a Reagan-style party.

Under the Restoration scenario, …Republicans, as if waking from a bad dream, could recapture their essential identity for the past hundred years as the party of business. They could revive a Reagan-like optimistic rhetoric of freedom and enterprise… Many Never Trumpers would feel comfortable again in a Restorationist Republican Party. Restoration could entail a conventionally positioned Presidential candidate, such as Mike Pence… But the most discussed Restorationist candidate is Nikki Haley, the former governor of South Carolina and a former U.N. ambassador.

Then we have the “Reversal” folks, who want the GOP to be the anti-capitalism party.

The Reversal scenario, though perhaps the least plausible, is the most threatening to the Democratic Party. The parties would essentially switch the roles they have had for the past century: the Republicans would replace the Democrats as the party of the people, the one with a greater emphasis on progressive economic policies… today poorer districts are far more likely to vote Republican and richer districts are far more likely to vote Democratic. …People in this camp talk about the failures of “neoliberalism,” “financialization,” and “market fundamentalism,” and condemn “zombie Reaganism.” …The favored Presidential candidate for 2024 among the Reversalists is Senator Marco Rubio, of Florida.

Now for my two cents.

Since I prefer Reagan over Trump, that presumably puts me in the “Restoration” camp.

But I don’t think many people care what I prefer, so I’ll wrap up by giving my prediction of what will happen.

In the post-Trump environment, I think Republicans will revert to their normal behavior (i.e., the “Restoration” folks will prevail), but only if they absorb two Trump-style flourishes.

• From a stylistic perspective, I think the desire for “a fighter” is what many voters found appealing about Trump (as was mentioned above in Elaina Plott’s article from the New York Times). My guess is that a lot of Republicans will copy that aspect of Trump’s behavior, but obviously without the silly tweets and insults. I hope that means no tax-hiking budget deals.
• From a policy perspective, I think the biggest change will be less sympathy for trade and immigration. To the extent I have any influence with Republicans, I’ll try to convince them to at least protect and promote free trade with other democratic nations. And I’ll also remind them that high-skill immigration (such as the people we attract with the EB-5 program) is worth preserving.

So which Republican can best mix Reaganism with those two bits of Trumpism?

Beats me.

P.S. For what it’s worth (and I don’t think it’s worth much since it’s far too early), here’s some polling data on Republican preferences for the the 2024 nomination.

Keep in mind that this poll took place last year, when the economy was booming and voters presumably had a more positive view of President Trump. I suspect the Trump children would not do as well if the poll was repeated today.

P.P.S. My nightmare scenario is that GOP politicians decide the lesson of Trumpism is that they should copy his approach of being weak-kneed on the issue of genuine entitlement reform.

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President Joe Biden Will Be Bad, but a President Kamala Harris Would Be Worse

Joe Biden has a very misguided economic agenda. I’m especially disturbed by his class-warfare tax agenda, which will be bad news for American workers and American competitiveness.

The good news, as I wrote earlier this year, is that he probably isn’t serious about some of his worst ideas.

Biden is a statist, but not overly ideological. His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party. The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

But what if Joe Biden’s health deteriorates and Kamala Harris – sooner or later – winds up in charge?

That’s rather troubling since her agenda was far to the left of Biden’s when they were competing for the Democratic nomination.

And it doesn’t appear that being Biden’s choice for Vice President has led her to moderate her views. Consider this campaign ad, where she openly asserted that “equitable treatment means we all end up at the same place.”

The notion that we should strive for equality of outcomes rather than equality of opportunity is horrifying.

For all intents and purposes, Harris has embraced a harsh version of redistributionism where everyone above average is punished and everyone below average is rewarded.

This goes way beyond a safety net and it’s definitely a recipe for economic misery since people on both sides of the equation have less incentive to be productive.

I’m not the only one to be taken aback by Harris’ dogmatic leftism.

Robby Soave, writing for Reason, is very critical of her radical outlook.

Harris gives voice to a leftist-progressive narrative about the importance of equity—equal outcomes—rather than mere equality before the law. …Harris contrasted equal treatment—all people getting the same thing—with equitable treatment, which means “we all end up at the same place.” …This may seem like a trivial difference, but when it comes to public policy, the difference matters. A government should be obligated to treat all citizens equally, giving them the same access to civil rights and liberties like voting, marriage, religious freedom, and gun ownership. …A mandate to foster equity, though, would give the government power to violate these rights in order to achieve identical social results for all people. 

And, in a column for National Review, Brad Polumbo expresses similar reservations about her views.

Whether she embraces the label “socialist” or not, Harris’s stated agenda and Senate record both reveal her to be positioned a long way to the left on matters of economic policy. From health care to the environment to housing, Harris thinks the answer to almost every problem we face is simply more government and more taxpayer money — raising taxes and further indebting future generations in the process. …Harris…supports an astounding $40 trillion in new spending over the next decade. In a sign of just how far left the Democratic Party has shifted on economics, Harris backs more than 20 times as much spending as Hillary Clinton proposed in 2016. …And this is not just a matter of spending. During her failed presidential campaign, Harris supported a federal-government takeover of health care… The senator jumped on the “Green New Deal” bandwagon as well. She co-sponsored the Green New Deal resolution in the Senate that called for a “new national, social, industrial, and economic mobilization on a scale not seen since World War II and the New Deal era.” …she supports enacting price controls on housing across the country. …The left-wing group Progressive Punch analyzed Harris’s voting record and found that she is the fourth-most liberal senator, more liberal even than Massachusetts senator Elizabeth Warren. Similarly, the nonpartisan organization GovTrack.us deemed Harris the furthest-left member of the Senate for the 2019 legislative year. (Spoiler alert: If your voting record is to the left of Bernie Sanders, you might be a socialist.)

To be fair, Harris is simply a politician, so we have no idea what she really believes. Her hard-left agenda might simply be her way of appealing to Democratic voters, much as Republicans who run for president suddenly decide they support big tax cuts and sweeping tax reform.

But whether she’s sincere or insincere, it’s troubling that she actually says it’s the role of government to make sure we all “end up at the same place.”

Let’s close with a video clip from Milton Friedman. At the risk of understatement, he has a different perspective than Ms. Harris.

Since we highlighted Harris’ key quote, let’s also highlight the key quote from Friedman.

Amen.

P.S. It appears Republicans will hold the Senate, which presumably (hopefully?) means that any radical proposals would be dead on arrival, regardless of whether they’re proposed by Biden or Harris.

P.P.S. Harris may win the prize for the most economically illiterate proposal of the 2020 campaign.

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A Victory for Biden, a Defeat for the Left

The day after the election, I wrote that “left-wing goals are now very unlikely” because Republicans almost certainly will retain control of the Senate.

But perhaps I should have been ever bolder and argued that the election was a rejection of the left-wing agenda.

An editorial from the Wall Street Journal points out that voters did not vote for bigger government or more statism.

…the closer we inspect the nationwide election returns, the more the result looks like a defeat…for the progressive agenda. …Democrats lost seats in the House, giving up some of the suburban gains they made in 2018 while continuing to struggle in rural areas. …A GOP Senate may compromise with Mr. Biden around centrist ideas, but the aggressive House agenda of the last two years would die again. This result is all the more remarkable given that Democrats had nearly all of the media, Silicon Valley billionaires, and all of the leading cultural figures and institutions helping them. …The lack of coattails was also evident in the states, where Democrats spent heavily to flip legislatures. …The GOP flipped both legislative bodies in New Hampshire, despite Mr. Trump’s loss in the Granite State, and Republicans protected their advantage nearly everywhere else. …There was no blue wave, and certainly no mandate for progressive change. …in their considerable wisdom, the voters may have elected Mr. Biden but they left his party and its radical ideas behind.

Some readers may think that the Wall Street Journal‘s editors are engaging in spin. In other words, because of their pro-market views, they’re trying to make it seem like a defeat wasn’t really a defeat.

But what about Helaine Olen, a reliably left-wing columnist for the Washington Post, who reached the same conclusion when opining about election results from California.

Proposition 22 — which would allow gig-economy companies such as Uber, Lyft and DoorDash to continue treating drivers as independent contractors — passed handily. On the other hand, Proposition 16, which would have restored affirmative action to California’s public college and university admissions, has gone down in defeat. …Let’s take Proposition 22. Activists have been unhappy with the tech giants of the sharing economy for years, pointing out repeatedly that they are using venture capital to subsidize an unprofitable industry and that, moreover, they offer almost nothing in either the way of labor or consumer protection. The entire business model is designed to get around government regulations. …Voters did not appear particularly concerned that allowing a major employer to override state regulation and effectively set its own working conditions is a terrible precedent — not when a few extra dollars per ride was at stake. When it came down to worker welfare vs. short-term convenience and financial gain, it wasn’t even a contest. …Proposition 16…supporters roundly outspent opponents and hoped the increased attention to issues of systemic racial inequities in the wake of the killing of George Floyd would help them garner support. …The biggest obstacle might have been the traditional antipathy toward affirmative action reasserting itself — a survey last year found that 3 out of 4 Americans opposed using race or ethnicity as a factor in college admissions.

And the New York Times isn’t exactly a bastion of right-wing thinking, yet an article by Thomas Fuller, Shawn Hubler, Tim Arango and Conor Dougherty also acknowledges that the election results were not great for the left.

…the nation’s most populous state put up mammoth numbers for the Democrats. But dig a little deeper into the results and a more complex picture of the Golden State voter emerges, of strong libertarian impulses and resistance to some quintessentially liberal ideas. In a series of referendums, voters in California rejected affirmative action, decisively shot down an expansion of rent control and eviscerated a law that gives greater labor protections for ride-share and delivery drivers, a measure that had the strong backing of labor unions. A measure that would have raised taxes on commercial landlords to raise billions for a state that sorely needs revenue also seemed on track for defeat. …said Bob Shrum, a former Democratic strategist…“California is a very liberal state that is now resistant to higher taxes.” …For all their liberal leanings on issues like the environment, California voters have long been less welcoming to new taxes… Proposition 15, would have removed the Proposition 13 tax limits on commercial properties like office buildings and industrial parks, continuing to shield homeowners while raising an estimated $6.5 billion to $11.5 billion a year for public schools and local governments. The measure was trailing on Thursday.. More than $100 million was also spent on another hot-button measure, rent control. Polls showed that the housing crisis was the No. 1 concern for state voters… And yet voters up and down the state resoundingly rejected efforts to expand tenants’ rights and rent control. …What do voters think about voting for Democrats and at the same time not supporting Democratic-led initiatives? José Legaspi, a Los Angeles resident…voted for Mr. Biden and did not think twice about opposing the measure that would raise taxes on commercial properties. “I truly believe in paying taxes,” he said. “However there is a point at which one should limit how much more in taxes one should personally pay.”

The bottom line is that Joe Biden won the White House (barring some dramatic and unexpected developments), but not because of his statist agenda.

It’s more accurate to say that voters wanted to end the sturm and drang of Trump, but without embracing bigger government.

P.S. I’m not going to pretend that voters are rabid libertarians who are clamoring for my preferred policies (such as shutting down departments, genuine entitlement reform, etc). But I also think that it’s safe to say that they don’t want the left’s agenda (class warfare, Medicare for all, green new deal, etc) of bigger government and more dependency.

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American Voters Reject the War on Drugs

In yesterday’s election postmortem, I highlighted a few implications for big-picture economic issues.

• There will be another “stimulus,” but it won’t be nearly as profligate as would have been the case if Democrats had total control of Congress and the White House.
• There won’t be any serious effort for forced unionization in right-to-work states.
• Biden’s class-warfare tax increases won’t happen.
• The state and local tax deduction will remain capped.
• The corporate tax rate will stay 21 percent (the best fiscal achievement of Trump’s presidency).

But here’s another takeaway from the election results: The American people have rejected the foolish and expensive War on Drugs.

Writing for Reason, Elizabeth Nolan Brown celebrates this development.

If Americans across the country provided a clear mandate for anything this year, it’s ending the hold that drug prohibition has on our country. Of nine drug decriminalization or legalization measures on state ballots last night—including two addressing hallucinogens and one covering all illegal drugs—not a single one failed. These were decisive victories, too, not close calls. …successful anti–drug war measures in 2020 spanned a diverse array of states. …Ballot measures making marijuana legal for recreational purposes passed in…Arizona, Montana, and New Jersey. South Dakota approved both recreational and medicinal marijuana. In addition, Mississippi voters approved a medical marijuana measure. …consumption of hallucinogenic mushrooms got a green light from voters in the District of Columbia and in Oregon. And Oregonians also approved Measure 110, partially decriminalizing all illegal drugs.

What happened in Oregon is especially amazing.

In effect, the state is following Portugal, which – as I wrote back in 2017 – decriminalized all drugs early this century.

So I was interested to see a new column in the New York Times about what’s happened in that nation. Authored by Professor Austin Frakt of Boston University, it’s a largely positive picture.

…it decriminalized the use of all illicit drugs in small amounts in 2001, including heroin and cocaine… Portugal’s law removed incarceration… Opioid overdose deaths fell after Portugal’s policy change. So did new cases of diseases associated with injection drug use, such as hepatitis C and H.I.V. …One study found an increase in drug experimentation after the law. But this was a transient effect… One consequence of ending incarceration as a penalty in Portugal is that prison overcrowding decreased. …In drug policy, there are many trade-offs. Though we may not have strong evidence that drug decriminalization alone is widely beneficial, we also lack compelling evidence of benefits from criminalizing drug use, which costs the United States billions of dollars annually.

I don’t know Professor Frakt’s philosophical preferences, but the column doesn’t make a libertarian case for decriminalization.

He’s simply focusing on cost-benefit issues.

Which is quite reasonable. Indeed, I worry that our welfare state will subsidize people making bad choices if there’s legalization in the United States, so I’m certainly cognizant of potential downsides.

That being said, the libertarian part of me is glad voters are giving people more freedom, even if it means some people may make dumb choices.

Now we simply need to convince voters that more personal liberty should be matched with more economic liberty.

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Interpreting the Election Results

For what it’s worth, my presidential prediction for 2020 will probably turn out to be more accurate than my presidential prediction for 2016.

But I doubt anyone cares about that. Let’s instead look at what happened last night (and, in some cases, what is still happening).

President

It appears that Biden will prevail in the battle for the White House when the dust settles, but you can see from this Washington Post map that the race was much closer than most people expected (Pennsylvania is expected to shift to Biden as mail-in votes are counted, and perhaps Georgia as well).

If that’s the final result, here are two obvious takeaways based on where a president has a lot of unilateral power.

• Trade policy will move in the right direction.
• Regulatory policy will move in the wrong direction.

Other policy areas generally require agreement between the executive branch and the legislative branch, so we can’t know the impact of a Biden presidency without perusing congressional results.

Senate

In my humble opinion, the big news of the night is that Republicans appear to have retained control of the Senate.

If true, that means some left-wing goals are now very unlikely.

There won’t be any court packing. There won’t be any serious effort to increase the number of Democratic senators by granting statehood to Washington, DC, and Puerto Rico.

But let’s focus on the economic issues. Here are some quick takeaways.

• There will be another “stimulus,” but it won’t be nearly as profligate as would have been the case if Democrats had total control of Congress and the White House.
• There won’t be any serious effort for forced unionization in right-to-work states.
• Biden’s class-warfare tax increases won’t happen.
• The state and local tax deduction will remain capped.
• The corporate tax rate will stay 21 percent (the best fiscal achievement of Trump’s presidency).

House of Representatives

It appears that Republicans will gain seats, which is contrary to all expectations.

That being said, there’s zero possibility of a GOP takeover, so Nancy Pelosi will remain in charge.

Ballot Initiatives

I wrote two weeks ago about this election’s six most important ballot initiatives.

The great news is that taxpayers scored a big victory by defeating the effort to get rid of the flat tax in Illinois an replace it with a so-called progressive tax. Winning that battle probably won’t rescue the Prairie State, but at least it will slow down its march to bankruptcy.

The other five battles mostly were decided correctly – at least based on the latest vote margins.

• California voters rejected an initiative that would allow the state to engage in racial discrimination.
• The California initiative to weaken limits on property taxes is trailing.
• The Colorado initiative to lower the state’s flat tax appears prevailed.
• The Colorado initiative to strengthen TABOR (the state’s spending cap) is leading.
• The one clear piece of bad news is that an Arizona initiative to impose a big increase in the top income tax rate appears likely to prevail.

What’s the future for Trump and Trumpism?

Regular readers know I want the GOP to be the Party of Reagan rather than the Party of Trump.

So I will be very interested to see whether Trump’s apparent defeat means Republicans go back to (at least pretending to favor) conventional small-government conservatism.

That will have the be the topic of a future column.

A Silver Lining for Republicans

The party controlling the White House usually loses mid-term elections. For recent examples, Democrats won the House in 2018 and there were big victories for the GOP in 2010 and 2014 during the Obama years.

In all likelihood, Republicans will now do much better in the 2022 midterm election with Biden in the White House instead of Trump.

A Silver Lining for Taxpayers

It’s not something that can be quantified, but congressional Republicans will now become much better on spending issues. They’ll no longer face pressure to go along with Trump’s profligacy and they’ll have a partisan incentive to oppose Biden’s profligate agenda.

P.S. Whether you’re happy or sad about the election results, remember that it’s always appropriate to laugh at the clowns and crooks in Washington.

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Election humor

Since everyone is focused on the election, there’s no point of producing a serious column on some weighty issue such as tax reform or spending caps.

Instead, let’s try to lighten the mood with some political humor – some of it going back 50 years.

We’ll start with two skits from Saturday Night Live. The first one is from 2016 and features some in-a-bubble white leftists dealing with the shock of Trump’s victory.

Younger readers may not know much about the 1988 presidential contest, but the Democrats nominated a dry leftist technocrat named Mike Dukakis (imagine a mix of Elizabeth Warren’s statism with Mitt Romney’s less-than-dynamic personality).

Well, he preemptively conceded the race.

What I found interesting is that the presumably left-leaning writers for the program acknowledged the huge success of Reaganomics at the end of the skit.

Speaking of Reagan, the end of this short clip features a clever line that the Gipper repeatedly used during the 1980 campaign.

For more examples of Reagan’s humor, watch the 4th and 8th videos in this collection.

Now let’s enjoy some libertarian-themed examples of election humor.

We’ll start with this meme from 2016, which matches my Tweedledee vs Tweedledum analysis.

Here’s an example for 2020.

Heck, that cartoon should be updated every four years since it’s an evergreen depiction of what it’s like to be a libertarian.

Now let’s travel all the way back to 1972 for a look at National Lampoon‘s famous Volkswagen advertisement for Ted Kennedy.

Last but not least, I can’t resist including something about today’s very important ballot initiative in Illinois.

The hypocritical governor wants voters to repeal the part of the state constitution that prohibits discriminatory tax rates (i.e., he wants to replace the flat tax with a so-called progressive tax).

Needless to say, once politicians get the power to tax one person at a higher rate, it’s just a matter of time before they tax everyone at a higher rate. Which is basically the message of this cartoon.

Which is why that referendum is at the top of the list when considering the most important ballot initiatives of 2020.

P.S. I imagine my friends who support a national sales tax, which they’ve labeled the “fair tax,” are very irked that Gov. Pritzker is using the same term for his awful proposal.

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The Final Pre-Election Edition of Donald Trump Humor

Yesterday, I shared some jokes about Joe Biden (since updated with a very amusing addendum). Today, to keep everything fair, we’re going to make fun of Trump.

We’ll start with Trump playing the role of James Bond.

Next, let’s look at Trump’s view of the world with this map.

If you liked this map, check out this collection of Trump maps from 2018.

There is some good news for Trump, at least according to Babylon Bee, America’s best site of satire.

Trump is polling high among an unexpected group: libertarians, who were energized and drawn to Trump’s cause after the New York Times revealed that he paid as little as $750 in federal taxes some years. “Only paying a few hundred in federal theft? This guy is my hero!” said libertarian man Murray Mickelson of New Hampshire. “If only all of us could be that smart with our taxes.” …Libertarians across the country paid tribute to Trump’s accomplishment by firing their AR-15s into the air and doing hard drugs, though this is what they were already planning on doing anyway.

Though let’s not forget Biden also aggressively avoided taxes, so libertarians may be torn.

I’m not sure there’s much mileage left in the Trump-Russia issue, but this cartoon got a chuckle from me.

The Onion has faded as a satire site, but it still produces some amusing material, such as this story about the Trump version of poll watching.

Pushing back against what he viewed as an overly hysterical media narrative, Trump supporter Tom Nagle whispered his assertion Monday that poll watching is not intimidation into the ear of a man filling out a ballot. “Keeping an eye on what’s going on at the polls is simply a way to ensure that the election is conducted fairly,” said an armed Nagle, his hot breath reportedly palpable on the prospective voter’s neck as he continually issued assurances that he was merely there to safeguard democracy. …At press time, Nagle had beaten the man unconscious after he was unable to immediately produce a voter ID.

The Onion also produced an article detailing how Trump can win.

With the election around the corner, the Republican Party campaign of President Donald Trump is looking for ways to win reelection over his Democratic Party challenger, Joe Biden. The Onion looks at key factors that could help Trump defeat Biden and retain the presidency. …Disenfranchise millions of Biden supporters with scheme to use electoral college exactly as intended. Win over undecided voters by committing to spare their lives during second term. …Giving everyone another 12 hundo couldn’t hurt. Disarm one of Biden’s key electoral advantages by killing Eric so he has a deceased son too. …Pledge to uphold core Republican values like massive voter suppression. Highlight dozens of crimes Biden failed to prevent him from committing during his first term. Refuse to accept election results citing upcoming Supreme Court ruling.

I’ve already predicted Trump will lose tomorrow.

But he’s about to get even worse news.

As usual, I’ve saved the best for last. I laughed out loud when I saw this meme.

Ouch!

P.S. If yesterday’s jokes and today’s jokes are insufficient, I shared some mockery of both Joe Biden and Donald Trump back in August.

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The Final Pre-Election Edition of Joe Biden Humor

Back in August, I shared some examples of Joe Biden Humor followed by some examples of Donald Trump Humor.

One of these clowns (hopefully!) will soon be fading from the public eye, so let’s take advantage of this opportunity for a final round of mockery. Today is Biden’s turn – starting with this trailer for the remake of a classic movie.

The Bernie Sanders version was a hit in North Korea, so I’m sure this additional remake will be good as well.

Next we have a cartoon about Biden’s get-out-the-vote efforts.

And here’s a campaign sign from Hunter Biden.

There was just a big battle over Amy Coney Barrett’s elevation to the Supreme Court and some folks on the left want to pack the court if Democrats are in power next year.

Biden infamously has refused to take a stand on this topic, which has led to two examples of clever satire from the Babylon Bee.

First, we have Biden expanding this evasive strategy.

Joe Biden was asked yet again today if he plans to abolish the Constitution, overthrow Congress, dismiss the Supreme Court, and set up a Communist regime to take their place. Once again, Biden refused to answer the question… “Look, if I tell you whether or not I plan to institute a new Communist order, establishing a glorious worker-led revolution that will lead us out of this capitalistic nightmare and into a paradisical utopia, that would become the headline,” Biden said. “That would be playing Trump’s game.” …”Don’t voters deserve to know this?” asked a concerned reporter. “No, they don’t deserve to know,” Biden snapped back. “And you’ll be the first thrown into the gulag, bucko, I tell you what. Write that whippersnapper’s name down, Kamala.”

The Babylon Bee also reports that this evasive approach is being adopted by Biden’s supporters.

According to anonymous sources, local liberal man Penn Millikers proposed to his girlfriend but has refused to reveal his position on adultery until after the wedding is over. The staunch Democrat said he wants the woman to marry him but won’t reveal his position on adultery until the marriage is finalized. …’Lookie here, Jill! If I tell you right now whether or not I plan to remain faithful to you, that would become the story! This is just a distraction! I think it’s better to just get married first with no prenup. Then I’ll tell you what I plan to do.'” Other things he refuses to reveal his position on include taking showers, putting socks in the hamper, going out drinking with the boys every night, and watching sports all day while he ignores his family.

Here’s another cartoon about Biden’s voter turnout strategy.

And you won’t be surprised to learn that we have a couple of memes about Biden’s cognitive skills.

Here’s the first one.

And here’s the second one.

Since we’re on the topic of Biden’s age, let’s share another story from the Babylon Bee.

Democrats around the nation are growing increasingly worried that their candidate for President, Joe Biden, will live through election day… Biden had surprised Democrats around the nation when he spoke for an extended period of time off a teleprompter…, causing a bit of a panic among Democratic Party operatives and voters. …“We all went back to the drawing board to plan a strategy that includes the possibility that Joe might actually be President…” At publishing time, the DNC was throwing the idea around that maybe they should be airing ads that make Biden look a little more on the verge of dying to reassure progressives.

Biden also has a reputation for unwanted touching.

Apparently it goes all the way back to the end of World War II.

Last but not least, here’s my favorite example from today’s collection.

Given her reckless profligacy and knee-jerk statism, that would be a terrifying remake on an Indiana Jones film!

Nov 2 addendum: I received this cartoon late yesterday. It’s too good not to include.

Reminds me of the Hillary joke I included when I made my 2016 predictions.

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The Party of the Rich

I wrote last year about Democrats favoring certain tax breaks that overwhelmingly benefit the rich.

The state and local tax deduction is an obvious example, but Democrats also are big fans of the tax exemption for municipal bond interest and other provisions that primarily reduce tax liabilities for upper-income taxpayers.

One interpretation is that Democrats don’t like the rich, but they’re even more interested in enabling more taxes and spending by state and local governments.

But I’m also beginning to wonder whether Democrats are becoming pro-rich (or less anti-rich) for the simple reason that upper-income people are a key constituency.

For instance, they control all 20 of the richest congressional districts in America, as explained by Terry Jeffrey.

Each of the nation’s 20 wealthiest congressional districts, when measured by median household income, …held by Democrats… Seven are in or near New York City. Five are in the San Francisco Bay Area. Four are in suburbs of Washington, D.C. Two are in Southern California. One is near Boston. And another — the only one in the middle of the continent — sits west of Chicago.

And John Fund reports that Biden is overwhelmingly the candidate of Wall Street.

Joe Biden is scooping up the lion’s share of big-money contributions from finance leaders on Wall Street. People in the financial industry have given well over $50 million to back Biden, according to the nonpartisan Center for Responsive Politics, compared with some $10 million for Trump. Biden has benefited from large contributions from leaders at Blackstone, JPMorgan Chase, The Carlyle Group, and Kohlberg Kravis Roberts, among other firms.

Ramesh Ponnuru opines that Democrats also are the party of the near-rich.

…the Democrats’ solicitude for the interests of the affluent in this case may not be the aberration it appears to be. It reflects the party’s long-term movement up the socioeconomic ladder — and shows why Democrats may find it impossible to reclaim their historical identity as a working-class party. …In the 2008 election, Republican John McCain did 11 points better among voters making more than $50,000 a year than among voters making less than that. He did one point better among those with college degrees than those without. By 2016, education had become a sharper dividing line between the parties. Trump did seven points better among those making more than $50,000 than among those making less. He did nine points better among those who lacked college degrees than among those who have them. …distressingly for the left’s true believers, the shift erodes the moral credibility of their historical self-presentation as the champion of the downtrodden.

Democrats are also the party of the Ivy League, based on the revealing data contained in this tweet.

Last but not least, here are some excerpts from a column for Reason, authored by Ira Stoll.

Maybe it’s time to rebrand the Democrats as the party of the rich. …”J.B.” Pritzker…governor of Illinois. Pritzker, an heir to the Hyatt hotel fortune, is worth an estimated $3.2 billion…Edward M. “Ned” Lamont Jr., …Connecticut governor…an heir to the J.P. Morgan banking fortune of his great-grandfather Thomas Lamont…governor of Colorado, Jared Polis, filed financial disclosure forms as a member of the House of Representatives indicating estimated wealth of more than $300 million. …all Democrats. …as a professor of political science at Williams College, Darrel Paul, put it after analyzing wealthy congressional districts, “the big story of the 2018 election is the swing of the rich toward the Democrats.” …Maybe it wouldn’t be a bad thing for the country, though, if wealthy voters do become a swing constituency to be courted by both political parties, rather than a group to be insulted, scapegoated, or taken for granted. …The sweet spot is for politicians to be rich enough that they understand and appreciate wealth creation, but not so rich that they are entirely remote from the reality of ordinary Americans.

Now for my two cents.

Based on what I see when I drive around the rich neighborhoods of Northern Virginia, the reports cited above are accurate. I mostly see Biden signs in the yards of people with multi-million dollar homes. But when I drive to poorer areas of the state, the situation is reversed and Trump signs dominate.

The interesting question is why? What accounts for rich people shifting to the left, especially since Democrats still support a wide range of policies (higher income tax rates, higher capital gains taxes, higher Social Security taxes, higher death taxes, a new wealth tax, etc) that target upper-income taxpayers?

I don’t pretend to know the answer, but here are a few possibilities:

Social issues are more important than economic issues – This is the theory that rich voters care mostly about what candidates think about issues such as abortion, climate, and gay marriage. In other words, they’ll accept higher taxes to get their preferred policies in other areas.

Class identification is more important that economic self-interest – This is the theory that people are very reluctant to break ranks with the prevailing view of their social group. For example, since Trump is viewed as a blowhard by the elite, they must side with Democrats.

Ignorance – This is the theory that rich people want to help the poor, perhaps because they feel guilty about their comfortable lives, and simply don’t understand that the policies pushed by Democrats actually make it harder for the less fortunate to climb the economic ladder.

Republicans are all talk but no (or negative) action – This is the theory that Republicans don’t actually do pro-growth things when they get power (think Nixon, Bush I, and Bush II), so why bother supporting the GOP.

Government-imposed credentialing helps the rich – This is the theory that a range of government-imposed and government-encouraged policies (everything from licensing requirements to degree requirements) create economic advantages for privileged people.

Add your speculation and guesses in the comment section. I’d be interested to see what everyone else thinks.

P.S. I guess we shouldn’t overlook the possibility that rich leftists are simply a bunch of hypocrites who have no intention of abiding by the policies they impose on everyone else.

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2020 Election Predictions (and Policy Implications)

Given my big miss in 2016, I’m not sure why anyone would be interested in my election predictions, but I’ve received several emails asking me to offer up my guesses for 2020 (perhaps some of them are long-time readers who remember 2010, when I actually did a good job?).

Before I offer up my prediction, I’ll first share some of the guesses from the experts.

Everyone is predicting Biden, though my Trump friends regularly remind me that the experts were wrong in 2016.

We’ll start with the outlook from Real Clear Politics.

Next, we have Nate Silver’s 538 numbers.

Here are the betting odds for the election, as compiled by John Stossel and Maxim Lott.

And here’s Larry Sabato’s Crystal Ball forecast.

I’ll add one caveat to the above estimates.

This tweet from Frank Luntz explains why my Democratic friends are still nervous.

RCP battleground poll average:

𝗢𝗰𝘁. 𝟮𝟵, 𝟮𝟬𝟭𝟲
• Florida: (Tied)
• Pennsylvania: Clinton +5.6
• Michigan: +7
• Wisc: +6.2
• NC: +3.2

𝗧𝗼𝗱𝗮𝘆
• Florida: Biden +1.2
• Pennsylvania: +5.1
• Michigan: +7.8
• Wisc: +4.6
• NC: +1.5

👉🏻 https://t.co/ZBRpAvXwZT https://t.co/GZmTCAxlSI

— Frank Luntz (@FrankLuntz) October 25, 2020

Finally, for those of you who want my guess, here’s my prediction of a comfortable Biden victory.

It’s basically the same (wrong) prediction I made in 2016, except I’m now giving Arizona and Michigan to the Democrats and Pennsylvania to the Republicans.

For what it’s worth, I was very tempted to give Pennsylvania – and maybe a few other states – to Biden.

Why? Because I think late-deciding voters may decide that they’re tired of all the drama and fighting that we get with Trump in the White House.

But I ultimately decided on the above map because I also think some of those voters may worry about Biden’s age. And they may worry even more about the Democratic Party’s leftward drift.

I guess we’ll know in a week (or so!).

In any event, if you really want to have fun, you can take my predictions, give Arizona, Florida, and North Carolina to Trump, along with one of Maine’s congressional districts, at which point you’d have a 269-269 tie. That would be a perfect ending for 2020, huh?

I’ll close with a few words about policy.

Biden clearly would move the country to the left on certain issues, most notably taxes and regulation. The only silver lining to that dark forecast is that I suspect that his tax increase will be much smaller than what’s contained in his awful plan.

I’m also somewhat hopeful that he won’t push for the so-called Green New Deal and that we’ll instead get the more-modest kind of Solyndra-style cronyism that we got under Obama. That’s bad, but not the end of the world.

The good news is that trade policy will move in the right direction.

But the biggest silver lining to a Biden victory is that Republicans will revert to pretending to once again be opposed to big government.

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The Economic Impact of the Biden Agenda

The good news is that the election season is almost over. The bad news is that we’ll have a president next year who does not embrace classical liberal principles of free markets and social tolerance.

But that doesn’t mean Trump and Biden are equally bad. Depending on what issues you think are most important, they’re not equally bad in what they say. And, because politicians often make insincere promises, they’re not equally bad in what they’ll actually do.

Regarding Trump, we have a track record. We know he’s pro-market on some issues (taxes and red tape) and we know he’s anti-market on other issues (spending and trade).

Regarding Biden, we have his track record in the United States Senate, where he routinely voted to expand the burden of government.

But we also have his presidential platform. And that’s the topic for today’s column. We’re going to review the major economic analyses that have been conducted on his proposals.

We’ll start with a report from Moody’s Analytics, authored by Mark Zandi and Bernard Yaros, which compares the economic impacts of the Trump and Biden agendas.

The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda. In this scenario, the economy is expected to create 18.6 million jobs during Biden’s term as president, and the economy returns to full employment, with unemployment of just over 4%, by the second half of 2022. During Biden’s presidency, the average American household’s real after-tax income increases by approximately $4,800, and the homeownership rate and house prices increase modestly. Stock prices also rise, but the gains are limited. …Near-term economic growth is lifted by Biden’s aggressive government spending plans, which are deficit-financed in significant part. …Greater government spending adds directly to GDP and jobs, while the higher tax burden has an indirect impact through business investment and the spending and saving behavior of high-income households. …The economic outlook is weakest under the scenario in which Trump and the Republicans sweep Congress and fully adopt their economic agenda. …Trump has proposed much less expansive support to the economy from tax and spending policies.

Here’s the most relevant set of graphs from the report.

The Moody’s study is an outlier, however. Most other comprehensive analyses are less favorable to Biden.

For instance, a study for the Hoover Institution by Timothy Fitzgerald, Kevin Hassett, Cody Kallen, and Casey Mulligan, finds that Biden’s plan will weaken overall economic performance.

We estimate possible effects of Joe Biden’s tax and regulatory agenda. We find that transportation and electricity will require more inputs to produce the same outputs due to ambitious plans to further cut the nation’s carbon emissions, resulting in one or two percent less total factor productivity nationally. Second, we find that proposed changes to regulation as well as to the ACA increase labor wedges. Third, Biden’s agenda increases average marginal tax rates on capital income. Assuming that the supply of capital is elastic in the long run to its after-tax return and that the substitution effect of wages on labor supply is nontrivial, we conclude that, in the long run, Biden’s full agenda reduces fulltime equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent.

Wonkier readers may be interested in these numbers, which show that there’s a modest benefit from unwinding some of Trump’s protectionism, but there’s a lot of damage from the the other changes proposed by the former Vice President.

In a report authored by Garrett Watson, Huaqun Li, and Taylor LaJoie, the Tax Foundation estimated the impact of Biden’s proposed policies. Here are some of the highlights.

According to the Tax Foundation General Equilibrium Model, Biden’s tax plan would reduce the economy’s size by 1.47 percent in the long run. The plan would shrink the capital stock by just over 2.5 percent and reduce the overall wage rate by a little over 1 percent, leading to about 518,000 fewer full-time equivalent jobs. …Biden’s tax plan would raise about $3.05 trillion over the next decade on a conventional basis, and $2.65 trillion after accounting for the reduction in the size of the U.S. economy. While taxpayers in the bottom four quintiles would see an increase in after-tax incomes in 2021 primarily due to the temporary CTC expansion, by 2030 the plan would lead to lower after-tax income for all income levels.

Table 2 from the report is worth sharing because it shows what policies have the biggest economic impact.

The bottom line is that it’s not a good idea to raise the corporate tax burden and it’s not a good idea to worsen the payroll tax burden.

Here are some excerpts by a study authored by Professor Laurence Kotlikoff for the Goodman Institute.

The micro analysis is based on The Fiscal Analyzer (TFA), which uses data from the Federal Reserve’s Survey of Consumer Finance to calculate how much representative American households will pay in taxes net of what they will receive in benefits over the rest of their lives. …The key micro issues…are the degree to which the Vice President’s reforms alter relative remaining lifetime net tax burdens and lifetime spending of the rich and poor within specific age cohorts and the impact of the reforms on incentives to work, i.e., remaining lifetime marginal net tax rates. The macro analysis is based on the Global Gaidar Model (GGM)…a dynamic, 90-period OLG, 17-region general equilibrium model. …The analysis includes three sets of findings. The first is the change in lifetime net taxes defined as the change in lifetime net taxes. The second is the percentage change in lifetime spending, defined as the change in the present value of outlays on all goods and services as well as bequests, averaged across all survivor path. The third is the lifetime marginal net tax rate from earning an extra $1,000. TFA’s lifetime marginal net tax rate measure takes full account of so-called double taxation. …The GGM predicts a close to 6 percent reduction in the U.S. capital stock. The GGM predicts close to a 2 percent permanent reduction in annual U.S. GDP.  The GGM predicts a roughly 2 percentage-point reduction in wages of U.S. workers, with a larger reduction in the wages of high-skilled workers.

In a study for the Committee to Unleash Prosperity, Professor Casey Mulligan estimated the following effects.

This study addresses the impact of these tax rate changes on economic behavior – work, investment, output and growth. This study finds that the Biden tax agenda will reduce production, incomes, and employment per capita by increasing taxation of both labor and business capital. Employment will be about 3 million workers less in the long run (five to ten years). This employment effect is primarily due to the agenda’s expansion of health insurance credits, which raises the average marginal tax rates on labor income by 2.4 percentage points. Biden also plans to increase taxes on businesses and their owners by a combined 6 to 10 percentage points. These taxes will reduce long-run wages, GDP per worker, and business capital per worker in the long run. By decreasing both the number of workers per capita and GDP per worker, respectively, these two key elements of Biden’s agenda reinforce to significantly reduce GDP per capita and average household incomes. I estimate that, as a result of Biden’s tax agenda, real GDP per capita would be 4 to 5 percent less, which is about $8,000 per household per year in the long run. The two parts of the tax agenda combine to reduce real per capita business capital by 7 to 12 percent in the long run.

Here’s a table from the study.

I’ll add two points to the above analyses.

First, the reason that the Moody’s study produces wildly different results is that its model is based on Keynesian principles. As such, a bigger burden of government spending is assumed to stimulate growth.

For what it’s worth, I think borrowing and spending can lead to short-run increases in consumption, but I’m very skeptical that Keynesian policies can generate increases in national income (i.e., what we produce rather than what we consume) over the medium-run or long-run.

All of the other studies rely on models that estimate how government policies impact incentives to engage in productive behavior. They don’t all measure the same things (some of the studies look solely at taxes, some look at overall fiscal policy, and some also include a look at regulatory proposals) but the methodologies are similar.

Second, I’ll re-emphasize the point I made at the beginning about how politicians routinely say things during campaigns that are either insincere or impractical.

For instance, Trump promised to restrain domestic discretionary spending by $750 billion and he actually increased it by $700 billion.

Likewise, I don’t expect Biden (assuming he prevails) to deliver on his campaign promises. In this case, that’s good news since he won’t increase taxes and spending by nearly as much as what he’s embraced during the campaign (in my fantasy world, he turns out be like Bill Clinton and actually delivers a net reduction in the burden of government).

P.S. For those on the losing side of the upcoming election, I’ll remind you that Australia is probably the best option if you want to escape the United States. Though you may want to pick Switzerland if you have a lot of money.

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The Six Most Important Ballot Initiatives of 2020

Since Americans are not as sensible as the Swiss, I’m generally not a fan of direct democracy in the United States.

Simply stated, I don’t like untrammeled majoritarianism, which occurs when 51 percent of voters can pillage 49 percent of voters.

But I’ll admit that the level of my angst fluctuates depending on whether voters make wise choices. With that in mind, here are the six ballot initiatives that I’ll be closely watching on election day.

1. Proposed Amendment to the 1970 Illinois Constitution

The most important ballot initiative is the proposal by the hypocritical governor of Illinois to undo the state’s flat tax. I’ve already dedicated an entire column to this issue, so I’ll simply add some additional analysis from a Wall Street Journal editorial.

Illinois voters will decide next month whether to enact a progressive income tax, paving the way for a new top rate of 7.99%. …The Prairie State currently ranks 36th worst in overall tax burden because its flat individual rate of 4.95% offsets very high property and other taxes. …its proposed slate of new individual income tax rates, along with a corporate tax hike tied to the same ballot measure, would drop the state’s rank overall to 47th. That would move Illinois into Dante’s ninth ring of tax hell, ahead of only New Jersey, New York and California. …Iowa and Missouri have…slashed their top rates in recent years rather than jacking them up as Illinois Democrats intend. Kentucky lawmakers in 2018 replaced their progressive income tax with a flat rate of 5%. Heading in the opposite direction of neighboring states could push many of Illinois’s overburdened families and businesses across the border.

2. Arizona Proposition 208

There’s a class-warfare proposal to dramatically increase the top income tax rate in Arizona.

Once again, the editors at the Wall Street Journal have spot-on analysis.

Arizona has long been a refuge for Americans seeking relief from high-tax California and states in the Northeast. But a tax referendum on the ballot Nov. 3 would whack job creators and make people rethink retirement in Scottsdale or a business move to Tucson. …The current top rate of 4.5% would rise to 8%, which would move the state to the 10th highest income-tax rate in the country, from 11th lowest today… Arizona would move closer to California (13.3% top rate) than Nevada (no income tax). …about half of the targets would be small businesses that pay taxes at the individual rate… They employ a huge chunk of Arizona workers, and the added tax costs would trickle down in lower pay and fewer jobs. …One definition of fiscal insanity would be to raise state taxes when the Biden Democrats may soon raise federal tax rates to heights not seen since the 1970s.

3. California Proposition 16

In California, politicians want the state to have to power to engage in racial and sexual discrimination. In pursuit of that goal, they are asking voters to repeal Proposition 209, adopted by voters in 1996.

Gail Heriot, a law professor who also serves on the U.S. Civil Rights Commission, explains why this is a bad idea in a column for Real Clear Politics.

California’s deep-blue legislature has been itching to repeal Proposition 209 for years. …Proposition 209 amended California’s constitution to prohibit the state from engaging in preferential treatment based on race or sex. It was a rebuke to the identity politics obsessions of state and local governments. …By approving Proposition 209 by a wide margin, they aimed to end the race and sex spoils system. …The best reason for retaining Proposition 209 is…that the initiative has been good for Californians — of all races…the number of under-represented minority students in academic jeopardy collapsed. …in the years immediately following Proposition 209, it had three effects on under-represented minorities in the UC system. It increased (1) graduation rates, (2) GPAs, and (3) the number of science or engineering majors.

4. California Proposition 15

Since we just discussed one bad California proposition, we may as well mention another.

There’s also a scheme to (again) raise taxes. The Wall Street Journal opines on this misguided initiative.

Sooner or later California’s public unions had to hit up the hoi polloi to pay for their pensions after soaking what’s left of the state’s millionaire class, and here they come. On Nov. 3, Californians will vote on a “split roll” ballot initiative (Prop. 15) that seeks to enact the biggest tax hike in state history. …Under current law, tax rates on residential and commercial property are capped at 1% of their assessed value—i.e., the purchase price—and can increase by no more than 2% annually. …This is the only balm in California’s oppressive tax climate and acts as a modest restraint on the government spending ratchet. Unions know that attempting to repeal this entirely would spur a homeowner revolt, so they are targeting businesses. …Facebook CEO Mark Zuckerberg is Prop. 15’s second biggest donor. Perhaps he’s trying to atone for his wealth, but as the NAACP and minority business groups explained in a letter to him in August: “Unlike Facebook, restaurants, dry cleaners, nail salons and other small businesses can’t operate right now and many may never open again. The last thing they need is a billionaire pushing higher taxes on them under the false flag of social justice.” …Prop. 15 would raise property taxes by $8.5 billion to $12.5 billion a year by 2025.

5. Colorado Proposition 117

Proponents of fiscal responsibility in Colorado want to strengthen TABOR (or, to be more accurate, stop the erosion of TABOR) by requiring a public vote for non-trivial efforts to increase government revenue.

Here’s a summary from CPR.

Proposition 117..would add a new TABOR-like provision to state law, requiring the state government to get voter permission before it creates major new “enterprises,” which are partially funded by fees. Colorado voters already have authority over tax increases and rarely approve them. The state Supreme Court has held that a fee is different from a tax because it is reasonably connected to a specific purpose. And in the years that TABOR has been in effect, lawmakers have used them as a way to raise money without raising taxes. Critics see fees as an end-run around TABOR’s spending limits.

6. Colorado Proposition 116

Sticking with Colorado, there’s also a proposal to lower the state’s flat tax.

Once again, let’s use CPR as a source.

This initiative would cut the state’s income tax rate from 4.63 percent to 4.55 percent. …This change would reduce the state government’s revenue by an estimated $170 million in the next fiscal year. Supporters argue it would boost businesses and consumer spending, while opponents say it would weaken government services and social supports already severely cut by the downturn. The measure was originally intended to counter a progressive tax measure that failed to make the ballot.

Honorable Mention

There are many other ballot initiatives. Here are some that I care about, even if they were not important enough to be featured.

Proposition 21 for rent control in California. Bad idea.

Proposition 22 to penalize the gig economy in California. Also a bad idea. [Oops, got this backwards. Prop 22 would undo the legislation that penalizes the gig economy.]

Initiatives to legalize marijuana in Arizona, Montana, New Jersey, and South Dakota. The libertarian side of me is very supportive, but the fiscal side of me doesn’t like the fact that one of the motives is a desire to collect more tax revenue.

Ranked-choice voting in Alaska and Massachusetts. This is a system that requires voters rank all candidates and awards victory to whoever has the strongest support across all ballots. It is assumed that the impact will be more centrist candidates and more civil elections. I don’t have strong views, but it’s worth noting that Australia uses this approach and it’s one of my favorite nations.

13 initiatives in San Francisco. Lot of tax increases, as you might expect from that poorly governed city.

P.S. Voting for politicians who make bad decisions is unfortunate. Directly voting for bad propositions isn’t any better.

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Unions and Labor Day: The Divergent Interests of Government Bureaucrats and Private-Sector Workers

Way back in early 2017, I warned in an interview that Trump would be a big spender (sadly, I was right). But I wasn’t being reflexively anti-Trump.

Here’s a clip from that same program where I speculated that Trump might have the political skill to win support from private-sector union workers.

In honor of Labor Day, let’s elaborate on this topic.

I’ll start with the political observation that Trump seems to do much better than other Republicans at getting support from working-class voters. Even workers who belong to unions (much to the dismay of their left-leaning leadership) appear to be disproportionately sympathetic.

Though it’s important to emphasize, as I said in the interview, the distinction between government bureaucrat unions and private-sector unions.

The unions that represent government employees have an incentive to lobby for bigger government since that means more lavishly paid members paying more dues. So those unions reflexively support higher taxes, more spending, and additional red tape.

Yet those are the policies that undermine private-sector job creation and reduce the competitiveness of companies operating in America. And that’s bad for all private workers – including those that belong to unions.

Which is why I speculated in the interview whether Trump would have the “political cunning” to convince those private-sector union members that their interests are not the same as those of bureaucrats.

I guess we’ll see on election day.

By the way, I have very mixed feelings on Trump’s strategy. Some of his policies are good (lower taxes and less red tap), but he also tries to appeal to union workers with policies that are bad (most notably, protectionism).

P.S. Feel free to enjoy some good cartoons mocking unionized bureaucrats by clicking here, here, here, and here.

P.P.S. I often tell my Republican friends that they’ll have more success appealing to private-sector union members if they come across as pro-market (which implies neutrality between employers and employees) rather than pro-business (which implies siding with employers).

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Joe Biden: An Incrementalist Version of Bernie Sanders?

Hardly anybody noticed because the nation has been focused on protests about police misbehavior, but Joe Biden officially clinched the Democratic nomination this past week.

And he’s now comfortably ahead in the political betting markets as well as public polling.

If Biden wins in November, what does that mean for the nation’s economic policy?

According to folks on the left, a Biden presidency means bigger government and more statism.

For instance, opining for the New York Times, Jamelle Bouie applauds Biden’s leftist agenda.

…if the goal is to move America to the left…then a Biden candidacy…represents an opportunity. …If Biden goes on to win the White House, there’s real space for the pro-Sanders left to work its will on policy. …It can fulfill some of its goals under the cover of Biden’s moderation, from raising the minimum wage nationally to pushing the American health care system closer to single-payer. …Biden…is a creature of the party. He doesn’t buck the mainstream, he accommodates it. He doesn’t reject the center, he tries to claim it. …the center of the Democratic Party as far left as it’s been since before Ronald Reagan, then Biden is likely to hew to that center, not challenge it.

His colleague at the NYT, Michelle Goldberg, is similarly enthused about the prospects for bigger government under a Biden Administration.

Biden’s proposals go far beyond his call for a $15 federal minimum wage — a demand some saw as radical when Sanders pushed it four years ago. While it’s illegal for companies to fire employees for trying to organize a union, the penalties are toothless. Biden proposes to make those penalties bite and to hold executives personally liable. …should Biden become president, progressives have the opportunity to make generational gains. …To try to unite the party around him, he’s making serious progressive commitments. …he’s moving leftward. Biden recently came out for tuition-free college for students whose families earn less than $125,000. He endorsed Elizabeth Warren’s bankruptcy plan…His climate plan already went beyond any of Barack Obama’s initiatives, and he’s pledged to make it even more robust.

According to (supposedly) neutral analysts, a Biden presidency means bigger government and more statism.

In an article for Newsweek, Steve Friess discusses Biden’s shift to the left.

Being stuck running for the presidency from the basement of his home in Wilmington, Delaware, had given the former vice president a lot of time to think, he told them, and he wanted bigger ideas. Go forth, he urged his financial brain trust, and bring back the boldest, most ambitious proposals they’d ever dreamed of to reshape the U.S. economy… Biden began issuing a raft of new proposals that move his positions closer to the progressive wing of the Democratic Party, with a promise to unveil an even more transformative economic plan this summer. …It’s a yes to adding $200 a month to Social Security benefits and lowering the qualifying age for Medicare from 65 to 60. Yes to trillions in new spending, yes to new regulations on banks and industry, yes to devil-may-care deficits. …the leader he most often invokes—in interviews, in public addresses, on his podcast—is no longer Barack Obama but Franklin Delano Roosevelt. …Biden has already made a series of significant leftward policy shifts since effectively sewing up the nomination in March.

Perry Bacon, in a piece for fivethirtyeight, analyzes Biden’s statist agenda.

…if Biden is elected in November, the left may get a presidency it likes after all…if American politics is moving left, expect Biden to do the same. …Biden’s long record in public office suggests that he is fairly flexible on policy — shifting his positions to whatever is in the mainstream of the Democratic Party at a given moment. …Biden is likely to be a fairly liberal president, no matter how moderate he sounded in the primaries. …Biden’s 2020 primary platform…adopted fairly liberal policies…more liberal than his pre-campaign record suggested. The Democratic Party is more liberal now than it was when Bill Clinton took office, or even when Obama was inaugurated, and Biden’s platform reflects that shift. …Biden and his advisers are now…rolling out more liberal policy plans, speaking in increasingly populist terms and joining forces with the most progressive voices in the party. …“Joe Biden is running on the most progressive platform of any Democratic nominee in recent history. But given the pandemic, he has to look at the New Deal and Great Society traditions in the Democratic Party and go bigger,” said Waleed Shahid, the communications director for Justice Democrats, a left-wing group aligned with Ocasio-Cortez.

Writing for the Washington Post, Sean Sullivan documents Biden’s leftward drift.

Joe Biden sought to appeal to liberal supporters of Sen. Bernie Sanders on Thursday with a pair of new proposals to expand access to health care and curtail student loan debt. Biden proposed lowering the eligibility age for Medicare coverage from 65 to 60. He also came out in favor of forgiving student loan debt for people who attended public colleges and universities and some private schools and make up to $125,000 a year. …In another peace offering to liberals, Biden proposed paying for his student debt plan by repealing a provision in the recent coronavirus legislation that Congress passed and President Trump enacted. “That tax cut overwhelmingly benefits the richest Americans and is unnecessary for addressing the current COVID-19 economic relief efforts,” he wrote… Biden endorsed a bankruptcy plan put forth by Sen. Elizabeth Warren (D-Mass.), another rival who ran to his left.

And, according to more market-friendly sources, a Biden presidency means bigger government and more statism.

The Wall Street Journal editorialized about Biden’s leftist agenda.

Already Medicare is scheduled to be insolvent by 2026. …In 1970, life expectancy in the U.S. was 70.8. Now it’s about eight years longer. By lowering the age of eligibility instead, Mr. Biden would begin shifting Medicare’s focus from seniors to everybody else. Don’t worry about the funding, he insists, since the extra costs would be “financed out of general revenues.” …Mr. Biden’s new left turn on student loans is equally sharp. …Cancel all federal undergraduate tuition debt for many borrowers who went to public schools, including four-year universities. This forgiveness would be given to anyone who earns $125,000 a year or less. …How much would it cost? There’s no explanation.

Jeff Jacoby analyzed Biden in a column for the Boston Globe.

Biden…is running on a platform far more progressive — i.e., far less moderate — than any Democratic presidential nominee in history. …on issue after issue, Biden has veered sharply from Obama’s path. On health insurance, for example, Obama rejected a public option as part of the Affordable Care Act and repeatedly stressed the importance of maintaining private coverage. But Biden favors a public option open to everyone… Biden supports government-funded health care even for unauthoritzed immigrants, something Obama never came close to proposing. …No Democratic presidential nominee ever endorsed anything like the radical Green New Deal, with its price tag in the tens of trillions of dollars and its goal of eliminating the use of all fossil fuels. But Biden does. No Democratic nominee ever called for a national minimum wage of $15 an hour. But Biden does. …Sanders may not end up on the November ballot, but it will unmistakably reflect his influence. For he and his band of progressives have pushed their party to the left with such success that even the “moderate” in the race would be the most liberal Democrat ever nominated for president.

Here’s some of what Peter Suderman wrote for Reason.

Biden is a moderate compared to Sanders, but he is notably to the left of previous Democratic standard-bearers. …Biden has proposed a significant expansion of the Affordable Care Act that his campaign estimates would cost $750 billion over a decade… Biden has proposed a $1.7 trillion climate plan that is similar in scope to many candidates on his left and a $750 billion education plan… He favors an assault weapons ban and other gun control measures, a national $15 minimum wage, and a raft of subsidies, loans, and other government-granted nudges designed to promote rural economies. Has proposed $3.4 trillion worth of tax hikes—more than double what former Secretary of State Hillary Clinton proposed when she ran in 2016. …Biden’s leftward drift is thus the party’s leftward shift…, a big-government liberal, a candidate whose current incarnation was shaped and informed by progressive politics, if not wholly captured by them.

The Tax Foundation examined the former Vice President’s tax plan and the results are not encouraging.

Former Vice President Joe Biden would enact a number of policies that would raise taxes, including individual income taxes and payroll taxes, on high-income individuals with income above $400,000. …According to the Tax Foundation’s General Equilibrium Model, the Biden tax plan would reduce GDP by 1.51 percent over the long term. …The plan would shrink the capital stock by 3.23 percent and reduce the overall wage rate by 0.98 percent, leading to 585,000 fewer full-time equivalent jobs. …On a dynamic basis, we estimate that Biden’s tax plan would raise about 15 percent less revenue than on a conventional basis over the next decade. …That is because the relatively smaller economy would shrink the tax base for payroll, individual income, and business income taxes. …The plan would lead to lower after-tax income for all income levels.

Here’s a table summarizing the findings.

So what does all this mean?

At the risk of oversimplifying, Biden unquestionably would move tax policy to the left (he actually said higher taxes are patriotic, even though he engages in aggressive tax avoidance), and the same thing would happen on regulatory issues.

His spending agenda is terrible, though it’s worth noting that Democrat presidents usually don’t spend as much as Republicans (with the admirable exception of Reagan).

And, to be fair, there’s no way he could be as bad on trade as Trump.

Let’s close by looking at some hard data. Back in January, I sifted through the vote ratings prepared by the National Taxpayers Union and the Club for Growth and showed that Biden was not a Bill Clinton-style moderate.

I went back to those same sources an put together this comparison of Biden and some other well-known Democrats (scores on a 0-100 scale, with zero being statism and 100 being libertarian).

In both measures, he’s worse than Crazy Bernie!

Moreover, a lifetime average of zero from the Club for Growth is rather horrifying. His average from the National Taxpayers Union isn’t quite so bad, but the trend is in the wrong direction. Biden’s post-2000 average was less than 10, while his score for the preceding years averaged more than 23.

That being said, my two cents on this topic is that Biden is a statist, but not overly ideological.

His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party.

The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

The bad news is that he will probably allow Nancy Pelosi and other statist ideologues to dictate that kind of agenda if he wins the presidency.

P.S. My collection of Biden-oriented humor is rather sparse (see here, here, here, and here), an oversight that I’ll have to address in the near future.

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How Radical Is Bernie Sanders?

Because of his extremist views, I often refer to Senator Sanders as “Crazy Bernie.”

You can argue I’m being unfair. After all, I pointed out during the last campaign that his voting record in the Senate was almost identical to the voting records of Hillary Clinton and Barack Obama (his vote rating also was similar to supposed moderate Joe Biden when he was a Senator).

But that doesn’t necessarily mean they think the same or have the same agenda. As the cartoon illustrates, Bernie wants to travel at a faster rate in the wrong direction.

And it’s quite likely that he wants to travel farther in the wrong direction. And he may even want to get to a very unpleasant destination.

You don’t have to believe me. You can simply listen to what Bernie Sanders has said, in this video narrated by Maxim Lott.

And if that’s not enough, here’s a video from Reason that has more of Crazy Bernie’s extremist statements.

So what should we think when we examine Bernie’s past statements, review his voting record in Congress, and also analyze his current platform?

Is he a radical? Crazy? A Marxist? A democratic socialist? A socialist democrat? Some combination of all those options?

We obviously have no way of knowing what his real motives and thoughts are, but James Pethokoukis of the America Enterprise Institute speculates whether Sanders has learned anything.

What lessons have the events of the last half century taught Bernie Sanders? …He’s certainly seen a lot that would seem to have direct bearing on his ideology, especially the collapse of the Soviet Union… Was he “very distressed” at the failure of the centrally planned Soviet economy? He certainly should have been, but only offers a condemnation of the authoritarian political system. …No wonder he’d rather talk about Scandinavia as his socialist success story. Those tiny economies score well on just about every economic metric. But there’s more to them than universal healthcare and generous paid leave. The Nordic model, according to a recent JPMorgan report, “entails a lot of capitalism and pro-business policies…” That’s stuff antithetical to the Sanders democratic socialist agenda. Indeed, the report concludes, “A real-life proof of concept for a successful democratic socialist society, like the Lost City of Atlantis, has yet to be found.”

For what it’s worth, Ryan Bourne points out that his agenda is more extreme than Jeremy Corbyn’s (which is not an easy task).

…some commentators are downplaying his socialist credentials, painting the veteran Senator as no more than a moderate social democrat. …To simply label him a socialist, without any caveats, is misleading. But it’s even more grossly misleading to suggest his “democratic socialist” ambitions stop at a Scandinavian-style welfare state. More redistribution is central to his agenda, sure, but he also proposes massive new market interventions, including the Green New Deal, a federal jobs guarantee, expansive price and wage controls… Sanders’ platform goes far beyond any modern social democracy in terms of government size and scope. Indeed, his policies can only be considered moderate if some three-way lovechild of the economics of 1970s Sweden, Argentina, and Yugoslavia’s market socialism is the baseline. …compare Labour’s 2019 manifesto against the Sanders’ economic platform. Doing so makes clear that Bernie is more radical than Corbyn on economics, both in absolute terms and relative to their countries’ respective politics. …Combined with national insurance, Labour’s top marginal income tax rate would have been 52%. Sanders’ top federal income taxrate alone would be 52%, bringing a top combined top rate of around 80% once state and payroll taxes are considered. Sanders wants a new wealth tax too, another option Labour shirked. …where there are differences, it’s because Sanders is offering the more radical leftwing policies. He and Labour both proposed big minimum wage rises, national rent control, mandated employee ownership, and workers on boards, for example. But where Labour proposed 10% worker ownership stakes in large companies, Sanders would mandate 20%… on the role of government, the declared economic platforms are instructive. Call it “democratic socialism,” or just plain old “interventionism,” Bernie Sanders is, in many respects, putting a more radical interventionist offer to the electorate than Jeremy Corbyn did.

Interestingly, social democrats from Nordic nations think Bernie Sanders is too far to the left.

Johan Hassel, the international secretary for Sweden’s ruling Social Democrats, visited Iowa before the caucuses, and he wasn’t impressed with America’s standard bearer for democratic socialism, Sen. Bernie Sanders (I-Vt.). “We were at a Sanders event, and it was like being at a Left Party meeting,” he told Sweden’s Svenska Dagbladet newspaper… “It was a mixture of very young people and old Marxists, who think they were right all along. There were no ordinary people there, simply.” …Lars Løkke Rasmussen, then the prime minister of Denmark, made a similar point in a speech at Harvard in 2015, when Sanders was gaining national attention. “I know that some people in the U.S. associate the Nordic model with some sort of socialism,” he said. “Denmark is far from a socialist planned economy. Denmark is a market economy”.

Giancarlo Sopo, opining for the Washington Examiner, worries that Sanders actually is an unrepentant Marxist.

Sanders is not the nice, Nordic-style “democratic socialist” he claims to be. At his core, Sanders is almost certainly an all-out Marxist. …The man has no business being anywhere near the Oval Office — not even on a guided tour. …Sanders has been an unabashed apologist for communism, an evil ideology with a body count of 100 million people dead in its wake. …While people such as my grandfather were languishing as political prisoners in Cuba, Sanders said that he was so “excited” about the island’s communist revolution that watching JFK get tough on Fidel Castro made him want to “puke.” …The 78-year-old presidential candidate even honeymooned in the Soviet Union and came back full of praise for it. Some may not grasp how bizarre this was during the Cold War… Sanders’s platform, which openly calls for nationalizing major industries such as higher education, healthcare, and even the internet, falls well outside the mainstream of U.S. politics and more closely resembles the central planning committees in Cuba and Venezuela.

Last but not least, in a column for the Wall Street Journal, Elliot Kaufman compares Sanders’ radical past with his modern rhetoric.

Campaigning for U.S. Senate in 1971, he demanded the nationalization of utilities. In 1973 he proposed a federal takeover of “the entire energy industry,” and in 1974 he wanted a 100% tax on all income above $1 million. In 1976 he asserted that workers needed to “take immediate control of the economy if we are to survive” and called for “public ownership of utilities, banks and major industries.” He had a plan for “public control over capital.” As late as 1987 he asserted that “democracy means public ownership of the major means of production.” …He had also begun a dalliance with the Socialist Workers Party, a communist group that had followed Leon Trotsky. Mr. Sanders endorsed the SWP’s presidential nominee in 1980 and 1984, spoke at SWP campaign rallies during that period, and in 1980 was part of its slate of would-be presidential electors. …After three decades in Congress, he has settled on a populist vision that fits in on the Democratic left. In a major speech last June elaborating his idea of socialism, he cast himself in the tradition of Franklin D. Roosevelt… He enumerated a series of positive rights—to “quality health care,” “as much education as one needs,” “a good job that pays a living wage,” “affordable housing,”… But he said nothing about state control over the means of production or Fidel Castro’s revolution.

So who’s the real Bernie Sanders?

I have no idea whether he still wants government ownership and control of the means of production (i.e., pure socialism with state-run factories, collective farms, etc). I also don’t know whether his past support for awful Marxist dictatorships meant he actually was a Marxist.

But I can confidently state that his current policy agenda is nuts.

A few years ago, I created a three-pronged spectrum in an attempt to illustrate the various strains of leftism.

I’ve decided to create a more up-to-date version. It shows that the Nordic nations are part of the rational left. A bit further to the left are conventional leftists such Joe Biden, Hillary Clinton, and then Barack Obama.

At that point, there’s a divergence, with Hitler and Stalin representing totalitarian socialism at the top and pure socialists (such as the U.K.’s Clement Attlee, who nationalized industries and sectors after World War II) at the bottom.

Without knowing what he truly thinks, I’ve put Bernie Sanders in a middle category for “Crazies.”

I suspect he has sympathies for the two other strains of leftism, but the real-world impact of his policies is that America would become an even-worse version of Greece (though hopefully not as bad as Venezuela).

P.S. Given that he’s now the leading candidate to win the Democratic Party’s nomination, and given that he’s ahead in some national polls, I’m very thankful that America’s Founders bequeathed to us a system based on separation of powers. If Sanders somehow makes it to the White House, he’ll have a very difficult time pushing through the radical parts of his agenda. Yes, it’s true that recent presidents (both Obama and Trump) have sought to expand a president’s power to unilaterally change policy, but I feel confident that even John Roberts and the rest of the Supreme Court would intervene to prevent unilateral tax increases and nationalizations.

P.P.S. More than 10 years ago, I speculated that America’s separation-of-powers system would save the country from Obamacare and cap-and-trade. I was half right.

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Bernie Sanders Easily Prevails in the Free-Stuff Primary

In an amazing display of incompetence, we still don’t know whether Bernie Sanders or Pete Buttigieg won the Iowa caucus.

This has created some opportunities for satire, with people asking how a political party that can’t properly count 200,000 votes somehow can effectively run a healthcare system for 340 million people.

That’s a very good point, but today let’s focus on a contest that does have a clear winner.

As explained in this video, John Stossel and his team crunched the numbers and they have concluded that “Crazy Bernie” wins the free-stuff primary.

Senator Sanders doubtlessly will be very happy with this victory, especially since he trailed Kamala Harris when Stossel did the same calculations last summer.

America’s taxpayers, however, might not be pleased with this outcome. Especially if Bernie Sanders somehow gets to the White House.

Last week, I shared new numbers from the Congressional Budget Office, which showed that the federal budget is now consuming $4.6 trillion.

Bernie Sanders is proposing a staggering $4.9 trillion of new spending – more than doubling the burden of government spending!

And the 10-year cost of his promises could be as high as $97 trillion.

To make matters worse, all this new spending is in addition to already-legislated spending increases for everything from boondoggle discretionary programs to behemoth entitlement programs.

Hello Greece.

Heck, it may be hello Venezuela if Bernie gets unleashed.

P.S. Trump’s record on spending is bad, though his mistakes are measured in billions rather than trillions.

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Bloomberg Proposes Huge Increase in America’s Tax Burden

One of the most significant developments in 2020 politics is how Democratic presidential candidates have embraced hard-left economic policies.

Prominent analysts on the left have noted that even Joe Biden, ostensibly the most moderate of the candidates, has a very statist economic platform when compared to Barack Obama.

And “Crazy Bernie” and “Looney Liz” have made radicalism a central tenet of their campaigns.

So where does Michael Bloomberg, the former mayor of New York City, fit on the spectrum?

The New York Times has a report on Bloomberg’s tax plan. Here are some of the key provisions, all of which target investors, entrepreneurs, small business owners, and other high-income taxpayers.

Former Mayor Michael R. Bloomberg of New York unveiled a plan on Saturday that would raise an estimated $5 trillion in new tax revenue… The proposal includes a repeal of President Trump’s 2017 tax cuts for high earners, along with a new 5 percent “surcharge” on incomes above $5 million per year. It would raise capital gains taxes for Americans earning more than $1 million a year and…it would partially repeal Mr. Trump’s income tax cuts for corporations, raising their rate to 28 percent from 21 percent. …Mr. Bloomberg’s advisers estimate his increases would add up to $5 trillion of new taxes spread over the course of a decade, in order to finance new spending on health care, housing, infrastructure and other initiatives. That amount is nearly 50 percent larger than the tax increases proposed by the most fiscally moderate front-runner in the race, former Vice President Joseph R. Biden Jr. …Mr. Bloomberg’s advisers said it was possible that he would propose additional measures to raise even more revenue, depending on how his other domestic spending plans develop.

These are all terrible proposals. And you can see even more grim details at Bloomberg’s campaign website.

Every provision will penalize productive behavior.

• Higher personal income tax rates will discourage work and entrepreneurship.
• Higher corporate income tax rates will undermine U.S. competitiveness.
• Higher capital gains taxes and higher death taxes will lower saving and investment.

But there is a bit of good news.

Though it would be more accurate to say that there’s a partial absence of additional bad news.

Bloomberg hasn’t embraced some of the additional bad ideas being pushed by other Democratic candidates.

It would…maintain a limit on federal deductions of state and local tax payments set under the 2017 law, which some Democrats have pushed to eliminate. …the plan notably does not endorse the so-called wealth tax favored by several of the more liberal candidates in the race, like Senators Elizabeth Warren and Bernie Sanders.

I’m definitely happy he hasn’t embraced a wealth tax, and it’s also good news that he doesn’t want to restore the state and local tax deduction, which encouraged profligacy in states such as California, New Jersey, and Illinois.

It also appears he doesn’t want to tax unrealized capital gains, which is another awful idea embraced by many of the other candidates.

But an absence of some bad policies isn’t the same as a good policy.

And if you peruse his website, you’ll notice there isn’t a single tax cut or pro-growth proposal. It’s a taxapalooza, what you expect from a France-based bureaucracy, not from an American businessman.

To add insult to injury, Bloomberg wants all these taxes to finance an expansion in the burden of government spending.

For what it’s worth, this is my estimate of what will happen to America’s tax burden (based on the latest government data) if Bloomberg is elected and he successfully imposes all his proposed tax increases. We’ll have a more punitive tax system that extracts a much greater share of people’s money.

P.S Take these numbers with a grain of salt because they assume that Bloomberg’s tax increases will actually collect $5 trillion of revenue (which won’t happen because of the Laffer Curve) and that GDP won’t be adversely affected (which isn’t true because there will be much higher penalties on productive behavior).

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