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Archive for the ‘Government intervention’ Category

I almost feel sorry for my leftist friends. Whenever there’s a story about a crazed shooter, they invariably speculate that it’s someone affiliated with the Tea Party. So they must be sad when it turns out to be a random nut or in some cases a leftist.

Similarly, when the news broke a few days ago about the Amtrak derailment, they instantly decided that the crash was the result of inadequate handouts from Washington. So imagine how forlorn they must be since it turns out the bureaucrat in charge of the train was traveling at about twice the appropriate speed.

But let’s set aside the tender feelings of our statist buddies and look to see whether there are any policy lessons to learn from the recent Amtrak tragedy.

Writing for National Review, Kevin Williamson makes a key point that Amtrak, like other parts of government, is first and foremost focused on maximizing the amount of money that can be extracted from taxpayers.

…everything from the stimulus bill to regular appropriations has spent billions of dollars on Amtrak, and Amtrak still failed to install the speed-control system that was supposed to be completed this year — a system that the NTSB and others believe would have prevented this accident. So, the “investments” in safety systems have produced no safety system. Where does Amtrak spend its money? Almost every dime of ticket revenue is spent on personnel — salaries, benefits, bonuses, etc.  Amtrak can’t be bothered to finish up a safety system on time. But did Amtrak CEO Joseph Boardman ever miss a nickel of his $350,000-a-year salary? No. Did Amtrak fail to pay employee bonuses? No—in fact, it paid bonuses to people who weren’t even eligible for them, and then refused to rescind them once it was pointed out that they were unauthorized. So Amtrak took care of Amtrak’s priorities, just like every other government agency. But Amtrak’s priorities are not its customers’ priorities.

In other words, the culture at Amtrak is to maximize goodies from government, not to maximize profits, which is the culture at a real company.

And the beneficiaries are the overpaid bureaucrats who operate Amtrak, as well as the insiders (like Joe Biden’s son) who get special appointments to Amtrak’s board of directors.

So what, then, is the solution?

As explained by Jeffrey Dorfman, an economics professor at the University of Georgia, it’s time to wean Amtrak from the public teat.

…within two days liberal politicians had seized on the occasion to demand larger subsidies for Amtrak. In fact, the events of last week show the precise opposite-Amtrak should not receive a larger subsidy, but rather should be sold off and privatized. Currently, Amtrak receives more than $1 billion in funding from Congress although it still manages to lose money. …This leads to the question of why Americans taxpayers should subsidize a rail service that only somewhere around one or two percent of Americans actually use. The clear and obvious answer is that they should not be. While Democratic leaders are calling for more federal funding, the problem is not a lack of subsidies but instead that Amtrak’s leadership is divided between serving its customers and serving the political benefactors who provide it with about $1.4 billion per year. If Amtrak was privatized, it could focus solely on serving its customers. If those customers were concerned with safety, then Amtrak would prioritize safety improvements because that would be a necessary step to staying in business.

Moreover, Amtrak would have the incentive to behave rationally if it wasn’t sponging off taxpayers.

If sold for a fairly low valuation for a railroad, Amtrak would sell for around $6.5 to $7 billion. …the federal government would save the $1.4 billion each year that it has been providing to Amtrak. After privatization, Amtrak will know that federal government subsidies are not available to it and will focus on serving its customers and turning a profit. That may mean that some routes are discontinued or continue operating with fewer scheduled trains. At the same time, some routes, such as those in the northeast corridor, may see an increase in the quality and frequency of service as Amtrak responds to the level of consumer demand in the free market.

Notwithstanding the recent accident, trains actually are very safe. And in the absence of government meddling, a private rail company would have the right incentives to produce the correct amount of investments in safety.

Train travel is already ten times safer than driving in terms of deaths per mile traveled. It is possible that riders do not want to pay more for train tickets in exchange for safety improvements. After all, Amtrak is actually ahead of many private railroads in installing the positive train control safety systems. However, if riders demand it, a private, profit-oriented railroad will provide it.

P.S. Here’s a personal story to give you a sense of Amtrak’s misguided culture.

P.P.S. The good news, for what it’s worth, is that Amtrak is a bargain for taxpayers compared to the rail boondoggle taking place in California. And I guess we should be happy that we don’t have the Chinese version of Amtrak.

P.P.P.S. Don’t carry a lot of cash if you’re a young black male and riding Amtrak.

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I don’t know which group is more despicable, Greek politicians or the voters who elected them. In both cases, they think they’re entitled to other people’s money.

But since the “other people” in this case happen to live in nations such as Germany and Finland, and those folks don’t want to write blank checks to a bunch of moochers and looters, Greece faces a difficult choice.

Either the Greeks behave like adults and rein in their bloated public sector. Or they throw a tantrum, which presumably means both a default on payments to bondholders and a return to the unstable drachma currency.

My guess is they’ll eventually go with the latter option.

But maybe there’s hope for Greece. One of the Prime Minister’s chief economic advisers, an out-of-the-closet communist, has announced his resignation. Here are a few of the details from a story in the EU Observer.

Giannis Milios, a member of Syriza’s central committee and long time economic advisor to Greek prime minister Alexis Tsipras, resigned Wednesday… A professor of economic policy who defines himself as a Marxist, Milios is considered one of the most loyal members of the left-wing party.

So does this signal a shift to more mature and sensible policy?

Perhaps not. According to an article in the Wall Street Journal, the problem in Greece isn’t really the communists. It’s the American leftists like Paul Krugman!

Germany, many other governments and senior policy makers in Brussels believe…that recklessness has been encouraged by misguided political and economic philosophies and bad advice from abroad. It isn’t so much that many in Mr. Tsipras’s Syriza party are Marxists—the eurozone can handle followers of the bearded 19th-century German philosopher. It is more that they are seen to be excessively influenced by a 20th-century British economist—John Maynard Keynes—and his living Anglo-Saxon disciples. At finance ministers’ meetings in Brussels, Mr. Varoufakis has been accompanied by American economists James Galbraith and Jeffrey Sachs. From across the Atlantic, the new government gets strong rhetorical backing from Paul Krugman, Joseph Stiglitz and others.

Wow, this is remarkable. Who would have guessed that run-of-the-mill American leftists are more damaging to economic policy than communists!

I guess this is because the Marxists are probably harmless crazies who hang out in coffee houses and gripe about the capitalist class.

The American leftists like Krugman, by contrast, do real damage because they use discredited Keynesian theory to argue that politicians should be spending even more money to “stimulate” an economy that’s in a crisis because of previous bouts of government spending.

Sort of like trying to get out of a hole by digging even deeper.

What’s amazing is that Krugman and other American statists are pushing bad policy when there are successful examples of nations escaping fiscal crisis with genuine spending cuts.

John Dizard wrote an interesting article about Greece for the Financial Times. He began his article by quoting Krugman, who wrote that the plans of the crazy Greek government are “not radical enough.” Dizard also shared another quote from Krugman, which criticized proponents of lower spending because “the best the defenders of orthodoxy can do is point to a couple of small Baltic nations.”

So Dizard decided to compare Greece with those Baltic nations of Estonia, Latvia, and Lithuania.

There are…some practical lessons to learn from…the contrasting ways that Greece has dealt with the world after the global financial crisis compared with the relatively poor Baltic states. Greece took a path of gradual fiscal adjustments weighted towards tax increases, accompanied by a partial debt default. The Baltic states adopted rapid and deep cuts in their state expenditure and current account deficits.

And here’s a shocking bit of news, though it won’t be surprise to folks in the real world. The Baltics have done far better.

The big issue in the Baltic states is upward wage pressure from tight labour markets. That is what we call a high-class problem. This understates the Baltic countries’ achievements. …They also did this without much benefit from concessionary multilateral finance or international debt haircuts.

Dizard looks at some of the differences between the Baltic nations and Greece.

There were virtually no dismissals from the Greek civil service over this period. Salaries were cut, but public sector staffing was reduced with lay-offs of temporary contract workers and early retirements. This had the effect of reducing already low service levels and transferring costs from payrolls to pension obligations. Latvia fired one-third of its civil servants. …The tax burden [in Greece] on salaried workers, compliant domestic businesses and property owners was substantially increased. In contrast, the Baltic states have fairly flat and relatively low tax rates.

All this is music to my ears since I’ve already written about the successful spending cuts in the Baltic countries.

And I particularly enjoyed having the opportunity, back in 2012, to correct the record when Krugman tried to blame Estonia’s 2008 recession on spending cuts that occurred in 2009.

P.S. Since today’s column focused on the statist ideas of Paul Krugman and because he’s a leading voice for the notion that more government spending somehow “stimulates” growth, I can’t resist sharing an explanation of Keynesian economics I gave back in 2009 as part of some remarks to Colorado’s Steamboat Institute.

Feel free to watch the whole video, but fast forward to 3:30 if you’re pressed for time. I’m being snarky, of course, but I also think my debunking of so-called stimulus is spot on.

P.P.S. By the way, the above video is from the Q&A portion of my remarks. If you watch my my actual speech, and if you pay attention about the 1:35 mark, you’ll see I was talking about the importance of having government grow slower than the economy’s productive sector back in 2009 even though I didn’t unveil Mitchell’s Golden Rule until two years later.

P.P.P.S. Since we’re picking on Krugman, here’s something that’s making the rounds on Twitter.

Good ol’ Professor Krugman praised the European approach of bigger government back in 2010, and everything that’s happened since that point has made his assessment look foolish.

Sort of reminds me of the time he attacked me for my gloomy assessment of California and claimed that the Golden State’s job market was strong. But it turns out that California had the 5th-highest unemployment rate in the nation.

P.P.P.P.S. Let’s close with the observation that the mess in Greece shouldn’t be blamed on Krugman. Sure, he’s giving bad advice, but Greek politicians deserve the lion’s share of the blame. Moreover, to the extent that outside advisers get blamed, we should remember that economists like Joseph Stiglitz and Jeffrey Sachs also are involved, and in some cases exercising more influence than Krugman.

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During periods of economic weakness, governments often respond with “loose” monetary policy, which generally means that central banks will take actions that increase liquidity and artificially lower interest rates.

I’m not a big fan of this approach.

If an economy is suffering from bad fiscal policy or bad regulatory policy, why expect that an easy-money policy will be effective?

What if politicians use an easy-money policy as an excuse to postpone or avoid structural reforms that are needed to restore growth?

And shouldn’t we worry that an easy-money policy will cause economic damage by triggering systemic price hikes or bubbles?

Defenders of central banks and easy money generally respond to such questions by assuring us that QE-type policies are not a substitute or replacement for other reforms.

And they tell us the downside risk is overstated because central bankers will have the wisdom to soak up excess liquidity at the right time and raise interest rates at the right moment.

I hope they’re right, but my gut instinct is to worry that central bankers are not sufficiently vigilant about the downside risks of easy-money policies.

But not all central bankers. While I was in London last week to give a presentation to the State of the Economy conference, I got to hear a speech by Kristin Forbes, a member of the Bank of England’s Monetary Policy Committee.

She was refreshingly candid about the possible dangers of the easy-money approach, particularly with regards to artificially low interest rates.

Here is one of the charts from her presentation.

Those of us who are old enough to remember the 1970s will be concerned about her first point. And this is important. It would be terrible to let the inflation genie out of the bottle, particularly since there may not be a Ronald Reagan-type leader in the future who will do what’s needed to solve such a mess.

But today I want to focus on her second, fourth, and fifth points.

So here are some of the details from her speech, starting with some analysis of the risk of bubbles.

…when interest rates are low, investors may “search for yield” and shift funds to riskier investments that are expected to earn a higher return – from equity markets to high-yield debt markets to emerging markets. This could drive up prices in these other markets and potentially create “bubbles”. This can not only lead to an inefficient allocation of capital, but leave certain investors with more risk than they appreciate. An adjustment in asset prices can bring about losses that are difficult to manage, especially if investments were supported by higher leverage possible due to low rates. If these losses were widespread across an economy, or affected systemically-important institutions, they could create substantial economic disruption. This tendency to assume greater risk when interest rates are low for a sustained period not only occurs for investors, but also within banks, corporations, and broader credit markets. Studies have shown that during periods of monetary expansion, banks tend to soften lending standards and experience an increase in their assessed “riskiness”. There is evidence that the longer an expansion lasts, the greater these effects. Companies also take advantage of periods of low borrowing costs to increase debt issuance. If this occurs during a period of low default rates – as in the past few years – this can further compress borrowing spreads and lead to levels of debt issuance that may be difficult to support when interest rates normalize. There is a lengthy academic literature showing that low interest rates often foster credit booms, an inefficient allocation of capital, banking collapses, and financial crises. This series of risks to the financial system from a period of low interest rates should be taken seriously and carefully monitored.

Her fourth and fifth points are particularly important since they show she appreciates the Austrian-school insight that bad monetary policy can distort market signals and lead to malinvestment.

Here’s some of what she shared about the fourth point.

…is there a chance that a prolonged period of near-zero interest rates is allowing less efficient companies to survive and curtailing the “creative destruction” that is critical to support productivity growth? Or even within existing, profitable companies – could a prolonged period of low borrowing costs reduce their incentive to carefully assess and evaluate investment projects – leading to a less efficient allocation of capital within companies? …For further evidence on this capital misallocation, one could estimate the rate of “scrappage” during the crisis and the level of capital relative to its optimal, steady-state level. Recent BoE work has found tentative evidence of a “capital overhang”, an excess of capital above that judged optimal given current conditions. Usually any such capital overhang falls quickly during a recession as inefficient factories and plants are shut down and new investment slows. The slower reallocation of capital since the crisis could partly be due to low interest rates.

And here is some of what she said about the fifth point.

A fifth possible cost of low interest rates is that it could shift the sources of demand in ways which make underlying growth less balanced, less resilient, and less sustainable. This could occur through increases in consumption and debt, and decreases in savings and possibly the current account. …if these shifts are too large – or vulnerabilities related to overconsumption, overborrowing, insufficient savings, or large current account deficits continue for too long – they could create economic challenges.

In her speech, Ms. Forbes understandably focused on the current environment and speculated about possible future risks.

But the concerns about easy-money policies are not just theoretical.

Let’s look at some new research from economists at the Federal Reserve Bank of San Francisco, the University of California, and the University of Bonn.

In a study published by the National Bureau of Economic Research, they look at the connections between monetary policy and housing bubbles.

How do monetary and credit conditions affect housing booms and busts? Do low interest rates cause households to lever up on mortgages and bid up house prices, thus increasing the risk of financial crisis? And what, if anything, should central banks do about it? Can policy directed at housing and credit conditions, with monetary or macroprudential tools, lead a central bank astray and dangerously deflect it from single- or dual-mandate goals?

It appears the answer is yes.

This paper analyzes the link between monetary conditions, credit growth, and house prices using data spanning 140 years of modern economic history across 14 advanced economies. …We make three core contributions. First, we discuss long-run trends in mortgage lending, home ownership, and house prices and show that the 20th century has indeed been an era of increasing “bets on the house.” …Second, turning to the cyclical fluctuations of lending and house prices we use novel instrumental variable local projection methods to show that throughout history loose monetary conditions were closely associated with an upsurge in real estate lending and house prices. …Third, we also expose a close link between mortgage credit and house price booms on the one hand, and financial crises on the other. Over the past 140 years of modern macroeconomic history, mortgage booms and house price bubbles have been closely associated with a higher likelihood of a financial crisis. This association is more noticeable in the post-WW2 era, which was marked by the democratization of leverage through housing finance.

So what’s the bottom line?

The long-run historical evidence uncovered in this study clearly suggests that central banks have reasons to worry about the side-effects of loose monetary conditions. During the 20th century, real estate lending became the dominant business model of banks. As a result, the effects that low interest rates have on mortgage borrowing, house prices and ultimately financial instability risks have become considerably stronger. …these historical insights suggest that the potentially destabilizing byproducts of easy money must be taken seriously

In other words, we’re still dealing with some of the fallout of a housing bubble/financial crisis caused in part by the Fed’s easy-money policy last decade.

Yet we have people in Washington who haven’t learned a thing and want to repeat the mistakes that created that mess.

Even though we now have good evidence about the downside risk of easy money and bubbles!

Sort of makes you wonder whether the End-the-Fed people have a good point.

P.S. Central banks also can cause problems because of their regulatory powers.

P.P.S. Just as there are people in Washington who want to double down on failure, there are similar people in Europe who think a more-of-the-same approach is the right cure for the problems caused in part by a some-of-the-same approach.

P.P.P.S. For those interested in monetary policy, the good news is that the Cato Institute recently announced the formation of the Center for Monetary and Financial Alternatives, led by former UGA economics professor George Selgin, which will focus on development of policy recommendations that will create a more free-market monetary system.

P.P.P.P.S. If you watch this video, you’ll see that George doesn’t give the Federal Reserve a very high grade.

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To save the nation from a future Greek-style fiscal meltdown, we should reform entitlements.

But as part of the effort to restore limited, constitutional government, we also should shut down various departments that deal with issues that shouldn’t be handled by the central government.

I’ve already identified some low-hanging fruit.

Get rid of the Department of Housing and Urban Development.

Shut down the Department of Agriculture.

Eliminate the Department of Transportation.

We need to add the Department of Education to the list. And maybe even make it one of the first targets.

Increasing federal involvement and intervention, after all, is associated with more spending and more bureaucracy, but NOT better educational outcomes.

Politicians in Washington periodically try to “reform” the status quo, but rearranging the deck chairs on the Titanic never works. And that’s true whether you look at the results of GOP plans, like Bush’s no-bureaucrat-left-behind scheme, or Democratic plans, like Obama’s Common Core.

The good news, as explained by the Washington Examiner, is that Congress is finally considering legislation that would reduce the federal government’s footprint.

There are some good things about this bill, which will serve as the reauthorization of former President George W. Bush’s No Child Left Behind law. Importantly, the bill removes the Education Department’s ability to bludgeon states into adopting the controversial Common Core standards. The legislative language specifically forbids both direct and indirect attempts “to influence, incentivize, or coerce” states’ decisions. …The Student Success Act is therefore a step in the right direction, because it returns educational decisions to their rightful place — the state (or local) level. It is also positive in that it eliminates nearly 70 Department of Education programs, replacing them with more flexible grants to the states.

But the bad news is that the legislation doesn’t go nearly far enough. Federal involvement is a gaping wound caused by a compound fracture, while the so-called Student Success Act is a band-aid.

…as a vehicle for moving the federal government away from micromanaging schools that should fall entirely under state and local control, the bill is disappointing. …the recent explosion of federal spending and federal control in education over the last few decades has failed to produce any significant improvement in outcomes. Reading and math proficiency have hardly budged. …the federal government’s still-modest financial contribution to primary and secondary education has come with strings that give Washington an inordinate say over state education policy. …The Student Success Act…leaves federal spending on primary and secondary education at the elevated levels of the Bush era. It also fails to provide states with an opt-out.

To be sure, there’s no realistic way of making significant progress with Obama in the White House.

But the long-run battle will never be won unless reform-minded lawmakers make the principled case. Here’s the bottom line.

Education is one area where the federal government has long resisted accepting the evidence or heeding its constitutional limitations. …Republicans should be looking forward to a post-Obama opportunity to do it for real — to end federal experimentation and meddling in primary and secondary education and letting states set their own policies.

Amen.

But now let’s acknowledge that ending federal involvement and intervention should be just the first step on a long journey.

State governments are capable of wasting money and getting poor results.

Local governments also have shown that they can be similarly profligate and ineffective.

Indeed, when you add together total federal/state/local spending and then look at the actual results (whether kids are getting educated), the United States does an embarrassingly bad job.

The ultimate answer is to end the government education monopoly and shift to a system based on choice and competition.

Fortunately, we already have strong evidence that such an approach yields superior outcomes.

To be sure, school choice doesn’t automatically mean every child will be an educational success, but evidence from SwedenChile, and the Netherlands shows good results after breaking up state-run education monopolies.

P.S. Let’s close with a bit of humor showing the evolution of math lessons in government schools.

P.P.S. If you want some unintentional humor, the New York Times thinks that government education spending has been reduced.

P.P.P.S. And you’ll also be amused (and outraged and disgusted) by the truly bizarre examples of political correctness in government schools.

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The Internet has made all of our lives better, in part because there’s been an accidental policy of benign neglect from Washington.

But that’s about to change.

Even though our economy already is burdened by record amounts of regulation and red tape, the FCC is pushing forward with a plan to turn the Internet into a moss-covered public utility.

This almost leaves me at a loss for words. It’s truly remarkable – in a bad way – that the bureaucrats at the Federal Communications Commission think that the Internet can be improved by a big dose of 1930s-era regulation and control.

My Cato colleague, Jim Harper, summarized the issue last month.

Do you want your Internet service provider to operate like the water company or the electric company?… the FCC has sought for years now to regulate broadband Internet service providers…like it used to regulate AT&T, with government mandated terms of service if not tariffs and price controls. This doesn’t fit the technical environment of the Internet, which allows for diverse business models. Companies that experiment with network management, pricing, internal subsidy, and so on can find the configurations that serve widely varying consumers and their differing Internet needs the best.

But the FCC apparently doesn’t like innovation, diversity, and experimentation and instead wants to impose centralized rules. And to justify its power grab, FCC regulators are reclassifying the Internet as “telecommunications carriers” rather than an “information service.”

Title II, which applies to “telecommunications carriers,” allows common carrier regulation of the type the FCC is trying to impose….This is so it can have more control over the business decisions made by Internet service providers. …”Net neutrality” is a good engineering principle, but it shouldn’t be a legal mandate. Technology and markets surpassed any need for command-and-control regulation in this area long ago. But regulators don’t give up power without a fight.

But maybe mockery is the best way to win this issue.

Here’s a new video from the folks at Protect Internet Freedom (the some people who put together the second video in this post).

If you’ve ever been at hold at the Department of Motor Vehicles or some other bureaucracy, this may cause uncomfortable and painful flashbacks.

And here’s another video, put together by Senator Cruz’s office.

Very well done, just like the humor Cruz’s office has deployed against Obamacare.

And speaking of humor, here are some new cartoons on the topic.

Though this next cartoon is my favorite because it so effectively captures my feelings.

The Internet has been a huge success, so why on earth would anybody think it will be better if a bunch of regulators can second-guess the free market?!?

If you want more cartoons on Internet regulation, here’s a collection that I shared last year.

P.S. Shifting to another topic, here’s a story that belongs in the category of “great moments in lobbying.”

Here are some excerpts from a story published by the Raleigh News and Observer.

Sex between lobbyists and government officials who are covered under North Carolina’s ethics laws does not constitute a gift that must be listed in disclosure reports, the State Ethics Commission said Friday. …The opinion was in a response to an inquiry from the Secretary of State’s lobbying compliance director, Joal H. Broun, in a letter on Dec. 15. …Broun’s request also wanted to know if that activity falls within the definition of “goodwill lobbying,” which is an indirect attempt to influence legislation or executive action, such as the building of relationships, according to state law, and is also considered lobbying.

I’m sure there are some serious points to be made, but I confess that my immediate reaction was to think about this cartoon.

Whether any “goodwill” is being created is a topic for another day.

That being said, you’ll be happy to know that actually procuring hookers is against the rules.

However, providing a prostitute to a legislator or other covered official would constitute a gift or item of value and would have to be reported on disclosure forms – which, of course, would also be evidence of a crime, the opinion says.

The good news is that this rule, if properly enforced, will protect a vulnerable group people from being morally corrupted.

But enough about the need to protect prostitutes from being contaminated by close proximity to politicians.

I want to close on a serious point. As I wrote the other day, the best way to reduce lobbying is to reduce the size and scope of government.

P.P.S. Actually, hookers and politicians have something in common.

P.P.P.S. If you liked my quip about protecting prostitutes from politicians, you’ll appreciate this Craig Ferguson joke.

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My Cato Institute colleague Michael Tanner has produced some first-rate substantive research on issues.

He produced a study showing that personal retirement accounts would have been a better deal than Social Security even for people who retired at the depth of the financial crisis and stock-market collapse.

He authored another study showing that overly generous welfare systems in most states make productive work relatively unattractive compared to government dependency.

And I’ve also cited his analysis and commentary on issues such as Obamacare and obesity.

Today, I want to cite him for the simple reason that I admire his cleverness.

For those of us who suffered through President Obama’s State of the Union address, you may recall that the President proposed a thawing of America’s relationship with Cuba on the basis that if something “doesn’t work for 50 years, it’s time to try something new.”

Since I’m not a foreign policy person, I didn’t pay close attention to that passage.

But perhaps I should have been more attentive. It turns out that Obama created a big opening.

Writing for National Review, Tanner decided to hoist Obama on his own petard.

During his State of the Union address last week, President Obama defended his Cuba policy by pointing out, “When what you’re doing doesn’t work for 50 years, it’s time to try something new.” As it happens, I agree with the president on Cuba. But it seems to me that his advice should be applied to a number of other issues as well

Mike starts with the ill-fated War on Poverty.

Lyndon Johnson declared war on poverty in January 1964, just three years after the start of the Cuban embargo. Since then we’ve spent more than $20 trillion fighting poverty. Last year alone, federal and state governments spent just under $1 trillion to fund 126 separate anti-poverty programs. Yet, using the conventional Census Bureau poverty measure, we’ve done nothing to reduce the poverty rate. …And, whatever success we’ve achieved in making material poverty less uncomfortable, we’ve done little to help the poor become independent and self-supporting.

He then points out the utter failure of the War on Drugs.

The War on Drugs has been going on even longer than the War on Poverty, with a similar lack of success. …in the last ten years alone we have spent some $500 billion fighting this “war,” and arrested more than 16 million Americans for drug offenses. The vast majority of arrests have been for simple possession, not sale or other drug crimes. While filling our prisons with nonviolent offenders, destabilizing countries like Mexico and Colombia, wrecking our own inner cities, and making the cartels rich, the drug war has failed to reduce either violence or drug use.

Mike also reminds us that we’ve had five decades-plus of government-run healthcare.

…we’ve suffered from government-run health care in this country for more than 50 years as well. Medicare and Medicaid started in 1965. Others would point out that we are still suffering the consequences of the IRS decision in 1953 to make employer-provided insurance tax-free, while individually purchased insurance has to be paid for with after-tax dollars. No matter how you want to measure the starting point, the government now pays for roughly 52 percent of U.S. health-care spending, and indirectly subsidizes another 37 percent. The result has been steadily rising health-care costs, a dysfunctional insurance market, and a growing shortage of physicians. …a study out of Oregon suggests that being on Medicaid provides no better health outcomes than being uninsured. Meanwhile, Medicare is running up more than $47.6 trillion in unfunded liabilities. And let us not forget the VA system and its problems.

And his article merely scratches the surface.

One could go on and on. Fannie and Freddie? Social Security and its almost $25 trillion in unfunded liabilities? Stimulus spending? Green energy? We won’t even mention the National Weather Service’s apparent inability to accurately predict snowstorms. If we are looking for lessons to learn from the last 50 years, here is one: Bigger government has not brought us more security, more freedom, or more prosperity. Yet, President Obama still sees the answer to every problem, no matter how small, as more government, no matter how big. …President Obama not only seems unable to learn from history, but apparently doesn’t even listen to his own speeches. If big government hasn’t worked for 50 years, 100 years, or for that matter pretty much the whole of human history, maybe it’s time to try something else.

The final sentence in that passage is not just a throw-away line.

I have my own two-question challenge for leftists, which is basically a request that they identify a nation – of any size and at any time – that has prospered with big government.

Mike does something similar. He basically points out that big government has an unbroken track record of failure, and not just for the past 50 years.

I suppose the question to ask is whether any big-government program can be considered a success? In other words, what has any government done well, once it goes beyond the provision of core public goods such as enforcing contracts, protecting property rights, and upholding the rule of law?

To be fair, there are some nations, such as Switzerland, that have enjoyed very long periods of monetary stability and peace. And jurisdictions such as Hong Kong and Singapore have experienced decades of prosperity and tranquility.

In all of those jurisdictions, I think government is too big, but they are considered small-government by modern-world standards.

In any event, the point I’m making is that some governments seem semi-competent, but there also seems to be a relationship between the size and scope of government and the failure of government.

It will be interesting to read the comments.

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How thoughtful. The President gave the economy a special gift before jetting off to Hawaii.

The Obama administration is cramming like a college student trying to study for a final exam, publishing more than 1,200 new regulations in the last 15 days alone, according to data from Regulations.gov. Energy and environment rules are the biggest category, with 139 published by the federal government in the last 15 days… So far this year, the Obama administration has proposed or finalized  more than $200 billion in regulations when the coal ash rule’s costs are factored in, according to the American Action Forum.

Unfortunately, it appears there is no return policy for these gifts, even if many of them are actually lumps of coal.

So is there a way to quantify the cost of all this regulation, particularly when added to all the red tape that’s already been imposed?

The honest answer is that it’s very difficult. Do you measure only direct budgetary costs? What about compliance costs for the private sector. And how about the indirect costs of diminished productivity, not only in terms of economic performance but also the impact on longevity?

On the other side of the ledger, should there also be some calculation of benefits? A national 5-MPH speed limit would wreck the economy, to be sure, but it would save lives. How does this get measured, using cost-benefit analysis?

The bottom line is that the methodological issues when looking at regulatory burdens are significant, so take any numbers with a few grains of salt. With that caveat out of the way, here are some very large numbers to digest.

Americans spend 8.8 billion hours every year filling out government forms.

The economy-wide cost of regulation is now $1.75 trillion.

For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

The Obama Administration added $236 billion of red tape in 2012 alone.

A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

And now we’re going to augment this disturbing list.

The Mercatus Center at George Mason University has a “RegData” page that allows a user to generate all sorts of information on regulatory burdens.

But I wasn’t focused on “micro” data on the regulations that affect different industries or the regulations promulgated by various bureaucracies.

I clicked on the data designed to capture the overall “macro” magnitude of red tape. And we have two types of information.

This first chart measures the numbers of words in the annual Code of Federal Regulations (which makes great reading if you’re suffering from insomnia).

The bottom line is that there’s been a 40 percent-plus increase in the number of words over the past 15 years.

To be sure, the number of words cranked out by regulatory bureaucracies is not a perfect measure of regulatory burdens.

The Pentagon, for instance, has 26 pages of regulation detailing how to bake brownies. That’s insanely stupid and probably makes brownie procurement four times more expensive than necessary.

But there are regulations with fewer pages (and fewer words) that are far more expensive to the overall economy. The IRS, for instance, imposed a regulation to force American banks to put foreign tax law above U.S. tax law regarding the reporting of bank deposit interest paid to nonresident foreigners with U.S. accounts. That regulation was less than five pages long, but could drive millions of dollars from the American financial system.

Now let’s look at the number of restrictions imposed by regulations. To be more specific, the Mercatus experts calculate the number of times that regulations use coercive words and phrases such as “shall” and “must not.”

The good news, if you’re grading on a curve, is that the use of coercive terminology has jumped by “only” 28 percent since 1997.

I guess you could say that bureaucrats are becoming loquacious faster than they’re becoming proscriptive.

Or if you’re a glass-half-empty person, you could say that they’re making us read more to learn how our freedoms are being curtailed.

Now let’s look at the regulatory burden imposed by one piece of legislation.

I’ve referred to the so-called Wall Street Reform and Consumer Protection Act as the Dodd-Frank Bailout Bill, but that really doesn’t capture the scope of the legislation. Robert Genetski has a column in Investor’s Business Daily that attempts to measure the law’s economic burden.

Our politicians have placed any number of barriers in the way of prosperity, and one of the most costly has been the Dodd-Frank financial reforms (DF). …The Government Accountability Office provided an original estimate of Dodd-Frank’s direct cost: $2.9 billion over the first five years. If that is accurate, it means the law will cost the taxpayers roughly $600 million annually, or $5 for each private-sector worker. The direct cost to taxpayers is only the beginning. Historical estimates show private-sector costs to comply with government regulations tend to be 36 times the direct cost to government. If Dodd-Frank is typical, the annual cost of compliance will be more like $22 billion, or $188 for each private-sector worker. Unfortunately, there are numerous indications the Dodd-Frank regulations are far from typical. …Dodd-Frank has a compliance cost of close to $120 billion annually, or just over $1,000 for each private-sector worker. As burdensome as that estimate sounds, it too likely understates Dodd-Frank’s compliance costs. …the Davis Polk law firm identified 398 explicit new regulations created by Dodd-Frank, making it at least 25 times more extensive and complex than Sarbanes-Oxley. If the costs of complying with Sarbanes-Oxley are the more reasonable gauge for those associated with Dodd-Frank, it could easily cost 25 times more than its predecessor, or $225 billion a year. This amounts to almost $2,000 for each private-sector worker.

Wow. I’m glad he ran out of space. The burden of the law got more expensive with each new paragraph.

Now let’s shift to a more uplifting story.

Back in the late 1970s, politicians actually deregulated the air cargo sector.

The folks at Mercatus highlight some of the benefits.

In the twenty years prior to deregulation, the CAB refused to certify the entry of any new cargo carriers or the expansion of existing ones into new routes and limited the size of plane allowed for air cargo hauls. Thus under this regime carriers such as FedEx, which was classified as an express (rather than cargo) service, could only use small planes even when larger ones were the more efficient choice. …Deregulation of the airline industry occurred in two stages: the first happened with the passage of Public Law 95-163 deregulating interstate air cargo transport in 1977; this was followed a year later by the Airline Deregulation Act of 1978 deregulating the air passenger industry. The effects of deregulation were dramatic. …Absent route restrictions, the air cargo industry began using hub-and-spoke models that made widespread overnight shipping possible. …Free from operational restrictions imposed by the CAB and the Interstate Commerce Commission (ICC), shippers increased reliability and provided a multitude of delivery speed, time, and method combinations. …Deregulation of air cargo was a key element in the emergence of modern supply chain management and allowed wider access to goods supplied by domestic and international sources. It also facilitated American trade to foreign markets. Efficiencies in widespread use of hub-and-spoke models for air cargo, by reducing total costs, enable more American products to reach foreign markets.

There’s also an accompanying video that is perfect for the season.

If air cargo regulation was the good and Dodd-Frank was the bad, I guess it’s now time for the ugly.

Here’s a video from Reason that satirizes the TSA for senseless rules on what can – and cannot – be carried onto a plane.

Just in case you think the video is unfair to the TSA, check out these horror stories.

P.S. Here’s what would happen if Noah tried to comply with current regulation when building an ark.

P.P.S. Meanwhile, there are reports that Santa Claus was arrested after a multi-bureaucracy investigation found that he violated a slew of federal rules.

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