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Archive for the ‘Government Spending’ Category

I want tax cuts. I support tax cuts. I relish tax cuts.

  • I like tax cuts because I’m a curmudgeonly libertarian and I think people should have the first claim on the money they earn.
  • I like tax cuts because I’m an economist and we’ll get more growth if penalties on productive behavior are reduced.
  • I like tax cuts because the academic research supports the “starve-the-beast” theory of less revenue leading to less spending.

This is why I wrote favorably about Trump’s campaign tax plan, and this is why I like Trump’s new tax plan (with a few exceptions).

But I confess that my heart’s not in it. Simply stated, I don’t think the new plan is serious.

If Trump really wanted a big tax cut, he would have a comprehensive plan to restrain the growth of government spending. He doesn’t.

If Trump genuinely wanted lower taxes, he would be aggressively pushing for genuine entitlement reform. He isn’t.

And Congress isn’t much better. At least in the absence of leadership from the White House.

It’s not merely that I’m concerned lawmakers won’t put the brakes on spending. And it’s not just that I fear they won’t enact much-needed entitlement reform. I worry they’ll actually increase the burden of federal spending. Just look what’s happening as Congress and the White House negotiate a spending bill for the remainder of the 2017 fiscal year. The pending deal would trade more defense spending for more Obamacare subsidies. Everyone wins…except taxpayers.

In this profligate environment, it’s hard to be optimistic about tax cuts.

By the way, I fully agree we would get more growth if Trump’s tax plan was enacted. But the Laffer Curve doesn’t say that all tax cuts pay for themselves with faster growth. That only happens in rather rare circumstances.

Yes, the lower corporate tax rate would have a big supply-side impact (and there’s plenty of evidence from overseas to support that notion), but many of the other provisions of his plan are sure to reduce revenue.

Again, I don’t lose sleep about the prospect of less money going to Washington. But you can be sure that politicians pay attention to that issue.

Which is why I’m pessimistic. I don’t think Congress is willing to approve a big tax cut.

The bottom line is that there are three possible outcomes.

  1. Congress and the White House decide to restrain spending, which easily would create room for a very large tax cut (what I prefer, but I won’t hold my breath for this option).
  2. Congress decides to adopt Trump’s tax cuts, but they balance the cuts with dangerous new sources of tax revenue, such as a border-adjustment tax, a carbon tax, or a value-added tax (the option I fear).
  3. Congress and the White House decide to go for a more targeted tax cut, such as a big reduction in the corporate income tax (which would be a significant victory).

Ultimately, I want to completely junk our corrupt system and replace it with a simple and fair flat tax. But for 2017, I’ll be happy if we simply slash the corporate rate.

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I’m normally a big fan of shutting down the government and I’ve tried to convince timid lawmakers that shutdown fights can be worthwhile.

The bottom line is that nothing really bad happens when there’s a shutdown (notwithstanding petty efforts by bureaucrats) for the simple reasons that only “non-essential” parts of the bureaucracy actually get closed. In other words, a government shutdown in all cases is simply a partial shutdown.

And since I don’t favor any funding of non-essential functions, I view a partial shutdown as a good start. Indeed, while the various interest groups in DC hyperventilate about supposed disaster, I experience a feeling of joy and serenity (as illustrated by this modified cartoon, which originally was altered to show my reaction to sequestration).

As far as I’m concerned, the key lesson from shutdown fights is that our nation will be better off if bureaucracies such as the Department of Housing and Urban Development or Department of Education are permanently shuttered. And let’s add the Department of Energy, Department of Transportation, and Department of Agriculture just for the fun of it.

These entities shouldn’t get short-run funding or long-run funding.

That’s the point I made in the second half of this recent interview on Fox Business.

I’m not the only person who likes the idea of a partial shutdown.

Writing for the Resurgent, Erick Erickson explains how a shutdown fight would be valuable.

Americans need to be reminded that the world will not end if the government shuts down. They need to be reminded to take care of themselves instead of relying on Uncle Sam’s teet. A government shutdown with the GOP in charge would be a far different thing from a government shutdown run by Democrats. President Obama tried to inflict maximum pain on the American people to force the GOP to reopen government. President Trump, instead, could take a different approach and use the experience to show Americans how out of control government has really gotten.

And Larry Kudlow had a similar message in a column for National Review back in 2015.

…sometimes you have to make a point. Send a message. Show voters what you really believe. Take a stand. …Most of the Beltway media will blame Republicans. Democrats will blame Republicans. And GOP pundits will blame Republicans. Political death, they will say. Really? …during the Reagan-O’Neill era, most of the shutdowns were budget focused. Reagan wanted less spending; the Democrats wanted more. …The Reagan-O’Neill-era shutdowns were short, and in most of them Reagan prevailed. Meanwhile, the Reagan recovery flourished, the Republicans held the Senate (until 1986), and the Gipper was reelected in a landslide in 1984. Going back to the Obamacare-related shutdown of 2013, a bit more than a year later the Republicans swept the Senate and gained an even larger majority in the House. …shutdowns are a cumbersome way to make a point. …But perhaps Republican leadership in both Houses might think of this: There are too many deals and not enough principles, beliefs, and clear messaging.

Having now provided all this evidence in favor of government shutdowns, you would think I’m excited about the possibility that there will be a partial shutdown this Saturday when a temporary funding bill expires.

Unfortunately, that’s not the case. I view shutdown as a means to an end. I want those fights to occur in hopes that there will be reforms that shrink the overall burden of government spending.

In this case, though, the shutdown fight largely revolves around President Trump’s request for money to build part of a wall between Mexico and the United States. Some people think that’s a good idea and others think it’s a bad idea, but the one thing I can say with certainty is that it’s not a money-saving idea. Even if Trump wanted to finance the wall by reducing outlays in other parts of the budget, the net result would not be smaller government.

The bottom line is that even though I almost always cheer for a government shutdown, I’ll be sitting on the sidelines for this fight.

But if Trump and congressional Republicans at some point decide to fight for much-needed spending restraint (a naive hope, I realize), then I’ll be the first to cheer if that battle leads to a shutdown.

P.S. My favorite bit of shutdown humor is at the bottom of this post, and other examples of shutdown-related humor can be enjoyed by clicking here, hereherehere, and here.

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As Ronald Reagan pointed out many years ago, Washington is a company town. But rather than being home to a firm or industry that earns money by providing value to willing consumers, the “company” is a federal government that uses a coercive tax system to provide unearned wealth to various interest groups.

And the beneficiaries of that redistribution zealously guard their privileges and pay very close attention to any developments that might threaten their access to the public trough

Federal bureaucrats are particularly concerned whenever there is talk about spending restraint. They get lavishly compensated compared to folks in the private sector, so they definitely fret whenever something might happen to derail their gravy train.

A recent segment on a local station in Washington, DC, focused on their angst, and I provided a contrary point of view.

Needless to say, my friends who work for the federal government generally don’t agree with my assessment.

Some of them have even told me that I’m off base because the federal workforce is remarkably efficient. Indeed, several of them even sent me an article from the Washington Post that claims the number of bureaucrats hasn’t changed since the late 1960s.

They claim this is evidence that the bureaucracy has become more efficient.

But they’re wrong. The official federal workforce may not have changed, but research from the Brooking Institution reveals that this statistic is illusory because of a giant shadow bureaucracy.

George Will’s latest column is about this metastasizing hidden bureaucracy.

…government has prudently become stealthy about how it becomes ever bigger. In a new Brookings paper, …government expands by indirection, using three kinds of “administrative proxies” — state and local government, for-profit businesses, and nonprofit organizations. Since 1960, the number of state and local government employees has tripled to more than 18 million, a growth driven by federal money: Between the early 1960s and early 2010s, the inflation-adjusted value of federal grants for the states increased more than tenfold. …“By conservative estimates,” DiIulio writes, “there are about 3 million state and local government workers” — about 50 percent more than the number of federal workers — “funded via federal grants and contracts.” Then there are for-profit contractors, used, DiIulio says, “by every federal department, bureau and agency.” For almost a decade, the Defense Department’s full-time equivalent of 700,000 to 800,000 civilian workers have been supplemented by the full-time equivalent of 620,000 to 770,000 for-profit contract employees. …the government spends more (about $350 billion) on defense contractors than on all official federal bureaucrats ($250 billion). Finally, “employment in the tax-exempt or independent sector more than doubled between 1977 and 2012 to more than 11 million.” Approximately a third of the revenues to nonprofits (e.g., Planned Parenthood) flow in one way or another from government.

When you add it all together, the numbers are shocking.

“If,” DiIulio calculates, “only one-fifth of the 11 million nonprofit sector employees owe their jobs to federal or intergovernmental grant, contract or fee funding, that’s 2.2 million workers” — slightly more than the official federal workforce. To which add the estimated 7.5 million for-profit contractors. Plus the conservative estimate of 3 million federally funded employees of state and local governments. To this total of more than 12 million add the approximately 2 million federal employees. This 14 million is about 10 million more than the estimated 4 million federal employees and contractors during the Eisenhower administration.

In other words, the federal budget has expanded and so have the number of people with taxpayer-financed jobs.

By the way, there’s nothing theoretically wrong with a government bureaucracy using non-profits or contractors. Assuming, of course, that both the agency and the person are doing something productive.

And that was the point I tried to make it the interview. I don’t care whether the Department of Agriculture or Department of Education is filled with official bureaucrats or shadow bureaucrats. What I do care about, however, is that they are part of an agency that should not exist.

And the same is true for the Department of Energy, Department of Labor, Department of Transportation, Department of Veterans Affairs, and Department of Housing and Urban Development.

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The recipe for growth and prosperity isn’t very complicated.

Adam Smith provided a very simple formula back in the 1700s.

For folks who prefer a more quantitative approach, the Fraser Institute’s Economic Freedom of the World uses dozens of variables to rank nations based on key indices such as rule of law, size of government, regulatory burden, trade openness, and stable money.

One of the heartening lessons from this research is that countries don’t need perfect policy. So long as there is simply “breathing room” for the private sector, growth is possible. Just look at China, for instance, where hundreds of millions of people have been lifted from destitution thanks to a modest bit of economic liberalization.

Indeed, it’s remarkable how good policy (if sustained over several decades) can generate very positive results.

That’s a main message in this new video from the Center for Freedom and Prosperity.

The first part of the video, narrated by Abir Doumit, reviews success stories from around the world, including Hong Kong, Singapore, Chile, Estonia, Taiwan, Ireland, South Korea, and Botswana.

Pay particular attention to the charts showing how per-capita economic output has grown over time in these jurisdictions compared to other nations. That’s the real test of what works.

The second part of the video exposes the scandalous actions of international bureaucracies, which are urging higher fiscal burdens in developing nations even though no poor nation has ever become a rich nation with bigger government. Never.

Yet bureaucracies such as the United Nations, the International Monetary Fund, and the Organization for Economic Cooperation and Development are explicitly pushing for higher taxes in poor nations based on the anti-empirical notion that bigger government is a strategy for growth.

I’m not joking.

As Ms. Doumit remarks in the video, these bureaucracies never offer a shred of evidence for this bizarre hypothesis.

And what’s especially frustrating is that the big nations of the western world (i.e., the ones that control the international bureaucracies) all became rich when government was very small.

And while the bureaucracies never provide any data or evidence, the Center for Freedom and Prosperity’s video is chock full of substantive information. Consider, for instance, this chart showing that there was almost no redistribution spending in the western world as late as 1930.

Unfortunately, the burden of government spending in western nations has metastasized starting in the 1930s. Total outlays now consume enormous amounts of economic output and counterproductive redistribution spending is now the biggest part of national budgets.

But at least western nations became rich first and then made the mistake of adopting bad fiscal policy (fortunately offset by improvements in other areas such as trade liberalization).

The international bureaucracies are trying to convince poor nations, which already suffer from bad policy, that they can succeed by imposing additional bad fiscal policy and then magically hope that growth will materialize.

And having just spent last week observing two conferences on tax and development at the United Nations in New York City, I can assure you that this is what they really think.

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The annual budget for our bloated and sclerotic federal government consumes about $4 trillion of America’s economic output, yet President Trump so far has not proposed to reduce that overall spending burden by even one penny.

A few programs are targeted for cuts, to be sure, but I explained last week, that “taxpayers won’t reap the benefits since those savings will be spent elsewhere, mostly for a bigger Pentagon budget.” More worrisome, I also pointed out that his budget proposal is “silent on the very important issues of tax reform and entitlement reform.”

All things considered, you would think that statists, special interest groups, and other denizens of the D.C. swamp would be happy with Trump’s timid budget.

Not exactly. There’s so much wailing and screaming about “savage” and “draconian” budget cuts, you would think the ghost of Ronald Reagan is haunting Washington.

Much of this whining is kabuki theater and political posturing as various beneficiaries (including the bureaucrats, lobbyists, contractors, and other insiders) make lots of noise as part of their never-ending campaigns to get ever-larger slices of the budget pie.

And nothing demonstrates the vapidity of this process more than the imbroglio over the Meals on Wheels program. Based on news reports, the immediate assumption is that Trump’s budget is going to starve needy seniors by ending delivery of meals.

Here’s how CNN characterized the proposal.

The preliminary outline for President Donald Trump’s 2018 budget could slash some funding for a program that provides meals for older, impoverished Americans.

“Slash”? That sounds ominous. Sounds like a cut of 40 percent, 50 percent, or 60 percent!

And a flack for Meals on Wheels added her two cents, painting a picture of doom and despair for hungry seniors.

…spokeswoman Jenny Bertolette said, “It is difficult to imagine a scenario in which they will not be significantly and negatively impacted if the President’s budget were enacted.”

Oh no, “significantly and negatively impacted” sounds brutal. How many tens of thousands of seniors will starve?

Only near the bottom of the story do we learn that this is all nonsense. All that Trump proposed, as part of his plan to shift some spending from the domestic budget to the defense budget, is to shut down a pork-riddled and scandal-plagued program at the Department of Housing Development. However, because a tiny fraction of community development block grants get used for Meals on Wheels, interest groups and leftist journalists decided to concoct a story about hungry old people.

In reality, the national office (appropriately) gets almost all its money from private donations and almost all the subsidies to the local branches are from a separate program.

About 3% of the budget for Meals on Wheels’ national office comes from government grants (84% comes from individual contributions and grants from corporations and foundations)… The Older Americans Act, as a function of the US Department of Health and Human Services, …covers 35% of the costs for the visits, safety checks and meals that the local agencies dole out to 2.4 million senior citizens, Bertolette said.

In other words, CNN engaged in what is now known as fake news, publishing a story designed to advance an agenda rather than to inform readers.

My colleague Walter Olson wrote a very apt summary for National Review.

The story that Trump’s budget would kill the Meals on Wheels program was too good to check. But it was false. …it wouldn’t have taken long for reporters to find and provide some needed context to the relationship between federal block grant programs, specifically Community Development Block Grants (CDBG), and the popular Meals on Wheels program. …From Thursday’s conversation in the press, it was easy to assume that block grant programs — CDBG and similar block grants for community services and social services — are the main source of federal funding for Meals on Wheels. Not so.

And if you want some accurate journalism, the editorial page of Investor’s Business Daily has a superb explanation.

What Trump’s budget does propose is cutting is the corruption-prone Community Development Block Grant program, run out of Housing and Urban Development. Some, but not all, state and local governments use a tiny portion of that grant money, at their own discretion, to “augment funding for Meals on Wheels,” according to the statement. …So what’s really going on? As Meals on Wheels America explained, some Community Development Block Grant money does end up going to some of the local Meals on Wheels programs. But it’s a small amount. HUD’s own website shows that just 1% of CDBG grant money goes to the broad category of “senior services.” And 0.17% goes to “food banks.” …All of this information was easily available to anyone reporting on this story, or anyone commenting on it, which would have prevented the false claims about the Meals on Wheels program from spreading in the first place. But why bother reporting facts when you can make up a story…?

The IBD editorial then shifted to what should be the real lesson from this make-believe controversy

…this fake budget-cutting story ended up revealing how programs like Meals on Wheels can survive without federal help. As soon as the story started to spread, donations began pouring into Meals on Wheels. In two days, the charity got more than $100,000 in donations — 50 times more than they’d normally receive. Clearly, individuals are ready, willing and eager to support this program once they perceive a need. Isn’t this how charity is supposed to work, with people donating their own time, money and resources to causes they feel are important, rather than sitting back and expecting the federal government to do it for them?

At the risk of being flippant, Libertarian Jesus would approve that message.

But to be more serious, IBD raises an important point that deserves some attention. Some Republicans think the appropriate response to CNN‘s demagoguery is to point out that Meals on Wheels gets the overwhelming share of its federal subsidies from the Older Americans Act rather than CDBG.

In reality, the correct lesson is that the federal government shouldn’t be subsidizing Meals on Wheels. Or any redistribution program that purports to help people on the state and local level.

There’s a constitutional argument against federal involvement. There’s a fiscal argument against federal involvement. There’s a diversity argument against federal involvement. And there’s a demographic argument against federal involvement.

But there’s also a common-sense argument against federal involvement. And that gives me an excuse to introduce my Third Theorem of Government. Simply stated, it’s a recipe for waste to launder money through Washington.

P.S. For those interested, here is the First Theorem of Government and here is the Second Theorem of Government.

P.P.S. I started today’s column by noting that Trump hasn’t proposed “even one penny” of lower spending. That’s disappointing, of course, but the news is not all bad. The President has  endorsed the Obamacare reform legislation in the House of Representatives, and while that legislation does not solve the real problem in our nation’s health sector, at least it does lower the burden of taxes and spending.

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I’ve looked at some of the grim fiscal implications of demographic changes the United States and Europe.

Now let’s look at what’s happening in Asia.

The International Monetary Fund has a recent study that looks at shortfalls in government-run pension schemes and various policies that could address the long-run imbalances in the region. Here are the main points from the abstract.

Asian economies are aging fast, with significant implications for their pension system finances. While some countries already have high dependency ratios (Japan), others are expected to experience a sharp increase in the next couple of decades (China, Korea, Singapore). …This has…implications. …pension system deficits can increase very quickly, limiting room for policy action and hampering fiscal sustainability. …This paper explores how incorporating Automatic Adjustment Mechanisms (AAMs)—rules ensuring that certain characteristics of a pension system respond to demographic, macroeconomic and financial developments, in a predetermined fashion and without the need for additional intervention— can be part of pension reforms in Asia.

More succinctly, AAMs are built-in rules that automatically make changes to government pension systems based on various criteria.

Incidentally, we already have AAMs in the United States. Annual Social Security cost of living adjustments (COLAs) and increases in the wage base cap are examples of automatic changes that occur on a regular basis. And such policies exist in many other nations.

But those are AAMs that generally are designed to give more money to beneficiaries. The IMF study is talking about AAMs that are designed to deal with looming shortfalls caused by demographic changes. In other words, AAMs that result in seniors getting lower-than-promised benefits in the future. Here’s how the IMF study describes this development.

More recently, AAMs have come to the forefront to help address financial sustainability concerns of public pension systems. Social insurance pension systems are dominated by defined benefit schemes, pay-as-you-go financed, with liabilities explicitly underwritten by the government. …these systems, under their previous contribution and benefit rules, are unprepared for population aging and need to implement parametric reform or structural reforms in order to reduce the level or growth rate of their unfunded pension liabilities. …Automatic adjustments can theoretically make the reform process politically less painful and more likely to succeed.

Here’s a chart from the study that underscores the need for some sort of reform. It shows the age-dependency ratio on the left and the projected increase in the burden of pension spending on the right.

I’m surprised that the future burden of pension spending in Japan will only be slightly higher than it is today.

And I’m shocked by the awful long-run outlook in Mongolia (the bad numbers for China are New Zealand are also noteworthy, though not as surprising).

To address these grim numbers, the study considers various AAMs that might make government systems fiscally sustainable.

Especially automatic increases in the retirement age based on life expectancy.

One attractive option is to link statutory retirement ages—which seem relatively low in the region—to longevity or other sustainability indicators. This would at the very least help ameliorate the impact of life expectancy improvements in the finances of public pension systems. … While some countries have already raised the retirement age over time (Japan, Korea), pension systems in Asia do not yet feature automatic links between retirement age and life expectancy. …The case studies for Korea and China (section IV) suggest that automatic indexation of retirement age to life expectancy can indeed help reduce the pension system’s financial imbalances.

Here’s a table showing the AAMs that already exist.

Notice that the United States is on this list with an “ex-post trigger” based on “current deficits.”

This is because when the make-believe Trust Fund runs out of IOUs in the 2030s, there’s an automatic reduction in benefits. For what it’s worth, I fully expect future politicians to simply pass a law stating that promised benefits get paid regardless.

It’s also worth noting that Germany and Canada have “ex-ante triggers” for “contribution rates.” I’m assuming that means automatic tax hikes, which is a horrid idea. Heck, even the study acknowledges a problem with that approach.

…raising contribution rates can have important effects on the labor market and growth, it would be important to prioritize other adjustments.

From my perspective, the main – albeit unintended – lesson from the IMF study is that private retirement accounts are the best approach. These defined contribution (DC) systems avoid all the problems associated with pay-as-you-go, tax-and-transfer regimes, generally known as defined benefit (DB) systems.

The larger role played by defined contribution schemes in Asia reduce the scope for using AAMs for financial sustainability purposes. Many Asian economies (Hong Kong, Singapore, Australia, Malaysia and Indonesia) have defined contribution systems, …under which system sustainability is typically inherent.

Here are the types of pension systems in Asia, with Australia and New Zealand added to the mix..

For what it’s worth, I would put Australia in the “defined contribution” grouping. Yes, there is still a government age pension that serves as a safety net, but there also are safety nets in Singapore and Hong Kong as well.

But I’m nitpicking.

Here’s another table from the study showing that it’s much simpler to deal with “DC” systems compared with “DB” systems. About the only reforms that are ever needed revolve around the question of how much private savings should be required.

By the way, even though the information in the IMF study shows the superiority of DC plans, that’s only an implicit message.

To the extent the bureaucracy has an explicit message, it’s mostly about indexing the retirement age to changes in life expectancy.

That’s probably better than doing nothing, but there’s an unaddressed problem with that approach. It forces people to spend more years working and paying into systems, and then leaves them fewer years to collect benefits in retirement.

That idea periodically gets floated in the United States. Here’s some of what I wrote in 2011.

Think of this as the pay-for-a-steak-and-get-a-hamburger plan. Social Security already is a bad deal for workers, forcing them to pay a lot of money in exchange for relatively meager retirement benefits.

I made a related observation about this approach back in 2012.

…it focuses on the government’s finances and overlooks the implications for households. It is possible, at least on paper, to “save” Social Security by cutting benefits and raising taxes. But such “reforms” force people to pay more and get less – even though Social Security already is a very bad deal, particularly for younger workers.

The bottom line is that the implicit message should be explicit. Other nations should copy jurisdictions such as Chile, Australia, and Hong Kong by shifting to personal retirement accounts

P.S. Speaking of which, here’s the case for U.S. reform, as captured by cartoons. And you can enjoy other Social Security cartoons here, here, and here, along with a Social Security joke if you appreciate grim humor.

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Donald Trump’s Budget Blueprint doesn’t thrill me, largely because it’s silent on the very important issues of tax reform and entitlement reform.

All that he’s proposing is to rearrange the allocation of annually appropriated spending (the so-called discretionary outlays).

Here’s a chart from a summary prepared by the Committee for a Responsible Federal Budget. As you can see, the federal Leviathan does not shrink in size.

It’s possible, of course, to applaud this shift from domestic discretionary to defense discretionary. Or to criticize the reallocation. But nobody can pretend the net result is smaller government.

My view, for what it’s worth, is that we should accept all the domestic reductions but not boost the defense budget (the U.S. already has a very large military budget compared to potential adversaries).

And speaking of domestic reductions, the main focus of today’s column is to highlight one of my favorite program terminations in Trump’s plan (yesterday’s example was the National Endowment for the Arts). The President has proposed to eliminate all taxpayer handouts for the Corporation for Public Broadcasting (CPB), which is the entity that subsidizes National Public Radio (NPR) and the Public Broadcasting Service (PBS).

This is music to my ears. As I wrote more than six years ago,

Even if we had a giant budget surplus, federal subsidies for the Corporation for Public Broadcasting would be misguided and improper. In an environment where excessive federal spending is strangling growth and threatening the nation’s solvency, the argument to defund PBS and NPR is even stronger…the fact that PBS and NPR have a statist bias is another argument for getting rid of taxpayer subsidies, but that’s barely a blip on my radar screen. It wouldn’t matter if government TV and radio was genuinely fair and balanced. Taxpayers should not subsidize broadcasting of any kind, period.

This should be a slam-dunk issue for congressional Republicans. Even milquetoast GOPers like Mitt Romney have said it’s time for NPR and PBS to be self-supporting.

But the best analysis, as usual, comes from the Cato Institute. Here are some excerpts from a study written by my colleague Trevor Burrus.

Assailed from all sides with allegations of bias, charges of political influence, and threats to defund their operations, public broadcasters have responded with everything from outright denial to personnel changes, but never have they squarely faced the fundamental problem: government-funded media companies are inherently problematic and impossible to reconcile with either the First Amendment or a government of constitutionally limited powers. The Constitution does not give Congress the power to create media companies, and we should heed the Founders’ wisdom on this matter. …before the Corporation for Public Broadcasting was created, nonprofit, noncommercial media stations enjoyed a vibrant existence, remaining free to criticize current policies and exhibit whatever bias they wished. Yet today…, public broadcasting suffers the main downside of public funding—political influence and control—yet enjoys little of the upside—a significant taxpayer contribution that would relieve it of the need to seek corporate underwriting and listener donations. But the limited taxpayer funding also shows that defunding can be relatively painless. Public broadcasting not only can survive on its own, it can thrive—and be free.

And Cato’s David Boaz adds another important point, which is that government-subsidized broadcasting is another odious example (Export-Import Bank, agriculture subsidies, TARP bailout, etc) of how government coercion is used to provide goodies to upper-income people at the expense of those with more modest levels of income.

Public broadcasting subsidizes the rich. A PBS survey shows that its viewers are 44 percent more likely than the average American to make more than $150,000 a year, 57 percent more likely to own a vacation home, and 177 percent more likely to have investments worth more than $150,000. Why should middle-class taxpayers be subsidizing the news and entertainment of the rich?

By the way, these numbers are more than 10 years old, so more recent data surely would show that an ever greater share of fans are part of an economic elite that easily can afford to privately finance PBS programming.

By the way, there already has been some self-privatization, as John Stossel reports in his Reason column

New York ran a photo of Big Bird, or rather a protester dressed as Big Bird, wearing a sign saying “Keep your mitts off me!” What New York doesn’t say is that the picture is three years old, and Big Bird’s employer, “Sesame Street,” no longer gets government funds. We confronted the article writer, Eric Levitz. He said, “Big Bird has long functioned as a symbol of public broadcasting … Still, considering Sesame Street‘s switch to HBO, I concede that some could have been misled.” You bet. Big Bird doesn’t need government help. Sesame Street is so rich that it paid one of its performers more than $800,000.

Last but not least, here’s a video from Reason that looks at how government-run broadcasting is driven by the interests of the stations rather than consumers.

P.S. Big Bird apparently wasn’t a big fan of Barack Obama, at least according to this bit of satire.

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