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Archive for the ‘Government Spending’ Category

Senate Republicans have produced their Obamacare repeal legislation, though as I noted at the end of this interview, it’s really more a bill about Medicaid reform than Obamacare repeal.

While it’s disappointing that big parts of Obamacare are left in place, it’s definitely true that Medicaid desperately needs reform, ideally by shifting the program to the states, thus replicating the success of welfare reform.

But critics are savaging this idea, implying that “deep cuts” will hurt the quality of care. Indeed, some of them are even engaging in poisonous rhetoric about people dying because of cutbacks.

There’s one small problem with the argument, however. Nobody is proposing to cut Medicaid. Republicans are merely proposing to limit annual spending increases. Yet this counts as a “cut” in the upside-down world of Washington budgeting.

The Washington Post contributes to innumeracy with a column explicitly designed to argue that the program is being cut.

…the Senate proposal includes significant cuts to Medicaid spending…the Senate bill is more reliant on Medicaid cuts than even the House bill…spending on the program would decline in 2026 by 26 percent…That’s a decrease of over $770 billion on Medicaid over the next 10 years. …By 2026, the federal government would cut 1 of every 4 dollars it spends on Medicaid.

An article in the New York Times has a remarkably inaccurate headline, which presumably isn’t the fault of reporters. Though the story has its share of dishonest rhetoric, especially in the first few paragraphs.

Senate Republicans…took a major step…, unveiling a bill to make deep cuts in Medicaid… The Senate measure…would also slice billions of dollars from Medicaid, a program that serves one in five Americans… The Senate bill would also cap overall federal spending on Medicaid: States would receive a per-beneficiary allotment of money. …State officials and health policy experts predict that many people would be dropped from Medicaid because states would not fill the fiscal hole left by the loss of federal money.

“Loss of federal money”?

I’d like to lose some money using that math. Here’s a chart showing the truth. The data come directly from the Congressional Budget Office.

At the risk of pointing out the obvious, it’s not a cut if spending rises from $393 billion to $464 billion.

Federal outlays on the program will climb by about 2 percent annually.

By the way, it’s perfectly fair for opponents to say that they want the program to grow faster in order to achieve different goals.

But they should be honest with numbers.

Now that we’ve addressed math, let’s close with a bit of policy.

The Wall Street Journal recently opined on the important goal of giving state policymakers the power and responsibility to manage the program. The bottom line is that recent waivers have been highly successful.

…center-right and even liberal states have spent more than a decade improving a program originally meant for poor women and children and the disabled. Even as ObamaCare changed Medicaid and exploded enrollment, these reforms are working… The modern era of Medicaid reform began in 2007, when Governor Mitch Daniels signed the Healthy Indiana Plan that introduced consumer-directed insurance options, including Health Savings Accounts (HSAs). Two years later, Rhode Island Governor Donald Carcieri applied for a Medicaid block grant that gives states a fixed sum of money in return for Washington’s regulatory forbearance. Both programs were designed to improve the incentives to manage costs and increase upward mobility so fewer people need Medicaid. Over the first three years, the Rhode Island waiver saved some $100 million in local funds and overall spending fell about $3 billion below the $12 billion cap. The fixed federal spending limit encouraged the state to innovate, such as reducing hospital admissions for chronic diseases or transitioning the frail elderly to community care from nursing homes. The waiver has continued to pay dividends under Democratic Governor Gina Raimondo. …This reform honor roll could continue: the 21 states that have moved more than 75% of all beneficiaries to managed care, Colorado’s pediatric “medical homes” program, Texas’s Medicaid waiver to devolve control to localities from the Austin bureaucracy.

By contrast, the current system is not successful.

It doesn’t even generate better health, notwithstanding hundreds of billions of dollars of annual spending.

Avik Roy explained this perverse result in Forbes back in 2013.

Piles of studies have shown that people on Medicaid have health outcomes that are no better, and often worse, than those with no insurance at all. …authors of the Oregon study published their updated, two-year results, finding that Medicaid “generated no significant improvement in measured physical health outcomes.” The result calls into question the $450 billion a year we spend on Medicaid… And all of that, despite the fact that the study had many biasing factors working in Medicaid’s favor: most notably, the fact that Oregon’s Medicaid program pays doctors better; and also that the Medicaid enrollees were sicker, and therefore more likely to benefit from medical care than the control arm.

In other words, I was understating things when I wrote above that there was “one small problem” with the left’s assertion about Medicaid cuts hurting people.

Yes, the fact that there are no actual cuts is a problem with that argument. But the second problem with the left’s argument is that Medicaid doesn’t seem to have any effect on health outcomes. So if Republicans actually did cut the program, it’s unclear how anybody would suffer (other than the fraudsters who bilk the program).

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Time for an update on the perpetual motion machine of Keynesian economics.

We’ll start with the good news. The Treasury Department commissioned a study on the efficacy of the so-called stimulus spending that took place at the end of last decade. As discussed in this news report, the results were negative.

…a scathing new Treasury-commissioned report…argues the cash splash actually weakened the economy and damaged local industry… The report, …says the…fiscal stimulus was “unnecessarily large” and “misconceived because it emphasised transfers, unproductive expenditure…rather than tax relief and/or supply side reform”.

The bad news, at least from an American perspective, is that it was this story isn’t about the United States. It’s a story from an Australian newspaper about a study by an Australian professor about the Keynesian spending binge in Australia that was enacted back in 2008 and 2009.

I actually gave my assessment of the plan back in 2010, and I even provided my highly sophisticated analysis at no charge.

The Treasury-commissioned report, by contrast, presumably wasn’t free. The taxpayers of Australia probably coughed up tens of thousands of dollars for the study.

But this is a rare case where they may benefit, at least if policy makers read the findings and draw the appropriate conclusions.

Here are some of the highlights that caught my eye, starting with a description of what the Australian government actually did.

The GFC fiscal stimulus involved a mix of new public expenditure on school buildings, social housing, home insulation, limited tax breaks for business, and income transfers to select groups. Stimulus packages were announced and implemented in the December 2008, March 2009 quarters and ran into subsequent quarters.

For what it’s worth, there are strong parallels between what happened in the U.S. and Australia.v

Both nations had modest-sized Keynesian packages in 2008, followed by larger plans in 2009. The total American “stimulus” was larger because of a larger population and larger economy, of course, and the political situation was also different since it was one government that did the two plans in Australia compared to two governments (Bush in 2008 and Obama in 2009) imposing Keynesianism in the United States.

Here’s a table from the report, showing how the money was (mis)spent in Australia.

Now let’s look at the economic impact. We know Keynesianism didn’t work very well in the United States.

And the report suggests it didn’t work any better in Australia.

…fiscal stimulus induced foreign investors to take up newly issued relatively high yielding government bonds whose AAA credit rating further enhanced their appeal. This contributed to exchange rate appreciation and a subsequent competitiveness… Worsened competitiveness in turn reduced the viability of substantial parts of manufacturing, including the motor vehicle sector. …Government spending continued to rise as a proportion of GDP… This put upward pressure on interest rates… this worsened industry competitiveness contributed to major job losses, not gains, in manufacturing and tourism. …In sum, fiscal stimulus was not primarily responsible for saving the Australian economy… Fiscal stimulus later weakened the economy.

Though there was one area where the Keynesian policies had a significant impact.

Australia’s public debt growth post GFC ranks amongst the highest in the G20. Ongoing budget deficits and rising public debt have contributed to economic weakness in numerous ways. …Interest paid by the federal government on its outstanding debt was under $4 billion before the GFC yet could reach $20 billion, or one per cent of GDP, by the end of the decade.

We got a similar result in America. Lots more red ink.

Except our debt started higher and grew by more, so we face a more difficult future (especially since Australia is much less threatened by demographics thanks to a system of private retirement savings).

The study also makes a very good point about the different types of austerity.

…a distinction can be made between “good” and “bad” fiscal consolidation in terms of its macroeconomic impact. Good fiscal repair involves cutting unproductive government spending, including program overlap between different tiers of government. On the contrary, bad fiscal repair involves cutting productive infrastructure spending, or raising taxes that distort incentives to save and invest.

Incidentally, the report noted that the Kiwis implemented a “good” set of policies.

…in New Zealand…marginal income tax rates were reduced, infrastructure was improved and the regulatory burden on business was lowered.

Yet another reason to like New Zealand.

Let’s close by comparing the burden of government spending in the United States and Australia. Using the OECD’s dataset, you see that the Aussies are actually slightly better than the United States.

By the way, it looks like America had a bigger relative spending increase at the end of last decade, but keep in mind that these numbers are relative to economic output. And since Australia only had a minor downturn while the US suffered a somewhat serious recession, that makes the American numbers appear more volatile even if spending is rising at the same nominal rate.

P.S. The U.S. numbers improved significantly between 2009 and 2014 because of a de facto spending freeze. If we did the same thing again today, the budget would be balanced in 2021.

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I’m agnostic about President’s Trump’s budget. It has some good proposals to save money and control the burden of government spending, but after he got rolled by the big spenders earlier this year, I wonder if he’s serious about tackling wasteful government.

Nonetheless, I’m the libertarian version of Sisyphus. Except instead of trying to roll a boulder up a hill, I have the much harder task of trying to convince the crowd in Washington to shrink the size and scope of the federal government.

So I’ve written in favor of some of Trump’s proposals.

  • Shutting down the wasteful National Endowment for the Arts.
  • Defunding National Public Radio and the Corporation for Public Broadcasting.
  • Terminating the scandal-plagued Community Development Block Grant program.
  • Block-granting Medicaid and reducing central government funding and control.
  • Curtailing foreign aid payments that enable bad policy in poor nations.

Today, let’s add to this list by looking at what’s being proposed to control spending on food stamps.

Here are the key details from the Trump budget.

The Budget provides a path toward welfare reform, particularly to encourage those individuals dependent on the Government to return to the workforce. In doing so, this Budget includes Supplemental Nutrition Assistance Program (SNAP) reforms that tighten eligibility and encourage work… SNAP—formerly Food Stamps—has grown significantly in the past decade. …despite improvements in unemployment since the recession ended, SNAP participation remains persistently high. The Budget proposes a series of reforms to SNAP that close eligibility loopholes, target benefits to the neediest households, and require able-bodied adults to work. Combined, these reforms will reduce SNAP expenditures while maintaining the basic assistance low-income families need to weather hard times. The Budget also proposes SNAP reforms that will re-balance the State-Federal partnership in providing benefits by establishing a State match for benefit costs. The Budget assumes a gradual phase-in of the match, beginning with a national average of 10 percent in 2020 and increasing to an average of 25 percent by 2023.

This is not the approach I prefer. It would be better to create a block grant that slowly phases out over a number of years (as part of an overall plan to get the federal government out of the redistribution racket).

Nonetheless, the Trump proposal would save money for taxpayers. Here are the projected savings from the budget.

To put those numbers in context, the Congressional Budget Office projects that food stamp outlays will be about $70 billion per year if current policy is left in place.

Folks on the left are predictably warning that any restrictions on the program will cause poor people to go hungry.

Yet it seems that many of these people are happy to give up their food stamps in order to avoid productive activity. I’ve already discussed examples from Maine, Wisconsin, and Kansas. Now let’s look at a news report from Alabama.

Thirteen previously exempted Alabama counties saw an 85 percent drop in food stamp participation after work requirements were put in place on Jan. 1, according to the Alabama Department of Human Resources. …there were 5,538 adults ages 18-50 without dependents receiving food stamps as of Jan. 1, 2017. That number dropped to 831 – a decline of about 85 percent – by May 1, 2017. …Statewide, the number of able-bodied adults receiving food stamps has fallen by almost 35,000 people since Jan. 1, 2016. …Nationwide, there are about 44 million people receiving SNAP benefits at a cost of about $71 billion. The Trump administration has vowed to cut the food stamp rolls over the next decade, including ensuring that able-bodied adults recipients are working.

The same thing is happening in Arkansas.

Food stamp enrollment dropped by 25,000 people in Arkansas in 2016, after the state reinstated work requirements limited individuals to three months of benefits unless they found or trained for a job… Arkansas stopped granting waivers to work requirements January 1, 2016, and by April, 9,000 people were off of food stamps, also called Supplemental Nutrition Assistance Program (SNAP) benefits. Another 15,000 more lost their benefits between April and November… J.R. Davis, a spokesman for Hutchinson’s office, told Arkansas Online. “If you’re receiving these SNAP benefits, you can continue to receive those SNAP benefits, but you have to work if you’re between 18 and 49 — that’s a conservative philosophy that the governor believes.”

By the way, recipients often don’t need to actually work to satisfy the work requirements. They can simply be enrolled in some sort of job-training program, many of which are run by the government at no direct cost to participants.

Yet a huge proportion of these able-bodied adults would rather give up food stamps than participate. Maybe I’m heartless, but this suggests that they are not actually dependent on handouts.

Let’s close by augmenting our list of con artists (the Octo-mom, college kids, etc) who mooch off the food stamp program. As reported by the Daily Caller, one of Mayor de Blasio’s cronies in New York City pretended to be poor so he could steal money from taxpayers.

A religious leader and big-time fundraiser for Democratic New York City Mayor Bill de Blasio has been charged with welfare fraud for getting around $30,000 in food stamps. Yitzchok “Isaac” Sofer, a Hasidic religious leader, hosted a fundraiser for de Blasio’s 2013 mayoral campaign at the same time he was receiving food stamps illegally. …FBI…agents found that Sofer has been on food stamps since the beginning of 2010, and received more than $30,000 in benefits from the Supplemental Nutrition Assistance Program (SNAP) since 2012, according to court documents… On his food stamp application in 2012, Sofer claimed to make $250 a week, or about $13,000 a year…in 2012, however, he listed his income for 2011 at $100,000, and assets at more than $600,000, according to the criminal complaint. Sofer still has ties with de Blasio’s office.

Sounds like he’s a wonderful human being. Let’s call him Exhibit A for the decline of social capital in the United States (though certain fast food restaurants might be an even more ominous sign of eroding cultural norms).

P.S. Even if Trump isn’t sincere about wanting to control food stamp spending, I guess I shouldn’t be too depressed. After all, at least he’s not proposing to make the problem worse. By contrast, the Obama Administration actually bribed states to lure more people into food stamp dependency. And, if you can believe it, Obama’s Agriculture Secretary argued that food stamps stimulate the economy.

P.P.S. Speaking of states, here are the states with the most and least food stamp dependency, and here is a ranking of states looking at the ratio of recipients compared to the eligible population.

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Neither involves nudity, but I’ve written about libertarian porn and poverty porn.

To augment that list, my former colleague Brian Riedl, now with the Manhattan Institute, has produced some fiscal porn. Nothing sexual, so you can disregard this column if that’s your thing. However, if you share my salacious interest in smaller government and more freedom, you’ll be squirming in your seat as you read parts of his column.

He starts with a simple observation.

President Trump’s…bold proposal to cut discretionary spending – excluding defense – from $619 billion this year to $429 billion a decade from now. That is a 30 percent reduction.

And Brian points out it’s a real cut, not a “Washington cut” that occurs when spending doesn’t rise as fast as previously planned.

I admit that my heart is beating faster.

But I shouldn’t get too excited. Brian points out that Trump doesn’t specify which domestic discretionary programs would get cut, either over the next several years or by 2027 when total outlays for that category are supposed to be $429 billion.

…the budget shows initial cuts followed by an across-the-board sequestration that would top $100 billion by 2027.

Brian doesn’t think politicians would want to accept a sequester.

I’d be happy with that outcome. Perhaps even pruriently happy.

But he may be right about the preferences of the political class.

So he decided to put together his own budget for domestic discretionary programs. In effect, a roadmap for lawmakers who may actually be serious about controlling the size and scope of Washington.

I extrapolate the budget’s own reductions, and fill in the remaining gaps based on my own experience crafting federal budgets for several leading presidential campaigns and working as a federal budget economist in the Senate.

He starts by going after the federal bureaucracy’s lavish compensation.

Federal employment and its generous compensation would be reduced. The federal civilian workforce could be downsized by 10 percent by replacing only one-third of the workers who leave their jobs ($7 billion saved in 2027), slowing the annual growth rate of federal civilian employee pay by half a percentage point ($12 billion), and requiring federal employees to contribute more to their own retirement plans ($7 billion).

I call this a good start. Not only is my heart racing, I’m flushed with anticipation.

Brian follows with ideas to raise revenue that – under D.C.’s bizarre budget rules – get counted as negative spending.

Other potential cross-agency reforms include raising user fees to better reflect program costs ($3 billion), and raising $10 billion annually by 2027 through modest federal asset and land sales (which Congress could classify as an offset to discretionary spending).

I don’t object to genuine user fees (such as setting entrance fees to national parks so costs are covered). And I certainly don’t object to selling federal land and other federal assets.

That being said, I prefer genuine spending cuts, so these provisions don’t excite me. My pulse has returned to normal. He’s ruined the mood!

But Brian then gets my heart racing again with some take-no-prisoners fiscal slashing.

With regard to specific programs, two-thirds of non-defense discretionary spending goes to federal operations, and the rest to state and local government grants. …federal operations could be targeted for deeper reforms. The Administration could shelve NASA’s human space exploration program ($10 billion), and halve the National Science Foundation and energy research (saving $6 billion). President Trump’s privatization targets include Amtrak ($1 billion); much of the Federal Aviation Administration (saving $10 billion); agriculture research ($1 billion); AmeriCorps and related programs ($1.5 billion); and the National Endowments for the Arts and the Humanities and public broadcasting ($0.7 billion combined). President Trump proposes cutting international spending nearly in half. Drastic reductions in the $45 billion foreign assistance budget.

I’m especially hot and bothered about what Brian suggests for Amtrak, the NEA, the CPB, and foreign aid.

And what he proposes for federal grants has me panting with desire.

…the completion of the interstate highway system leaves little reason for Washington to continue collecting the federal gas tax and redistributing it to states. Congress could save $40 billion in federal spending (and taxes) by eliminating the federal middle man and allowing states to collect and spend the tax themselves on projects of their choice. Other federal grant programs that could be devolved to states include housing aid to the poor (reduce by $30 billion and retain the final $10 billion for the hardest-hit states); means-tested food, child care, and home energy assistance ($10 billion); Head Start and other family service programs ($11 billion); job training ($6 billion); social services ($2 billion); economic development ($8 billion); justice ($2 billion); pollution control ($4 billion); disaster preparation ($2 billion); and numerous small public health grants ($6 billion). …lawmakers could freeze the two largest K-12 programs (special education and Title I grants to low-income school districts) at today’s combined $29 billion level, while eliminating dozens of small and largely unnecessary K-12 grant programs ($6 billion). Freezing Pell Grant spending at $24 billion, despite rising population, would require trimming either eligibility standards or the $4,860 annual maximum award.

A very good list, though I think he should get the federal government totally out of the education business, so his budget porn leaves something to be desired.

However, now for…ummm…the climax of Brian’s column (is that pun too obvious?).

Altogether, these reforms would reduce 2027 non-defense discretionary outlays to the $429 billion target proposed by President Trump.

And I must be young and virile, because the question that immediately comes to mind is what Brian can propose to get us to $329 billion. And then $229 billion.

By the way, Brian then ruins the mood with a final sentence. Maybe I’m reading it wrong, but I think he’s implying that the above cuts are too much and he’s only proposing them because Trump won’t address the old-age entitlements,

Such cuts are the price of balancing the budget without addressing the soaring Social Security and Medicare costs that are driving the deficit upwards.

My view is that we should bank all the savings to domestic discretionary that Brian identifies, accept all the reforms Trump proposes for Medicaid and other means-tested programs, and then add some reform of the other entitlements to the mix.

If Brian goes along with that, I won’t be upset if he doesn’t send flowers the next day.

P.S. If you’re looking for real porn, this isn’t the right website. I’ve commented (here, here, and here) on porn stars and politics, but you won’t find any “visuals.” Similarly, I’ve commented (here and here) on bureaucrats and porn, but you’ll have to use your imagination if you want some nakedness. And even when I’ve touched on the intersection of porn and public policy (here, here, and here), everything is PG-rated.

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In the Dirty Harry movies, one of Clint Eastwood’s famous lines is “Go ahead, make my day.”

I’m tempted to say the same thing when I read about politicians proposing economically destructive policies. Indeed, I sometimes even relish the opportunity. I endorsed Francois Hollande back in 2012, for instance, because I was confident he would make the awful French tax system even worse, thus giving me lots of additional evidence against class-warfare policies.

Mission accomplished!

Now we have another example. Politicians in California, unfazed by the disaster of Obamacare (or the nightmare of the British system), want to create a “single-payer” healthcare scheme for the Golden State.

Here’s a description of the proposal from Sacramento Bee.

It would cost $400 billion to remake California’s health insurance marketplace and create a publicly funded universal health care system, according to a state financial analysis released Monday. California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called “single-payer” system, the analysis by the Senate Appropriations Committee found. …Steep projected costs have derailed efforts over the past two decades to establish such a health care system in California. The cost is higher than the $180 billion in proposed general fund and special fund spending for the budget year beginning July 1. …Lara and Atkins say they are driven by the belief that health care is a human right and should be guaranteed to everyone, similar to public services like safe roads and clean drinking water. …Business groups, including the California Chamber of Commerce, have deemed the bill a “job-killer.” …“It will cost employers and taxpayers billions of dollars and result in significant loss of jobs in the state,” the Chamber of Commerce said in its opposition letter.

Yes, you read correctly. In one fell swoop, California politicians would more than double the fiscal burden of government. Without doubt, the state would take over the bottom spot in fiscal rankings (it’s already close anyhow).

Part of me hopes they do it. The economic consequences would be so catastrophic that it would serve as a powerful warning about the downside of statism.

The Wall Street Journal opines that this is a crazy idea, and wonders if California Democrats are crazy enough to enact it.

…it’s instructive, if not surprising, that Golden State Democrats are responding to the failure of ObamaCare by embracing single-payer health care. This proves the truism that the liberal solution to every government failure is always more government. …California Lieutenant Governor Gavin Newsom, the frontrunner to succeed Jerry Brown as Governor next year, is running on single-payer, which shows the idea is going mainstream. At the state Democratic convention last weekend, protesters shouted down speakers who dared to ask about paying for it. The state Senate Appropriations Committee passed a single-payer bill this week, and it has a fair chance of getting to Mr. Brown’s desk.

I semi-joked that California was committing slow-motion suicide when the top income tax rate was increased to 13.3 percent.

As the editorial implies, the state’s death will come much faster if this legislation is adopted.

A $200 billion tax hike would be equivalent to a 15% payroll tax, which would come on top of the current 15.3% federal payroll tax. …The report dryly concludes that “the state-wide economic impacts of such an overall tax increase on employment is beyond the scope of this analysis.”

California’s forecasting bureaucrats may not be willing to predict the economic fallout from this scheme, but it’s not beyond the scope of my analysis.

If this legislation is adopted, the migration of taxpayers out of California will accelerate, the costs will be higher than advertised, and I’ll have a powerful new example of why big government is a disaster.

Ed Morrissey, in a column for The Week, explains why this proposal is bad news. He starts by observing that other states have toyed with the idea and wisely backed away.

Vermont had to abandon its attempts to impose a single-payer health-care system when its greatest champion, Gov. Peter Shumlin, discovered that it would cost far more than he had anticipated. Similarly, last year Colorado voters resoundingly rejected ColoradoCare when a study discovered that even tripling taxes wouldn’t be enough to keep up with the costs.

So what happens if single payer is enacted by a state and costs are higher than projected and revenues are lower than projected (both very safe assumptions)?

The solutions for…fiscal meltdown in a single-payer system…all unpleasant. One option would be to cut benefits of the universal coverage, and hiking co-pays to provide disincentives for using health care. …The state could raise taxes for the health-care system as deficits increased, which would amount to ironic premium hikes from a system designed to be a response to premium hikes from insurers. Another option: Reduce the payments provided to doctors, clinics, and hospitals for their services, which would almost certainly drive providers to either reduce their access or leave the state for greener pastures.

By the way, I previously wrote about how Vermont’s leftists wisely backed off single-payer and explained that this was a great example of why federalism is a good idea.

Simply stated, even left-wing politicians understand that it’s easy to move across state lines to escape extortionary fiscal policy. And that puts pressure on them to be less greedy.

This is one of the main reasons I want to eliminate DC-based redistribution and let states be in charge of social welfare policy.

Using the same reasoning, I’ve also explained why it would be good news if California seceded. People tend to be a bit more rational when it’s more obvious that they’re voting to spend their own money.

Though maybe there’s no hope for California. Let’s close by noting that some Democrat politicians in the state want to compensate for the possible repeal of the federal death tax by imposing a huge state death tax.

In a column for Forbes, Robert Wood has some of the sordid details.

California…sure does like tax increases. …The latest is a move by the Golden State to tax estates, even if the feds do not. …A bill was introduced by state Sen. Scott Wiener (D-San Francisco), asking voters to keep the estate tax after all. …if the feds repeal it, and California enacts its own estate tax replacement, will all the billionaires remain, or will high California taxes spark an exodus? It isn’t a silly question.

Of course billionaires will leave the state. And so will many millionaires. Yes, the weather and scenery are nice, but at some point rich people will do a cost-benefit analysis and decide it’s time to move.

And lots of middle-class jobs will move as well. That’s the inevitable consequence of class-warfare policy. Politicians say they’re targeting the rich, but the rest of us are the ones who suffer.

Will California politicians actually move forward with this crazy idea? Again, just as part of me hopes the state adopts single-payer, part of me hopes California imposes a confiscatory death tax. It’s useful to have examples of what not to do.

The Golden State already is in trouble. If it becomes an American version of Greece or Venezuela, bad news will become horrible news and I’ll have lots of material for future columns.

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In this interview with Dana Loesch, I make several points about the Trump budget, including the need to reform means-tested entitlements and Obamacare (with a caveat from my Second Theorem of government), as well as some comments on foreign aid and fake budget cuts.

But those are arguments that I make all the time. Today, I want to call attention to the mid-point of the interview when I explain that President Trump is actually in a strong position to get a win, notwithstanding all the rhetoric about his budget being “dead on arrival.”

Simply stated, while he can’t force Congress to enact a bill that reforms entitlements, his veto power means he can stop Congress from appropriating more money that he wants to spend.

But if he wants to win that battle, he needs to be willing to allow a partial government shutdown.

Which he wasn’t willing to let happen when he approved a bad deal a few weeks ago to fund the government for the rest of the 2017 fiscal year.

But we have some good news. He may have learned from that mistake, at least if we take this tweet seriously.

Amen. Trump should be firm and explicitly warn Congress that he will veto any appropriations bill that spends one penny above what he requested in his budget.

And if Congress doesn’t comply, he should use his veto pen and we’ll have a partial shutdown, which basically effects the “non-essential” parts of the federal government that presumably shouldn’t be funded anyhow.

The only way Trump loses that fight is if enough Republicans join with Democrats to override his veto. But that’s unlikely since it is mostly Democrat constituencies (government bureaucrats and other recipients of taxpayer money) who feel the pinch if there’s a partial shutdown.

This is a big reason why, as we saw during the Clinton years, it’s Democrats who begin to cave so long as Republicans don’t preemptively surrender.

The bottom line is that being tough on the budget isn’t just good policy. As Ronald Reagan demonstrated, there are political rewards when you shrink the burden of government and enable faster growth.

P.S. I’m not convinced that Trump actually wants smaller government, but I hope I’m wrong. This upcoming battle will be very revealing about where he really stands.

P.P.S. And if we do have a shutdown fight, I hope it will generate some amusing political humor, such as what’s at the bottom of this post. Other examples of shutdown-related humor can be enjoyed by clicking here, hereherehere, and here.

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President Trump’s new budget is getting attacked by politicians and interest groups in Washington. These critics say the budget cuts are too severe and draconian.

My main reaction is to wonder whether these people are illiterate and/or innumerate. After all, even a cursory examination of Trump’s proposal shows that the federal government will expand over the next decade by an average of 3.46 percent every year, considerably faster than inflation.

For what it’s worth, I’m sure most of the critics actually do understand that government will continue growing under Trump’s budget. But they find it politically advantageous to engage in “Washington math,” which is when you get to claim a program is being cut if it doesn’t get a sufficiently large increase. I’m not joking.

That being said, while the overall federal budget will get bigger, there are some very good proposals in the President’s budget to terminate or reduce a few specific programs. I don’t know if the White House is actually serious about any of these ideas, but some of them are very desirable.

  • Shutting down the wasteful National Endowment for the Arts.
  • Defunding National Public Radio and the Corporation for Public Broadcasting.
  • Terminating the scandal-plagued Community Development Block Grant program.
  • Block-granting Medicaid and reducing central government funding and control.

Today, let’s add a fifth idea to our list. The Trump budget proposes a substantial reduction in foreign aid (for numbers, see line 18 of this OMB excel file).

I hope these cuts are implemented.

In part, I want to save money for American taxpayers, but I’m even more motivated by a desire to help the rest of the world. Simply stated, foreign aid is counterproductive.

The great paradox of government-to-government aid transfers is that they won’t work if recipient nations have bad policy. Yet we also know that nations with good policy don’t need handouts.

In other words, there’s no substitute for free markets and small government. That recipe works wherever it’s tried.

My colleague at the Cato Institute, Marian Tupy, embraces the idea of less foreign aid in a Reason column.

President Donald Trump is said to be considering large cuts to foreign aid. Those cuts cannot come soon enough.

And he explains why in the article. Here’s the passage that caught my eye.

Graham Hancock’s 1994 book, The Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business, is still worth reading. As the author explains, much of foreign aid is used to subsidize opulent lifestyles within the aid establishment. “Only a small portion of [aid money],” Hancock writes, “is ever translated into direct assistance. Thanks to bureaucratic inefficiency, misguided policies, large executive salaries, political corruption, and the self-perpetuating ‘overhead’ of the administrative agencies, much of this tremendous wealth is frittered away.”

The problems are not specific to the United States. Foreign aid also is used as a scam to line the pockets of contractors in the United Kingdom.

The British aid contracting industry has more than doubled in value from £540 million in 2012 to £1.34 billion last year. The proportion of every pound of taxpayers’ aid money that is spent on consultants has risen from 12p in 2011 to 22p. …Budget breakdowns showed the public being charged twice the going rate for workers. One contractor on a project had a margin of 141 per cent between staffing costs charged to Dfid and the cost at market rates.

By the way, one study even found that foreign aid undermines democracy.

Foreign aid provides a windfall of resources to recipient countries and may result in the same rent seeking behavior as documented in the “curse of natural resources” literature. …Using data for 108 recipient countries in the period 1960 to 1999, we find that foreign aid has a negative impact on democracy. In particular, if the foreign aid over GDP that a country receives over a period of five years reaches the 75th percentile in the sample, then a 10-point index of democracy is reduced between 0.6 and one point, a large effect.

Last but not least, Professor William Easterly explains in the Washington Post that foreign aid does not fight terrorism.

President Trump’s proposed budget includes steep cuts in foreign assistance. Aid proponents such as Bill Gates are eloquently fighting back. …The counter-terrorism argument for foreign aid after 9/11 indeed succeeded for a long time at increasing and then sustaining the U.S. foreign aid budget. …the link from aid to counter-terrorism never had any evidence behind it. As it became ever less plausible as terrorism continued, it set up aid for a fall. …the evidence for a link from poverty to terrorism never showed up. …studies since 9/11 have consistently shown that terrorists tend to have above-average income and education. Even if there had been a link from poverty to terrorism, the “aid as counter-terrorism” argument also required the assumption that aid has a dramatic effect on the poverty of entire aid-receiving nations. Today’s proponents of aid no longer make the grandiose claims of aid lifting whole societies out of poverty.

Heck, foreign aid keeps societies in poverty by enabling bigger government.

Yet international bureaucracies such as the United Nations keep peddling the discredited notion that developing nations should have more money to finance ever-bigger government.

The bottom line is that people who care about the world’s poor people should be advocating for freedom rather than handouts.

P.S. If you’re still skeptical, I invite you to try to come up with an example that answers either of these two questions.

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