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Archive for the ‘Joe Biden’ Category

Trump had some economically illiterate tweets about trade during his presidency, including the infamous one about being “Tariff Man.”

I think Joe Biden must be feeling envious that Trump got so much attention, so he has issued a tweet showing that he also suffers from economic illiteracy.

Or maybe Biden’s problem is dishonesty because his tweet is based on a make-believe number about the the average tax rate paid by billionaires.

For what it’s worth, this isn’t the first time that Biden has issued a tweet based on fake numbers.

In the previous instance, he deliberately confused the distinction between the financial concept of book income and and cash-flow concept of taxable income.

What accounts for his most recent error?

Reporting for the Wall Street Journal, Richard Rubin and Rachel Louise Ensign explain how the Biden Administration concocted this number.

What do the wealthy pay in federal taxes? On paper, the top marginal income-tax rate is 37% on ordinary income and 23.8% on capital gains. Government estimates put high-income filers’ average rates in the mid-20s. A new Biden administration analysis, however, pegs the average tax rate for the 400 wealthiest households at 8.2% from 2010 to 2018. …It’s far below traditional estimates from government number crunchers… Recent estimates of a broader group of rich people from the Congressional Budget Office, Treasury Department and the Joint Committee on Taxation fall between 23% and 26%.

So how does the Biden Administration get a number that is radically different than other sources?

By artificially inflating the income of rich people by asserting that changes in wealth should count as income.

White House…economists Greg Leiserson and Danny Yagan..include increases in unrealized capital gains. That is the change in the value of assets, including stocks, that haven’t been sold. …Conventional analyses and the current income-tax law don’t include unrealized gains.

At the risk of making a wonky point, “conventional analysis” and “income-tax law” don’t include unrealized capital gains as income because, well, changes in net worth are not income.

And the fact that some folks on the left want to tax people on unrealized capital gains doesn’t change that reality.

To understand why that would be wretched policy, let’s cite examples that apply to those of us who, sadly, are not billionaires.

  • Imagine filing your taxes next year and having to pay more money to the IRS simply because Zillow estimated that your house rose in value.
  • Imagine that you’re filling out your 1040 form next year and you have to pay more money to the IRS  simply because your IRA or 401(k) rose in value.

Both of these examples sound absurd because they would be absurd. And if a policy is absurd and unfair for regular people, it’s also absurd and unfair for rich people.

Since I’m a fiscal wonk, I’ll close by making the point that the Biden Administration wants to take a bad tax (capital gains tax) and make it worse (by taxing paper gains in addition to actual gains).

The net result is that we would have a backdoor wealth tax – a approach that is so anti-growth that even most European governments have repealed those levies.

But since Joe Biden is motivated by class warfare (see here, here, here, and here), he apparently doesn’t care about the economic consequences.

P.S. Biden once claimed that it is “patriotic” to pay higher taxes, but he then played Benedict Arnold with his own tax return.

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After almost 16 months in office, what is President Biden’s track record on fiscal policy?

The good news is that his big tax-and-spend plan to “build back better” has not been approved by Congress (and fingers crossed that it stays that way).

The bad news is that he has done other things, such as getting a fake stimulus though Congress, as well as a so-called infrastructure package.

The Committee for a Responsible Federal Budget put together an estimate of his major initiatives.

By the way, the CRFB folks fixate on how these initiative impact the deficit. What we really should be concerned about is how much money is being spent.

But let’s set that aside and focus instead on a jaw-dropping claim from the White House.

Even though all of his major initiatives have increased red ink, he is patting himself on the back for lower deficits.

For what it is worth, Biden’s claim is semi-accurate. It is true that budget deficits are temporarily falling.

But not because of him. Instead, red ink is falling because there was massive, one-time, multi-trillion dollar emergency spending for the COVID pandemic in 2020. That spending began to wind down in 2021 and it has mostly dissipated this year, so of course deficits have fallen.

For Biden to take credit for this drop would be akin to Truman taking credit for the big drop in red ink after World War II ended.

Eric Boehm of Reason wrote a column that debunks Biden’s ludicrous claim.

…this year’s budget deficit is forecasted to be the third or fourth-largest in American history—but President Joe Biden claims…his administration is overseeing a period of fiscal austerity. …Here are some words that actually tumbled out of the president’s mouth at a press conference… “We’re on track to cut the federal deficit by another $1.5 trillion by the end of this fiscal year. …on top of us having a $350 billion drop in the deficit last year, my first year as president,” Biden continued. …Those facts, however, exclude a few key details. …Biden took office the year after the budget deficit hit previously unimaginable highs due to a completely unprecedented spending binge triggered by a once-in-a-generation public health disaster. …if you look at the actual budgetary baselines published by the Congressional Budget Office—that is, the ongoing amount of annual federal spending absent any emergency stimulus bills like the ones passed on several occasions during the height of the pandemic—Biden has overseen a noticeable increase in the deficit above the pre-pandemic baseline. According to the Committee for a Responsible Federal Budget, a fiscal watchdog group that advocates for lower deficits, Biden’s policies have added about $2.5 trillion to the deficit over the next 10 years.

Brian Riedl is now with the Manhattan Institute, but we used to work together earlier this century at the Heritage Foundation. One of his admirable traits is that he hasn’t lost the ability to be outraged.

That comes through in his tweet about Biden’s supposed accomplishment.

By the way, I’m not making a partisan point. I have no doubt Trump would have done the same thing.

After all, politicians are probably the least ethical people in the nation. And Washington brings out the worst of the worst.

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Keynesian economics is based on the misguided notion that consumption drives the economy.

In reality, high levels of consumption should be viewed an indicator of a strong economy.

The real drivers of economic strength are private investment and private production.

After all, we can’t consume unless we first produce.*

Not everyone agrees with these common-sense observations. The Biden Administration, for instance, claimed the economy would benefit if Congress approved a costly $1.9 trillion “stimulus” plan last year.

Yet we wound up with 4 million fewer jobs than the White House projected. We even wound up with fewer jobs than the Administration estimated if there was no so-called stimulus.

So what did we get for all that money?

Some say we got inflation. In a column for the Hill, Professor Carl Schramm from Syracuse is unimpressed by Biden’s plan. And he’s even less impressed by the left-leaning economists who claimed it is a good idea to increase the burden of government.

Nobel Laureate economist Joseph Stiglitz rounded up another 16 of the 36 living American Nobel Prize economists to declare, in an open letter, that…there was no threat of inflation. …The Nobelists’ letter showed that those signing had bought Team Biden’s novel argument that its enormous expansion of social welfare programs really was just a different form of infrastructure investment, just like roads and bridges. …The laureates seemed to have overlooked that previous COVID benefits had often exceeded what tens of millions of workers regularly earned and that recipients displaced by COVID were never required to look for other work. While the high priests of economic “science” were cheering on higher federal spending, larger deficits and increased taxes, employers were and are continuing to deal with inflation face-to-face. …The Nobelists assured that we would see a robust recovery because of President Biden’s “active government interventions.” Their presumed authority was used to give credence to the president’s continuously twisting storyline on inflation — that it was “transitory,” good for the economy, a “high-class problem,” Putin’s fault for invading Ukraine, and the greed of oil and food companies… Today’s fashionable goals seem to have displaced the no-nonsense pragmatism that has long characterized economics as a discipline. …Don’t expect a mea culpa from Stiglitz or his coauthors any time soon. …They can be wrong, really wrong, and never pay a price.

The New York Post editorialized about Biden’s economic missteps and reached similar conclusions.

President Joe Biden loves to blame our sky-high inflation on corporate greed and Vladimir Putin. But a new study from the San Francisco Fed shows it was Biden himself who put America on this grim trajectory. …other advanced economies…haven’t seen anything like the soaring prices now punishing workers across America. Which means that the spike is due to something US-specific, rather than global prevailing conditions. That policy, was, of course, Biden’s signature economic “achievement.” …The damage it did has been massive. …inflation…to 7%… Put in concrete terms, a recent Bloomberg calculation translates this to an added $433 per month in household expenses for 2022. And historic producer price inflation, a shocking 10%, guarantees even more pain ahead.

For what it’s worth, I don’t fully agree with Professor Schramm or the New York Post.

They are basically asserting that Biden’s wasteful spending is responsible for today’s grim inflation numbers.

I definitely don’t like Biden’s spending agenda, but I agree with Milton Friedman that it is more accurate to say that inflation is a monetary phenomenon.

In other words, the Federal Reserve deserves to be blamed.

The bottom line is that Keynesian monetary policy produces inflation and rising prices while Keynesian fiscal policy produces more wasteful spending and higher levels of debt.

I’ll close with a couple of caveats.

  • First, Friedman also points out that there’s “a long and variable lag” in monetary policy. So it is not easy to predict how quickly (or how severely) Keynesian monetary policy will produce rising prices.
  • Second, Keynesian deficit spending can lead to Keynesian monetary policy if a central bank feels pressure to help finance deficit spending by buying government bonds (think Argentina).

*Under specific circumstances, Keynesian policy can cause a short-term boost in consumption. For instance, a government can borrow lots of money from overseas lenders and use that money to finance more consumption of things made in places such as China. The net result of that policy, however, is that American indebtedness increases without any increase in national income.

P.S. You can read the letter from the pro-Keynesian economists by clicking here. And you can read a letter signed by sensible economists (including me) by clicking here.

P.P.S. Keynesianism is a myth with a history of failure in the real world.

It’s also worth pointing out that Keynesians have been consistently wrong with predicting economic damage during periods of spending restraint.

  • They were wrong about growth after World War II (and would have been wrong, if they were around at the time, about growth when Harding slashed spending in the early 1920s).
  • They were wrong about Thatcher in the 1980s.
  • They were wrong about Reagan in the 1980s.
  • They were wrong about Canada in the 1990s.
  • They were wrong after the sequester in 2013.
  • They were wrong about unemployment benefits in 2020.

Call me crazy, but I sense a pattern. Maybe, just maybe, Keynesian economics is wrong.

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I wrote a few days ago about Biden’s plan to impose punitive double taxation on dividends.

But that’s not an outlier in his budget. As you can see from this table from the Tax Foundation, he wants to violate the principles of sensible fiscal policy by having high tax rates on all types of income.

What’s especially disappointing is that he wants tax rates in the United States to be much higher than in other developed nations.

At the risk of understatement, that’s not a recipe for jobs and investment.

The Wall Street Journal editorialized about Biden’s taxaholic preferences.

Mr. Biden…is proposing $2.5 trillion in new taxes that would give the U.S. the highest or near-highest tax rates in the developed world. …The biggest jump is in taxes on capital gains, as the top combined rate would rise to 48.9% from 29.2% today. That’s a 67% increase in the government’s take on long-term capital investments. The new top rate would be more than 2.5 times the OECD average of 18.9%. Nothing like reducing the U.S. return on capital to get people to invest elsewhere. Mr. Biden would also lift the top combined tax rate on corporate income to 32.3% from 25.8%. That would leap over Australia and Germany, which have top rates of 30% and 29.9% respectively, and it would crush the 22.8% OECD average. …Mr. Biden would also put the U.S. at the top of the noncompetitive list for personal income taxes, with multiple increases that would put the combined American rate at 57.3%. Compare that with 42.9% today and an average of 42.6% across the OECD.

The WSJ‘s editorial contained this chart.

The United States would be on top for corporate tax rates if Biden’s plan is adopted (which actually means on the bottom for competitiveness).

The bottom line is that Biden wants the U.S. to have the highest corporate rate, highest double taxation of dividends, and highest double taxation of capital gains.

To reiterate, not a smart way of trying to get more jobs and investment.

P.S. The “good news” is that the United States would not be at the absolute bottom for international tax competitiveness.

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Modern tax systems tend to have three major deviations from good fiscal policy.

  1. High marginal tax rates on productive behavior like work and entrepreneurship.
  2. Multiple layers of taxation on income that is saved and invested.
  3. Distortionary loopholes that reward inefficiency and promote corruption.

Today, let’s focus on an aspect of item #2.

The Tax Foundation has just released a very interesting map (at least for wonks) showing the total tax rate on dividends in European nations, including both the corporate income tax and the double-tax on dividends.

Because it has a reasonably modest corporate income tax rate, some of you may be surprised that Ireland has the most onerous overall burden on dividends. But that’s because there are high tax rates on personal income and households have to pay those high rates on any dividends they receive (even though companies already paid tax on that income).

It’s less surprising that Denmark is the second worst and France is the third worst.

Meanwhile, Estonia and Latvia have the least-onerous systems thanks to low rates and no double taxation.

But what about the United States?

There’s a different publication from the Tax Foundation that shows the extent – a maximum rate of 47.47 percent – of America’s double taxation.

The bottom line is that the United States would rank #7, between high-tax Belgium and high-tax Germany, if it was included in the above map.

That’s not a very good spot, at least if the goal is more jobs and more competitiveness.

To make matters worse, Joe Biden wants America to be #1 on the list. I’m not joking.

I’ve already written about his plan for a higher corporate tax rate.

But he wants an even-bigger increases in the second layer of tax on dividends.

How much bigger?

Pinar Cebi Wilber of the American Council for Capital Formation shared the unpleasant details in a column last year for the Wall Street Journal.

The Biden administration has released a flurry of tax proposals, including a headline-grabbing tax hike on capital gains that would apply retroactively from April. Dividends would be subject to the same treatment, according to a recently released Treasury Department document. …the proposal would tax qualified dividends—dividends from shares in domestic corporations and certain foreign corporations that are held for at least a specified minimum period of time—at income-tax rates (currently up to 40.8%) rather than the lower capital-gains rates (23.8%).

I also like that the column includes references to some academic research.

A 2005 paper by economists Raj Chetty and Emmanuel Saez looked at the effect of the 2003 dividend tax cuts on dividend payments in the U.S. The authors “find a sharp and widespread surge in dividend distributions following the tax cut,” after a continuous two-decade decrease in distributions. …Princeton’s Adrien Matray and co-author Charles Boissel looked at the issue the other way around. In a 2019 study, they found that an increase in French dividend taxes led to decreased dividend payments. …Another study from 2011, looking at America’s major competitor, reached the same directional conclusion: A 2005 reduction in China’s dividend tax rate led to an increase in dividend payments.

Not that anyone should be surprised by these results. The academic literature clearly shows that it’s not smart to impose high tax rates on productive behavior such as work, saving, investment, and entrepreneurship.

Unless, of course, you want more people dependent on government.

P.S. Biden also wants American to be #1 for capital gains taxation. So at least he is consistent, albeit in a very perverse way.

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I’ve already written that massive spending increases for various bureaucracies is the most offensive part of Biden’s new budget.

But I explicitly noted that these huge budgetary increases (well above the rate of inflation, unlike what’s happening to incomes for American families) were not the most economically harmful feature of Biden’s plan.

That dubious honor belongs to either his massive expansion of the welfare state or his big tax increases.

In today’s column, we’re going to focus on his tax plan.

The Wall Street Journal editorialized a couple of days ago about what the president is proposing.

A President’s budget is a declaration of priorities, so it’s worth underscoring that President Biden’s new budget for fiscal 2023 proposes $2.5 trillion in tax increases over 10 years. His priority is taking money from the private economy and giving it to politicians to spend. …Raising the top income-tax rate to 39.6% from 37% would raise $187 billion. Raising capital-gains taxes, including taxing gains like ordinary income for taxpayers earning more than $1 million would snatch $174 billion. Raising the top corporate tax rate to 28% from 21%—a tax on workers and shareholders—would raise $1.3 trillion. Fossil fuels are hit up for $45 billion. We could go on… Let’s hope none of these tax-increases pass, but the Democratic appetite for your money really is insatiable.

That’s a damning indictment.

But the WSJ actually understates the problems with Biden’s tax agenda.

That’s because the White House also is being dishonest, as explained by Alex Brill of the American Enterprise Institute.

The budget proposes $2.5 trillion in net tax hikes, almost entirely from businesses and high-income households, and touts policies that would “reduce deficits by more than $1 trillion” over the next decade. But a short note in the preamble to the Treasury Department’s report on the budget reveals a sleight of hand: “The revenue proposals are estimated relative to a baseline that incorporates all revenue provisions of Title XIII of H.R. 5376 (as passed by the House of Representatives on November 19, 2021), except Sec. 137601.”In other words, the budget pretends that the failed effort to enact President Biden’s Build Back Better Act was a success and considers new budget proposals in addition to those policies. But you won’t find the price of the Build Back Better (BBB) Act (including its roughly $1 trillion in net tax hikes) in the budget tables.

I’m going to use this trick during my next softball tournament. I’m going to assume at the start that I’ve already had 20 at-bats and that I got an extra-base hit each time.

So even if I have a crummy performance during my real at-bats, my overall average and slugging percentage will still seem impressive.

Needless to say, my teammates would laugh at me, just as serious budget people understand that Biden’s budget is a joke.

But there is some good news. Barring something completely unexpected, Congress is not going to approve the president’s farcical plan.

P.S. Don’t fully celebrate. As I noted in my “Hopes and Fears for 2022” column, there is a risk that some sort of tax-and-spend plan might get approved. The only silver lining to that dark cloud is that it wouldn’t be nearly as bad as Biden’s full budget.

P.P.S. If that prospect gets you depressed, here are a couple of humorous images depicting Biden’s fiscal agenda.

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Since the economy suffers when tax rates go up and the burden of government spending increases, there obviously are plenty of awful features in President Biden’s newly released budget.

If I had to select a worst feature, though, I’d be tempted to pick the proposed spending hikes that Biden is seeking for some of Washington’s most-wasteful bureaucracies.

Here’s a chart from a story in today’s Washington Post (based on Table S-8 in the budget), which summarizes how much additional “discretionary spending” Biden is seeking.

Why am I upset about these proposed spending increases?

From a big-picture economic perspective, it’s bad fiscal policy to allow the burden of government spending to grow faster than the private sector.

And since Biden is projecting that real GDP will grown by 2.8 percent next year and inflation will be 2.1 percent during the same period (see Table S-9 of the budget), he obviously wants all these bureaucracies to enjoy big increases (unlike families, who are losing ground compared to inflation).

But I’m also irked from a targeted fiscal perspective. That’s because Biden wants giant spending increases for bureaucracies that should not even exist.

Here’s what I’ve written about some of them.

By the way, “worst feature” is not the same as most economically damaging feature.

There are two other parts of Biden’s budget that definitely will cause more harm.

These tax increases and entitlement expansions will do considerably more damage than the discretionary spending increases excerpted above.

But it’s still an outrage that Biden is shoveling more money at some of Washington’s most wasteful and counterproductive bureaucracies.

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The good thing about being a policy-driven libertarian is that I don’t feel any need to engage in political spin.

I can praise Democrats who do good things and praise Republicans who do good things. And also criticize members of either party (sadly, that’s a more common task).

It also means I don’t believe in blaming politicians for things that are not their fault. For example, NBC just released a poll showing that Joe Biden has low marks for economic policy.

Some of that is appropriate (his fiscal policy is atrocious, to cite one reason), but I think the answers to this question show that the president is getting a bum rap on one issue.

Why am I letting Biden off the hook about monetary policy?

For the simple reason that the Federal Reserve (the “Fed”) deserves the blame. The central bank’s inflationary policies are the reason that prices are rising.

One can claim that Joe Biden is partly to blame because he recently re-nominated Jay Powell, the current Chairman of the Fed. But, if that’s the case, then Donald Trump also is partly to blame – or even more to blame – because he nominated Powell in the first place.

Moreover, as illustrated by this chart, the Fed’s mistake that led to rising prices occurred in early 2020.

Simply stated, the Fed pumped lots of liquidity into the system. That set the stage for today’s price increases (as Milton Friedman told us, there’s always a lag between decisions about monetary policy and changes in prices).

If you look closely, you’ll notice that this massive monetary intervention began nearly one year before Biden took office.

Given his support for Keynesian fiscal policy, I suspect Biden also believes in Keynesian monetary policy. As such, we presumably would have had the same policy if Biden had been elected in 2016.

In other words, Biden would have been just like Trump. At least on this issue.

But none of that changes the fact that Biden’s actions since becoming president have very little to do with today’s price increases.

Let’s close with a few additional observations about the aforementioned polling results.

  • The folks at NBC deserve some criticism for failing to give people the option of choosing the Federal Reserve’s monetary policy. I’m guessing this was because of ignorance rather than bias.
  • The people who blamed “corporations increasing prices” obviously didn’t pay attention in their economics classes. Rising prices are a symptom of inflation, not the cause.
  • The people who blamed Putin for inflation are even more ignorant. At the risk of stating the obvious, a Russian invasion in February of 2022 obviously wasn’t responsible for rising prices in 2021.

P.S. The inflation-recession cycle caused by bad monetary policy could be avoided if the Fed was constrained by some simple rules.

P.P.S. Or maybe, just maybe, we should reconsider the role of central banks.

P.P.P.S. For what it’s worth, very few politicians have the intelligence and fortitude to support good monetary policy.

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Having addressed Biden’s track record on subsidies, inflation, protectionism, household income, and fiscal policy, let’s finish our series by reviewing the president’s record on regulatory issues.

The first place to start is the Federal Register, which is Uncle Sam’s official site for new rules.

Though it gives us conflicting information. The number of pages (a crude measure of regulatory zeal, as I noted a few years ago) actually decreased during Biden’s first year. But only compared to Trump’s last year.

To understand what’s really going on, let’s look at the Forbes article from which the above table was taken.

Clyde Wayne Crews of the Competitive Enterprise Institute sifts through the data and concludes that Biden is a fan of expanded red tape.

The Federal Register is the daily depository of rules and regulations produced by hundreds of federal departments and agencies. …Under Biden, the regulatory establishment has its Hall Pass back, and it shows. The Federal Register page count ended the year with 74,532 pages. …The 2020 count under Trump was far higher, at 86,356. There had been “only” 61,308 pages back in Trump’s first year of 2017, which had been the lowest count in a quarter-century… Trump’s first year represented a 35 percent drop… But Trump’s final year made him number two… How come? Well, …removing rules that ought not have been written in the first place still requires writing new rules to do it. …So, paradoxically, any concerted Trump moves on “one-in, two-out” in service of deregulating and removing that which came decades before required fattening the Register to some extent. …Despite Biden’s lower Federal Register page count, we’re nonetheless back in the mode of not just unapologetically but combatively fattening the Federal Register. …several hundred of Trumps rules had been deemed “deregulatory” for purposes of his one-in, two-out program… Biden’s revivalist counts are embedded with no such purpose… Trump definitely left a mark. Biden is working on erasing it.

Incidentally, I don’t think regulatory experts from the left would disagree with the above assessment.

For instance, Brookings has a regulatory tracker that monitors what’s been happening since Biden took office and you will not find any evidence that the current administration is interested in limiting or reducing red tape.

Let’s wrap up by looking at a specific example of Biden’s regulatory excess. It’s about domestic energy production, which is a very timely issue given what is happening in Ukraine.

Ben Cahill of the Center for Strategic and International Studies summarized some of what Biden did to hinder America’s ability to produce energy.

President Joe Biden has followed through on a campaign pledge by introducing a moratorium on new oil and gas leasing on federal lands and waters. With nearly 25 percent of U.S. oil and gas production coming from federal lands, the policy shift may have significant implications for future investment and production. …This pause will not affect existing operations or permits for existing leases, and private lands will not be affected. …A more permanent leasing ban would have a significant impact, although visible offshore production declines may not materialize for up to 10 years, given the typical timeframe for planning, exploration, appraisal, and development. Onshore production declines could conceivably show up faster.

As you can see, the main damage is to future energy production rather than current energy production.

Needless to say, the same is true about the Biden Administration’s limitations on energy exploration and development in Alaska.

And don’t forget about pipelines (and geopolitics!), as mentioned in this column by Kevin Williamson for National Review.

The Biden administration already is reaching out to Caracas, where officials describe the initial conversation as “cordial” and “respectful.” I’ll bet it is. And Maduro’s isn’t the only tyrannical tuchus that requires kissing: President Joe Biden is said to be planning a personal trip to Riyadh to beg Crown Prince Mohammed bin Salman to ramp up Saudi production. …Right about now, President Biden must be wishing he had an extra pipeline to Canada. The thought has occurred to Alberta premier Jason Kenney, who observes about Keystone XL: “If President Biden had not vetoed that project, it would be done later this year — 840,000 barrels of democratic energy that could have displaced the 600,000 plus barrels of Russian conflict oil that’s filled with the blood of Ukrainians.” …We could spare ourselves some of these calculations by maximizing our own output — not only of crude oil and natural gas but also of refined-petroleum products. That would also mean building the necessary pipeline infrastructure and reforming our antiquated maritime regulations to enable the transportation of those fuels.

The bottom line is that the Biden Administration wants more regulation and red tape.

That has adverse consequences for economic dynamism and growth.

Especially when bureaucrats at the regulatory agencies ignore cost-benefit analysis (or put their thumbs on the scale to get a result that matches their ideological preferences).

And, in the case of energy, regulatory policy can have significant geopolitical implications as well.

P.S. You can click here to learn something about Obama’s record on the issue, and click here to learn a bit about Trump’s track record as well.

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Our series on the failure of Bidenomics has touched on four topics.

For our fifth edition, let’s turn our attention to the president’s misguided fiscal policy.

This means analyzing three pieces of legislation.

First, his so-called stimulus was approved last year, adding $1.9 trillion to the nation’s fiscal burden. The president and his team claimed it would lead to four million additional jobs, but the net result was a drop in employment compared to the White House’s own projections.

Second, his costly infrastructure plan also was approved last year, though only a small fraction of new spending was actually for roads and bridges (and even that spending should be handled by state and local governments).

Third, his “Build Back Better” proposal dramatically would expand the burden of government spending – by $5 trillion over the next decade! Along with a plethora of economy-sapping tax increases.

Regarding the third item, the president so far has not been able to convince all Democratic senators to support the scheme. And with the Senate evenly split between the two parties, Biden needs all of their votes to get his plan approved.

With any luck, that will never happen.

So what is the plan wrong? Along with several hundred other economists, I signed on to this letter explaining why Biden’s massive expansion of the welfare state would be bad news for the country.

The most important part of the statement is that bigger government would “reduce the number of people working, badly misallocate capital, and hobble economic growth.”

Based on research from the Congressional Budget Office, the damage would be enormous, reducing worker compensation by $1.6 trillion over the next ten years.

What about the other issues mentioned in the statement, such as debt and inflation?

It’s not good that debt goes up, of course, but that’s a symptom of the bigger problem, which is government consuming a greater share of the nation’s output.

Also, at the risk of being annoyingly pedantic, I don’t actually think Biden’s budget would increase inflation. That only happens if the Federal Reserve adopts bad monetary policy.

That being said, central banks are more likely to adopt bad monetary policy when politicians are following bad fiscal policy. So the core assertion is correct.

P.S. I don’t know whether to characterize this as absurd, pathetic, addled, or dishonest, but Joe Biden actually claimed his budget plan has zero cost.

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As part of my ongoing efforts to show that free enterprise produces better results than statism, I often use data on per-capita economic output – especially when comparing nations over long periods of time.

And I’ll sometimes build upon those numbers by comparing consumption levels in different nations.

But what if we’re looking at one country rather than several nations?

In the case of the United States, it is useful to peruse data on GDP and consumption, but I’m also a big fan of using the Census Bureau’s data on inflation-adjusted median household income (though even this data isn’t perfect because household sizes are declining over time).

These numbers allow us to gauge, over multi-year periods, whether government policies are making life better for average families. Or whether they are producing stagnation.

But what if we don’t have several years of data?

That’s a very relevant question since we’re in the midst of my series on Bidenomics.

The president has only been in office for a little over one year, so we don’t even have medium-run data, much less long-run data. Moreover, I’m always cautious about using data for just one month, one quarter, or one year. After all, you don’t know if something is a real trend, or just a statistical blip.

That being said, if we want to give a preliminary grade to Biden’s economic performance, the best data would be inflation-adjusted earnings.

On this basis, Joe Biden is doing a bad job. Here’s Chart 1 from the Bureau of Labor Statistics’ report on what happened to hourly earnings in 2021, adjusted for inflation.

At the risk of stating the obvious, it’s not good news if most of the bars are in negative territory. I’ve also highlighted (in red) the key takeaways for the year.

Sophisticated observers will point out that hourly earnings are only one piece of the compensation puzzle.

So I then went to the Bureau of Labor Statistics’ report that also includes fringe benefits.

And if you look at Chart 4, which measures compensation after adjusting for inflation, you’ll notice very depressing data for 2021.

Now that we’ve looked at some grim data, let’s contemplate whether Joe Biden deserves blame.

The answer is probably yes, but I’ll share five caveats.

  • First, it’s just one year of data, so always be wary of statistical blips (maybe inflation is just transitory).
  • Second, only a few Biden policies have actually been enacted (though I’m not a fan of his biggest achievement).
  • Third, those policies may not have been in place long enough to have a meaningful effect on the economy.
  • Fourth, keep in mind that the pandemic scrambled economic data (though perhaps in a way that should have meant a boom in 2021).
  • Fifth, bad news in 2021 could merely be a continuation of a preexisting trend, in which case Trump maybe deserves blame.

Regarding the final point, notice in Chart 4 that the data was heading south at the end of 2020, when Trump was still in the White House.

Was that merely a statistical blip? If not, were the numbers bad because of something Trump did, or were they related to the pandemic? Or perhaps the bad numbers at the end of 2020 were related to investors and entrepreneurs fearing a future Biden agenda?

The bottom line is that we should ignore partisan labels and instead focus on policy. If government is becoming a bigger burden, then we can expect slower growth.

As such, it is very reasonable to think that 2021’s bad data is – at least in part – a consequence of Biden’s dirigiste policy agenda.

P.S. If he is able to resuscitate his so-called Build Back Better plan, expect more bad data in 2022.

P.P.S. For previous columns in this series, click here, here, and here.

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In Part I of this series, I pointed out that Biden’s plethora of proposed handouts and subsidies would lead to higher prices and more inefficiency. And in Part II, I explained that his discussion of inflation was embarrassingly inaccurate.

In today’s column, we’re going to analyze his strident support for protectionist “Buy America” provisions, which drive up costs for taxpayers by making it harder for foreign firms to compete for government contracts and thus give American firms the ability to charge higher prices.

How much of a burden are these policies? How much more are taxpayers having to pay because governments can’t opt for the lowest qualified bidder?

According to research shared by the Peterson Institute for International Economics (PIIE), American taxpayers lose $94 billion per year.

The good news (if we have a very generous definition of “good”) is that procurement protectionism “only” pushes up costs in the United States by 5.6 percent.

Our dirigiste friends in the European Union suffer much more. Their procurement protectionism results in average markups of 17.6 percent, costing European taxpayers a staggering $471 billion.

But taxpayers are not the only losers.

In a 2017 study for PIIE, Gary Hufbauer and Euijin Jung explain that nations also lose exports because of procurement protectionism.

Buy American provisions are often enacted because politicians associate the patriotic slogan with the creation of domestic jobs. In fact, these laws are counterproductive: They are costly for taxpayers, they curtail exports, and they lose more jobs than they create. “Buy American” was bad policy in 1930 and does even more harm today. …Buy American dulls competition for everything that federal, state, and local governments purchase. Consequently, taxpayers pay inflated prices for new infrastructure, the latest information technology, and routine maintenance of subways, bridges, and airports. …Quantification is difficult, but the major federal Buy American laws probably equate to tariff equivalent barriers of at least 25 percent on federal purchases. State laws vary in scope and protective degree, but on average they probably entail at least 10 percent tariff equivalent barriers. …When Buy American policies are championed at home they are emulated abroad—in the form of Buy European, Buy Mexican, Buy Japanese, and other local content laws and policies. Consequently, US goods and services face severe barriers in foreign procurement markets. …US exports could expand by $189 billion annually if OECD countries all repealed their existing local content laws.

The Heritage Foundation’s Tori Smith authored a report when Trump was pushing his version of procurement protectionism. Here’s some of what she wrote.

Domestic content requirements, like those found in the Buy American Act, the Berry Amendment, and various other laws, result in additional regulatory burdens for producers, and increase costs for American taxpayers. All for little or no gain: The policies are unlikely to stimulate job growth in target industries. …Existing laws and provisions regarding domestic content requirements…are extremely onerous and complicated burdens. They have three main effects: (1) creating additional regulatory hurdles for producers; (2) costing American taxpayers more than they would otherwise pay for government projects; and (3) they are unlikely to yield job growth in target industries like the steel sector.

Here are the most important passages from her report.

…to eliminate all existing domestic content requirements….would create hundreds of thousands of American jobs across the country and contribute billions of dollars to U.S. gross domestic product.

And this chart shows how various states would benefit if there was open competition for government procurement.

I’ll close with three additional points.

First, it’s disappointing that Biden is continuing Trump’s protectionist policies. It’s even more disappointing that he wants to expand upon them. This is one area where people thought Biden might move policy in the right direction.

For some historical perspective on the failure of the Trump-Biden approach, the National Taxpayers Union helpfully shared the views of Harry Truman and Dwight Eisenhower.

Second, some national security experts make a very reasonable argument that the Pentagon should not make itself dependent on purchases from nations such as China.

But this is at most an argument for “Buy from Allied Nations,” not an argument for “Buy America.”

Third, Biden is perversely consistent. Everything he is doing will increase costs for taxpayers and consumers in order to bestow undeserved benefits on special-interest groups.

P.S. The argument for competition in the market for government procurement is the same as the general argument for free trade. And since we’re on the topic of trade, remember that dollars sent overseas as part of a procurement contract will come back to the United States, either to purchase American exports or as part of investment in the U.S. economy.

P.P.S. None of this changes the fact that the public sector should be much smaller. In a libertarian society, there would be far lower levels of government procurement.

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Yesterday’s column explained that Biden’s proposals to expand the welfare state were bad news, in part because government subsidies often lead to inefficiency and higher prices.

That’s not a smart strategy when inflation already is at 40-year highs.

President Biden did address the topic of rising prices during his speech, but his approach was so incoherent that even Larry Summers (Treasury Secretary for Bill Clinton and head of the National Economic Council for Barack Obama) felt compelled to share some critical tweets.

This is remarkable. I’ve spent the past three decades fighting against some of Summers’ bad ideas on fiscal policy (he was a big supporter of the OECD’s anti-tax competition project, for instance).

But now we’re sort of on the same side (at least on a few issues) because Biden has embraced a reckless Bernie Sanders-type agenda of budget profligacy, class-warfare taxes, regulatory excess, and crass protectionism that is too extreme for sane people on the left.

Along with a head-in-the-sand view of monetary policy.

In a column for Canada’s Fraser Institute, Robert O’Quinn and I addressed Biden’s strange comments on inflation.

Here’s some of what we wrote on that topic.

After a disastrous first year pursuing an agenda that became increasingly unpopular, President Biden had an opportunity to reset his administration in a centrist direction as part of his first State of the Union Address. But he didn’t. On every domestic issue, he catered to the Democratic Party’s hardcore left-wing activists… Inflation, as Nobel laureate Milton Friedman observed, is always and everywhere a monetary phenomenon. …In his speech, Biden ignored the true cause of inflation. Instead, he offered a grab bag of statist ideas such as aggressive antitrust enforcement, price controls on prescription drugs, and tax credits for energy conservation and green energy—policies that, whatever their merits, have little or nothing to do with inflation.

Our basic message is that Biden ignored the real cause of inflation (bad monetary policy by the Federal Reserve) and instead came up with ideas (either bad or irrelevant) to addresses the symptom(s) of inflation.

We also noted that Biden’s nominees to the Federal Reserve are underwhelming.

Moreover, he has been pushing three controversial nominees to the Federal Reserve Board—Sarah Bloom Raskin, Lisa Cook and Philip Jefferson—who lack monetary expertise and are generally regarded as inflation doves. Raskin’s primary “qualification” is her support for using the Fed’s regulatory powers to divert credit away from oil and natural gas production. Cook and Jefferson have primarily written about poverty and race, which are outside of the Fed’s legislative mandate.

What we need is a president – like Ronald Reagan – who understands that the inflation genie needs to be put back in the bottle and thus pushes the Federal Reserve in the right direction.

Instead, we have a president who thinks it’s a place where left-leaning activists should get patronage appointments.

P.S. If you have the time and interest, here’s an 40-minute video explaining the Federal Reserve’s track record of bad monetary policy.

P.P.S. If you’re constrained for time, I recommend this five-minute video on alternatives to the Federal Reserve and this six-minute video on how people can protect themselves from bad monetary policy.

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Joe Biden’s economic policy has been a disaster.

  • He’s bad on the issues where Trump was bad (spending and trade).
  • He’s bad on the issues where Trump was good (most notably, taxes).
  • And he’s bad on the issues where Trump had a mixed record (regulation).

Based on his track record as a long-time Senator, none of this is a surprise. According to vote ratings from the Club for Growth and National Taxpayers Union, Biden was to the left of even Crazy Bernie.

Unfortunately, a bad president (anyone remember Nixon?) can do a lot more damage than a bad senator.

Today is Part I of a series of columns analyzing Biden’s failure.

We’ll start with his so-called Build Back Better plan. Joe Biden didn’t explicitly mention “BBB” is his State of the Union address, but he did promote almost all of the specific policies that are in that plan.

And he even made the preposterous argument that some of those policies would help bring inflation under control.

I’ve repeatedly explained why the president’s plan for a bigger welfare state is bad news, but this tweet from Americans for Prosperity’s Akash Chougule does a great job of debunking Biden’s argument in a very succinct fashion.

You may recognize the chart. As I pointed out last year, it shows that prices rise rapidly in areas where government subsidies distort the market.

In areas where the free market operates, by contrast, prices actually tend to decline.

I’ll close with the observation that Biden’s Build Back Better is a clunky amalgamation of new and expanded entitlements. His per-child handout is the most expensive, and it’s especially pernicious because it would undo the success of Bill Clinton (and Newt Gingrich’s) welfare reform.

But if there was a prize for the most economic damage per dollar spent, Biden’s scheme for government-dictated childcare would be the worst of the worst since he subsidizes demand while also restricting supply. If it gets approved, the chart may need a new vertical axis because Biden will screw up the market for childcare even more than the government has screwed up the markets for health care and higher education.

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Other than just-for-the-fun-of-it election predictions, I generally stick to economic analysis rather than politics.

But I acted as a pundit in this interview about Joe Biden’s waning popularity (in my defense, I also used the opportunity to slip is some criticism of his agenda).

My assertions about Biden pushing a hard-left agenda aren’t new.

I made the same point during the 2020 election campaign.

And I take second place to nobody in criticizing what he’s been doing ever since he got inaugurated.

Indeed, the only thing I’m uncertain about is whether I should be more upset about his class-warfare tax agenda or his proposals to expand the burden of government spending.

And, for what it’s worth, I don’t think my comments about Biden’s leftist ideology are controversial. Not even back in 2020.

For instance, here’s the headline from a Vox column that year by Matt Yglesias.

And here’s a headline from a column that same year by Michael Kazin in the New York Times.

Both of those columns said the same thing – namely, that Biden had embraced a leftist agenda (and both authors were very happy about that development).

I also would direct people to this 2019 Washington Post column by Lane Kenworthy, which observes (with approval) that Democrats have moved to the left.

If you want even more evidence, this analysis from 538 also makes the same point.

And a report from Pew notes that there’s a much bigger gap now between Republicans and Democrats – and it’s almost entirely because the median Democrat is now much farther to the left.

There’s one other point from my RT interview that’s worth highlighting.

I mentioned that we’ve had a strange realignment in the United States. Many rich people have moved to the left while lots of low-income people have moved to the right.

Is this because Democrats are pushing some policies that disproportionately help upper-income people, such as student loan bailouts and expanding the deduction for state and local taxes?

Maybe that’s part of the answer, but I mentioned in the discussion that social and cultural issues are probably the main reason.

In other words, wokeness may be the big dividing line nowadays in American politics – which is not exactly good news for libertarians who want the focus to be statism vs. liberty.

P.S. I also used the interview to explain that Reagan was special because he was able to enact big changes (notwithstanding America’s separation-of-powers system). But unlike other presidents who oversaw big changes (such as LBJ and FDR), Reagan actually pushed through reforms that were good for the nation.

P.P.S. I don’t like the idea of government-financed media, but my philosophical objections haven’t prevented me from appearing on PBS, BBC, and France 24, so I figured it was okay to also appear on Russia Today.

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At the risk of understatement, economists are not good forecasters.

And they are especially incompetent when they make forecasts based on bad policy, such as when the Obama White House projected that his so-called stimulus would quickly lead to falling unemployment.

In reality, the jobless rate immediately increased and then remained much higher than projected for the remainder of the five-year forecast.

The failure of Obama’s stimulus should have been a learning moment for Washington politicians.

But Joe Biden must have slept through that lesson because his first big move after taking office was to saddle the nation with a $1.9 trillion “stimulus” package.

The White House claimed this orgy of new spending would lead to four million additional jobs in 2021, on top of the six million new jobs that already were expected.

So what happened? Matt Weidinger of the American Enterprise Institute looked at the final numbers for 2021 and discovered that employment actually fell compared to pre-stimulus baseline projection.

The nonpartisan Congressional Budget Office projected on February 1, 2021…a gain of 6.252 million jobs over…2021…we now know payroll employment in the fourth quarter of 2021 averaged 148.735 million — an increase of 6.116 million compared with the average of 142.619 million in the fourth quarter of 2020. That means the job growth the President praised this week has fallen 136,000 jobs short of what was expected under the policies he inherited. …President Biden and congressional Democrats promised their $1.9 trillion American Rescue Plan would create millions of additional new jobs this year — on top of what White House economists called the “dire” baseline of 6.252 million new jobs reflected in CBO’s projection without that enormous legislation. …House Speaker Nancy Pelosi (D-CA) repeated that claim, stating that “if we do not enact this package, the results could be catastrophic,” including “4 million fewer jobs.” Yet…not one of those four million additional jobs supposedly resulting from that $1.9 trillion spending plan has appeared, as job creation in 2021 did not even match CBO’s projection without that legislation.

Below you’ll see the chart that accompanied the article.

As you can see, the White House projected more than 10 million new jobs (right bar).

Yet we would up with 6.1 million new jobs (left bar), about 140,000 less than we were projected to get (center bar) without wasting $1.9 trillion.

If pressed, I’m sure the Biden Administration would use the same excuse that we got from the Obama White House (and from the Congressional Budget Office), which is that the initial forecast was wrong and that the so-called stimulus did create jobs.

In other words, the Biden economists now would say they should have projected 2 million new jobs, which means that the $1.9 trillion spending spree added 4 million jobs, for a net increase of 6 million.

You may think I’m joking, but that is exactly how the Keynesian economists tried to justify Obama’s stimulus failure.

The moral of the story is that the best way to really create jobs is to get government out of the way rather than adding new burdens.

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It’s an annual tradition (2021, 2020, 2019, 2018, etc) to list a handful of things that I hope might happen in the upcoming year, as well as the things I fear may happen.

Sadly, since I understand the economics of “public choice” (something Thomas Jefferson also implicitly understood) it’s always easier to envision the latter category.

But it’s good to begin a new year with optimism, so here are the good things that hopefully will happen in 2022.

Biden’s So-Called Build Back Better Stays Dead – The President squandered money on a fake stimulus and an infrastructure boondoggle, but we dodged the biggest bullet when Democrats couldn’t get all 50 of their Senators to support a multi-trillion dollar, growth-sapping expansion in taxes and spending.

The Supreme Court Ends Civil Asset Forfeiture – This was on my list last year, but the odious practice of “theft by government” continues. That being said, I still think it won’t survive if the Supreme Court has a chance to make a ruling (especially since America’s best Justice is very aware of the problem).

Republicans Win Congress in 2022 – I don’t have much faith in Republicans to do the right thing (especially when a Republican is in the White House), but I hope they win the House and Senate in November because they will oppose big tax increases while Democrats control the White House – even if only for partisan reasons.

In the “honorable mention” or “runner-up” category, I also hope to see further progress for school choice in 2022.

And I used to list a collapse of Venezuela’s reprehensible socialist government as one of my annual “hopes,” but I’ve largely given up (particularly since Latin Americans seem foolishly susceptible to “leftist saviors“).

Now let’s shift to the bad things that I fear will happen over the next 365 days.

Biden’s BBB Budget Plan Springs Back to Life – The President’s “Build Back Better” plan may be on life support, but sadly it’s not quite dead. I fear a scaled-down (but still horrible) version of the legislation may get approved this year. Senator Manchin of West Virginia, for instance, says he is willing to support a $1.5 trillion package and I fear the left eventually will decide that 50 percent of a (moldy and weevil-ridden) loaf is better than none.

Biden’s Remains a Protectionist – I hoped last year that Biden would reduce government trade taxes. Not because he believes in economic liberty, but simply because he wouldn’t want to continue a Trump-era policy. But that didn’t happen, and I now fear he’ll continue with protectionism in 2022. I don’t even have much hope that he’ll resuscitate the World Trade Organization.

New Tax Cartels – One of last year’s big defeats was the creation of a global tax cartel by governments. Barring some sort of miracle that prevents implementation, greedy politicians have set up a system that will require all nations to have a minimum corporate tax of 15 percent. That’s very bad news for workers, consumers, and shareholders, but I’m even more worried about the precedent it creates for additional tax cartels and ever-higher tax rates.

I’ll close by noting that last year’s list included the possibility of Kamala Harris becoming president.

But Biden has been so bad that it’s unclear that Harris would make things worse.

P.S. For the “fears” category, I could – and probably should – list entitlements every single year. Simply stated, the country is in deep long-run trouble because of an aging population and poorly designed tax-and-transfer programs. Years ago, I was semi-hopeful that we would get Medicaid and Medicare reform.

Now that seems like a distant dream and the real battle is preventing further entitlement expansions such as Biden’s per-child handout.

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Per tradition (2020, 2019, 2018, etc), we highlight the best and worst developments of the year on December 31.

The choices are based on whether a particular policy increases or decreases individual liberty, either in a big way or a symbolic way.

Interestingly, the coronavirus pandemic doesn’t show up on either the good list or bad list.

Why? Because governments continue to make things worse, but not in ways that are significantly new or different.

With that in mind, let’s look at what happened in 2021, starting with the good news.

The Death of (the horribly misnamed) Build Back Better – President Biden somehow decided a very narrow victory over a very unpopular incumbent meant that he had a mandate for a radical expansion of the welfare state, accompanied by a plethora of class-warfare tax increases. Fortunately, Congress did not approve Biden’s growth-sapping plan.

School Choice Advances – Led by a sweeping plan to empower parents in West Virginia, there were many encouraging victories this year for school choice. And as teacher unions continue to mishandle the pandemic, there’s hope for continued progress next year.

Arizona Tax Reform – Several states lowered tax rates in 2021, but what happened in Arizona deserves special attention. Lawmakers reversed the outcome of a class-warfare referendum, meaning the state’s top tax rate on households will be 4.5 percent rather than 8 percent.

Speaking of referendum results, if we had an “honorable mention” or “runner-up” category, I would list three results from  2021

Now let’s look at the three worst policy developments of 2021.

Biden’s Fake Stimulus and Infrastructure Boondoggle – Even though the so-called Build Back Better plan failed to advance, President Biden was able to significantly increase the burden of government spending with a supposed stimulus plan early in the year, followed by a grab-bag of special-interest handouts as part of “infrastructure” legislation later in the year.

Chile Elects a Hard-Core Leftist President – Much to my dismay, Chilean voters opted for a hard-core leftist president who wants to dismantle the nation’s very successful private social security system. The most economically successful nation in Latin America is now in danger of becoming another Argentina. Or worse.

Global Tax Cartel – While Biden’s proposal for a higher corporate tax rate in the United States did not succeed, he seems to have successfully paved the way for a global tax cartel that will require all nations to have a corporate tax rate of at least 15 percent. This is a victory for politicians over workers, consumers, and shareholders. And it creates a very dangerous precedent.

Let’s also have an honorable mention for bad news.

One positive development during the Trump years was the unwinding of regulations that forced Americans to use crummy, low-flow showerheads.

Well, that victory was short-lived, as captured by this headline from a Reason article.

For what it’s worth, I suspect this bit of bad news will be followed by some bad news on a related issue.

P.S. I thought about including inflation as one of the bad things that happened in 2021, but I think that’s the results of years of misguided monetary policy. Politicians from both parties seem perfectly happy with Keynesian policy from the Federal Reserve.

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The fight over President Biden’s budget, the so-called Build Back Better plan, has revolved around very important issues.

For today’s column, let’s zoom out and look at two charts that highlight the big issue that should be getting more attention.

First, here’s a comparison of projected inflation with baseline spending (the current spending outlook) and Biden’s budget – all based on economic and fiscal estimates from the Congressional Budget Office.

As you can see, spending was growing far too fast even without Biden’s budget. And if Biden’s budget is enacted, the spending burden will rise more than twice the rate of inflation.

Now let’s look at a chart that illustrates why Biden’s spending spree is just a small part of the problem.

To be sure, it’s not good that the President is exacerbating America’s fiscal problems, but you can see that he’s simply adding a few more straws to the camel’s back.

You’ll also notice that I included both the amount of spending that technically is in Biden’s budget plan (the orange part), as well as CBO’s estimate of the additional spending (the gray part) that will happen if the budget gimmicks are removed.

The bottom line is that America’s fiscal problem is too much government spending.

And that spending burden is getting worse over time because spending is growing faster than the private sector, violating the Golden Rule, which is bad news for jobs and growth.

Making the problem worse, as Biden proposes, will further hurt American prosperity.

P.S. Biden’s plan will increase the deficit, which also is not good, but keep in mind that tax-financed spending is no better than debt-financed spending. In either case, you wind up with the same bad result.

P.P.S. This column has two serious visuals to help understand Biden’s fiscal policy. If you prefer satire, here are two other images.

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I’m not a fan of Joe Biden’s economic policy, particularly his tax-and-spend agenda.

I also don’t approve when the Biden Administration uses phony numbers and phony arguments.

But what’s really baffling is the use of accurate numbers to make dumb arguments.

What do I mean by that? Well, here’s a tweet from the Democratic Congressional Campaign Committee celebrating a 2¢-per-gallon reduction in gas prices over a two-week period.

There’s only one problem with this tidbit of data.

If you look at what’s happened to gas prices during Biden’s time in office, the recent 2¢ reduction is swamped by $1 increase over the past year.

So how and why did the White House screw up?

Tim Carney of the Washington Examiner wrote about this strange episode.

The Democratic Congressional Campaign Committee has just produced and tweeted the worst chart of 2021. It is a line graph of gas prices with three data points covering a two-week time span. The absurd dishonesty comes when you look at the y-axis. Each horizontal line represents half of a cent. …Gas prices have nearly doubled over the past 18 months, and Biden’s allies are holding a parade for a less-than-1% drop over two weeks. Thanks, Joe Biden! …So, how did this horrible chart happen? It seems someone at the DCCC took seriously a joke made by liberal blogger Matt Yglesias. …Ron Klain, White House chief of staff (presumably not understanding the tweet was a joke), liked the tweet before the DCCC put it out sincerely.

This is the political equivalent of leading with your chin.

And it’s not the only example.

Here’s a retweet from the White House Chief of Staff, Ronald Klain, celebrating a very tiny improvement in the labor force participation rate.

In this case, there’s nothing disingenuous about the chart. We actually get to see several years of data.

But does this small uptick in the labor force participation rate actually mean that “America is back at work”?

Call me crazy, but it seems that the main takeaway from the chart is that the country is still way short of getting back to pre-pandemic levels of employment.

Which raises the obvious question of whether Biden’s redistribution agenda is making it easier for people to live off the government rather than be part of the workforce.

P.S. My criticisms of Biden are not driven by partisanship. I’m also not a fan when Republicans enact bad policy.

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Earlier this year, extrapolating from a study by the nonpartisan Congressional Budget Office, Robert O’Quinn (former Chief Economist at the Department of Labor) and I authored a study on the economic impact of Biden’s fiscal plan.

The results are not pretty.

Lost jobs, lost wages, lower living standards, and lost competitiveness.

But those estimates were based on the parameters of Biden’s economic plan in the summer.

His agenda has since been modified, which raises the question of how the current proposal would affect economic performance.

In a piece for Canada’s Fraser Institute (publishers of Economic Freedom of the World and Economic Freedom of North America), Robert and I updated our numbers and explained the implications of Biden’s tax-and-spend agenda.

According to independent experts at the Committee for a Responsible Federal Budget, the actual cost of the president’s policies is closer to $4.9 trillion. Some of this new spending will be financed with red ink, but President Biden also has embraced higher tax rates on work, saving, investment and entrepreneurship. Indeed, if his plan were enacted, the United States would have both the highest corporate tax rate and the highest capital gains tax rate in the developed world. …But how much would the economy be hurt? There are groups such as the Tax Foundation that do excellent work measuring the adverse effects of higher tax rates. But it’s also important to measure the harmful impact of a bigger welfare state. …Based on that CBO study, and using the CBO fiscal and economic baselines, we calculated the following unpalatable outcomes if Build Back Better bill (pushed by the president and Democrats in Congress) becomes law and growth is reduced by 2/10ths of 1 per cent per year.

And here are the results.

The good news is that the latest version of Biden’s plan doesn’t do quite as much damage as what was being discussed earlier this year.

The bad news is that our economy will be much weaker (and our results are in line with other estimates, including those done before the election and since the election).

Not that we should be surprised. If the United States becomes more like Europe, we’ll be more likely so suffer from European-style anemia.

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For self-interested reasons, I obviously like my video on the merits of free trade and the downside of protectionism.

But now I’ll also be recommending this new video from Liberty International.

It has some great examples, such as Washington’s corrupt trade barriers to sugar (as well as other examples of foolish agriculture subsidy programs).

And there’s some excellent analysis of how developing nations are hurt by the double-edged sword of protectionism and foreign aid.

What happened to Haiti is especially tragic.

My only criticism (and this is a sin of omission) is that there wasn’t enough time to explain why people shouldn’t fixate on the trade deficit – which is, after all, simply the flip side of a capital surplus.

For purposes of today’s column, though, I want to focus more on the politics of trade rather than the economics of trade.

That’s because Trump and Biden are basically the Bobbsey Twins of protectionism.

In his New York Times column, Binyamin Appelbaum explains why Trump’s China tariffs backfired.

I obviously agree, but Appelbaum only mentions in passing that Biden has not done much to reverse that policy.

Tariffs on imports from China have refilled the employee parking lot at Stoughton Trailers in Evansville, Wis. …the rest of us are paying for those jobs. The tariffs have contributed to a shortage of chassis in the middle of an import boom, one reason that American ports are gridlocked. Tariffs also drive up prices. American chassis are beginning to roll off production lines, but they cost more than pretariff Chinese chassis, which raises the price of everything that travels by chassis. …the government has decided to limit competition, a lazy approach that is both expensive and counterproductive. Taxing imports from China gives the appearance of punishing China, but the cost of the tariffs is paid by Americans. …Mr. Biden should make a clean break with Mr. Trump’s destructive tariffs. The right recipe is simple…, maintain an environment in which companies can flourish, ensure workers reap the benefits.

So at what point do Trump’s tariffs become Biden’s tariffs?

Technically, we hit that point in late January of 2021.

To make matters worse, Biden is also imposing new trade taxes on American consumers and businesses.

The Wall Street Journal opined today on Biden’s latest protectionist initiative.

President Biden says he feels your pain regarding inflation… Too bad his Administration’s policies reveal different priorities. Witness the Commerce Department’s decision to raise tariffs on lumber, which will raise building costs in an already strained housing market. The Commerce Department said last week that it will double the average tariff on Canadian softwood lumber to 17.9% from 8.99%. …There’s rarely a good time for trade restrictions, but the timing of this one is tragicomical. The same month Commerce revealed its tariff plan, lumber hit a record price of $1,650 per thousand board-feet, more than three times the level before pandemic supply shortages began. …The Biden Administration’s tariff resumes the U.S.-Canada lumber war where President Trump left off. …President Biden campaigned against his predecessor’s tariffs, but his trade policy in office has been nearly as protectionist. He’s kept most tariffs in place.

Kept most in place…and now adding more.

This is very sad, particularly since I had hoped that was one area where Biden might actually move policy in the right direction.

No, I didn’t think Biden actually understood why free trade is good (he’s always been a proponent of bigger government, after all).

But I hoped he would do the right thing simply to show he differed from Trump. Those hopes have been dashed.

P.S. If you want more reasons to be concerned, Biden also hasn’t done much to resuscitate the World Trade Organization and he isn’t pushing back on his party’s embrace of carbon protectionism.

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First we got Biden’s $1.9 trillion so-called stimulus.

Then we got his $1 trillion-plus infrastructure boondoggle.

Now Congress may be on the verge of approving the President’s budget, which (if we use honest numbers) is a $5 trillion plan to expand the welfare state.

And…

So it’s hardly a surprise that recent changes will lead to a much-larger burden of government spending.

This is bad news for our economy, as measured by my recent study (with similar findings from a wide range of academics – as well as normally left-leaning bureaucracies such as the IMF, World Bank, and OECD).

For purposes of today’s column, let’s put America’s fiscal decline in global context.

Here are some excerpts from a very depressing article in the Economist, starting with some discussion of how Biden’s spending binge is similar to the mistakes made by other nations.

President Joe Biden is building on what started as emergency pandemic-related policy, expanding the child-tax credit, creating a universal federally funded child-care system, subsidising paid family leave and expanding Obamacare. America’s government spending remains somewhat below the developed-world average. But this change is not just a matter of catching up; the target is moving. Government spending as a share of gdp in the oecd as a whole has consistently inched higher in the six decades since the club was formed in 1961.

There’s then some discussion about how a few nations – most notably Sweden and New Zealand – enjoyed period of genuine spending restraint, but accompanied by depressing observations about how fiscal responsibility is very rare.

Examples of genuine state retrenchment in developed countries are few and far between. Sweden managed it in the 1980s. In the early 1990s Ruth Richardson, then New Zealand’s finance minister, cut the size of the state drastically. …State spending is now six percentage points lower as a share of gdp than it was in 1990. But this is a rare achievement, and perhaps one doomed to pass. …This is a sorry state of affairs if you believe that low taxes and small government are the right, and possibly the only, conditions for reliable, enduring economic growth. …an argument made by Friedrich Hayek, an Austrian philosopher, Milton Friedman, an American economist, and others in the mid-20th century.

There’s also some historical analysis showing how the burden of government used to be relatively minor.

From 1274 to 1691 the English government raised less than 2% of gdp in tax. …In the 1870s the governments of rich countries were spending about 10% of gdp. In 1920 it was nearer 20%. It has been growing ever since (see chart 2).

Here’s the aforementioned chart 2, and there are a lot of depressing numbers, though notice how Switzerland does better than other nations.

I’ve previously shared a version of this data, calling it the “world’s most depressing chart” – all of which was made possible by the imposition of income taxes.

But there is some good news. The ever-rising fiscal burden of government has been somewhat offset by reductions in other bad policies.

Governments have not grown more powerful by all measures. Bureaucrats no longer, as a rule, set wages or prices, nor impose strict currency controls, as many did in the 1960s or 1970s. In recent decades the public sector has raised hundreds of billions of dollars from privatisations of state assets such as mines and telecoms networks. If you find it faintly amusing to hear that, from 1948 to 1984, the British state ran its own chain of hotels, that is because the “neoliberal” outlook on the proper place of government has triumphed.

Last but not least, there’s some discussion of “public choice,” which explains why politicians and bureaucrats have incentives to expand the size and scope of government.

Governments and bureaucrats are at least partly self-interested: “public-choice theory” says that unrestrained bureaucracies will defend their turf and seek to expand it. …Politicians have their own incentives to expand the state. It is generally more rewarding for a politician to introduce a new programme than it is to close an old one down; costs are spread across all taxpayers while benefits tend to be concentrated, thus eliciting gratitude from interest groups

I’ll close by reiterating my warning that ever-rising spending burdens not only lead to less growth, but they also will lead to Greek-style fiscal crises.

Europe will get hit first, but it’s just a matter of time before the United States suffers a similar fate.

P.S. There is a simple solution to avoid such crises, and a specific policy to achieve that solution. But don’t hold your breath waiting for politicians to tie their own hands.

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During his 2012 reelection campaign, Barack Obama created a fictional character named Julia and showed how she could mooch off taxpayers from cradle to grave.

Given Biden’s reputation as a plagiarizer, I guess we shouldn’t be surprised that the White House has reincarnated Julia as part of a push to trap more people in government dependency.

Here is the story of Linda and Leo.

The shocking part of the story, right at the start, is that Linda actually has a job in the private sector.

But Linda soon figures out that she can use the coercive power of government to take money from her neighbors.

She starts with Biden’s per-child handout.

She then puts her son into government-subsidized child care (with no discussion, of course, of how third-party payer causes prices to skyrocket).

I can only imagine the nursery rhymes he’ll hear in that setting.

She then enrolls him in a “free” pre-K program, presumably unaware that such programs have no evidence of success (but at least Biden will be happy that this program creates more unionized teachers to fight against quality education).

Next, her son enters taxpayer-funded community college (another third-party payer problem).

After college, he gets a job, which is nominally in the private sector, but which largely exists because of government distortions (all jobs are not created equal).

Last but not least, Linda gets to rely on taxpayers in her old age, thanks to other programs that are designed to produce additional overpaid government employees.

Let’s close this depressing celebration of dependency by shifting to humor.

Here’s a tweet about Biden’s people plagiarizing Obama’s people.

While I appreciate the satire, I’m quite worried about the long-run impact of Biden’s agenda (i.e., becoming Greece).

P.S. Regarding Obama’s Julia, here’s a great Michael Ramirez cartoon and here’s some clever Iowahawk satire.

P.P.S. And here’s my two-cartoon set on what happens as more and more people are lured into the wagon of government dependency.

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The good news is that President Biden wants the United States to be at the top. The bad news is that he wants America to be at the top in bad ways.

  • The highest corporate income tax rate.
  • The highest capital gains tax rate.
  • The highest level of double taxation.

We can now add another category, based on the latest iteration of his budget plan.

According to the Tax Foundation, the United States would have the developed world’s most punitive personal income tax.

Worse than France and worse than Greece. How embarrassing.

In their report, Alex Durante and William McBride explain how the new plan will raise tax rates in a convoluted fashion.

High-income taxpayers would face a surcharge on modified adjusted gross income (MAGI), defined as adjusted gross income less investment interest expense. The surcharge would equal 5 percent on MAGI in excess of $10 million plus 3 percent on MAGI above $25 million, for a total surcharge of 8 percent. The plan would also redefine the tax base to which the 3.8 percent net investment income tax (NIIT) applies to include the “active” part of pass-through income—all taxable income above $400,000 (single filer) or $500,000 (joint filer) would be subject to tax of 3.8 percent due to the combination of NIIT and Medicare taxes. Under current law, the top marginal tax rate on ordinary income is scheduled to increase from 37 percent to 39.6 percent starting in 2026. Overall, the top marginal tax rate on personal income at the federal level would rise to 51.4 percent. In addition to the top federal rate, individuals face taxes on personal income in most U.S. states. Considering the average top marginal state-local tax rate of 6.0 percent, the combined top tax rate on personal income would be 57.4 percent—higher than currently levied in any developed country.

Needless to say, this will make the tax code more complex.

Lawyers and accountants will win and the economy will lose.

I’m not sure why Biden and his big-spender allies have picked a complicated way to increase tax rates, but that doesn’t change that fact that people will have less incentive to engage in productive behavior.

What matters is the marginal tax rate on people who are thinking about earning more income.

And they’ll definitely choose to earn less if tax rates increase, particularly since well-to-do taxpayers have considerable control over the timing, level, and composition of their income.

P.S. Based on what happened in the 1980s, we can safely assume that Biden’s class-warfare plan won’t raise much money.

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Let’s look today at the wonky issue of “book income” because it’s an opportunity to point out that there are three types of leftists.

  1. Honest leftists who understand economics and recognize tradeoffs (I think of them as “Okunites“).
  2. Dishonest leftists who understand economics but pretend that tradeoffs don’t exist (the “demagogues“).
  3. Leftists who have no idea what they’re saying or thinking (I think of them as, well, Joe Biden).

I’m being snarky about the President because of this recent tweet, which contains a couple of big, glaring mistakes.

What are the mistakes (I’m not calling them lies because I don’t think Biden has the slightest idea that he is wrong, much less why he’s wrong).

  • The first mistake is that corporations pay a lot of tax (payroll tax, property tax, etc) even if they are losing money and don’t owe any corporate income tax.
  • The second mistakes is that Biden is relying on a report about corporate income taxes that has been debunked because it relied on book income rather than taxable income.
  • The third mistake is that the President implies that his plan force all big companies to pay the corporate tax when that’s obviously not true.

Regarding that third mistake, Kyle Pomerleau of the American Enterprise Institute explains why there will still be companies paying zero corporate income tax.

While the Biden administration’s proposals would increase the tax burden on corporations by about $2 trillion over the next decade, they would not change the basic structure of the corporate income tax. The Democrats’ proposal would not end corporations paying zero federal income tax in certain years. Corporations will still be able to carryforward losses, and credits will still be available for corporations to offset their tax liability. The administration has proposed a minimum tax to address these headlines by tying federal tax liability to book income. The minimum tax would require corporations with net income over $2 billion to pay the greater of their ordinary corporate tax liability or 15 percent of their book or financial statement income. Corporations would still be able to offset the book minimum tax with losses and general business credits.

Glenn Kessler of the Washington Post tried to defend Biden’s tweet as part of his misnamed “Fact Checker.”

He had to acknowledge Biden was using a made-up number, but nonetheless concluded that the President’s assertion was “probably in the ballpark.”

This is one of Biden’s favorite statistics. …the president has used it in speeches or interviews 10 times since April. Normally he is careful to refer to “federal income taxes” so the tweet is little off by referring just to “taxes.” …Let’s dig into this statistic. It’s not necessarily wrong but there are some limitations. …The number comes from…the left-leaning Institute on Taxation and Economic Policy (ITEP). …Company tax returns generally are not made public, so ITEP’s numbers are the product of its own research and analysis of public filings. But it is an imperfect measure. …the information in the filings may not reflect what is in the tax returns. …Nevertheless, the notion that 10 to 20 percent of Fortune 500 companies do not pay federal income taxes is consistent with a 2020 report by the nonpartisan Joint Committee of Taxation. …This “55 corporations” number is probably in the ballpark.

For what it’s worth, I don’t care that Kessler gave Biden a pass for writing “taxes” instead of “federal income taxes.”

After all, that’s almost surely what he meant to write (just like Trump almost surely meant “highest corporate tax rate” when complaining about America being the “highest taxed nation”).

But I’m not in a forgiving mood about the rest of Biden’s tweet (or Kessler’s biased analysis) for the simple reason that there is zero recognition that companies occasionally don’t pay tax for the simple reason that they sometimes lose money.

I’ve made this point when writing about boring issues such as depreciation, carry forwards, and net operating losses.

At the risk of stating the obvious, companies shouldn’t pay any corporate income tax in years when they don’t have any corporate income.

P.S. I’m not mocking Biden’s tweet for partisan reasons. I was similarly critical of one of Trump’s tweets that was glaringly wrong on the issue of trade.

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Biden’s tax-and-spend budget plan is based on dishonesty, and I’m just talking about his preposterous claim that a massive expansion of government has “zero cost.”

  • On the outlay side of the fiscal ledger, he’s actually proposing to increase the nation’s already-excessive spending burden by more than $5 trillion over the next ten years, not $3.5 trillion.
  • Based on dishonest estimates of the “tax gap,” he claims that a massive expansion of IRS staff will allow enough new audits to generate hundreds of billions of extra revenue in the next decade.
  • Most shocking, Biden’s budget even tries to mislead people by classifying some expanded welfare payments as tax cuts, simply because the IRS is the bureaucracy redistributing the money.

Today, let’s review another example of Biden’s dodgy approach to budgeting.

If you look at page 53 of his budget, you’ll see that the White House claims it can generate nearly $463 billion of tax revenue by having banks automatically share account information with the IRS.

Which bank accounts?

Well, almost all of them. The original proposal would give the IRS automatic access to accounts with as little as $600 of annual turnover.

That number is apparently going to increase, but even a limit of $10,000 would let the IRS snoop on almost every American’s private financial affairs.

At the risk of understatement, the proposal has generated a lot of pushback.

National Review editorialized against the scheme.

…the House reconciliation bill would let the Internal Revenue Service peer into the bank account of virtually every American. …Here’s the proposition: You permanently sacrifice your financial privacy, and the Democrats get a small step closer to funding their agenda. …Treasury secretary Janet Yellen claims the IRS will overcome perennial bureaucratic incompetence and track down “opaque income streams that disproportionately accrue to the top.” …If it’s high earners we’re worried about, why spy on everyone? …The administration is seriously arguing for a new oversight regime that would gather data on nearly every American on the off chance that a billionaire opens several thousand bank accounts. …this move on bank accounts would represent a new, jaw-dropping level of federal intrusiveness and is a power no government should have. Biden officials from Yellen on down have had trouble defending it — because it is literally indefensible.

Writing for the Hill, Thomas Hoenig and Brian Knight of the Mercatus Center pour cold water on the idea of expanding IRS snooping.

…the Biden administration is proposing requiring banks to report individual account transaction flows above $600 to the Internal Revenue Service (IRS). …a significant intrusion of consumer privacy. It’s also cumbersome, unlikely to achieve whatever legitimate goal the administration may have… the breadth of intrusion into the citizenry’s personal accounts is excessive and unwise. …Such a rule would also likely limit people’s access to banks. …Increasing compliance costs for banks will likely lead them to increase minimum balance requirements and fees to keep accounts economically viable, which could in turn force more people outside the banking system.

Here are excerpts from a Wall Street Journal editorial, which expresses similar concerns.

On your next trip to the ATM, imagine that Uncle Sam is looking over your shoulder. As if your annual tax filing wasn’t invasive enough, the Biden Administration would like a look at your checking account. …Ms. Yellen says the reporting will help to catch wealthy tax dodgers. …Casting a wide net over personal finances is a longstanding aim for Democrats and the political left. …the bigger threat of giving the IRS access to the details of your bank account is that politicians will eventually find a way to control how you save and spend your own money. This is a bad idea that deserves to die. …A group of 41 industry groups recently warned congressional leaders that the plan “is not remotely targeted” to detect major tax avoidance. …Twenty-three state treasurers and auditors signed a letter last month opposing the plan, calling it “one of the largest infringements of data privacy in our nation’s history.”

And let’s not forget that the IRS has shown that it is untrustworthy.

The bureaucracy repeatedly has leaked information and used its power to advance the leftist policy agenda.

All of which probably helps to explain why polling data shows overwhelming opposition to this Orwellian scheme.

Let’s close by debunking the White House claim that more IRS snooping on bank accounts will collect more revenue from the rich.

Simply stated, rich people are very clever about legal tax avoidance. They do things like invest in tax-free municipal bonds (which is not good for the economy, but it’s a very effective way of escaping tax).

Or they rely on building wealth with investments, since only the most crazy leftists (like Elizabeth Warren) would support taxes on unrealized capital gains.

So who would be targeted if Congress approves this plan to let the IRS snoop on bank accounts?

Primarily owners of small businesses. The IRS basically adopts the view that all entrepreneurs under report cash income and deduct personal expenses on their business tax returns.

Some of that actually happens, of course, but the best way to improve compliance is lower tax rates, not a massive expansion of the surveillance state.

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I freely admit that I don’t like President Biden’s fiscal agenda in part because of my libertarianism. Simply stated, I’m instinctively skeptical when someone wants to expand government.

But I’m also an economist who believes in cost-benefit analysis. Moreover, I recognize that there are “public goods” that the private sector can’t – or isn’t allowed to – provide.

So I’m a big believer in looking at evidence to see if a proposed expansion of government makes sense.

As such, if we review the economic performance of nations that have already adopted Biden-type policies – such as Western Europe’s welfare states, that should tell us whether those policies are a good idea for the United States.

Well, if that kind of evidence matters, the answer surely is negative.

The Wall Street Journal editorialized on this topic a few days ago and reached a similar conclusion.

Here are some key excerpts.

“To oppose these investments is to be complicit in America’s decline,” Mr. Biden said Tuesday, adding that “other countries are speeding up and America is falling behind.” …You have to admire the audacity of pitching higher taxes and more social welfare as the path to national revival, especially when the global evidence is the opposite. The result of Mr. Biden’s expanded entitlements is likely to be reduced incentives to work and invest, slower economic growth, lower living standards.

The editorial is filled with hard data on the sub-par performance of various European nations.

That’s the lesson from Europe’s cradle-to-grave welfare states… European jobless rates tend to be much higher than in the U.S., especially for the young. In 2019 labor participation was 62.6% in the U.S. versus 49.7% in Italy, 55% in France, 57.7% in Spain, 59.3% in Portugal and 61.3% in Germany. …U.S. GDP growth still averaged 2.3% from 2010 to 2019, surpassing Italy (0.27%), Portugal (0.86%), Spain (1.07%), France (1.42%) and Germany (1.97%). …Mr. Biden’s plan would empower the government, pile burdens on the private economy, and erode upward mobility by encouraging people not to work. That’s the real recipe for decline.

And let’s not forget that scholarly research also shows that bigger government leads to economic weakness.

P.S. the WSJ editorial also made a very important point that European-style welfare expansions necessarily require huge tax increases on lower-income and middle-class households.

Europe’s little-discussed secret is that its cradle-to-grave welfare states are financed by the middle class via value-added and payroll taxes. The combined employer-employee social security tax rate is 36% in Spain, 40% in Italy and 65% in France. Value-added taxes in most European economies are around 20%. There simply aren’t enough rich to finance their entitlements.

For what it’s worth, Biden wants people to believe that all his new entitlement expansions can be financed with class-warfare taxes on upper-income households.

Even Paul Krugman admits that is preposterously false.

P.P.S. What’s especially revealing is that European nations have been falling further behind the United States, making them members of the “Anti-Convergence Club.”

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President Biden’s fiscal agenda of higher taxes and bigger government is not a recipe for prosperity.

How much will it hurt the economy?

Last month, I shared the results of a new study I wrote with Robert O’Quinn for the Club for Growth Foundation.

We based our results on a wide range of economic research, especially a scholarly study from the Congressional Budget Office, and found a big drop in economic output, employment and labor income.

Most troubling was the estimate of a long-run drop in living standards, which would be especially bad news for young people.

Today, I want to share some different estimates of the potential impact of Biden’s agenda.

A study for the Texas Public Policy Foundation, authored by  E. J. Antoni, Vance Ginn, and Stephen Moore, found even higher levels of economic damage. Here are some main excerpts.

President Biden and congressional Democrats seek to spend another $6.2 trillion over the next decade, spread across at least two bills that comprise their “Build Back Better” plan. This plan includes heavy taxing, spending, and debt, which contributes to reducing growth rates for GDP, employment, income, and capital stock.  Compared to baseline growth over the next decade, this plan will result in estimated dynamic economic effects of 5.3 million fewer jobs, $3.7 trillion less in GDP, $1.2 trillion less in income, and $4.5 trillion in new debt. …There are many regulatory changes and transfer payments in current legislation whose effects have not been included in this paper but are worth mentioning in closing since they will have many of the same effects as the tax increases discussed in this paper. Extending or expanding the enhanced Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Tax Credit, and more, disincentivizes working, reducing incomes, investment, and GDP. Just the changes to these three tax credits alone are expected to cause a loss of 15,000 jobs… Permanently expanding the health insurance premium tax credits would similarly have a negative effect… Regulatory changes subsidizing so-called green energy while increasing tax and regulatory burdens on fossil fuels also result in a less efficient allocation of resources.

If we focus on gross domestic product (GDP), the TPPF estimates a drop in output of $3.7 trillion, which is higher than my study, which showed a drop of about $3 trillion.

Part of the difference is that TPPF looked at the impact of both the so-callled infrastructure spending package and Biden’s so-called Build Back Better plan, while the study for the Club for Growth Foundation only looked at the impact of the latter.

So it makes sense that TPPF would find more aggregate damage.

And part of the difference is that economists rarely agree on anything because there are so many variables and different experts will assign different weights to those variables.

So the purpose of sharing these numbers is not to pretend that any particular study perfectly estimates the effect of Biden’s agenda, but rather to simply get a sense of the likely magnitude of the economic damage.

Speaking of economic damage, here’s a table from the TPPF showing state-by-state job losses.

I’ll close by noting that you can also use common sense to get an idea of what will happen if Biden’s agenda is approved.

He wants to make the United States more like Western Europe’s welfare states, so all we have to do is compare U.S. living standards and economic performance to what’s happening on the other side of the Atlantic Ocean.

And when you do that, the clear takeaway is that it’s crazy to “catch up” to nations that are actually way behind.

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Having been in Washington for close to 40 years, I’ve seen lots of budget dishonesty, but nothing compares to Joe Biden’s claim that his profligate budget proposals have zero cost.

According to the official numbers, that’s a $3.5 trillion lie.

In reality, as I noted in July, it’s much bigger.

Let’s investigate this issue. I’ll start by noting that I have mixed feelings about the Committee for a Responsible Federal Budget (CRFB). They think controlling red ink should be the main focus of fiscal policy, whereas I think controlling spending should be the top goal.

That being said, CRFB’s staff have a well-deserved reputation for being thorough and careful when producing fiscal analysis.

So it’s worth noting that the group estimates that the Biden’s fiscal agenda would actually cost between $5 trillion and $5.5 trillion over 10 years, much higher than the “official” estimate of $3.5 trillion.

Here are some of the bottom-line numbers from their report.

That’s a truncated version of their table. If you want to see all the gory details, click here.

You’ll also be able to read the group’s analysis, including these key excerpts.

While the actual cost of this new legislation will ultimately depend heavily on details that have yet to be revealed, we estimate the policies under consideration could cost between $5 trillion and $5.5 trillion over a decade, assuming they are made permanent. In order to fit these proposals within a $3.5 trillion budget target, lawmakers apparently intend to have some policies expire before the end of the ten-year budget window, using this oft-criticized budget gimmick to hide their true cost. …To fit $5 trillion to $5.5 trillion…into a $3.5 trillion budget, background documents to reporters explain that “the duration of each program’s enactment will be determined based on scoring and Committee input.”  In other words, tax credits and spending programs will be set to expire at some point before the end of the decade, in the hope that future lawmakers will extend these programs. …This budget gimmick…would obscure the true cost of the legislation

The Wall Street Journal opined about Biden’s gimmickry.

Democrats are grasping for ways to finance their cradle-to-grave welfare state, with the left demanding what they claim is $3.5 trillion over 10 years. The truth is that even that gargantuan number hides the real cost of their plans. The bills moving through committees are full of delayed starts, phony phase-outs, and cost shifting to states designed to fit $3.5 trillion into a 10-year budget window… Start with the child allowance… Democrats have hidden the real cost by extending the allowance only through 2025. Even if Republicans gain control of Congress and the White House in 2024, Democrats and their media allies will bludgeon them to extend the payments… Democrats are using a different time shift to disguise the cost of their Medicare expansion…delaying the phase-in of the much more expensive dental benefit to 2028. This “saves” $420 billion over 10 years, but the costs explode after that. …the new universal child-care entitlement…gives $90 billion to the states—but only from 2022 to 2027. …The bottom line: $3.5 trillion is merely the first installment of a bill that would put government at the commanding heights of family life and the economy for decades to come. Tax increases will follow as far as the eye can see.

Regarding the final sentence of the above excerpt, the tax increases in Biden’s budget are merely an appetizer.

Ultimately, a European-sized welfare state requires European-style taxes on lower-income and middle-class households.

In other words, a value-added tax, along with higher payroll taxes, higher energy taxes, and higher income tax rates on ordinary workers (with this unfortunate Spaniard being a tragic example).

But we do have a tiny bit of good news.

A small handful of Democrats are resisting Biden’s budget, which means the package presumably will have to shrink in order to get sufficient votes.

But this good news may be fake news if Biden and his allies in Congress simply expand the use of dishonest accounting.

Brian Riedl of the Manhattan Institute documents some of this likely dishonesty in a column for the New York Post.

How does Congress cut a $3.5 trillion spending bill down to $1.5 trillion? By using gimmicks to hide its true cost. …Progressives have been abusing these gimmicks from the start. They began with a reconciliation proposal that would cost nearly $5 trillion over the decade. Then, in order to cut the bill’s “official” cost closer to $4 trillion, the bill’s authors included a December 2025 expiration of the $130 billion annual expansion of the child tax credit… Of course, no one believes that Congress will actually allow the child tax credit to be reduced at the end of 2025… Democrats purposely selected for “expiration” a popular middle-class benefit that they know even a future Republican Congress or president would not dare take away from voters. …expensive child care subsidies, family leave, and “free” community college benefits may also have their full cost hidden with fake expiration dates early into the 10-year scoring window. Lawmakers fully expect to extend these policies later, ultimately raising the cost of the total reconciliation bill closer to the $3.5 trillion target (or even higher). …Progressives are also discussing delaying the proposed new Medicare dental benefits until 2028, which legitimately saves money within the 10-year scoring window but also hides a larger long-term cost.

I realize that it’s not a big revelation to write that politicians are dishonest (Washington, after all, is a “wretched hive of scum and villainy“).

And I also realize that that the main problem with Biden’s plan is the economic damage it will cause, not the reliance on phony accounting.

But truth should matter a little bit, even in a town where lying about fiscal policy is a form of art.

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