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Archive for the ‘Leviathan’ Category

When I give speeches around the country, I often get asked whether it’s time to give up.

More specifically, has America reached a tipping point, with too many people riding in the wagon of government dependency and too few people creating wealth and pulling the wagon in the right direction?

These questions don’t surprise me, particularly since my speeches frequently include very grim BIS, OECD, and IMF data showing that the long-run fiscal problem in the United States is larger than it is in some nations that already are facing fiscal crisis.

But that doesn’t mean I have a good answer. I think there is a tipping point, to be sure, but I’m not sure whether there’s a single variable that tells us when we’ve reached the point of no return.

Is it when government spending consumes 50 percent of economic output? That would be a very bad development if the burden of government spending reached that level, but it’s not necessarily fatal. Back in the early 1990s, the public sector was that big in Canada, yet policy makers in that country were able to restrain budgetary growth and put the country on a positive path. Sweden is another nation that has turned the corner. Government spending peaked at 67 percent of GDP in the early 1990s, but is now down to 47 percent of GDP after years of free-market reforms.

Is it when a majority of households are getting government handouts? That’s also a worrisome development, especially if those folks see the state as a means of living off their fellow citizens. But taking a check from Uncle Sam doesn’t automatically mean a statist mindset. As one of my favorite people opined, “some government beneficiaries – such as Social Security recipients – spent their lives in the private sector and are taking benefits simply because they had no choice but to participate in the system.”

Is it when a majority of people no longer pay income taxes, leaving a shrinking minority to bear all the burden of financing government? It’s not healthy for society when most people think government is “free,” particularly if they perceive an incentive to impose even higher burdens on those who do pay. And there’s no question that the overwhelming majority of the tax burden is borne by the top 10 percent. There’s little evidence, though, that the rest of the population thinks there’s no cost to government – perhaps because many of them pay heavy payroll taxes.

I explore these issues in this interview with Charles Payne.

The main takeaway from the interview is that the tipping point is not a number, but a state of mind. It’s the health of the nation’s “social capital.”

So for what it’s worth, the country will be in deep trouble if and when the spirit of self-reliance becomes a minority viewpoint. And the bad news is that we’re heading in that direction.

The good news is that we’re not close to the point of no return. There is some polling data, for instance, showing that Americans still have a much stronger belief in liberty than their European counterparts.

And we’ve even made a small bit of progress against big government in the past few years.

I speculated in the interview that we probably have a couple of decades to save the country, but it will become increasingly difficult to make the necessary changes – such as entitlement reform and welfare decentralization – as we get closer to 2020 and 2030.

Welfare State Wagon CartoonsAnd if those changes don’t occur…?

That’s a very grim subject. I fully understand why some Americans are thinking about the steps they should take to protect their families if reforms don’t occur and a crisis occurs.

Indeed, this to me is one of the most compelling arguments against gun control. If America begins to suffer the chaos and disarray that we’ve seen in nations such as Greece, it’s better to be well-armed.

Though maybe there will be some nations that remain stable as the world’s welfare states collapse. And if emigration is your preferred option, I’d bet on Australia.

But wouldn’t it be better to fix what’s wrong and stay in America?

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If you don’t like the NSA collecting and monitoring all your communications, you probably won’t be thrilled about new technologies that will give government power to monitor where you drive and control how you drive.

Let’s look at a couple of options and then ponder which is more offensive.

We’ll start with government monitoring of where you drive. Here’s part of what Holman Jenkins wrote for the Wall Street Journal.

…the real threat to our autonomy gathers speed. “Autonomous” vehicles are part of the threat—because they won’t be autonomous at all. This column has warned for years about plate-recognition cameras, increasingly armed with face-recognition capabilities, that will make it impossible to go anywhere or do anything in public without being monitored. …The population is aging. An older, more timid society is likely to be in favor of penning up fellow citizens in a mesh of monitoring to regulate routine behavior. The authoritarianism of the weak, always a problem in society, will find an ally in the bureaucracy’s craving for resources.

Holman cites a few examples.

Traffic cameras…overwhelmingly ring up drivers for offenses that wouldn’t trouble a cop. New Jersey is just the latest state scandalized by discovery that yellow lights are set below the state minimum in order to yield more red-light camera tickets. …In some future discrimination or hate-crime lawsuit, will vehicle records be called up to show you locked your doors in a minority neighborhood but not in a white neighborhood? Will the state decide to raise your ObamaCare copays because a face-recognition camera also recognized a cigarette dangling from your lip? When our every action in space and cyberspace can be monitored and policed, we no longer police ourselves to any meaningful extent. We become not citizens but children. The state is our parent. The real threat is that many of our fellow citizens will like it this way.

This sounds very Orwellian and very bad, but there are other ways for government to make driving an unpleasant experience.

Let’s see what the UK-based Daily Mail is reporting about an obnoxious European proposal to give government control over your gas pedal.

Drivers face having their cars  fitted with devices that slam on the brakes if they go over the speed limit, under draconian new road safety measures being drawn up by  officials in Brussels. All new cars would have to include camera systems that ‘read’ the limits displayed on road signs and automatically apply the brakes. And vehicles already on the road could even be sent back to garages to be fitted with the ‘Big Brother’ technology… The EC’s Mobility and Transport Department hopes to roll out the ‘Intelligent Speed Adaptation’ technology (ISA) as part of a new road safety programme.

And how will this big-brother system work?

The ISA technology works in one of two ways – either through satellites, which communicate limits automatically to cars from databases, or by using cameras to read road signs. It then deploys one of three controls to slow drivers: ‘advice’, in which the motorist is simply notified of the speed limit by an alarm, giving them the opportunity to slow down; ‘driver select’, which arrests the car’s speed but gives the driver the option of disabling the device; or ‘mandatory’, which would not let a driver breach the speed limit under any circumstances. …A spokesman for the AA said at lower speeds the new technology could actually create dangers. He said: ‘If you were overtaking a tractor and suddenly needed to accelerate to avoid a head-on collision, you would not be able to.’

I’m glad people from the Automobile Association are warning that the system poses risks, but opposition should be based on more than utilitarian arguments. How about the freedom to be left alone and not monitored and pestered while you travel?

But let’s set that issue aside and contemplate whether it’s worse to have the government track where you drive or worse to have the government control how you drive.

Maybe this makes me a bad libertarian, but I’m not overly worried about the first option. Perhaps this is because I have a relatively staid life. I drive to work and I drive to softball. Every so often, I drive to the grocery store or to an airport. The bureaucrats tracking me would go crazy with boredom. Heck, I’d probably feel some pressure to spice up my social life simply because I’d feel sympathy for them.

Maybe they’ll force us to drive green cars?

By contrast, I would be very irritated if the government got control over my accelerator. It’s already annoying that revenue-hungry local governments and anti-automobile greenies conspire to set speed limits considerably below safe and efficient levels. But at least there’s very little risk if you drive within 10 miles of the limit and you always have the choice to drive even faster if you’re willing to take a chance that some random cop will pull you over. But if the government imposes some system that forces my car to stay within the speed limit, I won’t be a happy camper.

I’ll be very curious to read the comments for this post. In the meantime, I’m going to close with a few optimistic words.

Simply stated, government may have the technology to spy on us, but that doesn’t mean they have the brains, ability, or manpower to make much use of this power.

Money laundering laws are a good example. It’s rather offensive that the government has set up a system that forces banks and other financial institutions to spy on all of our financial transactions.

But other than imposing high costs on the financial sector, this system doesn’t have much impact on the average person. To be sure, some poor people lose access to the financial system. And, yes, there are horror stories about people who have their accounts frozen because they’ve engaged in an unusual transaction, but most of us will live our lives without ever noticing that the government has created this Orwellian regime.

Likewise, I don’t think the monitoring and collection of traffic data will impact our lives. At least not until the point the government uses its power in some of the ways described by Holman Jenkins. But I don’t think that’s going to happen anytime soon.

I’m also somewhat hopeful that car-control technologies won’t get abused. At least not right away. Local governments, for instance, would probably oppose a system to control travel speeds for the simple reason that they want to maintain the revenue from speeding tickets.

Moreover, I bet many Americans would rise up in revolt if the government tried to take control of our gas pedals. Politicians who pushed for such a scheme would lose election and bureaucrats who tried to impose such a system via regulation would get slapped down.

We’ve lost some of our freedoms and fighting spirit, but there are some lines the government still can’t cross. Driving faster than the government allows is as American as apple pie.

P.S. Speaking of American traditions, what about the young (and not-so-young) people who sometimes do a bit of romancing while in their cars? Maybe the bureaucrats (motivated by this Obama-NSA joke) will insist that we also install internal cameras in our vehicles.

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I’m not sure I could pick out a significant victory for human freedom in 2012.

Maybe I’m missing something, but the only good policy that’s even worth mentioning was the decision in Wisconsin to rein in the special privileges and excessive compensation for government workers.

But there definitely have been lots of sad developments.

The hard part is picking the most disappointing story.

1. Was it the craven decision by John Roberts to put politics before the Constitution and cast the deciding vote for Obamacare? This certainly could be the most disappointing event of the year, but technically it didn’t represent a step in the wrong direction since the Supreme Court basically gave a green light to unlimited federal power back in the 1930s and 1940s. The Obamacare case is best characterized as a failure to do the right thing. A very tragic decision, to be sure, but it maintained the status quo.

2. Was it the lawless decision by the Internal Revenue Service to impose a horrible regulation that forces American banks to put foreign law above U.S. law? This was a very bad development in the battle for tax competition, financial privacy, and fiscal sovereignty. But in the grand scheme of things, it’s just another in a long line of policies (such as FATCA) designed to increase the power of governments to impose and enforce bad tax policy.

3. Was it the Japanese government’s decision to double the value-added tax? I’m definitely not a fan of adding a VAT on top of the income tax, but Japan made that mistake years ago. The choice to increase the tax rate just shows why it’s dangerous to give politicians any new source of revenue. So this isn’t the worst policy development of 2012, particularly since the new Japanese government may suspend the tax hike.

4. Was it the delusional decision by 54 percent of California voters to impose a big, class-warfare tax hike? I thought the vote for Prop 30 was a very troubling development since it signaled that voters could be tricked into enacting class-warfare tax policy, even though they should have realized that more revenue for the state’s politicians would simply exacerbate the eventual fiscal collapse. But since I think this will be a learning experience on what not to do, I can’t put this at the top of my list.

5. Was it the French government’s punitive decision to impose a 75-percent top tax rate? This is a spectacularly misguided policy, and it’s already resulting in an exodus of entrepreneurs and other successful people. But just as I enjoy have California as a negative role model, I like using France as an example of bad policy. So it would be a bit hypocritical for me to list this as the worst policy of 2012.

6. Or was it the envy-motivated decisions by politicians in both Slovakia and the Czech Republic to replace flat tax systems with so-called progressive tax regimes? This is a strong candidate for the worst policy of the year. It’s very rare to see governments do the right thing, so it’s really tragic when politicians implement good reforms and later decide to reinstate class-warfare policies.

All things considered, I think this last option is the worst policy development of 2012. To be sure, I’m a bit biased since my work focuses on public finance issues and I’ve spent 20 years advocating for tax reform.

But I think there’s a strong case to be made, by anyone who believes in freedom, that politicians from Slovakia and the Czech Republic deserve the booby prize for worst public policy development of 2012.

Alvin Rabushka, sometimes referred to as the Father of the Flat Tax , summarizes the grim news.

On December 4, 2013, the center-left parliament of Slovakia modified the country’s historic 19% flat-rate tax…  Effective January 1, 2013, the income tax rate for corporations was raised from 19% to 23%, while that on individuals earning more than €39,600 (€1=$1.30) a year was raised to 25%, thereby creating two brackets of 19% and 25%. …On November 7, 2012, the lower house (Chamber of Deputies) of the national parliament approved a proposal to impose a second higher rate of 22% on annual income exceeding Czech Koruna (CZK) 100,000 ($5,200) per month.  President Vaclav Klaus signed the bill on December 22, 2012, which will take effect on January 1, 2013.

What’s especially depressing about these two defeats is that the supposedly right-wing parties deserve the blame.

Two nations filled with brain-dead conservative politicians

In Slovakia, all but one of the right-leaning parties in the old government decided to support the Greek bailout, leading to the collapse of the government and the election of a new socialist government that then sabotaged tax reform.

And in the Czech Republic, the current right-of-center government decided to scrap the flat tax for “fairness” reasons. I’m sure that will really be comforting to the Czech people as the economy suffers from less growth.

To understand what the people of those nations are losing, here’s my video on the flat tax.

Now for a bit of good news. There are still more than 25 flat tax jurisdictions in the world, including two of my favorite places – Hong Kong and Estonia.

So there are still some pockets of rationality. It’s just very unfortunate that the scope of human liberty is getting smaller every year.

P.S. The absolute worst thing that happened in 2012, if we look beyond public policy, was Georgia falling 4 yards short of beating Alabama in the Southeastern Conference Championship.

P.P.S. Speaking of sports, the best thing about 2012 occurred in Virginia Beach back in October.

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Over the past few years, I’ve shared a handful of images that capture the essence of government.

Now I have something new to add to the list – an image showing the evolution of government.

Evolution of Government

I’m not quite sure what the next-to-last image is supposed to specifically convey, but the clear message throughout is that government means coercion.

And that coercion doesn’t become legitimate merely because 51 percent of the population decides to plunder 49 percent of the population.

Which is perfectly shown by the final image, which accurately portrays today’s system of government and the IRS.

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I’ve written, ad nauseum, about the economic impact of excessive government spending.

But I’ve also acknowledged that Article I, Section VIII of the Constitution grants specific powers to the federal government.

What I’ve neglected to explore, though, is the key issue of how today’s bloated welfare state interferes with and undermines the government’s ability to competently fulfill its legitimate responsibilities.

Imagine, for instance, if we had the kind of limited federal government envisioned by the Founding Fathers and the “best and brightest” people in government – instead of being dispersed across a vast bureaucracy – were concentrated on protecting the national security of the American people.

In that hypothetical world, I’m guessing something like the 9-11 attacks would be far less likely.

I’m mostly thinking about reducing the inefficiency and incompetence of Washington, but the same principle applies to other levels of government.

Using lots of humor and sarcasm, Mark Steyn elaborates on this issue.

In political terms, Hurricane Sandy and the Benghazi consulate debacle exemplify at home and abroad the fundamental unseriousness of the United States in the Obama era. …John Brennan, the Counterterrorism guy, and Tony Blinken, the National Security honcho, briefed the president on the stiff breeze, but on Sept. 11, 2012, when a little counterterrorism was called for, nobody bothered calling the Counterterrorism Security Group, the senior U.S. counterterrorism bureaucracy. …our government is more expensive than any government in history – and we have nothing to show for it. …one Obama bill spent a little shy of a trillion dollars, and no one can point to a single thing it built. “A big storm requires Big Government,” pronounced The New York Times. But Washington is so big-hearted with Big Government it spends $188 million an hour that it doesn’t have – 24 hours a day, seven days a week, including Thanksgiving, Christmas and Ramadan. And yet, mysteriously, multitrillion-dollar Big Government Obama-style can’t doanything except sluice food stamps to the dependent class, lavish benefits and early retirement packages to the bureaucrats that service them, and so-called government “investment” to approved Obama cronies. …Last week, Nanny Bloomberg, Mayor of New York, rivaled his own personal best for worst mayoral performance since that snowstorm a couple of years back. This is a man who spends his days micromanaging the amount of soda New Yorkers are allowed to have in their beverage containers rather than, say, the amount of ocean New Yorkers are allowed to have in their subway system – just as, in the previous crisis, the municipal titan who can regulate the salt out of your cheeseburger proved utterly incapable of regulating any salt on to Sixth Avenue. Imagine if this preening buffoon had expended as much executive energy on flood protection for the electrical grid and transit system as he does on approved quantities of carbonated beverages. But that’s leadership 21st-century style: When the going gets tough, the tough ban trans fats. Back in Benghazi, the president who looks so cool in a bomber jacket declined to answer his beleaguered diplomats’ calls for help – even though he had aircraft and Special Forces in the region. Too bad. He’s all jacket and no bombers. This, too, is an example of America’s uniquely profligate impotence. When something goes screwy at a ramshackle consulate halfway round the globe, very few governments have the technological capacity to watch it unfold in real time. Even fewer have deployable military assets only a couple of hours away. What is the point of unmanned drones, of military bases around the planet, of elite Special Forces trained to the peak of perfection if the president and the vast bloated federal bureaucracy cannot rouse themselves to action? What is the point of outspending Russia, Britain, France, China, Germany and every middle-rank military power combined if, when it matters, America cannot urge into the air one plane with a couple of dozen commandoes? In Iraq, al-Qaida is running training camps in the western desert. In Afghanistan, the Taliban are all but certain to return most of the country to its pre-9/11 glories. But in Washington the head of the world’s biggest “counterterrorism” bureaucracy briefs the president on flood damage and downed trees.

Amen. Four Americans are dead in part because the idiots in Washington are focused on things that are not the proper responsibility of the federal government.

I don’t know if this was his intent, but Steyn just made a very compelling argument for the libertarian vision.

Here are a few of my favorite examples of Steyn’s writings.

This post is about the link between effective government and small government, with the obvious implication that the current federal behemoth is largely incapable of handling its legitimate responsibilities. Well, the flip side is that doesn’t do a good job in areas where it shouldn’t be involved, as cleverly illustrated by this cartoon.

P.S. Speaking of libertarianism, here’s some self-mocking humor. We’ll start with a video portraying Somalia as a libertarian paradise, followed by cartoons on libertarian ice fishing and libertarian lifeguards, then an info-graphic showing 24 types of libertarians, and close with a poster showing how the world sees libertarians.

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I’ve already written about the despicable practice of “civil forfeiture,” which allows governments to confiscate the property of innocent people who have not been convicted of any crime.

And I’ve cited great columns on the issue from George Will and John Stossel., as well a sobering report on the topic from the Wall Street Journal.

Now the Institute for Justice has a video that should outrage any decent person.

It’s examples of government thuggery like this that make me a libertarian. You should be one as well.

If you need more convincing, check out these horror stories of statist abuse.

But let’s end on a happy note, with a few jokes about cops, one sympathetic, one mocking, and one political.

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If you can read the following and not get upset, you are not a good person. Please move to France (where higher taxes are “patriotic”) and don’t come back.

I’m engaging in a bit of hyperbole, but you’ll hopefully understand after reading this excerpt from a very disturbing report posted on Zero Hedge.

Jacques Wajsfelner of Weston, Massachusetts is a criminal mastermind. Big time. Like Lex Luthor. But rest easy, ladies and gentlemen, for this nefarious villain is about to face some serious jail time thanks to the courageous work of US government agents. You see, Mr. Wajsfelner was finally caught and convicted of a most heinous crime: failing to disclose his foreign bank account to the US government. Note– he was not convicted of tax evasion. He was not convicted of failing to file or pay taxes. His crime was not filing the annual Report of Foreign Bank and Financial Accounts (FBAR). Because of his failure to disclose his foreign bank account, Wajsfelner is now looking at FIVE YEARS behind bars in a Day-Glo orange jumpsuit. Oh, one more thing– Wajsfelner is 83 years old. He was born in Germany during the global depression and rise of Adolf Hitler. The Wajsfelner family soon fled the Nazi regime and made its way to the United States.

Please note that Mr. Wajsfelner didn’t get convicted of not paying tax. He got convicted for the utterly trivial and victimless “crime” of not reporting a foreign bank account.

So the government is sending a completely harmless old man to jail for something that shouldn’t be illegal (and if we had a flat tax, there would be no double taxation of saving and investment, so it wouldn’t matter for tax purposes if your bank account was in Georgetown, Kentucky, or Georgetown, Cayman Islands).

Now let’s compare the treatment of Mr. Wajsfelner with the way some real criminals are treated.

Then there’s Eric Higgins of Port Huron, Michigan, who was recently busted for major possession of child pornography and engaging in sexually explicit conversations with juveniles online. He was given 20 months. Oh… and Mr. Higgins was a US Customs & Border Patrol agent. …Or Ricardo Cordero, another US Customs & Border Patrol officer who was given 27-months for personally smuggling 30 Mexican nationals into the United States, and assisting another smuggler to bring 15 Mexican nationals across the border. This genius even had the smuggler testify as a character witness at his divorce proceeding! Or Jon Corzine, former CEO of Goldman Sachs and member of the political elite, who presided over one of the largest plunders in the financial system ever seen during the recent MF Global collapse. He walks the streets freely to this day.

The article closes with a very accurate – but understated – assessment of the federal government.

It seems pretty clear where the US government stands: the victimless crime of failing to report a foreign bank account is far more egregious than, say, possession of child pornography, engaging with minors in online sex chat, bribery, extortion, fraud, and abuse of official power.

This horrifying example of government abuse is a good example of why I’m a libertarian. Yes, I get upset about bloated and counterproductive government spending. And I also get irked by our punitive and destructive class-warfare tax system.

But what gets me most upset is unfair tyranny against powerless people. If your stomach can stand it, here are some more examples.

Every one of the government officials involved in these episodes should be fired. And they should consider themselves lucky that tar and feathers are no longer a method of dealing with despicable bureaucrats.

P.S. The Zero Hedge website is also the source of the extremely funny and clever ethnic analysis of Europe.

P.P.S. While I utterly despise bureaucrats who engage in thuggish behavior, I’m not a big fan of bureaucrats in general.

P.P.P.S. The government’s grotesque treatment of Mr. Wajsfelner is part of the overall attack on tax competition. Heaven forbid people have the freedom to benefit from better tax policy in other jurisdictions!

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I’ve written posts revealing horror stories of government abuse and argued that people should become libertarian.

I’ve commented on research ostensibly showing that conservatives and libertarians don’t necessarily share moral premises.

And I’ve even speculated on whether libertarianism and patriotism are somehow inconsistent (this Penn & Teller video gives the right answer).

But I’ve never done a poll to gauge libertarian sentiment, so let’s do an experiment. Here’s an excerpt from a BBC report.

A farmer in the US state of Vermont who was facing a minor drugs charge is now in more serious trouble after driving a tractor over seven police cars. Roger Pion crushed the county sheriff’s cruisers on Thursday before making his getaway on the farm vehicle. The 34-year-old was stopped by police in Newport city, northern Vermont, not far from the crime scene. Sheriff’s deputies were unaware of the destruction in their department car park until a resident called 911. Orleans County Sheriff Kirk Martin said they were initially unable to give chase as their cars had been wrecked.

Now share your anonymous reaction.

If you’re so disposed, feel free to augment your vote in the comments section.

You won’t be surprised to learn that I’m torn between the third and fourth options.

When I think about it logically and dispassionately, I know I should pick the third choice. But my rebellious inner child wants to cheer for somebody who fights back, so I’m tempted to take the last option. That same inner child, by the way, was quite amused that the cops couldn’t even give chase because their cars were totaled.

Maybe this makes me a libertarian chicken hawk. I cheer for people who fight back even though I wouldn’t do the same thing.

Sort of like my attitude toward tax evasion. I applaud people who take that risk (assuming they live in nations with unjust governments), but am too cowed by the IRS to do it myself.

But I’m not a complete coward. I almost got thrown in a Mexican jail for opposing the tax-hungry bureaucrats at the OECD. That has to count for something.

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I periodically provide mind-blowing examples of individuals who have their lives turned upside down by evil bureaucrats.

You may think “evil” is too strong a word, but it sticks in my mind after perusing these examples of abusive actions by the federal government.

Now we have a George Will column that will get you very angry. At least if you’re a good person.

Will starts by describing the federal bureaucracy’s attack on an innocent woman for a non-crime.

…our unhinged government, with an obsession like that of Melville’s Ahab, has crippled Nancy Black’s scientific career, cost her more than $100,000 in legal fees — so far — and might sentence her to 20 years in prison. This Kafkaesque burlesque of law enforcement began when someone whistled. Black, 50, a marine biologist who also captains a whale-watching ship, was with some watchers in Monterey Bay in 2005 when a member of her crew whistled at the humpback that had approached her boat, hoping to entice the whale to linger. Back on land, another of her employees called the National Oceanic and Atmospheric Administration (NOAA) to ask if the whistling constituted “harassment” of a marine mammal, which is an “environmental crime.” NOAA requested a video of the episode, which Black sent after editing it slightly to highlight the whistling. NOAA found no harassment — but got her indicted for editing the tape, calling this a “material false statement” to federal investigators, which is a felony under the 1863 False Claims Act, intended to punish suppliers defrauding the government during the Civil War.

But it gets worse, because the federal jack-boots then raided her office (I don’t even know what “jack-boots” are, but they signify government thuggery, and that’s definitely a good description of what happened).

…after this bizarre charge — that she lied about the interaction with the humpback that produced no charges — more than a dozen federal agents, led by one from NOAA, raided her home. They removed her scientific photos, business files and computers.

This unfortunate woman has also been charged with another non-crime.

She has also been charged with the crime of feeding killer whales when she and two aides were in a dinghy observing them feeding on strips of blubber torn from their prey — a gray whale. To facilitate photographing the killers’ feeding habits, she cut a hole in one of the floating slabs of blubber and, through the hole, attached a rope to stabilize the slab while a camera on a pole recorded the whales’ underwater eating. So she is charged with “feeding” killer whales that were already feeding on a gray whale they had killed. She could more plausibly be accused of interfering with the feeding.

As an aside, Will notes that the NOAA bureaucrats have little regard for the Constitution.

Six years ago, NOAA agents, who evidently consider the First Amendment a dispensable nuisance, told Black’s scientific colleagues not to talk to her and to inform them if they were contacted by her or her lawyers. Since then she has not spoken with one of her best friends.

Most important, he concludes with the key point about how all of us are threatened by Leviathan.

In 1980, federal statutes specified 3,000 criminal offenses; by 2007, 4,450. They continue to multiply. Often, as in Black’s case, they are untethered from the common-law tradition ofmens rea, which holds that a crime must involve a criminal intent — a guilty mind. Legions of government lawyers inundate targets like Black with discovery demands, producing financial burdens that compel the innocent to surrender in order to survive. The protracted and pointless tormenting of Black illustrates the thesis of Harvey Silverglate’s invaluable 2009 book, “Three Felonies a Day: How the Feds Target the Innocent.” Silverglate, a civil liberties lawyer in Boston, chillingly demonstrates how the mad proliferation of federal criminal laws — which often are too vague to give fair notice of what behavior is proscribed or prescribed — means that “our normal daily activities expose us to potential prosecution at the whim of a government official.” Such laws, which enable government zealots to accuse almost anyone of committing three felonies in a day, do not just enable government misconduct, they incite prosecutors to intimidate decent people who never had culpable intentions. And to inflict punishments without crimes. …The more Americans learn about their government’s abuse of criminal law for capricious bullying, the more likely they are to recoil in a libertarian direction and put Leviathan on a short leash.

Utterly disgusting. As Glenn Reynolds periodically suggests, “tar, feathers” would be an appropriate way of dealing with these hyenas.

By the way, government thuggery is not limited to the crowd in Washington.

P.S. For the second time, I feel compelled to apologize to Hyenas. They’re part of the natural ecosystem. Thuggish bureaucrats, by contrast, are a malignant and artificial force.

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One of the reasons why this blog is called International Liberty is that the world is a laboratory, with some nations (such as France) showing why statism is a mistake, other jurisdictions (such as Hong Kong) showing that freedom is a key to prosperity, and other countries (such as Sweden) having good and bad features.

It’s time to include Chile in the list of nations with generally good policies. That nation’s transition from statism and dictatorship to freedom and prosperity must rank as one of the most positive developments over the past 30 years.

Here’s some of what I wrote with Julia Morriss for the Daily Caller. Let’s start with the bad news.

Thirty years ago, Chile was a basket case. A socialist government in the 1970s had crippled the economy and destabilized society, leading to civil unrest and a military coup. Given the dismal situation, it’s no surprise that Chile’s economy was moribund and other Latin American countries, such as Mexico, Venezuela, and Argentina, had about twice as much per-capita economic output.

Realizing that change was necessary, the nation began to adopt pro-market reforms. Many people in the policy world are at least vaguely familiar with the system of personal retirement accounts that was introduced in the early 1980s, but we explain in the article that pension reform was just the beginning.

Let’s look at how Chile became the Latin Tiger. Pension reform is the best-known economic reform in Chile. Ever since the early 1980s, workers have been allowed to put 10 percent of their income into a personal retirement account. This system, implemented by José Piñera, has been remarkably successful, reducing the burden of taxes and spending and increasing saving and investment, while also producing a 50-100 percent increase in retirement benefits. Chile is now a nation of capitalists. But it takes a lot more than entitlement reform, however impressive, to turn a nation into an economic success story. What made Chile special was across-the-board economic liberalization.

We then show the data (on a scale of 1-10) from the Fraser Institute’s Economic Freedom of the World, which confirm significant pro-market reforms in just about all facets of economic policy over the past three decades.

But have these reforms made a difference for the Chilean people? The answer seems to be a firm yes.

This has meant good things for all segments of the population. The number of people below the poverty line dropped from 40 percent to 20 percent between 1985 and 1997 and then to 15.1 percent in 2009. Public debt is now under 10 percent of GDP and after 1983 GDP grew an average of 4.6 percent per year. But growth isn’t a random event. Chile has prospered because the burden of government has declined. Chile is now ranked number one for freedom in its region and number seven in the world, even ahead of the United States.

But I think the most important piece of evidence (building on the powerful comparison in this chart) is in the second table we included with the article.

Chile’s per-capita GDP has increased by about 130 percent, while other major Latin American nations have experienced much more modest growth (or, in the tragic case of Venezuela, almost no growth).

Perhaps not as impressive as the performance of Hong Kong and Singapore, but that’s to be expected since they regularly rank as the world’s two most pro-market jurisdictions.

But that’s not to take the limelight away from Chile. That nation’s reforms are impressive - particularly considering the grim developments of the 1970s. So our takeaway is rather obvious.

The lesson from Chile is that free markets and small government are a recipe for prosperity. The key for other developing nations is to figure out how to achieve these benefits without first suffering through a period of socialist tyranny and military dictatorship.

Heck, if other developing nations learn the right lessons from Chile, maybe we can even educate policy makers in America about the benefits of restraining Leviathan.

P.S. One thing that Julia and I forgot to include in the article is that Chile has reformed its education system with vouchers, similar to the good reforms in Sweden and the Netherlands.

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Back in April, responding to an article written by Ann Hollingshead for the Task Force on Financial Integrity and Economic Development, I wrote a long post defending so-called tax havens.

I went through the trouble of a point-by-point response because her article was quite reasonable and focused on some key moral and philosophical issues (rather than the demagoguery I normally have to deal with when people on the left reflexively condemn low-tax jurisdictions).

She responded to my response, and she raised additional points that deserve to be answered.

So here we go again. Let’s go through Ann’s article and see where we agree and disagree.

A couple of weeks ago, I wrote a blog post criticizing the philosophies of Dan Mitchell, a libertarian scholar from the Cato Institute. I asked for a “thoughtful discussion” and I got it—both from the comments section of our blog and from Dan himself.  On his own blog, Dan replied with a thought-provoking point-by-point critique of my piece.

It has been a polite discussion, which is good because readers get to see that we don’t really disagree on facts. Our differences are a matter of philosophy, as Ann also acknowledges.

Dan made several interesting points in his rebuttal. As much as I’d like to take on the whole post right now, my reply would be far too long and I don’t think our readers would appreciate a blog post that approaches a novella. Rather I’ll focus on a couple of his comments that I find interesting on a philosophical level (there were many) and which demand a continued conversation because, I believe, they are the basis of our differences. We’ll start with a rather offhand remark in which Dan indirectly refers to financial privacy as a human right. This is an argument we’ve heard before. And it is worth some exploration.Unless I am very much mistaken, Dan’s belief that financial privacy is a human right arises out of his fundamental value of freedom. My disagreement with Dan, therefore, does not arise from a difference in the desire to promote human rights (I believe we both do), but rather in the different relative weights we each place on the value of privacy, which Dan (I’m supposing) would call an extension of freedom.

I wouldn’t argue with her outline, though I think it is incomplete. I’m a big fan of privacy as a principle of a civil and just society, but I also specifically support financial privacy as a means to an end of encouraging better tax policy. Simply stated, politicians are much more likely to reduce or eliminate double taxation if they feel such taxes can’t be enforced and simply put a country in a much less competitive position.

Okay, so on to [my] answer of the subject of this post. Privacy—and financial privacy by extension—is important. But is it a human right? That’s a big phrase; one which humanity has no business throwing around, lest it go the way of “[fill in blank]-gate” or “war on [whatever].” And as Dan himself points out, governments have a way of fabricating human rights—apparently some European courts have ruled that free soccer broadcasts and owning a satellite dish are a human rights—so it’s important that we get back to [philosophical] basics and define the term properly. The nearly universally accepted definition of “human rights” was established by the Universal Declaration of Human Rights, which the United Nations adopted in 1948. According to the UN, “human rights” are those “rights inherent to all human beings,” regardless of “nationality, place of residence, sex, national or ethnic origin, colour, religion, language, or any other status.” The Declaration includes 30 Articles which describe each of those rights in detail. “Financial privacy” per se is not explicitly a human right in this document, but “privacy” is, and I think it’s reasonable to include financial privacy by extension. But privacy is defined as a fundamental, not an absolute, human right. Absolute rights are those that there is never any justification for violating. Fundamental freedoms, including privacy and freedom from detention, can be ethically breached by the government, as long as they authorized by law and not arbitrary in practice. The government therefore has the right to regulate fundamental freedoms when necessary.

I’m not sure how to react. There are plenty of admirable provisions in the U.N.’s Universal Declaration of Human Rights, but there are also some nonsensical passages – some of which completely contradict others.

Everyone hopefully agrees with the provisions against slavery and in favor of equality under law, but Article 25 of the U.N. Declaration also includes “the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.”

That sounds like a blank check for redistributionism, similar to the statism that I experienced when I spoke at the U.N. last month, and it definitely seems inconsistent with the right of property in Article 17.

I guess what I’m trying to say is that I don’t care that the U.N. Universal Declaration of Human Rights includes a “right to privacy” because I don’t view that document as having any legal or moral validity. I don’t know whether it’s as bad as the European Union’s pseudo-constitution, but I do know that my support for privacy is not based on or dependent on a document from the United Nations.

As an aside, I can’t help noting that Articles 13 and 15 of the U.N. Declaration guarantee the right to emigrate and the right to change nationality, somethings leftists should keep in mind when they demonize successful people who want to move to nations with better tax law.

Getting back to Ann’s column, she confirms my point that you can’t protect property rights for some people while simultaneously giving other people a claim on their output.

That’s important because it means, that when it comes to freedom and privacy, we need to make choices. We can’t always have them all at once. To use a hideously crude example that gets back to the issue of tax evasion, in a developing country, a rich person’s right to financial privacy might be at odds with a poor person’s right to “a standard of living adequate for the health and well-being of himself and of his family.”

For those who are not familiar with the type of discussion, it is the difference between “negative rights” promoted by classical liberals, which are designed to protect life, liberty, and property from aggression, and the “positive rights” promoted by the left, which are designed to legitimize the redistributionist state.

Tom Palmer has a good discussion of the topic here, and he notes that “positive rights” create conflict, writing that, “…classical liberal ‘negative’ rights do not conflict with each other, whereas ‘positive’ rights to be provided with things produce many conflicts. If my ‘right to health care’ conflicts with a doctor’s ‘right to liberty,’ which one wins out?”

Continuing with Ann’s article, she says values conflict with one another, though that’s only if true if one believes in positive rights.

I started this post with a discussion of values, because at the core that’s what we’re talking about. Values are relative, individual, and often in conflict with one another. And they define how we rank our choices between human rights. Dan values freedom, perhaps above most else. He might argue that economic freedom would lead to an enrichment of human rights at all levels, but he probably wouldn’t disagree that that thesis remains untested. My views are a little more complicated because I don’t get to enjoy the (albeit appealing and consistent) simplicity of libertarianism.

I’m tempted to say, “C’mon in, Ann, the water’s fine. Libertarianism is lots of fun.” To be a bit more serious, libertarianism is simple, but it’s not simplistic. You get to promote freedom and there’s no pressure to harass, oppress, or pester other people.

As my colleague David Boaz has stated, “You could say that you learn the essence of libertarianism — which is also the essence of civilization –  in kindergarten: don’t hit other people, don’t take their stuff, keep your promises.”

The world would be a lot better if more people rallied to this non-coercive system.

One more point. Dan mentioned he does “fully comply” with the “onerous demands imposed on [him] by the government.” But as Dan insinuates, irrespective of an individual’s personal values, those demands are not optional. In the United States, we have the luxury of electing a group of individuals to represent our collective values. Together those people make a vision for the country that reflects our ideals. And then, we all accept it. If our country got together and decided to value freedom above all else, we would live in a world that looks a lot like Dan’s utopia. But, frankly, it hasn’t. So we respect our tax code out of a respect for the vision of our country. Dan has the right to try to shape that vision, as do I. Neither of us has the right to violate it.

What Ann writes is true, but not persuasive. Libertarians don’t like untrammeled majoritarianism. We don’t think two wolves and a sheep should vote on what’s for lunch.

We like what our Founding Fathers devised, a constitutional republic where certain rights were inalienable and protected by the judicial system, regardless of whether 90 percent of voters want to curtail our freedoms.

Ann, as you can see from her final passage, does not agree.

That, at is heart, is my problem with both tax evasion and tax avoidance. Neither lines up with the spirit of our collective compact; although the latter is not necessarily reflected in the official laws on the books. I’m not saying tax avoiders should be thrown in jail; they’ve done nothing illegal. I’m saying the regulations that confine us should line up with the vision we’ve created and the values we’ve agreed upon. If that vision is Dan’s, I’ll accept it. But I’m glad he’ll (begrudgingly) accept ours too.

I’m not automatically against having a “collective compact.” After all, that’s one way of describing the American Constitution. But I will return to my point about America’s founders setting up that system precisely because they rejected majoritarianism.

So what does all this mean? Probably nothing, other than the less-than-remarkable revelation that Ann and I have different views on the legitimate role(s) of the federal government.

Since I want to restrain the size and scope of government (not only in America, but elsewhere in the world) and avert future Greek-style fiscal nightmares, that means I want tax competition. And, to be truly effective, that means tax havens.

If that appeals to you (or at least seems like a reasonably hypothesis), I invite you to read some writings by Allister Heath of the United Kingdom and Pierre Bessard of Switzerland.

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While I’m obviously not a fan of big government, I have mixed feelings about why the public sector is so blindly wasteful.

Is it because politicians and bureaucrats are well-intentioned morons who accidentally do damage (as illustrated by this cartoon), or is it that they are venal vultures looking to grab as much loot as possible before the house of cards comes crashing down (powerfully demonstrated by this example)?

The answer is probably a combination, so the real challenge is figuring out whether specific examples of government stupidity fall into one category or another.

Let’s look at three recent examples.

First, we have a story from the surveillance state known as the United Kingdom.

On a cold, dark night on the mean streets of the UK, an undercover police officer was radioed and informed that a potential suspect was close by. Keen to do the right thing, he set off in hot pursuit. Twenty fraught minutes later, he learned he’d been chasing… himself. The CCTV operator reported to police that someone was ‘acting suspiciously’, according to The Telegraph. Unfortunately, the officer who decided to follow up on the report was actually the shadowy figure in question. …The poor guy doing the chasing reassured the CCTV operator that he was “hot on the heels” of the suspect. Uh, at least until the police officer’s boss turned up in the CCTV control room and recognized him.

This definitely falls into the incompetence and stupidity category. Why didn’t the camera operator figure our that there was only one person on the screen. Then again, I once spent a minute or so looking in my bedroom for a cell phone that I was holding in my left hand, so I don’t want to be overly judgmental.

So let’s look at another case of government in action. Indeed, this could become the start of a new TV program: The Fart Police.

Harold Wayne Hadley, Jr., 19, was arrested at a Mississippi junior college after he allegedly wrote a note on a piece of toilet paper on Tuesday, containing the word ‘bomb,’ according to Weirdnews.net. The note prompted 11 emergency agencies to respond to the school, but there was no bomb. Hadley and his family contend that he was only explaining the joy of flatulating in the library. “He was in the restroom doodling on some toilet paper … we are from the country, and he calls passing gas, bombs,” said Hadley’s aunt, who wouldn’t give her name to WDAM. “[He] put ‘I passed a bomb in the library,’ talking about passing gas, and somebody came in and found it, gave it to a teacher that recognized his hand writing and it blew all out of proportion.” …Hadley was arrested and held on $20,000 bail. If convicted of threatening to blow up the school, he faces 10 years in prison and a $10,000 fine,according to WAPT.

Part of me wants to forgive this example of government excess. After all, we live in a post-Columbine world and I suppose schools have to plan for the worst in case they have unstable Anthony-Weiner-type students.

But then I notice two things in the story that set off alarm bells, beginning with the fact that 11 government agencies responded. If that doesn’t tell you right away that we have too many government bureaucracies and too many bureaucrats with nothing to do, then you must be in a coma.

The other thing I noticed is that a teacher recognized the student’s handwriting. So if that was true, why didn’t someone contact the student before going nuclear on the situation?

Last but not least, let’s look at an example of government misbehavior that defies description.

[A] West Hoke Elementary School student was in her More at Four classroom when a state agent who was inspecting lunch boxes decided that her packed lunch — which consisted of a turkey and cheese sandwich, a banana, apple juice and potato chips — “did not meet U.S. Department of Agriculture guidelines,” the Journal reports. The decision was made under consideration of a regulation put in place by the the Division of Child Development and Early Education at the Department of Health and Human Services, which requires all lunches served in pre-kindergarten programs to meet USDA guidelines. “When home-packed lunches do not include all of the required items, child care providers must supplement them with the missing ones,” the Journal reports. The student’s mother told the Journal she received a note from the school about the incident and was charged $1.25 for the cafeteria tray, from which her daughter only ate three chicken nuggets. …The mother, who was not identified in the report, expressed concern about school officials telling her daughter that she wasn’t “packing her lunch box properly.”

This is downright horrifying, perhaps even more disgusting than any of these stories of government malfeasance and idiocy. Several questions come to mind.

  • Is the bureaucracy so bloated that we have food police in schools?
  • Why is the Department of Agriculture preparing food guidelines?
  • Why is there a Division of Child Development and Early Education
  • More important, why is there a Department of Health and Human Services?
  • When did the nanny state get the power to overrule parents on what kids eat for lunch?
  • And why are pencil-neck bureaucrats in charge of lunch box packing etiquette?

I rarely comment about religion on this blog, but reading this story almost makes me hope there’s no such thing as Heaven. That’s because I would hate to think our Founding Fathers are looking down from above and seeing what has happened to the land of the free and the home of the brave.

P.S. I’ll re-ask the question I posed last year: Why should we ever agree to more taxes when politicians and bureaucrats do such a rotten job with the money we’re already giving them?

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The Obama Administration is in a bit of hot water because it wants to coerce just about everyone – including a lot of religious institutions -  to provide health insurance policies that cover the cost of birth control and certain abortion-inducing drugs.

The White House already has tried to defuse the controversy by shifting the coverage mandate from insurance buyers to the insurance companies, but everyone with an IQ above room temperature realizes that is a meaningless cosmetic change.

Regardless of how one feels about abortion or birth control (or even how one feels about religion), this is a bad policy. Decisions about what  sort of insurance to provide shouldn’t be the result of a one-size-fits-all government mandate.

Yes, the Administration’s religious intolerance is unseemly, but it is also symptomatic of why government intervention in the health sector is the underlying problem.

John Cochrane, an economist at the University of Chicago (and an Adjunct Scholar at Cato!) addresses the economic issues in a Wall Street Journal column. Here are some key passages.

Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill. Insurance is a bad idea for small, regular and predictable expenses. There are good reasons that your car insurance company doesn’t add $100 per year to your premium and then cover oil changes, and that your health insurance doesn’t charge $50 more per year and cover toothpaste. You’d have to fill out mountains of paperwork, the oil-change and toothpaste markets would become much less competitive, and you’d end up spending more. …Doubling the number of wellness visits and free pills sounds great, but who’s going to pay for it? There is a liberal dream that by mandating coverage the government can make something free. Sorry. Every increase in coverage means an increase in premiums. If your employer is paying for your health insurance, he could be paying you more in salary instead.

For all intents and purposes, Professor Cochrane is explaining the economics of third-party payer, which occurs when government intervention undermines the ability of markets to promote efficiency and low prices.

He also delves into the moral issues and explains that the only solution is to get the government out of health care.

Our nation is divided on social issues. The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society. The critics fell for a trap. By focusing on an exemption for church-related institutions, critics effectively admit that it is right for the rest of us to be subjected to this sort of mandate. They accept the horribly misnamed Patient Protection and Affordable Care Act, and they resign themselves to chipping away at its edges. No, we should throw it out, and fix the terrible distortions in the health-insurance and health-care markets. Sure, churches should be exempt. We should all be exempt.

I’ve explained four principles that should guide policy makers as they try to put the toothpaste back in the tube and restore free markets to healthcare.

And I’ve cited a real-world example of how the system would work if the third-party payer crisis was fixed.

We can implement free-market reforms, though they won’t be easy. Or we can keep on the current path, lose more of our freedom, and eventually have life-and-death decisions controlled by bureaucrats.

Should be an easy choice.

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Michael Gerson is upset that the GOP budget would trim some money from the foreign aid budget. In his Washington Post column, he regurgitates Obama Administration talking points, claiming that less foreign aid will kill tens of thousands of poor children in Africa.

USAID estimates that reductions proposed in the 2011 House Republican budget would prevent 3 million malaria treatments. …this means about 1.5 million people in need of treatment would not receive it. About 3 percent of untreated malaria infections progress to severe malaria — affecting 45,000 children. Of those children, 60 to 73 percent will not survive, yielding 27,000 to 30,000 deaths. …global health programs are not analogous to many other categories of federal spending, such as job training programs or support for public television. A child either receives malaria treatment or does not. The resulting risk of death is quantifiable. The outcome of returning to 2008 spending levels, as Republicans propose, is predictable. …One can be a budget cutter and still take exception to cuts at the expense of the most vulnerable people on earth. …Cuts for global health programs should be of special concern to those of us who consider ourselves pro-life. No pro-life member of Congress could support welfare savings by paying for abortions.

Gerson’s moral preening is a bit tedious. He’s a guy who presumably is part of top 2 percent of income earners in America. And I bet his family’s overall level of consumption must be in the top 1 percent worldwide. Yet he wants to take money from the rest of us, with our lower living standards, so he can feel morally superior.

Having met Gerson a couple of times, I don’t doubt his sincerity, and I’m guessing he probably gives a lot of money to charity. Moreover, I doubt he personally benefits from more spending in these areas (i.e., he’s not an overpaid bureaucrat, a consultant with a fat contract from USAID, or anything like that).

But I still have a hard time taking him seriously because he thinks the coercive power of government should be used to spend money in ways that he finds desirable – even if that means that people with much lower levels of income and wealth are picking up the tab for something that Gerson wants.

My Cato colleague, Roger Pilon, had a column in yesterday’s Wall Street Journal examining the broader issue of whether federal spending is an appropriate way of fulfilling charitable impulses. As Roger notes, it’s not charity when you make other people pay for things that you think are important.

‘What Would Jesus Cut?” So read the headline of a full-page ad published in Politico last month by Sojourners, the progressive evangelical Christian group. Urging readers to sign a petition asking Congress “to oppose any budget proposal that increases military spending while cutting domestic and international programs that benefit the poor, especially children,” it was the opening salvo of a campaign to recast the budget battle as a morality play. Not to be outdone, Catholics for Choice took to Politico on Tuesday to run “An Open Letter from Catholic State Legislators to Our Colleagues in the US Congress.” The letter condemned “policies that unfairly target the least among us,” echoing a blogger at the National Catholic Reporter who averred last month that the federal budget is, after all, “a moral document.” …The budget battle is thus replete with moral implications far more basic than Sojourners and Catholics for Choice seem to imagine. They ask, implicitly, how “we” should spend “our” money, as though we were one big family quarreling over our collective assets. We’re not. We’re a constitutional republic, populated by discrete individuals, each with our own interests. Their question socializes us and our wherewithal. The Framers’ Constitution freed us to make our own individual choices. The irony is that Jesus, properly understood, saw this clearly—both when he asked us to render unto Caesar what is Caesar’s and unto God what is God’s, and when he spoke of the Good Samaritan. The ads’ signers imagine that the Good Samaritan parable instructs us to attend to the afflicted through the coercive government programs of the modern welfare state. It does not. The Good Samaritan is virtuous not because he helps the fallen through the force of law but because he does so voluntarily, which he can do only if he has the right to freely choose the good, or not. Americans are a generous people. They will help the less fortunate if left free to do so. What they resent is being forced to do good—and in ways that are not only inefficient but impose massive debts upon their children. That’s not the way free people help the young and less fortunate.

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One of my many frustrations of working in Washington is dealing with perpetual-motion-machine assertions. The classic example is Keynesian economics, which is based on the notion that you magically create additional economic activity by having the government spend money instead of allowing the private sector to decide how it gets spent (in an especially bizarre display of this thinking, Nancy Pelosi actually said that subsidizing unemployment was the best way to create jobs).

Another example of this backwards analysis can be found in the debate over the IRS budget. The President is resisting a GOP proposal to modestly trim the IRS’s gargantuan $12.5 billion budget and his argument is that we should actually boost funding for the tax collection bureaucracy since that will mean more IRS agents squeezing more money out of more taxpayers.

Here are some excerpts from an Associated Press report about the controversy.

Every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10, a rate of return so good the Obama administration wants to boost the agency’s budget.House Republicans, seeing the heavy hand of a too-big government, beg to differ. They’ve already voted to cut the IRS budget by $600 million this year and want bigger cuts in 2012. …IRS Commissioner Doug Shulman told the committee Tuesday that the $600 million cut in this year’s budget would result in the IRS collecting $4 billion less through tax enforcement programs. The Democrat-controlled Senate is unlikely to pass a budget cut that big. But given the political climate on Capitol Hill, Obama’s plan to increase IRS spending is unlikely to pass, either. Obama has already increased the IRS budget by 10 percent since he took office, to nearly $12.5 billion. The president’s budget proposal for 2012 would increase IRS spending by an additional 9 percent — adding 5,100 employees. …Obama’s 2012 budget proposal for the IRS includes $473 million and 1,269 new positions to start implementing the health care law.

Unlike Keynesian economics, there actually is some truth to Obama’s position. The fantasy estimate of $10 of new revenue for every $1 spent on additional bureaucrats is clearly ludicrous, but it is equally obvious that many Americans would send less money to Washington if they didn’t have to worry about a coercive and powerful tax-collection bureaucracy that had the power to throw them in jail.

This is an empirical question, at least with regards to the narrow issue of whether more IRS agents “pay for themselves” by shaking down sufficient numbers of taxpayers. Reducing the number of IRS bureaucrats by 90 percent, from about 100,000 to 10,000, for instance, surely would be a net loss to the government since the money saved on IRS compensation would be trivial compared to the loss of tax revenue.

But that doesn’t mean that a reduction of 10,000 or 20,000 also would lead to a net loss. And it certainly does not mean that adding 10,000 or 20,000 more IRS agents will result in enough new revenue to compensate for the salaries and benefits of a bigger bureaucracy. Even left-wing economists presumably understand the concept of diminishing returns.

But let’s assume that the White House is correct and that more IRS agents would be a net plus from the government’s perspective. The Administration would like us to reflexively endorse a bigger and more aggressive IRS, but public policy should not be based on what is a “net plus” for the government.

There are two ways to promote better tax compliance. The Obama approach, as we’ve read above, is to expand the size and power of the IRS. Up to a point, this policy can be “successful” in extracting additional money from the productive sector of the economy.

The alternative approach, by contrast, seeks better compliance by lowering tax rates and reforming/simplifying tax systems. This course of action boosts compliance by making evasion and avoidance less attractive. People are much less likely to cheat if the government isn’t being too greedy, and they’re also more likely to comply if they think there is less waste, fraud, corruption, and favoritism in the tax code.

Let’s now put this discussion in context. Obama wants more IRS agents in large part to enforce his new scheme for government-run healthcare. Yet that’s a perfect example of what I modestly call Mitchell’s Law – politicians doing one bad thing (expanding the IRS) only because they did another bad thing (enacting a health care bill that made the tax code even more convoluted and punitive).

So instead of making the IRS bigger in response to a bad healthcare law, why not repeal that bad law and shrink the size of the IRS? Even better, why not junk the entire tax code so we can replace the IRS with a system that is honest and fair?

And if these big steps are not immediately feasible, at least cut the IRS budget so that awful laws are enforced in a less destructive manner.

This Center for Freedom and Prosperity video has additional details about the national nightmare we call the IRS.

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Our fiscal policy goal should be smaller government, but here’s a video for folks who think that balancing the budget should be the main objective.

The main message is that restraining the growth of government is the right way to get rid of red ink, so there is no conflict between advocates of limited government and supporters of fiscal balance.

More specifically, the video shows that it is possible to quickly balance the budget while also making all the 2001 and 2003 tax cuts permanent and protecting taxpayers from the alternative minimum tax. All these good things can happen if politicians simply limit annual spending growth to 2 percent each year. And they’ll happen even faster if spending grows at an even slower rate.

This debunks the statist argument that there is no choice but to raise taxes.

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Our tax system in America is an absurd nightmare, but at least we have some ability to monitor what is happening. We can’t get too aggressive (nobody wants the ogres at the IRS breathing down their necks), but at least we can adjust our withholding levels and control what gets put on our annual tax returns. The serfs in the United Kingdom are in much worse shape. To a large degree, the tax authority (Inland Revenue) decides everyone’s tax liability, and taxpayers have no role other than to meekly acquiesce. But now the statists over in London have decided to go one step farther and have proposed to require employers to send all paychecks directly to the government. The politicians and bureaucrats that comprise the ruling class then would decide how much to pass along to the people actually earning the money. Here’s a CNBC report on the issue.
The UK’s tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer. The proposal by Her Majesty’s Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid. …George Bull, head of Tax at Baker Tilly, told CNBC.com. “If HMRC has direct access to employees’ bank accounts and makes a mistake, people are going to feel very exposed and vulnerable,” Bull said. And the chance of widespread mistakes could be high, according to Bull. HMRC does not have a good track record of handling large computer systems and has suffered high-profile errors with data, he said. …the cost of implementing the new system would be “phenomenal,” Bull pointed out.  …The Institute of Directors (IoD), a UK organization created to promote the business agenda of directors and entreprenuers, said in a press release it had major concerns about the proposal to allow employees’ pay to be paid directly to HMRC. 
This is withholding on steroids. Politicians love pay-as-you-earn (as it’s called on the other side of the ocean), largely because it disguises the burden of government. Many workers never realize how much of their paychecks are confiscated by politicians. Indeed, they probably think greedy companies are to blame when higher tax burdens result in less take-home pay. This new system could have an even more corrosive effect. It presumably would become more difficult for taxpayers to know how much government is costing them, and some people might even begin to think that their pay is the result of political kindness. After all, zoo animals often feel gratitude to the keepers that feed (and enslave) them.

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Jeff Jacoby righteously – and rightfully – condemns the moral perversion that allows people to overlook the barbaric cruelty and oppression of communism.

If Jose Saramago, the Portuguese writer who died on Friday at 87, had been an unrepentant Nazi for the last four decades, he would never have won international acclaim or received the 1998 Nobel Prize for Literature. Leading publishers would never have brought out his books, his works would not have been translated into more than 20 languages, and the head of Portugal’s government would never have said on his death — as Prime Minister José Sócrates did say last week — that he was “one of our great cultural figures and his disappearance has left our culture poorer.” But Saramago wasn’t a Nazi, he was a communist. And not just a nominal communist, as his obituaries pointed out, but an “unabashed” (Washington Post), “unflinching’’ (AP), “unfaltering’’ (New York Times) true believer. A member since 1969 of Portugal’s hardline Communist Party, Saramago called himself a “hormonal communist’’ who in all the years since had “found nothing better.” …the idea that good people can be devoted communists is grotesque. The two categories are mutually exclusive. There was a time, perhaps, when dedication to communism could be absolved as misplaced idealism or naiveté, but that day is long past. After Auschwitz and Babi Yar, only a moral cripple could be a committed Nazi. By the same token, there are no good and decent communists — not after the Gulag Archipelago and the Cambodian killing fields and Mao’s “Great Leap Forward.’’ Not after the testimonies of Alexander Solzhenitsyn and Armando Valladares and Dith Pran. In the decades since 1917, communism has led to more slaughter and suffering than any other cause in human history. Communist regimes on four continents sent an estimated 100 million men, women, and children to their deaths — not out of misplaced zeal in pursuit of a fundamentally beautiful theory, but out of utopian fanaticism and an unquenchable lust for power. Mass murder and terror have always been intrinsic to communism. “Many archives and witnesses prove conclusively,’’ wrote Stéphane Courtois in his introduction to “The Black Book of Communism,’’ a magisterial compendium of communist crimes first published in France in 1997, “that terror has always been one of the basic ingredients of modern communism.’’ The uniqueness of the Holocaust notwithstanding, the savageries of communism and of Nazism are morally interchangeable — except that the former began much earlier than the latter, lasted much longer, and shed far more blood.

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I don’t often agree with the statist president of the European Commission, but Mr. Barroso may be right when he warns that some nations are at risk of descending back into dictatorship. But while he may be correct in his diagnosis, his proposed solution is more of the policies – redistribution, handounts, bailouts, and subsidies – that have caused nations to get in trouble in the first place. At best, this approach postpones the day of reckoning – but it also causes a much bigger collapse.

During my recent visits to Europe, I was surprised by the level of pessimism from all segments of the population. The general assessment is that Europe is heading downhill and that there is little hope of changing direction because too many people have been convinced by politicians that they are entitled to mooch. But, as Margaret Thatcher famously warned, the problem with socialism is that you eventually run out of other people’s money. That is what is happening in Europe. But rather than sober up, the Greeks and others are rioting in hopes of finding new victims to consume. Many people I talked to expressed concern that this attitude eventually would cause economic collapse and lead to some sort of anti-democratic rule. The optimists (if you can call them that) think the result may be some sort of soft despotism dictated by Brussels and enforced by bribes from (mostly) German taxpayers. Others are more dour and fear the rise of more malignant forms of dictatorship.

Here’s a blurb from the U.K.-based Daily Mail:

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned. In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money. The stark warning came as it emerged that EU chiefs have begun work on an emergency bailout package for Spain which is likely to run into hundreds of billions of pounds. …Leaders are expected to thrash out a rescue package for Spain’s teetering economy. Spain is expected to ask for an initial guarantee of at least £100 billion, although this figure could rise sharply if the crisis deepens. News of the behind-the-scenes scramble in Brussels spells bad news for the British economy as many of our major banks have loaned Spain vast sums of money in recent years. Germany’s authoritative Frankfurter Allgemeine Newspaper reported that Spain is poised to ask for multi-billion pound credits. Mr Barroso and Jean-Claude Trichet of the European Central Bank are united on the need for a rescue plan. The looming bankruptcy of Spain, one of the foremost economies in Europe, poses far more of a threat to European unity and the euro project than Greece. Greece contributes 2.5 percent of GDP to Europe, Spain nearly 12 percent.

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Arthur Brooks of the American Enterprise Institute explains in the Wall Street Journal that Americans protest to restrain government while European riot to expand the burden of the state. But this American spirit of self reliance may not last if government seduces more and more people into dependency - and I think fighting against this grim possibility is the chief motivating force of the tea party movement.

Many Europeans also expect others to work so they can live. The International Social Survey Programme asked Americans and Europeans whether they believe “It is the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes.” In virtually all of Western Europe more than 50% agree, and in many countries it is much higher—77% in Spain, whose redistributive economy is in shambles. Meanwhile, only 33% of Americans agree with income redistribution.  Simply put, Europeans have a much stronger taste for other people’s money than we do. This is vividly illustrated by the recent protests in the U.S. and Greece. Why are citizens rioting and striking in Greece? Despite the worst economic crisis in decades, labor unions and state functionaries demand that others pay for the early retirements, lifetime benefits and state pensions to which they feel entitled. In America, however, the tea partiers demonstrate not to get more from others, but rather against government growth, public debt, bailouts and a budget-busting government overhaul of the health-care industry. In other words, the tea partiers are protesting against exactly what the Greeks are demanding. It is an example of American exceptionalism if there ever was one.

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Americans should not get too smug about the troubles in Europe because the Bush-Obama policies of wasteful spending are bringing us down the same path. The latest evidence comes from a well-researched article about personal income in USA Today showing that the share from private paychecks fell to a record low and the share from government handouts reached a record high. As Veronique de Rugy of the Mercatus Center points out in her quote, this is the pattern that led to fiscal disaster in Greece:

Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds. At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010. …The result is a major shift in the source of personal income from private wages to government programs. The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says. …Economist Veronique de Rugy of the free-market Mercatus Center at George Mason University says the riots in Greece over cutting benefits to close a huge budget deficit are a warning about unsustainable income programs. Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism. “People are paid for being rather than for producing,” he says.

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I´ve already posted a great video from the folks at the Institute for Justice about this issue, but this John Stossel column is another good reminder of the corrupt and evil impact of asset forfeiture laws. If bureaucrats have an incentive to take people´s property – even if they never get convicted of a crime, the results are bound to be horrendous. Repeal is the right answer, but at the very least the laws should be changed so cops and prosecutors can´t line their own pockets:

Zaher El-Ali has repaired and sold cars in Houston for 30 years. One day, he sold a truck to a man on credit. Ali was holding the title to the car until he was paid, but before he got his money the buyer was arrested for drunk driving. The cops then seized Ali’s truck and kept it, planning to sell it. …The police say they can keep it under forfeiture law because the person driving the car that day broke the law. It doesn’t matter that the driver wasn’t the owner. It’s as if the truck committed the crime. “I have never seen a truck drive,” Ali said. I don’t think it’s the fault of the truck. And they know better.” Something has gone wrong when the police can seize the property of innocent people. … This is serious, folks. The police can seize your property if they think  it was used in a crime. If you want it back, you must prove it was not  used criminally. The burden of proof is on you. This reverses a centuries-old safeguard in Anglo-American law against arbitrary government power. The feds do this, too. In 1986, the Justice Department made $94 million on forfeitures. Today, its forfeiture fund has more than a billion in it. …”When you give people the wrong incentives, people respond accordingly. And so it shouldn’t be surprising that they’re stretching the definition of law enforcement,” Balko said. “But the fundamental point is that you should not have people out there enforcing the laws benefiting directly from them.”

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David Ranson had a good column earlier this week in the Wall Street Journal explaining that federal tax revenues historically have hovered around 19 percent of gross domestic product, regardless whether tax rates are high or low. One reason for this relationship, as he explains, is that the Laffer Curve is a real-world constraint on class warfare tax policy. When politicians boost tax rates, that motivates taxpayers to earn and/or report less income to the IRS:

The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth. …tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution’s W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. “Hauser’s Law,” as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP. …he tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect.

Several people have asked my opinion about the piece. I like the column, of course, but I’m not nearly so optimistic that 19 percent of GDP represents some sort of limit on the federal government’s taxing power. There are many nations in Europe with tax burdens closer to 50 percent, for instance, so governments obviously have figured how to extract much higher shares of national output. Part of the difference is because America has a federal system, and state and local governments collect taxes of about 10 percent of GDP. That still leaves a significant gap in total tax collections, though, so the real question is why American politicians are not as proficient as their European cousins at confiscating money from the private sector?

One reason is that European countries have value-added taxes, which are a disturbingly efficient way of generating more revenue. So does this mean that “Hauser’s Law” will protect us if politicians are too scared to impose a nationwide sales tax? That’s certainly a necessary condition for restraining government, but probably not a sufficient condition. If you look at the table, which is excerpted from the OECD’s annual Revenue Statistics publication, you can see that nations such as New Zealand and Denmark have figured out how to extract huge amounts of money using the personal and corporate income tax.

In some cases, tax rates are higher in other nations, but the main factor seems to be that the top tax rates in other nations are imposed at much lower levels of income. Americans don’t get hit with the maximum tax rate until our incomes are nine times the national average. In other nations, by contrast, the top tax rates take effect much faster, in some cases when taxpayers have just average incomes. In other words, European nations collect a lot more money because they impose much higher tax rates on ordinary people. Here’s a chart I put together a few years ago for a paper I wrote for Heritage (you can find updated numbers in Table 1.7 of this OECD website, but the chart will still look the same).

Europeans also sometimes impose high tax rates on rich people, but this is not the reason that tax receipts consume nearly 50 percent of GDP in some nations. Rich people in Europe, like their counterparts in America, have much greater ability to control the amount of taxable income that is earned and/or reported. These “Laffer Curve” responses limit the degree to which politicians can finance big government on the backs of a small minority.

But class-warfare tax rates on the rich do serve a very important political goal. Politicians understand that ordinary people will be less likely to resist oppressive tax rates if they think that those with larger incomes are being treated even worse. Simply stated, higher tax rates on the rich are a necessary precondition for higher tax rates on average taxpayers.

For “Hauser’s Law” to be effective, this means proponents of limited government need to fight two battles. First, they need to stop a VAT. Second, they need to block higher tax rates on the so-called rich in order to prevent higher tax rates on the middle class.

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Newt Gingrich writes in the Washington Post today to defend his assertion that Obama is a socialist. He cites several examples of the President’s big-government agenda, which are excerpted below. These are all examples of bad policy, to be sure, but other than the student loan takeover, these are all examples of fascism rather than socialism. Socialism, technically speaking, is government ownership of the means of production. Fascism, by contrast, involves government control and direction of resources, but cloaked by a system of nominal private ownership.

Calling Obama a fascist, however, is counterproductive. Other than a few economists and historians, people don’t understand that fascism developed (with Mussolini perhaps being the best example) as a social/economic system. Instead, most people associate it with Hitler’s lunatic ideas on matters such as race and militarism. That’s why I prefer to call Obama a statist or a corporatist. Those words accurately describe his governing philosophy without creating the distractions caused by calling him a socialist or fascist.

Creating czar positions to micromanage industry reflects the type of hubris of centralized government that Friedrich von Hayek and George Orwell warned against. How can a White House “executive compensation czar” know enough to set salaries in multiple companies for many different people? Having a pay dictatorship for one part of the country sets the pattern for government to claim the right to set pay for everyone. If that isn’t socialism, what word would describe it?

Violating 200 years of bankruptcy precedent to take money from bondholders and investors in the auto industry to pay off union allies is rather an anti-market intervention.

Proposing that the government (through the Environmental Protection Agency or some sort of carbon-trading scheme) micromanage carbon output is proposing that the government be able to control the entire U.S. economy. Look at the proposals for government micromanagement in the 1,428-page Waxman-Markey energy tax bill. (I stopped reading when I got to the section regulating Jacuzzis on Page 442.) If government regulates every aspect of our use of power, it has regulated every aspect of our lives. What is that if not socialism?

Nationalizing student loans so that they are a bureaucratic monopoly. This will surely lead to fraud on the scale we see in Medicare and Medicaid, from which more than $70 billion per year is stolen.

Expanding government mortgage intervention to 90 percent of the housing market.

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Gloominess and despair are not uncommon traits among supporters of limited government – and with good reason. Government has grown rapidly in recent years and it is expected to get much bigger in the future. To make matters worse, it seems that the deck is stacked against reforms to restrain government. One problem is that 47 percent of Americans are exempt from paying income taxes, which presumably means they no longer have any incentive to resist big government. Mark Steyn recently wrote a very depressing column for National Review Online about this phenomenon, noting that, “By 2012, America could be holding the first federal election in which a majority of the population will be able to vote themselves more government lollipops paid for by the ever shrinking minority of the population still dumb enough to be net contributors to the federal treasury.” Walter Williams, meanwhile, has a new column speculating on whether this cripples the battle for freedom:

According to the Tax Policy Center, a Washington, D.C., research organization, nearly half of U.S. households will pay no federal income taxes for 2009…because their incomes are too low or they have higher income but credits, deductions and exemptions that relieve them of tax liability. This lack of income tax liability stands in stark contrast to the top 10 percent of earners, those households earning an average of $366,400 in 2006, who paid about 73 percent of federal income taxes. …Let’s not dwell on the fairness of such an arrangement for financing the activities of the federal government. Instead, let’s ask what kind of incentives and results such an arrangement produces and ask ourselves whether these results are good for our country. …Having 121 million Americans completely outside the federal income tax system, it’s like throwing chum to political sharks. These Americans become a natural spending constituency for big-spending politicians. After all, if you have no income tax liability, how much do you care about deficits, how much Congress spends and the level of taxation?

Steyn and Williams are right to worry, but the situation is not as grim as it seems for the simple reason that a good portion of the American people know the difference between right and wrong. Consider some of the recent polling data from Rasmussen, which found that “Sixty-six percent (66%) believe that America is overtaxed. Only 25% disagree. Lower income voters are more likely than others to believe the nation is overtaxed” and “75% of voters nationwide say the average American should pay no more than 20% of their income in taxes.” These numbers contradict the hypothesis that 47 percent of Americans (those that don’t pay income tax) are automatic supporters of class-warfare policy.

So why are the supposed free-riders not signing on to the Obama-Reid-Pelosi agenda? There are probably several reasons, including the fact that many Americans believe in upward mobility, so even if their incomes currently are too low to pay income tax, they aspire to earn more in the future and don’t want higher tax rates on the rich to serve as a barrier. I’m not a polling expert, but I also suspect there’s a moral component to these numbers. There’s no way to prove this assertion, but I am quite sure that the vast majority of hard-working Americans with modest incomes would never even contemplate breaking into a rich neighbor’s house and stealing the family jewelry. So it is perfectly logical that they wouldn’t support using the IRS as a middleman to do the same thing.

A few final tax observations:

The hostility to taxation also represents opposition to big government (at least in theory). Rasumssen also recently found that, “Just 23% of U.S. voters say they prefer a more active government with more services and higher taxes over one with fewer services and lower taxes. …Two-thirds (66%) of voters prefer a government with fewer services and lower taxes.” 

There is a giant divide between the political elite and ordinary Americans. Rasmussen’s polling revealed that, “Eighty-one percent (81%) of Mainstream American voters believe the nation is overtaxed, while 74% of those in the Political Class disagree.”

Voters do not want a value-added tax or any other form of national sales tax. They are not against the idea as a theoretical concept, but they wisely recognize the politicians are greedy and untrustworthy. Rasumussen found that “just 26% of all voters think that it is even somewhat likely the government would cut income taxes after implementing a sales tax. Sixty-six percent (66%) believe it’s unlikely to happen.” 

Fiscal restraint is a necessary precondition for any pro-growth tax reform. If given a choice between a flat tax, national sales tax, value-added tax, or the current system, many Americans want reform, but it is very difficult to have a good tax system if the burden of government spending is rising. Likewise, it would be very easy to have a good tax system if we had a federal government that was limited to the duties outlined in Article I, Section VIII, of the Constitution.

Republicans should never acquiesce to higher taxes. All these good numbers and optimistic findings are dependent on voters facing a clear choice between higher taxes and bigger government vs lower taxes and limited government. If Republicans inside the beltway get seduced into a “budget summit” where taxes are “on the table,” that creates a very unhealthy dynamic where voters instinctively try to protect themselves by supporting taxes on somebody else – and the so-called rich are the easiest target.

Last but not least, I can’t resist pointing out that I am part of a debate for U.S. News & World Report on the flat tax vs. the current system. For those of you who have an opinion on this matter, don’t hesitate to cast a vote.

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Politicians like to play a class-warfare game of demonizing rich people. Walter Williams explains, though, that rich people can only do bad things to us if they are conspiring with politicians. The moral of the story, of course, is that government is a threat to our freedom and liberty:

Bill Gates is the world’s richest person, but what kind of power does he have over you? Can he force your kid to go to a school you do not want him to attend? Can he deny you the right to braid hair in your home for a living? It turns out that a local politician, who might deny us the right to earn a living and dictates which school our kid attends, has far greater power over our lives than any rich person. Rich people can gain power over us, but to do so, they must get permission from our elected representatives at the federal, state or local levels. For example, I might wish to purchase sugar from a Caribbean producer, but America’s sugar lobby pays congressmen hundreds of thousands of dollars in campaign contributions to impose sugar import tariffs and quotas, forcing me and every other American to purchase their more expensive sugar. Politicians love pitting us against the rich. All by themselves, the rich have absolutely no power over us. To rip us off, they need the might of Congress to rig the economic game. It’s a slick political sleight-of-hand where politicians and their allies amongst the intellectuals, talking heads and the news media get us caught up in the politics of envy as part of their agenda for greater control over our lives. …While American politicians and intellectuals have not reached the depths of tyrants such as Lenin, Stalin, Mao and Hitler, they share a common vision. Tyrants denounce free markets and voluntary exchange. They are the chief supporters of reduced private property rights, reduced rights to profits, and they are anti-competition and pro-monopoly. They are pro-control and coercion, by the state.

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A new study from the University of Michigan Law School’s Empirical Legal Studies Center finds that it is more difficult today for politicians to impose excessive financial regulation because firms can migrate to jurisdictions with more pro-market policy. The author notes tht this is less true for institutions, such as big banks, that want government protection, but laissez-faire entities such as hedge funds have substantial ability to flee bad government policy:

Jurisdictional competition spread from corporate law to its close cousin, securities law. Historically, issuers listed their stock for trading on one of the exchanges in the country where they principally did business. Improvements in communication and related technologies, however, have made possible an international market for stock exchange listings that resembles in many respects the long‐standing federal market for corporate charters in the United States. Now companies can list their shares for trading on exchanges in any number of countries; there is no longer a logical nexus between the site of a company’s headquarters and where its shares are traded. …Does that free movement of capital limit the ability of the Obama administration to reform financial regulation in the United States? …After the United States effectively raised listing standards by enacting the Sarbanes‐Oxley Act in 2002, foreign companies headed for the door. London seized the opportunity; fourteen of the top twenty initial public offerings (“IPOs”) listed on the London Stock Exchange (“LSE”) came from outside the United Kingdom in 2005 to 2008. By contrast, only four of the top twenty IPOs in New York came from outside the United States. Further, it was not only foreign companies that were leaving; United States companies left the public market in droves, headed for the greener (or at less regulated) fields of private equity, and they were not being replaced. A Grant Thornton study documented a staggering thirty‐nine percent decline in United States listings from a peak of 8,823 in 1997 to only 5,401 in 2008. …hedge funds can go elsewhere if a country tries to enmesh them in red tape. Running a hedge fund only requires an office and an Internet connection. …Debates over hedge fund regulation take place against the shadow of the threat of the flight of these financial intermediaries. And that flight has already begun. The United Kingdom raised its top tax rate to fifty percent in April. That move, along with EU restrictions on borrowing by hedge funds, already prompted a number of hedge funds to emigrate to greener pastures. …Hedge fund bankers are not happy about being treated like bankers. Unlike bankers, however, they do not have to stick around and take it. “About [twenty] percent of the hedge‐fund community could leave the [United Kingdom] in the next two or three years. The feeling among the hedge‐community is there is a better place to be.” Where is that better place? Asia. Places like Singapore are attracting hedge funds… Of course, the fact that Singapore does not tax capital gains may have had something to do with its attractiveness. …So what does global competition mean for populist retribution against the money changers? Apparently it depends on the mobility of the money changes you are talking about. Big banks need government backing to be credible with depositors and counterparties, so the bankers at those institutions are going to have to stick around and take it. Smaller institutions, like hedge funds, are much more portable, and if Western governments attempt to impose banker‐like restrictions on them, they will head elsewhere. …The forces of financial capitalism can no longer be confined within the boundaries of a single nation, so regulation is not simply a matter of mustering the requisite political will. There is no shortage of anger against the bankers in the current environment, but it can only be deployed against financial intermediaries who cannot flee the regulatory wrath. …International competition in financial services regulation now serves as a check on populist retribution, but only a partial one.

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