The Deadly Impact of Government Regulations on Organ Transplants

Economists are sometimes considered to be a bit odd, and the same thing is sometimes said about libertarians.

And since I’m a libertarian economist, I realize that makes me doubly suspect.

So when I’ve written about the desirability of market-based organ transplants (see here, here, and here), I realize some people will instinctively object because selling one’s organs is somehow distasteful and icky.

Or it makes people subject to exploitation. For instance, writing for the Washington Post, Scott Carney argues that organ sales would take advantage of the poor.

What would happen if the United States legalized the sale of human organs? …Whether we like it or not, we live in the era of globalization, and if the U.S. legalizes the market for body parts, there is no reason to think that international economies won’t play a role in how a patient decides to procure transplant organs. …According to the National Foundation for Transplants, a kidney transplant costs about $260,000. In the illegal organ markets in India, Egypt and Pakistan, the same procedure rings in at just shy of $20,000 — certified organ included. …The only thing stopping the typical American transplant patient from going abroad and buying an organ is the difficulty of making contact with a broker and the threat of what might happen if they get caught. …the market for human body parts is a lot like the one for used cars: They’re only worth what someone is willing to sell them for. …hundreds of thousands of people are available and willing to sell their flesh for pennies on the dollar.

My view, for what it’s worth, is that I shouldn’t be allowed (and the government shouldn’t be allowed) to block a willing seller and a willing buyer from engaging in a mutually beneficial exchange.

But folks like Mr. Carney think that poor people will get exploited.

…it’s helpful to review what happened in the market for human surrogate babies. In the United States, it is legal to pay a woman to carry a child… Once the market was clearly defined in the United States, other countries, with looser definitions of human rights, fought for their share of the market. In 2002, India became the go-to destination for procuring a budget surrogate womb. To the surprise of no one, the Indian industry soon began to cut corners. Women were housed under lock and key in houses known to the press as “baby factories.” …Late last year, India finally outlawed surrogacy tourism after non-stop incidents and official inquiries into the surrogates’ well-being. Now the commercial surrogacy boom seems to be moving to Cambodia where regulations are still loose.

So what’s his bottom line?

We cannot solve our own organ shortage by exploiting the poor and helpless people on the other side of the world.

I don’t doubt that there are shady people willing to exploit the poor by not giving them relevant information and/or not fully compensating them, though that’s not an argument against organ sales (just as similar periodic bad behavior by car salesmen and insurance brokers isn’t an argument against markets for automobiles and life insurance).

Instead, it’s an argument for governments in places such as India to do a better job at protecting and upholding the rule of law, which is one of the few proper and legitimate functions of a state.

A Wall Street Journal column by two attorneys from the Institute for Justice approaches the issue more dispassionately, noting that a market for bone marrow could save many lives.

Hemeos is aimed at one of the most pressing problems in medicine: the shortage of bone-marrow donors to combat deadly blood diseases. Thousands of Americans are waiting for a lifesaving donor, and thousands more have died waiting. Marrow donors provide blood stem cells, which reproduce continuously in the patient and restore the ability to make healthy blood. …Blood is drawn from one arm, the blood stem cells are skimmed out, and the blood is returned through the other arm. Donated marrow cells regenerate quickly and fully. Despite the ease of donating, thousands of patients with leukemia or other blood-related disorders are desperately searching for donors because a specific genetic match is required. …Hemeos plans to revolutionize donor recruitment by taking one simple step: compensating donors with a check for around $2,000. As with every other valuable thing in the world, we will get more marrow cells when we pay for them. It’s Econ 101.

Sounds great, right? A classic example of a win-win situation!

Except, well, government.

In 1984 the National Organ Transplant Act (NOTA) made it a federal crime to pay donors. Unlike plasma, sperm and egg donation—for which compensation is legal and common—paying marrow donors remains illegal. The result? Shortages, waiting lists and unnecessary suffering.

Fortunately, the courts have stepped in.

Ms. Flynn has three girls with Fanconi anemia, a genetic disorder that causes marrow failure. Wanting to do everything to save her girls and others, Ms. Flynn, along with several cancer patients in need of bone marrow, sued the Justice Department to end the ban on compensating marrow donors. A federal appeals court ruled in 2011 that because Congress expressly said that NOTA wouldn’t affect compensation for blood donation, …Congress couldn’t have intended the law to restrict compensation for marrow donations using modern, nonsurgical techniques.

But, still, government is government.

But a year after Ms. Flynn won her case, the Department of Health and Human Services announced that it might enact a regulation effectively nullifying the court’s ruling—and thus Ms. Flynn’s victory. …And while HHS fiddles, patients die. Thousands of Americans have died awaiting a marrow transplant since HHS embarked on this needless diversion. How many could have been saved? And of those still alive, how many could have received a transplant faster and with a better-quality donor? This is a lesson in how a faceless, lumbering bureaucracy smothers innovation and optimism.

Here’s a very powerful video from IJ on this issue.

It’s hard to watch that video and think about what you would do if your children faced the risk of death.

Sally Satel of the American Enterprise Institute adds her two cents, writing on kidney sales from the unique perspective of being someone who has received two kidneys solely because of human kindness.

I am almost obscenely lucky. Within a 10-year period, two glorious women rescued me from years of grueling dialysis and a guarantee of premature death. …tremendous generosity allowed me to live many years in peace instead of constant worry. …I understood the general reluctance to donate. After all, giving a kidney is by no means risk-free (roughly a 0.02 percent, or 2 in 10,000 mortality rate, a 3–5 percent rate of serious complications, and perhaps a 25 percent chance of minor complications). Also, some people want to “save” their kidney lest, say, their own child needs it. Then, too, a lot of people are simply put off by surgery, and some handful—no one knows the extent of this group—can’t afford time off and lost wages. Of the 120,000 people waiting for organs, 101,000 are waiting for kidneys.

And for those who aren’t as lucky, Sally points out that current policy puts them in a very difficult position.

My transplants were a matter of private policy. My friends saved me—out of empathy, out of principle, out of affection. I’m beyond fortunate for them, because our public policy is failing far too many people who need organs. Twenty-two people die each day because they cannot survive the wait for an organ; 12 of those die from lack of a kidney in particular. The core of the problem is that prospective donors are legally required to relinquish an organ in the spirit of “altruism.” Despite the risk they take on, they are not allowed to benefit materially in any way. This mandate is part of the 1984 National Organ Transplant Act, the law that established the national system of organ procurement and distribution. Any exchange of an organ for any sort of “valuable consideration,” is a felony punishable by up to five years in prison and/or a $50,000 fine.

Indeed, current policy is causing people to needlessly die.

The original law was intended in good faith. The point was to prevent a classic free market where only wealthier patients could afford to buy organs; it also sought to avert the scenario where poor donors were the “suppliers” for the well-off. …But more than enough time has now elapsed to conclude with certainty that an altruism-only system is sorely inadequate. And as in so many realms, it is the poor (especially poor minorities) that have suffered the most because of the deficit. They are less likely to be referred for transplant, more likely to die on dialysis, and less likely to receive an organ from the national pool even when they are referred.

One lawmaker is trying to push policy in the right direction.

In May, Pennsylvania Rep. Matt Cartwright introduced a bill called the Organ Donor Clarification Act of 2016. Its goal is to permit study of the effect of rewarding people who are willing to save the life of a stranger through living donation: Not through a free market with direct cash payments… Rather than large sums of cash, potential rewards could include a contribution to the donor’s retirement fund, an income tax credit or a tuition voucher, lifetime health insurance, a contribution to a charity of the donor’s choice, or loan forgiveness. Only the government, or a government-designated charity, would be allowed to distribute these benefits. (The funds could potentially come from the savings of stopping dialysis, which costs roughly $80,000 a year per person.) In other words, needy patients would receive kidneys regardless of their ability to reward donors out of their own pockets. …The donors’ kidneys would be distributed to people on the waiting list according to the rules now in place.

Congressman Cartwright’s proposal obviously wouldn’t create a genuine free market. But it would allow compensation to become part of the equation. So his proposal presumably would save lives compared to the current system.

Oh, by the way, it’s worth noting that criminalization of organ sales doesn’t fully stop the practice. Other nations step in, often with policies that are disgusting.

…one of the most horrific markets operating today: Communist China’s selling of organs harvested from prisoners of conscience. Ten thousand “transplant tourists” travel annually to communist China, where they pay top dollar to get organs transplanted on demand. …Free countries may not be able to stop this horrific practice, but they could reduce the demand for these organs by allowing free people to exercise the choice to sell their organs. Currently, free countries rely only on altruism, which has resulted in severe shortages of organs and black markets.

In other words, the policies advocated by Mr. Carney (the first story cited at the start of this column) would enhance the profitability of the Chinese organ-harvesting system. That doesn’t seem like a good outcome.

Here’s a map showing how the kidney trade works right now, with the underground economy playing a big role.

My bottom line is that poor people would get more money and have more legal protections if the system was fully legalized and operating above ground.

P.S. When I wasn’t busy causing trouble in college, I would sell my plasma twice weekly. The $15 I received from the medical company was sufficient to cover my food budget. They exploited me and I exploited them.

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Mirror, Mirror, on the Wall, which Nation Has the Most Total Freedom of All?

Libertarians are sometimes described as people who don’t want the government to interfere in either the bedroom or boardroom, which is a shorthand way of saying that there should be both personal freedom and economic freedom.

Based on this preference for liberty and a desire to avoid government coercion, what’s the most libertarian nation in the world? Is it Australia, which I recommended as the best option for escaping Americans if the U.S. becomes a failed welfare state?

Not quite. According to the new Human Freedom Index, Australia gets a very good score, but the most libertarian-oriented place in the world isn’t even a country. It’s Hong Kong, a “special administrative region” of China.

Hong Kong earns its high score thank to it’s number-one status for economic freedom, combined with a top-20 score for personal freedom.

For what it’s worth, European nations dominate the rankings. Other than top-rated Hong Kong, New Zealand (#3), Canada (tied for #6), and Australia (tied for #6), every single nation in the top 20 is from the other side of the Atlantic.

So kudos to our friends from across the ocean. Most of them have big welfare states, but at least they compensate with free market policy in other areas, along with lots of personal freedom.

And what about the United States? We’re ranked #23, which certainly is decent considering that there are 159 countries that are scored, but obviously not worthy of superlatives.

The infographic below contains the specific scores for the United States. As you can see, our economic freedom score (7.75 out of 10) is worse – in absolute terms – than our personal freedom score (8.79 out of 10). But since more nations (especially in Europe) get high scores for personal freedom, our relative ranking for economic freedom (16 our of 159) is better than our relative ranking for personal freedom (28 our of 159).

And if we look at the sub-categories for personal freedom on the left side, you’ll notice that America’s main problem is a very mediocre score for rule of law. Thanks, Obama!

Let’s now look at the nations that have the most personal freedom.

I already mentioned that the United States is in 28th place, so we obviously don’t show up on this top-20 list. But you will find 17 European nations, along with Australia (tied for #12), Canada (#15), and Hong Kong (tied for #19).

By the way, Switzerland is the only nation to be in the top 10 for both personal and economic freedom. So maybe that country’s improbable success isn’t so improbable after all. You do the right thing and you get good results.

And honorable mention to Ireland, Australia, and the United Kingdom for just missing being in the top 10 in both categories.

In case you’re wondering why Hong Kong had the highest overall score even though it was “only” #19 for personal freedom, the answer is that the jurisdiction scores so much higher for economic liberty than the European nations.

P.S. For what it’s worth, I find it surprising that China, which ranks rather low for overall freedom (141 out of 159), is so tolerant of widespread freedom in Hong Kong. I assume (hope?) this is a positive sign that China will evolve in a positive direction.

P.P.S. The very last country on the list is Libya, so perhaps we can conclude that the Hillary Clinton/Barack Obama intervention has not produced good results. Meanwhile, I’m guessing that the thugs in Caracas (154 out of 159) are happy that Venezuela isn’t in last place.

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From New Hampshire at the Top to New York at the Bottom, Ranking Freedom at the State Level

Proponents of liberty generally are big fans of federalism. In part, this is simply an issue of “good governance” since both voters and lawmakers at the state and local level are more likely to actually understand the real issues in communities and be able to develop policies that are more sensible.

But we also like federalism because it’s relatively easy for people to move across state and local borders and this means governments have to compete with each other, both in terms of not driving away productive people and also in terms of not attracting those who want to mooch off the government.

The obvious implication is that if we can dramatically shrink the federal government so that it only handles the few (enumerated) powers envisioned by the Founding Fathers, that would give states far more authority to determine tax burdens and the degree of redistribution, and they would presumably do a better job because they would compete with each other for jobs and investment.

This is why I’m always interested when organizations produce rankings that show the degree to which states seem inclined to adopt good policy. For instance, I routinely highlight the findings of the Tax Foundation’s State Business Tax Climate Index so I can see which states have acceptable tax policy. And the Mercatus Center’s Ranking the States by Fiscal Condition is a must-read publication to see which states follow sensible budget policy.

The latest addition to this group is the Cato Institute’s Freedom in the 50 States. It’s a comprehensive publication with lots of data and number-crunching, so wonks will have a field day digging into the details.

But if you simply want the highlights, I first looked to see which states have the best fiscal policy. Here’s the relevant table from the document and I’ve modified it to show which states have no income tax (blue stars), which ones have flat taxes (red stars), and which ones have no sales tax (black stars).

The obvious implication is that having no state income tax is probably the single most important way of controlling the fiscal burden of government.

But fiscal policy is just one variable of economic freedom. And while states obviously don’t have any leeway on monetary policy and trade policy, they have considerable powers over issues related to regulation.

And when you add these factors to the mix, you can get a measure of overall economic freedom.

If you compare these first two tables, there are some predictable similarities (New York and California score poorly while South Dakota, Tennessee, and New Hampshire do well).

But you also get some odd results. Pennsylvania, for instance, is 13th for fiscal policy, but drops to 30th for overall economic policy. I guess this means they are regulatory maniacs.

By contrast, Indiana is ranked a mediocre 26th for fiscal policy, but jumps to 11th place for overall economic policy, which presumably means a very laissez-faire approach to red tape.

Now let’s add personal freedom issues to the equation (issues such as guns, gambling, sex, education, booze, and even fireworks).

The bottom line, if you value overall liberty, is that you better be tolerant of cold weather since New Hampshire and Alaska are atop the rankings. New York is in last place by a comfortable margin.

Interestingly, if you compare the fiscal ranking with the above table for overall freedom, you’ll notice that there’s a lot of overlap. New Hampshire is first in both and New York is last, for instance.

But there are some odd anomalies. Iowa, for example is 9th for overall freedom but only 30th for fiscal freedom, a gap of 21 spots. There’s also a big difference for Kansas, which is 33rd in fiscal freedom but 16th for overall freedom.

Conversely, Texas is 10th for fiscal freedom, but drops to 28th place for overall freedom. And Alabama also has a split personality, ranking 6th for fiscal policy but 23rd for overall freedom.

Why are some states bad on fiscal policy but good on regulation and personal freedom, like Iowa and Kansas? Or, in the case of states like Alabama and Texas, the other way around?

Beats me. Maybe some southern states like controlling people’s lives so long as it doesn’t involve the power of the purse (sort of like Singapore). And maybe some farm states exploit the power of the purse, both otherwise leave people alone (sort of like the Nordic nations).

Here’s something easier to understand, a measure of which states have improved the most and deteriorated the most in the 21st century.

The bad news is that only nine states have moved in the right direction, with Oklahoma easily winning the prize for pro-liberty reforms. Honorable mention to Alaska, Maine, and Idaho.

By the way, is anybody surprised that Illinois is in last place? The dropping scores for Hawaii, New Jersey, and Connecticut also aren’t surprising.

But why have Kentucky, Nebraska, and Tennessee fallen so much?

P.S. Since we’re ranking states, here’s one final bit of information.

I wrote recently to debunk the left’s claim that California is an economic success story. My main point was to share per-capita income data from the BEA to who that California has been losing ground over the medium-term and long-term to states such as Kansas and Texas. And even in the short-term as well if you look at Census Bureau data on median household income.

But some leftists pushed back by arguing that the numbers nonetheless showed higher income levels in California. That’s certainly what we see in both the BEA and Census data, though I would argue that’s actually not relevant unless one (incorrectly) claims that California became a rich state because of big government. As i wrote in that column, “we’re focusing on changes in per-capita income (i.e., which state is enjoying the most growth, regardless of starting point or how much money can buy in that state).”

Speaking of “how much money can buy,” let’s look at some great work from the Tax Foundation on that topic. If you have $100 of income, where will you be able to buy the best basket of goods and services. As you can see, you’re far better off in Texas or (especially) Kansas than in California.

The bottom line is that living standards in Texas and Kansas would be higher than those in California if BEA and Census numbers were adjusted for purchasing power parity (as happens when comparing living standards across nations).

Some people may want to live in California (or some other high-tax state) because of the climate or scenery. They just have to accept lower living standards caused by bigger government. Just like there are certain benefits of living in nations such as France and Italy, but you have to accept bloated government and economic stagnation as part of the package

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Borders Limit Freedom but Promote Liberty

Like all good libertarians, I hate waiting in government-mandated lines. Heck, you don’t even have to be a curmudgeonly libertarian to have unpleasant thoughts about the Post Office or Department of Motor Vehicles (not to mention the virtual lines that exist for people stuck on hold after calling the IRS or some other inefficient bureaucracy).

And it must be doubly irritating to wait in line to get bureaucratic approval for things that shouldn’t require any sort of government permission in the first place.

Since I have to do a bit of travel, I’m especially resentful of the lines I face for customs and immigration when I cross borders. In some cases, these restrictions can even turn “Heaven into Hell.”

My aversion to government-mandated lines is so strong that I’m a big fan of the European Union’s “Schengen Zone” that has made crossing many European borders as simple as crossing from one American state to another (and regular readers know that I’m normally very reluctant to say anything nice about the policies concocted by the crowd in Brussels).

Given all this, I was very interested to see that the leading bureaucrat of the European Commission, Jean-Claude Juncker, has said that borders are “the worst invention ever.”

Was he making a libertarian argument about the value of making it easier for people to travel and/or move? Let’s investigate. Here’s some of what was reported about Juncker’s comments in the U.K.-based Daily Mail.

EU chief Jean-Claude Juncker risked widening divisions with European leaders today by saying borders were the ‘worst invention ever’. He called for all borders across Europe to be opened, despite the chaos caused over the last year from the flood in refugees fleeing Syria and the wave of terror attacks hitting various continent’s cities. …Mr Juncker also said a stronger EU was the best way of beating the rising trend of nationalism cross Europe. In another extraordinary remark, he appeared to warn of war on the continent if the EU disintegrates as he echoed the warning from the former French president Francois Mitterrand, who said nationalism added to nationalism would end in war.

Writing for the American Enterprise Institute, Michael Barone offered a different perspective.

He starts with the observation that Juncker’s home country of Luxembourg is rich because of borders.

Juncker comes from Luxembourg, a 998-square mile country… If you look up Luxembourg in lists of world economic statistics, you’ll find it rated No. 2 in gross domestic product per capita. That’s thanks to what Juncker called politicians’ worst invention ever, borders. Luxembourg is a financial haven and headquarters of the world’s largest steel company, Arcelor Mittal. Without their borders and national laws, the 576,000 Luxembourgers wouldn’t be as affluent as they are.

Barone is correct. Luxembourg is only a very successful tax haven because it has the right to have tax laws inside its borders that are attractive relative to the tax laws that exist in adjoining nations such as France and Germany.

For those who care about foreign policy, Barone also pushes back at the notion the European Union somehow has prevented World War III.

Juncker said, “We have to fight against nationalism, we have the duty not to follow populists but to block the avenue of populists.” Such is the faith of the Eurocrats: The EU exists to prevent another war between France and Germany. Never mind that the chance of such a war has been zero since 1945, 71 years ago. …Juncker was denouncing Austria and other nations for erecting border controls to keep out Muslim refugees. Evidently he believes that World War III will somehow break out if they are kept out.

This is surely right. The people in Western Europe no longer have any interest in fighting each other. And to the extent any international organization deserves credit for that, it would be NATO (even if it no longer serves a purpose).

Let’s now shift back to the role of borders and the size and power of government.

If you want a really good libertarian-oriented explanation of why borders are valuable, let’s go back in time to 2004. Professor Andy Morriss wrote an article for The Freeman that explains borders are good for liberty because they limit the powers of governments.

Borders come from property rights and are essential to a free society…are wonderful things. Lorain and Cuyahoga counties in Ohio must compete for my family’s residence. Choosing to live where we do is related to the taxes charged by the communities where we might have lived.

The value of borders, Andy explains, is that they represent a territorial restriction on the power of government and people can cross those borders if they think governments are being too greedy and oppressive.

Investors make similar choices. …Choosing bad policies produces an exodus; choosing good policies leads to immigration of both capital and people. …the competition offered on local taxation policy and other regulatory issues is important in restraining governments from infringing liberty. …National borders are also important sources of liberty. …without borders we would not have the competition among jurisdictions that restricts attempts to abridge liberty. …Jurisdictions…compete to attract people and capital. This competition motivates governments to act to preserve liberty.

He cites the example of how Delaware became the leading jurisdiction for company formation (and also a very good tax haven for foreigners).

…states compete for corporations, with Delaware the current market leader. Delaware corporate law offers companies the combination of a mostly voluntary set of default rules and an expert decision-making body (the Court of Chancery). As a result, many corporations, large and small, choose to incorporate in Delaware, making it their legal residence. (Their actual headquarters need not be physically located there.) Corporations get a body of liberty-enhancing rules; Delaware gets tax revenue and employment in the corporate services and legal fields. That state’s position is no accident. At the beginning of the twentieth century, New Jersey was the market leader in corporate law. When New Jersey’s legislature made ill-advised changes to its corporations statute that reduced shareholder value, Delaware seized the opportunity and offered essentially the older version of New Jersey’s law.

Borders also are good, Andy explains, because they create natural experiments that allow us the compare the success of market-oriented jurisdictions with the failure of statist jurisdictions.

Statists are correct that competition among jurisdictions will make clear the costs of the policies they promote. …The former divide between East and West Berlin is a fine example of the impact of cross-border comparisons. East Germans could see the difference in outcomes between the two societies, and East Germany had to resort to increasingly costly and desperate measures to prevent its citizens from voting against communism with their feet. …Competition between the two Germanys exposed the cost of East German policies.

In an observation that could have been taken from today’s headlines, he also notes that uncompetitive governments try to prop up their inefficient welfare states by clamping down on pro-market policies in other nations.

To prevent cross-border competition from exposing the costs of their favorite policies, …special interests attempt to forestall it. …High-tax, heavy-regulatory jurisdictions in the European Union are waging just such a fight now, arguing, for example, that Ireland’s low taxes are “unfair” competition.

He’s exactly right. Which is precisely why it’s so important to block efforts to replace tax competition with tax harmonization.

Andy’s conclusion hits the nail on the head. We may not like having to wait in lines and fill out forms to cross borders, but the alternative would be worse.

Even though borders can be an excuse for reducing liberty, a world with lots of borders is nonetheless a far friendlier world for liberty than one with fewer borders. They promote competition for people and money, which tends to restrain the state from grabbing either. Borders offer chances to arbitrage regulatory restrictions, making them less effective. Without borders these constraints on the growth of the state would vanish.

Before closing, let’s look at an example of how governments are forced to dismantle bad policy because of the the jurisdictional competition that only exists because of borders. It’s from an academic study written by Jayme Lemke, a scholar from the Mercatus Center. Here are some excerpts from the abstract.

Married women in the early nineteenth century United States were not permitted to own property, enter into contracts without their husband’s permission, or stand in court as independent persons. This severely limited married women’s ability to engage in formal business ventures, collect rents, administer estates, and manage bequests through wills. By the dawn of the twentieth century, legal reform in nearly every state had removed these restrictions by extending formal legal and economic rights to married women.

Why did states grant economic liberty and property rights to women?

Was it because male legislators suddenly stopped being sexist?

Maybe that played a role, but it turns out that people moved to states that eliminated these statist restrictions and that pressured other states to also reform.

…what forces impelled legislators to undertake the costs of action? …interjurisdictional competition between states and territories in the nineteenth century was instrumental in motivating these reforms. Two conditions are necessary for interjurisdictional competition to function: (1) law-makers must hold a vested interest in attracting population to their jurisdictions, and (2) residents must be able to actively choose between the products of different jurisdictions. Using evidence from the passage of the Married Women’s Property Acts, I find that legal reforms were adopted first and in the greatest strength in those regions in which there was active interjurisdictional competition.

The moral of the story is that competition between states improved the lives of women by forcing governments to expand economic liberty.

And since even the New York Times has published columns showing that feminist-type government interventions actually hurt women, perhaps the real lesson (especially for our friends on the left) is that you help people by expanding freedom, not by expanding the burden of government.

P.S. There is a wealth of scholarly evidence that the western world became rich because of borders and jurisdictional competition.

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My Presidential Choice

I periodically get asked who should be in the White House.

Since I’m a policy wonk rather than a political pundit, I generally sidestep the question.

Though it probably isn’t too hard to figure out my preference if you peruse what I’ve written about previous presidents.

I’m a huge fan of both Ronald Reagan and Calvin Coolidge, for instance.

But I’m definitely not partisan. I’ve also said nice things about John F. Kennedy and even Bill Clinton.

And to further demonstrate my independence, it’s time for me to endorse another Democrat.

Yes, you read correctly. The person I want in the White House is….(drum roll, please)…the 22nd and 24th President of the United States, Grover Cleveland.

He’s mostly famous for being the only President to serve non-consecutive terms (he won in 1884, lost in 1888, and won again in 1892). And perhaps also for marrying a 21-year woman while in the White House.

But he should be remembered instead – and with great fondness – for his belief in classical liberal principles.

Let’s start with this blurb from his Wikipedia page.

Cleveland was the leader of the pro-business Bourbon Democrats who opposed high tariffs, Free Silver, inflation, imperialism, and subsidies to business, farmers, or veterans. His crusade for political reform and fiscal conservatism made him an icon for American conservatives of the era. Cleveland won praise for his honesty, self-reliance, integrity, and commitment to the principles of classical liberalism. He relentlessly fought political corruption, patronage, and bossism. …He also used his appointment powers to reduce the number of federal employees, as many departments had become bloated with political time-servers. …Cleveland used the veto far more often than any president up to that time.

Perhaps his most glorious moment came when he rejected the Texas Seed Bill.

After a drought had ruined crops in several Texas counties, Congress appropriated $10,000 to purchase seed grain for farmers there. Cleveland vetoed the expenditure. In his veto message, he espoused a theory of limited government:

I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. …the lesson should be constantly enforced that, though the people support the government, the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

Wow, can you imagine any President saying these words today?

President Cleveland’s steadfast behavior and sound principles have garnered him some well-deserved praise.

Writing for Investor’s Business Daily back in 2011, Paul Whitfield opined about Cleveland’s track record.

If free-market advocates could resurrect a U.S. president to deal with today’s problems, many would choose Grover Cleveland. …He vetoed hundreds of spending bills, refusing to succumb to political temptation whether it was wrapped in patriotism or sob stories. …Union military veterans had become a powerful special interest group. Expenditures on their pensions increased about 500% over 20 years… When Congress passed a bill granting pensions to veterans for injuries not caused by military service, he vetoed it. …He vetoed 414 bills during his eight years — 1885-89 and 1893-97 — in the White House, forcing Congress to curb its appetite for spending.

President Cleveland even had a libertarian approach to overseas entanglements.

Cleveland had a simple approach to foreign policy. He said America should “never get caught up in conflict with any foreign state unless attacked or otherwise provoked.”

Let’s go back even further in time. Here’s some of what Lawrence Reed wrote in 1996.

I give high marks to those presidents who actively sought to uphold the Constitution, and who worked to expand the frontiers of freedom. I’ll take a president who leaves us alone over one who can’t keep his hands out of other people’s pockets any day of the week. Honesty, frugality, candor, and a love for liberty are premium qualities in my kind of president. The one man among post-war presidents (post-Civil War, that is) who exemplified those qualities best was Grover Cleveland… Cleveland took a firm stand against a nascent welfare state. Frequent warnings against the redistributive nature of government were characteristic of his tenure. He regarded as a “serious danger” the notion that government should dispense favors and advantages to individuals or their businesses. …Disdainful of pork barrel politics, he felt that those who would use and gain from such projects should pay for them. …He rightly argued that tariffs stifle competition, raise prices, and violate the people’s freedom to patronize the sellers of their choice.

The article points out that Cleveland wasn’t perfect.

Indeed, the squalid Department of Agriculture was elevated to the Cabinet during his tenure.

But, on net, he pushed for liberty. Heck, look at this quote from President Cleveland, which Lawrence Reed shared in an article from 1999.

When more of the people’s sustenance is exacted through the form of taxation than is necessary to meet the just obligations of government and the expense of its economical administration, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free government.

Wow. Taxation to fund beyond limited government equals “ruthless extortion.” That warms my libertarian heart!

Robert Higgs, the great economic historian, shared another great quote from President Cleveland.

Cleveland believed in keeping government expenditure at the minimum required to carry out essential constitutional functions. “When a man in office lays out a dollar in extravagance,” declared Cleveland, “he acts immorally by the people.”

Let’s begin to wrap up with some wisdom from Burton Folsom, who wrote about President Cleveland for the Freeman back in 2004.

For a U.S. president, one test of this courage is the willingness to veto bad bills— bills that spend too much money or that contradict Article I, Section 8, of the Constitution. In that test of character, perhaps no president passed more convincingly than Grover Cleveland… During Cleveland’s first term (1885–1889), he vetoed 414 bills, more than twice the total vetoed by all previous presidents. …Over half of Cleveland’s vetoes involved pensions to Civil War veterans. Congressmen, especially Republicans, were increasingly trying to funnel taxpayer dollars to unqualified veterans in hopes of capturing “the soldier vote.”

Sadly, politicians today not only go after the “soldier vote,” but also the “farmer vote,” the “elderly vote,” the “urban vote,” etc, etc, etc.

And we don’t have principled leaders like Grover Cleveland with a veto pen.

Let’s look at some historical budget data to understand how truly lucky the nation was during Cleveland’s era. During the 1880s, in his first term, total primary spending (which is total outlays minus expenditures for net interest) averaged just 1.7 percent of GDP.

And this was before the income tax was enacted. After all, there was no need to have a punitive levy when the fiscal burden of government was so small.

P.S. Barton Folsom was the narrator of the superb video from Prager University on government-controlled investment.

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Happy Dependence Day for my Leftist Friends and Happy Independence Day for Normal People

Exactly five years, I created a Declaration of Dependence for my statist readers.

It was supposed to be satire, but after looking at some new estimates of dependency, I now wonder whether I accidentally foretold America’s future.

Anyhow, here’s how my attempt to be funny began.

We hold these truths to be self-evident, that all people should be made equal, that they are endowed by their government with certain unalienable Rights, that among these are jobs, healthcare and housing.–That to secure these rights, Governments must rule over the people, deriving their just powers from the consent of the elite.

While I like to think I came up with a few clever lines, it’s hard to laugh when you think about what’s happened ever since America’s real Declaration of Independence.

Here’s what the Tax Foundation tells us about the evolution of taxation.

Since our country’s founding, we have witnessed…federal revenues taking up less than 5 percent of our economy to more than 20 percent. …Taxation in the United States in 1776 was incredibly different than what it is today. There were no income taxes, no corporate taxes, and no payroll taxes.

Instead, the government relied on a relatively modest set of tariffs and excise taxes.

…taxes primarily existed on imports of goods and services to the colonies, as well as on the sale of particular products. What sort of items were these tariffs imposed on? Primarily, they were levied on ships on a per-tonnage basis, slaves, tobacco, and alcoholic beverages. In all, the average tariff worked out to about 10 percent of the value of imports.

Amazingly, this very modest form of taxation lasted for more than 100 years. It wasn’t until that wretched day when the 16th Amendment was approved that the stage was set for the oppressive tax system that now exists.

By the way, when there was no income tax, there also was very little government spending.

For much of our nation’s history, federal outlays consumed less than 3 percent of economic output. The burden of Washington spending today, by contrast, amounts to more than 20 percent of GDP. And I hate to even think about the long-run projections since I become suicidal.

Oh, and let’s not forget the regulatory burden. We’ve gone from a system that had virtually no red tape to a nation that is now suffocating from a blizzard of bureaucratic edicts.

All of which makes today more costly, as the Washington Examiner reports.

Hundreds of federal regulations on beer, fireworks, hamburgers and even corn-on-the-cob cost families an additional $40, according to a new report on the July 4th tax. American Action Forum regulatory policy director Sam Batkins researched the regulations on the holiday treats to determine the costs. And they are huge.

Here’s the infographic he created.

Red tape adding $40 to our costs today? That will leave a bad taste in your mouth.

Let’s close on an upbeat and inspirational note by reading Professor Randy Barnett on the drafting of the Declaration of Independence.

The Committee of Five consisted of the senior Pennsylvanian Benjamin Franklin, Roger Sherman of Connecticut, New York’s Robert Livingston, the Massachusetts stalwart champion of independence John Adams, and a rather quiet thirty-three year old Virginian named Thomas Jefferson. After a series of meetings to decide on the outline of the declaration, the committee assigned Jefferson to write the first draft. …Jefferson did not have three leisurely weeks to write. He had merely a few days. Needing to work fast, Jefferson had to borrow, and he had two sources in front of him from which to crib. The first was his draft preamble for the Virginia constitution that contained a list of grievances, which was strikingly similar to the first group of charges against the King that ended up on the Declaration. The second was a preliminary version of the Virginia Declaration of Rights that had been drafted by George Mason in his room at the Raleigh Tavern in Williamsburg where the provincial convention was being held. …Mason’s May 27th draft proved handy indeed in composing the Declaration’s famous preamble. Its first two articles present two fundamental ideas that lie at the core of a Republican Constitution. The first idea is that first come rights, and then comes government.

To be sure, the Founders’ view of rights was grossly imperfect. Blacks and Indians were grossly mistreated and women were not full citizens.

But by the standards that existed then, the America’s Founders did a remarkable job of curtailing the power of the state and enhancing the rights of individuals.

The good news is that there have been some significant expansions of liberty ever since the Declaration of Independence. A bloody war was fought in part to end the scourge of slavery. The toxic combination of racism and statism embodied by the Jim Crow laws has been abolished. And women now have full political and economic rights.

The bad news is that there also have been significant contractions of liberty in the economic sphere. It started with the so-called Progressive Era, particularly the disastrous tenure of Woodrow Wilson. It then accelerated during FDR’s economy-stifling New Deal. Government’s size and power further expanded during the grim LBJ-Nixon years. And, more recently, we witnessed the debacle of a Supreme Court ruling that the very limited enumerated powers in the Constitution somehow give the federal government the right to coerce individuals to buy products from private companies.

Notwithstanding all this bad news, I’m not quite ready to pack my bags for Australia.

The United States was the only nation founded on a set of philosophical principles and I’m very patriotic – in the proper sense of the word – about being an American.

I hope all American readers enjoy Independence Day. And in the spirit of the Founding Fathers, break a few rules. Dodge a tax, set off some illegal fireworks, and drive over the speed limit!

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The State of Liberty in America

Okay, the title for today’s column is a bit grandiose. It implies weighty and ponderous analysis of America’s ever-growing entitlement state and potentially dour predictions about when we reach a tipping point of too much dependency.

But let’s focus on the short run, which isn’t quite so depressing. I was one of John Stossel’s guests as we looked at what happened in 2015 and gave a sober assessment of whether the United States is moving in the right direction or wrong direction.

If you don’t want to watch 30-plus minutes, here are the highlights.

I’ll start with what has me worried and/or glum.

According to the political betting markets (which I feel are more accurate than polls), Donald Trump’s chances keep increasing. I don’t feel confident, however, that he would shrink the size and scope of government if he made it to the White House. And he’s using up the oxygen of candidates who (while imperfect) seem more sincerely interested in advancing economic liberty.

I see little hope of fixing a refugee program that lures newcomers into welfare dependency (and may breed terrorism by creating a dispiriting environment of helplessness).

Speaking of which, as government gets bigger and bigger, it becomes even less competent about fulfilling legitimate responsibilities such as thwarting people who want to kill us.

Here’s what I’m happy and/or optimistic about.

People are displeased about what’s happening in Washington, and it’s healthy for there to be hostility and distrust toward government.

There’s a real opportunity for genuine entitlement reform in 2017.

American society is becoming more tolerant. As I argued on the program, I don’t care whether people approve of gays or pot smoking, but I do want to be part of a society that (unlike Iran!) doesn’t persecute or harass people for behaviors or beliefs that don’t harm others.

So some good things are happening.

Though I reserve the right to be really depressed later this year.

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