The Three Stooges of Big Government

The 21st century has been bad news for America’s taxpayers. Every president (George W. Bush, Barack Obama, Donald Trump, and Joe Biden) has been a big spender.

We obviously can’t give Biden a final grade since he has at least two more years in office (though his performance so far has been dismal – and his so-called Build Back Better is an ongoing threat to fiscal sanity).

But there is comprehensive data allowing us to assess Biden’s three predecessors. Brian Riedl of the Manhattan Institute has a new report that shows what happened to red ink under Bush, Obama, and Trump.

He measures what happened to 10-year deficit projections based on both legislated changes (what laws were enacted during time in office) and changes in economic and technical assumptions (largely driven by unanticipated changes in the economy).

As I’ve repeatedly written, I don’t think we should focus on red ink. What really matters is the burden of government spending.

So I’ve taken Brian’s rigorous analysis and highlighted what happened to government spending during the Bush, Obama, and Trump administrations.

We’ll start with George W. Bush, who approved laws adding almost $4.3 trillion to America’s spending burden.

Then we have Barack Obama, who added $1.4 trillion to America’s spending burden.

Then we have Donald Trump, who added $6 trillion to America’s spending burden.

Here are some final observations about the numbers.

• Yes, Republicans often are bigger spenders than Democrats – a pattern going all the way back to Nixon.
• Bush was a big spender even if you don’t count the big post-9/11 increases in defense spending.
• Trump was a big spender even if you don’t count the explosion of pandemic-related spending.
• Obama was a big spender, and would have been far worse if Republicans did not win control of Congress.

The bottom line is that I wish we could return to the spending restraint that America enjoyed during the final two decades of the 20th century.

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New Research on the Link between Government and Corruption

Government breeds corruption by giving sleazy people a way of obtaining unearned wealth. Politicians and special interests are the winners and workers, consumers, and taxpayers are the losers.

It’s easy to find examples. Simply look at tax policy, spending policy, regulatory policy, energy policy, industrial policy, agricultural policy, foreign policy, health policy, trade policy, drug policy, and bailout policy. Or anything else involving politicians and their cronies.

Hmmm…, I wonder if there’s a lesson to be learned from that list?

But just in case some people are slow learners, let’s consider some new scholarly research from the Federal Reserve.

The study, authored by Joonkyu Choi, Veronika Penciakova, and Felipe Saffie, explores whether companies that give cash to politicians are then rewarded with cash from taxpayers.

The American Recovery and Reinvestment Act (ARRA) was enacted in the midst of the Great Recession, and over one-fourth of the funds were channeled directly to firms with the primary goal of saving and creating jobs. These stimulus funds were sizable and valuable to firms, with the average grant awarded exceeding $500,000. …With hundreds of thousands of dollars on the line, firms may have incentive to exert political influence… Are firms successful in influencing the allocation of stimulus spending? …This paper provides empirical answers… We find that firms’ campaign contributions to state politicians before the enactment of ARRA have a positive and significant impact on the probability of winning ARRA grants… We find that firms that contribute to winning candidates are 64 percent more likely to secure an ARRA grant and receive 10 percent larger grants. …The allocative distortion caused by political connections is sizable. Although only 6 percent of grant recipients contribute during local elections, they account for21 percent of total ARRA grants.

I feel like I need to take a shower after reading those results. Maybe I’m a political prude, but it galls me that politicians and interest groups have so much ability to fleece the rest of us.

And now you know what I refer to Washington as America’s “wretched hive of scum and villainy.”

The obvious takeaway from this research is that we’ll have less corruption if we have less government.

Which was my message in this video.

While I obviously like my video on the topic, I very much recommend this video interview with Andrew Ferguson.

P.S. Speaking of videos, here’s some satire about government corruption.

P.P.S. We shouldn’t be surprised that Obama’s so-called stimulus produced lots of corruption. The same was true with regards to Obamacare and green energy, which were his other main initiatives.

P.P.P.S. In the future, I’m sure we’ll see studies finding lots of corruption in Biden’s recent “stimulus” plan.

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Which Party Does Better on the Economy?

The best feature of libertarians is that we are very principled and look at everything through the lens of the non-aggression principle.

By contrast, the worst feature of politics, as explained by the Ninth Theorem of Government, is that it encourages people look at everything through the lens of partisanship.

In other words, there’s a desire to always make your team look good and the other team look bad, even if you have to torture data.

Here’s an example.

In a column for the New York Times, Michael Tomasky asserts that Democratic presidents have a much better track record on the economy than their Republican counterparts.

Mr. Biden and his party’s No. 1 job between now and Election Day: Make it clear that Democrats have been better stewards of the economy — for decades, and by far. Many people don’t believe this. …But it’s true. …the country has done better for decades under Democrats, by nearly every major economic measure. From John Kennedy through Barack Obama — 56 years during which, as it happens, we had a Democratic president for 28 years and a Republican president for 28 — we saw more than 50 million jobs created under Democrats and just 24 million jobs created under Republicans. Even the stock market has performed better under Democratic presidents. …just toting up numbers by the months each party had in power is imprecise. But there’s no better way to do it.

Any decent social scientist will quickly identify are all sorts of problems with Tomasky’s methodology.

• What about the impact of which party has full or partial control of Congress?
• Is it right to blame (or credit) presidents for what happens in their first year or two, before they’ve had a chance to enact and implement new policies?
• Should other variables be measured, such as median household income or labor force participation?

But let’s set aside these concerns, as well as others that can be listed, and accept Tomasky’s numbers. Does this mean that the economy does better when Democrats are in the White House?

That’s certainly a possible interpretation, but it’s far more accurate to say that the economy does better when a president – regardless of party – adopts good policy (or, to be more accurate, if good policy is implemented during their presidency).

I’ve previously ranked presidents based on what happened to the burden of government spending during their tenures. And one thing that stands out is that Republicans seem to be even worse than Democrats – even when looking at what happened to domestic spending (with Reagan and Johnson being the only two exceptions).

And I’ve also graded many of the modern presidents (Richard Nixon, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, Barack Obama) based on their overall record on economics. If you peruse their performances, you’ll see there’s no obvious connection between good policy and partisan affiliation.

But I’ve never put together a best-to-worst list, so here’s my ranking of every president since Kennedy.

Let me elaborate – and also add some caveats.

For what it’s worth, I don’t think there’s good modern-quality data on JFK (or, to be more accurate, I’ve never searched for it), but I included him since he’s part of Tomasky’s analysis. That being said, he may be ranked too low. Yes, he spent too much money and implemented some bad policies, but he also lowered tax rates and pushed for free trade.

I also think it’s too early to grade Trump, but I included him since I know that will be of interest to readers. As you might imagine, I like what he’s done on taxes and red tape, but his record on other issues is bad – and getting worse. I’m especially concerned about the consequences and impact of the Fed’s easy-money policy, an approach Trump certainly supports.

Johnson and Nixon are unambiguously terrible, while Reagan is the star performer.

Clinton was surprisingly good (feel free to give the credit to Newt Gingrich if you want, but we didn’t need veto overrides to get the good policies of the 1990s).

The rest of the presidents were generally bad. I put them in reverse chronological order since I didn’t see any logical way of differentiating between them.

I can’t resist citing one more segment from Tomasky’s column.

Republican failures are not an unhappy coincidence. They’re a result of conservative governing practice. Republicans no longer fundamentally believe in the workings of government, so they don’t govern well. Their contempt for government is a result of conservative economic theory.

This is nonsense, as should be obvious from what I’ve already written. Republicans do not have a track record of “conservative governing.”

With one exception. We had relatively competent governance from the one GOP president who did have a “contempt for government” (actually, just contempt for big government).

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New Job Numbers and the Trump Economy Vs Obama Economy

When comparing the Obama economy and the Reagan economy, I often used a database from the Minneapolis Federal Reserve that compared jobs and growth data during business cycles.

That made sense since both presidents had an economic expansion that began relatively early in their tenures.

But what about comparing Obama and Trump? The Minneapolis Fed data isn’t overly useful since we’re in the same expansion that began during the Obama years.

To avoid that methodological problem, some people have been comparing the final years of the Obama Administration with the early years of the Trump Administration.

Let’s do the same thing using the just-released jobs data from the Bureau of Labor Statistics. The unemployment rate is only 3.7 percent, which is certainly good news. But the employment-population ratio is a better gauge of the real strength of the jobs market.

But those numbers don’t tell us much. They’ve been improving during the Trump years, but not in a way that seems different than the trend that was underway in Obama’s final years.

What about if we look at income data instead of employment data?

The Wall Street Journal has an editorial comparing the fate of workers under both administrations.

Time to wake up from the Barack Obama economy, folks, and admit how many more Americans are prospering from the faster economic growth and tighter labor market after the policy changes of 2017. …the economic expansion reached its 10th anniversary, the longest on record. But the accounts ignore that the last two years have been far different than the first eight in economic policies and results. We’re long enough into the Trump era to track the differences. ……Average hourly earnings for production-level manufacturing workers have grown at an annual rate of 2.8% during the Trump Presidency compared to 1.9% during Barack Obama’s second term.

The WSJ shares data on income growth in key states, and it certainly seems that Trump deserves bragging rights.

The WSJ also argues that Trump’s policies have been beneficial for minorities.

The jobless rate for blacks is 6.2%, which is only 2.9 percentage-points higher than for whites versus a 4.6 percentage-point difference before the start of the 2008 recession. Unemployment has fallen twice as much among blacks as whites since December 2016. Nearly one million more blacks and two million more Hispanics are employed than when Barack Obama left office, and minorities account for more than half of all new jobs created during the Trump Presidency. Unemployment among black women has hovered near 5% for the last six months, the lowest since 1972, and a mere 3.5% of high school graduates are unemployed. …The Trump Administration…policy mix of deregulation and tax reform has unleashed more private investment and job creation that has lifted productivity and wages for the non-affluent. The result has been faster growth and less inequality.

All this is positive news, but I’m not quite as hopeful about Trump’s policies as the WSJ.

The numbers are accurate, though I’m not sure whether we should give all the credit to Trump since it would be more accurate to say that policy has moved only marginally in the right direction.

Yes, tax policy and regulatory policy has moved in the right direction, but we’re moving in the wrong direction on spending policy and trade policy. And maybe monetary policy as well.

What’s the overall effect?

I gave Trump a report card last year. Here’s an updated version, along with grades for Obama.

Trump’s GPA is higher, but it’s not as if either one of them was a good student.

And before people berate about today’s supposedly strong economy, don’t forget that we may be in a bubble fueled by debt and easy money.

P.S. Speaking of grades, this satirical college transcript may be my favorite example of anti-Obama humor.

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Obama, Brazil, and Guns

I have a confession. I miss Obama. On the issue of guns, at least.

He was so wrong, yet so ineffective, that it was almost funny.

Heck, it was funny.

Fortunately, he’s decided to make an encore performance. So there’s a new opportunity to puncture his pious pronouncements.

Writing for the Federalist, Ryan Cleckner debunks Obama’s fatuous statements about gun control at a recent speech in Brazil.

On May 30, former president Barack Obama was a keynote speaker at an event in Brazil. …During a conversation with a host on stage during the digital innovation event, Obama took the opportunity to speak negatively about U.S. gun laws. He said, “Our gun laws in the United States don’t make much sense. Anybody can buy any weapon, any time, without much, if any, regulation. They can buy [guns] over the internet, they can buy machine guns.” His statement to a foreign audience includes six lies about our gun laws.

Here are Obama’s six lies, with the concomitant corrections.

1. Anybody Can Buy a Firearm

There are three major federal restrictions on who may purchase firearms in the United States… The first category of persons who may not purchase firearms under federal law is based on age.  Persons under 21 years of age may not purchase handguns from a gun dealer, and persons under 18 years of age may not purchase rifles nor shotguns. The second category of persons who may not purchase firearms under federal law are referred to as “prohibited persons.” This category includes, among others…Felons, Those convicted of domestic violence, Unlawful users of controlled substances, Illegal aliens, Those subject to certain restraining orders, Those adjudicated as mental defectives or committed to mental institutions, Fugitives, and Veterans with dishonorable discharges… The third major category includes non-U.S. citizens.

2. Any Firearm Can Be Purchased

Under federal law, machine guns made after 1986 may not be purchased by civilians (more on this under lie No. 5 below). Also, the National Firearms Act of 1934 (NFA) regulates other firearms which may be purchased, but clearly not in the way insinuated by Obama’s comments (more on this under lie No. 3 below).

3. A Firearm Can Be Purchased at Any Time

When purchasing a firearm from a federally licensed gun dealer (FFL), background-check requirements must be satisfied. In most cases, this includes a background check being run through the federal National Instant Criminal Background Check System (NICS). …Federal background checks may only be run between 8 a.m. and 1 a.m. Eastern… Within the statement that a firearm can be purchased at any time is also the inference that a firearm may be purchased anywhere. This is also false. For example, handguns many only be purchased in a person’s state of residence. Therefore, if a person wants to purchase a handgun while he out of his home state, that is a time at which he is not permitted to purchase a firearm. For the class of firearms covered by the NFA, such as short-barreled rifles, a purchaser must wait until certain paperwork is approved by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). This wait time is often up to 10 months.

4. Firearms Can Be Purchased with Few Regulations

…the United States has many regulations on the purchase and possession of firearms.

5. Firearms Can Be Purchased Over the Internet

It seems clear that Obama wants people to think that a gun can be purchased online and shipped straight to a purchaser’s home like any other online purchase. This is not true. It is technically true that firearms may be purchased online. However, when a person purchases a firearm online from an out-of-state retailer, the firearm must first be shipped to a local FFL, where the purchaser must appear in person to fill out the federally required paperwork and satisfy the background check requirements.

6. Anyone Can Purchase a Machine Gun

…machine guns made after 1986 may not be purchased nor possessed by an ordinary civilian. These machine guns may only be purchased or possessed by FFLs or government entities. Machine guns made before 1986 are still NFA firearms and may only be purchased after the extensive paperwork and wait times that accompany all NFA firearm purchases. Additionally, some local laws outright ban the possession of any machine guns.

It’s unclear whether Obama actually knew he was lying.

I suspect he actually thinks he was being truthful. After all, he lives in a bubble and probably never hears any voices other than those from the leftist echo chamber.

Regardless, what makes this episode especially amusing is that Brazil is moving in the right direction on civil rights for gun owners.

Here are some excerpts from a CNN report in May.

Brazil’s President Jair Bolsonaro has signed an executive order relaxing gun rules in the country, making it easier to import guns and increasing the amount of ammunition a person can buy in a year. Bolsonaro announced the signing of the decree at a Tuesday news conference, arguing “it is an individual right of the one who may want to have a firearm or seek the possession of a firearm… obviously respecting and fulfilling some requirements.”The conservative provocateur…appears to delivering on his campaign promise to loosen gun laws. …Among the other changes, it simplifies the procedure to transfer the ownership of a firearm, and eases import restrictions on firearms,”allowing free initiative, stimulating competition, rewarding quality and safety, as well as economic freedom, so privileged by the Lord,” the Brazilian government wrote in a statement. …Bolsonaro had previously signed a decree in January making it easier to own a gun in the South American country.

I’m glad that law-abiding people in Brazil now have a better chance of protecting themselves from criminals.

Combined with the spending cap adopted a few years ago, there’s some small reason to hope that Brazil could become the next Chile.

Though we’ll have to wait and see if the country enacts some desperately needed pension reform.

In the meantime, kudos to Bolsonaro for doing the right thing on guns.

And too bad nobody in Brazil asked Obama why Brazil wasn’t following his empty advice.

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The Trump Economy v. the Obama Economy

During his final days in office, I gave a thumbs-down assessment of Barack Obama’s presidency. Simply stated, he increased the burden of government during his tenure, and that led to anemic economic numbers.

Now the economy seems to be doing a bit better, which is leading my friends on the left to make two impossible-to-reconcile claims.

1. It is doing better, but Obama deserves credit.
2. The economy isn’t doing better.

I’ve previously explained that the first argument doesn’t hold water. Today, let’s address the second argument.

Writing in the Wall Street Journal, former CEO Andy Puzder claims that Trump easily wins over Obama when you look at the numbers.

For eight years under President Obama, the growing burden of government suppressed the economic recovery that should have followed the recession of 2008-09. Mr. Obama nonetheless has claimed responsibility for today’s boom, asking Americans in September to “remember when this recovery started.” Yet it wasn’t until President Trump took office that the economy surged. …The result is a rising tide that is lifting boats across every class and region of the country. …Today unemployment rests at 3.7%, near a 50-year low. Since the government began reporting the data, unemployment has never been as low as it is today for African-Americans, Latinos, Asians and people with only a high-school education.

It’s certainly good news that unemployment rates have dropped. But labor-force participation numbers still haven’t fully recovered, or even come close to fully recovering, so the data on jobs is not quite as impressive as it sounds.

That being said, Puzder has a compelling indictment of Obama’s performance.

During a typical recovery, the economy grows at a rate between 3% and 4%, and the Obama administration predicted such a surge in its 2010 midsession review. It never came. The “recovery” of those years often felt much like a recession.

Amen. This echoes my criticism of Obamanomics. He made the U.S. a bit more like Europe, so it’s no surprise that growth was weak.

Let’s now look at Puzder’s evidence that Trump has done a better job. He compares the end of the Obama economy with the beginning of the Trump economy.

GDP growth staggered along at 1.5% in Mr. Obama’s final six full quarters in office. …growth doubled to 3% during Mr. Trump’s first six full quarters. …the increase in job openings over Mr. Trump’s first 21 months has averaged an impressive 75,000 a month. Over Mr. Obama’s last 21 months in office, the number of job openings increased an average of 900 a month. …During Mr. Obama’s last 21 months, the number of employed Americans increased an average of 157,000 a month. Under Mr. Trump, the increase has accelerated to 214,000 a month, a 36% improvement. …In Mr. Obama’s final 21 months, weekly earnings rose an average of $1.31 a month. Under Mr. Trump, weekly earnings have increased an average of $1.84 cents a month: a 40% improvement that’s come mostly since tax reform took effect in January. Over that period, weekly earnings have grown an average of $2.31 a month, a 76% increase over Mr. Obama’s last 21 months. …The unemployment rate declined 13% during Mr. Obama’s last 21 months, but from there it has dropped another 23% during Mr. Trump’s tenure.

All of this data is compelling, but I caution my GOP/Trump friends about relying on short-run economic data to make their case.

For instance, what if the economy is in a false boom caused by easy money? If that leads to a recession, will they want Trump to take the blame?

Or let’s consider a more tangible example. Trump and his supporters used to make a big deal out of rising stock prices, but that argument no longer appears to be very persuasive.

Let’s close with two charts that take different sides. The first one is from MSNBC, which makes a persuasive case that reductions in unemployment under Trump are simply a continuation of the trend.

On the other hand, this second chart, which comes from the White House, shows that economic outcomes are better than what the Obama Administration predicted.

This also is compelling data, and I’ve explained that even small improvements in economic performance are very desirable.

Though it remains to be seen whether this additional growth is either real or sustainable.

The bottom line is that there’s no reason to expect big economic improvements under Trump, at least in the long run. His good policies on taxes and regulation are offset by bad policies on spending and trade.

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Should We Upgrade Our Assessment of Obama’s Economic Record?

President Trump and former President Obama are arguing over who deserves credit for the economy’s performance. Given the less-than-ideal numbers for labor force participation, I’m not convinced we should be celebrating.

Regardless, here’s a quick assessment of whether Obama deserves praise, taken from yesterday’s interview with Neil Cavuto.

To elaborate, I generally don’t blame presidents if there’s a downturn as they take office. In many cases, such a downturn is baked in the cake thanks to bad monetary policy before they ever took office.

But I do hold them at least somewhat accountable for the economic performance after the recession. More specifically, is there strong growth for a year or two, allowing the economy recover the lost output? And does the economy then stabilize at the long-run trend of 3 percent growth (as illustrated by this chart showing U.S. growth from 1870-2008).

Remember, there is no substitute for long-run growth if the goal is higher living standards.

Yet we didn’t get that growth under Obama. We didn’t get a period of above-average growth, which meant we never recovered the lost output from the recession. We never even got back to the historical trendline.

Here’s a chart from Business Insider that reviews what has happened over the past 10 years. As you can see, we haven’t come close to our potential GDP. This is why Obama deserves bad marks.

But this doesn’t mean Trump deserves good marks.

First of all, it’s far too early to give a final grade. And, for what it’s worth, his interim grade is not that great. Good policy on taxes and red tape is being offset by bad policy on spending and trade.

Let me also say something semi-positive about the Obama economy. We may not have enjoyed strong growth, but the economy continued to expand. And if the economists who argue that there are structural reasons causing permanently lower potential growth are correct, maybe Obama did okay (my view is that “secular stagnation” is driven mostly by bad policy choices, so I’m not overly sympathetic to this hypothesis).

Regardless, Obama largely didn’t do anything destructive after his first two years (when we got mistakes such as the fake stimulus, Obamacare, and Dodd-Frank). Indeed, we even got some good policy later in Obama’s tenure, though the overall effect of his policies was negative.

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Trump and the Economy

In a recent interview, I got a chance to pontificate about the recipe for growth and prosperity.

Free market capitalism revolutionized the western world, creating prosperity where there used to be deprivation.

But that observation is the easy part. Later in the interview, I was asked to give my two cents on whether Trump’s policies are helping or hurting.

As you can see, I discussed the benefits of pro-growth reforms, but also warned that monetary policy is the wild card and also admitted that economists are lousy forecasters.

That being said, I speculated that there might be a positive surprise for financial markets if Republicans held Congress and investors believed that might lead to some good policies. Especially spending restraint.

Though I should have mentioned – as I have on many occasions – that Trump is sabotaging himself with his protectionist policies.

Since we’re discussing politics and the economy, let’s look at the debate over Trump’s economic stewardship.

Professors Ed Prescott and Lee Ohanian recently opined in the Wall Street Journal about the positive impact of certain Trump policies.

The growth paths in a market economy depend on the quality of government policies and institutions. These affect the incentives to innovate, start a business, hire workers, and invest in physical and human capital. If policies are reformed to increase incentives for market economic activity—as many have been under President Trump and the Republican-controlled Congress—then investment and labor input expand as the economy rises to a higher growth path. …When policies change to depress these incentives, the economy moves onto a lower long-run growth path. That happened after the 2007-09 recession. …According to our calculations, the U.S. cumulatively lost about $18 trillion in income and output between 2007 and 2016. Everything suggested this shortfall would persist or even grow.

I fully agree that economic performance was anemic during the Obama years. Though I would also give Bush 43 part of the blame.

And I think Prescott and Ohanian are right when they explain that some of Trump’s policies are having a positive effect.

U.S. economic performance is the strongest in years. One policy driving this turnaround is the substantially lower corporate-tax rate, which has made the U.S. more competitive with other countries. Regulatory changes—such as the partial rollback of Dodd-Frank and new leadership within the Consumer Financial Protection Bureau—also have proved helpful, particularly for small businesses, which are benefiting from lower record-keeping and compliance costs. Meanwhile, the number of regulatory pages in the Federal Register has been cut by a third since President Obama’s last year in office. …the U.S. can expect above-normal growth in the coming months, possibly even years.

Moreover, they are correct that more trade is the right approach, not Trump’s myopic protectionism.

Growth rates could improve with further policy changes. One example is a reduction in trade barriers. Since the General Agreement on Tariffs and Trade was signed 70 years ago, international commerce has expanded dramatically, hugely benefiting U.S. consumers by lowering prices and increasing the variety of available goods. The average household’s benefits from trade are greater than $10,000 a year… A second area for reform… The rise of health-care costs is the most important reason wages have not increased more for U.S. workers. The extra compensation is swallowed up by health-insurance premiums. Expanding medical savings accounts and decoupling health plans from employment would create incentives for both consumers and their health-care providers to economize on health-care spending. This would lower costs without compromising quality.

Good health reform would be very beneficial, though I would have explicitly pointed out that the main goal is to mitigate the problems of third-party payer.

Since the economy appears to be doing well, Richard Epstein of the Hoover Institution explores whether Obama deserves any of the credit.

…we easily praise or blame the sitting president for all the economic successes or failures that take place during his term in office. By that standard, President Trump seems to be riding a boom that eluded his predecessor, and that prospect distresses the legion of Trump critics who regard him as an unmitigated disaster. Accordingly, they hope to credit today’s good times to the work of President Obama. …It is well known that economic policies introduced in one year may well have effects long afterwards. …the key measure is whether a president promotes or frustrates competitive behavior. Under this standard, any protection of monopoly institutions is presumptively bad, while deregulation or tax reduction is presumptively good.

Using that benchmark, Obama gets a bad grade, starting with the faux stimulus but also including Dodd-Frank and other statist policies.

Unsound Obama policies help explain the abnormally low rate of economic growth during his eight-year tenure. …the 2009 stimulus package…left a long-term legacy of protectionist legislation for key businesses and labor unions. …Today’s economic successes come in the face of ARRA, not because of it. Obama pushed through three other major pieces of legislation during his first term, all net negatives. The 2010 Affordable Care Act (ACA) created an immense tangle because it incorporated into health-care insurance many unsustainable features—a rich package of mandatory minimum benefits, community rating, mandatory coverage of preexisting conditions, and poor integration of federal and state programs. …In 2010, …the Dodd-Frank legislation… On balance the legislation did more harm than good by concentrating too many assets in banks deemed too big to fail. It invited regulators to pursue an extended definition of a Systematically Important Financial Institution (SIFI) and with it the opportunity to expand the regulatory scope of Dodd-Frank. …I cannot think of a single mid-level Obama policy that counts as a pro-growth initiative.

Trump, by contrast, is a mix of good and bad.

Deregulation of labor and capital markets are not just a short-term shot in the arm, and the lower taxation of corporate income has worked to repatriate capital from overseas and to expand overall levels of investment. So long as these remain permanent features of the economy—a big “if” with an election coming up—private firms have the necessary time horizons to make much-needed long-term investments. That activity will in turn–as has begun to happen–rejuvenate labor markets. …serious Trump-created obstacles. President Trump is no fan of small domestic budgets, and he has run a perverse rearguard campaign to reverse the declining fortunes of the coal industry. Most importantly, he has waged a series of foolish trade wars against our long-term trading partners. His astounding ignorance on the principles of comparative advantage led Trump to unwisely pull out of the Trans-Pacific Partnership.

So what’s the net effect?

Here is the bottom line: the gains from Trump’s (imperfect) domestic program look enormous, given the large economic drag of his trade policies. From this assessment it’s clear that classical liberalism with strong property rights, freedom of contract, and free trade is the only engine to economic prosperity.

I fully agree with the last sentence of that excerpt and I hope the first sentence is true.

But if Trump goes really crazy with his protectionism (and he has lots of bad policies under consideration – dealing with NAFTA, auto trade, China, steel and aluminum, etc), then the net effect of his policies could go from positive to negative.

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Ranking Presidents on Economic Policy: The Predictably Bad Record of Barack Obama

When I gave speeches during Obama’s time in office, especially to audiences with a lot of Republicans, I sometimes asked a rhetorical question about whether they approved of presidents who increased spending, bailed out big companies, expanded the power of the Washington bureaucracy, imposed more red tape, and supported Keynesian stimulus schemes.

They understandably assumed I was talking about Obama, so they would always expressed disapproval.

I then would startle the audience (and sometimes make myself unpopular) by stating that I was describing economic policy during the Bush years.

To be sure, there were some differences. I would give Bush a better grade on tax policy. But Obama got a better score (or, to be more accurate, a less-worse score) on government spending. But the overall impact of both Bush and Obama, as confirmed by the declining score for the United States from Economic Freedom of the World, was a loss of economic liberty.

This bit of background is important because any analysis of economic policy during the Obama years reveals that “hope and change” somehow became “more of the same.”

At least for economic policy. When I examined the economic record of George W. Bush, there were a lot of items to include in the “anti-growth policy” portion of the bar chart, but not much for the “pro-growth policy” section.

And now that we’re doing the same exercise for the Obama years, we get a chart that looks very similar. The specific policies have changed, of course, but the net result is the same. Bigger role for the state, less breathing room for the private sector and civil society.

That’s a rather disreputable collection of policies, including the faux stimulus, the cash-for-clunkers boondoggle, the Dodd-Frank regulatory orgy, and the costly Obamacare disaster. And it’s worth noting that the one good policy that occurred during Obama’s policy, the Budget Control Act and the resulting automatic budget cuts (a.k.a., sequester), happened over his strenuous (and silly) objections.

By the way, I don’t think that Obama and Bush share the same ideology. My guess is that Obama has a very strident left-wing mindset and that he was telling the truth when he said he wanted to be a statist version of Ronald Reagan. I’m quite relieved that he was largely ineffective in achieving his goals.

Bush, by contrast, presumably didn’t want to significantly expand the size and scope of the federal government. But lacking a Reagan-style commitment to principles of limited government, his administration largely surrendered to public choice-driven incentives that resulted in incremental statism.

The lesson for the rest of us is that people should be less partisan and more principled. A bad policy doesn’t become good simply because a politician belong to the “R” team rather than “D” team.

Anyhow, the bottom line is that Obama era moved America in the wrong direction. For what it’s worth, he wasn’t nearly as bad as Nixon. And if I do this same exercise for LBJ, Hoover, and FDR, I expect Obama won’t be as bad as them, either.

But wouldn’t it have been nice if he had been as good as Bill Clinton?

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Mirror, Mirror, on the Wall, Obama Definitely Was Not the Biggest Spender of All

I’ve learned that it’s more important to pay attention to hard numbers rather than political rhetoric. Republicans, for instance, love to beat their chests about spending restraint, but I never believe them without first checking the numbers. Likewise, Democrats have a reputation as big spenders, but we occasionally get some surprising results when they’re in charge.

President Obama was especially hard to categorize. Republicans automatically assume he was profligate because he started his tenure with a Keynesian spending binge and the Obamacare entitlement. But after a few years in office, some were arguing he was the most frugal president of modern times.

• So I crunched the data in 2012 and discovered that he was either a big spender or a closet Reaganite depending on how the numbers were sliced.
• I then re-calculated the budget numbers in 2013 and found that spending grew at a slower rate the longer Obama was in office.
• And when I did the same exercise in 2014, using another year of data, Obama looked even more like a tight-fisted fiscal conservative.

Or, to be more accurate, what I basically discovered is that debt limit fights, sequestration, and government shutdowns were actually very effective. Indeed, the United States enjoyed a de facto spending freeze between 2009 and 2014, leading to the biggest five-year reduction in the burden of federal spending since the end of World War II. And it’s unclear that Obama deserves any of the credit since he was on the wrong side of those battles.

Anyhow, I’ve decided to update the numbers now that we have 8 years of data for Obama’s two terms.

But first, a brief digression on methodology: All the numbers you’re about to see have been adjusted for inflation, so these are apples-to-apples comparisons. Moreover, all my calculations are designed to show average annual increases. I also made sure that the “stimulus” spending that took place in the 2009 fiscal year was included in Obama’s totals, even though that fiscal year began (on October 1, 2008) while Bush was President.

We’ll start with a look at total outlays. On this basis, Obama is actually the most conservative President since World War II. And Bill Clinton is in second place.

But total outlays doesn’t really capture a President’s track record because interest payments are included, which effectively means they get blamed for all the debt run up by their predecessors.

So if we remove payments for net interest, we get a measure of what is called primary spending (total outlays minus net interest). As you can see, Obama is still in first place and Reagan jumps up to second place.

I would argue that one other major adjustment is needed to make the numbers more accurate.

There have been two major financial bailouts in the past 30 years, the savings & loan bailout in the late 1980s and the TARP bailout at the end of last decade. Those bailouts created big one-time expenses, followed by an influx of money (from asset sales and repaid loans) that actually gets counted as negative spending.

Those bailouts added a big chunk of one-time spending at the end of the Reagan years and at the end of the George W. Bush years, while then producing negative outlays during the early years of the George H.W. Bush Administration and Obama Administration.

So if we take out the one-time effects of those two bailouts (which I categorize as “non-TARP” for reasons of brevity), we get a new ranking.

Reagan is now in first place, followed by Clinton and Obama.

By the way, Lydon Johnson has been in last place regardless of how the numbers are calculated, and George W. Bush has had the second-worst numbers.

For all intents and purposes, the above numbers are how a libertarian would rank the various Presidents since both domestic spending and military spending are part of the calculations.

So let’s close by looking at how a conservative would rank the presidents, which is a simple exercise because all that’s required is to remove military spending. Here are the numbers showing the average inflation-adjusted increase in overall domestic outlays for various Presidents (still excluding the one-time bailouts, of course).

By this measure, Reagan easily is in first place. Though it’s worth noting that three Democrats occupy the next positions (though Obama’s numbers are no longer impressive), while Republicans (along with LBJ) get the worst scores.

The bottom line is that Reaganomics was a comparative success. But should we also conclude that Obama was a fiscal conservative?

I don’t think he deserves credit, but I won’t add anything to what I wrote above. Instead, I’ll simply note that Brian Riedl of the Manhattan Institute has a good analysis of Obama’s fiscal record. Here’s his conclusion.

It is important to recognize that Obama did not stop trying to expand government after 2010. The president’s eight annual budget requests gradually upped their 10-year revenue demands from $1.3 trillion to $3.4 trillion, while proposing an average of $1.0 trillion in new program spending over the next decade. His play, in short, was to gradually trim the budget deficit by chasing large spending increases with even larger tax increases. The Republican Congress stopped him. My assessment: Obama’s most important fiscal legacy was a sin of omission. Despite promising to confront Social Security and Medicare’s unsustainable deficits, the president refused to endorse any plan that would come close to achieving solvency. This surrendered eight crucial years of baby-boomer retirements while costs accelerated. With baby boomers retiring and a national debt projected to exceed $90 trillion within 30 years, this was no small surrender.

In other words, the relatively good short-run numbers were in spite of Obama. And the long-run numbers were bad – and still are bad – because he chose to let the entitlement problem fester. But he was still better (less worse) than Bush I, Bush II, and Nixon.

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Why Is the Trump Administration AWOL on the IRS?

Whether I like what’s happening (getting rid of Operation Choke Point) or don’t like what’s happening (expanding civil asset forfeiture), it appears that the Justice Department under Attorney General Jeff Sessions is willing to make decisions.

With one very puzzling exception.

No steps have been taken to reverse the Obama-era policy of stonewalling to hide evidence of IRS scandals. Everything seems to be on auto-pilot.

The Wall Street Journal opined about the issue today and is justifiably frustrated.

The Obama Justice Department dismissed the IRS political targeting scandal as no big deal, and the Trump Administration hasn’t been any better. …These are basic questions of political accountability, even if the IRS has stonewalled since 2013. President Obama continued to spin that the targeting was the result of some “boneheaded” IRS line officers in Cincinnati who didn’t understand tax law. Yet Congressional investigations have uncovered clear evidence that the targeting was ordered and directed out of Washington. Former director of Exempt Organizations Lois Lerner was at the center of that Washington effort, but the IRS allowed her to retire with benefits. She invoked the Fifth Amendment before Congress. One of her principal deputies, Holly Paz, has submitted to a deposition in separate litigation, but the judge has sealed her testimony after she claimed she faced threats. The Acting Commissioner of the IRS at the time, Stephen Miller, stepped down in the wake of the scandal, but as far as anyone outside the IRS knows, no other IRS employee has been held to account. Even if the culprits were “rogue employees,” as the IRS claims, the public deserves to know what happened. …The Trump Administration also has a duty to provide some answers. The Justice Department and IRS have continued to resist the lawsuits as doggedly as they did in the Obama era. Attorney General Jeff Sessions can change that… Seven years is too long to wait for answers over abuses of the government’s taxing power.

This is spot on. It’s outrageous that the Obama Administration weaponized and politicized the IRS. But it’s also absurdly incompetent that the Trump Administration isn’t cleaning up the mess.

I understand why the bureaucrats at the Justice Department instinctively (and probably ideologically) want to protect their counterparts at the IRS. But, as the WSJ stated, there’s no reason why Attorney General Sessions isn’t using his authority to change policy.

The President’s failure to fire the ethically tainted IRS Commissioner is a troubling sign that the problem isn’t limited to the Justice Department.

One of Republicans’ least favorite Obama administration officials remains in his position: IRS Commissioner John Koskinen. Some Republicans lawmakers have asked President Trump to ask for Koskinen’s resignation. The commissioner’s term expires in November, but he has said he would step aside sooner if asked by the president. …Koskinen to lead the IRS in 2013, not long after it was revealed that the agency had subjected Tea Party groups’ applications for tax-exempt status to extra scrutiny and delays. …Many Republicans accuse Koskinen of impeding congressional investigations into the political-targeting scandal. They argue that he made false and misleading statements under oath and didn’t comply with a subpoena. During the last months of Obama’s presidency, some House Republicans pushed for a vote on Koskinen’s impeachment… Since Trump has taken office, there have been calls from GOP lawmakers for Koskinen to step down. Days after Trump’s inauguration, Republican Study Committee (RSC) Chairman Mark Walker (R-N.C.) and more than 50 other lawmakers sent a letter urging Trump to fire Koskinen “in the most expedient manner practicable.” …It’s unclear why Trump hasn’t ousted Koskinen or if he plans to do so in the future.

Very disappointing. I’m not a fan of conspiracy theories, but this almost leads me to wonder whether Koskinen has some damaging information on Trump.

Incidentally, the Justice Department may be dragging its feet and the White House may have cold feet, but the Treasury Department is overtly on the wrong side. And the problem starts at the top, resulting in praise for the Treasury Secretary from the pro-IRS forces at the New York Times.

President Trump’s Treasury secretary, Steven Mnuchin, knows that investing in the Internal Revenue Service yields significant returns… And he’s right: Every dollar spent on the agency returns $4 in revenue for the federal government, and as much as $10 when invested in enforcement activities. …At his confirmation hearings in January, Mr. Mnuchin bemoaned the cuts to the I.R.S. budget over the last seven years. The agency “is under-resourced to perform its duties,” he said, adding that further cuts “will indeed hamper our ability to collect revenue.” He also acknowledged that money spent on the I.R.S. is a good investment: “To the extent that we add resources, we can collect more money.” …his faith in the I.R.S. work force prompted one of his congressional interrogators to call it “refreshing” to hear someone “praise the employees at the Treasury Department.”

Yet should we give more money to a bureaucracy that has a big enough budget to finance this kind of reprehensible behavior?

The Internal Revenue Service has seized millions of dollars in cash from individuals and businesses that obtained the money legally, according to a new Treasury Department inspector general’s report. …individuals and businesses are required to report all bank deposits greater than $10,000 to federal authorities. Intentionally splitting up large sums of cash into sub-$10,000 amounts to avoid that reporting requirement is known as “structuring” and is illegal under the federal Bank Secrecy Act. But many business owners engaged in perfectly legal activities may be unaware of the law. Others are covered by insurance policies that don’t cover cash losses greater than $10,000. Still others simply want to avoid extra paperwork, and keep their deposits less than $10,000 on the advice of bank employees or colleagues. …The reporting requirements were enacted to detect serious criminal activity, such as drug dealing and terrorism.

I’m very skeptical that these intrusive anti-money laundering laws are successful by any metric, but I’m nauseated that the main effect is to give IRS bureaucrats carte blanche to steal money from law-abiding people.

The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents’ suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity. The IG took a random sample of 278 IRS forfeiture actions in cases where structuring was the primary basis for seizure. The report found that in 91 percent of those cases, the individuals and business had obtained their money legally.

But here’s the part that’s most outrageous.

Innocent people weren’t the byproducts of a campaign to get bad guys. They were the targets.

…the report found that the pattern of seizures — targeting businesses that had obtained their money legally — was deliberate. “One of the reasons why legal source cases were pursued was that the Department of Justice had encouraged task forces to engage in ‘quick hits,’ where property was more quickly seized and more quickly resolved through negotiation, rather than pursuing cases with other criminal activity (such as drug trafficking and money laundering), which are more time-consuming,” according to the news release. In most cases, the report found, agents followed a protocol of “seize first, ask questions later.” Agents only questioned individuals and business owners after they had already seized their money.

In any event, the Trump Administration’s failure to deal with the problem seems to have emboldened the tax collection agency.

Despite promises to Congress, the Internal Revenue Service has yet to take advantage of a red-flag alert system designed to prevent it  from rehiring past employees with blots on their records, a watchdog found. …the Treasury Inspector General for Tax Administration found that more than 200 of 2,000-plus former employees “whom the IRS rehired between January 2015 and March 2016 had been previously terminated or separated from the tax agency while under investigation,” according to a report released on Thursday.

And keep in mind that IRS bureaucrats awarded themselves big bonuses in response to the scandal.

By the way, the problem isn’t limited to the executive branch.

Republicans in 2015 (after they had control of both the House and Senate!) decided that the best response to IRS scandals was to increase the agency’s budget. I’m not joking (and I’m also not happy). At the risk of being redundant, only the Stupid Party could be that stupid.

I sarcastically wrote four years ago that we should be thankful that Obama reminded the American people that the IRS isn’t trustworthy. Little did I realize that Republicans would fumble a golden opportunity to deal with the mess once they got power.

P.S. I’ve certainly done my part to explain why the IRS bureaucracy deserves scorn.

• It has thieving employees.
• It has incompetent employees.
• It has thuggish employees.
• It has brainless employees.
• It has protectionist employees.
• It has wasteful employees.
• And it has victimizing employees.

P.P.S. I don’t want to end on a sour note, so here’s more examples of IRS humor from my archives, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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The Much-Deserved End of Obama’s Operation Choke Point

Trump has been President for more than 200 days and those of us who want more economic liberty don’t have many reasons to be happy.

Obamacare hasn’t been repealed, the tax code hasn’t been reformed, and wasteful spending hasn’t been cut.

The only glimmer of hope is that Trump has eased up on the regulatory burden. More should be happening, of course, but we are seeing some small steps in the right direction.

Let’s share one positive development.

Professor Tony Lima of California State University opined back in January in the Wall Street Journal that Trump could unilaterally boost growth by ending a reprehensible policy known as “Operation Choke Point.”

…the Trump administration could shut down Operation Choke Point. This program, enforced by the Federal Deposit Insurance Corp., targets “risky” banking customers and pressures banks to deny them credit. It’s unnecessary: If these industries are really risky, banks would not want their business. The real purpose of Operation Choke Point is to target industries that are out of favor…, among them: Coin dealers, money-transfer networks and payday lenders. Sales of ammunition and firearms (Second Amendment, anyone?) and fireworks (legal in some states). …Other legal goods and services such as surveillance equipment, telemarketing, tobacco and dating services. …Denying credit hampers an industry’s growth. Eliminating Operation Choke Point would encourage growth. It costs nothing. And someday it may reduce enforcement spending.

And Professor Charles Calomiris from Columbia University echoed those views a few weeks later.

Imagine you have a thriving business and one morning you get a call from your banker explaining that he can no longer service your accounts. …That’s what happened to many business owners as the result of an Obama administration policy called Operation Choke Point. In 2011 the Federal Deposit Insurance Corp. warned banks of heightened regulatory risks from doing business with certain merchants. A total of 30 undesirable merchant categories were affected…the FDIC explained that banks with such clients were putting themselves at risk of “unsatisfactory Community Reinvestment Act ratings, compliance rating downgrades, restitution to consumers, and the pursuit of civil money penalties.” Other FDIC regulatory guidelines pointed to difficulties banks with high “reputation risk” could have receiving approval for acquisitions.

Keep in mind, by the way, that Congress didn’t pass a law mandating discrimination against and harassment of these merchants.

The Washington bureaucracy, along with ideologues in the Obama Administration, simply decided to impose an onerous new policy.

In effect, the paper pushers were telling financial institutions “nice business, shame if anything happened to it.”

But at least when mobsters engage in that kind of a shakedown, there’s no illusion about what’s happening.

Professor Calomiris explained that this regulatory initiative of the Obama Administration made no sense economically.

It is rather comical that regulators would use the excuse of regulatory risk management to punish banks. Banks are in the business of gauging risk and have every incentive to avoid customer relationships that could hurt their reputation. Regulators, on the other hand, have shown themselves unwilling or unable to acknowledge risk, the most obvious example being the subprime mortgage crisis in 2008.

And he also explained why Operation Choke Point was such a reprehensible violation of the rule of law.

The FDIC’s regulators never engaged in formal rule-making or announced penalties for banks serving undesirable clients. Such rule-making likely would have been defeated in congressional debate or under the Administrative Procedures Act. Instead, regulators chose to rely on informal decrees called “guidance.” …Financial regulators find regulatory guidance particularly expedient because it spares them the burden of soliciting comments, holding hearings, defining violations, setting forth procedures for ascertaining violations, and defining penalties for ignoring the guidance. Regulators prefer this veil of secrecy because it maximizes their discretionary power and places the unpredictable and discriminatory costs on banks and their customers.

Well, we have some good news.

The Trump Administration has just reversed this terrible Obama policy. Politico has some of the details.

The Justice Department has committed to ending a controversial Obama-era program that discourages banks from doing business with a range of companies, from payday lenders to gun retailers. The move hands a big victory to Republican lawmakers who charged that the initiative — dubbed “Operation Choke Point” — was hurting legitimate businesses. …House Judiciary Chairman Bob Goodlatte…and House Financial Services Chairman Jeb Hensarling (R-Texas), along with Reps. Tom Marino (R-Pa.), Blaine Luetkemeyer (R-Mo.) and Darrell Issa (R-Calif.) praised the department in a joint statement. “We applaud the Trump Justice Department for decisively ending Operation Choke Point,” they said. “The Obama Administration created this ill-advised program to suffocate legitimate businesses to which it was ideologically opposed by intimidating financial institutions into denying banking services to those businesses.”

And Eric Boehm of Reason is pleased by this development.

A financial dragnet that ensnared porn stars, gun dealers, payday lenders, and other politically disfavored small businesses has been shut down. Operation Choke Point launched in 2012… It quickly morphed into a questionably constitutional attack on a wide range of entrepreneurs who found their assets frozen or their bank accounts closed because they were considered “high-risk” for fraud. …Assistant Attorney General Stephen Boyd called Operation Choke Point “a misguided initiative” and confirmed that DOJ was closing those investigations… “Law abiding businesses should not be targeted simply for operating in an industry that a particular administration might disfavor,” Boyd wrote. …The repudiation of Operation Choke Point is a welcome development, says Walter Olson, a senior fellow at the libertarian Cato Institute.

I shared a video last year that explained Operation Choke Point in just one minute. But that just scratched the surface, so here’s a video from Reason that explains in greater detail why Operation Choke Point was so repulsive.

Kudos to the Trump Administration for reversing this awful policy.

But hopefully this is just the first step. Regulators are still squeezing financial institutions in an attempt to discourage them from doing business with low-tax jurisdictions. This policy of “de-risking” exists even though so-called tax havens generally have tighter laws against dirty money than the United States.

Trump should put an end to that misguided policy.

Ultimately, what’s really needed is a complete rethink of money-laundering laws and regulations.

• They don’t reduce crime or discourage bad behavior.
• They require banks to spy on innocent people and report their transactions.
• They impose heavy costs on the financial sector and boost prices on consumers.
• They disproportionately hurt poor people and poor countries.

Amazingly, some politicians actually want to make these laws even worse. Ideally, Trump will move completely in the other direction.

P.S. While it’s good that Trump has reversed Operation Choke Point, his Administration has moved in the wrong direction on civil forfeiture policy. One step forward and one step backwards is not a recipe for more growth and prosperity.

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The Fraud-Riddled Obamaphone Boondoggle

Time for another trip down Memory Lane to the early years of the Obama Administration.

Two days ago, I wrote about the market-wrecking price controls in Obamacare. And yesterday, I shared a new study exposing the utter failure of Obama’s Cash-for-Clunkers scheme. Now let’s take a look at the track record of the “Obamaphone.”

Though let’s start by noting that federal subsidies for phone service existed well before Obama took office. He simply took a misguided program and made it bigger. Here’s a concise explanation of the program from a story I shared in 2014.

The Federal Communications Commission program…charges a dollar or two per line on every American’s phone bill. The revenue generated by the “Universal Service Fund fee” is then used to pay select phone companies $9.25 per month for each poor person they sign up for a free phone. …its cost doubled in five years to $1.75 billion in 2011, and in some states, the number of phones given out exceeded the total eligible population.

But since big government is a recipe for big corruption, you won’t be surprised to learn that a bigger program of phone subsidies has produced scandalous levels of waste, fraud, and abuse. The Government Accountability Office has just released a report revealing widespread incompetence and malfeasance in the “Lifeline” program. Here are some highlights from GAO’s one-page summary.

GAO found weaknesses in several areas. For example, Lifeline’s structure relies on over 2,000 Eligible Telecommunication Carriers that are Lifeline providers to implement key program functions, such as verifying subscriber eligibility. This complex internal control environment is susceptible to risk of fraud, waste, and abuse as companies may have financial incentives to enroll as many customers as possible.

Yes, you read correctly. The private companies that are mooching off this program are in charge of determining eligibility, even though they get more handouts by signing up more recipients.

As you might expect, this is a green light for massive fraud.

Based on its matching of subscriber to benefit data, GAO was unable to confirm whether about 1.2 million individuals of the 3.5 million it reviewed, or 36 percent, participated in a qualifying benefit program, such as Medicaid, as stated on their Lifeline enrollment application.

Readers are welcome to plow their way through GAO’s full 89-page report, but news reports have teased out the most important details.

Here are some excerpts from a story in the Washington Times.

The controversial “Obamaphone” program, which pays for cellphones for the poor, is rife with fraud, according to a new government report released Thursday that found more than a third of enrollees may not even be qualified. Known officially as the Lifeline Program, the phone giveaway became a symbol of government waste in the previous administration. …the program has stashed some $9 billion in assets in private bank accounts rather than with the federal treasury, further increasing risks and depriving taxpayers of the full benefit of that money. “…everything that could go wrong is going wrong,” said Mrs. McCaskill, ranking Democrat on the Senate’s chief oversight committee and who is a former state auditor in Missouri. “We’re currently letting phone companies cash a government check every month with little more than the honor system to hold them accountable, and that simply can’t continue,” she said. …More than 5,500 people were found to be enrolled for two phones, while the program was paying for nearly 6,400 phones for persons the government has listed as having died. Investigators also submitted fraudulent applications to see what would happen, and 12 of the 19 phone carriers they applied to approved a phone.

The Daily Caller’s report also highlighted the program’s rampant fraud.

A massive portion of Obamaphone recipients are receiving the benefit after lying on their applications, according to a new 90-page report from the Government Accountability Office (GAO). An undercover sting operation showed ineligible applications were approved 63 percent of the time, and a review that found that 36 to 65 percent of beneficiaries in various categories had lied in easily-detectable ways but were approved anyway. The fraud reached unheard-of proportions because the Federal Communications Commission let the task of screening for eligibility fall to phone companies that profit off of enrolling as many people as possible. …All someone has to do to apply for free cell phone service is say that they are on another welfare program, such as food stamps or disability, known as SSI. But nationwide, “only 35.5 percent of people claiming eligibility based on SSI could actually be confirmed as eligible,” the GAO found. …Special interests have aggressively employed a bootleggers-and-Baptists model, with companies who profit greasing the wheels of government with donations and influence-peddling and using poor people as props in marketing campaigns. …The wife of the CEO of TracFone, the largest beneficiary of Obamaphones, was a mega-fundraiser for former President Barack Obama. …And a Pew Research Center report found that the problem of lack of access to technology is far less than it once was, the GAO noted. The FCC’s own data shows that “millions of Lifeline-eligible households are obtaining voice service without Lifeline,” while the fraud rates show that many of the people who do sign up are wealthier than those who don’t.

Again, keep in mind that subsidized telephone service isn’t an Obama invention.

He merely built upon a bad idea that existed for decades.

But also keep in mind that the waste, fraud, and abuse in the Obamaphone program is an inherent part of big government.

There’s fraud in the Medicare program. There’s fraud in the EITC program. There’s fraud in food stamps. There’s fraud in Medicaid. There’s fraud in the disability program. There’s welfare fraud.

But I don’t want to merely pick on what are perceived to be Democrat programs.

There’s also lots of waste, fraud, and abuse at the Pentagon.

Simply stated, when you give away free money, people will do dodgy things to get some of it.

P.S. Given the pervasive parasitical corruption of Washington, nobody should be surprised to learn that plenty of Republican lobbyists are willing to shill for the Obamaphone program.

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Reagan vs. Obama, America vs. Europe

Every time I’ve gone overseas in the past six months, I’ve been peppered with questions about Donald Trump. It doesn’t matter whether my speech was about tax reform, entitlements, fiscal crisis, or tax competition, most people wanted to know what I think about The Donald.

My general reaction has been to disavow any expertise (as illustrated by my wildly inaccurate election prediction). But, when pressed, I speculate that Hillary Clinton wasn’t a very attractive candidate and that Trump managed to tap into disdain for Washington (i.e., drain the swamp) and angst about the economy’s sub-par performance.

What I find galling, though, is when I get follow-up questions – and this happens a lot, especially in Europe – asking how it is possible that the United States could somehow go from electing a wonderful visionary like Obama to electing a dangerous clown like Trump.

Since I’m not a big Trump fan, I don’t particularly care how they characterize the current president, but I’m mystified about the ongoing Obama worship in other nations. Even among folks who otherwise are sympathetic to free markets.

I’ve generally responded by explaining that Obama was a statist who wound up decimating the Democratic Party.

And my favorite factoid has been the 2013 poll showing that Reagan would have trounced Obama in a hypothetical matchup.

I especially like sharing that data since many foreigners think Reagan wasn’t a successful President. So when I share that polling data, it also gives me an opportunity to set the record straight about the success of Reaganomics.

I’m motivated to write about this topic because I’m currently in Europe and earlier today I wound up having one of these conversations in the Frankfurt Airport with a German who noticed my accent and asked me about “crazy American politics.”

I had no problem admitting that the political situation in the U.S. is somewhat surreal, so that was a bonding moment. But as the conversation progressed and I started to give my standard explanation about Obama being a dismal president and I shared the 2013 poll, my German friend didn’t believe me.

So I felt motivated to quickly go online and find some additional data to augment my argument. And I was very happy to find a Quinnipiac poll from 2014. Here are some of the highlights, as reported by USA Today.

…33% named Obama the worst president since World War II, and 28% put Bush at the bottom of post-war presidents. “Over the span of 69 years of American history and 12 presidencies, President Barack Obama finds himself with President George W. Bush at the bottom of the popularity barrel,” said Tim Malloy, assistant director of the Quinnipiac University Poll. …Ronald Reagan topped the poll as the best president since World War II, with 35%. He is followed by presidents Bill Clinton (18%) and John F. Kennedy (15%).

Yes, Ronald Reagan easily was considered the best President in the post-World War II era.

Here’s the relevant chart from the story. Kudos to the American people from giving the Gipper high scores.

And what about the bottom of the list?

Here’s the chart showing Obama edging out George W. Bush for last place.

By the way, I suspect these numbers will look much different in 50 years. I’m guessing many Republicans picked Obama simply because he was the most recent Democrat president and a lot of Democrats picked W because he was the most recent Republican President.

With the passage of time, I think Nixon and Carter deservedly will get some of those votes (and I think LBJ deserves more votes as the worst president, for what it’s worth).

The bottom line, though, is that I now have a second poll to share with foreigners.

P.S. If there’s ever a poll that isn’t limited to the post-World War II era, I would urge votes not only for Reagan, but also for Calvin Coolidge and Grover Cleveland.

P.P.S. People are surprised when I explain that Bill Clinton deserves to be in second place for post-WWII presidents.

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Cronyism, Corruption, and the Obama White House

One of the points I repeatedly make is that big government breeds corruption for the simple reason that politicians have more power to reward friends and punish enemies.

It’s especially nauseating when big companies learn that they can get in bed with big government in order to obtain unearned wealth with bailouts, subsidies, protectionism, and other examples of cronyism.

And these odious forms of government intervention reduce our living standards by distorting the allocation of labor and capital.

But just as crime is bad for society but good for criminals, it’s also true that cronyism is bad for the economy and good for cronies.

Two professors at the University of the Illinois decided to measure the “value” of cronyism for politically connected companies.

Gaining political access can be of significant value for corporations, particularly since governments play an increasingly prominent role in influencing firms. Governments affect economic activities not only through regulations, but also by playing the role of customers, financiers, and partners of firms in the private sector. …Therefore, gaining and maintaining access to influential policymakers can be an important source of competitive advantage… In this paper, we investigate the characteristics of firms with political access as well as the valuation effects of political access for corporations. Using a novel dataset of White House visitor logs, we identify top corporate executives of S&P 1500 firms that have face-to-face meetings with high-level federal government officials. …We match the names of visitors in the White House visitor logs to the names of corporate executives of S&P1500 firms during the period from January 2009 through December 2015. We are able to identify 2,286 meetings between corporate executives and federal government officials at the White House.

And what did they find?

That cronyism is lucrative (I deliberately chose that word rather than “profitable” because money that it legitimately earned is very honorable).

Here are some of the findings.

…we find that firms that contributed more to Obama’s presidential election campaigns are more likely to have access to the White House. We also find that firms that spend more on lobbying, firms that receive more government contracts… Second, we find that corporate executives’ meetings with White House officials are followed by significant positive cumulative abnormal returns (CARs). For example, the CAR is about 0.865% during a 51-day window surrounding the meetings (i.e., 10 days before to 40 days after the meetings). We also find that the result is driven mainly by meetings with the President and his top aides.

For those interested, here are the companies that had a lot of interaction with the Obama White House.

And here are the officials that they met with.

For what it’s worth, I would be especially suspicious of the meetings with Valerie Jarrett and the three Chiefs of Staff. Those officials are political operatives rather than policy experts, so companies meeting with them were probably looking for favors.

Interestingly, it turns out that it wasn’t a good idea for companies to “invest” a lot of time and effort into cultivating relationships with Democrats.

…we exploit the election of Donald J. Trump as the 45th President of the U.S. as a shock to political access. We find that firms with access to the Obama administration experience significantly lower stock returns following the release of the election result than otherwise similar firms. The economic magnitude is nontrivial as well: after controlling for various factors that are likely correlated with firms’ political activities, such as campaign contributions, lobbying expenses, and government contracts, the stocks of firms with access to the Obama administration underperform the stocks of otherwise similar firms by about 80 basis points in the three days immediately following the election.

Though I guess you can’t blame the companies. Most observers (including me) expected Hillary to win, so the firms were simply playing the odds (albeit from an amoral perspective).

By the way, there are two very important caveats to share.

• First, we can’t universally assume that corporate executives who met with White House officials were seeking special favors. They may simply have been urging the Obama Administration not to raise taxes or impose new regulations (i.e., honorable forms of lobbying).
• Second, we can’t assume that the bad forms of lobbying have disappeared simply because there’s a Republican in the White House. As we saw during the Bush years, the GOP is more than capable of creating opportunities for unearned wealth by expanding the size and scope government.

For what it’s worth, I fear Trump will be tempted to play favorites as well. Which is why the real message for today is that smaller government is the only way to limit the corrupt interaction of big business and big government.

This image illustrates why my leftist buddies are naive to think that a bigger government will be a weapon against cronyism.

P.S. We should learn from Estonia on how to limit cronyism.

P.P.S. To close on a humorous note, those with left-wing children may want to get them “Kronies” for their birthdays or Christmas.

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Obama Dismal but Forgettable Legacy

President Obama gave his farewell speech last night, orating for more than 50 minutes. As noted by the Washington Examiner, his remarks were “longer than the good-bye speeches of Ronald Reagan, Bill Clinton and George W. Bush combined.”

But this wasn’t because he had a lengthy list of accomplishments.

Unless, of course, you count the bad things that happened. And there are three things on my list, if you want to know Obama’s legacy for domestic policy.

• A wasteful and failed stimulus.
• The Obamacare catastrophe.
• More regulation and red tape.

And those three things, combined with his other policies, produced dismal results.

• A very weak recovery.
• Falling labor force participation.
• Stagnant household income.

In other words, Obama’s legacy will be failed statism.

Writing for the Orange County Register, Joel Kotkin is not impressed by Obama’s overall record.

Like a child star who reached his peak at age 15, Barack Obama could never fulfill the inflated expectations that accompanied his election. …The greatest accomplishment of the Obama presidency turned out to be his election as the first African American president. This should always be seen as a great step forward. Yet, the Obama presidency failed to accomplish the great things promised by his election: racial healing, a stronger economy, greater global influence and, perhaps most critically, the fundamental progressive “transformation” of American politics. …Eight years after his election, more Americans now consider race relations to be getting worse, and we are more ethnically divided than in any time in recent history. …if there was indeed a recovery, it was a modest one, marked by falling productivity and low levels of labor participation. We continue to see the decline of the middle class.

And Seth Lipsky writes in the New York Post that Obama’s economic legacy leaves a lot to be desired.

Obama’s is the only modern presidency that failed to show a single year of growth above 3 percent… Plus, the Obama economy failed to prosper even though the Federal Reserve had its pedal to the metal. Its quantitative easing, $2 trillion balance-sheet expansion and zero-interest-rate policy all produced zilch. …The recent declines in the unemployment rate are due less to the uptick in employed persons than to an increasing number of persons leaving the labor force.

All these accusation are very relevant, and I would add another charge to the indictment. Median household income has been stagnant during the Obama years. And the data for Obamanomics is especially grim when you compare recent years to what happened under Reagan.

By the way, the bad news isn’t limited to economic policy.

Here’s what Tim Carney of the Washington Examiner wrote about Obama’s cavalier treatment of the Bill of Rights.

The Bill of Rights is a barricade protecting Americans from their government. Part of President Obama’s legacy will be that he inflicted damage on that barricade, eroding freedom of speech, free exercise of religion, the right to bear arms and the right to due process. Through his political arguments, executive actions and political leadership, Obama has taken some of the holes punched by previous presidents and made them broader or more permanent. This means that after Obama leaves office, people will be more easily silenced, killed or disarmed by their own government.

Tim extensively documents all these transgressions in his article. The entire thing is worth reading.

To be sure, there are people who defend Obama’s legacy.

From the left, Dylan Matthews wants readers of Vox to believe that Obama has been a memorable President. And he means that in a positive sense.

Barack Obama is one of the most consequential presidents in American history — and that he will be a particularly towering figure in the history of American progressivism. He got surprisingly tough reforms to Wall Street passed as well, not to mention a stimulus package that both blunted the recession and transformed education and energy policy.

A “towering figure”? That might be an accurate description of Woodrow Wilson, the despicable person who gave us both the income tax and the federal reserve. Or Franklin Roosevelt, who doubled the size of the federal government and wanted radical collectivism. Or Lyndon Johnson, the big spender who gave us Medicare and Medicaid.

All of those presidents changed America in very substantial (and very bad) ways.

Obama, by contrast, wanted to “fundamentally transform” America but instead turned out to be an incremental statist. Sort of like Bush.

And I can’t help but laugh at the assertion that Obama got “tough reforms to Wall Street” Dodd-Frank was supported by Goldman-Sachs and the other big players!

Let’s get back to the Matthews’ article. His strongest praise is reserved for Obamacare.

He signed into law a comprehensive national health insurance bill, a goal that had eluded progressive presidents for a century. …it established, for the first time in history, that it was the responsibility of the United States government to provide health insurance to nearly all Americans, and it expanded Medicaid and offered hundreds of billions of dollars in insurance subsidies to fulfill that responsibility.

I’ll agree that this is Obama’s biggest left-wing accomplishment. I’ve even noted that it may be a long-term victory for the left even though Republicans now control the House and Senate in large part because of that law (and it may not even be that if GOPers get their act together and actually repeal the law).

But I hardly think it was a game-changing reform, even if it isn’t repealed. Government was already deeply enmeshed in the healthcare sector before Obama took office. Obamacare simply moved the needle a bit further in the wrong direction.

Again, that was a victory for the left, just as Bush’s Medicare expansion was a victory for the left. But it didn’t “fundamentally transform” anything.

And here’s his conclusion.

You can generally divide American presidents into two camps: the mildly good or bad but ultimately forgettable (Clinton, Carter, Taft, Harrison), and the hugely consequential for good or ill (FDR, Lincoln, Nixon, Andrew Johnson). Whether you love or hate his record, there’s no question Obama’s domestic and foreign achievements place him firmly in the latter camp.

I strongly suspect that Obama will wind up in the former camp. He was bad, but largely forgettable. At least if the metric is policy.

Let’s close with a couple of observation on the political side.

I’m amused, for instance, that Obama’s bitter that he couldn’t rally the nation behind has anti-gun ideology.

President Obama said his biggest policy disappointment as president was not passing gun control laws, according to an interview CNN aired… Obama was unable to convince Congress to pass legislation that would change those policies, including enhancing background checks and not selling firearms at gun shows and other venues.

And I’m also amused that he believes the American people would have reelected him if he was on the ballot.

Arguing that Americans still subscribe to his vision of progressive change, President Barack Obama asserted in an interview recently he could have succeeded in this year’s election if he was eligible to run.

To be sure, he may be right. He definitely has better political skills than Hillary Clinton, and I’ll be the first to acknowledge that he was better at campaigning rather than governing.

But his victories in 2008 and 2012 were against very weak Republican candidates. And it’s interesting that a hypothetical poll showed him and Trump in a statistical dead heat. Given Trump’s low approval rating, that doesn’t exactly translate into a vote of confidence for Obama.

More important, I shared some hypothetical polling data back in 2013 which showed that Reagan would have defeated Obama in a landslide.

Once again, that’s hardly a sign of Obama being a memorable or transformative President.

And I imagine Reagan would have an even bigger lead if there was a new version of the poll.

For what it’s worth, I think the most insightful analysis of Obama’s legacy comes from Philip Klein. He notes that Obama wanted Americans to believe in big government. But he failed. Miserably.

President Obama entered office in 2009 with the twin goals of expanding the role that government plays in the lives of individuals and businesses and proving to Americans that the government could be trusted to achieve big things. He was only half successful. …the gulf between his promises and the reality of what was implemented dramatically hardened public skepticism about government. …As the Obama epoch wanes, trust in government has reached historic lows. A Pew poll last fall found that just 19 percent of Americans said they could trust the government to do the right thing most of the time — a lower percentage than during Watergate, Vietnam or the Iraq War. …Obama saw himself as the liberal answer to Reagan who could succeed where Clinton failed, putting an optimistic face on government expansion, passing historic legislation and getting Americans believing in government again. …Obama’s failure to repair the image of the federal government as a bungling institution — think of the DMV, just on a much bigger scale — will create enormous challenges for any Democratic successors trying to sell the public on the next wave of ambitious government programs.

This is spot on. I joked several years ago that the Libertarian Party should have named Obama “Man of the Year.”

But given how his bad policies have made people even more hostile to big government, he might deserve “Man of the Century.”

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The Obama Administration’s Assault on the Rule of Law

What’s the worst development in economic policy of the Obama years?

• The faux stimulus scheme?
• The Obamacare boondoggle?
• The fiscal cliff tax hike?
• The Dodd-Frank bailout bill?

Those are all good answers, but if you look at the data from Economic Freedom of the World, a major reason for the decline in America’s score is that the rule of law has eroded.

In other words, the United States is becoming a place where clear and neutral rules are being replaced by arbitrary and capricious government power. And this is not a trivial matter. Issues related to the rule of law account for 20 percent of a nation’s grade – the same level of importance as fiscal policy.

In another worrisome development, the United States only ranked #19 as of 2014 in a global ranking of how well nations maintain the rule of law.

There are several reasons why America’s ranking is going down. To cite just a few: The arbitrary rewrites of Obamacare. The Operation Chokepoint fiasco. IRS regulations that overturn existing law.

And it appears the Obama Administration wants to go out with a bang.

The Wall Street Journal opines on a new regulatory scheme from the Treasury Department to boost the death tax burden by arbitrarily inflating the value of certain assets.

…before President Obama leaves office, his Treasury Department is rushing to implement a de facto increase in the federal estate tax. Since Congress does not agree that the Internal Revenue Service should suck more cash out of family firms, Treasury Secretary Jack Lew is up to his usual tricks, trashing established interpretations of tax law to bypass the legislative branch. Not even Mr. Lew has the gall to claim he can raise the federal death-tax rate of 40% without congressional approval. So the game here is to contrive ways to expose more of the value—or imagined value—of an estate to IRS revenue collectors. Last month Mr. Lew’s Treasury announced a proposed rule to close what it calls an estate and gift tax “loophole.” Until now, the IRS permitted realistic values for portions of closely held corporations and partnerships. …consider a minority stake with limited rights in a family business. While the business as a whole may have considerable value, how much would an investor be willing to pay for a small, illiquid piece of a private business that she can’t control? The typical answer is not much. On the other hand, the investor might pay handsomely for a controlling interest. The IRS has long recognized this reality and has allowed the discounting of interests in closely held businesses to more closely reflect what they could fetch on the open market, rather than simply assigning a percentage of a firm’s overall estimated value.

In other words, Obama’s Treasury Department wants to force heirs to pay tax on what they think an asset is worth rather than what it would fetch on the open market.

This regulatory scheme – if ultimately successful – will make a bad tax even worse.

And it also will be bad for the economy.

…what seems like a reasonable interpretation to some looks like a wasted revenue opportunity to the Obama Treasury. …As always, Mr. Lew and Treasury are happy to seize more wealth from the private economy. …But voters may ask how much economic destruction is acceptable in the name of such fairness. …the tax clearly encourages people to consume now rather than invest in the future. This means lower GDP over time and fewer opportunities for the poor, some of whom might want to work for family businesses. The Tax Foundation reckons that the economy would be 0.8% larger over a decade without the estate tax.

Here’s another example.

The Obama Administration has been shaking down banks for money because of supposed misdeeds leading up the government-caused financial crisis.

The various fines may of may not be legitimate, but what’s really troubling is that a big chunk of the money is then being steered to left-wing groups. Many of which are seeking to impact the political process.

Andy Koenig of Freedom Partners has a column in the Wall Street Journal with some of the unseemly details.

The administration’s multiyear campaign against the banking industry has quietly steered money to organizations and politicians who are working to ensure liberal policy and political victories at every level of government. The conduit for this funding is the Residential Mortgage-Backed Securities Working Group, a coalition of federal and state regulators and prosecutors created in 2012 to “identify, investigate, and prosecute instances of wrongdoing” in the residential mortgage-backed securities market. In conjunction with the Justice Department, the RMBS Working Group has reached multibillion-dollar settlements with essentially every major bank in America. …Combined, the banks must divert well over $11 billion into “consumer relief,” which is supposed to benefit homeowners harmed during the Great Recession. …a substantial portion is allocated to private, nonprofit organizations drawn from a federally approved list. Some groups on the list—Catholic Charities, for instance—are relatively nonpolitical. Others—La Raza, the National Urban League, the National Community Reinvestment Coalition and more—are anything but. This is a handout to the administration’s allies. Many of these groups engage in voter registration, community organizing and lobbying on liberal policy priorities at every level of government. They also provide grants to other liberal groups not eligible for payouts under the settlements. …The settlements also give banks a financial incentive to fund these groups. Most of the deals give double credit or more against the settlement amount for every dollar in “donations.”

Needless to say, diverting money to political allies sounds like the kind of chicanery you’d find in a banana republic, not an advanced western society.

But it gets worse.

Here’s another Wall Street Journal editorial on an additional bit of regulatory/tax overreach by the Treasury Department. It deals with the Obama Administration trying to stop “inversions” by unilaterally changing the rules in ways that will hamper sensible business practices for all multinational companies.

The Treasury Secretary…wants to prevent “earnings stripping,” in which companies allegedly make loans from their overseas businesses to their U.S. subsidiaries to minimize taxes. The feds succeeded in destroying the proposed merger of Pfizer and Allergan. But we warned in April that the Treasury plan would be “ugly for everybody,” imposing new costs and paperwork burdens on companies that never had any intention of moving overseas or stripping earnings. And sure enough, from small S corps all the way to Exxon, the afflicted have been explaining how the new rules will make it more expensive and difficult to do even routine business functions like cash management. …the banks hate this rule too. By limiting their ability to move money across borders to meet customer demand and respond to market stress, it could force them to violate other regulations, or worse. A July letter from Citigroup, Bank of America and J.P. Morgan Chase to Treasury officials warned the rules could make “financial services groups more fragile in times of financial stress, thereby creating risk to the financial stability of the United States.” …If Mr. Lew were reasonable, he’d drop this misguided assault on American business and work with lawmakers to craft a corporate tax reform that ensures U.S. companies never want to leave the U.S.

A report in the New York Times highlighted some of the legal issues involved in this issue.

The U.S. Chamber of Commerce filed a lawsuit on Thursday to block new rules issued by the Obama administration that prevent American corporations from merging with foreign-based companies and moving their headquarters abroad to save on taxes. The business group, along with the Texas Association of Business, filed the lawsuit in federal court in Austin, Tex., saying the administration was overstepping its authority in issuing the rules. …“If the defendants’ rule is permitted to stand, it is not just mergers that will suffer — it is the rule of law, and the certainty and stability required for effective commerce, markets and economic growth, that are truly threatened by the defendants’ unauthorized and unlawful action,” the plaintiffs said in their filing. …“Although it might seem esoteric, this action is a clear case of federal executive branch officers and agencies bypassing Congress and short-circuiting legislative debate over a hotly contested issue,” the lawsuit says.

Ugh. At least Hillary Clinton is proposing to change the law in pursuit of bad policy on inversions. Obama just waves his magic wand.

Let’s wrap up by refocusing on why the rule of law is a fundamental building block of a free society. Back in 2014, I shared a very good video from Learn Liberty about the importance of the rule of law.

That video is a compelling explanation of why it is good to have clear rules, along with limits on the arbitrary power of government officials.

Indeed, it’s probably no exaggeration to assert that rule of law is the greatest contribution of western civilization.

Here’s a movie clip (courtesy of FEE) that makes this point.

Based on the Obama Administration’s unilateral and capricious actions, maybe a new movie should be made about the rise and decline of western civilization.

P.S. On the topic of Obama and movies, here’s some humor to offset today’s dismal topic.

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Trump’s Accurate Indictment of Hillarynomics

It’s no secret that I’m very leery of Donald Trump. Simply stated, I don’t sense any genuine commitment to smaller government and free markets.

In addition to fretting about his overall approach on the big issue of liberty vs. government, I’ve specifically criticized his views on protectionism, on bailouts, on entitlements, monetary policy, tax policy, and (just yesterday) distorting tax loopholes.

But skepticism isn’t the same as bias.

I commend Trump when he says something accurate or when he proposes good policies, and I defend him when he’s unfairly attacked.

With this in mind, it’s time to point out something very accurate in his big speech yesterday to the Detroit Economic Club.

He issued a strong and effective indictment of Obamanomics.

…let’s look at what the Obama-Clinton policies have done nationally. Their policies produced 1.2% growth, the weakest so-called recovery since the Great Depression… There are now 94.3 million Americans outside the labor force. …We have the lowest labor force participation rates in four decades. …Meanwhile, American households are earning more than $4,000 less today than they were sixteen years ago.

Trump’s basically right. No matter how you slice and dice the data, Obamanomics (which he refers to as Obama-Clinton policies for obvious reasons) clearly hasn’t worked.

We’ve had the weakest recovery since the Great Depression. Labor-force participation is dismal. And median household income has lagged.

I touched on some of those issues in this discussion on Fox Business News.

But you don’t have to believe me.

Former Senator Phil Gramm and former Senate staffer Mike Solon dissect Obamanomics in a column for the Wall Street Journal.

When President Obama took office during the 2007-09 recession no president was ever better positioned to lead a strong recovery. With an impressive electoral mandate, Mr. Obama enjoyed a filibuster-proof Senate supermajority, a 79-vote House majority and a nation ready for change. History too seemed to smile on Mr. Obama’s endeavor. The recession ended just six months into his first term and, with the sole exception of the Great Depression, every severe recession since 1870—when reliable annual data were first collected—had been followed by a vigorous recovery.

They point out that President Obama used the opportunity to push Keynesian fiscal and monetary policy.

No resources were spared. The Obama $836 billion stimulus exceeded all previous U.S. economic stimulus programs combined. The Treasury borrowed over $1 trillion a year for four years in a row, according to Office of Management and Budget data. The Federal Reserve injected $3 trillion of new reserves into the banking system, generating record-low interest rates.

And the institutions with Keynesian models predicted (what a surprise) that we would get good results.

In August 2010, the Congressional Budget Office projected 3.3% average real GDP growth for 2010-15. The Federal Reserve forecast growth as strong as 3.7%. Mr. Obama’s own Office of Management and Budget expected peak growth of 4.5%.

Unfortunately, these models were wrong. Wildly wrong.

…not once in the last seven years has annual economic growth ever reached 3%. Average real per capita income grew five times faster during the Clinton recovery, seven times faster during the Reagan recovery and 10 times faster during the Kennedy/Johnson recovery than during the Obama recovery.

Gramm and Solon point out that there’s only been one other “recovery” remotely similar to the one we’re having now.

…in only two recoveries did government impose economic policies radically different from the policies pursued in all the other recoveries—different than traditional policy but similar to each other— FDR’s Great Depression and Mr. Obama’s Great Recession. …When Mr. Obama replicated some of FDR’s “progressive” policies, history was there to reteach its lessons.

Amen.

The so-called New Deal was a statist disaster than lengthened and deepened the Great Depression.

Indeed, it was only a Great Depression because of awful policies that began under Herbert Hoover and then continued under Franklin Roosevelt.

Obama wanted the second coming of the New Deal.

The good news is that he wasn’t able to impose nearly as much bad policy as Hoover and FDR.

The bad news is that he imposed enough bad policy to produce an abnormally weak recovery.

Which leads to the lesson that everyone should learn.

The dominant lesson of the Great Depression and the Great Recession is that when government overspends, overtaxes and over-regulates, economic freedom is suppressed and economic growth vanishes.

Sadly, I don’t think either Donald Trump or Hillary Clinton understand this lesson.

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A Grim Final Year for Obamanomics

What’s the most important economic statistic to gauge a society’s prosperity?

I often use per-capita economic output when comparing nations.

But for ordinary people, what probably matters most is household income. And if you look at the median household income numbers for the United States, Obamanomics is a failure. According to the Census Bureau’s latest numbers, the average family today has less income (after adjusting for inflation) than when Obama took office.

In an amazing feat of chutzpah, however, the President is actually arguing that he’s done a good job with the economy. His main talking point is that the unemployment rate is down to 4.7 percent.

Yet as discussed in this Blaze TV interview, sometimes the unemployment rate falls for less-than-ideal reasons.

Since I’m a wonky economist, I think my most important point was about long-run prosperity being dependent on the amount of labor and capital being productively utilized in an economy.

And that’s why the unemployment rate, while important, is not as important as the labor force participation rate.

Here’s the data, directly from the Bureau of Labor Statistics.

As you can see, the trend over the past 10 years is not very heartening.

To be sure, Obama should not be blamed for the fact that a downward trend that began in 2008 (except to the extent that he supported the big-government policies of the Bush Administration).

But he can be blamed for the fact that the numbers haven’t recovered, as would normally happen as an economy pulls out of a recession. This is a rather damning indictment of Obamanomics.

By the way, I can’t resist commenting on what Obama said in the soundbite that preceded my interview. He asserted that “we cut unemployment in half years before a lot of economists thought we could.”

My jaw almost hit the floor. This is a White House that promised the unemployment rate would peak at only 8 percent and then quickly fall if the so-called stimulus was approved. Yet the joblessness rate jumped to 10 percent and only began to fall after there was a shift in policy that resulted in a spending freeze.

In effect, the President airbrushed history and then tried to take credit for something that happened, at least in part, because of policies he opposed.

Wow.

One final point. I was asked in the interview which policy deserves the lion’s share of the blame for the economy’s tepid performance and weak job numbers.

I wasn’t expecting that question, so I fumbled around a bit before choosing Obamacare.

But with the wisdom of hindsight, I think I stumbled onto the right answer. Yes, the stimulus was a flop, and yes, Dodd-Frank has been a regulatory nightmare, but Obamacare was (and continues to be) a perfect storm of taxes, spending, and regulatory intervention.

And even the Congressional Budget Office estimates it has cost the economy two million jobs.

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The “Race to the Bottom” and Global Minimum Corporate Taxes

Imagine if you had the chance to play basketball against a superstar from the NBA like Stephen Curry.

No matter how hard you practiced beforehand, you surely would lose.

For most people, that would be fine. We would console ourselves with the knowledge that we tried our best and relish he fact that we even got the chance to be on the same court as a professional player.

But some people would want to cheat to make things “equal” and “fair.” So they would say that the NBA player should have to play blindfolded, or while wearing high-heeled shoes.

And perhaps they could impose enough restrictions on the NBA player that they could prevail in a contest.

But most of us wouldn’t feel good about “winning” that kind of battle. We would be ashamed that our “victory” only occurred because we curtailed the talents of our opponent.

Now let’s think about this unseemly tactic in the context of corporate taxation and international competitiveness.

The United States has the highest corporate tax rate in the industrialized world, combined with having the most onerous “worldwide” tax system among all developed nations.

This greatly undermines the ability of U.S.-domiciled companies to compete in world markets and it’s the main reason why so many companies feel the need to engage in inversions.

So how does the Obama Administration want to address these problems? What’s their plan to reform the system to that American-based firms can better compete with companies from other countries?

Unfortunately, there’s no desire to make the tax code more competitive. Instead, the Obama Administration wants to change the laws to make it less attractive to do business in other nations. Sort of the tax version of hobbling the NBA basketball player in the above example.

Here are some of the details from the Treasury Department’s legislative wish list.

The Administration proposes to supplement the existing subpart F regime with a per-country minimum tax on the foreign earnings of entities taxed as domestic C corporations (U.S. corporations) and their CFCs. …Under the proposal, the foreign earnings of a CFC or branch or from the performance of services would be subject to current U.S. taxation at a rate (not below zero) of 19 percent less 85 percent of the per-country foreign effective tax rate (the residual minimum tax rate). …The minimum tax would be imposed on current foreign earnings regardless of whether they are repatriated to the United States.

There’s a lot of jargon in those passages, and even more if you click on the underlying link.

So let’s augment by excerpting some of the remarks, at a recent Brookings Institution event, by the Treasury Department’s Deputy Assistant Secretary for International Tax Affairs. Robert Stack was pushing the President’s agenda, which would undermine American companies by making it difficult for them to benefit from good tax policy in other jurisdictions.

He actually argued, for instance, that business tax reform should be “more than a cry to join the race to the bottom.”

In other words, he doesn’t (or, to be more accurate, his boss doesn’t) want to fix what’s wrong with the American tax code.

So he doesn’t seem to care that other nations are achieving good results with lower corporate tax rates.

I do not buy into the notion that the U.S. must willy-nilly do what everyone else is doing.

And he also criticizes the policy of “deferral,” which is a provision of the tax code that enables American-based companies to delay the second layer of tax that the IRS imposes on income that is earned (and already subject to tax) in other jurisdictions.

I don’t think it’s open to debate that the ability of US multinationals to defer income has been a dramatic contributor to global tax instability.

He doesn’t really explain why it is destabilizing for companies to protect themselves against a second layer of tax that shouldn’t exist.

But he does acknowledge that there are big supply-side responses to high tax rates.

…large disparity in income tax rates…will inevitably drive behavior.

Too bad he doesn’t draw the obvious lesson about the benefits of low tax rates.

Anyhow, here’s what he says about the President’s tax scheme.

The President’s global minimum tax proposal…permits tax-free repatriation of amounts earned in countries taxed at rates above the global minimum rate. …the global minimum tax plan also takes the benefit out of shifting income into low and no-tax jurisdictions by requiring that the multinational pay to the US the difference between the tax haven rate and the U.S. rate.

The bottom line is that American companies would be taxed by the IRS for doing business in low-tax jurisdictions such as Ireland, Hong Kong, Switzerland, and Bermuda.

But if they do business in high-tax nations such as France, there’s no extra layer of tax.

The bottom line is that the U.S. tax code would be used to encourage bad policy in other countries.

Though Mr. Stack sees that as a feature rather than a bug, based on the preposterous assertion that other counties will grow faster if the burden of government spending is increased.

…the global minimum tax concept has an added benefit as well…protecting developing and low-income countries…so they can mobilize the necessary resources to grow their economies.

And he seems to think that support from the IMF is a good thing rather than (given that bureaucracy’s statist orientation) a sign of bad policy.

At a recent IMF symposium, the minimum tax was identified as something that could be of great help.

The bottom line is that the White House and the Treasury Department are fixated at hobbling competitors by encouraging higher tax rates around the world and making sure that American-based companies are penalized with an extra layer of tax if they do business in low-tax jurisdictions

For what it’s worth, the right approach, both ethically and economically, is for American policy makers to focus on fixing what’s wrong with the American tax system.

P.S. When I debunked Jeffrey Sachs on the “race to the bottom,” I showed that lower tax rates do not mean lower tax revenue.

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Obama’s Miserable Economic Legacy

Let’s take a look at President Obama’s economic legacy.

The Washington Examiner opines on President Obama’s remarkable claim that he saved the world economy.

President Obama…wants to be remembered for…[being]…the savior of the American and global economies. “There are things I’m proud of,” he said, citing Obamacare, then added, “Saving the world economy from a Great Depression, that was pretty good.”

Not so fast. Looking at the economy’s anemic numbers the editors are less than impressed.

Obama will end eight years in office without presiding over a thriving economy of the sort America enjoyed in the past. It also suggests that even the mediocre growth of recent years depended on high oil prices, which have collapsed by more than half. This is the bitter fruit of creationist economics, the erroneous belief that government activity can somehow conjure new wealth and value.

The Wall Street Journal is similarly dour about Obama’s economic legacy.

When did Americans decide that 1% or 2% economic growth is acceptable, that puny wage increases are inevitable, and that we should all merely shrug and get used to the country’s diminished expectations? …the first quarter is further evidence of what has been the weakest economic expansion in the postwar era. …All of this continues the slow-or-slower pace of this entire expansion that began nearly seven years ago. Each year has had a similar GDP dip, and growth has never exceeded 2.5% (2010). The American economy hasn’t grown by more than 3% since 2005 (3.3%), the longest such stretch of malaise that we can find in the Bureau of Economic analysis tables going back to 1930. …Faster growth is possible, but it will take better policies.

In a column for Bloomberg, Narayana Kocherlakota, looks at what’s happened and compares it to what CBO projected would happen.

it’s not hard to see why many people are disappointed with the performance of the economy during Obama’s time in office. In January 2009, at the beginning of Obama’s first term, the nonpartisan Congressional Budget Office issued a 10-year forecast for the U.S. economy, including such indicators as unemployment, gross domestic product, the budget deficit, government debt and interest rates. …The unemployment rate has come closest to expectations. …Elsewhere, the story is less positive. Total income growth in the U.S. has fallen well short of expectations, in both nominal and inflation-adjusted terms. …the federal budget deficit…still much larger than the CBO forecast in 2009 — as is the ratio of government debt to GDP.

Here’s his chart.

Last, but not least, Louis Woodhill shares some numbers that capture Obama’s real legacy.

America’s elites have largely given up on growth, and are now distracting themselves with academic musings about “secular stagnation.” …assuming 2.67% RGDP growth for 2016, Obama will leave office having produced an average of 1.55% growth. This would place his presidency fourth from the bottom of the list of 39*, above only those of Herbert Hoover (-5.65%), Andrew Johnson (-0.70%) and Theodore Roosevelt (1.41%)

What makes this final comparison so damning is that Obama had the comparative good fortune to enter office in the middle of a recession. Which means, all things equal, that his numbers should look very positive.

Instead, he’s managed to compile one of the worst track records.

When I do comparisons, I like using the interactive recession/recovery site of the Minneapolis Federal Reserve, which allows users to compare every recession and recovery since the end of World War II.

Here’s how President Obama (red line) ranks on GDP growth.

As you can see, whether your starting point is the beginning of the recovery or the beginning of the recession, Obama is in last place.

He does slightly better on employment. He still has one of the worst records (again, the red line), but he does beat George W. Bush’s also-anemic performance on job creation.

By the way, some of you may be wondering why the employment data for Obama is so weak when the unemployment rate has significantly fallen.

The answer is that the unemployment rate doesn’t count people who have given up on finding a job, whereas the Minneapolis Fed data counts how many new jobs are being created.

And it’s the amount of people productively employed that matters if we want more economic output, so the Minneapolis Fed data is far more important and revealing than the official unemployment rate numbers.

Unfortunately, Obama and his team haven’t figured out (or simply don’t care) that jobs are more likely to be created when government is smaller rather than bigger.

By the way, this analysis presumably won’t be very compelling for Obama supporters because they’ll simply assert things could have been much worse without his policies.

They may even believe the President’s claim that he saved the American economy from a Great Depression.

But they overlook the fact that the economy normally bounces back quickly from a downturn. It was only during the 1930s, when Hoover and Roosevelt competed to impose bad policy, that a recession became a depression.

The bad news is that President Obama’s policies haven’t helped today’s economy, but the good news is that his policies are nowhere near as harmful as the combined statist agendas of Hoover and Roosevelt.

So if we want to learn a lesson on what works, the economy’s very strong boom under Reagan is a good case study. And if you want to go back further, the anti-Keynesian booms after World War I and World War II also teach important lessons.

P.S. President Obama is completely correct when he points out that America’s economy is generally stronger than European economies. Unfortunately, he doesn’t seem to realize what this implies.

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One Strike, Two Strikes, Three Strikes (and Many More Strikes) for Obamacare

The ongoing cluster-you-know-what of Obamacare is a source of unhappy satisfaction.

Part of me is glad the law is such a failure, but it’s tragic that millions of people are suffering adverse consequences. These are folks who did nothing wrong, but now are paying more, losing employment, suffering income losses, and/or being forced to find new plans and new doctors.

And it seems we get more bad news every day, as noted in a new editorial from Investor’s Business Daily.

ObamaCare rates will skyrocket next year, according to its former chief. Enrollment is tumbling this year. And a big insurer is quitting most exchanges. That’s what we learned in just the past few days.

Why do we know these three bad things are happening? Because that’s what we’re being told by Mary Tavenner, the former head of the Center for Medicare and Medicaid Services for the Obama Administration who has now cashed out and is pimping for the health insurance companies that got in bed with the White House to foist Obamacare on the American people.

IBD gives us the sordid details.

Why will 2017 rates spike even higher? In addition to the cost of complying with ObamaCare’s insurance regulations and mandates, there’s the fact that the ObamaCare exchanges have failed to attract enough young and healthy people needed to keep premiums down. Plus, two industry bailout programs expire this year, Tavenner notes. Oh, and she admits that people are gaming ObamaCare just like critics said they would: buying coverage after they get sick — since insurance companies can no longer turn them down or charge them more — then dropping it when they’re done with treatments. “That churn increases premiums. So you have to kind of price over that.”

And that’s just one slice of bad news.

Here’s more.

ObamaCare enrollment has already dropped an average of more than 14% in five states since February — a faster rate of decline than last year — as people get kicked off for not paying premiums. Finally, we learned on Tuesday that UnitedHealth Group (UNH) is planning to drop out of almost every ObamaCare market it currently serves after losing $1 billion on those policies. …Skyrocketing premiums, fewer choices in the marketplace, and people fleeing ObamaCare in droves after signing up. This isn’t exactly what Obama promised when he signed ObamaCare into law.

For those who were paying attention, none of this is a surprise. It was always a fantasy to think that more government intervention was going to improve a healthcare system that already was cumbersome and expensive because of previous government interventions.

By the way, IBD isn’t the only outlet to notice the ongoing disaster of Obamacare.

Let’s look at some other recent revelations.

Chris Jacobs writes that “For millions of Americans, the Left’s insurance utopia has rapidly deteriorated into a bleak dystopia” and that “the ‘cheaper prices’ that the president promised evaporated as quickly as the morning dew.”

John Graham explains that “CBO estimates Obamacare will leave 27 million uninsured through 2019 – an increase of almost one quarter” and that “CBO estimates 68 million will be dependent on the program this year through 2019 – an increase of almost one third in the welfare caseload.”

Betsy McCaughey opines that, “Obamacare is already hugely in the red. …over the next ten years Obamacare will add $1.4 trillion to the nation’s debt” and that “Insurers struggling with Obamacare are already drastically reducing your choice of doctors and hospitals to cut costs.”

Devon Herrick reveals that “Obamacare has caused more people to reach for their wallets after a medical encounter — not less” and that “all but the most heavily subsidized Obamacare enrollees would be better off financially if they skipped coverage and pay for their own medical care out of pocket.”

Jeffrey Anderson observes that “it seems possible that Obamacare has actually reduced the number of people with private health insurance” and that “Obamacare is basically an expensive Medicaid expansion coupled with 2,400 pages of liberty-sapping mandates.”

John Goodman notes that “Prior to Obamacare, many employers of low-wage workers offered their employees a “mini med” plan, covering, say, the first $25,000 of expenses” and that “Those plans are now gone… employees…are…completely uninsured”

The CEO of CKE Restaurants warns that “fewer people buying insurance through the exchanges, the economics aren’t holding up” and that “Ten of the 23 innovative health-insurance plans known as co-ops—established with $2.4 billion in ObamaCare loans—will be out of business by the end of 2015 because of weak balance sheets.”

Critics of Obamacare now get to say “we told you so.”

As the Washington Examiner opines:

…conservatives screamed a simple fact from the rooftops: Obamacare will not work. No one wanted to listen then, but their warnings are now coming into fruition. Obamacare, as constructed, attempted to fix a dysfunctional health care payment system by creating an even more complicated system on top of it, filled with subsidies, coverage mandates, and other artificial government incentives. But its result has been a system that plucked Americans out of coverage they like and forced them to pay more for less. …Taxpayers and insurance customers alike should demand replacing Obamacare with a system that reduces costs and improves quality by injecting actual choice and competition into the insurance market.

I especially like the last part of the excerpt. Which is why we need to go well beyond simply repealing Obamacare if we want to restore market forces to the healthcare sector.

P.S. I wrote about that it’s tragic that so many people are suffering because of Obamacare. I should add that there are some victims who actually are getting what they deserve.

P.P.S. In the long run, I fear taxpayers will be the biggest (and most undeserving) victims.

P.P.P.S.Though, in fairness, the law does have at least one redeeming feature.

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Mr. President, the only Thing We Can Learn from Communism Is that It Doesn’t Work

Over the years, Barack Obama has made some statements that indicate a very statist worldview.

• In my video on class warfare, I noted that Obama said in 2008 that – for reasons of “fairness” – he wanted to raise the capital gains tax even if the government lost revenue.
• A couple of years ago, he arrogantly remarked that “at some point you have made enough money.”
• In 2011, the President was complaining about bank fees and asserted that, “you don’t have some inherent right just to, you know, get a certain amount of profit…”
• In 2012, Obama made his infamous “you didn’t build that” statement, which generated some very amusing political cartoons.

Now he may have added to that list. Check out this excerpt from a report in the Daily Caller.

President Barack Obama downplayed the differences between capitalism and communism, claiming that they are just “intellectual arguments.” …Obama said…”I think for your generation, you should be practical and just choose from what works.”

It’s hard to object to the notion that people should choose “what works,” so perhaps there’s not a specific quote that I can add to my collection. However, the President’s implication that there’s some kind of equivalence between capitalism and communism, which both systems having desirable features, is morally offensive. Sort of like saying that we should “choose from what works” in Hitler’s national socialism.

Communism is a disgusting system that butchered more than 100,000,000 people.

It is a system that leads to starvation and suffering.

Communism produces Nazi-level horrors of brutality.

So what exactly “works” in that system, Mr. President? If you watch Obama’s speech, you’ll notice there’s not a lot of substance. There is a bit of praise for Cuba’s decrepit government-run healthcare system (you can click here, here, and here if you want to learn why the system is horrifying and terrible for ordinary citizens). And he also seems to think it’s some sort of achievement that Cuba has schools.

So let’s take a closer look at what Cuba actually has to offer. Natalie Morales is a Cuban-American actor, writer, and filmmaker. Here’s some of what she wrote about her country and her relatives still trapped on the island.

…we send money, medicine or syringes for the diabetic aunt (since the hospital doesn’t have any unused disposable ones), baby clothes, adult clothes, shoes, or food… a doctor, a lawyer, or another similar profession that is considered to be high-earning everywhere else in the world will make about twenty to thirty dollars per month in Cuba. Yet shampoo at the store still costs three dollars. This is because everything is supposed to be rationed out to you, but the reality is that they’re always out of most things, and your designated ration is always meager. …if you’re a farmer and you’ve raised a cow, and you’re starving, and your family is also starving, and you decide to kill that cow and eat it? You’ll be put in jail for life. Because it’s not “your” cow, it’s everyone’s cow. That’s good ol’ Communism in practice.

Ms. Morales is especially irritated by Americans who fret that capitalism will “ruin” Cuba.

…picture me at any dinner party or Hollywood event or drugstore or press interview or pretty much any situation where someone who considers themselves “cultured” finds out I’m Cuban. I prepare myself for the seemingly unavoidable…“I have to go there before it’s ruined!”…I will say some version of this: “What exactly do you think will ruin Cuba? Running water? Available food? Freedom of speech? Uncontrolled media and Internet? Access to proper healthcare? You want to go to Cuba before the buildings get repaired? Before people can actually live off their wages? Or before the oppressive Communist regime is someday overthrown?”

Here’s more about Cuba’s communist paradise, including her observations of the healthcare system that Obama admires.

The very, very young girls prostituting themselves are not doing it because they can’t get enough of old Canadian men, but because it pays more than being a doctor does. Hospitals for regular Cuban citizens are not what Michael Moore showed you in Sicko. …That was a Communist hospital for members of the Party and for tourists… There are no janitors in the hospitals because it pays more money to steal janitorial supplies and sell them on the street than it does to actually have a job there. Therefore, the halls and rooms are covered in blood, urine, and feces, and you need to bring your own sheets, blankets, pillows, towels, and mattresses when you are admitted. Doctors have to reuse needles on patients. My mom’s aunt had a stroke and the doctor’s course of treatment was to “put her feet up and let the blood rush back to her head.”

She closes with a PG-13 request for idiotic westerners.

…for God’s sake, please don’t wear a fucking Che t-shirt.

Very well said.

By the way, none of this means we shouldn’t normalize relations with Cuba. There’s no longer a Soviet Union, so Cuba doesn’t represent a strategic threat. So, yes, relax restrictions on trade and travel, just like we have for China, Zimbabwe, Vietnam, Russia, Venezuela, and other nations that have unsavory political systems.

But the opening of relations doesn’t mean we should pretend that other systems are somehow good or equivalent to capitalism and classical liberalism.

Let’s close by sharing some news from another garden spot of communism.

If North Korea’s reputation as a place of hunger, hardship and repression was not bad enough, scientists have now discovered that it is too grim even for vultures. …Eurasian black vultures are no longer bothering to stop over in North Korea as they fly from their breeding grounds in Mongolia to their winter homes in South Korea. They concluded that food is so short under the communist regime that even the world’s best-known carrion birds cannot feed themselves. …Lee Han Su, of the institute, said: “This seems to happen because in North Korea the vultures can barely find animal corpses, which are major food resources for them.” Under the draconian regime of Kim Jong Un the country is unable to feed itself. International aid agencies report chronic malnutrition in some regions. …wild animals face the risk of being eaten by people. Defectors describe how victims of the famine were driven to eat dogs, cats, rats, grasshoppers, dragonflies, sparrows and crows. Vultures, for the time being at least, are off the menu.

I’m not sure what American leftists will say we can learn from North Korea. Even PETA presumably won’t be happy that starving North Koreans are eating sparrows and grasshoppers.

The bottom line is that there is zero moral equivalence between communism and capitalism. The former is based on servility to the state and the latter is based on liberty.

But if you’re amoral and simply want to know what works, compare the performance of North Korea and South Korea. Or look at the difference between Cuba and Hong Kong.

Very compelling evidence.

But this isn’t an issue that should be decided on the basis of utilitarian comparisons. What should matter most is that communism is evil.

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Are Young People too Stupid to Vote?

Which group has suffered the most because of Obamanomics?

That’s hard to answer. We know that the average family has less income today than when Obama took office.

If we want to narrow things down, we know that blacks have endured hardship because of a weak economy.

But you also could make a strong case that young people have been the biggest victims.

Which is why it is so discouraging that many of them support big government. Here are some depressing numbers from a Frank Luntz survey, as reported by U.S. News & World Report.

Fifty-eight percent of young people choose socialism over capitalism (33 percent) as the most compassionate system. …A plurality of 28 percent say the most pressing issue facing the country is income inequality – one of Sanders’ top themes.

I strongly suspect, by the way, that these young people (just like Hillary Clinton and Debbie Wasserman-Schultz) have no idea how to define socialism.

But that’s hardly a cause for cheer. Even if they simply think socialism is class-warfare taxation and lots of redistribution, it’s still bad news that so many of them have been seduced by the politics of hate and envy.

It’s like they’re totally oblivious to the damage that big government has caused for young people in Europe.

Their views on income inequality are similarly flawed, though perhaps slightly more understandable since millennials have suffered through a very weak economy.

But that’s what makes this polling data so puzzling. Why on earth are young people supportive of statism when they’ve been among the main victims of the weak Obama economy?!?

Writing in the Wall Street Journal, Daniel Arbess ponders the bizarre fact that so many young people support Bernie Sanders.

…voters in the millennial bracket, 18- to 34-year-olds, will for the first time equal the baby-boomer share of the electorate, at 31%. These young voters appear to be falling headlong for the Vermont senator’s plaintive narrative of economic “unfairness.”…throwaway prescriptions for redistributing income and wealth… These young voters seem not to realize that the economic policies they find so resonant are the least likely to promote the growth and the social mobility they desire.

Arbess looks at some of the data about how Obamanomics has been bad for young people.

The millennials can’t be faulted for being anxious about their economic prospects. They are coming of age in the weakest economy in generations. The underemployment rate (measuring those working a job for which they’re overqualified and underpaid) for young adults below age 30 is 60%. The overall employment-to-population ratio of 77.4% for those in the prime-of-working-life 25-54 age bracket translates into 1.5 million jobs below the 20-year average. The college graduate living in his parents’ basement and working a marginal job to service a student loan is by now an archetype of the Obama era.

He then elaborates on the self-destructive instincts of many young voters.

…Why wouldn’t young voters want “free stuff” paid for by the rich, as the Bernie Sanders and Hillary Clinton narrative promises? Because the no-free-lunch axiom is still true: Mr. Sanders’s socialized education, health care and other policies would cost up to $20 trillion, according to analysts, requiring tax collections to increase up to 47%. And have we not at least learned from the collapse and dismantling of socialism over the past quarter century that governments lack the incentives and resources to effectively allocate and manage capital in the microeconomy? …Yet millennials, who would most benefit from a real economic recovery, replacing the false one of the past several years, so far seem intent on voting against their interests.

This video is a good summary of the issue.

Given all this evidence, I’m mystified that young people are big supporters of statism.

And it’s not just what we’ve looked at today. I’ve previously shared data indicating that they are clueless on public policy issues.

At the risk of sounding like some old guy who yells “you kids get off my lawn,” maybe the solution is to raise the voting age. Or, better yet, change the rules to that you only get to vote when you have a job and pay taxes!

More seriously, the answer is more education.

P.S. The good news is that suffering through Obamacare may change the minds of some young people.

P.P.S. In any case, the polling data on guns shows that young people are not totally hopeless.

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New Obama Budget: The Usual Reckless Spending Hikes…and a Big New Tax on American Energy Consumers

We have good news and bad news.

The good news is that President Obama has unveiled his final budget.

The bad news is that it’s a roadmap for an ever-growing burden of government spending. Here are the relevant details.

• The President wants the federal budget to climb by nearly $1.2 trillion over the next five years.
• Annual spending would jump by an average of about $235 billion per year.
• The burden of government spending would rise more than twice as fast as inflation.
• By 2021, federal government outlays will consume 22.4% of GDP, up from 20.4% of economic output in 2014.

I guess the President doesn’t have any interest in complying with Mitchell’s Golden Rule, huh?

While all this spending is disturbing (should we really step on the accelerator as we approach the Greek fiscal cliff?), the part of this budget that’s really galling is the enormous tax increase on oil.

As acknowledged in a report by USA Today, this means a big tax hike on ordinary Americans (for what it’s worth, remember that Obama promised never to raise their taxes).

Consumers will likely pay the price for President Obama’s proposed $10 tax per-barrel of oil, an administration official and a prominent analyst said Thursday. Energy companies will simply pass along the cost to consumers, Patrick DeHaan, senior petroleum analyst for GasBuddy.com, which tracks gas prices nationwide, said in an interview with USA TODAY. ….a 15-gallon fill-up would cost at least $2.76 more per day.  It would also affect people who use heating oil to warm their homes and diesel to fill their trucks.

Isn’t that wonderful. We’ll pay more to fill our tanks and heat our homes, and we’ll also pay more for everything that has oil as an input.

While middle-class consumers will see a big hit on their wallet, the Washington Post explains that Obama wants the new tax revenue to fund an orgy of special-interest spending.

…the tax would raise about $65 billion a year when fully phased in. …The administration said it would devote $20 billion of the money raised to expand transit systems in cities, suburbs and rural areas; make high-speed rail a viable alternative to flying in major regional corridors and invest in new rail technologies like maglev; modernize the nation’s freight system; and expand the Transportation Investment Generating Economic Recovery program launched in the 2009 economic stimulus bill to support local projects. …The budget would also use roughly $10 billion per year in revenues for shifting how local and state governments design regional transportation projects. Obama would also propose investing just over $2 billion per year in “smart, clean vehicles” and aircraft.

More railway money pits and Solyndra-style boondoggles? Gee, what could go wrong?

By the way, the Administration is claiming that the big new energy tax won’t really hurt our pocketbooks because oil prices have been falling. Here are parts of a story by the Washington Examiner.

President Obama said the oil supply glut that has forced prices down to about $30 a barrel makes his proposal to levy a $10 per-barrel tax on crude oil timely. …the White House appears to be of the view that consumers would have an easier time paying it during record low prices.

Gee, how thoughtful of them.

But is anybody under the illusion that the politicians in Washington will repeal the tax when energy prices rise?

Anybody? Bueller?

Here’s one last gem. As cited by the Los Angeles Times, the President offered this pithy statement.

“Rather than subsidize the past, we should invest in the future,” Obama said during his weekly Saturday address.

Now think about what he’s saying. Obama wants us to believe that the absence of a tax today and in the past is actually a subsidy!

Not that we should be surprised. Our friends on the left have a strange habit of arguing that we’re getting a subsidy when we’re allowed to keep our own money. Indeed, they even have a concept called “tax expenditures” that is based on that perverse notion.

P.S. The folks at Politico have a story about Obama’s plan, and there’s a bit of speculation about how it could become an issue for Hillary Clinton in the 2016 presidential race.

…the proposal could be particularly awkward for Hillary Clinton, who has embraced most of Obama’s policies but has also vowed to oppose any tax hikes on families earning less than $250,000 a year.

I think this analysis is absurd.

Hillary will promise all through the campaign that she opposes tax hikes on everyone other than the rich. But then, just like Obama, she’ll break that promise if she gets to the White House.

P.P.S. Lest anyone think I’m taking a partisan jab at Hillary because she’s a Democrat, keep in mind that I’m terrified that Republicans may decide (not withstanding their “dead on arrival” comments) to like Obama’s scheme. After all, many of them last year were very tempted by gas tax hikes to fund more pork-barrel spending.

P.P.P.S. And what’s really depressing is that I explained just last month that it would be very simple to shrink the relative burden government (and also balance the budget very quickly if that’s what you care about) if the federal budget “only” grew by the rate of inflation.

P.P.P.P.S. One final comment is that I might be tempted to accept an oil tax in exchange for the abolition of a tax – perhaps the death tax or capital gains tax – that collects a similar amount of revenue.

But I’d have two condition: First, the net result has to be a tax system that is less destructive to prosperity. Second, I’d have to be convinced that the swap wouldn’t backfire, with politicians somehow winding up with more power and/or money when the dust settles (which has been my concern about the Rand Paul and Ted Cruz plans to impose a value-added tax, even though their plans theoretically would produce a much less destructive tax system).

P.P.P.P.P.S. Oops, several people have reminded me that I forgot to include predictions for New Hampshire. These are only worth what you’re paying for them (in other words, nothing).

Trump  31
Kasich  17
Bush     12
Rubio   11
Cruz     10
Christie  7
Fiorina   5
Carson   4

Sanders   57
Clinton    42

Given what he did to expand Medicaid dependency in Ohio, I’m not sure I’m happy about Kasich’s strong showing. On the other hand, he played a key role in the spending restraint of the 1990s.

Since Hillary and Bernie are two peas in a pod, I have no strong thoughts about that race.

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Obama, Redistribution, and Jobs: Always Wrong, Never in Doubt

Let’s dig into the issue of whether the United States should become more like France.

In a 2014 study for the National Bureau of Economic Research, Stanford University’s Robert Hall wrote about America’s sub-par economic performance. His opening line was basically a preemptive refutation of Obama’s claim – made during the State-of-the-Union Address – that the economy is strong.

The years since 2007 have been a macroeconomic disaster for the United States of a magnitude unprecedented since the Great Depression.

I don’t know that I would use “disaster” to describe the economy. That word would be much more appropriate for failed welfare states such as Italy and Greece.

But Professor Hall was definitely correct that the U.S. economy has been sputtering, as illustrated by comparative business-cycle data from the Minneapolis Federal Reserve.

So what accounts for America’s anemic economy? Hall has about 50 pages of analysis, but since brevity is a virtue, let’s look at some of what he wrote in his final paragraph.

Labor-force participation fell substantially after the crisis, contributing 2.5 percentage points to the shortfall in output. The decline showed no sign of reverting as of 2013. …an important part may be related to the large growth in beneficiaries of disability and food-stamp programs. Bulges in their enrollments appear to be highly persistent. Both programs place high taxes on earnings and so discourage labor-force participation among beneficiaries. The bulge in program dependence…may impede output and employment growth for some years into the future.

In other words, he pointed out that a large number of people have left the labor force, which obviously isn’t good since our economy’s ability to generate output (and boost living standards) is a function of the degree to which labor and capital are being productively utilized.

And his work suggests that redistribution programs are a big reason for this drop in labor-force participation.

Now let’s look at another study from NBER, this one from 2015 that was authored by economists from the University of Pennsylvania, University of Oslo, and Stockholm University.

They examine the specific impact of unemployment insurance.

We measure the effect of unemployment benefit duration on employment. …Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states at the beginning of December 2013 were abruptly cut to zero. …we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders. We find that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.0161 log points. In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.

Wow, that’s a huge impact.

To be sure, I’ll be the first to admit that empirical work is imprecise. Ask five economists for an estimate and you’ll get nine answers, as the old joke goes.

Professor Hall, for instance, found a smaller impact of unemployment insurance on joblessness in his study.

But even if the actual number of people cajoled back into employment is only 500,000 rather than 1 million, that would still be profound.

Though at some point we have to ask whether it really matters whether people are being lured out of the labor force by food stamps, disability payments, unemployment insurance, Obamacare, or any of the many other redistribution programs in Washington.

What does matter is that we have a malignant welfare state that is eroding the social capital of the country. The entire apparatus should be dismantled and turned over to the states.

But not everyone agrees. You probably won’t be surprised to learn that the White House is impervious to data and evidence. Indeed, notwithstanding the evidence that the left was wildly wrong about the impact of ending extended unemployment benefits, the White House is proposing to expand the program.

Here’s some of what’s being reported by The Hill.

The president’s three-pronged plan includes wage insurance of up to $10,000 over two years, expanded unemployment insurance coverage… The plan comes on the heels of Obama’s final State of the Union address on Tuesday, in which he committed to fighting for expanded out-of-work benefits during his last year in office. …The plan would also extend benefits to part-time, low-income and intermittent workers who can’t already take advantage of the out-of-work programs. And it would mandate states provide at least 26 weeks of coverage for those looking for work.

The part about mandating that all states provide extended coverage is particularly galling.

It’s almost as if he wants to make sure that no states are allowed to adopt good policy since that would show why the President’s overall approach is wrong.

I joked in 2012 about a potential Obama campaign slogan, and I suggested an official motto for Washington back in 2014.

Perhaps we should augment those examples of satire with a version of the Gospel according to Obama: Always wrong, never in doubt.

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Obama’s Legacy? Dismal and Declining Labor Force Participation

I normally enjoy working for the Cato Institute since it’s a principled and effective organization.

But every so often, my job requires an unpleasant task, and watching the State-of-the-Union Address as part of Cato’s live-tweeting program counts as one my least enjoyable experiences since joining the team.

But let’s make lemonade out of lemons by looking at lessons that can be learned from Obama’s speech. The most jarring part of the evening was when Obama bragged about the American economy.

Since we’re suffering through the weakest recovery since the Great Depression, that was rather bizarre.

Moreover, being proud that we’re doing better than Europe is akin to getting a participation ribbon in a soccer league for kids.

And the chest thumping about the unemployment rate was very misplaced since that piece of data only looks good because so many Americans have given up on finding a job.

I’ve pontificated on that issue before and cited the Labor Department’s overall data, but let’s dig a little deeper to fully understand why Obama should have apologized rather than patted himself on the back.

Here’s the employment/population ratio for the prime, working-age population of those between 25 and 54 years of age.

As you can see, this ratio has improved a bit over the past five years, but it appears that there’s very little hope that the overall employment situation will ever recover to where it was before the recession.

At least not with current policies.

Here’s another way of looking at the same data. It’s labor force participation by age. The lines don’t seem that far apart, but a 3-4 percentage point decline across age groups adds up to millions of people no longer productively employed.

Last but not least, here’s another way of approaching this data.

We have a chart from the St. Louis Federal Reserve Bank showing the number of working-age people not in the labor force.

There are two takeaways from this chart.

First, it’s clear that the problem started well before Obama.

But it’s also clear that the problem has gotten much worse during his tenure.

The bottom line is that the expansion of redistribution programs has lured more and more people out of the labor force, particularly when matched by government policies that have hindered the private sector’s ability to create jobs.

So you’ll understand why I cited labor-force participation (along with stagnant household income) as Obama’s real legacy in this interview.

By the way, one of the perils of live TV is that you sometimes get curve balls. And since the Ted Cruz birther controversy is now big news, I was asked my opinion even though I don’t have the slightest competency to discuss the issue.

Sort of like the time I went on a program for the ostensible purpose of discussing trade and wound up trapped in a discussion on America’s relationship with North Korea.

My only regret from yesterday’s interview is that I wasn’t clever enough to say that I was more worried about Cruz supporting a Canadian-style tax system than I was about Cruz being born in Canada.

P.S. While I’m not happy about Cruz including a value-added tax in his reform proposal, don’t read too much into that grousing since there are warts in the other candidates’ plans as well.

With one exception.

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Ranking Presidents: Bill Clinton Was Closer to Ronald Reagan than Barack Obama

I wouldn’t be completely distraught to have Clinton in the White House in 2017. But before concluding that I’ve lost my mind, I’m thinking of Bill Clinton, not his far more statist (though similarly dodgy) spouse.

You’ll see what I mean below.

In a column for National Review, Deroy Murdock has some fun by pointing out that Bill Clinton just unintentionally attacked Barack Obama.

Bill Clinton…unsealed an indictment against Obama’s economy. …Hillary’s “secret weapon” told Granite State voters Monday, “I think this election is about restoring broadly shared prosperity, rebuilding the middle class, giving kids the American Dream back.”

Why is this an attack against Obama?

For the simple reason that we haven’t had “broadly shared prosperity” during the Obama years.

…a far-left Democrat has been president for the past seven years. The economic stagnation that Clinton critiqued is Obama’s. In Obama’s first or second year, Clinton might have managed to blame Baby Bush’s massive spending, red tape, and nationalizations for America’s economic woes and middle-class anxieties. But in Obama’s seventh year, this excuse has rusted. Obamanomics has narrowed prosperity, dismantled the middle class, and snatched the American Dream from America’s kids.

Deroy then compared the economic recovery America enjoyed under Reagan with the far-less-robust recovery taking place today.

In the 25 quarters since the Great Recession, Obama’s average, inflation-adjusted annual Gross Domestic Product growth has limped ahead at 2.2 percent. During Ronald Reagan’s equivalent interval, which began in the fourth quarter of 1982, such GDP growth galloped at 4.8 percent. …The total-output gap between Reagan and Obama is a whopping $10.6 trillion. …Under Reagan, private-sector jobs expanded 23.6 percent, versus the average recovery’s 17.0 percent, and 11.6 percent under Obama — less than half of Reagan’s performance. If Obama had equaled Reagan, America would enjoy some 12.9 million additional private-sector jobs. …Under Reagan, real after-tax income per person grew 3.1 percent, compared with 2.5 percent growth in an average recovery, and 1.2 percent under Obama. Had Obama delivered like Reagan, every American would have accumulated an extra $21,306 since June 2009.

All of this analysis is music to my ears and echoes some of the points I’ve made when comparing Reagan and Obama.

But I want to augment this analysis by adding Bill Clinton to the mix.

And I want to make this addition because there’s a very strong case to be made that we actually had fairly good policy during his tenure. Economic freedom increased because the one significantly bad piece of policy (the failed 1993 tax hike) was more than offset by lots of good policy.

Here’s a chart I put together showing the pro-market policies that were adopted during the Clinton years along with the one bad policy. Seems like a slam dunk.

At this point, I should acknowledge that none of this means that Bill Clinton deserves credit for the good policies. Most of the good reforms – such as 1990s spending restraint – were adopted in spite of what he wanted.

But at least he allowed those policies to go through. Unlike Obama, he was willing to be practical.

In any event, what matters is that we had better policy under Clinton than under Obama. And that’s why it’s useful to compare economic performance during those periods.

The Minneapolis Federal Reserve has a very interesting and useful webpage (at least to wonks) that allows users to compare various recoveries on the basis of GDP growth and job creation.

I’ve used this data to compare Reagan and Obama, so now let’s add the Clinton years to the mix. The following two charts from the Minneapolis Fed show the post-1981 recovery in blue, the post-1990 recovery in yellow, and the post-2007 recovery in red.

These numbers don’t match up exactly with when presidents took office, but it’s nonetheless apparent that we got the best performance under Reagan, and also that Clinton was much better than Obama.

Here’s the chart with the job numbers.

And here are the numbers for gross domestic product.

Here’s the bottom line.

Party labels don’t matter. Policy is what counts.

When the burden of government expands, like we saw with Jimmy Carter and Barack Obama on the Democrat side, but also with Richard Nixon, George H.W. Bush, and George W. Bush on the Republican side, the economy under-performs.

Similarly, when the burden of government is reduced, like we saw under Bill Clinton and Ronald Reagan, the economy enjoys relative prosperity.

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The White House Swings (and Misses) on Gun Control…for the Umpteenth Time

In my analysis of the best and worst developments of 2015, I suggested that growing resistance to gun control is something we should celebrate.

Particularly since we have a President who is relentless (though fortunately ineffective) in launching ideological attacks on the Second Amendment.

Speaking of which, Obama staged a press event yesterday and announced his latest effort to make it harder for law-abiding people to protect themselves.

John Lott is the go-to person on these issues. Here’s some of what he wrote for National Review, starting with the fact that Obama (gee, what a surprise) is disregarding the law.

…current law is very clear. Only federally licensed gun dealers are required to conduct background checks, and only sellers whose “principal objective of livelihood and profit [is] the repetitive purchase and resale of firearms” are required to obtain a federal license. Anyone “who sells all or part of his personal collection of firearms” is specifically exempted from the licensing requirement. But that doesn’t matter to Obama, whose actions today will require many sellers to get a license if they sell even a single gun.

John also explains that background checks are not a panacea.

The current federal background-check system is a mess. …Hillary Clinton claimed that, “Since [the Brady Act] was passed, more than 2 million prohibited purchases have been prevented.” In reality, there were over 2 million “initial denials”… In 2010, the Department of Justice’s annual report on the National Instant Criminal Background Check System (NICS) showed that 94 percent of “initial denials” were dropped after the first internal fact check. A 2004 review by Congress found that another two percent were dropped when the cases were sent out to BATFE field offices. Many more cases were dropped during the three remaining stages of review. …If a private company’s criminal-background checks on employees failed at anything close to the same rate, they’d be sued out of business in a heartbeat.

And what about the notion of requiring sellers retain information on gun buyers?

Well, this back-door form of registration doesn’t provide seem very helpful in helping the fight against real crime.

Police can’t seem to point to a single instance in which gun registration has helped them solve a crime. During a recent deposition, D.C. police chief Cathy Lanier said she couldn’t “recall any specific instance where registration records were used to determine who committed a crime.” Police in Hawaii, Canada, and other places have made similar admissions.

Lott explains in the article that the system could be improved in ways that would make it harder for the wrong people to get guns, but he says that productive changes aren’t feasible because of the left’s real motive.

…their real aim is to reduce gun ownership, not to stop crime.

This is spot on. Indeed, I don’t trust the left of climate issues for similar reasons. What our statist friends say and what they really want are two different things.

Moreover, their proposed “solutions” don’t even solve the problems that they say they want to address.

Remember the video from last month, which featured a White House official admitting that none of Obama’s proposed policies would have stopped a single mass shooter from getting weapons, and that not a single mass shooter has been on the Administration’s no-fly list or terrorist watch list?

Well, in the words of Yogi Berra, it’s deja vu all over again. These blurbs from an Associated Press story tell us everything we need to know about the President’s latest proposals.

The gun control measures a tearful President Barack Obama announced Tuesday would not have prevented the slaughters of 20 first-graders at Sandy Hook Elementary School in Newtown, Connecticut, or 14 county workers at a holiday party in San Bernardino, California. …The shooters at Sandy Hook and San Bernardino used weapons bought by others, shielding them from background checks. In other cases, the shooters legally bought guns. …In Aurora, Colorado, and at the Navy Yard in Washington, D.C., men undergoing mental health treatment were cleared to buy weapons because federal background checks looked to criminal histories and court-ordered commitments for signs of mental illness.

Since we’re on this topic, here’s my recent interview on gun control.

As you can see, I’m doing a bit of a victory dance. It’s great that the American people won’t go along with the left, even if it means they have to engage in civil disobedience.

By the way, I goofed in discussing the poll on banning so-called assault weapons. The actual margin of opposition is six points (50-44) rather than fourteen points (54-40). Though I guess transposing a couple of numbers is trivial compared to the $16 trillion mistake I once made in an interview.

In my humble opinion, the most important point from the interview is that (as Mark Steyn explained in amusing fashion) you can’t have effective and competent government unless it’s also small government.

Let’s close with some humor. Here’s the NRA’s satirical take on Hillary Clinton trying to put together her resolutions for 2016 (h/t: Washington Examiner).

And here are some excerpts from an article from The Onion about a new gun-sharing program for the people of Chicago.

Touting the program’s convenience and affordability, Chicago officials unveiled Monday the city’s new gun-sharing service, “QuikShot,” which allows individuals to check out a loaded firearm for short periods of time. The municipal initiative, through which users can rent semiautomatic pistols, shotguns, rifles, and submachine guns at more than 250 self-service kiosks, has reportedly been designed to make firepower easily available to residents and tourists alike nearly everywhere within the city limits. …Users, however, are reportedly expected to provide their own protective Kevlar body armor.

Too bad it’s not really true.

If it was, maybe there wouldn’t be this giant gap between Chicago and Houston.

P.S. If you want common sense on guns, most cops have the right idea, as do some police chiefs.

P.P.S. And even some leftists, as you can see here, here, and here.

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The Regulatory State Grew to Record Levels in 2015, and the Red-Tape Burden Will Get even Worse in 2016

For those of us worried (with good reason!) about excessive regulation and red tape, 2015 was not a good year.

As you can see from the headline of this story in the Washington Examiner, federal bureaucrats were very busy imposing new mandates and restrictions on the economy. Indeed, President Obama now has the cumulative record for red tape.

That’s obviously good news for compliance bureaucrats, lawyers, and others who get fat and happy because of the regulatory state. But it can’t be good for growth and competitiveness to have all that sand thrown into the gears of the economy.

And to put the numbers in context, here’s a chart from the folks at the Competitive Enterprise Institute. On the left side, it shows the biggest red-tape year for every President before Obama. And then on the right side, it shows how Obama is consistently meeting or exceeding prior records.

All this bad news might be somewhat bearable if there was some reason to think we were turning a corner and that the worst was behind us.

Unfortunately, that’s not the case. Let’s now share another headline, this time from a report in The Hill.

The bottom line is that the Obama Administration is openly excited about the prospect of building upon the President’s dubious red-tape record.

Though I guess we shouldn’t be surprised. If you read the story, you’ll see that next year will be a perfect storm of pro-regulation bureaucrats being egged on by Obama’s regulatory appointees who see 2016 as their last chance to impose additional red tape on the economy’s productive sector.

But the private sector will become less dynamic as we become more like Greece. Here are some very depressing bits of information I’ve shared in the past.

• Americans spend 8.8 billion hours every year filling out government forms.
• The economy-wide cost of regulation is now $1.75 trillion.
• For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.
• A World Bank study determined that moving from heavy regulation to light regulation “can increase a country’s average annual GDP per capita growth by 2.3 percentage points.”

P.S. While the regulatory burden in the United States is stifling, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

P.P.S. Though I suspect America wins the prize for worst regulatory agency and most despicable regulatory practice.

P.P.P.S. Here’s what would happen if Noah tried to comply with today’s level of red tape when building an ark.

P.P.P.P.S. Just in case you think regulation is “merely” a cost imposed on businesses, don’t forget that bureaucratic red tape is the reason we’re now forced to use inferior light bulbs, substandard toilets, second-rate dishwashers, and inadequate washing machines.

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