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A couple of years ago, filled with disgust at the sleazy corruption of the federal Leviathan, I put forth a simple explanation for what happens in Washington, DC.

I call it the “First Theorem of Government,” and I think it accurately reflects the real purpose and operation of government. Except I probably should have added lobbyists and contractors. And it goes without saying (though I probably should have said it anyhow) that politicians are the main beneficiaries of this odious racket.

I think this theorem has stood the test of time. It works just as well when Republicans are in charge as it does when Democrats are in charge.

But it doesn’t describe everything.

For instance, Republicans have won landslide elections in recent years by promising that they will repeal Obamacare the moment they’re in charge. Well, now they control both Congress and the White House and their muscular rhetoric has magically transformed into anemic legislation.

This is very disappointing and perhaps I’ll share some of Michael Cannon’s work in future columns about the policy details, but today I want to focus on why GOP toughness has turned into mush.

In part, this is simply a reflection of the fact the rhetoric of politicians is always bolder than their legislation (I didn’t agree with 98 percent of what was said by Mario Cuomo, the former Governor of New York, but he was correct that “You campaign in poetry. You govern in prose.”)

But that’s just a small part of the problem. The real issue is that it’s relatively easy for GOP politicians to battle against proposed handouts and it’s very difficult to battle against existing handouts. That’s because government goodies are like a drug. Recipients quickly get hooked and they will fight much harder to preserve handouts than they will to get them in the first place.

And that’s the basic insight of the “Second Theorem of Government.”

Here’s a recent interview on FBN. The topic is the Republican reluctance to fully repeal Obamacare. I only got two soundbites, and they both occur in the first half of the discussion, but you can see why I was motivated to put forth the new theorem.

Simply stated, I’m disappointed, but I’m more resigned than agitated because this development was so sadly predictable.

And here are a couple of follow-up observations. I guess we’ll call them corollaries to the theorem.

  1. You break it, you buy it – Government intervention had screwed up the system well before Obamacare was enacted, but people now blame the 2010 law (and the Democrats who voted for it) for everything that goes wrong with healthcare. Republicans fear that all the blame will shift to them if their “Repeal and Replace” legislation is adopted.
  2. Follow the money – What’s partly driving GOP timidity is their desire not to anger many of the interest groups – such as state governments, hospitals, doctors, insurance companies, etc – who benefit from various Obamacare handouts. That’s what is motivating criticism for politicians such as Ohio’s John Kasich and Alaska’s Lisa Murkowski.
  3. Don’t throw the baby out with the bathwater – The “Cadillac Tax” is the one part of Obamacare that’s worth preserving because it will slowly cut back on the distorting tax preferences that lead to over-insurance and third-party payer. For what it’s worth, the GOP plan retains that provision, albeit postponed until 2025.
  4. The switch in time that saved…Obamacare – I’m still upset that Chief Justice John Roberts (aka, the reincarnation of the 1930s version of Justice Roberts) put politics above the Constitution by providing the decisive vote in the Supreme Court decision that upheld Obamacare. If the law had been blocked before the handouts began, we wouldn’t be in the current mess.

For these reasons (as well as other corollaries to my theorem), I’m not brimming with optimism that we’ll get real Obamacare repeal this year. Or even substantive Obamacare reform.

P.S. Now you know what I speculated many years ago that Obamacare would be a long-run victory for the left even though Democrats lost many elections because of it. I sometimes hate when I’m right.

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President Trump gave his first address to a joint session of Congress last night.

The one thing I can say with great confidence, based on applause patterns, is that it didn’t generate the same spirit of bipartisan good will as the Pope’s address back in 2015.

But let’s set aside the Republican-vs-Democrat silliness and focus on public policy.

What was good in Trump’s speech? Overall, there were nine things that seemed positive.

These are the three things that got my blood pumping.

  1. Lower corporate tax rate – Trump didn’t specifically reference the 15-percent rate he mentioned in the campaign, but he aggressively argued for a big drop in America’s punitive corporate tax rate.
  2. Obamacare repeal – The president effectively outlined how Obamacare is a disaster for taxpayers, for consumers, for the economy, and for the healthcare system.
  3. Food and Drug Administration – Trump correctly criticized the bureaucrats at the FDA for stifling medical progress. I think it’s safe to assume that bureaucracy will be better behaved for the next four years. Maybe we’ll even get rid of the milk police.

What was hopeful about Trump’s speech?

Quite a bit, actually. Here are six things that caught my attention where it’s possible that we’ll see progress.

  1. Jobs – President Trump correctly diagnosed the problem of dismal labor force participation. It remains to be seen whether the net effect of his policies is more job creation.
  2. Washington corruption – I like that he focused on trying to clean up Washington, but I don’t think a handful of restrictions that make it hard for Administration officials to become lobbyists will make a difference. You need to shrink government to “drain the swamp.”
  3. Obamacare replacement – While the repeal message was strong, the replace message was fuzzy. It seems Trump wants more of everything, but at lower cost. That’s what a free market can deliver, but I worry that’s not quite what he has in mind. In the back of my mind, I’m worried that I was right five years ago when I predicted that Obamacare would decimate the Democrats politically but nonetheless be a long-fun victory for statism.
  4. Medicaid reform – We didn’t get the necessary specifics, but the President definitely used rhetoric that suggests he is not going to be an obstacle to at least this slice of entitlement reform. I feel good about the soft prediction I made two months ago.
  5. School choice – Trump’s comments on education were very uplifting. At the very least, the White House will use the bully pulpit to promote choices for parents rather than throwing more money into a failed system. It would be great if there was some follow-up, ideally leading to the abolition of the Department of Education.
  6. High-skilled immigration – I was surprised that the President said nice things about skilled immigration. Maybe this is a positive sign for the EB-5 program and other job-creating initiatives that are designed to attract successful investors and entrepreneurs to the United States.

And here’s what was negative about Trump’s remarks.

We’ll start with the five things that left me feeling somewhat pessimistic that we’ll have bigger government when the dust settles.

  1. Transportation infrastructure – The President wants a lot of money spent on infrastructure. Fortunately, he was careful not to say that the federal government will be the sole source of the new spending. But I worry that we’ll get a bigger and more wasteful Department of Transportation at the end of the process.
  2. Border-adjustable taxation – It’s troubling that Trump recycled the myth that foreign nations discriminate against American products when they impose value-added taxes on their citizens. It may be an indication that he will sign on to the misguided “border-adjustable tax” in an otherwise pro-growth House tax plan.
  3. Veterans – Trump said he wants to take care of veterans. That’s a good idea, and the ideal solution is to abolish the Veterans Administration. I’m worried, though, Trump will simply throw good money after bad by padding the budget of a bloated and incompetent bureaucracy that rewarded itself with bonuses after putting veterans on secret waiting lists.
  4. Immigration – Notwithstanding the positive comments about skilled immigrants, his overall tone was very anti-immigration. Given that so many immigrant groups from all over the world prosper enormously in the United States (and thus generate benefits for the rest of us), it would have been better if he has a more welcoming attitude while focusing instead on restricting access to the welfare state.
  5. Pentagon blank check – President Trump gave a mixed message. He criticized the heavy cost of needless overseas interventionism, yet then urged more money for a bureaucracy-heavy Pentagon. Yet why spend even more money if there aren’t going to be any more nation building exercises?

What was really disappointing about Trump’s speech? Here’s my list of three things that were unambiguously depressing.

  1. Protectionism – The president seems determined to harm American consumers and undermine America’s economy. Let’s hope these policies don’t lead to a global trade war like in the 1930s.
  2. Childcare Entitlement – Federal subsidies have resulted in higher costs and inefficiency in health care and higher education. Trump now wants to cause the same problems in childcare. This won’t end well.
  3. Paid Parental Leave – When even columnists for the New York Times confess that this type of policy backfires on women by making them less attractive to employers, it’s bizarre that it would be endorsed by a Republican president.

So what’s the bottom line?

To be blunt, beats the heck out of me.

I wondered back during the campaign whether Trump is a big-government Republican or a small-government conservative. I contemplated the same question when he got elected. And also when he got inaugurated.

Last night’s speech left me still wondering, though it’s safe to say Trump does not share Reagan’s instinctive understanding that government is the problem rather than solution.

That doesn’t necessarily mean we’ll get bad policy over the next four years. But there’s no guarantee we’ll get good policy, either.

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As part of an otherwise very good tax reform plan, House Republicans have proposed to modify the corporate income tax so that it becomes a “destination-based cash-flow tax.”

For those not familiar with wonky inside-the-beltway tax terminology, there are three main things to understand about this proposal.

  • First, the tax rate on business would drop from 35 percent to 20 percent. This is unambiguously positive.
  • Second, it would replace depreciation with expensing, which is a very desirable change that would eliminate a very counter-productive tax on new investment outlays. This is basically what makes the plan a “cash-flow” tax.
  • Third, any income generated by exports would be exempt from tax but the 20-percent tax would be imposed on all imports. These “border-adjustable” provisions are what makes the plan a “destination-based” tax.

I’m a big fan of the first two provisions, but I’m very hostile to the third item.

I don’t like it because I worry it sets the stage for a value-added tax. I don’t like it because it is designed to undermine tax competition. I don’t like it because it has a protectionist stench and presumably violates America’s trade commitments. I don’t like it because that part of the plan only exists because politicians aren’t willing to engage in more spending restraint. And I don’t like it because politicians should try to reinvent the wheel when we already know the right way to do tax reform.

Heck, I feel like the Dr. Seuss character who lists all the ways he would not like green eggs and ham. Except I can state with complete certainty I wouldn’t change my mind if I was suddenly forced to take a bite of this new tax.

Today, I’m going to augment my economic arguments by noting that the plan also is turning into a political liability. Here are some excerpts from a news report in the Wall Street Journal about opposition in the business community.

A linchpin of the House Republicans’ tax plan, an approach called “border adjustment,” has split Republicans and fractured the business world into competing coalitions before a bill has even been drafted. …There is also global uncertainty: Other countries may retaliate, either by border-adjusting their corporate taxes or by challenging the U.S. plan at the World Trade Organization as too tilted toward American producers.

And The Hill reports that grassroots organizations also are up in arms.

Americans for Prosperity is stepping up its efforts to advocate against a proposal from House Republicans to tax imports and exempt exports, as lawmakers are increasingly raising concerns about the proposal. …AFP has hundreds of volunteers and staff who are making phone calls about the proposal. The group has about 100 meetings set up with Congress members and their staff for next week, while Congress is in recess.

Meanwhile, the Economist reports that the plan is causing uncertainty around the world.

To offset a border-adjusted tax of 20%—the rate favoured by House Republicans—the greenback would need to rise fully 25%, enough to destabilise emerging markets burdened with dollar-denominated debts. If the dollar stayed put and wages and prices rose 25% instead, the Federal Reserve would have to decide how to respond to an unprecedented surge in inflation. Why tolerate such disruption?

Holman Jenkins of the Wall Street Journal has a devastating take on the issue.

Like a European value-added tax, its cost would be deeply hidden in the price of goods, thus easily jacked up over time. Also, compared with the current tax structure, businesses would see less incentive to move abroad in search of lower taxes, eroding a useful pressure on politicians to be fiscally sane. And because the tax would alter the terms of trade, it would be expected to lead to a sharp increase in the dollar. U.S. holders of foreign assets would suffer large paper losses. Since many foreigners borrow in dollars too, a global debt crisis might follow. The tax might also violate World Trade Organization rules, inviting other countries to impose punitive taxes on U.S. exports.

Last but not least, John Tamny outlines some of the political downsides at Real Clear Markets.

…the House of Representatives…is aggressively promoting a…tax on imports. …When we get up and go to work each day, our work is what we exchange for what we don’t have, including voluminous goods and services produced for us around the world.  …Party members are proudly seeking a tax on our work. …Only the “stupid” Party could come up with something so injurious to every American, to the American economy, and to its growth-focused brand.  But that’s where we are at the moment.  The Party that attained majorities with its tax cutting reputation is aggressively seeking to shed its growth brand through the introduction of tax hikes meant to give politicians even more of what we the people produce.  If so, the majority Party can kiss its majority goodbye.  It will have earned its minority status.

For what it’s worth, I think John overstates the case against the plan. The additional revenue from border-adjustable tax provision would be used to cut taxes elsewhere. Heck, the plan is actually a significant net tax cut.

But John is right when you look at the issue through a political lens. If the DBCFT actually began to move through the legislative process, opponents would start running commercials about the “GOP scheme to impose new consumption tax on Americans.” Journalists (most of whom dislike Republicans) would have a field day publicizing reports about the “GOP plan to raise average family tax bill by hundreds of dollars.”

Such charges would be ignoring the other side of the equation, of course, but that’s how politics works.

All of which brings me back to one of my original points. We already know that the flat tax is the gold standard of tax reform. And we already know the various ways of moving the tax code in that direction.

My advice is that Republicans abandon the border-adjustable provision and focus on lowering tax rates, reducing double taxation, and cutting back on loopholes. Such ideas are economically sounder and politically safer.

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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.

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

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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Wow.

I don’t know what else to say.

Almost all the experts said Trump couldn’t win the GOP nomination. Then the expert consensus was that Trump had virtually no chance of winning the White House.

Now, for better or worse, he’s going to be America’s next President.

What about my 2016 prediction? Well, other than my guess that Michigan might go for Trump (outcome still not confirmed), I don’t look very prescient. At the very least, I missed Pennsylvania, Florida, Wisconsin, and North Carolina.

For what it’s worth, I did better with Congress. Depending on the outcome of the Senate contest in New Hampshire, my prediction for a 51-49 GOP majority may be spot on (though I generally wasn’t right about the seats that would change hands). But who cares about my prediction. It’s downright remarkable that Republicans held on to the Senate, something that seemed improbable considering that the GOP was defending more than twice as many seats as Democrats.. Moreover, the leading Tea Party-type Senators from the 2010 election – Marco Rubio, Rand Paul, Ron Johnson, and Pat Toomey – were all reelected.

And we may not know the final number for a few days, but my guess that there would be 239 House Republicans also will be very close. Again, the accuracy of my prediction is trivial compared to the fact that the GOP will have lost fewer than 10 seats when they were defending their largest majority in almost 90 years. A stunning outcome.

So what does the election mean? The political answer is that Barack Obama has been a disaster for Democrats. I joked back in 2010 that Libertarians should name him as “Man of the Year” for restoring interest in the ideas of limited Government. Republicans should turn that joke into reality since Obama turned a dominant Democrat Party (majority of senators, representatives, governors, and state legislators) into a hollow shell.

The policy answer is a bit more difficult. I’ve fretted many times that Trump doesn’t believe in economic liberty. Some folks say that doesn’t matter since House and Senate Republicans can drive the agenda. But, as indicated by this slide that I shared in several recent European speeches, I don’t think that’s realistic.

A Republican Congress almost certainly isn’t going to push policies unless they get some sort of positive signal from the White House (remember how the Bush years led to lots of statism, notwithstanding a supposedly conservative House and Senate).

The real mystery is predicting the signal Trump will send. Here’s what I hope for – and what I’m afraid of – in the next four years.

My fantasy outcome – Given his disappointing rhetoric, it’s highly unlikely that Trump will embrace comprehensive entitlement reform. It’s especially doubtful that he will touch the programs (Social Security and Medicare) that provide benefits to seniors. But it’s plausible to think he might be open to reforming the “means-tested” programs. Even if he simply decided to support the block-granting of Medicaid, that would be a big achievement. And repealing Obamacare would be great as well. He did propose a rather attractive tax plan as part of his campaign, though I didn’t get too excited since a large tax cut seemed unrealistic in the absence of a concomitant plan to limit the growth of spending. But if Trump can get one or two of the big provisions approved, most notably a lower corporate rate and death tax repeal, that would be a very positive step in the right direction. And if he actually gets serious about the “Penny Plan,” that would give him a lot more leeway for big tax cuts. Needless to say, I also hope  his protectionist campaign rhetoric doesn’t translate into actual proposals for higher taxes on trade.

My feared outcome – In his acceptance speech, Trump focused on two policies. More infrastructure spending and helping veterans. This is not a good sign. Regarding infrastructure, my nightmare scenario is that he pushes a giant stimulus-type scheme that would increase the federal government’s role in transportation. On the issue of veterans. I’m not aware of any specific plans, but my fear is that he will simply throw more money at the failed VA system. Let’s also not forget he has endorsed a higher capital gains tax on “carried interest.” And if he does decide to push protectionist legislation, that could wreak a lot of havoc. In the long run, I’m also worried that Trump will commit a “sin of omission” by leaving entitlements untouched. And if we wait another four – or eight – years to address the problem, the slow-motion train wreck may turn into an about-to-happen train wreck. Last but not least, what if Trump gets to the White House and feels that all his big plans for tax cuts and new spending aren’t feasible because the numbers don’t add up? Will he then decide that he needs a big revenue plug like a value-added tax? Sounds crazy, right, but don’t forget that Rand Paul and Ted Cruz were seduced into adding VATs to their plans, so why wouldn’t Trump be susceptible to the same mistake? A horrifying, but not implausible, scenario.

Now perhaps you understand why, in yesterday’s column, I focused on the potential silver lining of a Hillary victory. It’s because I don’t like to dwell on the potential downside of a Trump victory.

Let’s close with a quick review of the major ballot initiatives I highlighted last month.

  • The Good – The biggest slam-dunk of the night was the overwhelming 80-20 rejection of single-payer health care in Colorado. Voters in the state also rejected a tax hike on tobacco. A pro-gun control initiative in Maine is narrowly failing. In other news, a sales tax increase was defeated in Oklahoma, as was the gross receipts tax in Oregon and the carbon tax in Washington. Also, lots of state legalized pot (although voting to tax it as well).
  • The bad – Voters appear to have approved class-warfare tax hikes in Maine and California. Maine voters also hiked the minimum wage, as did voters in Colorado, and California voters approved higher cigarette taxes. Soda taxes were approved in a handful of locations.
  • The ugly – The defeat of charter school expansion in Massachusetts is a crippling blow to the hopes of poor families for a better education.

As you can see, a mixed bag. Some good results, but also some bad choices.

But this is why I like federalism. States can innovate and experiment, constrained by the fact that really crazy policies will eventually lead to California-style decline. And I’d rather have a couple of states in a death spiral rather than the entire nation.

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The bad news is that America is about to elect a statist president. But will we get Hillary’s corruption or Donald’s buffoonery?

According to RealClearPolitics, Hillary Clinton will prevail, albeit by a very narrow margin, with 272 electoral votes. They have a very close race because Trump is projected to prevail in the swing states of Florida, North Carolina, and Nevada. If you believe these numbers, Trump simply has to flip semi-competitive New Hampshire (home to thousands of free-state libertarians) and he is the next President. At which point this joke about emigration to Canada becomes reality.

According to Nate Silver, a highly regarded statistics expert, Hillary Clinton wins comfortably because she carries the swing states of Florida, North Carolina, and Nevada. That should give her 323 electoral votes, but Silver’s model is based on probabilities, so she instead is projected to get 302.4 electoral votes. For what it’s worth, Gary Johnson easily breaks the record for the Libertarian Party, but he falls just short of the 5-percent mark.

According the political betting markets, Hillary Clinton will prevail with 323 electoral votes. The people waging cash believe she will come out on top in Nevada, Florida, and North Carolina, matching Nate Silver’s projection (interestingly, Trump is seen as having a better chance in Michigan than in Nevada). All of the third-party candidates, including Gary Johnson, apparently have a 0.1 percent chance of winning.

Last but not least, we have Professor Larry Sabato’s Crystal Ball. He picks Hillary and says she will get 322 electoral votes. Sabato has the same state-by-state breakdown as Silver and the betting markets, but he projects that Trump will win one electoral vote from Maine, which (like Nebraska) allocates two votes to the statewide winner and then one vote to the winner of each congressional district. In the for-what-it’s-worth department, there are twice as many (90) vulnerable electoral votes that Democrats have to worry about compared to Republicans (43).

So what’s my prediction?

If I wanted to torture the American people by prolonging the race, I would take the RealClearPolitics prediction, shift New Hampshire to Trump and shift Maine’s second congressional district to Hillary. The net result would be a 269-269 tie and the result would be total turmoil since the election would then be decided based on skullduggery in the electoral college or a state-by-state vote in the House of Representatives.

But I don’t expect that to happen, even though it would be highly entertaining (it would make Bush-vs.-Gore in 2000 seem like a bipartisan picnic).

I’m tempted to simply recycle the prediction I put forth one month ago. I showed Hillary winning with 328 electoral votes (basically similar to the consensus above, but with Iowa going for Hillary).

But it does indeed look like Trump will prevail in Iowa, so my final prediction will move the Hawkeye State back in the GOP column.

But I don’t want to have the same guess as almost everyone else (we libertarians have a tendency to be obstreperous), so let’s mix things up. The easy adjustment would be to give one or two of the “leaning Democrat” states to Trump. But my gut instinct tells me that growing Hispanic populations in Nevada and Florida make that unlikely. And North Carolina has too many college-educated whites, as well as an increased Hispanic presence, neither of which is good news for Trump.

So I’m going to defy all the experts and give Trump an extra state from the rust belt. Let’s say Michigan, which means my final electoral prediction is a 306-232 victory for Tweedledee. Or is she Tweedledum? Whatever.

Some of my Republican friends will be disappointed by this outcome, so time to make some predictions that will make them happy. The House stays Republican in my humble opinion, with a final total of 239 seats (my one success in the business of political prognostication occurred six years ago when I was exactly right in my House prediction).

The Senate outcome is even more important and GOPers will be very happen if I am correct in predicting that Republicans will hold the Senate 51-49, which would be a remarkable achievement since they are defending more than twice as many seats as Democrats this cycle. Nonetheless, that still means they will lose three seats, and my guess is that Wisconsin, Illinois, and Pennsylvania is where Republicans incumbents will fall short.

By the way, this outcome is not too bad for libertarians and other advocates of limited government. Consider these implications.

  • Hillary will enter office widely disliked and distrusted, and the media will pay much closer attention to her misdeeds once she defeats Trump.
  • She’ll have very little opportunity to expand the burden of government since the House (and maybe the Senate) will be controlled by Republicans.
  • The 2018 mid-term elections are usually bad news for the party that controls the White House and Democrats have to defend a disproportionate number of Senate seats that cycle.
  • The GOP might nominate someone in 2020 who believes in smaller government and that candidate may sweep into office with a Republican House and a Republican Senate.
  • In 2021, genuine entitlement reform and sweeping tax reform could get enacted and Dan Mitchell could then safely retire to the Cayman Islands and introduce softball to that population.

Nice scenario, huh?

Then again, I basically made the same argument four years ago, and that didn’t turn out so well.

So if you’re done laughing at my optimistic take, here’s some meant-to-be-funny material to carry you through the day.

We’ll start with Anthony Weiner learning why it’s not a good idea to get on Hillary’s bad side (by the way, I have run into people who actually think that the Clintons have had people murdered and I always give them this column in hopes of calming them down).

And since Donald Trump is on the bad side of lots of Hispanic voters (presumably enough to give the election to Hillary), this quip by Seth Meyers is particularly (and appropriately) savage. Indeed, if Trump loses by a narrow margin and if he is capable of introspection, one wonders whether he will regret some of his rhetoric.

Last but not least, if you liked the “Mitt Romney Style” video from 2012, we can balance it with a video about Hillary, showing how the White House will operate under when pay-to-play become the modus operandi at 1600 Pennsylvania Avenue.

P.S. Don’t forget that there are several important ballot initiatives today.

Addendum: Can’t resist adding this cleverly doctored photo of Chelsea reading a bedtime story.

Though, to her credit, Chelsea isn’t associated with any bad policy ideas. The same can’t be said for Ivanka Trump.

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In just 10 days, voters will go to the polls and deal with the rather distasteful choice of Donald Trump and Hillary Clinton.

In some states, they also will have an opportunity to vote for or against various ballot initiatives and referendums.

Here are the five proposals that would do the most damage in my humble opinion.

ColoradoCare (Amendment #69) – Apparently learning nothing from what happened in Vermont, advocates of big government in Colorado have a proposal to impose a 10 percent payroll tax to finance statewide government-run healthcare. The Tax Foundation points out that, if this scheme is approved, Colorado’s score in the State Business Tax Climate index “would plummet from 16th overall to 34th,” while the Wall Street Journal opines that “California would look like the Cayman Islands by tax comparison” if Colorado voters say yes.

Oregon Gross Receipts Tax (Measure #97) – Back in 2010, presumably guided by the notion that it’s okay to steal via majoritarianism, Oregon voters approved a class-warfare tax hike on upper-income taxpayers. Now they’re about to vote on a scheme to pillage the state’s businesses with a gross receipts tax, which is sort of like a value-added tax but with no credit for taxes paid earlier in the production process, which means the burden “pyramids” as goods and services are created. The Tax Foundation warns that this levy could lead to “a 25 percent increase in the Oregon state budget” and that “Oregon’s corporate tax climate would be the worst in the nation.”

Maine Income Tax Hike (Question #2) – Voters are being asked whether to boost the state’s top income tax rate to 10.15, which would be the second-highest in the nation. According to the Tax Foundation, the Pine Tree State “would drop to 45th overall” in the State Business Tax Climate Index (down from #30) if this class-warfare scheme is enacted. The National Taxpayers Union warns that the ” tax would make the state a less competitive place in which to do business.”

Oklahoma Sales Tax Increase (Question #779) – Sales taxes don’t do as much damage, per dollar raised, as income taxes, but it’s still a foolish idea to impose a big tax hike in order to finance bigger government. And that’s what will happen if voters in the state agree to boost the state sales tax by one-percentage point. The Tax Foundation notes that “Question 779 would give the Sooner State the second highest combined state and local sales tax rate in the nation, after only Louisiana.

California Tax-Hike Extension (Proposition #55) – One of worst ballot initiatives in 2012 was California’s Proposition 30, which imposed a big, class-warfare tax hike on upper-income residents and gave the Golden State the nation’s highest income tax rate. One of the arguments in favor of Prop 30 was that the tax increase was only temporary, lasting until the end of 2018. Well, as Milton Friedman famously observed, there’s nothing so permanent as a temporary government program. And that apparently applies to “temporary” taxes as well.  Proposition #55 would extend the tax until 2030.

Unfortunately, there aren’t a lot of ballot initiatives that would move policy in the right direction. Here’s the one that probably matters most.

Massachusetts Charter Schools (Question #2) – Much to the dismay of teacher unions (and presumably the hacks at the NAACP as well), this initiative would expand charter schools. It’s remarkable that even the very left-leaning Boston Globe is embracing Question 2, opining that “the proposal would create new opportunities for the 32,000 students, predominantly black and Latino, who are now languishing on waiting lists hoping for a spot at a charter school” and that “Students in all Massachusetts charter schools gain the equivalent of 36 more days of learning per year in reading and 65 more days of learning in math.”

A related measure is Amendment #1 in Georgia.

Now let’s shift to a ballot initiative that is noteworthy, though I confess I don’t have a very strong opinion about the ideal outcome.

Washington Revenue-Neutral Carbon Tax (Initiative #732) – The bad news is that a carbon tax would be imposed. This means, according to the Tax Foundation, that the “average household would pay $225 more per year for gasoline under the proposal, and $64 more for electricity.” The good news is that the sales tax would drop by one cent and the state’s gross receipts tax would almost disappear. So is this a good deal? Part of me says no because it’s never a good idea to give politicians a new source of tax revenue. But the fact that the measure is opposed by many hard-left green groups suggests that the idea probably has some merit.

For what it’s worth, I would vote against I-732 because of concerns that it eventually will lead to a net increase in the burden of government.

Last but not least, I’ll also be following the results on initiatives dealing with marijuana and tobacco.

States Voting for Marijuana Legalization (and Taxation) – Voters in Arizona, California, Maine, Massachusetts, and Nevada will have an opportunity to fully or partly legalize marijuana. These initiatives also include buzz-kill provisions to levy hefty taxes on producers and consumers.

States Voting for Tobacco Tax Increases – Politicians in California, Colorado, Missouri, and North Dakota all hope that voters will approve tax hikes that target smokers (and, in some cases, vapers). In every case, the tax hikes will fund bigger government.

P.S. I can’t resist adding that I’m also keeping my fingers crossed that other voters in Fairfax County will join me in rejecting a scheme to add a 4 percent tax on restaurant meals. Not just because it’s a tax hike to fund bigger government, but also because the hacks in the county government are using dishonest and reprehensible arguments to push the tax.

P.P.S. I will be updating my prediction for the presidential election, and also making predictions for the House and Senate, the morning of November 8.

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