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Archive for the ‘Privatization’ Category

Whenever someone accuses me of being too dogmatically opposed to government, I tell them that I only got 94 out of 160 possible points when I took Professor Bryan Caplan’s Libertarian Purity Quiz.

That’s barely 70 percent, which makes it seem like I’m some sort of squishy moderate even though I have a nice list of government departments and agencies I want to abolish.

And whenever someone accuses me of being insufficiently opposed to government, I point out that my score on Professor Caplan’s quiz is good enough – albeit just barely – for me to be categorized as a hard-core libertarian.

So does this mean I’m a principled moderate, if such a creature even exists?

Actually, it simply means that I’m not an “anarcho-capitalist,” which is the term for people who think all government can be abolished (sort of like the “more libertarian than thou” character in this amusing list of the 24 types of libertarians). If you want to get a perfect score on the Libertarian Purity Quiz, you have to favor abolishing the Department of Defense, the court system, and every other vestige of government.

That being said, I like that there are people pushing the envelope for more liberty. And I tell my anarcho-capitalist friends that we should all work together to get rid of 90 percent of government and then we can quibble over the rest.

Moreover, when I spoke earlier this year at the conference celebrating the 2nd-anniversary of Liberland, I pointed out that there are plenty of examples of how the private sector successfully carries out functions that most people think can only be handled by government.

Which leads me to the focus of today’s column. The U.K.-based Guardian has a fascinating story about a very successful Nigerian church.

The Redeemed Christian Church of God’s international headquarters in Ogun state has been transformed from a mere megachurch to an entire neighbourhood, with departments anticipating its members’ every practical as well as spiritual need. A 25-megawatt power plant with gas piped in from the Nigerian capital serves the 5,000 private homes on site, 500 of them built by the church’s construction company. New housing estates are springing up every few months where thick palm forests grew just a few years ago.

To most people, this story is probably interesting because of what it says about Nigeria and religion.

But since I’m a wonky libertarian, what grabbed my attention was the fact that the church – for all intents and purposes – was building an anarcho-capitalist society.

Education is provided, from creche to university level. The Redemption Camp health centre has an emergency unit and a maternity ward. …“If you wait for the government, it won’t get done,” says Olubiyi. So the camp relies on the government for very little – it builds its own roads, collects its own rubbish, and organises its own sewerage systems. And being well out of Lagos, like the other megachurches’ camps, means that it has little to do with municipal authorities. …according to the head of the power plant, the government sends the technicians running its own stations to learn from them. …the camp’s security is mostly provided by its small army of private guards in blue uniforms.

To be sure, it’s not a purely anarcho-capitalist society. The Nigerian government still has ultimate power to enforce laws.

But from a practical, day-to-day perspective, the church has set up a private city governed by private contract and voluntary cooperation. Sort of a Nigerian version of Galt’s Gulch.

And it’s definitely worth pointing out that it is far more successful than traditional Nigerian cities (and it sounds like it works better than many American cities!).

P.S. Anarcho-capitalism is susceptible to satire, as you can see from this clever video about Somalia and this ad for libertarian breakfast cereal.

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My favorite anti-libertarian video is the one based on the notion that Somalia is a libertarian paradise. Since no libertarian has ever pointed to that country as a role model, the underlying premise is a bit silly (I’ve written something semi-favorable about Somaliland, but that’s a different place). However, that doesn’t change the fact that the video is well produced and rather amusing.

It’s now time to share another amusing video with a bad message. It’s not targeting libertarians directly, but it’s mocking an idea that’s being promoted by libertarians such as my colleague Chris Edwards. The video shows a pair of English comedians doing a mock interview back in the 1990s on privatizing the U.K.’s air traffic control system.

Putting millions of passengers at the mercy of a for-profit company? Seems laughably absurd, right?

Except it actually happened. Not only in the United Kingdom, but also in Canada. So advocates of privatization actually got the last laugh.

And we may see similar progress in the United States. Remarkably, even the Washington Post is supporting this reform.

The United States can and should learn from the experience of other Western democracies… Take the prosaic but crucial function of air traffic control. In the United States, that is still a job for big government: specifically, the Federal Aviation Administration. Overseas, however, countries are turning away from this statist model. Canada spun off its system, Nav Canada, in 1996, to a private entity funded by user fees. Britain privatized in 2000. Australia and New Zealand are also part of the movement; ditto Germany and Switzerland… In all of these countries, safety and innovation have stayed the same or improved, which is not surprising.

The editorial urges something similar for America.

A new corporation, funded by charges on the system’s various users, would manage flights and implement the long-stalled modernization. The FAA would still ensure safety, a regulatory job it already does remarkably well and might do even better if it were free to focus on that exclusively. Major players in the industry would share governance of the new entity, working out their differences within its boardroom rather than through the costlier and more conflictual method of lobbying Congress, as they do now.

Wow, the Washington Post is pointing out that a leaner government with fewer responsibilities would be more effective. I hope in the future they apply that lesson on a consistent basis.

Let’s close with a reference to another bit of anti-libertarian humor. Last year, I shared an image showing a satirical box of libertarian cereal, which I freely admitted was very amusing. But I then made the obvious point that private companies have zero incentive to harm or kill their customers.

Moreover, there’s even a system of mutually reinforcing private regulation that further discourages bad or sloppy behavior by companies.

Sot the bottom line is that there are greater incentives for safety with for-profit firms than there are with governments, where it’s just about impossible to fire someone for doing a bad job.

P.S. Since I’m a fiscal wonk, I’ll confess that I also want to privatize air traffic control because I’m still irked that the FAA tried to deliberately and unnecessarily inconvenience travelers during the 2013 sequester. Sort of like the jerks at the National Park Service, who did something similar that year during the partial government shutdown (though at least we got some good humor out of that).

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I almost feel sorry for my leftist friends. Whenever there’s a story about a crazed shooter, they invariably speculate that it’s someone affiliated with the Tea Party. So they must be sad when it turns out to be a random nut or in some cases a leftist.

Similarly, when the news broke a few days ago about the Amtrak derailment, they instantly decided that the crash was the result of inadequate handouts from Washington. So imagine how forlorn they must be since it turns out the bureaucrat in charge of the train was traveling at about twice the appropriate speed.

But let’s set aside the tender feelings of our statist buddies and look to see whether there are any policy lessons to learn from the recent Amtrak tragedy.

Writing for National Review, Kevin Williamson makes a key point that Amtrak, like other parts of government, is first and foremost focused on maximizing the amount of money that can be extracted from taxpayers.

…everything from the stimulus bill to regular appropriations has spent billions of dollars on Amtrak, and Amtrak still failed to install the speed-control system that was supposed to be completed this year — a system that the NTSB and others believe would have prevented this accident. So, the “investments” in safety systems have produced no safety system. Where does Amtrak spend its money? Almost every dime of ticket revenue is spent on personnel — salaries, benefits, bonuses, etc.  Amtrak can’t be bothered to finish up a safety system on time. But did Amtrak CEO Joseph Boardman ever miss a nickel of his $350,000-a-year salary? No. Did Amtrak fail to pay employee bonuses? No—in fact, it paid bonuses to people who weren’t even eligible for them, and then refused to rescind them once it was pointed out that they were unauthorized. So Amtrak took care of Amtrak’s priorities, just like every other government agency. But Amtrak’s priorities are not its customers’ priorities.

In other words, the culture at Amtrak is to maximize goodies from government, not to maximize profits, which is the culture at a real company.

And the beneficiaries are the overpaid bureaucrats who operate Amtrak, as well as the insiders (like Joe Biden’s son) who get special appointments to Amtrak’s board of directors.

So what, then, is the solution?

As explained by Jeffrey Dorfman, an economics professor at the University of Georgia, it’s time to wean Amtrak from the public teat.

…within two days liberal politicians had seized on the occasion to demand larger subsidies for Amtrak. In fact, the events of last week show the precise opposite-Amtrak should not receive a larger subsidy, but rather should be sold off and privatized. Currently, Amtrak receives more than $1 billion in funding from Congress although it still manages to lose money. …This leads to the question of why Americans taxpayers should subsidize a rail service that only somewhere around one or two percent of Americans actually use. The clear and obvious answer is that they should not be. While Democratic leaders are calling for more federal funding, the problem is not a lack of subsidies but instead that Amtrak’s leadership is divided between serving its customers and serving the political benefactors who provide it with about $1.4 billion per year. If Amtrak was privatized, it could focus solely on serving its customers. If those customers were concerned with safety, then Amtrak would prioritize safety improvements because that would be a necessary step to staying in business.

Moreover, Amtrak would have the incentive to behave rationally if it wasn’t sponging off taxpayers.

If sold for a fairly low valuation for a railroad, Amtrak would sell for around $6.5 to $7 billion. …the federal government would save the $1.4 billion each year that it has been providing to Amtrak. After privatization, Amtrak will know that federal government subsidies are not available to it and will focus on serving its customers and turning a profit. That may mean that some routes are discontinued or continue operating with fewer scheduled trains. At the same time, some routes, such as those in the northeast corridor, may see an increase in the quality and frequency of service as Amtrak responds to the level of consumer demand in the free market.

Notwithstanding the recent accident, trains actually are very safe. And in the absence of government meddling, a private rail company would have the right incentives to produce the correct amount of investments in safety.

Train travel is already ten times safer than driving in terms of deaths per mile traveled. It is possible that riders do not want to pay more for train tickets in exchange for safety improvements. After all, Amtrak is actually ahead of many private railroads in installing the positive train control safety systems. However, if riders demand it, a private, profit-oriented railroad will provide it.

P.S. Here’s a personal story to give you a sense of Amtrak’s misguided culture.

P.P.S. The good news, for what it’s worth, is that Amtrak is a bargain for taxpayers compared to the rail boondoggle taking place in California. And I guess we should be happy that we don’t have the Chinese version of Amtrak.

P.P.P.S. Don’t carry a lot of cash if you’re a young black male and riding Amtrak.

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No, this post is not about that kind of fantasy.

Instead, we’re dealing strictly with public policy and specifically addressing whether the libertarian agenda is unrealistic.

This is because when I talk to people about libertarianism, they often will say something mildly supportive such as: “I like the idea of getting government out of my wallet and out of my bedroom.”

But then the other shoe drops and they say something skeptical such as: “But you folks are too idealistic in thinking the private sector can do everything.”

If you ask them to elaborate why libertarian ideas are fantasies, you’ll usually hear comments such as:

“Libertarians are crazy to think that we can replace Social Security with personal retirement accounts.” Apparently they’re unaware that dozens of nations including Australia and Chile have very successful private systems.

“Libertarians are silly to think that money could be handled by the private sector.” Apparently they’re unaware that paper money was a creation of the private marketplace and that competitive currencies worked very well in many nations until they were banned by governments.

“Libertarians are naive to think the mail could be delivered in the absence of a government monopoly.” Apparently they’re unaware that many nations such as the United Kingdom and Germany have shifted to competitive private mail delivery.

 “Libertarians are foolish to think that the private sector could build and maintain roads.” Apparently they’re unaware of what I’m going to write about today.

It turns out that the private sector can build roads. And a great example happened earlier this year on the other side of the Atlantic Ocean. Here are some passages from a story out of the United Kingdom.

A grandfather sick of roadworks near his home defied his council and built his own toll road allowing people to circumvent the disrupted section. Opened on Friday, it’s the first private toll road built since cars became a familiar sight on British roads 100 years ago.  …Mike Watts, 62, hired a crew of workmen and ploughed £150,000 of his own cash into building a 365m long bypass road in a field next to the closed A431. He reckons it will cost another £150,000 in upkeep costs and to pay for two 24 hour a day toll booth operators. …Father of four Mike asked his friend John Dinham if he would mind renting him the field until Christmas and hired three workmen to help build the road in just 10 days. He worked with the Highways Agency, has public liability insurance… But a spokesman for the council said it was not happy about the bold build.

Wow, talk about the private sector coming to the rescue. Two things jump out from that story. First, it took only 10 days and £150,000 to build the road. If the government did it, it would take 20 times as long and cost 30 times as much.

The other noteworthy part of the story is that the local government isn’t happy. Well, of course not. Mr. Watts showed them up.

Some of you may be thinking this is a once-in-a-lifetime story and that we shouldn’t draw any lessons.

But that’s why an article by Nick Zaiac in London’s City A.M. is a must read. He cites the new toll road, but puts it in historical context.

Adams’ work falls into a long tradition of private provision of public services in order to serve some private goal. …Actions like these are not without precedent. In the American island state of Hawaii, residents and business owners gathered together in 2009 to fix a road through a state park that was vital to the area. They completed it entirely for free, with locals donating machinery, materials, and labor. In fact, the project was completed in a shockingly brief eight days. …Private roads have a long and storied history in both Britain and the US. Between 1800 and 1830, private turnpikes made up an astounding 27 per cent of all business incorporations in the US. Britain, between 1750 and 1772, had previously experienced a period of “turnpike mania”, as noted by economic historians Daniel Klein and John Majewski. Put simply, private infrastructure is by no means a new thing. It is simply the slow return to the way many roads were originally built.

Nick then explains that the private sector is making a comeback, and not just for little projects in the United Kingdom and Hawaii.

Australia stands out as one of the leaders. There are currently eight P3 projects on the market, with others in the pipeline, ranging from new rail lines and roads to hospitals. Each of these projects brings private financing into traditionally public projects, with benefits to companies, taxpayers, and, local citizens. Even better, as David Haarmeyer notes in Regulation, infrastructure projects such as those funded public private partnerships serve as good, long-term investments for investors seeking safe returns. …The traditional role of the government as infrastructure monopolist is slowly falling apart. Whether from grassroots efforts or large, complicated P3 projects such as the M6 Toll, the market is proving that it can provide infrastructure that people need, in one way or another.

John Stossel also has written on the topic and discussed modern-day examples of private sector involvement in the United States.

Heck, there are even private lanes on the Virginia side of the “beltway” that circles Washington!

So the moral of the story is that the private sector can do a lot more than people think.

In other words, libertarians may fantasize when they think of very small government. But the fantasy is not because libertarian policy is impractical. The fantasy is thinking (and hoping…and praying…and wishing) that politicians will actually do the right thing.

P.S. You want to know the best part of private roads? If they’re truly private, that means local governments wouldn’t be able to use red-light cameras and ticket traps as scams to generate revenue!

P.P.S. As I explained on Wednesday (only partially tongue in cheek), I’m willing to let the government be in charge of roads if the statists will agree to give people more personal and economic freedom in other areas. I’m not holding my breath waiting for a positive reply.

P.P.P.S. Though if government continued to have authority to build and maintain roads, that doesn’t mean Washington should play a role. The Department of Transportation should be abolished as quickly as possible.

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It’s not often that I agree with the Washington Post, but a government-run monopoly is not the best way to get mail delivered.

Moreover, it’s not often that I agree with the timid (and sometimes reprehensible) Tory-led government in the United Kingdom, but they just put the Royal Mail into the private sector. And that’s something deserving of loud applause.

Here’s a slice of the big news from the Financial Times.

The goal of privatising Royal Mail had defeated governments for 40 years. …Even prime minister Margaret Thatcher balked at the political risk of selling off a public service that carried the Queen’s head on its stamps. This time, the legislation went through parliament.

My Cato colleague, Chris Edwards, is suitably impressed.

Here’s some of what he wrote for Cato-at-Liberty.

Britain privatized its Royal Mail in 2013, proceeding with an initial public offering of shares that raised about $2.7 billion. …privatization in Britain has been hugely successful. Prime Minister Cameron should be applauded for having the guts to build on the privatization reform legacy of Thatcher, Major, and Blair. Meanwhile on this side of the pond, Republican Darrell Issa is having trouble getting his own nominally conservative party to accept even small changes to the broken government postal system.

Not surprisingly, some folks in Washington think we should move in the wrong direction by retaining the monopoly and allowing the Postal Service to enter new lines of business.

In this interview with Neil Cavuto, I explain why the Postal Service should be unleashed – but only after getting weaned from the taxpayer teat.

You’ll notice that I took the opportunity to explain that many poor people can’t afford banking services in part because government “anti-money laundering” rules impose very high costs on banks.

And since I’ve already mentioned that I have strange bedfellows at the Washington Post and UK government on the issue of postal privatization, I may as well note that the World Bank agrees with me about the poor being disadvantaged by these ill-advised financial regulations.

Let’s close with a good cartoon by Jerry Holbert.

Postal Service Cartoon

It’s not as good as his classics about Obamacare, sequestration, big government, and Patty Murray’s budget, but obviously very appropriate for today’s topic.

P.S. In there was a contest for government stupidity, the Japanese might be front runners.

No, I’m not talking about their bizarre policy of regulating coffee enemas.

Instead, I’m baffled by the notion of government-funded dating. I’m not joking. Check out these excerpts from the British press.

The Japanese government is funding matchmaking events in a desperate attempt to boost a birth rate that has halved over the past six decades. …The support of marriage – and the active encouragement of young people to settle down – is regarded by government policy-makers as a key strategy for boosting the nation’s birth rate. …Matchmaking events organised by local authorities, where young singles are introduced to one another in romantic settings, are becoming increasingly common in areas such as rural Kochi, a prefecture around 500 miles west of Tokyo.

By the way, Japan does have a severe demographic problem.

And when you mix falling birthrates and increasing longevity with a tax-and-transfer welfare state, the results are catastrophic.

But the right way to deal with that problem is with genuine entitlement reform, not another bound-to-fail government-run version of Match.com.

P.P.S. If you like making fun of foreign governments, here are some more examples.

Taxpayer-financed friends for mass murderers in Norway.

Spending 800,000 euro to collect 25,000 euro of tax in Germany.

Giving welfare handouts to foreigners in the United Kingdom.

Remember, nothing is too stupid for government.

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Do libertarians have a sense of humor?

That’s a relevant question because many people think of us as unhappy curmudgeons, or perhaps as dorky Randians.

While I think those stereotypes are unfair, I also confess that I can only think of a few examples of explicitly pro-libertarian humor.

Libertarian Jesus scolding modern statists.

This poster about confused statists.

The libertarian version of a sex fantasy.

Since I could only find three examples, does this mean libertarians are hopelessly dour and lacking in humor?

I think the answer is “no” and I think there are two reasons to justify that response. First, libertarians are always making fun of oafish and moronic government. I like to think, for instance, that my UK-vs-US government stupidity contest contains some amusing satire.

Skeptics may respond that you can mock big government without being a libertarian, and that’s a fair point.

But this gives me an opportunity to list the second reason why it’s wrong to accuse libertarians of lacking a sense of humor. Simply stated, we have the ability to appreciate anti-libertarian humor. This not only shows that we have funny bones, but it also demonstrates that we have considerable confidence about the strength of our ideas.

So with that build-up, here’s an example of anti-libertarian humor I received from a fellow traveler in Illinois.

Libertarian Fire Dept

I think you’ll agree that this can be added to our collection of anti-libertarian humor.

P.S. Since I am a dorky libertarian, I can’t resist responding to the above cartoon by noting that we actually don’t need government fire departments. The folks at the Reason Foundation have been working on this issue for decades and have a study explaining the benefits of private fire departments.

But there’s a lot more evidence. Here’s what one expert wrote in 2012 for Cato Unbound.

…my town contracts out its entire fire department to the company Rural/Metro, a pioneer in privatized fire services. Their trucks are shiny, red, and full of water, just like a “traditional” fire department’s. Their firemen train just like their municipal counterparts do in neighboring jurisdictions. They respond to fire and EMS calls just like the government-run systems do. The main differences I’ve discerned are that: (1) their logo—which otherwise looks much like other fire department logos—notes the name of the company underneath the name of the town, and (2) workers are covered under a private sector 401(k) plan, so our town is not on the hook for a massive future pension payout. Neither of these differences is relevant from a service delivery standpoint.

And an article in Capitalism Magazine the same year pointed out that privatized fire protection exists in hundreds of communities.

…nearly half of Denmark’s municipalities contract with Group 4 Falck to provide firefighting and ambulance services. In America, more than 450 communities contract with Rural/Metro Corporation for fire protection service, EMS, or both. Unlike government fire services, which focus on fire response, Rural/Metro focuses on fire prevention. A former mayor of Scottsdale, Arizona, which has used Rural/Metro for more than two decades said, “Scottsdale citizens are offered a much better balance between response and prevention than is available in most communities.”

Why are so many communities looking at private options?

Most likely, it’s because unions have conspired with government officials to push labor costs to absurd levels, as humorously depicted is this somewhat off-color video.

P.P.S. Returning to the topic of humor, I have a serious request. Can anybody provide examples of self-deprecating humor by leftists?

I don’t think statists have much self-confidence in their ideas, so they probably don’t have much ability to poke at themselves, but I imagine there must be some examples.

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In an interview with Neil Cavuto earlier this month, I mocked proponents of big government for their hysterical predictions of bad things happening under sequestration. And cartoonists had a field day making the same point (see here and here).

The White House obviously wasn’t happy about the sequester, in part because they like bigger government and also because sequestration was a big defeat for the President.

Well, now the Obama Administration sees a chance for revenge and redemption. The President’s appointees, by choosing to furlough air traffic controllers, are seeking to turn air travel into something akin to a visit to the Post Office or DMV. It’s clear that the White House hopes to recreate momentum for a tax hike as an alternative to sequestration.

But they’re not exactly being subtle.

The Wall Street Journal exposes the White House’s political motivated chicanery, starting with the very important point that the FAA’s budget – even after sequestration – is as large as it was in 2010. Yet the White House is manipulating the sequester to cause the maximum amount of inconvenience for taxpayers.

The sequester cuts about $637 million from the FAA, which is less than 4% of its $15.9 billion 2012 budget, and it limits the agency to what it spent in 2010. The White House decided to translate this 4% cut that it has the legal discretion to avoid into a 10% cut for air traffic controllers. Though controllers will be furloughed for one of every 10 working days, four of every 10 flights won’t arrive on time.

The Obama Administration is pretending that it’s merely following the law, but the WSJ editorial debunks that notion.

This is a political pose to make the sequester more disruptive. Legally speaking, the sequester applies at a more general level known as “accounts.” The air traffic account includes 15,000 controllers out of 31,000 employees. The White House could keep the controllers on duty simply by allocating more furlough days to these other non-essential workers. Instead, the FAA is even imposing the controller furlough on every airport equally, not prioritizing among the largest and busiest airports. …ever since Al Gore launched a training initiative to increase the productivity of air traffic controllers in 1998, productivity has continued to fall. A larger workforce is now in charge of a smaller workload as the number of flights has dropped by 23%.

I didn’t realize that controllers were doing less work over time, but I’m not surprised to learn that superfluous bureaucrats at the FAA are being protected.

But the WSJ doesn’t go far enough. My Cato colleague Chris Edwards has a column in the Daily Caller that outlines the inefficiency of the FAA.

The federal budget sequester is interfering with the air traffic control (ATC) system and snarling up air traffic. As usual, politicians are pointing fingers of blame at everybody but themselves. But politicians are the ones who have strapped the ATC system to the chaotic federal budget. And they’re the ones who have insisted on running ATC as a bureaucracy, rather than freeing it to become the high-tech private business that it should be. …Last year Bloomberg reported: “More than one-third of the 30 contracts critical to building a new U.S. air-traffic system are over budget and half are delayed, a government audit concluded.

Chris then takes the logical next step and says the system should be privatized. Which is exactly what happened in his home country of Canada.

To run smoothly and efficiently, our ATC system should be given independence from the government. We should privatize the system, as Canada has done very successfully. …Canada provides an excellent model for U.S. reforms. Canada’s ATC system is run by the nonprofit corporation Nav Canada, which is separate from the government. Like any private business, it raises revenues from its customers to cover its operational costs and capital investments. The company’s financial statements for 2012 show revenues and expenses of $1.2 billion, with $125 million allocated to capital expenditures. Unlike the U.S. system, Nav Canada is self-supporting and not subsidized.

I’ve already written on this topic, citing some good analysis from Canada’s Financial Post, and the evidence is overwhelming that the private system in Canada works much better than the inefficient bureaucracy we have in the United States.

Let’s close with a Michael Ramirez cartoon. The “politics” and “waste” markings are very appropriate.

FAA Sequester

Lost in this controversy, by the way, is any recognition that sequestration barely makes a dent in the federal budget. There are some small first-year cuts in a few programs, but the wasteful behemoth known as the federal government is barely nicked.

To be more specific, the net effect of the sequester is that the burden of government spending grows by $2.4 trillion over the next 10 years rather than $2.5 trillion.

So don’t pay any attention to the hyperbole and hysteria from the special interest groups in Washington. The sequester is a tiny – and desirable – step in the direction of fiscal responsibility.

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