Archive for the ‘Redistribution’ Category

Federalism is the gold standard for reforming redistribution programs. This was the approach used in the very successful Clinton-era welfare reform, and it should be replicated for other means-tested programs.

The core argument is that the federal government does a very poor job of managing such programs, resulting in a maze of handouts that produce lots of fraud and dependency.

If states were in charge of such programs, by contrast, there would be lots of innovation and experimentation. This would help policy makers understand the best way of taking care of the truly destitute while helping others transition to productive and self-sufficient lives.

Today, let’s look specifically at food stamps. I’ve already explained why federalism is the right way of fixing the program.

And here are some additional reasons to support reform.

Writing for USA Today, Jim Bovard opined on the program’s glaring shortcomings – many of which were exacerbated by the Obama Administration’s efforts to expand dependency.

Why did the food stamp program spiral out of control? The Obama administration believed that maximizing handouts would maximize prosperity… So the feds bankrolled massive recruiting campaigns to sway people to abandon self-reliance. A North Carolina social services agency won a USDA “Hunger Champions Award” for attacking “mountain pride” as a reason not to accept government handouts. In Alabama, people received fliers proclaiming: “Be a patriot. Bring your food stamp money home.” The state of Florida paid individual recruiters to sign up at least 150 new food stamp recipients per month. …enrollment also skyrocketed after Obama effectively suspended the three-month limit for able-bodied adults without dependents to collect food stamps. From 2008 to 2010, the number of able-bodied recipients doubled.

Jim points out several reasons why the program is bad for the economy and bad for poor people.

A 2012 Journal of Public Economics study concluded that receiving food stamps sharply reduces work hours by single mothers. …state governments have little or no incentive to police the program because losses from fraud or waste don’t come out of state budgets. …the program is a dietary disaster. Walter Willett, chair of Harvard University’s Department of Nutrition, observed in 2015, “We’ve analyzed what (food stamp) participants are eating and it’s horrible food. It’s a diet designed to produce obesity and diabetes.” A 2017 study published in BMC Public Health found that food stamp recipients were twice as likely to be obese as eligible non-recipients. …A 2016 USDA report revealed that soft drinks and other sweetened beverages are the most common purchase in food stamp households, accounting for almost 10% of monthly expenditures. “Desserts, salty snacks, candy and sugar” account for another 10% of food stamp expenditures.

And it’s definitely bad for taxpayers. In a column for the Wall Street Journal, Kristina Rasmussen explained how rich people are able to bilk the system.

Consider the food stamp program’s longstanding policy of “broad-based categorical eligibility.” You probably assume that food stamps go to poor people only. But this policy, which the U.S. Department of Agriculture instituted during the Clinton administration, allows state food-stamp programs to grant benefits to anyone who has moderately low wage income, regardless of net worth. A family with a seven-figure bank account can be eligible for food stamps. That’s how lottery winners—including actual millionaires—wind up getting food stamps. In 2012 Amanda Clayton of Detroit was revealed to be receiving $200 in monthly food aid despite having won $1 million the year before. “I feel that it’s OK because I have no income,” she said, “and I have bills to pay. I have two houses.” In 2011 Leroy Fick of Bay County, Mich., was found to be receiving food assistance despite having taken home $850,000 in lottery winnings the previous year. …more than 30 states continue to have no asset limits. All you need to collect food aid is two things: an income below a multiple of the poverty line, ranging from 130% to 200%; and eligibility for some sort of benefit funded by Temporary Assistance for Needy Families (TANF), the main welfare program for single parents. And there’s the “one weird trick.” The state spends TANF dollars to print a welfare brochure. The brochure itself is defined as a “benefit,” which everybody is “eligible” to receive, thereby meeting the USDA requirement. Of the 47 million Americans who received food stamps in 2014, some four million got them under “broad-based categorical eligibility”—most because their wealth would have made them ineligible otherwise.

The good news is that the White House wants to reform the scandal-plagued program.

The bad news is that Trump and his people have chosen paternalism rather than federalism.

Here’s what is in the Administration’s budget (scroll to page 128).

The Budget would also create a new approach to nutrition assistance that combines traditional SNAP benefits with U.S. Department of Agriculture Foods provided directly to households. This cost-effective approach supports American agriculture, prevents certain types of program abuse, provides state flexibility in delivering food benefits, and ensures the nutritional value of the benefits provided. …Under the proposal, households receiving $90 or more per month in SNAP benefits will receive a portion of their benefits in the form of a USDA Foods package, which would include items such as shelf-stable milk, ready to eat cereals, pasta, peanut butter, beans and canned fruit, vegetables, and meat, poultry or fish. …This cost-effective approach will generate significant savings to taxpayers with no loss in food benefits to participants.

I can understand that people don’t like it when food stamp recipients are buying junk food. Or luxury items.

And I can also understand the desire to make dependency somewhat discomforting.

But I have zero faith in the federal government’s ability to send food boxes to people every month and somehow save money and avoid extra bureaucracy.

What’s frustrating about the plan in Trump’s budget is that they actually proposed a semi-decent policy of partial federalism last year. So I view this as a step in the wrong direction.

By the way, the fact that I don’t like the plan doesn’t mean I agree with some of the leftist critics. As this “perplexed meme” illustrates, the folks who correctly mock the White House’s proposal are also the same ones who want the government to have massive powers over matters that are far more complex than delivering food.

While the budget plan takes the wrong approach, the White House has done something good via the regulatory process by giving states more flexibility for work requirements.

Kansas, Maine, Wisconsin, and Alabama have achieved good results already, and now the same thing is happening in Georgia, as noted by PJ Media.

Thousands of Georgia residents who depend on food stamps are losing their benefits because they have failed to meet the state’s new requirements that force the able-bodied without children to find jobs. …“The greater good is people being employed, being productive and contributing to the state,” Bobby Cagle, director of the state Department of Family and Children Services, said. …State Rep. Greg Morris (R) said the fact that thousands of people have lost their benefits only showed the magnitude of the problem of welfare fraud in Georgia. He said the new mandate is working. “This is about protecting taxpayer dollars from abuse, and taking people off the cycle of dependency,” Morris said. However, Benita Dodd, vice president of the conservative Georgia Public Policy Foundation, wrote that saving taxpayer dollars was not the program’s ultimate goal. “The goal must be to focus aid on those who truly need help and restore the dignity of work to able-bodied adults,” Dodd wrote. “Reducing dependency and promoting economic opportunity help end the cycle of poverty, reinforce the temporary nature of assistance and encourage personal responsibility.”

The bottom line is that I don’t know how much work should be required, or what kind. I also don’t know whether the idea of direct food delivery in Trump’s budget is necessarily a bad idea.

Which is why I want decentralization of the program. Let states try different approaches and then learn from each other. That’s good for taxpayers and good for poor people.

Which is basically what I said in this interview more than six years ago.

P.S. Here’s a map showing which states (as of a few years ago) had the highest rate of food stamp dependency.

P.P.S. And here’s a table showing which states have the highest levels of food stamp dependency relative to the eligible population.

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Writing a column every day is a recipe for making an occasional mistake.

Sometimes the errors are minor, such as when I put Tucson in New Mexico rather than Arizona.

And sometimes they are less trivial, such as when I mischaracterized subsidies for the Postal Service or when I incorrectly criticized the Committee for a Responsible Federal Budget.

In an event, I always try to acknowledge and fix my mistakes.

And that’s why I want to write today about Oxfam. Early last year, I wrote a column criticizing the group’s statist orientation, asserting in my title that the group was a leftist joke instead of a real charity.

Time to correct the record. But I want to begin by noting that my title was only partly wrong. Oxfam is very much a left-wing organization. In prior columns, I’ve shared critiques of the group’s statist ideology from Tim Carney, Marian Tupy, and Tony Travers.

And before I get to the part about fixing my mistake, I want to augment this list by sharing the views of two more experts. We’ll start with some excerpts from a column in the Wall Street Journal by David Henderson.

Oxfam recently published a 76-page report, “Reward Work, Not Wealth,” that advocates taxing the rich to reduce inequality and help the poor. …There are two ways to close the gap. The first is to concentrate on making the poor better off. Mostly that has happened, thanks to liberalized international trade and reduced costs for shipping goods. Just as Walmart and Amazon have cut costs for Americans, the introduction of container shipping crushed transportation costs for the world. The second way to reduce inequality is to make the rich worse off.

Needless to say, Oxfam prefer the approach that gives more power and money to government.

Any guess which method Oxfam’s report emphasizes? “Governments should use regulation and taxation to radically reduce levels of extreme wealth,” the authors conclude. …The document’s title, “Reward Work, Not Wealth,” is strange: Wealth is one of the main rewards for productive work. High taxes on wealth and the wealthy reduce the incentive to produce.

And Oxfam, to its credit, understands that confiscatory taxes will require a global tax cartel.

…the report…effectively advocates…the creation of a tax cartel. Since capital is extremely mobile and will go where it is lightly taxed—witness the corporate “inversions” of American companies—the report suggests “a new generation of international tax reforms.” Negotiating tax rates would take place under the aegis of “a new global tax body that ensures all countries participate on an equal footing.”

Reading Henderson’s column, we have additional confirmation that Oxfam is a run-of-the-mill statist organization that myopically believes in class warfare.

So you might think the group is no different that other leftists groups such as the United Nations or the Organization for Economic Cooperation and Development. Or no different than politicians such as Barack Obama or Hillary Clinton.

But Oxfam also has a reputation for beclowning itself with shoddy analysis.

Johan Norberg mocked the group’s ideology-over-results approach when he noted that Oxfam is distressed about an era of “neoliberalism” in the world (meaning, in this case, the European definition of pro-market classical liberalism), yet that’s also the period of time when the poor enjoyed huge gains.

For what it’s worth, I wrote a study 17 years ago debunking some of Oxfam’s sloppy work.

And here’s some of what Tim Worstall just wrote for the U.K.’s Adam Smith Institute.

Buried in Oxfam’s latest report about how disastrously unequal the world is we’ve got an assumption which is so breathtakingly foolish as to kill off any belief in the sense or sensibility of the organisation’s mindset. They’re trying to insist that the minimum wage in a place should be very much higher than GDP per capita in that same place. …the garment trade in Bangladesh…minimum wage there is…5,000 taka a month, or £50. …Yes, a low sum and most assuredly we’d all like it to be much higher. But Oxfam’s claim is that this should be a living wage of more like £250 a month (perhaps $250). Something which simply cannot happen. GDP per capita in Bangladesh is some $1,500 a year or so. We cannot have a minimum wage twice that. This would be the same claim as insisting that the UK minimum wage should be $80,000 a year (say, £60,000). …It’s a demand based upon the most aggressively stupid misunderstanding of what ails Bangladesh, isn’t it? ……to get this so wrong seriously calls into doubt Oxfam’s right to anything more than a contemptuous sneer. …Sorry folks, but Oxfam is deluded.

Tim concludes with some very wise words.

Bangladesh’s problem is not global inequality, the thing Oxfam is whining about, it’s Bangladesh’s poverty. …The cure for poverty is economic growth, the very thing which has reduced that global absolute poverty from 40% of all humans to under 10% in just these past three decades of that very neoliberal globalisation.

Now it’s finally time for my correction. When I wrote last year that Oxfam was “not a real charity,” I was merely implying that the group was a bad charity since it advocated policies that hurt poor people.

But thanks to new revelations about Oxfam’s involvement in horrific sex-crimes scandals, I’ve learned it doesn’t deserved to be called a charity of any kind. Check out these excerpts from a CNN report.

Oxfam’s deputy chief executive has resigned amid a growing sex crimes scandal involving the organization’s aid workers in Haiti and Chad. …Oxfam announced the resignation after a meeting with UK government officials Monday, at which it had fought to keep millions of pounds in public funding. …Oxfam received about £32 million (about $44 million) from the government last financial year, according to public records.

And the money from British taxpayers is just the tip of the iceberg.

Here’s a shocking bit of information from the conclusion of  David Henderson’s column.

Oxfam’s annual budget exceeds $1 billion, and it gets almost half of that from governments and the United Nations. So maybe it’s time for a new name. Oxgov.

Almost half of its budget from taxpayers?!? At best, that makes them a government contractor rather than a charity.

I’ll conclude with two points.

  • First, I think Oxfam should lose public funding. But not because some of its employees engaged in sexual predation. Yes, that’s bad, but I certainly don’t think sex abuse was ever part of the organization’s mission. Instead, it should lose funding because taxpayer money should not go to leftist organizations that advocate for bigger government (the same argument I use, by the way, when urging an end to OECD handouts).
  • Second, instead of telling people that “Oxfam is a letist joke rather than a real charity,” I’ll have to changes the second part of the sentence. Maybe “Oxfam is a leftist joke and it mooches from taxpayers.” I’m not sure that rolls off the tongue gracefully, so I’m open to other suggestions.

P.S. You probably won’t be surprised to learn that the International Monetary Fund partners with Oxfam. I guess the old saying is right that birds of feather flock together.

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Back in 2014, I shared a report that looked at the growth of redistribution spending in developed nations.

That bad news in the story was that the welfare state was expanding at a rapid pace in the United States. The good news is that the overall fiscal burden of those programs was still comparatively low. At least compared to other industrialized countries (though depressingly high by historical standards).

I specifically noted that Switzerland deserved a lot of praise because redistribution spending was not only relatively modest, but that it also was growing at a slow rate. Yet another sign it truly is the “sensible country.”

But I also expressed admiration for Canada.

Canada deserves honorable mention. It has the second-lowest overall burden of welfare spending, and it had the sixth-best performance in controlling spending since 2000. Welfare outlays in our northern neighbor grew by 10 percent since 2000, barely one-fourth as fast as the American increase during the reckless Bush-Obama years.

But I didn’t try to explain why Canada had good numbers.

Now it’s time to rectify that oversight. I went to the University of Texas-Arlington last week to give a speech and had the pleasure of meeting Professor Todd Gabel. Originally from Canada, Professor Gabel has written extensively on Canadian welfare policy and he gave me a basic explanation of what happened in his home country.

I asked him to share some of his academic research and he sent me several publications, including two academic studies he co-authored with Nathan Berg from the University of Otago.

Here are some excerpts from their 2015 study published in the Canadian Journal of Economics. Gabel and Berg explain welfare reform in Canada and look at which policies were most successful.

During the 1990s and 2000s, Canada’s social assistance (SA) system transitioned from a relatively centralized program with federal administrative controls to a decentralized mix of programs in which provinces had considerable discretion to undertake new policies. This transition led to substantially different SA programs across provinces and years… Some provincial governments experimented aggressively with new policy tools aimed at reducing SA participation. Others did not. In different years and by different amounts, nearly all provinces reduced SA benefit levels and tightened eligibility requirements.

By the way, the SA program in Canada is basically a more generous version of the Temporary Assistance to Needy Families (TANF) program in America, in part because there are not separate programs for food and housing.

The study includes this remarkable chart showing a significant drop in Canadian welfare dependency, along with specific data for three provinces.

The authors wanted to know why welfare dependency declined in Canada. Was is simply a result of a better macroeconomic environment? Or did specific reforms in welfare policy play a role?

…what role, if any, did new reform strategies undertaken by provinces play in observed declines in SA participation. This paper attempts to address this question by measuring disaggregated effects of new reform strategies on provinces’ SA participation rates, while controlling for changes in benefit levels, eligibility requirements, labour market conditions, GDP growth and demographic composition.

Their conclusion is that welfare reform helped reduce dependency.

…our econometric models let the data decide on a ranking of which mechanisms—reductions in benefit levels, tightened eligibility requirements, improved macro-economic conditions or adoption of new reform strategies—had the largest statistical associations with declines in participation. The data suggest that new reforms were the second most important policy reform after reductions in employment insurance benefits. … In the empirical models that disaggregate the effects of different new reform strategies, it appears that work requirements with strong sanctions for non-compliance had the largest effects. The presence of strong work requirements is associated with a 27% reduction in SA participation.

Here’s their table showing the drop in various provinces between 1994 and 2009.

The same authors unveiled a new scholarly study published in 2017 in Applied Economics, which is based on individual-level data rather than province-level data.

Here are the key portions.

A heterogeneous mix of aggressive welfare reforms took effect in different provinces and years starting in the 1990s. Welfare participation rates subsequently declined. Previous investigations of these declines focused on cuts in benefits and stricter eligibility requirements. This article focuses instead on work requirements, diversion, earning exemptions and time limits – referred to jointly as new welfare reform strategies.

Here’s their breakdown of the types of reforms in the various provinces.

And here are the results of their statistical investigation.

The empirical models suggest that new reform strategies significantly reduced the probability of welfare participation by a minimum of 13% overall…the mean person in the sample faces a reduced risk of welfare participation of 1.1–1.3 percentage points when new reform strategies are present… the participation rates of the disabled, immigrants, aboriginals and single parents, appear to have responded to the presence of new reform strategies significantly more than the average Canadian in our sample. The expected rate of welfare participation for these groups fell by two to four times the mean rate of decline associated with new reform policies.

The bottom line is that welfare reform was very beneficial for Canada. Taxpayers benefited because the fiscal burden decreased. And poor people benefited because of a transition from dependency to work.

Let’s close by looking at data measuring redistribution spending in Canada compared to other developed nations. These OECD numbers include social insurance outlays as well as social welfare outlays, so this is a broad measure of redistribution spending, not just the money being spent on welfare. But it’s nonetheless worth noting the huge improvement in Canada’s numbers starting about 1994.

Canada now has the world’s 5th-freest economy. Welfare reform is just one piece of a very good policy puzzle. There also have been relatively sensible policies involving spending restraint, corporate tax reform, bank bailoutsregulatory budgeting, the tax treatment of saving, and privatization of air traffic control.

P.S. If it wasn’t so cold in Canada, that might be my escape option instead of Australia.

P.P.S. Given the mentality of the current Prime Minister, it’s unclear whether Canada will remain an economic success story.

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Inequality is now a major dividing line in the world of public policy.

Supporters of limited government think it’s not a big issue and instead focus on the policies that are most likely to generate growth. Simply stated, they tend not to care if some people get richer faster than other people get richer (assuming, of course, that income is honestly earned and not the result of cronyism).

Folks on the left, by contrast, think inequality is inherently bad. It’s almost as if they think that the economy is a fixed pie and that a big slice for the “rich” necessarily means smaller slices for the rest of us. They favor lots of redistribution via punitive taxes and an expansive welfare state.

When talking to such people, my first priority is getting them to understand that it’s possible for an economy to grow and for all income groups to benefit. I explain how even small differences in long-run growth make a big difference over just a few decades and that it is very misguided to impose policies that will discourage growth by penalizing the rich and discouraging the poor.

I sometimes wonder how vigorously to present my argument. Is it actually true, as Thatcher and Churchill argued, that leftists are willing to hurt poor people if that’s what is necessary to hurt rich people by a greater amount?

Seems implausible, so when I recently noticed this amusing humor on Reddit‘s libertarian page, I was not going to share it. After all, it presumes that our friends on the left genuinely would prefer equal levels of poverty rather than unequal levels of prosperity.

But, after reading a new study from the International Monetary Fund, I’m wondering if I’m underestimating the left’s fixation with inequality and the amount of economic damage they’re willing to inflict to achiever greater equality of outcomes.

Here are some introductory passages to explain the goal of the research.

…it is worth reemphasizing some lessons from the “old masters” in economics who addressed this topic a few decades ago—including Arthur M. Okun and Anthony B. Atkinson in the 1970s. Their lessons—on how to elicit people’s views on inequality and how to summarize societal welfare using a monetary indicator encompassing both average incomes and their distribution—remain relevant for fiscal policymakers today. …a satisfactory theory of welfare must recognize that welfare depends on both the size and the distribution of national income. …This primer seeks to encourage more widespread use by policymakers of the tools developed by welfare theory. …the primer provides an in-depth, step-by-step refresher on two specific tools chosen because of their simplicity and intuitive appeal: Okun’s “leaky bucket” and Atkinson’s “equally-distributed-equivalent income.”

Please note that the IMF explicitly is saying that it wants policymakers to change laws based on what’s in the study.

And, as you continue reading, it should become obvious that the bureaucrats are pushing a very radical agenda (not that we should be surprised given the IMF’s track record).

Here’s the bureaucracy’s take on Okun and his pro-redistribution agenda.

Okun (1975) proposed a thought experiment capable of eliciting people’s attitudes toward the trade -off between equality and efficiency: Okun asked the reader to consider five families: a richer one making $45,000 (in 1975) and four poorer ones making $5,000. Would the reader favor a scheme that taxed the rich family $4,000 and transferred the proceeds to the poorer families? In principle, each poorer family would receive $1,000. But what if 10 percent leaked out, with only $900 reaching the recipients? What would the maximum acceptable leak be? The leak represented not only the administrative costs of tax-and-transfer programs (and, one might add, potential losses due to corruption), but also the fact that such programs reduce the economic incentives to work. …Okun reported his own answers to the specific exercise he proposed (his personal preference was for a leakage of no more than 60 percent). ….Okun was willing to accept that a $4,000 tax on the rich household [would] translate, with a 60 percent leakage, into a $400 transfer to each of the four poor households.

The only good part about Okun’s equity-efficiency tradeoff is that he acknowledges that redistribution harms the economy. The disturbing part is that he was willing to accept 60 percent leakage in order to take money from some and give it to others.

It gets worse. When the IMF mixes Okun with Atkinson, that’s when things head in the wrong direction even faster. As I noted last month, Atkinson has a theory designed to justify big declines in national income if what’s left is distributed more equally. I’m not joking.

And that IMF wants to impose this crazy theory on the world.

Atkinson (1970) showed that under the assumptions above and having identified a coefficient of aversion to inequality, it becomes easy to summarize the well-being of all households in an economy with a single, intuitive measure: the equally-distributed-equivalent income (EDEI), i.e., the income that an external observer would consider just as desirable as the existing income distribution. …The percentage loss in mean income—compared with the initial situation—that an observer would find acceptable to have a perfectly equal distribution of incomes was introduced by Atkinson (1970) as a measure of inequality.

The study then purports to measure “aversion to inequality” in order to calculate equally-distributed-equivalent income (EDEI).

The greater the observers’ aversion to inequality, the lower the EDEI. Table (2) reports for a few alternative ε coefficients, for the example above.

Here’s a table from the study, which is based on a theoretical rich person with $45,000 and a theoretical poor person with $5,000 of income. A society that isn’t very worried about inequality (ε = 0.2) is willing to sacrifice about $4,000 on overall income to achieve the desired EDEI. But a nation fixated on equality of outcomes might be willing to sacrifice $32,000 (more than 60 percent of overall income!).

I’ve augmented the table with a few of the aggregate income losses in red.

In other words, nations that have a higher aversion to inequality are the ones that prefer lots of misery and deprivation so long as everyone suffers equally.

Another use of this data is that it allows the IMF to create dodgy data on income (sort of like what the OECD does with poverty numbers).

It appears the bureaucrats want to use EDEI to claim that poorer nations have more income than richer nations.

…the ranking of countries based on the EDEI often differs significantly from that based on mean income alone. For instance, South Africa’s mean income is more than double that of the Kyrgyz Republic, and substantially above that of Albania. However, those countries’ lower inequality implies that their EDEI is significantly higher than South Africa’s. …Similarly, the United States’ mean income is considerably above that of the United Kingdom or Sweden. However, for an inequality aversion coefficient of ε=1.5, Sweden’s EDEI is above that of the United States, and for ε=2.0 also the United Kingdom’s EDEI is above that of the United States.

Here’s a table from the study and you can see how the United States becomes a comparatively poor nation (highlighted in red) when there’s an “aversion” to inequality.

In other word, even though the United States has much higher living standards than European nations, the IMF is peddling dodgy numbers implying just the opposite.

But the real tragedy is that low-income people will be much more likely to remain poor with the policies that the IMF advocates.

P.S. Fans of satire may appreciate this “modest proposal” to reduce inequality. I imagine the IMF would approve so long as certain rich people are excluded.

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One of my pet peeves is when people characterize Robin Hood as some sort of left-wing redistributionist. As I’ve explained, that’s utter nonsense.

If you read the book or watch the movie starring Errol Flynn, Prince John and the Sheriff of Nottingham were the bad guys because they over-taxed the peasants. Robin Hood was the good guy because he rescued the money from the tax collectors and returned it to the people who earned it.

Kudos to Ted Cruz, who tried to educate (a poorly informed) Bernie Sanders on this topic.

Cruz accidentally promoted Prince John to King John (or is my aging memory betraying me and did Prince John declare himself King at some point?), but he’s 100 percent correct on the fundamental point.

And now I’m wondering which modern leftists should play the roles of the bad guys from Robin Hood if there’s a remake of the movie. Perhaps Obama should be Prince John, which might be a better fit than the other movie roles people have imagined for our former president.

And the Sheriff of Nottingham obviously could be played by our corrupt IRS Commissioner. He would be a natural for the role.

But let’s not get too distracted. The focus today is on whether Robin Hood belongs to Occupy Wall Street or the Tea Party. This image reinforces the point that the latter is a better fit.

Just in case the message isn’t clear, here’s a nice clip from the cartoon version of Robin Hood.

I’m delighted that children actually were exposed to this message. I suggest sharing this clip widely with your kids, grandkids, nieces, nephew, etc, etc.

For what it’s worth, I also tried to correct the record about Robin Hood in a TV interview back in 2012.

P.S. Leftists aren’t the only people to mischaracterize Robin Hood, as I noted when discussing an otherwise-solid column by Cal Thomas.

P.P.S. Since Cal Thomas mentioned Robin Hood as part of a column explaining that Jesus wasn’t a socialist, I can’t resist showing Libertarian Jesus, who dispenses wisdom here and here.

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Imagine that we’re in a parallel universe and that you’re the lookout on the Titanic. But in this make-believe world, you have all sorts of fancy radar that allows you to detect icebergs with lots of advance notice. Furthermore, imagine that you detect danger and give lots of warning to the Captain and other officers.

How would you feel if they then decided to ignore your warnings and continued on their course to disaster? You’d probably tear your hair out in frustration.

And that’s a pretty good description of how I feel about the easy-to-predict, visible-to-the-naked-eye, baked-in-the-cake, bound-to-happen fiscal crisis that will occur because of the combination of demographic change and poorly designed entitlement programs.

It’s happening in the United States. It’s happening in Europe. It’s happening in Asia. Heck, this is a worldwide problem.

Simply stated, welfare states were created back when everyone assumed that there would always be a “population pyramid,” which means relatively few old people (who collect a lot of money from entitlement programs) at the top, plenty of workers (also known as taxpayers) in the middle, and lots of children (i.e., future taxpayers) at the bottom.

In that world, a modest-sized welfare state isn’t a good idea, but at least it is mathematically sustainable.

Today, by contrast, such a welfare state is a problem because we’re living longer and having fewer children.

And in the future, that kind of welfare state is a recipe for a Greek-style fiscal crisis because demographic trends will be even less favorable. To be blunt, there won’t be enough people pulling the wagon compared to the mass of people riding in the wagon.

At the risk of beating a dead horse, here’s some additional data on this global problem. We’ll start with this look at how the population pyramid is becoming a population cylinder. The key thing to notice is the growth of the over-65 cohort.

And here’s a different way of looking at the same data, but stretching out to 2100.

I didn’t add a red line at age 65, but it’s easy to see that the number of older people will dramatically increase without a concomitant increase in the number of working-age people who are expected to pay the taxes to finance pensions and health care.

So what’s all this mean? Here’s a sobering thought from Prospect.

The ageing populations of the advanced economies and the larger emerging ones combines with past falls in the birth rate to mean that the share of total world population who are of prime working age has been falling since 2012. After a four-decade rise, the trend has reversed with that fall projected to last throughout the 2020s, 2030s and 2040s. A slower-growing global workforce will be a big challenge for the global economy.

A “big challenge” may win the prize for understatement.

Bloomberg has a column on the implications of this massive demographic shift. Notice the data on the number of workers per retiree in various nations.

Rising dependency ratios — or the number of retirees per employed worker — provide one useful metric. In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

The bottom line is that there are enormous unfunded liabilities.

Arnaud Mares of Morgan Stanley analyzed national solvency, or the difference between actual and potential government revenue, on one hand, and existing debt levels and future commitments on the other. The study found that by this measure the net worth of the U.S. was negative 800 percent of its GDP; that is, its future tax revenue was less than committed obligations by an amount equivalent to eight times the value of all goods and services America produces in a year. The net worth of European countries ranged from about negative 250 percent (Italy) to negative 1,800 percent (Greece). For Germany, France and the U.K., the approximate figures were negative 500 percent, negative 600 percent and negative 1,000 percent of GDP.

Wow, it’s depressing that the long-run outlook for the United States is worse than it is for some of Europe’s most infamous welfare states. Though I guess we shouldn’t be totally surprised since I’ve already shared similarly grim estimates from the IMF, BIS, and OECD.

I’ll close with some (sort of) good news.

Notwithstanding some of the estimates I’ve shared, America actually is in better shape than these other nations. If we enact genuine entitlement reform, ideally sooner rather than later, the long-run numbers dramatically improve because spending and debt no longer would be projected to rise so dramatically (whereas government already is an enormous burden in Europe).

This isn’t idle theory. Policymakers don’t have much control over demographics, but they can reduce the fiscal impact of demographic change by adopting better policy.

To cite the most prominent examples, jurisdictions such as Hong Kong and Singapore have very long lifespans and very low birthrates, yet their public finances don’t face nearly as much long-run pressure because they never made the mistake of setting up western-style welfare states.

The solution, therefore, is for America and other nations to copy these successful jurisdictions by replacing tax-and-transfer entitlements with systems based on private savings.

P.S. For what it’s worth, I’m not overflowing with optimism that we’ll get the reforms that are needed with Trump in the White House.

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Most economic policy debates are predictable. Folks on the left urge higher taxes and bigger government while folks on the right advocate lower taxes and smaller government (thanks to “public choice” incentives, many supposedly pro-market politicians don’t follow through on those principles once they’re in office, but that’s a separate issue).

The normal dividing line between right and left disappears, however, when looking at whether the welfare state should be replaced by a “universal basic income” that would provide money to every legal resident of a nation.

There are some compelling arguments in favor of such an idea. Some leftists like the notion of income security for everybody. Some on the right like the fact that there would be no need for massive bureaucracies to oversee the dozens of income redistribution programs that currently exist. And since everyone automatically would get a check, regardless of income, lower-income people seeking a better life no longer would face very high implicit tax rates as they replaced handouts with income.

But there are plenty of libertarians and small-government conservatives who are skeptical. I’m in this group because of my concern that the net result would be bigger government and I don’t trust that the rest of the welfare state would be abolished. Moreover, I worry that universal handouts would erode the work ethic and exacerbate the dependency problem.

And I have an ally of the other side of the ideological spectrum.

Former Vice President Joe Biden…will push back against “Universal Basic Income,”… UBI is a check to every American adult, but Biden thinks that it’s the job that is important, not just the income. In a blog post…timed to the launch of the Joe Biden Institute at the University of Delaware, Biden will quote his father telling him how a job is “about your dignity. It’s about your self-respect. It’s about your place in your community.”

I often don’t agree with Biden, but he’s right on this issue.

Having a job, earning a paycheck, and being self-sufficient are valuable forms of societal or cultural capital.

By contrast, a nation that trades the work ethic for universal handouts is taking a very risky gamble.

Let’s look at what’s been written on this topic.

In an article for the Week, Damon Linker explores the importance of work and the downside of dependency.

…a UBI would not address (and would actually intensify) the worst consequences of joblessness, which are not economic but rather psychological or spiritual. …a person who falls out of the workforce permanently will be prone to depression and other forms of psychological and spiritual degradation. When we say that an employee “earns a living,” it’s not merely a synonym for “receives a regular lump sum of money.” The element of deserving (“earns”) is crucial. …a job can be and often is a significant (even the primary) source of a person’s sense of self-worth. …A job gives a person purpose, a reason to get up in the morning, to engage with the world and interact with fellow citizens in a common endeavor, however modest. And at the end of the week or the month, there’s the satisfaction of having earned, through one’s own efforts, the income that will enable oneself and one’s family to continue to survive and hopefully even thrive.

Dan Nidess, in a column for the Wall Street Journal, opines about the downsides of universal handouts.

At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract, as millions of Americans become dependent on the government and the taxpaying elite. It would also create a structural division of society that would destroy any pretense of equality. …UBI would also weaken American democracy. How long before the well-educated, technocratic elites come to believe the unemployed underclass should no longer have the right to vote? Will the “useless class” react with gratitude for the handout and admiration for the increasingly divergent culture and values of the “productive class”? If Donald Trump’s election, and the elites’ reactions, are any indication, the opposite is likelier. …In the same Harvard commencement speech in which Mr. Zuckerberg called for a basic income, he also spent significant time talking about the need for purpose. But purpose can’t be manufactured, nor can it be given out alongside a government subsidy. It comes from having deep-seated responsibility—to yourself, your family and society as a whole.

An article in the American Interest echoes this point.

…work, for most people, isn’t just a means of making money—it is a source of dignity and meaning and a central part of the social compact. Simply opting for accelerated creative destruction while deliberately warehousing the part of the population that cannot participate might work as a theoretical exercise, but it does not mesh with the wants and desires and aspirations of human beings. Communities subsisting on UBIs will not be happy or healthy; the spectacle of free public redistribution without any work requirement will breed resentment and distrust.

Writing for National Review, Oren Cass discusses some negative implications of a basic income.

…even if it could work, it should be rejected on principle. A UBI would redefine the relationship between individuals, families, communities, and the state by giving government the role of provider. It would make work optional and render self-reliance moot. An underclass dependent on government handouts would no longer be one of society’s greatest challenges but instead would be recast as one of its proudest achievements. Universal basic income is a logical successor to the worst public policies and social movements of the past 50 years. These have taken hold not just through massive government spending but through fundamental cultural changes that have absolved people of responsibility for themselves and one another, supported destructive conduct while discouraging work, and thereby eroded the foundational institutions of family and community that give shape to society. …Those who work to provide for themselves and their families know they are playing a critical and worthwhile role, which imbues the work with meaning no matter how unfulfilling the particular task may be. As the term “breadwinner” suggests, the abstractions of a market economy do not obscure the way essentials are earned. A UBI would undermine all this: Work by definition would become optional, and consumption would become an entitlement disconnected from production. Stripped of its essential role as the way to earn a living, work would instead be an activity one engaged in by choice, for enjoyment, or to afford nicer things. …Work gives not only meaning but also structure and stability to life. It provides both socialization and a source of social capital. It helps establish for the next generation virtues such as responsibility, perseverance, and industriousness. …there is simply no substitute for stepping onto the first rung. A UBI might provide the same income as such a job, but it can offer none of the experience, skills, or socialization.

Tyler Cowen expresses reservations in his Bloomberg column.

I used to think that it might be a good idea for the federal government to guarantee everyone a universal basic income, to combat income inequality, slow wage growth, advancing automation and fragmented welfare programs. Now I’m more skeptical. …I see merit in tying welfare to work as a symbolic commitment to certain American ideals. It’s as if we are putting up a big sign saying, “America is about coming here to work and get ahead!” Over time, that changes the mix of immigrants the U.S. attracts and shapes the culture for the better. I wonder whether this cultural and symbolic commitment to work might do greater humanitarian good than a transfer policy that is on the surface more generous. …It’s fair to ask whether a universal income guarantee would be affordable, but my doubts run deeper than that. If two able-bodied people live next door to each other, and one works and the other chooses to live off universal basic income checks, albeit at a lower standard of living, I wonder if this disparity can last. One neighbor feels like she is paying for the other, and indeed she is.

In a piece for the City Journal, Aaron Renn also comments on the impact of a basic income on national character. He starts by observing that guaranteed incomes haven’t produced good outcomes for Indian tribes.

…consider the poor results from annual per-capita payments of casino revenues to American Indian tribes (not discussed in the book). Some tribes enjoy a very high “basic income”—sometimes as high as $100,000 per year— in the form of these payments. But as the Economist reports, “as payment grows more Native Americans have stopped working and fallen into a drug and alcohol abuse lifestyle that has carried them back into poverty.”

And he fears the results would be equally bad for the overall population.

Another major problem with the basic-income thesis is that its intrinsic vision of society is morally problematic, even perverse: individuals are entitled to a share of social prosperity but have no obligation to contribute anything to it. In the authors’ vision, it is perfectly acceptable for able-bodied young men to collect a perpetual income while living in mom’s basement or a small apartment and doing nothing but play video games and watch Internet porn.

Jared Dillian also looks at the issue of idleness in a column for Bloomberg.

I do not like the idea of a universal basic income. Its advocates fundamentally misunderstand human nature. What they do not realize about human beings is that for the vast majority of them, a subsistence level of income is enough — and those advocates are blind to the corrosive effects that widespread idleness would have on society. If you give people money for doing nothing, they will probably do nothing. …A huge controlled experiment on basic income has already been run — in Saudi Arabia, where most of the population enjoys the dividends of the country’s oil wealth. Saudi Arabia has found that idleness leads to more political extremism, not less. We have a smaller version of that controlled experiment here in the U.S. — for example, the able-bodied workers who have obtained Social Security Disability Insurance payments and are willing to stay at home for a piddling amount of money. …the overarching principle is that people need work that is worthwhile, for practical and psychological reasons. If we hand out cash to anyone who can fog a mirror, I figure we are about two generations away from revolution.

By the way, it’s not just American Indians and Saudi Arabians that are getting bad results with universal handouts.

Finland has been conducting an experiment and the early results don’t look promising.

The bottom line is that our current welfare system is a dysfunctional mess. It’s bad for taxpayers and recipients.

Replacing it with a basic income probably would make the system simpler, but at a potentially very high cost in terms of cultural capital.

That’s why I view federalism as a much better approach. Get Washington out of the redistribution racket and allow states to compete and innovate as they find ways to help the less fortunate without trapping them in dependency.

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