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Archive for the ‘Statism’ Category

What does World War I have to do with Obamanomics?

There’s no real connection, of course, but it did give me an opportunity to present a good analogy. At a conference in London last week, I was discussing with some folks the state of the American economy and the role of public policy.

I was trying to explain what’s happened in the past few years, describing the avalanche of bad policy last decade, culminating with the faux stimulus in 2009 and the enactment of Obamacare in 2010.

I then said that Obama’s efforts to impose further statism have been largely stymied, particularly after the Tea Party election of 2010. There have been lots of skirmishes in recent years, to be sure, with Obama winning a few (such as the recent imposition of “net neutrality” regulations on the Internet) but also losing a few (such as spending restraint caused by policies like the sequester).

But the fact that Obama hasn’t been able to make additional “progress” is not really a victory. It’s simply a stalemate.

And that’s where the World War I analogy fits. As I was trying to get across my point, it occurred to me that it’s vaguely like World War I.

When the war started, the Germans gained considerable ground, overrunning much of Belgium and a lot of territory in northwestern France. That’s akin to Obama’s victories in 2009-2010.

But then the period of trench warfare began and neither side made much progress. And that’s a good description of what’s been happening in recent years in Washington.

This is a good news-bad news situation. To continue with my analogy, the good news is that Obama isn’t conquering more territory. The bad news is that we aren’t pushing Obama back into Germany and reclaiming territory.

And so long as we’re in this stalemate, it’s unlikely that we’ll enjoy robust economic growth. And that’s our topic for today.

In my actual speech, I dusted off my charts based on Minneapolis Fed data, and updated them to compare today’s weak recovery with what’s happened during previous business cycles. And I specifically focused on a comparison of the very strong growth of the Reagan years with the lackluster growth of the Obama years.

But it’s a pity that my speech wasn’t one week later, because I’ve just seen some really good contributions on the same topic from economists Robert Higgs and John Taylor.

Writing for the Independent Institute, Higgs looks at what’s been happening with a key measure of our prosperity.

Arguably the best single, currently available measure of the entire public’s payoff from economic activity is real disposable income per capita. This is the average amount per annum that Americans receive in exchange for the use of their labor and other input services, after taxes, corrected for changes in the purchasing power of the dollar. …this measure of economic well-being has scarcely increased at all since 2007.

Higgs also prepared a table to make it easier to compare performance of this important variable during various business cycles.

As you can see, the current “recovery” has been dismal compared to previous periods.

And here’s his analysis of why we’re suffering from sub-par growth.

These figures demonstrate that even though the rate of increase has varied substantially in the past, it has never remained so low as it has been in recent years. Even during the decade of so-called stagflation from the early 1970s to the early 1980s, real disposable income per capita grew more than twice as fast as it has grown in the past seven years. In the past, recessions were always followed by relatively brisk growth during the first several years of the ensuing recovery. Such has not been the case this time. Nor do forecasters anticipate any such surge of growth in the future. Might it be that the state’s burdens loaded onto the private producers of wealth—taxes, regulations, uncertainties, intrusions of all sorts, including demands for elaborate reports, asset seizures, and threats of felony prosecution for completely innocent and harmless actions—have finally become the “last straw” for these long-suffering camels? …the current situation is clear enough. The U.S. economy, though not yet completely stagnant, has made little headway for more than seven years, and there is little reason to foresee any great change in this regard.

Returning to my analogy, Higgs is basically saying that we’ll be mired in trench warfare for the foreseeable future.

Not exactly a rosy projection.

Now let’s look at the analysis of Professor John Taylor of Stanford University. He starts by walking through a timeline of the current “recovery.”

At the time of the first anniversary of current recovery in 2010, it showed clear signs of weakness compared to the recovery from the recessions in the early 1980s and from all other deep recessions in American history.  …By the recovery’s second anniversary in 2011, it was weak for long enough that I called it “a recovery in name only, so weak as to be nonexistent.” …By the recovery’s third anniversary in 2012, it was now the worst recovery from a deep recession in American history. …By the recovery’s fourth anniversary in 2013, few disputed any more that it was unusually weak and disappointing.  …By the recovery’s fifth anniversary, we were so far away from the recession that linking the terrible performance to the recession became increasing far-fetched.

Professor Taylor has a couple of charts of his own that bolster his argument.

Here’s a comparison of quarterly growth during the Obama recovery and Reagan recovery.

If you’re keeping score, Reagan’s economy out-performed Obama’s economy (often by a very wide margin) in 19 out of 22 quarters.

If this was a boxing match, it would have been stopped long ago.

Taylor also looks at the performance of the labor market during the Obama recovery and Reagan recovery.

Once again, there’s no comparison. During the Reagan years more people were working and adding to the productive capacity of the nation.

During the Obama years, by contrast, the most optimistic assessment is that we’re treading water.

Here’s more of his analysis about the ongoing stagnation.

With the recovery now approaching its sixth anniversary, there is more optimism that we are finally coming out the excruciating slow growth. There is also some wishful thinking that the drop of people out of the labor force—which has made the unemployment rate come down—is due to demographic factors not the slow growth itself. And we are not as bad as Europe. But as these charts show there is still not much in this recovery to write home about. Growth over the four quarters of 2014 looks to average only 2.2% compared with 4.4% in the corresponding quarters of the 1980s recovery. And as of January 2015 the employment-to-population ratio is still lower than at the start of the recovery.

So what’s the bottom line?

To be blunt, you can’t make America more like Europe and then be surprised that our economy isn’t firing on all cylinders.

Returning to our analogy, we need to defeat the enemy of statism and reclaim our lost territory.

But that won’t happen until 2017 at the earliest. And it’s possible it will never happen, particularly if we don’t implement genuine entitlement reform.

P.S. The bad news is that we’re becoming more like Europe. The good news is that we’re not there yet. Our overall burden of government has expanded, but we still have considerably more economic liberty than the average European nation. And that helps to explain why our recovery (even though anemic by American standards) is far more impressive than what’s been happening across the Atlantic.

P.P.S. Based on insightful analysis from Thomas Sowell, John Mackey, and Ronald Reagan, it may have been more accurate (albeit snarky and inappropriate) to have used a World War II example, with Obama’s first two years being akin to the Nazi blitzkrieg and the conquest of France, and recent years being akin to the period between the Battle of Britain and D-Day.

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Several months ago, I put forth a two-question challenge for our left-wing friends.

Since they relentlessly insist that we can have bigger government, higher taxes, more regulation, and added intervention without any negative impact on economic performance, I asked them to identify a single country that became rich following their policies.

And because I’m such a nice guy, I even gave them an extra option. If they couldn’t find a nation that become prosperous with statist policies, they also could successfully respond to my challenge by picking out a big-government jurisdiction that is out-performing a similar country with free markets and small government.

So what’s been the response? Zip. Nada. Zilch. Nothing.

Not that we should be surprised. After all, the rich nations of the western world all became prosperous back in the 1800s and early 1900s when the burden of government was tiny, smaller even than the public sector in Hong Kong today.

And what about the second part of the challenge? Well, our leftist friends have no answers to that query either.

But our side has lots of counter-examples. I’ve put together several comparisons of relatively pro-market jurisdictions and relatively statist jurisdictions. And when making these comparisons, I’ve used several decades of data to avoid the risk of misleading results caused by cherry-picking favorable or unfavorable years.

* Chile vs. Argentina vs. Venezuela

* Hong Kong vs. Cuba

* North Korea vs. South Korea

* Cuba vs. Chile

* Ukraine vs. Poland

* Hong Kong vs. Argentina

* Singapore vs. Jamaica

* United States vs. Hong Kong and Singapore

In every single case, the places with smaller government and free markets generate much stronger economic performance. And that translates into higher living standards.

Now we’re going to add to our list of comparisons, and we’re going to travel to Africa.

Botswana is one of the most pro-market nations in sub-Saharan Africa. It’s still a long way from being Hong Kong, but you can see from the Economic Freedom of the World data that it’s been a steady performer, averaging more than 7 out of 10 this century.

Indeed, only Rwanda ranks higher for economic freedom in the region, but that’s the result of pro-growth reforms in the past few years, so we’ll have to wait a while (assuming the reforms are durable) before having useful data.

And speaking of comparisons, let’s now look at what’s happened to per-capita GDP in Botswana as well as the data for the countries in the region that get the worst scores from Economic Freedom of the World.

As you can see, Botswana (the thick blue line) used to be among the very poorest nations in the region, but over time its per-capita economic output has easily surpassed the countries that have followed statist policies.

These numbers are adjusted for inflation, so the key takeaway is that per-capita economic output is now almost 10 times higher in Botswana than it was in the mid-1960s.

Most of the other nations, by contrast, have suffered from declining real incomes. In other words, the price of statism is very high, particularly for the less fortunate in society.

But there is a sliver of good news (in addition to the Botswana data). If you look carefully, you’ll see that the overall numbers for Africa (thin blue line) have noticeably improved since the late 1990s. Which underscores the importance of promoting business investment in the region, as explained recently by Marian Tupy.

For more information on Botswana, here’s a video put together by Ed Frank (who’s also a very good softball player).

P.S. I rarely comment on foreign policy, but I confess that my jaw dropped when I saw that an Obama Administration official said that a jobs program was key to defeating ISIS.

I thought about recycling some of the evidence showing that government efforts to create jobs are a miserable failure, but then I saw two cartoons that are too funny not to share.

Our first contribution is from Glenn McCoy.

And here’s a gem from Michael Ramirez.

You can see why Ramirez won the political cartoonist contest.

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Back in 2013, I actually wrote something vaguely nice about HBO’s Bill Maher. Or at least I expressed approval for a point he made about the limits of class-warfare taxation.

It’s now time to compensate for that action.

Check out this interview. It’s about Obama’s new tax-and-spend budget, but pay particular attention at the 5:15 mark of the video and you’ll hear Maher asserting that “socialism” deserves the credit for the development of a thriving middle class in America.

Wow. Maher’s comments are astonishingly illiterate.

As I remarked in the interview, the United States (like other western nations) had a tiny public sector during the period when it transitioned from agricultural poverty to middle-class prosperity.

Federal spending averaged only about 3 percent of economic output, and overall government spending (including state and local governments) was only about 10 percent of GDP.

If that was socialism, then sign me up!

This isn’t to say we have laissez-faire paradise in the 1800s and early 1900s. Some of the so-called Robber Barons were cronyists who used government favoritism to line their pockets. Monetary policy oftentimes was a mess because of government regulation and control of banks. Tariffs were very onerous. And Jim Crow laws were an odious example of government power being used to oppress an entire class of citizens and hamper their ability to participate in the market economy.

But the one thing we didn’t have back then was socialism, whether you use the right definition (government ownership of the means of production) or the sloppy definition (a redistributive welfare state).

Sigh.

Enough on that topic. The bulk of the interview, of course, focused on Obama’s budget. I got in my main point, which is that we need to focus on restraining the growth of government spending.

So rather than recycle my thoughts, let’s cite comments by two wise observers.

Here’s how Dan Henninger of the Wall Street Journal described the President’s plan.

The president’s annual budget reminds the Beltway tribes of what they do—tax the country, distribute revenues to their allies, and euphemize it as a budget. With his 2015 budget, Barack Obama at last makes clear his presidency’s reason for being: to establish an empire of taxation. …In six years, the Obama Democrats have abandoned any belief in the idea that the private sector is the primary cause of American prosperity. Instead, they seem to see the private sector as a kind of tax sump-pump, a dumb machine whose only purpose is tax flow. …That is the empire of taxation. It is an isolated system, based in Washington, which allocates what it exacts from the private sector.

And here’s some of what George Will wrote about the poisonous spiral of more government leading to more stagnation leading to more demands for more government.

The progressive project of maximizing the number of people dependent on government is also aided by the acid of insecurity that grows rapidly when the economy does not. Anxious and disappointed people are susceptible to progressives’ blandishments about the political allocation of wealth and opportunity — “free” this and that. By making slow growth normal, iatrogenic government serves the progressive program of defining economic failure down.

I fully agree. Not only the points about the weakness of the Obama “recovery,” but also the concerns about more and more people being lured into government dependency, which sabotages American exceptionalism.

Jerry Holbert has a nice summary of the President’s worldview.

Hmmm…I think we’ve seen this bookstore before.

Though I’m surprised Obama is bothering to shop when he can just go to the library for his favorite books.

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I’ve periodically cited the great 19th-century French economist, Frederic Bastiat, for his very wise words about the importance of looking at both the seen and the unseen when analyzing public policy.

Those that fail to consider secondary or indirect effects of government, such as Paul Krugman, are guilty of the “broken window” fallacy.

There are several examples we can cite.

A sloppy person, for instance, will think a higher minimum wage is good because workers will have more income. But a thoughtful analyst will think of the unintended consequence of lost jobs for low-skilled workers.

An unthinking person will conclude that government spending is good for growth because the recipients of redistribution have money to spend. But a wiser analyst will understand that such outlays divert money from the economy’s productive sector.

A careless person will applaud when government “creates” jobs. Sober-minded analysts, though, will wonder about the private jobs destroyed by such policies.

It’s time, though, to give some attention to another important contribution from Bastiat.

He also deserves credit for the pithy and accurate observation about government basically being a racket or a scam.

And what’s really amazing is that he reached that conclusion in the mid-1800s when the burden of government spending – even in France – was only about 10 percent of economic output. So Bastiat was largely limited to examples of corrupt regulatory arrangements and protectionist trade policy.

One can only imagine what he would think if he could see today’s bloated welfare states and the various ingenious ways politicians and interest groups have concocted to line their pockets with other people’s money!

Which brings us to today’s topic. We’re going to look at venal, corrupt, wasteful, incompetent, and bullying government at the federal, state, and local level in America.

We’ll start with the clowns in Washington, DC.

Remember when the unveiling of the Obamacare turned into a cluster-you-know-what of historic proportions?

Well, the Daily Caller reports that the IRS has just signed an Obamacare-related contract with an insider company that recently became famous for completely botching its previous Obamacare-related contract.

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. …IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database. The IRS contract is worth $4.46 million, according to the FPDS data.

Just one more piece of evidence that Washington is a town where failure gets rewarded.

And CGI is an expert on failure.

A joint Senate Finance and Judiciary Committee staff report in June 2014 found that Turning Point Global Solutions, hired by HHS to review CGI’s performance on Healthcare.gov, reported they found 21,000 lines of defective software code inserted by CGI. Scott Amey, the general counsel for the non-profit Project on Government Oversight, which reviews government contracting, examined the IRS contract with CGI. “CGI was the poster child for government failure,” he told The Daily Caller. “I am shocked that the IRS has turned around and is using them for Obamacare IT work.” Washington was not the only city that has been fed up with CGI on healthcare. Last year, CGI was fired by the liberal states of Vermont and Massachusetts for failing to deliver on their Obamacare websites. The Obamacare health website in Massachusetts never worked, despite the state paying $170 million to CGI.

For a company like this to stay in business, you have to wonder how many bribes, pay-offs, and campaign contributions are involved.

Now let’s look at an example of state government in action.

Kim Strassel of the Wall Street Journal has a column about a blatantly corrupt deal between slip-and-fall lawyers and the second most powerful Democrat in the Empire State.

New York Assembly Speaker Sheldon Silver was last week arrested and accused by the feds of an elaborate kickback scheme. …Mr. Silver is alleged to have pocketed more than $5 million in a set-up in which he directed state funds to the clinic of an asbestos doctor, who in turn provided him with patients who could be turned into jackpot plaintiffs. Weitz & Luxenberg, a class-action titan, paid Mr. Silver huge referral fees for these names, off which the firm stands to make many millions. …when the Silver headlines broke, Weitz & Luxenberg founder Perry Weitz said he was “shocked”… The firm quickly put the Albany politician on “leave.”

A logical person might ask “on leave” from what? After all, he didn’t do anything.

But he did do something, even if it was corrupt and sleazy.

…here’s the revealing bit. Queried by prosecutors as to what exactly the firm did hire Mr. Silver to do—since he performed no legal work—Weitz & Luxenberg admitted that he was brought on “because of his official position and stature.” In other words, this was transactional. Weitz & Luxenberg gave Mr. Silver a plum job, and Mr. Silver looked out for the firm—namely by blocking any Albany bills that might interfere with its business model.

So workers, consumers, and businesses get screwed by a malfunctioning tort system, while insider lawyers and politicians get rich. Isn’t government wonderful!

Just one example among many of how state governments are a scam. Perhaps now folks will understand why I’m not very sympathetic to the notion of letting them take more of our money.

Last but not least, let’s look at a great moment in local government.

As we see from a report in USA Today, a village in New Jersey is dealing with the scourge of…gasp…unlicensed snow removal!

Matt Molinari and Eric Schnepf, both 18, also learned a valuable lesson about one of the costs of doing business: government regulations. The two friends were canvasing a neighborhood near this borough’s border with Bridgewater early Monday evening, handing out fliers promoting their service, when they were pulled over by police and told to stop. …Bound Brook, like many municipalities in the state and country, has a law against unlicensed solicitors and peddlers. … anyone selling goods and services door to door must apply for a license that can cost as much as $450 for permission that is valid for only 180 days. …Similar bans around the country have put the kibosh on other capitalist rites of passage, such as lemonade stands and selling Girl Scouts cookies.

Though, to be fair, it doesn’t seem like the cops were being complete jerks.

Despite the rule, however, Police Chief Michael Jannone said the two young businessmen were not arrested or issued a ticket, and that the police’s concern was about them being outside during dangerous conditions, not that they were unlicensed. “We don’t make the laws but we have to uphold them,” he said Tuesday after reading some of the online comments about the incident. “This was a state of emergency. Nobody was supposed to be out on the road.”

But the bottom line is that it says something bad about our society that we have rules that hinder teenagers from hustling for some money after a snowstorm.

Just like these other examples of local government in action also don’t reflect well on our nation.

Let’s close with my attempt to re-state Bastiat’s wise words. Here’s my “First Theorem of Government.”

And if you think what I wrote, or what Bastiat wrote, is too cynical, then I invite you to check out how politicians are bureaucrats are squandering money on Medicare, the Veterans Administration, the Agriculture Department, Medicaid, the Patent and Trademark Office, the so-called Consumer Financial Protection Bureau, the National Institutes of Health, Food Stamps, , the Government Services Administration, unemployment insurance, the Pentagon

Well, you get the idea.

Which is why this poster is a painfully accurate summary of government.

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While there are plenty of reasons to dislike the World Bank, United Nations, and (especially) the International Monetary Fund, the worst international bureaucracy on a per-dollar spent basis has to be the Paris-based Organization for Economic Cooperation and Development.

The OECD used to be relatively benign by the standards of international bureaucracies, but it has veered sharply to the left in recent years and some of the bureaucracy’s “research” now is more akin to talking points from the Obama White House.

And it getting worse. I wasn’t even aware that the OECD had a Directorate for Employment, Labour, and Social Affairs, but the bureaucrats in this division are – if this is even possible – pushing the Paris-based bureaucracy even further to the left.

At least that’s my conclusion after reading a new study from that Directorate on inequality and growth. You can read the entire 64-page paper if you’re a masochist, but you’ll get the full flavor by perusing the OECD’s three-page summary.

Here are the headline results.

New OECD analysis suggests that income inequality has a negative and statistically significant impact on medium-term growth. Rising inequality by 3 Gini points, that is the average increase recorded in the OECD over the past two decades, would drag down economic growth by 0.35 percentage point per year for 25 years: a cumulated loss in GDP at the end of the period of 8.5 per cent. …Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand, nearly 9 points in the United Kingdom, Finland and Norway and between 6 and 7 points in the United States, Italy and Sweden. On the other hand, greater equality prior to the crisis helped increase GDP per capita in Spain, France and Ireland.

Yes, you read correctly. We’re supposed to believe that Spain, France, and Ireland have enjoyed better growth.

I guess France’s stagnation is just a figment of our collective imaginations. And those bailouts for Spain and Ireland must have been a bad dream or something like that.

By the way, I’m not arguing inequality is good for growth. Indeed, it can even be bad for growth if the rich are using government to line their pockets with growth-stifling bailouts, handouts, subsidies, protectionism, and other forms of cronyism.

So is that what this study is arguing?

Hardly. Let’s move from absurdity to ideology by reviewing the OECD’s supposed solutions, which sound like something you would get if you created some sort of statist Frankenstein by mixing DNA from Francois Hollande and Elizabeth Warren in a blender.

The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth. …previous work by the OECD has clearly shown that the benefits of growth do not automatically trickle down across society… Policies that help to limit or reverse inequality may not only make societies less unfair, but also wealthier. …Anti-poverty programmes will not be enough. Not only cash transfers but also increasing access to public services, such as high-quality education, training and healthcare, constitute long-term social investment to create greater equality of opportunities in the long run.

I’m almost at a loss for words.

Part of me wants to make snarky comments about the absence of credible evidence. After all, if Spain, Ireland, and France are the success stories, the opportunities for satire are limitless.

But perhaps I should be more mature and simply note the real world contradicts this supposed research. Why is it, after all, that the countries that are most fixated on coercive redistribution tend to have the weakest economies?

Though the most remarkable thing about this study is that it is contradicted by other OECD research from the Economics Department, which is home to a more sensible crowd that periodically finds that larger governments and redistributive tax policies undermine economic performance.

A 1997 study by the Economics Department found that “a cut in the tax-to-GDP ratio by 10 percentage points of GDP (accompanied by a deficit-neutral cut in transfers) may increase annual growth by ½ to 1 percentage points.”

A 2001 study by the Economics Department found that “An increase of about one percentage point in the tax pressure (or, equivalently one half of a percentage point in government consumption, taken as a proxy for government size) – e.g. two-thirds of what was observed over the past two decades in the OECD sample – could be associated with a direct reduction of about 0.3 per cent in output per capita. If the investment effect is taken into account, the overall reduction would be about 0.6-0.7 per cent.”

Another 2001 study by the Economics Department found that “The overall tax burden is found to have a negative impact on output per capita.24 Furthermore, controlling for the overall tax burden, there is an additional negative effect coming from an extensive reliance of direct taxes.”

A 2008 study by the Economics Department found that “…relying less on corporate income relative to personal income taxes could increase efficiency. …Focusing on personal income taxation, there is also evidence that flattening the tax schedule could be beneficial for GDP per capita, notably by favouring entrepreneurship. …Estimates in this study point to adverse effects of highly progressive income tax schedules on GDP per capita through both lower labour utilisation and lower productivity… a reduction in the top marginal tax rate is found to raise productivity in industries with potentially high rates of enterprise creation. …Corporate income taxes appear to have a particularly negative impact on GDP per capita.”

A 2013 study by the Economics Department found that “personal income tax also discourages entrepreneurial activity and investment… tax autonomy may lead to a smaller and more efficient public sector, helping to limit the tax burden and improve tax compliance. …Progressive corporate income taxes harm incentives for businesses to grow.”

Let’s return to the study from the Employment, Labour, and Social Affairs Directorate. Like most logical people, you may be wondering what sort of rationale the OECD offers for this agenda of bigger government and higher taxes.

Apparently it’s all based on the notion that poor people won’t acquire skills (human capital accumulation) if rich people have a lot of money. I’m not joking.

The evidence is strongly in favour of one particular theory for how inequality affects growth: by hindering human capital accumulation income inequality undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.

We’re not given any plausible reason for why this happens. Nor are we given any explanation of why poor people will want to acquire skills if the government makes dependency more attractive with expanded redistribution.

In other words, it appears this is yet another example of the OECD engaging in statistical and analytical gymnastics in order to produce something that will justify the bad policies of member nations.

But you have to give the bureaucrats credit. This new “research” is having the desired effect, leading to news reports that will be very pleasing to advocates of bigger government. Consider these excerpts from a story in the EU Observer.

The report, published on Tuesday (9 December) by the Paris-based OECD, refutes the concept of ‘trickle-down economics’… “Income inequality has a sizeable and statistically significant negative impact on growth,” the report says, adding that “redistributive policies achieving greater equality in disposable income has no adverse growth consequences.” …In response, the OECD urges governments to hike property taxes on property and wealth and scrap tax breaks that disproportionately benefit higher earners, alongside greater support for the bottom 40 percent of earners to make sure that they are not left further behind. “As top earners now have a greater capacity to pay taxes than ever before, governments may consider re jigging their tax systems,” argues the report, adding that governments should also increase access to education, healthcare and training. “Anti poverty programmes will not be enough,” it states.

Writing for Forbes, Tim Worstall also notes that this sloppy OECD report is being used by statists to advance an ideological agenda.

We’re not surprised that The Guardian has leapt on this little report out from the OECD concerning inequality and GDP growth over the past 30 years. It conforms to every prejudice that that newspaper is every going to have about the subject. However, it should be pointed out that this report from the OECD is in fact howlingly bad. It manages to entirely ignore the OECD’s own research on exactly the same subject: the impact of inequality and attempts to reduce it on GDP growth.

The bottom line is that the OECD is working to advance the interests of the political class, not the interests of poor people. If the bureaucrats genuinely wanted to help the less fortunate, they would be pushing pro-growth policies.

Instead, they promote a bigger burden of government.

If you want to know more about the OECD’s economic malpractice, here’s the video I narrated for the Center for Freedom and Prosperity.

But if you don’t want to listen to me, here are some examples of statist policies that are directly contrary to American interests.

The OECD has allied itself with the nutjobs from the so-called Occupy movement to push for bigger government and higher taxes in the United States.

The bureaucrats are advocating higher business tax burdens, which would aggravate America’s competitive disadvantage.

The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.

It supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”

The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.

It even concocts dishonest poverty numbers to advocate more redistribution in the United States.

And don’t forget that you’re paying for this nonsense. American taxpayers finance the biggest share of the OECD’s budget.

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Is Obama a socialist?

If you’re asking whether he’s a big-spending interventionist, the answer is yes.

But if you’re asking whether the President believes in government ownership of the means of production (which is the defining issue in the socialist economic platform), the answer is no (though the White House surely won’t like how Thomas Sowell describes Obama’s ideology).

But I generally don’t care about these word fights. Big government is bad because it hurts people and relies on coercion, and that’s true whether we’re talking about socialism, communism, Nazism, corporatism, or other forms of statism.

But I do care for historical accuracy and honesty.

Writing for the U.K.-based Telegraph, Dan Hannan of the European Parliament explains that the German National Socialists of the Hitler era were….well, socialists.

Goebbels never doubted that he was a socialist. He understood Nazism to be a better and more plausible form of socialism than that propagated by Lenin. Instead of spreading itself across different nations, it would operate within the unit of the Volk. So total is the cultural victory of the modern Left that the merely to recount this fact is jarring.

Anti-capitalist propaganda from the Nazis

Not that today’s leftists should be surprised. Unless, of course, they’re historically illiterate. After all, the Nazi political vehicle was the National Socialist German Workers Party.

Subsequent generations of Leftists have tried to explain away the awkward nomenclature of the National Socialist German Workers’ Party as either a cynical PR stunt or an embarrassing coincidence. In fact, the name meant what it said. Hitler…boasted, adding that “the whole of National Socialism” was “based on Marx”. Marx’s error, Hitler believed, had been to foster class war instead of national unity – to set workers against industrialists instead of conscripting both groups into a corporatist order. His aim, he told his economic adviser, Otto Wagener, was to “convert the German Volk to socialism without simply killing off the old individualists” – by which he meant the bankers and factory owners who could, he thought, serve socialism better by generating revenue for the state. …authoritarianism was the common feature of socialists of both National and Leninist varieties, who rushed to stick each other in prison camps or before firing squads. Each faction loathed the other as heretical, but both scorned free-market individualists as beyond redemption. Their battle was all the fiercer, as Hayek pointed out in 1944, because it was a battle between brothers.

In other words, Soviet-style socialism and Nazi-style socialism were both evil forms of statism, but one attracted people by fomenting class envy and the other sought recruits by demonizing non-Aryans.

Hannan hastens to add that he doesn’t think that modern self-proclaimed socialists are closet Nazis, but he does object to leftists who try to put National Socialists on the right side of the political spectrum.

The idea that Nazism is a more extreme form of conservatism has insinuated its way into popular culture. …What is it based on, this connection? Little beyond a jejune sense that Left-wing means compassionate and Right-wing means nasty and fascists are nasty. When written down like that, the notion sounds idiotic, but think of the groups around the world that the BBC, for example, calls “Right-wing”: the Taliban, who want communal ownership of goods; the Iranian revolutionaries, who…seized industries and destroyed the middle class; Vladimir Zhirinovsky, who pined for Stalinism. The “Nazis-were-far-Right” shtick is a symptom of the wider notion that “Right-wing” is a synonym for “baddie”.

Citing the comprehensive work of Jonah Goldberg, Hannan’s column then makes a key point about government coercion.

Authoritarianism – or, to give it a less loaded name, the belief that state compulsion is justified in pursuit of a higher goal, such as scientific progress or greater equality – was traditionally a characteristic of the social democrats as much as of the revolutionaries. Jonah Goldberg has chronicled the phenomenon at length in his magnum opus, Liberal Fascism. Lots of people take offence at his title, evidently without reading the book since, in the first few pages, Jonah reveals that the phrase is not his own. He is quoting that impeccable progressive H.G. Wells who, in 1932, told the Young Liberals that they must become “liberal fascists” and “enlightened Nazis”.

To be fair, this doesn’t mean Wells was a horrible person, at least in the sense of embracing Hitlerism. In the early 1930s, the fascist policies of Mussolini and Hitler were simply about government intervention. At that point, few people recognized that racism and anti-Semitism were part of the fascist program.

I’m much more likely to be critical of people who make excuses for communism still today. Do they really want to romanticize an ideology that killed tens of millions of innocent people?!?

And it’s disgusting that people wear Che Guevara t-shirts when he was a brutal enforcer of Cuba’s totalitarian regime.

P.S. On a lighter note, here’s the “bread-ish” difference between socialism and capitalism.

P.P.S. Regarding European socialism, we have great (although technically inaccurate) cartoons from Glenn Foden and Michael Ramirez.

P.P.P.S. Here’s socialism for kids, though it’s really class warfare for kids.

P.P.P.P.S. And here’s what happens when you try socialism in the classroom.

P.P.P.P.P.S. Closing on a serious note, John Mackey and Steve Horwitz agree with Thomas Sowell about Obama’s real economic ideology.

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The United States is burdened with some very bad policies that hinder growth and undermine competitiveness. But sometimes you can win a race if your rivals have policies that are even more self-destructive.

And that’s a good description of why the U.S. economy is out-performing Europe and why people in the United States enjoy higher living standards than their European counterparts.

In 2010, I shared data showing that Americans had far higher levels of consumption than Europeans.

In 2012, I updated the numbers and showed once again that people in America far ahead of folks in Europe.

And here are the most recent numbers from the Organization for Economic Cooperation and Development, showing “average individual consumption” for various member nations of that international bureaucracy.

The average for all OECD nations is 100, and the average for eurozone nations is 96, so the U.S. score of 147 illustrates how much better off Americans are than citizens of other countries.

The only nations that are even close to the United States have oil (like Norway) or are low-tax international financial centers (such as Luxembourg and Switzerland).

So why is the United States doing better than Europe?

There are two responses.

First, notwithstanding what I’ve just written, it’s a bit misleading to compare the U.S. to Europe. Simply stated, there are vast differences among European nations in terms of policies and living standards, much more than you find between and among American states.

There are nations such as Switzerland and Finland, for instance, that rank above the United States in Economic Freedom of the World. But there are also highly statist and moribund countries such as France, Italy, and Greece, as well as transition economies in Eastern Europe that are still trying to catch up after decades of communist oppression.

So overall America-vs-Europe comparisons should be accompanied by a grain of salt.

Second, now that we’ve ingested some salt, let’s draw some general conclusions about the role of public policy. Most important, nations with bigger governments and more intervention (as is the case for many European countries) generally don’t grow as fast or have the same living standards as nations with smaller governments and more reliance on competitive markets.

The comparisons can get complicated because there are a wide range of policies that impact economic performance (many people focus on fiscal policy, but trade, regulation, monetary policy, and the rule of law are equally important). Comparisons also can get confusing because there are some relatively rich nations with bad policy and some relatively poor nations with good policy, which is why it is important to look at how rich or poor nations are (or were) when there were significant changes in policy.

For instance, many nations in Western Europe became relatively rich in the 1800s and early 1900s when the overall burden of government was very small. Now they’ve adopted welfare states and growth is much slower (or, in some cases, nonexistent), but they’re oftentimes still in better shape than nations (such as Estonia and Chile) that only recently have liberalized their economies.

Now that we’ve gone through all this background, let’s look at a couple of stories that make me pessimistic about Europe’s future because they capture the mentality that seems dominant among continental policy makers.

First, one of the bright spots for the continent is that there’s been vigorous corporate tax competition. In other words, politicians have been under pressure to lower tax burdens on the business community because of concerns that jobs and investment will migrate to nations with better policy.

As you can imagine, this irks the political class (even though lower rates haven’t resulted in less revenue!).

So you won’t be surprised to learn that there’s a new push for tax harmonization in Europe. Here are some of the details from a news report.

France, Germany and Italy have joined forces to outlaw tax competition between EU countries in a letter to the European Commission. …the language and tone in the joint letter to the new Economic and Taxation Commissioner, Pierre Moscovici, is much more aggressive than in the past. …the letter from the finance ministers of the eurozone’s three largest economies says that “the lack of tax harmonisation in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit-shifting to develop”. …Vanessa Mock, commission spokeswoman said Mr Moscovici “welcomes these significant contributions to the work being carried out by the commission”.

Hmmm…., the Frenchmen who is the Economic and Taxation Commissioner “welcomes” a call from the governments of France, Germany, and Italy to outlaw tax competition. I’m shocked, shocked, by this development.

But as one British politician explained, this approach of higher business taxes will further undermine European economic vitality.

Now let’s shift to our second story, which illustrates the self-serving greed of the political elite at the European Commission.

Here are some passages from a story on the spectacular golden parachutes offered to outgoing senior Eurocrats. And we’ll focus on the former President of the European Council since he’s such a deserving target of ridicule.

Herman Van Rompuy will be entitled to more than £500,000 for doing nothing at the taxpayer’s expense over the next three years, after finishing his term as president of Europe. After standing down on Monday, the former president of the European Council will be paid £133,723 a year, 55 per cent of his basic salary, until December 2017 – to ease him back into life outside the world of Brussels officialdom.

Gee, how kind of European taxpayers to “ease him back” into the real world.

Except, of course, Van Rompuy’s never been in the real world. He’s had his snout in the public trough his entire life.

And he also gets to pay far less tax on this money compared to the poor slobs in the private sector who are footing the bill for this official largesse.

…The “transitional allowance” does not require Mr Van Rompuy to do any work at all and the cash will be paid under reduced rates of EU “community” tax, which are far lower than taxation in his native country of Belgium. …Mr Van Rompuy has not been a stranger to controversy over the perks of EU officialdom since he took the post in December 2009. He was widely criticised four years ago for using his official motorcade of five limousines as a taxi service to take his family on 325-mile round trip to Paris airport en route to a private holiday in the Caribbean. …The cost of Mr Van Rompuy’s retirement is part of a much larger bill for the handover of the administration in EU as former European Commissioners serving in the last Brussels executive pocket “transitional allowances” worth around £30million.

This scam has been in operation for several years, and keep in mind that excessive pay and lavish perks for commissioners are matched by excessive pay and lavish perks for member of the European Parliament (including taxpayer-financed penile implants).

And lavish pay and perks for European Union bureaucrats.

And don’t forget these are the folks who are pushing for bigger government and higher taxes on a pan-European basis. Like many of our politicians in Washington, they think the private sector is some sort of piñata that is capable of producing endless amounts of revenue to finance ever-expanding government.

Even though the evidence from Greece, Italy, Spain, etc, confirms that Margaret Thatcher was right when she warned that the problem with big government is that sooner or later you run out of other people’s money.

P.S. European bureaucrats have decided taxpayer-financed tourism is a human right. And they also use taxpayer money to produce self-aggrandizing comic books.

P.P.S. The European political elite are so bad that even President Obama has felt compelled to oppose some of their tax initiatives.

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