Four Major Problems with Senator Romney’s Plan for Universal Child Allowances

My late friend Walter Williams was a first-rate economist, an important public intellectual, and a truly great American. He also was an amazing communicator, with an unparalleled ability to make important points in a succinct and easy-to-understand manner.

My favorite Walter quote is about how capitalism enabled positive-sum wealth creation.

Today, though, I want to share Walter’s quote about the simple rules for life that basically eliminate poverty.

Sadly, the current welfare state undermines those rules and instead lures many people into self-destructive behaviors. Choices that are bad for them and bad for society.

• Have kids out of wedlock? No problem, Uncle Sam will take care of you with a plethora of handouts.
• Watch TV on the sofa all day rather than work? No problem, Washington will provide you with benefits.

As an economist, I’m especially concerned that redistribution programs discourage employment. That’s bad for the economy. Even more important, it’s very bad for people who get trapped in lives of dependency.

Oh, and let’s not forget that the welfare state also is a big burden on taxpayers.

The reason for highlighting these problems is that Senator Mitt Romney has unveiled a plan (the “Family Security Act”) to have the federal government provide universal child allowances.

The good news is that his plan will mitigate some of the problems with the current system. The bad news is that his proposal will exacerbate other problems.

Here are some excerpts from the Senator’s summary of the proposal.

The Family Security Act would provide a monthly cash benefit for families, amounting to $350 a month for each young child, and $250 a month for each school-aged child. …Promoting marriage; Providing equal treatment for both working and stay-at-home parents; and Reforming and consolidating outmoded federal programs, including by fully paying for the new proposal….a new national commitment to American families by modernizing and streamlining antiquated federal policies into a monthly cash benefit. …The bill consolidates overlapping and often duplicative federal policies into direct support for families. …deficit-neutral.

That description sounds nice, and the proposal would be beneficial in some ways.

Most notably, there would not be high implicit marginal tax rates on work (a big problem in the current system) since people would get the child allowances regardless of employment status.

But there are some serious drawbacks to the plan. Here are four things that cause concern.

First, it increases the burden of government.

Senator Romney (as well as proponents of the plan such as the Niskanen Center) highlight the fact that the plan is “deficit neutral.” But that doesn’t tell us whether the plan increases or reduces the size and scope of the federal government.

Unfortunately, if you take a close look at the Senator’s summary, it’s clear the proposal would be a net increase in the burden of spending.

Here’s the relevant table, which ostensibly shows Romney’s new spending along with the “spending offsets” that make the plan deficit neutral.

For what it’s worth, I’m disappointed that the Senator (his staff?) chose to be dishonest. Three of the “spending offsets” are actually measures that would increase tax revenue (circled in red).

And when you fix that dodgy bit of accounting, Romney’s plan would add more than $45 billion per year to America’s fiscal burden.

Second, why would anyone think it’s a good idea to copy Europe?

According to an article from HuffPost, “The U.S. is one of the only developed countries that doesn’t pay parents a child benefit or child allowance. Romney’s proposal shows there is bipartisan support for the policy.”

This is an accurate observation, but it’s hardly persuasive. Yes, European nations generally send people money simply because they have children.

But why on earth would we want to copy nations where living standards are far below American levels? Heck, poor people in America tend to be more prosperous than middle-class people in Europe.

By the way, some like Romney’s plan because they think it will boost marriage rates and fertility rates (i.e., lure people into having more children). Seems like that might be theoretically true, but the data show that European birth rates are very low, significantly below American levels.

In other words, don’t hold your breath waiting for more marriages and more children.

Third, it undermines federalism by giving Washington a bigger role rather than smaller role.

I’ve argued that the so-called War on Poverty has been very bad news. We have a Byzantine system of handouts that require an army of bureaucrats to administer dozens of handouts that subsidize bad behavior.

It’s created dependency and the data show it actually has had a negative impact on the trend of poverty reduction and self sufficiency (same thing has happened in other nations as well).

The right approach is to get Washington out of the business of income redistribution. We’re far more likely to get good outcomes if we let states decide (and learn from each other on) how best to reduce poverty.

Fourth, it is akin to a “basic income” that may have a very corrosive impact on societal capital.

I was very opposed to Andrew Yang’s plan to provide universal handouts, in large part because I feared it would undermine personal independence, the work ethic, the spirit of self reliance, and other traits that are critical for a successful society. And I also didn’t trust (for good reason) Yang’s claim that his scheme would replace other redistribution programs.

Well, Romney’s proposal is like a starter version of a basic income, but with the handouts based on the number of children.

I fear this will enable some people to decide they can drop out of the labor force.

Scott Winship of the American Enterprise Institute shares my concerns.

The Romney proposal would take us back to the bad old days in key ways, and policymakers are playing Russian roulette with low-income families’ wellbeing. …some people (including future people) who would choose single parenthood or non-work except that the current safety net makes it unaffordable would be able to afford these choices under child allowances. For them, child allowances are allowances for behavior that would be expected to hurt their own long-term prospects and, more importantly, the wellbeing of their children.

I’ll conclude by observing that Romney’s plan is nowhere near as bad as Congresswoman Ocasio-Cortez’s scheme for universal handouts.

But that’s hardly the test for good legislation. For those who prefer smaller government, less dependency, and less centralization, Romney’s plan is bad news.

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Walter Williams, RIP

One of America’s leading public intellectuals, Walter Williams, has passed away.

In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.

I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club”  with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.

I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.

But there’s so much more to say. When I learned yesterday of Walter’s death, I wondered what sort of tribute I should write, especially since so many thoughtful essays already have been published (Don Boudreaux, Thomas Sowell, Veronique de Rugy, Alex Tabarrok, Mark Perry, and Nick Gillespie, to list just a few).

Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.

This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.

Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.

Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”

And here’s some of what he wrote about his assignment to South Korea.

We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.

Here’s a passage from his time as a Ph.D. student at UCLA.

My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian  said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”

I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.

He appreciated that his professors didn’t relax their standards because of his race.

Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.

Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.

Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.

Many years later, he wrote a very insightful column on racial and sexual profiling.

Here’s a final excerpt showing how he enjoyed shocking people.

At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.

Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.

The bottom line is that Walter was a man, not a victim. He fought and achieved.

Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.

P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.

 

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Calvin Coolidge, the Declaration of Independence, and Limits on the Power of Government

To keep with tradition, it’s time to expand my collection of 4th-of-July columns.

• In 2010, I contemplated the issue of libertarians and patriotism. My view, for what it’s worth, is captured by this t-shirt.
• In 2011, I pondered research about the partisan implications of patriotism and also created a satirical Declaration of Dependency for my left-wing friends.
• In 2012, I shared an inspirational video about freedom and individualism from Ronald Reagan.
• In 2013, I discussed the proper meaning of patriotism in the aftermath of revelations about NSA snooping.
• In 2014, I decided on a humorous approach with one a Remy video about government being “up in your grill.”
• In 2015, I waded into the controversial topic of what happens when flag burning meets the modern regulatory state.
• In 2016, I looked at how government has increased the cost of celebrating Independence Day.
• In 2017, I explained the difference between the statist vision of “positive liberty” and the libertarian vision of “negative liberty.”

Today, we’re going to commemorate a great speech by one of America’s best Presidents.

In 1926, Calvin Coolidge spoke on the 150th anniversary of the signing of the Declaration of Independence. Here’s some of what he said.

When we come to examine the action of the Continental Congress in adopting the Declaration of Independence in the light of what was set out in that great document and in the light of succeeding events, we can not escape the conclusion that it had a much broader and deeper significance than a mere secession of territory and the establishment of a new nation. …It was not because it was proposed to establish a new nation, but because it was proposed to establish a nation on new principles, that July 4, 1776, has come to be regarded as one of the greatest days in history. …In its main features the Declaration of Independence is a great spiritual document. It is a declaration not of material but of spiritual conceptions. Equality, liberty, popular sovereignty, the rights of man — these are not elements which we can see and touch. They are ideals. …It was in the contemplation of these truths that the fathers made their declaration and adopted their Constitution. It was to establish a free government, which must not be permitted to degenerate into the unrestrained authority of a mere majority or the unbridled weight of a mere influential few. …These are our guaranties of liberty. As a result of these methods enterprise has been duly protected from confiscation, the people have been free from oppression.

If you have the time, click on the link and read the entire speech.  But if you don’t have time, I hope the passages I excerpted reveal Coolidge’s appreciation for the philosophy of American independence.

I also like how he links those principles to economics, which is nicely captured in the last sentence.

Sadly, the Supreme Court no longer protects our economic liberties (John Roberts providing the most recent example), but it was nice while it lasted.

Speaking of which, here’s a great conversation between James Buchanan and Walter Williams on the meaning and importance of the Constitution. But that’s just the tip of the iceberg. They cover lots of additional material, including spending limits, tax reform, and free trade.

For what it’s worth, my favorite part of the conversation is about how markets are mutually beneficial, whereas government is a zero-sum, or negative-sum game.

Let’s close with a celebration of the great American tradition of civil disobedience against the state.

Sadly, with the likely exception of gun owners, we no longer seem to have the same ornery attitude as our ancestors. Though Charles Murray has a plan to recreate a culture of civil disobedience.

P.S. Here’s a first-hand account of what patriotism means.

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Teaching Economics to Texans: Three Cheers (and Three Videos) for Price Gouging

I generally use Texas as a good example when discussing public policy. Particularly compared to places such as California.

I like the sensible attitude about guns, but the absence of an income tax is particularly admirable when considering economic issues, and I confess to being greatly amused when I read about jobs and investment escaping high-tax states like California and moving to the Lone Star State.

But being more pro-market than California is a low bar to clear. And I’ve written that government is too big in Texas.

And now, because of Hurricane Harvey, I have another reason to criticize the state.

Texas has a law against “price gouging,” which means politicians there (just like the politicians in places like Venezuela) think they should get to determine what’s a fair price rather than allow (gasp!) a free market.

The state’s Republican Attorney General is even highlighting his state’s support for this perverse example of price controls.

>Price gouging by Texas merchants in the path of Hurricane Harvey has drawn the attention of Texas Attorney General Ken Paxton, who said Saturday that his office is looking into such cases. …”We’ll be dealing with those people as we find them,” he said. …Paxton issued a warning about price gouging Friday as the hurricane approached the Texas coast. Texas law prohibits businesses from charging exorbitant prices for gasoline, food, water, clothing and lodging during declared disasters.

Paxton is right about Texas law, but he is threatening to enforce a terrible policy.

To help explain why Texas law is bad and why the Attorney General is misguided, here’s a video from John Stossel on so-called price gouging.

It’s disgusting that Mississippi arrested John. The guy should have received a medal for putting his money at risk to serve others.

To augment Stossel’s analysis, here’s a video from Learn Liberty that explains why politicians shouldn’t interfere with the price system.

And here’s Walter Williams discussing the role of “windfall profits” and how high returns encourage the reallocation of resources in ways that benefit consumers.

The bottom line on this issue is that buyers understandably want low prices, particularly in emergency situations.

But that makes no economic sense. However, since buyers generally outnumber sellers, politicians will always have an incentive to demagogue on the issue.

I’m not surprised when we get economic illiteracy from certain politicians. Nonetheless, it’s very disappointing when Texas lawmakers sink to that level. I hope Mr. Paxton at least is feeling guilty.

P.S. But I’ll close on an upbeat note by sharing my collection of Texas-themed humor: Here, here, here, and here.

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In the Debate over Capitalism and Morality, the Score Is: Walter Williams 1 – Pope Francis 0

The biggest mistake of well-meaning leftists is that they place too much value on good intentions and don’t seem to care nearly as much about good results.

Pope Francis is an example of this unfortunate tendency. His concern for the poor presumably is genuine, but he puts ideology above evidence when he argues against capitalism and in favor of coercive government.

Here are some passages from a CNN report on the Pope’s bias.

Pope Francis makes his first official visit to the United States this week. There’s a lot of angst about what he might say, especially when he addresses Congress Thursday morning. …He’ll probably discuss American capitalism’s flaws, a theme he has hit on since the 1990s. Pope Francis wrote a book in 1998 with an entire chapter focused on “the limits of capitalism.” …Francis argued that…capitalism lacks morals and promotes selfish behavior. …He has been especially critical of how capitalism has increased inequality… He’s tweeted: “inequality is the root of all evil.” …he’s a major critic of greed and excessive wealth. …”Capitalism has been the cause of many sufferings…”

Wow, I almost don’t know how to respond. So many bad ideas crammed in so few words.

If you want to know why Pope Francis is wrong about capitalism and human well-being, these videos narrated by Don Boudreaux and Deirdre McCloskey will explain how free markets have generated unimaginable prosperity for ordinary people.

But the Pope isn’t just wrong on facts. He’s also wrong on morality. This video by Walter Williams explains why voluntary exchange in a free-market system is far more ethical than a regime based on government coercion.

Very well stated. And I especially like how Walter explains that markets are a positive-sum game, whereas government-coerced redistribution is (at best) a zero-sum game.

Professor Williams wasn’t specifically seeking to counter the muddled economic views of Pope Francis, but others have taken up that challenge.

Writing for the Washington Post, George Will specifically addresses the Pope’s moral preening.

Pope Francis embodies sanctity but comes trailing clouds of sanctimony. With a convert’s indiscriminate zeal, he embraces ideas impeccably fashionable, demonstrably false and deeply reactionary. They would devastate the poor on whose behalf he purports to speak… Francis deplores “compulsive consumerism,” a sin to which the 1.3 billion persons without even electricity can only aspire.

He specifically explains that people with genuine concern for the poor should celebrate industrialization and utilization of natural resources.

Poverty has probably decreased more in the past two centuries than in the preceding three millennia because of industrialization powered by fossil fuels. Only economic growth has ever produced broad amelioration of poverty, and since growth began in the late 18th century, it has depended on such fuels. …The capitalist commerce that Francis disdains is the reason the portion of the planet’s population living in “absolute poverty” ($1.25 a day) declined from 53 percent to 17 percent in three decades after 1981.

So why doesn’t Pope Francis understand economics?

Perhaps because he learned the wrong lesson from his nation’s disastrous experiment with an especially corrupt and cronyist version of statism.

Francis grew up around the rancid political culture of Peronist populism, the sterile redistributionism that has reduced his Argentina from the world’s 14th highest per-capita gross domestic product in 1900 to 63rd today. Francis’s agenda for the planet — “global regulatory norms” — would globalize Argentina’s downward mobility.

Amen (no pun intended).

George Will is right that Argentina is not a good role model.

And he’s even more right about the dangers of “global norms” that inevitably would pressure all nations to impose equally bad levels of taxation and regulation.

Returning to the economic views of Pope Francis, the BBC asked for my thoughts back in 2013 and everything I said still applies today.

P.S. Let’s close by taking a look at a few examples of how the world is getting better thanks to capitalism.

We’ll start with an example of how China’s modest shift toward markets has generated huge reductions in poverty (h/t: Cato Institute).

Now let’s look at how a wealthier society is also a safer society (h/t: David Frum).

Or how about this remarkable measure of higher living standards (h/t: Mark Perry).

Here’s an amazing chart showing how something as basic as light used to be a luxury good but now is astoundingly inexpensive for the masses (h/t: Max Roser).

These are just a few random examples of how free markets, when not overly stifled by government, can produce amazing things for ordinary people.

We may not notice the results from one year to the next, but the results are remarkable when we examine data over longer periods of time.

And if our specific goal is to help the poor, there’s no question that economic growth is far more effective than government dependency.

Which is why I’ve explained that it’s better to be a poor person in a capitalist jurisdiction.

I’d much rather be a poor person in a jurisdiction such as Hong Kong or Singapore rather than in a “compassionate” country such as France. France might give me lots of handouts, but I’d remain poor. In a free-market society, by contrast, I could climb out of poverty.

P.P.S. Methinks Pope Francis would benefit from a discussion with Libertarian Jesus.

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Three Cheers for Profits and Free Markets

What’s the most important factor for economic progress?

There are several possible answers to that question. We can take a big-picture view and argue that the key is free markets and small government, and there certainly is lots of evidence in favor of this assertion when you compare countries over time.

But what if we narrow our focus and try to identify, for instance, the key characteristic of a free market. At times, I’ve highlighted the importance of both property rights and the price system.

Private property gives people the right incentives to both produce and conserve, a lesson learned early in American history.

An unfettered price system is a mechanism that best ensures resources are efficiently utilized to serve consumers.

But we need to augment this list by also including the valuable role of the profit motive.

This Prager University video, narrated by my friend Walter Williams, succinctly explains the issue.

I especially like the section where Walter asks what institutions and entities leave us happy and contented. The answer, at least for most of us, is that we’re more likely to be satisfied in our dealing with private companies operating in competitive markets.

That’s because the profit motive gives them an incentive to treat us well, both to boost their reputations and so we’ll be repeat customers.

Simply stated, in a true free market, entrepreneurs, investors, and business owners can only become rich by providing consumers with things that make our lives better.

But our dealings with government (or government-enforced monopolies like cable companies) tend to be less rewarding, whether it’s because bureaucrats are taking our money, bossing us around, or simply treating us poorly.

So the next time some politician or pundit complains about “evil profits,” just remember Walter’s wise words from the video.

P.S. I’ve shared two other videos from Prager University, one of the Laffer Curve and one about statist policies and the Great Depression. They’ve both very much worth watching.

P.P.S. It goes without saying (but I’ll say it anyhow) that profits are only admirable if they’re earned honestly. There are fraudsters in private markets who rip off consumers and there are crony capitalists who use coercive government policies to line their pockets. These groups deserve disdain and punishment.

P.P.P.S. Walter Williams is one of America’s best public intellectuals. I’ve cited his work numerous times, but your first stop, in learning more about him, is this video from Reason TV.

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The Rahn Curve, the Laffer Curve, and Walter Williams

What’s the relationship between the Rahn Curve and the Laffer Curve?

For the uninitiated, the Rahn Curve is the common-sense notion that some government is helpful for prosperous markets but too much government is harmful to economic performance.

Even libertarians, for instance, will acknowledge that spending on core “public goods” such as police protection and courts (assuming, of course, low levels of corruption) can enable the smooth functioning of markets.

Some even argue that government spending on human capital and physical capital can facilitate economic activity. For what it’s worth, I think that the government’s track record in those areas leaves a lot to be desired, so I’d prefer to give the private sector a greater role in areas such as education and highways.

The big problem, though, is that most government spending is for programs that are often categorized as “transfers” and “consumption.” And these are outlays that clearly are associated with weaker economic performance.

This is why small-government economies such as Hong Kong and Singapore tend to grow faster than the medium-government economies such as the United States and Australia. And it also explains why growth is even slower is big-government economies such as France and Italy.

The Laffer Curve, for those who don’t remember, is the common-sense depiction of the relationship between tax rates and tax revenue.

The essential insight is that taxable income is not fixed (regardless of the Joint Committee on Taxation’s flawed methodology).

When tax rates are low, people will earn and report lots of income, but when tax rates are high, taxpayers figure out ways of reducing the amount of taxable income they earn and report to government.

This is why, for instance, the rich paid much more to the IRS after Reagan lower the top tax rate from 70 percent to 28 percent.

So why am I giving a refresher course on the Rahn Curve and Laffer Curve?

Because I’ve been asked on many occasions whether there is a relationship between the two concepts and I’ve never had a good answer.

But I’m happy to call attention to the good work of other folks, so here’s a very well done depiction of the relationship between the two curves (though in this case the Rahn Curve is called the Armey Curve).

I should hasten to add, by the way, that I don’t agree with the specific numbers.

I think the revenue-maximizing rate is well below 45 percent and I think the growth-maximizing rate is well below 30 percent.

But the image above is spot on in that it shows that a nation should not be at the revenue-maximizing point of the Laffer Curve.

Since I’m obviously a big fan of the Rahn Curve and I also like drawing lessons from cross-country comparisons, here’s a video on that topic from the Center for Freedom and Prosperity.

Well done, though I might quibble on two points, though the first is just the meaningless observation that the male boxer is not 6′-6″ and 250 lbs.

My real complaint (and this will sound familiar) is that I’m uneasy with the implication around the 1:45 mark that growth is maximized when government spending consumes 25 percent of economic output.

This implies, for instance, that government in the United States was far too small in the 1800s and early 1900s when the overall burden of government spending was about 10 percent of GDP.

But I suppose I’m being pedantic. Outlays at the national, state, and local level in America now consume more than 38 percent of economic output according to the IMF and we’re heading in the wrong direction because of demographic changes and poorly designed entitlement programs.

So if we can stop government from getting bigger and instead bring it back down to 25 percent of GDP, even I will admit that’s a huge accomplishment.

Libertarian Nirvana would be nice, but I’m more concerned at this point about simply saving the nation from becoming Greece.

P.S. I’ve shared numerous columns from Walter Williams and he is one of America’s best advocates of individual liberty and economic freedom.

Now there’s a documentary celebrating his life and accomplishments. Here’s a video preview.

Given Walter’s accomplishments, you won’t be surprised to learn that there’s another video documentary about his life.

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Immorality and the Redistributive State

Back in 2012, I shared a sadly amusing image about how the modern political process has degenerated into two wolves and a sheep voting what to have for lunch.

I was making an argument in that column against majoritarianism (and that is a critical issue, as explained in this video), but there’s also a very important moral component to this debate.

Walter Williams addresses this issue in his latest column. He starts by asking a hypothetical question.

Suppose I saw a homeless, hungry elderly woman huddled on a heating grate in the dead of winter. To help the woman, I ask somebody for a $200 donation to help her out. If the person refuses, I then use intimidation, threats and coercion to take the person’s money. I then purchase food and shelter for the needy woman. My question to you: Have I committed a crime? I hope that most people would answer yes. It’s theft to take the property of one person to give to another.

In other words, it doesn’t matter how Person A wants to spend money, it’s wrong for Person A to steal from Person B.

Walter than asks some critical follow-up questions, all of which are designed to make readers realize that theft doesn’t magically become acceptable simply because several people want to take Person B’s money.

Would it be theft if I managed to get three people to agree that I should take the person’s money to help the woman? What if I got 100, 1 million or 300 million people to agree to take the person’s $200? Would it be theft then? What if instead of personally taking the person’s $200, I got together with other Americans and asked Congress to use Internal Revenue Service agents to take the person’s $200? The bottom-line question is: Does an act that’s clearly immoral when done privately become moral when it is done collectively and under the color of law? Put another way, does legality establish morality?

Amen. Walter is exactly right.

And this is a point I need to internalize.

I’m often writing about the economic evidence for smaller government, but I suspect advocates of economic liberty and smaller government won’t win the debate unless we augment our arguments by also making the moral case against government-sanctioned theft.

And perhaps one way of getting this point across is to educate people about the fact that we used to have a very small federal government with little or no redistribution. Walter elaborates.

For most of our history, Congress did a far better job of limiting its activities to what was both moral and constitutional. As a result, federal spending was only 3 to 5 percent of the gross domestic product from our founding until the 1920s… James Madison, the acknowledged father of our Constitution, said, “Charity is no part of the legislative duty of the government.” In 1794, when Congress appropriated $15,000 to assist some French refugees, Madison stood on the floor of the House of Representatives to object, saying, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”

Here’s the bottom line according to Professor Williams.

We’ve become an immoral people demanding that Congress forcibly use one American to serve the purposes of another. Deficits and runaway national debt are merely symptoms of that larger problem.

Though I would slightly disagree with the way Walter phrased it.

I would argue that a bloated government is the symptom of growing immorality. Deficits and debt are then symptoms of that problem.

P.S. I want to quickly address another issue.

When I quote Art Laffer, I’m almost always going to be in agreement with what he says.

But, as I wrote last year, we’re in disagreement on the issue of whether states should be allowed to tax sales that take place outside their borders.

And now Art has a short video that rubbed me the wrong way.

He endorses legislation that would create a sales tax cartel and says – right at the start of this video – that this is because “states should have the right to be able to tax whatever they want to within their state.”

I agree, but this is why I’m against the so-called Marketplace Fairness Act. That legislation would allow state governments to tax outside their borders.

Simply stated, a merchant in one state should not be forced to collect taxes for a government in another state.

P.P.S. This also explains why FATCA is such horrible legislation. It is an effort by the U.S. government to coerce banks in other nations to enforce bad IRS law.

If we care about liberty, we should make sure the power of government is constrained by borders.

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Free Markets vs. Racism

Although I play basketball (poorly), I’m not a fan of the NBA. As such, I don’t pretend to have much interest in the Donald Sterling controversy.

Some people have wondered whether his rights to free speech are being infringed, but I disagree. He obviously has the right to say whatever he wants, even if he makes himself look like an idiot.

But the National Basketball Association is an organization that has certain rules, and it presumably has the right – by virtue of the contract among team owners – to impose disciplinary measures.

In other words, Sterling has free speech, but that doesn’t mean he is free from consequences if he says something dumb. Just as I have free speech at the Cato Institute, but also would suffer consequences if I said something offensive about a particular group (or, for that matter, if I started supporting tax hikes, bigger government, and statism).

And that’s a good thing. As a libertarian, I don’t want the government policing speech, but there’s nothing wrong with private sector penalties on racists.

And that’s the topic of today’s column. The free market is a powerful and under-appreciated tool for punishing racism and rewarding color-blind behavior.

Here’s some of what Walter Williams wrote on the topic for the Washington Examiner. He starts by pointing out that Sterling certainly wasn’t racist when making decisions about what basketball players to employ.

Though Sterling might be a racist, there’s an important “so what?” Does he act in ways commonly attributed to racists? Let’s look at his employment policy. This season, Sterling paid his top three players salaries totaling over $46 million. His 20-person roster payroll totaled over $73 million. Here are a couple of questions for you: What race are the players whom racist Sterling paid the highest salaries? What race dominated the 20-man roster? The fact of business is that Sterling’s highest-paid players are black, and 85 percent of Clippers players are black.

Walter draws the obvious conclusions, and he cites the path-breaking research of the late Gary Becker on the economics of discrimination.

How does one explain this? …Let’s use a bit of simple economics… First, professional basketball is featured by considerable market competition. …There’s open competition in joining both high-school and college teams. You just sign up for tryouts in high school and get noticed by college scouts. Then there’s considerable competition among the NBA teams in the acquisition of the best college players. Minorities and less preferred people always do better when there are open markets instead of regulated markets. Recently deceased Nobel Prize-winning economist Gary Becker pointed this phenomenon out some years ago in his path-breaking study “The Economics of Discrimination.” Many people think that it takes government to eliminate racial discrimination, but economic theory predicts the opposite. Market competition imposes inescapable profit penalties on for-profit enterprises when they make employment decisions on any basis other than worker productivity.

In other words, the free market pushes people to make decisions on the basis of ability rather than race.

The takeaway from the Sterling affair is that we should mount not a moral crusade but an economic liberty crusade. In other words, eliminate union restrictions, wage controls, occupational and business licensure, and other anti-free market restrictions. Make opportunity depend on one’s productivity.

And as you can imagine, Walter speaks with authority on these issues. And he’s right that the free market is a weapon against racism.

By contrast, when government gets involved with race issues, you often get nonsensical results, such as EEOC penalties against companies trying to weed out criminals, or legal harassment of financial institutions for trying to make sensible loans.

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Walter Williams on the Moral Difference Between Markets and Statism

Since starting this blog, I’ve cited several columns by Walter Williams (see here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, and here), in large part because he’s so good at explaining economic concepts, but also because he’s very effective when demonstrating how big government undermines both freedom and prosperity.

His latest column, though, is now among my favorites since he succinctly explains the moral difference between markets and government.

In a free-market system, in order for one to get more for himself, he must serve his fellow man. This is precisely what Adam Smith, the father of economics, meant when he said in “An Inquiry Into the Nature and Causes of the Wealth of Nations” (1776): “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” …Free-market capitalism is relatively new in human history. Before the rise of capitalism, the way people amassed great wealth was by looting, plundering and enslaving their fellow man. Capitalism made it possible to become wealthy by serving one’s fellow man.

I’ve tried to make similar points, particularly in my post about government coercion vs. private charity. But Walter has a way with words.

I also like the way he closed his column. After explaining that big businesses often oppose capitalism, he then shows the similarity between tyrants and other statists.

Free-market capitalism has other enemies — mostly among the intellectual elite and political tyrants. These are people who believe that they have superior wisdom to the masses… Tyrants do not trust that people acting voluntarily will do what the tyrant thinks they should do. They want to replace the market with economic planning and regulation. The Wall Street occupiers and their media and political allies are not against the principle of crony capitalism, bailouts and government special privileges and intervention. They share the same hostility to free-market capitalism and peaceable voluntary exchange as tyrants. What they really want is congressional permission to share in the booty from looting their fellow man.

If you want to learn more about this remarkable economist, here’s a video about Walter’s life and here’s an interview about his latest book.

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Walter Williams vs. Barack Obama on Class Warfare

It isn’t fair to compare and contrast the views of a distinguished economist with the envious ramblings of a career politician/community activist. But it’s also not right for the government to use coercion to impose bad policy, so I don’t feel guilty about sharing this excerpt from a recent Walter Williams column.

President Barack Obama, in stoking up class warfare, said, “I do think at a certain point you’ve made enough money.” This is lunacy. Andrew Carnegie’s steel empire produced the raw materials that built the physical infrastructure of the United States. Bill Gates co-founded Microsoft and produced software products that aided the computer revolution. But Carnegie had amassed quite a fortune long before he built Carnegie Steel Co., and Gates had quite a fortune by 1990. Had they the mind of our president, we would have lost much of their contributions, because they had already “made enough money.” Class warfare thrives on ignorance about the sources of income. Listening to some of the talk about income differences, one would think that there’s a pile of money meant to be shared equally among Americans. Rich people got to the pile first and greedily took an unfair share. Justice requires that they “give back.” Or, some people talk about unequal income distribution as if there were a dealer of dollars. The reason some people have millions or billions of dollars while others have very few is the dollar dealer is a racist, sexist, a multinationalist or just plain mean. Economic justice requires a re-dealing of the dollars, income redistribution or spreading the wealth, where the ill-gotten gains of the few are returned to their rightful owners. In a free society, for the most part, people with high incomes have demonstrated extraordinary ability to produce valuable services for — and therefore please — their fellow man. People voluntarily took money out of their pockets to purchase the products of Gates, Pfizer or IBM. High incomes reflect the democracy of the marketplace. The reason Gates is very wealthy is millions upon millions of people voluntarily reached into their pockets and handed over $300 or $400 for a Microsoft product. Those who think he has too much money are really registering disagreement with decisions made by millions of their fellow men. In a free society, in a significant way income inequality reflects differences in productive capacity, namely one’s ability to please his fellow man.

Here’s my contribution to the debate, a video listing five reasons why class-warfare tax policy is destructive.

The only point worth adding is that not all wealth is legitimate. Those who profit from crony capitalism and/or insider connections have accumulated money through coercion, not through their ability to serve the needs of others.

That’s why I explained, in this interview, that it is important for defenders of capitalism to draw a bright-line distinction between earning honest wealth through free markets and obtaining dishonest loot via statism.

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Are We Obligated to Obey Unjust Laws?

After World War II, some Germans tried to defend venal behavior by claiming that they were “just following orders” from their government.

Governments in America have never done anything nearly as awful as the Nazis, but there certainly are some very unpleasant blemishes in our past – and some very bad laws today.

This raises an interesting moral quandary. To what extent are we – as moral individuals – obliged to obey (or help enforce) bad law?

As is so often the case, Walter Williams has strong feelings and compelling analysis.

Decent people should not obey immoral laws. What’s moral and immoral can be a contentious issue, but there are some broad guides for deciding what laws and government actions are immoral. Lysander S. Spooner, one of America’s great 19th-century thinkers, said no person or group of people can “authorize government to destroy or take away from men their natural rights; for natural rights are inalienable, and can no more be surrendered to government — which is but an association of individuals — than to a single individual.” French economist/philosopher Frederic Bastiat (1801-50) gave a test for immoral government acts: “See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.” He added in his book “The Law,” “When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.”

I don’t pretend to know where to draw the line, but, as suggested by my posts about jury nullification, I fully subscribe to the libertarian principle that “not everything that’s illegal is immoral, and not everything that’s immoral should be illegal.”

So if you’re dodging taxes, cutting hair without a license, or smoking pot, the government better not put me on a jury if you get arrested. An if you have an expired registration sticker on your car, an unregistered gun, or a stockpile of normal light bulbs you plan on selling after the ban takes effect, you can safely confide in me.

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Policies that Disproportionately Hurt Blacks Are Bad, even if They Are Unintentionally Racist

Professor Walter Williams comments on new research showing how the minimum wage is hurting African-American employment.

Last week, two labor economists, Professors William Even (Miami University of Ohio) and David Macpherson (Trinity University), released a study for the Washington, D.C.-based Employment Policies Institute titled “Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases.” During the peak of what has been dubbed the Great Recession, the unemployment rate for young adults (16 to 24 years of age) as a whole rose to above 27 percent. The unemployment rate for black young adults was almost 50 percent, but for young black males, it was 55 percent. Even and Macpherson say that it would be easy to say this tragedy is an unfortunate byproduct of the recession, but if you said so, you’d be wrong. Their study demonstrates that increases in the minimum wage at both the state and federal level are partially to blame for the crisis in employment for minority young adults. …Among the white males, the authors find that “each 10 percent increase in a state or federal minimum wage has decreased employment by 2.5 percent; for Hispanic males, the figure is 1.2 percent. “But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent.” The authors go on to say, “The effect is similar for hours worked: each 10 percent increase reduces hours worked by 3 percent among white males, 1.7 percent for Hispanic males, and 6.6 percent for black males.”

I don’t think that supporters of the minimum wage are racist, but there’s no doubt that they support a policy that has a disproportionately negative impact on blacks. Indeed, the same is true for the school choice issue. African-Americans are especially victimized by crummy government-run schools. Yet the same leftists who generally support higher minimum wages that lead to black unemployment are almost always against school choice, thus condemning minorities to worse life outcomes.

At some point, they should be held morally accountable for the impact of their policies. On both minimum wage laws and school choice, they’re on the wrong side because of the power of union bosses (and all the campaign cash the unions disburse). They’re not motivated by racism, but the result is racist policies.

For more information about the minimum wage, here’s some of what Orphe Divougny had to say in his Center for Freedom and Prosperity video from last year.

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Walter Williams, Freedom Fighter

I’ve been fortunate to know Walter Williams ever since I began my Ph.D. studies at George Mason University in the mid-1980s. He is a very good economist, but his real value is as a public intellectual.

He also has a remarkable personal story, which he tells in his new autobiography, Up from the Projects. I’ve read the book and urge you to do the same. It’s very interesting and, like his columns, crisply written.

To get a flavor for Walter’s strong principles and blunt opinions, watch this video from Reason TV. I won’t spoil things, but the last couple of minutes are quite sobering.

I suppose a personal story might be appropriate at this point. My ex also was at George Mason University, and she was Walter’s research assistant. Walter would give multiple-choice tests to students taking his entry-level classes and she was responsible for grading them by sending them through a machine that would “click” for every wrong answer. For almost every student, it sounded like a machine gun was going off. Suffice to say, Walter’s classes were not easy.

So while I’m glad to say he’s my friend, I’m also happy I never took one of his classes.

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We Should Promote Liberty in the Middle East, not Democracy

I haven’t commented on what’s been happening in Libya, Egypt, and the rest of the Arab world. This isn’t because I don’t care, but rather because I don’t have much knowledge about the area and I’m not sure what, if anything, the United States should do. Or could do.

I will say, however, that one of my concerns is that these countries will stumble from one form of oppression to another. And maybe the new form of oppression (post-1979 Iran) will be worse than the old form of oppression (pre-1979 Iran). I suspect President Obama and his team understand this, which is why the White House is being very cautious.

What I would like to see, of course, is genuine freedom and liberty. But this is not the same as democracy.

Democracy and liberty can overlap, to be sure, but democracy also can morph into untrammeled majoritarianism – what is sometimes known as tyranny of the majority.

Interestingly, even researchers at the International Monetary Fund share my concerns. A recent study from the IMF reported that, “economic freedom [is]… beneficial to growth, while democracy may have a small negative effect.” In other words, give people liberty, and good things happen. Give them democracy, and the outlook is not nearly as encouraging.

Walter Williams, as is so often the case, explains the real issue. This is a long excerpt, but every word is worth reading, especially the quotes from the Founding Fathers.

Like the founders of our nation, I find democracy and majority rule a contemptible form of government. …I’ll begin by quoting our founders on democracy. James Madison, in Federalist Paper No. 10, said that in a pure democracy, “there is nothing to check the inducement to sacrifice the weaker party or the obnoxious individual.” At the 1787 Constitutional Convention, Virginia Gov. Edmund Randolph said, “… that in tracing these evils to their origin every man had found it in the turbulence and follies of democracy.” John Adams said, “Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There was never a democracy yet that did not commit suicide.” Alexander Hamilton said, “We are now forming a Republican form of government. Real Liberty is not found in the extremes of democracy, but in moderate governments. If we incline too much to democracy, we shall soon shoot into a monarchy, or some other form of dictatorship.” The word “democracy” appears nowhere in the two most fundamental documents of our nation — the Declaration of Independence and the U.S. Constitution. …What’s the difference between republican and democratic forms of government? John Adams captured the essence when he said, “You have rights antecedent to all earthly governments; rights that cannot be repealed or restrained by human laws; rights derived from the Great Legislator of the Universe.” That means Congress does not grant us rights; their job is to protect our natural or God-given rights. For example, the Constitution’s First Amendment doesn’t say Congress shall grant us freedom of speech, the press and religion. It says, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press…” …In a democracy, the majority rules either directly or through its elected representatives. As in a monarchy, the law is whatever the government determines it to be. Laws do not represent reason. They represent force. The restraint is upon the individual instead of government. Unlike that envisioned under a republican form of government, rights are seen as privileges and permissions that are granted by government and can be rescinded by government. To highlight the offensiveness to liberty that democracy and majority rule is, just ask yourself how many decisions in your life would you like to be made democratically. How about what car you drive, where you live, whom you marry, whether you have turkey or ham for Thanksgiving dinner?

Here are a few of David Harsanyi’s sage comments, from an article he wrote for Reason. He makes many of the same points about the importance of protecting individual liberty, regardless of the sentiments of 51 percent of the general population.

…a number of anchors and talking heads have made a careless habit of using the words “democracy” and “freedom” as if they were interchangeable ideas. …Alas, it only takes 51 percent of you to ban a stiff energy drink or a decent light bulb—a crime against not only liberty but also decent luminosity. When liberals crusade to end electoral colleges or scoff at states’ rights, they are fighting for a more direct, centralized democracy in which liberty becomes susceptible to the temporary whims, ideological currents, and fears (rational and sometimes not) of the majority. When the tea party members talk about returning “power to the people”—as they’re apt to do on occasion—they’re missing the point, as well. We already defer too much power to other people. If you knew the people I do, you’d be chanting “power from the people.” …democracy is clearly a vast improvement over an autocracy. …Democracy without a moral foundation, economic freedom, or a respect for individual and human rights, though, has the potential not to be any kind of freedom at all. We all wish the Muslim world the best in shedding its dictatorships and theocracies and finding true liberty. But let’s not confuse two distinct ideas.

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School Choice Is a Necessary but not Sufficient Condition to Improve Educational Performance by Minority Students

School choice should be the civil rights issue of the 21st century. Rich people already have school choice, both because they have the ability to live in good school districts and they have the resources to send their kids to private schools. The children of poor people, by contrast, are warehoused in failing government schools. Here’s what Kevin Huffman recently said for the Washington Post.

In this country, if you are middle or upper class, you have school choice. You can, and probably do, choose your home based on the quality of local schools. Or you can opt out of the system by scraping together the funds for a parochial school. But if you are poor, you’re out of luck, subject to the generally anti-choice bureaucracy. Hoping to win the lottery into an open enrollment “choice” school in your district? Good luck. How about a high-performing charter school? Sure – if your state doesn’t limit their numbers and funding like most states do. And vouchers? Hiss! You just touched a political third rail. …We may have done away with Jim Crow laws, but we have a Jim Crow public education system. …Consider the recent results from a test of 15-year-olds around the world. Headlines noted the embarrassing American mediocrity (31st out of 65 countries in math, with scores below the international average). Even worse, our results are profoundly segregated by race. White and Asian Americans are still in the upper echelon. But African American and Latino students lag near the bottom quartile of world standards. As we think about our game plan to “win the future,” our black and Latino students won’t be competing with China and Finland – they’re on track to scrap it out with Bulgaria and Mexico.

But school choice is only part of the answer. If parents lack a commitment to education (or are not even present in the home), then even good schools won’t translate into good students. Walter Williams explains.

The public education establishment bears part of the responsibility for this disaster, but a greater portion is borne by black students and their parents, many of whom who are alien and hostile to the education process. …Violence, weapons-carrying, gang activity and student or teacher intimidation should not be tolerated. Students engaging in such activity should be summarily expelled. Some might worry about the plight of expelled students. I think we should have greater concern for those students whose education is made impossible by thugs and the impossible learning environment they create. Another part of the black education disaster has to do with the home environment. More than 70 percent of black children are born to unwedded mothers, who are often themselves born to unwedded mothers. Today’s level of female-headed households is new in black history. Until the 1950s, almost 80 percent of black children lived in two-parent households, as opposed to today’s 35 percent. Often, these unwedded mothers have poor parenting skills and are indifferent, and sometimes hostile, to their children’s education. The resulting poorly behaving students should not be permitted to sabotage the education of students whose parents are supportive of the education process. At the minimum, a mechanism such as tuition tax credit or educational voucher ought to be available to allow parents and children who care to opt out of failing schools. Some people take the position that we should repair not abandon failing schools. That’s a vision that differs little from one that says that no black child’s education should be improved unless we can improve the education of all black children. …Our black ancestors, just two, three, four generations out of slavery, would not have tolerated school behavior that’s all but routine today. The fact that the behavior of many black students has become acceptable and made excuses for is no less than a gross betrayal of sacrifices our ancestors made to create today’s opportunities.

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The Extraordinary Life and Insight of Walter Williams

I don’t think I’ve ever promoted a book since starting this blog, but the new autobiography from Walter Williams is too good not to recommend. But don’t believe me. Walter was just interviewed by the Wall Street Journal, and you can get a flavor for his blunt style and crisp analysis. Speaking for myself, I’m going to steal his line about how “Politicians exploit economic illiteracy.” Read the entire WSJ column here, but mostly get his book and read that.

Even in the antebellum era, when slaves often weren’t permitted to wed, most black children lived with a biological mother and father. During Reconstruction and up until the 1940s, 75% to 85% of black children lived in two-parent families. Today, more than 70% of black children are born to single women. “The welfare state has done to black Americans what slavery couldn’t do, what Jim Crow couldn’t do, what the harshest racism couldn’t do,” Mr. Williams says. “And that is to destroy the black family.” …Walter Williams was a libertarian before it was cool. And like other prominent right-of-center blacks—Clarence Thomas, Thomas Sowell, Shelby Steele—his intellectual odyssey began on the political left. …”I thought some laws, like minimum-wage laws, helped poor people and poor black people and protected workers from exploitation. I thought they were a good thing until I was pressed by professors to look at the evidence.” …He earned his doctorate in 1972 from UCLA, which had one of the top economics departments in the country, and he says he “probably became a libertarian through exposure to tough-mined professors”—James Buchanan, Armen Alchian, Milton Friedman—”who encouraged me to think with my brain instead of my heart. I learned that you have to evaluate the effects of public policy as opposed to intentions.” …in 1982 he published his first book, “The State Against Blacks,” arguing that laws regulating economic activity are far larger impediments to black progress than racial bigotry and discrimination. Nearly 30 years later, he stands by that premise. …Mr. Williams’s writings have sought to highlight “the moral superiority of individual liberty and free markets,” as he puts it. “I try to write so that economics is understandable to the ordinary person without an economics background.” His motivation? “I think it’s important for people to understand the ideas of scarcity and decision-making in everyday life so that they won’t be ripped off by politicians,” he says. “Politicians exploit economic illiteracy.” …he says. “When I fill in for Rush, I get emails from blacks who say they agree with what I’m saying. And there are a lot of white people questioning ideas on race, too. There’s less white guilt out there. It’s progress.”

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Walter Williams Is Skeptical about the House GOP Pledge to Obey the Constitution

Walter Williams has a column about the House GOP’s commitment to make sure legislation is consistent with the Constitution. As with most things he writes, it is very much worth reading. Walter starts by explaining what Boehner and the rest of the Republicans have promised to do. He then points out that – if they’re serious – this will require dramatic changes.

Here’s the House of Representatives new rule: “A bill or joint resolution may not be introduced unless the sponsor has submitted for printing in the Congressional Record a statement citing as specifically as practicable the power or powers granted to Congress in the Constitution to enact the bill or joint resolution.” Unless a congressional bill or resolution meets this requirement, it cannot be introduced. If the House of Representatives had the courage to follow through on this rule, their ability to spend and confer legislative favors would be virtually eliminated. Also, if the rule were to be applied to existing law, they’d wind up repealing at least two-thirds to three-quarters of congressional spending.

Walter’s column cites several Presidents that actually cared about the Constitution and vetoed legislation that would have expanded the federal government’s powers. The passages, from Presidents Madison, Pierce, and Cleveland, are inspirational – particularly compared to what we get from modern Presidents. George W. Bush, for instance, signed the McCain-Feingold legislation to restrict free speech, even though he recognized that bill made a mockery of the First Amendment.

Madison, who is sometimes referred to as the father of our Constitution, added to his veto statement, “The legislative powers vested in Congress are specified and enumerated in the eighth section of the first article of the Constitution, and it does not appear that the power proposed to be exercised by the bill is among the enumerated powers.” Here’s my question to any member of the House who might vote for funds for “constructing roads and canals, and improving the navigation of water courses”: Was Madison just plain constitutionally ignorant or has the Constitution been amended to permit such spending? What about handouts to poor people, businesses, senior citizens and foreigners? Madison said, “Charity is no part of the legislative duty of the government.” In 1854, President Franklin Piece vetoed a bill to help the mentally ill, saying, “I cannot find any authority in the Constitution for public charity. (To approve the measure) would be contrary to the letter and spirit of the Constitution and subversive to the whole theory upon which the Union of these States is founded.” …President Grover Cleveland vetoed a bill for charity relief, saying, “I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit.”

Last but not least, Walter debunks the notion that the “general welfare” clause is some soft of carte blanche for Congress to grab powers not explicitly authorized in Article I. Section VIII, of the Constitution.

Suppose a congressman attempts to comply with the new rule by asserting that his measure is authorized by the Constitution’s general welfare clause. Here’s what Thomas Jefferson said: “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.” Madison added, “With respect to the two words ‘general welfare,’ I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”

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The Poverty Pimp Index

Walter Williams periodically has explained that the main beneficiaries of the so-called War on Poverty are all the bureaucrats who have very lucrative jobs in all the various redistribution programs, agencies, and departments. He calls these people “poverty pimps” and asks whether they actually have an incentive to solve problems since that would put their jobs at risk. Those are all interesting issues, but this post looks at the number of bureaucrats, by state, working in the “public welfare” industry (the Census Bureau has an interactive program that allows this type of calculation). Comparing that number of bureaucrats to each state’s population allows the creation of a “Poverty Pimp Index” showing the number of bureaucrats (at the state and local level) per 100,000 of population.

Surprisingly, New Hampshire is the worst state, requiring four times as many bureaucrats per capita to administer income-redistribution programs as Hawaii, which is the surprise winner as the most efficient state. I’m sure these numbers represent a gross over-simplification, and they may depend on how states classify employees, so this is nothing but a quick look at some interesting data. If anybody knows of more substantive research on the comparative efficiency of how states administer programs, please send it my way.

The Poverty Pimp Index (“public welfare” bureaucrats per 100,000 residents)

New Hampshire              360
Alaska                             302
New York                       290
Maine                              280
Wisconsin                      277
Pennsylvania                 277
DC                                 277
Minnesota                     266
New Jersey                   255
Ohio                               255

Kansas                             121
Idaho                               120
Georgia                           118
Texas                               113
South Carolina                104
Nevada                             99
Mississippi                         96
Indiana                            95
Florida                             92
Hawaii                              86

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A Basic – but Critical – Economics Lesson from Walter Williams

Just because something is free, that doesn’t mean there is no cost. This is the core message of Walter Williams’ column, which uses the example of “employer-paid” Social Security taxes to explain how politicians specialize in giving us very expensive things for “free.” 

Scarcity means there’s no free lunch. Having more of one thing requires having less of another. You might say, “Williams, that’s where you’re wrong. Someone gave me this newspaper and I’m reading your column for free!” Not true. If you weren’t spending time reading my column, you might have spent the time reading something else, chatting with your wife or children, or going out for a jog. You’re reading my column for a zero price but you’re not doing so at zero cost. You have to sacrifice something. There are zero-price services such as “free libraries,” “free public schools,” “free transportation” and free whatever. It doesn’t mean that costs are not being borne by somebody. The vision of getting something for nothing, or getting something that someone else has to pay for, explains why so many Americans are duped by politicians. A congressional hoax that’s flourished for seven decades is the Social Security hoax that half of the Social Security tax (6.2 percent) is paid by employers, the other half (6.2 percent) paid by employees. The law says that if you are self-employed, you get to pay both halves. The fact of the matter is whether you’re self-employed or not, you pay both halves of the Social Security tax that totals 12.4 percent. Let’s look at it. Suppose you hire me and our agreed-upon weekly salary is $500. From that $500, you’re going to deduct $31 as my share of the Social Security tax and you’re going to add $31 as the so-called employer’s share, sending a total of $62 to the IRS. Here’s the question: What is the weekly cost for you to hire me? I hope you answered $531. …The reason why Congress created the fiction of the employer share was to deceive us into thinking that we’re paying fewer taxes than we in fact are.

Reminds me of P.J. O’Rourke’s famous line about, “If you think health care is expensive now, wait until you see what it costs when it’s free.”

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Have Republicans Learned from their Mistakes?

Walter Williams looks at the terrible job Republicans did when they last held power and asks whether they deserve to win the House and/or Senate this November. Or perhaps the real question is whether it would make a difference for Republicans to regain control? The real test, Walter explains, is whether they would use their power of the purse to de-fund the implementation of Obamacare.

…what can liberty-minded Americans expect from a Republican majority? Maybe a good starting point for an answer might be to examine how Republicans have handled their majority in the past. …The 1994 elections gave Republican control of both the House and Senate. They held a majority for a decade. The 2000 election of George W. Bush as president gave Republicans what the Democrats have now, total control of the legislative and executive branches of government. When Bush came to office, federal spending was $1.788 trillion. When he left office, federal spending was $2.982 trillion. That’s a 60 percent increase in federal spending, closely matching the profligacy of Lyndon Johnson’s presidency. During the Republican control, the nation was saddled with massive federal interference in education through No Child Left Behind. Prescription drug handouts became a part of the Republican-controlled Congress’ legacy. And it was during this interval that Congress accelerated its interference, assisted by the Federal Reserve Bank, in the housing market in the name of homeownership that produced much of the financial meltdown that the nation suffered in 2008. …If Republicans win the House of Representatives, there are measures they should take in their first month of office, and that is to undo most of what the Democratically controlled Congress has done. If they don’t win a veto-proof Senate, they can’t undo Obamacare but the House alone can refuse to fund any part of it. There are numerous blocking tactics that a Republican-controlled House can take against those hell-bent on trampling on our Constitution. The question is whether they will have guts and principle to do it. After all, many Americans, including those who are Republicans, have a stake in big government control, special privileges and handouts.

I’m skeptical about the benefits of a GOP takeover. Look at the GOP leadership in the House and Senate and you will find a bunch of politicians who supported Bush’s big-government policies. They have been fighting against Obama’s statist schemes for the past two years, to be sure, but are they saying and doing the right thing now because they genuinely believe in freedom, or are they fighting Obama merely for partisan purposes? Needless to say, I’m not very confident about the answer to that question.

I’ve had conversations with people about whether it might be best for the nation to have Republicans go up to 215 seats in the House and 48 in the Senate. That would be enough (particularly in the Senate) to block any new Obama schemes such as cap-n-trade, but it would leave Democrats in the majority and give Republicans more time to purge the big-government virus that infected the party during the Bush years. But if I genuinely had confidence the GOP would de-fund the implementation of Obamacare, that might change the calculation.

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Walter Williams Discusses Racial and Sexual Profiling

With his usual bluntness, Professor Walter Williams of George Mason University explains why profiling is not always a sign of racism or sexism. And it certainly doesn’t necessarily indicate animus. His column explains that rational profiling can lead to injustice for law-abiding young black men, but he hits the nail on the head by stating that any resulting anger should be directed at young black male criminals who make other people (of all colors) more likely to profile. The same could be said about young Muslim men who object to extra attention at airports. For the 99 percent-plus that just want to peaceably travel, it must be very irritating to deal with suspicion. But they should be angry at the radical Islamists who have created legitimate apprehension. I don’t know if there are any policy lessons, but Walter’s column (as always) is worth reading.

Prostate cancer is nearly twice as common among black men as white men. It would…be a best practice for a physician to be attentive to — even risk false positive PSAs — prostate cancer among his black patients. What about physicians who order routine mammograms for their 40-year and older female patients but not their male patients? …Because of a correlation between race, sex and disease, the physician is using a cheap-to-observe characteristic, such as race or sex, as an estimate for a more costly-to-observe characteristic, the presence of a disease. The physician is practicing both race and sex profiling. Does that make the physician a racist or sexist? Should he be brought up on charges of racial discrimination because he’s guessing that his black patients are more likely to suffer from prostate cancer? Should sex discrimination or malpractice suits be brought against physicians who prescribe routine mammograms for their female patients but not their male patients? …Is an individual’s race or sex useful for guessing about other unseen characteristics? Suppose gambling becomes legal for an Olympic event such as the 100-meter sprint. I wouldn’t place a bet on an Asian or white runner. Why? Blacks who trace their ancestry to West Africa, including black Americans, hold more than 95 percent of the top times in sprinting. That’s not to say an Asian or white can never win but I know the correlations and I’m playing the odds. If women were permitted to be in the sprint event with men, I’d still put my money on a black male. Does that make me a sexist as well as a racist? …Ten years ago, a black D.C. commissioner warned cabbies, most of whom are black, against picking up dangerous-looking passengers. She described dangerous-looking as a “young black guy … with shirttail hanging down longer than his coat, baggy pants, unlaced tennis shoes.” She also warned cabbies to stay away from low-income black neighborhoods. Cabbies themselves have developed other profiling criteria. There is no sense of justice or decency that a law-abiding black person should suffer the indignity being passed up. At the same time, a taxicab driver has a right to earn a living without being robbed, assaulted and possibly murdered. One of the methods to avoid victimization is to refuse to pick up certain passengers in certain neighborhoods or passengers thought to be destined for certain neighborhoods. Again, a black person is justifiably angered when refused service but that anger should be directed toward the criminals who prey on cabbies. Not every choice based on race represents racism and if you think so, you risk misidentifying and confusing human behavior. The Rev. Jesse Jackson once said, “There is nothing more painful for me at this stage in my life than to walk down the street and hear footsteps and start thinking about robbery — then look around and see somebody white and feel relieved.”

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Roosevelt and Obama, Two Peas in a Pod

Walter Williams explains how Roosevelt’s policies extended the Great Depression. SInce Obama apparently would like to be the new FDR, this does not bode well for America’s future. The good news, so to speak, is that Obama’s policies are not nearly as bad as what Roosevelt (and Hoover) enacted, so America today is experiencing sub-par growth rather than economic cataclysm.

…let’s look at the failed stimulus program of Obama’s hero, Franklin Delano Roosevelt. FDR’s Treasury Secretary, Henry Morgenthau, wrote in his diary: “We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!” Morgenthau was being a bit gracious. The unemployment figures for FDR’s first eight years were: 18 percent in 1935; 14 percent in 1936; by 1938, unemployment was back to 20 percent. …During the Roosevelt administration, the top rate was raised at first to 79 percent and then later to 90 percent. Hillsdale College economic historian Professor Burton Folsom notes that in 1941, Roosevelt even proposed a whopping 99.5 percent marginal rate on all incomes over $100,000. …The Great Depression did not end until after WWII. Why it lasted so long went unanswered until Harold L. Cole, professor of economics at the University of Pennsylvania, and Lee E. Ohanian, professor of economics at UCLA, published their research project “How Government Prolonged the Depression” in the Journal of Political Economy (August 2004). Professor Cole explained, “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes. Ironically, our work shows that the recovery would have been very rapid had the government not intervened.” Professors Cole and Ohanian argue that FDR’s economic policies added at least seven years to the depression.

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Walter Williams and America’s Founding

I’ve only excerpted three paragraphs, but you should read his entire column. It is very tragic that the vision of liberty put forth by the Founders has been so undermined by modern politicians who swear an oath to the Constitution without having any idea what the document actually says.

In 1794, when Congress appropriated $15,000 to assist some French refugees, James Madison, the acknowledged father of our Constitution, stood on the floor of the House to object, saying, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” He later added, “(T)he government of the United States is a definite government, confined to specified objects. It is not like the state governments, whose powers are more general. Charity is no part of the legislative duty of the government.” Two hundred years later, at least two-thirds of a multi-trillion-dollar federal budget is spent on charity or “objects of benevolence.” What would the founders think about our respect for democracy and majority rule? Here’s what Thomas Jefferson said: “The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society.” John Adams advised, “Remember democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” The founders envisioned a republican form of government, but as Benjamin Franklin warned, “When the people find they can vote themselves money, that will herald the end of the republic.” What would the founders think about the U.S. Supreme Court’s 2005 Kelo v. City of New London decision where the court sanctioned the taking of private property of one American to hand over to another American? John Adams explained: “The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If ‘Thou shalt not covet’ and ‘Thou shalt not steal’ were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free.”

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How Unions Screw Poor People Out of Jobs

Ever wonder why unions care so much about the minimum wage when almost all union members get paid above that level? The answer is simple, but sleazy. As Walter Williams explains, they want to protect their high-pay status by increasing the cost of lower-skilled workers. For all intents and purposes, they are pricing poor people out of the job market:

Labor unions are the major supporters of increases in the minimum wage. Even though the overwhelming majority of their members earn multiples of the minimum wage, they spend millions upon millions lobbying for minimum wage increases. They do it because higher minimum wages protect their members from competition with low-skill, low-wage workers. Most other minimum wage supporters are decent people with a concern for low-wage workers, but their actions suffer from a misguided vision of how the world operates.

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Walter Williams on Immigration

I have mixed feelings about the right response to illegal immigration. I don´t favor amnesty because of my respect for the rule of law and because it would encourage more illegal immigration. On the other hand, I certainly do not want law enforcement resources diverted to hassling people who are in America solely in search of a better life based on hard and honest work. Walter Williams has a good column on the issue which concludes with a call for more legal immigration:

I believe most people, even my open-borders libertarian friends, would not say that everyone on the planet had a right to live in the U.S. That being the case suggests there will be conditions that a person must meet to live in the U.S. …most Americans would recoil at the suggestion that somebody other than Americans should be allowed to set the conditions for people to live in the U.S. …Probably, the overwhelming majority of Mexican illegal immigrants are hardworking, honest and otherwise law-abiding members of the communities in which they reside. It would surely be a heart-wrenching scenario for such a person to be stopped for a driving infraction, have his illegal immigrant status discovered and face deportation proceedings. Regardless of the hardship suffered, being in the U.S. without authorization is a crime. …Various estimates put the illegal immigrant population in the U.S. between 10 and 20 million. One argument says we can’t round up and deport all those people. That argument differs little from one that says since we can’t catch every burglar, we should grant burglars amnesty. Catching and imprisoning some burglars sends a message to would-be burglars that there might be a price to pay. Similarly, imprisoning some illegal immigrants and then deporting them after their sentences were served would send a signal to others who are here illegally or who are contemplating illegal entry that there’s a price to pay. …Start strict enforcement of immigration law, as Arizona has begun. Strictly enforce border security. Most importantly, modernize and streamline our cumbersome immigration laws so that people can more easily migrate to our country.

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Walter Williams: Is Secession the Answer?

Because the looters and moochers in Washington have made a mockery of the Constitution, Professor Williams wonders whether the only solution is for advocates of limited government to split off and create an America based on traditional principles of self reliance and individual freedom:

I believe we are nearing a point where there are enough irreconcilable differences between those Americans who want to control other Americans and those Americans who want to be left alone that separation is the only peaceable alternative. Just as in a marriage, where vows are broken, our human rights protections guaranteed by the U.S. Constitution have been grossly violated by a government instituted to protect them. The Democrat-controlled Washington is simply an escalation of a process that has been in full stride for at least two decades. There is no evidence that Americans who are responsible for and support constitutional abrogation have any intention of mending their ways. You say, “Williams, what do you mean by constitutional abrogation?” Let’s look at just some of the magnitude of the violations. Article I, Section 8 of our Constitution lists the activities for which Congress is authorized to tax and spend. Nowhere on that list is authority for Congress to tax and spend for: prescription drugs, Social Security, public education, farm subsidies, bank and business bailouts, food stamps and other activities that represent roughly two-thirds of the federal budget. Neither is there authority for congressional mandates to the states and people about how they may use their land, the speed at which they can drive, whether a library has wheelchair ramps and the gallons of water used per toilet flush. The list of congressional violations of both the letter and spirit of the Constitution is virtually without end. Our derelict Supreme Court has given Congress sanction to do anything upon which they can muster a majority vote. …Americans who wish to live free have several options. We can submit to those who have constitutional contempt and want to run our lives. We can resist, fight and risk bloodshed and death in an attempt to force America’s tyrants to respect our liberties and human rights. We can seek a peaceful resolution of our irreconcilable differences by separating. Some independence movements, such as our 1776 war with England and our 1861 War Between the States, have been violent, but they need not be. In 1905, Norway seceded from Sweden; Panama seceded from Columbia (1903), and West Virginia from Virginia (1863). Nonetheless, violent secession can lead to great friendships. England is probably our greatest ally.

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Walter Williams Decimates Obamacare

Walter Williams correctly summarizes what it means to make healthcare a “right.”

And he also dusts off that quaint document, long forgotten in Washington, called the U.S. Constitution.

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Politicians Are the Enemy, not Rich People

 

Politicians like to play a class-warfare game of demonizing rich people. Walter Williams explains, though, that rich people can only do bad things to us if they are conspiring with politicians. The moral of the story, of course, is that government is a threat to our freedom and liberty:

Bill Gates is the world’s richest person, but what kind of power does he have over you? Can he force your kid to go to a school you do not want him to attend? Can he deny you the right to braid hair in your home for a living? It turns out that a local politician, who might deny us the right to earn a living and dictates which school our kid attends, has far greater power over our lives than any rich person. Rich people can gain power over us, but to do so, they must get permission from our elected representatives at the federal, state or local levels. For example, I might wish to purchase sugar from a Caribbean producer, but America’s sugar lobby pays congressmen hundreds of thousands of dollars in campaign contributions to impose sugar import tariffs and quotas, forcing me and every other American to purchase their more expensive sugar. Politicians love pitting us against the rich. All by themselves, the rich have absolutely no power over us. To rip us off, they need the might of Congress to rig the economic game. It’s a slick political sleight-of-hand where politicians and their allies amongst the intellectuals, talking heads and the news media get us caught up in the politics of envy as part of their agenda for greater control over our lives. …While American politicians and intellectuals have not reached the depths of tyrants such as Lenin, Stalin, Mao and Hitler, they share a common vision. Tyrants denounce free markets and voluntary exchange. They are the chief supporters of reduced private property rights, reduced rights to profits, and they are anti-competition and pro-monopoly. They are pro-control and coercion, by the state.

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Politicians vs. the Constitution

With characteristic bluntness, Walter Williams explains that much of what is happening in Washington is eroding American exceptionalism by underming the Constitution’s restraints on the power of the federal government:

At the heart of the American idea is the deep distrust and suspicion the founders of our nation had for government, distrust and suspicion not shared as much by today’s Americans. Some of the founders’ distrust is seen in our Constitution’s language such as Congress shall not: abridge, infringe, deny, disparage, violate and deny. If the founders did not believe Congress would abuse our God-given rights, they would not have provided those protections. After all, one would not expect to find a Bill of Rights in Heaven; it would be an affront to God. Other founder distrust for government is found in the Constitution’s separation of powers, checks and balances and the several anti-majoritarian provisions such as the Electoral College and the requirement that three-quarters of state legislatures ratify changes in the Constitution. The three branches of our federal government are no longer bound by the Constitution as the framers envisioned and what is worse is American ignorance and acceptance of such rogue behavior. Look at the current debate over government involvement in health, business bailouts and stimulus packages. The debate centers around questions as whether such involvement is a good idea or a bad idea and whether one program is more costly than another. Those questions are entirely irrelevant to what should be debated, namely: Is such government involvement in our lives permissible under the U.S. Constitution?

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