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Posts Tagged ‘Big Government’

The Biden Administration’s approach to tax policy is awful, as documented here, here, here, and here.

We’ve now reached the stage where bad ideas are being turned into legislation. Today’s analysis looks at what the House Ways & Means Committee (the one in charge of tax policy) has unveiled. Let’s call this the Biden-Pelosi plan.

And we’re going to use some great research from the Tax Foundation to provide a visual summary of what’s happening.

We’ll start with a very depressing look at the decline in American competitiveness if the proposal becomes law (the good news is that we’ll still be ahead of Greece!).

Next, let’s look at the Tax Foundation’s map of capital gains tax rates if the plan is approved.

Unsurprisingly, this form of double taxation will be especially severe in California.

Our third visual is good news (at least relatively speaking).

Biden wanted the U.S. to have the developed world’s highest corporate tax rate. But the plan from the House of Representatives would “only” put America in third place.

Here’s another map, in this case looking at tax rates on non-corporate businesses (small businesses and other entities that get taxed by the 1040 form).

This is not good news for America’s entrepreneurs. Especially the ones unfortunate enough to do business in New York.

Last but not least, here’s the Tax Foundation’s estimate of what will happen to the economy if the Biden-Pelosi tax plan is imposed on the nation.

There are two things to understand about these depressing growth numbers.

  • First, small differences in growth rates produce very large consequences when you look 20 years or 30 years into the future. Indeed, this explains why Americans enjoy much higher living standards than Europeans (and also why Democrats are making a big economic mistake to copy European fiscal policy).
  • Second, the Tax Foundation estimated the economic impact of the Biden-Pelosi tax plan. But don’t forget that the economy also will be negatively impacted by a bigger burden of government spending. So the aggregate economic damage will be significantly larger when looking at overall fiscal policy.

One final point. In part because of the weaker economy (i.e., a Laffer Curve effect), the Tax Foundation also estimated that the Biden-Pelosi tax plan will generate only $804 billion over the next 10 years.

P.S. Here’s some background for those who are not political wonks. Biden proposed a budget with his preferred set of tax increases and spending increases. But, in America’s political system (based on separation of powers), both the House and Senate get to decide what they like and don’t like. And even though the Democrats control both chambers of Congress, they are not obligated to rubber stamp what Biden proposed. The House will have a plan, the Senate will have a plan, and they’ll ultimately have to agree on a joint proposal (with White House involvement, of course). The same process took place when Republicans did their tax bill in 2017.

P.P.S. It’s unclear whether the Senate will make things better or worse. The Chairman of the Senate Finance Committee, Ron Wyden, has some very bad ideas about capital gains taxation and politicians such as Elizabeth Warren are big proponents of a wealth tax.

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Time to update our series on “great moments in foreign government.”

We’ll start with Jersey. I wrote a few years ago about the (relatively) good tax laws in that British dependent territory off the coast of France.

But there are two ways those laws could be improved. First, officials could abolish its income tax because a zero income tax is better than a flat tax.

And with tax policy heading in the wrong direction in the United Kingdom, that would further enhance Jersey’s competitive advantage.

Sadly, the island’s lawmakers haven’t opted for that choice.

But they did approve a second reform. As reported by the New York Times, Jersey has joined the 20th century.

Lawmakers on the island of Jersey have approved scrapping a decades-old law that prevented married women from talking to the tax authorities without the permission of their husband or filing taxes under their own names… a popular tax haven, …its financial laws have not always kept up with the times: Under its current tax law, introduced in 1928, only the husband in a heterosexual marriage can pay taxes, with his wife’s earnings considered part of his income. …Things became a bit more modern in 2013, when a box appeared on income tax forms that husbands could tick rather than giving written permission. When civil unions and same-sex marriages became legal on the island, the law allowed the older partner to take the role of “husband” and the younger “wife.” …Under the proposal backed by a majority of lawmakers on Tuesday, taxpayers would be considered as individuals. …Legislation to bring in the changes will be drafted later this year and should come into effect in 2021.

Next, we’ll visit Indonesia, where the guy who drafted a law actually got some first-hand experience with how the law is implemented. The Daily Mail has the amusing details.

An Indonesian man working for an organisation which helped draft strict religious laws ordering adulterers to be flogged has himself been whipped after he was caught having an affair with a married woman. Mukhlis, who is a member of the Aceh Ulema Council and only goes under one name like many Indonesians, was beaten 28 times with a rattan cane in the provincial capital of Banda Aceh on Thursday. Mukhlis grimaced and flinched during the punishment, before his married companion was brought to the stage and flogged some 23 times.

Now let’s travel to Switzerland, which is a sensible country (at least by standards of the modern world) with all sorts of admirable policies.

But, as reported by the Economist, that nation’s politicians have some weird ideas. Such as a strategic coffee reserve.

The 15 big Swiss coffee retailers, roasters and importers, such as Nestlé, are required by law to store heaps of raw coffee. Together, these mandated coffee reserves amount to about 15,000 tonnes—enough for three months’ consumption. The government finances the storage costs through a levy on imports of coffee. All 15 companies are in favour of maintaining the coffee reserve—as long as they are paid for it. IG Kaffee, a lobby group, asks why the government wants to scrap a stockpile that has served Switzerland so well.

Not as strange as Germany’s coffee tax or Japan’s coffee enemas, but still rather odd.

Last but not least, the Venezuelan government is well known for economic mismanagement.

But BBC reports that it also should be known for military incompetence.

A Venezuelan navy coastal patrol boat sank in the Caribbean after allegedly ramming a cruise ship that it had ordered to change direction. …The incident took place near La Tortuga Island, a Venezuelan federal dependency, on 30 March.Columbia Cruise Services, which operates the Resolute, said the cruise ship had been carrying out routine engine maintenance in international waters…shortly after midnight, the Naiguata radioed the Resolute, questioning its intentions, and ordered the captain to follow it to a port on Isla Margarita, to the east. “While the master was in contact with the head office, gunshots were fired and, shortly thereafter, the navy vessel approached the starboard side at speed… and purposely collided with the RCGS Resolute,” it added. “The navy vessel continued to ram the starboard bow in an apparent attempt to turn the ship’s head towards Venezuelan territorial waters.” …the patrol boat began taking on water.

The moral of all these stories is that governments piss away money in very interesting and novel ways.

But while these stories are somewhat entertaining, they also confirm that it’s never a good idea to give politicians more money when they’ve repeatedly shown that they squander the revenues they already have.

P.S. Here are my posts about “great moments in local government” and “great moments in state government.”

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I periodically warn that the United States is on a path to become a European-style welfare state.

That sounds good to some people since it implies lots of goodies paid for by other people.

So I always explain that there’s a downside. The economic data clearly show that there’s been less growth in Europe and this has real-world consequences.

This is why it’s so depressing that Joe Biden has a radical agenda of higher tax rates and much bigger government.

He wants us to copy an approach that has produced inferior outcomes.

The editorial page of the Wall Street Journal has been sounding the alarm.

In a recent column, Professor Josef Joffe contemplates the impact of more dependency on America’s economy.

America is the land of “predatory capitalism,” German chancellor Helmut Schmidt liked to say. …President Biden’s tax plans might soon make Europe look like a capitalist heaven by comparison. …The middle class will pay the bill. …Reversing course won’t be easy because gifts, once given, are hard to take back, whether in the U.S. or in Europe. …As government expands and hands out more goodies, it also tightens its grip on the economy. It shrinks the private sector, the engine of U.S. wealth creation. It is no accident that Europe has grown more slowly over the past 40 years as government spending, regulations and taxes have increased.

Prof. Joffe’s point about the durability of entitlements (“once given, are hard to take back”) is vitally important.

This is why it is so important to block Biden’s per-child handouts.

Dan Henninger made similarly important points a couple of months ago.

The club Mr. Biden is joining…is one the U.S. has stayed out of since World War II. That is the club known as the European welfare state. It is the government-directed system of lifetime paternalism built up by the nations of Western Europe after 1945. …Public welfare has never been America’s reason for being, notwithstanding our substantial spending on social support programs. Despite the entitlement creations of FDR’s New Deal and LBJ’s Great Society, the U.S., unlike Europe, has remained a nation driven and led by capitalist initiative. For current-generation Democrats, that fact is anathema. …The March stimulus bill already had one foot inside the economic club of Europe’s door.

For what it’s worth, I’m not quite as positive about the United States as Henninger. Our welfare state is a significant burden, though he is right that it is smaller than the welfare states in Europe.

Let’s not quibble about that point, though, because Henninger has another observation that is spot on.

Biden’s agenda is a recipe for big tax increases on the middle class.

Europe became famous for its perpetual-motion tax machine, which suppressed the continent’s entrepreneurial instincts. Besides income taxes, Europe relies heavily on the collection of notoriously high value-added taxes…total tax revenue from all governments in the U.S. as a percentage of GDP is 24%, compared with an average of more than 40% in seven European nations… Those European tax levels will never fall. Their governments gotta have the money. Mr. Biden purports that his proposed $3 trillion in tax increases hit only corporations and “the wealthiest.” But if his entitlements become law, European levels of middle-class taxation—perhaps a VAT or carbon tax—are inevitable. Mr. Biden’s plans to increase Internal Revenue Service audits lay the groundwork for that.

Amen.

Honest folks on the left openly admit that this is true.

I’ll close with two final points.

First, it would be a mistake to copy Europe’s welfare states, but there are worse things that could happen. Those nations may lag the United States, but they are generally richer than other parts of the world.

But I’m not sure “better than Venezuela” is a persuasive selling point.

Second, because of demographic change and poorly designed entitlement programs, we’re already on a path to become a European welfare state.

But I’m not sure “let’s drive faster over the cliff” is a persuasive selling point.

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I’ve made the case for capitalism (Part I, Part II, Part III, Part IV, and Part V) and the case against socialism (Part I, Part II, and Part III), while also noting that there’s a separate case to be made against redistribution and the welfare state.

This video hopefully ties together all that analysis.

If you don’t want to spend 10-plus minutes watching the video, I can sum everything up in just two sentences.

  1. Genuine socialism (government ownershipcentral planning, and price controls) is an utter failure and is almost nonexistent today (only in a few basket-case economies like Cuba and North Korea).
  2. The real threat to free enterprise and economic liberty is from redistributionism, the notion that politicians should play Santa Claus and give us a never-ending stream of cradle-to-grave goodies.

For purposes of today’s column, though, I want to focus on a small slice of the presentation (beginning about 2:00).

Here’s the slide from that portion of the video.

I make the all-important point that profits are laudable – but only if they are earned in the free market and not because of bailoutssubsidiesprotectionism, or a tilted playing field.

This is hardly a recent revelation.

I first wrote about this topic back in 2009.

And many other supporters of genuine economic liberty have been making this point for much longer.

Or more recently. In a new article for City Journal, Luigi Zingales emphasizes that being pro-market does not mean being pro-business.

The first time I visited the Grand Canyon many years ago, I was struck…by a sign that said, “Please don’t feed the wild animals.” Underneath was an explanation: you shouldn’t feed them because it’s not good for them. …We should post something of this kind on Capitol Hill as well—with the difference being that the sign would read, “Please don’t feed the businesses.” That’s not because we don’t like business. Quite the opposite: we love business so much that we don’t want to create a situation where business is so dependent on…a system of subsidies, that it is unable to compete and succeed… This is the…difference between being pro-market and being pro-business. If you are pro-business, you like subsidies for businesses; you want to make sure that they make the largest profits possible. If, on the other hand, you are pro-markets, you want to behave like the ranger in the Grand Canyon: …ensuring that markets remain competitive and…preventing businesses from becoming too dependent on a crony system to survive.

Amen.

Cronyism is bad economic policy because government is tilting the playing field and luring people and businesses into making inefficient choices.

But I also despise cronyism because some people mistakenly think it is a feature of free enterprise (particularly the people who incorrectly assume that being pro-market is the same as being pro-business).

The moral of the story is that we should have separation of business and state.

P.S. There’s one other point from Prof. Zingales’ article that deserves attention.

He gives us a definition of capitalism (oops, I mean free enterprise).

We use the term “free markets” so often that we sometimes forget what it actually means. If you look up “free markets” in the dictionary, you might see “an economy operating by free competition,” or better, “an economic market or system in which prices are based on competition among private businesses and not controlled by a government.”

For what it’s worth, I did the same thing for my presentation (which was to the New Economic School in the country of Georgia).

Here’s what I came up with.

By the way, the last bullet point is what economists mean when they say things are “complementary.”

In other words, capital is more valuable when combined with labor and labor is more valuable when combined with capital – as illustrated by this old British cartoon (and it’s the role of entrepreneurs to figure out newer and better ways of combining those two factors of production).

One takeaway from this is that Marx was wrong. Capital doesn’t exploit labor. Capital enriches labor (just as labor enriches capital).

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I just got back from Medellin, Colombia, where I gave a presentation to the Liberty International World Conference.

My topic was “The Fatal Mix of Demographic Change and the Welfare State” and I made my usual points about how poorly designed entitlement programs are going to wreak havoc, in large part because of demographic change.

Simply stated, tax-and-transfer programs collapse when there are too many beneficiaries and too few taxpayers.

This means politicians will be forced to act and I included this slide to show some of their main options (including my favorite, genuine entitlement reform).

But I noted in my speech that this was just a partial list of how politicians can respond.

  • They can also reduce payments to beneficiaries (an option that I view as very unlikely)
  • They can also finance promised benefits by printing money (I hope this also is very unlikely).

But there’s another option that I didn’t mention.

Politicians can indirectly finance their vote buying with “financial repression.” If you’re not familiar with that concept, Joseph Sternberg tells you what you need to know in a must-read column in Wall Street Journal.

He starts with some discussion of how repression worked in the past.

Government spending is conventionally understood as a matter of increased taxation and debt, a framing that has the virtue of being true. But that conversation is incomplete without also exploring the concept of financial repression—which ultimately underlies both the taxes and debt. …in spendthrift developing countries. Governments would suppress interest rates on domestic savings to below the rate of inflation to reduce rates on lending. The point was to service government borrowing and subsidize credit to politically favored industries. In the process, they’d create a substantial wealth transfer from private creditors to debtors… Developed economies have deployed this gimmick too. Regulation of the rates banks paid on savings was an important, and not the only, bit of financial repression perpetrated against Americans.

And he warns how repression can work today.

Financial repression nowadays consists of several overlapping phenomena beyond the classic suppression of bank interest rates. A nonexhaustive list: more-intrusive management of assets and credit allocation in the banking system via reserve requirements, capital regulations and the like; a blurring of the line between fiscal and monetary policy such that monetary authorities subsidize the fiscal authority’s borrowing while the fiscal authority creates new credit subsidies for other parties; and any press release from Sen. Elizabeth Warren demanding a new regulation on this sort of lending or that sort of borrowing. …A gaze through the lens of financial repression offers a new view of how dangerous Washington’s spending boondoggles are. …Unfettered government spending also forces voters to pay via inflation and low returns on savings in the here and now. …The redirection of savers’ resources to politically favored “borrowers” (either directly via loan guarantees or more often indirectly via the disbursement of government grants raised via deficit financing) creates inefficiency and waste.

Here’s the bottom line.

…rampant misallocation of capital and the attendant distortions of saving and investment…will create a materially worse future.

In some sense, financial repression is a back-door form of industrial policy since politicians are putting their thumbs on the scale and hindering the efficient allocation of capital.

And that’s why there’s less growth and people wind up with lower living standards as time passes.

If you’re interested in this topic (and you should be), I shared some very worrisome analysis back in 2015.

P.S. If politicians succeed in their “war on cash,” that will give them another tool for financial repression.

P.P.S. History teaches us that there is a way of climbing out of a fiscal hole without using repression.

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When I share examples of socialism humor and communism humor, I sometimes wonder whether we should laugh about ideologies that have imposed so much death and misery on the world.

For instance, I’ve shared some jokes about the horrid consequences of Venezuelan socialism.

Including jokes dealing with widespread hunger.

But now I feel a bit guilty.

Not because I’ve been mocking communism and socialism. Both are evil and deserve endless scorn.

Instead, I feel a bit guilty because I’ve actually encountered real victims of Venezuelan statism.

I’m currently in Medellin, Colombia, where I’ll be speaking tomorrow to the Liberty International World Conference.

But I first spent a week with some friends in Cartagena, a beautiful colonial city on the Atlantic Ocean.

Great food, nice beaches, friendly people, and perfect weather, but I noticed there were quite a few beggars. But these were not like the well-fed panhandlers you can find at suburban intersections in the United States, or the bums in cities like New York, San Francisco, or Washington.

Many of them were gaunt mothers with young children, and I was told they were all from Venezuela.

I had no way of confirming that information, of course, but we were only a few hundred miles from the Venezuelan border. And since millions of people have fled that nation’s horrific conditions, it makes sense that some of them wound up in Cartagena.

The most heart-wrenching part of my experience is when we left a pizza restaurant one evening. I had a box with about six leftover slices (a nutritious breakfast for the next morning).

But within two blocks, I gave them all away to various children who must have sensed I was a soft touch.

And I couldn’t help but compare their suffering with the multi-billion stash of stolen loot amassed by Chavez’s daughter.

The bottom line is that I still plan on sharing satire about the misery that socialism has caused in Venezuela. But I’ll be very cognizant of the fact that there are countless stories of horrible suffering because of big government.

P.S. I wish Bernie Sanders and the other leftists could see (and understand) how Venezuelan socialism has caused so much human misery.

P.P.S. And I wish reporters from the New York Times had enough sense (or integrity) to recognize that the misery is a consequence of socialism.

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Our friends on the left who want more government spending generally have a short-run argument and a long-run argument.

  • In the short run, they assert that more government spending can stimulate a weak economy. This is typically known as Keynesian economics and it means temporary borrowing and spending.
  • In the long run, they claim that big government is an investment that leads to better economic performance. This is the “Nordic Model” and it means permanent increases in taxes and spending.

In many ways, the debate about short-run Keynesianism is different than the debate about the appropriate long-run size of government.

But there is one common thread, which is that proponents of more government pay too much attention to consumption and too little attention to production.

I wrote a somewhat wonky column about this topic back in April, but let’s take another look at this issue.

In a column last month for the Wall Street Journal, Andy Kessler shared some economic fundamentals.

Here’s how capitalism works—pay attention if you took the social-justice version of Econ 101. SIPPC: Save. Invest. Produce. Profit. Consume. Save means postponing consumption, money and time. Only then you can invest, especially your human capital, in something productive. Usually this means doing more with less, being efficient and effective. This is when innovation happens. Wealth comes only from productivity, not from giving away money. …Supply first and then consume…, creating incentives to put money into the hands of entrepreneurs and clearing a path for them to innovate by getting government out of the way.

In some sense, this is simply the common-sense observation that you can’t consume (or redistribute) unless someone first produces.

But it’s also a deeper message about what actually drives production.

There are no shortcuts. You can’t induce demand without supply. Didn’t the lockdowns prove that? Stimulus checks did little good given that there were few places to spend them until businesses were allowed to reopen. We’re now perversely sitting on almost $3 trillion in excess savings and even more new government debt. Yet the government stimulus mentality continues in Congress. …Through taxes and currency depreciation, demand-side spending steals savings needed to invest in future supply, which is why it never works. It is why the Great Depression lasted so long, why Japan lost two decades, and why 2009-16 saw subpar U.S. economic growth. When demand drops, government spending and giveaways make things worse. The only solution to kickstart production is to increase investment and make jobs more plentiful by cutting taxes and easing regulation. ..Price signals tell entrepreneurs what to supply. But price signals are only as good as their inputs. Minimum-wage laws mess up labor price signals. Tariffs mess up trade price signals. The Federal Reserve’s bond-buying blowouts mess up interest-rate price signals.

Amen. We know the policies that lead to more prosperity, but politicians constantly throw sand in the gears.

Simply stated, bigger government diverts resources from the productive sector of the economy. And that makes it more difficult to get the innovation and investment that are necessary for rising wages.

To be sure, there are some types of government spending that arguably help a private economy function.

But that’s not what we get from much of the federal government (Department of Housing and Urban DevelopmentDepartment of EducationDepartment of EnergyDepartment of AgricultureDepartment of Transportation, etc).

Which is why the growth-maximizing size of government is far smaller than what we are burdened with today.

P.S. I can’t resist sharing this additional segment of Mr. Kessler’s column.

Modern Monetary Theory, known as MMT—what economist John Christensen called the “Magic Money Tree”—is the worst of demand-side nonsense. MMT believers think that to boost aggregate demand we can have government print money and spend, spend, spend. We tried this in the 1960s and ’70s with Great Society programs

At the risk of understatement, I agree with his concerns.

P.P.S. It’s worth noting that the World BankOECD, and IMF have all published research showing the benefits of smaller government.

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I’ve written many times about how big businesses often climb in bed with politicians to lobby for anti-market policies such as subsidies, bailouts, and protectionism.

To get these special favors, they often deploy the “baptists and bootleggers” strategy, which means finding some nice-sounding reason for special interest policies.

For instance, the big health insurance firms lobbied for Obamacare because they liked the idea of getting undeserved profits by having the government force people to buy their products.

But they pretended that their motive was more access to health care.

Another example is the way some large companies are embracing “stakeholder capitalism” to curry favor with politicians and interest groups.

Today, let’s look at an additional version of this unsavory phenomenon.

The BBC reports that the CEO of a pretend-meat company likes the idea of big tax on his more tasty competitors.

The founder of the world’s biggest plant-based meat company has suggested that a tax on meat could help tackle some of the problems from growing meat consumption. Asked if he backed a tax on meat, Beyond Meat’s Chief Executive, Ethan Brown told the BBC “the whole notion of a Pigouvian tax, which is to tax negative, you know, things that are high in externalities, I think is an interesting one. I’m not an economist, but overall that type of thing does appeal to me”. …A tax on meat consumption would definitely be beneficial to companies such as Beyond Meat because it would make their products cheaper in comparison, says Rebecca Scheuneman, an equity analyst at US financial services firm Morningstar.How much of an advantage it would give “depends how significant the tax would be”, she told the BBC.

The woman from Morningstar is quite correct that a tax on meat would help the bottom line of companies that offer competing products.

Just as I wrote in 2012 that a tax increase on small businesses would tilt the playing field in favor of big businesses.

Matthew Lesh of the London-based Adam Smith Institute wrote about a potential meat tax in an article for CapX.

Beyond Meat’s call for a meat tax is a textbook example of ‘bootleggers and baptists’: a policy supported by a coalition of profiteering rent seekers hiding on the moral high ground. …does any of that make a new meat tax a good idea? …a cost-benefit analysis conducted by the University of Bristol concluded that a meat tax “could do more harm than good”. The researchers found it would cost £242 million a year but only save £100 million per annum in reduced carbon emissions. …Then there’s the most simple argument of all – most people enjoy meat. We get satisfaction and it provides important nutrients. …most people do not want to stop eating meat and there is substantial growing demand from the rising middle class in Asia and Africa.

While he makes a good point about the costs and benefits of meat taxation, I especially like Mr. Lesh’s point about people wanting to consume meat.

This is also why I don’t want politicians imposing sugar taxes.

Or taxes on other things that fall into disfavor, such as tobacco.  Or things that rise into favor, such as marijuana.

There are plenty of things in life that are unhealthy and/or dangerous. Maybe I’m just a knee-jerk libertarian, but I think adults should be free to make their own choices about the levels of risk they’re willing to incur.

And I certainly don’t want nanny state policies that – in reality – are the result of big companies trying to get unearned profits.

Remember, only earned profits are moral.

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I recently explained the evolution of taxation – and the unfortunate consequences of income taxation – to a seminar in the country of Georgia.

One of my main points was that income taxes are a relatively new source of revenue.

The first income tax was adopted in the United Kingdom in the mid-1800s and other nations followed over the next 50-plus years (the United States joined that unfortunate club in 1913).

And, as noted in the video, income tax enabled a massive expansion in the burden of government spending.

In a column for the Foundation for Economic Education, Martin Litwak explains how the U.S. and U.K. made the mistaken choice to impose income taxes.

…income tax is a rather recent “invention,”… Income Tax was first introduced by William Pitt in the United Kingdom in 1798, and it started to be charged in 1799. The aim was not to finance original expenses of the State but the Napoleonic Wars. …It was kept in force until the Battle of Waterloo. When the tax was annulled again, every document that referred to it was burnt, due to the sense of shame associated with having established and charged this tax. …Prime Minister Robert Peel reestablished it in 1841, not to finance a war but to cover the Government’s deficit. …the United States became independent from the United Kingdom in 1776…the country imposed the first income tax…to finance…the Civil War. …In 1872, the income tax was annulled, basically due to the pressure of taxpayers, who deemed it expropriatory… In 1894, the income tax was incorporated again, but the next year, …the Supreme Court declared it unconstitutional. …In 1909, the creation of this tax was proposed again… The 16th Amendment was introduced precisely to achieve this goal.

A sad column.

But it gets worse because politicians also then imposed payroll taxes.

Then they imposed value-added taxes.

Both of which helped to finance further expansions in the burden of government spending.

The bottom line is that it’s never a good idea to give politicians a new source of revenue.

Especially new taxes that are capable of generating a lot of revenue (or a medium amount or small amount of revenue).

P.S. Interestingly, many early advocates of income taxes in the U.K. and U.S. were not trying to finance a big welfare state, but rather wanted a new revenue source so they could lower or eliminate protectionist taxes on imports.

The moral of the story is to be careful of unintended consequences.

P.P.S. If you enjoyed watching a video about the history of the income tax, here’s a (much longer) history of economic policy in the 20th century.

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It’s been almost three months since I shared some satiric images about government.

So let’s rectify that oversight with five new items.

We’ll start with some very wise words from Forest Gump (not the imposter).

The second item in today’s collection sort of reminds me of this “shovel” cartoon about Keynesian economics.

Both involve pointless gestures that will never produce results.

I don’t think I need to add any commentary to this next photo.

I shared a cartoon many years ago suggesting that organized crime and government have a lot in common.

Here’s a different view.

Per tradition, I’ve saved my favorite example for the conclusion.

The lower-right frame may not be proof of a stroke, but it’s definitely evidence of brain damage of some kind.

Remember, you’ve asked a very strange question if government is the answer.

P.S. My full collection of amusing images (and cartoons) about government can be viewed here.

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When writing about economic policy in Latin America, Chile gets lots of attention because it’s a remarkable story of success.

Similarly, Venezuela gets lots of attention because it’s a remarkable story of failure (with Argentina also deserving condemnation for its downward slide).

But we can also learn from other Latin nations.

For instance, I wrote back in 2016 that Peru was one of the world’s “overlooked success stories” because of a big increase in economic liberty back in the good ol’ days of the Washington Consensus.

The huge increase in economic liberty that began in the mid-1980s has subsequently been followed by a period of stability.

Policy is not perfect in Peru, especially with regards to regulation and the legal system.

But it is #29 in the world according to the most-recent edition of Economic Freedom of the World, which puts the country in the “most free” quartile.

Not bad for a nation that was in the “least free” quartile as recently as 1990 (and among the five-lowest-scoring nations in 1985).

Perhaps more important, the economic liberalization in Peru is paying dividends.

Looking at the Maddison data on per-capita GDP (adjusted for inflation), you can see that living standards have basically doubled this century.

In this case, “not bad” would be an extreme understatement. Peru deserves to be viewed as a success story.

Now for some bad news.

While Peru has made great progress in recent decades, the nation may be on the verge of slipping into Venezuelan-style economic mismanagement following the recent election of Pedro Castillo, who campaigned on a far-left platform.

Surprisingly, the Washington Post has a superb editorial on this topic.

Now, the question is whether Mr. Castillo will seek to undermine…the country’s free market economy, or pursue or a more moderate course. At stake is whether the South American country of 32 million will follow the disastrous example of Venezuela, whose autocratic socialist regime has destroyed its prosperity, or continue what, until the covid-19 pandemic, was a record of steadily rising living standards. …Mr. Castillo, who was nominated by a Marxist-Leninist party founded by a Cuba-educated hardliner, says he is not a Communist. He campaigned on nationalizing the mining companies that are the foundation of the economy and summoning a constituent assembly to rewrite the constitution, the political tactic pioneered by Venezuelan strongman Hugo Chávez. But the head of his economics transition team has said there will be no nationalizations, expropriations, or exchange and price controls, and Mr. Castillo has indicated he will leave the conservative president of the central bank in place.Given that the president’s party lacks the parliamentary majority it would need to authorize a new constitution or change foreign investment laws… Venezuela’s implosion, which has caused 5 million people to flee the country for its neighbors — including 1 million in Peru — has demonstrated the consequences of leftist misrule for the region.

Wow, that’s a great defense of free markets that shows a great understanding that statism is a recipe for disaster.

I only wish the Washington Post was similarly concerned about “leftist misrule” in the United States (a.k.a., the Biden-Bernie agenda).

But I’m digressing. For purposes of today’s analysis, let’s simply hope that soon-to-be President Castillo doesn’t wreck Peru’s progress.

After all, we know the recipe for growth and prosperity, so it makes sense to worry when politicians want to do the opposite.

P.S. Let’s similarly hope that Chile’s progress isn’t undone by a new, dirigiste constitution.

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Back in 2009, there was strong and passionate opposition to Bush’s corrupt TARP scheme and Obama’s fake stimulus boondoggle – both of which had price tags of less than $1 trillion.

Today, Biden has already squandered $1.9 trillion on his version of “stimulus” and has asked Congress to expand the federal government’s budgetary burden by another $3.5 trillion (plus about $600 billion for so-called infrastructure).

Yet there doesn’t seem to be the same intensity of opposition, even though Biden is proposing policies that are far more costly.

Is this simply because Republicans were corrupted by Trump’s profligacy and are now comfortable with big government?

Or are they distracted by cultural battles over issues such as critical race theory?

I don’t know, but I’m very worried that insufficient opposition may result in Biden’s dependency agenda getting enacted.

And I’m even more worried because we now know that the left intends to increase the spending burden by a lot more than $3.5 trillion. Especially since Bernie Sanders is Chairman of the Senate Budget Committee.

The Wall Street Journal opined on this topic a couple of days ago.

Democrats have provided few details of what they plan to include in Sen. Bernie Sanders’s $3.5 trillion budget proposal, and now we know why. The real cost is $5 trillion or more… Their plan is to include every program but start small and pretend they’re temporary. This will let them skirt the budget-reconciliation rule that spending can’t add to the deficit outside a 10-year budget window without triggering a 60-vote threshold to pass. The nonprofit Committee for a Responsible Federal Budget examined the budget outline… Assuming the major provisions will be made permanent and continue through the 10-year budget window, the group says, the “policies under consideration could cost between $5 trillion and $5.5 trillion over a decade.” …All of this false accounting will let Democrats pretend the overall cost of their budget spending is lower than it really is… Any way you add it up, Democrats are attempting to pass the biggest expansion of government since the 1960s with narrow majorities and no electoral mandate. No wonder they want to disguise its real cost.

By the way, it’s not just Democrats who play this game. Some provisions of the Trump tax cut expire in 2025 because Republicans also finagled to get around restrictions that govern the 10-year budget process.

That being said, I don’t think there’s moral equivalency between proposals to let people keep their own money and the Biden-Bernie scheme to buy votes with other people’s money.

Anyhow, here’s the relevant table from the Committee for a Responsible Federal Budget’s report.

P.S. This battle is not just an issue of dollars and cents. Some of the Biden-Bernie proposals, such as per-child handouts, would increase dependency by undoing Bill Clinton’s welfare reform.

P.P.S. Don’t forget all the debilitating taxes that will accompany all the new spending.

P.P.P.S. But at least we’ll “catch up” with Europe if Biden-Bernie agenda is enacted.

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Over the past couple of years, one of the most disturbing – and also revealing – things to happen in Washington is when Congresswoman Alexandria Ocasio-Cortez proposed giving more money to people “unwilling to work.”

As discussed in this interview, the left seems to want more dependency.

This is a very unfortunate development. Just four years ago, Joe Biden rejected no-strings-handouts such as “basic income.”

But now he’s proposing a massive expansion of the welfare state, including huge per-child handouts that effectively would repeal Bill Clinton’s very successful welfare reform.

The obvious takeaway is that many politicians in Washington want to create a society where government dependency is normal and desirable.

That may be a good vote-buying strategy, but it has horrible consequences. Both morally and economically.

Let’s address one of the specific issues from the interview.

Regarding bonus unemployment benefits. I warned that we should be careful about over-interpreting short-run data. And that’s especially true because the states providing extra payments for joblessness are generally the states that also had the most onerous lockdown policies during the pandemic.

So, if unemployment is dropping in a state, is it because extra benefits have been cancelled, or is it a result of relaxed lockdown policies? Or is it something else, like lower tax rates?

One obvious way of trying to answer these questions is to ask people why they’re not working.

Here are the results of a recent poll, as reported by Λxios.

About 1.8 million out-of-work Americans have turned down jobs because of the generosity of unemployment insurance benefits, according to Morning Consult poll results released Wednesday. …U.S. businesses have been wrestling with labor supply shortages as folks capable of working have opted not to work for a variety of reasons. … Morning Consult surveyed 5,000 U.S. adults from June 22-25, 2021. Of those actively collecting unemployment benefits, 29% said they turned down job offers during the pandemic. In response to a follow-up question, 45% of that group said they turned down jobs specifically because of the generosity of the benefits.

So our friends on the left tell us that bigger handouts have no adverse economic consequences while the people getting the payments openly admit that they aren’t working because they can live off the taxpayers.

I know which group I believe.

P.S. Both this Wizard-of-Id parody and this cartoon do a great job of showing the economics of incentives.

P.P.S. Since the interview also included some discussion of basic income, here’s a recent study showing how those universal handouts would cripple work incentives.

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I’ve been warning, over and over and over again, that a European-style welfare state means huge tax increases on ordinary people.

Simply stated, there are not enough rich people to finance big government (even Paul Krugman agrees).

This means Joe Biden and Democrats need to make a choice: What matters most, their desire to make government bigger, or their promise not to impose higher taxes on families making less than $400K per year?

We now have the answer to that question, and I hope nobody is surprised to learn that they picked government over taxpayers.

But what is surprising is that they picked the Trump approach of protectionist taxes on global trade.

Here are some excerpts from a report by the New York Times.

Democrats have agreed to include a tax on imports from nations that lack aggressive climate change policies as part of a sweeping $3.5 trillion budget plan… The move to tax imports was made public Wednesday, the same day that the European Union outlined its own proposal for a similar carbon border tax, a novel tool that is designed to protect domestic manufacturing. …skeptics caution that a carbon border tax, which has yet to be implemented by any country, would be difficult to carry out, and could anger trading partners and face a challenge at the World Trade Organization. Unlike the Europeans, who outlined their plan in a 291-page document, Democrats released no details about their tax proposal on Wednesday. Calling it simply a “polluter import fee,” the framework does not explain what would be taxed, at what rate or how much revenue it would expect to generate. …verifying the amount of carbon…produced by foreign manufacturing is tricky, experts say.

It’s always a bad idea to give politicians a new source of revenue.

But it’s a worse idea to give them a new source of revenue that will require bureaucrats to measure the amount of carbon produced by every imported good. As I pointed out a few days ago when discussing the European Union’s version of this protectionist scheme, that’s a huge recipe for cronyism and favoritism.

P.S. I’ll be very curious to see how different international bureaucracies react to these anti-trade proposals. The OECD and IMF, while usually bad on fiscal issues, historically have favored unfettered trade. And the World Trade Organization exists specifically to protect global commerce. But will these organizations now change their position to curry favor with the nations that control their purse strings?

The theory of “public choice” suggests we shouldn’t be optimistic.

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Part I of this series looked at socialism’s track record of failure, while Part II pointed out that greater levels of socialism lead to greater levels of misery.

For Part III, let’s start with this video on the economics of socialism.

If the world was governed by logic, there would be no need to address this topic for a third time.

After all, the evidence is overwhelming that capitalism (oops, I mean free enterprise) does a better job than socialism.

But it seems that we don’t live in a logical world. We have too many people who have an anti-empirical belief in bigger government.

And, if the polling data is accurate, the problem seems especially acute with young people.

I’ve wondered whether sub-par government schools are part of the problem. Are they mis-educating kids?

I don’t know if that was a problem in the past, but Richard Rahn warns in the Washington Times that it will probably be a problem in the future.

Recent polls have shown rising support for socialism and an increasingly negative view of capitalism, particularly among the young.  …Most of those who say they support socialism are probably unaware that it has failed every place and time that it has been tried. …They may also not be aware that socialism relies on coercion to function… By contrast, capitalism relies on the voluntary exchange of goods and services… Last week at the NEA’s annual meeting, the delegates demanded that the union issue a study criticizing, among many things, “capitalism.” Has anyone thought through the alternatives – a system based on slavery or serfdom…? Under capitalism, investment and productive labor are allocated by individual consumer choice. …Under socialism, there is no good mechanism for meeting consumer demand; the socialist leaders decide what the people should have. There is no mechanism for creating and encouraging innovation – that is why socialist states normally only produce something new after it has already been produced in a capitalist country… So why then are the teachers’ unions advocating that capitalism be attacked, and socialism be applauded? The answer is simple, willful ignorance.

I’ve always supported school choice because I want better educational outcomes, especially for poor and minority students.

In recent months, I’ve wondered we also need school choice because of what teacher unions are doing on issues such as critical race theory and school re-openings.

Now it seems we need choice simply to protect kids from the risk of being propagandized.

P.S. Or protect kids from nonsensical forms of discipline.

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President Biden pushed through $1.9 trillion of new spending earlier this year, but that so-called stimulus plan was mostly for one-time giveaways. As I warn in this recent discussion on Denver’s KHOW, we should be much more worried about his proposals to permanently expand the welfare state.

When I first got to Washington, I would be upset that politicians wanted to add billions of dollars to the burden of government.

Well, those were the good ol’ days. Biden is proposing to divert trillions of dollars from the private sector to expand the welfare state.

Even worse, he wants to make more Americans dependent on the federal government.

Maybe that’s a smart way of buying votes, but it will erode societal capital.

John Cogan and Daniel Heil of the Hoover Institution warned about the consequences of this dependency agenda in a column for the Wall Street Journal.

The federal government’s system of entitlements is the largest money-shuffling machine in human history, and President Biden intends to make it a lot bigger. His American Families Plan—which he recently attempted to tie to a bipartisan infrastructure deal—proposes to extend the reach of federal entitlements to 21 million additional Americans, the largest expansion since Lyndon B. Johnson’s Great Society. …more than half of working-age households would be on the entitlement rolls if the plan were enacted in its current form. …57% of all married-couple children would receive federal entitlement benefits, and more than 80% of single-parent households would be on the entitlement rolls.

Many of the handouts would go to people with middle-class incomes.

And higher.

…The American Families Plan proposes several new entitlement programs. One promises students the government will pick up the entire cost of community-college tuition; another promises families earning 1.5 times their state’s median income that Washington will cover all daycare expenses above 7% of family income for children under 5; still another promises workers up to 12 weeks of federally financed wage subsidies to take time off to care for newborns or sick family members. …Two-parent households with two preschool-age children and incomes up to $130,000 would qualify for federal cash assistance for daycare. Single parents with two preschoolers and incomes up to $113,000 would qualify. And some families with incomes over $200,000 would be eligible for health-insurance subsidies. Other parts of the plan, such as paid leave and free community college, have no income limits at all.

The Wall Street Journal opined on this issue last month. Here are the key passages from their editorial.

The entitlements are by far the biggest long-term economic threat from the Biden agenda. …entitlements that spend automatically based on eligibility are nearly impossible to repeal, or even reform, and they represent a huge tax-and-spend wedge far into the future. …We’d highlight two points. First is the dishonesty about costs. Entitlements always start small but then soar. The Biden Families Plan is even more dishonest than usual. For example, it pretends the child tax credit ends in 2025, so its cost is $449 billion over the 10-year budget window that is used for reconciliation bills that require only 51 votes to pass the Senate. But a future Congress will never repeal the credit. …Second, these programs aren’t intended as a “safety net” for the poor or those temporarily down on their luck. They are explicitly designed to make the middle class dependent on government handouts.

The editorial explicitly warns that the United States will economically suffer if politicians copy Europe’s counterproductive redistributionism.

…on present trend the U.S. is falling into the same entitlement trap as Western Europe. Entitlement spending requires higher taxes, which grab 40% or more of GDP. Economic growth declines as more money flows to transfer payments instead of investment. The entitlement state becomes too large to afford but also too politically entrenched to reform. …Only a decade ago the Tea Party fought ObamaCare. Now most Beltway conservatives worry more about Big Tech than they do Big Government. If the Biden Families Plan passes, these conservatives will find themselves spending the rest of their careers as tax collectors for the entitlement state.

Amen. I’m baffled when folks on the left argue that we should “catch up” with Europe.

Are they not aware that American living standards are far higher? Do they not understand that low-income people in the United States often have more income than middle-class people on the other side of the Atlantic Ocean?

P.S. As I mentioned in the interview, the 21st century has been bad news for fiscal policy, with two big-government Republicans and two big-government Democrats.

For what it’s worth, the $3,000-per-child handouts are Biden’s most damaging idea. In one fell swoop, he would create a trillion-dollar entitlement program and repeal the successful Clinton-Gingrich welfare reform.

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I’m not optimist about America’s fiscal future. Thanks primarily to entitlement programs, the long-run outlook shows an ever-increasing burden of government spending.

And rather than hit the brakes, Biden wants to step on the gas with new giveaways, especially his plan to gut Bill Clinton’s welfare reform by creating new per-child handouts that would subsidize idleness and family dissolution.

But that doesn’t mean the problems can’t be fixed. We simply need to replace fiscal profligacy with spending restraint.

To set the stage for this discussion, here’s a look at what’s happened to the budget over the past several decades.  You can see how the burden of federal spending has steadily increased, with noticeable one-time bumps in 2008-2009 (TARP and Obama’s so-called stimulus) and 2020-2021 (coronavirus).

The chart also includes projections between 2021 and 2031, based on new numbers from the Congressional Budget Office.

For today’s column, I want to focus on the next 10 years and show how the current fiscal mess can be averted with some modest spending restraint.

This second chart shows that spending actually drops over the next two years as coronavirus-related spending comes to an end. But once we get to 2023, the orange line shows that “baseline” spending (what happens to the budget if things are left on autopilot) climbs rapidly, more than twice the rate needed to keep pace with inflation.

But if there’s any sort of fiscal restraint (a freeze or some sort of spending cap), then the numbers look much better.

More specifically, a freeze or a 1-percent spending cap would actually produce a budget surplus by the year 2031.

But I’m not fixated on getting to a balanced budget. What’s more important is that the burden of government spending shrinks when the budget grows slower than the private sector.

In other words, we get good results when policy makers follow fiscal policy’s Golden Rule.

P.S. While it’s difficult to convince politicians to support spending restraint, it’s worth noting that the nation enjoyed a five-year spending freeze between 2009-2014.

P.P.S. In the long run, a spending freeze almost certainly requires genuine entitlement reform.

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Back in 2009 and 2010, when I had less gray hair, I narrated a four-part series on the economic burden of government spending.

Here’s Part II, which discusses the theoretical reasons why big government reduces prosperity.

I provide eight examples to illustrate how and why government spending can hinder economic growth.

The last item is what I called the “stagnation cost,” which is the tendency of politicians and bureaucrats to throw good money after bad because there is no incentive to adapt.

When giving speeches, I usually refer to this as the “inertia cost.”

But, regardless of what I call it, I explain that every government program has a group of beneficiaries that are strongly motivated to keep their gravy train moving even if money is being wasted.

And since politicians like getting votes from those beneficiaries, it’s very difficult to derail programs.

In an article for National Review, Sean-Michael Pigeon offers one very plausible explanation for why this happens.

He says politicians fall victim to the fallacy of sunk costs.

…we need an understanding of government inefficiency… One reason government spending is so needlessly costly is somewhat paradoxical: The state is wasteful precisely because people are so concerned about wasting money. …This is a classic sunk-cost fallacy: Costs that can’t be recovered are “sunk,” and therefore irrelevant for future decision-making. But while this fallacy is well known in economics, sunk costs are a big deal in the practical world of politics. Nobody wants to waste money, and politicians don’t want to cause waste directly. No member of Congress wants to be publicly responsible for a half-built bridge, especially when they have to tell taxpayers they still have to foot the bill for it. …Congress’s unwillingness to cut the funding of poorly run projects is a significant reason government projects always spend too much. …Politicians are nervous about cutting ongoing projects because they don’t want to leave taxpayers empty-handed, but stomaching sunk costs is worth it. Not only is it economically sound to stop government agencies from bleeding money, but it also sets the precedent that shoddy work will be held accountable. …to save money, sometimes you have to lose money.

In other words, it would be good to stop the bleeding.

But that’s not politically easy. Mr. Pigeon has examples in his column, but he should have included California’s (supposed) high-speed rail project.

That boondoggle has been draining money from state and federal coffers for about a decade. Cost estimates have exploded (something that almost always happens with government projects), yet construction has barely started.

Yet now Biden wants to increase federal subsidies for that money pit, along with other long-distance rail schemes.

And you won’t be surprised that a big argument from supporters is that we’ve already wasted billions and billions of dollars on the project, so therefore we should continue to waste even more money (sort of like hitting yourself on the head with a hammer because it feels good when you stop).

The big-picture bottom line is that the burden of federal spending should be reduced so that politicians have less ability to waste money.

And that also means that Americans will be able to enjoy more growth and more prosperity.

The targeted bottom line is that we should get Washington out of infrastructure.

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California is a fascinating state for people who follow public policy. It has some immense advantages, such as climate, coastline, and natural resources.

But it also has high taxes, absurd regulations, a bloated bureaucracy, and a costly welfare state.

The net result of all these factors is mixed. There are some sectors that are still thriving, such as high tech, but there’s also evidence that the Golden State is losing ground.

And the comparative data will probably get worse over time because many taxpayers and businesses are now fleeing to lower-tax states.

Since I specialize in public finance, I’m tempted to say bad fiscal policy is California’s biggest problem. And that may actually be the case.

But if someone asks me for an example of what’s wrong with the Golden State, I’m going to direct them to this story in the Los Angeles Times.

The California Legislature on Monday approved a $100-million plan to bolster California’s legal marijuana industry, which continues to struggle to compete with the large illicit pot market nearly five years after voters approved sales for recreational use. …State officials initially expected to license as many as 6,000 cannabis shops in the first few years, but permits have been issued only for 1,086 retail and delivery firms. In 2019, industry officials estimated there were nearly three times as many unlicensed businesses as ones with state permits. …The $100 million would go to local agencies with the most provisional licenses for growing, manufacturing, distribution, testing and retail operations. Some of the money can be used by cities offering equity funding to cannabis businesses owned by people of color.

Yes, you read correctly.

The state did a smart thing (removing legal prohibitions on marijuana), but did it in the worst possible way (burdening the sector with high taxes and red tape).

As a result, there’s still a very robust black market.

Here are some additional details about how politicians and bureaucrats have made it difficult to operate a legal business.

Many cannabis growers, retailers and manufacturers have struggled to make the transition from a provisional, temporary license to a permanent one renewed on an annual basis — a process that requires a costly, complicated and time-consuming review. …some face two to four years to get through the licensing process. Many would face the prospect of shutting down, at least temporarily, if they don’t get a regular license by current state deadlines, Kiloh said. …Supporters of legalization blame the discrepancy on problems that they say include high taxes on licensed businesses, burdensome regulations… A key requirement to convert from a provisional license is to conduct a CEQA review to indicate how pot farms and other cannabis businesses will affect the surrounding water, air, plants and wildlife, and to propose ways to mitigate any harms. However, Kiloh said, some cities are just setting up ordinances and staffing to process licenses, meaning many businesses cannot meet the looming deadline. …industry officials note the money will go to a small fraction of California cities, and only those that have already decided to allow cannabis businesses. …said Kiloh, owner of the Higher Path cannabis store in Sherman Oaks. “The real problem is CEQA analysis is a very arduous process,” he added. “I think it would be good to have more reform of the licensing system instead of just putting money to it.”

Wow, provisional licenses, permanent licenses, CEQA analysis, taxes, regulations, reviews, and ordinances.

Sounds like my regulatory obstacle course. No wonder so many buyers and sellers of pot prefer the black market.

And Mr. Kiloh is correct. The solution is to deregulate, not to dump more money into the system.

No wonder California is a mess.

P.S. The late (and great) Walter Williams joking speculated whether California should set up East German-style border controls to prevent taxpayers from escaping.

P.P.S. There is a pro-secession group in California, though they should be careful what they wish for.

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Politicians and bureaucrats are (self-interested) conduits for taking money from one group of people and giving it to another group of people.

Milton Friedman famously explained that this is why they largely don’t care about how much money is spent or how effectively it is spent.

No wonder government programs, agencies, and departments waste so much money, year after year, decade after decade.

This observation about careless profligacy also applies to so-called emergency spending.

I’ve repeatedly written about the perverse impact of unemployment benefits that are so excessive that people have big incentives not to work.

But that’s just one problem with that program. Axios has a depressing report on how the turbo-charged benefits that were part of the coronavirus legislation triggered staggering levels of fraud.

Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say. …fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended in the hands of foreign crime syndicates… Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that…50% of all unemployment monies might have been stolen… Haywood Talcove, the CEO of LexisNexis Risk Solutions, estimates that at least 70% of the money stolen by impostors ultimately left the country, much of it ending up in the hands of criminal syndicates in China, Nigeria, Russia and elsewhere.

USA Today reported on one Nigerian scammer who feasted on American tax dollars.

Mayowa is an engineering student in Nigeria who estimates he’s made about $50,000 since the pandemic began. After compiling a list of real people, he turns to databases of hacked information that charge $2 in cryptocurrency to link that name to a date of birth and Social Security number. In most states that information is all it takes to file for unemployment. …“Once we have that information, it’s over,” Mayowa said. “It’s easy money.” …prepaid debit cards issued by some state unemployment offices paved the way for fraud this year, security experts said. …Asked whether he feels bad about stealing from unemployed Americans, Mayowa pointed out that 70% of his peers in school are working the scams as side hustles, too.

But it’s not just the unemployment benefits.

The government also has been sending out “stimulus” checks to people, even if they were employed all during the pandemic.

And they didn’t even need to be alive, according to a report from CNS.

The federal government sent nearly 1.2 million “economic impact payments” authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to people who were dead and, therefore, not qualified to receive them, according to a report published today by the Government Accountability Office. …On its website, the IRS describes individuals who are not eligible for an “Economic Impact Payment”… “Taxpayers likely won’t qualify for an Economic Impact Payment if any of the following apply: … You can be claimed a dependent on someone else’s return. … You are a nonresident alien. … An incarcerated individual. A deceased individual.”

Hundreds of foreigners also got handouts, as reported by the Washington Post.

Hundreds of people have cashed U.S. stimulus checks at Austrian banks in recent months. Some of them appeared puzzled by the unexpected payments or were ineligible for the payouts, according to bank officials and Austrian media reports. …He and his wife received $1,200 each, although neither is a U.S. resident or holds U.S. citizenship — key eligibility requirements. …Similar instances have been reported in other countries.

By the way, it’s not just Austrians who received handouts. NPR has a story featuring people all over the world who got $1200 checks from Uncle Sam.

And let’s not forget the PPP program, which was another big chunk of the coronavirus handouts.

The Wall Street Journal has a report on the rampant fraud in that program.

The federal government is swamped with reports of potential fraud in the Paycheck Protection Program, according to government officials and public data…the government allowed companies to self-certify that they needed the funds, with little vetting. The Small Business Administration’s inspector general, an arm of the agency that administers the PPP, said last month there were “strong indicators of widespread potential abuse and fraud in the PPP.” …The watchdog counted tens of thousands of companies that received PPP loans for which they appear to have been ineligible, such as corporations created after the pandemic began… Given the limited criteria Congress set for the program, he said, “The scandal is what’s legal, not what’s illegal.”

Reason also has a story about PPP waste.

…carmaker Lamborghini has benefitted from the Paycheck Protection Program (PPP)… Within days of receiving $1.6 million in PPP loans for his construction and logistics businesses, Lee Price III of Houston bought himself a 2019 Lamborghini Urus for $233,337, plus a $14,000 Rolex watch and close to $5,000 worth of entertainment at a strip club and various bars around town. …His scheme was audacious but hardly original. The DOJ had already brought similar fraud charges against Miami man David T. Hines, who had allegedly spent his ill-gotten PPP loans on a new $318,000 Lamborghini Huracán EVO. …Loan recipients include companies founded by members of Congress and prominent D.C. lobbying firms. Presidential adviser Jared Kushner’s family businesses, including their media and real estate concerns, received PPP loans, as did the clothing brand of rapper and aspiring president Kanye West.

We already knew that the coronavirus pandemic resulted in a bigger burden of government.

None of us should be surprised that we also wound up with record levels of waste.

P.S. Remember, “more government” is not the answer to any sensible question.

P.P.S. At some point, we will run out of “other people’s money.”

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Between March 2020 and January 2021, I authored a five-part series (see here, here, here, here, and here) on how big government hindered a quick and effective response to the coronavirus pandemic.

In this discussion with Brad Polumbo, I summarize some of my key points.

While I criticized the dismal performance of the FDACDC, and WHO, I also explained that there are costs and benefits to any approach.

I largely focus on the deleterious impact of government regulation and intervention, but I mentioned in the discussion that a laissez-faire approach has potential downsides.

My argument is simply that markets, on balance, will produce better outcomes.

For instance, Brad and I discussed how government regulators at the Food and Drug Administration did something good many decades ago by prohibiting thalidomide (which led to birth defects), but we also mentioned that academic research shows that our regulatory apparatus – on net – leads to bad outcomes because of lengthy delays in life-saving and live-improving drugs.

And we shouldn’t forget that the current system makes drugs far more expensive.

There are two other parts of the interview that merit special attention.

  • First, I mention that private companies should be allowed to require “vaccine passports.” I’m not saying they should, but I believe in property rights so it’s not the role of politicians to interfere in that choice.
  • Second, politicians should have adopted a more hands-off approach to mandatory lockdowns. This is not an argument against social distancing, masking, and other prudent behaviors, but mandates were largely unnecessary (and, in the case of what stores were allowed to operate, pointlessly discriminatory).

And I should have mentioned that politicians often didn’t follow the rules that they imposed on the rest of us.

P.S. The silver lining to the pandemic’s dark cloud is that we got some clever humor (see here, here, here, here, here, here, here, here, here, and here).

P.P.S. Actually, there’s a second silver lining. There’s been a lot of progress on school choice this year, which is partly a response to the self-serving actions of the government school monopoly during the pandemic.

P.P.P.S. There may even be a third silver lining. As mentioned in the discussion, I’m slightly hopeful that politicians and bureaucrats have learned that we need to set aside regulations and red tape, at least during emergencies. Heck, maybe they’ll even apply that lesson more broadly!

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Back in 2016, I created a 2×2 matrix to illustrate the difference between redistributionism (tax Person A and give to Person B) and state planning (politicians and bureaucrats trying to steer the economy, either through direct ownership or industrial policy).

The main point of that column was to show that countries should try to be in the top-left section, where there is less redistribution and less government control.

But I also wanted to help people understand that redistributionism and socialism are not the same thing.

For instance, Sweden (in the bottom-left box) is a capitalist economy with a big welfare state, whereas China (in the top-right box) doesn’t have much redistribution but government has substantial control over economic activity.

From an American perspective, the good news is that the U.S. currently is in the top-left box.

The bad news is that President Biden wants the country in the bottom-left box. So, if we want to be technically accurate, we should not accuse him of socialism.

Instead, as Antony Davies and James Harrigan explained in a column for the Foundation for Economic Education, the real threat to the nation is “transferism.”

Socialism is state control of the means of production. …By contrast, capitalism is simply private ownership of the means of production. …more than four in ten Americans think “some form of socialism” is a good thing. But what is “some form of socialism?” A society is either socialist or it isn’t. The state either owns the means of production or it doesn’t. There is no middle ground. …It appears that what Americans really have in mind when they think about socialism is not an economic system but particular economic outcomes. …they are advocating what we should really call “transferism.” Transferism is a system in which one group of people forces a second group to pay for things that the people believe they, or some third group, should have. Transferism isn’t about controlling the means of production. It is about the forced redistribution of what’s produced.

Davies and Harrigan are correct.

Moreover, they deserve credit for predicting the future since they wrote the column in 2019!

Now let’s consider whether redistributionism (or transferism) is a good idea.

I’ve previously explained that a big welfare state causes economic damage, even if a nation otherwise is very pro-capitalist.

Consider, for instance, the remarkable data showing how Swedish-Americans and Danish-Americans generate much more prosperity than Swedes and Danes who still live in Scandinavia.

Or consider the income data showing how average Americans enjoy much higher living standards than their European counterparts (either in Nordic nations or elsewhere).

What’s worrisome is that Biden wants a much bigger welfare state and he doesn’t seem to understand that European-sized government means anemic European-style economic performance.

This is the message that Bret Stephens shared in one of his recent columns for the New York Times.

He starts by describing Biden’s agenda.

President Biden charts a course toward the largest expansion of government since Lyndon Johnson’s Great Society. After signing a $1.9 trillion Covid-19 relief bill in March and proposing a $1.5 trillion discretionary budget in April (a 16 percent increase from this year, on top of what’s likely to be at least $3 trillion in mandatory spending on programs like Medicare and Medicaid), the president wants $2.3 trillion more for infrastructure and $1.8 trillion for new social programs. That’s $7.5 trillion in discretionary spending. To put the number in perspective, we spent $4.1 trillion in inflation-adjusted dollars over nearly four years to wage and win the Second World War. What will America get for the money?

He then points out the potential consequences.

…before the U.S. takes this leap into a full-blown American social-welfare state, moderates in Congress like Senator Joe Manchin or Representative Jim Costa ought to ask: What’s the catch? …The real catch is that massive government spending has hidden costs that are difficult to capture in numbers alone. Take another look at Europe. Why does R&D spending in the European Union persistently lag that in the U.S. …Why does Europe’s tech start-up scene…so notably lag its competitors…? Perhaps…social safety nets typically come at the expense of risk-taking and economic dynamism. And why is France, which, according to the Organization for Economic Cooperation and Development, spends more on social welfare than any other nation in the developed world, such an unhappy place, with chronically high unemployment, endless labor unrest, a decades-old brain drain, rising political extremism, a wealth tax that failed and a medical system that was on the brink of collapse long before Covid struck? …Beyond the gargantuan cost, Congress should think very hard about the real catch: transforming America into a kinder, gentler place of permanent decline.

Amen.

Biden’s agenda inevitably will erode societal capital, leading to less work (because of lavish freebies such as per-child handouts) and lower levels of entrepreneurship (because of tax penalties on investment and risk-taking).

And this can lead to a tipping point, which is illustrated by my Theorem of Societal Collapse.

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While Paul Krugman sometimes misuses and misinterprets numbers for ideological reasons (see his errors regarding the United States, France, Canada, the United States, Estonia, Germany, the United States, and the United Kingdom), he isn’t oblivious to reality.

At least not totally.

He’s acknowledged, for instance, that there is a Laffer Curve and that tax rates can become so onerous that tax revenues actually decline.

Now he’s had another encounter with the real world.

In a column that was mostly a knee-jerk defense of Biden’s class-warfare tax policy, Krugman confessed yesterday that big government ultimately means big tax increases for lower-income and middle-class people.

…is trying to “build back better” by taxing only the very affluent feasible? Is it wise? …There’s a good case that the kind of society progressives want us to become, with a very strong social safety net, can’t be paid for just by taxing the rich. A country like Denmark, for example, does have a high top tax rate… But Denmark also has very high middle-class taxation, in particular a 25 percent value-added tax, effectively a national sales tax. …the fact that even the Nordic countries feel compelled to raise a lot of money from the middle class suggests that there are limits…to how much you can raise just by taxing the rich. So if you want Medicare for all, Nordic levels of support for child care and families in general, and so on, just raising taxes on the 400K-plus elite won’t get you there.

It may not happen often, but Krugman is completely correct.

European-sized government requires European-style taxes on everyone. And that means a big value-added tax, as Krugman notes. And it almost certainly also means big energy taxes, higher payroll taxes, and much higher income tax rates on middle-class taxpayers.

This chart from Brian Riedl shows that government spending already was on track to become a bigger burden for the American economy, and Biden is proposing to go even faster in the wrong direction.

The growing gap between the blue lines and red lines implies giant tax increases. At the risk of understatement, there’s no way to finance that ever-expanding government by just pillaging upper-income taxpayers.

By the way, Krugman is right about big government leading to higher taxes on ordinary people, but he’s wrong about the desirability of that outcome.

He wants us to think that big government means a “better America,” but all the economic data tells a different story. A bigger fiscal burden means much lower living standards.

P.S. If you want another example of Krugman being right on a fiscal issue, click here.

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When I debate public policy with leftists, I frequently stump them by asking for an example of a country where their ideas have worked.

They get flummoxed for the simple reason that no nation has ever become rich with big government.

There are some rich nations that have big governments, to be sure, but they all became rich in the 1800s and early 1900s, back when government was a tiny burden (and there often were no income taxes).

That’s true for the United States. And it’s true for Western Europe.

It’s also worth noting that places that have become rich in the modern era, such as Hong Kong and Singapore, have small governments and low tax burdens.

I’m making these points because Jim Tankersley of the New York Times has a thorough article on the Biden Administration’s budgetary philosophy.

And that philosophy is based on a completely different perspective. Indeed, the headline and subtitle are a very good summary of the entire article.

Here are some passages that further capture the Biden approach.

President Biden’s $6 trillion budget bets on the power of government to propel workers, families and businesses to new heights of prosperity…by redistributing income and wealth from high earners and corporations to grow the middle class. …it sets the nation on a new and higher spending path, with total federal outlays rising to $8.2 trillion by 2031… That spending represents an attempt to expand the size and scope of federal engagement in Americans’ daily lives… Mr. Biden also seeks to expand the government safety net in an effort to help Americans — particularly women of all races and men of color — work and earn more, rather than relying on corporate America to funnel higher wages to workers. …Mr. Biden is pushing what amounts to a permanent increase in the size of the federal footprint on the U.S. economy. Since 1980, annual federal spending has been, on average, about one-fifth the size of the nation’s economic output; under Mr. Biden’s plans, that would grow to close to one-fourth.

The article is definitely correct about one thing. As I wrote yesterday, Biden wants a big expansion of government spending.

But is he correct about the consequences? Will bigger government “help Americans” and allow more of them to “enjoy prosperity”?

If the evidence from Europe is any indication, adopting bigger welfare states is not a recipe for more prosperity.

For instance, OECD data on “actual individual consumption” show that people in the United States enjoy much higher living standards than their counterparts on the other side of the Atlantic Ocean.

There’s also very powerful data showing that poor Americans (those at the 20th percentile) have higher living standards than most middle-class Europeans.

There’s even data showing that very poor Americans (those at the 10th percentile) have living standards equal to most middle-class Europeans.

The bottom line is that Biden wants higher taxes and more redistribution, but that’s been a big failure in the part of the world that has tried that approach.

Not that we should be surprised. Both theory and evidence tell us that bigger government is bad for prosperity.

P.S. There’s a very sobering example of what happens when a rich nation decides to dramatically curtail economic liberty.

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There are many things to dislike about President Biden’s budget plan to expand the burden of government.

There will be ample opportunity to write about these issues in the coming weeks. For today, however, let’s identify and highlight the biggest problem.

Simply stated, Biden wants to permanently and significantly increase the burden of government spending. Here’s a chart, based on data from Table S.1 of the President’s budget, augmented by data from Table 1.3 of the Budget’s Historical Tables.

The budget had reached $4 trillion before the pandemic. It then skyrocketed for coronavirus-related spending.

But now that the emergency is receding, Biden is not going to let the burden of government fall back to prior levels. Instead, he’s proposing a $6 trillion budget for the upcoming fiscal year.

And that’s just the starting point. He wants spending to then climb rapidly – at almost twice the rate of inflation – up to $8 trillion by 2031.

By the way, this horrifying data doesn’t tell the entire story.

Biden’s budget doesn’t include some of his new spending giveaways. Brian Riedl addressed this fiscal gimmickry in a column for today’s New York Post.

…this budget does not even include additional spending and debt proposals that are coming later. …They account only for the recently-enacted “stimulus,” a massive discretionary spending hike, and the trillions in (creatively-defined) “infrastructure” spending proposed by the President over the past two months. However, during last fall’s campaign, Biden also proposed trillions in new spending for health care, Social Security, Supplemental Security Income, climate change, college aid, and other priorities. The White House has signaled that these new spending initiatives are still in the pipeline. Including these forthcoming proposals, the President would push spending and deficits far above any levels that have ever been sustained.

And don’t forget all this spending, both proposed and in the pipeline, is in addition to all the entitlement spending that is going to burden the economy over the next several decades.

Here’s one final point to underscore and emphasize the radical nature of Biden’s budget.

I’ve taken the previous chart and added a trendline showing what spending would be if Biden has simply followed the trajectory based on the actual spending levels of every President from Carter to Trump.

In other words, we’re looking at trillions of dollars of additional money being diverted from the productive sector of the economy and being put under the control of politicians and bureaucrats.

That does not bode well for American prosperity. Even the Congressional Budget Office recognizes this means lower living standards for our nation.

The bottom line is that if you adopt European-style fiscal policy, you get anemic European-style levels of income.

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Last year, I compared the economic performance of red states and blue states.

My big takeaway from that column is that we should pay attention to the data on internal migration. More specifically, there’s a reason why Americans have been moving from high-tax states to low-tax states.

Today’s let’s follow up on that discussion.

Today’s Wall Street Journal has an editorial on the gap between blue states and red states. This accompanying illustration shows that there is a clear relationship between joblessness and the degree to which states pursue big-government policies.

And here’s how the WSJ explained the big differences.

The unemployment rate in April nationwide was 6.1%, but this obscures giant variations in the states. With some exceptions, those run by Democrats such as California (8.3%) and New York (8.2%) continued to suffer significantly higher unemployment than those led by Republicans such as South Dakota (2.8%) and Montana (3.7%). It’s rare to see differences that are so stark based on party control in states. But the current partisan differences reflect different policy choices over the length and severity of pandemic lockdowns and now government benefits such as jobless insurance. Nine of the 10 states with the lowest unemployment rates are led by Republicans. The exception is Wisconsin whose Supreme Court last May invalidated Democratic Gov. Tony Evers’s lockdown. …Most states in the Midwest, South and Mountain West aren’t far off their pre-pandemic employment peaks. One obstacle to a faster recovery may be the $300 federal unemployment bonus, which many GOP governors are rejecting. Meantime, states with Democratic governments continue to reward workers for sitting on the couch. The longer that workers stay unemployed, the harder it will be to get them to return to work.

For what it’s worth, I’m more upset about the subsidized unemployment than the differences in lockdown policies, particularly because the former is more indicative of economic illiteracy.

P.S. One of the worst parts of Biden’s waste-filled stimulus plan is that it gave a big bailout for states, based on a formula that actually rewarded them for having bad numbers.

P.P.S. Click here and here if you want to peruse comprehensive measures of state economic policy.

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I’ve shared all sorts of online quizzes that supposedly can detect things such as whether you’re a pure libertarian.

Or even whether you’re a communist.

Today, courtesy of the folks at the Committee for a Responsible Budget, you can agree or disagree with 24 statements to determine your “budget personality.”

I have some quibbles about some of the wording (for instance, I couldn’t answer “neither” when asked to react to: “The government should spend more money on children than on seniors”).

But I can’t quibble with the results. Given the potential outcomes, I’m glad to be a “Minimalist” who is “in favor of smaller government.”

Though I’m disappointed that I apparently didn’t get a perfect score on “Size of Government.”

And I need to explain why I got a mediocre score on the topic of “Fiscal Responsibility.”

The budget geeks at the Committee for a Responsible Federal Budget (CRFB) have a well-deserved reputation for rigorous analysis. I regularly cite their numbers and appreciate the work that they do.

That being said, they mistakenly focus on deficits and debt when the real problem is too much government.

I agree with Milton Friedman, who wisely observed that ““I would rather have government spend one trillion dollars with a deficit of a half a trillion dollars than have government spend two trillion dollars with no deficit.”

The folks at CRFB would disagree.

Indeed, they are so fixated on red ink that they would welcome tax increases.

At the risk of understatement, that would be a very bad approach.

The evidence from Europe shows that higher taxes simply lead to higher spending. And more debt.

Indeed, Milton Friedman also commented on this issue, warning that, “History shows that over a long period of time government will spend whatever the tax system raises plus as much more as it can get away with.”

The bottom line is that CRFB not only has the wrong definition of “Fiscal Responsibility,” but they also support policies that would make matters worse – even from their perspective!

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The United States has a big economic advantage over Europe in part because the burden of welfare spending is lower.

This means fewer people trapped in government dependency in America. And it means a smaller tax burden in America.

But some of our friends on the left think it is bad news that the United States isn’t more like Europe.

They want more redistribution in America and they may get their wish if Congress approves Biden’s so-called American Families Plan.

The Economist has an article about Biden’s radical proposal, which would, as they correctly note, “Europeanise the American welfare state.”

President Joe Biden is proposing an ambitious reweaving of the American safety-net, which the White House says will cost $1.8trn. The American Families Plan has bits of the European welfare state that have long been missing in the country—a child allowance, paid family leave, universal pre-school, subsidised child care and free community college—but contains no reference to work requirements. …So how did Democrats go from Clintonism—which implicitly conceded the Reaganite critique that too much governmental assistance is a very bad thing—to its present-day unconcern about (even relish for) deficit-financed expansions of the safety-net?

Here are some of the specific details from the story, including discussion of Biden’s plan for per-child handouts.

This would bring America more in line with the rest of the developed world: the average government spending on benefits such as child allowances, family leave and early education is 2.1% of GDP in the OECD club of mostly rich countries. In America, it is just 0.6%. …A generous child allowance is the main anti-poverty tool in most rich countries—and also one that America lacks. One such scheme was created this year as part of the covid-19 relief bill that the president signed in March. It will pay most families $3,000 per year per child ($3,600 for young children)… The president’s plan proposes to extend these payments until 2025. Some Democrats think they should simply be made permanent.

The Wall Street Journal opined about Biden’s plan last month.

It’s more accurate to call this the plan to make the middle class dependent on government from cradle to grave. The government will tell you sometime later, after you’re hooked to the state, how it will force you to pay for it. We’d call the price tag breathtaking, but by now what’s another $2 trillion? …But the cost, while staggering, isn’t the only or even the biggest problem. The destructive part is the way the plan seeks to insinuate government cash and the rules that go with it into all of the major decisions of family life. The goal is to expand the entitlement state to make Americans rely on government and the political class for everything they don’t already provide. …This is now about mainlining benefits to middle-class families so they become addicted to government—and to the Democratic Party that has become the promoting agent of government.

I agree with the WSJ. Biden wants to create more dependency, even if that means eviscerating Bill Clinton’s very successful welfare reform.

For my contribution to this discussion, I want to make two points about the practical implications of Biden’s plan to “Europeanise” the United States.

First, it is impossible to have a European-sized government without massive tax increases. And since there aren’t enough rich people to finance big government, that inevitably means low-income and middle-class taxpayers will have to be hit with much bigger fiscal burdens. Which is exactly what has happened in Europe (and lots of honest people on the left openly admit a bigger welfare state would require similar policies in the United States).

Second, it is impossible to have a European-sized government and still maintain a big economic advantage over Europe. Higher spending and higher taxes will combine to reduce work, saving, investment, and entrepreneurship. Simply stated, European fiscal policy will lead to European economic results, and that will be very bad news for ordinary Americans since living standards are 30 percent-40 percent lower on the other side of the Atlantic Ocean.

It’s also worth noting that the United States ranks very high in societal capital, and that presumably will erode if more people are lured into government dependency.

P.S. Biden used to oppose a government-guaranteed income, correctly realizing it would undermine the work ethic.

P.P.S. The United States already faces a huge long-run challenge because of entitlement spending, so it’s remarkable – in a bad way – that Biden wants to step on the gas rather than hit the brakes.

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Government breeds corruption by giving sleazy people a way of obtaining unearned wealth. Politicians and special interests are the winners and workers, consumers, and taxpayers are the losers.

It’s easy to find examples. Simply look at tax policy, spending policy, regulatory policy, energy policy, industrial policy, agricultural policy, foreign policy, health policy, trade policy, drug policy, and bailout policy. Or anything else involving politicians and their cronies.

Hmmm…, I wonder if there’s a lesson to be learned from that list?

But just in case some people are slow learners, let’s consider some new scholarly research from the Federal Reserve.

The study, authored by Joonkyu Choi, Veronika Penciakova, and Felipe Saffie, explores whether companies that give cash to politicians are then rewarded with cash from taxpayers.

The American Recovery and Reinvestment Act (ARRA) was enacted in the midst of the Great Recession, and over one-fourth of the funds were channeled directly to firms with the primary goal of saving and creating jobs. These stimulus funds were sizable and valuable to firms, with the average grant awarded exceeding $500,000. With hundreds of thousands of dollars on the line, firms may have incentive to exert political influence… Are firms successful in influencing the allocation of stimulus spending? …This paper provides empirical answers… We find that firms’ campaign contributions to state politicians before the enactment of ARRA have a positive and significant impact on the probability of winning ARRA grants… We find that firms that contribute to winning candidates are 64 percent more likely to secure an ARRA grant and receive 10 percent larger grants. …The allocative distortion caused by political connections is sizable. Although only 6 percent of grant recipients contribute during local elections, they account for21 percent of total ARRA grants.

I feel like I need to take a shower after reading those results. Maybe I’m a political prude, but it galls me that politicians and interest groups have so much ability to fleece the rest of us.

And now you know what I refer to Washington as America’s “wretched hive of scum and villainy.”

The obvious takeaway from this research is that we’ll have less corruption if we have less government.

Which was my message in this video.

While I obviously like my video on the topic, I very much recommend this video interview with Andrew Ferguson.

P.S. Speaking of videos, here’s some satire about government corruption.

P.P.S. We shouldn’t be surprised that Obama’s so-called stimulus produced lots of corruption. The same was true with regards to Obamacare and green energy, which were his other main initiatives.

P.P.P.S. In the future, I’m sure we’ll see studies finding lots of corruption in Biden’s recent “stimulus” plan.

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One week ago, I shared five images that capture the essence of government.

Today, we have another collection, starting with a reminder of, in the words of Ronald Reagan, the most terrifying words in the English language.

Next, we have warning signs about all sorts of things, but not about the the biggest threat we face.

Our third item captures what happens over time as a small government becomes medium-sized government and then evolves into big government.

Here’s a succinct explanation of how government and organized crime are similar (though here’s a cartoon reminding us how they are different).

Here’s my favorite, though given the spending proclivities of many Republicans, it should simply read “politicians promising everything for ‘free’.”

You get the same message from this Glenn McCoy cartoon and this Michael Ramirez cartoon.

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