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Posts Tagged ‘Big Government’

I’ve been accused of making supposedly inconsistent arguments against Hillary Clinton. Make up your mind, these critics say. Is she corrupt or is she a doctrinaire leftist?

I always respond with the simple observation that she’s both. Not that this should come as a surprise. Proponents of bigger government have long track records of expanding their bank accounts at the same time they’re expanding the burden of the public sector. This is true for radical leftists in places like Venezuela and it’s true for establishment leftists in places like America.

And it’s definitely true for Hillary Clinton. I shared lots of information about Hillary’s corruption yesterday, so let’s spend some time today detailing her statist policy agenda.

Consider her new entitlement scheme for childcare. As the Wall Street Journal opines, it’s even worse than an ordinary handout.

Hillary Clinton is methodically expanding her plans to supervise or subsidize those remaining spheres of human existence unspoiled by government. Mrs. Clinton rolled out her latest proposal…to make child care more affordable for working parents and also to raise the wages of child-care workers. The Democrat didn’t mention how she’d resolve the contradiction between her cost-increasing ideas and her cost-reducing ideas, though you can bet it will be expensive. …Her solution is for the feds to cap the share of a family’s income that goes toward care at 10%, with the rest of the tab covered by various tax benefits, direct cash payments and scholarships.

Her scheme to cap a family’s exposure so they don’t have to pay more than 10 percent may be appealing to some voters, but it is terrible economics.

Although we don’t have details on how the various handouts will work, the net effect surely will be to exacerbate a third-party payer problem that already is leading to childcare costs rising faster than the overall inflation rate.

After all, families won’t care about the cost once it rises above 10 percent of their income since Hillary says that taxpayers will pick up the tab for anything about that level.

There’s more information about government intervention in the editorial.

The auditors at the Government Accountability Office report that there are currently 45 federal programs dedicated to supporting care “from birth through age five,” spread across multiple agencies. The Agriculture Department runs a nursery division, for some reason. …Mrs. Clinton also feels that caregivers are paid “less than the value of their worth,” and she promises to increase their compensation. How? Why, another program of course. She’ll call it the Respect and Increased Salaries for Early Childhood Educators (Raise) Initiative, which she says is modelled after another one of her proposals, the Care Workers Initiative. …If families think day care and health care are “really expensive” now, wait until they have to pay for Mrs. Clinton’s government.

Just as subsidized childcare will be very expensive if Hillary gets elected, the same will be true for higher education.

But in a different way. The current system of subsidies and handouts gives money (in the form of grants and loans) to students, who then give the money to colleges and universities. This is a great deal for the schools, who have taken advantage of the programs by dramatically increasing tuition and fees, while also expanding bureaucratic empires.

Hillary’s plan will expand the subsidies for colleges and universities, but students apparently no longer will serve as the middlemen. Instead, the money will go directly from Uncle Sam to the schools.

Here’s some analysis from the Pope Center on Hillary’s new scheme.

Clinton has come out with a plan to make public colleges and universities free for families with earnings less than $125,000 annually by 2021. …“free” college…would depend on state governments going along with her scheme whereby the federal government would pay them if they cooperate by charging no tuition… Suppose a state decides to adopt Clinton’s free college plan. What would the consequences be? …That would mean at least a modest increase in enrollment, but it would come mainly from the most academically marginal students. The colleges and universities that gained in those enrollments would also find they need to increase remedial programs. …Another adverse result from making college tuition free would be that many students would devote less effort to their courses. …Federal Reserve Bank of New York economist Aysegul Sahin…studied the effort college students put into their work in a 2004 paper“The Incentive Effects of Higher Education Subsidies on Student Effort.” She concluded, “Low-tuition, high-subsidy policies cause an increase in the ratio of less highly-motivated students among the college graduates and that even highly-motivated ones respond to lower tuition by choosing to study less.”

As with much of Hillary’s agenda, we don’t have full details. I strongly suspect that colleges and universities will have a big incentive to jack up tuition and fees to take advantage of the new handout, though I suppose we have to consider the possibility (fantasy?) that the plan will somehow include safeguards to prevent that from happening.

Oh, and don’t forget all the tax hikes she’s proposing to finance bigger government.

The really sad part about all this is that her husband actually wound up being one of the most market-oriented presidents in the post-World War II era. I’ve written on this topic several times (including speculation on whether the credit actually belongs to the post-1994 GOP Congress).

Is it possible that Hillary decides to “triangulate” and move to the center if she gets to the White House?

Yes, but I’m not brimming with optimism.

The Wall Street Journal has some depressing analysis on Bill Clinton vs Hillary Clinton.

…the Obama-era Democratic Party has repudiated the Democratic Party’s Bill-era centrist agenda. They now call themselves progressives, not New Democrats… The Clinton contradiction is that she claims she’ll produce economic results like her husband did with economic policies like Mr. Obama’s.

The editorial looks at Bill Clinton’s sensible record and compares it to what Hillary is proposing.

His wife wants to nearly double the top tax rate on long-term cap gains to 43.4% from 23.8%, in the name of ending “quarterly capitalism.” That’s higher than the 40% rate under Jimmy Carter, and she’d also impose a minimum tax on millionaires and above, details to come. …Mrs. Clinton has repudiated the Trans-Pacific Trade Partnership that she had praised as Secretary of State. …She wants to extend Dodd-Frank regulation to nonbanks, and she promises to entrench Mr. Obama’s anticarbon central planning at the EPA and expand ObamaCare with price controls on new medicines. …Mrs. Clinton is proposing to impose many more such work disincentives. She’ll bestow tax credits on everything from child care to elderly care, from college tuition to businesses that share profits with workers. To the extent her new mandates for family leave, the minimum wage, overtime and “equal pay” increase the cost of labor, she’ll drive more Americans out of the workforce. Oh, and…Mrs. Clinton wants to “enhance” Social Security benefits and make Medicare available to pre-retirees.

I’ve already written about her irresponsible approach to Social Security.

And I also opined on the issue in this interview.

The bottom line is that we’re in a very deep hole and Hillary Clinton, simply for reasons of personal ambition, wants to dig the hole deeper. As I remarked in the interview, she’s akin to a Greek politician agitating for more spending in 2007.

Given all this, is anyone surprised that “French President Francois Hollande endorsed Hillary Clinton”? What’s next, a pro-Hillary campaign commercial featuring Nicolas Maduro? A direct mail piece from the ghost of Che Guevara?

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Back in 2009, I shared some academic research showing the unsavory link between lobbying expenditures and bailout cash from TARP.

Just in case anybody naively thinks that such distasteful favor-swapping no longer occurs, here’s some more evidence. A column in the International Business Times summarizes some new scholarly research, once again showing the corrupt nexus between big government and the financial sector.

…analysis from London Business School professors Ahmed Tahoun and Florin Vasvari analyzed how the personal finances of congressional lawmakers changed once they were appointed to the Senate Finance Committee, the Senate Banking Committee or the House Financial Services Committee. It also evaluated how their finances compared with other lawmakers who are not on those panels. …the researchers found that finance committee members’ personal borrowing tended to jump in the first year they were appointed to the panels — a trend not seen for other lawmakers who were given seats on other powerful committees. Similarly, the data show that upon joining the finance panels, lawmakers tended to be given 32 percent more time — or on average 4 and a half years more — to pay back those new debts than loans they previously had and that other members of Congress have. The study found that lawmakers also “report more favorable debt terms when they join the finance committee, relative to other years and to the terms other congressional members obtain including those on other powerful committees.”

Needless to say, the companies aren’t giving special treatment to these politicians because of altruism. For every quid, there’s a quo.

…the influence may operate in the other direction, too. Looking at which particular financial institutions are lending to lawmakers, the researchers found that underperforming banks provided new — and bigger — loans to more finance committee members than to other Members of Congress. They say that because those firms could face more regulatory scrutiny and financial instability from new federal policies, they are more reliant on strong political connections than competitors that are in better shape.

In other words, if you can’t succeed by competing in the marketplace, then curry favor with politicians so that you can be propped up by big government.

Though companies presumably have learned from the Countrywide scandal to be more cautious about disguising the fact that they are dispensing goodies.

…mortgage industry titan Countrywide Financial created a “VIP loan unit” that gave lower mortgage rates and expedited loan processing services to lawmakers that oversaw legislation affecting the firm. …Democratic U.S. Senators Chris Dodd and Kent Conrad were cleared by the ethics committee, which said they did not knowingly seek the perks. The committee, though, told the lawmakers they “should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator.”

By the way, I’m not exactly shocked that the congressional ethics committee (wow, talk about an oxymoron) didn’t even bother slapping the wrists of the politicians who got the favors. After all, imagine how much harder it would be to raise campaign cash if politicians couldn’t use the coercive power of government to swap favors with interest groups.

But the folks on Capitol Hill are amateurs compared to Bill and Hillary Clinton. The Wall Street Journal explains that the charity they set up has basically been a scam to advance their personal and political interests.

The foundation served for years as a conduit for corporate and foreign cash to burnish the Clinton image, pay for their travel expenses for speeches and foreign trips, and employ their coterie in between campaigns or government gigs. Donors could give as much as they wanted because the foundation is a “charity.” …the foundation promised the White House when Mrs. Clinton became Secretary of State that the foundation would restrict foreign donations and get approval from the State Department. It turned out the foundation violated that pledge, specifically when accepting $500,000 from Algeria. The foundation also agreed to disclose donor names but failed to do so for more than 1,000 foreign donors until the failure was exposed by press reports.

Some readers may think it doesn’t matter where the money came from. What really counts is that the Clinton Foundation used the money to make the world a better place, right?

Um, not exactly. Only pennies on the dollar were used for charitable purposes.

The rest of the money was a slush fund to finance the Clinton family’s political machinery.

If you think this sounds unfair to the Clinton Foundation, you may change your mind after reading this article from the Daily Caller. Here are some excerpts.

Clinton Foundation officials have ignored virtually all of the “best practices” urged by good governance organizations for public charities… Most glaringly, for example, the foundation’s insular board of directors…are among President Bill and Hillary Clinton’s closest and richest friends. The “good governance” movement in the nonprofit field has been gathering strength for two decades, but it clearly has yet to reach the Clinton Foundation. …Good governance groups also encourage well-managed non-profits to create dedicated oversight committees… The Clinton Foundation has none of those committees, according to its Internal Revenue Service 990 tax filings. …the Clinton Foundation spent $12.6 million on Bill Clinton’s 60th birthday party. The foundation recorded the expense as “fundraising expenses.” …In December 2014 the board approved a $395,000 pay package for Braverman to become the new CEO.  But the next month he abruptly resigned. Politico reported that Clinton’s insular staff were appalled at Braverman’s attempts at reforms. Braverman never explained the reasons for his departure. But Politico believes it was a backlash from Bill and Hillary’s hardened loyalists and “mega-donors” who chafed at the notion of more openness and transparency.

If the Clinton Foundation was a truly private organization, it wouldn’t be anybody’s business whether how it operated.

Moreover, it would be hypocritical for me to make that accusation. After all, I’m on the Board of the pro-tax competition Center for Freedom and Prosperity and the other Board members are long-time friends. And we don’t have a bunch of oversight committees since CF&P’s annual budget has averaged less than $200,000, which means such things don’t seem necessary (though we’ve managed to do a lot with a little, even earning a front-page attack from the Washington Post).

The real issue, however, is whether a nonprofit organization is genuinely private. In the case of the Clinton Foundation, ” the organization seemingly operated as a “pay-to-play” gatekeeper for goodies from the State Department?

Consider these blurbs from a column in the Wall Street Journal.

…more than two dozen companies and groups and one foreign government paid former President Bill Clinton a total of more than $8 million to give speeches around the time they also had matters before Mrs. Clinton’s State Department, according to a Wall Street Journal analysis. Fifteen of them also donated a total of between $5 million and $15 million to the Bill, Hillary and Chelsea Clinton Foundation, the family’s charity… In several instances, State Department actions benefited those that paid Mr. Clinton.

Here’s one of the examples discussed in the column.

…the capital of the United Arab Emirates asked for a facility to clear travelers for U.S. entry before they boarded planes so they could avoid delays when arriving in the U.S. …U.S.-based airlines, which have no direct flights between Abu Dhabi and the U.S., opposed the idea as a giveaway to the government-owned airline, Etihad Airways. …While Mrs. Clinton’s State Department and the Department of Homeland Security were working out a “letter of intent” with Abu Dhabi for the facility, Mr. Clinton sought permission to give a paid speech in Abu Dhabi. …On Dec. 6, 2011, U.S. officials signed the letter of intent. One week later, Mr. Clinton gave a 20-minute talk on climate change to the Abu Dhabi government environmental gathering. He collected $500,000, his wife’s disclosure report shows. In December 2012, Mr. Clinton sought approval for another speech in Abu Dhabi before the World Travel and Tourism Council…the speech was sponsored by three Abu Dhabi tourism agencies, all owned by the government. …Mr. Clinton gave a keynote address on the value of tourism. He was paid $500,000, his wife’s disclosure filings say. One week later, the U.S. and Abu Dhabi signed the final agreement for the facility. …Mrs. Clinton’s spokesman said it was “farcical” to suggest any connection between the speeches and the facility’s opening.

The “farcical” part of this is the notion that a) Bill Clinton is an expert on the “value of tourism”, and b) that his supposed expertise on the topic is worth $500,000.

Though I have to give Bill Clinton credit for getting good deals. When I give a speech, I’m content with simply getting the organizer to pay for a coach ticket and a hotel room.

But the L.A. Times reveals that Bill Clinton gets much better treatment, not even counting the giant piles of money funneled to the Clinton Foundation.

Clinton changed the rules of political speech-making for cash. He would push not just corporate hosts but also nonprofits and universities to pay fees well beyond what they were accustomed to. …He and Hillary Clinton would become so skilled at churning profits out of their lectures that they would net more than $150 million from speaking alone after he left the White House. …refusing questions that were not screened by his staff in advance. There is the nearly $1,400 bill for a day’s worth of phone calls from San Francisco’s Fairmont Hotel and the $700 dinner for two. …Clinton would demand in his contract to be shuttled by private jet from San Francisco to UC Davis, where he spoke at the Mondavi Center. The center had to appeal to its network of donors to find someone able to fly him the 70 miles, something it had never done and hasn’t since.

By the way, I don’t object to Bill Clinton being treated far better than me. But I do get agitated if he’s getting goodies because some interest group is participating in a pay-for-play scam based on favors from government.

And that does come out of my pocket, as well as from the pockets of every other taxpayer, consumer, and worker.

Speaking of pay-to-play, here’s a story from the Washington Examiner about some unseemly behavior from the Clinton Foundation.

A Clinton Foundation official asked an aide to then-Secretary of State Hillary Clinton if the government would allow the well-connected charity to accept a donation from an oil company with extensive ties to Iran. …The email shows Petronas, a Malaysian state-owned oil company, wanted to send CEO Shamsul Azhar bin Abbas to a Clinton Global Initiative event as a paying member. …Two months earlier, the State Department highlighted a $150 million contract between Petronas and General Electric in Malaysia. …David Bossie, president of Citizens United, said the timeline of the State Department’s announcement of the deal with GE should raise questions. “A month after the announcement, the Clinton Foundation staff is contacting the State Department saying, ‘Hey, we want to shake down the CEO, essentially, of Petronus, is that ok?’…,” Bossie said. “That is political crony capitalism — that’s the definition of it, is using your political contacts and your political achievements for financial gain for the foundation,” he continued. “Clearly, [there was] a conflict of interest.”

The only good news is that the proposed shakedown of Petronas apparently didn’t happen, though it’s unclear from the records whether this was because the company said no or because the idea was so over-the-top corrupt that it was rejected by the State Department.

Let’s close with a really nauseating example of Clintonian sleaze. A story in National Review exposes how the family’s Foundation victimized the people of Haiti.

Their story goes back to 2010, when a massive 7.0 earthquake devastated the island, killing more than 200,000 people, leveling 100,000 homes, and leaving 1.5 million people destitute. The devastating effect of the earthquake on a very poor nation provoked worldwide concern and inspired an outpouring of…some $10.5 billion in aid, with $3.9 billion of it coming from the United States.

But all this money hasn’t helped the poor people of Haiti.

…very little of this aid money actually got to poor people in Haiti. …Port-au-Prince was supposed to be rebuilt; it was never rebuilt. Projects aimed at creating jobs proved to be bitter disappointments. Haitian unemployment remained high, largely undented by the funds that were supposed to pour into the country. Famine and illness continued to devastate the island nation.

Why didn’t all the money have a positive impact?

Part of the answer is that foreign aid generally ineffective. Another part of the answer is that Haiti has statist policies that inhibit growth and prosperity.

But a final part of the answer is that a bunch of grifters diverted the money to their own pockets.

Where did it go? …Bill Clinton was the designated UN representative for aid to Haiti. …his wife Hillary was the United States secretary of state. She was in charge of U.S. aid allocated to Haiti. …an interesting pattern involving the Clintons and the designation of how aid funds were used. …a number of companies that received contracts in Haiti happened to be entities that made large donations to the Clinton Foundation. …For example, the Clinton Foundation selected Clayton Homes, a construction company owned by Warren Buffett’s Berkshire Hathaway, to build temporary shelters in Haiti. Buffett is an active member of the Clinton Global Initiative who has donated generously to the Clintons as well as the Clinton Foundation. …the contract was never competitively bid for. Clayton offered to build “hurricane-proof trailers” but what they actually delivered turned out to be a disaster. The trailers were structurally unsafe, with high levels of formaldehyde and insulation coming out of the walls. There were problems with mold and fumes. The stifling heat inside made Haitians sick and many of them abandoned the trailers because they were ill-constructed and unusable.

Here’s another example of pay-to-play favoritism.

The Clintons also funneled $10 million in federal loans to a firm called InnoVida, headed by Clinton donor Claudio Osorio. …Normally the loan approval process takes months or even years. …InnoVida had not even provided an independently audited financial report that is normally a requirement for such applications. This requirement, however, was waived. On the basis of the Clinton connection, InnoVida’s application was fast-tracked and approved in two weeks. The company, however, defaulted on the loan and never built any houses. An investigation revealed that Osorio had diverted company funds to pay for his Miami Beach mansion, his Maserati, and his Colorado ski chalet.

Gee, isn’t government a great racket!

Here’s one final oleaginous example.

In 2011, the Clinton Foundation brokered a deal with Digicel, a cell-phone-service provider seeking to gain access to the Haitian market. The Clintons arranged to have Digicel receive millions in U.S. taxpayer money to provide mobile phones. The USAID Food for Peace program, which the State Department administered through Hillary aide Cheryl Mills, distributed Digicel phones free to Haitians. Digicel didn’t just make money off the U.S. taxpayer; it also made money off the Haitians. When Haitians used the phones, either to make calls or transfer money, they paid Digicel for the service. Haitians using Digicel’s phones also became automatically enrolled in Digicel’s mobile program. By 2012, Digicel had taken over three-quarters of the cell-phone market in Haiti. Digicel is owned by Denis O’Brien, a close friend of the Clintons. O’Brien secured three speaking engagements in his native Ireland that paid $200,000 apiece. These engagements occurred right at the time that Digicel was making its deal with the U.S. State Department. O’Brien has also donated lavishly to the Clinton Foundation, giving between $1 million and $5 million sometime in 2010–2011. Coincidentally the United States government paid Digicel $45 million to open a hotel in Port-au-Prince.

If you’re not thoroughly nauseated, read the entire article for many more examples of pay-to-play sleaze.

By the way, I’m not merely picking on the Clintons. Yes, they seem to be remarkably amoral in their approach to politics, but the underlying problem is that big government enables corruption regardless of who is in charge.

That’s the moral of the story.

P.S. Don’t forget that the Clinton Foundation easily got approved by the IRS while innocuous Tea Party groups were stonewalled. Another typical example of government in action.

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Remember Bill Murray’s Groundhog Day, the 1993 comedy classic about a weatherman who experiences the same day over and over again?

Well, the same thing is happening in Japan. But instead of a person waking up and reliving the same day, we get politicians pursuing the same failed Keynesian stimulus policies over and over again.

The entire country has become a parody of Keynesian economics. Yet the politicians make Obama seem like a fiscal conservative by comparison. They keep doubling down on the same approach, regardless of all previous failures.

The Wall Street Journal reports on the details of the latest Keynesian binge.

Japan’s cabinet approved a government stimulus package that includes ¥7.5 trillion ($73 billion) in new spending, in the latest effort by Prime Minister Shinzo Abe to jump-start the nation’s sluggish economy. The spending program, which has a total value of ¥28 trillion over several years, represents…an attempt to breathe new life into the Japanese economy… The government will pump money into infrastructure projects… The government will provide cash handouts of ¥15,000, or about $147, each to 22 million low-income people… Other items in the package included interest-free loans for infrastructure projects…and new hotels for foreign tourists.

As already noted, this is just the latest in a long line of failed stimulus schemes.

The WSJ story includes this chart showing what’s happened just since 2008.

And if you go back farther in time, you’ll see that the Japanese version of Groundhog Day has been playing since the early 1990s.

Here’s a list, taken from a presentation at the IMF, of so-called stimulus plans adopted by various Japanese governments between 1992-2008.

And here’s my contribution to the discussion. I went to the IMF’s World Economic Outlook database and downloaded the numbers on government borrowing, government debt, and per-capita GDP growth.

I wanted to see how much deficit spending there was and what the impact was on debt and the economy. As you can see, red ink skyrocketed while the private economy stagnated.

Though we shouldn’t be surprised. Keynesian economics didn’t work for Hoover and Roosevelt, or Bush and Obama, so why expect it to work in another country.

By the way, I can’t resist making a comment on this excerpt from a CNBC report on Japan’s new stimulus scheme.

Abe ordered his government last month to craft a stimulus plan to revive an economy dogged by weak consumption, despite three years of his “Abenomics” mix of extremely accommodative monetary policy, flexible spending and structural reform promises.

In the interest of accuracy, the reporter should have replaced “despite” with “because of.”

In addition to lots of misguided Keynesian fiscal policy, there’s been a radical form of Keynesian monetary policy from the Bank of Japan.

Here are some passages from a very sobering Bloomberg report about the central bank’s burgeoning ownership of private companies.

Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year…. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy. …opponents say the central bank is artificially inflating equity valuations and undercutting efforts to make public companies more efficient. …the monetary authority’s outsized presence will make some shares harder to buy and sell, a phenomenon that led to convulsions in Japan’s government bond market this year. …the BOJ doesn’t acquire individual shares directly, it’s the ultimate buyer of stakes purchased through ETFs. …investors worry that BOJ purchases could give a free ride to poorly-run firms and crowd out shareholders who would otherwise push for better corporate governance.

Wow. I don’t pretend to be an expert on monetary economics, but I can’t image that there will be a happy ending to this story.

Just in case you’re not sufficiently depressed about Japan’s economic outlook, keep in mind that the nation also is entering a demographic crisis, as reported by the L.A. Times.

All across Japan, aging villages such as Hara-izumi have been quietly hollowing out for years… Japan’s population crested around 2010 with 128 million people and has since lost about 900,000 residents, last year’s census confirmed. Now, the country has begun a white-knuckle ride in which it will shed about one-third of its population — 40 million people — by 2060, experts predict. In 30 years, 39% of Japan’s population will be 65 or older.

The effects already are being felt, and this is merely the beginning of the demographic wave.

Police and firefighters are grappling with the safety hazards of a growing number of vacant buildings. Transportation authorities are discussing which roads and bus lines are worth maintaining and cutting those they can no longer justify. …Each year, the nation is shuttering 500 schools. …In Hara-izumi, …The village’s population has become so sparse that wild bears, boars and deer are roaming the streets with increasing frequency.

Needless to say (but I’ll say it anyhow), even modest-sized welfare states eventually collapse when you wind up with too few workers trying to support an ever-growing number of recipients.

Now maybe you can understand why I’ve referred to Japan as a basket case.

P.S. You hopefully won’t be surprised to learn that Japanese politicians are getting plenty of bad advice from the fiscal pyromaniacs at the IMF and OECD.

P.P.S. Maybe I’m just stereotyping, but I’ve always assumed the Japanese were sensible people, even if they have a bloated and wasteful government. But when you look at that nation’s contribution to the stupidest-regulation contest and the country’s entry in the government-incompetence contest, I wonder whether the Japanese have some as-yet-undiscovered genetic link to Greece?

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Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of its efforts to help Obama’s reelection campaign.

That’s when I decided to put forth my “First Theorem of Government,” which simply states that the public sector is a racket for the benefit of a ruling class comprised of bureaucrats, interests groups, cronies, and other insiders.

They have figured out how to line their pockets and live very comfortable lives at the expense of people in the economy’s productive sector.

The same thing is true on the other side of the Atlantic Ocean. The U.K.-based Daily Mail reports that senior bureaucrats in the country’s government-run healthcare system get lavish taxpayer-financed pension.

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Here are some of the details, all of which must be especially aggravating for the mistreated patients who suffer because of substandard care from the government.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector; …About 500 earn more than the Prime Minister – after Health Secretary Jeremy Hunt ordered them to ‘show restraint’ on executive pay. …the scheme every year pays retired staff £10 billion more than it takes in. That black hole has to be filled by the taxpayer. The subsidies enable NHS executives – including managers, human resources bosses and directors of ‘corporate administration’ – to build up vast pensions, at minimal personal expense.

Here’s the bureaucrat with the biggest pile of loot from taxpayers.

The biggest single beneficiary is Professor Tricia Hart, who retired as chief executive of South Tees Hospitals NHS Foundation Trust in January with a £2.6 million pension. That figure entitled her to a lump sum of at least £335,000 on retirement, plus an inflation-proof annual pension of £110-115,000. …at least four HR directors have amassed million-pound pensions.

By the way, I have nothing against people accumulating big nest eggs. Even if they work for the government.

My objection, as discussed in yesterday’s column about state and local bureaucrats in America, is when bureaucrats have special taxpayer-financed deals.

Especially, as we see all too often in the U.K., when taxpayers don’t even get good healthcare in exchange for the lavish salaries and benefits.

Almost four million people are now waiting for cataract surgery, hip and knee replacements and other routine operations. The number of people forced to wait more than four hours in A&E has doubled in two years. And wards are full of elderly people who cannot be discharged – because there are no care home places for them.

A spin doctor tried to rationalize and justify the cozy scheme for bureaucrats.

…a spokesman for NHS Pensions stressed that…The amounts individuals accrued were a result of the ‘rules and regulations’ of the NHS scheme. ‘What people get paid is a matter for NHS trusts,’ he added.

I’m amused by the assertion that the lavish pensions are the result of simply following the “rules and regulations.” That’s precisely the point. Government insiders write the rules and regulations and they inevitably produce systems that are very good for them and not so good for taxpayers.

I’m also amused (and when I write “amused,” I actually mean “irritated” or “appalled”) at the claim that compensation levels are “a matter for NHS trusts”. If the spin doctor was talking about a private company, I would agree. As I’ve argued before, pay levels in private companies should be determined by managers and stockholders.

But we’re talking in this case about pay levels in a government bureaucracy. And notwithstanding the elitist attitude of some government officials, taxpayers have every right to get outraged when they learn that their money is being squandered on excessive pay and gold-plated benefits.

It’s a problem all over the world.

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I’ve written (some would say excessively) about the fact that America has too many bureaucrats and that they’re paid too much.

That’s true in Washington. That’s true at the state level. And it’s true for local governments.

But since I’m a big believer in beating a dead horse, let’s revisit this issue. We’ll narrow our focus today and look solely at the issue of retirement benefits for state and local bureaucrats.

Why? Because, as explained by Andrew Biggs of the American Enterprise Institute, the unfunded liability for these schemes has mushroomed into a giant $5 trillion problem.

If the Actuarial Standards Board enacts recommendations from its Pension Task Force, actuarial valuations for state and local government pensions will report unfunded liabilities of over $5 trillion and funding ratios of just 39 percent. The public pensions industry will hate it, but those figures are the best available measures of the costs of public employee retirement plans. …That $5.2 trillion is the number most economists would think is most relevant to considering the costs of public sector pensions. …The simple reality is that public pension underfunding is a significant problem that can only really be addressed by increasing contributions or by lower pension benefits, choices that pretty much everyone involved in the pension world would prefer to avoid.

You won’t be surprised to learn that some states are more irresponsible than others.

CNBC reports that Nebraska is the most prudent and Alaska is the worst (politicians can’t resist squandering oil revenue). Several blue states rank poorly (think Illinois, Connecticut, California, and New Jersey), but there also are red states (such as Louisiana and Kentucky) that have made very foolish promises.

In Nebraska, for example, the pension liability amounts to about $386 per person, the lowest in the nation. That compares with Alaska ($19,394 per person: the highest in the country), Illinois ($15,158 per person) and Connecticut ($14,769). The average pension shortfall in 2014 amounted to $4,383.

The Wall Street Journal has an interactive table that allows readers to see which states have the biggest shortfall.

Meanwhile, Governing has an interactive map showing which states have the biggest gaps.

In other words, state and local bureaucrats have been promised a lot of money when they retire.

Much more money than is available.

And when you add Social Security benefits to the mix, as Andrew Biggs has calculated, you wind up having lots of bureaucrats enjoying very lavish levels of retirement income.

I tabulated the pension benefits paid to full-career “regular” state government employees (meaning, non-public safety) retiring in 2012. For states in which public employees participated in Social Security, I estimated the Social Security benefit the retiree would be eligible to receive. And finally, I compared total retirement benefits to the worker’s earnings immediately preceding retirement. …Mississippi paying the lowest replacement rate of 54% of final earnings. …West Virginia paid the most generous benefits, equal to 115% of final earnings, followed by New Mexico (113%), Oregon (105%), California (102%) and, yes, conservative Texas (101%).

Here’s a map that accompanied the article.

But maybe big numbers, maps and tables are too abstract.

To give some examples of how this is leading to a fiscal crisis, consider these recent news reports.

A story from the Las Vegas Review-Journal:

Nevadans should brace for reduced services, higher taxes or both — the necessary consequence of the Public Employee Retirement System of Nevada (PERS) having badly missed its investment target last year…PERS has now missed its target over the past five, 10, 15, 20 and 25 years — suggesting that another taxpayer-rate hike is on its way. Remarkably, this shortfall has occurred even though markets have nearly tripled from their 2009 lows, and currently sit at or near all-time highs. Nevada’s soaring pension costs — ranked third-highest in the nation at 9.8 percent of own-source revenue, according to 2013 data from the Public Plans Database — aren’t just due to overly optimistic investment assumptions, however. Another factor is the extraordinarily generous nature of the benefits.

A column from the Orange County Register:

…in the world of public sector pensions – among the biggest institutional investors in global markets – politicians…pretend they can count on big investment returns every year, while disregarding warning signs, mounting debts and increasingly unsustainable pension systems. We’re seeing the latest pension fund returns come in, and almost uniformly, it was a terrible year for states – and thus taxpayers. The California Public Employees’ Retirement System, the largest U.S. public pension fund, logged a paltry annual return of 0.6 percent. …CalPERS is currently only 76 percent funded, a figure that will inevitably drop given the latest weak returns.

A report from the Portland Tribune:

Oregon’s major business groups want lawmakers to start dealing with rising public pension costs as early as the session that opens Feb. 1. Although those costs start to kick in with the 2017-19 budget cycle — 18 months away — advocates say it’s not too early to whittle down an unfunded liability projected at $18 billion over the next few decades. …projected increases in contributions to PERS, which covers about 95 percent of Oregon’s public workers, will eat deeply into what they can spend over the next several two-year budget cycles. Cheri Helt, co-chair of the Bend-La Pine School Board, says pension costs will jump from the current 16 percent of payroll to 20 percent in 2017-19, and to 25 percent in the cycle afterward. …Jamie Moffitt, vice president and chief financial officer for the University of Oregon, says rising pension costs will eat up 40 percent — about 2 percentage points — of the 5.5 percent average annual increase in tuition.

An editorial about New Jersey in the Wall Street Journal:

New Jersey’s Senate president is in a Brando-like fight with government unions that he says are trying to extort or bribe legislators into doing their bidding. …At issue is the woefully underfunded state pension system. The teachers union wants to put a measure on the November ballot to amend the state constitution to require quarterly state pension payments of increasing amounts. …government unions have so much political sway over politicians that they often call the shots on their own pensions and benefits. …New Jersey’s public pensions are underfunded to the tune of $82 billion. Thomas Healey of the state’s bipartisan Pension and Health Benefit Study Commission notes that pensions and health care now eat up 11% of New Jersey’s budget, and without reform this will grow to 28% by 2025. …The pension commission has proposed reforms—including a shift to a hybrid retirement plan that includes features more akin to a 401(k)—but unions have blocked them. They now want voters to rewrite the state constitution so pension reform would be all but impossible.

A column about the corrupt system in Illinois:

Illinois’s government, says [Gov.] Rauner, “is run for the benefit of its employees.” Increasingly, it is run for their benefit when they retire. Pension promises [are] unfunded by at least $113 billion… The government is so thoroughly unionized (22 unions represent almost all government employees), that “I can’t,” Rauner says, “turn on a light switch without permission.” He exaggerates, somewhat, but the process of trying to fire someone is a career, not an option. …high-tax Illinois will continue bleeding population and businesses, but with one contented cohort — the Democratic political class, for whom the system is working quite well.

The crux of the problem is that most state and local governments have “defined-benefit” plans for bureaucrats, which means that taxpayers are on the hook to provide retiring bureaucrats a specific amount of benefits (not just retirement income, but other goodies such as health care) based on formulas that count years in the workforce, highest salary levels, and other factors. That may not sound totally unreasonable, but politicians realize they can buy votes by cutting deals with government unions and providing retirement benefits that are extremely generous, especially compared to what’s available for workers in the private sector.

But that’s simply one part of the problem. The other part of the problem is the employers with defined-benefit plans (usually referred to as “DB plans”) are supposed to set aside money in investment funds so that there’s a growing pool of assets that can be used to pay for the lavish benefits promised to the bureaucracy. But as we’ve already learned, politicians often are reluctant to take this step. They like committing lots of future money to bureaucrats, but when putting together annual budgets, they generally can buy more votes by allocating money to things like schools and roads rather than depositing money into a pension fund.

So the net result is that there’s a big unfunded liability, meaning that the amount that politicians have promised to give bureaucrats is larger than what’s set aside in the pension funds. And to make matters worse, the pension funds usually have dodgy accounting (they assume the investments will earn more money than is realistic). Which is why the actual shortfall is about $5.2 trillion, as noted above.

Given this ticking time bomb, some of you may be wondering why the title says there’s a libertarian quandary. Surely the answer is to cauterize this fiscal wound with immediate cuts and to avoid an even bigger long-run disaster by shifting newly hired bureaucrats to a defined-contribution system such as IRAs or 401(k)s. This type of reform automatically eliminates any liability for taxpayers since retirement benefits for bureaucrats would be solely a function of contributions to retirement accounts and the investment performance of those funds (most state and local bureaucrats also are part of the Social Security system).

Yes, that is the answer, but the quandary (to add to my collection) is whether the federal government should force, or even encourage, this type of reform. Don’t state and local governments, after all, have the right to make stupid decisions?

Writing for the Wall Street Journal, Ed Bachrach argues that Uncle Sam should limit these suicidal policies.

The pensions of states and local governments are, collectively, trillions of dollars in the hole. This debt is crippling budgets and will dump an enormous burden on future generations. Yet state and local politicians have proven that they cannot, or will not, solve the problem. The federal government ought to step in. But how? Instead of bailing out these pensions, Congress should pass a law allowing states and local governments to reduce promised benefits—something that is now illegal under some states’ statutes or constitutions. …Many pensions allow retirement at age 55; states and local governments could mandate that benefits cannot be drawn until age 65. Payments could be capped at 150% of the median income in the local jurisdiction. Automatic cost-of-living increases that now exceed expected inflation could instead be tied to increases in the median income. …Local governments must also be required to terminate their defined-benefit plans. These should be replaced with defined-contribution plans, like 401(k)s or 403(b)s… Rep. Devin Nunes (R., Calif.) proposed withholding federal aid to government entities that don’t accurately report pension funding. That would be a step forward but would not solve the problem of underfunding.

I obviously agree that there should be no bailouts, but I’m still not convinced that Washington should mandate good policy by state and local governments.

Federalism means the freedom to adopt good policy…but also the leeway to commit fiscal suicide.

Though Andrew Biggs points out that the part about accurate reporting certainly sounds reasonable.

Congress has a tremendous opportunity to require state and local government employee pension plans to accurately disclose their multi-trillion dollar unfunded liabilities. …For years, economists and government agencies like the Congressional Budget Office have called for so-called “fair market valuation,” which both more accurately calculates the value of public pension liabilities and accurately tells those plans that taking more investment risk doesn’t make their plans cheaper. …there’s legislative language already written: Rep. Devin Nunes’s Public Employee Pension Transparency Act (PEPTA), which has a number of Congressional co-sponsors including House Speaker Paul Ryan, would require state and local plans to accurately disclose their liabilities using fair market valuation. The federal government would respect state and local rights by not forcing any changes to how pensions are funded, but Nunes’s plan would require that state and local governments to tell the public – including people thinking of purchasing municipal bonds – how much they really owe to their pensions.

P.S. By the way, advocates of limited government don’t experience many victories, but there actually was a very good reform of the pension system for federal bureaucrats during the Reagan years. Yes, federal bureaucrats are still over-compensated, but it’s not nearly as bad as it used to be. Yet another example of how Reaganomics was a success.

P.P.S. Shifting to bad news (or laughable news), the hacks in California tried to argue that lavish pensions for bureaucrats boost the economy. Andrew Biggs does a great job of debunking this nonsense.

The California Public Employee Retirement System (CalPERS) issued a report in July claiming that its benefit payments to retired government employees in 2013-2014 “supported 104,974 jobs throughout California and generated more than $15.6 billion in additional economic output.” …To reduce pension benefits for public employees, the study implies, would harm the overall California economy. …This study is nothing short of propaganda that wouldn’t get a passing grade in a freshman economics course. …the CalPERS study lacks one important component, called “counting both sides of the equation.” It needs to count economic costs as well as economic benefits. …CalPERS doesn’t create money out of thin air. Every single dollar of CalPERS benefits comes from a dollar that taxpayers or government employees contributed to the program or from the interest earned on those contributions.

Sounds like the bureaucrats at CalPERS should be working for the Congressional Budget Office.

P.P.P.S. The focus of this column is on the inherent instability of defined-benefit pension plans for bureaucrats, but let’s not lose sight of the fact that the underlying issue is that bureaucrats are ripping off taxpayers. Here are some blurbs from a Reason report by Eric Boehm on how this scam works in California.

If public service truly is a sacrifice, then join me in shedding a tear for the 20,900 public workers in California who pulled down more than $100,000 in retirement benefits during 2015. …Leading the way for 2015 was Michael Johnson. The former Solano County administrator received a $388,407 pension last year. …Rounding out the top three are Stephen Maguin, a former Los Angeles County Sanitation District general manager who pulled down $340,811 in 2015 and Joaquin Fuster, a former UCLA professor who got a pension worth $338,412 last year. …Curtis Bowden, a former member of the California Highway Patrol…retired all the way back in 1947, which means he’s been collecting pension checks for 68 years, after working just 5.3 years for the state. He got $24,800 from CalPERS in 2015.

Wow, I’m not sure what’s more impressive, Getting an annual pension of nearly $400K after being a country bureaucrat or working for just a bit over five years and getting 68 years worth of retirement checks?

Seems like both of them should be part of the Bureaucrat Hall of Fame.

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I need combat pay. Or maybe some kind of bonus for pain and suffering. First, I had to watch Donald Trump’s incoherent speech on the economy and try to decipher his mish-mash economic plan.

And then, without the benefit of a lengthy vacation or counseling for post-foolishness stress disorder, I had to endure Hillary Clinton’s speech about the economy.

Though I will admit it was very coherent and there wasn’t much to decipher. As I pointed out in this interview, she wants more wasteful spending, more punitive taxes, and more stifling regulation.

There are two points from this interview that deserve some additional emphasis.

  1. Copying Obama and referring to subsidies and handouts as being an “investment” doesn’t make bigger government a wise use of other people’s money.
  2. Keynesian spending is a scam. It’s the fiscal version of a perpetual motion machine that ostensibly spits out dollar bills when you put quarters in a slot.

I closed the interview by pointing out that it makes no sense to make America more like Greece or Venezuela.

Yet Hillary is too clever to say that’s her agenda. To clear up this confusion, here are a few phrases from her recent speech in Michigan. I’ve helpfully translated them into English.

  • …support advanced manufacturing” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • a lot of urgent and important work to do” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • go out and make that happen” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • enormous capacity for clean energy production” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • if we do it together” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • things that your government could do” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • I will have your back every single day” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • make our economy work for everyone” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • restore fairness to our economy” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • go to bat for working families” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • pass the biggest investment” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • modernizing our roads, our bridges” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • help cities like Detroit and Flint” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • repair schools and failing water systems” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • we should be ambitious” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • connect every household in America to broadband” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • build a cleaner, more resilient power grid” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • creating an infrastructure bank” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • we’re going to invest $10 billion” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • bring business, government, and communities together” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • fight to make college tuition-free” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • liberate millions of people who already have student debt” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • support high-quality union training programs” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • We will do more” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • Investments at home” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • we need to make it fairer” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • we will fight for a more progressive…tax code” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • pay a new exit tax” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • Wall Street, corporations, and the super-rich, should finally pay their fair share” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • I support the so-called ‘Buffett Rule,” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • add a new tax on multi-millionaires” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • close the carried interest loophole” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • Just think about what we could do with those $4 billion dollars” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • I want to invest” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • affordable childcare available to all Americans” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • Paid family leave” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • Raising the federal minimum wage” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • expanding Social Security” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • strengthening unions” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • improve the Affordable Care Act” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • a public option health insurance plan” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.
  • build a new future with clean energy” = Notwithstanding all the previous failures of government, both in America and elsewhere in the world, I’m going to make American more like Greece and Venezuela by using coercion to impose more spending, taxes, and regulation.

The only good news is that Hillary is an incremental statist. Unlike crazy Bernie Sanders, she doesn’t want to become Greece at 90 miles-per-hour. She’s content to travel in the wrong direction at a steady 55 miles-per-hour.

And since Greece is such a basket case, even two terms of Hillary Clinton probably would only result in America having French-type levels of economic freedom. Or lack thereof, to be more accurate.

In other words, it will take a lot of bad policy over a couple of decades to completely hollow out America’s economy. The already-baked-into-the-cake expansion of entitlements will take us part of the way to that unfortunate destination.

And, to mix my metaphors, Hillary will be content to add a few more straws to the camel’s back.

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Okay, I’ll admit the title of this post is an exaggeration. There are lots of things you should know – most bad, though some good – about international bureaucracies.

That being said, regular readers know that I get very frustrated with the statist policy agendas of both the International Monetary Fund and the Organization for Economic Cooperation and Development.

I especially object to the way these international bureaucracies are cheerleaders for bigger government and higher tax burdens. Even though they ostensibly exist to promote greater levels of prosperity!

I’ve written on these issues, ad nauseam, but perhaps dry analysis is only part of what’s needed to get the message across. Maybe some clever image can explain the issue to a broader audience (something I’ve done before with cartoons and images about the rise and fall of the welfare state, the misguided fixation on income distribution, etc).

It took awhile, but I eventually came up with (what I hope is) a clever idea. And when a former Cato intern with artistic skill, Jonathan Babington-Heina, agreed to do me a favor and take the concept in my head and translate it to paper, here are the results.

I think this hits the nail on the head.

Excessive government is the main problem plaguing the global economy. But the international bureaucracies, for all intents and purposes, represent governments. The bureaucrats at the IMF and OECD need to please politicians in order to continue enjoying their lavish budgets and exceedingly generous tax-free salaries.

So when there is some sort of problem in the global economy, they are reluctant to advocate for smaller government and lower tax burdens (even if the economists working for these organizations sometimes produce very good research on fiscal issues).

Instead, when it’s time to make recommendations, they push an agenda that is good for the political elite but bad for the private sector. Which is exactly what I’m trying to demonstrate in the cartoon,

But let’s not merely rely on a cartoon to make this point.

In an article for the American Enterprise Institute, Glenn Hubbard and Kevin Hassett discuss the intersection of economic policy and international bureaucracies. They start by explaining that these organizations would promote jurisdictional competition if they were motivated by a desire to boost growth.

…economic theory has a lot to say about how they should function. …they haven’t achieved all of their promise, primarily because those bodies have yet to fully understand the role they need to play in the interconnected world. The key insight harkens back to a dusty economics seminar room in the early 1950s, when University of Michigan graduate student Charles Tiebout…said that governments could be driven to efficient behavior if people can move. …This observation, which Tiebout developed fully in a landmark paper published in 1956, led to an explosion of work by economists, much of it focusing on…many bits of evidence that confirm the important beneficial effects that can emerge when governments compete. …A flatter world should make the competition between national governments increasingly like the competition between smaller communities. Such competition can provide the world’s citizens with an insurance policy against the out-of-control growth of massive and inefficient bureaucracies.

Using the European Union as an example, Hubbard and Hassett point out the grim results when bureaucracies focus on policies designed to boost the power of governments rather than the vitality of the market.

…as Brexit indicates, the EU has not successfully focused solely on the potentially positive role it could play. Indeed, as often as not, one can view the actions of the EU government as being an attempt to form a cartel to harmonize policies across member states, and standing in the way of, rather than advancing, competition. …an EU that acts as a competition-stifling cartel will grow increasingly unpopular, and more countries will leave it.

They close with a very useful suggestion.

If the EU instead focuses on maximizing mobility and enhancing the competition between states, allowing the countries to compete on regulation, taxation, and in other policy areas, then the union will become a populist’s dream and the best economic friend of its citizens.

Unfortunately, I fully expect this sage advice to fall upon deaf ears. The crowd in Brussels knows that their comfortable existence is dependent on pleasing politicians from national governments.

And the same is true for the bureaucrats at the IMF and OECD.

The only practical solution is to have national governments cut off funding so the bureaucracies disappear.

But, to cite just one example, why would Obama allow that when these bureaucracies go through a lot of effort to promote his statist agenda?

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