The Biden-Trump Plan for Middle-Class Tax Increases

What do Joe Biden and Donald Trump have in common?

Speaking earlier this year to the Mackinac Center in Michigan, I warned they both implicitly favor massive tax increases on ordinary households.

If you don’t want to spend two minutes watching the video, I explained that the burden of government spending is going to dramatically increase over the next several decades because of demographic change and poorly designed entitlement programs.

This means we will have to make a choice: Either reform entitlements or acquiesce to massive future tax increases.

And because Biden and Trump oppose entitlement reform, that means that they favor tax increases.

Moreover, since there are not nearly enough rich people to finance big government, this means Biden and Trump favor massive tax increases on lower-income and middle-class households.

To be fair, there are alternatives other than entitlement reform or big tax increases.

For instance, politicians could endlessly issue more debt. That might work, at least until the fiscal house of cards collapses.

Another possibility, at least with regards to Social Security, is to do nothing.

How is this an alternative? Well, David McIntosh, President of the Club for Growth, explained last month in the Wall Street Journal that the Biden-Trump position on Social Security could be a recipe for automatic benefit cuts.

Joe Biden and Donald Trump agree on one thing. “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” Mr. Biden said in March. Mr. Trump has said: “I will do everything within my power not to touch Social Security, to leave it the way it is.” …The Biden-Trump position may sound like a pledge to protect Social Security, but it isn’t. …the Old Age and Survivors Insurance Trust Fund…will be able to issue payments to retirees only until 2034. …once the trust fund reserve is depleted, beneficiary payouts will be limited to whatever funds come in from Social Security payroll taxes. …Thus consequences of leaving Social Security “without any changes,” as promised by Biden-Trump, are dire. Ten years from now, benefit cuts of 23% will be triggered if there is no change to Social Security…the Biden-Trump strategy has been to play “beat the clock,” leaving their successors to deal with the crisis. Candidates with a record of entitlement reform like Messrs. Pence and DeSantis would do well to point out that doing nothing is the worst Social Security cut.

Technically, McIntosh is 100 percent correct. Under current law, there will be automatic benefit cuts once there no longer are any IOUs in the Social Security Trust Fund.

In reality, future politicians almost surely will change the law to continue full payments. Which is why I feel confident in stating that our real choice is between genuine entitlement reform and massive tax increases.

P.S. My collection of “honest leftists” includes many who openly admit that giant tax increases will be needed if there is no entitlement reform.

P.P.S. The agreement between Biden and Trump on entitlements should not be a surprise. They also agree on many other issues, such as nationalized infrastructure, industrial policy, government spending, and trade protectionism.

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Social Security’s $60 Trillion-Plus Problem

The 2023 Social Security Trustees Report was released yesterday, and just like I did last year (and the year before, and the year before that, etc), let’s look at the fiscal status of the retirement program.

There is a lot of data in the Report. But the most important set of numbers can be found in Table VI.G9.

As you can see from this chart, these numbers show the amount of revenue coming into the program each year, adjusted for inflation, as well as the amount of yearly spending. Both are rising rapidly.

Since the orange line (spending) is climbing faster than the blue line (revenue), the obvious takeaway is that Social Security has a deficit.

But that would be an understatement.

As you can see from the second chart, the cumulative deficit over the next 77 years is more than $60 trillion.

You’ll notice, of course, that I added a bit of editorializing to both charts.

That’s because it is reprehensible that Joe Biden and Donald Trump are opposed to reforms that would modernize the program.

They won’t admit it, but their approach necessarily and unavoidably means huge tax increases on lower-income and middle-class households.

P.S. If you are not Biden or Trump and want to do what’s best for America, I suggest learning about reforms in Australia, Chile, Switzerland, Hong Kong, Netherlands, the Faroe Islands, Denmark, Israel, and Sweden.

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Biden and Trump Should Learn from Sweden’s Social Security Reform

Some American politicians, such as Joe Biden and Donald Trump, are very much opposed to dealing with Social Security, even though the current system has a massive $56 trillion cash-flow deficit.

For all intents and purposes, both the current president and his predecessor want to kick the can down the road, which surely is a recipe for massive future tax increases and may cause drastic changes to promised benefits.

Given their advanced ages, they probably won’t be around next decade when the you-know-what hits the fan.

But the rest of us will have to deal with a terrible situation thanks to their selfish approach.

Other nations are more fortunate, with leaders who put the national interest above personal political ambition.

Johan Norberg has a new column in the Wall Street Journal about how Swedish lawmakers adopted personal retirement accounts and undertook other reforms to strengthen their pension system.

President Biden refuses to consider any reforms, and so do many Republicans. But that won’t save the program; it’ll doom it. …Sweden faced the same problem in the early 1990s. The old pay-as-you-go pension system had promised too much. With fewer births and longer lives, projections showed the system would be insolvent a decade later. …Its politicians chose not to deceive the voters. …In 1994 the Social Democrats agreed with the four center-right parties to create an entirely new system based on the principle that pensions should correspond to what the beneficiary pays into the system—a system in which the contribution, not the benefits, is defined. …Sweden introduced partial privatization of the kind the American left derides as a Republican plot… The Swedish government withholds roughly 2.3% of wages and puts it into individual pension accounts. Workers are allowed to choose up to five different funds in which to invest this money…the average Swede has made an impressive average return of roughly 10% a year since its inception in 1995, despite the dot-com crash, the financial crisis and the pandemic. …Sweden’s pension system was recently described as the world’s best by the insurance group Allianz, based on a combination of sustainability and adequacy.

Back in 2018, I wrote about Sweden’s pension reforms, and I cited a study I co-authored back in 2000 for the Heritage Foundation.

Readers who want to learn more about the details of the Swedish system should read those publications.

For purposes of today’s column, though, let’s zoom out and see how Sweden’s system compares to other nations.

We’ll start by looking at a report by Mercer and the Chartered Financial Analyst Institute, which compared retirement systems in 43 developed countries. You can click here to view the full report and full rankings, but let’s focus on the United States and Sweden.

As you can see, Sweden beats America in every category, including a giant lead for integrity.

It’s also worth noting that Sweden is above average in every category while the United States is below average in two of the three categories.

Based on the Mercer/CFA report, we know Sweden’s system is good for workers.

But what about taxpayers?

Here’s a table showing the fiscal burden of old-age programs in European nations, taken from a report by the International Monetary Fund.

As you can see for both the present and the future, Swedish taxpayers face one of the lowest burdens, with old-age spending consuming significantly less than 10 percent of economic output.

I’ll close with a couple of very important observations about the international data.

• Sweden is not the top nation in the Mercer/CFA report. It trails Australia, Denmark, Iceland, Israel, Netherlands, and Norway – all of which have systems that are fully or partly based on mandatory private savings.
• Sweden does have the lowest spending burden in the IMF. The Baltic nations all do better – and all of those countries have systems that are partly based on mandatory private savings.

It’s almost as if there’s a lesson to be learned, even if Biden and Trump want to bury their heads in the sand.

P.S. Here’s my short video making the case for personal retirement accounts.

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Donald Trump Supports Massive Tax Increases on Middle-Class Americans, Part II

Regular readers know that I generally don’t get overly agitated about government debt (I get far more upset about counterproductive spending, regardless of how it is financed).

But even I recognize that there is a point where debt becomes excessive.

So let’s start today’s column with the simple observation that America’s current fiscal trajectory is unsustainable.

The burden of federal spending is projected to jump over the next several decades up to 30 percent of GDP while taxes “only” increase to about 19 percent of GDP.

It is inconceivable that all that new spending will be – or can be – financed by borrowing. Simply stated, domestic and international investors will decide that bonds from Uncle Sam are too risky.

So that leaves only two options.

1. Spending restraint, inevitably requiring entitlement reform.
2. Massive tax increases, inevitably targeting middle-class Americans.

Regarding those two choices, Donald Trump supports massive tax increases.

He’s not overtly admitting that agenda, but that’s the unavoidable outcome based on what Joshua Green of Bloomberg recently reported about his opposition to entitlement reform.

Trump is hoping to reverse his fortunes and revive his moribund presidential campaign with a…short video message. …he looks straight to camera and declares, “Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security.” …In fact, he has been remarkably consistent and outspoken over the years in his attacks on Republican efforts to cut Social Security and Medicare. …he was viewed as the least conservative Republican nominee in decades. He favored lots of infrastructure spending…and he made a big deal about protecting Social Security and Medicare.

The story also explains that Trump was the big-government candidate among Republicans in 2016 (as I noted at the time) and suggests he will hold to that position as the 2024 race develops.

Trump’s position set him apart from the other 16 Republican presidential candidates, who generally shared Ryan’s belief, prevalent among House Republicans, that cutting Social Security and Medicare was a fiscal imperative. That’s where DeSantis comes in. …DeSantis was also one of the founding members of the House Freedom Caucus, which drove the effort to cut entitlements when he was in Congress. DeSantis voted repeatedly — in 2013, 2014, and 2015 — for budgets that slashed spending on Social Security and Medicare

By the way, the article is flat-out wrong on a few points.

It is grossly inaccurate to assert that the Ryan budgets “slashed spending.” Overall spending increased in the budgets that Ryan, DeSantis, and other Tea Party Republicans supported back in 2013, 2014, and 2015.

All that happened is that spending would not have been allowed to grow as fast as previously planned.

Also, while the Ryan budgets included genuine Medicare reform (and much-needed spending restraint), they did not address Social Security reform. So the report was wrong on that as well.

But I’m digressing. The key thing to understand is that Ryan, DeSantis and other Republicans in the House last decade tried to do the right thing.

Donald Trump, by contrast, did the wrong thing. And he wants to do the wrong thing in the future. And that means huge future tax increases on you and me.

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Donald Trump Supports Massive Tax Increases on Middle-Class Americans, Part I

Copying some self-styled national conservatives, Donald Trump this week endorsed major tax increases on lower-income and middle-class Americans.

But he embraced huge tax increases in an indirect fashion.

• He did not say “let’s adopt money-siphoning value-added taxes” like they have in Europe.
• Nor did he say “let’s impose very high income tax rates on ordinary people” like they do in Europe.
• And he didn’t say “let’s have much higher payroll tax rates” like they have in Europe.

Instead, Trump embraced huge tax increases by default. He told congressional Republicans to ignore America’s slow-motion crisis of entitlement spending.

For all intents and purposes, that is the same as embracing huge tax increases.

To be more specific, if you endorse European-style government spending, you are necessarily and unavoidably endorsing European-style tax policy.

And that’s what Trump did. Here are some excerpts from a report in the Hill by Brett Samuels.

Former President Trump on Friday urged Republicans in Congress not to cut “a single penny” from Medicare or Social Security… “Under no circumstances should Republicans vote to cut a single penny from Medicare or Social Security…,” Trump said in a recorded video statement posted to Truth Social. …The former president’s message about protecting Social Security and Medicare is consistent with his previous comments on the issue as a candidate in 2016.

For what it’s worth, I’m not surprised at what Trump said.

He favored big government as a candidate in 2016 and he expanded the burden of spending when he was President.

But some of us don’t want to surrender and doom the United States to European-style economic stagnation.

Which is why I’ve decided to take a sentence I wrote last month and turn it into the 15th Theorem of Government.

Here’s the bottom line: Genuine patriots recognize America has a problem and they have the courage to advocate reforms that will actually solve the problem.

It will be interesting to see how many Republicans fit that definition.

P.S. I’m not a never-Trumper or anti-Trumper. For instance, I praised his tax policy and said nice things about his record on regulation. But I’m loyal to ideas, not to people, so I don’t hesitate to criticize any politician who pushes ideas that are bad for America.

P.P.S. Here are the other 14 Theorems of Government.

• The “First Theorem” explains how Washington really operates.
• The “Second Theorem” explains why it is so important to block the creation of new programs.
• The “Third Theorem” explains why centralized programs inevitably waste money.
• The “Fourth Theorem” explains that good policy can be good politics.
• The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
• The “Sixth Theorem” explains an under-appreciated benefit of a flat tax.
• The “Seventh Theorem” explains how bigger governments are less competent.
• The “Eighth Theorem” explains the motives of those who focus on inequality.
• The “Ninth Theorem” explains how politics often trumps principles.
• The “Tenth Theorem” explains how politicians manufacture/exploit crises.
• The “Eleventh Theorem” explains why big business is often anti-free market.
• The “Twelfth Theorem” explains you can’t have European-sized government without pillaging the middle class.
• The “Thirteenth Theorem” explains that people are unwilling to pay for bloated government.
• The “Fourteenth Theorem” explains how poor people are hurt by big government.

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Trump’s Tax Returns and the Flat Tax

I applauded when Joe Biden used clever tax strategies to reduce his (apparently unpatriotic) tax bill to the IRS. I also applauded when Bill and Hillary Clinton engaged in clever tax avoidance, as well as John Kerry and Gov. Pritzker of Illinois.

In the spirit of bipartisanship, I also applaud when Donald Trump does the same thing, and that part of what we’re going to discuss today.

First, some background: The ongoing battle over Donald Trump’s personal tax information has finally ended. If you’re curious, the New York Times has a detailed report on what Trump earned (or lost) in recent years.

And the NYT also tells us how much tax he paid during those years.

When I look at these numbers, my first thought is that Trump is not a very good businessman since he has a negative income most years.

My second thought is that I’m glad he paid a low tax rate of about 3 percent in 2018 and approximately 4 percent in 2019, the two years when his income was positive.

Why am I glad? Because money in private hands is far more likely to be utilized wisely than money that gets diverted to the IRS and then spent by the politicians in Washington.

That’s the first part of today’s column.

The second part of today’s column is to use Trump’s tax return to show why the tax system would be much better if we junked the internal revenue code and replaced it with a simple and fair flat tax.

The flat is based on the principle of equality.

• All income tax taxed at the same low rate.
• No income is exempt from tax, other than a family-based allowance.
• No income is subject to double taxation.

A tax system based on equality also means radical simplicity. The hundreds of different tax forms in today’s tax code would get dumped in the garbage.

All that would be left is a simple tax form for households.

And a simple tax form for businesses.

What would this mean for Trump’s tax returns? I’m sure the implications would be enormous, but I want to focus on just two issues.

First, under the flat tax, business losses can not be used to lower taxes on household income (wages, salaries, and pensions). So that would probably mean a higher tax burden for Trump.

Second, the tax treatment of business changes in ways that would both help Trump and hurt Trump. The most important thing to realize is that the convoluted corporate income tax (as well as parts of the personal income tax such as Schedule C) are replaced by a very simple cash-flow system.

Here’s how Professors Robert Hall and Alvin Rabushka describe the business portion of the flat tax.

The business tax is a giant, comprehensive withholding tax on all types of income other than wages, salaries, and pensions. It is carefully designed to tax every bit of income outside of wages, but to tax it only once. The business tax does not have deductions for interest payments, dividends, or any other type of payment to the owners of the business. As a result, all income that people receive from business activity has already been taxed. …The resulting simplification and improvement in the tax system is enormous. …Eliminating the deduction for interest paid by businesses is a central part of our general plan to tax business income at the source.

One very important implication of this approach is there there no longer would be a bias for debt. This would not be good news for people like Trump who usually rely on debt to finance their businesses.

On the other hand, the net result would be a tax code more favorable to investment and entrepreneurship. So if Trump is a good businessman, he will benefit.

I’m agnostic on Trump’s entrepreneurial ability, but I’m an unabashed fan of having a better tax system for America. Replacing the internal revenue code with a sensible tax system would mean a more prosperous country and a less corrupt Washington.

P.S. Under a flat tax, a business would be allowed to “carry forward” losses from previous years, just as is usually the case for the current system.

P.P.S. A flat tax also would replace depreciation with expensing, which is another policy favorable to smart entrepreneurs.

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Republican Warfare, Part I: The Trump Problem

I’ve never been a fan of Donald Trump, though my criticism has always focused on his support for bad policies such as wasteful spending, foolish protectionism, and corrupt cronyism.

Today I’m going to change hats and pretend to be a political pundit so I can offer some unsolicited advice to my Republican friends.

If they like to win elections, they need to realize that Donald Trump is bad news.

Yes, he beat a very unpopular Hillary Clinton in 2016, but every subsequent election has produced Republican disappointment.

• The 2018 midterm elections.
• The 2020 presidential election.
• The 2022 midterm elections.

What should most upset the GOP is that Trump has given Democrats control of the Senate twice. First, by depressing Republican turnout in the two Georgia runoff contests with his sore-loser routine about stolen elections in the 2020 cycle. Second, by convincing Republican voters to nominate inferior candidates in the 2022 cycle.

But the fault is not entirely with Trump.

As illustrated by this cartoon, a significant share of Republican voters like Trump and this gives him enormous power over the GOP.

The interesting question to answer is why many rank-and-file Republicans feel so loyal to Trump – even though he often supported bad policies and has helped Democrats gain power in Washington.

I actually answered that question early last year. Here’s some of that column.

One thing that surprised me over the past four yeas is that I found strong support for Trump from grassroots conservative Republicans. Yes, they didn’t like his fiscal profligacy and they mostly didn’t like his protectionism, but they did like the fact that he was a “fighter,” unlike so many (but not all) Republican politicians who get cozy with the DC establishment. They also figured he was worth supporting because he was so reviled by the establishment media (i.e., the enemy of my enemy is my friend).

I think that analysis still applies, but let’s dig deeper. Another problem is that Republican voters think anti-Trump GOP politicians must be bad (closet Democrats, or something like that).

That may be true in some cases, with Mitt Romney being an obvious example.

But that binary analysis – the Trump camp vs the every-other-Republican camp – is woefully inadequate.

I think it’s more accurate (though obviously simplified) to look at the Republican Party as having three camps. And here’s a Venn diagram with my amateur depiction of what unites and divides them.

I’m sure many of you already know my conclusion, which is that the Republican Party should opt for Reaganism.

That’s the approach that reflects good policy and good politics.

I’ve written many times why it is good policy, so I’ll conclude by elaborating on why it is good politics.

Simply stated, Trump voters don’t trust establishment Republicans. They view them as proponents of things they don’t like such as bailouts, globalism, and amnesty.

And establishment Republicans obviously don’t like Trump and Trumpie candidates, even if only for stylistic reasons.

Reaganism, by contrast, can unite all the factions. And when I say Reaganism, I’m not just talking about tax cuts. What we need is the full market-friendly Reagan agenda of spending restraint, deregulation, trade expansion, and sound money.

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The Three Stooges of Big Government

The 21st century has been bad news for America’s taxpayers. Every president (George W. Bush, Barack Obama, Donald Trump, and Joe Biden) has been a big spender.

We obviously can’t give Biden a final grade since he has at least two more years in office (though his performance so far has been dismal – and his so-called Build Back Better is an ongoing threat to fiscal sanity).

But there is comprehensive data allowing us to assess Biden’s three predecessors. Brian Riedl of the Manhattan Institute has a new report that shows what happened to red ink under Bush, Obama, and Trump.

He measures what happened to 10-year deficit projections based on both legislated changes (what laws were enacted during time in office) and changes in economic and technical assumptions (largely driven by unanticipated changes in the economy).

As I’ve repeatedly written, I don’t think we should focus on red ink. What really matters is the burden of government spending.

So I’ve taken Brian’s rigorous analysis and highlighted what happened to government spending during the Bush, Obama, and Trump administrations.

We’ll start with George W. Bush, who approved laws adding almost $4.3 trillion to America’s spending burden.

Then we have Barack Obama, who added $1.4 trillion to America’s spending burden.

Then we have Donald Trump, who added $6 trillion to America’s spending burden.

Here are some final observations about the numbers.

• Yes, Republicans often are bigger spenders than Democrats – a pattern going all the way back to Nixon.
• Bush was a big spender even if you don’t count the big post-9/11 increases in defense spending.
• Trump was a big spender even if you don’t count the explosion of pandemic-related spending.
• Obama was a big spender, and would have been far worse if Republicans did not win control of Congress.

The bottom line is that I wish we could return to the spending restraint that America enjoyed during the final two decades of the 20th century.

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Biden’s Trumpian Trade Policy

For self-interested reasons, I obviously like my video on the merits of free trade and the downside of protectionism.

But now I’ll also be recommending this new video from Liberty International.

It has some great examples, such as Washington’s corrupt trade barriers to sugar (as well as other examples of foolish agriculture subsidy programs).

And there’s some excellent analysis of how developing nations are hurt by the double-edged sword of protectionism and foreign aid.

What happened to Haiti is especially tragic.

My only criticism (and this is a sin of omission) is that there wasn’t enough time to explain why people shouldn’t fixate on the trade deficit – which is, after all, simply the flip side of a capital surplus.

For purposes of today’s column, though, I want to focus more on the politics of trade rather than the economics of trade.

That’s because Trump and Biden are basically the Bobbsey Twins of protectionism.

In his New York Times column, Binyamin Appelbaum explains why Trump’s China tariffs backfired.

I obviously agree, but Appelbaum only mentions in passing that Biden has not done much to reverse that policy.

Tariffs on imports from China have refilled the employee parking lot at Stoughton Trailers in Evansville, Wis. …the rest of us are paying for those jobs. The tariffs have contributed to a shortage of chassis in the middle of an import boom, one reason that American ports are gridlocked. Tariffs also drive up prices. American chassis are beginning to roll off production lines, but they cost more than pretariff Chinese chassis, which raises the price of everything that travels by chassis. …the government has decided to limit competition, a lazy approach that is both expensive and counterproductive. Taxing imports from China gives the appearance of punishing China, but the cost of the tariffs is paid by Americans. …Mr. Biden should make a clean break with Mr. Trump’s destructive tariffs. The right recipe is simple…, maintain an environment in which companies can flourish, ensure workers reap the benefits.

So at what point do Trump’s tariffs become Biden’s tariffs?

Technically, we hit that point in late January of 2021.

To make matters worse, Biden is also imposing new trade taxes on American consumers and businesses.

The Wall Street Journal opined today on Biden’s latest protectionist initiative.

President Biden says he feels your pain regarding inflation… Too bad his Administration’s policies reveal different priorities. Witness the Commerce Department’s decision to raise tariffs on lumber, which will raise building costs in an already strained housing market. The Commerce Department said last week that it will double the average tariff on Canadian softwood lumber to 17.9% from 8.99%. …There’s rarely a good time for trade restrictions, but the timing of this one is tragicomical. The same month Commerce revealed its tariff plan, lumber hit a record price of $1,650 per thousand board-feet, more than three times the level before pandemic supply shortages began. …The Biden Administration’s tariff resumes the U.S.-Canada lumber war where President Trump left off. …President Biden campaigned against his predecessor’s tariffs, but his trade policy in office has been nearly as protectionist. He’s kept most tariffs in place.

Kept most in place…and now adding more.

This is very sad, particularly since I had hoped that was one area where Biden might actually move policy in the right direction.

No, I didn’t think Biden actually understood why free trade is good (he’s always been a proponent of bigger government, after all).

But I hoped he would do the right thing simply to show he differed from Trump. Those hopes have been dashed.

P.S. If you want more reasons to be concerned, Biden also hasn’t done much to resuscitate the World Trade Organization and he isn’t pushing back on his party’s embrace of carbon protectionism.

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Lessons about Trump and Trade

Like President Reagan, I believe in free trade rather than protectionism.

So you won’t be surprised that I agree with the message in this video

To elaborate, one of the big lessons of the Trump era is that he undermined his good policies – such as tax reform – by imposing higher taxes on global trade.

Sadly, he didn’t realize that a “trade deficit” is largely an irrelevant statistic. Indeed, it’s merely the flip side of having a capital surplus.

To state the obvious, it’s not a bad thing when foreigners decide they want to invest in the United States economy. Heck, it’s a good thing, a sign of economic strength.

Professor Douglas Irwin of Dartmouth made the same point, and many additional points, in a column for the Wall Street Journal late last year.

After four years, what have we learned? Many things, but especially that old economic truths still have value: Tariffs don’t reduce the trade deficit. …Economists have long pointed out that the trade deficit is driven by macroeconomic factors, particularly international capital flows. …The merchandise trade deficit was $864 billion in 2019, more than $100 billion higher than in 2016. …Tariffs are paid by consumers, destroy jobs and hurt the economy. Mr. Trump insisted that China would pay for the 15% to 25% duties that he imposed on $300 billion of its exports. In fact, the tariffs were passed on to American consumers, who paid more… Take steel. Higher prices might have saved some jobs in the steel industry, but..steel protection is a job-destroying policy. Economists at the Federal Reserve found that the steel and aluminum tariffs reduced overall employment in manufacturing by 75,000 workers.

But destroying jobs was just one negative effect of protectionism.

We also got more corruption, as the Wall Street Journal opined.

…it’s time to point out one unsightly effect of the Trump tariffs: expanding the D.C. swamp. …As Mr. Trump’s tariffs began to bite, Congress sent hundreds of letters to the USTR, supporting specific tariff exclusions. …Rep. Steny Hoyer signed a letter, “on behalf of the Congressional Fire Services Caucus,” asking for an exclusion on smoke alarms. North Carolina Senator Thom Tillis sought one for Honda’s lawn mower flywheels. For Sen. Sheldon Whitehouse, it was BedJet’s “ultra-thin adjustable bed ‘device.’” For Congressman Doug Collins, Home Depot’s light fixtures. For Sen. Patty Murray, empty coffee K-cup pods. Some of these exclusions were granted, and many weren’t. It’s difficult to know if lobbying by Congress made a difference… One substantial downside is more political interference in the economy. Pretty swampy.

We saw something very similar when President Obama was granting waivers for Obamacare. That was just one of the ways insiders got rich lobbying politicians for special treatment under government-run healthcare.

Let’s wrap this up.

Writing for the Wall Street Journal in March, Senator Pat Toomey and former Senator Phil Gramm conclude Trump’s protectionism was a failure.

In his first two years as president, Mr. Trump lifted regulatory burdens and pushed through a major tax cut, which triggered a broad-based rise in income and employment. He then turned to his protectionist agenda, which reduced economic growth and failed to deliver Michigan, Pennsylvania or Wisconsin in the 2020 election. Protectionism failed both as economic policy and political strategy. …As Mr. Trump found when he imposed tariffs on steel and aluminum, the resulting increase in jobs in those industries was small. …Jobs gained in the steel and aluminum industries after the tariffs were dwarfed by jobs lost in industries that use steel and aluminum in their manufacturing process, not to mention the jobs lost due to foreign trade retaliation. …Innovation, technological development and the capacity of a market economy to adapt to change provide our only sure path to job creation and prosperity. This is a lesson all politicians, but especially Republicans, need to learn from the economic and political failure of protectionism in the Trump era.

Amen.

Protectionism didn’t work. It didn’t create jobs, and it didn’t even buy votes.

Which is why I hope this meme is the lesson that people remember from the Trump years (also the message we should have learned from the Hoover years).

The bottom line is that “Tariff Man” hurt himself and hurt the economy.

P.S. Sadly, Biden has not reversed many of Trump’s protectionist policies. But that’s not a surprise given his support for statism.

P.P.S. Though I hold out some hope that Biden will utilize the World Trade Organization as a tool to expand trade, thus reversing one of Trump’s mistakes.

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Assessing Trump’s Record on Regulation

When I did my final assessment of Trump’s economic record, I gave him credit for cutting red tape in some areas, but also noted that he increased government intervention in other areas.

…there were some very positive moves on regulation, but they were partly offset by areas where Trump increased intervention (coal subsidies, property rights, Fannie/Freddie, and international tax rules, for instance).

I did give him credit, on net, for moving regulatory policy in the right direction. In other words, the good things he did regarding red tape outweighed the bad things.

But that’s a judgement call, in part because it’s rather difficult to measure the myriad forms of regulation from dozens of different bureaucracies, but also because there’s no agreement on how to measure success (is it a victory, for instance, to reduce the rate of increase in red tape?).

To see how this is challenging, let’s see what various experts wrote about Trump’s regulatory track record.

A new study, authored by Professors Cary Coglianese, Natasha Sarin, and Stuart Shapiro, pours cold water on Trump’s claim that he successfully reduced economic intervention.

Both the extent and impact of the Administration’s efforts to eliminate regulation are considerably less substantial than President Trump and his supporters have claimed. …We recognize that the Trump Administration has repealed or modified a series of agency regulations adopted under the Obama Administration, and even that the Administration has adopted a smaller number of new regulations deemed significant than other recent administrations. Yet overall the reality of regulatory elimination is rather unremarkable… The Administration has accomplished markedly little compared to what it has claimed. … in measuring levels of regulatory activity,researchers rely on a variety of sources of data, including overall pages in the Federal Register and the CFR,the incidence of new rules published in the Federal Register,and the number of actions listed in the semi-annual regulatory agenda. …The Code of Federal Regulations (CFR) is the authoritative source of all existing regulatory requirements on the books. …Growth continued in the Obama Administration to 185,053 pages in 2016. If President Trump’s claim to have eliminated 25,000 pages were correct, we would expect to see no more than160,000 pages in the CFR by now. But, quite to the contrary, the count as of the end of 2019 was185,984 pages—actually a somewhat greater number of pages, not fewer.

Here’s Figure 1 from the paper, which does confirm that there was not a 25,000-page reduction in red tape.

Though if you focus on the last couple of years, it is obvious that the rate of increase slowed significantly. Depending on one’s perspective, that is either a victory or a smaller defeat.

The authors do acknowledge that the number of pages isn’t even the right way to measure regulatory burden.

So they then examine the claim that the Trump Administration had more initiatives to reduce rather than increase red tape.

A count of pages in the CFR is only an indirect proxy for regulatory obligations. …Another way to look at what the Trump Administration has done by way of deregulation would be to look not at pages but at the number of actual rules. …Although the President and his supporters have claimed various levels of deregulatory activity—from 7 to 22 rules removed for every new rule added—these claims are false or misleading. …The lists overcount deregulatory actions by including withdrawals of proposals that were never finalized, delays in effective dates which do not eliminate regulations, non-regulatory actions such as the repeal of guidance documents, and even proposed deregulatory actions rather than completed ones. In addition, when comparing deregulatory actions to regulatory ones, the White House only counts new regulations designated as “significant,” while they count deregulatory actions of any magnitude or level of significance… rather than there being more deregulatory actions than other actions, as the Trump Administration’s claims have implied, there was, in fact, just the opposite. Overall about three completed actions in the regulatory agenda appear for every action designated as deregulatory.

The bottom line, based on their assessment, is that Trump didn’t accomplish much, particularly when compared to what happened under Carter and Clinton.

…in terms of“dramatic regulatory relief,” nothing the Trump Administration has done compares to the deregulation of the airlines, rail, and truck transportation that was executed by the Carter Administration in the late 1970s. Prior to that time, these major sectors of the economy—along with others, such as natural gas and telecommunications—were subject to regulations of prices and outputs—an inefficient form of regulation that advantaged incumbent firms but at the expense of consumers. President Carter championed major deregulatory initiatives that loosened the government restrictions on the air, rail, and transport sectors.Retrospective analysis indicates that the deregulation of these industries resulted in $70 billion in annual consumer benefits. …the evidence does not support the Trump Administration’s claims to have engaged in a dramatic scaling back of government regulation. More pages were removed from the CFR in the Clinton Administration than the Trump Administration. A more substantial unleashing of market forces occurred from the deregulatory changes made in the Carter Administration. And the Trump Administration has done at least as much regulating as it has deregulating.

For what it’s worth, Clinton was much more market oriented than most people realize. And Carter, while misguided in some areas, did a very good job on regulation.

So it’s not necessarily a knock on Trump to say he fell short of those two presidents.

Now let’s look at a pro-Trump perspective.

Professor Casey Mulligan of the University of Chicago early last year offered an upbeat assessment of the former president’s performance in tackling regulations.

In just three years the administration has reversed hundreds of regulations, many of which drone on for hundreds of pages. …Many of the regulations reversed had been written and implemented at the behest of special interests, including large banks, trial lawyers, major health insurance companies, big tech companies, labor unions, and foreign drug manufacturers. …the Council of Economic Advisers (CEA)…dedicated a great deal of manpower preparing a comprehensive and rigorous assessment of deregulation since 2017. That report, released in June, concluded that the past three years of deregulation is comparable to, and probably exceeds, any deregulatory episode in modern U.S. history. …the CEA report estimates that over the next five to 10 years, the deregulatory efforts of the Trump administration will increase annual real incomes in the United States by $3,100 per household.

I wrote about the above-mentioned report from the CEA in the summer of 2019. The CEA’s goal was to present Trump’s policies favorably, so I certainly don’t object to some skepticism from outsiders, but I also noted that, “the underlying assumptions aren’t overly aggressive” and “even modest improvements in growth lead to meaningful income gains over time.”

In a column for the Hill, James Broughel of the Mercatus Center analyzed Trump’s track record and concluded that some good things happened.

…the president issued Executive Order 13,771 soon after taking office. Its “2 for 1” requirement received the most attention: Two regulations must be identified for elimination each time a new one is put forward. However, perhaps more important is the “regulatory budget” it set up, which essentially set a cap on new regulatory costs executive branch agencies can impose. …A look at the data suggests the cap is largely working. On Jan. 20, 2017 — Trump’s inauguration day — there were 1,079,601 regulatory restrictions on the books. By Dec. 6, 2019, that number stood at 1,077,822. While the code has not declined substantially by this measure — and the administration should acknowledge that aggregate cuts to-date have been modest — it’s rare to see a code fail to grow across an entire presidential term.

Incidentally, the Mercatus measure of “regulatory restrictions” almost certainly is better than other measures of red tape, so it’s disappointing that Coglianese, Sarin, and Shapiro failed to include it in their analysis.

But if we’re simply looking at the volume of “significant rules,” here’s a tweet from James Pethokoukis showing that the increase in red tape dramatically slowed once Trump took over.

Philip Wallach of the R Street Institute examined Trump’s track record on red tape in an article for National Review in late 2019 and he thought the glass was half empty rather than half full.

Regulation became one area where conservatives wary of Trump allowed themselves high hopes. Trump’s experiences as a developer left him with a bone-deep skepticism of regulations. …There have been some real bright spots for deregulators. Many of the Obama administration’s aggressive and legally dubious environmental rules have been stalled or rolled back, including the Waters of the United States rule, Corporate Average Fuel Economy standards for tailpipe emissions, and the Clean Power Plan, which regulated greenhouse-gas emissions from existing power plants. The Endangered Species Act will be interpreted so as to make it less burdensome. Promises to scrap Obamacare may have gone unfulfilled, but the administration has quietly and constructively made the program more flexible for states and individuals. …the Trump administration…to an unprecedented degree…has…issu[ed] far fewer new regulations than any of its predecessors.

As you can see, it’s important to define success. Is it a victory to have “far fewer new regulations”?

Or, as you can see in the following excerpt from Wallach’s article, is it a victory to cut red tape by less than Obama increased it?

These triumphs notwithstanding, three years in, hopes of a thoroughgoing overhaul have been dashed. …hitting the pause button, however unusual, does not a revolution make. The hoped-for transformation of the administrative state is nowhere to be found. …In 2018, the administration sought to show its relative merit by noting that, through its first two years, the Obama administration had imposed $245 billion in regulatory costs. The Trump administration’s negative $33 billion in costs imposed at that point certainly was a lot less than $245 billion. But the comparison cuts harder in the other direction: The administration is admitting that it is coming nowhere close to reversing the costs imposed even by the Obama administration — let alone the decades of regulatory burdens built up previously. …the administration’s math allows it to take credit for deregulatory policies as soon as they are promulgated, without paying any attention to whether they are carried through. …the administrative state has been more discomfited than deconstructed by the Trump administration.

Last but not least, former Obama official Cass Sunstein opined for Bloomberg back in 2018 that Trump’s main achievement was to slow the tide of new regulations.

Is President Donald Trump dismantling the regulatory state? Not close. …let’s take a broader perspective. Under George W. Bush, the Office of Information and Regulatory Affairs approved about 2,500 final regulations. Under Barack Obama, it approved about 2,100 final regulations. …By comparison, the Trump administration has repealed … dozens of finalized regulations. …about 2 percent of the number of regulations finalized over the past 16 years. …Much more fundamentally, he’s substantially slowed the flow of new ones. …From Bush’s inauguration to Sept. 1, 2002, the Office of Information and Regulatory Affairs approved about 400 proposed regulations and about 500 final regulations. From Obama’s inauguration to Sept. 1, 2010, the Office of Information and Regulatory Affairs approved about 270 proposed regulations and about 470 final regulations. …the Bush and Obama administrations look pretty similar… The Trump administration is a big outlier. From Trump’s inauguration to the present, the Office of Information and Regulatory Affairs approved about 170 proposed regulations and about 160 final regulations. That’s a major reduction.

So what’s my two cents?

The obvious conclusion is that the Trump Administration did some good things to ease the nation’s regulatory burden, but there was no major paradigm shift.

The United States had a lot of red tape when Trump took office and it had a lot of red tape when Trump left office, though he definitely slowed the rate of increase.

But a slower rate of increase is still not good news, as illustrated by the fact that the Fraser Institute calculates that America’s score on red tape has declined slightly since 2016.

Indeed, the overall score for economic liberty in the United States has declined slightly since Obama left office, which is evidence for my argument that Trump delivered an incoherent mix of good policies (taxes, for instance) and bad policies (trade, for instance).

P.S. Trump’s Jekyll-Hyde record on economic policy is one of the reasons why I prefer Reaganism over Trumpism. The establishment doesn’t like either of those options, but I very much prefer the one that unambiguously reduces the size and scope of government.

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Everything You Need to Know about Fixing the Budget Mess in Washington

The 21st century has been bad news for proponents of limited government. Bush was a big spender, Obama was a big spender, Trump was a big spender, and now Biden also wants to buy votes with other people’s money.

That’s the bad news.

The good news is that there is still a simple solution to America’s fiscal problems. According to the just-released Budget and Economic Outlook from the Congressional Budget Office, tax revenues will grow by an average of 4.2 percent over the next decade. So we can make progress, as illustrated by this chart, if there’s some sort of spending cap so that outlays grow at a slower pace.

The ideal fiscal goal should be reducing the size of government, ideally down to the level envisioned by America’s Founders.

But even if we have more modest aspirations (avoiding future tax increases, avoiding a future debt crisis), it’s worth noting how modest spending restraint generates powerful results in a short period of time. And the figures in the chart assume the spending restraint doesn’t even start until the 2023 fiscal year.

The main takeaway is that the budget could be balanced by 2031 if spending grows by 1.5 percent per year.

But progress is possible so long as the cap limits spending so that it grows by less than 4.2 percent annually. The greater the restraint, of course, the quicker the progress.

In other words, there’s no need to capitulate to tax increases (which, in any event, almost certainly would make a bad situation worse).

P.S. The solution to our fiscal problem is simple, but that doesn’t mean it will be easy. Long-run spending restraint inevitably will require genuine reform to deal with the entitlement crisis. Given the insights of “public choice” theory, it will be a challenge to find politicians willing to save the nation.

P.P.S. Here are real-world examples of nations that made rapid progress with spending restraint.

P.P.P.S. Switzerland and Hong Kong (as well as Colorado) have constitutional spending caps, which would be the ideal approach.

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Blacks, Trump, and Media Bias

I rarely write about media bias, but I sometimes come across stories that cry out for correction because of blatant inaccuracies.

• The New York Times asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
• The Washington Post claiming a GOP budget included “large cuts” when spending actually would grow 3.3 percent annually.
• The Economist writing about poverty in the United States, but then citing numbers that have nothing to do with poverty.
• The New York Times asserting that U.S. multinationals pay little tax on foreign-source income, but forgetting to include the taxes paid to foreign governments.
• A Washington Post column blaming problems in France on “austerity” when the nation has the biggest spending burden in Europe.
• The Atlantic reporting about “steady defunding” in Washington when the federal budget has tripled (adjusted for inflation) since 1980.
• A New York Times column that blames capitalism for the shortcomings of China’s government-run health system.

We’re going to add to the list today.

In a story for the Washington Post, Tracy Jan (aided by Seung Min Kim and Emily Guskin) argue that the Trump’s policies were bad news for African Americans.

Black voters overwhelmingly chose Biden, with 87 percent casting their ballots for him… Trump presided over the most unequal recession in modern American history because of his mismanagement of the coronavirus pandemic. …Economists say that rather than champion economic policies targeting average Black Americans, who are more likely to work low-wage jobs without health and retirement benefits, Trump’s annual budgets proposed eviscerating the social safety net, with cuts to housing, food stamps and health care.

I have two minor comments and one major comment.

The first minor comment is that Trump never proposed to eviscerate the so-called social safety net. Indeed, he increased domestic spending faster than Obama.

The second minor comment is that the recession was caused by the coronavirus, not by Trump’s policies.

The major comment is that Ms. Jan and her two colleagues wrote a lengthy story (more than 2,000 words) and never once mentioned or acknowledged that the black poverty rate fell to a record low during the Trump years.

Or that median household income for blacks rose to a record high.

This is a shocking level of journalistic malpractice. Sort of like writing about the Cold War without ever mentioning the Soviet Union.

By the way, I’m not saying that a pro-Trump spin was needed. They could have written about the poverty and income data and offered alternative explanations for why there were good numbers.

Heck, that’s what I did.

To be fair, the article does acknowledge that unemployment rate for African Americans fell to a record low during the Trump years.

…the Black unemployment rate’s record low average of 6.1 percent over 2019 — a steady improvement that had begun during the Obama administration — remained double that of Whites.

Though the obvious implication is that Trump doesn’t deserve any credit for a trend that started under Obama.

Which is certainly a legitimate argument, though honest journalists would have cited some people making the counter argument that his policies did make a difference (for what it’s worth, I think it’s a combination of both).

P.S. I’ll add another minor comment. The story quotes several people (all on the left side of the political spectrum) on how African Americans ostensibly will benefit if there is a bigger welfare state and more redistribution.

It’s certainly appropriate to write about that perspective, but why didn’t the three journalists bother to cite at least one person who could have pointed out the inverse relationship between social-welfare spending and the poverty rate?

Or cite at least one person who could have pointed out that low-income people in the United States enjoy higher living standards than middle class people in nations with bigger welfare states?

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Ranking Presidents: Trump’s Mixed Economic Record

Since both political parties have sent good and bad people to the White House, I don’t think it makes much sense to compare all Democratic presidents vs all Republican presidents.

But we can learn a lot by looking at the track record of specific presidents. I’ve done that with several past chief executives (Wilson, Hoover, FDR, Nixon, Reagan, Bush I, Clinton, Bush II, and Obama), and today we’re going to assess Trump’s performance.

The bottom line, as you can see from the chart, is that he did really well in some areas and really poorly in other areas, so his overall record was flat. Or perhaps slightly negative.

The bottom line is that Trump was good on taxes and bad on spending and trade.

And there were some very positive moves on regulation, but they were partly offset by areas where Trump increased intervention (coal subsidies, property rights, Fannie/Freddie, and international tax rules, for instance).

By the way, I’d like to give Trump a negative grade for his failure to address entitlements, but, in the interest of fairness, I only include actual policy changes.

Having given my big-picture assessment, here are some columns and articles that offer interesting insights.

We’ll start with some pro-Trump analysis. Professor Casey Mulligan opined in the Wall Street Journal that he restored growth (until the coronavirus, of course).

The Obama administration promulgated hundreds of new federal regulations that protected certain special interests from market competition. The beneficiaries included large banks, trial lawyers, big tech, major health-insurance companies, labor unions and foreign drug manufacturers. President Trump promised to undo all that, and in many cases succeeded, sometimes with the help of a Republican Congress. …Mr. Trump also helped remove government obstacles to innovation and competition in health care. Democrats will tell you that the first calendar-year drop in retail prescription drug prices in 46 years was mere coincidence, not the result of deregulation. …The Fed and the Obama economic team overpredicted growth almost every year from 2010-16. When growth failed to meet their rosy predictions, Mr. Obama’s advisers blamed the poor economic performance on America itself. …No one in Washington predicted that small business optimism would skyrocket to record levels when Mr. Trump was elected, that real wages would grow again (especially for blue-collar workers), that business formation would hit 20th-century highs, or that poverty and unemployment rates would quickly fall to record lows for Hispanics and African-Americans.  …Although Mr. Trump’s economic policy was imperfect, it was preferable by a long shot to Mr. Obama’s, which punished work, hiring and success rather than rewarding them. 

And here’s a chart that definitely makes Trump look good compared to Obama.

Those numbers will look much worse once 2020 numbers are included, but I won’t blame Trump for coronavirus-caused economic havoc (though I also don’t give him full credit for the good data in 2019).

Now let’s look at some less-than-flattering analysis.

Jeffrey Tucker of the American Institute for Economic Research lists some of Trump’s statist policies.

From 2015, even from his first public speeches following his presidential run, it was clear that Donald Trump was not a conservative in the Reagan tradition… This is not an American ideal. It’s not about freedom, rights, the rule of law, much less the limits on government. …Trump’s first year began with a more traditional Republican agenda of tax cuts, deregulation, and non-progressive court appointments. …That all changed on January 22, 2018. …This was the beginning of the trade war that would expand to Europe, Canada, Mexico, most of Asia, and ultimately the entire world. …What he ended up seeking was nothing short of trade autarky. …In addition to this calamity, US government spending soared 47% while the money supply registered record increases as measured by M1. The effects of this debt and money printing will be felt through next year.

Rick Newman wrote for Yahoo that Trump’s fiscal performance makes him an honorary Democrat.

Trump’s last-second objection to the $900 billion coronavirus relief bill Congress approved after eight months of negotiation is an unexpected Christmas gift for Democrats. Trump says the $600 direct payment to most Americans contained in the bill is too small. He wants $2,000. Trump could have insisted on this while Congress was drafting the bill… Democrats are gleeful. They’d happily accept a supersized stimulus payment, and even better, they now get to watch Republicans battle each other as they try to figure out what to do about Trump. Some Congressional Republicans think $2,000 is too generous, and there’s no chance of that getting into the bill unless other provisions come out. 

Newman was focusing on Trump’s spending proclivities during the pandemic, but the assertion that “maybe Trump’s a Democrat” applies to his fiscal record during his first three years as well.

P.S. I didn’t rank Trump on monetary policy for the same reason I didn’t rank Obama on that issue. Simply stated, I think both of them pursued a misguided Keynesian approach of easy money and artificially low interest rates, but we don’t have firm evidence (yet) of negative consequences.

P.P.S. I also didn’t give Trump a grade, positive or negative, regarding coronavirus. The federal government failed, but those failures largely were independent of the White House.

P.P.P.S. I generally approved of Trump’s judicial appointments, but don’t includes judges in my assessments of economic policy (though I may have to change my mind if they restore the Constitution’s protections of economic liberty and limits on the power of Washington).

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Ten Observations about Trump and the GOP

Since I’m a policy wonk, I rarely play the role of political pundit other than biennial election predictions.

But I’m getting a lot of requests to comment about Trump, especially in light of the recent protest/riot/insurrection and the ongoing political fallout (impeachment, etc).

So here are 10 observations (full disclosure: I didn’t vote for Trump in 2016 or 2020, but have never been part of the Never-Trump community).

Trump’s style is bluster and bullying – As I wrote way back before the 2016 election, Trump’s personal style is akin to a temperamental child. This can be entertaining (which is why CNN and other networks gave him so much attention during his initial campaign), but it also has limitations as an approach to governance (for instance, you don’t stop a virus by merely asserting it won’t come to the United States).

Trump is America’s “Crazy Uncle” – Early in his presidency, I happened to be in New Zealand and was asked about Trump in a TV interview. I basically said he’s like a grouchy and opinionated uncle who shows up on holidays and dominates the conversation with controversial statements. Given what’s happened over the past few years, that observation holds up well.

Republicans lawmakewrs in Washington never liked Trump – GOPers in the House and Senate like some of the things Trump has accomplished (tax reform and conservative judges), but they’ve never liked having him as president because he is too erratic and too self-centered. But most important, they’ve been afraid his simultaneous popularity (with core GOP primary voters) and unpopularity (with, say, suburbanites) is a threat to their ability to stay in power. In other words, it’s hard to win general elections in some places as a Trumpian populist but also hard to win GOP primaries in many places as a Never-Trumper.

Republican voters, by contrast, like Trump – One thing that surprised me over the past four yeas is that I found strong support for Trump from grassroots conservative Republicans. Yes, they didn’t like his fiscal profligacy and they mostly didn’t like his protectionism, but they did like the fact that he was a “fighter,” unlike so many (but not all) Republican politicians who get cozy with the DC establishment. They also figured he was worth supporting because he was so reviled by the establishment media (i.e., the enemy of my enemy is my friend).

Republican lawmakers generally have been in a no-win situation – Because of Trump’s popularity with GOP voters, Republican lawmakers have felt a lot of pressure to act as Trump loyalists even though many of them don’t like his behavior and disagree with some of his policies.

Be glad there were normal GOPers in the Trump Administration – Some people in the Never-Trump community want to create a blacklist of people who worked for Trump. This is misguided in the vast majority of cases. Most Trump appointees had nothing to do with Trump’s excesses and instead did good things (deregulation, for instance) in the various agencies and departments where they worked.

There are three GOP wings: Populist Trumpies, conservative Reaganites, and the establishment – Most pundits portray GOP infighting as a battles between Trumpist conservatives and the Republican establishment (symbolized, perhaps, by Sen. Romney). But that’s an insufficient description of what’s happening because it overlooks the fact that there are plenty of Reagan-style conservatives who definitely are not part of the establishment, yet don’t fit in with Trump’s big-government populism. It will be very interesting to see which anti-establishment strain wields more influence in the next few years.

Trump’s legacy to GOP: Total Democratic control of DC – On January 21, 2017, Republicans controlled the House, the Senate, and the White House. Four years later (a few days from now), Democrats will control the House, the Senate, and the White House. By way of background, one of the reasons I don’t like George W. Bush is that his failed polices paved the way for the left to have total control of Washington in 2009 and 2010. Shouldn’t Trump be judged similarly?

In spite of his many flaws, why did Trump win normally Democratic states? – While I just explained that Trump set the stage for the left to have total power in Washington, Republicans need to figure out how Trump managed to win some states in 2016 that historically have been unwinnable when contested by establishment Republicans (though he lost some traditionally GOP-leaning states in 2020).

In spite of his many flaws, why did Trump get more minority votes? – Similarly, Republicans need to figure out how a supposedly racist Trump managed to win a higher percentage of minority voters than recent GOP nominees such as John McCain and Mitt Romney. The bottom line is Republicans need to figure out if there are good parts of Trumpism once Trump is out of the picture.

I’ll close with a few statements:

• It is perfectly okay to have voted for Trump because you liked some of his policies (whether they are ones I like, such as tax cuts, or ones I don’t like, such as protectionism).
• It is perfectly okay to have voted against Trump for the same reason.
• It is perfectly okay to have voted for Trump because you wanted to shake up the Washington establishment with unconventional behavior.
• It is perfectly okay to have voted against Trump because his unconventional behavior was offensive.
• It is perfectly okay to have been a Never-Trumper or a Trumpian populist.
• What’s not okay, though, is to engage in political violence.
• And what’s utterly awful is lying to supporters and creating the conditions for political violence.

P.S. While it’s worth spending some time to dissect and analyze the past four years, I hope that libertarians, Reagan conservatives, Trump populists, Never-Trumpers, establishment Republicans, etc, all join together to fight some of Biden’s awful ideas (the “public option” threat to private health insurance, class-warfare taxes, gun control, a blue-state bailout, etc).

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In 2021 and Beyond, Will the GOP be a Reagan Party or a Trump Party?

Even though my 2020 prediction for the presidential race was much more accurate than my 2016 prediction, I’m definitely a policy wonk rather than a political pundit.

That being said, I’m very interested in elections because voting patterns eventually can translate into policy changes.

And some of the voting patterns from Tuesday were rather surprising. For instance, I was shocked at the data that compared 2016 exit poll data with 2020 exit poll data and found that Trump got more votes in 2020 from every group other than white men.

And I was also shocked to learn that Trump did a much better job of attracting non-white votes than any other Republican candidate in recent history.

GOP share of non-white vote, presidential elections (%)

1952: 21
1956: 39
1960: 32
1964: 6
1968: 12
1972: 13
1976: 15
1980: 10
1984: 13
1988: 18
1992: 11
1996: 12
2000: 9
2004: 17
2008: 10
2012: 11
2016: 21
2020: 26 (preliminary)

— Adrian Gray (@adrian_gray) November 4, 2020

My pro-Trump friends tell me that this is evidence that a Trumpian approach is capable of attracting new voters, particularly minorities. Indeed, they tell me that Trumpism should be the model for all the politicians who may think about going for the Republican nomination in 2024.

So, as part of my post-election analysis (see here, here, here, and here), let’s explore whether the GOP will be (or should) a Trump party.

We’ll start with an article that Sean Trende authored for Real Clear Politics.

The Democratic playbook against Republicans had remained more or less the same since 1992. You could portray the GOP candidate as someone who wanted to gut Medicare and Social Security. Or, you could portray him as a closet theocrat. …Every major GOP candidate was vulnerable to at least one of these attacks, and usually both. As for Trump? Neither of those attacks landed. He famously opposed entitlement reform, and ran as a big-spending Republican. And the closet theocrat charge? Needless to say, that mantle is hard to hang on Trump. …there’s no going back for Republicans. …it is a “NeverTrump” delusion that the old GOP coalition is going to be resurrected. The political demand isn’t there, and whomever is nominated in 2024 will likely have an agenda that more closely resembles Trump’s than Mitt Romney’s. …The successful Republican candidates over the past 50 years have all had a cultural connection to what some jokingly call ’Murica.  …Reagan spoke the language of Middle America. To be sure, Donald Trump’s vulgarity contrasts sharply with Reagan’s class, and that has limited his opportunities for political success substantially, but he nevertheless connects with a group of voters.

Elaina Plott, in a piece for the New York Times, explains that the GOP is now a Trumpist party, even if that simply means being more willing to fight.

…for all the attention paid to what Trump represents in American politics, the most salient feature of his ascent within the Republican Party might be what he doesn’t represent. When Ronald Reagan overthrew the old order of the Republican Party in the 1980 election, he did so as the figurehead of a conservative movement… Trump’s takeover, by contrast, has been as one-dimensional as it has been total. In the space of one term, the president has co-opted virtually every power center in the Republican Party… But though he has disassembled much of the old order, he has built very little in its place. …That this is no longer Paul Ryan’s party is clear. What Trump has turned it into, though, is less so. …“The party right now is just Trump, right?” said one senior Senate G.O.P. aide. “So when you take him out of it, what do we have left?” …The difficulty with engineering a new paradigm that builds on Trump’s 2016 win is that the president himself is not especially committed to it. …the one thing that truly unified the Republican base in its support of Trump was a belief that he was a “fighter.” …the Republican base today is willing to bend more on policy in service of what it believes to be a more existential war.

Interestingly, even ardent anti-Trumpers seem to think Trump-style politics will outlast Trump.

In a column for the Chicago Tribune, Eric Zorn frets that post-Trump Trumpism will be very effective.

Trumpism — an unapologetically coarse, swaggering and nasty brand of politics — has been vindicated. Forget competence. Forget dignity. Forget class. Even forget policy (remember Trump’s health care plan that was always just two weeks away from unveiling?). Tribalism is king. Fear clobbers hope. Truth is optional. Character doesn’t count. The guardrails are down. …The GOP looks likely to hold the Senate, which means Republicans can put a brick on any legislation a President Joe Biden would want to pass. Trump has already given the GOP three U.S. Supreme Court justices and conservative control of the judicial branch of government for at least a generation… a Democratic President Biden, flailing impotently against a recalcitrant Republican Senate, would likely boost the GOP’s fortunes in the 2022 midterms and position the party well for the presidential race two years later. With Trump and his family safely on the sidelines, Republicans could nominate a candidate who inspires their base with shameless bluster and schoolyard insults, but who actually knows a thing or two about governing. Trumpism without Trump. An even more frightening thought in some ways than Trumpism with Trump.

Meanwhile, Jonathan Last of the never-Trumper Bulwark writes that there will be a battle for the GOP’s soul and that the Trumpists will prevail.

If Donald Trump loses, there is going to be a civil war inside the Republican party and the conservative movement. On one side will be the Trumpists, who believe all of white nationalism and authoritarian stuff. On the other side will be the Vichycons, who never liked Trump, but who went along with Trumpism because they were partisans… Here is how the civil war will play out. …After the inauguration, all three of these groups will join together to oppose anything and everything the Biden administration does and it will look like comity. …Once it becomes clear that Trump plans on being the one to choose the 2024 nominee, he’ll have a large base of support and the Republican party will be faced with the same decision matrix it had in mid-2016. …if Republican primary voters want more Trumpism, then the Republican party will continue down this path, no matter what the Vichycons say. The Vichycons will have the magazines and op-ed pages, and a handful of elected Republicans. The Trumpists will have an active former president of the United States, his family, Fox, …and a floor of probably 30 million voters. I know which side I would bet on.

Last but not least, in a must-read article for New Yorker, Nicholas Lemann writes about how Trump won in 2016, how he governed, and what will happen after he leaves.

…is there a future in Trumpism? …An ambitious Republican can’t ignore Trumpism. …But is it possible to address it without opening a Pandora’s box of virulent rage and racism? …The Republican Party has long had a significant nativist, isolationist element. In the Party’s collective memory, this faction was kept in check by “fusionism,” a grand entente between this element and the Party’s business establishment. …Trump…didn’t talk about the need for limited government or for balancing the federal budget. …He didn’t extoll free trade. He didn’t court the Koch brothers. He did not sign the no-new-tax pledge… Trump was opposed by more officials in his own Party (the Never Trumpers of their title) than any Presidential nominee in recent American history. …Trump’s key insight in 2016 was that the Republican establishment could be ignored, and his primary campaign pitched only to the Republican base, which no longer believed in the free-market gospel, if it ever had. …the difference between Trump as a candidate and Trump as the President goes back to fusionism. …appointees without previous connections to Trump but with deep connections to the Party’s libertarian wing have put in place an enhanced version of the standard Republican program. The result has been an odd mix of traditional Republican policies and Trumpian rhetorical flourishes. …As Trump has outsourced economic policy to the establishment, he has outsourced social policy to the evangelicals. …Steven Hayward, a well-connected conservative who has written the two-volume history “The Age of Reagan,” told me, “The biggest surprise about Trump is that he has turned out to govern as a conservative. …That raises the question of where the Republican Party will go after he leaves office. …there are three competing predictions about the future of the Party over the coming years. Let’s call them the Remnant, Restoration, and Reversal scenarios.

And here are those three camps, starting with the “Remnant” crowd, who are the heirs to Trumpism.

Could somebody else use the Trump playbook to win a Presidential election? Those who believe in the Remnant scenario think so. …The obvious candidate to carry out a high Trumpist strategy in 2024 would be Donald Trump, Jr… Several other potential Republican candidates, most notably Senators Tom Cotton, of Arkansas, and Josh Hawley, of Missouri, have demonstrated that they see Trump’s success as instructive.

Next we have the “Restoration” group, who want the GOP to be a Reagan-style party.

Under the Restoration scenario, …Republicans, as if waking from a bad dream, could recapture their essential identity for the past hundred years as the party of business. They could revive a Reagan-like optimistic rhetoric of freedom and enterprise… Many Never Trumpers would feel comfortable again in a Restorationist Republican Party. Restoration could entail a conventionally positioned Presidential candidate, such as Mike Pence… But the most discussed Restorationist candidate is Nikki Haley, the former governor of South Carolina and a former U.N. ambassador.

Then we have the “Reversal” folks, who want the GOP to be the anti-capitalism party.

The Reversal scenario, though perhaps the least plausible, is the most threatening to the Democratic Party. The parties would essentially switch the roles they have had for the past century: the Republicans would replace the Democrats as the party of the people, the one with a greater emphasis on progressive economic policies… today poorer districts are far more likely to vote Republican and richer districts are far more likely to vote Democratic. …People in this camp talk about the failures of “neoliberalism,” “financialization,” and “market fundamentalism,” and condemn “zombie Reaganism.” …The favored Presidential candidate for 2024 among the Reversalists is Senator Marco Rubio, of Florida.

Now for my two cents.

Since I prefer Reagan over Trump, that presumably puts me in the “Restoration” camp.

But I don’t think many people care what I prefer, so I’ll wrap up by giving my prediction of what will happen.

In the post-Trump environment, I think Republicans will revert to their normal behavior (i.e., the “Restoration” folks will prevail), but only if they absorb two Trump-style flourishes.

• From a stylistic perspective, I think the desire for “a fighter” is what many voters found appealing about Trump (as was mentioned above in Elaina Plott’s article from the New York Times). My guess is that a lot of Republicans will copy that aspect of Trump’s behavior, but obviously without the silly tweets and insults. I hope that means no tax-hiking budget deals.
• From a policy perspective, I think the biggest change will be less sympathy for trade and immigration. To the extent I have any influence with Republicans, I’ll try to convince them to at least protect and promote free trade with other democratic nations. And I’ll also remind them that high-skill immigration (such as the people we attract with the EB-5 program) is worth preserving.

So which Republican can best mix Reaganism with those two bits of Trumpism?

Beats me.

P.S. For what it’s worth (and I don’t think it’s worth much since it’s far too early), here’s some polling data on Republican preferences for the the 2024 nomination.

Keep in mind that this poll took place last year, when the economy was booming and voters presumably had a more positive view of President Trump. I suspect the Trump children would not do as well if the poll was repeated today.

P.P.S. My nightmare scenario is that GOP politicians decide the lesson of Trumpism is that they should copy his approach of being weak-kneed on the issue of genuine entitlement reform.

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Interpreting the Election Results

For what it’s worth, my presidential prediction for 2020 will probably turn out to be more accurate than my presidential prediction for 2016.

But I doubt anyone cares about that. Let’s instead look at what happened last night (and, in some cases, what is still happening).

President

It appears that Biden will prevail in the battle for the White House when the dust settles, but you can see from this Washington Post map that the race was much closer than most people expected (Pennsylvania is expected to shift to Biden as mail-in votes are counted, and perhaps Georgia as well).

If that’s the final result, here are two obvious takeaways based on where a president has a lot of unilateral power.

• Trade policy will move in the right direction.
• Regulatory policy will move in the wrong direction.

Other policy areas generally require agreement between the executive branch and the legislative branch, so we can’t know the impact of a Biden presidency without perusing congressional results.

Senate

In my humble opinion, the big news of the night is that Republicans appear to have retained control of the Senate.

If true, that means some left-wing goals are now very unlikely.

There won’t be any court packing. There won’t be any serious effort to increase the number of Democratic senators by granting statehood to Washington, DC, and Puerto Rico.

But let’s focus on the economic issues. Here are some quick takeaways.

• There will be another “stimulus,” but it won’t be nearly as profligate as would have been the case if Democrats had total control of Congress and the White House.
• There won’t be any serious effort for forced unionization in right-to-work states.
• Biden’s class-warfare tax increases won’t happen.
• The state and local tax deduction will remain capped.
• The corporate tax rate will stay 21 percent (the best fiscal achievement of Trump’s presidency).

House of Representatives

It appears that Republicans will gain seats, which is contrary to all expectations.

That being said, there’s zero possibility of a GOP takeover, so Nancy Pelosi will remain in charge.

Ballot Initiatives

I wrote two weeks ago about this election’s six most important ballot initiatives.

The great news is that taxpayers scored a big victory by defeating the effort to get rid of the flat tax in Illinois an replace it with a so-called progressive tax. Winning that battle probably won’t rescue the Prairie State, but at least it will slow down its march to bankruptcy.

The other five battles mostly were decided correctly – at least based on the latest vote margins.

• California voters rejected an initiative that would allow the state to engage in racial discrimination.
• The California initiative to weaken limits on property taxes is trailing.
• The Colorado initiative to lower the state’s flat tax appears prevailed.
• The Colorado initiative to strengthen TABOR (the state’s spending cap) is leading.
• The one clear piece of bad news is that an Arizona initiative to impose a big increase in the top income tax rate appears likely to prevail.

What’s the future for Trump and Trumpism?

Regular readers know I want the GOP to be the Party of Reagan rather than the Party of Trump.

So I will be very interested to see whether Trump’s apparent defeat means Republicans go back to (at least pretending to favor) conventional small-government conservatism.

That will have the be the topic of a future column.

A Silver Lining for Republicans

The party controlling the White House usually loses mid-term elections. For recent examples, Democrats won the House in 2018 and there were big victories for the GOP in 2010 and 2014 during the Obama years.

In all likelihood, Republicans will now do much better in the 2022 midterm election with Biden in the White House instead of Trump.

A Silver Lining for Taxpayers

It’s not something that can be quantified, but congressional Republicans will now become much better on spending issues. They’ll no longer face pressure to go along with Trump’s profligacy and they’ll have a partisan incentive to oppose Biden’s profligate agenda.

P.S. Whether you’re happy or sad about the election results, remember that it’s always appropriate to laugh at the clowns and crooks in Washington.

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The Final Pre-Election Edition of Donald Trump Humor

Yesterday, I shared some jokes about Joe Biden (since updated with a very amusing addendum). Today, to keep everything fair, we’re going to make fun of Trump.

We’ll start with Trump playing the role of James Bond.

Next, let’s look at Trump’s view of the world with this map.

If you liked this map, check out this collection of Trump maps from 2018.

There is some good news for Trump, at least according to Babylon Bee, America’s best site of satire.

Trump is polling high among an unexpected group: libertarians, who were energized and drawn to Trump’s cause after the New York Times revealed that he paid as little as $750 in federal taxes some years. “Only paying a few hundred in federal theft? This guy is my hero!” said libertarian man Murray Mickelson of New Hampshire. “If only all of us could be that smart with our taxes.” …Libertarians across the country paid tribute to Trump’s accomplishment by firing their AR-15s into the air and doing hard drugs, though this is what they were already planning on doing anyway.

Though let’s not forget Biden also aggressively avoided taxes, so libertarians may be torn.

I’m not sure there’s much mileage left in the Trump-Russia issue, but this cartoon got a chuckle from me.

The Onion has faded as a satire site, but it still produces some amusing material, such as this story about the Trump version of poll watching.

Pushing back against what he viewed as an overly hysterical media narrative, Trump supporter Tom Nagle whispered his assertion Monday that poll watching is not intimidation into the ear of a man filling out a ballot. “Keeping an eye on what’s going on at the polls is simply a way to ensure that the election is conducted fairly,” said an armed Nagle, his hot breath reportedly palpable on the prospective voter’s neck as he continually issued assurances that he was merely there to safeguard democracy. …At press time, Nagle had beaten the man unconscious after he was unable to immediately produce a voter ID.

The Onion also produced an article detailing how Trump can win.

With the election around the corner, the Republican Party campaign of President Donald Trump is looking for ways to win reelection over his Democratic Party challenger, Joe Biden. The Onion looks at key factors that could help Trump defeat Biden and retain the presidency. …Disenfranchise millions of Biden supporters with scheme to use electoral college exactly as intended. Win over undecided voters by committing to spare their lives during second term. …Giving everyone another 12 hundo couldn’t hurt. Disarm one of Biden’s key electoral advantages by killing Eric so he has a deceased son too. …Pledge to uphold core Republican values like massive voter suppression. Highlight dozens of crimes Biden failed to prevent him from committing during his first term. Refuse to accept election results citing upcoming Supreme Court ruling.

I’ve already predicted Trump will lose tomorrow.

But he’s about to get even worse news.

As usual, I’ve saved the best for last. I laughed out loud when I saw this meme.

Ouch!

P.S. If yesterday’s jokes and today’s jokes are insufficient, I shared some mockery of both Joe Biden and Donald Trump back in August.

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2020 Election Predictions (and Policy Implications)

Given my big miss in 2016, I’m not sure why anyone would be interested in my election predictions, but I’ve received several emails asking me to offer up my guesses for 2020 (perhaps some of them are long-time readers who remember 2010, when I actually did a good job?).

Before I offer up my prediction, I’ll first share some of the guesses from the experts.

Everyone is predicting Biden, though my Trump friends regularly remind me that the experts were wrong in 2016.

We’ll start with the outlook from Real Clear Politics.

Next, we have Nate Silver’s 538 numbers.

Here are the betting odds for the election, as compiled by John Stossel and Maxim Lott.

And here’s Larry Sabato’s Crystal Ball forecast.

I’ll add one caveat to the above estimates.

This tweet from Frank Luntz explains why my Democratic friends are still nervous.

RCP battleground poll average:

𝗢𝗰𝘁. 𝟮𝟵, 𝟮𝟬𝟭𝟲
• Florida: (Tied)
• Pennsylvania: Clinton +5.6
• Michigan: +7
• Wisc: +6.2
• NC: +3.2

𝗧𝗼𝗱𝗮𝘆
• Florida: Biden +1.2
• Pennsylvania: +5.1
• Michigan: +7.8
• Wisc: +4.6
• NC: +1.5

👉🏻 https://t.co/ZBRpAvXwZT https://t.co/GZmTCAxlSI

— Frank Luntz (@FrankLuntz) October 25, 2020

Finally, for those of you who want my guess, here’s my prediction of a comfortable Biden victory.

It’s basically the same (wrong) prediction I made in 2016, except I’m now giving Arizona and Michigan to the Democrats and Pennsylvania to the Republicans.

For what it’s worth, I was very tempted to give Pennsylvania – and maybe a few other states – to Biden.

Why? Because I think late-deciding voters may decide that they’re tired of all the drama and fighting that we get with Trump in the White House.

But I ultimately decided on the above map because I also think some of those voters may worry about Biden’s age. And they may worry even more about the Democratic Party’s leftward drift.

I guess we’ll know in a week (or so!).

In any event, if you really want to have fun, you can take my predictions, give Arizona, Florida, and North Carolina to Trump, along with one of Maine’s congressional districts, at which point you’d have a 269-269 tie. That would be a perfect ending for 2020, huh?

I’ll close with a few words about policy.

Biden clearly would move the country to the left on certain issues, most notably taxes and regulation. The only silver lining to that dark forecast is that I suspect that his tax increase will be much smaller than what’s contained in his awful plan.

I’m also somewhat hopeful that he won’t push for the so-called Green New Deal and that we’ll instead get the more-modest kind of Solyndra-style cronyism that we got under Obama. That’s bad, but not the end of the world.

The good news is that trade policy will move in the right direction.

But the biggest silver lining to a Biden victory is that Republicans will revert to pretending to once again be opposed to big government.

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The “Public Option” and the Future of Employer-Provided Health Insurance

Last night’s train-wreck debate reinforced my disdain for politicians.

But let’s ignore the immature theatrics from Trump and Biden and focus on one of their policy disagreements.

The two candidates squabbled over whether creating a government-administered health plan (see page 31 for a description of Biden’s so-called  “public option“) would lead to the demise of the current system of employer-provided health insurance.

For what it’s worth, there are two big reasons why I’m not a fan of the current employer-based system.

• It is propped up by a huge distortion in the tax code known as the “healthcare exclusion.”
• It leads to over-insurance and therefore exacerbates our third-party payer problem.

That being said, I’m very aware of the fact that politicians are always capable of making things worse (the “lather-rinse-repeat cycle” of government failure).

So let’s consider this key question: Government intervention has made our health system expensive and inefficient, but would a “public option” make things better or worse?

About two months ago, I shared this video which explains why the so-called public option will wind up being an expensive boondoggle.

Given the track record of health entitlements, I think the video you just watched is correct. A public option would be a fiscal nightmare.

But does that mean it also would be a threat to the employer-based system of private health insurance?

I think the answer is yes, largely because the subsidies that will make the system more expensive are also the subsidies that will make the public option seem like a good deal.

Let’s use two analogies to get this point across.

• Fannie Mae and Freddie Mac dominate housing finance, not because government-created entities are efficient, but because they use subsidies from the federal government to under-price private competitors.
• Parents know private schools produce much better educational outcomes than government schools, but most families opt for the inferior option because it’s already being financed by their tax dollars.

I fear the same thing will happen with the so-called public option. Politicians (in their never-ending efforts to but votes) will keep increasing the subsidies. That will make employer-based health plans seem less attractive by comparison.

And there will also be political pressure to provide an ever-more-extensive set of benefits (as illustrated by the cartoon). That will also make employer-based health plans seem less attractive by comparison.

The net result of all this is that even though the vast majority of workers are happy with their current employer-provided health plans, Biden’s public option will slowly but surely squeeze them out of the market.

The bottom line is that we’ll wind up with single-payer, government-run healthcare, but politicians would be sneaking it in the back door.

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Kudos to Trump and Biden for Aggressive Tax Avoidance

Washington is a cesspool of waste, fraud, and abuse.

All taxpayers, to avoid having their income squandered in D.C., should go above and beyond the call of duty to minimize the amount they send to the IRS.

Which is why today’s column is a bipartisan love fest for Donald Trump and Joe Biden – both of whom have been very aggressive in limiting their tax liabilities.

Here are some details from the report in the New York Times about Trump’s leaked tax returns.

Donald J. Trump paid $750 in federal income taxes the year he won the presidency. In his first year in the White House, he paid another $750. He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made. …His reports to the I.R.S. portray a businessman who takes in hundreds of millions of dollars a year yet racks up chronic losses that he aggressively employs to avoid paying taxes. …They report that Mr. Trump owns hundreds of millions of dollars in valuable assets, but they do not reveal his true wealth. …Most of Mr. Trump’s core enterprises — from his constellation of golf courses to his conservative-magnet hotel in Washington — report losing millions, if not tens of millions, of dollars year after year. …Business losses can work like a tax-avoidance coupon: A dollar lost on one business reduces a dollar of taxable income from elsewhere. The types and amounts of income that can be used in a given year vary, depending on an owner’s tax status. But some losses can be saved for later use, or even used to request a refund on taxes paid in a prior year.

It’s worth noting that the leaked returns didn’t show any unknown business ties to Russia. Nor do they suggest any criminality.

Instead, Trump appears to have relied on using losses in some years to offset income in other years – a perfectly legitimate practice.

Now let’s look at some of what CNBC reported about Joe Biden’s clever tactic to save lots of money.

…consider borrowing a tax-planning tip from Joe Biden. The former vice president…reported about $10 million in income in 2017 from a pair of S-corporations… The two entities were paid for the couple’s book deals and speaking gigs. …both S-corps generated a lot of income, they paid out modest salaries in comparison. …In 2017, the two companies paid the couple a combined $245,833 in wages. …any amounts the Bidens received as a distribution wasn’t subject to the 15.3% combined Social Security and Medicare tax. …Tim Steffen, CPA and director of advanced planning at Robert W. Baird & Co. in Milwaukee. “…if you don’t report that income to the business as wages, then that portion of the income avoids Social Security and Medicare taxes,” he said.

So how much did this aggressive strategy save  the family?

The article doesn’t do all the math, but it certainly seems like the Biden household avoided having to cough up any payroll taxes on more than $9.75 million.

There’s a “wage base cap” on Social Security taxes (thankfully), so it’s possible that their tax avoidance only saved them about $283,000 (what they would have paid in Medicare taxes – 2.9 percent rather than 15.3 percent).

But that’s still a nice chunk of change – about four times as much as the average household earned that year.

As far as I’m concerned, we should applaud both Trump and Biden. Tax avoidance is legal. Even more important, it’s the right thing to do.

Though my applause for Biden is somewhat muted because he said in 2008 that paying more tax is patriotic. So he’s guilty of tax hypocrisy, which seems to be a common vice for folks on the left (the Clintons, John Kerry, Obama’s first Treasury Secretary, Obama’s second Treasury Secretary, Governor Pritzker of Illinois, etc).

For all his flaws, at least Trump isn’t a hypocrite on this issue (though all his spending may pave the way for future tax increases).

P.S. Here’s a story about the greatest-ever tactic for escaping taxes.

P.P.S. And here’s my favorite adults-only story about tax avoidance.

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Importing Price Controls from Europe Will Undermine Pharmaceutical Innovation

Last November, I criticized Nancy Pelosi’s scheme to impose European-style price controls on pharmaceutical drugs in the United States.

I wasn’t the only one who objected to Pelosi’s reckless idea.

We have forty centuries of experience demonstrating that price controls don’t work. The inevitable result is shortages and diminished production (sellers won’t produce sufficient quantities of a product if they are forced to lose money on additional sales).

Which helps to explain why the Wall Street Journal also was not a fan of Pelosi’s proposal

Here’s some of the paper’s editorial on the adverse impact of her proposed intervention.

Mrs. Pelosi’s legislation would direct the secretary of Health and Human Services to “negotiate” a “fair price” with drug manufacturers… Any company that refuses to negotiate would get slapped with a 65% excise tax on its annual gross sales that would escalate by 10% each quarter. Yes, 65% on sales. …The bill also sets a starting point for Medicare negotiations at 1.2 times the average price of drugs in Australia, Canada, France, Germany, Japan and the U.K.—all of which have some form of socialized health system. …foreign price controls have reduced access to breakthrough treatments. …Price controls are also a prescription for less innovation since they reduce the payoff on risky research and development. …Only about 12% of molecules that enter clinical testing ultimately obtain FDA approval, and those successes have to pay for the 88% that fail. …Price controls would hamper competition by slowing new drug development. The U.S. accounts for most of the world’s pharmaceutical research and development, so there would be fewer breakthrough therapies for rare pediatric genetic disorders, cancers or hearing loss.

A damning indictment of knee-jerk interventionism, to put it mildly.

Well, a bad idea from Democrats such as price controls doesn’t magically become a good idea simply because it subsequently gets pushed by a Republican (unless, of course, you qualify as a partisan as defined by my Ninth Theorem of Government).

Unfortunately, we now have a new example of bipartisan foolishness.

Andy Quinlan of the Center for Freedom and Prosperity opined on President Trump’s misguided plan to adopt European-style price controls.

…other nations have been free riders on America’s innovative pharmaceutical industry. …they have enacted socialist price controls to limit what they pay knowing that the largest market would pick up the slack to ensure a steady supply of new lifesaving drugs. It needs to stop, but President Trump’s recent executive order is not the right way to do it. …his “Most Favored Nations” Executive Order to…limit…prescription medication payments made through Medicare… But this is a flawed way of thinking about the problem. Other nations are…engaging in theft via price controls. …drugs can take months or even a year longer to arrive in countries with socialist healthcare systems. Patients suffer as a result… Another likely consequence is less innovation. Some drugs in this new price environment will no longer be cost effective to be developed. Patients again will suffer. …Getting foreign jurisdictions to pay for their share of pharmaceutical innovation by putting a stop to price manipulation is a noble goal. But it should not come at the expense U.S. industry and patients.

A study by Doug Badger for the Galen Institute points out that the Trump Administration’s approach – for all intents and purposes – would use Obamacare’s so-called Center for Medicare and Medicaid Innovation to impose foreign price controls on prescription drugs in the United States.

The Affordable Care Act created CMMI and vested it with extraordinary powers. …The statute also shields CMMI projects against administrative and judicial review. …two HHS secretaries have claimed authority under CMMI to mandate a Medicare Part B payment mechanism without having to seek new legislation. …the Trump administration issued an advance notice of proposed rulemaking (ANPRM) announcing its intention to propose a far more sweeping Medicare Part B drug demonstration project….to…scrap the ASP Medicare reimbursement methodology in favor of one based on drug prices paid in other countries. …CMS is considering the establishment of an “international price index” (IPI). It would calculate the IPI based on the average price per standard unit of a drug in select foreign countries.

This is troubling for several reasons.

…the other countries on the proposed list have lower living standards than do Americans, as measured by per capita household disposable income… The median disposable per-capita income in the IPI countries is thus about one-third less than in the U.S. …Medicare reimbursement for physician-administered drugs would largely be based on international reference prices in which the regulatory agency of one government sets drug prices based at least in part on those set by regulatory agencies in other countries. …for all the different payment methodologies Congress has devised for medical goods and services, it has never based reimbursement on prices that prevail in foreign countries. The agency’s role is to implement congressionally-established reimbursement systems, not to create them out of whole cloth.

As you might expect, the Wall Street Journal has also weighed in on Trump’s plan.

The editorial points out there will be very adverse consequences if the President imposes European-style price controls.

Mr. Trump signed an executive order that could make…life-saving therapies less likely. Mr. Trump has been threatening drug makers for months with government price controls. …The President’s order directs the Department of Health and Human Services to require drug makers to give Medicare the “most favored nation” (i.e., lowest) price that other economically developed countries pay. …This ignores some crucial details. …Other countries also have to wait longer for breakthrough therapies, which is one reason the U.S. has much higher cancer survival rates. …The larger reality is that developing novel therapies isn’t cheap and can take years—sometimes decades—of research. Most products in clinical pipelines fail, and even those that succeed aren’t guaranteed to produce a profit. …The risk for all Americans is that drug makers will shelve therapies for hard-to-treat diseases that are in the early stages of development because of the high failure rate and low expected profit. This risk is most acute for therapies that treat rarer forms of diseases… The victims will be the cancer patients of the future, including perhaps some reading this editorial.

The bottom line, as I noted in the above interview and as many others have observed, is that other nations are free-riding on American consumers.

They get access to most of the drugs at low prices (since pharmaceuticals are cheap to produce once they are finally approved).

But the net result, as I tried to illustrate in this modified image, is that American consumers finance the lion’s share of new research and development.

This isn’t fair.

But we’d be jumping from the frying pan into the fire if we had European-type price controls that stifled innovation by pharmaceutical companies.

Sure, we’d enjoy lower prices in the short run, but we would have fewer life-saving drugs in the future.

P.S. There’s an analogy between prescription drugs and NATO since Americans bear a disproportionate share of costs for both. However, there’s a strong argument that there’s no longer a need for NATO. By contrast, I don’t think anyone thinks it would be a good idea to stifle the development of new drugs.

P.P.S. As an alternative, a friend has been urging me to support the idea of using the coercive power of government to mandate that American-based pharmaceutical companies charge market prices when selling overseas – an approach that would give foreign governments a choice of paying more or not getting the drugs. That seems like a better approach, at least in theory, but my friend has no answer when I point out that those companies would then have an incentive to leave the United States (as many firms did before Trump lowered the corporate tax rate to improve U.S. competitiveness).

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Does Trump Deserve Credit for Strong 2019 Economic Data?

Regular readers know that I give Trump mixed grades on economic policy.

He gets good marks on issues such as taxes and regulation, but bad marks in other areas, most notably spending and trade.

Which is why I’ve sometimes asserted that there has been only a small improvement in the economy’s performance under Trump compared to Obama.

But I may have to revisit that viewpoint. The Census Bureau released its annual report yesterday on Income and Poverty in the United States. The numbers for 2019 were spectacularly good, with the White House taking a big victory lap.

Here are the three charts that merit special attention.

First, we have the numbers on inflation-adjusted median household income. You can see big jumps for all demographic groups.

Next, here’s a look at whether Americans are getting richer or poorer over time.

As you can from this chart, an ever-larger share are earning high incomes (a point I made last month, but this new data is even better).

Last but not least, here’s the data on the poverty rate.

Once again, remarkably good numbers, with all demographic groups enjoying big improvements.

We’ll see some bad news, of course, when the 2020 data is released at this point next year. But that’s the result of coronavirus.

So let’s focus on whether Trump deserves credit for 2019, especially since I got several emails yesterday from Trump supporters asking whether I’m willing to reassess my views on his policies.

At the risk of sounding petulant, my answer is no. I don’t care how good the data looks in any particular year. Excessive government spending is never a good idea, and it’s also never a good idea to throw sand in the gears of global trade.

But perhaps we should rethink whether the positive effects of some policies are stronger and more immediate while the negative effects of other policies are weaker and more gradual.

I’ll close with two cautionary notes about “sugar high” economics.

• First, Trump’s fiscal policy of tax cuts and more spending could be viewed as textbook Keynesianism. I definitely don’t think that approach creates more long-run growth, but it can lead to some illusory short-term prosperity as an economy consumes more than it produces.
• Second, I worry that some of last year’s good economic data may have been the result of the Federal Reserve’s easy-money policies. As I’ve previously noted, bubbles always feel good when they’re expanding. They don’t feel so good when they pop.

For what it’s worth, we’re not going to resolve this debate because coronavirus has been a huge, exogenous economic shock.

Though if (or when) the United States ever gets to a tipping point of too much debt, there may be some retroactive regret that Trump (along with Obama and Bush) viewed the federal budget as a party fund.

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The Trump Administration Tramples Property Rights

During the Obama years, I frequently criticized the Administration’s bad policy choices. On a wide range of issues.

But I also expressed disappointment when President Obama arbitrarily and unilaterally decided to override or overlook laws that were inconvenient to his agenda.

Or when he asserted powers that didn’t exist.

Simply stated, I care about the rule of law.

And I care about the rule of law regardless of which political party holds power.

Which is why I’m disgusted that the Trump Administration has stretched the law beyond the breaking point so that the Centers for Disease Control can run roughshod over private rental contracts.

In his column for the Washington Post, George Will observes the CDC is engaged in an unprecedented power grab.

…the Centers for Disease Control and Prevention…this month asserted a power to prohibit — through the end of 2020, but actually for as long as the CDC deems “necessary” — the eviction of private tenants from privately owned residences because of unpaid rent. This, even though eviction levels have been below normal during the lockdown. The CDC’s order protects tenants earning up to $99,000 — almost quadruple the official poverty line of $26,200 for a family of four. Or, for those filing joint tax returns, tenants earning up to $198,000, who are in the top quintile of U.S. households. …Noncompliant landlords can be fined up to $100,000 and incarcerated for up to a year. …A regulation promulgated by the executive branch grants vast — almost limitless, the CDC clearly thinks — discretion to an executive branch bureaucrat, the CDC director… And, if today’s director is correct, the director is authorized to curtail some property rights and abrogate some contracts nationwide, to suspend some state laws and strip state courts of jurisdiction in eviction cases. …The CDC presents all this as just another anti-infection protocol. Try, however, to imagine an activity or legal arrangement that the CDC, citing the regulation, could not overturn by fiat in the context of even a seasonal infectious disease such as the flu. Ilya Somin, law professor at George Mason University and another Cato adjunct scholar, notes: “Pretty much any economic transaction or movement of people and goods could potentially spread disease in some way.”

Christian Britschgi opines for Reason about the Trump Administration’s assault on property rights.

…the CDC’s eviction moratorium is an excellent example of how a patchwork of extreme, temporary policy interventions intended to stem the coronavirus pandemic has created a self-perpetuating justification for expanding government power across the board. …Over time, the economic damage and mass unemployed caused by a prolonged pandemic and continually extended shelter-in-place orders have fueled justifications for extending and expanding eviction moratoriums. After all, how can someone be expected to pay the rent if they aren’t legally allowed to work? Now a federal eviction moratorium covering all rental properties is being justified as necessary to ensure compliance with shelter-in-place orders. …the CDC’s order..ratchets up the government’s power in a way that won’t be easily undone.

Writing for the Foundation for Economic Education, Brad Polumbo explains why the CDC’s actions are so worrisome.

Under the direction of the Trump administration, the CDC instituted a unilateral order halting many evictions. It essentially nationalizes millions of private rental properties and strips landowners of their basic rights. …For legal justification, the Trump administration cites one vague law that says during a pandemic the CDC director “may take such measures to prevent such spread of the diseases as he/she deems reasonably necessary, including inspection, fumigation, disinfection, sanitation, pest extermination, and destruction of animals or articles believed to be sources of infection.” ….Across the country, millions of landlords will have tenants occupying their property and have no way to force them to pay rent or remove them if they won’t. …the federal government is trampling over private contracts and essentially seizing all affected rental properties as the domain of the state. …

Brad also makes the all-important point that the CDC’s regulation will actually make rental housing more expensive in the long run (sort of like the way rent control backfires).

…the CDC’s overreach will undoubtedly have severe economic consequences. This move will worsen the housing crisis in the long-run and make housing more expensive for everyone by decreasing supply. Many landlords will be unable to make their mortgage and property tax payments without rental income or any remedy for nonpayment. This will result in them losing their property and its eventual removal from the market. …this unprecedented invasion of contract rights and private property is sure to discourage future would-be landlords from renting out their property or entering the market. The long-term impact will be less housing overall, which means higher prices.

Congressman Thomas Massie of Kentucky is one of the nation’s most principled lawmakers.

Here’s his succinct analysis of what just happened.

Though I have a slight disagreement with Massie’s tweet.

This latest power grab by the federal government isn’t socialism. That would involve the government owning and operating rental properties.

Under the CDC edict, rental properties are still privately owned. It’s just that government controls how the property is used.

That’s a different economic system, as Thomas Sowell has explained.

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The Best and Worst Fiscal Policies of Trump’s Presidency

With the election less than two months away, there’s a lot of discussion and debate about Trump’s performance.

I put together a report card last year showing that his economic policies have been a mixed bag, with good grades on tax and regulation, but bad grades on trade and spending.

Today, let’s focus specifically on fiscal issues and try to identify the best and worst changes that have occurred during his presidency.

Let’s start with the good news.

For what it’s worth, I’m somewhat conflicted between two different provisions of the 2017 tax reform.

I’m a huge fan of the cap on the state and local tax deduction. For years, I had been arguing that it was very foolish for the federal tax system to subsidize high-tax states.

So I was delighted that the 2017 law restricted this subsidy (and I’m further delighted that we’re already seeing a positive impact with people “voting with their feet” against states such as New York, Illinois, and California).

However, that reform is not permanent. Like many other provisions of that law, it automatically expires at the end of 2025.

Which is why I’m going to choose the lower corporate tax rate as Trump’s best policy. Not only is that reform permanent (at least until/unless Joe Biden takes office), but it was enormously important for American competitiveness since the United States used to have the highest corporate tax rate in the developed world.

And the rate is still too high today, especially if you include the impact of state corporate tax rates, but at least the 2017 reform took a big step in the right direction.

And that big step is good news for jobs, wages, investment, and competitiveness.

Now for the bad news.

I could make the case that Trump’s overall spending increase is the problem.

Indeed, in a column for Reason, Matt Welch points out that Trump has not been a fiscal conservative.

The most traditional way to measure the size of government is to count how much money it spends. In Barack Obama’s last full fiscal year of 2016…, the federal government spent $3.85 trillion… In fiscal year 2020, before the coronavirus pandemic triggered a record amount of spending, the federal government was on course to cough up $4.79 trillion… So under Trump’s signature, before any true crisis hit, the annual price tag of government went up by $937 billion in less than four years—more than the $870 billion price hike Obama produced in an eight-year span… You can argue plausibly that Joe Biden and the Democratic Party will grow the government more. But the fact is, the guy railing against socialism…has grown spending faster than his predecessor and shown considerably less interest in confronting the entitlement bomb.

All of this is true, but I want to focus on specific policies, not just the overall spending performance.

Which is why I would argue that Trump’s worst fiscal policy is captured by this table from the Committee for a Responsible Federal Budget.

It shows what Trump promised compared to what he delivered and I’ve highlighted his awful record on non-defense discretionary spending (which is basically domestic spending other than entitlements). He promised $750 billion of reductions over 10 years and instead he saddled the American economy with $700 billion of additional increases.

P.S. Click here if you want background info on the different types of federal spending. But all you probably need to know is that many parts of the federal government that shouldn’t exist (Department of Education, Department of Agriculture, Department of Housing and Urban Development, Department of Transportation, etc) get much of their funding from the non-defense discretionary budget.

P.P.S. Trump has failed to address entitlements, which is reckless, but that’s a sin of omission. The increase in non-defense discretionary is a sin of commission.

P.P.P.S. I also thought about listing Trump’s failure to follow through on his proposal to get rid of taxpayer subsidies for the Paris-based Organization for Economic Cooperation and Development.

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Unions and Labor Day: The Divergent Interests of Government Bureaucrats and Private-Sector Workers

Way back in early 2017, I warned in an interview that Trump would be a big spender (sadly, I was right). But I wasn’t being reflexively anti-Trump.

Here’s a clip from that same program where I speculated that Trump might have the political skill to win support from private-sector union workers.

In honor of Labor Day, let’s elaborate on this topic.

I’ll start with the political observation that Trump seems to do much better than other Republicans at getting support from working-class voters. Even workers who belong to unions (much to the dismay of their left-leaning leadership) appear to be disproportionately sympathetic.

Though it’s important to emphasize, as I said in the interview, the distinction between government bureaucrat unions and private-sector unions.

The unions that represent government employees have an incentive to lobby for bigger government since that means more lavishly paid members paying more dues. So those unions reflexively support higher taxes, more spending, and additional red tape.

Yet those are the policies that undermine private-sector job creation and reduce the competitiveness of companies operating in America. And that’s bad for all private workers – including those that belong to unions.

Which is why I speculated in the interview whether Trump would have the “political cunning” to convince those private-sector union members that their interests are not the same as those of bureaucrats.

I guess we’ll see on election day.

By the way, I have very mixed feelings on Trump’s strategy. Some of his policies are good (lower taxes and less red tap), but he also tries to appeal to union workers with policies that are bad (most notably, protectionism).

P.S. Feel free to enjoy some good cartoons mocking unionized bureaucrats by clicking here, here, here, and here.

P.P.S. I often tell my Republican friends that they’ll have more success appealing to private-sector union members if they come across as pro-market (which implies neutrality between employers and employees) rather than pro-business (which implies siding with employers).

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Trump Humor, Part II

Yesterday’s column featured some anti-Trump humor.

Today, in the interest of providing equal time, here’s some pro-Trump satire.

We’ll start with this nightmare for left-wing parents.

By the way, I raised my daughter correctly, though I now worry she’s drifting in the wrong direction.

The satirists at the Babylon Bee report on anti-Trumpism in the media.

At his press conference last night, President Trump told everyone to stay hydrated and drink lots of water. “Water’s tremendous, very powerful stuff,” he said. “You won’t believe the things they can do with water. …It’s amazing. You can freeze it and make ice, I’m told. Ice is great for lots of things. Ice cream. Ice cubes. Igloos.” …Horrified journalists scrambled to warn Americans not to drown themselves in their pools and bathtubs. “Trump says water is good — but this is very misleading,” said Rachel Maddow. “Did you know that water kills many people every year? …Plus, do you know what’s hidden in water? Sharks. This president wants you to die from a shark attack!” Representatives for various bottled water companies quickly released a statement distancing themselves from the president’s remarks and warning everyone not to submerge themselves in the ocean for minutes at a time.

If I was still doing my weekly updates of coronavirus-themed humor, this next image would be perfect.

It’s a satirical look at casualty predictions for various events compared to the death toll from the virus.

I’m especially amused by the inclusion of “net neutrality” since folks on the left hysterically claimed the Internet would grind to a halt if that Obama-era policy was repealed.

Next, we have a old joke that has been reconfigured for the Trump era.

A CNN reporter walks into a neighborhood tavern and is about to order a drink when he sees a guy at the end of the bar wearing a “Make America Great Again” hat. It didn’t take an Einstein to know the guy was a Donald Trump supporter.

The CNN guy shouts over the bartender, loudly enough that everyone in the bar could hear, “Drinks for everyone in here, bartender, except for that Trump supporter.”

After the drinks were handed out, the Trump guy gives the CNN guy a big smile, waves at him and say, in an equally loud voice, “Thank you!”

This infuriates the CNN reporter, so he once again loudly orders drinks for everyone except the guy wearing the Trump hat. As before, this doesn’t seem to bother the Trump guy. He just continues to smile and again yells, “Thank you!”

So the CNN guy again loudly order drinks for everyone except the Trump guy. And again the Trump guy just smiles and yells back, “Thank you!”

At that point, the aggravated CNN reporter asks the bartender, “What the hell is the matter with that Trump supporter? I’ve ordered three rounds of drinks for everyone in the bar but him and all the silly ass does is smile and thank me. Is he nuts?”

“Nope,” replies the bartender. “He owns the place.”

As usual, I’ve saved the best for last.

I’ll close with the observation that it’s always the right time to make fun of politicians. We should mock Republicans. We should mock Democrats.

And we should mock individual politicians – not only Biden and Trump, but also Barack Obama, Hillary Clinton, Mitt Romney, Bernie Sanders, and Elizabeth Warren.

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Trump Humor, Part I

I recently shared some Joe Biden humor, so now it’s time to target Trump.

But there’s so much of it that today’s column will feature anti-Trump humor today, and we’ll look at pro-Trump humor tomorrow.

We’ll start with this video mocking the Trump campaign’s interactions with Russia.

Not quite as good as Iowahawk’s video about the Pelosi GTxi, but very well done.

Next we have a helpful suggestion from Microsoft.

The following cartoon strip is especially painful to me since so few Republicans are publicly opposing Trump’s wasteful spending.

Here’s a cartoon that made me laugh.

The artist, Mike Lukovich, is very clever for a leftist.

Here’s the Trump version of a joke that seems to circulate every four years.

Donald Trump met with the Queen of England, and he asked her, “Your Majesty, how do you run such an efficient government? Are there any tips you can give me?”

“Well,” replied the Queen, “the most important thing is to surround yourself with intelligent people.”

Trump frowned, and then asked, “But how do I know the people around you are really intelligent?”

The Queen took a sip of tea. “Oh, that’s easy; you just ask them to answer an intelligent riddle.”

The Queen pushed a button on her intercom. “Please send Theresa May in here, would you?”

Theresa May walked into the room and said, “Yes, Your Majesty?”

The Queen smiled and said, “Answer me this, if you would, Theresa. Your mother and father have a child. It is not your brother and it is not your sister. Who is it?”

Without pausing for a moment, Theresa May answered, “That would be me.”

“Yes! Very good,” said the Queen.

Trump went back home to ask Mike Pence the same question. “ Mike, answer this for me. Your mother and your father have a child. It’s not your brother and it’s not your sister. Who is it?”

“I’m not sure,” said Pence. “Let me get back to you on that one.” He went to his advisers and asked everyone, but none could give him an answer.

Finally, Pence ran in to Sarah Palin in a restaurant the next night. Pence asked, “Sarah, can you answer this for me? Your mother and father have a child and it’s not your brother or your sister. Who is it?”

Sarah Palin answered right back, “That’s easy, it’s me!”

Pence smiled, and said, “Thanks!”

Pence then, went back to speak with Trump. “Say, I did some research and I have the answer to that riddle.

It’s Sarah Palin!”

Trump got up, stomped over to Pence, and angrily yelled, “No, you idiot! It’s Theresa May!”

Ouch. Reminds me of this Obama joke.

Next we have a cartoon that puts the GOP in the role of being Jerry Falwell, Jr. (if you don’t get the reference, I reluctantly invite you to click here).

As usual, I save the best for last.

Here’s a message from Stormy Daniels.

P.S. Other examples of Trump-themed humor can be found here, here, here, here, here, here, and here.

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Which Party Does Better on the Economy?

The best feature of libertarians is that we are very principled and look at everything through the lens of the non-aggression principle.

By contrast, the worst feature of politics, as explained by the Ninth Theorem of Government, is that it encourages people look at everything through the lens of partisanship.

In other words, there’s a desire to always make your team look good and the other team look bad, even if you have to torture data.

Here’s an example.

In a column for the New York Times, Michael Tomasky asserts that Democratic presidents have a much better track record on the economy than their Republican counterparts.

Mr. Biden and his party’s No. 1 job between now and Election Day: Make it clear that Democrats have been better stewards of the economy — for decades, and by far. Many people don’t believe this. …But it’s true. …the country has done better for decades under Democrats, by nearly every major economic measure. From John Kennedy through Barack Obama — 56 years during which, as it happens, we had a Democratic president for 28 years and a Republican president for 28 — we saw more than 50 million jobs created under Democrats and just 24 million jobs created under Republicans. Even the stock market has performed better under Democratic presidents. …just toting up numbers by the months each party had in power is imprecise. But there’s no better way to do it.

Any decent social scientist will quickly identify are all sorts of problems with Tomasky’s methodology.

• What about the impact of which party has full or partial control of Congress?
• Is it right to blame (or credit) presidents for what happens in their first year or two, before they’ve had a chance to enact and implement new policies?
• Should other variables be measured, such as median household income or labor force participation?

But let’s set aside these concerns, as well as others that can be listed, and accept Tomasky’s numbers. Does this mean that the economy does better when Democrats are in the White House?

That’s certainly a possible interpretation, but it’s far more accurate to say that the economy does better when a president – regardless of party – adopts good policy (or, to be more accurate, if good policy is implemented during their presidency).

I’ve previously ranked presidents based on what happened to the burden of government spending during their tenures. And one thing that stands out is that Republicans seem to be even worse than Democrats – even when looking at what happened to domestic spending (with Reagan and Johnson being the only two exceptions).

And I’ve also graded many of the modern presidents (Richard Nixon, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, Barack Obama) based on their overall record on economics. If you peruse their performances, you’ll see there’s no obvious connection between good policy and partisan affiliation.

But I’ve never put together a best-to-worst list, so here’s my ranking of every president since Kennedy.

Let me elaborate – and also add some caveats.

For what it’s worth, I don’t think there’s good modern-quality data on JFK (or, to be more accurate, I’ve never searched for it), but I included him since he’s part of Tomasky’s analysis. That being said, he may be ranked too low. Yes, he spent too much money and implemented some bad policies, but he also lowered tax rates and pushed for free trade.

I also think it’s too early to grade Trump, but I included him since I know that will be of interest to readers. As you might imagine, I like what he’s done on taxes and red tape, but his record on other issues is bad – and getting worse. I’m especially concerned about the consequences and impact of the Fed’s easy-money policy, an approach Trump certainly supports.

Johnson and Nixon are unambiguously terrible, while Reagan is the star performer.

Clinton was surprisingly good (feel free to give the credit to Newt Gingrich if you want, but we didn’t need veto overrides to get the good policies of the 1990s).

The rest of the presidents were generally bad. I put them in reverse chronological order since I didn’t see any logical way of differentiating between them.

I can’t resist citing one more segment from Tomasky’s column.

Republican failures are not an unhappy coincidence. They’re a result of conservative governing practice. Republicans no longer fundamentally believe in the workings of government, so they don’t govern well. Their contempt for government is a result of conservative economic theory.

This is nonsense, as should be obvious from what I’ve already written. Republicans do not have a track record of “conservative governing.”

With one exception. We had relatively competent governance from the one GOP president who did have a “contempt for government” (actually, just contempt for big government).

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The Make-Believe Postal Service Panic and the Tenth Theorem of Government

Politicians and interest groups periodically fan the flames of temporary panic to push for misguided policy. We’ve already seen three big examples this century.

• The so-called PATRIOT Act was enacted in the feverish aftermath of 9-11, but many of its provisions simply added bureaucracy and gave government new/expanded powers unrelated to fighting terrorism.
• The TARP bailout allegedly was needed to save us for financial collapse, but in reality was a substitute for a policy (FDIC resolution) that would have recapitalized the banking system without bailing out Wall Street.
• Obama’s stimulus scheme had to be enacted to supposedly save the nation from another depression, but unemployment soared beyond administration projections and cronies got rich from boondoggles.

The same thing is now happening with the Postal Service, which ostensibly is on the verge of catastrophic collapse because of an expected increase in mail-in voting and sabotage by the Trump Administration.

The real story, though, is that bureaucracy has been losing money at a rapid pace for years and the only sensible solution is privatization. But that would upset the various postal unions and related interest groups, so they’ve created a make-believe crisis in hopes of getting more cash from taxpayers.

And this has nothing to do with Trump vs. Biden.

Let’s look at some rational voices on this topic, starting with this column by Charles Lane of the anti-Trump Washington Post.

Harder to account for is the progressive left’s idealization of the USPS, which began well before the uproar over new Postmaster General Louis DeJoy’s cost-cutting and its alleged impact on election mail. …when you look at what the agency actually does, a lot of it turns out to be a federally underwritten service for — profit-seeking businesses.Of the 142.6 billion pieces of mail of all kinds that the USPS handled in 2019, 53 percent was advertising material, a.k.a. junk mail, up from 48 percent in 2010. Junk mail makes up an even bigger share — 58 percent — of what individual households receive. …Companies pay a special rate, 19 cents apiece, to send these items (in bulk), as opposed to the 55 cents for a first-class stamp. …Some progressives are stuck in the pre-Internet age. Last week, Sen. Bernie Sanders (I-Vt.) said, apropos alleged mail delays: “I am not exaggerating when I say this is a life-and-death situation. The Post Office…delivers Social Security checks to seniors who rely on those benefits to survive.” He is exaggerating — a lot. Over 99 percent of all Social Security payments are sent by the more secure route of direct deposit; a 2013 law mandates it. …Crying “privatization” is the perennial scare tactic of progressives who oppose postal reform. That’s an odd one, too: Several European countries and Japan…have either fully or partially privatized their postal services. Actually, privatization is highly unlikely in the United States, given resistance from the two key lobbies — junk mailers and postal unions — that most influence Congress on this issue. …Something must be done to stem the Postal Service’s losses, which have totaled $83.1 billion since 2006, and to reduce its unfunded pension and health-care liabilities, which exceed $120 billion.

Here’s a twitter thread debunking some of the political hysteria about missing mailboxes.

Turns out the Washington Post uncovered the Great Mailbox Conspiracy ELEVEN YEARS AGO!

2009: "…half of the blue boxes in the Washington area have disappeared in the last nine years, and 200,000 nationwide have been plucked up in the last 20 years, leaving 175,000 total." pic.twitter.com/oLYV8rbEYn

— Jeryl Bier (@JerylBier) August 16, 2020

And how about this column by Nick Gillespie of the anti-Trump Reason magazine.

By now you’ve probably heard that President Donald Trump and Postmaster General Louis DeJoy “are sabotaging democracy in plain sight” through a mix of nefarious ploys, ranging from removing “blue Post Office drop boxes” to scrapping mail-sorting machines to allegedly mandating a slowdown in delivering the mail. …The truth is far less incendiary… Here’s a little bit of math that should give voters succor. In 2016, about 140 million total votes were cast in the presidential election…with “nearly 24 percent…cast using by-mail absentee voting.” …Assume, for the sake of argument, that the same number of votes will be cast this year as in 2016. Even if all voters used the mail and posted their ballots on exactly the same day, that would comprise only 30 percent of the amount of mail the USPS says it processes every single day. So if the USPS screws up delivering votes in a timely and efficient manner this fall, it won’t be because of any sinister actions by the White House. It will be because of longstanding, well-documented managerial and cultural problems… For those who are interested in the post office’s chronically bad performance and “unsustainable” situation, the Government Accountability Office (GAO) has produced a long list of studies on where the problems come from and how they might be addressed. The short version is that Congress has blocked all sorts of serious reforms to an operation that has seen a 33 percent decline in mail volume since 2006.

And here’s another twitter thread that’s worth a look.

OK so everyone has seen the "viral" photo going around of the piles of mailboxes in Wisconsin being used as evidence that Trump is sabotaging USPS. Problem is, they have been there for years: Hartford Finishing Inc. powder coats and refurbishes the old mailboxes. (1/8) pic.twitter.com/HQpAprWxoK

— Gary He (@garyhe) August 17, 2020

 

Or what about this article by Jack Shafer from (probably anti-Trump) Politico.

The USPS really is hurting finanically, and really is worried about delivering ballots on time. It’s legitimate to worry about postal delays botching the vote, if a mass of votes are cast by mail just before Election Day. But don’t extrapolate from news accounts, USPS union protestations and candidate carping… the USPS has sent letters to 46 states expressing its doubts about delivering all the ballots in time to be counted. But, as the Washingtonn Post also mentioned in its story, those letters were in the works before Trump’s new postmaster general took office. …What about those vanishing USPS mail collection boxes? As it turns out, the USPS has been culling the boxes since 2000, when their numbers peaked and 365,000 of them stood sentinel on U.S. streets. Today, their numbers have dwindled to 142,000. Why has the USPS deleted them? Because the volume of first-class has nose-dived.

So what’s actually going on?

As I noted at the beginning of this column, we’re getting scammed. The folks who benefit from the current system want to create a sense of panic so they can get a big bailout for the Postal Service.

The Wall Street Journal (which isn’t anti-Trump, but understands how Washington works) opined accurately on what’s really happening.

Mrs. Pelosi is trying to put on a political show, starring Democrats as the saviors of the post office. She says she wants to pass a bill that “prohibits the Postal Service from implementing any changes to operations or level of service it had in place on January 1.” Also in the mix may be a $25 billion cash infusion. Then Chuck Schumer will demand that the Senate come back to town for the same vote. By the way the letter-carriers union endorsed Joe Biden on the weekend.

My modest contribution to this discussion is to unveil aTenth Theorem of Government.

I’ll close with a prediction that politicians at some point in the future will manufacture a crisis (probably about deficits and debt) in order to impose a value-added tax.

P.S. Here are the nine previous Theorems of Government.

• The “First Theorem” explains how Washington really operates.
• The “Second Theorem” explains why it is so important to block the creation of new programs.
• The “Third Theorem” explains why centralized programs inevitably waste money.
• The “Fourth Theorem” explains that good policy can be good politics.
• The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
• The “Sixth Theorem” explains an under-appreciated benefit of a flat tax.
• The “Seventh Theorem” explains how bigger governments are less competent.
• The “Eighth Theorem” explains the motives of those who focus on inequality.
• The “Ninth Theorem of Government” explains how politics often trump principles.

 

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