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Posts Tagged ‘Elizabeth Warren’

Since Elizabeth Warren is now the supposed frontrunner for the Democrats, she merits closer inspection.

That includes serious analysis of her policy proposals. I’ve already done some of that (reviewing her statist views on Social Security, corporate governance, federal spending, taxation, Wall Street, etc).

And, since all politicians deserve mockery, it also includes humor.

Needless to say, most Warren satire revolves around her dodgy claim to Indian ancestry. I’ve already shared some examples, and we’re adding to that collection today.

We’ll start with a pointed observation about her support for gun control

By the way, check the end of this column for a more serious take on the topic.

Returning to today’s theme, Senator Warren appeared on daytime TV to get her DNA results.

Though, to be fair, her DNA test did discover a tiny trace of Indian ancestry.

Though not enough to beat Ivory.

And since I used to drive a Jeep Cherokee, I found this item particularly amusing.

Last but not least, here’s an item for conspiracy-minded folks who think Bill and Hillary Clinton have a habit of…well, let’s put it delicately…a habit of permanently removing political obstacles.

I’ll close with a serious point.

There’s nothing wrong with Warren thinking she had Indian ancestry. Plenty of people presumably have mistaken beliefs about their genetic wiring, especially in a melting-pot nation like the United States.

And I don’t even have a big problem with her fake stories about family persecution. I suspect all politicians embellish their resumes and try to make their life stories more appealing.

What’s offensive about Warren, however, is that she used fake claims of minority status for personal advantage, even if it meant taking jobs from real minorities (which is why her phoniness reminds me of Soul Man, a comedic flick from the 1980s).

P.S. Since I believe in the humor version of equal opportunity, we have some Bernie humor here, here, and here, some Biden humor here, here, and here, and some potshots at Trump here, here, and here.

P.P.S. And let’s not forget this mockery of Senator Warren from 2011.

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In addition to being a contest over expanding the burden of government spending, the Democratic primary also is a contest to see who wants the biggest tax increases.

Bernie Sanders and Elizabeth Warren have made class-warfare taxation an integral part of their campaigns, but even some of the supposedly reasonable Democrats are pushing big increases in tax rates.

James Pethokoukis of the American Enterprise Institute opines about the anti-growth effect of these proposed tax hikes, particularly with regard to entrepreneurship and successful new firms.

The Democratic presidential candidates have plenty of ideas about taxes. Wealth taxes. Wall Street taxes. Inequality taxes. And probably more to come. So lots of creative thinking about wealth redistribution. Wealth creation? Not so much. …one way to look at boosting GDP growth is thinking about specific policies to boost labor force and productivity growth. But there’s another way of approaching the issue: How many fast-growing growing new firms would need to be generated each year to lift the economy-wide growth rate each year by one percent? …a rough calculation by analyst Robert Litan figures there about 15 billion-dollar (in sales) companies formed every year. But what if the American entrepreneurial ecosystem were so vibrant that it produced 60 such companies annually? …The big point here is that the American private sector is key to growth. No other large economy is as proficient as the US in creating high-impact startups. But it doesn’t appear that the Democratic enthusiasm for big and bold tax plans is matched by concern about unwanted trade-offs.

If you want a substantive economic critique of class-warfare tax policy, Alan Reynolds has a must-read article on the topic.

He starts by explaining why it’s important to measure how sensitive taxpayers are (the “elasticity of taxable income”) to changes in tax rates.

Elasticity of taxable income estimates are simply a relatively new summary statistic used to illustrate observed behavioral responses to past variations in marginal tax rates. They do so by examining what happened to the amount of income reported on individual tax returns, in total and at different levels of income, before and after major tax changes. …For example, if a reduced marginal tax rate produces a substantial increase in the amount of taxable income reported to the IRS, the elasticity of taxable income is high. If not, the elasticity is low. ETI incorporates effects of tax avoidance as well as effects on incentives for productive activity such as work effort, research, new business start-ups, and investment in physical and human capital.

Alan then looks at some of the ETI estimates and what they imply for tax rates, though he notes that the revenue-maximizing rate is not the optimal rate.

Diamond and Saez claim that, if the relevant ETI is 0.25, then the revenue-maximizing top tax rate is 73 percent. Such estimates, however, do not refer to the top federal income tax rate, …but to the combined marginal rate on income, payrolls, and sales at the federal, state, and local level. …with empirically credible changes in parameters, the Diamond-Saez formula can more easily be used to show that top U.S. federal, state, and local tax rates are already too high rather than too low. By also incorporating dynamic effects — such as incentives to invest in human capital and new ideas — more recent models estimate that the long-term revenue-maximizing top tax rate is between 22 and 49 percent… Elasticity of taxable, or perhaps gross income…can be “a sufficient statistic to approximate the deadweight loss” from tax disincentives and distortions. Although recent studies define revenue-maximization as “optimal,” Goolsbee…rightly emphasizes, “The fact that efficiency costs rise with the square of the tax rate are likely to make the optimal rate well below the revenue-maximizing rate.”

These excerpts only scratch the surface.

Alan’s article extensively discusses how high-income taxpayers are especially sensitive to high tax rates, in part because they have considerable control over the timing, level, and composition of their income.

He also reviews the empirical evidence from major shifts in tax rates last century.

All told, his article is a devastating take-down of the left-of-center economists who have tried to justify extortionary tax rates. Simply stated, high tax rates hinder the economy, create deadweight loss, and don’t produce revenue windfalls.

That being said, I wonder whether his article will have any impact. As Kevin Williamson points out is a column for National Review, the left isn’t primarily motivated by a desire for more tax money.

Perhaps the strangest utterance of Barack Obama’s career in public office…was his 2008 claim that raising taxes on the wealthy is a moral imperative, even if the tax increase in question ended up reducing overall federal revenue. Which is to say, Obama argued that it did not matter whether a tax increase hurt the Treasury, so long as it also hurt, at least in theory and on paper, certain wealthy people. …ideally, you want a tax system with low transaction costs (meaning a low cost of compliance) and one that doesn’t distort a lot of economic activity. You want to get enough money to fund your government programs with as little disruption to life as possible. …Punitive taxes aren’t about the taxes — they’re about the punishment. That taxation should have been converted from a technical question into a moral crusade speaks to the basic failure of the progressive enterprise in the United States…the progressive demand for a Scandinavian welfare state at no cost to anybody they care about…ends up being a very difficult equation to balance, probably an impossible one. And when the numbers don’t work, there’s always cheap moralistic histrionics.

So what leads our friends on the left to pursue such misguided policies? What drives their support for punitive taxation?

Is is that they’re overflowing with compassion and concern for the poor?

Hardly.

Writing for the Federalist, Emily Ekins shares some in-depth polling data that discovers that envy is the real motive.

Supporters often contend their motivation is compassion for the dispossessed… In a new study, I examine…competing explanations and ask whether envy and resentment of the successful or compassion for the needy better explain support for socialism, raising taxes on the rich, redistribution, and the like. …Statistical tests reveal resentment of the successful has about twice the effect of compassion in predicting support for increasing top marginal tax rates, wealth redistribution, hostility to capitalism, and believing billionaires should not exist. …people who agree that “very successful people sometimes need to be brought down a peg or two even if they’ve done nothing wrong” were more likely to want to raise taxes on the rich than people who agree that “I suffer from others’ sorrows.” …I ran another series of statistical tests to investigate the motivations behind the following beliefs: 1) It’s immoral for our system to allow the creation of billionaires, 2) billionaires threaten democracy, and 3) the distribution of wealth in the United States is “unjust.” Again, the statistical tests find that resentment against successful people is more influential than compassion in predicting each of these three beliefs. In fact, not only is resentment more impactful, but compassionate people are significantly less likely to agree that it’s immoral for our system to allow people to become billionaires.

Here’s one of her charts, showing that resentment is far and away the biggest driver of support for class-warfare proposals.

These numbers are quite depressing.

They suggest that no amount of factual analysis or hard data will have any effect on the debate.

And there is polling data to back up Emily’s statistical analysis. Heck, some folks on the left openly assert that envy should be the basis for tax policy.

In other words, Deroy Murdock and Margaret Thatcher weren’t creating imaginary enemies.

P.S. If you think Kevin Williamson was somehow mischaracterizing or exaggerating Obama’s spiteful position on tax policy, just watch this video.

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I sometimes mock the New York Times for dodgy and inaccurate writing about economics.

Though, to be fair, the paper has many sound journalists who do a good job, so I should be more careful about explaining that the mistakes are the result of specific reporters and columnists.

Paul Krugman is an obvious example.

And we should add David Leonhardt to the list. He actually claims that imposing a wealth tax and confiscating private capital can lead to more growth.

There are two problems with the arguments from these opponents. First, they’re based on a premise that the American economy is doing just fine and we shouldn’t mess with success. …Second, …it’s also plausible that a wealth tax would accelerate economic growth. …A large portion of society’s resources are held by a tiny slice of people, who aren’t using the resources very efficiently. …Sure, it’s theoretically possible that some entrepreneurs and investors might work less hard… But it’s more likely that any such effect would be small — and more than outweighed by the return that the economy would get on the programs that a wealth tax would finance, like education, scientific research, infrastructure and more.

Wow. It’s rare to see so much inaccuracy in so few words.

Let’s review his arguments.

His first claim is utter nonsense. I’ve been following the debate over the wealth tax for years, and I’ve never run across a critic who argued that the wealth tax is a bad idea because the economy is “doing just fine.”

Instead, critics invariably explain that the tax is a bad idea because it would exacerbate the tax code’s bias against saving and investment and thus have a negative effect on jobs, wages, productivity, and competitiveness.

And those arguments are true and relevant whether the economy is booming, in a recession, or somewhere in between.

His second claim is equally absurd. He wants readers to believe that government spending is good for growth and that those benefits will more than offset the economic harm from the punitive tax.

To be fair, at least this is not a make-believe argument. Left-leaning bureaucracies such as the International Monetary Fund and Organization for Economic Cooperation and Development have been pushing this idea in recent years. They use phrases such as “resource mobilization” and “financing for development” to argue that higher taxes will lead to more growth because governments somehow will use money wisely.

Needless to say, that’s a preposterous, anti-empirical assertion. Especially when dealing with a tax that would do lots of damage on a per-dollar-collected basis.

Interestingly, a news report in the New York Times had a much more rational assessment, largely focusing on the degree of damage such a tax would cause.

Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth…with new taxes that could fundamentally reshape the United States economy. …Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy… the idea of redistributing wealth by targeting billionaires is stirring fierce debates at the highest ranks of academia and business, with opponents arguing it would cripple economic growth, sap the motivation of entrepreneurs who aspire to be multimillionaires and set off a search for loopholes. …At a conference sponsored by the Brookings Institution in September, N. Gregory Mankiw, a Harvard economist, …offered a searing critique, arguing that a wealth tax would skew incentives that could alter when the superrich make investments, how they give to charity and even potentially spur a wave of divorces for tax purposes. He also noted that billionaires, with their legions of lawyers and accountants, have proven to be experts at gaming the system to avoid even the most onerous taxes. …“On the one hand it’s a bad policy, and then the other thing is it’s a feckless policy,” Mr. Mankiw said. Left-leaning economists have expressed their own doubts about a wealth tax. Earlier this year, Lawrence Summers, who was President Bill Clinton’s Treasury secretary, warned…that wealth taxes would sap innovation by putting new burdens on entrepreneurial businesses while they are starting up. In their view, a country with more millionaires is a sign of economic vibrancy.

This is an example of good reporting. It cited supporters and opponents and fairly represented their arguments.

Readers learn that the real debate is over the magnitude of economic harm.

Speaking of which, a Bloomberg column explains how much money might get siphoned from the private economy if a wealth tax is imposed.

Billionaires such as Jeff Bezos, Bill Gates and Warren Buffett could have collectively lost hundreds of billions of dollars in net worth over decades if presidential candidate Elizabeth Warren’s wealth tax plan had been in effect — and they had done nothing to avoid it. That’s according to calculations in a new paper by two French economists, who helped her devise the proposed tax on the wealthiest Americans. The top 15 richest Americans would have seen their net worth decline by more than half to $433.9 billion had Warren’s plan been in place since 1982, according to the paper by University of California, Berkeley professors Emmanuel Saez and Gabriel Zucman. …The calculations underscore how a wealth tax of just a few percentage points might erode fortunes over time.

Here’s the chart that accompanied the article.

What matters to the economy, though, is not the amount of wealth owned by individual entrepreneurs.

Instead, it’s the amount of saving and investment (i.e., the stock of capital) in the economy.

A wealth tax is bad news because it diverts capital from the private sector and transfers it to Washington where politicians will squander the funds (notwithstanding David Leonhardt’s fanciful hopes).

So I decided to edit the Bloomberg chart so that is gives us an idea of how the economy will be impacted.

The bottom line is that wealth taxation would be very harmful to America’s economy.

P.S. Several years ago, bureaucrats at the IMF tried to argue that a wealth tax wouldn’t damage growth if two impossible conditions were satisfied: 1) It was a total surprise, and 2) It was only imposed one time.

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When I wrote about the wealth tax early this year, I made three simple points.

I obviously have not been very persuasive.

At least in certain quarters.

A story in the Wall Street Journal explores the growing interest on the left in this new form of taxation.

The income tax..system could change fundamentally if Democrats win the White House and Congress. …Democrats want to shift toward taxing their wealth, instead of just their salaries and the income their assets generate. …At the end of 2017, U.S. households had $3.8 trillion in unrealized gains in stocks and investment funds, plus more in real estate, private businesses and artwork… Democrats are eager to tap that mountain of wealth to finance priorities such as expanding health-insurance coverage, combating climate change and aiding low-income households. …The most ambitious plan comes from Sen. Warren of Massachusetts, whose annual wealth tax would fund spending proposals such as universal child care and student-loan forgiveness. …rich would pay whether they make money or not, whether they sell assets or not and whether their assets are growing or shrinking.

The report includes this comparison of current law with various soak-the-rich proposals (click here for my thoughts on the Wyden plan).

The article does acknowledge that there are some critiques of this class-warfare tax proposal.

European countries tried—and largely abandoned—wealth taxes. …For an investment yielding a steady 1.5% return, a 2% wealth levy would be equivalent to an income-tax rate above 100% and cause the asset to shrink. …The wealth tax also has an extra asterisk: it would be challenged as unconstitutional.

The two economists advising Elizabeth Warren, Emmanuel Saez and Gabriel Zucman, have a new study extolling the ostensible benefits of a wealth tax.

I want to focus on their economic arguments, but I can’t resist starting with an observation that I was right when I warned that the attack on financial privacy and the assault on so-called tax havens was a precursor to big tax increases.

Indeed, Saez and Zucman explicitly argue this is a big reason to push their punitive new wealth tax.

European countries were exposed to tax competition and tax evasion through offshore accounts, in a context where until recently there was no cross-border information sharing. …offshore tax evasion can be fought more effectively today than in the past, thanks to recent breakthrough in cross-border information exchange, and wealth taxes could be applied to expatriates (for at least some years), mitigating concerns about tax competition. …Cracking down on offshore tax evasion, as the US has started doing with FATCA, is crucial.

Now that I’m done patting myself on the back for my foresight (not that it took any special insight to realize that politicians were attacking tax competition in order to grab more money), let’s look at what they wrote about the potential economic impact.

A potential concern with wealth taxation is that by reducing large wealth holdings, it may reduce the capital stock in the economy–thus lowering the productivity of U.S. workers and their wages. However, these effects are likely to be dampened in the case of a progressive wealth tax for two reasons. First, the United States is an open economy and a significant fraction of U.S. saving is invested abroad while a large fraction of U.S. domestic investment is financed by foreign saving. Therefore, a reduction in U.S. savings does not necessarily translate into a large reduction in the capital stock used in the United States. …Second, a progressive wealth tax applies to only the wealthiest families. For example, we estimated that a wealth tax above $50 million would apply only to about 10% of the household wealth stock. Therefore increased savings from the rest of the population or the government sector could possibly offset any reduction in the capital stock. …A wealth tax would reduce the financial payoff to extreme cases of business success, but would it reduce the socially valuable innovation that can be associated with such success? And would any such reduction exceed the social gains of discouraging extractive wealth accumulation? In our assessment the effect on innovation and productivity is likely to be modest, and if anything slightly positive.

I’m not overly impressed by these two arguments.

  1. Yes, foreign savings could offset some of the damage caused by the new wealth tax. But it’s highly likely that other nations would copy Washington’s revenue grab. Especially now that it’s easier for governments to track money around the world.
  2. Yes, it’s theoretically possible that other people may save more to offset the damage caused by the new wealth tax. But why would that happen when Warren and other proponents want to give people more goodies, thus reducing the necessity for saving and personal responsibility?

By the way, they openly admit that there are Laffer Curve effects because their proposed levy will reduce taxable activity.

With successful enforcement, a wealth tax has to deliver either revenue or de-concentrate wealth. Set the rates low (1%) and you get revenue in perpetuity but little (or very slow) de-concentration. Set the rates medium (2-3%) and you get revenue for quite a while and de-concentration eventually. Set the rates high (significantly above 3%) and you get de-concentration fast but revenue does not last long.

Now let’s look at experts from the other side.

In a column for Bloomberg, Michael Strain of the American Enterprise Institute takes aim at Elizabeth Warren’s bad math.

Warren’s plan would augment the existing income tax by adding a tax on wealth. …The tax would apply to fortunes above $50 million, hitting them with a 2% annual rate; there would be a surcharge of 1% per year on wealth in excess of $1 billion. …Not only would such a tax be very hard to administer, as many have pointed out. It likely won’t collect nearly as much revenue as Warren claims. …Under Warren’s proposal, the fair market value of all assets for the wealthiest 0.06% of households would have to be assessed every year. It would be difficult to determine the market value of partially held private businesses, works of art and the like… This helps to explain why the number of countries in the high-income OECD that administer a wealth tax fell from 14 in 1996 to only four in 2017. …It is highly unlikely that the tax would yield the $2.75 trillion estimated by Emmanuel Saez and Gabriel Zucman, the University of California, Berkeley, professors who are Warren’s economic advisers. Lawrence Summers, the economist and top adviser to the last two Democratic presidents, and University of Pennsylvania professor Natasha Sarin…convincingly argued Warren’s plan would bring in a fraction of what Saez and Zucman expect once real-world factors like tax avoidance…are factored in. …economists Matthew Smith, Owen Zidar and Eric Zwick present preliminary estimates suggesting that the Warren proposal would raise half as much as projected.

But a much bigger problem is her bad economics.

…a household worth $50 million would lose 2% of its wealth every year to the tax, or 20% over the first decade. For an asset yielding a steady 1.5% return, a 2% wealth tax is equivalent to an income tax of 133%. …And remember that the wealth tax would operate along with the existing income tax system. The combined (equivalent income) tax rate would often be well over 100%. Underlying assets would routinely shrink. …The tax would likely reduce national savings, resulting in less business investment in the U.S… Less investment spending would reduce productivity and wages to some extent over the longer term.

Strain’s point is key. A wealth tax is equivalent to a very high marginal tax rate on saving and investment.

Of course that’s going to have a negative effect.

Chris Edwards, in a report on wealth taxes, shared some of the scholarly research on the economic effects of the levy.

Because wealth taxes suppress savings and investment, they undermine economic growth. A 2010 study by Asa Hansson examined the relationship between wealth taxes and economic growth across 20 OECD countries from 1980 to 1999. She found “fairly robust support for the popular contention that wealth taxes dampen economic growth,” although the magnitude of the measured effect was modest. The Tax Foundation simulated an annual net wealth tax of 1 percent above $1.3 million and 2 percent above $6.5 million. They estimated that such a tax would reduce the U.S. capital stock in the long run by 13 percent, which in turn would reduce GDP by 4.9 percent and reduce wages by 4.2 percent. The government would raise about $20 billion a year from such a wealth tax, but in the long run GDP would be reduced by hundreds of billions of dollars a year.Germany’s Ifo Institute recently simulated a wealth tax for that nation. The study assumed a tax rate of 0.8 percent on individual net wealth above 1 million euros. Such a wealth tax would reduce employment by 2 percent and GDP by 5 percent in the long run. The government would raise about 15 billion euros a year from the tax, but because growth was undermined the government would lose 46 billion euros in other revenues, resulting in a net revenue loss of 31 billion euros. The study concluded, “the burden of the wealth tax is practically borne by every citizen, even if the wealth tax is designed to target only the wealthiest individuals in society.”

The last part of the excerpt is key.

Yes, the tax is a hassle for rich people, but it’s the rest of us who suffer most because we’re much dependent on a vibrant economy to improve our living standards.

My contribution to this discussion it to put this argument in visual form. Here’s a simply depiction of how income is generated in our economy.

Now here’s the same process, but with a wealth tax.

For the sake of argument, as you can see from the letters that have been fully or partially erased, I assumed the wealth tax would depress the capital stock by 10 percent and that this would reduce national income by 5 percent.

I’m not wedded to these specific numbers. Both might be higher (especially in the long run), both might be lower (at least in the short run), or one of them might be higher or lower.

What’s important to understand is that rich people won’t be the only ones hurt by this tax. Indeed, this is a very accurate criticism of almost all class-warfare taxes.

The bottom line is that you can’t punish capital without simultaneously punishing labor.

But some of our friends on the left – as Margaret Thatcher noted many years ago – seem to think such taxes are okay if rich people are hurt by a greater amount than poor people.

P.S. Since I mentioned foresight above, I was warning about wealth taxation more than five years ago.

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The invaluable John Stossel has an entertaining and informative video that estimates how many handouts are being promised by Joe Biden, Pete Buttigieg, Kamala Harris, Bernie Sanders, Donald Trump, and Elizabeth Warren.

Wow, how depressing.

When I wrote about about the “dangerous seduction of free” a month ago, I apparently underestimated the problem. We have politicians completely divorced from fiscal reality (the “Green New Deal” being a frightening example).

But the key question is whether the American people are actually getting seduced.

It’s not looking good on the Democratic side. Joe Biden is presumably part of the Democratic Party’s anti-socialist wing, which is encouraging. But all the other leading candidates are hard-core big spenders.

And it’s not looking good on the Republican side, either. Trump may not have crazy proposals for new spending, but in practice he’s been profligate. Indeed, I’m guessing he will wind up with a worse record on spending than Obama.

The bottom line is that the public sector already is too large in the United States. Yet we have politicians who want it to become an even bigger burden. In some cases, much bigger.

That has very serious economic consequences. Especially if it coincides with an erosion of societal capital.

For instance, I think some European countries have already reached a “tipping point” because of a dependency mindset.

Historically, the United States has been insulated from that problem because of a belief in personal responsibility. But ever-growing levels of dependency suggest that this advantage is dissipating.

I’ll close with a final observation about the candidates – Sanders, Warren, and Harris – who were identified in the video as advocating trillions of dollars of new spending.

How do they plan to finance this orgy?

  • Sanders has a plethora of new taxes, including class-warfare tax increase and middle-class tax increases, so he definitely wants to put our money where his mouth is. In terms of fiscal policy, think of him as Sweden.
  • Warren supports a bunch of new taxes, mostly on the rich, most notably a huge wealth tax, which surely would backfire but theoretically is a big source of money. In terms of fiscal policy, think of her as France.
  • Harris has some class-warfare tax hikes but is mostly promising a free lunch since there’s a huge mismatch between what she wants to spend and the new taxes she has embraced. In terms of fiscal policy, think of her as Greece.

For what it’s worth, I’m waiting for the Hong Kong candidate.

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I’m constantly surprised by what happens in the world of politics. I didn’t think Donald Trump had any chance of winning in 2016, yet I was obviously wrong.

I also thought Elizabeth Warren’s political career would be crippled after people found out she fraudulently claimed Indian ancestry to gain special preferences in hiring at law schools. Yet she’s now a serious candidate to be the Democratic nominee in 2020.

So, instead of political prognosticating, I’ll stick with policy analysis, which is what I do in this clip from an interview about Sen. Warren’s plan to give Washington more power over capital markets.

If you want specifics on her plan, this Politico story has lots of detail, and this CNN report also has plenty of information.

I’ve previously written about some of the provisions, such as Glass-Steagall and carried interest, so today I want to focus on the broader point from the interview.

Every single economic theory agrees that saving and investment play a key role in long-run growth and higher living standards. But who controls and directs how capital is allocated?

I prefer competitive markets, which reward decisions that make us more prosperous.

The socialists, by contrast, think government can directly control how capital is allocated. At the risk of understatement, that approach doesn’t have a good track record.

Elizabeth Warren prefers an indirect approach, which involves lots of regulation, taxation, red tape, and intervention. This cronyist approach also is misguided. Her corporatist agenda unavoidably will hinder the efficient (i.e., growth maximizing) allocation of capital and also reduce the overall level of saving and investment.

And that translates into less income for workers.

By the way, my disagreement with Sen. Warren’s policy agenda does not mean I have a pro-Wall Street perspective.

In the past, I opposed the TARP bailout and the Dodd-Frank regulatory expansion, both of which were supported by the big players on Wall Street.

And I currently oppose the Fed’s easy-money policy and also want to remove the tax code’s preference for debt, which again puts me on the other side from the big players on Wall Street.

The bottom line: I support economic liberty, not big business.

P.S. Here’s some political humor that will be very appropriate if there’s a Trump-Warren race next year.

P.P.S. Here’s some satire regarding Warren’s class warfare.

P.P.P.S. On a serious note, I strongly recommend Kevin Williamson’s analysis of Warren’s fake populism.

P.P.P.P.S. And I recommend my own work on Warren’s mistaken viewpoints on corporate taxation and corporate governance.

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When writing about Bernie Sanders back in 2016, I put together a flowchart to identify different strains of statism.

In part, I wanted to show that genuine socialists, with their advocacy of government ownershipcentral planning, and price controls, aren’t really the same as other leftists (and I’ve made the unconventional claim that “Crazy Bernie” isn’t a true socialist – at least based on his policy positions).

I’m not the only one to notice that not all leftists have the same approach.

Writing for the Washington Post about the battle between Bernie Sanders and Elizabeth Warren for the Democratic nomination, Elizabeth Bruenig opines on the difference between two strains of statism.

What is the difference between Sanders (I-Vt.) and Sen. Elizabeth Warren (D-Mass.)? …much of it comes down to the matter of regulation vs. revolution. For Warren, the solution to our economic ills already exists in well-regulated capitalism. “I believe in markets,”… Warren believes today’s socioeconomic ills are the result of high concentrations of power and wealth that can be resolved with certain regulatory tools and interventions. …for Sanders, those solutions come up short. ,,,Instead, he aims to transfer power over several key segments of life to the people — by creating a set of universal economic rights that not only entitle citizens to particular benefits (such as medical care, education and child care) but also give those citizens a say in how those sectors are governed: in short, democratic socialism.

They both sound like “stationary bandits” to me, but there are some nuances.

Elizabeth Warren basically favors private ownership but she explicitly wants politicians and bureaucrats to have the power to dictate business decisions.

Thomas Sowell points out this economic philosophy is fascism. But I’ll be more polite and refer to it as corporatism.

By contrast, as a self-declared socialist, Bernie Sanders should be in favor of nationalizing companies.

But, as reported by the New York Times, he actually sees himself as another Franklin Roosevelt.

Senator Bernie Sanders of Vermont offered a vigorous defense of the democratic socialism that has defined his five decades in political life on Wednesday… Mr. Sanders cast himself at times in direct competition with President Trump, contrasting his own collectivist views against what he called the “corporate socialism” practiced by the president and the Republican Party. And Mr. Sanders, 77, declared that his version of socialism was a political winner, having lifted Mr. Roosevelt to victory four times… Mr. Sanders…presented his vision of democratic socialism not as a set of extreme principles but as a pathway to “economic rights,”… He argued that his ideology is embodied by longstanding popular programs, including Social Security, Medicare and Medicaid, that Republicans have labeled socialist. …Mr. Sanders called for a “21st-century economic Bill of Rights,” which he said would address health care, wages, education, affordable housing, the environment and retirement.

I’ll make two points.

First, FDR may have won four times, but he was an awful President. His policies deepened and lengthened the Great Depression.

And his proposed “economic bill of rights” would have made a bad situation even worse. He basically said everyone has a right to lots of freebies without ever stopping to think about the impact such policies would have on incentives to lead productive lives.

For all intents and purposes, we wanted to turn this cartoon into reality.

Second, I don’t actually think there’s a significant difference between Sanders and Warren. Yes, their rhetoric is different, but they both want higher taxes, more regulation, additional spending, and more intervention.

Heck, if you examine their vote ratings from the Club for Growth or the National Taxpayers Union, it’s hard to find any real difference.

At the risk of making a radical understatement, neither of them is a friend to taxpayers.

But thinking about this issue has motivated me to modify my statism flowchart. Here’s the new version.

As you can see, I created a much-needed distinction between totalitarian statism and democratic statism.

And while Warren is on the corporatist side and Sanders is on the socialist side, I also put both of them relatively close to the Venezuela-style track of “incoherent statism.” In other words, I think they’re guided by vote buying rather than a cohesive set of principles.

P.S. I wrote last week about the emerging “anti-socialist” wing of the Democratic Party. Presumably they would be the “rational leftists” on the flowchart.

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