Posts Tagged ‘Government Spending’

Way back in 2009, I narrated a video explaining that people worry too much about deficits and debt. Red ink isn’t desirable, to be sure, but I pointed out that the real problem is government spending.

And the bottom line is that most types of government spending are bad for an economy, regardless of whether they are financed by taxes or borrowing.

It is possible, of course, for a nation to have a debt crisis. But keep in mind that this simply means a government has accumulated so much debt that investors no longer trust that they will receive payments on government bonds.

That’s not a good outcome, but replacing debt-financed spending with tax-financed spending is like jumping out of the frying pan and into the fire. Or the fire into the frying pan, if you prefer. In either case, politicians are ignoring the real problem.

Greece is a cautionary example. Thanks to a period of overspending, Greek politicians drove the country into a debt crisis. But this dark cloud had a silver lining. The good news (at least relatively speaking) is that the government no longer could borrow from the private sector to finance more spending.

But the bad news is that Greek politicians subsequently hammered the economy with huge tax increases in hopes of propping up the country’s bloated welfare state. And the “troika” made a bad situation worse with bailout funds (mostly to protect big banks that unwisely lent money to Greek politicians, but that’s a separate story).

In other words, Greece got in trouble because of too much government spending and it remains in trouble because of too much government spending. As is the case for many other European nations.

And I fear the United States is slowly but surely heading in that direction. I elaborate about the problem of government spending – and the concomitant symptom of red ink – in this interview with the Mises Institute.

For all intents and purposes, I’m trying to convince people that deficits and debt are bad, but they’re bad mostly because they are a sign that government is too big. Sort of like a brain tumor being the real problem and headaches being a warning sign.

I feel like Goldilocks on this issue. Except instead of porridge that is too hot or too cold, I deal with people on both sides who think red ink is either wonderful or terrible.

For an example of the former group, here’s some of what Stephanie Kelton wrote for the New York Times last October.

…bigger deficits wouldn’t wreck the nation’s finances. …Lawmakers are obsessed with avoiding an increase in the deficit. …It’s also holding us back. Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering…long-term prosperity.

Hard to disagree with the above excerpt.

But here’s the part I don’t like. She’s a believer in the perpetual motion machine of Keynesian economics. She thinks deficits are actually good for the economy and she wants to use debt to finance an ever-larger burden of government spending.

Government spending adds new money to the economy, and taxes take some of that money out again. …we should think of the government’s spending as self-financing since it pays its bills by sending new money into the economy. …the deficit itself could be deployed as a potent weapon in the fights against inequality, poverty and economic stagnation.


Now let’s check out the view of the so-called deficit hawks who think red ink is an abomination.

Here are some passages from a Hill report on the battle over last year’s tax plan.

A handful of GOP deficit hawks are worried that their party’s tax plan could add trillions to the deficit, deepening a debt crisis for future generations. …The tax plan could cost the government $1.5 trillion in revenue over the next decade… Sen. Bob Corker (R-Tenn.), who recently announced his retirement at the end of this Congress, has warned he’ll oppose the tax plan if it adds to the deficit. …In a separate interview, he told The New York Times that the debt is “the greatest threat to our nation,” more dangerous than the Islamic State in Iraq and Syria, or North Korea.

Ugh, again.

The threat isn’t the red ink. The real danger is an ever-increasing burden of government spending, driven by entitlements.

Besides, the GOP tax bill actually is a long-run tax increase!

Let’s close with a video on the topic from Marginal Revolution. It has too much Keynesianism in it for my tastes, but the discussion of Argentina’s default is useful for those who wonder about whether the United States is going to have a debt meltdown at some point.

P.S. I don’t agree with Keynesians and I don’t agree with the self-styled deficit hawks. But I can appreciate that both groups have a consistent approach to public finance. What really galls me are the statist hypocrites who are cheerleaders for debt when there are proposals to increase government spending, but then do a back flip and pretend that debt is terrible and must be reduced when tax increases are being discussed.

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I’ve narrated a video on why big government is theoretically bad for an economy, another video looking at the empirical evidence on government spending and economic performance, and also a video on the growth-maximizing size of the public sector.

But if you want to see a lot of what I said condensed into one video, here’s Dennis Prager talking about differences in how the left and right view government. The opening part of the video is interesting, though I suspect his descriptions only apply to philosophically motivated activists on each side.

The part I want to focus on begins about 1:15, when he outlines seven adverse consequences of ever-growing government.

I think he put together a very good list. Here’s my two cents on his seven points.

  1. More Corruption – He points out that a government with lots of power and control will be very susceptible to misbehavior as interest groups and politicians figure out ways of scamming the system. Very similar to the message in one of my videos.
  2. Less Liberty – It is basically a tautology that ever-larger government necessitates a reduction in liberty. Not in a totalitarian sense, but taxes and regulations constrain the freedom of individual to earn and control income.
  3. Fiscal Crisis – He warns that big government is a recipe for fiscal crisis. I’m not sure if this has to be inevitable, but from a practical perspective, he is right. Demographic change and entitlements are a poisonous combination.
  4. Punitive Taxation – If government consistently expands faster than the productive sector of the economy, that almost certainly means ever-higher taxes, which ultimately will be self defeating because of the Laffer Curve.
  5. Unsustainable Debt – An expanding burden of government spending also will mean ever-higher levels of red ink, especially once the tax burden is so high that additional levies don’t produce much – if any – revenue.
  6. Totalitarianism – This is probably Prager’s weakest point. He’s right that bad people do very bad things when they control a government, but I suspect western nations will suffer societal breakdown rather that dictatorship.
  7. Dependency – He closes very strong with observations about the danger of luring people into reliance on government. This concern about the erosion of societal capital is much more important than most people think.

For all intents and purposes, Prager’s video is a very good description of “goldfish government.”

This is the term I use to describe the unfortunate tendency of politicians to over-tax and over-spend until a society faces a crisis.

For what it’s worth, I don’t think western nations necessarily will collapse (though some almost certainly will depending on the degree to which societal capital has been destroyed).

But I will acknowledge that politicians generally don’t like taking the necessary steps to avert fiscal crisis.

Which is one of the reasons I’m such a big fan of tax competition. I don’t want politicians to think that endless tax increases are a way of postponing the fiscal day of reckoning.

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Writing about federal spending last week, I shared five charts illustrating how the process works and what’s causing America’s fiscal problems.

Most important, I showed that the ever-increasing burden of federal spending is almost entirely the result of domestic spending increasing much faster than what would be needed to keep pace with inflation.

And when I further sliced and diced the numbers, I showed that outlays for entitlements (programs such as Social SecurityMedicareMedicaid, and Obamacare) were the real problem.

Let’s elaborate.

John Cogan, writing for the Wall Street Journal, summarizes our current predicament.

Since the end of World War II, federal tax revenue has grown 15% faster than national income—while federal spending has grown 50% faster. …all—yes, all—of the increase in federal spending relative to GDP over the past seven decades is attributable to entitlement spending. Since the late 1940s, entitlement claims on the nation’s output of goods and services have risen from less than 4% to 14%. …If you’re seeking the reason for the federal government’s chronic budget deficits and crushing national debt, look no further than entitlement programs. …entitlement spending accounts for nearly two-thirds of federal spending. …What about the future? Social Security and Medicare expenditures are accelerating now that baby boomers have begun to collect their government-financed retirement and health-care benefits. If left unchecked, these programs will push government spending to levels never seen during peacetime. Financing this spending will require either record levels of taxation or debt.

Here’s a chart from his column. Only instead of looking at inflation-adjusted growth of past spending, he looks at what will happen to future entitlement spending, measured as a share of economic output.

And he concludes with a very dismal point.

…restraint is not possible without presidential leadership. Unfortunately, President Trump has failed to step up.

I largely agree. Trump has nominally endorsed some reforms, but the White House hasn’t expended the slightest bit of effort to fix any of the entitlement programs.

Now let’s see what another expert has to say on the topic. Brian Riedl of the Manhattan Institute paints a rather gloomy picture in an article for National Review.

…the $82 trillion avalanche of Social Security and Medicare deficits that will come over the next three decades elicits a collective shrug. Future historians — and taxpayers — are unlikely to forgive our casual indifference to what has been called “the most predictable economic crisis in history.” …Between 2008 and 2030, 74 million Americans born between 1946 and 1964 — or 10,000 per day — will retire into Social Security and Medicare. And despite trust-fund accounting games, all spending will be financed by current taxpayers. That was all right in 1960, when five workers supported each retiree. The ratio has since fallen below three-to-one today, on its way to two-to-one by the 2030s. …These demographic challenges are worsened by rising health-care costs and repeated benefit expansions from Congress. Today’s typical retiring couple has paid $140,000 into Medicare and will receive $420,000 in benefits (in net present value)… Most Social Security recipients also come out ahead. In other words, seniors are not merely getting back what they paid in. …the spending avalanche has already begun. Since 2008 — when the first Baby Boomers qualified for early retirement — Social Security and Medicare have accounted for 72 percent of all inflation-adjusted federal-spending growth (with other health entitlements responsible for the rest). …

Brian speculates on what will happen if politicians kick the can down the road.

…something has to give. Will it be responsible policy changes now, or a Greek-style crisis of debt and taxes later? …Restructuring cannot wait. Every year of delay sees 4 million more Baby Boomers retire and get locked into benefits that will be difficult to alter… Unless Washington reins in Social Security and Medicare, no tax cuts can be sustained over the long run. Ultimately, the math always wins. …Frédéric Bastiat long ago observed that “government is the great fiction through which everybody endeavors to live at the expense of everybody else.” Reality will soon fall like an anvil on Generation X and Millennials, as they find themselves on the wrong side of the largest intergenerational wealth transfer in world history.

Not exactly a cause for optimism!

Last but not least, Charles Hughes writes on the looming entitlement crisis for E21.

Medicare and Social Security already account for roughly two-fifths of all federal outlays, and they will account for a growing share of the federal budget over the coming decade. …Entitlement spending growth is a major reason that budget deficits are projected to surge over the next decade. …The unsustainable nature of these programs face mean that some reforms will have to be implemented: the only questions are when and what kind of changes will be made. The longer these reforms are put off, the inevitable changes will by necessity be larger and more abrupt. …Without real reform, the important task of placing entitlement programs back on a sustainable trajectory will be left for later generations—at which point the country will be farther down this unsustainable path.

By the way, it’s not just libertarians and conservatives who recognize there is a problem.

There have been several proposals from centrists and bipartisan groups to address the problem, such as the Simpson-Bowles plan, the Debt Reduction Task Force, and Obama’s Fiscal Commission.

For what it’s worth, I’m not a big fan of these initiatives since they include big tax increases. And oftentimes, they even propose the wrong kind of entitlement reform.

Heck, even folks on the left recognize there’s a problem. Paul Krugman correctly notes that America is facing a massive demographic shift that will lead to much higher levels of spending. And he admits that entitlement spending is driving the budget further into the red. That’s a welcome acknowledgement of reality.

Sadly, he concludes that we should somehow fix this spending problem with tax hikes.

That hasn’t worked for Europe, though, so it’s silly to think that same tax-and-spend approach will work for the United States.

I’ll close by also offering some friendly criticism of conservatives and libertarians. If you read what Cogan, Riedl, and Hughes wrote, they all stated that entitlement programs were a problem in part because they would produce rising levels of red ink.

It’s certainly true that deficits and debt will increase in the absence of genuine entitlement reform, but what irks me about this rhetoric is that a focus on red ink might lead some people to conclude that rising levels of entitlements somehow wouldn’t be a problem if matched by big tax hikes.

Wrong. Tax-financed spending diverts resources from the private economy, just as debt-financed spending diverts resources from the private economy.

In other words, the real problem is spending, not how it’s financed.

I’m almost tempted to give all of them the Bob Dole Award.

P.S. For more on America’s built-in entitlement crisis, click here, here, here, and here.

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I write constantly (some would say incessantly and annoyingly) about entitlement spending. And I occasionally write about discretionary spending.

It’s time to address the budget in a comprehensive fashion. Let’s look at five charts to put everything in context and to show how we got into our current mess.

Our first chart (based on Table 8.2 from the Office of Management and Budget’s Historical Tables) shows what has happened to major spending categories from 1962 to 2017. And all the data is in inflation-adjusted dollars (2009 benchmark) to accurately gauge how and why the burden of federal spending has grown.

This next chart shows the actual percentage increases in the major spending categories during this time period. The two big takeaways are that 1) the defense budget is not the cause of our long-run fiscal problems (though that doesn’t mean it should be exempt from cuts), and 2) entitlement expenditures have exploded.

And if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same trends will prevail for the next three decades.

In other words, our fiscal problems start with entitlements and end with entitlements.

If you want to look at the problem with a broader lens, this next chart shows that the problem is domestic spending (i.e., the combination of entitlement and domestic discretionary outlays).

If you’re pressed for time, you can stop reading now. You have the key information already.

But if you want to get a bit wonky, here are two other charts that help explain the intricacies of how budgets work (or don’t work!) in Washington.

The first thing to realize is that there are two budget processes in Washington. There are entitlement programs, which basically operate on autopilot. For all intents and purposes, the President and Congress could go on vacation for the next three years and programs such as Social Security, Medicare, Medicaid, and Obamacare would mechanically continue. But there is also “discretionary” spending for the Pentagon and various domestic programs, all of which is determined through an annual “appropriations” process. Whenever you read about a government shutdown, it’s because politicians can’t agree on the level of funding for the discretionary part of the budget.

Now let’s get to my favorite part, which is figuring out how to limit the size of the federal leviathan.

This last chart shows that net interest spending is genuinely untouchable (unless one wants a Greek-style or Argentine-style default). The rest of the budget, however, can be addressed. Entitlements can be changed through “reconciliation”, which is a legislative process designed to minimize procedural roadblocks (in general, tax bills also use reconciliation legislation). And discretionary programs can be changed via annual appropriations legislation.

I should add that net interest may not be directly touchable, but interest payments can be reduced by controlling spending and thus reducing red ink.

Another thing to understand is that the budget caps (yes, the ones that were weakened in 2013, 2015, and earlier this year) only apply to discretionary spending.

And the most important thing to realize is that the only solution to our budget mess is genuine entitlement reform. Which is why we need constitutional (and comprehensive) limits on total outlays. Politicians will only do what’s right if every other option is off the table.

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I sometimes sardonically comment about Democratic politicians playing Santa Claus, but Republicans can play that game as well.

Trump and his allies in Congress recently agreed on a big-spending budget deal that lavishes more money on both the Pentagon and domestic programs, and that was only a few weeks after agreeing on a tax reform plan that lower taxes (though only for nine years).

Even if I like part of what’s been happening, that kind of populist approach at some point becomes unsustainable. And when the D.C. swamp ultimately has to choose between lower taxes or higher spending, they’ll go with the latter and make things even worse by jacking up the tax burden.

My frustration is apparent in this recent interview.

And I’m not the only one who sees the long-run dangers.

In a column for the Wall Street Journal, Professor Edward Lazear of Stanford explores the economic damage of ever-expanding government.

The budget deal President Trump signed earlier this month will send federal spending and the deficit skyrocketing. On top of this spending explosion, the administration now plans to add a $500 billion infrastructure bill. …over time high spending necessitates high taxes, and high taxes reduce work and restrain growth. Economic trends in developed nations consistently show that low taxes and hard work are linked to robust growth.

He looks at some of the cross-country evidence.

European countries trail the U.S. in working hard and controlling taxes, and their economies have lagged in comparison. France has a tax-to-GDP ratio of about 44%, and in Italy it’s 43%. The French and Italians work almost 30% fewer hours per person than Americans. Notably, the French economy has flatlined since 2010 while Italy’s has contracted. …Data from the Organization for Economic Cooperation and Development suggests that a 1% increase in a nation’s tax rate is associated with a 1.4% decrease in hours worked per person in the working-age population.

Here’s the part that resonated with me. It’s excessive spending that ultimately is the problem.

…taxes are ultimately dictated by spending. Countries can borrow to finance short-run spending, but they must eventually levy taxes to repay the loans. Whether a government raises taxes now or later to pay for expenditures is a minor consideration compared with its decision to spend in the first place. …Higher spending goes hand in hand with higher taxes, higher deficits, fewer worked hours and less growth. The international comparisons suggest that a 4% increase in spending is associated with a decrease of roughly 0.5 percentage point in the average annual growth rate. Furthermore, it is spending—rather than the deficit—that correlates with sluggish growth. …Deficits often coincide with low growth because deficit increases are usually caused by heightened spending, not reduced taxes. Raising taxes, or keeping them high without lowering spending, stifles growth.

Heck, even the OECD has produced research on the negative impact of government spending on economic performance.

And this approach can lead to a downward spiral.

To the extent that government spending goes to programs such as welfare that directly discourage work, it has an additional growth-reducing effect. When fewer people work, those who do must be taxed even more to cover public expenses. These heightened taxes on labor discourage work in turn, pushing more potential workers toward government support.

In other words, if we stay on this path, we’ll eventually become Greece. Not a good idea, to put it mildly.

Since we’re on the topic, let’s look at some additional evidence. Three economists from Australia and the United Kingdom did a meta-analysis of studies on the relationship between government spending and economic growth. Here are some of the findings.

One of the most contentious issues in economics is whether ‘big government’ is good or bad for economic growth. …Theoretically, big government can have both negative and positive effects on growth. …In this study, we include all effect-size estimates reported by empirical studies that examine the direct effect of government size on growth.

Here’s what they found.

… findings indicate that: (i) total government expenditures have a medium and adverse effect on per-capita income growth in developed countries only; (ii) the effect of government consumption on per-capita income growth is also medium in developed countries and in developed and LDCs pooled together; and (iii) neither total expenditures nor government consumption has a significant effect on per-capita income growth in LDCs.

I’m not surprised that they didn’t find a strong link in poor nations. The data show that those countries are generally too mismanaged and corrupt to collect much revenue. Therefore, as I noted in my recent analysis of Indian economic policy, they can’t spend much.

What’s primarily holding back those countries is weak rule of law, excessive regulation, and protectionism.

But I’m digressing. The study also acknowledges the Rahn Curve, though they call it the Armey Curve.

…government size tends to have a negative effect on per-capita income growth as the level of income increases. This finding ties in with the Armey curve hypothesis (Armey, 1995), which posits an inverted-U relationship between government size and economic growth. The theoretical argument here is that government size may be characterised by decreasing returns. Another theoretical argument relates to the distortionary nature of taxes, which is minimal for low levels of taxation, but beyond a certain threshold, they grow rapidly and become extremely large.

Quite true.

Sadly, some people mistakenly conclude that if a little bit of government is associated with more prosperity, then a bloated public sector must be even better.

On a related note, Professor Alexander Salter dismisses the assertion (pushed by international bureaucracies) that big government is a pre-condition for prosperity. Here’s some of what he wrote.

Why are Western countries like the United States and Germany so much richer today than other countries around the world? …One explanation for the success of the West is, in a word, liberty. Over the last few hundred years, classical liberal ideas such as the rights of man and the rule of lawput constraints on European governments’ power, which resulted in a strong protection of private property rights. This resulted in meteoric economic growth, which delivered the modern cornucopia of wealth. …Free countries get rich; unfree countries stay poor.

But there’s a competing theory.

…another explanation — state capacity…is the idea that economic development requires strong, centralized states to uphold the rule of law and provide crucial public goods. …The state capacity literature in economics…places heavy emphasis on a single, strong, central legal authority. In this framework, the fractured and decentralized legal authorities in medieval and early modern Europe are now seen as antithetical to economic development.

Salter is skeptical of the second theory.

…it is undeniable that economic growth in the West did not take off until the rise of modern nation-states. … While governance institutions obviously began centralizing at the beginning of the modern era, …that’s insufficient as a causal explanation. …the state capacity literature has a hard time dealing with a very troubling counterexample: the totalitarian states of the 20th century: like the USSR and China. These states had plenty of capacity, as evidenced by their ability to murder millions of their own citizens… Needless to say, these kinds of things aren’t conducive to economic development.

So he concludes that the first theory must be the answer, at least in part.

…whatever is “doing the work” of promoting economic growth, it is upstream of the creation of states. …State capacity may or may not be a valuable steppingstone to an explanation, but it is not itself an explanation that social scientists should accept. …it seems the old hypothesis — that the big ideas of classical liberalism created Western economic growth — is worth another look!

My bottom line, for what it’s worth, is that the classical-liberalism approach is the necessary condition, but that doesn’t automatically make it a sufficient condition.

In a column last year on the emerging micro-state of Liberland, I tried to square the circle. Here’s some of what I wrote after looking at the literature on state capacity.

…the key to prosperity is having a state strong enough and effective enough to provide rule of law, but to somehow constrain that state so that it doesn’t venture into destructive redistribution policies. This is why competition between governments played a key role in the economic development of the western world. When governments have to worry about productive resources escaping, that forces them to focus on things that help an economy (i.e., rule of law) while minimizing the policies that hinder prosperity (i.e., high taxes and spending). …America’s Founding Fathers dealt with the same issues… Their solution was a constitution that explicitly limited the size and scope of the federal government. …that system worked reasonably well until the 1930s.

I find this issue fascinating, but I suspect most people are more concerned about the real-world consequences rather than the theoretical underpinnings.

So I’ll end on a pessimistic note by observing that we normally get bad fiscal policy from Democrats and worse fiscal policy from Republicans (Reagan being the only modern-era exception).

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I’ve received several emails and Facebook messages asking me why I haven’t written about Trump’s recently unveiled budget proposal for the 2019 fiscal year.

My answer is that I don’t want to waste my time.

Let me explain what I mean. I wrote during the 2016 campaign that Trump was a big-government Republican.

But when he got elected and appointed some good people to fiscal positions, I decided to partially suppress my concerns. After all, maybe I was wrong.

So I wrote last year about his budget and praised specific provisions (dealing with government-funded media, food stamps, government-funded art, foreign aid, OECD subsidies, community development block grants, and Medicaid).

And I even outlined the strategy that was necessary to achieve success, at least with regards to so-called discretionary spending. But I included a very important postscript as part of that column.

P.S. I’m not convinced that Trump actually wants smaller government, but I hope I’m wrong. This upcoming battle will be very revealing about where he really stands.

Well, that battle occurred and the result was a disaster for taxpayers. The budget caps were busted again, with the net effect being even worse than the big-spending agreements back in 2013 and 2015.

But it’s not that the Trump Administration lost. They never even tried. The folks I know on Capitol Hill said the White House didn’t lift a finger to urge spending restraint, much less fight to limit budgetary growth. Never.

And the painful experience of the profligate Bush years taught me that most Republican Senators and Representatives will partake in a spending spree when they sense the White House is soft on the issue (the common excuse I get from them is that “the floodgates have opened, I can’t do anything to stop it, so I may as well get a chunk for my voters”).

What’s extra depressing is that Trump’s fiscal incontinence is actually par for the course for Republican presidents, at least in recent decades.

I recently crunched the numbers for every president since the 1960s who served at least one full term, and I measured the average annual growth of government spending (adjusted for inflation) for the years they held power.

Moreover, I sliced and diced the numbers in several ways. I wanted readers to understand what happened to total spending (the combined growth of defense and domestic outlays), as well as what happened to domestic spending.

And the bottom line is that Republicans generally do worse than Democrats. Not just on total spending. They’re even more profligate on domestic spending!

The only exceptions to this pattern are Reagan (the only good Republican) and LBJ (the only really awful Democrat).

By the way, I’m not claiming that Clinton, Carter, or Obama were fiscal conservatives or that they believed in small government. I’m simply pointing out government grew slower when they were in office, at least compared to the growth of government under Nixon, Bush I, or Bush 2. The numbers don’t lie.

I suspect these counter-intuitive results are because of two factors.

  1. Presidents try to deflect and/or preempt criticism, so that leads Democrats to be cautious about spending money (they don’t want to be called “big spenders”) and it leads Republicans to squander a lot of cash (they don’t want to be called “heartless” or “mean”).
  2. The party controlling the White House often loses seats in mid-term elections and that subsequently limits the ability of presidents to push an agenda that is opposed by the other party, or even leads them to acquiesce to initiatives pushed by the other party.

Needless to say, this is rather depressing for those of us who want to limit the size and scope of government. It’s quite likely that Trump will spend the next three years or seven years instigating and/or accepting bigger government. And then we’ll probably have a Democrat in the White House who will – at least for the first two years – push for even more government.

But I get more upset when Republicans are big spenders because they should know better. Most Democrats actually believe it’s a good idea to make America more like Greece. Republicans, by contrast, make us more like Greece because they put short-term politics ahead of the national interest.

Let’s close this depressing column with some anti-GOP humor, starting with a look at how libertarians see Republicans (h/t: Reddit‘s libertarian page).

Reminds me, for obvious reasons, of my “Charlie Brown Award.”

Next we have a gathering of Republicans who actually believe in smaller government (h/t: Reddit‘s libertarian page).

I guess you would say “like father, like son.”

Last but not least, here’s some very clever satire from Babylon Bee.

During a budgetary discussion Friday, Republican lawmakers announced a plan to pretend to be fiscally conservative again if a Democrat takes office again in 2020 or 2024. The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party. “The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,” Speaker Paul Ryan said in an address to the House of Representatives Friday. “For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.” At publishing time, Republicans further announced they would pretend to oppose giving Planned Parenthood a half billion dollars year after year once they need conservative voters’ support to regain their offices.

Good dig about Planned Parenthood, needless to say.

But as we laugh about these jokes, just remember that the recklessness in Washington is going to come back to bite us at some point. No, we won’t have a Greek-style fiscal crisis in the next five years. Or even in the next 10 or 20 years.

But more spending and more dependency is not a good recipe for long-run economic health. Republicans understand that and I despise them for putting politics first and country second.

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One of the great insights of “public choice” is that politicians engage in self-serving behavior just like everyone else.

But there’s a profound difference between them and us. In the private economy, we can only make ourselves better off by providing value to others. In government, by contrast, politicians oftentimes make themselves better off by providing unearned benefits to various interest groups.

This elementary insight is a good starting point for those who want to understand how Washington (mal)functions.

And these behavioral insights don’t change when you cross national borders, which is why I periodically share examples of bizarre boondoggles as part of my series on “Great Moments in Foreign Government”. Here are some examples of prior editions.

Today, we have a special version of this series from the British Isles.

We’ll start with a story, from the U.K.-based Sunday Times, about a voluntary tax scheme in a rich part of London.

Westminster city council said it would be writing to 15,000 of its wealthiest homeowners asking them to make a voluntary donation on top of their council tax. The initiative comes amid warnings that a crisis in local government funding is likely to drive five councils into insolvency within the next 12 months, with 10 running out of money within two years. …The begging letters scheme, dubbed the “Westminster community contribution”, will see letters sent to all 15,000 band H properties, worth about £1m and above. Nickie Aiken, leader of Westminster council, said she had decided to tap the wealthy for donations because “they have asked me, ‘Why can’t we pay more council tax?’ We are giving people the option. It is an opportunity to invest in their neighbourhood.” …A total of 904 people replied.

My immediate reaction is that there are 904 nitwits in Westminster.

But, to be fair, it doesn’t say they responded by sending extra money to the local council. Maybe they scrawled obscenities on the notice and returned it, which would have been my preferred response.

But I’m guessing many of them did cough up some cash, which makes them more foolish than the taxpayers of Norway. And even more foolish than hypocritical leftists in the United States.

It’s also frustrating that there’s no data in the story on why local councils are feeling a budget pinch. I’m guessing that they’re in trouble because spending has climbed much faster than inflation (similar to what happened where I live in Fairfax County, Virginia). So why reward that overspending with additional payments?

Now let’s head across the Irish Sea.

The Irish Times has a story about how a program that supposedly was designed to help homeless people actually is lining the pockets of well-to-do property owners.

The Government’s homeless family hub solution is not only a short-term fix for a long-term crisis, it’s a shocking deal for taxpayers that benefits private operators. …doesn’t “hub” have a cosy ring to it? There will be a total of 18 family accommodation hubs in Dublin, nine of which include hotels and B&Bs already in use being “adapted”. …Let’s take the former Mater Dei site as a prime example. Dublin City Council (DCC) earmarked €4.5 million to refurbish the former college complex to house 50 families… Sources say the project is likely to substantially overrun due to “many extras”… The problem is, after ploughing millions into a magnificent revamp, the council must hand the property back to the archdiocese in less than three years. …This is mirrored in every one of the family hubs, the longest lease being just five years. It starts to look like an incredible deal for the private owners. They get back a terrifically refurbished, furnished and equipped building, paid for by taxpayers, that can be rented out for profit. Everything goes back to the owner… On top of the deal of a lifetime, DCC is paying rent on the site, a figure it described as “nominal” but not nominal enough to make public.

Cronies getting rich(er) thanks to programs that supposedly were designed to help the poor? As Inspector Renault said in Casablanca, “I’m shocked, shocked”!

Probably as shocked as he was to learn that Obamacare cost estimates were wrong and that childcare subsidies led to higher costs in the U.K.

Sadly, insiders always figure out how to line their pockets as government gets bigger. It’s a feature, not a bug.

Last but not least, let’s travel to Scotland.

In the U.K.-based Times, we learn that the government is so incompetent that it has a hard time ripping off European taxpayers for farm subsidies.

Scottish ministers have appealed to Europe for help in heading off a looming crisis in farm subsidy payments for the second year running. Discussions have taken place with the European Commission to set up “contingency plans” in case Scottish farmers once again missed out on their payouts. An extension to the end-of-the-month deadline for processing payments is vital if the Scottish government is to avoid being hit with millions of pounds in fines. …The first minister is likely to be asked what her government is doing to make sure farmers get their payments on time. Scottish ministers came in for extensive criticism last year after an IT failure delayed European agriculture subsidy payments to thousands of farmers.

What makes this story extra depressing is that the supposed Conservative opposition doesn’t question the wisdom of handouts.

…the Scottish government had asked for a deadline extension earlier this week, prompting anger from opposition politicians. Ruth Davidson, the Scottish Conservative leader,…added: “It’s a disgrace that so many farmers are still waiting for payments, and it looks like, for the second year running, the SNP is going to have to go cap-in-hand to Europe and ask for special treatment.”

And it goes without saying that the welfare recipients…oops, I mean farmers…are anxious to know when their handouts will arrive.

Scott Walker, the chief executive of the National Farmers’ Union in Scotland, said: “Everyone who is due a payment simply wants to know when it will arrive and that is a reasonable demand.”


One of the reasons I was sympathetic to Scottish independence is that the entitlement mindset in the country may have been disrupted if they lost subsidies from the central government in London. Redistribution isn’t as fun when you’re taking money from your own pockets.

However, that wouldn’t have put an end to handouts from the statists in Brussels, assuming that Scotland would have been part of the European Union. So I’ll never be without things to write about. That’s good for me, bad for Europe.

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