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Posts Tagged ‘Higher Taxes’

Can you identify the nation with the world’s 7th-friendliest tax system according to the Index of Economic Freedom?

Don’t know the answer? Well, here’s a hint. If you don’t count Middle Eastern nations that finance their governments with oil money, this is the nation that is in second place, behind only the Bahamas.

Still don’t know?

Well, don’t be embarrassed because most people have never heard of the place. This tax paradise is an obscure nation in the South Pacific called Vanuatu. Comprised of dozens of islands, Vanuatu is one of the few places in the world that doesn’t have an income tax. No personal income tax (I’m jealous). No corporate income tax (I’m jealous). No capital gains tax (I’m jealous). No death tax (I’m jealous).

Nada. Zero. Zilch.

But the absence of an income tax bothers some outsiders. Nations such as Australia and international bureaucracies such as the World Bank are pressuring politicians in Vanuatu to adopt an income tax. And they’re playing dirty, trying to bribe and extort lawmakers with promises to provide more aid or threats to withdraw existing aid.

Faced with this threat, members of the Vanuatu business community asked me if I would make a big sacrifice and come to their nation so I could explain to politicians and the public why an income tax would be a terrible mistake. Being a noble person and nice guy, I said yes, even though it means I’m having to miss some of the wonderful December weather in Washington, DC.

This is only my second day in Vanuatu, but I’ve already given one speech, done some local media, and met with a bunch of people. Combined with the research I did before arriving, there are two lessons that we can learn from what’s happening.

First, the absence of an income tax does not necessarily mean a country a role model for free markets. If you look at the latest edition of the Index of Economic Freedom, Vanuatu is ranked #89 out of 178 nations, barely qualifying for the “Moderately Free” club of countries. To give you an idea what this means, Vanuatu ranks below Italy and France.

The moral of the story is that it’s good to have a low tax burden and no income tax, but that’s just one piece of the puzzle. Vanuatu gets very low scores in other areas, particularly regulatory efficiency and rule of law.

This is one of the reasons why Vanuatu is still a poor country.

The Bahamas has no income tax, but it also gets decent scores in other areas, so it ranks #31 out of 178 nations. Unsurprisingly, the people of the Bahamas are much more prosperous than their counterparts in Vanuatu.

And if you look at jurisdictions such as Bermuda, Monaco, and the Cayman Islands, they don’t get ranked by the Index of Economic Freedom, but they presumably would be in the top 10 because of their systemic commitment to free markets. And all of those jurisdictions are among the wealthiest places on the planet.

So the bottom line is that Vanuatu has only one good policy, and that’s the absence of an income tax. I’m telling them they need to engage in further economic liberalization. Other outside forces, however, are telling policy makers to get rid of their only attractive economic policy. Go figure.

Second, the reason why the income tax is a threat is that Vanuatu politicians have increased the burden of government spending. There are several source of data, including the IMF’s massive database, and they all show that government spending since 2000 has grown by an average of about 6 percent annually.

In other words, they’ve been violating my Golden Rule. And when that happens, it just a matter of time before there’s pressure for big tax increases.

So in my big public speech last night, I obviously explained why an income tax would be a horrid mistake for Vanuatu, but I also explained that bad tax policy will be inevitable unless there is an effective policy to control the growth of government. And that’s why the last half of my speech was about the merits of a spending cap.

I cited the positive results in nations that have enjoyed multi-year periods of spending restraint, and I specifically highlighted the very effective spending caps in Hong Kong and Switzerland. I even pointed out that international bureaucracies such as the OECD and IMF have admitted that spending caps are the only effective fiscal rule.

The challenge, of course, is that politicians very rarely are willing to tie their own hands. From their perspective, a spending cap is a threat to their ability to play Santa Claus. They’d much prefer, based on “public choice” incentives, to impose a new form of taxation.

But this doesn’t mean the fight against the income tax is hopeless. As I’ve explained when writing about American politicians, lawmakers are often tempted to do the wrong thing. They may frequently surrender to temptation and choose to do the wrong thing. But they’re also capable of doing the right thing.

My job is to be the angel on one shoulder, offering good advice to counter the malignant pressure being imposed by the devil (especially the Australian Tax Office) on the other shoulder.

The United States made a very big mistake back in 1913. Vanuatu should learn from our error.

P.S. This isn’t the first time I’ve waded into a battle over whether a zero-income-tax jurisdiction should impose an income tax. A few years ago, I helped thwart a scheme to impose an income tax in the Cayman Islands. I hope to be similarly successful in helping the people of Vanuatu.

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I’m a big fan of the Baltic nations of Estonia, Latvia, and Lithuania.

These three countries emerged from the collapse of the Soviet Empire and they have taken advantage of their independence to become successful market-driven economies.

One key to their relative success is tax policy. All three nations have flat taxes. Estonia’s system is so good (particularly its approach to business taxation) that the Tax Foundation ranks it as the best in the OECD.

And the Baltic nations all deserve great praise for cutting the burden of government spending in response to the global financial crisis/great recession (an approach that produced much better results than the Keynesian policies and/or tax hikes that were imposed in many other countries).

But good policy in the past is no guarantee of good policy in the future, so it is with great dismay that I share some very worrisome news from two of the three Baltic countries.

First, we have a grim update from Estonia, which may be my favorite Baltic nation if for no other reason than the humiliation it caused for Paul Krugman. But now Estonia may cause sadness for me. The coalition government in Estonia has broken down and two of the political parties that want to lead a new government are hostile to the flat tax.

Estonia’s government collapsed Wednesday after Prime Minister Taavi Roivas lost a confidence vote in Parliament, following months of Cabinet squabbling mainly over economic policies. …Conflicting views over taxation and improving the state of Estonia’s economy, which the two junior coalition partners claim is stagnant, is the main cause for the breakup. …The core of those policies is a flat 20 percent tax on income. The Social Democrats say the wide income gaps separating Estonia’s different social groups would best be narrowed by introducing Nordic-style progressive taxation. The two parties said Wednesday that they will immediately start talks on forming a coalition with the Center Party, Estonia’s second-largest party, which is favored by the country’s sizable ethnic-Russian majority and supports a progressive income tax.

And Lithuanians just held an election and the outcome does not bode well for that nation’s flat tax.

After the weekend run-off vote, which followed a first round on October 9, the centrist Lithuanian Peasants and Green Union party LGPU) ended up with 54 seats in the 141-member parliament. …The conservative Homeland Union, which had been tipped to win, scored a distant second with 31 seats, while the governing Social Democrats were, as expected, relegated to the opposition, with just 17 seats. …The LPGU wants to change a controversial new labour code that makes it easier to hire and fire employees, impose a state monopoly on alcohol sales, cut bureaucracy, and above all boost economic growth to halt mass emigration. …Promises by Social Democratic Prime Minister Butkevicius of a further hike in the minimum wage and public sector salaries fell flat with voters.

The Social Democrats sound like they had some bad idea, but the new LGPU government has a more extreme agenda. It already has proposed to create a special 4-percentage point surtax on taxpayers earning more than €12,000 annually (the government also wants to expand double taxation, which also is contrary to the tax-income-only-once principle of a pure flat tax).

So the bad news is that the flat tax could soon disappear in Estonia and Lithuania.

But the good news, based on my discussions with people in these two nations, is that the battle isn’t lost. At least not yet.

In both cases, policy can’t be changed unless all parties in the coalition government agree. Fortunately, they haven’t reached that point.

And hopefully that point will never be reached if Estonia and Lithuania want long-run success.

All of the Baltic nations get reasonably good scores from Economic Freedom of the World. Ditching the flat tax will cause their scores to decline.

Given that fiscal policy is only 20 percent of a nation’s grade, adopting some bad tax policy may not seem like the end of the world.

But the flat tax isn’t just good policy. It also has symbolic value, telling both domestic entrepreneurs and global investors that a country has a commitment to a system that won’t impose extra punishment just because a person contributes more to national economic output.

By the way, the LPGU Party is very correct to worry about emigration. The Baltic nations (like most countries in Eastern Europe) face a very large demographic problem. And every time a young person leaves for better opportunities elsewhere (even if that better opportunity is a big welfare check), that makes the long-run outlook even more challenging.

But imposing a more punitive tax system is exactly the opposite of what should happen if the goal is faster growth so that people don’t leave the nation.

Let’s close with a famous quote from John Ramsay McCulloch, a Scottish economist from the 1800s.

To be sure, progressive taxation didn’t lead to total catastrophe, so McCulloch’s warning may seem overwrought by today’s standards.

But the so-called progressive income tax did lead to the modern welfare state. And the modern welfare state, when combined with demographic change, is threatening immense economic and societal damage in many nations.

So what he wrote in 1863 may turn out to be very prescient for historians in 2063 who wonder why the western world collapsed.

P.S. If Estonia and Lithuania move in the wrong direction, Latvia could be a big winner. That nation already has received some positive attention for being fiscally responsible, and it also has withstood pressure from the IMF to impose bad tax policy. So Latvia is well positioned to reap the benefits if Estonia and Lithuania shoot themselves in the foot.

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I must be perversely masochistic because I have the strange habit of reading reports issued by international bureaucracies such as the International Monetary Fund, World Bank, United Nations, and Organization for Economic Cooperation and Development.

But one tiny silver lining to this dark cloud is that it’s given me an opportunity to notice how these groups have settled on a common strategy of urging higher taxes for the ostensible purpose of promoting growth and development.

Seriously, this is their argument, though they always rely on euphemisms when asserting that politicians should get more money to spend.

  • The OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to successfully meet the challenges of development and achieve higher living standards for their people.”
  • The Paris-based bureaucrats of the OECD also asserted that “now is the time to consider reforms that generate long-term, stable resources for governments to finance development.”
  • The IMF is banging on this drum as well, with news reports quoting the organization’s top bureaucrat stating that “…economies need to strengthen their fiscal frameworks…by boosting…sources of revenues.” while also reporting that “The IMF chief said taxation allows governments to mobilize their revenues.”
  • And the UN, which has “…called for a tax on billionaires to help raise more than $400 billion a year” routinely categorizes such money grabs as “financing for development.”

As you can see, these bureaucracies are singing from the same hymnal, but it’s a new version.

In the past, the left agitated for higher taxes simply in hopes for having more redistribution.

And they’ve urged higher taxes because of spite and hostility against those with high incomes.

Some folks on the left also have supported higher taxes on the theory that the economy’s performance is boosted when deficits are smaller.

But now, they are advocating higher taxes (oops, excuse me, I mean they are urging “resource mobilization” to generate “stable resources” so there can be “financing for development” in order to “strengthen fiscal frameworks”) on the theory that bigger government is the way to get more growth.

You probably won’t be surprised to learn, however, that these reports from international bureaucracies never provide any evidence for this novel hypothesis. None. Zero. Zilch. Nada. The null set.

They simply assert that governments will be able to make presumably wonderful growth-generating “investments” if politicians can squeeze more money from the private sector.

And I strongly suspect that this absence of evidence is deliberate. Simply stated, international bureaucracies are willing to produce shoddy research (just look at what the IMF and OECD wrote about the relationship between growth and inequality), but there’s a limit to how far data can be tortured and manipulated.

Especially when there’s so much evidence from real scholars that economic performance is weakened when government gets bigger.

Not to mention that most sentient beings can look around the world and look at the moribund economies of nations with large governments (such as France, Italy, and Greece) and compare them with the better performance of places with smaller government (such as Hong Kong, Switzerland, and Singapore).

But if you read the aforementioned reports from the international bureaucracies, you’ll notice that some of them focus on getting more growth in poor nations.

Perhaps, some statists might argue, government is big enough in Europe, but not big enough in poorer regions such as sub-Saharan Africa.

So let’s look at the numbers. Is it true that governments in the developing world don’t have enough money to provide core public goods?

The answer is no.

But before sharing those numbers, let’s look at some historical data. A few years ago, I shared some research demonstrating that countries in North America and Western Europe became rich in the 1800s and early 1900s when the burden of government spending was very modest.

One would logically conclude from this data that today’s poor nations should copy that approach.

Yet here’s the data from the International Monetary Fund on government expenditures in various poor regions of the world. As you can see, the burden of government spending in these areas is two or three times larger than it was in America and other nations that when they made the move from agricultural poverty to middle class prosperity.

The bottom line is that small government and free markets is the recipe for growth and prosperity in all nations.

Just don’t expect international bureaucracies to share that recipe since one of the obvious conclusions is that we therefore don’t need parasitical bodies like the IMF, OECD, World Bank, and UN.

P.S. Unsurprisingly, Hillary Clinton also has adopted the mantra of higher-taxes → bigger government → more growth.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, but I’m not brimming with optimism.

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

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

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

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

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

And I also opined on the issue in this interview.

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

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

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If I had to summarize my views on fiscal policy in just two sentences, here’s what I would say.

  1. Government spending undermines growth by diverting labor and capital from more productive uses to less productive uses.
  2. Tax rates on productive economic behaviors such as work, saving, investment, and entrepreneurship should be as low as possible.

So you can imagine that I’m not overly enthused about Hillary Clinton’s embrace of class-warfare tax policy to finance an ever-growing burden of government spending.

Here’s a story that’s giving me heartburn. The Washington Examiner reports that Hillary is “going where the money is.”

Hillary Clinton promised Tuesday that she would pay for her ambitious White House agenda by hitting up the wealthy. “I’ll tell you how we’re going to pay for it,” she said Tuesday in Pennsylvania, referring specifically to her economic agenda. “We’re going where the money is. We are going after the super wealthy, we are going after corporations, we are going after Wall Street so they pay their fair share.”

So what does it mean for various groups to “pay their fair share”?

Well, since even the IRS has admitted that upper-income taxpayers finance a hugely disproportionate share of the federal government, logic tells us that these supposedly evil rich people should get a tax cut.

But that’s not what Hillary means. She wants voters to adopt and us-vs-them mentality, so she demonizes successful people and implies that their wealth is somehow illegitimate.

In part, she is perpetuating the traditional leftist myth that the economy is a fixed pie and that the rest of us have less because someone like Bill Gates has more.

But I also think she wants to imply that upper-income people somehow don’t deserve their money. Maybe they are a bunch of Paris Hilton types with trust funds, living indolent lives while the rest of us have to work.

That’s never been a compelling argument to me. If Paris Hilton’s family earned money honestly (and already paid tax on the money when it was first earned), it’s their right to give it to their children without all sorts of punitive extra layers of taxation.

But this stereotype isn’t even accurate in the first place. James Pethokoukis of the American Enterprise Institute shows that people like the late Steve Jobs are more the norm. In other words, rich people are rich because they are innovating and creating, building new businesses and new products that make the rest of our lives better.

Since innovation, risk-taking, investment, entrepreneurship, and hard work are the keys to long-run growth, it certainly seems that the tax code shouldn’t be punishing those things.

Yet that’s what Hillary has in mind when she demagogues about the “super wealthy.”

Interestingly, another New York Democrat seems to understand the negative relationship between taxes and good outcomes, at least on a selective basis. Larry O’Connor explains.

Without the teeniest sense of irony, Sen. Chuck Schumer (D-NY) has proposed that America’s Olympic medal winners should not have to pay taxes on the cash prizes they are awarded with their medals. Schumer’s reasoning behind lifting the tax? Because “hard work” and excellence shouldn’t be punished.

The problem, of course, is that Senator Schumer routinely supports higher taxes.

Indeed, the only tax hike he doesn’t favor, to my knowledge, is the Trump-Clinton plan to hike the capital gains tax on “carried interest.” But Schumer’s only good on that issue because of the money he gets from the private-equity folks on Wall Street, not because he actually understands or favors good tax policy.

But Schumer’s make-believe support for lower taxes on Olympic medal winners is good news, if for no other reasons than it gave Mark Perry an excuse to produce another one of his famous Venn diagrams.

Let’s close by contemplating Hillary’s statement that she wants to go “where the money is.”

That statement rang a bell. Someone else said almost the exact same thing.

And then I remembered. It was an infamous bank robber named Willie Sutton, who is widely reported to have said he robbed banks because “That’s where the money is.”

Needless to say, I don’t want to imply that there’s some moral equivalence between Hillary Clinton and Willie Sutton. Perish the thought!

After all, I’m sure Willie Sutton never expected gratitude from his victims.

P.S. In my role as the Don Quixote of fiscal policy, I have helpfully shared evidence with Mrs. Clinton about the consequences of higher tax burdens in both Europe and various American states.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I think this hits the nail on the head.

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

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

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

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

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

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

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

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

They close with a very useful suggestion.

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

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

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

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

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

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