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Posts Tagged ‘Local government’

I wrote just yesterday that it’s tough to be a libertarian because “public choice” means never-ending pressure for bigger government.

But the good part of working in public policy as a libertarian is that I never lack for topics. Simply stated, governments do so many foolish things (not just in Washington, but also overseas, as well as state governments and local governments) that I have a target-rich environment for analysis and commentary.

But sometimes there’s a personal motivation. I’m a resident of Fairfax County in Virginia, and my profligate local government levies a very onerous property tax on my house.

And what do I get in exchange? The lion’s share of the county budget goes to government schools, but that doesn’t benefit me since I found those institutions inadequate and put my kids in private schools.

The other major line item in the budget is police and fire protection. I’ve been fortunate to never need those services, but I recognize that they have value. But this still leaves the question of whether I’m overpaying or underpaying for the theoretical benefits I’m receiving.

If this story from the Washington Post is any indication, it’s the former rather than the latter.

One Fairfax County firefighter tripled his salary to more than $270,000 with overtime pay. A county police officer took home $175,000… A fire captain pocketed $163,000 in additional compensation, more than many of his colleagues make in a year. The eye-popping figures have prompted Fairfax County supervisors to review overtime pay and other compensation for employees as the county faces a budget squeeze. …more than 1,700 county employees who are not department heads earned more than $100,000 in 2016, according to county figures.

Needless to say, the unions representing these bureaucrats pushed back.

Public safety unions and officials strongly pushed back against the idea that overtime pay might be excessive, saying that some employees must work extra hours because of staffing shortages… Some were also rankled because many public safety employees have endured pay freezes in recent years and earn far less than many residents in one of the nation’s most expensive counties. “They are complaining about guys who are working overtime trying to make the median income for the jurisdiction,” said Joseph Woloszyn, president of the Fairfax County chapter of the Police Benevolent Association.

It’s certainly true that Fairfax is a rich county, driven in large part by the overpaid federal workforce, along with the various contractors, lobbyists, cronyists, and other insiders who have their snouts comfortably buried in the federal trough.

Given how all this unearned wealth distorts the local labor market, I have no problem with the idea that cops and firefighters presumably need to be paid more than the national average. After all, employers should pay what’s necessary to attract a sufficient number of qualified individuals to fill appropriate jobs.

This doesn’t mean, however, that 1,700 bureaucrats should be getting six-figure salaries. Or that police and fire departments are the right size.

Though I admit that this excerpt makes me wonder.

…the Fairfax County fire chief…said his department has been dealing with a chronic shortage of firefighters. Currently, he said, the department has 56 vacancies, forcing some to work shifts as long as 48 hours or be recalled to work each day.

In any event, I should count my lucky stars that I don’t live in Orange County, California, where the average firefighter is obscenely overpaid.

The bottom line is that firefighters and cops do real jobs and those jobs involve some danger. But that doesn’t mean they should be over-compensated.

P.S. And if you want good nationwide data on firefighters, here are some jaw-dropping numbers.

…vehicle fires declined 64 percent from 1980 to 2013. Building fires fell 54 percent during that time. When they break out, sprinkler systems almost always extinguish the flames before firefighters can turn on a hose. …as the number of fires has dropped, the ranks of firefighters have continued to grow — significantly. There are half as many fires as there were 30 years ago, but about 50 percent more people are paid to fight them. …Firefighters responded to 487,500 structure fires across the United States in 2013, which means each of the nation’s 30,000 fire departments saw just one every 22 days, on average. And yet, taxpayers are paying more people to staff these departments 24-7. As a result, the amount of money shelled out for local fire services more than doubled from 1987 to 2011, to $44.8 billion, accounting for inflation.

For what it’s worth, I very much suspect that the numbers in Fairfax County would match the nationwide data.

So it’s likely that firefighters (and cops) in Fairfax are overpaid. But it’s even more likely that there are too many of them given the possible dangers.

P.P.S. If you think libertarians are doctrinaire and impractical about firefighting, you’ll like this picture.

P.P.P.S. If you think firefighters are overpaid, you’ll like this video.

P.P.P.P.S. I don’t want to neglect police officers, so here’s some humor about a compassionate Pennsylvania cop and a Texas police exam. And here’s what to do if you need cops in a hurry.

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What word best describes the actions of government? Would it be greed? How about thuggery? Or cronyism?

Writing for Reason, Eric Boehm has a story showing that “all of the above” may be the right answer.

At first it seems like a story about government greed.

When Mats Järlström’s wife got snagged by one of Oregon’s red light cameras in 2013, he challenged the ticket by questioning the timing of the yellow lights at intersections where cameras had been installed. Since then, his research into red light cameras has earned him attention in local and national media—in 2014, he presented his evidence on an episode of “60 Minutes”…on how too-short yellow lights were making money for the state by putting the public’s safety at risk.

Three cheers for Mr. Järlström. Just like Jay Beeber, he’s fighting against local governments that put lives at risk by using red-light cameras as a revenue-raising scam.

But then it became a story about government thuggery.

…the Oregon State Board of Examiners for Engineering and Land Surveying…threatened him. Citing state laws that make it illegal to practice engineering without a license, the board told Järlström that even calling himself an “electronics engineer” and the use of the phrase “I am an engineer” in his letter were enough to “create violations.” Apparently the threats weren’t enough, because the board follow-up in January of this year by officially fining Järlström $500 for the supposed crime of “practicing engineering without being registered.”

Gasp, imagine the horror of having unregistered engineers roaming the state! Though one imagines that the government’s real goal is to punish Järlström for threatening its red-light revenue racket.

But if you continue reading the story, it’s also about cronyism. The Board apparently wants to stifle competition, even if it means trying to prevent people from making true statements.

Järlström is…arguing that it’s unconstitutional to prevent someone from doing math without the government’s permission. …The notion that it’s somehow illegal for Järlström to call himself an engineer is absurd. He has a degree in electrical engineering from Sweden… it’s not the first time the Oregon State Board of Examiners for Engineering and Land Surveying has been overly aggressive…the state board investigated Portland City Commissioner Dan Saltzman in 2014 for publishing a campaign pamphlet that mentioned Saltzman’s background as an “environmental engineer.” Saltzman has a bachelor’s degree in environmental and civil engineering from Cornell University, a master’s degree from MIT’s School of Civil Engineering, and is a membership of the American Society of Civil Engineers

In other words, this is yet another example of how politicians and special interests use “occupational licensing” as a scam.

The politicians get to impose “fees” in exchange for letting people practice a profession.

And the interest groups get to impose barriers that limit competition.

A win-win situation, at least if you’re not a taxpayer or consumer.

Or a poor person who wants to get a job.

Some of the examples of occupational licensing would be funny if it wasn’t for the fact that people are being denied the right to engage in voluntary exchange.

Such as barriers against people who want to help deaf people communicate.

If you want to help a deaf person communicate in Wisconsin, you’ll have to get permission from the state government first. Wisconsin is one of a handful of states to require a license for sign language interpreters, and the state also issues licenses for interior designers, bartenders, and dieticians despite no clear evidence that any of those professions constitute a risk to public health in other states without similar licensing rules. …It’s hard to imagine any health and safety benefits to mandatory licensing for sign language interpreters, which is one of eight licenses highlighted in a new report from Wisconsin Institute of Law and Liberty, a conservative group. …Since 1996, the number of licensed professions in the Badger State has grown from 90 to 166—an increase of 84 percent, according to the report. Licensing cost Wisconsin more than 30,000 jobs over the last 20 years and adds an additional $1.9 billion annually in consumer costs.

Or restricting the economic liberty of dog walkers.

…according to the Colorado government, people who watch pets for money are breaking the law unless if they can get licensed as a commercial kennel—a requirement that is costly and unrealistic for people working out of their homes, often as a side job. This is not simply a case of an outdated law failing to accommodate modern technology. There are more nefarious motives—those of special interests who want to protect their profits by keeping out new competition. …it is time to add “Big Kennel” to the list of special interests that support ridiculous occupational licensing schemes.

Or trying to deny rights, as in the case of horse masseuses.

…an Arizona state licensing board finally backed down from an expensive, unnecessary mandate that nearly forced three women to give up their careers as animal masseuses. …the Arizona State Veterinary Medical Examining Board said it would no longer require animal massage practitioners, who provide therapeutic services to dogs, horses, and other animals, to obtain a veterinary license. Obtaining that license requires years of post-graduate schooling, which can cost as much as $250,000. “All I want is the freedom to do my job, and I have that now,” Celeste Kelly, one of three plaintiffs in the lawsuit, said in a statement. …the state board tried to driver her out of business by threatening her with fines and jail time if she didn’t get a veterinary license.

The good news is that there’s a growing campaign to get rid of these disgusting restrictions of voluntary exchange.

The acting head of the Federal Trade Commission is getting involved. On the right side of the issue!

Maureen K. Ohlhausen, the new acting chair of the Federal Trade Commission, thinks it’s high time that the FTC start giving more than lip service to its traditional mandate of fostering economic liberty. And the first item in her crosshairs is the burgeoning growth in occupational licenses. Over the past several decades, licensing requirements have multiplied like rabbits, she noted. Only 5 percent of the workforce needed a license in 1950, but somewhere between one-quarter and one-third of all American workers need one today. …depending on where you live, you might need a license to be an auctioneer, interior designer, makeup artist, hair braider, potato shipper, massage therapist or manicurist. “The health and safety arguments about why these occupations need to be licensed range from dubious to ridiculous,” Ohlhausen said. “I challenge anyone to explain why the state has a legitimate interest in protecting the public from rogue interior designers carpet-bombing living rooms with ugly throw pillows.”

Hooray for Ms. Ohlhausen. She’s directing the FTC to do something productive, which is a nice change of pace for a bureaucracy that has been infamous in past years for absurd enforcement of counterproductive antitrust laws.

A column in the Wall Street Journal highlights Mississippi’s reforms.

State lawmakers in Mississippi are taking the need for reform to heart. Two weeks ago Gov. Phil Bryant signed into law H.B. 1425, which will significantly rein in licensing boards. …H.B. 1425 explicitly endorses competition and says that the state’s policy is to “use the least restrictive regulation necessary to protect consumers from present, significant and substantiated harms.” Under the law, the governor, the secretary of state, and the attorney general must review and approve all new regulations from professional licensing boards to ensure compliance with the new legal standard. This should be a model for other states. …Mississippi’s law…covers all licensing boards controlled by industry participants, spells out a pro-competition test, and requires new rules to be approved by elected officials accountable to voters. Mississippi has smartly targeted the core problem: Anticompetitive regulations harm the economy, slow job growth, and raise consumer prices.

Here’s some of the national data in the WSJ column.

Keep in mind, as you read these numbers, that poor people disproportionately suffer as a result of these regulatory barriers to work.

In the 1950s only about 1 in 20 American workers needed a license, but now roughly 1 in 4 do. This puts a real burden on the economy. A 2012 study by the Institute for Justice examined 102 low-income and middle-income occupations. The average license cost $209 and required nine months of training and one state exam. …Even the Obama administration saw the problem. A 2015 report from the White House said that licensing can “reduce employment opportunities and lower wages for excluded workers.” In 2011 three academic economists estimated that these barriers have result in 2.85 million fewer jobs nationwide, while costing consumers $203 billion a year thanks to decreased competition.

Professor Tyler Cowen explains in Time that licensing laws explain in part the worrisome decline in mobility in America.

Some of the decline in labor mobility may stem from…the growth of occupational licensure. While once only doctors and medical professionals required licenses to practice, now it is barbers, interior decorators, electricians, and yoga trainers. More and more of these licensing restrictions are added on, but few are ever taken away, in part because the already licensed established professionals lobby for the continuation of the restrictions. In such a world, it is harder to move into a new state and, without preparation and a good deal of investment, set up a new business in a licensed area.

Last but not least, we have a candidate for the Bureaucrat Hall of Fame. Elizabeth Nolan Brown explains for Reason that a paper pusher in Florida managed to use occupational licensing fees as a tool of self-enrichment.

In Palm Beach County, Florida, all topless dancers are required to register with county officials and obtain an Adult Entertainment Work Identification Card (AEIC), at the cost of $75 per year. The regulation is ridiculous for a lot of reasons, but at least applicants—many of whom are paid exclusively in cash—were able to pay the government-ID fee with cash, too, making things a little more convenient and a little less privacy-invading. But not anymore, thanks to the alleged actions of one sticky-fingered government employee. …Pedemy “diverted” at least $28,875 (and possibly an additional $3,305) from county coffers between October 2013 and mid-November 2016. The money came from both adult-entertainer fees—approximately 70 percent of which were paid in cash—and court-ordered payments intended for a crime Victims Services Fund.

At the end of the article, Ms. Brown looks at the bigger issue and asks what possible public purpose is being served by stripper licensing.

Demanding strippers be licensed in the first place is a problem… There’s no legitimate public-safety or consumer-protection element to the requirement—strip club patrons don’t care if the woman wriggling on their laps is properly permitted. Government officials have portrayed the measure as a means to stop human trafficking and the exploitation of minors, but that’s ludicrous; anyone willing to force someone else into sex or labor and circumvent much more serious rules with regard to age limits isn’t going to suddenly take pause over an occupational licensing rule they’ll have to skirt. The only ones truly affected are sex workers and adult-business owners. Not only does the regulation drive up their costs…, it gives Palm Beach regulators a database of anyone who’s ever taken their clothes off for money locally—leaving these records open to FOIA requests or hackers—and gives cops a pretense to check clubs at random to make sure there aren’t any unlicensed dancers. Those found to be dancing without a license can be arrested on a misdemeanor criminal charge.

Though I guess we shouldn’t be too surprised. If you peruse “Sex and Government,” you’ll find that politicians and bureaucrats like to stick their noses in all sorts of inappropriate places. Including the vital state interest of whether topless women should be allowed to cut hair without a license!

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If I had to pick my least-favorite tax loophole, the economist part of my brain would select the healthcare exclusion. After all, that special preference creates a destructive incentive for over-insurance and contributes (along with Medicare, Medicaid, Obamacare, etc) to the third-party payer crisis that is crippling America’s healthcare system.

But if I based my answer on the more visceral, instinctive portion of my brain, I would select the deduction for state and local taxes. As I’ve previously noted, that odious tax break enables higher taxes at the state and local level. Simply stated, greedy politicians in a state like California can boost tax rates and soothe anxious state taxpayers by telling them that they can use their higher payments to Sacramento as a deduction to reduce their payments to Washington.

What’s ironic about this loophole is that it’s basically a write-off for the rich. Only 30 percent of all taxpayers utilize the deduction for state and local taxes. But they’re not evenly distributed by income. Here’s a sobering table from a report by the Tax Foundation.

The beneficiaries also aren’t evenly distributed by geography.

Here’s a map from the Tax Foundation showing in dark blue that only a tiny part of the country benefits from this unfair loophole for high-income taxpayers.

As you can see from the map, the vast majority of the nation deducts less than $2,000 in state and local taxes.

But if you really want to see who benefits, don’t simply look at the dark blue sections. After all, most of those people would happily give up the state and local tax deduction in exchange for some of the other policies that are part of tax reform – particularly lower tax rates and less double taxation.

And I suspect that’s even true for the people who hugely benefit from the deduction. The biggest beneficiaries of this loophole are concentrated in a tiny handful of wealthy counties in New York, California, New Jersey, and Connecticut.

As you can see, they reap enormous advantages from the state and local tax deduction, though I suspect these same people also would benefit if tax rates were lowered and double taxation was reduced.

Regardless of who benefits and loses, there’s a more fundamental question. Should federal tax law be distorted to subsidize high tax burdens at the state and local level?

Kevin Williamson of National Review says no.

…the deduction of state taxes against federal tax liabilities creates a subsidy and an incentive for higher state taxes. California in essence is able to capture money that would be federal revenue and use it for its own ends, an option that is not practically available to low-tax (and no-income-tax) states such as Nevada and Florida. It makes sense to allow the states to compete on taxes and services, but the federal tax code biases that competition in favor of high-tax jurisdictions.

The Governor of New York, by contrast, argues that the tax code should subsidize his profligacy.

It would be “devastating on the state of New York, California, et cetera, if you didn’t allow the people of this state to deduct their state and local taxes,” Cuomo told reporters… State and local governments have been working to preserve the deduction, and they argue that doing away with the preference would hurt states and localities’ flexibility to make tax changes.

By the way, I noticed how the reporter displays bias. Instead of being honest and writing that that the loophole enables higher taxes, she writes that the loss of the preference “would hurt states and localities’ flexibility to make tax changes.”

Gee, anyone want to guess how that “flexibility” is displayed?

Though at least the reporter acknowledged that the deduction is primarily for rich people in blue states.

…the deduction…is viewed as disproportionately benefiting wealthy people. It also tends to be used in areas that lean Democratic.

And that’s confirmed by a 2016 news report from the Wall Street Journal.

Repealing the federal deduction for state and local taxes would make 23.6% of U.S. households pay an average of $2,348 more to the Internal Revenue Service for 2016. But those costs—almost $1.3 trillion over a decade—aren’t evenly spread… Ranked by the average potential tax increase, the top 13 states (including Washington, D.C.), as well as 16 of the top 17, voted twice for President Barack Obama. …And nearly one-third of the cost would be paid by residents of California and New York, two solidly Democratic states. …President Ronald Reagan tried repealing the deduction as part of the tax-code overhaul in 1986, but he was rebuffed by congressional Democrats and state officials. …Republicans argue that the break subsidizes high state taxes, because governors and legislators know they can raise income taxes on their citizens and have the federal government pick up part of the tab. …half the cost of repealing the deduction would be borne by households making $100,000 to $500,000, using a broad definition of income. Another 30% would be borne by households making more than $1 million. Under the GOP plans, residents of high-tax states wouldn’t necessarily pay more in federal taxes than they do now. They would benefit from tax-rate cuts.

Here’s one final image that underscores the unfairness of the deduction.

The Tax Policy Center has a report on the loophole for state and local taxes and they put together this chart showing that rich people are far more likely to take advantage of the deduction. And it’s worth much more for them than it is for lower-income Americans.

How much more? Well, more than 90 percent of taxpayers earning more than $1 million use the deduction and their average tax break is more than $260,000. By contrast, only a small fraction of taxpayers earning less than $50 thousand annually benefit from the deduction and they only get a tax break of about $3,800.

Yet leftists who complain about rich people manipulating the tax system usually defend this tax break.

It’s enough to make you think their real goal is bigger government.

I’ll close by calling attention to the mid-part of this interview. I shared it a couple of days ago as part of a big-picture discussion of Trump’s tax plan. But I specifically address the state and local tax deduction around 3:00 and 4:30 of the discussion.

P.S. In addition to the loophole that encourages higher taxes at the state and local level, there’s also a special tax preference that encourages higher spending at the state and local level. Sigh.

P.P.S. Now, perhaps, people will understand why I want to rip up the current system and replace it with a simple and fair flat tax.

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The real world is like a cold shower for our friends on the left. Everywhere they look, there is evidence that jurisdictions with free markets and small government outperform places with big welfare states and lots of intervention.

That’s true when comparing nations. And it’s also true when comparing states. That must be a source of endless frustration an disappointment for statists.

Speaking of disappointed statists, the real world has led to more bad news. The left-wing Mayor of Baltimore campaigned in favor of a $15 minimum wage, but then decided to veto legislation to impose that mandate. The Wall Street Journal opines on this development.

Mayor Catherine Pugh, a Democrat, has rejected a bill that would raise the city’s minimum wage to $15 an hour by 2022. She did so even though she had campaigned in favor of raising the minimum wage, which shows that economic reality can be a powerful educator. She explained her change of heart by noting that raising the rate above the $8.75 an hour minimum that prevails in the rest of Maryland would send jobs and tax revenue out of Baltimore to surrounding counties. The increase would also have raised the city’s payroll costs by $116 million over the next four years when she’s already coping with a deficit of $130 million in the education budget.

The key thing to notice is that the Mayor recognized that the real-world impact of bad legislation is that economic activity would shrink in the city and expand outside the city.

Writing for Reason, Eric Boehm also points out that the Mayor was constrained by the fact neighboring jurisdictions weren’t making the same mistake.

Pugh said the bill would not be in the best interest of Baltimore’s 76,000 unemployed workers and would drive businesses out of the city to the surrounding counties. …Indeed. Raising the minimum wage would not solve Baltimore’s economic troubles, and would likely only add to them. While support for a $15 minimum wage has become something of a litmus test for progressive politicians, the true test of any politician should be whether he or she is willing to set aside campaign trail rhetoric that flies in the face of economic reality. Signing the bill would have made progressive pols and activists happy—one Baltimore city councilman called Pugh’s decision “beyond disappointing” and a minimum wage activist group said it would remind voters of Pugh’s “broken promise”—but there’s no honor in following through on a promise to do more damage to an already struggling city’s economy. Pugh’s decision to veto a $15 minimum wage bill isn’t disappointing in the least. More politicians should learn from her example of valuing economic reality over populist rhetoric.

The Mayor’s veto is good news, though it remains to be seen whether city legislators will muster enough votes for an override.

Regardless of what happens, notice that the Mayor didn’t do the right thing because she believed in economic liberty and freedom of contract. She also didn’t do the right thing because she recognized that higher minimum wage mandates would lead to more joblessness.

Instead, she felt compelled to do the right thing because of jurisdictional competition. She was forced to acknowledge that bad policy in her city would explicitly backfire since economic activity is mobile. She had to admit that there are no magic boats.

And this underscores why federalism and decentralization are vital features of a good system. Governments are more likely to do bad things when the costs can be imposed on an entire nation (or, even better from their perspective, the entire world). But when bad policy is localized, it becomes very hard to disguise the costs of bad policy.

And, as today’s column illustrates, decentralization stopped the Mayor of Baltimore from a bad policy that would hurt poorly skilled workers. Just as federalism stopped Vermont politicians from imposing a destructive single-payer health system.

Let’s close by circling back to the minimum wage.

Writing in today’s Wall Street Journal, Andy Puzder makes a very timely point about automation.

Entry-level jobs matter—and you don’t have to take my word for it. In a speech last week on workforce development in low-income communities, Federal Reserve Chair Janet Yellen said that “it is crucial for younger workers to establish a solid connection to employment early in their work lives.” Unfortunately, government policies are destroying entry-level jobs by giving businesses an incentive to automate at an accelerated pace. In a survey released last month, the publication Nation’s Restaurant News asked 319 restaurant operators to name their biggest challenge for 2017. Nearly a quarter of them, 24%, said rising minimum wages. …The trend toward automation is particularly pronounced in areas where the local minimum wage is high.

Need more evidence?

By the way, even the normally left-leaning World Bank has research on the damaging impact of minimum wage mandates.

This paper uses a search-and-matching model to examine the effects of labor regulations that influence the cost of formal labor (notably minimum wages and payroll taxes) on labor market outcomes… The results indicate that these regulations, especially minimum wage policy, contribute to higher unemployment rates and constraint formalization…, especially for youth and women.

The research was about the labor market in Morocco, but the laws of supply and demand are universal.

As I’ve repeatedly stated, when you mandate that workers get paid more than what they’re worth, that’s a recipe for unemployment. And as the World Bank points out, it’s the more vulnerable members of society who pay the highest price.

In an ideal world, there should be no minimum wage mandates. But since that’s not an immediately practical goal, the best way of protecting low-skilled workers is to make sure Washington does not impose a nationwide increase. That won’t stop every state and local government from imposing destructive policies that cause unemployment, but the pressure of jurisdictional competition will

And when those bad policies do occur, that will simply give us more evidence against intervention. Which brings us back to where we started. The real world is a laboratory that shows statism is a bad idea.

P.S. In honor of Equal Pay Day, I can’t resist sharing this tidbit from the Washington Free Beacon.

Oh, you also won’t be surprised to learn that there was also a big pay gap in Hillary Clinton’s Senate office, as well as Obama’s White House. In reality, of course, the market punishes genuine discrimination and the pay gap is basically nonexistent when comparing workers with similar education, experience, and work patterns.

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I focus most of my ire on the federal government because bad policy from Washington is the biggest threat to our nation’s freedom and prosperity.

But we also get plenty of bad policy from other levels of government. I periodically focus on the foibles of states such as California, Illinois, and New York.

Today, though, let’s contemplate the inane policies of local government.

I’ve shared plenty of examples in the post, even to the point of putting together two contests (here and here) to pick the craziest action by a local government.

Politicians and bureaucrats in cities and towns do lots of big things that are bad, such as creating massive unfunded liabilities, providing crappy schools, turning law enforcement into back-door tax collectors, and trying to turn children into wusses.

And they do lots of small things that are bad, such as shutting down children’s lemonade stands, arresting people for saving rafters from drowning, fining people for rescuing children from savage dog attacks, leaving a dead body in a pool for two days, requiring permits to be a bum, poisoning water supplies, and paying bureaucrats not to work for 12 years.

Let’s augment these lists.

As reported by the Chicago Sun-Times, here’s an example of Chicago cronyism.

A real estate venture created by President Barack Obama’s onetime boss and a nephew of former Mayor Richard M. Daley squandered $68 million it was given to invest on behalf of pension plans for Chicago teachers, cops, city employees and transit workers… The five public pension funds haven’t made a dime on the investments they made nearly a decade ago… In fact, the financially troubled pension plans have lost most of the money they gave DV Urban… Though the pension funds lost out, DV Urban and its affiliated companies got about $9 million of the pension money for management fees.

Not that this should be a surprise. Being a Daley relative has commonly been a route to undeserved riches. And the same can be said about being an Obama crony.

Speaking of government greed, here are some excerpts from a very depressing Forbes column about shakedowns of poor people in Los Angeles.

An unbuckled seat belt caused Gloria Mata Alvarado to lose her driver’s license. When her husband was driving Mata to a doctor’s appointment for her gastritis in August 2012, her stomach began hurting. For relief, Mata adjusted her seat belt. But a police officer saw her take off the belt and cited her. …In court, Mata was ordered to pay $712, almost half the monthly income for her and her husband. (Both are on disability.) After telling the judge that she couldn’t pay the fine because of her limited means, a judge graciously reduced the fine—to $600. Unable to pay, her license was ultimately suspended. …In Los Angeles County alone, nearly 200,000 drivers had their licenses suspended simply because they failed to pay fines or appear in court. Statewide, from 2006 to 2013, the California Department of Motor Vehicles suspended more than 4.2 million driver’s licenses for those reasons… Throughout the Golden State, motorists are routinely nickeled-and-dimed in traffic court. Looking to raise revenue, state lawmakers slapped on additional fees and surcharges to the base fines for traffic tickets. For instance, the fine for failing to signal or running a stop sign is $35. But after all the surcharges and fees have been imposed, that fine soars to $238. Likewise, a $20 ticket for using a cell phone while driving balloons to $162, while a $100 traffic ticket for failing to carry proof of car insurance actually costs $490. Even worse, failing to pay can trigger an additional $300 “civil assessment” fee. So for many low-income Angelenos, a $20, $35 or $100 ticket can easily become $462, $538, and $815 respectively. …Notably, the courts themselves receive the collected civil assessment penalties, granting them a strong financial incentive to levy fees.

This sickens me. I hate the thought of poor people having their lives made worse because of venal and greedy government.

Especially when many (probably most) of the infractions are for things that don’t actually promote or protect public safety.

At the very least, the fines (and accompanying fees) should be slashed. Though I recognize this could result in more cities being like Detroit, which actually spends more administering parking tickets than it collects in revenue.

Maybe the answer is to levy fines based on income. If a lot of middle class and rich people suddenly experienced severe financial discomfort like the poor, that might generate enough pressure to shut down these revenue-raising scams.

Let’s now travel up the coast to enjoy a classic case of government incompetence from San Francisco.

last year, SFMTA officials excitedly unveiled the first of sixty brand new electric trolley buses purchased by the city of San Francisco. …these $1.1 million-a-piece vehicles were touted as a crucial investment in a public transit system still running buses 20-plus-years old. There’s just one problem: The 60-foot buses can’t go up San Francisco’s hills. In fact, the buses were never designed to handle our iconic hills — anything over a 10 percent grade wears down motor components. …the New Flyer buses also struggle to meet Muni’s internal acceleration standards on inclines of 5 to 10 percent — sometimes taking double the time during tests to accelerate to required speeds on the slight inclines.

But at least the buses are electric, which means they have zero emissions, so the nitwits in San Francisco can feel virtuous (though it does require them to pretend electricity magically appears from nowhere rather than emissions-producing power plants).

This story reminds me of the streetcar boondoggle in DC.

Now let’s go to another city famous for bad policy.

New York City has been padding its budget by ticketing cars that are parked legally.

As of late 2008, in NYC you can park in front of a sidewalk pedestrian ramp, as long as it’s not connected to a crosswalk. …I’ve got a pedestrian ramp leading to nowhere particular in the middle of my block in Brooklyn, and on occasion I have parked there.  Despite the fact that it is legal, I’ve been ticketed for parking there.  Though I get the tickets dismissed, it’s a waste of everybody’s time. And that got me wondering- How common is it for the police to give tickets to cars legally parked in front of pedestrian ramps?

What the reporter discovered is shocking.

…thanks to NYC’s Open Data portal, I was able to look at the most common parking spots in the City where cars were ticketed for blocking pedestrian ramps. …What I found when I dove into the data surprised me.  To start, I found the top address where this ticket were given: in front of 575 Ocean Avenue in Brooklyn, where over $48,000 in parking fines were issued in the last 2.5 years. … the spot, (or really spots since there are two ramps), are legal, since they are in the middle of the block, with no crosswalk.  $48,000 in tickets at a legally parked spot, and that is just the last 2.5 years.

The next top spots on the list had the same story to tell.

1705 Canton Avenue in Brooklyn, 273 Tickets, $45,045: Legal. 270-05 76 Avenue in Queens, 256 Tickets ($42,440) Legal. 143-49 Cherry Ave, Queens, 246 Tickets, ($40,590).  Legal. …I started to skip down the list.  This spot in Battery Park, ranked #16 on my list and the top spot in Manhattan, had 116 tickets ($19,140) and turned out to be legal. …I started to skip down the list faster and faster.  Take #1000 in my top list, at 1059 Virginia Avenue, where 8 tickets had been given ($1320).  It is a classic T intersection, meaning it’s legal. …I then selected 30 random spots that had received 5 or more tickets over the time period, and based on Google Maps found that all of them appeared to be legal parking spots!

The good news is that this exposé supposedly is forcing the city to stop this type of illegal ticket, so some stories actually do have a happy ending.

The next step hopefully will deal with extortionate fines for the horrible crime of…gasp…idling for more than three minutes!

But not all stories end well.

Here’s a jaw-dropping report of bureaucratic abuse from Sarasota, Florida.

At 90 years old, Marie Louise Sikorski has lived in her house on Webber Street in Sarasota for most of her life… The city found several code violations at her home. Since then, she’s racked up massive fines, which she says add up to about 150,000 dollars. As a widow receiving only 1,000 dollars a month…, she says there’s little she can do. …That’s when 30-year-old Miles came into her life. …As her neighbor, Miles heard about her situation and began to help with repairs around the home, sometimes putting in 16 hour days, all free of charge.

This sounds like a happy ending, right? A greedy local government hits a senior citizen who is too old to maintain her house with massive fines, but a wonderful neighbor steps in to save the day.

You’re probably thinking the local government then waived the absurd fines.

…the City is still not satisfied, and she says she’s still being charged 500 dollars a day. …Sarasota requires much of the work to be done by a “licensed” contractor, something Miles is not.

In other words, we get a sad end to the story because of a mix of two ugly things, routine government greed and oligopolistic government licensing restrictions. Reminds me of the disgusting actions of the local government in Montgomery, Alabama.

Last but not least, let’s close with a classic story of wasteful spending.

A local politician in Portland, Oregon, squandered tax money taking her staff to a luxury spa in Arizona for supposed diversity training.

Commissioner Amanda Fritz says she will close her office next week to take her six staff members to a retreat in Arizona to learn about diversity at a cost of roughly $40,000. Fritz and her staff, about half of whom are people of color, plan to spend at least 3 1/2 days in Tubac, Arizona, near the Mexican border, participating in a diversity workshop put on by a Portland-based company, White Men as Full Diversity Partners. …The program charges $4,750 per person for tuition, lodging, meals and site fees. Fritz’s office will also have to pay for the staffers’ flights to Arizona.

Though, to be fair, Commissioner Fritz is not the only Portland politician to rip off taxpayers for this type of scam.

Former Mayor Charlie Hales drew criticism for spending $56,000 to send 16 white, male city employees to a resort on Mt. Hood in 2014 for another workshop put on by the same organization. The City of Portland has spent more than $126,000 on programs and consulting from White Men as Full Diversity Partners since August 2014, according to city invoice records.

As you might expect, there are some sketchy connections between the city bureaucracy and the contractor.

Office of Neighborhood Involvement Director Amalia Alarcon Morris worked as a paid associate for the diversity organization more than a decade ago… The diversity company still lists Alarcon Morris as a consultant on its website.

By the way, I fully expect that a search of campaign finance records would reveal that the owners and managers of White Men as Full Diversity Partners have recycled some of the loot they’ve received into the campaigns of Portland politicians.

The politicians win with campaign contributions. The bureaucrats win with a free vacation. The contractor wins by getting a big check.

The only losers are…you guessed it…the taxpayers!

The moral of the story, as explained by Veronique de Rugy in a column for Reason, is that governments at all levels are venal and incompetent.

What do home Bible study classes, transgender bathrooms, lemonade stands, cat litter, and marijuana have in common? To the blind eye, not much—but in fact, they’re all things state and local governments are actively working to regulate. …it turns out local governments are frequently the worst offenders of all when it comes to petty tyranny. …Dozens of places, including Austin, Texas; Sacramento, California; and Thurston County, Washington, have banned supermarkets, convenience stores, and pharmacies from providing customers with free plastic bags. “Many cities restrict the economic freedom of their residents and potential migrants through minimum wage laws, business licensing, rent control, and zoning restrictions,” Mercatus Center state and local policy expert Adam Millsap explains. And many of these regulations, particularly zoning and occupational licensing laws, place a disproportionate burden on poor people and minorities.

And she points out that decentralization, while theoretically very desirable, won’t generate many benefits if misguided federal policies are replaced by bad local policies.

Many on the political right believe that the devolution of power to lower levels of government can help overcome problems created by centralized authority….In a 2014 paper, George Mason University economist Richard Wagner explored whether federalism really supports liberty. He found that devolving power to lower levels can be good for individual freedom under the right conditions—but it’s far from guaranteed.

P.S. Don’t forget to vote for Veronique in the “most influential libertarian” contest. And you don’t even need to make it a write-in vote. She’s been added to the list by popular demand.

P.P.S. I suspect most people won’t care about what’s happening with my local government, but local politicians and bureaucrats are whining about belt-tightening even though spending has climbed much faster than inflation.

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What do Andy Johnson, Anthony Smelley, the Hammond family, Charlie Engle, Tammy Cooper, Nancy Black, Russ Caswell, Jacques Wajsfelner, Jeff Councelller, Eric Garner, Martha Boneta, James Slatic, Carole Hinders, Salvatore Culosi, and James Lieto, as well as the Sierra Pacific Company and the entire Meitev family have in common?

They are all victims of brutal, unfair, capricious, and evil government actions. And I challenge anyone to read their stories and not feel at least some degree of outrage at their mistreatment.

And now we’re going to add Corey Statham to the list. The New York Times has an all-too-typical report of government greed and callousness.

Corey Statham had $46 in his pockets when he was arrested in Ramsey County, Minn., and charged with disorderly conduct. He was released two days later, and the charges were dismissed. But the county kept $25 of Mr. Statham’s money as a “booking fee.” …He did get a debit card for the remaining $21. But there was no practical way to extract his cash without paying some kind of fee. Among them: $1.50 a week for “maintenance” of the unwanted card, starting after 36 hours; $2.75 for using an A.T.M. to withdraw money; $3 for transferring the balance to a bank account; and $1.50 for checking the balance. …Mr. Statham is represented by Michael A. Carvin, a prominent conservative lawyer who…said the county’s motives were not rooted in solicitude for the people it had arrested. “Revenue-starved local governments are increasingly turning toward fees like Ramsey County’s in order to bridge their budgetary gaps,” he wrote in a Supreme Court brief. …“Providing a profit motive to make arrests,” he said, “gives officers an incentive to make improper arrests.” …$25 is not a lot of money — unless you are poor. It represents almost half a day’s work at the federal minimum wage, a federal judge wrote in a dissent in another case on booking fees.

I have no idea whether Mr. Statham is a sympathetic victim. But even if he’s a total jerk, that doesn’t change the fact that people who interact with the legal system should not be subject to fines or fees without a conviction.

This is yet another example of innocent people victimized by “policing for profit,” which notoriously happens with civil asset forfeiture.

And at the risk of sounding like a closet leftist, it bothers me when poor people and rich people face the same fines. I don’t know Statham’s situation, but there are plenty of low-income people who can suffer severe financial consequences when they have an unfortunate encounter with local law enforcement. Maybe we should be like Switzerland and proportionately adjust fines based on wealth. I don’t suggest that because I want local governments to have more money. Instead, I’m thinking such a policy would both make the law more equal and give the rest of us a strong incentive to fight against thuggish revenue-raising tactics.

P.S. I’m obviously on the side of Statham’s lawyer, but I can’t resist correcting something said by Michael Carvin. I’ve never looked at the numbers for Ramsey County, but, based on nationwide fiscal data for state and local governments, I will say with 99 percent confidence that Ramsey County is not “revenue-starved.” In the interests of accuracy, Mr. Carvin in the future should refer to local politicians as being “revenue-hungry.”

P.P.S. On a separate topic, here’s a nice reminder of the difference between the private sector and the government.

A man in Pomona was upset after a postal carrier was seen on surveillance video throwing a small package on his doorstep, but a surprise hero was also captured on footage. Brian Mundy sent the video to our sister station in Los Angeles using #abc7eyewitness. In it, you see the U.S. Postal Service carrier carelessly tossing the package. Much to Mundy’s surprise, moments later, a FedEx driver – wearing a reindeer hat – is seen gently putting down two packages. That driver even picks up the small box from the USPS carrier and gently puts it on top of the rest.

It’s all on video if you click on the story link. Yes, this is just an anecdote. And, yes, I’m sure there are plenty of bad FedEx employees and wonderful Postal Service employees. I’m mostly sharing the story for amusement value.

But I suspect John Stossel was right when he explained that, as a general rule, the private sector will do a better job.

 

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What are the main problems with government bureaucrats?

Is it that they’re paid too much? Given that they get far more compensation than workers in the economy’s productive sector, that certainly true.

Is it that there are too many of them? Well, we have lots of bureaucracies that shouldn’t exist, such as HUD, Education, Transportation, Agriculture, etc. So that’s true as well.

But there’s another possible answer. People employed by government take advantage of preferential rules in ways that should get all decent people upset.

Writing for Reason, Eric Boehm tells us about a cop who successfully mugged taxpayers in Paterson, New Jersey.

Despite not having to show up for work since June 2007, Manuel Avila received periodic increases in pay, managed to double his monthly pension and qualified for free healthcare for the rest of his life at the expense of city taxpayers. Avila qualified for all those benefits while spending the past nine years on paid leave from the Paterson, New Jersey, police department because he was under investigation for having sex with a female prisoner at the city’s jail.

Wow, go fishing every day, get pay increases, a fat pension, and free healthcare. Where can I sign up for that deal?

Government, of course.

And let’s not overlook sex with a female prisoner, which gives a whole new meaning to the notion of fringe benefits. Reminds me of the Pennsylvania bureaucrat who came up with the clever idea of trading welfare benefits for sex.

But the story is actually more disturbing (at least from the perspective of taxpayers) than you think.

It gets worse, though, because that crime would never have happened if Avila’s bosses hadn’t already been trying to give his retirement benefits a little boost. …Avila—apparently with plenty of help, or at least an abundance of people willing to look the other way—was able to boost his annual pension to about $70,000 from an estimated $32,000 if he had been forced to retire in 2007 when a police psychiatrist recommended removing Avila from the force. “But instead of forcing Avila out of the police department, city law enforcement officials decided to allow him to stay on the job for another six months so he could reach a critical pension milestone of 20 years, the court records show,” the Paterson Press wrote. While there, he was charged with sexually assaulting a female prisoner. Those charges were dropped in 2010 after the city paid an undisclosed amount of money to the accuser as part of a settlement, but Avila remained on paid leave from the department until finally retiring this year.

This is galling. If Mr. Avila misbehaved and was declared unfit, why wasn’t he immediately terminated?

And now that we’ve learned about this scandal, why aren’t the officials who enabled this ripoff being fired?

At the risk of repeating myself, the answer is government.

There are two broader policy lessons from this scandal.

First, the use of “defined benefit” pension systems for bureaucrats should be discontinued. By way of background, these “DB” plans promise workers guaranteed monthly payments based on formulas including factors such as years worked and highest pay levels. There is no reason why DB plans can’t be feasible and successful (indeed, the Netherlands has a private Social Security system based on this model), but politicians at the state and local level repeatedly have demonstrated that they are incapable of operating this type of system, both because they promise lavish benefits (on top of overly generous pay levels) as a means of buying political support (using our money) from government workers and because they then don’t set aside enough money to finance the generous benefits they have promised. That system may be good for getting reelected in the short run, but it’s also why there’s a multi-trillion dollar shortfall that is contributing to deep fiscal problems in states such as Illinois and California. To stop from going deeper in the red, states should switch to “defined contribution” plans, which work similar to the IRAs and 401(k)s that are now prevalent in the private sector.

Second, something needs to be done to curtail the power of government unions. It’s not just that they conspire with politicians to get excessive pay for bureaucrats, but they compound that damage by also insisting on rules that make it very difficult to discipline or terminate problem employees. In the private sector, employees generally work “at will,” which means they can be fired without reason (this is one of the reasons the United States is near the top in the World Bank’s Doing Business ranking. In government, by contrast, slackers, trouble makers, and other undesirable employees are shielded from this discipline. And that results in cases (such as the example discussed above) that are bad for taxpayers and bad for government. I don’t know if this means that unions should be prohibited (as even President Franklin Roosevelt believed), but surely one lesson to be learned is that there needs to be a much tougher approach when contract negotiations take place.

P.S. Let’s shift to a different topic. I’ve written many times about the gap between intentions and results in government. It’s very common to see politicians vote for laws that (at least in some cases) they think will help people, but they fail to recognize the indirect or second-order effects of government intervention.

Now we have another example. Almost all politicians will agree that it’s a good idea to prohibit child labor in poor nations. But what if poor families don’t have any better options? Could it be that government intervention will hurt the people who are supposed to be helped?

According to the World Bank (not normally a hotbed of libertarian thought), the answer is yes.

The study explores the law that increased the minimum employment age from 14 to 16 in Brazil in 1998, and uncovers its impact on time allocated to schooling and work in the short term and on school attainment and labor market outcomes in the long term. The analysis uses cross-sectional data from 1998 to 2014… The estimates show that the ban reduced the incidence of boys in paid work activities by 4 percentage points or 27 percent. …The study follows the same cohort affected by the ban over the years, and finds that the short-term effects persisted until 2003 when the boys turned 18. The study pooled data from 2007 to 2014 to check whether the ban affected individuals’ stock of human capital and labor market outcomes. The estimates suggest that the ban did not have long-term effects for the whole cohort, but found some indication that it did negatively affect the log earnings of individuals at the lower tail of the earnings distribution.

So the bottom line is that lower-skilled workers missed a chance to earn money when they were young and they then suffered income losses over time as well.

Bastiat certainly wouldn’t be surprised by this outcome. And if the lower-skilled workers understood how they were hurt, I’m sure that they wouldn’t feel very grateful to politicians for their “compassion.”

P.P.S. This reminds me of the “sweatshop” controversy. The left wants to ban factory work in the developing world because they don’t understand or appreciate that such jobs are a great opportunity when nations are at a certain stage of development.

P.P.P.S. This isn’t the first time that the World Bank has produced good research. In 2014, the bureaucrats released a good study showing how high tax rates facilitate corruption. And in 2012, they issued a study explaining how large public sectors undermine prosperity.

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