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Posts Tagged ‘News Appearance’

What’s worse, Democrats who deliberately seek to make government bigger because of their ideological belief in statism, or Republicans who sort of realize that big government is bad yet make government bigger because of incompetence?

I’m not sure, though this is a perfect example of why I often joke that Washington is divided between the Evil Party and the Stupid Party.

And the fight over spending caps is a perfect example.

President Obama and the Democrats despise this small bit of fiscal discipline, which was created as part of the 2011 Budget Control Act (BCA). They’re aggressively seeking to eviscerate the law, particularly the sequester enforcement mechanism. And since they believe in bigger government, their actions make sense.

Republicans, by contrast, claim to believe in smaller government and fiscal responsibility. So they should be in the driver’s seat on this fight. After all, the BCA is the law of the land and the spending caps – assuming they are not changed – will automatically limit overspending in Washington. In other words, the BCA fight is like the fight over reauthorizing the corrupt Export-Import Bank. Republicans can win simply by doing nothing.

Seems like a slam dunk win for taxpayers, right?

Not exactly. With apologies for mixing my sports metaphors, the Republicans are poised to fumble the ball at the one-yard line.

Which would be a very depressing development. In this interview, I explain that preserving the spending caps should be the most important goal for advocates of limited government.

And you’ll see that I also explained that fighting for good policy today is necessary if we want to avoid huge fiscal problems in the future.

But that doesn’t seem to matter very much for a lot of Republicans.

Let’s look at what other fiscal policy experts are saying about this issue.

Writing for Reason, Veronique de Rugy of the Mercatus Center explains that the key to good fiscal policy (including tax cuts) is to have effective and enforceable long-run spending restraint.

If lawmakers want big tax cuts, there will need to be commensurately greater levels of spending restraint. The difficulty, of course, is to persuade politicians to implement such spending constraints and actually stick to them in the long run.

Amen.

That’s basically the same message I shared yesterday.

President Obama, however, has threatened to veto the budget and shut down the government if Congress doesn’t agree to bust the current spending caps.

And plenty of Republicans, either because they also want to buy votes with other people’s money or because they’re scared of a shutdown fight, are willing to throw in the towel.

The battle isn’t lost, at least not yet, but it’s very discouraging that this fight even exists. Controlling discretionary spending should be the easy part.

After all, if politicians balk at the modest requirements of the BCA, what hope is there that they’ll properly address entitlements? As Veronique notes, those are the programs that are driving America’s long-run fiscal crisis.

…the only realistic way to limit spending growth to 2 or 3 percent per year is to reform the fastest-growing programs in our budget, or the so-called entitlements.

What makes this issue especially frustrating is that we know sustained spending restraint is possible.

Nations such have Switzerland have shown how spending caps produce very positive results.

But that requires some commitment for good policy by at least some people in Washington.

And that may be lacking. In a column for the Wall Street Journal, Steve Moore takes a closer look at how GOPers are poised to throw away their biggest fiscal victory of the Obama years.

Let’s start with an excerpt illustrating how the BCA and sequestration have worked.

…the Budget Control Act helped slam the brakes on Mr. Obama’s first-term spending spree. …In 2009 the federal government accounted for nearly a quarter of the American economy, 24.4%. That fell by 2014 to 20.3% of GDP.

He’s right. I’ve shared similar numbers showing how Obama’s spending binge was halted.

And that’s led to the biggest five-year reduction in the burden of government spending since the end of World War II.

But fiscal sobriety needs to be sustained. Deciding to have “just one drink” at the big spender’s bar is not a good way to stay on the wagon.

And Steve shares some bad news on this issue.

Congress and the White House are quietly negotiating a deal for the new fiscal year that would bust the spending caps that have brought down the deficit. Breaking the caps yet again—this would be the third violation in four years—is lousy policy. …the GOP is reportedly forging a compromise with Mr. Obama that would raise the caps by $70 billion to $100 billion. …What’s worse, the deal would likely raise the spending caps permanently, meaning…nearly $1 trillion…over the next decade.

By the way, there’s a reason why this sounds like déjà vu all over again. Republicans already agreed to bust the spending caps at the end of 2013.

That was an unambiguous victory for Obama.

And now it may happen again. Steven discusses the implications of this looming GOP surrender.

The mystery is why Republicans are so ready to throw away their best fiscal weapon… Liberals hate the sequester because it squeezes their favorite programs, from transit grants to Head Start. But it is the law of the land. President Obama can do nothing to circumvent the sequester—unless Republicans in Congress cave in. …Busting the spending caps will only reverse progress toward a balanced budget, fatten liberal social programs, and confirm what many tea-party voters have been shouting for years: that Republicans break their promises once elected.

For all intents and purposes, the battle over BCA spending caps is a huge test of GOP sincerity. Do they really believe in limited government, or is that just empty rhetoric they reserve for campaign speeches.

P.S. Some Republicans argue that they favor smaller government, but that the sequester is “unfair” and the spending caps are too “harsh” because the defense budget is disproportionately affected.

It’s true that the defense budget is being capped while most domestic spending (specifically entitlement programs) is left unconstrained. But that doesn’t mean the nation’s security is threatened.

Defense spending still grows under these laws and our military budget is still far bigger than the combined budgets of all possible adversaries.

For further information, read George Will’s sober analysis and also peruse some writings by Mark Steyn and Steve Chapman.

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When I first got to Washington in the mid-1980s, one of the big issues was the supposedly invincible Japanese economy. Folks on the left claimed that Japan was doing well because the government had considerable power to micro-manage the economy with industrial policy.

With the benefit of hindsight, it’s now quite apparent that was the wrong approach.

In more recent years, some on the left have praised China’s economic model. And while it’s true that the country has enjoyed strong growth, it’s far from a role model.

Here’s some of what I wrote back in 2010.

Yes, China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom – which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. …This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. Better to have $6,710 of per capita GDP than $3,710. But China still has a long way to go if the goal is a vibrant and rich free-market economy. The country’s nominal communist leadership has allowed economic liberalization, but China is still an economically repressed nation.

With my skeptical view of the Chinese economic system, I figured it was just a matter of time before the nation experienced some economic hiccups.

And the recent drop in the Shanghai stock market certainly would be an example. I discussed the topic earlier this week in this Skype interview with Blaze TV.

To elaborate, there’s no precise formula for determining a nation’s prosperity. After all, economies are not machines.

But there is a strong relationship between prosperity and the level of economic freedom.

And as I explained earlier this year, China’s problem is that government is still far too big. As such, its overall ranking from Economic Freedom of the World is still very low.

And this means that the Chinese people – while much better off then they were under a pure communist system – are still not rich.

I mentioned the comparative numbers on per-capita economic output in the interview, which is something I wrote about back in 2011. And you can click here if you want the underlying figures to confirm that Americans are far more prosperous.

By the way, this is an issue where the establishment seems to have a semi-decent understanding of what’s happening, even if they don’t necessarily draw any larger lessons from the episode.

The Associated Press, for instance, has a good report on the issue. Here’s some of the story, which looks at why the the stock market seems untethered from economic fundamentals.

When China’s economy was roaring along at double digit rates in the 2000s, Chinese stocks floundered. But starting in the summer of 2014, as evidence of an economic slowdown gathered, the Shanghai Composite index climbed nearly 150 percent. …Now the Chinese stock bubble has burst and Shanghai shares are in a free fall. They’ve lost about 30 percent since peaking last month. …Prices in the stock market are supposed to reflect business realities: the health of the economy, the quality of the companies listed on stock exchanges, the comparative allure of alternative investments. But in a communist country where the government plays an oversized role in the economy, investors pay more attention to signals coming from policymakers in Beijing than to earnings reports, management shake-ups and new product announcements.

If savvy investors think it’s important to focus on what the government is doing, that’s obviously bad news.

During the booming 2000s, only politically connected firms were allowed to list on stock exchanges for the most part. Many of them were run by insiders of dubious managerial talent. The markets were dominated by inefficient state-owned companies. Investors were especially wary of investing in big government banks believed to be sinking under the weight of bad loans. Stocks went nowhere.

And when the government started to encourage a bubble, that also wasn’t a good idea.

…state media began encouraging Chinese to buy stock, even as the country’s economic outlook dimmed. The economy grew 7.4 percent last year, the slowest pace since 1990. It’s expected to decelerate further this year. But authorities allowed investors to borrow to buy ever-more shares. Unsophisticated investors — more than a third left school at the junior high level — got the message and bought enthusiastically, taking Chinese stocks to dangerous heights. Now it’s all crashing down.

I’m not sure “all crashing down” is the right conclusion.

As I said in the interview, the market doubled and now it’s down about 30 percent, so many investors are still in good shape.

That being said, I have no idea whether the market will recover, stabilize, or continue to drop.

But I do feel comfortable making a larger point about the relationship between economic freedom and long-run prosperity.

So if you want to learn lessons from East Asia, look at the strong performances of Hong Kong, Taiwan, Singapore, and South Korea, all of which provide very impressive examples of sustained growth enabled by small government and free markets.

P.S. I was greatly amused when the head of China’s sovereign wealth fund mocked the Europeans for destructive welfare state policies.

P.P.S. Click here if you want some morbid humor about China’s pseudo-communist regime.

P.P.P.S. Though I give China credit for trimming at least one of the special privileges provided to government bureaucrats.

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I’m not a big fan of Obamanomics. We’re going through the weakest recovery since the Great Depression. Income and wages have been stagnant, particularly when compared to previous expansions. And while the unemployment rate has finally come down, that’s in part a consequence of people dropping out of the labor force.

The net result is that our nation’s output is far lower than it would be if economic performance had simply matched the average for previous business cycles. And that translates into foregone income for American households.

Yet the President seems to think that he deserves applause for his economic legacy. Here are some excerpts from an AP story in the Oregonian.

President Barack Obama is not shy about defining his achievements and casting them in the most positive light…on Monday Obama offered a rare glimpse at how he wants history to judge his presidency, letting the “L” word cross his lips as he touted the U.S. economic recovery… “Obviously there are things that I’ve been proud of,” he said. He first cited the economic crisis he faced upon assuming office in 2009. “It was hard, but we ended up avoiding a terrible depression,” he said.

You won’t be surprised to learn that I have a different perspective. I was on CNN earlier this week and expressed my disappointment with the President’s policies and their impact on the nation.

To be fair, I’m focusing in the interview on the strength (or lack thereof) of the recovery. Obama, by contrast, wants credit for the fact that the 2008 recession didn’t turn into a depression.

Needless to say, there aren’t alternative universes where we can see what would have happened if Obama didn’t get to the White House. And it probably wouldn’t matter even if there were alternative universes since neither McCain nor Romney had a substantially different vision anyhow.

But here’s why I think it’s absurd for Obama to take credit for avoiding a depression. Simply stated, it takes a lot of mistakes, on a sustained basis, to produce a depression.

And that’s precisely what we got from Presidents Hoover and Roosevelt. Thanks to protectionist policies, higher tax rates, a bigger burden of government spending, and massive intervention in markets, a normal downturn was magnified and extended to last an entire decade.

So I suppose we could give Obama credit for not being as bad as Hoover and Roosevelt, but that’s an extreme case of damning with faint praise. And even faint praise is probably unwarranted since Obama wanted more statism and was stopped by the 2010 election.

The bottom line is that Obama wants people – based on zero evidence – to believe a depression would have occurred naturally in the absence of his policies.

The more realistic assessment is that Obama’s policies have been a net negative for the economy. But as I remarked in the interview, I’m not making a partisan argument. Bush’s policies also were a net negative.

By comparison, you can look at Reagan and Clinton for examples of Presidents who increased economic freedom during their reigns.

P.S. Since today’s topic is the economy, here’s a grim reminder of one of the reasons why growth has been relatively anemic.

The folks at Mercatus have put together a pictograph on the regulatory burden.

Something to keep in mind when considering the degree to which red tape is constraining growth and entrepreneurship.

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I don’t understand the left’s myopic fixation on income inequality. If they genuinely care about the less fortunate, they should be focused on policies that produce higher incomes.

But instead, they agitate for class warfare and redistribution, which leads me to believe that many of them hate the rich more than they love the poor.

And while it’s surely true that governments can harm (or worse!) the financial status of folks like Bill Gates, that doesn’t help the poor.

Indeed, the poor could be worse off since statist policies are linked to weaker economic performance.

So relative inequality may decline, but only because the rich suffer even more than the poor (as Margaret Thatcher brilliantly explained).

That’s a bad outcome by any reasonable interpretation.

But let’s set aside the economic issues and contemplate the political potency of so-called income inequality.

Writing for the Wall Street Journal, William Galston of the Brookings Institution (and a former adviser to Bill Clinton) opines that income inequality isn’t a powerful issue in America.

Hillary Clinton was reportedly struck that no one had asked her about inequality. She shouldn’t have been surprised… Recent opinion surveys show inequality well down the list of public concerns. In a February CBS News poll, for example, only 4% of Americans named income disparities as the most important problem facing the country. In March only 2% told Gallup that the income gap was at the top of their list.

Galston cites a couple of studies of public opinion trends.

In…Public Opinion Quarterly in 2013, Matthew Luttig also found that rising inequality has failed to boost support for redistribution and may actually have the opposite effect. What is going on? The authors of the Brookings paper found that the principal beneficiaries of government programs—especially the elderly—have become increasingly resistant in recent decades to additional redistributive policies. During that period, just about every new cohort entering the ranks of the elderly has been less supportive of redistribution than its predecessor.

He doesn’t think voters necessarily are becoming libertarian or conservative.

But he does think leftists are deluding themselves if they think more propaganda will sway voters in favor of redistribution.

Many Democratic activists believe that the weakness of public support for redistribution rests on ignorance: Give them more information about what is really happening, and their policy preferences will be transformed. But a recent paper for the Washington Center for Equitable Growth reported that while survey respondents “who view information about inequality are more likely to believe that inequality is a serious problem, they show no more appetite for many interventions to reduce inequality.” The best explanation for this apparent anomaly: rising mistrust of government, especially the federal government. Many people who think inequality is an important problem don’t believe that Washington’s political institutions can be trusted to fix it.

Gee, I wonder why people think the federal government is incompetent in helping the poor?

Could it be that voters are slowly but surely realizing that P.J. O’Rourke was right?

In any event, Galston concludes with some very sound recommendations.

What matters most is growth that includes everyone. To get that kind of growth, we will have to act on a broad front to expand opportunity for those who now lack it—and ensure that workers earn enough to provide opportunity for their children. These measures will reduce inequality, all the more so if they are financed by linking real wages to productivity gains and terminating tax preferences that don’t promote growth while benefiting mainly the wealthiest Americans.

To be sure, Galston’s embrace of growth instead of redistribution doesn’t mean he has good ideas on what causes growth.

But at least he understands that the goal should be to make the pie bigger.

And that’s the point I made in this CNN interview, which took place via Skype since I was at a conference in Brussels.

Though you may notice that I mangle my metaphor at the end of the interview, switching from pie to cake.

But setting aside that one glitch, I hopefully got across my main point that the focus should be growth rather than inequality.

P.S. It’s worth noting that states with the most support for class warfare and redistribution also are the states with the most inequality. Maybe they should experiment with bad policy inside their own borders before trying to foist such policies on the entire nation.

P.P.S. I wrote last year about six remarkable examples of leftist hypocrisy. Make that seven.

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What’s America’s main fiscal policy challenge, particularly in the long run?

Most sensible people will agree that our greatest threat is the rising burden of entitlement spending.

More specifically, demographic changes and ill-designed programs will combine to dramatically expand the size of the public sector over the next few decades.

So it’s really amazing that some politicians, led by the clownish Elizabeth Warren, want to dig the hole deeper.

Here are some excerpts from a recent article in the Washington Examiner.

Elizabeth Warren is pushing Democrats to expand Social Security rather than cut it, a move that could pressure presumed party frontrunner Hillary Clinton to move left. …”What Elizabeth Warren has done on pushing the ball forward on Social Security is another example of why she’s a bold progressive hero,” said T.J. Helmstetter, a representative for the Progressive Change Campaign Committee, an outside group that pushes for progressive causes. …In March, almost all Democratic senators voted for a symbolic budget amendment to express support for expanding Social Security. …The messaging amendment approved by most Senate Democrats also did not specify how benefits were to be expanded.

I discussed this topic in a recent interview.

Though I’m surprised that my head didn’t explode while discussing such a reckless idea.

I closed the interview by expressing a modest bit of optimism.

Surely (at least I hope) politicians won’t dig the hole deeper when we can see right before our eyes the fiscal chaos and economic disarray in Greece, right?!?

I’m surprised demagogues such as Elizabeth Warren haven’t rallied behind a plan to simply add a bunch of zeroes to the IOUs already sitting in the so-called Social Security Trust Fund.

Fortunately, not all politicians think it’s smart to accelerate as you’re driving toward a cliff.

Writing in the Washington Post, Charles Lane explains Governor Christie’s proposal.

New Jersey Gov. Chris Christie…wants to campaign on a sweeping proposal to rein in federal entitlement spending on the elderly. …he urged a phaseout of Social Security benefits for retirees with $80,000 or more in other income and backed a gradual upward adjustment of the retirement ages for Medicare and Social Security, which is also appropriate, given increased life expectancy. …Social Security…remains a non-trivial cause of the government’s long-term fiscal imbalance. Its trust fund, admittedly an accounting fiction of sorts, is on course to run out of cash by the early 2030s. Christie’s plan would provide three-fifths of the resources necessary to guarantee Social Security’s solvency for 75 years

Kudos to Governor Christie for recognizing that you can’t repeal mathematics with politics.

And this modest bit of praise isn’t based on policy. I’m not a big fan of means testing, which has some unfortunate economic effects.

And I also think that raising the retirement age is sub-optimal since it forces people to pay longer into an inferior system that already is giving them a very low rate of return.

The right approach is to transition to a system of personal retirement accounts, but at least Christie has an adult proposal based on real-world considerations.

Though, to be fair, many leftists claim we can afford higher benefits and also “fix” the system with a giant tax increase. So they sometimes recognize that math exists, even if they want us to believe that 2 + 2 = 7.

P.S. If Hillary winds up endorsing Warren’s reckless plan, it will give us another data point for our I-can’t-believe-she-said-that collection.

P.P.S. Is Elizabeth Warren more of a faux populist or more of a faux American Indian?

P.P.P.S. You can enjoy some previous Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

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With tax day looming, let’s wallow in misery by contemplating the burden on America’s taxpayers.

But we’ll ignore the angst caused be dealing with an indecipherable tax code and an oppressive IRS and simply focus on the amount of money that gets extracted from our income each year.

The bad news is that the federal government is collecting a record amount of money, even after adjusting for inflation. Here’s a chart, based on the latest numbers from the Office of Management and Budget.

But there is some good news. This isn’t a record tax burden when measured as a share of economic output.

Federal taxes are projected to consume 17.7 percent of GDP this year. That’s higher than the post-WWII average of 17.2 percent of GDP, but there have been several years in which the federal tax burden has been higher than 17.7 percent, most recently in 2007, when it reached 17.9 percent of economic output.

So while it’s bad news that the IRS is collecting a record amount of revenue in inflation-adjusted dollars, I guess we should consider ourselves lucky that it’s not a record share of GDP.

I discuss the growing federal tax burden in this CNBC debate with Jared Bernstein.

A few points are worth emphasizing from the interview, two of which deal with corporate taxation.

First, it’s silly to talk to compare “taxes by individuals” to “taxes paid by corporations.” That’s because all taxes on business ultimately are paid by individuals, whether as workers, consumers, or shareholders. To be blunt, corporations may collect taxes, but the burden inevitably falls on people.

Second, the fact that corporate tax receipts are lagging is a sign that tax rates are too high rather than too low. In other words, there’s a Laffer Curve effect, and there’s lots of evidence that a lower corporate rate will generate more revenue. Which is precisely what happened when personal tax rates were reduced on the “rich” in the 1980s.

Third, if we want a balanced budget, the only responsible approach is spending restraint. As I’ve noted before, our long-run fiscal challenge is because of a rising burden of spending. Indeed, spending is more than 100 percent of the long-run problem.

By the way, let’s not forget about the role of state and local governments. WalletHub just released a report on state and local tax burdens.

Here are the 10 best states.

I’m mystified to see California in the top 10.

Though maybe this is a Laffer Curve-based result. In other words, perhaps taxes are so high that people are paying less?

Moreover, the Golden State drops to 30 if you adjust for the cost of living (see column on far right).

Now here are the 10 worst states.

I’m not surprised to see Illinois in last place, but who knew that Nebraska was a hotbed of taxaholism?

And if you look at the right-most column, you’ll see that New York and Connecticut could be considered the worst states. Both jurisdictions are richly deserving of that designation.

P.S. Don’t forget that Puerto Rico is a secret tax haven for American citizens, particularly when considering federal taxes, so it deserves honorary first place recognition.

P.P.S. The best (i.e., least worst or least destructive) approach to taxation is the flat tax.

P.P.P.S. Though the ideal scenario is to have a very small federal government so that there’s no need for any broad-based tax whatsoever. Our nation enjoyed strong growth before that dark day in 1913 when the income tax was imposed.

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With tax day fast approaching, it’s time to write about our good friends at the Internal Revenue Service.

One of the new traditions at the IRS is an annual release of tax scams. It’s know as the “dirty dozen” list, and while it may exist mostly as a publicity stunt, it does contain some useful advice.

And that’s true of this year’s version. But I worry that the IRS is looking at a few trees and missing the forest.

The Washington Examiner was kind enough to let me write a cover story on the “dirty dozen” list. Here’s my effort to add some context to the discussion.

…our friends at the Internal Revenue Service have a relatively new tradition of providing an annual list of 12 “tax scams” that taxpayers should avoid. It’s an odd collection, comprised of both recommendations that taxpayers protect themselves from fraud, as well as admonitions that taxpayers should be fully obedient to all IRS demands. Unsurprisingly, the list contains no warnings about the needless complexity and punitive nature of the tax code. Nor does the IRS say anything about how taxpayers lose the presumption of innocence if there’s any sort of conflict with the tax agency. Perhaps most important, there’s no acknowledgement from the IRS that many of the dirty dozen scams only exist because of bad tax policy.

In the article, I list each scam and make a few observations.

But I think my most useful comments came at the end of my piece.

…maybe the tax system wouldn’t engender so much hostility and disrespect if it was simple, transparent, fair, and conducive to growth. And that may be the big-picture lesson to learn as we conclude our analysis. When the income tax was first imposed back in 1913, the top tax rate was only 7 percent, the tax form was only two pages, and the tax code was easily understandable. But now that 100 years have gone by, the tax system has become a mess, like a ship encrusted with so many barnacles that it can no longer function. …the bottom line is that the biggest scam is the entire internal revenue code. The winners are the lobbyists, politicians, bureaucrats and insiders. The losers are America’s workers, investors, and consumers.

In other words, if we actually want a humane and sensible system, we should throw the current tax code in the garbage and replace it with a simple and fair flat tax.

And that’s exactly the message I shared in this interview with C-Span.

Here are a few of the points from the discussion that are worth emphasizing.

The current tax code benefits Washington insiders, not the American people.

But I’m not optimistic about fixing the tax code, in part because the crowd in DC would lose some power.

We’ll never get good tax reform unless there’s genuine entitlement reform to restrain the growing burden of government spending.

The flat tax and national sales tax are basically different sides of the same coin.

If you want class-warfare tax rates on the rich, keep in mind that high rates don’t necessarily translate into more revenue.

The no-tax-hike pledge is a vital and necessary component of a strategy to restrain government.

Itemized deductions benefit the rich, not the poor.

If you care about poor people, focus on growth rather than inequality.

We should mimic Hong Kong and Singapore, not France and Greece.

P.S. I wrote last week that the Senate GOP put together a budget that is surprisingly good, both in content and presentation. A reader since reminded me that the Chairman of the Senate Budget Committee was a sponsor of the “Penny Plan,” which would lower non-interest outlays by 1 percent per year.

Since Mitchell’s Golden Rule simply requires that spending grow by less than the private sector, Senator Enzi’s Penny Plan obviously passes with flying colors.

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I’m not reflexively opposed to executive orders and other unilateral actions by the White House. A president and his appointees, after all, have a lot of regulatory authority.

This is because, for better or worse, many of the laws approved in Washington basically express a goal and identify some tools. It’s then up to the relevant agency or agencies to promulgate regulations to enforce and implement those tools in order to supposedly achieve those goals.

But here’s the catch. The executive branch has to make at least a semi-plausible case that any given action is consistent with the law.

And the problem with this White House is that it has been using regulations and executive orders to change laws, thwart laws, and ignore laws.

There have been several instances of the White House arbitrarily deciding to ignore or alter major parts of Obamacare.

The Obama Administration has decided a law giving the federal government authority over the “navigable waterways” of the United States also means the federal government can regulate ponds on private land.

President Obama’s Treasury Department not only used a regulation to force American banks to put foreign law above American law, it also dealt with the unworkability of FATCA by creating an intergovernmental agreement mechanism that isn’t even mentioned in the law.

And don’t forget, regardless of what you think about immigration, the President also unilaterally decided to grant amnesty to millions of illegal aliens.

And that issue served as a springboard for a discussion with Fox News about a possible White House scheme to unilaterally impose big tax hikes on the business sector.

I’m surprised that I didn’t splutter with outrage during the interview. You don’t need to be a constitutional scholar, or even a lawyer, to be able to read Article 1, Section 7, of the Constitution.

And while Obama may not have a problem with the notion of America becoming a banana republic, we actually have co-equal branches of government, each with specific roles and powers.

Here’s the relevant text from the Constitution, as contained in the official repository at the National Archives.

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills. Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States.

Maybe I’m not very careful reader, but I don’t see anything in that passage about “unless President Obama feels otherwise” or “with the exception of unilateral tax hikes on companies.”

Though I imagine Ruth Bader Ginsburg could rationalize that such hidden clauses actually exist.

For additional background, here’s some of what The Hill has reported.

The Obama administration is not ruling out using executive powers to also address the tax code. With Senate Democrats openly pushing the administration to take its own action on the tax front, the White House is not shooting down the idea. …Earnest noted that the president has told lawmakers what he is interested in on taxes — closing loopholes for the wealthy and corporations… Earnest said he was not “ruling anything in or out,” when it came to specific executive steps. “This is related to the president’s ability to use his executive authority to do what he thinks is the right thing for the country,” he said.

By the way, my opposition to unilateral changes is based on principle.

So I’d be opposed even if a pro-freedom President wanted to suspend bad parts of the tax code or use “prosecutorial discretion” to provide de facto amnesty to taxpayers who refused to comply with an immoral part of the tax code, such as the death tax.

Though you won’t be surprised to learn that Obama isn’t contemplating any good unilateral changes. Instead, the policies being examined would exacerbate double taxation and extend worldwide taxation.

So we may get the worst of all worlds. Unilateral action on taxes that makes a mockery of our Constitution and rule of law while also making an already terrible business tax system even worse.

P.S. The United States only ranks #19 in an international comparison of what nations do a good job of upholding the rule of law. Makes you wonder where we’ll rank by the time Obama leaves office.

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Last week, I shared a TV interview about Obama’s budget, but much of the discussion was routine and didn’t warrant special attention.

But there was one small part of the interview, dealing with the silly claim that America became a rich nation because of socialism, that got me all agitated.

Well, to quote the great Yogi Berra, it’s deja vu all over again. Here’s an interview I did with CNBC about labor unrest. As you might expect, I made the standard libertarian argument that it’s not the job of government to pick sides when labor and management have squabbles.

That’s a point I’ve made before (here, here, here, here, here, and here), so there’s no need to elaborate on that issue.

But if you pay attention at the 3:00 mark of the video, you’ll notice that the discussion shifts to income inequality. And this is what got me agitated. I’m completely baffled that some people think that redistribution is more important than growth.

As I point out in the interview, nobody wins in the long run if you have a stagnant economy and politicians are fixated on re-slicing a shrinking pie.

The goal of everyone – including unions and leftist politicians – should be growth. If we get robust growth, that will mean tight labor markets, and that’s a big cause of rising wages.

But here’s my hypothesis to explain why statists don’t support good policies. Simply stated, I think they hate the rich more than they like the poor.

That sounds like a rather bold claim, but is there any other explanation for why they reject the types of tax policies (such as lower corporate rates, reduced double taxation, and expensing) that will increase investment, thus boosting productivity and wages?

Heck, look at this chart showing the relationship between capital formation and labor compensation.

Any decent person, after looking at the link between capital and wages, should be clamoring for the flat tax.

Yet Obama wants to move the tax code in the opposite direction!

I confess that I have no idea if this is because of malice or ignorance, but I do know that no nation has ever generated faster growth with class warfare.

I realize I’m ranting, but the more I think about this topic, the more upset I get. Politicians and their allies are making life harder for workers, and I hope I never stop being outraged when that happens.

P.S. On a totally separate subject, here’s a good joke forwarded to me by a friend this morning. It definitely belongs in my collection of gun control humor.

A state trooper in Kansas made a traffic stop of an elderly lady for speeding on U.S. 166 just East of Sedan, KS. He asked for her driver’s license, registration, and proof of insurance. The lady took out the required information and handed it to him.

In with the cards, he was somewhat surprised (due to her advanced age) to see she had a concealed carry permit. He looked at her and asked if she had a weapon in her possession at this time. She responded that she indeed had a .45 automatic in her glove box.

Something, body language, or the way she said it, made him want to ask if she had any other firearms. She did admit to also having a 9mm Glock in her center console. Now he had to ask one more time if that was all. She responded once again that she did have just one more, a .38 special in her purse.

He then asked her “Ma’am, you sure carry a lot of guns. What are you so afraid of?”

She looked him right in the eye and said, “Not a damn thing!”

You can enjoy other examples of gun control humor by clicking here, here, here, here, here, and here.

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Back in 2013, I actually wrote something vaguely nice about HBO’s Bill Maher. Or at least I expressed approval for a point he made about the limits of class-warfare taxation.

It’s now time to compensate for that action.

Check out this interview. It’s about Obama’s new tax-and-spend budget, but pay particular attention at the 5:15 mark of the video and you’ll hear Maher asserting that “socialism” deserves the credit for the development of a thriving middle class in America.

Wow. Maher’s comments are astonishingly illiterate.

As I remarked in the interview, the United States (like other western nations) had a tiny public sector during the period when it transitioned from agricultural poverty to middle-class prosperity.

Federal spending averaged only about 3 percent of economic output, and overall government spending (including state and local governments) was only about 10 percent of GDP.

If that was socialism, then sign me up!

This isn’t to say we have laissez-faire paradise in the 1800s and early 1900s. Some of the so-called Robber Barons were cronyists who used government favoritism to line their pockets. Monetary policy oftentimes was a mess because of government regulation and control of banks. Tariffs were very onerous. And Jim Crow laws were an odious example of government power being used to oppress an entire class of citizens and hamper their ability to participate in the market economy.

But the one thing we didn’t have back then was socialism, whether you use the right definition (government ownership of the means of production) or the sloppy definition (a redistributive welfare state).

Sigh.

Enough on that topic. The bulk of the interview, of course, focused on Obama’s budget. I got in my main point, which is that we need to focus on restraining the growth of government spending.

So rather than recycle my thoughts, let’s cite comments by two wise observers.

Here’s how Dan Henninger of the Wall Street Journal described the President’s plan.

The president’s annual budget reminds the Beltway tribes of what they do—tax the country, distribute revenues to their allies, and euphemize it as a budget. With his 2015 budget, Barack Obama at last makes clear his presidency’s reason for being: to establish an empire of taxation. …In six years, the Obama Democrats have abandoned any belief in the idea that the private sector is the primary cause of American prosperity. Instead, they seem to see the private sector as a kind of tax sump-pump, a dumb machine whose only purpose is tax flow. …That is the empire of taxation. It is an isolated system, based in Washington, which allocates what it exacts from the private sector.

And here’s some of what George Will wrote about the poisonous spiral of more government leading to more stagnation leading to more demands for more government.

The progressive project of maximizing the number of people dependent on government is also aided by the acid of insecurity that grows rapidly when the economy does not. Anxious and disappointed people are susceptible to progressives’ blandishments about the political allocation of wealth and opportunity — “free” this and that. By making slow growth normal, iatrogenic government serves the progressive program of defining economic failure down.

I fully agree. Not only the points about the weakness of the Obama “recovery,” but also the concerns about more and more people being lured into government dependency, which sabotages American exceptionalism.

Jerry Holbert has a nice summary of the President’s worldview.

Hmmm…I think we’ve seen this bookstore before.

Though I’m surprised Obama is bothering to shop when he can just go to the library for his favorite books.

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There’s a lot of navel-gazing analysis in Washington about whether to expect some sort of bipartisanship over the next two years.

I find such discussions very irritating because they assume that you automatically get good results when Republicans and Democrats both agree on a policy. My reaction, to put it mildly, is “these people are f@*&#^@g crazy!!!”

Was it progress when Republicans and Democrats conspired to bail out their contributors on Wall Street with TARP?

Was it progress when Republicans and Democrats joined hands to impose Bush’s no-bureaucrat-left-behind education scheme?

Was it progress when the first President Bush broke his read-my-lips promise and sided with Democrats to boost taxes and spending in 1990?

So you can see why I instinctively like gridlock. Simply stated, it’s better to do nothing if the alternative is to have more bad laws that expand the burden of government.

But perhaps I’m being too cynical. After all, sometimes bipartisanship accidentally produces good policies. Like when we got the Budget Control Act as part of the 2011 debt limit fight, which then led to the sequester.

Though I’m not holding my breath expecting similar good results over the next two years.

Why? Because as I said in my first comments during last week’s John Stossel show, the President is simply too far to the left to expect any progress.

I do acknowledge in the interview that you have to give Obama credit for ideological consistency, but his agenda of bigger government and more dependency doesn’t lead me to think we’ll get any good policy in the near future.

Here are a few additional points from the interview that are worth highlighting.

*This is still a weak recovery, perhaps most compelling illustrated by comparing what happened under Reagan with what’s been happening under Obama.

*But things have improved in the past couple of years, in part because there’s been progress in restraining the burden of government spending.

*Ironically, the President bragged that America’s been creating more jobs than Europe even though he wants to copy European policies.

*It’s also galling that the President says he wants to make America more competitive even though he’s pushing class-warfare taxation.

*Republicans also deserve criticism since some of them are advocating for higher gas taxes rather than the federalist approach of decentralization.

*On tax reform, if you give politicians a new tax, it’s very likely they will use the money to finance bigger government instead of abolishing an existing tax.

*My final comment from the interview brings us back to the central point of today’s post. Simply stated, bipartisanship isn’t good if it means more government.

P.S. I goofed last week when I wrote that median household income fell every year under Obama, and I repeated that mistake in the Stossel interview, which took place before I discovered that there was a very small increase in 2013. Well, I also made another mistake in the interview. I said that Kate Upton was the daughter of Congressman Fred Upton. That’s wrong. She’s actually his niece. Alas, yet another sign that I’m clueless about popular culture. I guess that means Kate won’t date me after the PotL finds another boyfriend.

P.P.S. Since we’re still debating over the issues Obama raised in his speech, I may as well call attention once again to my contribution to the U.S. News and World Report online debate on whether the State of the Union is strong. I’m doing okay in the overall reader rankings, but (as I write these words) I do have the third-highest number of “down” votes, so I gather that some of our leftist friends must not like what I wrote. So feel free to go to the article and click on the “up” arrow if you want to help me out.

P.P.P.S. Shifting to a less narcissistic topic, I wrote in 2013 that the Ohio Governor should be known as John “Barack” Kasich because he chose to expand Obamacare in his state. Now, as explained by Philip Klein of the Washington Examiner, we have Mike “Barack” Pence from Indiana.

…on Tuesday, he betrayed taxpayers when he embraced an expansion of Medicaid through President Obama’s healthcare law. …Pence buckled under pressure from hospital lobbyists who are eager to receive more federal money… Myopic Republican governors think they can fool conservatives by gaining token concessions on what remains a government-run healthcare program and calling it “free market reform.” But the Obama administration is playing the long game, realizing that if it keeps adding beneficiaries to the books, big government liberalism wins.

How disappointing. Yes, GOP governors are getting pressured by in-state lobbyists because of the lure of “free” federal money, but that’s no excuse for adopting a policy that will hurt federal taxpayers in the short run and state taxpayers in the long run.

This is yet another reason why we need to replace the federal Medicaid entitlement with a block grant.

P.P.P.P.S. I don’t want to close on a dour note, so let’s shift to sequestration, which was one of the topics in the Stossel interview. That was not only an unambiguous victory over big government, but it also resulted in some great political humor. You can see some of my favorite cartoons on the topic by clicking herehere, here, here, here, and here.

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One of the many challenges of being libertarian is that people sometimes think you’re naive about foreign policy (sort of like the first entry in this 24-part satirical collage of libertarians).

In large part, I think that’s because they confuse non-interventionism with pacifism.

To elaborate on why they’re wrong, I’ve shared some thoughts from Mark Steyn, George Will, and Steve Chapman on the libertarian mindset on foreign policy. And to augment their analysis, here’s John Stossel’s very good synopsis of the clear-headed libertarian approach.

Most libertarians believe our attempts to create or support democracy around the world have made us new enemies, and done harm as well as good. …Some conservatives respond to that by calling us isolationists, but we’re not. I want to participate in the world; I just don’t want to run it. …it’s realistic to acknowledge that America has dangerous enemies, it’s also realistic to acknowledge that going to war is not always worth the loss of money and lives, and that it makes new enemies. War, like most government plans, tends not to work out as well as planners hoped.

And in a version of Mitchell’s Law, he points out that screwups become the excuse for further mistakes.

Occasionally government acknowledges mistakes in domestic policy — but that doesn’t mean it then becomes more efficient. It usually just spends more to try, and fail, to fix the problem. It’s the nature of government. Politicians don’t face the competitive incentives that force other people to make hard decisions. Candidate Obama garnered support by criticizing Bush for costing money and lives through a protracted stay in Iraq. But that didn’t stop Obama from putting more money and troops into Afghanistan. …Our military should be used for defense, not to police the world.

So where exactly does Obama fit? He’s obviously not a neo-con, but how should he be characterized?

My colleague at Cato, Gene Healy, writes that the President has stumbled upon a good guide for foreign policy.

…there’s something to be said for President Obama’s latest foreign-policy maxim: “don’t do stupid stuff.” …Yet “DDSS” has been greeted with contempt by the D.C. commentariat. “How far we have come from the audacity of hope, yes we can” moans David Rothkopf, publisher of Foreign Policy magazine. “DDSS” just isn’t an “elevating notion,” he complains. (Neither, I suppose, is the Hippocratic Oath.) …The concept of avoiding catastrophic error shouldn’t be hard to grasp.

But having a good guide doesn’t mean anything if you don’t live up to it (just like Bush didn’t live up to his pronouncement that he wanted America to have a “humble” approach to the world).

It’s true that Obama has never lived up to the cautious foreign policy maxim he’s coined: launching a destructive “dumb war” in Libya, doubling down on Afghanistan with precious little to show for it. But “DDSS” is a sound, even noble, foreign policy goal, one that can help us avoid further sacrifice of American blood and treasure — even as we try to extricate ourselves from past stupidities.

I add my two cents to this discussion, pointing out in this interview about Ukraine that Obama sometimes veers in the direction of libertarianism. Or at least non-interventionism.

Unfortunately, I suspect that Obama doesn’t genuinely believe in non-interventionism. Instead, he sometimes winds up doing the right thing because of passivity rather than some underlying and principled desire to avoid foreign entanglements.

Speaking of libertarian foreign policy, this Steve Breen cartoon is a pretty good summary of what we’ve been doing in Afghanistan for the past decade.

This reminds me of being in a coalition meeting last decade and somebody from the Bush Administration was saying the mission  was a success because tax dollars had been used to build a bunch of schools and sewer system in Afghanistan.

Being the disagreeable type, I pointed out that the federal government shouldn’t even build schools and sewers in America, so why on earth were we doing that overseas.

I thought it was a good point, but the silence in the room reminded me that libertarians aren’t always the most persuasive people.

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Early last month, I wrote an article for The Federalist on job creation.

I used that opportunity to document that there is a serious problem with jobs under Obama, and I explained that the problem existed in part because the President was intervening with so-called stimulus schemes.

The far better approach is for government to “get out of the way.”

Though that’s not really correct. I want changes in government policy. Indeed, major changes. But those policy changes would involve less government, whereas Obama pushed major changes in the other direction.

I took this discussion to the next level in this debate on C-Span.

My opponent, Ross Eisenbrey of the Economic Policy Institute, was my mirror image.

He wanted more spending and I urged less spending.

He called for more intervention and I advocated less intervention.

We would probably even disagree about the answer to 2 + 2 = ?.

Viewers can make their own decisions on who did a better job in the debate. I’ll simply state that my strongest point (at least in my humble opinion) is that businesses only create jobs when they expect new workers will increase net revenue.

But don’t believe me. You can read what actual real-world employers have to say about the topic.

In other words, I agree with the message of this poster. If you think more government is the answer, you’ve asked a very silly question.

P.S. I’m in Monaco for the Convention of Independent Financial Advisors and the Princess of the Levant is with me at the Hotel Hermitage. It’s nice to get a glimpse at the lifestyle of the infamous Top 1 Percent.

photo5edited

Fortunately, Monaco seems to have plenty of guys with women out of their league, so I don’t feel too out of place.

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As a supporter of genuine capitalism, which means the right of contract and the absence of coercion, I don’t think there should be any policies that help or hinder unions.

The government should simply be a neutral referee that enforces contracts and upholds the rule of law.

Similarly, I also don’t have any philosophical objection to employers and employees agreeing to “defined benefit” pension plans, which basically promise workers a pre-determined amount of money after they retire based on factors such as average pay and years in the workforce.

After all, my money and property aren’t involved, so it’s not my business.

That being said, these so-called “DB plans” have a bad habit of going bankrupt. And that means the rest of us may get stuck with the bill if there’s a taxpayer bailout.

I discuss these issues in an interview with Fox Business News.

My main point is that there’s a deep hole in many of these plans, so someone is going to feel some pain.

I don’t want taxpayers to be hit, and I also don’t think well-managed pensions should be gouged with ever-rising premiums simply because other plans are faltering.

But I bet both will suffer, as will workers and retirees in the under-funded plans.

As part of the interview, I also warned that other “DB plans” are ticking time bombs. More specifically, most pensions for state and local bureaucrats involve (overly generous) pre-determined commitments and very rarely have governments set aside the amount of money needed to fund those promises.

And the biggest DB time bomb is Social Security, which has an unfunded cash-flow liability of more than $30 trillion. That’s a lot of money even by Washington standards.

But I closed with a bit of good news.

As workers and employers have learned that DB plans tend to be unstable and unsustainable, there has been a marked shift toward “defined contribution” plans such as IRAs and 401(k)s.

These plans are the private property of workers, so there’s no risk that the money will be stolen or squandered.

But even this good news comes with a caveat. We closed the interview by fretting about the possibility that governments will steal (or at least over-tax) these private pension assets at some point in the future.

That’s already happened in Argentina and Poland, so I’m not just being a paranoid libertarian.

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It’s not often that I agree with the Washington Post, but a government-run monopoly is not the best way to get mail delivered.

Moreover, it’s not often that I agree with the timid (and sometimes reprehensible) Tory-led government in the United Kingdom, but they just put the Royal Mail into the private sector. And that’s something deserving of loud applause.

Here’s a slice of the big news from the Financial Times.

The goal of privatising Royal Mail had defeated governments for 40 years. …Even prime minister Margaret Thatcher balked at the political risk of selling off a public service that carried the Queen’s head on its stamps. This time, the legislation went through parliament.

My Cato colleague, Chris Edwards, is suitably impressed.

Here’s some of what he wrote for Cato-at-Liberty.

Britain privatized its Royal Mail in 2013, proceeding with an initial public offering of shares that raised about $2.7 billion. …privatization in Britain has been hugely successful. Prime Minister Cameron should be applauded for having the guts to build on the privatization reform legacy of Thatcher, Major, and Blair. Meanwhile on this side of the pond, Republican Darrell Issa is having trouble getting his own nominally conservative party to accept even small changes to the broken government postal system.

Not surprisingly, some folks in Washington think we should move in the wrong direction by retaining the monopoly and allowing the Postal Service to enter new lines of business.

In this interview with Neil Cavuto, I explain why the Postal Service should be unleashed – but only after getting weaned from the taxpayer teat.

You’ll notice that I took the opportunity to explain that many poor people can’t afford banking services in part because government “anti-money laundering” rules impose very high costs on banks.

And since I’ve already mentioned that I have strange bedfellows at the Washington Post and UK government on the issue of postal privatization, I may as well note that the World Bank agrees with me about the poor being disadvantaged by these ill-advised financial regulations.

Let’s close with a good cartoon by Jerry Holbert.

Postal Service Cartoon

It’s not as good as his classics about Obamacare, sequestration, big government, and Patty Murray’s budget, but obviously very appropriate for today’s topic.

P.S. In there was a contest for government stupidity, the Japanese might be front runners.

No, I’m not talking about their bizarre policy of regulating coffee enemas.

Instead, I’m baffled by the notion of government-funded dating. I’m not joking. Check out these excerpts from the British press.

The Japanese government is funding matchmaking events in a desperate attempt to boost a birth rate that has halved over the past six decades. …The support of marriage – and the active encouragement of young people to settle down – is regarded by government policy-makers as a key strategy for boosting the nation’s birth rate. …Matchmaking events organised by local authorities, where young singles are introduced to one another in romantic settings, are becoming increasingly common in areas such as rural Kochi, a prefecture around 500 miles west of Tokyo.

By the way, Japan does have a severe demographic problem.

And when you mix falling birthrates and increasing longevity with a tax-and-transfer welfare state, the results are catastrophic.

But the right way to deal with that problem is with genuine entitlement reform, not another bound-to-fail government-run version of Match.com.

P.P.S. If you like making fun of foreign governments, here are some more examples.

Taxpayer-financed friends for mass murderers in Norway.

Spending 800,000 euro to collect 25,000 euro of tax in Germany.

Giving welfare handouts to foreigners in the United Kingdom.

Remember, nothing is too stupid for government.

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I generally get very suspicious when rich people start pontificating on tax policy.

People like Warren Buffett, for instance, sometimes advocate higher taxes because they’re trying to curry favor with the political elite. Or maybe they feel compelled to say silly things to demonstrate that they feel guilty about their wealth.

Tax SystemRegardless, I don’t like their policy proposal (as you can see from TV debates here and here).

That being said, I also realize that stereotypes can be very unfair, so it’s important to judge each argument on the merits and not to reject an idea simply because it comes from a rich guy.

That’s why I was very interested to see that Bill Gates, the multi-billionaire software maker, decided to add his two cents to the discussion of tax reform.

Here’s what Gates said at an American Enterprise Institute forum (transcript here and video here).

…economists would have said that a progressive consumption tax is a better construct, you know, at any point in history. What I’m saying is that it’s even more important as we go forward.

He doesn’t really expand on those remarks other than to say that it’s important to reduce the tax on labor.

That part of Gates’ remarks doesn’t make much sense for the simple reason that workers are equally harmed whether the government takes 20 percent of their income when it’s earned or 20 percent of their income when it’s spent.

But his embrace of a “progressive consumption tax” is very intriguing.

I don’t like the “progressive” part because that’s shorthand for high marginal tax rates, and that type of class-warfare policy is a gateway to corruption and is also damaging to growth (see here, here, here, here, and here).

But the “consumption” part is one of the key features of all good tax reform plans.

For all intents and purposes, a “consumption tax” is any system that avoids the mistake of double-taxing income that is saved and invested.

Both the national sales tax and the value-added tax, for instance, are examples of consumption-based tax systems.

But the flat tax also is a consumption tax. It isn’t collected at the cash register like a sales tax, but it has the same “tax base.”

Under a flat tax, income is taxed – but only one time – when it is earned. Under a sales tax, income is taxed – but only one time – when it is spent. They’re different sides of the same coin.

Most important, neither the flat tax nor the sales tax has extra layers of tax on saving and investment. And that’s what makes them “consumption” taxes in the wonky world of public finance economists.

This means no death tax, no capital gains tax, no double taxation of interest or dividends. And businesses get a common-sense cash-flow system of taxation, which means punitive depreciation rules are replaced by “expensing.”

So Bill Gates is halfway on the path to tax policy salvation. His endorsement of so-called progressivity is wrong, but his support for getting rid of double taxation is right.

If you like getting into the weeds of tax policy, it’s interesting to note that Gates is advocating the opposite of the plan that was proposed by Congressman Dave Camp.

Camp wants to go in the right direction regarding rates, but he wants to exacerbate the tax code’s bias against capital. Here’s what I said to Politico.

Dan Mitchell, an economist at the libertarian Cato Institute, said he didn’t see it as an individual versus business issue, but rather took issue with Camp’s punitive treatment of savings and investment. “The way Camp is extracting more money from businesses — more punitive depreciation and the like — is he is making the tax system more biased against savings and investment,” said Mitchell, who worked for Republican Sen. Bob Packwood after the historic 1986 tax act that Packwood helped negotiate as chair of the Finance Committee.

By the way, this doesn’t mean Camp’s plan is bad. You have to do a cost-benefit analysis of the good and bad features.

Just like that type of analysis was appropriate in 1986, when the bad provisions that increased taxes on saving and investment were offset by a big reduction in marginal tax rates.

The 1986 law did take aim at some popular business benefits, including a lucrative investment tax credit. But the reward was a lot sweeter. “At least then, we got a big, big reduction in tax rates in exchange,” Mitchell said.

Here’s an interview I did with Blaze TV on Congressman Camp’s plan. If you pay attention near the beginning (at about the 2:00 mark), you’ll see my matrix on how to grade tax reform plans.

Now let’s circle back to the type of tax system endorsed by Bill Gates.

We obviously don’t know what he favors beyond a “progressive consumption tax,” but that bit of information allows us to say that he wants something at least somewhat similar to the old “USA Tax” that was supported by folks such as former Senators Sam Nunn and Pete Domenici.

Is that better than the current tax system?

Probably yes, though we can’t say for sure because it’s possible they may want to increase tax rates by such a significant amount that the plan becomes a net minus for the economy.

Not that any of this matters since I doubt we’ll get tax reform in my lifetime.

P.S. Speaking of taxes and the rich, you’ll enjoy this very clever interview exposing the hypocrisy of wealthy leftists.

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I wish there was a magic wand that somebody could wave and all of us would have more money. Or maybe Santa Claus could play that role, or some version of the Tooth Fairy.

And if that magic person only had limited powers, I would want more money specifically for those with modest incomes.

Unfortunately, we don’t live in this fantasy world. As a society, we can’t enjoy output unless we first go through the toil and trouble of working, saving, and investing.

Heck, even some leftists have admitted that you can’t redistribute unless somebody first produces.

But that doesn’t stop some politicians from practicing free-lunch economics. They tell us, for instance, that government can impose a higher minimum wage with no job losses.

And now the Obama Administration is claiming that it can expand overtime eligibility rules without any adverse impact of base pay, hours, or employment.

In my role as the designated bad guy who has to inform people there’s no magic wand or Santa Claus, here’s what I told the New York Times.

“There’s no such thing as a free lunch,” said Daniel Mitchell, a senior fellow with the Cato Institute, who warned that employers might cut pay or use fewer workers. “If they push through something to make a certain class of workers more expensive, something will happen to adjust.”

I also shared my putative wisdom with the International Business Times, underscoring the principle that government shouldn’t intervene in labor markets.

“Our view is pretty straightforward,” Daniel Mitchell, a fellow at the libertarian CATO Institute in Washington D.C., told International Business Times by phone on Wednesday. “From a philosophical perspective the government shouldn’t get involved with labor contacts between two consenting adults. You can’t impose more labor costs and have them magically disappear.”

I also pontificated on this issue for CBS News radio, but the “highlight” of the day was having to dispel economic myths in a series of TV interviews.

In this debate for Nightly Business Report, I had to explain that faster growth was the only effective way to improve living standards, but my opponent somehow thought we should go back to the glorious 1970s.

And in this interview with Ali Velshi on AJ, I’m stunned that he blames today’s weak job market on free markets.

Last but not least, I made what will probably be my last appearance on Larry Kudlow’s great show on CNBC and used the opportunity to say we shouldn’t copy Europe’s failed welfare states.

Larry is retiring at the end of the month and he will be sorely missed.

P.S. Lots of people are suffering because of Obamacare, especially taxpayers and patients.

But since our main topic today is jobs, let’s not forget that millions of workers are being screwed over by this bad law. They’re losing jobs, losing hours, and/or losing take-home pay thanks to Obama’s ham-fisted intervention.

If you like gallows humor, Reason TV addresses this issue in a new video. Enjoy.

And if you like Obamacare parody videos, here are the other ones that will produce some smiles and laughs.

*The head of the National Socialist Workers Party finds out he can’t keep his health plan.

Varvel Obamacare Ambulance*A creepy version of Uncle Sam wants to know about your sex life.

*Young people discover that they’re screwed by Obamacare.

*One of the biggest statists of the 20th century is angry that the Obamacare exchanges don’t work.

*A consumer tries to buy Obama-coffee.

By the way, if you’re concerned about America’s fiscal future, here’s a video on Obamacare that definitely is not funny.

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In recent weeks, I’ve pontificated on Obama’s spendthrift budget, Congressman Dave Camp’s timid tax reform plan, and the corrupt cronyism of Washington.

I got to elaborate on all these topics – and more – in this interview with Professor Glenn Reynolds, more widely known as Instapundit.

If there was an overall theme, it’s that President Obama’s statist agenda is not helping the country.

Other than my hair looking strange, I think this was a good interview.

But here’s a point I probably should have included when assessing the President’s performance. If you look at the Census Bureau’s data on median household income (adjusted for inflation), you’ll see that the median American is earning less during the Obama years. And that’s true whether you use 2008 or 2009 as the base year.

Median Household Income

Now let me provide three caveats on this data, two that help Obama and another that is less favorable.

1. First, if you look at the historical data from the Census Bureau, you’ll see that median household income is a lagging indicator. That means that incomes don’t improve in the first year or two of a recovery.

In other words, you can argue, with considerable justification, that Obama inherited bad numbers.

2. Second, median household income is an incomplete measure of living standards. If you peruse the data, you’ll see that median income for 2012 (the latest available year) is lower than it was the year Reagan left office.

I’m a big Reagan fan, so I’m tempted to say the country has lost ground since he left office, but that would be an exaggeration. We obviously have higher living standards today, notwithstanding the Census Bureau numbers.

3. But I’m not making excuses for Obama. My third and final caveat is that the median numbers don’t tell the full story. If you look at the Census Bureau’s numbers for various income groups, you’ll see that the only cohort that has enjoyed higher real income during the Obama years is….drum roll, please…the rich!

You read correctly. The bottom 20 percent have suffer lower incomes. The three middle-income quintiles have lost ground. Even the top 20 percent have lower median incomes. The only group that is ahead is the top 5 percent.

In other words, Obama may use lots of class-warfare rhetoric to pretend he’s on the side of ordinary people.

But his policies (TARPSolyndra, etc) have been enormously beneficial to the cronyists and insiders that have made the Washington metropolitan area so wealthy.

Here’s some of what Senator Portman of Ohio had to say about the topic.

It’s been five years since the experts said the recession was over, but for millions of Americans, it feels like it never ended. We’re living through the weakest economic recovery since World War II, and a lot of folks are struggling to make ends meet. Unemployment remains stubbornly high; the number of long-term unemployed is actually at record levels. But these statistics only tell half the story. Eleven million Americans have become so discouraged that they’ve given up looking for work altogether. Poverty rates have gone up, salaries have gone down, with the average family now bringing home $4,000 less than they did just five years ago.

Just in case you doubt Portman’s remarks, here’s the chart I produced using data from the Minneapolis Federal Reserve Bank.

It shows every recovery since end of World War II. The red line is Obamanomics.

Hmmm….this is almost enough to make one think that maybe we should try free markets and small government instead.

P.S. This Gary Varvel cartoon provides a good synopsis of Obama’s economic policy.

Political Cartoons by Gary Varvel

I also like Varvel’s take on Obamacare, and here’s another one of his cartoons on Obamanomics.

Varvel is the best at exposing the spending-cut hoax in DC, as you can see from this sequester cartoon and this deficit reduction cartoon. This cartoon about Bernie Madoff and Social Security, however, is at the top of my list.

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One of my goals is to convince people that even small differences in long-run growth can have a powerful impact on living standards and societal prosperity.

In other words, the economy is not a fixed pie. The right policies, such as free markets and small government, can create a better life for everybody.

And bad policy, needless to say, can have the opposite impact.

Very few people realize, for instance, that Argentina was one of the world’s 10-richest nations at the end of World War II, but interventionist policies have weakened growth and caused the country to plummet in the rankings.

Hong Kong, by contrast, had a relatively poor economy at the end of the war, but now is one of the globe’s most prosperous jurisdictions.

If you want more examples, check out this chart showing how North Korea and South Korea have diverged over time.

Or how about the chart showing how Chile has out-performed other major Latin American economies.

This comparison of living standards in the United States and Europe also is very compelling.

Here’s a simple guide to highlight the difference between weak growth and strong growth. It shows how long it takes a nation to double economic output depending on annual growth.

As you can see, a nation with 1 percent growth (think Italy) will have to wait 70 years before the economic pie doubles in size.

But a nation that grows 4 percent or faster each year (think Singapore) will double GDP in less than 20 years.

Years to Double GDP

So why am I plowing through all this material?

My answer is simple, but depressing. I’m worried that the United States is becoming more like Europe. During the Bush-Obama years, we’ve seen big increases in the size and scope of government, and it’s no surprise that we’re now suffering from anemic economic performance.

That’s the first point I made in this interview with Michelle Fields of PJTV.

Much of the material in the interview will be familiar to regular readers, but a few points deserve some emphasis.

I say that America becoming more like Europe isn’t the end of the world, but I should elaborate. What I meant is that we can survive 2 percent growth instead of 3 percent growth. We could even survive 1 percent growth.

But if we continue on the current path of ever-growing government and combine that with an aging population and poorly designed entitlement programs, then we will see the end of the world. At least in the sense of fiscal crisis and economic collapse.

All the points I make about jobs, employment, labor force participation, unemployment insurance and disability are simply different ways of saying that it’s not good for the economy when politicians continuously make dependency more attractive than work.

If you want to know more about why the so-called stimulus was a failure, my article in The Federalist is a nice place to start.

The libertarian fantasy world of a small central government is a very good goal, but it’s still possible to make significant progress if politicians follow Mitchell’s Golden Rule.

P.S. You may recognize the host because she narrated a very good video for the Center for Freedom and Prosperity. Michelle explained how the big-government policies of Hoover and Roosevelt deepened and extended the Great Depression.

She also exposed rich leftists as complete hypocrites in this interview.

P.P.S. Since I mentioned above that South Korea has far surpassed North Korea, I should share this powerful nighttime picture of the Korean peninsula.

North Korea v South Korea

Gee, maybe capitalism is better than statism after all.

Unless, of course, you think there’s something really nice about North Korea to offset South Korea’s economic advantages.

Such as malnutrition or enslavement. Or a small carbon footprint, which led some nutjobs to rank Cuba far above America.

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As part of his State-of-the-Union speech, President Obama announced he was going to unilaterally create a new retirement savings account that supposedly would be available to all workers.

Employers would be mandated to facilitate these”MyRA” accounts, and the money collected would be invested in “guaranteed” government bonds.

There are some good features to the MyRA plan, most notably the fact that money in the accounts would be protected from double taxation. Workers would put after-tax money in the accounts, but there would be no additional layers of tax on any earnings, or when the money is withdrawn.

In other words, a MyRA would be akin to a back-ended (or Roth) IRA.

But there are some bad features, including the fact that taxpayers would be subsidizing the earnings, or interest, paid to account holders (though this would be a relatively benign form of government spending, at least compared to Obamacare, ethanol, etc, etc).

My biggest complaints, though, are the sins of omission, which I discuss in this interview for Blaze TV.

Simply stated, if Obama was concerned about low returns for savers, he should be directing his ire at the Federal Reserve, which has artificially pushed interest rates to very low levels as part of its easy-money policy.

But more importantly, MyRAs will be very inadequate for most workers with modest incomes. If the President really wanted to help ordinary people save for retirement, he would follow the successful example of more than 30 other nations and allow workers to shift their payroll taxes into personal retirement accounts.

This video explains why reform is so desirable.

Critics say it would be very expensive to make a transition to this modern system, and they’re right. If we let younger workers put their payroll taxes in a personal accounts, we’ll have to come up with a new source of revenue to finance benefits being paid to current retirees and older workers.

And we’re talking lots of money, as much as $7 trillion over the next few decades.

But that’s a lot less than the $36 trillion cash shortfall that we’ll have to somehow deal with if we maintain the current system.

In other words, we’re in a very deep hole. But if we shift to personal retirement accounts, the hole won’t be nearly as large.

P.S. The video mentions that Chile and Australia deserve special attention. Click here if you want to learn about Chile’s successful system and click here if you want to see how Australia’s “superannuation” system has been a big winner.

P.P.S. Some people already have asked me whether I was too Pollyannish in saying that there’s no risk for several decades that Washington will default. I could be wrong, of course, and I have shared BISOECD, and IMF data that reveals the United States has gigantic long-run fiscal challenges. But as I said in the interview, I think most other welfare states will collapse first, and that will lead to “flight capital” coming to America, which will help prop up our system.

P.P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate dark humor.

P.P.P.P.S. You probably don’t want to know how Obama would like to “fix” the Social Security shortfall.

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I’ve shared many charts over the years, but two of the most compelling ones deal with poverty.

Poverty Rate DataThe numbers in this chart, which are based on Census Bureau data and scholarly studies (see here, here, here, and here), show that the poverty rate was steadily falling in the United States – until the federal government decided to launch a so-called War on Poverty.

Once Washington got more involved and started spending trillions of dollars, we stopped making progress. The poverty rate has changed a bit with shifts in economic conditions, but it’s stayed remarkably steady between 11 percent and 15 percent of the population.

So why have we stopped making progress? This second chart shows how redistribution programs create a dependency trap. The plethora of handouts from government make self-reliance and work comparatively unattractive, particularly since poor people are hit with very high implicit marginal tax rates.

And just as rich people respond logically to incentives, the same is true of poor people.

In a recent debate with a representative of the Center for American Progress, I tried to make these points. I doubt I had any effect on her outlook, but hopefully viewers began to see that the welfare state has been bad news for taxpayers and bad news for poor people.

Our debate was cut short by the host, but I think it was a fair representation of each side’s views.

And if you want more information on this topic, my former colleague from my days at the Heritage Foundation, Robert Rector, assesses the War on Poverty for today’s Wall Street Journal.

He starts with some very sobering numbers.

Fifty years later, we’re losing that war. Fifteen percent of Americans still live in poverty, according to the official census poverty report for 2012, unchanged since the mid-1960s. Liberals argue that we aren’t spending enough money on poverty-fighting programs, but that’s not the problem. …The federal government currently runs more than 80 means-tested welfare programs that provide cash, food, housing, medical care and targeted social services to poor and low-income Americans. Government spent $916 billion on these programs in 2012 alone, and roughly 100 million Americans received aid from at least one of them, at an average cost of $9,000 per recipient. …Federal and state welfare spending, adjusted for inflation, is 16 times greater than it was in 1964. If converted to cash, current means-tested spending is five times the amount needed to eliminate all official poverty in the U.S.

He then explains that poor people don’t suffer from material deprivation (which may explain why the Obama Administration wants to manipulate the numbers to justify more welfare spending).

…the typical American living below the poverty level in 2013 lives in a house or apartment that is in good repair, equipped with air conditioning and cable TV. His home is larger than the home of the average nonpoor French, German or English man. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flat-screen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.

Robert then gets to the heart of the issue, explaining that the welfare state has expanded dependency and exacerbated social pathologies.

…consider LBJ’s original aim. He sought to give poor Americans “opportunity not doles,” planning to shrink welfare dependence not expand it.  …By that standard, the war on poverty has been a catastrophe. The root “causes” of poverty have not shrunk but expanded as family structure disintegrated and labor-force participation among men dropped. A large segment of the population is now less capable of self-sufficiency than when the war on poverty began. …In 1963, 6% of American children were born out of wedlock. Today the number stands at 41%. As benefits swelled, welfare increasingly served as a substitute for a bread-winning husband in the home. …children raised in the growing number of single-parent homes are four times more likely to be living in poverty than children reared by married parents of the same education level. …Even in good economic times, a parent in the average poor family works just 800 hours a year, roughly 16 hours weekly, according to census data. Low levels of work mean lower earnings and higher levels of dependence.

Mr. Rector also has some specific suggestions in his column, most of which seem sensible, but this is where I think my idea of sweeping decentralization and federalism is very appropriate.

P.S. Thomas Sowell’s indictment of the welfare state is must reading.

P.P.S. Some honest leftists now acknowledge that big government creates worrisome forms of dependency.

P.P.P.S. If you want to know how dependency varies by state, here’s a map showing welfare payments and another map showing food stamp usage.

P.P.P.P.S. Shifting to a bigger stage, my least favorite international bureaucracy has made the preposterous claim that poverty is a bigger problem in America than it is in basket-case nations such as Greece and Portugal. Not that we should be surprised since the OECD actively urges a bigger welfare state in the United States.

P.P.P.P.P.S. And don’t forget our Moocher Hall of Fame if you want examples of the human cost of the welfare state.

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When you work in Washington (and assuming you haven’t been corrupted), you run the risk of being endlessly outraged about all the waste.

But not all waste is created equal. Some examples are so absurd that they deserve special attention.

We now have another example to add to the list. Russian diplomats have been busted for bilking the Medicaid program of more than $1 million.

This is so outrageous that it may actually be the impetus for some desperately needed reform, as I suggest in this interview with Neil Cavuto.

But is fraud really a problem? Defenders of the Medicaid entitlement presumably would like us to think that this latest story is just an anomaly.

That would be nice, but the experts who have looked at the issue have come to a much different conclusion.

While food stamp fraud is significant, especially with a record-high 47 million Americans now on food stamps, it pales in comparison to what is stolen from Medicare and Medicaid. …It is widely accepted across the political spectrum that upwards of $100 billion of that amount is fraud and abuse. Recently, a report from the Oversight and Government Reform Committee in the US House of Representatives outlined many billions of dollars being wasted every year just in New York’s Medicaid program. Grossly inflated payments to intermediate care facilities and excessive salaries were just the tip of the iceberg in a $53 billion program that easily bleeds  more than $10 billion annually to criminals.

So what’s the best way of dealing with the Medicaid mess? Fortunately, we have a simple answer. As I mentioned in the interview, the entire program should be block granted and turned over to the states.

That doesn’t automatically eliminate fraud, but it does create much better incentives for sound governance since state taxpayers would be the ones picking up the tab if a state program is riddled with fraud. Under the current system, by contrast, the cost of waste and malfeasance is spread among taxpayers from all 50 states.

This video from the Center for Freedom and Prosperity explains how block grants would work.

One final point to emphasize is that fraud reduction is really just a fringe benefit if we reform Medicaid.

The main reasons to decentralize the program are fiscal sanity and better health care policy.

But the one common thread is that third-party payer facilitates problems, whether we’re looking at excessive costs, health inefficiency, or rampant fraud.

P.S. Don’t forget the other two big entitlements that need reform, Social Security and Medicare. Like Medicaid, Medicare has major challenges with fraud. From what I understand, the retirement portion of Social Security doesn’t have major fraud issues, but the disability program is a huge problem.

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There are many reason I don’t like Obamacare, including its punitive impact on taxpayers and the way it takes our healthcare system even further from a market-based approach.

But now I’m increasingly worried Obamacare also is creating a playground for hackers and identity thieves – and the rest of us will be the victims.

Simply stated, the results probably won’t be very pretty when you mix together these two items.

1) Typical government incompetence.

2) Massive data collection by government.

I pontificate on these issues in an interview with Neil Cavuto.

To elaborate, the internal revenue code is filled with double taxation of income that is saved and invested. As such the IRS insists on knowing extensive details on our income-producing assets, as well as any capital gains we earn.

And, if you’re subject to the death tax, they’ll want to know about everything you own. None of that would be necessary if we had a flat tax or a national sales tax.

Heck, they wouldn’t even need to know about your bank account since there’s no double taxation of interest with real tax reform.

But we’re on the other side of the pendulum, with the government wanting to know just about everything about our financial affairs. That’s good news for statists who want more redistribution…and it’s good news for other thieves who also want to take our money (but without using government as a middleman).

If you think I’m needlessly worried, check out this CNBC report. Here are some key excerpts.

Serious security weaknesses in the Internal Revenue Service’s data system have left millions of taxpayers’ sensitive financial information vulnerable to hackers. The agency claims it has fixed the problem, but its auditors beg to differ. A new report released by the Treasury Inspector General for Tax Administration (TIGTA) found that although the IRS claimed it had implemented 19 fixes to secure the system recommended by the auditor in previous years, at least eight (or 42 percent) of them “had not been fully implemented,” and should not have been checked off as completed. The auditors said the IRS never tracked its progress on the repairs, and in many cases, it closed cases without submitting documentation to prove the fix was complete. …The report also found that the agency didn’t properly scan servers—which contain taxpayer information—for “major vulnerabilities,” or properly lock user accounts, and it did not update software on databases. “When the right degree of security diligence is not applied to systems, disgruntled insiders or malicious outsiders can exploit security weaknesses and may gain unauthorized access,” Treasury Inspector General J. Russell George said.

That’s not exactly reassuring.

But it gets worse. Obamacare exchanges are a disaster waiting to happen, as explained in a USA Today column by the Chairman of the House Intelligence Committee.

Every day, personal information is the subject of hundreds of thousands of hacking attempts from all over the world. …On October 1, a major component of Obamacare made you even more vulnerable to devastating attacks on your personal information and the administration is doing too little about it. The Federal Data Services Hub (Hub), a component of the health insurance exchanges created by Obamacare, connects seven different government agencies and establish new access points to the sensitive personal information of the American public. Social Security numbers, employment information, birth dates, health records and tax returns are among the personal data that will be transmitted to this hub, consolidating an unprecedented amount of information. Every shred of data one would need to steal your identity or access your confidential credit information would be available at the fingertips of a skilled hacker, producing a staggering security threat. …These potential vulnerabilities are a dream of faceless international hackers and hostile foreign intelligence services.

Heck, you may as well put all your credit card info on your Facebook page.

More seriously, any sensible person will stay far away from Obamacare. Though if you don’t sign up on an Obamacare exchange, the White House wants you to get fined. So you lose no matter what.

Gee, isn’t big government wonderful?

P.S. I should have mentioned the huge privacy risks that will be created if politicians succeed in imposing an Internet sales tax cartel. Such a system will require a database of every online purchase and it will be accessible by bureaucrats from state and local governments.

P.P.S. I also failed to mention how high-tax governments such as France and Germany (with assistance from the Obama Administration) are pushing to create a global network of tax police that would collect and share information among governments – regardless of their level of corruption or pattern of human rights abuses!

NSA Yes We ScanP.P.P.S. Last but not least, we can’t have a discussion of privacy without mentioning our inquisitive friends at the NSA. Some of you may think it’s a non-story that the NSA is spying on just about all communications. The government, we are told, is merely trying to fight terrorism. Sounds okay in theory, but I’m not that sanguine for the simple reason that I don’t trust government. Indeed, all of us should worry that the NSA was just busted for spying on the web-surfing habits of its critics. Moreover, it doesn’t take much imagination to think the Obama White House would misuse that power to spy on political enemies. If you think I’m being paranoid, just consider how the IRS has been used as a partisan political tool in recent years.

P.P.P.P.S. I’ve been asked whether I’m worried that the NSA will snoop through my web history. As a matter of principle, I would object, but I’m not overly concerned because I’m a relatively boring person. That’s true even when I search for “libertarian porn” and “libertarian sex fantasies.”

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Forget the debate over whether Obama is a socialist.

Now we’re discussing whether Jesus is for big government. Or, to be more accurate, the Pope has started a debate about whether free markets are bad, particularly for the poor.

Samuel Gregg of the Acton Institute wrote about the underlying theological issues in an article for National Review, but I hope I also contributed to the secular aspect of the debate in this BBC interview.

The first thing I said was the rather obvious point that there’s a lot more to life than accumulating wealth.

My most important point was that capitalism is the only successful model for creating broadly shared prosperity and I used examples from the Pope’s home region of Latin America to show that nations with more economic liberty are far more successful.

But I emphasized that supporters of freedom have a challenge because many people mistakenly associate capitalism with cronyism and bailouts for big business. In reality, free markets are a system based on voluntary exchange and private property, which means no special favors for any industry or company.

To bolster my point that economic growth is the best way to help the poor, I cited Hong Kong as a role model, both for creating growth and for enabling upward mobility.

My second most important point, which came near the end of the interview, was that genuine compassion is when you give away your own money, not when you vote for politicians who will use coercion to redistribute other people’s money. I should have used the opportunity to cite the data showing that Americans are far more compassionate – in the right sense – than their European counterparts.

I’m sure “Libertarian Jesus” would have agreed.

Now we need to get others to climb on the freedom bandwagon. I suspect the Pope will be more receptive to that message than politicians, though the Vatican sometimes has been very good on these issues and at times very disappointing.

P.S. I was worried I made up a word when I stated that I wanted to make a “theologic” point, but it’s actually in the dictionary, so I got lucky. But even if it turned out it wasn’t a word, it wouldn’t have been nearly as embarrassing as the time in the 1990s when I wanted to say “annals” and pronounced it “anals.”

P.P.S. Thomas Sowell has some insightful analysis on whether Obama is a socialist.

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Switzerland’s left-wing party has instigated a referendum for November 24 that asks voters to limit pay ranges so that a company wouldn’t be able to pay top employees more than 12 times what they’re paying their lowest-level employees.

I talked with Neil Cavuto about this proposal and made several (hopefully) cogent points.

Since Swiss voters already have demonstrated considerable wisdom (rejecting a class-warfare tax proposal in 2010 and imposing a cap on government spending in 2001), I predicted they will reject the plan. And I pointed out that Switzerland’s comparatively successful system is a result of not letting government have too much power over the economy.

But I don’t want to focus today on the Swiss referendum. Instead, I want to expand on my final point, which deals with the misguided belief by some on the left that the economy is a fixed pie and that you have to penalize the rich in order to help the poor.

I’ve covered this issue before, and I even tried to educate a PBS audience that economic growth is key.

But maybe this chart is the most persuasive bit of evidence. It shows per-capita GDP in France and Hong Kong over the past 50 or so years. France is a nation that prides itself of redistribution to “help” the poor while Hong Kong is famous for having the most economic freedom of any jurisdiction.

Now look at this data and ask yourself whether you’d rather be a poor person in France or Hong Kong?

Hong Kong v France Per-Capita GDP

Since Hong Kong is richer and is growing faster, the obvious answer is that poor people in France almost surely face a bleaker outlook.

In other words, the welfare state can give you the basic necessities and allow you to survive (at least until the house of cards collapses), but it comes at a very high cost of lower growth and diminished opportunity.

The moral of the story is that prosperity is best achieved by a policy of free markets and small government.

P.S. If you want more evidence on the superiority of markets over statism, check out the comparison of South Korea and North Korea and the difference between Chile, Argentina, and Venezuela. Heck, even the data comparing America and Europe show similar results.

P.P.S. As you might expect, Margaret Thatcher addressed this issue in a brilliant fashion.

P.P.P.S. There’s a lot to like about Sweden, but click here if you want to see an impossibly absurd example from that nation of the equality-über-alles mentality.

P.P.P.P.S. There is some very interesting academic research that suggests humans are hard-wired by evolution to be statists. Let’s hope that’s not true.

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If this blog was an episode of Jeopardy, the response to the title of this post would be “Name three things that Dan Mitchell doesn’t like.”

But this blog isn’t a game show. It’s a serious forum* for discussing how we protect freedom and prosperity from ever-expanding government.

That’s why, in this interview with John Stossel, I reiterate my mantra that government spending is the problem and that deficits and debt are symptoms of the problem.

I usually use the analogy that government spending is a brain tumor and red ink is the headache caused by the tumor when seeking to help people understand that it’s important to focus on the disease and not the symptom. But to show that I’m not just a single-analogy kind of guy, this time I said that government spending was like lung cancer and that deficits are akin to the resulting cough.

I also concocted an analogy about government goodies being akin to heroin. If you’re an addict, it may feel good to put more junk in your veins, but you’ll be much better off if you endure the short-run discomfort of going clean. Just as it may cause angst among interest groups if we stop the federal gravy train, but they’ll be better off in the long run if we reduce the burden of government spending and restore robust growth.

And nobody will be surprised to see that I made my usual points that there was no risk of default and that it’s actually surprisingly simple to balance the budget with modest spending restraint.

Speaking of analogies, I also modified Senator Durbin’s analogy so that he and his colleagues are a bunch of drug dealers trying to buy votes by addicting people to big government.

*Okay, given all the political humor I share, perhaps it’s a semi-serious forum, but my analysis of fiscal policy is not a joking matter.

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I’m not overly optimistic about the outcome of the government shutdown fight. In part this is because our system of government, based on separation of powers, means it is very difficult to change the status quo.

This system, by the way, generally has been good for the country. It probably helps to explain why the United States has not traveled as rapidly in the wrong direction as other industrialized nations. Simply stated, the left didn’t have easy opportunities to impose bad policies such as a VAT or single-payer government-run healthcare.

But it also means it isn’t easy for supporters of small government to undo expensive policy mistakes such as Obamacare.

But I’m glad some people are trying to do the right thing, even though they not only have to fight Obama, but they also need to overcome a biased media that is serving as an echo chamber for the left’s talking points.

I deal with some of that bias in this interview on Canadian TV. The hosts were very polite and gave me plenty of time to make my points, but all their questions could have been written in the White House communications office.

Here are a few takeaways from that interview.

The fact that Obamacare is the law today does not mean it must be enshrined forever. A lot of folks in the media are regurgitating this White House talking point. I pointed out that the Continuing Resolution also is the law, but maybe I should have pointed out that politicians change the tax code all the time.

As hinted at above, this fight is not a sign of dysfunctional government, but rather is an example of how our Founding Fathers expected Washington to function.

Media Bias ShutdownMedia bias is covering up angst and division on the Democratic side of the aisle. My Democrat friends on the Hill have told me they are worried about being forced to cast votes in favor of provisions such as the special Obamacare exemption for politicians. But as this Glenn McCoy cartoon implies, the press is pushing the left’s narrative rather than reporting the news.

Republicans won a policy victory as a result of the 1995 shutdown fight and they at least fought to a draw in the 1996 elections.

This is a fight to save America from turning into a bankrupt European-style welfare state. Even if that’s an uphill battle, that’s a fight worth having.

Using the example of corrupt agriculture subsidies, I explain that Obamacare won’t work very well, but that doesn’t mean it won’t lure more people into government dependency.

I like to think I did a decent job in this interview, but now it’s time to confess that this isn’t just a battle against Obama and the media.

If we want to shrink the size and scope of government, we also need to prevail against the lobbyist community. This is especially the case in the shutdown fight.

These excerpts from a Politico article reveal how Washington really works.

Though President Barack Obama often blames special interests and Washington lobbyists for the dysfunction and paralysis that plagues Beltway politics, most of the working K Street — and their clients — would like nothing better than for Congress to start working again on the routine business of drafting, debating and passing legislation. …“When Congress doesn’t do things and when Congress is not productive, people who are trying to influence Congress are not productive,” said Steve Elmendorf, a Democratic lobbyist who was a top adviser to former House Majority Leader Dick Gephardt. …Urban, who was a top staffer to former Sen. Arlen Specter (R-Pa.), said the latest fight over spending are throwing a wrench in K Street’s bread and butter work of tweaking legislation and attracting new client business. “The wide variety of client business — interests that come to Washington lobby — is now interrupted,” Urban said about the shutdown. …no major pieces of new legislation have moved since the takeover of the House by the GOP in 2010 —putting a big damper on new business development and existing client work. …”Not that we should be doing policymaking on K Street’s behalf,” Gold added. “But that’s the reality.”

In other words, the parasite class in DC wants “business as usual.” They want the government open so they can strike their backroom deals.

This is a perfect illustration of my “First Theorem of Government.” Washington insiders benefit from activist government. It means more money and power for the political class.

And notice how the lobbyists are complaining about less business ever since the 2010 elections. That’s because fewer laws mean fewer opportunities for graft and redistribution, so lobbyists suffer. Which is why I had to correct a massive typo when USA Today wrote that the Tea Party Congress was “unproductive.”

That “unproductive” Congress, by the way, reduced the burden of federal government spending from more than 24 percent of GDP to about 21.5 percent of economic output.

We should all be hoping that the current Congress is equally “unproductive” and we further shrink the burden of government spending and further curtail opportunities for political corruption.

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As illustrated by this chart, economists are lousy forecasters.

To be more specific, economists are no better than fortune tellers when trying to make short-run macroeconomic forecasts. Heck, if we actually knew what was going to happen over the next 12 months, we’d all be billionaires.

But we can (on occasion) make sensible predictions about the long-run impact of various government policies. All other things being equal, for instance, it’s safe to say that countries with bigger governments will grow slower than nations that don’t divert as many resources from the private sector. Even the World Bank and European Central Bank agree with that common-sense proposition.

Another can’t-fail prediction is that bailouts will reward bad behavior and lead to dependency. That’s why I’m not at all surprised by the news that Greece will get another bailout.Greek Bailout 1 Indeed, if there was a least-surprising-headline contest, it would go to the EU Observer for this headline.

A third bailout? You mean the first two didn’t work? I’m shocked! Which is why we need to change to a least-surprising-headlines contest, Greek Bailout 2because we also have this headline from City AM.

And this one from the UK-based Times. Which they may want to save for when it’s time for the fourth bailout. Greek Bailout 3And the fifth bailout. And…well, you get the idea.

Makes you wonder why the Germans (and the Dutch, Finns, Swedes, etc) keep subsidizing bad behavior elsewhere. Greek Bailout 4Yet these people apparently don’t care about moral hazard, so we see this headline from the Telegraph.

Last but not least, here’s what the BBC wrote. Greek Bailout 5

Given all these headlines from today, you can see why I felt safe in predicting a couple of days ago for Canadian TV that Europe was still in bad shape. Simply stated, government is far too big and costs far too much.

Yes, there are a few bright spots, such as Switzerland and the Baltic nations, but the fiscal debate in Europe is mostly between those who want higher taxes and those who want higher spending.

With that kind of contest, there are no winners other than politicians.

P.S. The ostensible purpose of the interview was to discuss Europe’s supposed recovery. I explained a few days ago why nobody should be impressed by the anemic growth on the other side of the Atlantic. But I think any changes in short-run economic performance – for better or worse – are far less important than the long-run projections of expanding government and growing dependency in Europe.

P.P.S. Americans shouldn’t feel cocky or superior. Long-run projections from the BIS, OECD, and IMF all show that the United States will be in deep trouble if we don’t engage in genuine entitlement reform.

P.P.P.S. Since I was talking to a Canadian audience, I mentioned that Europe should copy the spending restraint Canada enjoyed in the 1990s. You can click here to learn more about happened north of the border (and why the United States also should copy the same policy).

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I suggested last year that President Obama adopt “my work here is done” as a campaign slogan.

Admittedly, that was merely an excuse to share this rather amusing poster (and you can see the same hands-on-hips pose, by the way, in this clever Michael Ramirez cartoon).

But I want to make a serious point.

For those of us who want the prosperity and liberty made possible by smaller government and free markets, it would be ideal if the President actually did think his work was done. If that was the case, presumably he wouldn’t propose new schemes to expand the size and scope of the public sector.

Unfortunately, that’s not the case. Indeed, he bragged about providing handouts, subsidies, and bailouts for housing in his recent pivot-to-the-economy speech and he specifically stated “We’re not done yet.”

As I said in this interview on FBN, that phrase could replace “I’m from Washington and I’m here to help you” as the most frightening sentence in the English language.

Obama’s phrase is particularly distressing since he wants more intervention in housing markets – yet it was misguided government intervention that caused the housing bubble and financial crisis in the first place!

Simply stated, you don’t solve the problems caused by the Fed’s easy-money policy with more government. And you don’t solve the problems caused by corrupt Fannie Mae-Freddie Mac subsidies with more government.

The right approach is to get government out of housing altogether. That means getting rid of the Department of Housing and Urban Development. It means privatizing Fannie Mae and Freddie Mac. It even means eliminating preferences for housing in the tax code as part of a shift to a simple and fair system like the flat tax.

Once we achieve all these goals, then we can say “we’re done”…and move on to our other objectives, like dealing with the damage caused by government in the health sector, the education sector, the financial markets sector, etc, etc…

P.S. Some people doubtlessly will complain that bad things will happen if the government no longer is involved in housing, but I think we’ll survive just fine without bureaucrats screwing over poor people and mandating “emotional support” animals in college dorms.

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