The Public Choice Challenge

Back in 2016, I shared three videos to explain the theory of “public choice,” which is simply the application of economic principles to understand the self-interested behavior of politicians, bureaucracies, and voters.

Wonky readers will enjoy this fourth video.

I’m citing public choice because the Economist, in a recent article, shared a very depressing chart about the decline of economic growth in the developed world.

As you can see, the average increase in per-capita economic output has dropped by more than 50 percent since the turn of the century.

From a policy perspective, there’s a very simple explanation.

As explained in this fascinating video, the western world enjoyed pro-growth policies of the 1980s and 1990s. You can credit Reagan and Thatcher or you can credit the “Washington Consensus.”

Unfortunately, the opposite has happened in the 21st century. The United States has moved toward statism and the same is true for Japan and most of Western Europe.

So it’s no surprise that growth has slowed in industrialized nations.

And it’s also no surprise (given the magazine’s ideological bent) that the Economist doesn’t really understand what’s been happening. Here are some excerpts from the article.

The long-run rate of growth has dwindled alarmingly, contributing to problems including stagnant living standards and fulminating populists. Between 1980 and 2000, gdp per person grew at an annual rate of 2.25% on average. Since then the pace of growth has sunk to about 1.1%. …The problem is that…reviving growth has slid perilously down politicians’ to-do lists. Their election manifestos are less focused on growth than before… Our analysis of political manifestos shows that the anti-growth sentiment they contain has surged by about 60% since the 1980s. Welfare states have become focused on providing the elderly with pensions and health care… Support for growth-enhancing reforms has withered. …unless they embrace growth, rich democracies will see their economic vitality ebb away and will become weaker on the world stage. Once you start thinking about growth, wrote Robert Lucas, a Nobel-prize-winning economist, “it is hard to think about anything else”. If only governments would take that first step. Moreover, even when politicians say they want growth, they act as if they don’t.

At the risk of being presumptuous, it’s not just a matter of thinking about growth. It’s also understanding the policies that produce growth.

And it’s also understanding how to get those pro-growth policies when politicians have big incentives to do the wrong thing. And this brings us back to public choice.

Let’s now look at some excerpts from a column in the Wall Street Journal by Alberto Mingardi.

‘What would you do if you were the state?” So begins the greatest book of political theory you never read. “The State,” by the Hungarian-born economist Anthony de Jasay, was published in 1985… Jasay argued that particular leaders matter far less than might be supposed and that all governments ultimately seek to maximize their discretionary power. …Politicians differ, sometimes sharply, in ideas and character. But governments—like businesses—have basic structural tendencies. The state always seeks to expand. Redistribution, Jasay maintained, is “addictive.” The moment government starts giving out goodies, the mechanisms undergirding society and the economy change. Corporations and interest groups have a new incentive to work to win the state’s favor. So businesses tend to shift resources and attention from engineers to lawyers, from serving customers to capturing decision makers. “The greater the reach of the state, the greater is the scope for profiting from its commands,” Jasay wrote.

Sadly, I don’t have any easy solutions. Once people learn they can vote themselves money, it is very hard to rescue a society.

But I know that protecting and promoting jurisdictional competition is part of the answer if we want to avoid the problem of “goldfish government.”

P.S. For more public choice-related analysis, I recommend these three videos.

P.P.S. For more about politicians, click here and here.

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The Case for Gridlock

My views on gridlock were fully captured in the title of a 2015 column, which stated that divided government was “Better than the Alternative of Expanding Government.”

And I followed up with a 2020 column that showed that spending restraint was more likely when the two parties were forced to share power.

To be sure, divided government also can produce very bad results (the country suffered a big expansion in the burden of government during the Nixon years, for instance).

But J.D. Tuccille from Reason explains why Americans should feel happy about gridlock starting in 2023.

…the election results stand as an expression of overwhelming lack of confidence in the major parties, with a resulting breather for the country resulting from the split decision’s ensuing, and quite welcome, gridlock. …The Wall Street Journal‘s Brody Mullins and John D. McKinnon noted last week. “…Washington overall isn’t expected to do much for the next two years.” That’s good news for Americans baffled by Democrats’ insistence on treating the U.S. economy as something between a laboratory experiment and a toy train set, with lawmakers indulging their whims through serial rounds of life-altering policy moves. …Republicans didn’t exactly convince the country that they were the cavalry riding to the rescue. Their main selling point seems to have been that they weren’t Democrats. …gridlock, with all of its faults and instability, is what we have, and we should be thankful for that. …gridlock can give us a bit of a national breather, and that may be the best we can hope for from a destructive political system.

Amen. I’m in favor of more breathing room for the economy’s productive sector. That’s when we get better outcomes.

But there are two reasons why gridlock is not a long-run solution.

First, Tuccille points out that we now have presidents claiming autocratic powers.

The gridlock…isn’t total. The increasingly autocratic nature of the presidency allows enormous room for the nation’s chief executive to act unilaterally. Through executive orders and memoranda, presidents enact policy changes that should go through Congress (if they’re permissible at all) in a manner befitting elective monarchs. The only real check on that power is the willingness of the courts to remind the country that, while rule-by-decree is a form of government, it’s not one permitted by the Constitution.

Second, we have very serious problems (an awful tax system, runaway entitlement spending, the administrative state, etc) that can only be solved by legislative action.

I’ll close with a depressing observation about what to expect from politics. Simply stated, politicians generally have incentives to maximize their short-run status, not to maximize the nation’s long-run health.

So, whether we have gridlock or not, it’s not easy to be optimistic.

Unless, of course, we can figure out ways to reincarnate the very rare Republican and very rare Democrat who did the right thing.

Until and unless that happens, I want politicians to be “unproductive.”

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To Which Hypothetical Political Party Do You Belong?

Whether they are based on 10 questions or 144 questions, I can’t resist taking quizzes that supposedly identify one’s political or economic philosophy.

The good news, according to various quizzes, is that I’m 92 percent minarchist and only 6 percent communist.

And, based on the quiz I shared most recently, I’m a “minimalist” who is “in favor of smaller government.”

I certainly won’t argue with those results.

For today’s column, we’re going to look at a quiz on hypothetical political parties that Lee Drutman put together for yesterday’s New York Times. You can click here to take it.

Here are my results.

Given the various alternatives, I’m not surprised that I’m part of the “Growth and Opportunity Party.”

But I don’t like this description of this group.

The Growth and Opportunity Party is the socially moderate, pro-business wing of the Republican Party. It is the heir to the old moderate “Rockefeller Republican,” the East Coast wing of the G.O.P. Its potential leaders include Larry Hogan, Charlie Baker, Mitt Romney, John Kasich and Michael Bloomberg. Based on data from the Democracy Fund’s VOTER survey, this party would be the best fit for about 14 percent of the electorate.

My objections are partly historical (I was a “Reaganite” in my youth rather than a big-government “Rockefeller Republican”) and partly based on the politicians listed as political leaders.

I don’t know enough about Larry Hogan and Charlie Baker to have an opinion, but Mitt Romney, John Kasich, and Michael Bloomberg are definitely proponents of bigger government.

I’ll close by grousing about a couple of the questions.

For instance, should you “agree” or “disagree” with this question? I definitely want to decrease the scope of police work if that means less enforcement of victimless crimes such as drugs, gambling, and prostitution, but I don’t want to decrease the scope of police work in fighting genuine crime.

I also wasn’t sure how to answer this next question. Does it mean creating more opportunities to come to the United States, especially for people that are unlikely to become dependent on government handouts? Or does it mean allowing limitless illegal border crossing?

Because the wording was not very clear, I basically punted on these two question.

P.S. For what it’s worth, I think the two best quizzes are the “definitive political orientation test” and the “libertarian purity test.”

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The Political Consequences of Tax Migration

When I ask my left-leaning friends what they think about the flight of investors, entrepreneurs, and business owners from high-tax states, I tend to get three responses.

1. It isn’t actually happening (these are my friends who apparently don’t know how to read).
2. It’s happening, but it doesn’t matter (data from the IRS suggests it actually is significant).
3. It’s happening, but high-tax states will be better off without these selfish and greedy people.

The folks making the third point actually have a decent argument, at least in terms of short-run political outcomes. Democrats rarely have to worry about retaining control of states like California, New York, Illinois, and New Jersey now that many Republican-leaning voters have moved away.

But sometimes short-run benefits are exceeded by long-run costs, and the recent data on congressional redistricting from the Census Bureau is a good example.

As you can see, there’s a continuing shift of political power – as measured by seats in Congress – from blue states to red states.

Patrick Gleason of Americans for Tax Reform explains what this means in a column for Forbes.

Over the past decade Americans have been voting with their feet in favor of states with lower overall tax burdens… As a result, high tax states…are set to lose congressional clout for the next decade, to the benefit of low tax states… the seven states that will lose congressional seats due to stagnant population growth have higher top income tax rates and greater overall tax burdens, on average, than do the six states gaining seats. In fact, the average top personal income tax rate for states losing seats in congress is 6.5%, which is 46% greater than the 4.45% average top income tax rate for states gaining seats.

Some people may want to dismiss Mr. Gleason’s column since he works for a group that supports smaller government.

But you can find the same analysis in this column in the Washington Post by Aaron Blake.

…what does the new breakdown mean from a partisan perspective? All told, five seats will migrate from blue states to red ones — owing to population shifts from the Rust Belt, the Northeast and California to the South and other portions of the West. Five of the seven seats being added also go to states under complete GOP control of redistricting, with three of seven being taken away coming from states in which Democrats have some measure of control over the maps. …That should help Republicans… The Cook Political Report estimates the shifts are worth about 3.5 seats… As for the electoral college in future presidential elections, …Michigan and Pennsylvania…are states Democrats probably need to win in the near future, meaning it’s probably a bigger loss for them. …If we reran the 2020 electoral college with the new electoral votes by state, Biden’s margin would shrink from 306-232 to 303-235. That seems negligible. But if you overlay the 2000 presidential results — three reapportionments ago — on the current electoral vote totals, George W. Bush’s narrow win with 271 electoral votes becomes a much more decisive win with 290. That gives you a sense where things have trended.

Let’s now return to the hypothesis that tax-motivated migration is playing a role.

Here’s an instructive tweet from Andrew Wilford of the National Taxpayers Union.

It should be not at all surprising to anyone that which states gained/lost Congressional seats from the latest apportionment tracks very strongly with the state's tax burden pic.twitter.com/DJRcNErNXm

— Andrew Wilford (@PolicyWilford) April 26, 2021

I’ll wrap up today’s column by augmenting the data in Mr. Wilford’s tweet.

Because not only are there, on average, lower tax burdens in the states gaining congressional seats, but every one of them has some very desirable feature of its tax code.

To be sure, not all of the state-to-state migration is due to tax policy. There are all sorts of other policies that determine whether a state is an attractive place for people looking to relocate.

And there are other factors (family, climate, etc) that have nothing to do with public policy.

All things considered, however, being a low-tax state means more jobs, growth, and people, at least when compared with being a high-tax state.

P.S. If you’re interested in seeing how states rank in various indices, click here, here, and here.

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Ten Observations about Trump and the GOP

Since I’m a policy wonk, I rarely play the role of political pundit other than biennial election predictions.

But I’m getting a lot of requests to comment about Trump, especially in light of the recent protest/riot/insurrection and the ongoing political fallout (impeachment, etc).

So here are 10 observations (full disclosure: I didn’t vote for Trump in 2016 or 2020, but have never been part of the Never-Trump community).

Trump’s style is bluster and bullying – As I wrote way back before the 2016 election, Trump’s personal style is akin to a temperamental child. This can be entertaining (which is why CNN and other networks gave him so much attention during his initial campaign), but it also has limitations as an approach to governance (for instance, you don’t stop a virus by merely asserting it won’t come to the United States).

Trump is America’s “Crazy Uncle” – Early in his presidency, I happened to be in New Zealand and was asked about Trump in a TV interview. I basically said he’s like a grouchy and opinionated uncle who shows up on holidays and dominates the conversation with controversial statements. Given what’s happened over the past few years, that observation holds up well.

Republicans lawmakewrs in Washington never liked Trump – GOPers in the House and Senate like some of the things Trump has accomplished (tax reform and conservative judges), but they’ve never liked having him as president because he is too erratic and too self-centered. But most important, they’ve been afraid his simultaneous popularity (with core GOP primary voters) and unpopularity (with, say, suburbanites) is a threat to their ability to stay in power. In other words, it’s hard to win general elections in some places as a Trumpian populist but also hard to win GOP primaries in many places as a Never-Trumper.

Republican voters, by contrast, like Trump – One thing that surprised me over the past four yeas is that I found strong support for Trump from grassroots conservative Republicans. Yes, they didn’t like his fiscal profligacy and they mostly didn’t like his protectionism, but they did like the fact that he was a “fighter,” unlike so many (but not all) Republican politicians who get cozy with the DC establishment. They also figured he was worth supporting because he was so reviled by the establishment media (i.e., the enemy of my enemy is my friend).

Republican lawmakers generally have been in a no-win situation – Because of Trump’s popularity with GOP voters, Republican lawmakers have felt a lot of pressure to act as Trump loyalists even though many of them don’t like his behavior and disagree with some of his policies.

Be glad there were normal GOPers in the Trump Administration – Some people in the Never-Trump community want to create a blacklist of people who worked for Trump. This is misguided in the vast majority of cases. Most Trump appointees had nothing to do with Trump’s excesses and instead did good things (deregulation, for instance) in the various agencies and departments where they worked.

There are three GOP wings: Populist Trumpies, conservative Reaganites, and the establishment – Most pundits portray GOP infighting as a battles between Trumpist conservatives and the Republican establishment (symbolized, perhaps, by Sen. Romney). But that’s an insufficient description of what’s happening because it overlooks the fact that there are plenty of Reagan-style conservatives who definitely are not part of the establishment, yet don’t fit in with Trump’s big-government populism. It will be very interesting to see which anti-establishment strain wields more influence in the next few years.

Trump’s legacy to GOP: Total Democratic control of DC – On January 21, 2017, Republicans controlled the House, the Senate, and the White House. Four years later (a few days from now), Democrats will control the House, the Senate, and the White House. By way of background, one of the reasons I don’t like George W. Bush is that his failed polices paved the way for the left to have total control of Washington in 2009 and 2010. Shouldn’t Trump be judged similarly?

In spite of his many flaws, why did Trump win normally Democratic states? – While I just explained that Trump set the stage for the left to have total power in Washington, Republicans need to figure out how Trump managed to win some states in 2016 that historically have been unwinnable when contested by establishment Republicans (though he lost some traditionally GOP-leaning states in 2020).

In spite of his many flaws, why did Trump get more minority votes? – Similarly, Republicans need to figure out how a supposedly racist Trump managed to win a higher percentage of minority voters than recent GOP nominees such as John McCain and Mitt Romney. The bottom line is Republicans need to figure out if there are good parts of Trumpism once Trump is out of the picture.

I’ll close with a few statements:

• It is perfectly okay to have voted for Trump because you liked some of his policies (whether they are ones I like, such as tax cuts, or ones I don’t like, such as protectionism).
• It is perfectly okay to have voted against Trump for the same reason.
• It is perfectly okay to have voted for Trump because you wanted to shake up the Washington establishment with unconventional behavior.
• It is perfectly okay to have voted against Trump because his unconventional behavior was offensive.
• It is perfectly okay to have been a Never-Trumper or a Trumpian populist.
• What’s not okay, though, is to engage in political violence.
• And what’s utterly awful is lying to supporters and creating the conditions for political violence.

P.S. While it’s worth spending some time to dissect and analyze the past four years, I hope that libertarians, Reagan conservatives, Trump populists, Never-Trumpers, establishment Republicans, etc, all join together to fight some of Biden’s awful ideas (the “public option” threat to private health insurance, class-warfare taxes, gun control, a blue-state bailout, etc).

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Is Gridlock a Good Outcome?

Most Republicans and Democrats have a self-interested view of divided government.

They obviously prefer if their party controls everything. After all, that’s how Republicans got tax reform in 2017 and it’s how Democrats got Obamacare in 2010.

But they also like gridlock if that’s the only way of stopping the other party from wielding all the power.

Which is why Democrats liked gridlock after the 2018 election (they won the House of Representatives) and Republicans are going to like gridlock after the 2020 election (assuming they hold the Senate).

But what about those of us who want more economic liberty? Is gridlock good or bad?

As a matter of political economy, gridlock is good because it is harder for politicians to do anything when there’s divided government. Indeed, America’s Founders created a “separation of powers” system precisely because they wanted “checks and balances” to limit the power of politicians.

That’s the theory.

So how has it worked in practice?

First, we can look at international evidence by comparing the United States and Europe. We know two things.

• European nations have a larger burden of government spending than the United States and generally have lower levels of economic liberty when compared to America.
• European nations have parliamentary systems of government (the party that controls the legislature, by definition, controls the entire government), which means no checks and balances that can produce gridlock.

It’s certainly possible – or even quite likely – that those two points are interconnected. In other words, government has expanded faster in Europe precisely because there was no effective way of slowing or blocking statist legislation (and, as we know from the Second Theorem of Government, it’s difficult to take away goodies once voters get used to dependency).

Second, we can look at domestic evidence by comparing what’s happened in recent decades when there’s been gridlock in Washington.

Professor Steve Hanke crunched the numbers a couple of years ago. Here’s the chart he prepared showing that we got the most spending restraint (shaded in green) when there was divided government.

Steve’s data is persuasive, but I think it’s even more instructive to focus on the next column, which shows changes in non-defense spending.

By this measure, the only good results (i.e., a falling burden of spending) occurred during the Reagan and Clinton years. Since I did a video on exactly this issue, I concur that we got good results during their presidencies.

But notice that we now see very bad numbers when there was divided government during the Eisenhower and Nixon years. And the numbers for the first President Bush moved further in the wrong direction.

The bottom line is that divided government can be good, but it may actually produce the worst-possible results when you combine weak-on-spending Republican presidents with profligate Democratic Congresses.

P.S. There’s strong evidence that gridock following the 2010 election produced better results for the nation.

P.P.S. Here’s my more advanced breakdown of what happened to government spending for every president since LBJ.

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Interpreting the Election Results

For what it’s worth, my presidential prediction for 2020 will probably turn out to be more accurate than my presidential prediction for 2016.

But I doubt anyone cares about that. Let’s instead look at what happened last night (and, in some cases, what is still happening).

President

It appears that Biden will prevail in the battle for the White House when the dust settles, but you can see from this Washington Post map that the race was much closer than most people expected (Pennsylvania is expected to shift to Biden as mail-in votes are counted, and perhaps Georgia as well).

If that’s the final result, here are two obvious takeaways based on where a president has a lot of unilateral power.

• Trade policy will move in the right direction.
• Regulatory policy will move in the wrong direction.

Other policy areas generally require agreement between the executive branch and the legislative branch, so we can’t know the impact of a Biden presidency without perusing congressional results.

Senate

In my humble opinion, the big news of the night is that Republicans appear to have retained control of the Senate.

If true, that means some left-wing goals are now very unlikely.

There won’t be any court packing. There won’t be any serious effort to increase the number of Democratic senators by granting statehood to Washington, DC, and Puerto Rico.

But let’s focus on the economic issues. Here are some quick takeaways.

• There will be another “stimulus,” but it won’t be nearly as profligate as would have been the case if Democrats had total control of Congress and the White House.
• There won’t be any serious effort for forced unionization in right-to-work states.
• Biden’s class-warfare tax increases won’t happen.
• The state and local tax deduction will remain capped.
• The corporate tax rate will stay 21 percent (the best fiscal achievement of Trump’s presidency).

House of Representatives

It appears that Republicans will gain seats, which is contrary to all expectations.

That being said, there’s zero possibility of a GOP takeover, so Nancy Pelosi will remain in charge.

Ballot Initiatives

I wrote two weeks ago about this election’s six most important ballot initiatives.

The great news is that taxpayers scored a big victory by defeating the effort to get rid of the flat tax in Illinois an replace it with a so-called progressive tax. Winning that battle probably won’t rescue the Prairie State, but at least it will slow down its march to bankruptcy.

The other five battles mostly were decided correctly – at least based on the latest vote margins.

• California voters rejected an initiative that would allow the state to engage in racial discrimination.
• The California initiative to weaken limits on property taxes is trailing.
• The Colorado initiative to lower the state’s flat tax appears prevailed.
• The Colorado initiative to strengthen TABOR (the state’s spending cap) is leading.
• The one clear piece of bad news is that an Arizona initiative to impose a big increase in the top income tax rate appears likely to prevail.

What’s the future for Trump and Trumpism?

Regular readers know I want the GOP to be the Party of Reagan rather than the Party of Trump.

So I will be very interested to see whether Trump’s apparent defeat means Republicans go back to (at least pretending to favor) conventional small-government conservatism.

That will have the be the topic of a future column.

A Silver Lining for Republicans

The party controlling the White House usually loses mid-term elections. For recent examples, Democrats won the House in 2018 and there were big victories for the GOP in 2010 and 2014 during the Obama years.

In all likelihood, Republicans will now do much better in the 2022 midterm election with Biden in the White House instead of Trump.

A Silver Lining for Taxpayers

It’s not something that can be quantified, but congressional Republicans will now become much better on spending issues. They’ll no longer face pressure to go along with Trump’s profligacy and they’ll have a partisan incentive to oppose Biden’s profligate agenda.

P.S. Whether you’re happy or sad about the election results, remember that it’s always appropriate to laugh at the clowns and crooks in Washington.

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The Final Pre-Election Edition of Donald Trump Humor

Yesterday, I shared some jokes about Joe Biden (since updated with a very amusing addendum). Today, to keep everything fair, we’re going to make fun of Trump.

We’ll start with Trump playing the role of James Bond.

Next, let’s look at Trump’s view of the world with this map.

If you liked this map, check out this collection of Trump maps from 2018.

There is some good news for Trump, at least according to Babylon Bee, America’s best site of satire.

Trump is polling high among an unexpected group: libertarians, who were energized and drawn to Trump’s cause after the New York Times revealed that he paid as little as $750 in federal taxes some years. “Only paying a few hundred in federal theft? This guy is my hero!” said libertarian man Murray Mickelson of New Hampshire. “If only all of us could be that smart with our taxes.” …Libertarians across the country paid tribute to Trump’s accomplishment by firing their AR-15s into the air and doing hard drugs, though this is what they were already planning on doing anyway.

Though let’s not forget Biden also aggressively avoided taxes, so libertarians may be torn.

I’m not sure there’s much mileage left in the Trump-Russia issue, but this cartoon got a chuckle from me.

The Onion has faded as a satire site, but it still produces some amusing material, such as this story about the Trump version of poll watching.

Pushing back against what he viewed as an overly hysterical media narrative, Trump supporter Tom Nagle whispered his assertion Monday that poll watching is not intimidation into the ear of a man filling out a ballot. “Keeping an eye on what’s going on at the polls is simply a way to ensure that the election is conducted fairly,” said an armed Nagle, his hot breath reportedly palpable on the prospective voter’s neck as he continually issued assurances that he was merely there to safeguard democracy. …At press time, Nagle had beaten the man unconscious after he was unable to immediately produce a voter ID.

The Onion also produced an article detailing how Trump can win.

With the election around the corner, the Republican Party campaign of President Donald Trump is looking for ways to win reelection over his Democratic Party challenger, Joe Biden. The Onion looks at key factors that could help Trump defeat Biden and retain the presidency. …Disenfranchise millions of Biden supporters with scheme to use electoral college exactly as intended. Win over undecided voters by committing to spare their lives during second term. …Giving everyone another 12 hundo couldn’t hurt. Disarm one of Biden’s key electoral advantages by killing Eric so he has a deceased son too. …Pledge to uphold core Republican values like massive voter suppression. Highlight dozens of crimes Biden failed to prevent him from committing during his first term. Refuse to accept election results citing upcoming Supreme Court ruling.

I’ve already predicted Trump will lose tomorrow.

But he’s about to get even worse news.

As usual, I’ve saved the best for last. I laughed out loud when I saw this meme.

Ouch!

P.S. If yesterday’s jokes and today’s jokes are insufficient, I shared some mockery of both Joe Biden and Donald Trump back in August.

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The Party of the Rich

I wrote last year about Democrats favoring certain tax breaks that overwhelmingly benefit the rich.

The state and local tax deduction is an obvious example, but Democrats also are big fans of the tax exemption for municipal bond interest and other provisions that primarily reduce tax liabilities for upper-income taxpayers.

One interpretation is that Democrats don’t like the rich, but they’re even more interested in enabling more taxes and spending by state and local governments.

But I’m also beginning to wonder whether Democrats are becoming pro-rich (or less anti-rich) for the simple reason that upper-income people are a key constituency.

For instance, they control all 20 of the richest congressional districts in America, as explained by Terry Jeffrey.

Each of the nation’s 20 wealthiest congressional districts, when measured by median household income, …held by Democrats… Seven are in or near New York City. Five are in the San Francisco Bay Area. Four are in suburbs of Washington, D.C. Two are in Southern California. One is near Boston. And another — the only one in the middle of the continent — sits west of Chicago.

And John Fund reports that Biden is overwhelmingly the candidate of Wall Street.

Joe Biden is scooping up the lion’s share of big-money contributions from finance leaders on Wall Street. People in the financial industry have given well over $50 million to back Biden, according to the nonpartisan Center for Responsive Politics, compared with some $10 million for Trump. Biden has benefited from large contributions from leaders at Blackstone, JPMorgan Chase, The Carlyle Group, and Kohlberg Kravis Roberts, among other firms.

Ramesh Ponnuru opines that Democrats also are the party of the near-rich.

…the Democrats’ solicitude for the interests of the affluent in this case may not be the aberration it appears to be. It reflects the party’s long-term movement up the socioeconomic ladder — and shows why Democrats may find it impossible to reclaim their historical identity as a working-class party. …In the 2008 election, Republican John McCain did 11 points better among voters making more than $50,000 a year than among voters making less than that. He did one point better among those with college degrees than those without. By 2016, education had become a sharper dividing line between the parties. Trump did seven points better among those making more than $50,000 than among those making less. He did nine points better among those who lacked college degrees than among those who have them. …distressingly for the left’s true believers, the shift erodes the moral credibility of their historical self-presentation as the champion of the downtrodden.

Democrats are also the party of the Ivy League, based on the revealing data contained in this tweet.

Last but not least, here are some excerpts from a column for Reason, authored by Ira Stoll.

Maybe it’s time to rebrand the Democrats as the party of the rich. …”J.B.” Pritzker…governor of Illinois. Pritzker, an heir to the Hyatt hotel fortune, is worth an estimated $3.2 billion…Edward M. “Ned” Lamont Jr., …Connecticut governor…an heir to the J.P. Morgan banking fortune of his great-grandfather Thomas Lamont…governor of Colorado, Jared Polis, filed financial disclosure forms as a member of the House of Representatives indicating estimated wealth of more than $300 million. …all Democrats. …as a professor of political science at Williams College, Darrel Paul, put it after analyzing wealthy congressional districts, “the big story of the 2018 election is the swing of the rich toward the Democrats.” …Maybe it wouldn’t be a bad thing for the country, though, if wealthy voters do become a swing constituency to be courted by both political parties, rather than a group to be insulted, scapegoated, or taken for granted. …The sweet spot is for politicians to be rich enough that they understand and appreciate wealth creation, but not so rich that they are entirely remote from the reality of ordinary Americans.

Now for my two cents.

Based on what I see when I drive around the rich neighborhoods of Northern Virginia, the reports cited above are accurate. I mostly see Biden signs in the yards of people with multi-million dollar homes. But when I drive to poorer areas of the state, the situation is reversed and Trump signs dominate.

The interesting question is why? What accounts for rich people shifting to the left, especially since Democrats still support a wide range of policies (higher income tax rates, higher capital gains taxes, higher Social Security taxes, higher death taxes, a new wealth tax, etc) that target upper-income taxpayers?

I don’t pretend to know the answer, but here are a few possibilities:

Social issues are more important than economic issues – This is the theory that rich voters care mostly about what candidates think about issues such as abortion, climate, and gay marriage. In other words, they’ll accept higher taxes to get their preferred policies in other areas.

Class identification is more important that economic self-interest – This is the theory that people are very reluctant to break ranks with the prevailing view of their social group. For example, since Trump is viewed as a blowhard by the elite, they must side with Democrats.

Ignorance – This is the theory that rich people want to help the poor, perhaps because they feel guilty about their comfortable lives, and simply don’t understand that the policies pushed by Democrats actually make it harder for the less fortunate to climb the economic ladder.

Republicans are all talk but no (or negative) action – This is the theory that Republicans don’t actually do pro-growth things when they get power (think Nixon, Bush I, and Bush II), so why bother supporting the GOP.

Government-imposed credentialing helps the rich – This is the theory that a range of government-imposed and government-encouraged policies (everything from licensing requirements to degree requirements) create economic advantages for privileged people.

Add your speculation and guesses in the comment section. I’d be interested to see what everyone else thinks.

P.S. I guess we shouldn’t overlook the possibility that rich leftists are simply a bunch of hypocrites who have no intention of abiding by the policies they impose on everyone else.

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2020 Election Predictions (and Policy Implications)

Given my big miss in 2016, I’m not sure why anyone would be interested in my election predictions, but I’ve received several emails asking me to offer up my guesses for 2020 (perhaps some of them are long-time readers who remember 2010, when I actually did a good job?).

Before I offer up my prediction, I’ll first share some of the guesses from the experts.

Everyone is predicting Biden, though my Trump friends regularly remind me that the experts were wrong in 2016.

We’ll start with the outlook from Real Clear Politics.

Next, we have Nate Silver’s 538 numbers.

Here are the betting odds for the election, as compiled by John Stossel and Maxim Lott.

And here’s Larry Sabato’s Crystal Ball forecast.

I’ll add one caveat to the above estimates.

This tweet from Frank Luntz explains why my Democratic friends are still nervous.

RCP battleground poll average:

𝗢𝗰𝘁. 𝟮𝟵, 𝟮𝟬𝟭𝟲
• Florida: (Tied)
• Pennsylvania: Clinton +5.6
• Michigan: +7
• Wisc: +6.2
• NC: +3.2

𝗧𝗼𝗱𝗮𝘆
• Florida: Biden +1.2
• Pennsylvania: +5.1
• Michigan: +7.8
• Wisc: +4.6
• NC: +1.5

👉🏻 https://t.co/ZBRpAvXwZT https://t.co/GZmTCAxlSI

— Frank Luntz (@FrankLuntz) October 25, 2020

Finally, for those of you who want my guess, here’s my prediction of a comfortable Biden victory.

It’s basically the same (wrong) prediction I made in 2016, except I’m now giving Arizona and Michigan to the Democrats and Pennsylvania to the Republicans.

For what it’s worth, I was very tempted to give Pennsylvania – and maybe a few other states – to Biden.

Why? Because I think late-deciding voters may decide that they’re tired of all the drama and fighting that we get with Trump in the White House.

But I ultimately decided on the above map because I also think some of those voters may worry about Biden’s age. And they may worry even more about the Democratic Party’s leftward drift.

I guess we’ll know in a week (or so!).

In any event, if you really want to have fun, you can take my predictions, give Arizona, Florida, and North Carolina to Trump, along with one of Maine’s congressional districts, at which point you’d have a 269-269 tie. That would be a perfect ending for 2020, huh?

I’ll close with a few words about policy.

Biden clearly would move the country to the left on certain issues, most notably taxes and regulation. The only silver lining to that dark forecast is that I suspect that his tax increase will be much smaller than what’s contained in his awful plan.

I’m also somewhat hopeful that he won’t push for the so-called Green New Deal and that we’ll instead get the more-modest kind of Solyndra-style cronyism that we got under Obama. That’s bad, but not the end of the world.

The good news is that trade policy will move in the right direction.

But the biggest silver lining to a Biden victory is that Republicans will revert to pretending to once again be opposed to big government.

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The Economic Impact of the Biden Agenda

The good news is that the election season is almost over. The bad news is that we’ll have a president next year who does not embrace classical liberal principles of free markets and social tolerance.

But that doesn’t mean Trump and Biden are equally bad. Depending on what issues you think are most important, they’re not equally bad in what they say. And, because politicians often make insincere promises, they’re not equally bad in what they’ll actually do.

Regarding Trump, we have a track record. We know he’s pro-market on some issues (taxes and red tape) and we know he’s anti-market on other issues (spending and trade).

Regarding Biden, we have his track record in the United States Senate, where he routinely voted to expand the burden of government.

But we also have his presidential platform. And that’s the topic for today’s column. We’re going to review the major economic analyses that have been conducted on his proposals.

We’ll start with a report from Moody’s Analytics, authored by Mark Zandi and Bernard Yaros, which compares the economic impacts of the Trump and Biden agendas.

The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda. In this scenario, the economy is expected to create 18.6 million jobs during Biden’s term as president, and the economy returns to full employment, with unemployment of just over 4%, by the second half of 2022. During Biden’s presidency, the average American household’s real after-tax income increases by approximately $4,800, and the homeownership rate and house prices increase modestly. Stock prices also rise, but the gains are limited. …Near-term economic growth is lifted by Biden’s aggressive government spending plans, which are deficit-financed in significant part. …Greater government spending adds directly to GDP and jobs, while the higher tax burden has an indirect impact through business investment and the spending and saving behavior of high-income households. …The economic outlook is weakest under the scenario in which Trump and the Republicans sweep Congress and fully adopt their economic agenda. …Trump has proposed much less expansive support to the economy from tax and spending policies.

Here’s the most relevant set of graphs from the report.

The Moody’s study is an outlier, however. Most other comprehensive analyses are less favorable to Biden.

For instance, a study for the Hoover Institution by Timothy Fitzgerald, Kevin Hassett, Cody Kallen, and Casey Mulligan, finds that Biden’s plan will weaken overall economic performance.

We estimate possible effects of Joe Biden’s tax and regulatory agenda. We find that transportation and electricity will require more inputs to produce the same outputs due to ambitious plans to further cut the nation’s carbon emissions, resulting in one or two percent less total factor productivity nationally. Second, we find that proposed changes to regulation as well as to the ACA increase labor wedges. Third, Biden’s agenda increases average marginal tax rates on capital income. Assuming that the supply of capital is elastic in the long run to its after-tax return and that the substitution effect of wages on labor supply is nontrivial, we conclude that, in the long run, Biden’s full agenda reduces fulltime equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent.

Wonkier readers may be interested in these numbers, which show that there’s a modest benefit from unwinding some of Trump’s protectionism, but there’s a lot of damage from the the other changes proposed by the former Vice President.

In a report authored by Garrett Watson, Huaqun Li, and Taylor LaJoie, the Tax Foundation estimated the impact of Biden’s proposed policies. Here are some of the highlights.

According to the Tax Foundation General Equilibrium Model, Biden’s tax plan would reduce the economy’s size by 1.47 percent in the long run. The plan would shrink the capital stock by just over 2.5 percent and reduce the overall wage rate by a little over 1 percent, leading to about 518,000 fewer full-time equivalent jobs. …Biden’s tax plan would raise about $3.05 trillion over the next decade on a conventional basis, and $2.65 trillion after accounting for the reduction in the size of the U.S. economy. While taxpayers in the bottom four quintiles would see an increase in after-tax incomes in 2021 primarily due to the temporary CTC expansion, by 2030 the plan would lead to lower after-tax income for all income levels.

Table 2 from the report is worth sharing because it shows what policies have the biggest economic impact.

The bottom line is that it’s not a good idea to raise the corporate tax burden and it’s not a good idea to worsen the payroll tax burden.

Here are some excerpts by a study authored by Professor Laurence Kotlikoff for the Goodman Institute.

The micro analysis is based on The Fiscal Analyzer (TFA), which uses data from the Federal Reserve’s Survey of Consumer Finance to calculate how much representative American households will pay in taxes net of what they will receive in benefits over the rest of their lives. …The key micro issues…are the degree to which the Vice President’s reforms alter relative remaining lifetime net tax burdens and lifetime spending of the rich and poor within specific age cohorts and the impact of the reforms on incentives to work, i.e., remaining lifetime marginal net tax rates. The macro analysis is based on the Global Gaidar Model (GGM)…a dynamic, 90-period OLG, 17-region general equilibrium model. …The analysis includes three sets of findings. The first is the change in lifetime net taxes defined as the change in lifetime net taxes. The second is the percentage change in lifetime spending, defined as the change in the present value of outlays on all goods and services as well as bequests, averaged across all survivor path. The third is the lifetime marginal net tax rate from earning an extra $1,000. TFA’s lifetime marginal net tax rate measure takes full account of so-called double taxation. …The GGM predicts a close to 6 percent reduction in the U.S. capital stock. The GGM predicts close to a 2 percent permanent reduction in annual U.S. GDP.  The GGM predicts a roughly 2 percentage-point reduction in wages of U.S. workers, with a larger reduction in the wages of high-skilled workers.

In a study for the Committee to Unleash Prosperity, Professor Casey Mulligan estimated the following effects.

This study addresses the impact of these tax rate changes on economic behavior – work, investment, output and growth. This study finds that the Biden tax agenda will reduce production, incomes, and employment per capita by increasing taxation of both labor and business capital. Employment will be about 3 million workers less in the long run (five to ten years). This employment effect is primarily due to the agenda’s expansion of health insurance credits, which raises the average marginal tax rates on labor income by 2.4 percentage points. Biden also plans to increase taxes on businesses and their owners by a combined 6 to 10 percentage points. These taxes will reduce long-run wages, GDP per worker, and business capital per worker in the long run. By decreasing both the number of workers per capita and GDP per worker, respectively, these two key elements of Biden’s agenda reinforce to significantly reduce GDP per capita and average household incomes. I estimate that, as a result of Biden’s tax agenda, real GDP per capita would be 4 to 5 percent less, which is about $8,000 per household per year in the long run. The two parts of the tax agenda combine to reduce real per capita business capital by 7 to 12 percent in the long run.

Here’s a table from the study.

I’ll add two points to the above analyses.

First, the reason that the Moody’s study produces wildly different results is that its model is based on Keynesian principles. As such, a bigger burden of government spending is assumed to stimulate growth.

For what it’s worth, I think borrowing and spending can lead to short-run increases in consumption, but I’m very skeptical that Keynesian policies can generate increases in national income (i.e., what we produce rather than what we consume) over the medium-run or long-run.

All of the other studies rely on models that estimate how government policies impact incentives to engage in productive behavior. They don’t all measure the same things (some of the studies look solely at taxes, some look at overall fiscal policy, and some also include a look at regulatory proposals) but the methodologies are similar.

Second, I’ll re-emphasize the point I made at the beginning about how politicians routinely say things during campaigns that are either insincere or impractical.

For instance, Trump promised to restrain domestic discretionary spending by $750 billion and he actually increased it by $700 billion.

Likewise, I don’t expect Biden (assuming he prevails) to deliver on his campaign promises. In this case, that’s good news since he won’t increase taxes and spending by nearly as much as what he’s embraced during the campaign (in my fantasy world, he turns out be like Bill Clinton and actually delivers a net reduction in the burden of government).

P.S. For those on the losing side of the upcoming election, I’ll remind you that Australia is probably the best option if you want to escape the United States. Though you may want to pick Switzerland if you have a lot of money.

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Unions and Labor Day: The Divergent Interests of Government Bureaucrats and Private-Sector Workers

Way back in early 2017, I warned in an interview that Trump would be a big spender (sadly, I was right). But I wasn’t being reflexively anti-Trump.

Here’s a clip from that same program where I speculated that Trump might have the political skill to win support from private-sector union workers.

In honor of Labor Day, let’s elaborate on this topic.

I’ll start with the political observation that Trump seems to do much better than other Republicans at getting support from working-class voters. Even workers who belong to unions (much to the dismay of their left-leaning leadership) appear to be disproportionately sympathetic.

Though it’s important to emphasize, as I said in the interview, the distinction between government bureaucrat unions and private-sector unions.

The unions that represent government employees have an incentive to lobby for bigger government since that means more lavishly paid members paying more dues. So those unions reflexively support higher taxes, more spending, and additional red tape.

Yet those are the policies that undermine private-sector job creation and reduce the competitiveness of companies operating in America. And that’s bad for all private workers – including those that belong to unions.

Which is why I speculated in the interview whether Trump would have the “political cunning” to convince those private-sector union members that their interests are not the same as those of bureaucrats.

I guess we’ll see on election day.

By the way, I have very mixed feelings on Trump’s strategy. Some of his policies are good (lower taxes and less red tap), but he also tries to appeal to union workers with policies that are bad (most notably, protectionism).

P.S. Feel free to enjoy some good cartoons mocking unionized bureaucrats by clicking here, here, here, and here.

P.P.S. I often tell my Republican friends that they’ll have more success appealing to private-sector union members if they come across as pro-market (which implies neutrality between employers and employees) rather than pro-business (which implies siding with employers).

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Joe Biden Humor

Now that Joe Biden has been officially nominated, I should probably augment my analysis of his statist economic agenda.

But it’s also been a long time (almost nine years!) since I last shared some Biden-themed humor, so let’s make that today’s topic.

We’ll start with this campaign poster.

For what it’s worth, I think this visual would have been even better.

That being said, Biden’s propensity for unwanted touching doesn’t seem damaging, perhaps for the reason identified by America’s premiere satire site, Babylon Bee.

Medical experts were excited to announce today that Democrats have achieved herd immunity against sexual assault allegations. …”It’s amazing — the entire Democrat demographic is entirely immune,” said one researcher as he took blood samples from Joe Biden. “After conspiring with the media to squash any accusations that pop up, it seems, over time, Democrats have been able to develop a kind of herd immunity to any allegations.” Biden has been an important case study for medical experts’ work, as he can publicly sniff people’s hair and inappropriately touch many people on camera and still be entirely protected from any accusation whatsoever. His DNA is being studied for a possible breakthrough for other politicians. …Other political parties and at-risk conservatives are being advised to quarantine so as to avoid any allegations until a vaccine is discovered.

There’s more good news for Biden.

He’s been endorsed by Obama.

The Babylon Bee reported on Obama’s endorsement.

Many were worried Obama wasn’t going to endorse Biden, but he came through for the DNC establishment, telling everyone how deeply and personally Biden has touched everyone he has ever worked with. “Many leaders, um, you know, they, um, don’t rub you the right way,” Obama said. “But not Joe. Joe, see, he, um, touches everyone he comes into contact with, whether they want him to or not. …Joe’s campaign is very touching, that’s what I’m, um, here to say. So don’t let a Trump victory sneak up on us — embrace Joe Biden in 2020.”

We’ll wrap up with three more satirical images.

First, the former Vice President is prepared to defend America from foreign attacks.

The final two items target Biden’s alleged forgetfulness.

As usual, I save my favorite item for last.

P.S. You can find a few other anti-Biden jabs here, here, and here.

P.P.S. Sometimes Biden is unintentionally funny.

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Which Party Does Better on the Economy?

The best feature of libertarians is that we are very principled and look at everything through the lens of the non-aggression principle.

By contrast, the worst feature of politics, as explained by the Ninth Theorem of Government, is that it encourages people look at everything through the lens of partisanship.

In other words, there’s a desire to always make your team look good and the other team look bad, even if you have to torture data.

Here’s an example.

In a column for the New York Times, Michael Tomasky asserts that Democratic presidents have a much better track record on the economy than their Republican counterparts.

Mr. Biden and his party’s No. 1 job between now and Election Day: Make it clear that Democrats have been better stewards of the economy — for decades, and by far. Many people don’t believe this. …But it’s true. …the country has done better for decades under Democrats, by nearly every major economic measure. From John Kennedy through Barack Obama — 56 years during which, as it happens, we had a Democratic president for 28 years and a Republican president for 28 — we saw more than 50 million jobs created under Democrats and just 24 million jobs created under Republicans. Even the stock market has performed better under Democratic presidents. …just toting up numbers by the months each party had in power is imprecise. But there’s no better way to do it.

Any decent social scientist will quickly identify are all sorts of problems with Tomasky’s methodology.

• What about the impact of which party has full or partial control of Congress?
• Is it right to blame (or credit) presidents for what happens in their first year or two, before they’ve had a chance to enact and implement new policies?
• Should other variables be measured, such as median household income or labor force participation?

But let’s set aside these concerns, as well as others that can be listed, and accept Tomasky’s numbers. Does this mean that the economy does better when Democrats are in the White House?

That’s certainly a possible interpretation, but it’s far more accurate to say that the economy does better when a president – regardless of party – adopts good policy (or, to be more accurate, if good policy is implemented during their presidency).

I’ve previously ranked presidents based on what happened to the burden of government spending during their tenures. And one thing that stands out is that Republicans seem to be even worse than Democrats – even when looking at what happened to domestic spending (with Reagan and Johnson being the only two exceptions).

And I’ve also graded many of the modern presidents (Richard Nixon, Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, Barack Obama) based on their overall record on economics. If you peruse their performances, you’ll see there’s no obvious connection between good policy and partisan affiliation.

But I’ve never put together a best-to-worst list, so here’s my ranking of every president since Kennedy.

Let me elaborate – and also add some caveats.

For what it’s worth, I don’t think there’s good modern-quality data on JFK (or, to be more accurate, I’ve never searched for it), but I included him since he’s part of Tomasky’s analysis. That being said, he may be ranked too low. Yes, he spent too much money and implemented some bad policies, but he also lowered tax rates and pushed for free trade.

I also think it’s too early to grade Trump, but I included him since I know that will be of interest to readers. As you might imagine, I like what he’s done on taxes and red tape, but his record on other issues is bad – and getting worse. I’m especially concerned about the consequences and impact of the Fed’s easy-money policy, an approach Trump certainly supports.

Johnson and Nixon are unambiguously terrible, while Reagan is the star performer.

Clinton was surprisingly good (feel free to give the credit to Newt Gingrich if you want, but we didn’t need veto overrides to get the good policies of the 1990s).

The rest of the presidents were generally bad. I put them in reverse chronological order since I didn’t see any logical way of differentiating between them.

I can’t resist citing one more segment from Tomasky’s column.

Republican failures are not an unhappy coincidence. They’re a result of conservative governing practice. Republicans no longer fundamentally believe in the workings of government, so they don’t govern well. Their contempt for government is a result of conservative economic theory.

This is nonsense, as should be obvious from what I’ve already written. Republicans do not have a track record of “conservative governing.”

With one exception. We had relatively competent governance from the one GOP president who did have a “contempt for government” (actually, just contempt for big government).

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The Make-Believe Postal Service Panic and the Tenth Theorem of Government

Politicians and interest groups periodically fan the flames of temporary panic to push for misguided policy. We’ve already seen three big examples this century.

• The so-called PATRIOT Act was enacted in the feverish aftermath of 9-11, but many of its provisions simply added bureaucracy and gave government new/expanded powers unrelated to fighting terrorism.
• The TARP bailout allegedly was needed to save us for financial collapse, but in reality was a substitute for a policy (FDIC resolution) that would have recapitalized the banking system without bailing out Wall Street.
• Obama’s stimulus scheme had to be enacted to supposedly save the nation from another depression, but unemployment soared beyond administration projections and cronies got rich from boondoggles.

The same thing is now happening with the Postal Service, which ostensibly is on the verge of catastrophic collapse because of an expected increase in mail-in voting and sabotage by the Trump Administration.

The real story, though, is that bureaucracy has been losing money at a rapid pace for years and the only sensible solution is privatization. But that would upset the various postal unions and related interest groups, so they’ve created a make-believe crisis in hopes of getting more cash from taxpayers.

And this has nothing to do with Trump vs. Biden.

Let’s look at some rational voices on this topic, starting with this column by Charles Lane of the anti-Trump Washington Post.

Harder to account for is the progressive left’s idealization of the USPS, which began well before the uproar over new Postmaster General Louis DeJoy’s cost-cutting and its alleged impact on election mail. …when you look at what the agency actually does, a lot of it turns out to be a federally underwritten service for — profit-seeking businesses.Of the 142.6 billion pieces of mail of all kinds that the USPS handled in 2019, 53 percent was advertising material, a.k.a. junk mail, up from 48 percent in 2010. Junk mail makes up an even bigger share — 58 percent — of what individual households receive. …Companies pay a special rate, 19 cents apiece, to send these items (in bulk), as opposed to the 55 cents for a first-class stamp. …Some progressives are stuck in the pre-Internet age. Last week, Sen. Bernie Sanders (I-Vt.) said, apropos alleged mail delays: “I am not exaggerating when I say this is a life-and-death situation. The Post Office…delivers Social Security checks to seniors who rely on those benefits to survive.” He is exaggerating — a lot. Over 99 percent of all Social Security payments are sent by the more secure route of direct deposit; a 2013 law mandates it. …Crying “privatization” is the perennial scare tactic of progressives who oppose postal reform. That’s an odd one, too: Several European countries and Japan…have either fully or partially privatized their postal services. Actually, privatization is highly unlikely in the United States, given resistance from the two key lobbies — junk mailers and postal unions — that most influence Congress on this issue. …Something must be done to stem the Postal Service’s losses, which have totaled $83.1 billion since 2006, and to reduce its unfunded pension and health-care liabilities, which exceed $120 billion.

Here’s a twitter thread debunking some of the political hysteria about missing mailboxes.

Turns out the Washington Post uncovered the Great Mailbox Conspiracy ELEVEN YEARS AGO!

2009: "…half of the blue boxes in the Washington area have disappeared in the last nine years, and 200,000 nationwide have been plucked up in the last 20 years, leaving 175,000 total." pic.twitter.com/oLYV8rbEYn

— Jeryl Bier (@JerylBier) August 16, 2020

And how about this column by Nick Gillespie of the anti-Trump Reason magazine.

By now you’ve probably heard that President Donald Trump and Postmaster General Louis DeJoy “are sabotaging democracy in plain sight” through a mix of nefarious ploys, ranging from removing “blue Post Office drop boxes” to scrapping mail-sorting machines to allegedly mandating a slowdown in delivering the mail. …The truth is far less incendiary… Here’s a little bit of math that should give voters succor. In 2016, about 140 million total votes were cast in the presidential election…with “nearly 24 percent…cast using by-mail absentee voting.” …Assume, for the sake of argument, that the same number of votes will be cast this year as in 2016. Even if all voters used the mail and posted their ballots on exactly the same day, that would comprise only 30 percent of the amount of mail the USPS says it processes every single day. So if the USPS screws up delivering votes in a timely and efficient manner this fall, it won’t be because of any sinister actions by the White House. It will be because of longstanding, well-documented managerial and cultural problems… For those who are interested in the post office’s chronically bad performance and “unsustainable” situation, the Government Accountability Office (GAO) has produced a long list of studies on where the problems come from and how they might be addressed. The short version is that Congress has blocked all sorts of serious reforms to an operation that has seen a 33 percent decline in mail volume since 2006.

And here’s another twitter thread that’s worth a look.

OK so everyone has seen the "viral" photo going around of the piles of mailboxes in Wisconsin being used as evidence that Trump is sabotaging USPS. Problem is, they have been there for years: Hartford Finishing Inc. powder coats and refurbishes the old mailboxes. (1/8) pic.twitter.com/HQpAprWxoK

— Gary He (@garyhe) August 17, 2020

 

Or what about this article by Jack Shafer from (probably anti-Trump) Politico.

The USPS really is hurting finanically, and really is worried about delivering ballots on time. It’s legitimate to worry about postal delays botching the vote, if a mass of votes are cast by mail just before Election Day. But don’t extrapolate from news accounts, USPS union protestations and candidate carping… the USPS has sent letters to 46 states expressing its doubts about delivering all the ballots in time to be counted. But, as the Washingtonn Post also mentioned in its story, those letters were in the works before Trump’s new postmaster general took office. …What about those vanishing USPS mail collection boxes? As it turns out, the USPS has been culling the boxes since 2000, when their numbers peaked and 365,000 of them stood sentinel on U.S. streets. Today, their numbers have dwindled to 142,000. Why has the USPS deleted them? Because the volume of first-class has nose-dived.

So what’s actually going on?

As I noted at the beginning of this column, we’re getting scammed. The folks who benefit from the current system want to create a sense of panic so they can get a big bailout for the Postal Service.

The Wall Street Journal (which isn’t anti-Trump, but understands how Washington works) opined accurately on what’s really happening.

Mrs. Pelosi is trying to put on a political show, starring Democrats as the saviors of the post office. She says she wants to pass a bill that “prohibits the Postal Service from implementing any changes to operations or level of service it had in place on January 1.” Also in the mix may be a $25 billion cash infusion. Then Chuck Schumer will demand that the Senate come back to town for the same vote. By the way the letter-carriers union endorsed Joe Biden on the weekend.

My modest contribution to this discussion is to unveil aTenth Theorem of Government.

I’ll close with a prediction that politicians at some point in the future will manufacture a crisis (probably about deficits and debt) in order to impose a value-added tax.

P.S. Here are the nine previous Theorems of Government.

• The “First Theorem” explains how Washington really operates.
• The “Second Theorem” explains why it is so important to block the creation of new programs.
• The “Third Theorem” explains why centralized programs inevitably waste money.
• The “Fourth Theorem” explains that good policy can be good politics.
• The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
• The “Sixth Theorem” explains an under-appreciated benefit of a flat tax.
• The “Seventh Theorem” explains how bigger governments are less competent.
• The “Eighth Theorem” explains the motives of those who focus on inequality.
• The “Ninth Theorem of Government” explains how politics often trump principles.

 

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Trump Humor and the Ninth Theorem of Government

I know pro-market people who plan on voting to re-elect Trump because they like his record on taxes or regulation. I also know pro-market people who plan on voting against Trump because they don’t like his record on spending or trade.

I understand their motives. What baffles me, however, are people who have decided – because of their views on Trump – to change their views on policy issues. Which is one of the clever aspects of this amusing video from Ryan Long.

By the way, this is not a new phenomenon.

During the 2001-2008 period, I constantly interacted with people who were against proposals for bigger government when Bill Clinton was in the White House, but then decided to rationalize George Bush’s profligacy and interventionism.

There’s a word for this: Hypocrisy.

This accusation certainly applies to politicians, who face pressure to “be a team player” when a member of their party is in the White House and issuing foolish proposals.

But it also applies to ordinary people. And this Ninth Theorem of Government is dedicated to both groups.

I’ll close by revisiting what I wrote about understanding the motives of pro-market people who are either voting for Trump or against Trump.

That being said, I don’t the pro-Trump voters to suddenly decide that it’s a good idea to squander money or impose trade taxes. I want them to vote for Trump in spite of those bad policies.

And I don’t want the anti-Trump voters to decide that it’s a a good idea to oppose pro-growth tax cuts and deregulation.  I want them to vote against Trump in spite of those good policies.

This analysis also applies to folks who are motivated by other issues (immigration, foreign policy, guns, judges, decorum, etc). Simply stated, put principles first.

P.S. Here are the eight previous Theorems of Government.

• The “First Theorem” explains how Washington really operates.
• The “Second Theorem” explains why it is so important to block the creation of new programs.
• The “Third Theorem” explains why centralized programs inevitably waste money.
• The “Fourth Theorem” explains that good policy can be good politics.
• The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
• The “Sixth Theorem” explains an under-appreciated benefit of a flat tax.
• The “Seventh Theorem” explains how bigger governments are less competent.
• The “Eighth Theorem” explains the motives of those who focus on inequality.

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Joe Biden: An Incrementalist Version of Bernie Sanders?

Hardly anybody noticed because the nation has been focused on protests about police misbehavior, but Joe Biden officially clinched the Democratic nomination this past week.

And he’s now comfortably ahead in the political betting markets as well as public polling.

If Biden wins in November, what does that mean for the nation’s economic policy?

According to folks on the left, a Biden presidency means bigger government and more statism.

For instance, opining for the New York Times, Jamelle Bouie applauds Biden’s leftist agenda.

…if the goal is to move America to the left…then a Biden candidacy…represents an opportunity. …If Biden goes on to win the White House, there’s real space for the pro-Sanders left to work its will on policy. …It can fulfill some of its goals under the cover of Biden’s moderation, from raising the minimum wage nationally to pushing the American health care system closer to single-payer. …Biden…is a creature of the party. He doesn’t buck the mainstream, he accommodates it. He doesn’t reject the center, he tries to claim it. …the center of the Democratic Party as far left as it’s been since before Ronald Reagan, then Biden is likely to hew to that center, not challenge it.

His colleague at the NYT, Michelle Goldberg, is similarly enthused about the prospects for bigger government under a Biden Administration.

Biden’s proposals go far beyond his call for a $15 federal minimum wage — a demand some saw as radical when Sanders pushed it four years ago. While it’s illegal for companies to fire employees for trying to organize a union, the penalties are toothless. Biden proposes to make those penalties bite and to hold executives personally liable. …should Biden become president, progressives have the opportunity to make generational gains. …To try to unite the party around him, he’s making serious progressive commitments. …he’s moving leftward. Biden recently came out for tuition-free college for students whose families earn less than $125,000. He endorsed Elizabeth Warren’s bankruptcy plan…His climate plan already went beyond any of Barack Obama’s initiatives, and he’s pledged to make it even more robust.

According to (supposedly) neutral analysts, a Biden presidency means bigger government and more statism.

In an article for Newsweek, Steve Friess discusses Biden’s shift to the left.

Being stuck running for the presidency from the basement of his home in Wilmington, Delaware, had given the former vice president a lot of time to think, he told them, and he wanted bigger ideas. Go forth, he urged his financial brain trust, and bring back the boldest, most ambitious proposals they’d ever dreamed of to reshape the U.S. economy… Biden began issuing a raft of new proposals that move his positions closer to the progressive wing of the Democratic Party, with a promise to unveil an even more transformative economic plan this summer. …It’s a yes to adding $200 a month to Social Security benefits and lowering the qualifying age for Medicare from 65 to 60. Yes to trillions in new spending, yes to new regulations on banks and industry, yes to devil-may-care deficits. …the leader he most often invokes—in interviews, in public addresses, on his podcast—is no longer Barack Obama but Franklin Delano Roosevelt. …Biden has already made a series of significant leftward policy shifts since effectively sewing up the nomination in March.

Perry Bacon, in a piece for fivethirtyeight, analyzes Biden’s statist agenda.

…if Biden is elected in November, the left may get a presidency it likes after all…if American politics is moving left, expect Biden to do the same. …Biden’s long record in public office suggests that he is fairly flexible on policy — shifting his positions to whatever is in the mainstream of the Democratic Party at a given moment. …Biden is likely to be a fairly liberal president, no matter how moderate he sounded in the primaries. …Biden’s 2020 primary platform…adopted fairly liberal policies…more liberal than his pre-campaign record suggested. The Democratic Party is more liberal now than it was when Bill Clinton took office, or even when Obama was inaugurated, and Biden’s platform reflects that shift. …Biden and his advisers are now…rolling out more liberal policy plans, speaking in increasingly populist terms and joining forces with the most progressive voices in the party. …“Joe Biden is running on the most progressive platform of any Democratic nominee in recent history. But given the pandemic, he has to look at the New Deal and Great Society traditions in the Democratic Party and go bigger,” said Waleed Shahid, the communications director for Justice Democrats, a left-wing group aligned with Ocasio-Cortez.

Writing for the Washington Post, Sean Sullivan documents Biden’s leftward drift.

Joe Biden sought to appeal to liberal supporters of Sen. Bernie Sanders on Thursday with a pair of new proposals to expand access to health care and curtail student loan debt. Biden proposed lowering the eligibility age for Medicare coverage from 65 to 60. He also came out in favor of forgiving student loan debt for people who attended public colleges and universities and some private schools and make up to $125,000 a year. …In another peace offering to liberals, Biden proposed paying for his student debt plan by repealing a provision in the recent coronavirus legislation that Congress passed and President Trump enacted. “That tax cut overwhelmingly benefits the richest Americans and is unnecessary for addressing the current COVID-19 economic relief efforts,” he wrote… Biden endorsed a bankruptcy plan put forth by Sen. Elizabeth Warren (D-Mass.), another rival who ran to his left.

And, according to more market-friendly sources, a Biden presidency means bigger government and more statism.

The Wall Street Journal editorialized about Biden’s leftist agenda.

Already Medicare is scheduled to be insolvent by 2026. …In 1970, life expectancy in the U.S. was 70.8. Now it’s about eight years longer. By lowering the age of eligibility instead, Mr. Biden would begin shifting Medicare’s focus from seniors to everybody else. Don’t worry about the funding, he insists, since the extra costs would be “financed out of general revenues.” …Mr. Biden’s new left turn on student loans is equally sharp. …Cancel all federal undergraduate tuition debt for many borrowers who went to public schools, including four-year universities. This forgiveness would be given to anyone who earns $125,000 a year or less. …How much would it cost? There’s no explanation.

Jeff Jacoby analyzed Biden in a column for the Boston Globe.

Biden…is running on a platform far more progressive — i.e., far less moderate — than any Democratic presidential nominee in history. …on issue after issue, Biden has veered sharply from Obama’s path. On health insurance, for example, Obama rejected a public option as part of the Affordable Care Act and repeatedly stressed the importance of maintaining private coverage. But Biden favors a public option open to everyone… Biden supports government-funded health care even for unauthoritzed immigrants, something Obama never came close to proposing. …No Democratic presidential nominee ever endorsed anything like the radical Green New Deal, with its price tag in the tens of trillions of dollars and its goal of eliminating the use of all fossil fuels. But Biden does. No Democratic nominee ever called for a national minimum wage of $15 an hour. But Biden does. …Sanders may not end up on the November ballot, but it will unmistakably reflect his influence. For he and his band of progressives have pushed their party to the left with such success that even the “moderate” in the race would be the most liberal Democrat ever nominated for president.

Here’s some of what Peter Suderman wrote for Reason.

Biden is a moderate compared to Sanders, but he is notably to the left of previous Democratic standard-bearers. …Biden has proposed a significant expansion of the Affordable Care Act that his campaign estimates would cost $750 billion over a decade… Biden has proposed a $1.7 trillion climate plan that is similar in scope to many candidates on his left and a $750 billion education plan… He favors an assault weapons ban and other gun control measures, a national $15 minimum wage, and a raft of subsidies, loans, and other government-granted nudges designed to promote rural economies. Has proposed $3.4 trillion worth of tax hikes—more than double what former Secretary of State Hillary Clinton proposed when she ran in 2016. …Biden’s leftward drift is thus the party’s leftward shift…, a big-government liberal, a candidate whose current incarnation was shaped and informed by progressive politics, if not wholly captured by them.

The Tax Foundation examined the former Vice President’s tax plan and the results are not encouraging.

Former Vice President Joe Biden would enact a number of policies that would raise taxes, including individual income taxes and payroll taxes, on high-income individuals with income above $400,000. …According to the Tax Foundation’s General Equilibrium Model, the Biden tax plan would reduce GDP by 1.51 percent over the long term. …The plan would shrink the capital stock by 3.23 percent and reduce the overall wage rate by 0.98 percent, leading to 585,000 fewer full-time equivalent jobs. …On a dynamic basis, we estimate that Biden’s tax plan would raise about 15 percent less revenue than on a conventional basis over the next decade. …That is because the relatively smaller economy would shrink the tax base for payroll, individual income, and business income taxes. …The plan would lead to lower after-tax income for all income levels.

Here’s a table summarizing the findings.

So what does all this mean?

At the risk of oversimplifying, Biden unquestionably would move tax policy to the left (he actually said higher taxes are patriotic, even though he engages in aggressive tax avoidance), and the same thing would happen on regulatory issues.

His spending agenda is terrible, though it’s worth noting that Democrat presidents usually don’t spend as much as Republicans (with the admirable exception of Reagan).

And, to be fair, there’s no way he could be as bad on trade as Trump.

Let’s close by looking at some hard data. Back in January, I sifted through the vote ratings prepared by the National Taxpayers Union and the Club for Growth and showed that Biden was not a Bill Clinton-style moderate.

I went back to those same sources an put together this comparison of Biden and some other well-known Democrats (scores on a 0-100 scale, with zero being statism and 100 being libertarian).

In both measures, he’s worse than Crazy Bernie!

Moreover, a lifetime average of zero from the Club for Growth is rather horrifying. His average from the National Taxpayers Union isn’t quite so bad, but the trend is in the wrong direction. Biden’s post-2000 average was less than 10, while his score for the preceding years averaged more than 23.

That being said, my two cents on this topic is that Biden is a statist, but not overly ideological.

His support for bigger government is largely a strategy of catering to the various interest groups that dominate the Democratic Party.

The good news is that he’s an incrementalist and won’t aggressively push for a horrifying FDR-style agenda if he gets to the White House.

The bad news is that he will probably allow Nancy Pelosi and other statist ideologues to dictate that kind of agenda if he wins the presidency.

P.S. My collection of Biden-oriented humor is rather sparse (see here, here, here, and here), an oversight that I’ll have to address in the near future.

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Bernie Has Faded, but Socialism Is Still a Threat

I would like to think that the election results from Super Tuesday signify a rejection of the evil and destructive ideology of socialism. After all, despite promising the most handouts, Bernie Sanders was defeated in most states and quickly went from being the front-runner to a long-shot candidate.

This chart shows how political betting markets have dramatically changed in the past couple of days. Crazy Bernie (in green) has collapsed with Biden (in blue) has skyrocketed.

Moreover, the other explicitly hard-left major candidate, Elizabeth Warren, saw her support collapse even earlier.

Daniel Henninger of the Wall Street Journal opined today on the implications of this week’s political earthquake.

Before the voting began Tuesday it was conventional wisdom…that something called progressivism was on the march in the U.S., sweeping aside decades if not centuries of belief, history and tradition with a new agenda of wokeness, identity politics and socialism. …Guess what? The voters still get the last word. …Progressives, however much they dominate the culture, keep losing big, competitive elections. …Joe Biden, hardly a commanding presence, is a proxy for Democratic voters’ pragmatism and their doubts about Mr. Sanders, socialism and the American left.

By the way, it’s not just that Crazy Bernie got trounced.

As reported by the New York Times, many hard-left congressional candidates also are being rejected.

Ms. Ocasio-Cortez previously suggested that Democrats who were not sufficiently loyal to an emergent brand of progressive politics should have others like her run against them in a primary. She is now suggesting that, exit polling be damned, Mr. Biden’s latest string of successes is because of the strong-arming of corporate lobbyists, something Mr. Sanders has underscored by repeatedly calling Mr. Biden the establishment candidate. But the results speak for themselves. Ms. Ocasio-Cortez threw her weight behind Cristina Tzintzún Ramirez in her Senate primary campaign in Texas to defeat the Democratic Senatorial Campaign Committee’s chosen candidate, M.J. Hegar. Ms. Hegar ended up easily outpacing a crowded Democratic field.

All of this is very encouraging, but I’m still worried.

There are three reasons why I’m not brimming with optimism.

First, as explained by Annie Lowrey for the Atlantic, a non-trivial number of young people are enamored with the evil ideology of socialism.

A striking generational divide has emerged. Older people still see socialism and communism as dangerous, authoritarian political systems, whereas younger people are more likely to see them as economic systems, and to care far less one way or another. For millions of potential voters, the Red Scare is no longer so scary. …The simple passage of time explains a lot. Millions of Millennials and Gen Zers were never exposed to the threats of the Soviet Union; they did not live through the fall of the Berlin Wall… A recent poll conducted by the Victims of Communism Memorial Foundation showed that 36 percent of Millennials have a favorable opinion of communism, as do a quarter of Gen Zers. Roughly half of the members of those two generations have a favorable view of socialism and thinks the government should act as an employer of last resort. One in five Millennials thinks the Communist Manifesto better “guarantees freedom and equality” than the Declaration of Independence and thinks society would be better off if the government abolished private property.

I’ve shared plenty of additional data to confirm this worrisome trend.

Second, older Democrats may not embrace the socialist label, but they have shifted in that direction.

I previously wrote about how even prominent folks on the left agree that Joe Biden is far to the left of both Barack Obama and Hillary Clinton.

This graphic from the New York Times illustrates how the rest of the Democratic establishment (as measured by party platforms) has also veered toward statism.

For what it’s worth, the “Median party” line shows the average position of the world’s other political parties, so the takeaway is that America’s Democrats (and the U.K.’s Labour Party) are now further to the left than some of the world’s socialist parties.

Third, while the Republican Party hasn’t moved to the left based on its platforms, I fear that the GOP isn’t motivated today by a Reagan-style belief in limited government and individual liberty.

It’s not just that Trump is a big spender (and a protectionist). Every major Republican in the post-Reagan era has expanded the burden of government and rejected the principles of classical liberalism.

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Bernie Sanders Easily Prevails in the Free-Stuff Primary

In an amazing display of incompetence, we still don’t know whether Bernie Sanders or Pete Buttigieg won the Iowa caucus.

This has created some opportunities for satire, with people asking how a political party that can’t properly count 200,000 votes somehow can effectively run a healthcare system for 340 million people.

That’s a very good point, but today let’s focus on a contest that does have a clear winner.

As explained in this video, John Stossel and his team crunched the numbers and they have concluded that “Crazy Bernie” wins the free-stuff primary.

Senator Sanders doubtlessly will be very happy with this victory, especially since he trailed Kamala Harris when Stossel did the same calculations last summer.

America’s taxpayers, however, might not be pleased with this outcome. Especially if Bernie Sanders somehow gets to the White House.

Last week, I shared new numbers from the Congressional Budget Office, which showed that the federal budget is now consuming $4.6 trillion.

Bernie Sanders is proposing a staggering $4.9 trillion of new spending – more than doubling the burden of government spending!

And the 10-year cost of his promises could be as high as $97 trillion.

To make matters worse, all this new spending is in addition to already-legislated spending increases for everything from boondoggle discretionary programs to behemoth entitlement programs.

Hello Greece.

Heck, it may be hello Venezuela if Bernie gets unleashed.

P.S. Trump’s record on spending is bad, though his mistakes are measured in billions rather than trillions.

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Bloomberg Proposes Huge Increase in America’s Tax Burden

One of the most significant developments in 2020 politics is how Democratic presidential candidates have embraced hard-left economic policies.

Prominent analysts on the left have noted that even Joe Biden, ostensibly the most moderate of the candidates, has a very statist economic platform when compared to Barack Obama.

And “Crazy Bernie” and “Looney Liz” have made radicalism a central tenet of their campaigns.

So where does Michael Bloomberg, the former mayor of New York City, fit on the spectrum?

The New York Times has a report on Bloomberg’s tax plan. Here are some of the key provisions, all of which target investors, entrepreneurs, small business owners, and other high-income taxpayers.

Former Mayor Michael R. Bloomberg of New York unveiled a plan on Saturday that would raise an estimated $5 trillion in new tax revenue… The proposal includes a repeal of President Trump’s 2017 tax cuts for high earners, along with a new 5 percent “surcharge” on incomes above $5 million per year. It would raise capital gains taxes for Americans earning more than $1 million a year and…it would partially repeal Mr. Trump’s income tax cuts for corporations, raising their rate to 28 percent from 21 percent. …Mr. Bloomberg’s advisers estimate his increases would add up to $5 trillion of new taxes spread over the course of a decade, in order to finance new spending on health care, housing, infrastructure and other initiatives. That amount is nearly 50 percent larger than the tax increases proposed by the most fiscally moderate front-runner in the race, former Vice President Joseph R. Biden Jr. …Mr. Bloomberg’s advisers said it was possible that he would propose additional measures to raise even more revenue, depending on how his other domestic spending plans develop.

These are all terrible proposals. And you can see even more grim details at Bloomberg’s campaign website.

Every provision will penalize productive behavior.

• Higher personal income tax rates will discourage work and entrepreneurship.
• Higher corporate income tax rates will undermine U.S. competitiveness.
• Higher capital gains taxes and higher death taxes will lower saving and investment.

But there is a bit of good news.

Though it would be more accurate to say that there’s a partial absence of additional bad news.

Bloomberg hasn’t embraced some of the additional bad ideas being pushed by other Democratic candidates.

It would…maintain a limit on federal deductions of state and local tax payments set under the 2017 law, which some Democrats have pushed to eliminate. …the plan notably does not endorse the so-called wealth tax favored by several of the more liberal candidates in the race, like Senators Elizabeth Warren and Bernie Sanders.

I’m definitely happy he hasn’t embraced a wealth tax, and it’s also good news that he doesn’t want to restore the state and local tax deduction, which encouraged profligacy in states such as California, New Jersey, and Illinois.

It also appears he doesn’t want to tax unrealized capital gains, which is another awful idea embraced by many of the other candidates.

But an absence of some bad policies isn’t the same as a good policy.

And if you peruse his website, you’ll notice there isn’t a single tax cut or pro-growth proposal. It’s a taxapalooza, what you expect from a France-based bureaucracy, not from an American businessman.

To add insult to injury, Bloomberg wants all these taxes to finance an expansion in the burden of government spending.

For what it’s worth, this is my estimate of what will happen to America’s tax burden (based on the latest government data) if Bloomberg is elected and he successfully imposes all his proposed tax increases. We’ll have a more punitive tax system that extracts a much greater share of people’s money.

P.S Take these numbers with a grain of salt because they assume that Bloomberg’s tax increases will actually collect $5 trillion of revenue (which won’t happen because of the Laffer Curve) and that GDP won’t be adversely affected (which isn’t true because there will be much higher penalties on productive behavior).

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How Do We Rescue Young People from Socialism?

I started fretting about the socialist tendencies of young people early last decade.

And when Sanders attracted a lot of youth support in 2016, I gave the issue even more attention, and I’ve since continued to investigate why so many young people are sympathetic to such a poisonous ideology with a lengthy track record of failure and deprivation.

Some of the recent polling data is very discouraging.

And if you want to be even more depressed, here are some tweets with the most-recent data about the the views of young people.

It’s not just that they have warm and fuzzy thoughts about so-called democratic socialism.

I’m completely horrified to learn that more than one-third of young people even have a positive perception of communism.

36% of millennials polled say that they approve of communism, which is up significantly from 28% in 2018. https://t.co/WVFGJmZ3ba

— MarketWatch (@MarketWatch) October 28, 2019

In other words, wearing Che t-shirts isn’t just a vapid fashion statement.

These kids are either overtly evil or utterly oblivious.

Yes, I realize I sound like a curmudgeon (“you kids get off my lawn!”), but how else should I react when I see these numbers from Axios.

50% of millennials and 51% of Generation Z have a somewhat or very unfavorable view of capitalism. https://t.co/LxESSusLk4

— Axios (@axios) October 28, 2019

For what it’s worth, the same problem exists in the United Kingdom.

And it may be even more lopsided.

Latest student voting intention:

Labour 72%
Lib Dems 10%
Conservatives 8%
SNP 3%
Brexit Party 2%
Plaid Cymru 2%
Green 1%

ICM 29 Nov-2 Dec#GE2019

— Matthew Goodwin (@GoodwinMJ) December 5, 2019

(Though I’m very relieved the misguided views of young people didn’t prevent a victory for Boris Johnson last month.)

For today’s column, let’s keep our focus on the United States.

What’s the underlying cause of bad polling numbers in America?

In a column for the Washington Times, Robert Knight explains that many young people have been spoon-fed a leftist version of American history.

Why do so many young people hate America and think we’d be better off as a socialist country? …reading and believing Howard Zinn’s best-selling ‘A People’s History of the United States’… First published in 1980, “A People’s History” has sold more than 2.5 million copies and is in virtually every school district, university and local library. …Everything Zinn wrote was couched in the language of Marxist class warfare. Key events were omitted. The mass slaughter that followed the Communist takeover of Cambodia? Good luck finding it in “A People’s History.” …Zinn was a member of numerous Soviet front groups, and he helped found the socialist New Party… Before the fall of the Berlin Wall, Zinn warned that concern over communism was due to “hysteria,”… In a chapter titled “The Coming Revolt of the Guards,” …Zinn states flatly that “capitalism has always been a failure for the lower classes. It is now beginning to fail for the middle class.” …Zinn envisions a utopian future in which “certain basic things” would be “…available — free — to everyone: food, housing, health care, education, transportation.” …The reason this insane, economically illiterate, un-American scheme appeals to so many is that they’ve been miseducated via Howard Zinn into thinking that they live in a bad country that must be rebuilt as a socialist paradise.

Jarrett Stepman opined on the adverse consequences of historical illiteracy in a piece for the Daily Signal.

As young Americans are losing an understanding of civics and American history, they increasingly embrace socialism. …younger generations have a far sunnier view of socialism and communism than their elders. …Perhaps worse than nostalgia for the Soviet Union, “57% of millennials (compared to 94% of the Silent Generation) believe the Declaration of Independence better guarantees freedom and equality over the Communist Manifesto.” That’s appalling. …there’s not only been a worrisome decline in inculcating informed patriotism in young Americans, but a willful attempt to re-educate them to turn them against the foundations of America itself. …So far, we have escaped the curse of socialism… But a troubling collapse in a basic understanding of our history, along with the malignant attempt to reframe our country’s origins to make us more susceptible to doctrines outside our tradition, means that the specter of socialism now hangs over us.

Amen. The government’s education monopoly too often gives kids a diet of statist pabulum. This is another reason why we need school choice.

But it’s not just bad history in government schools.

It’s also bad policy in government.

In a column for the Wall Street Journal, Mene Ukueberuwa shares some insights from Edward Glaeser, a professor at Harvard who warns that statist policies are leading young people to support bigger government.

Bernie Sanders…has become an unlikely voice of the young generation. …this axis of today’s struggle could change politics for generations to come, as millennials reject the country’s capitalist consensus and embrace socialism in record numbers. …Critics often blame today’s socialist surge on millennials’ laziness. …One free-market economist has a different explanation. Edward Glaeser, a Harvard professor…, argues that young people have radicalized politically because “there are a number of ways in which the modern American economy isn’t working all that well for them.” Many public policies make it harder to get a job, save money or find an affordable home, leaving young idealists thinking, “Why not try socialism?” But that cure would merely worsen the disease. Mr. Glaeser decries policies that constrain the job market and increase the cost of living compared with what the economy would produce if left alone. …Consider the housing market. “In the 1960s and earlier,” Mr. Glaeser says, “America basically had a property-rights regime that meant that anyone who had a plot of land could pretty much put up anything reasonable on that plot of land.” …The shift of income toward those Mr. Glaeser calls the “entrenched” is most explicit in entitlement programs. …They’re funded by payroll taxes, which snag a disproportionate share of low-earners’ paychecks. Taxpayers also pony up ever more to fund the retirements of government employees.

Glaeser is right.

Government intervention is increasing the price of housing for the young. Entitlement programs are pillaging the young. And bureaucrat pensions are a scam that victimizes the young.

For all intents and purposes, Prof. Glaeser is describing Mitchell’s Law.

Bad policy causes bad results, which leads some people (in this case, young people) to want more bad policy.

So the obvious solution, he argues, is to get rid of the bad policies that are causing problems in the first place.

And maybe young people will realize that they should support free markets and limited government!

“They say, ‘Well, there are a whole bunch of projects—a whole bunch of government spending that helps old people. I want mine. If we’re going to spend a huge amount on Medicare, why aren’t we spending a whole lot on education for me?’” …To give newcomers a chance, Mr. Glaeser would curtail the influence of entrenched groups and restore incentives for “a capitalism that is inclusive, and that provides a place of opportunity for more people.” …Mr. Glaeser insists that this message would be likelier to catch on if it were backed by policy reforms that make work more fruitful. A program of plentiful job opportunities, cheaper housing, and tax cuts financed by curtailed entitlements could be a significant step toward replacing socialism in the hearts of Mr. Sanders’s young supporters.

For what it’s worth, bad history and bad policy are both good explanations, but they don’t fully explain why young people are misguided.

I suspect many young people also think support for socialism is a way of signalling that you’re a nice person. That you care about others.

I’m not sure how we solve this problem, but this clever video from Kristian Niemietz suggests that part of the answer may be satire.

Though I may be biased since I have an entire collection of humor that targets socialism and communism.

P.S. When it hits close to home, college students actually reject socialism, though maybe they should have learned that lesson in kindergarten.

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Economics, Politics, and Trump

When I was in London last week for Boris Johnson’s landslide victory, many people asked me whether Trump would win again in 2020.

Since I was wrong about 2016, I told them I wasn’t the right person to ask.

That being said, Trump has some positive economic tailwinds.

For those of you who care about political outcomes, there’s a new CNN poll of battleground states.

It’s good news for Republicans, particularly if one assumes that there are some people who don’t want to admit that they will vote for Trump (which seems to have been true in 2016).

BATTLEGROUND STATE* VOTERS
Choice for President

Dem. Trump
Biden 47% 47%
Warren 46% 48%
Sanders 45% 49%
Buttigieg 43% 48%

Margin of error: +/-6.6% pts

* the 15 states decided by 8 points or less in 2016

— Jake Tapper (@jaketapper) December 20, 2019

Political betting markets also are pointing to a Trump victory.

Here’s a screenshot showing the 2019 odds of success for the various candidates. As you can see Trump’s numbers are trending upwards – including a positive bump after the House voted for impeachment!

Both polls and betting markets were wrong in 2016, so take all this data with a grain of salt.

For those who care about economic policy, I’ll simply regurgitate my usual comment that Trump is good on some issues (taxes and regulation) and bad on other issues (trade and spending).

I expect this pattern to continue if he’s reelected.

The big wild card is monetary policy.

As I said in the interview, I worry there’s a bubble caused by an easy-money approach. And bad things happen when bubbles pop.

P.S. I should have mentioned that the employment-population data is not as positive as the unemployment-rate data.

P.P.S. I mentioned macroeconomic political forecasts in the interview. I wrote about those predictions back in October.

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Economics and Election Predictions

There’s an entire field of economics called “public choice” that analyzes the (largely perverse) incentive structures of politicians and bureaucrats.

But is economic analysis also helpful to understand voting and elections?

In the past, I’ve suggested that political betting markets are a useful place to start since “you are seeing estimates based on people defending their views with cold, hard cash.”

In his Bloomberg column, Professor Tyler Cowen takes a more rigorous look at the potential insights of political betting markets.

Prediction markets…are a quick way to get an overview of the state of the campaign. President Donald Trump is currently at about 0.40 to be re-elected… Under normal assumptions about the uncertainty of future economic growth, the markets rate Trump’s chances of winning at 40%. …it is a useful corrective to the argument that Trump is toast — or, alternatively, that he is a shoo-in.  The market incorporates the relevant uncertainties in both directions. (Interestingly, Trump’s re-election odds have stayed pretty steady over the last week or so of negative news.) In many cases, prediction markets…“see through” the day-to-day volatility that may buffet the polls but not affect the final outcome. …Prediction markets…also made me think that a possible Hillary Clinton candidacy…is perhaps an undercovered story. …It is not a valid criticism of prediction markets to say that they didn’t predict Trump, say, or Brexit. The purpose of prediction markets is not to foresee particular upsets. They can, however, tell you in advance what would be an upset — much like probability theory can tell you that getting three heads in a row is unlikely but is of no help in predicting exactly when it will happen.

There are also people who build models that predict elections based largely on economic factors.

The Washington Post just published a very interesting review of how three of these models show Trump comfortably winning.

President Trump is on a fast track to an easy reelection. That’s the conclusion reached by economic forecasters… Moody’s Analytics projects the president will win handily next year if the economy doesn’t badly stumble — and in fact, rack up a greater margin in the electoral college than the 304-to-227 victory he secured against Hillary Clinton in 2016. …The finding jibes with those of other forecasting models that rely on measures of the economy’s strength to predict which major party’s candidate will win the White House next. Oxford Economics sees Trump winning 55 percent of the popular vote next year barring a “significant downturn” in the economy. …by the reckoning of the firm’s model, three key economic indicators — unemployment, inflation and real disposable income growth — all favor Trump’s reelection. They outweigh a “negative exhaustion factor” with Trump that dents his support in the projection. …Another model, assembled by Trend Macrolytics, accurately predicts every presidential victor back to 1952 by focusing on the effects of the economy and incumbency on the electoral college, according to Donald Luskin, the firm’s chief investment officer. It projects Trump will win reelection next year with 354 electoral votes — a margin that seems staggering on its face.

Here’s the Moody’s electoral map, which doubtlessly will cause sleepless nights for the anti-Trump crowd.

Wow, not only do they show Trump winning every state he won in 2016, but they show him picking up New Hampshire, Virginia, and Minnesota.

So which approach is more accurate, betting markets of election models?

Given my inaccurate 2016 predictions, I’m probably not the right person to ask.

I’ll simply observe that both approaches have erred in the past.

And if you believe in guilt by association, some of the people who put together political prediction models also put together deeply flawed Keynesian economic models.

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Are Republicans Now the (Second) Party of Big Government?

When I talked to CNBC on Wednesday, I was very critical of Trump and other Republicans for promoting protectionism, Keynesian monetary policy, and wasteful spending.

Yes, I give Trump and the GOP credit for improvements in regulatory policy and tax policy. And I used to think that the pro-growth effect of those reforms was enough to balance out the anti-growth effects of the bad policies.

But I now think the net effect of the Trump presidency is to expand the overall burden of government.

In early July, my report card on Trump’s economic policy (based on the five key indices in Economic Freedom of the World) had him slightly above a C average.

Now, as you can see, he’s slightly below. And since Republicans in Congress are largely going along with Trump’s policies, they also deserve blame.

I realize that people also care about other matters, such as social issues, the judiciary, and foreign policy, so it’s not my goal to influence how anyone votes.

But I do want people to understand that economic policy matters. And for readers who like Trump (or at least think he’s a less-worse alternative than Sanders, Harris, Warren, etc), be forewarned that Trump’s big-government policies are increasing the probability of having Democrats win in 2020.

The lesson Republicans should have learned from Ronald Reagan is that good policy is good politics (my Fourth Theorem of Government).

George H.W. Bush didn’t learn that lesson. George W. Bush didn’t learn that lesson. And now Trump is demonstrating that he didn’t learn that lesson.

P.S. Some of us knew ahead of time to expect bad policy from Trump.

P.P.S. Since my 2016 election prediction was wrong, feel free to ignore my political prognosticating.

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The Left-Wing Debate Between Socialism and Corporatism

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

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

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

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

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

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

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

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

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

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

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

I’ll make two points.

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

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

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

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

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

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

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

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

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

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

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An Emerging Anti-Socialist Wing of the Democratic Party?

Since I’m a policy economist, I rarely comment on political matters.

But I am worried that the Democratic Party is veering too far to the left. Bernie Sanders, an out-of-the-closet socialist is leading the way, followed closely by other leading Democrats with hard-left policy agendas, such as Kamala Harris and Elizabeth Warren.

But not every 2020 candidate is hopping on the socialism bandwagon. Some of the major candidates, such as Joe Biden, have avoided saying anything favorable about socialism.

And two of the candidates have explicitly rejected the poisonous ideology.

Interestingly, they’re both from Colorado.

CNN reports that the former governor, John Hickenlooper. received a very hostile reception when he rejected socialism.

The welcoming cheers 2020 presidential hopeful John Hickenlooper received when he first graced the stage at California’s Democratic Convention quickly crumbled into boos and jeers after he rejected socialism as the answer to Democrats’ problems. “If we want to beat Donald Trump and achieve big progressive goals, socialism is not the answer,” Hickenlooper said to a crowd of more than 4,500 delegates and observers on Saturday.Before he could get finish his next sentence, a chorus of boos…overtook his speech, lasting for more than 30 seconds. …The former Colorado governor is one of 15 Democratic candidates to address the San Francisco crowd, which is known to be home to some of the party’s furthest left progressives.

And, as reported by the Hill, one of the state’s U.S. Senators, Michael Bennet, also condemned socialism for being contrary to American ideals.

Sen. Michael Bennet (D-Colo.), a 2020 presidential hopeful, said on Sunday that his dismissal of socialism as a solution for America is not out of the mainstream for the Democratic Party. “I don’t think I’m out of step,” Bennet told ABC’s “This Week.” “I think we have 230 years of being the longest-lived democracy on the planet. That’s something we need to preserve.” …Bennett made the comments in response to a viral moment in which his fellow Democratic presidential candidate, former Colorado Gov. John Hickenlooper, was booed at the California Democratic Convention over the weekend …Bennet…is on the moderate end of the Democratic primary field.

I hope Joe Biden and other Democrats join Hickenlooper and Bennet.

In my fantasy world, the next Democratic president will turn out to be another Bill Clinton who presides (either intentionally or unintentionally) over an expansion of economic freedom in the United States.

But at the very least, I don’t want the country to take a big step toward statism, which was the mistake the United Kingdom made under Clement Attlee after World War II.

P.S. I realize many Democrats today don’t really have a firm understanding of socialism. Many of them don’t realize it implies government ownership, central planning, and price controls. Heck, some of them probably think the market-oriented Nordic welfare states (which have similar levels of economic freedom as the United States) are socialist. Regardless, they definitely want government to get bigger at a faster rate, so I’m hoping they’re not the majority of the Democratic Party.

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Argentina and the Political Consequences of Right-Wing Statism

Just last month, I wrote about Argentina’s grim economic outlook and criticized the supposed right-of-center President, Mauricio Macri, for failing to deliver any meaningful economic liberalization.

And reform is desperately needed.

According to Economic Freedom of the World, Argentina is one of the most statist nations on the planet (the only nations that do worse are Libya and Venezuela).

For all intents and purposes, Argentina is suffering from decades of bad policy.

Argentina is a sobering example of how statist policies can turn a rich nation into a poor nation. …After World War II, Argentina was one of the world’s 10-richest nations. But then Juan Peron took power and initiated Argentina’s slide toward big government, which eroded the nation’s competitiveness and hampered growth.

To put it mildly, the country is an economic tragedy and it should be a lesson for all countries about the importance of good policy.

Yet why am I writing again about Argentina after last month’s analysis?

Because a story in the New York Times discusses the nation’s upcoming presidential election and manages to paint a grotesquely inaccurate picture of what’s been happening in the country. We’re supposed to believe that Macri has been a hard-charging free-market fundamentalist.

Since taking office more than three years ago, President Mauricio Macri has broken with the budget-busting populism that has dominated Argentina for much of the past century, embracing the grim arithmetic of economic orthodoxy. Mr. Macri has slashed subsidies… “It’s a neoliberal government…It’s a government that does not favor the people.” …tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri’s turn away from left-wing populism. He vowed to shrink Argentina’s monumental deficits by diminishing the largess of the state. …Mr. Macri’s…presidency was supposed to offer an escape from the wreckage of profligate spending.

And we’re also supposed to believe that his failed free-market policies are paving the way for a return to left-wing populism.

As the October election approaches, Mr. Macri is contending with the growing prospect of a challenge from the president he succeeded, Cristina Fernández de Kirchner… Her return would resonate as a rebuke of his market-oriented reforms while potentially yanking Argentina back to its accustomed preserve: left-wing populism.

For what it’s worth, I suspect that Kirchner will win the next election. So that part of the article is correct.

But the part about free-market reforms is laughably inaccurate.

You don’t have to believe me. Let’s look at the Argentinian data from Economic Freedom of the World. Maybe I’m being dogmatic, but I hardly think a tiny improvement in 2015 followed by backsliding in 2016 qualifies as “diminishing the largess of the state.”

The bottom line is that Macri should have been bold and made sweeping changes once he was in charge. Like Chile after Allende’s Marxist regime was deposed.

Those reforms doubtlessly would have triggered protests. But if they became law, they would have produced tangible results.

Instead, Macri chose a timid approach and the economy has remained stagnant. Yet because many voters think he adopted reforms, they blame him and they blame free markets.

The net result is that they will probably vote for Kirchner, which presumably will mean even more statism for the long-suffering people of Argentina.

P.S. What’s happening in Argentina is not an isolated example. It’s very common for supposed right-wing politicians to choose bad policies, which then paves the way for left-wing election victories. Look at how Bush’s statist policies created the conditions for an Obama victory. Or how Sarkozy set the stage for Hollande in France. Or how Theresa May’s fecklessness in the United Kingdom may lead to a win for Jeremy Corbyn.

P.P.S. I’m tempted to also warn that Trump’s risky protectionism may lead to a victory for Crazy Bernie or some other Democrat in 2020. But Trump does have some good policies as well, so it’s hard to know whether the economy will be a net plus or net minus in the election.

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The Trump Economy v. the Obama Economy

During his final days in office, I gave a thumbs-down assessment of Barack Obama’s presidency. Simply stated, he increased the burden of government during his tenure, and that led to anemic economic numbers.

Now the economy seems to be doing a bit better, which is leading my friends on the left to make two impossible-to-reconcile claims.

1. It is doing better, but Obama deserves credit.
2. The economy isn’t doing better.

I’ve previously explained that the first argument doesn’t hold water. Today, let’s address the second argument.

Writing in the Wall Street Journal, former CEO Andy Puzder claims that Trump easily wins over Obama when you look at the numbers.

For eight years under President Obama, the growing burden of government suppressed the economic recovery that should have followed the recession of 2008-09. Mr. Obama nonetheless has claimed responsibility for today’s boom, asking Americans in September to “remember when this recovery started.” Yet it wasn’t until President Trump took office that the economy surged. …The result is a rising tide that is lifting boats across every class and region of the country. …Today unemployment rests at 3.7%, near a 50-year low. Since the government began reporting the data, unemployment has never been as low as it is today for African-Americans, Latinos, Asians and people with only a high-school education.

It’s certainly good news that unemployment rates have dropped. But labor-force participation numbers still haven’t fully recovered, or even come close to fully recovering, so the data on jobs is not quite as impressive as it sounds.

That being said, Puzder has a compelling indictment of Obama’s performance.

During a typical recovery, the economy grows at a rate between 3% and 4%, and the Obama administration predicted such a surge in its 2010 midsession review. It never came. The “recovery” of those years often felt much like a recession.

Amen. This echoes my criticism of Obamanomics. He made the U.S. a bit more like Europe, so it’s no surprise that growth was weak.

Let’s now look at Puzder’s evidence that Trump has done a better job. He compares the end of the Obama economy with the beginning of the Trump economy.

GDP growth staggered along at 1.5% in Mr. Obama’s final six full quarters in office. …growth doubled to 3% during Mr. Trump’s first six full quarters. …the increase in job openings over Mr. Trump’s first 21 months has averaged an impressive 75,000 a month. Over Mr. Obama’s last 21 months in office, the number of job openings increased an average of 900 a month. …During Mr. Obama’s last 21 months, the number of employed Americans increased an average of 157,000 a month. Under Mr. Trump, the increase has accelerated to 214,000 a month, a 36% improvement. …In Mr. Obama’s final 21 months, weekly earnings rose an average of $1.31 a month. Under Mr. Trump, weekly earnings have increased an average of $1.84 cents a month: a 40% improvement that’s come mostly since tax reform took effect in January. Over that period, weekly earnings have grown an average of $2.31 a month, a 76% increase over Mr. Obama’s last 21 months. …The unemployment rate declined 13% during Mr. Obama’s last 21 months, but from there it has dropped another 23% during Mr. Trump’s tenure.

All of this data is compelling, but I caution my GOP/Trump friends about relying on short-run economic data to make their case.

For instance, what if the economy is in a false boom caused by easy money? If that leads to a recession, will they want Trump to take the blame?

Or let’s consider a more tangible example. Trump and his supporters used to make a big deal out of rising stock prices, but that argument no longer appears to be very persuasive.

Let’s close with two charts that take different sides. The first one is from MSNBC, which makes a persuasive case that reductions in unemployment under Trump are simply a continuation of the trend.

On the other hand, this second chart, which comes from the White House, shows that economic outcomes are better than what the Obama Administration predicted.

This also is compelling data, and I’ve explained that even small improvements in economic performance are very desirable.

Though it remains to be seen whether this additional growth is either real or sustainable.

The bottom line is that there’s no reason to expect big economic improvements under Trump, at least in the long run. His good policies on taxes and regulation are offset by bad policies on spending and trade.

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Five Takeaways from the 2018 Elections…and Implications for Liberty

We had an election yesterday in the United States (or, as Mencken sagely observed, an advance auction of stolen goods). Here are five things to keep in mind about the results.

First, the GOP did better than most people (including me) expected.

This tweet captures the zeitgeist of last night.

A lot of painful losses for Republicans tonight, but man would I be unhappy if I was a Democrat tonight with these results in this climate.

— Dan McLaughlin (@baseballcrank) November 7, 2018

The Senate results were especially disappointing for the Democrats. It does appear the Kavanaugh fight worked out very well for Republicans.

Second, better-than-expected election news for the GOP does not imply better-than-expected news for public policy. Given Trump’s semi-big-government populism, I fear this tweet is right about the increased risk of a counterproductive infrastructure package and a job-destroying increase in the minimum wage.

Santorum says on CNN that he expects Trump to take advantage of Dem house to pass infrastructure and raise the minwage.

— David Freddoso (@freddoso) November 7, 2018

For what it’s worth, I think we’ll also get even more pork-filled appropriations spending. In other words, busting the spending caps after already busting the spending caps.

The only thing that might save taxpayers is that Democrats in the House may be so fixated on investigating and persecuting Trump that it poisons the well in terms of cooperating on legislation.

Fingers crossed for gridlock!

Third, there was mixed news when looking at the nation’s most important ballot initiatives.

On the plus side, Colorado voters rejected an effort to replace the flat tax with a discriminatory system (in order to waste even more money on government schools), California voters sensibly stopped the spread of rent control, Washington voters rejected a carbon tax, Florida voters expanded supermajority requirements for tax increases, and voters in several states legalized marijuana.

On the minus side, voters in four states opted to expand the bankrupt Medicaid program, Arizona voters sided with teacher unions over children and said no to expanded school choice, and voters in two states increased the minimum wage.

Fourth, Illinois is about to accelerate in the wrong direction. Based on what happened last night, it’s quite likely that the state’s flat tax will be replaced by a class-warfare-based system. In other words, the one bright spot in a dark fiscal climate will be extinguished.

This will accelerate the out-migration of investors, entrepreneurs, and businesses, which is not good news for a state that is perceived to be most likely to suffer a fiscal collapse. It’s just a matter of time before the Land of Lincoln becomes the land of bankruptcy.

Interesting, deep-blue Connecticut voters elected a Republican governor. Given the state’s horrific status, I suspect this won’t make a difference.

Fifth, Obama was a non-factor. Democrats lost almost every race where he campaigned.

Obama took norm-breaking step of campaigning in midterm against his successor. Visited Indiana, Georgia, Florida in recent days. Didn't go well. Indiana and Florida flipped Senate seats from Dem to GOP. Democrat Abrams lost governor race in GA.

— Mollie (@MZHemingway) November 7, 2018

Though I should point out that he deserves credit for trying to have an impact in close races. Many top-level politicians, looking to have a good “batting average,” only offer help to campaigns that are likely to prevail.

That being said, this adds to my hypothesis that Obama was basically an inconsequential president.

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2018 Election Predictions…and Potential Economic Consequences

If you look at my election predictions from 2010, 2012, 2014, and 2016, you’ll see that my occasional insights are matched by some big misses. So I don’t think I offer any special insight.

But since readers seem to enjoy these biennial predictions, I’ll once again go out on a limb. The bottom line is that my Democratic friends will be happy.

Since so many Democratic seats are up, it will be a big defeat if Republicans stay at 51 seats in the Senate. And the loss of more than 45 seats in the House is approaching bloodbath territory.

This outcome is why I advised my GOP friends that it might have been better to lose the 2016 presidential election.

Now let’s consider the potential economic implications, which is what I care about.

The first-order effect is that we’ll have gridlock and that’s not a bad outcome as far as I’m concerned. Simply stated, that means less legislation, which presumably means less mischief from Washington.

But not all gridlock is created equal. Here’s a chart published a couple of days ago by the Washington Post. I’ve highlighted in green relative stock market performance when there’s good gridlock with a Republican Congress and not-so-good gridlock with a Democratic Congress.

I don’t think S&P performance is the best indicator of prosperity, and the “sample size” produced by American elections it rather small, so I caution against over-interpreting this data.

That being said, I’ve crunched budget numbers and revealed that Republican presidents generally allow more spending than Democrats. The only exception to this rule is Ronald Reagan.

Unfortunately, as I warned the day after the 2016 election, Trump is no Reagan. As such, I wouldn’t be surprised if the net result (assuming my predictions are remotely accurate) is that the already-excessive growth of spending becomes an even bigger problem.

P.S. There are some very important ballot initiatives that will be decided today.

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