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Posts Tagged ‘Poverty’

President Obama recently took part in a poverty panel at Georgetown University. By D.C. standards, it was ideologically balanced since there were three statists against one conservative (I’ve dealt with that kind of “balance” when dealing with the media, as you can see here and here).

You won’t be surprised to learn that the President basically regurgitated the standard inside-the-beltway argument that caring for the poor means you have to support bigger government and more redistribution.

Many observers were unimpressed. Here’s some of what Bill McGurn wrote for the Wall Street Journal.

The unifying progressive contention here is the assertion that America isn’t “investing” enough in the poor—by which is meant the government isn’t spending enough. …President Obama…went on to declare it will be next to impossible to find “common ground” on poverty until his critics accept his spending argument.

I think this argument is nonsense. We’re spending record amounts of money on means-tested, anti-poverty programs, yet the poverty rate hasn’t come down since the “War on Poverty” started.

Indeed, you can make a very persuasive case that government intervention has backfired since the poverty rate was falling before the federal government got involved. Yet now that Washington is paying people to be poor, progress has ground to a halt.

In his column, though, McGurn pointed out that it’s also important to look at how money is spent.

…it’s simply false to say that Republicans won’t make the public “investments” needed to help the poor. In New York in the 1990s, for example, Republican Mayor Rudy Giuliani not only invested in the police but sent them into the areas where they were most needed—primarily poor and minority neighborhoods. In too many other Democratic cities, by contrast, mayors in effect cede whole neighborhoods to the thugs and gangs. Republicans are also willing to spend on education. What they are not willing to do is dump ever more dollars down the same rathole of big-city public school systems that function more as jobs programs for city bureaucrats and members of the teachers unions.

And he challenged the view of some GOPers that government spending will promote stable families.

…it would similarly be good for Republicans to address the hard implications of their own message. If, for example, broken families are indeed driving modern American poverty, is the only answer despair—or praying for some miracle? And if you believe the government can’t help but bungle something as basic as food stamps, shouldn’t you bring this same skepticism to a “conservative” program that enlists the government to, say, discourage divorce or promote chastity?

I certainly agree with that point. President Bush’s program to encourage marriage certainly wasn’t a success.

But let’s focus on the present. Here’s some of what Thomas Sowell said about Obama’s performance. As you can see, he was not impressed with the President’s abuse of the English language.

One of the ways of fighting poverty, [the President] proposed, was to “ask from society’s lottery winners” that they make a “modest investment” in government programs to help the poor. …But the federal government does not just “ask” for money. It takes the money it wants in taxes, usually before the people who have earned it see their paychecks. …It seizes what it wants by force. If you don’t pay up, it can take not only your paycheck, it can seize your bank account, put a lien on your home and/or put you in federal prison. So please don’t insult our intelligence by talking piously about “asking.”

And Sowell closes his column by raising the fundamental question of whether it makes sense to let government consume a greater share of economic output.

The fact that most of the rhetorical ploys used by Barack Obama and other redistributionists will not stand up under scrutiny means very little politically. After all, how many people who come out of our schools and colleges today are capable of critical scrutiny? When all else fails, redistributionists can say, as Obama did at Georgetown University, that “coldhearted, free-market capitalist types” are people who “pretty much have more than you’ll ever be able to use and your family will ever be able to use,” so they should let the government take that extra money to help the poor. …The real question is whether the investment of wealth is likely to be done better by those who created that wealth in the first place or by politicians. The track record of politicians hardly suggests that turning ever more of a nation’s wealth over to them is likely to turn out well.

Amen. The academic evidence is very strong that nations with large public sectors suffer from economic anemia.

And since the poor are most dependent on growth to get a good foothold on the economic ladder, Prof. Sowell surely is right when he states that it’s better to leave resources in the productive sector of the economy. Moreover, he’s explained in the past that the welfare state certainly doesn’t help the poor.

P.S. Since today’s column ended with a discussion about whether government should be bigger or smaller, it’s appropriate to share this bit of humor concocted by the Princess of the Levant.

If you’re a new reader and don’t get the joke, Richard is famous for the Rahn Curve, though I think he overstates the growth-maximizing size of government. As such, I argue that we need to impose my (not nearly as famous) Golden Rule of spending restraint.

P.P.S. Shifting back to the topic of poverty and redistribution, we should all be very concerned that the Obama White is trying to manipulate the definition of poverty in order to justify ever-larger amounts of redistribution and dependency. And you won’t be surprised to learn that the OECD supports this dishonest and misleading initiative.

P.P.P.S. Here’s an image that accurately summarizes the left’s misguided view of redistribution.

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Let’s revisit the issue of urban unrest, with special attention to the challenges for both entrepreneurs and ordinary citizens.

While potential police misconduct may serve as a trigger for riots, the powder keg is already in place because of decades of bad government policy.

Jay Steinmetz, who runs a supply-chain management company in Baltimore, provides a real-world perspective on what it’s like to be an entrepreneur in a city run by kleptocrats. Here are some excerpts from his Wall Street Journal column.

When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden.  …Maryland still lags most states in its appeal to companies, according to well-documented business-climate comparisons put out by think tanks, financial-services firms, site-selection consultants and financial media. Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively.

Here’s what it means, in terms of lost revenue, to Mr. Steinmetz’s company.

The bottom line is that our modest 14,000-square-foot building is hit with $50,000 in annual property taxes. And when we refinanced our building loan in 2006, Maryland and Baltimore real-estate taxes drove up the cost of this routine financial transaction by $36,000. State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.

So it’s no surprise to learn that the geese with the golden eggs (as well as the silver and bronze eggs) are flying away.

Our employees reduce their tax burden and receive better public services in the suburbs.  …The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.

I’m not sure why Mr. Steinmetz hasn’t left as well. I guess it’s both admirable and foolish for him to persevere is such a hostile environment.

Thomas Sowell, in an article published by National Review, demolishes the argument that criminal behavior can be blamed on racism or poverty.

He starts by drawing attention to the 1960s as a key turning point.

The “legacy of slavery” argument is not just an excuse for inexcusable behavior in the ghettos. …Anyone who is serious about evidence need only compare black communities as they evolved in the first 100 years after slavery with black communities as they evolved in the first 50 years after the explosive growth of the welfare state, beginning in the 1960s.

Prof. Sowell then makes the obvious point that blacks faced much harsher conditions before the 1960s, yet crime was much lower.

And the black family was much more stable before the so-called war on poverty in the 1960s.

We are told that such riots are a result of black poverty and white racism. But in fact — for those who still have some respect for facts — black poverty was far worse, and white racism was far worse, prior to 1960. But violent crime within black ghettos was far less. Murder rates among black males were going down — repeat, down — during the much-lamented 1950s, while it went up after the much celebrated 1960s, reaching levels more than double what they had been before. Most black children were raised in two-parent families prior to the 1960s. But today the great majority of black children are raised in one-parent families.

Sowell’s point is that the welfare state created incentives for dysfunctional behavior.

And he stresses that this isn’t a racial issue.

Such trends are not unique to blacks, nor even to the United States. The welfare state has led to remarkably similar trends among the white underclass in England over the same period. …You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility, and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large. Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock.

I particularly appreciate his point about the importance of social capital, what he calls the requirements of civilization.

But this doesn’t mean black citizens don’t have some legitimate grievances. Radley Balko of the Washington Post explains that African-Americans are getting abused by greedy governments, just like Mr. Steinmetz.

He starts his article by sharing some good news on falling crime rates and big reductions in police deaths. But for our purposes today, the most powerful and relevant part of his story deals with one citizen’s interaction with government.

Antonio Morgan [is] a 29-year-old resident of Hazelwood, Missouri. He owns his own small business, a car repair and body shop he’d been saving up to buy since he was a teenager. He has also been arrested more than 20 times. All but two of those arrests were for misdemeanors. Morgan saved up for his business by fixing cars in his mother’s driveway. That required him to occasionally park cars on the street. That earned him parking tickets. He paid them when he could, but he occasionally missed deadlines. And that would lead to an arrest warrant. All of this also put Morgan on the radar of local police.

As you continue reading, keep in mind he was “on the radar” even though he did nothing to infringe on the life, liberty, and property of other citizens.

His unpaid parking tickets led not just to arrest warrants, but to the occasional suspension of his license. That led to more citations, although like many in the area, Morgan was sometimes pulled over and issued only a ticket for driving on a suspended license, or driving a car that wasn’t registered to him. (Morgan sometimes drove his clients’ cars to test them.) But there was no underlying traffic violation — which raises the question of why the officer pulled Morgan over in the first place, if it wasn’t to profile him. Those citations then led to more arrests.

It certainly seems as if St. Louis County in Missouri has been treating Mr. Morgan as a revenue-generating milk cow, much as Baltimore has been squeezing Mr. Steinmetz.

Different approach, but same result.

Cops would show up at his garage and cite his employees for operating without a business license. Morgan has a license; his employees didn’t need one. But to get the citations dismissed, Morgan and his employees would have to go to court, which was held once a month, at night. If they missed their court date, they too would be hit with an arrest warrant. Wealthy people can hire an attorney to go in their stead, and to negotiate their way out of a citation. But neither Morgan nor his employees were wealthy.

Some of you may be wondering about the two ostensibly more serious arrests on his record.

Radley’s column discusses both, and it certainly looks like Mr. Morgan has been mistreated by the justice system.

Here’s the first arrest. And remember it only occurred because he had to be in court to deal with ridiculous fines and petty harassment.

As Morgan walked toward the courthouse a police officer asked him the kids in the truck were his. He replied that they were. The officer asked him why he had left them alone. Morgan replied that he hadn’t, and that the woman parked next to him had agreed to watch them. ..Morgan pleaded with the police officer to flag down his friends, who he said would vouch for him. He says the officer then threatened to Taser him. Morgan put up his hands. The officer then arrested him for child endangerment. …The incident still upsets Morgan — not even the arrest so much as that his children had to see it. “I’m a good father,” he says. “I own my own business. I provide for my kids. Do you know what it’s like for your own children to see you get arrested? For a cop to say, right in front of them, that he’s arresting you because you’re a bad parent?”

I’m not someone who sees racism under every bed and behind every tree, but you can’t help but wonder whether this incident would have even happened if he was a white guy in a business suit.

The second arrest is equally dubious.

…the officer confronted Morgan because he was “trespassing” on a neighbor’s lawn. Morgan responded that he wasn’t trespassing, because the neighbors didn’t mind. Morgan says the cop moved to arrest him, and he lost his cool. He claims he never struck the police officer, but he does admit that he screamed at him. Once he did, he was hit with a Taser and arrested for assaulting a police officer. That charge was later dropped. (The neighbors back Morgan’s account of the entire incident, including his assertion that he never touched the cop.)

It’s always a smart idea to act servile and obsequious when dealing with cops, so Mr. Morgan obviously didn’t play his cards right.

But imagine if you had been endlessly harassed. Wouldn’t you be angry? Radley sure would have been.

I was stunned. But not because Morgan lost his cool with the cop. I was stunned that it had taken him so long to do so. And that even then, he’d manage to restrain himself from physical violence. I’m not sure I’d have been able to say the same.

Here’s the bottom line. Or, to be more accurate, two bottom lines.

First, we should sympathize with Mr. Morgan just as we should sympathize with Mr. Steinmetz. Actually, we should sympathize more with Morgan.

Morgan is no one’s definition of a “thug.” He’s a guy who breaks his back to keep up the business that supports his family, despite obstacles that, frankly, most white business owners don’t have to endure. For all he’s been through, he is remarkably composed. He deals with the daily harassment in a remarkably manner-of-fact way. …Morgan isn’t a drug pusher. He isn’t an absentee father. He isn’t in a gang. He’s a guy trying to do right by his family.

Second, we should recognize that one “root cause” of the problem is greedy government.

The primary source of revenue for the local towns is sales tax. But the poorer (which means blacker) towns don’t generate enough income from sales taxes. So they turn to municipal fines to keep themselves from going under. The poorer the town and its residents, the more likely the town relies on fines for a greater percentage of its annual revenue. Which means that the blacker the town, the more likely its residents are getting treated like ATMs for the local government.

None of this justifies rioting. And I have to imagine that Mr. Morgan would be one of the good guys during any unrest (much like Stretch and his friends in Ferguson).

But stories like this should make all of us appreciate how some communities may have a very sour impression of the police.

Let’s close with some economic analysis of riots (hey, I’m a policy wonk, so bear with me).

Here’s some of what Professor Edward Glaeser of Harvard wrote a few years ago for Bloomberg.

…public disturbances are a classic example of tipping-point phenomena, which occur when there is some positive feedback mechanism that makes an activity more attractive, or less costly, as more people do it. …There is a tipping point in rioting because the cost of participating — the risk of going to jail — gets lower as the number of people involved increases. …riots occur when the shear mass of rioters overwhelms law enforcement.

He then looks at the more challenging issue.

But how do these mass events get started? In some cases, …such as the 1965 Watts Riot, a peaceful crowd provides cover for initial lawlessness. Sporting events, such as Game 7 of the Stanley Cup Finals in Vancouver this year, can easily produce the crowds that allow a riot to start. Most strangely, riots can follow an event that creates a combination of anger and the shared perception that others will be rioting. The acquittal of police officers in the Rodney King case seems to have created these conditions in Los Angeles in 1992.

The left-wing excuse for rioting doesn’t seem to have much merit.

…across U.S. cities, there has never been much of a link between unrest and either inequality or poverty. In fact, the riots of the 1960s were actually slightly more common in cities that had more government spending.

But economic analysis gives us good clues, both about how to deter riots and who is most victimized when they occur.

Light penalties widely applied and serious penalties applied to a few can both deter unlawful behavior. This is a central conclusion of Gary Becker’s path-breaking economic analysis of crime and punishment. …Even when they are connected to understandable grievances, they do great harm, particularly to the poorest residents.

The moral of the story is that we should be tough on crime, but that doesn’t mean mistreating people like Antonio Morgan.

Instead, the legal system should focus on trying to deter bad behavior, which is when genuinely bad people infringe on the life, liberty, and property of others.

But how do we get politicians and bureaucrats to properly focus?

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As shown by this graphic, why are so many people in Maine taking advantage of the food stamp program? As shown by this map, why does Oregon have such a high level of food stamp dependency?

These are just rhetorical questions since I don’t have the answers. But if we can come up with good answers, that could lead to better public policy.

After all, if we want a self-reliant citizenry, it would be better if people were more like those in Nevada and less like the folks in Vermont, at least based on the infamous Moocher Index.

But one thing we can say with certainty is that the food stamp program has morphed into a very expensive form of dependency.

Jason Riley of the Wall Street Journal opines on the importance of reforming this costly entitlement.

Officially known as the Supplemental Nutrition Assistance Program, or SNAP, the food-stamp program has become the country’s fastest-growing means-tested social-welfare program. …Between 2000 and 2013, SNAP caseloads grew to 47.6 million from 17.2 million, and spending grew to $80 billion from $20.6 billion… SNAP participation fell slightly last year, to 46.5 million individuals, as the economy improved, but that still leaves a population the size of Spain’s living in the U.S. on food stamps. …The unprecedented jump in food-stamp use over the past six years has mostly been driven by manufactured demand. The Obama administration has attempted to turn SNAP into a middle-class entitlement by easing eligibility rules and recruiting new food-stamp recipients. …Democrats tend to consider greater government dependence an achievement and use handouts to increase voter support. The president considers European-style welfare states a model for America.

Making America more like Greece, however, is not good news for taxpayers.

But the program also has negative effects on recipients. Contrary to the left’s narrative, we don’t have millions of starving people in America.

…it now operates more like an open-ended income-supplement program that discourages work. Some 56% of SNAP users are in the program for longer than five years, which suggests that the assistance is being used by most recipients as a permanent source of income, not as a temporary safety net. …“Today, instead of hunger, the central nutritional problem facing the poor, indeed all Americans, is not too little food but rather too much—or at least too many calories,” Douglas Besharov, who teaches courses on poverty alleviation at the University of Maryland, told the House Agriculture Committee last month. “Despite this massive increase in overweight and obesity among the poor, federal feeding programs still operate under their nearly half-century-old objective of increasing food consumption.

So why don’t we try to help both taxpayers and low-income Americans by reforming the program, specifically by “block-granting” it to the states?

Uncle Sam picks up almost all of the bill. That means states have little incentive to control costs. Republicans argue that shifting to block grants would not only save money but also encourage states to increase the labor-participation rate of low-income populations. A state that has only so much money to work with is more likely to promote self-sufficiency in the form of employment, job-search and job-training requirements for able-bodied adults on the dole.

Decentralization, Riley explains, worked very well in the 1990s with welfare reform.

…1996 reforms…imposed more stringent time limits and work requirements on welfare recipients enrolled in programs like Temporary Assistance for Needy Families, or TANF. Welfare rolls subsequently plunged. By 2004, caseloads had fallen by 60% overall and by at least 30% in nearly every state. Child poverty, black child poverty and child hunger also decreased, while employment among single mothers rose. This was a welcome outcome for taxpayers, poor people and everyone else—except those politicians with a vested interest in putting government dependence ahead of self-sufficiency to get elected and re-elected.

So kudos to Republicans on Capitol Hill for proposing to put the states in charge of food stamps.

Just like they also deserve applause for working to block-grant the Medicaid program.

This is something that should happen to all mean-tested programs. Once they’re all back at the state level, we’ll get innovation, experimentation, and diversity, all of which will help teach policy makers which approaches are genuinely in the best interests of both taxpayers and poor people (at least the ones seeking to escape dependency).

Though I can’t resist adding one caveat. The ultimate goal should be to phase out the block grants so that states are responsible for both raising and spending the money.

Let’s close with a few real-world horror stories of what we’re getting in exchange for the tens of billions of dollars that are being spent each year for food stamps.

With stories like this, I’m surprised my head didn’t explode during this debate I did on Larry Kudlow’s show.

P.S. Shifting to another example of government waste, let’s look at the latest example of overspending and mismanagement by the Department of Veterans Affairs.

Nothing, of course, can compare with the horrible outrage of bureaucrats awarding themselves bonuses after putting veterans on secret waiting lists and denying them care.

But having taxpayers pay nearly $300,000 just so a bureaucrat can move from one highly paid job in DC to another highly paid job in Philadelphia should get every American upset. Here are some of the sordid details from a local news report.

Rep. Jeff Miller (R., Fla.), who chairs the House Veterans Affairs Committee, has also raised questions about the salary and “relocation payments” to the new director of the Philadelphia office, Diana Rubens. Rubens, who was a senior executive in the D.C. office when she was tapped in June to take over the troubled Philadelphia branch, received more than $288,000 in relocation expenses. “The government shouldn’t be in the business of doling out hundreds of thousands in cash to extremely well-compensated executives just to move less than three hours down the road,” Miller said. …Under federal regulations, an agency can pay a variety of costs associated with reassigning an employee, including moving, closing costs, and a per-diem allowance for meals and temporary lodging for the employee’s household.

I’m baffled at how somebody could run up such a big bill. Did she use the space shuttle as a moving van?

Did she have to stay six months at a 5-star resort while waiting for her new house to be ready?

Does a per-diem allowance allow three meals a day at the most expensive restaurant in town?

This is either a case of fraud, which is outrageous, or it’s legal, which means it’s an outrageous example of government run amok.

Regardless, it underscores what I wrote back in 2011.

I will never relent in my opposition to tax increases so long as the crowd in Washington is spending money on things that are not appropriate functions of the federal government. …I will also be dogmatic in my fight against higher taxes so long as there is massive waste, fraud, and abuse in federal programs.

Not to mention that we should never allow tax hikes when it’s so simple to balance the budget with modest spending restraint.

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Sweden is an odd country, at least from the perspective of public policy.

On the positive side, it has private Social Security accounts. It has an admirable school choice system. And it was a good role model of spending restraint back in the 1990s.

But on the negative side, Sweden has one of the world’s biggest welfare states. Even after the spending restraint of the 1990s, the public sector consumes about 50 percent of economic output. And that necessitates a punitive tax code.

There’s also a truly perverse fixation on equality. And you won’t be surprised to learn that the government-run healthcare system produces some unpleasant outcomes.

Today, let’s build on our understanding of Sweden by looking at how the country’s welfare state interacts with the immigration system.

Writing for CapX, Nima Sanandaji discusses these issues in his adopted country of Sweden.

Sweden has had an unusually open policy towards refugee and family immigrants. The Swedish Migration Agency estimates that around 105,000 individuals will apply for asylum only this year, corresponding to over one percent of Sweden’s entire population.

This openness is admirable, but is it successful? Are immigrants assimilating and contributing to Sweden’s economy?

Unfortunately, the answer in many cases is no.

…the open attitude towards granting immigrants asylum is not matched by good opportunities on the labor market. An in-depth study by the daily paper Dagens Nyheter shows that many migrants struggle to find decent work even ten years after entering the country. …The median income for the refugees in the group was found to be as low as £880 a month. The family immigrants of refugees earned even less. Ten years after arriving in the country, their median income was merely £360 a month. These very low figures suggest that a large segment of the group is still relying on welfare payments. Dagens Nyheter can show that at least four out of ten refugees ten years after arrival are supported by welfare. The paper acknowledges that this is likely an underestimation.

So what’s the problem? Why are immigrants failing to prosper?

Nima suggests that government policies are the problem, creating perverse incentives for long-term dependency.

To be more specific, the country’s extravagant welfare state acts as flypaper, preventing people from climbing in the ladder of opportunity.

The combination of generous benefits, high taxes and rigid labour regulations reduce the incentives and possibilities to find work. Entrapment in welfare dependency is therefore extensive, in particular amongst immigrants. Studies have previously shown that even highly educated groups of foreign descent struggle to become self-dependent in countries such as Norway and Sweden. …The high-spending model is simply not fit to cope with the challenges of integration.

The part about “highly educated groups” is particularly important since it shows that the welfare trap doesn’t just affect low-skilled immigrants (particularly when high tax rates make productive activity relatively unattractive).

So what’s the moral of the story? Well, the one obvious lesson is that a welfare state is harmful to human progress. It hurts taxpayers, of course, but it also has a harmful impact on recipients.

And when the recipients are immigrants, redistribution is especially perverse since it makes it far less likely that newcomers will be net contributors to a nation.

And that then causes native populations to be less sympathetic to immigration, which in unfortunate since new blood – in the absence of bad government policy – can help boost national prosperity.

Though let’s at least give Sweden credit. I’m not aware that its welfare programs are subsidizing terrorism, which can’t be said for the United Kingdom, Australia, France, or the United States.

P.S. Here’s my favorite factoid about Sweden.

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My Cato Institute colleague Michael Tanner has produced some first-rate substantive research on issues.

He produced a study showing that personal retirement accounts would have been a better deal than Social Security even for people who retired at the depth of the financial crisis and stock-market collapse.

He authored another study showing that overly generous welfare systems in most states make productive work relatively unattractive compared to government dependency.

And I’ve also cited his analysis and commentary on issues such as Obamacare and obesity.

Today, I want to cite him for the simple reason that I admire his cleverness.

For those of us who suffered through President Obama’s State of the Union address, you may recall that the President proposed a thawing of America’s relationship with Cuba on the basis that if something “doesn’t work for 50 years, it’s time to try something new.”

Since I’m not a foreign policy person, I didn’t pay close attention to that passage.

But perhaps I should have been more attentive. It turns out that Obama created a big opening.

Writing for National Review, Tanner decided to hoist Obama on his own petard.

During his State of the Union address last week, President Obama defended his Cuba policy by pointing out, “When what you’re doing doesn’t work for 50 years, it’s time to try something new.” As it happens, I agree with the president on Cuba. But it seems to me that his advice should be applied to a number of other issues as well

Mike starts with the ill-fated War on Poverty.

Lyndon Johnson declared war on poverty in January 1964, just three years after the start of the Cuban embargo. Since then we’ve spent more than $20 trillion fighting poverty. Last year alone, federal and state governments spent just under $1 trillion to fund 126 separate anti-poverty programs. Yet, using the conventional Census Bureau poverty measure, we’ve done nothing to reduce the poverty rate. …And, whatever success we’ve achieved in making material poverty less uncomfortable, we’ve done little to help the poor become independent and self-supporting.

He then points out the utter failure of the War on Drugs.

The War on Drugs has been going on even longer than the War on Poverty, with a similar lack of success. …in the last ten years alone we have spent some $500 billion fighting this “war,” and arrested more than 16 million Americans for drug offenses. The vast majority of arrests have been for simple possession, not sale or other drug crimes. While filling our prisons with nonviolent offenders, destabilizing countries like Mexico and Colombia, wrecking our own inner cities, and making the cartels rich, the drug war has failed to reduce either violence or drug use.

Mike also reminds us that we’ve had five decades-plus of government-run healthcare.

…we’ve suffered from government-run health care in this country for more than 50 years as well. Medicare and Medicaid started in 1965. Others would point out that we are still suffering the consequences of the IRS decision in 1953 to make employer-provided insurance tax-free, while individually purchased insurance has to be paid for with after-tax dollars. No matter how you want to measure the starting point, the government now pays for roughly 52 percent of U.S. health-care spending, and indirectly subsidizes another 37 percent. The result has been steadily rising health-care costs, a dysfunctional insurance market, and a growing shortage of physicians. …a study out of Oregon suggests that being on Medicaid provides no better health outcomes than being uninsured. Meanwhile, Medicare is running up more than $47.6 trillion in unfunded liabilities. And let us not forget the VA system and its problems.

And his article merely scratches the surface.

One could go on and on. Fannie and Freddie? Social Security and its almost $25 trillion in unfunded liabilities? Stimulus spending? Green energy? We won’t even mention the National Weather Service’s apparent inability to accurately predict snowstorms. If we are looking for lessons to learn from the last 50 years, here is one: Bigger government has not brought us more security, more freedom, or more prosperity. Yet, President Obama still sees the answer to every problem, no matter how small, as more government, no matter how big. …President Obama not only seems unable to learn from history, but apparently doesn’t even listen to his own speeches. If big government hasn’t worked for 50 years, 100 years, or for that matter pretty much the whole of human history, maybe it’s time to try something else.

The final sentence in that passage is not just a throw-away line.

I have my own two-question challenge for leftists, which is basically a request that they identify a nation – of any size and at any time – that has prospered with big government.

Mike does something similar. He basically points out that big government has an unbroken track record of failure, and not just for the past 50 years.

I suppose the question to ask is whether any big-government program can be considered a success? In other words, what has any government done well, once it goes beyond the provision of core public goods such as enforcing contracts, protecting property rights, and upholding the rule of law?

To be fair, there are some nations, such as Switzerland, that have enjoyed very long periods of monetary stability and peace. And jurisdictions such as Hong Kong and Singapore have experienced decades of prosperity and tranquility.

In all of those jurisdictions, I think government is too big, but they are considered small-government by modern-world standards.

In any event, the point I’m making is that some governments seem semi-competent, but there also seems to be a relationship between the size and scope of government and the failure of government.

It will be interesting to read the comments.

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If nothing else, our leftist friends deserve credit for chutzpah.

All around the world, we see concrete evidence that big government leads to stagnation and decay, yet statists repeatedly argue that further expansions in taxes and spending will be good for growth.

During Obama’s recent state-of-the-union address, he pushed for class warfare policies to finance bigger government, claiming such policies would be an “investment” in the future.

But it’s not just Obama. Hillary Clinton, on several occasions (see here, here, here, and here), has explicitly argued that higher tax rates and bigger government are good for growth.

The statists at the Paris-based Organization for Economic Cooperation and Development (financed with our tax dollars) actually argue that higher taxes and more spending will somehow enable more prosperity, both in the developing world and in the industrialized world.

And some left-wing “charities” are getting in on this scam. Oxfam, for instance, now argues that higher tax rates and bigger government are necessary for growth and development in poor nations. And Christian Aid makes the same dodgy argument.

The Oxfam/Christian Aid argument is especially perverse.

If they actually think that bloated public sectors are the key to faster growth in the developing world, shouldn’t they provide at least one example of a jurisdiction that has become rich following that approach?

Let’s examine this issue more closely.

Here are some excerpts from a column in the most recent issue of Cayman Financial Review. Written by the Cato Institute’s Marian Tupy, it looks at the challenge of boosting prosperity in sub-Saharan Africa.

Marian starts with some good news. The 21st Century, at least so far, has seen genuine progress.

Real gross domestic product has been ticking along at an average annual rate of 4.8 percent, while per capita income has grown by roughly 40 percent. …The benefits to ordinary people have been impressive. The share of Africans living on less than $1.25 per day fell from 56 percent in 1990 to 48 percent in 2010. …If the current trend continues, Africa’s poverty rate will fall to 24 percent by 2030. In addition, per-capita caloric intake has increased from 2,150 kcal in 1990 to 2,430 kcal in 2013. …Moreover, between 1990 and 2012, the percentage of the population with access to clean drinking water increased from 48 percent to 64 percent. Many African countries have also seen dramatic falls in infant and child mortality. Over the last decade, for example, child mortality in Senegal, Rwanda, Uganda, Ghana, and Kenya declined at a rate exceeding 6 percent per year.

This is very good news.

And foreign investment deserves some of the credit. When western multinationals enter a nation, they play a vital role in creating (relatively) high-paying and building a nation’s capital stock.

Particularly since the overall economic and policy climate in many sub-Saharan nations is very dismal.

As you can see from the accompanying map, based on the Fraser Institute’s Economic Freedom of the World, most nations in the region are either in the most economically repressed category (red) or the next-t0-last category (yellow).

In either case, these countries obviously have far too much taxes, spending, regulation, and intervention.

Needless to say, these policies make it difficult for local businesses and entrepreneurs to succeed, which means the jobs and prosperity made possible by foreign investment are absolutely vital.

But Marian warns that this progress could come to a halt if African nations fall victim to class-warfare proposals that seek to demonize multinational firms as part of a push to expand tax collections.

…future growth could be at risk if economic conditions on the continent deteriorate.  And that may happen if policy makers decide to adopt a more hostile approach to entrepreneurs and investors. Specifically, African governments are urged to take a stance against so-called tax havens, which are alleged to deprive the former of significant chunks of tax revenue. …Oxfam, a British charity, has argued that…tax maneuvering by multinational companies is entrenching poverty and weakening developing countries’ economies. According to Oxfam, “Developing countries lose an estimated $100 billion to $160 billion annually to corporate tax dodging.” As such, Oxfam has urged the G20 to rewrite international tax laws so that “developing countries are not taken advantage of by the rich.”

The problem with this ideology, as Marian explains, is that foreign companies won’t have nearly as much incentive to create jobs and growth in Africa if tax policy becomes more onerous.

Africa has one of the world’s riskiest business environments. Government accountability and transparency are low. The rule of law and protection of property rights are weak. Corruption is high. In a sense, low taxes compensate domestic and foreign investors for shortcomings of the business environment that are more difficult to address: a low tax rate can be legislated overnight, but corruption-free bureaucracy takes generations to accomplish. What’s true for corporations is also true for individuals. Many wealthy Africans continue to work and create wealth in the difficult African business environment in part because they know that at least a portion of their wealth is safe from inflation and predation.

But the most important part of Marian’s article is the section where he debunks the notion that bigger government somehow leads to more prosperity.

…the argument in favor of higher tax revenues assumes that government spending is an efficient driver of economic growth. This is a common misperception in the West, which is now being applied, with potentially disastrous consequences, to the developing world. In America, for example, Hillary Clinton has argued that more revenue improves economic development and the “rich people … [who] do not contribute [jeopardize]… the growth of their own countries.” She has urged “the wealthy across the Americas to pay their ‘fair share’ of taxes in order to eliminate poverty and promote economic opportunity for all.” Is the former Secretary of State correct? Are developing nations suffering from inadequate levels of public spending? Is there a need for more revenue to finance bigger government so that national economies can grow faster?

Marian looks at the actual data.

And he makes the absolutely essential point that western nations became rich when government was very small and there was virtually no redistribution.

According to the International Monetary Fund, government outlays consume, on average, about 27 percent of economic output in sub-Saharan nations….the burden of government spending averaged only about 10 percent of economic output in North America and Western Europe through the late 1800s and early 1900s – the period when the nations in these regions enjoyed huge increases in living standards and evolved from agricultural poverty to middle-class prosperity. If the goal is to have African nations copy the successful growth spurts of western nations (keeping in mind that per-capita economic output today in sub-Saharan Africa is roughly equal to per-capita GDP levels in Western nations in the late 1800s), then the latter’s experience implies that high levels of government spending are not necessary. Indeed, too much spending presumably hinders growth by leading to the misallocation of labor and capital. Moreover, it should be pointed out that the United States and other currently rich countries also had no income taxes when they made their big improvements in economic status.

In other words, the best recipe for African prosperity is the one that worked for the western world.

Sub-Saharan Africa needs small government and free markets.

And, yes, there is a role for government in providing the rule of law and other core public goods, but African nations already collect more than enough revenue to finance these legitimate roles.

Here’s the bottom line.

Of course, not all government spending is bad for growth. Upholding the rule of law and protecting property rights costs money, but helps growth. Historically, African governments have been at their weakest when providing for these “night watchman” functions of the state. And their economies suffered as a result. Were African governments to focus on a set of narrow, clearly defined goals, they would find plenty of revenue to finance their accomplishment – without having to resort to punitive tax policies that are likely to undermine Africa’s long term economic prospects.

P.S. Since today’s topic dealt with tax havens, that’s my excuse to share this interview with the folks at the Mises Institute. I wax poetic about why tax havens are a liberalizing force in the global economy, while also touching on issues such as double taxation, corporate inversions, financial privacy, and FATCA.

For more information, here’s my video series on tax competition and tax havens.

P.P.S. On a completely separate topic, I’ve often made the point that the “Obama recovery” is very anemic.

Well, here’s some new evidence from the Wall Street Journal.

Wow, less than half the growth we got under Reaganomics.

Seems like a good opportunity for me to reissue my two-part challenge to the left. To date, not a single statist has successfully responded.

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There’s a famous quote, commonly  attributed to Alexis de Tocqueville, about the American character.

America is great because America is good. If America ever stops being good, it will stop being great.

What makes this quote so popular (even though Wikipedia says it’s not actually from de Tocqueville) is the instinctive understanding that a society’s success is at least in part driven by the moral character of its people.

And even if the quote is incorrectly attributed, it clearly is something that could have come from de Tocqueville. In his writings, he openly acknowledged that good laws were only part of what’s needed for a successful society.

The best laws cannot make a constitution work in spite of morals; morals can turn the worst laws to advantage.

This is spot on. A nation is far more likely to be successful if people have the right attitudes, what’s variously referred to as social capital, national character, cultural capital, civics, or tradition.

Here’s what I wrote about the topic last year.

…social capital…refers to the attitudes of a country’s people….Do the people of a nation believe in the work ethic? Or would they be comfortable as wards of the state, living off others? Are they motivated by the spirit of self-reliance? Would they be ashamed to go on welfare? Do they think the government is obligated to give them things? The answers to these questions matter a lot because a nation can’t prosper once you reach a tipping point of too many people riding in the wagon and too few people producing.

I fear that many nations, such as France and Greece, have already reached the point of no return. And I’m worried America is on the same path.

That’s the main reason I created the Moocher Hall of Fame. Yes, taxpayers should get outraged how their money is being wasted, but the far bigger problem is the mentality, present is an ever-growing number of people, that there’s nothing wrong with living off the government.

Sort of as depicted by this Lisa Benson cartoon.

Though it would be more accurate to say that too many people are opting to live off the work of others. After all, the government doesn’t have money to redistribute unless it is taxed or borrowed from those who earned it.

But enough of my amateur commentary, which only scratches the surface of this issue. For those who want deep expertise and knowledge on the topic, I’m delighted (in a very pessimistic and dour sense of the word) to share some excerpts from a superb article in National Affairs by Nicholas Eberstadt, who is a scholar at the American Enterprise Institute.

He starts by explaining that an ever-growing share of the population is receiving handouts and that this pattern is a threat to American exceptionalism.

Asking for, and accepting, purportedly need-based government welfare benefits has become a fact of life for a significant and still growing minority of our population: Every decade, a higher proportion of Americans appear to be habituated to the practice. If the trajectory continues, the coming generation could see the emergence in the United States of means-tested beneficiaries becoming the majority of the population. …nearly half of all children under 18 years of age received means-tested benefits (or lived in homes that did). For this rising cohort of young Americans, reliance on public, need-based entitlement programs is already the norm — here and now. It risks belaboring the obvious to observe that today’s real existing American entitlement state, and the habits — including habits of mind — that it engenders, do not coexist easily with the values and principles, or with the traditions, culture, and styles of life, subsumed under the shorthand of “American exceptionalism.” Especially subversive of that ethos, we might argue, are essentially unconditional and indefinite guarantees of means-tested public largesse.

For those who prefer hard numbers, here is a chart from his article.

There’s so much interested data and analysis in the article, that it’s difficult to choose only a few things to highlight. But these passages are particularly depressing.

The corrosive nature of mass dependence on entitlements is evident from the nature of the pathologies so closely associated with its spread. Two of the most pernicious of them are so tightly intertwined as to be inseparable: the breakdown of the pre-existing American family structure and the dramatic decrease in participation in work among working-age men. When the “War on Poverty” was launched in 1964, 7% of children were born outside of marriage; by 2012, that number had grown to an astounding 41%, and nearly a quarter of all American children under the age of 18 were living with a single mother. …As for men of parenting age, a steadily rising share has been opting out of the labor force altogether. Between 1964 and early 2014, the fraction of civilian men between the ages of 25 and 34 who were neither working nor looking for work roughly quadrupled, from less than 3% to more than 11%. In 1965, fewer than 5% of American men between 45 and 54 years of age were totally out of the work force; by early 2014, the fraction was almost 15%. …mass gaming of the welfare system appears to be a fact of modern American life. The country’s ballooning “disability” claims attest to this. Disability awards are a key source of financial support for non-working men now, and disability judgments also serve as a gateway to qualifying for a whole assortment of subsidiary welfare benefits. Successful claims by working-age adults against the Social Security Disability Insurance (SSDI) program rose almost six-fold between 1970 and 2012 — and that number does not include claims against other major government disability programs, such as SSI.

Ugh. It’s almost as if this Chip Bok cartoon is becoming a depiction of American reality.

To close, here are some excerpts that put the issue of dependency in broader context.

The burning personal ambition and hunger for success that both domestic and foreign observers have long taken to be distinctively American traits are being undermined and supplanted by the character challenges posed by the entitlement state. The incentive structure of our means-based welfare state invites citizens to accept benefits by showing need, making the criterion for receiving grants demonstrated personal or familial financial failure, which used to be a source of shame. …The entitlement state appears to be degrading standards of citizenship in other ways as well. For example, …The late senator Daniel Patrick Moynihan once wrote, “It cannot too often be stated that the issue of welfare is not what it costs those who provide it, but what it costs those who receive it.” The full tally of those costs must now include the loss of public honesty occasioned by chronic deception to extract unwarranted entitlement benefits from our government…collusive bipartisan support for an ever-larger welfare state is the central fact of politics in our nation’s capital today, as it has been for decades. Until and unless America undergoes some sort of awakening that turns the public against its blandishments, or some sort of forcing financial crisis that suddenly restricts the resources available to it, continued growth of the entitlement state looks very likely in the years immediately ahead.

So what’s the answer to this mess?

Without question, the first step is to get Washington out of the business of imposing a one-size-fits-all system on the country.

Simply stated, take the money in Washington that is spent on all redistribution programs, lump those funds into a block grant, and then turn the money over to the states and give them free rein to decide how best to alleviate poverty without creating discomfort.

Republicans, to their credit, already have proposed that solution for Medicaid. But they need to expand that legislation to other means-tested programs.

The real key to success, though, is slowly but surely phasing out the block grant. It’s good to give states flexibility in spending money, but you won’t get responsible decisions unless states – at some point – are also responsible for raising the money.

In other words, the answer is federalism. And because this means jurisdictional competition, we’re quite likely to get better policy. After all, if crazy states such as California, New York, and Illinois want to impose high tax rates to fund overly generous handout, they’ll quickly learn why that’s a bad idea since productive people will emigrate and welfare recipients will immigrate.

Ideally, state lawmakers will decide that welfare programs should focus on people with genuine material deprivation and not ….

Writing about Eberstadt’s article, George Will highlights the fact that you no longer have to be poor to get freebies from federal anti-poverty programs.

Between 1983 and 2012, the population increased by almost 83 million — and people accepting means-tested benefits increased by 67 million. So, for every 100-person increase in the population there was an 80-person increase in the recipients of means-tested payments. Food stamp recipients increased from 19 million to 51 million — more than the combined populations of 24 states. What has changed? Not the portion of the estimated population below the poverty line (15.2 percent in 1983; 15 percent in 2012). Rather, poverty programs have become untethered from the official designation of poverty: In 2012, more than half the recipients were not classified as poor but accepted being treated as needy.

And as you read that passage, keep in mind that the poverty line in America is well above the average level of income in most parts of the world.

But the left wants to redefine poverty in ways that enable redistribution to people who aren’t poor.

P.S. Here’s a great video on differences between the United State and Europe. And here’s a video that is best described as the result of an affair between Dr. Seuss and a think tanker.

P.P.S. Here’s a superb Chuck Asay cartoon on how government undermines social capital. And here’s a Michael Ramirez cartoon making the same point.

P.P.P.S. If you enjoy satire, here’s a book of left-wing nursery rhymes.

P.P.P.P.S. And if you want to know one of my fantasies (which deals with the entitlement mindset), click here.

P.P.P.P.P.S. Last but not least, here’s the famous set of cartoons showing the rise and (inevitable) fall of the welfare state.

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