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Posts Tagged ‘United Kingdom’

As far as I’m concerned, no sentient human being could look at what happened in the United States in the 1980s and not agree that high tax rates on upper-income taxpayers are foolish and self-destructive.

Not only did the economy grow faster after Reagan lowered rates, but the IRS even collected more revenue (a lot more revenue) because rich people earned and reported so much additional income.

That should be a win-win for all sides, though there are some leftists who hate the rich more than they like additional revenue.

Anyhow, I raise this example because there are politicians today who think it’s a good idea to go back to the punitive tax policy that existed in the 1970s.

Hillary Clinton proposed big tax hikes in last year’s campaign. And now, as reported by the U.K.-based Times, the Labour Party across the ocean is openly embracing a soak-the-rich agenda.

Labour’s tax raid on the country’s 1.3 million highest earners could raise less than half the £4.5 billion claimed by the party, experts said last night. The policy was announced by Jeremy Corbyn as part of plans to raise £48 billion through tax increases. …At the manifesto’s heart are plans to lower the threshold for the 45p tax rate from £150,000 to £80,000 and introduce a 50p tax band for those earning more than £123,000 a year. …Labour said that the increases could raise as much as £6.4 billion to help to fund giveaways such as the scrapping of tuition fees and more cash for the NHS, schools and childcare.

Here’s a chart from the article, showing who gets directly hurt by Corbyn’s class-warfare scheme.

But here’s the amazing part of the article.

The Labour Party, which has become radically left wing under Corbyn, openly acknowledges that the Laffer Curve is real and that there will be negative revenue feedback.

Under Labour’s calculation, if no one changed their behaviour as a result of the tax changes, a future government would raise an extra £6.4 billion a year. In its spending commitments the party is assuming that the new measures would bring in about £4.5 billion.

This is remarkable. The hard-left Labour Party admits that about 30 percent of the tax increase will disappear because taxpayers will respond by earning and/or reporting less taxable income.

That’s a huge concession to the real world, which is more than Barack Obama or Hillary Clinton ever did. Welcome to the supply side, Jeremy Corbyn!

Moreover, establishment organizations such as the Institute for Fiscal Studies also incorporate the Laffer Curve in their analysis. But even more so.

They say Labour’s class-warfare tax hike would – at best – raise less than half as much as the static revenue estimate.

The IFS said that even this reduced figure looked optimistic and the changes were more likely to raise £2 billion to £3 billion — about half the amount claimed. “The amount of extra revenue these higher tax rates would raise is very uncertain,” Paul Johnson, director of the IFS, said. “What we do know is that raising tax levels on those people earning over £150,000 does not bring in additional revenues because the kind of people on these kinds of incomes are significantly more able to work around the tax system.

Now let’s compared the enlightened approach in the United Kingdom to the more primitive approach in the United States.

The official revenue-estimating body on Capitol Hill, the Joint Committee on Taxation, has only taken baby steps in the direction of dynamic scoring (which is an improvement over their old approach of static scoring, but they still have a long way to go).

Fortunately, there are some private groups who do revenue estimates, similar to the IFS in the UK.

The Committee for a Responsible Federal Budget put together this very useful table comparing how the Tax Foundation and the Tax Policy Center “scored” the Better Way Plan.

The key numbers are in the dark blue rows. As you can see, the Tax Foundation assumes about 90 percent revenue feedback while the left-leaning Tax Policy Center only projects about 22 percent revenue feedback.

Since not all tax cuts/tax increases are created equal, the 22-percent revenue feedback calculation by the Tax Policy Center does not put them to the left of the Labour Party, which assumed 30-percent revenue feedback.

Indeed, the Labour Party’s tax hike is focused on upper-income taxpayers, who do have more ability to respond when there are changes in tax policy, so a high number is appropriate. However, there are some very pro-growth provisions in the Better Way Plan, such as a lower corporate tax rate, expensing, death tax repeal, etc, so I definitely think the Tax Foundation’s projections are closer to the truth.

For policy wonks, Alan Cole of the Tax Foundation explained why their numbers tend to differ.

The bottom line is that we are slowly but surely making progress on dynamic scoring. Even folks on the left openly acknowledge that higher tax rates impose at least some damage. You know what they say about a journey of a thousand miles.

P.S. None of this changes the fact that I still don’t like the BAT, but I freely admit that the economy would grow much faster if the overall Better Way Plan was enacted.

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There’s an election next month in the United Kingdom, though there’s not much political suspense.

The Labour Party is led by Jeremy Corbyn, a crazed Bernie Sanders-style leftist, and British voters have no desire to become an Anglo-Saxon version of Venezuela. Or, since Corbyn’s main economic adviser actually has said all income belongs to the government and Corbyn himself has endorsed a maximum wage, maybe an Anglo-Saxon version of North Korea.

Given the Labour Party’s self-inflicted suicide, it is widely expected that the Conservative Party, led by Theresa May, will win an overwhelming victory.

But what difference will it make? Will the Tories have a mandate? Do they actually want to change policy?

Let’s start by asking whether policy should change. The good news is that the United Kingdom is ranked #10 according to Economic Freedom of the World. That means the U.K. is more market-friendly than the vast majority of nations (including the United States, I’m sad to report).

The bad news is that the U.K.’s score has been slipping throughout the 21st century. Basically, there were a lot of great reforms during the Thatcher era, but policy in recent years has been slowly deteriorating.

More worrisome is that the U.K. – like most developed nations – has a demographic problem.

In the absence of reform, the burden of government automatically will increase.

And that’s a big problem in a nation where a majority of people already are net dependents. In a column for the Telegraph, Daniel Mahoney of the Centre for Policy Studies analyzes this major threat to the U.K.

This week, the Office for National Statistics published figures showing the level of net dependency on the UK state. …The figure now stands at 50.5 per cent. In the 1980s and 1990s, this figure was just over 40 per cent – that is to say that around four in ten households received more in benefits than they paid in taxes. But this dramatically changed in the New Labour era, which left office with well over half of the population being deemed net dependent on the state. …Labour’s enormous increase in spending on public services and welfare was equally responsible for this worrying trend. Public spending grew from just 34.5 per cent of GDP in 2000 to 41% of GDP just before the financial crisis hit the UK… There has been some progress in recent years, …but levels of net dependency remain too high. Over half of households are still net dependent on the state. …It is important for the next Government to reduce dependency further.

But rather than move policy in the right direction, there’s considerable concern that Theresa May is a British version of George W. Bush.

Thatcherites are worried.

Theresa May has been warned not to abandon Margaret Thatcher’s free market economics as she prepares to reveal the most interventionist Tory manifesto for generations. …The Prime Minister has already announced an energy price cap and is expected to clamp down on executive pay and empower workers on boards in her election pitch. …cabinet ministers who served under Mrs Thatcher were scathing of the Prime Minister’s energy price cap when speaking off the record. One said it would create “incredible distortions” in the energy market, while another warned that Government cannot “force water uphill” by trying to stop free-market forces.

If you’re curious about May’s energy policy, Rupert Darwall has a helpful article in The Conservative.

For some time, politicians of all parties have been imposing policies that force up energy costs. Now they want to cut the energy bills that have been driven higher by their own policies. …the Competition and Markets Authority noted the role of decarbonisation policies in pushing up costs. “Pressure on prices is likely to grow in the future, due in part to the increasing costs imposed by climate and energy policies,” the CMA stated. …BEIS ministers have convinced themselves that there is widespread popular support for the aggressive decarbonisation policies that are making energy more expensive. They should have the courage of their convictions and acknowledge that high and rising energy bills are a consequence of the decarbonisation policies they claim are so popular. Once they’ve done that, we can have an honest debate.

Sounds like a classic example of Mitchell’s Law. Politicians pursue a policy (green energy or decarbonisation) that leads to higher prices. They then respond to the problem created by their intervention with another form of intervention (energy price caps).

All of which will cause bigger problems in the future.

But for purposes of today’s column, what matters is that this bad policy is being pushed by the leader of the (supposedly) Conservative Party.

To be sure, it’s possible that this bad policy is just a gimmicky election promise and won’t be implemented. It’s also possible that it will be implemented but will be offset by better policy in other areas.

What matters is whether the overall burden of government is expanding or receding. Maybe May will cap spending (an area where her predecessor did a good job his last few years in office). Maybe she will cut tax rates (the corporate rate already has been slashed and will be reduced to 17 percent over the next few years).

At this stage, there’s no way to predict the direction of policy. But there is reason to worry because there aren’t enough people in the U.K. making the principled case for economic liberty.

Allister Heath explains what is needed to rejuvenate his country.

Britain needs a new movement to sell free-market ideas. It is the only way that this country’s slow drift Left-wards, which began in 1997, will be halted and reversed. It’s the only way that Labour, which has reembraced Marxism under Jeremy Corbyn, and the Tories, which have fallen back in love with old fashioned economic interventionism, will ever see sense again. …Tories gave up fighting for free markets years ago, when David Cameron was elected leader…he decided…to accept all of Labour’s increases in state spending and regulation, including environmental and labour market rules…when the financial crisis struck, the Tories joined in the banker-bashing.

But it’s not just that the Tories did bad things.

They also failed to do good things.

…they didn’t fight from the bully pulpit. They didn’t stand up and explain the merits of low taxes, which boost incentives. They didn’t shout from the rooftops that we need entrepreneurs to create wealth, and that people who make money by selling their wares to the public are performing a public service. They didn’t defend privatisation. They failed to make the case for profits… They conceded too much, including the destructive idea that the private sector is less moral and less law abiding than the state sector. They deferred to egalitarians and class warriors… When the financial crisis came, the Tories didn’t explain that much of it was actually caused by misplaced government intervention, including guarantees extended to financial institutions, pro-sub prime policies in the US, moral hazard and cheap money injected into the system by over-confident central banks. …We now have Mayonomics, a continuation of this trend, and its embrace of Ed Miliband-style energy price caps and yet more interventionism.

So Allister is urging a campaign for economic liberty.

The campaign must explain why private companies that compete against one another always generate better outcomes than public sector monopolies. …All of the lessons that became part of the political conventional wisdom after the 1970s need to be relearnt and retaught, and we need a new generation of pro-free market activists to lead this struggle. It’s time for supporters of capitalism to stand up and be counted.

Sadly, the business community is unwilling to lead.

The big business lobby groups are not up to the task… With a few exceptions, they don’t support real, genuine, free-markets.

For all intents and purposes, Allister is making the argument that Britain needs to become a more ethical society. In other words, he wants a campaign to inform and educate about the value of liberty qua liberty. A belief in self reliance, work, and individual responsibility. Characteristics that could be considered part of social capital or cultural capital.

And I think he’s spot on.

I worry a lot about the erosion of social capital in America. But if the polling data is accurate, the problem is much bigger in the United Kingdom.

P.S. Brexit is a wild card in this discussion. I supported the decision to leave the European Union in large part because of my hope U.K. policy makers would feel pressure to shift policy in a more market-oriented direction.

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The centerpiece of President Trump’s tax plan is a 15 percent corporate tax rate.

Republicans in Congress aren’t quite as aggressive. The House GOP plan envisions a 20 percent corporate tax rate, while Senate Republicans have yet to coalesce around a specific plan.

Notwithstanding the absence of a unified approach, you would think that the stage is set for a big reduction in America’s anti-competitive corporate tax rate, which is the highest in the developed world (if not the entire world) and creates big disadvantages for American workers and companies.

If only.

While I am hopeful something will happen, there are lots of potential pitfalls, including the “border-adjustable tax” in the House plan. This risky revenue-raiser has created needless opposition from major segments of the business community and could sabotage the entire process. And I also worry that momentum for tax cuts and tax reform will erode if Trump doesn’t get serious about spending restraint.

What makes this especially frustrating is that so many other nations have successfully slashed their corporate tax rates and the results are uniformly positive.

My colleague Chris Edwards recently shared the findings from an illuminating study published by the London-based Centre for Policy Studies. It examines what’s happened in the United Kingdom as the corporate tax rates has dropped from 35 percent to 20 percent over the past 30 years. Here’s some of what Chris wrote about this report.

New evidence comes from Britain… It shows the tax rate falling from 35 percent to 20 percent since the late 1980s and corporate tax revenues as a percentage of gross domestic product (GDP) trending upwards. As the rate has fallen, the tax base has grown more than enough to keep money pouring into the Treasury. …the CPS study says, “In 1982-83 when the rate was 52%, corporation tax receipts yielded revenues equivalent to 2% of GDP. Corporation tax now raises over 2.3% of GDP when the headline rate is at just 20%.”

And keep in mind that GDP today is significantly greater in part because of a better corporate tax system.

Here’s the chart from the CPS study, showing the results over the past three decades.

 

The results from the most-recent round of corporate rate cuts are especially strong.

In 2010-11, the government collected £36.2 billion from a 28 percent corporate tax. The government expected its corporate tax package—including a rate cut to 20 percent—to lose £7.9 billion a year by 2015-16 on a static basis. …But that analysis was apparently too pessimistic: actual revenues in 2015-16 had risen to £43.9 billion. So in five years, the statutory tax rate fell 29 percent (28 percent to 20 percent) but revenues increased 21 percent (£36.2 billion to £43.9 billion). That is dynamic!

None of this should be a surprise.

Big reductions in the Irish corporate tax rate also led to an uptick in corporate receipts as a share of economic output. And remember that the economy has boomed, so the Irish government is collecting a bigger slice of a much bigger pie.

And Canadian corporate tax cuts generated the same effect, with no drop in revenues even though (or perhaps because) the federal tax rate on business has plummeted to 15 percent.

Would we get similar results in the United States?

According to experts, the answer is yes. Scholars at the American Enterprise Institute estimate that the revenue-maximizing corporate tax rate for the United States is about 25 percent. And Tax Foundation experts calculate that the revenue-maximizing rate even lower, down around 15 percent.

I’d be satisfied (temporarily) if we split the difference between those two estimates and cut the rate to 20 percent.

Let’s close with some dare-to-hope speculation from Joseph Sternberg of the Wall Street Journal about what might happen in Europe if Trump significantly drops the U.S. corporate tax rate.

Donald Trump says many things that alarm Europeans, but one of the bigger fright lines may have come in last week’s address to Congress: “Right now, American companies are taxed at one of the highest rates anywhere in the world. My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone.” What’s scary here to European ears is…the idea that tax policy is now fair game when it comes to global competitiveness. …One of the biggest political gifts Barack Obama gave European leaders was support for their notion that low tax rates are unfair and that taxpayers who benefit from them are somehow crooked. Europeans pushed that line among themselves for years, complaining about low Irish corporate rates, for instance. The taboo on tax competition is central to the political economy of Europe’s welfare states… Mr. Obama…backed global efforts against “base erosion and profit shifting,” meaning legal and efficient corporate tax planning. The goal was to obstruct competition among governments… The question now is how much longer Europe could resist widespread tax reform if Mr. Trump brings in a 20% corporate rate alongside rapid deregulation—or what the consequences will be in terms of social-spending trade-offs to a new round of tax cutting. Dare to dream that Mr. Trump manages to trigger a new debate about competitiveness in Europe.

Amen. I’m a huge fan of tax competition because it pressures politicians to do the right thing even though they would prefer bad policy. And I also like the dig at the OECD’s anti-growth “BEPS” initiative.

P.S. I want government to collect less revenue and spend less money, so the fact that a lower corporate tax rate might boost revenue is not a selling point. Instead, it simply tells us that the rate should be further reduced. Remember, it’s a bad idea to be at the revenue-maximizing point on the Laffer Curve (though that’s better than being on the downward-sloping side of the Curve, which is insanely self-destructive).

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In my never-ending strategy to educate policy makers about the Laffer Curve, I generally rely on both microeconomic theory (i.e., people respond to incentives) and real-world examples.

And my favorite real-world example is what happened in the 1980s when Reagan cut the top tax rate from 70 percent to 28 percent. Critics said Reagan’s reforms would deprive the Treasury of revenue and result in rich people paying a lot less tax. So I share IRS data on annual tax revenues from those making more than $200,000 per year to show that there was actually a big increase in revenue from upper-income taxpayers.

It has slowly dawned on me, though, that this may not be the best example to share if I’m trying to convince skeptical statists. After all, they presumably don’t like Reagan and they may viscerally reject my underlying point about the Laffer Curve since I’m linking it to the success of Reaganomics.

So I have a new strategy for getting my leftist friends to accept the Laffer Curve. I’m instead going to link the Laffer Curve to “successful” examples of left-wing policy. To be more specific, statists like to use the power of government to control our behavior, often by imposing mandates and regulations. But sometimes they impose taxes on things they don’t like.

And if I can use those example to teach them the basic lesson of supply-side economics (if you tax something, you get less of it), hopefully they’ll apply that lesson when contemplating higher taxes on thing they presumably do like (such as jobs, growth, competitiveness, etc).

Here’s a list of “successful” leftist tax hikes that have come to my attention.

Now I’m going to augment this list with an example from the United Kingdom.

By way of background, there’s been a heated housing market in England, with strong demand leading to higher prices. The pro-market response is to allow more home-building, but the anti-developer crowd doesn’t like that approach, so instead a big tax on high-value homes was imposed.

And as the Daily Mail reports, this statist approach has been so “successful” that the tax hike has resulted in lower tax revenues.

George Osborne’s controversial tax raid on Britain’s most expensive homes has triggered a dramatic slump in stamp duty revenues. Sales of properties worth more than £1.5million fell by almost 40 per cent last year, according to analysis of Land Registry figures… This has caused the total amount of stamp duty collected by the Treasury to fall by around £440million, from £1.079billion to a possible £635.7million. The figures cover the period between April and November last year compared to the same period in 2015.

Our leftist friends, who sometimes openly admit that they want higher taxes on the rich even if the government doesn’t actually collect any extra revenue, should be especially happy because the tax has made life more difficult for people with more wealth and higher incomes.

Those buying a £1.5 million house faced an extra £18,750 in stamp duty. …Tory MP Jacob Rees-Mogg…described Mr Osborne’s ‘punitive’ stamp duty hikes as the ‘politics of envy’, adding that they have also failed because they have raised less money for the Treasury.

By the way, the fact that the rich paid less tax last year isn’t really the point. Instead, the lesson to be learned is that a tax increase caused there to be less economic activity.

So I won’t care if the tax on expensive homes brings in more money next year, but I will look to see if fewer homes are being sold compared to when this tax didn’t exist.

And if my leftist friends say they don’t care if fewer expensive homes are being sold, I’ll accept they have achieved some sort of victory. But I’ll ask them to be intellectually consistent and admit that they are implementing a version of supply-side economics and that they are embracing the notion that tax rates change behavior.

Once that happens, it’s hopefully just a matter of time before they recognize that it’s not a good idea to impose high tax rates on things that are unambiguously good for an economy, such as work, saving, investment, and entrepreneurship.

Yes, hope springs eternal.

P.S. In addition to theory and real-world examples, my other favorite way of convincing people about the Laffer Curve is to share the poll showing that only 15 percent of certified public accountants agree with the leftist view that taxes have no impact have taxable income. I figure that CPAs are a very credible source since they actually do tax returns and have an inside view of how behavior changes in response to tax policy.

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Since I’m always reading and writing about government policies, both in America and around the world, I’m frequently reminded of H.L. Mencken’s famous observation about the shortcomings of “tolerable” government.

If you take a close look at the world’s freest economies, you quickly learn that they are highly ranked mostly because of the even-worse governments elsewhere.

Even places such as Switzerland have some misguided policies.

But there’s a silver lining to this dark cloud. The incompetence, mendacity, and cronyism that exists all over the world means that I’ll never run out of things to write about.

So let’s enjoy a new edition of Great Moments in Foreign Government.

We’ll start with the utterly predictable failure of an entitlement program in the United Kingdom.

The government must stop ‘nannying’ British parents and do away with universal free childcare, a new report has urged. Families most in need of help are not getting it because Government subsidies are poorly targeted, the Institute of Economic Affairs publication said. Many families on average earnings are spending more than a third of their net income on childcare, the report claimed, saying too much regulation in the sector has hiked prices. …One study has estimated that keeping parents in work costs £65,000 per job, the report claimed, describing current policy as ‘costly and inefficient’. …home-based childminders are priced out of the sector, it said. Co-author of the report Len Shackleton, an editorial research fellow at the Institute of Economic Affairs, said: ‘Government interventions in the childcare sector have resulted in both British families and taxpayers bearing a heavy burden of expensive provision.

Gee, a sector of the economy gets more expensive and inefficient once government gets involved.

I’m totally shocked, just like Inspector Renault in Casablanca.

Sentient human beings, of course, are not surprised. After all, just look at what government intervention has done for healthcare and higher education.

I’m still waiting for an example of a government “solution” that makes a problem better rather than worse.

Let’s now turn to Germany. I’ve previously referenced the country’s intelligence community because the BND managed to lose the blueprints for its costly new headquarters building.

But apparently the incompetence goes well beyond architecture. Another German intelligence division, the BfV, had an Islamic terrorist on staff. Here are some excerpts from a report in the Washington Post.

German intelligence agents noticed an unusual user in a chat room known as a digital hideout for Islamic militants. The man claimed to be one of them — and said he was a German spy. He was offering to help Islamists infiltrate his agency’s defenses to stage a strike. Agents lured him into a private chat, and he gave away so many details about the spy agency — and his own directives within it to thwart Islamists — that they quickly identified him, arresting the 51-year-old the next day. Only then would the extent of his double life become clear. The German citizen of Spanish descent confessed to secretly converting to Islam in 2014. From there, his story took a stranger turn. Officials ran a check on the online alias he assumed in radical chat rooms.

And they found out that the terrorist had a rather colorful past.

The married father of four had used it before — as recently as 2011 — as his stage name for acting in gay pornographic films. …which could cast a fresh light on the judgment and vetting of the German intelligence agency at a critical time.

These revelations have generated some concern, as one might expect.

News of the case sparked a storm of outrage in Germany, even as critics said it raised serious questions about the country’s bureaucratically named domestic spy agency, known as the Federal Office for the Protection of the Constitution (BfV). …“It’s not only a rather bizarre, but also a quite scary, story that an agency, whose central role it is to engage in counterespionage, hired an Islamist who potentially had access to classified information, who might have even tried to spread Islamist propaganda and to recruit others to let themselves be hired by and possibly launch an attack” against the domestic intelligence agency, said Hans-Christian Ströbele, a member of the Parliamentary Control Committee that oversees the work of the German intelligence services.

You won’t be surprised to learn that the German government is not alone. The U.K. government also has hired terrorists to work in anti-terrorism divisions.

In the United States, by contrast, we import them and give them welfare. I’m not sure which approach is more insane.

The only saving grace is that terrorists sometimes display similar levels of incompetence, as illustrated in the postscripts of this column.

Let’s close with a trip to Canada. Our friends to the north generally are a sensible bunch, but you can find plenty of senseless policies, particularly in the French-speaking areas.

And I’m not sure whether to laugh or cry about this example of bureaucratic extortion.

A Camrose man is ticked about his ticket — a $465 traffic violation issued by Edmonton police — for having a cracked driver’s licence. Dave Balay admits he’s guilty of having a small crack in his licence. But he doesn’t think the penalty fits the crime. He was returning home from visiting a friend Wednesday evening when he was pulled over on Anthony Henday Drive. …He gave the officer his driver’s licence, registration and insurance card. …”He came back, and the younger policeman said he was going to give me a ticket for my driver’s licence being mutilated,” said Balay. “I said, ‘Mutilated? I didn’t even know there was such a thing.’ Then he gave me a ticket for $465.” The mutilation referred to was a crack in the top left corner of Balay’s licence. “Maybe not even quite an inch long,” said Balay, adding the crack doesn’t obstruct any pertinent information. …”I think I outright laughed, and said, ‘Seriously? Four-hundred-and-sixty-five bucks for this crack?’ [The officer] said, ‘It’s a mutilated licence.’ …”Had I scratched out my eyes or drawn a mustache on my face, or scratched out the licence number or something, then, yeah, give me a ticket for that. That should be an offence.”

But the local government says Mr. Balay should be grateful that he was treated with such kindness.

Edmonton police released a statement Friday suggesting the officer actually gave Balay a break. According to the statement, the officer had grounds to lay a careless driving charge, which carries a fine of $543 and six demerit points. But because Balay was co-operative, the officer issued a lesser fine for a cracked driver’s licence.

Though Mr. Balay doesn’t think he’s been given a break.

Balay said he won’t pay the fine, even if that means serving jail time or community service. “I don’t have $465,” he said. “…I do some part-time substitute teaching, supply teacher. It’s a week’s wage.”

Good for Mr. Balay. Hopefully the publicity that he’s getting will force the revenue-hungry bureaucrats in Edmonton to back down.

Meanwhile, this story adds to my ambivalence about Canada. On the minus side of the ledger, there are absurd policies granting special rights to alcoholics, inane harassment of kids selling worms or lemonade, fines on parents who don’t give their kids carbs at lunchtime, and punishment for kids who protect classmates from knife-wielding bullies.

Then again, Canada is now one of the world’s most economically free nations thanks to relatively sensible policies involving spending restraint, corporate tax reform, bank bailouts, regulatory budgeting, the tax treatment of saving, and privatization of air traffic control. Heck, Canada even has one of the lowest levels of welfare spending among developed nations.

Though things are now heading in the wrong direction, which is unfortunate for our northern neighbors.

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When I debate one of my leftist friends about deficits, it’s often a strange experience because none of us actually care that much about red ink.

I’m motivated instead by a desire to shrink the burden of government spending, so I argue for spending restraint rather than tax hikes that would “feed the beast.”

And folks on the left want bigger government, so they argue for tax hikes to enable more spending and redistribution.

I feel that I have an advantage in these debates, though, because I share my table of nations that have achieved great results when nominal spending grows by less than 2 percent per year.

The table shows that nations practicing spending restraint for multi-year periods reduce the problem of excessive government and also address the symptom of red ink.

I then ask my leftist buddies to please share their table showing nations that got good results from tax increases. And the response is…awkward silence, followed by attempts to change the subject. I often think you can even hear crickets chirping in the background.

I point this out because I now have another nation to add to my collection.

From the start of last decade up through the 2009-2010 fiscal year, government spending in the United Kingdom grew by 7.1 percent annually, far faster than the growth of the economy’s productive sector. As a result, an ever-greater share of the private economy was being diverted to politicians and bureaucrats.

Beginning with the 2010-2011 fiscal year, however, officials started complying with my Golden Rule and outlays since then have grown by an average of 1.6 percent per year.

And as you can see from this chart prepared by the Institute for Fiscal Studies, this modest level of fiscal restraint has paid big dividends. The burden of government spending has significantly declined, falling from 45 percent of national income to 40 percent of national income.

This means more resources in private hands, which means better economic performance.

Though allow me to now share some caveats. Fiscal policy is only a small piece of what determines good policy, just 20 percent of a nation’s grade according to Economic Freedom of the World.

So spending restraint should be accompanied by free trade, sound money, a sensible regulatory structure, and good governance. Moreover, as we see from the tragedy of Greece, spending restraint doesn’t even lead to good fiscal policy if it’s accompanied by huge tax increases.

Fortunately, the United Kingdom is reasonably sensible, which explains why the country is ranked #10 by EFW. Though it’s worth noting that it gets its lowest score for “size of government,” so the recent bit of good news about spending restraint needs to be the start of a long journey.

P.S. The United States got great results thanks to spending restraint between 2009-2014. It will be interesting to see whether Republicans get better results with Trump in the White House.

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Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of its efforts to help Obama’s reelection campaign.

That’s when I decided to put forth my “First Theorem of Government,” which simply states that the public sector is a racket for the benefit of a ruling class comprised of bureaucrats, interests groups, cronies, and other insiders.

They have figured out how to line their pockets and live very comfortable lives at the expense of people in the economy’s productive sector.

The same thing is true on the other side of the Atlantic Ocean. The U.K.-based Daily Mail reports that senior bureaucrats in the country’s government-run healthcare system get lavish taxpayer-financed pension.

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Here are some of the details, all of which must be especially aggravating for the mistreated patients who suffer because of substandard care from the government.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector; …About 500 earn more than the Prime Minister – after Health Secretary Jeremy Hunt ordered them to ‘show restraint’ on executive pay. …the scheme every year pays retired staff £10 billion more than it takes in. That black hole has to be filled by the taxpayer. The subsidies enable NHS executives – including managers, human resources bosses and directors of ‘corporate administration’ – to build up vast pensions, at minimal personal expense.

Here’s the bureaucrat with the biggest pile of loot from taxpayers.

The biggest single beneficiary is Professor Tricia Hart, who retired as chief executive of South Tees Hospitals NHS Foundation Trust in January with a £2.6 million pension. That figure entitled her to a lump sum of at least £335,000 on retirement, plus an inflation-proof annual pension of £110-115,000. …at least four HR directors have amassed million-pound pensions.

By the way, I have nothing against people accumulating big nest eggs. Even if they work for the government.

My objection, as discussed in yesterday’s column about state and local bureaucrats in America, is when bureaucrats have special taxpayer-financed deals.

Especially, as we see all too often in the U.K., when taxpayers don’t even get good healthcare in exchange for the lavish salaries and benefits.

Almost four million people are now waiting for cataract surgery, hip and knee replacements and other routine operations. The number of people forced to wait more than four hours in A&E has doubled in two years. And wards are full of elderly people who cannot be discharged – because there are no care home places for them.

A spin doctor tried to rationalize and justify the cozy scheme for bureaucrats.

…a spokesman for NHS Pensions stressed that…The amounts individuals accrued were a result of the ‘rules and regulations’ of the NHS scheme. ‘What people get paid is a matter for NHS trusts,’ he added.

I’m amused by the assertion that the lavish pensions are the result of simply following the “rules and regulations.” That’s precisely the point. Government insiders write the rules and regulations and they inevitably produce systems that are very good for them and not so good for taxpayers.

I’m also amused (and when I write “amused,” I actually mean “irritated” or “appalled”) at the claim that compensation levels are “a matter for NHS trusts”. If the spin doctor was talking about a private company, I would agree. As I’ve argued before, pay levels in private companies should be determined by managers and stockholders.

But we’re talking in this case about pay levels in a government bureaucracy. And notwithstanding the elitist attitude of some government officials, taxpayers have every right to get outraged when they learn that their money is being squandered on excessive pay and gold-plated benefits.

It’s a problem all over the world.

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