Sunday, February 28, 2010

Don't Trust (Macro) Economists

I posted an amusing (and disappointing) graph in January showing how economists consistently failed to predict major changes in GDP. Russ Roberts of George Mason University explains in the Wall Street Journal that we should blame the practitioners of macroeconomics. They want the profession to be a hard science like physics, and some of them dream of the day when sophisticated models will make at least soft versions of central planning possible. But this is a fundamentally flawed way of thinking about economics. Professor Roberts says that the profession is more like biology because of the economy's complex and unpredictable nature. Microeconomists, by contrast, focus on human behavior and thus are far more likely to have useful (and pro-market) insights about public policy:

The defenders of modern macroeconomics argue that if we just study the economy long enough, we'll soon be able to model it accurately and design better policy. Soon. That reminds me of the permanent sign in the bar: Free Beer Tomorrow. We should face the evidence that we are no better today at predicting tomorrow than we were yesterday. Eighty years after the Great Depression we still argue about what caused it and why it ended. If economics is a science, it is more like biology than physics. Biologists try to understand the relationships in a complex system. That's hard enough. But they can't tell you what will happen with any precision to the population of a particular species of frog if rainfall goes up this year in a particular rain forest. They might not even be able to count the number of frogs right now with any exactness. We have the same problems in economics. The economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions. The bottom line is that we should expect less of economists. Economics is a powerful tool, a lens for organizing one's thinking about the complexity of the world around us. That should be enough. We should be honest about what we know, what we don't know and what we may never know. Admitting that publicly is the first step toward respectability.

Mark Steyn on Greece

Pulling no punches, Mark Steyn ponders the entitlement-driven collapse of Greece and asks why politicians in America are repeating the same mistakes:

Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen. What’s happening in the developed world today isn’t so very hard to understand: The 20th-century Bismarckian welfare state has run out of people to stick it to. In America, the feckless, insatiable boobs in Washington, Sacramento, Albany, and elsewhere are screwing over our kids and grandkids. ...By the way, you don’t have to go to Greece to experience Greek-style retirement: The Athenian “public service” of California has been metaphorically face down in the ouzo for a generation. ...as the Greek protests make plain, nothing makes an individual more selfish than the socially equitable communitarianism of big government: Once a chap’s enjoying the fruits of government health care, government-paid vacation, government-funded early retirement, and all the rest, he couldn’t give a hoot about the general societal interest; he’s got his, and to hell with everyone else. People’s sense of entitlement endures long after the entitlement has ceased to make sense. ...Think of Greece as California: Every year an irresponsible and corrupt bureaucracy awards itself higher pay and better benefits paid for by an ever-shrinking wealth-generating class. ...The problem is there are never enough of “the rich” to fund the entitlement state, because in the end it disincentivizes everything from wealth creation to self-reliance... And in America, Obama, Pelosi, and Reid are saying we need to paddle faster to catch up with the Greeks... What could go wrong?

Saturday, February 27, 2010

Competition Between Governments Can Help Thwart Over-Regulation

A new study from the University of Michigan Law School's Empirical Legal Studies Center finds that it is more difficult today for politicians to impose excessive financial regulation because firms can migrate to jurisdictions with more pro-market policy. The author notes tht this is less true for institutions, such as big banks, that want government protection, but laissez-faire entities such as hedge funds have substantial ability to flee bad government policy:

Jurisdictional competition spread from corporate law to its close cousin, securities law. Historically, issuers listed their stock for trading on one of the exchanges in the country where they principally did business. Improvements in communication and related technologies, however, have made possible an international market for stock exchange listings that resembles in many respects the long‐standing federal market for corporate charters in the United States. Now companies can list their shares for trading on exchanges in any number of countries; there is no longer a logical nexus between the site of a company’s headquarters and where its shares are traded. ...Does that free movement of capital limit the ability of the Obama administration to reform financial regulation in the United States? ...After the United States effectively raised listing standards by enacting the Sarbanes‐Oxley Act in 2002, foreign companies headed for the door. London seized the opportunity; fourteen of the top twenty initial public offerings (“IPOs”) listed on the London Stock Exchange (“LSE”) came from outside the United Kingdom in 2005 to 2008. By contrast, only four of the top twenty IPOs in New York came from outside the United States. Further, it was not only foreign companies that were leaving; United States companies left the public market in droves, headed for the greener (or at less regulated) fields of private equity, and they were not being replaced. A Grant Thornton study documented a staggering thirty‐nine percent decline in United States listings from a peak of 8,823 in 1997 to only 5,401 in 2008. ...hedge funds can go elsewhere if a country tries to enmesh them in red tape. Running a hedge fund only requires an office and an Internet connection. ...Debates over hedge fund regulation take place against the shadow of the threat of the flight of these financial intermediaries. And that flight has already begun. The United Kingdom raised its top tax rate to fifty percent in April. That move, along with EU restrictions on borrowing by hedge funds, already prompted a number of hedge funds to emigrate to greener pastures. ...Hedge fund bankers are not happy about being treated like bankers. Unlike bankers, however, they do not have to stick around and take it. “About [twenty] percent of the hedge‐fund community could leave the [United Kingdom] in the next two or three years. The feeling among the hedge‐community is there is a better place to be.” Where is that better place? Asia. Places like Singapore are attracting hedge funds... Of course, the fact that Singapore does not tax capital gains may have had something to do with its attractiveness. ...So what does global competition mean for populist retribution against the money changers? Apparently it depends on the mobility of the money changes you are talking about. Big banks need government backing to be credible with depositors and counterparties, so the bankers at those institutions are going to have to stick around and take it. Smaller institutions, like hedge funds, are much more portable, and if Western governments attempt to impose banker‐like restrictions on them, they will head elsewhere. ...The forces of financial capitalism can no longer be confined within the boundaries of a single nation, so regulation is not simply a matter of mustering the requisite political will. There is no shortage of anger against the bankers in the current environment, but it can only be deployed against financial intermediaries who cannot flee the regulatory wrath. ...International competition in financial services regulation now serves as a check on populist retribution, but only a partial one.

Political Humor (very appropriate for today)

Political Humor

Live by the teleprompter, die by the teleprompter.

Yes, Simon, People in the United Kingdom Die Because of Government-Run Healthcare

For those of you who saw this segment of Wednesday's show on CNBC, my co-host got quite agitated when I said I did not want America to have a substandard government-dictated healthcare system. Simon expressed doubt about my assertions, so it's rather serendipitous that Investor's Business Daily just editorialized about a new report (from the UK) about the failings of one British hospital system:

American health care is not British health care, at least not yet. But if Democrats get their way, this country will rush to adopt a system much like the one that is killing people in Great Britain. Democrats say that what they have planned for U.S. health care is not a copy of the British system. But a nationalized health care system, no matter how it's tailored, will collapse like other socialist programs. Government-run health care may at times look like it works, but it is unsustainable — and deadly. Consider the British hospital trust that was the focus of a recently completed independent inquiry. According to U.K. media reports, the review found that at least 400 and as many as 1,200 patients died from 2005 to 2008 because of poor care by Mid Staffordshire National Health Service Foundation Trust, which operates two hospitals. ...The inquiry also noted "serious departures from the standard of basic care which every patient is entitled to expect," abuses of elderly patients, and the too-common presence of unwashed patients and bedding "soiled with urine and feces for considerable periods of time." Other sanitation problems included the presence of blood, discarded needles and used dressings. These problems shouldn't be unexpected. Last year, the media reported that up to 10,000 cancer patients were dying needlessly in the U.K. each year because their condition was diagnosed too late, according to research by the government's director of cancer services. Also in 2009, there were reports that the health secretary ordered a probe into "claims that patients are dying due to poor care in at least 27 hospitals around the country."

UK Taxpayer Group Mocks Climate Nazis for Wasting Money

The Taxpayers Alliance in London has an amusing video highlighting different ways the government has wasted money on global warming/climate change propaganda. Or maybe it's only amusing because I'm American and my tax dollars weren't being wasted on the projects in the video.

Friday, February 26, 2010

Proud to Be American

Saw this very encouraging CNN story linked on Hotair.com. According to a new poll, a comfortable majority of Americans recognize that the federal government is an immediate threat to the rights and freedoms of ordinary people. My only quibble is that we're way past the threat stage. Between an oppressive tax system and a dependency-creating morass of spending programs, the federal government already is undermining our liberties. Our Founding Fathers would be very disappointed to see what has happened to our nation:

A majority of Americans think the federal government poses a threat to rights of Americans, according to a new national poll. Fifty-six percent of people questioned in a CNN/Opinion Research Corporation survey released Friday say they think the federal government's become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens. ...According to CNN poll numbers released Sunday, Americans overwhelmingly think that the U.S. government is broken - though the public overwhelmingly holds out hope that what's broken can be fixed.

Europe Lags Behind

Since many of the politicians want America to be more like Europe (including full government-run healthcare), it's worth contemplating what that would mean for the economy. America today is richer than Western Europe. Indeed, per-capita living standards are about 30 percent higher in the United States - and that's according to the statists at the Paris-based Organization for Economic Cooperation and Development (see page 6 of this report). And we have been growing faster, which presumably should not be the case according to convergence theory (see Annex Table No. 1 of this OECD database). It also seems that Europe's economy is more likely to endure a double-dip recession. Bloomberg reports:

Europe’s economy may be coming unstuck from the global recovery as governments to the south of the region struggle to reverse budget deficits and consumers in the north pull back spending. After the 16-nation euro economy almost stagnated in the fourth quarter, data this week showed the weakness reaching into 2010. ...“Europe is where we see the biggest risk of a double dip at the global level,” said Julian Callow, chief European economist at Barclays Capital in London. “Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” ...“There are tentative signs that the U.S. economy may be pulling ahead from Europe,” Nelson said in a Feb. 23 report... “The sovereign debt crisis in Europe’s periphery reinforces drags on euro-area growth,” said Michael Saunders, an economist at Citigroup in London.
Irwin Stelzer, meanwhile, writes in the Washington Examiner about the same topic:

Europeans are comparing their close-to-zero growth rate in the last quarter of 2009 with our almost-6 percent growth. ...We are growing and they are not. ...Large numbers of shops in London are shuttered, students see no prospect of work when they graduate, and businessmen are groaning under rising tax burdens.

Thursday, February 25, 2010

Greetings from California

I spoke yesterday afternoon to the Constitutional Law Quarterly 37th Annual Symposium at Hastings Law School in San Francisco. The title of the event was "Waking from the California Dream: The Past, Present, and Future of California's Fiscal Constitution," and the discussion revolved around the state's fiscal crisis.

Unsurprisingly, I was the only pro-taxpayer speaker, with the other 15 or so speakers ranging from center-left to far-left. So it was a fair fight. Not because I had some special talent, but rather because the evidence is so overwhelming that California has taxed and spent itself into a fiscal cul-de-sac. It is the Greece of America (though Illinois is providing some stiff competition for that dubious honor).

But the facts did not have much impact on the other speakers, who said that the state's fiscal crisis exists because of Proposition 13, the supermajority tax-increase requirement, the initiative process, or some combination of the above.

I simply noted that California has very high tax rates, a bloated and expensive government bureaucracy, and one of the largest public sectors (as measured by government spending as a share of state economic output) in the country. This excellent report from the Pacific Research Institute has plenty of details.

The students who organized the conference took all the speakers to a nice dinner at the Asian Art Museum, where I did my best to rescue the ones at my table from wasted lives of statism. I suppose only time will tell whether I saved any souls.

The Greek Farce Continues

There doesn't seem to be much union in the European Union. Greek politicians are wetting their pants that Germany isn't bending over fast enough to provide bailout money, so they pulled out the Nazi card. I'm sure the Germans raped Greece during World War II, but that does not explain why German taxpayers are responsible for the fiscal incontinence of Greek politicians 60 years later. The Guardian reports:

Tens of thousands of striking Greek workers took to the streets today, some throwing stones at police, in a defiant show of protest against austerity measures aimed at averting the debt-plagued country's economic collapse. Riot police responded with teargas when, in sporadic bursts, masked youths charged them in Athens city centre. The violence coincided with a general strike that shut down public services and closed off Greece to the outside world. For trade unions the mass show of force was a warning shot to a government struggling to satisfy its eurozone partners with policies deemed vital for the nation's fiscal health while appeasing angry workers at home. ...The protests came against a backdrop of mounting Greek hostility towards the EU, with particular venom reserved for Germany, which has pressed for harder measures to be forced on Athens. Greece's political elite has been outraged and hurt by hard-hitting German media coverage of the debt crisis. The cover of a German magazine, Focus, which showed the Venus de Milo making a less than complimentary finger gesture under the headline "Swindlers in the eurozone" has triggered widespread fury. In an extraordinary tirade, the deputy prime minister, Theodore Pangalos, said Germany had no right to judge Greek finances after wreaking havoc on the economy during the four years that the country was under Nazi occupation in the second world war. Worse still, he said, Germany had failed to make adequate compensation. ...Berlin hit back with a tart reminder that Greece had received 115m deutschmarks in compensation by 1960. "I must reject these accusations," said Andreas Peschke, a spokesman at the German foreign ministry. Greece, he said, had also received around €33bn in aid from Germany "both bilaterally and in the context of the EU".

Wednesday, February 24, 2010

The Final Day Channeling Larry Kudlow

I've already received some reasonably positive feedback on Wednesday's show, though I don't think it was any better than Tuesday's performance.

I'd be delighted to get feedback. You can watch the segments here, here, here, here, and here.

Nanny State Alert

I can't believe I missed this stary from last October. The food Nazis in New York City have banned bake sales. This cripples fundraising for student groups, but that presumably is a small price to pay so that politicians get an opportunity for a few hollow sound bites about childhood obesity. Of course, if the politicians really want to do something about overweight kids, they could arrest the parents and destroy all televisions sets, video games, and computers in private homes. But maybe I shouldn't give them any ideas. The New York Times has the odious details:

There shall be no cupcakes. No chocolate cake and no carrot cake. According to New York City’s latest regulations, not even zucchini bread makes the cut. ...the Education Department has effectively banned most bake sales, the lucrative if not quite healthy fund-raising tool for generations of teams and clubs. The change is part of a new wellness policy that also limits what can be sold in vending machines and student-run stores, which use profits to help finance activities like pep rallies and proms. ...Unsurprisingly, the rationale is getting a cool reception among students. At Fiorello H. La Guardia High School on the Upper West Side, students are used to having bake sales several times a month. Now, Yardain Amron, a sophomore basketball player, laments that his team will not be able to raise money for a new scoreboard. Another La Guardia student, Eli Salamon-Abrams, 14, said that when the soccer team held a bake sale in May, his blueberry muffins sold out in 15 minutes. He said of the ban: “I think it’s kind of pointless. I mean, why can’t we have bake sales?” The new policy also requires that vending machines, which generate millions of dollars for school sports, be supplied with snacks such as reduced-fat Baked Doritos and low-sugar granola bars. A new vending machine contract is expected to be approved on Wednesday by the Panel for Educational Policy, the school oversight board. Student stores will be able to sell only approved snacks bought from the new vendor, rather than obtain the food themselves, as they once did. ...Department officials are suggesting that teams use walk-a-thons and similar activities as a way of raising money and doing something active.

George Will's CPAC Speech

Watch it here.

I Would Trade Five Congressional Republicans for Dan Hannan

We need effective, articulate, and principled lawmakers in Washington. I don't think many Republicans in DC understand the tax competition issue. And if they do, I doubt they could give either of these speeches.



I especially appreciate his defense of tax havens.

A Big Improvement for my Second Night Hosting the Kudlow Report

I gave myself a gentleman's C for my performance Monday. Last night's performance was much better, at least I think.

Watch here, here, here, here, here, and here and let me know what you think.

The first three clips are the most interesting (at least to me) since we're talking public policy. When we shift to talking about investments during the last half of the show, I don't have any special insight, though I do manage to cause a bit of controversy in the final segment.

Tuesday, February 23, 2010

Great Moments in International Bureaucracy

This gem was linked on Instapundit. According to the UK-based Telegraph, European taxpayers are getting ripped off to the tune of about $300,000 so the European Commission can send comic books about heroic bureaucrats to schools across the continent. You can't make this stuff up.

They are normally painted as faceless, grey Eurocrats ridiculed for endless deliberations on the bendiness of bananas or the amount of light that bulbs should give off. But now European Commission officials have had their revenge – by producing a lavish comic book portraying themselves as heroes battling to save the world. More than 300,000 copies of the glossy hardback – printed in five languages at a cost of £200,000 – are being sent to homes and schools in the UK and across the Continent. The graphic novel follows the 'adventures' of Zana, Max et al at the European Commission's Humanitarian Aid Department – known as ECHO – as they struggle to secure funding for the fictional sate of Borduvia, which has been devastated by an earthquake. ...The book's heroine Zana, a feisty, beautiful aid worker whose uniform consists of a safari jacket with the European Union flag emblazoned upon it, is then dispatched to Borduvia by bearded and besuited bureaucrats to sort out the humanitarian crisis. ...Zana's mission is to write daily reports – known in the business as 'sitreps' – that will secure funding for its worst-hit region Kellow and the rebel-held stronghold deep in the Urgi Mountains. ...The total cost of the book to print is 225,000 euros (£195,000) and is sent out for free at a further cost to the taxpayer.

My First Night Hosting Kudlow's Show on CNBC

I can't figure out how to embed the videos from the CNBC website, but you can watch me here, here, here, here, and here.

So how did I do? I felt a bit wooden in the beginning, but then got into the flow of things. My only faux pas occured when my co-host asked me a question in one of the segments, but I assumed he said my name by accident and meant the question for one of the guests.

Regarding tonight and tomorrow night, there is no way to watch the show live online, so you'll have to wait for the video to get posted. Unless you get CNBC World, of course.

Monday, February 22, 2010

So-Called Stimulus Spending Means Fewer Jobs, Part II

To follow up on the post from Saturday, here's a column by John Lott, which makes the very sensible point that shifting resources from the productive sector of the economy to the government necessarily will cause dislocation in the short run. There also would be inefficiency in the long run, but that's a separate issue:

...the stimulus created higher unemployment. In fact, my columns in this space predicted that during at the beginning of February 2009 that would be the case. Moving around a trillion dollars from areas where people would have spent it to areas where the government wants to spend it will move a lot of jobs away from those firms that are losing the money to those who are now favored by the government. Since people won't instantly move from one job to another, there will be a temporary increase in unemployment.

Should Banks Be Forced by the Government to Spy on Consumers?

There's a principled Fourth Amendment argument against anti-money laundering laws. In this video, however, I mostly focus on the cost-benefit issue, explaining that the fight against crime will be more effective if law enforcement is not forced to look for a needle in a haystack.

Sunday, February 21, 2010

Exciting News (though with a big asterisk)

For the next three days, I'll be guest-hosting The Kudlow Report on CNBC.

That's the great news. The not-so-great news is that the show is pre-empted inside the United States by olympic hockey. Nonetheless, it's quite an honor to be sitting in for Larry.

I'll post an update later today with more information.

Obama's Proposal to Reduce Jobs in America

The President presumably does not want to destroy jobs, but I explain in this Cato podcast that this will be the result if he succeeds in further tilting the playing field against American multinationals.

If This Is the GOP Future, They Will Be a Minority Party

Did Republicans lose in 2006 and 2008 because they were too far to the left or too far to the right? And which approach should they adopt if they want to regain power in 2010 and 2012? Some people think the GOP needs to be more moderate. David Frum, for instance, says Republicans need to mimic David Cameron in the United Kingdom. And at his website, Frum highlights this (rather disturbing, as I will explain below) video of Cameron making a pitch to the British people.



First, the good news about the video. It is possible that Cameron intends to do good things about education and welfare policy. Unfortunately, it's also possible that he intends to do bad things. But we don't know since there is nothing but rhetoric. Speaking of rhetoric, it is troubling that he also has lots of language about a "fair" society and the gap between rich and poor. This doesn't necessarily mean he intends to push bad policy. A policy of smaller government and free markets, after all, will boost economic growth and help poor people climb the ladder. Shrinking government also will reduce the power of special interests, which will make society more fair. But it's also possible - and perhaps more likely - that he is using this rhetoric to signal support for more redistribution.

What is most troubling, though, is that Cameron sides with government and against taxpayers whenever he gets specific about policy. About one minute into the video, he endorses the minimum wage and higher fuel subsidies. Fifteen seconds later, he wants more redistribution for food programs. The worst proposal comes around the 2:50 mark, when he endorses wage indexing instead of price indexing for the U.K.'s version of Social Security (which would be grossly irresponsible and undermine one of the best achievements of Margaret Thatcher). Last but not least, he then endorses more spending on government-run healthcare.

These proposals are all bad policy, but they're also bad politics. If an election is decided on the basis of which party is more excited and more sincere about redistribution, that benefits left-wing parties. That doesn't mean that a (supposedly) right-wing party will never win an election. Indeed, Gordon Brown may very well lose to Cameron later this year. But that will simply be a case of the electorate rejecting an incumbent party for doing a terrible job. There will be no mandate for better policy. Indeed, it appears that Cameron wants to be like Obama - a big-spending politicians who takes over from another big-spending politician. In the long run, this is a recipe for the Tories to be a minority party. And if Republicans follow the same approach, they also will be a minority party.

One final comment. It should go without saying that right-leaning parties should always be figuring out better ways of selling the message of liberty, freedom, prosperity, and responsibility. And they should be finding the candidates who are best able to articulate that message in an optimistic, forward-looking way to average voters. But that's not what Cameron represents. From what I can tell, he's Richard Nixon with a smile.

P.S. Cameron also has surrendered to the left on the global warming/climate change issue, though maybe the absence of any rhetoric in this video is an indication that he realizes the tide has turned and there is nothing to be gained electorally by imposing that particular piece of awful policy.

P.P.S. And he has refused to say that he will undo Gordon Brown's reckless decision to raise the top tax rate from 40 percent to 50 percent.

Just Because Democrats Are Terrible, that Doesn't Mean Republicans Are Good

Howie Rich has a very good column at Townhall.com. He asks whether Republicans have learned any lessons during their time in the minority, specifically whether they recognize that bloated and wasteful spending under Republicans is just as bad as bloated and wasteful spending under Democrats:

The GOP’s new revisionist message was summed up in a billboard that appeared recently on Interstate 35 in Wyoming. “Miss me yet?” a smiling picture of former President Bush asks passing motorists. In a word? “No.” What this theory of “Republican revisionism” lacks is even a tangential basis in fact. That’s because Republicans – at least prior to the election of a Democratic Congress in 2006 and a Democratic President in 2008 – were engaged in precisely the same policies they now spend all of their time railing against. ...Republicans are no strangers to massive government overreaching. For example, President Bush responded to the September 11 terrorist attacks by creating a huge new government bureaucracy... Meanwhile, he supported the unconstitutional suppression of free speech by signing so-called “campaign finance” reform, dramatically stifling the ability of the public to criticize incumbent politicians. ...Bush and his cronies loved pork barrel spending, too. In 2005 – over the strenuous objections of taxpayer advocates – he signed a massive $286 billion transportation bill that included 6,371 pet projects inserted by Republican and Democratic lawmakers. ...Bush and his GOP allies also fought to create new entitlement spending – including a prescription drug benefit to Medicaid that has cost taxpayers hundreds of billions of dollars. They federalized education with No Child Left Behind... Republicans are quick to forget that Bush is on the hook for a considerable portion of the unsustainable spending that is currently driving our debt even further into the stratosphere. Indeed, Bush cemented his anti-free market legacy in late 2008 with the passage of the Troubled Asset Relief Program (TARP) and tens of billions of dollars worth of automotive bailouts – additional examples of his kneejerk tendency to resolve every crisis faced by the nation with an unprecedented expansion of government power and taxpayer debt. Was Bush a better steward of your tax dollars than Obama? Yes – but that’s the problem. Getting mugged worse the second time around doesn’t absolve the first thief of his culpability.

Saturday, February 20, 2010

So-Called Stimulus Spending Means Fewer Jobs, Part I

The Administration is arguing that last year's $800 billion spending bill has created jobs. But since the unemployment rate is higher and the total number of Americans with jobs has fallen, the White House can only make this claim by arguing that the unemployment rate would be even higher without all the new spending. This argument is seductive to those (such as journalists) who don't understand that government can't dump money into the economy without first taking money out of the economy. But there are more reasons why so-called stimulus spending is bad for the economy and job creation. Writing for Investor's Business Daily, Alan Reynolds of the Cato Institute points out that the recession lasted longer than average and that much of the spending was for programs that subsidize people for not working:

President Obama seized on the one-year anniversary of the American Recovery and Reinvestment Act (ARRA) as an opportunity to take credit for the belated and tenuous economic recovery. But the economy always recovered from recessions, long before anyone imagined that government borrowing could "create jobs." And we didn't used to have to wait nearly two years for signs of recovery, as we did this time. A famous 1999 study by Christina Romer, who now heads the Council of Economic Advisers, found the average length of recessions from 1887 to 1929 was only 10.3 months, with the longest lasting 16 months. ...The bill was launched last year amid grandiose promises of "shovel ready" make-work projects. In reality, as the CBO explains, "five programs accounted for more than 80% of the outlays from ARRA in 2009: Medicaid, unemployment compensation, Social Security ... grants to state and local governments ... and student aid." In other words, what was labeled a "stimulus" bill was actually a stimulus to government transfer payments — cash and benefits that are primarily rewards for not working, or at least not working too hard.

Great Moments in (Anti) Stimulus

There were many reasons to oppose last year's so-called stimulus legislation, especially the fact that government is too big and it makes no sense to go even faster in the wrong direction. But perhaps one of the most compelling reason is that politicians and bureaucrats inevitably do really stupid things because the federal budget is a racket designed to funnel the maximum amount of money to powerful interest groups. Here's a great example from a story I saw linked on Kausfiles.com. A city in New Hampshire wanted to stick its snout in the trough in order to subsidize a water treatment plant, but eventually decided to reject the money because the local government's out-of-pocket costs actually would increase - primarily thanks to corrupt rules designed to line the pockets of union bosses, but also because of protectionist requirements and a mind-boggling $100,000 of paperwork expenses:

As stimulating as it might have sounded at the time, the city recently declined $2.5 million from the American Recovery and Reinvestment Act for its new water treatment plant because federal wage regulations would have forced the city to pay more for the project. ...the low bidder — Penta Corporation — presented final cost of $21 million with the stimulus funds and $17.3 million without. So the city said thanks, but no thanks, to the stimulus funds. "It just didn't make sense," said Deputy Public Works Director David Allen. "It was going to cost us more money to take the money." Stimulus funds mandate workers are paid using Davis-Bacon Wage Determination, which sets the pay scale for workers on federal projects and added $2.5 million to the bottom line. The "Buy American" provision would've added another $500,000 and Allen said there would have been significant administrative costs — upwards of $100,000 — for the city to track it the way the government requires over the course of the two-year project.

Bashing the VAT...with an Unexpected Ally

With the VAT becoming an ever-bigger issue, I discuss the issue on CNBC. Interestingly, my opponent winds up agreeing with me.

Friday, February 19, 2010

The Greek Saga

Here are a few interesting links to keep you informed about the fiscal crisis in Greece.

Richard Rahn has a nice comparison in the Washington Times of Poland's good policy and Greece's profligacy.

Reuters has a story about some new reforms in Greece, including a very Orwellian proposal to track everyone's purchases by banning cash transactions above 1,500 euro.

And the Associated Press has a story about gas shortages because bureaucrats at the Customs office went on strike to protest a proposal by the government to give them only one (rather than two) extra month(s) of pay per year.

Tax Havens Are Not Money Laundering Centers

Demagogues such as Senator Carl Levin, as well as many other politicians and journalists, often assert that low-tax jurisdictions are havens for dirty money and terrorist financing. From a theoretical perspective, this does not make sense. So-called tax havens have a big incentive to avoid scandal since they are much more vulnerable to reputational risk. Just imagine what would happened, after all, if the 9-11 terrorists had used a bank in the Bahamas instead of a bank in Florida. Critics of low-tax jurisdictions automatically would have assumed that the bank was complicit and the entire financial services industry in the Bahamas would have been crippled - or even destroyed. But because the terrorists used American banks (as well as banks in high-tax European nations and the Middle East), there was not a knee-jerk reaction. People understood that the bank tellers and managers had no way of knowing that the flight school students were actually lunatics.

But this does not stop the anti-tax haven smear campaign. Low-tax jurisdictions are viewed as a threat by politicians since it is much harder to impose bad tax policy in a world where tax competition is allowed to flourish. This is why tax havens are attacked whenever something bad happens. If there is a terrorist attack, blame tax havens. If there is a financial crisis, blame tax havens.

With this in mind, a new report from the University of Basel's Institute of Governance did some real research and came up with a list of nations where there actually is a high risk of money laundering and terrorist financing. As the map below indicates, only one so-called tax haven is among the 28 countries listed, and that nation was in the lowest-risk category.

The So-Called Stimulus Was a Flop

On the one-year anniversary of Obama's stimulus scam, I appeared on the Fox Business Network to explain why squandering $800 billion was bad for the economy.

Thursday, February 18, 2010

A Value-Added Tax Is Not the Answer...Unless the Question is How to Finance Bigger Government

While admitting that spending restraint is the ideal approach, Tyler Cowen of Marginal Revolution asks whether a value-added tax (VAT) might be the most desirable of all realistic options for dealing with an unsustainable budget situation.

Read his post for yourself, but I think a fair summary is that he is basically saying that a) there will be a crisis if we don't do something about future deficits, b) a crisis will result in very bad policy, and c) if we support a VAT now, we will at least be able to extract concessions from the other side.

I have no idea whether there will be a future crisis, but I think the rest of Tyler's argument is wrong.

But before explaining my position, let's start by stating what I assume to be our mutual objective, which is to control the size of government. We all agree that there is a problem because government is too big now, and it is projected to get even bigger because of the built-in growth of entitlement programs. One symptom of growing government is deficits, which are very large today and will be even bigger in the near future as more and more baby boomers retire and push up costs for Social Security, Medicare, and Medicaid.

Our side (broadly speaking) wants to solve the budgetary situation by restraining the growth of government. One proposed solution is Congressman Paul Ryan's Roadmap plan, which would reform entitlements and curtail other programs so that the long-term burden of federal spending is reduced to less than 20 percent of GDP. Since long-term federal tax revenues under current law - even if the 2001 and 2003 tax cuts are made permanent - are expected to be about 19 percent of GDP, this solves the budet problem (the tax reform component of the Roadmap includes a VAT, which is a poison pill in an otherwise excellent plan, but let's set that aside for another day).

The left, by contrast, generally wants to let federal spending consume ever-larger shares of economic output, and they believe that increasing the tax burden is the right way of keeping the deficit from getting too large. No statist has put forth a detailed plan to match Rep. Ryan, but several high-ranking Democrats have made no secret about their desire for a VAT (see here, here, and here). And everyone agrees that a VAT is capable of extracting a lot of money from the productive sector of the economy.

These two visions are fundamentally incompatible, which helps to explain why there is a standoff. The bad guys do not want to control the size of government and the good guys do not want to raise taxes. But now we have to add one more piece to the puzzle. While gridlock normally is a good result, inaction to some degree favors the other side because entitlement programs automatically expand. The helps to explain why Tyler (with reluctance) thinks that it may be best to acquiesce to a VAT now rather than to wait for a fiscal crisis.

Now let's explain why Tyler is wrong. First, it is far from clear that surrendering to a VAT now will result in better (less worse) policy than what will happen during a crisis. It certainly is true that some past crises have led to terrible policy, such as the failed policies of Hoover and Roosevelt in the 1930s or the more recent Bush-Paulson-Obama-Geithner TARP debacle. But at other points in time, a crisis atmosphere has paved the way for better policy, with Reagan's presidency being the most obvious example.

The wait-for-a-crisis strategy clearly is a bit of a gamble, but even if we lose, we get a VAT in the future rather than a VAT today. So what's the downside? Tyler and others might say that the future legislation in the midst of a crisis could be a vehicle for other bad provisions, but he offers no evidence for this proposition. And it may be the case that the other side would be forced to add good provisions instead. Moreover, the lack of a VAT in the period between today and the future crisis might help lead to some much-needed spending restraint.

What about Tyler's argument that the good guys could extract some concessions from the other side by putting a VAT on the table. This is horribly naive. Even though George Mason University is less than 20 miles from Washington, and even though Tyler is a renassaince man with many talents, he does not understand how Washington really works.

Imagine there is a budget summit where politicians from both sides get together to work on this supposed deal. Here are the inevitable ground rules - and the consequences they will produce:

1. The deal will be 50 percent spending cuts and 50 percent tax increases, but the supposed spending "cuts" will be nothing more than reductions in already-legislated increases. The tax increases, by contrast, will be on top of all the additional revenue that is already exepected under current law (not a trivial matter since receipts will be $1.5 trillion higher in 2015 than they are today according to OMB). For proponents of limited government, using the "current services baseline" as a benchmark in budget negotiations is like playing a five-minute basketball game after spotting the other team a 20-point lead.

2. All spending and revenue decisions will be examined through the prism of CBO income distribution tables, and the left will successfully insist that nothing is done to make the tax code less progressive. But since a VAT is a proportional tax, the only way of preserving overall progressivity is to raise tax rates on those wicked and evil rich people and/or to massively increase "refundable" tax credits (what normal people call income redistribution). Any proposal to lower income tax rates or eliminate the corporate income tax, as Tyler envisions, would be laughed out of the room (though Democrats will offer a fig leaf or two in order to seduce a sufficient number of gullible Republicans into supporting a terrible agreement, and that might include a cosmetic change to the corporate tax regime).

3. Many of the supposed spending cuts, for all intents and purposes, will be back-door tax increases on saving and investment. More specifically, a big chunk of the supposed spending cut portion of a budget deal will be from means-testing entitlement programs. This sounds good. After all, who wants to send a Social Security check to Bill Gates when he retires? But consider how such a system actually will work. The government will say that people with income (and/or assets) above a certain level are ineligible for some or all of the benefits available to less-fortunate retirees. From an economic persepective, this is very much akin to a higher tax rate on people who save and invest during their working years. And since means testing would only generate substantial budgetary savings if it applied to millions of regular people in addition to Bill Gates, we would wind up with a system that created big penalties on middle-class families that were dumb enough to save and invest.
I've already pontificated enough for one blog post, so let me summarize by stating that Tyler's approach, while not unreasonable, is about how to lose gracefully. Even if his strategy works perfectly, the result is bigger government. I'd much rather fight. If you want some inspiration for the battle, watch this video. If you haven't had enough of me already, here's my video explaining why the VAT is a horrible idea.

The Global Ranking that Really Matters

The United States may not have the freest economy in the world. And America may not be the best place to live. But we do have the most hotties, at least according to a poll of British travelers that was linked on Instapundit. Having done a bit of travel myself, I'd put Estonia at the top of the list for those who prefer blondes and Montenegro for those who prefer brunettes. But what do I know? Here's a report on the survey from the Daily Telegraph:

The United States, home to George Clooney and Jessica Simpson, came top in a poll of more than 5,000 globe-trotting Britons. In second place was Brazil while Spain, which boasts Hollywood actress Penelope Cruz as one of its natives, was third. Blonde, tanned surfers of Australia saw it voted into fourth place, while Italy came fifth. Sexy Swedes, such as model Victoria Silvstedt, helped it into sixth spot, but England only made it into seventh place in the poll. India was eighth, France ninth, and Canada finished off the top 10. ...A spokeswoman for www.OnePoll.com, which carried out the study, said: ''America has got a lot on offer and boasts some of the sexiest people on the planet.

More Good News on the Climate Scam

One of the many reprehensible features of Washington is how companies climb into bed with government. They do this either because they want legislation to get undeserved wealth by screwing consumers or competitors, or they do it because they think they the government is going to do something bad to them and they hope to reduce the pain by acting like cringing curs. This is a good description of the global-warming/climate-change/whatever-they're-calling-it-now issue, where many big companies are part of a coalition to support the Administration's statist agenda. The good news is that this coalition is now beginning to fall apart, as thee big companies have decided that having a "seat at the table" isn't such a good idea if it's Thanksgiving and you're a turkey. The Wall Street Journal reports:

Three big companies quit an influential lobbying group that had focused on shaping climate-change legislation, in the latest sign that support for an ambitious bill is melting away. Oil giants BP PLC and Conoco-Phillips and heavy-equipment maker Caterpillar Inc. said Tuesday they won't renew their membership in the three-year-old U.S. Climate Action Partnership... "We think there's momentum to get [a climate bill] done," USCAP spokesman Tad Segal said. "President [Barack] Obama's State of the Union address made it clear the administration is behind us." But experts said the companies' decision to withdraw from USCAP is a sign the politics of climate change is shifting in Washington. When Mr. Obama took office, Congress appeared to have momentum for a climate bill that would push the economy toward lower-carbon alternatives. But as the economy soured, support waned.

Wednesday, February 17, 2010

Is the Mount Vernon Statement Disappointing?

Many of the leaders of the conservative movement just released the Mount Vernon Statement, which is supposed to identify a common set of principles. It culminates with these words:

A Constitutional conservatism based on first principles provides the framework for a consistent and meaningful policy agenda. It applies the principle of limited government based on the rule of law to every proposal. It honors the central place of individual liberty in American politics and life. It encourages free enterprise, the individual entrepreneur, and economic reforms grounded in market solutions. It supports America’s national interest in advancing freedom and opposing tyranny in the world and prudently considers what we can and should do to that end. It informs conservatism’s firm defense of family, neighborhood, community, and faith.
These are fine words, but what do they achieve? Should there be a no-tax increase pledge? A commitment to reduce the size of government, or to shut down agencies, programs, and departments that are not proper functions of the federal government?

To be sure, a statement of principles is not supposed to be a policy platform, so perhaps it's not the right place to call for, say, replacing a bankrupt Social Security system with individual accounts.

On the other hand, it isn't too much of a stretch to imagine President Obama's speechwriters putting very similar language in one of his speeches. So if the principles of the conservative movement are so vague that collectivists and statists can pretend to support them, what exactly is the point?

Tuesday, February 16, 2010

Class Warfare Tax Policy Wreaks Havoc with New Jersey Economy

Barack Obama wants higher tax rates on the so-called rich, including steeper levies on income, capital gains, dividends, and even death! Along with other greedy politicians in Washington, he acts as if successful taxpayers are like sheep meekly awaiting slaughter. In reality, class-warfare tax policies generally backfire because of the five reasons outlined in this video:



A new study from Boston College provides additional evidence about the consequences of hate-and-envy tax policy. The research reveals that high tax rates in New Jersey have helped cause wealthy people to leave the state, leading to a net wealth reduction of $70 billion between 2004 and 2008. Wealth and income are different, of course, so it is worth pointing out that another study from 2007 estimated that the state lost $8 billion of gross income in 2005. That's a huge amount of income that is now beyond the reach of the state's greedy politicians. Here's a report from the New Jersey Business News:

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest. Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced. ...The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes. “This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey. ...In New Jersey, the top 1 percent of taxpayers pay more than 40 percent of the state’s income tax, he said. “That’s probably why we have these massive income shortfalls in the state budget, especially this year,” he said. Until the tax structure is improved, he said, “we’ll probably see a continuation of the trend, until there are no more high-wealth individuals left.” He added the report reinforces findings from a similar study he conducted in 2007 with fellow Rutgers professor Joseph Seneca, which found a sharp acceleration in residents leaving the state. That report, which focused on income rather than wealth, found the state lost nearly $8 billion in gross income in 2005. ...Ken Hydock, a certified public accountant with Sobel and Company in Livingston, said in this 30-year-career he’s never seen so many of his wealthy clients leave for "purely tax reasons" for states like Florida, where property taxes are lower and there is no personal income or estate tax. In New Jersey, residents pay an estate tax if their assets amount to more than $675,000. That’s compared to a $3.5 million federal exemption for 2009. Several years ago, he recalled, one of his clients stood to make $60 million from stock options in a company that was being acquired by another. Before he cashed out, however, the client put his home up for sale, moved to Las Vegas, and “never stepped foot back in New Jersey again,” Hydock said. “He avoided paying about $6 million in taxes,” he said. “He passed away two years later and also saved a huge estate tax, so he probably saved $7 million.”
Still not convinced that high tax rates are causing wealth and income to escape from New Jersey? The Wall Street Journal wrote a very powerful editorial about the Boston College study, noting that New Jersey "...was once a fast-growing state but has now joined California and New York as high-tax, high-debt states with budget crises." But the most powerful part of the editorial was this simple image. Prior to 1976, there was no state income tax in New Jersey. Now, by contrast, highly-productive people are getting fleeced by a 10.75 percent tax rate. No wonder so many of them are leaving.

The Fable of the Ant and the Grasshopper, the PC Version

TRADITIONAL VERSION

The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the ant is warm and well fed.

The grasshopper has no food or shelter, so he dies out in the cold.

MORAL OF THE STORY: Be responsible for yourself!

------------------------------------------------------------------------------

OBAMA-REID-PELOSI VERSION

The ant works hard in the withering heat and the rain all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while he is cold and starving.

CBS, NBC, PBS, CNN, and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.

America is stunned by the sharp contrast.

How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?

Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, 'It's Not Easy Being Green.'

ACORN stages a demonstration in front of the ant's house where the news stations film the group singing, "We shall overcome." Then Rev. Jeremiah Wright has the group kneel down to pray to God for the grasshopper's sake.

President Obama condemns the ant and blames capitalism for the grasshopper's plight.

Nancy Pelosi & Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.

Finally, the EEOC drafts the Economic Equity & Anti-Grasshopper Act retroactive to the beginning of the summer.

The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar and given to the grasshopper.

The story ends as we see the grasshopper and his free-loading friends finishing up the last bits of the ant's food while the government house he is in, which, as you recall, just happens to be the ant's old house, crumbles around them because the grasshopper doesn't maintain it.

The ant has disappeared in the snow, never to be seen again.

The grasshopper is found dead in a drug related incident, and the house, now abandoned, is taken over by a gang of spiders who terrorize the ramshackle, once prosperous and once peaceful, neighborhood.

The entire Nation collapses bringing the rest of the free world with it.

MORAL OF THE STORY: If you choose to become a parasite, don't kill your victim.

Bureaucrats vs. Taxpayers, Part X

Saw something very interestin on the National Review blog. We finally have some good news in the battle between government workers and the serfs who support them (i.e., taxpayers). A Rhode Island town, frustrated by the intransigence of the teacher union, decided to fire the entire staff of the local high school. The union was upset that teachers were being asked to work harder, even though teachers make more than three times as much as the town's median income. Hopefully, this is a sign that taxpayers have finally become fed up and state and local politicians will decide that they need to side with the people pulling the wagon rather than those riding in the wagon. Here's an excerpt from the Providence Journal:

Under threat of losing their jobs if they didn’t go along with extra work for not a lot of extra pay, the Central Falls Teachers’ Union refused Friday morning to accept a reform plan for one of the worst-performing high schools in the state. The superintendent didn’t blink either. After learning of the union’s position, School Supt. Frances Gallo notified the state that she was switching to an alternative she was hoping to avoid: firing the entire staff at Central Falls High School. In total, about 100 teachers, administrators and assistants will lose their jobs. Gallo blamed the union’s “callous disregard” for the situation, saying union leaders “knew full well what would happen” if they rejected the six conditions Gallo said were crucial to improving the school. ...In an interview, Jane M. Sessums, union president, said the union intends to fight the terminations, although she was not ready to say how.

Monday, February 15, 2010

England's Absurd - and Intrusive - Nanny State

A story from the U.K.'s Daily Mail shocked me for two reasons. First, a supermarket has announced that it won't offer valuable savings on infant formula because it violates European law. Apparently, there are lots of bored bureaucrats in Brussels who apparently have nothing better to do than concoct such inane policies. That was bad enough, but the story also reveals that the government sends bureaucrats to the homes of new mothers to badger them back in the workforce (presumably to pay taxes to support needless bureaucrats). Can anyone from England tell me if this is a mandatory program? Do families have to accept visits from these baby-ogling bureaucrats?

New mothers are being denied valuable money saving offers on infant milk formula because of 'politically correct' pressure to breast feed. Boots says it cannot award loyalty points on milk for newborns because it is against EU law to 'promote' bottle feeding. ...Under European legislation, Boots and other stores with loyalty schemes can be penalised by trading standards officers for 'incentives' to buy formula milk for babies up to six months. ...Health visitors sent to help new mothers have been told to ask them when they will go back to work. They have been instructed to find out about job plans as part of routine checks on the health of the baby. The pressure on mothers to think about an early return to work has come as part of a Government drive to widen the role of health visitors. But their union last night called the edict 'unethical', while mothers said the intrusive questioning made them feel guilty for wanting to stay at home to look after their families.

More TSA Stupidity

The bureaucrats at the TSA must be trying to surpass their colleagues at various motor vehicles departments in the race for bone-headed and inane bureaucracy. Here's a story from Philadelphia about abusive treatment of a 4-year old kid with leg braces. Even though I think it's ridiculous, I can understand the rule about not allowing metal to go through without more inspection. But what possible purpose does it serve not to allow a parent to carry a child through?

This happened to Bob Thomas, a 53-year-old officer in Camden's emergency crime suppression team, who was flying to Orlando in March with his wife, Leona, and their son, Ryan. Ryan was taking his first flight, to Walt Disney World, for his fourth birthday. The boy is developmentally delayed, one of the effects of being born 16 weeks prematurely. His ankles are malformed and his legs have low muscle tone. In March he was just starting to walk. ...The boy's father broke down the stroller and put it on the conveyor belt as Leona Thomas walked Ryan through the metal detector. The alarm went off. The screener told them to take off the boy's braces. The Thomases were dumbfounded. "I told them he can't walk without them on his own," Bob Thomas said. "He said, 'He'll need to take them off.' " Ryan's mother offered to walk him through the detector after they removed the braces, which are custom-made of metal and hardened plastic. No, the screener replied. The boy had to walk on his own. ...Bob Thomas was furious. He demanded to see a supervisor. The supervisor asked what was wrong. "I told him, 'This is overkill. He's 4 years old. I don't think he's a terrorist.' " The supervisor replied, "You know why we're doing this," Thomas said. Thomas said he told the supervisor he was going to file a report, and at that point the man turned and walked away.

Watch and Laugh

Saw this linked on Instapundit. It's poetic justice when scam artists and moochers get mocked.

The United Kingdom Is Screwed No Matter Who Wins the Next Election

Prime Minister Gordon Brown has done a terrible job and is widely unpopular.. But even if the opposition party wins control later this year, it may not make much of a difference. The leader of the Tory party, David Cameron, is a British version of a RINO. He has not pledged to reduce the burden of government spending (which, as the chart illustrates, has skyrocketed). He has not pledged to reverse Brown's dramatic increase in the top tax rate. And now the Conservative Party is expressing support for a huge increase in the value-added tax. The UK-based Times reports:

A rise in VAT is looming whichever party wins the general election, as Labour and the Conservatives draw up plans to balance Britain’s books. Alistair Darling and George Osborne, the Shadow Chancellor, are both considering raising VAT to as high as 20 per cent — the European average — from the current rate of 17.5 per cent, The Times has learnt. ...One City source close to the Tory tax team said: “There is a view across the Conservative Party that VAT is going to have to go up.” The Chancellor is also keenly aware that Britain needs to retain the confidence of the credit-rating agencies. He has privately ruled out either raising income taxes or increasing the scope of VAT, but has deliberately left open the possibility of increasing the sales tax in the next Parliament.

Sunday, February 14, 2010

Why I'm Proud to Be an American

Mark Steyn has a typically witty column that covers everything from the infamous Audi Superbowl commercial to the kid who was stopped by TSA for having Arabic-language flash cards. But he closes his piece with this powerful statement:

...the difference between America and Europe is that, when the global economy nosedived, everywhere from Iceland to Bulgaria mobs took to the streets and besieged Parliament demanding to know why government didn’t do more for them. This is the only country in the developed world where a mass movement took to the streets to say we can do just fine if you control-freak statists would just stay the hell out of our lives, and our pockets. You can shove your non-stimulating stimulus, your jobless jobs bill, and your multi-trillion-dollar porkathons.
There are obviously millions of Europeans who want to be left alone and millions of Americans who like sticking their snouts in the public trough, but Mark's observation is generally true. The United States is the only major nation that still has a libertarian tradition of individual liberty and personal responsibility. This is why we need to stop government-run healthcare and roll back the nanny state. Yes, it is bad that bigger government undermines growth and prosperity, but the real danger is that collectivism will destroy the American soul.

George Will Condemns Obama's Dependency Agenda

The healthcare fight in Washington is not about access to doctors and hospitals, or the cost of those services. It is an effort by the left to create more dependency on government. George Will examines this theme in a Washington Post column:

Killing this small program, which currently benefits 1,300 mostly poor and minority children, is odious and indicative. It is a small piece of something large -- the Democrats' dependency agenda, which aims to multiply the ways Americans are dependent on government. Democrats, in their canine devotion to teachers unions, oppose empowering poor children to escape dependency on even terrible government schools. ...For congressional Democrats, however, expanding dependency on government is an end in itself. They began the Obama administration by expanding the State Children's Health Insurance Program. It was created for children of the working poor but the expansion made millions of middle-class children eligible -- some in households earning $125,000. The aim was to swell the number of people who grow up assuming that dependency on government health care is normal. ...Democrats' "reforms" of the financial sector may aim to reduce financial institutions to dependent appendages of the government. By reducing banks to public utilities, credit, which is the lifeblood of capitalism, could be priced and allocated by government. ...Many Democrats, opposing the Supreme Court, advocate new campaign finance "reforms" that will further empower government to regulate the quantity, timing and content of speech about government. Otherwise voters will hear more such speech than government considers good for them.

Saturday, February 13, 2010

Super Waste at the Super Bowl

The Union Leader newspaper in New Hampshire has a correct view of the absurd $130 million "census awareness budget," inlcuding the reprehensible decision to squander $2.5 million on an ad during the Super Bowl. It's bad enough that the Census has evolved into an exercise in nanny-state intrusion, rather than the simple head-counting exercise as our Founders envisioned. But it adds insult to injury (or should it be injury to insult?) that our tax dollars are being wasted to publicize the exercise. Anybody want to guess whether the public relations agency that got the contract for this boondoggle donated money to Obama?

Did you see that Super Bowl ad for the U.S. Census? If not, too bad, because you paid $2.5 million for it. Maybe you can catch it on YouTube. If you think that's outrageous, it gets worse. The $2.5 million is just 1.9 percent of the government's $130 million "census awareness budget." Oh, yes. Just in case you didn't know that Census Bureau workers will be coming to your home this year to do what they have done every 10 years for more than two centuries, Washington is spending $130 million of your money to tell you. ...It's also par for the course in a Washington so awash in money that $130 million isn't considered serious spending, and yet the government still manages to outspend revenues by $1.6 trillion.

The Obamacare Fight Is Not Over

Even though the American people don't want government-run healthcare, and even though Democrats are very nervous after losing a supposedly-safe Senate seat in Massachusetts, Obamacare is not dead. The Democrats still have huge majorities in the House and Senate and the White House clearly is trying to put the GOP back on the defensive. Exhibit A is the President's invitation for a televised healthcare summit on February 25. Exhibit B is the fact that the Congressional Budget Office has greased the skids by concocting preposterous estimates that government-run healthcare will reduce the budget deficit. This may seem like meaningless wonkery, but it could allow the Democrats to use the "reconciliation" process to impose Obamacare with just 51 votes in the Senate. Here are two reminders of why it is utterly absurd to think that a giant new entitlement program will reduce red. First, we have an excerpt from a Wall Street Journal column about how the "cost curve" is bending up rather than down. Second, we have a Center for Freedom and Prosperity video that looks at the evidence confirming that government-run healthcare will be a budget buster:

Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, reports that under his analysis national health spending will rise under the bills by $222 billion over the next 10 years. In other words, ObamaCare really does "bend the cost curve"—up. Even that estimate exists only on paper, as Mr. Foster has the honesty to admit. Because "most of the coverage provisions would be in effect for only six of the 10 years of the budget period, the cost estimates shown in this memorandum do not represent a full 10-year cost for the proposed legislation," he writes. The report is punctuated by phrases like "unrealistic" and "doubtful," and Mr. Foster adds that "the scope and magnitude of these changes are such that few precedents exist for use in estimation." ...ObamaCare is "paid for" only in the sense that Medicare's payments to doctors are assumed in the bill to be cut by more than 20% this spring and even deeper after that, which will never happen in practice. ...As for the White House's promise that it will reduce health spending painlessly by cutting "waste," Mr. Foster isn't buying it. He writes that "we find the language as it now reads is not sufficiently specific to provide estimates." The report also calls out the new entitlement program for long-term care, which is included only because it will start collecting premiums five years before it starts paying benefits. In return for this accounting gimmick, the fisc will be saddled with a program that Mr. Foster estimates will be bankrupt by 2025.

Two More Great Gun Control Posters

I'm told these posters are created by a guy named Oleg Volk. All I know is that I got an email with a bunch of them. The two I posted earlier and these two are my favorites.


Friday, February 12, 2010

Switzerland's Strong Human Rights Laws Should be Emulated, not Persecuted

In a rational world, Switzerland would be a role model for other nations. It is quite prosperous thanks largely to a modest burden of government. There is remarkable ethnic and religoius diversity, but virtually no tension because power is decentralized (sort of what America's Founders envisioned for the United States). Yet despite these - and many other - attractive features, Switzerland is being persecuted because of strong human rights laws that protect financial privacy. Money-hungry politicians from other nations resent Swtizerland's attractive policies, and they would rather trample Swiss sovereignty rather than fix their own oppressive tax laws. An official from the Swiss Bankers Association provides some background in a New York Times column:

In Switzerland, this tradition of treating a client’s financial affairs in confidence became law in 1934 when it was codified in Article 47 of the country’s first-ever federal banking act as a contemporary reaction to the economic crisis, various domestic political considerations and well-publicized cases of espionage involving France and Germany. ...Banking secrecy, therefore, is not some gimmick the Swiss devised to attract foreign clients to their banks. It reflects the very high degree of trust that exists between the Swiss state and its citizens and it has strong democratic foundations. ...The Swiss are proud of their system and they reward it with a high level of taxpayer honesty. It works because the Swiss vote their own taxes, they have a high degree of control over the way tax revenues are spent and over all they believe their tax system to be reasonable, comprehensible, transparent and fair. The principle of self-declaration backed up with withholding taxes and, if necessary, stiff fines supports this “honesty box” system. ...Doesn’t Switzerland hear the snapping jaws and cracking whips of foreign finance ministers, tax collectors, O.E.C.D. bureaucrats, cash-dispensing government agents and other denizens of the encroaching real world as they circle round Mother Helvetia intent on biting huge chunks out of her banking secrecy, if not swallowing it whole? ...In March last year the Swiss announced they would give up the evasion-fraud distinction for foreign bank clients and adopt the O.E.C.D. standards on information exchange in tax matters. ...However, requests for assistance must be made with regard to a specific individual, and “fishing expeditions” — any indiscriminate trawling through bank accounts in the hope of finding something interesting — remain ruled out. ...Switzerland demonstrates to the world that it is possible for a state to collect taxes with a high degree of taxpayer honesty and without the authorities being corroded with suspicion about the financial activities of their citizens. Citizens in a democracy would never allow their police force to have an automatic right of forced entry into their homes just on the off-chance of finding some stolen goods, so why on earth should the state have an automatic right of forced entry into citizens’ banks accounts just on the off-chance of discovering some tax evasion? There must be a limit to the extent to which respect for an individual’s privacy is sacrificed on the altar of international cooperation in tax matters.

Sadly, the United States is part of the effort to create a global tax cartel. An "OPEC for politicians" would be terrible news for taxpayers, though, much as a cartel of gas stations would be bad for driviers. So-called tax havens play a valuable role in curtailing the greed of the political class. Ask yourself a simple question: Would politicians be more likely or less likely to raise tax rates if they knew taxpayers had no escape options?

If the So-Called Stimulus Was an Unsung Hero, I'd Hate to Meet a Singing Enemy

The White House recently released the Economic Report of the President. In a post at the White House blog, Christina Romer brags that the stimulus legislation was a big success.

This Act is the great unsung hero of the past year. It has provided a tax cut to 95 percent of America’s working families and thousands of small businesses. It has meant the difference between hanging on and destitution for millions of unemployed workers who had exhausted their conventional unemployment insurance benefits. It has kept hundreds of thousands of teachers, police, and firefighters employed by helping to fill the yawning hole in state and local budgets. And, it has made crucial long-run investments in our country’s infrastructure and jump-started the transition to the clean energy economy. All told, the Recovery Act has saved or created some 1½ to 2 million jobs so far, and is on track to have raised employment relative to what it otherwise would have been by 3.5 million by the end of this year.
Let's set aside some of the disingenuous components of her post, such as categorizing income redistribution as tax relief, and focus on her claim that the legislation created at least 1.5 million new jobs when total employment has dropped by 3 million. Romer is not bad at math. Instead, she is saying that the economy would have lost 4.5 without the $787 billion increase in government spending. This what-might-have-been analysis is completely legitimate, assuming that there is good theory and evidence to back the assertion. Unfortunately (at least for the White House's credibility), Ms. Romer and another colleague last year prepared a supposedly rigorous what-might-have-been report, where they estimated that the so-called stimulus would keep the unemployment rate at 8 percent and that failure to increase the burden of government spending would drive the unemployment rate to 9 percent. Yet as this chart from their paper indicates, when we add in the data for what actually has happened, in turns out that bigger government is not only theoretically misguided, but it also doesn't work in the real world.

Bureaucrats vs. Taxpayers, Part IX

According to a new article from the Mackinac Center, Michigan has below-average income compared to other states. But even though it is in 37th place for per-capita income, the politicians in the state are currying favor with union bosses by paying the 8th-highest teacher salaries:

The president of the Michigan Education Association stated on the radio recently that school employees have "given and given and given and given." Comparing teacher salaries to personal income demonstrates that the taxpayers who pay for teacher salaries have "given" a lot more. The National Education Association just released its annual report that compares average teacher salaries throughout the country. For 2009-2010, Michigan ranks 8th. ...Public school teachers are government employees and are paid with tax dollars, and therefore their wages are inextricably linked to the economic well-being of the state and the wealth of its citizens. ...Michigan has many difficult decisions ahead, especially if Lansing continues its failed economic policies. Based on the numbers above, one issue that must be addressed is whether Michigan can continue to pay teachers "rich state" wages while the taxpayers footing the bill have "poor state" incomes.

Thursday, February 11, 2010

The Federal Government Is Bribing States to Create More Welfare Dependency?!?

If you want to get depressed or angry, the New York Times has an article celebrating the effort by politicians at all levels of government to lure more people into the food stamp program. New York City is running ads in foreign languagues asking people to stick their snouts in the public trough. The City is even signing up prisoners when they get out of jail. The state of New York, meanwhile, actually set up quotas for enrolling new recipients. And on the federal level, there apparently is a program that gives states "bonuses" for putting more people on the dole. No wonder one out of every eight Americans is receiving food stamps. By the way, this is not just the fault of Democrats. The ranking Republican on the Agriculture Committee is a big defender of the program, in part because of the sordid pact among urban and rural politicians to support each other's handouts. And President George W. Bush's food stamp administrator actually had the gall to assert "food stamps is not welfare." No wonder the burden of federal spending skyrocketed during the reign of so-called compassionate conservatism. The correct policy, of course, is to get the federal government out of the welfare business. If Mayor Bloomberg thinks it is a "civic duty" to expand food stamps, he should see whether New York City voters agree with him - and want to foot the bill.

A decade ago, New York City officials were so reluctant to give out food stamps, they made people register one day and return the next just to get an application. The welfare commissioner said the program caused dependency and the poor were “better off” without it. Now the city urges the needy to seek aid (in languages from Albanian to Yiddish). Neighborhood groups recruit clients at churches and grocery stores, with materials that all but proclaim a civic duty to apply — to “help New York farmers, grocers, and businesses.” There is even a program on Rikers Island to enroll inmates leaving the jail. “Applying for food stamps is easier than ever,” city posters say. ...These changes, combined with soaring unemployment, have pushed enrollment to record highs, with one in eight Americans now getting aid. “I’ve seen a remarkable shift,” said Senator Richard G. Lugar, an Indiana Republican and prominent food stamp supporter. “People now see that it’s necessary to have a strong food stamp program.” ...The program has commercial allies, in farmers and grocery stores, and it got an unexpected boost from President George W. Bush, whose food stamp administrator, Eric Bost, proved an ardent supporter. “I assure you, food stamps is not welfare,” Mr. Bost said in a recent interview. Still, some critics see it as welfare in disguise and advocate more restraints. ...The federal government now gives bonuses to states that enroll the most eligible people. ...In 2008, the program got an upbeat new name: the Supplemental Nutrition Assistance Program — SNAP. ...Since Mayor Michael R. Bloomberg took office eight years ago, the rolls have doubled, to 1.6 million people... Albany made a parallel push to enroll the working poor, setting an explicit goal for caseload growth. “This is all federal money — it drives dollars to local economies,” said Russell Sykes, a senior program official. But Mr. Turner, now a consultant in Milwaukee, warns that the aid encourages the poor to work less and therefore remain in need. “It’s going to be very difficult with large swaths of the lower middle class tasting the fruits of dependency to be weaned from this,” he said.

Great Moments in Local Government

Since we've been talking about the snow, here's a story about city that must have no real crime. At least, that's the only sensible thing to conclude after reading that cops in Harrisonburg, VA, arrested (on felony charges!) two college kids for the horrific offense of tossing snowballs (technically they were charged with "throwing a missile at an occupied vehicle"). This would be understandable if the kids embedded rocks in the snowballs, or even if they compacted slush to make ice balls, which also can be dangerous. But the city's press release offered no evidence of anything other than kids having fun. The Smoking Gun has the details:

Felony snowball throwing charges have been leveled against two Virginia college students for allegedly pelting a city plow and an undercover police car during Saturday's blizzard. Charles Gill and Ryan Knight, both 21, were nabbed by cops in Harrisonburg, where they attend James Madison University. According to police, the pair first targeted a city plow last Saturday afternoon. ...If convicted of the felonious snowball tossing, the men each face between one and five years in prison, and a maximum $2,500 fine.

The Phony Cost of Shutting Down the Federal Government

For the fourth day in a row, the federal government is shut down because of snow. This causes me mixed feelings. Because federal workers already are so vastly overpaid, part of me is irritated that they are getting what are, for all intents and purposes, extra vacation days. On the other hand, isn't it better to have bureaucrats sitting at home instead of hunched over their desks figuring out new ways to tax and regulate? And let's not forget that Harry Reid has been forced to delay the so-called jobs bill because of the snow, so the economy at least will be temporarily spared this new stimulus scam. But then I saw a story that it costs $100 million for each day the government is shut down. This perplexed me. While I have great faith in the ability of government to waste money, how could it cost even more for bureaucrats to stay home? It turns out this number is fake. As the story excerpted below indicates, the $100 million figure is a government estimate of "lost productivity." For people in the real world, however, fewer IRS audits, fewer OSHA inspections, and fewer Dept. of Energy subsidies translate into higher productivity:

While D.C. residents take out their snow shovels for untold hours of back-breaking labor, the Office of Personnel Management estimates that the shuttering of the federal government is breaking the bank as well -- costing taxpayers about $100 million every day in lost productivity, or work that's not getting done. With Friday's half day, and three full days of government shut-down this week, that adds up to $350 million -- and it could top $500 million if the government, with its 230,000 D.C.-area employees, remains closed through the end of the week.

Wednesday, February 10, 2010

The European Superstate Continues to Metastasize

Insanity is sometimes defined as doing the same thing over and over again while expecting a different result. On this basis the Euro-statists are clinically over the edge. They keep centralizing more power in Brussels and then they complain that European economies remain stagnant. On this basis, the new EU President must have escaped from the sanitarium, because he is asking for "economic government." This means, not surprisingly, more power for Brussels to harmonize and regulate in hopes of creating the imaginary nirvana of a competitive social model. But I have to admire the perseverance of the "federalists," as they are known. Every time they expand power, such as the recent Lisbon Treaty (basically a sanitized version of the statist EU constitution), they claim that they don't intend to push for more centralization. Yet the ink is barely dry on one agreement before they start pushing for more powers. You would think European citizens would wake up to this boy-who-cried-wolf scam, but since the "European project" is fundamentally anti-democratic, most of them have ceased paying attention.

The European Union's new president, Herman Van Rompuy, is calling for an "economic government" for the bloc, with closer policy coordination and financial incentives for good performers. ..."Whether it is called coordination of policies or economic government," only the European nations working are "capable of delivering and sustaining a common European strategy for more growth and more jobs," he underlined. ...The evocation of a European "economic government" will please France which has lobbied in this direction for years without success. ...Thursday's summit will also will also prepare the ground for a new EU economic strategy, focussing on investing in research, innovation and the green economy. This will replace the bloc's Lisbon Strategy launched in 2000. The ambitious Lisbon Strategy was supposed to make Europe's economy the most competitive and dynamic in the world. It failed to do so and Van Rompuy was happy to bury it. ...For Van Rompuy it the matter is urgent and strikes at the very heart of the European project. ..."Our structural growth rate is not high enough to create jobs and sustain our social model," he warned.