Wednesday, March 31, 2010

PG 13 Political Joke (and Two Extras from the Late-Night Comics)

The Last Nickel

A father walks into a restaurant with his young son. He gives the young boy 3 nickels to play with to keep him occupied. Suddenly, the boy starts choking, going blue in the face. The father realizes the boy has swallowed the nickels and starts slapping him on the back. The boy coughs up 2 of the nickels, but keeps choking. Looking at his son, the father is panicking, shouting for help.

A well dressed, attractive and serious looking woman in a blue business suit is sitting at the coffee bar reading a newspaper and sipping a cup of coffee. At the sound of the commotion, she looks up, puts her coffee cup down, neatly folds the newspaper and places it on the counter, gets up from her seat and makes her way, unhurried, across the restaurant.

Reaching the boy, the woman carefully drops his pants, takes hold of the boy's testicles and starts to squeeze and twist, gently at first and then ever so firmly. After a few seconds the boy convulses violently and coughs up the last nickel, which the woman deftly catches in her free hand. Releasing the boy's testicles, the woman hands the nickel to the father and walks back to her seat at the coffee bar without saying a word.

As soon as he is sure that his son has suffered no ill effects, the Father rushes over to the woman and starts thanking her saying, "I've never seen anybody do anything like that before, it was fantastic. Are you a doctor?"

"No", the woman replied. "I'm with the IRS."

-----

And here are two extra jokes from the late-night comics.

Obama demanded more accountability, a crackdown on corruption, and a better government. And if it works in Afghanistan, he’s going to try it in the United States - Dave Letterman, on Obama's trip to Afghanistan

It must be very embarrassing for the people involved. I’m sure the strippers didn’t want anyone to know they were hanging out with politicians - Craig Ferguson, commenting on the scandal of the RNC spending donor money at a strip club

When Regulators Attack

No, that's not the name of a new TV series. We should be so lucky. Instead, it's a good description of the government's approach to tobacco. Instead of letting adults make up their own minds about costs and benefits of risky choices (which includes most things in life, such as crossing a street and eating a cheeseburger), nanny-state officials have decided to investigate menthol-flavored cigarettes. And since the Food and Drug Administration has been given authority over the tobacco industry and since the FDA's supposed purpose is to ensure drugs are "safe and effective," that almost certainly means this latest campaign will lead to either further restrictions on free speech or outright bans. Here's a blurb from the Wall Street Journal:

Congress last year added the tobacco industry to the FDA’s regulatory mix and today a panel of health experts making up the agency’s new Tobacco Products Scientific Advisory Committee is kicking off a two-day meeting. First on the agenda: how menthol flavoring in cigarettes affects smokers’ habits. Small wonder that menthol is getting early attention, says the New York Times, which notes menthol butts account for almost a third of the $70 billion U.S. cigarette market. After more meetings, the advisory panel will send recommendations to the FDA, which could eventually decide to ban menthol products or take steps to curtail their marketing.
One can only wonder how far down the slope we will slide. There already are attacks against fatty foods and sugary soft drinks. Both provide pleasure to many people, but that no longer means much in Washington. Will regulators, either at the FDA or elsewhere, eventually decide that anything linked to obesity must be regulated and/or taxed? And now that government is going to pick up the tab for an even larger share of health costs, how long before the politicians use obesity-related costs as a major justification for further efforts to control our private lives? Maybe some day we will have a Federal Health Police to enforce daily exercise mandates? I better stop now before I give them any ideas.

Talking about Overpaid Bureaucrats on CNBC

It's only a two-minute clip, but Larry and I cover the key reasons why excessive government pay in bad for taxpayers and bad for the economy.



By contrast, Ben Stein has a video defending bureaucrats, but he never addresses whether they are overpaid or whether there are too many of them. His argument isn't very focused, but he cleverly selects the handful of categories (cops, firefighters, etc) where government workers perform useful services, and wants us to have positive feelings for all bureaucrats. He also implies that the term "bureaucrat" is some sort of slur, which is a surprise to me. Anyhow, if this is the best the other side can do, I feel confident that they have no legitimate defense.

Excellent Video Channeling Bastiat

Tom Palmer of the Atlas Network has a very concise - yet quite devastating - video exposing the Keynesian fallacy that the destruction of wealth by calamities such as earthquakes or terrorism is good for economic growth. Tom cites the work of Bastiat, who sagely observed that, "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." As you can see from the video, many who pontificate about economic matters today miss this essential insight:



I can't resist the opportunity to also plug a couple of my own videos that touch on the same issues. Here's one of Keynesian economics, one on the failure of Obama's faux stimulus, and another on the policies that actually promote prosperity.

Tuesday, March 30, 2010

Taxpayers vs. Bureaucrats, Part XX

There’s been a bit of buzz about a recent story in Politico revealing a huge increase in the number of congressional staff receiving six-figure salaries. Some of the details are eye-openers, including a 39 percent increase in the past four years in the number of staffers earning at least $163,358:

Nearly 2,000 House of Representatives staffers pulled down six-figure salaries in 2009, including 43 staffers who earned the maximum $172,500 — or more than three times the median U.S. household income. ...But while these top earners are a small percentage of the overall congressional work force, their numbers are growing at a rapid rate under the Democratic Congress. The number of staffers earning within the upper 3 percent of House salaries — currently $163,358 or more — has increased by nearly 39 percent in the past four years, according to LegiStorm data. ...“These are people who could be making a lot more money in the private sector, but they choose to work here,” said Pelosi spokesman Brendan Daly, who also makes $172,500. ...There are approximately 10,000 House staffers, including district office workers, according to the chief administrative officer.
Even though I’m a former Hill staffer, I’m certainly not going to defend these salaries (especially since I was nowhere near the top of the pay structure!). But excessive pay is actually a secondary problem. The real issue is the explosion in the number of staff. The image below, taken from a 1993 congressional report, shows the increase in the number of staff for each member of the House of Representatives. This doesn’t include, incidentally, the increase in committee staff and the growth in auxiliary institutions such as the Congressional Budget Office (the folks who just told us that a giant new entitlement program would reduce red ink).

It’s a chicken-and-egg issue whether this bloated congressional staff structure is a result of bigger government, or whether it contributes to bigger government. In either case, it would be a good idea to go back to the number of staff — and size of government — we had in the past.

Great Moments in Government Waste and Stupidity

This Associated Press story really bolsters my confidence in the public sector. I can't wait for geniuses like this to be in charge of determining what health care procedures are acceptable:

Fifteen phony products - including a gasoline-powered alarm clock - won a label from the government certifying them as energy efficient in a test of the federal "Energy Star" program. Investigators concluded the program is "vulnerable to fraud and abuse." A report released Friday said government investigators tried to pass off 20 fake products as energy efficient, and only two were rejected. Three others didn't get a response. The program run by the Energy Department and Environmental Protection Agency is supposed to identify energy-efficient products to help consumers. Tax credits and rebates serve as incentives to buy Energy Star products. But the General Accountability Office, Congress' investigative arm, said Energy Star doesn't verify claims made by manufacturers - which might explain the gasoline-powered alarm clock, not to mention a product billed as an air room cleaner that was actually a space heater with a feather duster and fly strips attached, and a computer monitor that won approval within 30 minutes of submission.

Amusing Cartoon on the Value-Added Tax

Monday, March 29, 2010

Is America Becoming a Nation of Moochers?

This story from the Daily Caller about colleges helping kids sign up for food stamps, got me completely depressed. It's not so much that this is indicative of a bloated, out-of-control government, though it is. It's more that this symbolizes how the social capital of the nation is being eroded by the moocher mentality. Welfare should have social stigma, it should not be overly generous, and it should not be part of the federal government. As you can see from this excerpt, I'm batting 0-3:

About 20,000 people sign up for food stamps every day, and college students across the country are the newest demographic being encouraged to enlist. Portland State University devotes a page on its Web site to explaining the ease with which students can receive benefits, along with instructions on how to apply. The school says food stamps are not charity but rather a benefit all honest taxpaying citizens can afford. ...Traditionally food stamps are for the working poor and single parents, but colleges are trying to make it as easy as possible for students to obtain federal assistance, no matter their socio-economic background. Oregon has a state-wide non-profit which includes a special focus on food stamps for students... The Grand Views, a college newspaper from Grand View University in Des Moines, Iowa, featured a story on students who apply for food stamps because they claim they don’t have time to hold down a job between classes and basketball practices. ...Adam Sylvain, a sophomore at Virginia’s George Mason University, recounted a recent conversation with friends in his dorm room. “My roommate told me he applied for food stamps, and they told him he qualified for $200 a month in benefits,” Sylvain said. “He’s here on scholarship and he saves over $5,000 each summer in cash.” “A few of our other friends who were in the room also said if there were able to, they would get food stamps … They think that if they’re eligible it’s the government’s fault, so they might as well,” Sylvain said. ...President Obama’s latest budget included $72.5 billion for food stamps — nearly double the amount from 2008. Approximately 38 million people, or 13 percent of the U.S. population is on food stamps. It’s a trend that seems on the rise — Salon recently reported on young, broke hipsters using federal assistance to buy high-end organic food. “I’m sort of a foodie, and I’m not going to do the ‘living off ramen’ thing,” one young man said, fondly remembering a recent meal he’d prepared of roasted rabbit with butter, tarragon and sweet potatoes. “I used to think that you could only get processed food and government cheese on food stamps, but it’s great that you can get anything.”

The Flat Tax: Good for America, Bad for Washington

America's biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly and produced by the Center for Freedom and Prosperity, explains how a flat tax would work and why it would promote growth and fairness.

The American People Describe Congress - both Funny and True

Someboy sent me a link to this American Thinker article, which includes the following word cloud of a Pew Research Center poll on the "One word that best describes your impression of Congress." Enjoy.

Sunday, March 28, 2010

Should Babies Born in America to Illegal Immigrants Get Automatic U.S. Citizenship?

George Will argues that the answer should be no. I'm not a lawyer, but I think he makes a compelling case regardless of how one feels about immigration in general or the specific issue of how to deal with illegals:

A simple reform...would bring the interpretation of the 14th Amendment into conformity with what the authors of its text intended, and with common sense, thereby removing an incentive for illegal immigration. To end the practice of "birthright citizenship," all that is required is to correct the misinterpretation of that amendment's first sentence: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside." From these words has flowed the practice of conferring citizenship on children born here to illegal immigrants. A parent from a poor country, writes professor Lino Graglia of the University of Texas law school, "can hardly do more for a child than make him or her an American citizen, entitled to all the advantages of the American welfare state." ...If those who wrote and ratified the 14th Amendment had imagined laws restricting immigration -- and had anticipated huge waves of illegal immigration -- is it reasonable to presume they would have wanted to provide the reward of citizenship to the children of the violators of those laws? Surely not. ...Congress has heard testimony estimating that more than two-thirds of all births in Los Angeles public hospitals, and more than half of all births in that city, and nearly 10 percent of all births in the nation in recent years, have been to mothers who are here illegally. Graglia seems to establish that there is no constitutional impediment to Congress ending the granting of birthright citizenship to those whose presence here is "not only without the government's consent but in violation of its law."

California May Do the Right Thing on Drugs for the Wrong Reason

There's going to be a referendum on marijuana prohibition this November in the (not so) Golden State. The good news is that it is ahead in the polls. But the bad news is that this is not a reflection of libertarian sentiment. Instead, voters are sympathetic to the notion that pot could be a new source of tax revenue (which presumably means a smaller risk of other tax increases). The AP reports:

When California voters head to the polls in November, they will decide whether the state will make history again - this time by legalizing the recreational use of marijuana for adults. The state was the first to legalize medicinal marijuana use, with voters passing it in 1996. Since then, 14 states have followed California's lead, even though marijuana remains illegal under federal law. "This is a watershed moment in the decades-long struggle to end failed marijuana prohibition in this country," said Stephen Gutwillig, California director for the Drug Policy Alliance. "We really can't overstate the significance of Californians being the first to have the opportunity to end this public policy disaster." ...The California secretary of state's office certified the initiative for the general election ballot Wednesday after it was determined that supporters had gathered enough valid signatures. The initiative would allow those 21 years and older to possess up to one ounce of marijuana, enough to roll dozens of marijuana cigarettes. Residents also could grow their own crop of the plant in gardens measuring up to 25 square feet. The proposal would ban users from ingesting marijuana in public or smoking it while minors are present. It also would make it illegal to possess the drug on school grounds or drive while under its influence. Local governments would decide whether to permit and tax marijuana sales. Proponents of the measure say legalizing marijuana could save the state $200 million a year by reducing public safety costs. At the same time, it could generate tax revenue for local governments. A Field Poll taken in April found a slim majority of California voters supported legalizing and taxing marijuana to help bridge the state budget deficit.

Government Corruption Watch, Part II

Sleazy political behavior does not necessarily require a bag of money being handed to a poltician in a deserted parking garage. Sometimes it is blatantly visible. A good example is the European version of "cap-and-trade" climate legislation. While the legislation produced lots of criminal activity, it also enabled big European companies to game the system, pocketing lots of unearned money thanks to their lobbying power. The House-passed version of the "cap-and-trade" bill in America makes many of the same mistakes, with favors to various campaign contributors and special interests. The Wall Street Journal editorial excerpted below is a good indication of the type of nonense that will happen in the United States if the bill is approved by the Senate:

Democrats are promising to apply themselves to the task of imposing legislative curbs on carbon. So it’s a good time to see how a prototype cap-and-trade scheme, the European Union’s Emission Trading System, is faring. ...Last week, spot trading on the ETS ground to a complete halt for three days after a scandal erupted over players gaming the system. In this case, the government of Hungary admitted to reselling “certified emission reduction” credits that companies had already relinquished, or “spent.” ...This is just the latest in a string of embarrassments that have plagued the system almost from the beginning. European authorities admitted last year that in certain countries, 90% of the trading volume was taken up by value-added tax fraud. Sandbag, a British advocacy group, reported in February that metals firms ArcelorMittal, Salzgitter, U.S. Steel, and Corus were just a few of the companies that had been granted more emission permits than they needed. In ArcelorMittal’s case, according to Sandbag, those spare permits amounted to €202 million in asset value in 2008. Last year, Corus announced it was closing a steel plant in Britain and laying off 1,700 workers, for which the company reaped a windfall in carbon allowances. ...the ETS is a cautionary tale in how quickly environmental policy engineering degrades into rent-seeking for the fortunate few.

Saturday, March 27, 2010

Americans Will Pay More and Get Less, but at Least Castro Is Happy with Obamacare

I actually think this it is unfair to highlight Fidel Castro's endorsement of Obamacare, but I'm in a grumpy mood because I've started a diet, so I'll simply twist the knife a bit by noting that we probably could improve American healthcare by imposing Cuban-style rationing. I imagine many of our obesity-related health problems would disappear if we were limited to one pound of beef and 12 eggs per month. Ah, the joy of socialism! Solidarity in malnutrition. But I better stop lest I give Obama some new ideas. Here's an excerpt from the AP report of Castro's endorsement:

Cuban revolutionary leader Fidel Castro on Thursday declared passage of American health care reform "a miracle" and a major victory for Obama's presidency, but couldn't help chide the United States for taking so long to enact what communist Cuba achieved decades ago. "We consider health reform to have been an important battle and a success of his (Obama's) government," Castro wrote in an essay published in state media... "It is really incredible that 234 years after the Declaration of Independence ... the government of that country has approved medical attention for the majority of its citizens, something that Cuba was able to do half a century ago," Castro wrote.

Great Moments from the IRS

Everyone's favorite bureaucracy really stepped in it recently, when they harassed a car wash owner for an upaid tax bill of (drumroll please) four cents. But since we're talking about the Internal Revenue Service, the bureaucrats also tacked on an extra $200 to the bill - even though the owner had never been notified of any unpaid balance and even had a letter from the IRS stating that he was completely up to date with his obligations. The Sacramento Bee reports:

It was every businessperson's nightmare. Arriving at Harv's Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. "They were deadly serious, very aggressive, very condescending," says Harv's owner, Aaron Zeff. The really odd part of this: The letter that was hand-delivered to Zeff's on-site manager showed the amount of money owed to the feds was ... 4 cents. Inexplicably, penalties and taxes accruing on the debt – stemming from the 2006 tax year – were listed as $202.31, leaving Harv's with an obligation of $202.35. Zeff...finds the situation a bit comical. "It's hilarious," he says, "that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities." Now he's trying to figure out how penalties and interest could climb so high on such a small debt. He says he's never been told he owes any taxes or that he's ever incurred any late-payment penalties in the four years he's owned Harv's. In fact, he provided us with an Oct. 22, 2009, letter from the IRS that states Harv's "has filed all required returns and addressed any balances due."

Taxpayers vs. Bureaucrats, Part XIX

Here's a story to warm the hearts of struggling taxpayers around the nation. Washington, DC, is one of the few spots in the nation where income is climbing. According to the Wall Street Journal, "Personal income in 42 states fell in 2009, the Commerce Department said Thursday. Nevada's 4.8% plunge was the steepest, as construction and tourism industries took a beating. Also hit hard: Wyoming, where incomes fell 3.9%. Incomes stayed flat in two states and rose in six and the District of Columbia." Serfs in flyover country will also be delighted to learn that a new survey finds that a majority of America's 10-richest communities are now suburbs of Washington, DC. To be fair, not all of the wealth in places such as Loudoun County is because of a bloated and overpaid bureaucracy. Some of it is because of the fat-cat lobbyists who work with the bureaucrats to funnel your tax dollars to special interest groups. I'm not sure if that will make you feel better, but here are the details from the Forbes survey:

...most Americans still aren't ready to brag about their paychecks. Except, perhaps, in Loudoun County, Va., where median household incomes are higher than anywhere else in the country. This affluent suburb of Washington, D.C., where families take home a median $110,643 annually, tops our list of America's 25 richest counties. ...It's not surprising that workers in Loudoun do well. The federal government generates a wealth of jobs, keeping unemployment in the D.C. metro area at a low 6.2% (the national average is still near 10%). The best-paid workers from D.C. take their money home to Loudoun, where jobs have grown 4% between the second quarter of 2007 and the second quarter of 2009... Like Loudoun, a number of the country's wealthiest households are tightly concentrated in counties around the nation's capital. Six of the richest counties lie on the outskirts of Washington: Fairfax County, Va., Arlington County, Va., Stafford County, Va., Prince William County, Va., Charles County, Md., and Alexandria City, Va.

Friday, March 26, 2010

Tax Haven Policies Attract $Trillions of Job-Creating Investment to the U.S. Economy

I think it is very nice when left-wing groups help make the case for pro-market policies A recent example is a report from the Center for International Policy, which wants to demonize so-called tax havens, but their report shows that the United States is actually the biggest beneficiary of tax haven policies, with more than $2 trillion of non-resident deposits in American financial institutions(the Cayman Islands is in second place, with $1.55 trillion of deposits compared to $2.18 trillion in the U.S.). This augments a report from another left-wing group, which found that Delaware is the world's best tax haven. In other words, America's tax haven policies (sadly, only available to non-resident aliens) are enormously beneficial to U.S. financial markets, which means capital that boosts investment and job creation. It's also worth noting that even non-U.S. tax havens benefit the American economy. As this Treasury Department chart illustrates, Caribbean banking centers have about $2 trillion invested in America's economy. The left-wing groups would like to destroy tax competition and set up a global tax cartel, sort of an "OPEC for politicians," but the numbers they report underscore how important it is for American policymakers to preserve the open flow of capital and why tax havens are great news for the U.S. economy. Which is exactly what we argued in our video on the Economic Case for Tax Havens.

Regardless of the Problem, the European Political Elite Thinks More Centralization and Bigger Government Is always the Answer

Greece is in trouble for a combination of reasons. Government spending is far too excessive, diverting resources from more efficient uses. The bureaucracy is too large and paid too much, resulting in a misallocation of labor. And tax rates are too high, further hindering the productive sector of the economy. Europe's political class wants to bail out Greece's profligate government. The official reason for a bailout, to protect the euro currency, makes no sense. After all, if Illinois or California default, that would not affect the strength (or lack thereof) of the dollar.

To understand what is really happening in Europe, it is always wise to look at what politicians are doing and ignore what they are saying. Political union is the religion of Europe's political class, and they relentlessly use any excuse to centralize power in Brussels and strip away national sovereignty. Greece's fiscal crisis is simply the latest excuse to move the goalposts. The Daily Telegraph reports that Germany and France are now conspiring to create an "economic government" for the European Union. Supposedly this entity would only have supervisory powers, but it is a virtual certainty that a European-wide tax will be the next step for the euro-centralizers.

Germany and France have [proposed] controversial plans to create an "economic government of the European Union" to police financial policy across the continent. They have put Herman Van Rompuy, the EU President, in charge of a special task force to examine "all options possible" to prevent another crisis like the one caused by the Greek meltdown. ...The options he will consider include the creation of an "economic government" by the by the end of the year. "We commit to promote a strong co-ordination of economic policies in Europe," said a draft text expected to be agreed by EU leaders last night. "We consider that the European Council should become the economic government of the EU and we propose to increase its role in economic surveillance and the definition of the EU's growth strategy." ...Mr Van Rompuy, the former Prime Minister of Belgium, is an enthusiastic supporter of "la gouvernement économique" and last month upset many national capitals by trying impose "top down" economic targets. Angela Merkel, the German Chancellor, has called for the Lisbon Treaty to be amended in order to prevent any repetition of the current Greek crisis, which has threatened to tear apart the euro.

Thursday, March 25, 2010

Raising My Daughter Right

I got her this t-shirt at the New Hampshire Liberty Forum. Am I a doting father, or what?

Subsidized Viagra for Sex Offenders: A Fitting Conclusion to the Obamacare Nightmare

I don't seem to be as depressed as everyone else about Obamacare, in part because our system is already so distorted and controlled by government that (this is my rough guess, to be sure) all we did was move from a system that is 68 percent run by government to a system that is 79 percent run by government. Nonetheless, any movement in the wrong direction is terrible. But there is one group that will celebrate the passage of the reconciliation portion of Obamacare. As noted by an Oklahoma newspaper, the Senate of the United States voted to kill an amendment that would deny subsidies for erectile dysfunction drugs for convicted child molesters, rapists, and other sex offenders.

The Senate on Wednesday killed a proposal by Sen. Tom Coburn to prevent convicted sex offenders from getting Viagra or similar prescriptions in the insurance markets to be established under the new health reform law. ...Coburn, R-Muskogee, called the new health reform law "the greatest assault on liberty this country has ever had,” as he put Democrats in the position of voting down his proposal to prevent convicted child molesters, rapists and other sex offenders from getting federal drug coverage for erectile dysfunction drugs. The amendment was killed by a vote of 57-42. ..."This amendment will prohibit prescriptions for recreational drugs for rapists and child molesters,” Coburn said. "Nobody can disagree with that … If this bill goes through without this amendment, your tax dollars are going to be paying for Viagra for child molesters. That’s what’s going to happen.”

Government Corruption Watch, Part I

I realize that the "Taxpayers vs. Bureaucrats" series is rather depressing, with only two tiny pieces of good news out of 18 installments, so I'm almost reluctant to unveil a new series. But odious and corrupt deal-making is a fundamental - and probably unavoidable - feature of government, and we need to shine a spotlight on the way government really works. This is especially important since the bigger the government, the more rampant the sleaze. Our first post in the series highlights a Wall Street Journal column exposing how one Congressman is funneling some of the loot from a new government monopoly to a campaign contributor:

President Obama and Congressional Democrats have been criticized for being antibusiness. But Washington is about to bestow a huge gift upon one particular type of business—the type that doesn't pay taxes. Despite bipartisan opposition, this week the Democrats hope to use budget reconciliation in the Senate to ram through changes to the health-care bill the House passed on Sunday. Coming along for the legislative ride is a federal takeover of the student-loan market. ...All such loans will now come directly from the U.S. Department of Education. ...But while Democrats are eliminating a revenue stream at for-profit companies, they are simultaneously creating another one for a handful of favored nonprofit companies. Currently, for loans that the government makes directly to students, the Department of Education conducts competitive bidding and hires private companies to service the loans. But in the pending bill, several dozen nonprofit firms will be eligible to receive no-bid servicing contracts on up to 100,000 student accounts for each firm. Which nonprofit organizations will qualify? California's ALL Student Loan looks to be a big winner, thanks to language written by Representative George Miller of California. ALL Student Loan may have helped its cause by retaining the services of Vincent Reusing, a lobbyist whom the Chronicle of Higher Education has described as a "personal friend" of Mr. Miller. ...According to OpenSecrets.org, Mr. Reusing has contributed more than $80,000 to various Democratic campaigns, including Mr. Miller's.

Taxpayers vs. Bureaucrats, Part XVIII

I thought it was an outrage when it was reported that the unfunded liability for state government pension plans was about $500 billion, or perhaps even $1 trillion. I'm not even sure what to say about this item. Writing in the Wall Street Journal, Andrew Biggs from the American Enterprise Institute estimates that the shortfall for overly-generous pensions for state government bureaucrats is about $3 trillion:

Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. ...In a recent AEI working paper I've shown that the typical state employee public pension plan has only a 16% chance of solvency. More public pensions have a zero probability of solvency than have a probability in excess of 50%. When public pension assets fall short, taxpayers are legally obligated to make up the difference. The market value of this contingent liability exceeds $3 trillion.

Wednesday, March 24, 2010

Great Moments in Foreign Government

Or maybe this belongs in the "great moments in international bureaucracy" series since it relates to European Union law. Regardless, we have another sign of Europe's fiscal nightmare. A court in the United Kingdom has given a big green light to welfare tourism by ruling that a foreign citizen can get handouts based on children living in another country.I realize, of course, that there is welfare tourism in the United States, but surely no state would give money for children living elsewhere (at least I hope). The Daily Express reports on the latest lunacy from the other side of the Atlantic:

A landmark ruling that allows jobless migrants to claim benefits in Britain for their children living in their home country sparked outrage last night. Critics warned the judgment could "open the door" to thousands of benefits tourists abusing generous payouts in Britain. In yesterday"s High Court ruling " showing how EU law is taking precedence over the UK"s " a Portuguese national living in Britain won a legal battle for child benefit for his two daughters in his home country despite no longer working and claiming incapacity benefit here. ...three top judges blocked an appeal by HM Revenue and Customs to prove he was not eligible for the money. Lawyers for Mr Ruas argued EU rules allowed any worker from an EU country who was employed or who received "social assistance" to claim child benefits even if the child lives abroad. Matthew Elliott, chief executive of the TaxPayers" Alliance, said: "This opens the door to a huge bill for taxpayers which is utterly unjustified. "Now there are even greater incentives for people to come to Britain trying to take advantage of the benefits system. Time and again it seems these judgments go against the best interests of hard-pressed British taxpayers."

My Big Fat Greek Budget

Since we're already depressed by the enactment of Obamacare, we may as well wallow in misery by looking at some long-term budget numbers. The chart below, which is based on the Congressional Budget Office's long-run estimates, shows that federal government spending will climb to 45 percent of GDP if we believe CBO's more optimistic "baseline" estimate. If we prefer the less optimistic "alternative" estimate, the burden of federal government spending will climb to 67 percent of economic output. These dismal numbers are driven by two factors, an aging population and entitlement programs such as Medicare, Medicaid, and Social Security. For all intents and purposes, America is on a path to become a European-style welfare state.

If these numbers don't depress you enough, here are a couple of additional observations to push you over the edge. These CBO estimates were produced last year, so they don't count the cost of Obamacare. And as Michael Cannon repeatedly has observed, Obamacare will cost much more than the official estimates concocted by CBO. And speaking of estimates, the long-run numbers in the chart are almost certainly too optimistic since CBO's methodology naively assumes that a rising burden of government will have no negative impact on the economy's growth rate. Last but not least, the data above only measures federal spending. State and local government budgets will consume at least another 15 percent of GDP, so even using the optimistic baseline, total government spending will be about 60 percent of GDP, higher than every European nation, including France, Greece, and Sweden. And if we add state and local spending on top of the "alternative" baseline, then we're in uncharted territory where perhaps Cuba and North Korea would be the most appropriate analogies.

So what do we do? There's no sure-fire solution. Congressman Paul Ryan has a reform plan to reduce long-run federal spending to less than 20 percent of GDP. This "Roadmap" plan is excellent, though it is marred by the inclusion of a value-added tax. Bill Shipman of CarriageOaks Partners put forth a very interesting proposal in a Washington Times column to make the federal government rely on states for tax revenue. And I've been an avid proponent of tax competition as a strategy to curtail the greed of the political class since it is difficult to finance redistribution if labor and capital can escape to jurisdictions with better tax law. Any other suggestions?

Tuesday, March 23, 2010

Walter Williams Decimates Obamacare

The famous George Mason University economist, Walter Williams, correctly summarizes what it means to make healthcare a "right."

And he also dusts off that quaint document, long forgotten in Washington, called the U.S. Constitution.

The Not-Safe-for-Work Version of Obamacare

Click at your own risk (just in case any readers don't like R-rated humor).

Great Moments in International Bureaucracy

Greece's fiscal disarray is a visible manifestation of Europe's future, but the most appropriate symbol of what's wrong with the continent comes from Brussels, where there are three "presidents" fighting over the right to represent Europe at international gatherings. The contestants include the President of the European Commission, the President of the European Council, and the European Union President (which rotates every six months among different national leaders). While these three personalities fight over who gets to sit where and shake hands first, the real problem is that they all agree that government should be bigger, taxes should be higher, and power should be more centralized as part of the effort to create a superstate in Brussels. Inside this gilded cage, insulated from actual voters, Europe's technocratic elite is content to enjoy a parasitical existence while the welfare states of member nations slowly but surely collapse and lead to social chaos. Here's an excerpt from the UK-based Express about the fight between the the philosophical descendants of Louis XVI (or would Nero be a better analogy?):

Promises by EU leaders that the Lisbon Treaty would herald a new era of clarity have been shattered after attempts to settle a major internal power feud resulted in a typical Brussels fudge. Bureaucrats have decided to send not just one president and his entourage to global summits but a tax-draining three. Only four months after the fanfare of Herman Van Rompuy’s appointment as European Council president, his most jealous and powerful rival in Brussels has persuaded allies to allow him to muscle in too. José Manuel Barroso, president of the European Commission, has succeeded in his demands that he should also go to diplomatic summits, such as the G20, after insisting only he has the expertise to deal with specific policy matters. At certain summits there will even be a third representative – the leader of the country holding the EU’s rotating presidency. This seems to justify criticism that the Lisbon Treaty would add to the EU’s murky waters and not be a move towards transparency. ...Since the Lisbon Treaty came into force at the end of last year, arguments have raged in Brussels over which department does what. Mr Van Rompuy, the former Belgian prime minister dismissed last month by Ukip MEP Nigel Farage as a “damp rag” and a “low-grade bank clerk”, is the permanent president of the European Council.

Monday, March 22, 2010

Fulminating on CNBC: Obama's Plan Is Centrist...on the French Political Spectrum

I don't get to talk for the first three minutes, but I then kick the you-know-what out of Obama's statist healthcare scheme.

Taxpayers vs. Bureaucrats, Part XVII

Finally, some good news to report! Ireland may be in a recession (caused in large part by misguided housing subsidies), but there are two things worth admiring about the Emerald Isle's public policy. Many wonks already know about the first policy, the 12.5 percent corporate tax rate that helped transform Ireland from the "sick man of Europe." But it seems that Irish policymakers are reading Chris Edwards, because the second admirable policy is that lawmakers actually cut civil service compensation by 13.5 percent. And these are real cuts, not the type of phony gimmick you find in Washington, where something is called a "cut" simply because it didn't increase as fast as previously planned. A columnist writing in the UK-based Times wonders why Irish bureaucrats did not go nuts with public protests and speculates that maybe they actually understand that they have a sweetheart deal compared to their brethren in the productive sector of the economy:

Because of the budget deficit, shrinking economy and untenable level of national debt, all public service salaries will be cut by an average of 13.5 per cent, with immediate effect. The charges will appear on your payslip as “government levy”, and will apply to frontline public workers in health, education, transport and local services and also to MPs, Ministers of State and the Attorney-General. ...Couldn’t happen, could it? Actually it has, and close to home. ...public sector pay in the Republic has been cut. Not frozen, sharply cut. ...although the payslips have been changed for many months now, the schools are open, the hospitals treat the sick, rubbish is collected and paper pushed around briskly enough in public organisations. Belts are tight all right and pips are squeaking; but the country whose public pay once led the EU league has not imploded into the chaos of suicidal strikes, unburied bodies, closed schools and garbage mountains, which the UK or France would expect as a matter of course if a government did any such thing. ...Yet the pay cuts — I say again, 10 to 15 per cent cuts in pay, real and immediate holes in the family budget — have not caused the enraged citizenry to pull down the pillars of the temple around their own heads and everybody else’s. They just haven’t. Why? ...unlike the self-righteous whiners who speak for British public service unions, middle-Ireland still knows that a secure and pensionable job is a privilege: that working in the public sector is not an altruistic gift to the nation, but a damn lucky break. I saw a spirited, self-mocking sketch performed by 12-year-olds in a village hall entertainment the other night about “Marty Matchmaker O’Donoghue, where every ould stocking will find an ould shoe”. The girl being advertised to the men is talked up by the matchmaker as having “a Government Job! A clerk at the council office — I tell ye, she’s a laying hen!” Friends confirm that it’s an old saying: “Marry a teacher or a nurse, you’ve got a laying hen.” It does not seem that way in boom times, but even in the UK it is becoming true.

Bureaucrats vs. Taxpayers, Part XVI

This topic seems very pedestrian since we just took another in a long series of steps in the wrong direction on health care, but the bloated civil service is a major reason why we are heading toward a Greece-style fiscal meltdown. This story from California is shocking. More than 30,000 teachers, including about 1,000 that are failures, yet over a 10-year period the school district was able to fire four teachers. No wonder California schools do such a bad job. Here's the relevant part of an expose from LA Weekly:

Los Angeles Unified School District, with its 885 schools and 617,000 students, educates one in every 10 children in California. It also mirrors a troubled national system of teacher evaluations and job security... Recent articles in the Los Angeles Times have described teachers who draw full pay for years while they sit at home fighting allegations of sexual or physical misconduct. But the far larger problem in L.A. is one of "performance cases" — the teachers who cannot teach, yet cannot be fired. Their ranks are believed to be sizable — perhaps 1,000 teachers, responsible for 30,000 children. But in reality, nobody knows how many of LAUSD's vast system of teachers fail to perform. Superintendent Ramon Cortines tells the Weekly he has a "solid" figure, but he won't release it. In fact, almost all information about these teachers is kept secret. But the Weekly has found, in a five-month investigation, that principals and school district leaders have all but given up dismissing such teachers. In the past decade, LAUSD officials spent $3.5 million trying to fire just seven of the district's 33,000 teachers for poor classroom performance — and only four were fired, during legal struggles that wore on, on average, for five years each. Two of the three others were paid large settlements, and one was reinstated. The average cost of each battle is $500,000. During our investigation, in which we obtained hundreds of documents using the California Public Records Act, we also discovered that 32 underperforming teachers were initially recommended for firing, but then secretly paid $50,000 by the district, on average, to leave without a fight.

What Now? Four Guiding Principles for Health Care

So where do we go from here now that Obama has succeeded in pushing through a corrupt and bloated healthcare bill?

Let's start with some good news. This is not the end of the world. If this was 1920, Obamacare would be a paradigm-shifting expansion in the size and scope of Washington. But we do not have a free-market healthcare system today. Government already directly finances nearly one-half of all health expenditures, and the ostensibly private part of our healthcare system is immensely distorted by regulations and tax policy (particularly the exculsion of fringe benefits in the tax code).

We have deviated so far from a free market that only 12 percent of healthcare costs are paid for out-of-pocket by consumers. And health insurance, rather than being based on risk and protecting against catastrophic expenses, has morphed into a grossly inefficient form of pre-paid health care.

So what does this mean? The way to think of Obamacare is that we are shifting from a healthcare system 68 percent controlled/directed by government to one that (when all the bad policies are phased in) is 79 percent controlled/directed by government. Those numbers are just vague estimates, to be sure, but they underscore why Obamacare is just a continuation of a terrible trend, not a profound paradigm shift. Yes, it is very bad news. Yes, it will cost more than politicians claimed. Yes, it will reduce the quality of care. All those things are true, but we are going 79 mph in the wrong direction instead of 68 mph.

By the way, the 2008 elections did not make that much difference. Republicans often are just as bad as Democrats when it comes to feckless vote buying. Our healthcare system took a big step in the wrong direction with the passage of the Medicare prescription drug entitlement under Bush. This horrible piece of legislation had the support of almost all the congressional Republicans who were railing against Obamacare last night (where was John Boehner's "Hell no" speech in 2003?). And Senator McCain's healthcare plan would have expanded the role of government, so if he won (and then did one of his infamous "bipartisan" compromises) we probably would have wound up with a healthcare system 73 percent controlled/directed by government.

What matters now is our next steps. There is no magic formula, but we should be guided by these principles:

1. Promote genuine free market principles. The only way to fix healthcare is to restore the free market. That means going back to a system where people pay out-of-pocket for most healthcare and use insurance to protect against genuine risk and catastrophic expenses. The time has come to reduce the size and scope of government.

2. Say no to RINO-style compassionate conservatism. When Republicans do the wrong thing, they are usually motivated by political fear ("if we don't pass a new prescription drug entitlement, the Democrats will accuse us of not caring about seniors"). This approach ultimately fails. The Democrats take power and have an easier time expanding the burden of government because Republicans have already done much of the work for them.

3. Change Medicare into a system based on personal health accounts and shift all means-tested spending to the states. Congressman Paul Ryan's Roadmpap plan has some good components, but check out Michael Cannon's work at Cato to get the details.

4. Adopt a flat tax. There are many reasons to implement real tax reform, but the flat tax is ideal from a healthcare perspective since it gets rid of the healthcare exclusion in the tax code as part of a shift to a tax system with low rates and no double taxation.

Sunday, March 21, 2010

Live Free or Die in New Hampshire

At the airport waiting for a flight to DC. A few concluding observations about the New Hampshire Liberty Forum.

1. The Free State Project is a cool idea. If you're not tied to a particular state and you don't need hot weather, why not move to New Hampshire and help the fight for liberty? These folks already have four people in the state legislature, including one elected as a Democrat. At the very least, there's a good network of friends who value liberty. And as you might expect, lots of interesting characters. I don't think I've ever seen so many openly armed folks in my life.

2. Judge Napolitano gives a good speech. I'm not a lawyer, but I like everything he said - especially the story about the Yankees beating the Mets in a pivotal game last year when Castillo dropped A-Rod's pop fly to second base and turned the final out into the play that let the Yankees win.

3. I despise government more than ever. Not because of the conference, but because I was given a bottle of real maple syrup as my honorarium for speaking. But I wasn't willing to pay $25 to check my bag, so I went through TSA security hoping rationality would prevail. Not surprisingly, that wasn't the case.

A Victory Against the Federal Reserve

Kudos to the federal appeals court that just ruled that the Federal Reserve has no right to hide the sordid special handouts it provided to well-connected financial firms. Here's an excerpt from a report about the decision:

The Federal Reserve must reveal documents identifying financial companies that received Fed loans to survive the financial crisis, a federal appeals court ruled Friday. A panel of the 2nd U.S. Circuit Court of Appeals in Manhattan said in two separate opinions that such information isn't automatically exempt from requests under the Freedom of Information Act. News Corp.'s Fox News Network LLC and Bloomberg L.P. sued separately for details about loans that commercial banks and Wall Street firms received and the collateral they put up. Other news agencies, including The Associated Press, filed briefs with the appellate court in their support. The Fed argued that if it identified banks that drew emergency loans, it could cause a run on those institutions, undermine the loan programs and potentially hurt the economy, and lower-court judges were split on the issue. The Federal Reserve said it's studying Friday's ruling.
On a broader note, I'm periodically asked about monetary policy, the Fed, and the financial crisis. I do my best to stay away from the first two topics, largely because my interests are elsewhere (though I did handle the Federal Reserve for the Bush/Quayle transition team, many years in the past). But that does not mean the issues are unimportant. For those that are interested, I recommend two articles, one by George Selgin and the other by Gerald O'Driscoll.

A Proposal that Actually Would Improve Health Care and Lower Costs

While the politicians in Washington are poised to undermine the healthcare system with additional layers of taxes, spending, and regulation, Steven Chapman proposes to use markets to improve a part of the system that is suffering from a punitive form of price controls. Orgain donors are allowed zero compensation for their sacrifice. This policy - driven by an ideological impulse against markets and voluntary exchange - directly leads to the death of thousands of people each year

Consider the economics of an organ transplant. Everyone involved gets something of value. The doctors and nurses are paid. The hospital receives money. The organ recipient gets something that will save her life. ...since 1984, it has been illegal to pay someone to surrender a body part, even posthumously. Campaigns to browbeat Americans into signing organ donor cards, however, haven't sufficed. The transplant organ shortage has grown. Since 1989, kidney donations have doubled. But the number of patients in need of them is five times higher than it was then. Last year, 4,456 people died while waiting for a kidney transplant. The story with livers follows the same line. Among the losers from this guaranteed-shortage policy are victims of cancer and other lethal diseases who need bone marrow transplants. Some of them have filed a lawsuit, which goes to court in Los Angeles this week, asking to be allowed to offer compensation to donors -- which is now a felony punishable by five years in prison. ...The ban is particularly indefensible in this realm. Someone giving up a kidney loses an important organ for good. But bone marrow donors produce new marrow to replace what is lost. Given that it's legal under federal law to buy and sell blood and sperm, why is bone marrow treated differently? ...If Americans could be paid for bone marrow, more would step forward. Nobel Prize-winning economist Gary Becker of the University of Chicago, in a 2007 paper written with Julio Jorge Elias of the State University of New York at Buffalo, figured the kidney shortage could be eliminated for $15,000 per organ.

Saturday, March 20, 2010

The Right Way to Deal with Budget Problems

With Intrade.com showing an 83 percent chance that Obamacare will be approved, let's console ourselves by looking at a bit of good news. The Wall Street Journal has a good editorial today lauding the new Republicans governors of New Jersey and Virginia, both of whom are reducing spending. But unlike in Washington, where a spending cut is so loosely defined that politicians can increase spending and simultaneously claim to be cutting spending (so long as they increase spending by less than previously planned), Governors Christie and McDonnell actually are proposing to spend less next year than is being spent this year. That hasn't happened in Washington since 1965 - and it certainly won't happen under Obama's phony spending freeze:

Republicans Chris Christie (New Jersey) and Bob McDonnell (Virginia) were elected in November in states that had seen years of tax increases and explosive spending growth. Mr. Christie inherited a $2.2 billion deficit in 2010 and it is expected to grow to $11 billion in 2011. Mr. McDonnell is confronting the largest deficit in Virginia history—$4.2 billion for fiscal years 2011 and 2012, out of a $32 billion two-year general fund. This week Mr. Christie proposed his first budget, calling for a 9% cut in the state's $32 billion annual general fund. He is not talking about phony Washington-style "cuts" against a baseline that automatically increases each year. The governor is asking Trenton to spend $2.9 billion less in 2011 than it did in 2009, shrinking the budget to $29.3 billion, which he admits will be "painful, but what other choice do we have?" ...Mr. Christie deserves special applause for his willingness to battle government employee unions. His office calculates that New Jersey's unionized employees have carved out health-care benefits that are 41% higher than the typical Fortune 500 company offers. A teacher who has contributed $62,000 toward her pension, and nothing toward medical benefits, can retire and receive over her lifetime a $1.4 million retirement package and an additional $215,000 in health-care payments. ...Meanwhile, Mr. McDonnell is preparing to sign a 2011-12 budget of $14.5 billion that will reduce state spending below 2006 levels ($14.8 billion). The $2.3 billion in cuts include a reduction in state employee pay, halving arts funding, selling off state-owned liquor stores, and cutting Medicaid payments by $300 million and aid to school districts by $700 million. Mr. McDonnell argues the cuts are fair because school spending has risen 60% in the last decade, while Medicaid is up more than 75%. He has already signed legislation to allow off-shore oil drilling, which the state says could raise $5 billion in revenues over the next 30 years. (Are you listening, California?) Both governors are under attack from liberal interest groups and the media for not raising taxes, but the public wants government to restrain itself the way families have already had to do. New Jersey's property tax rates are the nation's highest and its top income tax rate is close to the highest at 8.97%. Mr. Christie will have to negotiate his way through a legislature that is dominated by Democrats who answer to the public unions, but as he told them: This "is what the people sent me here to do." Virginia Democrats raised taxes twice in six years and should consider New Jersey's punishing rates and fleeing taxpayers an example not to emulate.

Only Mark Steyn Could (Appropriately) Combine Pornography and Healthcare

Very funny column, but the underlying message is quite depressing:

Last Thursday, the California Occupational Safety and Health Standards Board voted to set up a committee to examine whether condoms should be required on all pornographic film shoots. California has run out of money, but it hasn't yet run out of things to regulate. For a government regulatory hearing, the testimony was livelier than usual. Porn star Madelyne Hernandez recalled an especially grueling scene in which she had been obliged to have sex with 75 men. The bureaucrats nodded thoughtfully, no doubt contemplating another languorous 18-month committee assignment looking into capping the number of group-sex participants at 60 per scene. The committee will also make recommendations on whether the "adult" movie industry should be subject to the same regulatory regime and hygiene procedures as hospitals and doctors' surgeries. ...If you've ever been in the filthy wards of Britain's National Health Service, it may make more sense after the passage of ObamaCare to require hospitals to bring themselves up to the same hygiene standards as the average Bangkok porn shoot. ...Hard to believe there will be California bureaucrats looking forward to early retirement on gold-plated pensions who'll be getting home, sinking into the La-Z-Boy and complaining to the missus about a tough day at the office working on the permits for "Debbie Does The Fresno OSHA Office." Meanwhile, ObamaCare will result in the creation of at least 16,500 new jobs. Doctors? Nurses? Ha! Dream on, suckers. That's 16,500 new IRS agents, who'll be needed to check whether you — yes, you, Mr. and Mrs. Hopendope of 27 Hopeychangey Gardens — comply with the 15 tax increases and dozens of new federal mandates about to be "deemed" into existence. ...Obama is government, and government is Obama. That's all he knows and all he's ever known. You elected to the highest office in the land a man who's never run a business or created wealth or made a payroll, and for his entire adult life has hung out with guys who've demonized such grubby activities. Obama's Cabinet has less experience of private business than any in the last century. What it knows is government, and government's default mode is to grow, and grow. Look around you, take it all in. From now on, it gets worse. If you have kids, they'll live in smaller homes, drive smaller cars, live smaller lives. If you don't have kids, you better hope your neighbors do, because someone needs to spawn a working population large enough to pay for the unsustainable entitlements the Obama party has suckered you into thinking you're entitled to.

On Healthcare, Let's Laugh Before We Cry

With the Intrade.com market now showing that the odds of Obamacare passing have jumped to more than 80 percent, let's at least enjoy some gallows humor. Here's an amusing pic I saw linked on Instapundit.

Friday, March 19, 2010

Pushing Higher Taxes in America...and Around the World

If nothing else, the Obama Administration at least is consistent. Not only do they want higher taxes in America, but they also want other nations to pursue ruinous class warfare policies. Here's an excerpt from Tax-news.com:

US Secretary of State, Hillary Clinton, wants Pakistan to review the tax treatment of the country’s most affluent taxpayers to ensure that they are fairly contributing to government coffers. ...In testimony before the US Senate Foreign Relations Committee Clinton said that “well-off Pakistani’s do not pay their fair share for the services that are needed.”

Greetings from the Liberty Forum in New Hampshire

It is not often that I feel insufficiently libertarian, but being at the annual conference of the Free State Project is one of those instances. These people take freedom seriously. Reminds me of being in graduate school at George Mason University.

The most interesting factoid I've learned so far is that the federal government has the power to reject beer labels. A guy at the conference who owns a microbrewery told me that one of his labels was censored because it featured an American flag. I have no idea (and he has no idea) why the bureaucrats thought that was a bad idea, but he did get approval when he re-submitted the label after replacing the 50 stars on the flag with the communist hammer-and-sickle emblem. I guess the paper-pushers in Washington didn't see the irony.

Here's another example that accurately captures the stupidity of government. He submitted a label for a beer that he wanted to call "Liquid Wisdom." This was rejected because the bureaucrats believed that it made an unsubstantiated health claim. Isn't it nice to know that the federal government is protecting us from thinking that a beer would makes us wiser or smarter? I know I'll sleep better tonight.

Obamacare Means Dramatic Expansion of IRS Power

I know I promised extra political humor this week, but here's some extra policy pain. Not only does government-run healthcare mean more spending, more regulation,and more taxes, but it also means more power for the internal revenue service. A new report reveals that the legislation makes the IRS the chief enforcer of the new scheme:

If H.R. 3590, the Senate Democrats’ health care bill, is enacted, which could happen as early as this week, Democrats will have vastly expanded the responsibilities of the Internal Revenue Service (IRS) and fundamentally altered the relationship between the IRS and taxpayers. Specifically, this report examines the Individual Mandate Tax (IMT) proposed in the Democrats’ health care legislation. Under this provision, Democrats make the IRS the chief enforcer for a new government-run health insurance system. One of the most troubling aspects of this new IRS authority is the newly granted power to collect additional taxes from Americans whose health insurance coverage is deemed to be insufficient to meet the definition of minimum coverage, as defined by federal bureaucrats, required to be purchased. Disturbingly, the IRS would be in charge of verifying that every American taxpayer has obtained acceptable health coverage for every month of the year. If the IRS determines that a taxpayer lacks acceptable insurance for even a single month, then the IRS would impose a new tax on that taxpayer, even auditing the taxpayer and could assess interest and penalties on top of the tax. This is an unprecedented new role for the IRS – one that will inject the IRS even further into the lives of American families. This report examines the details of the IRS’s new powers and how this federal bureaucracy will scrutinize and exercise its enhanced authority over Americans. Key findings include: IRS agents verify if you have “acceptable” health care coverage; IRS has the authority to fine you up to $2,250 or 2 percent of your income (whichever is greater) for failure to prove that you have purchased “minimum essential coverage”; IRS can confiscate your tax refund; IRS audits are likely to increase; IRS will need up to $10 billion to administer the new health care program this decade; IRS may need to hire as many as 16,500 additional auditors, agents and other employees to investigate and collect billions in new taxes from Americans; and; Nearly half of all these new individual mandate taxes will be paid by Americans earning less than 300 percent of poverty ($66,150 for a family of four).

Thursday, March 18, 2010

Lies, Damned Lies, and CBO Estimates

Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President's proposal to further expand the federal government's control over the healthcare system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to "drive down red ink":

The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade - and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.
My Cato Institute colleague Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong (see first video below), in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, healthcare providers, state and local politicians, etc) will modify their behavior to become eligible for other people's money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses (see second video below).

If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That's good for Washington and bad for the country.



The Joy of Government-Run Healthcare

I don't think the number of doctors leaving the profession will come anywhere close to this level, but polling data reported by the New England Journal of Medicine is another indication of the dangers of letting politicians get even more power over the health care system. The politicians will still get quality care, but average Americans will find that going to a doctor or hospital is more akin to a visit to the Post Office or DMV:

46.3% of primary care physicians (family medicine and internal medicine) feel that the passing of health reform will either force them out of medicine or make them want to leave medicine.
To add to the grim news, Intrade.com shows that chances of passage are now up to 75 percent. I'll try to find something humorous to post later today to compensate for this grim news.

Wednesday, March 17, 2010

Personal Accounts Are Better than Empty Promises from Social Security

My Cato colleague Jose Pinera makes a powerful argument for "privatizing" Social Security, which is something that has happened in about 30 nations.



My Ph.D. dissertation was on Australia's private system, so I've always had a soft spot for this issue. Sadly, Washington is busy creating new entitlements instead of fixing the ones we already have.

Big Business and Big Government in Bed Together: The Example of Corrupt Pharmaceutical Companies

This column by Tim Carney in the Washington Examiner should make every honest person nauseous. It explains how the big pharmaceutical companies are Obama's biggest allies. This is well know inside the beltway, but average Americans don't understand that Obamacare is largely a giveaway to powerful interest groups. Two observations are worth making. First, the pharmaceutical companies are going to get screwed over once the bill passes. The budget numbers will look terrible and the White House, under pressure to do something (besides just higher taxes), will stab the companies in the back by imposing price controls. Second, even though this will be bad for healthcare since it will undermine research on new drugs, I will take a certain perverse satisfaction in that result. Heck, I think opponents of government-run healthcare should have offered amendments to tax and regulate the industry during debate on the healthcare bills. Companies that climb into bed with government deserve all the bad things that happen to them:

As they whip for the health care bill, Democratic leaders pack a mean one-two punch of populist rhetoric and the hefty financial backing of the drug industry. ...drug industry lobbyists, according to Politico, spent the weekend "huddled with Democratic staffers" who needed the drug lobby to "sign off" on proposals before moving ahead. Meanwhile, we learn that the drug lobby is buying millions of dollars of ads in 43 districts where a Democratic candidate stands to suffer for supporting the bill. The doctors' lobby and the hospitals' lobby are also on board with the Senate bill. ...Of all the single-industry lobbies in Washington, the largest is the Pharmaceutical Researchers and Manufacturers of America. PhRMA spent $26.2 million on lobbying last year — that's nearly three times as much as the insurance lobby, America's Health Insurance Plans, which spent $8.9 million. If you include individual companies' lobbying, pharmaceuticals blow away the competition, beating all other industries by 50 percent, according to data at the Center for Responsive Politics. Given this Big Pharma clout, it's unsurprising that the bill Obama's whipping for — Senate bill — has nearly everything the drug companies wanted: prohibiting reimportation of drugs, preserving Medicare's overpayment for drugs, lengthy exclusivity for biotech drugs, a mandate that states subsidize drugs under Medicaid, hundreds of billions in subsidies for drugs, and more.

A Confession from the CBO Director

The Congressional Budget Office recently estimated that the so-called stimulus generated jobs and growth. I addressed some of the profound shortcomings in CBO's Keynesian model in a previous post, pointing out that the model is structured to produce certain results regardless of what happens in the real world. Interestingly, the Director of the CBO, Doug Elmendorf, basically agrees with me. In a recent speech, recorded by C-Span, he was asked during the question-and-answer session whether the model simply spits out pre-determined numbers. After some hemming and hawing and a follow-up question, he confessed "that's right" when asked if the model would be unable to detect whether the stimulus failed. The relevant exchange begins around the he 39-minute mark of this recording, and Elmendorf's confession takes place shortly after the 40-minute mark (I selflessly watched the entire thing so you wouldn't have to suffer waiting for the key moment).

I'm not sure whether this admission is good news or bad news. It is a sign of progress, I suppose, that CBO's Director is now on the record acknowledging that the model is useless (at least for purposes of measuring the effectiveness of more government spending). But it is perhaps an even more troubling indication of what's wrong in Washington that nobody is concluding that the time has come to junk Keynesian analysis. This is either an updated version of The Emperor's New Clothes or a perverse form of the joke about the drunk looking for his keys under the streetlight because there's light, even though he lost them someplace else.

This Morning's Political Humor

I realize, of course, that this is actually very un-funny when you think about it, but it's the best I can do. To darken your day, I just checked the intrade.com betting site, and the market is guessing that there's a two-in-three chance of this turkey getting approved.

Tuesday, March 16, 2010

Does a Story about Government-Run Healthcare Have a Happy Ending?

We've already addressed this issue in a different context, but this story is even more amusng. I'll resist the need for any (additional) awful puns, and I'll even admit I don't know for sure that these...um...services are financed by taxpayers (but that must be true since we're talking about the Netherlands, right?). But is this really such a big issue for the Dutch that the nurses need to mount a national campaign?

A union representing Dutch nurses will launch a national campaign Friday against demands for sexual services by patients who claim it should be part of their standard care. ...The union said in a statement Thursday that the campaign follows a complaint it had received in the last week from a 24-year-old woman who said a 42-year-old disabled man asked her to provide sexual services as part of his care at home. The young woman witnessed some of the man's other nurses offering him sexual gratification, the union said. When she refused to do the same, he tried to dismiss her on the grounds that she was unfit to provide care.

Obama Delusion Watch (with guest commentary by Jay Leno)

I had to laugh when I saw this article linked on the Drudge Report. Does Obama really think that Democrats in the House will be intimidated by a threat not to campaign for them? Look what wonders Obama did campaigning for Corzine in New Jersey and Coakley in Massachusetts. If he can't boost Democrats in very blue states, I doubt he would be helpful for Blue Dog Democrats from red states. Here's the laugh line from the article:

Barack Obama has said he will not campaign for any Democratic congressmen who fails to support health care reform.
Jay Leno was much more accurate when he joked the other night that, "President Obama turned the heat up on Congress to pass healthcare reform. He’s telling Democrats if they don’t vote for this bill, he will campaign for them in November."

Surviving a Terrible Week with Humor

Maybe I'm a pessimist, but I expect that Pelosi and Obama will use enough bribes and coercion to get the votes needed to pass the Senate bill in the House. Whether there is a subsequent reconciliation bill doesn't really matter, at least to those of us trying to save America from becoming a decrepit welfare state like Greece or France.

To help us survive through this dismal period, we're going to have at least one "political humor" post each day. Let's start (appropriately) with this song, which would be a good contender for the Obama national anthem.

Monday, March 15, 2010

The Obama Administration's Dangerous Re-Definition of Poverty

A former colleague from my days at the Heritage Foundation, Robert Rector, has a very disturbing article at National Review Online. Robert explains that the Obama Administration is putting together a new - and rigged - definition of poverty that has nothing to do with material deprivation. This new system instead will be a measure of income distribution, thus creating a public policy bias supporting spread-the-wealth type policies:

...the Obama administration announced it will create a new poverty-measurement system that will eventually displace the current poverty measure. This new measure, which has little or nothing to do with actual poverty, will serve as the propaganda tool in Obama’s endless quest to “spread the wealth.” ...The current poverty measure counts absolute purchasing power — how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. ...In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms. ...The weird new poverty measure will produce very odd results. For example, if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in “poverty,” because the poverty income threshold would also triple. ...Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the United States, even though the actual living conditions in those countries are extremely bad. ...For most Americans, the word “poverty” suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. But only a small number of the 40 million per­sons classified as poor under the government’s current poverty definition fit that description. Most of America’s poor live in material conditions that would have been judged comfortable, or even well-off, two generations ago. ...Clearly, “poverty” as currently defined by the government has little connection with “poverty” as the average American understands it. The new Obama poverty measure will stretch this semantic gap, artificially swelling the number of “poor” Americans, and severing any link between the government’s concept of poverty and even modest deprivation. In honest English, the new system will measure income inequality, not poverty. Why not just call it an “inequality” index? Answer: because the American voter is unwilling to support massive welfare increases, soaring deficits, and tax increases to equalize incomes. However, if the goal of income leveling is camouflaged as a desperate struggle against poverty, hunger, and dire deprivation, then the political prospects improve. The new measure is a public-relations Trojan horse, smuggling in a “spread the wealth” agenda under the ruse of fighting real material privation... In effect, the Obama poverty measure sets a new national goal of class warfare and income redistribution.

Quite Amusing

The Real Cost of the Government School Monopoly

Here's a great video, put together by my Cato colleagues, exposing the real cost of government-run school systems.

Sunday, March 14, 2010

Cast Your Vote on the Green Jobs Debate

Andy Morriss, a professor at the University of Illinois Law School, is having a debate abourt so-called green jobs at The Economist. For some strange reason, the British magazine picked the nutjob Van Jones as his opponent (you may remember that he was forced to resign from the Obama White House after he was exposed for thinking the U.S. government was complicit in the 9/11 terrorist attacks). Andy has a much stronger argument, but see for yourself. And if you agree that government should not be engaged in corrupt, special interest pandering that destroys more jobs than it creates, then cast a vote for Andy's side of the debate. Here's an excerpt from his opening statement:

...virtually none of the analyses supporting green jobs programmes make calculations of net jobs. Shifting power generation from coal to solar undoubtedly boosts employment in solar energy but it also reduces employment in coal industries. Since solar power is more costly than coal power, the increase in energy prices wipes out jobs in other industries. If their employment effects are a reason to support these programmes, we need to know that the expenditures will actually create more new jobs than they destroy. ...We know how to improve energy efficiency, develop new technologies and create new jobs: unleash entrepreneurs and take advantage of markets to solve what the Nobel Prize winning economist Friedrich Hayek called "the knowledge problem". Put simply, Hayek's point, on this issue, is that we do not know enough to plan on the grand scale green jobs that proponents propose.

Bureaucrats vs. Taxpayers, Part XV

The left pretends to care about fairness, but they have no problem taking money from ordinary people to help fatten the wallets of overpaid government bureaucrats. Pat Buchanan asks what's fair about redistributing from the poor to the rich:

...government work is becoming a sweet deal for those who can get it, which may explain why government has begun to crush the private sector that has to carry the government on its back. Consider. Between 2000 and 2010, U.S. manufacturing, backbone of the nation, lost 5.7 million jobs, one-third of all the manufacturing jobs America had. But government employment rose that same decade by 1.9 million jobs to 22 million, with three-fourths of the new workers being added to local government payrolls. States like California, whose public employees are among the best paid in the nation, are the states closest to chapter 11. ...Should middle-class Americans be forced to subsidize $100,000-a-year pensions for middle-aged California retirees? Yet, Barack Obama, Nancy Pelosi and Harry Reid, in that $787 billion stimulus bill, shoveled billions of federal tax dollars into California to pay salaries, pensions and health benefits of Californians who have been paid more than private-sector workers all of their lives. Where is the fairness here? Not another federal dime should go out to any state government whose employees receive more in pay and pensions than the average worker in that state or the other 49. As for the U.S. government, Republicans should call for a one-year freeze on federal salaries and a two-year freeze on congressional salaries. If sacrifices are to be made, the people who had a fat decade at taxpayers' expense should make them sacrifice, not a ravaged private sector that has contributed almost all of the conscripts to today's 15-million-man army of the unemployed.

Some Political Humor from my Inbox

Senior Health Care Solution According to Maxine

So you're a senior citizen and the government says no health care for you, what do you do?

Our plan gives anyone 65 years or older a gun and 4 bullets. You are allowed to shoot 2 senators and 2 representatives. Of Course, this means you will be sent to prison where you will get 3 meals a day, a roof over your head, and all the health care you need! New teeth, no problem. Need glasses, no problem. New hips, knees, kidney, lungs, heart? All covered.

And who will be paying for all of this? The same government that just told you that you are too old for health care. Plus, because you are a prisoner, you don't have to pay income tax anymore.

IS THIS A GREAT COUNTRY OR WHAT?!

Saturday, March 13, 2010

Keynesian Economics and the Wizard of Oz

When Dorothy and her friends finally reach Oz, they present themselves to the almighty Wizard, only to eventually discover that he is just an illusion maintained by a charlatan hiding behind a curtain. This seems eerily akin to to the state of Keynesian economics. It does not matter that Keynesianism isn't working for Obama. It does not matter that it didn't work for Bush, or for Japan in the 1990s, or for Hoover and Roosevelt in the 1930s. In the ultimate triumph of theory over reality, the Keynesians say all that matters is the macroeconomic model behind the curtain showing that more government spending leads to more jobs and growth. Consider the recent report from the Congressional Budget Office (CBO), which claimed that Obama's stimulus created at least one million jobs. As Brian Riedl of the Heritage Foundation noted:

CBO’s calculations are not based on actually observing the economy’s recent performance. Rather, they used an economic model that was programmed to assume that stimulus spending automatically creates jobs — thus guaranteeing their result. ...The problem here is obvious. Once CBO decided to assume that every dollar of government spending increased GDP..., its conclusion that the stimulus saved jobs was pre-ordained.
But surely this can't be true, you may be thinking. Our public servants in Washington would not make important policy decisions based on a model that automatically produces a certain result, would they? Peter Suderman of Reason pulls aside the curtain:

...those reports rely on assumption-packed models that effectively predetermine their outcomes; what they say, in essence, is that the stimulus worked because we assume it did. ...That's especially true when estimating government spending's productive effects, which is accomplished by plugging numbers into a formula that assumes that government spending produces a multiplier—an increased return for every government dollar spent. In other words, it extrapolates from how much money is put in rather than from what has actually come out. And it does so using a formula that dictates that if money is put in, even more money will come out. According to the CBO's estimates, depending on how the money is spent, one dollar of government spending can produce total economic activity of up to $2.50. What a deal! ...for all practical purposes, the same multipliers that were used to predict how many jobs would be created are being used to estimate how many jobs have been created.
Interestingly, CBO's analysis is completely schizophrenic. Its short-run budget numbers are based on free-lunch Keynesianism that assumes deficit-financed government spending boosts growth, while its long-run numbers are driven by an assumption that government borrowing is terrible for growth (which is why CBO actually claims higher taxes boost economic output - see, for example, figure 3 of this CBO analysis). It is impossible to know whether the people at CBO actually believe their own work, or whether they are simply trying to please their political paymasters by producing results that (conveniently) match up with political preferences for more spending today and higher taxes tomorrow. You can draw your own conclusions, but keep in mind that CBO is now making the absurd claim that a giant new healthcare entitlement will reduce budget deficits.

But I digress. Let's now give the defense of Keynesian model. The folks at CBO and other Keynesian who publish estimates that inevitably turn out to be wrong (Mark Zandi comes to mind) will claim that they are right because they are predicting results compared to what otherwise would have happened. So when they claim that Obama's so-called stimulus created jobs, they are really saying that the economy would have lost even more jobs if the government didn't spend all that money. The problem with this approach is that there is no independent benchmark, but this is not why Keynesianism is wrong. Indeed, most of the economic profession relies on this kind of "counterfactual" analysis. Instead, the problem with Keynesianism is that it fails the empirical test. The Keynesians may be good at constructing models, but that doesn't mean much if the models don't match the real world. Here's what Kevin Hassett of the American Enterprise said in recent congressional testimony:

...most economists learned in graduate school that models like those relied upon most heavily by the CBO provide nonsensical results. The reason the original large scale Keynesian Macro forecasting models were discarded by most of the profession is that they make a simple logical error in assuming that individuals do not change their behavior based on the expectation of future policy. ...Professor Barro has been one of the primary contributors to the macroeconomic time series literature that has tried to estimate effects from observed economic data, rather than assume affects, as is done by the Keynesian models. ...Barro's analysis is based on econometric evidence, a reliance on experience. The CBO analysis is based almost exclusively on speculation within the context of Keynesian Macro models that were discredited decisively in the 1970s. ...Dating at least back to the seminal work of Nelson (1972), economists have known that the empirical time series approach significantly outperforms macroeconomic models in forecasting competitions. ...Ashley (1988) compares data based time series forecasts to those from the large macro forecasters and concludes not only that the time series approach is superior, but that the macro forecasts were so bad that, "most of these forecasts are so inaccurate that simple extrapolation of historical trends is superior for forecasts more than a couple of quarters ahead." ...Finally, one should note that this literature, combined with an earlier public finance literature, raises questions concerning the welfare gain associated with short-term increases in spending. ...Browning (1987) finds that the marginal cost ranges widely, between 10% and 300%. Thus, the welfare costs of paying the bill may be greater than the short-term boost to the economy from the most optimistic estimates. This literature would be consistent with Barro's analysis that suggests the stimulus makes us worse off in the long run.