Should American Taxpayers Subsidize Left-Wing Bureaucrats in Paris (Who get Tax-Free Salaries) so They Can Advocate Higher Taxes in America?

The federal government is capable of enormous waste, which obviously is bad news, but the worst forms of government spending are those that actually leverage bad things. The old welfare system, for instance, paid people not to work and have babies out of wedlock (this still happens, but it's not as bad as it used to be). Paying exorbitant salaries to federal bureaucrats is bad, but it's even worse if they take their jobs seriously and promulgate new regulations and otherwise harass people in the productive sector of the economy. In a previous video on the economics of government spending, I called this the "negative multiplier" effect.

One of the worst examples of a negative multiplier effect is the $100 million that taxpayers spend each year to subsidize the Paris-based Organization for Economic Cooperation and Development. This video has the gory details.

The IMF Is Urging Governments to Adopt Regulatory and Tax Cartels to Benefit Politicians

Price fixing is illegal in the private sector, but unfortunately there are no rules against schemes by politicians to create oligopolies in order to prop up bad government policy. The latest example comes from the bureaucrats at the International Monetary Fund, who are conspiring with national governments to impose higher taxes and regulations on the banking sector. The pampered bureaucrats at the IMF (who get tax-free salaries while advocating higher taxes on the rest of us) say these policies are needed because of bailouts, yet such an approach would institutionalize moral hazard by exacerbating the government-created problem of "too big to fail." But what is particularly disturbing about the latest IMF scheme is that the international bureaucracy wants to coerce all nations into imposing high taxes and excessive regulation. The bureaucrats realize that if some nations are allowed to have free markets, jobs and investment would flow to those countries and expose the foolishness of the bad policy being advocated elsewhere by the IMF. Here's a brief excerpt from a report in the Wall Street Journal:

Mr. Strauss-Kahn said there was broad agreement on the need for consensus and coordination in the reform of the global financial sector. "Even if they don't follow exactly the same rule, they have to follow rules which will not be in conflict," he said. He said there were still major differences of opinion on how to proceed, saying that countries whose banking systems didn't need taxpayer bailouts weren't willing to impose extra taxation on their banks now, to create a cushion against further financial shocks. ...Mr. Strauss-Kahn said the overriding goal was to prevent "regulatory arbitrage"—the migration of banks to places where the burden of tax and regulation is lightest. He said countries with tighter regulation of banks might be able to justify not imposing new taxes.

I've been annoyingly repetitious on the importance of making governments compete with each other, largely because the evidence showing that jurisdictional rivalry is a very effective force for good policy around the world. I've done videos showing the benefits of tax competition, videos making the economic and moral case for tax havens, and videos exposing the myths and demagoguery of those who want to undermine tax competition. I've traveled around the world to fight the international bureaucracies, and even been threatened with arrest for helping low-tax nations resist being bullied by high-tax nations. Simply stated, we need jurisdictional competition so that politicians know that taxpayers can escape fiscal oppression. In the absence of external competition, politicians are like fiscal alcoholics who are unable to resist the temptation to over-tax and over-spend.

This is why the IMF's new scheme should be resisted. It is not the job of international bureaucracies to interfere with the sovereign right of nations to determine their own tax and regulatory policies. If France and Germany want to adopt statist policies, they should have that right. Heck, Obama wants America to make similar mistakes. But Hong Kong, Switzerland, the Cayman Islands, and other market-oriented jurisdictions should not be coerced into adopting the same misguided policies.

Greetings from the Cayman Islands

I'm now relaxing in the warm sunshine of the Cayman Islands, having given a speech to an International Funds Conference.

My speech was a standard critique of high-tax governments and international bureaucracies for trying stifle tax competition and create a global tax cartel - sort of an OPEC for politicians.

The most interesting part of the conference was when an expert from Hong Kong equated the tax system of the United States with North Korea and Libya. A bit of hyperbole, to be sure, but our tax system has totalitarian aspects that are far worse than anything found even in places such as France. And now Obama wants to further increase the power of the IRS and strip away even more of our freedoms.

For those who want more information on the topic, here's my video on tax competition, followed by a video castigating Obama's anti-tax haven demagoguery.