Category Archives: Economist Dan Mitchell

What Jerry Seinfeld’s ‘Black Card’ Can Teach Lawmakers About Debt Limit

17 Reasons the large national debt is a big deal!!!

We got to stop spending so much money and start paying off our national debt or the future of our children and grandchildren will be very sad indeed. Everyone knows that entitlement spending must be cut but it seems we are not brave enough to do it. I have contacted my Congressmen and Senators over and over but nothing is getting done!!! At least there are 66 conservative Republicans in the House that have stood up  and voted against raising the debt ceiling.

Comedian Jerry Seinfeld waits for the next scene to be filmed for an episode of the program “Comedians in Cars Getting Coffee” near the Capitol in Washington on Dec. 6, 2015. All too many lawmakers under the Capitol dome think they have a no-spending-limits credit card of the sort Seinfeld joked about. (Photo: Matt McClain/The Washington Post/Getty Images)

As members of Congress debate the debt limit, some seem to think the government has an American Express “Black Card.”

In a 2018 episode of “Comedians in Cars Getting Coffee,” Jerry Seinfeld explained his version of how the Black Card came to be:

I was waiting for [the crew] to move some cameras, and the crew guy comes up to me, he says, ‘You got the Black Card?’ And I go, ‘No, what’s the Black Card?’ He says, ‘There’s only three in the world. The Sultan of Brunei has one, the president of American Express has one, and I thought you would have the third one.’ Next morning, I call the president of American Express. I go, ‘Is there a Black Card?’ He says, ‘It’s just a rumor. It doesn’t exist.’ He said, ‘But you know what? It’s not a bad idea.’ And so they developed it, and they gave me the first one.

The so-called Black Card—formally, the Centurion Card—is an exclusive, “no spending limit” credit card, available by invite only. While other companies also have their own versions of “no spending limit” credit cards, the reality is that none offers a blank check on spending.

The cards may have no preset spending limit, but they all limit cardholders’ purchasing power based on a rolling assessment of their creditworthiness and ability to repay.

And that makes sense because neither the Sultan of Brunei, nor Jerry Seinfeld, nor American politicians should be given a limitless line of credit.

America’s debt limit exists as a checkpoint, meant to protect Americans from the reckless accumulation of debt in their names, and those of their children and grandchildren. That’s why a majority of Americans oppose raising the debt limit unless policymakers also reduce spending.

Already, the U.S. has accumulated $31.4 trillion in federal debt—the equivalent of $242,000 per household.

If the federal government’s borrowing were subject to the same constraints as ordinary households, and it actually had to repay its borrowing, every household in America would suddenly have two mortgage or rent payments each month, instead of just one. (At $220,000 in 2021, average mortgage debt was slightly lower than each household’s share of the federal debt.)

But unlike ordinary households—and unlike even exclusive Black Card holders—the federal government can simply vote to raise or temporarily waive its debt limits.

Over the past decade, policymakers have frequently given lip service to the debt limit, choosing to “suspend” the debt limit for periods of time, instead of setting dollar limits, and usually failing to include meaningful measures to alter unsustainable federal spending.

The proof is in the pudding in the case against Congress granting itself unlimited spending periods. Over the course of 74 years, from the establishment of the first debt limit in 1939 (an amount equal to $968 billion in today’s dollars) to 2013, policymakers raised the debt limit by about $15.4 trillion.

In 2013, policymakers began the practice of “suspending” the debt limit instead of setting dollar limits and the consequence was $12 trillion in new debt over the following eight years, through 2021. That’s seven times the inflation-adjusted rate of expansion prior to the reckless practice of suspending the debt limit.

And the federal government blew through Democrats’ $2.5 trillion debt-limit increase enacted in December 2021, adding $19,200 in debt per household over the past 13 months.

>>> Combat the Inflation Reduction Act’s Central Planning

Imposing an actual debt limit and enacting meaningful spending reforms is crucial, because if politicians don’t set their own limits, they’ll face the market’s limits.

At some point, investors will become unwilling to continue lending to the U.S. government at reasonable interest rates, and recent years of reckless spending have pushed us closer to that point. The consequences of a market-imposed federal debt limit will be far more severe than the short-term effects of modest fiscal restraints that should accompany any debt-limit increase.

For example, if markets soured on U.S. debt in 2025, balancing the federal budget in that year alone would require policymakers to take an extra $10,000 per household across the U.S.

If, however, policymakers were to agree to meaningful spending reductions and pro-growth policy reforms in exchange for a specified increase in the debt limit, they could help avoid a fiscal crisis and start reducing the second-mortgage equivalent of federal debt that looms over every household in America.

They might even start to get us out of the red—and into the black.

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June 17, 2013 at 7:13 am

GO-Debt-Denial-rev_600

Remember the debt? That $17 trillion problem? Some in Washington seem to think it’s gone away.

The Washington Post reported that “the national debt is no longer growing out of control.” Lawmakers and liberal inside-the-Beltway organizations are floating the notion that it’s not a high priority any more.

We beg to differ, so we came up with 17 reasons that $17 trillion in debt is still a big, bad deal.

1. $53,769 – Your share of the national debt.  

As Washington continues to spend more than it can afford, every American will be on the hook for this massive debt burden.

willrogers_450

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2. Personal income will be lower.

The skyrocketing debt could cause families to lose up to $11,000 on their income every year. That’s enough to send the kids to a state college or move to a nicer neighborhood.

3. Fewer jobs and lower salaries.

High government spending with no accountability eliminates opportunities for career advancement, paralyzes job creation, and lowers wages and salaries.

4. Higher interest rates.

Some families and businesses won’t be able to borrow money because of high interest rates on mortgages, car loans, and more – the dream of starting a business could be out of reach.

5. High debt and high spending won’t help the economy.

Journalists should check with both sides before committing pen to paper, especially those at respectable outlets like The Washington Post and The New York Times. A $17 trillion debt only hurts the economy.

6. What economic growth?

High-debt economies similar to America’s current state grew by one-third less  than their low-debt counterparts.

7. Eventually, someone has to pay the nation’s $17 trillion credit card bill, and Washington has nominated your family.

It’s wildly irresponsible to never reduce expenses, yet Washington continues to spend, refusing to acknowledge the repercussions.

>>>Watch this video to see how scary $17 trillion really is for your family.

8. Jeopardizes the stability of Medicare, Social Security, and Medicaid.

Millions of people depend on Medicare, Medicaid, and Social Security, but these programs are also the main drivers of the growing debt. Congress has yet to take the steps needed to make these programs affordable and sustainable to preserve benefits for those who need them the most.

9. Washington collects a lot, and then spends a ton. Where are your tax dollars going?

In 2012, Washington collected $2.4 trillion in taxes—more than $20,000 per household. But it wasn’t enough for Washington’s spending habits. The federal government actually spent $3.5 trillion.

>>> Reality check: See where your tax dollars really went.

10. Young people face a diminished future.

College students from all over the country got together in February at a “Millennial Meetup” to talk about how the national debt impacts their generation.

>>>Shorter version: They’re not happy. Watch now.

11. Without cutting spending and reducing the debt, big-government corruption and special interests only get bigger.

The national debt is an uphill battle in a city where politicians too often refuse to relinquish power, to the detriment of America.

12. Harmful effects are permanent.

Astronomical debt lowers incomes and well-being permanently, not just temporarily. A one-time major increase in government debt is typically a permanent addition, and the dragging effects on the economy are long-lasting.

13. The biggest threat to U.S. security.

Even President Obama’s former Chairman of the Joint Chiefs of Staff thinks so:

Mullen_450

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14. Makes us more vulnerable to the next economic crisis.

According to the Congressional Budget Office’s 2012 Long-Term Budget Outlook, “growing federal debt also would increase the probability of a sudden fiscal crisis.”

15. Washington racked up $300 billion in more debt in less than four months.

Our nation is on a dangerous fiscal course, and it’s time for lawmakers to steer us out of the coming debt storm.

16. High debt makes America weaker.

Even Britain’s Liam Fox warns America: Fix the debt problem now, or suffer the consequences of less power on the world stage.

17. High debt crowds out the valuable functions of government.

By disregarding the limits on government in the Constitution, Congress thwarts the foundation of our freedoms.

Read the Morning Bell and more en español every day at Heritage Libertad.

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New Video shows how Obama has run up the national debt

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In One Year, Spending on Interest on the National Debt Is Greater Than Funding for Most Programs

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National Debt Set to Skyrocket

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Each American’s Share of National Debt Is Growing

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How can the Federal Reserve buy trillions dollars of our national debt without any money?

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An open letter to President Obama (Part 58) “Our national debt threatens our security”

Liam Fox Issues a Warning to America Uploaded by HeritageFoundation on Feb 28, 2012 Britain’s Liam Fox has a warning for America: Fix the debt problem now or suffer the consequences of less power on the world stage. The former U.K. secretary of state for defense visited Heritage to explain why the America’s debt is […]

USA’s biggest defense problem is our national debt

Liam Fox Issues a Warning to America Uploaded by HeritageFoundation on Feb 28, 2012 Britain’s Liam Fox has a warning for America: Fix the debt problem now or suffer the consequences of less power on the world stage. The former U.K. secretary of state for defense visited Heritage to explain why the America’s debt is […]

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Incoming House Oversight Chairman: ‘Imperative’ to Stop Omnibus Spending Bill

Rob Bluey  @RobertBluey / December 21, 2022

James Comer in a grey suit in front of an American flag

Rep. James Comer, R-Ky., the incoming chairman of the House Oversight and Reform Committee, is urging his Senate counterparts to reject the $1.85 trillion omnibus spending bill in order to strengthen GOP’s oversight authority for the next Congress.

Comer will ascend to chairman of the powerful House committee Jan. 3 with a range of investigations planned. Before he’s even able to get started, however, Senate Republicans who support the omnibus spending bill could strip Comer of important leverage—the power of the purse.

With 20 Republican senators already votingTuesday on a procedural motion to advance the bill, Senate Majority Leader Chuck Schumer, D-N.Y., appears to have enough GOP support to get the bill done this week.

That hasn’t stopped Comer and other House Republicans from warning about the consequences.

“It’s imperative that we stop the massive omnibusso that Republicans can use our majority power next Congress to conduct oversight of the federal government, hold the Biden Administration accountable, and enact good government reforms,” Comer told The Daily Signal in a statement.

Withholding money from the Biden administration is one tool House Republicans can use to exercise effective oversight—particularly if federal agencies and government officials are uncooperative or not forthcoming with information in the new year.

“The primary method that Congress can use to hold federal agencies accountable is via appropriations,” said Paul Winfree, former budget policy director for President Donald Trump and a distinguished fellow at The Heritage Foundation. “They should not be appropriating until they’ve figured out just how to use their oversight powers.” (The Daily Signal is the multimedia news organization of The Heritage Foundation.)

Passage of the omnibus spending bill would insulate the Biden administration from a spending fight for the next year. The bill making its way through the Senate funds the president’s agenda from through Sept. 30, 2023.

>>> No Surprise: Republicans Won’t Hold Biden Accountable

Comer was first elected to Congress in 2016 and served as ranking member on the House Oversight and Reform Committee while Democrats had the majority. He’ll ascend to the top spot once the 118th Congress starts in less than two weeks.

He’s among a vocal group of House Republicans who are warning about implications of passing the massive spending bill during the current lame-duck Congress rather than waiting until next year when Republicans have control of the House.

“It’s no surprise that Democrats are racing to use their waning days of power to force through trillions of dollars in new spending and a host of bad policies that will weaken our country,” Comer told The Daily Signal. “Democrats’ unhinged, inflation-inducing spending binge over the last two years caused 40-year high inflation that’s harming the pocketbooks of Americans and has allowed rampant government waste.”

In addition to Comer, 13 House Republicans are promising to oppose and stymie the legislative priorities of any Republican senator who votes in favor of the omnibus spending bill this week. They have the support of likely incoming House Speaker Kevin McCarthy, R-Calif., as well.

>>> Warning Shot: House Conservatives Threaten Revenge If GOP Senators Vote for Pelosi-Schumer Spending Bill

Schumer already has the support of Senate Minority Leader Mitch McConnell, R-Ky., and Sens. Richard Shelby, R-Ala., vice chairman of the Senate Appropriations Committee. They were among the 20 Senate Republicans who voted to move forward on the bill Tuesday.

Earlier this year, House Republicans outlined an ambitious oversight agenda. It includes an investigation of Homeland Security Alejandro Mayorkas’ failures leading to the border crisis, the government’s collusion with Big Tech to censor speech, the origins of COVID-19, Hunter Biden’s corrupt business dealings, the disastrous withdrawal from Afghanistan, politicization of the FBI, the administration’s promotion of critical race theory, and many other topics.

Have an opinion about this article? To sound off, please email letters@DailySignal.com and we’ll consider publishing your edited remarks in our regular “We Hear You” feature. Remember to include the url or headline of the article plus your name and town and/or state.

A.F. Branco for Oct 21, 2021

 

Incoming House Oversight Chairman: ‘Imperative’ to Stop Omnibus Spending Bill

James Comer in a grey suit in front of an American flag

“It’s imperative that we stop the massive omnibus so that Republicans can use our majority power next Congress to conduct oversight of the federal government, hold the Biden Administration accountable, and enact good government reforms,” Rep. James Comer, incoming chairman of the House Oversight and Reform Committee, said in a statement. (Photo by Anna Moneymaker/Getty Images)

Rep. James Comer, R-Ky., the incoming chairman of the House Oversight and Reform Committee, is urging his Senate counterparts to reject the $1.85 trillion omnibus spending bill in order to strengthen GOP’s oversight authority for the next Congress.

Comer will ascend to chairman of the powerful House committee Jan. 3 with a range of investigations planned. Before he’s even able to get started, however, Senate Republicans who support the omnibus spending bill could strip Comer of important leverage—the power of the purse.

With 20 Republican senators already votingTuesday on a procedural motion to advance the bill, Senate Majority Leader Chuck Schumer, D-N.Y., appears to have enough GOP support to get the bill done this week.

That hasn’t stopped Comer and other House Republicans from warning about the consequences.

 

“It’s imperative that we stop the massive omnibusso that Republicans can use our majority power next Congress to conduct oversight of the federal government, hold the Biden Administration accountable, and enact good government reforms,” Comer told The Daily Signal in a statement.

Withholding money from the Biden administration is one tool House Republicans can use to exercise effective oversight—particularly if federal agencies and government officials are uncooperative or not forthcoming with information in the new year.

“The primary method that Congress can use to hold federal agencies accountable is via appropriations,” said Paul Winfree, former budget policy director for President Donald Trump and a distinguished fellow at The Heritage Foundation. “They should not be appropriating until they’ve figured out just how to use their oversight powers.” (The Daily Signal is the multimedia news organization of The Heritage Foundation.)

Passage of the omnibus spending bill would insulate the Biden administration from a spending fight for the next year. The bill making its way through the Senate funds the president’s agenda from through Sept. 30, 2023.

>>> No Surprise: Republicans Won’t Hold Biden Accountable

Comer was first elected to Congress in 2016 and served as ranking member on the House Oversight and Reform Committee while Democrats had the majority. He’ll ascend to the top spot once the 118th Congress starts in less than two weeks.

He’s among a vocal group of House Republicans who are warning about implications of passing the massive spending bill during the current lame-duck Congress rather than waiting until next year when Republicans have control of the House.

“It’s no surprise that Democrats are racing to use their waning days of power to force through trillions of dollars in new spending and a host of bad policies that will weaken our country,” Comer told The Daily Signal. “Democrats’ unhinged, inflation-inducing spending binge over the last two years caused 40-year high inflation that’s harming the pocketbooks of Americans and has allowed rampant government waste.”

In addition to Comer, 13 House Republicans are promising to oppose and stymie the legislative priorities of any Republican senator who votes in favor of the omnibus spending bill this week. They have the support of likely incoming House Speaker Kevin McCarthy, R-Calif., as well.

>>> Warning Shot: House Conservatives Threaten Revenge If GOP Senators Vote for Pelosi-Schumer Spending Bill

Schumer already has the support of Senate Minority Leader Mitch McConnell, R-Ky., and Sens. Richard Shelby, R-Ala., vice chairman of the Senate Appropriations Committee. They were among the 20 Senate Republicans who voted to move forward on the bill Tuesday.

Earlier this year, House Republicans outlined an ambitious oversight agenda. It includes an investigation of Homeland Security Alejandro Mayorkas’ failures leading to the border crisis, the government’s collusion with Big Tech to censor speech, the origins of COVID-19, Hunter Biden’s corrupt business dealings, the disastrous withdrawal from Afghanistan, politicization of the FBI, the administration’s promotion of critical race theory, and many other topics.

By voting for the $1.7 trillion spending bill, Senate Republicans would strip their House counterparts of the leverage they need on all those investigations and more by giving Biden and Democrats exactly what they want—money to continue on, unaffected, for another year.

Have an opinion about this article? To sound off, please email letters@DailySignal.com and we’ll consider publishing your edited remarks in our regular “We Hear You” feature. Remember to include the url or headline of the article plus your name and town and/or state.


March 31, 2021

President Biden  c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

 

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

 

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

______________

Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]

_______

Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.

_____________

_________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733

Williams with Sowell – Minimum Wage

Thomas Sowell

Thomas Sowell – Reducing Black Unemployment

By WALTER WILLIAMS

—-

Ronald Reagan with Milton Friedman
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Dan Mitchell: The Conservative Party is unwilling to do anything to restrain spending on the NHS (or any other part of the UK budget), which is why their main role nowadays is to be the tax collectors for the welfare state!

A.F. Branco for Oct 21, 2021

 

 

In Five Sentences, Everything You Need to Know about Bureaucracy

One thing that became very apparent during the pandemic is that government schools are mostly run for the benefit of bureaucrats rather than students.

Not that any of us should have been surprised.

The same is true for other government bureaucracies, as well as parts of the private sector where there is a lot of government intervention that subsidizes featherbedding.

What’s especially galling is when budget increases are used to hire more bureaucrats, yet taxpayers get nothing of value in exchanges.

That’s certainly the case in the United States, where education bureaucracies (and education spending) have dramatically increased, yet there has been no concomitant increase in educational outcomes.

Another examples come from the United Kingdom where the government-run National Health Service gets more money and more bureaucrats every year, as explained in CapX by Fiona Bulmer, yet there’s never an improvement in health outcomes.

Indeed, these five sentences are a perfect example of government bureaucracies in action.

…the NHS in England employs the full time equivalent of 1.2 million people, nearly 200,000 more than they did in 2012.

…in 2021, the NHS was around 16% less productive than before the pandemic.

…one of the managers lamented to me that he could schedule a maximum of four knee operations a day but in the private sector they manage eight a day. 

…7m people on NHS waiting lists.

The NHS, like all organisations where users have no choice defaults to accommodating the providers not the consumers.

I’m left with two conclusions after reading those depressing numbers.

The obvious takeaway, as I’ve previously noted, is that if you don’t want massive future tax increases, there’s no alternative to what critics call “free-market fundamentalism.”


March 31, 2021

President Biden  c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

 

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

 

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

______________

Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]

_______

Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.

_____________

_________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733

Williams with Sowell – Minimum Wage

Thomas Sowell

Thomas Sowell – Reducing Black Unemployment

By WALTER WILLIAMS

—-

Ronald Reagan with Milton Friedman
Milton Friedman The Power of the Market 2-5

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Dan Mitchell: The Case for Gridlock

 

The Case for Gridlock

My views on gridlock were fully captured in the title of a 2015 column, which stated that divided government was “Better than the Alternative of Expanding Government.”

And I followed up with a 2020 column that showed that spending restraint was more likely when the two parties were forced to share power.

To be sure, divided government also can produce very bad results (the country suffered a big expansion in the burden of government during the Nixon years, for instance).

But J.D. Tuccille from Reason explains why Americans should feel happy about gridlock starting in 2023.

…the election results stand as an expression of overwhelming lack of confidence in the major parties, with a resulting breather for the country resulting from the split decision’s ensuing, and quite welcome, gridlock. …The Wall Street Journal‘s Brody Mullins and John D. McKinnon noted last week. “…Washington overall isn’t expected to do much for the next two years.”That’s good news for Americans baffled by Democrats’ insistence on treating the U.S. economy as something between a laboratory experiment and a toy train set, with lawmakers indulging their whims through serial rounds of life-altering policy moves. …Republicans didn’t exactly convince the country that they were the cavalry riding to the rescue. Their main selling point seems to have been that they weren’t Democrats. …gridlock, with all of its faults and instability, is what we have, and we should be thankful for that. …gridlock can give us a bit of a national breather, and that may be the best we can hope for from a destructive political system.

Amen. I’m in favor of more breathing room for the economy’s productive sector. That’s when we get better outcomes.

But there are two reasons why gridlock is not a long-run solution.

First, Tuccille points out that we now have presidents claiming autocratic powers.

The gridlock…isn’t total. The increasingly autocratic nature of the presidency allows enormous room for the nation’s chief executive to act unilaterally. Through executive orders and memoranda, presidents enact policy changes that should go through Congress (if they’re permissible at all) in a manner befitting elective monarchs. The only real check on that power is the willingness of the courts to remind the country that, while rule-by-decree is a form of government, it’s not one permitted by the Constitution.

Second, we have very serious problems (an awful tax system, runaway entitlement spending, the administrative state, etc) that can only be solved by legislative action.

I’ll close with a depressing observation about what to expect from politics. Simply stated, politicians generally have incentives to maximize their short-run status, not to maximize the nation’s long-run health.

So, whether we have gridlock or not, it’s not easy to be optimistic.

Unless, of course, we can figure out ways to reincarnate the very rare Republican and very rare Democrat who did the right thing.

Until and unless that happens, I want politicians to be “unproductive.”

 

 


Open letter to President Obama (Part 584)

(Emailed to White House on 6-10-13.)

President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

The federal government debt is growing so much that it is endangering us because if things keep going like they are now we will not have any money left for the national defense because we are so far in debt as a nation. We have been spending so much on our welfare state through food stamps and other programs that I am worrying that many of our citizens are becoming more dependent on government and in many cases they are losing their incentive to work hard because of the welfare trap the government has put in place. Other nations in Europe have gone down this road and we see what mess this has gotten them in. People really are losing their faith in big government and they want more liberty back. It seems to me we have to get back to the founding  principles that made our country great.  We also need to realize that a big government will encourage waste and corruption. The recent scandals in our government have proved my point. In fact, the jokes you made at Ohio State about possibly auditing them are not so funny now that reality shows how the IRS was acting more like a monster out of control. Also raising taxes on the job creators is a very bad idea too. The Laffer Curve clearly demonstrates that when the tax rates are raised many individuals will move their investments to places where they will not get taxed as much.

______________________

If you blame the Sequester for blaming job growth then you don’t have a good grasp on economics.

When the monthly job numbers are released, most people focus on the unemployment rate.

On many occasions, I’ve cited that number, usually to point out that the unemployment rate is far higher than the Obama Administration promised it would be if the so-called stimulus was enacted.

That episode should be additional proof that Keynesian economics is misguided.

But that’s not the issue we should be worrying about now. Instead, our concern should be what appears to be a permanent reduction in the share of the working-age population that is employed.

As I explain in this interview for Blaze TV, our ability to produce is governed by the quality and quantity of labor and capital in the economy. Unfortunately, it appears that the Bush-Obama policies of bigger government have had a negative impact.

To build upon that interview, here are the very latest numbers from the Bureau of Labor Statistics.

To be fair, the drop you see on the chart started before Obama took office. But he can be fairly blamed for the fact that there’s been no recovery.

Obama Jobs Legacy

The moral of the story is that bigger government is not a recipe for prosperity.

The burden of government spending is too high, the tax code is too punitive, red tape is hindering entrepreneurship, and various handouts are creating a dependency culture that discourages work.

Should we be surprised that the employment-population ratio is grim?

___________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

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By Everette Hatcher III | Posted in Cato Institute, Current Events, Economist Dan Mitchell, spending out of control | Edit | Comments (0)

Dan Mitchell: “Looking at reforms at the state level, the past two years have produced very good news on education policy and tax policy!”

The Correct Rate for a State Income Tax Is Zero

Looking at reforms at the state level, the past two years have produced very good news on education policy and tax policy.

Regarding the latter, many states have lowered tax rates and several of them have junked so-called progressive tax systems and replaced them with simple and fair flat taxes.

But I’m greedy for even bigger improvements.

I want to see some states move not just to Column 2 in my ranking of state tax policy. I want them to be in Column 1.

And that means they need to get rid of income taxes.

The good news is that some states are having that discussion.

Here are some excerpts from an Associated Pressreport from Mississippi, written by Michael Goldberg.

Mississippi Gov. Tate Reeves promised to push for a full elimination of the state’s income tax during the 2023 legislative session. The move would make Mississippi the 10th state with no income tax. …Mississippi’s Republican-controlled legislature passed legislation in 2022 that will eliminate the state’s 4% income tax bracketstarting in 2023. In the following three years, the 5% bracket will be reduced to 4%. …Supporters of the 2022 Mississippi tax cut said it would spur economic growth and attract new residents to Mississippi. …Republican House speaker Philip Gunn has said full elimination of the state income tax is “achievable,” though he hasn’t committed to doing so in the 2023 session. …Tax-cut proposals are a direct effort to compete with states that don’t tax earnings, including Texas, Florida and Tennessee.

And here are portions of an article in National Review about Colorado, authored by Ben Murrey, which also notes that the TABOR spending limit will need to be strengthened if lawmakers are serious about getting rid of the state’s income tax.

When an interviewer recently asked Colorado’s Democratic governor Jared Polis what the state’s income-tax rate should be, he answered without hesitation: “It should be zero.” …The effort to chisel away at the income tax has already gained steam in the state.Last year, voters reduced the tax with Proposition 116 — a ballot initiative that brought the rate from 4.63 percent to 4.55 percent. …Eliminating the tax would provide an enormous direct windfall to Colorado households. …every reduction in income tax will allow Coloradans to keep more of every dollar they earn, and it invites more jobs and opportunities for residents. …To eliminate the income tax entirely, the state would probably need to begin lowering the revenue limit along with the rate reductions in the future. …these two reforms would put the state on a road to zero.

By the way, Colorado voters once again just cut the state’s flat tax in a referendum earlier this month.

Would Mississippi and Colorado be doing the right thing if they joined the zero-income-tax club?

Yes. I cited some evidence on this issue about 10 years ago.

Here’s some updated analysis from Chris Edwards.

The nine states without an individual income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. …What they have in common is providing needed state‐​local services to their residents without complex, anti‐​freedom, and anti‐​growth individual income taxes. Most of the nine run leaner and more efficient governments than most other states. They only partly make up for the income tax revenue gap with other revenues. In terms of overall tax burdens, eight of the nine states are toward the bottom of the 50 states and Washington is in the middle. …Total taxes in the seven states average 8.1 percent of income. The average in the 40 other states is 9.6 percent. Thus, the lack of individual income tax restrains the overall tax burden. …Repealing state individual income taxes is a good goal. …Residents get the state‐​local services they need, but at lower cost.

Here’s the chart that accompanied Chris’ article. He separates Alaska and Wyoming because they get so much money from energy taxes and are not realistic role models for other states.

The bottom line is that states without an income tax tend to have smaller government.

This is especially true for Florida, Tennessee, South Dakota, and New Hampshire. And Texas may join those states now that it has strengthened its spending cap.

One should-be-obvious conclusion from this data is that states with no income taxes should not make the mistake of adopting that punitive levy. Unless, of course, they want to repeat Connecticut’s unhappy experience.

Illinois and Fiscal Suicide, Part I

I wrote a couple of days ago about California’s grim future.

But now I’ll share some good news. No matter how bad California gets, the Golden State probably won’t have to worry about people and businesses fleeing to Illinois.

That’s because the Prairie State is an even bigger mess. If California is committing “slow motion suicide,” Illinois is opting for the quickest-possible fiscal demise.

Politicians in Springfield (the Illinois capital) have a love affair with higher taxes. A very passionate love affair.

But the state’s productive people have a different point of view. More and more of them have been escaping.

And they are now being joined by the state’s most-famous company, as Matt Paprocki of the Illinois Policy Institute explains in a column for the Washington Post.

When Boeing announced last month that it was moving its headquarters from Chicago to Arlington, Va., it sent shudders through the Illinois business community and state capital.But last week, when the heavy-equipment manufacturer Caterpillar said it was moving its headquarters to Texas, it felt more like a bulldozer ramming into the news. …If you’re an Illinois business owner or resident, as I am, the economics of staying are tough and the enticements to move away are many. …According to the U.S. Census Bureau, last year the state had the third-largest loss of residents due to domestic migration in the nation (-122,460), trailing only California and New York.

It’s easy to understand why people and businesses are leaving.

In 2017, Illinois lawmakers raised the personal income tax rate to 4.95 percent, from 3.75 percent, and hiked the corporate rate to 7 percent, from 5.25 percent. When J.B. Pritzker took office as governor in 2019, he passed another 24 tax and fee hikes costing taxpayers over $5 billion. …With 278,475 regulatory restrictions and requirements — double the national average — Illinois has the third most heavily regulated environment in the country. …Illinois owes over $139 billion in state pension debt as of last year, and local governments owe about $75 billion, which is the primary driver for Illinois’ spiraling property taxes, second-highest in the nation.

Mr. Paprocki offers all sorts of suggestions for reform, including a spending cap.

But the chances of pro-growth reform are effectively zero. The governor is a hard-core leftist (as well as a hypocrite) and the state legislature is controlled by government employee unions.

So if you’re hoping for a TABOR-style spending cap, there’s little reason to be optimistic.

And if you’re hoping for reforms that will improve the state’s “least friendly” tax climate, don’t hold your breath.

California is the Greece of the USA, but Texas is not perfect either!!!

Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax.

No wonder the Lone Star State is growing faster and creating more jobs.

And the gap will soon get even wider since California voters recently decided to drive away more productive people by raising top tax rates.

But a key challenge for all governments is controlling the size and cost of bureaucracies.

Government employees are probably overpaid in both states, but the situation is worse in California, as I discuss in this interview with John Stossel.

Dan Mitchell Comparing Excessive Bureaucrat Compensation in Texas and California

But being better than California is not exactly a ringing endorsement of Texas fiscal policy.

A column in today’s Wall Street Journal, written by the state’s Comptroller of Public Accounts, points out some worrisome signs.

As the chief financial officer of the nation’s second-largest state, even I have found it hard to get a handle on how much governments are spending, and how much debt they’re taking on. Every level of government is piling up incredible bills. And they’re coming due, whether we like it or not. Even in low-tax Texas, property taxes have risen three times faster than the inflation rate and four times faster than our population growth since 1992. Our local governments, meanwhile, more than doubled their debt load in the last decade, to more than $7,500 in debt for every man, woman and child in the state. In Houston alone, city-employee pension plans are facing an unfunded liability of $2.4 billion. But too many taxpayers aren’t given the information they need to make informed decisions when they vote debt issues. Recently I spent several months holding about 40 town-hall meetings with Texans across our state. Each time, I asked the attendees if they could tell me how much debt their local governments are carrying. Not a single person in a single town had this information.

In other words, taxpayers need to be eternally vigilant, regardless of where they live. Otherwise the corrupt rectangle of politicians, bureaucrats, lobbyists, and interest groups will figure out hidden ways of using the political process to obtain unearned wealth.

P.S. The second-most-viewed post on this blog is this joke about Texas, California, and a coyote, so it must be at least somewhat amusing. If you want some Texas-specific humor, this police exam is amusing and you’ll enjoy this joke about the difference between Texans, liberals and conservatives. And if you want California-specific humor, this Chuck Asay cartoon hits the nail on the head.

Dan Mitchell: The Most Economically Free State Is…?

The Most Economically Free State Is…?

According to the Fraser Institute’s Economic Freedom of the World, New Hampshire was the most economically free state in America in 2017, 2018, and 2019.

But the state famous for “Live Free or Die” has now been replaced by the Sunshine State.

The most-recent edition, which is based on 2020 data, informs us that Florida now enjoys more economic liberty than any other state.

New Hampshire still is ranked very high, coming in at #2, followed by South Dakota at #3. Texas and Tennessee are tied for #4.

What’s the one thing they all have in common? No state income tax.

Meanwhile, the report also highlights the states that (predictably) dominate the bottom of the rankings.

For the purpose of comparing jurisdictions within the same country, the subnational indices are the appropriate choice. …In the United States, the most economically free state was Florida at 7.94, followed by New Hampshire at 7.84, South Dakota at 7.75, and Texas and Tennessee at 7.66.(Note that since the indexes were calculated separately for each country, the numeric scores on the subnational indices are not directly comparable across countries.) The least-free state was again New York at 4.25, following California at 4.59, Hawaii at 4.65, Vermont at 4.70, and Oregon at 4.92. For the first time, we have made a preliminary attempt to include the US territory of Puerto Rico in the US subnational index. It came in with a score of 2.04. The next lowest score was more than twice as high.

Here are the full rankings at the subnational level (i.e., measuring the policies that are under the control of state lawmakers).

For the first time, the report assesses Puerto Rico. Hardly a surprise to see where it ranks.

The report also has an “all-government” ranking, which includes the effect of both national and subnational governments.

On that basis, New Hampshire is in first place.

The all-government index includes…comparisons among Canadian, Mexican, and US subnational jurisdictions that take into account national policies affecting all jurisdictions within each country. …The top jurisdiction is New Hampshire at 8.10, followed by Florida (8.05), Utah (8.03), and then Idaho and South Carolina, tied for fourth (8.02).

The all-government scores allow comparison of all the state and provinces in the US, Canada, and Mexico.

The one clear takeaway is that Mexico desperately needs pro-market reforms.

I’ll close by observing that almost every US state ranks above every Canadian province.

But that wasn’t always the case. Which shows that Justin Trudeau is pushing Canada in the wrong direction even faster than American politicians are pushing the US in the wrong direction.

California is the Greece of the USA, but Texas is not perfect either!!!

Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax.

No wonder the Lone Star State is growing faster and creating more jobs.

And the gap will soon get even wider since California voters recently decided to drive away more productive people by raising top tax rates.

But a key challenge for all governments is controlling the size and cost of bureaucracies.

Government employees are probably overpaid in both states, but the situation is worse in California, as I discuss in this interview with John Stossel.

Dan Mitchell Comparing Excessive Bureaucrat Compensation in Texas and California

But being better than California is not exactly a ringing endorsement of Texas fiscal policy.

A column in today’s Wall Street Journal, written by the state’s Comptroller of Public Accounts, points out some worrisome signs.

As the chief financial officer of the nation’s second-largest state, even I have found it hard to get a handle on how much governments are spending, and how much debt they’re taking on. Every level of government is piling up incredible bills. And they’re coming due, whether we like it or not. Even in low-tax Texas, property taxes have risen three times faster than the inflation rate and four times faster than our population growth since 1992. Our local governments, meanwhile, more than doubled their debt load in the last decade, to more than $7,500 in debt for every man, woman and child in the state. In Houston alone, city-employee pension plans are facing an unfunded liability of $2.4 billion. But too many taxpayers aren’t given the information they need to make informed decisions when they vote debt issues. Recently I spent several months holding about 40 town-hall meetings with Texans across our state. Each time, I asked the attendees if they could tell me how much debt their local governments are carrying. Not a single person in a single town had this information.

In other words, taxpayers need to be eternally vigilant, regardless of where they live. Otherwise the corrupt rectangle of politicians, bureaucrats, lobbyists, and interest groups will figure out hidden ways of using the political process to obtain unearned wealth.

P.S. The second-most-viewed post on this blog is this joke about Texas, California, and a coyote, so it must be at least somewhat amusing. If you want some Texas-specific humor, this police exam is amusing and you’ll enjoy this joke about the difference between Texans, liberals and conservatives. And if you want California-specific humor, this Chuck Asay cartoon hits the nail on the head.

Dan Mitchell: Last week, I explained that “supply siders” need to be ardent advocates of spending restraint. After all, there is no chance of good tax policy in the future if the burden of federal spending continues to expand!

A.F. Branco for Oct 21, 2021

Republican Warfare, Part IV: Will the GOP Get Serious about Spending?

Last week, I explained that “supply siders” need to be ardent advocates of spending restraint. After all, there is no chance of good tax policy in the future if the burden of federal spending continues to expand.

I also wrote about “national conservatives” and pointed out that their opposition to entitlement reform means they implicitly embrace massive tax increases.

The bottom line is that the United States has a built-in spending crisis. Democrats are not serious about addressing the problem. So if Republicans bail as well, the nation is doomed to become a decrepit, European-style welfare state.

What does that mean? Nothing good, at least for people in the productive sector of the economy.

In an article for National Review, Philip Klein speculates whether there is any appetite for spending restraint, even among self-described conservatives.

For much of the history of the American conservative movement, limiting the size and scope of government has stood as one of its central goals. …In 2022, such messages were barely anywhere to be found on the campaign trail…conservatives have largely moved on from making the case for reducing the size and power of Washington. In some cases, this shift has been passive. …It has become popular in some circles on the right to mock “zombie Reaganism” and insist that while it may have made sense back in the 1980s to argue for smaller government, such a message is now outdated. …the argument that the battle to limit government has already been lost also neglects to recognize that things could always get worse. That is, even though the federal government has gone through extraordinary growth since the New Deal, it would have grown even larger had there been no conservative movement to push back. One need only look at Europe, where conservative parties long ago made their peace with the welfare state, to see how government agencies have crowded out civil society… There is no way in which a nation with…a ballooning welfare state will be an accommodating place for conservatives in the long run, no matter how much some may fantasize about seizing the dragon and precisely aiming its fire at their enemies during the relatively brief windows in which Republicans have power. Conservatives…should not abandon the fight for limited government.

At the risk of understatement, I fully agree.

I wrote two days ago and also the previous week to make the case for spending restraint.

Those are easy columns to write since it is the same argument I’ve been making my entire life. But what is depressing now is that there is opposition from Republicans as well as Democrats.

Maybe they should all be forced to watch my video series on the economics of government spending.

Augmenting the Case for Spending Restraint

I explained last week that excessive government spending is responsible for about 97 percent of America’s fiscal deterioration in the 21st century.

I followed that column with two post-election pieces that explained how huge tax increases will be inevitable if there is no effort to deal with the spending problem.

Simply stated, lawmakers need to copy the fiscal restraint of the Reagan years and Clinton years.

Why? To help people enjoy better lives thanks to faster growth and more opportunity.

In the Wall Street Journal, Andy Kessler explains that smaller government is the recipe for more growth.

Winston Churchill…said: “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucketand trying to lift himself up by the handle.” The U.S. should heed that advice… economic growth is going to come from efficient supply chains and productivity in manufacturing in the U.S. Tax andspending cuts are the cure. …Republicans must resist the urge to subsidize higher energy costs and instead help slay inflation and bring back a strong, productive economy.

Let’s look at some new academic research bolstering Kessler’s argument.

Megha Jain Aishwarya Nagpal, and Abhay Jain published a study last year in the South Asia Journal of Macroeconomics and Public Finance.

The key findings deal with the Armey-Rahn Curveand can be found in the abstract.

The current study attempts to examine the linkage between government (public) spending and economic growth in the broader framework of selected South Asian Nations (SANs), BRICS and other emerging nations by using two sets of empirical modelling over the period 2007–2016 by using inverted U-shaped hypothesis, propounded by Armey curve (1995).…The key findings signify the existence of an inverted U-shaped relationship for the selected data set of emerging nations and, therefore, support the Armey curve hypothesis. The projected threshold (tipping) levels (as a percentage of GDP) are 24.31% for the government total expenditures (GTotExp), 12.92% for consumption spending (GConExp) and 7.11% for investment spending (GInvExp). It has been observed that a rise in the public spending (size) resulted in a substantial…decrease…in the growth rate when the public spending was…after…the optimal threshold level, indicating a non-monotonic association.

For what it’s worth, I think the study is wrong and that the growth-maximizing level of government spending is much lower than 24.3 percent of economic output.

But since total government spending in the United States now consumes about 40 percent of GDP, at least we can all agree that there will be more prosperity if America’s fiscal burden is dramatically reduced.

If we ever bring the spending burden back down to 24.3 percent of economic output, we can then figure out whether the ultimate goal is even lower (as it was for much of America’s history).

There is one point from the study that merits further attention. The authors estimated not only the growth-maximizing level of total spending, but also how much the government should spend on “consumption” and “investment” outlays (an issue I addressed last month).

Here’s a chart from the study showing that consumption outlays should be less than 13 percent of economic output.

P.S. If you want to watch videos that address the growth-maximizing size of government, click here, here, here, here, and here.

P.P.S. Ironically, the case for smaller government is bolstered by research from normally left-leaning international bureaucracies such as the OECD, World Bank, ECB, and IMF.

March 31, 2021

President Biden  c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

______________

Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]

_______

Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.

_____________

_________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733

Williams with Sowell – Minimum Wage

Thomas Sowell

Thomas Sowell – Reducing Black Unemployment

By WALTER WILLIAMS

—-

Ronald Reagan with Milton Friedman
Milton Friedman The Power of the Market 2-5

Related posts:

Welfare Spending Shattering All-Time Highs

  We got to act fast and get off this path of socialism. Morning Bell: Welfare Spending Shattering All-Time Highs Robert Rector and Amy Payne October 18, 2012 at 9:03 am It’s been a pretty big year for welfare—and a new report shows welfare is bigger than ever. The Obama Administration turned a giant spotlight […]

We need more brave souls that will vote against Washington welfare programs

We need to cut Food Stamp program and not extend it. However, it seems that people tell the taxpayers back home they are going to Washington and cut government spending but once they get up there they just fall in line with  everyone else that keeps spending our money. I am glad that at least […]

Welfare programs are not the answer for the poor

Government Must Cut Spending Uploaded by HeritageFoundation on Dec 2, 2010 The government can cut roughly $343 billion from the federal budget and they can do so immediately. __________ Liberals argue that the poor need more welfare programs, but I have always argued that these programs enslave the poor to the government. Food Stamps Growth […]

Private charities are best solution and not government welfare

Milton Friedman – The Negative Income Tax Published on May 11, 2012 by LibertyPen In this 1968 interview, Milton Friedman explained the negative income tax, a proposal that at minimum would save taxpayers the 72 percent of our current welfare budget spent on administration. http://www.LibertyPen.com Source: Firing Line with William F Buckley Jr. ________________ Milton […]

The book “After the Welfare State”

Dan Mitchell Commenting on Obama’s Failure to Propose a Fiscal Plan Published on Aug 16, 2012 by danmitchellcato No description available. ___________ After the Welfare State Posted by David Boaz Cato senior fellow Tom G. Palmer, who is lecturing about freedom in Slovenia and Tbilisi this week, asked me to post this announcement of his […]

President Obama responds to Heritage Foundation critics on welfare reform waivers

Is President Obama gutting the welfare reform that Bill Clinton signed into law? Morning Bell: Obama Denies Gutting Welfare Reform Amy Payne August 8, 2012 at 9:15 am The Obama Administration came out swinging against its critics on welfare reform yesterday, with Press Secretary Jay Carney saying the charge that the Administration gutted the successful […]

Welfare reform part 3

Thomas Sowell – Welfare Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. The Continuing Good News About Welfare Reform By Robert Rector and Patrick Fagan, Ph.D. February 6, 2003 Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. […]

Welfare reform part 2

Uploaded by ForaTv on May 29, 2009 Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap. —– Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. In the controversial […]

Why did Obama stop the Welfare Reform that Clinton put in?

Thomas Sowell If the welfare reform law was successful then why change it? Wasn’t Bill Clinton the president that signed into law? Obama Guts Welfare Reform Robert Rector and Kiki Bradley July 12, 2012 at 4:10 pm Today, the Obama Department of Health and Human Services (HHS) released an official policy directive rewriting the welfare […]

“Feedback Friday” Letter to White House generated form letter response July 10,2012 on welfare, etc (part 14)

I have been writing President Obama letters and have not received a personal response yet.  (He reads 10 letters a day personally and responds to each of them.) However, I did receive a form letter in the form of an email on July 10, 2012. I don’t know which letter of mine generated this response so I have […]

Dan Mitchell noted that excessive government spending is responsible for about 97 percent of America’s fiscal deterioration in the 21st century!

A.F. Branco for Oct 21, 2021

Augmenting the Case for Spending Restraint

I explained last week that excessive government spending is responsible for about 97 percent of America’s fiscal deterioration in the 21st century.

I followed that column with two post-election pieces that explained how huge tax increases will be inevitable if there is no effort to deal with the spending problem.

Simply stated, lawmakers need to copy the fiscal restraint of the Reagan years and Clinton years.

Why? To help people enjoy better lives thanks to faster growth and more opportunity.

In the Wall Street Journal, Andy Kessler explains that smaller government is the recipe for more growth.

Winston Churchill…said: “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucketand trying to lift himself up by the handle.” The U.S. should heed that advice… economic growth is going to come from efficient supply chains and productivity in manufacturing in the U.S. Tax andspending cuts are the cure. …Republicans must resist the urge to subsidize higher energy costs and instead help slay inflation and bring back a strong, productive economy.

Let’s look at some new academic research bolstering Kessler’s argument.

Megha Jain Aishwarya Nagpal, and Abhay Jain published a study last year in the South Asia Journal of Macroeconomics and Public Finance.

The key findings deal with the Armey-Rahn Curveand can be found in the abstract.

The current study attempts to examine the linkage between government (public) spending and economic growth in the broader framework of selected South Asian Nations (SANs), BRICS and other emerging nations by using two sets of empirical modelling over the period 2007–2016 by using inverted U-shaped hypothesis, propounded by Armey curve (1995).…The key findings signify the existence of an inverted U-shaped relationship for the selected data set of emerging nations and, therefore, support the Armey curve hypothesis. The projected threshold (tipping) levels (as a percentage of GDP) are 24.31% for the government total expenditures (GTotExp), 12.92% for consumption spending (GConExp) and 7.11% for investment spending (GInvExp). It has been observed that a rise in the public spending (size) resulted in a substantial…decrease…in the growth rate when the public spending was…after…the optimal threshold level, indicating a non-monotonic association.

For what it’s worth, I think the study is wrong and that the growth-maximizing level of government spending is much lower than 24.3 percent of economic output.

But since total government spending in the United States now consumes about 40 percent of GDP, at least we can all agree that there will be more prosperity if America’s fiscal burden is dramatically reduced.

If we ever bring the spending burden back down to 24.3 percent of economic output, we can then figure out whether the ultimate goal is even lower (as it was for much of America’s history).

There is one point from the study that merits further attention. The authors estimated not only the growth-maximizing level of total spending, but also how much the government should spend on “consumption” and “investment” outlays (an issue I addressed last month).

Here’s a chart from the study showing that consumption outlays should be less than 13 percent of economic output.

P.S. If you want to watch videos that address the growth-maximizing size of government, click here, here, here, here, and here.

P.P.S. Ironically, the case for smaller government is bolstered by research from normally left-leaning international bureaucracies such as the OECD, World Bank, ECB, and IMF.

March 31, 2021

President Biden  c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

______________

Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]

_______

Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.

_____________

_________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733

Williams with Sowell – Minimum Wage

Thomas Sowell

Thomas Sowell – Reducing Black Unemployment

By WALTER WILLIAMS

—-

Ronald Reagan with Milton Friedman
Milton Friedman The Power of the Market 2-5

Related posts:

Welfare Spending Shattering All-Time Highs

  We got to act fast and get off this path of socialism. Morning Bell: Welfare Spending Shattering All-Time Highs Robert Rector and Amy Payne October 18, 2012 at 9:03 am It’s been a pretty big year for welfare—and a new report shows welfare is bigger than ever. The Obama Administration turned a giant spotlight […]

We need more brave souls that will vote against Washington welfare programs

We need to cut Food Stamp program and not extend it. However, it seems that people tell the taxpayers back home they are going to Washington and cut government spending but once they get up there they just fall in line with  everyone else that keeps spending our money. I am glad that at least […]

Welfare programs are not the answer for the poor

Government Must Cut Spending Uploaded by HeritageFoundation on Dec 2, 2010 The government can cut roughly $343 billion from the federal budget and they can do so immediately. __________ Liberals argue that the poor need more welfare programs, but I have always argued that these programs enslave the poor to the government. Food Stamps Growth […]

Private charities are best solution and not government welfare

Milton Friedman – The Negative Income Tax Published on May 11, 2012 by LibertyPen In this 1968 interview, Milton Friedman explained the negative income tax, a proposal that at minimum would save taxpayers the 72 percent of our current welfare budget spent on administration. http://www.LibertyPen.com Source: Firing Line with William F Buckley Jr. ________________ Milton […]

The book “After the Welfare State”

Dan Mitchell Commenting on Obama’s Failure to Propose a Fiscal Plan Published on Aug 16, 2012 by danmitchellcato No description available. ___________ After the Welfare State Posted by David Boaz Cato senior fellow Tom G. Palmer, who is lecturing about freedom in Slovenia and Tbilisi this week, asked me to post this announcement of his […]

President Obama responds to Heritage Foundation critics on welfare reform waivers

Is President Obama gutting the welfare reform that Bill Clinton signed into law? Morning Bell: Obama Denies Gutting Welfare Reform Amy Payne August 8, 2012 at 9:15 am The Obama Administration came out swinging against its critics on welfare reform yesterday, with Press Secretary Jay Carney saying the charge that the Administration gutted the successful […]

Welfare reform part 3

Thomas Sowell – Welfare Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. The Continuing Good News About Welfare Reform By Robert Rector and Patrick Fagan, Ph.D. February 6, 2003 Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. […]

Welfare reform part 2

Uploaded by ForaTv on May 29, 2009 Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap. —– Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. In the controversial […]

Why did Obama stop the Welfare Reform that Clinton put in?

Thomas Sowell If the welfare reform law was successful then why change it? Wasn’t Bill Clinton the president that signed into law? Obama Guts Welfare Reform Robert Rector and Kiki Bradley July 12, 2012 at 4:10 pm Today, the Obama Department of Health and Human Services (HHS) released an official policy directive rewriting the welfare […]

“Feedback Friday” Letter to White House generated form letter response July 10,2012 on welfare, etc (part 14)

I have been writing President Obama letters and have not received a personal response yet.  (He reads 10 letters a day personally and responds to each of them.) However, I did receive a form letter in the form of an email on July 10, 2012. I don’t know which letter of mine generated this response so I have […]

Dan Mitchell: The World’s Worst “Tax Hells”

The World’s Worst “Tax Hells”

Most people don’t know how to define a “tax haven,” but we assume places with no income tax are on the list. And there’s a lot to admire when looking at jurisdictions such as Bermuda, Monaco, and the Cayman Islands.

But what if we want to identify the opposite of a tax haven. What is a “tax hell” and how can they be identified?

A new study for the 1841 Foundation undertakes that task and it lists 12 nations that deserve this unflattering label. Belarus is the worst of the worst, followed by Venezuela, Argentina, and Russia.

But this isn’t just a list of places with high tax burdens.

To be a tax hell, a nation has to have punitive taxation and a lousy government. Here’s how the report describes the methodology.

The Tax Hells Index is an in-depth look at both the qualitative and quantitative data that is released annually by both the IMF and The World Bank. By drawing out critical insights from this data, The 1841 Foundation was able to create a comprehensive index and critically examine 94 countries against a stringent framework.…we believe that a “Tax Hell” is not only a country with high taxes, but rather a country with a weak rule of law and where the rights to privacy and property are not enforced or protected as required. …Therefore, when considering the results, countries with high government quality and economic and legal stability may have high taxes (i.e., Denmark), but are very far from being considered Tax Hells. In fact, there are countries with both low and high taxes in the Top-12 tax hells; all of them, however, have low quality of government, high levels of corruption and discretion, poor economic management, and weak institutions.

By the way, the report identified 12 tax hells, but also lists 14 other nations that are “risky.”

These are countries that should be perceived as high risk.

I’ll close by noting that the report only considers nations in North America, Europe, and South America. If subsequent editions include Asia and Africa, I’m sure there will be more tax hells and more risky jurisdictions.

P.S. The five best-scoring nations are Ireland, Denmark, San Marino, Switzerland, and Luxembourg. Remember, these are not necessarily low-tax jurisdictions. Indeed, Denmark is a high-tax nation. But all of these jurisdictions at least provide high-quality governance.

P.P.S. If you want a defense of tax havens, click here, here, and here.

Illinois and Fiscal Suicide, Part I

I wrote a couple of days ago about California’s grim future.

But now I’ll share some good news. No matter how bad California gets, the Golden State probably won’t have to worry about people and businesses fleeing to Illinois.

That’s because the Prairie State is an even bigger mess. If California is committing “slow motion suicide,” Illinois is opting for the quickest-possible fiscal demise.

Politicians in Springfield (the Illinois capital) have a love affair with higher taxes. A very passionate love affair.

But the state’s productive people have a different point of view. More and more of them have been escaping.

And they are now being joined by the state’s most-famous company, as Matt Paprocki of the Illinois Policy Institute explains in a column for the Washington Post.

When Boeing announced last month that it was moving its headquarters from Chicago to Arlington, Va., it sent shudders through the Illinois business community and state capital.But last week, when the heavy-equipment manufacturer Caterpillar said it was moving its headquarters to Texas, it felt more like a bulldozer ramming into the news. …If you’re an Illinois business owner or resident, as I am, the economics of staying are tough and the enticements to move away are many. …According to the U.S. Census Bureau, last year the state had the third-largest loss of residents due to domestic migration in the nation (-122,460), trailing only California and New York.

It’s easy to understand why people and businesses are leaving.

In 2017, Illinois lawmakers raised the personal income tax rate to 4.95 percent, from 3.75 percent, and hiked the corporate rate to 7 percent, from 5.25 percent. When J.B. Pritzker took office as governor in 2019, he passed another 24 tax and fee hikes costing taxpayers over $5 billion. …With 278,475 regulatory restrictions and requirements — double the national average — Illinois has the third most heavily regulated environment in the country. …Illinois owes over $139 billion in state pension debt as of last year, and local governments owe about $75 billion, which is the primary driver for Illinois’ spiraling property taxes, second-highest in the nation.

Mr. Paprocki offers all sorts of suggestions for reform, including a spending cap.

But the chances of pro-growth reform are effectively zero. The governor is a hard-core leftist (as well as a hypocrite) and the state legislature is controlled by government employee unions.

So if you’re hoping for a TABOR-style spending cap, there’s little reason to be optimistic.

And if you’re hoping for reforms that will improve the state’s “least friendly” tax climate, don’t hold your breath.

California is the Greece of the USA, but Texas is not perfect either!!!

Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax.

No wonder the Lone Star State is growing faster and creating more jobs.

And the gap will soon get even wider since California voters recently decided to drive away more productive people by raising top tax rates.

But a key challenge for all governments is controlling the size and cost of bureaucracies.

Government employees are probably overpaid in both states, but the situation is worse in California, as I discuss in this interview with John Stossel.

Dan Mitchell Comparing Excessive Bureaucrat Compensation in Texas and California

But being better than California is not exactly a ringing endorsement of Texas fiscal policy.

A column in today’s Wall Street Journal, written by the state’s Comptroller of Public Accounts, points out some worrisome signs.

As the chief financial officer of the nation’s second-largest state, even I have found it hard to get a handle on how much governments are spending, and how much debt they’re taking on. Every level of government is piling up incredible bills. And they’re coming due, whether we like it or not. Even in low-tax Texas, property taxes have risen three times faster than the inflation rate and four times faster than our population growth since 1992. Our local governments, meanwhile, more than doubled their debt load in the last decade, to more than $7,500 in debt for every man, woman and child in the state. In Houston alone, city-employee pension plans are facing an unfunded liability of $2.4 billion. But too many taxpayers aren’t given the information they need to make informed decisions when they vote debt issues. Recently I spent several months holding about 40 town-hall meetings with Texans across our state. Each time, I asked the attendees if they could tell me how much debt their local governments are carrying. Not a single person in a single town had this information.

In other words, taxpayers need to be eternally vigilant, regardless of where they live. Otherwise the corrupt rectangle of politicians, bureaucrats, lobbyists, and interest groups will figure out hidden ways of using the political process to obtain unearned wealth.

P.S. The second-most-viewed post on this blog is this joke about Texas, California, and a coyote, so it must be at least somewhat amusing. If you want some Texas-specific humor, this police exam is amusing and you’ll enjoy this joke about the difference between Texans, liberals and conservatives. And if you want California-specific humor, this Chuck Asay cartoon hits the nail on the head.

Dan Mitchell: While most people pay attention to which political party enjoys success when there’s an election, I think it’s also important to look at ballot initiatives!

The Most Important Ballot Referendum of 2022

While most people pay attention to which political party enjoys success when there’s an election, I think it’s also important to look at ballot initiatives.

But, as we’ve seen in California and Oregon, not every referendum produces a sensible result.

Today, we’re going to look at the most important ballot initiative of 2022. But before looking at the details, here’s a map showing the states gaining and losing population when Americans move across borders.

You’ll notice that Massachusetts is one of the top states for outbound migration, which means people are “voting with their feet” against the Bay State.

But bad news can become worse news. And that will definitely be the case if voters in Massachusetts approve a referendum next month to junk the state’s flat tax and replace it with a class-warfare system that has a top rate of 9 percent.

Jeff Jacoby wrote last year about the idea in a column for the Boston Globe.

A century-old provision of the Massachusetts Constitution commands that if the commonwealth taxes income, it must do so at a “uniform rate.” Five times in the modern era — in 1962, 1968, 1972, 1976, and 1994 — tax-and-spend liberals have invited voters to discard that rule and make it legal to soak the rich at higher tax rates. Five times voters have said no.…There is considerable arrogance in the way advocates of the surtax blithely disregard the voters’ repeated refusal to overturn the constitutional ban. Their attitude seems to be that no matter how many times the people uphold the uniform-rate rule, there is no reason to take them seriously. …more than 150 Massachusetts businesses representing almost 16,000 workers sent lawmakers an open letter imploring them not to hobble the state’s economy with a stiff new tax, and expressing “alarm” at the proposed constitutional amendment. They…know that a surtax aimed at millionaires is bound to injure countless people who will never earn anywhere close to a million bucks.

The Wall Street Journal has editorialized against the proposal.

…progressives in Boston want to join New York and other nearby states in a high-tax arms race. …Bay State ballots in November will give voters the choice to place a 4% surtax on incomes above $1 million, bringing the top rate to 9% from 5%. The proposal would amend the state constitution to remove its flat-tax mandate. Passing the measure would rocket Massachusetts to seventh from 31st on the list of states with the highest marginal income-tax rates.…A $2.3 billion revenue surplus shows that the state is already taxing more than it needs. This year’s tax haul was so big it triggered a largely forgotten state law that caps revenue. Residents may soon receive checks that refund a portion of last year’s taxes. …Approving the tax would speed up a wealth exodus already under way. The Pioneer Institute last year noted that Massachusetts’ tax base has been eroding, and there’s no surprise about where the escapees are going. The top two destinations are Florida and New Hampshire, both of which lack an income tax. …The constitution’s flat rate mandate is a crucial limit on the demands of interest groups for ever-more spending. If tax rates rise and the revenue cap goes away, spending will soar to snatch the new revenue and soon the politicians will return to seek even higher rates, as they always do.

The economic consequences of class-warfare taxation are never positive.

And that will be true in Massachusetts. A study from the Beacon Hill Institute in Massachusetts estimates the economic damage that the surtax would cause.

…we find, using our in-house computer model (MA-STAMP) that the effects on the economy will be as follows: In its first year of implementation, the amendment will cause the state to lose 4,388 working families due to outmigration. This outmigration plus a reduction in labor hiring and labor-force participation will cause a loss of 9,329 jobs. …the state economy, real (inflation-adjusted) gross domestic product, will shrink by $431 million… Advocates of the measure claim that it will make possible a $2 billion annual in state spending. …Instead, we find that the revenue yield of the tax will be far less, the result of the expected shrinkage in economic activity. (See Table E-2.) In its first year of implementation, combined state and local revenues will rise by only about $1.2 billion.

Here’s a table showing some of the negative effects.

Alex Brill of the American Enterprise Institute also estimated that revenues would be lower than expected once the effects of the Laffer Curve are incorporated into the analysis.

Here are some excerpts from his article in the Hill.

Modifying the revenue forecast to incorporate evidence from the academic literature about likely behavioral changes yields a significantly lower estimated revenue pickup. I estimate that about 400 of the 22,000 taxpayers affected by the surtaxwould exit the state and many others would reduce work or shift and relabel their income to avoid the tax. By my estimate, the surtax would generate approximately $1.5 billion in 2023, since these behavioral responses would offset 32 percent of the revenue gain that would occur if taxpayers kept their behavior unchanged. Using a similar approach, Tufts University’s Center for State Policy Analysis recently estimated that the proposed surtax would generate only $1.3 billion in 2023.

Last but not least, the Tax Foundation crunched the numbers and also found the surtax would cause significant economic damage.

…while no one would mistake Massachusetts for a low-tax state, it has carved out a place as a competitive area to live and work within the Northeast corridor. …but consider the Commonwealth’s ranking on the Tax Foundation’s State Business Tax Climate Index…in 2022, the Bay State still ranked 34th overall on the Index—well below the median.…Massachusetts’ competitive tax advantage in New England is primarily due to its individual income and sales tax systems, which rank 11th and 12th on the Index, respectively. With regard to its neighbors, only New Hampshire has a better overall Indexranking than Massachusetts. …In 2007, Christina Romer and David Romer, professors of economics at the University of California Berkeley, conducted a study to determine the impact of legislated tax changes on the economy. …The study found that a tax increase equal to 1 percent of gross domestic product (GDP) resulted in an estimated 3 percent decline in GDP after three years. …If the Romer and Romer study were applied to the Massachusetts surtax it would result in a 0.942 percent decline in GDP after three years. In other words, the Commonwealth’s total economic output could contract by $5.98 billion by the end of 2025.

Here’s a table from the report, showing that zero-income tax New Hampshire and Florida already are big winners when people escape Massachusetts.

If the referendum is approved, we can easily predictthat future versions of this chart will show much bigger numbers.

Simply stated, some of the geese with the golden eggs will fly away (while the ones that stay will decide to produce fewer eggs – as well as figure out ways to protect the eggs that remain).

California is the Greece of the USA, but Texas is not perfect either!!!

Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax.

No wonder the Lone Star State is growing faster and creating more jobs.

And the gap will soon get even wider since California voters recently decided to drive away more productive people by raising top tax rates.

But a key challenge for all governments is controlling the size and cost of bureaucracies.

Government employees are probably overpaid in both states, but the situation is worse in California, as I discuss in this interview with John Stossel.

Dan Mitchell Comparing Excessive Bureaucrat Compensation in Texas and California

But being better than California is not exactly a ringing endorsement of Texas fiscal policy.

A column in today’s Wall Street Journal, written by the state’s Comptroller of Public Accounts, points out some worrisome signs.

As the chief financial officer of the nation’s second-largest state, even I have found it hard to get a handle on how much governments are spending, and how much debt they’re taking on. Every level of government is piling up incredible bills. And they’re coming due, whether we like it or not. Even in low-tax Texas, property taxes have risen three times faster than the inflation rate and four times faster than our population growth since 1992. Our local governments, meanwhile, more than doubled their debt load in the last decade, to more than $7,500 in debt for every man, woman and child in the state. In Houston alone, city-employee pension plans are facing an unfunded liability of $2.4 billion. But too many taxpayers aren’t given the information they need to make informed decisions when they vote debt issues. Recently I spent several months holding about 40 town-hall meetings with Texans across our state. Each time, I asked the attendees if they could tell me how much debt their local governments are carrying. Not a single person in a single town had this information.

In other words, taxpayers need to be eternally vigilant, regardless of where they live. Otherwise the corrupt rectangle of politicians, bureaucrats, lobbyists, and interest groups will figure out hidden ways of using the political process to obtain unearned wealth.

P.S. The second-most-viewed post on this blog is this joke about Texas, California, and a coyote, so it must be at least somewhat amusing. If you want some Texas-specific humor, this police exam is amusing and you’ll enjoy this joke about the difference between Texans, liberals and conservatives. And if you want California-specific humor, this Chuck Asay cartoon hits the nail on the head.