Here’s a chart that will tells you everything you need to know. Andorra’s top tax rate is just 10 percent, while its neighbors (Spain and France) have top tax rates of more than 40 percent.
Not as good as the Cayman Islands and Monaco, to be sure, but it is obviously better to keep 90 percent of the income you earn rather than only about 50 percent in Spain or France.
Actually, you probably only get to benefit from the use of about 40 percent of your income in those two nations when you factor in the value-added tax.
Lawrence Reed of the Foundation for Economic Education recently wrote about the virtues of Andorra, including its superior tax regime.
…one of Europe’s seven “micro-states,” quaint and tiny nations which are political holdovers from the distant past. The other six are San Marino, Liechtenstein, Luxembourg, Monaco, Malta, and Vatican City. Andorra is landlocked and sandwiched in the eastern Pyrenees Mountains between France and Spain.…Micro-states are fascinating and among the freest enclaves in the world. …Freedom House ranks Andorra in its highest category—a “Free” country scoring an impressive 93 on a 100-point scale of political and civil liberties. …“The legal and regulatory framework,” the survey reports, “is generally supportive of property rights and entrepreneurship, and there are few undue obstacles to private business activity in practice.” …writes Guy Sharp, a native Andorran financial advisor…“you get many of the benefits of Europe without the high taxes.” …The maximum personal income tax rate, as well as the capital gains rate, is just 10 percent. …Most goods are subject to a modest value-added tax rate of less than five percent.
I can vouch for the fact that everything is more affordable in Andorra. That nation’s 4.5 percent value-added tax is akin to a modest sales tax in American states. When I’m in Spain, France, or other European countries, by contrast, you definitely feel the pain of 20 percent-plus VATs.
That being said, it’s the low-rate income tax that is a magnet for jobs and investment. The nation’s tax system is even attracting Spanish tax exiles.
Especially entrepreneurs who are making money online. Miodrag Pepic reports for the Valencian.
When the famous YouTube star ElRubius announced last month that he is permanently moving to Andorra, the Spanish public became aware for the first time that the most popular YouTubers are leaving the country, taking their earnings with them as well.The reason is very simple – Andorra has become a tax haven for this type of activity…many Spanish YouTubers have moved there. But ElRubius is one of the most famous. …In Spain, he would have paid up to 54% of his income in taxes, while in Andorra, the top income tax is only 10%. …The decision of ElRubius was criticised in the Spanish media as unpatriotic. …his popularity on YouTube remained undeterred, and in fact, his subscription base even grew. …There are quite a few other countries that have begun to lose their top earners, notably France and the Netherlands
Predictably, the Spanish government is not amused, as reportedby Aida Pelaez-Fernandez of Reuters.
Spain’s tax agency said on Monday it would start using “big data” to track wealthy individuals who pretend to reside abroad for tax purposes. The crackdown comes after some of Spain’s most popular YouTube personalities moved their residency to Andorra, a wealthy microstate perched in the Pyrenees mountains between France and Spain, with lower tax rates than its larger neighbours. …In Spain, anyone who earns above 300,000 euros per year must pay income tax of 47%, compared with a 10% flat rate charged by Andorra on earnings of more than 40,000 euros.
As you might expect, the Spanish government is not considering lower tax rates, which would be the best way of retaining successful entrepreneurs.
P.P.S. Of the seven European micro-states mentioned by Lawrence Reed, I’ve now visited San Marino, Liechtenstein, Luxembourg, Monaco, and Vatican City. I still need to get to Malta.
The shift toward free markets, which began in the mid-1970s, was especially beneficial for the less fortunate (see here, here, and here).
But it’s quite common for critics to assert that Chile is a bad example because many of the reforms were enacted by General Augusto Pinochet, a dictator who seized power in 1973. And some of those critics also attack Milton Friedman for urging Pinochet to liberalize the economy and reduce the burden of government.
Are these critics right?
To answer that question, I very much recommend the following cartoon strip by Peter Bagge. Published by Reason, it accurately depicts the efforts of reformers to get good reforms from a bad government.
It starts in 1973, with a group of Chilean economists, known as the “Chicago Boys,” who wanted free markets.
In 1975, they invited Milton Friedman to help make the case for economic reform.
This 1982 strip shows some of the controversies that materialized.
But by the time we got to the 21st century, everything Friedman said turned out to be true.
First, I’ll be able to share it with people who want to delegitimize Chile’s transition to a market-oriented democracy (ranked #14 according to the most-recent edition of Economic Freedom of the World). Simply stated, it was bad that Chile had a dictatorship, but it was good that the dictatorship allowed pro-market reforms (particularly when compared to the alternative of a dictatorship with no reforms). And it was great that Chile became a democracy (a process presumably aided by mass prosperity).
Second, we should encourage engagement with distasteful governments. I certainly don’t endorse China’s government or Russia’s government, but I’ve advised government officials from both nations. Heck, I would even give advice to Cuba’s government or North Korea’s government (not that I’m expecting to be asked). My goal is to promote more liberty and it would make me very happy if I could have just a tiny fraction of Friedman’s influence in pursuing that goal.
P.S. Here’s Milton Friedman discussing his role in Chile.
P.P.S. While I disagree, it’s easy to understand why some people try to delegitimize Chile’s reforms by linking them to Pinochet. What baffles me are the folks who try to argue that the reforms were a failure. See, for instance, Prof. Dani Rodrik and the New York Times.
José Niño is a graduate student based in Santiago, Chile. A citizen of the world, he has lived in Venezuela, Colombia, and the United States. He is currently an international research analyst with the Acton Circle of Chile. Follow@JoseAlNino.
EspañolThe power of ideas to help shape political movements has been grossly underestimated over the years. In truth, some of the largest political transformations in human history have come from ideas that were developed in the secluded confines of an intellectual’s home or in obscure academic institutes. Regardless of the origins, ideas can snowball into powerful vehicles of social change.+
As Friedrich Hayek noted in one of his most powerful works, Intellectuals and Socialism,the triumph of socialist ideas can largely be attributed to the ideas first put forward by various intellectuals. They began with relatively well-off intellectuals and then made their way to “second-hand dealers” — journalists, scientists, doctors, teachers, ministers, lecturers, radio commentators, fiction writers, cartoonists, and artists — who then spread those ideas to the masses.+
Intellectuals like Milton Friedman took it upon themselves to reverse this trend and create an environment that was more favorable to free markets. Steadfast in his beliefs in the power of ideas, Friedman knew that big changes usually start out in small venues.+
It was in Chile where Friedman’s vision was first implemented on a large scale. The results were nothing short of spectacular, as Chile was able to escape a veritable economic collapse and experience an unprecedented boom.+
Chile’s economic success was no mere coincidence; it was the product of ideas that Milton Friedman put forward in the 1950s. To understand how such a radical change was brought about, one must first look at the origins of the Chicago Boys, the group of Chilean economists that played a pivotal role in the transformation of Chile’s economy during the 1970s and 1980s.+
The Chicago Boys
Under the tutelage of the United States Agency for International Development (USAID), the University of Chicago signed a modest agreement with the Pontifical Catholic University of Chile in the 1950s to provide a group of Chilean students training in economics.+
In exchange, the University of Chicago would send four faculty members to help the Catholic University build up their economics department. Of these four faculty members, Arnold Harberger would serve as the Chicago Boys’ principal mentor.+
What at first looked liked just another exchange program between universities would play a substantial role in Chile’s economic rise.+
A Country Mired By Statism
At the start of this program, Chile’s economy was in the doldrums. Another victim of Raúl Prebisch’s Import Substitution Industrialization (ISI) policy, Chile had a very loose central banking policy, featured 15 different exchange rates, heavy tariffs, and a number of import and export controls. Subsequent governments maintained the same neo-mercantilist structure up until the 1970s.+
During this era of economic malaise, the Chicago Boys constructed El Ladrillo(The Brick), a text primarily shaped by economist Sergio de Castro which advocated for economic liberalization in all sectors of the Chilean economy. Sadly, this text was largely ignored at that time.+
It wasn’t until the presidency of Salvador Allende that the Chicago Boys’ talents would be desperately needed.+
On the Road to Cuba 2.0
Though democratically elected by a narrow margin in 1970, Salvador Allende was determined to turn Chile into the next Cuba by undermining all of its democratic institutions. Through price controls, arbitrary expropriations, and lax monetary policy, Allende put the Chilean economy on the verge of collapse. By 1973, inflation reached 606 percent and per capita GDP dropped 7.14 percent.+
Under the command of General Augusto Pinochet, the military deposed Allende’s government. Despite this tumultuous change, the military ruler did not have a clear economic vision for Chile.+
Enter Milton Friedman
Milton Friedman’s visit to Chile in March 1975 proved to be quite fateful. Friedman was on a week-long lecture tour for various think thanks. Eventually, Friedman sat down with the general himself for 45 minutes. Right off the bat, Friedman recognized that Pinochet had very little knowledge of economics. After their meeting, Friedman sent Pinochet a letter with a list of policy recommendations.+
Friedman was blunt is his diagnosis of Chile’s economy: for the country to recover, it had to truly embrace free-market measures.+
Ideas Put in Action
Cooler heads prevailed and Pinochet let the Chicago School disciples occupy various posts in the military government. In April 1975, El Plan de Recuperación Económica (The Economic Recovery Plan) was implemented. Soon Chile curbed its inflation, opened up its markets, privatized state-owned industries, and cut government spending. By the 1990s, Chile was experiencing the largest economic boom in its history.+
A principled libertarian, Friedman criticized Pinochet’s repressive political measures. Friedman understood that economic and political freedoms are not mutually exclusive. The principles laid in Friedman’s book Capitalism and Freedom inspired José Piñera, a notable Chilean reformer, to become a part of Chile’s classical liberal revolution.+
Like Friedman, Piñera understood the link between economic and political freedom. This motivated him to help ratify the Chilean Constitution of 1980. The most classically liberal constitution in Latin America’s history, it established the transition towards free elections and Chile’s return to democracy.+
Additionally, Piñera was the architect of Chile’s private social security system that empowered millions of workers and has fostered the growth of an ownership society. This model has been exported to dozens of countries abroad and has served as a market-based alternative to government-run pension systems.+
The “Chilean Miracle” represented the first major triumph against communism during the Cold War. Chile’s classical-liberal revolution subsequently inspired the Thatcher Revolution of 1979 and the Reagan Revolution of 1980. These ideas had resounding effects all over the globe and marked the beginning of the end for Soviet-style models of economic organization.+
There is still much work to do, as the illegitimate children of Marxist and Keynesian thought still run loose these days throughout Latin America. But one thing is absolutely certain: an idea whose time has come is unstoppable.+
RIP Milton Friedman
Milton Friedman is the short one!!!
Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1
Milton Friedman The Power of the Market 5-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
But it’s possible to have a system that is even worse. Americans can look across the ocean at the United Kingdom’s National Health Service.
Our British friends are burdened with something akin to “Medicare for All.”
But it’s even worse because doctors and nurses are directly employed by government, which means they have been turned into government bureaucrats.
And government bureaucrats generally don’t have a track record of good performance. That seems to apply to health bureaucrats, as captured by this Alys Denby column for CapX.
Numbers are no way to express a human tragedy, but those in the Ockenden Report into maternity services at Shrewsbury and Telford Hospital NHS Trust are nonetheless devastating. The inquiry examined 1,592 incidents since 2000. It found that poor care led to the deaths of 201 babies and nine mothers;94 babies suffered avoidable brain damage; and one in four cases of stillbirth could have had a different outcome. That’s hundreds of lives lost, and hundreds of families suffering unimaginable pain, all on the watch of ‘Our NHS’. …the report is strewn with examples of individual cruelty and incompetence. Bereaved parents…were given excuses, false information and even blamed for their own child’s death. The Health Secretary has said that vital clinical information was written on post-it notes that were swept into the bin by cleaners. …The NHS has a culture of arrogance, sanctimony and impunity.
And here are some excerpts from a 2021 article in National Review by Cameron Hilditch.
The NHS has proven itself comprehensively and consistently incapable of dealing with a regular flu season, something that crops up at the same predictable time of year in every country north of the equator. It has long been obvious that Britain’s single-payer health-care system isn’t fit for purpose even in normal times,much less during a global pandemic. Yet the NHS’s failures are systematically ignored. …age-standardized survival rates in the U.K. for the most common kinds of cancer are well below those of other developed countries, which translates into thousands of needless deaths… The excess deaths that the U.K. is suffering…along with the crushing physical and mental burdens borne by British doctors and nurses ultimately redound to this long-term failure of British culture. By transforming a medical institution into a cultural institution for the sake of forging a new, progressive national identity, Britons have underwritten decades of deadly failure.
This is damning information.
To be sure, mistakes will happen in any type of health system. But when government runs the show, the odds of appropriate feedback are much lower.
Way back in 2009, some folks on the left shared a chart showing that national expenditures on healthcare compared to life expectancy.
This comparison was not favorable to the United States, which easily spent the most money but didn’t have concomitantly impressive life expectancy.
At the very least, people looking at the chart were supposed to conclude that other nations had better healthcare systems.
And since the chart circulated while Obamacare was being debated, supporters of that initiative clearly wanted people to believe that the U.S. somehow could get better results at lower cost if the government played a bigger role in the healthcare sector.
There were all sorts of reasons to think that chart was misleading (higher average incomes in the United States, more obesity in the United States, different demographics in the United States, etc), but my main gripe was that the chart was being used to advance the cause of bigger government when it actually showed – at least in part – the consequences of government intervention.
The real problem, I argued, was third-party payer. Thanks to programs such asMedicare and Medicaid, government already was paying for nearly 50 percent of all heath spending in the United States (indeed, the U.S. has more government spending for health programs than some nations with single-payer systems!).
But that’s just party of the story. Thanks to a loophole in the tax code for fringe benefits (a.k.a., the healthcare exclusion), there’s a huge incentive for both employers and employees to provide compensation in the form of very generous health insurance policies. And this means a big chunk of health spending is paid by insurance companies.
The combination of these direct and indirect government policies is that consumers pay very little for their healthcare. Or, to be more precise, they may pay a lot in terms of taxes and foregone cash compensation, but their direct out-of-pocket expenditures are relatively modest.
And this is why I said the national health spending vs life expectancy chart was far less important than a chart I put together showing the relentless expansion of third-party payer. And the reason this chart is so important is that it helps to explain why healthcare costs are so high and why there’s so much inefficiency in the health sector.
Simply stated, doctors, hospitals, and other providers have very little market-based incentive to control costs and be efficient because they know that the overwhelming majority of consumers won’t care because they are buying care with other people’s money.
To get this point across, I sometimes ask audiences how their behavior would change if I told them I would pay 89 percent of their dinner bill on Friday night. Would they be more likely to eat at McDonald’s or a fancy steakhouse? The answer is obvious (or should be obvious) since they are in box 2 of Milton Friedman’s matrix.
So why, then, would anybody think that Obamacare – a program that was designed to expand third-party payer – was going to control costs?
Though I guess it doesn’t matter what anybody thought at the time. The sad reality is that Obamacare was enacted. The President famously promised healthcare would be more affordable under his new system, both for consumers and for taxpayers.
But let’s focus today on households, which haveborne the brunt of the President’s bad policies. The Wall Street Journal had a report a few days ago about what’s been happening to the spending patterns of middle-class households.
The numbers are rather grim, at least for those who thought Obamacare would control health costs.
A June Brookings Institution study found middle-income households now devote the largest share of their spending to health care, 8.9%… By 2014, middle-income households’ health-care spending was 25% higher than what they were spending before the recession that began in 2007, even as spending fell for other “basic needs” such as food, housing, clothing and transportation, according to an analysis for The Wall Street Journal by Brookings senior fellow Diane Schanzenbach. …Workers aren’t the only ones feeling the pain of rising health-care costs. Employers still typically pay roughly 80% of individual health-insurance premiums… In 2015, 8% of Americans’ household spending went toward health care, up from 5.8% in 2007, according to the Labor Department.
Here’s a chart from the story. It looks at data from 2007-2014, so it surely wouldn’t be fair to say Obamacare caused all the increase. But it would be fair to say that the law hasn’t delivered on the empty promise of lower costs.
Let’s close with a few important observations.
First, there’s a very strong case to repeal Obamacare, but nobody should be under the illusion that this will solve the myriad problems in the health sector. It would be a good start, but never forget that the third-party payer problem existed before Obamacare.
Second, undoing third-party payer will be like putting toothpaste back in a tube. Even though there are some powerful examples of how healthcare costs are constrained when genuine market forces are allowed to operate, consumers will be very worried about shifting to a system where they pay directly for a greater share of their healthcare costs.
Third, there’s one part of Obamacare that shouldn’t be repealed. The so-called Cadillac Tax may not be the right way to deal with the distorting impact of the healthcare exclusion, but it’s better than nothing.
Actually, we could add one final observation since the Obama era will soon be ending. When historians write about his presidency, will his main legacy be the Obamacare failure? Or will they focus more on the failed stimulus? Or maybe the economic stagnation that was caused by his policies?
Michael Cannon observed, “The centerpiece of Rubio’s proposal… If you purchase a government-approved health plan, you could save, for example, $2,000 on your taxes. If you don’t, you pay that $2,000 to the government. That is exactly how Obamacare’s individual mandate works.” The Obama-Rubio “Healthcare Mandate” Controversy March 2, 2016 by Dan Mitchell My colleague […]
Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013 July 31st is the birth date of one of the great intellectuals of the freedom philosophy. Milton Friedman (1912–2006) would have […]
Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman – Health Care Reform (1992) pt 3/4 Milton Friedman – Health Care Reform (1992) pt 4/4 Milton Friedman And ObamaCare November 4, 2013 Where is Milton Friedman when we need him most? His ability to […]
Milton Friedman – Health Care Reform (1992) pt 1/4 Milton Friedman – Health Care Reform (1992) pt 2/4 Milton Friedman on the Energy Crisis (and ObamaCare to come) By Robert Bradley Jr. — July 31, 2013 July 31st is the birth date of one of the great intellectuals of the freedom philosophy. Milton Friedman (1912–2006) would have […]
In all cases, price controls are imposed by politicians who are stupid or evil. That’s blunt language, but it’s the only explanation.
Sadly, there will never be a shortage of those kinds of politicians, as can be seen from this column in the Wall Street Journal by Andy Kessler.
Here are some excerpts.
On the 2020 campaign trail, Joe Biden declared, “ Milton Friedman isn’t running the show anymore.” Wrong! …Lo and behold, inflation is running at 7.9%, supply chains are tight, and many store shelves are empty. Friedman’s adage “Inflation is always and everywhere a monetary phenomenon” has stood the test of time. But what scares me most is the likely policy responses by the Biden administration that would pour salt into this self-inflicted wound.It feels as if price controls are coming. …Prices set by producers are signals, and consumers whisper feedback billions of times a day by buying or not buying products. Mess with prices and the economy has no guide. The Soviets instituted price controls on everything from subsidized “red bread” to meat, often resulting in empty shelves. President Franklin D. Roosevelt’s National Recovery Agency fixed prices, prolonging the Depression, all in the name of “fair competition.” …Price controls don’t work. Never have, never will. But we keep instituting them. Try finding a cheap apartment in rent-controlled New York City. …Sen. Elizabeth Warren, a leader among our economic illiterate, noted in February that high prices are caused in part by “giant corporations…”
He closes with a very succinct and sensible observation.
Want to whip inflation now? Forget all the Band-Aids and government controls. Instead, as Friedman suggests, stop printing money.
In other words, Mr. Kessler is suggesting that politicians do the opposite of Mitchell’s Law.
Instead of using one bad policy (inflation) as an excuse to impose a second bad policy (price controls), he wants them to undo the original mistake.
Will Joe Biden and Elizabeth Warren take his advice?
That’s doubtful, but I’m hoping there are more rational people in the rooms where these decisions get made.
Maybe some of them will have read this column from Professor Boudreaux.
Prices are among the visible results of the invisible hand’s successful operation, as well as the single most important source of this success. Each price objectively summarizes an inconceivably large number of details that must be taken account of if the economy is to perform even moderately well. Consider the price of a loaf of a particular kind and brand of bread.…The price at the supermarket of a loaf of bread, a straightforward $4.99, is the distillation of the economic results of the interaction of an unfathomably large number of details from around the globe about opportunities, trade-offs, and preferences. The invisible hand of the market causes these details to be visibly summarized not only in the price of bread, but in the prices of all other consumer goods and services, as well as in the prices of each of the inputs used in production. …These market prices also give investors and entrepreneurs guidance on how to deploy scarce resources in ways that produce that particular mix of goods and services that will today be of greatest benefit for consumers.
I have two comments.
First, Don obviously buys fancier bread than my $1.29-a-loaf store brand (used to be 99 cents, so thanks for nothing to the Federal Reserve).
Second, and far more important, he’s pointing out that market-based prices play an absolutely critical role in coordinating the desires of consumers and producers.
When politicians interfere with prices, it’s akin to throwing sand in the gears of a machine.
Anti‐price gouging laws prolonged shortages of certain goods that were in high demand early in the pandemic. Some analysis suggests these laws even worsened public health outcomes, because ongoing shortages of, say, hand sanitizer and toilet paper, led to consumers in states with these regulations searching for them more at physical retailers, actually increasing transmission of the virus.
But there’s an interesting question that’s often underexplored in regard to these laws: how does the expectation that these price controls will be triggered shape people’s beliefs about products’ availability and so customer search behavior?
That’s the topic of another fascinating new paper by economists Rik Chakraborti and Gavin Roberts. Using data for online searches for hand sanitizer and toilet paper across states, they harness the variation in when laws were introduced to research the question: is consumer search behaviour different in states with new anti‐price gouging legislation introduced during the pandemic from states with pre‐existing anti‐price gouging laws?
Economic theory would suggest that any anti‐price gouging legislation, whenever introduced, would lead to more consumer search for goods, due to the induced shortages. And, sure enough, after controlling for the effects of lockdowns, rising infections, and declines in travel which plagued the early stages of the pandemic, consumers in states with anti‐price gouging laws were significantly more likely to search online for toilet paper and hand sanitizer than those in states without such laws.
More searching presumably reflects higher levels of hoarding and panic‐buying creating the shortages—after all, having to resort to online shopping for goods that are commonly bought in stores means the local grocery or drug store has probably been emptied already.
But theory would also suggest that customers in states with past experience of anti‐price gouging laws might search even more intensely, because people come to expect shortages again when crises hit. In other words, those who have experienced shortages before might be more likely to hoard and panic buy this time around, leading to even higher online search than in situations where new laws are introduced for the first time.
Again, Chakraborti and Roberts’ paper suggests economic theory is correct. States with anti‐price gouging regulations on the books before the pandemic saw Google Shopping searches for hand sanitizer jump by 153 percent and toilet paper searches nearly double (a 99 percent increase) relative to states without anti‐price gouging laws. This uplift was much larger than in states where the laws were introduced during the pandemic (100 percent and 46 percent, respectively).
The long and short is that consumers in states with pre‐existing price controls searched most intensely online for hand sanitizer and toilet paper. This suggests customers learned from previous experience of these price regulations’ effects, with the higher search levels reflecting greater hoarding and panic buying in anticipation of shortages to come. As the authors state, this implies that longstanding anti‐price gouging legislation is even worse for economic welfare than we might think. The anticipation of shortages actually compounds shortages as consumers become more “experienced,” with excessive and fruitless searching for products the wasteful result.
For more on the basics of anti‐price gouging legislation in the pandemic, see my book Economics In One Virus. Other Cato pieces can be found here, here, and here.
Way back in 2009, I shared a meme that succinctly summarizes how Washington operates.
It’s basically a version of Mitchell’s Law. To elaborate, governments cause problems and politicians then use those problems as an excuse to make government even bigger.
I worry the same thing may be about to happen because of the current concern about “supply chain” issues, perhaps best illustrated by the backlog of ships at key ports, leading to shortages of key goods.
Some of this mess is fallout from the coronavirus pandemic, but it’s being exacerbated by bad policy.
In a column for Reason, J.D. Tuccille points out that government is the problem, not the solution.
…supply-chain issues…create shortages and push prices up around the world. …Lockdowns also changed people’s lives, closing offices and factories and confining people at home. That resulted in massive and unpredictable shifts in demand and unreliable supply. …”Market economies tend to be pretty good at getting food on the supermarket shelves and fuel in petrol stations, if left to themselves,” agrees Pilkington. “That last part is key: if left to themselves. Heavy-handed interference in market economies tends to produce the same pathologies we see in socialist economies, including shortages and inflation. That has been the unintended consequence of lockdown.” …The danger is that people see economic problems caused by earlier fiddling and then demand even more government intervention. …if the government were to further meddle in the market to allocate products made scarce by earlier actions, it’s hard to see how the result wouldn’t be anything other than increased supply chain chaos.
Allysia Finley opines for the Wall Street Journal about California’s role in the supply-chain mess.
The backup of container ships at the Long Beach and Los Angeles ports has grown in recent weeks… The two Southern California ports handle only about 40% of containers entering the U.S., mostly from Asia. Yet ports in other states seem to be handling the surge better. Gov. Ron DeSantis said last month that Florida’s seaports had open capacity.So what’s the matter with California? State labor and environmental policies. …business groups recently asked Gov. Gavin Newsom to declare a state of emergency and suspend labor and environmental laws that are interfering with the movement of goods. …One barrier is a law known as AB5. …Trucking companies warned that the law could put small carriers out of business and cause drivers to leave the state. …there’s little doubt the law hinders efficiency and productivity. …State officials have also pressed localities to attach green mandates to permits for new warehouses, which can be poison pills. …This boatload of regulations is making it more expensive and difficult to store goods arriving at California ports.
Needless to say, I’m not surprised California is making things worse.
The state seems to have some of the nation’s worst politicians.
But let’s set that aside and close with some discussion about one of the differences between government and the private sector.
This may surprise some readers, but people and businesses in the private sector make mistakes all the time.
So part of the supply-chain mess presumably is a result of companies and entrepreneurs making bad guesses.
That being said, there’s a big feedback mechanism in the private sector. It’s called profit and loss.
So when mistakes are made, there’s a big incentive to quickly change.
With government, by contrast, there’s very little flexibility (as we saw during the pandemic). And when politicians and bureaucrats do act, they often respond to political incentives that lead them to make things worse.
My response is easy. I care about results rather than rhetoric. And while GOP politicians often pay lip service to the principles of limited government,they usually increase spending even faster than Democrats.
This is bad news because it means the burden of government expands when Republicans are in charge.
And, as Gary Abernathy points out in a column for the Washington Post, Republicans then don’t have the moral authority to complain when Democrats engage in spending binges.
President Biden is proposing another $3 trillion in spending… There are objections, but none that can be taken seriously. …Republicans had lost their standing as the party of fiscal responsibility when most of them succumbed to the political virus of covid fever and rubber-stamped around $4 trillion in “covid relief,”… With Trump out and Biden in, Republicans suddenly pretended that their 2020 spending spree happened in some alternate universe.But the GOP’s united opposition to Biden’s $1.9 trillion package won’t wash off the stench of the hypocrisy. …I noted a year ago that we had crossed the Rubicon, that our longtime flirtation with socialism had become a permanent relationship. Congratulations, Bernie Sanders. The GOP won’t become irrelevant because of its association with Trump, as some predict. It will diminish because it is bizarrely opposing now that which it helped make palatable just last year. Fiscal responsibility is dead, and Republicans helped bury it. Put the shovels away, there’s no digging it up now.
For what it’s worth, I hope genuine fiscal responsibility isn’t dead.
Maybe it’s been hibernating ever since Reagan left office (like Pepperidge Farm, I’m old enough to remember those wonderful years).
Subsequent Republican presidents liked to copy Reagan’s rhetoric, but they definitely didn’t copy his policies.
Spending restraint was hibernating during the presidency of George H.W. Bush.
Spending restraint also was hibernating during the presidency of George W. Bush.
And spending restraint was hibernating during the presidency of Donald Trump.
I’m not the only one to notice GOP hypocrisy.
Here are some excerpts from a 2019 column in the Washington Post by Fareed Zakaria.
In what Republicans used to call the core of their agenda — limited government — Trump has been profoundly unconservative. …Trump has now added more than $88 billion in taxes in the form of tariffs, according to the right-leaning Tax Foundation. (Despite what the president says, tariffs are taxes on foreign goods paid by U.S. consumers.) This has had the effect of reducing gross domestic product and denting the wages of Americans.…For decades, conservatives including Margaret Thatcher and Ronald Reagan preached to the world the virtues of free trade. But perhaps even more, they believed in the idea that governments should not pick winners and losers in the economy… Yet the Trump administration…behaved like a Central Planning Agency, granting exemptions on tariffs to favored companies and industries, while refusing them to others. …In true Soviet style, lobbyists, lawyers and corporate executives now line up to petition government officials for these treasured waivers, which are granted in an opaque process… On the core issue that used to define the GOP — economics — the party’s agenda today is state planning and crony capitalism.
Zakaria is right about Republicans going along with most of Trump’s bad policies (as illustrated by this cartoon strip).*
The bottom line is that Republicans would be much more effective arguing against Biden’s spending orgy had they also argued for spending restraint when Trump was in the White House.
If they make the wrong choice (anything other than Reaganism), Margaret Thatcher has already warned us about the consequences.
*To be fair, Republicans also went along with Trump’s good policies. It’s just unfortunate that spending restraint wasn’t one of them.
—-
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.
“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.
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.
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.”
[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
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 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 […]
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 […]
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 […]
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 […]
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 […]
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. […]
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 […]
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 […]
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 […]
I’ve already written that massive spending increases for various bureaucracies is the most offensive part of Biden’s new budget.
But I explicitly noted that these huge budgetary increases(well above the rate of inflation, unlike what’s happening to incomes for American families) were not the most economically harmful feature of Biden’s plan.
In today’s column, we’re going to focus on his tax plan.
The Wall Street Journaleditorialized a couple of days ago about what the president is proposing.
A President’s budget is a declaration of priorities, so it’s worth underscoring that President Biden’s new budget for fiscal 2023 proposes $2.5 trillion in tax increases over 10 years. His priority is taking money from the private economy and giving it to politicians to spend.…Raising the top income-tax rate to 39.6% from 37% would raise $187 billion. Raising capital-gains taxes, including taxing gains like ordinary income for taxpayers earning more than $1 million would snatch $174 billion. Raising the top corporate tax rate to 28% from 21%—a tax on workers and shareholders—would raise $1.3 trillion. Fossil fuels are hit up for $45 billion. We could go on… Let’s hope none of these tax-increases pass, but the Democratic appetite for your money really is insatiable.
That’s a damning indictment.
But the WSJ actually understates the problems with Biden’s tax agenda.
That’s because the White House also is being dishonest, as explained by Alex Brill of the American Enterprise Institute.
The budget proposes $2.5 trillion in net tax hikes, almost entirely from businesses and high-income households, and touts policies that would “reduce deficits by more than $1 trillion” over the next decade. But a short note in the preamble to the Treasury Department’s report on the budgetreveals a sleight of hand: “The revenue proposals are estimated relative to a baseline that incorporates all revenue provisions of Title XIII of H.R. 5376 (as passed by the House of Representatives on November 19, 2021), except Sec. 137601.”In other words, the budget pretends that the failed effort to enact President Biden’s Build Back Better Act was a success and considers new budget proposals in addition to those policies. But you won’t find the price of the Build Back Better (BBB) Act (including its roughly $1 trillion in net tax hikes) in the budget tables.
I’m going to use this trick during my next softball tournament. I’m going to assume at the start that I’ve already had 20 at-bats and that I got an extra-base hit each time.
So even if I have a crummy performance during my real at-bats, my overall average and slugging percentage will still seem impressive.
Needless to say, my teammates would laugh at me, just as serious budget people understand that Biden’s budget is a joke.
But there is some good news. Barring something completely unexpected, Congress is not going to approve the president’s farcical plan.
P.S. Don’t fully celebrate. As I noted in my “Hopes and Fears for 2022” column, there is a risk that some sort of tax-and-spend plan might get approved. The only silver lining to that dark cloud is that it wouldn’t be nearly as bad as Biden’s full budget.
P.P.S. If that prospect gets you depressed, here are a couple of humorous images depicting Biden’s fiscal agenda.
March 7, 2021
President Biden c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500
I have written about 66 heroes of mine in the House of Representatives that voted “no” on the Obama/Biden debt ceiling increase request in 2011. I believe we must have representatives that will vote to restore our freedom and that means voting to cut spending and lower taxes like the Patriots of long ago wanted. Today the Tea Party represented my views the most closely. Lord knows I have written a lot about that in the past. . I have praised over and over and over the 66 House Republicans that voted no on that before. If they did not raise the debt ceiling then we would have a balanced budget instantly. I agree that the Tea Party has made a difference and I have personally posted 49 posts on my blog on different Tea Party heroes of mine.
THIS BRINGS ME TO ONE OF MY BIGGEST ECONOMIC HEROES AND IT IS THE LATE MILTON FRIEDMAN. Friedman had such revolutionary policies such as eliminating welfare and instituting the negative income tax and putting in school vouchers.
The problem in Washington is not lack of revenue but our lack of spending restraint. This video below makes that point.
Though there are currently more students participating in scholarship tax credit (STC) programs than voucher programs nationwide (about151,000 to 104,000), the former have not received nearly as much attention as the latter. That has begun to change in recent years as growth in the number of STC programs has outpaced growth in voucher programs.
Over the past week, I have enjoyed engaging in a spirited debate over STC programs with Professor Kevin Welner of the University of Colorado at Boulder. The debate was sparked by Valerie Strauss’blog postat the Washington Post, which contained several significant errors that I addressedhere. Welner thenrespondedat Strauss’ blog and we continued to sparhereandhere. It is my sincere hope that readers who have followed the debate have found it illuminating.
Though I suspect that Welner might not share my aspiration for universal educational choice, we have a least found common ground in the belief that, given limited resources, such programs should first aid those most in need. I also agree that our three primary areas of contention are: 1) the differences between STC programs and vouchers and their significance; 2) the fiscal impact of STC programs; and 3) who receives tax-credit scholarships. I will address Welner’s latest arguments on these matters below.
First, however, I must make two important corrections to Welner’s last post. In explaining why he did not provide context for some of his remarks, Welner wrote: “Much of this change happened in the aftermath of the 2010 midterm elections, when Republicans swept into state offices in very large numbers.” Actually,only five out of the fourteen STC programs(in Louisiana, New Hampshire, Oklahoma, Virginia and one of the two in Pennsylvania) were adopted in the wake of the 2010 midterm elections. Moreover, there was strong support among Democrats in two of those states. Pennsylvania’s 2012 STC legislation passed with thesupportof 15 of 20 Democrats in the Senate andunanimous supportin the House. In Louisiana, thelegislation passedwith the support of 11 of 15 Senate Democrats (32-7 total) and 32 of 45 House Democrats (66-37 total).
Scholarship Tax Credits vs. Vouchers
Welner wonders why I did not use the term he invented to describe scholarship tax credit programs. “Neovouchers” is a confusing term that appears nowhere in any of the fourteen STC laws. It also blurs the distinctions between STCs and vouchers, which I have described previously. I have likewise avoided the term “opportunity scholarships” because it is essentially meaningless as well. The terms “scholarship tax credits” or “education tax credits” accurately describe a program in which individuals or corporations receive tax credits for donating to scholarship organizations that fund low- and middle-income students attending nonpublic schools. I don’t begrudge Welner for using the term that shares a name with his book, but I also don’t see why he should expect that others should adopt.
In my previous posts, I argued that these two policies have similar ends but very different means and therefore should be called by different names. I then explained how the means are different, particularly their funding (public vs. private money) and administration (government-run/centralized/uniform vs. privately-run/decentralized/diverse). Welner then responds, essentially, “Yes, but their ends are nearly identical!” I would suggest that he misses the point.
Welner also takes issue with the examples I gave of courts that decided the question of whether tax credits constitute public or private money. Welner noted correctly that some of those cases did not pertain directly to scholarship tax credit programs. What he misses is that this fact strengthens my point. State courts have ruled that tax credits do not constitute “public funds” both with regard to STC programs and other forms of tax credits. This consistency shows that STC programs are not merely a legal loophole or “money laundering”, as Welner called it. The freedom of citizens to direct their own money makes such tax credit programs qualitatively different in policy terms and this difference is reflected in the law, not arbitrarily invented by it.
Credible Evidence of Savings
Welner points out that I overinterpreted his statement that he would not be surprised if Florida’s STC program generates savings. Instead, he holds that the available evidence does not support that conclusion. He argues that we do not have all the data necessary for a conclusive determination so he throws up his hands. In fact, there is credible evidence of savings.
The best available estimate of any STC program’s fiscal impact is from Florida’s Office of Program Policy Analysis and Government Accountability (OPPAGA). This is important since Florida’s STC program is the least likely candidate for realizing savings (with the possible exception of Georgia’s). Florida offers the maximum possible tax credit (100%) whereas programs inseven of the other ten statesoffer only partial credits, as low as 50% in Indiana and Oklahoma. Florida has the largest average scholarship size and the highest ratio of scholarship size to average public school operating per pupil expenditures, as shown in the table below. (Note that the National Center for Education Statistics’ calculation of total per pupil expenditures excludes unfunded pension liabilities. Moreover, low-income students generally cost the state more money than average to educate.)
[This chart excludes Arizona’s STC program for special needs students and the STC programs in Louisiana, New Hampshire, Oklahoma, Virginia and Pennsylvania’s corporate program, which were only recently launched or have yet to launch. Table includes the most recent data available in each category.]
Now Welner is certainly correct that savings depend on the ratio of switchers to stayers, but the data I’ve provided thus far indicates that the percentage of switchers does not have to be very high to realize savings in most states. Welner was rightly skeptical of OPPAGA’s2008 report, which made an educated guess that 90% of scholarship recipients were switchers. However, OPPAGA’s2010 reportand2012 revenue estimating conferencerelied on U.S. Census data and found that their previous estimate of switchers had beentoo low, since 94.6% of scholarship-eligible low-income students were attending public schools in the year before the STC program took effect. As Jon East explained inRedefinED, “The estimating conference went even further, combining American Community Survey data from 2005-09 with private school enrollment data to make projections about the actual number of low-income students enrolled in each grade level in private schools in 2012.” The more recent report projected savings of $57.9 million for Florida in 2012-13.
Welner is also correct that the analysis of the total fiscal impact of STC programs should not stop there. States that offer less than Florida’s 100% tax credit should also account for the impact of the deduction of non-credit eligible portion of the donation, as well as the caps on deductions. A complete fiscal analysis would also have to include other government programs or tax credits that are available in a given state. I agree with Welner that in most states, we need more data. However, the evidence of savings in Florida is strong, even accounting for Welner’s caveats. And if there are savings in the least likeliest of states, then there are likely savings elsewhere.
Clear Benefit to Low-Income Families
In my previous posts, I criticized Strauss for claiming that low-income families do not benefit from tax-credit scholarships. Welner admits that STC programs “provide financial assistance to many lower-income families” but says that he “didn’t read [Strauss’] statement to be saying that zero low-income families receive neovouchers. ” Once again, Strauss correctly noted that tax-credit scholarships do not cover the full cost of tuition, then incorrectly concluded: “Poor families can’t make up the difference. Guess who can.” That’s a fairly unambiguous statement. Strauss didn’t even qualify her claim by referring to “most” or “some” low-income families, let alone provide any evidence to support her claim. If she wants to be taken seriously as a responsible commentator, she should correct the record.
Likewise, Strauss has not yet rescinded her fallacious charge that STC programs are “welfare for the rich” because the donors somehow benefit from the tax credits. As I have demonstrated, the donors break even at most. Even Welner abandoned that line of argument in his latest post. Again, Strauss has a duty to correct the record.
In his latest post, Welner conceded that all of the STC programs are means-tested but for Georgia’s and one of Arizona’s two programs. However, Welner expressed skepticism about the organization that issued thestudyshowing that two-thirds of scholarship recipients in Arizona fall under 185% of the federal poverty line. He also noted correctly that the income thresholds in some states allow some middle-income families to qualify as well. That said, it is unclear why he ignored the evidence I provided from state governments showing that the average income of scholarship recipients is far below the means-testing thresholds. For example, the average income of recipient families inPennsylvaniawas only $29,000, just under half of the state’s income threshold at the time. Welner has not explained why we should assume that recipients in other states look significantly different, especially when there is evidence of similar patterns.
Welner calls for more a more comprehensive state-level reporting system. I am sympathetic to this suggestion, though I believe that states should proceed with caution. Scholarship organizations are already more regulated than ordinary nonprofits, like the Salvation Army or Red Cross. While regulations vary by state, STC programs generally have more stringent accounting standards, reporting requirements, and some states even require background checks for employees. Every STC program requires that scholarship organizations spend no more than 10% on administrative costs, the exceptions being Florida’s 3% maximum and Pennsylvania’s unnecessarily high 20% maximum. (It’s important to note that agovernment studyfound that 62% of Pennsylvania scholarship organizations disbursed 100% of their collected funds while only 5% used the maximum administrative expenses.)
Our education system should empower families to choose the education that best meets their kids’ individual needs. Scholarship tax credit programs move our education system toward that goal. As with all government programs, we should constantly reassess whether STC programs are achieving their desired ends and make any necessary changes. I would like to thank Professor Welner for taking the time to discuss this important matter.
[Update: An earlier version of this post incorrectly labeled total per pupil expenditures as operating per pupil expenditures.]
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,
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 49) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 48) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 47) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 46) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 45) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 44) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
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Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 40) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 39) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
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Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 34) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
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Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 30) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 29) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but […]
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The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 27) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
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Uploaded by RepJoeWalsh on Jun 14, 2011 Our country’s debt continues to grow — it’s eating away at the American Dream. We need to make real cuts now. We need Cut, Cap, and Balance. The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 25) This post today is a part of a series […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 24) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 23) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 22) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 21) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 20) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 19) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 18) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 17) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 16) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, […]
Sen Obama in 2006 Against Raising Debt Ceiling The Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 15) This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from […]
The Biden administration has released its federal budget for 2023. One of the themes is deficit reduction. The president says the budget “keeps us on track to reduce the deficit this year to less than half of what it was before I took office.” The administration will be “the first in history to reduce the deficit by more than $1 trillion in a single year.”
Finally, someone is taking an axe to the bloated federal budget!
Or maybe not. Under the Biden budget:
Deficits are currently falling, but would start rising again in 2024, as shown in the chart.
Spending would rise from $5.85 trillion this year to $8.87 trillion in 2032.
Debt held by the public would rise from $24.8 trillion this year to $39.5 trillion in 2032, or 102.4 percent of GDP to 106.7 percent.
Taxes would be increased $2.5 trillion over 10 years, but these hikes likely won’t pass Congress, so deficits would be higher than proposed unless spending is restrained.
Interest rates on federal debt are projected to remain low, with the rate on 10‐year debt only rising to 3.3 percent by 2032. Thus the budget says the “burden of debt would stay low,” which seems very optimistic. Every 1 percentage point increase in average borrowing costs on $25 trillion of federal debt is $250 billion in added annual interest outlays.
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.
“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.
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.
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.”
[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
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 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 […]
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 […]
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 […]
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 […]
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 […]
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. […]
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 […]
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 […]
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 […]
If I had to select a worst feature, though, I’d be tempted to pick the proposed spending hikes that Biden is seeking for some of Washington’s most-wasteful bureaucracies.
Here’s a chart from a story in today’s Washington Post (based on Table S-8 in the budget), which summarizes how much additional “discretionary spending” Biden is seeking.
Why am I upset about these proposed spending increases?
And since Biden is projecting that real GDP will grown by 2.8 percent next year and inflation will be 2.1 percent during the same period (see Table S-9 of the budget), he obviously wants all these bureaucracies to enjoy big increases (unlike families, who are losing ground compared to inflation).
But I’m also irked from a targeted fiscal perspective. That’s because Biden wants giant spending increases for bureaucracies that should not even exist.
Here’s what I’ve written about some of them.
Get rid of the Department of Housing and Urban Development.
These tax increases and entitlement expansions will do considerably more damage than the discretionary spending increases excerpted above.
But it’s still an outrage that Biden is shoveling more money at some of Washington’s most wasteful and counterproductivebureaucracies.
Ep. 4 – From Cradle to Grave [6/7]. Milton Friedman’s Free to Choose (1980)
March 1, 2021
President Biden c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500
Dear Mr. President,
Thank you for taking time to have your office try and get a pulse on what is going on out here in the country. I wanted to let you know what I think about the minimum wage increase you have proposed for the whole country and I wanted to quote Milton Friedman who you are familiar with and you made it clear in July that you didn’t care for his views!Let me challenge you to take a closer look at what he had to say!
Progressives have gone crazy over the minimum wage.
President Obama got the ball rolling when he called for hiking the federal minimum wage from $7.25 to $10.10 per
Dreamstime
hour. Now, bothDemocratic presidential candidates are trying to one-up him, with Bernie Sanders demanding a $15 federal wage and Hillary Clinton $12. Meanwhile, California and New York have already passed laws mandating the Bernie rate, and scores of cities across the country are clamoring to follow suit.
And all the while, minimum wage advocates are making increasingly fanciful claims on behalf of their beloved laws.
The left’s minimum wage obsession dovetails with a shifting academic consensus that until the 1990s considered such hikes a recipe for killing jobs, especially for low-skilled workers. For a long time, the generally accepted rule of thumb was that, all else remaining equal, every 10 percent increase in the minimum wage would decrease low-skilled employment by 1 to 2 percent, since the more employers had to pay these employees, the fewer jobs they could afford to provide.
This consensus began to fray with a 1992 study by economists David Card and Alan Kreuger, who found that New Jersey’s minimum wage hike—from $4.25 to $5.05—did not lead to expected job losses in the state’s fast food restaurants. This finding has been hotly contested, but even if it were true, it doesn’t mean there are no other downsides to minimum wage laws. For example, sometimes employers don’t respond to minimum wage hikes by laying off workers, but instead by raising prices for consumers. (Minimum wage opponents haven’t helped their case by hitching it almost exclusively to job losses while ignoring the other, equally pernicious, adjustment responses by businesses.)
There is only one scenario, according to Naval Postgraduate School economist David Henderson, under which a modest legally mandated minimum wage might do more good than harm: when employers enjoy monopsony power (a monopoly on the buying side) in the labor market, either because there are very few of them or because workers can’t leave for some reason. Employers then have a relatively free hand to hold wages down. A mandated minimum wage under those circumstances merely diverts the firm’s “excess profits” to the worker, something that would have happened automatically in a more competitive market. But it doesn’t diminish a company’s productivity or its incentive for additional hiring—thereby actually boosting job growth. But genuine monopsony isn’t common and would require a very finely calibrated and skillfully crafted minimum wage, which is not how blanket policies work in the real world.
America’s federal minimum wage of $7.25 per hour works out to about 42 percent of its $17.40 hourly median wage. Even the most gung-ho academics only advocate raising it to 50 percent of the median — which means a little over $8.70. This in itself is a crude benchmark that lumps together high-wage service occupations with low-wage construction and other non-service ones whose market realities are completely different. Be that as it may, it is inconceivable that a $15 minimum wage—equal to 86 percent of America’s median wage, and the highest in the Western world—wouldn’t kill jobs, especially in small towns and cities where wages tend to be lower. Witness the chronic double-digit unemployment rate that a far less insane minimum wage has generated in France, Spain, Belgium, and other European countries.
And yet, minimum wage enthusiasts are abandoning all caution and making increasingly extravagant claims. Here are four of their sillier arguments:
False: Minimum wage hikes will lead to productivity-boosting automation
The standard rap against minimum wage laws is that by raising the cost of hiring workers, they prompt companies to invest in labor-saving technologies, throwing people out of work. But Matthew Yglesias claims that this would by no means be a “bad thing.” Why? Because productivity is the engine of economic progress. And if machines are more productive than people, then policies that prod employers to replace people with machines would mean more wealth without toil for everyone. This is the reverse of the Luddite fallacy that seeks to boost jobs by eschewing labor-saving technologies. Nobel laureate Milton Friedman once heard a Third World bureaucrat, suffering from this fallacy, defend his decision to have poor workers dig a massive canal with shovels rather than earth movers because that meant more jobs. Friedman asked: Why don’t you replace their shovels with spoons?
Increasing productivity is not simply a matter of increasing output, but doing so in the most cost-effective way. You do not encourage that with policies that force investments in capital equipment when labor is plentiful. Indeed, this raises the overall opportunity cost, rendering an economy less efficient. If Friedman were alive, he may well have asked Yglesias why, by his logic, he doesn’t just advocate a ban on all manual labor.
False: Minimum wage hikes helps firms make more money
This claim strains credulity. How would a $15 mandate that almost doubles a company’s labor costs actually boost profits? The argument that former Labor Secretary Robert Reich offers is that higher wages means happier employees and lower turnover, something that saves a company money. If so, the million-dollar question is why aren’t greedy companies doing this already? Are they too stupid or sadistic or both to pass up on a win-win deal for both themselves and their workers?
False: Minimum wage hikes will stimulate the economy
Michael Reich, an economist at the University of California, Berkeley, claims not only that a $15 minimum wage wouldn’t produce job losses in the short run, but would actually stimulate the economy, resulting in job gains in the long run. “They’d (employees) have more money to spend, the overall level of demand for goods and services would be higher, and so would the level of employment,” he claims.
But shifting wealth around doesn’t generate real economic growth. Boosting productivity does. Indeed, ordering employers to give artificial raises means that they would have less money to spend or invest, cancelling out any extra spending by workers.
False: Minimum wage hikes will diminish the strain on welfare programs
Advocates of the minimum wage claim that without a suitably high minimum, low-income workers are forced to rely on food stamps and health care programs to make ends meet. In essence, they argue, welfare programs end up subsidizing McDonald’s low-wage workforce, which is hardly fair to taxpayers. Forcing companies to pay something resembling “living” wages would diminish low-wage workers’ dependence on government programs.
This assumes that boosting the minimum wage would hand more workers a raise than it would throw people out of work, of course — which is hardly a reasonable assumption, as pointed out earlier. Indeed, notesUniversity of California, Irvine’s David Neumark, the probability that a family will escape poverty due to higher wages will be offset by the probability that another will enter poverty because it has been priced out of the labor market.
The core fallacy in this line of reasoning is that employers can set wages based on employee needs rather than market forces. Hence, they can simply be forced to hand over more money to their workers. That, however, is not how things work, especially in a globalized world where forcing employers to cough up wages higher than the market can bear would undermine their competitiveness—not something that helps anyone in the long run.
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
The first place to start is the Federal Register, which is Uncle Sam’s official site for new rules.
Though it gives us conflicting information. The number of pages (a crude measure of regulatory zeal, as I noted a few years ago) actually decreased during Biden’s first year. But only compared to Trump’s last year.
To understand what’s really going on, let’s look at the Forbesarticle from which the above table was taken.
Clyde Wayne Crews of the Competitive Enterprise Institute sifts through the data and concludes that Biden is a fan of expanded red tape.
The Federal Register is the daily depository of rules and regulations produced by hundreds of federal departments and agencies. …Under Biden, the regulatory establishment has its Hall Pass back, and it shows. The Federal Register page count ended the year with 74,532 pages. …The 2020 count under Trump was far higher, at 86,356. There had been “only” 61,308 pages back in Trump’s first year of 2017,which had been the lowest count in a quarter-century… Trump’s first year represented a 35 percent drop… But Trump’s final year made him number two… How come? Well, …removing rules that ought not have been written in the first place still requires writing new rules to do it. …So, paradoxically, any concerted Trump moves on “one-in, two-out” in service of deregulating and removing that which came decades before required fattening the Register to some extent. …Despite Biden’s lower Federal Register page count, we’re nonetheless back in the mode of not just unapologetically but combatively fattening the Federal Register. …several hundred of Trumps rules had been deemed “deregulatory” for purposes of his one-in, two-out program… Biden’s revivalist counts are embedded with no such purpose… Trump definitely left a mark. Biden is working on erasing it.
Incidentally, I don’t think regulatory experts from the left would disagree with the above assessment.
For instance, Brookings has a regulatory tracker that monitors what’s been happening since Biden took office and you will not find any evidence that the current administration is interested in limiting or reducing red tape.
Let’s wrap up by looking at a specific example of Biden’s regulatory excess. It’s about domestic energy production, which is a very timely issue given what is happening in Ukraine.
Ben Cahill of the Center for Strategic and International Studies summarized some of what Biden did to hinder America’s ability to produce energy.
President Joe Biden has followed through on a campaign pledge by introducing a moratorium on new oil and gas leasing on federal lands and waters. With nearly 25 percent of U.S. oil and gas production coming from federal lands,the policy shift may have significant implications for future investment and production. …This pause will not affect existing operations or permits for existing leases, and private lands will not be affected. …A more permanent leasing ban would have a significant impact, although visible offshore production declines may not materialize for up to 10 years, given the typical timeframe for planning, exploration, appraisal, and development. Onshore production declines could conceivably show up faster.
As you can see, the main damage is to future energy production rather than current energy production.
Needless to say, the same is true about the Biden Administration’s limitations on energy exploration and development in Alaska.
And don’t forget about pipelines (and geopolitics!), as mentioned in this column by Kevin Williamson for National Review.
The Biden administration already is reaching out to Caracas, where officials describe the initial conversation as “cordial” and “respectful.” I’ll bet it is. And Maduro’s isn’t the only tyrannical tuchus that requires kissing: President Joe Biden is said to be planning a personal trip to Riyadh to beg Crown Prince Mohammed bin Salman to ramp up Saudi production.…Right about now, President Biden must be wishing he had an extra pipeline to Canada. The thought has occurred to Alberta premier Jason Kenney, who observes about Keystone XL: “If President Biden had not vetoed that project, it would be done later this year — 840,000 barrels of democratic energy that could have displaced the 600,000 plus barrels of Russian conflict oil that’s filled with the blood of Ukrainians.” …We could spare ourselves some of these calculations by maximizing our own output — not only of crude oil and natural gas but also of refined-petroleum products. That would also mean building the necessary pipeline infrastructure and reforming our antiquated maritime regulations to enable the transportation of those fuels.
The bottom line is that the Biden Administration wants more regulation and red tape.
Especially when bureaucrats at the regulatory agencies ignore cost-benefit analysis (or put their thumbs on the scale to get a result that matches their ideological preferences).
And, in the case of energy, regulatory policy can have significant geopolitical implications as well.
P.S. You can click here to learn something about Obama’s record on the issue, and click here to learn a bit about Trump’s track record as well.
In Part I of this series, I pointed out that Biden’s plethora of proposed handouts and subsidies would lead to higher prices and more inefficiency. And in Part II, I explained that his discussion of inflation was embarrassingly inaccurate.
In today’s column, we’re going to analyze his strident support for protectionist “Buy America” provisions, which drive up costs for taxpayers by making it harder for foreign firms to compete for government contracts and thus give American firms the ability to charge higher prices.
How much of a burden are these policies? How much more are taxpayers having to pay because governments can’t opt for the lowest qualified bidder?
According to research shared by the Peterson Institute for International Economics (PIIE), American taxpayers lose $94 billion per year.
The good news (if we have a very generous definition of “good”) is that procurement protectionism “only” pushes up costs in the United States by 5.6 percent.
Our dirigiste friends in the European Union suffer much more. Their procurement protectionism results in average markups of 17.6 percent, costing European taxpayers a staggering $471 billion.
But taxpayers are not the only losers.
In a 2017 study for PIIE, Gary Hufbauer and Euijin Jung explain that nations also lose exports because of procurement protectionism.
Buy American provisions are often enacted because politicians associate the patriotic slogan with the creation of domestic jobs. In fact, these laws are counterproductive: They are costly for taxpayers, they curtail exports, and they lose more jobs than they create. “Buy American” was bad policy in 1930 and does even more harm today. …Buy American dulls competition for everything that federal, state, and local governments purchase.Consequently, taxpayers pay inflated prices for new infrastructure, the latest information technology, and routine maintenance of subways, bridges, and airports. …Quantification is difficult, but the major federal Buy American laws probably equate to tariff equivalent barriers of at least 25 percent on federal purchases. State laws vary in scope and protective degree, but on average they probably entail at least 10 percent tariff equivalent barriers. …When Buy American policies are championed at home they are emulated abroad—in the form of Buy European, Buy Mexican, Buy Japanese, and other local content laws and policies. Consequently, US goods and services face severe barriers in foreign procurement markets. …US exports could expand by $189 billion annually if OECD countries all repealed their existing local content laws.
The Heritage Foundation’s Tori Smith authored a report when Trump was pushing his version of procurement protectionism. Here’s some of what she wrote.
Domestic content requirements, like those found in the Buy American Act, the Berry Amendment, and various other laws, result in additional regulatory burdens for producers, and increase costs for American taxpayers. All for little or no gain: The policies are unlikely to stimulate job growth in target industries. …Existing laws and provisions regarding domestic content requirements…are extremely onerous and complicated burdens. They have three main effects: (1) creating additional regulatory hurdles for producers; (2) costing American taxpayers more than they would otherwise pay for government projects; and (3) they are unlikely to yield job growth in target industries like the steel sector.
Here are the most important passages from her report.
…to eliminate all existing domestic content requirements….would create hundreds of thousands of American jobs across the country and contribute billions of dollars to U.S. gross domestic product.
And this chart shows how various states would benefit if there was open competition for government procurement.
I’ll close with three additional points.
First, it’s disappointing that Biden is continuingTrump’s protectionist policies. It’s even more disappointing that he wants to expand upon them. This is one area where people thought Biden might move policy in the right direction.
For some historical perspective on the failure of the Trump-Biden approach, the National Taxpayers Union helpfully shared the views of Harry Truman and Dwight Eisenhower.
Second, some national security experts make a very reasonable argument that the Pentagon should not make itself dependent on purchases from nations such as China.
But this is at most an argument for “Buy from Allied Nations,” not an argument for “Buy America.”
Third, Biden is perversely consistent. Everything he is doing will increase costs for taxpayers and consumers in order to bestow undeserved benefits on special-interest groups.
P.S. The argument for competition in the market for government procurement is the same as the general argument for free trade. And since we’re on the topic of trade, remember that dollars sent overseas as part of a procurement contract will come back to the United States, either to purchase American exports or as part of investment in the U.S. economy.
The pandemic has shocked every sector of the economy. Trade restrictions enacted by the Trump administration and maintained by President Biden have rippled through the U.S. economy but have particularly impacted U.S. ports. The pandemic highlighted that American ports have broader efficiency problems and could use some serious policy and management reforms.
On the west coast in particular, ship congestion has caused severe delays, wreaking havoc on the supply chain. While factories and ports in Asia are working 24/7 to supply American consumers with valuable goods, U.S. ports have been open for far fewer hours because labor union contractsdictate the hourly terms. However, after months of backlog, the ports of Los Angeles (LA) and Long Beach (LB) are finally switching to 24/7 shifts to move goods more quickly.
As a result of these union contracts, government offices are also not open 24/7. The ports of LA and LB account for almost half of all U.S. imports. The Customs and Border Protection (CBP) officials who must clear and admit goods do not work nights or weekends. These limits create additional pressure to have goods shipped to the United States during a prohibitive time frame, or leave ships idling around the ports until they can get in. The latter is the most common response. Recently, ships have been waiting an average of 12.5 days to enter the LA port. Ship idling has caused other problems too. Orange County, CA was affected by an oil spill that is suspected to have been caused by a pipeline hit with idling ship anchors. These differences in operating hours have caused huge ports efficiency losses that are felt across the country.
While it is positive that retailers, couriers, and the International Longshore and Warehouse Union (ILWU) are making changes to run ports more efficiently, permanent trade policy changes would help ease America’s coastal shipping problems.
The best policy would be to unilaterally remove tariffs by the United States. Simply eliminating tariffs would reduce an administrative burden both for traders and CBP officials. Duty‐free trade would increase imports and exports but all other things equal, the freed‐up CBP resources would help to move goods more swiftly through the ports.
However, a few smaller reforms could be implemented now that would considerably help the efficiency of U.S. ports. Removing Section 232 tariffs on steel and aluminum imports could temper the current domestic scarcity of some transportation‐related goods, including chassis (the frame of a vehicle that holds containers). Thesematerials are vital inputs for such products and the Section 232 tariffs are affecting American manufacturers’ ability to meet domestic demand. Eliminating duties and tariffs on transportation‐related goods, including the 221 percent antidumping and countervailing (AD/CVD) duties and 25 percent Section 301 tariffs on Chinese chassis, could help increase the U.S. supply of chassis. While some freighters are paying the higher prices for Chinese chassis, the supply of transportation is still constrained, which has resulted in higher sticker prices on consumer goods.
As LA and LB move to 24/7 shifts, CBP offices should also be open 24/7. Given the sheer volume of trade these two ports process, it would seem sensible to make staffing 24/7 a permanent change at these ports, and at others depending on trade volumes.
Reforming the Jones Act could also help. All freight moved between U.S. ports mustuseU.S.-built, -crewed, and -flagged ships. As a result, traders circumvent these regulations by using alternative modes like trucks and trains. It would be prudent to reform the Jones Act to allow ships not in compliance with the Jones Act to pick up shipments in one U.S. port and unload at another. This would reduce pressure on inland transit that is currently being impacted by the aforementioned tariffs.
These bottlenecks have provided insight into the problems that exist at U.S. ports and with coastal shipping more broadly. Improvements in trade policy have a role to play and policymakers would be remiss not to consider permanent changes that would be beneficial now and could preempt pressures during future economic shocks.
Milton Friedman – Free Trade vs. Protectionism
Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman
Larry Elder rebuts candidate’s ‘they’re taking our jobs’ claim
Published: 02/03/2016 at 6:39 PM
One of Donald Trump’s talking points and biggest applause lines is how “they” – Japan, China and Mexico – are “beating us in trade” and are “taking our jobs.” He proposes tariffs, for example, on Chinese goods in retaliation for that country’s alleged “cheating.”
To someone who is out of work in an industry where foreign workers do what he or she once did, Trump-like protectionism sounds appealing. But Trump actually proposes punishing the American consumer. As economist Milton Friedman says, protectionism discriminates against low prices.
It is certainly true that many countries prop up or subsidize companies or even whole industries by providing capital or special privileges. This allows them to produce goods and services “below cost” – or at prices below what a competitor could charge and still make a profit. But doing so also means that taxes in that country, which could have gone to a more productive use, are squandered to keep a company in business that otherwise wouldn’t exist or would have gone out of business. This means consumers in other countries with which the “cheater” country trades can buy those imported goods at a cheaper price.
Trump proposes to retaliate by placing tariffs on those imported goods. But this prevents American consumers from benefiting from the “cheater” country’s folly of propping up companies that would not survive but for the taxes spent to keep it alive. Why compound the stupidity?
Another justification for this kind of protectionism is that a foreign country “exploits” America through the use of “slave labor” which, as to wages, causes a “race to the bottom.” Certainly forced labor, as when “blood diamonds” are mined by workers with guns pointed to their heads, is criminal and immoral. But free laborers offering to work for less money than others is how poor countries become wealthier – by allowing other countries to buy goods more cheaply.
NAFTA, the North American Free Trade Agreement, established in 1994, has become exhibit A on how “we lose” on trade. After all, many American jobs have been “outsourced” to Mexico. But that looks at but one side of the ledger. That an American pays less for certain things frees up capital to spend on something or on someone else. A machinist sees his job “shipped to Mexico,” but the planner or analyst hired by a company with the “savings” might not see the direct relationship between free trade and the fact that he or she has this new job. When NAFTA was debated, businessman and presidential candidate Ross Perot predicted “a giant sucking sound” as jobs and incomes would be lost to Mexico.
The American Enterprise Institute writes: “It is an article of faith among protectionists that NAFTA harmed American workers. … The justification may be that NAFTA went into force at the beginning of 1994 and the U.S. trade balance with Canada and Mexico, two of our top partners, then deteriorated.
“But the American job market improved as these trade deficits grew. Unemployment fell more than two points from the beginning of 1994 through the middle of 2000. Already high labor force participation edged higher to its all-time record by early 2000. Manufacturing employment rose until mid-1998 and was above its pre-NAFTA level until April 2001. Manufacturing wages rose. The strength in the American job market from 1994 to 1999 is not due primarily to NAFTA, but it is plain that the job market, including manufacturing, strengthened after NAFTA.”
Trump is also schizophrenic on this issue. On the one hand, he opposes illegal immigration, which most often is an economic decision where, for example, a poor, unskilled worker from Mexico sneaks into America to make money. On the other hand, Trump deems it unfair and a form of “cheating” if an American company relocates to or builds a factory in Mexico to take advantage of that unskilled Mexican worker’s willingness to work for less.
If Trump were talking about the excessive taxes or regulations that induce American companies to leave the U.S. or to put factories in foreign countries, that would be one thing. The U.S. general top marginal corporate income tax rate is the highest in the industrialized world – and, worldwide, is only exceeded by Chad and the United Arab Emirates. Unnecessary regulations also increase the cost of doing business stateside. But this is not Trump’s argument.
About free trade, the father of modern economics, Adam Smith, in 1776 wrote in “The Wealth of Nations”: “In every country it always is and must be in the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.”
Milton Friedman’s FREE TO CHOOSE “The Tyranny of Control” Transcript and Video (60 Minutes) In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
Open letter to President Obama (Part 654) (Emailed to White House on July 22, 2013) 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 […]
Open letter to President Obama (Part 650) (Emailed to White House on July 22, 2013) 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 […]
The small, but capable, Israeli economy has charted an upward trajectory of economic freedom over the past 26 years, due in no small part to the efforts of Israel’s foremost free markets advocate, Daniel Doron, who died Feb. 28 at age 92. (Photo: Atlantide Phototravel/Corbis Documentary/Getty Images)
Daniel Doron, the notable Israeli free market thinker and the recipient last year of The Heritage Foundation’s inaugural Steven M. Sass Economic Freedom Award, died Feb. 28 at the age of 92.
Indeed, throughout his career of promoting policies of economic freedom and entrepreneurship, Doron had been a leading voice promoting market-oriented reform of Israel’s economy for more than 60 years.
He founded the Israel Center for Social and Economic Progress in 1983. The center, an independent, pro-market public policy think tank, has since its founding been the most influential advocate of economic freedom there.
In remarks in 2009 that are as relevant today as they were then, Doron elaborated on why he fights for economic freedom:
Since the recent financial crisis, we have heard many voices asserting that it revealed that the market economy was deeply flawed; that the “invisible hand” cannot be relied upon any longer to promote economic welfare; and that we must, therefore, resort more and more for the correction of its putative faults to the all-too-visible hand of regulation; namely, of government.
The powerful lessons we have learned in Israel run in the opposite direction. They teach that government control and regulation aggravate, rather than solve, problems.
They also point out that globalization—namely, enhanced global trade, also under attack—has been highly beneficial precisely for developing nations.
But above all we have learned in Israel that free and prosperous markets provide the most powerful incentive for peace, not just paper peace signed by politicians, but [also] a real peace between people who recognize the benefits of peace when it is based on the mutual interests of people and on the mutual cooperation that it engenders.
Over the past few decades, Israel has risen into the ranks of countries whose economies are “mostly free,” according to The Heritage Foundation’s Index of Economic Freedom, a policy guidebook that tracks free market policies and economic governance of nations across the globe. (The Daily Signal is the news outlet of The Heritage Foundation.)
More specifically, Israel’s openness to global commerce has been an important factor in promoting innovation and productivity growth. The relatively sound judicial framework that sustains the rule of law and provides consistent protection for property rights has also contributed to economic stability and long-term competitiveness.
The small, but capable, Israeli economy has charted an upward trajectory of economic freedom over the past 26 years. Israel is striving to be a scale-up nation, and more market-based reforms will facilitate its progress toward greater economic freedom and entrepreneurial dynamism.
Much of that progress has stemmed from the efforts of principled free market thinkers and freedom advocates, such as Doron.
As the now-deceased Nobel Prize-winning economist Milton Friedman once pointed out, “Daniel Doron has consistently been perhaps the most effective proponent of a strictly free market approach in Israel.”
Indeed, Friedman’s keen observation about Doron was well-received by many. We at The Heritage Foundation were honored to have the opportunity to recognize the remarkable achievements of Doron in his lifetime of service in the promotion of economic freedom through Heritage’s Sass Economic Freedom Award.
In a lecture at The Heritage Foundation in 1991, Doron emphasized:
Educating people to function in a market economy is a long, arduous process, but there are no shortcuts. It is the reformer’s task not to hit their opponents over their heads, but to educate them patiently, convince them that through individual freedom and free markets their yearning for a better life can be realized sooner, more peacefully, and even more justly.
Indeed, Doron’s insightful words still ring true and remain even more relevant today.
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.
Milton Friedman, recipient of the 1976 Nobel Memorial Prize in Economic Science, is a Senior Research Fellow at the Hoover Institution. This article is reprinted with the permission of Encounter and The Fraser Institute.
“Capitalism and the Jews” was originally presented as a lecture before the Mont Pelerin Society in 1972. It subsequently was published in England and Canada and appears here without significant revision.
Freedom of Entry and Jewish Representation
Moreover, within those countries, Jews have flourished most in the sectors that have the freest entry and are in that sense most competitive. Compare the experience of the Jews in banking, that I have referred to, with their experience in retail trade, which has been almost a prototype of the textbook image of perfect competition and free entry. Or compare their minor role in large industry with their prominence in the professions such as law, medicine, accountancy and the like.[4] Though there are barriers to entry in the professions, too, once past the initial barriers, there is a large measure of free competition for custom. Even the differences within the professions illustrate my theme. In the U.S., for which I know the details, there was for a long time a major difference between medicine and law in the extent to which state licensure was an effective bar to entry. For reasons that are not relevant here, there was significant restriction of entry in medicine, relatively little in law. And Jews were proportionately much more numerous in law than in medicine.
The movie industry in the U.S. was a new industry and for that reason open to all. Jews became a major factor and this carried over to radio and television when they came on the scene. But now that government control and regulation has become more and more important, I am under the impression that the Jewish role in radio and T.V. is declining.
Capitalism and Israel
A rather different example of the benefits Jews have derived from competitive capitalism is provided by Israel, and this in a dual sense.
First, Israel would hardly have been viable without the massive contributions that it received from world Jewry, primarily from the U.S., secondarily from Britain and other Western capitalist countries. Suppose these countries had been socialist. The hypothetical socialist countries might conceivably have contributed, but if so they would have done so for very different reasons and with very different conditions attached. Compare Soviet aid to Egypt or official U.S. aid to Israel with private contributions. In a capitalist system, any group, however small a minority, can use its own resources as it wishes, without seeking or getting the permission of the majority.
Second, within Israel, despite all the talk of central control, the reality is that rapid development has been primarily the product of private initiative. After my first extended visit to Israel two decades ago, I concluded that two traditions were at work in Israel: an ancient one, going back nearly two thousand years, of finding ways around governmental restrictions; a modern one, going back a century, of belief in “democratic socialism” and “central planning.” Fortunately for Israel, the first tradition has proved far more potent than the second.
To summarize: Except for the sporadic protection of individual monarchs to whom they were useful, Jews have seldom benefited from governmental intervention on their behalf. They have flourished when and only when there has been a widespread acceptance by the public at large of the general doctrine of non-intervention, so that a large measure of competitive capitalism and of tolerance for all groups has prevailed. They have flourished then despite continued widespread anti-Semitic prejudice because the general belief in non-intervention was more powerful than the specific urge to discriminate against the Jews.
III. The Anti-capitalist Mentality of the Jews
Despite this record, for the past century, the Jews have been a stronghold of anti-capitalist sentiment. From Karl Marx through Leon Trotsky to Herbert Marcuse, a sizable fraction of the revolutionary anti-capitalist literature has been authored by Jews. Communist parties in all countries, including the patty that achieved revolution in Russia but also present-day Communist parties in Western countries, and especially in the U.S.,[5] have been run and manned to a disproportionate extent by Jews—though I hasten to add that only a tiny fraction of Jews have ever been members of the Communist party. Jews have been equally active in the less- revolutionary socialist movements in all countries, as intellectuals generating socialist literature, as active participants in leadership, and as members.
Coming still closer to the center, in Britain the Jewish vote and participation is predominantly in the Labor party, in the U.S., in the left wing of the Democratic party. The party programs of the so-called right-wing parties in Israel would be regarded as “liberal,” in the modern sense, almost everywhere else. These phenomena are so well known that they require little elaboration or documentation.[6]
In Part I of this series, I pointed out that Biden’s plethora of proposed handouts and subsidies would lead to higher prices and more inefficiency. And in Part II, I explained that his discussion of inflation was embarrassingly inaccurate.
In today’s column, we’re going to analyze his strident support for protectionist “Buy America” provisions, which drive up costs for taxpayers by making it harder for foreign firms to compete for government contracts and thus give American firms the ability to charge higher prices.
How much of a burden are these policies? How much more are taxpayers having to pay because governments can’t opt for the lowest qualified bidder?
According to research shared by the Peterson Institute for International Economics (PIIE), American taxpayers lose $94 billion per year.
The good news (if we have a very generous definition of “good”) is that procurement protectionism “only” pushes up costs in the United States by 5.6 percent.
Our dirigiste friends in the European Union suffer much more. Their procurement protectionism results in average markups of 17.6 percent, costing European taxpayers a staggering $471 billion.
But taxpayers are not the only losers.
In a 2017 study for PIIE, Gary Hufbauer and Euijin Jung explain that nations also lose exports because of procurement protectionism.
Buy American provisions are often enacted because politicians associate the patriotic slogan with the creation of domestic jobs. In fact, these laws are counterproductive: They are costly for taxpayers, they curtail exports, and they lose more jobs than they create. “Buy American” was bad policy in 1930 and does even more harm today. …Buy American dulls competition for everything that federal, state, and local governments purchase.Consequently, taxpayers pay inflated prices for new infrastructure, the latest information technology, and routine maintenance of subways, bridges, and airports. …Quantification is difficult, but the major federal Buy American laws probably equate to tariff equivalent barriers of at least 25 percent on federal purchases. State laws vary in scope and protective degree, but on average they probably entail at least 10 percent tariff equivalent barriers. …When Buy American policies are championed at home they are emulated abroad—in the form of Buy European, Buy Mexican, Buy Japanese, and other local content laws and policies. Consequently, US goods and services face severe barriers in foreign procurement markets. …US exports could expand by $189 billion annually if OECD countries all repealed their existing local content laws.
The Heritage Foundation’s Tori Smith authored a report when Trump was pushing his version of procurement protectionism. Here’s some of what she wrote.
Domestic content requirements, like those found in the Buy American Act, the Berry Amendment, and various other laws, result in additional regulatory burdens for producers, and increase costs for American taxpayers. All for little or no gain: The policies are unlikely to stimulate job growth in target industries. …Existing laws and provisions regarding domestic content requirements…are extremely onerous and complicated burdens. They have three main effects: (1) creating additional regulatory hurdles for producers; (2) costing American taxpayers more than they would otherwise pay for government projects; and (3) they are unlikely to yield job growth in target industries like the steel sector.
Here are the most important passages from her report.
…to eliminate all existing domestic content requirements….would create hundreds of thousands of American jobs across the country and contribute billions of dollars to U.S. gross domestic product.
And this chart shows how various states would benefit if there was open competition for government procurement.
I’ll close with three additional points.
First, it’s disappointing that Biden is continuingTrump’s protectionist policies. It’s even more disappointing that he wants to expand upon them. This is one area where people thought Biden might move policy in the right direction.
For some historical perspective on the failure of the Trump-Biden approach, the National Taxpayers Union helpfully shared the views of Harry Truman and Dwight Eisenhower.
Second, some national security experts make a very reasonable argument that the Pentagon should not make itself dependent on purchases from nations such as China.
But this is at most an argument for “Buy from Allied Nations,” not an argument for “Buy America.”
Third, Biden is perversely consistent. Everything he is doing will increase costs for taxpayers and consumers in order to bestow undeserved benefits on special-interest groups.
P.S. The argument for competition in the market for government procurement is the same as the general argument for free trade. And since we’re on the topic of trade, remember that dollars sent overseas as part of a procurement contract will come back to the United States, either to purchase American exports or as part of investment in the U.S. economy.
The pandemic has shocked every sector of the economy. Trade restrictions enacted by the Trump administration and maintained by President Biden have rippled through the U.S. economy but have particularly impacted U.S. ports. The pandemic highlighted that American ports have broader efficiency problems and could use some serious policy and management reforms.
On the west coast in particular, ship congestion has caused severe delays, wreaking havoc on the supply chain. While factories and ports in Asia are working 24/7 to supply American consumers with valuable goods, U.S. ports have been open for far fewer hours because labor union contractsdictate the hourly terms. However, after months of backlog, the ports of Los Angeles (LA) and Long Beach (LB) are finally switching to 24/7 shifts to move goods more quickly.
As a result of these union contracts, government offices are also not open 24/7. The ports of LA and LB account for almost half of all U.S. imports. The Customs and Border Protection (CBP) officials who must clear and admit goods do not work nights or weekends. These limits create additional pressure to have goods shipped to the United States during a prohibitive time frame, or leave ships idling around the ports until they can get in. The latter is the most common response. Recently, ships have been waiting an average of 12.5 days to enter the LA port. Ship idling has caused other problems too. Orange County, CA was affected by an oil spill that is suspected to have been caused by a pipeline hit with idling ship anchors. These differences in operating hours have caused huge ports efficiency losses that are felt across the country.
While it is positive that retailers, couriers, and the International Longshore and Warehouse Union (ILWU) are making changes to run ports more efficiently, permanent trade policy changes would help ease America’s coastal shipping problems.
The best policy would be to unilaterally remove tariffs by the United States. Simply eliminating tariffs would reduce an administrative burden both for traders and CBP officials. Duty‐free trade would increase imports and exports but all other things equal, the freed‐up CBP resources would help to move goods more swiftly through the ports.
However, a few smaller reforms could be implemented now that would considerably help the efficiency of U.S. ports. Removing Section 232 tariffs on steel and aluminum imports could temper the current domestic scarcity of some transportation‐related goods, including chassis (the frame of a vehicle that holds containers). Thesematerials are vital inputs for such products and the Section 232 tariffs are affecting American manufacturers’ ability to meet domestic demand. Eliminating duties and tariffs on transportation‐related goods, including the 221 percent antidumping and countervailing (AD/CVD) duties and 25 percent Section 301 tariffs on Chinese chassis, could help increase the U.S. supply of chassis. While some freighters are paying the higher prices for Chinese chassis, the supply of transportation is still constrained, which has resulted in higher sticker prices on consumer goods.
As LA and LB move to 24/7 shifts, CBP offices should also be open 24/7. Given the sheer volume of trade these two ports process, it would seem sensible to make staffing 24/7 a permanent change at these ports, and at others depending on trade volumes.
Reforming the Jones Act could also help. All freight moved between U.S. ports mustuseU.S.-built, -crewed, and -flagged ships. As a result, traders circumvent these regulations by using alternative modes like trucks and trains. It would be prudent to reform the Jones Act to allow ships not in compliance with the Jones Act to pick up shipments in one U.S. port and unload at another. This would reduce pressure on inland transit that is currently being impacted by the aforementioned tariffs.
These bottlenecks have provided insight into the problems that exist at U.S. ports and with coastal shipping more broadly. Improvements in trade policy have a role to play and policymakers would be remiss not to consider permanent changes that would be beneficial now and could preempt pressures during future economic shocks.
Milton Friedman – Free Trade vs. Protectionism
Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman
Larry Elder rebuts candidate’s ‘they’re taking our jobs’ claim
Published: 02/03/2016 at 6:39 PM
One of Donald Trump’s talking points and biggest applause lines is how “they” – Japan, China and Mexico – are “beating us in trade” and are “taking our jobs.” He proposes tariffs, for example, on Chinese goods in retaliation for that country’s alleged “cheating.”
To someone who is out of work in an industry where foreign workers do what he or she once did, Trump-like protectionism sounds appealing. But Trump actually proposes punishing the American consumer. As economist Milton Friedman says, protectionism discriminates against low prices.
It is certainly true that many countries prop up or subsidize companies or even whole industries by providing capital or special privileges. This allows them to produce goods and services “below cost” – or at prices below what a competitor could charge and still make a profit. But doing so also means that taxes in that country, which could have gone to a more productive use, are squandered to keep a company in business that otherwise wouldn’t exist or would have gone out of business. This means consumers in other countries with which the “cheater” country trades can buy those imported goods at a cheaper price.
Trump proposes to retaliate by placing tariffs on those imported goods. But this prevents American consumers from benefiting from the “cheater” country’s folly of propping up companies that would not survive but for the taxes spent to keep it alive. Why compound the stupidity?
Another justification for this kind of protectionism is that a foreign country “exploits” America through the use of “slave labor” which, as to wages, causes a “race to the bottom.” Certainly forced labor, as when “blood diamonds” are mined by workers with guns pointed to their heads, is criminal and immoral. But free laborers offering to work for less money than others is how poor countries become wealthier – by allowing other countries to buy goods more cheaply.
NAFTA, the North American Free Trade Agreement, established in 1994, has become exhibit A on how “we lose” on trade. After all, many American jobs have been “outsourced” to Mexico. But that looks at but one side of the ledger. That an American pays less for certain things frees up capital to spend on something or on someone else. A machinist sees his job “shipped to Mexico,” but the planner or analyst hired by a company with the “savings” might not see the direct relationship between free trade and the fact that he or she has this new job. When NAFTA was debated, businessman and presidential candidate Ross Perot predicted “a giant sucking sound” as jobs and incomes would be lost to Mexico.
The American Enterprise Institute writes: “It is an article of faith among protectionists that NAFTA harmed American workers. … The justification may be that NAFTA went into force at the beginning of 1994 and the U.S. trade balance with Canada and Mexico, two of our top partners, then deteriorated.
“But the American job market improved as these trade deficits grew. Unemployment fell more than two points from the beginning of 1994 through the middle of 2000. Already high labor force participation edged higher to its all-time record by early 2000. Manufacturing employment rose until mid-1998 and was above its pre-NAFTA level until April 2001. Manufacturing wages rose. The strength in the American job market from 1994 to 1999 is not due primarily to NAFTA, but it is plain that the job market, including manufacturing, strengthened after NAFTA.”
Trump is also schizophrenic on this issue. On the one hand, he opposes illegal immigration, which most often is an economic decision where, for example, a poor, unskilled worker from Mexico sneaks into America to make money. On the other hand, Trump deems it unfair and a form of “cheating” if an American company relocates to or builds a factory in Mexico to take advantage of that unskilled Mexican worker’s willingness to work for less.
If Trump were talking about the excessive taxes or regulations that induce American companies to leave the U.S. or to put factories in foreign countries, that would be one thing. The U.S. general top marginal corporate income tax rate is the highest in the industrialized world – and, worldwide, is only exceeded by Chad and the United Arab Emirates. Unnecessary regulations also increase the cost of doing business stateside. But this is not Trump’s argument.
About free trade, the father of modern economics, Adam Smith, in 1776 wrote in “The Wealth of Nations”: “In every country it always is and must be in the interest of the great body of the people to buy whatever they want of those who sell it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of the people.”
Milton Friedman’s FREE TO CHOOSE “The Tyranny of Control” Transcript and Video (60 Minutes) In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount. I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?” and “Created Equal” and From Cradle to Grave, […]
Open letter to President Obama (Part 654) (Emailed to White House on July 22, 2013) 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 […]
Open letter to President Obama (Part 650) (Emailed to White House on July 22, 2013) 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 […]
There are certain topics that seem to be slam-dunk wins for those who favor free markets and limited government, and one reason I make this assertion is that folks on the left don’t even bother to make counter-arguments.
Here are just a few examples:
Nobody on the left ever tries to produce an alternative explanation for the IRS data showing that rich people paid a lot more taxafter Ronald Reagan lowered the top income tax rate from 70 percent to 28 percent.
Nobody on the left ever tries to produce an alternative explanation for the success of Switzerland’s spending cap.
Prior to today, I also would have included this example:
Nobody on the left ever tries to produce an alternative explanation for Chile’s amazing jump from poverty to prosperity after the country shifted to pro-market policies such as private social security.
But now I can no longer include Chile’s economic renaissance because I finally found someone who concocted an alternative explanation.
As part of a column in today’s Washington Post about Chile’s upcoming presidential election, Anthony Faiola made this claim about that nation’s economic performance.
After Pinochet’s ruthless rule came to an end in 1990, the newly democratic nation witnessed a historic period of economic growth.Gross domestic product growth between 1990 and 2018 averaged 4.7 percent annually, well above the Latin American average. Over that same period, democratic governments increased social spending. Extreme poverty (below $1.5 per day) was virtually wiped out.
But now let’s consider whether this alternative explanation is accurate.
Mr. Faiola wants readers to believe that the positive developments in Chile (“historic period of growth” and “extreme poverty…was virtually wiped out”) occurred after 1990.
As shown by these two charts, it’s far more likely that the dramatic rise in per-capita economic performance around 1980 is the result of a big increase in economic liberty (as measured by Economic Freedom of the World) that also was occurring around that time.
One should always be careful about interpreting numbers. For instance, national economic data at a given moment in time will be affected when there are periods of global recession, such as the early 1980s and 2008.
Which is why it is important to look at longer periods of time. And when looking at decades of data for Chile, the big jump in prosperity clearly began after the economy was liberalized, not after Pinochet ceded power in 1990.
We’ll close with some bad news and good news.
The bad news, as captured by the bottom-half of the stacked charts abvoe, is that there hasn’t been much pro-market reform in recent decades.
But the good news is that Chile hasn’t deteriorated. The nation has endured some left-leaning governments, but economic freedom has remained high by world standards. Which means the economy continues to grow.
P.S. I’ll add some worrisome news. The left in Chile wants a new constitution that would give politicians more power over the economy. If that effort is successful, I fear the country will suffer Argentinian–styledecline.
P.P.S. I suppose Mr. Faiola deserves some credit for cleverness. Some leftists have tried to argue Chile is a failed “neoliberal experiment.” Given the nation’s superior performance, that’s obviously an absurd strategy. So Faiola came up with a new hypothesis that acknowledges the growth, but tries to convince readers that it’s all the result of things that happened after 1990. He’s wildly wrong, but at least he tried.
P.P.P.S. I have a three-part series (here, here, and here) on how low-income people have been big winners as a result of Chile’s shift to free enterprise.
P.P.P.P.S. Here’s a column on Milton Friedman’s indirect contribution to Chilean prosperity.
The shift toward free markets, which began in the mid-1970s, was especially beneficial for the less fortunate (see here, here, and here).
But it’s quite common for critics to assert that Chile is a bad example because many of the reforms were enacted by General Augusto Pinochet, a dictator who seized power in 1973. And some of those critics also attack Milton Friedman for urging Pinochet to liberalize the economy and reduce the burden of government.
Are these critics right?
To answer that question, I very much recommend the following cartoon strip by Peter Bagge. Published by Reason, it accurately depicts the efforts of reformers to get good reforms from a bad government.
It starts in 1973, with a group of Chilean economists, known as the “Chicago Boys,” who wanted free markets.
In 1975, they invited Milton Friedman to help make the case for economic reform.
This 1982 strip shows some of the controversies that materialized.
But by the time we got to the 21st century, everything Friedman said turned out to be true.
First, I’ll be able to share it with people who want to delegitimize Chile’s transition to a market-oriented democracy (ranked #14 according to the most-recent edition of Economic Freedom of the World). Simply stated, it was bad that Chile had a dictatorship, but it was good that the dictatorship allowed pro-market reforms (particularly when compared to the alternative of a dictatorship with no reforms). And it was great that Chile became a democracy (a process presumably aided by mass prosperity).
Second, we should encourage engagement with distasteful governments. I certainly don’t endorse China’s government or Russia’s government, but I’ve advised government officials from both nations. Heck, I would even give advice to Cuba’s government or North Korea’s government (not that I’m expecting to be asked). My goal is to promote more liberty and it would make me very happy if I could have just a tiny fraction of Friedman’s influence in pursuing that goal.
P.S. Here’s Milton Friedman discussing his role in Chile.
P.P.S. While I disagree, it’s easy to understand why some people try to delegitimize Chile’s reforms by linking them to Pinochet. What baffles me are the folks who try to argue that the reforms were a failure. See, for instance, Prof. Dani Rodrik and the New York Times.
José Niño is a graduate student based in Santiago, Chile. A citizen of the world, he has lived in Venezuela, Colombia, and the United States. He is currently an international research analyst with the Acton Circle of Chile. Follow@JoseAlNino.
EspañolThe power of ideas to help shape political movements has been grossly underestimated over the years. In truth, some of the largest political transformations in human history have come from ideas that were developed in the secluded confines of an intellectual’s home or in obscure academic institutes. Regardless of the origins, ideas can snowball into powerful vehicles of social change.+
As Friedrich Hayek noted in one of his most powerful works, Intellectuals and Socialism,the triumph of socialist ideas can largely be attributed to the ideas first put forward by various intellectuals. They began with relatively well-off intellectuals and then made their way to “second-hand dealers” — journalists, scientists, doctors, teachers, ministers, lecturers, radio commentators, fiction writers, cartoonists, and artists — who then spread those ideas to the masses.+
Intellectuals like Milton Friedman took it upon themselves to reverse this trend and create an environment that was more favorable to free markets. Steadfast in his beliefs in the power of ideas, Friedman knew that big changes usually start out in small venues.+
It was in Chile where Friedman’s vision was first implemented on a large scale. The results were nothing short of spectacular, as Chile was able to escape a veritable economic collapse and experience an unprecedented boom.+
Chile’s economic success was no mere coincidence; it was the product of ideas that Milton Friedman put forward in the 1950s. To understand how such a radical change was brought about, one must first look at the origins of the Chicago Boys, the group of Chilean economists that played a pivotal role in the transformation of Chile’s economy during the 1970s and 1980s.+
The Chicago Boys
Under the tutelage of the United States Agency for International Development (USAID), the University of Chicago signed a modest agreement with the Pontifical Catholic University of Chile in the 1950s to provide a group of Chilean students training in economics.+
In exchange, the University of Chicago would send four faculty members to help the Catholic University build up their economics department. Of these four faculty members, Arnold Harberger would serve as the Chicago Boys’ principal mentor.+
What at first looked liked just another exchange program between universities would play a substantial role in Chile’s economic rise.+
A Country Mired By Statism
At the start of this program, Chile’s economy was in the doldrums. Another victim of Raúl Prebisch’s Import Substitution Industrialization (ISI) policy, Chile had a very loose central banking policy, featured 15 different exchange rates, heavy tariffs, and a number of import and export controls. Subsequent governments maintained the same neo-mercantilist structure up until the 1970s.+
During this era of economic malaise, the Chicago Boys constructed El Ladrillo(The Brick), a text primarily shaped by economist Sergio de Castro which advocated for economic liberalization in all sectors of the Chilean economy. Sadly, this text was largely ignored at that time.+
It wasn’t until the presidency of Salvador Allende that the Chicago Boys’ talents would be desperately needed.+
On the Road to Cuba 2.0
Though democratically elected by a narrow margin in 1970, Salvador Allende was determined to turn Chile into the next Cuba by undermining all of its democratic institutions. Through price controls, arbitrary expropriations, and lax monetary policy, Allende put the Chilean economy on the verge of collapse. By 1973, inflation reached 606 percent and per capita GDP dropped 7.14 percent.+
Under the command of General Augusto Pinochet, the military deposed Allende’s government. Despite this tumultuous change, the military ruler did not have a clear economic vision for Chile.+
Enter Milton Friedman
Milton Friedman’s visit to Chile in March 1975 proved to be quite fateful. Friedman was on a week-long lecture tour for various think thanks. Eventually, Friedman sat down with the general himself for 45 minutes. Right off the bat, Friedman recognized that Pinochet had very little knowledge of economics. After their meeting, Friedman sent Pinochet a letter with a list of policy recommendations.+
Friedman was blunt is his diagnosis of Chile’s economy: for the country to recover, it had to truly embrace free-market measures.+
Ideas Put in Action
Cooler heads prevailed and Pinochet let the Chicago School disciples occupy various posts in the military government. In April 1975, El Plan de Recuperación Económica (The Economic Recovery Plan) was implemented. Soon Chile curbed its inflation, opened up its markets, privatized state-owned industries, and cut government spending. By the 1990s, Chile was experiencing the largest economic boom in its history.+
A principled libertarian, Friedman criticized Pinochet’s repressive political measures. Friedman understood that economic and political freedoms are not mutually exclusive. The principles laid in Friedman’s book Capitalism and Freedom inspired José Piñera, a notable Chilean reformer, to become a part of Chile’s classical liberal revolution.+
Like Friedman, Piñera understood the link between economic and political freedom. This motivated him to help ratify the Chilean Constitution of 1980. The most classically liberal constitution in Latin America’s history, it established the transition towards free elections and Chile’s return to democracy.+
Additionally, Piñera was the architect of Chile’s private social security system that empowered millions of workers and has fostered the growth of an ownership society. This model has been exported to dozens of countries abroad and has served as a market-based alternative to government-run pension systems.+
The “Chilean Miracle” represented the first major triumph against communism during the Cold War. Chile’s classical-liberal revolution subsequently inspired the Thatcher Revolution of 1979 and the Reagan Revolution of 1980. These ideas had resounding effects all over the globe and marked the beginning of the end for Soviet-style models of economic organization.+
There is still much work to do, as the illegitimate children of Marxist and Keynesian thought still run loose these days throughout Latin America. But one thing is absolutely certain: an idea whose time has come is unstoppable.+
RIP Milton Friedman
Milton Friedman is the short one!!!
Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1
Milton Friedman The Power of the Market 5-5 How can we have personal freedom without economic freedom? That is why I don’t understand why socialists who value individual freedoms want to take away our economic freedoms. I wanted to share this info below with you from Milton Friedman who has influenced me greatly over the […]
…Micro-states are fascinating and among the freest enclaves in the world. …Freedom House ranks Andorra in its highest category—a “Free” country scoring an impressive 93 on a 100-point scale of political and civil liberties. …“The legal and regulatory framework,” the survey reports, “is generally supportive of property rights and entrepreneurship, and there are few undue obstacles to private business activity in practice.” …writes Guy Sharp, a native Andorran financial advisor…“you get many of the benefits of Europe without the high taxes.” …The maximum personal income tax rate, as well as the capital gains rate, is just 10 percent. …Most goods are subject to a modest value-added tax rate of less than five percent.
The reason is very simple – Andorra has become a tax haven for this type of activity…many Spanish YouTubers have moved there. But ElRubius is one of the most famous. …In Spain, he would have paid up to 54% of his income in taxes, while in Andorra, the top income tax is only 10%. …The decision of ElRubius was criticised in the Spanish media as unpatriotic. …his popularity on YouTube remained undeterred, and in fact, his subscription base even grew. …There are quite a few other countries that have begun to lose their top earners, notably France and the Netherlands
after some of Spain’s most popular YouTube personalities moved their residency to Andorra, a wealthy microstate perched in the Pyrenees mountains between France and Spain, with lower tax rates than its larger neighbours. …In Spain, anyone who earns above 300,000 euros per year must pay income tax of 47%, compared with a 10% flat rate charged by Andorra on earnings of more than 40,000 euros.
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