Category Archives: President Donald Trump

FRIEDMAN FRIDAY NOVEMBER 10, 2016 3:18PM Trump Spending Cut Ideas By CHRIS EDWARDS

 

There is nothing that is free and that is why we have to cut government spending since we are all paying for this inefficient government!!

Milton Friedman – The Free Lunch Myth

NOVEMBER 10, 2016 3:18PM

Trump Spending Cut Ideas

President-elect Donald Trump said on the campaign trail that he will balance the federal budget and cut wasteful spending. Here are some of Trump’s views on budget reforms:

  • “We are going to ask every department head in government to provide a list of wasteful spending projects that we can eliminate in my first 100 days.” Source.
  • “We can also stop funding programs that are not authorized in law. Congress spent $320 billion last year on 256 expired laws … Removing just 5 percent of that will reduce spending by almost $200 billion over a ten-year period.” Source.
  • “I may cut Department of Education. I believe Common Core is a very bad thing,” Trump said. “I believe that we should be — you know, educating our children from Iowa, from New Hampshire, from South Carolina, from California, from New York. I think that it should be local education.” Source.
  • “If we save just one penny of each federal dollar spent on non-defense, and non-entitlement programs, we can save almost $1 trillion over the next decade.” Source.
  • “We’re going local. Have to go local. Environmental protection—we waste all of this money. We’re going to bring that back to the states … We are going to cut many of the agencies, we will balance our budget, and we will be dynamic again.” Source.
  • “Waste, fraud and abuse all over the place. Waste, fraud and abuse. You look at what’s happening with Social Security, you look—look at what’s happening with every agency—waste, fraud and abuse. We will cut so much, your head will spin.” Source.

I hope my head does spin from cuts, although most of Trump’s proposals are vague and quite timid. Still, I’m hoping that the more the incoming president finds out about the federal budget, the more he will appreciate the need for major terminations.

So let me suggest some wasteful spending that the new administration should tackle, and the annual savings from terminating each:

President Trump will face major budget pressures in coming years as deficits and entitlement spending soar. Today’s $600 billion deficits are headed toward $1 trillion, and deficits will be even higher if a recession comes along.

Federal spending cuts would help avert a fiscal crisis and boost growth by reducing economic distortions. The incoming Trump team should start with some of the cuts here, and there are plenty more proposals at DownsizingGovernment.org.

 

Related posts:

FRIEDMAN FRIDAY Mark J. Perry@Mark_J_Perry July 30, 2016 10:46 am | AEIdeas Happy 104th birthday, Milton Friedman

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman Free to Choose Part 4: From Cradle to Grave Featuring Milton Friedman Mark J. Perry@Mark_J_Perry July 30, 2016 10:46 am | AEIdeas Happy 104th birthday, Milton Friedman Tomorrow […]

FRIEDMAN FRIDAY Champion of Liberty by Stephen Moore Friday, October 26, 2012

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FRIEDMAN FRIDAY Socialism, RIP Tottering European economies prove again the Keynesian model is a failure By Stephen Moore – – Sunday, July 12, 2015

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman Socialism, RIP Tottering European economies prove again the Keynesian model is a failure By Stephen Moore – – Sunday, July 12, 2015 ANALYSIS/OPINION: A few years ago, the […]

FRIEDMAN FRIDAY What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET One of the fascinating sideshows of the immigration debate within the […]

FRIEDMAN FRIDAY Obama loves the death tax but listen to what Milton Friedman had to say about it!!!

__ Obama loves the death tax but listen to what Milton Friedman had to say about it!!! Milton Friedman Redistribution of Wealth and the Death Tax ___________ The Obama Administration’s Assault on the Rule of Law September 6, 2016 by Dan Mitchell What’s the worst development in economic policy of the Obama years? The faux stimulus […]

FRIEDMAN FRIDAY Dan Mitchell and Milton Friedman: Subsidies for Higher Education Are the Problem!

Milton Friedman – Should Higher Education Be Subsidized? Published on Aug 14, 2013 Professor Friedman leads a roundtable discussion with students. http://www.LibertyPen.com Hillary Is Wrong: Subsidies for Higher Education Are the Problem, not the Solution August 24, 2016 by Dan Mitchell “So many bad ideas, so little time.” That’s my attitude about Hillary Clinton. She proposes […]

FRIEDMAN FRIDAY Milton Friedman and Walter Williams have explained, minimum wage laws are especially harmful for blacks!

Milton Friedman – A Conversation On Minimum Wage Published on Oct 4, 2013 A debate on whether the minimum wage hurts or helps the working class. http://www.LibertyPen.com Is Anybody Shocked that Higher Minimum Wage Mandates Are Resulting in Fewer Jobs? August 25, 2016 by Dan Mitchell While economists are famous for their disagreements (and their incompetent […]

FRIEDMAN FRIDAY Milton Friedman and Dan Mitchell look at the economics of medical care!!

Milton Friedman on Medical Care (Full Lecture) Another Grim Reminder that Obamacare Has Made Healthcare More Expensive August 29, 2016 by Dan Mitchell 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 […]

FRIEDMAN FRIDAY 2 videos by Milton Friedman on welfare state plus 2 cartoons that illustrate the fate of socialism from the Cato Institute

__________   Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism: Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State July 15, 2011 by Dan Mitchell In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often […]

FRIEDMAN FRIDAY Milton Friedman has the two solutions to the Black Teenage Unemployment Problem!!!

Milton Friedman on Donahue Show in 1979 Milton Friedman has the two solutions to the Black Teenage Unemployment Problem!!! The solutions would be first to lower the Minimum Wage Amount and  second give students the opportunity to have vouchers so their parents can put them in the best schools when they start in the kindergarten […]

FRIEDMAN FRIDAY NOVEMBER 15, 2016 5:22PM New President. New SEC. Less Regulation? By THAYA BROOK KNIGHT

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Milton Friedman – Regulation In A Free Society

NOVEMBER 15, 2016 5:22PM

New President. New SEC. Less Regulation?

The Securities and Exchange Commission (SEC) is poised to have the majority of its seats filled by Trump nominees.  Earlier this week SEC chair Mary Jo White announced she would be stepping down at the end of President Obama’s term. This is not in itself surprising.  The chair serves at the will of the president and it’s customary for the current chair to step aside and let an incoming president install a chair of his or her choosing.  What is remarkable however is the number of vacancies that leaves president-elect Trump to fill.

The five member commission has had two empty seats for over a year and a half now, following Republican Dan Gallagher’s resignation in May 2015 and the expiration of Democrat Luis Aguilar’s term the same month. Although President Obama nominated two candidates to fill those seats, Republican Hester Peirce and Democrat Lisa Fairfax, their confirmations have been stalled in congress.  (Like many similar commissions, the SEC must be politically balanced with no more than three seats filled by members of the same party.)  White’s resignation will therefore leave only two commissioners in office, Republican Michael Piwowar and Democrat Kara Stein. Until a new chair can be confirmed, it is likely that president-elect Trump will name Piwowar acting chair.  In the meantime, however, with only two commissioners, it is unlikely that the SEC will pursue any kind of ambitious agenda.

Looking forward to what the SEC might look like with its new members in place, it would be reasonable to hope for a less aggressive and more market-friendly agency than we have had under White’s direction.  Trump has sounded a decidedly deregulatory tone both in the course of the campaign, vowing to dismantle Dodd-Frank, and in the days since the election.  His pick of Paul Atkins, a former SEC commissioner known for his strong free-market bent, to head up part of his transition team also signals a commitment to paring back the voluminous regulations that have plagued the financial sector in recent years.

As far as concrete agenda items for a new chair, there are a number of regulations ripe for reform.

The U.S. capital markets have seen a marked decrease in the number of initial public offerings (IPOs) in recent years, which many have attributed to the Sarbanes-Oxley Act of 2002 and its onerous reporting and internal controls requirements for public companies.  Under new direction, the SEC would be able to investigate what has been depressing interest in IPOs and to pursue strategies to reduce the regulatory burden as necessary.

Dodd-Frank imposed several disclosure requirements unrelated to companies’ profitability, a tactic former commissioner Gallagher has called “hijacking” the SEC’s disclosure regime. While many of these disclosure requirements cannot be repealed without an act of congress, the new SEC chair would have the authority to push back against any additional issue-of-the-day disclosures.  Senator Warren and others on the left have agitated for a requirement that companies disclose information about political spending; it is unlikely that an SEC chair picked by Trump or his team would pursue such a rule.

Finally, a highly technical rule known as Regulation NMS has long plagued the securities exchanges, even some have argued spawning the trading strategy known as “high frequency trading.”  A new chair would be well-positioned to reopen that regulation and to evaluate its potential unintended consequences.

 

Related posts:

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FRIEDMAN FRIDAY Socialism, RIP Tottering European economies prove again the Keynesian model is a failure By Stephen Moore – – Sunday, July 12, 2015

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman Socialism, RIP Tottering European economies prove again the Keynesian model is a failure By Stephen Moore – – Sunday, July 12, 2015 ANALYSIS/OPINION: A few years ago, the […]

FRIEDMAN FRIDAY What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET One of the fascinating sideshows of the immigration debate within the […]

FRIEDMAN FRIDAY Obama loves the death tax but listen to what Milton Friedman had to say about it!!!

__ Obama loves the death tax but listen to what Milton Friedman had to say about it!!! Milton Friedman Redistribution of Wealth and the Death Tax ___________ The Obama Administration’s Assault on the Rule of Law September 6, 2016 by Dan Mitchell What’s the worst development in economic policy of the Obama years? The faux stimulus […]

FRIEDMAN FRIDAY Dan Mitchell and Milton Friedman: Subsidies for Higher Education Are the Problem!

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FRIEDMAN FRIDAY Milton Friedman and Walter Williams have explained, minimum wage laws are especially harmful for blacks!

Milton Friedman – A Conversation On Minimum Wage Published on Oct 4, 2013 A debate on whether the minimum wage hurts or helps the working class. http://www.LibertyPen.com Is Anybody Shocked that Higher Minimum Wage Mandates Are Resulting in Fewer Jobs? August 25, 2016 by Dan Mitchell While economists are famous for their disagreements (and their incompetent […]

FRIEDMAN FRIDAY Milton Friedman and Dan Mitchell look at the economics of medical care!!

Milton Friedman on Medical Care (Full Lecture) Another Grim Reminder that Obamacare Has Made Healthcare More Expensive August 29, 2016 by Dan Mitchell 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 […]

FRIEDMAN FRIDAY 2 videos by Milton Friedman on welfare state plus 2 cartoons that illustrate the fate of socialism from the Cato Institute

__________   Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism: Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State July 15, 2011 by Dan Mitchell In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often […]

FRIEDMAN FRIDAY Milton Friedman has the two solutions to the Black Teenage Unemployment Problem!!!

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FRIEDMAN FRIDAY Trump better not start a trade war!!!

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Milton Friedman – Free Trade Vs Protectionism

Published on Jul 30, 2012

Professor Friedman clarifies the motives of protectionism and explains why free trade policies benefit the masses. (1978) Apologies for poor video quality at times. http://www.LibertyPen.com

NOVEMBER 22, 2016 10:26AM

Protectionist Steel Interests Given Keys to Trump’s Trade Policy Kingdom

“Well we’re living here in Allentown
And they’re closing all the factories down
Out in Bethlehem they’re killing time
Filling out forms
Standing in line
Well our fathers fought the Second World War
Spent their weekends on the Jersey Shore
Met our mothers in the USO
Asked them to dance
Danced with them slow
And we’re living here in Allentown.”

– Billy Joel, “Allentown,” 1982

Nearly 35 years after the release of Billy Joel’s wistful lament about the decline of iconic Bethlehem Steel and the selfless virtues of America’s “Greatest Generation” along with it – the U.S. steel industry may be getting the last laugh. Yesterday, former Nucor Steel CEO Dan DiMicco and longtime Washington trade attorney Robert Lighthizer, who has devoted much of his professional career to building walls between foreign steel and the U.S. companies that want to buy it, were appointed heads of President-elect Trump’s “Landing Team” at the Office of the United States Trade Representative.

To those who have been holding out hope that Trump’s anti-trade campaign bluster would moderate before it could be converted to policy, the selection of DiMicco and Lighthizer is pretty devastating news. Neither has met a tariff he didn’t like or a trade agreement he did. To the non-political staff at USTR, the DiMicco/Lighthizer duo must feel like a real poke in the eye. After all, the mission of the agency is “to work toward opening markets throughout the world to create new opportunities and higher living standards.” The staff is generally committed to trade liberalism and good will among nations and their sensibilities are informed by foreign service backgrounds.  DiMicco and Lighthizer bring an enforcement and prosecution ethos to the USTR, which will send a lot of the existing staff to the exits, while ensuring that the agency’s budget is devoted primarily to bringing complaints against our trade partners, rather than negotiating new and better deals.

Of course, Trump mistakenly cites the U.S. trade deficit as evidence that the United States is losing at trade.  We are losing, he bellows, because our trade agreements are disastrous. And, they are disastrous, he reasons, because U.S. negotiators always get outsmarted by their crafty foreign counterparts. What better way not to get outsmarted than to appoint people who would take a wrecking ball to existing agreements instead of crafting new ones?

For reasons unsupported by facts, DiMicco abhors the North American Free Trade Agreement and wants it shredded.  He also wants the United States to withdraw from the Trans-Pacific Partnership – which, yesterday, became one of Trump’s Day One priorities. Trump has been outspoken about his intentions to declare China a currency manipulator and to respond with punitive unilateral measures. To the extent that Trump’s actions are constrained by U.S. treaty commitments under the World Trade Organization, Lighthizer has a long history of challenging the veracity of the WTO dispute settlement system, which he claims embodies an anti-American bias. He has long advocated for closer scrutiny and, if warranted, U.S. withdrawal from the WTO.

Ten years ago, I debated Lighthizer in this week-long back-and-forth hosted by the Council on Foreign Relations. His affinity for wanting to bend the WTO to be more responsive to U.S. demands (i.e., “All animals are equal but some are more equal than others”) was very much on display then.

The U.S. steel industry has been one of America’s most protectionist and litigious industries for more than a century. Its model was never to compete on economics or commercial considerations. It was always to invest in K Street and use the levers of politics to cordon off the U.S. market for domestic steel. As a trade attorney, Lighthizer brought hundreds of antidumping and countervailing duty cases against foreign producers with the aim of raising the cost of foreign steel to downstream, steel-consuming U.S. industries, such as appliance, automobile, and pipe and tube manufacturers. Often testifying in hearings before the U.S. International Trade Commission, where Lighthizer argued for the imposition of tariffs, was Dan DiMicco, in his capacity as Nucor CEO.

It’s not that the steel industry isn’t entitled to its day in court. The problem is that the industry’s interests are so overrepresented in Washington. After all, “primary metal” manufacturing (which is a sector that includes more than just steel-making) accounted for $56 billion of value-added output last year. That’s a lot – until you recall that total value-added in the U.S. economy last year (GDP) was over $18 trillion. In other words, the direction of the administration’s trade policy is being shaped by two men who speak on behalf of interests that account for less than 0.3 percent of the U.S. economy. What about agricultural interests?  What about the tech industry? Pharmaceuticals? Equipment manufacturers? Professional services? Will the interests of the other 99.7 percent of the U.S. economy have a voice in the formulation of trade policy?

Most of us don’t live in Allentown.

 

Related posts:

FRIEDMAN FRIDAY Mark J. Perry@Mark_J_Perry July 30, 2016 10:46 am | AEIdeas Happy 104th birthday, Milton Friedman

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman Free to Choose Part 4: From Cradle to Grave Featuring Milton Friedman Mark J. Perry@Mark_J_Perry July 30, 2016 10:46 am | AEIdeas Happy 104th birthday, Milton Friedman Tomorrow […]

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Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) Free to Choose Part 2: The Tyranny of Control (Featuring Milton Friedman Socialism, RIP Tottering European economies prove again the Keynesian model is a failure By Stephen Moore – – Sunday, July 12, 2015 ANALYSIS/OPINION: A few years ago, the […]

FRIEDMAN FRIDAY What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET

Free to Choose: Part 1 of 10 The Power of the Market (Featuring Milton Friedman) What Would Milton Friedman Say? Immigration opponents often try to claim the famed economist as an ally. They’re mistaken. By STEPHEN MOORE Updated May 29, 2013 8:31 p.m. ET One of the fascinating sideshows of the immigration debate within the […]

FRIEDMAN FRIDAY Obama loves the death tax but listen to what Milton Friedman had to say about it!!!

__ Obama loves the death tax but listen to what Milton Friedman had to say about it!!! Milton Friedman Redistribution of Wealth and the Death Tax ___________ The Obama Administration’s Assault on the Rule of Law September 6, 2016 by Dan Mitchell What’s the worst development in economic policy of the Obama years? The faux stimulus […]

FRIEDMAN FRIDAY Dan Mitchell and Milton Friedman: Subsidies for Higher Education Are the Problem!

Milton Friedman – Should Higher Education Be Subsidized? Published on Aug 14, 2013 Professor Friedman leads a roundtable discussion with students. http://www.LibertyPen.com Hillary Is Wrong: Subsidies for Higher Education Are the Problem, not the Solution August 24, 2016 by Dan Mitchell “So many bad ideas, so little time.” That’s my attitude about Hillary Clinton. She proposes […]

FRIEDMAN FRIDAY Milton Friedman and Walter Williams have explained, minimum wage laws are especially harmful for blacks!

Milton Friedman – A Conversation On Minimum Wage Published on Oct 4, 2013 A debate on whether the minimum wage hurts or helps the working class. http://www.LibertyPen.com Is Anybody Shocked that Higher Minimum Wage Mandates Are Resulting in Fewer Jobs? August 25, 2016 by Dan Mitchell While economists are famous for their disagreements (and their incompetent […]

FRIEDMAN FRIDAY Milton Friedman and Dan Mitchell look at the economics of medical care!!

Milton Friedman on Medical Care (Full Lecture) Another Grim Reminder that Obamacare Has Made Healthcare More Expensive August 29, 2016 by Dan Mitchell 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 […]

FRIEDMAN FRIDAY 2 videos by Milton Friedman on welfare state plus 2 cartoons that illustrate the fate of socialism from the Cato Institute

__________   Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism: Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State July 15, 2011 by Dan Mitchell In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often […]

FRIEDMAN FRIDAY Milton Friedman has the two solutions to the Black Teenage Unemployment Problem!!!

Milton Friedman on Donahue Show in 1979 Milton Friedman has the two solutions to the Black Teenage Unemployment Problem!!! The solutions would be first to lower the Minimum Wage Amount and  second give students the opportunity to have vouchers so their parents can put them in the best schools when they start in the kindergarten […]

FRIEDMAN FRIDAY Trump Administration’s Infrastructure Initiative should include more private-sector involvement!!!

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Trump Administration’s Infrastructure Initiative should include more private-sector involvement!!!

Milton Friedman – The role of government in a free society (Q&A)

During the election, Donald Trump promised a big package of infrastructure spending, twice as much new spending as Hillary Clinton was proposing.

During his victory speech the night of the election, he doubled down on this approach, promising that more infrastructure spending would be one his first priorities.

This sounds like bad news for advocates of limited government. And it may turn out to be bad news. Though if you look at what the Trump campaign actually proposed, there’s a lot of wiggle room.

I will work with Congress to introduce the following broader legislative measures and fight for their passage within the first 100 days of my Administration: …American Energy & Infrastructure Act. Leverages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years. It is revenue neutral.

In other words, it’s possible that President-Elect Trump might give us an Obama-style stimulus scheme. Or he may take a radically different approach by removing roadblocks that hinder more private-sector involvement.

And my colleague Chris Edwards points out that the private sector already does most of the heavy lifting when it comes to infrastructure spending.

Hillary Clinton says that “we are dramatically underinvesting” in infrastructure and she promises a large increase in federal spending. Donald Trump is promising to spend twice as much as Clinton. …But more federal spending is the wrong way to go.  …let’s look at some data. There is no hard definition of “infrastructure,” but one broad measure is gross fixed investment in the BEA national accounts. …The first thing to note is that private investment at about $3 trillion was six times larger than combined federal, state, and local government nondefense investment of $472 billion. Private investment in pipelines, broadband, refineries, factories, cell towers, and other items greatly exceeds government investment in schools, highways, prisons, and the like. …if policymakers want to boost infrastructure spending, they should reduce barriers to private investment.

This is very helpful and interesting data. And one of the obvious conclusions is that the types of infrastructure that historically are the responsibility of the private sector (pipelines, cell towers, etc) are handled much more efficiently than those (highways, mass transit, etc) that have been monopolized by governments.

Trump presumably intends his infrastructure plan to focus on the latter type of infrastructure, so let’s consider three simple rules to help guide an effective approach for transportation.

1. More private-sector involvement

A key principle for good infrastructure policy is to harness the efficiency of the private sector.

Why? Because, as Lawrence McQuillan of the Independent Institute argues, governments naturally are inefficient and incompetent at building and managing infrastructure.

Government authorities view maintenance solely as a cost, rather than as an investment that can increase future revenues. As a result, roads remain riddled with potholes, bridges crumble, airports are overcrowded, water is contaminated, and we have classrooms with mold and falling ceilings. Moreover, without a profit motive, repairs are seldom done in a timely manner or at lowest cost. Instead of assets being owned and controlled by people who understand the economics of the industry and have the technical knowledge to operate and repair them efficiently, politicians (the majority of whom appear to be lawyers these days) and bureaucrats control them. This guarantees waste, inefficiency and cronyism, such as the greenlighting of white-elephant projects that are driven by politics rather than economics.

But there is some good news.

Chris Edwards explains that the private sector is taking a larger role.

Before the 20th century, for example, more than 2,000 turnpike companies in America built more than 10,000 miles of toll roads. And up until the mid-20th century, most urban rail and bus services were private. With respect to railroads, the federal government subsidized some of the railroads to the West, but most U.S. rail mileage in the 19th century was in the East, and it was generally unsubsidized. The takeover of private infrastructure by governments here and abroad in the 20th century caused many problems. Fortunately, most governments have reversed course in recent decades and started to hand back infrastructure to the private sector. …Short of full privatization, many countries have partly privatized portions of their infrastructure through public-private partnerships (“PPPs” or “P3s”). PPPs differ from traditional government contracting by shifting various elements of financing, management, maintenance, operations, and project risks to the private sector. …Unfortunately, the United States “has lagged behind Australia and Europe in privatization of infrastructure such as roads, bridges and tunnels,” notes the OECD. More than one fifth of infrastructure spending in Britain and Portugal is now through the PPP process, so this has become a normal way of doing business in some countries. Canada is also a leader in using PPP for major infrastructure projects.

2. Less involvement from Washington

To the extent that government must be involved, another important principle is to let state and local governments handle infrastructure.

That’s what I argued back in 2014.

…the Department of Transportation should be dismantled for the simple reason that we’ll get better roads at lower cost with the federalist approach of returning responsibility to state and local governments. …Washington involvement is a recipe for pork and corruption. Lawmakers in Congress – including Republicans – get on the Transportation Committees precisely because they can buy votes and raise campaign cash by diverting taxpayer money to friends and cronies. …the federal budget is mostly a scam where endless streams of money are shifted back and forth in leaky buckets. This scam is great for insiders and bad news for taxpayers. Washington involvement necessarily means another layer of costly bureaucracy. And this is not a trivial issues since the Department of Transportation is infamous for overpaid bureaucrats.

For a more detailed explanation, Professor Edward Glaeser of Harvard has some devastating analysis in an article for City Journal.

The most pressing problem with federal infrastructure spending is that it is hard to keep it from going to the wrong places. We seem to have spent more in the places that already had short commutes and less in the places with the most need. Federal transportation spending follows highway-apportionment formulas that have long favored places with lots of land but not so many people. …Low-density areas are remarkably well-endowed with senators per capita, of course, and they unsurprisingly get a disproportionate share of spending from any nationwide program. Redirecting tax dollars across jurisdictions is rarely fair—and it isn’t right, either, that poorer, lower-density regions should subsidize New York’s subway and airports. Washington’s involvement also distorts infrastructure planning by favoring pet projects. The Recovery Act set aside $8 billion for high-speed rail, for instance, despite the fact that such projects would never be appropriate for most of moderate-density America. California was lured down the high-speed hole with Washington support… Detroit’s infamous People Mover Monorail would never have been built without federal aid. Alaska’s $400 million Gravina Island bridge to nowhere was a particularly notorious example of how Congress abuses transportation investment. As the Office of Management and Budget noted, during the Bush years, highway funding was “not based on need or performance and has been heavily earmarked.”

3. Sensible cost-benefit analysis

Our third principle is that infrastructure should only be built if it makes sense. In other words, do the benefits exceed the costs?

In the private sector, the profit motive automatically generates that type of calculation.

With government, that effort becomes much more challenging.

Professor Michael Boskin at Stanford explains the problem in a column for the Wall Street Journal.

…a huge pot of additional money earmarked for infrastructure, on top of the recently passed $305 billion five-year highway bill, is sure to unleash a mad scramble in Congress to secure funds for the home turf. The logrolling and pork will get ugly without far tighter cost-benefit tests and oversight. …Most federal infrastructure spending is done by sending funds to state and local governments. For highway programs, the ratio is usually 80% federal, 20% state and local. But that means every local district has an incentive to press the federal authorities to fund projects with poor national returns. We all remember Alaska’s infamous “bridge to nowhere.” In other words, if a local government is putting up only 20% of the funds, it needs the benefits to its own citizens to be only 21% of the total national cost. Yet every state and every locality has potential infrastructure needs that it would like the rest of the country to pay for. That leads to the misallocation of federal funds and infrastructure projects that benefit the few at the cost of the many. …taxpayers generally don’t notice all the fiscal cross-hauling, sending their money to Washington to be sent back in leaky buckets to local jurisdictions. Since we all reside in a state and locality, it’s an inefficient negative sum game with complex cross-subsidies. If these local projects are so good, why aren’t citizens willing to finance the projects locally?

And don’t forget government infrastructure always is more expensive – sometimes far more expensive – than politicians first promise. Chris Edwards has the details.

Federal infrastructure projects often suffer from large cost overruns. Highway projects, energy projects, airport projects, and air traffic control projects have ended up costing far more than promised. When both federal and state governments are involved in infrastructure, it reduces accountability. That was one of the problems with the federally backed Big Dig highway project in Boston, which exploded in cost to five times the original estimate. U.S. and foreign studies have found that privately financed infrastructure projects are less likely to have cost overruns.

The challenge, of course, is getting governments to produce honest cost-benefit analysis. Bureaucrats respond to the people who control their jobs and control their pay. So if politicians want to squander more money, it’s quite likely that bureaucrats will concoct the numbers needed to justify the expansion of government.

To cite a high-profile example, I caught the IMF making up numbers to justify infrastructure boondoggles, even though that politically driven analysis contradicted the work of the bureaucracy’s professional economists.

Let’s finish with two additional points.

First, advocates of more infrastructure spending act like there’s some national crisis.

But if this is true, why does the United States get relatively high scores from the World Economic Forum?

Second, let’s consider the example of Japan. That nation has been stuck in a multi-decade period of stagnation, with very little expectation of an economic turnaround. But if infrastructure spending was some sort of elixir, that economy should be booming.

…a look at ailing Japan, which has spent over $6.3 trillion since 1981 on truly impressive bridges and bullet trains, suggests infrastructure isn’t always a cure for economic woes.

The bottom line is that Donald Trump should not follow the business-as-usual approach of simply dumping more money into a system that almost always produces poor results.

P.S. Whoever does the “Redpanels” cartoons is very clever. I’ve already shared ones on the minimum wage, universal basic income, and Keynesian economics. Now, here’s one on federal infrastructure.

P.P.S. I wrote two years ago about the guy in England who built a private road to help drivers avoid lengthy delays caused by poor government planning. We have an even more…um…interesting example from Russia of how the private sector can take over when the government founders.

Gangs smuggling goods into Russia have secretly repaired a road on the Belarussian border in order to boost business, the TASS news agency reported Monday. Smugglers have transformed the gravel track in the Smolensk region in order to help their heavy goods vehicles traveling on the route, said Alexander Laznenko from the Smolensk region border agency. The criminal groups have widened and raised the road and added additional turning points, he said. The road, which connects Moscow to the Belarussian capital of Minsk, is known to be used by smugglers wishing to avoid official customs posts.

This is like a libertarian fantasy. The private sector builds a road to help entrepreneurs avoid trade taxes. What’s not to love? And unlike the libertarian sex fantasy or my 1992 debate fantasy, it’s actually true!

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FRIEDMAN FRIDAY Milton Friedman favored entitlement reform and Trump better too!!!

PRC Forum: Milton Friedman (U1060) – Full Video

____

Published on Mar 18, 2016

Milton Friedman, 1976 Nobel Laureate in Economics and author of “Free To Choose,” urges alertness to the difference between false and real problems. The problem is not budget deficits, trade deficits, or the federal debt. The problem is government spending relative to income, protectionist policies, and unfunded debt resulting from entitlements. Dr. Friedman simplifies and explains these and other policy issues. ©1987/58 min.

___________

I’m a fiscal policy wonk, so I freely acknowledge that I sometimes look at the world through green-eyeshade-colored lenses. But I don’t think it’s an exaggeration to say that expanding entitlements,Demographic 2030 changing demographics, and increasing dependency are the main long-run threats to the American economy.

And this is why the concerns I had about a Hillary Clinton presidency aren’t that different from the concerns I have about a Donald Trump presidency.

Simply stated, he apparently doesn’t even think there’s a problem that needs to be addressed. Here’s what Trump said in an interview with the Daily Signal.

I’m not going to cut Social Security like every other Republican and I’m not going to cut Medicare or Medicaid.

Some people have told me not to get too worried about this statement because candidates make so many speeches and give so many interviews that they’re bound to make mistakes and say things they don’t really mean.

I agree that we shouldn’t get too hung up on every slip of the tongue on the campaign trail (notwithstanding this clip, for instance, Obama surely doesn’t think there are 57 states).

But the Trump people actually re-posted the Daily Signal interview on the campaign’s website, which certainly suggests (to use legal terminology) malice and forethought on the issue of entitlements.

That being said, this doesn’t mean Trump is a lost cause and that genuine entitlement reform is an impossibility.

  • First, politicians oftentimes say things they don’t mean (remember Obama’s pledge that people could keep their doctors and their health plans if Obamacare was enacted?).
  • Second, the plans to fix Social Security, Medicare, and Medicaid don’t involve any cuts. Instead, reformers are proposing changes that will slow the growth of outlays.
  • Third, if Trump is even slightly serious about pushing through his big tax cut, he’ll need to have some plan to restrain overall spending to make his agenda politically viable.

For what it’s worth, I’m particularly hopeful (or not un-hopeful, to be more accurate) that Trump will be willing to address Medicaid reform, ideally as part of an overall proposal to block-grant all means-tested programs.

One reason for my semi-optimism is that the programs is becoming even more of a mess thanks to Obamacare and plenty of governors and state legislators would gladly accept that kind of reform simply to have more control over state budget matters.

And every serious budget person in Washington understands the program must be reformed because of spiraling costs.

The Wall Street Journal has an editorial today about out-of-control Medicaid spending.

One immediate problem is ObamaCare’s expansion of Medicaid, which has seen enrollment at least twice as high as advertised. …Governors claimed not joining would leave “free money” on the table because the feds would pick up 100% of the costs of new beneficiaries. In a new report this week for the Foundation for Government Accountability, Jonathan Ingram and Nicholas Horton tracked down the original enrollment projections by actuaries in 24 states that expanded and have since disclosed at least a year of data on the results. Some 11.5 million people now belong to ObamaCare’s new class of able-bodied enrollees, or 110% higher than the projections. Analysts in California expected only 910,000 people to sign up, but instead 3.84 million have, 322% off the projections. The situation is nearly as dire in New York, where enrollment is 276% higher than expected, and Illinois, which is up 90%. This liberal state triumvirate is particularly notable because they already ran generous welfare states long before ObamaCare.

Of course, the “free money” for states is a fiscal burden for all taxpayers. It’s just that the money from taxpayers gets cycled through Washington before going to state capitals.

But it’s also worth noting that the money soon won’t be “free.”

The state spending share of new Medicaid enrollment will rise to 5% next year and then to 10% by 2020, up from 0% today. The enrollment overruns mean these states will have less to spend than they planned for every other priority, especially the least fortunate.

I suppose this is a good opportunity to recycle my video on Medicaid reform. It was filmed more than five years ago, so some of the numbers are outdated (they’re worse today!). But the policy analysis is still right on point.

Promote Federalism and Replicate the Success of Welfare Reform with Medicaid Block Grants

Who knows, maybe Trump actually will do the right thing and (in a phrase he took from Reagan) make America great again.

Remember, none of us expected that economic freedom would expand during Bill Clinton’s presidency, so a bit of optimism isn’t totally out-of-bounds.

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Trump Administration’s Infrastructure Initiative should include more private-sector involvement!!!

__

Trump Administration’s Infrastructure Initiative should include more private-sector involvement!!!

Milton Friedman – The role of government in a free society (Q&A)

 

During the election, Donald Trump promised a big package of infrastructure spending, twice as much new spending as Hillary Clinton was proposing.

During his victory speech the night of the election, he doubled down on this approach, promising that more infrastructure spending would be one his first priorities.

This sounds like bad news for advocates of limited government. And it may turn out to be bad news. Though if you look at what the Trump campaign actually proposed, there’s a lot of wiggle room.

I will work with Congress to introduce the following broader legislative measures and fight for their passage within the first 100 days of my Administration: …American Energy & Infrastructure Act. Leverages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years. It is revenue neutral.

In other words, it’s possible that President-Elect Trump might give us an Obama-style stimulus scheme. Or he may take a radically different approach by removing roadblocks that hinder more private-sector involvement.

And my colleague Chris Edwards points out that the private sector already does most of the heavy lifting when it comes to infrastructure spending.

Hillary Clinton says that “we are dramatically underinvesting” in infrastructure and she promises a large increase in federal spending. Donald Trump is promising to spend twice as much as Clinton. …But more federal spending is the wrong way to go.  …let’s look at some data. There is no hard definition of “infrastructure,” but one broad measure is gross fixed investment in the BEA national accounts. …The first thing to note is that private investment at about $3 trillion was six times larger than combined federal, state, and local government nondefense investment of $472 billion. Private investment in pipelines, broadband, refineries, factories, cell towers, and other items greatly exceeds government investment in schools, highways, prisons, and the like. …if policymakers want to boost infrastructure spending, they should reduce barriers to private investment.

This is very helpful and interesting data. And one of the obvious conclusions is that the types of infrastructure that historically are the responsibility of the private sector (pipelines, cell towers, etc) are handled much more efficiently than those (highways, mass transit, etc) that have been monopolized by governments.

Trump presumably intends his infrastructure plan to focus on the latter type of infrastructure, so let’s consider three simple rules to help guide an effective approach for transportation.

1. More private-sector involvement

A key principle for good infrastructure policy is to harness the efficiency of the private sector.

Why? Because, as Lawrence McQuillan of the Independent Institute argues, governments naturally are inefficient and incompetent at building and managing infrastructure.

Government authorities view maintenance solely as a cost, rather than as an investment that can increase future revenues. As a result, roads remain riddled with potholes, bridges crumble, airports are overcrowded, water is contaminated, and we have classrooms with mold and falling ceilings. Moreover, without a profit motive, repairs are seldom done in a timely manner or at lowest cost. Instead of assets being owned and controlled by people who understand the economics of the industry and have the technical knowledge to operate and repair them efficiently, politicians (the majority of whom appear to be lawyers these days) and bureaucrats control them. This guarantees waste, inefficiency and cronyism, such as the greenlighting of white-elephant projects that are driven by politics rather than economics.

But there is some good news.

Chris Edwards explains that the private sector is taking a larger role.

Before the 20th century, for example, more than 2,000 turnpike companies in America built more than 10,000 miles of toll roads. And up until the mid-20th century, most urban rail and bus services were private. With respect to railroads, the federal government subsidized some of the railroads to the West, but most U.S. rail mileage in the 19th century was in the East, and it was generally unsubsidized. The takeover of private infrastructure by governments here and abroad in the 20th century caused many problems. Fortunately, most governments have reversed course in recent decades and started to hand back infrastructure to the private sector. …Short of full privatization, many countries have partly privatized portions of their infrastructure through public-private partnerships (“PPPs” or “P3s”). PPPs differ from traditional government contracting by shifting various elements of financing, management, maintenance, operations, and project risks to the private sector. …Unfortunately, the United States “has lagged behind Australia and Europe in privatization of infrastructure such as roads, bridges and tunnels,” notes the OECD. More than one fifth of infrastructure spending in Britain and Portugal is now through the PPP process, so this has become a normal way of doing business in some countries. Canada is also a leader in using PPP for major infrastructure projects.

2. Less involvement from Washington

To the extent that government must be involved, another important principle is to let state and local governments handle infrastructure.

That’s what I argued back in 2014.

…the Department of Transportation should be dismantled for the simple reason that we’ll get better roads at lower cost with the federalist approach of returning responsibility to state and local governments. …Washington involvement is a recipe for pork and corruption. Lawmakers in Congress – including Republicans – get on the Transportation Committees precisely because they can buy votes and raise campaign cash by diverting taxpayer money to friends and cronies. …the federal budget is mostly a scam where endless streams of money are shifted back and forth in leaky buckets. This scam is great for insiders and bad news for taxpayers. Washington involvement necessarily means another layer of costly bureaucracy. And this is not a trivial issues since the Department of Transportation is infamous for overpaid bureaucrats.

For a more detailed explanation, Professor Edward Glaeser of Harvard has some devastating analysis in an article for City Journal.

The most pressing problem with federal infrastructure spending is that it is hard to keep it from going to the wrong places. We seem to have spent more in the places that already had short commutes and less in the places with the most need. Federal transportation spending follows highway-apportionment formulas that have long favored places with lots of land but not so many people. …Low-density areas are remarkably well-endowed with senators per capita, of course, and they unsurprisingly get a disproportionate share of spending from any nationwide program. Redirecting tax dollars across jurisdictions is rarely fair—and it isn’t right, either, that poorer, lower-density regions should subsidize New York’s subway and airports. Washington’s involvement also distorts infrastructure planning by favoring pet projects. The Recovery Act set aside $8 billion for high-speed rail, for instance, despite the fact that such projects would never be appropriate for most of moderate-density America. California was lured down the high-speed hole with Washington support… Detroit’s infamous People Mover Monorail would never have been built without federal aid. Alaska’s $400 million Gravina Island bridge to nowhere was a particularly notorious example of how Congress abuses transportation investment. As the Office of Management and Budget noted, during the Bush years, highway funding was “not based on need or performance and has been heavily earmarked.”

3. Sensible cost-benefit analysis

Our third principle is that infrastructure should only be built if it makes sense. In other words, do the benefits exceed the costs?

In the private sector, the profit motive automatically generates that type of calculation.

With government, that effort becomes much more challenging.

Professor Michael Boskin at Stanford explains the problem in a column for the Wall Street Journal.

…a huge pot of additional money earmarked for infrastructure, on top of the recently passed $305 billion five-year highway bill, is sure to unleash a mad scramble in Congress to secure funds for the home turf. The logrolling and pork will get ugly without far tighter cost-benefit tests and oversight. …Most federal infrastructure spending is done by sending funds to state and local governments. For highway programs, the ratio is usually 80% federal, 20% state and local. But that means every local district has an incentive to press the federal authorities to fund projects with poor national returns. We all remember Alaska’s infamous “bridge to nowhere.” In other words, if a local government is putting up only 20% of the funds, it needs the benefits to its own citizens to be only 21% of the total national cost. Yet every state and every locality has potential infrastructure needs that it would like the rest of the country to pay for. That leads to the misallocation of federal funds and infrastructure projects that benefit the few at the cost of the many. …taxpayers generally don’t notice all the fiscal cross-hauling, sending their money to Washington to be sent back in leaky buckets to local jurisdictions. Since we all reside in a state and locality, it’s an inefficient negative sum game with complex cross-subsidies. If these local projects are so good, why aren’t citizens willing to finance the projects locally?

And don’t forget government infrastructure always is more expensive – sometimes far more expensive – than politicians first promise. Chris Edwards has the details.

Federal infrastructure projects often suffer from large cost overruns. Highway projects, energy projects, airport projects, and air traffic control projects have ended up costing far more than promised. When both federal and state governments are involved in infrastructure, it reduces accountability. That was one of the problems with the federally backed Big Dig highway project in Boston, which exploded in cost to five times the original estimate. U.S. and foreign studies have found that privately financed infrastructure projects are less likely to have cost overruns.

The challenge, of course, is getting governments to produce honest cost-benefit analysis. Bureaucrats respond to the people who control their jobs and control their pay. So if politicians want to squander more money, it’s quite likely that bureaucrats will concoct the numbers needed to justify the expansion of government.

To cite a high-profile example, I caught the IMF making up numbers to justify infrastructure boondoggles, even though that politically driven analysis contradicted the work of the bureaucracy’s professional economists.

Let’s finish with two additional points.

First, advocates of more infrastructure spending act like there’s some national crisis.

But if this is true, why does the United States get relatively high scores from the World Economic Forum?

Second, let’s consider the example of Japan. That nation has been stuck in a multi-decade period of stagnation, with very little expectation of an economic turnaround. But if infrastructure spending was some sort of elixir, that economy should be booming.

…a look at ailing Japan, which has spent over $6.3 trillion since 1981 on truly impressive bridges and bullet trains, suggests infrastructure isn’t always a cure for economic woes.

The bottom line is that Donald Trump should not follow the business-as-usual approach of simply dumping more money into a system that almost always produces poor results.

P.S. Whoever does the “Redpanels” cartoons is very clever. I’ve already shared ones on the minimum wage, universal basic income, and Keynesian economics. Now, here’s one on federal infrastructure.

P.P.S. I wrote two years ago about the guy in England who built a private road to help drivers avoid lengthy delays caused by poor government planning. We have an even more…um…interesting example from Russia of how the private sector can take over when the government founders.

Gangs smuggling goods into Russia have secretly repaired a road on the Belarussian border in order to boost business, the TASS news agency reported Monday. Smugglers have transformed the gravel track in the Smolensk region in order to help their heavy goods vehicles traveling on the route, said Alexander Laznenko from the Smolensk region border agency. The criminal groups have widened and raised the road and added additional turning points, he said. The road, which connects Moscow to the Belarussian capital of Minsk, is known to be used by smugglers wishing to avoid official customs posts.

This is like a libertarian fantasy. The private sector builds a road to help entrepreneurs avoid trade taxes. What’s not to love? And unlike the libertarian sex fantasy or my 1992 debate fantasy, it’s actually true!

Related posts:

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FRIEDMAN FRIDAY Obama loves the death tax but listen to what Milton Friedman had to say about it!!!

__ Obama loves the death tax but listen to what Milton Friedman had to say about it!!! Milton Friedman Redistribution of Wealth and the Death Tax ___________ The Obama Administration’s Assault on the Rule of Law September 6, 2016 by Dan Mitchell What’s the worst development in economic policy of the Obama years? The faux stimulus […]

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FRIEDMAN FRIDAY Milton Friedman and Walter Williams have explained, minimum wage laws are especially harmful for blacks!

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__________   Cato Institute scholar Dan Mitchell is right about Greece and the fate of socialism: Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State July 15, 2011 by Dan Mitchell In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often […]

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