Category Archives: Keynesian

Tax Apologists Don’t Even Believe Their Own Rhetoric

Whenever I debate my left-wing friends on tax policy, they routinely assert that taxes don’t matter.

It’s unclear, though, whether they really believe their own rhetoric.

After all, if taxes don’t affect economic behavior, then why are folks on the left so terrified of tax havens? Why are they so opposed to tax competition?

And why are they so anxious to defend loopholes such as the deduction for state and local taxes?

Eliminating Estate Taxes

Perhaps most revealing, why do leftists sometimes cut taxes when they hold power? A story in the Wall Street Journal notes that there’s been a little-noticed wave of state tax cuts. Specifically reductions and/or eliminations of state death taxes. And many of these supply-side reforms are happening in left-wing states!

In the past three years, nine states have eliminated or lowered their estate taxes, mostly by raising exemptions. And more reductions are coming. Minnesota lawmakers recently raised the state’s estate-tax exemption to $2.1 million retroactive to January, and the exemption will rise to $2.4 million next year. Maryland will raise its $3 million exemption to $4 million next year. New Jersey’s exemption, which used to rank last at $675,000 a person, rose to $2 million a person this year. Next year, New Jersey is scheduled to eliminate its estate tax altogether, joining about a half-dozen others that have ended their estate taxes over the past decade.

This is good news for affected taxpayers, but it’s also good news for the economy.

Death taxes are not only a punitive tax on capital, but they also discourage investors, entrepreneurs, and other high-income people from earning income once they have accumulated a certain level of savings.

But let’s focus on politics rather than economics. Why are governors and state legislators finally doing something sensible? Why are they lowering tax burdens on “rich” taxpayers instead of playing their usual game of class warfare?

I’d like to claim that they’re reading Cato Institute research, or perhaps studies from other market-oriented organizations and scholars.

But it appears that tax competition deserves most of the credit.

Cutting Taxes Is Trendy

This tax-cutting trend has been fueled by competition between the states for affluent and wealthy taxpayers. Such residents owe income taxes every year, but some are willing to move out of state to avoid death duties that come only once. Since the federal estate-and-gift tax exemption jumped to $5 million in 2011, adjusted for inflation, state death duties have stood out.

I don’t fully agree with the above excerpt because there’s plenty of evidence that income taxes cause migration from high-tax states to zero-income-tax states.

But I agree that a state death tax can have a very large impact, particularly once a successful person has retired and has more flexibility.

Courtesy of the Tax Foundation, here are the states that still impose this destructive levy.

Though this map may soon have one less yellow state. As reported by the WSJ, politicians in the Bay State may be waking up.

In Massachusetts, some lawmakers are worried about losing residents to other states because of its estate tax, which brought in $400 million last year. They hope to raise the exemption to half the federal level and perhaps exclude the value of a residence as well. These measures stand a good chance of passage even as lawmakers are considering raising income taxes on millionaires, says Kenneth Brier, an estate lawyer with Brier & Ganz LLP in Needham, Mass., who tracks the issue for the Massachusetts Bar Association. State officials “are worried about a silent leak of people down to Florida, or even New Hampshire,” he adds.

I’m not sure the leak has been silent. There’s lots of data on the migration of productive people to lower-tax states.

But what matters is that tax competition is forcing the state legislature (which is overwhelmingly Democrat) to do the right thing, even though their normal instincts would be to squeeze upper-income taxpayers for more money.

As I’ve repeatedly written, tax competition also has a liberalizing impact on national tax policy.

Following the Reagan tax cuts and Thatcher tax cuts, politicians all over the world felt pressure to lower their tax rates on personal income. The same thing has happened with corporate tax rates, though Ireland deserves most of the credit for getting that process started.

I’ll close by recycling my video on tax competition. It focuses primarily on fiscal rivalry between nations, but the lessons equally apply to states.

P.S. For what it’s worth, South Dakota arguably is the state with the best tax policy. It’s more difficult to identify the state with the worst policy, though New Jersey, Illinois, New York, California, and Connecticut can all make a strong claim to be at the bottom.

P.P.S. Notwithstanding my snarky title, I don’t particularly care whether there are tax cuts for rich people. But I care a lot about not having tax policies that penalize the behaviors (work, saving, investment, and entrepreneurship) that produce income, jobs, and opportunity for poor and middle-income people. And if that means reforms that allow upper-income people to keep more of their money, I’m okay with that since I’m not an envious person.

Reprinted from International Liberty.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

This article was originally published on Read the original article.

By permission from International Liberty

The Federal Tax Code Shouldn’t Subsidize and Encourage Profligacy by State and Local Governments

The federal income tax is corrosive and destructive. It’s almost as if a group of malicious people decided to deliberately design a system that imposes maximum damage while also allowing the most corruption.

The economic damage is not only the result of high tax rates and pervasive double taxation, but also because of loopholes that exist to bribe people into making economically unwise decisions.

These include itemized deductions for mortgages and charitable contributions, as well as the fringe benefits exclusion and the exemption for municipal bond interest. And there are many other corrupt favors sprinkled through a metastasizing tax code.

But there’s a strong case to be made that the worst loophole is the deduction for state and local taxes. Why? For the simple reason that it encourages, enables, and subsidizes bad policy.

Here’s how it works. State and local lawmakers can increase income taxes or property taxes and be partially insulated from political blowback because their taxpayers can deduct those taxes on their federal return.

And it’s a back-door way of giving a special break to upper-income taxpayers because the deduction is more valuable to people in higher tax brackets.

Let’s look at an example that’s currently in the news. Democrats in the Illinois state legislature want a big increase in the personal income tax. If they succeed and boost taxes by an average of $1000, high-income taxpayers who take advantage of the deduction may only suffer a loss of as little as $600 since their federal tax bill may fall by almost $400.

For politicians, this is an ideal racket. They can promise various interest groups $1000 of goodies while reducing take-home pay by a lesser amount.

Let’s review some recent commentary on this topic.

The Wall Street Journal opined on the issue last weekend.

Chuck Schumer aspires to raise taxes on every rich person in America, save one protected class: coastal progressives. …Like many other Democrats, he’s apoplectic about a plan to end the state and local tax deduction. …One goal of tax reform is to reduce unproductive tax loopholes, and ending the state and local deduction would generate revenue to finance lower rates: The deduction is worth about $100 billion a year… About 88% of the benefits in 2014 flowed to taxpayers who earn more than $100,000, while 1% went to those who earn less than $50,000. California alone reaps nearly 20% of the benefit…and a mere six states get more than half. …The folks underwriting this windfall are in Alaska, South Dakota, Wyoming and other places without a state income tax. …Eliminating the deduction would be a powerful incentive for Governors to cut state taxes on residents who are suddenly exposed to their full liability. …killing the state and local deduction would pay a double dividend: The first is creating a more equitable tax code with a broader base and lower rates. The second is spurring reform in states that are long overdue for a better tax climate.

Writing earlier this year for National Review, Kevin Williamson was characteristically blunt.

It’s time for…blue-state…tax increases that would fall most heavily on upper-income Americans in high-tax progressive states such as California and New York. …eliminate the deduction for state income taxes, a provision that takes some of the sting out of living in a high-tax jurisdiction such as New York City (which has both state and local income taxes) or California, home to the nation’s highest state-tax burden. Do not hold your breath waiting for the inequality warriors to congratulate Republicans for proposing these significant tax increases on the rich. …allowing for the deduction of state taxes against federal tax liabilities creates a subsidy and an incentive for higher state taxes. California in essence is able to capture money that would be federal revenue and use it for its own ends, an option that is not practically available to low-tax (and no-income-tax) states such as Nevada and Florida. It makes sense to allow the states to compete on taxes and services, but the federal tax code biases that competition in favor of high-tax jurisdictions.

And Bob McManus adds his two cents in an article for the Manhattan Institute’s City Journal.

Voters in all heavy-tax, high-spending states have no one to blame for their situation save themselves. At a minimum, it seems clear that deductibility—by softening the impact of federal taxation—encourages outsize state and local spending. States that take advantage of deductibility—mostly in the Northeast and on the West Coast—are in effect subsidized by states that have kept tighter control on their spending. …New York’s top-of-the-charts spending puts the state at the pinnacle…with New Yorkers paying a national high of 12.7 percent of income in state and local levies. Local property taxes in New York are astronomical and not coming down any time soon. …deductibility has powerful friends—among them the public-employee unions… New York and the nation would benefit if deductibility was jettisoned. …end the incentive for the tax-and-spend practices that have been so economically corrosive to big-spending Blue states.

Let’s close with the should-be-obvious point that the goal isn’t to repeal the state and local tax deduction in order to give politicians in Washington more money to spend. Instead, every penny of that revenue should be used to finance pro-growth tax reforms.

That creates a win-win situation of better tax policy in Washington, while also creating pressure for better tax policy at the state and local level.

For what it’s worth, both Trump and House Republicans are proposing to get rid of the deduction.

P.S. I mentioned at the start of this column that it would not be unreasonable to think that the tax code was deliberately designed to maximize economic damage. But even a curmudgeon like me doesn’t think that’s actually the case. Instead, our awful tax system is the result of 104 years of “public choice.”

P.P.S. Itemized deductions and other loopholes create distortions by allowing people to understate their income if they engage in approved behaviors. There are also provisions of the tax code – such as depreciation and worldwide taxation – that force taxpayers to overstate their income.

Reposted from International Liberty

The Politically Hopeless, Completely Incoherent, and Totally Lame Economic Agenda of the Democratic Party

The Politically Hopeless, Completely Incoherent, and Totally Lame Economic Agenda of the Democratic Party

In a column from December of 2015, the Wall Street Journal’s Mary O’Grady unveiled an inconvenient fact that poverty warriors on the American left and right would perhaps prefer remain hidden: from 1980 to 2000, when the U.S. economy boomed, the number of Mexican arrivals into the U.S. grew from 2.2 million in 1980 to 9.4 million in 2000. The previous number is a clear market signal that the U.S. is where poverty has always been cured, as opposed to a condition that requires specific U.S. policy fixes.

Economic progress always and everywhere springs from investment.

O’Grady’s statistics came to mind while reading a recent New York Times column by Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities. He writes that a “highly progressive agenda [from Democratic scholars and politicians] has been coming together in recent months, one with the potential to unite both the Hillary and Bernie wings of the party, to go beyond both Clintonomics and Obamanomics.”  

The problem is that the agenda that’s got Bernstein so giddy has nothing to do with the very economic growth that is always the source of rising economic opportunity for the poor, middle and rich.

More Welfare

Up front, Bernstein expresses excitement about a $190 billion (annually) program that he describes as a “universal child allowance.” The allowance would amount to annual federal checks sent to low-income families of $3,000/child. It all sounds so compassionate on its face to those who think it kind for Congress to spend the money of others, but given a second look even the mildly sentient will understand that economic opportunity never springs from a forcible shift of money from one pocket to another. If it were, theft would be both legal and encouraged.

The very economic growth in the U.S. that has long proven a magnet for the world’s poorest springs not from wealth redistribution, but instead from precious capital being matched with entrepreneurs eager to transform ideas into reality. Just as the U.S. economy wouldn’t advance if Americans with odd-numbered addresses stealthily ‘lifted’ $3,000 each from those with even-numbered addresses, neither will it grow if the federal government is the one taking from some, only to give to others.

Economic progress always and everywhere springs from investment, yet Bernstein is arguing with a straight face that the U.S.’s poorest will be better off if the feds extract $190 billion of precious capital from the investment pool. As readers can probably imagine, he doesn’t stop there.

Government Jobs

Interesting is that Bernstein’s next naïve suggestion involves “direct job creation policies, meaning either jobs created by the government or publicly subsidized private employment.” Ok, but all jobs are a function of private wealth creation as Bernstein unwittingly acknowledges given his call for resource extraction from the private sector in order to create them.

Government can’t create any work absent private sector wealth, so why not leave precious resources in the hands of the true wealth creators?

This begs the obvious question why economic opportunity would be enhanced if the entrepreneurial and business sectors had less in the way of funds to innovate with. But that’s exactly what Bernstein is seeking through his $190 billion “universal child allowance,” not to mention his call for more “jobs created by the government.”

Stating what’s obvious even to Bernstein, government can’t create any work absent private sector wealth, so why not leave precious resources in the hands of the true wealth creators? Precisely because they’re wealth focused, funds kept in their control will be invested in ways that foster much greater opportunity than can politicians consuming wealth created by others.

Contradictions Abound

Still, Bernstein plainly can’t see just how contradictory his proposals are; proposals that explicitly acknowledge where all opportunity emerges from. Instead, he calls for more government programs. Specifically, he’s proposing a $1 trillion expansion of the “earned-income tax credit” meant to pay Americans to go to work.

As he suggests, the $1 trillion of funds extracted from the productive parts of the economy would lead to family of four tax credits of $6,000 in place of the “current benefit of about $2,000.” Ok, but what goes unexplained here is why we need to pay those residing in the U.S. to work in the first place.

What gives life to the above question is the previously mentioned influx of Mexican strivers into the U.S. during the U.S. boom of the 80s and 90s. What the latter indicated clearly is that economic growth itself is the greatest enemy poverty has ever known. It also indicated that work is available to those who seek it, and even better, the work available is quite a bit more remunerative than one could find anywhere else in the world.

The U.S. has long been very unequal economically, yet the world’s poorest have consistently risked their lives to get here.

Rest assured that the U.S. hasn’t historically experienced beautiful floods of immigration because opportunity stateside was limited. People come here because the U.S. is once again the country in which the impoverished can gradually erase their poverty thanks to abundant work opportunities. If Mexicans who frequently don’t speak English can improve their economic situations in the U.S., why on earth would the political class pay natives who do speak the language to pursue the very work that is the envy of much of the rest of the world?

Put rather simply, those who require payment above and beyond their wage to get up and go in the morning have problems that have nothing to do with a lack of work, and everything to do with a lack of initiative. Importantly, handouts from Washington logically won’t fix what is a problem of limp ambition. At best, they’ll exacerbate what Bernstein claims to want to fix.

Inequality Hurts No One

Most comical is Bernstein’s assertion that the tax credits will allegedly mitigate “the damage done to low- and moderate-wage earners by the forces of inequality that have steered growth away from them” in modern times. What could he possibly mean? The U.S. has long been very unequal economically, yet the world’s poorest have consistently risked their lives to get here precisely because wealth gaps most correlate with opportunity.

Translated, investment abundantly flows to societies where individuals are free to pursue what most elevates their talents (yes, pursuit of what makes them unequal), and with investment comes work options for everyone. Doubters need only travel to Seattle and Silicon Valley, where the world’s five most valuable companies are headquartered, to see up close why the latter is true.

Similarly glossed over by this confused economist is that rising inequality is the The same lame-brained policies of redistribution that the left have been promoting for decades.

surest sign of a shrinking lifestyle inequality between the rich and poor. We work in order to get, and thanks to rich entrepreneurs more and more Americans have instant access at incessantly falling prices to the computers, mobile phones, televisions, clothing and food that were once solely the preserve of the rich.

Just once it would be nice if Bernstein and the other class warriors he runs with would explain how individual achievement that leads to wealth harms those who aren’t rich. What he would find were he to replace emotion with rationality is that in capitalist societies, people generally get rich by virtue of producing abundance for everyone. In short, we need more inequality, not less, if the goal is to improve the living standards of those who presently earn less.

Remarkably, Bernstein describes the ideas presented as “bold” and “progressive,” but in truth, they’re the same lame-brained policies of redistribution that the left have been promoting for decades. And as they’re anti-capital formation by Bernstein’s very own admission, they’re also inimical to the very prosperity that has long made the U.S. the country where poverty is cured. To be clear, if this is the best the Democrats have, they’ll long remain in the minority.

John Tamny

John Tamny

John Tamny is a Forbes contributor, editor of RealClearMarkets, a senior fellow in economics at Reason, and a senior economic adviser to Toreador Research & Trading. He’s the author of the 2016 book Who Needs the Fed? (Encounter), along with Popular Economics (Regnery Publishing, 2015).

This article was originally published on Read the original article.

The Congressional Budget Office’s Questionable Analysis of Obamacare Repeal

Back in 2015, I basically applauded the Congressional Budget Office for its analysis of what would happen if Obamacare was repealed. The agency’s number crunchers didn’t get it exactly right, but they actually took important steps and produced numbers showing how the law was hurting taxpayers and the economy.

Now we have a new set of Obamacare numbers from CBO based on the partial repeal bill approved by the House of Representatives. The good news is that the bureaucrats show substantial fiscal benefits. There would be a significant reduction in the burden of spending and taxation.

But the CBO did not show very favorable numbers in other areas, most notably when it said that 23 million additional people would be uninsured if the legislation was enacted.

Part of the problem is that Republicans aren’t actually repealing Obamacare. Many of the regulations that drive up the cost of health insurance are left in place.

My colleague at Cato, Michael Cannon, explains why this is a big mistake.

Rather than do what their supporters sent them to Washington to do – repeal ObamaCare and replace it with free-market reforms – House Republicans are pushing a bill that will increase health-insurance premiums, make health insurance worse for the sick… ObamaCare’s core provisions are the “community rating” price controls and other regulations that (supposedly) end discrimination against patients with preexisting conditions. …Community rating is the reason former president Bill Clinton called ObamaCare “the craziest thing in the world” where Americans “wind up with their premiums doubled and their coverage cut in half.” Community rating is why women age 55 to 64 have seen the highest premium increases under ObamaCare. It is the principal reason ObamaCare has caused overall premiums to double in just four years. Community rating literally penalizes quality coverage for the sick… ObamaCare is community rating. The AHCA does not repeal community rating. Therefore, the AHCA does not repeal ObamaCare.

It would be ideal if Republicans fully repealed Obamacare.

Heck, they should also address the other programs and policies that have messed up America’s healthcare system and caused a third-party payer crisis.

That means further reforms to Medicaid, as well as Medicare and the tax code’s exclusion of fringe benefits.

But maybe that’s hoping for too much since many Republicans are squeamish about supporting even a watered-down proposal to modify Obamacare.

That being said, there are some reasonable complaints that CBO overstated the impact of the GOP bill.

Doug Badger and Grace Marie Turner, for instance, were not impressed by CBO’s methodology.

The Congressional Budget Office (CBO) launched its latest mistaken Obamacare-related estimate this week, predicting that a House-passed bill to repeal and replace the embattled law would lead to 23 million more uninsured people by 2026. …the agency’s errors are not only massive – one of their predictions of 2016 exchange-based enrollment missed by 140%… Undaunted by failure and unschooled by experience, CBO soldiers on, fearlessly predicting that millions will flock to the exchanges any day now.  …CBO measures the House-passed bill against this imaginary baseline and finds it wanting. …One reason CBO gets it so wrong so consistently is its fervent belief that the individual mandate has motivated millions to enroll in coverage.  …CBO’s belief in the power of the individual mandate is misplaced. …The IRS reports that in the 2015 tax year, 6.5 million uninsured filers paid the tax penalty, 12.7 million got an exemption and additional 4.2 million people simply ignored the penalty.  They left line 61 on their form 1040 blank, refusing to tell the government whether or not they had insurance.  …In all, that is a total of 23.4 million uninsured people – out of an estimated 28.8 million uninsured – who either paid, avoided or ignored the penalty.  That hardly suggests that the mandate has worked.

The Wall Street Journal also was quite critical of the CBO analysis.

…the budget scorekeepers claim the House bill could degrade the quality of insurance. This editorializing could use some scrutiny. Without government supervision of insurance minutiae and a mandate to buy coverage or pay a penalty, CBO asserts, “a few million” people will turn to insurance that falls short of the “widely accepted definition” of “a comprehensive major medical policy.” They might select certain forms of coverage that Obama Care banned, like “mini-med” plans with low costs and low benefits. Or they might select indemnity plans that pay a fixed-dollar amount per day for illness or hospitalization, or dental-only or vision-only single-service plans. CBO decided to classify these people as “uninsured,” though without identifying who accepts ObamaCare’s definition of standardized health benefits and why they deserve to substitute their judgment for the choices of individual consumers. …But the strangest part of CBO’s preoccupation with “high-cost medical events” is that the analysts never once mention catastrophic coverage—not once. These types of plans didn’t cover routine medical expenses but they did protect consumers against, well, a high-cost medical event like an accident or the diagnosis of a serious illness. Those plans answered what most people want most out of insurance—financial security and a guarantee that they won’t be bankrupted by cancer or a distracted bus driver. …under the House reform Americans won’t have any problem insuring against a bad health event, even if CBO won’t admit it. …CBO has become a fear factory because it prefers having government decide for everybody.

Drawing on his first-hand knowledge, Dr. Marc Siegel wrote on the issue for Fox News.

…23 million…will lose their health insurance by 2026 if the American Health Care Act, the bill the House passed to replace ObamaCare, is passed in the Senate and signed by President Trump. This number is concerning — until you look at it and the CBO’s handling of the health care bills more closely. …First, the CBO was wildly inaccurate when it came to ObamaCare, predicting that 23 million people would be getting policies via the exchanges by 2016. The actual number ended up being only 10.4 million… Second, many who chose to buy insurance on the exchanges did so only because they wanted to avoid paying the penalty, not because they needed or wanted the insurance. Many didn’t buy insurance until they got sick.

The Oklahoman panned the CBO’s calculations.

IN the real world, people who don’t have insurance coverage cannot lose it. Yet…the CBO estimates 14 million fewer people will have coverage in 2018 if the House bill is enacted than would be the case if the ACA is left intact, and 23 million fewer by 2026. …In 2016, there were roughly 10 million people obtaining insurance through an Obamacare exchange. The CBO estimated that number would suddenly surge to 18 million by 2018 if the law was left intact, but that far fewer people would be covered if the House reforms became law. Put simply, the CBO estimated that millions of people who don’t have insurance through an exchange today would “lose” coverage they would otherwise obtain next year. That’s doubtful. …At one point, the office estimated 22 million people would receive insurance through an Obamacare exchange by 2016. As already noted, the actual figure was less than half that. One major reason for the CBO being so far off the mark is that federal forecasters believed Obamacare’s individual mandate would cause people to buy insurance, regardless of cost. That hasn’t proven true. …In a nutshell, the CBO predicts reform would cause millions to lose coverage they don’t now have, and that millions more would eagerly reject the coverage they do have because it’s such a bad deal. Those aren’t conclusions that bolster the case for Obamacare.

And here are passages from another WSJ editorial.

CBO says 14 million fewer people on net would be insured in 2018 relative to the ObamaCare status quo, rising to 23 million in 2026. The political left has defined this as “losing coverage.” But 14 million would roll off Medicaid as the program shifted to block grants, which is a mere 17% drop in enrollment after the ObamaCare expansion. The safety net would work better if it prioritized the poor and disabled with a somewhat lower number of able-bodied, working-age adults. The balance of beneficiaries “losing coverage” would not enroll in insurance, CBO says, “because the penalty for not having insurance would be eliminated.” In other words, without the threat of government to buy insurance or else pay a penalty, some people will conclude that ObamaCare coverage isn’t worth the price even with subsidies. …CBO’s projections about ObamaCare enrollment…were consistently too high and discredited by reality year after year. CBO is also generally wrong in the opposite direction about market-based reforms, such as the 2003 Medicare drug benefit whose costs the CBO badly overestimated.

Here are excerpts from Seth Chandler’s Forbes column.

My complaints about the CBO largely revolve around its dogged refusal to adjust its computations to the ever-more-apparent failings of the Affordable Care Act. When the CBO says that 23 million fewer people will have insurance coverage under the AHCA than under the ACA — a statistic that politics have converted into a mantra —  that figure is predicated on an ACA that no longer exists. It is based on the continuing assumption that the ACA will have 18 million people enrolled on its exchanges in 2018 and that this situation will persist until 2026. I know no one on any side of the political spectrum who believes this to be true. The ACA has about 11 million people currently enrolled on its exchanges in 2017 and, with premiums going up, some insurers withdrawing from various markets, and the executive branch fuzzing up whether the individual mandate will actually be enforced. The consensus is that ACA enrollment will stay the same or go down, not increase 60%.

And here’s some of what Drew Gonshorowski wrote for the Daily Signal.

…reducing premium levels by rolling back regulations could actually have the effect of making plans more desirable for individuals looking to pay less. The CBO lacks any real discussion of these positive effects. …The CBO’s score on Medicaid…reflects that it assumes more states would likely have expanded in the future under the Affordable Care Act. Thus, its projection that 14 million fewer people would be insured due to not having Medicaid under the American Health Care Act might be overstated… CBO…assumes the Affordable Care Act will enroll 7 to 8 million more people in the individual market, when in reality it does not appear this will be the case

Last but not least, my former colleague Robert Moffit expressed concerns in a column for USA Today. The part that caught my eye was that CBO has a less-than-stellar track record on Obamacare projections.

The GOP should be skeptical of CBO’s coverage estimates. It has been an abysmal performance. For example, CBO projected initially that 21 million persons would enroll in exchange plans in 2016. The actual enrollment: 11.5 million.

The bottom line is that CBO overstated the benefits of Obamacare, at least as measured by the number of people who would sign up for the program.

The bureaucrats were way off.

Yet CBO continues to use those inaccurate numbers, creating a make-believe baseline that is then used to estimate a large number of uninsured people if the Republican bill is enacted.

This is sort of like the “baseline math” that is used to measure supposed spending cuts when the budget actually is getting bigger.

P.S. You may be wondering why Republicans don’t fully repeal Obamacare so that they can get credit for falling premiums. Part of the problem is that they are using “reconciliation” legislation that supposedly is limited to fiscal matters. In other words, you can’t repeal red tape and regulation. At least according to some observers. I think that’s silly since such interventions drive up the cost of health care, which obviously has an impact on the budget. Also, Republicans are a bit squeamish about reducing subsidies for various groups, whether explicit (like the Medicaid expansion) or implicit (like community rating). In other words, the Second Theorem of Government applies.

Reposted from International Liberty

The Hitchhiker’s Guide to Government

The Hitchhiker’s Guide to Government

“In the beginning, the universe was created,” explains author Douglas Adams. “This has made a lot of people very angry, and has been widely regarded as a bad move.”

The Hyperspace Bypass

Adams wrote The Hitchhiker’s Guide to the Galaxy, a classic work of farcical and absurd hilarity. The small volume is also possessed of no small degree of brilliance. Adams notes, rightly, that discontentedness is endemic to existence, and goes on to demonstrate (even more rightly) that humanity’s collective attempts to rectify its malcontent are usually for the worse.

Discontentedness is endemic to existence.

Put briefly, the protagonist (an exceptionally average man named Arthur) has his house demolished by the government to make way for a bypass. Shortly thereafter, the story takes an intergalactic twist when the Vogon aliens demolish Earth to make way for a hyperspace bypass. Adventures ensue, but here we are concerned with only the first part – humanity’s discontent and its failed attempts at satisfying itself.

The reason we are so often indignant at life, the universe, and everything, is that we feel cheated. We each want something, and yet external forces continually thwart our objectives. To escape the state of nature in which, as Hobbes would say, our lives are “nasty, brutish, and short,” we collectively organize our species into civilization.

Setting Men Free

John Locke describes in his treatises on government the nature of civilization: humans forge an implicit agreement, called the social contract, in which some liberties are surrendered for the sake of acquiring more liberty in the long run. I, for example, surrender my right to dispose of dangerous chemicals on my land, not only because they will be hurtful to me, but also because, without proper containment, they will destroy my neighbor’s property.

Ayn Rand summarized it best: “Civilization is the process of setting men free from men.” We submit to society in order that we might escape the depredations of the savage.

Yet, as Douglas Adams so astutely notes, civilization seems at times to be a complete failure, utterly destructive of the end to which it was first organized. While lying in front of the bulldozer in order to prevent the driver from knocking his house down, Arthur asks, quite sensibly, why the bypass must be built. “It’s a bypass!” Mr. Prosser, the driver, yells back. “You’ve got to build bypasses.”

How elucidating.

Unfortunately, this philosophy is all too prominent in the modern West: “It’s health care! You’ve got to have health care.” “It’s social security! You’ve got to have social security.” “It’s car insurance! You’ve got to have car insurance.”

I would be the last to dispute the value of insurance and retirement savings. However, the question we must ask is, “At what cost?”

What must we pay for these things? Each individual must ultimately decide for himself where it is worthwhile for him to invest his resources. Arthur has nothing against bypasses personally. He simply values his house more.

The sole object of civilization is to set man free, and we find that the collective power of humanity, while capable of exponentially greater good than the isolated bohemian, is likewise capable of exponentially greater evil.

Freedom’s Ambiguity

To “liberals” of today, “freedom” means not freedom from coercion, but freedom from want.

There is a very simple reason for this: the logical fallacy of equivocation. We have equivocated our term “freedom” to mean a variety of terms. We remember that our ultimate objective is “liberty,” but to the “liberal” of today, “freedom” means not freedom from coercion, but freedom from want. Society wants bypasses, so let us build them! Society wants medical care, so let us provide it for them!

But any attempt to ensure freedom from want results in arbitrary coercion. Arthur’s house has to be removed, for the benefit of the culture. Suddenly, as he powerlessly watches the destruction of his home, he realizes that the state of nature has been replaced with a far more coercive tyranny.

Civilization’s Despotism

Of course, those in charge aren’t likely to see their actions as despotic. “It’s not as if it’s a particularly nice house,” Mr. Prosser attempts to console Arthur. And when the Vogons train their cannons on Earth, they patiently explain, “There’s no point in acting all surprised about it. All of the planning charts have been on display for 50 years, in your local planning department in Alpha Centauri, so you’ve had plenty of time to lodge a formal complaint, and it’s too late to make a fuss now.” And then the Earth goes the way of Arthur’s house – obliterated in a casual puff of bureaucracy.

Defending the South’s practice of slavery, John C. Calhoun said, “We of the South will not, cannot, surrender our institutions. To maintain the existing relations between the two races, inhabiting that section of the Union, is indispensable to the peace and happiness of both.”

Calhoun identifies two goods: peace and happiness. These public rights, he claims by inference, are more important than the fundamental, more individual human rights of the African. He was right, too, at least in part – doing away with slavery required the destruction of his ultimate value of peace.

In the USSR, the demand for national security was naturally quite high. The resulting trade-off was that uranium mines were given free reign to dump their waste wherever they so desired (thus they could produce more uranium, which would in turn contribute to Russia’s arsenal of ICBMs). The town of Oberrothenbach was so badly contaminated by nuclear waste that, as Richard Maybury wrote, “unknown to the residents, homes were built of radioactive slag.”

Price controls in Venezuela were instituted to make food more affordable. Health care in Sweden was sponsored by the government to give the poor insurance. Tariffs in India were established to prevent job loss. And yet Venezuelans are starving, Swedes in need of urgent surgery have visited veterinarians, and, until the repeal of tariffs in the 80s and 90s, Indian automobiles sold at a far higher price and a fraction of the quality of the cars in the rest of the world.

The Coercive “Public Interest”

Again, to quote Rand, “Since there is no such entity as the public, since the public is merely a number of individuals, any claimed or implied conflict of the public interest with private interests, means that the interests and wishes of some men are to be sacrificed to the interests and wishes of others.” Any “need of the public,” therefore, results out of a conflict of interests between individuals. And preference to one group is left up to the subjective biases of a determining agency.

Civilization is our greatest achievement, but only so long as it is about setting men free from men, not from want.

Discontent with our world, we have set about improving it. We have made tremendous progress. A great many obstacles to our ends and objectives have been removed by our industry.

Yet we run the risk of creating a great many more. So long as laws and government are constructed to benefit the public interest, as opposed to the rights of individuals, then only a lucky few can ever be free. Civilization is our greatest achievement, but only so long as we remember: it is the process of setting men free from men. Not setting men free from want.

If we mistake civilization for something inherently valuable, instead of as the means of reducing coercion, we will destroy the end for which it was originally intended. It may seem good, at first. We may alleviate some want. We may lift up some downtrodden spirit.

But when the Vogons come, espousing our own philosophy – our own arbitrary value of the public’s interests, which have supplanted rights – we will realize the despotism that we have championed.

Tegan Truitt

Tegan Truitt

Tegan Truitt is the author of the small blog, A Shortage of Sand, which deals with economic philosophy, and a sometime speaker for the homeschooling company Classical Conversations.

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Mises’s ‘Planned Chaos’ is a Masterful Critique of Statism

Mises’s ‘Planned Chaos’ is a Masterful Critique of Statism

In 1947, Leonard Read of FEE asked Ludwig von Mises to cumulate all his knowledge (gained from experience) of 20th-century political history into a single essay, one that dealt with all forms of state planning. The result was the single most sophisticated book on politics that Mises had written until that time of his life. It still holds up as a masterpiece, a piece you can read multiple times and still gain insight.

Appearing two years before Human Action, Mises broadened his early critique of socialism to include fascism and Nazism and the conditions that led to their rise. It is in this work that he isolates statism in general, and dictatorship in particular, as the ultimate enemies of freedom, regardless of whether that statism is from the left or the right.

Planned Chaos, then, is a statement for the ages, a mature and passionate work that grew from enormous learning and personal experience. FEE is pleased to make this classic volume available as a free ebook. I strongly recommend that you download it now.

Production can either be directed by the prices fixed on the market by the buying and by the abstention from buying on the part of the public. Or it can be directed by the government’s central board of production management. There is no third solution available. There is no third social system feasible which would be neither market economy nor socialism. Government control of only a part of prices must result in a state of affairs which—without any exception—everybody considers as absurd and contrary to purpose. Its inevitable result is chaos and social unrest. ~ Ludwig von Mises

Jeffrey A. Tucker

Jeffrey A. Tucker

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

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Listen NPR, the Market is Already Saving PBS

I have a guilty pleasure to admit that will likely bring my libertarian credentials into question: I watch and listen to public broadcasting.

I’ve bonded particularly with their children’s programming because of my young son’s love for it. He adores shows like Daniel Tiger’s Neighborhood, Curious George, and all of the unique children’s programming offered by PBS.

Public broadcasting can survive privatization. In fact, it would likely thrive by monetizing their unique content.

My household is not alone in our enjoyment of PBS, NPR, or other products of public broadcasting. Millions of Americans tune into public broadcasting on a daily basis.

The size of this audience can be easily detected by the outpouring of support whenever defunding of public broadcasting is discussed. With Donald Trump in office, the caterwauling has resumed after a long period of quiet on the issue. We haven’t witnessed fervor like this since Mitt Romney’s so-called “war on Big Bird”. (As you’ll learn later, privatizing Sesame Street is one of the best things to ever happen to the show.)

However, most of this outrage is as misguided and shortsighted as it is shrill. The truth of the matter is that public broadcasting can survive privatization. In fact, it would likely thrive by monetizing their unique content.

This is evidenced by the drastically different paths taken by the two organizations that embody public broadcasting: NPR and PBS. One provider has been wheeling-and-dealing in an effort to cash in on its unique content, while the other clutches to its antiquated and costly distribution practices.

It’s a tale of two (soon-to-be-defunded) public broadcasting providers.

NPR Clings to Outdated Formula 

In March 2016, Christopher Turpin, NPR’s vice president of news programming and operations, laid out a series of internal policies in a memo. Some of the policies demonstrated a troubling commitment to NPR’s dying business model.

Based on the rules outlined in these memos, show hosts are discouraged from promoting any NPR-branded podcasts. “We won’t tell people to actively download a podcast or where to find them,” reads the memo. “No mentions of, iTunes, Stitcher, NPR One, etc.”

NPR’s reluctance to embrace modern digital trends speaks volumes about its commitment (or lack thereof) to adjusting to market trends. “The ban was widely viewed as proof that NPR is less interested in reaching young listeners than in placating the managers of local member stations, who pay handsome fees to broadcast NPR shows and tend to react with suspicion when NPR promotes its efforts to distribute those shows digitally,” writes Slate’s Leon Neyfakh. (Neyfakh’s deep-dive into the wastefulness and antiquated nature of NPR is very insightful.)

As more and more people are jettisoning their radios for internet-based streaming content, this outdated formula is draining public broadcasting’s ability to innovate.

Even flagship shows like Morning Edition and All Things Considered, which generate more revenue for NPR via licensing fees than any other source of funding, have been shutout in the great digital conversion.

Member stations continue to oppose offering these shows as podcasts. Losing listeners and revenue to such digital disruption threatens the very existence of “legacy stations.” This is why representatives from member stations have worked hard to maintain a majority on NPR’s board of directors, so they could block any efforts to digitize.

In addition to outdated philosophy, the funding mechanism that supports NPR is also antiquated. The Public Broadcasting Act of 1967 codified the financial structure of the Corporation of Public Broadcasting (CPB), and not much has changed since it was signed into law by President Lyndon Johnson.

The majority of the funding established by the act—roughly 70 percent—was allocated not for content, but for maintaining a costly network of 1,100 regional stations across the country. CPB spends almost $100 million annually in “unrestricted” grants on existing radio infrastructure maintenance, community outreach, and other non-programming related expenses.

As more and more people are jettisoning their radios for internet-based streaming content, this outdated formula is draining public broadcasting’s ability to innovate. Defunding public broadcasting would incentivize the organization to invest in the server space necessary to compete in the digital economy or develop new programming.

PBS Is Embracing the Marketplace

On the other side of the equation stands PBS, which offers a successful model for transitioning public broadcasting to a private space.

PBS is far from perfect. The organization makes it unnecessarily difficult to syndicate new shows through their distribution networks. However, despite the current howling over privatizing public broadcasting, PBS has already trended in that direction.

The shift to online streaming video has helped PBS ink several deals with prominent online content providers.

Let’s return to the aforementioned “War on Big Bird” waged by Romney. It turns out that Big Bird’s home on Sesame Street was already on the verge of foreclosure long before Mitt could get his mitts on it. Around the same time the public was lambasting the former GOP frontrunner for threatening to defund PBS, Sesame Street was operating at a huge loss—nearly $11 million in 2014.

Then HBO came along. Already in the market to compete with Netflix and Amazon Prime for children’s programming, HBO secured a five-year deal with PBS that, according to Hollywood Reporter, allowed “the iconic kids’ franchise to deliver nearly twice as much new content per season.” The market saved Big Bird.

Markets have also embraced other children’s programming originally found on PBS.

The shift to online streaming video has helped PBS ink several deals with prominent online content providers. Amazon Prime netted the biggest deal with PBS, securing the rights to Daniel Tiger’s Neighborhood, Odd Squad, Wild Kratts, Dinosaur Train, Nature Cat, and Ready Jet Go. Curious George is exclusively streamed on Hulu, while Super Why! remains on Netflix.

Aside from children’s programming, adult content typically offered on public broadcasting has also moved online. Netflix streams several Ken Burns documentary series, including The Civil War, Prohibition, and The Roosevelts.

It is obvious that PBS is drastically ahead of the curve in comparison to NPR.

Netflix and Chill Out

The key to the transition of public broadcasting into the private sphere is an axiom familiar to marketers: content is king. When you produce thoughtful and entertaining content, consumers will knock down your doors to access it.

Consider the rise and fall and rise of Netflix. In 2011, Netflix almost struck a fatal, self-inflicted wound when they altered the pricing and availability of their mail-in and streaming services. In an awkward attempt to restructure, Netflix created Qwikster as a separate company to handle the mail-in DVD side of the business. Many subscribers felt slighted. As a result, nearly 800,000 customers unsubscribed, Netflix’s stock went into a nose dive, and Quikster got the ax. It suffered a more humiliating market defeat than Blockbuster.

Public broadcasting has the numbers to survive privatization.

In an effort to rebuild its brand, Netflix focused its energy on offering new and original content. Consider the quantity and quality of highly-acclaimed series that originated with Netflix: Orange is the New Black, House of Cards, Bloodline, Stranger Things, Black Mirror, The Crown, Narcos, etc. Netflix also worked to secure exclusive distribution rights to already established, popular shows like Peaky Binders.

In fact, Netflix is slated to spend nearly $6 billion in writing, producing, casting, and securing distribution for its unique selection of “Netflix Originals” in 2017.

This resilient comeback has bolstered Netflix’s subscriptions with over 75 million subscribers in 200 different countries.

If Netflix can bounce back, public broadcasting can easily survive privatization. Considering that PBS viewership is over 95 million and at least 23 million people tune into at least one NPR radio show per day—all dedicated consumers tuning into the unique content only available through their networks—public broadcasting has the numbers to survive privatization.

If public broadcasting organizations shifted all of their efforts to content development (branding the existing shows and creating new ones), and away from the costly upkeep of its regional stations, it is painfully apparent that the marketplace would support them.

NPR and PBS fans need to take a lesson from Netflix and chill out.

Got Amazon Prime, You Already Support Privatization

Even though I am a fan of the content available on public broadcasting, I would gladly support abolishing the CPB. I don’t expect my neighbors to pay for my entertainment.

Furthermore, considering the unique content already produced by these organizations, I have the utmost confidence that public broadcasting networks can continue to find success selling exclusive rights to their programming. Competition for selling publishing rights is robust, demonstrated by the availability of existing platforms to stream said content: Amazon Prime, Hulu, HBO, Netflix, Audible, Spotify, etc. Subscriptions to all of these platforms are extremely affordable and offer other perks. (If you haven’t experienced two-day shipping by Amazon Prime yet, you need to come out of the dark ages.)

So when I say I would gladly support public broadcasting after it is privatized with my own money, I mean it, because—as my subscriptions to many streaming services indicate—I am already doing so.

Now, if you’ll excuse me I’m going to fire up Amazon Prime so my kiddo can watch Daniel Tiger’s Neighborhood.

Jay Stooksberry

Jay Stooksberry

Jay Stooksberry is a freelance writer with passions for liberty, skepticism, fatherhood, humor, and whiskey. His work has been published in Newsweek, Independent Voter Network, Fatherly, and other publications. When he’s not writing, he splits his time between marketing consultation, outreach work for his local Libertarian Party affiliate, and enjoying his spare time with his wife and son. Follow him on Facebook and Twitter.

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