ECB Research: Pro-Market Reforms Generate Very Positive Results, but not Overnight Miracles

https://danieljmitchell.wordpress.com/2018/02/22/ecb-research-pro-market-reforms-generate-very-positive-results-but-not-overnight-miracles/

http://danieljmitchell.wordpress.com/?p=40062

I wrote three days ago about the worst-international-bureaucracy contest between the International Monetary Fund and the Organization for Economic Cooperation and Development.

A reader emailed to ask me whether I had a favorite international bureaucracy. I confess I’ve never given that matter any thought. My gut-instinct answer would be the World Trade Organization since its mission is to discourage protectionism.

But I’m also somewhat fond of the European Central Bank, both because the euro has been better than many of the currencies it replaced and because the ECB often publishes good research.

  • Two studies (here and here) on the benefits of spending caps.
  • Two studies (here and here) showing small government is more efficient.
  • Two studies (here and here) on how large public sectors retard growth.
  • And also studies on the adverse impact of regulation, bureaucracy, and welfare.

And here’s a study on regulation to add to the collection. The European Central Bank published a working paper that looks at the effect of selected pro-market reforms. Here’s their methodology.

In this paper, we investigate the relationship between a wide range of structural reforms and economic performance over a ten-year time horizon. …we identify 23 episodes of wide-reaching structural reform implementation (so-called “reform waves”). These are based on a database…which provides detailed information on both real and financial sector reforms in 156 advanced and developing countries over a 40 year period. Indicators considered specifically cover trade-, product market-, agriculture-, and capital-account liberalisation, together with financial and banking sector reform. Then, we track top-reforming countries over the 10 years following adoption and estimate the dynamic impact of reforms.

And here’s an excerpt that describes the theoretical assumptions.

…orthodox economic theory has made a strong case for structural reforms, identified as measures aimed at removing supply-side constraints in an economy. This in turn would favour efficient factor allocation and contribute to medium- to long-term growth. Such measures include, but are not limited to, product and labour market liberalisations, current and capital account openness, and financial liberalisation. For a long time, a collection of these policies has fallen under the name of Washington Consensus.

I agree with this theory, though allow me to elaborate.

The Fraser Institute’s Economic Freedom of the World is the gold standard when looking at overall economic policy. It considers five major factors – fiscal policy, trade policy, regulatory policy, monetary policy, and governance policy (indicators such as rule of law and property rights).

The “Washington Consensus” also is based on good policy, but it undervalues the importance of a small burden of government spending.

But I’m digressing. Let’s return to the ECB study, which basically looks at the impact of trade liberalization and deregulation. Here’s what the authors found.

Our main findings are as follows: on average, reforms had a negative but statistically insignificant impact in the short term. This slowdown seems to be connected to the economic cycle, and the tendency to implement reforms during a downturn, rather than an effect of reforms per se. Reforming countries however experienced a growth acceleration in the medium-term. As a result, ten years after the reform wave started, GDP per capita was roughly 6 percentage points higher than the synthetic counterfactual scenario.

Here’s a chart from the study illustrating the positive effect of reform.

And here’s another chart from the ECB report looking at the results from another perspective.

The obvious good news from this research is that we have new evidence about the benefits of pro-market reforms. Boosting economic output by an extra 6.3 percent is nothing to sneeze at. And it reinforces my oft-made point that even small improvements in growth – if sustained over time – can lead to dramatic improvements in living standards.

What might be most noteworthy in this study, however, is the finding that pro-market reforms are associated with a short-run dip in economic performance. The authors suggested that it might be a statistical quirk related to the fact that governments have a “tendency to implement reforms during a downturn”.

That’s certainly plausible, but I’m also open to the notion that good reforms sometimes may have short-run costs. Simply stated, if bad policy has produced a misallocation of labor and capital, then pro-growth reforms are going to cause some temporary disruption.

But unless you’re planning on dying very soon and also don’t care about your heirs, that’s not an argument against reform. For example, I think the housing lobby’s opposition to the flat tax is misguided since every sector will enjoy long-run benefits from faster growth, but it’s certainly possible that residential real estate will endure some short-run weakness as some resources shift to business investment.

Unfortunately, politicians tend to have very short time horizons (i.e., the next election), so they fixate on short-run costs and under-value long-run benefits.

But I’m digressing again. Let’s look at one final passage from the ECB study. For those interested in additional research, there’s a section citing some of the other literature on liberalization and growth.

Post-Soviet countries moving towards a market economy have received considerable attention in this respect. Fischer et al. (1996) looked at 26 transition economies over the period 1989-1994. They conclude that structural reforms played a vital role in reviving economic growth. This finding for transition economies was echoed by de Melo et al. (1996), and more recently by Havrylyshyn and van Rooden (2003) and Eicher and Schreiber (2010). Focussing more broadly on countries implementing wide reform packages covering domestic finance, trade, and the capital account, Christiansen et al. (2013) find a strong impact of the former two on growth in middle-income countries. Moreover, they show how well-developed property rights are a precondition in order to reap fully the benefits of structural reforms. The importance of institutions in explaining cross-country heterogeneity is further remarked by Prati et al. (2013), who illustrate how the positive relationship between structural reforms and growth depends on a country’s constraints on the authority of the executive power. Distance from the technological frontier seems also to play a role.

If you’re not familiar with technological jargon, “distance from the technological frontier” is basically a way of saying that nations with lots of bad policy – and thus lots of misallocated and/or underutilized labor and capital – probably have more ability to enjoy fast growth. Sort of a version of convergence theory.

I also like the reference to “constraints on the authority of the executive power,” which presumably a recognition of the importance of the rule of law.

The bottom line is that the ECB study reconfirms that free enterprise is the answer if the goal is reducing poverty and increasing prosperity.

Argentina, Trump, and Perón

https://danieljmitchell.wordpress.com/2018/02/21/argentina-trump-and-peron/

http://danieljmitchell.wordpress.com/?p=40041

Since I called Trump a big-government Republican during the 2016 campaign and just condemned his capitulation to a spendaholic budget deal, it goes without saying that I’m not a huge fan of the President.

Heck, I also recently criticized his protectionism, warning that additional barriers to trade could offset the pro-growth effect of lower tax rates.

But I like to think I’m fair in my criticisms. I stay away from the personal stuff (other than for humor purposes) and and simply focus on whether liberty is increasing or decreasing.

Today, though, I want to quasi-defend Trump because a professor from the University of Richmond wrote a really strange column for the Washington Post with a very bizarre assertion about Juan Perón, the populist post-World War II president of Argentina.

It’s en vogue for enraged liberals to compare Trumpism to Argentine Peronism, wielding the analogy as a warning about the potential apocalypse that they fear is about to engulf us. …Like so many familiar historical cliches, however, this one is incomplete, if not downright wrong.

The professor who wrote the piece, Ernesto Semán, wants us to believe Perón is someone to admire, sort of the Argentine version of Bernie Sanders.

…the core of Peronism was a vision that is the exact opposite of Trumpism. Peronism led a process of expanding economic equality, collective organization and political enfranchisement. …Juan Perón presided over a process of massive wealth redistribution on behalf of the emerging working classes. …his government increased its intervention in the economy and provided…free public health care and education for everyone, as well as a wide array of union-managed social services. Peronism enacted strong regulations on private capital… Argentina’s social transformations resembled in some ways those that took place in the United States during the New Deal. Perón certainly thought so…in 1946 quoted entire paragraphs from President Franklin Roosevelt’s second inaugural address.

And he says that today’s Democrats should embrace Perón’s policies.

…comparison of Trumpism to Peronism…ignores how in fundamental ways the two are polar opposites… Instead of fearing Latin American populism, …Democrats should look to it as offering a potential path forward for a more equal and fair country.

Wow. This isn’t quite as bizarre as arguing that Venezuela should be a role model (looking at you, Bernie Sanders, Joe Stiglitz, and others), but it’s close.

Here’s everything you need to know about Peronism, from a 2014 article in the Economist.

The country ranked among the ten richest in the world…its standing as one of the world’s most vibrant economies is a distant memory… Its income per head is now 43% of those same 16 rich economies… As the urban, working-class population swelled, so did the constituency susceptible to Perón’s promise to support industry and strengthen workers’ rights.

Takes a look at this chart from the article showing Argentina’s per-capita GDP relative to other nations. As you can see, the country used to be much richer than Brazil and considerably richer than Japan. And all through the first half of the 20th century, Argentina was not that far behind the United States and other wealthy nations. But then look at the lines starting after Perón came to power in the late 1940s.

In other words, Peronist policies reduced the comparative prosperity of the ordinary people.

Just like similar policies have reduced the comparative prosperity of ordinary people in Venezuela.

What makes these numbers especially powerful is that convergence theory assumes that the gap between rich nations and poor nations should shrink. Yet statist policies are causing the gap to widen.

I put together a chart back in 2011 showing the relative rankings of both Argentina and Hong Kong. As you can see, Argentina used to be one of the world’s richest nations. Indeed, it was the world’s 10th-richest country when Perón took over. And Hong Kong was relatively poor. But look at what’s happened over time. Perón’s statist policies produced a steady decline while Hong Kong’s laissez-faire approach has now made it one of the richest jurisdictions on the planet.

Yet Mr Semán says we should copy Perón. Go figure.

Let’s conclude by circling back to Trump. Semán is upset because some people are equating Trump (who he despises) with Perón (who he admires).

I’m vaguely sympathetic to part of his argument. He’s right that Trump’s version of populism is not the same as Perón’s left-wing version of populism (basically the Bernie Sanders agenda).

But since I care about the less fortunate, I have nothing for disdain for Semán’s assertion that Perón’s policies should be adopted in America.

P.S. Given his remarkable level of  economic illiteracy, you won’t be surprised to learn that Pope Francis was influenced by Peronism.

Jurisdictional Competition, Mutual Recognition, and European Prosperity

https://danieljmitchell.wordpress.com/2018/02/20/jurisdictional-competition-mutual-recognition-and-european-prosperity/

http://danieljmitchell.wordpress.com/?p=40030

If you’re reading this, you are a very lucky person because you were born at the right time. If you were born 500 years ago, 1000 years ago, or 1500 years ago, the odds are overwhelming that you would have endured a very short and difficult life, one that was characterized by unimaginable poverty.

But then, as explained in short videos by Professors Deirdre McCloskey and Don Boudreaux, the world suddenly became much richer starting a few hundred years ago.

And Western Europe led the way. But why?

In 2012, I shared lots of academic research showing how jurisdictional competition enabled rising levels of prosperity in Europe. And I then augmented that research a few years later by highlighting two very important developments in 1356 that helped set the stage for that competition.

Today, let’s expand on that evidence by looking at some recent analysis.

Here are some excerpts from a fascinating Aeon article by Professor Joel Mokyr.

How and why did the modern world and its unprecedented prosperity begin? …One of the oldest and most persuasive explanations is the long political fragmentation of Europe. …The modern European economic miracle was…neither designed nor planned. …How did this work? In brief, Europe’s political fragmentation spurred productive competition. It meant that European rulers found themselves competing for the best and most productive intellectuals and artisans. …the existence of multiple competing states encouraged scientific and technological innovation. …the rivalries between the states, and their examples to one another, also meliorated some of the worst possibilities of political authoritarianism. …interstate competition was a powerful economic mover. More important, perhaps, the ‘states system’ constrained the ability of political and religious authorities to control intellectual innovation.

Mokyr then explains that the benefits of jurisdictional competition were augmented and enabled by a form of labor mobility.

…political fragmentation was not enough. …more was needed. The size of the ‘market’ that intellectual and technological innovators faced was one element of scientific and technological development that has not perhaps received as much attention it should. …political and religious fragmentation did not mean small audiences for intellectual innovators. Political fragmentation existed alongside a remarkable intellectual and cultural unity. Europe offered a more or less integrated market for ideas, a continent-wide network of learned men and women, in which new ideas were distributed and circulated. …In early modern Europe, national boundaries mattered little in the thin but lively and mobile community of intellectuals in Europe. Despite slow and uncomfortable travel, many of Europe’s leading intellectuals moved back and forth between states. …If Europe’s intellectuals moved with unprecedented frequency and ease, their ideas travelled even faster. …Europe’s unique combination of political fragmentation and its pan-European institutions of learning brought dramatic intellectual changes in the way new ideas circulated. …Europe’s intellectual community enjoyed the best of two worlds, both the advantages of an integrated transnational academic community and a com­petitive states system.

By the way, I don’t consider this the “best of two worlds.” Labor mobility is a feature of jurisdictional competition, so I would say it’s simply one of the benefits. But six of one, half dozen of the other.

Let’s now look at another benefit of capitalism. Here are some passages from a CapX column on how the development of a merchant class constrained militarism. Here’s the thesis.

Although a number of things contributed to the huge decline in violence of the late medieval period, …the development of capitalism, and the rise of a merchant class whose wealth was not won with a sword, played a huge part.

And here’s an example.

This order was first shaken in 1302 when France’s cavalry confidently marched north to suppress a revolt by the Flemish. Flanders is not naturally rich in resources –Vlaanderen means flooded – but its people had turned swamps into sheep pastures and towns, building a cloth industry that made it the wealthiest part of Europe, its GDP per capita 20 per cent greater than France and 25 per cent better than England. …The Flemish were traders, not knights, which is why the French were sure of victory. And yet, with enough money to pay for a large, well-drilled infantry they were able for the first time to destroy the cavalry at the Battle of the Golden Spurs. It was the beginning of the end – no longer could the aristocracy simply push around the bourgeoisie, and as the latter grew in strength so it undermined the violence-obsessed culture of the nobility.

And another example.

European capitalism had begun in northern Italy, chiefly Venice, one of nine Italian cities that had surpassed 50,000 people by this point. …Venice was high in trust, a vital component for the growth of sophisticated markets, and so was the first to develop joint-stock companies and banks. …The Venetians, along with their arch-rivals the Genoese and Pisans, had been involved in the crusades, but despite papal prohibition had continued to trade with the infidel. Indeed, nothing would stop their desire to engage in commerce, and Arab geographer and traveller Ibn Jubayr noted that “It is amazing to see that the fires of discord burn” between Christians and Muslims when it comes to politics but, when trading, travellers “come and go without interference”.

And another case study.

London was behind Italy or Flanders but it was catching up. The city had started to grow as a trading hub in the 12th century, and its mayor, William Hardel, was the only commoner to witness Magna Carta in 1215 and helped secure Clause 41, which stated that all foreign “merchants are to be safe and secure in departing from and coming to England” without “evil exactions”. London expanded rapidly in the later middle ages, increasing its share of England’s wealth from two to nine per cent, and Henry IV (1399-1413) was the first king to invite its merchants on to the royal council, among them Sir Richard Whittington…the merchants purposefully avoided conflict, so that when in the 1380s Richard II tried to raise an army in the city to fight his various internal enemies he was met with apathy

What makes this analysis especially important is that military conflict is one of the putative downsides of political fragmentation. Indeed, Mokyr mentions that in his article.

I confess I don’t know enough to judge that issue. For instance, I’d like to know if there were there more wars in Europe, or were European wars between countries as opposed to an equal amount of civil wars elsewhere in the world?

In any event, at least there is some evidence that the prosperity generated by capitalism produced resistance to militarism.  Sort of brings to mind Bastiat’s famous statement about trade and war.

(Something to keep in mind given Trump’s self-destructive protectionist impulses.)

Let’s close by looking at Europe today and exploring whether jurisdictional competition on the continent. The good news is that the principle of “mutual recognition” has produced a form of competitive federalism, as explained in an article by Professor Michael Greve.

…the principle of reciprocity and “mutual recognition”…allows decentralized political institutions to coexist with a common, open, and efficient economic market. …cross-border trade…must be governed either by the rules of the country where a particular good or service ends up or by the rules of its origin country. The former “destination” principle would compel each company to comply with different and often conflicting regulations in all the member states where its products might end up. The result is not a common market but a collection of regulatory fiefdoms. The solution to this dilemma is the opposite, origin-based rule: so long as a company in a member state complies with the laws of its home state, it may freely sell its goods and services in other member states. …the origin principle…is commonly called the principle of “mutual recognition.” …it is the only principle that is consistent with both a common economic market and political decentralization. Mutual recognition integrates member states without central intervention. …Mutual recognition, then, liberates commerce by eliminating the cost of complying with different, conflicting, and often incomprehensible rules. Beyond that, mutual recognition institutionalizes jurisdictional competition. …The ability of individuals and firms to vote with their feet, modems, and pocketbooks will liberate markets and discipline politicians. …Trade unions, environmental interests, and any other interest group whose agenda rests on redistribution consistently oppose mutual recognition: they cannot rob Peter to pay Paul if Peter is allowed to escape to more hospitable climes.

Incidentally, the “origin principle” is at the core of the battle over the so-called Streamlined Sales Tax Proposal, a scheme by certain state governments to impose destination-based tax laws on out-of-state merchants.

And that principle also was a big reason for my fight against the border-adjustment tax, which was a destination-based levy.

For what it’s worth, Europe generally has been better than the United States about using the origin-based approach.

Europeans [are] ahead of the United States in viewing mutual recognition as an efficient means of harmonizing, as it were, the demands of economic integration and political diversity. Here at home, mutual recognition governs corporate chartering—but almost nothing else. Tort law, insurance and financial regulation, state taxation, product labeling, and most other areas of regulation are either subject to a destination rule or else preempted under federal law. No American legislator or corporate executive has ever heard of mutual recognition, let alone pressed it as a serious policy option.

Insurance regulation is a key example. Many states impose costly mandates that drive up the cost of health insurance. But if consumers had the freedom to buy health insurance from companies based in more market-oriented states, they would be able to save money.

Unfortunately, statists in Europe are moving in the wrong direction, seeking to replace mutual recognition with one-size-fits-all harmonization.

The European political class is bent on establishing pan-European, sovereign political institutions. …As political aspirations begin to dominate the process of European integration, mutual recognition will be jettisoned. …Habermas denounces the premises on which mutual recognition rests as the “building blocks of a neoliberal world view,” and he declares them at odds with “the Europeans’ normative self-understanding.” The European Union must therefore construct a European society of citizens, a pan-European “public sphere,” and a shared European political culture…precisely to confine economic competition and choice to a subordinate sphere. …the Europeans will harmonize their way toward a common constitution and citizenship, with dental care for all.

If the centralizers in Europe succeed (and they’ve already moved policy in the wrong direction), that will not bode well.

Europe already faces severe challenges because of excessive government and bad demographics.

Harmonization will exacerbate the problem of too much government because the “stationary bandit” no longer will face competitive pressure.

So “goldfish government” will become one step closer to reality.

P.S. This helps to explain my support for Brexit.

P.P.S. Speaking of Brexit, here’s a UKIP member of the European Parliament expounding on the benefits of mutual recognition over harmonization.

P.P.P.S. Mutual recognition also allows for regulatory diversity, which reduces systemic risk.

The International Monetary Fund Doubles Down on a Pro-Tax Agenda

https://danieljmitchell.wordpress.com/2018/02/19/the-international-monetary-fund-doubles-down-on-a-pro-tax-agenda/

http://danieljmitchell.wordpress.com/?p=40019

The worst-international-bureaucracy contest is heating up.

In recent years, the prize has belonged to the Paris-based Organization for Economic Cooperation and Development for reasons outlined in this interview. Indeed, I’ve even argued that subsidies for the OECD are the worst expenditure in the federal budget, at least when measured on a damage-per-dollar-spent basis.

But the International Monetary Fund stepped up its game in 2017, pushing statism to a much higher level.

  • In June, I wrote about the IMF pushing a theory that higher taxes would improve growth in the developing world.
  • In July, I wrote about the IMF complaining that tax competition between nations is resulting in lower corporate tax rates.
  • In October, I wrote about the IMF asserting that lower living standards are desirable if everyone is more equally poor.
  • Also in October, I wrote about the IMF concocting a measure of “fiscal space” to justify higher taxes across the globe.
  • In November, I wrote about the IMF publishing a study expanding on its claim that equal poverty is better than unequal prosperity.

And the IMF is continuing its jihad against taxpayers in 2018.

The head bureaucrat at the IMF just unleashed a harsh attack on the recent tax reform in the United States, warning that other nations might now feel compelled to make their tax systems less onerous.

IMF Managing Director Christine Lagarde said the Trump administration’s $1.5 trillion tax cut could prompt other nations to follow suit, fueling a “race to the bottom” that risks hemming in public spending. …It also will fuel inflation, she said. “What we are beginning to see already and what is of concern is the beginning of a race to the bottom, where many other policy makers around the world are saying: ‘Well, if you’re going to cut tax and you’re going to have sweet deals with your corporates, I’m going to do the same thing,”’ Lagarde said.

Heaven forbid we have lower tax rates and more growth!

Though the really amazing part of that passage is that Ms. Lagarde apparently believes in the silly notion that tax cuts are inflationary. Leftists made the same argument against the Reagan tax cuts. Fortunately, their opposition we ineffective, Reagan slashed tax rates and inflation dramatically declined.

What’s also noteworthy, as illustrated by this next excerpt, is that Lagarde doesn’t even bother with the usual insincere rhetoric about using new revenues to reduce red ink. Instead, she openly urges more class-warfare taxation to finance ever-bigger government.

The IMF chief’s blunt assessment follows an unusually public disagreement between the fund and President Donald Trump’s administration last fall over an IMF paper arguing that developed nations can share prosperity more evenly, without sacrificing growth, by shifting the income-tax burden onto the rich. Competitive tax cuts risk holding back governments in spending on anything from defense and infrastructure to health and education, Lagarde said.

What makes her statements so absurd is that even IMF economists have found that higher taxes and bigger government depress economic activity. But Ms. Largarde apparently doesn’t care because she’s trying to please the politicians who appointed her.

By the way, keep in mind that Ms. LaGarde’s enormous salary is tax free, as are the munificent compensation packages of all IMF employees. So it takes enormous chutzpah for her to push for higher taxes on the serfs in the economy’s productive sector.

But it’s not just Lagarde. We also have a new publication by two senior IMF bureaucrats that urges more punitive taxes on saving and investment.

Although Thomas Piketty has famously proposed a coordinated global wealth tax of the wealthiest at two percent, there are now very few effective explicit wealth taxes in either developing or advanced economies. Indeed between 1985 and 2007, the number of OECD countries with an active wealth tax fell from twelve to just four. And many of those were, and are, of limited effectiveness. …This hot topic of how tax systems can assist in addressing excessive increases in wealth inequality was discussed at the regular IMF-World Bank session on taxation last October. …some among the very rich recognize some social benefit from being taxed more heavily (for instance, Bill Gates’ father). Perhaps then there is more that can be done to foster that sense of social responsibility… The exchange of tax information between countries is a powerful tool…and perhaps ultimately game-changing approach to the taxation of the wealthy…we do see good cause to be less pessimistic than even a few years ago.

Once again, we can debunk the IMF by….well, by citing the IMF. The professional economists at the bureaucracy have produced research showing that discriminatory taxes on capital are very bad for prosperity.

But the top bureaucrats at the organization are driven by either by statist ideology or by self interest (i.e., currying favor with the governments that decide senior-level slots).

The bottom line is that perhaps the IMF should be renamed the Anti-Empirical Monetary Fund.

And with regards to worst-international-bureaucracy contest, I fully expect the OECD to quickly produce something awful to justify its claim to first place.

P.S. I’m not a fan of the United Nations, but that bureaucracy generally is too ineffective to compete with the IMF and OECD.

P.P.S. The World Bank also does things I don’t like (as well as some good things), but it generally doesn’t push a statist policy agenda, at least compared to the nefarious actions of OECD and IMF.

Bureaucrats Behaving Badly

https://danieljmitchell.wordpress.com/2018/02/18/bureaucrats-behaving-badly/

http://danieljmitchell.wordpress.com/?p=39666

Time for a confession.

I routinely mock bureaucrats, but I don’t really think they are any worse than other people. Indeed, I have plenty of friends and acquaintances who work for various levels of government and they are fundamentally decent people.

The real problem is that bureaucracies create bad incentives. So even people who are generally good will be tempted to exploit rules that reward bad behavior.

And some of these folks, operating in systems with bad incentives, will morph into bad people. Heck, some of them are so awful that I elect them to the Bureaucrat Hall of Fame.

But it’s also important to recognize other bureaucrats – as well as the perverse rules that encourage their bad actions.

Let’s start with a cop in New Jersey who went above and beyond the call of duty, at least if the call of duty involves ripping off taxpayers.

…former Police Chief Philip Zacche…could spend the first decade of his retirement in federal prison after he admitted to stealing $31,713 from an agency that serves the city’s neediest families. Federal prosecutors said Friday that Zacche filled out phony time sheets to get paid for security work that he never performed for the Jersey City Housing Authority. …As a member of the department’s brass, Zacche pulled a six-figure salary before overtime. He earned even more by working an off-duty part-time gig as a security officer for the Authority’s Marion Gardens housing development. When he retired in June, city taxpayers had to cut Zacche a check for $512,620 to compensate him for 450 unused comp and vacation days. The 61-year-old Manalapan resident is now set to collect a pension of at least $11,946 every month for the rest of his life.

That’s a pension of more than $140,000 per year. And he gets it well before age 65. No wonder New Jersey is a fiscal mess.

Let’s also highlight a senior federal bureaucrat who specialized in exploiting immigrants to steal money.

A chief counsel at US Immigration and Customs Enforcement (ICE) has admitted stealing immigrants’ identities to defraud banks. Raphael Sanchez, 44, forged identity documents on his government computer to open bank accounts and credit cards in the names of seven immigrants. He racked up more than $190,000 (£135,000) in personal loans, transferred funds and card-spending during the four-year scam. …He claimed three were dependent relatives on his tax returns for 2014 to 2016. …He resigned from his role at the ICE’s Office of the Principal Legal Advisor after his crimes came to light.

I’m almost impressed by this guy’s depravity. Not only did he steal identities, but he even listed some of the victims as dependents on his tax return. That’s real chutzpah!

And notice that theft and fraud apparently are not enough to get a bureaucrat fired. Instead, he resigned.

And since we’re on the topic of bureaucrats doing bad things and not getting fired, we may as well note that the guy who sent the false alert in Hawaii is still getting checks from the taxpayers he terrified.

The worker who sent a false missile alert to Hawaiian residents on Saturday has reportedly been reassigned. The civil defence employee has been moved to another role, but not fired, according to multiplemedia reports. In a press conference on Saturday, the head of Hawaii’s Emergency Management Agency, Vern Miyagi, said the worker “feels terrible.” …The Post also confirmed that there are no plans to fire the employee.

Here’s a fourth example, dealing with a former Obama appointee who was unmasked for screwing taxpayers.

Vikrum Aiyer liked to commute to his government job by taxi. On at least 130 occasions over two years — the majority during a four-month stretch in 2016 — the then-chief of staff for the U.S. Patent and Trademark Office called a taxi to pick him up near his home in the District. He was chauffeured across the Potomac River 10 miles or so to the agency’s headquarters in downtown Alexandria. And then…Aiyer billed the government for each ride. To escape notice, Aiyer impersonated current and former high-level agency officials, writing their names on cab receipts and vouchers he submitted to the taxi company, which then billed the government, investigators found. …Aiyer…released a statement saying he had a “misunderstanding of agency taxi rules.”

Hmmm…, I think I’ll go to the grocery store later today and slip a couple of steaks into my jacket. If I get caught leaving the store, I’ll say I had a “misunderstanding of store rules.”

The good news, at least if we’re grading on a curve, is that it only took about two years for the government to realize what was happening.

Aiyer’s unauthorized rides apparently went unnoticed for at least two years by budget officials who reviewed the invoices from Alexandria Yellow Cab, which has a contract to provide authorized taxi services for agency officials. The patent office paid the taxi company more than $4,000 for Aiyer’s rides, the report says. …For most of the cab rides, Aiyer was picked up on a street corner a tenth of a mile from his home, according to the report. But he wrote on the invoice that he was leaving from Commerce Department headquarters in downtown Washington. …investigators found…that he “used the Agency’s Cab Company account to facilitate his weekend social activity… Aiyer also racked up $15,000 in expenses on his government-issued credit card, charging for food and drink at local bars, clubs, coffee shops, restaurants, grocery stores, dry cleaners and at least one liquor store, the report said. …The report says he also misstated his educational credentials on résumés he submitted to the Obama administration, claiming to have a postgraduate degree that he did not receive.

By the way, the article mentioned that Aiyer was a technology adviser for the White House. Did he advise on how to lie on your resume and how to get taxpayers to finance one’s social life?

A common problem in most of these stories is that politicians and bureaucrats conspire together to create rules that enable bad behavior.

Government employee unions, for instance, give lots of money to politicians and then sit down with those lawmakers to “negotiate” pay and benefit packages.

Needless to say, the interests of taxpayers don’t get represented. And that’s why many state and local governments are careening toward bankruptcy.

What’s especially discouraging is how these deals often include loopholes that are designed to be exploited.

For instance, the Los Angeles Times has a very depressing exposé showing how senior bureaucrats in the police and fire departments benefited from a scam allowing them to double dip. But not just double dip. They get extra compensation and oftentimes then don’t do any work.

When Capt. Tia Morris turned 50, after about three decades in the Los Angeles Police Department, she became eligible to retire with nearly 90% of her salary. But like many cops and firefighters in her position, the decision to keep working was a financial no-brainer, thanks to a program that allowed her to nearly double her pay by keeping her salary while also collecting her pension. A month after Morris entered the program, her husband, a detective, joined too. Their combined income for four years in the Deferred Retirement Option Plan was just shy of $2 million, city payroll records show. But the city didn’t benefit much from the Morrises’ experience: They both filed claims for carpal tunnel syndrome and other cumulative ailments about halfway through the program. She spent nearly two years on disability and sick leave; he missed more than two years… The couple spent at least some of their paid time off recovering at their condo in Cabo San Lucas.

Yes, I’m sure they were “recovering” at their luxurious place on the beach.

Just like the other bureaucrats who exploited the system.

The Morrises are far from alone. In fact, they’re among hundreds of Los Angeles police and firefighters who have turned the DROP program — which has doled out more than $1.6 billion in extra pension payments since its inception in 2002 — into an extended leave at nearly twice the pay… Former Police Capt. Daryl Russell, who collected $1.5 million over five years in the program, missed nearly three of those years because of pain from a bad knee, carpal tunnel and multiple injuries he claimed he suffered after falling out of an office chair. …Former firefighter Thomas Futterer, an avid runner who lives in Long Beach, hurt a knee “misstepping off the fire truck,” three weeks after entering DROP, according to city records. The injury kept him off the job for almost a full year.Less than two months after the knee injury, a Tom Futterer from Long Beach crossed the finish line of a half-marathon in Portland, Ore.

Yes, you read correctly. His knee supposedly was so damaged that he couldn’t work, but he nonetheless runs long-distance races.

I’m beginning to think that firefighters in big cities are the most cossetted of all bureaucrats. I now understand the hostility in this video.

Here’s some background on the DROP scam.

The idea of allowing retirement-age public employees to collect their pensions while working and receiving paychecks originated more than three decades ago in tiny East Baton Rouge, La. …the goal was the opposite: to discourage older employees from staying so long that they limited upward mobility for younger workers. And it had a two-year time limit. Since then, versions of the program have been adopted by dozens of states, counties and cities across the country. The details vary — some have short terms to encourage early retirement, others have long terms to retain experience — but the central appeal for employees is constant: two large checks instead of one. …former Mayor Richard Riordan…said: “Oh, yeah, that was a mistake…it’s total fraud.” …in recent years, a growing number of jurisdictions have abandoned or drastically scaled back DROP programs because the math doesn’t work. …Instead of saving money, or remaining “cost-neutral,” the programs lead to ballooning pension costs and accusations that employees are simply double-dipping.

Needless to say, the taxpayers who finance all this aren’t treated nearly as well as government insiders.

When most Los Angeles taxpayers reach the standard retirement age, 65, they face a stark choice: keep working and collecting their paychecks or quit and start collecting Social Security, which replaces only a small fraction of annual wages for most people.When city firefighters or police officers reach their retirement age, 50, the choices are far better. They can keep working for a paycheck, they can retire with up to 90% of their salary in pension and city-subsidized health insurance for life, or they can enter DROP. For many, the choice is easy. …they keep working and collecting their paychecks for up to five years while their pension checks are deposited into a special account. …the city guarantees 5% interest on the money in the account. The city also adds annual cost-of-living raises to the pension checks to make sure they keep pace with inflation.

Disgusting.

Let’s close by speculating whether Trump will do anything to fix this mess, at least the part that occurs on the federal level.

Some pro-Trump readers sent me this story from the Washington Post and suggested it shows that the President is making progress.

…a year into his takeover of Washington, President Trump has made a significant down payment on his campaign pledge to shrink the federal bureaucracy… By the end of September, all Cabinet departments except Homeland Security, Veterans Affairs and Interior had fewer permanent staff than when Trump took office in January — with most shedding many hundreds of employees, according to an analysis of federal personnel data… The falloff has been driven by an exodus of civil servants, a diminished corps of political appointees and an effective hiring freeze. …Federal workers fret that their jobs could be zeroed out amid buyouts and early retirement offers that already have prompted hundreds of their colleagues to leave, according to interviews with three dozen employees across the government. Many chafed as supervisors laid down new rules they said are aimed at holding poor performers and problem workers to account. …“Morale has never been lower,” said Tony Reardon, president of the National Treasury Employees Union, which represents 150,000 federal workers at more than 30 agencies. “Government is making itself a lot less attractive as an employer.”……Agencies have told employees that they should no longer count on getting glowing reviews in their performance appraisals, according to staff in multiple offices, as has been the case for years. Housing and Urban Development managers, for example, are being evaluated for the first time on how effectively they address poor performers.

If I was planning to die in the next month, I would probably agree with readers that Trump made progress in this area.

But as I wrote last year, the only way to successfully shrink bureaucracy in the long run is to shrink government.

Yet Trump just capitulated to a budget deal that increases spending.

I’m willing to praise this President when he does good things, but his weak record on spending almost surely is going to translate into a bigger bureaucracy over time. Though I hope I’m wrong.

Here are two final additional passages from the story that deserve some attention. Starting with an honest bureaucrat.

…some civil servants said they welcome the focus on rooting out waste and holding federal workers to high standards. “Oftentimes we run on autopilot and continue to fund programs that don’t produce the results that were intended,” said Stephanie Valentine, a program analyst at the Education Department. “You can’t keep blindly spending because that’s what we’ve always done.”

And since I’ve previously contrasted Bill Clinton’s good record and Obama’s bad record, this passage is added confirmation of my findings.

Trump already has begun to reverse the growth of the Obama era, when the government added a total of 188,000 permanent employees, according to Office of Personnel Management data. …The last time federal employment dropped during a president’s first year, President Bill Clinton was in the White House.

It’s also worth noting that the bureaucracy didn’t contract during the big-government Bush years.

I’ll conclude by circling back to my original point. Most bureaucrats are no better or no worse than the rest of us. Given the perverse “public choice” incentives inherent in government, however, the good bureaucrats often are lured into bad behavior and the bad bureaucrats frequently become scam artists and crooks.

P.S. If my conclusion was too grim and pessimistic, you can cheer yourself up with another example of bureaucrat humor.

Name-Calling Contest Between Libertarians and Leftists: Autistic Dorks vs. Ugly Weaklings

https://danieljmitchell.wordpress.com/2018/02/17/name-calling-contest-between-libertarians-and-leftists-autistic-dorks-vs-ugly-weaklings/

http://danieljmitchell.wordpress.com/?p=36316

In TV debates, I’ve asserted that folks on the left are “neurotic” and “guilt-ridden.” And I shared a make-believe divorce agreement that exploited every negative stereotype about left wingers.

So I’m not averse to philosophical mockery, at least if it’s done with humor rather than malice.

As you might imagine, this is a two-way street. Folks on the other side make fun of libertarians quite frequently.

And not always with a smile. According to one leftist academic, we are borderline autistic.

Speaking at New York City’s Unitarian Church of All Souls…, MacLean…answered an audience member’s question about the motivations of the late economist James Buchanan, whom she considers to be one of the founders of libertarianism. In response, she suggested that Buchanan might have been on the “autism spectrum.” “It’s striking to me how many of the architects of this cause seem to be on the autism spectrum,” she said an hour into the talk. “You know, people who don’t feel solidarity or empathy with others and who have difficult human relationships sometimes.”

I don’t know anything about how autism is measured, so I can’t agree or disagree with her assertion. Though I’m tempted to reflexively disagree because MacLean’s book on Buchanan was incredibly shoddy.

But I will admit that libertarians can be a bit dorky. Heck, I’ve specifically shared humor noting our nerdy tendencies.

Moreover, Jonathan Haidt, who is a serious and non-shoddy academic, has done some work quantifying the libertarian psyche.

We’ve been deluged in recent years with research on the psychology (and brain structure) of liberals and conservatives. But very little is known about libertarians — an extremely important group in American politics that is not at home in either political party. …In a project led by Ravi Iyer, we analyzed data from nearly twelve thousand self-described libertarians, and compared their responses to those of 21,000 conservatives and 97,000 liberals. …The findings largely confirm what libertarians have long said about themselves, but they also shed light on why some people and not others end up finding libertarian ideas appealing. Here are three of the major findings:

Here’s how libertarians score on “moral values”.

Libertarians match liberals in placing a relatively low value on the moral foundations of loyalty, authority, and sanctity (e.g., they’re not so concerned about sexual issues and flag burning), but they join conservatives in scoring lower than liberals on the care and fairness foundations (…e.g., they don’t want a welfare state and heavy handed measures to enforce equality). This is why libertarians can’t be placed on the spectrum from left to right: …They really do put liberty above all other values.

Here’s how they score on “reasoning and emotions”.

Libertarians have the most “masculine” style, liberals the most “feminine.” We used Simon Baron-Cohen’s measures of “empathizing” (on which women tend to score higher) and “systemizing”, which refers to “the drive to analyze the variables in a system, and to derive the underlying rules that govern the behavior of the system.” Men tend to score higher on this variable. Libertarians score the lowest of the three groups on empathizing, and highest of the three groups on systemizing. …On this and other measures, libertarians consistently come out as the most cerebral, most rational, and least emotional. On a very crude problem solving measure related to IQ, they score the highest.

And here’s what characterizes libertarians on “relationships”.

Libertarians are the most individualistic; they report the weakest ties to other people. They score lowest of the three groups on many traits related to sociability, including extroversion, agreeableness, and conscientiousness. They have a morality that matches their sociability – one that emphasizes independence.

In other words, based on the final category, maybe there is some truth to the stereotype that we’re introverted, disagreeable, and self-centered.

I don’t know if that means we are more likely to be autistic, but dorkiness might be a semi-fair insult.

But folks on the left should be careful about stereotyping since they have vulnerabilities of their own.

Here’s a story from the U.K.-based Times, for instance, on how leftists are more likely to be weaklings.

A study has found that weaker men are more likely to be in favour of redistributive taxation. …That is one interpretation of research by academics from Brunel University, who assessed 171 men for how buff they were – looking at strength, bicep circumference, weight and height. Writing in the journal Evolution and Human Behaviour, they found that those men who looked more formidable were…much less likely to back policies that redistribute wealth. Michael Price, from Brunel University London, said that this fitted with some of the predictions of evolutionary psychology. …“Our minds evolved in environments where strength was a big determinant of success. If you find yourself in a body not threatened by other males, if you feel you can win competitions for status, then maybe you start thinking inequality is pretty good.” The question was which way did the relationship go? Were men who were naturally strong also more likely to be less egalitarian – calibrating their morals to fit their abilities? Or was it that men who were less egalitarian felt more need to go to the gym, unconsciously believing they needed the strength in order to reach a better place in a red-in-tooth-and-claw social hierarchy? When Dr Price factored in time spent in the gym some, but not all, of the link disappeared – implying some truth to the second explanation.

For what it’s worth, I shared a similar story on this kind of research back in 2012.

There’s also academic research indicating leftists are not as attractive.

The researchers claim that never before has the effects of physical attractiveness on politics been examined on this level and that there is “good reason to believe that individuals’ physical attractiveness may alter their political values and worldviews”. They said that their findings prove attractive people tend to lean towards the right because they have better social skills and are more popular, competent and intelligent due to the “halo effect”… Writing about their findings in the Politics and Life Sciences journal published in December 2017, the pair said that on average, hotter people have an easier life so don’t see the need for more welfare, aid and government support, unlike their left-wing counterparts.

And there’s more than one study reaching this conclusion.

A recently published study in the Journal of Public Economics concludes that the attractiveness of a candidate does correlate with their politics. They find that politicians on the right are more good looking in Europe, the United States and Australia. The study shows correlation, not causation, but the researchers float a simple economic explanation for why this might happen. Numerous studies have shown that good-looking people are likely to earn more, and that people who earn more are typically more opposed to redistributive policies, like the progressive taxes and welfare programs favored by the left. The researchers also offer a more general psychological explanation for the trend: That good-looking people are often treated better than others, and thus see the world as a more just place. Past studies have found that the more attractive people believe themselves to be, the lower their preference for egalitarianism, a value typically associated with the political left.

For what it’s worth, the three articles I just cited don’t reflect well on folks on the left, but conservatives shouldn’t feel good either since the research sort of implies that they’re entitled and arrogant jerks.

It’s unclear where libertarians score on these measures.

Incidentally, there is research on how attractiveness means higher earnings and some folks actually think government should somehow intervene to compensate for “lookism.”

Now let’s shift from soft science to hard science. A 2012 study from Trends in Genetics advances the hypothesis that ideology and values may be hard-wired.

…we review the ‘genetics of politics’, focusing on the topics that have received the most attention: attitudes, ideologies, and pro-social political traits, including voting behavior and participation. …there has been a recent shift in perspective by both life and social scientists that emphasizes the interplay between genes and the environment, and gene–culture coevolution, which has proven more accurate than any position favoring either nature or nurture. It is against this background that a growing movement has begun to address the substantial, but not exclusive, role of genetic influences in the manifestation of political differences. …These findings are summarized in Figure 1, which shows that genetic influences account for a substantial proportion of individual differences in political traits.

And here is Figure 1, which shows that genetics (the blue bars) matters a lot for certain things like overall ideology and doesn’t matter at all for other factors such as party identification.

By the way, I have no way of judging whether this is good science or bad science, and I don’t even know if the results are positive or negative from a libertarian perspective. I’m simply sharing the results because they’re potentially illuminating/interesting.

Let’s close with some research that teases out some differences between libertarians (or “economic conservatives,” which I assume is a proxy) and other groups.

Here’s some academic research on attitudes about science.

It is frequently asserted that conservatives exhibit a cognitive style that renders them less well disposed toward science than progressives, and that they are correspondingly less trusting of scientific institutions and less knowledgeable about scientific ideas. Here we scrutinize these assertions, using data from the U.S. General Social Survey. We distinguish between three different definitions of ‘conservative’: first, identifying as conservative, rather than as liberal; second, holding socially conservative views, rather than socially progressive views; and third, holding economically conservative views, rather than economically leftist views. We find that self-identified conservatives and social conservatives are less scientifically literate and optimistic about science than, respectively, self-identified liberals and social progressives. However, we find that economic conservatives are as or more scientifically literate and optimistic about science than economic leftists.

In other words, folks that lean more libertarian rank at the top in terms of knowledge and attitudes.

And here’s an article about underlying value systems.

Political battles in the US are often portrayed as a clash between “bleeding heart” liberals and “pull yourself up by your bootstraps” conservatives. …Scientists are beginning to zero in on a few key differences in the ways that people on opposite ends of the political spectrum react to stimuli. …A study published in the journal Behavioural Brain Research in January suggests that you might be able to tell whether someone is liberal or conservative simply by the way they react to pictures of gross things like blood, feces or vomit. The authors found that socially conservative students will physically look away from “disgusting” images more quickly than their liberal peers (but the same didn’t hold true for people with fiscally conservative beliefs). …There’s also evidence that the areas of the brain that process and express fear are more active in conservative voters, which might make them more likely to quickly turn away from something that could make them sick. …New research on compassion is de-bunking the myth that liberal voters might inherently be more empathetic and kind-hearted people than conservatives.

Since folks on the right donate more than folks on the left, I’ve always thought the stereotype about generous leftists was absurd.

As “Libertarian Jesus” teaches, you’re not supposed to be charitable with other people’s money.

But what I noticed in the article was the difference between fiscal conservatives (presumably more libertarian?) and general conservatives. We may be allies on some issues, but we’re not the same (though I’m not sure why anyone would want to look any longer than necessary at pictures of blood, feces, and vomit).

My last item is a video exploring the research of Haidt and others on libertarian values.

Haidt isn’t a libertarian, but his research (which I’ve cited before) seems honest and rigorous.

My goal in all this is to figure out how nerdy libertarians can be more persuasive.

The Trump Administration and Food Stamps: Right Diagnosis, Wrong Prescription

https://danieljmitchell.wordpress.com/2018/02/16/the-trump-administration-and-food-stamps-right-diagnosis-wrong-prescription/

http://danieljmitchell.wordpress.com/?p=37496

Federalism is the gold standard for reforming redistribution programs. This was the approach used in the very successful Clinton-era welfare reform, and it should be replicated for other means-tested programs.

The core argument is that the federal government does a very poor job of managing such programs, resulting in a maze of handouts that produce lots of fraud and dependency.

If states were in charge of such programs, by contrast, there would be lots of innovation and experimentation. This would help policy makers understand the best way of taking care of the truly destitute while helping others transition to productive and self-sufficient lives.

Today, let’s look specifically at food stamps. I’ve already explained why federalism is the right way of fixing the program.

And here are some additional reasons to support reform.

Writing for USA Today, Jim Bovard opined on the program’s glaring shortcomings – many of which were exacerbated by the Obama Administration’s efforts to expand dependency.

Why did the food stamp program spiral out of control? The Obama administration believed that maximizing handouts would maximize prosperity… So the feds bankrolled massive recruiting campaigns to sway people to abandon self-reliance. A North Carolina social services agency won a USDA “Hunger Champions Award” for attacking “mountain pride” as a reason not to accept government handouts. In Alabama, people received fliers proclaiming: “Be a patriot. Bring your food stamp money home.” The state of Florida paid individual recruiters to sign up at least 150 new food stamp recipients per month. …enrollment also skyrocketed after Obama effectively suspended the three-month limit for able-bodied adults without dependents to collect food stamps. From 2008 to 2010, the number of able-bodied recipients doubled.

Jim points out several reasons why the program is bad for the economy and bad for poor people.

A 2012 Journal of Public Economics study concluded that receiving food stamps sharply reduces work hours by single mothers. …state governments have little or no incentive to police the program because losses from fraud or waste don’t come out of state budgets. …the program is a dietary disaster. Walter Willett, chair of Harvard University’s Department of Nutrition, observed in 2015, “We’ve analyzed what (food stamp) participants are eating and it’s horrible food. It’s a diet designed to produce obesity and diabetes.” A 2017 study published in BMC Public Health found that food stamp recipients were twice as likely to be obese as eligible non-recipients. …A 2016 USDA report revealed that soft drinks and other sweetened beverages are the most common purchase in food stamp households, accounting for almost 10% of monthly expenditures. “Desserts, salty snacks, candy and sugar” account for another 10% of food stamp expenditures.

And it’s definitely bad for taxpayers. In a column for the Wall Street Journal, Kristina Rasmussen explained how rich people are able to bilk the system.

Consider the food stamp program’s longstanding policy of “broad-based categorical eligibility.” You probably assume that food stamps go to poor people only. But this policy, which the U.S. Department of Agriculture instituted during the Clinton administration, allows state food-stamp programs to grant benefits to anyone who has moderately low wage income, regardless of net worth. A family with a seven-figure bank account can be eligible for food stamps. That’s how lottery winners—including actual millionaires—wind up getting food stamps. In 2012 Amanda Clayton of Detroit was revealed to be receiving $200 in monthly food aid despite having won $1 million the year before. “I feel that it’s OK because I have no income,” she said, “and I have bills to pay. I have two houses.” In 2011 Leroy Fick of Bay County, Mich., was found to be receiving food assistance despite having taken home $850,000 in lottery winnings the previous year. …more than 30 states continue to have no asset limits. All you need to collect food aid is two things: an income below a multiple of the poverty line, ranging from 130% to 200%; and eligibility for some sort of benefit funded by Temporary Assistance for Needy Families (TANF), the main welfare program for single parents. And there’s the “one weird trick.” The state spends TANF dollars to print a welfare brochure. The brochure itself is defined as a “benefit,” which everybody is “eligible” to receive, thereby meeting the USDA requirement. Of the 47 million Americans who received food stamps in 2014, some four million got them under “broad-based categorical eligibility”—most because their wealth would have made them ineligible otherwise.

The good news is that the White House wants to reform the scandal-plagued program.

The bad news is that Trump and his people have chosen paternalism rather than federalism.

Here’s what is in the Administration’s budget (scroll to page 128).

The Budget would also create a new approach to nutrition assistance that combines traditional SNAP benefits with U.S. Department of Agriculture Foods provided directly to households. This cost-effective approach supports American agriculture, prevents certain types of program abuse, provides state flexibility in delivering food benefits, and ensures the nutritional value of the benefits provided. …Under the proposal, households receiving $90 or more per month in SNAP benefits will receive a portion of their benefits in the form of a USDA Foods package, which would include items such as shelf-stable milk, ready to eat cereals, pasta, peanut butter, beans and canned fruit, vegetables, and meat, poultry or fish. …This cost-effective approach will generate significant savings to taxpayers with no loss in food benefits to participants.

I can understand that people don’t like it when food stamp recipients are buying junk food. Or luxury items.

And I can also understand the desire to make dependency somewhat discomforting.

But I have zero faith in the federal government’s ability to send food boxes to people every month and somehow save money and avoid extra bureaucracy.

What’s frustrating about the plan in Trump’s budget is that they actually proposed a semi-decent policy of partial federalism last year. So I view this as a step in the wrong direction.

By the way, the fact that I don’t like the plan doesn’t mean I agree with some of the leftist critics. As this “perplexed meme” illustrates, the folks who correctly mock the White House’s proposal are also the same ones who want the government to have massive powers over matters that are far more complex than delivering food.

While the budget plan takes the wrong approach, the White House has done something good via the regulatory process by giving states more flexibility for work requirements.

Kansas, Maine, Wisconsin, and Alabama have achieved good results already, and now the same thing is happening in Georgia, as noted by PJ Media.

Thousands of Georgia residents who depend on food stamps are losing their benefits because they have failed to meet the state’s new requirements that force the able-bodied without children to find jobs. …“The greater good is people being employed, being productive and contributing to the state,” Bobby Cagle, director of the state Department of Family and Children Services, said. …State Rep. Greg Morris (R) said the fact that thousands of people have lost their benefits only showed the magnitude of the problem of welfare fraud in Georgia. He said the new mandate is working. “This is about protecting taxpayer dollars from abuse, and taking people off the cycle of dependency,” Morris said. However, Benita Dodd, vice president of the conservative Georgia Public Policy Foundation, wrote that saving taxpayer dollars was not the program’s ultimate goal. “The goal must be to focus aid on those who truly need help and restore the dignity of work to able-bodied adults,” Dodd wrote. “Reducing dependency and promoting economic opportunity help end the cycle of poverty, reinforce the temporary nature of assistance and encourage personal responsibility.”

The bottom line is that I don’t know how much work should be required, or what kind. I also don’t know whether the idea of direct food delivery in Trump’s budget is necessarily a bad idea.

Which is why I want decentralization of the program. Let states try different approaches and then learn from each other. That’s good for taxpayers and good for poor people.

Which is basically what I said in this interview more than six years ago.

P.S. Here’s a map showing which states (as of a few years ago) had the highest rate of food stamp dependency.

P.P.S. And here’s a table showing which states have the highest levels of food stamp dependency relative to the eligible population.

Trump=Bush=Nixon: Republicans Are Big Spenders, Worse than Democrats

https://danieljmitchell.wordpress.com/2018/02/15/trumpbushnixon-republicans-are-big-spenders-worse-than-democrats/

http://danieljmitchell.wordpress.com/?p=39969

I’ve received several emails and Facebook messages asking me why I haven’t written about Trump’s recently unveiled budget proposal for the 2019 fiscal year.

My answer is that I don’t want to waste my time.

Let me explain what I mean. I wrote during the 2016 campaign that Trump was a big-government Republican.

But when he got elected and appointed some good people to fiscal positions, I decided to partially suppress my concerns. After all, maybe I was wrong.

So I wrote last year about his budget and praised specific provisions (dealing with government-funded media, food stamps, government-funded art, foreign aid, OECD subsidies, community development block grants, and Medicaid).

And I even outlined the strategy that was necessary to achieve success, at least with regards to so-called discretionary spending. But I included a very important postscript as part of that column.

P.S. I’m not convinced that Trump actually wants smaller government, but I hope I’m wrong. This upcoming battle will be very revealing about where he really stands.

Well, that battle occurred and the result was a disaster for taxpayers. The budget caps were busted again, with the net effect being even worse than the big-spending agreements back in 2013 and 2015.

But it’s not that the Trump Administration lost. They never even tried. The folks I know on Capitol Hill said the White House didn’t lift a finger to urge spending restraint, much less fight to limit budgetary growth. Never.

And the painful experience of the profligate Bush years taught me that most Republican Senators and Representatives will partake in a spending spree when they sense the White House is soft on the issue (the common excuse I get from them is that “the floodgates have opened, I can’t do anything to stop it, so I may as well get a chunk for my voters”).

What’s extra depressing is that Trump’s fiscal incontinence is actually par for the course for Republican presidents, at least in recent decades.

I recently crunched the numbers for every president since the 1960s who served at least one full term, and I measured the average annual growth of government spending (adjusted for inflation) for the years they held power.

Moreover, I sliced and diced the numbers in several ways. I wanted readers to understand what happened to total spending (the combined growth of defense and domestic outlays), as well as what happened to domestic spending.

And the bottom line is that Republicans generally do worse than Democrats. Not just on total spending. They’re even more profligate on domestic spending!

The only exceptions to this pattern are Reagan (the only good Republican) and LBJ (the only really awful Democrat).

By the way, I’m not claiming that Clinton, Carter, or Obama were fiscal conservatives or that they believed in small government. I’m simply pointing out government grew slower when they were in office, at least compared to the growth of government under Nixon, Bush I, or Bush 2. The numbers don’t lie.

I suspect these counter-intuitive results are because of two factors.

  1. Presidents try to deflect and/or preempt criticism, so that leads Democrats to be cautious about spending money (they don’t want to be called “big spenders”) and it leads Republicans to squander a lot of cash (they don’t want to be called “heartless” or “mean”).
  2. The party controlling the White House often loses seats in mid-term elections and that subsequently limits the ability of presidents to push an agenda that is opposed by the other party, or even leads them to acquiesce to initiatives pushed by the other party.

Needless to say, this is rather depressing for those of us who want to limit the size and scope of government. It’s quite likely that Trump will spend the next three years or seven years instigating and/or accepting bigger government. And then we’ll probably have a Democrat in the White House who will – at least for the first two years – push for even more government.

But I get more upset when Republicans are big spenders because they should know better. Most Democrats actually believe it’s a good idea to make America more like Greece. Republicans, by contrast, make us more like Greece because they put short-term politics ahead of the national interest.

Let’s close this depressing column with some anti-GOP humor, starting with a look at how libertarians see Republicans (h/t: Reddit‘s libertarian page).

Reminds me, for obvious reasons, of my “Charlie Brown Award.”

Next we have a gathering of Republicans who actually believe in smaller government (h/t: Reddit‘s libertarian page).

I guess you would say “like father, like son.”

Last but not least, here’s some very clever satire from Babylon Bee.

During a budgetary discussion Friday, Republican lawmakers announced a plan to pretend to be fiscally conservative again if a Democrat takes office again in 2020 or 2024. The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party. “The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,” Speaker Paul Ryan said in an address to the House of Representatives Friday. “For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.” At publishing time, Republicans further announced they would pretend to oppose giving Planned Parenthood a half billion dollars year after year once they need conservative voters’ support to regain their offices.

Good dig about Planned Parenthood, needless to say.

But as we laugh about these jokes, just remember that the recklessness in Washington is going to come back to bite us at some point. No, we won’t have a Greek-style fiscal crisis in the next five years. Or even in the next 10 or 20 years.

But more spending and more dependency is not a good recipe for long-run economic health. Republicans understand that and I despise them for putting politics first and country second.

Sugar Subsidies Impose a Bitter Price on Workers, Consumers, and Taxpayers

https://danieljmitchell.wordpress.com/2018/02/14/sugar-subsidies-impose-a-bitter-price-on-workers-consumers-and-taxpayers/

http://danieljmitchell.wordpress.com/?p=38875

Government intervention is not good for economic prosperity. That general observation is both accurate and appropriate, but it might also be helpful to contemplate what sector of the economy suffers the most damage and distortion because of government.

Speaking of agriculture, let’s commemorate Valentine’s Day by exploring how politicians shower sugar producers with undeserved wealth every time one of us buys something sweet for a sweetheart.

Vincent Smith of the American Enterprise Institute shares some grim news on who is reaping unearned benefits.

Valentine’s Day is here again, and still the US sugar lobby has its hand in everyone’s wallet when they buy chocolate and other candy for their friends and families. For over four decades, the sugar lobby has managed to persuade Congress to maintain a Soviet-style supply control program that, by sharply limiting imports and curtailing domestic production, keeps US sugar prices well above free market levels. The program costs US consumers an average of about $3.4 billion every year, effectively a hidden annual tax of over $40 for a typical family of four, all to benefit fewer than 5,000 farm businesses. Further, the program raises production costs for the US food processing industry, damaging the food industry’s ability to compete in export markets and causing them to sacrifice a share of the domestic market to exporters from other countries. The impact of the US sugar program on employment for US citizens consistently has been estimated to be negative, costing the US economy between 10,000 and 20,000 jobs on a net basis. While the program creates employment for some workers in sugar refineries, it destroys far more employment opportunities in the US food processing sector by making the sector less competitive.

Two of his colleagues, John C. Beghin and Amani Elobeid, produced a detailed study on the topic for AEI. Here are the key findings.

The sugar program is a protectionist policy, which increases the domestic price of sugar above the corresponding world price. It restricts imports of raw and refined sugar, depresses world sugar prices, and substantially changes the mix of sweeteners used in processed food. Domestic markets are distorted, sugar users are effectively taxed by the program, and sugar producers are subsidized by it. The welfare transfer to sugar growers and processors is quite large in the aggregate, hovering around $1.2 billion. Losses to households are diffused, about $10 per person per year but large for the population as a whole, in the range of $2.4–$4 billion. …Gains to producers are concentrated in a few hands, especially in the cane sugar industry. Labor effects from lost activity in food industries are between 17,000 and 20,000 jobs annually.

For those who like the quantitative details, here’s a table with the most important numbers in the study.

Writing for the Federalist, Eric Peterson explains the high costs and inefficiency associated with this bit of central planning.

The history of candy canes dates back over 300 years… While this iconic symbol of Christmas saw its first mass production in America, Washington politicians have too often behaved like Scrooge, enacting policies that have sent all but one maker of this holiday classic fleeing abroad. One reason for the mass exodus is the little known U.S. sugar program. …Government interference in the sugar market comes in four flavors: Price supports, marketing allotments, import quotas, and the Feedstock Flexibility Program. …Although programs such as price supports (which mandate domestic prices for sugar at nearly double the world price) are fairly straightforward, programs such as Feedstock Flexibility are far more opaque. It allows sugar producers to sell sugar to the government at above market value, which the government then sells to ethanol producers at a loss. …Companies that need sugar for their products…can’t even import cheaper sugar from abroad thanks to import quotas that strictly limit foreign sugar. It’s no one wonder that some companies like Atkinson Candy Co have responded by moving some of their peppermint-candy production to Guatemala, where sugar is cheap and plentiful. …Consumers pay higher prices on everything from chocolate to cranberry sauce thanks to these big-government mandates, with the estimated annual costs to consumers and food manufacturers adding up to a whopping $3.5 billion annually. …Since 1997, for example, over 120,000 jobs have been lost in the sugar industry. It’s estimated for every job subsidies prop up, three are destroyed.

Notice, by the way, the consistent theme that subsidies and protectionism result in fewer jobs. This is not a surprising result for anybody who has looked at the fourth item in this column.

Let’s continue with some more analysis. The Foundation for Economic Education has a column by Ted Ellis on the program.

…for taxpayers, …sweetness doesn’t come cheap. For decades, domestic sugar producers have been protected from fair competition. In recent years, their influential lobby has ensured producers’ inflated profits through $260 million worth of federal subsidies and restrictions on fairly priced imported sugar. …these handouts rarely accrue to anyone but the industry’s largest and most well-connected players. …The National Confectioners’ Association, a trade group, agrees…that “the benefits of sugar subsidies and protections go directly to just 14 sugar beet and sugarcane producers in a few states.” …inflated prices disrupt domestic supply chains, threatening thousands of well-paying American manufacturing jobs, all while nibbling away at American taxpayers’ wallets. …the sugar program costs American businesses and consumers more than $3 billion every year. …the cost of special-interest lobbying in the sugar industry is felt most heavily by US workers laid off by companies that have been forced to move abroad, where sugar prices are cheaper. A 2006 report by the US International Trade Administration found that as many as 10,000 American jobs were lost as confectioners such as Hershey Co. and Lifesavers were forced by government-inflated domestic sugar prices to move plants out of the US. The same report found that the many jobs lost on account of federal intervention in sugar production far outweigh the few jobs saved for growers. In fact, it found that “for each one sugar growing and harvesting job saved through high US sugar prices, nearly three confectionery manufacturing jobs are lost.”

If you’re tired of reading about the senselessness of sugar subsidies, here’s a video on the topic from Reason. It has a Halloween theme instead of a Valentine’s Day theme, but that doesn’t change anything.

Let’s conclude with some hard-hitting analysis by Jim Bovard, who explains the tangled web of cronyism for CapX.

…the federal government has maintained an array of sugar import quotas and/or tariffs for most of the last 200 years. The regulatory regime has provided windfalls for generations of politicians and jobs for legions of bureaucrats while destroying more than a hundred thousand private, productive jobs. …The sugar program illustrates why politicians cannot be trusted to competently manage anything more complex than a lemonade stand. In 1816, Congress imposed high tariffs on sugar imports in part to prop up the value of slaves in Louisiana. In 1832, a committee of Boston’s leaders issued a pamphlet denouncing sugar tariffs as a scam on millions of low-paid American workers to benefit fewer than 500 plantation owners. …Despite perpetual aid, the number of sugar growers has declined by almost 50% in recent decades to fewer than 6,000. Federal policy failed to countervail the fact that the climate in the mainland U.S. is relatively poorly suited for sugarcane production. …Federal sugar policy costs consumers $3 billion a year and is America’s least efficient welfare program. In the 1980s, sugar import restrictions cost consumers $10 for each dollar of sugar growers’ income. …producing candy and many other food products is far more expensive here than abroad. Since 1997, sugar policy has zapped more than 120,000 jobs in food manufacturing… More than 10 jobs have been lost in manufacturing for every remaining sugar grower in the U.S. …The sugar lobby showers Congress with money, including almost $50 million in campaign contributions and lobbying between 2008 and 2013. In return, members of Congress license sugar growers to pilfer consumers at grocery checkouts and rob hardworking Americans of their jobs.

That last segment is the key. Sugar subsidies are a class case of “public choice,” with special interests and politicians both benefiting while ordinary people pay the price.

There are many reasons to shut down the Department of Agriculture. But it’s hard to imagine a bigger reason than getting rid of handouts for Big Sugar. Maybe ultra-corrupt ethanol handouts are even worse, but that’s a judgement call.

P.S. Since today is Valentine’s Day, here’s a very topical explanation of why unfettered prices are desirable.

P.P.S. And here’s a Libertarian Valentine’s Day. Or, for my statist readers, here’s Obama’s vision of Valentine’s Day.

The Incomprehensible Horror of Venezuelan Socialism

https://danieljmitchell.wordpress.com/2018/02/13/the-incomprehensible-horror-of-venezuelan-socialism/

http://danieljmitchell.wordpress.com/?p=39950

It’s now a pattern. I’ll come across a soul-sapping story about terrible suffering caused by statism in Venezuela and I think the country has hit rock bottom. Such as back in September, when I read about people literally starving.

But then I will read another report about incredible misery and realize that the socialist regime is even worse than I thought. Such as back in December, when I read about economic deprivation ruining sex for the women of the country.

And then I find another horrifying example of how big government destroys lives and I’m forced to reconsider the definition of failure. Such as last month, when I read about criminal gangs using food to recruit children.

Despite this pattern, I’m going out on a limb and asserting that nothing possibly could be worse than this Washington Post story of Venezuelan parents giving up their children because they can’t afford to feed them.

In September, her mother left her at a subway station with a bag of clothes and a note begging someone to feed the child.  Poverty and hunger rates are soaring as Venezuela’s economic crisis leaves store shelves empty of food, medicine, diapers and baby formula. Some parents can no longer bear it. They are doing the unthinkable.  Giving up their children. …it was a challenge to actually meet the tiniest victims of this broken nation. My requests to enter orphanages run by the socialist government had gone unanswered. One child-protection official — warning of devastating conditions, including a lack of diapers — confided that such a visit would be “impossible.” …A child-welfare official in El Libertador — one of the capital’s poorest areas — called the situation at public orphanages and temporary-care centers “catastrophic.”  “We have grave problems here,” said the official, who spoke on the condition of anonymity out of fear of reprisals from the authoritarian government.

Fortunately, there are still some private facilities that help families.

But even though such institutions are run more efficiently and compassionately, it’s still a tragedy that they have to exist. And the stories the reporter uncovered are heartbreaking.

“I didn’t know what else to do,” said Angélica Pérez, a 32-year-old mother of three, near tears. …she showed up at Fundana with her 3-year-old son and her two daughters, ages 5 and 14. She lost her job… Her plan: leave the children at the center, where she knew they would be fed, so she could travel to neighboring Colombia to find work. She hoped she would eventually be able to take them back. Typically, children are allowed to stay at Fundana for six months to a year before being placed in foster care or put up for adoption. “You don’t know what it’s like to see your children go hungry,” Pérez told me. “You have no idea. I feel like I’m responsible, like I’ve failed them. But I’ve tried everything. There is no work, and they just keep getting thinner.

Here’s another incomprehensibly sad example.

For many Venezuelan families, hunger presents an excruciating choice.  I met Dayana Silgado, 28, as she entered Fundana’s new food center for parents in economic crisis. Silgado seemed drained. The shoulder blades on her thin frame protruded from her tank top. In November, she surrendered her two youngest children to Fundana after losing her job… At the center, she knew, they would get three meals a day. Fundana’s home for children did not accept older kids, so Silgado was still trying to feed her two eldest — ages 8 and 11 — at home. …After eating dinner, Silgado said, her children tell her, “Mom, I want more.” “But I don’t have more to give,” she said.

What a terrifying awful country.

Shame on Bernie Sanders. Shame on Joe Stiglitz. Shame on every leftist who offered support for the evil government of Venezuela.

Since we’re on the topic of that despotic regime, here are a few additional stories that are worth a mention.

We’ll start with a lesson about inflation.

Street vendors in Venezuela are weaving baskets from banknotes after 13,000 per cent inflation rendered them practically worthless. …Cash is worth so little there bank notes are often seen littered on the streets. …street seller Wilmer Rojas has found a use for them. …The 25-year-old is selling origami-style handbags, purses, hats and baskets – all made out of money. …Mr Rojas, a father-of-three, said: ‘People throw them away because they are no good to buy anything. …These things are no good for buying anything. At least I am putting them to good use rather than throwing them away.’ …Jose Leon, a 26-year-old designer, draws the faces of Star Wars characters over the image of Simon Bolivar and other famous Venezuelans pictured on the notes. Foreign customers pay him up to £14 ($20) for each piece of ‘money art’, which he said increases the note’s value by nearly 5,000 per cent.

Wow. I periodically gripe about the Federal Reserve, but I guess I should consider myself lucky.

Now let’s look at our next story. Rather than weave money, some Venezuelans have turned to crime.

When he set off at sunset from the town of La Grita in western Venezuela on his 900-km (560-mile) journey, Aguilar knew he was taking his life in his hands. With hunger widespread amid a fifth year of painful economic implosion under President Nicolas Maduro, Venezuela has seen a frightening surge in attacks on increasingly lawless roads. Just a few days earlier, Aguilar said he sat terrified when hundreds of looters swarmed a stationary convoy, overwhelming drivers by sheer numbers. They carted off milk, rice and sugar from other trucks but left his less-prized vegetables alone. “Every time I say goodbye to my family, I entrust myself to God and the Virgin,” said the 36-year-old trucker. …looting of cargoes on roads has soared in Venezuela in recent times and appears…directly linked to growing hunger and desperation among the population of 30 million. …“The hunger and despair are far worse than people realize, what we are seeing on the roads is just another manifestation of that. We’ve also been seeing people stealing and butchering animals in fields, attacking shops and blocking roads to protest their lack of food. It’s become extremely serious,” said ORC director Oswaldo Ramirez. …The dystopian attacks in a country with one of the world’s highest murder rates are pushing up transport and food costs in an already hyperinflationary environment, as well as stifling movement of goods in the crisis-hit OPEC nation.

Given these horrifying condition, is it any surprise that people are doing whatever they can to escape the socialist hellhole of Venezuela?

Thousands of desperate Venezuelans are trying to enter Colombia in a bid to escape the hunger and soaring crime rate caused by the spiralling economic crisis. Incredible pictures show the mass exodus of refugees crossing the Simon Bolivar international bridge trying to flee the political crisis threatening to engulf Venezuela. Colombia – along with its neighbour Brazil – has sent extra soldiers to patrol their porous border with the country after officially taking in more than half a million migrants over the last six months of 2017. …In a visit to a border city at the epicenter of Colombia’s mounting migration crisis, President Juan Manuel Santos on Thursday announced new measures that could make it more difficult for Venezuelan migrants to cross into the country illegally or remain there without any official status. ‘Colombia has never lived a situation like the one we are encountering today,’ Santos said. Migration into Colombia has surged as Venezuelan President Nicolas Maduro has moved to consolidate his rule and the nation’s economy plummets. Colombia migration authorities say there are an estimated 600,000 Venezuelans currently in Colombia – double the number six months ago.

I also know from my visits to Panama that the Venezuelan population has exploded there as well. And I wouldn’t be surprised if the same is true for other nations in Latin America as well.

In other words, this image may be humorous, but it’s also true.

P.S. To be fair, while Venezuela has an awful government, it does allow citizens to escape. So it’s not as bad as the despotic dictatorships of Cuba and North Korea. At least not yet.

P.P.S. Some leftists are disowning Venezuela. But only because it isn’t sufficiently socialist!