Tag: big government

Republicans and Democrats Should Be Especially Concerned about the Threat of Government When Their Party Is in Charge

Gallup just released a poll showing that 46 percent of Americans view the federal government as an immediate threat to the rights and freedoms of ordinary Americans. My first reaction was to wonder why the number was so low. After all, we have a political elite that wants to do everything from control our health care to monitor our financial transactions.

But a secondary set of numbers is even more remarkable. As seen in this chart, both Republicans and Democrats tend to view the federal government as a threat mostly when the White House is controlled by the other party.

This complacency is very unfortunate. Republicans presumably want to limit government control over the economy, yet it was the Bush Administration that put in place policies such as Sarbanes-Oxley, the banana-republic TARP bailout, the corrupt farm bills, and the pork-filled transportation bills. Democrats, meanwhile, presumably want to protect our civil liberties, yet the Obama Administration has left in place virtually all of the Bush policies that the left was upset about just two years ago. There has been no effort to undo the more troublesome provisions of the PATRIOT Act. And shouldn’t honest liberals be upset that the Obama Administration is going to such lengths to defend the military’s don’t-ask-don’t-tell policy?

The lesson to be learned is that there is an unfortunate tendency for politicians to misbehave when they get control of the machinery of government. Lord Acton warned that “Power corrupts and absolute power corrupts absolutely.” It’s almost as if Republicans and Democrats do their best every day to confirm this statement.

The False Choice Between a VAT and Impossible Spending Cuts

Governor Mitch Daniels of Indiana has triggered a spat among policy wonks with his recent comments expressing sympathy for a value-added tax (VAT). Kevin Williamson of National Review is arguing that a VAT will probably be necessary because there is no hope of restraining spending. Ryan Ellis of Americans for Tax Reform jumped on Williamson for his “apostasy,” arguing that a VAT would be bad news for taxpayers. From a policy perspective, I’m very much against a VAT because it will finance bigger government, as explained in this video.


That being said, Kevin Williamson makes a good point when he says that some supply-siders have neglected the spending side of the fiscal ledger. And it certainly is true that Republicans don’t seem very interested in curtailing the growth of government. But does this mean, as Williamson argues, but that our choices are limited to 1) a 36 percent spending cut, 2) catastrophic deficits and debt, or 3) a European-style value-added tax.

I actually think it would be a great idea to reduce the budget by 36 percent. That would bring the burden of federal spending back down to where it was in 2003. Notwithstanding the screams from various interest groups that this would generate, nobody was starving in the streets when the budget was $2.3 trillion rather than today’s $3.5 trillion. But Kevin is unfortunately correct in noting that this type of fiscal reform won’t happen.

Kevin is wrong, however, in saying that we therefore have to choose between either Greek-style deficits or a VAT. According to the Congressional Budget Office, tax revenues over the next 10 years will increase by an average of about 7.3 percent each year - and that’s assuming the tax cuts are made permanent and the AMT is adjusted for inflation. Reducing red ink simply requires that politicians exercise a tiny bit of restraint so that spending grows by a lesser amount. This video walks through the numbers and shows how quickly the budget could be balanced with varying levels of spending discipline.

By the way, it’s worth pointing out that the VAT has not prevented gigantic deficits in nations such as Greece, Japan, Ireland, Spain, England, etc, etc. Politicians in those nations implemented VATs, usually with promises that the money would be used to reduce other taxes and/or lower red ink, but all that happened was more spending and bigger government (this cartoon makes the point in a rather amusing fashion). In other words, Milton Friedman was right when he wrote that, ”In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

The Alaska Version of Big Government Means Big Corruption

Tim Carney of the Washington Examiner is an expert on graft and sleaze inside the Beltway, and his column this morning is a perfect example. He shows how corrupt insiders in Alaska use something known as the “Rent-an-Eskimo” scam to pull in hundreds of millions of tax dollars from no-bid federal contracts. These insiders, meanwhile, steers big bucks to Washington lobbyists (almost all of whom worked for politicians like Lisa Murkowski), who then provide campaign cash to the corrupt officials who pass the laws that enable the circle of graft to continue. Here are some key passages from Tim’s column.

Sen. Lisa Murkowski’s write-in candidacy is being funded by $100,000 contributions from a handful of Alaska corporations that have been handsomely subsidized by the federal government. These six-figure donors have pulled in billions of taxpayer dollars thanks to special legislative favors from Murkowski and her mentors – the late Sen. Ted Stevens (R), and Lisa’s father, former senator and governor, Frank Murkowski (R). …In late September AST took in $800,000 from nine Alaska Native Corporations – unique, privileged, and politically connected for-profit entities created in the 1970s by legislation written by Stevens.  While the companies are technically owned by the natives, the taxpayer-funded spoils from these contracts accrue to the well-connected nonnative lobbyists, subcontractors, and executives in the “Alaska mafia” made up of aides, friends and donors of Stevens, the Murkowskis, and Rep. Don Young (R). Meanwhile the 130,000 Alaska Natives, who are shareholders in the ANCs, have received $720 million over the last nine years, which comes to $615 per native annually. In effect, the natives are unwitting frontmen for this racket. Critics on Capitol Hill say this is worse than Jack Abramoff’s exploitation of Indian tribes, and, in a dark joke, dub the ANCs with the politically incorrect name “rent-an-Eskimo. …These multimillion-dollar (in some cases billion-dollar) corporations are exempt from competition requirements that cover most federal contracts because they are automatically treated as small businesses from socially and economically disadvantaged populations – although their success in pulling in federal contracts would suggest otherwise. …These overpriced no-bid contracts aren’t welfare for poor natives as much as they are patronage for politically connected lobbyists and executives, most of whom are not natives. …The ANCs highlight the truly corrupt aspect of pork-barrel spending, especially in Alaska. “Bringing home the bacon” is not simply about transferring wealth north from the Lower 48 – it’s often about using taxpayer money to line the pockets of the politically connected, who return the favor in the form of campaign contributions. Much of the pork doesn’t make it all the way to Alaska – it stays right here on K Street.

This is just one example of how big government creates a breeding ground for corruption. The circle of graft is Washington’s version of recycling. Money gets taken from taxpayers and then winds up getting passed back and forth among special interests, lobbyists, and politicians. This video provides more of the sordid details.

A Hidden Cost of ObamaCare

Today at the Cato Institute, Duke University Prof. Chris Conover presented his estimates of the economic losses that will be created by the taxes necessary to fund ObamaCare.  This chart is taken from his presentation:

The Excess Burden of ObamaCare

Here’s Conover’s full presentation (with comments by former Congressional Budget Office director Douglas Holtz-Eakin), as well as his Cato Policy Analysis, and his op-ed.

Hiding the Cost of Government Leads to Bigger Government

At the Daily Caller, Duke University Prof. Chris Conover writes:

There you are, about to sign the papers, when the car salesman offers to throw in a $1,000 options package. He knows those options will cost you a further $440 by reducing the performance of your new car’s engine, but he doesn’t tell you that.

Sounds sleazy, right? Congress does it every day.

Politicians love to rail against car dealers and mortgage lenders who surprise consumers with hidden costs. Yet Congress hides from voters a huge part of the cost of government: the hidden costs of taxes, which include lost income and jobs. Failing to account for these costs creates a bias in favor of bigger government and a less efficient tax code.

Read the rest of Conover’s oped here, and his Cato study here.

Mirror, Mirror, on the Wall, Which Nation Has the Most Debt of All?

The Economist has a fascinating webpage that allows readers to look at all the world’s nations and compare them based on various measures of government debt (and for various years).

The most economically relevant measure is public debt as a share of GDP, and you can see that the United States is not in great shape, though many nations have more accumulated red ink (especially Japan, where debt is much higher than it is even in Greece).  As faithful readers of this blog already understand, the real issue is the size of government, but this site is a good indicator of nations that finance their spending in a risky fashion.

By the way, keep in mind that these figures do not include unfunded liabilities. For those who worry about debt, those are the truly shocking numbers (at least for the United States and other nations with government-run pension and health schemes).

Do We Have a Problem of Too Much Spending or Too Little Revenue?

Here’s a chart from Veronique de Rugy’s new article on federal revenues vs. spending in The American. Amazing how the problem becomes obvious when you look at real numbers and don’t get trapped into using “baseline” math (as I explain in my latest video).

By the way, find out when John Stossel’s program on Fox Business News airs in your area. Veronique is a guest this week talking about these issues.