Tag: big government

Business Roundtable: We Love/Hate Big Government

Regular readers of this blog know that big corporations often are enemies of free markets and individual liberty. So it is hardly suprising to know that the Business Roundtable, a lobby representing CEOs of major companies, supported the wasteful and ineffective stimulus program in 2009 and the bloated new health care entitlement in 2010. Big companies, after all, are quite proficient at working the system to obtain unearned wealth and to rig the rules against smaller competitors.
What is surprising, however, is that representatives of that organization now have the chutzpah to complain about a “hostile environment for investment and job creation.” Equally galling, the group has published a document called “Policy Burdens Inhibiting Economic Growth.” We’ve all heard the joke about the guy who murders his parents and then asks the court for mercy because he’s an orphan. The Business Roundtable has adopted that strategy, except this time taxpayers are the butt of the joke. Here’s an excerpt from the Washington Post report:

The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama’s closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an “increasingly hostile environment for investment and job creation.” Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and “harm our ability … to grow private-sector jobs in the U.S.” …The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. One, a provision of the administration’s financial regulation overhaul, would make it easier for shareholders to nominate corporate board members. The other would raise taxes on multinational corporations. The rhetoric accompanying the tax proposals has been particularly harsh, Castellani said, with Democrats vowing to campaign in this fall’s midterm elections on a platform of punishing companies that move jobs overseas. …Seidenberg polled the members of the Business Roundtable and a sister organization, the Business Council. The result was a 54-page document, delivered to Orszag on Monday, chock full of bullet points about actions taken or considered by a wide array of executive agencies, including the White House Middle Class Task Force and the Food and Drug Administration. We believe the cumulative effect of these proposals will help defeat the objectives we all share – reducing unemployment, improving the competitiveness of U.S. companies and creating an environment that fosters long-term economic growth,” Seidenberg wrote in a cover letter for the document, titled “Policy Burdens Inhibiting Economic Growth.”

Uncertainty More Than Anecdotal

During a recent CNBC debate on federal spending, I argued that government policies are creating uncertainty in the business community. Businesses are reluctant to invest or hire because they’re concerned that the president’s big government agenda will mean higher taxes and more onerous regulations.

I mentioned that every business owner I’ve spoken with has expressed this concern. In fact, the owner of the TV studio I was in told me that he wants to hire more employees but is afraid he may have to turn around and fire them later on thanks to Washington. My debate opponent dismissed my argument on the basis that “you cannot conduct macroeconomic policy by anecdote.”

Unfortunately, there is plenty of evidence to support my concern beyond what I’ve heard from folks in the business community. Yesterday, the chairman of the Business Roundtable, which the Washington Post calls “President Obama’s closest ally in the business community,” said that the president and his Democratic allies are creating an “increasingly hostile environment for investment and job creation.”

From the article:

Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and “harm our ability … to grow private-sector jobs in the U.S.”

“In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore,” Seidenberg said in a lunchtime speech to the Economic Club of Washington. “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.”

Big businesses aren’t the only ones complaining. Surveys of small businesses conducted by the National Federation of Independent Business continue to point to government taxes and regulations as their single biggest obstacle.

Even the Washington Post’s editorial page is now acknowledging that government-induced uncertainty is an issue:

But as analysts ponder the mystery of weak private-sector hiring despite signs of economic growth, it’s worth asking what role is played by government-induced uncertainty. With the federal government promoting major changes in health care, financial regulation and energy law, it wouldn’t be surprising if some companies are more inclined to wait and see than they might otherwise be. And that’s especially true when they look at looming American indebtedness and the effect that could have on long-term interest rates.

The uncertainty caused by expanding government that we are facing today isn’t a new phenomenon. Economist Robert Higgs coined the phrase “regime uncertainty” in a study that showed that FDR’s anti-business policies prolonged the Great Depression. Had the Roosevelt administration heeded the “anecdotes” from the business community in the 1930s, perhaps the country could have been spared some pain. Let’s hope history doesn’t repeat itself.

Hey, UK: Meet the New Boss, Same as the Old Boss

As the chart below indicates, the United Kingdom has a large budget deficit solely because government spending has increased to record levels (OECD data). Unfortunately, the new Tory-Liberal coalition government has decided that taxpayers should be punished for all the over-spending that occurred when the Labor government was in charge.

The Telegraph reports that the top capital gains rate will jump to 28 percent, up from 18 percent (the new government foolishly thinks this will result in more revenue). But the biggest change is that the value-added tax will increase to 20 percent. According to Business Week, the Chancellor of the Exchequer (the British equivalent of Treasury Secretary) actually bragged that the VAT increase was good since it would generate “13 billion pounds we don’t have to find from extra spending cuts.” Here are some further details from Business Week about the disappointing fiscal news from London.

British Chancellor of the Exchequer George Osborne increased the value-added tax rate to 20 percent from 17.5 percent in the first permanent change to the levy on sales of goods and services in almost two decades. “The years of debt and spending make this unavoidable,” Osborne told Parliament in London in his emergency budget today as he announced a package of spending cuts and tax increases to cut the U.K.’s record deficit. …“We understand that the budget deficit needs to be tackled but we think the focus needs to be cutting public spending over tax rises,” Krishan Rama, a spokesman for the industry lobby group, the British Retail Consortium, said in a telephone interview yesterday. …VAT has remained at 17.5 percent in every year except one since 1991, when John Major’s Conservative administration raised the rate from 15 percent to help plug a deficit.

The one tiny glimmer of good news from the budget is that the corporate tax rate is being reduced from 28 percent to 24 percent, which is probably a reflection of the strong and virtuous tax competition that is forcing greedy governments to lower tax rates in order to attract and/or retain business activity. There also is a two-year pay freeze for government bureaucrats, but this is hardly good news since a 30-percent pay cut is needed to bring compensation down to private sector levels.

The Moocher Index

The Center for Immigration Studies recently put out a study arguing that immigration has had negative effects on California. One of their measures was a comparison of how many people in the state were receiving some form of welfare compared to other states. I found that data (see Table 3 of the report) very interesting, but not because of the immigration debate (I’ll leave others to debate that topic). Instead, I wanted to get a better understanding of the variations in government dependency. Is there a greater willingness to sign up for income redistribution programs, all other things being equal, from one state to another? The “all other things being equal” caveat is very important, of course, since the comparison produced by CIS may simply be an indirect measure of the factors that determine welfare eligibility. One obvious (albeit crude) way of addressing this problem is to subtract each state’s poverty rate to get a measure of how many non-poor people are signed up for income-redistribution programs. Let’s call this the Moocher Index.

A few quick observations. Why is Vermont (by far) the state with the largest proportion of non-poor people signed up for welfare programs? I have no idea, but maybe this explains why they elect people like Bernie Sanders. But it’s not just Vermont. Four of the top five states on the Moocher Index are from the Northeast, as are six of the top nine. Mississippi also scores poorly, coming in second, but many other southern states do well. Indeed, if we reversed the ranking and did a Self-Reliance Index, Virginia, Florida, and Georgia would score in the top 10. Nevada, arguably the nation’s most libertarian state, is the state with the lowest number of non-poor people signed up for welfare.

Let’s now emphasize several caveats. I’m not an expert on the mechanics of social welfare programs, but even I know that eligibility is not governed solely by the poverty rate. Indeed, some welfare programs are open to people with much higher levels of income. This means that a more thorough analysis at the very least would have to include some measure of income distribution by state. Moreover, states use different formulas for Medicaid eligibility, so this index ideally also would be adjusted for state-specific policies that make it easier or harder for people to become dependent. There also are some states (and even colleges) that actually try to lure people into signing up for welfare, which also might affect the results. And I’m sure there are many other factors that are important, including perhaps immigration. If anybody knows of substantive research in this area, please don’t hesitate to share material.

The Sleazy Combination of Big Business and Big Government

There’s an article today in the Wall Street Journal showing how already-established companies and their union allies will use the coercive power of government to thwart competition. The article specifically discusses efforts by less competitive supermarkets to block new Wal-Mart stores. Not that Wal-Mart can complain too vociferously. After all, this is the company that endorsed a key provision of Obamacare in hopes its hurting lower-cost competitors. The moral of the story is that whenever big business and big government get in bed together, you can be sure the outcome almost always is bad for taxpayers and consumers.

A grocery chain with nine stores in the area had hired Saint Consulting Group to secretly run the antidevelopment campaign. Saint is a specialist at fighting proposed Wal-Marts, and it uses tactics it describes as “black arts.” As Wal-Mart Stores Inc. has grown into the largest grocery seller in the U.S., similar battles have played out in hundreds of towns like Mundelein. Local activists and union groups have been the public face of much of the resistance. But in scores of cases, large supermarket chains including Supervalu Inc., Safeway Inc. and Ahold NV have retained Saint Consulting to block Wal-Mart, according to hundreds of pages of Saint documents reviewed by The Wall Street Journal and interviews with former employees. …Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant’s low prices lest they lose market share. …In many cases, the pitched battles have more than doubled the amount of time it takes Wal-Mart to open a store, says a person close to the company. … For the typical anti-Wal-Mart assignment, a Saint manager will drop into town using an assumed name to create or take control of local opposition, according to former Saint employees. They flood local politicians with calls, using multiple phones to make it appear that the calls are coming from different people, the former employees say. …Former Saint workers say the union sometimes pays a portion of Saint’s fees. “The work we’ve funded Saint to do to preserve our market share and our jobs is within our First Amendment rights,” says Jill Cashen, spokeswoman for the United Food and Commercial Workers Union. Safeway declined to comment. …Mr. Saint says there is nothing illegal about a company trying to derail a competitor’s project. Companies have legal protection under the First Amendment for using a government or legal process to thwart competition, even if they do so secretly, he says.

You Don’t Need to Waste More Money to Shrink Government

It’s rather symbolic of what’s wrong with Washington that a commission ostensibly created to promote deficit reduction is seeking a bigger budget, as noted in the Tax Notes story excerpted below. Rather than impose a bigger burden on taxpayers, though, I will generously suggest that they could easily fulfill their mandate by perusing Cato’s Downsizing Government website. And if they really want to do the right thing, they can always just look at Article I, Section VIII, of the Constitution and get rid of existing programs and activities that are not enumerated powers of the federal government.

Saddled with a tight deadline and great expectations, members of President Obama’s deficit reduction commission say they may not have the resources necessary to meet their task. The National Commission on Fiscal Responsibility and Reform, which the president created through an executive order in February, is charged with developing a plan by December 1 that would stabilize the budget deficit by 2015 and reduce the federal debt over the long term. The group is widely expected to consider a combination of tax reforms and spending cuts. But despite the weighty demands, the panel has only a fraction of the staff and budget of standing congressional committees. The panel’s own cochairs and Senate Majority Leader Harry Reid, D-Nev., have criticized the meager resources and called for more support. …The White House has set aside the resources to provide the equivalent of four full-time salaries and $500,000 in operating costs for the commission, fiscal commission Executive Director Bruce Reed told Tax Analysts.

(h/t: TaxProf)

Robin Hood and the Tea Party Haters

What is it with modern American liberals and taxes? Apparently they don’t just see taxes as a necessary evil, they actually like ‘em; they think, as Gail Collins puts it in the New York Times, that in a better world “little kids would dream of growing up to be really big taxpayers.” But you really see liberals’ taxophilia coming out when you read the reviews of the new movie Robin Hood, starring Russell Crowe. If liberals don’t love taxes, they sure do hate tax protesters.

Carlo Rotella, director of American Studies at Boston College, writes in the Boston Globe that this Robin Hood is A big angry baby [who] fights back against taxes” and that the movie is “hamstrung by a shrill political agenda — endless fake-populist harping on the evils of taxation.” You wonder what Professor Rotella teaches his students about America, a country whose fundamental ideology has been described as “antistatism, laissez-faire, individualism, populism, and egalitarianism.”

At the Village Voice, Karina Longworth dismisses the movie as “a rousing love letter to the Tea Party movement” in which “Instead of robbing from the rich to give to the poor, this Robin Hood preaches about ‘liberty’ and the rights of the individual as he wanders a countryside populated chiefly by Englishpersons bled dry by government greed.” Gotta love those scare quotes around “liberty.” Uptown at the New York Times, A. O. Scott is sadly disappointed that “this Robin is no socialist bandit practicing freelance wealth redistribution, but rather a manly libertarian rebel striking out against high taxes and a big government scheme to trample the ancient liberties of property owners and provincial nobles. Don’t tread on him!” The movie, she laments, is “one big medieval tea party.”

Moving on down the East Coast establishment, again with the Tea Party hatin’ in Michael O’Sullivan’s Washington Post review:

Ridley Scott’s “Robin Hood” is less about a band of merry men than a whole country of really angry ones. At times, it feels like a political attack ad paid for by the tea party movement, circa 1199. Set in an England that has been bankrupted by years of war in the Middle East – in this case, the Crusades – it’s the story of a people who are being taxed to death by a corrupt government, under an upstart ruler who’s running the country into the ground.

Man, these liberals really don’t like Tea Parties, complaints about lost liberty, and Hollywood movies that don’t toe the ideological line. As Cathy Young notes at Reason:

Whatever one may think of Scott’s newest incarnation of the Robin Hood legend, it is more than a little troubling to see alleged liberals speak of liberty and individual rights in a tone of sarcastic dismissal. This is especially ironic since the Robin Hood of myth and folklore probably has much more in common with the “libertarian rebel” played by Russell Crowe than with the medieval socialist of the “rob from the rich, give to the poor” cliché. At heart, the noble-outlaw legend that has captured the human imagination for centuries is about freedom, not wealth redistribution….The Sheriff of Nottingham is Robin’s chief opponent; at the time, it was the sheriffs’ role as tax collectors in particular that made them objects of loathing by peasants and commoners. [In other books and movies] Robin Hood is also frequently shown helping men who face barbaric punishments for hunting in the royal forests, a pursuit permitted to nobles and strictly forbidden to the lower classes in medieval England; in other words, he is opposing privilege bestowed by political power, not earned wealth.

The reviewers are indeed tapping into a real theme of this Robin Hood, which is a prequel to the usual Robin Hood story; it imagines Robin’s life before he went into the forest. Marian tells the sheriff, “You have stripped our wealth to pay for foreign adventures.” (A version of the script can be found on Google Books and at Amazon, where Marian is called Marion.)  Robin tells the king the people want a charter to guarantee that every man be “safe from eviction without cause or prison without charge” and free “to work, eat, and live merry as he may on the sweat of his own brow.” The evil King John’s man Godfrey promises to “have merchants and landowners fill your coffers or their coffins….Loyalty means paying your share in the defense of the realm.” And Robin Hood tells the king, in the spirit of Braveheart’s William Wallace, “What we ask for is liberty, by law.”

Dangerous sentiments indeed. You can see what horrifies the liberal reviewers. If this sort of talk catches on, we might become a country based on antistatism, laissez-faire, individualism, populism, and egalitarianism and governed by a Constitution.