Tag: central planning

Scapegoating ObamaCare

Here’s how Ezra Klein spins Sen. Max Baucus’ (D-MT) preditions of an ObamaCare “train wreck”:

The GOP can try and keep the implementation from being done effectively, in part by refusing to authorize the needed funds. Then they can capitalize on the problems they create to weaken the law, or at least weaken Democrats up for reelection in 2014.

In other words, step one: Create problems for Obamacare. Step two: Blame Obamacare for the problems. Step 3: Political profit!

It never ceases to amaze me how people who want government to plan our lives are horrified when government then interferes with their plans. Here’s one way to summarize Klein’s attempt to blame ObamaCare’s opponents for ObamaCare’s failures:

Step one: Pass a law the public opposes.

Step two: Act surprised when the public continues to oppose it.

Step three: Blame the public for the law’s failures. 

Or:

Step one: Enact an immense law requiring lots of implementation funding.

Step two: Don’t include any implementation funding.

Step three: Blame opponents for not funding the implementation. 

Ooh, this is fun:

Step one: Give government new powers.

Step two: Express frustration when those powers fall into the hands of your political opponents.

Step three: Put your political opponents in camps.

I wonder if Mike Pompeo will pen a letter to Klein, too.

CBO on Income and Tax Distribution

The Washington establishment loves talking about the “distribution” of income and taxes. The CBO has issued a new report on the topic that will no doubt keep the discussion rolling on.

That said, the CBO report has some interesting statistics to consider. Most important are calculations of average federal tax rates, which are total federal taxes paid as a share of income. The chart shows average tax rates by quintiles, which each contain one fifth of U.S. households grouped by income level. The households at the top are hit with the largest burdens by far. Elsewhere, I’ve discussed who some of these high-earning households are and the damage done by nailing them with such high taxes. (For example, see here and here).

Republican Freshmen Protect Big Government

The Community Development Block Grant program is a perfect example of the blurring of responsibility between the federal government and the states. The program’s roots go back to the Great Society and the wishful belief that the problems of urban Americans could be solved with handouts from Washington. Instead, the program “has degenerated into a federal slush fund for pet projects of local politicians and politically connected businesses.”

That quote comes from Rep. Tom McClintock (R-CA) who introduced an amendment this week to terminate CDBGs. As McClintock explained to his House colleagues, it is not the federal government’s responsibility to fund purely parochial activities:

Even in the best of circumstances, these are all projects that exclusively benefit local communities or private interests and ought to be paid for exclusively by those local communities or private interests. They are of such questionable merit that no city council is willing to face its constituents and say, this is how we’ve spent your local taxes.  But they are more than happy to spend somebody else’s federal taxes.

Unfortunately, McClintock’s words fell upon deaf ears as his amendment was voted down 80 to 342.  Not a single Democrat supported the amendment. But it was the 156 Republicans who voted against the amendment that doomed it. Among those Republicans voting “no” was House Budget Committee chairman Paul Ryan (R-WI). Worse, only 33 percent of the GOP “Tea Party Freshmen” voted to terminate a program that is completely at odds with the principles of limited government.

As I noted back in May, many of the GOP freshmen have switched from tea to Beltway Kool-Aid. Take, for example, tea party favorite Allen West of Florida. On West’s congressional website, he states that “As your Congressman, I will curb out of control Government spending.” He also says that “we need to challenge the status quo in Washington and stop the floodgates of government spending” and that he will “carry the torch of conservative, small government principles with me to Washington.” West, however, voted to save the CDBG program and he also voted back in May to save the Economic Development Administration, which is another parochial slush fund. In April, he accused Democrats of being communists. That’s pretty rich given that he proceeded to vote to protect programs that engage in central planning.

Democratic Tax Policy, Then and Now

My new piece at Daily Caller looks at how the Democratic Party’s approach to tax policy has changed over the decades.

The piece was prompted by a recent article from Norm Ornstein and Tom Mann claiming that needed bipartisan reforms are being blocked by the new “ideologically extreme” Republican Party.

Baloney. It’s the Democrats who have changed. The party’s leaders have moved far to the left on economic issues.

As evidence, I point to this Cato Journal article from 1985 by Democrat Richard Gephardt, who was a leader on tax reform. As a free-market guy, I agree with the great majority of what Gephardt said, yet I agree with virtually nothing that modern Democratic leaders say about tax policy.

Regarding ridding the tax code of special breaks, Gephardt says, “I confess that I am not qualified to act as a central planner and I do not know anybody on either committee who is.” Amen!

And Gephardt says, “We in Congress take pride in the free market system.” When was the last time you heard a Democratic leader say something like that?

Why Hayek Would Have Hated Software Patents

In his famous essay “The Use of Knowledge in Society,” Friedrich Hayek argued that the socialists of his day falsely assumed that knowledge about economy could be taken as “given” to central planners. In reality, information about the economy—about what products are needed and where the necessary resources can be found—is dispersed among a society’s population. Economic policies that implicitly depend on omniscient decision-makers are doomed to failure, because the decision-makers won’t have the information they need to make good decisions.

In a new paper to be published by the NYU Annual Survey of American Law, Christina Mulligan (who drafted a recent amicus brief for Cato) and I argue that the contemporary patent debate suffers from a similar blind spot. A patent is a demand that the world refrain from using a particular machine or process. To comply with this demand, third parties need an efficient way to discover which patents they are in danger of infringing. Yet we show that for some industries, including software, the costs of discovering which patents one is in danger of infringing are astronomical. As a consequence, most software firms don’t even try to avoid infringing peoples’ patents.

Patents are often described as “intellectual property,” and patent law provides for harsh property-like remedies against patent infringers. But a property system that is so convoluted that ordinary firms can’t figure out who owns what isn’t a property system at all. Genuine property rights enhance economic efficiency by bringing predictability to the allocation of scarce resources and thereby promoting decentralized decision-making. Software patents retard economic efficiency by subjecting software firms to a constant and unavoidable threat of litigation for accidentally infringing the patent rights of others. Hayek would not have approved.

Our paper is available from SSRN.

Even the New York Times Wants to Cut Medicaid

From their editorial the other day:

There is no doubt that Medicaid… has to be cut substantially in future decades to help curb federal deficits. For cash-strapped states, program cuts may be necessary right now. But in reducing spending, government needs to ensure any changes will not cause undue harm to millions.

How would the Times cut Medicaid spending? The magic of central planning!

The best route to savings — already embodied in the reform law — is to make the health care system more efficient over all so that costs are reduced for Medicaid, Medicare and private insurers as well. Various pilot programs to reduce costs might be speeded up….

And if government were smart, rather than stupid, that would work.

I’ve got a better idea for cutting Medicaid that meets the Times’s criterion of not causing undue harm to millions.

Ben Bernanke: Central Planner

There’s a great piece in the spring issue of The Independent Review on Federal Reserve Chairman Ben Bernanke by San Jose State Professor Jeffrey Rogers Hummel.  Although a bit long, its well worth the read for anyone wanting to understand both Bernanke’s thinking and his actions during and since the financial crisis.

First, Prof. Hummel discusses the differences between Bernanke’s and Milton Friedman’s explanations for the Great Depression.  Those that debate whether Bernanke’s actions, especially the quantitative easings, would be approved of by Friedman will get a lot out of this discussion.  From this comparison, you get the point that Friedman was concerned about overall credit conditions and liquidity, whereas Bernanke is less focused on the monetary factors than on the impairment of credit intermediation, which explains his support of selective bailouts.

Hummel’s comparison of Greenspan and Bernanke is also insightful, particularly since many (myself included) often lump the two’s policies together.  From the analysis, it is clear that Greenspan falls into the Friedman camp, his “rescues” were of the financial system in general, and not of specific firms.

One might say a bailout is a bailout, so what’s the difference between rescuing the system and rescuing individual firms within the system?  Certainly that’s a view I have some sympathy for.  The “Greenspan put” was as much a contributor to reckless risk-taking as anything else.  Hummel, however, discuses why this difference ultimately matters, and why it shows Bernanke to fit the role of economic central planner.  In short, the facts are presented that during the financial crisis, Bernanke did not actually increase overall liquidity by much, he re-directed it to those firms he deemed most important.  This process of reducing liquidity to some sectors while re-directing it to others, arguably less efficient sectors, goes a considerable distance in explaining some of the decline in both aggregate demand and consumption in 2008.

Again, the piece is one of the more accessible and insightful I’ve read on Bernanke in quite a while.