Tag: fiscal policy

Europe’s Self-Inflicted Decline: French Taxing, Italian Regulating, Greek Mooching, and IMF Economic Illiteracy

Every day brings more and more evidence that Obamanomics is failing in Europe.  I wrote some “Observations on the European Farce” last week, but the news this morning is even more surreal.

Let’s start with France, where I endorsed the explicit socialist over the implicit socialist precisely because of a morbid desire to see a nation commit faster economic suicide. Well, Monsieur Hollande isn’t disappointing me. Let’s look at some of his new initiatives, as reported by Tax-News.com.

The French Minister responsible for Parliamentary Relations, Alain Vidalies, has recently conceded that EUR10bn (USD12.7bn) is needed to balance the country’s budget this year, to be achieved notably by means of implementing a number of emergency tax measures. …The government plans to abolish the exemption from social contributions applicable to overtime hours, expected to yield a gain for the state of around EUR3.2bn, and to subject overtime hours to taxation, predicted to realize approximately EUR1.4bn in additional revenues. Other proposed measures include plans to reform the country’s solidarity tax on wealth (ISF), to cap tax breaks at EUR10,000, to impose a 3% tax on dividends and to increase the inheritance tax as well as the tax on donations. …French President Hollande announced plans during his election campaign to reform ISF. Holland intends to restore the wealth tax scale of between 0.55% and 1.8%, in place before the former government’s 2011 reform, to be applied on wealth in excess of EUR1.3m. Currently a 0.25% rate is imposed on net taxable wealth in excess of EUR1.3m and 0.5% on net taxable assets above EUR3m.

France already has the highest tax burden of any non-Scandinavian nation, so why not further squeeze the productive sector? That’s bound to boost jobs and competitiveness, right? And more revenue as well!

In reality, the Laffer Curve will kick in because France’s dwindling productive class isn’t going to passively submit as the political jackals start looking for a new meal.

But while France is driving into a fiscal cul-de-sac, Italian politicians have constructed a very impressive maze of red tape, intervention, and regulation. From the Wall Street Journal, here is just a sampling of the idiotic rules that paralyze job creators and entrepreneurs:

Once you hire employee 11, you must submit an annual self-assessment to the national authorities outlining every possible health and safety hazard to which your employees might be subject. These include work-related stress and stress caused by age, gender and racial differences. …Once you hire your 16th employee, national unions can set up shop, and workers may elect their own separate representatives. As your company grows, so does the number of required employee representatives, each of whom is entitled to eight hours of paid leave monthly to fulfill union or works-council duties. …Hire No. 16 also means that your next recruit must qualify as disabled. By the time your firm hires its 51st worker, 7% of the payroll must be handicapped in some way, or else your company owes fees in kind. …Once you hire your 101st employee, you must submit a report every two years on the gender-dynamics within the company. This must include a tabulation of the men and women employed in each production unit, their functions and level within the company, details of their compensation and benefits, and dates and reasons for recruitments, promotions and transfers, as well as the estimated revenue impact. …All of these protections and assurances, along with the bureaucracies that oversee them, subtract 47.6% from the average Italian wage, according to the OECD. …which may explain the temptation to stay small and keep as much of your business as possible off the books. This gray- and black-market accounts for more than a quarter of the Italian economy. It also helps account for unemployment at a 12-year high of 10%, and GDP forecast to contract 1.3% this year.

You won’t be surprised to learn that the unelected prime minister of Italy, Mr. Monti, isn’t really trying to fix any of this nonsense and instead is agitating for more bailouts from taxpayers in countries that aren’t quite as corrupt and strangled by red tape.

Monti also is a big supporter of eurobonds, whichs make a lot of sense if you’re the type of person who likes co-signing loans for your unemployed alcoholic cousin with a gambling addiction.

But let’s not forget our Greek friends, the ones from the country that subsidizes pedophiles and requires stool samples from entrepreneurs applying to set up online companies.

The recent elections resulted in a victory for the supposedly conservative party, so what did the new government announce? A flat tax to boost growth? Sweeping deregulation to get rid of the absurd rules that strangle entrepreneurship?

Nope. In addition to whining for further handouts from taxpayers in other nations, the Wall Street Journal reports that the new government has announced that it won’t be pruning any bureaucrats from the country’s bloated government workforce:

Greece’s new three-party coalition government on Thursday ruled out massive public-sector layoffs, a move that could help pacify restive trade unions… The new government’s refusal to slash public payrolls and its demands to renegotiate its loan deal comes just as euro-zone finance ministers meet in Luxembourg to discuss Greece’s troubled overhauls—and possibly weigh a two-year extension the new government is seeking in a bid to ease the terms of the austerity program that has accompanied the bailout. …Cutting the size of the public sector has been a top demand by Greece’s creditors—the European Union, European Central Bank and International Monetary Fund—to reduce costs and help Greece meet its budget-deficit targets needed for the country to get more financing. So far, Greece has laid off just a few hundred workers and failed to implement a so-called labor reserve last year, which foresaw slashing the public sector by 30,000 workers.

Gee, isn’t this just peachy? Best of all, thank to the IMF, the rest of us are helping to subsidize these Greek moochers.

And speaking of the IMF, it just released a report on problems in the eurozone that makes zero mention of excessive government spending or high tax burdens. The tax-free IMF bureaucrats do claim that “Important actions have been taken,” but they’re talking about bailouts and easy money:

The ECB has lowered policy rates and conducted special liquidity interventions to address immediate bank funding pressures and avert an even more rapid escalation of the crisis.

And even though the problems in Europe are solely the result of bad policies by member nations’ governments, the IMF says that “the crisis now calls for a stronger and more collective effort”:

Absent collective mechanisms to break these adverse feedback loops, the crisis has spilled across euro area countries. Contagion from further intensification of the crisis—including acute stress in funding markets and tensions involving systemically-important banks—would be sizeable globally. And spillovers to neighboring EU economies would be particularly large. A more determined and forceful collective response is needed.

Let’s translate this into plain English: The IMF wants more money from American taxpayers (and other victimized producers elsewhere in the world) to subsidize the types of statist policies that I described above in places such as France, Italy, and Greece.

I’ve previously explained why conspiracy theories are silly, but we’ve gotten to the point where I can forgive people for thinking that politicians and bureaucrats are deliberately trying to turn Europe into some sort of statist dystopia.

The Decision Is Whether We Will Reform Health Care with Our Eyes Open

Donald Berwick may have mastered the science of health care management and delivery. (I for one would jump at the chance to enroll my family in the Berwick Health Plan.) But his recent oped in the Washington Post shows he has yet to absorb the lessons that economics teaches about government planning of the economy, such as through ObamaCare.

Berwick, whom President Obama recess-appointed to be administrator of the Centers for Medicare & Medicaid Services (CMS), sets out to defend ObamaCare from a fairly devastating critique by Robert Samuelson a few days earlier. Berwick responds, in essence, nuh-uh:

I saw how this law is helping tens of millions of families and is finally putting our health-care system on the right track…I have seen how improving care can reduce costs dramatically.

Berwick fails to see the world of difference between those two statements. Yes, in his private-sector work, Berwick has helped hospitals save more lives, kill fewer people, and save money in the process. I’m pretty sure he has saved more lives than I ever will.

But all he saw from his perch at Medicare’s helm was people happy to receive checks from the government, and a bunch of well-meaning bureaucrats setting goals. He did not see the costs imposed by those subsidies. As for goal-setting, this one sentence captures it all:

The CMS, for example, has set ambitious goals to reduce complications that, if met, would save 60,000 lives and $35 billion in just three years.

If. Met. A recent Congressional Budget Office review of Medicare pilot programs showed that Medicare bureaucrats set goals all the time. They never achieve them.

Berwick’s claim that ObamaCare “cracks down hard on waste and fraud” because “Last year the government recaptured a record $4 billion” is even more ridiculous. The official (read: low-ball) estimates are that CMS loses $70 billion per year to fraud and improper payments. The best evidence suggests that wasteful spending approaches $200 billion per year in Medicare alone. All that money that comes from you, John Q. Taxpayer. Berwick knows all these things. Yet he thinks you should be impressed that recovering a measly $4 billion is the best the government has ever done.

Berwick would never tolerate such willful blindness, shoddy reasoning, and (surprise!) poor results if it were his own money on the line. Which is exactly the point. In a free market, people spend their own money. At Medicare, Berwick spent, and ObamaCare continues to spend, other people’s money.

That is the main reason why markets are smart and government is stupid. And why otherwise smart people like Berwick can afford to keep their eyes shut.

Fidel Castro, Medicare Beneficiary?

There’s no proof yet, but it looks an awful lot like Medicare might be subsidizing the Castro brothers.

I, for one,  was not surprised to read that Medicare payments for non-existent medical services are ending up in Cuban (read: government-controlled) banks. Nor that “accused scammers are escaping in droves to Cuba and other Latin American countries to avoid prosecution — with more than 150 fugitives now wanted for stealing hundreds of millions of dollars from the U.S. healthcare program, according to the FBI and court records.”

In fact, I have been wondering for some time when we would see evidence that foreign governments have been stealing from Medicare. The official (read: conservative) estimates are that Medicare and Medicaid lose $70 billion each year to fraud and improper payments, a result of having almost zero meaningful controls in place. That’s practically an open invitation to steal from American taxpayers. Kleptocratic governments—and other organized-crime rings—would be insane not to wet their beaks.

In this National Review article, I explain how easily it could happen:

Last year, the feds indicted 44 members of an Armenian crime syndicate for operating a sprawling Medicare-fraud scheme. The syndicate had set up 118 phony clinics and billed Medicare for $35 million. They transferred at least some of their booty overseas. Who knows what LBJ’s Great Society is funding?

I also explain how these vast amounts of fraud aren’t going to stop without fundamental Medicare and Medicaid reform. Give the National Review article a read, and tell me if you share my suspicion that Medicare is bankrolling other governments.

Adler on How the IRS Is Rewriting ObamaCare to Tax Employers

Jonathan H. Adler is the Johan Verheij Memorial Professor of Law and director of the Center for Business Law and Regulation at Case Western Reserve University.  In this new Cato Institute video, Adler explains how a recently finalized IRS rule implementing ObamaCare taxes employers without any statutory authority.

For more, see this previous Cato video, “States Should Flatly Reject ObamaCare Exchanges”:

See also our November 2011 op-ed on this IRS rule that appeared in the Wall Street Journal.

NRO Op-ed: IPAB, ObamaCare’s Super-Legislature

Yesterday, Cato released “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature,” by the Goldwater Institute’s Diane Cohen and me.

Today, National Review Online publishes our op-ed based on that study. An excerpt:

[U]nder the statute as written, if Congress fails to repeal IPAB in 2017, the secretary must implement IPAB’s edicts even if Congress votes to block them. Nancy Pelosi was right: We needed to pass ObamaCare to find out what was in it. We’re still finding out.

ObamaCare is so unconstitutional, it’s absurd. It delegates legislative powers that Congress cannot delegate. It creates a permanent super-legislature to supplement—and when conflicts arise, to supplant—Congress. It tries to amend the Constitution via statute rather than the amendment procedure of Article V.

ObamaCare proves economist Friedrich Hayek’s axiom that government direction of the economy threatens both democracy and freedom. After decades of failing to deliver high-quality, low-cost health care through Medicare, Congress struck upon the “solution” of creating a permanent super-legislature—or worse, an economic dictator—with the power to impose taxes and other laws that the people would reject.

Fortunately, one Congress cannot bind future Congresses by statute. If the Supreme Court fails to strike down ObamaCare, Congress should exercise its power to repeal IPAB—and the rest of ObamaCare with it.

Cohen is also the lead attorney for the plaintiffs in Coons v. Geithner, which challenges the constitutionality of IPAB and which a federal court has put on hold pending the Supreme Court’s ruling in the individual-mandate and Medicaid-mandate cases.

Cato Study: Heretofore Unreported ObamaCare ‘Bug’ Puts IPAB Completely beyond Congress’ Reach

Today, the Cato Institute releases a new study by Diane Cohen and me titled, “The Independent Payment Advisory Board: PPACA’s Anti-Constitutional and Authoritarian Super-Legislature.” Cohen is a senior attorney at the Goldwater Institute and lead counsel in the Coons v. Geithner lawsuit challenging IPAB and other aspects of the Patient Protection and Affordable Care Act of 2010, a.k.a. ObamaCare.

From the executive summary:

When the unelected government officials on this board submit a legislative proposal to Congress, it automatically becomes law: PPACA requires the Secretary of Health and Human Services to implement it. Blocking an IPAB “proposal” requires at a minimum that the House and the Senate and the president agree on a substitute. The Board’s edicts therefore can become law without congressional action, congressional approval, meaningful congressional oversight, or being subject to a presidential veto. Citizens will have no power to challenge IPAB’s edicts in court.

Worse, PPACA forbids Congress from repealing IPAB outside of a seven-month window in the year 2017, and even then requires a three-fifths majority in both chambers…

IPAB’s unelected members will have effectively unfettered power to impose taxes and ration care for all Americans, whether the government pays their medical bills or not. In some circumstances, just one political party or even one individual would have full command of IPAB’s lawmaking powers. IPAB truly is independent, but in the worst sense of the word. It wields power independent of Congress, independent of the president, independent of the judiciary, and independent of the will of the people.

The creation of IPAB is an admission that the federal government’s efforts to plan America’s health care sector have failed. It is proof of the axiom that government control of the economy threatens democracy.

Importantly, this study reveals a heretofore unreported feature that makes this super-legislature even more authoritarian and unconstitutional:

[I]f Congress misses that repeal window, PPACA prohibits Congress from ever altering an IPAB “proposal.”

You read that right.

The Congressional Research Service and others have reported that even if Congress fails to repeal this super-legislature in 2017, Congress will still be able to use the weak tools that ObamaCare allows for restraining IPAB. Unfortunately, that interpretation rests on a misreading of a crucial part of the law. These experts thought they saw the word “or” where the statute actually says “and.”

How much difference can one little conjunction make?

Under the statute as written, if Congress fails to repeal IPAB in 2017, then as of 2020 Congress will have absolutely zero ability to block or amend the laws that IPAB writes, and zero power to affect the Secretary’s implementation of those laws. IPAB will become a permanent super-legislature, with the Secretary as its executive. And if the president fails to appoint any IPAB members, the Secretary will unilaterally wield all of IPAB’s legislative and executive powers, including the power to appropriate funds for her own department. It’s completely nutty, yet completely consistent with the desire of ObamaCare’s authors to protect IPAB from congressional interference.

It’s also completely consistent with Friedrich Hayek’s prediction that government planning of the economy paves the way for authoritarianism.

Emails Show PhRMA Bought and Paid for ObamaCare

Remember that guy?

Well today, the Wall Street Journal reprints a series of emails showing how his administration colluded with drug-company lobbyists to pass ObamaCare. Never mind the nonsense about Big Pharma making an $80 billion “contribution” to pass the law. An accompanying Wall Street Journal editorial explains that Big Pharma “understood that a new entitlement could be a windfall as taxpayers bought more of their products.”

The money quote from these emails comes from Pfizer lobbyist/Republican/former George W. Bush appointee Anthony Principi. Even though the drug companies were donating to all the right politicians and pledging to spend hundreds of millions of dollars on pro-ObamaCare advertising campaigns and grassroots lobbying, President Obama still accused unnamed ”special interests” of trying to stop ObamaCare in order to preserve “a system that worked for the insurance and the drug companies.” Principi was indignant:

We’re trying to kill it? I guess we didn’t give enough in contributions and media ads supporting hcr. Perhaps no amount would suffice.

The nerve. I smell a campaign slogan. “Barack Obama: a Politician Who Cannot Stay Bought.”

The Journal adds:

[Former Energy and Commerce Chairman Henry] Waxman [D-CA] recently put out a rebuttal memo dismissing these email revelations as routine, “exactly what Presidents have always done to enact major legislation.” Which is precisely the point—the normality is the scandal.

And which critics have argued from the beginning. As I wrote more than two years ago, ObamaCare is corruption:

Each new power ObamaCare creates would be targeted by special interests looking for special favors, and held for ransom by politicians seeking a slice of the pie.

ObamaCare would guarantee that crucial decisions affecting your medical care would be made by the same people, through the same process that created the Cornhusker Kickback, for as far as the eye can see.

When ObamaCare supporters, like Kaiser Family Foundation president Drew Altman, claim that “voters are rejecting the process more than the substance” of the legislation, they’re missing the point.

When government grows, corruption grows.  When voters reject these corrupt side deals, they are rejecting the substance of ObamaCare.

Fortunately, voters so detest ObamaCare that there’s a real chance to wipe it from the books. This video explains how state officials can strike a blow against ObamaCare/corruption: