Tag: government

Europe: A Fiscal & Monetary Reality Check

Led by Alexis Tsipras, head of Greece’s newly-elected, left-wing coalition, some other leading political lights in Europe—Messrs. Hollande and Valls in France and Renzi in Italy—are raising a big stink about fiscal austerity. Yet they always fail to define austerity. Never mind. They don’t like it. The pols have plenty of company, too. Yes, they can trot out a host of economists—from Nobelist Paul Krugman on down—to carry their water.

But public expenditures in Greece, Italy and France are not only high, but growing as a proportion of the economy. One can only wonder where the austerity is. As the first chart shows, only five of 28 European Union countries now spend a smaller proportion of national income on government than they did before the current crisis. For example, Greece spent 47.5% of national output on government in 2007 and 58.5% in 2013, an increase of 11 percentage points. 

Government expenditures cut to the bone? You must be kidding. Even in the United States, where most agree that there is plenty of government largesse, the government (federal, plus state and local) still accounts for “only” 38.1% of GDP.

Government Gold-Plating

Sen. Tom Coburn (R-OK) released his annual Wastebook this past week. It contains a laundry list of doozies. The U.S. government’s gold-plating operations included $190,000 to study compost digested by worms, $297 million for the purchase of an unused mega blimp, and $1 million on a Virginia bus stop where only 15 people can huddle under a half-baked roof. These questionable (read: absurd) expenditures only represent the tip of the iceberg.

In addition to supporting members of Congress and civil servants, U.S. taxpayers support welfare recipients. And they support them lavishly, too. Hawaii, Massachusetts, and D.C. residents receive sizeable welfare payments (read: salaries). Indeed, the magnitude of these payments exceeds the average salary of an American teacher, as well as a soldier deployed in Afghanistan, by at least $10,000 per year.

The public can forget all the clap-trap they are hearing about austerity. Indeed, a fairly dull knife could cut billions of dollars from the U.S. government’s largess. 

The Great Society Meets the Taxpayer

President Lyndon Johnson’s legacy was the so-called Great Society (read: entitlement programs). As these programs have matured, along with the U.S. population, the proportion of the people dependent on the State has soared. Indeed, spending on entitlement programs gobbles up bigger and bigger chunks of the federal budget.

As the population grows older, entitlements will grow. Worryingly, the ratio of people receiving government benefits to those paying taxes will continue to climb, too. As the accompanying chart shows, those who receive government goodies already number the same as those who pay taxes (the ratio is one). With the steady progression of the ratio, it will be very hard to put the genie of the Great Society back in the bottle. Can you just imagine how difficult it will be to cut entitlement programs when those who are dependent on the government outnumber taxpayers by two to one?

Africa: the Good, the Bad and the Ugly

Last week, President Obama hosted the U.S.-Africa Leaders Summit in Washington, D.C. He welcomed over 40 African heads of state and their outsized entourages to what was a festive affair. Indeed, even the Ebola virus in West Africa failed to dampen spirits in the nation’s capital. Perhaps it was the billions of dollars in African investment, announced by America’s great private companies, that was so uplifting.

Good cheer was also observed in the advertising departments of major newspapers. Yes, many of the guest countries paid for lengthy advertisements–page turners–in the newspapers of record. That said, the substantive coverage of this gathering was thin. Neither the good, the bad, nor the ugly, received much ink.

What about the good? Private business creates prosperity, and prosperity is literally good for your health. My friend, the late Peter T. Bauer, documented the benefits of private trade in his classic 1954 book West African Trade. In many subsequent studies, Lord Bauer refuted conventional wisdom with detailed case studies and sharp economic reasoning. He concluded that the only precondition for private trade and prosperity to flourish was individual freedom reinforced by security for person and property.

More recently, Ann Bernstein, a South African, makes clear that the establishment and operation of private businesses does a lot of economic good (see: The Case for Business in Developing Countries, 2010). Yes, businesses create jobs, supply goods and services, spread knowledge, pay taxes, and so forth. Alas, in the Leaders Summit reportage that covered the multi-billion dollar investments by the likes of Coca-Cola, General Electric, and Ford Motor Co., the benefits of the humdrum activity of business and trade were nowhere to be found. But, as they say, “that’s not the president’s thing.”

Let’s move from the good to the bad and the ugly, and focus on the profound misery in Sub-Saharan Africa. I measure misery with a misery index. It is the simple sum of inflation, unemployment, and the bank lending interest rate, minus year on year GDP per capita growth. Using this metric, the countries for Sub-Saharan Africa are ranked in the accompanying table for 2012.

“We’re from the Government and We’re Here to Help,” Schoolyard Edition

In an epic case of unintended consequences, government-mandated anti-bullying programs are actually increasing bullying by teaching kids how to bully, according to a new study published in the Journal of Criminology:

The study concluded that students at schools with anti-bullying programs might actually be more likely to become a victim of bullying. It also found that students at schools with no bullying programs were less likely to become victims.

The results were stunning for Jeong [the author]. “Usually people expect an anti-bullying program to have some impact—some positive impact.”

The student videos used in many campaigns show examples of bullying and how to intervene. But Jeong says they may actually teach students different bullying techniques—and even educate about new ways to bully through social media and texting.

Jeong said students with ill intentions “…are able to learn, there are new techniques [and gain] new skills.” He says students might see examples in videos and then want to try it.

According to Jeong, some programs even teach students how to bully without leaving evidence behind. “This study raises an alarm,” he said. “There is a possibility of negative impact from anti-bullying programs.”

So under the pretense of helping, the government essentially created a “How To Bully and Get Away With It” program that has made the lives of tens of thousands of schoolchildren more miserable. 

A Time for Choosing: The GOP and the Marijuana Initiatives

Attorney General Eric Holder is soon expected to announce the federal government’s response to the marijuana legalization initiatives recently approved in Colorado and Washington.  For conservatives and GOP persons in the Congress, it is a time for choosing.

The first path is to turn against the federal drug war.  Call it a correction–just as many have acknowledged the runaway spending errors during the Bush years.  Recall that conservatives just took a principled stand against federal overreaching in the Obamacare legal fight.  It would be a drastic mistake to shift ground now and start defending federal police raids.  Clarence Thomas has the constitutional law right.  And William F. Buckley and Milton Friedman were right on the policy side–legalization of drugs is the correct policy stance to take.  The neocon approach championed by Bush administration alumni (William Bennett, John Walters, and Michael Gerson) has been profoundly misguided.  

We’ve heard a lot about demographics in the election aftermath.  Immigration has received most of the attention, but consider drug policy.  Young people just don’t think marijuana users are “criminals.”  Hispanic-Americans see the  chaos in Mexico more clearly than average Americans.  African-Americans bear the brunt of drug law stops, raids, arrests and incarceration.  And let’s not forget that this policy debate is taking place in the context of a fiscal crisis.  The GOP likes to think of itself as the party that is willing to tackle government policies that don’t work and have unintended consequences.  One cannot talk seriously about criminal justice reform and corrections spending without addressing the drug war.  It’s past time to end the federal war on drugs.  

The second path is to champion the DEA and federal police powers.   Flip-flop back to big government conservatism?  From arguing that it’s a federal overreach to fine someone for not buying health insurance …to lock up that gal over there with a joint in her purse?  Alienate the tea party folks and their small government movement?  Alienate young voters and African-Americans with talk about how the government is helping everyone with increasing numbers of arrests?  Alienate Hispanic-Americans and fiscal hawks with talk about another billion dollar aid package to the Mexican government to fight the drug war?  Sounds like a foolish consistency with the past.

Betsy Woodruff of the National Review Institute gets it right.

[T]here’s one easy ideological maneuver that Republicans could make that would simultaneously burnish their stance as the party of freedom and expand their base while alienating the president from his. It is a move that might also make one swing state a little easier to win in 2016. Congressional Republicans and conservative leaders could get on the weed bandwagon.

Hear, hear.  Some on the religious right–Pat Robertson–are already on that bandwagon.

Some may ask, “Isn’t there some sorta middle position between legalization and stay-the-course-drug war policy?”  Yes–that position is this: “I am not sure about Colorado and Washington are doing, but that’s their prerogative in our federal system.”

To paraphrase Ronald Reagan, no one is saying the choices are going to be easy, but the policy choices are fairly simple.

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