Featuring Rep. Scott Garrett (R-NJ), Chairman of the Congressional Constitution Caucus; Neal McCluskey, Associate Director, Center for Educational Freedom, Cato Institute; and Lindsey Burke, Will Skillman Fellow in Education, Heritage Foundation; moderated by Laura Odato, Director of Government Affairs, Cato Institute.
We are grateful to the Harry and Lynde Bradley Foundation and the Carthage Foundation whose support of the October 2012 Cato Conference “Europe’s Crisis and the Welfare State: Lessons for the United States” made possible this special issue of the Cato Journal.
Renowned development economist Deepak Lal draws on 50 years of experience around the globe to describe developing-country realities and rectify misguided notions about economic progress.
The Cato Institute tops a new measure of think tank performance in the United States, according to a recent report. Cato bested all other U.S. think tanks in the main category of “Aggregate Profile per Dollar Spent.” “I’m grateful to the Center for Global Development for showing that Cato gives its sponsors something I wish government gave more of to taxpayers: bang for the buck,” said Cato CEO John Allison.
Triggered by an appearance on Canadian TV, I asked yesterday why we should believe anti-sequester Keynesians. They want us to think that a very modest reduction in the growth of government spending will hurt the economy, yet Canada enjoyed rapid growth in the mid-1990s during a period of substantial budget restraint. I make a similar point in this debate with Robert Reich, noting that the burden of government spending was reduced as a share of economic output during the relatively prosperous Reagan years and Clinton years:
Being a magnanimous person, I even told Robert he should take credit for the Clinton years since he was labor secretary. Amazingly, he didn’t take me up on my offer.
I also point out that we shouldn’t worry about government employees getting a slight haircut since federal bureaucrats are overcompensated. Moreover, I warn that some agencies may deliberately try to inconvenience people in an attempt to extort more tax revenue.
This example is important because the Obama White House is making the Keynesian argument that a smaller burden of government spending somehow will translate into less growth and fewer jobs.
Nobody should believe them, of course, since they used this same discredited theory to justify the so-called stimulus and all their predictions were wildly wrong.
But the failed 2009 stimulus showed the bad things that happen when government spending rises, and maybe the big spenders want us to think the relationship doesn’t hold when government gets put on a diet?
Well, here’s some data from the International Monetary Fund showing that the Canadian economy enjoyed very strong growth when policymakers imposed a near-freeze on government outlays between 1992 and 1997.
For more information on this remarkable period of fiscal restraint, as well as evidence of what happened in other nations that curtailed government spending, here’s a video with lots of additional information.
By the way, we also have a more recent example of successful budget reductions. Estonia and the other Baltic nations ignored Keynesian snake-oil when the financial crisis hit and instead imposed genuine spending cuts.
America’s political elite is nauseating for many reasons, but perhaps most of all when they blame others for problems that are caused by misguided government policies. A stark example is the way they attacked the Facebook billionaire who moved to Singapore because of punitive taxation and class-warfare policy.
Today, let’s look at an example that affects almost everybody rather than just a handful of rich people. Many people in Washington sanctimoniously say that American households and businesses are too focused on the short term and that we don’t save enough.
But as I explain in this CBNC interview, tax and spending policies from Washington have undermined the incentive to save.
Good politicians would respond by junking the tax code and adopting a flat tax, which has no double taxation of income that is saved and invested. But good politicians are like the Loch Ness Monster.
The moral of the story, just in case you haven’t picked up on the theme, is that bad things happen because politicians can’t resist expanding the burden of government when they should be doing the opposite. Which is why this poster is funny, but in a painful way.
P.S. I should have mentioned that some politicians think that we can boost savings by imposing a value-added tax! This is not only a perverse example of Mitchell’s law, but it’s also completely illogical.
A VAT does not change the incentive to save since current consumption and future consumption are equally taxed. But it does reduce the amount of money people have, thus reducing both private consumption and private savings.
Statists would argue that a new tax will reduce the budget deficit and thus reduce the amount of private savings that is being used to finance government debt. That’s only true, though, if you’re naive enough to think politicians won’t spend the new revenue. Good luck with that.
