Topic: General

Mirror, Mirror, on the Wall, Which Nation Is in the Deepest Fiscal Doo-Doo of All?

According to the Bank for International Settlements, the United States has a terrible long-run fiscal outlook. Assuming we don’t implement genuine entitlement reform, the only countries in worse shape are the United Kingdom and Japan.

The Organization for Economic Cooperation and Development, meanwhile, also has a grim fiscal outlook for America. According to their numbers, the only nations in worse shape are New Zealand and Japan.

But I’ve never been happy with these BIS and OECD numbers because they focus on deficits, debt, and fiscal balance. Those are important indicators, of course, but they’re best viewed as symptoms.

The underlying problem is that the burden of government spending is too high. And what the BIS and OECD numbers are really showing is that the public sector is going to get even bigger in coming decades, largely because of aging populations. Unfortunately, you have to read between the lines to understand what’s really happening.

But now I’ve stumbled across some IMF data that presents the long-run fiscal outlook in a more logical fashion. As you can see from this graph (taken from this publication), they show the expected rise in age-related spending on the vertical axis and the amount of needed fiscal adjustment on the horizontal axis.

In other words, you don’t want your nation to be in the upper-right quadrant, but that’s exactly where you can find the United States.

IMF Future Spending-Adjustment Needs

Yes, Japan needs more fiscal adjustment. Yes, the burden of government spending will expand by a larger amount in Belgium. But America combines the worst of both worlds in a depressingly impressive fashion.

So thanks to FDR, LBJ, Nixon, Bush, Obama and others for helping to create and expand the welfare state. They’ve managed to put the United States in a worse long-run position than Greece, Italy, Spain, Portugal, France, and other failing welfare states.

Immigration Illusions Part Two: Rector and Richwine Rediscover Budget Deficits

A recent paper by Robert Rector and Jason Richwine  (“The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer”) went to a lot of unnecessary trouble to estimate that governments at all levels spent $54.5 billion more on services and benefits to households headed by unlawful immigrants (which includes children and spouses who are citizens) than was collected in taxes from them in 2010.  

It is hardly shocking to learn that federal, state, and local governments spent more on unlawful immigrants than they received in taxes, since governments spent more on nearly everyone than they received in taxes. That is what happens when governments run big budget deficits.  

Spending by federal state and local governments exceeded revenues by $1,342.6 billion in 2010—a conspicuously grander figure than the mere $54.5 billion Rector and Richwine attribute to unlawful immigration.  

For researchers to discover that unlawful immigrants, like most of us, did not pay enough taxes in 2010 to cover government spending was remarkably unenlightening. The paper is even less informative about the future, because (1) it ignores the fact that the Senate bill’s reduced restrictions on legal immigration would reduce the incentive for future illegal immigration, and (2) it ignores economic effects of a larger labor force in raising long-run economic growth

A Great Year for Cato at the Supreme Court

The Supreme Court’s term is over, with 75 cases having been argued and decided. It’s safe to say that the most significant ones were those decided this week, on the politically fraught subjects of affirmative action, the Voting Rights Act and gay marriage. I’m extremely proud that Cato was on the winning side of each of these issues. In fact, we were the only organization to file briefs supporting the challengers on each one (Fisher v. UT-AustinShelby County v. Holder, Windsor v. United States Perry v. Hollingsworth).

That says a lot. Not that the Supreme Court always takes its guidance from us – would that it were so! – but that we’re consistent in embracing the Constitution’s structural and rights-based protections for individual freedom and self-governance. It’s gratifying that the Supreme Court saw it our way in those “big” cases, even if Fisher was an extremely narrow decision and the others were all 5-4.

But that’s not all. After finishing my commentary on Windsor and Perry last night, I was curious to see how we did overall, beyond the high-profile cases. It turns out that we went 15-3 on the year. That is, looking purely at briefs we filed on the merits – you can see our record on briefs supporting cert petitions here – the Supreme Court ruled our way 15 times and against us three (and I can assure you that we don’t pick cases strategically to inflate our winning percentage. (I don’t count Perry in either column, by the way. While we ended up with a favorable result, Prop 8 struck down, the Court decided the case on standing grounds, incorrectly in my view).

Again, I’m not claiming that the Court was heavily influenced by briefs with Cato’s (or my) name on them – there’s just no way to know, and even briefs that are cited may be less influential than others – but many, many of these decisions track our thinking. That’s also gratifying, regardless of how the justices reached their conclusions.  

For the record, here’s the list of cases in which we filed this term (in order of argument):

Winning side (15): Kiobel v. Royal Dutch PetroleumArkansas Game & Fish Commission v. United States, Fisher v. UT-Austin, Florida v. Jardines, Bailey v. United States, Comcast v. Behrend, The Standard Fire Insurance Co. v. Knowles, Gabelli v. SEC, Koontz v. St. Johns River Water Management DistrictPPL Corp. v. IRSShelby County v. Holder, Horne v. U.S. Dept. of Agriculture, Windsor v. United StatesAID v. AOSISekhar v. United States

Losing side (3): City of Arlington v. FCCSalinas v. TexasUnited States v. Kebodeaux

My colleague Walter Olson has already compared our record to the greatest sports teams of all time, as well as what I consider to be the most dominate year by a baseball player, Sandy Koufax in 1963 (who went 25-5 and was the regular season and World Series MVP). I just wish that The Man With the Golden Arm could have had as long a career as Cato’s amicus brief program.

Ed Sec to Media: Get Those Common Core Critics!

In a bid to prove that Washington never tried to strong-arm states into adopting the Common Core, yesterday U.S. Secretary of Education Arne Duncan told the American Society of News Editors that the media had better start attacking “fringe,” “misinformed,” Core opponents and their arguments.

Think about that for a moment.

Yup, seems like a self-defeating tactic to me, too. But it’s not the first time the secretary has launched into attack mode to show that Washington would never – ever! – get pushy on education.

Now, despite my fatigue with constantly debunking Core supporters on federal coercion, I was prepared to do a huge dismantling of Duncan’s speech. Thankfully, both for the public and my workload, one of those media types whom Duncan implied hasn’t been doing her job – Michele McNeil of Education Week – was, indeed, inspired to do some fact-checking by Duncan. Too bad for the secretary, it was on his claims. Among McNeil’s offerings:

  • “On a grading scale of 500 points, Duncan said adopting common standards and assessments was worth relatively little. ‘Did the points, and the dollars, matter to the states? Undoubtedly. But it’s not the only reason or even the most important reason why states adopted the Common Core,’ he said. In fact, adopting and implementing common standards and assessments was worth 50 points, or 10 percent. That’s the same amount of points allotted to a state’s plan for turning around low-performing schools. In a contest in which only a few points separated winners from losers, those points mattered—a lot. And it likely spurred states to actually adopt the standards; the first state adopted them in February 2010.”

Time to End the Farmers’ Dole

Last week Washington enjoyed a miracle. Legislators failed in a high profile attempt to mulct the public.

Legislators were debating the Farm Bill, which mixes Food Stamps and agricultural price supports. Even though Washington is drowning in red ink, Republicans and Democrats wanted to approve a measure to spend nearly a trillion dollars over the next decade. 

The Democrats and Republicans disagreed only over details. The Democratic Senate approved $955 billion. The House Republican leadership wanted $940 billion. The president took no position other than to support more spending. 

However, last Thursday the House leadership miscalculated and lost support from Democrats as well as conservative Republicans, leading to the bill’s surprise defeat.

Of course, Washington was filled with recriminations. But the collapse of the legislation is very good news. As I pointed out in my latest Forbes column, the politicians’ failure creates a rare opportunity for real change. 

Indeed, both parts of the Farm Bill require transformation.

As I wrote:

The first step would be to separate Food Stamps from price supports. Debate the former in the context of the scores of overlapping and expensive welfare programs. Indeed, the Carleson Center for Public Policy recently counted an astounding 157 means-tested federal programs. Total government spending on general welfare runs about $1 trillion a year. It’s time Congress rethought and revamped the entire welfare industry.

As for the farmers’ dole, abolition is the only sensible policy. New Zealand successfully took this approach in 1984. 

Farmers are practiced businessmen who employ sophisticated scientific techniques to produce food and sophisticated financial tools to manage risk. Farmers are enjoying boom economic times. Wealthier on average than other Americans, farmer don’t need their own special welfare program.  Indeed, many operators already make a profit with little or no federal support. 

It is rare to stop the two major parties when they combine for a raid on the taxpayers. The task now is to make their defeat permanent. In recent years Americans have deregulated communications, finance, and transportation. Agriculture should be next.

Read the rest here.

Obama to NBA: I’m Not Done Raising Your Taxes, Now Help Me Sell ObamaCare

President Obama has a lot of nerve asking the National Basketball Association to help him sell ObamaCare to their fans.

It’s not just that President Obama is asking the NBA to lend its credibility to the least popular thing this side of Tim Donaghy. Obama has spent his political career trying to take more money from high-income earners like NBA players, executives, and owners. ObamaCare is one of his great successes in that effort. Another is the recent fiscal-cliff-avoidance deal. Yet Obama isn’t satisfied; he wants to take even more of their money. 

NBA players, owners, and executives are extremely talented and productive people. They create lots of jobs. They earn lots of money because they make other people happy. For this crime, they already pay more in taxes than almost anyone, and pay more than they receive from the government in benefits.

Yet President Obama seems to spend every waking moment trying to figure out how to take even more from them. And then he turns around and asks them to help him sell his train wreck of a health care law. Chutzpah.

Before the NBA casts its lot with ObamaCare, every NBA player, executive, and owner should ask their accountant exactly how much this president has cost them. I’m looking at you, Lebron.

Committee Issues Excuse to Keep Doing Wrong Thing

Today, the Democratic staff of Congress’s Joint Economic Committee released a report which seems mainly to be an excuse to keep doing the wrong things.

The basic tenets of the report certainly feel sensible: People with more education tend to have greater skills and earn more, but the ever-inflating price of college saddles people pursuing education with bigger and bigger debts. The solutions? Keep subsidized federal loan rates frozen at 3.4 percent, greatly expand loan forgiveness, and convert private loans into federal loans. Basically, more cheap aid—exactly the wrong thing.

The fundamental problem with the report is the fundamental problem with federal aid in microcosm: It ignores the crippling, self-defeating, unintended consequences of aid. You know: The downsides of federal “help.”

First and foremost, federal aid furnishes jet fuel for tuition inflation, both by allowing people to demand more than they otherwise would, and by enabling schools to raise prices knowing students will be able to pay them. It also encourages millions of people to enroll in college who, for many reasons, have little prospect of finishing. That’s why roughly one out of every two people who enter a postsecondary program don’t finish. Finally, it powers over-credentialing, with about a third of people with bachelor’s degrees in jobs not requiring them, and many jobs that require the degree likely doing so for basic signaling reasons—e.g., the person has some basic stick-to-it-iveness—rather than indicating that they possess useful skills or abilities they obtained in college.

A reasonable reading of the data forces one to conclude that Washington should markedly reduce its presence in college—indeed, get out altogether—rather than perpetuate bad policy. Which is likely why policymakers seem to assiduously avoid reasonable readings—or any readings at all—of important data.

Cross-posted at seethruedu.com