Topic: General

Everything You Need to Know About the Ryan Budget

By
Daniel J. Mitchell

Sigh. Even when they’re sort of doing the right thing, Republicans are incapable of using the right argument.

Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, has unveiled his proposed budget and he and other Republicans are bragging that the plan will balance the budget in 10 years.

That’s all fine and well, but good fiscal policy is achieved by reducing the burden of government spending, and that means restraining the budget so that federal outlays grow slower than the private sector.

It’s good to balance the budget, of course, but that should be a secondary goal.

Now for the good news. The Ryan Budget does satisfy the Golden Rule of fiscal policy. As you can see in the chart, federal spending grows by an average of 3.4 percent annually, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023.

It’s also good news that the Ryan Budget calls for structural reform of entitlement programs, including Medicaid block grants and Medicare premium support. The budget also assumes the repeal of the costly Obamacare program.

And there’s also some good tax policy. Not bold tax reform like a flat tax, but top tax rates would be reduced to 25 percent and many forms of double taxation, like the death tax and capital gains tax, presumably would be reduced or eliminated.

Let’s be clear, though, that this is not a libertarian budget. Federal spending will still be far too high. Indeed, the budget will consume a larger share of the economy than it did when Bill Clinton left office.

And while Republicans do a good job of restraining spending in the first couple of years of the new Ryan Budget, outlays rise far too rapidly beginning around 2016.

Moreover, there’s no Social Security reform.

Equally worrisome, the budget assumes that the federal tax burden should remain at about 19 percent of GDP, higher than the long-run average of 18 percent of GDP and—for all intents and purposes—permanently enshrining Obama’s fiscal cliff victory.

And it’s depressing to see that the Ryan Budget has gotten weaker each year.

At this rate, it won’t be that long before the GOP budget and Obama budget converge.

Okay, that’s an exaggeration. But the moral of the story is that the Ryan Budget is a step in the right direction, but much more will be needed to restore limited, constitutional government.

Topics: 
General, Government and Politics, Social Security, Tax and Budget Policy

My Heart Breaks and Tears Flow When I Read about Sequestration Being a Big Defeat for Lobbyists

By
Daniel J. Mitchell

I believe in the First Amendment, so I would never support legislation to restrict political speech or curtail the ability of people to petition the government.

That being said, I despise the corrupt Washington game of obtaining unearned wealth thanks to the sleazy interaction of lobbyists, politicians, bureaucrats, and interest groups.

So you can imagine my unfettered joy when reading about how this odious process is being curtailed by sequestration. Here are some cheerful details from story in Roll Call.

…sequester cuts…reflect not only Washington’s political paralysis but a bitter lobbying failure for K Street interests across the board. From university professors and scientists to cancer victims, defense contractors and federal workers, hundreds of advocacy, trade and labor groups have lobbied aggressively for months to head off the cuts. They’ve run ads, testified on Capitol Hill, staged demonstrations and hounded lawmakers, all to no avail. …the path forward could be a lobbying nightmare.

Reading the story, I recalled a Charles Addams cartoon from my childhood. Thanks to the magic of Al Gore’s Internet, I found it.

Slightly modified to capture my spirit of elation, here it is for you to enjoy.

Except I like to think I’m a bit more prepossessing than the Uncle Fester character, but let’s not get hung up on details.

What matters is that sequestration was a much-needed and very welcome victory for taxpayers. Obama suffered a rare defeat, as did the cronyists who get rich by working the system.

To be sure, all that we’ve achieved is a tiny reduction in the growth of federal spending (the budget will be $2.4 trillion bigger in 10 years rather than $2.5 trillion bigger). But a journey of many trillions of dollars begins with a first step.

Topics: 
General, Government and Politics, Political Philosophy, Tax and Budget Policy

William Letwin, R.I.P.

By
Alberto Mingardi

Economic historian William Letwin passed away, age 90, a few days ago. Professor Letwin belonged to a prominent family: his wife, Shirley Robin Letwin, was a philosopher and social critic, author of, among other things, of “The Pursuit of Certainty”  and of the very perceptive “The Anatomy of Thatcherism.” His son, Oliver, is a British politician and currently Minister of State for Policy. The Letwins were fond of social life and held a salon in their house—the most prominent guest being Michael Oakeshott, the dean of conservative philosophy, a mentor to Shirley and a colleague to William (who moved from Chicago to the London School of Economics).

Letwin was no libertarian, and is mostly overlooked by libertarian scholars. However, his work is well worth remembering—not least for his mastery of the English language. Letwin’s works are both insightful and a pleasure to read.

Libertarians should be better acquainted with at least two of his contributions: his book Law and Economic Policy in America, and his introduction to a 1975 edition of The Wealth of Nations. His little book, The Origins of Scientific Economics: English Economic Thought 1660-1776, is another jewel.

Law and Economic Policy in America is a learned work on the origins of the Sherman Act, sharply narrated with all their political economy implications. Letwin examined both the (rather stretched) common-law rationale for competition policy, and the politics of competition policy, in its genetic moment. As the saying goes, if you like laws and sausages, you should never watch either one being made. But perhaps watching how competition policy was (and is) made will be an eye-opener for some.

Letwin’s book is still a masterpiece in explaining how antimonopoly sentiment built up in American public opinion. 

Letwin distinguished between the attitude towards contract “in restraint of trade” as emerged through the complex working of common law jurisprudence, and the way in which a widespread skepticism towards ever-larger corporations grabbing the advantages of economies of scale at the detriment of smaller businesses smoothed the way for a very different kind of legislative measure. 

Read the rest of this post »

Topics: 
General, Political Philosophy

Challenge for Keynesian Anti-Sequester Hysterics, Part I: Why Did Canada’s Economy Boom When the Burden of Spending Was Sharply Reduced?

By
Daniel J. Mitchell

In this appearance on Canadian TV, I  debunk anti-sequester hysteria, pointing out that “automatic budget cuts” merely restrain government so that it grows $2.4 trillion over the next 10 years rather than $2.5 trillion.

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.

Dan Mitchell Explaining What Americans Can Learn from Canada’s Fiscal Restraint in the 1990s

But I think the most important point in the interview was the discussion of what happened in Canada in the 1990s.

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.

Spending Restraint, Part II: Lessons from Canada, Ireland, Slovakia, and New Zealand

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.

The result? Growth has recovered and these nations are doing much better than the European countries that decided that big tax hikes and/or Keynesian spending binges were the right approach.

Paul Krugman, not surprisingly, got this wrong.

Topics: 
General, Government and Politics, International Economics and Development, Tax and Budget Policy

Unlike Policymakers, Consumers Use Logic to Avoid Horsemeat

By
K. William Watson

A scandal has recently erupted in Europe after it was discovered that horsemeat was being sold to consumers in processed foods claiming to be 100% beef. This is, of course, already blatantly illegal, but that hasn’t stopped regulators from trying to figure out how to increase their oversight of Europe’s already highly regulated food market.

Unfortunately, some policymakers have used this scandal to push for increased trade barriers within the European Union. Their preferred barrier is the increased use of mandatory country of origin labels. This policy ignores the fact that horsemeat can be passed off as beef in any country and that doing so is illegal in all of them.

Nevertheless, this call for labels reveals a justified concern that complex supply chains obscure relevant information from consumers. But, consumers don’t need protectionist mandates to solve their problems; a little common sense will do just fine. The Scottish Farmer, an advocacy group for Scottish agriculture, reports that 92% of local butcher shops in Scotland have reported increased patronage since the horsemeat scandal broke.

If complex supply chains are perceived as unreliable, consumers will forego the price benefits of frozen packaged food and choose to buy meat from a simpler and more transparent source. Such rational consumer behavior will likely do more to improve the quality of international supply chains than any tweak in complex regulatory oversight.

Topics: 
General, Regulatory Studies, Trade and Immigration

The Fed: ObamaCare “Leading to Layoffs”

By
Michael F. Cannon

The Hill has the story:

The Federal Reserve on Wednesday released an edition of its so-called “beige book,” that said the 2010 healthcare law is being cited as a reason for layoffs and a slowdown in hiring.

“Employers in several Districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff,” said the March 6 beige book, which examines economic conditions across various Federal Reserve districts across the country.

Or in other words, yes, ObamaCare will eliminate some 800,000 jobs.

Topics: 
General, Government and Politics, Health Care

Will the CR Delay ObamaCare?

By
Michael F. Cannon

Rep. Nita Lowey (D-NY) fears it will:

Lowey Statement on 2013 Continuing Resolution

Congresswoman Nita Lowey, Ranking Democrat on the House Appropriations Committee, today delivered the following statement on the House floor regarding the FY2013 Continuing Resolution and Defense and Military Construction/VA Appropriations bills:

Mr. Speaker, the bill before us contains a defense bill and a military construction/Veterans Affairs bill adjusting the FY 2012 funding levels to meet FY 2013 needs. It is unacceptable that federal agencies and departments covered by the 10 remaining bills would be forced to operate under full-year continuing resolutions based on plans and spending levels enacted 15-18 months ago.

Congress’ failure to do our jobs and pass responsible, annual spending bills limits our ability to respond to changing circumstances, implement other laws enacted by Congress, and eliminate funding that is no longer necessary.

Specifically, this bill will delay implementation of the Affordable Care Act, scheduled to begin enrolling participants in October. Without IT infrastructure to process enrollments and payments, verify eligibility and establish call centers, health insurance for millions of Americans could be further delayed.

But wait. The Obama administration says ObamaCare will roll out on schedule. Does Lowey know something?

Topics: 
General, Government and Politics, Health Care

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