Topic: Government and Politics

Downsize the Department of Agriculture

The Department of Agriculture spends over $150 billion dollars per year on various programs related to agriculture and food. It spends tens of billions on farm subsidies that largely go to growers of just a few crops: wheat, corn, soybeans, rice, and cotton. Beyond this, it subsidizes food through the federal food stamp program, which is rife with waste and corruption. It also regulates many agricultural products, most notably milk and sugar, setting minimum prices which artificially keep food prices high for consumers.

The federal government has little reason to be engaging in any of these activities, which should be left to the states in the case of food stamps, or eliminated entirely in the case of regulations or subsidies. This could save taxpayers $140 billion per year. To that end we’ve created a short video which makes these and other points, which you can watch below:

Even the Establishment Media Is Now Admitting the French Economic Model Is Fatally Flawed

Some things in life are very dependable. Every year, for instance, the swallows return to Capistrano.

And you can also count on Dan Mitchell to wax poetic about the looming collapse of French statism.

Geesh, looking at that list, I guess I’m guilty of - in the words of Paul Krugman - being part of the “plot against France” by trying to discredit that nation’s economy.

Or maybe I’m just ahead of my time because we’re now seeing articles that almost sound like they could have been written by me appearing in establishment outlets such as Newsweek. Check out some amazing excerpts from an article by Janine di Giovanni, who lives in France and serves as the magazine’s Middle East Editor.

…what is happening today in France is being compared to the revocation of 1685. …the king closed churches and persecuted the Huguenots. As a result, nearly 700,000 of them fled France, seeking asylum in England, Sweden, Switzerland, South Africa and other countries. The Huguenots, nearly a million strong before 1685, were thought of as the worker bees of France. They left without money, but took with them their many and various skills. They left France with a noticeable brain drain.

It’s happening again, except this time the cause is fiscal persecution rather than religious persecution. French politicians have changed the national sport from soccer to taxation!

Since the arrival of Socialist President François Hollande in 2012, income tax and social security contributions in France have skyrocketed. The top tax rate is 75 percent, and a great many pay in excess of 70 percent. As a result, there has been a frantic bolt for the border by the very people who create economic growth – business leaders, innovators, creative thinkers, and top executives. They are all leaving France to develop their talents elsewhere.

It’s an exaggeration to say “they are all leaving,” but France is turning Atlas Shrugged from fiction to reality.

Emergency UI Benefits: Reasons Against

The Senate is considering legislation to revive the emergency unemployment insurance program. These federally funded benefits were in place from mid-2008 to the end of 2013.

Federal policymakers like to spend money helping people in need, but there are large and less visible costs to such welfare legislation. Here are some reasons why new UI spending is not a good idea:

  • The U.S. economy has been out of recession and growing for more than four years. The unemployment rate is down to 7 percent and jobs are being created. The time for “emergency” UI benefits has passed and it’s time for us to go back to the regular benefit structure of 26 weeks. We all want the economy to grow faster and create more jobs, but the way to do that is to enact free market policies, not more welfare spending.
  • There is no free lunch. Extending UI benefits for another year would cost approximately $25 billion, which is money the federal government does not have. It would have to borrow every cent of the added spending, and thus impose those costs (plus interest) on working Americans in the future. Proponents of more UI spending point to sad stories of individuals out of work, but there will be far more pain inflicted on millions of Americans in coming years unless we get federal spending and debt under control.
  • Large UI benefits are counterproductive because they push up unemployment, as discussed here. Long-term unemployment has been particularly high in recent years. Meanwhile, employers may have a bias against hiring people who have been unemployed a long time. The upshot is that if generous UI benefits discourage people from taking less-than-optimal job offers early on, it ends up hurting them later when it is harder to find any job. Government “help” often backfires.
  • States can fund their own benefits. Nevada Sen. Dean Heller wants to “shrink the size” of the federal government, yet he is co-sponsoring legislation to revive emergency federal UI benefits because his state has high unemployment. But there is nothing stopping Nevada from funding its own extra UI benefits, and thus no need for Heller to try to impose the cost of his state’s problems on the other 49 states.
  • From a political perspective, it would be a big mistake for Republican leaders to go along with the push to spend more on UI. GOP leaders already caved in with more spending on the recent Ryan-Murray budget deal. If they cave in on UI, cave in on the costly farm bill, and cave in on upcoming debt-limit legislation, there would be no reason for fiscal conservatives to show up and vote Republican in November.    

Our current UI system is economically damaging, hugely complex, and fraud-ridden. Rather than adding to the system’s problems with higher benefits, policymakers should consider moving to a pro-growth savings-based UI system, as Chile has done.

Dean’s Dilemma: Capitalism or Welfare for Senator Heller?

Republican Sen. Dean Heller of Nevada has co-sponsored a bill to revive the emergency unemployment insurance program. Senate Majority Leader Harry Reid is pleased as punch that Heller is breaking with the “tea party folks” on the issue.

What’s Heller justification for taking the big government side and jacking up welfare spending? He says: “Providing a safety net for those in need is one of the most important functions of the federal government. As Nevada’s unemployment rate continues to top the charts nationwide, many families and individuals back home do not know how they are going to meet their basic needs.”

Perhaps Heller should spend more time with the “tea party folks.” They would direct him to this document to see whether handouts are indeed “one of the most important functions of the federal government.” And they would explain to him the concept of federalism: If Nevadans want larger UI benefits, their own legislature could provide them without having to loot the national treasury.

Yet Heller styles himself as a staunch fiscal conservative—a tea partier—so he should know this. From Heller’s biography on his Senate website:

Since coming to Congress, Heller has fought for smaller government, the elimination of wasteful spending, and a balanced budget. He has been at the forefront of the fight for fiscal responsibility in Washington, voted against hundreds of billions in tax increases, and fought the expansion of government and out-of-control spending. Heller is also the only member of the Nevada delegation to vote against the Wall Street bailout. In addition, Heller has fought for fiscal policies that promote economic recovery and believes controlling government spending will create an environment where businesses can flourish and foster long-term economic growth.

Not only that, but Heller thinks that “big government is not the answer to fixing our economy. Congress needs to control wasteful spending and shrink the size of government… Capitalism is the foundation of America’s prosperity. We should embrace these principles, not run from them.”

Furthermore, Heller argues that “this government has been on a massive spending spree for too long, and it is time for this reckless behavior to end. As an opponent of the stimulus and the only member of the Nevada delegation to vote against the bailout, I believe it is critical to rein in spending, address the yearly deficits, and get government debt under control.”

Those are all laudable goals. I couldn’t have said it better myself. But it is just empty rhetoric if one also goes around supporting borrow-and-spend welfare legislation.

Boost Worker Pay - and Make the United States More Competitive - by Gutting the Corporate Income Tax

The business pages are reporting that Chrysler will be fully owned by Fiat after that Italian company buys up remaining shares.

I don’t know what this means about the long-term viability of Chrysler, but we can say with great confidence that the company will be better off now that the parent company is headquartered outside the United States.

This is because Chrysler presumably no longer will be obliged to pay an extra layer of tax to the IRS on any foreign-source income.

Italy, unlike the United States, has a territorial tax system. This means companies are taxed only on income earned in Italy but there’s no effort to impose tax on income earned - and already subject to tax - in other nations.

Under America’s worldwide tax regime, by contrast, U.S.-domiciled companies must pay all applicable foreign taxes when earning money outside the United States - and then also put that income on their tax returns to the IRS!

And since the United States imposes the highest corporate income tax in the developed world and also ranks a dismal 94 out of 100 on a broader measure of corporate tax competitiveness, this obviously is not good for jobs and growth.

No wonder many American companies are re-domiciling in other countries!

Maybe the time has come to scrap the entire corporate income tax. That’s certainly a logical policy to follow based on a new study entitled, “Simulating the Elimination of the U.S. Corporate Income Tax.”

Written by Hans Fehr, Sabine Jokisch, Ashwin Kambhampati, Laurence J. Kotlikoff, the paper looks at whether it makes sense to have a burdensome tax that doesn’t even generate much revenue.

The U.S. Corporate Income Tax…produces remarkably little revenue - only 1.8 percent of GDP in 2013, but entails major compliance and collection costs. The IRS regulations detailing corporate tax provisions are tome length and occupy small armies of accountants and lawyers. …many economists…have suggested that the tax may actually fall on workers, not capitalists.

Europeans Debate Creating a Bigger Military Policy with a Smaller Military

A second marriage, it is said, is the triumph of hope over experience.  So is a European Union debate over defense.  At the latest European Council meeting in late December, European leaders again promised to do more than free ride on the U.S. 

It was hard enough to get the Europeans to divert cash from their generous welfare states during the Cold War when there was a plausible enemy.  The financial crisis, enduring recession, and Eurozone imbroglio have sapped what little interest most Europeans had in maintaining real militaries.  Earlier this year a top NATO official admitted at a private luncheon that “there is no chance for budget increases, not even for keeping spending levels as they are.” 

The Europeans have been embarrassed when going to war.  They ran out of missiles when fighting the grand legions of Libya’s Muammar Gaddafi.  France’s Little Napoleon, Francois Hollande, had to turn to the U.S. for air “lift” to get his forces to Mali in 2012. 

So European leaders have been issuing calls for better if not more spending—in fact, “smart defense” has become a NATO mantra.  But it doesn’t matter how smart you spend if you don’t spend much.

The latest Council meeting delivered what we have come to expect from the European Union: grandiose promises and minimal expectations.  Europe will grow only more dependent on America—at least if Americans allow it.

According to the Stockholm International Peace Research Institute, only Britain, France, Germany, Italy, and Spain fall within world’s top 20 military spenders.  Even that sounds more impressive than it really is.  London spends 8.9 percent of Washington’s outlays on the military.  Madrid spends 1.7 percent. 

Even the Central and Eastern Europeans, who claim to worry about Russia, are laggards.  As I point out in the American Spectator:

Whatever their rhetoric, these countries either don’t feel threatened or don’t want to be bothered to create even a minimal deterrent capability.  They all prefer that NATO, meaning America, prepare for a war which would be disastrous and would serve no conceivable U.S. interest.

The European Council admitted as much in its discussion of the Common Security and Defense Policy:  “Defense budgets in Europe are constrained, limiting the ability to develop, deploy and sustain military capabilities.”  Instead of urging more outlays, the Council called “on the Member States to deepen defense cooperation.”  But what if even the continent’s “big” powers, Britain and France, are shrinking their militaries? 

Indeed, Council members indicated they weren’t very serious even as they approved the latest communiqué.  First, Great Britain sought to keep Europe dependent on America through NATO.  Prime Minister David Cameron explained:  “It isn’t right for the European Union to have capabilities, armies, air forces and the rest of it.”

Second, France found little support from its fellow EU members for French military operations in Mali and the Central African Republic.  Paris did, however, win a Council call for a report on how the EU could address the “challenges and opportunities arising for the Union.” 

Europe will almost certainly continue its downward military descent.  The Europeans don’t believe they have to do anything, other than the bare minimum necessary to quiet U.S. complaints.  Their only fear is that Washington might eventually tire of playing GloboCop for countries that prefer to devote their resources to economic development and social welfare.

However, the U.S. should start saying no to European dependency.  The American military’s job is to most effectively and inexpensively defend America—its people, territory, liberty, and prosperity.  Safeguarding the European welfare state should not be Washington’s objective.

The U.S. should turn responsibility for Europe’s defense over to Europe and bring America’s troops home.  It’s time to dismantle the Cold War alliance and treaty structure.  And for America to invite Europe to take up its proper military responsibilities in a new and changing world.

Libertarian Views in the Republican Party: An Outlier

Last week, Ross Tilchin at Brookings asked whether a stronger appeal to libertarian voters could help Republicans win elections. He was skeptical:

First, according to the [Public Religion Research Institute] PRRI poll, libertarians represent only 12% of the Republican Party. This number is consistent with the findings of other studies by the Pew Research Center and the American National Election Study. This libertarian constituency is dwarfed by other key Republican groups, including white evangelicals (37%) and those who identify with the Tea Party (20%).

Tilchin’s use of the phrase “consistent with” to describe the findings of other studies is, well, interesting. In fact, other studies have found almost three times more libertarians in the Republican Party than PRRI’s poll.

As I blogged at Cato and found in a study for FreedomWorks, libertarian views in the Republican Party are the highest level in a decade. According to my analysis of American National Election Studies data, libertarians represent 35 percent of the Republican Party, an increase of 9 percentage points since 2000. Gallup’s own studies confirm this trend: libertarian views represent 34 percent of the Republican Party, a 19 percentage point increase since 2002. See chart below.

GG3

How exactly are 35 percent and 34 percent “consistent with” 12 percent? A better word to describe PRRI’s finding would be “outlier.”

As Karlyn Bowman pointed out at Brookings’ own forum on the subject, PRRI’s finding that libertarians are 7 percent of Americans is at the very low end of other estimates of libertarian voters. In 2011, Pew’s Typology Survey found 9 percent libertarians. In 2012, Gallup’s Governance Survey found 25 percent libertarians. Emily Ekins averaged seven Reason-Rupe polls from 2011 to 2012 and found libertarians represented 24 percent of Americans.

David Boaz and I, in our original study on the “Libertarian Vote,” took a conservative middle ground, estimating that libertarians were 15 percent of voters in 2004. Of course, even a conservative 15 percent is twice as many libertarians as the 7 percent PRRI choose to recognize. And, picking a smaller number, as PRRI does, makes it easier to question or dismiss libertarians’ importance.

Fortunately, there’s a simple way to make PRRI’s data “consistent with” other findings. PRRI’s methodology defines libertarians based on nine issue questions, ranking answers for their libertarian-ness on a 7-point scale, with 1 being the most libertarian, and 7 being the least. Robbie Jones and the other authors at PRRI defined “libertarians” as respondents who score between 9 and 25 points. Respondents who scored 26-33 were categorized as “lean libertarian.”

If we add PRRI’s two categories of “libertarian” and “lean libertarian,” the data show 23 percent of Americans are broadly libertarian. Using this definition, PRRI’s data are actually quite “consistent with” the findings from other studies:

  • PRRI’s data show libertarians represent 36 percent of Republican Party in 2013, consistent with ANES and Gallup data;
  • Libertarians are about the same size as other key constituencies in the Republican Party, such as white evangelicals; 
  • Libertarians represent 56 percent, or half, of the tea party, consistent with the finding in Emily Ekins and my Cato study, “Libertarian Roots of the Tea Party.”

Of course, how to define libertarians and who counts as a “real” libertarian is a favorite parlor game of libertarian intellectuals. Do you count only those “hard core” libertarians who have rigorously consistent beliefs? Or, do you count those who hold broadly libertarian views or instincts that are different than conservatives or liberals? If you think this is a simple question, just amuse yourself with GMU economist Bryan Caplan’s 64-question “Libertarian Purity Test.”

What is missing from the PRRI study is that it doesn’t deal with this past literature, or make an argument for its methodology, one way or the other. Particularly when your definition of libertarians is an outlier, your readers deserve to have the finding placed in context.

Regardless, the very fact that PRRI and Brookings did this study is an important milestone. For many years, libertarian voters were a research topic of interest to a small group of think tankers, writers, and contrarian political strategists, as well as a handful of curious academics. But when the Ford Foundation funds a major study on libertarian voters, and Brookings hosts a panel with scholars from PRRI, AEI, Cato, and the Ethics & Public Policy Center, I take this as a sign that libertarians are no longer politically ignorable.

That’s a good thing.