Topic: Tax and Budget Policy

And the Award for Most Hypocritical Performance by a Member of Congress Goes To…

During the House Agriculture Committee’s debate over a new farm bill, Tennessee Republican Stephen Fincher cited 2 Thessalonians 3:10 in defending relatively small cuts in food stamps after Rep. Juan Vargas’s (D-CA) cited Jesus’s call to feed the hungry: 

“For also, when we were with you, this we declared to you: that, if any man will not work, neither let him eat.”     

The federal government uses force and the threat of violence to obtain the money that is used to pay for food stamps, so I would argue that Rep. Vargas badly misunderstands what the Prince of Peace was getting at. But whereas Vargas was wrong, Rep. Fincher’s biblical counterpunch was breathtakingly hypocritical. As it turns out, Fincher has likely received millions of dollars in federal farm subsidy payments over the years. 

From the New York Times: 

Using Agriculture Department data, researchers at the Environmental Working Group found that Representative Stephen Fincher, a Republican and a farmer from Frog Jump, Tenn., collected nearly $3.5 million in subsidies from 1999 to 2012. The data is part of the research group’s online farm subsidy database, from which the group issues a report each year. 

In 2012 alone, the data shows, Mr. Fincher received about $70,000 in direct payments, money that is given to farmers and farmland owners, even if they do not grow crops. It is unclear how much Mr. Fincher received in crop insurance subsidies because the names of people receiving the subsidies are not public. The group said most of the agriculture subsidies go to the largest, most profitable farm operations in the country. These farmers have received $265 billion in direct payments and farm insurance subsidies since 1995, federal records show. 

During debate on the farm bill in the House Agriculture Committee last week, Mr. Fincher was one of the biggest proponents of $20 billion in cuts to food stamps in the legislation. At times he quoted passages from the Bible in defending the cuts. 

“We have to remember there is not a big printing press in Washington that continually prints money over and over,” Mr. Fincher said during the debate. “This is other people’s money that Washington is appropriating and spending.”

Yes, Rep. Fincher – and it’s other people’s money that’s been going into your back pocket. As another recent quote from Fincher indicates, the congressman either doesn’t recognize his hypocrisy or he doesn’t care. (I can’t decide which is worse.) 

From the International Business Times: 

“But more than that, the role of citizens, of Christians, of humanity, is to take care of each other,” Fincher said at a Memphis event last week. “But not for Washington to steal money from those in the country and give it to others in the country. Our role is out of control.”

Stunning. 

Rep. Fincher’s inability or unwillingness to remove the plank in his own eye is yet another example of how Republicans are generally lousy at making the case for spending cuts. They mock President Obama’s stimulus job creation claims, but turn around and argue that military spending cuts will kill jobs and hurt the economy. They complain about Solyndra and the White House’s crony capitalist schemes, but they work to secure the same handouts for companies back in the district. They rant against big government but continue to vote for it. Etc, etc. 

Both food stamps and farm subsidies should be cut, and preferably, eliminated. Unfortunately, there are too few members of Congress who are willing and able to make the case.    

Mirror, Mirror on the Wall, Which Country Has the Most Expensive Bureaucrats of All?

I’ve complained endlessly about America’s bloated and expensive government bureaucracies. It irks me that people in the productive sector get slammed with ever-higher taxes in part to support a gilded class of paper pushers who have climbed on the gravy train of public sector employment.

It even bothers me that bureaucrats put in fewer hours on the job than private-sector workers, even though I realize the economy probably does better when government employees are lazy (after all, we probably don’t want hard-working OSHA inspectors, Fannie and Freddie regulators, and IRS bureaucrats).

But sometimes it helps to realize that things could be worse. And based on some international data from my “friends” at the OECD, let’s be thankful the United States isn’t Denmark.

That’s because nearly 20 percent of Denmark’s economic output is diverted to pay the salaries and benefits of bureaucrats, compared to “only” about 11 percent of GDP in the United States.

Bureaucrat Costs

Not only are bureaucrats nearly twice as expensive in Denmark as in the United States, they’re also much more expensive in Denmark than in other Nordic nations.

Speaking of Nordic nations, they tend to get bad scores because a very large share of their populations are feeding at the government employment teat.

Bureaucrat share of labor force

Whether we’re looking at the total cost of the bureaucracy or the number of bureaucrats, the United States is a middle-of-the-pack country.

But I am somewhat surprised by some of the other results.

  • Germany is significantly better than the United States, whether measured by the cost of the bureaucracy or the size of the bureaucracy.
  • Japan also does much better than America, notwithstanding that nation’s other problems.
  • In the I’m-not-surprised category, France does poorly and Switzerland does well.
  • To see where bureaucrats are most overpaid, look at the nations (particularly Greece, but also Portugal and Spain) where overall pay is a very large burden but bureaucrats are not a big share of the workforce.
  • To see where the trends are most worrisome, look at the changes over time. The total cost of bureaucracy, for instance, jumped considerably between 2000 and 2009 in Ireland, Greece, the United Kingdom, Denmark, Spain, and the United States. So much for “austerity.”

P.S. These numbers are only for OECD nations, so it’s quite possible that other jurisdictions are worse. To cite just one example, I was one of the researchers for the Miller-Shaw Commission, which discovered several years ago that fiscal problems in the Cayman Islands are almost entirely a function of too many bureaucrats with too much compensation.

P.P.S. Here’s my video on the cost of bureaucracy in the United States.

P.P.P.S. Denmark has a bloated and costly bureaucracy, but it compensates by having very pro-market policies in areas other than fiscal policy.

P.P.P.P.S. Perhaps the numbers are bad in Denmark because people like Robert Nielson are listed on government payrolls as independent leisure consultants?

Five Reasons to Repeal Farm Subsidies

Cato held a packed forum on Capitol Hill yesterday examining major farm legislation that is moving through Congress. Our panelists included Andrew Moylan of R Street, Josh Sewell of Taxpayers for Common Sense, and Scott Faber of the Environmental Working Group.

I discussed five reasons why farm subsidies make no sense.

1. Unfair Redistribution. Farm programs take from average taxpayers and give to higher-income farm households, which is a reverse Robin Hood scheme. In 2011 average incomes of farm households was $87,289, or 25 percent higher than the $69,677 average of all U.S. households.

2. Economic Distortions. Farm subsidies can induce excess production, an overuse of marginal farmland, and land price inflation. Subsidies can cause less efficient planting, induce excess borrowing by farmers, and cause insufficient attention to cost control. Farm businesses have less incentive to innovate and control their costs because they know that the government will always bail them out.

3. Environmental Damage. Farm subsidies tend to draw marginal farmland into production, lands that might otherwise be used for forests or wetlands. Subsidies can also induce excess use of fertilizers and pesticides in farm production.

4. Farming Not Unique. Why is farming so coddled by the government? It’s a risky business, but not uniquely so. Industries such as high technology, newspapers, and restaurants are very risky, yet they don’t rely on government handouts. Farming faces certain risks such as adverse weather. But high-tech companies are vulnerable to rapid innovations by competitors, and restaurants are vulnerable to changing consumer tastes and intense competition.

Farmers are supposed to be rugged individualists, so is it strange that they don’t feel more guilt and embarrassment about sponging off taxpayers decade after decade. Instead, farm organizations intensely lobby to keep and expand their welfare handouts from the government.

5. Farming Would Thrive Without Subsidies. If farm subsidies were ended, farming would go through a transition period, which would be tough on some farmers. But farmers would adjust by changing their mix of crops, altering their land use, cutting costs, innovating with new crops and new technologies. Some farms would go bankrupt. But a stronger and more innovative agriculture industry would emerge that would be more productive and more resilient in the long run.

Consider New Zealand’s reforms in the 1980s. That country eliminated nearly all its agriculture subsidies, which created challenges for the nation’s farmers. But New Zealand farmers turned out to be great entrepreneurs, and they made impressive changes to survive and thrive in the new free market environment. Today, New Zealand farmers generally don’t want subsidies, and they argue that we would be all better off without them.

More

Photo credit: Sarah Gormley, Cato

Food Stamps and the House Farm Bill

Debate on the House Agriculture Committee’s version of the next farm bill will begin in the Republican-controlled chamber in June. One of the most contentious issues will be spending on the Supplemental Nutrition Assistance Program (SNAP, a.k.a, food stamps). The House Ag bill would cut SNAP spending by $20.5 billion over 10 years versus the Congressional Budget Office’s baseline. That’s too much for Democrats and it might be too little for conservative Republicans. 

Earlier in the week I wrote that the federal government should not administer or fund anti-poverty programs. Unfortunately, both Republicans and Democrats support big government so that isn’t an option. So let’s put the proposed cuts in food stamps in perspective.

The first chart shows the dramatic increase in inflation-adjusted SNAP spending since 2000. (See here for a quick background on what caused SNAP spending to more than triple since 2000).

 

The second chart shows the projected amount of spending under the House Ag bill versus the CBO’s baseline. Sum up the difference and you get the $20.5 billion over 10 years in cuts. On an annualized basis, it becomes clear that we’re hardly talking about major cuts to the food stamps program. Moreover, as the first chart shows, spending would remain near the elevated levels of recent years.

 

CBO’s Tax Expenditure Report Uses Wrong Benchmark, Overstates Loopholes

As a long-time advocate of tax reform, I’m not a fan of distortionary loopholes in the tax code. Ideally, we would junk the 74,000-page internal revenue code and replace it with a simple and fair flat tax - meaning one low rate, no double taxation, and no favoritism.*

The right kind of tax reform would generate more growth and also reduce corruption in Washington. Politicians no longer would have the ability to create special tax breaks for well-connected contributors.

But we won’t get to the right destination if we have the wrong map, and this is why a new report about “tax expenditures” from the Congressional Budget Office is so disappointing.

As you can see from this excerpted table, CBO makes the same mistake as the Tax Policy Center and assumes that there should be double taxation of income that is saved and invested. As such, they list IRAs and 401(k)s as tax expenditures, even though those provisions merely enable people to avoid being double-taxed.

Likewise, the CBO report assumes that there should be double taxation of dividends and capital gains, so provisions to guard against such destructive policies also are listed as tax expenditures.

CBO Tax Expenditure List

Should Murderers and Rapists Get Food Stamps?

Last week, the Senate accepted by unanimous consent an amendment to the pending farm bill that would ban convicted murderers, rapists, and pedophiles from receiving Supplemental Nutrition Assistance Program benefits (a.k.a. food stamps). Introduced by Louisiana Republican David Vitter, the amendment has received condemnation from the left and at least one round of applause on the right. 

My initial reaction was “A few undesirables will lose a taxpayer-financed handout—so what?” But the more I thought about the amendment, the less I cared for it. For starters, the amendment appears to be politically motivated. Vote against it and a Senator can expect to see a negative campaign add from his or her next opponent. That’s probably why the amendment was agreed to by unanimous consent instead of being formally voted on in the Democratic-controlled Senate.   

More importantly, what does it accomplish? In terms of budgetary savings, it probably won’t save taxpayers much money. In addition to doing little to curb the size of government, it does nothing to rein in the federal government’s scope. I believe that it is not a proper role of the federal government to fund and/or administer anti-poverty programs. At most, such concerns should be the domain of state and local governments. Ideally, poverty relief would be completely handled by charities and other private organizations. The Vitter amendment, however, is just another example of the Beltway’s one-size-fits-all mentality. 

So should an individual convicted of a horrible crime who has paid his or her dues to society be denied assistance? Some would say yes, others would say no. The left has a case when they argue that denying assistance to an ex-criminal could have the unintended consequence of incentivizing further criminal activity. But the right also has a case that, hey, that’s our hard-earned money being taken from the government and being handed over to people who made awful choices. 

The diversity of opinion points to a fundamental problem with the government trying to act like a charity: the country gets stuck with whatever the politicians conjure up. Contrary to what youngsters are led to believe in school, our elected officials are not altruistic, enlightened beings. In reality, federal efforts to alleviate poverty will always be undermined by the self-serving nature of politics. And even when approached with the noblest of intentions, bureaucratic sclerosis and the undue influence of special interests will ultimately undermine a program’s effectiveness and efficiency.   

Personally, I would have no problem donating to a charity that helps struggling ex-cons who need to put food on the family table. Perhaps other people wouldn’t feel as comfortable and would instead direct their donations toward charities that only serve, say, hungry women and children who were the victims of violent crime. That’s the beauty of choice, which stands in stark contrast to the ugly, coercive alternative of the political system.     

The Real Reason Politicians Want a Bigger Bite of Apple

Earlier this month, I explained four reasons why the Apple “tax avoidance” issue is empty political demagoguery.

And Rand Paul gave some great remarks at a Senate hearing, excoriating some of his colleagues for trying to pillage the company.

But this Robert Ariail cartoon may be the best summary of the issue.

Arial Apple Cartoon

What makes this cartoon so effective is that it properly and cleverly identifies what’s really driving the political class on this issue. They want more revenue to finance a bigger burden of government spending.

When I did my contest for best political cartoonist, I picked a cartoon about Greece and euro for Robert Ariail’s entry. While I still think that was a very good cartoon, this Apple cartoon would probably take its place if I did a new contest.