Europe’s Hard Choice

In Monday’s Financial Times, columnist Gideon Rachman presented a grim outlook for Greece and the European Union. He argues there are no good outcomes. There are three options. First, the EU can make concessions to Greece. Second, the EU can stand firm and allow Greece to leave the Euro. Third, the Greek government can accept the EU’s terms.

The first option represents a near-term victory for the Greek government. It also creates moral hazard within the broader EU. Governments in other countries implementing austerity measures would come under pressure. Populist parties would make further electoral gains across Europe. Consensus rule within the EU would become impossible.

It is feared the second route would put pressure on other countries, e.g., Spain and Italy, viewed as being vulnerable to the economic woes besetting the Greeks. That is an argument for “contagion.”

The third outcome may offer no long-term solution. Even were the Greek government largely to accept what the EU, the ECB and the IMF want to impose on it, that would likely not solve the Greek problem in the long run. Greece’s debt level would still likely be unsustainable. It is not clear that any government can implement the far-reaching economic reforms needed to put the Greek economy on a sustainable growth trajectory.

Richman’s analysis is cogent, if bleak.

Bobby Jindal’s Fiscal Record

Bobby Jindal, Governor of Louisiana, will officially announce his run for the White House this afternoon, joining the ever-growing Republican field. Jindal hopes his experience cutting state spending and shrinking the state’s workforce will help propel him to the presidency. However, like the other governors whose records we have highlighted, Jindal’s fiscal record is not without faults.

Jindal took office in January of 2008, and 2015 will be his last year in office. He has scored well on the Cato Fiscal Policy Report Card on America’s Governors earning an “A” in 2010, and a “B” in both 2012 and 2014. All three report cards commend Jindal’s resolve to cut Louisiana state spending.

Since fiscal year 2009, the first full fiscal year of Jindal’s term, state general fund spending has decreased by 7 percent. Per capita state spending has fallen from $2,089 in 2009 to $1,883 in 2015, a decrease of 10 percent. This spending restraint is quite remarkable. For comparison, per capita state spending grew nationally by 8.5 percent during the same time period.

State-by-State Data on the Number of Taxpayers King v. Burwell Would Free from Illegal Taxes

A ruling for the challengers in King v. Burwell would have benefits that swamp other effects of the ruling, including:

  • More than 67 million Americans would be freed from illegal taxes in the form of ObamaCare’s employer mandate.
  • More than 11 million Americans would be freed from an illegal tax averaging $1,200 (i.e., ObamaCare’s individual mandate).
  • Affected workers could receive a pay raise of around $900 per year.
  • The ruling could create an estimated 237,000 new jobs.
  • It could add an estimated 1.3 million workers added to the labor force.
  • It could result in more hours and higher incomes for 3.3 million part-time workers.

The number of people who could benefit from a ruling for the challengers is, therefore, more than ten times the number who would lose an illegal subsidy. And, as discussed here, the pool of people who need such subsidies may be as small as one-tenth the number receiving them.

Click here for state-by-state data on the number of employers and taxpayers who would benefit from King v. Burwell.

Europeans Rely on America to Protect Them from Vladimir Putin

Europe is at risk from Russia, we are told. But no one in Europe seems to care. Even the countries supposedly in Vladimir Putin’s gun sites aren’t much concerned.

Even if Russia threatens the continent, the Europeans don’t plan on defending themselves. Instead, virtually everyone expects America to save them, if necessary. Washington is being played for a sucker as usual.

Defense Secretary Ashton Carter recently announced that the United States. will contribute aircraft, weapons, and personnel to the “Very High Readiness Joint Task Force.” That’s not all. Separately, the Obama administration plans to pre-position tanks and other equipment for a combat brigade in Eastern Europe.

Carter explained that Washington was acting “because the United States is deeply committed to the defense of Europe, as we have for decades.” America is more committed to Europe than are Europeans.

Educational Choice: Getting It Right

Over the last couple weeks, the Thomas B. Fordham Institute has been holding its second annual Wonk-a-thon. In the wake of Nevada enacting a groundbreaking, nearly universal education savings account (ESA) law, Fordham asked practitioners, scholars, and policy analysts what Nevada must “get right in order to provide positive outcomes for kids and taxpayers.”

Readers can vote for the wonk who offered the wisest analysis here. For a summary of the various recommendations, see here.

ESAs have the potential to radically remake the education landscape. Rather than choose just a single school, parents can use ESA funds for a variety of educational goods and services. Students may spend part of a day in a classroom, part on a computer, and part with personal tutors. Someday, students may even learn in “education malls” where they will choose from among numerous education providers for each subject, each with a different approach or focus. Or perhaps there will be explosive growth in full or partial homeschooling or blended learning. Frankly, we cannot predict with any certainty how education will change over the next few decades in a robust market.

An Illustrated Guide to Civil Asset Forfeiture

This cheerfully drawn comic from the Daily Signal does an excellent job highlighting the insanity of civil asset forfeiture.  It begins with a quintessentially American premise: a young person setting out on his own, all wordly possessions in hand, to start a new life as an adult.  Far be it from me to spoil the rest:

 

Arresting your property

 

If such stories seem unbelievable (it is a cartoon after all), be sure and check out the recent all-too-real stories of Joseph Rivers and Charles Clarke, for whom this cartoon surely hits too close to home.  Even they are only the tip of the iceberg.

New Mexico has taken the initiative to end this inherently abusive practice once and for all, and there are active reform efforts underway in California, Michigan, Montana, Oklahoma, Maryland, and others. But until every other state and the federal government join in, these incredible tales of legalized theft and policing for profit will continue.

FreedomWorks recently released a handy map accompanying their report on state forfeiture laws. How does your state stack up?  

 

 

Are State Regulators A Source of Systemic Risk?

The Dodd-Frank Act creates the Financial Stability Oversight Council (FSOC).  One of the primary responsibilities of the FSOC is to designate non-banks as “systemically important” and hence requiring of additional oversight by the Federal Reserve.  Setting aside the Fed’s at best mixed record on prudential regulation, the intention is that additional scrutiny will minimize any adverse impacts on the economy from the failure of a large non-bank.  The requirements and procedures of FSOC have been relatively vague.  We have, however, gained some insight into the process since MetLife has chosen to contest FSOC’s designation of MetLife as systemically important.