Cato at Liberty
Cato at Liberty
Government and Politics
Before he launched his presidential campaign, Jeb Bush released his emails from his eight years as governor. Now he’s released a 700-page book of selected emails. According to Amazon’s search function, I’m not in the book. But I did have a brief exchange with Governor Bush in 2003. As a libertarian, I wasn’t convinced by his argument. But I was impressed that the governor personally answered an email that I didn’t even send to him but rather to a member of his press staff. Governor Bush announced the creation of the Governor’s Task Force on the Obesity Epidemic, with such goals as:
- Recommend ways to promote the recognition of overweight and obesity as a major public health problem in Florida that also has serious implications for Florida’s economic prosperity;
- Review data and other research to determine the number of Florida’s children who are overweight or at risk of becoming overweight;
- Identify the contributing factors to the increasing burden of overweight and obesity in Florida;
- Recommend ways to help Floridians balance healthy eating with regular physical activity to achieve and maintain a healthy or healthier body weight;
- Identify and research evidenced-based strategies to promote lifelong physical activity and lifelong healthful nutrition, and to assist those who are already overweight or obese to maintain healthy lifestyles;
- Identify effective and culturally appropriate interventions to prevent and treat overweight and obesity;
When the announcement of this task force reached my inbox, courtesy of the governor’s office press list, I had this exchange (read from the bottom):
From: Jeb Bush [mailto:jeb@jeb.org]
Sent: Thursday, October 16, 2003 8:05 PM
To: David Boaz
Cc: jill.bratina@myflorida.com
Subject: FW: Executive Order Number 03–196
David, the reason for this is that obesity creates huge costs to government. If you believe in limited government, you should support initiatives that reduce it. I know you believe that it is not the role of government to deal with these demands, which I respect, but until you win the day, we need to respond to the challenge.
Jeb
—–Original Message—–
From: David Boaz [mailto:dboaz@cato.org]
Sent: Wednesday, October 15, 2003 10:30 AM
To: DiPietre, Jacob
Subject: RE: Executive Order Number 03–196
Why is what I eat any of the government’s business? This is the very definition of big government.
—–Original Message—–
From: DiPietre, Jacob [mailto:Jacob.DiPietre@MyFlorida.com]
Sent: Wednesday, October 15, 2003 10:21 AM
To: ALL OF EOG, OPB & SDD
Subject: Executive Order Number 03–196
Memorandum
DATE: October 15, 2003
TO: Capital Press Corps
FROM: Jill Bratina, Governor’s Communications Director
RE: Executive Order Number 03–196
Please find attached an Executive Order creating the Governor’s Task Force on the Obesity Epidemic.
As I said, I wasn’t persuaded. I’ve written that obesity is not in fact a public health problem. It may be a widespread health problem, but you can’t catch obesity from doorknobs or molecules in the air. And the idea that our personal choices impose costs on government, through semi-socialized medicine and similar programs, has no good stopping point. If obesity is the government’s business, then so are smoking, salt intake, motorcycle riding, insufficient sleep, cooking all the nutrients out of vegetables, and an endless stream of potentially sub-optimal decisions. (I was going to include drinking whole milk, but … well, you know.)
I’m glad to note that last month Jeb Bush said that a federally developed anti-obesity video game, “Mommio,” was a waste of “scarce resources.” Maybe he’s coming around.
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Presidential candidates Ted Cruz and Rand Paul have proposed value-added taxes (VATs) as part of their tax reform plans.
I critique these taxes in National Review today, arguing that they could become engines of big government growth.
Cruz and Paul are champions of small government, and so their embrace of VATs is unfortunate, and also potentially dangerous.
Dangerous because VATs are probably the only way that liberals would be able to fund the huge projected growth in unreformed entitlement programs in coming years.
In a worse-case scenario under the current tax system, liberals would succeed in hiking income taxes, but they wouldn’t be able to seize much more money because the income tax base is so mobile in today’s global economy. The corporate income tax, for example, is a complex and damaging tax, but it is not capable of raising the government any more revenue than it already does.
But in a worst-case scenario under a Cruz or Paul VAT, the government would be able to confiscate far more money as the VAT rate were jacked up over time. It is no coincidence that Western European governments—with their VATs—collect substantially higher revenues as a share of GDP than we do.
In a best-case scenario, reformers like Cruz and Paul will lead the charge to cut entitlements and enact a simpler, lower, pro-growth tax code. But we have to consider how liberals will work to hijack new tax structures and try to drive us in the opposite direction.
Cruz and Paul are heroes for their battles against the GOP establishment on overspending and other issues. But I fear their tax plans would not move us in the small-government direction they want to go in over the long run.
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The government of China has launched its 13th five-year plan (known as 13.5), sticking with the form if not the substance of Stalinism. But in our modern and networked world, China wants the world to understand its planning process, so it released this catchy video in American English:
The video explains how comprehensive the planning process is:
Every five years in China, man
They make a new development plan!
The time has come for number 13.
The shi san wu, that’s what it means!
There’s government ministers and think tank minds
And party leadership contributing finds.
First there’s research, views collected,
Then discussion and views projected.
Reports get written and passed around
As the plan goes down from high to low,
The government’s experience continues to grow.
They have to work hard and deliberate
Because a billion lives are all at stake!
It must be smart: note the picture of Einstein along with Chinese leaders such as Mao Zedong (around 0:50).
Of course, this “planning process” doesn’t work. In the best of circumstances, it’s no match for a billion producers and consumers making decisions every day about what actions are likely to better their own condition. It’s characterized by bureaucracy, backward-looking decisions, and cronyism. In less-than-ideal circumstances, when the planners are armed with total power and inspired by an ideological belief that they can actually direct the activities of millions of people, as in China from 1949 to 1979, the results are disastrous: poverty, starvation, and even cannibalism. Fortunately, after 1979, the planners led by Deng Xiaoping began to dismantle the system of collective farming and to allow Chinese farmers to make many of their own decisions, and growth took off. Plans work better when they allow individuals to plan.
I wrote about planning in The Libertarian Mind:
It is the absence of market prices that makes socialism unworkable, as Ludwig von Mises pointed out in the 1920s. Socialists have often considered the question of production an engineering question: Just do some calculations to figure out what would be most efficient. It’s true that an engineer can answer a specific question about the production process, such as, What’s the most efficient way to use tin to make a 10-ounce soup can, that is, what shape of can would contain 10 ounces with the smallest surface area? But the economic question—the efficient use of all relevant resources—can’t be answered by the engineer. Should the can be made of aluminum, or of platinum? Everyone knows that a platinum soup can would be ridiculous, but we know it because the price system tells us so. An engineer would tell you that silver wire would conduct electricity better than copper. Why do we use copper? Because it delivers the best results for the cost. That’s an economic problem, not an engineering problem.
Without prices, how would the socialist planner know what to produce? He could take a poll and find that people want bread, meat, shoes, refrigerators, televisions. But how much bread and how many shoes? And what resources should be used to make which goods? “Enough,” one might answer. But, beyond absolute subsistence, how much bread is enough? At what point would people prefer a new pair of shoes to more food? If there’s a limited amount of steel available, how much of it should be used for cars and how much for ovens? What about new goods, which consumers don’t yet know they’d like? And most important, what combination of resources is the least expensive way to produce each good? The problem is impossible to solve in a theoretical model; without the information conveyed by prices, planners are “planning” blind.
In practice, Soviet factory managers had to establish markets illegally among themselves. They were not allowed to use money prices, so marvelously complex systems of indirect exchange—or barter—emerged. Soviet economists identified at least eighty different media of exchange, from vodka to ball bearings to motor oil to tractor tires. The closest analogy to such a clumsy market that Americans have ever encountered was probably the bargaining skill of Radar O’Reilly on the television show M*A*S*H. Radar was also operating in a centrally planned economy—the U.S. Army—and his unit had no money with which to purchase supplies, so he would get on the phone, call other M*A*S*H units, and arrange elaborate trades of surgical gloves for C rations for penicillin for bourbon, each unit trading something it had been overallocated for what it had been underallocated. Imagine running an entire economy like that.
Despite the total failure of total planning, I wrote,
the Holy Grail of planning dies hard among intellectuals. What is President Obama’s health care plan but a central plan for one-seventh of the American economy? [And see also his promise of “strategic decisions about strategic industries.”] President Bill Clinton had offered an even more breathtaking view of the ability and obligation of government to plan the economy:
We ought to say right now, we ought to have a national inventory of the capacity of every… manufacturing plant in the United States: every airplane plant, every small business subcontractor, everybody working in defense.
We ought to know what the inventory is, what the skills of the work force are and match it against the kind of things we have to produce in the next 20 years and then we have to decide how to get from here to there. From what we have to what we need to do.After the election, a White House aide named Ira Magaziner fleshed out this sweeping vision: Defense conversion would require a twenty-year plan developed by government committees, “a detailed organizational plan… to lay out how, in specific, a proposal like this could be implemented.” Five-year plans, you see, had failed in the Soviet Union; maybe a twenty-year plan would be sufficient to the task.
China’s catchy jingle can’t obscure the fact that central economic planning is a misguided holdover from the era of centralized industries and centralized governments. It’s increasingly backward in a dynamic world of instant communication, global markets, and unprecedented access to information.
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In the 15 months since the president unilaterally launched our latest war in the Middle East, he’s repeatedly pledged that he wouldn’t put U.S. “boots on the ground” in Syria. As he told congressional leaders on September 3, 2014, “the military plan that has been developed” is limited, and doesn’t require ground forces.
Alas, if you liked that plan, you can’t keep it. Earlier today, the Obama administration announced the deployment of U.S. Special Forces to Northern Syria to assist Kurdish troops in the fight against ISIS. U.S. forces will number “fewer than 50,” in an “advise and assist” capacity; they “do not have a combat mission,” according to White House press secretary Josh Earnest. Granted, when “advise and assist” missions look like this, it can be hard for us civilians to tell the difference.
Asked about the legal authorization for the deployment, Earnest insisted: “Congress in 2001 did give the executive branch the authority to take this action. There’s no debating that.”
It’s true that there hasn’t been anything resembling a genuine congressional debate over America’s war against ISIS. But the administration’s legal claim is eminently debatable. It’s based on the 2001 authorization for the use of military force, or AUMF, the Congress passed three days after 9/11, targeting those who “planned, authorized, [or] committed” the attacks (Al Qaeda) and those who “aided” or “harbored” them (the Taliban).
In 2013, Obama administration officials told the Washington Post that they were “increasingly concerned the law is being stretched to its legal breaking point.” That was before they’d stretched it still further, 15 months later, to justify war against ISIS, a group that’s been denounced and excommunicated by Al Qaeda and is engaged in open warfare with them. Headlines like “ISIS Beheads Leader of Al Qaeda Offshoot Nusra Front,” or “Petraeus: Use Al Qaeda Fighters to Beat ISIS” might give you cause to wonder–or even debate!–whether this is the same enemy Congress authorized President Bush to wage war against, back before Steve Jobs unveiled the first iPod.
In the Obama theory of constitutional war powers, Congress gets a vote, but it’s one Congress, one vote, one time. This is not how constitutional democracies are supposed to go to war. But it’s how we’ve drifted into a war that the Army chief of staff has said will last “10 to 20 years.” Sooner or later, we’ll have cause to regret the normalization of perpetual presidential war, but any congressional debate we get will occur only after the damage has already been done.
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Hands On Originals, a t‑shirt printing company in Kentucky, refused to print t‑shirts promoting a gay-pride event, the Lexington Pride Festival. Its owners weren’t objecting to any customers’ sexual orientation; instead, they objected only to the ideological message conveyed by the shirts.
The Gay and Lesbian Services Organization nevertheless filed a complaint with the Lexington-Fayette Urban County Human Rights Commission under an antidiscrimination ordinance that bans public accommodations from discriminating against individuals based on sexual orientation. The Commission ruled against Hands On Originals, but the state district court reversed on free speech and free exercise grounds.
The case is now before the Kentucky Court of Appeals, where Cato filed an amicus brief, drafted by Prof. Eugene Volokh and UCLA’s First Amendment clinic. Our brief urges the court to uphold the right of printers to choose which speech they will help disseminate and which they won’t.
In Wooley v. Maynard (1977)—the “Live Free or Die” license-plate case—the Supreme Court held that people may not be required to display speech with which they disagree because the First Amendment protects the “individual freedom of mind.” Wooley’s logic applies equally to Hands On Originals’ right not to print messages with which they disagree, which is an even greater imposition than having to passively carry the state motto on your car’s tag.
Thanks to Prof. Volokh and his student, Ashley Phillips, for their work on the brief, and on this blogpost.
The tax-reform landscape is getting crowded.
Adding to the proposals put forth by other candidates (I’ve previously reviewed the plans offered by Rand Paul, Marco Rubio, Jeb Bush, Bobby Jindal, and Donald Trump), we now have a reform blueprint from Ted Cruz.
Writing for the Wall Street Journal, the Texas Senator unveiled his rewrite of the tax code.
…tax reform is a powerful lever for spurring economic expansion. Along with reducing red tape on business and restoring sound money, it can make the U.S. economy boom again. That’s why I’m proposing the Simple Flat Tax as the cornerstone of my economic agenda.
Here are the core features of his proposal.
…my Simple Flat Tax plan features the following: • For a family of four, no taxes whatsoever (income or payroll) on the first $36,000 of income. • Above that level, a 10% flat tax on all individual income from wages and investment. • No death tax, alternative minimum tax or ObamaCare taxes. • Elimination of the payroll tax and the corporate income tax… • A Universal Savings Account, which would allow every American to save up to $25,000 annually on a tax-deferred basis for any purpose.
From an economic perspective, there’s a lot to like. Thanks to the low tax rate, the government no longer would be imposing harsh penalties on productive behavior. Major forms of double taxation such as the death tax would be abolished, creating a much better environment for wage-boosting capital formation.
And I’m glad to see that the notion of a universal savings account,
popularized by my colleague Chris Edwards, is catching on.
Moreover, the reforms Cruz is pushing would clean up some of the most complex and burdensome sections of the tax code.
But Cruz’s plan is not a pure flat tax. There would be a small amount of double taxation of income that is saved and invested, though the adverse economic impact would be trivial because of the low tax rate.
And the Senator would retain some preferences in the tax code, which is somewhat unfortunate, and expand the earned income credit, which is more unfortunate.
It maintains the current child tax credit and expands and modernizes the earned-income tax credit… The Simple Flat Tax also keeps the current deduction for all charitable giving, and includes a deduction for home-mortgage interest on the first $500,000 in principal.
But here’s the part of Cruz’s plan that raises a red flag. He says he wants a “business flat tax,” but what he’s really proposing is a value-added tax.
…a 16% Business Flat Tax. This would tax companies’ gross receipts from sales of goods and services, less purchases from other businesses, including capital investment. …My business tax is border-adjusted, so exports are free of tax and imports pay the same business-flat-tax rate as U.S.-produced goods.
His proposal is a VAT because wages are nondeductible. And that basically means a 16 percent withholding tax on the wages and salaries of all American workers (for tax geeks, this part of Cruz’s plan is technically a subtraction-method VAT).
Normally, I start foaming at the mouth when politicians talking about value-added taxes. But Senator Cruz obviously isn’t proposing a VAT for the purpose of financing a bigger welfare state.
Instead, he’s doing a swap, imposing a VAT while also getting rid of the corporate income tax and the payroll tax.
And that’s theoretically a good deal because the corporate income tax is so senselessly destructive (swapping the payroll tax for the VAT, as I explained a few days ago in another context, is basically a wash).
But it’s still a red flag because I worry about what might happen in the future. If the Cruz plan is adopted, we’ll still have the structure of an income tax (albeit a far-less-destructive income tax). And we’ll also have a VAT.
So what happens 10 years from now or 25 years from now if statists control both ends of Pennsylvania Avenue and they decide to reinstate the bad features of the income tax while retaining the VAT? They now have a relatively simple way of getting more revenue to finance European-style big government.
And also don’t forget that it would be relatively simple to reinstate the bad features of the corporate income tax by tweaking Cruz’s business flat tax/VAT.
By the way, I have the same specific concern about Senator Rand Paul’s tax reform plan.
My advice to both of them is to ditch the VAT and keep the payroll tax. Not only would that address my concern about enabling the spending proclivities of statists in the future, but I also think Social Security reform is more feasible when the system is financed by the payroll tax.
Notwithstanding my concern about the VAT, Senator Cruz has put forth a plan that would be enormously beneficial to the American economy.
Instead of being a vehicle for punitive class warfare and corrupt cronyism, the tax code would simply be the method by which revenue was collected to fund government.
Which gives me an opportunity to raise an issue that applies to every candidate. Simply stated, no good tax reform plan will be feasible unless it’s accompanied by a serious plan to restrain government spending.