Topic: Tax and Budget Policy

Hitler’s America? Only to an Anti-Trade Liberal

In an op-ed in today’s Wall Street Journal the political liberal Thomas Frank paints a Depression-era picture of American workers and households.

“Real hourly wages for most workers … have risen only 1% since 1979,” he writes. Median “non-elderly” household income is down since 2000. Americans work more hours per year than their counterparts in other industrialized countries. The phrase “modern American slave labor” even finds its way into his column. All this reminds Frank of “those what-if stories in which Hitler wins World War II. Could this really have happened to my country?”

What is to blame for this “disaster”? According to Frank, “tax cuts, trade agreements, deregulatory measures, and enforcement decisions all finely crafted to benefit one part of society and leave the rest of us behind.”

Facts on the ground show a far different America. In a study from last October, titled “Trading Up,” I found that expanding trade and trade agreements have actually lifted the living standards of most Americans. Consider a few facts that directly contradict Frank’s doom-saying:

  • In the past decade, the average hourly real compensation—wages and benefits adjusted for inflation—earned by American workers is up 22 percent.
  • Median household income for all Americans (what, don’t the elderly count, too?) is up 6 percent in the past decade.
  • The share of American households earning LESS than $35,000 a year continues to fall.
  • The median net worth of American families, adjusted for inflation, is up by more than one-third since the mid-1990s.
  • Total employment is up by 16.5 million and the unemployment rate is down. (And since when did liberals find it objectionable that Americans seem to have plenty of work to do?)

Critics of free markets and free trade may find it politically expedient to paint a grim picture of economic “stagnation,” but in the real world Americans continue to progress.

The Gas Tax Holiday Explained

The commentariat (including Cato folks and friends) have spent the past couple of weeks sounding off on John McCain and Hillary Clinton’s proposals to suspend the federal motor fuels tax this summer. The commentary has been almost uniformly critical of the idea, and some of the harshest critics have been economists.

Unfortunately, a lot of this commentary seems to be value judgments disguised as economics. Also, much of the economic analysis makes assumptions about the market that may not be correct or that may be offset by other market conditions — but the commentators do not mention (and may even forget) those problems. Put simply, though the idea of a gas tax holiday may be flawed, many of the opinion and analysis pieces on the McCain and Clinton proposals appear to be flawed as well.

Peter Van Doren and I have put together this short paper on the microeconomics of the gas tax. Don’t let the figures and the talk of “elasticities” throw you — the ideas are easy to understand.

The upshot is this: Contrary to many economists’ claims, it’s quite possible that a tax holiday could give consumers some price relief on motor fuels. (This is an economic insight.) However, it’s an open question whether that savings is worth its cost. (Answering that question requires a value judgment.)

Prevention Is Better than Cure: More on That Veto Override

As I should have mentioned in my previous post, the House and Senate are likely to vote on the Farm Bill conference report tomorrow.

The bill, an abysmal one that carries a price tag of roughly $300 billion, will likely pass easily in the Senate, where an earlier version of the bill sailed through the chamber last year in a 79-14 vote.

So the questions over the possibility of an override center mainly on the House, which will likely see a closer vote, but not by much.

If House Republicans are unable to secure enough votes to sustain a veto, it would signify a remarkable failure of their leadership, especially of House Minority Leader John Boehner. Boehner has publically opposed the bill, but - along with House Minority Whip Roy Blunt - has refused to actively push his Republican colleagues to do the same.

An article in today’s The Hill notes:

[L]obbyists said members were being told to “vote their districts,” meaning they could support the measure without fearing any consequence from leadership.

What’s worse is that the bill probably could have been improved upon, much earlier in the process. The Republican leadership has full discretion over committee assignments. Instead of seating on the Agriculture Committee a balanced array of viewpoints, the House GOP leadership has chosen a collection of members that hail almost universally from farm-heavy districts and are greatly predisposed to support an increase in agricultural spending.

In fact, an informal vote count compiled by the office of Rep. Jeff Flake suggests that every single Republican member of the House Agriculture Committee is likely to support the Farm Bill tomorrow.

What would the bill look like if Rep. Flake or another critic of current farm policies was a member of the committee? Sure, one member can have only so much impact on a committee of 46. But at least that would give taxpayers a voice at the table.

Veto Override Possible for Farm Bill

Further to my quasi-post on the farm bill Friday, I may have been premature in my enthusiasm. According to an article [$] today in Congress Daily, the ranking member of the Senate Finance Committee Charles Grassley (R, IA) is confident that Congress will be able to override the President’s threatened veto:

Grassley expects the White House will not push Republicans to sustain the expected veto. If Bush does push support for the veto, cautioned Grassley, he should expect “very weak loyalty in the Congress from his own party.” Bush has said that some Republicans in safe seats who represent districts without agriculture might not worry about offending anti-hunger advocates by turning down the bill’s $10 billion increase in nutrition programs. Grassley said today that such a scenario is the only way he could envision the White House getting enough House support to sustain a veto.

The full conference report, in all its glory, available here for the strong-of-stomach.

Also alarming: the conference report apparently includes language that would nullify a federal appeals court decision under the Freedom of Information Act that has done so much (via the great Ken Cook at the Environmental Working Group) to shed light on these egregious subsidies. See here.

50 Years On, Some Common Sense

Steve Clemons posts a heartening little video of Bush père’s National Security Adviser Brent Scowcroft responding to Steve’s question “What do you think about Cuba?” It’s a rare occasion for foreign policy folks to take heart and ponder whether the forces of reality may not be making progress on some issues, at least:

More common sense on Cuba here.

California: Poster Child for Poor Fiscal Management

On Wednesday Gov. Arnold Schwarzenegger is releasing his revised budget proposal against a backdrop of a massive deficit.  In my op-ed in today’s San Francisco Chronicle, I lay out the background of the “fiscal crisis” in the state (too much spending) and point out a few specific programs the governor can terminate.  Enacting a spending limit and working to increase the use of public-private partnerships would be great, but this year’s budget debate highlights the need to also eliminate programs, cut spending (not merely spending growth) and refocus the state government on its core functions. 

Not from California?  Your state has also likely forgotten the lessons of the 1990s and may have its own “crisis” brewing.