12 (Author at Cato Institute) https://www.cato.org/ en Another Big Spending Trump Budget Proposal https://www.cato.org/multimedia/cato-daily-podcast/another-big-spending-trump-budget-proposal Chris Edwards, Caleb O. Brown <p>A big problem with the Trump spending plan is the President’s inability or unwillingness to follow through on spending cuts. Chris Edwards discusses the proposal.</p> Fri, 14 Feb 2020 17:42:08 -0500 Chris Edwards, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/another-big-spending-trump-budget-proposal Wasteful Local Infrastructure https://www.cato.org/blog/wasteful-local-infrastructure Chris Edwards <p>Politicians love infrastructure, but many local government projects seem awfully wasteful. We’ve all seen the questionable spending—the half dozen union guys standing around while one digs, the needless reconstruction of sidewalks, the dangerous bike‐​lane schemes on city streets, the empty city buses clogging traffic, and those digital announcement signs on highways with no useful information.</p> <p>Local governments are flush with cash, and they waste it. Where I live in Virginia, a local government spent $1 million on <a href="https://www.downsizinggovernment.org/update-arlingtons-1-million-bus-stop">one bus stop</a> that should have cost $20,000.</p> <p><a href="https://www.rstreet.org/team/kevin-kosar/">Kevin Kosar</a> flagged a <a href="https://wjla.com/news/local/metro-38-million-5-years-bike-racks">news story</a> yesterday about Washington’s terribly mismanaged transit agency. ABC7’s Sam Sweeney found:</p> <blockquote><p>Metro has spent $3.8 million and taken five years to build two unfinished bike racks—at East Falls Church and Vienna Metro Stations.</p> <p>WMATA originally budgeted $600,000 for each rack, but the price tag has soared to $1.9 million each.</p> <p>The covered bike shelters will house 92 bikes, putting the price tag at more than $20,000 per bike. Future costs to finish the projects could raise that number even higher.</p> <p>The projects were supposed to be completed in December of 2015 but remain unfinished in 2020.</p> <p>… In January 2020 signs at the fenced‐​off construction site said the project would wrap up in late 2018. After ABC7 aired its story in January, the signs were removed.</p> </blockquote> <p>Large cost escalations and delays <a href="https://www.downsizinggovernment.org/government-cost-overruns">are typical</a> on government projects. Also typical: government agencies not being responsive to document requests and trying to blame others for failures, as ABC noted in its story.</p> <p>People wonder why their local governments can’t seem to fill potholes, remove graffiti, maintain park equipment, and perform other basic functions. It’s because they are wasting money on Taj Mahal bike racks at $20,000 per bike.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="619d175f-3a6d-47d8-90e2-5b74f42174b5" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-02/east%20falls%20church%20wjla.png?itok=U9UPt3MR 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-02/east%20falls%20church%20wjla.png?itok=q3ltRmx1 1.5x" width="700" height="431" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-02/east%20falls%20church%20wjla.png?itok=U9UPt3MR" alt="b" typeof="Image" class="component-image" /></p></div> Thu, 13 Feb 2020 09:52:04 -0500 Chris Edwards https://www.cato.org/blog/wasteful-local-infrastructure Chris Edwards discusses the Trump administration’s 2020 budget proposal on WRVA’s Richmond’s Morning News with John Reid https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-trump-administrations-2020-budget-0 Tue, 11 Feb 2020 11:47:05 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-trump-administrations-2020-budget-0 Chris Edwards discusses the Trump administration’s 2020 budget proposal on WWL’s First News with Tommy Tucker https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-trump-administrations-2020-budget Tue, 11 Feb 2020 11:44:05 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-trump-administrations-2020-budget Trump Spending Soars in First 4 Years https://www.cato.org/blog/trump-spending-soars-first-4-years Chris Edwards <p>President Trump came into office promising spending cuts and debt reduction, but so far he has delivered the opposite. His new budget promises cuts, but his record over the first four years is fairly spendthrift compared to past presidents.</p> <p><span>The chart shows the total real (inflation‐​adjusted) spending increase over the first four years of each president. For Trump, I’ve assumed he gets the 2021 spending he proposes in his new budget. Thus, Trump’s spending increases are fiscal 2021 divided by fiscal 2017.</span></p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="d59ce0bd-c68f-4238-916f-84d9421e833c" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-02/president%20spending.png?itok=xHnQh-OX 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-02/president%20spending.png?itok=VT9r3dU8 1.5x" width="603" height="489" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-02/president%20spending.png?itok=xHnQh-OX" alt="a" typeof="Image" class="component-image" /></p></div> <p><span>The data comes from <a href="https://www.whitehouse.gov/omb/historical-tables/">Table 6.1 here</a> with one exception. I’ve adjusted spending for 2009 to remove TARP and the stimulus bill. That affects the calculations for Bush II and Obama, as I <a href="https://www.cato.org/blog/presidential-spending-update">explain here</a>.</span></p> <p><span>The nondefense figures include discretionary and entitlement spending. </span></p> <p>Here’s a quick take on the presidential records:</p> <p>Carter and Bush II were big spenders across the board.</p> <p>Reagan was fairly successful at limiting nondefense spending increases.</p> <p>Bush I and Clinton benefited from defense spending falling after the Cold War. Bush I was a big spender on nondefense programs.</p> <p>Obama pushed to pass $800 billion in stimulus spending his first year. Luckily, most of it was temporary and petered out in subsequent years. Thus, Obama’s nondefense looks frugal in the chart, but it mainly excludes his misguided stimulus spending. Also, the GOP Congress pushed to restrain spending after the 2010 election.</p> <p>Obama’s defense spending fell as Iraq and Afghanistan started to wind down.</p> <p>Trump has been a big spender across the board. His new budget promises cuts, but it remains to be seen whether he really means it or whether his budget is just an accounting exercise.</p> Mon, 10 Feb 2020 16:33:18 -0500 Chris Edwards https://www.cato.org/blog/trump-spending-soars-first-4-years Trump to Spend $5.4 Trillion in 2021 https://www.cato.org/blog/trump-spend-54-trillion-2021 Chris Edwards <p><span>President Trump’s new budget projects that federal spending will rise to $4.83 trillion in fiscal year 2021. When Trump came into office in 2017, spending was $3.98 trillion. In just four years under this president, spending will be up $850 billion, or 21 percent. </span></p> <p><span>In reality, however, federal spending in 2021 will be more than $4.83 trillion. That figure is “net” outlays, but “gross” outlays will be $5.41 trillion, as shown in the chart. Reporters and budget wonks usually use the net figure, but the gross figure is the government’s actual total spending.</span></p> <p><span>The difference is “offsetting collections” and “offsetting receipts” from the public. These revenues are netted against spending at either the program level, agency level, or government‐​wide level. Some examples are national park fees, postal service revenues, and Medicare premiums. There are hundreds of such cash inflows to the government that are deducted from spending before reaching the widely reported net. </span></p> <p><span>Net outlays in 2021 will be 20.7 percent of gross domestic product, while gross outlays will be 23.2 percent. The latter is a better measure of the share of the economy controlled by the federal government through spending. </span></p> <p><span>The Office of Management and Budget buries gross outlay data <a href="https://www.whitehouse.gov/wp-content/uploads/2020/02/ap_12_offsetting_fy21.pdf">in the budget here</a>, while the Congressional Budget Office does not report it. But citizens are entitled to full information about the government’s large footprint on the economy. OMB and CBO should highlight gross outlays in their main budget tables.</span></p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="3c2249a5-4ddc-462b-b7ce-99224ac554a5" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-02/gross%20and%20net.png?itok=NY8DPrSV 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-02/gross%20and%20net.png?itok=JIbFxogB 1.5x" width="562" height="436" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-02/gross%20and%20net.png?itok=NY8DPrSV" alt="a" typeof="Image" class="component-image" /></p></div> Mon, 10 Feb 2020 14:18:08 -0500 Chris Edwards https://www.cato.org/blog/trump-spend-54-trillion-2021 President Trump’s 2021 Budget https://www.cato.org/blog/president-trumps-2021-budget Chris Edwards <p>The Trump administration <a href="https://www.whitehouse.gov/omb/">has released</a> its budget for fiscal year 2021. In the face of huge deficits, the budget proposes numerous reforms to discretionary and entitlement spending and foresees the budget eventually balancing by 2035.</p> <p>On the revenue side, the budget would extend the Trump tax cuts beyond 2025, which would reduce federal revenue growth. But the budget also assumes strong economic growth in the coming years, which the administration projects would help fill federal coffers with rising tax receipts.</p> <p>The chart below compares spending and revenues in the Trump budget to the latest baseline projections from the Congressional Budget Office.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="04376fee-e7ff-44fc-b819-9ef2e67a7d78" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-02/10%20year%20spending%20omb%20cbo.png?itok=cgkV-i8S 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-02/10%20year%20spending%20omb%20cbo.png?itok=H5iUypwQ 1.5x" width="591" height="446" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-02/10%20year%20spending%20omb%20cbo.png?itok=cgkV-i8S" alt="x" typeof="Image" class="component-image" /></p></div> <p>The administration is proposing $4.6 trillion in deficit‐​reduction measures over the next decade. Those changes sound large but would represent just 7 percent of projected federal spending over the next decade of $61 trillion. Most of the Trump cuts make sense, although larger entitlement reforms should be pursued.</p> <p>Some pundits will say that the Trump spending cuts will hurt the economy, but that narrative is false. Large spending cuts would spur economic growth by leaving more resources in the private sector and allocated by markets. Federal spending causes microeconomic damage that undermines growth.</p> <p>Facing large deficits in the 1990s, Canada slashed federal spending across‐​the‐​board and the economy boomed. Spending <a href="https://www.canada.ca/en/department-finance/services/publications/fiscal-reference-tables/2019/part-1.html#tbl2">was cut</a> from 22.9 percent of GDP in 1993 to 16.1 percent by 2000 and the economy was launched on a decade of robust growth.</p> <p>Under the Trump budget, U.S. federal spending would fall from 21.6 percent of GDP this year to 18.4 percent in 2030. The Trump spending reductions would be a good start, but even <a href="https://www.downsizinggovernment.org/">larger reforms</a> are possible and desirable, as the Canadian experience shows.</p> Mon, 10 Feb 2020 13:14:49 -0500 Chris Edwards https://www.cato.org/blog/president-trumps-2021-budget Chris Edwards discusses the looming fiscal crisis on Bloomberg Radio https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-looming-fiscal-crisis-bloomberg-radio Thu, 06 Feb 2020 11:08:51 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-looming-fiscal-crisis-bloomberg-radio Cato’s Letters: 300 Years https://www.cato.org/blog/catos-letters-300-years Chris Edwards <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="f58bb9dc-d101-4b16-ae28-f8d89f97a8b7" class="align-right embedded-entity" data-langcode="en"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-02/cato%20letters%202.jpg?itok=Re5nRs_P 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-02/cato%20letters%202.jpg?itok=3C7uBLQu 1.5x" width="700" height="1080" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-02/cato%20letters%202.jpg?itok=Re5nRs_P" alt="Cato's Letters" typeof="Image" class="component-image" /></p></div> <p>I grabbed a book off my shelf the other day that I had not read in years. <em><a href="https://www.amazon.com/English-Libertarian-Heritage-Trenchard-Independent/dp/0930073096/ref=sr_1_1?keywords=english+libertarian+heritage&amp;qid=1580756480&amp;sr=8-1">The English Libertarian Heritage</a></em> is a sampling of essays written three centuries ago by John Trenchard and Thomas Gordon. The pair as “Cato” published their provocative essays on liberty in the <em>London Journal</em> and <em>British Journal</em> between 1720 and 1723, naming themselves after Cato the Younger, who defended republican Rome against Julius Caesar.</p> <p>The book’s foreword says that the essays, called <em>Cato’s Letters</em>, would years later “exercise a profound influence on the arguments put forward by American colonists in their struggles with the British crown.” The introduction quotes an expert saying the essays were “the most popular, quotable, esteemed source of political ideas in the colonial period.”</p> <p>The American Founders praised the essays, and it is not hard to see why. Letter #59 argues that “Liberty is the unalienable right of all mankind.” Letter #62 defined liberty as “the power which every man has over his own actions, and his right to enjoy the fruit of his labour, art, and industry, as far as by it he hurts not the society, or any members of it, by taking from any member, or by hindering him from enjoying what he himself enjoys.”</p> <p><span><em><span>Cato’s Letters</span></em><span> heaps abuse on self‐​interested government officials and their misguided policies. Centuries before public choice theory, Trenchard and Gordon described government as it actually operated rather than as the public‐​interest fairy tales that governments want people to believe. Letter #60 argues, “The experience of every age convinces us, that we must not judge of men by what they ought to do, but by what they will do; and history affords but few instances of men trusted with great power without abusing it.”</span></span></p> <p><span><span>Letter #17 describes “what measures are actually taken by wicked and desperate ministers to ruin and enslave their country.” Some of those measures are “<span>contriving and forming wicked and dangerous projects, to make the people poor, and themselves rich; well knowing that dominion follows property,” and another is “by all practicable means of oppression, provoke the people to disaffection; and then make that disaffection an argument for new oppression.”</span></span></span></p> <p><span><span><span>This government strategy will sound familiar to readers of Cato Institute commentaries:</span></span></span></p> <blockquote><p><span><span><span>They will engage their country in ridiculous, expensive, fantastical wars, to keep the minds of men in continual hurry and agitation, and under constant fears and alarms; and, by such means, deprive them both of leisure and inclination to look into publick miscarriages. Men, on the contrary, will, instead of such inspection, be disposed to fall into all measures offered, seemingly, for their defence, and will agree to every wild demand made by those who are betraying them.</span></span></span></p> </blockquote> <p>Another government strategy is to convert temporary measures into permanent expansions of power, as noted in letter #115:</p> <blockquote><p>It is the nature of power to be ever encroaching, and converting every extraordinary power, granted at particular times, and upon particular occasions, into an ordinary power, to be used at all times, and when there is no occasion; nor does it ever part willingly with any advantage. From this spirit it is, that occasional commissions have grown sometimes perpetual.</p> </blockquote> <p>When they were published, <em>Cato’s Letters</em> provoked an uproar. The government tried strong‐​arm tactics to suppress them, but that backfired, and the essays increased in popularity. The government then switched tactics and managed to silence the authors by subsidizing the owner of the<em> London Journal</em>. Sadly, that insidious government strategy is engrained in U.S. policies today. The federal government’s <a href="https://www.downsizinggovernment.org/independence-1776-dependence-2014">2,300</a> subsidy programs tend to silence dissent and turn otherwise independent institutions such as businesses and charitable groups into tools of the state.</p> <p>Trenchard and Gordon believed England to be the freest country in Europe. With Brexit, the British today have the independence to rediscover some of the libertarian ideas that they pioneered.</p> <p>For Americans, <em>Cato’s Letters</em> is a reminder that the fight for liberty did not begin in 1776, and also that it will never end because the thirst for power is unquenchable. Government officials “wherever they were trusted with too much power, always abused it.” Government is a “Trust, which ought to be bounded with many and strong restraints, because power renders men wanton, insolent to others, and fond of themselves.”</p> <p>Officials try to convince citizens that there is “difficulty and mystery” in government affairs “far above the vulgar understandings” of average folks. But letter #38 argues that government is not as complicated as officials make it seem: “Every ploughman knows a good government from a bad one, from the effects of it: he knows whether the fruits of his labour be his own, and whether he enjoy them in peace and security.” However, the public needs to invest in “thinking and enquiry” to see through all the self‐​interested mischief.</p> <p><em>Cato’s Letters</em> are available online from Liberty Fund <a href="https://oll.libertyfund.org/titles/trenchard-catos-letters-4-vols-in-2-lf-ed">here</a>. The Cato Institute has provided commentary on the essays <a href="https://www.libertarianism.org/columns/legacy-ideas-behind-catos-letters">here</a> and <a href="https://www.libertarianism.org/encyclopedia/catos-letters">here</a>.</p> Mon, 03 Feb 2020 15:48:20 -0500 Chris Edwards https://www.cato.org/blog/catos-letters-300-years Infrastructure Policy: Eight Lessons https://www.cato.org/blog/infrastructure-policy-eight-lessons Chris Edwards <p>The House Ways and Means Committee <a href="https://waysandmeans.house.gov/legislation/hearings/paving-way-funding-and-financing-infrastructure-investments">held hearings</a> on infrastructure yesterday. The <a href="https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/Gribbin_Ways%20and%20Means%20Testimony_Final.pdf">testimony</a> by D. J. Gribbin was excellent. He was special assistant to President Trump for <span>infrastructure policy</span> and is very experienced in the field.</p> <p>Many of Gribbin’s themes support points <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">I’ve made</a> for years regarding infrastructure and federalism. Gribbin and I don’t come to the same policy conclusions, but his observations about current policy failings are spot on.</p> <p>Here are eight lessons for infrastructure policy:</p> <p><strong><em>1. States Own Most Infrastructure.</em></strong> Gribbin notes, “the federal government owns less than 7<span> percent of</span><span> the nation’s</span><span> public</span>,<span> non</span>-<span>defense</span> infrastructure.” The disconnect between federal funding and this state ownership leads to “inefficiencies.” That is for sure, I’ve discussed <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/tbb-78-updated.pdf">here</a> and <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">here</a>.</p> <p><strong><em>2. Federal Funds Come from the States</em></strong>. Gribbin says, “The federal <span>government does not have the ability to create funds, just reallocate them</span>,” making the point that federal aid ultimately comes from taxpayers who live in the 50 states. <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">To me</a> that simple reality creates a high bar for federal action—why not let the states keep their own money and fund their own highways and transit?</p> <p><strong><em>3. Costly Federal Regulations Are Tied with Aid</em></strong>. Gribbin argues, “Expenditure of f<span>ederal highway funds </span><span>trig</span><span>gers the need for</span><span> compliance with an exhaustive list of federal requirements.</span> These requirements not only <span>impose direct additional costs on projects, but can also cause delays, which in turn lead to </span><span>further costs.” I discuss some of these costs <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">here</a>.</span></p> <p><strong><em>4. Federal Aid Induces States to Delay Projects</em></strong>. State and local governments delay high‐​value projects for years waiting for federal money when they should go ahead and get the projects done. Gribbon calls this the “coupon effect” and points to a highway example in Kentucky. I’ve discussed <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">(#12)</a> this problem and pointed to delayed seaport, highway, and air traffic control projects. In my view, if the Feds got completely out of the way, infrastructure would be built faster and cheaper with fewer delays.</p> <p><strong><em>5. Federal Aid Crowds Out State Investment</em></strong>. Gribbon says that sometimes “state and local governments reduce their own<span>, planned</span><span> expenditures on infrastructure </span><span>after having received federal grants</span>.” He points to a Federal Reserve study finding crowd out of highway spending. A more serious problem I’ve noted <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">(#17)</a> is that federal aid crowds out the private provision of infrastructure such as airports, seaports, and transit.</p> <p><strong><em>6. U.S. Infrastructure Costs Are Suspiciously High</em></strong><em>.</em> Gribbin is right that “U.S.<span> infrastructure costs hav</span><span>e become unacceptably</span><span>, and inexplicably</span>,<span> high</span>,” meaning the costs to build specific projects. He points to a study finding that “real per‑m<span>ile construction costs for the Interstate Highway System were three times higher </span><span>in the 1990s than they were in the 19</span>6<span>0s</span>.” And Gribbin hits the nail on the head saying that policymakers put little effort into researching the root causes. Congress is all about more spending, <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa777.pdf">never cost reduction</a>.</p> <p><strong><em>7. Federal Regulations</em></strong>. Federal rules inflate construction costs, as I discuss here <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">(#9)</a>. Gribbin says that his “anecdotal conversations with state <span>transportation </span><span>departments suggest that accepting </span><span>federal funding reduces purchasing power by 20 to 30 percen</span><span>t due to myriad regulations.</span>” Gribbon discusses how other countries have much shorter environmental reviews for projects such as highways.</p> <p><strong><em>8. Governments Fail at Maintenance.</em></strong> Gribbin says, “Today, s<span>tate and local leaders are incentivized to ignore maintenance … so</span><span> they can spend those funds elsewhere. Yet, poor maintenance </span><span>practices damage the </span><span>long</span>-<span>term</span><span> quality of infrastructure and result in a maintenance backlog </span><span>that must be met by future taxpayers.</span>” Federal aid induces the states to buy expensive systems such as fancy rail projects. The politicians get the photo ops at groundbreaking, but then they ignore maintenance until a crisis hits, <a href="https://www.cato.org/blog/bostons-rail-system-another-government-failure">as we’ve seen</a> with subway systems in Boston, New York, and D.C.</p> <p>The solution to all these chronic problems is to <a href="https://www.downsizinggovernment.org/transportation">end federal funding of infrastructure</a> owned by the states, including highways, transit, airports, and seaports. In addition, the federal government should <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa794_1.pdf">privatize</a> or devolve to the states many of the assets it owns, including Army Corps facilities, the postal system, passenger rail, dams and water projects, and many other items.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="59830b07-c864-4010-98bc-acf6a98e119a" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/boston_metro.png?itok=SiXWrWih 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/boston_metro.png?itok=C8exQSAk 1.5x" width="546" height="436" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/boston_metro.png?itok=SiXWrWih" alt="s" typeof="Image" class="component-image" /></p></div> Thu, 30 Jan 2020 17:06:14 -0500 Chris Edwards https://www.cato.org/blog/infrastructure-policy-eight-lessons Federal Budget Outlook: Worse than CBO https://www.cato.org/blog/federal-budget-outlook-worse-cbo Chris Edwards <p>The Congressional Budget Office <a href="https://www.cbo.gov/publication/56020">has released</a> new projections for federal spending and revenues through to 2030.</p> <p>Federal budget policy is a disaster. The government will spend $4.6 trillion this year, raise $3.6 trillion in tax revenues, and fill the gap with $1 trillion in fresh borrowing. That is like a worker earning $36,000 in income but spending $46,000 and putting $10,000 on credit cards. Maybe he can get away with the excess spending for a while, but eventually his finances will crash.</p> <p>The CBO’s baseline projections show spending rising faster than revenues in coming years, with the result that annual deficits by 2030 are expected to hit $1.74 trillion. Spending in 2030 at $7.49 trillion will be 30 percent higher than revenues of $5.75 trillion, as shown in the chart below.</p> <p>Those projections are ugly, but they are optimistic if policymakers do not enact major reforms. One optimistic CBO assumption is that discretionary spending will decline as a share of GDP in coming years, which seems unlikely given that both parties these days push for higher spending. So I’ve included on the chart a “more likely” spending projection that assumes discretionary spending stays at today’s share of GDP.</p> <p>On the revenue side, CBO includes the expiration of the GOP tax cuts after 2025, but it is likely that some or all of those cuts will be extended. Democrats may agree to extension in return for more low‐​income benefits. So the chart includes a “more likely” revenue line, which assumes the tax cuts are extended, which I roughly calculated by assuming revenues stay at the 2025 share of GDP.</p> <p>The more likely spending line also includes my rough estimate of the higher interest costs created by higher spending and lower revenues.</p> <p>Under the more likely scenario, the annual deficit by 2030 will be $2.37 trillion, up from $1.74 trillion under the CBO baseline. The more likely scenario has spending in 2030 at $7.79 trillion, which will be 44 percent higher than revenues that year of $5.42 trillion.</p> <p>Our economy is growing and we are at peace, so federal deficits and debt should be falling. But deficits are soaring and debt is at record high levels for peacetime as a share of the economy. The outlook is particularly scary because neither party is even talking about spending reforms. We are marching into a fiscal crisis and our elected leaders seem to have no idea how to tackle it and do not even seem to care.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="ba13257a-20d0-4ccc-a34a-1c88313bded9" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/cbo%20outlook.png?itok=0-yz8vts 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/cbo%20outlook.png?itok=Tfp1zzn5 1.5x" width="528" height="390" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/cbo%20outlook.png?itok=0-yz8vts" alt="s" typeof="Image" class="component-image" /></p></div> Wed, 29 Jan 2020 12:23:54 -0500 Chris Edwards https://www.cato.org/blog/federal-budget-outlook-worse-cbo Winner and Loser States from Big Government https://www.cato.org/blog/winner-loser-states-big-government Chris Edwards <p><span>American government has become much larger and more centralized over the past century. That has created winner and loser states as taxpayer cash floods into Washington and is then dispersed through more than 2,300 federal spending programs.<br><br> In 2020, the federal government will vacuum $3.6 trillion from taxpayer wallets in the 50 states and borrow $1 trillion from global capital markets. Then it will turn on the leaf blower to scatter $4.6 trillion back across the 50 states, except for the cut the middleman in D.C. will keep for itself.<br><br> The Rockefeller Institute has released <a href="https://rockinst.org/issue-area/new-yorks-balance-of-payments-with-the-federal-government/">a&nbsp;report</a> detailing these cash flows. The report calculates a “balance of payments” for each state in 2018, which is federal spending less federal taxes paid by individuals and businesses in each state. The winner states have a&nbsp;positive balance and the loser states a&nbsp;negative one. Federal spending includes four items: benefits (such as Social Security), state‐​local grants (such as Medicaid), procurement (such as fighter jets), and pay for federal workers.<br><br> On a&nbsp;per capita basis, the biggest winner states are Virginia, Kentucky, Alaska, and New Mexico. The biggest loser states are Connecticut, Massachusetts, New Jersey, and New York. Those loser states have a&nbsp;large number of high‐​earning individuals who get hit hard under the federal income tax, which imposes higher rates on top incomes.<br><br> Figure 1&nbsp;shows data from the Institute’s report. Taxes per capita are on the horizontal axis and spending per capita on the vertical axis. Each dot is a&nbsp;state. The figure excludes a&nbsp;portion of taxing and spending that could not be allocated by state. </span></p> <p><span>States on the bottom right are the losers and those on the top left are winners.</span> Connecticut is on the far right paying $14,004&nbsp;in federal taxes per capita but receiving only $11,750&nbsp;in federal spending. Connecticut would be better off in a&nbsp;decentralized United States with citizens paying their taxes to state and local governments rather than the federal government.</p> </p> <div data-embed-button="embed" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="d5b1c2f4-495c-4470-8529-19d569a768ce" data-langcode="en" class="embedded-entity"> <div class="embed embed--infogram js-embed js-embed--infogram"> <div class="infogram-embed" data-id="203bac24-f073-4e89-bd5b-d7785787dbbb" data-type="interactive" data-title="Balance of Payments Figure 1"></div> </div> </div> <p><br><br><span>Every state is actually worse off than indicated in Figure 1&nbsp;because federal borrowing in 2018 allowed for spending to be 22 percent larger than taxes. But borrowing is not a&nbsp;free lunch. It creates a&nbsp;cost that will hit residents of every state down the road — borrowing is just deferred taxes.</span><br><br><span><span><span><span><span><span><span><span><span>For Figure 2, I&nbsp;scaled up taxes to include both the current and deferred federal burdens. Connecticut residents paid $17,098&nbsp;in current and deferred taxes per capita and received only $11,750&nbsp;in spending. They are only getting back 69 cents in federal spending for every dollar of federal tax burden.</span></span></span></span></span></span></span></span></span></p> <p><span>In the figure, the loser states from centralized government are below the line and the winner states above it. Actually, because centralization creates lower‐​quality government, residents of every state lose, <a href="https://www.cato.org/sites/cato.org/files/pubs/pdf/pa868_2.pdf">as I&nbsp;discuss here</a>.</span></p> <p>The interesting political question is why do loser states such as Connecticut, Massachusetts, New Jersey, and New York stand for it? Politicians from those states should be pressing for a&nbsp;less progressive federal income tax and for devolution of government activities back to the states.</p> <div data-embed-button="embed" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="79531b87-3041-405c-b7e9-329df0e0d9bf" data-langcode="en" class="embedded-entity"> <div class="embed embed--infogram js-embed js-embed--infogram"> <div class="infogram-embed" data-id="b9ec9bc2-4575-4e1f-bf1e-2f853c0ec30a" data-type="interactive" data-title="Balance of Payments Figure 2"></div> </div> </div> <p>Research assistance from David Kemp.</p> Tue, 28 Jan 2020 12:03:29 -0500 Chris Edwards https://www.cato.org/blog/winner-loser-states-big-government Wealth Is Business Ownership https://www.cato.org/blog/wealth-business-ownership Chris Edwards <p>On her campaign website, Senator Elizabeth Warren <a href="https://elizabethwarren.com/plans/ultra-millionaire-tax/">discusses</a> reasons why she supports an annual wealth tax. She says, “<span>Consider two people: an heir with $500 million in yachts, jewelry, and fine art, and a teacher with no savings in the bank.” </span></p> <p><span>Is that how an heir would hold $500 million—in yachts, jewelry, and fine art? That perception of the assets of the rich seems to be common. Economist John Cochrane <a href="https://johnhcochrane.blogspot.com/2020/01/wealth-and-taxes-part-i.html">suggests</a> that people think top wealth looks like Scrooge McDuck’s gold vault.</span></p> <p><span>Of course wealthy people own personal luxury assets, but most wealth at the top is business assets. </span>In <a href="https://www.cato.org/blog/top-wealth-business-assets">this piece</a>, I look at the holdings of the richest 0.1 percent of Americans, who are people with net wealth above $16 million. <span><span><span>Almost 90 percent of that group’s wealth consists ultimately of equity and debt in businesses, which in turn funds capital investments and creates jobs and growth.</span></span></span></p> <p><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span><span>A related belief people have is that wealth at the top comes at others’ expense, as does the lady in this 1979 video below (<a href="https://www.mercatus.org/people/tad-dehaven">h/​t</a>). But the reality is the opposite, as Milton Friedman explains to her on the Phil Donahue show. </span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></span></p> <p><span>Wealth at the top supports opportunities for other people, as discussed <a href="https://www.cato.org/publications/commentary/wealth-tax-tax-business">here</a>, <a href="https://www.cato.org/publications/policy-analysis/exploring-wealth-inequality">here</a>, and <a href="https://www.cato.org/publications/tax-budget-bulletin/taxing-wealth-capital-income">here</a>. </span></p> <div data-embed-button="embed" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="f4a5c0ba-91cf-4490-8789-fbcfbe324260" data-langcode="en" class="embedded-entity"> <div class="embed embed--youtube js-embed js-embed--youtube"> <div class="responsive-embed"> </div> </div> </div> Fri, 24 Jan 2020 16:12:04 -0500 Chris Edwards https://www.cato.org/blog/wealth-business-ownership Chris Edwards’ blog post, “New York vs. Florida on Bureaucracy,” is cited on KEEL’s Strategies for Living https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-blog-post-new-york-vs-florida-bureaucracy-cited Mon, 20 Jan 2020 12:09:25 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-blog-post-new-york-vs-florida-bureaucracy-cited Population Flows out of High‐​Tax States https://www.cato.org/multimedia/cato-daily-podcast/population-flows-out-high-tax-states Chris Edwards, Caleb O. Brown <p>New data highlights the flow of residents from high‐​tax states to low‐​tax states. Chris Edwards provides details.</p> Sun, 19 Jan 2020 15:25:48 -0500 Chris Edwards, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/population-flows-out-high-tax-states New York Shortchanged but NY Politicians No Help https://www.cato.org/blog/new-york-shortchanged-ny-politicians-no-help Chris Edwards <p>I reported that state and local governments in New York spend <a href="https://www.cato.org/blog/new-york-government-twice-size-floridas">twice as much</a> as governments in Florida. New York also has a <a href="https://www.cato.org/blog/new-york-vs-florida-bureaucracy">larger</a> bureaucracy. Carl Campanile of the <em>New York Post</em> <a href="https://nypost.com/2020/01/14/new-york-spends-twice-as-much-as-florida-to-keep-things-running/">reported on</a> these findings yesterday and captured a retort from the office of New York Governor Andrew Cuomo:</p> <blockquote><p>“Sounds like this ginned‐<span>up study from a group of right</span>-<span>wing 19th century robber</span><span> baron </span><span>wannabes fail to mention that New York is Washington’s favorite ATM, paying $26.6 billion </span><span>more in federal taxes than we get back while Florida receives $45.9 billion</span><span> more than it pays,” </span><span>said Cuomo senior adviser Rich Azzopardi.</span><span> “Get a calculator.”</span></p> </blockquote> <p>Actually, I am familiar with the “balance of payments” data Azzopardi refers to, and back in the 1990s aided then New York Senator Daniel Patrick Moynihan with such calculations. New York has long paid more to Washington in taxes than it receives back in federal spending on social programs, contracts, grants, and federal wages.</p> <p>New York’s Rockefeller Institute <a href="https://rockinst.org/wp-content/uploads/2019/01/1-7-19b-Balance-of-Payments.pdf">has done the latest calculations</a>. It found, “New York’s overall balance of payments remains the least favorable of any state in the nation.” Why does New York get such a raw deal? The Institute found, “New York’s consistently negative balance of payments is driven primarily by the disproportionate amount of federal taxes paid, rather than relatively lower federal spending received.”</p> <p>And why does New York pay a disproportionate amount of federal taxes? Because the federal tax code is highly progressive and New York has a large number of high‐​earners and a high cost of living. The progressive federal tax code has ripped off New York and other wealthy states for decades. The chart below from Rockefeller shows federal taxes paid per capita.</p> <p>But here’s the thing: New York politicians have done nothing about it! New York politicians should be leading the charge against the unfair soak‐​the‐​rich federal income tax. Instead, most House and Senate members from New York are liberals who cheerlead for progressive taxation, and thus who work in the federal legislature to undermine their own state.</p> <p>Since New York gets such a raw deal from federal fiscal relations, New York politicians should be the ones trying to revive federalism by shrinking federal spending and transferring activities back to the states. I <a href="https://www.cato.org/publications/policy-analysis/restoring-responsible-government-cutting-federal-aid-states">argue here</a> that such devolution would be good for every state, but it would particularly benefit states such as New York that pay so much in federal taxes.</p> <p>Finally, note that New York’s balance of payments problem is no excuse for the gross inefficiency of its government compared to that of Florida. Rather than griping about Cato Institute data, Cuomo and Azzopardi should be grabbing their calculators and finding savings in the state’s bloated budget.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="5a0294f5-3aa3-47a8-bacd-680f827aa695" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/state%20map%20taxes.png?itok=fQSi2bQ0 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/state%20map%20taxes.png?itok=nnKqeIta 1.5x" width="700" height="504" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/state%20map%20taxes.png?itok=fQSi2bQ0" alt="m" typeof="Image" class="component-image" /></p></div> Thu, 16 Jan 2020 15:44:17 -0500 Chris Edwards https://www.cato.org/blog/new-york-shortchanged-ny-politicians-no-help New York vs. Florida on Bureaucracy https://www.cato.org/blog/new-york-vs-florida-bureaucracy Chris Edwards <p>New York and Florida have similar populations of 20 million and 21 million, respectively. But state and local governments in New York spent twice as much ($348 billion) as governments in Florida ($177 billion), as <a href="https://www.cato.org/blog/new-york-government-twice-size-floridas">discussed here</a>.</p> <p>New York’s excess includes spending more on handouts such as welfare. Another cause of New York’s high spending is employment of more government workers and paying them more than in Florida. We can examine this factor using <a href="https://www.census.gov/data/tables/2018/econ/apes/annual-apes.html">Census data for 2018</a>.</p> <p>In the table below on the left are the numbers of state and local workers measured in full‐​time equivalents. New York governments employ 34 percent more workers than Florida governments. Caution is in order because for some functions the state differences may reflect whether services are provided in‐​house or contracted‐​out. Solid waste management may be an example of such a difference.</p> <p>That said, the New York worker count in some areas seems inordinately large. <span>The two states </span><a href="https://nces.ed.gov/programs/digest/d18/tables/dt18_203.20.asp"><span>have similar</span></a><span> K‑12 school enrollments of 2.7 million in New York and 2.8 million in Florida.</span> But New York employs 31 percent more teachers and administrators than Florida. Do the 111,000 extra staff in New York generate better school outcomes? Apparently not—<a href="https://www.cato.org/publications/policy-analysis/fixing-bias-current-state-k-12-education-rankings">this Cato study</a> puts Florida near the top and New York in the middle on school quality.</p> <p>Does New York really need two times more highway workers than Florida and three times more welfare workers? If I was a New York taxpayer, I would want my political leaders to justify such differences.</p> <p>The columns on the right show average annual wages, which I estimated by multiplying the <a href="https://www.census.gov/data/tables/2018/econ/apes/annual-apes.html">Census March payroll data</a> by twelve. Government workers in New York make 42 percent more in wages than government workers in Florida, on average. Perhaps that makes sense because New York generally has a higher cost of living than Florida. However, it is also true that many New York government workers are in Albany and in local governments outside of high‐​cost Manhattan.</p> <p>There are some outliers that New York taxpayers should investigate. New York’s solid waste workers make 92 percent more in wages than do Florida’s. New York’s K‑12 education workers make 71 percent more and its transit workers make 68 percent more.</p> <p>One problem in New York is public sector unionization, which tends to inflate compensation and undermine productivity. <span>New York’s public workforce is 67 percent </span><a href="https://www.unionstats.com/"><span>unionized</span></a><span> compared to Florida’s at 27 percent. This <a href="https://www.empirecenter.org/publications/taylor-made/">Empire Center study</a> by </span>E.J. McMahon and Terry O’Neil recommends reforms to New York’s public sector union rules and government pay.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="5469fc92-6a29-45b6-ae0e-df1418e6e8bc" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20bureaucracy.png?itok=TKU3pxVU 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/ny%20florida%20bureaucracy.png?itok=wzbtOFaP 1.5x" width="700" height="708" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20bureaucracy.png?itok=TKU3pxVU" alt="b" typeof="Image" class="component-image" /></p></div> Tue, 14 Jan 2020 12:51:48 -0500 Chris Edwards https://www.cato.org/blog/new-york-vs-florida-bureaucracy Chris Edwards’ paper, “Tax Reform and Interstate Migration,” is cited on KKOH’s Reno’s Morning News https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-paper-tax-reform-interstate-migration-cited-kkohs Tue, 14 Jan 2020 11:05:19 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-paper-tax-reform-interstate-migration-cited-kkohs Neil Peart: An Appreciation https://www.cato.org/blog/neil-peart-appreciation Chris Edwards <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="ebb3e766-63d4-43c3-ad10-ed6b45f11592" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/peart%205.png?itok=ZBbfkzV4 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/peart%205.png?itok=zFpToNdo 1.5x" width="700" height="612" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/peart%205.png?itok=ZBbfkzV4" alt="n" typeof="Image" class="component-image" /></p></div> <p>Neil Peart, drummer for Canadian rock band Rush, passed away last week after a three‐​year battle with brain cancer. Peart was 67. He was <a href="https://www.moderndrummer.com/2020/01/rush-drummer-neil-peart-passes/">regarded</a> as one of the best rock drummers of all time, and Rush carved out a unique place in music overlapping heavy metal and progressive rock.</p> <p>Aside from his virtuoso drumming skills, Peart gained fame for the brainy lyrics he wrote for Rush’s remarkable string of 19 studio albums. Libertarians may be aware that Rush credited ideas on its 1976 album <em>2112</em> to the “genius of Ayn Rand.” Peart was not a full‐​fledged libertarian, but many of his songs were influenced by Rand’s individualism. The epic title track on <em>2112</em> describes a dystopian world where an all‐​powerful government crushes creativity.</p> <p>Peart was a voracious reader and his songs reflected a wide range of influences. He explored freewill, heroes, mob rule, scheming and hypocritical leaders, forced equality of outcomes, the soul‐​killing conformity of suburbs, survival in a prison camp, the drama of a rocket liftoff, the joy of music, the beauty of sunlight, and the illicit thrill of revving up a sports car in a future car‐​free despotism. Peart’s lyrics were always thoughtful and honest. While other rock bands sang about romance, sex, and left‐​wing politics, Rush offered something different.</p> <p>In interviews, Peart and his bandmates Alex Lifeson and Geddy Lee always came across as the nicest guys. No trashed hotel rooms, drug overdoses, or ugly band infighting with these guys. They were focused, humble, and dedicated professionals. Even after reaching the peak of his profession, Peart continued taking drum lessons to see what else he might learn. Peart’s passion for his art is clear in <a href="https://www.cygnus-x1.net/links/rush/drummer-11.2004.php">this</a> interview.</p> <p>In the photo above from <em><a href="https://www.cygnus-x1.net/links/rush/images/books/drummer-11.2004/drummer-11.2004-cover.jpg">Drummer</a></em>, Peart’s drum kit sports Rush’s starman emblem. The naked man representing creativity and free thought stands before the star of the dictatorship—the Solar Federation from <em>2112</em>—which controls every facet of life and enforces equality. Here is a <a href="https://www.cygnus-x1.net/links/rush/comicbook-2112-5.1.php">graphic version</a> of the story.</p> <p>If you are not a Rush fan, you might start by listening to <em>Moving Pictures</em> and <em>A Farewell to Kings</em>.</p> <p>When I first moved to D.C. I lived at 2112 37th Street, which was the perfect address for a Canadian‐​born classic rock fan.</p> <p>Neil Peart will be greatly missed.</p> Mon, 13 Jan 2020 12:15:46 -0500 Chris Edwards https://www.cato.org/blog/neil-peart-appreciation New York’s Government Is Twice the Size of Florida’s https://www.cato.org/blog/new-york-government-twice-size-floridas Chris Edwards <p>New <a href="https://www.cato.org/blog/migration-low-tax-states-continues">Census data</a> show that Americans are continuing to move from high‐​tax to low‐​tax states. One of the largest migration flows is from New York to Florida, as discussed <a href="https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-84-revised.pdf">in this Cato study</a>.<br /><br /> The exodus from New York is sad, but the blame falls on the politicians who impose high‐​cost government on the state. New York’s high taxes are a side effect of excessive state and local spending.</p> <p>The excess is clear when comparing New York to Florida.</p> <p>The table below shows <a href="https://www.census.gov/data/datasets/2017/econ/local/public-use-datasets.html">Census data</a> for state and local spending in 2017. New York and Florida have similar populations of 20 million and 21 million, respectively. But governments in New York spent twice as much as governments in Florida, $348 billion compared to $177 billion.</p> <p>On some activities, spending in the two states is broadly similar, such as on transportation, police, fire, parks, sewers, and solid waste. But in other budget areas, New York’s excess spending is striking.</p> <p>New York spent $69 billion on K‑12 schools in 2017 compared to Florida’s $28 billion. Yet the states <a href="https://nces.ed.gov/programs/digest/d18/tables/dt18_203.20.asp">have about</a> the same number of kids enrolled—2.7 million in New York and 2.8 million in Florida.</p> <p>New York spent $71 billion on public welfare compared to Florida’s $28 billion. Liberals say that governments provide needed resources to people truly in need. Conservatives say that generous handouts induce high demand whether people need it or not. Given that New York’s welfare costs are 2.5 times higher than Florida’s, the latter effect probably dominates.</p> <p>New York spends vastly more on transit than Florida. Transit system revenues in New York are $6.8 billion per the Census, but that appears to leave about $14 billion a year in taxpayer costs. Because of its size and density, New York City does need an extensive transit system. But that does not mean that taxpayers should bear such high costs. Hong Kong is a huge and dense city with an extensive subway system that is <a href="https://www.cato.org/blog/privatize-washingtons-metro-system">run privately without taxpayer subsidies</a>.</p> <p>New York spends vastly more on employee retirement than Florida. Retirement systems are mainly funded by contributions and investment earnings, although most systems are underfunded. New York has a larger and more unionized public workforce than Florida. New York governments <a href="https://www.census.gov/data/tables/2017/econ/apes/annual-apes.html">employed</a> 1,196,632 workers in 2017 compared to Florida’s 889,950 (measured in FTEs). New York’s public workforce is 67 percent <a href="https://www.unionstats.com/">unionized</a> compared to Florida’s at 27 percent.</p> <p>New York spends $10 billion more a year on interest costs than Florida. That is a clear example of how profligacy imposes an unnecessary burden on New York taxpayers.</p> <p>If New York wants to stem its chronic loss of residents, it needs to slash spending on welfare, transit, and worker payroll and benefits. It should privatize transit systems, pursue school choice, and repeal collective bargaining for government workers. It should fund services from current revenues, not borrowing.</p> <p>Most New York residents do not benefit from bloat in government payrolls, inefficient transit, excessive welfare, and deficit spending. To them, the high taxes are disproportionate to the government services received. That is why they are moving to better‐​managed states with lower taxes.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="dc0bf0f9-5cbb-4fa6-87a3-8da259df2722" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20spending_0.png?itok=ihA6tb6q 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/ny%20florida%20spending_0.png?itok=AOdkc8J3 1.5x" width="697" height="1523" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20spending_0.png?itok=ihA6tb6q" alt="spending" typeof="Image" class="component-image" /></p></div> Mon, 13 Jan 2020 11:39:26 -0500 Chris Edwards https://www.cato.org/blog/new-york-government-twice-size-floridas Tax Migration New York to Florida https://www.cato.org/blog/tax-migration-new-york-florida Chris Edwards <p>Yesterday, I <a href="https://www.cato.org/blog/migration-low-tax-states-continues">looked at</a> migration from high‐​tax to low‐​tax states. Today, the <a href="https://www.wsj.com/articles/in-florida-homeowners-come-for-the-weather-and-stay-for-the-tax-relief-11578501325?mod=hp_major_pos6"><em>Wall Street Journal</em></a> focuses on wealthy tax exiles from the Northeast in Florida: “President Donald Trump and Carl Icahn both announced in the fall that they’ll be making Florida their primary residence, joining other high‐​profile executives like financiers Barry Sternlicht, Eddie Lampert and Paul Tudor Jones.”</p> <p>The <em>Journal</em> had accounting firm BDO run some numbers: “A New York couple filing jointly with $5 million in taxable income would save $394,931 in state income taxes by moving to Florida.”</p> <p>I noted <a href="https://www.cato.org/publications/tax-budget-bulletin/tax-reform-interstate-migration">in this study</a> that the wealthy often bring their businesses and philanthropy with them, so the greediness of high‐​tax states really boomerangs on them. As the <em>Journal</em> notes:</p> <blockquote><p>Multimillionaires aren’t just moving their families south, they are taking their businesses with them, says Kelly Smallridge, president and CEO of the Business Development Board of Palm Beach County. “We’ve brought in well over 70 financial‐​services firms” in the past few years, she says. “The higher the taxes, the more our phone rings.”</p> </blockquote> <p>You may think it is unfair that states such as New York are losing their residents and businesses. But they’ve only got themselves to blame because the high taxes are caused by excessive spending. Indeed, the difference between total state and local government spending in New York and Florida is staggering.</p> <p>The chart shows <a href="https://www.census.gov/data/datasets/2017/econ/local/public-use-datasets.html">Census Bureau data</a> for 2017. New York and Florida have similar populations, yet state and local governments in New York spent twice as much as governments in Florida, $348 billion vs. $177 billion.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="d110c829-1df7-42be-bf76-43d4e5506633" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20spending.png?itok=YJGNpWru 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/ny%20florida%20spending.png?itok=L7vpVtNo 1.5x" width="425" height="512" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/ny%20florida%20spending.png?itok=YJGNpWru" alt="f" typeof="Image" class="component-image" /></p></div> Fri, 10 Jan 2020 16:04:53 -0500 Chris Edwards https://www.cato.org/blog/tax-migration-new-york-florida Migration to Low‐​Tax States Continues https://www.cato.org/blog/migration-low-tax-states-continues Chris Edwards <p><span>The Census Bureau <a href="https://www.census.gov/data/tables/time-series/demo/popest/2010s-national-total.html">has released estimates</a> of state population changes between July 2018 and July 2019. One component of population changes is migration between the states. The new Census data show that Americans are continuing to move from high‐​tax to low‐​tax states.<br /><br /><a href="https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-84-revised.pdf">This Cato study</a> examined interstate migration using IRS data and found that people are moving, on net, from tax‐​punishing places such as California, Connecticut, Illinois, New York, and New Jersey to tax‐​friendly places such as Florida, Idaho, Nevada, Tennessee, and South Carolina. The Census data confirms the trends.<br /><br /> In the chart, each blue dot is a state. The vertical axis shows the one‐​year Census net interstate migration figure as a percent of 2018 state population. The horizontal axis shows state and local household taxes as a percent of personal income in 2017. Household taxes include individual income, sales, and property taxes. The red line is a fitted regression line.<br /><br /> On the right, nearly all of the high‐​tax states have net out‐​migration. The exception is Maine. The blue dots on the far right are Hawaii and New York, which each have domestic migration losses of nearly 1 percent a year. </span></p> <p><span>On the left, nearly all of the net in‐​migration states have taxes of less than about 8.5 percent. If policymakers want their states to attract residents, they should reduce their household tax burdens to 8.5 percent of personal income or below. The outlier at the bottom left is Alaska.</span></p> <p><span>Interstate migration patterns tend to persist over time. The biggest loser states, such as Illinois and New York, have large and chronic problems. To stem the losses and strengthen their economies, these states should reduce taxes, <span>slim down their governments, and cut regulations to enhance freedoms.</span></span></p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="89245add-7324-46ef-938b-00e4da6ed091" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/state%20migration%20census.png?itok=GSaOUg0G 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/state%20migration%20census.png?itok=JFV328Nq 1.5x" width="700" height="481" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/state%20migration%20census.png?itok=GSaOUg0G" alt="i" typeof="Image" class="component-image" /></p></div> Thu, 09 Jan 2020 10:07:02 -0500 Chris Edwards https://www.cato.org/blog/migration-low-tax-states-continues Crescent Dunes: Another Green Flop https://www.cato.org/blog/crescent-dunes-another-green-flop Chris Edwards <p>The Department of Energy <a href="https://www.energy.gov/eere/success-stories/articles/eere-success-story-mirage-reality-energy-department-investment-brings">called</a> the vast and expensive solar project a “success story” and “<span>milestone for the country’s energy future.”</span></p> <p>But you can’t trust what the government says. Crescent Dunes is a flop and taxpayers are set to lose $737 million on it, according to a new <a href="https://news.bloombergenvironment.com/environment-and-energy/a-1-billion-solar-plant-was-obsolete-before-it-ever-went-online">Bloomberg</a> report. That is even more than the $535 million taxpayers lost on the <a href="https://www.downsizinggovernment.org/energy/energy-subsidies">corruption‐​soaked Solyndra solar project</a>.</p> <p>With 10,000 mirrors arrayed in the Nevada desert, Crescent Dunes does look cool. But with the much lower costs of solar photovoltaic and natural gas projects, the government’s gamble on this alternative technology was folly. Politicians never apologize for their mistakes, and the main politician responsible for this one, former Senator Harry Reid, has retired and won’t face any tough questions about wasting our money.</p> <p>Crescent Dunes was apparently undermined by mismanagement, unreliability, and excessive costs. The various players are now <a href="https://pv-magazine-usa.com/2019/10/07/will-doe-take-the-crescent-dunes-solar-project-into-bankruptcy/">pointing fingers</a> of blame at each other, which is typical of government‐​funded projects because they tend to diffuse responsibility.</p> <p>Another solar‐​array boondoggle is the Ivanpah<span> project in California, which received $1.6 billion in federal money. It generates less energy than was promised and at very high costs.</span> I discuss other failed federal energy projects <a href="https://www.downsizinggovernment.org/energy/energy-subsidies">in this essay</a>.</p> <p>The lesson is that political daydreams about green new deals ultimately need to confront reality. And the reality is that the government’s <a href="https://www.downsizinggovernment.org/energy/energy-subsidies">track record</a> at guiding our energy future has been pretty dismal.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="f453381c-f75f-4825-89bf-b75debdbfff5" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/crescent%20dune.png?itok=9sAY4X8L 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/crescent%20dune.png?itok=oD6c29aI 1.5x" width="700" height="409" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/crescent%20dune.png?itok=9sAY4X8L" alt="d" typeof="Image" class="component-image" /></p></div> Tue, 07 Jan 2020 16:08:57 -0500 Chris Edwards https://www.cato.org/blog/crescent-dunes-another-green-flop Are Tech Companies Too Big? https://www.cato.org/blog/are-tech-companies-too-big Chris Edwards <p>P<span>oliticians and pundits are claiming that technology companies such as Amazon, Google, and Microsoft are damaging monopolies. Some politicians, such as <a href="https://medium.com/@teamwarren/heres-how-we-can-break-up-big-tech-9ad9e0da324c">Elizabeth Warren</a>, want to actively break up big tech firms. Ryan Bourne explains the folly of these sentiments <a href="https://www.cato.org/publications/policy-analysis/time-different-schumpeter-tech-giants-monopoly-fatalism">in a recent study</a>. A decent understanding of the dynamism in U.S. economic history reveals why aggressive antitrust policy makes no sense.</span></p> <p><span>When a big tech company is earning high profits, it attracts competitors like sharks smelling blood in the water, which is a good thing. Meanwhile, what do tech firms earning high profits use them for? To push innovation forward by funding huge amounts of research. </span></p> <p><span>The <a href="https://www.wsj.com/articles/quantum-computing-remains-a-challenge-for-tech-firms-11578345473"><em>Wall Street Journal</em></a> outlines current efforts to fund quantum computing. That technology would be a revolutionary leap, but it is a tough nut to crack. We need a bunch of tech companies with deep pockets pursuing a diversity of approaches to make the needed breakthroughs. And that is what we are seeing with Amazon, Google, Microsoft, IBM, Intel, and others in a vigorous competitive race. </span></p> <p><span>At the same time, the <em>Journal</em> reports that venture capitalists are placing bets on quantum computing startups. So the big firms are feeling the competitive heat from each other while they all risk being undercut from below. Microsoft spent two years building a quantum computer that ended up falling short, and now it has restructured its project. Unlike governments, businesses pull the plug on things that are not working and try again.</span></p> <p><span>The <em>Journal</em> says, “</span>The field attracted a total of at least $450 million in private investments in 2017 and 2018,” which is impressive given that skeptics say that profit‐​seeking companies don’t do basic long‐​term research. Microsoft has been funding quantum computing research for many years, which a stream of solid profits has made possible. Some of the firms the <em>Journal</em> profiles are focused on making short‐​term breakthroughs, but other firms see quantum computing as a longer‐​term goal.</p> <p>Profits, competition, diversity of strategies, big companies and startups, uncertainty, and experimentation. That is what markets are all about. Politicians, pundits, and antitrust lawyers claim to know the proper size of companies, how large profits ought to be, and how industries should be structured. They don’t. We need markets to figure it all out.</p> <div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="fa11a093-370b-4531-999e-d1293035f376" data-langcode="en" class="embedded-entity"> <p><img srcset="/sites/cato.org/files/styles/pubs/public/2020-01/quantum.png?itok=lKRxj6FH 1x, /sites/cato.org/files/styles/pubs_2x/public/2020-01/quantum.png?itok=8sOzsu8k 1.5x" width="700" height="521" src="https://www.cato.org/sites/cato.org/files/styles/pubs/public/2020-01/quantum.png?itok=lKRxj6FH" alt="q" typeof="Image" class="component-image" /></p></div> Tue, 07 Jan 2020 12:35:10 -0500 Chris Edwards https://www.cato.org/blog/are-tech-companies-too-big Chris Edwards discusses how wealth taxes have failed in Europe on Texas Scorecard Radio https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-how-wealth-taxes-have-failed-europe-texas Thu, 19 Dec 2019 11:52:38 -0500 Chris Edwards https://www.cato.org/multimedia/media-highlights-radio/chris-edwards-discusses-how-wealth-taxes-have-failed-europe-texas