oecd

Preferably for Reasons of Good Policy rather than Political Revenge, Trump and Republicans Should End Subsidies for the OECD

If I was Captain Ahab in a Herman Melville novel, my Moby Dick would be the Organization for Economic Cooperation and Development. I have spent more than 15 years fighting that Paris-based bureaucracy. Even to the point that the OECD threatened to throw me in a Mexican jail.

So when I had a chance earlier today to comment on the OECD’s statist agenda, I could barely contain myself

Notwithstanding the glitch at the beginning (the perils of a producer talking in my ear), I greatly enjoyed the opportunity to castigate the OECD.

OECD Overlooks Amazing Success of Low-Tax Singapore, Urges Higher Taxes in Asia

I wrote a rather favorable column a few days ago about a new study from economists at the Organization for Economic Cooperation and Development. Their research showed how larger levels of government spending are associated with weaker economic performance, and the results were worth sharing even though the study’s methodology almost certainly led to numbers that understated the case against big government.

Regardless, saying anything positive about research from the OECD was an unusual experience since I’m normally writing critical articles about the statist agenda of the international bureaucracy’s political appointees.

That being said, I feel on more familiar ground today since I’m going to write something negative about the antics of the Paris-based bureaucracy.

The OECD just published Revenue Statistics in Asian Countries, which covers Indonesia, Singapore, Malaysia, South Korea, Japan, and the Philippines for the 1990-2014 period. Much of the data is useful and interesting, but some of the analysis is utterly bizarre and preposterous, starting with the completely unsubstantiated assertion that there’s a need for more tax revenue in the region.

…the need to mobilise government revenue in developing countries to fund public goods and services is increasing. …In the Philippines and Indonesia, the governments are endeavoring to strengthen their tax revenues and have established tax-to-GDP targets. The Philippines aims to increase their tax-to-GDP ratio to 17% (excluding Social Security contributions) by 2016…and Indonesia aims to reach the same level by 2019.

Needless to say, there’s not even an iota of evidence in the report to justify the assertion that there’s a need for more tax revenue. Not a shred of data to suggest that higher taxes would lead to more economic development or more public goods. The OECD simply makes a claim and offers no backup or support.

But here’s the most amazing part. The OECD report argues that a nation isn’t developed unless taxes consume at least 25 percent of GDP.

These targets will contribute to increasing financial capacity toward the minimum tax-to-GDP ratio of 25% deemed essential to become a developed country.

This is a jaw-dropping assertion in part because most of the world’s rich nations became prosperous back in the 1800s and early 1900s when government spending consumed only about 10 percent of economic output.

OECD Economic Research Finds That Government Spending Harms Growth

At the risk of understatement, I’m not a fan of the Organization for Economic Cooperation and Development. Perhaps reflecting the mindset of the European governments that dominate its membership, the Paris-based international bureaucracy has morphed into a cheerleader for statist policies.

All of which was just fine from the perspective of the Obama Administration, which doubtlessly appreciated the OECD’s partisan work to promote class warfare and pimp for wasteful Keynesian spending.

What is particularly irksome to me is the way the OECD often uses dishonest methodology to advance the cause of big government:

But my disdain for the leftist political appointees who run the OECD doesn’t prevent me from acknowledging that the professional economists who work for the institution occasionally generate good statistics and analysis.

For instance, I’ve cited two examples (here and here) of OECD research showing that spending caps are the only effective fiscal rule. And I praised another OECD study that admitted the beneficial impact of tax competition. I even listed several good examples of OECD research on tax policy as part of a column that ripped the bureaucracy for some very shoddy work in favor of Obama’s redistribution agenda.

And now we have some more good research to add to that limited list. A new working paper by two economists at the OECD contains some remarkable findings about the negative impact of government spending on economic performance. If you’re pressed for time, here’s the key takeaway from their research:

Governments in the OECD spend on average about 40% of GDP on the provision of public goods, services and transfers. The sheer size of the public sector has prompted a large amount of research on the link between the size of government and economic growth. …This paper investigates empirically the effect of the size and the composition of public spending on long-term growth… The main findings that emerge from the analysis are… Larger governments are associated with lower long-term growth. Larger governments also slowdown the catch-up to the productivity frontier.

For those who want more information, the working paper is filled with useful information and analysis.

Notwithstanding a New Rhetorical Strategy from Statists, Higher Taxes and Bigger Government Is Not a Recipe for Growth and Development

I must be perversely masochistic because I have the strange habit of reading reports issued by international bureaucracies such as the International Monetary Fund, World Bank, United Nations, and Organization for Economic Cooperation and Development.

But one tiny silver lining to this dark cloud is that it’s given me an opportunity to notice how these groups have settled on a common strategy of urging higher taxes for the ostensible purpose of promoting growth and development.

Seriously, this is their argument, though they always rely on euphemisms when asserting that politicians should get more money to spend.

  • The OECD, for instance, has written that “Increased domestic resource mobilisation is widely accepted as crucial for countries to successfully meet the challenges of development and achieve higher living standards for their people.”
  • The Paris-based bureaucrats of the OECD also asserted that “now is the time to consider reforms that generate long-term, stable resources for governments to finance development.”
  • The IMF is banging on this drum as well, with news reports quoting the organization’s top bureaucrat stating that “…economies need to strengthen their fiscal frameworks…by boosting…sources of revenues.” while also reporting that “The IMF chief said taxation allows governments to mobilize their revenues.”
  • And the UN, which has “…called for a tax on billionaires to help raise more than $400 billion a year” routinely categorizes such money grabs as “financing for development.”

As you can see, these bureaucracies are singing from the same hymnal, but it’s a new version.

Defending Green Cards

The 2016 GOP platform states that:

“In light of the alarming levels of unemployment and underemployment in this country, it is indefensible to continue offering lawful permanent residence to more than one million foreign nationals every year.”

The GOP platform statement assumes that those on green cards take jobs from Americans, an assumption that is incorrect (see here, here, and here for more information). 

What’s actually indefensible about our green card system is how few of them come here for work purposes.  First, legal immigrant inflows to the U.S. as a percent of our population are small compared to other developed countries (Figure 1).  The only countries with fewer immigrant inflows as a percent of their populations are Portugal, Korea, Mexico, and Japan.  The United States does allow more immigration as an absolute number than any other country but we also have a very large population, making these annual flow figures seem small.

Figure 1

Immigrant Inflows as a Percent of Population, 2013

 

Sources: OECD, EuroStat, E-Stat, Citizenship and Immigration Canada.

These relatively small immigrant flows have only produced an immigrant percentage of our population that is midrange among the OECD countries (Figure 2).  New Zealand has the highest at 28.4 percent of their population while Mexico has the lowest at 0.84 percent of theirs.  The United States is in the middle at 13 percent.  Our legal immigration system is so restrictive that without unauthorized immigrants the U.S. population of the foreign-born would only be about 9.5 percent of our population – a 28 percent reduction in present numbers.

Figure 2

Immigrant Stock as a Percent of the Population, 2013

Source: OECD.

Green card workers admitted as a percentage of the total annual immigrant inflow are far lower here than in other countries (Figure 3).  Only about 7.7 percent of all green cards annually issued by the U.S. government are for workers – virtually all of them high skilled.  The employment-based green card system allowed about 140,000 green cards to be issued annually but that number also includes the family members of those workers.  In 2014, 56 percent of green cards set aside for skilled workers actually went to family while 44 percent were for the workers themselves.  The GOP platform wants to decrease this already small number of green cards for skilled workers even further.  

More Dishonest Data Manipulation from Tax-Happy Bureaucrats at the OECD

The Organization for Economic Cooperation and Development is a Paris-based international bureaucracy. It used to engage in relatively benign activities such as data collection, but now focuses on promoting policies to expand the size and scope of government.

That’s troubling, particularly since the biggest share of the OECD’s budget comes from American taxpayers. So we’re subsidizing a bureaucracy that uses our money to advocate policies that will result in even more of our money being redistributed by governments.

Adding insult to injury, the OECD’s shift to left-wing advocacy has been accompanied by a lowering of intellectual standards. Here are some recent examples of the bureaucracy’s sloppy and/or dishonest output.

Deceptively manipulating data to make preposterous claims that differing income levels somehow dampen economic growth.

Falsely asserting that there is more poverty in the United States than in poor nations such as Greece, Portugal, Turkey, and Hungary.

Cooperating with leftist ideologues from the AFL-CIO and Occupy movement to advance Obama’s ideologically driven fiscal policies.

Peddling dishonest gender wage data, numbers so misleading that they’ve been disavowed by a member of Obama’s Council of Economic Advisers.

Given this list of embarrassing errors, you probably won’t be surprised by the OECD’s latest foray into ideology-over-accuracy analysis.

OECD Scheme to Boost Taxes on Business Sector Will Hurt Global Economy and Enable Bigger Government

Citing the work of David Burton and Richard Rahn, I warned last July about the dangerous consequences of allowing governments to create a global tax cartel based on the collection and sharing of sensitive personal financial information.

I was focused on the danger to individuals, but it’s also risky to let governments obtain more data from businesses.

Remarkably, even the World Bank acknowledges the downside of giving more information to governments.

Here are some blurbs from the abstract of a new study looking at what happens when companies divulge more data.

Relying on a data set of more than 70,000 firms in 121 countries, the analysis finds that disclosure can be a double-edged sword. …The findings reveal the dark side of voluntary information disclosure: exposing firms to government expropriation.

And here are some additional details from the full report.

…disclosure has important costs in allowing exposure to government expropriation… We show that accounting information disclosure can be detrimental to firm development… Such disclosure allows corrupt bureaucrats to gain access to firm-level information and use it for endogenous harassment. …once firm information is disclosed, the threat of government expropriation is widespread. Information disclosure thus allows rent-seeking bureaucrats to gain access to the disclosed information and use it to extract bribes. …Our paper offers a vivid illustration that an important hindrance to institutional development—here in the form of adopting information disclosure—is government expropriation. …The results are thus supportive of Acemoglu and Johnson (2005) on the overwhelming importance of constraining government expropriation in facilitating economic development.

Yet this doesn’t seem to bother advocates of bigger government.

The OECD’s “Perspective” on Swedish Education

The OECD has just released a report offering “its perspective” on Sweden’s academic decline. Its perspective is too narrow. In launching the new report, OECD education head Andres Schleicher declared that “It was in the early 2000s that the Swedish school system somehow seems to have lost its soul.” The OECD administers the international PISA test, which began in the year 2000.

Certainly Sweden’s academic performance has fallen since the early 2000s, but its decline was substantially faster in the preceding decade. PISA cannot shed light on this, but TIMSS—an alternative international test—can, having been introduced several years earlier. On the 8th grade mathematics portion of TIMSS, Sweden’s rate of decline between 1995 and 2003 was over five points per year. Between 2003 and 2011 it was less than two points per year. Still regrettable, but less grievously so.

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