When Ronald Reagan said that big government undermined the economy, some people dismissed his comments because of his philosophical belief in liberty.

And when I discuss my work on the economic impact of government spending, I often get the same reaction.

This is why it’s important that a growing number of establishment outfits are slowly but surely coming around to the same point of view.

• The European Central Bank published a study showing “…a significant negative effect of the size of government on growth.”
• A study by two Harvard economists found that “large adjustments in fiscal policy, if based on well-targeted spending cuts, have often led to expansions.”
• The Organization for Economic Cooperation and Development noted in recent research that welfare programs are economically destructive because they lure people into dependency because “net disposable income would increase despite putting in fewer hours.”
• A study from the International Monetary Fund concluded that “Cuts to pension and health entitlements had the most beneficial effect on economic growth.”

This is remarkable. It’s beginning to look like the entire world has figured out that there’s an inverse relationship between big government and economic performance. (more…)

1.  Congressional Budget Office (January 31, 2012)

“The unemployment rate would be even higher than it is now had participation in the labor force not declined as much as it has over the past few years….Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 11⁄4 percentage points higher than the actual rate of 8.7 percent.”

2.  Ezra Klein, The Washington Post (January 6, 2012)

“Unemployment is 8.5 percent — and, if not for the millions of discouraged workers who have left the labor force since 2008, it would be nearer to 11 percent. It’s nice to add 200,000 jobs in a single month, but, as this graph from the Hamilton Project shows, at that rate, it will take well over a decade to fully recover from the Lesser Depression.

3.  Jay Cost, The Weekly Standard (February 8, 2012)

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There’s been a great deal made of whether the unemployment rate dropped, or if the number of individuals in the job market dropped by some 1.2 million. If the American Spectator is to believed, this has all been much ado about nothing. Owing to a once-in-a-decade adjustment based upon census data, they make the case that the workforce didn’t lose over a million workers, but neither did the real unemployment rate drop.

In other words, the participation rate (employment-population ratio) was reported to have dropped by 0.3%, exactly the amount of participation rate “drop” created by changing the population number used in the calculation (due to updated census data.) Without this once-a-decade adjustment, the change in participation rate would have been reported as…wait for it…zero.

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That great phrase was coined by the late Jack Kemp, who believed that growth and opportunity for all is the answer to poverty. In fact, Kemp believed it was the answer to all things economic. And he was right. The best anti-poverty program is the one that creates jobs. The answer to large budget deficits? Grow the economy, create jobs, watch incomes rise, and let the tax revenues come rolling in.

Partly from Jack Kemp’s work, and partly from his own experience, Ronald Reagan believed the same thing. He knew that growth is the single best solution for our economic ailments. And neither Reagan nor Kemp saw the world in terms of specific income classes or categories. They looked at the whole economy and realized that everyone is tied together. Dragging down the top earners will not help the middle class. And providing an ever larger safety net will not solve poverty. Reagan believed in the safety net, and maintained it. But he knew it was a stop-gap, not a solution.

Does Mitt Romney understand this?

The worry stems from Romney’s ill-advised statement this week. He said, “I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it.” That raises doubts as to whether he understands the Reagan-Kemp model. Perhaps he does. But he will have to tell us more.

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As the price of oil shoots through the roof because of political instability, and the inability of the Obama Administration to say yes to Canadian oil and thousands of jobs, we have to turn to other energy sources. Fortunately, there’s a cleaner and safer opportunity in natural gas right here in the United States

But some Chicken Littles in the environmental panic industry are preventing people from heating their homes and driving up the cost of electricity, while simultaneously denying needed jobs in the worst unemployment in decades. They claim to have found environmental damage in the process to retrieve the gas from shale deposits – called hydraulic fracturing, but the short answer is they’re wrong. The long answer is that they’re really fracking wrong: hydraulic fracturing is safer, cleaner, and cheaper than any of our current alternatives; and that’s just what’s scares these pseudo-scientists.

We must look at the scientific facts before making a policy decision, and the facts about shale gas, when you cut through a great deal of disinformation, are simple. First, it’s less expensive than the fossil fuel alternatives. At $66 per megawatt-hour, natural gas beats the dirtier and more dangerous coal, which costs around $90 per MWh. It even costs less than solar, wind (off and onshore), nuclear, oil and bio-diesel.

And shale gas doesn’t just save money, it saves lives. On average, fifty to sixty coal miners die every year. Every miner must wear artificial breathing apparatus to protect them in case of a disaster, disasters which happen with alarming frequency. Explosions, cave-ins and methane leaks combine to make coal mining the most dangerous job in the United States today.

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After spurning Trump debate, Romney takes his endorsement

Nevada, or, as I like to call it, “Snowfall,” may be poorly named after the blizzard of ads we’ve been seeing elsewhere in Florida, South Carolina, New Hampshire, and Iowa; but beneath the calmness and lack of exposure is a well-oiled strategic machine that is methodically getting out the vote.

If the latest poll is to be believed, Mitt Romney might just strike political gold in the “Silver State.” Romney is the favorite of 50% of likely GOP caucus-goers, according to the Democratic-leaning polling firm Public Policy Polling. He’s leading his next closest rival, Newt Gingrich, by 25 points. Ron Paul is third at 15 percent, and Rick Santorum is fourth at 8 percent.

Nevada has been particularly hard hit by the economic downturn, with a high number of home foreclosures and an unemployment rate that recently soared to an all-time high of 14.9%. In other words, Nevada’s looking for a turnaround; Nevada Republicans think that the guy who turned around the Olympics next door might be able to help.

For the Mitt supporters out there, Romney is doing especially well in the state that went for Barack Obama in 2008, with 55% of the vote. I quote the PPP poll:

Romney hits the 70% favorability mark in Nevada, something we’ve seen for him in very few states. Just 25% see him unfavorably. That’s partially due to an 89/8 standing with Mormons, but he’s at a still very strong 64/30 with non-Mormons as well. One thing that’s contributing to Romney’s strength in Nevada is a strong advantage on the electability question. 56% think he would be the strongest candidate against Barack Obama this fall with no one else topping 21%.

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Okay, we made up the word. But in medicine, as any physician knows, a blastoma is a malignancy of so-called precursor cells called blasts.  Should such an anomaly go untreated…well, let’s not go there.  Anyway, we decided to refer to any chronic economic conditions that threaten the health of our economy as econoblatomas, because of the real risk that they are precursors to a potential economic crisis; that is, they can spread.   What follows are what we call the Seven (there are, of course, others) Warning Signs of Econoblastoma.

1. The Euro – A default by any other name:

Greece will default on its debt, probably within the next 60 days.  They’re working on a plan that will allow the EU leaders to call it something else, but whenever lenders get taken to the cleaners by a borrower there has generally been a default.  Greece’s lenders (bond holders) are soon to be taken to the cleaners (again) so we’re about to see the first default in a Euro Zone country.  Now this Econoblastoma has been under treatment for a long time with, we’re sorry to say, poor results.  The prognosis is dire.

The reader will recall that over a year ago, the private bondholders who loaned money to Greece (based on fabricated economic assurances by the Greek government) were informed they would have to take a 20% haircut in order for Greece to meet its obligations.  Then last July the bondholders were told that 20% just wouldn’t do it, and that a 50% haircut would be required.  Now the bondholders are being told,  “fifty percent?” well, “that was okay for starters,” but it’s not nearly enough to treat this particular Econoblastoma.

No, it seems the cure for years of Greek profligacy will require that the holders of about  $206 billion in Greek bonds will have to swap them for bonds that will pay, upon maturity, 60% less.

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On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh…not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

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Big Labor backed Indiana Senate Democrats shrilly-repeated inaccurate talking points as they made last efforts to let union bosses know that they tried their best to stop worker freedom from coming to Indiana.  But, they failed.  Indiana passed Right To Work – union bosses will no longer be able to force most private sector employees to pay them without their willful consent.

From the National Right To Work Committee release:

Today, Mark Mix, President of the 2.6 million-member National Right to Work Committee, praised the Indiana House and Senate for passage of the Indiana Right to Work Law.

Mr. Mix said, “This is a great day for Indiana’s workers and taxpayers.

“After a ten-year struggle involving hundreds of thousands of mobilized Hoosiers, Indiana will finally be able to enjoy all the benefits of a Right to Work law,” said Mr. Mix.

“Today, the Indiana Senate passed the Right to Work Bill by a vote of 28 to 22. The bill has already passed the House, so it now goes straight to Governor Daniels, who has vowed to sign it, making Indiana America’s 23rd Right to Work state,” continued Mix.

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Back in 2010, I crunched the numbers from the Congressional Budget Office and reported that the budget could be balanced in just 10 years if politicians exercised a modicum of fiscal discipline and limited annual spending increases to about 2 percent yearly.

When CBO issued new numbers early last year, I repeated the exercise and again found that the same modest level of budgetary restraint would eliminate red ink in about 10 years.

And when CBO issued their update last summer, I did the same thing and once again confirmed that deficits would disappear in a decade if politicians didn’t let the overall budget rise by faster than 2 percent each year.

Well, the new CBO 10-year forecast was released this morning. I’m going to give you three guesses about what I discovered when I looked at the numbers, and the first two don’t count.

Yes, you guessed it. As the chart illustrates (click to enlarge), balancing the budget doesn’t require any tax increases. Not does it require big spending cuts (though that would be a very good idea).

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It seems a foregone conclusion that Mitt Romney will win the Republican primary in Florida.

This is good news for those of us that support Mitt Romney, as it means he will have won (or effectively tied) three Republican primaries in swing states (Iowa, New Hampshire, and Florida) and is one step closer to winning the nomination.

Still, there are a few questions I’ll have as the numbers roll in.

Let’s call them the seven “Ms” of Mitt Romney.

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Leftists want higher tax rates and they want greater tax compliance. But they have a hard time understanding that those goals are inconsistent.

Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.

• When tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities legally.
• When tax rates change, sometimes they choose to alter their levels of work, saving, and investment.
• And when tax rates go up, sometimes they resort to illegal steps to protect themselves from the tax authority.

In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes:
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Imagine for a moment that you are a small-business owner looking to hire a new employee. As tough as the economy has been, you’ve managed to put your firm on track to expand.

Now imagine facing a lawsuit for requiring perhaps one of the most basic qualifications for job applicants – a high school diploma. You don’t have to imagine that last part. It’s now an unfortunate reality thanks to guidance recently issued by the Equal Employment Opportunity Commission.

The “informal discussion letter” states that requiring a high-school diploma as a qualification for employment may violate the Americans with Disabilities Act, which the EEOC enforces. Therefore, an employer must prove a high school education is “job related and consistent with business necessity,” or face potential fines or lawsuits brought under ADA.

Employers should take note. Despite this being an “informal” letter, EEOC investigators and trial lawyers will undoubtedly use this to their advantage. It continues an unfortunate pattern of federal agencies quietly making policy and stepping up enforcement on small businesses for the slightest missteps.

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After the headline rate of unemployment (U-3) reached 8.5 percent in December 2011 ( the most recent month reported), some commentators began to talk as if the employment situation is now improving rapidly. Some have gone on to suggest that those of us who have emphasized the role of regime uncertainty in retarding the current recovery are now barking up the wrong tree, if indeed we ever had a valid point. To speak of employment woes as old news, however, is highly premature.

The Labor Department has recently made public its preliminary estimate of nonfarm employment for 2011. I have added the department’s data for previous years, back to 1999, to construct this table.

Employees on nonfarm payrolls, 1999-2011

(annual average, in thousands)

Year Total Private

1999…… 128,993 108,686

2000….. 131,785 110,995

2001…… 131,826 110,708

2002…… 130,341 108,828

2003…… 129,999 108,416

2004…… 131,435 109,814

2005…… 133,703 111,899

2006…… 136,086 114,113

2007…… 137,598 115,380

2008…… 136,790 114,281

2009….. 130,807 108,252

2010…… 129,818 107,337

2011(p).. 131,159 109,080

The good news is that private nonfarm employment has grown since its recent trough in 2010: the increase in 2011 amounted to 1.6 percent. This is not much, but it’s better than continued decline.

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I’ve already bragged that the Cato Institute is America’s best think tank, highlighting the fact that we took the lead in battling against Obama’s faux stimulus at a time when many were dispirited and reluctant to fight big government.

I’m biased, of course, so I’ll understand if you discount what I say. But I hope you’ll agree that my colleagues have put together an excellent video response to the President’s state-of-the-union speech.

As part of my contribution to the video, beginning around 6:35, I debunk the President’s class-warfare tax agenda by citing IRS data from the 1980s to explain that higher tax rates don’t necessarily mean higher tax revenue.

After a night’s sleep, here are a few additional observations on the President’s remarks.

• I was disappointed, but not surprised, that he repeated the economically foolish assertion that Warren Buffett pays a lower tax rate than his secretary.
• I also was not surprised that he didn’t say much about jobs and the economy. These four charts show he doesn’t have much to brag about.
• It was also noteworthy that he didn’t spend much time talking about Obamacare, which suggests that White House pollsters understand that government-run healthcare isn’t very popular.
• It was equally revealing that he didn’t spend much time on the so-called income inequality issue. Redistribution was implicit in what he said, to be sure, but the Occupy-Wall-Street crowd is probably disappointed that he didn’t explicitly embrace their agenda. More evidence that the pollsters played a big role in this speech.
• I’m definitely not surprised that he talked about eliminating Osama bin Laden. Kudos to the Commander-in-Chief.
• I was amazed that he had the gall to say “no bailouts,” particularly given his support for TARP, the Dodd-Frank bailout bill, and the giveaway to GM and the auto unions. And if the GM bailout is supposed to be a success, I’d hate to see his definition of failure.
• And I was stunned that he could talk about the housing meltdown and mortgage crisis without mentioning the Federal Reserve, Fannie Mae, or Freddie Mac. Sort of like analyzing World War II and pretending Germany and Japan didn’t exist.

Since most of the previous observation are critical, I want to stress that I’m not being partisan. I also was disappointed in the Republican response. Was the GOP smart to showcase a governor who was part of the big-spending Bush Administration? Especially one who has said nice things about the value-added tax?

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Last night, at the State of the Union address, President Obama spoke of a recovery, but the evidence for such a recovery doesn’t really exist.

The national unemployment is now 8.5% (December’s), its lowest level since January 2009, but while some saw this welcome news as something to celebrate, it hides a much darker economic picture: the jobs report vastly undercounts the unemployment rate. Moreover, as of this writing, we don’t know if December’s jobs report is a trend, or if, as some economists predict, economic growth will slow in the first quarter of 2012, forestalling some of the gains made. In November, the unemployment rate fell from 9% to 8.6%, but this was not due to an increase in jobs, but due to a decrease in the numbers of people “actively seeking” them. “The 315,000 who dropped out of the labor market exceeded the 120,000 new jobs,” notes Edward Luce, former speechwriter to then Treasury Secretary and Obama economic advisor Larry Summers in The Financial Times. “If the same number of people were looking for work today as in 2007, the jobless rate would be 11%.”  In December 2007, the U.S. economy employed 146 million; today, four years later, it employs 140 million. The population has grown; the number of jobs has declined.

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I’ve written a couple of times about the Food Stamp program, citing ridiculous examples of waste, fraud, and abuse. These include:

• Using food stamps to buy luxury coffee at Starbucks.
• Buying steaks and lobster with food stamps.
• The Obama Administration rewarding states that sign up more food stamp recipients.
• Proposals to make it easier to use food stamps at fast food restaurants.
• College kids scamming the program for handouts.
• New York City giving food stamps to newly released prisoners and running foreign-language ads encouraging more people to sign up for the program.

As a taxpayer, I get upset about these examples. But as a public policy economist, I’m much more worried about the fiscal and economic impact of the program.

As a human being, though, my primary concern is the way redistribution saps the spirit of self reliance and traps people into lives of dependency. That’s the very first point I make in this debate on CNBC.

By the way, my opponent in the debate is Jared Bernstein, who is infamous for being the co-author of the Obama Administration claim that enacting the s0-called stimulus would keep the unemployment rate from rising above 8 percent.

I’ve had lots of fun mocking that claim. Every couple of months I post Jared’s predictions and compare them to the real-world results.

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Labor union membership continues to be blind to the fact that the support of its “leadership” to President Obama and his political allies is coming at the cost of the members. Big Labor bosses and their political allies are happy to continue to throw the membership under the bus for their own personal gain. For President Obama, this is the prospect of re-election; for the labor bosses, this is the survival of their “way of life.” This can be seen through the President’s actions and comments over the past three years.

Early in his presidency, President Obama made disparaging remarks about business owners whose companies had corporate jets. This was done in a blatant attempt to incite class warfare, despite the fact that the country was in a deep recession. By his words, the President willingly sacrificed the jobs of the very people who supported him through union dues. He knew the liberal media would not expose the tragic result his words would have on the private jet and airplane manufacturing industry.

In Wichita, Kansas, the home of private aircraft manufacturing has suffered tremendously, as thousands of union employees employed by Cessna and Beechcraft have been laid off, not to mention the thousands of jobs affiliated with general aviation lost across the country including manufacturers, part suppliers, fuel, pilots, mechanics, FBO services and insurance providers. Additionally, due to the loss of significant sales, use, income environmental and aviation tax revenues, thousands of local, state and federal employee positions, many of which were union jobs, have disappeared.

Adding insult to injury now the White House Defends User Fees of $100/flight on general aviation and corporate aviation to raise revenues in Obama’s continued class warfare and redistribution of wealth scheme in his effort to bring down America. Ironically this will cost more jobs, many of them union, as revenues ultimately will be reduced as fewer aircraft are purchased and general aviation travel is curtailed due to the added expense. The vicious cycle will continue to perpetuate itself at the expense of American jobs!

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Earlier this week, I explained why Mitt Romney is a Republican version of Barack Obama. His transgressions include being open to a value-added tax, a less-than-stellar record on healthcare, weakness on Social Security reform, an anemic list of proposed budget savings, and support for reprehensible ethanol subsidies.

Now we can add something else to the list. He wants to cut off the bottom rungs of the economic ladder and hurt low-skilled workers.

Here are a couple of passages from a report in the Oregonian.

Mitt Romney…continues to be a supporter of indexing the minimum wage for inflation. Oregon and Washington were among the first states to index their own minimum wages to inflation – nine states now do so – and it’s a favorite of liberals… Romney campaigned in favor of indexing the minimum wage when he ran for governor in 2002.  However, ABC News noted in 2007 that he wasn’t sure he supported indexing the federalminimum wage (which is lower than the minimum wage in several states).  In this new video, you could quibble that he doesn’t explicitly say he’s talking about the federal minimum — but that sure seems to be the tenor of his comments.

In other words, Romney is willing to condemn lower-skilled workers to unemployment, in hopes that he will gain some sort of short-term political advantage. In this regard, he will be just like Bush.

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I don’t know whether to laugh or cry when I write about insanely stupid government policies. But I know I get more motivated to fight big government.

How can anyone want to give more money and power to politicians, for instance, after reading these comparisons of dumb government policy in the United States and United Kingdom? Or how can anyone think it’s a good idea to expand the public sector after reading these examples of bureaucratic incompetence?

But now I’ve come across something even more amazing, a story of government stupidity that trumps these other examples. And this is not satire. It is not from The Onion.

Believe it or not, the Greek government has decided that pedophiles are “disabled” and therefore deserve money from the government.

And what really makes this boondoggle remarkable is that you’re helping to pay for it thanks to the IMF bailout of Greece. Here’s the link to the AP story, and here are the relevant passages.

…a government decision to expand a list of state-recognized disability categories to include pedophiles, exhibitionists and kleptomaniacs. …The Labor Ministry said categories added to the expanded list – that also includes pyromaniacs, compulsive gamblers, fetishists and sadomasochists – were included for purposes of medical assessment and used as a gauge for allocating financial assistance. …The new list gives pyromaniacs and pedophiles disability pay up to 35 percent.

Maybe I’m just old fashioned, but my first reaction to this story is that child molesters should be in jail, not getting taxpayer-funded handouts.

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