I’ve written several times about a proposed IRS regulation that would force American banks to put foreign law above U.S. law. I’ve repeatedly warned that the scheme, which would force financial institutions to report the deposit interest they pay to foreigners, is bad economic policy, bad regulatory policy, and bad banking policy.

My arguments have included:

• Explaining that this onerous regulatory scheme will result in capital fleeing to other nations, needlessly harming the financial sector and putting American banks at risk.
• Explaining why the proposal is a threat to human rights since many foreigners keep money in the United States because they live in nations with unstable and/or repressive governments.
• Explaining that the IRS action is a gross abuse of the regulatory process since an executive branch agency does not have the authority to overturn laws enacted as part of the democratic process.
• Explaining that this proposed regulation is just the beginning, and that proponents hope to issue follow-up rules that would cripple policies making America a haven for global capital.

But these points don’t seem to matter to the Obama Administration, which is ideologically committed to the anti-tax competition agenda of Europe’s welfare states. This is why the White House supports all sorts of destructive policies, including not only this misguided regulation, but also the creation of something akin to a world tax organization that will have power to block free-market tax policy.

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A small-town newspaper (scroll down to Section B after hitting the link) profiled a local land developer, explaining how he started and grew his own business.

Harry Fox, Jr. spent the past few decades becoming a successful land developer in the Commonwealth of Pennsylvania. (Fox generally does not build but instead acquires large tracts of land and goes through the necessary steps in order to subdivide the land into lots and bring them to market.) He mentioned to the newspaper that if he had tried getting into the land developing business today he would have a much harder time doing so because of all the government regulation that exists. I wanted to know what he meant by this so I contacted him and conducted an interview of my own.

South-central Pennsylvania on a foggy, autumn day. Photograph © Paul Hair, 2011.

I wanted Fox to explain to me all the steps needed to bring a piece of land to market in the Commonwealth of Pennsylvania. However, government regulations and requirements are so extensive that we couldn’t go through all the steps in just a few hours. So we focused on just one area: what a developer needs to do to bring a piece of land to market with that piece of land having a private septic system. The description that follows pertains only to Pennsylvania. Any errors made are mine and mine alone.

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Politicians in Europe have spent decades creating a fiscal crisis by violating Mitchell’s Golden Rule and letting the government grow faster than the private sector.

As a result, government is far too big today, and nations such as Greece are in the process of fiscal collapse.

But that’s the good news – at least relatively speaking. Over the next few decades, the problems will get much worse because of demographic change and unsustainable promises to spend other people’s money.

(By the way, America will suffer the same fate in the absence of reforms.)

Here’s a stark indicator (click to enlarge) of why Greece is in the toilet.

Look at the skyrocketing number of people riding in the wagon of government dependency (and look at these cartoons to understand why this is so debilitating).

By the way, Greece’s population only increased by a bit more than 16 percent during this period. Yet the number of bureaucrats jumped by far more than 100 percent.

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In late August House Majority Leader Eric Cantor published an open memo announcing that House Republicans would seek to block ten regulations currently being considered by various federal administrative agencies. Most of these regulations involve the Environmental Protection Agency, including ozone protection, greenhouse gas regulation, coal ash and utility pollution standards. The National Labor Relations Board is also targeted for its proposed union election rules and its attempt to block Boeing from opening a new, non-union factory in right-to-work South Carolina.

Rep. Cantor has sound reasons to target these regulations. The economic impact of any one of these ten regulations on an economy already on the brink of a double-dip recession would be severe. Some, like new emission rules for utility plants are guaranteed to increase energy costs, which would have a cascade effect on all aspects of the economy. Others, like NLRB’s Boeing decision, are bald-faced pandering to the labor interests that shower so much support on Democrats in general and President Obama in particular. Put bluntly, the targeted regulations serve special interests like unions or environmentalists at the expense of the public interest.

While having the virtue of being good policy, and probably good politics, Rep. Cantor’s strategy has the vice of treating the symptoms while ignoring the underlying cause. The larger problem with these regulations is not that these agencies are abusing their rulemaking power; the problem is that these agencies possess rulemaking power in the first place. Administrative agencies are exercising authority which properly belongs to Congress.

The Constitution is unmistakably clear. Article I, Section 1 states that “All legislative Power herein granted shall be vested in a Congress of the United States….” If the power is legislative, and if the power is granted to the federal government by the Constitution, then the power must be exercised by Congress, and only by Congress. Congress is nowhere authorized to transfer the power to make laws to any entity. Only Congress is constitutionally empowered to make laws.

Moreover, Article I, Section 7 mandates that any action of the federal government, which has the force of law, must be enacted according to the specific process enumerated therein. Both houses must approve, and the bill must be sent to the president for his signature. His veto may be overridden, but only by a supermajority in each house. The very act of enacting rules on the part of the EPA or any other agency is thus a violation of this provision of the Constitution, because it deviates from this process.

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President Obama has made a big deal out of corporate jets. Apparently they are a symbol not of success but of greed. Yet even as the private jet marked has lagged with the ongoing recession, President Obama’s own employees in his administration have significantly increased the number of limousines available for their travel.

The private jet market has historically risen in line with corporate profits, but started a steep downturn in 2008. The result was the loss of literally thousands of jobs in the factories that make private jets, with Cessna laying off almost 9000 workers alone, mostly in that notorious haunt of millionaires in Wichita, Kansas. Meanwhile, federal government departments increased the numbers of limousines bought in the first two years of the Obama administration by 73 percent, spending $1.9 billion on new cars in 2009 alone. These aren’t cheap autos, either. The most popular model is the Cadillac DTS, with the government paying about $60,000 per vehicle. Cadillac, of course, is part of the bailed-out General Motors.

This all confirms something I examine in my new book, Stealing You Blind: How Government Fatcats Are Getting Rich Off of You. When bureaucrats have taxpayer money to spend, they spend it on themselves. In Chapter Eight (“Municipal Madness”), for example, I detail how two departments (Public Works, and Transportation) of the City of Los Angeles received $111 million between them in stimulus money, and used it to ’save or create’ just 55 jobs, nearly all of them, apparently, in the public sector.

Another example comes in the increasingly risibly-named education sphere. As we all know, vast amounts of taxpayer money have been directed towards global warming research in the past few years. This has led, as we can see from numbers compiled by the Bureau of Labor Statistics, to a substantial increase in the salaries of “atmospheric, earth, marine and space science teachers” at public universities. In 2004, before the wave of public funding was unleashed following An Inconvenient Truth, such teachers were paid $53 an hour. Today they earn $70 an hour. On top of that, of course, they have tenure and enviable benefits, not to mention the shorter hours.

Indeed, government workers have made out like bandits while the rest of us eked out our living in the recession. According to USA Today, “When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.” That was in 2009, before the President announced his much-vaunted “federal pay freeze.”

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What do the London riots and the recent government crackdowns on Lemonade stands across America have in common? The answer is that in each case, government has done its best to control young people, to stop them engaging in enterprise. In Britain, the project is much more advanced. So if we want to know where the war on Lemonade selling ends up, we just have to look at the smashed windows and looted shops of Clapham Junction.

Let’s start in Britain so we can see where we’re going. The first thing to know is that government has removed the incentive to work. The British unemployment rate is currently 7.7%, yet there are over 100,000 households bringing in more than $37,000 annually in government handouts (the average household income in the UK). There are 650,000 households taking home more than $25,000 in these benefits.

That, however, is only part of the story. As that essential chronicler of British national demoralization, Theodore Dalrymple, said in the Wall Street Journal yesterday, employers are no longer interested in British youth:

But while the rioters have been maintained in a condition of near-permanent unemployment by government subvention augmented by criminal activity, Britain was importing labor to man its service industries. You can travel up and down the country and you can be sure that all the decent hotels and restaurants will be manned overwhelmingly by young foreigners; not a young Briton in sight (thank God).

The reason for this is clear: The young unemployed Britons not only have the wrong attitude to work, for example regarding fixed hours as a form of oppression, but they are also dramatically badly educated. Within six months of arrival in the country, the average young Pole speaks better, more cultivated English than they do.

The icing on the cake, as it were, is that social charges on labor and the minimum wage are so high that no employer can possibly extract from the young unemployed Briton anything like the value of what it costs to employ him. And thus we have the paradox of high youth unemployment at the very same time that we suck in young workers from abroad.

The role of the minimum wage is crucial. It is around $10 per hour (slightly lower for 18-20 year olds), much higher than the US minimum of $7.25. The difference is all the more important when one considers that the US has a higher average income (around $42,000 annually), meaning that British employers are being asked to pay (roughly) over half of average wage as a minimum rather than a third in the US.

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I’m not a big fan of the IRS, but usually I blame politicians for America’s corrupt, unfair, and punitive tax system. Sometimes, though, the tax bureaucrats run amok and earn their reputation as America’s most despised bureaucracy.

Here’s an example. Earlier this year, the Internal Revenue Service proposed a regulation that would force American banks to become deputy tax collectors for foreign governments. Specifically, they would be required to report any interest they pay to accounts held by nonresident aliens (a term used for foreigners who live abroad).

The IRS issued this proposal, even though Congress repeatedly has voted not to tax this income because of an understandable desire to attract job-creating capital to the U.S. economy. In other words, the IRS is acting like a rogue bureaucracy, seeking to overturn laws enacted through the democratic process.

But that’s just the tip of the iceberg. The IRS’s interest-reporting regulation also threatens the stability of the American banking system, makes America less attractive for foreign investors, and weakens the human rights of people who live under corrupt and tyrannical governments.

This Center for Freedom and Prosperity video outlines five specific reason why the IRS regulation is bad news and should be withdrawn.

I’m not sure what upsets me most. As a believer in honest and lawful government, it is outrageous that the IRS is abusing the regulatory process to pursue an ideological agenda that is contrary to 90 years of congressional law.

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The showdown in Wisconsin has generated competing claims about whether state and local government bureaucrats are paid too much or paid too little compared to their private sector counterparts.

The data on total compensation clearly show a big advantage for state and local bureaucrats, largely because of lavish benefits (which is the problem that  Governor Walker in Wisconsin is trying to fix). But the government unions argue that any advantage they receive disappears after the data is adjusted for factors such as education.

This is a fair point, so we need to find some objective measure that neutralizes all the possible differences. Fortunately, the Bureau of Labor Statistics has a Job Openings and Labor Turnover Survey, and this “JOLTS” data includes a measure of how often workers voluntarily leave job, and we can examine this data for different parts of the workforce.

Every labor economist, right or left, will agree that higher “quit rates” are much more likely in sectors that are underpaid and lower levels are much more likely in sectors where compensation is generous.

Not surprisingly, this data shows state and local bureaucrats are living on Easy Street. As the chart illustrates, private sector workers are more than three times as likely to quit their jobs.

This helps explain why the unions are treating the Wisconsin debate as if it was Custer’s Last Stand. The bureaucrats know they have comfortable sinecures and they are fighting to preserve their unfair privileges.

The only bit of semi-good news for Wisconsin taxpayers is that state and local bureaucrats are not as lavishly over-compensated as federal bureaucrats.

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Dale Smith has been cutting hair for over 50 years.  The Oregon barber is well-known in his hometown for walk-in appointments and $8 cuts — at least, until he got shut down by bureaucrats from Oregon’s Board of Cosmetology.

Dale’s crime?  He forgot to renew the barber license he earned 54 years ago.

The bureaucrats are saying that in order for Dale to return to work, he has to pass a 75-question examination, similar to the one he passed in 1957.  Further, he has to demonstrate to their satisfaction that he still knows how to cut hair:

Dale had to post a sign in his window saying that he was closed until further notice.  He doesn’t want to cut through all the red tape and isn’t sure what he’ll do next.

As Institute for Justice Senior Attorney Clark Neily explains in the video above:

Americans have a constitutional right to earn a living in the occupation of their choice, free from unreasonable government interference.  What happened to this man is the very definition of unreasonable.  A properly engaged judiciary is one that takes rights seriously, including the right to earn a living.  And it says to government officials, you have to treat people reasonably.  You have to respect their constitutional right to earn a living.

Of course, Dale is not alone.  In November, IJ economic liberty expert Paul Sherman spoke about armed government agents raiding barbershops and handcuffing barbers in front of their clients.  Big Government readers know that occupational licensing abuse is rampant in America.

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I’m not a big fan of the Internal Revenue Service, but I try not to demonize the bureaucrats because politicians actually deserve most of the blame for America’s complex, unfair, and corrupt tax system. The IRS generally is in the unenviable position of simply trying to enforce very bad laws.

But sometimes the IRS runs amok and the agency deserves to be held in contempt by the American people

Let’s look at a grotesque example of IRS misbehavior. It deals with a seemingly arcane issue, but it has big implications for the US economy, the rule of law, and human rights.

On January 7, the tax-collection bureaucracy proposed a regulation that, if implemented, would force American financial institutions to put foreign tax law above US tax law. Banks would be required to report to the IRS any interest they pay to foreigners, but not so the US government can collect tax, but in order to let foreign governments tax this US-source income.

This isn’t the first time the IRS has tried to pull this stunt. At the very end of the Clinton years, the agency proposed a rule to do the same thing. But the bureaucrats were thwarted because of overwhelming opposition from Capitol Hill, the financial services industry, and public policy experts. There was near-unanimous agreement that it would be crazy to drive job-creating capital out of the US economy and there was also near-unanimous agreement that the IRS had no authority to impose a regulation that was completely inconsistent with the laws enacted by Congress.

But like a zombie, this IRS regulation has risen from the grave.

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George Will in today’s Washington Post:

Unlike most of the 111 that preceded it, the 112th Congress must begin the process of restoring the national regime and civic culture the Founders bequeathed. This will require reviving the rule of law, reasserting the relevance of the Constitution and affirming the reality of American exceptionalism.

Many congressional Republicans, and surely some Democrats with institutional pride, think Congress is being derogated and marginalized by two developments. One is the apotheosis of the presidency as the mainspring of the government and the custodian of the nation’s soul. The second is the growing autonomy of the regulatory state, an apparatus responsive to presidents.

The eclipse of Congress by the executive branch and other agencies is Congress’s fault.

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Buried beneath the avalanche of press coverage about the lame-duck Congress, I found a story about President Obama’s mid-December meeting with twenty corporate CEOs. The purpose of this Blair House get-together was to discuss how to jump-start our still-ailing economy. Among other aims, Mr. Obama reiterated his goals to increase employment, end the recession, and double U.S. exports over the next five years.

These are lofty and laudable ambitions. But it seems that Mr. Obama’s regulatory bureaucrats haven’t gotten the memo. For example, consider the counter-productive impact of their efforts on agriculture.

As any shopper knows, food prices this past year have been rising faster than the overall rate of inflation. “Fears of a global food crisis swept the world’s commodity markets as prices for staples such as corn, rice and wheat spiraled after the U.S. government warned of ‘dramatically’ lower supplies,” the Financial Times reported in early October. “There is growing concern among countries about continuing volatility and uncertainty in food markets,” said World Bank president Robert Zoellick later that month. “These concerns have been compounded by recent increases in grain prices.”

Confronting this looming food-supply crisis is the American farmer. His productivity is such that the United States is the world’s largest agricultural exporter, with $108.7 billion in farm products shipped abroad in 2010. Helping him increase the supply of agricultural products is the key to addressing both rising food prices and global shortages. His productivity is also critical to our country’s broader economic recovery.

So, you would think that the administration’s apparatchiks would be doing whatever they can to remove the regulatory impediments that farmers face. But you would be wrong. Consider several ways in which federal regulators are threatening agricultural productivity, both directly and indirectly.

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This post could be entitled, “So many dumb bureaucrats, so little time,” but let’s have some fun and turn it into a contest. Which bone-headed decision by a local government best exemplifies mindless bureaucracy, politically correct nonsense, and government waste?

Contestant Number One is Sgt Brian Albert of the Baltimore County Natural Resources Police, who fined two men $90 each for the vicious, horrible, nasty crime of …(please don’t faint)… rescuing a deer. Yes, your eyes do not deceive you. Two hardened criminals used an inflatable raft to free a helpless animal, but they flouted the law by not wearing life jackets. Since I already did a blog post about a man being fined for rescuing a wounded deer, I guess the moral of the story is that bureaucrats don’t like Bambi.

Contestant Number Two is the Metro Police in Washington, DC, which has decided to harass random travelers by searching their bags before they board the subway. This is akin to the TSA’s mindless bureaucracy – but even worse. There surely are nut-jobs who would like to blow up Americans, but they could do that on a bus, on a crowded street during rush hour, or any other place where a large number of people are gathered. Heck, they can drive a car into a crowd. Good intelligence by the CIA and FBI is the way to stop these crackpots, not empty security theater that makes life more difficult for law-abiding people.

Contestant Number Three is the St. Paul School District in Minnesota, which has turned all schools into “sweet-free zones.” This ban also applies to salty foods, however that is defined, and deals “a blow to booster clubs and parent organizations, too, which won’t be able to sell hot chocolate, doughnuts, candy bars and cookies at school events.” I actually agree with Michelle Obama that American kids are overweight, but I also know that government intervention isn’t going to solve the problem unless we want a police state that bans video games, TVs, computers, and the other technological developments that are responsible for sedentary kids.

Contestant Number Four is Battlefield High School, in Haymarket, VA, which disciplined 10 unrepentant gang members. What did these thugs do to warrant detention? Brace yourself and make sure no children are looking over your shoulders, because these hoodlums belong to a particularly nasty group called the Christmas Sweater Club and they got in trouble for handing out miniature candy canes. One school administrator (Mrs. Grinch?)  explained that “not everyone wants Christmas cheer,” thus turning Jay Leno’s parody into reality.

So who wins the prize? I’m not technologically advanced enough to include a poll with this question, so the only thing we can really conclude is that governments do dumb things. That’s true at the national level, the state level, and the local level.

I just wish I could write like Dave Barry.

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On this Thanksgiving holiday, the economy itself might be thankful if Congress would take a machete to the regulations strangling business and job creation.

From transportation to trade, from communications to banking and from telecommunications to technology policy, policy makers of both parties have at times challenged the moral legitimacy  and economic rationality of federal regulatory intervention. For example Democrats helped spearhead transportation deregulation decades ago; both parties rolled back unfunded mandates in the 1990s.

Regulations are frequently anti-competitive and anti-consumer, annually costing consumers hundreds of billions of dollars. The Small Business Administration, in a study by Mark and Nicole Crain, peg today’s cost at $1.7 trillion. Policymakers still largely do not know the full benefits and costs of the regulatory enterprise. Meanwhile, regulatory agencies grow in power and budget; simply look at EPA carbon-dioxide regulation campaign, FCC’s net neutrality hunger, and the rules-to-come from the health care and financial reform bills.

Many reform ideas have been proposed. Strengthening cost-benefit analysis of new regulations, however informative it may sometimes be, is politically unpopular; nor does it actually bring the largely unaccountable regulatory state under any congressional control, so there’s nothing in it for voters to react to.

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Texas Senator Dan Patrick has just filed Senate Bill 126, which would require law enforcement officials to check legal documentation of lawfully stopped individuals. Other states will likely follow suit.

Let me confess how this immigration business is especially poignant to me. I teach college students and have every ethnic persuasion imaginable in my class. If S. B. 126 becomes law, I will turn to my black students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” I will turn to my Asian students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” I will turn to my western European students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” But if I turn to Yolanda Garcia (pseudonym), who is legal and came from Spain three years ago, I will have to say to her, “If a cop stops you, you will have to have papers to prove you’re not illegal, or otherwise be fined, if not jailed.”

A New Yorker cartoon depicts this prejudice accurately. It shows a police officer putting a handcuffed man into a police car, warning, “Anything you say with an accent may be used against you.” S. B. 126 will come to this.

There is something downright sick in this prejudicial treatment. Conservatives and libertarians usually champion the supremacy of the individual over the collective. We judge individuals as individuals, not as members of a group. But too many conservatives are now demanding that we prejudicially judge people as members of a group. They have become the collectivists that they supposedly reject.

The Constitution will not help their case. The Framers designed it to protect, more than anything else, the freedom of the individual.

It gets even worse.

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Carl Mitz is a third-generation horseman.  The Texan is widely known as one of the nation’s best horse dentists.  He’s treated the teeth of over 100,000 horses and has clients in over 30 states.

But Texas bureaucrats tried for years to shut him down.

In a classic case of economic protectionism, Carl and all other Texas equine dentists were told they had to spend up to $100,000 and four years at veterinary school, where they would learn next to nothing about caring for horses’ teeth, or else abandon their occupation.  To top it off, they were threatened with massive fines and even jail.

Instead of giving up his American Dream, Carl teamed up with other Texas horsemen and the Institute for Justice to fight for their right to earn an honest living.

And this week, they won.

On Tuesday, a Texas judge struck down the effort by the Texas Board of Veterinary Medical Examiners to put equine dentists like Carl—known as floaters—out of business and leave the state’s approximately one million horses without proper dental care.

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Nationwide, government at every level is requiring more and more of the workforce to get its permission just to earn a living.

In the 1950s, only about 5 percent of the workforce needed a government license to do their job. Today, that number is over 30 percent.  And governments impose all kinds of other requirements that make it hard for would-be entrepreneurs to start and grow small businesses.

Entrepreneurs like Chuck, here:

Unemployment in the United States has now topped 9.5 percent for 14 straight months—the longest stretch since the Great Depression.  Nearly 14.8 million people were unemployed last month.

Consider the nation’s capital.

Year after year, Washington, D.C., is ranked the worst place in the United States to start a small business. How can the District change its ways to allow entrepreneurs to create more jobs and opportunity?

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On June 5, Andrew Coulson posted a disturbing graph at Big Government:

He showed that public education costs are skyrocketing while student achievement remains flat.  In another graph in the same post, he showed that the public school bureaucracy is growing TEN times as fast as the student body.

The bottom line:  The growth and cost of the education establishment is out of control, while the quality of public education is in desperate need of improvement.

Regarding the latter, just how bad can things be?  Check out this brief video clip:

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We landed on the moon over two generations ago, and ever since NASA has been used as intellectual support for those who think we can solve any problem with a wave of the legislative or regulatory wand.   “If government can put a man on the moon,” goes statist conventional wisdom, “it can do anything.” If you’ve ever been in a debate with a true believer in the magic of big government, you’ve probably heard some variation of this generic argument.

Despite the significant flaws in this logic, it was always difficult to convince the general public just why it was wrong.  Now, with the ridiculous admission of NASA Administrator Charles Bolden that the so-called space agency’s priority is to boost Muslim self-esteem, this last fig leaf of big government has finally been removed.  Believers in grand government solutions to all social problems are left naked for all to see.

The comment itself isn’t really the big story.  Yes, it’s outrageous.  It represents everything that is wrong with the PC-obsessed, America-bashing, leftist administration currently occupying the White House.  But it’s merely the latest  in a lengthy list of NASA disappointments.  The real story is the slow, drawn-out transformation of NASA from a symbol of American exceptionalism into a national embarrassment.

Given the dramatic and iconic bang with which NASA introduced itself to the public, it’s easy to overlook that it’s a government bureaucracy just like any other.  It suffers from all the typical failings of government institutions.  Without market pressures, NASA has grown increasingly wasteful.  A recent GOA report found that 9 out of 10 assessed projects experienced cost overruns and delays.  That’s almost a perfect score in inefficiency.

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The political process often resembles an unseemly racket as politicians take money from people who earn it and give it to another group in exchange for campaign cash and political support. The modern bureaucracy is a good example. Government workers have now become a cosseted elite, with generous pay, extravagent benefits, lavish pensions, and ironclad job security. In exchange for this privileged status, they reward the politicians with millions of dollars of support and a host of in-kind contributions.  I have documented many of these outrages in my “Taxpayers vs. Bureaucrats” series at the International Liberty blog. Well, now we have a video detailing how the government workforce has morphed into a fiscal nightmare for taxpayers.

There are three things in the video that deserve special emphasis. First, bureaucrats are vastly overpaid. The government data cited in the video show that total compensation for the federal civil service is twice as high, on average, as it is for workers in the productive sector of the economy. There are some bureaucrats who deserve above-average pay, such as scientists dealing with nuclear weapons, but it is outrageous that the average drone in the federal bureaucracy is getting twice as much compensation as the taxpayers (serfs) who pay their salaries.

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