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…)

Is it April Fool’s Day? Has somebody in Paris hacked the website at the Organization for Economic Cooperation and Development? Have we been transported to a parallel dimension where up is down and black is white?

Please forgive all these questions. I’m trying to figure out why any organization – even a leftist bureaucracy such as the OECD – would send out a press release entitled, “Rising tax revenues: a key to economic development in Latin American countries.”

Not even Keynesians, after all, think higher taxes are a recipe for growth.

Ah, never mind. I just remembered that the OECD is a hotbed of statism, so the press release makes perfect sense. After all, the US-taxpayer-funded organization has become infamous for reflexively advocating big government.

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We have just passed through the Stop Online Piracy Act (SOPA) brouhaha.

A bill intended to stop theft – an important goal, and a necessary function of government.  But SOPA was overly broad, and deserved in its most recent iteration to go away – which it did.

Because of a bipartisan oppositional uprising – but the two sides arose for very different reasons.

The Theft-Left is vociferously opposed to private property rights.  SOPA is aimed at protecting private property.  So the Left said No.

The Right is loathe to grow government control of anything – including the Web.  And having just witnessed the recent Big Government Network Neutrality Internet power grab, their antennae were highly sensitized – and they said No.

Now, Washington is talking cyber security.  Where there is, again, a legitimate role for government – but we have, again, a bill that defines said role much too broadly.

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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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Bob Lutz is a good man.  A Swiss-born immigrant American success story.

He’s held big gigs at BMW and Ford.  He also worked way up the food chain at (now $85 billion bailed-out) Chrysler and General Motors (GM) – retiring as GM’s Vice Chairman in 2010.

And he has recently written a piece:

Chevy Volt And The Wrong-Headed Right

…in vociferous defense of the Chevy Volt.

You know, the more-than-$200,000 in government-subsidies-per-unit-sold Volt.

The overproduced, unprofitable, unpopular, combustible Volt.  (And January 2011’s sales were no less disappointing.)

That Chevy Volt.

Are we on the Right wrong-headed?  Let’s take Mr. Lutz’s piece piecemeal and see.

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One year ago, I wrote about how the French government was getting unexpected additional revenues following the implementation of lower tax rates.

This is the Laffer Curve in action, and it’s happening again in France, only this time because the government reduced the wealth tax.

Here’s part of the story at Tax-news.com.

France’s solidarity tax on wealth (l’impôt de solidarité sur la fortune – ISF), which was radically reformed by the government in June last year, has served to yield much greater fiscal revenues for the state than initially predicted. …the government agreed that the solidarity tax on wealth would in future comprise of only two tax brackets: a 0.25% tax rate imposed on individuals with net taxable wealth in excess of EUR1.3m (USD1.7m), and a 0.5% tax rate levied on individuals with net taxable assets above EUR3m. Previously, the entry threshold at which wealth tax was applied was EUR800,000, with the rates varying between 0.55% and 1.8%. To alleviate any threshold effects, a discount mechanism was also instated applicable to wealth of between EUR1.3m and EUR1.4m, as well as to wealth of between EUR3m and EUR3.2m. Although the new provisions provide for lower tax rates and for the abolition of the first tax bracket, effectively exempting around 300,000 taxpayers from the tax, according to latest government figures, the tax yielded around EUR4.3bn in 2011, almost EUR60m more than originally forecast in the collective budget.

This is not to say that France is an example to follow. There shouldn’t be any wealth tax, and income tax rates are still far too high.

And it’s also worth remembering that tax policy is just one of many factors that determine economic performance.

That being said, nations that shift from terrible tax policy to bad tax policy will enjoy better economic performance, just as nations that go from good policy to great policy also will reap benefits.

In other words, incremental changes make a difference. That’s even the case when the politicians impose a “Snooki tax” on indoor tanning services.

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I attended Wednesday’s 8:00am (8am?!?) House Oversight and Government Reform Committee hearing entitled:

Volt Vehicle Fire: What Did NHTSA Know And When Did They Know It?

The witnesses were killer:

National Highway Transportation Safety Administration (NHTSA), Barack Obama-appointee Administrator David Strickland.

And General Motors (GM), Barack Obama-appointee CEO Dan Akerson.

The scope of the hearing was a bit too narrow – leaving out some fairly important attending facts.  Like, say, the (at least) five other Chevy Volt fires that have occurred besides the one being discussed.

This hearing was all about a single June Volt blaze.  The battery burst into flames about three weeks after a test crash at and by the National Highway Transportation Safety Administration (NHTSA).

A fire about which Obama’s NHTSA did tell the Obama White House.

But a fire about which neither Obama’s NHTSA, the Obama Administration nor Obama’s GM told the American people for nearly six months – and then did so only when forced by a looming Bloomberg news story.

But:

The White House had no role in the decision to delay disclosure of a fire that broke out in a crash-tested Chevrolet Volt, the Obama administration told Congress on Friday.

Of COURSE not.

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President Barack Obama is in full 2012 reelection mode.  Part of that process is preparing to possibly take on Mitt Romney – whom (it appears) he thinks has the strongest chance to be his Republican opponent.  Which he and many Democrats think is very good news.

Romney fits right into the Left’s absurd anti-capitalism, “robber baron,” Occupy Wall Street anti-1%-er, scorched earth storyline.

Romney is very wealthy, which for Obama and his Democrats is the height of eee-vill (except – these Donkeys are mostly rich…).  Never mind that Romney’s wealth is right in line with many past Presidents and candidates – including 2004 Democrat nominee John Kerry.  (The difference?  Romney earned it, Kerry married it.)

And as Romney recently told us, he these days pays the 15% capital gains tax rate – rather than the (absurdly) higher income tax rates those of us receiving salaries do.  Never mind that this is perfectly legal (and good fiscal policy, and “fair”) – it is culled right from the Leftist, Warren Buffett “I pay less in taxes than my secretary” fraudulent script.

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How did Romney make his coin?  Via the epitome of eeeee-villll free market entities – the venture capital firm.  His was, of course, Bain Capital.

Yes, Bain sometimes invests in failing companies.  Some of which they determine to be not worth saving, so down they go.  Welcome to Reality, Boys and Girls.

(more…)

The German Chancellor and French President have put together a plan to boost growth. Sounds like a good goal, but what specifically are they proposing?

Some of the obvious ideas include:

• Lowering tax rates to boost incentives for productive behavior.
• Reducing the burden of government spending to allow more efficient allocation of labor and capital.
• Cutting back regulation and red tape to boost market efficiency.

But those are only obvious ideas if you want a growth plan that actually leads to…(drum roll, please)…more growth.

Merkel and Sarkozy must have some other objective in mind, because they’ve proposed a plan comprised of new taxes, higher taxes, and tax harmonization.

This is beyond satire. Even if I was trying to make fun of the French and Germans (perish the thought), I wouldn’t be able to make up something this absurd.

(more…)

The Stop Online Piracy Act (SOPA) (and its Senate alternative, the Protect Intellectual Property Act [PIPA]) have been taking a bipartisan beating.  Conservatives have joined with Leftists to savage the bill and thus its chances for passage.

I too am opposed to this iteration of SOPA – it remains too overly broad.

But something similar and more finely, sharply crafted – must become law.  And conservatives will need to reorient themselves when a better version of the bill comes along – and support it.

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We cannot look at the SOPA debate without putting it into the broader context of the immediately preceding Network Neutrality debate.

Conservatives rightly became highly tuned to Internet censorship as a result of the Left’s drive to impose the truly censorious Net Neutrality by any means necessary.

Following so closely on Net Neutrality’s heels, SOPA got swallowed up in this righteous protect-free-speech verve.

But there are some fundamental differences between SOPA and Net Neutrality that must be acknowledged.

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What’s an absurd Leftist policy without an agitprop song to accompany the inanity?

The attempted spoonful-of-sugar to help force down the bad Progressive medicine they are pushing.

Which brings us to General Motors (GM) and one of the Leftist ideological windmills at which they tilt – the Chevy Volt.

We the Taxpayers have spent billions subsidizing the Volt.  And continue subsidizing it still.

We bailed out GM ($50 billion) and Chrysler to the tune of $83 billion.  On which the Obama Administration now admits we’ll lose (at least) $23.6 billion.  (President Obama once upon a time promised us we’d actually make money on the deal.)

We the Taxpayers are still stuck holding 500 million shares of GM stock – on which we are poised to lose tens of billions of dollars more.

But you know what makes all of this terrible-ness so much less worse?  GM spent some of our money on – the Chevy Volt official song and music video:

Don’t you feel better?

(more…)

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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Of wireless Internet bandwidth hogs, that is.

We have for months been odiferously awash in word of the Occupy Wall Street (#OWS) “movement.”

Intellectually and ideologically sloven, these gathered gaggles have been commandeering sporadic public spaces (and some private ones) all across the fruited plain.

When asked why they are so doing, you get an inanity cornucopia – think Jay (Leno) Walking or (Jesse) Watters’ World on ignorance steroids.

The only semi-comprehensible – but still factually vacuous – thing to emanate from the whole mess is the 1% – 99% nonsense.

That being the #OWS-ers saying that the upper 1% of Americans control most of the money and power and thusly must be…destroyed?  Certainly taxed and regulated into utter oblivion.

In an always-and-forever failed effort to “spread the wealth around” – misery being the only thing that ever ends up equally distributed.

Work, work ethic and talent never enter the #OWS equation – but then again, why should they?

(more…)

The fact that Paul Krugman received the Nobel Prize in economics makes sense given that both Al Gore and Obama received the Nobel Peace Prize. But that is the only way that it makes sense.

In his December 29^th column in the New York Times, Keynes Was Right, he continues to make the case that the only reason we haven’t come roaring out of the Great Recession is because we spent too little.

Krugman cites the downturn of 1937 when FDR’s government programs were curtailed and unemployment rose. He says that unlike in that fateful year we should instead redouble our efforts and spend more to prime the economic pump. Austerity is insanity he says. We must spend more as Keynes would have advised, deficits (and inflation) be damned.

Build pyramids as Keynes said we should. So what if the they do not contribute, and probably detract, from the quality of the economy. It is the quantity of economic activity that we are interested in not quality. Get people employed doing whatever. This is the road to prosperity!

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The Barack Obama Administration has, since its inception, been moving the United States dramatically leftward, trying to (at the very least) make us a western European socialist entity. Ideologically, a full-on participant in – rather than a rational outlier of – the patently absurd United Nations (UN).

Perhaps the greatest – and worst – example of President Obama’s UN-ing of America was his Federal Communications Commission (FCC)’s December 2010 illegal Network Neutrality Internet power grab.

The Administration going to these unlawful lengths to commandeer control of the ‘Net makes it a little more difficult to persuade international autocrats and dictators to leave alone their portions of the World Wide Web.

Or ours.

Which brings us to the United Nations. (more…)

It’s hardly a secret that the 2012 election is shaping up as a contest between free markets and big government.  And while the choice seems clear in the current political environment, it’s important to recall that government does play a critical role in the development and maintenance of functioning markets.  Yet, as Tea Partiers, Occupiers, and Ron Paul acolytes all note, government has both abdicated that critical role and inserted itself where it does not belong.

If markets were magical places that flourished whenever government disappeared, Somalia would be the world’s leading economy.  Markets are sophisticated mechanisms that enable informed parties to exchange resources, voluntarily, to mutual benefit.  There’s a lot packed into that sentence.  For markets to work, participants must trust the system.  They must believe that they have—or least can access—the information they need to make informed decisions.  They must feel free from coercion—both explicit coercion and unacceptable take-it-or-leave-it offers.  They must trust the inherent fairness of the system, and they must believe that it is possible to enforce the rules of the marketplace by sanctioning cheaters.  The closer an actual market comes to meeting these needs, the better it will function.  The further a market drifts from these goals, the more likely it is to fail.  It is thus absolutely critical that someone—presumably the government—serve as the market referee and the guarantor of market enforcement.

First and foremost, market participants must believe that courts will honor contracts and property rights fairly, dispassionately, and smoothly.  Contracts allow strangers to exchange promises; property allows people to focus on matters in front of them without worrying about possessions that may be out of sight.  In the absence of enforceable contracts and property rights, people could never travel far from home, leverage their assets, or exchange current payment or performance for a promise of future delivery with anyone unfamiliar.  In short, a society that distrusts its courts cannot progress beyond a tribal or a village economy—even if it employs tribal or village markets.

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I’ve written before about whether California is the Greece of America, in part because of crazy policies such as overpaid bureaucrats and expensive forms of political correctness,

And we all know that California has one of the nation’s greediest governments, imposing confiscatory tax rates on a shrinking pool of productive citizens.

So it is hardly surprising that the Golden State is falling behind, losing jobs and investment to more sensible states such as Texas.

But not everybody is learning the right lessons from California’s fiscal and economic mess.

There’s a group of crazies who want to increase the top tax rate by five percentage points, an increase of about 50 percent. And they have made Kim Kardashian the poster child for their proposed ballot initiative.

I’m relatively clueless about popular culture, but even I’m aware that there is a group of people know as the Kardashian sisters. I don’t know who they are or what they do, but I gather they are famous in sort of the same way Paris Hilton was briefly famous.

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What’s a Barack Obama Administration multi-billion dollar boondoggle without a Czar to oversee it?

For the automobile industry bailout, the Lord Overseer was Car Czar Steven Rattner.

This is the same Steven Rattner who late last year reportedly paid a $6.2 million Securities and Exchange Commission (SEC) fine and accepted a two-year ban from associating with broker-dealers or investment advisers.  For an alleged “pay-to-play” New York state pension fund kickbacks scheme he orchestrated after leaving Washington and his Czar-ship.

DC-Wall Street nexis, anyone?  Crony Socialism, anyone?

His current gig – besides being a (shocker) MSNBC Morning Joe “Economic Analyst”?  Managing New York Mayor – and 1%-er billionaire – Michael Bloomberg’s personal and philanthropic assets.

DC-Wall Street nexis, anyone?  Crony Socialism, anyone?

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This is the first installment of a multi-part series on suggested economic policies for the next government to consider.  These are meant to be long-term solutions.  Our current economic downturn is temporary and has some short-term causes but a large part of the explanation lies in the worldview and longer term thinking that governments of both parties have adopted, in small ways since maybe Abraham Lincoln but in significant ways since Franklin Roosevelt and in exaggerated extremes since Lyndon Johnson.  The federal deficit, the mess we call a tax code and so forth were created over a long time and while the solutions can be implemented with greater haste it will take some time for the transition and full effects to be felt and the returns to be realized.  The political class has seldom shown signs of long term thinking and the greater population seems less so, we can only pray and hope the message gets through.  My first installment is on the tax code.

Axiom 1 of Taxation: Higher rates are counter-productive: They do not collect more revenues and provide incentives to engage in non-productive behavior.

Policy application of Axiom 1: Lower the top rate to increase revenue collected and reduce the incentives for unproductive defensive actions.

Axiom 2 of Taxation: Income is income; its source is irrelevant.

Policy application of Axiom 2: Eliminate the corporate tax and the different tax treatment for capital gains.  All income should be taxed at the time it is realized and at the same rate.

Axiom 3 of Taxation: The tax code should not destroy the incentive or ability to save or to transfer wealth.

Policy application of Axiom 3: Eliminate taxation on the interest earned on savings accounts, certificate of deposit and other interest bearing bank accounts as well as the gift tax and inheritance tax.

Axiom 4 of Taxation: The tax code should be easy to understand and easy to comply with.

Policy application of Axiom 4: The tax code needs a massive simplification; fewer brackets, shorter forms more universal treatment of income.  The first tax form fit on one page, it should again.

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$787 billion.  Plus interest.  At downgrade – and thusly increased – rates.

Behold the American Recovery and Reinvestment Act of 2009 – the “Stimulus.”  Brought to you by President Barack Obama, Senate Majority Leader Harry Reid, then-House Speaker Nancy Pelosi and their Congressional Democrat cohorts.

Passed in the panicked wake of the 2008 Community Reinvestment Act-Fannie Mae-Freddie Mac-government-induced global economic collapse.  Because “you never want a serious crisis to go to waste.”

Passed, we were told, to create “or save” jobs.  In places like non-existent Congressional districts.

Passed, we were told, to keep unemployment below 8%.  How’d that work?

The unemployment rate when Obama took office was 7.6%. The stimulus was passed in February 2009. According to Obama, it was never supposed to go above 8% — well, it was already at 8.1% when the stimulus became a law. And it never got any better. According to the Bureau of Labor & Statistics, the unemployment rate remained high. There were some predictions that it would stay above 9% until 2012 (and this was from the White House no less). The CBO also predicts that the unemployment rate would be 8.2% come November 2012 which is higher than when he took office.

It worked swimmingly.  Drowning-ly, actually.

As we said way back in February:

Government attempting to “assist” the private sector is the D.C. version of the elementary school game Red Light-Green Light.

If the government has given itself the Green Light – and is lumbering and lurching around the free market, blindly and ignorantly throwing around laws, regulations and money – the private sector freezes in place, afraid to move in any direction for fear of the next federal anvil to fall.  The overactive government has thusly emplaced a Red Light in front of the private sector.

Rarely if ever has the federal government been more active than they have been these past two plus years.  And as a result the private sector has been exceedingly timid – which explains why our “recovery” has been so pathetic – if not non-existent.

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Which brings us to the government “helping” the Internet.

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