Just hours after winning the Florida primary, Mitt Romney let loose a potential gaffe that turned what should have been a rallying moment for Republican supporters into an uncomfortable position of having to defend the man that is likely to face Obama in the general election.

If taken out of context, which the media is very adept to doing, Romney’s comment, “I’m not concerned about the very poor” sounds heartless and indefensible. In fact, that is exactly how many conservative commentators reacted.

From a purely political position, the criticism is reasonable. Romney effectively handed Democrats a shiny set of brass-knuckles to use against, not only him, but the Republican Party in general as being out of touch with every day Americans. As NRO’s David Kahane put it, “In the Fight of the Century between the Apologetic Oligarch and the Tribune of the Folks, who do you think the fans will be rooting for?” In other words, Romney unwillingly played into the class-warfare meme that Obama has wrapped himself in.

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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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In a recent column for the Wall Street Journal, I explained why Mitt Romney’s interest in a value-added tax is deeply troubling.

One of my key points was that the VAT is a money machine for big government.

But don’t believe me. Look at Japan, where the politicians see increases in the VAT as a way of financing a much larger burden of government spending. Here’s some of what is being reported by Bloomberg.

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015… Japan’s finances are “getting worse and worse every day, every second,” Takahira Ogawa, Singapore-based director of sovereign ratings at S&P… Japan’s aging population is also weighing on Noda’s struggle to achieve fiscal health. Social-security expenses have more than doubled in two decades and will account for 52 percent of general spending for the year starting in April, according to a budget proposal the cabinet approved last month.

The key point in this excerpt is that the VAT is a substitute for entitlement reform. Without the VAT, politicians might actually reform the welfare state. But because of the VAT, they want to take the easy (but extremely destructive) route and boost the tax burden.

This is why I get so agitated about the threat of a VAT in America, as illustrated by this recent appearance on Larry Kudlow’s show.

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From time immemorial—from Etienne de la Boitie to David Hume to Ludwig von Mises—political analysts have noted that because the number of those in the ruling elite amounts to only a small fraction of the number in the ruled masses, every regime lives or dies in accordance with “public opinion.” Unless the mass of the people, no matter how objectively abused and plundered they may appear to be, believe that the existing rulers are legitimate, the masses will not tolerate the regime’s continuation in power. Nor need they tolerate it, because they greatly outnumber the rulers, and hence whenever they become subjectively fed up, they have the power—which is to say, the overwhelming advantage of superior numbers—to oust the regime. Even if the regime possesses a great advantage of coercive power, its employment avails the rulers nothing if they must kill or imprison 90 percent of the population, because such massive violence would reduce them to the status of parasites without hosts.

This consideration long seemed to make sense as a critical element of political analysis, and even today one often encounters it. Something akin to it seems to motivate the current Occupy Wall Street movement and its spin-offs in other venues when they represent themselves as members of the (exploited) 99 percent, in opposition to the (exploiting) 1 percent.

Certain long-established trends in the welfare state, however, have progressively weakened the force of this analysis. The main element of these trends is the tremendous growth in the number of people (and in their proportion in the population) who are directly dependent on government benefits to a substantial degree. Researchers at the Heritage Foundation have been tracking this development for several years and have pushed their analysis back for several decades. An index of dependency based on this research increases from 19 in fiscal year 1962 to 272 in fiscal year 2009.

The Heritage index uses information on almost three dozen important federal programs on which Americans depend for cash income and other support—including housing assistance, Medicaid, Medicare, Social Security, unemployment insurance benefits, educational benefits, and farm-income supports—but it is scarcely a comprehensive measure, inasmuch as the total number of federal programs with dependents is gigantic at present. Of course, each such program has government employees and contractors who run it and hence depend on it to earn much, if not all, of their income. Government civilian and military retirees add millions more to the ranks.

The Heritage researchers found that in 1962, 21.7 million persons depended on the programs they included in their index for benefits. By 2009, the corresponding number of dependents had grown to 64.3 million. Adding dependents not included in the Heritage study might easily increase the number to more than 100 million, or to more than a third of the entire population. Thus, the parasites verge ever closer to outnumbering their hosts.

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About a month ago, I posted in regard to what I called “the euthanasia of the saver.” This comment had to do with the fact that nominal interest rates in the United States for financial investments such as bank certificates of deposit and bank savings accounts—the kinds of investments traditionally employed by retired persons and small savers, who wish to gain income without exposing their funds to great risk of capital loss—now fall considerably below the rate of inflation, and hence the real (or inflation-adjusted) yield on such investments is negative. That is, the nominal payoff is insufficient to offset the loss of purchasing power of the money invested.

About a month before I wrote my commentary, my old friend Richard Rahn had, without my noticing, written on the same issue in a commentary article published in the Washington Times, but he had gone beyond the simple point I made. Rahn notes that besides suffering the loss of wealth occasioned by the negative real yield on such investments, the investor has to pay tax on the nominal yield—truly a case of the government’s adding insult to injury. He notes that given the currently prevailing rates of interest, rate of inflation, and tax rates, a small investor who earns a nominal yield of 1% and pays a 20% marginal tax rate, while the rate of inflation is 3.5 %, actually ends up paying a real tax rate of 370%. For example, an investor buys a $100,000 CD, earns $1,000 in annual interest, pays a tax of $200, and incurs a loss of $3,500 in purchasing power on the invested principal. Total (nominal) income is $1,000; total real tax (nominal tax plus inflation tax) is $3,700.

This expropriation of private wealth is not accidental.

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I’ve written about the fiscal implosion in Europe and warned that America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and Medicaid.

But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.

I particularly like the five lessons she identifies.

1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn – especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.

2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.

3. A welfare state cripples the human spirit. This was the point eloquently made by Hadley Heath of the Independent Women’s Forum in a recent video.

4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.

5. Bailouts don’t work. This also was a powerful lesson. Imagine how much better things would be in Europe if Greece never received an initial bailout. Much less money would have been flushed down the toilet and this tough-love approach would have sent a very positive message to nations such as Portugal, Italy, and Spain about the danger of continued excessive spending.

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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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The Center for Freedom and Prosperity has released another “Economics 101″ video, and this one has a very powerful message about the federal government’s so-called War on Poverty.

As explained by Hadley Heath of the Independent Women’s Forum, the various income redistribution schemes being imposed by Washington are bad for taxpayers – and bad for poor people.

The video has a plethora of useful information, but the data on the poverty rate is particularly compelling. Prior to the War on Poverty, the United States was getting more prosperous with each passing year and there were dramatic reductions in the level of destitution.

But once the federal government got involved in the mid-1960s, the good news evaporated. Indeed, the poverty rate has basically stagnated for the past 40-plus years, usually hovering around 13 percent depending on economic conditions.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries – and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty.

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Treasury Secretary Tim Geithner may be most famous in the United States for cheating on his taxes (you can even buy a t-shirt to acknowledge his tax dodging), but he’s becoming a punch line in the rest of the world for different reasons.

I wrote two years ago about Chinese students erupting in laughter after Geithner claimed the Administration believed in a strong dollar.

Now he’s getting mocked by the Europeans.

After Friday’s post about the absurdity of Obama sending his Treasury Secretary to lecture the Europeans, you can imagine my great amusement today as I read that the Europeans basically told Geithner to go jump in a lake.

Here are some passages from the Reuters report.

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The Census Bureau has just released the 2010 poverty numbers, and the new data is terrible.

There are now a record number of poor people in America, and the poverty rate has jumped to 15.1 percent.

But I don’t really blame President Obama for these grim numbers. Yes, he’s increased the burden of government, which doubtlessly has hindered the economy’s performance and made things worse, but the White House crowd legitimately can argue that they inherited a crummy situation.

What’s really striking, if we look at the chart, is that the poverty rate in America was steadily declining. But then, once President Lyndon Johnson started a “War on Poverty,” that progress came to a halt.

As I’ve explained before, the so-called War on Poverty has undermined economic progress by trapping people in lives of dependency. And this certainly is consistent with the data in the chart, which show that the poverty rate no longer is falling and instead bumps around between 12 percent and 15 percent.

This is bad news for poor people, of course, but it’s also bad news for taxpayers. The federal government, which shouldn’t have any role in the field of income redistribution, has squandered trillions of dollars on dozens of means-tested programs. And they’ve arguably made matters worse.

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By now, you likely have heard of Dr. David Ludwig, Harvard professor and child obesity specialist at Children’s Hospital in Boston. He and attorney and research partner Lindsey Murtagh authored a piece in the Journal of the American Medical Association suggesting that severely obese children might require the government to remove them from custody of their parents.

If this doesn’t convince you that liberals support a nanny state, nothing will.

As a child psychologist with over 20 years of experience, I can say with supreme confidence that taking a child from his or her parents is almost always traumatic. Sometimes it is justified, of course; in cases of physical, sexual, or emotional abuse, the child is sometimes far better off living without the offending parent. Similarly, when a parent evidences a profound inability to provide the basic needs of a child, the child might be safer with a relative or, rarely, with a foster parent. But removing a child from the home because the parent doesn’t adequately assist the child in losing weight? This is nothing short of ridiculous.

Such a proposal includes several dangerous messages. First, the messages to children: your parents are so screwed up that they can’t take care of you. They aren’t good enough for you and you aren’t good enough to stay with them. Second, the messages to parents:  ultimately, you do not control the destiny of your child; the government does.  Also, the state has the right to take your children away if you don’t get their weight (or other variables) under control. Third, the message to departments of child protective services: now you have more power to control parents and children. Finally, the message to taxpayers: you will now bear the burden of paying for a state-run juvenile weight-loss program.

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In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point-of-no-return when the number of people riding in the wagon begins to outnumber the number of people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving pensions, etc), it becomes rather difficult to form a coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

These images are remarkably accurate.

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I’ve explained before that one of the most damning pieces of evidence against Obamanomics is that the economy is suffering from sub-par growth, something that is particularly damning since normally one expects to see faster-than-average growth following an economic downturn.

In a recent presentation, Robert Lucas of the University of Chicago included a couple of graphs that illustrate this phenomenon. This first chart shows the history of U.S. economic growth over the past 140 years. As you can see, the growth rate was remarkably constant over time, and there were always periods of rapid growth following economic downturns.

Lucas, who won the Nobel Prize in economics in 1995, then looks at the data for the recent downturn and recovery. As you can see, we have been struggling to get back to average growth rates and we have not enjoyed any of the above-average growth that normally follows a recession.

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Just a year ago, the Obama Administration was on the verge of converting America into a European style social-welfare state. The President had pushed up federal, state and local deficit spending to 41% of our gross-domestic-product (GDP), a level not seen since World War II. He passed healthcare legislation nationalizing 1/6 of the American economy and his Congressional majority was on the threshold of enacting labor and environmental regulations that would have collectivized broad swaths of American production and employment.

Then Greece and a number of other European nations suffered credit rating down-grades, soon followed by debt defaults and economic collapse. Today America stands at the precipice of its own collapse; either halt deficit spending or risk the financial collapse of our nation.

Barak Obama, during his Presidential bid, campaigned across Europe to symbolically express his solidarity with their economic social-welfare model by stating: “In America, there’s a failure to appreciate Europe’s leading role in the world.” Once elected, President Obama partnered with European nations on a multi-trillion dollar government spending initiative in hopes of generating a multiple of economic growth.

Unfortunately for America, Greece and the other deficit spenders, the spending was squandered on bureaucratic overhead and crony projects. Now that lenders are demanding repayment, many countries are being forced to default on payment.

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Sooner or later, there will be a giant battle in Washington over the value-added tax. The people who want bigger government (and the people who are willing to surrender to big government) understand that a new source of tax revenue is needed to turn the United States into a European-style social welfare state. But that’s exactly why the VAT is a terrible idea.

I explain why in a column for Reuters. The entire thing is worth reading, but here’s an excerpt of some key points.

Many Washington insiders are claiming that America needs a value-added tax (VAT) to get rid of red ink. …And President Obama says that a VAT is “something that has worked for other countries.” Every single one of these assertions is demonstrably false. …One of the many problems with a VAT is that it is a hidden levy. …VATs are imposed at each stage of the production process and thus get embedded in the price of goods. And because the VAT is hidden from consumers, politicians find they are an easy source of new revenue – which is one reason why the average VAT rate in Europe is now more than 20 percent! …Western European nations first began imposing VATs about 40 years ago, and the result has been bigger government, permanent deficits and more debt. According to the Economist Intelligence Unit, public debt is equal to 74 percent of GDP in Western Europe, compared to 64 percent of GDP in the United States (and the gap was much bigger before the Bush-Obama spending spree doubled America’s debt burden). The most important comparison is not debt, but rather the burden of government spending. …you don’t cure an alcoholic by giving him keys to a liquor store, you don’t promote fiscal responsibility by giving government a new source of revenue. …To be sure, we would have a better tax system if proponents got rid of the income tax and replaced it with a VAT. But that’s not what’s being discussed. At best, some proponents claim we could reduce other taxes in exchange for a VAT. Once again, though, the evidence from Europe shows this is a naive hope. The tax burden on personal and corporate income is much higher today than it was in the pre-VAT era. …When President Obama said the VAT is “something that has worked for other countries,” he should have specified that the tax is good for the politicians of those nations, but not for the people. The political elite got more money that they use to buy votes, and they got a new tax code, enabling them to auction off loopholes to special interest groups.

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In a country of exceptionally high rates of personal taxation and home to one of the world’s most generous welfare states, Norway’s Progress Party, which describes itself as a “classical liberal” organization committed to “personal freedom,” is something of an anomaly. But it is an increasingly powerful anomaly, now ranking as the country’s second biggest political party.

In August, Progress Party leader Siv Jensen sat down with Reason senior editor Michael C. Moynihan and explained that Norwegians are growing tired of “regulation, bureaucracy, and high taxes” and why the Scandinavian health care model is bad for America—and Scandinavia.

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Drums are beating in Washington for a value-added tax in addition to the “stimulus” taxes, health care taxes, energy taxes and other taxes President Obama has imposed and wants to impose on hard-pressed taxpayers. Supposedly a value-added tax is a magic elixir for curing budget deficits and excessive debt. Quack remedy would be more like it. If it worked, you’d observe that countries with a VAT had budget surpluses and no debt problems. But almost every country that has a VAT is plagued with budget deficits and excessive debt. … No surprise that the worst financial basket cases all have a VAT. Iceland has the highest VAT rates, but this didn’t prevent its financial crisis and the near bankruptcy of its government. Italy’s VAT rates are almost as high, and its debt exceeds its GDP. Financial crises are looming in Spain and Portugal, and of course they have a VAT. Greece has a VAT, too, and when politicians ran out of money to pay government employees for more than a year’s worth of work every year, they rioted in the streets.  Great Britain has a VAT, and its government finances are in the worst shape since World War II — its budget deficit is expected to be bigger than that of Greece. Moreover, the OECD has acknowledged that “(VAT) tax and transfer wedges have discouraged firms from offering employment and individuals from taking it, reduced employment and increased inequality.”

Suddenly the American public is shocked.  Perhaps there is no economic recovery.  Perhaps the One really does favor Islam.

Democrats and Republicans shake their heads and wonder, how could our President pursue such divisive and unpopular policies?  What is the rationale for his decisions?  Is he incompetent?  Is he naive?

The answer is none of the above.

I have said before and I will say again, Barack Obama does not share the values of Americans.  His vision is completely anathema to an America based on individualism, private property rights and Judeo-Christian morality.

When one argues that Barack Obama is merely mistaken in his economic program, they completely discount the notion that he knows exactly what he is doing and that he has been 100% successful in achieving his policies and their intended ends, means and ends that any objective viewer would realize were insane.  After all, an economy is nothing more than the collection of mutually beneficial voluntary exchanges of labor and the fruits of labor.  Anything that impedes one’s labor, or the trading of its fruits is necessarily bad for the economy.  Hence, almost everything a government does to try to stimulate an economy, impeding the natural spontaneous harmony of such a system necessarily postpones any recovery.

We were in major trouble with unsustainable public and private debt prior to this President, coupled with a completely insolvent financial system, a destined to fail monetary system and numerous stagnant businesses sucking up economic resources.  A real financial restructuring would have taken significant time, and even the most “fiscally conservative” President and Congress would not have been able to move enough roadblocks out of the way to make this recovery painless or quick.  I question whether or not anything could change the direction of the economy in the long run, save for a collapse that would force us to let the free market work and liquidate the welfare state.  But this President ensures that there will not even be a chance for recovery for many many years, regardless of who the next President is.

And it is all by design.

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“The denial of the possibility that there is an endpoint [to the welfare state] is crucial to the liberal enterprise,” says Dr. William Voegeli, author of the new book, Never Enough: America’s Limitless Welfare State and a visiting scholar at Claremont McKenna College’s Henry Salvatori Center for the Study of Individual Freedom in the Modern World.

In this Reason.tv interview, Voegeli traces recent federal government expansions to President Franklin Roosevelt’s introduction of a “second Bill of Rights” that included the right to housing, education, and medical care.

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As many thrills as he sends up Chris Matthews’ leg and despite his ability to walk on water, Barack Obama like all legislators cannot create jobs.  All any politician can do is take resources from the private sector and allocate them according to his or her own fancy, often towards favored constituencies, at a prohibitive and wasteful cost.

Instead of letting individuals determine how best to allocate land, labor and capital based upon their own subjective values and aspirations, the government in its self-attributed divine wisdom believes it is morally right for it to squander other people’s money.  Apparently, we are not ourselves capable of deciding how to dispense with our property, and deal with the consequences of such actions good or bad.

Then again, in our “social”ist democracy we feel it proper that government take care of our health and our retirement under the auspice of the “public good.”  So what of a little more state paternalism?  To that I say, the so-called public good is a public bad because when the collective supplants the individual, society fails.  If people would rather have the government take care of such things then take care of them themselves, then the best we can hope for is that the government not monopolize such goods and services but allow for unobstructed private competition.

In any event, to ascribe the word “sector” to the limitless Unconstitutional and unnecessary public “businesses” is pure subterfuge.  The plunder sector is the only accurate title for what the government does outside its strict Constitutional scope.

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