Feeds:
Posts
Comments

Archive for June, 2010

If misery loves company, then American and English taxpayers can enjoy a bonding experience after reading this story about excessive pay for bureaucrats in Brussels. According to the Daily Telegraph, at least 1,000 (and probably more than 2,000) of these euro-crats earn more than the U.K. Prime Minster. 

More than one thousand EU officials earn more than the Prime Minister, according to research carried out by the The Daily Telegraph. …Included in the overall total are Herman Van Rompuy, the EU president, Baroness Ashton, Europe’s foreign minister, José Manuel Barroso, the European Commission President along with six vice-presidents and 19 commissioners. This group of 28 people, who are all unelected, earn £57,000 to £103,000 more than Mr Cameron and include the three best paid politicians, Mr Van Rompuy, Mr Barroso and Lady Ashton, in the western world. Among the 995 European civil servants, who are on the AD14 to AD16 grades earning £146,267 to £179,703, are at least 90 unelected British EU officials earning more than the Prime Minister. The Commission has admitted that the true numbers cannot be calculated and could be at least twice as high. After tax relief and generous perks are taken into account it is likely that over 2,000 officials are earning more than Mr Cameron. …Research and information requests have also found that there are 19 European Parliament assistants, or researchers to MEPs, who earn £75,752 a year. Another 12 assistants, eligible along with EU officials for low tax rates, pocket £70,217 a year. A British MP in the House of Commons earns just £65,738.
http://www.telegraph.co.uk/news/worldnews/europe/eu/7841716/Over-1000-EU-officials-earn-more-than-David-Cameron.html 

Read Full Post »

In his Washington Post column discussing a crisis of confidence among economists, Robert Samuelson correctly notes that Keynesians don’t seem to have the right answers. But he concludes that other schools of thought are similarly befuddled by current events. What he writes is not terribly objectionable, but it’s almost as if he thinks the fiscal debate in the economics profession is limited to the spend-now-and-forever Keynesians and the all-that-matters-is-the-budget-deficit proponents of “austerity” (which often is just an excuse to raise taxes, as I explain here). I gather Samuelson’s not familiar with the Austrian theory developed by scholars such as Mises and Hayek. Unlike the Keynesians and the crowd at the IMF, the Austrian school is not baffled by world events. The Austrians are not so foolish as to think they can predict the economy’s short-term fluctuations, but they were the ones who correctly warned against the intervention and spending that created the current mess and they can take a certain grim satisfaction about being proven correct. And they have the only intelligent prescription for what should be done now – namely, that politicians should get out of the way. After all, the crowd in Washington created the mess by doing too much and doing more of the same bad policies will – at best – further reduce the economy’s long-term prosperity. 

Economics has become the shaky science; its intellectual chaos provides context for today’s policy disputes at home and abroad. Consider the matter of budgets. Would bigger deficits stimulate the economy and create jobs, as standard Keynesianism suggests? Or do exploding government debts threaten another financial crisis? The Keynesian logic seems airtight. If consumer and business spending is weak, government raises demand through tax cuts or spending increases. But in practice, governments’ high debts impose financial and psychological limits. …There’s a tug of war between the stimulus of bigger deficits and the fears inspired by bigger deficits. …The disconnect between theory and reality seems ominous. The response to the initial crisis was to throw money at it — to lower interest rates and expand budget deficits. But with interest rates now low and deficits high, what happens if there’s another crisis?
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/27/AR2010062703257.html

Read Full Post »

Dan Mitchell recently appeared on MSNBC to explain why we should not be surprised to learn that more than $9 million dollars in home buyer tax credits were given to prison inmates who were clearly not new home owners.  This kind of waste is to be expected when Congress writes a 70,000+ page tax code that no one can understand, full of loopholes, credits or other goodies, and then expects a bunch of government bureaucrats to carry it out competently.

A simple flat tax, without all the complicated credits and other carve-outs that politicians slip into the current code, would largely eliminate this kind of waste.

Read Full Post »

Shakespeare would likely describe the latest major legislation winding its way through Congress as a piece of legislation crafted by idiots, full of sound and fury, signifying nothing.  Rather than address the systemic distortions created by prior government policies, and which caused the financial meltdown, policy makers are now “[putting] a lot of faith in the watchful eye of regulators to prevent another financial crisis,” according to the Washington Post.

Nearly two years after tremors on Wall Street set off a historic economic downturn, congressional leaders greenlighted a bill early Friday that would leave the financial industry largely intact but facing a more powerful network of regulators who could impose limits on risky activities.

The final bill took shape after a 20-hour marathon negotiation between House and Senate leaders seeking to reconcile their separate versions. The legislation puts a lot of faith in the watchful eye of regulators to prevent another financial crisis. New agencies would police consumer lending, the invention of financial products and the trading of exotic securities known as derivatives. Bank supervisors would have the power to seize large, troubled financial firms whose collapse could threaten the entire system. The bill calls for banks to hold more money in reserve to weather economic storms but leaves the details to regulators.

…”We are poised to pass the toughest financial reform since the ones we created in the aftermath of the Great Depression,” Obama said at the White House, adding that the bill “represents 90 percent of what I proposed when I took up this fight . . . We’ve all seen what happens when there is inadequate oversight and insufficient transparency on Wall Street.”

Essentially, Congress has decided that all we need is yet more overpaid bureaucrats.  No reform of Fannie and Freddie.  No efforts to stop politicians from continuing to force banks to issue risky loans so that they can point to expanding home-ownership under their watch.  Instead, we get harmful price controls on debit cards, which has nothing to do with the cause of the 2008 recession.

Even the crafters of the bill aren’t really buying their own stance that more government will help.  In one of those rare moments where a politician accidentally let’s the truth slip out, Senator Dodd admitted, “No one will know until this is actually in place how it works.”  Belief in big government really is all about faith.

Read Full Post »

A new study from the Mercatus Center at George Mason University examines some of the academic research about the relationship between government spending and economic performance. Reinforcing many of the points I made in my theory and evidence videos, the GMU study finds that big government undermines growth:

Although the studies are not all consistent, historical evidence suggests an undesirable, long-run effect from government spending: it crowds out private-sector spending and uses money in unproductive ways.

…Professor Emeritus of Law at George Mason University Gordon Tullock suggests that politicians and bureaucrats try to gain control of as much of the economy as possible.5 Moreover, demand for government resources by the private sector leads to misallocation of resources through “rent seeking”—the process by which industries and individuals lobby the government for money. Rather than spend money where it is most needed, legislators instead allocate money to favored groups.

…A 1974 paper by Stanford’s Gavin Wright found that political attempts to maximize votes explained between 59 and 80 percent of the difference in per capita federal spending to the states during the Great Depression.

…An NBER paper that analyzes a panel of OECD countries found that government spending also has a strong negative correlation with business investment. Conversely, when governments cut spending, there is a surge in private investment.…Additionally, in a study of 76 countries, the University of Vienna’s Dennis C. Mueller and George Mason University’s Thomas Stratmann found a statistically significant negative correlation between government size and economic growth.

Read Full Post »

Campaigning in Wisconsin, Vice President Biden met his match in a local small business owner.

It doesn’t have quite the snappy ring of “Joe the Plumber,” but it will do. Earlier today Joe Biden was in Wisconsin, trying to help Russ Feingold salvage his Senate run, and he stopped at a frozen custard stand. When he asked the proprietor how much the custard cost, the proprietor answered, “Nothing, just lower our taxes.”

Such encounters are always a danger any time statists venture out for their token frolics with the common folk, who are growing increasingly tired of the high tax burdens made necessary by, among other things, bloated civil service salaries.

Read Full Post »

I was interviewed by CNN about the issues relating to Congressman Barton’s apology to BP. The network only used one of my quotes from the interview, and I was happy to see that I was not taken out of context (always a danger when you are taped in advance).

To augment my limited quote from the story, my main gripe with the $20 billion fund is that compensation claims should be part of the regular legal process and not the result of pressure from the White House. That being said, I won’t be too agitated about the fund – assuming that the money does not become a piggy bank for White House vote buying. On the broader issue of BP and the spill, protecting people from harm (either intentional harm, which is addressed by the criminal justice system, or unintentional harm, which should be addressed through the tort system) is one of the few legitimate functions of government.

One final comment. The CNN story, shortly after the 2:00 mark, makes it appear as if polling data shows the American people favor Obama’s approach. That is not the case. The polling data simply shows that people don’t think the spill is under control and that they think BP should pay all damages. That’s not contrary to Obama’s position, but neither is it contrary to the libertarian position.

Read Full Post »

« Newer Posts - Older Posts »

%d bloggers like this: