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Posts Tagged ‘Politics’

Thanks to demographics and ill-conceived entitlement programs, America is on a path to becoming a bankrupt European-style welfare state. We know how to fix this problem, but whether we make the necessary reforms depends on the heart and soul of the GOP.

Are Republicans a bunch of hard-right Tea Party types, salivating at the thought of reversing the welfare state and ushering a new ear of limited government?

Or are GOPers a bunch of political hacks who have decided the cesspool of Washington is really a hot tub and merely pretend to be fiscally conservative to appease the conservative base?

The answer is yes and yes.

More specifically, almost all politicians are some combination of these two descriptions.  It’s almost like they have an angel on one shoulder and a devil on the other.

They usually have some underlying principles, and they would like to do the right thing and make America a better place.

Yet they also want to get reelected and accumulate power, and this lures them into casting votes that they know are bad for the country.

Sometimes the devil has the most influence. During the Bush years, for instance, most Republicans on Capitol Hill went along with Bush’s bad proposals, such as the no-bureaucrat-left-behind education bill, the prescription drug entitlement, the corrupt farm bills, the pork-filled transportation bills, and the TARP bailout. The lawmakers will admit, especially in private, that those were bad votes, but they “went along to get along.”

Yet every so often the angel gets control. All Republicans, including the ones who were in office and doing the wrong thing during the Bush years, presumably are going to vote for Congressman Paul Ryan’s budget later this week, which would limit the growth of federal spending and fundamentally reform Medicare and Medicaid. And they’ll cast that vote even though they’ll get demagogued in 2012.

So what decides whether the angel or devil is in charge? I may not have learned much in my 25 years in Washington, but I think a key factor is that politicians are often willing to take political risks and do the right thing if they think there’s actually a chance of implementing good policy.

In other words, there is a chance of saving America. I think Republicans can be convinced to charge the machine gun nests of big government. But we need to create the right set of circumstances – and that means persuading them that the long-run policy benefits will offset the short-run political risks.

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When I was in college and first became active in politics and public policy, I periodically would meet people who warned about sinister conspiracies that had to be exposed and overcome.

The most common villain, reviled by conspiracy theorists on the left and right, was something called the Trilateral Commission, though the Council of Foreign Relations often was mentioned in the same breath (I also remember a lefty friend warning about the Bilderbergers and Illuminati, though I never quite understood who or what they were supposed to be).

It’s been a long time since I’ve heard anybody mention any of the above groups, but this doesn’t mean conspiracy theories have faded into the sunset. There are thriving communities of people who think:

a) Obama is a Kenyan and/or Muslim (the birthers).

b) The U.S. government and/or George W. Bush were complicit in the 9-11 attacks (the truthers).

c) The Federal Reserve is a sinister cabal.

d) The Koch brothers have a secret plan to turn America into…well, I’m not sure, but they have a secret plan to do something bad.

This is probably just the tip of the iceberg, but you get the idea. The common theme in all these conspiracies is that wealthy/powerful people, in some unaccountable and hidden fashion, manipulate the levers of government to achieve some evil goal.

I suppose a quick disclaimer would be appropriate. The Koch brothers directly or indirectly provide 3 percent of the funding for the Cato Institute, so if they have a conspiracy, I’m part of it. Though I’m not sure how a conspiracy can be a conspiracy if it’s all public information.

But I digress. The main point I want to make is that it is almost always foolish to believe in conspiracies. Or, to be more specific, it’s foolish to believe in big conspiracies. We have a government that is spectacularly incompetent, filled with some of the most short-sighted and narcissistic people in the world, so why would anyone think it is realistic to believe that this bunch of buffoons could maintain a conspiracy using an organization that doesn’t even have the ability to give away money without creating giant clusterf*cks?

In a column for National Review, Jonah Goldberg made this point quite effectively in discussing the fevered speculations of the birthers and truthers.

I’m not saying there are no secret dealings in Washington. There are lots of them. But they involve run-of-the-mill corruption, with politicians doing things like providing earmarks in exchange for campaign cash. That’s the kind of scheme that works, because only a tiny handful of people are in on the deal, and they obviously have lots of reasons to keep quiet. Heck, in most cases there’s probably not even an overt conspiracy, just an implied understanding.

I think people are drawn to conspiracy theories because they assume that things happen for a reason, as part of a deliberate design. So if we have a TARP bailout, for instance, they assume that there was a deliberate effort to create chaos so the people who are part of the conspiracy can grab more money and power.

I’m willing to accept the last part of that scenario. Washington is filled with people who are willing to use any excuse to grab money and power. But I think it is silly to think that some hidden group of bigwigs orchestrated the financial crisis for that reason.

As indicated in my title, it is much more realistic to believe bad things happen because of corruption, incompetence, politics, ideology, greed, and self-interest. These ever-present characteristics of human nature help explain why politicians, bureaucrats, lobbyists, and interest groups pursued the various policies (easy money, housing subsidies, etc) that inadvertently came together in a perfect storm to destabilize the financial system.

Yes, powerful interest groups have a lot of influence on the political system. But it’s not a hidden conspiracy. Take the example of Goldman Sachs, which frequently is cited as being part of some evil plan. Their lobbyists are well known, their campaign contributions are public knowledge, and their policy positions are openly stated.

I often disagree with the actions of Goldman Sachs. But you don’t need to believe that the company’s endorsement of, say, the Dodd-Frank bailout bill is part of a conspiracy. It’s just the kind of the out-in-the-open, day-after-day, special-interest deal-making that is routine in Washington.

I like good conspiracy theories, but I like them in David Baldacci novels rather than as explanations for what happens in Washington.

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The “good government” crowd tells us that voting is a “civic duty.” When I hear that type of nonsense, it makes me want to deliberately stay home.

But I did actually vote today, in part to avoid lines on Tuesday and in part because I leave that morning for a speech in Florida. But why did I bother? The odds of my vote making a difference in any race are so infinitesimally small that there’s no logical reason to vote. But that’s if you view voting as an “investment good” – i.e., you vote in hopes of influencing the outcome.

Voting only make sense as a “consumption good.” In other words, you do it just for the sheer joy of voting against someone (or, in very rare cases, because you actually want to vote for someone).

Some libertarians argue that voting is wrong, for any reason, because it legitimizes the current system. This is the sentiment that motivates this t-shirt, and it also is the title of P.J. O’Rourke’s new book. But that argument, while superficially appealing, doesn’t make sense. Does anyone actually think that the corrupt crowd in Washington will suddenly stop stealing our money and trying to control our lives if fewer people decide to vote? I don’t think it would have the slightest impact on their behavior.

I’m not saying people shouldn’t vote, but don’t delude yourself into thinking that you can escape the predations of the political class if you opt out. Pericles, way back around 430 B.C., supposedly said that, “Just because you do not take an interest in politics doesn’t mean politics won’t take an interest in you.”

I’m not sure if that’s a real quote, but it sure is accurate.

 

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In the past 15 years, I’ve debated in favor of a national sales tax, testified before Congress on the merits of a national sales tax, gone on TV to advocate for the national sales tax, and spoken with dozens of reporters to explain why the national sales tax is a good idea. Even though I prefer the flat tax, I’ve been an ardent defender of sales tax proposals such as the FAIR tax because it would be a great idea to replace the current system with any low-rate system that gets rid of the tax bias against saving and investment. I even narrated this video explaining that a national sales tax and flat tax are different sides of the same coin – and therefore either tax reform proposal would significantly improve prosperity and competitiveness.

I will continue to defend the FAIR tax and other national sales tax proposals that replace the income tax, but I wonder whether this is a losing battle. Every election cycle, candidates that endorse (or even say nice things about) the FAIR tax wind up getting attacked and put on the defensive. Their opponents are being dishonest, and their TV ads are grossly misleading, but they are using this approach because the anti-FAIR tax message is politically effective. Many pro-tax reform candidates have lost elections in favorable states and districts, largely because their opponents were able to successfully demagogue against a national sales tax.

The Wall Street Journal reaches the same conclusion, opining this morning about the false – but effective – campaign against candidates who support a national sales tax.

In 16 House and three Senate races so far, Democrats have blasted GOP candidates for at one point or another voicing an interest in the FAIR tax. …FAIR tax proponents are right to say these Democratic attacks are unfair and don’t mention the tax-cutting side of the proposal, but the attacks do seem to work. Mr. Paul’s lead in Kentucky fell after the assault, and the issue has hurt GOP candidate Ken Buck in a close Colorado Senate race. In a special House election earlier this year in Pennsylvania, Democrat Mark Critz used the FAIR tax cudgel on Republican opponent Tim Burns. In a district that John McCain carried in 2008, Mr. Critz beat the Republican by eight points and is using the issue again in their rematch. This is a political reality that FAIR taxers need to face. …in theory a consumption tax like the FAIR tax is preferable to an income tax because it doesn’t punish the savings and investment that drive economic growth. If we were designing a tax code from scratch, the FAIR tax would be one consumption tax option worth debating. But…voters rightly suspect that any new sales tax scheme will merely be piled on the current code.

We won’t know until next Tuesday what is going to happen in Kentucky and Colorado, and we won’t know until then what will happen in the other campaigns where the FAIR tax is an issue. But if there are two tax reform plans that achieve the same objective, why pick the approach that faces greater political obstacles?

FAIR tax proponents presumably could defuse some of the attacks by refocusing their efforts so that repealing the income tax is the top priority. This would not require any heavy lifting since all honest proponents of a national sales tax want to get rid of the 16th Amendment and replace it with something that unambiguously prohibits any direct tax on income. So why not lead with that initiative, and have the national sales tax as a secondary proposal? This is what I propose in the video, and I think it would be much harder for demagogues to imply that a FAIR tax would mean a new tax on top of the corrupt system that already exists.

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I thought it was shocking when Senator Bennett of Utah was denied renomination, but I’m even more stunned that Senator Murkowski of Alaska is trailing her opponent in preliminary results from Tuesday’s primary. As the Wall Street Journal explained in an editorial this morning, this is a big sign that voters are not merely interested in electing big-government Republicans instead of big-government Democrats. They actually want leaders who will fight to limit government and expand freedom. After nearly 10 years of Bush-Obama statism, I’m very happy to see the American people still value liberty.

GOP Members of Congress who think they can return to business as usual if they regain the majority should pay attention.

The biggest shock came in Alaska, with incumbent Senator Lisa Murkowski trailing unheralded challenger Joe Miller by roughly 1,700 votes with as many as 16,000 absentee ballots still to be counted.

…Though heavily outspent, Mr. Miller was helped by former Governor Sarah Palin’s endorsement and especially by Ms. Murkowski’s failure to understand the anti-Washington mood. When he asked Senator Murkowski in a debate which part of the Constitution permitted Roe v. Wade and bank bailouts, she responded that the nation might suffer if the government only funded things explicitly authorized by the Constitution. Bad answer.

Ms. Murkowski opposed ObamaCare but Alaskans punished her for her 2009 refusal to rule out a government-run health-care plan. She is learning the lesson that ousted Utah Senator Bob Bennett did: GOP voters don’t want their representatives to negotiate with President Obama. They’re looking for people who can defeat his agenda.

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One of the main factors determining incumbent election success is economic performance. When disposable income is rising and people feel good about the future, it is difficult for an incumbent to lose. So why, then, is Obama pursuing policies that are undermining growth? Sure, it is in the interests of the left in the long run to create more dependency on government. That’s one of the reasons why there is nothing resembling a free market party in most European nations. But America isn’t at that stage yet (thankfully). And as John Stossel writes, Obama’s bad government policy is causing joblessness and uncertainty. This is going to hurt Democrats this November and may linger until 2012, when Obama would suffer the consequences (in the unlikely event that Republicans put forth a semi-decent candidate).

Why isn’t the economy recovering? After previous recessions, unemployment didn’t get stuck at close to 10 percent. If left alone, the economy can and does heal itself, as the mistakes of the previous inflationary boom are corrected.

The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire. President Obama’s vaunted legislative record not only left entrepreneurs with the burden of bigger government, it also makes it impossible for them to accurately estimate the new burden.

In at least three big areas — health insurance, financial regulation and taxes — no one can know what will happen.

…Nothing more effectively freezes business in place than what economist and historian Robert Higgs calls “regime uncertainty.”

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I don’t agree with all the points in this column from Real Clear Markets, but I fully agree with the overall theme that the GOP would be wise to cut Bush out of the Party’s history. Like Nixon, he was a failed, big-government statist.

The sour economy is presenting Republicans with a golden opportunity to retake both houses of Congress. The Democrats will try to defend their seats by attacking Bush’s record on the economy. Republican candidates should counter this move by acknowledging the economic errors made during the Bush years. This will help restore the credibility of the Republican brand with respect to the economy and free up the candidates to move on to what really matters-the future.

…Was Bush 43 the worst post-1952 president in terms of the economy? No, he was the second-worst. Jimmy Carter managed to drive the Real Dow down by 78% in just four years, 1976-1980. If considered as one presidency, Nixon/Ford was the third-worst…

So, what were the mistakes that made Bush 43 the second-worst president since 1952 with respect to the economy?

The biggest single economic error Bush made was his “weak dollar” policy. While the president has no direct control over monetary policy, it is said that a president always gets the monetary policy he wants. Bush (and his Treasury Secretaries) wanted a weak dollar, and they got one. The dollar lost 69% of its value against gold during the Bush years. This accounted for almost 80% of the decline in the Real Dow during his presidency.

The unstable dollar during the Bush years was the root cause of the financial crisis of 2008. The dollar fell almost continuously during the first seven years of his term. By February 2008, it had lost 72% of its value.

…The third biggest economic error under Bush was the design of the 2001 tax cuts, which phased in the reductions in the top income tax rate over 5 years. As we learned in 1981-1982, phased-in tax cuts guarantee economic sluggishness, because people defer income until the lower rates take effect. The result was a “jobless recovery”, slow growth, and escalating deficits. The 2001 tax cuts also wasted $58 billion on futile Keynesian “stimulus”, an error that Bush was to repeat in 2008.

If Bush had gotten his 2001 tax cuts right, and economic growth in fiscal years 2002 and 2003 had averaged 3.5% instead of 1.6%, the “Bush deficits” would have peaked at 2.5% of GDP in FY2004, rather than at 3.5%. A continuation of 3.5% real growth would have put the budget in surplus by FY2007, despite the massive spending.

…Because the Democrats have “doubled down” on Bush’s economic errors, Democrat-held House and Senate seats are ripe for the picking. During the first 18 months of the Obama administration (i.e., through June, 2010), the Real Dow fell by another 11% to 7.86, which was the level of June 1952. After 16 months of massive government “stimulus”, total employment in June 2010 was 6.0 million below what the administration predicted it would be if the stimulus bill passed, and 3.2 million lower than they said it would be if the stimulus bill didn’t pass. If the labor force participation rate had not unexpectedly declined, June’s unemployment rate would have been reported at 11%.

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