Category: too much government

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too much government

The Ceanneidigh Case

“You don’t have a paycheck, you don’t file taxes, you have no income.”

You can’t say that welfare caseworkers aren’t helpful. A man calling himself Ted Ceanneidigh walked into a Maine welfare office and presented his problem. He worked for himself. He had a lucrative, cash-only business and didn’t pay taxes. He had plenty of money and drove a Corvette. He showed his business card, which incorporated a certain well-known leaf as a distinctive symbol (and it wasn’t Canada’s maple leaf). Interestingly, he said he operated his parents’ fishing business, though that was going under — all they knew was that the boats were going out and money was being placed into their bank account. He was requesting the state’s subsidized medical assistance, though he had enough money to be able to afford private insurance —but that, he said, “doesn’t matter.”

That’s when the Maine civil servant advised Mr. “Ceanneidigh” to keep his income hidden. And offered him government assistance in medical care. After all, it made a sort of bureaucratic sense: The man couldn’t show a paycheck, didn’t file taxes. Obviously no income!

This was a setup, of course, a private “sting” operation organized by the Maine Heritage Policy Center. You can watch the video on YouTube.

It showed something interesting: The narrow focus of Health and Human Services caseworkers. They are there to give out “welfare.” Even to criminals. Even if it bankrupts the state.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

The Costs of a Good Cause

Costs are what we give up for what we want. Focus only on a transaction, and that McChicken sandwich “costs” only a bit over a buck. But ultimately that McChicken costs you what you give up in your budget because you purchased it: a candy bar, a chocolate milk, or a tune on iTunes.

Nearly everything has costs, often hidden.

Take Michele Obama’s anti-obesity campaign. The Hunger-Free Kids Act, the legislative kicker of the First Lady’s cause, withholds money from schools that don’t provide a rigorous well-balanced menu. Kids must take a variety of fruits and veggies with each meal. Must!

The regulation will cost local school districts about $7 billion to comply. Cash-strapped school districts. It will also cost quite a lot in thrown-away food, as kids are “required” to take food they don’t intend to eat.

And then there’s the cost in reduced nutrition.

It appears that kids like flavored milk products. You know, chocolate milk, strawberry-flavored milk, etc. But high fructose corn syrup (which was foisted on our population by the federal government in the first place, via huge subsidies to corn farmers in general and Archer Daniels Midland in particular) is now a no-no. Flavored milks are on the way out.

The cost of cutting them?

Well, kids get 70 percent of their milk from flavored milks. Take away their chocolate, and . . . the result, for many, will be no milk at all.

That’s how a pro-nutrition regulation can end up reducing nutrition.

This is Common Sense. I’m Paul Jacob.

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national politics & policies too much government

Default by a Thousand Cuts

Alan Greenspan half-smilingly argues that U.S. Treasury bonds will never be defaulted because “we can always print money.” How reassuring.

It’s one thing to pull money out of the proverbial magic cookie jar and place it in bank ledgers (“high-powered money,” or QE1, QE2) while people are substituting consumption with saving, fearful of the near-term prospects (increasing their “demand for money”). It’s quite another to do that while people expect prices only to rise. Massive increase in the supply of money (“printing money”) while people anticipate inflation (lowered “demand for money”) can lead to runaway inflation, hyperinflation.

America hasn’t experienced that since the Civil War. But Germany has (after World War I), as has Zimbabwe (just recently). It can ruin a whole way of life.

After Germany’s hyperinflation, Nazism arose.

Greenspan may have been trying to make a subtle point, but the blunt point remains: Default is likely, for inflation itself serves as a form of default. Under Greenspan’s scenario, the Federal Reserve, conspiring with Treasury, would, by “simply” printing money, pay debt with decreased-value dollars.

The ancient Chinese had a perverse form of torturous execution: Death by a thousand cuts. Inflation is like that, it’s torture for almost everyone, default by a . . . gazillion devaluations.

The only way around this is to make very different cuts — in federal spending.

That’s not torture, that’s the road to recovery.

It’s unlikely, of course, because, to politicians and insiders, cutting spending seems like torture.

This is Common Sense. I’m Paul Jacob.

Categories
Accountability too much government

Congress to Blame

Last week, the budget deal, with its first consequence: the immediate increase of U.S. government debt, to outsize the Gross Domestic Product.

By week’s end, that notoriously rising debt was downgraded in the ratings.

Immediately, politicians began blaming each other.

In other words: No surprises.

Sen. Rand Paul and Rep. Michele Bachmann both called for Timothy Geithner to resign. Sen. Paul argued that “Secretary Geithner assured everyone that raising the debt ceiling without a plan to balance the budget would not result in a downgrade to our debt. . . . He was clearly wrong. Our debt has been downgraded for the first time in history, and now American taxpayers will have to suffer the consequences.” Rep. Bachmann blamed the president first, then demanded Geithner’s walking papers.

Now, I hate to defend Geithner (he probably should resign), but the debt debacle is Congress’s fault.

But such niceties of responsibility didn’t stop Move-on.org from setting up a Facebook campaign to impugn the Tea Party, blaming the Tea Party’s cussedness for the downgrade.

Really? To focus only on the one political group actively trying to decrease the size of the debt demonstrates huge hunks of partisan chutzpah. By trying and failing to restrain spending, Tea Party folks only demonstrated Congress’s dedication to binge spending. The fault is in the binging, not in the feckless attempt at self-restraint.

Which is just what S & P considered: the company cited the wimpiness of the debt deal as the reason for the downgrade.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Big Government Bigger Than All Else

No sooner had the president signed the new debt limit, and then up went federal debt — to $14.58 trillion.

Brave new world, that has such numbers in it.

What’s so amazing about this number is that it is larger than last year’s GDP of $14.53 trillion.

I know, Gross Domestic Product figures are a mess, and don’t measure exactly what we think they measure. But they are the most popular form of national income accounting, and indicate, in a very rough sense, “the size of the economy” for a given year.

And, boy, for our federal government to owe the amount of the whole economy it rules, and more — what a milestone!

The last time debt was more than GDP? The late 1940s.

Recovery happened swiftly, then. This should give us hope: There is a way out.

But remember: World War II didn’t bring us out of the Great Depression, the end of the war did.

And remember, further: Most of the big names in economics — by then, Keynesians all — had predicted a huge economic downturn as government spending plummeted and wartime regulations (chiefly wage and price controls) hit the dustbin.

Bad prediction. The economy soon took off.

Why? Less government spending, less regulation.

Alas, I don’t see that happening, today or tomorrow. With the budget deal, overall spending is now set to rise still further. The medical industry — a huge growth sector for government spending as well as private spending — is set for increasing regulation.

Brace yourself.

This is Common Sense. I’m Paul Jacob.

Categories
national politics & policies too much government

Fiddling in the Flames?

The president and congressional leaders came to some sort of an agreement last night. It sounded a tad vague to me. Apparently, politicians still fear taking pride in identifying actual cuts.

Harvard economist Jeffrey Miron, writing last week, argues that the deals then on the table amounted to “fiddling while Rome burned.”

The only thing surprising about the above sentence, to savvy readers, might be the suggestion that “Harvard economist” is not a contradiction in terms. But hey: Judge for yourself.

“The problem with the Democratic position is that it regards redistribution, rather than economic productivity, as the prime goal of government policy,” Miron reasonably asserts. The problem with the Republicans? A “refusal to distinguish between the tax revenue that comes from higher rates and that which comes from fixing tax loopholes that inappropriately privilege certain consumption or production.”

Higher tax rates won’t work, because “the available revenue from the wealthy is far too small. And higher taxes discourage economic growth, making deficits worse.”

But Obama’s idea of closing some loopholes is not a horrible idea, Miron argues. These so-called loopholes are bad policy to begin with, integral, as they are, to bipartisan folly, favoring some folk at the expense of the rest. Picking winners — what some tart up as “industrial policy,” but most of us identify as “buying votes.”

Miron says that Medicare, though, is the biggest ongoing fiscal destabilizer. Cuts must be made there.

Those will likely be the hardest to secure.

This is Common SEnse. I’m Paul Jacob.

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too much government

Don’t Spend that Penny

Cato Institute’s Chris Edwards succinctly explains that not only does Rep. Boehner’s budget plan fail to cut spending $1 trillion over the next ten years — as advertised — but it “doesn’t actually cut spending at all.”

Zilch. Spending goes up.

“Why doesn’t the House leadership propose real cuts?” asks Edwards. He means identify specific line items that can be cut back — now, as in today or this week — rather than setting optimistic and unenforceable spending caps on future congresses. This especially goes for “caps” that don’t actually cap spending, but allow it to grow by, say, $7–8 trillion over the next decade.

Boehner’s plan allows debt to continue to pile up at historically huge levels. But he’s not alone. Obama has no plan. Reid’s plan? Calling it “smoke and mirrors” gives smoke and mirrors a bad name.

The Penny Plan, introduced by Florida Rep. Connie Mack and endorsed by Kentucky Sen. Rand Paul, has some merit. It would cut the budget by one percent for six years and then cap federal government spending at 18 percent of GDP.

Yes, cutting federal spending by only one penny on each dollar (one percent) for six years, rather than increasing spending by upwards of 7 percent a year under the Congressional Budget Office’s baseline budget, would balance the budget in eight years.

But to restore balance and end the debt crisis, a penny cut has to actually be a cut.

This is Common Sense. I’m Paul Jacob.

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national politics & policies too much government

A “Progressive” Reform

The money’s running out; the government is on a timeline. Something must be done before going into default.

Of course, the Executive Branch could prioritize spending, fiddle with accounts and still pay the interest on the federal debt as well as pay Social Security recipients — to year’s end. But it looks like the Obama Administration is just as committed to brinksmanship as the (heroic!) Tea Party folks who refuse to raise the debt ceiling.

And now the infamous “Gang of Six” re-emerge with a cockamamie proposal to “solve” the problem, mostly by saying they’ll “cut in the future” but keep mum, for now, what those cuts would be. It’s the typical lily-livered politician’s move.

The worst of the Gang of Six proposal, as fed-spending watchdog Dan Mitchell noticed, is that the alleged spending cuts don’t actually cut spending overall, just (get ready for it…) cut spending over planned increases.

We’ve been hearing this since the Carter era.

Something I haven’t heard from anyone (except my colleagues, of course — nothing from politicians, naturally) is a real cut that could substantially help.

Since the government is running out of money, cut federal wages across the board.

And make the cuts “progressive.”

How? Take any current federal government salary. Exempt the first (say) $60,000. And then cut the remaining salary level above that by (say) 20 percent. The exemption makes the rate cut in effect progressive. The “rich” would face greater income reductions.

Progressives should like that, no?

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Bankrupted by Cushy Pension Contracts

Central Falls, Rhode Island, is not a large city. It is a town of under 20,000 people. And its government is broke, facing likely bankruptcy.

Municipal bankruptcies are not common. But they might become so. Why? The blame is easy to place: the proverbial gun-under-the-table contracting foisted on small localities by state governments.

That’s what happened in Central Falls, anyway.

Even the New York Times has an idea of the underlying problem:

The city, just north of Providence, is small and poor, but over the years it has promised police officers and firefighters retirement benefits like those offered in big, rich states like California and New York. These uniformed workers can retire after just 20 years of service, receive free health care in retirement, and qualify for full disability pensions when only partly disabled.

Walter Olson, of the Cato Institute, elaborates on this account: “‘Promised’ is a word of art here, because the city wasn’t really making all of these concessions on a voluntary basis. . . .” The concessions to unions were, instead, forced on the town by “public-sector arbitration” (which has almost nothing to do with private arbitration) that has led to a widespread “crisis in municipal finance,” which, the Times states, has brought one in four Rhode Island municipalities to the brink.

Olson makes the reasonable case that public-sector employee unions are a very bad idea to begin with. The end comes either with serious reform or bankruptcy.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets insider corruption too much government

Medallions “Stink of Tyranny”

Not long ago on Townhall.com I briefly told the tale of two journalists, both arrested for taking pictures at a public meeting. This stunk of tyranny, to me. “Government cameras on citizens? Dangerous. Citizen lenses trained on government? Essential safety devices.”

What I didn’t mention was that the public meeting was for the District of Columbia’s taxi-cab commission. The commission oversees what was once a remarkably free system of taxis, but has become more regulated while also earning a reputation for corruption. Pete Tucker, one of the reporters, was on the scene to cover a breaking story related to that corruption: The commission’s proposal to regulate the industry using the over-used and idiotic “medallion” system, familiar to New Yorkers and far too many other city-dwellers.

Well, Tucker’s work has reached the completion stage, now, with Reason TV’s video about the medallion system up on YouTube. It’s an eye-opener.

The gist of the piece may be familiar: Government regulation helps bigger businesses at the expense of smaller ones . . . as well as consumers. You may have read similar tales from economists such as those in the French Liberal School (Frédéric Bastiat), the Chicago School (Milton Friedman), the Austrian School (Ludwig von Mises), and Public Choice (James Buchanan). Courtesy of the Reason video, now you can see ordinary citizens making the case. One said, “We know tyranny when we smell it.”

The stench is also of corruption, which has driven the politics behind the new regulatory scheme.

This is Common Sense. I’m Paul Jacob.