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U.K. Election Week, Part I: The Threat of Corbynomics

Mon, 12/09/2019 - 12:24pm

I’m currently in London for discussions about public policy, particularly the potential for the right kind of free-trade pact between the United States and United Kingdom.

I deliberately picked this week for my visit so I also could be here for the British election. As a big fan of Brexit, I’m very interested in seeing whether the U.K. ultimately will escape the slowly sinking ship otherwise known as the European Union.

But the election also is an interesting test case of whether people are willing to vote for socialism. The Brits actually made this mistake already, voting for Clement Attlee back in 1945. That led to decades of relative decline, culminating in a bailout from the International Monetary Fund.

Margaret Thatcher then was elected in 1979 to reverse Attlee’s mistakes and she did a remarkable job of restoring the British economy.

But do voters understand this history?

We’ll find out on Thursday because they’ll have the opportunity to vote for the Labour Party, led by Jeremy Corbyn, who is the British version of Bernie Sanders.

And he doesn’t hide his radical vision for state control of economic life. Here’s how the Economist describes Corbyn’s agenda.

…the clear outlines of a Corbyn-led government emerged in the manifesto. Under Labour, Britain would have a larger, deeper state… Its frontiers would expand to cover everything from water supply to broadband to how much a landlord may charge a tenant. Where the state already rules, such as in education or health, the government would go deeper, with the introduction of free child-care for pre-schoolers and a “National Care Service” for the elderly. …The government would spend £75bn on building 100,000 council homes per year, paid for from a £150bn “transformation fund”, a pot of money for capital spending on public services. Rent increases would be capped at inflation. The most eye-catching proposal, a plan to nationalise BT’s broadband operations and then offer the service free of charge… Surviving policies from 2017 include a plan to nationalise utilities, alongside Royal Mail and the rail network, and a range of new rights for workers, from a higher minimum wage to restored collective-bargaining rights. All told, government spending would hit 45.1% of GDP, the highest ratio in the post-war era outside of a recession and more than in Germany… To pay for it all, very rich people and businesses would be clobbered. Corporation tax would rise to 26% (from 19% now), which Labour believes, somewhat optimistically, would raise another £24bn by 2024.

As reported by City A.M., the tax increases target a small slice of the population.

Jeremy Corbyn…is planning to introduce a new 45 per cent income tax rate for those earning more than £80,000 and 50 per cent on those with incomes of £125,000 or more. The IFS…estimates that would affect 1.6m people from the outset, rising to 1.9m people by 2023-24. Labour’s policy would add further burden to the country’s biggest tax contributors, with the top five per cent of income tax payers currently contributing half of all income tax revenues, up from 43 per cent just before the financial crisis.  But the IFS warned the amount this policy would raise was “highly uncertain”, with estimates ranging from a high of £6bn to an actual cost of around £1bn, if the policy resulted in a flight of capital from the UK. Lawyers have previously warned that high net worth individuals are poised to shift billions out of the country in the event of a Corbyn government.

Is that a smart idea?

We could debate the degree to which upper-income taxpayers will have less incentive to be productive.

But the biggest impact is probably that the geese with the golden eggs will simply fly away.

Even the left-leaning Guardian seems aware of this possibility.

The super-rich are preparing to immediately leave the UK if Jeremy Corbyn becomes prime minister, fearing they will lose billions of pounds if the Labour leader does “go after” the wealthy elite with new taxes, possible capital controls and a clampdown on private schools. Lawyers and accountants for the UK’s richest families said they had been deluged with calls from millionaire and billionaire clients asking for help and advice on moving countries, shifting their fortunes offshore and making early gifts to their children to avoid the Labour leader’s threat to tax all inheritances above £125,000. …Geoffrey Todd, a partner at the law firm Boodle Hatfield, said many of his clients had already put plans in place to transfer their wealth out of the country within minutes if Corbyn is elected. …“There will be plenty of people on the phone to their lawyers in the early hours of 13 December if Labour wins. Movements of capital to new owners and different locations are already prepared, and they are just awaiting final approval.” …On Thursday, Corbyn singled out five members of “the elite” that a Labour government would go after in order to rebalance the country. …The shadow Treasury minister Clive Lewis went further than the Labour leader, telling the BBC’s Newsnight programme: “Billionaires shouldn’t exist. It’s a travesty that there are people on this planet living on less than a dollar a day.

Some companies also are taking steps to protect shareholders.

National Grid (NG.) and SSE (SSE) are certainly not adopting a wait-and-see approach to the general election. Both companies have moved ownership of large parts of their UK operations overseas in a bid to soften the blow of potential nationalisation. With the Labour manifesto reiterating the party’s intention to bring Britain’s electricity and gas infrastructure back into public ownership, energy companies (and their shareholders) face the threat of their assets being transferred to the state at a price below market value.

The Corbyn agenda violates the laws of economics.

It also violates the laws of math. The Labour Party, for all intents and purposes, wants a big expansion of the welfare state financed by a tiny slice of the population.

That simply doesn’t work. The numbers don’t add up when Elizabeth Warren tries to do that in the United States. And an expert for the Institute for Fiscal Studies notes that it doesn’t work in the United Kingdom.

The bottom line is that Corbyn and his team are terrible.

That being said, Boris Johnson and the current crop of Tories are not exactly paragons of prudence and responsibility.

They’re proposing lots of additional spending. And, as City A.M. reports, Johnson also is being criticized for promising company-specific handouts and protectionist rules for public procurement.

In a press conference today, Johnson promised to expand Britain’s state aid regime once the UK leaves the EU. “We will back British businesses by introducing a new state aid regime which makes it faster and easier for the government to intervene to protect jobs when an industry is in trouble,” a briefing document said. Head of regulatory affairs at the Institute of Economic Affairs (IEA) Victoria Hewson said support for state aid was “veiled support for cronyism.” …A spokesperson for the Institute of Directors said: “It’s not clear how these proposals will fit with ambitions of a ‘Global Britain’. The Conservatives must be wary of opening a can of worms on state aid, it’s important to have consistent rules in place to resist the impulse of unwarranted protectionism.” Johnson also promised to introduce a buy British rule for public procurement. …IEA economics fellow Julian Jessop said: “A ‘Buy British’ policy is pure protectionism, and it comes with heavy costs.

Perhaps this is why John O’Connell of the Taxpayers Alliance has a rather pessimistic view about future tax policy. Here are excerpts of a column he wrote for CapX.

Theresa May’s government implemented a series of big state, high tax policies. Promises of no strings attached cash for the NHS; new regulations on net zero; tax cuts shelved and the creation of more quangos. After his surprise non-loss in the election, Corbyn shifted even further to the political left, doubling down on his nationalisation plans. All in all, the 2017 election result was terrible for people who believe in a small state. …A report from the Resolution Foundation found that government spending is rising once again, and likely to head back towards the heights of the 1970s over the coming years. The Conservatives’ recent spending review suggests state spending could be 41.3% of GDP by 2023, while Labour’s spending plans could take it to 43.3%. This compares to the 37.4% average throughout the noughties. Based on the manifestos, Labour are working towards a German-sized state, while the Tories’ plan looks more Dutch. Unsurprisingly we see this mirrored by the tax burden, which at 34.6% of GDP has already reached a fifty-year high. It is likely to increase further. …British taxpayers are presented with something of a Hobson’s choice: Boris Johnson will see taxes increase and spending shoot up, while Jeremy Corbyn has £1.2 trillion worth of unfunded spending rises just waiting to become unimaginable tax hikes for everyone. Whoever you vote for, you’ll get higher taxes, the question is just about how high.

Let’s close by looking at the big picture.

Here’s a chart showing the burden of government spending in the United Kingdom since 1900. I’ve augmented the chart to show the awful trend started by Attlee (in red) and then the positive impact of Thatcher (in green).

You can also see that Tony Blair and Gordon Brown did a bad job early this century, followed by a surprisingly good performance by David Cameron.

Now it appears that British voters have to choose between a slow drift in the wrong direction under Boris Johnson or a rapid leap in the wrong direction under Jeremy Corbyn.

Normally I would be rather depressed by such a choice. I’m hoping, however, that Brexit (assuming it actually happens!) will cause Boris Johnson to make smart choices even if he is otherwise tempted to make bad choices.

P.S. Unsurprisingly, Corbyn has been an apologist for thugs and dictators.

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Image credit: Garry Knight | CC0 1.0.

Taxation, Benefits, and Relative Prosperity in Finland

Sun, 12/08/2019 - 12:30pm

I’ve written many columns about Sweden and Denmark over the past 10-plus years, and I’ve also written several times about Norway and Iceland.

But I’ve mostly neglected Finland, other than some analysis of the country’s experiment with “basic income” in 2017 and 2018.

Now, thanks to a very interesting column in the New York Times, it’s time to rectify that oversight. According to the authors, Anu Partanen and Trevor Corson, Finland is a great place with lots of goodies provided by taxpayers.

Finland, of course, is one of those Nordic countries that we hear some Americans, including President Trump, describe as unsustainable and oppressive — “socialist nanny states.”…We’ve now been living in Finland for more than a year. The difference between our lives here and in the States has been tremendous… What we’ve experienced is an increase in personal freedom. …in Finland, we are automatically covered, no matter what, by taxpayer-funded universal health care… Our child attends a fabulous, highly professional and ethnically diverse public day-care center that amazes us with its enrichment activities and professionalism. The price? About $300 a month — the maximum for public day care, because in Finland day-care fees are subsidized for all families. …if we stay here, …College would also be tuition free. If we have another child, we will automatically get paid parental leave, funded largely through taxes, for nearly a year… Compared with our life in the United States, this is fantastic.

Interestingly, the authors are not clueless Bernie Sanders-style leftists.

They fully understand and appreciate that Finland (like all Nordic nations) is not a socialist country.

…surely, many in the United States will conclude, Finnish citizens and businesses must be paying a steep price in lost freedoms, opportunity and wealth. …In fact, a recent report by the chairman of market and investment strategy for J.P. Morgan Asset Management came to a surprising conclusion: The Nordic region is not only “just as business-friendly as the U.S.” but also better on key free-market indexes, including greater protection of private property, less impact on competition from government controls and more openness to trade and capital flows. …What to make of all this? For starters, politicians in the United States might want to think twice about calling the Nordics “socialist.” …in Finland, you don’t really see the kind of socialist movement…, especially around goals such as curtailing free markets and even nationalizing the means of production. The irony is that if you championed socialism like this in Finland, you’d get few takers. …a 2006 study by the Finnish researchers Markus Jantti, Juho Saari and Juhana Vartiainen demonstrates…throughout the 20th century Finland remained — and remains to this day — a country and an economy committed to markets, private businesses and capitalism.

This is a very accurate assessment. Finland is more market-oriented than the United States in many categories.

Moreover, the country is ranked #21 for economic freedom out of 162 nations in Economic Freedom of the World, with a score of 7.80. That’s just .05 behind Taiwan and .09 behind Chile.

That being said, the burden of taxes and spending is rather onerous.

…after World War II, …Finnish capitalists also realized that it would be in their own long-term interests to accept steep progressive tax hikes. …the nation’s commitment to providing generous and universal public services…buffered and absorbed the risks and dislocations caused by capitalist innovation. …Visit Finland today and it’s obvious that the much-heralded quality of life is taking place within a bustling economy of upscale shopping malls, fancy cars and internationally competitive private companies. …Yes, this requires capitalists and corporations to pay fairer wages and more taxes than their American counterparts currently do.

The column concludes by suggesting that American capitalists follow the same model.

Right now might be an opportune moment for American capitalists to pause and ask themselves what kind of long-term cost-benefit calculation makes the most sense.

So should the United States copy Finland, as the authors suggest?

People would get lots of taxpayer-financed freebies, but there would be a heavy price. Taxes consume nearly 50 percent of an average family’s income (even higher according to some measures).

That’s compared to about 30 percent in the United States.

And there’s a very Orwellian aspect of the Finnish tax system. As the New York Times reported last year, everyone in the country has the right to know how much income you earn.

Pamplona can boast of the running of the bulls, Rio de Janeiro has Carnival, but Helsinki is alone in observing “National Jealousy Day,” when every Finnish citizen’s taxable income is made public at 8 a.m. sharp. The annual Nov. 1 data dump is the starting gun for a countrywide game of who’s up and who’s down. …Finland is unusual, even among the Nordic states, in turning its release of personal tax data — to comply with government transparency laws — into a public ritual of comparison. …A large dosage of Thursday’s reporting concerned the income of minor celebrities… The country’s best-known porn star, Anssi “Mr. Lothar” Viskari, was reported to have earned 23,826 euros (about $27,000).

Given the onerous level of Finnish taxes, it’s probably safe to say that “Mr. Lothar” is getting screwed more than he’s…um….well, you get the point.

So what’s the bottom line? Should America be more like Finland? Is the country reasonably successful because of high taxes, or in spite of high taxes?

The U.S. should not mimic Finland, at least if the goal is higher living standards. Finland has some advantages over the United States (including better business taxation), but the United States has more overall economic liberty.

And that presumably helps to explain why, based on data from the Organization for economic Cooperation and Development, the average American enjoys 40 percent higher living standards than the average Finn.

But the most compelling piece of data, for those who prefer apples-to-apples comparison, is that Americans of Finnish descent produce 47 percent more than Finns in Finland.

Is Finland a relatively rich nation? Yes.

Is Finland a relatively free nation? Definitely.

Is Finland a good example of western civilization? Unquestionably.

The bottom line is that Finland seems like a great country (I’ve never visited). All I’m saying is that Americans would not be as prosperous if we had Finnish-style taxation and Finnish-style spending.

P.S. Researchers at Finland’s central bank seem to agree with my concern.

P.P.S. And Finland’s former Prime Minister understood the downside of an excessive public sector.

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Image credit: alessandrodanchini | Pixabay License.

A Quiz to Identify Your Ideological Perspective

Sat, 12/07/2019 - 12:06pm

Since I’m an out-of-the-closet libertarian with a track record of more than 5000 columns, there’s not much mystery about my philosophical outlook.

However, knowing my weakness for this kind of thing, a reader sent me an online “Political Sextant Quiz” and I naturally couldn’t resist.

Some of the questions were easy.

For instance, I know we shouldn’t abolish wages since that would be an extreme version of price controls. So “disagree” was the only sane answer.

Likewise, it’s a no-brainer (at least for me) to answer that I want government limited to core public goods (though fire services easily could be privately provided).

Other questions were harder to answer.

For instance, what does “my culture” mean in this next question, and what does it mean to say I “support those of my culture”?

Lacking any additional information, I interpreted this first question to be about my view on western civilization (rule of law, individual rights, etc), which I like. On the other hand, liking my culture doesn’t mean I want to reflexively put one of my neighbors “over” someone else.

So I opted for “slightly agree.”

And I gave the same answer for the second question because capitalism has produced immense material prosperity, yet “more than enough” implies that additional economic growth would be meaningless.

Needless to say, I wasn’t really happy with these questions.

The ambiguous wording left me wondering whether my answers would be interpreted the wrong way (such as being opposed to additional levels of production)?

But when I clicked to get my score, I was largely satisfied.

Since I want to get rid of 90 percent of government, it makes sense that I’m 90 percent anarcho-capitalist. I’ve never been sure what it means to be a bleeding-heart libertarian compared to a regular libertarian, but 88 percent seems reasonable. And I got my highest grade, 92 percent, for minarchism, which seems to a good description of my actual position.

Anyhow, here’s the link to the Political Sextant Quiz. See if you like your results.

And if you want to do more of this kind of thing, I’ve shared several other quizzes over the past decade.

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Image credit: 472301 | Pixabay License.

Class-Warfare Taxation, Government Spending, and Economic Growth

Fri, 12/06/2019 - 12:59pm

Arthur Okun was a well-known left-of-center economist last century. He taught at Yale, was Chairman of the Council of Economic Advisors for President Lyndon Johnson, and also did a stint at Brookings.

In today’s column, I’m not going to blame him for any of LBJ’s mistakes (being a big spender, creating Medicare and Medicaid).

Instead, I’m going to praise Okun for his honesty. Is his book, Equality and Efficiency: The Big Trade Off, he openly acknowledged that higher taxes and bigger government – policies he often favored – hindered economic performance.

Sadly, some folks on the left today are not similarly honest.

column in the New York Times by Jim Tankersley looks at the odd claim, put forth by Elizabeth Warren and others, that class-warfare taxes are good for growth.

Elizabeth Warren is leading a liberal rebellion against a long-held economic view that large tax increases slow economic growth… Generations of economists, across much of the ideological spectrum, have long held that higher taxes reduce investment, slowing economic growth. …Ms. Warren and other leading Democrats say the opposite. …that her plans to tax the rich and spend the revenue to lift the poor and the middle class would accelerate economic growth, not impede it. …That argument tries to reframe a classic debate…by suggesting there is no trade-off between increasing the size of the pie and dividing the slices more equitably among all Americans.

Most people, when looking at why some nations grow faster and become more prosperous, naturally recognize that there’s a trade-off.

So what’s the basis of this counter-intuitive and anti-empirical assertion from Warren, et al?

It’s partly based on their assertion that more government spending is an “investment” that will lead to more growth. In other words, politicians ostensibly will allocate new tax revenues in a productive manner.

Ms. Warren wrote on Twitter that education, child care and student loan relief programs funded by her tax on wealthy Americans would “grow the economy.” In a separate post, she said student debt relief would “supercharge” growth. …Ms. Warren is making the case that the economy could benefit if money is redistributed from the rich and corporations to uses that she and other liberals say would be more productive. …a belief that well-targeted government spending can encourage more Americans to work, invest and build skills that would make them more productive.

To be fair, this isn’t a totally absurd argument.

The Rahn Curve, for instance, is predicated on the notion that some spending on core public goods is correlated with better economic performance.

It’s only when government gets too big that the Rahn Curve begins to show that spending has a negative impact on growth.

For what it’s worth, modern research says the growth-maximizing size of government is about 20 percent of economic output, though I think historical evidence indicates that number should be much lower.

But even if the correct figure is 20 percent of GDP, there’s no support for Senator Warren’s position since overall government spending currently consumes close to 40 percent of U.S. economic output.

Warren and others also make the discredited Keynesian argument about government spending somehow kick-starting growth, ostensibly because a tax-and-spend agenda will give money to poor people who are more likely to consume (in the Keynesian model, saving and investing can be a bad thing).

Democrats cite evidence that transferring money to poor and middle-class individuals would increase consumer spending…liberal economists say taxes on high-earners could spur growth even if the government did nothing with the revenue because the concentration of income and wealth is dampening consumer spending.

This argument is dependent on the notion that consumer spending drives the economy.

But that’s not the case. As I explained two years ago, consumer spending is a reflection of a strong economy, not the driver of a strong economy.

Which helps to explain why the data show that Keynesian stimulus schemes routinely fail.

Moreover, the Keynesian model only says it is good to artificially stimulate consumer spending when trying to deal with a weak economy. There’s nothing in the theory (at least as Keynes described it) that suggests it’s good to endlessly expand the public sector.

The bottom line is that there’s no meaningful theoretical or empirical support for a tax-and-spend agenda.

Which is why I think this visual very succinctly captures what Warren, Sanders, and the rest (including international bureaucracies) are proposing.

P.S. By the way, I think Tankersley’s article was quite fair. It cited arguments from both sides and had a neutral tone.

But there’s one part that rubbed me the wrong way. He implies in this section that America’s relatively modest aggregate tax burden somehow helps the left’s argument.

Fueling their argument is the fact that the United States now has one of the lowest corporate tax burdens among developed nations — a direct result of President Trump’s 2017 tax cuts. Tax revenues at all levels of government in the United States fell to 24.3 percent of the economy last year, the Organization for Economic Cooperation and Development reported on Thursday, down from 26.8 percent in 2017. America is now has the fourth lowest tax burden in all of the O.E.C.D.

Huh? How does the fact that we have lower taxes that other nations serve as “fuel” for the left?

Since living standards in the United States are considerably higher than they are in higher-taxed Europe, it’s actually “fuel” for those of us who argue against class-warfare taxation and bigger government.

Though maybe Tankersley is suggesting that America’s comparatively modest tax burden is fueling the greed of U.S. politicians who are envious of their European counterparts?

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Image credit: Gage Skidmore | CC BY-SA 2.0.

Redistribution Programs and Work Requirements

Thu, 12/05/2019 - 12:40pm

Building on the success of state-level reforms in KansasMaine, WisconsinAlabama, and Georgia, the Trump Administration has proposed to tighten rules that impose work requirements on childless and able-bodied adults who receive food stamps.

Since I want to get Washington out of the business of redistribution, this is not the ideal solution.

But are work requirements better than the status quo?

Here’s some of what National Review wrote about the proposal.

Our food-stamp program has some bizarre loopholes… In theory, the program has a strict time limit for “ABAWDs,” or able-bodied adults without dependents… But in practice, the executive branch has broad discretion to waive the limit for large geographic areas with weak labor markets — and previous administrations used that discretion promiscuously. As of 2017, about a third of the U.S. population lived in waived areas. …Under the new rule, effective in April of next year, these waivers won’t be granted to areas with unemployment below 6 percent. And states will be far more limited in the geographical configurations they can request waivers for. …Many on the left complain about the rule simply because it will reduce the number of people on food stamps — by about 700,000, roughly 2 percent of total food-stamp enrollment… But…there is clearly room for cuts. (Despite the recovery, total enrollment is about double what it was in 2000.) …The 1996 welfare reform proved the effectiveness of this approach.

As you might expect, this proposal is causing angst for some lawmakers.

Congresswoman Marcia Fudge condemned the proposal in a column for the Washington Post.

…taking food from the tables of hungry Americans during the holidays…that’s the latest act of cartoonish villainy by the Trump administration. …the Agriculture Department played the part of the Grinch, finalizing a rule to cut billions of dollars from the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. The rule will remove nearly 700,000 from the program…, representing a callous escalation of the Trump administration’s war on people in need. …both red and blue states want the flexibility this rule will eliminate. The rule will dramatically reduce the flexibility of states to decide how best to serve the needs of their own citizens.

My view on food stamps (as well as other redistribution programs) is that Washington should have no role.

So if Congresswoman Fudge wants her state to give goodies to able-bodied adults with no children, that would be a decision for Ohio’s politicians (or, even more relevantly, Oregon’s politicians).

I’m fine with that type of flexibility, but there’s a catch that Ms. Fudge doesn’t mention. She wants taxpayers from across the country to subsidize that decision.

That’s not the way it should work. I’m all in favor of “the flexibility of states,” but that principle should apply to both raising money and spending money.

By the way, work requirements are not just an issue for the food stamp program.

There are also discussions about whether people getting Medicaid should have an obligation to work.

Writing for the Federalist, John Daniel Davidson applauds an initiative from the White House to move in that direction.

The Trump administration…will allow states to impose work requirements on abled-bodied adults to qualify for Medicaid. …it’s about time. …imposing work requirements on able-bodied adults will…help enrollees far more than Medicaid coverage will, mostly by giving them a strong incentive to secure full employment. …By putting millions of able-bodied adults on the Medicaid rolls, Obamacare created perverse incentive for those enrollees to limit their income so they could keep their Medicaid coverage. …Work requirements are a proven way to unwind perverse incentives and improve people’s lives. …progressives consider work requirements insulting and demeaning.

It was also a major focus of the very successful 1996 welfare reform legislation.

In an article for City Journal, Kay Hymowitz points out that law is still yielding big dividends.

…the Census Bureau released its report on the nation’s income, poverty, and health-insurance coverage for 2018. …poverty in single-mother households sank to its lowest rate . . . ever. What’s more, the decline took place entirely among black and Hispanic single-mother families. …this is a “Wow!” moment. …More black and Hispanic women have jobs and are working more hours. “The rise in full-time, year-round work led to an increase in incomes and earnings at the household level,” the Census Bureau found. Better yet, the growing number of hours worked by single mothers led to a decline in child poverty of 2.5 percentage points. …the 1996 welfare-reform law…overturned Aid to Families with Dependent Children, which had entitled poor single mothers to cash benefits. As a result, unemployment among the growing number of single mothers was high. Essentially, welfare reform said no more free lunch, instituting work requirements and replacing open-ended AFDC with a time-limited grant to poor mothers (TANF, or Temporary Assistance to Needy Families). …full-time, year-round work can reduce poverty and…poor minority women can improve their lives and the lives of their children through nine-to-five labor. Any “welfare-reform-is-a-failure” narrative should collapse under the weight of such demonstrated facts.

And it’s worth pointing out that one of America’s major redistribution programs – the EITC – is entirely based on work.

Recipients only get a handout if they also earn some money.

Regarding the desirability of work requirements, we can learn from what’s happened in other countries.

In an article from last year, Ryan Streeter of the American Enterprise Institute found good news from work-oriented reforms, especially in Nordic nations.

A majority of Americans, including 55 percent of people living in poverty, believe the purpose of welfare is to help people get on their feet, not just to dispense benefits. Eight in 10 low-income respondents believe working should be required to receive welfare benefits. …Welfare reformers might draw some lessons from unlikely places…the Scandinavian welfare systems are arguably more pro-work than ours… For instance, to deal with declining labor force participation, Denmark eliminated permanent disability benefits for people under 40 and refashioned its system to make employment central. Sweden reformed its welfare system to focus on rapid transitions from unemployment to work. Their program lowers jobless assistance the longer one is on welfare. …Similarly, the British government combined six welfare programs with varying requirements into a single “universal credit.” …An evaluation of the new program, which encourages work, found that 86 percent of claimants were trying to increase their work hours and 77 percent were trying to earn more, compared to 38 percent and 55 percent, respectively, under the previous system.

Regarding the reforms in the United Kingdom, here are some excerpts from a report by Emily Top for E21.

The UK overhauled its welfare system with the Welfare Reform Act 2012. …In addition to simplifying the programs into one, the Act required claimants to agree to a “Claimant Commitment,” in which they sought the services of a work coach to improve their job prospects and get hired. …the program has led to an increase in UK labor force participation as well as a decrease in dependence on benefits. During the same period that the labor force participation rate in the U.S. declined from 84 percent to 82 percent for prime age workers, the rate in the UK increased from 84 percent to 86 percent.

Let’s close by looking at some academic research on work requirements in the United States.

Three professors studied the impact of Bill Clinton’s welfare reform on recipients and found significant societal benefits.

The US Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, often referred to as ‘welfare reform’, was a major policy shift in the US that sought to dramatically reduce dependence of single parents on government benefits by promoting work… The key strategy for reducing dependence was to promote employment by imposing work requirements as a condition for receiving benefits in concert with a lifetime limit on receipt of cash assistance. …The reforms have been successful in that welfare caseloads have declined dramatically – 78% since their peak in 1994. …In a series of recent papers, we investigated the effects of welfare reform in the US – which is still in effect today – on women’s illicit drug use and other types of crime… We found robust evidence that welfare reform led to a 10%–21% decline in illicit drug use among women at risk of relying on welfare, as well as associated declines in drug-related arrests (6%–7%), drug-related hospital emergency department episodes (7%–11%), and possibly drug-related prison admissions (11%–19%). These findings provide some support of the ‘mainstreaming’ argument underlying welfare reform. …We found that welfare reform led to decreases in female arrests for property crime – which is the type of crime women are most likely to commit (Campagniello 2014) – by 4–5%… The findings from this study point to broad-based work incentives – and, by inference, employment – as an important determinant of female property crime…

These are all good outcomes.

Though the best news – both for taxpayers and poor people – is contained in this chart from their research.

P.S. While the Trump proposal is not my ideal policy, it does compare well with the Obama Administration’s efforts to expand food stamp dependency – including bribes for states that signed up additional recipients.

P.P.S. With all redistribution programs, there is an ever-present challenge – highlighted by Thomas Sowell – of how to avoid trapping people in dependency with high implicit marginal tax rates.

P.P.P.S. There’s also a moral issue of whether people should feel ashamed for taking government handouts.

Government Schools, the New York Times, and the Butterfield Effect

Wed, 12/04/2019 - 12:17pm

To help me follow policy developments, I get 30-plus daily emails from various news outlets and institutions, and I scroll through these messages to see what I should be reading.

Given my interest in fiscal policy, I’m always on the lookout for articles on tax reform and the burden of government spending.

But since I just wrote about the dismal performance of government schools as part of my series for National Education Week, I obviously noticed this story (highlighted in red) in an email from the New York Times.

My immediate reaction, given the wealth of evidence, was to scoff at the discredited notion that more spending is a key to better educational outcomes.

We have plenty of data showing that pouring more money into government schools doesn’t produce good results.

Anyhow, I clicked on the story and read that supposed experts are puzzled about stagnant academic performance.

The performance of American teenagers in reading and math has been stagnant since 2000, according to the latest results of a rigorous international exam, despite a decades-long effort to raise standards and help students compete with peers across the globe. …The disappointing results from the exam, the Program for International Student Assessment, …follow those from the National Assessment of Educational Progress, an American test that recently showed that two-thirds of children were not proficient readers. …Low-performing students have been the focus of decades of bipartisan education overhaul efforts, costing many billions of dollars, that have resulted in a string of national programs — No Child Left Behind, Race to the Top, the Common Core State Standards, the Every Student Succeeds Act — but uneven results.

By the way, we haven’t had a “decades-long effort to raise standards.”

What we really had is a decades-long effort to appease teacher unions by pouring more money into the existing school monopoly.

That was the real purpose of failed schemes like Bush’s No Child Left Behind (I call it No Bureaucrat Left Behind) and Obama’s Common Core.

I briefly thought how much fun I would have if I was an editor at the New York Times. Then the email summary would have looked like this.

To be fair, I don’t think spending (either a lot or a little) is the issue.

The real problem is the structure of our education system. We have a very inefficient monopoly that has been captured by the teacher unions, which means mediocre results.

It doesn’t matter that most teachers are well meaning and it doesn’t matter that most parents are well meaning. Until we replace the monopoly with school choice, things won’t get any better.

Let’s close with some speculation about whether the above story is an example of media bias?

Perhaps, but I think it’s most likely that it’s an an example of the “Butterfield Effect.” As I explained back in 2010, this is a term used to mock journalists for being blind to the real story.

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explained that crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

In other words, the journalist who wrote the aforementioned story may not be biased. Or even a leftist.

But such people inhabit a world where government is universally perceived as a means of solving problems.

P.S. Here are some of my favorite examples of the “Butterfield Effect,” all of which presumably were caused by some combination of media bias and economic ignorance.

  • A newspaper article that was so blind to the Laffer Curve that it actually included a passage saying, “receipts are falling dramatically short of targets, even though taxes have increased.”
  • Another article was entitled, “Few Places to Hide as Taxes Trend Higher Worldwide,” because the reporter apparently was clueless that tax havens were attacked precisely so governments could raise tax burdens.
  • In another example of laughable Laffer Curve ignorance, the Washington Post had a story about tax revenues dropping in Detroit “despite some of the highest tax rates in the state.”
  • Likewise, another news report had a surprised tone when reporting on the fully predictable news that rich people reported more taxable income when their tax rates were lower.
  • New York Times article was headlined, “Trillions Spent, but Crises like Greece’s Persist,” indicating nobody realized spending was the problem rather than solution.
  • The news staff of the Wall Street Journal also demonstrated their ignorance of the Laffer Curve with a story headlined: “Despite Top-Property Tax Rate in Connecticut, the State’s Capital Teeters on Bankruptcy.”

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Image credit: InstagramFOTOGRAFIN | Pixabay License.

Coalition Supports Congressional Reforms for EB-5 Investor Immigrant Program

Wed, 12/04/2019 - 10:35am

For Immediate Release
Wednesday, December 4, 2019
202-285-0244
www.freedomandprosperity.org

Coalition Supports Congressional Reforms for EB-5 Investor Immigrant Program

(Washington, D.C.,Wednesday, December 4, 2019) A coalition of 18 free market organizations, led by the Center for Freedom and Prosperity, today offered support for Congressional reforms to the EB-5 investor immigrant program. Long overdue, the compromise bill, S. 2778, the Immigrant Investor Program Reform Act, contains numerous fixes and improvements to the program, as well as a long-term re-authorization.

The coalition letter reads, in part:

“Congress needs to act soon to expand the program while making changes that will protect against fraud, because the EB-5 regional center program is scheduled to expire soon… Reliance on short-term EB-5 extensions over the last five years has diminished America’s ability to attract foreign investment for economic development projects here in the U.S. The balanced and comprehensive approach in the pending legislation will calm markets abroad while bringing stability to the regional center programs.

…Global competitiveness has been a top objective of the Trump administration. Tax reform and efforts to streamline government regulations have contributed to historic lows in unemployment numbers and made America more competitive for business. Furthermore, many countries seek to attract foreign investment through economic citizenship programs. The EB-5 program allows for the U.S. to compete for mobile foreign investment and the jobs that these funds bring.”

The letter further notes that Congressional action means that Obama-era “midnight regulations” that threaten the integrity of the program and are slated soon to go into effect should be withdrawn.

Representatives from the following 18 organizations joined the letter: 

Center for Freedom and Prosperity, Americans for Tax Reform, FreedomWorks, Taxpayers Protection Alliance, Competitive Enterprise Institute, Small Business & Entrepreneurship Council, The American Consumer Institute, 60 Plus Association, Niskanen Center, National Tax Limitation Committee, Campaign for Liberty, Institute for Policy Innovation, Citizen Outreach, Market Institute, National Black Chamber of Commerce, Institute for Liberty, American Encore, Consumer Action for a Strong Economy

The full letter is available here.

For additional comments:
Andrew Quinlan can be reached at 202-285-0244, [email protected]

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Image credit: Chris6d | CC BY-SA 4.0.

Coalition to Congress: Pass Updates to EB-5 Investor Immigrant Program

Wed, 12/04/2019 - 10:32am

[PDF Version]

The Honorable Lindsey Graham
Chairman, Committee on the Judiciary
United States Senate
290 Russell Senate Office Building
Washington, DC 20510

The Honorable Dianne Feinstein
Ranking Member, Committee on the Judiciary
United States Senate
331 Hart Senate Office Building
Washington, DC 20510

Dear Chairman Graham and Ranking Member Feinstein:

On behalf of the undersigned organizations, we write to support the Immigrant Investor Program Reform Act, S.2778, a bill that makes important reforms to the EB-5 Investor Visa program. This legislation strikes a balance between rural and urban stakeholders, ensuring that the EB-5 program will continue to create American jobs by attracting foreign investment to American infrastructure projects.

Congress needs to act soon to expand the program while making changes that will protect against fraud, because the EB-5 regional center program is scheduled to expire soon. Modernization of this program should come from Congress and is the appropriate way to deal with changes to the program versus harmful and heavy-handed pending Department of Homeland Security regulations still active from the Obama Administration and proceeding under the Trump Administration.

Congress, not the executive branch, is the appropriate place to fix the EB-5 program. Now that legislation is moving through Congress, it makes sense for the Trump Administration to toss aside the Obama administration’s “midnight regulation” intended to sabotage the program.  Congress should move quickly to get this legislation to the president’s desk.

Reliance on short-term EB-5 extensions over the last five years has diminished America’s ability to attract foreign investment for economic development projects here in the U.S. The balanced and comprehensive approach in the pending legislation will calm markets abroad while bringing stability to the regional center programs.

Numerous studies prove this program to be an economic success story. The EB-5 program has attracted a significant amount of foreign investment to the U.S. to date. A study from the American Action Forum found the program increased foreign investment in the United States by $20 billion since 2008. A 2017 Department of Commerce report similarly found that the EB-5 program increased investment in the U.S. by $5.8 billion in 2012 and 2013 alone. Using data from FY12-FY13, these projects were expected to create an estimated 174,039 jobs for American workers.

EB-5 investment provides alternative sources of funding for worthwhile projects that may otherwise go overlooked. Urban areas often struggle to secure development investment despite significant interest, but now, for instance, dilapidated parts of the nation’s capital are being revitalized thanks to EB-5 investment and the hard work of an American entrepreneur.

Global competitiveness has been a top objective of the Trump administration. Tax reform and efforts to streamline government regulations have contributed to historic lows in unemployment numbers and made America more competitive for business. Furthermore, many countries seek to attract foreign investment through economic citizenship programs. The EB-5 program allows for the U.S. to compete for mobile foreign investment and the jobs that these funds bring.

For these reasons, we urge Congress to take up and pass S. 2778 to update the program and calm concerns about the national security implications of the EB-5 Investor Visa program.

Sincerely,

Andrew Quinlan ~ President, Center for Freedom and Prosperity
Grover Norquist ~ President, Americans for Tax Refor
Jason Pye ~ Vice President of Legislative Affairs, FreedomWorks
Tim Andrews ~ Executive Director, Taxpayers Protection Alliance
Iain Murray ~ Vice President for Strategy, Competitive Enterprise Institute
Karen Kerrigan ~ President & CEO, Small Business & Entrepreneurship Council
Steve Pociask ~ President, The American Consumer Institute
James L. Martin ~ Founder/Chairman, 60 Plus Association
Jerry Taylor ~ President, Niskanen Center
Lew Uhler ~ President, National Tax Limitation Committee
Norman Singleton ~ President, Campaign for Liberty
Tom Giovanetti ~ President, Institute for Policy Innovation
Chuck Muth ~ President, Citizen Outreach
Charles Sauer ~ President, Market Institute
Harry C. Alford ~ President/CEO, National Black Chamber of Commerce
Andrew Langer ~ President, Institute for Liberty
Sean Noble ~ President, American Encore
Matthew Kandrach ~ President, Consumer Action for a Strong Economy

Should Government Bureaucracies Be Relocated Outside the Beltway?

Tue, 12/03/2019 - 12:34pm

An utterly depressing statistic is that the Washington, D.C.-area is now the richest region of the country.

At the risk of understatement, that wealth is largely unearned. It’s mostly a reflection of overpaid bureaucratsgreedy politiciansfat-cat lobbyistsbeltway-bandit contractors, and other insiders who have their snouts buried in the federal trough.

I’m not a fan of class warfare, but there’s one exception: It’s galling that lower-income and middle-class taxpayers across the nation are subsidizing a gilded class in Washington.

That’s the type of redistribution that should be ended first.

So what can be done to address this inequity? Is there an approach that will curtail D.C.’s entitled, self-aggrandizing elite?

In a column for the Wall Street Journal, Terry Wanzek, a state legislator from North Dakota, makes the case for new legislation that would shift government bureaucracies from Washington to the hinterland.

The Hawley-Blackburn bill calls for moving Agriculture and its more than 100,000 employees to Missouri. Other departments would go elsewhere: Commerce to Pennsylvania, Education to Tennessee, Energy to Kentucky, Health and Human Services to Indiana, Housing and Urban Development to Ohio, Interior to New Mexico, Labor to West Virginia, Transportation to Michigan, and Veterans Affairs to South Carolina. …The bill’s sponsors pitch their legislation as an employment program…but the main benefit would come from putting regulators into proximity with the people whose lives and businesses they regulate. …This would be a government “of the people”—something that is lacking as the administrative state inexorably grows in Washington, D.C.

This is an interesting proposal. But does that mean it’s a good idea?

Clyde Wayne Crews of the Competitive Enterprise Institute is not overly impressed.

In today’s Wall Street Journal, he opines that it would backfire.

The bill’s sponsors, Sens. Josh Hawley of Missouri and Marsha Blackburn of Tennessee, would send the Agriculture and Education departments to their respective states. Eight other federal departments and most nondepartment agencies would also be dispersed throughout the land, often to places intended to suit their functions—for example, the Transportation Department would be sent to Michigan to be near the auto industry. …The only understandable part of this plan is conservatives’ visceral desire for revenge. People across the county can see the massive houses Washington bureaucrats and consultants occupy, walled off in single-party strongholds like Fairfax, Va. …But since when did Republicans accept the idea that the federal government ought to be a premier job creator? The GOP insisted for decades that many New Deal agencies and subsequent government bodies should never have been created in the first place, and that their red tape and interference is a dominant cause of economic inefficiency. …It will be impossible to uproot or at least prune the bureaucracy once its seeds are spread to every state. …Would legislators from the “lucky” chosen states ever have the gumption to slash funding from agencies that employ thousands of their constituents and pay them generously? The HIRE Act would tie Middle America inextricably to big progressive government, remaking America in Washington’s image.

So who is right?

wrote about this topic back in 2016.

Part of me liked the idea, though mostly for punitive reasons.

…it wouldn’t be a bad idea. …locate some bureaucracies in the dodgy parts of cities such as Detroit. Especially departments such as HUD and HHS since they helped cause the economic misery in inner cities. And the Department of Education could be placed somewhere like Newark where government-run schools are such awful failures.

But I concluded it would be a bad idea.

Shouldn’t we focus on shutting down counterproductive bureaucracies rather than moving them? …If we move bureaucracies (whether they are necessary ones or useless ones), does that create the risk of giving other parts of the nation a “public-choice” incentive to lobby for big government since they’ll be recipients of federal largesse? Will we simply get duplication, meaning a new bureaucracy somewhere in America without ever really getting rid of the original bureaucracy in Washington, DC?

So I’m siding with Mr. Crews over Mr. Wanzek.

P.S. I’ve already identified bureaucracies that should be terminated.

  • Get rid of the Department of Housing and Urban Development.
  • Shut down the Department of Agriculture.
  • Eliminate the Department of Transportation.
  • Abolish the Department of Education.
  • Pull the plug on the Department of Energy.
  • Phase out the Department of Veterans Affairs.
  • Privatize the Postal Service.
  • Dump the Small Business Administration.

Looking at this list, it reminds me that I need to make the case for the abolition of some other bureaucracies.

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Image credit: Martin Jacobsen | CC BY-SA 3.0.

A Primer on “Full Expensing” of Business Investment

Mon, 12/02/2019 - 12:14pm

Whenever I review a tax proposal, I automatically check whether it is consistent with the “Holy Trinity” of good policy.

  1. Low marginal tax rates on productive activity such as work and entrepreneurship.
  2. No tax bias (i.e., extra layers of tax) penalizing saving and investment.
  3. No complicating preferences and loopholes that encourage inefficient economic choices.

A good proposal satisfies one of these three principles. A great proposals satisfies all of them.

And that’s a good way of introducing today’s topic, which is about whether we should replace “depreciation” with “expensing.” Or, for those who aren’t familiar with technical tax terminology, this issue revolves around whether there should be a tax penalty on new investment.

Erica York of the Tax Foundation has a nice summary of the issue.

While tax rates matter to businesses, so too does the measure of income to which those tax rates apply. The corporate income tax is a tax on profits, normally defined as revenue minus costs. However, under the current tax code, businesses are unable to deduct the full cost of certain expenses—their capital investments—meaning the tax code is not neutral and actually increases the cost of investment. …Typically, when businesses incur capital investment costs, they must deduct them over several years according to preset depreciation schedules, instead of deducting them immediately in the year the investment occurs. …the delay in taking deductions means the present value of the write-offs (adjusted for inflation and the time value of money) is smaller than the original cost. …The delay effectively shifts the tax burden forward in time as businesses face a higher tax burden today because they cannot fully deduct their costs, and it decreases the after-tax return on the investment. …Ultimately, this means that the corporate income tax is biased against investment in capital assets to the extent that it makes the investor wait years or decades to claim the cost of machines, equipment, or factories on their tax returns.

Here’s a visual depiction of how the current system works.

The key thing to understand is that businesses are forced to overstate their income, which basically means a higher tax rate on actual income (thus violating principle #1).

Back in 2017, Adam Michel and Salim Furth wrote about this topic for the Heritage Foundation.

Here is their main argument.

The current system gives companies a partial deduction for each dollar invested in the economy. The real value of the deduction depends on the vagaries of the tax code, future inflation, and the company’s cost of borrowing. The classification of investments by type and the somewhat arbitrary assignment of the number of years over which each investment must be written off are called depreciation schedules. The imperfect design of these schedules creates unequal tax rates on investment across industries. …Adopting full expensing would reduce effective tax rates everywhere, but especially in industries disfavored under the current system. The result would be more economically efficient: The tax code would no longer be steering investment to arbitrarily favored industries. …Expensing lowers the cost of capital investments. …Both the U.S. capital stock and the demand for labor to operate and service the new investments would be permanently larger. A larger capital stock and higher labor demand would increase the number of jobs and place upward pressure on wages.

A key takeaway is that the tax bias created by the current system is a penalty on new investment (thus violating principle #2).

And the current approach of depreciation also is incredibly complicated (thus violating principle #3).

Expensing can also significantly cut compliance costs. According to IRS research, business tax compliance costs are over $100 billion per year, representing a massive waste of money and effort. Other estimates place the cost of complying with depreciation schedules alone at over $23 billion annually, or 448 million hours each year. Considering that the total compliance cost for traditional C corporations is equal to 14 percent of their taxes paid, expensing could make major inroads toward simplifying business taxpaying and lowering compliance costs.

Unsurprisingly, some politicians are on the wrong side.

Not only are they against a neutral system based on expensing, Erica York explains that they want to make the current system even more biased against new investment.

…proposals to stretch deductions over longer periods of time, such as those from Senators Warren (D-MA) and Sanders (I-VT)…would increase the cost of capital, bias the tax code against investment, and lead to less capital accumulation and lower productivity, output, and wages.

Yes, I know readers are shocked to learn that “Crazy Bernie” and “Looney Liz” want to make a bad situation even worse.

Returning to the policy discussion, the fight over depreciation vs. expensing also matters for national competitiveness.

In another study for the Tax Foundation, Amir El-Sibaie looks at how the U.S. compares to other developed nations.

Currently, the U.S. tax code only allows businesses to recover an average of 67.7 percent of a capital investment (e.g., an investment in buildings, machinery, intangibles, etc.). This is slightly higher than the Organisation for Economic Co-operation and Development’s (OECD) average capital allowance of 67.2 percent. …Since 1979, overall treatment of capital assets has worsened in the U.S., dropping from an average capital allowance of 75.8 percent in the 1980s to an average capital allowance of 67.7 percent in 2018. Capital allowances across the OECD have also declined, but by a lesser extent over the same period: 72.4 percent in the 1980s to 67.2 percent in 2018. …The countries with the best average treatment of capital assets are Estonia (100 percent), Latvia (100 percent), and Slovakia (78.2 percent). Countries with the worst treatment of capital assets are Chile (41.7 percent), the United Kingdom (45.7 percent), and Spain (54.5 percent).

The bad news is that the United States is much worse than Estonia (the gold standard for neutral business taxation).

The good news is that we’re not in last place. Here’s a comparison of the United States to the average of other developed nations.

By the way, there are folks in the United Kingdom who want to improve that nation’s next-to-last score.

Here are some excerpts from a column in CapX by Eamonn Ives.

…successive governments have…cut the headline rate of corporation tax. …That said, some of the positive effects of the cuts to corporation tax were blunted by changes to the tax code which allow businesses to write off the cost of capital expenditure… Typically, corporate tax systems let firms deduct day to day expenses – like labour and materials – right away. However, the cost of longer-term investments – such as those in machinery and industrial premises – can only be deducted in a piecemeal manner, over a set period of time. …this creates a problem for businesses, because the more a tax deduction for capital investment is spread out, the less valuable it becomes to a firm. This is not only because of inflationary effects, but also due to what economists would call the time value of money… Thankfully, however, a solution is at hand to iron out this peculiarity. ‘Full expensing’ allows firms to immediately and entirely deduct the cost of any investment they undertake from their corporation tax bill.

He cites some of the research on the topic.

A 2017 study, from Eric Ohrn, found that in parts of America, full expensing has increased investment by 17.5%, and has increased wages by 2.5%. Employment also rose, by 7.7% after five years, as did production, by 10.5%. If the same results were replicated in the UK, the average worker could stand to earn a staggering additional £700 a year. Another academic study, this time from the UK itself, found that access to more generous capital allowances for small and medium sized enterprises which were offered prior to fiscal year 2008/09 increased the investment rate by 11%.

Let’s conclude.

When I discuss this issue, I usually start by asking an audience for a definition of profit.

That part is easy. Everyone agrees that profit is the difference between cost and revenue.

To show why depreciation should be replaced by expensing, I then use the very simple example of a lemonade stand.

In the start-up year for this hypothetical lemonade stand, our entrepreneur has total costs of $25 (investment costs for the actual stand and operating costs for the lemons) and total revenue of $30. I then explain the different tax implications of expensing and depreciation.

As you can see, our budding entrepreneur faces a much higher tax burden when forced to depreciate the cost of the lemonade stand.

For all intents and purposes, depreciation mandates that businesses overstate profits.

This is unfair. And it’s also bad economic policy because some people will respond to these perverse incentives by deciding not to invest or be entrepreneurial.

To be fair, businesses eventually are allowed to deduct the full cost of investments. But this process can take as long as 39 years.

Here’s another comparison, which shows the difference over time between expensing and a five-year deprecation schedule. I’ve also made it more realistic by showing a loss in the first year.

In both examples, our entrepreneur’s five-year tax bill is $3.

But the timing of the tax matters, both because of inflation and the “time value” of money. That’s why, in a good system, there should only be a tax when there’s an actual profit.

Needless to say, good tax reform plans such as the flat tax are based on expensing rather than depreciation.

P.S. This principle applies even if businesses are investing in private jets.

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Image credit: mohamed_hassan | Pixabay License.

Measuring the Impact of 20 Years of Socialism in Venezuela

Sun, 12/01/2019 - 12:12pm

Fifty years ago, Venezuela was ranked #10 for economic liberty and enjoyed the highest living standards in Latin America

Today, the nation is an economic disaster. Hugo Chavez and Nicolas Maduro deserve much of the blame. Their socialist policies have dropped Venezuela to last place according to Economic Freedom of the World.

Predictably, this has resulted in horrific suffering.

And it’s going from bad to worse.

In ways that are unimaginable for those of us living in civilized nations.

For instance, the Associated Press reports that grave-robbing is now a problem in the country.

Even the dead aren’t safe in Maracaibo, a sweltering, suffering city in Venezuela. Thieves have broken into some of the vaults and coffins in El Cuadrado cemetery since late last year, stealing ornaments and sometimes items from corpses as the country sinks to new depths of deprivation. “Starting eight months ago, they even took the gold teeth of the dead,” said José Antonio Ferrer, who is in charge of the cemetery, where a prominent doctor, a university director and other local luminaries are buried. Much of Venezuela is in a state of decay and abandonment, brought on by shortages of things that people need the most: cash, food, water, medicine, power, gasoline. …Many who have the means leave, joining an exodus of more than 4 million Venezuelans who have left the country in recent years. …Some people sift through trash, scavenge for food.

And hyper-inflation is creating a barter economy according to the AP.

…the economy is in such shambles that drivers are now paying for fill-ups with a little food, a candy bar or just a cigarette. Bartering at the pump has taken off as hyperinflation makes Venezuela’s paper currency, the bolivar, hard to find and renders some denominations all but worthless, so that nobody will accept them. Without cash in their wallets, drivers often hand gas station attendants a bag of rice, cooking oil or whatever is within reach. …This barter system…is just another symptom of bedlam in Venezuela. …The International Monetary Fund says inflation is expected to hit a staggering 200,000% this year. Venezuela dropped five zeros from its currency last year in a futile attempt to keep up with inflation. …Venezuela, which sits atop the world’s largest oil reserves, was once rich. But the economy has fallen into ruin because of what critics say has been two decades of corruption and mismanagement under socialist rule.

Mary O’Grady of the Wall Street Journal points out that the poor are being hurt the most.

…the gap in living standards between the haves and the have-nots is wider than ever. It wasn’t supposed to be like this. Economic equality is the socialists’ Holy Grail. People are poor, the logic goes, because the rich have too much. Ergo, all it takes to end poverty is the use of state coercion to distribute economic gains evenly. …Tell that to the Venezuelan poor. Not only have their numbers increased under socialism, but the suffering among the most vulnerable has grown more intense. …Venezuela now experiences recurring blackouts and brownouts… in the “ranchos,”…residents now make “lamps” out of mayonnaise jars, diesel taken from vehicles, and pieces of cloth. One local described it to the reporter as going back to “prehistoric” times. With water, sanitation and other public services, the story is the same. …the have-nots are at Mr. Maduro’s mercy.

College students also are suffering, as reported by the Union Journal.

…5 youngsters had fainted and two of them have been whisked away in an ambulance. The faintings on the major college have turn into a daily prevalence as a result of so many college students come to class with out consuming breakfast, or dinner the evening earlier than. In different faculties, youngsters wish to know if there’s any meals earlier than they resolve whether or not to go in… Venezuela’s devastating six-year financial disaster is hollowing out the varsity system… Starvation is simply one of many many issues chipping away at them now. Thousands and thousands of Venezuelans have fled the nation in recent times, depleting the ranks of scholars and academics alike. …Many colleges are shuttering within the once-wealthy nation as malnourished youngsters and academics who earn nearly nothing abandon lecture rooms to scratch out a residing on the streets or flee overseas. It’s a significant embarrassment for the self-proclaimed Socialist authorities.

In a column for the New York Times, Nicholas Kristof shares some sad observations about the consequences of Venezuelan socialism.

This country is a kleptocracy ruled incompetently by thugs who are turning a prosperous oil-exporting nation into a failed state sliding toward starvation. …Serrano, 21, lives in the impoverished, violent slum of La Dolorita, where I met her. The baby was fading from malnutrition in May, so she frantically sought medical help — but three hospitals turned the baby away, saying there were no beds available, no doctors and no supplies. …Daisha…died at home that night. …President Nicolás Maduro’s brutal socialist government is primarily responsible for the suffering, and there are steps Maduro could take to save children’s lives, if he wanted to. …Venezuela may now be sliding toward collapse and mass starvation, while fragmenting into local control by various armed groups. Outbreaks of malaria, diphtheria and measles are spreading, and infant mortality appears to have doubled since 2008.

By the way, Kristof argues that sanctions imposed by Obama and Trump are making a bad situation worse.

That’s true, but it doesn’t change the fact that Venezuela’s awful government deserves the overwhelming share of the blame.

Let’s measure how the people of Venezuela have suffered. Here are the per-capita GDP numbers since Chavez took power in 1999. There’s volatility in the data, presumably because of changes in oil prices. But the trend is unmistakably negative.

The bottom line is that Venezuela’s living standards have collapsed by about 50 percent since the socialists took over.

That makes Greece seem like an economic powerhouse by comparison.

Let’s close, though, by comparing Venezuela to Latin America’s most market-oriented nation.

As you can see, per-capita economic output in Chile (in blue) has soared while per-capita GDP in Venezuela (in red) has collapsed.

In other words, free markets and small government are the right recipe if the goal is broadly shared prosperity.

P.S. I’ve explained on many occasions that lower-income people in Chile have been the biggest beneficiaries of pro-market reforms.

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Image credit: ZiaLater | CC BY-SA 3.0.

The Value-Added Tax Is a Precursor for a Bigger Burden of Government Spending

Sat, 11/30/2019 - 12:59pm

wrote yesterday about Japan’s experience with the value-added tax, mostly to criticize the International Monetary Fund.

The statist bureaucrats at the IMF are urging a big increase in Japan’s VAT even though the last increase was only imposed two months ago (in a perverse way, I admire their ability to stay on message).

Today, I want to focus on a broader lesson regarding the political economy of the value-added tax. Because what’s happened in Japan is further confirmation that a VAT would be a terrible idea for the United States.

Simply stated, the levy would be a recipe for bigger government and more red ink.

Let’s look at three charts. First, here’s a look at how politicians in Japan have been pushing the VAT burden ever higher.

What’s been the result? Have politicians used the money to lower other taxes? Have they used the money to reduce government debt?

Hardly. As was the case in Europe, the value-added tax in Japan is associated with an increase in the burden of spending.

Here’s a chart (based on the IMF’s own data) showing that government is now consuming almost 35 percent of economic output, up from about 30 percent of GDP when the VAT was first imposed.

I’ve added a trend line (automatically generated by Excel) to illustrate what’s been happening. It’s not a big effect, but keep in mind the VAT never climbed above 5 percent until 2014.

Now let’s look at some numbers that are very unambiguous.

Japan’s politicians imposed the VAT in part because they claimed it was a way of averting more red ink.

Yet our final chart shows what’s happened to both gross debt and net debt since the VAT was imposed.

To be sure, the VAT was only one piece of a large economic puzzle. If you want to finger the main culprits for all this red ink, look first at Keynesian spending binges and economic stagnation.

But we also know the politicians were wrong when they said a VAT would keep debt under control.

I’ll close with a political observation.

The left wants a value-added tax for the simple reason that it’s the only way to finance European-type levels of redistribution (yes, they also want class-warfare taxes on the rich, but that’s mostly for reasons of spite since even they recognize that such levies don’t actually generate much revenue).

But it’s very unlikely that a VAT will be imposed on the United States by the left. At least not acting alone.

The real danger is that we’ll wind up with a VAT because some folks on the right offer their support. These people don’t particularly want European-type levels of redistribution, but they think that’s going to happen. So one of their motives is to figure out ways to finance a large welfare state without completely tanking the economy.

They are right that a VAT doesn’t impose the same amount of damage, on a per-dollar-collected basis, as higher income tax rates. Or increases in double taxation (though it’s important to realize that it would still penalize productive behavior by increasing the wedge between pre-tax income and post-tax consumption).

But their willingness to surrender is nonetheless very distressing.

The bottom line is that the most important fiscal issue facing America is the need for genuine entitlement reform. Achieving that goal is an uphill battle. But if politicians get a big new source of revenue, that uphill battle becomes an impossible battle.

The IMF Proposes Ever-Increasing Tax Hikes for Japan

Fri, 11/29/2019 - 12:46pm

It seems that the International Monetary Fund and the Organization for Economic Cooperation and Development have an ongoing contest to see which bureaucracy can be the biggest cheerleader for bad fiscal policy.

  • They compete (OECD vs IMF) to promote more spending.
  • They compete (OECD vs IMF) to push higher tax burdens.
  • They compete (OECD vs IMF) to advocate class warfare.

You can even see them competing to encourage bad policy in various nations.

In Japan, for instance, the OECD has been pushing for higher taxes while the IMF has been pushing for Keynesian spending.

But now the IMF is upping the ante by adding its bad advice on tax policy.

Japan’s politicians raised the value-added tax just two months ago.

But that’s not enough for the IMF. The bureaucrats already are urging a far bigger increase in the levy.

Japan needs to raise its consumption tax further to fund growing social security costs, the International Monetary Fund recommended… The tax “would need to increase gradually” to 15% by 2030 and 20% by 2050, the IMF said in a report. …IMF Managing Director Kristalina Georgieva praised the smooth implementation of the Oct. 1 hike that took the consumption tax to 10% from 8%.

Needless to say, one of the main lessons from this sordid experience is that it’s never a good idea to give politicians a new source of revenue.

Look at what’s happened ever since the VAT was first imposed in 1989.

And now the IMF wants to push the rate up to 15 percent. And then 20 percent.

By the way, it’s worth noting that Japan’s politicians actually welcome this bad advice.

The nation faces a big demographic crunch (increasing life expectancy and low birth rates), and that means entitlement spending is on track to consume an ever-larger share of economic output.

To give you an idea of what’s happening, here’s a chart from the IMF’s report on Japan. It only looks at health-related spending, so keep in mind that the red line would be significantly hihger if Japan’s version of Social Security was included.

The bottom line is that Japan’s politicians want options to finance a growing burden of government spending.

And since decades of failed Keynesian policy have saddled the nation with record levels of debt, ever-larger sources of tax revenue are their preferred choice.

Sadly, the IMF is more than happy to rationalize that bad approach.

P.S. Japan’s politicians could reform entitlements, of course, but don’t hold your breath waiting for that to happen. Instead, expect this “depressing chart” to get even more depressing.

Thanksgiving, Socialism, and Free Enterprise

Thu, 11/28/2019 - 12:38pm

By global standards, the United States is a bulwark of capitalism. Yes, government is too big and there’s far too much intervention, but we have enough private property and free enterprise to be ranked #5 for economic liberty. Which helps to explain why Americans enjoy higher living standards than Europeans.

But capitalism had to be learned. One of the first European settlements in North America, the Plymouth Plantation in Massachusetts, was based on socialism.

And it was real socialism, with common ownership of the means of production.

Unsurprisingly, it was not a rousing success. Indeed, it was a miserable failure.

Here’s Larry Reed’s analysis of what happened.

We should never forget that the Plymouth colony was headed straight for oblivion under a communal, socialist plan… Land was held in common. Crops were brought to a common storehouse and distributed equally. For two years, every person had to work for everybody else (the community), not for themselves as individuals or families. Did they live happily ever after in this socialist utopia? Hardly. The “common property” approach killed off about half the settlers. Governor Bradford recorded in his diary that everybody was happy to claim their equal share of production, but production only shrank. Slackers showed up late for work in the fields, and the hard workers resented it. …The disincentives of the socialist scheme bred impoverishment and conflict until, facing starvation and extinction, Bradford altered the system. He divided common property into private plots… Communal socialist failure was transformed into private property/capitalist success, something that’s happened so often historically it’s almost monotonous.

And here are some excerpts from a column that Professor Ben Powell wrote back in 2004.

Bad weather or lack of farming knowledge did not cause the pilgrims’ shortages. Bad economic incentives did. In 1620 Plymouth Plantation was founded with a system of communal property rights. Food and supplies were held in common and then distributed based on “equality” and “need” as determined by Plantation officials. People received the same rations whether or not they contributed to producing the food, and residents were forbidden from producing their own food. …Because of the poor incentives, little food was produced. Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. …This change, Bradford wrote, “had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been.” Giving people economic incentives changed their behavior. …Once the Pilgrims in the Plymouth Plantation abandoned their communal economic system and adopted one with greater individual property rights, they never again faced the starvation and food shortages of the first three years.

By the way, the settlement in Jamestown, Virginia, also had a very unsuccessful experiment with socialism.

Every Thanksgiving, I like to remind people about America’s failed experiment with big government.

This year, I want to build on that history lesson by looking at how capitalism’s invisible hand is making our modern holidays ever-more affordable.

We’ll start with Mark Perry of the American Enterprise Institute, who explains how free enterprise makes Thanksgiving possible.

…most of you probably didn’t call your local supermarket ahead of time and order a Thanksgiving turkey this year. Why not? Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you appeared “unannounced” at your local grocery store and selected your Thanksgiving bird. Or it will be there…when you “skip the trip” to the grocery store and get free 2-hour delivery from Amazon Prime Now… The reason your Thanksgiving turkey was waiting for you without an advance order? Because of the economic concepts of “spontaneous order,” “self-interest,” and the “invisible hand” of the free market. Turkeys appeared in your local grocery stores primarily because of the “self-interest” (greed?) of thousands of turkey farmers, truck drivers, and supermarket owners and employees who are complete strangers to you and your family. But all of those strangers throughout the turkey supply chain co-operated on your behalf and were led by the “invisible hand” to make sure your family had a turkey (or two) on the table to celebrate Thanksgiving.

By the way, just imagine what would happen if a government bureaucracy (like the Department of Agriculture) was in charge of Thanksgiving. Everything would cost more and have lower quality.

And the entire experience would be like a trip to the Department of Motor Vehicles.

But this isn’t just a story about how food appears on store shelves because of market forces rather than central planning.

It’s also a story about the competitive forces of capitalism make that food ever-more affordable. As shown in this chart from Marian Tupy of Human Progress, the cost of a Thanksgiving dinner is dropping over time.

But even that’s not the full story.

We’re also getting richer over time thanks to free enterprise.

So the amount of work that is required to buy Thanksgiving dinner is falling even faster. Here’s a chart from Mark Perry.

Now you know what to be thankful for.

P.S. I embedded a couple of humorous anti-libertarian memes in the column. If you want some more Thanksgiving-themed humor, you can click here and here for some mockery of Obama. And here’s a satirical look at a future Thanksgiving in a nation controlled by our friends on the left.

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Image credit: "Pilgrims Going To Church" | Public Domain.

Government-Run Companies vs. Private-Run Companies

Wed, 11/27/2019 - 12:48pm

In pure socialist systems, governments own and operate companies (the “means of production“). Such an approach also requires central planning and price controls.

But you don’t need socialism to have government-controlled companies. There are plenty of “state-owned enterprises” that exist in supposedly market-oriented nations.

Including in the United States. The federal government, for instance, owns and operates the air traffic control system and the postal service, to cite two big examples.

So what happens when politicians are de facto shareholders?

Today, thanks to some new research from the Asian Development Bank Institute, we’re going to look at the economic consequences of such firms.

Throughout history, and especially since the end of World War II, state-owned enterprises (SOEs) have been created in much of the world… Although private companies play a dominant role in market-based societies, enterprises with government ownership are still key players in the global economy, making their performance important for economic growth and competitiveness… Thus, scholars and policymakers around the world have been left with a task of reassessing the efficiency of state ownership. …In this paper, we aim to investigate whether certain ownership types consistently show superior economic performance relative to others when controlling for other economic factors. …we aim to fill in this gap and report further empirical evidence on the relative efficiency of public and private companies.

According to the study, state-run companies play a very large role in some countries.

The authors consider some of the theoretical reasons why state-run firms might not be very efficient, including “public choice.”

Agency theory…states that in a corporation, managers (or agents) may follow a personal agenda rather than work on behalf of, and for the interest of, the principals who own the corporation. Within a SOE, in particular, …the managers of SOEs are those who are appointed by the government…and seek firm-specific rents, such as high pay, fringe benefits, and low effort levels. Unlike their peers who operate in private-owned enterprises and may face the risk of replacement and dismissal due to their firms’ low performance…, the chief executive officers (CEOs) of SOEs are put under little financial constraint, and their compensation is not necessarily linked to firm performance… Public choice theory…also provides a cornerstone conceptual framework on which SOEs’ underperformance can be explained. This framework assumes that…special interests affect…governments’ own objectives.

They put together a dataset of more than 25,000 companies, both government and private, and then looked at key performance metrics.

Not surprisingly, government-run firms are not very efficient compared to their private counterparts.

…we find significant evidence that SOEs are outperformed by their POEs counterparts. The findings are consistent over both simple univariate comparisons and multivariate regressions. Government firms appear to be less profitable than POEs. They are also more dependent on debt and financial support from outside sources rather than equity. Hence, we provide support for the view that public firms are less efficient than private firms… The cross-sectional comparisons also show that government firms tend to be more labor intensive and have higher labor costs than non-government ones. …The differences in profitability appear to be economically important. The average return on assets for private firms is 8.010, almost twice that for SOEs. …SOEs have a higher liabilities-to-assets ratio, meaning that they tend to rely more on debt than shareholder funds. … state-owned companies…generate smaller sales volumes and have a higher cost per one employee. In other words, firms owned by private sectors are more labor efficient than government ones. …our findings suggest that privatization could be considered as a driver for firm efficiency.

For those that like perusing quantitative results, here are the results of their statistical regressions.

I’ve highlighted the key difference.

As already noted, government-run firms accumulate more debt.

This is presumably because investors assume that government-run companies won’t default.

Not because they don’t lose money, but rather because the political pressures that led to their creation also will prevent their demise.

SOEs can enjoy a “soft” budget constraint since they are backed by the government for their funding… They have the advantage of borrowing funds at a lower rate rather than accessing the equity market to raise capital… Thus, the discipline that capital markets impose on state-held firms and the threat of financial distress for them is less important than their private counterparts. …it is worth noting that such “soft” budget constraints, to a certain extent, could also be a source of inefficiency in government firms.

In other words, the growth-enhancing process of “creative destruction” is blocked when governments are in charge of companies.

For what it’s worth, this is a big problem in nations such as China.

Though we also saw a version of this in the United States, with the big bailouts of Fannie Mae and Freddie Mac, both of which are government-sponsored enterprises (private ownership, but created by government and controlled by government).

And there are many other examples of bad results when the federal government has intervened in the business world.

The bottom line is that government should not be owning, operating, controlling, or directing private companies. These forms of intervention inevitably produce inefficiencysubsidiescronyismcorruption, and waste.

And it means that people like you and me wind up with less income and lower living standards because politicians are misallocating labor and capital.

Fight on the Right, Part II: Debating “Common-Good Capitalism”

Tue, 11/26/2019 - 12:06pm

I’m a big fan of Marco Rubio. The Florida Senator has been very good on some big issues and on some small issues. And he’s willing to fight important philosophical battles.

No politician is perfect (for instance, Rubio defends sugar subsidies), so I’ve always judged them by whether – on net – they’re on the side of more freedom or more statism.

Which is the ideal framework for today’s column.

Earlier this month, Rubio wrote a column for National Review asserting it is time for “common-good capitalism.”

Pope Leo XIII wrote that the ultimate goal for any society should be to “make men better” by providing people the opportunity to attain the dignity that comes from hard work, ownership, and raising a family. …What makes this society possible is the rights of both workers and businesses, but also their obligations to each other. …In the economy Pope Leo described, workers and businesses are not competitors for their share of limited resources, but partners in an effort that strengthens the entire nation. …This…doesn’t describe the economy we actually have today. Large corporations have become vehicles for shareholders and banks to assert claims to cash flows, rather than engines of productive innovation. Over the past 40 years, the financial sector’s share of corporate profits increased from about 10 to nearly 30 percent. The share of profits sent to shareholders increased by 300 percent. This occurred while investment of those profits back into the companies’ workers — and future — dropped 20 percent. …This is what it looks like when, as Pope Francis warned, “finance overwhelms the real economy.” …Diagnosing the problem is something we should be able to achieve… Ultimately, deciding what the government should do about it must be the core question of our politics. …What we need to do is restore common-good capitalism. …our nation does not exist to serve the interests of the market; the market exists to serve our nation.

Some of this rhetoric rubs me the wrong way (and citing an economic illiterate like Pope Francis is appalling), but what really matters is whether Rubio is proposing more power for government or less power for government.

That’s hard to say because he doesn’t offer much in terms of policy.

Though I’m not overly impressed by the handful of ideas that were mentioned.

I don’t pretend to know anything about rare-earth minerals, but it’s laughable to think the Small Business Administration is a wellspring of innovation, and there’s plenty of evidence that paid parental leave is bad policy (child tax credits aren’t bad, but there are other tax policies that are far better for families).

On the other hand, Rubio also has been making the case for “full expensing,” which is a very good policy.

Since we don’t have any additional details, I don’t know whether his new agenda is a net plus or a net negative.

Kevin Williamson of National Review, by contrast, is definitely not a fan of Rubio’s approach. Here’s some of what he wrote last week.

Senator Rubio…joins the ranks of those who propose to reinvent capitalism — “common-good capitalism,” he calls it. …Senator Rubio, working from remarks originally delivered in a speech at Catholic University, references a series of popes — Leo XIII, mostly, but also Benedict and Francis — to describe (whether the senator understands this or not) the familiar moral basis of fascist economic thinking… I write this as a fellow Catholic: God defend us from these backward, primitive-minded Catholic social reformers. …power is what is at issue. Men such as Senator Rubio desire for themselves the power to overrule markets — to limit trade and property rights, enterprise and exchange — in the service of what Senator Rubio describes as the “common good.” The problems with that are…Senator Rubio does not know what the common good is and has no way of knowing. …What we need from men in government is not the quasi-metaphysical project of reinventing capitalism in the name of the “common good.” …This is not a brief for anarchism. …We need stability and predictability from a government that secures our liberty and our property in the least obtrusive way that can be managed.

And he followed up two days later with another critical column, even equating Rubio’s agenda to Elizabeth Warren’s loony proposal.

From Senator Marco Rubio and his “common-good capitalism” to Senator Elizabeth Warren and her “accountable capitalism,” politicians right and left who want politicians to have more power over private economic decisions assume a dilemma in which something called “capitalism” must be balanced against or made subordinate to something called the “common good.” This is the great forgetful stupidity of our time. …Capitalism, meaning security in one’s own property and in the right to work and to trade, is the common good… What is contemplated by Senator Rubio and Senator Warren — along with a few batty adherents of the primitive nonidea known in Catholic circles as “integralism” and everywhere else more forthrightly as “totalitarianism” — is to invert the purpose of the U.S. government. …We’re supposed to give up our property rights so that these two and their ilk can use corporate welfare to fortify their own political interests? …The “stakeholder” thesis put forward by Rubio and Warren would strip shareholders of control of their own property and use that property in the service of interests of other parties, who are not its rightful owners. …the great prosperity currently enjoyed by North Americans and Western Europeans — and, increasingly, by the rest of the world — is a product…of capitalism… It wasn’t magic. It wasn’t the cleverness of Senator Rubio or Senator Warren. It wasn’t the big ideas of Pope Francis, to the modest extent that he has any economic ideas worth identifying as such.

Oren Cass argues that Williamson is both unfair and wrong about Rubio.

Williamson believes that Rubio wants to “be . . . the bandit, taking control of other people’s property”; “strip shareholders of control of their own property,” which “is robbery”; “redefine away the property rights of millions of Americans”; “limit . . . property rights”; and “run Apple or Facebook or Ford.” …I’ve read the Rubio speech carefully and can find none of this. …Rubio’s project is to explore the vast gray expanse between the white of liberty and the black of property theft. …This is the terrain on which many of American history’s great public deliberations have unfolded, yielding policies from Hamilton’s Report on Manufactures to the “internal improvements” of the early 1800s, the tariff debates between McKinley and Bryan, Teddy Roosevelt’s trust-busting, Franklin Roosevelt’s New Deal, Kennedy’s space race, and Reagan’s import quotas. Property theft all of it, at gunpoint no less, if I understand Williamson correctly. …Someone will have to make a value judgment as to what “goods” are in fact “good” and thus worthy of providing publicly.

Cass is right that there’s a lot of space between pure capitalism and awful statism. I’ve made the same point.

But it does worry me that he favorably cites a bunch of historical policy mistakes, such as protectionismantitrust laws, and the New Deal.

Jonah Goldberg makes the should-be-obvious point that the United States is hardly a laissez-faire paradise.

For as long as I can remember, people on the left have complained about “unfettered capitalism.” …Senator Bernie Sanders said earlier this year that “we have to talk about democratic socialism as an alternative to unfettered capitalism.” …Recently, the concern with capitalism’s unfetteredness has become bipartisan. Senators Josh Hawley and Marco Rubio have taken up the cause in a series of speeches and policy proposals. Conservative intellectuals such as Patrick Deneen and Yoram Hazony have taken dead aim at unrestrained capitalism. J. D. Vance, the author of Hillbilly Elegy, and Tucker Carlson of Fox News have suggested that economic policy is run by . . . libertarians. My response to this dismaying development is: What on earth are these people talking about? …If you think there are no restraints on the market or on economic activity, why on earth do we have the Department of Labor, HHS, HUD, FDA, EPA, OSHA, or IRS? The United States has one of the most progressive tax systems in the world (i.e., the share of taxes paid by the rich versus everyone else). If you take into account all social-welfare spending, we spend more on entitlements than plenty of rich countries. Now, if you think we don’t spend, regulate, or tax enough, fine. Make your case. If you think we should spend and tax differently, I’m right there with you. But the notion that the United States is a libertarian fantasyland is itself a fantasy.

Amen.

And this brings me to my modest contribution to this discussion.

I’ve already admitted that Rubio hasn’t provided enough details to assess whether he wants more liberty or more statism.

That being said, I’m skeptical of “common-good capitalism” in the same way I’m suspicious about “nationalist conservatism” and “reform conservatism” (and we know for a fact that “kinder-and-gentler conservatism” and “compassionate conservatism” meant more statism).

So here’s my challenge to Rubio and Cass (as well as everyone else who proposes an alternative to Reagan-style small-government conservatism). Please specifically identify how much government you want. Yes, there is a “vast gray expanse” between pure laissez-faire and pure statism, as Cass noted. But he didn’t say where in that expanse he wants America to be.

To help people respond to this challenge, here’s a chart, based on the data from Economic Freedom of the World. In that “vast gray expanse” between pure capitalism and pure statism, should policy makers try to shift America in the direction of Hong Kong? Or in the direction of Sweden, or even Greece?

The bottom line is that we need to climb the scale (i.e., have more overall economic liberty) if we want more prosperity.

That’s what will help facilitate all the things, such as good jobs and strong communities, that Senator Rubio wants for America.

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Image credit: Gage Skidmore | CC BY-SA 2.0.

Fight on the Right, Part I: Are Tax Cuts Still Economically Desirable and Politically Salient?

Mon, 11/25/2019 - 12:40pm

I want lower taxes. I want to reform taxes. And I want to abolish existing taxes and block new taxes.

But I also recognize that the biggest fiscal problem, both in America and elsewhere in the world, is that there’s too much government spending.

This creates a bit of a quandary. Given the various pressures and trade-offs in the world of fiscal policy, should supporters of limited government embrace additional tax relief?

Steve Moore opines in the Washington Times that it’s time for further tax cuts.

Every single plausible Democratic candidate for president has endorsed tax increases as centerpieces of their economic agenda. …Meanwhile, Mr. Trump and the Republicans in Congress have the 2017 tax cut to trumpet… Middle class incomes have hit an all-time high as has the stock market and employment. …Mr. Trump and the Republicans need a new tax cut plan… Mr. Trump has said he wants any new tax cut to be aimed at the middle class. …Let the liberals spend the next 11 months trying to explain why higher taxes and lower take home pay is better for families than lower taxes and MORE take home pay.  That should be fascinating to watch.

Steve specifically mentions some good ideas, such as lower marginal tax rates, a lower tax burden on capital gainsprotecting more savings from double taxation, and allowing workers to shift some of their payroll taxes to personal retirement accounts.

But are these ideas smart policy?

Robert Verbruggen of National Review is very skeptical.

…it’s shocking that anyone is even thinking about tax cuts as a smart policy right now. …Our deficit has grown by a quarter since the 2018 fiscal year to hit nearly a trillion dollars in 2019, Baby Boomers are retiring, and the president has consistently said he has no intention of cutting the old-age entitlements that drive our spending. …tax cuts at this point would just add to the debt and hasten the day of our fiscal reckoning. We have a bunch of bills piling up. Let’s start paying them. …We need some mix of spending cuts and tax hikes to survive this. …Politicians almost certainly don’t have the guts to get serious about all this until a true crisis forces them to. But at very least, they should stop making matters worse.

So who is right?

The answer may depend on the goal.

If the objective is to simply get more votes in 2020, I’m not the right person to judge the effectiveness of that approach. After all, I’m a policy wonk, not a political strategist.

So let’s focus on the narrower issue of whether further tax relief would be good policy. Here are five things to consider, starting with two points about taxes and the economy.

1. Will tax cuts improve long-run economic performance? It’s impossible to answer this question without knowing what kind of tax cut. Increasing child credits may or may not be desirable, but that kind of tax relief doesn’t boost incentives for additional economic activity. Other types of tax reforms, by contrast, can have a very positive effect on incentives for work, saving, investment, and entrepreneurship.

2. Will tax cuts improve short-run economic performance? This is actually the wrong way to analyze fiscal policy. Advocates of Keynesian economics are fixated on trying to tinker with the economy’s short-run performance. That being said, some types of tax cuts – particularly reforms designed to attract global capital – may generate quicker positive effects.

Now let’s broaden our scope and consider tax cuts as part of overall fiscal policy.

3. Should policy makers focus on deficit reduction? Excessive government borrowing is undesirable, but it’s important to understand that red ink is the symptom and government spending is the underlying disease. Treat the disease and the symptoms automatically begin to go away.

4. Will tax cuts interfere with a bipartisan deal? Some people imagine that America’s fiscal problems can be addressed only if there’s a package deal of tax increases and spending cuts (dishonestly defined). Such an outcome is theoretically possible, but entirely unrealistic. Tax increases almost surely would be a recipe for additional spending.

5. Is there a starve-the-beast constraint on spending? There’s a theory, known as “starve the beast,” that suggests lower taxes can help constrain government spending. Given that Trump has simultaneously lowered the tax burden and increased the spending burden, that’s obviously not true in the short run. But the evidence suggests a firm commitment to lower taxes can inhibit long-run spending.

Based on these five points, I side with Steve Moore. It’s always a good idea to push for lower taxes.

And I definitely disagree with Robert Verbruggen’s willingness to put tax increases on the table. A huge mistake.

That being said, the Trump Administration’s reckless approach to discretionary spending and feckless approach to entitlement spending makes any discussion of further tax relief completely pointless.

So, at the risk of sounding like a politician, I also disagree with Steve. Instead of writing a column discussing additional tax cuts, he should have used the opportunity to condemn big-spending GOPers.

P.S. For what it’s worth, more than 100 percent (yes, that’s mathematically possible) of America’s long-run fiscal problem is excessive spending.

P.P.S. If you doubt my assertion that higher taxes will lead to more spending, I invite you to come up with another explanation for what’s happened in Europe.

Elizabeth Warren’s Reprehensible Hypocrisy

Sun, 11/24/2019 - 12:39pm

If I had to identify the most economically destructive part of Senator Elizabeth Warren’s agenda, I’d have a hard time picking between her confiscatory wealth tax and her so-called Medicare-for-All scheme.

The former would dampen wages and hinder growth by penalizing saving and investment, while the latter would hasten America’s path to Greece.

By contrast, it’s easy to identify the most ethically offensive part of her platform.

Just like President Obama, she’s a hypocrite who wants to deny poor families any escape from bad government schools, even though her family has benefited from private education.

To make matters worse, she’s even lied about the topic.

Corey DeAngelis of the Reason Foundation has been on top of this issue. I recommend his article. And if you like exposing dishonest politicians, here’s a very snarky PG-13-rated tweet.

Holy shit. I have Warren on video lying about where she sent her kids to school.

Sarah Carpenter: “I read that your children went to private schools”

Warren: “No my children went to public schools” pic.twitter.com/PEHr3jNvjx

— Corey A. DeAngelis (@DeAngelisCorey) November 22, 2019

The Washington Free Beacon has some additional details.

Sarah Carpenter, a pro-school choice activist who organized a protest of Warren’s Thursday speech in Atlanta, told Warren that she had read news reports indicating the candidate had sent her kids to private school. Though Warren once favored school choice and was an advocate for charter schools, she changed her views while seeking the Democratic presidential nomination. …Warren denied the claim, telling Carpenter, “My children went to public schools.” …however, …Warren’s son, Alex Warren, attended the Kirby Hall School for at least the 1986-1987 school year… The college preparatory school is known for its “academically advanced curriculum” and offers small class sizes for students in grades K-12. …Carpenter pressed Warren to reconsider her education plan, which would place stringent regulations on both charter and private schools. She told the candidate that she simply didn’t have the resources to exercise the same choices for her children that Warren appears to have made for her son.

Moreover, private schools are a family tradition, as the Daily Caller revealed.

Sen. Elizabeth Warren, a Democrat representing Massachusetts, has a granddaughter who rubs shoulders with the children of movie stars at the trendy Harvard-Westlake School in Los Angeles, California. Tuition at Harvard-Westlake costs $35,900 each year. There’s also a $2,000 fee for new students. Harvard-Westlake offers a bevy of amazing opportunities for students including study-abroad programs in Spain, France, China, Italy and India. There’s also the Mountain School, “an independent semester program that provides high school juniors the opportunity to live and work on an organic farm in rural Vermont.”

If you want to learn more about Warren’s disingenuous posture, I also recommend this article by Chrissy Clark of the Federalist. Anyhow, what makes her hypocrisy especially odious is that she was semi-good on the issue. At least back before political ambition caused here discard her moral compass. Education Week looked at Warren’s record and confirmed she used to be sympathetic to school choice, albeit only for parents who wanted to choose among various types of government schools.

Massachusetts Sen. Elizabeth Warren’s education..plan’s contention that the nation must “stop the privatization and corruption of our public education system” and keep money from being “diverted” away from public schools through vouchers. …supporters of school choice cried foul. They pointed to what Warren and her daughter Amelia Warren Tyagi wrote in The Two-Income Trap, a book they authored in 2003, as evidence that she once backed a voucher system for parents seeking education options for their children, but has now abandoned that position for political expediency and to please teachers’ unions. …In 2003, Warren and Tyagi wrote that while…many schools might technically be public, they said, many parents effectively paid tuition for good public schools through their ability to purchase a home in their attendance zones. …So how to solve it? “A well-designed voucher program would fit the bill neatly,” the two authors stated, adding that “fully funded” vouchers would “relieve parents from the terrible choice of leaving their kids in lousy schools or bankrupting themselves to escape those schools.” …Essentially, what Warren and Tyagi wanted was an open enrollment system of public schools.

So why has her position “evolved”? She’s decided that getting to the White House is more important than the best interests of poor children. The Daily Caller reports on Warren’s kowtowing to union bosses.

Democratic Massachusetts Sen. Elizabeth Warren is pledging to crack down on school choice if elected, despite the fact that she sent her own son to an elite private school, publicly available records show. The 2020 presidential candidate’s public education plan would ban for-profit charter schools…and eliminate government incentives for opening new non-profit charter schools, even though Warren has praised charter schools in the past. …Warren has pledged to reduce education options for families, but she chose to send her son Alexander to Kirby Hall, an elite private school near Austin. Tuition for Kirby Hall’s lower and middle schools — kindergarten through eighth grade — is $14,995 for the 2019-2020 school year. A year of high school costs $17,875. …“I do not blame Alex one bit for attending a private school in 5th grade. Good for him,” said Reason Foundation director of school choice Corey DeAngelis, who first flagged Alexander’s private schooling Monday. “This is about Warren exercising school choice for her own kids while fighting hard to prevent other families from having that option.” …Warren’s crackdown on elite charter schools would leave elite private schools like Kirby Hall unscathed, while greatly eliminating charter schools as a parallel option for lower-income families.

It’s important to note that this is an issue where honest people on the left are on the right side. Here’s a recent editorial from the Washington Post.

…when it comes to education, Ms. Warren has a plan that seems aimed more at winning the support of the powerful teachers unions than in advancing policies that would help improve student learning. …Ms. Warren took a page from the union playbook in calling for a clampdown on public charter schools. In addition to banning for-profit charter schools (which make up about 15 percent of the sector), she would subject existing charters to more scrutiny and red tape and make it harder for new charters to open… Ms. Warren’s change of heart (which started in 2016, when she opposed a referendum that would have lifted caps on charter schools in Massachusetts), along with the silence of other Democrats who once championed charter schools (New Jersey Sen. Cory Booker and former vice president Joe Biden come to mind), is no mystery. The teachers unions wield outsize influence in the Democratic Party, and they revile the mostly non-unionized charter sector. …The losers in these political calculations are the children whom charters help. Charters at their best offer options to parents whose children would have been consigned to failing traditional schools. They spur reform in public school systems in such places as the District and Chicago. And high-quality charters lift the achievement of students of color, children from low-income families and English language learners. Research from Stanford University’s Center for Research on Education Outcomes found, for example, that African American students in charter schools gained an additional 59 days of learning in math and 44 days in reading per year compared with their traditional school counterparts. More than 3.2 million children already attend charter schools, and 5 million more would choose a charter school if one could open near them.

And Jonathan Chait of New York magazine is certainly not a conservative or libertarian, but he’s part of the honest left. As you might imagine, he’s also disappointed that Warren chose union bosses over poor children.

Warren has changed her views on education, which are now aligned with the interests of the tenured workforce, at the expense of educating low-income children https://t.co/xfrkbJnZNa

— Jonathan Chait (@jonathanchait) October 29, 2019

To be fair, there are plenty of other folks on the left who have sold their souls to the National Education Association and American Federation of Teachers – including, most disappointingly, the NAACP.

P.S. Some Republicans are hypocrites on the issue as well.

P.P.S. Speaking of hypocrites, President Obama’s Secretary of Education sent his kids to private schools, yet he fought to deny that opportunity to poor families. The modern version of standing in the schoolhouse door.

P.P.P.S. If you want to learn more about school choice, I recommend this column and this video.

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Image credit: DonkeyHotey | CC BY 2.0.

The OECD’s Recipe for Continuing Poverty in Africa

Sat, 11/23/2019 - 12:01pm

Free markets and limited government are a tried-and-true recipe for growth and prosperity.

Indeed, it’s the only way for a poor nation to become a rich nation. Those are the policies that helpd North America and Western Europe become rich in the 1800s and it’s how East Asia became rich in the second half of the 1900s.

By contrast, there’s no poor country that has implemented statist policies and then become rich (which is why none of my left-wing friends have ever come up with a good answer to my two-question challenge).

But that doesn’t stop some international bureaucracies from pushing bad policies on poor nations.

I wrote last year about the International Monetary Fund’s pernicious efforts to impose higher tax burdens in Africa.

Now the Organization for Economic Cooperation and Development is seeking to perpetuate poverty in the world’s poorest continent. The Paris-based bureaucracy actually is arguing that “urgent action” is need to impose higher taxes.

The average tax-to-GDP ratio for the 26 countries participating in the new edition of Revenue Statistics in Africa was…17.2% for the third consecutive year in 2017. …underlining the need for urgent action to enhance domestic revenue mobilisation in Africa. …Overall, the tax structure across participating countries has evolved over the past decade, with VAT and personal income tax (PIT) accounting for a higher proportion of revenue generation in 2017 relative to 2008, on average. However, PIT (15.4% of total tax revenues) and social security contributions (8.1% of total tax revenues) remain low in Africa. Reforms to broaden the personal tax base…and expand social insurance coverage can assist in domestic resource mobilisation efforts while contributing to inclusive growth. …Property taxes are shown to be much lower in Africa than in LAC and in the OECD but have the potential to play a key role.

Before explaining why the OECD’s analysis is wrong, here are a couple of charts for those who want some country-specific details.

Here’s a look at the aggregate tax burdens in various nations.

I’m not surprised that South Africa’snumbers are so bad.

And here’s a look at how tax burdens have changed over the past 10 years.

Kudos to Botswana.

The big question to consider, of course, is why the OECD is pushing for higher taxes in poor nations.

The real reason is that the OECD represents the interest of governments and politicians instinctively want more revenue.

The official reason, though, is that the bureaucrats want people to believe – notwithstanding reams of evidence – that higher taxes are good for prosperity. And it’s not just the OECD pushing this bizarre theory. It’s now routine for international bureaucracies to push this upside-down analysis, based on the anti-empirical notion that economies will prosper if governments can finance more spending.

P.S. Africa’s big economic challenge is not bad fiscal policy. If you peruse the data from Economic Freedom of the World, the continent has huge problems with excessive regulation and poor quality of governance. What’s tragic, though, is that the OECD doesn’t push for good reforms in those area. Instead, it wants to make fiscal policy worse.

P.P.S. To be fair, the OECD doesn’t discriminate. The bureaucrats also advocate higher taxes in other poor regions, such as Latin America and Asia.

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Image credit: wjgomes | Pixabay License.

Education Week, Part V: The Home Schooling Phenomenon

Fri, 11/22/2019 - 12:53pm

So far, our acknowledgement of National Education week has addressed the following topics.

  • Part I looked at the deteriorating performance of government schools.
  • Part II reviewed the evidence for school choice.
  • Part III explained how government subsidies make higher education more costly.
  • Part IV addressed the controversy over teacher compensation.

Today, let’s look at home schooling, which is what occurs when parents take responsibility for directing the education of their children. For general background on this issue, I recommend this article on “100 Reasons to Homeschool Your Kids” and this article on “7 Persistent Myths about Homeschoolers Debunked.”

And for those interested, here’s a map showing if and how home schooling is regulated across the United States.

I want to focus on whether home schooling produces good results.

J.D. Tuccille looks at the data in an article for Reason.

Based on such evidence, homeschooling is enjoying a boom, as growing numbers of families with diverse backgrounds, philosophies, and approaches abandon government-controlled schools in favor of taking responsibility for their own children’s education. …”From 1999 to 2012, the percentage of students who were homeschooled doubled, from an estimated 1.7 percent to 3.4 percent,” reports the National Center for Education Statistics. …In 2014, SAT “test scores of college-bound homeschool students were higher than the national average of all college-bound seniors that same year,” according to NHERI. “Mean ACT Composite scores for homeschooled students were consistently higher than those for public school students” from 2001 through 2014, according (PDF) to that testing organization, although private school students scored higher still.

As reported by USA Today, home-schooled students are better educated.

…children who are home-schooled often face classic stereotypes of being strange or different than children educated in traditional schools when they enter college. …While the most common reason for homeschooling remains to be religious or moral beliefs, the number of secular homeschooling groups in the United States is growing, as is the overall number of home-schooled children. …According to a 2007 survey, more than 1.5 million children in the United States are home-schooled, which represents about 2.9% of school-aged children. …home-schooled students generally score slightly above the national average on both the SAT and the ACT and often enter college with more college credits. Studies have also shown that on average home-schooled students have higher grade point averages in their freshman years and have higher graduation rates than their peers. …studies have begun chipping away at the conception of home-schooling as socially stunting students – research shows that on average home-schooled students routinely participate in eight social activities outside of the home, and typically consume considerably less television than do traditionally-educated students. They are also…less susceptible to peer pressure.

The good news isn’t limited to the United States.

Home-schooled kids also outperform their peers in the U.K., as reported by the Guardian.

Children taught at home significantly outperform their contemporaries who go to school, the first comparative study has found. It discovered that home-educated children of working-class parents achieved considerably higher marks in tests than the children of professional, middle-class parents and that gender differences in exam results disappear among home-taught children. …The number of home-educated children in Britain has grown from practically none 20 years ago to about 150,000 today – around 1 per cent of the school age population. By the end of the decade, the figure is expected to have tripled. …Paula Rothermel, a lecturer in learning in early childhood at the University of Durham, who spent three years conducting the survey…said: ‘This study is the first evidence we have proving that home education is a huge benefit to large numbers of children….” She found that 65 per cent of home-educated children scored more than 75 per cent in a general mathematics and literacy test, compared to a national figure of only 5.1 per cent. The average national score for school-educated pupils in the same test was 45 per cent, while that of the home-educated children was 81 per cent. …Rothermel found that the children of working-class, poorly-educated parents significantly outperformed their middle-class contemporaries. While the five- to six-year old children of professional parents scored only 55.2 per cent in the test, children far lower down the social scale scored 71 per cent.

By the way, this isn’t a new issue. Here are some passages from a column that Professor Don Boudreaux wrote more than 20 years ago.

Americans are increasingly aware that government education specialists in charge of K-12 government schools are lousy educators. …these alleged specialists are so bad that non-specialist parents outperform them at the task of education. The average home-schooled child scores in the 85th percentile on standardized achievement tests a full 35 points higher than the score registered by the average public-school student. …it isn’t the case that K-12 education bureaucrats have no specialized skills. Indeed, they are exquisitely specialized. The problem is that their specialty isn’t education; it’s political lobbying.

Given all these positive results, no wonder ever-greater numbers of parents are opting for homeschooling.

Needless to say, the education monopoly doesn’t like this form of competition.

Home schoolers constantly need to defend their rights in the United States.

At over two million young people, the number of US homeschoolers is comparable to the number of US students enrolled in public charter schools, and it is now considered a worthwhile education option for many families. …In many ways, this freedom, flexibility, and family-centered learning are terrifying to the state. Despite the fact that homeschooling has been legally recognized in all 50 states since 1993, attempts to limit homeschooling freedoms are ongoing. …efforts to tighten homeschooling regulations have been spotlighted in New Hampshire and Iowa, and homeschoolers in the United Kingdom are now dealing with mounting pressure… An underlying theme in these calls for regulating homeschoolers is that parents can’t be trusted… Considering the fact that…homeschooling students continue to outrank their schooled peers in academic performance – we should wonder who really knows best how to educate kids.

Unsurprisingly, California’s politicians are hostile to home schooling.

That’s the bad news.

The good news is that there’s effective opposition from home-schooling families.

They came by the hundreds, one newspaper said—“perhaps thousands.” Some traveled hours, others waited hours, all for the opportunity to protest one of the most outrageous homeschooling bills ever introduced: California’s AB 2756. …the bill tried to mandate fire inspections of all homeschooling families (which, not surprisingly, firefighters rejected). Then the proposal was amendedthis time to force homeschooling families to give out private information… Hours later, families got the news they’d been waiting for“no member of the committee was willing to make a motion for a vote.” The bill was dead.

Some nations have a very punitive approach that makes California seem like a libertarian paradise.

Germany, for instance, has a horrid policy of prohibiting home schooling and persecuting families.

In August 2013, more than 30 police officers and social workers stormed the home of the Wunderlich family. The authorities brutally removed the children from their parents and their home, leaving the family traumatized. The children were ultimately returned to their parents but their legal status remained unclear as Germany is one of the few European countries that penalizes families who want to homeschool. After courts in Germany ruled in favour of the government, the European Court of Human Rights agreed to take up the case in August 2016. Now, the Court has ruled against the German family, disregarding their right to private family life. …“This judgement is a huge setback but we will not give up the fight to protect the fundamental right of parents to homeschool their children in Germany and across Europe,” said Mike Donnelly, international homeschooling expert and Director of Global Outreach for the Home School Legal Defense Association which has long supported the family in their legal struggles.

One other point worth sharing is that home schooling is not merely an option for white evangelicals.

Tracy Jan of the Washington Post writes about the benefits of home schooling from a left-of-center, minority perspective.

…we recently began researching educational alternatives for the future — including the idea of home schooling. …As he entered kindergarten as a 5-year-old in August, I wondered what he would learn about the flag, about our country’s history, about the Founding Fathers. I doubted that the public schools, even in progressive D.C., would keep it real. …In addition to worrying about the Eurocentric bias in most schools’ history curriculums, I do not want our son to fall victim to teacher biases. …Home schooling, we thought, could be the answer to many of these concerns. …The concept of schooling as parents see fit — freed from the constraints of bureaucracy and school board politics — appealed to me. So did the tight bonds that I saw develop when parents become not only provider and disciplinarian, but also teacher. …in many ways, the District makes it easy: Parents simply need to submit a one-page form to the Office of the State Superintendent of Education. They also are required to keep a portfolio of instruction… The number of home-schooled students in the city has doubled to roughly 400 since the office began tracking the data in 2008. D.C. does not break the numbers down by race, but, nationally, black home schooling has been on the rise. The number of African American children who are home-schooled grew by roughly 10 percent, to more than 200,000, between 2012 and 2016… DeLise Bernard, a former policy staffer for a previous D.C. mayor, and her husband, Rahsaan, executive director of THEARC, a nonprofit in Southeast Washington that provides educational, cultural and social service programs…decided to home-school their three children because, as Rahsaan puts it, “we refuse to allow the prevailing culture to determine ours.” They wanted to exert maximum influence over their children’s character development, grounded in their Christian faith, teaching them to deeply love their fellow human beings. …Armah, an audio engineer, musician and poet…decided to home-school his twin boys… “I’m not afraid of my children being exposed to everyone else and hearing opposing ideas,” Armah says. “I’m not afraid of my children being okay in public schools. But my goal is for them to be more than okay.”

Wow, lots of encouraging and inspiring information.

And it’s worth noting that many other minority families are choosing to home school their kids (which shouldn’t be a surprise considering the wretched overall performance of government schools).

Let’s close by circling back to the issue of whether home schooling produces good results.

Based on these two charts from Homeschool World, the answer is yes.

The first chart looks at how home-schooled kids perform in college.

And the second chart looks at how they score standardized tests.

P.S. To add a bit of levity, here’s a very funny video about a home-schooled family.

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Image credit: Regstuff | CC BY-SA 3.0.

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