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Happy 229th Anniversary to the 2nd Amendment

Tue, 12/15/2020 - 12:06pm

When I write about gun control, it’s normally to make wonky points about how gun ownership reduces crime by changing the cost-benefit analysis of potential bad guys.

Today, in honor of Bill of Rights Day, let’s change the focus and celebrate the ratification of the 2nd Amendment. It was on this day, back in 1791, that the right to keep and bear arms was added to the Constitution.

To celebrate that freedom, here are some wise observations by some of America’s Founders. We’ll start with Thomas Jefferson.

Next is Samuel Adams.

Here’s what George Mason had to say.

Thomas Paine had the right perspective.

And we’ll finish up by sharing some wisdom from James Madison.

P.S. I feel quite confident that all of these quotes are genuine (not an easy task when perusing the Internet).

P.P.S. Maybe I’m being a Pollyanna, but it does seem that more folks on the left are coming to their senses on the issue of gun control.

  • In 2012, I shared some important observations from Jeffrey Goldberg, a left-leaning writer for The Atlantic. In his column, he basically admitted his side was wrong about gun control.
  • Then, in 2013, I wrote about a column by Justin Cronin in the New York Times. He self-identified as a liberal, but explained how real-world events have led him to become a supporter of private gun ownership.
  • In 2015, I shared a column by Jamelle Bouie in Slate, who addressed the left’s fixation on trying to ban so-called assault weapons and explains that such policies are meaningless.
  • More recently, in 2017, Leah Libresco wrote in the Washington Post that advocates of gun control are driven by emotion rather empirical research and evidence.
  • Last but not least, Alex Kingsbury in 2019 acknowledged the futility of gun control in a column for the New York Times.

The Benefits of Dollarization

Sun, 12/13/2020 - 12:20pm

I’m not a fan of the European Union, which has morphed from something good (a free-trade pact) to something bad (a pro-centralization, wannabe United States of Europe that exacerbates the continent’s tax-and-spend mentality).

Indeed, that’s why I’m a huge fan of Brexit. The United Kingdom is wise to escape the sinking ship.

But notwithstanding all my critiques of the E.U., I’ve never blamed or condemned the euro currency.

Why? Because many of the nations that joined that common currency did a lousy job when they had national currencies. Italy and Greece, for instance, routinely used their central banks as printing presses to help finance bloated budgets.

And that inflation exacerbated all the other economic problems that existed.

The bottom line is that many nations would benefit if they took monetary policy away from their politicians and instead adopted the currency of a nation with a better track record.

That happened in Europe when the euro was adopted since it means – for all intents and purposes – that Mediterranean nations use a currency that is controlled by Germany.

This lesson should be applied elsewhere in the world, which is why “dollarization” can be a good idea.

Professor Steve Hanke of Johns Hopkins University wrote a good description of this concept for National Review.

Before the rise in central banking (monetary nationalism), the world was dominated by unified currency areas, or blocs, the largest of which was the sterling bloc. As early as 1937, the great Austrian economist and Nobel winner Friedrich von Hayek warned that the central banking fad, if it continued, would lead to currency chaos and the spread of banking crises. …Indeed, for most emerging‐​market countries with central banks, hot money flows are frequent and so are exchange‐​rate and domestic banking crises. What to do? The obvious answer is for vulnerable emerging‐​market countries to do away with their central banks and domestic currencies, replacing them with a sound foreign currency.  Today, 32 countries are “dollarized” and rely on a foreign currency as legal tender. …Panama, which was dollarized in 1903, illustrates the important features of a dollarized economy. …The results of Panama’s dollarized money system and internationally integrated banking system have been excellent when compared with other emerging-market countries… Emerging-market countries should follow Panama’s lead and “dollarize.” Most central banks in emerging countries produce junk currencies, banking crises, instability, and economic misery. These central banks should have been mothballed and put in museums long ago.

Back in 2018, Mary Anastasia O’Grady opined in the Wall Street Journal that Argentina should dollarize.

Another currency crisis is roiling Argentina… The question that seems to be on everyone’s lips: Why is this happening again… The answer: Because Argentina still has a central bank. To fix the problem once and for all, it should dollarize. …an IMF package can’t cure what ails the peso. This is a long-term political problem that has manifested itself in repeated economic crises since the mid-20th century. The government lives beyond its means while taxes and regulations, particularly on labor, make many businesses uncompetitive. The net effect is always the same: ballooning debt and a lethargic economy followed by devaluation or default or both. …The fastest way to restore confidence would be to put an end to the misery caused by the peso and to adopt the dollar. Argentines could then get on with the business of saving and investing in their beautiful country.

The Wall Street Journal has editorialized in favor of dollarization in Argentina.

Dollarizers face resistance from the Peronist party, which relies on the inflation tax to fund its populism when revenues run low. Yet demand for dollars suggests…popular backing for adopting the greenback as the national currency. …Panama has used the dollar as legal tender since 1904, and El Salvador and Ecuador dollarized in 2000. Ecuador did it to resolve a banking crisis and El Salvador did it to bring down interest rates. El Salvador and Panama now have the lowest domestic borrowing rates in Latin America and the longest maturities. Ecuador has price stability not seen in at least a half century.

Here’s the real shocker. As reported by Reuters, Venezuela is on the verge of dollarizing.

Venezuelan President Nicolás Maduro embraced the currency of his bitter rival the United States on Sunday, calling it an “escape valve” that can help the country weather its economic crisis… The official currency, the bolivar, has depreciated more than 90% this year, while hyperinflation in the first nine months of the year clocked in at 4,680%… “I don’t see it as a bad thing … this process that they call ‘dollarization,’” Maduro said in an interview broadcast on the television channel Televen. “It can help the recovery of the country, the spread of productive forces in the country, and the economy … Thank God it exists,” the socialist leader said.

Writing for National Review, Professor Steve Hanke explains that Maduro has no choice but to move in the right direction.

Maduro, in a rare display of good judgment, is taking a necessary step toward what I have been advocating for many years: official dollarization in Venezuela. …Venezuela’s bolivar is worthless, and its annual inflation rate is the world’s highest…2,156 percent per year. Not surprisingly, Venezuelans get rid of their bolivars like hot potatoes and replace them with U.S. dollars. So, Venezuela is, to a large extent, unofficially dollarized. Official “dollarization” is a proven elixir. I know because I operated as a state counselor in Montenegro when it dumped the worthless Yugoslav dinar in 1999 and replaced it with the Deutsche mark. I also watched the successful dollarization of Ecuador in 2001… Countries that are officially dollarized produce lower, less variable inflation rates and higher, more stable economic growth rates than comparable countries with central banks that issue domestic currencies. There is a tried-and-true way to stabilize the economy…since more than 80 percent of transactions in Venezuela take place in U.S. dollars, it doesn’t seem unreasonable to think that the approval rating would now exceed 80 percent. So, it’s not surprising that Maduro has embraced the dollarization idea. After all, the public already does.

In another column for National Review, Steve Hanke and Craig Richardson cite what’s been happening in Zimbabwe.

They begin by pointing out that part of that nation has avoided problems by using the dollar.

Zimbabwe’s economy has gone through the wringer. In just 20 short years, it has witnessed two episodes of hyperinflation. And, if that wasn’t bad enough, Zimbabwe’s real GDP per capita has plunged by 21 percent over that same period. …But,…when you enter the town of Victoria Falls, it’s as if you have walked into an alternative African economic universe. Victoria Falls is an island of stability in Zimbabwe, a country that has descended into monetary and fiscal chaos. How could this be? …Victoria Falls…has long operated under very different monetary rules. …the glue that holds Victoria Falls together is the U.S. dollar. It’s the coin of the realm in Victoria Falls. Yes, Victoria Falls is officially dollarized. It only accepts U.S. dollars for payment of property taxes and keeps its books in U.S. dollars as well.

But they also note that the entire nation enjoyed the benefits of dollarization, at least until venal politicians opted out because they wanted the power to finance more spending by printing money.

…in February 2009, a unity government was formed. …In one of its first acts, the unity government scrapped the Zimbabwe dollar and officially dollarized the country. In so doing, the printing presses were shut down; the U.S. dollar became legal tender, taxes were required to be paid in dollars, and government accounts were kept in dollars. With the imposition of a hard budget constraint, the fiscal deficit disappeared, and the economy boomed. That rebound persisted during the term of the national unity government, which lasted until July 2013. Indeed, during this period, real GDP per capita surged at an average annual rate of 11.2 percent. Zimbabwe’s period of stability was short lived, however. With the collapse of the unity government and the return of Mugabe’s ZANU-PF party, government spending and fiscal deficits surged, resulting in economic instability. To finance its deficits, the government created a “New Zim dollar,” and Zimbabwe de-dollarized. …The money supply exploded, as did inflation.

This column has focused on dollarization, but there are other currencies that are serve the same role. And there are currency boards/pegs as well.

This map from Wikipedia provides a helpful summary.

P.S. Some people will point out that the dollar doesn’t have a great track record and the the Federal Reserve has behaved imprudently. I certainly won’t argue against those observations. But if I’m a Venezuelan or Argentinian, I’d still prefer the dollar over a currency controlled by my politicians.

P.P.S. It’s probably in the interests of the United States to have more nations dollarize, which is an argument against extraterritorial policies that discourage use of the dollar.

The Humor Version of Left-Wing Hypocrisy

Fri, 12/11/2020 - 12:17pm

I’ve written about how our friends on the left represent the rich, and pointed out how big parts of their agenda are designed to help people with above-average incomes.

Today, let’s have some fun with that issue.

Bernie Sanders has three houses, yet complains about the supposed excesses of capitalism. I wonder if he applies that analysis to his Mini-Me, Congresswoman Alexandria Ocasio-Cortez?

But that $3,500-plus ensemble is chump change compared to what she wore for Vanity Fair‘s obsequious cover story.

AOC on the cover of Vanity Fair. The clothes are estimated to cost $14,000. So happy that AOC is upholding the long established hypocritical tradition of Socialists who believe Socialism is for poor while they enjoy the fruits of Capitalism. pic.twitter.com/g8iTa1my1q

— Sunanda Vashisht (@sunandavashisht) October 29, 2020

Next, we have the irony of “AOC” augmenting her financial status by selling $58 “tax the rich” t-shirts.

By the way, just in case you think I’m making this up, here’s AOC’s tweet.

In other words, we have one rich person selling over-priced products to other rich people so they can virtue-signal about how awful it is that some people are rich.

The Babylon Bee has some satire on other products AOC could sell.

In an Instagram live video recorded in her posh D.C. apartment, Alexandria Ocasio-Cortez announced today she is now selling Tax the Rich Caviar for just $10,000 a can. “Show everyone how bad the rich people are with this delicious caviar,” the website reads. “All our Tax the Rich caviar is responsibly sourced, with all proceeds going to help Alexandria Ocasio-Cortez tax the rich.” …Many people are criticizing the products as tone-deaf and out of touch, but Ocasio-Cortez says she is making a list of these people for some future purpose.

Let’s close with Crazy Bernie, joined by fellow millionaires (and fellow hypocrites) Elizabeth Warren and Michael Moore.

I don’t know if they were actually discussing inequality when that photo was snapped, but all three of them definitely enjoy the blessings of capitalism while pushing policies that would prevent other people from becoming similarly wealthy

 

P.S. Let’s not forget about other left-wing millionaires, such as Joe BidenJohn KerryBill and Hillary Clinton, and the Governor of Illinois, all of whom want to atone for their wealth by raising taxes on the rest of us.

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Image credit: DonkeyHotey | CC BY-SA 2.0.

Time to Surrender on Entitlement Reform?

Thu, 12/10/2020 - 12:41pm

Back in 2015, just five years ago, it seemed like entitlement reform might happen.

Republicans in the House and Senate voted for budgets based on much-needed changes to Medicare and Medicaid. That was only a symbolic step with Obama in the White House, to be sure, but the presumption was that actual reform would be possible if Republicans controlled both the White House and Congress after the 2016 election.

The good news is that the GOP did wind up in control of Washington.

The bad news is that Donald Trump was in the White House.

Given his unfortunate views on government spending, that killed entitlement reform for the past four years.

And now Biden will be in the White House, and he wants to expand those programs, so that presumably kills reform for the next four years.

But does that change the fact that the programs should be reformed?

In a column for National Review, Fred Bauer asserts that Republicans should give up on trying to control big government.

Republicans…risk being lured toward a pivot back to 2010s-style austerity politics during the Biden administration, with a renewed focus on the federal deficit and entitlement reform. …Trying to push party-line entitlement reform has backfired on the GOP again and again in the recent past. George W. Bush’s 2005 Social Security–privatization proposal kneecapped his second term from the start. In 2012, Republicans got bogged down defending their position on Medicare reform… retreating to austerity politics could cost Republicans a chance to promote other kinds of reforms that would strengthen workers and families: fixing the medical marketplace (by reducing cartelization, revising medical licensing, etc.), passing a 21st-century infrastructure program, trying to secure a strategic industrial base, enacting smarter regulation of Big Tech that addresses market concerns and serves the public welfare, offering Americans family tax credits, and so on.

Also writing for National Review, Yuval Levin of the American Enterprise Institute explains that we have no choice but to grapple with entitlements.

The Republican Party has styled itself the party of fiscal restraint for the better part of a century… But there hasn’t been much action, or much willingness to expend political capital or make some painful deals to achieve a meaningful change in the trajectory of the government’s finances. …the willful blindness of the Trump era…means the underlying fiscal problems have grown worse… the costs of fiscal irresponsibility have more to do with constraints on future growth… Fiscal reform will need to involve changes to these programs.

Levin even suggests that entitlement reform is so important that it might be worth ceding ground in other areas.

Repub­licans should be willing to make bargains that involve leaving discretionary spending untouched, or even on a path of modest growth, if that allows for some reforms of entitlements. They should also be willing to contemplate tax increases and reforms that move the burden of federal revenue upward on the income scale, provided such changes do not unduly undermine growth.

My two cents is that Levin is right and Bauer is wrong.

To be sure, I don’t agree with everything Levin wrote (it’s theoretically possible to make a tax increase acceptable, for instance, but that won’t happen in the real world). But at least he recognizes the long-run spending outlook is so dour that entitlement reform is absolutely necessary.

Bauer, by contrast, argues that we should throw in the towel because reform is politically difficult.

I think he misreads the evidence.

Regarding Social Security, Bush got elected twice while supporting personal accounts, but the issue never went anywhere in his second term in large part because the White House never proposed a plan. Moreover, the public continued to be supportive of the idea of personal accounts, even after Bush left office.

Likewise, I think Bauer is wrong on Medicare and Medicaid. Republicans easily maintained control of the House in 2012, 2014 and 2016, notwithstanding Democratic attacks that they wanted to “push granny off a cliff.” And they still control the Senate after years of similar attacks.

But even if Bauer was right about the politics, he’s wrong about policy.

America will become another Greece if we don’t reform entitlements. That will be bad for the nation. It will be bad for our economy. It will be bad for our children and grandchildren. It will be bad for the fabric of our society.

The bottom line is that entitlement reform is the patriotic thing to do.

Debt, Deficits, and Goldilocks

Wed, 12/09/2020 - 12:39pm

At the risk of oversimplification and exaggeration, these six principles tell you everything you need to know about fiscal policy.

For purposes of today’s column, let’s focus on Principle #3, which is that “Deficits and debt are symptoms of the underlying problem” of excessive spending.

I’ve been making that point over and over and over and over and over again, but I feel motivated to address the issue again after reading two columns about government debt.

First, here’s some of what Paul Krugman wrote on the topic for his column in the New York Times.

…we’ve learned a lot about the economics of government debt over the past few years — enough so that Olivier Blanchard, the eminent former chief economist of the International Monetary Fund, is talking about a “shift in fiscal paradigm.” And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do. …It made some sense, nine or 10 years ago, to worry that the financial crisis in Greece was a harbinger of potential debt crises in other countries. …What briefly seemed like a spread of Greek-style problems across southern Europe turned out to be a temporary investor panic, quickly ended by a promise from the European Central Bank that it would lend money to cash-short governments if necessary. …We weren’t and aren’t anywhere close to that kind of crisis, and probably never will be. …But what about the longer term? …The important point for current discussion is that government borrowing costs are now very low and likely to stay low for a long time. …given what we’ve learned and where we are, it’s clear that the U.S. government should be investing heavily in the nation’s future, and that it’s OK, indeed desirable, to borrow the money we need to make those investments.

Second, Brian Riedl of the Manhattan Institute provides a different perspective in a column for today’s Washington Post, .

The election of Joe Biden to the presidency has prompted liberal calls to set aside pesky budget deficit concerns and go deeper into debt to finance large new spending initiatives… All these writers share the view that the persistence of low interest rates — currently about 1 percent for a 10-year Treasury bill — means the rules of the fiscal game have fundamentally changed. …But…deficit advocates must face two fundamental realities: First, the debt is already set to soar in the absence of any new spending. And second, these bloated debt levels will mean that any future rise in interest rates could bring a full-scale debt crisis. …Deficit doves are essentially gambling the future of the U.S. economy on the expectation that interest rates never again exceed 4 percent or 5 percent. …they are wrong to assume that state of affairs will continue. …Exceeding the projections by two or three points would mean annual interest costs consuming all projected tax revenue, leaving no taxes to finance normal federal programs. These debt spirals become nearly impossible to escape, as rising interest costs necessitate more borrowing, which in turn brings higher interest costs… Deficit doves would gamble America’s economic future on the hope that interest rates will never again top 4 or 5 percent. Are you feeling lucky?

At the risk of sounding like a muddle-headed, finger-in-the-wind moderate, I’m going to disagree with both of them (I’m like Goldilocks, who doesn’t want the porridge too hot or too cold).

I have a fundamental disagreement with Krugman because he’s overtly arguing for a bigger burden of government. Based on his past writings, he is willing to use higher taxes to finance some additional spending.

But the aforementioned column confirms that he’s in favor of a big amount of additional debt-financed spending as well.

He presumably wants to move the country into the lower-right quadrant of this 2×2 matrix, but doesn’t mind getting there by detouring through the lower-left quadrant.

My disagreement with Brian is probably more a matter of rhetoric. Based on his past writings, I think he wants to be in the upper-left quadrant, but he has an unfortunate tendency to fixate on the symptom of debt and deficits when he should be focusing on the underlying disease of excessive government spending.

My bottom line if that bigger government is a bad idea when it’s financed by debt, but it’s an equally bad idea if it’s financed by taxes.

Moreover, I worry when well-meaning people grouse about red ink because that creates an opening for not-so-well-meaning people to say, “I agree with you, so let’s raise taxes.”

P.S. In the real world of Washington (as opposed to blackboard theorizing), higher taxes lead to higher deficits and more debt.

P.P.S. Assuming they’re both sincere and guided by empiricism, people who care about red ink should support a spending cap.

P.P.P.S. Maintained for a sufficient period of time, spending restraint can even eliminate huge debt burdens.

Policing for Profit Is Morally Offensive

Tue, 12/08/2020 - 12:28pm

Since I’m an economist specializing in public finance, I get very upset about punitive tax policy and wasteful government spending.

But what really gets my blood boiling is reading about the horrific policy of civil asset forfeiture, which literally allows government to steal your property even if you haven’t been convicted of a criminal offense. Or, in many cases, even charged with any wrongdoing!

I’ve decided to revisit this issue because of a recent tweet reminding us that the people who are supposed to protect us actually take more of our property than burglars.

What’s particularly nauseating is that this policy gives law enforcement an incentive to misbehave.

Consider, for instance, these details from a 2014 story in the New York Times.

…civil asset forfeiture…allows the government, without ever securing a conviction or even filing a criminal charge, to seize property suspected of having ties to crime. The practice, expanded during the war on drugs in the 1980s, has become a staple of law enforcement agencies because it helps finance their work. …The practice…has come under fire…amid a spate of negative press reports and growing outrage among civil rights advocates, libertarians and members of Congress who have raised serious questions about the fairness of the practice, which critics say runs roughshod over due process rights. …Much of the nuts-and-bolts how-to of civil forfeiture is passed on in continuing education seminars for local prosecutors and law enforcement officials… In the sessions, officials share tips on maximizing profits, defeating the objections of so-called “innocent owners” who were not present when the suspected offense occurred, and keeping the proceeds in the hands of law enforcement…seized money has been used by the authorities, according to news reports, to pay for sports tickets, office parties, a home security system and a $90,000 sports car. …forfeitures were highly contingent on the needs of law enforcement. …Flat screen televisions…“are very popular with the police departments.”

This is why asset forfeiture is accurately described as “policing for profit.”

There was some good news on this issue last year in South Carolina, as reported by the Greenville News.

A South Carolina circuit court judge in Horry County has ruled the state’s civil asset forfeiture law unconstitutional, in violation of the U.S. Constitution’s Fourth, Fifth and 14th amendments. …Earlier this year The Greenville News published coverage from a two-year investigation into civil asset forfeiture in South Carolina. …Nearly 800 times when police seized money or property, no related criminal charge was filed. In another 800 cases, someone was charged with a crime but not convicted. …About 65% of the cases involved black men though black men make up just 13% of the state’s population. …John’s written decision found that South Carolina’s forfeiture laws violate both the federal and state constitutional protections against excessive fines by allowing the government to seize unlimited amounts of cash and property that aren’t proportionate to the alleged crime. …The judge’s ruling signals how he would approach forfeiture cases in his court in the future but doesn’t set precedent across the state.

What we really need, of course, is a ruling from the U.S. Supreme Court that civil asset forfeiture violates the Constitution (violates the presumption of innocence, excessive punishment, etc), and there are some reasons to hope that may soon happen.

It’s also good news that conservatives have joined with libertarians (such as the great people at the Institute for Justice) in opposing this egregious practice.

Here are some excerpts from a National Review article by Isaac Schorr.

The process is broken. …the government brings charges against the property itself without leveling any against the property owner. On a federal level, criminal behavior need not be proven for law enforcement to initiate civil-asset-forfeiture proceedings; mere suspicion is considered reason enough. It’s worth noting that as California’s attorney general, Democratic vice-presidential nominee Kamala Harris strongly supported handing this same power to local law enforcement — for the people, of course. …Why has civil-asset forfeiture, which flies in the face of American expectations of due process and the presumption of innocence, been allowed to persist in its current form? It’s all about the Benjamins. …This practice…provides local authorities with perverse incentives. …they can move to forfeit property under federal law and take up to 80 percent of what the property is worth,” which gives them “a direct financial stake in forfeiture encourag[ing] profiteering and not the pursuit of justice.” What police department would not take advantage of such a profitable opportunity, particularly when those profits are not subject to the same oversight as taxpayer dollars?

When cops lose access to this loot, they naturally complain.

Here are some passages from a story in the Mercury News.

While the value of property seized in California has skyrocketed, the state’s share of the booty — which has traditionally helped fund local police agencies — has plunged. That’s largely because of a new state law seeking to protect personal property, allowing local agencies to keep proceeds from asset seizures only when people are convicted of a crime, rather than simply when they’re arrested. …California…passed laws — more stringent than the federal government — restricting when state and local police could seize private property. So local agencies worked around them by partnering directly with the U.S. Department of Justice in asset-forfeiture cases, bypassing the rules in state laws. SB 443 closes that loophole for state and local agencies — but not for the federal government, which can continue to seize property without criminal convictions. …The Golden State is trying to set a good example and do the principled thing, even as the federal government goes in the opposite direction, said Gregory Chris Brown, associate professor of criminal justice at Cal State Fullerton.

In other words, fixing this problem involves all levels of government.

Local law enforcement needs to stop policing for profit.

State government needs to stop policing for profit.

And Uncle Sam needs to get out of the racket as well.

Speaking of the federal government, the Obama Administration took a tiny step in the right direction, but the Trump Administration has been very unhelpful.

And what about the incoming Biden Administration? I haven’t seen any indication, but I’m not brimming with optimism given Biden’s generic desire for Washington to have more money, as well as his unpalatable record as a booster of the failed War on Drugs.

But hopefully he’ll surprise me.

In the meantime, let’s keep our fingers crossed for further reforms at the state level.

Let’s close by recycling a great video on this issue from the folks at Reason.

P.S. It’s worth noting that the first two people in charge of asset forfeiture for the federal government have since come out against this odious practice.

P.P.S. Here’s some sauce-for-the-goose-sauce-for-the-gander humor involving asset forfeiture.

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Image credit: U.S. Immigration and Customs Enforcement | Public Domain.

Coalition Urges Congress to Dump the Price Controls

Mon, 12/07/2020 - 3:49pm

This morning, a coalition of 17 free market groups, including CF&P, released a letter urging rejection of government price controls as part of any deal to address surprise medical bills.

Here’s the key highlight:

Some members of Congress and interest groups are attempting to use government funding and COVID-19 relief legislation to enact proposals that would harm patients and healthcare workers by empowering the government to set payments between providers and health insurers (referred to as a “benchmark” rate). These proposals are not “market-based” as some have claimed. They are straightforward price controls that will inflict great damage on the healthcare system during a global pandemic.

CF&P’s Andy Quinlan also added his own commentary today:

When Americans spoke out in increasing numbers to demand a solution to surprise medical bills, they did not want Congress to inflict further pain on a struggling health industry. But that is what may be about to happen.

…The imposition of a government-derived price for contested services should continue to be rejected every time it is brought up because price controls have failed every time that they have been tried. The distortions price controls introduce lead inevitably to shortages and quality deterioration. And the cost of failure when it comes to health care is particularly high—often measured in terms of lives lost.

…Surprise medical bills are a complicated problem that requires careful balancing of numerous trade-offs. The strain added to our health care system by a global pandemic only raises the stakes.

For the best chance at finding an ideal solution to surprise medical bill, the issue should be addressed on its own instead of packaged into a “must-pass” government funding bill, where there will be no time for debate or amendments, or otherwise used as a trading piece for unrelated policies

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Image credit: Upupa4me | CC BY-SA 2.0.

Congress: Don’t Rush Through Price Controls to Address Surprise Billing

Mon, 12/07/2020 - 3:14pm

Congress may be preparing to fill the Christmas stockings of health care providers with a lump of coal. Despite the heavy toll the pandemic has taken on doctors, nurses, and hospitals, lawmakers are considering compounding 2020’s misery by imposing price controls as part of its solution to “surprise medical bills.”

Patients can get surprise bills after being taken to and treated in an emergency at hospitals outside their health plan’s networks, or when they go to hospitals that their insurers claim are in-network only to learn later that one or more specialists on their care team were not.

When Americans spoke out in increasing numbers to demand a solution to surprise medical bills, they did not want Congress to inflict further pain on a struggling health industry. But that is what may be about to happen.

As the lame duck Congress considers “must-pass” bills to keep the government funded, there is a danger it may include contentious provisions like rate-setting, a form of price control that has been repeatedly advanced by insurer-friendly legislators but so far keeps getting rejected. Unfortunately, it only must succeed once to do lasting damage to patients and health care providers.

The imposition of a government-derived price for contested services should continue to be rejected every time it is brought up because price controls have failed every time that they have been tried. The distortions price controls introduce lead inevitably to shortages and quality deterioration. And the cost of failure when it comes to health care is particularly high—often measured in terms of lives lost.

Unfortunately, the idea has heavy backing from insurers due to the inordinate leverage it would provide them in negotiations. Since the government would derive its price based on nearby median in-network rates or other similar formula, insurers would be able to game the system by strategically and unilaterally narrowing their networks, already a growing health care related problem.

Moreover, government rate-setting wouldn’t just impact hospitals. It would put even more financial pressure on independent practices that are already disappearing at alarming rate thanks to the high administrative burdens and other financial incentives toward consolidation in Obamacare. These practices have long provided the backbone of our nation’s health care system by delivering a high volume of care at lower costs.

With word that Speaker of the House Nancy Pelosi may be sending to the Senate a solution that includes price controls, six Republican Senators (Marsha Blackburn, Rand Paul, Ron Johnson, Mike Lee, and Roger Wicker) wrote a letter to Senate leadership warning that, “Any surprise medical billing legislation that includes rate setting or artificial limits that act as rate setting should not be included in any spending or legislative package before the end of the 116th Congress.”

This is good advice. Surprise medical bills are a complicated problem that requires careful balancing of numerous trade-offs. The strain added to our health care system by a global pandemic only raises the stakes.

For the best chance at finding an ideal solution to surprise medical bill, the issue should be addressed on its own instead of packaged into a “must-pass” government funding bill, where there will be no time for debate or amendments, or otherwise used as a trading piece for unrelated policies. And once Congress is prepared to do that, it should also remember that government price controls never work.

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Image credit: U.S. Air Force photo by Airman 1st Class Cameron Otte | Public Domain.

Texas vs. California, Part VI

Sun, 12/06/2020 - 12:02pm

asked a couple of years ago, “How long can California survive big government?”

Based on migration patterns, the answer is “Not much longer.” Simply stated, bad fiscal and regulatory policy have produced a long-run decline for the Golden State. So we shouldn’t be surprised that people are fleeing.

And it appears Californians like escaping to Texas, a state with no personal or corporate income tax.

I’ve written several times about the divergent performance of the two states.

So let’s make today’s column the sixth edition of Texas vs. California.

We’ll start with a column in the Wall Street Journal by Joe Lonsdale, a venture capitalist who explains why he and his company are moving to Texas.

I love California…and have spent most of my adult life in the San Francisco Bay Area, founding technology companies like Palantir and Addepar and investing in many others. In 2011 I founded 8VC, a venture-capital firm that today manages more than $3.6 billion in committed capital. …I am moving myself and dozens of my 8VC colleagues to a new land of opportunity: Texas. The harsh truth is that California has fallen into disrepair. Bad policies discourage business and innovation, stifle opportunity and make life in major cities ugly and unpleasant. …That’s not all. The California government is beholden to public-employee unions and spending is out of control. A broken environmental review process means it takes a decade of paying lawyers to build anything. Legislation makes it impossible for businesses to hire contractors without an exemption—granted by friends in the legislature, as with the music industry, or won by spending hundreds of millions on a referendum, as gig-economy companies with drivers just did. This isn’t how business is done in developed countries. …It’s tragic that California is no longer hospitable to that mission, but beautiful that Texas is. Our job as entrepreneurs and investors is to build the future, and I know of no better place to do so than Texas.

In a report for CNBC, Ari Levy and Lora Kolodny write about Elon Musk’s looming escape to the Lone Star State.

Tesla CEO Elon Musk put his California houses on the market this year while he was sparring with state lawmakers over Covid-19 restrictions. He’s simultaneously been expanding operations in Texas and cozying up to Republican Gov. Greg Abbott. Now, several of his close friends and associates say that Musk has told them he’s planning to move to the Lone Star State. …California, often condemned by the super rich for its high tax rates and stiff regulations, has seen an exodus of notable tech names… In May, as businesses across California were forced to remain closed because of the pandemic, Musk tweeted that he was moving Tesla’s headquarters and future development from California to Texas and Nevada. Getting out of California, with the highest income tax in the country, and into Texas, which has no state income tax, could save Musk billions of dollars.

Meanwhile, Hewlett Packard already has made the move, as reported by the Associated Press.

Tech giant Hewlett Packard Enterprise said it is moving its global headquarters to the Houston area from California, where the company’s roots go back to the founding of Silicon Valley decades ago. …”As we look to the future, our business needs, opportunities for cost savings, and team members’ preferences about the future of work, we are excited to relocate HPE’s headquarters to the Houston region,” CEO Antonio Neri said in a written statement… moving out of Northern California is a loss, at least symbolically, for the tech industry that electronics pioneers William Hewlett and David Packard helped start in a Palo Alto garage in 1939. A plaque outside the home where they worked on their first product, an audio oscillator, calls it the birthplace of Silicon Valley, the “world’s first high-technology region.”

To be sure, the three stories shared above are anecdotes.

But if you look at comprehensive data on both people and income, there’s a very clear pattern. Simply stated, Texas is winning and California is losing.

No, this doesn’t mean Texas is perfect. Or that California is always bad (it’s much better than Texas with regards to asset forfeiture, for instance).

But it’s hard to feel much optimism about the Golden State.

P.S. My favorite California-themed jokes (not counting the state’s elected officials) can be found hereherehere, and here. And here’s some tongue-in-cheek advice for California from the recently departed Walter Williams.

P.P.S. If you prefer comparisons of New York and Florida, click hereherehere, and here.

Bureaucrat(s) of the Year

Sat, 12/05/2020 - 12:57pm

The most-common complaint about bureaucrats is that they’re lazy.

Though it’s probably more accurate to say that bureaucracies have very little incentive to care about citizens.

After all, the rest of us are captive customers, whether we’re dealing with the federal government’s postal service, a state motor vehicles department, or a local government’s education bureaucracy.

So it would be naïve to expect the kind of attentiveness and hustle you find when dealing with many private merchants.

But one thing we can say is that bureaucrats aren’t sluggish when they have an opportunity to defraud taxpayers.

For instance, a report in the New York Times by Benjamin Weiser exposes a jaw-dropping overtime scam by transit bureaucrats in New York.

Thomas Caputo, a senior track worker for the Long Island Rail Road, put in for 15 hours of overtime for work he said he had done at the West Side Yard in Manhattan. His shift began at 4 p.m. and ended at 7 o’clock the next morning. But, the authorities say, Mr. Caputo was somewhere else that evening: at a bowling alley in Patchogue, N.Y., more than 55 miles away, where he bowled three games, averaging a score of 196. He took home an overtime payment of $1,217. …Mr. Caputo, 56, who retired in 2019 after three decades with the railroad, was listed in 2018 as the highest paid M.T.A. employee with total pay of more than $461,000, including about $344,000 in overtime. …In 2018, according to a criminal complaint unsealed on Thursday, Mr. Caputo claimed to have worked 3,864 overtime hours, on top of 1,682 regular hours. If he had worked every single day that year (which he did not), the complaint said, his claims would average about 10 hours of overtime each day for the entire year, beyond his regular 40-hour workweek.

But Mr. Caputo was just the tip of the iceberg.

Caputo was one of five current and former employees of the Metropolitan Transportation Authority charged on Thursday with participating in an overtime fraud scheme that allowed them to become among the highest-paid employees at the agency… All five defendants each earned more than the salary of the M.T.A. chairman or Gov. Andrew M. Cuomo, who oversees the agency.

Another bureaucrat was very creative in milking the system.

Michael Gundersen, 42, a maintenance-of-way supervisor at New York City Transit, was accused of reporting he had worked long shifts in March 2018, for which he was paid $2,481. But evidence showed that at the same time, he had hotel reservations in Atlantic City and tickets for concerts there on successive nights, a second complaint charged. During other periods that Mr. Gundersen was paid thousands of dollars for claimed overtime, he was on vacation in Williamsburg, Virginia, participating in a 5K footrace in New Jersey, and on a family vacation at a resort in the Hudson Valley.

By the way, you probably won’t be surprised to learn that the M.T.A. has serious financial problems (one of the few entities to get bailout money as part of pandemic relief).

The charges come at a time when the authority is confronting its worst financial crisis because of the pandemic and a stalemate over federal aid. Without a financial bailout, the agency has said that it will have to slash subway and bus service and that more than 9,000 workers could lose their jobs. …The huge overtime payments made to Mr. Caputo and other M.T.A. employees were revealed a month earlier by the Empire Center for Public Policy, a conservative think tank in Albany. Its research showed that 33 M.T.A. employees earned more than $300,000 in 2018, with almost all receiving large amounts of overtime pay. …The charges come more than a decade after the Long Island Rail Road was caught up in a scandal over disability payments. A New York Times investigation had found that nearly every career employee who retired received a disability pension.

In other words, not only are bureaucrats overpaid in general, but they also are very adept at cheating the system to pad their paychecks.

We’ll close with by explaining that this type of scam is common with government employment.

Why? For the simple reason – as illustrated by the cartoon – that politicians are bureaucrats tend to be on the same side with negotiating new contracts.

Nobody represents the interests of taxpayers.

In any event, I’m sure we can all agree that Mr. Caputo, Mr. Gunderson, and the rest of the crooks deserve membership in the Bureaucrat Hall of Fame.

P.S. Here’s a new element discovered inside the bureaucracy, and a letter to the bureaucracy from someone renewing a passport.

P.P.S. And this satirical video actually does a very good job of capturing how bureaucracy actually operates.

P.P.P.S.  Here’s a great top-10 list from Letterman about bureaucrats.

Remembering Walter Williams, R.I.P.

Fri, 12/04/2020 - 2:44pm

This week saw the passing of Walter E. Williams at age 84. A long-time friend of the Center for Freedom and Prosperity (CF&P), Dr. Williams served on our advisory board and his columns were frequently cited on our blog. Dr Williams was also a colleague and a friend of CF&P’s chairman Dan Mitchell. Here is a link to Dan’s poignant and eloquent memorial of a remarkable life, where he recounts many excerpts from Dr. Williams’s impressive biography, “Up from the Projects.” But I want to take an additional moment and share my memories of the importance of Dr. Williams in my own professional life.

Before the internet, I would eagerly await my copy of the Conservative Chronicles, a monthly compilation of great contemporary conservative writings. Dr. Williams was always the first I would read.

Much of what I use today in my professional life I learned from reading Dr. Williams. I also enjoyed when he substituted for Rush Limbaugh on Rush’s 3-hour daily radio show. His ability to distill complex issues down into simple, understandable language was his gift to us all. And I will always remember his great appearances on CNN’s Crossfire many years ago.

I was lucky to have met Dr. Williams on a few occasions, and I was honored that he agreed to be an advisor to the Center for Freedom and Prosperity.

Dr. Williams is well-known for his multiple newspaper columns, academic work, and books including “Race and Economics,” “South Africa’s War Against Capitalism,” and “The State Against Blacks.” The latter lambasted occupational licensing, among other government programs, as bringing disproportionate harm to blacks. Today, benefitting from his early influence, the issue has become not just a cause célèbre among free market advocates but is reaching a broad consensus for reform.

Teaching was also incredibly important to Dr. Williams, and as his good friend and fellow economic titan Dr. Thomas Sowell recounts, he hoped to do so until the day he died. As it happens, he conducted his final class the day before, but his intellectual contributions hopefully will continue educating Americans for generations more.

Whether it be lessons imparted to much appreciation in the classroom or through his long-running syndicated column, the economics profession, and indeed all of us, have suffered a tremendous loss. Our condolences go to his family, but all of us are truly worse off for his absence. Rest in Peace Dr. Williams. You will be sadly missed!

Walter Williams, RIP

Thu, 12/03/2020 - 2:52pm

One of America’s leading public intellectuals, Walter Williams, has passed away.

In 2014, I shared a teaser for Suffer No Fools, a video biography of his life. To commemorate the life of this great man, here’s the full video.

I first got to know Walter when I was a Ph.D. student at George Mason University in the 1980s, where my then-wife was his research assistant, but I was fortunate to become a friend later in life when I got to become a member of the “Politically Incorrect Boys Club”  with Walter, Ed Crane, and Richard Rahn. This meant lots of fun dinners featuring everything from juvenile humor to grousing about the foolishness of ever-expanding government.

I had an opportunity to reminisce about Walter for WMAL this morning, and you can hear my remarks by clicking here.

But there’s so much more to say. When I learned yesterday of Walter’s death, I wondered what sort of tribute I should write, especially since so many thoughtful essays already have been published (Don BoudreauxThomas SowellVeronique de RugyAlex TabarrokMark Perry, and Nick Gillespie, to list just a few).

Then I recalled a left-leaning friend once telling me that Walter must be some sort of “Uncle Tom” because he opposed racial preferences and the welfare state.

This statement struck me as ludicrous because Walter was a take-no-prisoners troublemaker who got in trouble as a young man (everything from arrests to a court martial) because he refused to tolerate racism.

Here are some excerpts from his must-read autobiography, Up from the Projects, staring with this passage about his time at Fort Stewart after getting drafted.

Numerous forms of troublemaking made me unpopular with many of the soldiers, including black ones. Some warned that was going to get into a lot of trouble, to which I’d flippantly reply, “What kind of trouble? Is somebody going to paint me black and send me to Georgia?”

And here’s some of what he wrote about his assignment to South Korea.

We had been told to fill out forms that contained vital personal information such as blood type, race, religion, next of kin, etc. …I had checked off “Caucasian.” A warrant officer told me I had made a mistake. …He wanted to know why I would say Caucasian when I was actually a Negro. “I’m not stupid,” I replied. “If I checked off ‘Negro,’ I’d get the worst job over here.

Here’s a passage from his time as a Ph.D. student at UCLA.

My fellow students were in awe of someone who’d challenge Professors Alchian and Hirschleifer as I did. One notable challenge occurred when Professor Alchian  said to me in class, “Williams, I bet you’re against discrimination.” I replied that no, I favored discrimination. Smiling, he asked whether that included racial discrimination. “Yes,” I said. “I practiced it a lot when I was dating.”

I should point out that while he believed in freedom of association (including the right to discriminate), Walter also noted that capitalism was the best way of punishing bad types of discrimination.

He appreciated that his professors didn’t relax their standards because of his race.

Flunking economic theory the first time around, I later realized, did have a benefit. It convinced me that UCLA professors didn’t care anything about my race. …The university’s economics professors weren’t practicing affirmative action with me. …Sometimes I sarcastically, perhaps cynically, say that I’m glad I received virtually all of my education before it became fashionable for white people like black people. …I encountered back then a more honest assessment of my strengths and weaknesses.

Walter also had the self-confidence to deal with white mistakes, such as this anecdote from when he lived in a rich suburb of D.C.

Being among the very few blacks in Chevy Chase taught me a lesson about racial relationships. Living in a corner house…prompted a Saturday chore of picking up trash that people discarded from passing cars. One Saturday, while doing that, an elderly white neighbor approached me to ask me whether, when I completed my tasks, I would be interested in working that afternoon in his yard. I told him very nicely that I would be spending that afternoon putting the final touches on my Ph.D. dissertation. The man’s face turned red with embarrassment and he apologized profusely. Some blacks might have been insulted and charged the man with racism. But I realized that the man was a Bayesian…, meaning that if a black person was spotted in Chevy Chase, picking up trash, the overwhelming probability was that he was a worker as opposed to a homeowner. Playing racial odds doesn’t make one a racist.

Many years later, he wrote a very insightful column on racial and sexual profiling.

Here’s a final excerpt showing how he enjoyed shocking people.

At the leftist reception, …the questioner asked, “How do you feel about the enslavement of your ancestors?” They were all shocked by my response… I started off by saying that slavery is one of the most despicable abuses of human rights. …But I went further to tell them that I, Walter E. Williams, have benefited enormously from the horrible suffering of my ancestors. …my wealth and personal liberties are greater having been born in the United States than in any African country.

Indeed, Walter relished the opportunity to tease his white friends and colleagues, often granting them a pardon for their skin color.

The bottom line is that Walter was a man, not a victim. He fought and achieved.

Since I’ve cited so many of his columns over the years, it would be impractical to list everything. But I definitely recommend the moral arguments he made in videos on capitalism and profits.

P.S. I also can’t resist suggesting that you watch Walter’s conversation with his Nobel Prize-winning colleague, Jim Buchanan.

Great Moments in International Bureaucracy

Wed, 12/02/2020 - 12:54pm

A couple of days ago, I criticized officials at the United Nations for advocating higher taxes and bigger government.

Fortunately, that bureaucracy is so sclerotic and inefficient that its efforts to promote statism are not very effective

But it still galls me that international bureaucrats who receive lavish, tax-free salaries spend their days trying to promote higher taxes on everyone else.

And that’s also my view of the tax-loving bureaucrats at the International Monetary Fund, as well as their counterparts at the Organization for Economic Cooperation and Development.

Perhaps the logical takeaway is that international bureaucracies are inherently problematic, pushing misguided policy on their bad days and wasting money on their good days.

Here are some additional examples, starting with with the “Eurocrats” in Brussels. The U.K.-based Telegraph reports that they’ve been naughty hypocrites.

An MEP tried to escape through a window after police raided a 25-strong sex party in Brussels’ city centre for breaking Belgium’s coronavirus rules. …Police raided the flat after neigbours complained about the noise. …Belgian media reported two EU diplomats at the sex party… Police fined the 25 people, who were mostly naked men, at the orgy £225 each before releasing them. They broke rules limiting gatherings to groups of four. …A European Parliament source said: “There is nothing wrong to participate in a sex party of any kind. However, …parliamentary immunity does not exempt you from obeying the law.” Brussels hosts the major EU institutions, including one of the European parliament’s two seats.

Next, let’s take a look at the World Health Organization.

That bureaucracy is infamous for its bungled and politicized response to the coronavirus.

So maybe it’s a bit of karma that the bureaucracy is now suffering its own outbreak. Here are some excerpts from a story in the Las Angeles Times.

The World Health Organization has recorded 65 coronavirus cases among staff members based at its headquarters, despite the agency’s public assertions that there has been no transmission at the Geneva site, an internal email obtained by the Associated Press shows. …32 were found in staff who had been working at the headquarters building, suggesting that the health agency’s strict hygiene, screening and other prevention measures were not sufficient to spare it from the pandemic. …On Nov. 2, the WHO’s technical lead for the COVID-19 response, Maria Van Kerkhove, told reporters that there had been no transmission or clusters at headquarters.

Let’s wrap up by looking at the North Atlantic Treaty Organization (NATO).

You may have assumed this bureaucracy no longer exists since the Soviet Union (thankfully) no longer exists.

But not only is NATO still there, the Washington Free-Beacon reported that it built itself an opulent Taj Mahal-style headquarters.

…the new NATO headquarters…building cost an astounding $1.23 billion, according to a budget released by the North Atlantic Treaty Organization. Architecture, design, and quality management cost the alliance $129 million alone. Audio visual installations ran $29 million, while construction ran $514 million, the document states. …The alliance bragged that the structure is also a “green building for the future.” “The environment and sustainability have played a major role in the design process. The new building’s energy consumption has been optimized through the use of geothermal and solar energy and advanced lighting systems. …the buildings short wings will have green roofs,” the document states.

Lots of moral preening about being a “green building,” but nothing about whether this monument to extravagance will make NATO more effective as a fighting force.

Then again, as Mark Steyn observed many years ago, NATO nowadays is about as useful as “keeping forts in South Dakota to defend settlers against hostile Indians.”

In a perverse way, I almost have to admire NATO.

It takes special bureaucratic skills to survive the collapse of the Soviet Union and the end of the Warsaw Pact. And it takes super-special bureaucratic skills to then get a $1.23 billion headquarters when the organization’s reason for existing disappeared nearly three decades ago.

Ronald Reagan obviously would not be surprised.

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Image credit: United States Mission Geneva | CC BY-ND 2.0.

Positive Rights vs Negative Rights

Tue, 12/01/2020 - 12:26pm

Back in 2017, I compared the welfare state vision of “positive rights” with the classical liberal vision of “negative rights.”

To elaborate, here’s a video from Learn Liberty that compares these visions.

For what it’s worth, I don’t like the terms “positive rights” and “negative rights” for the simple reason that an uninformed person understandably might conclude that “positive” is good and “negative” is bad.

Needless to say, I don’t think it’s good for people to think they have a right to other people’s money.

That’s why I prefer Professor Skoble’s use of the terms “liberties” and “entitlements,” which we also find in this slide from Professor Imran Ahmad Sajid of the University of Pakistan.

As you might expect, there are plenty of politicians who try to buy votes with an agenda of “positive rights.” Bernie Sanders, for instance, constantly argued that people have a “right” to all sorts of goodies.

But he wasn’t the first to make the case for unlimited entitlements.

Franklin Roosevelt was one of America’s worst presidents, in part because his policies deepened and lengthened the Great Depression. But also because he pushed the idea that people have the right to get all sorts of taxpayer-financed handouts.

Let’s see what some other people have to say about this topic.

In his National Review column, Kevin Williamson looks at the logical fallacy of positive rights.

Positive rights run into some pretty obvious problems if you think about them for a minute, which is why so much of our political discourse is dedicated to moralistic thundering specifically designed to prevent such thinking. Consider, in the American context, the notion that health care is a right. Declaring a right in a scarce good such as health care is intellectually void, because moral declarations about rights do not change material facts. If you have five children and three apples and then declare that every child has a right to an apple of his own, then you have five children and three apples and some meaningless posturing — i.e., nothing in reality has changed, and you have added only rhetoric instead of adding apples. In the United States, we have so many doctors, so many hospitals and clinics, so many MRI machines, etc. This imposes real constraints on the provision of health care. If my doctor works 40 hours a week, does my right to health care mean that a judge can order him to work extra hours to accommodate my rights? For free? If I have a right to health care, how can a clinic or a physician charge me for exercising my right? If doctors and hospitals have rights of their own — for example, property rights in their labor and facilities — how is it that my rights supersede those rights?

And here’s what he says about “negative rights.”

A negative right is a right to not be constrained. The right to free speech, for example, implies only non-interference. The right to freedom of the press doesn’t mean the government has to give you a press. The good of negative freedom is, in the economic sense, not rivalrous — your exercise of free speech doesn’t leave less freedom of speech out there for others to enjoy

And Larry Reed opines on the issue for the Foundation for Economic Education.

America is a nation founded on the notion of rights. …Despite the centrality of rights in American history, it’s readily apparent today that Americans are of widely different views on what a right is, how many we have, where rights come from, or why we have any in the first place. …if you need something, does that mean you have a right to it? If I require a kidney, do I have a right to one of yours? Is a right something that can or should be granted or denied by majority vote?

He helpfully provides a list of negative rights (a.k.a., liberties).

And he argues that positive rights (a.k.a., entitlements) are not real rights.

The bottom line, he explains, is that so-called positive rights impose obligations on other people.

Indeed, they can only be provided by coercion.

The first list comprises what are often called both “natural rights” and “negative rights”—natural because they derive from our essential nature as unique, sensate individuals and negative because they don’t impose obligations on others beyond a commitment to not violate them. The items in the second are called “positive rights” because others must give them to you or be coerced into doing so if they decline. …while I believe neither you nor I have a right to any of those disparate things in the second list, I hasten to add that we certainly have the right to seek them, to create them, to receive them as gifts from willing benefactors, or to trade for them. We just don’t have a right to compel anyone to give them to us or pay for them.

There’s not much I can add to this issue, given the wisdom contained in the video and in the articles by Williamson and Reed.

So I’ll close with the should-be-obvious point that a system based on entitlements only works if there are enough people pulling the wagon to support all the people riding in the wagon.

But that kind of society contains the seeds of its own downfall (think Greece or Venezuela) because it subsidizes dependency and penalizes production.

Which means, as Margaret Thatcher warned us, that positive rights can’t be provided when politicians run out of other people’s money.

Young People and Anti-Capitalism Mentality

Mon, 11/30/2020 - 12:28pm

I’ve written a couple of times about a disturbingly large share of young people support statist economic policies.

A good example can be seen in this polling data from the Pew Research Center (relevant data circled in red).

Christopher Ingraham wrote about this survey in the Washington Post.

According to the Pew Research Center, 39 percent of adults younger than 30 support the view that people whose personal fortunes exceed $1 billion “is a bad thing,” while 16 percent say billionaires are good for society. …These attitudes were likely sharpened by the Democratic presidential campaign, which at one point pitted a multibillionaire (Mike Bloomberg) against a socialist senator who says that billionaires shouldn’t exist (Bernie Sanders)…the Pew data…suggest that young Americans are concluding that billionaires have amassed their wealth “through their rigging of the tax code, through legal political bribery, through their tax avoidance in shelters like the Cayman Islands, and through lobbying for public policy that benefits them privately.” …“The billionaire class is ‘up there’ because they are standing on our backs pinning us down,” Giridharadas said. …Among respondents 50 and older, just 15 percent say billionaires are a bad thing.

This is depressing data, just like the views of America’s young people in the GIEM survey I wrote about recently.

Some of them don’t like capitalism and wealth even when they’re beneficiaries.

The New York Times has a report on “socialist-minded millennial heirs” who want to use the money they inherited to undermine free enterprise.

“The wealth millennials are inheriting came from a mammoth redistribution away from the working masses, creating a super-rich tiny minority at the expense of a fleeting American dream that is now out of reach to most people,” said Richard D. Wolff, a Marxist and an emeritus economics professor at University of Massachusetts Amherst…he has been professionally arguing against capitalism’s selling points since his teaching career began, in 1967, but that his millennial students “are more open to hearing that message than their parents ever were.” …an individual act of wealth redistribution does not, on its own, change a system. But these heirs see themselves as part of a bigger shift, and are dedicated to funding its momentum. …In short, this means using their money to support more equitable economic infrastructures. This includes investing in or donating to credit unions, worker-owned businesses, community land trusts, and nonprofits aiming to maximize quality of life through democratic decision making, instead of maximizing profits through competition.

Here are three examples from the story.

Sam Jacobs has been…trying to gain access to more of his $30 million trust fund. At 25, he…wants to give it all away. “I want to build a world where someone like me, a young person who controls tens of millions of dollars, is impossible,” he said. A socialist since college, Mr. Jacobs sees his family’s “extreme, plutocratic wealth” as both a moral and economic failure. He wants to put his inheritance toward ending capitalism.

Rachel Gelman, a 30-year-old in Oakland, Calif., who describes her politics as “anticapitalist, anti-imperialist and abolitionist.” …“My money is mostly stocks, which means it comes from underpaying and undervaluing working-class people, and that’s impossible to disconnect from the economic legacies of Indigenous genocide and slavery,” Ms. Gelman said.

Pierce Delahunt, a 32-year-old “socialist, anarchist, Marxist, communist or all of the above,” has a trust fund that was financed by their former stepfather’s outlet mall empire. (Mx. Delahunt takes nongendered pronouns.) “…I think about intersectional oppression,” Mx. Delahunt said. There’s the originally Indigenous land each mall was built on, plus the low wages paid to retail and food service workers, who are disproportionately people of color, and the carbon emissions of manufacturing and transporting the goods. With that on their mind, Mx. Delahunt gives away $10,000 a month, divided between 50 small organizations, most of which have an anticapitalist mission.

There’s certainly nothing wrong with giving away one’s inheritance.

Since I’ve (sadly) never inherited any money, I haven’t had any reason to ponder the issue, but one of my dreams would be to use a windfall of money to help finance school choice so poor kids could escape failing government schools.

Needless to say, I wouldn’t finance anti-capitalist groups, like the folks described above.

But I’m digressing. Let’s return to the issue of misguided young people.

In a column for Law & Liberty, Professor John McGinnis offers suggestions about how to rescue them from statism.

…young voters are America’s future, and even if a few years in the workforce brings some greater political wisdom, many people still stick with their youthful paradigms unless some political shock disrupts them. For those who would try to change the mind of this generation (and the following one), it is important to understand how our education, occupational licensing, and entitlement policies are driving them to socialist views which break sharply with America’s political traditions of liberty. …It is not surprising that this structure prompts some young people to demand that the government pony up money for them… More generally, why not vote for radicals in the hope of shaking up the system on the assumption that it can’t get worse for them than it is now? …The classical liberal alternative is clear: reduce the transfers from the young to the old and eliminate those unnecessary barriers to career entry that privilege incumbents.

Here are the reforms that Prof. McGinnis believes would make young people more favorable to liberty.

Reform of the universities thus must be a priority. But it is very difficult. …they are getting worse by the decade if not by the year. Alternative institutions are probably the only answer. …Online education will allow for new challengers to rise, ones who are not as likely to be wedded to political correctness as the incumbents.

…our entitlement structure is currently designed to take from the younger generation and give to the elderly. Social security is a pay-as-you-go system. And given that social security is not actuarially sound, most of the current elderly will get more than they pay in. It is the payment of the young that makes up the difference. Medicare too is a government program from which the elderly benefit at the expense of the young.

The costs of occupational licensing also fall disproportionately on the young. Of course, that burden occurs in part because their elders already have their licenses. But more importantly, the barriers to entering many occupations have grown more expensive over the years.

Since I’ve written about the failures of higher education, the need for entitlement reform, and the downsides of licensing, I obviously have no reason to disagree with any of his suggestions.

But there’s something else that’s needed, especially when you contemplate the Pew data cited at the start of today’s column.

Supporters of free enterprise need to go after cronyism. And not just because the economy will perform better, but also because it’s morally offensive for people to line their pockets thanks to government coercion.

Indeed, half of the main message to young people (and everyone else) should be that honestly earned wealth is great, because that means (as Walter Williams sagely observed) someone accumulated lots of money by serving the needs of others.

And the other half of the main message is that it’s bad to have rich people who obtain loot with subsidies, handouts, protectionism, and other forms of cronyism.

P.S. Before giving up and wondering if young people are simply too stupid to vote, watch this video showing that young people reject socialism when they understand the implications.

Should the United Nations Decide that Low Taxes Are a Violation of Human Rights?

Sat, 11/28/2020 - 12:17pm

Professor James Buchanan won a Nobel Prize for developing the theory of “public choice,” which looks at how politicians, bureaucrats, and voters seek to maximize their self interest, generally in ways that lead to an ever-expanding burden of government.

Some people wonder why Buchanan’s analysis was prize-worthy when the unseemly nature of government has long been understood (as illustrated by the quote from Thomas Jefferson).

But it was a revelation for most academic economists, who – when they did policy analysis – naively assumed that people in government were motivated only by a desire to improve society.

I’m starting today’s column with this bit of background because I want to remind people that government has a natural tendency to expand. Often in an economically suicidal fashion, as we see from nations such as Greece and Venezuela.

Indeed, that’s the reason for my theorem on “Goldfish Government.”

But awful policy doesn’t have to be the outcome. The final part of the theorem says that bad results can be averted if there’s some sort of external constraint on rapacious government.

In the United States, our Founders gave us a Constitution that was explicitly designed to constrain the power of government. And it worked, at least up until FDR’s Supreme Court decided to put ideology above the law.

Tax competition” is another constraint on government greed. This is the premise that the “stationary bandit” of government won’t tax and spend as much when politicians know that people and businesses can move across borders to escape bad policy.

And tax competition works. In recent decades, politicians have faced pressure to lower tax rates. Even for groups that they normally target, such as corporations and upper-income taxpayers.

Needless to say, politicians don’t like this development. Interest groups don’t like this development. International bureaucracies don’t like this development. And folks on the left don’t like this development.

Indeed, the non-profit groups on the left are vociferous opponents of tax competition, precisely because they understand it is a threat to their agenda.

I’ve previously written about the dodgy work of Oxfam. Today, let’s look at the agenda of Christian Aid (they obviously believe in Socialist Jesus rather than Libertarian Jesus).

Sorley McCaughey is with the Irish branch of that organization and he argues in the Irish Times that low taxes are a violation of human rights, as defined by the United Nations.

I’m not joking. Here are some excerpts from his column.

…the United Nations General Assembly adopted the Convention on the Rights of the Child. …Ratified by Ireland and more than 120 countries, signatory states are bound by the obligations within the treaty and compliance is assessed by the UN Committee on the Rights of the Child every five years. In a landmark decision earlier this month, the committee confirmed that their current review of Ireland will, for the first time, consider the country’s role in facilitating tax avoidance and whether it undermines the ability of developing countries to raise revenue and guarantee the rights of children. …The decision…has the potential to change the way tax competition between countries is assessed. …Justice demands a reorientation of tax policy that puts principles of international cooperation, equality and human rights – including those of children – at its core.

As you might expect, there are plenty of people in the United Nations who also are pushing an anti-tax competition agenda.

And it’s been going on for a while. Here are some excerpts from a 2016 story.

A United Nations human rights expert has urged the…UN secretary-general to make the elimination of tax havens a priority to ensure that corporations, billionaires and ‘kleptocrats’ pay their fair share of taxes. …American law professor Alfred de Zayas also urged Antonio Guterres…to call a world conference on phasing out the offshore havens. …De Zayas urged the General Assembly to draft a convention to outlaw tax havens worldwide.

And here are passages from another report that year.

Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights, and two members of the Human Rights Council Advisory Committee, Obiora Okafor and Jean Ziegler, stressed the importance of establishing a UN body designated specifically to target and eliminate tax heaven secrecy. …countries lose hundreds of billions of dollars every year…funds that could and should be used to fund public services such as health care, schools, housing, social security… “States must set uniform minimum taxation floors, to prevent individuals and business entities from shopping for the lowest possible tax rates,” experts stated.

The following year, in 2017, I took part in a meeting of the U.N.’s so-called Committee of Experts on International Cooperation in Tax Matters, as well as the Special Meeting of ECOSOC on International Cooperation in Tax Matters.

At the risk of understatement, it was an eye-opening experience as participant after participant discussed ways of extracting more money from the productive sector of the economy (very similar to what I observed when participating in conferences at the U.N. in 2012 and 2019).

And I’ve written over the years about various U.N. proposals for global taxes on financial transactionsenergywealthtobaccoair travel, and the Internet.

All of these proposals are based on the flawed theory that bigger government can promote development. And all of the proposals also are hypocritical since U.N. bureaucrats, like their counterparts at other international bureaucracies, are exempt from tax.

Maybe the moral of the story is that we should tighten belts at the United Nations rather than allow the bureaucrats to push policies that tighten the belts of people who actually pay taxes?

P.S. James Buchanan was the target of a despicable smear by a taxpayer-funded academic hack.

P.P.S. If it’s even possible, the work the United Nations does on poverty is even worse than its work on taxation.

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Image credit: Basil D Soufi | CC BY-SA 3.0.

Will Mississippi Join the No-Income-Tax Club?

Fri, 11/27/2020 - 12:43pm

When examining state public policy, big jurisdictions such as CaliforniaTexasNew York, and Florida get a lot of attention.

But what about Mississippi? It has mediocre scores for overall economic policy.

And the Magnolia State also isn’t winning any prizes when looking specifically at tax policy.

But the state may be about to take a big step in the right direction.

The governor wants to get rid of his state’s progressive income tax and instead join the no-income-tax club.

The Associated Press reports on the proposal.

Mississippi Gov. Tate Reeves said Monday that the state should phase out its individual income tax by 2030 to attract new residents and businesses that could boost economic growth. …Mississippi’s population has grown slowly this year after declining in recent years. Florida, Texas and Tennessee, which do not have an individual income tax, have grown rapidly. “Let’s eliminate the income tax, which is one huge speed bump to long-term economic growth and recovery for Mississippi,” Reeves said.

Analyzing the proposal for the Tax Foundation, Katherine Loughead points out a big logistical challenge.

The income tax currently generates a big chunk of revenues for the state’s budget, so abolition of that levy will require serious spending restraint and/or offsetting tax increases.

Mississippi Governor Tate Reeves (R), in his budget proposal for fiscal year (FY) 2022, has announced his goal of phasing out the state’s income tax by 2030. Mississippi’s income tax currently has three marginal rates of 3 percent, 4 percent, and 5 percent. …Under legislation adopted in 2016, the first marginal rate is already being phased out. …Gov. Reeves’ proposal seeks to build upon the ongoing phaseout of the 3 percent rate by also eliminating the 4 percent rate within five years. Then, subject to revenue availability, the governor hopes to eliminate the 5 percent rate so that, by 2030, Mississippi will join the ranks of the states with no income tax. …Mississippi’s income tax generated nearly 43 percent of the state’s total tax collections in FY 2019, with nearly $1.9 billion coming from the individual income tax and $644 million from the corporate income tax. The state will need to see continued revenue gains over the next decade to phase out the income tax without increasing other taxes. …Even if full income tax repeal is out of reach, however, the state could certainly reduce tax liability, particularly for lower-income residents, by continuing to increase the amount of income that is exempt from taxation, eliminating the first two brackets so a single-rate tax remains, and then reducing the rate below 5 percent.

A flat tax would be a step in the right direction, but state lawmakers should be aggressive and push for total elimination of the income tax. Which probably means the state will need a TABOR-style spending cap to make the numbers work.

The bottom line is that Mississippi is a relatively poor state by American standards (roughly akin to the United Kingdom or New Zealand, for those who prefer international comparisons) and needs bold reforms to catch up to the rest of the nation.

Abolishing the income tax definitely would qualify as a big move. Revisiting the chart from above, which I created in 2018, abolishing the income tax would vault the state to the top quintile of tax policy.

P.S. I also modified the chart to show that Arizona will drop from the middle quintile to the bottom quintile because voters foolishly voted for a class-warfare tax hike earlier this month.

P.P.S. The last southern governor to propose total repeal of the income tax didn’t make any progress.

P.P.P.S. Even though the people of Mississippi are the least likely of any state to read my columns, I hope they soon enjoy the benefits of living in a no-income-tax jurisdiction.

P.P.P.P.S. There’s also a proposal to get rid of the Nebraska state income tax.

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Image credit: pxhere | CC0 Public Domain.

Happy Thanksgiving from America’s Hypocritical Politicians

Thu, 11/26/2020 - 12:26pm

I’m going to break tradition.

Normally, I use Thanksgiving as an opportunity to explain how the Pilgrims almost starved to death because they initially used a socialist system for farming, but then began to prosper once the colony shifted to a property rights-based approach (the same thing happened at the Jamestown settlement in Virginia as well).

If you want to learn about the failure of socialism in the early 1600s, watch this video from Reason, or these videos from John Stossel and Prager University.

Today’s topic, though, is about Thanksgiving hypocrisy by the political elite.

In his column for the Wall Street Journal, Jason Riley excoriates do-as-I-say-not-as-I-do politicians.

…politicians have always believed that they deserve special treatment, that the ordinary rules don’t apply to them. They have pushed for limits on school choice for the poor while sending their own children to private schools. They have advocated for gun control and defunding the police while being protected by armed security guards. …there could be as many as 50 million Thanksgiving travelers this year, only 10% less than in 2019. This is a form of mass civil disobedience like nothing the country has seen since the 1960s. Some of it is born of Covid fatigue, to be sure. But the endless parade of politicians flouting their own rules surely has also played a role. It began shortly after the spring lockdowns and if anything has become more commonplace, even farcical. …There’s a widespread assumption among liberal elites that the rest of us are incapable of calculating risks and taking necessary precautions to ride out the pandemic, and it’s insulting. …The decision of so many millions of Americans to buck public-health warnings, trust their common sense, and spend Thanksgiving with loved ones is a welcome indication that people may be tiring of all this condescension.

Meanwhile, NBC News reports on the two-faced actions of Mayor Michael Hancock of Denver.

Denver’s mayor is explaining himself and offering an apology after he traveled to Mississippi for Thanksgiving, though he had urged others to stay home if possible because of the coronavirus pandemic. …The mayor’s trip comes as officials in Colorado have warned about a steep increase in Covid-19 cases that threatens to stress the hospital system, and after warnings from the governor and others to keep Thanksgiving gatherings small and safe. …The station reported he traveled to Houston for the Mississippi trip, and that his account tweeted the guidance to stay home about 30 minutes before his flight.

Last but not least, Bill McGurn of the Wall Street Journal is not impressed with the hypocritical behavior of politicians, but he focuses on the big-picture lesson to be learned.

Californians live under some of the tightest Covid-19 restrictions in the nation. So when Gov. Gavin Newsom was recently caught without a mask at a crowded table for 12 at a posh Napa Valley eatery, he instantly became the poster boy for the “Do as I Say, Not as I Do” crowd. …No doubt Thanksgiving will bring fresh examples. While many citizens dutifully inform grandma there’s no room for her at the table because of new Covid-19 restrictions, someone inevitably will be caught enjoying the holiday with dozens of friends and second cousins… And it’s easy to mock these pols for their blatant hypocrisy when they are caught. But maybe the more important lesson to be learned here is that hypocrisy is guaranteed when we impose one-size-fits-all mandates that are rigid and unworkable.

Amen.

wrote back in May about the two-faced behavior of politicians in the coronavirus era, and nothing has changed in the past six months.

They genuinely think that they should be exempt from all the nonsensical policies that they impose on everyone else.

They’re hypocrites on coronavirus. They’re hypocrites on education. They’re hypocrites on taxes. And they’re hypocrites on global warming.

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Image credit: mohamedmatar | Pixabay License.

A Genuine Quality-of-Life Achievement from the Trump Administration

Wed, 11/25/2020 - 12:39pm

Last year, I shared this video from the Competitive Enterprise Institute to help explain how government bureaucrats are making it harder for Americans to clean their plates, bowls, and silverware.

Washington’s dishwasher mandate is just one example of how red tape diminishes the quality of life.

Call me crazy, but I don’t like spending extra time in the shower, flushing more than once, and risking self-immolation when I refill my lawnmower.

But there is a bit of good news. The Trump Administration wants to make it easier for us to clean up after dinner.

The Wall Street Journal’s editorial is a good summary of the issue.

For years American homes have been stuck with dishwashers that take forever and still don’t get the job done. A new Department of Energy rule…will help change that. …Regulations on energy and water usage—tightened in 2013 by the Obama Administration—mean that dishwashers now take at least two hours to complete a full wash cycle. Dishes may still emerge with pieces of last night’s lasagna baked on. …CEI petitioned the Energy Department to allow dishwashers that would reduce the average cycle to one hour from two, while also giving better performance. CEI argued that if the aim of the regulation was to conserve water and energy, it’s unlikely they achieved their purpose. People responded to poor dishwasher performance by pre-rinsing each dish before putting it through their washers, wasting more water… The revised DOE rule is…an example of how common-sense deregulation can deliver real benefits for the public.

And Sam Rutzick of Reason explains this latest development in the battle for clean dishes.

Trump’s Department of Energy finalized a rule establishing a new product class for residential dishwashers that will have a normal cycle time of up to one hour and that can use five gallons of water per cycle. Those rules effectively roll back an Obama-era rule limiting standard dishwashers to use no more than 3.1 gallons of water per cycle. That limit forced dishwasher companies to adjust their products’ cycle lengths. And the supposedly more efficient but less useful dishwashers have been a punchline…the average dishwasher cycle time has jumped from the one-hour cycle that was common a decade ago to more than two hours today. The tighter rules didn’t lead to energy savings for customers. …they actually increased water consumption by 63 billion gallons, as households would have to run their dishwashers multiple cycles, or pre-rinse their dishes by hand, in order to get dishes actually clean.

But Rutzick’s column contains a very important caveat.

Joe Biden may reverse this important bit of deregulation.

Unfortunately, the new rules may not last. While the incoming administration has been vague about which deregulatory efforts they intend to undo, they have spoken in favor of tightening environmental regulations—and the new dishwasher rules could be a casualty. If so, that’ll be bad news for consumers.

For what it’s worth, while he embraced some very bad policies during the campaign, I don’t think Joe Biden is a Bernie Sanders-style nutjob.

But I fear environmentalism is an area where he will push policy significantly to the left.

So I’m not overly optimistic that we’ll have better dishwashers in the future.

The only good news is that Americans, every time they do the dishes, will have an irritating reminder that government is the problem rather than the solution.

P.S. Yes, I realize better dishwashers are not as important as better tax policy (or as important as worse trade policy), but I don’t think politicians should be undermining our quality of life.

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Image credit: Bart Everson | CC BY 2.0.

Big Government Enables Big Corruption

Tue, 11/24/2020 - 12:16pm

Most readers care about economic developments and economic comparisons involving the United States.

Some readers also care about what’s happening in other major nations, such as ChinaGermanyItalyFranceJapan, and the United Kingdom.

Relatively few readers, by contrast, care about economic developments in nations with comparatively small economic footprints, such as Peru.

That’s understandable, but I want to cite Mary Anastasia O’Grady’s recent column in the Wall Street Journal because she focuses attention on the very important – and very unsavory – relationship between big government and corruption.

Her column is about political turmoil in Peru, but what she writes applies everywhere in the world.

…it’s hard to see how an electorate that so often votes for populism at the polls can extricate itself from the grasp of crooked politicians. The hard left’s solution, which is to rewrite the 1993 constitution and give the state a larger role in the economy, would make things worse. …Peruvians are frustrated. They have been told that by voting they can secure an honest government. But elected officials repeatedly turn out to be self-interested and corrupt. …Yet as fast as they throw the bums out and bring in new ones, more scandals arise. At the core of this dysfunction is a state with vast powers to redistribute wealth. …Even voters who say they want less corruption may find that change conflicts with their self-interest. The siren song of populism draws them to politicians who can hand out plenty of government jobs and other goodies in a world of weak institutional checks.

Amen.

I made the same point, for instance, in this 2009 video from the Center for Freedom and Prosperity. And I was focusing on the United States.

Simply stated, when politicians have more power over the allocation of a nation’s resources, the greater their incentive to abuse that power.

To be sure, it’s not a linear relationship.

A country’s political culture also matters. Some nation’s have developed very low levels of tolerance for corruption, so there’s not a strong relationship between corruption and the size of government.

As you can see from Transparency International’s Corruption Perceptions Index, the Nordic nations are among the countries that are especially good in this regard.

But nation’s from the developing world, including the perennial bottom-dweller Venezuela, tend to get poor scores.

The moral of the story is that it’s especially important to limit government (and therefore limit opportunities for corruption) in countries that don’t have high scores.

I’m including this data because Peru, unfortunately, is in the bottom half of nations.

Not a terrible score when compared to Venezuela, but weak compared to Chile.

That being said, I want to close with a dose of optimism about Peru.

Today’s final visual is a chart showing how economic freedom in the country dramatically increased starting in the mid-1980s when the “Washington Consensus” was ascendant. And, just as Prof. William Easterly found in his research, this eventually kick-started much better economic performance.

P.S. It is worrisome that Peruvian economic policy stopped improving beginning about 2005. And based on Ms. O’Grady’s column, it seems unlikely that policy will get better in the near future.

P.P.S. Chile remains (at least for now) the big economic success story of Latin America, though Panama deserves a bit of attention as well.

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

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