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Compared to the United States, Does Europe Have a “Better” Distribution of Income?

Center for Freedom and Prosperity (CF&P) - Tue, 01/12/2021 - 12:17pm

As illustrated by my recent three-part series (herehere, and here), I care about helping the poor rather then hurting the rich.

More broadly, I want a bigger economic pie so that everyone can have a larger slice. And I don’t particularly care if some people get richer faster than other people get richer (assuming they are earning money honestly and not relying on government favoritism).

In other words, it doesn’t bother me if someone like Bill Gates is getting richer faster than I’m getting richer, so long as there’s an economic environment that gives both of us a chance to prosper based on how much value we are providing to others.

But some folks are fixated on how the pie is sliced.

For instance, the Peterson Institute for International Economics recently tweeted that there is too much inequality in the United States (compared to Europe) and that something should be done to “fix” this supposed problem.

This type of data irks me because some people will assume that rising levels of income for the rich somehow imply falling levels of income for everyone else.

That may be true in nations with despotic socialist governments, such as CubaNorth Korea, and Venezuela, where the ruling class lines it pockets at the expense of the general population.

However, let’s focus on the United States and Europe, since the Peterson Institute wants readers to think that politicians in Washington should “fix” the distribution of income in America so that we resemble our friends on the other side of the Atlantic Ocean.

But first we must answer two very important questions: Are the non-rich in the United States suffering because rich people are doing well? And are the non-rich in Europe better off than the non-rich in America?

Earlier today, I answered those questions with three tweets.

I started with this tweet pointing out that average living standards are far higher in the United States than they are in Europe.

I then shared this tweet pointing out that the bottom 10 percent of people in America would be middle class compared to their counterparts in Europe.

I then concluded with this tweet showing that the bottom 20 percent of people in the United States have incomes higher than the average income in most European countries.

The moral of this story is that ordinary people are better off in America.

And that’s almost certainly because there’s generally more economic freedom in the United States – including lower tax burdens and less enervating redistribution.

P.S. While the Peterson Institute is very misguided on the tradeoff between inequality and growth, it is quite good on trade-related issues (see herehereherehereherehere, and here).

Cartoon of the Day: Shark bait

Liberty Unyielding - Tue, 01/12/2021 - 11:22am

Blood in the water

The post Cartoon of the Day: Shark bait appeared first on Liberty Unyielding.

Virginia Governor leaves GOP senate seat vacant to ensure unchecked progressive dominance

Liberty Unyielding - Tue, 01/12/2021 - 11:06am

Virginia’s state senate had a narrow Democratic majority, with 21 Democrats and 19 Republicans. Then, on January 1, Republican State Senator Ben Chafin died. Virginia’s Democratic Governor has deliberately delayed filling the seat, so that progressive bills will be able to pass the state legislature more easily, and without being moderated by the amendment process. […]

The post Virginia Governor leaves GOP senate seat vacant to ensure unchecked progressive dominance appeared first on Liberty Unyielding.

Pelosi says Captiol rioters chose their ‘whiteness’ over democracy

Liberty Unyielding - Tue, 01/12/2021 - 10:19am

What's unacceptable is his and his party's refusal to acknowledge the reason the country is so badly broken right now. And that is because of their stubborn insistence that all Americans share their hopelessly misguided narrative that the nation is fundamentally racist.

The post Pelosi says Captiol rioters chose their ‘whiteness’ over democracy appeared first on Liberty Unyielding.

Biden Promises Race and Gender-based Prioritization for Economic Relief

Center for Freedom and Prosperity (CF&P) - Mon, 01/11/2021 - 2:26pm

Despite invoking the need for unity, the Biden transition team chose to put out the following divisive statement describing how the next administration will approach economic recovery:

“Our priority will be Black, Latino, Asian, and Native American owned small businesses, women-owned businesses, and finally having equal access to resources needed to reopen and rebuild.” — President-elect Biden pic.twitter.com/pIyDuhf5pH

— Biden-Harris Presidential Transition (@Transition46) January 10, 2021

As businesses continue to suffer under government lockdown orders and other restrictions, it is appalling to see any suggestion that efforts to relieve this pain will involve consideration of race, gender, and other irrelevant demographic characteristics.

Biden does not appear to be a true-believer of the woke ideology gaining ground on the left, but the fact that he would make such a statement and that his PR flaks would choose to highlight its most divisive quote suggests we can expect to see more corrosive racial and gender politics under a Biden administration.

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Image credit: Marc Nozell | CC BY 2.0.

Report: Dems working to classify MAGA rallies as ‘domestic terrorist activity’

Liberty Unyielding - Mon, 01/11/2021 - 2:24pm

A broader interpretation of the plan to reclassify MAGA rallies is that Democrats are now working to criminalize dissent and political opposition. 

The post Report: Dems working to classify MAGA rallies as ‘domestic terrorist activity’ appeared first on Liberty Unyielding.

Capitol riot reveals wasted federal spending

Liberty Unyielding - Mon, 01/11/2021 - 12:59pm

The pro-Trump riot last Wednesday at the Capitol reflected poorly on the leadership of the Capitol Police, which failed to prevent it. It also revealed how much federal security spending has been wasted. As the Cato Institute’s Chris Edwards notes, The attack on Capitol Hill yesterday was disgraceful. It was also remarkable. After all the […]

The post Capitol riot reveals wasted federal spending appeared first on Liberty Unyielding.

The Globe’s Looming Fiscal Crisis

Center for Freedom and Prosperity (CF&P) - Mon, 01/11/2021 - 12:36pm

I have repeatedly warned that nations get in fiscal trouble when government is too big and growing too fast.

In such countries, it’s very common to find high levels of government debt as one of the symptoms of excessive spending.

This can create the conditions for a fiscal crisis, particularly during an economic downturn. Simply stated, investors (the people who buy government bonds) begin to worry that governments may renege on their promises (i.e., default).

There’s a must-read story on this issue in today’s Washington Post suggesting that the economic fallout from coronavirus has created conditions for new fiscal crises in nations across the globe.

Authored by Alexander Villegas, Anthony Faiola and Lesley Wroughton, the report explains that the downturn has produced record levels of debt.

Around the globe, the pandemic is racking up a mind-blowing bill: trillions of dollars in lost tax revenue, ramped-up spending and new borrowing set to burden the next generation with record levels of debt. In the direst cases — low- and middle-income countries, mostly in Africa and Latin America, that are already saddled with backbreaking debt — covering the rising costs is transforming into a high-stakes test of national solvency. …By the end of 2020, total government debt worldwide was projected to soar by $9 trillion and top 103 percent of global GDP, according to the Institute of International Finance — a historic jump of more than 10 percentage points in just one year. Countries have maxed out their figurative credit cards.

Keep in mind, by the way, that spending burdens were climbing in most nations, leading to more red ink, even before the pandemic.

That was true in developed nations (the U.S.EuropeJapan), but also in developing nations.

And, the story explains that developed nations are far more vulnerable to fiscal crisis.

The pandemic is hurtling heavily leveraged nations into an economic danger zone, threatening to bankrupt the worst-affected. Costa Rica, a country known for zip-lining tourists and American retirees, is scrambling to stave off a full-blown debt crisis, imposing emergency cuts and proposing harsher measures that touched off rare violent protests last fall. …Angola, in contrast, effectively shut out of global markets, is racing to strike a deal with the Chinese, but even that might not be enough to prevent a painful debt crisis. Sri Lanka, locked in recession, needs to make $4 billion in debt payments this year with only $6 billion in the bank. Brazil’s debt, worsened by a yawning budget deficit, has surged to a crippling 95 percent of GDP — raising alarm over the medium-term ability of the Latin American giant to stay afloat. …Zambia, once a shining example of Africa’s economic renaissance, is now the Ghost of Crises Future for debt-burdened countries slammed by the pandemic. The sub-Saharan nation fell into default in November.

Here’s a visual from the report.

To simplify, it’s good to be in a lighter-colored nation and bad to be in a darker-colored country. At least in terms of national debt burdens.

All this grim data understandably raises the very important question of what choices governments should now make.

Sadly, some self-styled experts are actually urging even more spending, mostly because of a dogmatic belief in the supposed elixir of Keynesian economics. In other words, they want governments to dig a deeper hole.

Analysts argue that the need for stimulus to keep economies running during this historically challenging period still outweighs the need to balance budgets. …the IMF…is telling countries that now is not the time to scrimp, lest they jeopardize still-fragile economic recoveries.

Politicians will want to follow that advice because it tells them that their vice (buying votes with other people’s money) is a virtue (more spending magically can boost growth).

In the real world, there are two big lessons we should learn.

  • First, it’s profoundly reckless to further increase tax and spending burdens when nations are already in trouble because of previous bouts of fiscal profligacy.
  • Second, countries should focus on spending restraint in both the short run and long run, ideally by enacting caps to limit annual spending increases.

For what it’s worth, the U.S. would be in great shape today if, back in 2000, lawmakers had adopted a Swiss-style spending cap.

P.S. One reason that spending caps work so well is that there’s built-in flexibility when dealing with economic volatility.

P.P.S. Financing government with the printing press won’t work any better than financing it with taxes and debt.

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Image credit: germantown | Pixabay License.

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