Where Are the European Spending Cuts?
Average Government spending in the sample in the pre-crisis period run at 44.36% of GDP and in 2012 this number was 48.05% of GDP. In other words: it went up, not down.
…All in, there is no ‘savage austerity’ in spending levels or as % of GDP.
Michigan Cut Per-Pupil Spending, But Handed Out Millions to Hollywood for "Oz"
Ironically, the state film subsidy nearly matched the $39.8 million salary Walt Disney Chief Executive Robert Iger was paid in 2012.
“Oz” was filmed in Pontiac at Michigan Motion Picture Studios, formerly known as Raleigh Studios. The movie officially opens on Friday.
While Disney went on to post a record profit, Raleigh Studios struggled. It has missed three payments to investors, which had to be paid for by the State of Michigan Retirement Systems. The state has paid $1.68 million in the last year and is on the hook for $18 million in bonds if the Michigan Motion Pictures Studios is unable to make its payments to bondholders.
The Hoovernomics Myth Lives On
Contrary to widespread belief — even among those who should know better — Herbert Hoover oversaw a vast expansion of federal outlays:
Harold Meyerson writes that Herbert Hoover “cut spending” in order to bring the government’s budget “into balance” (“Sequestration stupidity,” Feb. 27). Mr. Meyerson is spectacularly wrong on both counts.
U.S. government spending rose during every year of Hoover’s administration. In 1932, Hoover’s last full year in office, nominal spending was 52 percent higher than it was in 1929, the year he took office. Given that these years were ones of deflation, the increase in real spending was even larger. And as for balancing the budget, by 1932 Uncle Sam’s budget deficit, at $2.7 billion, was 4 percent of GDP - then the third-largest budget deficit in U.S. history.
Fiction is not made into fact by incessant repetition.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The reason the myth lives on, of course, is that it is politically convenient. As Meyerson writes (emphasis added),
From British Laborite Ramsay MacDonald to the German centrist Heinrich Bruning to American conservative Herbert Hoover, leaders cut spending to bring their budgets into balance. These austerity policies proved an unmitigated disaster. By reducing government spending while business and consumer spending were tanking, these heads of government constricted all economic activity.
The trouble is that Hoover did not practice anything remotely like “austerity” — he practiced its opposite. Yet the economy continued to tank. For advocates of interventionist government, this is far less convenient.
Did the stimulus really create jobs? Judging by the chart above, it doesn’t look that way. Had it done so, you’d expect some kind of correlation — the higher the stimulus, the better the improvement in employment figures. It wouldn’t have to be 1:1, but there would have to be some kind of pattern. Yet there doesn’t seem to be.
Backstory and explanation here.
P.S. - yes, fact-check organizations say otherwise. And in a narrow sense they are correct: If you take the money out of Joe’s wallet and pay Fred to dig a ditch, you have created a job for Fred. That is undeniable, and it is silly for Republicans to try to deny it.
What the analysis misses is the unseen effects. If you had left the money in Joe’s wallet, he would have paid Mike to mow his lawn. So, in creating a job for Fred, you took a job away from Mike.
Government stimulus spending, then, does not so much create jobs as reallocate them. The chart above seems to give that conclusion statistical heft.
Gov. Bob McDonnell on Wednesday approved a bill to extend the 30-cents-per-100-pound excise tax on peanuts until 2016.
In France, firms with 50 or more employees face far more stringent regulation than those with 49 or fewer. By an amazing coincidence, there are a large number of firms with exactly 49 employees.
The employer insurance mandate Patient Protection and Affordable Care Act — aka Obamacare — kicks in at 50 full-time employees. By an amazing coincidence, many firms have begun shifting employees to part-time status.
Peter Suderman at Reason suspects it also will lead to far more 49-employee companies here in the U.S.
And, I suspect, he’s right.
Maybe the Greatest Question Ever Put to President Obama
Dear Mr. Obama:
In this year’s State of the Union Show you called for the hourly minimum-wage to be raised from $7.25 to $9.00. That’s an increase of more than 24 percent. Because you trumpet this proposal as one to assist low-paid workers, you, presumably, deny that such a hike in the cost of hiring low-paid workers will prompt employers to hire fewer such workers.
In last year’s State of the Union Show you bragged of your administration’s increase in the tariff rate on Chinese-made automobile tires. This tariff increase, which averages 30 percent over three years, is explicitly designed to dissuade Americans from buying Chinese-made tires – an effect that you recognize and applaud.
Question: If a government policy that artificially raises the price of Chinese-made tires reduces the quantities of such tires that are bought, why does a government policy that artificially raises the price of low-skilled labor not reduce the quantities of such labor that are hired?
I’m told that you’re a man of science. I await your response.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Tough Immigration Policies Are Bad for American Citizens
“Democracies choose bad policies because bad policies are popular,” writes Bryan Caplan in a recent edition of Cato Journal, “and bad policies are popular because voters have systematically biased beliefs about their effects.” The piece in which that apothegm appears concerns immigration, which is fitting.
Americans — conservative Americans particularly — think America will be better off if it fiercely guards its borders, allowing only a few people of the more desirable sort to cross them. They are mistaken. Not only does a generous immigration policy improve life for people already here, a hawkish immigration policy also can have serious downsides for U.S. citizens.
Economically, the case for more immigration is compelling: Immigrants are more likely than native-born Americans to start a business, more likely to launch a hugely successful one, more likely to work and less likely to commit crime. Free trade increases prosperity, and that is just as true of trade in labor as is goods. (Caplan cites research estimating that “open borders would roughly double world GDP, enough to virtually eliminate global poverty.”)
Morally, the case for easing restrictions on immigration is compelling as well. Government has no more justification restricting the free movement of people than it has restricting the free movement of products or services. A tight-border policy denies native-born Americans the opportunity to hire, work for, sell to, lease to, make friends with, and even marry individuals they would freely do those things with if they could. A tight-border policy also consigns countless opportunity-seeking individuals to life in countries that are poorer and less free than the United States.
Granted, not everyone cares about the effect of immigration policy on other people. But there are sound, self-interested reasons to oppose tight border control as well.
According to Gallup, 85 percent of Americans support requiring employers to verify that all new hires are living in the U.S. legally. This likely is owing to the false belief that illegal immigrants take jobs that “belong to” Americans. That belief is false for three reasons: First, jobs don’t belong to anyone but the person doing the hiring. Second, illegal immigrants often do work Americans refuse to do. Third, Americans don’t just give jobs to undocumented workers. They also take money from them by selling them food and clothing, renting apartments to them, and so forth. That commerce creates jobs for — yep — Americans.
What’s more, trying to stop illegal immigrants from finding jobs could keep Americans from finding them, too. In a recent piece for The Wall Street Journal, Laura W. Murphy of the liberal ACLU and Fred L. Smith Jr. of the conservative Competitive Enterprise Institute explain that the E-Verify system is riddled with holes. More over, “if an employee’s information conflicts with the database, the individual cannot work until he corrects the error. Every potential employee is thus presumed to be ineligible to work until proven otherwise.”
They note a 2009 Homeland Security report showing that a national E-Verify system “would force 1.2 million of today’s legal workers to sort out such problems. Of these, almost 770,000 genuinely legal workers would lose their jobs.”
Conservatives, especially of the tea party variety, should be alarmed by the prospect of having to get a permission slip from the federal government — a government they consider as efficient as the Postal Service and as compassionate as the IRS — before exercising the right to earn a living. That is just one part of the price to pay for the dubious benefit of “securing the border.”
The gutting of the Bill of Rights is another. Since 2008, the Department of Homeland Security has claimed the right to seize and search your electronic belongings — cellphone, laptop, etc. — at the border, without a warrant and without even any suspicion of wrongdoing.
But not just at the border: DHS claims the authority to conduct warrantless electronic searches within 100 miles of the U.S. border. That covers 197 million people — almost two-thirds of the American population. What constitutional authority does DHS have to disregard the Fourth Amendment this way? That’s classified, it says. While the agency has released an executive summary of its rationale, the ACLU had to file a Freedom of Information Act request on Feb. 8 to see the entire report.
Meanwhile, Homeland Security continues to put its policy into practice. Without any suspicion of wrongdoing, it has seized the electronic devices of a computer programmer involved with a legal defense fund for Bradley Manning, a researcher for Wikileaks, and others. (According to an October lawsuit filed by the ACLU of San Diego, border agents also have seized cameras from photographers who were simply taking photographs in public — which is not merely legal, but constitutionally protected.)
That’s the trouble with taking a hawkish approach to immigration: The harder you try to keep people outside the fence, the more you’re bound to restrict the freedom of people already inside it. You can have a leak-free border, or you can have limited government that respects liberty and individual rights. Take your pick.
Today’s lamentable trend: The number of jobs created annually by entrepreneurs has been declining for more than a decade now.
(via)
In Health Care, One Law Is Working Like a Charm
“We have to pass the bill so you can find out what’s in it,” said Nancy Pelosi during the debate over Obamacare. The Affordable Care Act passed, and Americans are now finding out. It’s not a pretty picture.
Take employment. “Medical device makers in Massachusetts and elsewhere are warning of potential job losses,” reports The Boston Globe, because of a 2.3 percent tax on medical devices imposed by law. Even liberal-heartthrob-turned-Massachusetts-Senator Elizabeth Warren, a supporter of the law, says repealing that tax is “essential.” (To paraphrase a cliché, if it saves one job – hers – it’s worth it.)
But the ACA’s effect on jobs goes well beyond medical device makers. Reporting on January’s employment numbers, Investor’s Business Daily notes an “apparent shift to part-time work ahead of a key Obamacare deadline.” Although more people are working in the retail sector, they are working fewer hours per person – now just a hair above 30 hours a week. “A similar trend,” IBD notes, “showed up in leisure and hospitality.”
Why? No great mystery: Under the ACA, companies with 50 full-time employees or more must provide health insurance or pay a fine. As Paul Christiansen writes in The Wall Street Journal, “thousands of small businesses across the U.S. are desperately looking for a way to escape their own fiscal cliff” through layoffs or shifting to more part-time employees. (He advises a third route: “going protean,” an approach in which a small cadre of managers sets strategy and outsources everything else — from accounting and IT to product development and manufacturing — to contractors.)
This employment shift may frustrate one of the aims of the Affordable Care Act: increasing the percentage of Americans who have employer-based health insurance. Won’t the downsized be able to buy subsidized health insurance through the new state exchanges, though? Sure. In fact, they will be forced to, or pay a fine. But that only highlights another area where the law is falling short: cost control. Back in 2010 the Congressional Budget Office estimated the average subsidy at $3,970 per individual. It’s now up to $5,510 — bringing the overall cost between now and 2022 to more than $1 trillion.
This is the trajectory of a law President Obama insisted was necessary to “bend the cost curve downward.” Indeed, three years ago Health and Human Services Secretary Kathleen Sebelius explained the “urgency” of health-care reform this way: “Working families have been saddled with huge rate increase in their health insurance premiums” — 39 percent in California, 56 percent in Michigan, and so on.
Yet as Michael Cannon of the Cato Institute notes, a recent survey of insurance companies finds that “if the law’s insurance rules were in force [now], the premium for a relatively bare-bones policy for a 27-year-old male nonsmoker on the individual market would be nearly 190 percent higher.”
Okay, so maybe the conservative group that conducted the survey cherry-picked that case. What about other sorts of policies, and other people? The news isn’t much better: Wisconsin predicts “an average premium increase of 41 percent.” Ohio’s Department of Insurance says “the individual health insurance market premiums are estimated to increase by 55 percent to 85 percent above current market average rates.”
ACA defenders retort that consumers won’t pay the full cost of those big increases because of the subsidies. But those subsidies — soaring already, as noted above — merely shift costs; they do not lower them. The government is picking up the tab in the same sense that it picked up the tab for the war in Iraq: by handing it off to taxpayers.
That’s precisely the story with regard to Medicaid, too: Washington is trying to bribe states to expand the Medicaid rolls by funding nearly all of the increases. From a state government’s perspective it looks like a sweet deal: free federal money! From the taxpayer’s point of view, it looks like a sick joke: Medicaid’s expansion could raise the cost of the program by $1 trillion over the next nine years.
That’s on top of the trillion-plus cost of subsidizing insurance purchased through state exchanges. Speaking of which: Under ACA law, those exchanges will require thousands of “navigators” to help consumers select a policy. California alone expects to hire 21,000. (Virginia, which is letting the feds run its exchange, has no estimate.)
The insurance industry is supposed to foot the bill for the navigators through a surtax – just one of the many levies in the legislation that are now taking or soon will take effect. Others include a 0.9 percent Medicare tax increase, a 3.8 percent tax on investment income, a tax on indoor tanning, a tax on brand-name drugs … and of course the tax for failing to abide by the individual insurance mandate.
Long story short: Less employment, higher rather than lower costs, higher taxes, and massive increases in government spending. The health-care law might not be working as advertised. But another law — the one about unintended consequences — is working like a charm.
