Wednesday, November 25, 2015

Why Trump Can Win BIG

Return with us to those thrilling days of yesteryear, June 6, 1978, when voters approved Proposition 13in California by a landslide 65-35 percent. Proposition 13 is a constitutional amendment that limits property taxes to 1 percent of a property’s market value based on sale price and limits increases to 2 percent a year.

Proposition 13 was opposed by the political, economic, social, and educational establishments.  A partial list of naysayers included the AFL-CIO, the California Teachers Association, the American Federation of Teachers, the California State Employees Association, County and Municipal Employees, Bank of America, Atlantic Richfield, Standard Oil, Common Cause, the League of Women Voters, the California PTA, the League of California Cities, the Democrat Party, every major newspaper except the Los Angeles Herald Examiner, the vast majority of state legislators, the 58 county boards of supervisors, most city councils, most school board members, Governor Jerry Brown, and two Republican candidates for Governor, Pete Wilson and Ken Maddy.  Opponents massively outspent supporters.

Opponents ran a campaign of fear against Proposition 13.  Radio advertisements repeated that seven past presidents of the American Economic Association and 450 economists teaching in California’s universities, colleges and community colleges warned that cutting $7 billion from property taxes would savage state services and thousands of public servants would lose their jobs.

Pollsters and analysts rushed to explain Proposition 13’s unexpected victory.  It was simple.

Even a majority of policemen and firefighters voted for the measure despite being warned that they would likely be the first to lose their jobs.  Many told reporters that while they might lose their jobs, they were sure to lose their homes to skyrocketing property taxes unless something was done to halt government greed.

The parallel with Trump is clear.  A large number of Americans are fed up with the establishment and its threats.  The election of 2016 could well turn out to be a reprise of Proposition 13.

Monday, November 23, 2015

Beware of Economists Calling for More Government Funding of Government Data Collection

Sixty-three distinguished economists signed an open letter to Congress urging increased federal spending for government agencies charged with collecting economic data.

In particular, they want more data on assessing GDP, understanding labor markets, and better statistical poverty measures.

What are economists likely to do with better data if their letter succeeds?

My guess is to advocate more funding to fight poverty, not more efficient use of existing appropriations.

More government funding to support greater participation in labor markets, not removing regulations, high taxes, and other impediments to labor market participation.

More stimulus to increase GDP, not less government interference in the economy.

More redistribution to reduce income inequality.

And so on, and so forth.

Delusions of Democracy in the Middle East

Those whom the Gods would destroy they first make mad with delusions of democracy in the MiddleEast.

The following article, "The Freedom Agenda Has Failed," is presented with no comment.

Sunday, November 15, 2015

Students Rally For Divestment--But From What?

The Global Climate Change Summit will be held in Paris during November 30-December 11, 2015. Its goal is to set out a schedule to limit greenhouse gas emissions.  Every important political leader in the world will attend.

In advance of the summit, students are holding rallies, encouraging their universities to divest from companies that produce fossil fuels (oil, natural gas, coal).  Stanford, for example, has divested from coal-producing companies (but not companies, such as steel, that use coal).

Divesting from oil is more problematic.  Even the most ardent opponents of fossil fuels still fly and drive, some daily.  While about half of oil production goes into fuels, the rest is used in the production of some 6,000 products.  Here are several web sites you can copy into your browser that list some of the most common consumer products in which oil is used:

Renewables are fine but not until their costs become more competitive with fossil fuels.  That is still some time away.

Pardon the pun, but expect to see a lot of hot air emanate from the Paris summit!

Thursday, November 12, 2015

Flat Tax Plans Dominate Republican Candidates Tax Proposals in the November 10, 2015, Fox Business News-WSJ Debate

On December 10, 1981, my distinguished colleague Robert (Bob) E. Hall and I first proposed our flat-tax plan in the editorial pages of the Wall Street Journal.  We followed it with a book in 1983, which we updated in 1985, 1995, and 2007 (the latest edition is free to download and print from the Hoover Press).

Imitators followed in short order.  With very slight adjustments to the tax rate and personal allowance, Dick Armey and Steve Forbes proposed identical plans.   (As politicians, they attached their own names to the plans.  A politician cannot run for office using the names of two academics as the authors of their plans).

Art Laffer wrote a different kind of flat tax for Jerry Brown in 1992 and asked me to serve as Brown’s spokesman for the plan, which I did for six weeks.  Laffer has written similar plans for Rand Paul and Ted Cruz, differentiated by rates on gross business income minus investment (effectively a VAT) and personal income.

Ben Carson has an across-the-board 15 percent and Rick Santorum 20 percent flat taxes.  Jeb Bush, aided by some of his brother’s former advisers, has proposed a modification of George W’s tax legislation.  The others are talking in terms of lower rates and fewer deductions.  Carly Fiorina wants a three-page income tax; Hall-Rabushka's draft law is three-and-a-half pages long.  Marco Rubio is an outlier, with a top rate of 35 percent in his plan co-authored with Senator Mike Lee.  (The Tax Foundation has an excellent table, which updates and compares all the candidates tax proposals, both Democrat and Republican.)

One or another version of a flat tax has been adopted in over 40 jurisdictions worldwide, most following the collapse of the Soviet Union.  Others are under consideration in the Isle of Man beginning April 1, 2016, and in Italy, Ireland, and Poland in preparation for their next national elections.  (Our book has been translated into Italian and Polish).

Will the United States have a flat tax anytime in the near future?  It depends first on who becomes the Republican nominee, and if he (she) wins.  Second, Republicans must retain majorities in both branches of Congress.  Third, the Senate must be prepared to use the nuclear option, if necessary, to defeat a filibuster.

No one would have predicted in 1981 that over forty countries would have a flat tax in 2015, or that Western Europe would have several countries considering a flat tax.  Good ideas with strong marketing can overcome inertia, special interests, and establishment politicians with their Praetorian Guards of academic advisers, and such international organizations favoring steeply graduated income taxes (in the guise of fairness) as the IMF, OECD, World Bank, and numerous left-leaning think tanks.

Your friendly proprietor has racked up hundreds of thousands of miles traveling the globe to explain the flat tax and support flat-tax movements.  I frequently receive requests from foreign countries in Africa, Asia, Central and South America, the Caribbean, and the Middle East to explain the details and benefits of the Hall-Rabushka flat tax.  I have written flat-tax plans for several countries to show how they can replace their harmful, complicated, multi-bracket tax codes to improve compliance and growth.

On personal note, it is gratifying to see thirty-five years of work bearing fruit.

Tuesday, November 10, 2015

Something is Rotten in the State of Denmark

Democrats, candidates for higher office, economists, and celebrities (Oprah), love Denmark as an example of a high-tax, big government, all-encompassing welfare state that works.  Your friendly proprietor is still waiting for an exodus of these Dane-loving Americans to apply for permanent residence in Denmark.

Having visited Denmark numerous times beginning in 1967, most recently in 2005, I can say that Tivoli Gardens is fun in summer, the old castles and palaces are charming as elsewhere in Europe, and that fresh Danish pastry cannot be surpassed anywhere in the world.  Good beer. Danes are among the top English-speakers in the world--do we expect tourists to speak Danish?  Denmark is a lovely place for a three-day visit, if you can afford it!

But those features are overwhelmed by Denmark's shortcomings.

Pickled fish.
Dreadful food, except for perhaps the three-star $200 lunch.
Cold and dark eight months of the year.
Tiny.  One can get around the entire country within a day.
Oppressive taxation.
Unpronounceable language (so say the Norwegians and Swedes).
Weak higher education.

The latter needs some detail.  Higher education may be free for Danes in exchange for high taxes, but what about its quality.  Denmark's highest ranking university, the University of Copenhagen, stands at 82 in the Times Higher Education list of the world's top 100 universities (the only one in the top 100), 69 in the QS World Ranking, 61 in the U.S. News list, and a somewhat better 40 in the Shanghai Jiao Tong list (along with the Aarhus University at 74).

Danes rank high on the list of happiest people in the world.  One person's happiness may be another's quiet resignation.

I am open-minded and flexible in my beliefs, but as a native Missourian, show me!  Please let me know when dozens, okay, I'll settle for 10, prominent leftist Democrats move to Denmark.

Monday, November 9, 2015

Definition of a Politician

Sir Henry Wotton (1568-1639), an English author, diplomat and politician who sat in the House of Commons in 1614 and 1625, is credited with the following statement:

"An ambassador is an honest gentleman sent to lie abroad for the good of his country."  He said that on a mission to Augsburg in 1604.

Your friendly proprietor proposes a corollary (fast forward 411 years):

"A politician is a person, honest or otherwise, who is paid to lie to her (or his) own country."