Columnist.
I'm slow to defend corporations these days because so many of them have built their business models around government-granted privileges and are free markets' worst enemies. However, for all the perks they get from governments, they also fall victim to their own government. And sometimes the shakedown is done by multiple governing authorities. A few weeks ago, the European Union's antitrust regulator demanded that Ireland get back $14.5 billion in taxes from Apple Inc. At the heart of the issue are legal tax arrangements between Ireland and Apple passed in 1991 and 2007, which allow the company to pay an annual tax rate of roughly 1 percent on its European profits channeled to Ireland.
Election cycles can be unfriendly to serious policy debates on critical issues, such as Washington's ongoing addiction to excessive government spending and debt. The circus of this election cycle has been particularly devoid of serious discussion on this paramount problem. We see minimal concern that deficits are growing again, no serious solutions being offered to control the exploding federal debt and a failure to recognize the overdue need to rein in the government's major entitlement programs. Instead, members of Congress from both parties are hoping to avoid yet another last-minute tussle over the annual federal budget process so they can focus on November's high-stakes elections.
One of the most powerful arguments for limiting the size and scope of government is the inability of politicians and regulators to keep up with the pace of technological change. Case in point: Congress has not updated the rules regulating when and how law enforcement may access stored online data since the time period depicted in Netflix's 1980s nostalgia-heavy hit, "Stranger Things." The Electronic Communications Privacy Act was passed in 1986, when data storage was considerably more expensive and primitive. At the time, it was not common for data to be kept online for very long. As such, the ECPA considers emails held online by a third party for more than 180 days to be abandoned and thus open to access by law enforcement without a normal warrant. Sure puts that cluttered inbox in a new light, doesn't it?
When outspoken socialist Sen. Bernie Sanders was in the presidential race, he often expressed his dream to turn the United States into a Nordic-type social democracy like the one in Denmark. Hillary Clinton dismissed his comments by claiming that the United States isn't Denmark. But the truth is that at the center of her political platform is an extensive set of Nordic-like government interventions, including paid sick leave, paid parental leave, subsidized child care and a more generous safety net — and higher taxes. So what's the appeal of Nordic democracies for U.S. Democrats? Writing in The Atlantic, Anu Partanen (a Finn living in the United States) claims that Nordic nations "offer their citizens — all of their citizens, but especially the middle class — high-quality services that save people a lot of money, time, and trouble."
Which states in our union are the most tolerant of marijuana and guns? Which interfere the least with your life? Which are likelier to hand out special goodies to politically connected companies? Those are some of the questions answered by economists Will Ruger and Jason Sorens in the 2016 edition of their study "Freedom in the 50 States." Their ranking of the states in the U.S. in terms of freedom is based on three public policy dimensions affecting economic, social and personal freedoms. Sorens, a lecturer in the government department at Dartmouth College, and Ruger, vice president of research and policy at the Charles Koch Institute, scored more than 200 policies, including things such as gambling restriction, trans fat bans, the audio recording of police, occupational licensing restrictions, mandated family leave and the ability of couples to enter into private contracts.
Hillary Clinton recently laid out her plan for the economy, which boils down to more government, more spending, more taxes, more regulations and more red tape. It translates into more debt and less growth. Some of the most outrageous provisions of her plan are those that target U.S. corporations abroad. To be fair, Clinton's policies are very similar to those of President Barack Obama. They both want to prevent U.S. companies from leaving the country through a process called inversion. They both also fundamentally misunderstand the reasons behind inversions and try to fix the perceived problem by treating the symptoms rather than the causes.
With both Donald Trump and Hillary Clinton selecting the Detroit Economic Club as the venue for their "big" campaign economic speeches, the Motor City is receiving a lot of attention this election cycle. But a fixation on Detroit's revival is evidence of a backward-looking vision and a gross misunderstanding of economic development and prosperity. During his recent speech, Trump highlighted the terrible performance of the city that "was once the economic envy of the world" and helped "power America to its position of global dominance in the 20th century." Indeed, the city went from being the 4th largest city in the country with a population of about 2 million to being a distressed city with a little under 700,000 people today.
Remember when the Obama administration promised that the Affordable Care Act's expansion of Medicaid would be awesome? The idea behind this part of the law was that the expansion of the pool of people eligible for Medicaid would help reduce the number of uninsured and that these new enrollees would be relatively cheap when compared with those already in the program. Well, that's not what happened. A colleague of mine at the Mercatus Center, Brian Blase, recently reported a shocking statistic: The Department of Health and Human Services just "found that the ACA's Medicaid expansion enrollees cost an average of $6,366 in (fiscal) 2015 — 49 percent higher than the $4,281 amount that the agency projected in last year's report." That's quite a mistake.
The federal government is packed full of crony programs, such as the Export-Import Bank and the ethanol mandate. When it comes to the unhealthy marriage between government and the private sector, however, the U.S. Department of Agriculture may take the cake. With the exception of food stamps, which should have nothing to do with the farm bill, every program in the agency is meant to subsidize or boost the profits of farmers. We have such programs as the Dairy Margin Protection Program and the Dairy Market Stabilization Program. The former effectively guarantees profits for dairy farmers, and the latter is a complicated program meant to drive up milk prices to benefit small-scale dairy farmers. Then there are sugar tariffs, which are meant to artificially boost the profits of a few companies by keeping the price of sugar high in the United States at the expense of consumers and taxpayers.
The Congressional Budget Office recently released its long-term budget outlook. There isn't much new there; we are still in the red, and it will only continue to get worse. Considering the extent of the problem, you would think someone on the campaign trail would pay attention. Yet no presidential candidate really is. First, CBO projects that the federal public debt-to-GDP ratio will go from its current 75 percent (up from 39 percent in 2008) to 86 percent in 2026 and 141 percent in 2046. On the deficit side, CBO projects that by 2020, our deficit level will reach $1 trillion, up from its current level of $534 billion. Today's deficit-to-GDP ratio is 2.9 percent, and it may be close to 5 percent in 10 years and 8.8 percent in 2046.
As recent events have demonstrated, more than 50 years after much-delayed civil rights legislation was passed by Congress and signed into law, very different views on the persistence of racism still exist in America. According to the Pew Research Center, 38 percent of whites believe that "our country has made the changes needed to give blacks equal rights with whites," but just 8 percent of blacks agree. Here's something that all Americans should agree on: Many policies have a disproportionately negative effect on black families -- and, by extension, on all of us. The most insidious of them all, however, may be the war on drugs.
Making a profit by selling goods and services that consumers want to buy at given prices is the first goal of any business. If consumers aren't interested and the business doesn't adapt, it will go under. That's unless you are the U.S. Postal Service. The Postal Service is a major business enterprise operated by the federal government. Thanks to Congress, it has something many business owners would love to have — protection from competition. Its monopoly on access to mailboxes and the delivery of first-class and standard mail means it doesn't have to worry about someone offering a better service at a lower price. But that's not all. In a new Cato Institute study, Chris Edwards explains that unlike private businesses, the Postal Service has access to low-rate loans from the Department of the Treasury, effectively pays no income or property taxes, is exempt from local zoning rules and even has the power of eminent domain.
Cronyism is the ugly marriage between special interest groups and politicians, which results in an abuse of the government's power to grant special privileges to a few winners — for example, unfairly preventing competition or doling out subsidies and bailouts at the expense of taxpayers. Though cronyism is always outrageous, the way cronies go about achieving their goals is sometimes oddly funny. Case in point: the government's changing the definition of catfish to classify the fish as — wait for it — meat, not seafood. As Patrick Mustain reports in Scientific American, Sen. Thad Cochran, R-Miss., included an amendment in the 2008 farm bill designating catfish as a "species amenable to" the Federal Meat Inspection Act, which "requires appointment of inspectors to examine and inspect all meat food products prepared for commerce." The 2014 farm bill made this silly amendment official.
The Congressional Budget Office has a new report looking at the return of federal investment in transportation and research. The bottom line is that the return is not so much as the private-sector investment. So rather than invest more money in federal investments, let's get rid of all the federal policies that get in the way of the private sector's doing the investing. First, let's look at the CBO report. Salim Furth of The Heritage Foundation explained in an email to me how this CBO report deserves much credit for "diligently following Congress' new requirement that CBO include macroeconomic feedback effects in its evaluations of major fiscal policy changes." He continued: "This dynamic approach is a lot more work than the alternative, and Director Keith Hall is quietly making CBO more transparent. He's more open to criticism, but that's a benefit in the long run, since it will compel CBO to constantly improve its modeling."
If you think that all members of Congress have to comply with all of the laws that we common citizens have to obey, think again. Over the years, Congress has passed thousands of bills and statutes that dictate how we should or shouldn't live our lives, but its members often fail to comply with these rules. In many instances, they actually exempt themselves from those burdensome constraints.
Many states are broke, even though their constituents don't know it. The two main drivers of states' fiscal problems are the bloated promises made by lawmakers to their public employees about health care and pension benefits and an unwillingness to acknowledge the existence of a problem. Whether the dodging of long-term obligations is done knowingly or inadvertently hardly matters. The results are still the same. Faulty accounting always comes back to hurt the people in the cities and states that have used it — for example, Puerto Rico, Detroit and Chicago.
One of the assets of the American economic model is a relatively flexible labor market, especially when compared with labor markets in many European countries. It explains some of the consistently lower U.S. unemployment rates and higher economic growth. Unfortunately, this flexibility is increasingly threatened by government policies that would increase the cost of employing workers. These policies include the Department of Labor's recent overtime rules, the call for employer-paid family leave and a minimum wage increase.
During a visit to the World Bank this week, I got a sobering lesson about the degree to which the people working at international bureaucracies, including the Organization for Economic Cooperation and Development, dislike tax competition. For years, these organizations — which are funded with our hard-earned tax dollars — have bullied low-tax nations into changing their tax privacy laws so uncompetitive nations can track taxpayers and companies around the world. The global bureaucrats want to rewrite the rules of international commerce to protect uncompetitive nations, such as France, from the consequences of reckless fiscal policy.
Corporate welfare takes many forms: a tax break to a particular industry, a tariff against foreign sugar producers to shelter domestic producers from competition, a loan guarantee program for exporters, etc. It can also take the form of lawmakers forcing the Department of Defense to provide New Balance athletic shoes — and only New Balance athletic shoes — for new military recruits.
Some members of Congress want the Department of Justice to know that they are unhappy. The source of their consternation is the correct DOJ's finding in 2011 that the 1961 federal Wire Act — long believed to prohibit all forms of interstate gambling — is in fact "limited only to sports betting." To show their displeasure, language was recently inserted into a Senate appropriations bill, which made the obvious point that the Wire Act didn't change in 2011, and that it is up to state courts to interpret criminal laws.
