Columnist.
In an interview about his legacy recently published by The New York Times, President Barack Obama took a shot at the Reagan revolution to make the case that contrary to conservative dogma, tax cuts and other free market policies — such as cutting spending — weren't good at jump-starting the economy. The implication seems to be that his preference for big-government policies produced superior results.
Creating something that people want is how one gets wealthy in a market economy. Sadly, there's another way to get rich. It's called cronyism, and it can make billions for the lucky businesses that get government support — whether their products are profitable or not. In the process, the taxpayers foot the bill. Taxpayer insurance against unprofitability takes many forms, from loan guarantees to grants, which provide a no-lose scenario for beneficiaries. If the business is profitable, then the corporation makes massive profits. If the business goes bust, then the taxpayers take a hit. Either way, the crony capitalist wins.
Americans just finished filing and paying for their federal income taxes. It was painful and expensive. Collectively, we still have several more days to go before we are done paying for our entire tax bill. In 2016, Tax Freedom Day is April 24. As the Tax Foundation explains in its annual report on the issue, "Tax Freedom Day is the day when the nation as a whole has earned enough money to pay off its total tax bill for the year." The tax bill in question includes all federal income taxes, payroll taxes and state and local taxes. In 2016, that's $4.99 trillion, including $3.3 trillion in federal taxes. That's 31 percent of national income.
The intensity with which some American companies try to use the government to trick or deceive consumers is astonishing. Yet the extent to which lawmakers seem content to cater to these crony pursuits never disappoints, either. Case in point: the current attempt to protect contact lens sellers from competition at the expense of consumers. An estimated 40 million Americans wear contact lenses. That's a $4 billion industry. Thanks to the heavy-handed government regulation of all things health care, contacts already cost more than they should. However, if an ongoing effort to reduce competition through government cronyism were to succeed, costs might soon rise even more.
If you haven't heard yet, the release of the so-called Panama Papers has revealed that top global leaders such as Russian President Vladimir Putin and Iceland's prime minister may be using companies and other business entities created by a Panama-based firm as a way to avoid taxes or conceal wealth. It's creating quite an uproar. Unsurprisingly, with very little evidence of actual illegality on the part of the law firm from which the documents were stolen — or most of its clients — the usual suspects are already calling for sanctions or dramatic and punitive changes to international tax laws.
The front-runner for the Republican presidential nomination, businessman Donald Trump, has been called a lot of things by the media and his adversaries. When it comes to his policy positions, however, it's difficult to put a political label on him. For instance, though he holds some pretty standard free market positions on taxes, he's far from being a purist on the issue. On one hand, he would cut the top marginal individual rate to 25 percent and reduce the number of brackets to three to encourage productive behavior. However, his plan fails to remove most double taxation of income saved and invested and fails to eliminate many deductions for special interest groups. He would also remove a large number of taxpayers from the tax rolls, exacerbating the illusion that government services are free.
What do Sen. Chuck Schumer, D-N.Y., President Barack Obama and all the Republican presidential candidates have in common? They all want to fundamentally reform the corporate income tax. President Obama proposed cutting the corporate tax rate from 35 percent to 28 percent. Sen. Schumer wants a major reduction to taxation of corporate income abroad. Sen. Ted Cruz, R-Texas, says he would abolish the tax altogether as president — replacing it with a 16 percent business flat tax — and Donald Trump would reduce the corporate tax rate to 15 percent.
Wouldn't it be nice if your boss were forced to pay you more because the government said so? Not if — as the result of the government's intervention — you lost your job, saw your salary reduced or couldn't work from home anymore. Yet that's what the Obama administration is trying to do by requiring that employers pay overtime for salaried employees who earn less than $50,440 per year. Under the Fair Labor Standards Act, most employers must pay time and a half for overtime hours (usually understood as hours worked above and beyond 40 hours per week) for salaried employees who don't have sufficiently advanced job duties or make less than $23,660 annually. Employers only have to track the hours of salaried employees eligible for overtime.
Democratic presidential candidate Bernie Sanders is one of a kind. He is the only self-proclaimed socialist in Congress, and he is also the only Democratic candidate in the presidential race to oppose crony programs such as the Export-Import Bank of the United States. Hillary Clinton, a big supporter of the bank, and Sanders clashed quite vigorously on the issue during the recent presidential debate in Flint, Michigan.
If you are tired of reading columns about Affordable Care Act failures, don't read any further. If you're not, please meet yet another example of how the shockingly incompetent government has wasted so much of our money in developing and administering services that are taken for granted in the private market — namely, the ACA exchanges. The federal government spent an eye-popping $2.1 billion on 60 different contractors to build the HealthCare.gov boondoggle, and President Barack Obama's proposed budget calls for another $535 million to operate the exchange in fiscal 2017.
Of the seven main candidates running for president, only one wants to keep the Affordable Care Act in place: the Democratic kind-of-front-runner Hillary Clinton. Everyone else wants to get rid of it. Most Republicans would replace it by returning health insurance regulation to the states, although they would also lock in much of the ACA's new spending. Self-proclaimed socialist Bernie Sanders would replace it with a single-payer system — Medicare for all. It's a terribly inefficient and costly idea, as many pundits have explained.
President Obama recently released his last budget, laying out his priorities and proposals for FY2017 and the years to come. Not surprisingly, it's a tax-and-spend budget that not only does nothing to get us off the unsustainable financial path we're on, but also it claims that more taxes and spending will grow the economy. According to Congressional Quarterly, the president's budget should be called the "Do Nothing Budget." It's a good name, if we consider that it doesn't do anything to address the explosion of the debt and the growth in spending for Medicare, Medicaid, Affordable Care Act subsidies and Social Security.
If you have ever found yourself at the gas pump thinking, "I really wish it cost more to fill up," then President Obama has just the idea for you. In his final budget request, he will include a call for an additional $10 in taxes per barrel of oil. This terrible idea would roll back the tremendous energy gains made in recent years and harm the economy. The biggest and most obvious impact of the Obama gas tax would be its impact on the pocketbooks of American drivers. That's right; one of the most underrated findings in economics is the fact that the person cutting the tax check isn't always the one shouldering its burden. In this case, you can tax "oil companies" as much as you want, but the burden will be passed on to consumers. And indeed, estimates show the $10 per barrel fee could translate to roughly 22 cents per gallon of gasoline. That would more than double the current federal gasoline tax of 18.4 cents per gallon. The president, in other words, wants Uncle Sam to collect $5 or more every time you fill up.
The statutory limit on how much debt the federal government can accumulate is back in the news, but this time it's not because Washington is close to breaching it. That's not a present concern thanks to the year-end bipartisan spending spree that included a suspension of the debt limit until March 2017. The news is that a report from the House Financial Services Committee found that the Obama administration's Treasury Department has been repeatedly misleading the American public on the matter. Treasury has routinely rejected the idea that once the government reaches the debt limit, federal spending could be prioritized to avoid a default. During a previous debate over the debt limit in 2011, my colleague Jason Fichtner and I wrote a paper explaining that even if Treasury is unable to issue more debt, it can still avoid a default and thus give policymakers more time to implement reforms that would put the government on a more sustainable fiscal path.
Stop me if you've heard this one before: A government, run by a succession of politicians, spent frivolously for decades and repeatedly ignored all the warning signs of looming fiscal disaster, and now that it has arrived, is begging for a bailout. No, I'm not talking about Greece. This time, it's Puerto Rico. And the Republican-controlled Congress is seriously considering a bailout. Even Washington's out-of-touch cronies recognize that a simple cash bailout would be too politically toxic. But they've come up with an alternative that may have some appeal but also has very problematic features: bankruptcy.
During the Democratic presidential debate, former Secretary of State Hillary Clinton mentioned that as president she would build on President Obama's signature health care plan. The Affordable Care Act "is one of the greatest accomplishments of President Obama, of the Democratic Party, and of our country," she added. I beg to differ. First, the ACA didn't reform the health care system. It just threw trillions of dollars at an already dysfunctional system. In the next 10 years alone, ACA spending will be at least $1.5 trillion.
Those who pay just casual attention to the annual federal budget process can see that it's a mess. It's rarely completed on time, and it always seems to get bogged down by partisan bickering and political scheming. When the dust finally does settle, the result is usually a bloated conglomeration of goodies for countless special interests, who most likely had a better grasp of the contents than our elected representatives who voted on it.
Benjamin Franklin said there are only two things certain in life: death and taxes. But I'd like to add a third: cronies coming back for more after Washington gives them a handout. Case in point, the merchants and retailers who got a juicy morsel from Dodd-Frank are now clamoring for more. Sen. Dick Durbin, D-Ill., slipped into the monstrous 2010 Dodd-Frank financial regulation bill a favor long sought by big-box retailers, such as Wal-Mart. The Durbin amendment, as it is known, imposed price controls on interchange fees for debit cards. Interchange fees are what banks and card issuers charge retailers for processing payments. Many consumers prefer to use cards instead of cash, so it's advantageous for retailers to provide that as an option.
A tumultuous year for the Republican-led Congress has come to an end. If you were a supporter of the GOP establishment's shallow goal to show the country that it could "govern" by passing bloated spending bills, congratulations. If you're a special interest, congratulations are probably in order, as well. If, however, you held out hope that the GOP would put up a fight for smaller government, I hope the New Year's Eve Champagne helps with the disappointment.
In honor of the release of the new "Star Wars" movie, Sen. Jeff Flake, R-Ariz., subtitled this year's "Wastebook" as "The Farce Awakens." The latest edition of this annual report details 100 spending programs, totaling $108.5 million, that are a complete waste of your money.
