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Agricultural machinery, monitoring and control unit at an exhibition. Graphic for agricultural industry, sector business concept. (Photo: AdobeStock)

Agricultural machinery, monitoring and control unit at an exhibition. Graphic for agricultural industry, sector business concept. (Photo: AdobeStock)

Cities that convert small private farms into new housing tracts and expand farming outward, are more productive, providing jobs and growth to cities.

Yet, there was an article the other day in the Arizona Republic about a farmer in Queen Creek who was selling off his land to developers who were going to build homes on the lot.

The article took the bent that this was somehow a tragedy. It lamented the loss of pastoral farmland to evil developers who would build more new homes that we don’t need — even though the farmer in question certainly didn’t seem to be lamenting the tens of thousands of dollars he got per acre, and was heavily involved in the development of those homes.

Judging from the comments in the article, a lot of readers also agreed, railing against society and how awful it is that some poor farmer was forced off his land.

Preposterous.

First off, lets discuss the farmland. Farmland is certainly not less polluting or damaging to the environment than urban homes. Between the toxic runoff from chemicals and the damage to the local fauna and fauna, farmland can be very damaging to the natural ecosystem.

Remember, we are not talking about preserved desert lands or untouched wilderness, we are talking about irrigated and developed croplands.

Second, and the most important issue — productivity.

It is far more productive to society as a whole to live in more modern housing and use less valuable land farther out from city center for farming — or better yet, to use more arable land in better climates.

The article bewailed the loss of single or family owned farms, but frankly, large scale corporate farming was the best thing for modern society. A small family farm might feed 100 people off a tract a land. But a large scale corporate farm which has access to more labor and better technology can feed 10 times that many people.

Truth be told,  America’s corporate farmlands support not only America’ population but a goodly portion of the rest of the 6 billion people (and rising) in the world today. America’s farms are 5 times or more, more productive than their foreign counterparts.

This is what comes with modern technology and consolidation of family farms into more productive corporate farming methods and lands, and the centralization of farmlands in agrarian areas with better climates and water available.

Speaking of 6 billion people, populations are rising daily- and not just here in Arizona. People have to live someplace, and so do their progeny. Stop building homes and the urban areas are going to quickly become overcrowded, overpopulated anthills of people. Urban sprawl provides a very definite purpose- it prevents overgrowth of urban areas, not to mention housing and urban pricing.

Good luck finding an affordable home in San Francisco or New York where urban development has crawled to a standstill. This can also make a good case for better urban planning and redevelopment, assuming the leftwing would let developers do it.

Try to get permits to level city blocks downtown in a major city, and you’ll see what that means. Good luck with the locals selling you their broken down homes at a reasonable price, too, once they learn that a developer wants to rebuild downtown in any city. There’s always one crazy grandpa who refuses to sell at any price, who would rather see the place fall down around him than move.

Even assuming you do get all that done and go ahead with your projects, you’ll have to price it to offset all your costs and investment money, and it’s a tough sell to get people to move into these areas. Who wants to spend top dollar to move into a blighted area all around them, when they can buy at half the price elsewhere in a newer neighborhood?

Lastly, urban development spurs the economy. Jobs are created when houses are built. Ask the construction industry if they don’t hire people when new homes are cropping up. And those homes need to be sold, so salespeople make money too. And the banks? They loan money for those new homes and make money on that.

And all that money made goes where? Into the local economy in the form of goods bought and sold so shopkeepers make money. Doctors and dentists and teachers make money as they move into new neighborhoods.

Growth is a good thing, not a bad one. Economies grow and thrive where money changes hands and trade occurs, not sitting in our homes watching that farmer grow his artichokes.

As for that farmer, no more working 16 -18 hours a day in manual labor that can be done more efficiently and profitably by machinery and equipment operators on an agricultural conglomerate. He can retire comfortably knowing that the land on which he invested and worked for years will go for hundreds of times what he paid for it.

His family and his heirs will live more comfortably with more modern appliances, and more free time to spend doing things they may enjoy more.

I understand the desire to look back on earlier times with fondness, and say, ‘Gee, look at the poor farmer and how great a simpler life might be.’

That is, until you are standing in the hot sun, running a hoe through the dirt for 16 hours just to grow enough beans to feed your family. Do that every day for 20 years, and you won’t feel the same way.

I say, good for the farmer for selling off some of his land. Progress is a good thing, not a bad one. What I find ironic, is that all the people who are complaining about this whole business, are sitting in air conditioned homes, and are most likely in a suburb, and on a computer.

Unless of course, you are a Luddite.

Listen to “Liberty Never Sleeps 08/09/18 Show” on Spreaker.

America’s corporate farmlands support not only America’

Import, Export, Logistics concept - Map global partner connection of Container Cargo freight ship for Logistic Import Export background (Photo: AdobeStock/Elements of this image furnished by NASA)

Import, Export, Logistics concept – Map global partner connection of Container Cargo freight ship for Logistic Import Export background (Photo: AdobeStock/Elements of this image furnished by NASA)

U.S. import prices were unchanged and export prices fell sharply by 0.5% in July, following a 0.1% decline and 0.2% increase in June, respectively. The decline in export prices for July was driven by a 5.3% decline in agricultural export prices, the U.S. Bureau of Labor Statistics reported.

Without the price of oil, monthly inflation would be nonexistent.

All Imports

Prices for all U.S. imports were flat in July, fell 0.1% in June and rose 0.9% in May. For the year ending July, U.S. import prices saw the largest 12-month gain (4.8%) since the index rose 5.1% in February 2012. Import prices have not fallen on an over-the-year basis since the index fell 0.2% in October 2016.

That slightly beat the 4.7% consensus forecast.

All Exports

U.S. export prices rose 0.7% in May, but the decline in July was the first monthly decrease since June 2017 and the largest since the index fell 0.6% in May 2017. Overall export prices rose 4.3% between July 2017 and July 2018.

That missed the 5.3% consensus forecast, given the lower-than-expected prices for agricultural exports in July. The decline in agricultural exports for July was the largest monthly decline since the index fell 6.5% in October 2011.

U.S. import prices were flat and export

Suspected members of the MS-13 gang are presented to the media in San Salvador on June 19, 2015. (Photo: Reuters)

Suspected members of the MS-13 gang are presented to the media in San Salvador on June 19, 2015. (Photo: Reuters)

A member of La Mara Salvatrucha, or MS-13, was sentenced to two consecutive sentences of life in prison for racketeering and multiple violent crimes. Raul Ernesto Landaverde-Giron, aka “Humilde,” and “Decente,” 28, of Silver Spring, Maryland, was convicted by a federal jury on March 14, after a three-week trial.

U.S. District Judge Peter J. Messitte handed down the sentence for murder in aid of racketeering; conspiracy to commit murder in aid of racketeering; using, carrying and discharging a firearm during a crime of violence; and murder resulting from the use, carrying and discharging of a firearm during a crime of violence.

MS-13 is transnational criminal organization composed primarily of immigrants or descendants from El Salvador. Evidence presented at trial showed that branches or “cliques” of MS-13, one of the largest street gangs in the U.S., operate throughout Prince George’s County, Montgomery County, and Frederick County, Maryland.  Landaverde-Giron was a member of the MS-13 Normandie Locos Salvatrucha Clique.

On November 30, 2013, Landaverde-Giron and two other Normandie Clique members murdered an individual in Frederick, Maryland, who had fled El Salvador to escape a “greenlight” imposed by MS-13 members in El Salvador.

More severe violations of MS-13 rules — for example, cooperating with law enforcement — could result in a greenlight, or an order to be killed. One of the principal rules of MS-13 is that its members must attack and kill rivals, known as “chavalas,” whenever possible.

A co-conspirator recognized the victim in Frederick, and a Normandie Clique members called an MS-13 leader in prison in El Salvador to confirm the greenlight was still in effect. Then, a co-conspirator lured the victim to a wooded area in Frederick, where he shot the victim in the head.

Landaverde-Giron and another co-conspirator stabbed the victim in the face and neck. For his loyalty, or “respect,” Landaverde-Giron was promoted within the Normandie Clique for his participation in this murder.

This case is part of Project Safe Neighborhoods (PSN), a program reinvigorated by Attorney General Jeff Sessions in 2017 as part of the Justice Department’s renewed focus on targeting violent criminals.

Mr. Sessions instructed U.S. Attorney’s Offices to work in partnership with federal, state, local, and tribal law enforcement and the local community to develop effective, locally-based strategies to reduce violent crime.

Landaverde-Giron pleaded guilty today to illegally reentering the United States after having been deported, and was sentenced to six months in prison.  Landaverde-Giron has been detained since his arrest.

A member of La Mara Salvatrucha, or

A team of millennial business owners collaborating on an online project using a touchpad tablet in a modern office space. (Photo: AdobeStock/AYAimages)

A team of millennial business owners collaborating on an online project using a touchpad tablet in a modern office space. (Photo: AdobeStock/AYAimages)

The Small Business Optimism Index rose to within 0.1 point of the highest level in the survey’s 45-year history at 107.9. The second highest level beat the 107.1 consensus forecast and nearly matched the all-time high of 108 measured in July 1983.

“Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita D. Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.”

As with many other economic indicators and surveys, the Small Business Optimism Index has roared back to life under the Trump Administration. This month’s survey for July provides yet another example.

A net 8% of all small business owners (seasonally adjusted) reported higher nominal sales in the past 3 months juxtaposed to the prior 3 months. July is the eighth consecutive strong month of reported sales gains after years of low or negative numbers.

A net 35% of owners expect better business conditions, increasing slightly by 2 points from June.

“Small business owners have never been so optimistic for so long, helping to power the second longest expansion in history,” said NFIB Chief Economist Bill Dunkelberg. “Despite challenges in finding qualified workers to fill a record number of job openings, they’re taking advantage of this economy and pursuing growth.”

Fifty-nine percent (59%) said they were hiring or trying to hire, a decline of 4 points. However, 52% — and, 88% of those hiring or trying to hire — reported few or no qualified applicants for the positions they were trying to fill.

Twenty-three percent (23%) of owners cited having a difficulty finding qualified workers as their single most important business problem, a gain of 2 points from the reading in June and just 1 point below the 45-year record high.

Click here to view the NFIB Small Business Economic Trends Survey.

About the Small Business Economic Trends

The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the 4th quarter of 1973 and monthly surveys since 1986. Survey respondents are drawn from a random sample of NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in July 2018.

The Small Business Optimism Index rose to within

Argentina's President Mauricio Macri speaks during a ceremony to launch Argentina's one-year presidency of the G20 in Buenos Aires, Argentina November 30, 2017. (Photo: Argentine Presidency/Handout)

Argentina’s President Mauricio Macri speaks during a ceremony to launch Argentina’s one-year presidency of the G20 in Buenos Aires, Argentina November 30, 2017. (Photo: Argentine Presidency/Handout)

The central bank of Argentina on Monday hiked its benchmark interest rate to 45%, up from 40%. The early-week move comes after the peso currency plummeted in response to a local corruption scandal, which has been exacerbated by the currency crisis in Turkey.

The central bank also announced that it would issue less in lebac, or short-term debt from the central bank that will mature to reduce indebtedness. The International Monetary Fund (IMF) said in a statement that issuing less in lebac “should remove an important source of vulnerability.”

Argentina’s treasury ministry said in a statement that they have instructed the central bank to discontinue its daily sale of U.S. dollars due to liquidity in the peso.

According to the Maddison database, Argentina used to be one of the world’s richest nations, ranking as high as #10 in the 1930s and 1940s (see chart). But decades of Peronist policies exacted a heavy toll, which dropped Argentina to about #45 in 2008.

Venezuela was ranked roughly #30 in 1950 pertaining to the richest nations. After years of socialist and generally statist policies, Venezuela is ranked much lower. Decades of bad policy have led to decades of sub-par economic performance. And Argentina and Venezuela stagnated, other nations become richer.

According to the latest Maddison numbers, Argentina is now ranked #62. Above is a chart from 2011, data appended.

The central bank of Argentina on Monday

Peter Strzok, a top counterintelligence agent at the Federal Bureau of Investigation (FBI).

Peter Strzok, a top counterintelligence agent at the Federal Bureau of Investigation (FBI).

Peter Strzok, the agent at the center of the Clinton email and Russia probes, has been fired from the Federal Bureau of Investigation (FBI). The former head of the counterintelligence division was fired as a result of the damning text messages uncovered by the Justice Department (DOJ) Office of Inspector General.

Aitan Goelman, who is serving as Mr. Strzok’s lawyer, said FBI Deputy Director David L. Bowdich ordered the firing on Friday.

Deputy Attorney General Rod Rosenstein told the House Judiciary Committee that the text messages from Mr. Strzok “clearly do indicate bias.”

“I certainly agree with the findings of the inspector general report,” Mr. Rosenstein told Congress. “I think those messages clearly do indicate bias.”

Inspector General Michael Horowitz released a highly-anticipated report that uncovered text messages between Mr. Strzok and FBI lawyer Lisa Page, with whom he was having an affair. In one of the more damning messages, Mr. Strzok vowed to prevent Mr. Trump from becoming the 45th President of the United States.

Lisa Page: “[Trump’s] not ever going to become president, right? Right?!”

Peter Strzok: “No. No he won’t. We’ll stop it.”

These messages were excluded from a disclosure from the same text string, which was previous handed over to members of Congress.

Mr. Rosenstein’s admission came after Mr. Horowitz himself testified “it’s clear from the text messages” that Mr. Strzok “had a bias state of mind.”

Previously obtained text messages also show the two lovers discussed needing to talk to “Andy” about an “insurance policy” in the event Mr. Trump defeated Hillary Clinton, a reference to then-FBI Deputy Director Andrew McCabe.

“I want to believe the path you threw out for consideration in Andy’s office — that there’s no way he gets elected — but I’m afraid we can’t take that risk. It’s like an insurance policy in the unlikely event you die before you’re 40,” Mr. Strzok wrote to Ms. Page.

Mr. Horowitz confirmed to the Senate Judiciary Committee that the IG believed “Andy” was a reference to Andrew McCabe, who has since been fired. The inspector general referred Mr. McCabe to the U.S. Attorney for criminal charges after concluding he lacked candor (lied) under oath.

Ms. Page, along with FBI lawyer Jim Baker, both of whom worked closely with fired former FBI director James Comey, resigned from the agency in May.

Mr. Strzok has been relieved of his post as head of the counterintelligence department and reassigned to Human Resources (HR). In June, he was escorted out of the bureau, and is now the third highest ranking FBI official to be fired for misconduct.

Worth noting, Mr. Strzok and Ms. Page both worked on the Democrat-dominated team assembled by Special Counsel Robert Mueller III. They were fired last summer before members of Congress conducting oversight and the media learned of the content of the messages.

Further, Mr. Strzok steered the FBI from the Clinton case to the investigation into so-called collusion with Russia. Mr. Horowitz said the inspector general review found the most concerning examples of bias and wrongdoing pertained to this pivot.

Devin Nunes, R-Calif., the Chairman of the House Intelligence Committee, confirmed the memo that served as the genesis of the Russia collusion narrative was written by Mr. Strzok.

From left to right: Demoted FBI lawyer Lisa Page, her extramarital lover and reassigned former counterintelligence head Peter Strzok, fired former FBI director James Comey, and fired former FBI deputy director Andrew McCabe. (Photos: Reuters/FBI)

From left to right: Demoted FBI lawyer Lisa Page, her extramarital lover and reassigned former counterintelligence head Peter Strzok, fired former FBI director James Comey, and fired former FBI deputy director Andrew McCabe. (Photos: Reuters/FBI)

The DOJ recently released the documents used to justify the FISA warrant application to spy against Carter Page, a former and peripheral campaign adviser to Mr. Trump.

Section 702 of the Foreign Intelligence Surveillance Act (FISA) allows intelligence agencies to collect information on foreign targets abroad. However, as PPD also previously reported, it has been “routinely” abused and misused to spy on domestic targets, including President Trump, his associates and other U.S. citizens.

The heavily-redacted documents confirm crucial details of the memo largely prepared by Chairman Nunes and the majority on the House Permanent Select Committee on Intelligence (HPSCI).

That includes the allegation that FBI and DOJ officials relied upon the unproven and largely discredited dossier put together by former MI6 British intelligence agent Christopher Steele. The dossier was funded by the Democratic National Committee (DNC) and the campaign for Mrs. Clinton.

The Clinton campaign and DNC hired by the shadowy firm Fusion GPS to conduct opposition research against Mr. Trump. Fusion GPS hired Mr. Steele, who almost exclusively used his Kremlin contacts from his days on the Russian desk at MI6 to source the dossier.

But it’s still clear from the warrant documents that the Obama Administration went out of their way to not fully disclose the political nature of the dossier. Their use of circular reporting to support it and that much of the information in it is materially false.

The DNC and Clinton campaign are identified as Political Party #2 and Candidate #2. Yet, the FBI did not tell the FISC that Political Party #2 and Candidate #2 paid for the dossier as political opposition research against Candidate #1.

With the release of the FISA warrant application, there’s now no doubt that political opposition research was a major component used to justify the initial and subsequent renewals. The non-redacted sections of the released FISA documents do not indicate the dossier was ever verified.

Instead, the FBI claimed Mr. Steele, the former Russian desk head who was reportedly driven out of MI6, was “reliable” based on his previous work.

In January 2018, Senators Chuck Grassley, R-Ia., and Lindsey Graham, R-S.C., sent a a criminal referral for Mr. Steele. It cites potential violations of 18 U.S.C. § 1001, or making false statements to investigators particularly regarding the distribution of claims contained in the dossier.

Mr. Steele fed the dossier to former Associate Deputy Attorney General Bruce Ohr. The former British spy texted Mr. Ohr that they were “very concerned” and “needed some reassurance” in light of Senator Grassley, the Chairman of the Senate Judiciary Committee, probing the nature of his relationship with the FBI.

Mr. Ohr, who also served as the director of the Organized Crime Drug Enforcement Task Forces (OCDETF), was ousted from the fourth floor of “Main Justice” in 2017. He was demoted a second time in January and stripped of his role at the OCDETF for hiding his secret contacts and ties to Fusion GPS.

“Would it be possible to speak later today please?” Mr. Steele asked Mr. Ohr in a text message on March 7, 2017. “We’re very concerned by the Grassley letter and it’s possible implications for us, our operations and our sources. We need some reassurances. Many thanks.”

Lawmakers are now focusing in on Mr. Ohr, as well as former Deputy Attorney General Sally Yates. The two maintained contact with Fusion GPS before, during and after the election, a relationship that continued three months after the FBI terminated its agreement with Mr. Steele.

The FBI concluded on November 1, 2016, that he broke the agreement by leaking parts of the dossier to the media. They characterized him as “not suitable for use” as a confidential source, internal memos show.

Mr. Steele was also seemingly concerned about not having a contact at the FBI or OJ in the event Mr. Ohr was held accountable.

“Thanks. You have my sympathy and support. If you end up out though, I really need another (bureau?) contact point/number who is briefed,” Mr. Steele texted to Mr. Ohr on January 31, 2017. “We can’t allow our guy to be forced to go back home. It would be disastrous all around, though his position right now looks stable.”

His “sympathy and support” is a reference to the firing of Ms. Yates, who was fired for refusing to enforce President Trump’s travel ban. The U.S. Supreme Court recently ruled in favor of the Trump Administration, calling the order “squarely within the scope of Presidential authority.”.

Peter Strzok, the agent at the center

White House Press Secretary Sean Spicer. (Photo: Reuters)

White House Press Secretary Sean Spicer. (Photo: Reuters)

In an interview on Saturday, former White House Press Secretary and Communications Director Sean Spicer said the big difference working for President Donald Trump than other politicians is that “he drives the train,” not “the other way around.”

“You’re sort of considered the subject matter expert on messaging and media and therefore you craft a strategy and a message, talking points and all that,” he said. “You bring them up to the principle you serve and say, ‘Okay, boss. Here’s what I think we should say, here’s how we should do it, here’s when we should do it and what I think we should say about it, and your boss will tweak or edit or approve it.”

“The difference with Trump and the dynamic you’re talking about is that he drives the train, and your job is to sort of follow and amplify as opposed to the other way around.”

Mr. Spicer is referring to a politician being handled by political advisors armed with poll-tested messages. President Trump does not get handled by anyone, which in many instances, works to his benefit. But it can also work against him.

Mr. Spicer’s remarks came during an interview Saturday on the Don Smith Show to discuss his book, The Briefing: Politics, the Press, and the President.

With more than two decades of experience as a political campaign and communications strategist, he also offered his opinion of why President Trump’s message struck such a strong cord with working class Americans.

“So many times working class men and women have heard exactly what my Dad was saying, that politicians would come along and say. ‘I’m going to do this for you. I’m going to fight for this policy, enact things that will get greater economic growth,’ and all this. I think for most people it falls on deaf ears, they say, ‘yeah, we’ve heard this before,'” Mr. Spicer said. “Trump was very specific about understanding the needs working men and women have, which is that their jobs in many cases are at stake because of a lot of these policies, and he was looking after their jobs.”

“Most people are tired. They don’t want policies so much as results. Trump was saying, ‘I want to focus on the result,’ which is your job and your well-being.”

The insider book also offers an inside look into the White House communications shakeup in 2017. Mr. Spicer pulls no punches on the reason behind him leaving the White House.

Anthony Scaramucci, who was fired 10 days after he took over at communications.

Rich Baris, Director of Big Data and PPD’s Election Project Model, who also made an appearance on the Don Smith Show on Saturday, said Mr. Spicer was the first initial first-term press secretary to be “shafted” out of a presidential “honeymoon.”

He also noted that — while the lack of a disciplined poll-tested message helps his authenticity — it can play out terribly wrong, as was the case in Helsinki.

“Sean Spicer is particularly unique. As an employee of President Trump’s Administration, he got shafted out of what Donald Trump got shafted by extension,” he said. “Every president gets a honeymoon period, Don. In all the years we’ve been doing this, even after Bush vs. Gore in 2000, there was still a honeymoon period, even with half the country feeling Bush was an illegitimate president.”

“Donald Trump never got that. And by extension, Sean Spicer, being his first press secretary, never got that benefit, either. So, it was completely unchartered territory,” he added. “He [Spicer] didn’t have a blueprint on how to handle this.”

Sean Spicer’s interview begins after the commercial break at around 12:35 pm EST, or about 34 minutes into the clip below.

Former White House Press Secretary Sean Spicer reveals

Two months ago, I shared some data on private gun ownership in the United States and declared that those numbers generated “The Most Enjoyable Graph of 2018.”

Now I have something even better because it confirms my hypothesis about tax competition being the most effective way of constraining greedy politicians.

To set the stage, check out these excerpts from a heartwarming story in the Wall Street Journal.

Last year’s corporate tax cut is reducing U.S. tax collections, as expected. But that change is likely to ripple far beyond the country’s borders in the years ahead, shrinking other countries’ tax revenue… The U.S. tax law will reduce what other countries collect from multinational corporations by 1.6% to 13.5%… Companies will be more likely to put profits and real investment in the U.S. than they were before the U.S. lowered its corporate tax rate from 35% to 21%, according to the paper. That will leave fewer corporate profits for other countries to tax. And as that happens, other countries are likely to chase the U.S. by lowering their corporate tax rates, too, creating the potential for what critics have called a race to the bottom. …Mexico, Japan and the U.K. rank near the top of the paper’s list of countries likely to lose revenue… Corporate tax rates steadily declined over the past few decades as countries competed to attract investment.

Amen. This was one of my main arguments last year for the Trump tax plan. Lower tax rates in America will lead to lower taxes elsewhere.

For instance, look at what’s now happening in Germany.

Ever since Donald Trump last year unveiled deep tax cuts for companies in America, German industry has been wracked with fears over the economic fallout. …“In the long term, Germany cannot afford to have a higher tax burden than other countries,” warned Monika Wünnemann, a tax specialist at German business federation BDI. …the BDI urges Berlin to cut the overall tax burden, including corporate and trade levies, to a maximum 25 percent, compared to 26 percent in the US. …tax competition has clearly heated up within the European Union: France plans to reduce its top corporate rate to 25 percent by 2022 from 34 percent. The UK wants to cut its rate to 17 percent by 2021 from 20 percent today. If it fails to take action, Germany will be stuck with the heaviest corporate tax burden among industrialized countries.

Now let’s peruse a recent study from the International Monetary Fund.

Tax competition and declining corporate income tax (CIT) rates are not new phenomena. However, over the past 30 years, the United States has been an outlier in not reducing tax rates Combined with the worldwide system of taxation, this is widely regarded as having served as an anchor to world CIT rates. Now the United States has cut its rate by 14 percentage points to 26 percent (21 percent excluding state taxes), which is close to the OECD member average of 24 percent (Figure 1). Combined with the (partial) shift toward territoriality, this may intensify tax competition. …Given the combination of highly mobile capital and source-based corporate income taxation, pressures on tax systems are not surprising. …The most clear-cut, and possibly largest, spillovers are still likely to be caused by the cut in the tax rate. …Depending on parameter assumptions, we find that reform will lead to average revenue losses of between 1.5 and 13.5 percent of the MNE tax base. …The paper has also discussed the likely policy reactions of other countries. …tax rates elsewhere also fall (by on average around 4 percentage points based on tentative estimates).

And here’s the chart from the IMF report that sends a thrill up my leg.

 

As you can see, corporate tax rates have plunged by half since 1980.

And the reason this fills me with joy is two-fold. First, we get more growth, more jobs, and higher wages when corporate rates fall.

Second, I’m delighted because I know politicians hate to lower tax rates. Indeed, they’ve tasked the OECD with trying to block corporate tax competition (fortunately the bureaucrats haven’t been very successful).

And I could add a third reason. The IMF confesses that we have even more evidence of the Laffer Curve.

So far, despite falling tax rates, CIT revenues have held up relatively well.

Game, set, match.

I’m very irked by what Trump is doing on tradegovernment spending, and cronyism, but I give credit where credit is due. I suspect none of the other Republicans who ran in 2016 would have brought the federal corporate tax rate all the way down to 21 percent. And I’m immensely enjoying how politicians in other nations feel pressure to do likewise.

Data from the International Monetary Fund (IMF)

Paul Krugman, the Keynesian Nobel winning economist and New York Times columnist, predicted the market would "never" recover if Donald Trump was elected President of the United States.

Paul Krugman, the Keynesian Nobel winning economist and New York Times columnist, predicted the market would “never” recover if Donald Trump was elected President of the United States.

I’ve been writing about the Laffer Curve for decades, making the simple point that there’s not a linear relationship between tax rates and tax revenue.

To help people understand, I ask them to imagine that they owned a restaurant and decided to double prices. Would they expect twice as much revenue?

Of course not, because people respond. Customers would go to other restaurants, or decide to eat at home. Depending on how customers reacted, the restaurant might even wind up with less revenue.

Well, that’s how the Laffer Curve works. When tax rates change, that alters incentives to engage in productive behavior (i.e., how much income they earn). In other words, to figure out tax revenue, you have to look at taxable income in addition to tax rates.

For some odd reason, this is a controversial issue.

My wayward buddy Bruce Bartlett posted a video on Facebook from Samantha Bee’s Full Frontal show. The goal was to mock the Laffer Curve, and here’s the part of the video featuring economists dismissing the concept as a “joke.”

Wow, that’s pretty damning. Economists from Stanford, Harvard, MIT, and the University of Chicago are on the other side of the issue.

Should I give up and retract all my writings and analysis?

Fortunately, that won’t be necessary since I have an unexpected ally. As shown in this excerpt from the video, Paul Krugman agrees with me about the Laffer Curve.

And Krugman’s not alone. Many other left-leaning economists also admit there is a Laffer Curve.

To be sure, as Krugman noted, there is considerable disagreement about the revenue-maximizing tax rate. Folks on the left often say tax rates could be 70 percent while folks on the right think the revenue-maximizing rate is much lower.

I have two thoughts about this debate.

First, if the revenue-maximizing rate is 70 percent, then why did the IRS collect so much additional revenue from upper-income taxpayers when Ronald Reagan lowered the top rate from 70 percent to 28 percent?

Second, I don’t want to maximize revenue for government. That’s why I always make sure my depictions of the Laffer Curve show both the revenue-maximizing point and the growth-maximizing point. At the risk of stating the obvious, I prefer the growth-maximizing point.

 

Laffer-Curve-graphThe bottom line is that I think the revenue-maximizing point is probably closer to 30 percent, as shown in my chart. Especially in the long run.

But I wouldn’t care if the revenue-maximizing rate was actually 50 percent. Politicians should only collect the relatively small amount of revenue that is needed to finance the growth-maximizing level of government spending.

P.S. As tax rates get closer and closer to the revenue-maximizing point, that means an increasing amount of economic damage per dollar collected.

P.P.S. Paul Krugman is also right that value-added taxes are not good for exports.

Addendum: This post was updated on August 12 to add the clip of selected economists mocking the Laffer Curve.

Even Paul Krugman admits to the existence

A protestor rests next to their big government big mistake sign. (Photo: Reuters)

A protestor rests next to their big government big mistake sign. (Photo: Reuters)

When I give speeches about modern welfare states, I’ll often cite grim data from the IMF, BIS, and OECD about the very depressing fiscal consequences of ever-expanding government.

And if I really want to worry an audience, I’ll augment those numbers by talking about the erosion of societal capital and explain it’s very hard to adopt necessary reforms once the work ethic and self-reliance have been replaced by a culture of dependency and entitlement.

I basically warn people that many western nations (including the United States) are doomed to suffer Greek-style fiscal collapse. Depending on the type of speech, this is where I sometimes share a slide suggesting that there are two possible outcomes once an economic crisis occurs.

  • Does a crisis caused by bad government lead to even more bad government, which is the pessimistic hypothesis in Robert Higgs’ classic, Crisis and Leviathan?
  • Or does an economic crisis force politicians to actually scale back the size and scope of government, which is the hypothesis in Naomi Klein’s The Rise of Disaster Capitalism.

I’ve generally sided with Higgs, though there obviously are cases – such as Chile– where bad statist policies were followed by sweeping economic liberalization.

But, based on new research from the International Monetary Fund, it may be that Klein has a stronger argument (which would be a depressing outcome for her, since she favors bigger government).

Here are some of the issues that the authors investigated.

Relying on a new database of major past labor and product market reforms in advanced countries, we test a large set of variables for robust correlation with reform in each area. …structural reforms are notoriously difficult to implement…one of the most prominent hypotheses put forward in the literature, namely that crisis induces reform… we attempt to minimize value judgements and measurement error by employing a newly constructed “narrative” dataset of major reforms in four areas namely product market regulation (PMR) in network industries, EPL for regular workers, EPL for temporary workers, and unemployment benefit systems. … The large welfare costs of economic or financial crisis can break the deadlock over welfare-enhancing measures that could not be adopted otherwise due to conflict over their distributional consequences.

In short, they wanted to find out whether bad economic news (as captured by data on “GDP growth, deep recession, unemployment, crisis”) leads to pro-market reforms.

The answer is yes.

Our main result supports some form of the crisis-induces-reform hypothesis across all four reform areas. High unemployment, recession and/or an open economic crisis tend to be associated with a greater likelihood of reform. The effect is economically significant. For example, an increase of 10 percentage points in unemployment (as seen in several European economies in the aftermath of the Great Recession) is associated with an increase in the probability to undertake a major EPL reform for regular contract of about 5 percentage points — that is, about twice the average probability in the sample.

Here’s a chart from the report showing a big spike in deregulation in late 1990s/early 2000s.

And here’s a chart showing nations that took steps to cut back on unemployment subsidies.

Keep in mind, by the way, that some nations (such as Austria) may not have reformed because they never adopted bad policies in the first place.

Kudos to Denmark for implementing so much reform. And Greece wins a Booby Prize for failing to adopt desperately needed reforms.

I was also happy to see some results that bolster my argument in favor of jurisdictional competition as a tool to encourage better policy.

We also find evidence that outside pressure increases the likelihood of reform in certain areas. Reforms are more likely when other countries also undertake them.

Interestingly, it doesn’t appear that ideology plays a major role.

…we do not find any evidence for an ideological bias—there is no robust difference between left- and right-of-center governments’ propensity to undertake reform. …In the context of labor and product market reforms, while a reforming right-of-center government may face the combined resistance of the leftwing electorate, trade unions and other civil society groups, a left-of-center government will be less likely to be accused of pushing through reforms on ideological grounds and may therefore be more likely to succeed.

My two cents is that ideology can play a role (think Reagan and Thatcher, for instance), but that there are plenty of instances of putative right-of-center politicians making government bigger (Nixon and Bush, to cite US examples) and several instances of supposed left-of-center politicians overseeing pro-market reforms (Bill Clinton being the obvious example from America).

I’ll close with a very important caveat. The IMF study looked at regulatory policy. There are no lessons to be learned from this research about whether crises produce better fiscal policy.

For what it’s worth, based on all the post-financial-crisis tax increases that were imposed in Europe, I suspect that the Higgs hypothesis is still very relevant.

Do economic crises caused by bad government

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