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Senate Minority Leader Chuck Schumer (D-NY) speaks after the Democratic policy luncheon on Capitol Hill in Washington, U.S., January 9, 2018. (Photo: Reuters)

Senate Minority Leader Chuck Schumer (D-NY) speaks after the Democratic policy luncheon on Capitol Hill in Washington, U.S., January 9, 2018. (Photo: Reuters)

On Monday, Democrats in the U.S. Senate caved after shutting down the government in an effort to legalize between 700,000 to 5 million illegal immigrants currently in the United States under the Deferred Action for Childhood Arrivals (DACA) program.

Minority Leader Chuck Schumer, D-N.Y., had attempted to paint the stalemate as the Trump Shutdown, but it didn’t work. After days of the #SchumerShutdown hashtag trending on social media, Red State Democrats in states the president won overwhelmingly bailed on their party, and only 18 Democrats voted “No” to break the filibuster and reopen the government.

During the shutdown showdown, Minority Leader Schumer said on the floor of the U.S. Senate that after a White House meeting Friday with President Trump, he believed “in my heart” that they could reach an agreement on DACA. The New York Democrat claimed he “reluctantly” offered concessions to President Trump on his immigration reform demands, including funding for the border wall.

He went on to claim President Trump “backed off at the first sign of pressure.”

But according to multiple sources with knowledge of what was said during that meeting, Senator Schumer was not telling the truth.

The two men never came to an agreement during the meeting at the White House. Mr. Schumer offered funding for “The Wall” on the southern border with Mexico, but refused to agree to end chain migration and the Diversity Immigrant Visa (DV) Program. For months, President Trump has publicly and privately stated that these are two deal-breakers for any immigration reform legislation passed in Congress and sent to his desk.

On Twitter in September, he said it “cannot be allowed,” indicating he would use his veto power.

Chain migration refers to the endless chains of foreign nationals who are allowed to immigrate to the U.S. because citizens and lawful permanent residents are allowed to sponsor their non-nuclear family members. Annual immigration has at least tripled since chain migration began in the mid-1960s, though some estimates are even higher.

In 2001, the U.S. admitted 1,064,318 immigrants, roughly 4 times greater than in the 1950s. As the Federation for American Immigration Reform (FAIR) notes, that’s enough people to populate or even create a major city the size of Chicago, Illinois.

Only five years after chain migration began, the number of immediate relative admissions nearly doubled from 32,714 in 1965 to 79,213 in 1970. Thirty-six years later, the number of immediate relatives admitted was more than 13 times higher–443,964.

It has led to millions being consigned to visa waiting lists and chain migration further incentivized illegal immigration, which has been exacerbated by programs like DACA.

It is also dangerous, and has led to the importation of Islamic terrorism.

The Department of Homeland Security (DHS) confirmed Akayed Ullah, 27, a Bangladeshi national living in Brooklyn — the suspect behind an attempted terror attack on the Port Authority in New York City — was in the U.S. due to chain migration.

In September, President Trump  called on the U.S. Congress to “immediately terminate” the Diversity Immigrant Visa (DV) Program. As PPD was first to report, Sayfullo Saipov, the 29-year-old Uzbekistan national who killed 8 and injured at least 11 others during a terror attack near the World Trade Center in November, came to the U.S. under the program in 2010.

Contrary to his version of events, multiple sources confirm Senator Schumer told the president during their meeting on Friday that he would not agree to ending either one of these programs. In response, President Trump told the minority leader in no uncertain terms that there would be no deal on DACA without those concessions.

A new Harvard-Harris Poll finds Americans overwhelmingly agree with President Trump on the two issues and roughly 8 in 10 want legal immigration levels to be reduced. When polling on the shutdown began to turn on Democrats, who now erased their double-digit generic ballot lead, the shutdown-for-DACA coalition crumbled.

A memo leaked roughly a week before the shutdown provides some insight into their position.

A week before the shutdown, a memo circulated and co-authored by former Clinton communications director Jennifer Palmieri, urged congressional Democrats not to support any funding measure to keep the government open unless they can attach a deal on DACA. It states that legalizing so-called “Dreamers” is a “critical component” of the party’s “future electoral success.”

The memo confirmed what most Republicans have argued for years — Democrats use illegal immigration as a voter registration invasion.

“In short, the next few weeks will tell us a lot about the Democratic Party and its long-term electoral prospects.”

By pushing for a deal on DACA without ending chain migration, Mr. Schumer was hoping to ensure future waves of “Dreamers” and amnesty-like deals to build a new electoral coalition.

Minority Leader Chuck Schumer, D-N.Y., claimed to

U.S. Attorney General Jeff Sessions at the Justice Department in Washington, D.C., on July 20, 2017. (Photo: Reuters)

U.S. Attorney General Jeff Sessions at the Justice Department in Washington, D.C., on July 20, 2017. (Photo: Reuters)

Attorney General Jeff Sessions on Monday announced the Justice Department (DOJ) is searching for missing text messages sent between Peter Strzok and Lisa Page, two corrupt FBI officials tied to Special Counsel Robert Mueller III.

“We will leave no stone unturned to confirm with certainty why these text messages are not now available to be produced and will use every technology available to determine whether the missing messages are recoverable from another source,” Attorney General Sessions said in a statement. “I have spoken to the Inspector General and a review is already underway to ascertain what occurred and to determine if these records can be recovered in any other way.”

The announcement came after the Federal Bureau of Investigation (FBI) claimed they had “failed to preserve” five months of texts between Mr. Strzok and his lover, Ms. Page. DOJ informed the relevant congressional committees of the missing text messages on Friday, while they were calling for Justice to release a memo detailing widespread spying abuses under the Obama Administration.

The two were having an affair before Mr. Mueller let them go in an attempt to save the credibility of his highly criticized investigation.

“After reviewing the voluminous records on the FBI’s servers, which included over 50,000 texts, the Inspector General discovered the FBI’s system failed to retain text messages for approximately 5 months between December 14, 2017 to May 17, 2017,” Attorney General Sessions added. “If any wrongdoing were to be found to have caused this gap, appropriate legal disciplinary action measures will be taken.”

The FBI agent and lawyer were involved in an effort to undermine President Trump before and after the 2016 presidential election, joining the chorus of Republican lawmakers who are eager to recover the exchange. They discussed needing to talk to “Andy” about an “insurance policy” in the event President Trump defeated Hillary Clinton,

Text messages recently obtained insinuate that former AG Loretta Lynch knew the investigation into Mrs. Clinton was a sham that would not result in an indictment. Ms. Lynch said she would defer to career prosecutors on the decision after she was caught meeting with Bill Clinton in secret on a tarmac in Phoenix.

According to the text messages, she already knew those “career prosecutors” were never going to bring a case.

Attorney General Jeff Sessions on Monday announced

The U.S. Capitol Building in Washington D.C.

The U.S. Capitol Building in Washington D.C.

The U.S. Senate on Monday voted overwhelmingly 81 to 18 to end the Democratic filibuster over illegal immigration and moved to end a 3-day long partial government shutdown. The upper chamber now moves to vote on a deal to reopen the government, which includes a very short-term spending gap and a promise to work on a bill to protect illegal immigrants.

“I want to thank the Democratic leader for his indication that he would support this measure,” Majority Leader Mitch McConnell, R-Kty., said on the floor of the Senate before the vote. “If we learned anything from this process, it’s that shutting down the government over illegal immigration is something the American people didn’t understand, and won’t in the future.

Democrats waged a filibuster to oppose the measure because it does not include a provision to grant legal status to roughly 800,000 illegal immigrants currently in the U.S. under Deferred Action for Childhood Arrivals (DACA).

Minority Leader Chuck Schumer, D-N.Y., tweeted before the vote closed.

The U.S. Senate on Monday voted overwhelmingly

The Federal Reserve Bank of Chicago. (Photo: AP)

The Federal Reserve Bank of Chicago. (Photo: AP)

The Chicago Fed National Activity Index (CFNAI) indicated stronger-than-expect growth in December, gaining 0.27 in December from a revised 0.11 in November. That slightly beats the already elevated 0.25 consensus forecast.

Two of the four broad categories of indicators increased from November, and three of the four categories made positive contributions to the index. The CFNAI-MA3, the index’s three-month moving average, ticked down slightly to 0.42 in December from 0.43 in November.

The Chicago Fed National Activity Index (CFNAI)

U.S. Vice President Mike Pence and his wife Karen wave as they landed at Tel Aviv airport Sunday, Jan. 21, 2018. Pence will pay a three day visit to Israel. (Photo: AP)

U.S. Vice President Mike Pence and his wife Karen wave as they landed at Tel Aviv airport Sunday, Jan. 21, 2018. Pence will pay a three day visit to Israel. (Photo: AP)

U.S. Vice President Mike Pence told the Knesset the U.S. Embassy will be moved from Tel Aviv to Jerusalem by the end of 2019, ahead of schedule. His remarks, which received a standing ovation, came during the first ever address by a sitting U.S. vice president to the Israeli parliament.

“The United States has chosen fact over fiction — and fact is the only true foundation for a just and lasting peace,” Vice President Pence said. “Jerusalem is Israel’s capital. In the weeks ahead, our administration will advance its plan to open the U.S. Embassy in Jerusalem, and the Embassy will open by the end of next year.”

In December, President Donald Trump made the “historic decision” to recognize Jerusalem as the capital of Israel. President Trump said it was “long overdue” and “the right thing to do,” adding that Israel “like every other sovereign nation has the right to determine its capital.”

The revelation the plans are moving ahead of schedule aren’t particularly surprising. Almost immediately after the decision, Secretary Rex W. Tillerson said the State Department would “immediately” begin “preparations to move the U.S. Embassy from Tel Aviv to Jerusalem.”

The decision not only fulfills a major campaign promise to religious conservatives and the vast majority of Americans who support Israel but also a 22-year old national promise to the key ally.

In 1995, Congress passed The Jerusalem Embassy and Relocation Act, which recognizes Jerusalem as the capital of Israel and called for moving the U.S. Embassy from Tel Aviv to Jerusalem. Waivers are permitted by presidents in the event national security is a concern, which President Trump signed in June.

U.S. Vice President Mike Pence walks with Israel’s Prime Minister Benjamin Netanyahu in Jerusalem, Monday, Jan. 22, 2018. Pence is receiving a warm welcome in Israel, which has praised the American decision last month to recognize Jerusalem as Israel’s capital. The decision has infuriated the Palestinians and upset America’s Arab allies as well. (Photo: AP)

U.S. Vice President Mike Pence walks with Israel’s Prime Minister Benjamin Netanyahu in Jerusalem, Monday, Jan. 22, 2018. Pence is receiving a warm welcome in Israel, which has praised the American decision last month to recognize Jerusalem as Israel’s capital. The decision has infuriated the Palestinians and upset America’s Arab allies as well. (Photo: AP)

Israeli Prime Minister Benjamin Netanyahu, who spoke before Vice President Pence, praised the Trump Administration. He called Mr. Pence “a great friend of Israel” and said there was “no alternative for American leadership” regarding the Middle East peace process.

“Whoever is not ready to talk with the Americans about peace — does not want peace,” he said, a remark meant to answer Palestinian criticisms.

The Palestinians said it was no longer acceptable for the U.S. to be the mediator in the Mid-East peace process, something that has stalled amid hardliners on both sides gaining power. Mahmoud Abbas was elected under the flag of the political wing of the terrorist group Hamas, and is too often pushed away from a position of truly supporting a two-state solution.

Vice President Pence urged the Palestinians to return to the negotiation table and said the administration will support a two-state solution if both parties agree.

“Peace can only come through dialogue,” he said.

The Trump Administration has been much more pro-Israel than his predecessor. While the Obama Administration had been working with the United Nations (UN) against or to punish our key ally in the region, the Trump White House has done just the opposite.

In October, President Trump announced he had withdrawn the U.S. from UNESCO, citing badly-needed reforms and a continued anti-Israel bias. The United Nations Educational, Scientific and Cultural Organization (UNESCO) has long been under fire for exposed corruption and bias that continues to go unaddressed.

U.S. Vice President Mike Pence told the Knesset,

Vice President Mike Pence looks on with President Donald Trump during a meeting with Senate Minority Leader Chuck Schumer, D-N.Y., and other Congressional leaders in the Oval Office of the White House, Wednesday, Sept. 6, 2017, in Washington. (Photo: AP)

Vice President Mike Pence looks on with President Donald Trump during a meeting with Senate Minority Leader Chuck Schumer, D-N.Y., and other Congressional leaders in the Oval Office of the White House, Wednesday, Sept. 6, 2017, in Washington. (Photo: AP)

The U.S. Senate adjourned on Sunday without lawmakers reaching a deal to end the partial government shutdown. A bipartisan group of 18 senators had been negotiating on the terms of a shorter-term deal to vote on around 1:00 AM EST.

“The shutdown should stop today,”Senate Majority Leader Mitch McConnell, R-Kty., said on the Senate floor Sunday evening. “And we’ll soon have a vote that will allow us to do that.”

He called for lawmakers to “step back from the brink.”

“The shutdown should stop today,” McConnell, R-Ky., said on the Senate floor Sunday evening. “And we’ll soon have a vote that will allow us to do that.”

The 28-day short-term spending bill that passed the U.S. House of Representatives would have kept the government open until February 16, but it failed to pass the upper chamber.

The group was weighing a deal that would have included a continuing resolution (CR) that would fund the government only to February 8 in exchange for a pledge to address immigration policy. Democrats waged a filibuster to oppose the measure because it does not include a provision to grant legal status to roughly 800,000 illegal immigrants currently in the U.S. under Deferred Action for Childhood Arrivals (DACA).

“The American people cannot begin to understand why the Senate Democratic leader thinks the entire government should be shut down until he gets his way on illegal immigration,” Leader McConnell added.

The House bill funded the healthcare of nearly 9 million American children and critical needs of the U.S. military. It failed in the Senate by a 50-49 vote, which broke largely along party lines. Senate Democrats who voted for the measure are all vulnerable incumbents up for reelection in 2018 from states President Trump won, handily.

A new CNN poll finds Republicans have cut their double-digit deficit on the generic ballot more than in half, with Democrats now only leading by 5 points rounded up. Separate polling shows the blame is falling on Democrats and Americans are more inclined to side with Republicans on the issue.

A 56% majority of Americans say approving a budget to avoid a government shutdown was more important than passing a bill to maintain the DACA program. Only about 1 in 3, 34%, said DACA was worth a shutdown. A 57% majority of independents agree with Republicans that avoiding a government shutdown is more important than finding a solution on DACA solution.

“I think they miscalculated on the shutdown,” Senate Majority Whip John Cornyn, R-Texas, said. “It’s very unpopular and they’re trying to find a way out of it.”

Only 34% of independents say a DACA solution is more important. Worth noting, there is no DACA solution at the moment. Democrats have not put forward a bill and the previous outline violated the negotiated terms of the bipartisan agreement hatched at the White House two weeks ago.

recently leaked memo urged Democrats not to support any funding measure to keep the government open unless they can attach a deal on Deferred Action for Childhood Arrivals (DACA). It states that legalizing so-called “Dreamers” is a “critical component” of the party’s “future electoral success.”

“In short, the next few weeks will tell us a lot about the Democratic Party and its long-term electoral prospects.”

Overall, 8 in 10 Americans say it is extremely or very important to fund CHIP.

Meanwhile, national parks and other services remain open as directed by the White House. Under Barack Obama, these parks were closed by executive direction in an effort to maximize the impact and score political points. The Trump Administration has chosen not to do that.

Lawmakers are expected to meet at 10:00 AM EST on Monday. A vote to break the Democratic filibuster is scheduled for noon.

The U.S. Senate adjourned on Sunday without

John Cornyn (R-TX) arrive to speak with reporters following the party luncheons on Capitol Hill in Washington, U.S. November 14, 2017. (Photo: Reuters)

John Cornyn (R-TX) arrive to speak with reporters following the party luncheons on Capitol Hill in Washington, U.S. November 14, 2017. (Photo: Reuters)

Majority Leader Mitch McConnell, R-Kty., said the U.S. Senate will vote to break the Democratic filibuster and end the shutdown will happen by 1:00 AM EST on Monday. The short-term spending bill that passed the U.S. House of Representatives, which would have kept the government open until February 16, failed to pass the upper chamber.

“I asked for consent to move up a vote on this bipartisan solution and end this craziness. The Democrats objected,” Leader McConnell said late Saturday. “That won’t work forever. If they continue to object, we cannot proceed to a cloture vote until 1 a.m. Monday.”

“But I assure you, we will have the vote at 1 a.m. Monday, unless there is a desire to have it sooner.”

Sources tell People’s Pundit Daily (PPD) Leader McConnell is likely to attempt a vote on a continuing resolution (CR) that would fund the government only to February 8 — less time than the initial 28-day CR passed in the lower chamber.

The House bill funded the healthcare of nearly 9 million American children and critical needs of the U.S. military. It failed in the Senate by a 50-49 vote, which broke largely along party lines. Senate Democrats who voted for the measure are all vulnerable incumbents up for reelection in 2018 from states President Trump won, handily.

Indiana Senator Joe Donnelly, North Dakota Senator Heidi Heitkamp, Alabama Senator Doug Jones, West Virginia Senator Joe Manchin and Missouri Senator Claire McCaskill joined with all but five Republicans.

But as a party, Democrats oppose the measure because it does not include a provision to grant legal status to roughly 800,000 illegal immigrants currently in the U.S. under Deferred Action for Childhood Arrivals (DACA).

The slim 51-vote Republican majority in the U.S. Senate is not sufficient to meet a 60-vote threshold for appropriation bills. The GOP has been making an extremely effective argument and branded the filibuster result the Schumer Shutdown, after Minority Leader Chuck Schumer, D-N.Y., and polling is not looking good for Democrats.

A new CNN poll finds Republicans have cut their double-digit deficit on the generic ballot more than in half, with Democrats now only leading by 5 points rounded up. Separate polling shows the blame is falling on Democrats and Americans are more inclined to side with Republicans on the issue.

A 56% majority of Americans say approving a budget to avoid a government shutdown was more important than passing a bill to maintain the DACA program. Only about 1 in 3, 34%, said DACA was worth a shutdown. A 57% majority of independents agree with Republicans that avoiding a government shutdown is more important than finding a solution on DACA solution.

Only 34% of independents say a DACA solution is more important. Worth noting, there is no DACA solution at the moment. Democrats have not put forward a bill and the previous outline violated the negotiated terms of the bipartisan agreement hatched at the White House two weeks ago.

recently leaked memo urged Democrats not to support any funding measure to keep the government open unless they can attach a deal on Deferred Action for Childhood Arrivals (DACA). It states that legalizing so-called “Dreamers” is a “critical component” of the party’s “future electoral success.”

“In short, the next few weeks will tell us a lot about the Democratic Party and its long-term electoral prospects.”

Those prospects are currently outweighing the need to fund the Children’s Health Insurance Program (CHIP), which currently provides coverage to 8,900,074 American children. Funding for CHIP lapsed as of September 30, 2017. The House Republican plan to fund the government includes a six-year extension of the popular program.

Overall, 8 in 10 Americans say it is extremely or very important to fund CHIP.

Meanwhile, a recorded voicemail message at the White House has Democrats triggered.

“Thank you for calling the White House, unfortunately, we cannot answer your call today because congressional Democrats are withholding government funding, including funding for our troops and other national security priorities, hostage to an unrelated immigration debate,” the voicemail states. “Due to this obstruction, our government is shut down.”

In reality, national parks and other services remain open as directed by the White House. Under Barack Obama, these parks were closed by executive direction in an effort to maximize the impact and score political points. The Trump Administration has chosen not to do that.

White House Legislative Affairs Director Marc Short said Democrats are having a “2-year-old temper tantrum.”

“The White House position remains the same,” he said. “We will not negotiate the status of 690,000 unlawful immigrants while hundreds of millions of taxpaying Americans, including hundreds of thousands of our troops in uniform and border agents protecting our country, are held hostage by Senate Democrats.”

While estimates vary, the number of DACA recipients could be as high as 4 or 5 million under the proposed fix.

Majority Leader Mitch McConnell, R-Kty., said the

WASHINGTON, : A generic photo of the Washington, D.C. building that houses the Export-Import Bank, the Veterans Affairs Office of Construction, Board of Veterans Appeals, and the Administrative Office of the US Courts.

WASHINGTON, : A generic photo of the Washington, D.C. building that houses the Export-Import Bank, the Veterans Affairs Office of Construction, Board of Veterans Appeals, and the Administrative Office of the US Courts.

With apologies to Elizabeth Barrett Browning, here’s the opening of the big-business version of Sonnet 43.

How do I hate thee, capitalism? Let me count the ways.
I hate thee to the depth and breadth and height
My soul can reach, for I am big and competition is a threat
Better to have bailoutssubsidiesmandatesprotectionism, and cronyism.

I wish this was just empty satire. Sadly, however, there are many examples of big businesses fighting against free enterprise.

And now we have a new example.

The head of a huge investment fund has implied that businesses should become social justice warriors, a missive that (predictably) led to some fawning coverage in the New York Times.

Laurence D. Fink, founder and chief executive of the investment firm BlackRock, is going to inform business leaders that their companies need to do more than make profits — they need to contribute to society as well if they want to receive the support of BlackRock. …“Society is demanding that companies, both public and private, serve a social purpose,” he wrote in a draft of the letter that was shared with me.

Actually, as Walter Williams has eloquently explained, businesses perform a very valuable social purpose when they earn profits.

Indeed, the free enterprise system is why we enjoy unimaginable prosperity and why poor people in the United States have higher living standards than the average person in a socialist economy.

But that’s not the point Mr. Fink is making. Instead, he’s giving aid and comfort to the interventionists and redistributionists who want politicians and bureaucrats to have more power.

Which is, of course, the angle the New York Times chose to highlight.

It may be a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism. …for the world’s largest investor to say it aloud — and declare that he plans to hold companies accountable — is a bracing example of the evolution of corporate America. …Mr. Fink’s declaration…pits him, to some degree, against many of the companies that he’s invested in, which hold the view that their only duty is to produce profits for their shareholders, an argument long espoused by economists like Milton Friedman.

Friedman was right, of course.

And not just about the value of profits. He also pointed out that people like Mr. Fink play a very destructive role.

Friedman wrote…in this very newspaper. “Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

Amen.

So why would a fabulously rich man like Mr. Fink engage in this kind of stunt.

There are three possible explanations.

  1. He’s stupid. But I think we can eliminate that possibility by virtue of what he has achieved.
  2. He sincerely believes that businesses should sacrifice profits to pursue social justice. If that’s the case, I would suggest he lead by example by voluntarily giving the government 90 percent of his income over $200,000 per year (sort of a do-it-yourself version of 1950s tax policy). Needless to say, I’m not holding my breath. Rich people who decide to become left-wing always seem to want to appease their feelings of guilt by coercing other people into giving more money to politicians.
  3. He realizes his letter is a bunch of nonsense, but he wants to appease the left in order to shield his industry from bad policies such as an increase in capital gains taxes on “carried interest.” If this is the right answer, I sympathize with Mr. Fink’s policy objective (especially since higher taxes on carried interest would be the precursor for higher taxes on other forms of capital gains), but I very much disagree with his tactics.

Indeed, I have a suggestion for Republicans on Capitol Hill, one that I’ve made in the past when big businesses have urged tax hikes.

They should invite Mr. Fink to testify and ask him whether he supports higher taxes to achieve warm and fuzzy goals. Assuming he then says yes, they should then ask how much of his income he is voluntarily giving to Washington.

He’ll presumably say none (like all the other rich leftists), at which point they should rake him over the coals for hypocrisy,

And then they should ask him for a yes-or-no answer on whether he will support legislation specifically increasing the tax rate on CEOs of investment funds.  And follow that with a question of whether he endorses higher capital gains taxes on carried interest (a class-warfare levy that would be very painful for firms that specialize in private equity investments.

Last but not least, they should ask him for examples of BlackRock choosing unprofitable (or even less-profitable) investments in order to “serve a social purpose.” It would be somewhat amusing to see the reaction of investors if Fink actually named examples (and amusing to expose an additional layer of hypocrisy if he didn’t).

Here’s my bottom line on this issue. If Mr. Fink wants to be an effective advocate of social justice, properly defined, then he should concentrate on making very wise (i.e., profitable) investments. Because getting a healthy return on his investments would be the best possible evidence that he was helping the poor.

There are many examples of big businesses

Sodas are displayed at a Walmart store in Secaucus, New Jersey, November 11, 2013.

Sodas are displayed at a Walmart store in Secaucus, New Jersey, November 11, 2013.

Here are three things I’ve written about tax policy. See if you can detect a pattern:

  • I’ve written that I don’t want a value-added tax because the money would be used to finance bigger government.
  • I’ve also explained I don’t want a carbon tax because the revenue from such a levy would finance bigger government.
  • I’ve given thumbs down to financial transactions taxes as well because I don’t want to finance bigger government.

Just in case it’s not obvious, the common theme is that I don’t want to give politicians new sources of revenue that would be used to expand the burden of government spending.

Some of my technocrat friends get upset by these writings. They argue, often correctly, that some of these taxes are not as destructive as the current tax code.

My response is that they’re making an irrelevant argument. Politicians who advocate the above taxes are not proposing to eliminate the income tax and repeal the 16th Amendment. Instead, they simply want to levy a new tax without fully repealing the awful system that already exists.

And now there’s a new tax idea gaining steam.

The Task Force on Fiscal Policy for Health…will examine the evidence on excise tax policy for health, including barriers to implementation, and make recommendations on how countries can best leverage fiscal policies to yield improved health outcomes for their citizens with the added benefit of bringing in additional revenue.

For readers who aren’t familiar with DC bureaucrat-speak, “leverage fiscal policies” means higher taxes. More specifically, advocates want higher “sin taxes” on unhealthy food and drink.

This Task Force is being spearheaded by Larry Summers (yes, that Larry Summers) and Mike Bloomberg (yes, that Mike Bloomberg) so it’s no surprise that this pair of leftists view “additional revenue” as an “added benefit.”

While my focus is on the negative fiscal and economic consequences of higher taxes and more spending, it’s worth pointing out the moral and practical argument against sin taxes.

Bill Wirtz, in a column for CapX, warns that nanny-state policies treat people as infants.

2017 has seen yet another increase in lifestyle regulations and sin taxes… Historically, it was social conservatives pushing for this kind of meddling. …How different is today’s excruciatingly irritating public health lobby…? Food and non-alcoholic drinks are…under fire, and blamed for a range of health issues. France and Ireland are now cracking down on that scourge on society: fizzy drinks. Ireland introduced a new tax on sugary drinks, while France increased the tax created in 2012 under French president Nicolas Sarkozy. Such policies are highly regressive… When Denmark introduced its controversial tax on fatty foods, consumers simply switched to cheaper – but equally unhealthy – alternatives. The country’s diet did not improve. …We are adults and we sometimes make decisions for ourselves which are unhealthy. The answer is for us to moderate our consumption, not quasi-prohibition. It’s time to stop infantilising the…consumer.

Charles Hughes of the Manhattan Institute reviews what happened with a new sin tax on sweetened beverages in Seattle.

Seattle recently became the latest major city to enact a sweetened beverage tax. …customers are reeling from sticker shock. One local reporter found that the tax added $10.34 to a case of Gatorade, bringing the final price to more than $26.00. …One of the justifications for beverage taxes is that customers will respond to price changes by reducing consumption of taxed beverages. The mechanism here is straightforward: tax something to get less of it. If people were to substitute diet sodas or other, less-harmful beverages for sugared sodas, they would be healthier.

But will such a policy work?

Many people are likely to avoid the tax by traveling to other untaxed locations to purchase groceries. Costco tells its customers about locations outside the city that are not subject to the beverage tax. …so the tax will have limited success in its health-related goals while also harming local businesses and failing to generate revenue.

Yet the fact the tax will be a failure at generating revenue isn’t stopping the city was squandering the money.

…revenue has already been allocated to a smorgasbord of causes, ranging from $500,000 for displaced worker retraining, to more than $1 million in tax administration costs, to vouchers to purchase fruits and vegetables.

While I’m glad consumers are escaping the tax by buying beverages from outside the city’s borders, in an ideal world, they would react in a bolder fashion.

 

If nothing else, the pro-tax crowd has a very elastic definition of sin.

They even want to tax meat.

Move over, taxes on carbon and sugar: the global levy that may be next is meat. Some investors are betting governments around the world will find a way to start taxing meat production… Meat could encounter the same fate as tobacco, carbon and sugar, which are currently taxed in 180, 60, and 25 jurisdictions around the world, respectively, according to a report Monday from investor group the FAIRR (Farm Animal Investment Risk & Return) Initiative. Lawmakers in Denmark, Germany, China and Sweden have discussed creating livestock-related taxes in the past two years.

By the way, the supposed Conservative Party in the United Kingdom is pushing sin taxes to finance bigger government.

The sugar tax was announced by Chancellor Philip Hammond in his budget statement in 2017. He said the money raised as part of the levy would go to the Department for Education. The former Chancellor said the new levy would be put on drinks companies and they would be taxed according to how much sugar was in their beverages. Two categories of taxation are set to come into force. One on the total sugar content on drinks with more than 5g per 100ml and a higher levy for drinks with 8g per 100ml or more. …The new tax could whack up the cost of a 2 litre bottle of Coca-Cola (10.6g per 100ml) by as much as 48p.

The nanny-state crowd complains that this isn’t enough.

Health campaigners have said the fizzy drinks tax should be extended to cover all chocolate, sweets and other confectionery containing the highest levels of sugar. …Action on Sugar is urging a mandatory levy set at a minimum of 20 per cent on all confectionery products that contain high levels of sugar.

Politicians in other nations also are using this excuse to extract more money from the citizenry.

Other countries have introduced similar measures and have seen some success in reducing the drinking of fizzy drinks. Mexico introduced a 10 per cent tax on sugary drinks in 2014 and saw a 12 per cent reduction over the first year. Hungary brought in a tax on the drinks companies and saw a 40 per cent decrease in the amount of sugar in the products. Brits will be joining some of our European neighbours with the move with similar measures in place on drinks in France and Finland and the Norwegians chocolate tax.

Let’s sum this up. The case against sin taxes is based on two simple principles.

  1. Politicians want to seize more of our money in order to have greater ability to buy votes. Saying no to tax increases is a necessary (though sadly not sufficient) condition for good fiscal policy.
  2. Politicians want to tell us how to live our lives. But that’s not their job, even in cases where I agree with the underlying advice. Coerced good behavior is not a sign of virtue.

The bottom line is that some proponents of sin taxes presumably have their hearts in the right place. But they need their brains in a good place as well. If they want to be taken seriously, at the very least they should match their proposed sin taxes with permanent repeal of an existing tax of similar magnitude.

For example, offer to trade a sugar tax for repeal of the death tax. Or suggest a fat tax accompanied by elimination of the capital gains tax.

Until we see such offers, advocates of sin taxes should be met with unyielding opposition.

While some proponents of the sin taxes

Forza Italia party leader Silvio Berlusconi waves as he leaves after the news conference about the Lombardy autonomy referendums in Milan, Italy, October 18, 2017. (Photo: Reuters)

Forza Italia party leader Silvio Berlusconi waves as he leaves after the news conference about the Lombardy autonomy referendums in Milan, Italy, October 18, 2017. (Photo: Reuters)

To put it mildly, Italy’s economy is moribund. There’s been almost no growth for the entire 21st century. Bad government policy deserves much of the blame.

According to Economic Freedom of the World, Italy is ranked only 54th, the worst score in Western Europe other than Greece. The score for fiscal policy is abysmal and regulatory policy and rule of law are also problem areas.

Moreover, thanks to decades of excessive government spending, the nation also has very high levels of public debt. Over the last few years, it has received official and unofficial bailouts from the International Monetary Fund and the European Central Bank, and Italy is considered at high risk for a budgetary meltdown when another recession occurs.

And let’s not forget that the country faces a demographic death spiral.

You don’t have to believe me (though you should).

Others have reached similar conclusions. Here are excerpts from some VoxEU research.

Italy will increasingly need to rely on growth fundamentals to sustain its public debt. Unfortunately, the fundamentals do not look good. Not only was Italy severely battered by Europe’s double dip recession (its GDP is lower today than it was in 2005) but when we look at the growth of labour productivity…, we can see that Italy has been stagnating since the mid-90s. …At the end of 2016, Italy’s central government debt was the third-largest in the world…, at $2.3 trillion. …a debt crisis in Italy could trigger a global financial catastrophe, and could very possibly lead to the disintegration of the Eurozone. To avoid such a scenario, Italy must revive growth…a tentative policy prescription is for Italy, to remove those institutional barriers (such as corruption, judicial inefficiency and government interference in the financial sector) that stifle merit and contribute to cronyism.

Desmond Lachman of the American Enterprise Institute paints a grim picture.

Italy’s economic performance since the Euro’s 1999 launch has been appalling. …an over-indebted Italian economy needs a coherent and reform-minded government to get the country quickly onto a higher economic growth path. …since 2000, German per capita income has increased by around 20 percent, that in Italy has actually declined by 5 percent. Talk about two lost economic decades for the country. …if Italy is to get itself onto a higher economic growth path, it has to find ways improve the country’s labor market productivity… It has to do so through major economic reforms, especially to its very rigid labor market…being the Eurozone’s third largest economy, Italy is simply too big to fail for the Euro to survive in its present form. However, it is also said that being roughly ten times the size of the Greek economy, a troubled Italian economy would be too big for Germany to save.

Even the IMF thinks pro-market reforms are needed.

Average Italians still earn less than two decades ago. Their take-home pay took a dip during the crisis and has still not yet caught up with the growth in key euro area countries. …a key question for policymakers is how to enhance incomes and productivity… In the decade before the global financial crisis, Italy’s spending grew faster than its income, in important part because of increases in pensions. …The tax burden is heavy…a package of high-quality measures on the spending and revenue side the country could balance the need to support growth on the one hand with the imperative of reducing debt on the other. Such a package includes…lower pension spending that is the second highest in the euro area; and lower tax rates on labor, and bringing more enterprises and persons into the tax net. …together with reforms of wage bargaining and others outlined above, can raise Italian incomes by over 10 percent, create jobs, improve competitiveness, and substantially lower public debt.

There’s a chance, however, that all this bad news may pave the way for good news. There are elections in early March and Silvio Berlusconi, considered a potential frontrunner to be the next Prime Minister, has proposed a flat tax.

Bloomberg has some of the details.

A flat tax for all and 2 million new jobs are among the top priorities in the draft program of former premier Silvio Berlusconi’s Forza Italia party… The program aims to relaunch the euro region’s third-biggest economy…and recoup the ground lost in the double-dip, record-long recession of the 2008-2013 period. …Forza Italia’s plan doesn’t cite a level for the planned flat income tax for individuals, Berlusconi has said in recent television interviews it should be 23 percent or even below that. The written draft plan says a flat tax would also apply to companies. The program pursues the balanced budget of the Italian state and calls public debt below 100 percent of GDP a “feasible” goal. It is currently above 130 percent.

Wow. As a matter of principle, I think a 23-percent rate is too high.

But compared to Italy’s current tax regime, 23 percent will be like a Mediterranean version of Hong Kong.

So can this happen? I’m not holding my breath.

The budget numbers will be the biggest obstacle to tax reform. The official number crunchers, both inside the Italian government and at pro-tax bureaucracies such as the International Monetary Fund, will fret about the potential for revenue losses.

In part, those concerns are overblown. The high tax rates of the current system have hindered economic vitality and helped to produce very high levels of evasion. If a simple, low-rate flat tax is adopted, two things will happen.

  • There will be more revenue than expected because of better economic performance.
  • There will be more revenue than expected because of a smaller underground economy.

These things are especially likely in Italy, where dodging tax authorities is a national tradition.

That being said, “more revenue than expected” is not the same as “more revenue.” The Laffer Curve simply says that good policy produced revenue feedback, not that tax cuts always pay for themselves (that only happens in rare circumstances).

So if Italy wants tax reform, it will also need spending reform. As I noted when commenting on tax reform in Belgium, you can’t have a bloated public sector and a decent tax system.

Fortunately, that shouldn’t be too difficult. I pointed out way back in 2011 that some modest fiscal restraint could quickly pay big dividends for the nation.

But can a populist-minded Berlusconi (assuming he even wins) deliver? Based on his past record, I’m not optimistic.

Though I’ll close on a hopeful note. Berlusconi and Trump are often linked because of their wealth, their celebrity, and their controversial lives. Well, I wasn’t overly optimistic that Trump was going to deliver on his proposal for a big reduction in the corporate tax rate.

Yet it happened. Not quite the 15 percent rate he wanted, but 21 percent was a huge improvement.

Could Berlusconi – notwithstanding previous failures to reform bad policies – also usher in a pro-growth tax code?

To be honest, I have no idea. We don’t know if he is serious. And, even if his intentions are good, Italy’s parliamentary system is different for America’s separation-of-powers systems and his hands might be tied by partners in a coalition government. Though I’m encouraged by the fact that occasional bits of good policy are possible in that nation.

And let’s keep in mind that there’s another populist party that could win the election And its agenda, as reported by Bloomberg, includes reckless ideas like a “basic income.”

…economic malaise is increasingly common across Italy, where unemployment tops 11 percent and the number of people living at or below the poverty line has nearly tripled since 2006, to 4.7 million last year, or almost 8 percent of the population… “Poverty will be center stage in the campaign,” says Giorgio Freddi, professor emeritus of political science at the University of Bologna. …Five Star is a fast-growing group fueled by anger at the old political class. …a €500 ($590) monthly subsidy to the disadvantaged…is a key plank in Five Star’s national platform, and the group’s leaders have promised to quickly implement such a program if they take power. Beppe Grillo, the former television comedian who co-founded the party, says fighting poverty should be a top priority. A basic income can “give people back their dignity,”… The Five Star program echoes universal basic income schemes being considered around the world. …Five Star says the plan would cost €17 billion a year, funded in part by…tax hikes on banks, insurance companies, and gambling.

Ugh. Basic income is a very troubling idea.

Which helps to explain why I wrote that Sardinians should secede and become part of Switzerland (where a basic income scheme was overwhelmingly rejected).

In conclusion, I suppose I should point out that a flat tax would be very beneficial for Italy’s economy, but other market-friendly reforms are just as important.

To put it mildly, Italy’s economy is moribund.

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