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Kill the Death Tax

House Speaker Paul Ryan, R-Wis., holds up a post card form during the introduction of the Republican tax reform plan, dubbed the “Tax Cuts and Jobs Act,” on Thursday November 2, 2017.

Since Republicans screwed up ObamaCare repeal and haven’t even tried to impose spending restraint, I was rather pessimistic about tax reform earlier this year.

Given my dour attitude, I thought the best-possible outcome was nothing more than a reduction in the corporate tax rate.

But now I’m actually somewhat hopeful that we’ll get a lower corporate rate and repeal of the pernicious deduction for state and local income taxes.

And I’m even wondering whether I should allow myself to hope that the death tax can be repealed. The final outcome will depend on negotiations on Capitol Hill. The House bill gets rid of the tax (albeit only for people who can stay alive a few more years). The Senate bill isn’t as good since it only increases the exemption.

Is it possible the final deal will kill this destructive form of double taxation?

Folks on the left are afraid it may happen. The New York Times is predictably editorializing in favor of keeping the tax.

“Only morons pay the estate tax,” Gary Cohn, Mr. Trump’s chief economic adviser, told Senate Democrats, meaning, it was later explained, “rich people with really bad tax planning.” Many of the very wealthy use loopholes, like trusts, to avoid paying inheritance tax. …An estate tax repeal would provide a tax windfall of more than $3 million apiece for the top 0.2 percent of earners, and more than $20 million for the wealthiest Americans. It would cost $239 billion in revenue over a decade. It offers nothing for middle-class people, except more evidence of Mr. Trump’s and Republicans’ bad faith.

Frankly, I don’t care whether rich people benefit. I want the tax repealed because it penalizes saving and investment.

The actual victims of the tax (the “morons” who failed to hire clever lawyers and accountants) are forced to liquidate assets and turn the money over to government.

And potential victims of the tax engage in inefficient forms of tax planning to protect assets from the government.

Call me crazy, but I want capital to be allocated efficiently since that’s one of the keys for economic growth and rising wages.

The U.K.-based Economist has just published a defense of the death tax that begins by acknowledging that it’s not a popular levy.

Inheritance tax is routinely seen as the least fair by Britons and Americans. This hostility spans income brackets. …The estate of a dead adult American is 95% less likely to face tax now than in the 1960s. …For a time before the second world war, Britons were more likely to pay death duties than income tax; today less than 5% of estates catch the taxman’s eye. It is not just Anglo-Saxons. Revenue from these taxes in OECD countries, as a share of total government revenue, has fallen sharply since the 1960s. Many other countries have gone down the same path. In 2004 even the egalitarian Swedes decided that their inheritance tax should be abolished.

Notwithstanding the magazine’s name, the article shows very little understanding of economics.

…this trend towards trifling or zero estate taxes ought to give pause. Such levies pit two vital…principles against each other. One is that governments should leave people to dispose of their wealth as they see fit. The other is that a permanent, hereditary elite makes a society unhealthy and unfair. How to choose between them? …The positive argument for steep inheritance taxes is that they promote fairness and equality. …Unlike capital-gains taxes, heavier estate taxes do not seem to dissuade saving or investment.

I’m glad that the article pays lip service to the notion that people should be able to decide how to spend their own money, but then the article veers into pure class warfare.

What’s really remarkable, though, is that we’re supposed to believe that death taxes don’t have a negative impact on capital formation (i.e., saving and investment).

Utter nonsense.

Let’s think this through. Imagine a successful entrepreneur who earns income and gets hit with, say, a 40 percent personal income tax. That entrepreneur than invests some of the after-tax income, which then presumably triggers additional layers of tax — business taxes, capital gains taxes, dividend taxes — which easily can confiscate 30 percent of affected funds.

And then there can be a death tax that may grab another 40%.

At the risk of plagiarizing the New York Times, only a “moron” is going to ignore the cumulative impact of all those taxes. There’s either going to be less quantity of saving and investment or less quality of saving and investment (because of inefficient tax planning).

Fortunately, governments in the real world increasingly understand that death taxes are very damaging. In another article, the Economist shares some specific details on how death taxes have become less popular around the world.

In OECD countries the proportion of total government revenues raised by such taxes has fallen by three-fifths since the 1960s, from over 1% to less than 0.5%. Over the same period Australia, Canada, Russia, India and Norway are among countries that have abolished death duties. More than 20 American states binned wealth-transfer taxes between 1976 and 2000… In 1976 roughly 8% of American estates filed a taxable return; that has since fallen to around 0.2%.

I actually think tax competition deserves a lot of the credit for the good reforms that have happened, but that’s an issue for another day.

Here’s a chart from the article, which is supposed to show how death taxes have become a smaller and smaller share of tax revenue. This seems like good news, but keep in mind that what it really shows is that personal income taxes, payroll taxes, and (in the U.K.) the value-added tax have grown enormously since the pre-World War II era. If the Economist wanted to be honest, it would have shown inflation-adjusted death tax revenue.

I can’t resist commenting on one other thing. The Economist wants people to think that the death tax is okay because compliance costs supposedly are modest.

A study published in 1999 suggests that the overall cost of estate-tax compliance is 7% of estate-tax revenues. Yet a chunk of those costs, such as selecting executors and drafting documents, would still be paid even in the absence of the tax. So it is hardly clear that the rich would be left with much extra time for more productive undertakings.

I’m skeptical of their compliance calculations, but let’s set that aside.

What the article overlooks (and what is far more important from an economic perspective) is that the death tax causes capital to be misallocated. Successful families make decisions about saving and investment based on potential tax implications rather than what is most productive. And really successful families create trusts and foundation to protect their wealth.

Good for them — and, good for their financial advisers — but not so good for everyone else since money won’t be used as efficiently. And if you don’t think the death tax distorts incentives, consider that evidence from Australia indicates it even impacts when people die.

I’m not going to hold my breath, but it would be great news if congressional Republicans can kill the death tax.

November 26, 2017

The empirical data is crystal clear. Republicans

Policy

If “Neoliberal” Experiment Failed In Chile, Why Is It More Prosperous than the Rest of Latin America?

Chilean presidential candidate Sebastian Pinera delivers a speech to supporters after leading in the first round of general elections in Santiago Chile November 19, 2017. (Photo: Reuters)

One of the interesting things I’ve noticed in my world travels is that supporters of free markets and small government generally are known as “liberals” everywhere other than North America. I think the rest of the world has the right idea. After all, folks like Adam Smith are considered “classical liberals,” so it’s bizarre that “liberal” now is used to describe anti-capitalists in America.

To muddy the waters even further, it’s not uncommon for modern supporters of capitalism to be called “neoliberals,” though I wonder if that’s supposed to a be a term of derision.

When I’m called a neoliberal in other countries, it’s always by someone who is criticizing my support for economic liberty.

Professor Dani Rodrik of Harvard, in a column for the U.K.-based Guardian, is not a fan of neoliberalism. He acknowledges that the term is ill-defined, but recognizes that it means a less power for government.

…neoliberalism…denotes a preference for markets over government, economic incentives over cultural norms, and private entrepreneurship over collective action. …The term is used as a catchall for anything that smacks of deregulation, liberalisation, privatisation or fiscal austerity.…That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation, financial liberalisation and individual enterprise?

Rodrik then proceeds with a lengthy discussion of the weaknesses and limitations of conventional economic analysis.

Much of what he writes is perfectly reasonable. The economy is not a machine and people are not robots, so mechanistic economic concepts – while useful – have limited value. Moreover, culture and institutions make a big difference, and it’s rather difficult to capture those concepts in economic models.

Moreover, he makes some interesting observations on how various nations such as China have liberalized in ways that defy easy analysis.

That is certainly a fair point.

But then he finishes up his column with two examples that simply don’t make sense.

First, Rodrik cites Mexico as a supposed example of neoliberal reform.

Following a series of macroeconomic crises in the mid-1990s, Mexico embraced macroeconomic orthodoxy, extensively liberalised its economy, freed up the financial system, sharply reduced import restrictions and signed the North American Free Trade Agreement (Nafta). These policies did produce macroeconomic stability and a significant rise in foreign trade and internal investment. But where it counts – in overall productivity and economic growth – the experiment failed. Since undertaking the reforms, overall productivity in Mexico has stagnated, and the economy has underperformed even by the undemanding standards of Latin America.

My reaction is “huh?”

I spend a lot of time combing through international data in hopes of finding success stories to publicize and I’ve never come across anything to suggest Mexico is a good example. Instead, I found evidence a few years ago suggesting the country is a bad example.

Here’s the Mexican data from Economic Freedom of the World. You can certainly argue that Mexico did some good reforms in the late 1980s. But where’s the evidence for sweeping liberalization after the mid-1990s?

There was a very slight increase in Mexico’s score after 1995, which is better than nothing. But I’m not surprised that it didn’t yield impressive results since the rest of the world was liberalizing at a much faster rate.

Indeed, Mexico dropped from #49 to #69 between 1995 and 2000 because other nations were the ones with “extensive liberalization,” not Mexico.

Second, he takes a shot at Chile.

Chile’s neoliberal experiment eventually produced the worst economic crisis in all of Latin America.

“Huh?” would be an understatement. I was flabbergasted by this assertion.

But not the first part of that sentence. He’s correct that Chile is a poster child for market-friendly reform.

Here’s a chart from Economic Freedom of the World showing how the nation’s score dramatically improved between 1975 and 1995.

But I was shocked by the second part of the sentence. Chile had “the worst economic crisis in all of Latin America”?

Since I’ve written several times about the Chilean economic boom, I was totally baffled. What was Rodrik talking about?

So I took another look at a couple of sources to see if I had overlooked something.

Here’s the IMF data on per-capita GDP for Chile and the rest of Latin America. The numbers are only available back to 1980, but everything we see underscores my argument that Chile is a great success. It used to have living standards only slightly higher than the average for Latin America and now the people are more than twice as rich as their peers. If that’s a “worst economic crisis,” we should all be lucky enough to have similar problems.

Then I looked at the Angus Maddison dataset, which allows us to go back to 1970.

His numbers are adjusted for inflation, so the lines don’t rise as rapidly, but we see the same long-run pattern. Chile is getting richer at a much faster pace than other countries from Latin America. Once again, if this is a “crisis,” other nations should hope for a similar fate.

So what did Rodrik mean by “worst economic crisis”?

His article doesn’t provide any details, but if you look at the Maddison data for the early 1980s, there was a downturn, with per-capita output dropping in Chile from about $6,000 to about $5,000. And that reduction was noticeably larger than the average reduction for the rest of Latin America.

I’m guessing this is the supposed “crisis” that he mentions in the article.

But if that’s true, he’s guilty of an egregious example of “cherry-picking” data. Sort of like saying the record-setting 1998 Yankees were a failure because of a four-game losing streak in late August that year.

Honest analysis requires a look at the overall record, and all data sources show that Chile’s economic performance is far superior to its peers.

The bottom line is that Rodrik is on solid ground when he points out the limitations of conventional economic analysis. But when he then decides to criticize pro-market reforms, he concocts two examples that are – at best – sloppily inaccurate.

November 26, 2017

If the "neoliberal" experiment in Chile has

Economy

4Q GDP Forecasts Project Third Straight Quarter At or Above 3% for First Time Since 2004

President Donald Trump speaks about tax reform, Wednesday, Aug. 30, 2017, at the Loren Cook Company in Springfield, Mo. (Photo: AP)

Regional Federal Reserve forecast models project the U.S. economy to grow by 3% or higher in the fourth quarter (4Q) 2017. If the 4Q forecasts are matches or exceeded, it’ll mark the third straight quarter of economic growth at or above 3% since 2004.

The Federal Reserve Bank of New York is forecasting 4Q GDP to grow at 3.67% as of November 24, down slightly from the 3.82% forecast on November 17. The Atlanta Federal Reserve’s GDPNow model forecast is at 3.4% as of November 22, unchanged from November 17.

Worth noting, the actual GDP growth rate released by the Bureau of Economic Analysis (BEA) topped these forecasts in the second and third quarters of 2017. With the White House pushing for tax reform before Christmas, the action or inaction of Congress weighs heavily on future economic performance.

“What the economists and market strategists have totally underestimated in their GDP forecasting is the positive effect from the multi-agency regulatory roll back from the Trump Administration,” TJM Investments analyst Tim Anderson said. “This has led to a record high level of business confidence indicators and most recently the highest level of industrial production in 3 years.”

Mr. Anderson is in part referring to what is known as a Congressional Review Act (CRA), a tool used by the Trump Administration to unravel regulations put in place by his predecessor. President Trump also signed an executive order requiring agencies to rollback 2 regulations for every new one they created.

The window for using the CRA closed in early May. However, President Trump and congressional Republicans made historic use of it.

The 21-year-old law that created CRAs, a fast track for reversing “midnight rules” finalized within the last 60 days of a presidential administration, had been used only once before the Trump Administration.

Republicans had hoped for 6 to 12 rollbacks, but were successful in 14 of their 15 attempts. It saved the U.S. economy billions. Their final attempt, an effort to roll back a methane emissions rule that punishes oil and gas production on federal lands, failed when Republican Arizona Sen. John McCain surprised his party leaders by voting against the repeal.

The American Action Forum, a conservative-leaning think tank, estimated repealing the rules saved the economy millions of hours of paperwork, $3.7 billion in regulatory costs and upwards of $35 billion in compliance costs for U.S. industry.

In March 2016, the St. Louis Federal Reserve revisited their GDP projections for the next 10 years, which initially expected no more than an average 2.2% annual rate over the next decade. But they didn’t change it at the time and it was rosier than the historically underperforming 2.0% annual rate projected by the Congressional Budget Office (CBO).

Neither appear to be realistic if the U.S. returns to its post-World War II average growth rate. But the U.S. economy had underperformed against that average over the last 8 years.

In 2014, even a strong 2Q (4.6%) and 3Q (5.2%) growth rate couldn’t offset the contraction in the 1Q and returned weakness in the 4Q (2.0%), bringing the annual rate to 2.7%. If the 4Q for 2017 comes in at the lower end of the regional Federal Reserve forecasts, roughly 3.4%, the first year under President Trump will either match or exceed the strongest year under Barack Obama.

November 25, 2017

GDP forecast models project the U.S. economy

Policy

Obama’s Legacy Leaves Putin as the Man to See in the Middle East

Russian President Vladimir Putin shakes hands with Iranian President Hassan Rouhani during a joint news conference following their meeting at the Kremlin in Moscow, Russia March 28, 2017. (Photo: Reuters)

As Russian President Vladimir Putin hosted the leaders of Iran and Turkey in Sochi this week in an attempt to forge an end to the bloody Syrian civil war, the consequences of the conflict are becoming all too evident as the smoke starts to clear.

The Arab Spring cultivated and nurtured by the Obama Administration will have long-term effects for our allies in the region and for America’s national security — most of them harmful.

The obvious result of the Kremlin’s intervention on the side of Syrian President Bashar Assad is that Mr. Putin is now the man to see in the Middle East, a result achieved with far less blood and treasure than was spent by the U.S. in its military adventures Iraq and Syria.

Yes, the war is costing Russia money it doesn’t have, as social services continue to be cut. And yes, green sprouts of social unrest continue to pop up, complicating Mr. Putin’s re-election hopes next year. But there is no denying the facts on the ground: If any Middle Eastern country wants to protect its interests as the fighting winds down, you fly to Moscow, not Washington, and kiss Mr. Putin’s ring.

Israel figured this out a long time ago, which is why Israeli Prime Minister Benjamin Netanyahu has been traveling to Moscow multiple times over the last few years. No longer is Jerusalem entirely dependent on the United States for its future and its security.

Mr. Netanyahu is loath to find himself again dealing with an American president who is overtly anti-Israel and who is willing to betray American national security, and hence that of the Jewish state, by allowing Israel’s No. 1 enemy to acquire nuclear weapons and massive amounts of military hardware that can threaten Tel Aviv.

Russia state media announced recently that Israel has made it very clear to Moscow that it will not allow Iran to gain a foothold in Syria after the war. This tells me that Mr. Netanyahu is paying tribute at Mr. Putin’s court to achieve the result he desires, not bothering to make a separate stop at the White House.

Saudi Arabia and our Gulf allies, after being also betrayed by President Obama, Secretary of State John Kerry and crew, have moved away from Washington as well, hedging their bets with Beijing and Moscow.

Of course, all this leaves Iran happier than a pig in you-know-what.

The mullahs in Tehran have the money to buy lots of sophisticated weapons from Russia. They have money to fund whatever diabolical schemes they can cook up to fund terror while ensconced in their hardened nuclear bunkers. Heck, the real Islamic state — the Islamic Republic of Iran — will have nuclear weapons in few short years and the missiles to deliver them, a gift from Valerie Jarrett and the Obama gang, now all living together in Mr. Obama’s mansion in Washington.

And now let’s discuss Mr. Obama’s coup de grace — the Islamic invasion of Europe, funded, aided and abetted by Mr. Obama’s State Department and George Soros’ network of NGOs. The Arab Spring really served as a launch pad for the migration of millions of economic refugees into the heart of Europe, irreversibly changing it, altering its culture and security forever. The only European cultures that seem to have the will to survive are in the east, where countries like Hungary and Poland continue to defy Brussels and its suicidal globalist dictates.

So the bottom line is that after the leadership of Mr. Obama, aided by Hillary Clinton’s magic touch, American power is weakened, our allies are betrayed, Russia and Iran are ascendant, and Western Europe is in crisis.

A pretty impressive demolition for a president who famously said, “The future must not belong to those who slander the prophet of Islam.”

This article first appeared on The Washington Times via “Threat Assessment” by L. Todd Wood.

November 24, 2017

Under Barack Obama, Vladimir Putin became the

Policy

Repealing the State and Local Tax Deduction Will Help the Republican Party in High-Tax Blue States

FILE PHOTO – Crates filled with 2011 tax forms are seen at the 96th Street Public Library in New York April 17, 2012. (Photo: Reuters)

Time for a confession. My left-wing friends are correct. I’m an idiot.

Why?

Because I’m an anti-tax libertarian, yet I keep writing favorably about a provision that will raise my taxes. I’m talking specifically about the provision, currently in both the House and Senate tax plans, to eliminate the deduction for state and local income taxes (and maybe also property taxes, though the House proposal will retain deductibility for the first $10,000).

Source: Wall Street Journal

I think this distortion in the tax code is very bad policy and I hope the loophole is entirely eliminated (including the property tax deduction).

But as I look at all the provisions in both bills and speculate about the contours of a final agreement, it’s highly likely that the net result will be a tax hike on one of my favorite people – me!

Sigh. I’ve joked in the past that “it ain’t easy being libertarian,” but it will definitely hurt to put my money where my mouth is (and it reminded me why GOPers should have made tax reform a tax cut by including some spending restraint).

That being said, let’s remind ourselves why the deduction is a bad idea.

Citing the self-destructive example of a recent tax hike in Illinois, Andrew Wilford of the National Taxpayers Union points out that the deduction enables and encourages state and local politicians to impose higher taxes.

…eliminating SALT would…remove this incentive for local governments to overtax its citizens. … this incentive to hike taxes can prove significant enough to drive state policy. In Illinois, residents were forced to bear the burden of a 32 percent hike on their taxes because of the state’s unwillingness to tackle its growing pension funding problem. Tax increases did not solve this underlying spending problem, but it was politically expedient— in part because state lawmakers knew that the federal government would pick up part of the tab.

It also violates my ethical-bleeding-heart rule, as Brian Riedl explains in the New York Post.

Wealthy families are four times more likely to utilize SALT than other families. Only 24 million of 125 million tax filers earning under $100,000 take the deduction, typically lowering their taxes by $1,000. By contrast, 20 million of the 25 million filers earning over $100,000 take the deduction… In fact, half the savings accrue to the richest 5 percent of taxpayers — and in New York, half of the SALT savings go to families making over $500,000.

But I don’t want today’s column to fixate on the policy argument.

Instead, let’s look at whether voting to get rid of the deduction is electoral suicide for Republicans from high-tax states such as New York and California.

Looking at the situation in the Golden State, that’s certainly the argument from the folks at Vox.

Just three of the 14 California House Republicans went against leadership… Republicans in California clearly ran on cutting taxes — but this tax bill could raise taxes on their constituents. …it also sets up their constituents for more risk. Cutting the state and local tax deduction puts undue burden on the state’s budget… “At this point it looks like California Republicans are eager to lose their seats in 2018,” Tyler Law, a spokesperson for the Democratic Congressional Campaign Committee, said.

Though Kimberly Strassel of the Wall Street Journal has a more upbeat (if you’re a Republican) assessment. She starts by explaining how California GOPers were targeted.

The House GOP passed its tax-reform bill on Thursday, and special medals of valor go to the 11 of 14 California Republicans who voted in support. The lobbyist brigade had joined with Democrats to target the Golden State delegation, seeing it as their best shot at peeling off enough Republicans to kill the bill. The assault was brutal, dishonest and all-out. …Gov. Jerry Brown unleashed on state Republicans, calling them “sheep” for supporting an end to most state and local tax, or SALT, deductions, and sending them letters deploring the tax hit on residents of high-tax California. Minority Leader Nancy Pelosi accused them of “looting” the state. Her Senate counterpart, New York’s Chuck Schumer, warned of “political fallout” that would be “catastrophic.”

They fought back by arguing that the Democrats are the high-tax party.

What proved most effective, however, was the state Republicans’ willingness to go on offense and throw SALT in Gov. Brown’s face. California has the heaviest tax burden in the country and only just implemented a punishing new 12-cent-a-gallon-increase in its gasoline tax. Mr. McCarthy used the occasion to release a video pouncing on that hike and noting that “if Gov. Brown is worried about the tax burden, let’s make cutting [taxes] a federal and state project.” Other state Republicans ran with that message, even more bluntly. “Why punish the rest of the nation because California is stupid?” asked Rep. Duncan Hunter in a local TV interview. Even Rep. Darrell Issa, who voted “no” on Thursday (along with Dana Rohrabacher and Tom McClintock ), zapped a letter back to Gov. Brown, noting that if SALT had become a big issue, it was “a direct result of the tremendous weight that your misguided policies have put on California taxpayers.”

At the risk of sounding like a mealy-mouthed Washington apparatchik, I’m going to agree with both Vox and the Wall Street Journal.

The bottom line is that voting for tax reform probably does endanger GOP lawmakers from high-tax states, which is the message that the leftists at Vox are peddling in hopes of preserving the awful status quo.

But I want to close with the observation that enacting tax reform will improve the electoral outlook for blue-state Republicans even if it’s not necessarily good for current GOP incumbents.

That’s because voters in high-tax states will be much more likely to resist bad state tax policy if there’s no federal deduction to mitigate the burden.

And that means politicians in blue states will be under even greater pressure to lower tax rates rather than increase tax rates. If they don’t do the right thing, more and more taxpayers will escape, as the Wall Street Journal opines.

The liberal tax model is to fleece the rich to finance spending on entitlements and government programs that invariably grow faster than the economy and revenues. IRS data on tax migration show this model is now breaking down in progressive states as the affluent run for cover and the middle class is left paying the bills. Between 2012 and 2015 (the most recent data), a net $8.5 billion in adjusted gross income left New Jersey while $6.2 billion poured out of Connecticut—4% of the latter state’s total income. Illinois lost $13.6 billion. During that period, Florida with no income tax gained $39.3 billion in AGI. …As these state laboratories of Democratic governance show, dunning the rich ultimately hurts people of all incomes by repressing the growth needed to create jobs, boost wages and raise government revenues that fund public services. If the Republican House and Senate tax-reform bills follow through with eliminating all or part of the state and local tax deduction, progressive states will have an even harder time hiding the damage. They should be the next candidates for reform.

Indeed, the mere prospect of tax reform already is causing statists to rethink their approach.

Even in New Jersey.

The Republican tax reform…already it’s having a political impact in at least one high-tax, ill-governed state. Democrat Steve Sweeney, president of the New Jersey Senate, said last week that the GOP decision to eliminate the state and local tax deduction could throw a new tax increase on millionaires into doubt. …Excellent news. Making politicians in Trenton, Albany, Sacramento and Springfield nervous about raising taxes is one desirable outcome of tax reform. These politicians have been passing the burden of their tax-and-spend policies onto taxpayers in other states via the state and local deduction. If that goes away, Democrats will have to rethink their policies lest they drive from their states the affluent taxpayers who finance most of state government. …Here’s a radical idea: Cut taxes and make New Jersey more desirable for people to work and invest. Tax reform in Washington could also spur reform in the states.

If tax reform happens and the deduction for state and local taxes is eliminated, the left’s class-warfare agenda will become much less appealing – and much harder to implement.

And in that kind of environment, it should be much easier for Republican politicians to win votes.

For all intents and purposes, tax reform for Republicans could be like ObamaCare for Democrats.

Allow me to explain. When ObamaCare was enacted, I worried that it might be a long-term political victory for the left even though it was very painful for Democrats in the short run. Simply stated, voters in the future (and we’re now entering that future) would become more reluctant to vote for Republicans once they were hooked on the heroin of government dependency.

Federal tax reform would have a similar impact, except the GOP will be the long-run winners. Voters in high-tax states will be more reluctant to vote for Democrats once a $100 tax hike (for instance) actually costs $100. Which is why genuine tax reform is a win-win situation.

November 24, 2017

If tax reform happens and the state

Policy

Happy Free-Market Thanksgiving

The First Thanksgiving 1621, oil on canvas by Jean Leon Gerome Ferris (1899).

The biggest Thanksgiving tradition in America is a turkey dinner.

Some people also have a secondary tradition of watching football. But libertarians can be a bit quirky, so my secondary tradition has been to periodically share (in 2010, in 2013, and in 2016) a video from Reason about how property rights saved the Pilgrims.

But I don’t like being overly repetitive, so I’m thankful that Reason has a new Thanksgiving video. Narrated by John Stossel, it tells the story of the first Thanksgiving, augmented by a modern example of why communal property creates bad incentives.

And here’s another video with a Thanksgiving theme.

It’s from Prager University and it uses the colonial experience to teach about the failures of mercantilism and collectivism.

It’s no exaggeration to say that capitalism was a life-saver for the Pilgrims.

And it’s a money-saver for us in the modern era, as Mark Perry points out.

The fact that a family in America can celebrate Thanksgiving with a classic turkey feast for less than $50 and at a “time cost” of only 2.21 hours of work at the average hourly wage for one person means that we really have a lot to be thankful for on Thanksgiving: an abundance of cheap, affordable food. The average worker would earn enough money before their lunch break on just one day to be able to afford the cost of a traditional Thanksgiving meal. Compared to 1986, the inflation-adjusted cost of a turkey dinner today is more than 23% cheaper, and 31% cheaper measured in the “time cost” for the average worker. Relative to our income and relative to the cost of food in the past, food in America is more affordable today than almost any time in history.

Remember, also, that these numbers would look even better for consumers if it wasn’t for the heavy burden of government that gets built into the cost of everything.

Other Thanksgiving Reads

Thanksgiving, Election 2016 and the Spirit of Capitalism

Thanksgiving Tragedy

The Zen of Thanksgiving

The First Thanksgiving and the Spirit of Capitalism

Real Thanksgiving Message: Faith And Capitalism Vindicated

November 23, 2017

John Stossel and Larry Schweikart narrative videos

Politics

Fusion GPS Paid Journalists Known for Russia Collusion Stories, Court Filings Show

Newly filed court documents reveal Fusion GPS, the shadowy firm behind the debunked Steele dossier, paid at least three journalists between June 2016 until February 2017. According to the filing, the three journalists who were paid by Fusion GPS are known for reporting on “Russia issues relevant to [the committee’s] investigation.”

The dates are noteworthy, considering that’s when Big Media began pushing the unsubstantiated “collusion” narrative between Russia and people close to now President Donald Trump.

Further, a filing by lawyers for the House Intelligence Committee claims Fusion GPS “brokered meetings for dossier author Christopher Steele with at least five major media outlets in September 2016, including Yahoo news.”

The recipients’ names, the payment amounts and purposes were either redacted from the documents that Fusion GPS filed to the U.S. District Court for the District of Columbia or were not disclosed. The firm, which was cofounded by former Wall Street Journal reporter Glenn Simpson, requested a restraining order against the House Intelligence Committee.

Congressional investigators — who have long alleged the dossier was used by mediates to fabricate collusion stories and by corrupt Obama Administration officials to begin their investigation — are demanding financial documents that will shed light on payments to reporters. A bombshell report recently revealed that the Clinton campaign and the Democratic National Committee (DNC) paid more than $10 million to fund the dossier.

The nonprofit Campaign Legal Center (CLC) filed a complaint with the Federal Election Commission (FEC) alleging neither the Clinton campaign nor the DNC violated campaign finance law by failing to accurately disclose payments for the discredited dossier.

The Washington Examiner reported that one of the documents filed by Fusion GPS co-founder Peter Fritsch just this week was an affidavit that stated, “[The House Intelligence Committee] has also demanded records related to transactions between Fusion GPS and certain journalists — i.e., Request Nos. 66, 68-69, 107-112. Those requested records involve transactions that are not pertinent to work related to Russia or Donald Trump.”

The numbered “requests” correspond to a list of payments made by Fusion GPS being examined by the committee, which was also among the documents filed Tuesday, although the list was heavily redacted.

As People’s Pundit Daily (PPD) previously reported, Fusion GPS has been less than cooperative with both the House and Senate committees investigating their role in what appears more likely to be a smear campaign.

Mr. Simpson refused to answer questions during a closed-door interview in August with the Senate Judiciary Committee and his lawyer Josh Levy provided thousands of “disrespectful” records to the committee, being that most were blank or press clippings.

Fusion GPS didn’t deny payments went to reporters, but argues that these payments were for research. The bank documents include a total 112 transactions involving Fusion GPS, several are Russia-related.

“Fusion GPS is a research firm set up by former investigative journalists,” Mr. Levy said in a statement to the Washington Examiner. “As such, it sometimes works with contractors that have specialized skills seeking public information. Contractors are not permitted to publish any articles based on that work, and Fusion GPS does not pay journalists to write stories.”

Bill Browder, the CEO and co-founder of Hermitage Capital, said during sworn testimony before the Senate Judiciary Committee in July that he suspects Fusion GPS gives “incentives” to journalists who push stories for their “smear campaigns.” The firm was hired by Russians to conduct a smear campaign against Sergei Magnitsky and Mr. Browder before congressional hearings on the Global Magnitsy Act.

Bill Browder, the CEO and co-founder of Hermitage Capital, testifies before the Senate Judiciary Committee about Fusion GPA, the shadowy firm hired to conduct “smear campaigns” on July 27, 2017. (Photo: People's Pundit Daily) — Bill Browder, the CEO and co-founder of Hermitage Capital, testifies before the Senate Judiciary Committee about Fusion GPA, the shadowy firm hired to conduct “smear campaigns” on July 27, 2017. (Photo: People’s Pundit Daily)

“I suspect a number of journalists, and one in particular, were operating so far outside the bounds of normal journalistic integrity there must have been some incentive for them to do it coming from Fusion GPS,” he said.

Mr. Magnitsky, a Russian attorney and auditor, was tortured and murdered after he uncovered a money-laundering scheme in Russia.

Yet, Mr. Levy dismissed the idea that these payments were somehow used for a smear campaign against President Trump.

“This is simply another desperate attempt by the president’s political allies to discredit Fusion GPS’s work and divert attention from the question these committees are supposed to be investigating: the Trump campaign’s knowledge of Russian interference in the election,” he said.

But one of the documents filed by lawyers for the House Intelligence Committee said each of the three reporters who received payments had written about the Russia probe, which seems to indicate reporters were using Fusion GPS’s debunked research to write their stories.

“Additionally, the Committee seeks transactions related to three individual journalists, [names redacted], each of whom have reported on and/or been quoted in articles regarding topics related to the Committee’s investigation, some of which were published as recently as October 2017,” the committee filing stated.

Meanwhile, the meeting brokered between Mr. Steele and Yahoo News resulted in one of the first media reports based on the dossier. It specifically named Carter Page, a former and peripheral advisor to then-candidate Mr. Trump. Mr. Page praise the House Intelligence Committee for the filing.

“While many politicians and bureaucrats in the U.S. Congress remain distracted by irrelevant sideshows such as the minuscule amounts of money spent on Facebook ads that no one paid attention to last year or how various perverted members might have once amused themselves, the determined leaders and hard working staff with the House Intelligence Committee have once again remained on the tip of the spear as they drive toward essential answers regarding the real government interference in the 2016 election,” he wrote in an email to the Washington Examiner.

Worth noting, Mr. Steele isn’t just a former British intelligence officer, he was the head of the Russian desk for MI6. As The Washington Times reported, he has identified his sources in the dossier as “a senior Russian Foreign Ministry figure,” a former “top level Russian intelligence officer active inside the Kremlin,” a “senior Kremlin official” and a “senior Russian government official.”

Mr. Page filed a defamation suit against the parent company of Yahoo for the article published in September of last year.

Worth noting, the FBI and Justice Department (DOJ) have recently conceded to congressional investigators that they have not been able to verify or corroborate the salacious “allegations of collusion between Russia and the Trump campaign outlined in the Trump dossier.”

November 22, 2017

Court documents reveal Fusion GPS, the shadowy firm

Economy

Pre-Holiday Consumer Sentiment Strongest in 10 Years, Expected Wage Growth Hits Expansion High

President Donald J. Trump delivers remarks on tax reform at the state fairgrounds in Indianapolis, Indiana, on Wednesday September 27, 2017. (Photo: PPD)

The final reading of consumer sentiment beat the consensus forecast at 98.5 in November, as expectations for wage growth hit an expansion high. The consensus forecast was 98.1 and the index overall has returned to a 13-year high.

“Overall, the Sentiment Index has remained largely unchanged since the start of the year at the highest levels since 2004,” said Richard Curtain, Chief Economist at the Survey of Consumers. “What has changed recently is the degree of certainty with which consumers hold their economic expectations. In contrast to the media buzz about approaching cyclical peaks and an aging expansion, with the implication of greater uncertainty about future economic trends, consumers have voiced greater certainty about their expectations for income, employment, and inflation.”

The Federal Reserve Open Market Committee will undoubtedly be interested in the unusual certainty among consumers that inflation will remain very low, at 2.5% for the year-ahead outlook and 2.4% of the 5-year outlook. That will factor into whether or not they choose to raise interest rates.

“Inflation expectations have shown the smallest dispersion on record, and increased certainty about future income and job prospects has become a key factor that has supported discretionary purchases,” Mr. Curtain added.

Looking at the components in the Survey of Consumers, the Current Economic Conditions subindex came in at 113.5, which is slightly below October’s 116.5 but very strong.

“To be sure, caution is warranted given that the current expansion will soon be the second longest expansion since the mid-1800s, as well as the potential for significant changes in tax policies and the new Fed leadership and Board members,” Mr. Curtain said. “Interestingly, the data indicate that neither changes in fiscal nor monetary policies have yet had any noticeable impact on consumer expectations.”

“Overall, the data signal an expected gain of 2.7% in real consumption expenditures in 2018, and more importantly for retailers, the best runup to the holiday shopping season in a decade.”

November 22, 2017

Consumer sentiment in November posted the strongest

Economy

Jobless Claims Continue to Show Unusually Strong Labor Market

Weekly Jobless Claims Graphic. Number of Americans applying for first-time jobless benefits.

The Labor Department said Wednesday that first-time jobless claims came in at 239,000 for the week ending November 18, a decrease of 13,000 and less than the forecast. The previous week’s level was revised up by 3,000 from 249,000 to 252,000 but the labor market continues to post unusually strong numbers.

The 4-week moving average came in at 239,750, a gain of 1,250 from the previous week’s revised average. The previous week’s average was revised up slightly by 750 from 237,750 to 238,500.

Continuing claims also held at historic lows at 1.904 million in lagging data for the week ending November 11. The unemployment rate for insured workers did tick up slightly by 0.1%, but also remains near historic lows at only 1.4%. The report overall bodes well for the labor market, indicating another very strong jobs report at the end of the month.

The highest insured unemployment rates in the week ending November 4 were in Puerto Rico (4.7), the Virgin Islands (4.7), Alaska (3.1), New Jersey (2.0), Connecticut (1.8), California (1.7), Massachusetts (1.6), and Pennsylvania (1.6).

The largest increases in initial claims for the week ending November 11 were in New York (+3,025), Minnesota (+1,621), California (+1,241), New Jersey (+1,076), and Pennsylvania (+463), while the largest decreases were in Michigan (-2,641), Puerto Rico (-1,591), Illinois (-1,342), Oklahoma (-1,254), and Georgia (-1,166).

November 22, 2017

The Labor Department said first-time jobless claims

Elections

Republicans Continue to Stomp Democrats in Fundraising for October

In this March 3, 2016 file photo, RNC Chairwoman Ronna McDaniel, then the Michigan Republican Party chair, speaks before a Republican presidential primary debate in Detroit. (Photo: AP)

The numbers for October are in, and the Republican National Committee (RNC) continued to stop the Democratic National Committee (DNC) in fundraising for October. The RNC announced this week it raised $9.2 million in October, a fundraising haul more than double the $3.9 million posted by the DNC.

Republicans have significantly outpaced Democrats in fundraising for the first time in a non-presidential cycle in 2017. With the fundraising haul in October, the RNC has raised a total $113.2 million this year juxtaposed to just $55 million for the DNC.

“Another month of strong fundraising shows great enthusiasm among voters for President Trump and his agenda,” RNC Chairwoman Ronna McDaniel said in an emailed statement. “That’s why we need to continue to work hard to support his vision for the American people, including tax cuts for the middle-class.”

The DNC was run into the ground financially by Debbie Wasserman Schultz, who was ousted during the 2016 Democratic National Convention. WikiLeaks revealed she had steered the DNC in favor of Hillary Clinton, who assumed control of the finances even as longtime ally Donna Brazile took over as interim chair.

The new team promised to improve Democrats’ fortunes.

“Well, I got there on March 1,” DNC Chair Tom Perez said in June when confronted with anemic fundraising numbers for that quarter. In August, Deputy Chair Keith Ellison, D-Minn., promised he would have “some really good reports to share in the weeks to come.”

But thus far, those promises have gone unfulfilled. The RNC has a total $42.5 million cash on hand, nearly 25 times more than the $5 million posted by the DNC. Under Chairwomen McDaniel, the RNC is debt-free, while the DNC has $3.2 million in debt.

Party	October	Year-To-Date	Cash on Hand	Debt
RNC	$9.2M	$113.2M	$42.5M	$0
DNC	$3.9M	$55.0M	$5.0M	$3.2M

Democrats are quick to point to the recent electoral victories in Virginia and other states. But as People’s Pundit Daily (PPD) has repeatedly reported, our likely voter battleground metrics show the Old Dominion should be renamed the New Dominion. It’s the one and only battleground state where Democrats have made relative gains in key indicators such as party affiliation and ideological lean.

Chairman Perez and others also often claim that Democratic candidates are out-fundraising Republican candidates, $221 million to $206 million. However, if you drill down into the numbers, $31 million of the total House Democrat haul came from Jon Ossoff, who ran a failed and outrageously expensive race against now-Representative Karen Handel in Georgia’s 6th Congressional District.

Only 14% of Mr. Ossoff’s haul came from in-state individual donations. He significantly out-fundraised Rep. Handel, who ended up winning by a rather comfortable margin. House Democrats and House Republican candidates have roughly the same cash on hand, $205 million to $204 million.

Meanwhile, nearly 60% of what the RNC has raised in direct contributions has come from small donations under $200, a major change for the GOP indicative of the populist appeal both President Donald Trump and Chairwoman McDaniel have brought to the party.

“This wide ranging small donor support is about one thing and one thing only,” said RNC Finance Chairman Steve Wynn. “The Republican Party stands for more jobs and keeping more of your paycheck. The jobs and the paycheck are what matter and that’s what we are about. That’s why we are getting the support and why we’re going to continue to win.”

November 22, 2017

The fundraising numbers for October are in

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