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Policy


chris-christie-nh

New Jersey Gov. Chris Christie speaks about Social Security reform at the First in the Nation Republican Leadership Summit April 17, 2015 in Nashua, New Hampshire. (PHOTO: DARREN MCCOLLESTER, GETTY IMAGES)

America has a giant long-run problem largely caused by poorly designed entitlement programs such as Social Security, Medicare, and Medicaid.

SS-Cumulative-Deficit

So when I wrote last month about proposals by some Democrats to expand Social Security, I was less than enthusiastic.

…demographic changes and ill-designed programs will combine to dramatically expand the size of the public sector over the next few decades. So it’s really amazing that some politicians, led by the clownish Elizabeth Warren, want to dig the hole deeper. …I’m surprised demagogues such as Elizabeth Warren haven’t rallied behind a plan to simply add a bunch of zeroes to the IOUs already sitting in the so-called Social Security Trust Fund. …If Hillary winds up endorsing Warren’s reckless plan, it will give us another data point for our I-can’t-believe-she-said-that collection.

But it turns out I may have been too nice in my analysis.

As reported by USA Today, independent researchers have discovered that Social Security is even more bankrupt than suggested by official estimates.

New studies from Harvard and Dartmouth researchers find that the SSA’s actuarial forecasts have been consistently overstating the financial health of the program’s trust funds since 2000. “These biases are getting bigger and they are substantial,” said Gary King, co-author of the studies and director of Harvard’s Institute for Quantitative Social Science. “[Social Security] is going to be insolvent before everyone thinks.” …Once the trust funds are drained, annual revenues from payroll tax would be projected to cover only three-quarters of scheduled Social Security benefits through 2088.

By the way, I’m not overly enamored with this analysis since it is based on the assumption that the Social Security Trust Fund is real when it’s really nothing but a collection of IOUs.

But if you don’t believe me, perhaps you’ll believe the Clinton Administration, which admitted back in 1999 (see page 337) that the Trust Fund is just a bookkeeping gimmick.

These balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.

In other words, what really matters is that Social Security spending is climbing too fast and consuming an ever-larger share of economic output.

That means – in the absence of reform – that more and more money will be diverted from the economy’s productive sector, in the form of taxes or borrowing, to finance benefits.

And when I write “more and more money,” that’s not a throwaway statement.

Returning to the USA Today report, academic experts warn that the long-term shortfall in the program is understated because it is based on 75-year estimates even though the program doesn’t have an expiration date.

The bigger problem with the Social Security Administration is not disclosure, it’s accounting, said Laurence Kotlikoff, a Boston University professor of economics… Kotlikoff…wants the agency to calculate its liabilities using fiscal gap accounting, which considers the difference between the government’s projected financial obligations and the present value of all projected future tax and other revenue. …Under this accounting system, SSA’s projected unfunded liabilities would be $24.9 trillion (instead of the $10.6 trillion projected in 2088). …17 Nobel Prize-winning economists have endorsed Kotlikoff’s push for the SSA and other government agencies to use the fiscal gap accounting method more broadly. “We have a situation that is like Enron accounting,” Kotlikoff said. “And the public doesn’t want to hear about it.”

At the risk of being pedantic, I’m also not enamored with either approach mentioned in the above passage.

Sure, we should acknowledge all expenses and not arbitrarily assume the program disappears after 75 years, but the approach used to calculate “unfunded liabilities” is artificial since it is based on how much money would need to be invested today to finance future promised benefits (whether for 75 years or forever).

Needless to say, governments don’t budget by setting aside trillions of dollars to meet future expenses. Social Security, like other programs, is funded on a pay-as-you-go basis.

That’s why the most appropriate way to measure the shortfall is to take all projected future deficits, adjust them for inflation, and calculate the total. When you do that, the Social Security shortfall is a staggering $40 trillion.

And that’s based on just a 75-year estimate, so the real number is much higher.

Though keep in mind that this is just an estimate of the fiscal shortfall. What really matters is the total level of spending, not how much is financed with red ink.

Which is why the only real answer is genuine reform.

For further information, here’s the video I narrated for the Center for Freedom and Prosperity on the need to modernize the system with personal retirement accounts.

[brid video=”8193″ player=”1929″ title=”Saving Social Security With Personal Retirement Accounts”]

But if you prefer to trust politicians, you can always support the left’s favored solution.

P.S. You can enjoy some previous Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

P.P.S. The “Trust Fund” is real only in the sense that the government’s legal authority to pay benefits will be constrained when the IOUs are used up. That’s why the USA Today article says that the government at that point would be able to pay only about 3/4ths of promised benefits (though one imagines that future politicians will simply override that technical provision and require full payments).

P.P.P.S. Many nations have adopted genuine reform based on private retirement savings, including Australia, Sweden, the Faroe Islands, Chile, and The Netherlands.

P.P.P.P.S. Because of lower life expectancies, African-Americans are very disadvantaged by the Social Security system. A system of personal accounts presumably wouldn’t help them live longer, but at least they would have a nest egg to pass on to their kids.

P.P.P.P.P.S. And don’t fall for the false argument that financial markets are too unstable for personal retirement accounts.

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Democrats want to expand a giant long-run

Policy, Video

[brid video=”7813″ player=”1929″ title=”Time to End the Fed The Origin of Central Banking and Possible Alternatives”]

The Federal Reserve has existed for almost 100 years and it has created manufactured crisis after crisis, including depressions, recessions, inflation, and bubbles. This video, hosted by PPD contributor and CATO Institute Senior Fellow Dan Mitchell, explains the history of the Federal Reserve and the Fed has impacted the value of U.S. currency, monetary policy.

The Federal Reserve has existed for almost

Policy


civil-disobedience-poll-tax

A poll tax demo at Warrington magistrates court. (Photo: Denis Thorpe/Guardian)

Civil disobedience is a powerful and traditional way for Americans to resist bad government policy. The most famous example is the way civil rights leaders used disobedience (and armed self defense) to help end the Jim Crow laws imposed by state governments.

It’s also encouraging that gun owners have no intention of obeying bad gun control laws, with evidence of massive resistance to bad laws in states such as Connecticut, Colorado, and New York.

And motorists ended the use of speed (i.e., revenue) cameras in Arizona in part by simply ignoring the fines that arrived in the mail (folks in Houston needed to use a referendum).

These are encouraging stories, but we also need to be realistic about the fact that most Americans meekly comply with lots of other bad laws and regulations imposed by greedy and overbearing governments.

The regulatory burden in the United States has become absurd, for instance, but it’s difficult to envision a successful strategy to resist various bureaucratic impositions.

Until now.

The great scholar Charles Murray has a column in the Wall Street Journal about fighting back against the regulatory state.

He begins with a very depressing assessment.

America is no longer the land of the free. We are still free in the sense that Norwegians, Germans and Italians are free. But that’s not what Americans used to mean by freedom. It was our boast that in America, unlike in any other country, you could live your life as you saw fit as long as you accorded the same liberty to everyone else. …with FDR’s New Deal and the rise of the modern regulatory state, our founding principle was subordinated to other priorities and agendas. What made America unique first blurred, then faded, and today is almost gone.

In some sense, we’ve been buried by red tape.

…consider just the federal government. The number of federal crimes you could commit as of 2007 (the last year they were tallied) was about 4,450, a 50% increase since just 1980. A comparative handful of those crimes are “malum in se”—bad in themselves. The rest are “malum prohibitum”—crimes because the government disapproves.

This is something that we’ve already discussed. I made the distinction just the other day between real crimes (which involve an infringement on someone else’s life, liberty, and property) and innocent behavior that is criminalized by government.

But it’s even worse when folks have no idea how to be compliant.

Everyone knows how to obey the laws against robbery. No individual can know how to “obey” laws such as Sarbanes-Oxley (810 pages), the Affordable Care Act (1,024 pages) or Dodd-Frank (2,300 pages). We submit to them. The laws passed by Congress are just the beginning. In 2013, the Code of Federal Regulations numbered over 175,000 pages.

Especially when constitutional protections are weakened.

It gets worse. If a regulatory agency comes after you, forget about juries, proof of guilt beyond a reasonable doubt, disinterested judges and other rights that are part of due process in ordinary courts. The “administrative courts” through which the regulatory agencies impose their will are run by the regulatory agencies themselves, much as if the police department could make up its own laws and then employ its own prosecutors, judges and courts of appeals.

And the insult to injury is that many regulations make no sense.

Regulations that waste our time and money are bad enough. Worse are the regulations that prevent us from doing our jobs as well as we could—regulations that impede architects from designing the most functional and beautiful buildings that would fit their clients’ needs, impede physicians from exercising their best judgment about their patients’ treatment, or impede businesses from identifying the best candidates for job openings. …Public-school teachers typically labor under regulatory regimes that prescribe not only the curriculum but minutely spell out how that curriculum must be taught—an infantilization of teachers that drives many of the best ones from the public schools.

So what’s the solution?

You can fight these bureaucrats in their kangaroo courts, or maybe even force the case into a real court.

But Murray acknowledges that this is prohibitively expensive.

…when the targets of the regulatory state say they’ve had enough, that they will fight it in court, the bureaucrats can—and do—say to them, “Try that, and we’ll ruin you.”

Charles has an idea of how to overcome this problem.

…the regulatory state is the Wizard of Oz: fearsome when its booming voice is directed against any single target but, when the curtain is pulled aside, revealed as impotent to enforce its thousands of rules against widespread refusal to comply. And so my modest proposal: Let’s withhold that compliance through systematic civil disobedience. Not for all regulations, but for the pointless, stupid and tyrannical ones.

More specifically.

…it should be OK to ignore the EPA when it uses a nonsensical definition of “wetlands” to forbid you from building a home on a two-thirds-acre lot sandwiched between other houses and a paved road…there’s no reason for the government to second-guess employer and employee choices on issues involving working hours and conditions that don’t rise to meaningful definitions of “exploitation” or “unsafe.” …Let’s just ignore them and go on about our lives as if they didn’t exist.

That’s sounds nice, but how does one overcome the risk of discriminatory and abusive prosecution and persecution by miffed bureaucrats?

Here’s the clever proposal Charles has for the private sector.

Let’s treat government as an insurable hazard, like tornadoes. …let’s buy insurance that reimburses us for any fine that the government levies and that automatically triggers a proactive, tenacious legal defense against the government’s allegation even if—and this is crucial—we are technically guilty. Why litigate an allegation even if we are technically guilty? To create a disincentive for overzealous regulators. The goal is to empower citizens to say, “If you come after me, it’s going to cost your office a lot of time and trouble, and probably some bad publicity.”

People presumably will be willing to fight if they have some free talent coming to their defense.

I propose…a legal foundation functioning much as the Legal Services Corporation does for the poor, except that its money will come from private donors, not the government. It would be an altruistic endeavor, operating exclusively on behalf of the homeowner or small business being harassed by the regulators. The foundation would pick up all the legal costs of the defense and pay the fines when possible.

Here’s the bottom line.

The measures I propose won’t get the regulations off the books, nor will they improve the content of those regulations, but they will push the regulatory agencies, kicking and screaming, toward a “no harm, no foul” regime. They will be forced to let the American people play.

And if you want to see this strategy in the form of a picto-graph, this is a very helpful depiction.

I mentioned yesterday that I was in Poland for a Liberty Fund conference.

After the conference, I had the opportunity to visit the Solidarity Museum, which commemorated the 1980 protests against communism at the Gdansk shipyards.

Here’s an image that warmed my heart. One of the rooms had a tape of Poland’s communist dictator announcing martial law. Here’s a screen capture of him saying there’s no turning back from socialism.

Gee, that didn’t turn out to be the case.

Indeed, Poland is now a reasonably good example of how markets enable higher living standards.

And that speech should be a permanent memorial about the evil of communism. And if you want further reminders, click here, here, and here.

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Civil disobedience is a powerful and traditional

Politics


obama_immigration_executive_order

President Obama, left, issued an executive order on immigration following the 2014 midterm elections.

The Obama administration admitted to a federal judge last week that they broke the injunction handed down by Judge Andrew S. Hanen temporarily blocking the president’s executive amnesty by issuing thousands of work permits to illegal immigrants. Now, a report by PJ Media further provides proof Obama’s amnesty order was always about adding new Democrats to the voter rolls.

Despite assurances by top administration officials to the contrary, including from Department of Homeland Security Secretary Jeh Johnson, the United States Citizenship and Immigration Services is reallocating significant resources away from a computer system — known as the “Electronic Immigration System” — in order to send letters to all 9,000,000 green card holders urging them to naturalize prior to the 2016 election.

A newly obtained document (viewable below) written by Leon Rodriguez, the “director and co-chair of the Task Force on New Americans,” details an “integration plan that will advance our nation’s global competitiveness and ensure that the people who live in this country can fully participate in their communities.”

“’Full participation’ is a term commonly used to include voting rights,” says former Justice Department lawyer J. Christian Adams. “To that end, resources within DHS have been redirected toward pushing as many aliens and non-citizens as possible to full citizenship status so they may ‘fully participate’ in the 2016 presidential election.”

In fact, the document does blatantly states that “specific recommendations” aim to “strengthening pathways to citizenship and promoting civic engagement,” otherwise known as naturalization and voting rights.

According to Adams, Mr. Rodriguez has been a controversial and less-than honest central player in the “radicalization of Eric Holder’s Civil Rights Division.” He cites an instance when Rodriguez “undertook a purportedly illegal search” of a government employee’s computer in Montgomery County, Maryland.

Adams said that DHS is not only fast-tracking new green card holders before the 2016 election, but also hunting down previous visa holders to move them to green card status.

Meanwhile, Judge Hanen has been weighing whether to sanction the Justice Department lawyers after they were previously caught misleading him in the case on more than 100,000 amnesty applications approved between the Nov. 20 date Mr. Obama announced the amnesty order and the Feb. 16 date the judge issued the injunction.

However, the latest stunning admission is legally far worse than the previous instance, because it breaks Hanen’s injunction directly.

“The government sincerely regrets these circumstances and is taking immediate steps to remedy these erroneous three-year terms,” the administration lawyers in the brief filed with the court just before midnight Thursday. However, officials also say they will simply reduce the term from three to two years, not undo actions the judge ruled they never had the authority to take.

But that’s not satisfying the chairman of the Senate Judiciary Committee, who said it was “remarkable” that the administration continues to ignore Judge Hanen’s order by approving further applications without the constitutional authority to do so.

“The last time I checked, injunctions are not mere suggestions. They are not optional,” Iowa Sen. Chuck Grassley wrote in a letter to Secretary Johnson. “This disregard for the court’s action is unacceptable and disturbing, especially after Secretary Johnson’s assurances that his agency would honor the injunction.”

Yet, multiple sources at DHS confirmed that President Obama’s political appointees are pushing naturalization ahead of the 2016 presidential election, with the obvious purpose of giving Democrats an electoral edge via millions of new voters in the election. La Raza, an alleged pro-Hispanic civil rights group that translates to “The Race,” as well as the American Immigration Lawyers Association have been playing a central “stakeholders” role in the administration’s immigration policies, both secretively and internally.

“Middle class Hispanics were a key voting bloc that helped propel the Republican Party to its historic wave election in 2014,” says PPD senior political analyst Richard Baris. “As PPD has repeatedly demonstrated through the available data, outreach efforts made by the party and their private supporters paid off in 2014, big time.”

“Democratic strategists are increasingly fearful that the nearly monolithic black coalition, as well as the 2 to 1 support they enjoyed among Hispanic voters in 2012, were an Obama electorate phenomena,” he added. “They believe these margins are unlikely to be repeated by their 2016 nominee and congressional candidates. The significant Republican inroads among minorities in Florida, Nevada, Colorado, Georgia and Virginia, further exacerbated that fear.”

The administration broke the injunction blocking Obama's

Politics, Video

[brid playlist=”391″ player=”1929″ title=”Fox News Sunday”]

This week on the Fox News Sunday Panel, host Chris Wallace is joined by Brit Hume, Lisa Lerer, Michael Needham, and Charles Lane to discuss the possible fallout from all the Clinton scandals. In the second segment, the panelists debate the issue of NSA data collection in wake of the domestic terror attack in Texas.

(Video H/T RightSightings.com)

This week on the Fox News Sunday

Policy


Friedrich-August-von-Hayek

Austrian school economist Friedrich August von Hayek.

I wrote just yesterday about new evidence showing that decentralized government is more efficient. Part of the reason is because local governments are easier for voters to monitor and more likely to reflect the actual preferences of residents.

Another reason is tax competition. It’s relatively easy to “vote with your feet” by moving from one community to another, and this makes it difficult for interest groups and politicians to impose excessive tax burdens.

Now we have some serendipity.

I’m in Gdansk, Poland, for a Liberty Fund seminar on “Economic Growth, Entrepreneurship, and the Future of the Welfare State.”

Two of the readings, by great scholars from the Austrian school of economics, had passages about the importance of decentralization.

In 1960, here’s some of what Friedrich Hayek wrote in his classic, The Constitution of Liberty.

While it has always been characteristic of those favoring an increase in governmental powers to support maximum concentration of these powers, those mainly concerned with individual liberty have generally advocated decentralization. There are strong reasons why action by local authorities offers the next-best solution…it has many of the advantages of private enterprise and fewer of the dangers of coercive action by government. Competition between local authorities or between larger units within an area where there is freedom of movement…will secure most of the advantages of free growth. Though the majority of individuals may never contemplate a change of residence, there will usually be enough people, especially among the young and more enterprising, to make it necessary for the local authorities to provide as good services at a reasonable costs as their competitors. It is usually the authoritarian planner who…supports the centralist tendencies.

I should have remembered that quote from my collection of pro-tax competition statements by Nobel laureates.

In any event, I’m glad my memory was refreshed.

And here’s some of what Ludwig von Mises wrote in his 1944 book, Omnipotent Government. He approached the issue from the opposite direction, explaining that proponents of redistribution needed centralization so their intended victims couldn’t escape by moving across city borders.

Every step toward more government interference and toward more planning means at the same time an expansion of the jurisdiction of the central government. …It is a very significant fact that the adversaries of this trend toward more government control describe their opposition as a fight against Washington…against centralization. …This evolution is not accidental. It is the inevitable outcome of policies of interference and planning. …There can be no question of adopting these measure for only one state. It is impossible to raise production costs within a territory not sheltered by trade walls.

And remember that there’s academic evidence showing that decentralization limits redistribution.

So the statists were smart to oppose welfare reform, since that meant decentralization and less wasteful and counterproductive spending.

Just as the statists are smart to push for a nationwide sales tax cartel. And just as the statists are wise to push for an end to international tax competition.

All of which means, of course, that the rest of us (at least those of us who value liberty) should follow the wisdom of Hayek and Mises.

P.S. Hayek even has groupies.

P.P.S. And Hayek even came back to life for Part I and Part II of the Hayek v Keynes rap videos.

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Two readings at the Liberty Fund seminar,

Politics, Video

[brid video=”8128″ player=”1929″ title=”The McLaughlin Group 5815 New Joint Chiefs Hillary Clinton Vs. Bernie Sanders”]

The McLaughlin Group hosts Clarence Page, Pat Buchanan and Eleanor Clift on this week’s events, including the new Joint Chiefs of Staff, Hillary versus Sen. Bernie Sanders in the Democratic primary and more.

The McLaughlin Group hosts Clarence Page, Pat

Elections


ron-de-santis

U.S. Rep. Ron DeSantis, R-Florida, currently holds the House seat in the 6th Congressional District in the northeastern part of the state near Jacksonville.

The entrance of Rep. Ron DeSantis, R-Fla., into the Florida Senate race gives the Republican Party an early edge in the election to replace Sen. Marco Rubio, who announced he is running for president. Rubio has kept his promise he made early in the cycle and will not seek reelection to the U.S. Senate and run for the Republican nomination, simultaneously.

Of course, DeSantis will have to secure the Republican nomination first. So, let’s appropriately begin with the Republican primary field.

Florida Republicans are quick to point out to everyone that they have a very deep bench in the Sunshine State, unlike Democrats. The GOP controls a large majority of the U.S. House delegation, the state legislature and all but one statewide office. Sen. Bill Nelson, D-Fla., who is up for reelection in 2018, is the only Democrat to hold statewide office. However, Florida Chief Financial Officer Jeff Atwater, the only other candidate we believed could put together a primary coalition to challenge DeSantis, has decided against a run. Our sources told us this week in preparation for this expanded analysis article that this is not going to change, as he is already mulling a run for governor in 2018.

Lt. Gov. Carlos Lopez-Cantera, R-Fla., is more likely than not to enter the contest and pose a challenge to DeSantis. However, Floridians have not historically taken to lieutenant governors, as they have given them few post-tenure electoral successes. Other potential primary challengers include Rep. Tom Rooney, Rep. Vern Buchanan, ex-state Speaker of the House Will Weatherford, and former Sen. George LeMieux.

LeMieux, who was appointed by then-Gov. Charlie Crist to serve out the remainder of former Sen. Mel Martinez’s term in 2009, has expressed interest in a Senate bid. He stepped aside knowing that Crist would run for the seat himself in 2010, but Rubio badly defeated Crist in the GOP primary before Crist broke his promise and decided to run as an independent. LeMieux flirted with a Senate bid in 2012, but he dropped out before the GOP primary. Because he has never proven himself a formidable candidate in either the GOP primary or a statewide bid, we don’t see him as a threat to DeSantis.

We believe that the comparison of DeSantis to former Rep.-turned-Sen. Tom Cotton, R-Ark., is a correct comparison to make for two main reasons. First, both men are Ivy League veterans seeking higher office from the House of Representatives and both represent(ed) districts that are pivotal to their party’s statewide electoral success. We were always more bullish on Mr. Cotton in 2014 than other election projection models, despite erroneous polling and pundits suggesting the contrary. The fundamentals strongly favored Mr. Cotton and he represented the 4th Congressional District in Arkansas, which sat largely in what used to be a swingy region of the state, where defeated Democrat Sen. Mark Pryor had outperformed past Democratic candidates. Taken together with a strong candidate that wasn’t likely to scare swingy suburban voters, Sen. Pryor always had little chance of holding on.

We foresee a similar dynamic if DeSantis is the nominee, which we expect him to be. Let’s take a look at his support — continuing with our comparison — before moving on to the maps.

Immediately after Rep. DeSantis made his announcement, PPD received emails from conservative groups endorsing DeSantis, whom they had hoped would run. Senate Conservatives Fund, the Club for Growth (DeSantis has a 95 lifetime rating), FreedomWorks and Madison Project, all have begun raising money on his behalf in an effort that is very reminiscent of Cotton’s early coalition.

“I am honored to have the support of conservatives in Florida and across the country who believe we need to provide opportunity for all Americans,” Rep. DeSantis emailed PPD in response. “Floridians are hurting because of President Obama’s failed economic policies, which have stimulated Washington, D.C. but have made it harder for the middle class to get ahead and stay there. The support I hope to receive from grassroots conservatives will be critical for getting my message out across the state of Florida.”

While that is all well and good, as it will likely discourage other primary opponents, we see the potential in DeSantis to put together the various wings of the party akin to Sens. Tom Cotton, Joni Ernst and Cory Gardner. Grassroots support is fantastic, but you must perform in the I-4 corridor if you hope to win statewide office in Florida. Democrats, including Sen. Bill Nelson, defeat Republican candidates in the state by running up their margin in the Southeast part of the state, while holding down Republican support in the I-4 corridor, plain and simple. That takes a particular kind of Democrat, as we will now see.

Sen. Bill Nelson won the 2012 Florida Senate race with 4,523,451 votes, or 55.23 percent, against Rep. Connie Mack, who received an unimpressive 3,458,267, or 42.23 percent. Below is a county-by-county heat map showing the margins in the 2012 Florida Senate race between Nelson and Mack.

Fl-sen-2012

A few things should immediately jump out at you. First, Mack performed very poorly in the I-4 corridor and in counties that are traditional Republican strongholds. Further, with President Obama on the ballot in 2012, turnout and margins for Democrats in the Southeast were very impressive. By comparison, Sen. Rubio won all but five counties in 2010. But there’s another element to this picture that cannot be fully appreciated until we compare it with the following image below.

Florida_US_Congressional_District_6_(since_2013)

This is Florida’s 6th Congressional District in the northeastern part of the state near Jacksonville. Take a wild guess who represents the district. That would be Rep. Ron DeSantis, who in the same year, which was not a very favorable election cycle for Republican candidates, defeated Democrat Heather Beaven with over 57 percent of the vote. In 2014, DeSantis cruised to reelection with 62.5 percent of the vote, or roughly 70,000 votes, which coincidentally was Obama’s margin over Romney. Though he would have to outperform Mack in more than just the 6th Congressional District, a 36-year-old Ivy League Iraq War veteran is just the candidate to do it in this state.

That’s even more likely when we factor in the Democratic field.

Rep. Patrick Murphy, D-Fla., who represents the swingy 18th Congressional District, was the first to declare he will seek the seat. Murphy, a former Republican, is somewhat of a centrist and has significant establishment support. But he very well may have to fend off a challenge from the uber-liberal and controversial Rep. Alan Grayson, who represents the 8th Congressional District. This would turn the Democratic primary into an ugly and expensive setback for the party, which has moved decidedly left in recent years. In fact, if Grayson does run, there is a serious possibility that he could be the nominee, which would make the Republican nominee a likely favorite in the general election.

While Murphy is the sort of moderate Democratic candidate who historically has had electoral success in Florida, he is not a very good candidate. Sen. Bill Nelson, in contrast, is somewhat moderate but also very likable. And Floridians like him. Further, he enjoyed President Obama’s coattails in the Southeastern Democratic stronghold, which other white Democrats have not been able to replicate. We saw this on full display during the 2014 gubernatorial contest — first in the primary and then in the early voting data — when Obama essentially gave Crist his entire turnout operation. Against polls and pundits, we argued the data and fundamentals indicated the Obama GOTV operation would not produce for Crist.

It didn’t. And Crist lost against the unpopular Gov. Rick Scott, albeit narrowly.

As of now, or at least until we see evidence to the contrary, the Florida Senate race is rated Leans Republican on PPD’s 2016 Senate Election Projection Model. The likelihood of a Republican victory is 54 percent.

Race ratings for our 2016 Senate Elections Map are determined by PPD’s comprehensive election projection model that includes several variables, including but not limited to polling; weighted to value based on pollster accuracy, or the PPD Pollster Scorecard; state demographics and political leanings, including Partisan Voting Index (PVI); candidate ideology juxtaposed to party ID and voter registration in a particular state; party ID and voter registration trends separate from other variables; candidate recruitment and strength, factoring in experience, GOTV and campaign organizations; the national political environment, or voters’ sentiment toward each party; the ever-important variables of the economy, both state and national; and, of course, presidential approval rating in both state and national polls.

The entrance of Rep. Ron DeSantis, R-Fla.,

Policy


conservative-vs-liberal-reagan-vs-obama

President Ronald Reagan, left, the conservative standard-bearer with deep libertarian notes, and President Barack Obama, right, who wants to be the liberal big government standard-bearer, with deep modern liberal notes, which Reagan said resembles fascism.

In early November of last year, I shared some remarkable data from a groundbreaking study published by the European Central Bank (ECB). The study looking at public sector efficiency (PSE) in developed nations and found that “big governments spend a lot more and deliver considerably less.”

world-bank-gni-rankings

Later in the month, I wrote about a second ECB study that looked at a broader set of nations and further confirmed that smaller government produces better results.

The first ECB study clearly concluded that “small” government is more efficient and productive than either “medium” government or “big” government. Based on the second ECB study, we can conclude that it’s even better if government is…well, I guess we’ll have to use the term “smaller than small.”

Today, we can augment this research by looking at a new study from the International Monetary Fund.

IMF-decentralization

The IMF’s new working paper on “Fiscal Decentralization and the Efficiency of Public Service Delivery” shows that it’s not only good to have small government, but that it’s also good to have decentralized government. Here are the main findings.

This paper analyzes the impacts of fiscal decentralization on the efficiency of public service delivery. …The paper’s findings suggest that fiscal decentralization can serve as a policy tool to improve performance… an adequate institutional environment is needed for decentralization to improve public service delivery. Such conditions include effective autonomy of local governments, strong accountability at various levels of institutions, good governance, and strong capacity at the local level. Moreover, a sufficient degree of expenditure decentralization seems necessary to obtain a positive outcome. And finally, decentralization of expenditure needs to be accompanied by sufficient decentralization of revenue to obtain favorable outcomes.

Here’s some explanation of why it’s better to have decisions made by sub-national governments.

Local governments possess better access to local preferences and, consequently, have an informational advantage over the central government in deciding which provision of goods and services would best satisfy citizens’ needs. …Local accountability is expected to put pressure on local authorities to continuously search for ways to produce and deliver better public service under limited resources, leading to “productive efficiency.” …Decentralization…encourages competition across local governments to improve public services; voters can use the performance of neighboring governments to make inferences about the competence or benevolence of their own local politicians… Fiscal decentralization may lead to a decrease in lobbying by interest groups.

I especially like the fact that the study recognized the valuable role of tax competition in limiting the greed of the political class.

The study also noted that genuine federalism leads to spending competition, though I get the impression that the authors seems to think this is a negative outcome.

Fiscal decentralization can also obstruct the redistribution role of the central government.

For what it’s worth (and based on previous academic research), I agree that decentralization makes it harder for government to be profligate.

But that’s a good thing. I want to “obstruct” economically destructive redistribution.

Now let’s look at the specific finding from the study.

…expenditure decentralization seems to improve the efficiency of public service delivery in advanced economies… To quantify this effect, one could say that a 5 percent increase in fiscal decentralization would lead to 2.9 percentage points of efficiency gains in public service delivery. …about one third of public expenditure would need to be shifted to the local authorities to obtain positive outcomes from fiscal decentralization.

Though it’s worth emphasizing that decentralization works when the sub-national levels of government are completely responsible for raising and spending their own money.

Revenue decentralization shows positive and statistically significant impacts on public service delivery for advanced economies and emerging economies and developing countries. …These findings might imply the need to accompany expenditure decentralization with sufficient revenue decentralization to ensure improvement of performance.

I’ve already argued that federalism is good politics and good policy.

Now we have evidence that it’s good government.

And who would have guessed that the normally statist IMF would be the bearer of this good news.

[mybooktable book=”global-tax-revolution-the-rise-of-tax-competition-and-the-battle-to-defend-it” display=”summary” buybutton_shadowbox=”true”]

New studies looking at public sector efficiency

Policy


baltimore-rioters

Let’s revisit the issue of urban unrest, with special attention to the challenges for both entrepreneurs and ordinary citizens. While potential police misconduct may serve as a trigger for riots, the powder keg is already in place because of decades of bad government policy.

Jay Steinmetz, who runs a supply-chain management company in Baltimore, provides a real-world perspective on what it’s like to be an entrepreneur in a city run by kleptocrats. Here are some excerpts from his Wall Street Journal column.

When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden.  …Maryland still lags most states in its appeal to companies, according to well-documented business-climate comparisons put out by think tanks, financial-services firms, site-selection consultants and financial media. Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively.

Here’s what it means, in terms of lost revenue, to Mr. Steinmetz’s company.

The bottom line is that our modest 14,000-square-foot building is hit with $50,000 in annual property taxes. And when we refinanced our building loan in 2006, Maryland and Baltimore real-estate taxes drove up the cost of this routine financial transaction by $36,000. State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.

So it’s no surprise to learn that the geese with the golden eggs (as well as the silver and bronze eggs) are flying away.

Our employees reduce their tax burden and receive better public services in the suburbs.  …The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.

I’m not sure why Mr. Steinmetz hasn’t left as well. I guess it’s both admirable and foolish for him to persevere is such a hostile environment.

thomas-sowell-thumbThomas Sowell, in an article published by National Review, demolishes the argument that criminal behavior can be blamed on racism or poverty.

He starts by drawing attention to the 1960s as a key turning point.

The “legacy of slavery” argument is not just an excuse for inexcusable behavior in the ghettos. …Anyone who is serious about evidence need only compare black communities as they evolved in the first 100 years after slavery with black communities as they evolved in the first 50 years after the explosive growth of the welfare state, beginning in the 1960s.

Prof. Sowell then makes the obvious point that blacks faced much harsher conditions before the 1960s, yet crime was much lower.

And the black family was much more stable before the so-called war on poverty in the 1960s.

We are told that such riots are a result of black poverty and white racism. But in fact — for those who still have some respect for facts — black poverty was far worse, and white racism was far worse, prior to 1960. But violent crime within black ghettos was far less. Murder rates among black males were going down — repeat, down — during the much-lamented 1950s, while it went up after the much celebrated 1960s, reaching levels more than double what they had been before. Most black children were raised in two-parent families prior to the 1960s. But today the great majority of black children are raised in one-parent families.

Sowell’s point is that the welfare state created incentives for dysfunctional behavior.

And he stresses that this isn’t a racial issue.

Such trends are not unique to blacks, nor even to the United States. The welfare state has led to remarkably similar trends among the white underclass in England over the same period. …You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility, and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large. Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock.

I particularly appreciate his point about the importance of social capital, what he calls the requirements of civilization.

But this doesn’t mean black citizens don’t have some legitimate grievances. Radley Balko of the Washington Post explains that African-Americans are getting abused by greedy governments, just like Mr. Steinmetz.

He starts his article by sharing some good news on falling crime rates and big reductions in police deaths. But for our purposes today, the most powerful and relevant part of his story deals with one citizen’s interaction with government.

Antonio Morgan [is] a 29-year-old resident of Hazelwood, Missouri. He owns his own small business, a car repair and body shop he’d been saving up to buy since he was a teenager. He has also been arrested more than 20 times. All but two of those arrests were for misdemeanors. Morgan saved up for his business by fixing cars in his mother’s driveway. That required him to occasionally park cars on the street. That earned him parking tickets. He paid them when he could, but he occasionally missed deadlines. And that would lead to an arrest warrant. All of this also put Morgan on the radar of local police.

As you continue reading, keep in mind he was “on the radar” even though he did nothing to infringe on the life, liberty, and property of other citizens.

His unpaid parking tickets led not just to arrest warrants, but to the occasional suspension of his license. That led to more citations, although like many in the area, Morgan was sometimes pulled over and issued only a ticket for driving on a suspended license, or driving a car that wasn’t registered to him. (Morgan sometimes drove his clients’ cars to test them.) But there was no underlying traffic violation — which raises the question of why the officer pulled Morgan over in the first place, if it wasn’t to profile him. Those citations then led to more arrests.

It certainly seems as if St. Louis County in Missouri has been treating Mr. Morgan as a revenue-generating milk cow, much as Baltimore has been squeezing Mr. Steinmetz.

Different approach, but same result.

Cops would show up at his garage and cite his employees for operating without a business license. Morgan has a license; his employees didn’t need one. But to get the citations dismissed, Morgan and his employees would have to go to court, which was held once a month, at night. If they missed their court date, they too would be hit with an arrest warrant. Wealthy people can hire an attorney to go in their stead, and to negotiate their way out of a citation. But neither Morgan nor his employees were wealthy.

Some of you may be wondering about the two ostensibly more serious arrests on his record.

Radley’s column discusses both, and it certainly looks like Mr. Morgan has been mistreated by the justice system.

Here’s the first arrest. And remember it only occurred because he had to be in court to deal with ridiculous fines and petty harassment.

As Morgan walked toward the courthouse a police officer asked him the kids in the truck were his. He replied that they were. The officer asked him why he had left them alone. Morgan replied that he hadn’t, and that the woman parked next to him had agreed to watch them. ..Morgan pleaded with the police officer to flag down his friends, who he said would vouch for him. He says the officer then threatened to Taser him. Morgan put up his hands. The officer then arrested him for child endangerment. …The incident still upsets Morgan — not even the arrest so much as that his children had to see it. “I’m a good father,” he says. “I own my own business. I provide for my kids. Do you know what it’s like for your own children to see you get arrested? For a cop to say, right in front of them, that he’s arresting you because you’re a bad parent?”

I’m not someone who sees racism under every bed and behind every tree, but you can’t help but wonder whether this incident would have even happened if he was a white guy in a business suit.

The second arrest is equally dubious.

…the officer confronted Morgan because he was “trespassing” on a neighbor’s lawn. Morgan responded that he wasn’t trespassing, because the neighbors didn’t mind. Morgan says the cop moved to arrest him, and he lost his cool. He claims he never struck the police officer, but he does admit that he screamed at him. Once he did, he was hit with a Taser and arrested for assaulting a police officer. That charge was later dropped. (The neighbors back Morgan’s account of the entire incident, including his assertion that he never touched the cop.)

It’s always a smart idea to act servile and obsequious when dealing with cops, so Mr. Morgan obviously didn’t play his cards right.

But imagine if you had been endlessly harassed. Wouldn’t you be angry? Radley sure would have been.

I was stunned. But not because Morgan lost his cool with the cop. I was stunned that it had taken him so long to do so. And that even then, he’d manage to restrain himself from physical violence. I’m not sure I’d have been able to say the same.

Here’s the bottom line. Or, to be more accurate, two bottom lines.

First, we should sympathize with Mr. Morgan just as we should sympathize with Mr. Steinmetz. Actually, we should sympathize more with Morgan.

Morgan is no one’s definition of a “thug.” He’s a guy who breaks his back to keep up the business that supports his family,despite obstacles that, frankly, most white business owners don’t have to endure. For all he’s been through, he is remarkably composed. He deals with the daily harassment in a remarkably manner-of-fact way. …Morgan isn’t a drug pusher. He isn’t an absentee father. He isn’t in a gang. He’s a guy trying to do right by his family.

Second, we should recognize that one “root cause” of the problem is greedy government.

The primary source of revenue for the local towns is sales tax. But the poorer (which means blacker) towns don’t generate enough income from sales taxes. So they turn to municipal fines to keep themselves from going under. The poorer the town and its residents, the more likely the town relies on fines for a greater percentage of its annual revenue. Which means that the blacker the town, the more likely its residents are getting treated like ATMs for the local government.

None of this justifies rioting. And I have to imagine that Mr. Morgan would be one of the good guys during any unrest (much like Stretch and his friends in Ferguson).

But stories like this should make all of us appreciate how some communities may have a very sour impression of the police.

Let’s close with some economic analysis of riots (hey, I’m a policy wonk, so bear with me).

Here’s some of what Professor Edward Glaeser of Harvard wrote a few years ago for Bloomberg.

…public disturbances are a classic example of tipping-point phenomena, which occur when there is some positive feedback mechanism that makes an activity more attractive, or less costly, as more people do it. …There is a tipping point in rioting because the cost of participating — the risk of going to jail — gets lower as the number of people involved increases. …riots occur when the shear mass of rioters overwhelms law enforcement.

He then looks at the more challenging issue.

But how do these mass events get started? In some cases, …such as the 1965 Watts Riot, a peaceful crowd provides cover for initial lawlessness. Sporting events, such as Game 7 of the Stanley Cup Finals in Vancouver this year, can easily produce the crowds that allow a riot to start. Most strangely, riots can follow an event that creates a combination of anger and the shared perception that others will be rioting. The acquittal of police officers in the Rodney King case seems to have created these conditions in Los Angeles in 1992.

The left-wing excuse for rioting doesn’t seem to have much merit.

…across U.S. cities, there has never been much of a link between unrest and either inequality or poverty. In fact, the riots of the 1960s were actually slightly more common in cities that had more government spending.

But economic analysis gives us good clues, both about how to deter riots and who is most victimized when they occur.

Light penalties widely applied and serious penalties applied to a few can both deter unlawful behavior. This is a central conclusion of Gary Becker’s path-breaking economic analysis of crime and punishment. …Even when they are connected to understandable grievances, they do great harm, particularly to the poorest residents.

The moral of the story is that we should be tough on crime, but that doesn’t mean mistreating people like Antonio Morgan.

Instead, the legal system should focus on trying to deter bad behavior, which is when genuinely bad people infringe on the life, liberty, and property of others.

But how do we get politicians and bureaucrats to properly focus?

While potential police misconduct may serve as

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