Best. Econ. Videos. Ever.

The first one of these can be found on their site, or on YouTube. It is funny and enlightening. This one, shown below, should be sent to your liberal and moderate friends far and wide.

Two videos to help win the budget debate

It’s a testament to the slow witted nature of the Republicans that they haven’t found a way to run this ad across the country. It makes the case for cuts so clearly that only the most partisan person could deny its truth.

Let the sheer magnitude of the problem do the heavy lifting.

Next up, let’s give Paul Ryan the “Profiles in Political Courage” award for tackling Medicare, Medicaid, and Social Security. I don’t know how this all turns out, but I must say that it’s good to see Republican telling the truth.

Defending Mitch Daniels, Heartland’s new blog, Criticizing Tea Party Mistakes

The Heartland Institute has just started their new blog, called Somewhat Reasonable. I’m posting there regularly now, and I’ll be cross posting here, there, and over at ChicagoBoyz as well.

I don’t agree with Mitch Daniels trial balloon VAT proposal. I support a complete transition away from all income taxes, and toward consumption taxes. That said, the knee-jerk reaction to his attempt to discuss solutions to our national financial problems is wrong. This is the best Governor in the country. Having him as President would be a blessing.

For more debate, go here.

For a better proposal on swapping ALL income taxes, go here.

For a critique of Tea Party Candidate errors, go here.
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3 Cheers for Mitch Daniels, Leader

Let’s start with this. If Mitch Daniels is running for President, he’s made the strategic decision to run on bold policy, regardless of the risk. If he is not running for president, he has at least decided that he wants to have a positive impact on the policy debate, something the current GOP sorely needs.

If you haven’t heard, Mitch Daniels has once again voiced opinions that depart from the received canon of the GOP punditocracy and policy shops. He floated the trial balloon of using a VAT to offset other taxes and move the nation away from the financial conflagration brought on by our failed tax code. This is a good thing. Here is what we read in Politico and Newsweek.

Mitch Daniels open to VAT, oil tax hike

Daniels recited from Kahn’s book: “It would be most useful to redesign the tax system to discourage consumption and encourage savings and investment. One obvious possibility is a value added tax and flat income tax, with the only exception being a lower standard deduction.”

“That might suit our current situation pretty well,” said Daniels, who served as George W. Bush’s Office of Management and Budget director and was a senior adviser in Ronald Reagan’s White House. “It also might fit Bill Simon’s line in the late ‘70s that the nation should have a tax system that looks like someone designed it on purpose.”

The so-called VAT, common in European economies which have stagnated, is a toxic acronym to fiscally conservative activists like Grover Norquist and Dick Armey. It slaps a tax on the estimated market value for products at every stage of production. Progressives, meanwhile, loathe flat income taxes because they’re regressive and punish the poor. But some on the right have found the VAT attractive as an alternative to progressive income taxes and levies on capital gains.

The Horror!! He said the “T” word!!! Run awwwaaaaaayy! But wait, there’s more!

Indiana Gov. Mitch Daniels Earns Conservative Ire for Tax Remarks

Mitch Daniels has been much talked-about in the media, and for good reason: he’s one of the more interesting Republican contenders for 2012. But the normally mild-mannered Indiana governor has occasionally made headlines for his controversial statements, and he’s back at it.

The reaction from some quarters was fierce. In what almost (but not quite) seems like a validation of Godwin’s law, Grover Norquist, the noted antitax activist who leads Americans for Tax Reform, compared Daniels to Rich Iott, the Ohio congressional candidate who wore a Nazi uniform as part of World War II reenactments.

Stay classy, Grover.

Let me say that I’m not particularly enamored of the form of this trial balloon, either as a matter of policy or the way it was floated. I’m on record for supporting a complete phase out of all forms of income taxation, both individual, payroll, corporate, and capital gain.

I floated my trial balloon here. I’ve backed off the gas taxes since then, but the rest is utterly reasonable and defensible, particularly in comparison with our failed tax code. Daniels was simply wrong to float the flat tax (or any income tax) along with the VAT. Get rid of all income taxes, period.

I’m guessing there is a reason that politicians, even those as successful as Daniels, are afraid of calling for an end to all income taxation. That reason has to do with the politics of taxing the lower income citizen at a very high rate, while the rich get the proverbial “free ride.”

BTW, The political solution to that problem is to phase in giving every American over 21 a stipend that covers health care, retirement, and HSAs. This is a feature to the flawed “Fair Tax” plan, and should be a part of any tax swap plan. Stop arguing about the welfare state, and simply individualize it. But I digress…

If I’m so critical of Daniel’s poor plan, why am I so happy he floated the idea? Because it shows leadership. Because it shows an understanding of the size of the problem and the political maneuvering necessary to gain bipartisan support.

It’s time to move America in a better fiscal and cultural direction, and the nattering nabobs of negative attacks (Norquist, Carville, Begala, and Rove) aren’t cutting it anymore.

We have had 3 decades of one ideology staying in power just long enough to enact the worst policies, while the next ideology encrusts that bad policy with layers of even worse policy. Break the stalemate, risk running on robust policy, and do the hard work of bargaining for a better deal. If you agree that the time is ripe for such a strategy, you couldn’t pick a better person than Daniels to be in your corner.

He is criticized for raising some taxes early in his administration, but his critics probably don’t want you to know that this came with;

  • Dramatic spending cuts
  • An Executive Order repealing collective bargaining rights for public employees
  • More spending cuts
  • HSAs and consumer driven plans for public employees
  • Substantial property tax relief.
  • Grover Norquist’s administration started with….

    Oh wait! Grover’s never been elected to anything. He’s never put his name on the line or submitted himself to a vote (or an important policy decision). Instead, he’s given us a generation of Republicans who have signed “No Tax Pledges,” many of whom spent (and thus taxed) us into oblivion.

    The current tax system is beyond reform and/or repair. Too few pay into it to flatten it out, an broadening means tax increases on the middle class. It is incapable of raising the money needed for the promises that have been made, even after the coming big haircut. Attempting to re-run the 80s, 1994, or the weaker 2000s is a fool’s errand. We can’t get there from here under any realistic growth scenario.

    The danger we face in following the “nattering nabobs” is the near certainty that we get both VAT taxes AND the income tax regime in any event.

    We are approaching a rare moment in time where Americans are interested in policy ideas, the Constitution, and a return to self governance. We should use that opportunity to reset the nation’s course, not to score talking points until the next wave of anger topples the next majority.

    Is all this an endorsement for Daniels for President? Probably. I admire him for leading. We could use more of that in the next few years.

    If you aren’t hacking entitlements, you aren’t serious about the deficit

    The video below will tell you just how much we are going to have to slash ALL entitlements if we are to survive into the future.

    Earmarks should be cut, to be sure, but if you aren’t talking about Social Security, Medicare & Medicaid cuts, then you aren’t serious about the debt and the deficit.

    As for taxes, yes, there is some wiggle room, but if you chase capital off shore, you can never catch up with the downward spiral.

    Addressing SEIU/AFSCME talking points

    Public Unions are taking well-deserved heat for their pension greed. If you look at all the pension articles, the comments are full of reasonable sounding folks trotting out the argument that the really bad examples of abusive pensions are “outliers.” They then tell you that the average benefit is “only $20,000/year.” It’s best to address this calmly, reasonably, and accurately. Here’s how.

    Some folks defending the public employee pension issue like to point out that the majority of those receiving benefits get relatively low payouts. They often use lines like “the average benefit is only $17-20K/yr.” This union talking point needs to be addressed.

    While it is technically correct, they mask the real problem, which is the large number of the new retirees on the horizon, coupled with the actuarial insanity of their benefits. (I’m using Illinois as an example, but the same has occurred in CA, NJ, and the entire Northeast)

    Think of 10 people who retired 15-20 years ago receiving $20K/yr. Now think of one greedy school superintendent who just retired sucking down $200K (or more) after hopping from district to district, ramping up his retirement with fat contracts no one ever vetted. Multiply that one person by a few 1000 in each state. Add to that whatever number of teachers are receiving big pensions after goosing their unwarranted salaries for the last 4 years of their careers.

    Now you have this large run up in the number of retirees, the size of the pensions, and the INSANE early retirement options. It’s a HUGE problem. For icing on the bankruptcy cake, add in free health care for life for many of these folks.

    Public Unions have bankrupted the states where they’ve gained massive power. It’s time to tell them to sit down, shut up, and take the massive cuts they deserve. Since their pension benefits are probably protected by awful constitutional clauses guaranteeing them, the best solution is to make every one of these folks with pensions over $100K pay 100% of their own health costs. In this political environment, that policy will pass political muster.

    When a politician balks at this policy, and defends unions, fat pensions, and the feeble idea that “government workers” have the right to bankrupt the state, burn their political career to the ground. The time is right. There is no real downside to being rhetorically and politically aggressive on this point. To that end, I post this type of comment on many articles about the pension greed of public unions.

    Look here, the fact that police protect us, that firemen run into burning buildings, and teachers educate our children, does NOT give them the right to bankrupt our civilization. It is time to get right up into the face of these unethical people and tell them to stop! It is also time for all of you to stop buying the “poor public employee” load of lies, and abolish public unionization. The best next step is to end this era of public greed is to cap the growth of EVERY government entity’s budget to inflation plus population growth.

    Sweden, the latest Red State

    America, even with Republicans in the House and possibly Senate, runs the risk of becoming the model sclerotic empire, wasting away while European states become more free.

    Sweden is one country to watch. First, it does socialism about as well as any state could. (of course, this is easier when your nation is small, homogeneous, and free of the burdens of world leadership.

    Sweden’s Quiet Revolution
    Without much fanfare, the Scandinavian country has been moving away from socialism.

    There is something about Sweden that provokes a mix of envy, horror, and bewilderment among American observers. Liberals have traditionally celebrated its cradle-to-grave safety net, while conservatives have disparaged its high taxes and centralized health-care regime. Yet both groups have generally agreed that Swedish-style socialism is a far cry from rough-and-tumble U.S. capitalism.

    In fact, contemporary Sweden is much less socialist than many Americans realize. Since the early 1990s, when it suffered a painful financial crisis, the Scandinavian country has deregulated key industries (such as airlines, telecommunications, and electricity), lowered its overall tax burden, established universal school vouchers, partially privatized its pension system, abolished certain government monopolies, sold a number of state-owned enterprises (including the parent company of Absolut vodka), and trimmed public spending. Several years ago, it eliminated gift and inheritance taxes. The World Economic Forum now ranks Sweden as the second-most competitive economy on earth, behind only Switzerland. According to the 2010 Index of Economic Freedom (compiled by the Wall Street Journal and the Heritage Foundation), Sweden offers greater business freedom, trade freedom, monetary freedom, investment freedom, financial freedom, freedom from corruption, and property-rights protection than does the United States.

    Bolstered by prudent economic stewardship and a relatively conservative financial sector, Sweden entered the global recession on a sound footing. While it endured a nasty spike in unemployment, its export-driven recovery has been so vigorous that the central bank is now concerned about inflation risks. In the second quarter of 2010, Sweden posted a 4.6 percent annual growth rate, prompting the Wall Street Journal to hail it as “the biggest success story in post-recession Europe.” It currently has the lowest deficit-to-GDP ratio in the entire European Union. Before the election, Swedish finance minister Anders Borg announced plans to privatize another $14 billion worth of state assets. “If we get a surplus in place,” Reinfeldt told a Reuters interviewer, “we will deliver on tax cuts for 6.1 million workers and pensioners.” (The total Swedish population is roughly 9.4 million.)

    To be sure, Sweden won’t look like Hong Kong or Singapore anytime soon. It still has a lavish welfare state, and its aggregate tax burden is still quite heavy. The top marginal income-tax rate is 57 percent in Sweden, compared with 35 percent (for now) in America. On the other hand, a 2008 OECD study found that household taxes are substantially more progressive in the U.S. than they are in Sweden, even after we control for America’s higher level of income inequality. Sweden has a much lower average statutory corporate-tax rate than the U.S., and also a much lower effective corporate-tax rate on new capital investments (according to University of Calgary economists Duanjie Chen and Jack Mintz). Its tax structure is made even more regressive by a 25 percent value-added tax on consumption of most goods and services.

    Which brings us to a common misconception about the Swedish system — that it takes from the rich and gives to the poor. Actually, says Lund University economist Andreas Bergh, “the majority of the taxes you pay are given back to you during your life cycle.” Thus, “if you pay more when you work, you will also get more when you retire.” Even upper-class Swedes enjoy bountiful government largesse.

    Another popular myth would have us believe that Sweden’s wealth was somehow created or facilitated by social democracy. In reality, “Sweden’s prosperity is the result of well-functioning capitalist institutions,” says Bergh, author of the new Swedish-language book The Capitalist Welfare State. As Cato Institute scholar Johan Norberg explained in a 2006 National Interest essay, the relative “success” of the country’s social-democratic model “was built on the legacy of an earlier model: the period of economic growth and development preceding the adoption of the socialist system.”

    When will we stop spending?

    The graph below compares American spending against other OECD countries. It comes from an article in the left-leaning American Prospect that basically argues that our spending isn’t really a problem.

    OECD Spending

    OECD Spending

    A Million Here, a Million There ?
    Why federal spending never goes down, and why that’s not a problem.

    Politicians can fulminate all they want about the $2 million earmark or the silly sounding $150,000 research project. But the truth is that government spending is going to continue to rise, because neither Democrats nor Republicans really want government to get smaller – at least not badly enough to cut it in a meaningful way. It can rise at a slower or faster rate, depending on the decisions we make (the biggest source of future spending is Medicare and Medicaid, a problem the Affordable Care Act begins to tackle). But no matter who wins the election this year, or in 2012, or in any other year, it’s going to keep growing.

    First, the comment that ObamaCare is going to “tackle” spending is absurd.

    Next, the fact is that spending does matter for all kinds of reasons, particularly for a nation that doesn’t want to go down the path of sclerotic Europe. No one knows if the Tea Party/Patriot movement is going to succeed in curtailing spending. I get the feeling that they just might. If the Republicans don’t curtail the rate of spending in some meaningful way, the loose network of activists will coalesce into a party.

    For how long, and what level of success such a party has is an open question.

    The answer need not be cutting spending below the previous year, but merely curtailing spending growth to a manageable number. Raise the retirement age, combine and means test Medicaid and Medicare, and outlaw public unionism at the state level.

    Those 3 things alone will cure the spending problems. Get political power, and ram them through.

    Paul Ryan vs. the intellectually bankrupt Republicans

    There is a great piece in the American Spectator about Paul Ryan and his “Road Map.” Ryan lacks Gingrich’s Machiavellian talents, and therefore isn’t in the running for taking over the party. Of course, Ryan doesn’t seem to have any of Newt’s devastating character flaws either.

    The fact is that Ryan is being wasted in the slow-witted and slow moving Republican Party. He’s a policy guy trying to save the nation while the party is run by idiots running the failed “Pelosi Fright Wig” strategy. We all understand the trade off balancing the easier path of winning power by vacuity or actually having a mandate.

    In this cycle, we actually could win an honest mandate for change by following Ryan. Instead, we are wasting the opportunity to put in a gaggle of intellectually flaccid graymeat who will do what Boehner tells them to do. This is a strategy for disaster.

    Paul Ryan’s Friends

    The amount of flack being directed at Ryan and his “Roadmap” has been rapidly increasing. Former White House budget director Peter Orszag, who should know better, trashed the Ryan plan in his farewell lecture at Brookings. This from the man who, as noted by the Wall Street Journal, “presided over record deficits of $1.4 trillion in 2009-or 9.9% of GDP-and an expected $1.5 trillion in 2010.” Cheeky fellow.

    Jon Ward of the Daily Caller observed that this high-profile critique of Ryan “shows the seriousness with which Obama and his top advisers take Ryan’s alternative vision for the country’s future, as well as the vehemence with which they disagree.” Ward mentioned that the Orszag attack was the same day the Democratic National Committee attacked the “Roadmap.”

    Note that the left takes Ryan more seriously than the leaders in his own party.

    You can live with enemies in politics, but you can’t survive without friends. Ryan needs more than intellectual or moral support from conservative intellectuals, commentators, and even honest liberals, as important as they are. He and his “Roadmap” need the heartfelt support of his party, its leaders and its candidates across the country who must take the argument to the people in this watershed election year.

    The stakes are too high for the Republicans to simply stand by, quietly, hoping the Democrats will self-immolate. The GOP needs to embrace a big, visionary idea, something like Ryan’s “Roadmap,” which addresses the most important political challenge of the age: the runaway costs of entitlements which were irresponsibly put on autopilot under both Democratic and Republican governments.

    Just so you know, I put forth a much bigger, better, and more visionary idea over at the Chicago Boys blog a few days ago. While I laud Ryan as true thinker, leader, and one of the few hopes for a brain dead party, my idea is a better roadmap.

    Raising retirement age saves Social Security

    With the Democrats wringing their hands over a newly energized GOP, it isn’t hard to understand that they are running the same plays they have for decades. Now that many in the GOP are advancing robust public policy (like raising the retirement age for Social Security), the Dems are accusing them of trying to destroy it.

    Some of the first big posts on this site a(around 2005) discussed personal accounts, phasing out Social Security, and replacing it with entirely private accounts. Those policies, while arguably good public policy, would actually “destroy” Social Security.

    Raising the Retirement age, on the other hand, is one of the few policies that would actually go a long way toward saving it. Go and read about it.