Massive $20 million food stamp fraud bust in Florida, this time…

There is so much that could be done to stop the fraud including disallowing ‘mom and pop’ convenience stores from accepting EBT cards.

If you are a longtime reader, you know that following food stamp fraud cases is a side interest of mine. Go here to my large archive on past cases.  I haven’t written much lately on the topic because reporting on the refugee program is about all I can handle.

I continue to urge one of you to write a blog solely on the topic of immigrant fraud such as food stamp fraud and other welfare fraud—a topic that could keep you busy every day and do our country a great service.

And, besides, your blog could be hopping (and fun to write!) because I suspect we will see more crackdowns now that the Justice Department is run by Jeff Sessions.

The type of fraud mentioned here in the Breitbart story (called trafficking) works like this: Customer with SNAP benefits comes in to store wanting cash (for drugs?). Manager or owner pays customer 50 cents on the dollar in cash and then seeks reimbursement from the government (you!) for the full $1 dollar supposedly spent on food.

Here is Breitbart:

Twelve Floridians have been charged with running an alleged $20 million food stamp fraud scheme in one of the “largest” food stamp fraud crackdowns in history, according to the Justice Department.

Federal prosecutors told the Miami Herald that the 12 defendants who reportedly defrauded the federal government of $20 million were charged with food stamp fraud, wire fraud, and conspiracy to commit wire fraud.

The list of those charged include Mohammed Alobaisi, 37; Mohammad Alteen, 33; Joe Ann Baker, 56; Reynold Francois, 38; Omar Hajje, 43; Jalal Hajyousef, 42; Andy Javier Herrera, 24, and his father, Javier Herrera, 49; Ihab Hassouna, 44; Maria Jerdana, 36; Hasan Saleh, 59; and Yousef “Joe” Homedan Zahran, 60.

“In this instance, eight small convenience stores in South Florida committed a staggering amount of fraud in a relatively short amount of time,” said Karen Citizen-Wilcox, special agent in charge, U.S. Department of Agriculture-Office of the Inspector General, in a press release.

[….]

Store owners and employees who commit food stamp fraud face steep consequences.

Continue here.

No, I would not call a few months in jail “steep consequences.”  And, how does someone pay restitution when they have sent your tax dollars out of the country (which is often the case)?

RELATED ARTICLE: Austria: Burqa ban promotes ‘acceptance and respect of Austrian values’

Give Everyone a Raise through Payroll Tax Cuts

Income tax cuts are great, but it’s not the best way to help lower- and middle-class workers.

James Capretta

by  James Capretta

Republicans are just getting started with their effort to reform individual and corporate taxes, but already it is possible to see warning signs ahead. Opponents of reform say the effort will mainly benefit high-income households, who don’t need the help. They ignore the effect lower marginal rates will have on economic growth and job creation.

Tax reform could falter if the public perceives it as a giveaway to the rich. Republicans can partially blunt the effectiveness of these attacks by including in their plan a reduction in payroll tax rates, which would directly help the middle class.

Why Payroll Taxes?

The payroll tax is a much heavier burden on the middle class than income taxes. According to the Tax Policy Center, 62 percent of all taxpaying households paid more in payroll taxes than income taxes in 2017; and 67 percent of households with incomes below $100,000 in annual income paid more in payroll taxes. The average effective payroll tax rate for households in the middle quintile of the income distribution was 8 percent in 2016, well above the average effective rate of 3.5 percent for income taxes.

In the past, policymakers have been wary of cutting payroll taxes because the revenue is used to pay for Social Security and Medicare Hospital Insurance (HI) benefits, and both programs are projected to run short of funds in the future. The current tax rate for Social Security is 12.4 percent of wages, split evenly between workers and their employers, up to a maximum of $127,200 in 2017. Social Security has an unfunded liability of $12.5 trillion over the next 75 years.Workers and employers also pay a combined 2.9 percent tax for Medicare, and there is no limit on the amount of wages subject to the tax. High earners — individuals who earn above $200,000 and couples who earn above $250,000 — pay an additional Medicare tax of 0.9 percent.  The Medicare HI trust fund has an unfunded liability of $3.3 trillion over the next 75 years.

In 2011 and 2012, President Obama supported and Congress enacted a 2 percentage point reduction in the employee portion of the Social Security payroll tax, reducing revenue by about $100 billion in 2011 and slightly more in 2012. The law transferred an identical amount of funds from the general fund of the Treasury to Social Security to prevent depletion of the program’s trust funds.

Congress could enact another payroll tax rate cut of 1.5 to 2 percentage points without depleting the Social Security or Medicare trust funds and without relying on another transfer of funds from the Treasury. Tax reform is supposed to be about cutting tax rates as well as broadening the tax base by closing loopholes and limiting tax breaks. There are a number of tax breaks that reduce the amount of payroll tax revenue collected by the government that could be narrowed to help pay for a cut in the payroll tax rate.

How to Do It

For starters, the exclusion of employer-paid health-insurance premiums from taxation will reduce payroll taxes by $1.8 trillion over the period 2017 to 2026. Capping the amount that is tax-free at the 75th percentile of plan premiums would increase payroll tax revenue by about $72 billion over 10 years. In addition, employer-paid premiums for disability and other income-replacement programs are excluded from the taxable compensation of workers.  Limiting that exclusion could provide at least another $100 billion in payroll tax revenue over 10 years. In a large tax reform package, there are likely to be additional opportunities to increase payroll tax collections by broadening the tax base.

Further, the full benefits of a payroll tax cut could be limited to households with incomes below a certain threshold, such as $75,000 per year. (The income tax system could gradually recapture lost payroll tax revenue from households with higher incomes.) The tax cut could also be time-limited in the initial legislation, so as to fit within available offsetting revenue increases, and then extended later as more offsets were identified.A cut in the payroll tax rate would be good for workers. A 2 percentage point reduction in the total tax would increase the after-tax income of a household with $50,000 in earned income by $1,000. Cutting payroll taxes would also boost economic growth by encouraging more work. A cut in the tax rate could, at least in theory, reduce the supply of labor by boosting the income of workers who could then substitute more time off for time at work. But there is substantial evidence that high marginal tax rates on labor generally have the opposite effect: discouraging work by reducing its value to workers with high taxes.

Some skeptics of cutting payroll taxes argue that because Social Security and Medicare benefits are partly based on what an individual earns while working, the economic value of such a cut is lessened, as workers equate payroll taxes with contributions toward their retirement. But the benefits owed to workers under Social Security are based on the amount of wages earned by the worker, not the taxes paid on those wages. Consequently, a cut in the payroll tax rate would in no way lessen future Social Security benefits. Further, the opaqueness and complexity of the Social Security benefit formula make it near impossible for the average worker to make a sensible connection between what he earns and what he will get in retirement. (There is often very little connection, anyway.) Medicare benefits are in no way tied to the amount of taxes paid or even to overall earnings. Instead, workers must meet a minimum threshold of wages over a 10-year period to become eligible for coverage at age 65.

By focusing tax reform on the individual and corporate income tax systems, Republicans have made their task more difficult than it should be. The federal income tax is already progressive; low and moderate wage households pay little in income taxes. But, in relative terms, they still pay a lot of payroll taxes. Cutting that tax is the best way to deliver real tax relief to families that need it most as well as to increase the value of their work effort.

Reprinted from American Enterprise Institute

James Capretta

James Capretta

James C. Capretta is a resident fellow and holds the Milton Friedman Chair at the American Enterprise Institute, where he studies health care, entitlement, and US budgetary policy, as well as global trends in aging, health, and retirement programs. In 2015 and 2016, he directed two major studies: one on reforming US health care according to market principles and consumer choice, and the second on reforming major federal entitlement programs to promote greater personal responsibility, focus limited resources on those most in need, and lower long-term federal expenditures.

Your House Does Not Need a New Roof at My Expense

The moral and economic issues raised by government flood insurance ought to be obvious.

Lawrence W. Reed

by  Lawrence W. Reed

Pardon the pun, but I would like to discuss the subject of “sunk costs” in the context of hurricane-induced flooding.  Here’s the background, from a page one Wall Street Journal article on September 15, “Repeated Claims Flood Insurance Program”:

Brian Harmon had just finished spending over $300,000 to fix his home in Kingwood, Texas, when Hurricane Harvey sent floodwaters “completely over the roof.”

The six-bedroom house, which has an indoor swimming pool, sits along the San Jacinto River. It has flooded 22 times since 1979, making it one of the most flood-damaged properties in the country.

Government records show that between 1979 and 2015 the federal flood insurance program paid out more than $1.8 million to rebuild the house—a property that Mr Harmon figured was worth $600,000 to $800,000 before Harvey hit late last month.

“It’s my investment,” the 49-year old said this summer, before the hurricane. “I can’t just throw it away.”

On a house worth maybe $800,000, the government expended a total of $1.8 million—spread over as many as 22 occasions. What Mr. Harmon has personally spent (to build or buy, and later to improve or fix the house) is not stated, other than the $300,000 for recent hurricane repairs. It’s conceivable that this one single-family structure has sucked up a sum equivalent to five times its value, or more. And since it’s flooded 22 times in 36 years, it’s probably not done sucking.

Mr. Harmon says he “can’t just throw it away” but I as a taxpayer sure wish he would.

Loss Aversion

The moral and economic issues raised by government flood insurance ought to be obvious. Since its creation by Congress in 1968, the National Flood Insurance Program (NFIP) has lost money every year—about $25 billion to date, with this year’s deficit in excess of a billion.

Mr. Harmon’s reluctance to give up on his house seems motivated by what economists call “loss aversion,” the uneasy feeling people often have about wasting something they’ve invested in.

You buy a ticket to a movie but at the last minute a friend invites you to a sumptuous dinner at your favorite restaurant. That would be an easy decision if you hadn’t already bought the theater ticket; you could always see the film next week. But darn it, you paid for it and if you don’t go, it’ll be wasted. You may still accept your friend’s invitation, but with a tinge of regret. (To lessen that regret, you might pass the ticket on to someone else).

Nonetheless, economists caution us to recognize that a cost you’ve incurred in the past and which is unrecoverable is, in a word, “sunk.” The sooner you can put a sunk cost behind you—perhaps learn from it but otherwise forget about it—the better your future decisions will be.

Many times I’ve caught myself allowing a sense of loss aversion to overwhelm my knowledge of sunk costs. Here’s an example I shared often with students when I taught at Northwood University: I once bought a half gallon of butter pecan ice cream on sale for a mere 99 cents. “Such a deal!” I thought. When I opened it at home, scoop in hand, I discovered it was almost all ice cream (lousy to the taste, no less) and virtually no pecans! I suppose I could have angrily returned it to the store for a refund (minus the two dollars in gasoline it would have taken to get there), but I’m an easygoing chap. I just stuck the whole thing in my tiny freezer. For weeks thereafter as I tried to make room for other things, I would jam that half gallon of bad ice cream into a different corner.

Fixating on sunk costs is a major reason why a lot of small investors stay small.

Then it hit me. I’m never going to eat that stuff! It’s just taking up room I could use for something better. That 99 cents ain’t comin’ back. What am I keeping this junk for? Pleased that I was finally allowing my economics knowledge to inform me, I tossed that bad investment into the garbage can.

Opportunity Cost

As the author of this article explains, another example of this “sunk cost fallacy” would be to assume, “I might as well continue dating someone bad for me because I’ve already invested so much in them.”

Fixating on sunk costs is a major reason why a lot of small investors stay small. They can’t bring themselves to admit a mistake when the market moves against them. Rather than cut their losses short and move on, they hang on. Loss aversion then becomes loss accumulation.

Obviously, some people are quicker than others to learn from the errors arising from their loss aversion and the sunk cost fallacy. But one general lesson proves itself time and again—if it’s your own investment you’re playing with, and losses associated with it are all internalized (that is, it’s you who pays them), you tend to learn sooner rather than later. Your behavior changes as a result, so that you act less to “avoid” past losses and more to avoid future ones—the ones that are actually avoidable.

In the case of Mr. Harmon and his flood-prone home, his endless commitment seems akin to forgoing the better invitation to go instead to an inferior movie, or stuffing the lousy ice cream back in the freezer, or getting engaged to a bad fit because of all the gifts and dinners he previously bought her. So why does he do it? Because his sunk costs are only partially internalized; most of them are paid by other parties (taxpayers). From his vantage point, his decision to throw your good money after his bad money doesn’t seem nearly as irrational as it might to you and me.

There’s another concept of cost that’s being overlooked in the Harmon example—opportunity cost. If the federal flood insurance program hadn’t given Mr. Harmon $1.8 million for his house, what might those from whom it was taken spend that money on? Perhaps three or four houses. Or a whole lot of things, big and small, according to the personal choices of those very people who earned the money in the first place. That unrealized cornucopia is what Frederic Bastiat referred to as “that which is not seen.”

Lots of lessons here, some very obvious and others more hidden or implied: Don’t cry over spilt milk. Don’t let a past, unrecoverable cost hobble your future decision-making or forgo a better opportunity.

Failure to internalize sunk costs results in a waste of resources by short-circuiting market signals and creating the wrong incentives. (Unless you live in an infinitely bountiful Garden of Eden, this latter point should concern you.)

So now that we’ve learned these lessons, tell me which of the following proposals makes the most sense:

  1. Keep the federal flood insurance program in place. We’ve invested in it and can’t afford to kiss off those billions we’ve already spent.
  2. Kill the federal flood insurance program (or at least price it so that those who build in flood-prone areas pay the full costs of it). Anything less is just a welfare program, not insurance.

I think you know my druthers.

Lawrence W. Reed

Lawrence W. Reed

Lawrence W. Reed is president of the Foundation for Economic Education and author of Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of ProgressivismFollow on Twitter and Like on Facebook.

IMF Head Foresees the End of Banking and the Triumph of Cryptocurrency

Bitcoin “”puts a question mark on the fractional banking model we know today.”

Jeffrey A. Tucker

by  Jeffrey A. Tucker

In a remarkably frank talk at a Bank of England conference, the Managing Director of the International Monetary Fund has speculated that Bitcoin and cryptocurrency have as much of a future as the Internet itself. It could displace central banks, conventional banking, and challenge the monopoly of national monies.

Christine Lagarde–a Paris native who has held her position at the IMF since 2011–says the only substantial problems with existing cryptocurrency are fixable over time.

In the long run, the technology itself can replace national monies, conventional financial intermediation, and even “puts a question mark on the fractional banking model we know today.”

In a lecture that chastised her colleagues for failing to embrace the future, she warned that “Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.”

Here are the relevant parts of her paper:

Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.

Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.

For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.

But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.

Better value for money?

For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.

IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008.

And yet, why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable.

For instance, they could be issued one-for-one for dollars, or a stable basket of currencies. Issuance could be fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored…or even a “smart rule” that might reflect changing macroeconomic circumstances.

So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.

Better payment services?

For example, consider the growing demand for new payment services in countries where the shared, decentralized service economy is taking off.

This is an economy rooted in peer-to-peer transactions, in frequent, small-value payments, often across borders.

Four dollars for gardening tips from a lady in New Zealand, three euros for an expert translation of a Japanese poem, and 80 pence for a virtual rendering of historic Fleet Street: these payments can be made with credit cards and other forms of e-money. But the charges are relatively high for small-value transactions, especially across borders.

Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender.

So, when the new service economy comes knocking on the Bank of England’s door, will you welcome it inside? Offer it tea—and financial liquidity?

New models of financial intermediation

This brings us to the second leg of our pod journey—new models of financial intermediation.

One possibility is the break-up, or unbundling, of banking services. In the future, we might keep minimal balances for payment services on electronic wallets.

The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms with an edge in big data and artificial intelligence for automatic credit scoring.

This is a world of six-month product development cycles and constant updates, primarily of software, with a huge premium on simple user-interfaces and trusted security. A world where data is king. A world of many new players without imposing branch offices.

Some would argue that this puts a question mark on the fractional banking model we know today, if there are fewer bank deposits and money flows into the economy through new channels.

How would monetary policy be set in this context?

Today’s central banks typically affect asset prices through primary dealers, or big banks, to which they provide liquidity at fixed prices—so-called open-market operations. But if these banks were to become less relevant in the new financial world, and demand for central bank balances were to diminish, could monetary policy transmission remain as effective?

Cuban doctors tired of ‘being slaves’ sue Cuban Government

As former Bill Clinton said, “It’s the economy stupid!” For the Cuban people it truly is the economy, stupid.

Perhaps a few of my first hand experiences during my visit to Cuba will help those who favor big government understand where “socialismo” leads.

One of the things some people, many of whom have never visited Cuba, tout is their “excellent” healthcare system. Let me explain about the Cuban single payer government healthcare system. First, every visitor to Cuba must purchase health insurance from the Cuban government. For example, the cost of my health insurance was automatically included in the price of my plane ticket. So how much does the Cuban government pay its doctors to provide universal healthcare? The salary of a doctor is $30 a month.

In 2013 Brazil hired 4,000 doctors from Cuba to “work in areas where medical services and physicians are scarce.” These Cuban doctors were to be paid approximately $30,000 a year to provide medical services to remote areas of Brazil. According to U.S. News & World Report, “Analysts say the export of medical services adds about $6 billion a year to Cuba’s economy.”

How does this work? Brazil paid the Cuban government the $30,000 annual salaries of the Cuban doctors and the Cuban government then paid the doctors $30 a month or $360 a year. This equates to an 83% profit for the Cuban government. Not surprisingly many of these Cuban doctors sought asylum in Brazil to be paid what they actually earned, $30,000.

In socialist governments the “minimum wage” inextricably becomes the prevailing wage.

 in his New York Times article “Cuban Doctors Revolt: ‘You Get Tired of Being a Slave’” reports:

RIO DE JANEIRO — In a rare act of collective defiance, scores of Cuban doctors working overseas to make money for their families and their country are suing to break ranks with the Cuban government, demanding to be released from what one judge called a “form of slave labor.”

Thousands of Cuban doctors work abroad under contracts with the Cuban authorities. Countries like Brazil pay the island’s Communist government millions of dollars every month to provide the medical services, effectively making the doctors Cuba’s most valuable export.

But the doctors get a small cut of that money, and a growing number of them in Brazil have begun to rebel. In the last year, at least 150 Cuban doctors have filed lawsuits in Brazilian courts to challenge the arrangement, demanding to be treated as independent contractors who earn full salaries, not agents of the Cuban state.

“When you leave Cuba for the first time, you discover many things that you had been blind to,” said Yaili Jiménez Gutierrez, one of the doctors who filed suit. “There comes a time when you get tired of being a slave.”

Read more.

What I observed is that the Cuban people have great potential if they are unleashed and allowed to earn what they are truly worth.

As one Cuban man put it to me, “the people have no love for their work.” They have no love for their work because Cuba needs a change in direction. This change in direction will only come when there is a change of the socialist regime.

RELATED ARTICLE: The Twelve Reasons Why Cuba Is A Terrorist Nation And Is A Security Treat To The USA

GOP Reform Stops Voters in Their Tax

If you’re looking for some light reading, skip the federal tax code. Clocking in at 74,608 pages, it’s one of the most complicated and cumbersome documents Washington has ever produced. House Republicans are pledging to change that, unveiling a simple nine-page framework for rewriting the guiding document for the most loathed agencies in D.C.: the IRS. At a mini-retreat yesterday, the GOP tried to regroup on its next big project now that the health care repeal is stuck in Senate limbo until the next fiscal year. One way Republicans are hoping to woo back angry voters is by slashing their sky-high taxes and letting families keep more of their hard-earned money. For House Speaker Paul Ryan (R-Wisc.), Budget Chairman Kevin Brady (R-Texas), Senate Majority Leader Mitch McConnell (R-Ky.), and Finance Chairman Orrin Hatch (R-Utah), this has been a longtime goal — one that President Trump is determined to make a reality.

At a speech in Indiana yesterday, the president called it a “once-in-a-generation opportunity.” The billionaire businessman was quick to remind people that they have a Tax-Expert-in-Chief. “I guess it’s probably something I could say that I’m very good at. We’re going to cut taxes for the middle class, make the tax code simpler and fairer for everyday Americans. And we are going to bring back the jobs and wealth that have left our country and most people thought left our country for good.”

Together with House Republicans, he wants to reduce the personal income tax brackets from seven to three (12 percent, 25 percent, and 35 percent), double the standard deduction for married and single filers, cut the corporate tax rate to 20 percent, and kill the death tax, among other things. Since proposing the very first child tax credit, FRC has fought to make the family — the engine of the economy — the center of tax reform. But instead of rewarding families for their role, the government punishes them – not realizing that what Washington does to family budgets has long-term effects on the country as a whole.

The GOP blueprint makes the tax code fairer, simpler, and more efficient. Conservatives should cheer the increase of the child tax credit, end of the estate tax, and the inclusion of a care credit, which lets families better provide for their loved ones. Unlike the Obama administration, which threatened to turn philanthropy upside-down, the Republican plan keeps the tax incentives for charitable contributions.

If all goes according to plan (a big “if” in this Congress!), the House hopes to have the bill to the Senate by the end of October and to Trump’s desk by year-end. If they can manage it, Americans would have a lot more jingle in their pockets this Christmas!


Tony Perkins’ Washington Update is written with the aid of FRC senior writers.


Also in the September 28 Washington Update:

The Plane Truth about HHS’s Private Jets

Steve Scalise’s Miraculous Return to Congress

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GOP’s Top Tax Writer Promises More Jobs, Bigger Paychecks With Reform

Tax Reform Just Got Real. Why the GOP Tax Plan Is Great News for America.

What’s in the GOP’s Plan for Tax Reform

Any tax reforms passed by Congress should give relief to middle-class families and small businesses, bring jobs and capital back to the United States, and make the tax code more fair by ending loopholes and breaks for special interests, congressional Republicans said Wednesday in what they call a framework for debate.

The framework from House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, and other GOP leaders calls for creating a larger zero-tax bracket (an individual’s first $12,000 of income would become tax free, and the first $24,000 for married couples), roughly doubling taxpayers’ standard deduction, and condensing the current seven tax brackets to three.

“This is a historic day,” Ryan said at an afternoon press conference. “This is a day that is a long time in coming. In fact, it was on this day, under this dome, in 1986 that Congress took the final vote on the last overhaul of our tax code. That long. After that vote, President Reagan said Americans would ‘finally have a tax code that they can be proud of.’

“It was true then, but things look very very different today, don’t they?” Ryan added. “Instead of a source of pride, our tax code has become a constant source of frustration. It is too big. It is too complicated, it’s too expensive. Today, we are taking the next step to liberate Americans from our broken tax code.”

“Tax reform that follows the outline we heard today will deliver significant benefits for all Americans,” Adam Michel, a tax policy analyst at The Heritage Foundation, said in an email to The Daily Signal, adding:

The outlined tax reform will raise wages, increase job creation, and create untold additional opportunities. The plan goes a long way toward fixing our business tax system that makes it hard for businesses to invest in America.

Depending on their income, individual taxpayers currently may be taxed at one of these percentages: 10, 15, 25, 28, 33, 35, or 39.6.

The three brackets in Republicans’ proposed tax framework are 12 percent, 25 percent, and 35 percent.

The framework would end personal exemptions for dependents and increase the child tax credit.

President Donald Trump has made overhauling the tax code a major agenda item during his first year in office, and Treasury Secretary Steven Mnuchin has promised to deliver it by the end of 2017, now three months away.

Republican lawmakers’ plan would repeal the alternative minimum tax, created in 1969 to ensure that more affluent taxpayers could lower their tax bill only via deductions a certain amount. Many lawmakers, including Sen. Ted Cruz, R-Texas, previously have called for an end to the alternative minimum tax.

The framework for tax reform would eliminate most itemized deductions, taken from a taxable adjusted gross income and “made up of deductions for money spent on certain goods and services throughout the year,” as Investopedia explains it.

The plan also calls for repeal of the estate tax—which opponents call the death tax—and the generation-skipping transfer tax, what the Tax Policy Center calls an “additional tax on a transfer of property.”

The plan includes tax benefits to incentivize work, higher education, and retirement security and promises to repeal many provisions “to make the system simpler and fairer for all families and individuals, and allow for lower tax rates.”

The framework also would:

  • Limit the minimum tax rate for small businesses and sole proprietorships to 25 percent.
  • Lower the corporate tax rate to 20 percent, “below the 22.5 percent average of the industrialized world.”
  • Allow expensing of “new investments in depreciable assets other than structures made after Sept. 27, 2017, for at least five years.”
  • Lower rates for domestic manufacturers and update rules for various industries and sectors “to ensure that the tax code better reflects economic reality and that such rules provide little opportunity for tax avoidance.”

The Republican plan also seeks to keep companies from moving overseas by taxing both businesses and foreign profits of U.S. corporations at a reduced rate.

Rep. Mark Walker, R-N.C., chairman of the Republican Study Committee, the largest GOP caucus in the House, praised the newly released details.

“At first glance, the policies released today are good news to the American people,” Walker said in a formal statement. “I am proud to see that a large part of the Republican Study Committee’s submission to the tax reform task force was incorporated into today’s framework. We need to begin acting on this framework legislatively as soon as possible.”

Rep. Diane Black, R-Tenn., chairwoman of the House Budget Committee, said the goals would put America at an advantage:

By simplifying the system and getting the government out of the way of our free-market economy, America is made more competitive on an international scale and the potential for unprecedented job creation is unleashed. We believe this will be a catalyst for more jobs, bigger paychecks and fairer taxes—this framework is pro-America. Plain and simple.

Alfredo Ortiz, president and CEO of the Job Creators Network, said the plan shows promise.

“I’m encouraged to see that the administration is moving forward with tax cuts for small business,” Ortiz said in a statement provided to The Daily Signal, adding:

While many details still need to be filled in, this is a crucial and positive step in the right direction. Make no mistake: the recent progress in the campaign for tax relief should bring optimism to the 29 million small business owners and the roughly 56 million people that depend on them for their livelihoods.

In a statement provided to The Daily Signal, David McIntosh, president of the Club for Growth, said the plan will foster economic development.

“Club for Growth is very encouraged and pleased with the long-awaited tax reform outline that the Big Six released today,” McIntosh said. “Fundamental tax reform comes around only once in a generation, and this is our chance. The outline is both aggressive and very pro-growth with its rate reductions.”

Mike Needham, chief executive officer of Heritage Action for America, the lobbying affiliate of The Heritage Foundation, said the plan is a call to action.

“While today’s announcement marks an important and encouraging first step, it is imperative the administration and congressional leaders work hand-in-hand with conservatives to push back against the radical left and the special interests that will pull out every stop to preserve the status quo,” Needham said.

This report was updated to include Ryan’s afternoon remarks.

Rachel del Guidice

Rachel del Guidice is a reporter for The Daily Signal. She is a graduate of Franciscan University of Steubenville, Forge Leadership Network, and The Heritage Foundation’s Young Leaders Program. Send an email to Rachel. Twitter: @LRacheldG.

A Note for our Readers:

Trust in the mainstream media is at a historic low—and rightfully so given the behavior of many journalists in Washington, D.C.

Ever since Donald Trump was elected president, it is painfully clear that the mainstream media covers liberals glowingly and conservatives critically.

Now journalists spread false, negative rumors about President Trump before any evidence is even produced.

Americans need an alternative to the mainstream media. That’s why The Daily Signal exists.

The Daily Signal’s mission is to give Americans the real, unvarnished truth about what is happening in Washington and what must be done to save our country.

Our dedicated team of more than 100 journalists and policy experts rely on the financial support of patriots like you.

Your donation helps us fight for access to our nation’s leaders and report the facts.

You deserve the truth about what’s going on in Washington.

Please make a gift to support The Daily Signal.

SUPPORT THE DAILY SIGNAL

VIDEO: Rep. Matt Gaetz (R-FL-1) Tells NFL Tax Breaks to Take a Knee

Washington, D.C. — Congressman Matt Gaetz (R-FL-1) became the lead sponsor of H.R. 296, the Pro Sports Act, a bill that ends the tax-exempt status of professional sports leagues.

The NFL League Office has received a special tax carveout since 1966, when the tax code first listed “professional football leagues” as trade organizations. Though individual teams are not tax-exempt, the NFL League Office is. They are responsible for the construction and development of new stadiums, paid for with over 6.5 billion taxpayer dollars. Tax-exempt revenues for professional sports leagues are higher than $2 billion. According to the Internal Revenue Service, businesses that conduct operations for profit on a “cooperative basis” should not qualify for tax-exempt treatment, yet a special exemption is made for professional football leagues.

“Like many Americans, I was dismayed and disgusted to see multimillionaire athletes sitting or kneeling during the national anthem. Standing for the national anthem shows respect for our nation, and for the brave men and women who have sacrificed so much to protect our freedoms,” Rep. Gaetz said. “Those hard-fought freedoms include freedom of speech, and free speech does include protest. But nowhere in the Constitution does it say that Americans are required to subsidize disrespect for America, or to have their tax dollars wasted on corporate welfare to sports teams. Tax reform is currently the top priority of Congress. We must close this loophole in the tax code, and end taxpayer subsidies for professional athletics. If players want to protest, they have that right — but they should do it on their own time, and on their own dime.”

In 2016, the Joint Committee on Taxation estimated that this bill would bring in approximately 150 million dollars in new revenue over ten years.

The Pro Sports Act was previously led by Rep. Jason Chaffetz, who has subsequently retired from Congress.

Revoke the NFL’s Antitrust Exemption

Ever wonder why the price of NFL football game individual and season tickets are so prohibitively expensive, as well as the high price of official NFL gear sold on the internet or in sporting goods stores? Ever wonder why the NFL has gotten away with not disclosing the dangers inherent in the sport, and has colluded among team owners to to hide this from the players and the public – despite their having access to top notch sports physicians on their staff? I can go on and on.

Indeed, were the NFL not subject to an antitrust exemption granted to it by our compromised Congress, thanks to the sport’s lobbyists having spread “beaucoup” money all over Capitol Hill, the club of uber rich owners who make their own rules with impunity could be charged under RICO, the Racketeer Influenced and Corrupt Organizations Act, for price fixing, market division and other illegal anti-competitive acts. As a former Justice Department Antitrust Division prosecutor who was on the trial team that broke up AT&T during the Reagan administration for price fixing and market division, take it from me!

For the owners of the NFL teams which have dominated much of our culture, it comes as no surprise that they would support the players on their teams who find it their “duty” to kneel when the national anthem is played. Last Sunday, several teams, such as the Seattle Seahawks, Tennessee Titans, and Pittsburgh Steelers, with the owners consent if not complicity, saw fit to even up the ante, and took it a disrespectful step further and refused to come out of the locker room until after the national anthem was played. These owners acquiesced to this outrage because without these players, they would not have a team to profit from – so they wrongly believe. The owners are not just profiteering hack elitist tycoons, but cowards. Forced to choose between respect for our nation and our veterans who gave their lives to protect and preserve our freedoms, and instead sided with a growing number of their own high priced arrogant players who jingle the change each weekend for them, much like Judas they elect to sell out the country, and collect and bank their “30 pieces of silver.”

President Donald J. Trump was both right and courageous to take this issue on. This is what separates The Donald from every other president in American history! Even President Ronald Reagan, who I loved – I still tear up when I take a day off and go to the Reagan Library in Simi Valley, California, and see video of his speeches – would not have stuck his neck out to this extent. It’s time that an American president not worry about being polite! In today’s world I prefer a commander in chief who tells it like it is, and advocates hard remedies.

Thus, President Trump was right to advocate firing these rogue players, boycotting NFL games, and suggesting that fans simply walk out when these unpatriotic players kneel, refuse to come out of the locker room when the national anthem is played, or do other acts disrespectful to our nation. In my humble opinion, this destructive conduct, which sets a bad example as well for our country’s youth, is not so much about race and discrimination against African-Americans, as it is about anti- patriotism. Nor is it a matter of First Amendment rights!

A football game and the NFL is a commercial enterprise and fans pay for the right to participate by going to or watching games on television, or buying sports gear. If players wish to protest the whatever ginned up discrimination claims of the likes of President Barack Obama, former attorneys general Eric Holder and Loretta Lynch, Black Lives Matter, Al Sharpton, Louis Farrakhan of the Nation of Islam and other agitators have misleadingly sold to them for political gain, they can protest on any street corner or public park in the United States, at their time and expense, rather than on our dime. Fans simply did not pay for disrespectful behavior toward our brave servicemen, and others going all the way back to our Founding Fathers, who fought and risked and gave their lives to create a free nation. And, Betsy Ross did not design our Stars and Stripes, nor Francis Scott Key compose our Star Spangled Banner, to see them effectively spit on at our expense at NFL games!

But I also recommend that President Trump, at the urging of supporters such as you and me, put pressure on Congress to revoke the antitrust exemption that NFL team owners, with campaign contributions, “bribed” senators and congressmen to obtain. In this way, not only will NFL owners have to play by the rule of law and cease price fixing and dividing television, radio, internet, retail and other markets – all of which is otherwise per se illegal under our competition laws – but also teach them a real lesson. And, by revoking their antitrust exemption, this will create competition and lower the price for fans to proudly attend games and buy gear in support of their, not exclusively the owners’, hometown teams.

ABOUT LARRY KLAYMAN

Larry Klayman

Larry Klayman, founder of Judicial Watch and Freedom Watch, is known for his strong public interest advocacy in furtherance of ethics in government and individual freedoms and liberties. During his tenure at Judicial Watch, he obtained a court ruling that Bill Clinton committed a crime, the first lawyer ever to have done so against an American president. Larry became so famous for fighting corruption in the government and the legal profession that the NBC hit drama series West Wing created a character after him: Harry Klaypool of Freedom Watch. His character was played by actor John Diehl.

In 2004, Larry ran for the U.S. Senate as a Republican in Florida’s primary. After the race ended, he founded Freedom Watch.

The author of two books, Fatal Neglect and Whores: Why and How I Came to Fight the Establishment, Larry is a frequent commentator on television and radio, as well as a weekly columnist, on Friday, for WND.com. He has been credited as being the inspiration for the Tea Party movement. (See “Larry Klayman — The One Man TEA Party,” by Dr. Richard Swier.)

EDITORS NOTE: This column originally appeared on NewsMax.com. This column originally appeared in © Copyright 2017 by Larry KlaymanFollow on Twitter @FreedomWatchWeb

VIDEO: Obama’s ‘Julia’ Will Have Better Life Because of Tax Reform

Julia and her husband, James, are worried about their future.

James lost his job and can’t find work. Julia has not received a raise in many years and is unhappy at her job.

They are struggling just to make ends meet and provide for their children. Every year, the government takes more of their hard-earned money. Money that they would like to use for things like a vacation ends up going to Uncle Sam.

But things could change for Julia and James.

Congress is talking about updating the tax code.

Recent analysis shows the economy could grow significantly larger because of tax reform. In time, the average American family’s wages could rise by more than 7.5 percent. That would be almost $4,000 extra in the pockets of families earning $50,000 per year.

Under an updated tax code, businesses could add 1.7 million new full-time jobs. That means that James could find a job to help support his family. Julia could get a raise and a promotion at work.

Not only can they start saving for a vacation … But they can save for their kids’ college fund as well.

James and Julie would be able to do things like renovate their home or buy a new car.

Imagine this: Julia could turn her hobby into a small business. She could even quit her boring desk job and become happily self-employed.

Tax reform means greater financial independence and opportunity for Americans at all income levels.

Just think how it could help you.

COMMENTARY BY

A Note for our Readers:

Trust in the mainstream media is at a historic low—and rightfully so given the behavior of many journalists in Washington, D.C.

Ever since Donald Trump was elected president, it is painfully clear that the mainstream media covers liberals glowingly and conservatives critically.

Now journalists spread false, negative rumors about President Trump before any evidence is even produced.

Americans need an alternative to the mainstream media. That’s why The Daily Signal exists.

The Daily Signal’s mission is to give Americans the real, unvarnished truth about what is happening in Washington and what must be done to save our country.

Our dedicated team of more than 100 journalists and policy experts rely on the financial support of patriots like you.

Your donation helps us fight for access to our nation’s leaders and report the facts.

You deserve the truth about what’s going on in Washington.

Please make a gift to support The Daily Signal.

SUPPORT THE DAILY SIGNAL

EDITORS NOTE: Americans need an alternative to the mainstream media. But this can’t be done alone. Find out more >>

The National Debt Just Hit $20 Trillion. Here’s How Congress Can Restore Fiscal Sanity.

Our national debt just topped $20 trillion. That’s 13 zeros, or $20,000,000,000,000.

This also means that the federal government now owes almost $1.5 trillion more than the entire U.S. economy produced in 2016. To put this number into context, here are some other things that add up to $20 trillion:

So how exactly did we get here?

Simply put, massive government spending is the single largest driver of high national debt.

Of the entire federal budget, just four entitlement programs—Medicare, Medicaid, Obamacare, and Social Security—account for most of that spending. In fiscal year 2016, these entitlements consumed 52 percent of all tax dollars.

Without reforms, these programs and interest on the debt will be driving 83 percent of all spending growth projected over the next decade.

Entitlements continue to grow at this rate because they are on autopilot. The programs were enacted in law years ago so that agencies are authorized to spend whatever is needed to keep them running.

Congress has the final say about funding for these programs, but lawmakers choose not to reform them because it is politically difficult to cut popular programs—even if they are unsustainable.

Safeguards could prevent these programs from growing to unsustainable levels in the absence of political will.

Normally, Congress limits how much debt the government can take on by enforcing a debt limit. When the government reaches this limit, the Treasury Department no longer can borrow money to finance government operations.

Reaching the debt limit should be a wake-up call to lawmakers that their level of spending is unsustainable and that they need to enact budget reforms.

But that’s not the effect that reaching the debt limit has had in recent years.

Indeed, spending and debt have grown and the government has repeatedly hit the debt limit, only to be raised without making any reforms. Lawmakers have failed to adopt any long-term solutions.

The debt limit has been suspended since November 2015. Congress just suspended it again through Dec. 8 as part of the Trump-Pelosi-Schumer deal that provided relief for victims of Hurricane Harvey.

Suspending the debt limit lets the Treasury borrow unlimited funds to pay for governmental operations. Basically, this is a blank check for government borrowing. Once the suspension ends, the debt limit is raised based on how much debt was issued during the suspension.

For example, in February 2014, Congress raised the debt limit to $17.2 trillion and then suspended the debt limit until March 2015. When the suspension ended and Congress reset the debt limit, it set it nearly $1 trillion higher at $18.1 trillion.

The United States cannot afford to keep ignoring the debt limit and taking on more debt without serious reform. If the U.S. remains on the current fiscal course, publicly held debt will reach 90 percent of gross domestic product in 10 years.

As the debt grows, so will debt-servicing costs.

The Congressional Budget Office estimates that in 2027, net interest payments on the national debt will consume $768 billion tax dollars. When the government is forced to spend more money servicing the debt, there is less money available for other national priorities, like national defense or lower taxes.

This massive, now $20 trillion debt is a threat to the economy and the American people. Lawmakers and the new administration must reform entitlements, enforce the debt limit, and put the budget back on a path to balance to truly control the national debt.

Mollie McNeill is a research assistant for economic and budget policy at The Heritage Foundation. Twitter: 

A Note for our Readers:

Trust in the mainstream media is at a historic low—and rightfully so given the behavior of many journalists in Washington, D.C.
Ever since Donald Trump was elected president, it is painfully clear that the mainstream media covers liberals glowingly and conservatives critically.
Now journalists spread false, negative rumors about President Trump before any evidence is even produced.
Americans need an alternative to the mainstream media. That’s why The Daily Signal exists.
The Daily Signal’s mission is to give Americans the real, unvarnished truth about what is happening in Washington and what must be done to save our country.
Our dedicated team of more than 100 journalists and policy experts rely on the financial support of patriots like you.
Your donation helps us fight for access to our nation’s leaders and report the facts.
You deserve the truth about what’s going on in Washington.
Please make a gift to support The Daily Signal.

SUPPORT THE DAILY SIGNAL

EDITORS NOTE: Safeguards could prevent government programs from growing to unsustainable levels in the absence of political will (Photo: Ingram Publishing/Newscom). Americans need an alternative to the mainstream media. But this can’t be done alone. Find out more >>

Thousands of impoverished people arriving in the U.S. while Americans are homeless

The image above is of Irma damage in Florida. The cost of hurricanes Harvey and Irma to the U.S. economy can be $290 billion or more.

As I have said until you are surely sick to death of it, President Donald J. Trump is expected to present to Congress a ‘determination’ within days about how many third world impoverished people will be admitted to the U.S. beginning on October 1.

But, here is the thing—he has complete authority to say that NO refugees will be admitted in FY18 because the Refugee Act of 1980 gives that power to the President!

In the last 2 days, three reporters (that I know of) wrote about suspending, or shutting down, the UN/US Refugee Admissions Program for this year.

Frank Sharry

Frank Sharry, open borders advocate.

First, Thomas Allen at VDARE wrote this (read it all, it is full of historical knowledge about the program).  Allen mentions this:

But even Open Borders activists recognize Trump has the legal authority to set the number at zero for 2018. Frank Sharry [Email him] a leading Treason Lobbyist, told a group of activists at the National Partnership for New Americans conference in September 2017 that Trump could “zero the program out” if he chose to. And Congress certainly could zero out the funding of the program if it chose to.

Not only did Sharry acknowledge this, but so did Bill Frelick from Human Rights Watch, here.

Bill Frelick of Human Rights Watch: “…there is no requirement that the U.S. resettle a single refugee….”

And, indeed HIAS executives reported (here) that George W. Bush delayed a Presidential determination in the wake of 9/11 without any legal consequences to him. (The administration must have been worried about Islamic terrorists getting in to the U.S. even then!)

Harvey leaves American homes in Texas ruined by flood waters. Maybe the refugee contractors could get their volunteers busy helping Americans first!

Harvey trash

Destruction from hurricane Harvey.

Next, read Daniel Horowitz yesterday at Conservative Review.

And, finally don’t miss Leo Hohmann at World Net Daily where I am quoted saying this:

Ann Corcoran, who has followed refugee resettlement for more than a decade, said Trump has plenty of reason to do just that and still come across as a great humanitarian by focusing on needy Americans.

“The public should be outraged to learn that in the wake of Hurricanes Harvey and Irma, which have left tens of thousands of Americans homeless, that we are poised to take in thousands of impoverished refugees when we now have our own refugees, struggling people who have lost their homes, lost everything, with their lives shattered, living in tents, shelters and RVs,” Corcoran said.

To bring in more from other countries in a time like this would be the ultimate insanity.”

Read it all.

The refugee industry (the resettlement contractors and the cheap labor lobby) want you to think that the President must submit a determination of at least 50,000 for the upcoming fiscal year, but it just isn’t so!

Tell the President what you think by clicking here to get instructions…Tell your members of Congress and U.S. Senators too!

America First!

The Top Three Arguments against a Universal Basic Income

Unfortunately, a welfare state by any other name is still a welfare state. Brittany Hunter — by  Brittany Hunter

Every so often a new study is released, concluding that a universal basic income (UBI) is needed to fix this country’s welfare system. Most recently, the Roosevelt Institute claimed that switching to a UBI system could actually grow the economy by $2.5 trillion by the year 2025.

The study is full of hypothetical situations in which Americans receive a UBI of varying amounts. The research concludes that the higher the UBI, the more prosperous the economy. But like many UBI apologists, the study misses the major problems with such a system. Here are the three main ones:

1. It’s Expensive

Proponents claim that the UBI would be an efficient replacement for the country’s bloated welfare apparatus, and so would actually reduce overall costs.

Unfortunately, a welfare state by any other name is still a welfare state. And the UBI is just replacing one pricey system for another. And unlike the current welfare state, which has standards for determining who qualifies for certain aid, a UBI would be given to everyone. This would dramatically increase the pool of citizens receiving benefits from the state and inflict massive expenses across the board.

The Roosevelt Institute study posits two different ways to fund the UBI. But neither would benefit the national economy or the taxpayer. The study’s “positive” findings about economic stimulation are only applicable if the program is funded by increasing the federal deficit. So basically, in order to “grow” our economy, we must first plunge the American people even further into debt.

The second scenario presented in the report was a UBI funded through increased taxation. In this instance, the study found no net benefit to the overall national economy. In fact the report even went so far as to state:

When paying for the policy by increasing taxes on households rather than paying for the policy with debt, the policy is not expansionary. In effect, it is giving to households with one hand what it is taking away with the other. There is no net effect.”

There would be an effect, however, on the American taxpayer. When the Resolution Foundation, a think tank in the UK crunched the numbers to see what the cost would be to the taxpayer, they found that the amount paid would actually be much more than the amount received.

Commenting on the problems with the UBI as they related specifically for the UK, Robert Colvile writes:

…From the first pound you earned to the £43,001st, you’d pay a combined rate of income tax and National Insurance of around 35-40 per cent, after which the higher rate of tax would kick in as normal. In other words, to get that £3,692 from the Government, you’d pay thousands of pounds more.”

What this type of proposal really means is that a vast sum of people will be paying more in taxes than they already do. Colvile also notes that “In fact, it would represent a transfer of £120 billion of extra taxation into the welfare state – the equivalent of the entire budget of the NHS in England.”

If this is the case for the UK, it would most certainly be the case for the US.

This money has to come from somewhere. It will not appear out of thin air. And unfortunately, it is the American people who would be stuck with the bill for a grandiose UBI system.

2. Incentives Work, Handouts Don’t

Incentives are a powerful force. And there is no greater incentive than financial security and holding a job is essential to that end. When something comes easy, it is easily taken for granted. And while it would be nice to believe otherwise, giving cash handouts to every American incentivizes them to try that much less.

By removing the financial incentive to work, the state is encouraging idleness, something contrary to the entrepreneurial spirit so deeply woven throughout our country’s history.

During the Clinton era, the welfare state saw tremendous decreases. But that didn’t mean there were millions of Americans struggling to get by. Employment actually increased because individuals were incentivized to get jobs when there was no longer a guaranteed safety net.

3. The Welfare State Isn’t Going Anywhere

As previously mentioned, there are always claims that a UBI could decrease, reform, or even abolish our welfare system. But no one seems to have any idea as to how this transition would actually look.

This is because there is no transitory plan in place. And any such plan that came to fruition would surely be political suicide since you run the risk of angering someone. And for politicians who rely on the support and approval of their constituents, this is sure to bring some unwanted criticisms.

Anyone in the policy realm knows that there is no better way to alienate older constituents than threatening to take away their Social Security benefits. In fact, even the mere mention of decreases usually causes rooms of senior citizens to fear for their well being. Even if there is an alternative plan presented to them, it does not calm the fears of what might happen during the transitionary period. It is for this reason that Social Security is often called the “third rail” of politics.

Additionally, trying to get individuals transitioned off of one welfare plan, and into the next requires, at least temporarily, the funding of both programs. A decision to enact a UBI would not magically abolish the American welfare system. America’s welfare programs have been around for so long, it would take time to unroot it. Too many people have become reliant on our welfare state to have it simply wiped out overnight.

And who is going to pay for the process in the meantime? Well, the American taxpayer of course.

If anything, incorporating a UBI in America would most likely result in an additional layer of the welfare being added on top of our existing programs. This would, in effect, increase the state’s power rather than decrease it. Governments are rarely keen on relinquishing their power, and there is great power in controlling the welfare of the citizenry. It is therefore highly unlikely that the welfare state as we know it today would simply cease to exist.

There Is No Welfare Utopia

Bastiat famously said, “The state is that great fiction by which everyone tries to live at the expense of everyone else.” This is exactly why any form of welfare state is bound to fail. You cannot take from one, give to another and expect everyone’s hardships to be solved.

The UBI creates the illusion of decreasing the welfare state when the facts of the matter all point to the contrary. Everyone would like to live in a society where no one wanted for anything and everyone was provided for. But we live in a society of individuals with individual aspirations and goals. Pretending that we can centrally plan a welfare system with so many distinct wants and needs is unrealistic and unobtainable.

Our current system cannot be maintained because it’s too expensive. Period. Already programs like Social Security are projected to run out of money within the next decade and there is no plan for how to approach this coming storm. Why would anyone think broader welfare state situation would be any different?

If we cannot financially maintain our current system, it would be an unwise to believe we could somehow afford a UBI. As Colvile says when comparing one welfare system with the other, “It’s old wine in new bottles – redistributive, seventies-style taxation under a trendy new branding.”

Brittany Hunter

Brittany Hunter

Brittany Hunter is an associate editor at FEE. Brittany studied political science at Utah Valley University with a minor in Constitutional studies.

‘Liberal Socialism’ is Another False Utopia by Richard M. Ebeling

Very often bad and failed ideas do not die, they simply reappear during periods of supposed social and political crisis in slightly different intellectual garb, and offer “solutions” that would merely help to bring about some of the very types of crises for which they once again claim to have the answers. Socialism in its various “progressive” mutations represents one of the leading so-called solutions of our time.

The Marxian-style socialism of the nineteenth and the first half of the twentieth centuries is now long passé.

The latest manifestation of this appeared on August 24, 2017 in the New Republic in an online article by John B. Judis on, “The Socialism America Needs Now.” He is heartened by the wide appeal, especially among younger voters, that Bernie Sanders received during the 2016 presidential contest. He thinks that this may herald a rebirth and a renewed possibility for a socialist alternative to the current American political and economic system.Having traveled over the decades from the 1970s to the present from a radical, revolutionary socialist to a more “moderate” one today, Mr. Judis admits that the Marxian-style socialism of the nineteenth and the first half of the twentieth centuries is now long passé. The embarrassing experience of “socialism-in-practice” in the form Lenin and Stalin created in the Soviet Union or by Chairman Mao in China will not fly anymore.

From Soviet Central Planning to “Liberal Socialism”

Central planning seemed not to work too well, and the “communist” variation on the socialist theme also had a tendency to be authoritarian with some drawbacks for human life and liberty. (He tactfully avoids mentioning that Marxist-inspired regimes in the twentieth century murdered well over a 100 million people – with some estimates suggesting the number might have been closer to 150 million or more in the name of building the “bright, beautiful socialist future.” (See my article, “The Human Cost of Socialism in Power”.)

He turns his mind and ideal to the “democratic socialist” parties and regimes in Western Europe in the post-World War II era, or as Mr. Judis prefers to call it – following John Maynard Keynes -“liberal socialism.” What makes this form of socialism “liberal”? It is the belief that there can be “socialism with a human face.” In other words, a form of “economic” socialism that leaves in place democratic politics with a respect for a broad range of personal and civil liberties.Virtually all socialists condemned and called for the abolition of private ownership of means of production.

We have heard this all so many times before. While Mr. Judis wishes to suggest that there is no real or definitive definition of “socialism” (any more than there are of “liberalism” or “democracy”), the fact is that throughout the nineteenth century and well into the twentieth, virtually all socialists condemned and called for the abolition of private ownership of means of production, and imagined in its place some form of socialist central planning directed by government in the name of “the people.”

Mr. Judis actually more or less admits this, and that the only great debate among socialists and communists in the late nineteenth and twentieth centuries was over how the socialist utopia would be brought about, whether through violent revolution or through the democratic ballot box. The Russian Marxists led by Vladimir Lenin insisted that only revolution and a “dictatorship of the proletariat” could bring “the workers” to power and assure their permanent triumph over the exploitive capitalist class. The German democratic socialists opted for democratic means to power and rejected the dictatorship of Lenin and later Stalin.

But it is nonetheless the case that well into the post-World War II period this was a dispute over political means and not ideological ends, which remained for both branches of the socialist movement the abolition of capitalism and the imposition of socialist central planning. Communists wanted to bring about this transformation of society in one fell swoop through violent means and imposed dictatorship.  The German Social Democrats and the “Fabian” socialists in Great Britain proposed democratic means, with socialism coming more gradually and through incremental extensions of government control and planning over more and more parts of society. But for both, the end result would be the same: centralized government direction of economic affairs and social change.

As the 1950s turned into the 1960s and 1970s, more and more “democratic” socialists in Western Europe grudgingly accepted the fact that comprehensive socialist central planning was a failure as practiced in the Moscow-dominated Soviet bloc countries; and it brought little of the prosperity that government planning promised to provide as an escape from poverty in the “third world” countries of Asia, Africa and Latin America.

The collectivist dream and delusion springs eternal.

Plus, the tyranny and brutality of Soviet-style socialism made it ethically difficult to defend. So the democratic socialists turned to the interventionist-welfare state to achieve their “social justice” ends without nationalizing all the means of production or centrally planning all economic activity in society. (See my article, “Barack Obama and the Meaning of Socialism”.)

Social Justice Tourism

But those communist regimes were not so repulsive that democratic socialists in the West would not continue to give moral indulgence and wishful hopes that somehow Marxian socialism would finally work and fulfill its promise in, Mao’s China, Castro’s Cuba, or Ho Chi Minh’s Vietnam, or in the Sandinista’s Nicaragua, or any other failed utopia we can find in recent history. The collectivist dream and delusion springs eternal. After all, even a rude, crude, and rough Marxist regime isn’t the United States – please, almost anything other than capitalist America!

Even today, the enlightened “progressive” can take a tour of Castro’s Cuba with the leftist magazine, The Nation. Don’t miss out! This November 2017 you can go with The Nation and, their advertisement promises, “learn about the Cuban Revolution from experts at some of its most pivotal locations, including the Moncada Barracks, the site of the first armed assault by Fidel Castro and his band of rebels on July 26, 1953.”

The progressive political pilgrim to the collectivist promised land will be spending his or her “days meeting with prominent Cuban professors, government officials,” including “urban planners” and “health care workers.” Don’t miss out on your chance to visit one of the remaining socialist “utopias” before global capitalism succeeds in taking it away.Che arbitrarily sent hundreds to their deaths, sometimes literally by his own hand.

No doubt, these “social justice” tourists will not be taken to La Cabana prison, where Che Guevara was assigned by Castro the role of state prosecutor against “enemies of the people,” following Fidel’s triumphant entrance into Havana and seizure of power in January 1959. In the role as unrestrained judge and jury, Che arbitrarily sent hundreds to their deaths, sometimes literally by his own hand.

Nor are they likely to have quoted to them Che’s words that, “My ideological training means that I am one of those people who believe that the solution to the world’s problems is to be found behind the Iron Curtain.” And that “I can’t be the friend of anyone who doesn’t share my ideas.” Or that Che was the one who in 1960 instituted communist Cuba’s system of forced labor camps. This would not fit in with the heroic face of Che on the t-shirts that, no doubt, some of these “progressive” travelers to utopia would be wearing. After all, Fidel and Che did it all for “the people,” and, well, they did have “good intentions.”

Of course, while such political pilgrims are pleased to visit these places and bask in the moral satisfaction that the few remaining communist regimes in the world are still trying to make that “better world,” even if with the heavy hand of dictatorship, censorship of art, music and political views, the imprisonment of political opponents, and torture and execution of “enemies of the people” (all of which they still mostly turn a blind eye to), they prefer to live in their own Western countries and dream the “liberal socialist” dream, as clearly Mr. Judis is doing.

Liberal Socialism as the Regulatory and Redistributive State

What, precisely, is this democratic or “liberal” socialism to which Mr. Judis hopes a younger generation of Americans will turn in the years ahead? It turns out to be the same “utopia” of the interventionist-welfare state that Western countries have been following since the end of the Second World War, though, admittedly, to different degrees in different places around the world.

Mr. Judis wants the government to intensively and pervasively regulate, command, restrict and direct various aspects of the private enterprises in society, while ensuring that American society can still take advantage of the self-interested incentives and innovations that can improve the material conditions of life. But the direction, form, and extent to which private enterprisers shall be allowed to do those productive and innovative things with their businesses will be confined to and constrained within those avenues that serve the “higher” and “non-market” values and purposes of “society.”

Matching the regulatory and interventionist state must be the redistributive welfare state.

Matching the regulatory and interventionist state must be the redistributive welfare state. The excessive and unnecessary income and wealth of the businessmen and private sector investors of America must be taxed – heavily – to assure greater material egalitarianism, and to fund all the social services and government-provided safety nets, which “would bring immeasurable benefit to ordinary Americans. A good watchword is economic security – something that is very lacking to all except the wealthiest Americans.”

At this point, it might be wondered what, then, marks off Mr. Judis’ “liberal socialism” from the already existing modern American “liberal” interventionist-welfare state? It turns out that it is all a matter of intentions and the intended recipients. In Mr. Judis’ view, mainstream modern American liberals have lost their way; they too frequently sleep with the enemy (think Bill and Hillary Clinton) in the form of excessively collaborating with businessmen and bankers to the latter’s benefit; American liberals and progressives have stopped sufficiently emphasizing “economic justice” for middle America with their increasingly primary focus on “identity politics.”

Liberal Socialism and Democratic Politics Without Romance

Also, unlike the communists and many radical socialists and some progressives, Mr. Judis calls for moving towards his notion of a better socialist future through a more active participation in the Democratic Party. The task is to nudge and shove mainstream modern American liberals in the Democratic Party further to the socialist left, which in many of their hearts these people already know is right. And to use the Democratic Party as the vehicle to propagandize and persuade more in society that socialism is good and just and the best for them.

In other words, Mr. Judis calls for using the methods of the earlier German Democratic Socialists and the British Fabians, only do so in a way that does not seem to be as threatening or undermining of all the institutions of existing society as those earlier groups often did with their call for the total abolition of capitalism.

What is sometimes called “crony capitalism” is just Pareto’s “bourgeois socialism.”

Mr. Judis’ “liberal socialism” is really just the existing interventionist-welfare state placed – “democratically” – in the “right” elected hands, so those manning and managing the machinery of government will do what he wants political authority to do, rather than what it is currently being done by Republicans and the current Democratic Party establishments.

A way for Mr. Judis to more easily defend his desire and ideal is to suggest that the existing political-economic system in America today is a free market, “neo-liberal” capitalism, rather than what the Italian economist, Vilfredo Pareto (1848-1923) once more accurately labeled it: “bourgeois socialism.” That is, a system of government regulation, redistribution, favors and privileges that benefits many in the private enterprise sectors of society rather than a more “proletarian socialism” that simply would take from “the rich” to give to “the workers” and “the poor.”

What is sometimes called “crony capitalism” is just Pareto’s “bourgeois socialism.” Pareto also understood with amazing clarity in the 1890s one of the insights of modern Public Choice theory, that “participatory democracy” of the community as a whole is a theoretical and practical illusion in a complex society. Politics in an unrestrained democracy always becomes a contest among special interest groups capable of gaining concentrated benefits from State intervention and redistribution at the diffused expense of the rest of the society.

In democratic societies it takes the form of coalitions of special interest groups who succeed in offering campaign contributions and votes to politicians desiring elected political office, who then fulfill their campaign promises to those groups once in the actual halls of political power.

The communist “classless society” had one of the most intricate social webs of favoritism and plunder ever.

In totalitarian societies, such as in the former Soviet Union, it took the form of hierarchical positions within the Communist Party and within the central planning bureaucracy, including the state enterprise managers, who had the decision-making power over access to and use of the socialized means of production. Thus, the communist “classless society” had one of the most intricate social webs of power, privilege, favoritism and plunder ever seen in human society.

This “politics without romance,” to use Nobel Laureate, James M. Buchanan’s (1919-2013) phrase, shows why the notion of “the people” owning, controlling, regulating and overseeing the collective direction of an economy is pure illusion and deception concerning the reality of how and why political power works the way it does.

What Mr. Judis and far too many who share his views about capitalism and some form of socialism – “liberal” or otherwise – fail to understand is that any and all forms of planning, regulation, and political redistribution in fact takes power and decision-making out of the hands of the people about whom they express their concerns.

Real Participatory Liberation under Free Market Liberalism

It is the open, competitive market economy that, precisely, gives each and every individual wide latitude and liberty over his own personal affairs. It is the market that enables each of us to make his own choices concerning the profession, occupation, or productive calling to pursue. It is the market that enables each and everyone of us to have the freedom to make our own choices to earn an income and spend that income as we consider best in terms of the values, beliefs, purposes and desires that we think may bring meaning and happiness to our individual lives.

It is the free society that provides truly participatory opportunities to form groupings of almost any type.

It is the free society of individual liberty and voluntary association that provides truly participatory opportunities to form groupings of almost any type to further the ends outside of the narrower arena of market transactions to better our lives materially, socially, culturally and spiritually. See my article, “Individual Liberty and Civil Society” for more about this.

At this point no doubt, Mr. Judis would reasonably ask, but what about those who are unable to provide for themselves, due to personal tragedy, unfortunate circumstances, or simply bad luck? Is this not the reason why enlightened and decent societies had to move “leftward” to establish and financially provide for those unable to personally meet the essentials of everyday life and to have opportunities to fulfill their potentials as a human being? Is not the welfare state of “liberal socialism” the inescapable necessity of having a humane society?

The classical liberal responds that these very concerns can be far better and more successfully solved and served through the voluntary institutions and associations of civil society than to turn such tasks over to the government. In the nineteenth and early twentieth centuries, before the modern welfare state, all such “social problems” were handled with wide and positive effects by charities, philanthropies and for-profit organizations in places such as Great Britain and the United States. That their workings and successes are virtually unknown to most people in modern society shows the extent to which their history and social nobility has gone down a memory hole of collectivist misinterpretation and misunderstanding of what a society of liberty did and could provide (for more about this, see my article, “A World Without the Welfare State”).

Furthermore, the transfer of such welfare responsibility to the government reduces each and every recipient to a ward of the State. It is politicians and bureaucrats who decide the education your children will receive in government schools; they are the ones who determine the retirement possibilities you will have, the healthcare to which you will have access and its type, the wages and work conditions under which you may be allowed to be employed or unemployed, and the forms and types of associations you may enter into as well as the activities and membership you are permitted.

“Liberal socialism” is not the path to liberation, but of continuing servitude to the those with political power.

The “liberal socialism” about which Mr. Judis dreams is not the path to liberation, but of continuing servitude to those with political power and who have the presumption to imagine that they know better how people are to care for their own lives than those individuals (See my article, “Democratic Socialism Means Loss of Liberty”).

One would have thought that after more than seven decades of the interventionist-welfare state as the political left’s “liberal socialist” alternative to Marxian socialist central planning, it would be realized that it is just another constraining and corrupt manifestation of the unworkability of any collectivist system of control and command.

Mr. Judis’ program for a socialist America also shows the intellectual bankruptcy of those on “the left.” The revolutionary transformation of society, for which they yearn, ends up being nothing more than the existing interventionist-welfare state, except with the desire that people who agree with Mr. Judis should be at the helm of political power rather than those with whom he disagrees.

Richard M. Ebeling

Richard M. Ebeling

Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.