Government Is Why the Rent Is Too Damn High by Randal OToole

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Rising home prices and apartment rents have been in the news lately, but almost no one is looking at the real causes behind these problems.

Instead, they are proposing band-aid solutions that will do little to help most people afford housing but will greatly benefit special interest groups.

According to the news, Boston, Los Angeles, Miami, New York, Portland, San Francisco–Oakland, San Jose, Seattle, and Washington, DC, among other major urban areas, are all suffering from housing crises. Economists who have studied these regions know why their housing is becoming less affordable.

First, urban-growth boundaries and other land-use regulations in most of these regions have limited the amount of land available for new housing. Urban planners say these regulations are needed to control the externalities caused by urban sprawl.

However, as New Zealand’s Deputy Prime Minister recently noted in a speech about a similar housing crisis in Auckland, urban planning itself “has become the externality” that is making housing the most expensive.

Second, in many of these regions — specifically, Los Angeles, New York, San Francisco-Oakland, San Jose, and Washington — rent control has only made housing less affordable for everyone not lucky enough to live in a rent-controlled apartment.

Even though some of these cities exempt new developments from rent-control rules, developers know that such exemptions could be eliminated at any time and are wary of investing in new housing.

Many of these and other cities have also passed “inclusionary zoning ordinances” that force developers to sell or rent 10 to 20 percent of the new housing units they build at below-market rates, which both discourages new development and increases the cost of the market-rate units that are built.

Although these problems are obvious to anyone who understands the rudiments of supply and demand, they are almost completely ignored by politicians, housing officials, and low-income housing advocates.

Instead, the almost exclusive focus is on building government-subsidized (or, in the case of inclusionary zoning, developer-subsidized) housing. Yet this does nothing to solve the problem for the vast majority of homebuyers and renters.

California has the nation’s second-least affordable housing (after Hawaii), and probably has some of the most aggressive subsidized housing programs. Yet a recent report from the state legislative analyst’s office found that these programs have produced only about 7,000 subsidized housing units per year, or about 5 percent of new housing.

In a state that has nearly 14 million homes and apartments, adding 7,000 subsidized units per year will have no measurable influence on overall prices, especially in the face of growth boundaries and other factors that make housing expensive.

So why is so much emphasis placed on a policy that won’t work while a policy of deregulating land markets is ignored? The answer is that long-standing federal subsidies to housing have created an affordable-housing-industrial complex that thrives on subsidies in unaffordable housing markets and whose reason for existence would be severely diminished if those markets were deregulated.

Take, for example, Enterprise Community Partners (ECP), whose mission (as described on its IRS Form 990) is “to create opportunities for low and moderate-income people through affordable housing.”

ECP is heavily funded by your tax dollars to promote affordable housing, getting much of its tax support through Section 4 of the HUD Demonstration Act of 1993, which specifically designates ECP as a grant recipient.

Enterprise Community Partners has certainly found the business of promoting a few units of affordable housing, as opposed to making all housing more affordable, to be quite lucrative, at least for many of its staff.

According to its tax form, only a quarter of the organization’s $58 million annual expenses went to grants aimed at making more affordable housing, while 62 percent went for salaries, benefits, and professional service contracts. (The rest went for things like conferences, travel, rent, and office expenses.)

More than two dozen of its staff members earned more than $200,000 in salaries and benefits in 2013. The United States of America gets along with just one vice president; ECP has sixteen of them, half of whom make more than the $230,700 per year taxpayers pay to Joe Biden.

The organization’s tax form also admits that it spent nearly $600,000 on lobbying in 2013. Thus, groups like ECP that focus on creating a few units of affordable housing, while they ignore the real problem, become self-perpetuating. They use taxpayer dollars lobby to continue their tinkering at the edges of affordability while they and the people who listen to them do nothing about the overall affordability problem in regions with strict land-use regulation and rent control.

This post first appeared at Cato @ Liberty.

Randal OToole
Randal OToole

Randal O’Toole is a Cato Institute Senior Fellow working on urban growth, public land, and transportation issues.

Rep. Vern Buchanan (R-FL) Votes for the Boehner-Obama Budget Busting Deal

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Florida District 16 U.S. Representative Vern Buchanan was one of 79 Republicans to vote for the Boehner-Obama budget busting deal. It is now the Buchanan-Boehner-Obama budget.

When Vern Buchanan first ran for Congress he vowed to reduce the federal budget deficits and called for a Constitutional balanced budget amendment. In a June 2015 press release Rep. Buchanan called balancing the budget “an urgent priority”. Buchanan stated:

“[T]he United States can no longer afford to ignore its out-of-control spending problem…We’re going broke, it’s not a matter of if, it’s a matter of when, unless we change what we’re doing. We need a standard and I think that standard is a Constitutional Balanced Budget Amendment– Florida balances the budget every year, we make the tough choices…

It’s immoral what we’re passing on to our kids and grandkids. I have a granddaughter and a grandson on the way and I feel horrible about what’s taking place up here. “

[Emphasis added]

Given all of his rhetoric he still voted, in his own words “immorally” and against the best interests of his children grandchildren and ours, for Obama’s budget.

Melissa Quinn from the Daily Signal reports:

Despite overwhelming opposition from the majority of Republicans, the House of Representatives voted to pass a two-year budget deal today that raises spending caps by $80 billion and suspends the debt limit through March 2017.

The deal passed, 266-167, with support from moderate Republicans and all but one of the Democrats. Just 79 Republicans supported it, and all of those opposing the fiscal agreement were Republicans.

[Emphasis added]

To find out how your Congressman voted on this budget deal click here.

Stephen Moore, in his op-ed column titled “This Is the Worst Budget Deal GOP Has Negotiated Since George H.W. Bush Violated No New Taxes Pledge”
writes:

Halloween is looking especially scary this year. On Monday, Republican leaders in Congress declared an unconditional fiscal surrender to President Barack Obama and the  left, negotiating a dangerous budget deal that eliminates all of the checks on Washington’s spend-and-borrow binge by breaking the budget caps, ending the sequester and raising the debt ceiling by over $1 trillion.

It’s the worst budget deal to be negotiated by the GOP since George H.W. Bush violated his no new taxes pledge in 1990 at Andrews Air Force Base.

The result of that capitulation was to make Bush a one-term president and to split the Republican party right down the middle. This deal has the same catastrophic potential.

Read more.

Citizens Against Government Waste reports:

Forty-six cents!  That’s how much of your individual income tax dollar the government squanders on wasteful spending programs.

donate

Another 31 cents goes to pay the $433 billion in annual interest on the national debt!

That leaves just 23 cents – or not quite one quarter of your tax dollar – to pay for the services that you expect from government!

 

RELATED VIDEO: Rep. Vern Buchanan on balancing the federal budget:

RELATED ARTICLES:

Lame Ducks, Lame Deal: The Boehner-Obama Budget Plan

Boehner-Obama Budget Deal Uses Same Accounting Gimmick as Obamacare

EDITORS NOTE: The featured image of John Boehner and President Obama is by Kevin Dietsch/UPI/Newscom.

Rep. Vern Buchanan (R-FL) Joins Democrats to Clear Path for Vote Reviving Export-Import Bank

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Representative Vern Buchanan (R-FL District 16) was one of 62 Republicans to vote in favor of bringing to the House floor a bill funding the Export-Import Bank.

The Daily Signal reports:

The House of Representatives moved one step closer to bringing the Export-Import Bank back from the dead Monday after 62 Republicans teamed up with 184 House Democrats to force a vote to reauthorize the embattled agency.

Despite opposition from the vast majority of Republicans, the House passed a motion to discharge a bill reauthorizing Ex-Im from the Financial Services Committee, 246-177. (See how your member of Congress voted.)

The vote clears a path for the chamber to vote on the legislation sponsored by Rep. Stephen Fincher, R-Tenn. Under Fincher’s legislation, the 81-year-old bank would be reauthorized through 2019. Lawmakers are expected to vote on his bill tomorrow.

Read more.

Can you say bust the budget yet again?

Buchanan seems to say one thing and vote for the special interests.

Buchanan has repeatedly called for a Constitution balanced budget amendment but he has also consistently voted to raise the debt ceiling and keep wasteful spending programs – such as the Import-Export Bank – fully funded.

RELATED ARTICLES:

Rep. Vern Buchanan (R-FL 16) Busts the Budget — Votes for Amnesty and Obamacare

The Boehner-Obama Budget Deal Explained in One Chart

This [Budget] Deal Is Unacceptable. Congress Should Wait Until New Speaker Chosen

Find Out How Your Congressman Voted on Reauthorizing the Export-Import Bank

Freedom Caucus Members Will Stick With Daniel Webster in Today’s Speaker Vote

The Federal Reserve’s Counterfeit Prosperity

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When I was a young Secret Service agent on a local financial crimes task force between 2000 and 2002, I was inundated with an explosion of new counterfeit cases. There were a number of causes for this explosion in currency counterfeiting but the main ones were: the rapid advancement in ink-jet printing technology, the declining costs, and correspondingly increased availability of affordable home printers. Prior to these technological advancements, counterfeiting U.S. currency was the near exclusive purview of state-sponsored actors, sophisticated criminals and criminal syndicates.

With the growth in ink-jet printing, any thirteen-year-old with a printer could counterfeit money. I, along with hundreds of other Secret Service agents, were so preoccupied with tracking down this new class of counterfeiters and stemming the tidal wave of new counterfeit making its way into the money supply that I never had the time to philosophize on the deeper reasons why this crime is so dangerous to national cohesion.

We are lucky enough to live in a time where the authenticity of the physical currency in our wallets is taken for granted, but when the Secret Service was founded in 1865 to combat counterfeiting—the Secret Service’s role in Presidential Protection didn’t formally begin until 1901 after the assassination of President William McKinley—it was estimated that approximately half of the currency in circulation was counterfeit. Think about that: you had a roughly 50 percent chance, when engaged in commerce, of receiving money with ZERO value. That people had faith in their currency was so important to the U.S. government at the time that the Secret Service was established and charged with hunting down and prosecuting counterfeiters in order to re-establish public trust in the battered dollar.

Read more.

 

RELATED ARTICLES:

62 House Republicans Join Democrats to Clear Path for Vote Reviving Export-Import Bank

How Marriage, Strong Families Contribute to Economic Growth

EDITORS NOTE: This column originally appeared in the Conservative Review. The featured image of Federal Reserve Chair Janet Yellen is by Jacquelyn Martin | AP Photo.

In Government, Nobody Quits – And You Can’t Get Fired by Daniel Bier

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Government work is pretty sweet, if you can get it. If you have to pay for it… not so much.

The government has one of the highest paid workforces in the country. Federal bureaucrats make 78% more in total compensation than people in the private sector. State and local employees make on average 25% more.

Combined with laws that make it extremely difficult to fire public employees, even for explicit or criminal misconduct, it’s no wonder that hardly anyone leaves.

A CBS News investigation found,

At the Environmental Protection Agency (EPA), red tape is preventing the removal of a top level employee accused of viewing porn two to six hours a day while at work, since 2010. Even though investigators found 7,000 pornographic files on his computer and even caught him watching porn, he remains on the payroll. …

The administrative process meant to prevent against politically motivated firings is the civil servant protection system. The rules give employees the right to appeal a termination, a process that can take up two years. … [CEO Max Stier] said those rules make it nearly impossible to fire poor performers or problematic employees, even when they’ve committed egregious violations. …

A CBS News analysis of cases under review by the Merit System Protection Board (MSPB), an appeals board for federal workers, found other instances of employees who had committed seemingly fireable offenses who were later reinstated to their jobs, often with back pay and interest. …

Five years ago, the General Services Administration (GSA) spent more than $800,000 on a lavish conference in Las Vegas. They were served 1,000 sushi rolls costing $7 each and a clown and mind reader were hired for entertainment. Two managers were initially fired but got their jobs back after the MSPB reversed the decision. …

Firing belligerent or hostile workers is difficult, too. One former manager told CBS News he tried for more than a year to fire an employee who was intimidating co-workers and superiors, at one point even chasing a manager down the hall.

Upset about being reprimanded, the employee sent him numerous menacing emails, including one that read: “I can stand over you to [sic]. I am 6 foot 3 inches and I weigh 265, and I am not backing down. … And by the way, I do know where you live.”

The federal government is not unique in this. Rules vary across cities and states, but thanks to union contracts and special “law enforcement bill of rights,” it’s almost impossible to fire a cop, even for obvious criminal misconduct, let alone ordinary incompetence.

The same is often true for teachers. Thank to tenure, union rules, and other political privileges, firing a bad teacher is really hard. New York City alone spends $22 million a year to keep problem teachers in “rubber rooms,” away from kids, as they bounce around the arbitration process while the city tries to fire them.

Lest you think this is just anecdotal, look at the data on job separations. The turnover rate in government is a third of that in private industry.

Why is that? Because, to a close approximation, nobody quits. The quit rate of government employees is 70% lower than the private sector. (This also rebuts the claim that we should pay public employees so much because they have such hard jobs… that they almost never want to leave.)

And, to a close approximation, nobody gets fired, either. The rate of firing and layoffs for public employees is 71% lower than in the private economy (except for once in the summer of 2010, when states had such massive revenue shortfalls they literally did not have the money to pay them).

If you want, you can choose to believe that government employees are somehow three times more competent, honest, and productive than private employees, but that doesn’t seem very probable. What seems more likely is that government officials are just like the rest of us, but the political system protects their jobs and pays them substantially more than their services would be worth in the private sector.

In general, it’s a sweetheart deal for public employees: make a bunch more money, don’t worry about getting fired or laid off, retire and collect a pension (or two, or three). That doesn’t make them bad people (although it should concern all of us that bad apples are very hard to remove from government).

But neither does that make it a good deal for the people they are ostensibly working for and who are forced through taxes to pay their salary (and pay the costs whenever one of them gets sued for hurting someone).

The fact that public employees never leave is both a cause and a symptom of the problem with government. It makes public services — from police to education to the DMV — less efficient, less productive, and more expensive than they ought to be. But more fundamentally, it exposes the danger of having a government so big that public sector unions can dictate terms to the elected officials who are supposed to represent the taxpayers and the general public.

Daniel BierDaniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

What Killed Economic Growth? by Jeffrey A. Tucker

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Debating why the economy is so sluggish is an American pastime. It fills the op-eds, burns up the blogosphere, consumes the TV pundits, and dominates the political debates.

It’s a hugely important question because many people are seriously frustrated about the problem. The recent popularity of political cranks and crazies from the left and right — backed by crowds embracing nativist and redistributionist nostrums — testify to that.

Sometimes it’s good to look at the big picture. The Economic Freedom of the World report does this with incredible expertise. If you believe in gathering data, and looking just at what the evidence shows and drawing conclusions, you will appreciate this report. It sticks to just what we know and what we can measure. The editors of the report have been doing this since 1996, so the persistence of the appearance of cause and effect is undeniable.

The report seeks measures of five key indicators of economic freedom: security of property rights, soundness of money, size of government, freedom to trade globally, and the extent of regulation. All their measures are transparent and heavily scrutinized by experts on an ongoing basis. If you question how a certain measure was arrived at, you are free to do so. It’s all there, even the fantastically detailed data sets, free for the download.

The report examines 157 countries with data available for 100 countries back to 1980. A total of 42 distinct variables are used in the index.

The big takeaway from this report: freer economies vastly outperform unfree economies by every measure of wellbeing.

The countries in the top quarter of the freest economies have average incomes more than 7 times higher than those countries listed into the bottom quarter (the least free). This is even true for the poor: the average income of the poor in free economies is 6 times that of the average in unfree economies. The lowest income group in free economies still 50% greater than the overall average is least free economies.

Life expectancy is 80.1 years in the top quarter as versus 63.1 in the bottom quarter.

The report further shows that civil liberties are more protected in freer economies than less free economies.

It’s a beautiful thing how this report puts to rest of a century of ideological debates. Indeed, these results are not generated by political ideology. They are generated by facts on the ground, the real conditions of law, regulation, institutions, legislation, and policy.

The implications are screamingly obvious. If you want a country to grow richer, you have to embrace freedom in economic life. If you want to drive a country into poverty, there is a way: grow the government, destroy the money, shut down trade, and heavily regulate all production and consumption.

One leaves this report with the question: Why are we still debating this?

What about the United States?

Everyone knows that the US has a problem. Despite living through the greatest explosion of technology and communication in the history of the world, a transformation that should have set off a wonderful economic boom similar to what we saw in the 19th century, we’ve seen pathetic results in growth and household income.

A quick casual look shows what I mean. Here’s percent change in GDP from the end of World War II to the present.

And here is real median household income from 1984 to 2013:

From those two pictures alone, you can discern the source of voter frustration, and also the general atmosphere of angst.

People want to know why, and whom to blame. The Economic Freedom Index gives you a strong hint.

From 1970 to 2000, the United States was generally listed as the third freest economy in the world, behind only Singapore and Hong. Starting in 2000, the US began to slip. Over the period between 2000 and today, the summary position in the index slipped 0.9%. This doesn’t sound like much, but “a one-point decline in the EFW rating is associated with a reduction in the long-term growth of GDP of between 1.0 and 1.5 percentage points annually,” says the report, and this adds up, year after year.

Relative to other countries, listed most free to least free, the US has slipped from the number 3 spot all the way to number 16. Countries that are ahead of the US include Australia, Chile, Ireland, Canada, Jordan, Taiwan, New Zealand, Hong Kong, and Singapore.

And here is a fact that I found incredible: The former Soviet state of Georgia ranks at number 12. And can you guess which country is just behind the US at number 17? The formerly Communist nightmare of Romania. That Romania is only slightly less free than the United States is great progress for Romanians, but should be an embarrassment for Americans.

The fall in economic freedom in this country has been precipitous. The authors of the report further note that this decline is highly unusual. Most all countries in the world are getting freer, which accounts from the thrilling fall in global poverty.

But the US is going the opposite direction, fast: “Nowhere has the reversal of the rising trend in the economic freedom been more evident than in the United States.”

What in particular accounts for the largest portion of this slide? It’s about the security of property. The drug war, the bailouts, the rise of forced transfers to political elites, eminent domain, and asset forfeiture all contribute. There are other problems with regulation and taxation, but it is the lack of security in what we own that has been decisive. This is what kills investment, confidence in the future, and the ability to accumulate capital that is so essential to prosperity.

What’s strikes me when looking at all this data, and the crystal clear connections here, is the strange silence on the part of the opinion class. People are flailing around for answers. Where’s the growth? Who is stealing the future? Maybe it’s the immigrants, foreign nations, and the rise of inequality. Maybe technology is taking jobs. Maybe people are just lazy and incompetent.

Or maybe we should look at the data. It’s all about freedom.

Jeffrey A. Tucker
Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook.

Only Obama Can Shut Down the Government

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The inclination many establishment Republicans have shown for premature legislative and ideological surrender is, at times, only matched by their eagerness to surrender the messaging battle as well.

Committed conservatives are already fighting a difficult messaging battle. They face committed liberal activists, far-left elected officials at the local, state, and federal level, an entrenched federal bureaucracy, an ideologically blinded media, an influential entertainment community, and an insulated, left-leaning academic community. We do not need to waste precious resources fighting against our own party. But the establishment has backed us into a corner by integrating the language of the Left into its own messaging.

I witnessed this recently at a Republican debate I attended for Florida’s 18th congressional district. The moderator of the debate asked the candidates a question about a vote for or against a debt ceiling hike, and insinuated via the wording of the question that a “no” vote would be a vote for shutting down the government. I was hoping the candidates would see through the messaging magic trick the debate moderator was playing on them, but many did not. By answering this “question,” without challenging the inaccurate premise of the question, many of the candidates lent credence to the premise that the GOP is responsible for “shutting down the government.” This is complete garbage and no activist, candidate, elected official, or responsible member of the GOP with a media voice should make room for this nonsensical idea.

Democrats, and their ideologically-aligned media friends, invented the false narrative that the GOP is responsible for any government shutdown as a tool to force the GOP to forfeit the constitutional congressional power of the purse, which the GOP-led House of Representatives rightfully holds.

Now that the narrative has been firmly implanted in the American public conscience, with the assistance of many in the GOP, and with Republican leadership afraid to tell the truth about how the government “shuts down,” the GOP insider class has effectively disempowered itself, along with the voters who busted their butts to get them elected and millions of conservative Americans who are pleading for their lawmakers to fight back against President Obama’s “fundamental transformation.”

Here are the very simple, and indisputable facts, about government “shutdowns.” The Republican-led House of Representatives has the constitutional duty to put forth, and pass, a federal budget. When a compromise budget is accepted by both the House and the Senate, it is then passed on to President Obama who can choose whether to sign the budget. If the president refuses to sign the budget and the government “shuts down”—a misnomer in itself because the government’s essential functions continue unabated during a “shutdown”— it is the exclusive result of presidential inaction. This requires no leap in logic or world-class imagination to figure out.

With this said, I am pleading with Republicans across the grassroots and elected spectrum to please stop saying, “We shouldn’t shut down the government.” Of course we shouldn’t shut down the government because we can’t shut down the government. Only the president can do that.

Do you really think that if the roles were reversed, and the Republicans held the White House and the Democrats held the House and Senate, that the media narrative would be the same? Of course not. The media would be blaming the Republican President for “shutting down the government” if he refused to sign the Democratic congress’ budget.

So please stop playing along like media lapdogs and carrying their messaging water for them. Just gather yourselves together and commit to doing the right thing and not the easy thing, and tell the people the truth. We deserve it.

EDITORS NOTE: This column originally appeared in the Conservative Review. The featured image of President Obama is by Pablo Martinez Monsivais | AP Photo.

Can Soaking the Rich Reduce Income Inequality? by Karen Walby, Ph.D.

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On the campaign trail recently, Bernie Sanders, a candidate running for the Democratic Party’s presidential nomination, said that America’s leaders shouldn’t worry so much about economic growth if that growth serves to enrich only the wealthiest Americans. And that our economic goals have to be redistributing a significant amount of wealth back from those in the top one percent of households according to income to the households at the bottom of the income distribution.

Most of the candidates for the Republican presidential nomination have said in one way or another that creating economic growth and with it economic opportunity is the best way to address the issue of income inequality. The subject is so popular it even has its own website, inequality.org.

Income inequality refers to the extent to which income is distributed in an uneven manner among a population. In the US, income inequality, or the gap between the rich and everyone else, has been growing markedly, by every major statistical measure, for some 30 years. While there is general agreement that this is something that needs to be addressed, a consensus on how to reduce income inequality remains elusive.

Three economists from the Brookings Institute recently looked into this issue in their article “Would a significant increase in the top income tax rate substantially alter income inequality?” And their findings are enlightening: They found that even a big increase in the marginal tax rate for top earners would have “shockingly little effect” on after-tax income inequality.

To briefly summarize their findings, they hiked the top income tax rate from 39.6 to 50%, a 26% increase. For households in the 95th to 99th percentiles of income, taxes would rise by an average of $6,464 a year while for the top 0.1 percent, the average yearly tax increase would be in $568,617. This rate increase would generate $96 billion in additional tax revenues.

But what effect would increasing taxes on the richest households have on reducing the income difference between the richest and the poorest households?

To answer that, the authors calculated the Gini coefficient for after-tax income before and after the 26% increase in the tax rate for the richest households. (The Gini coefficient is an index that ranges from 0, if everyone has the same earnings (maximum equality), to 1, if a single person has all the earnings and everyone else has none (maximum inequality.)

Under the current income tax rates, the after-tax income Gini coefficient was estimated to be .574. Raising the top marginal tax rate to 50 percent would reduce the Gini coefficient to .571, only a one-half of one percent decrease in income inequality. Incredibly, even when the authors assumed that all of the $96 billion in increased tax collections would be redistributed on an equal basis to the households in the bottom 20%, the Gini coefficient was only reduced to .560, a reduction in income inequality of only 2.4 percent.

So it turns out that the primary justification for keeping the progressive income tax system, that it is more beneficial to the poor, has been exposed for the fantasy it is.

The FAIRtax, a single rate tax on all consumption which replaces all federal income and payroll taxes, avoids the pitfalls of attempting to soak the rich. Thanks to the prebate, poor households would pay no sales taxes in net terms. Second, it eliminates the highly regressive Social Security and Medicare payroll taxes.  And third, it effectively taxes wealth as well as wages:  When the rich spend their wealth and when workers spend their wages, they will both pay taxes.  This broadens the effective tax base to include wealth, not just the income earned on it (much of which is currently exempted or taxed at a low rate under the current system).  Thus, one can lower the required consumption tax rate and, thereby, reduce the tax burden on workers.

headshot3_Karen_Walby_HeadshotABOUT DR. KAREN WALBY

Karen Walby, Ph.D. is the Director of Research Americans For Fair Taxation. To learn more about the Fair Tax click here.

Is Trump Right that NAFTA Was a “Disaster”? by Donald J. Boudreaux

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Assessing the consequences of NAFTA, Mark Thoma says, “For the U.S. – where the Bill Clinton administration sold the agreement as a job-creating policy because U.S. exports would grow by more than its imports – the agreement has not lived up to its promise” (“Is Donald Trump right to call NAFTA a ‘disaster’?” Oct. 5).

Disappointingly, Prof. Thoma writes as if he were a politician rather than the economist that he is. Politicians routinely sell freer trade as a source of net job and export creation. Yet economists since Adam Smith — and ranging across the ideological spectrum from Milton Friedman to Paul Krugman — have consistently rejected such claims as justifications for free trade.

Economists understand that freer trade neither increases nor decreases the total number of jobs in an economy. Instead, freer trade changes the kinds of jobs performed in an economy by shifting jobs from industries that are comparatively inefficient to industries that are comparatively efficient.

Likewise, the correct case for freer trade does not depend upon exports growing by more than imports. First, there’s no reason to expect freer trade to result in such an outcome. Second, such an outcome, should it occur, might well be lamentable for it could reveal that investment opportunities at home are consistently less attractive than are investment opportunities abroad.

Cross-posted from Cafe Hayek.

Donald J. Boudreaux

Donald J. Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Muslim Refugee Resettlement Resistance Grows: Feds shifiting costs to State and Local Taxpayers

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Fox News reporter, Melissa Jacobs, posted a very useful piece earlier this week entitled, ‘Obama’s refugee resettlement plan could stir battle with states.‘

Here is a bit that interested me (be sure to read the whole thing because she mentions several states and local communities resisting the resettlement of more refugees.  See if your city or state gets a mention!).

The Obama administration’s pledge to absorb thousands more Syrian and other refugees could run headlong into resistance from state and local officials worried about whether their communities can handle the influx.

[….]

“It’s a fiscal issue,” said Peter Steele, a spokesman for Maine Gov. Paul LePage. “You can only pay for what you can afford, and those funds should be going to the most needy citizens in our state.”

Don Barnett

Don Barnett, Center for Immigration Studies Fellow.

[….]

…. push back from the states could pose practical challenges.

According to a 1980 law, states can opt out of the program and need to be consulted in the process. However, Don Barnett, a fellow with the Center for Immigration Studies,describes refugee resettlement as a “secretive” and lucrative business for “non-profits” who operate with little coordination with state and local communities.

“In every encounter I’ve had with resettlement representatives, they will say if the locality doesn’t want it, we won’t resettle them — but this hasn’t been tested,” Barnett said.

Concern about the funding burden falling on local governments is hardly new.

The 1981 Select Commission on Immigration and Refugee Policy noted, “Many state and local officials are concerned that the costs of resettlement assistance will continue beyond the period of federal reimbursement and that the burden of providing services will then fall upon their governments.”

“There is a complete cost shift to the states,” Barnett said.

Indeed, federal funding, extended for 36 months at the beginning of the program, dropped to the current eight-month period by 1991. The Heritage Foundation estimates the total lifetime cost of government benefits at $6.5 billion per 10,000 refugees.

See Julia Hahn at Breitbart, here, for more on the Heritage Foundation study.

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Maryland Senators want more Syrians resettled in the state; seek to streamline security screening

Coeur d’Alene, Idaho newspaper confirms it: No refugees to be resettled in Northern Idaho (“right now”)

‘Refugee’ security screening Greek-style

PODCAST: You Cannot Multiply Wealth By Dividing It

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A sermon given in 1984 by Dr. Adrian Pierce Rogers, Baptist Pastor, Author, and Political Commentator titled, “God’s Way to Health, Wealth and Wisdom.”

“You cannot legislate the poor into freedom by legislating the industrious out of it. You don’t multiply wealth by dividing it. Government cannot give anything to anybody that it doesn’t first take from somebody else. Whenever somebody receives something without working for it, somebody else has to work for it without receiving. The worst thing that can happen to a nation is for half of the people to get the idea they don’t have to work because somebody else will work for them, and the other half to get the idea that it does no good to work because they don’t get to enjoy the fruits of their labor.”

Please listen to Dr. Roger’s entire sermon “God’s Way to Health, Wealth and Wisdom“:

Florida must become energy independent by 2020

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What will promote human life? What will promote human flourishing — realizing the full potential of life? How do we maximize the years in our life and the life in our years? Answer: cheap and reliable power.

Organic Fossil Fuels are the Lifeblood of Civilization!

Florida’s Governor, Congressional delegation and state legislature must make it their number 1 priority to make the Sunshine State Energy Independent by 2020 or sooner!

Florida:

  1. Imports all of its natural gas and 99.9 % of its oil.
  2. Imports all of its refined petroleum based products (e.g. gasoline).
  3. Is the second largest user of natural gas, Texas being the largest.

According to the U.S. Energy Information Administration:

  1. Geologists believe there may be large oil and natural gas deposits in the federal Outer Continental Shelf off of Florida’s western coast.
  2. Florida was second only to Texas in 2014 in net electricity generation from natural gas, which accounted for 61% of Florida’s net generation; coal accounted for almost 23%, the state’s nuclear power plants accounted for 12%, and other resources, including renewable energy, supplied the remaining electricity generation.
  3. Renewable energy accounted for 2.3% of Florida’s total net electricity generation in 2014, and the state ranked 10th in the nation in net generation from utility-scale solar energy.
  4. In part because of high air conditioning use during the hot summer months and the widespread use of electricity for home heating during the winter months, Florida’s retail electricity sales to the residential sector were second in the nation after Texas in 2014.
  5. Electricity accounts for 90% of the site energy consumed by Florida households, and the annual electricity expenditures of $1,900 are 40% higher than the U.S. average, according to EIA’s Residential Energy Consumption Survey.

Even as human populations have grown dramatically and increased their use of fossil fuels, the world has become a much better place.

As CO2 emissions have risen so too have the GDP per person, life expectancy and the population.

Florida politicians are addicted to the precautionary principle (“better safe than sorry”). It is a maxim embraced by government planners and regulators in the Sunshine state at every level. They do not even want to determine what organic fossil fuels lay off of Florida’s coastlines. The precautionary principle worked to stop the building of nuclear power plants in the United States after the 3 Mile Island incident. Today the same tactic is being used to stop off shore drilling using the Deepwater Horizon incident.

Off shore drilling naysayers use the example of the Deepwater Horizon spill to strike fear into the hearts of Floridians. But as FDR said, “The only thing we have to fear is fear itself.”  An example of using the fear factor (precautionary principle) is what happened in Japan following the meltdown of a nuclear power plan in Fukushima. The facts are that no one has died from radiation, nor has cancer increased however, 1,600 did die of stress due to the unnecessary evacuation of people from the area.

Fear kills.

What off shore naysayers, fear mongers, don’t tell you is that mother nature is the greatest polluter in the Gulf of Mexico. According to NOAA over 2,500 barrels of oil naturally seeps daily from fissures in the Gulf. This seeping has been going on for tens of thousands of years, yet the Gulf is doing just fine. Would it not be better to capture this oil, and natural gas, than have it continue to seep into the Gulf?

Some argue that even if natural gas is discovered in Florida’s waters that building an on shore natural gas processing plant is not economically feasible or politically doable. There is an answer to this negative with a positive via new technology. Israel is faced with the same concerns about onshore natural gas processing plants. To solve the problem Nobel Energy and Shell Oil have come up with a solution. Process the natural gas using floating plants. According to Robert Sullivan of the New York Times:

It’s called Prelude, and it’s bigger than big. More than 530 yards long and 80 yards wide, it was constructed with 260,000 metric tons of steel, more than was used in the entire original World Trade Center complex, and it’s expected to displace 600,000 metric tons of water, or as much as six aircraft carriers. Even the paint job is huge: Most big vessels dry-dock every five years for a new coat, but Prelude’s paint is supposed to last 25 years. It will produce more natural gas than Hong Kong needs in a year. And it’s so big that you can’t really photograph it, at least not all at once.

[ … ]

What makes this giant liquefied-natural-gas enterprise feasible, paradoxically enough, is the miniaturization its construction represents. It’s much smaller than landlocked equivalents — imagine shrinking your local refinery until it fits on a barge. Shell Oil, which has the biggest stake in the project, describes Prelude as more environmentally friendly than an onshore site. There are no estuaries under threat, no shorelines to run pipe across and reduced risks to population centers, given the explosiveness of natural gas. And it is designed to ride out extreme weather, thanks to three giant 6,700-horsepower thrusters that can turn it into the wind and waves. “These are the things that the naval architects had to worry through,” says Robert Bea, co-founder of the Center for Catastrophic Risk Management, at the University of California, Berkeley. “It works like a big-ass weather vane.”

Read more.

Environmentalists use the fear factor when talking about drilling for natural gas and oil off of Florida’s shores. The same is true for some of Florida’s Congressional delegation, such as Rep. Vern Buchanan. Fear is not good public policy.

What is good public policy is insuring that Floridians have access to cheap and reliable power in the foreseeable future. Now it the time to take action. Waiting is not an option.

If Governor Rick Scott and Republicans are committed to creating jobs, then they must diversify the economy by promoting energy independence. Energy independence will lead to reduced costs for electricity, gasoline and diversify the economy. That is good public policy.

RELATED ARTICLE: Miami-Dade County school district accepts BP oil spill settlement, sets maximum tax rate

Obama Administration Slashes Military Retirement, Pay and Benefits

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According to the Military Officers Association of America (MOAA):

House and Senate conferees finally agreed to move forward with an annual defense bill, one with a lower than expected pay raise and significant changes to military pay and benefits.

Military Pay

The defense bill capped the active duty pay raise at 1.3 percent. This marks a third consecutive year of pay caps, and continues to undo a decade of work by Congress to eliminate a 13.5 percent wage gap between military and private sector pay.

Pay caps add up. An active duty O-3 with 10 years of service has now lost over $1,800 since pay caps started.

Military Retirement

The bill also includes major changes to military retirement. Beginning in 2018, the new system will cut military retirement by 20 percent, and decrease the disability retirement calculation in order to provide a five percent government match to federal Thrift Savings Plan (TSP) accounts held by military members.

The intent of the plan is to provide a portable retirement benefit to troops exiting service prior to serving a full career. However, servicemembers are already eligible to use TSP, albeit without a government contribution.

MOAA has supported government matching of personal Thrift Savings Plan accounts, but it should not come at the expense of cutting military retirement, or cutting the payments to medically retired service men and women.

The new retirement plan provides an automatic one percent government contribution to TSP accounts, with an additional match of up to four percent of a servicemember’s contribution. Earlier proposals stopped government contributions after 20 years of service. Lawmakers compromised and agreed to extend government matching up to 26 years of service.

MOAA will continue to advocate for government matching for a full career.

The new plan also allows for a lump sum distribution of a portion of retired pay.

Current servicemembers and retirees will be grandfathered into the current retirement system. Servicemembers with less than 12 years of service will have the option to opt-in to the new program.

Slashing military retirement by 20 percent and providing a ‘401k-style’ benefit will erode career retention and provide a greater incentive for members to leave service early. Because the policy funds the new vesting provisions by imposing major cutbacks in benefits for those staying for a career, MOAA has great concerns about the impact on long-term readiness and retention.

Congress also repealed the final section of a complicated COLA-reducing law for future military retirees. Future retirees were originally subject to a one-percentage point reduction in annual retirement COLA until age 62. At age 62, military retired pay would be recalculated and receive full COLA increases.

MOAA was instrumental in repealing the COLA change, with members sending 300,000 messages to Capitol Hill in just a few months.

TRICARE

MOAA is grateful Congress rejected proposals to means-test annual TRICARE fees and implement new enrollment fees for TRICARE For Life beneficiaries, at least for now.

Congress also rejected proposals to consolidate TRICARE Prime and Standard. Under those proposals, beneficiaries would have been subject to the enrollment fees of TRICARE Standard without the guaranteed access of TRICARE Prime. In essence, beneficiaries would be paying more for less.

Although lawmakers rejected major changes to TRICARE this year, they made no bones about the fact that now that they’ve overhauled military retirement, their next focus will be on health care. In report language, lawmakers warned, “… that comprehensive reform of the military health care system is essential” and “all elements of the current system must be re-evaluated, and that increases to fees and copays will be a necessary part of such a comprehensive reform effort.”

Prescription Copays

One of the most contentious issues in the defense bill was the future of prescription copays. The administration’s original budget called for 10 years of TRICARE pharmacy increases.

Senate lawmakers agreed, and proposed increases of 25 to 125 percent.

Proposals to increase prescription copays fail to take into account that TRICARE beneficiaries now pay 145 percent more since 2011, and that pharmacy copays are already indexed to annual COLAs.

Fortunately, House conferees prevailed over the Senate, but had to concede to a one-year increase in prescription drug prices.

2016 TRICARE Rx Proposals

Survivor Benefits

The defense bill also included language to correct an inequity for military survivors. The bill authorizes Survivor Benefit Plan coverage for a spouse in the event a former spouse predeceases the servicemember.

Commissaries

Original budget proposals called for both a consolidation of the commissary and exchange systems and a dramatic cut in commissary funding.

Those plans were thwarted thanks largely to the work of Sens. Barbara Mikulski (D-Md.) and James Inhofe (R-Okla.). They delayed any privatization efforts until further cost saving studies on the proposal are conducted. Sen. Mikulski also led the effort to restore over $300 million in commissary funding.

The commissary budget only decreased slightly because of Mikulski’s efforts.  Patrons would have seen a reduction in the number of days open and operating hours.

The defense bill fell short on major MOAA-supported issues. The bill did not include provisions to:

  • End the “widow’s tax” for military survivors
  • Expand concurrent receipt for disabled retirees
  • Establish that career reservists with no active duty service are deemed veterans of the armed forces

“We are disappointed in the final defense bill and its adverse effect on military families,” says MOAA President Vice Adm. Norbert R. Ryan Jr., USN (Ret). “We must reverse this trend of eroding pay and benefits because we’re sending the wrong signal to the troops at the wrong time.”

With the political horizon looking the way it is, MOAA’s membership will be even more important next year to protect hard-earned benefits in service to the nation.

EDITORS NOTE: This report originally appeared on MOAA.org.

We’re on the verge of a major international conflict

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I know most of us are still reeling from the Umpqua Community College shooting in Roseburg, Oregon. Prayers for the souls of those who lost their lives, their families, and those wounded and perhaps scarred for life. But we must never forget the carnage and death that occurs regularly in our inner cities, our urban areas, such as President Obama’s hometown of Chicago, that goes unmentioned from the nation’s biggest bully pulpit.

obama_angry_2012_8_63

But that is not want I want to focus on right now.

Today we got the September jobs report and it is still disturbing. Our economy is not growing at the necessary rate. The report put the unemployment rate at 5.1 percent, which is unfathomable when you consider the U.S. workforce participation rate remains at a historic low near 62.7 percent. In the entire month of September, the American economy added 142,000 jobs, 30,000 below what was estimated. These numbers are anemic, and do not represent a flourishing free market economy but one that is struggling — under crippling tax and regulatory policies implemented over the past seven years.

This cannot be the new normal and accepted as “positive” gains, especially considering annual GDP growth is below 2.5 percent. These are the reasons why the Obama administration has turned to Janet Yellin and the Federal Reserve to prop up the economy with artificial measures called “quantitative easing” — incessantly low interest rates and printing. It’s creating another bubble that will certainly burst. And it’s not about raising taxes on high wage earners; it’s about sound fiscal policy that restores our economy.

That is the major domestic economic concern for today, but there is a greater international concern. Due to the weakness of the Obama administration — or perhaps the intentional decimation of our global influence and military capacity — we could be on the verge of a major conflict.

A declared state terrorist organization, Iran’s Quds Force, led by General Qassem Suleimani, is now openly operating on the ground in Syria. Yes, Iran has “boots on the ground” in Syria using Russian air assets to attack the Syrian rebel forces supposedly supported by the Obama administration. I think it is fair and honest to say, another “red line” has been crossed in Syria. Sadly, President Obama took to the stage yesterday, showing his unrighteous indignation over having new gun safety laws – but said nothing about the Russian-Iranian-Syrian-Hezbollah alliance.

Perhaps President Obama should take to the world’s largest bully pulpit today and announce that the Joint Comprehensive Plan of Action (JCPOA), the Iranian nuclear deal, is cancelled. It is beyond belief that President Obama and his cohort of 42 Democrat Senators, who blocked the Resolution of Disapproval from even reaching the Senate floor for a vote, could still support this foolish agreement.

I’d like Obama, any Democrat, any liberal progressive supporter or their media accomplices to explain to me why ….

Continue here

How can President Obama actually look at himself in the mirror, look at the American people and tell us Bashar Assad must go — when he has created the conditions for him to stay? ~ Allen West

Why Don’t All Sandwiches Cost $1,500? by Chelsea German

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What would life be like without exchange or trade? Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow, turned the milk into cheese, pickled a cucumber in a jar, ground his own flour from wheat to make the bread, collected his own honey, and personally killed a chicken for its meat.

This month, he published the results of his endeavor in an enlightening video: making a sandwich entirely by himself cost him 6 months of his life and set him back $1,500.

(It should be noted that he used air transportation to get to the ocean to gather salt. If he had taken it upon himself to learn to build and fly a plane, then his endeavor would have proved impossible).

The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own clothes. It was a time of unimaginable poverty and labor without rest.

The greater the number of people involved in exchange, the more beneficial the process becomes.

This morning, thanks to international trade, I am drinking coffee grown in Latin America, viewing a computer screen with eyeglasses made in Europe, and typing this blog post on a keyboard made in Asia.

Fortunately, freedom to trade internationally has improved, on average, around the world. Increased trade has helped raise living standards and decrease global poverty.

However, the recent trend in the United States is less positive.

If trade protectionist politicians, like Bernie Sanders on the left and Donald Trump on the right, have their way, then U.S. freedom to trade internationally may deteriorate further. They put down trade by claiming that it harms the U.S. economy and destroys jobs.

Yet, there is a widespread agreement among economists that free trade is key to prosperity. (Learn more about the relationship between increased trade and jobs here).

This morning, as you drink your coffee, take a moment to consider where it comes from. You probably would not be drinking it right now if it were not for trade. This video elegantly draws attention to the myriad ways in which the exchange of goods and services across national borders touches lives and helps raise living standards.

Almost everything you use is the product of a complex web of human cooperation, often extending beyond your country. Even something as simple as a bag of groceries or a pencil is the end result of a “symphony of human activity that spans the globe.”

This post first appeared at Cato.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.