Is Fiscal Constraint a Bug or a Feature?

A Washington Post profile of Art Pope, political donor and now budget director of North Carolina, finds a flaw in his fiscal management:

For all of his pull, the revolution Pope helped set in motion is not going quite as planned. The tax overhaul, styled in part off ideas promoted by Pope-backed groups, has contributed to tight finances in North Carolina at a time when other states are flush with cash.

Is that bad? Fiscal conservatives such as Pope just might think that budgetary constraints are a good thing, perhaps especially when revenues would otherwise be rising, leading to profligacy. State governments have a tendency to overspend when the economy booms, and then face difficult adjustments in downturns. Limits on overspending, whether constitutional constraints or tax reductions, should be seen as a feature, not a bug, in state fiscal systems.

By the way, this Post profile of Pope, who is a contributor to the Cato Institute, is not exactly positive, but it’s nothing like Jane Mayer’s 2011 profile in the New Yorker, which I dubbed “Snidely Whiplash in North Carolina.”

Posted on July 20, 2014  Posted to Cato@Liberty

David Boaz discusses the free market at FreedomFest 2014 on Power Trading Radio with John Boyle

Posted on July 18, 2014  Posted to Cato@Liberty

David Boaz discusses the free market at FreedomFest 2014 on Power Trading Radio with John Boyle

Posted on July 18, 2014  Posted to Cato@Liberty

U.S. Chamber of Commerce Seeks to Defeat Top Free-Enterpriser Rep. Justin Amash

In 2008 the U.S. Chamber of Commerce supported TARP, the $800 billion Wall Street bailout. Early in 2009 the Chamber supported President Obama’s $800 billion “stimulus” bill. Then four months later it announced its creation of the “Campaign for Free Enterprise.” As I pointed out at the time, it would have been nice if the Chamber had discovered the virtues of free enterprise when it mattered.

Now the Chamber’s got a new campaign that seems incongruous for a “free enterprise” organization. It has endorsed the primary opponent of Rep. Justin Amash (R-MI), the most pro-free-enterprise and most libertarian member of Congress. You don’t have to take my word for that. The Club for Growth rates Amash 100 percent. The National Taxpayers Union rates him second among 435 members of Congress in fiscal conservatism. He scored 100 percent on the Freedomworks Scorecard.

So why would the Chamber of Commerce oppose him? I looked at big business opposition to Amash and several other libertarian-leaning legislators last month:

In Michigan business leaders are funding financial consultant Brian Ellis’s primary challenge to Rep. Justin Amash. Since his election in the 2010 tea party wave, Amash has emerged as the most libertarian member of the House of Representatives. He’s second to McClintock on the National Taxpayers Union spending-vote ratings. He organized a bipartisan effort to rein in the National Security Agency that came within a few votes of passing the House. He heads the House Liberty Caucus. Amash told the New York Times, “I follow a set of principles, I follow the Constitution. And that’s what I base my votes on. Limited government, economic freedom and individual liberty.”

So why wouldn’t Grand Rapids business leaders be proud to have such a widely admired young representative? They say they want a congressman who will work with others to “get things done.” Andrew Johnston, the political director of the Grand Rapids Chamber of Commerce, told the Wall Street Journal, “There is frustration among those who think his rigidity makes it difficult to move forward on legislation.” He promised that Ellis “will have access to funds that will be helpful to his campaign.”

It’s not just local businessmen. Washington lobbyists are rallying around Ellis. He’s also put $400,000 of his own money into his campaign—in the form of loans, which can be paid back out of more lobbyists’ contributions if he wins the race.

In an interview with the Weekly Standard, Ellis strikingly dismissed Amash’s principled, constitutional stand: “He’s got his explanations for why he’s voted, but I don’t really care. I’m a businessman, I look at the bottom line. If something is unconstitutional, we have a court system that looks at that.”

Most members of Congress vote for unconstitutional bills. Few of them make it an explicit campaign promise.

Amash does have the support of Freedomworks, Club for Growth, and some local business leaders such as several members of Amway’s DeVos and Van Andel families. And polls show him 20 points ahead of Ellis. But Rep. Eric Cantor had a poll putting him 30 points ahead of David Brat before he unexpectedly lost, and Ellis’s self-funding now amounts to $800,000. So Amash can’t take anything for granted.

Of course, the Export-Import Bank is now a hot issue in Congress. Amash opposes it; the Chamber vigorously supports it. So it looks like it may be tough to support free markets, oppose bailouts and corporate welfare, and receive the support of the nation’s largest business organization.

Posted on July 18, 2014  Posted to Cato@Liberty

U.S. Chamber of Commerce Seeks to Defeat Top Free-Enterpriser Rep. Justin Amash

In 2008 the U.S. Chamber of Commerce supported TARP, the $800 billion Wall Street bailout. Early in 2009 the Chamber supported President Obama’s $800 billion “stimulus” bill. Then four months later it announced its creation of the “Campaign for Free Enterprise.” As I pointed out at the time, it would have been nice if the Chamber had discovered the virtues of free enterprise when it mattered.

Now the Chamber’s got a new campaign that seems incongruous for a “free enterprise” organization. It has endorsed the primary opponent of Rep. Justin Amash (R-MI), the most pro-free-enterprise and most libertarian member of Congress. You don’t have to take my word for that. The Club for Growth rates Amash 100 percent. The National Taxpayers Union rates him second among 435 members of Congress in fiscal conservatism. He scored 100 percent on the Freedomworks Scorecard.

So why would the Chamber of Commerce oppose him? I looked at big business opposition to Amash and several other libertarian-leaning legislators last month:

In Michigan business leaders are funding financial consultant Brian Ellis’s primary challenge to Rep. Justin Amash. Since his election in the 2010 tea party wave, Amash has emerged as the most libertarian member of the House of Representatives. He’s second to McClintock on the National Taxpayers Union spending-vote ratings. He organized a bipartisan effort to rein in the National Security Agency that came within a few votes of passing the House. He heads the House Liberty Caucus. Amash told the New York Times, “I follow a set of principles, I follow the Constitution. And that’s what I base my votes on. Limited government, economic freedom and individual liberty.”

So why wouldn’t Grand Rapids business leaders be proud to have such a widely admired young representative? They say they want a congressman who will work with others to “get things done.” Andrew Johnston, the political director of the Grand Rapids Chamber of Commerce, told the Wall Street Journal, “There is frustration among those who think his rigidity makes it difficult to move forward on legislation.” He promised that Ellis “will have access to funds that will be helpful to his campaign.”

It’s not just local businessmen. Washington lobbyists are rallying around Ellis. He’s also put $400,000 of his own money into his campaign—in the form of loans, which can be paid back out of more lobbyists’ contributions if he wins the race.

In an interview with the Weekly Standard, Ellis strikingly dismissed Amash’s principled, constitutional stand: “He’s got his explanations for why he’s voted, but I don’t really care. I’m a businessman, I look at the bottom line. If something is unconstitutional, we have a court system that looks at that.”

Most members of Congress vote for unconstitutional bills. Few of them make it an explicit campaign promise.

Amash does have the support of Freedomworks, Club for Growth, and some local business leaders such as several members of Amway’s DeVos and Van Andel families. And polls show him 20 points ahead of Ellis. But Rep. Eric Cantor had a poll putting him 30 points ahead of David Brat before he unexpectedly lost, and Ellis’s self-funding now amounts to $800,000. So Amash can’t take anything for granted.

Of course, the Export-Import Bank is now a hot issue in Congress. Amash opposes it; the Chamber vigorously supports it. So it looks like it may be tough to support free markets, oppose bailouts and corporate welfare, and receive the support of the nation’s largest business organization.

Posted on July 18, 2014  Posted to Cato@Liberty

David Boaz discusses the free market at FreedomFest 2014 on Power Trading Radio with John O’Connell

Posted on July 16, 2014  Posted to Cato@Liberty

David Boaz discusses the free market at FreedomFest 2014 on Power Trading Radio with John O’Connell

Posted on July 16, 2014  Posted to Cato@Liberty

Trevor Ariza: NBA Champion, Tax Refugee

Do some people think taxes don’t affect economic choices? If so, they should talk to Trevor Ariza and the Washington Wizards. Ariza, a member of the Los Angeles Lakers’ 2009 NBA championship team and “a key part of the Wizards’ playoff run,” has decided to leave Washington and join the Houston Rockets. Why?

Washington was disappointed but hardly shaken when Ariza chose to accept the same four-year, $32 million contract offer in Houston, where the 29-year-old could pocket more money because the state doesn’t tax income.

Yes, a $32 million salary – or indeed a $32,000 salary – goes further in Texas than in the District of Columbia. What economists call the “tax wedge” is the gap between what an employer pays for an employee’s services and what the employee receives after taxes. It causes some jobs to disappear entirely, as employees and employers may not be able to agree on a wage once taxes are taken out of the paycheck. It causes some employees to flee to lower-tax countries, states, or cities. The Beatles, the Rolling Stones, Bono, and Gerard Depardieu are some of the better-known “tax exiles.” Now Trevor Ariza has joined their ranks.

Posted on July 14, 2014  Posted to Cato@Liberty

Trevor Ariza: NBA Champion, Tax Refugee

Do some people think taxes don’t affect economic choices? If so, they should talk to Trevor Ariza and the Washington Wizards. Ariza, a member of the Los Angeles Lakers’ 2009 NBA championship team and “a key part of the Wizards’ playoff run,” has decided to leave Washington and join the Houston Rockets. Why?

Washington was disappointed but hardly shaken when Ariza chose to accept the same four-year, $32 million contract offer in Houston, where the 29-year-old could pocket more money because the state doesn’t tax income.

Yes, a $32 million salary – or indeed a $32,000 salary – goes further in Texas than in the District of Columbia. What economists call the “tax wedge” is the gap between what an employer pays for an employee’s services and what the employee receives after taxes. It causes some jobs to disappear entirely, as employees and employers may not be able to agree on a wage once taxes are taken out of the paycheck. It causes some employees to flee to lower-tax countries, states, or cities. The Beatles, the Rolling Stones, Bono, and Gerard Depardieu are some of the better-known “tax exiles.” Now Trevor Ariza has joined their ranks.

Posted on July 14, 2014  Posted to Cato@Liberty

Liberalism and the French Revolution

Twenty-five years ago today I stood on the Champs-Elysees and watched a parade celebrating the bicentennial of the French Revolution, capped off with Jessye Norman singing “La Marseillaise.”

Of course, the French Revolution is controversial, especially among my conservative friends. How should libertarians see it? Three years ago I discussed that topic at FreedomFest and on the Britannica Blog. Here’s some of what I wrote then:

The Chinese premier Zhou Enlai is famously (but apparently inaccurately) quoted as saying, “It is too soon to tell.” I like to draw on the wisdom of another deep thinker of the mid 20thcentury, Henny Youngman, who when asked “How’s your wife?” answered, “Compared to what?” Compared to the American Revolution, the French Revolution is very disappointing to libertarians. Compared to the Russian Revolution, it looks pretty good. And it also looks good, at least in the long view, compared to the ancien regime that preceded it.

Conservatives typically follow Edmund Burke‘s critical view in his Reflections on the Revolution in France. They may even quote John Adams: ”Helvetius and Rousseau preached to the French nation liberty, till they made them the most mechanical slaves; equality, till they destroyed all equity; humanity, till they became weasels and African panthers; and fraternity, till they cut one another’s throats like Roman gladiators.”

But there’s another view. And visitors to Mount Vernon, the home of George Washington, get a glimpse of it when they see a key hanging in a place of honor. It’s one of the keys to the Bastille, sent to Washington by Lafayette by way of Thomas Paine. They understood, as the great historian A.V. Dicey put it, that “The Bastille was the outward visible sign of lawless power.” And thus keys to the Bastille were symbols of liberation from tyranny….

Liberals and libertarians admired the fundamental values [the French Revolution] represented. Ludwig von Mises and F. A. Hayek both hailed “the ideas of 1789” and contrasted them with “the ideas of 1914” — that is, liberty versus state-directed organization.

The Declaration of the Rights of Man, issued a month after the fall of the Bastille, enunciated libertarian principles similar to those of the Declaration of Independence:

1. Men are born and remain free and equal in rights… .

2. The aim of all political association is the preservation of the natural and imprescriptible rights of man. These rights are liberty, property, security, and resistance to oppression… .

4. Liberty consists in the freedom to do everything which injures no one else; hence the exercise of the natural rights of each man has no limits except those which assure to the other members of the society the enjoyment of the same rights… .

17. [P]roperty is an inviolable and sacred right.

But it also contained some dissonant notes, notably:

3. The principle of all sovereignty resides essentially in the nation. No body nor individual may exercise any authority which does not proceed directly from the nation… .

6. Law is the expression of the general will.

A liberal interpretation of those clauses would stress that sovereignty is now rested in the people (like “Governments are instituted among Men, deriving their just powers from the consent of the governed”), not in any individual, family, or class. But those phrases are also subject to illiberal interpretation and indeed can be traced to an illiberal provenance. The liberal Benjamin Constant blamed many of France’s ensuing problems on Jean-Jacques Rousseau, often very wrongly thought to be a liberal: “By transposing into our modern age an extent of social power, of collective sovereignty, which belonged to other centuries, this sublime genius, animated by the purest love of liberty, has nevertheless furnished deadly pretexts for more than one kind of tyranny.” That is, Rousseau and too many other Frenchmen thought that liberty consisted in being part of a self-governing community rather than the individual right to worship, trade, speak, and “come and go as we please.”

The results of that philosophical error—that the state is the embodiment of the “general will,” which is sovereign and thus unconstrained—have often been disastrous, and conservatives point to the Reign of Terror in 1793-94 as the precursor of similar terrors in totalitarian countries from the Soviet Union to Pol Pot’s Cambodia.

In Europe the results of creating democratic but essentially unconstrained governments have been far different but still disappointing to liberals. As Hayek wrote in The Constitution of Liberty:

The decisive factor which made the efforts of the Revolution toward the enhancement of individual liberty so abortive was that it created the belief that, since at last all power had been placed in the hands of the people, all safeguards against the abuse of this power had become unnecessary.

Governments could become vast, expensive, debt-ridden, intrusive, and burdensome even though they remained subject to periodic elections and largely respectful of civil and personal liberties. A century after the French Revolution Herbert Spencer worried that the divine right of kings had been replaced by “the divine right of parliaments.”

Still, as Constant celebrated in 1816, in England, France, and the United States, liberty

is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone’s right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims.

Compared to the ancien regime of monarchy, aristocracy, class, monopoly, mercantilism, religious uniformity, and arbitrary power, that’s the triumph of liberalism.

Mark Twain, in A Connecticut Yankee in King Arthur’s Court, reminded us of the reality of the ancien regime: 

There were two “Reigns of Terror,” if we would but remember it and consider it: the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other lasted a thousand years; the one inflicted death on ten thousand persons, the other upon a hundred millions; but our shudders are all for the horrors of the minor Terror, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? What is swift death by lightning compared with death by slow fire at the stake? A city cemetery could contain the coffins filled by that brief Terror, which we have all been so diligently taught to shiver at and mourn over, but all France could hardly contain the coffins filled by that older and real Terror which none of us has been taught to see in its vastness or pity as it deserves.

Posted on July 14, 2014  Posted to Cato@Liberty

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