Tax Hikes Not Needed to Balance the Budget | Daniel J. Mitchell | Cato Institute: Commentary

Tax Hikes Not Needed to Balance the Budget | Daniel J. Mitchell | Cato Institute: Commentary: "Washington insiders say that tax increases are unavoidable because deficits are too large. Since these often are the same people who supported 'Obamacare' and the so-called stimulus, their crocodile tears about red ink probably are not very sincere. But hypocrisy is not necessarily the same as inaccuracy, so let's look at whether it is possible to balance the budget without higher taxes."

"One approach would be to get rid of counterproductive forms of spending such as the Department of Agriculture, energy-subsidy programs, Department of Housing and Urban Development, Small Business Administration, Department of Education, National Endowment for the Arts, and Department of Transportation."

"For much of America's history, when such restraints were honored, federal spending was on average only 3 percent of economic output. If we did the same thing today, federal spending would be about $450 billion. We'd not only have a balanced budget; we'd have a giant surplus and could easily afford to abolish the income tax."

"Politicians simply need to reduce the rate at which spending is growing.

It's a simple matter of mathematics. The Congressional Budget Office estimates that tax revenue will grow by an average of 7.3 percent annually over the next 10 years. Reducing the budget deficit is easy — so long as politicians increase overall spending by less than that amount. And with inflation projected to be about 2 percent over the same period, this is an ideal environment for some long-overdue fiscal discipline."

"If spending is simply capped at the current level with a hard freeze, the budget is balanced by 2016. If we limit spending growth to 1 percent each year, the budget is balanced in 2017. And if we allow 2 percent annual spending growth — letting the budget keep pace with inflation, the budget balances in 2020."

"Milton Friedman was correct many years ago when he warned that, 'In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.'"

"Trannie Mae" and Special Interests | Randal O'Toole | Cato Institute: Commentary

"Trannie Mae" and Special Interests | Randal O'Toole | Cato Institute: Commentary: "A real bank lends money for projects that are likely to cover their costs and repay the loans. Many of the projects Mr. Obama wants the new 'bank' to fund, including high-speed rail and rail transit, will not see a single dime; they won't cover their operating costs, much less the capital costs of the projects. So much of Trannie Mae's money will have to be in the form of grants, not loans."

"For example, the Federal Transit Administration's (FTA) New Starts program gives out billions of dollars each year to rail-transit projects using supposedly clear, analytical criteria. Those criteria include 'cost effectiveness' and 'mobility improvement' ratings. However, the FTA does not require transit agencies to compare the added efficiency of rail transit with alternatives, such as bus-rapid transit or simply building new highway lanes.

As a result, decisions about New Starts funding are highly subjective and subject to meddling by lawmakers. If powerful members of Congress find that a favored project is rated low by one or more criteria, they simply exempt the project from those criteria."

Hooray, the Recession Is Over! - Robert P. Murphy - Mises Daily

Hooray, the Recession Is Over! - Robert P. Murphy - Mises Daily: "Rather, I am pointing out the virtual uselessness of the empirical approach when it comes to 'fine-tuning' the macroeconomy. Even if we had reason to believe that government policies could overcome the failings of the free market, such interventions would be as hopeless as those of an Earth surgeon operating on a Martian patient with a remote-controlled scalpel. The information lag would be enormous."

"According to the NBER, the US economy went through a severe recession from December 2007 to June 2009. Now it took the NBER until December 1, 2008 to announce that the economy was in a recession — a full year after it began (according to the same NBER). And then, with this week's announcement, the NBER announced that the economy had exited the recession, a full 15 months after the fact."

"Let's say you are running and then break a leg. You have to crawl now, but you develop that skill and are able to get from here to there. Are you in recovery from the accident? According to the NBER, yes — so long as you are crawling faster than when you first hit the ground in agony."

The Curse of Government Failure | Steve H. Hanke | Cato Institute: Commentary

The Curse of Government Failure | Steve H. Hanke | Cato Institute: Commentary: "Without the Fed pushing interest rates to artificially low levels, yield-chasing speculators, who employed carry trades and fantastic leverage, would have never seen the light of day. Yes, there were other government failures that contributed to various asset bubbles and associated instabilities in the real estate markets, for example. But, the primary enabler was the Fed and its ultra-accommodative monetary policy. Among other things, it was the Fed's monetary laxity that led to the fall of the dollar against the euro and the dramatic rise in commodity prices that climaxed in July 2008."

"$3.40 of lost output is associated with every dollar of government spending. So, the much touted fiscal multiplier is negative, not positive. This is a case — like many others in the government sphere — in which doing nothing would have been superior to doing something."

"there were over 115 government regulatory agencies for financial services before the crisis. Where were they as the Fed-induced credit mania built to a climax?"

Drop Pretension to Supremacy | Benjamin H. Friedman and Christopher Preble | Cato Institute: Commentary

Drop Pretension to Supremacy | Benjamin H. Friedman and Christopher Preble | Cato Institute: Commentary: "Hawks and defense industry trade groups say this spending is essential to U.S. security. But much of Washington's military spending is geared toward defending others and toward the dubious proposition that global stability depends on U.S. military deployments.

If our military had less to do, the Pentagon could spend less — at least $1.22 trillion less over the next 10 years, according to a Cato Institute report released Tuesday.

Washington confuses what it wants from its military (global primacy or hegemony) with what it needs (safety)."

"Making large spending cuts without reducing military commitments is a recipe for overburdening service members. Nor should Washington embrace strategic restraint just for budgetary reasons. A force reduction strategy would make sense even without deficits, however, because it could enhance security."

Foolhardy Tax Hikes | Alan Reynolds | Cato Institute: Commentary

Foolhardy Tax Hikes | Alan Reynolds | Cato Institute: Commentary: "As puny as it is, the official $34 billion estimate of the revenue from Obama's crusade against high incomes is wildly optimistic. To begin with, it fails to take into account how taxpayers would react. To make matters much worse, if there are any adverse effects on the economy at all, the net effect would be to reduce, rather than increase, federal, state, and local tax receipts in 2011. Are these risks worth taking in the foolhardy hope of paying for nine days' worth of deficit?"

Conflict-of-Interest Bugaboo | Richard W. Rahn | Cato Institute: Commentary

Conflict-of-Interest Bugaboo | Richard W. Rahn | Cato Institute: Commentary: "George Soros, who gives even more money to the Democrats and left-leaning causes, is treated as a benevolent hero. Mr. Soros made his money in financial bets against the success of government policies (i.e. shorting currencies); he was betting on economic failure and, in one case at least, with inside information. The Kochs, by contrast, have companies that produce products that are useful to people, such as carpets and paper towels. The Kochs have a vested interest in the success of the American and world economy. Too bad Mr. Soros cannot say the same."

"if you omit from your sample all of those environmental scientists who are on a government tab — salary or research grant — and those relatively few environmental scientists who are on the tab of an oil company or some other vested private industry, you are likely to have a much smaller ratio between those who agree versus those who disagree about global warming. If you are a professor at a state university and write a research paper showing that global warming is not a problem, how long do you think your government funding will remain?"

"The political class and the media decry the growth of lobbyists in Washington. Yet why is it so hard to understand that as government increasingly gives away more money and dispenses more favors, it attracts greater numbers looking for those benefits?"

More Proof We Can't Stop Poverty By Making It More Comfortable | Michael D. Tanner | Cato Institute: Commentary

More Proof We Can't Stop Poverty By Making It More Comfortable | Michael D. Tanner | Cato Institute: Commentary: "Combined, these 122 programs spent more than $591 billion in 2009, and are projected to cost even more this year.

That amounts to $14,849 for every poor man, woman and child in America. Given that the poverty line is $10,830, it would have been cheaper just to mail every poor person a check for $11,000."

"We focus far too much on making poverty more comfortable, and not enough on creating the prosperity that will get people out of poverty.

Observers have known for a long time that the surest ways to stay out of poverty are to finish school, not get pregnant outside marriage and get a job, any job, and stick with it."

"An enormous amount of evidence and experience shows that private charities are far more effective than government welfare programs.

While welfare provides incentives for counterproductive behavior, private charities can use their aid to encourage self-sufficiency, self-improvement, and independence. Private charities can individualize their approaches and target specific problems that are holding people in poverty."

Pelosi's False Tax Choice | Michael D. Tanner | Cato Institute: Commentary

Pelosi's False Tax Choice | Michael D. Tanner | Cato Institute: Commentary: "Speaker Pelosi is presenting us with a false choice: higher taxes or more debt. Spending cuts just aren't part of her lexicon."

The Empirical Case against Government Stimulus - Robert P. Murphy - Mises Daily

The Empirical Case against Government Stimulus - Robert P. Murphy - Mises Daily: "What's really amazing about the [European Central Bank] piece is that it stressed that spending cuts were a much better way of closing a budget hole than raising taxes."

"Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies."

"The anti-Keynesians point to actual success stories as evidence of the potency of their policies. The Keynesians, in contrast, point to awful economies and claim that they'd be even worse were it not for the Keynesian 'medicine.'"