You are browsing the archive for 2014 January 27.

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We Win the ‘NY Times’ Prize

January 27, 2014 in Economics

By Mises Updates

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Lew Rockwell writes in today’s Mises Daily: 

The New York Times, whistling past the financial graveyard, paused over the weekend to smear the Mises Institute, Ron Paul, our other scholars, hardcore libertarianism, and me. Why? Because our ideas and our youth movement are gaining real traction. It is in effect a compliment. They have never faced opposition like ours before, and Ron Paul’s tremendous resonance with young people has only made things worse from the Times’s point of view.

The Times wants opponents who play the game, who accept the presuppositions of the regime, and who are willing to confine themselves to the narrow range of debate to which the Times would prefer to confine the American people.

The purpose of articles like the one over the weekend, it should be unnecessary to point out, is not to shed light. It is to demonize and destroy a school of thought that the regime considers threatening.

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Source: MISES INSTITUTE

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Turning Their Backs on Sweden’s Welfare State

January 27, 2014 in Economics

By Per Bylund

800px-Flag_of_Sweden.svg

As noted by e.g. Reason.com, Yahoo! News recently reported that Swedes are increasingly turning their backs on their globally lauded utopian welfare state. While very little known, Sweden’s welfare state “worked” through the early 1970s thanks to deliberately preserving capitalist institutions and expanding its scope at a slower rate than the country’s overall economic growth. This changed in the 1970s, which necessitated several devaluations of the currency in only a few years intended to “boost” exports, and then a somewhat lost decade in the 1980s.

The welfare state finally imploded under financial problems in what can best be categorized as an economic depression in the early 1990s. The social democratic government resigned, government lost control (to the extent it ever had any), and politicians from all parties got together to enforce strict budget discipline (no deficits) and consistently cut back on the state’s generous welfare benefits. At the same time, pseudo-market forces were reintroduced through Friedmanite voucher systems, private health care was no longer prohibited, and the national pharmacy monopoly was privatized. Even Sweden’s railway traffic is now carried out largely by private companies.

Also, since 2006, Sweden has also seen relatively extensive (for being Sweden, at least) tax cuts.

Of course, these measures were necessitated by the great crisis in and around 1992 – the state does not limit its own power unless it absolutely has to. And the welfare system is still quite generous with almost-”free” health care and fully taxpayer-funded education from kindergarten through university degrees and doctorates. This is, as us Austrians have known for quite some time, unsustainable, and it has in Sweden impacted the economy as well as the morals in the country.

While Sweden has lately ”fallen” from the #1 position on the global tax rate list to #4, public spending still amounts to well over half of the country’s GDP. The national debt as a fraction of GDP, not including pensions and other liabilities, has halved over the course of the last two decades. Twenty years of reform, away from the extensive welfare state and socialist experiment, explains Sweden’s relatively strong finances in the present financial crisis. But much remains to be done.

As the Yahoo! News report shows, Swedes are fed up with their “great” public health care (which is very costly, highly qualitative, but mostly inaccessible) and gladly (and in great numbers) take advantage of the market solutions made available …read more

Source: MISES INSTITUTE

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Sen. Paul Appears on NBC's Meet the Press- January 26, 2014

January 27, 2014 in Politics & Elections

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Source: RAND PAUL

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Obama Wants to Tax the World

January 27, 2014 in Economics

By Richard W. Rahn

Richard W. Rahn

The administration and many in Congress seem to have learned nothing from the Obamacare disaster. Now that they have destroyed the world’s best health care system, they are in the process of further destroying what was at one time a very functional global financial system.

In its place, they would erect a tax law whose costs were far higher than its benefits; that may drive hundreds of billions of dollars of job-creating foreign capital out of the United States; that could trigger a global financial crisis by driving up interest rates that the U.S. government pays on its bonds; that makes it almost impossible for Americans living abroad to open bank accounts; and that violates international trading agreements that the United States has signed.

The legislation has greatly angered foreign companies and friendly foreign governments such as Canada, because it demands that they report to the Internal Revenue Service, despite being sovereign entities. It is so complex that its implementation has had to be delayed numerous times because Treasury is unable to develop workable compliance systems, and hundreds of thousands of foreign financial firms that are subject to the law also cannot figure out how to comply with ever-changing regulations.

The measure could result in sensitive personal tax and financial data being shared with foreign governments (even untrustworthy and corrupt ones, or worse), and it would violate many privacy laws and regulations and could put innocent people at risk for both their fortunes and lives.

Most Americans have never heard of the law, the Foreign Account Tax Compliance Act, which is beginning to cause the damage noted above. In essence, the act would require any financial institution (not just banks) anywhere in the entire world that has any dealings with anyone subject to U.S. tax laws to report to the U.S. government.

How any foreign financial institution could possibly know this in this age of dual citizenships and green cards is anyone’s guess.

Last week, the Republican National Committee adopted a resolution calling for repeal of the law. Predictably, the Democrats and their big-government allies immediately claimed repeal would facilitate tax evasion — even though they are unable to design an implementation scheme that would work. This is another example of mindless left-wing ideology over rationality.

The law is now slated to go into effect on July 1, despite the fact that nobody can comply — neither the governments nor financial institutions. Accordingly, there is talk of another delay, in violation of the law. …read more

Source: OP-EDS

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Sen. Rand Paul Appears on CNN's State of the Union- January 26, 2014

January 27, 2014 in Politics & Elections

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Source: RAND PAUL

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Most Americans Shrug at State of the Union Spectacle

January 27, 2014 in Economics

By Gene Healy

Gene Healy

My fellow Americans, the State of the Union is … irrelevant.

Quick: Give me a memorable line from any of President Obama’s previous five SOTUs. That’s what I thought. I couldn’t give you one offhand — and it’s my job to watch these pompous, unedifying spectacles and write about them.

In its modern form, the SOTU is a meaningless ritual that rarely even does the president — let alone the public — any good.”

The few enduring lines from past SOTUs stick out for irony value (Bill Clinton in 1996: “the era of big government is over”); because they herald a looming policy disaster (George W. Bush in 2002: “Axis of Evil”) — or for the rare outbreak of candor (Gerald Ford in 1975: “the state of the union is not good”).

But most years, the speech gets submerged in the churn of the news cycle, little noted and not long remembered. It’s unlikely that 2014 will be any different. In its modern form, the SOTU is a meaningless ritual that rarely even does the president — let alone the public — any good.

That’s bad news for a chief executive whose chief talent is speechifying. “I have a gift, Harry,” then-Sen. Obama unhumble bragged to Sen. Harry Reid, D-Nev., some years ago, in the afterglow of a well-received speech. But according to the polling data and the political science research, it’s a gift that won’t keep on giving.

“There is overwhelming evidence that presidents, even ‘great communicators,’ rarely move the public in their direction,” writes George C. Edwards III, a presidential scholar at Texas A&M University. “Going public does not work.” In a 2013 analysis of SOTU polling, Gallup found that“ most presidents have shown an average decrease in approval of one or more points between the last poll conducted before the State of the Union and the first one conducted afterward.”

As the speech has become less important, presidents’ rhetoric has grown more frantically stentorian. Presidential scholar Elvin T. Lim notes “increasing rhetorical assertiveness” and “an increasing lack of humility” in the language of the SOTU over time. Modern presidents speak more often of “reform,” while “references to (and hence concern for) the Constitution and constitutional in the annual messages have declined.”

You’d hardly imagine it from watching the speech, but the SOTU has constitutional roots, in the duty imposed on the president by Article II, sec. 3: “he shall from time to time give to …read more

Source: OP-EDS

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More Economic Freedom Is Key to U.S. Economic Success

January 27, 2014 in Economics

By James A. Dorn

James A. Dorn

The key question facing policymakers in 2014 will be how to energize the economy and lower the rate of unemployment while avoiding another financial crisis caused by asset price inflation and a misallocation of credit.

The Fed seems concerned with deflation, but the real risk is that the Fed’s bloated balance sheet, and the extraordinary run-up in the monetary base during the last five years, will begin to show up in inflationary increases in the monetary aggregates.

In an election year, policymakers will be timid in raising interest rates, so the asset bubbles that are becoming more and more obvious could grow larger.

Many of America’s problems stem from intrusive government, not from genuine free markets.”

But no one expects another 26% gain in stock prices. When, not if, longer-term rates rise, the bubbles will deflate.

If the Fed tries to inject funds to forestall the downturn, general inflation could occur, along with a rise in unemployment. Stagflation is more probable than deflation.

From a more fundamental viewpoint, the outlook for the U.S. economy depends on whether policy decisions are supportive of economic freedom. Policies that are consistent with the primacy of the market and limited government will allow individuals to pursue their happiness — and the wealth of the nation will grow along with opportunities for exchange.

The economy is a complex system that cannot be fine-tuned by government. However, sound economic policies can provide a stable institutional framework for markets to create wealth.

Long-term rules that provide for the maximum economic freedom under a rule of law protecting people’s rights to own property, trade, and reap the rewards (or bear the costs) of those trades will bring about economic and social harmony.

When government interferes with those rights, undermines the rule of law, and fails to ensure sound money and fiscal rectitude, special interests will trump limited government.

The result will be bigger government, a loss of economic freedom, and disharmony as groups vie for a larger slice of a slowing economy.

The sharp increase in the size and scope of government since the financial crisis has significantly reduced economic freedom.

For two decades (1980–2000), the U.S. was consistently in the top tier of economically free countries, ranking second in 2000 (using the Economic Freedom of the World chain-linked index, published by the Fraser Institute along with the Cato Institute and a number of other think tanks).

By 2011, the U.S. had dropped …read more

Source: OP-EDS

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Obamacare: What We Know Now

January 27, 2014 in Economics

For all intents and purposes, the Patient Protection and Affordable Care Act (ACA), also known as Obamacare, has been fully implemented. And while much of the media coverage has been dominated by the technical failures of the program’s initial rollout, we are also learning much about the impact of health care reform on employers, providers, patients, taxpayers, and individual consumers. In a new study, Cato scholar Michael D. Tanner illustrates how the law’s problems go far beyond a failed website.

…read more

Source: CATO HEADLINES