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Increasing Economic Growth Means Shrinking the Size and Scope of Government

December 15, 2014 in Economics

By James A. Dorn

James A. Dorn

There is a growing body of evidence that bigger government means slower growth of real GDP. Once the level of total government spending as a percentage of GDP reaches a tipping point, estimated to be from 15 percent to 25 percent of GDP, additional expansion crowds out private productive investment and slows economic growth. When government overreaches, economic freedom is diminished and private exchange opportunities are lost — that is, the range of choices open to individuals is restricted.

In a pioneering study of the link between the growth of government and the wealth of nations, which appeared in the fall 1998 issue of the Cato Journal, economists James Gwartney, Randall Holcombe, and Robert Lawson found that a 10 percentage point increase in government spending as a percentage of GDP decreases real GDP growth by 1 percentage point. Thus, if government spending went from 25 percent of GDP to 35 percent, real GDP growth would slow over the longer term by a full percentage point. They also found that a 10 percentage point increase in the government’s share of GDP lowered private investment by 1.6 percentage points.

One of the key findings of their study was that secure property rights — which includes a legal system that protects persons and property, enforces contracts, and  limits the power of government by a just rule of law — play an important role in promoting economic growth.

The positive relationship between property rights and economic growth was developed more fully by the late Bernhard Heitger, an economist at the Kiel Institute for World Economics, in his path-breaking article in the Cato Journal. In that article, Heitger distinguished between proximate and ultimate determinants of economic growth. The former are well known: additions to physical and human capital and technological progress (also known as total factor productivity). But Heitger was interested in the question of what drives capital accumulation and innovation. His answer: the structure of property rights and the associated incentives.

Conventional growth theory took private property rights and incentives as givens. Heitger rigorously showed that private property rights and the rule of law are the ultimate sources of economic growth and the wealth of nations. Well-defined private property rights improve efficiency and increase per capita income. In turn, as a nation grows richer, people demand stronger protection of their property rights — advancing institutional change.

To move up the …read more

Source: OP-EDS

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Sen. Rand Paul Appears on Fox's Hannity – December 13, 2014

December 15, 2014 in Politics & Elections

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Source: RAND PAUL

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Sen. Paul Statement on the Passing of Marshall County Judge-Executive Mike Miller

December 15, 2014 in Politics & Elections

WASHINGTON, D.C. – Sen. Rand Paul issued the following the statement upon the passing of Marshall County Judge-Executive Mike Miller: ‘I am deeply saddened at the passing of Marshall County Judge-Executive Mike Miller. Mike was a dedicated public servant who spent 40 years of his life serving the community he loved as county judge-executive. Mike and I worked well together over the past few years, despite being from different political parties. Kelley and I offer our condolences and prayers to Chyrill and the Miller family.’
### …read more

Source: RAND PAUL

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Final Year-End Federal Spending Bill Prohibits Justice Department from Undermining State Medical Marijuana and Hemp Laws

December 15, 2014 in PERSONAL LIBERTY

By drosenfeld

Spending Bill Allows Legalization of Marijuana Possession in Washington, D.C. to Move Forward, but Prevents Taxing and Regulating Marijuana like Alcohol

Momentum Builds Nationally to End the Failed War on Drugs

WASHINGTON, D.C. – The final “cromnibus” federal spending bill that Congress passed over the weekend contains historic language prohibiting the U.S. Justice Department from spending any money to undermine state medical marijuana laws.

December 15, 2014

Drug Policy Alliance

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Source: DRUG POLICY

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WATCH: Ohio Detective Threatens John Crawford's Sobbing Girlfriend with Jail after Cop Shot Crawford Dead

December 15, 2014 in Blogs

By Jon Swaine, The Guardian

The callousness towards this grieving, shocked woman is horrifying.


Police aggressively questioned the tearful girlfriend of a young black man they had just shot dead as he held a BB gun in an Ohio supermarket – accusing her of lying, threatening her with jail, and suggesting that she was high on drugs.

Tasha Thomas was reduced to swearing on the lives of her relatives that John Crawford III had not been carrying a firearm when they entered the Walmart in Beavercreek, near Dayton, to buy crackers, marshmallows and chocolate bars on the evening of 5 August.

“You lie to me and you might be on your way to jail,” detective Rodney Curd told Thomas, as she wept and repeatedly offered to take a lie-detector test. After more than an hour and a half of questioning and statement-taking, Curd finally told Thomas that Crawford, 22, had died. 

“As a result of his actions, he is gone,” said the detective, as she slumped in her chair and cried.

Crawford had been shot by police officer Sean Williams, after a customer called 911 and claimed the 22-year-old was pointing a gun at passersby. Surveillance footage released later showed Crawford picking up the BB rifle from a shelf, wandering the aisles and occasionally swinging the gun at his side while he spoke on his cellphone to his ex-girlfriend.

A 94-minute police video recording, released to the Guardian by the office of Mike DeWine, the Ohio attorney general, in response to a public records request, shows Thomas, 26, being interviewed by Curd after she was driven from Walmart to the Beavercreek police department. Curd later told investigators he had not yet been told Crawford only had a BB gun that had been on sale at the store.

Curd promptly asked Thomas whether she and Crawford had criminal records. Already tearful and breathless, Thomas explained that she may have had some traffic offences and had been arrested for petty theft as a juvenile.

The …read more

Source: ALTERNET

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Socialist Policies Undoing Success of South America's Strongest Economy

December 15, 2014 in Economics

By Richard W. Rahn

Richard W. Rahn

Why do very successful nations often adopt policies that lead to their undoing? After a revolution or major reform, some countries allow a high degree of economic freedom, establish the rule of law, protect private property rights and establish low tax rates with strict limits on government spending and regulation. The economy takes off, the citizens become far richer and then the government mucks it up, usually by attempting to redistribute income and expand state control.

Is Chile, which has been one of the bright spots in the world economy, falling into this pattern under socialist President Michelle Bachelet?

For the past three decades, Chile has outperformed the other South American countries and now has the highest per-capita income in South America, averaging approximately $22,000 per year on a purchasing power parity basis. The World Bank lists Chile as a “developed economy,” and it was the first Latin American country to become a member of the Organization for Economic Cooperation and Development. The average Chilean has a per capita income about three times higher than in 1983. Ian Vasquez, director of the Center for Global Liberty and Prosperity at the Cato Institute, recently noted that in Chile, “all welfare indicators have risen like no other part of Latin America. Chile is not only a star in Latin America, but has been a star in terms of development around the world.”

What is happening in Chile is neither surprising nor new.”

Chile began its march to success after the overthrow of Marxist Salvador Allende in 1973 by Gen. Augusto Pinochet. Allende nationalized many companies, including the copper industry. Inflation reached 140 percent, and the economy was sinking. Pinochet had little understanding of economics when he seized power, and after flailing about, he hired a group of free market economists collectively known as the “Chicago Boys.”

The Chicago Boys began to free up the economy by removing many of the tax, regulatory, trade and other impediments to growth imposed by the socialists. According to the Annual Index of Economic Freedom in 1970, Chile had the least-free economy among those rated. By the early 1980s, Chile moved into the top half of the ranking, and by 2008 it was ranked as the fifth-freest economy in the world. Its ranking has slipped modestly in the past several years. In 2012, the latest year available, it was ranked as No. 10. Chile has been politically and economically stable, with governments swinging back and forth from moderate right to moderate left since the full restoration of …read more

Source: OP-EDS

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The Cromnibus: The Good, the Bad, and the Ugly

December 15, 2014 in Economics

By Nicole Kaeding

Nicole Kaeding

This week, House and Senate negotiators released the legislative text for the government’s newest spending bill, dubbed the “Cromnibus.” The bill authorizes the government to spend $1.1 trillion on discretionary programs between now and September 30, 2015. The total spending level honors last year’s Ryan-Murray budget deal, and also makes a number of important changes to federal law. Since hardly anybody has time to read all 1,600 pages of this massive legislation, here is the good, the bad, and the ugly.

The Good:

The Cromnibus includes multiple provisions that should be applauded. For example, two controversial federal agencies had their budgets dramatically cut. Funding for the Environmental Protection Agency (EPA) was cut by $60 million, continuing a steady trend in reductions since 2010, and the IRS’s budget is cut by $345.6 million.

The bill does not cut funding for ObamaCare implementation, but it also does not include any new funding to the Department of Health and Human Services and the IRS, the two agencies with primary implementation responsibilities. More importantly, the bill limits ObamaCare’s risk corridor provision, which provides a bailout to insurance companies who experienced greater-than-anticipated losses from new ObamaCare enrollees.

Congress’ Cromnibus spends too much money, including its $1.1 trillion in discretionary spending and $64 billion in funding for military operations.”

Finally, the federal moratorium on internet taxes is extended for one year.  In 1998, Congress passed a law making it illegal for federal, state, or local governments to impose taxes on internet access, such as bandwidth or email taxes. Analysis from the American Action Forum estimated that if the moratorium lapsed, American taxpayers would pay $15 billion a year in new taxes. While extending the moratorium another year is good news, the incoming Congress should make it permanent.

The Bad:

Last December, House Budget Chairman Paul Ryan (R-Wis.) and Senate Budget Chairman Patty Murray (D-Wash.) agreed to a deal that set fiscal year 2015 spending levels at $1.1 trillion. The Cromnibus honors those spending levels. It’s rare that Congress actually honors its promises, but there is good reason to curb your enthusiasm. The Ryan-Murray deal increased spending for this year by $18 billion from a prior deal made in 2011 by Congress and the president. It’s encouraging that Congress honors its commitment from last year, but given our dire fiscal straits, they should have been able to maintain spending levels agreed to just three years ago.

The …read more

Source: OP-EDS

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Burma Enjoys an Uneasy Peace: Time to Close Thailand's Refugee Camps?

December 15, 2014 in Economics

By Doug Bandow

Doug Bandow

Trees give way to primitive wooden homes in the rolling hills approaching Mae La refugee camp on Thailand’s border with Burma. Access is controlled by the Thai army. The largest camp in Thailand, Mae La, holds 50,000 refugees. Some residents have spent their entire lives within Mae La’s confines.

Burma, also known as Myanmar, has been at war most of its history. A British colony occupied by Japan during World War II, Burma gained its independence shortly after that conflict ended. But the new government refused to grant the autonomy promised the nation’s many ethnic groups. War erupted.

Although the bloodiest and most tragic aspect of Burma’s history, the fragmented civil war has been overshadowed by the democracy struggle centered in Rangoon. In 1962 the superstitious Gen. Ne Win overthrew his country’s young democracy. The junta changed shape over the years, with his eventual ouster, but the generals refused to relax their bloody grip.

Democracy protests were brutally suppressed in 1988; two years later the junta foolishly held an election, decisively won by Aung San Suu Kyi’s National League for Democracy. The regime refused to recognize the results and reinforced its repressive rule, placing Suu Kyi, who received the Nobel Peace Prize in 1991, under long-term house arrest. But three years ago the generals moved into the background and yielded authority to a new nominally civilian leadership. The reform process has since slowed if not stalled.

A return would be an improvement for countless thousands with no future.”

As the regime was liberalizing politically it initiated a series of ceasefires with the various ethnic groups. Today 14 agreements are in force; only the Kachin and Palaung remain formally at war with the central government, now based in Naypyitaw.

The resulting peace is real but imperfect—besides fighting with the Kachin there recently has been some combat in the Shan State. (Violence also has erupted against the Islamic Rohingya, but the conflict is mostly civilian and sectarian.) The process of reaching a nation-wide ceasefire is only slowly moving forward. In August the central government’s Union Peace Working Committee (UPWC) met with the 16 ethnic groups’ National Ceasefire Coordination Team (NCCT) to discuss such issues as location of military forces, creation of a joint peacekeeping personnel, and refugee resettlement. While the Thein Sein government appears genuinely committed to peace, the Burmese military’s support seems less complete.

Addressing the status of those displaced by the …read more

Source: OP-EDS

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Paul Krugman Reveals Why Congress' Wall Street Giveaway Is a Catastrophe in the Making

December 15, 2014 in Blogs

By Janet Allon, AlterNet

The financial industry bought a Congress and is reaping great returns already.


“The Masters of the Universe, it turns out, are a bunch of whiners,” Paul Krugman writes in his Monday column decrying Congress's recent Wall Street giveaway. “But they’re whiners with war chests, and now they’ve bought themselves a Congress.” 

There was a time, not so very long ago when the securities and investment industry, unlike other industries like coal, gave large donations to both parties more or less equally, Krugman recounts. But all that changed in 2010, when “financial tycoons went ballistic over the president’s suggestion that some bankers helped cause the financial crisis.” Specifically, they were mad about the Dodd-Frank reform, which limited some of their high-flying financial antics. Ever since then, Wall Street has been in an “Obama rage,” and invested heavily in Republican candidates.

Last week, they got a good return on that investment, Krugman writes, and a totally indefensible one with one of the provisions in the budget bill. “The incoming congressional majority has revealed its agenda — and it’s all about rewarding bad actors,” Krugman writes.

He helpfully explains the provision:

One of the goals of financial reform was to stop banks from taking big risks with depositors’ money. Why? Well, bank deposits are insured against loss, and this creates a well-known problem of “moral hazard”: If banks are free to gamble, they can play a game of heads we win, tails the taxpayers lose. That’s what happened after savings-and-loan institutions were deregulated in the 1980s, and promptly ran wild.

Dodd-Frank tried to limit this kind of moral hazard in various ways, including a rule barring insured institutions from dealing in exotic securities, the kind that played such a big role in the financial crisis. And that’s the rule that has just been rolled back.

Yupp. Indefensible.

Still, on the rapidly dimming bright side, Krugman does not think this provision in itself is the death-blow to financial reform. The crisis of 2008 was caused more by uninsured financial institutions like Lehman Brothers and A.I.G. “The really important parts of reform involve consumer protection …read more

Source: ALTERNET

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A Primer on Compromise for Libertarians

December 15, 2014 in Blogs

By Robin Koerner

“If a house is divided against itself, that house will not be able to stand.” – Mark 3:25
“Politics at its purest is philosophy in action” – Margaret Thatcher
“Every difference of opinion is not a difference of principle.” – Thomas Jefferson

Whereas to many outside the liberty movement, including the mainstream media, politicians like Rand Paul seem quite libertarian, many Americans who actually call themselves “libertarians” seem to despise Rand Paul for not being libertarian enough in various areas, and so they call him a “neo-con” or a “shill” or similar.

To other libertarians, Rand Paul is exciting not only because he’s standing up for important pro-liberty and pro-Constitutional positions but also because he’s getting significant parts of the libertarian message into the mainstream, and doing it in a way that isn’t making everyone roll their eyes and marginalize him as some kind of a kook. The latter may be his most important work because culture drives politics, and cultural change is what makes political change stick.

Among the latter subset of liberty-lovers, there is some frustration in the perception that as a movement, we actively refuse to make the best of every opportunity (and goodness knows we have so few of them) to move the dials of the cultural and political mainstream toward liberty.

Like it or not, it is almost impossible to discuss political effectiveness without an understanding of the nature of compromise. Speaking as an insider of the liberty movement, I believe we have a particularly uncomfortable relationship with it, which we must examine if we are going to cease to be political outsiders.

A good way in to the topic is to consider the sentiment, felt by so many of us who realize that both sides of the political duopoly (or monopoly disguised as a duopoly) are responsible for the destruction of our liberty: “I’m sick of supporting the lesser of two evils.”

What does that really mean? For a libertarian, liberty is the direction of the Good, and tyranny is the direction of evil. In a complex society of competing interests, and especially in politics, you almost never get to move directly toward where you want to go (your version of the Good). Imagine it on a diagram. Draw a line from where we are to where we want to be: we are …read more

Source: ROBIN KOERNER BLOG