Albert Jay Nock famously said that it’s our enemy. (At least, it’s the enemy of those who want to live in peace and wouldn’t think of aggression against others.) Today’s Freeman piece takes an excerpt from his great book.
Our friend Bob Smith writes here in praise of a Wilmington Star editorial about the very elevated pay levels of some state government officials, who earn much more than they would if they had to work in private industry doing the same work — distributing alcoholic beverages.
This is why many people like expansive government. It gives the lucky ones high paying, secure jobs paid for by taxpayers. As Murray Rothbard used to point out, the real class warfare isn’t between labor and capitalists, but between tax consumers and tax payers.
The IRS could issue nearly $2.3 billion in fraudulent tax returns to individuals who forge tax identification numbers each year, according to the Treasury Inspector General for Tax Administration (TIGTA).
An audit released on Thursday found that the tax agency routinely issues refunds to business accounts with fabricated Employer Identification Numbers (EINs).
“Perpetrators of fraud are using stolen or falsely obtained EINs to submit tax returns with false income and withholding documents to the IRS for the sole purpose of receiving a fraudulent tax refund,” TIGTA said.
The audit identified 285,670 stolen or falsely obtained EINs that were used for 767,071 tax returns in 2011. As a result, a total of $2,273,177,371 in potentially fraudulent refunds were dispensed that year.
“Based on our analysis we estimate that the IRS could issue approximately $11.4 billion in fraudulent refunds over the next five years because of stolen and falsely obtained EINs,” TIGTA said.
A federal judge’s ruling yesterday that Detroit worker pensions can be cut as part of the city’s bankruptcy case has angered city workers and shocked some of their supporters. Workers carrying signs outside the federal bankruptcy court yesterday blamed big banks for Detroit’s fiscal woes and demanded, “No cuts to our pensions.” They carried photos of Michigan governor Rick Snyder, painted to make him look like the devil. But if workers seek a culprit, they might look at the city’s pension-system trustees and the unions that were supposed to have influence over them. For years, the trustees granted annual bonuses to retirees and fattened worker-savings accounts with high guaranteed rates of return, siphoning crucial assets out of the retirement system, even as Detroit’s finances deteriorated. By one estimate, reported in the Detroit Free Press in September, the bonuses and guaranteed-interest programs cost the pension funds nearly $2 billion in contributions and foregone investment returns—money that might have made the pension system well-funded today and allowed retirement benefits to remain untouched.
Most press accounts note that city-worker pensions in Detroit are modest. They rarely mention that, for two decades, the city supplemented those pensions with annual, so-called “13th checks” for retirees—an additional monthly pension payment. Pension-fund trustees—themselves city workers, retirees, city residents, and elected officials—handed out nearly $1 billion in these annual payments to retirees in the city’s general pension fund. The trustees defended the payments as rewards to workers in years when the pension system’s investment returns exceeded projections. In lean years, they justified them as social policy. “Many retirees relied on that check to pay their increased utility bills during the winter,” wrote an attorney for the city’s pension system in 2011. “Also remember that the money would go directly into the local economy.”
Some reform-minded Detroit officials tried to halt the payments, understanding that they undermined the pension system’s finances. When he succeeded Coleman Young as mayor in 1994, Dennis Archer grew alarmed at the extra payments. He was rightfully concerned—as the Free Press noted, the pension system “was largely controlled by union officials acting as trustees.” Archer placed a voter initiative on the ballot in 1996 to cease the extra payments, but ferocious union opposition helped defeat it. “That’s a whole lot of money that if it was in the pension fund today, that may have made a difference in terms of where the pension fund stands,” Archer recently said.
Astoundingly, the 13th checks continued even after the city borrowed $1.44 billion in 2005 to plug a funding hole. Even today, the city’s unions are pursuing legal action to restore the bonus checks.
Obama wasn’t just giving a warning, he was also teaching a partisan, progressive, left-wing history lesson. As he sees it, these toxic trends have been slowly poisoning the US economy and the American Dream for decades. The pro-market or “neoliberal” turn in the nation’s economic policy — tax cuts, deregulation — that started in the late 1970s was, according the president, a big mistake that made rich people even richer and little else.
But much of Obama’s argument is either dubious, deceptive, or demonstrably false. Let’s start with his “fundamental threat” claim. Is Team Obama aware of a 2009 study by researchers Dan Andrews, Christopher Jencks and Andrew Leigh that finds “no systematic relationship between top income shares and economic growth” in advanced economies. Actually, more inequality is associated with higher GDP growth, according to the analysis.
Let’s move on. Obama:”Since 1979, when I graduated from high school, our productivity is up by more than 90 percent, but the income of the typical family has increased by less than 8 percent.”
Reality check: Obama grossly overstates the productivity-income gap, and the middle-class stagnation argument is a myth. According to the Congressional Budget Office, for the 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income — meaning after federal taxes have been deducted and government transfers including Social Security and unemployment insurance have been added – was just under 40% from 1979 through 2007, the end of the last business cycle. The CBO numbers sync well with those of Cornell University’s Richard Burkhauser who finds that mean income growth — also taking into a account a broader measure of income — for the middle 20% rose by 37% from 1979 through 2007. And research by the University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan find accounting properly for inflation shows median incomes have gone up by about 50% since 1980.
But there’s so much more. Obama claims that starting in the late 1970s, “businesses lobbied Washington to weaken unions and the value of the minimum wage. As the trickle-down ideology became more prominent, taxes were slashes for the wealthiest while investments in things that make us all richer, like schools and infrastructure, were allowed to wither.”
Really? Union membership as a share of total employed peaked in 1954 not the late 1970s, according to the Cleveland Fed. Most Americans in 2010 — not just the rich — paid far less in total taxes — federal, state and local — than they would have paid 30 years ago, according to an analysis by The New York Times. And a 2011 study by Marco Percoco, a professor at Bocconi University in Italy, shows US. public investment has tracked the OECD average since at least 1970, according to Bloomberg. And when a proper inflation adjustment is used, the current minimum of $7.25 is just a nickel below the average from 1960 to 1980.
Here’s Obama aiming his comments at young people this Wednesday: “The product is good. It’s affordable. This is a big deal, to quote Joe Biden. And if you’re a student-body president, set up a conference on campus. If you’re a bartender, have a happy hour.”
But it’s the president who may need a drink after viewing the latest poll numbers on young people’s attitudes towards Obamacare. At the heart of the health-care law is the following premise: Enough young and healthy people will sign up for new health insurance through the government’s excuse for a website to provide enough income for insurance companies so the planned subsidies to older and sicker uninsured people can keep flowing. …
… Obama’s most pressing problem is that young people aren’t buying into his sales pitch. A new Harvard University Institute of Politics poll of those under 30 years of age has devastating news for Obamacare.
Only 29 percent of uninsured young people say they will definitely (13 percent) or likely (16 percent) enroll in new plans via the exchanges. Despite an avalanche of public-service ads, thousands of “navigators” — glorified sales reps — recruited from Obama-friendly nonprofits, and numerous celebrity endorsements, the product isn’t moving.
The Harvard study found that the president’s job approval among young people is down to 41 percent. A full 57 percent of young people now oppose Obamacare, with those believing it will lower the quality of health care outnumbering those who think it will improve the quality by more than two to one.
North Carolina legislators adopted a number of reforms in 2013 favored by conservative icons such as Ronald Reagan, Barry Goldwater, and Milton Friedman. John Hood discusses those reforms during the next edition of Carolina Journal Radio.
Sarah Curry discusses her recent research into North Carolina’s state government spending growth, while Roy Cordato critiques N.C. Commerce Secretary Sharon Decker’s comments about the state’s need to provide targeted tax incentives to seal major economic development deals.
You’ll hear a defense of free-market principles from the Rev. Robert Sirico, head of the Acton Institute. And you’ll hear highlights from a legislative debate about a recent trip to Colorado designed to highlight one county’s approach to a range of school-choice options.
This week’s Carolina Journal Online Friday interview features Donna Martinez’s conversation with Jane Shaw of the Pope Center for Higher Education Policy about a proposal to assign colleges and universities more responsibility for their students’ loan defaults.
Katherine Restrepo’s Daily Journal probes the Affordable Care Act’s questionable definition of “affordable.”