Saturday, January 12, 2019

Matt Welch On Trump's Misleading Claims On Terrorists Caught At The Border

See Trump Will Probably Lie About Immigration Tonight: The president and his administration have a long track record of basing policy on dystopian falsehoods about terrorists and criminals streaming north. Excerpt:
"On Friday, White House Spokeswoman Sarah Huckabee Sanders asserted on Fox News that "nearly 4,000 known or suspected terrorists that CPB picked up [in fiscal year 2017] came across our southern border." That assertion is both false and familiar.

During the pre-election migrant-caravan panic, Vice President Pence told a Washington Post forum that "in the last fiscal year we apprehended more than 10 terrorists or suspected terrorists per day at our southern border from countries that are referred to in the lexicon as 'other than Mexico'―that means from the Middle East region." That 10-a-day stat is a staple of administration propaganda about the southern border. And it's "eye-poppingly bogus," in the words of The Washington Post's Aaron Blake.

In fact, according to an NBC News report yesterday, "U.S. Customs and Border Protection encountered only six immigrants at ports of entry on the U.S-Mexico border in the first half of fiscal year 2018 whose names were on a federal government list of known or suspected terrorists, according to CBP data provided to Congress in May 2018." More:
Overall, 41 people on the Terrorist Screening Database were encountered at the southern border from Oct. 1, 2017, to March 31, 2018, but 35 of them were U.S. citizens or lawful permanent residents. Six were classified as non-U.S. persons.
On the northern border, CBP stopped 91 people listed in the database, including 41 who were not American citizens or residents.
Border patrol agents, separate from CBP officers, stopped five immigrants from the database between legal ports of entry over the same time period, but it was unclear from the data which ones were stopped at the northern border versus the southern border.
Further, the State Department concluded in July 2017 that there was "no credible information that any member of a terrorist group has traveled through Mexico to gain access to the United States." So where does that 10-a-day stat come from?

It seems to be the conflation of two separate numbers—the 3,755 people from the government's Known and Suspected Terrorist (KST) list who were stopped at all points of entry (mostly at airports) in fiscal 2017, and the 3,028 "special interest aliens" (SIAs) who were flagged at the southern border. So who are those eight (not 10) SIAs we're catching every day down south?

The Department of Homeland Security's own press release from yesterday trying to put the best possible gloss on recent numerical/classification controversies acknowledges that "the term SIA does not indicate any specific derogatory information about the individual," and that "[not] all SIAs are 'terrorists.'" What are they, then?
Generally, an SIA is a non-U.S. person who, based on an analysis of travel patterns, potentially poses a national security risk to the United States or its interests. Often such individuals or groups are employing travel patterns known or evaluated to possibly have a nexus to terrorism. DHS analysis includes an examination of travel patterns, points of origin, and/or travel segments that are tied to current assessments of national and international threat environments.
As The Washington Post's Salvador Rizzo reported in a useful explainer yesterday:
Alan Bersin, an assistant homeland security secretary in the Obama administration, described them in 2016 as "unauthorized migrants who arrive in the United States from, or are citizens of, several Asian, Middle Eastern, and African countries." For example, a GAO report from 2010 lists "Afghanistan, Iran, Iraq, and Pakistan" as special interest countries.
"While many citizens of these countries migrate for economic reasons or because they are fleeing persecution in their home countries, this group may include migrants who are affiliated with foreign terrorist organizations, intelligence agencies, and organized criminal syndicates," Bersin testified in March 2016. (Emphasis ours.)
Bersin also testified that "the majority of individuals that are traveling, be they from special interest alien countries or other places, we found the large majority of these individuals are actually fleeing violence from other parts of the world[."]
So we've gone from 10 "known or suspected terrorists" caught on the southern border each day to eight people who show up on a not-necessarily-terrorist watchlist, a "large majority" of whom are "actually fleeing violence." No wonder Nielsen is backpedaling behind a cloud of authoritative-sounding vagueness:
The threat is real. The number of terror-watchlisted individuals encountered at our Southern Border has increased over the last two years. The exact number is sensitive and details about these cases are extremely sensitive. But I am sure all Americans would agree that even one terrorist reaching our borders is one too many.
Those italics, contained in the source material, are a useful reminder of what Trump and his administration have really been up to: trying to spin ghastly and all-too-real criminal anecdotes into stubbornly elusive data, in order to sell impossible-to-attain zero tolerance policies that remain popular (solely) among his core base of supporters despite sacrificing the rights of U.S. citizens. Trumpian conservatism, which is the type that currently holds sway in the national GOP, apparently requires vast presidential power grabs and the obliteration of private property rights in rural Texas in order to achieve its politically unpopular goals.

Exaggerating and lying is what the unscrupulous do when they lack confidence in the persuasive power of existing facts. There's no reason not to expect more of it tonight."

Peter Suderman On Why The Government Shutdown Is No Great Libertarian Experiment

See Sorry, Paul Krugman, the Government Shutdown Is No Great Libertarian Experiment: Trump’s shutdown is a temporary, political fight that won’t save any money or reduce the size of government.
"In The New York Times, columnist Paul Krugman declares that the current government shutdown can be understood as "a big beautiful libertarian experiment." Government programs have been forced to pause, federal workers aren't being paid, the swamp of Washington is relatively quiet. Isn't this exactly what libertarians want?

Even Krugman understands that it isn't. As he acknowledges in the column, the sudden nature of a shutdown like this means private sector companies that might take over some of the federal government's current activities "don't exist now and can't be conjured up in a matter of weeks. So even true libertarians wouldn't necessarily celebrate a sudden government shutdown." To be clear: A temporary, unplanned shutdown of an undetermined length that probably won't save money is not what most libertarians have in mind when they talk about limited government.

For one thing, shutdowns like this one are shortlived and limited in scope: During the shutdown, much of the government—including automatic spending on the major entitlement programs that make up the bulk of government spending and the biggest drivers of long-term debt—remains open. And although it is at least theoretically possible that the impasse lasts for months, it increasingly looks as if President Donald Trump will declare a state of emergency, continue fighting for a border wall in the courts, and move on to ending the shutdown. So whether it lasts another two days or another two months, the rest of the government will eventually reopen. When it does, no significant long-term progress toward reducing the size of government will have been made.

Federal workers affected by the shutdown are almost certain to eventually receive backpay. That's what happened during previous shutdowns, and given that the Senate has already approved a backpay resolution for after the current shutdown ends, that's what is likely to happen this time as well.
At the same time, the federal government will, by law, owe interest on contract payments and other fiscal obligations it didn't meet during the shutdown. Which means that ultimately, the shutdown won't save taxpayers money. If anything, it might actually cost more than if the government had stayed open.

There's also public opinion to consider: Government shutdowns tend to be unpopular, and, if anything, drive support for expanding government.

Consider what happened in October 2013, when Sen. Ted Cruz (R–Texas) led a push to shut down the government over Obamacare.

The shutdown started the same day that the health law's insurance exchanges opened for business. The federal exchange system, however, crashed on launch and was barely operable for months. But initially, the shutdown drew more attention, and Obamacare, despite its obvious technical problems, actually grew more popular.

It's not too hard to imagine that keeping the government open would have led to even more intense scrutiny and criticism of the exchange failures, and stronger out-of-the-gate public disapproval. Instead, the shutdown served as a distraction. Forcing a shutdown was meant to serve as an impediment to Obamacare, but it probably made no difference, and might have been an own goal.
Which illustrates the biggest problem with shutdowns: As a tool for promoting limited government, they are nearly always tactically ineffective.

That's why I largely agree with Jeff Miron, the director of economic studies at the libertarian Cato Institute, when he writes at Vox that "shutdowns distract from the serious conversations that need to be had about fiscal reform and the size of government."

That's particularly true of this shutdown, which is happening mostly because President Trump is demanding roughly $5 billion for a border wall (sorry, "steel barrier"). The border wall is a pointless boondoggle, premised on lies, that Trump wants mainly to fulfill an insipid campaign promise. The showdown over the wall is a partisan food fight, not a way of drawing attention to the problems with a government that is too expensive and too powerful.

Yes, some libertarians might appreciate shutdowns as form of political theater, but if your goal is to actually reduce the size of government, mere theatrics won't get you very far. As Miron writes, "libertarians will only succeed in reducing the size of government when they convince non-libertarians that smaller government is better. A government shutdown does little to nothing to change minds." If anything, the opposite is true. A shutdown comes across as chaotic, and creates the opportunity for someone like Krugman to declare that this haphazard, partial government closure is a demonstration of an ideal libertarian government.

The government should be smaller on a permanent basis, ideally with public buy-in and plenty of time for everyone to prepare. A shutdown that hijacks the federal government's broken budget process so the president can make a futile attempt to fulfill a foolish and wasteful campaign promise is little more than a cheap political stunt, not a substantive libertarian victory."

Friday, January 11, 2019

High Tax Rates Won’t Work in Today’s Economy

By Chris Edwards of Cato.
"Rep. Alexandria Ocasio-Cortez is making headlines calling for raising the top individual income tax rate to 70 percent to fund a Green New Deal. Sympathetic commentators are saying that such a high rate on the wealthy is no big deal because the top tax rate used to be 70 percent and above. Noah Smith at Bloomberg says the congresswomen’s plan would be “a return to the 20th century norm.”
The problem is that globalization has dramatically changed the economy over recent decades. High tax rates were not a good idea back then, but they would be disastrous now.

Before the 1980s, capital controls under fixed currency exchange rate regimes kept money bottled up within countries, keeping taxpayers in national economic prisons. That regime broke down, and today trillions of dollars flows over borders under flexible exchange rate systems, while industries and entrepreneurs have become highly mobile. Tax bases are far too movable these days for governments to sustain yesteryear’s excessive tax rates, as I discuss in Global Tax Revolution.

Every industrial country has figured that out, and their policy decisions refute the soak-the-rich tax dreaming of Rep. Ocasio-Cortez. Top income rates have plunged around the world since 1980 under governments of both the political left and right.

The chart shows the average top federal-state income tax rate for 26 core OECD countries that have good data back to 1980. The average top rate among these high-income nations fell from 68 percent in 1980 to 47 percent today. The average rate for all 35 OECD countries today is 43 percent. The top U.S. federal-state tax rate at 46 percent in 2017 was above the OECD average. The recent GOP tax cut dropped the top federal rate a few points, but raised the effective state rate by capping deductibility. On individual income taxes, America is not a low rate country.

The 26 countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States. Data for 2000-2017 from the OECD. Data for 1980-1995 from Global Tax Revolution."

Why Ocasio-Cortez's 70% Marginal Tax Rate Wouldn't Generate the Revenue She Thinks

By Daniel J. Mitchell. Excerpt:
"First, this approach isn’t practical, even from a left-wing perspective. Simply stated, upper-income taxpayers have considerable control over the timing, level, and composition of their income, and they can take very simple (and completely legal) steps to protect their money as tax rates increase.
This is one of the reasons why higher tax rates don’t translate into higher tax revenue.

If you don’t believe me, check out the IRS data on what happened in the 1980s when Reagan dropped the top tax rate from 70 percent to 28 percent. Revenues from those making more than $200,000 quintupled.

Ms. Ocasio-Cortez wants to run that experiment in reverse. That won’t end well (assuming, of course, that her goal is collecting more revenue, which may not be the case)."

New World Bank Study Shows the Economic Damage High Income Tax Rates Cause

The new analysis notes that higher tax rates are the wrong way to address fiscal shortfalls

By Daniel J. Mitchell. Excerpt:
"I was very interested to see a new study on this topic from the World Bank. It starts by noting that higher tax rates are the wrong way to address fiscal shortfalls:
…studies have used the narrative approach for individual or multi-country analyses (in all cases, focusing solely on industrial economies, and mostly on industrial European countries). These studies find large negative tax multipliers, ranging between 2 and 5. This recent consensus pointing to large negative tax multipliers, especially in industrial European countries, naturally entails important policy prescriptions. For example, as part of a more comprehensive series of papers focusing on spending and tax multipliers, Alesina, Favero, and Giavazzi (2015) point that policies based upon spending cuts are much less costly in terms of short run output losses than tax based adjustments.
The four authors used data on value-added taxes to investigate whether higher tax rates did more damage or less damage in developing nations:
A natural question is whether large negative tax multipliers are a robust empirical regularity… In order to answer this highly relevant academic and policy question, one would ideally need to conduct a study using a more global sample including industrial and, particularly, developing countries. …This paper takes on this challenge by focusing on 51 countries (21 industrial and 30 developing) for the period 1970-2014. …we focus our efforts on building a new series for quarterly standard value-added tax rates (henceforth VAT rates). …We identify a total of 96 VAT rate changes in 35 countries (18 industrial and 17 developing).
The economists found that VAT increases did the most damage in developing nations:
…when splitting the sample into industrial European economies and the rest of countries, we find tax multipliers of 3:6 and 1:2, respectively. While the tax multiplier in industrial European economies is quite negative and statistically significant (in line with recent studies), it is about 3 times smaller (in absolute value) and borderline statistically significant for the rest of countries.
Here’s a chart showing the comparison:

Now here’s the part that merits close attention. The study confirms that the deadweight loss of VAT hikes is higher in developed nations because the initial tax burden is higher:
Based on different types of macroeconomic models (which in turn rely on different mechanisms), the output effect of tax changes is expected to be small at low initial levels of taxation but exponentially larger when initial tax levels are high. Therefore, the distortions and disincentives imposed by taxation on economic activity are directly, and non-linearly, related to the level of tax rates. By the same token, for a given level of initial tax rates, larger tax rate changes have larger tax multipliers. …In line with theoretical distortionary and disincentive-based arguments, we find, using our novel worldwide narrative, that the effect of tax changes on output is indeed highly non-linear. Our empirical findings show that the tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and more negative as the initial tax rate and the size of the change in the tax rate increase. …This evidence strongly supports distortionary and disincentive-based arguments regarding a nonlinear effect of tax rate changes on economic activity…the economy will inevitably suffer when taxes are increased at higher initial tax rate levels."

Thursday, January 10, 2019

Despite the stereotype of heavy European income taxes on the rich, Paris relies disproportionately on social-insurance, payroll and property taxes

See WSJ editorial All the Taxes in France Even before the fuel tax, France had the highest burden in the West. Excerpts:
"The Organization for Economic Cooperation and Development (OECD) released its annual Revenue Statistics report this week, and France topped the charts, with a tax take equal to 46.2% of GDP in 2017. That’s more than Denmark (46%), Sweden (44%) and Germany (37.5%), and far more than the OECD average (34.2%) or the U.S. (27.1%, which includes all levels of government).

France doesn’t collect that revenue in the ways you might think. Despite the stereotype of heavy European income taxes on the rich, Paris relies disproportionately on social-insurance, payroll and property taxes. Social taxes account for 37% of French revenue; the OECD average is 26%. Payroll and property taxes contribute 3% and 9%, compared to the OECD averages of 1% and 6%.

This is another reminder that rapacious states can’t support themselves solely with progressive income taxes. The rich aren’t rich enough to fund the modern welfare state’s ambitions, and their labor and wealth are too mobile to pin down in high-tax jurisdictions. The real money is in the middle class, whose labor income is far easier to tax, especially if the tax is disguised as a social “contribution.”

Then Europe adds a regressive consumption tax, the value-added tax. In France, VAT and other consumption taxes make up 24% of revenue, and that’s on the low side compared to an OECD average of 33%. Consumption taxes often fall hardest on the poor and middle class, who devote a greater proportion of their income to consumption."

"Increases in charges on gasoline and diesel clobber the same rural and exurban French who already pay in so many other ways."

"Mr. Macron may now cave by re-imposing a wealth tax he killed last year. The tax helps drive productive French out of the country, though it raised only some €5 billion a year, compared to the €372 billion Paris raised via social taxes in 2016."

Tyler Cowen On 70% Tax Rates

See The Democrats’ Latest Idea on Taxes Will Only Help Trump: A top marginal income tax rate of 70 percent is bad economics and even worse politics. Excerpts:
"Let’s consider the economics of such a tax reform. Most of the income of America’s super-wealthy comes not from labor but from capital. It can be earned through capital gains, exercising stock options, and from corporations with possible foreign domiciles. Raising the marginal income tax rate to 70 percent will not, for better or worse, squeeze them very much.

Who then is most likely to pay more? Well, it depends on exactly which income level the higher rate would set in. But say you had a 70 percent rate at $500,000 and above. The biggest losers would be high-earning professionals in major cities and suburbs. Think doctors, lawyers, business consultants and the like, mostly on the coasts. A lot of those people live in blue states and are highly educated. More and more of them are educated women. All of these groups tend to be strongly anti-Trump, often passionately so.

And they are not just voters, they are donors, fundraisers, organizers and prominent voices in their communities. Some of them are even columnists for newspapers and web sites, or TV pundits. In essence, the Democrats would be giving some of their most influential supporters a huge pay cut. The party also would be telling them they can’t ever hope to build up much of a financial cushion for the future.

You might think this is all fair compared to what the government does to address the travails of a single mother trying to get by on $27,000 a year. But I don’t think that message will be especially well-received.

Keep in mind the 70 percent marginal tax rate is on the federal level. If you live in, say, California, the maximum state income tax rate is over 12 percent, which could increase your total marginal rate to more than 82 percent. (Just imagine if the 12 percent were added to an 80 percent marginal income tax rate.) If you then consider that some cities have income taxes, and the effect of sales taxes, then the true marginal rates go higher yet."

"By the way, you might be tempted to boost taxes on capital income too, or maybe instead of hitting the high-income professionals. But keep in mind that a lot of capital is internationally mobile, and the social democracies of Western Europe typically have low tax rates on capital income. (They tend to fund their additional expenditures through value-added taxes.) “Soak the rich,” however easy it may sound, doesn’t automatically make the government more just or responsible. Finally, Democrats should remember this: Their last president proposed cutting the corporate tax rate to 28 percent."