I Need a Balanced Budget, Stat!

Dr. Alan Parks, MD, is the founder of Americans for a Balanced Budget Amendment. He sent me an e-mail notifying me of his new website. I perused for a bit, and found it worth mentioning. He's already gathered an endorsement from noted personal finance guru Dave Ramsey.

Dr. Parks ran across this post of mine in support of a balanced budget amendment. I tend to channel William Buckley when I'm emotional, as my vocabulary soars above my standard typo ridden fare. Looking back at it, I'm still pleased with it.

At any rate, check out Americans for a Balanced Budget Amendment, and lend your support.

China Is Getting Wary of Lending to the U.S.

This Bloomberg article is a bit of disconcerting news.

China’s Premier Wen ‘Worried’ on Safety of Treasuries

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

U.S. President Barack Obama is relying on China to sustain buying of Treasuries as his administration sells record amounts of debt to fund a $787 billion economic-stimulus package. Chinese investors have lost money on the securities so far this year, after increasing their holdings 46 percent to $696 billion in 2008, according to Treasury Department data.

“China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,” said Phil Deans, a professor of international affairs at Temple University in Tokyo. “If China stops buying where does Obama’s borrowing to fund his stimulus come from?”
…
“China is worried that the U.S. may solve its problems by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

Some States Are Getting Screwed by the Stimulus

The Wall Street Journal released a cool map today that shows how much money per capita is going to each state. One might think that Congress would divy up the money based on how bad the recession was in individual states, but you would be wrong.

Which state is getting the most money per capita? Utah! The same Utah that is currently enjoying an unemployment rate of 4.3%, better than 45 other states.

What about Utah's neighboring state of Nevada with it's unemployment rate of 9.1% (5th worst in the country)? It will receive the 3rd LEAST amount of money. Odd how a Republican state is getting the lion's share (and voted No), but Senate Majority Leader Harry Reid's state is getting screwed.

How about North Dakota with it's 3.5% unemployment? Well, it's getting the 3rd MOST amount of money. Surely, Florida, with it's skyrocketing unemployment (up from 4.9% to 8.1% in just 9 months) is getting it's fair share? Don't be silly, it's getting the least!

Let's dig a little deeper and find where the vaunted "Infrastructure investments" are going. One would think that infrastructure spending would go to states with large population growth rates to accomodate future needs. Using the WSJ map, you can toggle and see where that money is going. Of course, one would be wrong!

Which states are getting the largest proportional "investment" in their infrastructure? The booming populations of Wyoming and North Dakota! You know North Dakota, it's the one with fewer people now than in the 1930's.

Surely, one of these fast growing states is nearer the top: Florida, Nevada, Arizona, Utah, Colorado and North Carolina. No, these are actually the bottom 6! Or perhaps California with it's notorious congestion? No, it's the 7th least! How about fast growing Texas? No, it's the 10th least.

Looking at the map, it is generally states with the lowest population growth rates getting the most money per capita: The Great Plains, the Northeast, Alaska, Arkansas, Oklahoma...

Thank goodness we have the brightest minds dishing out this money.

Maybe House Republicans are Starting to Get It

The stimulus passed the House, but...

From Bloomberg:

Obama had traveled to Capitol Hill earlier this week to personally lobby for Republican support for the stimulus bill, an effort that included a private session with the party’s House members. He failed to win any converts. In yesterday’s vote, all of the 244 “yes” votes came from Democrats. Voting “no” were 177 Republicans and 11 Democrats.

Not a single Republican voted for the stimulus. Good job guys!

Bailout Backlash

We're mad as hell, and we're not going to take it any more!

This weekend I watched Mitt Romney on one of the Sunday political shows. He gives lips service to free markets and then turns around and spends half his time talking about how we need a stimulus. Not the $1T spending style, but one mixed with spending and tax cuts. We've seen a number of moderate Republicans duck their heads and acquiesce to massive government intervention. Why? Because they are afraid. They haven't taken the time to properly educate themselves on economics, so they just want to look busy until it blows over.

If Republicans want to revive their influence, they have to take a stand. They have to start not just talking, but shouting, that we must end these bailouts and so-called stimulus packages. The average American does not like this at all. They are getting angry, and if the economy doesn't recover soon there is going to be hell to pay for the party left holding the bag. If Republicans speak up loudly now, they won't be holding that bag.

Brent Budowsky, from The Hill, has a column today with a lot populist overtones that echoes some of the sentiment that I see growing.

Americans have begun an angry backlash against bailouts that could become a national revolt in 2009.
...
Virtually none of this money directly helps average Americans. Virtually none of it trickles down to the people who suffer the most and pay for the program.
...
The public backlash is only beginning. It will rise with every new scandal and Ponzi scheme and every new increase in credit card rates. It has already infected good judgment in the auto case, where major support is needed, tied to major plans for industry renewal.

I do not oppose bailouts, I oppose bailouts managed with banana-republic standards of secrecy and incompetence in which recipients of massive taxpayer largesse work against those who pay for this largesse.
...
Bailout money is not a private account that belongs to Fed Chairman Ben Bernanke, Fed governors, the Treasury secretary or the banks. It is the people’s money. It should be used to benefit the people. It should be monitored through the checks and balances of the democratic process.

Secrecy is the enemy of equity, integrity and common sense. Secrecy is the friend of negligence, misjudgment and corruption. There are probably selected instances where the Fed should not disclose, but show me $2 trillion of secretly spent money and I will show you trouble.

In the coming days I will be writing about the Bloomberg case and offering specific bailout proposals on The Hill’s Pundits Blog. The backlash is coming. Time is short. The dangers are extreme.

Stimulus Talk Rises to $1 Trillion

According to Foxnews:

Obama's Economic Advisers Considering $1 Trillion Stimulus Plan

Less than three weeks back I mentioned this:

If anyone is aware of how I can invest in the future size of the coming "stimulus" package that would be great. Just a few weeks ago Obama was suggesting a $150 Billion package. Within that last week I was none too surprised to see Paul Krugman pushing "at least $600 Billion". Now, Obama's advisors are topping them all.

$700 Billion...

That would have been a 43% return in just 19 days!

Just imagine how badly this could effect the economy if they are wrong (which they are). Imagine how much corruption and lobbying is going to go on with this sort of spending spree. This is going to be a mess of historic proportions.

Victory for Now

Senate Republicans block the Auto Bailout Bill!
From Yahoo.

I'm sure they will try again, especially given that Bush wants this to happen, but it's nice to Republicans have a little guts.

Why College Costs Keep Rising

It is the conventional wisdom that every American should have the opportunity to go to college so that they too can achieve the American dream. It is alleged that we need to increase college aid to achieve this goal. Unfortunately, reality trumps these idealistic goals.

First, many schools don't want to get any bigger, they want to become more illustrious. They want to move up the famous U.S. News and World Report college rankings. Almost all of the college rankings judge schools by the amount of resources they spend per student. What incentive does this give universities that want to improve their standing? Get and spend more money, and maintain your student body size.

To help students afford college, the government subsidizes attendance in many ways. From grants, to subsidized students loans, to simple budget increases for universities. This increases demand. If the supply of student slots does not increase, the price to attend will rise until the subsidy has been completely negated for those at the margin. When the government spends more, a restricted supply will push prices upwards. It becomes a vicious circle of higher prices and increased subsidies.

The other justification for these kinds of subsidies are that they help the economy and increase incomes throughout the entire community. Steven Malanga writes today at RealClearMarkets in response to the lack of skepticism of this paradigm by the press:

A few researchers, however, have asked these questions, and the answers aren’t always pretty, nor are they part of the conventional wisdom. One of the skeptics is Richard Vedder, distinguished professor of economics at Ohio State University and head of the Center for College Affordability and Productivity. He’s spent years observing the upward spiral of tuition at American colleges and universities and the increase in government’s subsidies for higher education. His research suggests we are already over investing in our public universities.

For one thing, Vedder has found little evidence that government spending on higher education stimulates an economy. He has run hundreds of regression analyses trying to understand the relationship between subsidies for public universities and local economic growth, and what he’s found is that at best the spending produces no gains, while at worse, “the more states spend on higher education, the lower the growth” over time.

On the question of whether state spending actually lowers tuition and costs for students, he goes on.

...state universities devote a small proportion of incremental public financing to keeping tuition low. In one study, the Center for College Affordability determined that on average public universities use only 30 percent of public funding increases to hold down tuition costs. Instead, public universities have been pouring more money into intercollegiate athletics and student services, raising salaries rapidly and increasing hiring of non-instruction personnel. In 1975, for instance, the ratio of non-instructional staff to instructors at America’s colleges and universities was about 4.5-to-10. Today, it’s about 8-to-10.

He also makes some good points that not every student is capable of performing well in college, if you want to read the rest.

Texas Faces Huge Surplus

Leonard Gilroy from the Reason Foundation, with whom I've partaken of some fine Vietnamese food (which makes me super cool by association!) has a piece on Texas' $11 Billion state surplus.

Some excerpts:

A recent study by the Center for Budget & Policy Priorities found that at least 41 states have recently faced, or are facing, budget deficits. Today 13 states are staring at budget shortfalls in excess of $1 billion in fiscal year 2009, with California ($31 billion) and New York ($6.4 billion) leading the pack. Moody's recently reported that 30 states are in recession, and 19 more are at risk.
...
Texas is currently the envy of the nation with an $11 billion budget surplus. How did the state do it? For starters, the Texas Constitution gives the state Comptroller of Public Accounts (a chief fiscal officer, of sorts) the responsibility to certify the state's budget and send back any spending bills that the state can't afford. It's an elected position and the current comptroller, Susan Combs, launched a "Where the Money Goes" website to boost transparency and show taxpayers where their money is going. Having a third-party enforce prudent fiscal forecasting and spending helps to avoid the situation so many states now face—governors and legislators gravitate to the rosiest of revenue projections to help justify new spending, and then when the mythical money doesn't materialize, the state faces a budget "crisis."

Texas also engages in performance-based budgeting—tying a given programs' funding to its effectiveness at meeting clear performance targets. A Sunset Advisory Commission conducts mandatory periodic reviews of all state agencies to find duplicative or unnecessary programs that must be cut. Since the Sunset Commission was created in 1977, over 47 governmental agencies have been eliminated and another 11 have been consolidated.

Ah, maybe this is why Texas Governor Rick Perry wrote an op-ed against state bailouts from the Federal Government. Why should my tax dollars go to bailout other irresponsible states?

Guess who's likely to get my third consecutive unapologetic vote for Governor in 2010?

Now the Stimulus is $700 Billion

If anyone is aware of how I can invest in the future size of the coming "stimulus" package that would be great. Just a few weeks ago Obama was suggesting a $150 Billion package. Within that last week I was none too surprised to see Paul Krugman pushing "at least $600 Billion". Now, Obama's advisors are topping them all.

$700 Billion From Bloomberg.

Let's do some addition.

$450 Billion - deficit already.
$1,350 Billion - for the Wall Street Bailout ($1.2 Trillion bailout + $150 Billion in Pork) see update
$25 Billion - in Auto Loans (enacted not the new proposed)
$0 - No tax hikes on those evil rich people
$700 Billion - for stimulus
$2.525 TRILLION Deficit next year

And this doesn't count the other likely effects.
($?? Billion) - Lower Tax revenues from weaker economy
$50 Billion - Detroit bailout

Wonder if that will effect interest rates for the government to borrow 1/6th of the entire US economic output?

Update:

Whoops, I should have finished the entire article before posting. It's even worse!

The incoming administration may also enlarge the $700 billion financial-rescue fund enacted last month. It may surge to perhaps $1.2 trillion, said Martin Baily, who served as White House chief economist under Clinton and is now at the Brookings Institution in Washington.

David Brooks Gets it Right on Big 3

David Brooks of the New York Times writes his column today on the potential bailout of the Big 3 automakers. While I disagree with his sentiments for a broad social safety net he has a number of good points directly relevant to the issue.

Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America.

In short, a bailout will not solve anything — just postpone things. If this goes through, Big Three executives will make decisions knowing that whatever happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac. In the meantime, capital that could have gone to successful companies and programs will be directed toward companies with a history of using it badly.

He goes on to rip Obama. (I know! A liberal columnist at the New York Times writing something critical of Obama. Surely a sign of the apocalypse)

The second part of Obama’s plan is the creation of an auto czar with vague duties.

Are we really to believe there exists a czar omniscient, omnipotent and beneficent enough to know how to fix the Big Three? Who is this deity? Are we to believe that political influence will miraculously disappear, that the czar would have absolute power over unions, management, Congress and the White House? Please.

Come on David, take this argument to its logical end. It's Hayek's Fatal Conceit on display. The government cannot successfully run any part of the economy. The knowledge of a few planners cannot supercede that of millions of individuals.

Subsidizing Irresponsible State Governments

Don't cut spending, increase your begging.

In recent months, a number of states, especially New York, have been cranking up the volume on their need for bailouts. Their tax revenues have fallen sharply and they are facing large budget deficits. As far as I am aware, no state allows itself a budget deficit. If revenues drop, they have to cut spending. Those who believe in Big Government don't think they should be bound by budget constraints. Now they have found powerful friends in Congress to help them out.

The Wall Street Journal quotes Congressman Charlie Rangel:

Our hope is that the leadership of both parties will be able to confer and come back after the election, and see what we can do to provide assistance to our local and state governments, as we have been able to do for our banking and finance industry

Moral Hazard is the result of removing the downside risks of personal behavior. In my industry, Insurance, we see this all the time. Even in Life Insurance, people are slightly more likely to commit suicide when they have significant coverage.

Now we have states that spent more during the good times, and don't want to have to cut back in the bad times. Bailing these states out will insure that their spending continues to climb in the future. What lesson does this provide for other states, like Texas, that have braved political fallout by ruthlessly cutting spending during previous downturns?

The simple message of this plan to state politicians is: If you cut spending you'll get bad press and your citizens will have subsidize the bailouts of states more wasteful than your own. Don't cut spending, increase your begging.

Time to Eliminate the Federal Gas Tax

The Federal Gas Tax must go. It is part of the rent-seeking bog that has mired our Congress in excessive spending, and provides the murkiest pool of funds for pork barrel projects. It serves virtually no national interest and it wastes the time of lawmakers and federal officials.

I am not proposing a tax cut. I would fully expect most every state to increase their gas taxes to make up for the lost funds from federal transportation outlays. The point is for individual states to make decisions on transportation spending, and remove the bulk of funds that Congress hands out with a wink and a nod to friends, donors, and the well connected.

Many have attacked earmarks with good cause, but there are still those that defend them. The defenses go something like this:

“I was sent to Congress to fight for my state/district and make sure we get our fair share of federal funds”

or

“The citizens in my state/district would rather have their elected officials work for them instead of relying on some bureaucrat”

Should individual states get their fair share of gas tax revenue? Yes, by never sending the money to Washington in the first place.

Who should decide how gas tax revenue in Delaware be spent? The people of Delaware. If Oklahoma wants to build freeways, then let them use their own money. If Oregon wants no freeways and only light rail, then let them use their own money. Funding should not be based on the seniority of a state’s congressional delegation. It should be decided with the reasonable judgment of those who are most familiar with state transportation needs: The State governments.

The bumbling bureaucrats and the arcane funding formulas give incentives for every state and city to maximize their funding by kowtowing to the rules and not strictly looking out for the interests of their local citizens. If these defenders of pork are right, state governments would be vastly superior at appropriating gas tax funds than the federal government. When a state government is using their own money there will be far fewer “Bridges to Nowhere”. It is only when they are trying to game the system that idiotic projects of that ilk are enacted.

Federal Gas Tax dollars are a cesspool of corruption. They waste time and misappropriate transportation dollars around the country. The Federal Gas Tax must go!

My Platform to Revive the Republican Party

Frustration with the government has reached an all time high. Rasmussen recently released a poll that showed that the number of people who believed that Congress was doing a good or excellent job fell to a mere 9%. The lowest in the history of their polling. Neither side seems to be able to get anything done. Republicans were accomplishing very little and the Democrats seem to be biding their time hoping that this next election will give them large majorities and the White House.

The huge mistake that Republicans made when they were in power was kowtowing to special interest groups, giving unequal tax, and regulatory advantage to their supporters. The Democrats swept into power with a little idealistic fervor to change all this, but they too have succumbed to the same pressures. They let their union devotion shut down a very good trade bill with our ally in Colombia, and their anger towards “Republican” Big Oil has stopped them from easing our price problems with gasoline. Neither party has the muster to stop these bad habits.

It is not merely a problem with politicians, it is a problem with the power that we have given them. Anyone who is given a position of authority where they can help themselves, their friends or their ideology with other people’s money will be tempted to do so. This is the human condition. The only solution is to limit that authority.

Here are my 3 plans –

Ban Earmarks – Craft a bill that prevents any Congressman from submitting a bill or addition to a bill suggesting an allocation of funds to any specific organization or geographic local. A Congressman can not be bribed or cajoled to offer funds when he does not have the authority to do so. Lobbying of Congress would fall significantly.

Enact a Flat Tax – The shorter the tax code the more transparent it becomes. Having a flat tax that offers few or no deductions would stop the lobbying for special tax treatment by numerous groups. Right now the tax code punishes the new wealth accumulation at the highest tax rates, but the myriad deductions help shelter those who are trying to preserve their wealth. Lobbying of Congress to offer tax breaks for this person, but not that person would disappear.

Scrap the Corporate Income Tax – When ExxonMobil makes $40 Billion a year, their tax bill without deductions and account techniques would have been $21.5 Billion at the current 35% tax on profits. This gives a huge incentive for every corporation on earth to hire an army of accountants to cut this amount down. It also gives them a huge incentive to hire an army of lobbyists to fight for tax deductions and favorable tax accounting techniques. The income from the corporate tax should be shifted to the individual taxpayer. Wealthier individuals own more stock so their burden should be higher than those with less income so that each income group pays as close to what they already effectively pay right now. When this is done, corporate lobbying will drop precipitously.

We must take away the power of Congress to hand out money. We must take away the power of lobbyists to affect the tax code. We must take away the power of special interest groups to prosper at the expense of others. Our Congress should be focused on issues of importance not the appeasement of well-financed beggars.

The Republican Party was embarrassed out of office by too many scandals. Before we can hope to regain power and regain the public trust, we must cut off the supply of money. Legislators can not fall into corruption if they lack the power to hand out money.

Ban Earmarks, Enact a Flat Tax, and Scrap the Corporate Income Tax

School Daze

I was reminded this week of how wasteful the public school system is by an article in the Houston Chronicle. Klein Independent School District is trying to pass a bond measure to borrow money for new facilities. Part of the bond package is to replace two existing high schools.

What is the price tag for each high school? Only $130 Million per high school! Each school is supposed to house a close-knit 3,500 students. The schools are full of “necessities”, such as “natatoriums, black-box theaters, dance areas and extensive career and technology programs”. The natatorium is likely an indoor Olympic size swimming pool. A black-box theater allows for special stage productions in addition to a traditional school theater.

Adding to that high price is the fact that the school district already owns the land and it does not include the price of furnishings.

Are these costs out of whack, or is it simply that expensive to build a high school today? How much did schools cost 15 to 20 years ago? What has been the increase in construction costs?

For proper comparison, the price needs to be divided by the number of students the school is expected to educate. It wouldn’t be fair to compare a small town high school to large suburban schools without adjusting for student population. The price per student is around $37,100 for these new high schools.

According to an expert quoted in the article:

“The median cost-per-square-foot of a high school has increased from $104 in 1995 to $171 in 2007, he said. And rates continue to increase as much as 15 percent a year, experts said.”

So, in 1995 this school would have cost $22,600. The article also mentions the price of the high school I attended, Pearland High school, also a suburban Houston school, that was built in 1991. Filling the four year gap between 1991 and 1995, and adding two more years after 2007 to coincide with the actual groundbreaking date with the same rate of construction cost inflation between 1995 and 2007, this implies that my high school should have cost $17,600 per student.

From my memory, my high school was 5A (the largest classification in Texas) and held about 2,400 students my senior year when we started to run out of space. Using these numbers, it implies that my high school should have cost around $42 million.

What was the actual construction price of my high school according to the article? Only $12 million. This means that Klein’s school district has chosen to build these schools 3½ times more extravagant than Pearland did in 1991.

While the Klein High School numbers were rather shocking to me, I did a quick Google search assuming that this could not be the most outrageously expensive high school in America. I was not disappointed.

In suburban Boston, the town of Newton is building a high school for around 2,000 students. According to Boston Globe the costs have spiraled out of control up to $197 million. That is $98,500 per student. That price is just over 2½ times more expensive than Klein’s schools, and a mere 19 times more expensive per student than my high school. Surprisingly enough, the article does not mention any gold plated desks or diamond studded pencils.

The most heinous problem with this out of control spending is where the money is going. The costs for building a simple classroom have not increased so staggeringly. What has gone up is the enormous appetite of school officials for extracurricular facilities. While I have little doubt that all those things are fun for these students, I don’t really understand why the government needs society as a whole to pay for them. Having fun and forming hobbies is not the business of government.

I propose a state law that would limit school construction to having 40% of square footage to academic classroom space. The 40% is just an estimate and may seem high or low, but accounts for the need for hallways, offices, cafeterias, etc… There should also be room for extracurricular activities and vocational classes, but the school should not be dominated by hundreds of thousands of square feet of non-academic building space.

This bond package would include a 16% increase in school property taxes for Klein I.S.D. I complain about taxes, but the only way to keep taxes down is for the government to spend less. When millions of dollars of waste are included in all-or-nothing school bond packages, it puts voters in the unfair position of choosing between preventing waste and having crowded dilapidated schools.

As always, tell me what you think.

Thoughts and Ideas

Two topics this week.

More thoughts on Health Care

Over the last few months I have written a number of posts concerning the universal health care proposals. My three main criticisms of these plans are:

1. The Universal insurance plans proposed continue the HMO style of health insurance. HMO style insurance encourages over use of medical services by separating us from the actual expense of health care.

2. These Universal HMO plans by Obama, Edwards and Clinton also discourage people from finding the least expensive doctor or treatment. We don’t pay the costs so we don’t bother finding this information

3. HMO style insurance over insures us and leads us to take less care of our health because they don’t face the financial repercussions.

Well, I came up with yet another criticism of these proposed moves towards government run health care systems like those that exist in Canada and Western Europe. To be fair, none of the Universal Insurance plans Democrats have proposed would cause side effects of the size I’m talking about. However, all three have mentioned the “excessive profits” that drug companies are making and their party has been pushing to confiscate these profits or mandate lower prices by law. These moves could easily cause the effects that I fear.

According to the Kenneth Shadlen of Development Studies Institute, between 1996 and 2000 the United States accounted for 63% of all medical patents worldwide even though we make up only 5% of the population. Even when you compare the U.S. to Western Europe we blow them away. On a per capita basis, the U.S. puts out 2 to 2 ½ times the medical advances of the UK, France, Canada, and Germany. Clearly, our medical system, based on profits, outperforms the European countries with socialized medicine. The rest of the world is relying on our free market system because we choose not to exclude them from new medicines and technologies.

All else being equal, if the United States were to switch to a similar system for medicine as the four mentioned, worldwide medical advances would fall by almost 40%. Instead of finding cures and treatments for say 500,000 people next year, it would only be 300,000. That treatment you were hoping for that was only 10 years off could be 18 years off. How much needless suffering and pain would we inflict upon the world if we were to do as others have chosen to do?

Before we barrel down the road towards socialized medicine, we need to appreciate what could be the catastrophic consequences.

It’s a Nice Idea, But It Can’t be Done

Recently, in this newsletter, on my blog, and other blogs I have been defending the idea of Texas dropping the property tax for a sales tax in the spirit of the Fair Tax. I’ve come across general support, but also some doubt that it could ever be accomplished. I'm told that like the flat tax, fair tax, and many of the ideas that I have proposed, these changes are too ambitious to ever occur. I have run across some evidence that these doubt are unfounded.

The state of Utah recently switched from a complicated income tax with lots of loopholes and deductions to a Flat Tax. Read about it here:

http://www.sltrib.com/ci_7766094

The governor of the state of South Carolina recently proposed a budget that includes a flat tax option where citizens can choose whether to pay their state income tax under the existing system of deductions and loopholes or pay a flat tax.

“Under the plan, residents could choose to pay a flat 3.4 percent income tax rate. In exchange, they could claim no tax deductions or credits.”

http://www.thestate.com/local/story/262697.html

When the winds are blowing against the ideas of the free market and small government, it seems like an impossible task to significantly reduce the size of our government. Over the last 20 years, Ireland has shown that it can be done.

In 1985, government spending accounted for 54% of the Irish economy. The Irish made a choice to reduce the size of government and they did. Over the last twenty years, the Irish have cut government spending by 35% as a percentage of GDP. Their country now has a lower overall tax rate than the United States. They have moved from one of the poorest countries in Western Europe to one of the wealthiest. The Heritage Foundation lists them as having a more free economy than the United States. In 1985, the average Irish family made 40% less than their French and German counterparts. Today, because of the massive spending cuts and massive growth from that, the Irish make 40% more than the French and the Germans according to the IMF.

Do you think that we can move to less government in the United States? Tell me yes or no. Tell me what you think is the easiest government spending to get rid of. Send me an e-mail or go out to my blog.

As always, tell me what you think and pass this newsletter along to anyone who might be interested.