Power & Market

Too Much Partisanship in Washington? No, Too Much Bipartisanship!

12/10/2018Ron Paul

Washington is once again gripped by the specter of a government shutdown, as Congress and President Trump negotiate an end-of-year spending deal. A main issue of contention is funding for President Trump’s border wall. Sadly, but not surprisingly, neither Congress nor the administration is fighting to cut, or at least not increase, spending.

Federal spending has increased from 3.6 trillion dollars to 4.4 trillion dollars since Republicans gained control over both chambers of Congress in 2014. Some may try to defend congressional Republicans by pointing out that for two years the Republican Congress had to negotiate spending deals with President Obama. But federal spending has increased by 7.5 percent, or over 300 billion dollars, since Donald Trump become President.

A big beneficiary of the Republican spending spree is the military-industrial complex. Republicans have increased the “defense” budget by eight percent in the past two years. President Trump and congressional Republicans claim the increases are necessary because sequestration “decimated” the military. But Congress, with the Obama administration’s full cooperation and support, suspended sequestration every year but one, so the planned cuts never went into full effect. Congress and Obama also “supplemented” the official military budget with generous appropriations for the Pentagon’s off-budget Overseas Contingency Operations fund. Spending on militarism increased by as much as 600 billion dollars over the amounts allowed for under sequestration.

President Trump has proposed reducing the projected military budget for fiscal year 2020 to 700 billion dollars. This would be a mere two percent cut, yet the usual voices are already crying that this tiny reduction would endanger our security. If history is any guide, the military-industrial complex’s congressional allies and high-priced lobbyists will be able to defeat the president’s proposed reductions and convince President Trump to further increase the military budget.

This huge military budget has little or nothing to do with America’s legitimate security needs. In fact, as candidate Trump recognized, America’s military interventions in the Middle East have endangered our security by empowering terrorist groups like ISIS and al-Qaeda.

While the warfare state has been a big beneficiary of the Republican spending spree, the GOP has hardly neglected the welfare state. Domestic spending has increased seven percent since 2016. Except for a half-hearted attempt to repeal Obamacare and some food stamp reforms that were included in and then dropped from this year’s farm bill, Republicans have not made any effort to roll back or even reform the welfare state.

The farm bill, which Congress is expected to pass this week, will spend as much as 900 billion dollars over the next ten years. Much of that spending will be on taxpayer subsidies for wealthy farmers and even “farmers in name only.”

Trump’s budget deals have been supported by the majority of Democrats. Even those who have called for the president’s impeachment are more than happy to vote with him when it comes to increasing spending and debt. These Democrats are the mirror image of 1990s Republicans who made a big spending deal with President Clinton while simultaneously trying to impeach him.

We suffer from too much bipartisanship when it comes to the welfare-warfare state. This bipartisanship has resulted in a national debt that is rapidly approaching 30 trillion dollars. This will inevitably lead to a major economic crisis. The way to avoid this crisis is to replace the bipartisan welfare-warfare consensus with a new consensus in favor of limited government, peace, free markets in all areas including currency, and auditing then ending the Fed.

Reprinted with permission.

 

 

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The Corporate Debt Market: Is It Teetering on the Edge?

Jeff Peshut answers the question that has been widely discussed in the media lately: Is There Really A Corporate Debt Bubble That’s Ready To Burst? 

To unravel the mystery, Peshut compares movements in the Rothbard-Salerno TMS monetary aggregate with movements in corporate business debt from 1978 through 2017.  At the end of 2017 corporate business debt stood at $29.1 billion or about $10 trillion above its post-crisis trough at the end of 2009.  TMS reached its cyclical trough of $5.1 trillion at the end of 2006 and increased to $13.1 trillion, a breath-taking increase of 156.9%, by the end of 2017.  For the sake of comparison, during the housing bubble TMS increased by “only” 70%, from $3.0 trillion to $5.1 trillion from 2000 to 2006. The year-over-year (YOY) rate of growth of TMS has precipitously fallen from over 7% in 2016 to less than 4% at the end of 2017. The huge increase in the money supply from 2009 onward would certainly lead us to suspect that there is a systemic overvaluation of asset markets that will sooner or later come to a bad end.  But the trillion dollar question is, of course: When?

With respect to the corporate debt market, Peshut gives us a cogent ad informed forecast.  He finds that in the last three complete credit cycles, from 1994 through 2009, the trough in the YOY growth rate of TMS has preceded the trough in the YOY growth rate of corporate business debt by about three years in each case.  Given this three-year lag, even if TMS has already reached its trough, Peshut concludes that claims that the corporate debt bubble is about to pop are premature and the more likely scenario is that the bubble bursts in 2021 or 2022. 

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Trump is the Rare Honest Politician about US Debt

12/06/2018Tho Bishop

Once again Donald Trump’s presidency has done a great job of highlighting the hypocrisy and delusion of the beltway bubble.

A recent story from the Daily Beast reports that Trump is frustrating advisers with his apathy towards the current trillion dollar deficits coming out of Washington. 

Since the 2016 presidential campaign, Donald Trump’s aides and advisers have tried to convince him of the importance of tackling the national debt.

Sources close to the president say he has repeatedly shrugged it off, implying that he doesn’t have to worry about the money owed to America’s creditors—currently about $21 trillion—because he won’t be around to shoulder the blame when it becomes even more untenable.

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the national debt in the not-too-distant future. In response, Trump noted that the data suggested the debt would reach a critical mass only after his possible second term in office.

“Yeah, but I won’t be here,” the president bluntly said, according to a source who was in the room when Trump made this comment during discussions on the debt.

Trump’s lack of concern for the debt should hardly be surprising. As a candidate, he boasted about his desire to preserve various entitlement programs while simultaneously promising significant increases in military spending – a promise he has delivered on. Left unsaid in the report is that the goal of at least some of Trump’s advisors was undoubtedly to encourage the president to embrace some form of tax increase. We know, for example, that Treasury Secretary Steve Mnuchin has encouraged Trump to embrace a VAT tax in the past, a policy that would be particularly damaging to America’s low and middle class. 

What’s all the more comical, however, is the resulting jeering from DC pundits and political enemies acting as if Trump’s view on the debt is some radical new threat to American stability. On the contrast, all Trump is doing is being honest about the views held by almost everyone that has served in Washington the past several decades. While politicians from both parties love to give lip service to “fiscal responsibility”, the closest thing we’ve come to meaningful action on budgetary restraint was the budget sequestration of 2013. Of course those cuts to future spending increases (not to be confused with actual spending cuts) came into place simply because of the inaction of federal legislators and faced instant bipartisan condemnation.

This isn’t the first time that Trump’s truth telling over the debt has thrown opposing politicians and pundits into a tizzy. On the campaign trail, Trump was accused of threatening financial Armageddon when he suggested that America could default on its debt. What should be obvious to anyone who has paid even passive attention to American politics is that US default is inevitable. The only question is what form will it take.

One of the greatest myths in DC is that America has never defaulted on its debt, something repeated not long ago by Fed Chair Jerome Powell in a Congressional hearing. Of course this is simply absurd.

As James Grant and other financial historians have explained, the federal government has defaulted numerous times in its history, the most recent of which occurred when Richard Nixon closed the gold window.  In that case, the out of control spending, led by the Vietnam war and LBJ’s Great Society, led the US to default on its obligations to foreign governments, repaying their loans with dollars valued at far less than the $35 per ounce they were promised.

This form of monetary default may be the future of the dollar, an outcome that Ron Paul has long warned us about

Another option, one that Murray Rothbard advlocated, is simple debt repudiation. As he wrote in 1992, when US debt was a quaint $4 trillion:

I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington.

Rothbard goes on to suggest that a more traditional debt restructuring – similar to what Trump touched on during his campaign  –  could also be an option if outright repudiation was considered to be “too draconian.”

The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing....The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly....This combination of repudiation and privatization would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.  

Peter Klein has also written on the absurd hyperventilating in the beltway when such an idea is ever suggested:

[T]he idea that the US can never restructure or even repudiate the national debt — that US Treasuries must always be treated as a unique and magical “risk-free” investment — is wildly speculative at best, preposterous at worst. Every other borrowing entity — individuals, business firms, and governments — has the option of renegotiating interest payments and even defaulting on loans. It is hardly an extraordinary event, even for sovereign borrowing — that’s why lenders charge a risk premium beyond the return they require to compensate for time preference.

There is lots of evidence on private, corporate, and sovereign defaults, and the results are hardly catastrophic. Depending on the circumstances, the benefits of reducing debt can exceed the costs of harming the borrower’s reputation and thus increasing the costs of future borrowing. Anyone who has been through a personal or corporate bankruptcy knows this.

At the end of the day Trump’s views on dismissal of US debt illustrate is another example of short-sighted economic thinking. It’s absurd, however, to treat this as some radical change from his more “dignified” and “respectable” predecessors. Instead, just like his views on tariffsmonetary policy, and defense spending, Trump’s real sin is simply being a continuation of the status quo on these issues

The difference is that Trump says out loud the part politicians are supposed to keep quiet.

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The Obvious Contradictions of Politicians on Trade

12/05/2018Per Bylund

The trade policies of both the USA and the EU seem to be based on the contradictory philosophy that unrestricted trade is beneficial within its borders, even if across internal borders, but not with parties outside those borders.

But this makes no sense. From the point of view of trade, the voluntary exchange of goods, why are the borders between USA and Mexico, and Greece and Turkey, different from the borders between Missouri and Kansas, and France and Germany?

The difference is political and arbitrary.

If protectionism works, which is the policy applied on the USA's and the EU's 'external' borders, then it should work for other borders at well. But instead the 'internal' policy is free trade, and it's considered as obvious for the latter as restricted trade for the former.

Protectionists may produce an argument that 'within USA' is different, since it is within a country. While likely based on a romantic fiction of the (federal) nation, there is significant coordination of policy that facilitate trade between states. That's exactly the core of the European Union as a trade union between countries with different languages, cultures, and political traditions. Countries within the EU are at least as similar and dissimilar as the USA and Canada. Or as the USA and the EU. The differences that can be identified are differences that are caused by policy, which makes them highly suspect as possible rationales or reasons for (specific and different) policy. The question remains, why is protectionism good for some borders, and free trade for others?

It really comes down only to this: politics is able to produce emotionally compelling reasons, based on simplistic identity claims and 'us vs. them', for completely contradictory policies for different instances of the same phenomenon (political borders).

No politician in his right mind would claim that Washington, DC, should adopt a protectionist trade policy with respect to the 50 states. He would be laughed at. But saying the same about, say, the US and Canada is considered very different. And this is the case also for the EU, where it would be political suicide (although not as much [because EU is younger and not yet as politically integrated?]) to state there should be protectionism between Germany and France or between Sweden and Denmark. But it's the 'obvious' and correct policy for the waters between Greece (EU) and Turkey (not EU).

But think about it: if a trade policy is beneficial across some (political) borders, shouldn't it be beneficial across all such borders? The answer is rather obviously 'yes'.

Except in politics, where 'yes' and 'no' are irrelevant--what matters is that a story can be told that, for the time being, may gather support from the electorate. Often by pointing to a threat--always by some 'them'. Canadians are not us; Turks are not us. But Midwesterners and Manhattanites are the same, just like Germans and French are the same?

Originally posted on Twitter @PerBylund
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Trump Foreign Policy: Doing the Same Thing and Expecting a Different Result

12/05/2018Ron Paul

After a week of insisting that a meeting with Putin on the sidelines of the G20 meeting in Argentina was going to happen, President Trump at the last minute sent out a Tweet explaining that due to a Russia/Ukraine dispute in the Sea of Azov he would no longer be willing to meet his Russian counterpart.

According to Trump, the meeting had to be canceled because the Russians seized three Ukrainian naval vessels in Russian waters that refused to follow instructions from the Russian military. But as Pat Buchanan wrote in a recent column: how is this little dispute thousands of miles away any of our business?

Unfortunately it is “our business” because of President Obama’s foolish idea to overthrow a democratically-elected, pro-Russia government in Ukraine in favor of what his Administration believed would be a “pro-Western” and “pro-NATO” replacement. In short, the Obama Administration did openly to Ukraine what his Democratic Party claims without proof the Russians did to the United States: meddled in a vote.

US interventionism in Ukraine led to the 2014 coup and many dead Ukrainians. Crimea’s majority-Russian population held a referendum and decided to re-join Russia rather than remain in a “pro-West” Ukraine that immediately began discriminating against them. Why would anyone object to people opting out of abusive relationships?

What is most disappointing about President Trump’s foreign policy is that it didn’t have to be this way. He ran on a platform of America first, ending foreign wars, NATO skepticism, and better relations with Russia. Americans voted for this policy. He had a mandate, a rejection of Obama’s destructive interventionism.

But he lost his nerve.

Instead of being the president who ships lethal weapons to the Ukrainian regime, instead of being the president who insists that Crimea remain in Ukraine, instead of being the president who continues policies the American people clearly rejected at the ballot box, Trump could have blamed the Ukraine/Russia mess on the failed Obama foreign policy and charted a very different course. What flag flies over Crimea is none of our business. We are not the policemen of the world and candidate Trump seemed to have understood that.

But now Trump’s in a trap. He was foolish enough to believe that Beltway foreign policy “experts” have a clue about what really is American national interest. Just this week he told the Washington Post, in response to three US soldiers being killed by a roadside bomb in Afghanistan, that he has to keep US troops fighting in the longest war in US history because the “experts” tell him there is no alternative.

He said, “virtually every expert that I have and speak to say if we don’t go there, they’re going to be fighting over here. And I’ve heard it over and over again.”

That is the same bunkum the neocons sold us as they lied us into Iraq! We’ve got to fight Saddam over there or he’d soon be in our streets. These “experts” are worthless, yet for some reason President Trump cannot break free of them.

Well here’s some unsolicited advice to the president: Listen to the people who elected you, who are tired of the US as the world’s police force. Let Ukraine and Russia work out their own problems. Give all your “experts” a pink slip and start over with a real pro-American foreign policy: non-interventionism.

Reprinted with permission.

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The Coming Bankruptcy of the American Empire

11/21/2018Hunter DeRensis

The chickens are coming home to roost. It’s only a question of when.

Herbert Stein was chair of the Council of Economic Advisors under Presidents Richard Nixon and Gerald Ford and is the father of the more well known Ben Stein. In 1976, he propounded what he called “Stein’s Law”: if something cannot go on forever, it will stop. Stein was referring to economic trends, but the same law applies just as much to foreign policy and the concept of empire.

Stein’s Law at first glance might seem like a banal platitude. But we should be fully cognizant of its implications: an unsustainable system must have an end. The American empire is internally flawed, a fact that anti-imperialists both left and right should appreciate.

The United States’ national debt is approaching $22 trillion with a current federal budget deficit of over $800 billion. As Senator Rand Paul often points out, bankruptcy is the Sword of Damocles hanging perilously close to Uncle Sam’s neck. Outside of a handful of libertarian gadflies in Congress such as Paul, there is no serious political movement to curb the country’s wayward spending. It would take some upset of multiple times greater magnitude than Donald Trump’s 2016 victory to alter this course.

The United States holds the most debt of any country in the history of the world. In fairness, when our debt-to-GDP ratio is factored in, there are many countries in far more perilous economic situations than the U.S. But there will come a tipping point. How much debt can the system hold? When will the cracks grow too big to hide? When will the foundation crumble? There’s a great deal of ruin in a nation, said Adam Smith, and our ruin must ultimately come.

Is bankruptcy possible? As some Beltway economists remind us, no. Technically the government has the power to artificially create as many dollars as it needs to pay its debts. But this kind of hyper-inflation would deprive the U.S. dollar of any value and tank the global economy that trades with it. Simple failure to pay back our debt might even be a better scenario than such an inflationary hellscape.

When the world loses confidence in the American government’s ability to pay its debt, or the interest rate on our debt becomes unsustainably high, choices will have to be made. No more kicking the can down the road, no more 10-year projections to balance the budget. Congress, in a state of emergency, will have to take a buzzsaw to appropriations. And the empire will be the first thing to go.

Just like its warfare state, the government’s welfare state has plenty of internal calamities. But while it might be the preference of some megalomaniacal globalists to let the proles starve while preserving overseas holdings, it’s not going to happen. What would transpire if Social Security checks stopped showing up in mailboxes and Medicare benefits got cut off? When presented with that choice, will the average American choose his social safety net or continued funding for far-flung bases in Stuttgart, Okinawa, and Djibouti? Even the most militaristic congressperson will know which way to vote, lest they find a mob waiting outside their D.C. castles.

Neoconservatives constantly harp on the danger of vacuums. Without a U.S. presence, the logic goes, more sinister forces will take over. What happens when American troops must be evacuated from all over the world because we can’t afford to keep them there anymore? There’s no debate, no weighing of options, and no choice. If the money isn’t there, the money isn’t there. Nothing could tie the hands of America’s military more than a debt crisis. And if one happens, it will be in part because those same neoconservative intellectuals preached a multi-trillion-dollar global war to remake humanity in our image. Hubris leads to downfall.

This is the kind of danger that Rand Paul and others warn about. Not only are our undeclared wars illegal, counterintuitive, and destabilizing to foreign regions, they’re financially destabilizing for us as well.

A radical reexamination of America’s overseas assets and obligations must take place. Ideologically motivated wars have led us to the precipice of financial disaster. American foreign policy must adopt a limited, highly strategic view of its national interest and use its remaining wealth sparingly and only when necessary. Realism can stave off national ruin. Close bases in Germany and bring the money home, instead of forcing the troops to evacuate in the dead of night after it’s too late. Enter negotiations with the Taliban and have a planned withdrawal from Afghanistan, lest it end with helicopters fleeing Kabul like they did Saigon. Make the hard choices before circumstances make them for you.

Our leaders ignore Stein’s Law at their own peril. No matter what, U.S. troops are coming home. Better it be our decision than our debt collectors.

This article appeared earlier at The American Conservative.

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The New Bob Murphy Podcast Interview with Jeff Deist

11/15/2018The Editors

Bob Murphy has a terrific new podcast called, unsurprisingly, The Bob Murphy Show. His focus? "Free markets, free minds, and grateful souls." Bob tells us he plans to focus more on individuals and their personal stories than libertarianism or economics per se. He's already hosted Tom Woods and Carlos Lara, and has big ideas for noteworthy future guests.   

Bob_Murphy_Podcast_Logo.jpg

Here Bob and our own Jeff Deist discuss Jeff's time in DC, and what it's really like behind the scenes in the feckless US House (hint- people are uglier, dumber, and less cunning than House of Cards). They also consider Jeff's work in the world of private equity M&A, and how low interest rates cause huge distortions in how--and whether-- deals are done.

Be sure to subscribe to Bob's new show!

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The Midterm Election Showed Why We Need More States

11/09/2018Tho Bishop

The midterm elections continue to play themselves out in various races throughout the country. The fight going on in Florida and Arizona over newly discovered ballots brings to mind the line attributed to Joseph Stalin, “It's not the people who vote that count, it's the people who count the votes."

While it may be too soon to come up with official vote totals for a few senate races, there is one election night conclusion we can be certain about: America needs more states.

While the idea may seem may seem radical, smaller political units are the best way of addressing some of the growing cultural divides that the media loves to talk about. Some of these divisions are illustrated quite starkly when we look at a county by county break down of various statewide elections.

For example, New York does a great job showing the difference between the political preferences of urban and rural voters. Though the state is one of the strongest havens for the Democratic party, Governor Andrew Cuomo only won 15 of the state’s 63 counties in his successful re-election bid. Without significant change, rural parts of New York will always have very little say in the direction of the state government due to how small their population is relative to the boroughs of New York City.

The political dominance of NYC is of course also true in primaries. Letitia James, who was elected this week as New York’s Attorney General, won the Democratic primary in spite of coming in third place in every New York county north of Westchester and Rockland.

AG Primary NY.png
(Source: New York Times)

Of course it’s not always true that cities dominant state politics. The Georgia governor’s race, for example, saw Republican Brian Kemp defeat Democrat Stacey Abrams in spite of the latter’s strong support in the metro Atlanta area (though Abrams is pushing a legal challenge to the result.) The cultural divide in that race goes beyond rural vs. urban voters, but also demographic representation. The majority of counties Abrams won were those with majority black populations. Similarly, the non-urban blue counties in the Texas governor’s race were all areas with Hispanic-majority populations.

While it’s fair to question whether one party is actually better equipped to serve the interests of one demographic or another, the desire for communities to have greater political self-determination is understandable.

Ludwig von Mises wrote at length about the struggles of being an ethnic or cultural minority living under an interventionist government. We see these concerns played out in current topics such as the push for community policing as a means to try and address police brutality in minority communities.

There are other practical advantages to smaller political units, beyond political self-determination. Research by Mark Thornton, George S. Ford, and Marc Ulrich has found a correlation between constituency size and government spending. As Ryan McMaken summarized in an article on what the US can learn from Swiss federalism:

As Thornton et al. conclude:

[T]he evidence is very suggestive that constituency size provides an explanation for much of the trend, or upward drift in government spending, because of the fixed-sized nature of most legislatures. Potentially, constituency size could be adjusted to control the growth of government.

Other factors mentioned by Thornton, et al. and others include:

  • Large constituencies increase the cost of running campaigns, and thus require greater reliance on large wealth interests for media buys and access to mass media. The cost of running a statewide campaign in California, for example, is considerably larger than the cost of running a statewide campaign in Vermont. Constituencies spread across several media markets are especially costly.
  • Elected officials, unable to engage a sizable portion of their constituencies rely on large interest groups claiming to be representative of constituents.
  • Voters disengage because they realize their vote is worth less in larger constituent groups.
  • Voters disengage because they are not able to meet the candidate personally.
  • Voters disengage because elections in larger constituencies are less likely to focus on issues that are of personal, local interest to many of the voters.
  • The ability to schedule a personal meeting with an elected official is far more difficult in a large constituency than a small one.
  • Elected officials recognize that a single voter is of minimal importance in a large constituency, so candidates prefer to rely on mass media rather than personal interaction with voters.
  • Larger constituent groups are more religiously, ethnically, culturally, ideologically, and economically diverse. This means elected officials from that constituent group are less likely to share social class, ethnic group, and other characteristics with a sizable number of their constituents.
  • Larger constituencies often mean the candidate is more physically remote, even when the candidate is at "home" and not at a distant parliament or congress. This further reduces access.

In these ways changes to the size of states wouldn’t only grant voters a greater say in what goes on in their state capitols, but could potentially lead to a change in how the Federal government operates. Smaller states would diminish the significant advantages incumbent senators enjoy due to the costs of running state-wide campaigns in expensive media markets like those found in California or Florida, and could even diminish some of the power national parties have on the higher chamber.

Of course none of these structural changes will help solve the issues America faces without an ideological change in favor of free markets and individual liberty. Still, at a time when Americans are questioning all sorts of political norms, it is worthwhile to question the physical size of political units in the US.

So as we prepare for several news cycles fixated on various electoral lawsuits, the best solution is the simplest one: let them both win.

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The Most Important Florida Election Win is the One No One is Talking About

11/07/2018Tho Bishop

Last night’s midterms were the odd political event where both sides left seeming reasonably happy with the result. While it was no blue wave, Democrats will now have two years of using the House to investigate the Trump Administration, while the GOP has strengthened its hold of the Senate and held on to several governorships.

Republicans also managed to expand its position in the state of Florida, with Rick Scott edging out Senator Bill Nelson – though recounts are on the horizon. This was an interesting political year for the Sunshine State, with proud Trump supporter Ron DeSantis topping the Bernie-backed Andrew Gillum. Looking beyond statewide races though, several constitutional amendments passed that will have a positive impact on the state’s future – particularly the three of the state’s 12 amendments dealt with taxes.

Amendment 1 expanded the homestead property tax exemption for property value up to $125,000 from the previous $100,000. Coupled with Amendment 2, which made permanent a temporary 10% cap on assessment increases on property not subject to homestead exemption, Florida voters gave themselves some stronger protections against property taxes – one of the more sinister means of government revenue collection.

An even bigger change came with the passing of Amendment 5, which establishes that a supermajority is now required for any future tax increases in the state of Florida. This is an important protection for the state which should isolate a radical change in fiscal policy beyond the reach of a single election cycle. For example, this amendment would have gone a far way in handcuffing the ability of Andrew Gillum to follow through with his platform that prioritized Medicaid Expansion paid for by new corporate taxes. Given the makeup and geographical breakdown of the Florida legislature, it will require a serious makeover of Florida politics for these sorts of ideas to ever near a supermajority.

This protection, combined with the strides Florida has made in recent years on regulation and licensing reform and lowest-in-the-country per capita spending means Florida should remain a strong contender for its current title as the freest state economy in the country well into the future. My guess is that more residents and businesses will continue to move to one of Paul Krugman's least favorite states. 

While the outcome of these tax-related amendments can be viewed as positives for Florida, the outcome of other amendments may cause people to question the wisdom of direct democracy. For example, Amendment 9 was an odd double-issue amendment that combined a ban on off-shore drilling with a restriction on indoor vaping. It, like all amendments on the ballot, passed.

It will be interesting to see if the “just vote yes” approach to on-ballot amendments continues next year. Attorney John Morgan, the driving force behind last year’s medical marijuana initiative, has announced plans to push for two issues in 2020. One would legalize recreational marijuana in the state, while the other would be a minimum wage hike.

Should he be successful, we’ll see if Florida voters are able to figure out the good idea from economic folly.

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Thales College

10/31/2018David Gordon

The distinguished entrepreneur Robert Luddy, a friend and benefactor for many years of the Mises Institute, has extended his innovations in education from elementary and high schools to universities. His Thales Academy has had great success, and he now proposes a Thales College as well. This college will not seek accreditation, in that way cutting through oceans of bureaucratic red tape. Students will pay only $4000 per term for tuition, enabling them to avoid the long-term burden of repaying student debt. The college, located in Wake Forest, North Carolina, will use innovative techniques such as the “flipped classroom,” in which students read the material at home and meet in class only for discussions. You can be sure that students in a program run by Bob Luddy will get a sound education in free market economics and the values of Western civilization.

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