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Distinguishing Welfare from Socialism

Political terms evolve and Kevin Williamson makes an rare but important distinction. Providing for the poor from the public sector is not not synonymous with socialism.  Socialism is more about government control of the economy than mere redistribution.

from Venezuela Reaches the End of the Road to Serfdom by Kevin Williamson at National Review

Canada in most meaningful ways enjoys a more free-market economy than does the United States, which is why our friends at the Heritage Foundation rank it several steps higher on their economic-liberty index. Denmark has a very free-market economy, too, though it is ranked one step behind the United States; Iceland is ranked ahead of Japan and enjoys a dramatically more free economy than is the Western European norm, ranked at No. 20 as opposed to No. 75 France and No. 86 Italy.

The reasons for these disparities are pretty obvious: The Nordic countries have relatively high taxes and big welfare states, but they also have free trade, relatively liberal regulatory regimes, transparent and effective public institutions, etc. The United States gets dinged for crony capitalism and overly complex regulation. As Nima Sanandaji points out in these pages, four of the five Nordic countries have center-right governments, with the social democrats holding power only in Sweden. But even Sweden has undergone decades of reform in what would be understood in the United States as a generally conservative direction, as indeed did Canada a few decades ago.

Welfare states are welfare states and socialism is socialism, and, in spite of the Bernie Sanders gang and the Right’s talk-radio ranters, they are not the same thing. Welfare states use taxes and transfer payments to enable higher levels of consumption among certain groups, usually vulnerable ones: the poor, the sick, the elderly, children. Welfare states are not synonymous with big government: Singapore, for example, offers surprisingly generous housing and health-care benefits despite having a public sector that is (as measured by spending) about half the size of our own and a little more than a third the size of France’s. Switzerland has a fairly typical portfolio of welfare benefits (including a health-care system that is approximately what Obamacare was intended to look like, if Obamacare hadn’t been written and enacted by fools) with a public sector that is smaller than our own. You can view the data and make your own comparisons here.


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Chasing Cash Instead of Crime

When Cops Seize Property from Michael Haugen at The National Review

If this situation sounds like an abuse of constitutional due process, it is — and it gets worse. Because the property itself “commits” a crime under civil forfeiture, the burden of proof is on the property owner, who must prove that the property was not involved in criminal activity, or that he didn’t know, or couldn’t have known, that it would be used for that purpose. And since law-enforcement agencies usually get to retain most, if not all, forfeiture proceeds upon final disposition, this creates a perverse incentive to be as aggressive as possible in pushing civil forfeiture to its limits.

It isn’t just the government that’s making money, either. DEA agents paid one Amtrak secretary $854,460 over two decades to provide information on travelers. Initially this was done only at an agent’s request, but soon the secretary “began making queries on his own initiative.” The potential for civil forfeiture to corrupt otherwise well-intended law-enforcement activity is very significant, and evidently isn’t limited to government actors. Ordinary citizens should not be co-opted to aid in a constitutionally dubious practice with the allure of hefty remunerations, nor should they be incentivized to take law into their own hands.

“We want the cash,” proclaimed a former drug-task-force supervisor who oversaw one such operation attached to Chicago’s O’Hare International Airport. “Good agents chase cash.” This sort of sentiment is an unfortunate example of how the perverse incentives behind asset forfeiture can transform an otherwise legitimate crime-fighting tool into a constitutional nightmare, and well-meaning law-enforcement officers into de facto revenue generators.

Good agents don’t chase cash, they combat crime.


Asset forfeiture laws are morally and legally reprehensible.

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Unbridled Rent Seeking

from Holman Jenkins, Jr. at The Wall Street Journal, Regulation vs. The American People

If Mr. Obama was “deeply frustrated,” the reason was the American people’s lack of support for his agenda. And what the Times calls his regulatory strategy would better be described as unbridled rent seeking.

That’s the term economists use for exercising government power to create private gains for political purposes. Consider:

Mr. Obama’s bank policy dramatically consolidated the banking industry, which the government routinely sues for billions of dollars, with the proceeds partly distributed to Democratic activist groups.

His consumer-finance agency manufactured fake evidence of racism against wholesale auto lenders in order to facilitate a billion-dollar shakedown.

His airline policy, urged by labor unions, led to a major-carrier oligopoly, with rising fares and profits.

His FDA is seeking to extinguish small e-cigarette makers for the benefit of Big Tobacco and Big Pharma (whose smoking-cessation franchise is threatened by cheap and relatively safe electronic cigarettes).

We could go on. Mr. Obama’s own Council of Economic Advisers complains about the increasing cartelization of the U.S. economy—as if this were not a natural output of regulation. In a much-noted Harvard Business Review piece this spring, James Bessen, an economist, lawyer and software entrepreneur, cites increased “political rent seeking” to explain the puzzle of rising corporate profits in the absence of job creation and economic growth.

The truth is, government playing neutral arbiter over the private economy doesn’t produce rents. A stable and predictable regulatory system produces only mingy or non-existent rents.

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Determined to Save

From Barron’s Stephanie Pomboy: A Grim Outlook for the Economy, Stocks by Leslie Norton

Post-crisis, the consumer has clearly pulled back. How many months did we have disappointing retail sales numbers that no one could explain? They’d say it’s too hot, too cold, there’s Brexit. But what’s really causing this slowdown in spending is that the post-crisis consumer is determined to save, and do it the old-fashioned way. Historically, when rates go down, people save less. In this cycle, things have completely reversed. Over the same stretch of time that the two-year note has gone from 4% to 1%, the savings rate has doubled. There are mountains of evidence to support my thesis. But every Wall Street analyst and the Fed is using the pre-crisis analytical framework to look at an economy that is fundamentally challenged.

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The Buyer of Last Resort

George Gilder

George Gilder

So there we have it. The unicorn buyer of last resort will be the Fed. The “lender of last resort” for the financial system, the governmental guarantor for all the big banks and other “systemically important financial institutions,” the backup reinsurer for windmill Quixotes, ethanol pushers, and solar prospectors, the last ditch for Fannie Mae and Freddie Mac and other mortgage packagers, the default financier for the trillions of dollars of student loans, for veterans’ hospitals, for underfunded pensions and Medicaid reserves of the states, and above all for the proliferating securities and insecurities of the federal government, this same federal fount of funds and faith is also seen as the savior of Silicon Valley. What assures a soft landing for the hang-gliding unicorns is the Fed. Is the ultimate symbol of our predicament not a bailout for middle-class mortgages but a backup of imaginary money for mythical beasts?

Gilder, George (2016-03-28). The Scandal of Money: Why Wall Street Recovers but the Economy Never Does (Kindle Locations 1791-1797). Regnery Publishing. Kindle Edition.