The Great Depression of the 1930s was by far the greatest economic calamity in U.S. history. In 1931, the year before Franklin Roosevelt was elected president, unemployment in the United States had soared to an unprecedented 16.3 percent. In human terms that meant that over eight million Americans who wanted jobs could not find them. In 1939, after almost two full terms of Roosevelt and his New Deal, unemployment had not dropped, but had risen to 17.2 percent. Almost nine and one-half million Americans were unemployed.
On May 6, 1939, Henry Morgenthau, Roosevelt’s treasury secretary, confirmed the total failure of the New Deal to stop the Great Depression: “We are spending more than we have ever spent before and it does not work. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!” (For more information, see “What Caused the Great Depression?“)
In FDR’s Folly, Jim Powell ably and clearly explains why New Deal spending failed to lift the American economy out of its morass. In a nutshell, Powell argues that the spending was doomed from the start to fail. Tax rates were hiked, which scooped capital out of investment and dumped it into dozens of hastily conceived government programs. Those programs quickly became politicized and produced unintended consequences, which plunged the American economy deeper into depression.
More specifically, Powell observes, the National Recovery Administration, which was Roosevelt’s centerpiece, fixed prices, stifled competition, and sometimes made American exports uncompetitive. Also, his banking reforms made many banks more vulnerable to failure by forbidding them to expand and diversify their portfolios. Social Security taxes and minimum-wage laws often triggered unemployment; in fact, they pushed many cash-strapped businesses into bankruptcy or near bankruptcy. The Agricultural Adjustment Act, which paid farmers not to produce, raised food prices and kicked thousands of tenant farmers off the land and into unemployment lines in the cities. In some of those cities, the unemployed received almost no federal aid, but in other cities — those with influential Democratic bosses — tax dollars flowed in like water.
Powell notes that the process of capturing tax dollars from some groups and doling them out to others quickly politicized federal aid. He quotes one analyst who discovered that “WPA employment reached peaks in the fall of election years. In states like Florida and Kentucky — where the New Deal’s big fight was in the primary elections — the rise of WPA employment was hurried along in order to synchronize with the primaries.” The Democratic Party’s ability to win elections became strongly connected with Roosevelt’s talent for turning on the spigot of federal dollars at the right time (before elections) and in the right places (key states and congressional districts).
Powell’s book is well researched and well organized. His chapter titles are a delight. He synthesizes a mass of secondary sources (and some primary sources) in making a strong and persuasive case that the New Deal was a failure and that the Roosevelt presidency, at least in its first two terms — was a disaster. Powell covers all the major New Deal programs; he draws on the research of historians both “liberal” and conservative; and he is nuanced — this is no hatchet job — in that he concedes that some of Roosevelt’s policies, such as tariff revision, were more economically sound than, say, his industrial and agricultural policies.
FDR’s Folly takes its place on the shelf alongside Gary Dean Best’s Pride, Prejudice, and Politics and his more recent Retreat from Liberalism as liberating revisionist works that challenge the long-standing adulation of Roosevelt given by almost all historians. In the most recent Schlesinger Presidential Poll (1997), the historians and “experts” chosen by Arthur Schlesinger, Jr., collectively ranked Roosevelt as the greatest president in American history, even though every other American president had lower unemployment rates than Roosevelt did for his first eight years in the White House. As late as 1999, David Kennedy won the Pulitzer Prize for a book (Freedom from Fear) that largely praised the New Deal as a legislative program and Roosevelt as its author.
With the dawning of the 21st century, we may be witnessing the final departure of Roosevelt’s loyal academic propagandists and those targeted recipients of his federal largess. In such a climate, Jim Powell has given us, with FDR’s Folly, a refreshing, must-read account of the New Deal.
American’s trust in our politicians’ ability to handle domestic and international problems is at its lowest point in more than two decades. A Gallup poll in January showed 35 percent of Americans do not trust the U.S. government to handle domestic problems, and only 41 trust it to handle international problems.
If Americans’ faith could be restored in our politicians’ ability to make prudent decisions, we would no doubt see an increase in trust. To be this trusted politician, the Greek philosopher Aristotle said requires practical wisdom, also called prudence. Such a man or woman must be able to choose the clever choice of action and have good intentions.
There are two components to our choices. One is our moral goal, the other is our practical goal. What moral thing do we want? Good choices not only involve good moral intentions, but they also involve practical decisions that pick through the circumstances to determine the correct action.
Dr. Larry P. Arnn said in his free online lecture at Hillsdale College that prudence “is the facility to calculate circumstances and find and issue true command.” It is practical wisdom about things that are always changing.
“Statesmanship is the scene where practical judgment is demanded intensely all the time,” Arnn said. Things are constantly changing, demanding good judgement of situations.
Practical wisdom is different than knowledge, however. Aristotle defines knowledge as “knowing a thing that is fixed and can be relied on,” Arnn said. Practical wisdom and judgement, on the other hand, are adaptable, as they are about changeable things.
Practical judgement is “a truth-disclosing active condition involving reason that governs action, concerned with what is good and bad for a human being,” Aristotle wrote in “Nicomachean Ethics.” It finds the truth about what to do and then does it. It is key that the judgement fit the circumstance.
We learned in Book One of “Ethics” that something is good only if it fulfills its purpose. A cup is only good if it has a bottom; otherwise it is not a cup. Likewise, a judgement is only good if it fits the circumstance that it is in. It requires wisdom because accurately placing judgement on ever-changing circumstances is difficult.
This is how we can determine a good politician in these always changing circumstances. Those who can calculate means and ends, and can understand evolving circumstances, tend to serve their nations well.
There are three distinctions to practical judgement. Astuteness is understanding the moving parts of a situation but does not issue action. Cleverness does issue action, as it knows how to insert oneself to get what one wants. Prudence, or good judgement, pursues action with good intent.
Arnn pointed to Adolf Hitler and Winston Churchill as examples of cleverness and prudence. Both were lethal individuals who knew how to get their way, yet used their discernment and action for opposite ends. Hitler used his charisma and cleverness for evil ends, while Churchill used his for good.
Alas, astuteness does not guarantee possession of all virtues. Hitler can be considered brave, but not just. To be clever but not prudent is incredibly dangerous. While not many are as dangerous as someone like Hitler, politicians without prudence may only pursue their own gain.
Perhaps our politicians can learn something from Aristotle, and learn to pursue a good beyond themselves and for the country.
If the National Popular Vote drive kills the Electoral College, rural and small town Americans who supply our food and energy will lose their voice.
By USA Today•
Should rural and small-town Americans be reduced to serfdom? The American Founders didn’t think so. This is one reason why they created checks and balances, including the Electoral College. Today that system is threatened by a proposal called the National Popular Vote Interstate Compact, or NPV.
Rural America produces almost all our country’s food, as well as raw materials like metals, cotton and timber. Energy, fossil fuels but also alternatives like wind and solar come mostly from rural areas. In other words, the material inputs of modern life flow out of rural communities and into cities.
This is fine, so long as the exchange is voluntary — rural people choose to sell their goods and services, receive a fair price, and have their freedom protected under law. But history shows that city dwellers have a nasty habit of taking advantage of their country cousins. Greeks enslaved whole masses of rural people, known as helots. Medieval Europe had feudalism. The Russians had their serfs.
Credit the American Founders with setting up a system of limited government with lots of checks and balances. The U.S. Senate makes sure all states are represented equally, even low-population rural states like Wyoming and Vermont. Limits on federal power, along with the Bill of Rights, are supposed to protect Americans from overreaching federal regulations. And the Electoral College makes it impossible for one population-dense region of the country to control the presidency.
This is why Hillary Clinton lost in 2016. Instead of winning over small-town Americans, she amassed a popular vote lead based on California and a few big cities. She won those places with huge margins but lost just about everywhere else. And the system worked. The Electoral College requires more than just the most raw votes to win — it requires geographic balance. This helps to protect rural and small-town Americans.
Now a California millionaire named John Koza is trying to undo this system. He is leading and funding the National Popular Vote campaign. Their plan is to get state governments to ignore how their own citizens vote in presidential elections and instead get them to cast their electoral votes based on the national popular vote. If it works, this will be like getting rid of the Electoral College but without actually amending the Constitution.
California has already passed NPV, along with 13 other states plus Washington, D.C. Nevada, with six electoral votes, could be next. NPV only takes effect if it is joined by enough states that they control 270 electoral votes, which would then control the outcome of all future presidential elections. If that happens (NPV needs 81 more electoral votes), and if the courts do not strike it down, big cities will gain more political power at the expense of everyone else.
The idea that every vote should count equally is attractive. But a quote often attributed to Benjamin Franklin famously reminds us that democracy can be “two wolves and a lamb voting on what’s for lunch.” (City dwellers who think that meat comes from the grocery store might not understand why this is such a big problem for the lamb.) And when you think about it, every check on government power, from the Electoral College to the Bill of Rights, is a restraint on the majority.
The Electoral College makes it even harder to win the presidency. It requires geographic balance and helps protect Americans who might otherwise have their voices ignored. All Americans should value constitutional protections, like the Electoral College, that remind us that the real purpose of government is to protect our individual rights.
Last week, at the invitation of Sen. Ted Cruz, I spoke to the Senate Judiciary Committee about Google’s having placed more than 60 Prager University videos on its restricted list. Any family that filters out pornography and violence cannot see those particular videos on YouTube (which is owned by Google); nor can any school or library.
This statement is as much about what I and PragerU stand for as it is about Google. Those interested in viewing the presentation can do so here:
It is an honor to be invited to speak in the United States Senate. But I wish I were not so honored. Because the subject of this hearing — Google and YouTube’s (and for that matter, Twitter and Facebook’s) suppression of internet content on ideological grounds — threatens the future of America more than any external enemy.
In fact, never in American history has there been as strong a threat to freedom of speech as there is today.
Before addressing this, however, I think it important that you know a bit about me and the organization I co-founded, Prager University — PragerU, as it often referred to.
I was born in Brooklyn, New York. My late father, Max Prager, was a CPA and an Orthodox Jew who volunteered to serve in the U.S. Navy at the start of World War II. My father’s senior class thesis at the City College of New York was on anti-Semitism in America. Yet, despite his keen awareness of the subject, he believed that Jews living in America were the luckiest Jews to have ever lived.
He was right. Having taught Jewish history at Brooklyn College, written a book on antisemitism and fought Jew-hatred my whole life, I thank God for living in America.
It breaks my heart that a vast number of young Americans have not only not been taught how lucky they are to be Americans but have been taught either how unlucky they are or how ashamed they should be.
It breaks my heart for them because contempt for one’s country leaves a terrible hole in one’s soul and because ungrateful people always become unhappy and angry people.
And it breaks my heart for America because no good country can survive when its people have contempt for it.
I have been communicating this appreciation of America for 35 years as a radio talk show host, the last 20 in national syndication with the Salem Radio Network — an organization that is a blessing in American life. One reason I started PragerU was to communicate America’s moral purpose and moral achievements, both to young Americans and to young people around the world. With a billion views a year, and with more than half of the viewers under age 35, PragerU has achieved some success.
My philosophy of life is easily summarized: God wants us to be good. Period. God without goodness is fanaticism and goodness without God will not long endure. Everything I and PragerU do emanates from belief in the importance of being a good person. That some label us extreme or “haters” only reflects on the character and the broken moral compass of those making such accusations. They are the haters and extremists.
PragerU releases a five-minute video every week. Our presenters include three former prime ministers, four Pulitzer Prize winners, liberals, conservatives, gays, blacks, Latinos, atheists, believers, Jews, Christians, Muslims and professors and scientists from MIT, Harvard, Stanford and a dozen other universities.
Do you think the secretary-general of NATO; or the former prime ministers of Norway, Canada or Spain; or the late Charles Krauthammer; or Philip Hamburger, distinguished professor of law at Columbia Law School, would make a video for an extreme or hate-filled site? The idea is not only preposterous; it is a smear.
Yet, Google, which owns YouTube, has restricted access to 56 of our 320 five-minute videos and to other videos we produce. “Restricted” means families that have a filter to avoid pornography and violence cannot see that video. It also means that no school or library can show that video.
Google has even restricted access to a video on the Ten Commandments … Yes, the Ten Commandments!
We have repeatedly asked Google why our videos are restricted. No explanation is ever given.
But of course, we know why: because they come from a conservative perspective.
Liberals and conservatives differ on many issues. But they have always agreed that free speech must be preserved. While the left has never supported free speech, liberals always have. I therefore appeal to liberals to join us in fighting on behalf of America’s crowning glory — free speech. Otherwise, I promise you, one day you will say, “First they came after conservatives, and I said nothing. And then they came after me. And there was no one left to speak up for me.”
Perhaps it’s time for Bernie Sanders to put his money where his mouth is and pay his staffers a “living wage”—and the overtime they should be entitled to.
For all is rhetoric, it may turn out that socialist Sen. Bernie Sanders is just another hypocritical politician who takes money from big corporations, invests in Wall Street and, reportedly, pays his workers “poverty wages” (and NO overtime)—despite the fact that they’re unionized.
Back in March, to show his “pro-union” bonafides, Bernie Sanders made headlines when he encouraged his staffers to unionize with the United Food & Commercial Workers, turning his campaign into the first-ever unionized presidential campaign.
However, as often happens when activists who campaign to dictate standards upon others actually have to live under those standards, things do not always go as planned.
On Thursday, the same day that the House of Representatives passed a bill to raise the federal minimum wage to $15 an hour—which Sanders has long advocated for—the Washington Post ran an article that shed some light on a wage dispute that is currently going on within his campaign.
Apparently, Sanders’ campaign workers are lashing out at campaign management regarding the low wages that they are receiving.
“I am struggling financially to do my job, and in my state, we’ve already had 4 people quit in the past 4 weeks because of financial struggles,” one field organizer reportedly wrote on a message board to Sanders’ campaign manager Faiz Shakir.
Another employee wrote his co-workers “shouldn’t have to get payday loans to sustain themselves.”
Then, there was this interesting statement:
The draft letter estimated that field organizers were working 60 hours per week at minimum, dropping their average hourly pay to less than $13. [Emphasis added.]
As field organizers are paid an annual salary of $36,000 under their new union contract, things would be fine—if they are only working 40 hours per week.
However, it appears they are not.
If they are truly working 60 hours per week (or 3,000 hours per year), on a salary of $36,000, they are only making $12 per hour, instead of the $17.30 they should be making on a standard 40-hour week, 2,080-hours per work year.
Obviously, $12 per hour is far less than the $15 Bernie Sanders claims to support.
However, it’s worse than that.
Based on the article, it also appears that Sanders is not paying overtime.
Under the Fair Labor Standards Act (FLSA) of 1938, employees who are not exempted from the law are entitled to time and one half pay for every hour worked after 40 hours in a given workweek.[Some states (and, more importantly, some union contracts) actually mandate time and one half after eight hours.]
If the Sanders campaign workers are not exempt from the FLSA and are entitled to overtime, they should be making nearly $26 per hour for every hour worked over 40.
Following the 2016 election, the DNC was sued by former field organizers who alleged that the “the state party defendants conspired with one another and with Defendant DNC to unlawfully designate Plaintiffs, and those similarly situated, as exempt employees under the FLSA and applicable state wage statutes, thereby denying Plaintiffs full and appropriate compensation.”
Unfortunately for the DNC’s field organizers, the suit was dismissed in 2018.
In dismissing the overtime suit, according to this summary, “the Court relied on an often-overlooked defense to the Fair Labor Standard Act (“FLSA”) – namely, that the FLSA only covers employees engaged in interstate commerce as opposed to employees engaged in purely local activities. [Emphasis added.]”
That case involved multiple state parties (as well as the DNC)–and not a singular candidate.
In the case of Bernie Sanders, however, a court could determine his campaign to be a singular employer…and, if so, it is definitelyoperating across state lines (interstate commerce).
It is also possible that the new union contract may aid a court in establishing that employees are not exempted from the FLSA. However, neither the campaign, nor the UFCW has released the contract to the public.
Perhaps it’s time for Bernie Sanders to, quite literally, put his money where his mouth is.
By Fox News•
Like most people who follow the news, I’ve seen the difficult stories of families crossing the southern border into the U.S. and how they are treated, no matter if they crossed legally seeking asylum or illegally. My heart breaks seeing little children with no shoes and threadbare clothes clinging to their parents.
What could I do to help? Turns out, quite a lot. Here’s what I experienced on Saturday in Texas at a humanitarian respite center run by Catholic Charities. But first, a little background…
I’m an outspoken pro-life woman. A movie, “Unplanned,” was made about my conversion from Planned Parenthood clinic director to pro-life advocate. While being pro-life is certainly about helping women in crisis pregnancies and caring for their needs, it’s also about helping the most vulnerable, no matter where they are.
Volunteers unloading the truck of supplies at respite center in McAllen, Texas. (Courtesy of the author)
I have eight children, I run a non-profit ministry, and I travel around the world as a speaker — I’m a good multi-tasker. I can help people in my community, in my country and even in other parts of the world.
My friend, Destiny Herdon-De La Rosa, who runs New Wave Feminists, is also a pretty good multi-tasker and came up with the idea to help these immigrants we were seeing in the news. I jumped right in because that’s what a pro-life woman should do.
The Bottles2TheBorder campaign was born from pro-life women who wanted to do more to help others. And we weren’t alone. We created a registry of items needed at the respite center run by Catholic Charities in McAllen, Texas.
Warehouse of supplies in respite center in McAllen, Texas. (Courtesy of the author)
That registry sold out in a matter of days so we created another one, which we had to close because we had too many items to take down there and needed time to sort it all before bringing it to the border.
A man from a local church in Houston heard about our efforts and donated an 18-wheeler to haul the items to McAllen. Over $120,000 worth of items were donated, which was used to purchase water, pull-ups, powdered milk, and a host of other supplies to bring with us.
When we got to the respite center on Saturday there was a press conference with several Democratic members of Congress at the same location.
Destiny Herndon-De La Rosa, New Wave Feminists, unloads water at respite center in McAllen, Texas. (Courtesy of the author)
National media were covering their field trip, which reached its lowest point when aides to the Congressmen and women gave them cheap toys, which they, in turn, gave to the little kids at the respite center in front of all the cameras for the ideal photo op.
They were dressed in starched suits and pressed dresses, pants, high heels, and polished shoes.
I headed into the center in shorts and a T-shirt I had snagged from Groupon, minutes after pumping milk for my six-week-old baby, and walked up to the group after their photo-op because I had something to say.
Abby Johnson (in shorts and black top) speaking with Democratic members of Congress at the respite center in McAllen, Texas. (Courtesy of the author)
I introduced myself and said we had an 18-wheeler arriving at the respite center in the next 20 minutes full of supplies for these poor people, who had nothing and needed help unloading it. I told them their cheap toys and photo op wasn’t helping these people.
Abby Johnson and others getting ready to unload supplies at the respite center in McAllen, Texas. (Courtesy of the author)
If they truly wanted to help, they could lend a hand in unloading the semi-truck in the 102-degree heat with all of us women who came from all over Texas to help.
They looked stunned that someone had the gall to ask them to actually do something, as in not just for the cameras. They told me they couldn’t help because they only had 10 more minutes, which they used to move to the other side of the room and continue their press conference — for another 30 minutes. They told me they “would help,” but they had another press opportunity to get to.
Volunteers line up to get supplies from the truck into the respite center warehouse in McAllen, Texas. (Courtesy of the author)
President Ronald Reagan once said that the most terrifying words in the English language are “I’m from the government and I’m here to help.” He should have added, “…to help and to have a photo op.” This trip to the border wasn’t about politics; it was about people. But seeing those Congressional representatives blatantly use those immigrants for their own political purposes was sickening, especially since there was a legitimate opportunity to do something to actually help them right at the center.
We didn’t give up though. Rep. Vincente Gonzalez, D-Texas, who donated $1,000 to the center, according to the monitor, walked by our 18-wheeler as we were just getting ready to start unloading and we asked him again to help.
Donated diapers for respite center in McAllen, Texas. (Courtesy of the author)
With a dismissive wave of his hand, he smugly said “I’ll send someone” and then walked to his air-conditioned car and left. No one from his office came to help. Are you surprised?
In the end, we had about two dozen women and a handful of awesome men unload the truck. We unloaded it in the smelly back alley next to half a dozen dumpsters to get everything into the back door of the center, up the dilapidated conveyor belt and into the warehouse.
Volunteers unloading supplies into respite center in McAllen, Texas. (Courtesy of the author)
It took us over three hours in 102-degree heat to unload 119,608 diapers, 13,230 bottles of water, 6,660 pull-ups, 30,000 pairs of shoelaces, 16,172 ounces of formula, 420 canisters of Nido powdered milk, 8,100 maxi pads, 3,100 drawstring backpacks, and thousands of deodorant, baby wipes, bottles, nursing supplies, Lysol, Germ-X, hair ties, baby blankets, Dramamine, Tylenol, Advil, DayQuil, and chapstick.
Destiny Herndon-De La Rosa, New Wave Feminists, and Abby Johnson taking a break from unloading supplies at respite center in McAllen, Texas. (Courtesy of the author)
As we walked through the respite center, we saw moms and dads cradling infants and trying to stem toddler tantrums.
We saw wide-eyed children who were perhaps seeing freedom for the first time.
We saw smiling volunteers handing out whatever the families needed.
We were sore and tired and thirsty and probably smelled horrible. But we did something the government couldn’t do — we used whatever resources we had to make something happen for the good of vulnerable human beings. And the offer still stands for elected officials to help us out next time.
It is typical for pundits to criticize the Jones Act claiming that it harms American consumers or benefits others — some even outlandishly claim it benefits Russian President Vladimir Putin. These hypercritical pundits all seem to either overlook or completely ignore a number of critically important facts. In a fact free world, one can come to any conclusion — even silly ones. But when facts and sound reasoning matter, the conclusions must stand up to scrutiny.
The Merchant Marine Act of 1920 (also known as the Jones Act) was passed in the aftermath of World War I to ensure that America had a viable merchant marine that could provide support to our navy and military in times of war or national emergency. It was also intended to ensure that we had a viable ship-building and ship repairing capability — again to support our military. In a world where many foreign nations heavily subsidize their shipping industries as well as their ship building and repairing industries, we must not allow ourselves to become dependent upon other nations to maintain our naval strength.
Contrary to the view that the Jones Act is favored by despots like Vladimir Putin, the act has significant national security benefits for the U.S. Consider the Vice Chairman of the Joint Chiefs of Staff Gen. Paul Selva, who said, “I am an ardent Supporter of the Jones Act. It supports a viable ship building industry, cuts costs and produces 2,500 qualified mariners. Why would I tamper with that?” Likewise, Former Coast Guard Commandant Adm. Paul Zunkunft has said, “You take the Jones Act away, the first thing to go is these shipyards and then the mariners… If we don’t have a U.S. fleet or U.S. shipyard to constitute that fleet how do we prevail?” The military understands that the Jones Act is critically important to our national security.
History teaches an important lesson. In 1812, Napoleon left France with an army of about 700,000 soldiers. Napoleon’s army easily pushed through western Russia and made it all the way to Moscow. But as Napoleon’s supply lines became attenuated, his army lacked the ability to feed and supply itself. Napoleon, despite having the world’s greatest army, was defeated because he couldn’t supply his troops. When he returned to France six months later, his army had only 27,000 soldiers who could defend France and the balance of power in Europe was radically altered for a century.
The lesson we must learn from this is obvious — we may have the best technology and the best trained military on the planet, but if we cannot properly supply them, we too could meet with disaster. The Jones Act is an important part of our military’s ability to supply itself.
In a world in which China and Russia are expanding their naval capabilities, the need for the Jones Act is all the greater. Putin would like a weaker America, not a strong America – with a functioning domestic shipping industry to support our nation’s military strength.
The Jones Act also has a significant impact on homeland security. It limits foreign flagged ships and foreign crewed ships from sailing around America’s inland waterways. Dr. Joan Mileski, head of the Maritime Administration Department at Texas A&M, said, “If we totally lifted the Jones Act, any foreign-flagged ship — with an entirely unknown crew — could go anywhere on our waterways, including up the Mississippi River.” Obviously, this would make our defenses very porous.
Since 9/11/2001, our homeland security approach has been to place most of our security resources and assets at our coasts and at the ports that have the most traffic. But few assets and resources are used along the more than 25,000 miles of navigable inland waterways in the United States. There we rely upon the Jones Act to provide security. American flagged and American crewed ships are trained and keep a watchful eye for signs of terrorism and are thus an important part of our nation’s homeland security layered defense.
Our southern border is 1,989 miles long. The U.S. has more than 25,000 miles of navigable waters. Without the Jones Act, we’ve just made both sides of every river a possible entry point. Michael Herbert, Chief of the Customs & Border Protection’s Jones Act Division of Enforcement has said: “We use the Jones Act as a virtual wall. Without the Jones Act in place, our inland waterways would be inundated with foreign flagged vessels.”
The truth is the Jones Act is more important today than even when it was first passed. Today, it not only provides America with trained and skilled mariners and a viable ship building and ship repairing capability to support our military and Navy, but it also protects us from terrorists and other nefarious international bad actors.
Imagine if Chinese government owned ships could operate freely up and down the Mississippi River and remain there throughout the year. They would use that access to spy and intercept even civilian communications.
Adam Smith, the father of free market economics, in his seminal work — The Wealth of Nations — strongly supported and defended the British Navigation Act, which was a cabotage law much like America’s Merchant Marine Act. His rationale included, “The defense of Great Britain, for example, depends very much on the number of its sailors and shipping.”
The Jones Act protects America. This is a verifiable fact. Any alleged costs are amorphous and difficult to verify or prove. But what is not difficult to prove is that America’s security is benefited and protected by the Jones Act. The world is a dangerous place, filled with adversaries that will be all too happy if the Jones Act is weakened. It is time tested and proven.
A new proposal under discussion by the Senate Finance Committee is a perfect example of the folly of trying to centrally design the economy — in this case by a ham-handed attempt at price controls.
The proposal, from Sen. Ron Wyden (D-OR) and under consideration by Chairman Chuck Grassley (R-IA), would change the Medicare Part D prescription drug rebate to penalize drugs whose prices rise faster than the rate of inflation.
It’s ironic the proposal targets Part D, one of the few islands of economic sanity to be found in the health care sector, which, beset by rampant government intervention, suffers from a wide variety of perverse unintended consequences.
Part D is one of the few government health care programs to successfully foster price-based productivity increases. In most parts of the economy, over time, prices go down and quality goes up, due to increases in productivity. The underlying mechanism driving this is competition.
One sign of how successful Part D has been in wielding competition is that in its first decade of existence, it cost over 40% less than what the Congressional Budget Office estimated it would, a historical and underappreciated achievement.
Tacking on feel-good, one-off pricing rules like Wyden’s “faster than inflation” penalty could easily disrupt the market-based dynamics that enabled Part D to flourish in the first place.
It’s just silly to think that something as complex, distributed and organic as a worldwide market for pharmaceutical drugs could be controlled by something as ramshackle as a “faster than inflation” rule.
Consider the variety of pricing mechanisms that exist in well-functioning markets. In retail, there are coupons, package deals, membership plans and other discounts. In the stock market, there is the “continuous auction,” providing ongoing price discovery that can react to new information in a matter of seconds.
Amazon’s server rental business offers clients a tremendous range of pricing options, split by eighteen datacenter regions, dozens of server types, and several tiers of availability.
There is a whole world of financing, from store-offered, no interest payment plans to credit cards to mortgages. Stores employ all manor of psychological pricing tricks, such as charging 99 cents instead of $1. One of the more incredible such tricks, which would be hard to believe without the well-established research backing it up, is that prices that contain fewer syllables (when read out loud) are more attractive than those with more syllables. For instance, $28.16 (five syllables) is better than $27.82 (seven syllables).
The incredible diversity in pricing practices stems from the decentralized nature of the market. You could never ask a single committee, or even a large organization, to come up with this level of creativity and variety on its own. It’s only from the organic interaction between millions of businesses and billions of customers, each expertly seeking their own interests, that it can ever arise.
You might compare Wyden’s “faster than inflation” proposal to the fences in Jurassic Park — “life finds a way,” as Dr. Ian Malcolm tells us, foreshadowing the inability of the park to contain the beasts contained within. Except, at least the 40-foot electric fences were a good faith effort. Wyden’s proposal is more like if they attempted to keep the T-Rex at bay with only the thin walls of the bathroom hut the hate-able lawyer ran and hid inside, shortly before becoming a dinosaur’s dinner.
In other word’s this “faster than inflation” rule is a laughable, pitiful attempt at something that isn’t even achievable by the most expert, determined effort — something like, say, the Soviet Union, which tried, and failed, to put price controls into practice at super power scale.
But that’s not to say it can’t do harm. At the very least, it will increase the cost of participating in the market, both in terms of compliance costs, and in the changed incentives and their inevitable unintended consequences. For example, a company that requires more revenue to survive might raise the prices slightly on all its products, instead of steeply on just one. How this all plays out is impossible to predict. What can be said for certain is the market’s “logic” would now be less about providing the most value for customers at the lowest price, and now more about the political ramifications of pricing decisions.
More specifically, as it relates to the Part D drug market in particular, the rule could crowd out existing rebates negotiated by the plans buying the drugs. Many plans have already secured “price protection rebates” which kick in if prices increase more rapidly than some agreed-upon threshold. In other words, the market has already invented, in a much more sophisticated and dynamic way, the “faster than inflation” rule on its own.
The worst case scenario is more dire. Generally speaking, fostering well-functioning markets in the health care sphere is exceedingly difficult, given the immense government intervention at every level. Part D’s success in doing so is nearly unique. Additional rules that make supply and demand less important to how the market functions could result in it ceasing to function as a market entirely. It certainly would not be the first time the government accidentally killed a market.
Wyden’s proposal exemplifies the folly of centrally-designed price controls. It will harm one of the only well-functioning parts of the federal government’s health care policy. For those reasons, Chairman Grassley and Committee Republicans should cast it in the dustbin of bad socialist ideas.
This essay is part of a RealClearPolicy series centered on the American Project, an initiative of the Pepperdine School of Public Policy. The project looks to the country’s founding principles to respond to our current cultural and political upheaval.
The Declaration of Independence served a dual function at the momentous occasion of its adoption, July 4, 1776. The first was that it was the issuance of a statement of political independence containing within it a rational defense of our dramatic break with the government of Great Britain and its unaccountable king. The second, however, was the annunciation of the principles animating that declaration. According to the Founders, it was the violation of these principles that justified separation; their defense demanded the birth of a new nation.
These principles are outlined in the document’s most famous line: “We hold these truths to be self-evident, that all men are created equal, that they are endowed with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” The rights to life and to liberty suggest the autonomy of the individual, whereas the statement that men are created equal highlights the universal dignity of all. The dynamic tension between these two principles, liberty and equality, underlies the ongoing left-right dialectic that has characterized American politics from the beginning. For this reason, it may be easy to overlook the last phrase in this statement, “the pursuit of Happiness.” It reads to modern eyes, perhaps, like a poetic after thought to the weightier philosophical statements that precede it. Yet it is in the pursuit of happiness that we are called upon to exercise the virtues needed to weave the fabric of a nation.
It is the role of virtue in realizing happiness through community — especially a community of free and equal citizens — that conservatism should remind us of today.
What is virtue? Before offering an answer, it is worth noting that it is a term that exists in our moral vocabulary today largely as an artifact of classical literature and our Christian heritage — rather like a poetical term sapped of substantive meaning. We think of moral questions today predominantly in deontological or consequentialist terms, rather than in terms of the virtues. Deontological ethics holds that an action is right or wrong depending on whether it conforms to some rule or maxim (“It is always wrong to do X,” “It is my duty to do Y.”). Consequentialism, by contrast, holds that we should evaluate an action based on its outcomes or consequences. In the political sphere, we often waver between these two, incompatible approaches to moral questions.
Take just about any debate in the realm of policy. The right to own a firearm or the right to health care is often met with arguments about why such alleged rights may or may not be practical. The right to bear arms makes it too easy for bad actors to buy guns; universal health care is too expensive or will have other harmful consequences, etc. Some oppose abortion on the basis of the right to life for unborn children, whereas opponents object with practical arguments about the difficulty of raising children in certain conditions. These disagreements, however legitimate, leave us speaking conflicting moral languages that offer no path to resolution. More importantly, both moral languages overlook the importance of moral character, which is what yields meaningful happiness and establishes the basis of flourishing community.
The virtues are habits of moral character. In the classical tradition, these include such qualities as fortitude or courage, prudence, temperance, and justice. The Christian tradition adds the “theological virtues:” faith, hope, and charity (love). We might easily add qualities such as honor, nobility, fairness, equanimity, and wisdom (the cornerstone of the good life, according to Aristotle). According to the tradition of virtue ethics, we should aspire to cultivate these habits, which conduce to lives of human flourishing, rather than basing our actions on rules or consequences.
This classical understanding informed the founding of the United States. Though the empirical orientation of the Enlightenment had much to do with setting us on a course away from virtue as the ground of morality, the founding fathers nevertheless recognized the indispensability of moral virtue in securing the project of liberty, representative government, and the pursuit of happiness. As Benjamin Franklin put it: “Only a virtuous people are capable of freedom. As nations become more corrupt and vicious, they have more need of masters.” Or Thomas Jefferson: “A nation as a society forms a moral person, and every member of it is personally responsible for his society.” Or, finally, George Washington: “There is no truth more thoroughly established, than that there exists … an indissoluble union between virtue and happiness.”
This is not to downplay the glaring vices present in American society at the founding. The point is that the Founders were at least minimally aware of the vital role virtue plays in establishing a political society capable of securing individual liberty and the common good. Whence the motivation for John Adams’ saying: “Public virtue cannot exist in a nation without private, and public virtue is the only foundation of republics.”
American society today has reaped the benefits of a prosperous economy aided by a political system that is the legacy of previous generations of Americans bound by more than the pursuit of riches. Indeed, the political liberalism of the Enlightenment has had much to do with the quest for a more egalitarian society in America, rooted in the dignity of the individual. However, the moral basis not merely of the Founding but also many of the great periods of moral progress in our history since the Founding can be traced to a religious consciousness that has stirred popular demands for social reforms, expressed through a moral language preserved by a Christian culture far older than classical liberalism.
Examples of this include the Abolitionist Movement, the Women’s Suffrage Movement and the Civil Rights Movement. William Lloyd Garrison, apart from Frederick Douglass perhaps the most well-remembered figure of the late abolitionist movement, might be described as less orthodoxly Christian than some of his peers in the movement. Yet, he could not have been more Christian in the framing of his moral arguments against slavery and the institutions that abided it, decrying both South and North in the years preceding the Civil War for their complicity:
The reason why the South rules, and the North falls prostrate in servile terror, is simply this: with the South, the preservation of slavery is paramount to all other considerations above party success, denominational unity, pecuniary interest, legal integrity, and constitutional obligation. With the North, the preservation of the Union is placed above all other things-above honor, justice, freedom, integrity of soul, the Decalogue and the Golden Rule-the infinite God himself.
Such language leans heavily upon conceptions of virtue harvested from Christian ethical teachings. Similarly, the sermons of Quaker minister and women’s rights activist Lucretia Mottemphasized the ethical substance of New Testament teachings against dogmatic interpretations that justified the subjugation of women, emphasizing religious behavior over rigidity of doctrine.
The nonviolent philosophy of Martin Luther King, Jr., should be understood as the application not only of the methodology of Gandhi but also the moral substance of the Gospels. “Christian love” demanded more than a belief in equality. One of the most important and distinguishing elements of nonviolence, according to Reverend King, was that it “avoids not only external physical violence but also internal violence of spirit. The nonviolent resister not only refuses to shoot his opponent but he also refuses to hate him. At the center of nonviolence stands the principle of love.” Love was not only the preeminent value but also the preeminent virtue of the Nonviolent Civil Rights Movement. The embrace of love as a virtue required the embrace of attendant virtues such as patience, courage, forgiveness, humility, and the suite of moral attributes that lent such ethical force to the work of King and those who followed his moral path.
If the importance of virtue is evident in great social movements it is also visible in the ideational edifice of America’s long-standing institutions. The United States Armed Forces is not merely as a functional organization that safeguards our national security, it is also, at its best, an institution that models and cultivates in its soldiers many of the virtues that we associate with what is most admirable in the American character. “The Army Values” lists seven key virtues that soldiers are trained to adhere to: loyalty, duty, respect, selfless service, honor, integrity, and personal courage. In a similar way, the judicial oath taken by every judge or justice of the United States requires that they “administer justice without respect to persons, and do equal right to the poor and the rich,” and to do so “faithfully and impartially,” clearly implying the virtues of faithfulness and impartiality as necessary to the moral character of a proper judge or justice. Even the traditional etiquette of reference that attends the addressing of members of congress (‘the honorable senator…’) expresses the hope that our elected officials possess, or should be held accountable to, the virtue of honor.
It may not be an exaggeration to say that virtue alone serves as the enforcer of all social contract and civic obligation. There are practical arguments that may justify the existence of our institutions, and there are rules, more or less reasonable, that might compel certain behavior from individuals or groups. But if the inward motivation to act in accordance with these rules or to seek the common good through participation in these institutions is lacking, what prevents any of us from subverting our institutions and social relationships for our own gain or becoming altogether alienated from them and one another?
The institution of marriage requires its participants to practice the virtues of selflessness and fidelity in order for it to be sustained. To be a proper friend, one must exhibit the qualities of understanding, patience, and helpfulness. To be a good parent, educator, or really anyone in a position of authority, one must be temperate, fair-minded, and balanced. To be a good student, employee, or soldier, one should be humble and coachable. To be a good leader, one ought to have courage, integrity, and, perhaps, even nobility.
Virtue, as opposed to legal compulsion or mere rationality, forms the basis of genuine interpersonal and social trust. The more we are able to see in and demonstrate for each other those habits of character necessary for flourishing, the more we find ourselves able (as both a reflection of our own virtues and those of our fellows) to collaborate with others, bear with each other’s faults, accept each other’s legitimate authority, and refrain from doing one another harm, whether out of fear, contempt or ambition.
Individual virtue breeds communal virtue, and vice versa, making virtue the great nourisher of our social fabric. If virtue seems to be vanishing from our social, political, and cultural spheres — if it is no longer something that we even pretend to demand of our politicians — this may be because virtue is vanishing from our moral language. At a moment when our political discourse is increasingly limited to our commitments to equality or individualism, and the policies they may seem to imply, American conservativism would do well to reintroduce the virtues into our moral vocabulary — those inward qualities of moral character have always formed the basis for our national excellence and our political community.
Ezra Klein thinks it’s “ridiculous” to ask Democratic presidential candidates whether they want to abolish private health insurance. It’s supposedly ridiculous because the correct answer isn’t yes or no, but “it depends.”
Several of the Democratic candidates have endorsed Senator Sanders’s Medicare for All bill. Klein takes up the subject:[I]f you assume both the generosity and the financing of Sanders’s plan, there’s really no reason to debate private insurance. If the government will cover everything, with no copays or deductibles or hidden forms of rationing, then there’s no need for private coverage. . . .[Sanders’s bill] doesn’t actually abolish private insurance. It outlaws “health insurance coverage that duplicates the benefits provided under this Act.” If the proposed benefits contracted during the legislative process, it would open more room for private insurers to enter the system. So even Sanders’s answer to this question isn’t truly “yes” or “no.” It depends on what’s covered, which in turn depends on how much Americans are willing to pay in taxes.
Klein then lists questions that he thinks debate moderators should be asking instead: Would your plan include cost sharing at the point of service, how would prices be determined, and so on. They’re not bad questions. But neither is the question about outlawing private insurance. In the first place, whether the Sanders proposal would change in the legislative process is irrelevant to the question of what the candidates are seeking. Their endorsement tells us the answer to that question. It is also hard to picture the Sanders proposal changing so much that anything like the private health-insurance policies that scores of millions of Americans now rely on could survive.
Several candidates — Gillibrand, Warren, Sanders, Harris, and probably a few others I’ve forgotten — have endorsed, of their own free will, making it illegal for Americans to buy the kind of insurance most of them now have. Americans should be informed about what Democratic health programs will look like. They should know as well whether they’ll have a choice about participating.
The savage beating of journalist Andy Ngo in Portland by far-left antifa rioters last Saturday shocked everyone. Well, conservatives anyway, plus a few honorable liberals. As the police stood by watching at a distance, masked thugs hit him, stole his camera and threw milkshake, rocks and eggs at him. He ended up in the hospital with a brain hemorrhage.
Criminal laws are supposed to deter criminal behavior. But that only works when the criminal gets caught and punished, and when people are permitted to hide their identities behind a mask, as antifa thugs are, no one gets caught.
Portland’s mayor, Ted Wheeler, has vowed to hold the offenders accountable. Let us know who the perpetrators are, he asked, and the city would hold them accountable — a supremely useless plea when dealing with a largely masked and anonymous group.
The antifa slogan in Portland is “we own the streets.” And they do. The city has let it happen. Last October, they blocked a street and threatened drivers and passers-by who wanted to get through. A few months before that, they beat up a Bernie Sanders supporter who was carrying an American flag.
And it isn’t just Portland. We saw similar brutality in Washington, during President Trump’s Inauguration. Hundreds of rioting antifa members took over downtown DC. They marched in black bloc fashion, five abreast, their faces wholly covered, smashing windows and pushing people off the sidewalk. The police arrested 234 people, but not one of them was found guilty.
It’s the masks that save them. They’re a get-out-of-jail-free card. Deterrence doesn’t work when you can hide your identity. That’s a lesson we should have learned from the Ku Klux Klan.
Thanks to the masks, antifa won’t pay a cost. Instead, they will luxuriate in their sense of justified political hatred. They will also have the backing of prominent apologists in the liberal establishment, including Minnesota Attorney General Keith Ellison, who endorsed the antifa handbook, and CNN’s Don Lemon, who said in defense of the group that “no organization is perfect.”
Best of all for antifa, their actions have an effect. They are letting conservatives and even dissident liberals like Ngo know that they aren’t safe in Portland.
Mind you, that only works if the state is complicit. And when the city abandons its duty to protect its citizens, its inaction amounts to permission.
Mayor Wheeler is picky about the people he will protect. When a federal immigration building was surrounded by protesters last summer, its workers feared for their safety. But the mayor supported the protesters, and, following his orders, the local police refused to take sides.
The Immigration and Customs Enforcement workers were effectively imprisoned in their building until federal forces from Homeland Security arrived to rescue them. When it was over, Homeland Security installed a “no-climb” fence to protect the ICE workers, to which the city objected because it was too high.
Wheeler says he is against violence. But the hooded antifa riots are still tolerated. The Portland police chief wants to ban masks, but fat chance the state will pass such a law, against protests by civil libertarians. And an anti-mask law isn’t necessary. The state already has a perfectly suitable remedy, in its anti-riot law. A person commits the crime of riot if, while participating with at least five other people, he engages in tumultuous and violent conduct and thereby intentionally or recklessly creates a grave risk of causing public alarm.
I can’t think of a better definition of the antifa method of operation.
After Ngo was beaten, the police declared a riot. Next time, the riot should be declared the moment hooded antifa protesters show up. But Wheeler won’t let that happen. That would get in the way of antifa’s free-speech rights, he thinks.
Evidently, it’s time for the federal government to step in — and crack down. It has had to do so in the past, especially during the civil rights era in the South.
There’s a federal law against conspiring to injure or intimidate a person in the free exercise of enjoyment of his rights or privileges, and I should think the elements of the offense are complete the moment the antifa goons show up in Portland.
What’s missing is the will to protect ordinary citizens, and since the city of Portland won’t do so, it’s time for federal marshals or the FBI to step in.
On Tuesday night my CNN colleague Chris Cuomo correctly asserted that I, and people like me, embrace terms such as “nationalist” and “America First” — phrases that are, in his view, “stained.” He challenged me to provide an example of “nationalism that was positive and not oppressive to another.” My immediate answer was “American nationalism,” to which he responded, “There’s no American nationalism.”
It is abundantly clear, of course, that American nationalism is a real thing. We can consider, of course, the merits of this ideology, but we cannot honestly litigate its existence. Our TV debate that night revealed a foundational chasm that is magnified in our political discourse. For those of us embedded in the widespread 2016 movement toward sovereignty, a muscular return to nationalism forms a prerequisite for economic fairness and the diffusion of power. Conversely, the “resistance” views nationalism as a retrograde parochialism that usurps the allegedly enlightened internationalism that has dominated policy and thinking among elites of government, big business, academia, and the media for several decades.
But instead of confronting American nationalism on its actual tenets, the Democratic Party and mainstream media complex smear the movement as inherently racist and evocative of oppressive fascism. For example, permissive immigration advocates assail U.S. border enforcement as intrinsically racist. During that CNN discussion, my colleague Angela Rye insisted that the motivations of people — like me — who desire stronger border protection flow from “fear that white people are losing their power in this country. That is what is driving this. White fear. What is what is driving this. It is racism.”
In addition to slandering me, a Hispanic and immigrant son, as motivated by “white fear,” Miss Rye’s diatribe conveniently overlooks the clear reality that America is not a race. American citizenship pays no regard at all to color. In point of fact, protecting America from illegal alien trespassers proves particularly crucial for Americans of color, who suffer disproportionately from the ravages of mass illegal immigration, including unfair labor market competition and totally preventable street crime from dangerous troublemakers mixed among the migrants.
Rye then extended the verbal attacks. She echoed the alarmism of Rep. Alexandria Ocasio-Cortez, warning that, by operating detention facilities for border trespassers, America heads down a road that leads to “death camps” like those operated by Nazi Germany. I wish that such inane hyperbole could be dismissed as a radical outlier but, in fact, such comparisons have become all too common in the mainstream media since President Trump’s election. For example, MSNBC’s Donny Deutsch admonished “Morning Joe” viewers that “if you vote for Trump then you the voter – you, not Trump – are standing at the border like Nazis.”
In this effort, agents of the left deliberately conflate American nationalism with the rancid ethno-fascist history of the Axis powers. The latter built political bonds based on blood and soil, focusing on racial purity and cross-border military conquest. In direct contravention to such evil, American nationalism discounts heritage and genetics. As a nation of immigrants, our founding instead focused almost totally on shared beliefs, on our creed as enunciated in the Declaration of Independence: “we hold these truths…” There is no DNA test for American nationalism; it is, rather, a commonality of believers. Among these beliefs are the principles of pluralism, religious liberty, free-market economics, respect for our Constitution, and reverence for our great flag.
In addition, quite unlike the expansionist ethos of ethno-fascism, American nationalism, properly understood, seeks protection of our interests with a minimum of U.S. intervention abroad. Whereas actual fascists overrun borders and abuse the prerogatives of sovereign nations, our nationalism strives to protect the integrity of our borders. In such efforts, we fulfill the teachings of a very famous nationalist, Mahatma Gandhi. As leader of the Indian Nationalist Movement, he once remarked that “our nationalism can be no peril to other nations inasmuch as we will exploit none, just as we will allow none to exploit us.”
America First stipulates that we, like any proud people, place our country’s own self-interest before the goals of multinational structures. I believe this aspect of American nationalism drives much of the visceral disdain displayed by the globalist elites. Luminaries of media and big business, for example, have thrived in a multilateral world, and largely find stronger bonds with journalists or executives in Paris, France than with the people of Paris, Texas. These cronies, therefore, recoil at the notion of enlightened nationalism and consequently seek to delegitimize it as somehow racist and despotic.
But these privileged influencers should stop this dishonest disparagement. They should also look beyond their narrow self-interest and instead acknowledge the incredible benefits both here and abroad from an America motivated by a rational, mature, and edified self-interest. To channel Teri Hatcher’s famous breakup line to Jerry Seinfeld way back in 1993: American nationalism: It’s real … and it’s spectacular!
"This is the flip side (of) tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?" said New York Governor Andrew M. Cuomo on Feb. 4
After the Trump tax cut went into effect one year ago, we predicted that the Trump tax reform would supercharge the national economy but could cause big financial problems for the highest-tax states: New Jersey, Illinois, Connecticut, and New York.
The capping of the state and local tax deduction at $10,000 raised the highest effective state tax rates by about 66% (for example, in New York City, the rate on millionaires rose from about 8% to 13.3%). In New Jersey, the highest rate has risen from 7.5% to 12.75%.
Now, we have Andrew Cuomo conceding that the trend of rich people moving out of New York has caused the loss of $2.3 billion of tax revenue in Albany’s coffers. Cuomo called this tax change “diabolical.” We think it was a matter of tax fairness. No longer do residents of low-tax states have to pay higher federal taxes to support the blob of excessive state/local spending and pensions in the blue states.
As we predicted, the wealthy are fleeing these states. The new United Van Lines data were just released that are a good proxy for where Americans are moving to and from. Guess what four states had the highest percentage of leavers in 2018: 1) New Jersey, 2) Illinois, 3) Connecticut and 4) New York. Even high-tax California had more Americans pack up and leave than enter.
Ironically, liberals like Cuomo who argued for years that businesses don’t make location decisions based on taxes in their states are now forced to admit that the cap on the state and local tax deduction (which primarily affects the richest 1%) is depleting their state coffers. The rich change their residence by moving for at least 183 days of the year to low taxers such as Arizona, Florida, Tennessee, Texas and Utah.
We advised Cuomo and other blue state governors to immediately cut their tax rates if they wanted to remain even semi-competitive with low-tax states. They are doing the opposite. Connecticut, Illinois and New Jersey have led the nation in tax increases on the rich over the last three years, while “progressives” have cheered them on.
Last year, legislators in Trenton went on a taxing spree, raising the income tax on those making more than $5 million a year to 10.75% — now the third-highest in the country — and then enacting a health care individual mandate tax on workers, a corporate rate increase and an option for localities to impose a payroll tax on businesses. And they are still short of cash. Idiotically, these tax hikes were passed after the state and local tax deduction cap was enacted, thus pouring gasoline on their fiscal fires.
How has this worked out for them?
In addition to New York’s fiscal woes, the deficit in Illinois is pegged at $2.8 billion (with a $7.8 billion backlog of unpaid bills), and Connecticut faces a two-year $4 billion shortfall despite three tax increases in five years.
New Jersey has a $500 million deficit this year (even after the biggest tax hike in the state’s history) and Moody’s predicts that gap will widen to $3 billion over the next five years. This is all happening at a time when most states have healthy and unexpected surplus revenues due to the Trump economic boom and the historic decline in unemployment.
A Pew study published late last year on which states are bleeding the most red ink ranked New Jersey worst, Illinois second worst and Connecticut seventh worst. New York was also in the bottom 10.
Let us state this loud and clear in the hopes that lawmakers in state capitals across the country are paying attention: The three states that have raised their taxes the most now have the worst fiscal outlook.
Worst of all, things don’t look like they are going to get better in any of these states.
Last fall, Connecticut, Illinois and New Jersey voters elected mega-rich Democratic Govs. Ned Lamont, J.B. Pritzker and Phil Murphy, who have promised to sock it to the rich — the ones who haven’t yet left. In Illinois, Pritzker would eliminate the state’s constitutionally protected flat tax so that he can raise the income tax on the rich by as much as 50%. After raising income taxes three times in the last five years, Connecticut’s legislature now wants to raise the sales tax rate. No one in any of these progressive states even dares utter the words tax cut. In just one decade, New York lost 1.3 million net residents; Illinois 717,000, New Jersey 516,000 and Connecticut 176,000. California has lost 929,000.
There is also a useful warning for the soak-the-rich crowd of progressives in Washington. If a rise in the state tax rate from 8% to 13% because of the state and local tax deduction cap can have this big and immediate negative impact, think of the economic carnage from doubling of the federal tax rate from 37% to 70% as some want to do. The wealthy would relocate their wealth and income in low-tax havens like Hong Kong, the Cayman Islands and Ireland. That would do wonders for the middle class living in those countries.
We are sticking with our warnings from last year. If the four states of the Apocalypse — Connecticut, Illinois, New Jersey and New York — do not reverse their taxing ways and choose to keep making things worse, these once very rich and prosperous states will see thousands more rich taxpayers leave. The politicians in these states just don’t seem to understand math. A soak-the-rich tax rate of 8%, 10% or even 13% on income of zero yields zero income when the wealthy leave the state. Cuomo was right: The bleak outlook for the four states of apocalypse is “as serious as a heart attack.”