I've ranted incessantly about entitlement programs, but Phil Gramm and Jodey Arrington take to the op-ed page of the Wall Street Journal with a contrarian view: Welfare Is What’s Eating the Budget.
Ask any budget expert in Washington to explain the ballooning deficit and debt, and Social Security and Medicare will be high on the list of causes. That’s wrong. The real driver, the elephant in the room, is means-tested social-welfare spending—Medicaid, food stamps, refundable tax credits, Supplemental Security Income, Temporary Assistance for Needy Families, federal housing subsidies and almost 100 other programs whose eligibility is limited to those below an income threshold.
True, Social Security and Medicare are a drain on general revenue and will become big fiscal problems if not reformed. But they aren’t the major source of our current fiscal crisis, because both are financed in large part by dedicated payroll taxes. Since its inception, Social Security has produced cash surpluses 60% of the time. In 2023 Social Security payroll taxes funded 88.9% of benefits. The cost of Social Security’s Old-Age, Survivors and Disability Insurance program, net of payroll tax collections, was only $88.1 billion. Medicare payroll taxes and premiums funded 49.7% of Medicare expenditures, producing a net cost of $509 billion.
Means-tested social-welfare spending totaled $1.6 trillion in 2023. Welfare spending now absorbs an astonishing 72.6% of unobligated general revenue (total revenue net of Social Security and Medicare payroll taxes and premiums and mandatory interest on the public debt) and is larger than the claims against unobligated general revenue by Social Security (4.1%), Medicare (23.5%) and defense (37.2%) combined.
Further fun fact:
After counting all transfer payments as income to the recipients and taxes as income lost by taxpayers, and adjusting for household size, the average households in the bottom, second and middle quintiles all have roughly the same incomes—despite dramatic differences in work effort.
That's huge. Why work?
Also of note:
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Of course he did. I'm bored by all the debate post-mortems, but Reason's Emma Camp noticed something non-boring: Trump Threatens ABC's Broadcast License After Rocky Debate Performance.
Former President Donald Trump gave a floundering, erratic performance in last night's debate. However, he's blaming an unlikely culprit for his uninspiring showing: ABC News.
"ABC took a big hit last night," Trump said during an interview on Fox and Friends Wednesday morning. "I mean, to be honest, they're a news organization. They have to be licensed to do it. They ought to take away their license for the way they did that."
According to The Hill, ABC and other large networks don't have or need Federal Communications Commission (FCC) licensing. Trump's call to shut down ABC is simply another in a long line of preposterous, dubiously legal, claims that his enemies should face government crackdowns—which, just recently, have ranged from calls to throw in jail everyone from flag-burners to "Lawyers, Political Operatives, Donors, Illegal Voters, & Corrupt Election Officials," who allegedly caused his 2020 defeat.
Trump and Kamala seem to be in a furious competition to see who can disgust me more.
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Both candidates are awful on this too. At the Dispatch, Scott Lincicome lists Tariff Myths, Debunked. For example, Myth 1 is "Foreigners Pay Protective Tariffs". Nope.
Perhaps the silliest of all tariff myths is the one Donald Trump keeps repeating. By law, a U.S.-based person or company importing a product into the country will be liable for paying any tariff (tax) owed on that product. In theory, however, the ultimate burden of those taxes—who actually pays—will depend on whether a foreign seller wants to stay in the U.S. market so much that he’s willing to lower his price enough to offset any tariff amount being applied to his product. In the case of, say, a 25 percent tariff on a widget that used to be sold for $100, a foreign widget seller could lower his price to $80 to offset the $20 in new tariffs that a U.S. importer paid when it entered the country, thus keeping the widget’s total price at $100. (American consumers rejoice!) However, if the foreign seller doesn’t lower his price, then someone in the United States will ultimately be paying the tariff (so, $25 on a $100 widget), with no exceptions. (The Tax Foundation’s Erica York patiently walks through these choices in a recent Cato Institute essay.)
How tariffs’ “economic incidence” shakes out in the real world will depend on lots of things, such as an exporter’s profit margins, the type of product, and whether there are reasonable alternative markets or products available elsewhere in the world. And it’s not all or nothing—often importers and exporters share a tariff burden.
For Trump and his fellow American protectionists, however, there are two big problems with the “foreigners always pay” argument. First and foremost, a tariff paid by foreigners can’t also protect domestic manufacturers (like Trump says his tariffs did) because the total import price ($100 in the example above) won’t change after the tariff is applied and thus won’t change the purchasing decisions of still-price-conscious Americans. Thus, George Mason University economist Don Boudreaux explains (emphasis mine):
A protective tariff serves its purpose only if the importer passes on at least part of that cost to its customer. The very purpose of tariffs is to increase demand for domestically produced goods by raising the prices that consumers pay for imports. A tariff that doesn’t raise prices paid by consumers doesn’t protect domestic producers.
You can’t have it both ways.
Second, we now have piles of real-world evidence showing that American companies and individuals bore almost all the Trump-era tariffs’ economic burdens, whether as additional import taxes or higher prices of both foreign and domestic goods (more on the latter in a sec). Along with the many first-person accounts of companies and individuals paying these tariffs and often passing them on to U.S. consumers, York summarizes the extensive economic research showing a “near complete pass-through of the 2018–2019 tariffs”—on steel and aluminum, on Chinese imports, on washing machines, on solar panels—to American companies and consumers.
That's a long excerpt, but it's a long article. Lincicome has Myths 2-9 as well:
- Protective Tariffs Don’t Increase U.S. Prices
- Tariffs Made America Great
- Tariffs Can Reduce the Trade Deficit
- U.S. Tariffs Can Boost the U.S. Economy on Net
- American Manufacturing Needs Tariffs to Compete
- America Has No Tariffs, While Every Other Country Has Tons
- Tariffs Are Good and Effective Negotiating Leverage to Achieve Real Free Trade (and That’s All Trump Wants)
- Tariffs Can Replace the Income Tax
As always, I recommend a Dispatch subscription.
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"If it saves one life…" Reason assistant editor Jack Nicastro reveals: The Government Thinks It Can Save 67 Lives for the Low Price of $48 Million. Specifically, rulemakers at the National Highway Traffic Safety Administration (NHTSA) have proposed a standard which "would establish test procedures simulating a [pedestrian]-head-to-[vehicle]-hood impact and performance requirements to minimize the risk of head injury." Nicastro's bottom line:
The NHTSA estimates that its proposal, if approved, would "mitigate approximately 67.4 fatalities annually." Not 67.4 hundred—just 67.4 lives. While the number of lives saved is small, the cost of the program is anything but, with "total annual costs rang[ing] from $48.94 to $60.43" million. Using discount rates of 3 and 7 percent, the NHTSA's regulation costs $1.1 million per life saved. There are cheaper ways to save a life.
Bureaucrats need to justify their continued employment somehow. Or as Mel Brooks observed, more pithily:
I embed that video clip a lot, don't I?
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