United Liberty

Do you live in a free state? This question would receive a variety of answers because, after all, the 50 states make up our Union each have their own versions and views on freedom.

Politicians on the “left coast” view freedom as “freedom from want,” which is why they have set in place a vast — and costly — welfare state and burdensome regulatory policies. The north isn’t too dissimilar, especially with its emphasis on nanny state policies.

States that comprise the “libertarian west” and the south tend to have fiscally conservative-leanings and the approach toward personal liberty is, while not great on every issue, generally much less regulated.

So how do you determine if you live in a free state? The Mercatus Center has released its annual report, Freedom in the 50 States, which serves as a guide to weigh various aspects of freedom — fiscal policy, regulatory policy, and personal freedom.

The authors of the report, William Ruger and Jason Sorens, explained their findings yesterday and concluded that states that clamp down on freedoms are seeing people leave for states with more freedom.

“The more a state denies people their freedoms, increases their taxes or passes laws that make it hard for businesses to hire and fire, the more likely they are to leave,” wrote the authors of the report. “And while there’s clearly more to life than drinking oversized beverages and eating foie gras, the states that won’t allow you to often cause trouble for their residents in other ways.”

Veronique de Rugy of the Mercatus Institute has a new analysis out on agricultural subsidies, with a title that could have come from my own heart — Farm Subsidies Must Die. I dig it.

In 2012, the Department of Agriculture (USDA) spent $22 billion on subsidy programs for farmers. Introduced in the 1930s to help struggling small family farms, the subsidies now routinely draw condemnation from both left and right as wasteful corporate welfare. While the number of farms is down 70 percent since the 1930s—only 2 percent of Americans are directly engaged in farming—farmers aren’t necessarily struggling anymore. In 2010, the average farm household earned $84,400, up 9.4 percent from 2009 and about 25 percent more than the average household income nationwide.

What’s more, a handful of farmers reap most of the benefits from the subsidies: Wheat, corn, soybeans, rice, and cotton have always taken the lion’s share of the feds’ largesse. The Environmental Working Group (EWG) reports that “since 1995, just 10 percent of subsidized farms—the largest and wealthiest operations—have raked in 74 percent of all subsidy payments. 62 percent of farms in the United States did not collect subsidy payments.”

That is completely wasteful spending right there, something we could drop immediately and wouldn’t be hurt for it. In fact, repealing agricultural subsidies would have a very beneficial effect on the poorest of Americans:

During his inaugural address, President Barack Obama launched a defense of entitlement programs and spoke about income equality. But despite the rhetoric and increased spending on welfare programs during his first four years, the poverty rate in the United States hasn’t declined.

Writing at US News and World Report, Keith Hall, a senior research fellow at the Mercatus Center, explains that government spending won’t lift people out of poverty, noting instead that Congress should pursue policies that create private-sector jobs to lift Americans out of poverty:

Since the start of the recession, the number of Americans in poverty has grown by 9 million. This increase has come at a time when government spending on the poor has also reached record levels. In 2011, more than 100 million people lived in households that received some kind of low-income government assistance; spending on these programs at the federal, state, and local level combined now exceeds $1 trillion annually. Government assistance for low-income families now equals a shocking 10 percent of all household spending.

It has been long recognized that recessions can increase the number of families in poverty, and over the past 20 years it has become clear that the rising and falling poverty rate correlates directly with the jobless rate. The graph below shows this relationship.

The stagnant economy is sure to be on the minds of voters as we get closer to the fall election. President Obama’s campaign is doing everything it can to distract voters from the dismal unemployment rate, depressing budget deficits, and looming tax hikes.

Recently, Veronique de Rugy, an economist at the Mercatus Center, noted the job creation numbers under presidents dating back to 1945. While Obama claims that the economy has created some four million jobs since taking office, the truth is that Americans have seen the worst job creation numbers under the current administration than any of his predecessors dating back to Truman.

And while his fixes haven’t worked as sold haven’t worked as promised — and there was no question that they would fail before they were even passed, President Obama is trying to sell more snake oil to Americans by pushing crippling taxes hikes. Nevermind that the share of income taxes paid by higher-income earners has gone up since the passage of the 2001 and 2003 tax cuts and nevermind that even Keynesian economists will tell you that raising taxes in an economy is a bad idea.

Dr. Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University. His primary research interests include economic freedom and economic growth, government spending, state and local fiscal policy, public choice, and institutional economics.

When he’s not researching, Dr. Mitchell blogs for Neighborhood Effects, a blog which touches on state, local, and global economic policy, often in a conversational way. You can follow his freedom-loving Tweets @MattMitchell80.

Matt Naugle: How did you become a libertarian?

Matt Mitchell: I credit my brother and the Institute for Humane Studies (IHS). Since I was 13 or 14, my brother and I have been debating politics and ideas. We agree on 95 percent of issues but like to focus on the 5 percent where we disagree. Through those discussions—and the reading I had to do to inform them—the edges of my worldview were gradually shaped.

When I was in college, I attended a weeklong IHS seminar and came to the realization that I could debate like this for a living. Basically from that point on, I set my sights on studying public choice economics at Mason, followed by a career discussing ideas. (My brother became a physician; as our friend puts it, I became “a doctor of silly diagrams”).

MN: As a member of the Joint Advisory Board of Economists for Virginia, does the state follow your advice?

With a vote expected in the Senate tomorrow to extend income tax cuts those making under $250,000, some on the far left are urging Senate Democrats to let the economy to fall off the “fiscal cliff” if Republicans don’t go along with the crippling tax hike proposal. Take, for instance, Howard Dean, who, in a debate with Sen. Pat Toomey (R-PA), urged Congress to do the unthinkable:

Former Vermont Gov. and Democratic National Committee Chairman Howard Dean offered a characteristically blunt take on the “fiscal cliff” of looming spending cuts coupled with the expiration of the Bush-era tax cuts on Jan. 1: Let it happen.

“Let’s just go over the fiscal cliff,” he said Monday on CNBC’s “Squawk Box.” “Everybody’s going to bite the bullet. The Republicans are going to hate the taxes and the Democrats are going to hate some of the cuts, but it’s going to have to happen.”
[…]
Mr. Dean begged to differ, pointing to estimates from the nonpartisan Congressional Budget Office projecting that 60 percent of the deficit by 2019 will be a result of the Bush-era tax cuts.

He was also not optimistic about a bipartisan solution to fix the deal.

“If you think Democrats are going to agree to cuts in Medicare and Social Security while millionaires are getting big huge tax breaks, that’s insane,” he said. “Everybody’s going to have to put some skin in this game. This deficit was caused by all of us, and we’re all going to have to put something in the pot to fix this, and that includes tax increases and spending [cuts].”

BREAKING: ObamaCare won’t reduce the deficit. Of course, you already knew that. Unfortunately, the Obama Administration and Democrats in Congress still insist that the Patient Protection and Affordable Care Act (PPACA) will be good for taxpayers.

But a new report from Charles Blahous, a Medicare Trustee and senior research fellow at the Mercatus Center, once again exposes ObamaCare as a boondoggle for taxpayers, what opponents of the law have been saying since before it was passed, that will add $340 billion to the deficit over the next 10 years.

Here’s the story from the Washington Post:

The study [released yesterday] by Charles Blahous, a conservative policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security. His analysis challenges the conventional wisdom that the health-care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers.

Over the last few days, there has been a lot of talk about Rep. Paul Ryan’s budget proposal for FY 2013. Democrats are, as you might imagine, slamming it at every turn they get, claiming the spending cuts are too deep. However, many conservatives and Tea Party activists are skeptical over it because it doesn’t cut spending enough to bring the country back on a sustainable path quickly enough.

Veronique de Rudy, a research fellow at the Mercatus Center, compares both Ryan’s budget and the spending proposed by President Barack Obama and finds a marginal difference:

At $3.53 trillion in total spending, the Ryan plan is only 5 percent less than the president’s. Where the Ryan plan projects an annual average growth of projected spending from 2013 to 2022 at 4 percent, the president’s plan projects it at 5 percent.

Of the $5 trillion in savings in the Ryan plan’s 10-year spending projections, compared to Obama’s, $352 billion would come from discretionary programs, $2.5 trillion from so-called entitlements, and $514 billion from interest costs.

Apart from a modest reduction in spending for Medicare and Medicaid, the only significant difference between the two plans is the anticipated repeal of the 2010 health care law. Social Security ($10.5 trillion) and funds for the “global war on terrorism” ($500 billion) are left untouched in both plans.

Cumulative spending over the next 10 years under both the Ryan plan ($40 trillion) and the White House plan ($45 trillion) pale in comparison to the Congressional Budget Office’s estimate of $47 trillion—an estimate based on historical spending patterns and realistic assumptions about laws that are set to expire.

Over the last couple of days, we’ve explained why President Barack Obama’s latest tax hike proposal is a campaign ploy, not a serious policy proposal. But Veronique de Rugy, an economist at George Mason University, notes that what’s getting lost in the shuffle from conservatives and libertarians in the debate is that government has grown out of control and that has served as an impediment to economic:

Former president Bill Clinton hit the morning shows on Sunday and Monday. The purpose was mainly to highlight his Clinton Global Initiative meeting in New York this week, but he also used the opportunity to remind people that the economy won’t suffer from letting marginal tax rates creep back up to the pre-Bush-tax-cut levels. His evidence: The economy was doing well during his presidency in spite of the 39.6 percent top marginal rate on income.

To be sure, the economy was doing well in the nineties, even with higher marginal rates. However, the burden of taxation isn’t the only factor in the health of an economy. A factor consistently overlooked by those calling for higher marginal tax rates is the size of government as measured by its spending.

According to OMB’s historical tables, when Clinton left office, government spending as a share of the economy was 18.2 percent. In FY 2005, the government spent $2 trillion. This year, government spending as a share of the economy is 25.3 percent, and real spending has reached $3.3 trillion. That’s significantly larger than when Clinton left office.

This chart from the Mercatus Center at George Mason University shows that spending at all levels of government (local, state and federal) is now at levels we haven’t seen since World War II.

Matthew Mitchell, an economist at Mercatus, notes that this level of spending isn’t likely to go away anytime soon because the “bulk of current and future government spending is on entitlement programs like Social Security and Medicare. This variety of spending is nearly impossible to reduce in the near term.”