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Firearms • Gun Facts You Need To Know
http://www.theburningplatform.com/?p=52232
Statistics: Posted by yoda — Sun Apr 07, 2013 3:03 am
View full post on opinions.caduceusx.com
Canadian • As Canada Collapses, Do We Need to Ask Why?
FRIDAY, MARCH 29, 2013
As Canada Collapses, Do We Need to Ask Why?
By Staff Report
On thinning ice … Disappointing exports, stalled investment and fiscal austerity leave the overstretched consumer as Canada’s only hope for growth … WHEN the world financial system collapsed in 2007, triggering a global recession, Canada recovered faster than any of the other members of the G7 group of large developed countries. Its banks remained solid, while low interest rates encouraged consumers to borrow and spend. But five years on, consumers are showing signs of flagging. The economy is set to expand by a paltry 1.6% this year. So the authorities are casting around for another source of growth. The trouble is they cannot seem to find one. – Economist
Dominant Social Theme: Now it’s Canada’s turn to plunge into recession. This is not looking good. How did this happen?
Free-Market Analysis: So Canada, the bright light of Western industry along with Australia, is now showing signs of wavering. The Canadian miracle is growing long in the tooth.
We’ve already written about this but it occurs to us that the presentation of the impending collapse is being reported in the same way as all the Western economic collapses: with wide-eyed astonishment.
At some point this sort of astonished rhetoric must begin to grow stale, even, well … unbelievable. We are supposed to slap our collective forehead and ask, "How could this be happening?" But, in fact, we already know.
You do, too. Central banking monopoly money stimulation has taken down Western economies from Europe to the United States and beyond. And after a full century of central banking mayhem it is impossible to believe that the leaders of this failed economic environment can have any doubt left about its destructive tendencies.
Given the general awakening of understanding on the Internet about monopoly central banking, we figure it may only be a matter of time before faith in the system drains away completely and something else emerges, hopefully competitive currencies and a free-banking gold and silver standard.
In the meantime, countries and economies continue to collapse like so many raggedy scarecrows subject to a high wind. That wind is the result of monetary inflation. We are not surprised about Canada. Here’s more:
Government, both federal and provincial, is trying to curb deficits swollen by stimulus spending. Companies are restrained by uncertainty prompted by Europe’s woes and the stand-off over fiscal policy in the United States, Canada’s main trading. Exports have still not returned to their pre-recession peak.
As for consumers, after 11 consecutive years in which household spending has exceeded disposable income, they are deeply in hock. Just over a year ago, Craig Alexander, chief economist at Toronto-Dominion Bank, predicted the debt build-up "is going to end in tears". The ratio of household debt to disposable income has continued to edge up (see chart 1). An increase in unemployment (from 7% at the moment) or a rise in interest rates could push some households into bankruptcy and puncture a housing bubble inflating in several Canadian cities.
Jim Flaherty, Canada’s finance minister, has repeatedly warned of the threat household debt poses to the economy. He has made it harder for risky borrowers to get mortgages; he publicly upbraided two banks that recently dropped their rate for five-year, fixed mortgages below 3%.
Yet in his budget on March 21st, Mr Flaherty did little to encourage business investment or exports to take the place of consumers in supporting growth. Rather, his focus was on eliminating the federal budget deficit—currently at 1.4% of GDP, low compared with most G7 economies —before the next general election in 2015. His plan, which relies on spending restraint and unusually high revenue growth, is seen by many as wishful thinking.
Mark Carney, the outgoing governor of the Bank of Canada, has also been ringing the alarm on household debt. Yet the bank has kept its benchmark rate at just 1% since September 2010. This month it signalled that the rate is likely to remain there.
House prices are still rising everywhere except Vancouver, but housing sales and housing starts have dropped. Analysts are divided on whether this signals the beginning of a crash, or just a pause before a new burst of activity in the coming months, which are traditionally the housing market’s busiest.
Rather than a housing bubble, what is needed is a rebound in business investment and an increase in exports. Neither is taking shape. Canadian firms have been piling up cash faster even than their counterparts south of the border. Investment is expected to rise by just 1.7% this year. When Mr Carney and Mr Flaherty tried to jawbone businesses into investing some of this money last year—Mr Carney called it dead money—they were met with angry retorts. The budget extended a scheme letting manufacturers write off purchases of machinery and equipment more quickly. But this might not have much impact until the world economy looks more settled.
Notice how this article NEVER mentions central banking policy or loose money generally. This is the Keynesian approach to monetary analysis. The great man dealt at length with the result of a credit crisis in his incomprehensible and dishonest book General Credit, but he never got around to mentioning how such crises are actually manufactured.
The proximate cause of Western troubles is money printing. Carney knows it, as well. These individuals are being dishonest when they try to strong-arm Canadian firms into "investing." No one in his right mind would "invest" in the current puffed-up environment. So much money has been printed and so many failing enterprises are supported by central bankers and government officials terrified the "system" might collapse (it already has) that it is likely impossible to tell a solvent company from an insolvent one.
Canada’s inevitable destiny is the rational outcome of an irrational system. And the protests and jawboning of those directly involved are increasingly fooling fewer and fewer. When the system you lead constantly performs in exactly the opposite way from what you have predicted eventually people will catch on. And this Internet era makes that almost a surety.
Conclusion: Will Australia be next? Who then is left standing? It seems certain globalist factions actually want a Western industrial collapse because that will make it easier for East and West to merge within the context of one industrial and monetary policy. Is that a conspiratorial interpretation? Well … we say, "Be careful what you wish for."
http://www.thedailybell.com/28905/As-Ca … to-Ask-Why
Statistics: Posted by yoda — Fri Mar 29, 2013 2:48 pm
View full post on opinions.caduceusx.com
Do We Need to Go to War for Oil?
David R. Henderson is a research fellow with the Hoover Institution and an associate professor of economics at the Naval Postgraduate School in Monterey, California.
In this video from a 1991 conference in Monterey, Henderson speaks about the then-ongoing Gulf War, which George H. W. Bush once described as a “war for oil.” Henderson asks whether America would ever conceivably need to go to war to secure oil supplies from the influence of rogue states and also speaks briefly on the effects of CAFE and other mileage standards on automobile manufacturers and U.S. drivers.
View full post on Libertarianism.org
Everything You Need to Know About the Ryan Budget
Daniel J. Mitchell
Sigh. Even when they’re sort of doing the right thing, Republicans are incapable of using the right argument.
Rep. Paul Ryan (R-WI), chairman of the House Budget Committee, has unveiled his proposed budget and he and other Republicans are bragging that the plan will balance the budget in 10 years.
That’s all fine and well, but good fiscal policy is achieved by reducing the burden of government spending, and that means restraining the budget so that federal outlays grow slower than the private sector.
It’s good to balance the budget, of course, but that should be a secondary goal.
Now for the good news. The Ryan Budget does satisfy the Golden Rule of fiscal policy. As you can see in the chart, federal spending grows by an average of 3.4 percent annually, and that modest bit of fiscal discipline is enough to reduce the burden of government spending to 19.1 percent of economic output by 2023.
It’s also good news that the Ryan Budget calls for structural reform of entitlement programs, including Medicaid block grants and Medicare premium support. The budget also assumes the repeal of the costly Obamacare program.
And there’s also some good tax policy. Not bold tax reform like a flat tax, but top tax rates would be reduced to 25 percent and many forms of double taxation, like the death tax and capital gains tax, presumably would be reduced or eliminated.
Let’s be clear, though, that this is not a libertarian budget. Federal spending will still be far too high. Indeed, the budget will consume a larger share of the economy than it did when Bill Clinton left office.
And while Republicans do a good job of restraining spending in the first couple of years of the new Ryan Budget, outlays rise far too rapidly beginning around 2016.
Moreover, there’s no Social Security reform.
Equally worrisome, the budget assumes that the federal tax burden should remain at about 19 percent of GDP, higher than the long-run average of 18 percent of GDP and—for all intents and purposes—permanently enshrining Obama’s fiscal cliff victory.
And it’s depressing to see that the Ryan Budget has gotten weaker each year.
- Two years ago, he put forth a budget that limited spending so that it grew 2.8 percent per year.
- Last year, he put forth a budget that limited spending so that it grew 3.1 percent per year.
- Now, spending will climb 3.4 percent per year.
At this rate, it won’t be that long before the GOP budget and Obama budget converge.
Okay, that’s an exaggeration. But the moral of the story is that the Ryan Budget is a step in the right direction, but much more will be needed to restore limited, constitutional government.
View full post on Cato @ Liberty
We need more capitalism, not less. More freedom, not less.
Never forget, the financial crisis which we are suffering through is not the creation of capitalism. It is not the creation of a free market. It isn’t because businessmen were too free in their dealings that everything fell apart the way it did.
The financial crisis was and is a failure of central planning.
The Fed kept rates too low for too long. That is at the very core of what we are dealing with now. Because the most important price in the world, the price of money, was kept artificially low by our central bank a giant bubble emerged. Then it popped. Now we have the carnage.
In a free market the price of money (interest rates) move with the market and so this dynamism helps us to avoid catastrophic dislocations such as we were just witness to and will likely see again in the not too disatant future.
Policy makers may have made the greatest collective policy mistake in the history of modern politics in how they reacted to the 2008 crash and subsequent recession/depression.
George Bush famously proclaimed that he was “abandoning capitalism to save capitalism.” Nonsense, what he and his Treasury Secratary Hank Paulson did was save and even more deeply entrench crony capitalism. The big banks with connections in Washington wanted the untenable system which they had created and which was enabled by the Federal Reserve to continue on. That they were leveraged 100 to 1 was not unreasonable after all. Why should the big banks actually pay for their folly? Capitalism was after all for the little guys, they were the banks. They deserved a bailout. And they of course got it in one of the greatest crimes against the American citizenry there has ever been.
What we need now is more capitalism, more dynamism, freer prices, freer markets, less regulation, more transparency increased separation of government and business, more freedom. Let the economy breathe and prosperity will come. Let the miracle of human action manifest itself. Let innovation kill old ways of doing business and let it open new frontiers of opportunity. Free the market and free the American people (and the world) of the insidious malaise which infects it.
Or alternatively we could regulate the economy into a slow moving, giant slug of fiat money and corruption. This is the path we are currently on.
In the attached article from The Independent, Ian Birrel agrees with me that markets must be freed for the West to again see real prosperity.
Capitalism remains a uniquely vigorous force. Just look at the pace of change in the unfettered technology industry. But ask why those banks that wrecked the economy – and, in the case of the retail ones, are often loathed by their customers – have not been replaced by more dynamic entrants instead of being salvaged by the state.
The post We need more capitalism, not less. More freedom, not less. appeared first on AgainstCronyCapitalism.org.
View full post on AgainstCronyCapitalism.org
International News • We need a strategy we can believe in, not Mr Micawber’s blin
We need a strategy we can believe in, not Mr Micawber’s blind optimism
A change in policy is in the air. About time too. Not only was the last quarterly GDP growth figure negative but the next one may also be pretty weak.
‘Companies would be more likely to invest, banks to lend, and households to spend, if they could believe in economic recovery.’ 6:11PM GMT 10 Feb 2013
Meanwhile, the reduction of public borrowing, which has been this Government’s overriding aim, has stalled. Unless something turns up soon, there is a real risk of economic catastrophe. Let’s all hope that something does indeed turn up. But Mr Micawber is not a good example to follow. So what can be done?
The current policy framework is part of the problem. It was designed to maintain the confidence of the financial markets so that the government’s deficit can be funded cheaply. This imperative underlies both the inflation targeting regime and the emphasis on reducing the government’s borrowing requirement.
Admittedly, there was also a belief that low inflation and prudent public finances would boost the confidence of households and companies and hence contribute to the strength of the real economy. But this was a subsidiary objective. In any case, if this was the intention, the outcome has recently been dismal.
Mind you, this strategy was correctly based on the idea that in economic affairs, as in so much else, confidence is often absolutely vital.
The trouble is that the strategy is a direct response to the financial crises of the 1970s, whereas the current predicament shares more in common with the 1930s.
The most pressing issue now is not how to maintain the confidence of the financial markets but rather how to boost the confidence of firms and households in economic recovery – and thereby to make it more likely.
Companies would be more likely to invest, banks to lend, and households to spend, if they could believe in economic recovery.
Nor is the real economy imperative in blatant conflict with current financial objectives. The financial markets now realise that their greatest threat derives from the absence of economic recovery.
There are several things that could be done. The inflation targeting regime could be tweaked to create scope for inflation to return to target over a longer period, thereby giving the flexibility to undertake more expansionary policy and to give meaningful assurance that interest rates will not rise for a long time.
As Mark Carney suggested, this could be supplemented by a clear statement that rates would not be raised until GDP or employment reached a pre-specified level.
Another (but controversial) measure would be to announce an exchange rate cap, as the Swiss have. The response of exporters to a lower exchange rate is bound to be muted if they have no assurance that the currency is going to stay down. Again, confidence is crucial.
Fiscal policy has its part to play as well. Last week’s report from the Institute for Fiscal Studies argued that after the election the Government would either have to cut departmental budgets by a further 6pc in real terms or raise taxes by £20bn. Such an increase in taxes would be madness. But households and companies may believe that it is going to happen.
The Government needs to rule it out explicitly. Indeed, the Chancellor could announce much tougher future cuts in current spending, but accompanied by pre-announced reductions in taxes.
Moreover, the Government needs to take actions which themselves help to boost recovery as well as encouraging private companies to increase investment.
The first priority is to reverse planned cuts in public investment and indeed to increase spending on infrastructure.
Of course, the Treasury will say that there are no viable projects that could be undertaken quickly. They always do.
Some years ago, an advertising campaign pitched TSB as the bank that likes to say “yes”. The Treasury is the department that likes to say “no”. The Chancellor needs to put his foot down – lay out the plans, really commit to them, and communicate this to the private sector.
I have banged on before about decisions on key projects which have large public sector involvement but which may also hold the key to major private sector spending, e.g. over London’s airport capacity.
The Government has kicked this issue into the long grass by commissioning a study which will not finally report until 2015. But it could lay down a timetable for what will happen thereafter and give an undertaking that one of the major options for expanding capacity will be taken.
Above all, both the Government and the Bank need to instil confidence.
The present Governor’s habit of telling us all that we are in the worst downturn of all time and that it isn’t going to get better until Doomsday has not been helpful.
He may be right, but telling all and sundry doesn’t increase the chances of him being proved wrong. Yes, Churchill promised us blood, toil, tears and sweat, but he also promised victory.
He not only created the material means to achieve it but also, by his words and personal bearing, persuaded people to believe in it.
http://www.telegraph.co.uk/finance/comm … imism.html
Statistics: Posted by yoda — Sun Feb 10, 2013 8:54 pm
View full post on opinions.caduceusx.com
International News • We need a strategy we can believe in, not Mr Micawber’s blin
We need a strategy we can believe in, not Mr Micawber’s blind optimism
A change in policy is in the air. About time too. Not only was the last quarterly GDP growth figure negative but the next one may also be pretty weak.
‘Companies would be more likely to invest, banks to lend, and households to spend, if they could believe in economic recovery.’ 6:11PM GMT 10 Feb 2013
Meanwhile, the reduction of public borrowing, which has been this Government’s overriding aim, has stalled. Unless something turns up soon, there is a real risk of economic catastrophe. Let’s all hope that something does indeed turn up. But Mr Micawber is not a good example to follow. So what can be done?
The current policy framework is part of the problem. It was designed to maintain the confidence of the financial markets so that the government’s deficit can be funded cheaply. This imperative underlies both the inflation targeting regime and the emphasis on reducing the government’s borrowing requirement.
Admittedly, there was also a belief that low inflation and prudent public finances would boost the confidence of households and companies and hence contribute to the strength of the real economy. But this was a subsidiary objective. In any case, if this was the intention, the outcome has recently been dismal.
Mind you, this strategy was correctly based on the idea that in economic affairs, as in so much else, confidence is often absolutely vital.
The trouble is that the strategy is a direct response to the financial crises of the 1970s, whereas the current predicament shares more in common with the 1930s.
The most pressing issue now is not how to maintain the confidence of the financial markets but rather how to boost the confidence of firms and households in economic recovery – and thereby to make it more likely.
Companies would be more likely to invest, banks to lend, and households to spend, if they could believe in economic recovery.
Nor is the real economy imperative in blatant conflict with current financial objectives. The financial markets now realise that their greatest threat derives from the absence of economic recovery.
There are several things that could be done. The inflation targeting regime could be tweaked to create scope for inflation to return to target over a longer period, thereby giving the flexibility to undertake more expansionary policy and to give meaningful assurance that interest rates will not rise for a long time.
As Mark Carney suggested, this could be supplemented by a clear statement that rates would not be raised until GDP or employment reached a pre-specified level.
Another (but controversial) measure would be to announce an exchange rate cap, as the Swiss have. The response of exporters to a lower exchange rate is bound to be muted if they have no assurance that the currency is going to stay down. Again, confidence is crucial.
Fiscal policy has its part to play as well. Last week’s report from the Institute for Fiscal Studies argued that after the election the Government would either have to cut departmental budgets by a further 6pc in real terms or raise taxes by £20bn. Such an increase in taxes would be madness. But households and companies may believe that it is going to happen.
The Government needs to rule it out explicitly. Indeed, the Chancellor could announce much tougher future cuts in current spending, but accompanied by pre-announced reductions in taxes.
Moreover, the Government needs to take actions which themselves help to boost recovery as well as encouraging private companies to increase investment.
The first priority is to reverse planned cuts in public investment and indeed to increase spending on infrastructure.
Of course, the Treasury will say that there are no viable projects that could be undertaken quickly. They always do.
Some years ago, an advertising campaign pitched TSB as the bank that likes to say “yes”. The Treasury is the department that likes to say “no”. The Chancellor needs to put his foot down – lay out the plans, really commit to them, and communicate this to the private sector.
I have banged on before about decisions on key projects which have large public sector involvement but which may also hold the key to major private sector spending, e.g. over London’s airport capacity.
The Government has kicked this issue into the long grass by commissioning a study which will not finally report until 2015. But it could lay down a timetable for what will happen thereafter and give an undertaking that one of the major options for expanding capacity will be taken.
Above all, both the Government and the Bank need to instil confidence.
The present Governor’s habit of telling us all that we are in the worst downturn of all time and that it isn’t going to get better until Doomsday has not been helpful.
He may be right, but telling all and sundry doesn’t increase the chances of him being proved wrong. Yes, Churchill promised us blood, toil, tears and sweat, but he also promised victory.
He not only created the material means to achieve it but also, by his words and personal bearing, persuaded people to believe in it.
http://www.telegraph.co.uk/finance/comm … imism.html
Statistics: Posted by yoda — Sun Feb 10, 2013 8:54 pm
View full post on opinions.caduceusx.com
ObamaCare’s Triple-Digit Premium Hikes Dramatize the Need for Repeal
Michael F. Cannon
In 2010, the Obama administration excoriated health insurance companies for “rate hikes as high as 39 percent.” HHS Secretary Kathleen Sebelius wrote:
This is unacceptable…
President Obama has offered a health insurance reform proposal to help working families and small business owners. It will hold insurance companies accountable by laying out common-sense rules of the road to keep premiums down…
Reform will change the rules and help stop exorbitant increases.
And the President’s plan will help reduce costs…
According to the Chicago Sun-Times, that double-digit rate increase “helped dramatize the need for regulation.”
That episode came to mind this morning when I read about a survey of health insurers that shows ObamaCare will neither “keep premiums down” nor “stop exorbitant increases” nor “reduce costs”:
The survey, fielded by the conservative American Action Forum and made available to POLITICO, found that if the law’s insurance rules were in force, the premium for a relatively bare-bones policy for a 27-year-old male nonsmoker on the individual market would be nearly 190 percent higher…
Most other studies have tried to estimate average premium increases, which have ranged anywhere from negligible to 85 percent and higher. This survey looks at individual examples in specific markets to show the itemized impact of the major Obamacare reforms…
On average, premiums for individual policies for young and healthy people and small businesses that employ them would jump 169 percent, the survey found.
These findings are in line with projections by neutral observers and even ObamaCare supporters like MIT economist Jonathan Gruber that the law will increase premiums for some individuals and small businesses by more than 100 percent.
If double-digit premium increases dramatized the need for regulation, do triple-digit increases dramatize the need for its repeal?
Politico offers a strange rationalization for these rate hikes:
The increase will most likely be substantial for “a slice of the younger population,” said Massachusetts Institute of Technology health economist Jon Gruber, a supporter of the health law who has studied its impact on premiums.
And those are the people who, before Obamacare, benefited from insurers’ ability to charge older, sicker people much higher rates — or deny them coverage altogether — practices that have kept premiums for the young low.
Set aside the fact that these rate hikes effectively tax young workers to subsidize older workers who generally have higher incomes. According to this theory – I can’t tell if it came from Gruber or Politico – those young workers are today unjustly enriched because they’re not being robbed.
View full post on Cato @ Liberty
Where Is Thaddeus Stevens Now That We Need Him?
David Boaz
The radical abolitionist Thaddeus Stevens is enjoying a rediscovery as the moral center of Steven Spielberg’s film Lincoln. As portrayed in the film, he confronts the sort of dilemma faced by many people of strong ideological convictions forced to deal with political reality: Will he disavow his radical belief in full racial equality in order to ease passage of the Thirteenth Amendment to abolish slavery? (No spoilers here.)
Stevens’s belief in equality under the law went beyond race, as Karen Tumulty notes in a Washington Post article on the fiscal cliff negotiations:
House Ways and Means Chairman Thaddeus Stevens (now enjoying a return to popular consciousness as Tommy Lee Jones’s character in the movie “Lincoln”) denounced the idea of a graduated rate structure as a “strange way to punish men because they are rich.”
View full post on Cato @ Liberty
We Need More Growth and Prosperity to Boost Charitable Contributions, not Bribery in the Tax Code
Daniel J. Mitchell
I’m a strong believer in fundamental tax reform. We need a system like the flat tax to improve economic performance.
No tax system is good for growth, of course, but the negative impact of taxation can be reduced by lowering marginal tax rate(s), eliminating double taxation of saving and investment, and getting rid of loopholes that encourage people to make decisions for tax reasons even if they don’t make economic sense.
While the general public is quite sympathetic to tax reform and would like to de-fang the IRS, there are three main pockets of resistance.
- The class-warfare crowd is opposed to the flat tax for ideological reasons. They want high tax rates and punitive double taxation – even if the government winds up collecting less money.
- The lobbyists and special interest groups also are opposed to tax reform, along with the politicians that they cultivate. The tax code is a major source of political corruption, after all, and there would be a lot fewer opportunities to game the system and swap loopholes for political support if the 72,000 page tax code was tossed in a dumpster.
- Beneficiaries of certain tax preferences such as the mortgage interest deduction, the charitable deduction, and the state and local tax deduction are worried about tax reform, either because they are taxpayers who utilize the preferences or because they represent interest groups that benefit because the government has tilted the playing field.
This post is designed to allay the fears of this third group, specifically the folks who worry that tax reform might be bad news for charities.
The Wall Street Journal today published a pro-con debate on the charitable deduction. As you might expect, my role is to argue in favor of a simple and fair system that would eliminate all tax preferences.
Here’s some of what I wrote on the charitable deduction, beginning with the key point that economic growth is key because the biggest determinants of charitable giving are disposable income and net wealth.
…the best way to help charities is to boost economic growth, which leaves people with more money to donate. And I think the best way to do that is to replace our current system with a simple and fair flat tax. …I don’t think there’s a compelling argument for the charitable deduction. …Over the decades, there have been major changes in tax rates and thus major changes in the tax treatment of charitable contributions. At some points, there has been a big tax advantage to giving, at others much less. Yet charitable giving tends to hover around 2% of U.S. gross domestic product, no matter what the incentive.
The final sentence in the above excerpt is key. The value of a tax deduction is determined by the tax rate. So in 1980, when the top tax rate was 70 percent, it only cost 30 cents to give $1 to charity. By 1988, though, the top tax rate was down to 28 percent, which means that the cost of giving $1 had jumped to 72 cents.
Yet charitable giving rose during the 1980s. Why? Because Reagan implemented reforms – such as lower tax rates – that produced a healthier economy.
Some may wonder whether the example I just cited is appropriate since it focuses on the tax rate (and therefore the value of the tax deduction) for upper-income taxpayers.
But there’s a good reason for that choice. The charitable deduction overwhelmingly goes to the rich.
Upper-income households are the biggest beneficiaries of the deduction, with those making more than $100,000 per year taking 81% of the deduction even though they account for just 13.5% of all U.S. tax returns. The data are even more skewed for households with more than $200,000 of income. They account for fewer than 3% of all tax returns, yet they take 55% of all charitable deductions.
I’m not against rich people, or against them lowering their tax liabilities. But I do want a tax system that generates more prosperity because that’s good news for the entire economy – including the nonprofit sector.
Speaking of which, I think tax-deductible groups will become better and more efficient without the deduction.
Charities, meanwhile, get fatter and lazier because of that dynamic. Think of all the exposés in recent years about charities that devote an overwhelming share of their budgets to administrative costs and marketing expenses. No system will create perfect nonprofit groups, but cutting back or cutting out the deduction would break the cycle of inefficiency that now exists.
My debating partner is Diana Aviv, the head of Independent Sector, which is basically a trade associate in DC for charities. Here are the most relevant excerpts from her piece.
…more than 80% of those who itemized their tax returns in 2009 claimed the charitable deduction and were responsible for more than 76% of all individual contributions to charitable organizations.
That’s all fine and well. What she’s basically saying is that almost all rich people itemize and those rich people get the lion’s share of the benefit from the deduction.
But that’s not the key issue. What matters is whether the deduction makes a big difference for the amount that people contribute. Diana addresses that point.
According to a 2010 Indiana University survey, more than two-thirds of high-net-worth donors said they would decrease their giving if they did not receive a deduction for donations.
I don’t put complete faith in public opinion data, but let’s assume that this poll is a completely accurate snapshot of how rich people think they would react. But let’s balance that off with the real-world evidence from the 1980s, which shows that rich people gave more money in the 1980s after Reagan cut tax rates and dramatically lowered the value of the tax deduction.
I’m not saying the lower tax rates caused the increase in giving, but I am saying that the lower tax rates and other reforms helped boost the economy. And I’m saying that rich people gave more to charity because they had more income and more wealth.
I also can’t resist a comment about this excerpt.
Finally, there’s another important consideration. The charitable deduction is unique in that it’s a government incentive to sacrifice on behalf of the commonweal. Unlike incentives to save for retirement or buy a home, it encourages behavior for which a taxpayer gets no direct, personal, tangible benefit.
Huh?!? Diana’s entire article is based on the notion that people need to be bribed in order to contribute, yet she simultaneously says that taxpayers get “no direct, personal, tangible benefit.”
Let me close by tying this debate to the fiscal cliff negotiations. There is some discussion of capping itemized deductions as a way of extracting more money from the rich. That creates a bit of a quandary. Here’s something else I wrote for my part of the debate.
I don’t want to give more revenue to Washington. That’s like putting blood in the water with hungry sharks around. But if politicians are going to extract more money from the private sector anyway, reducing or eliminating the deduction is much less damaging to growth than imposing higher marginal tax rates.
That being said, that type of change – while not as bad for the economy – probably would have a negative impact on charitable giving.
My argument is that real tax reform can benefit the nonprofit sector because the loss of the deduction is more than offset by the pro-growth impact of lower tax rates, less double taxation, etc.
But if all politicians are doing is limiting the deduction as part of a money grab, then nonprofits get some pain and no gain.
Incidentally, this is why the nonprofit community should join the rest of us in fighting against an ever-climbing burden of government spending. If we don’t rein in Leviathan, it’s just a matter of time before politicians get rid of the deduction as part of a relentless search for more revenue.
I think it would be better for nonprofits – and for the rest of us – if we limit the size and scope of government and enact a tax system that produces the kind of prosperity that is beneficial for all sectors of the economy.
View full post on Cato @ Liberty