Spending caps can control spending. | Liu Xiaobo, R.I.P. | Conspiracy, she wrote. | The misuse of hate labeling. | Michigan leads on pensions.

July 15, 2017
Unlike most other reforms, spending caps have a proven record of actually controlling spending. Chinese democracy activist Liu Xiaobo has died. A new book claims public choice economics is a conspiracy; two honest liberals explain why its argument is wrong. Why does the media let a progressive activist group decide who should be labeled a hate group? Michigan has taken a bold step toward fixing its pension problems; other states should take note.
Spending caps are the reform that gets a country’s fiscal house in order. The Center for Freedom and Prosperity has a new video, narrated by Yamila Feccia, explaining why. [Cato Institute] Dan Mitchell summarizes the points: “Demographics – Almost all developed nations have major long-run fiscal problems because welfare states will implode because of aging populations and falling birthrates (Ponzi schemes need an ever-growing number of new people to stay afloat). “Golden Rule – If government spending grows slower than the private sector, that reduces the relative burden of government spending (the underlying disease) and also reduces red ink (the symptom of the underlying disease). “Success Stories – Simply stated, spending caps work. [Feccia] lists the nations that have achieved very good results with multi-year periods of spending restraint. She points out that the U.S. made a lot of fiscal progress when GOPers aggressively fought Obama. And she shares the details about the very successful constitutional spending caps in Hong Kong and Switzerland. “Better than Balanced Budget Amendments or Anti-Deficit Rules – The video explains why policies that try to target red ink are not very effective, mostly because tax revenues are very volatile. “Even International Bureaucracies Agree – Remarkably, the International Monetary Fund (twice!), the European Central Bank, and the Organization for Economic Cooperation and Development (twice!) have acknowledged that spending caps are the most, if not only, effective fiscal rule.” [Cato Institute]   Liu Xiaobo, R.I.P. Liu Xiaobo, writer, professor of literature, and activist for Chinese democracy died of liver cancer at the age of 61 on Thursday. Imprisoned in 1996 and again in 2009 for “counterrevolutionary behavior” and “subverting state power,” Xiaobo was awarded the Nobel Peace Prize in 2010. He was released on a medical parole on June 26. Dissident, the blog of the Victims of Communism Memorial Foundation, writes: “Liu Xiaobo was an intellectual and moral giant, not just for the Chinese nation but for all of humanity. His poetry overflows with beauty. His political criticisms are as incisive as they are insightful. His commitment to nonviolent democracy went to his core. Liu’s indomitable character is summed up in the statement he read at his trial: ‘I have no enemies, and no hatred. None of the police who have monitored, arrested and interrogated me, the prosecutors who prosecuted me, or the judges who sentence me, are my enemies… For hatred is corrosive of a person’s wisdom and conscience; the mentality of enmity can poison a nation’s spirit, instigate brutal life and death struggles, destroy a society’s tolerance and humanity, and block a nation’s progress to freedom and democracy. I hope therefore to be able to transcend my personal vicissitudes in understanding the development of the state and changes in society, to counter the hostility of the regime with the best of intentions, and defuse hate with love.’” [Dissident] There will be a candlelight vigil for Xiaobo on Monday, July 17, at 8 p.m. at the Victims of Communism Memorial (between Massachusetts Avenue, NW, New Jersey Avenue, NW, and G Street, NW, in Washington, D.C.).   Conspiracy, she wrote. You don’t have to be a fan of public choice economics to see that Nancy MacLean’s book Democracy in Chains is a flawed smear job on James Buchanan and his libertarian co-religionists. At the Left-leaning Vox, Henry Farrell and Steven Teles, who avow that they “do not share Buchanan’s ideology,” lay into MacLean’s methods and conclusions: “MacLean […] doesn’t want to explain how public choice economists think and argue. Instead, she portrays them as participants in a far-reaching conspiracy. […] In language better suited to a Dan Brown novel than a serious nonfiction book, she describes Buchanan as an ‘evil genius,’ and suggests he had a ‘diabolical’ plan to permanently ‘shackle’ democracy, so that the will of the majority would no longer influence government in core areas of the economy. […] “[L]ibertarians and conservatives have attacked it online. Several have argued that MacLean misleadingly truncates quotes, to make it seem as if Buchanan and other libertarians such as Tyler Cowen are anti-democratic. While they obviously have a great deal of skin in the game, their critiques of the book have landed a number of solid blows. […] “MacLean is not only wrong in detail but mistaken in the fundamentals of her account. […] “Despite MacLean’s apparent shock, for example, the political tactics that Buchanan advocated are nothing unusual in politics. He advocated splitting the opposing coalition (liberals and the left), to win advantage for the pro-market agenda through stealthy tactics, and to change the terrain of politics to make the policy victories of his side hard to reverse. […] “The architects of the welfare state used such stratagems to hide their true intentions and entrench the welfare state so deeply that future politicians would be unable to roll it back. […] FDR famously observed of the decision to fund Social Security through a payroll tax, ‘We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. … With those taxes in there, no damn politician can ever scrap my social security program.’ “Indeed, what Buchanan and others thought they were doing is more aptly described as trying to undo the advantages won by their left-wing opponents, who had succeeded in building a welfare state that seemed immune to fundamental reform […] .” [Vox]   The media is letting a radical progressive group do its thinking. In news reports published this week, ABC and NBC referred to the Alliance Defending Freedom as a hate group. Why? Because the Southern Poverty Law Center says they are a hate group. Apparently, favoring traditional marriage and conventional gender designations for bathrooms is a hate crime. Perhaps news outlets should have noticed that there is real hate going on in the world. As Katrino Trinko writes, the timing of these references is unseemly: “Never mind that a mere 29 days ago, Rep. Steve Scalise, R-La., was shot by a violent man, a man whose actions would have resulted in ‘a massacre,’ according to Sen. Rand Paul, R-Ky., who was present, were it not for the actions of the Capitol Police. “In fact, the Capitol Police generally would not have been present for a baseball practice among lawmakers, and were in fact only there because Scalise is a member of the GOP House leadership. Never mind that others were also shot and that Scalise was back in the ICU the day after the Fourth of July, battling an infection. “And never mind that the alleged shooter, James T. Hodgkinson, liked the Southern Poverty Law Center on Facebook”. Trinko continues: “So disclosure time: I’m attending this supposed hate group’s conference this week. “And you know what I haven’t heard at all? Hate. And considering how I’ve been in an insane number of conversations, all off the record, it’s clear there is no secret hate agenda here. “(And yes, I’m one of those crazy Christians who thinks it’s a sin to lie … so I’m telling you the truth here.) “Alliance Defending Freedom, for those not familiar with the organization, is a group dedicated to preserving religious freedom. And what I’ve heard over and over again at this conference is people discussing how to keep the United States a country where people can be true to their beliefs, where they are not forced by a tyrannical government to violate their conscience.” [The Daily Signal]   Michigan is becoming a leader in pension reforms. Anthony Randazzo explains: “Michigan’s Gov. Snyder has signed into law a first-of-its-kind, innovative pension reform bill that will provide a new set of retirement choices for state teachers and cap the growth of liabilities in the state’s current, structurally flawed retirement plan. The Michigan Public School Employee System (MPSERS)—currently only 60% funded with $29 billion in unfunded pension liabilities—now has its most realistic path to solvency in the past two decades.”  Randazzo writes that the new plan includes better actuarial assumptions as well as the following elements: “· New hires will be auto-enrolled in a defined contribution retirement plan (DC Plan) that has a default 10% total contribution rate. DC Plans inherently have no risk of unfunded liabilities, and the maximum employer share for the plan (7%) is less than what employers should be paying for the current plan. “· However, if new teachers would prefer a defined benefit pension plan (DB Plan), they will have the choice to voluntarily switch to a new ‘hybrid’ plan that, unlike the current ‘hybrid’ plan offered to teachers, uses very conservative assumptions and short amortization schedules and splits all costs 50-50 between the employee and employer. “· Uniquely, the hybrid plan will have a safeguard mechanism that would trigger closure if the funded ratio falls below 85% for two consecutive years.” [Reason Foundation] And James Hohman writes: “Michigan’s situation is not unique, but the legislation signed by Gov. Snyder today goes farther than any other reforms to limit the ability to promise benefits now and push the costs onto future taxpayers. Some states have passed legislation that offers new employees a less generous retirement package, but this does little to stop generating new debt. Michigan’s move restrains the problem from getting worse, provides even more generous benefits to future hires and leaves the pensions of current teachers and retirees untouched.” [Mackinac Center]
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