Quotulatiousness

January 16, 2018

Yet another money squeeze for Britain’s military

Filed under: Britain, Government, Military — Tags: , , , — Nicholas @ 03:00

At the Thin Pinstriped Line, Sir Humphrey outlines the difficult financial position the British Ministry of Defence (MOD) finds itself in and the very limited options available for the decision makers to choose among:

The Times has broken details of the planned cuts put forward by the MOD to meet the likely scale of budget cuts needed under the ongoing national Security Review being conducted in the Cabinet Office. The planned cuts as leaked to the Times highlight the sheer scale of the challenge facing the MOD at the moment, and seem to resort to many of the ‘greatest hits’ intended to arouse strong opposition, such as ‘merging the Parachute Regiment and Royal Marines’ option.

It is indicated that the Prime Minister has opposed the measures put forward, and that this in turn will lead to a full blown Strategic Defence and Security Review [SDSR], which will look again at force structures and outputs, and hopefully deliver a more balanced force in due course. The challenge is doing this against a budget which reportedly is £20bn in debt, with no meaningful way to find savings without serious pain.

[…]

The difficulty then for Defence is conducting an SDSR in a world where politicians seem unsure as to what their ambition is for the UK in the next 5-10 years, and whether they want to find the money to do this or not. There is probably strong political support for the idea of maritime and air power, both of which can easily be deployed (and recovered) discretely and with no long-term entanglements. It is reasonable to assume that the RN and RAF have a compelling case that they should receive the lions share of investment in the review.

By contrast the Army will find itself facing a difficult time – it is telling that all three options presented in the Times focused on a major loss of Army manpower, and capability reduction. What is also likely is the wider impact of further delays in procurement and reduction of exercises, training and other tools essential to keeping the Army credible. As its vehicle fleet ages, and with almost all of its primary weapon systems verging on becoming near obsolete, politicians face a difficult choice – do they continue to direct funding into high end high capability ground equipment, or do they take the ‘UOR [Urgent Operational Requirement] it on the day’ option of reducing the size of the Army and hope that come the next long-term ground operation, there is enough time to sort a round of UOR purchases out to equip people to the right standard.

At its heart though is the difficulty that the UK seems pathologically incapable of taking and sticking to credible long-term plans on defence and seeing them through to fruition. Strategic now seems to mean ‘two-year horizon’ at best, and there is a real sense that for all the glossy PowerPoint slides and publications, it is a department in a perpetual state of crisis as it struggles to afford the equipment needed to do the tasks asked of it.

This cycle of unaffordability is not new, in fact it seems never ending. There is an occasional period of a few years when things seem a bit better, but then another thing goes wrong and the Department is back to square one. Part of this problem lies in an eternally optimistic set of planning assumptions, coupled with such regular turn over of staff that no one ever has to see through the impact of their work.

The other problem is that rather than bite the bullet, take some incredibly tough decisions and wholesale withdrawal from commitments and capability, the Department lurches on, occasionally being bailed out by some deal that finds a few extra quid to just about see it through. What isn’t happening is systematic and thorough reforms to really grip and address the problems that the Department has got to stop them cropping up time and time again.

At some point the UK must have a serious policy discussion about what it really wants from its defence and national security capability. Does it want to seriously fund it, at a time of economic challenge and government austerity, or does it want to scale back ambition in order to find funding for other national projects? This conversation will not happen though in any meaningful sense, and instead the debate will be shallow, superficial and focus on numbers not outputs and leaked papers warning of an inability to defend the UK if something is cut.

It is all very well having an SDSR again (the third in 8 years), but unless there is a real change in behaviours, there will simply be another one in a couple of years’ time when the new plan proves unaffordable and unworkable. We cannot go on like this indefinitely.

January 13, 2018

The common factor of the Net Neutrality fight and the EpiPen price gouging scandal

Filed under: Bureaucracy, Economics, Government, Health, Technology, USA — Tags: , , , , — Nicholas @ 05:00

Lili Carneglia explains what these two examples of “capitalist excess” are actually the result of regulatory failures:

Without net neutrality, regulations that prevent internet service providers (ISPs) from charging more for priority speeds and higher bandwidth-use sites would disappear. Most Americans are pretty confused by the revised rules but highly skeptical that this action could have any benefits. Many people, especially those living in the rural south where choices are limited, feel like these companies have been taking advantage of their customers for years, and loosening regulatory constraints on these companies seems like a terrible idea.

Net neutrality was a regulatory policy set under the Obama administration in 2015 that mandated ISPs to treat the internet like other utilities, such as highways and railroads, under laws established before most people had TVs. Under these rules, companies must act as neutral gateways to the internet without controlling the content or the speed of the content that passes through that gateway. Supporters of the rule argue that these regulations ensure the free flow of information, while those against the policy see net neutrality as a misapplication that stifles an industry that is more dynamic than other public utilities.

[…]

Yes, a handful of industry giants can and have abused their market power. Most consumers have limited ISPs to choose from in a given area, and options are more limited outside of big cities, where “three-quarters of American homes have no competitive choice for the essential infrastructure for 21st-century economics and democracy,” according to the former FCC chairman Tom Wheeler. It is important to consider how these circumstances came about before deciding that federal regulation might help consumers.

Governments, by and large, prefer to have fewer players in a given market as it makes that market easier to regulate, and the easiest market to regulate is a monopoly. When cable networks were beginning to spread across North America, many local governments were persuaded that a single cable provider would be the best option for their jurisdiction and the broadband internet market that came later was heavily shaped by the already carved-up markets for cable TV. For many, there were no competitive options because the local government had precluded the chance of competition for their already entrenched cable monopoly (or, in a few cases, tight oligopoly).

Competition is the best answer to monopolistic abuse of customers … if you get shitty service from the Blue Cable Company, you’ll be more likely to switch to the Red Cable Company. If you only have Red and Blue to choose from, your leverage is small, but if you have a full rainbow of competing options, Red and Blue are forced to make their services at least comparable to what Orange and Pink and Magenta are offering, or they lose too many customers. If there’s no threat of a competitor scooping up unhappy customers, there’s no incentive for the existing company to do more than the absolute minimum to keep customer complaints down to a dull roar. The customer’s only recourse — other than giving up the service or moving to a different jurisdiction — is to complain to the regulator.

The base problem with Mylan’s EpiPen price gouging is the same: an effective monopoly supported by the government:

The arguments against net neutrality repeals center around fears about what producers will do without regulation since they have significant market power and the ability to raise prices to levels that would not be sustainable under more competitive conditions. The concern about increased internet prices is similar to what happened in 2016 when a pharmaceutical company with market power, Mylan, increased the price of life-saving EpiPens by about 400 percent.

The “greedy” pharmaceutical companies were hung out to dry as Congress berated Mylan representatives in hearing after hearing. There were similar cries of outrage and demands that the federal government do something to prevent such selfish price-gouging, similar to what many consumers fear ISPs will do absent regulations.

Even (supposed) free-market advocates started supporting further regulation during the EpiPen debate. Most notably, then fiscal hawk representative and now Trump budget director Mick Mulvaney, defended further market intervention on the condition that, “If you want to come to the state capitols and lobby us to make us buy your stuff, this is what you get. You get a level of scrutiny and a level of treatment that would ordinarily curl my hair.”

However, in all of those hearings, almost no one bothered to unearth the problem that Mulvaney hinted at: Why was Mylan able to increase that price in the first place? Government intervention. Burdensome FDA regulations and other laws pressuring public schools to buy the drug essentially granted Mylan a monopoly. It was as misguided then as it is now to think that these same institutions can be trusted to clean up the mess they created.

Mylan had no effective competition, so there was nothing to stop the price gouging until it got so bad that even the regulator had to pay attention. If there were other pharmaceutical companies allowed to compete, do you think Mylan would have risked jacking up the price only to watch their competitors gaining market share?

Scott Alexander explained the Mylan monopoly quite expansively in 2016.

January 11, 2018

QotD: Regime uncertainty

Filed under: Books, Economics, Government, Quotations — Tags: , , — Nicholas @ 01:00

Washington’s destructive policies have been dubbed “regime uncertainty” in a strand of innovative analyses pioneered by Robert Higgs of the Independent Institute. Regime uncertainty relates to the likelihood that an investor’s private property — namely, the flows of income and services it yields — will be attenuated by government action. As regime uncertainty is elevated, private investment is notched down from where it would have been. This can result in a business-cycle bust and even economic stagnation. I recommend Higgs’ most recent book for evidence on the negative effects of regime uncertainty: Robert Higgs. Taking a Stand: Reflections on Life Liberty, and the Economy. Oakland, CA: The Independent Institute, 2015.

Steve Hanke, “What’s Killing U.S. Growth?”, Huffington Post, 2016-04-12.

January 10, 2018

QotD: Winston Churchill as First Lord of the Admiralty

Filed under: Britain, Government, Military, Quotations — Tags: , — Nicholas @ 01:00

It did not take me very long to find out that Mr. Churchill was very apt to express strong opinions upon purely technical matters. Moreover, not being satisfied with expressing opinions, he tried to force his views upon the Board [of the Admiralty]. His fatal error was his entire inability to realize his own limitations as a civilian. I admired very much his wonderful argumentative powers. He surpassed the ablest of lawyers and would make a weak case appear exceedingly strong. While this gift was of great use to the Admiralty when we wanted the naval case put well before the government, it became a positive danger when the First Lord started to exercise his powers of argument on his colleagues on the Board. Naval officers are not brought up to argue a case and few of them can make a good show in this direction.

Vice-Admiral Sir John Jellicoe, Second Sea Lord of the Admiralty 1912-14, quoted by Robert K. Massie, in Castles of Steel.

December 30, 2017

Congressional New Year’s Resolutions

Filed under: Government, Humour, USA — Tags: , , — Nicholas @ 04:00

ReasonTV
Published on 29 Dec 2017

In this special holiday edition of “Mostly Weekly” Andrew Heaton comes up with some out-of-the-box New Year’s resolutions for our legislators.

As 2017 thankfully limps to its conclusion, we turn our sights to 2018 and ways in which Congress can be less awful. In this special holiday edition of “Mostly Weekly” Andrew Heaton comes up with some out-of-the-box ideas for our legislators:

•Find out what’s inside the stuff they vote on
•Quit hemorrhaging money like a drunken sailor
•Balance mental health with Mr. Trump’s twitter account
•Find healthy outlets for pint up sexual energy otherwise directed at staffers

And, of course, what to do about that shrimp running on a government-funded treadmill.

Mostly Weekly is hosted by Andrew Heaton with headwriter Sarah Rose Siskind.
Script by Andrew Heaton with writing assistance from Sarah Rose Siskind
Edited by Sarah Rose Siskind and Austin Bragg
Produced by Meredith and Austin Bragg.
Theme Song: Frozen by Surfer Blood.

December 29, 2017

2017 wasn’t all doom and gloom and Trump tweet wars

Veronique de Rugy manages to find three things that 2017 produced that somehow didn’t kill millions of Americans (so far, as far as we know):

First, President Donald Trump just signed a historic reduction in the corporate income tax rate, from 35 percent — the highest of all industrialized nations — to 21 percent. And except for a one-time repatriation tax, the U.S. will no longer tax most profits made by businesses overseas.

Both changes should boost economic growth and American workers’ wages. Moreover, the reform removes many of the distortions that discourage companies from investing foreign-earned income in the United States and prompt them to use tax avoidance techniques.

Second, this was a very good year for deregulation. Cutting taxes isn’t the only way to boost growth and raise wages; innovation may matter even more. Getting rid of duplicative and outdated regulatory hurdles to innovation promises to have a real impact on our lives. That’s what the Trump administration, with the help of Congress, seems committed to doing.

When the president first got to the White House, for example, he froze many not-yet-implemented Obama-era regulations. These include the punishing overtime pay regulation, which would have increased the cost of employing workers and ultimately reduced their base compensation to offset the increase in overtime pay.

[…]

Last but not least are the sustained efforts by Sens. Pat Toomey, R-Pa., and Richard Shelby, R-Ala., to slow down the process that would restore the Export-Import Bank, a bastion of cronyism, to its full and former glory.

Appointing enough board members to give Ex-Im a full quorum would instantly restore the agency’s ability to sign off on deals above $10 million for the benefit of a handful of very large foreign and domestic corporations. By resisting, the two senators are fighting a lonely fight on behalf of the unseen victims of corporate welfare.

December 25, 2017

Repost – The market failure of Christmas

Filed under: Economics, Government — Tags: , — Nicholas @ 03:00

Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:

In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.

But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us — and who are spending other people’s money — perhaps can’t.

So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?

December 23, 2017

Words as weapons, words as tools

Filed under: Bureaucracy, Government, Media, Politics, USA — Tags: , , — Nicholas @ 04:00

In City Journal, Howard Husock looks at the recent media fuss about certain words being “banned” by Trump or the Republicans:

A political tempest arose last week when the Washington Post reported that the Department of Health and Human Services had banned the use of certain words or phrases — “vulnerable,” “science-based,” and “entitlements,” among others — in official budget documents. National Affairs editor Yuval Levin debunked the story, though, finding instead that bureaucrats concerned about offending Republican budget overseers had, in fact, decided to censor themselves. If so, that suggests that the bureaucrats have been reading their George Orwell, who observed in his classic essay “Politics and the English Language” that language is “an instrument which we shape for our own purposes”; they are sharp enough to realize that even neutral terms can constitute mini-arguments. Each of the terms in question — and a great many more — have been weaponized for use in political conflict.

“Vulnerable,” for example, is a substitute for “poor” or “low-income,” but it usually suggests that the person in question should not be considered in any way responsible for his or her situation, because social conditions that transcend individual action have stacked the deck adversely. “Science-based” is a pithy way to characterize the views of one’s political opponents as ignorant or superstitious. The belief that climate change will prove catastrophic is said to be science-based; any view that minimizes the risk constitutes “denial,” another noun that has become an argument. The widely used “entitlement” has also become an argument. The idea that all citizens are “entitled” to certain forms of financial support — checks for those above a certain age, health insurance for those below a certain income — implies no other way of seeing the situation. Those who would change the way entitlements are disbursed, then, are impinging on rights, not programs.

Other examples abound. “Disadvantaged” describes low-income children — while implying that other children are advantaged — and thus that the system is unfair and violates “social justice,” another loaded term. The “homeless,” by and large, are not living on the street but are often doubled up with friends or family; they don’t have their own home, in other words. But the word-picture painted by “homeless” is more powerful. The Right plays the same game. “Death tax” as a substitute for “estate tax,” for example, characterizes a debatable policy as an immoral absurdity.

Repost – “Merry Christmas” versus “Happy Holidays” versus “Happy Midwinter Break”

L. Neil Smith on the joy-sucking use of terms like “Happy Midwinter Break” to avoid antagonizing the non-religious among us at this time of year:

Conservatives have long whimpered about corporate and government policies forbidding employees who make contact with the public to wish said members “Merry Christmas!” at the appropriate time of the year, out of a moronic and purely irrational fear of offending members of the public who don’t happen to be Christian, but are Jewish, Muslim, Hindu, Buddhist, Sikh, Jain, Rastafarian, Ba’hai, Cthuluites, Wiccans, worshippers of the Flying Spaghetti Monster, or None of the Above. The politically correct benediction, these employees are instructed, is “Happy Holidays”.

Feh.

As a lifelong atheist, I never take “Merry Christmas” as anything but a cheerful and sincere desire to share the spirit of the happiest time of the year. I enjoy Christmas as the ultimate capitalist celebration. It’s a multiple-usage occasion and has been so since the dawn of history. I wish them “Merry Christmas” right back, and I mean it.

Unless I wish them a “Happy Zagmuk”, sharing the oldest midwinter festival in our culture I can find any trace of. It’s Babylonian, and celebrates the victory of the god-king Marduk over the forces of Chaos.

But as anybody with the merest understanding of history and human nature could have predicted, if you give the Political Correctness Zombies (Good King Marduk needs to get back to work again) an Angstrom unit, they’ll demand a parsec. It now appears that for the past couple of years, as soon as the Merry Christmases and Happy Holidayses start getting slung around, a certain professor (not of Liberal Arts, so he should know better) at a nearby university (to remain unnamed) sends out what he hopes are intimidating e-mails, scolding careless well-wishers, and asserting that these are not holidays (“holy days”) to everyone, and that the only politically acceptable greeting is “Happy Midwinter Break”. He signs this exercise in stupidity “A Jewish Faculty Member”.

Double feh.

Two responses come immediately to mind, both of them derived from good, basic Anglo-Saxon, which is not originally a Christian language. As soon as the almost overwhelming temptation to use them has been successfully resisted, there are some other matters for profound consideration…

December 19, 2017

The imminent threat of Neo-Victorianism

Filed under: Business, Education, Government, Media, USA — Tags: , , , , , , — Nicholas @ 05:00

Megan McArdle on the moral panic currently gripping modern American public life:

The same logic applies to the burdens of proof. If unsubstantiated claims are accepted at face value, then eventually enough will turn out to be false that many future claims will be disregarded — whether they are plausible or not, whether they are substantiated or not. That was the harm done by cases like the Duke Lacrosse scandal, the UVA rape case, the Tawana Brawley accusations, and many others. But there’s another potential harm we also have to think about.

Let’s say that we do manage to establish a social norm that a single accusation of “inappropriate sexual behavior” toward a woman is enough to get you fired and drummed out of your industry. It’s the crux of the issue so eloquently explored recently by Claire Berlinski: What would a reasonable and innocent heterosexual man do to protect himself from the economic death penalty?

One thing he might do is avoid being alone with anyone of the opposite sex — not in the office and not even in social situations. You might, in other words, adopt something like the Pence Rule, so recently mocked for its Victorian overtones. (Or worse still, work hard not to hire any women who could become a liability.)

This would obviously be bad for women, who would lose countless opportunities for learning, advancement, friendship, even romance — the human connections that make us human workers superior to robots, for now.

On the radio recently, I pointed out that this might be a logical result of a “one strike and you’re out” policy. The host, aghast, remarked that this was obviously not what we wanted. And of course, that isn’t what anyone wants. It might nonetheless be the logical result of the rules we’re setting up.

It’s easy for me to think of all the things I would have lost out on under a strict Pence Rule. The creative writing professor who conducted my independent study in his house, for example. It was perhaps a more innocent time, but even then I was not unaware of the sexual overtones our culture would see in a young female student going to a much older male professor’s home while his wife was at work. He was a perfect gentleman who made me cabbage soup, taught me to insert little slivers of garlic into a beef roast, and savagely critiqued my prose. David Slavitt, wherever you are, thank you for making me a better writer. And my condolences to all the female students today who will never have similar opportunities — if I may judge by the bemusement/horror of male professors to whom I have told this story.

December 18, 2017

QotD: The perils of well-meaning regulation

Filed under: Economics, Government, Quotations — Tags: , , — Nicholas @ 01:00

Because the rich and powerful run the government, the poor and other powerless have been regularly hurt by governmental regulation – even by such sweet-sounding regulations as evening closing of shops (making it hard for the working poor to have time to shop) or protections limiting the hours women could work (making it hard for them to hold supervisory jobs requiring one to come early and stay late) or building codes claiming to promote safety but instigated by building trade unions (making it hard to build inexpensive housing) or minimum wages (making it hard for blacks, immigrants, women, and nonmembers of craft unions to get paying jobs).

Dierdre McCloskey, Bourgeois Equality, 2016.

December 17, 2017

E-Estonia

Filed under: Europe, Government, Technology — Tags: — Nicholas @ 03:00

In the New Yorker, Nathan Heller reports on how Estonia is attempting to be the first digital state:

E-Estonia is the most ambitious project in technological statecraft today, for it includes all members of the government, and alters citizens’ daily lives. The normal services that government is involved with — legislation, voting, education, justice, health care, banking, taxes, policing, and so on—have been digitally linked across one platform, wiring up the nation. […]

Today, citizens can vote from their laptops and challenge parking tickets from home. They do so through the “once only” policy, which dictates that no single piece of information should be entered twice. Instead of having to “prepare” a loan application, applicants have their data — income, debt, savings — pulled from elsewhere in the system. There’s nothing to fill out in doctors’ waiting rooms, because physicians can access their patients’ medical histories. Estonia’s system is keyed to a chip-I.D. card that reduces typically onerous, integrative processes — such as doing taxes — to quick work. “If a couple in love would like to marry, they still have to visit the government location and express their will,” Andrus Kaarelson, a director at the Estonian Information Systems Authority, says. But, apart from transfers of physical property, such as buying a house, all bureaucratic processes can be done online.

Estonia is a Baltic country of 1.3 million people and four million hectares, half of which is forest. Its government presents this digitization as a cost-saving efficiency and an equalizing force. Digitizing processes reportedly saves the state two per cent of its G.D.P. a year in salaries and expenses. Since that’s the same amount it pays to meet the NATO threshold for protection (Estonia — which has a notably vexed relationship with Russia — has a comparatively small military), its former President Toomas Hendrik Ilves liked to joke that the country got its national security for free.

Other benefits have followed. “If everything is digital, and location-independent, you can run a borderless country,” Kotka said. In 2014, the government launched a digital “residency” program, which allows logged-in foreigners to partake of some Estonian services, such as banking, as if they were living in the country. Other measures encourage international startups to put down virtual roots; Estonia has the lowest business-tax rates in the European Union, and has become known for liberal regulations around tech research. It is legal to test Level 3 driverless cars (in which a human driver can take control) on all Estonian roads, and the country is planning ahead for Level 5 (cars that take off on their own). “We believe that innovation happens anyway,” Viljar Lubi, Estonia’s deputy secretary for economic development, says. “If we close ourselves off, the innovation happens somewhere else.”

December 14, 2017

Cognitive dissonance in action – Net Neutrality partisans want TRUMP to control the internet

Filed under: Government, Politics, Technology, USA — Tags: , , , , — Nicholas @ 05:00

Jon Gabriel on the weird position Net Neutrality fans find themselves in … demanding that Il Donalduce himself, the most hated politician in Liberal America since Richard Nixon be the one to dictate how the internet is run:

If President Trump is some kind of digital facist, he sure has a funny way of going about it.

His FCC chairman is trying to remove government from the Internet, returning it to those dark, authoritarian days of 30 months ago — you know, when pretty much every website, app and online service we use was created.

Bizarrely, these net neutrality alarmists are demanding that Trump maintain control of the Internet, planting his administration firmly between citizens and whatever content they want to view or create.

Even if Democrats were running the show in Washington, how could federal meddling improve the Internet? Do they want the Web run by the bureaucrats who spent $2 billion to build a health care website that didn’t work? Do they want our privacy assured by those behind the National Security Agency?

Nevertheless, progressives insist that Trump regulate the Internet in the name of free speech. Perhaps he can do this between his tweets bashing the press.

[…]

If the FCC approves this new proposal, the worst of federal meddling online will be retired. Instead, the commission will simply require Internet service providers to be transparent about their service offerings. That way, tech innovators will have the information they need and consumers will know which plan works best for them.

In other words, Web users and creators will be back in control of the Internet instead of lawyers and bureaucrats. Just as they were for all but the past couple of years.

To ensure transparency, Pai made all his proposals public before the FCC vote Thursday. A big departure from the Obama administration’s methods, which kept its net neutrality rules secret until after they were approved.

Before the FCC’s heavy-handed intervention, we saw the creation of Amazon, Google and Twitter. If Washington removes these unnecessary regulations as expected, we’ll see the Internet continue to blossom.

And my daughters will get to watch their favorite YouTube celebrities complain about net neutrality for years to come.

Canadian politicians and police chiefs still struggling with notion of “legal” marijuana

Filed under: Cancon, Government, Law — Tags: , , — Nicholas @ 04:00

The federal government will legalize the use of marijuana across Canada in July, 2018. You’d think that would be plenty of time for provincial, regional, and municipal governments and police forces to make adequate changes for the newly legal product, right? No, this is Canada, the home of the overblown local concern:

December 12, 2017

Kill the Mortgage Interest Deduction Now!

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 04:00

ReasonTV
Published on 11 Dec 2017

Thankfully, one of the biggest scams in the American tax code is finally under attack in the House version of Republican tax reform.

It’s the mortgage-interest deduction, which lets homeowners deduct interest paid on mortgages of up to $1 million for two houses. Ever since owning a home has been a central tenet of the American Dream since the end of World War II and the rise of suburbia, it’s been a given that deducting mortgage interest from your taxes is as American as apple pie.
_____

The House plan would limit filers to deducting interest on the first $500,000 of a mortgage on just one house, sending a blind panic through wealthy home owners, realtors, and the building trades, all of whom are terrified that a government subsidy is being yanked away from them.

But the real problem with the House bill is that it doesn’t go far enough. We should scrap the mortgage-interest deduction altogether and let housing prices reflect real market values.

The mortgage-interest deduction is typically justified by claiming that it lets people—especially vaguely defined “middle-class” people–afford homes. But it also increases the price of housing by making it artificially cheap to borrow, meaning homebuyers are willing to pay more. England, Canada, and Australia don’t let their taxpayers deduct their mortgage interest and they all have higher rates of homeownership than the United States.

The mortgage-interest deduction disproportionately benefits the wealthiest Americans, who soak up almost all the $70 billion a year it costs in foregone revenue each year. Reason Foundation’s director of economic research, Anthony Randazzo calculates that only 20 percent of tax filers claim the mortgage-interest deduction. That group by and large are part of six-figure households in a country where the median household income is $57,000.

Killing the mortgage-interest deduction might cause a one-time 7 percent drop in real estate prices, according to one estimate, with wealthy homeowners feeling most of the pain.

As a homeowner, that seems like a small price to pay to end a policy that distorts the real estate market, complicates the tax code, and benefits mostly wealthier Americans on the false promise that it makes home-owning affordable for the middle class.

The mortgage-interest deduction is just special interest pandering wrapped in a gooey story that equates “the American Dream” with having a mortgage. The tax code should be designed to raise the revenue necessary to pay for essential services, not to nudge and prod us into spending money on something the government decides is good for us.

Produced by Todd Krainin. Written and narrated by Nick Gillespie.

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