No Exit

The New York Times reports that the United States is losing citizens at a record pace. In the fourth quarter of 2009, 502 American expatriates renounced their citizenship. Although 502 people are little more than a rounding error when compared to the total number of Americans living overseas, the overall trend line looks like the Fed’s money supply graph – it’s moving up at an alarmingly high rate. The number of renunciations in 2008 was only 235, but in 2009 that number jumped to a total of 743 – an increase of 316%.

The Times article chalks up the increase in defections to “frustrations over tax and banking questions, not political considerations” (as if the ever-increasing tax burden and banking controls were somehow unrelated to basic freedoms that Americans used to enjoy). By this they mean that expats are starting to chafe under the extraterritorial nature of the US tax code. The United States is the only industrialized country that taxes income earned overseas. Although there is an exemption on the first $91,400 earned, anything in excess of that amount is taxed by the US above and beyond the local taxes that must be paid. This double taxation is a unique privilege, available only to those lucky individuals who happen to hold a US passport.

In addition to the tax burden, banking restrictions imposed by the federal government both here and abroad are taking their toll on Americans living overseas. The Patriot Act, for example, requires that banks verify the US address of anyone holding an account. For Americans who don’t actually live in the United States, this can be a difficult standard to meet.

But the banking woes for expats don’t end there. President Obama recently signed into law H.R. 2847, the “Hiring Incentives to Restore Employment Act.” As reported by Zero Hedge, the bill contains a provision that imposes capital controls on overseas bank accounts held by American citizens. The new law requires that foreign banks withhold 30% of all outgoing capital flows and disclose the full details of non-exempt account holders to the IRS. If the US law conflicts with foreign law, the foreign bank is required to close the account.

This new regulation sounds like a follow-up to the G20’s broadside last year against so-called “tax havens” like Switzerland and Singapore. The threat of OECD sanctions quickly brought the renegade countries to heel and privacy in banking has now gone the way of the dodo, just as the US government demanded.

These banking and tax laws are only part of the problem, of course. The skyrocketing federal debt, stifling regulatory burden, increasing government management of industry, and incessant destruction of the dollar are all factors contributing to the economic decline of the United States. According to The Heritage Foundation’s 2010 Index of Economic Freedom, the US has dropped out of the group of “free” countries and the Star-Spangled Banner now waves o’er the land of the “mostly” free instead.

The recent uptick in renunciations reported by The New York Times may be one of the first hints of the long-term effects of this decline. Emigration away from the United States is increasing, while even illegal immigration into the United States is decreasing. This should not be surprising. Immigration flows (legal or otherwise) can be seen as the proverbial canary in the coalmine, since people always migrate from areas of less freedom to areas of greater freedom. Have you ever heard of anyone building a raft out of inner tubes and rowing it toward Cuba?

As increasing numbers of Americans seek greener pastures outside the borders of their home country, the reaction of the federal government will most likely be the imposition of even more oppressive measures to stem the outflow. No doubt this is another factor in the decision by many expats to renounce their citizenship now rather than later. Better to get out while the financial Berlin Wall currently under construction can still be scaled with relative ease. The longer they wait, the higher the cost of exit is likely to become.

A radically different, liberty-oriented approach might yet alter this trend. A restoration of economic freedom and an overall reduction in government meddling in what should be completely private financial affairs would do wonders to improve our battered economy. The United States might once again become the greener pasture in which the world seeks opportunities. Failing that new approach, however, we can only assume that the need to emigrate will become more urgent for more Americans, even as their ability to emigrate is curtailed.

Lagniappe - April 2010

Paying for Free Speech
The Fort Worth Weekly reports that Texas rancher Billy Mitchell has been fined for purchasing billboards and newspaper advertisements critical of Governor Rick Perry. Mr. Martin was under the mistaken impression that, as an American citizen, he has the right to speak his mind about the issues that concern him, such as eminent domain and Gov. Perry’s abuse of it.

“I wasn’t aware you had to fill out a form to exercise your freedom of speech,” Mitchell said. “It’s not what they taught us at Aledo High School in government class. They said freedom of speech is unrestricted.”

Evidently the curriculum at Aledo High needs to be updated. The Texas Ethics Commission, the state department tasked with enforcing election laws and promoting public confidence in “ethical government” [sic], has fined Mr. Mitchell $1,300 for the crime of registering as a one-man political action committee eight days late. In the state of Texas, failure to submit a PAC form on time can result in a $500 fine, plus $100 a day after that, up to $10,000.

Mr. Mitchell persists in his error and refuses to pay the fine. He sent a letter to the Texas Ethics Commission explaining, “I was not endorsing any candidate. I was not coordinated with any candidate’s campaign. I was just expressing my thought using the guaranteed freedom of speech under the First Amendment.” He also demanded that either the fine be dismissed or that he be given a trial by a jury of his peers (something he also claims is guaranteed him by the Bill of Rights).

“I’m one person. I asked what happened to my freedom of speech. He [the ethics commission attorney] said I didn’t fill out the right paperwork to get my freedom of speech.”

Premeditated Horticulture
Dallas police have arrested a 67 year old woman for beautifying the city. Sandra McFeeley was recently handcuffed and charged with felony criminal mischief for thinning thickets in a city park. The arrest took place at Ms. McFeeley’s home in Oak Cliff, a particularly crime-ridden area of the Dallas metroplex. Oak Cliff residents can now rest easy knowing that there is one less unauthorized hedge trimmer prowling the streets today.

Agenda? What Agenda?


This promo for MSNBC’s The Rachel Maddow Show is one of the funniest things I’ve seen in a long time. In it Ms. Maddow states, “Sometimes I get defined as an ‘activist’ because I say what my opinion is. I’m not trying to push an agenda of any stripe.”

I wonder how many takes she needed to say that line with a straight face?

How’s That Working Out?
I don’t imagine that anyone voted for President Obama because of his command of economics (not that his opponent or predecessor had any advantage on that score). A lot of people - libertarians included - did vote for Obama, however, because they thought he would at least be better on issues of war and civil liberties.

So how’s that working out?

Gitmo is still open. Troops are still in Iraq. The war in Afghanistan is escalating. The administration is working diligently to slap additional sanctions on Iran, and is busy updating military plans as well. Electronic strip search machines (a.k.a. “full body imaging machines”) are being rolled out to US airports. Capital controls have been imposed on offshore accounts held by Americans. The Obama administration argues that the government should be able to track citizens’ movements via their cell phones without a warrant because Americans enjoy no "reasonable expectation of privacy" with regard to their whereabouts. Some additional details concerning the NSA’s Einstein program have been revealed, but the administration doesn’t seem too concerned about a program designed to monitor all Internet communications, including the contents of e-mail.

And speaking of e-mail, Yahoo and Google are fighting the Obama administration’s broad request for users’ e-mail messages (again, without a warrant). Perhaps Yahoo and Google learned a lesson from the uproar over the Bush administration’s warrantless foray into phone company records – a lesson Obama never learned.

The Definition of Success

I’ve been engaged in a seemingly endless online debate with the guys in my fantasy baseball league over the relative merits of Keynesian stimulus programs. An odd forum for that kind of discussion perhaps, but I’m certainly better at talking politics and economics than I am at discussing earned run averages or whether Manny Ramirez is a better pick than Magglio Ordonez. It has not been a terribly fruitful discussion, but I suppose I’m stuck with it (at least until the start of fantasy football).

My league consists of eight liberal Democrats, one neocon Republican, and me. It’s going to be a long season. Just to give an indication of how long, here’s a snippet from the current debate:

Neocon: …do you consider Keynesian style stimulus a good idea?

Liberal #1: Under specific circumstances when consumer confidence is exceptional [sic] low and spending is in a death spiral government stimulas [sic] is called for. Without some sort of spending infusion things will get so bad so quickly in times of great stress that the resulting hit to employment and even the deficit, due to reduced taxes, that it is called for. I assume that you are taking a shot at the stimulas [sic] or perhaps the stimulas [sic] from the great depression. The government can only do so much as 70% plus of spending comes from the consumer, but both gov't stimulas [sic] spending programs stablized [sic] the economy and in this case kept us from much worse employment [sic]. At this point there is little more the government can do now that things have stablized [sic], so we need to sadly just wait it out.

Neocon: When has stimulus / priming the pump / Keynesian economics ever worked? It hasn’t worked and in fact when tried stimulus has made things worse. You state that 70% of spending comes from consumers (meaning the private sector). Well stimulus takes money out of the private sector which ultimately crowds out private investment. Private investment is what creates the vast majority of jobs. Hence the reason why Obama’s stimulus plan w/ the goal of creating jobs has been such an absolute failure. In the on-deck circle is runaway inflation and a double dip recession. 2011 is going to make 2008 look like a walk in the park.

Liberal #2: Stimulus did work because you guys aren't being raped by guys who
ride motor cycles and only wear leather and glasses with one lens!

Now I have heard any number of justifications, rationalizations, and excuses for the various stimulus programs that have been implemented in true bipartisan fashion over the past few years, but I have to admit this last point was far and away the most original of the bunch. To my knowledge, no one else has suggested that the stimulus program was necessary to avert some sort of homoerotic Mad Max apocalypse (although I should probably review Paul Krugman’s archives just to make sure).

The debate rages on, and I have certainly offered my two cents (1.25 cents after taxes). I’ll spare you the endless back-and-forth. Instead, here’s a relatively simple point I made:

“In pushing his Economic Stimulus Act of 2008, Bush claimed that printing up a
bunch of $600 checks would avert the nascent recession. Did it? Obama claimed
that an additional $787 billion stimulus package would prevent unemployment from
exceeding 8%. Did it? The Japanese central bank followed the Keynesian playbook
to the letter, claiming that public spending would ‘increase aggregate demand’
and restore their economy to its 80s-era vitality. Did it?”

So far, these questions have gone completely unanswered by my opponents in the league. Rather than addressing the points raised they skip merrily along, pointing instead to Business Week’s Mike Dorning, who argues that Obamanomics is working - no matter what your own lying eyes might show you. The Dow is just a smidge over 11,000 right now. GDP is up. Ipso facto, everything’s fine because Keynesian spending has boosted the aggregate demand that had been depressed by those pesky animal spirits for so long. Thank you, John Maynard!

Maybe my opponents are right - perhaps Keynesianism has succeeded. Maybe in their minds a national debt of $12.8T (and climbing) is evidence of the kind of success to which they refer. Maybe an annual deficit of $1.17T is yet another sign of success. Nationalizing the finance and banking sectors, the automotive industry, and health care might also be considered evidence of Keynesian success. No doubt a persistent official unemployment rate of 9.7% is reason to cheer. After all, just imagine how bad that number would be if the Feds hadn’t “saved or created” all those jobs.

As if to support my friends’ arguments, Bernanke, Obama, Geithner, et al have been furiously patting themselves on the back lately for delivering these stellar results, telling us (with a straight face, no less) that the economy has now “turned a corner.” The recent and much-ballyhooed news of 163,000 new jobs last month does sound like an improvement, after all. At least until one realizes that about a quarter of those jobs were “created” by the Census department and will be “uncreated” as soon as they’re done harassing you about the number and ethnicity of the people living in your house.

But as Bill Bonner of The Daily Reckoning points out, “Peak to trough, December ’07 to February ’10, 8.3 million jobs were lost…take away the statistical tricks and the number of people with real jobs actually fell last month – despite reports of an additional 163,000 new jobs in March… The private sector added 123,000 jobs last month. According to our sources it needs to create 100,000 just to stay even with population growth. At this rate, it will take approximately 320 years to get back the 8 million jobs that have been lost.”

So I guess the argument all boils down to your definition of success, doesn’t it? If the numbers rolling in are enough to be considered a success in America these days, then the guys in my fantasy league are correct. Keynesian economic policies have certainly succeeded at deepening the pain and delaying the recovery. And they have the added benefits of imposing a crushing debt burden on future generations and setting the groundwork for an even more painful correction somewhere down the road.

But I have a different definition of success. In my opinion, a successful economic policy is one which allows production to align itself with actual consumer preferences, resulting in an economy that is neither artificially stimulated nor restrained. A successful economic policy would allow individuals and companies not only to earn profits, but also to incur losses - no bailouts and no “too big to fail” mentality. A successful economic policy would be one in which the lifeblood of the economy, money, would be honest and stable - no inflation, and none of the military adventurism financed by it.

I realize the radical economic policy I’m proposing here (known in some circles as “classical liberalism” or even - God forbid - “capitalism”) is neither popular nor politically feasible. It would require government to do less, not more – a terrifying prospect for the vast majority of American citizens (and 99.99% of American politicians). Nevertheless, it would provide for stable, long-term economic growth, wealth creation, and peace.

That’s my definition of success.

We Few, We Happy Few

The Libertarian Party of Texas is hosting a Tax Freedom Day dinner here next week. According to the Tax Foundation, April 9th is the day working Americans complete their annual indentured servitude to the government and start earning money for themselves, rather than for the state. I’m planning to attend the LP event, but after reading today’s news I’m a little worried that the turnout might be low this year. As the Associated Press reports, 47% of US households pay no federal income tax whatsoever, and for those people Tax Day is “simply somebody else's problem.”

Hi. My name’s Stephen, and I’m “somebody else.”

Once again this year, the Smith family finds itself squarely among the shrinking number of households that do pay income taxes. Lots of them, in fact. We few, we happy few taxpayers are shouldering a heavy burden, working diligently to support the growing number of net tax consumers in this country. Fortunately, though, we don’t have to carry the load all by ourselves. Our government’s addiction to deficit financing ensures that our children and our children’s children will also be pressed into service, forced to pay for the Feds’ current consumption with future taxation and a greatly devalued currency.

The upcoming April 15th filing deadline (and the rather large check I just sent the IRS) has given me a chance to reflect a bit. I have to admit that I never gave much thought about how much I would be willing to pay a company in the free market to destroy my savings, increase the cost of living, launch elective wars, tell me what I may or may not purchase, what I may or may not eat, or with whom I may or may not associate. Whatever that price is, though, it’s a lot less than what I’m being charged now.

No doubt many will tell me that I’m looking at this thing all wrong. After all, it’s only fair. One half of society should pay for the government services that are provided whether they want them or not, or whether they use them or not. And that same half should also be forced to pay for the services for the other half as well. You can’t expect 47% of American households to pay for things themselves, after all. That just wouldn’t be fair!

So cry, “God for Barry, Washington, and Saint Pelosi!” And be sure to file your return on time - half of the country is depending on it.




SMITH
O that we now had here
But one ten thousand of those men in America
That pay no taxes to-day!

KING BARRY I
What's he that wishes so?
My cousin Smith? No, my fair cousin;
If we are mark'd to die, we are enow
To pay the estate tax; and if to pay the federal income tax,
The fewer men, the greater share of honour.

God's will! I pray thee, wish not one man more.
By Jove, I am not covetous for gold - just fiat money;
Nor care I who doth feed upon your cost;
It yearns me not if men your garments wear;
Such outward things dwell not in my desires.
But if it be a sin to covet the wealth of others,
I am the most offending soul alive.

No, faith, my coz, wish not a man with a job.
God's peace! I would not lose so great an honour
As one man more methinks would share from me
For the best hope I have. O, do not wish one more!

Rather proclaim it, Smith, through my host,
That he which hath no stomach to these taxes,
Let him depart the workforce; ‘tis easily done these days,
And someone else’s crowns for convoy put into his purse;
We would not pay income tax in that man's company
That fears his fellowship to pay with us.

This day is call'd Tax Freedom Day.
He that outlives this day, and comes safe home,
Will finally be working for himself rather than the State,
If only for nine months of the year.

He that shall live this day, and see old age,
Will yearly on the vigil join his neighbours,
And ask, 'Whatever happened to that lock box they promised us?'

Then will he strip his sleeve and show his scars,
And say 'These wounds I had from the Public Option.'
Old men forget; yet all shall be forgot,
But he'll remember, with advantages,
What feats he did that day. Then shall our names,
Familiar in his mouth as household words-
Barry the King, Pelosi and Reid,
Paulson and Geithner, Bush and Bernanke-
Be in their flowing cups freshly rememb'red.

This story shall the good man teach his son;
And Tax Freedom Day shall ne'er go by,
(Tho’ later each year than the one before)
From this day to the ending of the world,
But we in it shall be remembered-

We few, we happy few, we band of taxpayers;
For he to-day that gives his money to me
Shall be my serf; be he ne'er so vile,
This day shall lighten his bank account;

And gentlemen in America now-unemployed
Shall think themselves accurs'd they were not here,
And hold their entitlements cheap whiles any speaks
That fought with us to postpone Tax Freedom Day!