Five Fiscal Truths

by Ryan Bourne, Cato at Liberty, April 18, 2024.


The recorded federal deficit from 2023, at $1.7 trillion (or 6.3 percent of gross domestic product, or GDP), was 23 percent higher than in 2022, but even that was pushed artificially downward by the Congressional Budget Office (CBO) recording the Supreme Court’s cancellation of Biden’s student loan forgiveness plan as a one‐​off spending cut. The underlying figure was around $2 trillion, or 7.4 percent of GDP. This is easily the largest deficit recorded outside wars or acute emergencies since the Great Depression of the 1930s.

Figure 1 shows the CBO’s budget deficit projections for the next 10 years. It estimates, on current policy, that annual deficits will grow to $2.6 trillion per year by 2034. This likely understates the scale of red ink. It assumes that large portions of the Tax Cuts and Jobs Act will be allowed to simply expire, that no other large spending programs will be introduced after the next presidential election, and that no unexpected shocks or recessions will hit in the interim. The feds are simply borrowing vast amounts, especially given today’s sanguine macroeconomic conditions.


America’s New Regulation Busters

by Andy Kessler, Wall Street Journal, April 14, 2024.


Most venture capitalists invest and help startups with new strategies and hiring a team. Mr. Churi describes what he does as “trench warfare,” fighting with regulators and incumbents deal by deal. He notes that “we have built houses the same way for 1,000 years—with sticks and bricks.” A startup, ICON, hoped to create homes for the homeless in Texas using a giant 3-D printing machine that deposits layers of concrete. It can “print” a 500-square-foot home in 24 hours. For $4,000. Game changing.

Then came the regulators. Mr. Churi says that for homes, international fire safety codes say, “ ‘You’ve got to put the wooden joists like this.’ But there are no wooden joists. The whole thing is inherently fireproof—it’s concrete.” As for regulators, “they’re like, ‘You’ve got to put the wooden joists like that. See it says it right here on the page.’ ” They grappled with fire-code permitting bodies. “New language got passed. It took two years.”

There’s so much I LOVE about this article. I remember David Friedman, in his first book, The Machinery of Freedom, quoting H.L. Hunt’s statement “If this country is worth saving, it’s worth saving at a profit.” I don’t literally agree with that statement and I bet David doesn’t either. But I think he quoted it because it’s getting at a good point: if people can make a profit by increasing freedom, they’ll be more likely to increase freedom than if they can’t.

IRS’s Most Wanted: The $200,000 Man

by the Editorial Board, Wall Street Journal, April 2, 2024.


The most recent data suggests the IRS is still focused on the middle class. As of last summer, 63% of new audits targeted taxpayers with income of less than $200,000. Only a small overall share reached the very highest earners, while 80% of audits covered filers earning less than $1 million. Don’t forget to save those charitable-giving receipts.

My comment:

In 2021, the last year for which the IRS gives the relevant data, those with AGI of $682,577 or more were in the top 1 percent. [See Table 4.1.] So devoting 20% of audits to the less than 1% of taxpayers with income over $1 million does constitute focusing on high-income people.

I am NOT defending the IRS. I’m defending numeracy and the importance of not misleading readers.


Crime Rates, Not the Number of Crimes, Are a Better Way to Judge Immigrant Criminality

by Alex Nowrasteh, Cato at Liberty, April 17, 2024.


Cuccinelli’s statement that crime rates don’t matter, that only the number of crimes matters, says nothing substantive about the potential danger that immigrants pose to Americans. Let me give an example. Under Cuccinelli’s interpretation, a city with 100 murders is twenty times more dangerous than a city with five murders. But if the city with 100 murders has a million residents and the city with five murders has only 100 residents, then the city with fewer murders is far more dangerous to the residents. The city with one million residents and 100 murders has a homicide rate of 10 per 100,000. The city with 100 residents and five murders has a homicide rate of 5,000 per 100,000, which is 500 times as great as the larger city with 20 times the number of murders.

This is an extreme example, but an example necessary to explain why crime rates are more important to understand relative to criminality and danger than the number of crimes. Which city would you want to live in?

My comment:  Alex makes a good point. There’s a further point. In any large group of people, some are going to be criminals. If the group is big enough (and assuming that we’re not talking about people who are in prison or on trial for crime), the vast majority are not criminal in the usual sense. (I defer to Harvey Silverglate’s point in his book with the highly exaggerated title Three Felonies a Day.)

I think Alex could have made the point even more strongly. There are tradeoffs. Whether the population at issue is born in America or born elsewhere, there is a risk of crime. That’s a cost. There are also benefits. We get their labor and their contribution to our culture. It’s not enough to say that the pool of immigrants contains criminals. It also contains very productive people, and their number is a multiple of the number who are criminals. You can’t do a cost/benefit analysis by considering only the costs. As my friend and fellow economist Alan Reynolds once said, that’s single-entry bookkeeping.