Quote:How the Swiss 'Debt Brake' Tamed Government

by Daniel J. Mitchell

Americans looking for a way to tame government profligacy should look to Switzerland. In 2001, 85% of its voters approved an initiative that effectively requires its central government spending to grow no faster than trendline revenue.

The reform, called a "debt brake" in Switzerland, has been very successful. Before the law went into effect in 2003, government spending was expanding by an average of 4.3% per year. Since then it's increased by only 2.6% annually.

The Swiss debt brake does not require a balanced budget in the traditional sense. Tax receipts, as we know from the American experience, tend to increase rapidly when the economy is doing well and fall off when the economy stumbles. To smooth out the ups and downs, Switzerland's debt brake limits spending growth to average revenue increases over a multiyear period (as calculated by the Swiss Federal Department of Finance).

This feature appeals to Keynesians, who like deficit spending when the economy stumbles and tax revenues dip. But it appeals to proponents of good fiscal policy, because politicians aren't able to boost spending when the economy is doing well and the Treasury is flush with cash.

Equally important, it is very difficult for politicians to increase the spending cap by raising taxes. Maximum rates for most national taxes in Switzerland are constitutionally set (such as by an 11.5% income tax, an 8% value-added tax and an 8.5% corporate tax). The rates can only be changed by a double-majority referendum, which means a majority of voters in a majority of cantons would have to agree.

Needless to say, that's not very likely. History shows the Swiss are more likely to approve tax cuts than tax increases.

Switzerland's spending cap has helped the country avoid the fiscal crisis affecting so many other European nations. Annual central government spending today is less than 20% of gross domestic product, and total spending by all levels of government is about 34% of GDP. That's a decline from 36% when the debt brake took effect.

This may not sound impressive, but it's remarkable considering how the burden of government has jumped in most other developed nations. In the U.S., total government spending has jumped to 41% of GDP from 36% during the same time period, according to the Organization for Economic Cooperation and Development.

The spending cap has been an effective debt brake. Between 2005 and 2010, when debt levels in the average euro-zone nation jumped to 85% of GDP from 70%, Switzerland's overall government debt declined to 40% of GDP from 53%. Debt is now down to 36.5% of GDP.

The Swiss system isn't perfect. Some social insurance programs are not covered by the spending cap, so outlays presumably will increase in this area as the population ages — though Switzerland is still in good shape since a large share of its health and pension expenses are handled by the private sector.

The United States, by contrast, is a mess. Big spending increases under Presidents Bush and Obama have doubled federal spending in the past 11 years, to an estimated $3.8 trillion in fiscal year 2012 from $1.86 trillion in 2001. The long-run outlook is even more troubling since there is no mechanism to restrain the growth of outlays.

But that may change. Rep. Kevin Brady (R., Texas), vice chairman of the Joint Economic Committee, has introduced legislation that is akin to the Swiss debt brake. Called the Maximizing America's Prosperity Act, his bill would impose direct spending caps, but tied to "potential GDP." Potential GDP is a projection of trendline economic output, assuming full employment and no inflation, and would be calculated by the Congressional Budget Office.

Since potential GDP is a reasonably stable variable (like average revenue growth in the Swiss system), this approach creates a sustainable glide path for spending restraint.

Of course, politicians don't want any type of constraint on their ability to buy votes with other people's money. But people everywhere are starting to realize that business-as-usual is no longer acceptable.

Quote:Rasmussen: Dems least likely to know spending has risen over last ten years

We see enough surveys that claim conservatives are either less intelligent or poorly informed, so why not take a look at the reverse? Actually, Rasmussen’s most recent national poll didn’t aim to make claims over partisan fact-based realities, but to see how likely voters view spending issues in the run-up to a general election where debt and deficits will be big factors. Let’s take a look at the toplines first:

Quote:A new Rasmussen Reports national telephone survey finds that 76% of Likely U.S. Voters recognize that government spending in America has gone up over the past 10 years. Just nine percent (9%) think spending has gone down, and another nine percent (9%) believe it has stayed about the same. …

Fifty-seven percent (57%) of voters favor a law that would limit government spending so it could grow only enough to cover population growth and inflation. Twenty-four percent (24%) oppose such a law. Nineteen percent (19%) are undecided.

Findings on these questions are largely unchanged from the first time Rasmussen Reports asked them last May. Government spending in the United States has grown faster than the growth of population plus inflation every year but one since the Beatles played Shea Stadium in 1965. Most of that spending growth resulted from policies enacted while Lyndon Johnson and Richard Nixon were in the White House.

Among those voters who oppose a cap on spending increases, 31% want even stricter spending limits. But 40% favor looser limits on spending, and 25% more say there should be no spending limits at all.

More than three-quarters of Republicans (76%) want a spending cap that indexes spending to population growth, and half of those who don’t want a stricter spending cap. Only 36% of Democrats want an indexed cap, and 49% of those who don’t prefer a looser cap, and another 22% want no cap at all. The indexed cap gets 57% of independents, but only 31% of independents opposed to it want a stricter cap. Nevertheless, support for caps of one sort or another add up to around 60% of the overall electorate — which would make it difficult for Democrats to run on a spend-more platform.

First, though, you’d have to make sure that people understand that we are spending more over the last ten years. Nearly nine of ten Republicans know it (86%), and almost as many independents (81%). Only 61% of Democrats correctly answer that question, while 16% believe it’s stayed the same. Younger voters tend to follow the same pattern (66% and 10% respectively), while older demos have more than 80% each answering correctly. Self-identified Tea Party members do a little better than non-members (87% to 73%), while the working-class incomes score higher than lower and higher brackets.

The most ironic part of the survey? The political class, which should know this better than most, only gets 65% answering correctly, while 85% of the mainstream gets it right. That tells us we probably need a new political class, eh?

In a similar vein, which nation spends more public funds per capita — the teetering EU nations of Greece, Spain, Portugal, Italy, or the United States? The Republican caucus on the Senate Budget Committee provided this surprising answer yesterday, based on IMF data:


Four of these nations will probably get bailouts from the other. One can’t possibly get bailed out by the other four combined. Care to guess which is which? Oh … let’s not always see the same hands ….

Quote:Is there a drone in your backyard?

Earlier this week, the federal government announced that the Air Force might be dispatching drones to a backyard near you. The stated purpose of these spies in the sky is to assist local police to find missing persons or kidnap victims, or to chase bad guys.

If the drone operator sees you doing anything of interest (Is your fertilizer for the roses or to fuel a bomb? Is that Sudafed for your cold or your meth habit? Are you smoking in front of your kids?), the feds say they may take a picture of you and keep it. The feds predict that they will dispatch or authorize about 30,000 of these unmanned aerial vehicles across America in the next 10 years. Meanwhile, more than 300 local and state police departments are awaiting federal permission to use the drones they already have purchased -- usually with federal stimulus funds.The government is out of control.

If the police use a drone without a warrant to see who or what is in your backyard or your bedroom, or if while looking for a missing child the drone takes a picture of you in your backyard or bedroom and the government keeps the picture, its use is unnatural and unconstitutional.

I say “unnatural” because we all have a natural right to privacy; it is a fundamental right that is inherent in our humanity. All of us have times of the day and moments in our behavior when we expect that no one -- least of all the government -- will be watching. When the government watches us during those times, it violates our natural right to privacy. It also violates our constitutional right to privacy. The Supreme Court has held consistently that numerous clauses in the Bill of Rights keep the government at bay without a warrant.

Even when we don’t have an expectation of privacy, we do have a right to be left alone. But merely watching us in public isn’t enough for the police, as many street corner cameras are equipped with listening devices and tiny megaphones. We can expect that these devices will soon bark commands: “Put down that BlackBerry.” “Look to your right before crossing.” “Don’t kiss her; a car is coming.” Actually, Big Brother is coming, and he’s not smiling.

Big Brother is watching from the skies, as well as the streets. This started when the Department of Defense decided to offer help to police -- and they are prepared to accept. Never mind that the military may not lawfully operate within our borders, except in the case of rebellion, and then only when publicly authorized by the president. Never mind that the military may not lawfully be used for law enforcement, except in the case of disaster, and then only when publicly authorized by the president. And never mind that this use of drones by the Air Force was not the result of legislation debated and enacted by Congress, but was done under the authority of the president alone.

Add to all this the use of drones to kill people. President Obama has argued that he can use drones to kill Americans overseas, whose deaths he believes will keep us all safer, without any constitutional due process whatsoever. His attorney general has argued that the president’s careful consideration of each target and the narrow use of deadly drones are an adequate substitute for due process. Of course, no court has ever ruled that way. The president’s national security adviser has argued that the use of drones is humane since they are “surgical” and only kill their targets. Of course, that’s not true, but it misses the point. Without a declaration of war, the president can’t lawfully kill anyone, no matter how humane his killing.

How long will it be before the Air Force and the police adopt the unconstitutional arguments of the president’s wrongheaded advisers and use the drones not only to spy but also to kill Americans in America?

The whole reason we have a Bill of Rights is to assure that tyranny does not happen here, to guarantee that the government, to which we have supposedly consented, will leave us alone. Do you think the government accepts that? Would you feel safe with a drone in your backyard? Would you feel like you were in America?

Quote:Americans Like Having a Rich Class, as They Did 22 Years Ago
Most Americans would also like to be rich



Nearly two-thirds of Americans believe that the United States benefits from having a rich class, a figure unchanged from over 20 years ago, according to a new survey Friday.

Indeed, 63 percent of Americans believe that the United States is better off from having a class of wealthy, according to Gallup. Only 34 percent believe that the country does not benefit from having an upper class.



Even as the president has called on the rich to pay their “fair share” in taxes, the Occupy Wall Street protests, and amid a public debate over the so-called Buffett rule, American views of the rich have not changed significantly in over 20 years.

In 1990, 62 percent thought that the U.S. was better off with a rich class of people, compared with 32 percent who disagreed.

On this topic, there is a partisan gap, but a majority of Democrats, Republicans and independents all agree that having a class of rich people benefits the U.S. — 52 percent of Democrats, 59 percent of independents and 80 percent of Republicans.

Meanwhile, 63 percent of Americans say that they would personally want to be rich, compared with 35 percent who said they would prefer not to be if they had a choice. Only 28 percent of Americans, however, thought that it was “very” or “somewhat” likely that they would be rich in their lifetimes.

The Gallup Poll was conducted May 3-6, with a sample of 1,024 adults and a margin of error of plus or minus 3 percentage points.

Quote:Now that Democrats have ended their divisive recall primary in Wisconsin, one would expect the polling to show their nominee to be gaining some traction against sitting Governor Scott Walker. Milwaukee Mayor Tom Barrett was considered the stronger of the Democrats challenging Walker in the unusual recall election, and polls just after the recall showed him nearly within the margin of error of the incumbent. This week, however, a new poll from We Ask America of over 1200 likely voters puts Walker on top by nine, 52/43:

The election takes place on June 5th, so if this is an accurate look at the race as it stands now, Barrett is in big trouble. An incumbent with 52% three weeks before the election is going to be hard to beat under any circumstances, especially in a race with this kind of exposure. It has drawn national attention for more than a year, which means that there won’t be many who already support Walker who will suddenly discover a reason to switch. The same can’t be said for Barrett, who has only re-emerged into the spotlight after losing to Walker in 2010.

Quote:Keynesianism Is The New Black Death



One election at a time, voters in Europe are tossing out politicians associated with “austerity”. This week, it was national elections in France and Greece, and state elections in part of Germany. Nicolas Sarkozy became the eighth leader of a eurozone member country to lose his job in a little over a year.

The voters of Spain, Greece, France, etc., understand that their governing elites have pushed their economies into austerity death spirals, and they have been expressing their unhappiness at the ballot box.

Unfortunately for Europe and the world right now, there are no pro-growth candidates and/or parties on the Continent to offer relief from the austerity programs that are grinding their economies to dust. With no one to vote for, all that European electorates have been able to do is to vote against. They have sought to register their protest by defeating incumbents.

Europe as a whole is in recession, and Greece, Spain, and Portugal are in depressions. What are the people supposed to do if the economic chefs on both the political Left and the political Right are offering the same poisonous “austerity” menu?

Fortunately, unlike the last time something like this happened in Europe, there isn’t going to be a war. Fifty years of ever-expanding welfare states has left the nations of Europe too enfeebled to fight each other. Today’s worst-case scenario (which is becoming uncomfortably likely in the case of Greece) is an economic collapse, accompanied by a breakdown in law and order.

Is an outright economic collapse really possible? Sure. If Greece were to abandon the euro and try to reintroduce the drachma, its economy would implode. Or, to be more accurate, it would implode all at once. With its GDP expected to fall by another 5% this year, the Greek economy is already undergoing a slow-motion implosion.

So, what happened in Europe? The short answer is, “plague”.

The Black Death of the 14th century was caused by the Yersinia pestis bacterium, which was spread by rats. Today’s plague is the result of Keynesianism, which is being spread by the economics departments of major universities and The New York Times. Unfortunately, unlike Yersinia pestis, Keynesianism does not respond to antibiotics.

Austerity, as currently being practiced in Europe, is based upon the Keynesian belief that tax increases and government spending cuts have the same effect upon both the government deficit and the economy. In fact, the most virulent strains of Keynesianism cause people to believe that raising top marginal tax rates and increasing government spending can actually boost GDP, because “the rich” have a higher “marginal propensity to save” than do the recipients of government handouts.

Quote:Here's what happens when the president of the United States publicly targets a private citizen for the crime of supporting his opponent.

Frank VanderSloot is the CEO of Melaleuca Inc. The 63-year-old has run that wellness-products company for 26 years out of tiny Idaho Falls, Idaho. Last August, Mr. VanderSloot gave $1 million to Restore Our Future, the Super PAC that supports Mitt Romney.

Three weeks ago, an Obama campaign website, "Keeping GOP Honest," took the extraordinary step of publicly naming and assailing eight private citizens backing Mr. Romney. Titled "Behind the curtain: a brief history of Romney's donors," the post accused the eight of being "wealthy individuals with less-than-reputable records." Mr. VanderSloot was one of the eight, smeared particularly as being "litigious, combative and a bitter foe of the gay rights movement."


About a week after that post, a man named Michael Wolf contacted the Bonneville County Courthouse in Idaho Falls in search of court records regarding Mr. VanderSloot. Specifically, Mr. Wolf wanted all the documents dealing with Mr. VanderSloot's divorces, as well as a case involving a dispute with a former Melaleuca employee.

Mr. Wolf sent a fax to the clerk's office—which I have obtained—listing four cases he was after. He would later send a second fax, asking for three further court cases dealing with either Melaleuca or Mr. VanderSloot. Mr. Wolf listed only his name and a private cellphone number.

Some digging revealed that Mr. Wolf was, until a few months ago, a law clerk on the Democratic side of the Senate Permanent Subcommittee on Investigations. He's found new work. The ID written out at the top of his faxes identified them as coming from "Glenn Simpson." That's the name of a former Wall Street Journal reporter who in 2009 founded a D.C. company that performs private investigative work.

The website for that company, Fusion GPS, describes itself as providing "strategic intelligence," with expertise in areas like "politics." That's a polite way of saying "opposition research."

When I called Fusion's main number and asked to speak to Michael Wolf, a man said Mr. Wolf wasn't in the office that day but he'd be in this coming Monday. When I reached Mr. Wolf on his private cell, he confirmed he had until recently worked at the Senate.

When I asked what his interest was in Mr. VanderSloot's divorce records, he hesitated, then said he didn't want to talk about that. When I asked what his relationship was with Fusion, he hesitated again and said he had "no comment." "It's a legal thing," he added.

Fusion dodged my calls, so I couldn't ask who was paying it to troll through Mr. VanderSloot's divorce records. Mr. Simpson finally sent an email stating: "Frank VanderSloot is a figure of interest in the debate over civil rights for gay Americans. As his own record on gay issues amply demonstrates, he is a legitimate subject of public records research into his lengthy history of legal disputes."


A look through Federal Election Commission records did not show any payments to Fusion or Mr. Wolf from political players, such as the Democratic National Committee, the Obama campaign, or liberal Super PACs. Then again, when political groups want to hire researchers, it is not uncommon to hire a less controversial third party, which then hires the researchers.

This is not the first attack on Mr. VanderSloot. While the executive has been a force in Idaho politics and has helped Mr. Romney raise money, he's not what most would consider a national political power player. Through 2011, nearly every mention of Mr. VanderSloot appeared in Idaho or Washington state newspapers, often in reference to his business.

That changed in January, with the first Super PAC disclosures. Liberal bloggers and media have since dug into his past, dredging up long-ago Idaho controversies that touched on gay issues. His detractors have spiraled these into accusations that Mr. VanderSloot is a "gay bashing thug." He's become a national political focus of attention, aided by the likes of partisan Salon blogger Glenn Greenwald and MSNBC host Rachel Maddow. Bloggers have harassed his children, visiting their social media accounts and asking for interviews and information.

Mr. VanderSloot has said his attackers have misconstrued facts and made false allegations. In February he wrote a long reply, publicly stating that he has "many gay friends whom I love and respect" who should "have the same freedoms and rights as any other individual." The Obama campaign's response, in April, was to single out Mr. VanderSloot and repeat the slurs.

Political donations don't come with a right to privacy, and Mr. VanderSloot might have expected a spotlight. Then again, President Obama, in the wake of the Gabby Giffords shooting, gave a national address calling for "civility" in politics. Yet rather than condemn those demeaning his opponent's donors, Mr. Obama—the nation's most powerful man—instead publicly named individuals, egging on the attacks. What has followed is the slimy trolling into a citizen's private life.

Mr. VanderSloot acknowledges that "when I first learned that President Obama's campaign had singled me out on his 'enemies list,' I knew it was like taping a target on my back." But the more he's thought it through, "the public beatings and false accusations that followed are no deterrent. These tactics will not work in America." He's even "contemplating a second donation."

Still. If details about Mr. VanderSloot's life become public, and if this hurts his business or those who work for him, Mr. Obama will bear responsibility. This is what happens when the president makes a list.

Quote:citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren’t listed in Facebook’s regulatory filings.

citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world’s largest social network holds its IPO.

“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.

Saverin’s name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin renounced his U.S. citizenship “around September” of last year, according to his spokesman.

Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign- sourced income,” according to a government website on tax policies there.