There is so much thick-headedness and tendentiousness in Stephen Metcalf’s anti-libertarian tirade in Slate that one could write a very long response to practically any paragraph.

Because I do not  hate myself that much, I am not going to do so, but this bit particularly stuck in my craw:

Libertarians will blanch at lumping their revered Vons — Mises and Hayek — in with the nutters and the shills. But between them, Von Hayek and Von Mises never seem to have held a single academic appointment that didn’t involve a corporate sponsor. 

As an attempt to impeach the intellectual integrity of two great thinkers, this is fairly lame, not to mention crude. It is also an invitation to mockery: Mr. Metcalf’s work at Slate is supported by worthies pitching their products thus: “57 Year Old Mom Looks 27!” and “Vacuums on eBay.” I didn’t click through to check out that 57-year-old mom, but I’m pretty sure that Mr. Metcalf ought to retire this sort of ad pecuniam argument, and especially the word “shill,” which really ought not to be used unselfconsciously by any former employee of the Clinton clan.

For the record, Mises taught for twenty years at the University of Vienna and then for six at the Graduate Institute for International Studies in Geneva, where he held a chair in international economic relations. When he arrived in the United States in 1940 — a refugee from the Nazis — he was nearly 60 years old, an age when many academics are wrapping up their careers rather than launching new ones. Mises went on to teach, notably at New York University, until he was 87 years old, and retired as the oldest active professor in the United States. It is true that he was not a salaried and tenured professor in any of these roles. In Vienna, he was secretary of the chamber of commerce and later worked for the government. In the United States, he worked also for the government, in the National Bureau of Economic Research, and later at the National Association of Manufacturers. His work in the United States was also supported by a number of nonprofits, including the Volker Fund and the Earhart Foundation.

F. A. Hayek — not von Hayek, incidentally — was on the faculty at the London School of Economics. He taught in various capacities at the University of Chicago, the University of Freiburg, UCLA, and the University of Salzburg. He also won the Nobel Prize in economics, for what it’s worth.

Does Mr. Metcalf of Slate seriously believe that all of these academic institutions (and the Nobel committee) were somehow corrupted by filthy lucre to such an extent that they allowed themselves to be used by “nutters and shills”? (And, if so, why would a regular academic appointment at one of these corrupt institutions be desirable?) I have my reservations about the academic establishment and its merits, but that theory still seems to me preposterous. Mr. Metcalf also seems blind to the possibility that the fact that neither Mises nor Hayek became a Harvard don or similar, and that their work was supported in no small part by businessmen, speaks very poorly of the midcentury academic establishment and very well of midcentury businessmen. I am reminded of the case of Prof. F. A. Harper of Cornell, who quit his professorship when a trustee of the university tried to forbid him from having his students read Hayek’s The Road to Serfdom, on the grounds that it was reactionary and that everybody knew — everybody! — that economic central planning was the wave of the future.

But, hey, Stephen Metcalf of Slate says that’s not good enough. So, there! 

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

The word “denier” has had a strange political career. It began with Holocaust deniers, that execrable little group of closeted Nazis. Next, in order to libel global-warming skeptics with an echo of Holocaust denial, environmentalists began to call them “deniers” — global-warming deniers, climate deniers, etc. Now comes Forbes writer Ralph Benko with “prosperity deniers,” a group of miscreants that includes, according to Mr. Benko, your obedient servant.

At issue is a recent exchange between the great Larry Kudlow and yours truly on the issue of economic growth. Jack up economic growth, Mr. Kudlow argues, and all this budget-balancing stuff gets easier. Not so fast, says I. If we had the ability to know in advance how much growth particular economic policies would produce — or even whether they would produce growth at all — then we would never have a recession. We would always be at the sweet spot of maximum real growth. But we are limited and fallible creatures, and right-wing political macroeconomic management is no more reliable, or predictable in its outcomes, than is Keynesian political macroeconomic management. The economy is not a machine, and any time a politician says, “If we will adopt Policy X, we are sure to achieve Statistical Abstraction Y,” he is talking through his hat. The best government can do is maintain stable rules and liberal institutions and try to stay out of the way.

One can hope for growth beyond the trend line, but counting on it is something else. (And the something else it is is foolishness.)

Mr. Benko summarizes the exchange thus: “Now, the obvious if ambitious goal of bringing economic growth rates from under 2% to 5% has been charmingly attacked by NRO’s erudite Kevin Williamson as ‘magic unicorns’. This ridicule was elegantly and decisively repelled by his host, Larry Kudlow, who stated, factually and fairly, ‘I did it once, Kevin, and I can do it again.’”

My impression is that Mr. Kudlow was making a joke there. (But do watch the video and decide for yourself.)  My chief piece of evidence for that hypothesis is the fact that Mr. Kudlow is a bull, not a jackass. But if this is to be taken as an “elegant and decisive” refutation, a few facts are relevant.

If you chart the growth in real per capita GDP of the United States — the growth in economic output relative to the size of the population — you will see a remarkably straight line indicating about 2 percent real growth per year. There are ups and downs, of course, but the consistency is notable. Thanks to Jake at Econompic Data for charting it:

The period of 1929–2009 includes a great variety of economic policies without proportionally varied outcomes in the big picture. The most plausible explanation of that consistency is that, short of the Great Depression or World War II, the effects of incremental policy changes in the relatively consistent political environment of the United States are small relative to other factors affecting economic growth. Add to that the fact that the outcomes of economic policies are not known in advance or necessarily consistent over time: Nobody wanted a financial crisis or a real-estate meltdown, but we got them. We probably credit politicians too much for good economic outcomes and blame them too much for bad economic outcomes. The economy is big and complex; public finances are less so, and we could, right now, enact policies that would address the imbalances in those public finances, and do so in an orderly and largely predictable way. But that means making very unpleasant choices of the sort that are bound to be keenly unpopular with voters in New Hampshire, Iowa, Florida, etc.

Mr. Benko himself sees the same data but makes something else of it, writing: “Last week Eric Cantor produced a piece of a sure-enough path to prosperity, some of the real deal after several GOP false starts. The GOP has forfeited its credibility with us mere voters. How? Every Republican administration since Reagan has provided economic stagnation: GDP growth averaging around 2%. That is economic and political disaster. Every American has been, on average, treading water for the past decade.”

Two percent average real GDP growth is far from disaster: It doubles the national economic output every 35 years. That’s not so bad. More would be better, of course, but we can get government finances in order on 2 percent real growth. 

Mr. Cantor’s plan is based around what he calls “gazelles,” innovative early-stage startup companies. Mr. Cantor likes them because they are responsible for a disproportionate number of new jobs. So, let’s have some more gazelles, then, herds of them, which will supercharge growth and employment — and, in the process, spare Mr. Cantor and his colleagues the pain of making some very hard decisions they would really rather not make. Well, okay, fine: Let’s let the entrepreneurial geniuses in Congress put their heads together (it’ll sound like a bowling alley) and inspire a bunch of new startups. See what they come up with. After we’re done laughing, we can go back to arguing for the usual dose of regulatory liberalization, tax reductions, and fiscal prudence that Dr. GOP prescribes for every malady. (First we cut taxes, afterward we cut taxes, and next we cut taxes. Clysterium donare, postea seignare, ensuita purgare.) But here’s the thing: Fiscal prudence, deregulation, and a lighter federal hand are good things in and of themselves. Conservatives would be arguing for those if the growth rate were 1 percent, 5 percent, or 105 percent. Will they lead to 5 percent growth driven by early-stage startup firms under present economic conditions? Nobody could possibly know. (Not even the guys at Forbes!)

Don’t bet the Treasury on it.

The conservative economic arsenal is familiar enough. But Mr. Benko has a killing stroke to add, a policy proposal from the very bleeding edge of innovation: a return to the gold standard. I’d like to quote him at some length in order to give you the full flavor of his thinking:

Spending, regulatory and tax reform are necessary but not sufficient. To get to 5% we need a trustworthy monetary policy. As Kudlow suggests, there’s only one way tried, true, with Tea Party constitutional integrity: the gold standard. Avoiding it just got monumentally harder.

The second shift: Prof Robert Mundell is the ur-guru behind Reaganomics with the “Mundell-Laffer Hypothesis.” He is the father of the euro, the holder of a Nobel Prize in Economics. This writer has called him “the greatest living humanitarian since the death of Norman Borlaug.” Mundell broke silence on May 25th and issued a public endorsement of the gold standard.

On Pimm Fox’s Bloomberg Television “Taking Stock” Mundell joined his authority with Elder Statesmen Lewis E. Lehrman, Steve Forbes, Larry Kudlow, Jeffrey Bell, William Kristol and Charles Kadlec, and young turks Sean Fieler, Judy Shelton, Brian Domitrovic, John Tamny, and others — all gold standard proponents.

Breakthrough. The sound you heard? The hinge of history turning.

(Miscellany: I am not sure what an ur-guru is. It sounds like something for which you would want penicillin. And I wonder whether Professor Mundell (or anybody) still wishes to claim paternity of the euro, which is not a model of sound money at the moment. Also, there is no Nobel Prize in economics, really. It’s kind of made up. No, don’t ask me to explain it; ask Jay. But I am sure that next to his medal for the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, Professor Mundell has a brass plaque reading: “Greatest Living Humanitarian Since the Death of Norman Borlaug—Ralph Benko.”)

A return to the gold standard is unlikely. I expect to see a very large herd of magical unicorns galloping across the Third Avenue Bridge into the Bronx, kicking up rainbows in their wake, before I see the United States government choosing to return to a gold standard. And I do not think that a gold standard would solve all the problems gold-standard enthusiasts think it would. It would have economic consequences that are not predictable. But, yeah, that is the plan: unusually high growth rates and a gold standard. If that fails, maybe the Growth Fairy will leave $14.3 trillion under our pillow.

I recently got a bit grumpy about a similar argument from the George W. Bush Institute, published here, that argued, in essence: “Hey, all we have to do so solve our fiscal problems is achieve and maintain a level of growth that is substantially higher than that in our historical experience.” Okay, great: What’s Plan B? Hope is not a policy. Wishful thinking is not a substitute for mindful thinking.

It is important to work toward growth, of course, and to adopt good economic and monetary policies that we think will encourage it. (Gold standard? I would prefer privatizing the money supply.) But counting on optimistic assumptions about growth beyond current projections is, for the most part, a way to evade the very difficult business of reconciling our public income with our public spending. We have to work with what we have, with the reality before us. By all means, encourage production wherever you can, but stop trying to sell us a free lunch.

An aside . . .

I very much enjoyed this little bit of snark:

Mr. Williamson. You have succumbed to an optical illusion: mistaking gazelles for magical unicorns. Understandable. The Reagan architects of such growth did their “voodoo” when you were in grade school in Lubbock. Consistent Gazelle-like growth in the economy has been so rare that it’s easy for a youth to confuse a glimpse of a gazelle with a claim of a unicorn.

True enough: During the 1984 election, I was the lead Reagan guy for the mock-election debate in my sixth-grade class. I ambushed poor Mike D., to this very day a misguided Mondale man like his father before him. “Tell me the truth, Mike: Is your family better off than you were four years ago?” They were, so he had to answer in the affirmative. The Gipper carried the day at E. J. Parsons Elementary School, in a landslide that prefigured the actual election. (Recount Minnesota!) I failed to work in a “There you go again, Mikey.”

But Mr. Benko is entirely correct that gazelle-like growth in the economy has been quite rare — which ought to suggest that it is not so easy to achieve as Mr. Benko thinks it is. Like Reagan in ’84, I will not make age an issue in this debate, though I’ll thank Mr. Benko for pretending that I still am a “youth” and lament that his hoary locks and reverend age do not proclaim a fiscal sage.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

A thing you can do if you really want to go off the deep end for about twenty minutes: Go to regulations.gov and have a good hard look at politics in action. You want to tuck into the federal regulations dealing with migratory birds? Review, in all its glory, Kathleen Sibelius’s mandatory obesity rating for every American (another gem tucked into the stimulus bill)? It’s all in there, and the reasoning for making a federal issue out of your fat can is documented in excruciatingly precise language.

Just take a random sample for the flavor, if you can bear it:

Proposed subparagraph (h) also proposes to require the importer to maintain these records in an organized manner and either electronically or in a central location, at or in close proximity to the NHP facility, to allow CDC to inspect the records during CDC site visits during regular business hours or within one hour of such visits. Before distributing or transferring an imported NHP, an importer must communicate to the recipients of NHPs, in writing, the restrictions and definitions of permitted purposes and obtain written certifications from the intended recipient that the NHPs will be used and distributed for one of the permitted purposes before the NHPs are sent to them. CDC is soliciting public comments on these proposed requirements.

That’s from the regulations touching what Americans are and are not allowed to do with an imported monkey. (Approved purposes for monkeys include getting them high on cocaine, another project funded by the stimulus.) I’m not sure whether that monkey in The Hangover 2 is a domestic NHP (that’s non-human primate) or an imported one, but you can be sure that, either way, the handling of it is subject to regulation from more than one federal entity. (The bananas, too.)

If you go to regulations.gov and do a search for all of the existing and proposed rules, the listing of headings alone runs more than 6,000 pages, containing more than 61,000 items. That’s not the whole shebang, of course — just what’s available on the web site. The Federal Register, within living memory about the size of a family Bible, today takes up about 30 feet of shelf space.

Out of these millions of words of small-print lawyerese, Obama’s regulatory czar, Cass Sunstein, has identified about 30 regulations he’d like to see repealed, as part of a review of regulations mandated by an executive order. That’s nice. In 2010 alone, Mr. Sunstein and his colleagues inflicted 43 new “final rules” (which is what regulators call regulations), on the country, half again as many as the total number of regulations he has sifted of the vast galaxy of administrative law. The trend is against us.

And more regulations are on the way. A surprising number of our regulations are intended to improve regulation, reduce paperwork, enhance transparency, etc. If you want to pull all your hair out, read the federal regulations about improving regulatory practice.  

Some of the regulations Mr. Sunstein has targeted are nice candidates for repeal. For instance, because milk contains fat, it is regulated the same way as petroleum is — milk fat being an organic oil. That means that people who ship and package milk have to be prepared to clean up the Exxon Valdez, basically, spilt milk being the same thing as spilt crude in the eyes of the bureaucrats, costing the dairy industry about $67 million a year. This has led to a lot of “crying over spilt milk” jokes, and it is easier to repeal regulations that make people laugh. So, there’s one down.

Mr. Sunstein shares his thoughts on the matter in the Wall Street Journal today. You would think that the attention he has lately paid to the millions of wasted man-hours and trillions of wasted dollars entailed by our gigantic regulatory apparatus would have him rethinking the scope of the regulatory enterprise. You would be wrong.

You’ll note I wrote “trillions of wasted dollars” above, not billions. That’s not a typo: The annual cost of regulatory compliance in the United States runs about $1.75 trillion a year. As the Heritage Foundation points out, that means that regulations cost Americans more than do individual income taxes.

With that in mind, I cannot honestly write, “Thanks for nothing, Mr. Sunstein.” Instead, I’ll offer: Thanks for the functional equivalent of nothing, Mr. Sunstein.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Pres. Barack Obama’s stimulus is a bit like an Easter egg: It was first experienced as a brightly colored bauble intended to signify a new beginning, then it got lost somewhere along the way, and now it’s stinking so badly that we have to revisit the issue.

One can always tell what the Obama administration is not taking seriously — it’s the stuff it puts Joe Biden in charge of. Biden’s in charge of meeting with congressional leaders to identify deficit-reduction measures, for one thing, but, before that, he was put in charge of stimulus oversight. You remember: “Don’t mess with Joe,” and all that rot. While Joe was being messed with, billions of dollars in stimulus contracts went to deadbeats who owe a total of three-quarters of a billion dollars in taxes. It would have been no surprise if one or two tax scofflaws had sneaked by — even by the ever-watchful Joe Biden — but, in fact, it was more than one or two, or three or four, or a few hundred: 3,700 firms awarded stimulus contracts owe taxes — $757 million worth.

If you’re like me, the first thing you wondered was: Which firms? And how much money did their executives donate, and to which politicians? Which leads me to the worst part of the scandal: The Government Accountability Office (bitterly ironic name if ever there was one) is refusing to release the names of the miscreants. GAO argues that, because it is a tax matter, they cannot make the names public. So much for the most transparent administration in American history.

This is not simply a tax matter. It is, presumably, a law-enforcement matter, potentially a criminal matter, and unquestionably a matter of government accountability. Insofar as this subject is concerned, the GAO is helping the Obama administration to evade accountability rather than take it up.

Interestingly, several of these deadbeat contractors are nonprofits, community organizers of a sort. (Which? Don’t ask GAO.) Here’s what GAO has to say about one of these organizations:

• Nonprofit organization primarily owes payroll taxes from the mid to late 2000s. Nonprofit organization did not make any federal tax deposits for several periods.

• On multiple occasions, the nonprofit organization defaulted on installment agreements with IRS. IRS records also indicated that the nonprofit organization may have submitted an offer in compromise to delay IRS collection efforts.

• An executive was assessed a TFRP [trust fund recovery penalty]. IRS records indicated that this executive was responsible for numerous questionable business expenses. In addition, the executive had numerous transactions with casinos totaling hundreds of thousand [SIC] of dollars each year. IRS records also indicated that IRS assessed a TFRP on this executive for another entity that went defunct.

• IRS records indicated that the nonprofit organization failed to meet employee payroll obligations on numerous occasions in the late 2000s.

• According to one executive, the nonprofit received millions of dollars in government grants.

• IRS filed federal tax liens against this organization.

Lots of financial transactions with casinos, dodgy expense-account activity, questionable business practices, deadbeat executive — and millions in government grants: but GAO is not saying who.

Oddly, government isn’t always so close-lipped about tax investigations. I happen to know that the kabbalah center favored by Madonna is under tax investigation. How did I come across that top-secret information? It was in the newspaper. If memory serves, the IRS wasn’t exactly secretive about tormenting the Christian Coalition back in the day. But these deadbeats get shielded.

We spent more trying to stimulate our economy out of recession than we spent on the Iraq and Afghanistan wars combined, and the American Recovery and Reinvestment Act was a big piece of that. It was an obvious rip-off from Day One, and the rip-off is looking worse the closer it is studied. That this rip-off enriched tax cheats makes it a double rip-off, perpetrated by an administration with a famous tax cheat in the cabinet.

Release the names, and let’s see who’s connected to whom and how.

— Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Koch vs. Pickens.

The federal government wants to sell some old buildings and vacant land. This is not a bad idea, so far as it goes. What it is not, though, is a plan for reducing the federal deficit — though in some quarters it has been embraced as such. That is ridiculous.

The proposed Civilian Properties Realignment Commission, modeled on the old Base Realignment and Closure Commission, which was charged with rationalizing our military-installation footprint starting back in the 1980s, would identify underused federal real-estate assets to offload, if buyers could be found. Federal holdings are a mess: George W. Bush was the first modern president to even order an accurate inventory of them to be taken. Federal waste in asset management is of course vast and deep — but neither vast enough nor deep enough to make much of a hole in the deficit if it is redressed. The Obama administration reckons that about $3 billion could be saved in the first year. (The real savings come from avoiding the cost of maintaining the buildings, not in generating revenue from their sale; i.e., these are permanent reductions in spending rather than one-time revenue gains, a fact that is to be celebrated.)

So, $3 billion saved: Cheers to that. In 2011, the federal government is spending about $3 billion every seven hours or so.

I am not opposed to finding efficiencies. Thrift is a great American virtue (or was once). But these sorts of penny-ante projects, which generate a lot of happy talk about belt-tightening and prudence and sobriety as often as not end up being a way to not talk about the serious budget reforms that must be enacted.

Our friends at the Heritage Foundation have identified a larger asset they’d like to see the government liquidate: its gold holdings. These are worth a couple of hundred billion dollars — real money, but still only a few months of this year’s $1.6 trillion deficit. As much as I’m for downsizing Leviathan and doing what it takes to reduce the deficit, I’d advise against selling off the gold: If the United States should ever need to rebuild its currency — say, in the wake of a dollar collapse from hyperinflation resulting from incontinent spending and the monetization of the resulting deficits (Crazy, right?) — some gold might come in handy, particularly since Standard & Poor’s and the big bond investors are not convinced that the “full faith and credit” of the United States is what it once was.

Repeat as necessary: Medicare, Medicaid, Social Security, and national defense is where the spending is. Raising taxes enough to cover that spending and stabilize the debt would mean an 88 percent increase in every federal tax — not just for “the rich,” but for everybody, according to IMF estimates. Raising taxes on the middle class to support Social Security and Medicare for the middle class is a shell game. You may as well just cut the benefits: essentially the same outcome, but more cleanly executed.

You are not going to balance the budget on tax hikes only on people you do not like. You are not going to balance the budget on pulling out of Afghanistan (wise as that might be) or on eliminating foreign aid (desirable as that is) or on shuffling Uncle Sam’s real-estate portfolio (prudent though that may be). You are not going to balance the budget on eliminating waste, fraud, and abuse.

There is a caveat to that last one: We spend most of our money (more than half) on entitlements and welfare, and those are rife with abuse. Prof. Malcolm Sparrow of Harvard estimates that net health-care fraud in the United States runs $100 billion to $500 billion a year, with a great deal of that paid out by the federal government. (Miami alone is estimated to account for $3 billion in Medicare fraud annually.) Peter Orszag has estimated that 30 percent of Medicare spending (which totals more than a half-trillion dollars a year) is wasted, largely through overpayment for services. Sen. Orrin Hatch has put combined Medicare-Medicaid fraud at $200 billion a year. For comparison, the Iraq War cost $140 billion in its most expensive year.  

Getting a hold on entitlement fraud is not going to balance the budget, either, not alone, but it will do a heck of a lot more than a federal garage sale — and it’s something that should be done even if we were running a surplus.

—Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Hey, forget about all that budget-balancing stuff I’ve been writing about: All we really need is a historically atypical high rate of growth, schools that suddenly are an order of magnitude better than the ones we have, and the enactment of nine-tenths of the conservative economic agenda. It’s all so obvious.

If I were the head of something called the George W. Bush institute, I would not make fiscal policy my opening gambit.

Economic growth. Why didn’t I think of that?

A few people have sent me that “Nine Things the Rich Don’t Want You to Know about Taxes” article that’s making the rounds today. I have some criticisms here.

What General Electric has in common with the guy who runs Obama’s IRS: not paying taxes. That New York Times report on G.E.’s remarkable ability to avoid paying U.S. taxes has been getting a lot of attention today, but there was one paragraph that reminded me of why I’m a flat-tax guy:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

As government extends its reach over every aspect of the economy, this sort of corporatism will only become more deeply entrenched in fields like health care and energy. What G.E. has done with taxes, the insurance giants will do (and have done) with Obamacare. Everything looks  like ethanol.

But I’ll take a little bit of issue with Ezra Klein’s response:

So patriotic! It really explains why President Obama tapped Jeffrey Immelt, GE’s CEO, to lead the President’s Council on Jobs and Competitiveness. If this isn’t the sort of corporate behavior America needs more of, what is?

I’m sort of creeped out by this particular usage of the word “patriotic,” as though the alternative to the profit-maximizing corporation were the Great People’s Patriotic General Electric Corporation. (I also intensely dislike the proposition that paying taxes is an expression of patriotism, as though the state were the nation.) But I’ll say this: Yes, this is exactly the sort of corporate behavior America needs more of, inasmuch as our corporate-tax regime is kind of dumb, and also kind of corrupt, and one way of cleaning that up is to abolish it.

In spite of our having the second-highest nominal corporate-income tax rate in the developed world (Hello, Japan!), the rates actually paid by businesses vary wildly according to their political clout. Progressives look at that and see the evidence of businesses’ having undue influence on Washington; I look at that and see evidence of Washington’s undue influence on business. But it’s a two-way street, and the end product smells the same.

There are many arguments for a flat tax: Compliance costs are lower, it’s easier to understand, it doesn’t create a divide-and-conquer dynamic with regard to the tax brackets, it aligns taxpayers’ incentives, etc. But there’s a practical moral argument, too: The tax code is corrupt. Using the tax code as a cookie jar full of special favors for friends and supporters is corrupt. It does not matter that it’s legal, it is immoral. The purpose of taxes is to raise revenue for the government, not to repay political favors or to bribe voters with their own money. I do not think our tax system probably is really salvageable: Obamacare is not the only thing that should be repealed and replaced.

While everybody else was filling out their college-basketball brackets, I was working on my fantasy federal budget (I know, I know, I’m a lot of fun on dates), which is not yet complete, but which I will share when it is. (I’m planning a fantasy-budget reader contest.) My revenue side assumed a true flat tax on all forms of personal income — salaries, benefits, bonuses, dividends, inheritances, capital gains, etc. — and, once I’d trimmed the federal government back as small as I think we could realistically get it, figured that I could fund it with a flat rate of about 20 percent, and no corporate income tax. (I think this might be good for investment.)

The upside of the fiscal crisis that our country insists on marching toward is that it will give us the opportunity to enact radical reform of some of our most important institutions, and the tax code should be high on the list. A federal/state/local system that produces a $3.2 billion tax benefit for G.E. but taxes the pants off of poor people to fund useless schools that do their children very little good (and a great measure of harm, in many cases) is an unbearable burden. It has to go.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

In terms of harbingers of the apocalypse, it isn’t exactly dogs and cats living together or John Bolton exchanging facial-hair-grooming tips over sugary mint tea with ayatollahs, but, brace yourselves: Texas is facing a projected budget deficit. I know, I know: horrors, right?

Paul Krugman is practically rubbing his hands together with glee like some thin-mustached and top-hatted melodrama villain: Bwahahaha! If Texas goes down, conservative economics goes down with it!I shall rule the world! Look for the usual liberal snots to be talking up the story: Texas is finished, baby!

Keep your pants on, professor. Texas is not going to have a budget shortfall.

Texas’s present situation is not exactly unprecedented. It happens in Texas from time to time: You have a state with no income tax, property taxes assessed at the local level (where the taxpayers are apt to fire the taxspenders), and very little else, revenue-wise — Texas has one of the lowest tax burdens in the country — which leaves the state sales tax and the 1-percent “franchise” tax, which is a fancy way of saying a weird little business-revenue tax on firms with more than $1 million in sales. (Hey, New Jersey:  How’d you like to trade your current state-tax burden for a 1-percent business tax and a 6.25 percent sales tax? You get most of the nation’s  new jobs in the deal, too.) So, money’s always tight for Lone Star State government, and lots of Texans kind of like it like that.

But Texas, despite its small-government reputation, is not exactly Galt’s Gulch — you’ve still got to pay those menacing state troopers and the surly fat lady down at the DMV, etc. On top of all that, Texas has a boomier-bustier economy than most other states do, mostly because of the outsize role the oil business plays in the economy, and hence in the tax-revenue stream.

Ergo, the occasional shortfall projection.

Except that Texas doesn’t do shortfalls. Texas starts from scratch: Every year is basically Year Zero when it comes to the state budget — there is no assumption that next year’s funding will match or exceed this year’s, and the state’s constitution explicitly forbids any legislature to tie the hands of a subsequent legislature, financially or otherwise. When necessary, Texas implements zero-baseline budgets, in order to keep the state living within its means, even if Paul Krugman thinks it beastly.

Rick Perry established a pretty good standard for gubernatorial brass-dangling the last time there was a projected budget shortfall, in 2003. Governor Perry and his colleagues in the Texas legislature took a radical right-wing approach to government budgeting, inasmuch as they started by asking: “How much money do we have?” (Insane, right?) After they figured out how much money they were going to have, they then decided how to divvy it up, in total and radical and right-wingish contravention of the Washington model of budgeting, which goes: Spend everything you have, spend everything you can borrow, and then spend some more, regardless of how much you actually have to spend. And then spend some more; repeat. Which is totally how James Madison wanted it, I am sure.

In 2003, Governor Perry and Texas Republicans took the state’s budget baseline to zero, and told state agencies to write new budgets, based on what they actually needed to spend to accomplish their missions, rather than based on increasing by 3 percent or 4 percent or 30 percent or 40  percent what they spent last year. And the Republicans handled the politics pretty well: Instead of calling state agency chiefs down to the legislature to be dressed down by pompous elected types or denouncing them from the governor’s office, they had a bunch of what must have been drearily tedious private meetings with them, and helped them to sweat their budgets down in a rigorous but respectful way. It worked. Texas balanced the books, and the place does not look like Afghanistan.

Republicans like to brag that they balanced the budget with no tax increases, which is almost true (some fees and such went up, and some new ones were created). The franchise tax, which had originally kicked in at around $300,000 in revenue but had been pushed up to $1 million, is coming back down to a $600,000 threshold. It’s a tax increase, but it’s not much of one. If congressional Republicans in D.C. performed as well as Republicans in Austin, we’d be pinning medals on their chests.

Texas’s low-B.S. approach has had some salubrious effects, as I’ve documented here and here. It also left Texas with surpluses that allowed the state to put about $10 billion in its rainy-day fund, which could come in handy now that the economy seems to be clouding up a little. Could, but probably won’t: Republicans plan to introduce a budget that comes in within current revenue without touching the rainy-day fund. Get your head around that: There’s a multibillion-dollar pot of cash sitting there in front of politicians who must be just slavering inside at the thought of it, and they aren’t going to touch it — even though they have a pretty good excuse. Imagine a Congress that could do that.

They haven’t delivered yet, but Perry’s Republicans did the stand-up thing last time around and reaped the rewards. Expect them to do it again.

And it may not be all that hard: Pace Krugman et al., Texas’s potential shortfall probably is not $25 billion. The inside guys talk about $11 billion to $15 billion, spread out over a two-year budget. (Texas writes one budget every two years, and has a legislature that meets every two years.) Even the liberal bedwetters over at the Center for Budget and Policy Priorities expect the budget hole to amount to about 10 percent of the whole enchilada, as compared to more than 50 percent in basketcase California.

Of that $11–$15 billion, about $8 billion will be Medicaid  — and that is the real budget problem faced by Texas and many other states. Rules changes associated with Obamacare will add about 71 percent to Texas’s Medicaid expenses over the first ten years of implementation — that’s Texas’s out-of-pocket expense, not money that the feds reimburse under Medicaid — an increase that quite literally threatens to bankrupt the state. Analysts predict that Medicaid expenses could outstrip all state revenue within a few decades — meaning that Texas could not pay its Medicaid expenses, even if it dedicated 100 percent of its tax revenue to them. That is going to have to change, and I’m going to bet that Texas has better ideas for fixing that problem than Paul  Krugman does.

Texas doesn’t need a new tax to fix it; it ain’t broke.

UPDATE: A reader points out something I should have pointed out:

Krugman points to our middlin’ unemployment rate, saying “it’s about the same as the unemployment rate in New York or Massachusetts.”

Well, that is true. But he forgets one thing. Texas has a 7.9% unemployment rate after a net inflow of 1.78 million job seekers and their families over the  last ten years, while New York’s 8% unemployment rate come after 847,000 people left the state.

If Mr. Krugman would look at the data with a more discerning eye, he’d realize how amazing this statistic is.

Indeed, it is. I also winced a little at Krugman’s assertion that Texas has to create lots of jobs just to keep up with all the people moving there. Why does the good professor think people are moving there in the first place? Ballet Lubbock is great and  all, but I suspect it’s the jobs.

– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, now available at Amazon.com. You can buy an autographed copy through National Review Online here.

It is helpful to remember that there are two sides to every transaction. If the price of an ounce of gold goes up $100, you can say that the price of gold has gone up in terms of dollars — or you can say with equal accuracy that the price of dollars has gone down in terms of gold. A trivial and not exactly blazingly original insight, but one to keep in mind.

Food prices are hitting record highs. Sugar, meat, oils — boom, boom, boom. Food-related products, like fertilizers, are on a pretty steep upward trajectory. (Even the reliably pessimistic cotton farmers are celebrating.) Inflation is nipping at the Chinese economy and threatens to exacerbate social unrest in the world’s largest for-profit police state.

Meanwhile, oil prices are zooming, and the boom in gold and other precious metals has been too amply remarked upon to bear further commentary here.

So, what’s happening? Has the entire planet suddenly got a serious case of the munchies? Sure, there are specific factors contributing to all of this — population growth, higher demand in Asia, non-economic events such as crop failures and droughts, etc. — but we ought to consider another interpretation: The price of food and petroleum isn’t so much rising as the price of dollars, euros, yen, and renminbi is dropping. The financial crisis, the continuing fiscal incontinence of the U.S. and European governments, and the global attempt to stimulate our way out of our recent economic troubles has undermined confidence in government finances, and with it confidence in government-issued currencies, which have no inherent value. (No, I am not setting up an argument for gold-buggery.)

Yesterday, I put up a picture yesterday of a guy sporting my new favorite tattoo: one of the old supply-and-demand graph familiar from your Econ 101 textbook over the motto: “These Laws Cannot Be Broken.” (I want every joker elected to federal office to get that tattoo on his voting hand.) What is underappreciated is that the laws of supply and demand apply to currencies, too: You create new money (and, boy howdy, have we been creating money!), you increase the supply, demand does not change, and the price goes down. Usually, this is reflected in currency exchange rates: Uncle Sam creates lots of dollars, and the greenback falls against the euro and the yen. But when all of the major currencies are being pumped up at the same time, the exchange rates won’t move in the same way, since they’re all being devalued at the same time.

Another underappreciated aspect of our current currency situation: One of the biggest stimulators out there — and one of the biggest money-supply inflators — has been China. China’s money supply, by some estimates, increased by 50 percent during its stimulus campaign. Part of that is the familiar ChiCom program for keeping its currency artificially cheap and its people artificially poor to keep the exports sector booming, but part of it is Beijing doing exactly what they’ve been doing in Washington and London and Tokyo: flooding the economy with free money in the hopes of stimulating economic activity — i.e., the crystal-meth approach to economics.

It seems to me entirely plausible that what we are seeing is a giant, global vote of no confidence  in the economic policies of the world’s major economies: Europe and the United States, sure, but China, too. I used to say that you could judge how seriously a man took his beliefs about the future by how much of his own money he was willing to bet on a given proposition. But there are things that people take even more seriously than money: things with real value, like food and fuel. Inflation happens when the money supply is increased, regardless of whether it shows up in the Consumer Price Index. CPI jumps are not inflation, they are a reaction to inflation. But don’t tell me that at a time when the market is putting high or record prices on everything of inherent value that everything is hunky-dory on the inflation front. When one country devalues its currency in a last-ditch effort to stave off crisis, it’s a banana republic. When the United States, Europe, Japan, and China do it in a coordinated fashion, we’re all part of the Banana Federation of Greater Bananastan.

Supply and Demand: These Laws Cannot Be Broken.

– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, now available at Amazon.com. You can buy an autographed copy through National Review Online here.

Exchequer’s new favorite tattoo: 

According to Jonathan Cohn, cutting spending to 2008 levels is radical:

As many others have noted, the demand of going back to 2008 spending levels is radical and, not coincidentally, highly unrealistic: According to the Center on Budget and Policy Priorities, it’d amount to a one-fifth cut in discretionary spending–forcing cuts that could damage the fragile recovery and starve programs like Pell Grants that most Americans value.

Starving Pell grants? Not Pell grants! My heart races at the prospect.

Radicalism should be made of sterner stuff.

This is buffoonery, but buffoonery of an interesting sort, inasmuch as it throws some light on the thought processes at work here.

There are, I suppose, two ways of looking at 2008 spending levels vs. 2010 spending levels. One is to look at 2008 in independent terms: Did we have a radically small or austere government in 2008? I’d say no. Maybe Citizen Cohn feels differently. Or we could ask, Are 2008 levels radically lower than 2010 levels? Twenty percent? Sure, let’s call that radical. But if a 20 percent change is radical, then we could as easily say we’ve had radical, irresponsible growth in government spending since 2008 as say a 20 percent discretionary-spending cut today would be radical. And would not that be more accurate? Increased spending, after all, is the moving variable. It’s not like we’ve had 20 percent population growth since 2008.

But ratchets by definition only go one way. And this ratchet is a racket.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, now available at Amazon.com. You can buy an autographed copy through National Review Online here.

Have a gander at America’s 17 most-bankrupt cities, and consider the party variable: Two Republican mayors, two independents, one city so bankrupt that it is in state receivership — and twelve Democratic mayors, meaning the Democrats lead 70.5 percent of the most-bankrupt cities, by my always-suspect English-major math.

And you thought their record was bad in Congress.

And get a load of the size of these budget shortfalls: Camden, N.J., at 15 percent, Hamtramck, Mich., at 17 percent, Paterson, N.J., at 24 percent, Central Falls, R.I., at 22 percent.

The state of California cannot afford to bail out San Francisco, Los Angeles, San Diego, and San Jose; the state of Illinois cannot afford to bail out Chicago and Joliet; New Jersey cannot afford to bail out Camden, Patterson, and Newark. The outstanding municipal-bond obligations are huge. Vero has some thoughts here, and here’s one sleep-disturbing fact:

But municipal bonds have not yet lost their low-risk reputation. According to the Investment Company Institute, $84 billion went into long-term municipal bond mutual funds in 2010, up from $69 billion in 2009. And the 2009 level represents a 785 percent increase from the 2008 level of $7.8 billion. Artificial incentives have lured investors into thinking that lending cash to bankrupted cities will be profitable.

New Jersey already has been accused of fraud for running what amounts to a muni-bond Ponzi scheme.

Questions: Why do city voters continue to elect these mayoral specimens? And why do the markets continue to lend city councils vast amounts of money? And which one of those trends comes to an end first?

In the hotly contested Amazon category of books about socialism . . .

You can help build my lead over Marx here or buy an autographed copy from National Review here.

Our regularly scheduled deficit panic will now resume.

The Politically Incorrect Guide to Socialism hits store shelves on January 10. You can pre-order from Amazon here or buy an autographed and personalized copy from National Review here.

Jack Fowler tells me that a few unsigned copies were sent out to people who had ordered signed copies. We’re waterboarding the guy in charge of that all weekend, but if you happen to get an unsigned copy when you’d ordered a signed one, your signed copy should be on the way. If you have any problems, e-mail me at kwilliamson@nationalreview.com and I’ll straighten it out for you.

Thanks to all you early-ordering readers! We sent a big stack of signed books out the door today and are ready to send some more. I’m grateful for your support.

Say this for the Democrats: They’re trying to go out in style, with a pork-packed, earmark-laden, shameful embarrassment of a spending bill, full of junk on practically every one of its 2,000 pages. It is the political equivalent of a raised middle finger to the fiscally sobered-up American electorate that just threw them out.

I think the Democrats have just handed another big political win to the Republicans, who can and should kill this bill. Republicans who vote for it all but demand a swift and brutal visit from the Club for Growth and the Tea Party.

A stinging observation from John Cochrane:

If you really believe Keynesian Stimulus, you think Bernie Medoff is a hero. Seriously. He took money from people who were saving it, and gave it to people who were going to consume it. In return he gave the savers worthless promises that look a lot like government debt.

Brutal. And this:

The current policy attempt, consisting of  stimulus now, but strong promises to address the deficit in the future, can have no effect whatsoever. If you think stimulus works by fooling people to ignore future tax hikes or spending cuts, then loudly announcing such tax hikes and spending cuts must undermine stimulus!  Augustinian policy, “give me chastity, but not yet,” will not work. Casanova is needed.

Cochrane’s essay, “Fiscal Stimulus, R.I.P.,” is well worth a read.

Chef Nick Gillespie cooks up a balanced budget.