The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Dan Hannan: Every single action taken by the government since the financial crisis has served to make things worse.

Posted by iusbvision on July 16, 2009

Dan Hannan:

There are so many superb conservative organisations in the US that, whenever I come here, I feel like a defector from the old Soviet bloc confronted with teeming supermarket shelves. One outfit which deserves a special place of honour, though, is the American Legislative Exchange Council (ALEC). The mission statement says it all:

The mission of the American Legislative Exchange Council is to advance the Jeffersonian principles of free markets, limited government, federalism and individual liberty among America’s state legislators.

You will immediately perceive that this, mutatis mutandis, is what British localism is all about. We, too, fight for the dispersal of power, and for the Jeffersonian ideal that decisions should be taken as closely as possible to the people they affect. The Plan is, in one sense, an application of the ALEC doctrine to British conditions. The only politician whose features adorn my office is Thomas Jefferson: I have a bust of the great man on my desk, given to me on a previous visit to ALEC.I am blogging from Atlanta, Georgia, where ALEC is celebrating its 36th annual conference. There are hundreds of state legislators here, swapping ideas on everything from welfare reform to tax cuts.

Yet again, I am struck by the advantages of dispersed jurisdiction: the freedom to innovate, to copy what works elsewhere; the benefits of competition and pluralism. I’m reading a book called Rich States, Poor States which explains, with pitiless statistical evidence, why states with high taxes are deserted, first by wealthy individuals and employers, then by the population at large. Twelve hundred people a day are moving from high-tax to low-tax states. Still, the very fact of tax competition keeps overall tax levels down in a way unknown in Britain.

One of the co-authors of the book, the father of supply-side economics, Art Laffer, just gave a brilliant disquisition in which he demonstrated why every single action taken by the government since the financial crisis has served to make things worse. (Regular readers will know that the same is true in Britain.) He did so by restating the most basic economic truths: what Kipling called “The Gods of the Copybook Headings”. If you take money from people who work and give it to people who don’t, you disincentivise work. If you tax the rich and reward the poor, you get fewer rich people and more poor people. If your tax rates are higher than your competitors, people prefer to do business elsewhere. Laffer has a brilliant knack of making economics seem simple – or, as he would say, of showing how simple it truly is, once you cut through the jargon and cant in which professional economists have bandaged it.

I am addressing ALEC tomorrow, following a quick visit to the local Republicans this evening. But what I’m really hoping to do in Georgia is to meet one of the greatest living politicians in the US, Newt Gingrich. Even now, I’m not sure people grasp the magnitude of his Contract with America, which ended forty years of one-party rule in Congress and introduced Americans to the idea that elected representatives might, after all, keep their promises. An unremarked but baleful consequence of the Obama stimulus package has been the reversal of the single most successful part of the Contract: welfare reform. America will soon be crying out for another Gingrich; Britain already is.

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