The Road to Freedom

by Arthur C. Brooks

  43Ralph Nader, speaking at the NAACP’s 91st Annual Convention, Baltimore, Maryland, July 11, 2000.

  44Video, http://dailycaller.com/2011/11/17/patriotic-millionaires-demand-higher-taxes-but-unwilling-to-pay-up-video/

  45This conclusion is the product of a two-stage least squares regression, in which income is regressed on a vector of demographics and a fitted value of charitable donations. This fitted value comes from a regression of donations on volunteer time plus appropriate demographics.

  46Tiffany Field, Maria Hernandez-Reif, Olga Quintino, Saul Schanberg, and Cynthia Kuhn, “Elder retired volunteers benefit from giving massage therapy to infants,” Journal of Applied Gerontology 17 (1998): 229–239.

  47James Morgan, “Too good to be true? Altruism’s better for you,” The Herald (UK), October 26, 2006. The election of the biggest giver as group leader was repeated in other popularity contests, with the more selfish in the group routinely shunned.

  48I infer causality through the use of Granger tests.

  49Christina Romer and Jared Bernstien, “Job Impact of the American Recovery and Reinvestment Plan,” January 9, 2009, http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf; Mark Zandi, “A Second Quick Boost From Government Could Spark Recovery,” edited excerpts of testimony before the U.S. House Committee on Small Business, July 24, 2008, http://www.economy.com/mark-zandi/documents/Small%20Business_7_24_08.pdf; Robert J. Barro, “Government Spending Is No Free Lunch,” Wall Street Journal, January 22, 2009, http://online.wsj.com/article/SB123258618204604599.html; Andrew Mountford and Harald Uhlig, “What Are the Effects of Fiscal Policy Shocks?” SFB 649, Discussion Paper 2005-039, 2005, http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2005-039.pdf

  502000 Social Capital Community Benchmark Survey, Roper Center, University of Connecticut. The same thing happens with gifts of time. Imagine two people who are identical in terms of income, education, age, religion, politics, sex, and family situation, but one of them volunteers once more a week than the other. That person will be half again as likely to say he or she is “very happy.”

  51David Sloan Wilson and Mihaly Csikszentmihalyi, “Health and the Ecology of Altruism,” The Science of Altruism and Health, ed. S. G. Post (Oxford University Press, 2006), 6.

  52Rodney Balko, “The Road to Hell . . .” Reason.com, November 29, 2006, http://reason.com/blog/2006/11/29/the-road-to-hell. The 2006 law has since been reversed.

  53“Euro area unemployment at 10.0%,” Eurostat, August 31, 2011, http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-31082011-BP/EN/3-31082011-BP-EN.PDF

  CHAPTER FIVE

  1Frank Newport, “Socialism Viewed Positively by 36% of Americans,” Gallup.com, February 4, 2010, http://www.gallup.com/poll/125645/Socialism-Viewed-Positively-Americans.aspx

  2“Entrepreneurship in the EU and Beyond,” Flash Eurobarometer, December 2009, http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/eurobarometer/fl283_en.pdf; “AEI Political Report: The Entrepreneurial Spirit,” American Enterprise Institute for Public Policy Research, June 2011, http://www.aei.org/docLib/PR-June-2011.pdf

  3Washington Post–ABC News Poll, January 12–15, 2010, question 40, http://www.washingtonpost.com/wp-srv/politics/polls/postpoll_011610.html

  4NBC News/Wall Street Journal Survey, Study #11091, February 2011, http://online.wsj.com/public/resources/documents/wsj-nbcpoll03022011.pdf

  5According to Gallup in 2011, 47 percent agreed with this statement, versus 49 percent who disagreed. Lydia Saad, “Americans Divided on Taxing the Rich to Redistribute Wealth,” Gallup.com, June 2, 2011, http://www.gallup.com/poll/147881/Americans-Divided-Taxing-Rich-Redistribute-Wealth.aspx

  6Lydia Saad, “Americans Express Historic Negativity Toward U.S. Government,” Gallup.com, September 26, 2011, http://www.gallup.com/poll/149678/Americans-Express-Historic-Negativity-Toward-Government.aspx?utm_source=tagrss&utm_medium=rss&utm_campaign=syndication

  7Woodrow Wilson, “Socialism and Democracy,” August 22, 1887. In Arthur S. Link, ed,. The Papers of Woodrow Wilson, vol. 5 (Princeton University Press, 1966–1993).

  8Woodrow Wilson, “The Study of Administration,” Political Science Quarterly 2, no. 2 (June 1887), 197–222. http://www.jstor.org/stable/2139277?origin=JSTOR-pdf&. In his essay “The Study of Administration,” Wilson laid out definitions of administration science (“a few steady, infallible, placidly wise maxims of government into which all sound political doctrine would be ultimately resolvable”) and an administrative cadre (“A corps of civil servants prepared by special schooling and drilled, after appointment, into a perfected organization, with appropriate hierarchy and characteristic discipline . . . serving with good behavior . . . meaning steady, hearty allegiance to the policy of government . . .”).

  9Author’s calculations using Office of Management and Budget “The Budget of the United States of America” historical tables. http://www.whitehouse.gov/omb/budget/Historicals

  10Ibid.

  11Leverett S. Lyon, et al., “The National Recovery Administration: An Analysis and Appraisal,” Brookings Institution, 1935, 873.

  12Amity Shlaes, The Forgotten Man: A New History of the Great Depression, by (HarperCollins, 2007).

  13Ronald Reagan, “State of the Union Address: 1988 Ronald Reagan,” State of the Union Address Library, January 25, 1988, http://stateoftheunionaddress.org/category/ronald-reagan

  14“NIPA Tables: Table 3.1 Government Current Receipts and Expenditures,” Bureau of Economic Analysis, data, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1. Also, for these facts I am grateful to Wisconsin Senator Ron Johnson and his staff.

  15“Economic Outlook No 88—December 2010—OLIS version,” OECD, Current disbursements, general government, as a percentage of GDP, http://stats.oecd.org/index.aspx?r=33156.

  16Data comes from the Office of Management and Budget Historical Tables (Federal Spending) and the Bureau of Economic Analysis NIPA tables (state and local) for the period 1930–2010. Federal spending and GDP are projected by the CBO in the June 2011 Long-Term Budget Outlook alternative fiscal scenario. State spending is projected by pegging the rate of social benefits growth to federal medical entitlement growth, and pegging the rate of all other state spending growth to other federal noninterest spending growth. Spending prior to 1928 is estimated using the Historical Statistics of the United States Millennial Edition Online by averaging the growth across years using the available data. GDP estimates are from BEA NIPA tables for the period 1929–2010. GDP estimates prior to 1929 use GNP Estimates from Christina Romer, “World War I and the Postwar Depression: A Reinterpretation Based on Alternative Estimates of GNP,” Journal of Monetary Economics 22 (July 1988): 91–115. “NIPA Tables: Table 3.1 Government Current Receipts and Expenditures,” Bureau of Economic Analysis, data, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1; “Office of Management and Budget Historical Tables: Table 1.1—Summary of Outlays, Surpluses or Deficits (-): 1789-2016,” OMB, February 14, 2011, http://www.whitehouse.gov/omb/budget/Historicals; “CBO’s 2011 Long-Term Budget Outlook.” Congressional Budget Office. June 22, 2011. http://www.cbo.gov/ftpdocs/122xx/doc12212/06-21-Long-Term_Budget_Outlook.pdf

  17NBC News/Wall Street Journal Survey Study #11579, Hart/McInturff, November 22, 2011. Available at http://www.scribd.com/doc/72058015/NBC-Wall-Street-Journal-11-8-11

  18Tax Foundation. “Federal Individual Income Tax Returns with Zero or Negative Tax Liability,” October 18, 2011. http://taxfoundation.org/files/fed_incometax_nonpayer_data_1950-2009-20111018.pdf.

  19Urban-Brookings Tax Policy Center MicroSimulation Model (version 0411–2), “Table T11-0173: Tax Units with Zero or Negative Tax Liabiilty, 2004–2011.” http://www.taxpolicycenter.org/numbers/Content/PDF/T11-0173.pdf.

  20“Memorandum: Information on Income Tax Liability for Tax Year 2009,” Congress of the United States, Joint Committee on Taxation, April 29, 2011, http://taxprof.typepad.com/files/jct-analysis-2009-income-tax.pdf. Of course, many Americans pay payroll taxes. But this
is forced savings, not support for general government services.

  21Matt Moon, “Special Report: How Do Americans Feel About Taxes Today,” Tax Foundation, April 2009, no. 166, http://www.taxfoundation.org/files/sr166.pdf

  22Scott A.Hodge, “Accounting for What Families Pay for Taxes and What They Receive in Government Spending,” Tax Foundation, September 21, 2009, Fiscal Fact no. 189, http://www.taxfoundation.org/publications/show/25195.html

  23Gerand Prante and Mark Robyn, “Summary of Latest Federal Individual Income Tax Data,” Tax Foundation Fiscal Facts, October 6, 2010. http://www.taxfoundation.org/news/show/250.html

  24Congressional Budget Office, “Average Federal Tax Rates in 2007,” June 2010. http://www.cbo.gov/ftpdocs/115xx/doc11554/AverageFederalTaxRates2007.pdf

  25Kip Hagopian has argued convincingly that the progressive income tax is “plainly inequitable.” Such inequality becomes clear when the importance of work effort—defined as the number hours worked and the intensity of the effort applied during those hours—is considered. Hagopian argues that, when considering these data, the progressive tax punishes those who work more. In fact, the most equitable system is one based on the value of benefits received from the government. Kip Hagopian, “The Inequity of the Progressive Income Tax,” http://www.scribd.com/fullscreen/5192761

  26OECD Tax Database, www.oecd.org/ctp/taxdatabase. Even more important, the U.S. average marginal tax rate is also well above the mean for the countries of the Organization for Economic Cooperation and Development (OECD). Aparna Mathur, “Race to the Top of the Laffer Curve,” American.com, February 16, 2011, http://www.american.com/archive/2011/february/race-to-the-top-of-the-laffer-curve

  27OECD Tax Database, “2010 Top Statutory Rate Table,” table 11.1, www.oecd.org/dataoecd/26/56/33717459.xls

  28Nicole V. Crain, and W. Mark Crain, “The Impact of Regulatory Costs on Small Firms,” Small Business Administration, Office of Advocacy, September 2010, http://archive.sba.gov/advo/research/rs371tot.pdf

  29“National Economic Accounts: Gross Domestic Product,” Bureau of Economic Analysis, data, http://www.bea.gov/national/index.htm#gdp; “The Budget and Economic Outlook: Fiscal Years 2011 to 2021,” Congressional Budget Office, January 2011, http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf; “Reducing the Deficit: Spending and Revenue Options,” Congressional Budget Office, March 2011, http://www.cbo.gov/ftpdocs/120xx/doc12085/03-10-ReducingTheDeficit.pdf

  30Scott Shane, “Small Businesses, Big Regulatory Problem,” The American, January 20, 2011, http://www.american.com/archive/2011/january/small-business-big-regulatory-burden

  31Susan Dudley and Melinda Warren, “Fiscal Stalemate Reflected in Regulators’ Budget: An Analysis of the U.S. Budget for Fiscal Years 2011 and 2012,” The George Washington University and Washington University in St. Louis, May 2011, http://wc.wustl.edu/files/wc/2012_Regulators_Budget_2_1.pdf

  32As of 2 December 2011. The current debt estimate comes from http://www.brillig.com/debt_clock/

  33Author’s calculation using Congressional Budget Office 2001 Long-Term Budget Outlook Alternative Fiscal Scenario, http://www.cbo.gov/doc.cfm?index=12212

  34Ana Lucia Iturriza, International Institute of Social Studies of Erasmus University Rotterdam, http://www.iss.nl/fileadmin/ASSETS/iss/Documents/Scholas/An_Exercise_in_Worldmaking_2005-2006.pdf

  35A. Bergh and M. Henrekson, “Government Size and Growth: A Survey and Interpretation of Evidence,” Journal of Economic Surveys. (June 2011), doi: 10.1111/j.1467-6419.2011.00697.x.

  36For a sample of the literature, see Y. Algan, , P. Cahuc, and A. Zylberberg, “Public Employment and Labor Market Preferences.” Economic Policy, (2002): 1–65. T. Conley, and B. Dupor, “The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled.” May 2011. http://web.econ.ohio-state.edu/dupor/arra10_may11.pdf; J.Malley, and T. Moutos, “Government Employment and Unemployment: With One Hand Giveth, The Other Taketh,” University of Glasgow, Working Paper Series no. 9709, May 1998.

  37“National Economic Accounts: Gross Domestic Product,” Bureau of Economic Analysis, data, http://www.bea.gov/national/index.htm#gdp.

  38The trendline is calculated using a simple OLS regression.

  CHAPTER SIX

  1Thomas Jefferson, First Inaugural Address, March 4, 1801, The Avalon Project at Yale School, http://avalon.law.yale.edu/19th_century/jefinau1.asp.

  2“Now, there are some who question the scale of our ambitions. . . . What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works—whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.” Barack Obama, Inaugural address, January 21, 2009, http://www.whitehouse.gov/blog/inaugural-address/

  3See http://www.washingtonpost.com/politics/president-obamas-economic-speech-in-osawatomie-kans/2011/12/06/gIQAVhe6ZO_print.html

  4Fox News Opinion Dynamics Poll, February 19, 2009, http://www.foxnews.com/projects/pdf/021909_FNCPoll.pdf

  5“2011 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,” May 13, 2011, https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf

  6Figure reflects total expenditures on Medicaid, Food and Nutrition Assistance, Supplemental Security Income, and Family and Other Support Assistance. Office of Management and Budget Historical Tables, “Table 8.5—Outlays for mandatory and related programs: 1962–2016,” http://www.whitehouse.gov/omb/budget/Historicals

  7Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Sálvio M. Soares (MetaLibri, 2007), v.1.0s.

  8Data for November 2011, “2011 Monthly Medallion ‘Non-Accessible’ Sales—Average Prices & Number of Transfers,” New York City Taxi & Limousine Commission, http://www.nyc.gov/html/tlc/downloads/pdf/avg_med_price_2k11_november.pdf

  9Melissa Kearney, “State Lotteries and Consumer Behavior,” NBER Working Paper 9330, November 2002

  10Ibid.

  11Ronald H. Coase, “The Problem of Social Cost,” Journal of Law and Economics 3, no. 1 (1960): 1–44.

  12Raquel Girvin, “Aircraft noise-abatement and mitigation strategies,” Journal of Air Transport Management 15 (2009): 14–22.

  13Scott Cohn, “CNBC’s Top States for Business 2010—And the Winner Is Texas,” cnbc.com, July 13, 2010, http://www.cnbc.com/id/37642856/CNBC_s_Top_States_For_Business_2010_And_The_Winner_Is_Texas

  14Bureau of Labor Statistics employment data, http://data.bls.gov/cgi-bin/surveymost?sm+48

  15Mavis Amundson, “Local professor notes Hunthausen’s influence,” West Seattle Herald, January 11, 1984.

  16Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2012, “Table 3.1—Outlays by Superfunction and Function: 1940-2016,” http://www.whitehouse.gov/omb/budget/Historicals

  17Economists also note that public goods are “nonrivalrous,” meaning that one person’s use does not crowd out another’s. For example, the keyboard I am using right now is rivalrous in that my using it means you can’t. In contrast, my protection by the army right now does not lessen yours.

  18George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (1970): 488–500.

  19See http://www.washingtonpost.com/politics/president-obamas-economic-speech-in-osawatomie-kans/2011/12/06/gIQAVhe6ZO_print.html.

  20Michael Barone, “Federal Expansion the Real Issue in Debt Ceiling Debate,” Washington Examiner, July 17, 2011.

  21The government is involved, however, if you get a tax deduction for your contribution.

  22Alex Pollock, “Lots of Regulatory Expansion but Little Reform,” AEI Regulation Outlook, June 2010, http://www.aei.org/docLib/04-RegO-2010-g.pdf

>   23Economists have proved that social capital makes people more prosperous, too. See Anil Rupasingha, Stephan J. Goetz, and David Freshwater, “Social Capital and Economic Growth: A County-Level Analysis,” Journal of Agricultural and Applied Economics 32, no. 3 (2000): 565–572.

  24In general, monopoly is the area least mitigated by social capital. But even there, trust and social cohesion make people less likely to want to behave in a predatory way with competitors and consumers.

  25See http://www.hks.harvard.edu/saguaro/communitysurvey/results_matrix.html

  26This wasn’t always so. As Charles Murray points out in his 2012 book Coming Apart, dense urban areas in the past frequently had very high levels of social capital. Charles Murray, Coming Apart: The State of White America, 1960–2010. New York: Crown Forum, (2012).

  27Alexis de Tocqueville, Democracy in America, ed. J. P. Maier, trans. George Lawrence (Anchor Books, 1969).

  28Murray also uses this example in his book Coming Apart.

  29Edward C. Banfield, The Moral Basis of a Backward Society (Free Press, 1958).

  30See Arthur C. Brooks, “Is There a Dark Side to Government Support for Nonprofits?” Public Administration Review 60, no. 3 (2000): 211–218; B. Duncan, “Modeling charitable contributions of time and money,” Journal of Public Economics 72, no. 2 (1999): 213–242.

  31James Andreoni and A. Abigail Payne, “Is crowding out due entirely to fundraising? Evidence from a panel of charities,” Journal of Public Economics 95 (2011): 334–343.

  32See, in particular, Peter L. Berger and Richard John Neuhaus, To Empower People: from State to Civil Society, 20th anniversary ed. (American Enterprise Institute Press, 1996).

  33Pope Pius XI, “Quadragesimo Anno,” Papal Encyclical, http://www.vatican.va/holy_father/pius_xi/encyclicals/documents/hf_p-xi_enc_19310515 _quadragesimo-anno_en.html.

  CHAPTER SEVEN

  1CNN Opinion Research Corporation poll, June 3–7, 2011, http://i2.cdn.turner.com/cnn/2011/images/06/08/june.8.pdf

  2There is overlap in these solutions across issues, because the same policy (for example, repealing Dodd-Frank, or reforming our tax code) can have positive effects on more than one issue. I leave aside energy, health care, and terrorism only because they require much more specialized information and background than I can practically bring to bear in this chapter.