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GOP House intelligence chief has seen no evidence to back Trump wiretap charge

House Permanent Select Committee on Intelligence Chairman Devin Nunes (R-CA) speaks to the media about President Donald Trump's allegation that his campaign was the target of wiretaps on Capitol Hill in Washington March 7, 2017. REUTERS/Aaron P. Bernstein
WASHINGTON (Reuters) - The chairman of the U.S. House of Representatives intelligence committee said on Tuesday he had seen no evidence to support President Donald Trump's allegation he was wiretapped by then-President Barack Obama during the 2016 presidential campaign.

Republican Representative Devin Nunes said if Trump's assertion were true, the leaders of Congress and chairmen of its two intelligence committees, known collectively as the "Gang of Eight," should have been briefed.

"I have not seen that evidence," Nunes told a news conference. "I think the bigger question that needs to be answered is whether or not Mr. Trump or any of his associates were in fact targeted by any of the intelligence agencies or law enforcement authorities."

Trump made the accusation in tweets on Saturday, providing no evidence. An Obama spokesman denied it.

Trump has since pressed the House and Senate intelligence committees to expand probes into allegations that Russia meddled in the U.S. election to look into his charge.

"We are supposed to be kept up to speed on any pertinent counterintelligence investigation," Nunes said. "If Trump or any other political campaign, or anybody associated with Trump, was under some type of investigation, that clearly should have risen to the Gang of Eight level."

Adam Schiff, the top committee Democrat, also said it did not appear that the group had been appropriately briefed.

Schiff said it was "a scandal" that Trump had levied that accusation against Obama. He said the intelligence panel would address the issue and deal with it quickly.

Nunes said his committee planned public hearings as part of its Russia probe, beginning with one on March 20 at which Federal Bureau of Investigation Director James Comey and Admiral Mike Rogers, director of the National Security Agency, were called to testify.

Former Director of National Intelligence James Clapper, former Central Intelligence Agency Director John Brennan and former acting Attorney General Sally Yates were also invited.

Nunes said the panel would not issue subpoenas for that hearing. "But if we have to, we will subpoena all information that is pertinent to this investigation if people either ... don't want to appear or if the appropriate agencies do not provide the information we ask for."

Schiff addressed speculation that the issue was too partisan for Congress to conduct a credible investigation. "To be honest, we don't know yet. I can't say for certain that will be possible," he said at news briefing several hours after Nunes'.

 (Reporting by Timothy Ahmann and Patricia Zengerle; Editing by Peter Cooney and Richard Chang)

Trump economic adviser: Fed doing 'good job,' respects independence

U.S. President Donald Trump's senior advisor Jared Kushner (L) and the head of the National Economic Council Gary Cohn, talk with Fiat Chrysler CEO Sergio Marchionne (C) during Trump's meeting with U.S. auto industry CEOs at the White House in Washington January 24, 2017. REUTERS/Kevin Lamarque - RTSX4VT
WASHINGTON (Reuters) - White House economic adviser Gary Cohn said on Sunday that the Federal Reserve "has been doing a good job" and the Trump administration respects its independence, even if the U.S. central bank raises interest rates this week.

Cohn, director of the National Economic Council, told Fox News Sunday that the Trump administration will keep working to reduce barriers to job creation no matter what the Fed does on interest rates.

"The Federal Reserve is an independent agency and they operate as such. They have their economic data, which they look at and they are trying to always modulate economic growth with inflation, with the work force," Cohn said. "I think the Federal Reserve has been doing a good job in doing that. The Fed will do what they need to do. And we respect the powers of the Fed."

 (Reporting by David Lawder; Editing by Nick Zieminski)

White House says Trump did not know Flynn was representing Turkey

White House National Security Advisor Michael Flynn (C) arrives prior to a joint news conference between Canadian Prime Minister Justin Trudeau and U.S. President Donald Trump at the White House in Washington, U.S., February 13, 2017. REUTERS/Carlos Barria
WASHINGTON (Reuters) - The White House said on Friday that President Donald Trump did not know until this week that his former national security adviser, Michael Flynn, had been working as a representative for Turkey, although the issue was raised with the Trump team before the Republican took office.

Flynn acted as a foreign agent representing the interests of Turkey’s government in exchange for more than $500,000 during last year’s presidential campaign even as he was advising  Trump, the New York Times said on Friday.

White House spokesman Sean Spicer told reporters Flynn's lobbying was a personal and business matter, and it was up to him to decide when to register.

Asked if Trump had not been aware that former general Flynn was working as a foreign agent, Spicer said: "Correct... You wouldn't know that until he filed. He didn't file until two days ago."

Some U.S. lawmakers have questioned Flynn's relationship with the government of Turkish President Recep Tayyip Erdogan. Before Trump's inauguration, Flynn's ties to Turkey were widely reported and he wrote an article urging the United States to cultivate better relations with Erdogan.

Trump fired Flynn last month for discussing U.S. sanctions on Russia with the Russian ambassador to the United States before Trump took office on Jan. 20 and misleading Vice President Mike Pence about the conversations.

Before Trump took office, Flynn's lawyer contacted the presidential transition team about his work for Turkey to ask what he should do, Spicer said. The lawyer was told "it was up to the personal lawyer to work with the appropriate authorities ... to determine what was appropriate and what was not appropriate in terms of filing," Spicer said.

"We trust people to fill out the forms that they are required to do so in an honest and legal manner, and in this case he retroactively filed the forms he was supposed to do," he said.

"We did the right thing then, and we expect every employee to follow the law."

Spicer said he did not know whether Flynn had disclosed his lobbying work in the security clearance review before he became national security adviser.      

 (Reporting by Washington Newsroom; Editing by Alistair Bell)

Trump’s Unique Opportunity to Reform Social Security

As President Donald Trump is preparing his first budget submission to the Congress, he should consider making Social Security reform a priority.

The future of the Old-Age and Survivors Insurance and disability programs, and their impact on American families, the federal budget, and the economy, are issues too big to ignore. Social Security reform is needed, and ever more urgently.

Heading Toward Insolvency

Social Security is fiscally unsustainable. The primary program under Social Security—the Old-Age and Survivors Insurance Program—has been running cash-flow deficits for the past six years, meaning it has to cash in IOUs from the federal treasury and thereby increase the national debt.

The Social Security trustees project that the trust fund will run dry by 2035, and potentially sooner, according to Congressional Budget Office projections.

Either way, waiting to reform the program should not be an option because the magnitude and gravity of changes necessary to Social Security only grow larger the longer Congress and the president delay reform.

Absent reform, the Social Security trustees predict that benefits would have to be cut by 23 percent across the board when the trust fund runs dry. Without changes to benefits, American workers could be faced with a 33 percent  increase in their payroll taxes, putting a serious strain on middle- and lower-income workers.

Eliminating the payroll tax cap, as some are proposing, would have damaging economic consequences without guaranteeing a secure financial future for the program. Tax increases are not the answer.

Driving Up the Deficit

Social Security also exacerbates the nation’s overall financial woes by adding to the deficit.

In 2010, Social Security started paying out more money in benefits than it received annually in taxes. At the current rate, the program will accumulate more than $1 trillion in deficits over the next 10 years.

Social Security’s trust funds are only solvent on paper. In reality, the funds to pay benefits, in excess of what the program receives from taxes, come from general revenues—or in the case of federal deficits, from additional borrowing.

Source: Federal Budget in Pictures.

A Broken Model

Besides the financial woes, Social Security is outdated and ineffectively targeted.

In 1945, there were more than 40 workers to pay for the benefits of every one beneficiary. Since then, the ratio of workers to beneficiaries has decreased drastically to 2.8 workers for every one beneficiary.

In addition, benefits are not necessarily going to those who need them most.

The Social Security benefit structure is very complex, and the program is rife with perverse incentives and benefits that undeservedly reward higher-income families more, such as through outdated spousal benefits.

The Path to Reform

The Social Security Reform Act of 2016, a bill introduced by Rep. Sam Johnson, R-Texas, in the last Congress, is a good place to start. The bill would make several progressive changes to how benefits are calculated, along with a gradual increase in the retirement age to 69.

These proposals would help to better target benefits toward lower-income workers, while reducing work disincentives and making Social Security financially solvent without any tax increase.

And yet, Congress should go even further.

A bolder proposal would consider reducing Social Security’s payroll tax burden over time, or allowing individuals to opt out of a portion (or all) of their payroll taxes (and benefits) to control their own retirement savings as they deem best.

Nevertheless, the Johnson plan presents a reasonable, targeted, and fiscally responsible approach to reforming Social Security.

Economic growth alone cannot achieve sustainable Social Security solvency. While higher wage growth would bring more payroll taxes into the program in the short term, it would also generate higher future benefits due, raising Social Security’s long-run costs.

Benefit reforms are necessary to preserve Social Security benefits without excessive taxes or debt.

Trump is in a unique position to assuage the fears of vulnerable American seniors and those with disabilities that their benefits will be there for them, while also pursuing sensible reforms to ensure future benefits are sustainable and do not burden younger generations with undue taxes and debt.

Together with Congress, the president can help to secure a financial and prosperous future for older and younger generations.

Commentary by Jonathan Iwaskiw and Romina Boccia. Originally published at The Daily Signal.

Senator: We Must Keep Our Promise to Fully Repeal Obamacare

“For five years, Senate Democrats have blocked our efforts to repeal Obamacare,” House Speaker Paul Ryan said on Jan. 6, 2016. “That ends today.”

“With this vote, we are keeping a promise and putting a bill that repeals Obamacare and defunds Planned Parenthood on the president’s desk,” Ryan continued.

“This budget reconciliation bill, which would reduce the federal deficit by a half trillion dollars, forces the president to confront the failures of Obamacare head-on. But most importantly, it clears the path to repealing this law with a Republican president in 2017 and replacing it with a truly patient-centered health care system. We will not back down from this fight to defend the sanctity of life and make quality health care coverage achievable for all Americans.”

It is now 2017, and we have a Republican president in the White House. A bill repealing Obamacare should have been sent to President Donald Trump’s desk weeks ago.

Unfortunately, the House of Representatives is now debating a bill that not only fails to repeal as much of Obamacare as it voted to do in 2015, but it also affirms much of Obamacare’s current structure, thus making any future efforts to replace the system that much more difficult.

The House leadership’s health care bill simply is not the Obamacare repeal bill we’ve been waiting for. It is a missed opportunity and a step in the wrong direction.

It doesn’t repeal the Obamacare Medicaid expansion. It doesn’t repeal the Obamacare regulations that drive up the cost of premiums. But it does create a brand new spending program whose size and cost are entirely unclear.

This is a bad bill—one that will almost certainly be made worse once the Senate parliamentarian gives it the “Byrd bath” required for it to go through the Senate with just 51 votes.

The simple reality is that Republicans do not have the 60 votes in the Senate they need to pass a bill that repeals all of Obamacare and replace it with a new conservative health care system designed from scratch.

But Republicans do have the 51 votes in the Senate needed to use the reconciliation process laid out in the Congressional Budget Act of 1974 to pass legislation that changes federal revenue or spending obligations.

But thanks to a rule created by former Sen. Robert Byrd, D-W.Va., changes to federal policy that are “merely incidental” to a bill’s budgetary components are not “privileged” and therefore are subject to a filibuster.

Hence the term “Byrd bath,” which in this case could be used to knock out key provisions of the House bill, including prohibitions on taxpayer funding of abortion and price controls on insurance premiums.

The good news is that we already have a bill that not only made it through the Byrd bath but was also voted for by every Republican: the 2015 repeal bill that Ryan praised in the quote above.

Now, the 2015 bill is not perfect. It might be improved during a Senate vote-a-rama when the Senate parliamentarian might be convinced that Obamacare’s insurance regulations do in fact have a big impact on federal spending (almost every economist agrees that Obamacare’s insurance regulations drive up the price of premiums, which are subsidized by federal revenues). But it might not.

Either way, there will be a lot more work to do on health care reform. Work that can’t be finished in the narrow window of time between now and when the Senate needs to spend floor time confirming Judge Neil Gorsuch to the Supreme Court in April.

So, let’s fulfill our promise to repeal Obamacare immediately and then take our time and make sure we get health care reform right. Let’s pass the 2015 repeal bill that Republicans in both houses of Congress voted for just 15 months ago.

Once Obamacare has been properly sent to the dustbin of history, then we can begin a deliberative, open, and honest process to reform our nation’s health care system.

Commentary by Senator Mike Lee (R-UT). Originally published at The Daily Signal.

At Odds With History: States Seize Control of Civil Asset Forfeiture

In 1762, agents of the king of England entered John Entick’s house without his consent, searched it from top to bottom, and seized documents and other printed materials.

Entick was not accused of a crime; rather, the king’s men were in search of allies and materials associated with John Wilkes, an outspoken critic of the British government and the king.

Entick sued, and the resulting court case, along with other injustices suffered by American colonials under siege from aggressive British search and seizure practices provided the background as John Adams and the Founding Fathers laid the philosophical groundwork for the Fourth Amendment to the United States Constitution.

The Founding Fathers who pieced together the world’s longest surviving written charter of government would be aghast at one current practice that would appear to them—and many others—to come in direct conflict with the Fourth Amendment: civil asset forfeiture.

Last week, in refusing to consider a civil asset forfeiture case on procedural grounds, Supreme Court Justice Clarence Thomas cast doubt that these practices could stand up constitutionally or be sustained by historical practice.

We share his doubt. Civil asset forfeiture is a procedure where state and federal government actors seize property from private citizens under the suspicion that the property is somehow involved with a crime. Those citizens are rarely charged or convicted of criminal behavior, but the property is brought into a civil court of law, wherein the government must meet what is usually a low burden to “prove” that property’s guilt.

Putting aside the issues with bringing criminal accusations into a civil court, an innocent property owner is forced to come into that civil court, often without legal assistance, and attempt to prove a negative—that their property is not guilty—against the full force and weight of a government agency.

For example, a volunteer manager of a Christian rock band who toured the country to raise funds for charity was pulled over in Oklahoma for a broken taillight. The government found and seized $53,000 from him, without having any evidence that the cash was obtained in conflict with any laws. The manager, Eh Wah, only received the band’s money back after a lawsuit was filed and public outcry became too loud for the government to withstand.

Our notion of government, our reasons for creating this great country, were founded in part on the sacred belief that we would never let an American be caught in such a Byzantine scheme against his or her own government.

Fortunately, many states are leading the way to protect innocent property owners from this government overreach.

In 2015, New Mexico policymakers passed legislation that moved government forfeiture practices into the criminal justice system, wisely reasoning that when a government agent makes a criminal allegation, such a claim should be within the purview of a criminal court.

That same year, Montana required a criminal conviction prerequisite to its civil forfeitures, ensuring that criminal activity was at least proven beyond a reasonable doubt at some point before the state takes its citizens property.

In 2016, Nebraska and New Hampshire followed suit, requiring a criminal conviction for forfeiture, while Maryland raised the burden of proof that the government must meet in civil court to “clear and convincing.”

Florida went one step further, raising that burden of proof for forfeiture to “beyond a reasonable doubt.”

In 2017, constitutionally-minded policymakers in several states are positioning themselves to be leaders on this issue, remaining faithful to the Founding Fathers by protecting their citizens’ property rights.

Michigan, which raised the burden of proof required for forfeiture just two years ago, now seeks to move its forfeiture practices closer to a model that Adams would find constitutionally acceptable.

Arizona is working to require a higher burden of proof for forfeitures, while retracting a particularly onerous and egregious quirk in its law that allows innocent owners to be held liable for the government’s attorney’s fees if they come to court and lose. Legislators in Pennsylvania, Texas, Idaho, and Tennessee all are considering reforming forfeiture laws.

But there is far more to do.

Dozens of states still have archaic and constitutionally unsound practices in place, and the federal government, including the Department of Justice and the Internal Revenue Service, continues to engage in widespread forfeiture.

It’s a multibillion-dollar revenue stream: $4.5 billion (net) was deposited in the federal Asset Forfeiture Fund in 2014 alone, followed by $1.6 billion in 2015, and almost $2 billion in 2016.

The federal government’s forfeitures are so rampant, and so lacking in adequate constitutional protections, that many of the states that have passed reforms were forced to include anti-circumvention measures to prevent federal laws from undermining the states’ work to protect their citizens’ property.

In concurring with the Supreme Court’s decision not to hear a civil asset forfeiture case out of Texas, Thomas noted: “Whether this Court’s treatment of the broad modern forfeiture practice can be justified by the narrow historical one is certainly worthy of consideration in greater detail.”

While the court awaits a case ready to undertake that consideration, more and more states are moving forward with legislative protections, making it clear they do not find such adequate justification in current forfeiture practices.

We stand with those states, and with Entick, Adams, and our Founding Fathers.

Commentary by Jenna Moll (@JennaRMoll.) Originally published at The Daily Signal.

Why You're Being Watched

Wikileaks has just published over 8,000 files they say were leaked from the CIA, explaining how the CIA developed the capacity to spy on you through your phone, your computer, and even your television. And Wikileaks’s Julian Assange claims these “Vault 7” documents are just one percent of all the CIA documents they have.

The media will be combing through these for weeks or months, so now is a perfect moment for us to reconsider the role of privacy, transparency, and limited government in a free society.

We’ve put together a quick list of the six best Learn Liberty resources on government spying and whistleblowing to help inform this discussion.

1. War Is Why We’re Being Watched
Why is the US government spying on its citizens in the first place? Professor Abby Hall Blanco says that expansive state snooping at home is actually the result of America’s military interventionism abroad:

2. Is Privacy the Price of Security?

Yes, you may think, the government is snooping on us, but it’s doing that to keep us safe!
That’s the most common justification for sweeping and intrusive surveillance, so we held a debate between two experts to get right to the heart of it. Moderated by TK Coleman, this debate between Professor Ronald Sievert and Cindy Cohn, the Executive Director of the Electronic Frontier Foundation, was inspired in part by the revelations about NSA surveillance leaked by Edward Snowden in June 2013.

3. Freedom Requires Whistleblowers

People are already drawing parallels between the Snowden leaks and the Vault 7 revelations. If the leaks are indeed coming from a Snowden-like whistleblower, that will once again raise the issue of government prosecution of people who reveal classified information to the public.

Professor James Otteson argues that a free society requires a transparent government, and whistleblowers play a key role in creating that accountability. Otteson also sounds a warning that should resonate with many Americans today:
Maybe you’re not concerned about the invasions of privacy that the federal government agencies are engaging in because you think, “Well, I haven’t done anything wrong. What do I have to fear?” Maybe you think, “I like and support this president. I voted for him.”
But what about the next president?  The powers that we let the government have under one president are the same powers that the next president will have too.
What if the next president is one you don’t support? He, too, will have all the power that you were willing to give the president you now support."

4. Encryption Is a Human Rights Issue

Documents from Vault 7 suggest that the CIA has been so stymied by encrypted-messaging apps, such as Signal and Whatsapp, that it has resorted to taking over entire smartphones to read messages before they are sent.

That turns out to be a costly, targeted, and time-consuming business that doesn’t allow for mass data collection. But for decades, government officials have tried to require tech companies to give the government a backdoor into their encryption. In “Encryption Is a Human Rights Issue,” Amul Kalia argues that protecting encryption from government is essential to our safety and freedom.

5. The Police Know Where You Live

It turns out that it’s not just spy agencies that have access to detailed information about your life. Ordinary police officers have it, too, and they often face little supervision or accountability. As Cassie Whalen explains, “Across the United States, police officers abuse their access to confidential databases to look up information on neighbors, love interests, politicians, and others who had no connection to a criminal investigation.”

Surveillance is a serious issue at every level of government.

6. Understanding NSA Surveillance

If you’re ready to take your learning to the next level, check out our complete video course on mass government surveillance with Professor Elizabeth Foley. In it, you’ll learn what you need to know to make sense of the NSA scandal in particular and mass surveillance in general.

Reprinted from Learn Liberty.
Kelly Wright
Kelly Wright
Kelly Wright is an Online Programs Coordinator at the Institute for Humane Studies.
This article was originally published on FEE.org. Read the original article.

It's Long Past Time to Cut Corporate Tax Rates

The centerpiece of President Trump’s tax plan is a 15 percent corporate tax rate.
Republicans in Congress aren’t quite as aggressive. The House GOP plan envisions a 20 percent corporate tax rate, while Senate Republicans have yet to coalesce around a specific plan.

Notwithstanding the absence of a unified approach, you would think that the stage is set for a big reduction in America’s anti-competitive corporate tax rate, which is the highest in the developed world (if not the entire world) and creates big disadvantages for American workers and companies.

If only.

While I am hopeful something will happen, there are lots of potential pitfalls, including the “border-adjustable tax” in the House plan. This risky revenue-raiser has created needless opposition from major segments of the business community and could sabotage the entire process. And I also worry that momentum for tax cuts and tax reform will erode if Trump doesn’t get serious about spending restraint.

Internationally Speaking

What makes this especially frustrating is that so many other nations have successfully slashed their corporate tax rates and the results are uniformly positive.

My colleague Chris Edwards recently shared the findings from an illuminating study published by the London-based Centre for Policy Studies. It examines what’s happened in the United Kingdom as the corporate tax rates has dropped from 35 percent to 20 percent over the past 30 years. Here’s some of what Chris wrote about this report.
New evidence comes from Britain… It shows the tax rate falling from 35 percent to 20 percent since the late 1980s and corporate tax revenues as a percentage of gross domestic product (GDP) trending upwards. As the rate has fallen, the tax base has grown more than enough to keep money pouring into the Treasury. …the CPS study says, “In 1982-83 when the rate was 52%, corporation tax receipts yielded revenues equivalent to 2% of GDP. Corporation tax now raises over 2.3% of GDP when the headline rate is at just 20%.”
And keep in mind that GDP today is significantly greater in part because of a better corporate tax system.

Here’s the chart from the CPS study, showing the results over the past three decades.

The results from the most-recent round of corporate rate cuts are especially strong.
In 2010-11, the government collected £36.2 billion from a 28 percent corporate tax. The government expected its corporate tax package—including a rate cut to 20 percent—to lose £7.9 billion a year by 2015-16 on a static basis. …But that analysis was apparently too pessimistic: actual revenues in 2015-16 had risen to £43.9 billion. So in five years, the statutory tax rate fell 29 percent (28 percent to 20 percent) but revenues increased 21 percent (£36.2 billion to £43.9 billion). That is dynamic!”
None of this should be a surprise.

Big reductions in the Irish corporate tax rate also led to an uptick in corporate receipts as a share of economic output. And remember that the economy has boomed, so the Irish government is collecting a bigger slice of a much bigger pie.

And Canadian corporate tax cuts generated the same effect, with no drop in revenues even though (or perhaps because) the federal tax rate on business has plummeted to 15 percent.

Back Home

Would we get similar results in the United States?

According to experts, the answer is yes. Scholars at the American Enterprise Institute estimate that the revenue-maximizing corporate tax rate for the United States is about 25 percent. And Tax Foundation experts calculate that the revenue-maximizing rate even lower, down around 15 percent.

I’d be satisfied (temporarily) if we split the difference between those two estimates and cut the rate to 20 percent.

Let’s close with some dare-to-hope speculation from Joseph Sternberg of the Wall Street Journal about what might happen in Europe if Trump significantly drops the U.S. corporate tax rate.
Donald Trump says many things that alarm Europeans, but one of the bigger fright lines may have come in last week’s address to Congress: “Right now, American companies are taxed at one of the highest rates anywhere in the world. My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone.” What’s scary here to European ears is…the idea that tax policy is now fair game when it comes to global competitiveness. …One of the biggest political gifts Barack Obama gave European leaders was support for their notion that low tax rates are unfair and that taxpayers who benefit from them are somehow crooked. 
Europeans pushed that line among themselves for years, complaining about low Irish corporate rates, for instance. The taboo on tax competition is central to the political economy of Europe’s welfare states… Mr. Obama…backed global efforts against “base erosion and profit shifting,” meaning legal and efficient corporate tax planning. 
The goal was to obstruct competition among governments… The question now is how much longer Europe could resist widespread tax reform if Mr. Trump brings in a 20% corporate rate alongside rapid deregulation—or what the consequences will be in terms of social-spending trade-offs to a new round of tax cutting. Dare to dream that Mr. Trump manages to trigger a new debate about competitiveness in Europe."
Amen. I’m a huge fan of tax competition because it pressures politicians to do the right thing even though they would prefer bad policy. And I also like the dig at the OECD’s anti-growth “BEPS” initiative.

P.S. I want government to collect less revenue and spend less money, so the fact that a lower corporate tax rate might boost revenue is not a selling point. Instead, it simply tells us that the rate should be further reduced. Remember, it’s a bad idea to be at the revenue-maximizing point on the Laffer Curve (though that’s better than being on the downward-sloping side of the Curve, which is insanely self-destructive).

Reprinted from International Liberty.
Daniel J. Mitchell
Daniel J. Mitchell
Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.
This article was originally published on FEE.org. Read the original article.

How the Black Market Is Saving Two Countries from Their Governments

Ever since governments began banning and licensing different parts of the economy, the black market has made sure people still have access to the things they need. Unstable governments always turn on their own citizens using price controls, heavy taxes, and even the threat of imprisonment to prop up their failing systems. As conditions inevitably deteriorate, as they have in Venezuela and Greece, the underground economy becomes invaluable to those living through the crisis.

Markets Survive in Venezuela

The shadow economy refers to more than just the trade of illegal goods. A grey market, for example, provides legal products distributed through illegal channels. Since basic things like toilet paper, medicine, and even food have disappeared from store shelves in Venezuela, the peer-to-peer network has become the only reliable way to secure life’s necessities. In desperate situations like this, the existence of independent merchants can mean the difference between life and death.

Even the value of Venezuela’s currency has started to move away from the government’s control.  At one point, the official exchange rate was fraudulently set at 10 bolivars per U.S. dollar, while on the black market it was trading at 1,000 to one. This action hurt millions by suppressing wages across the country and eroding any remaining trust. Inflation has quickly become the most imminent threat to the Venezuelan people, stealing the value of their labor and savings. For years, the bolivar has experienced hyperinflation, increasing the cost of living almost exponentially.

The State’s desperate response was to institute price controls, but that has only led to shortages across the board. Luckily, the unregulated markets have been able to determine the true value of goods and provide vital support for the struggling communities. Many people think that so-called price gouging is unethical, but isn’t it better to buy what you need at twice the price than to not be able to get it at all?

Black Markets Amid Greek Fiscal Mayhem

Greece is going through a transformation of its own — but in response to a very different set of circumstances. The Greek people have endured a series of tax increases and pension cuts over the past several years to fund debts owed to the European Union. These austerity measures have created a dire situation for those trying to secure their financial independence. The result has been widespread tax evasion, which has helped grow Greece’s underground economy to nearly 25% of the country’s GDP.

Surprisingly, it’s not only the poor who are utilizing the shadow economy in Greece, but also the professional class. Those earning large amounts of money are subjected to extremely high tax rates, driving many business owners and entrepreneurs to either seek better opportunities abroad or take steps to conceal their income.

By persecuting the most successful members of society and not allowing them to keep what they earn, authorities are only encouraging disregard for the law. Without the grey market in Greece, many more skilled workers would have already left the country. Even though the black market is consistently blamed for taking away tax revenues, it ironically may be the only thing keeping the debt crisis from spiraling even further out of control.

Scarcity and the Consolidation of Power

Scarcity is more than just a mindset; it’s a harsh reality that people born in developed nations rarely see firsthand. But any time a bankrupt government seizes control over their citizens’ lives and the economy, the end result is always despotism. The consolidation of power into the hands of a few is rationalized during chaotic times but ultimately puts the rights of all citizens at risk.

Just last year, Venezuelan law enforcement carried out raids that killed 245 people. There was no accountability regarding whether the shootings were justified, but reports claim that many of the victims posed no threat and some were even killed after being taken into custody. Such violent crackdowns are the inevitable result of governments attempting to maintain control amid the chaos of broken economic systems.

In 2011, Robert Neuwirth wrote a report for Foreign Policy that highlighted the importance of this untaxed, unlicensed, and unregulated global marketplace. He called it “System D.”
“They say that inventive, self-starting, entrepreneurial merchants who are doing business on their own, without registering or being regulated by the bureaucracy and, for the most part, without paying taxes are part of ‘l’economie de la d├ębrouillardise.’ (Literally 'Economy of Resourcefulness') or, for street use, ‘Systeme D.’ This essentially translates as the ingenuity economy, the economy of improvisation and self-reliance, the do-it-yourself, or DIY, economy.”
The nanny state has done an excellent job attacking anything outside of the government’s jurisdiction, but a lack of regulation is what allows for the most rapid growth and productivity. Legislators notoriously overestimate their influence on the millions of people they attempt to rule over, but ultimately, grassroots decisions made by individuals have the greatest impact. People who rely on their own skills and reputation rather than a bureaucratic stamp of approval are labeled criminals, but they’re the ones providing real value to society in many cases.

Our Black Market Future

Merchants in these off-grid markets are often associated with danger and violence, but in reality, they provide the purest form of voluntary transactions. Negative aspects, like organized crime, are only made possible because of the profits created as a result of prohibition. Without the State intimidating the public at gunpoint, there would be no incentive for people to seek out the services of nefarious organizations.

These organic free markets are only strengthened with the circulation of assets like cash, bitcoin, and precious metals. Anonymity mixed with technology is empowering people in ways never imagined. The adoption of cryptocurrencies is bringing the shadow economy into the digital age and expanding its reach internationally. This new economic system represents a very real threat to the current financial and political structures.

However, innovators in this environment have to be careful, and after the Silk Road was taken down, real legal implications became apparent. Most famously, Silk Road co-founder Ross Ulbricht was sentenced to life in prison and targeted specifically for challenging the existing system.

The growing progression towards decentralization he attempted to catalyze is on a direct collision course with the central banks and their war on cash.  As the public’s faith in fiat money continues to wane, there will be more and more opportunities to show the benefits that come from peer-to-peer networks over central planning. Those who recognize the inherent extortion of the old system have to lead by example and educate others, regardless of which tactics of intimidation are deployed against them.
Republished from The Anti-Media.
Shaun Bradley
Shaun Bradley writes at TheAntiMedia.org
This article was originally published on FEE.org. Read the original article.

How Communism Became the Disease It Tried to Cure

From Radical Revolutionaries to Privileged Bureaucrats

The great German sociologist, Max Weber (1864-1920) offered an understanding of the evolution of socialist regimes in the twentieth century from revolutionary radicalism to a stagnant system of power, privilege and plunder, manned by self-interested Soviet socialist office holders.

Max Weber, in his posthumously published monumental treatise, Economy and Society (1925), defined a charismatic leader as one who stands out from the ordinary mass of men because of an element in his personality viewed as containing exceptional powers and qualities. He is on a mission because he has been endowed with a particular intellectual spark that enables him to see what other men do not, to understand what the mass of his fellow men fail to comprehend.

But his authority, Weber explains, does not come from others acknowledging his powers, per se. His sense of authority and destiny comes from within, knowing that he has a truth that he is to reveal to others and then knowing that truth will result in men being set free; and when others see the rightness of what he knows, it becomes obvious and inevitable that they should follow his leadership.

Certainly Vladimir Lenin (1870-1924) fit that description. While many who met or knew him pointed out his either non-descript or even unattractive physical appearance and presence, most emphasized at the same time Lenin’s single-mindedness of being on a “mission” for which he had absolute confidence and unswerving determination, and due to which others were drawn to him and accepted his leadership authority.

Surrounding Lenin, the charismatic, was an array of disciples and comrades who were called and chosen, and saw themselves as serving the same mission: the advancement of the socialist revolution. As Weber says:
“The . . . group that is subject to charismatic authority is based on an emotional form of communal relationship . . . It is . . . chosen in terms of the charismatic qualities of its members. The prophet has his disciples . . . There is a ‘call’ at the instance of the leader on the basis of the charismatic qualification of those he summons . . .”
The “chosen” group renounces (at least in principle, if not always in practice) the material temptations of the worldly circumstances, which the goal of their “mission” is meant to overthrow and destroy. And, this too, marked the often conspiring, secretive and sometimes Spartan lifestyle of Marxist revolutionaries. Max Weber explained:
“There is no such thing as salary or a benefice. Disciples or followers tend to live primarily in a communistic relationship with their leader . . . Pure charisma . . . disdains and repudiates economic exploitation of the gifts of grace as a source of income, though to be sure, this often remains more an ideal than a fact . . . On the other hand, ‘booty’. . . whether extracted by force or other means, is the other typical form of charismatic provision of needs.”
But once the charismatic and his followers are in power, a transformation soon occurs in their behavior and relationship to the rest of the society. Now it becomes impossible to stand outside of the flow of the mundane affairs of daily life. Indeed, if they do not immerse themselves in those matters, their power over society would be threatened with disintegration. Slowly, the burning fervor of ideological mission and revolutionary comradeship begins to die. Said Max Weber:
“Only the members of the small group of enthusiastic disciples and followers are prepared to devote their lives purely and idealistically to their calling. The great majority of disciples and followers will in the long run ‘make their living’ out of their ‘calling’ in a material sense as well . . . Hence, the routinization of charisma also takes the form of the appropriation of powers of control and of economic advantages by the followers and disciples and the regulation of the recruitment of these groups . . .
Correspondingly, in a developed political body the vassals, the holders of benefices, or officials are differentiated from the ‘taxpayers.’ The former, instead of being ‘followers’ of the leader, become state officials or appointed party officials . . . With the process of routinization the charismatic group tends to develop into one of the forms of everyday authority, particularly . . . the bureaucratic.”
I would suggest that in Max Weber’s analysis we see the outline of the historical process by which a band of Marxist revolutionaries, convinced that they saw the dictates of history in a way that other mere mortals did not, took upon themselves to be the midwives of that history through violent revolution.

But as the embers of socialist victory cooled, such as in Russia after the Revolution of 1917 and the bloody three-year civil war that followed, the revolutionaries had to turn to the mundane affairs of “building socialism.” Building socialism meant the transformation of society, and the transforming of society meant watching, overseeing, controlling and commanding everything.

Self-Interest and the New Socialist “Class Society”

Hence, was born in the new Soviet Union what came to be called the Nomenklatura. Beginning in 1919, the Communist Party established the procedure of forming lists of government or bureaucratic positions requiring official appointment and the accompanying lists of people who might be eligible for promotion to these higher positions of authority. Thus was born the new ruling class under socialism.

Ministries needed to be manned, Party positions needed to be filled, nationalized industries and collective farms needed managers assigned to supervise production and see to it that central planning targets were fulfilled, state distributions networks needed to be established, trade unions needed reliable Party directors, and mass media needed editors and reporters to tell the fabricated propaganda stories about socialism’s breakthrough victories in creating a new Soviet Man in his new glorious collectivist society.

Contrary to the socialist promises of making a new man out of the rubble of the old order, as one new stone after another was put into place and the socialist economy was constructed, into the cracks between the blocks sprouted once again the universals of human nature: the motives and psychology of self-interested behavior, the search for profitable avenues and opportunities to improve one’s own life and that of one’s family and friends, through the attempt to gain control over and forms of personal use of the “socialized” scarce resources and commodities within the networks and interconnections of the Soviet bureaucracy.

Since the state declared its ownership over all the means of production, it was not surprising that as the years and then the decades went by more and more people came to see membership in the Nomenklatura and its ancillary positions as the path to a more prosperous and pleasant life. In the end, the socialist state did not transform human nature; human nature found ways to use the socialist state for its own ends.

The system of privilege and corruption that Soviet socialism created was explained by Boris Yeltsin (1931-2007), the Russian Communist Party member who, more than many others, helped bring about the end of the Soviet Union and an independent Russia in 1991 that at first tried democracy. In his book, Against the Grain (1990), Yeltsin explained:
“The Kremlin ration, a special allocation of normally unobtainable products, is paid for by the top echelon at half its normal price, and it consists of the highest-quality foods. In Moscow, a total of 40,000 people enjoy the privilege of these special rations, in various categories of quantities and quality. There are whole sections of GUM – the huge department store that faces the Kremlin across Red Square – closed to the public and specially reserved for the highest of the elite, while for officials a rung or two lower on the ladder there are other special shops. All are called ‘special’: special workshops, special dry cleaners, special polyclinics, special hospitals, special houses, and special services. What a cynical use of the world!”
The promised “classless society” of material and social equality was, in fact, the most granulated system of hierarchical privilege and power. Bribery, corruption, connections and favoritism permeated the entire fabric of Soviet socialist society. Since the state owned, produced and distributed anything and everything, everyone had to have “friends,” or friends who knew the right people, or who knew the right person to whom you could show just how appreciative you could be through bribery or reciprocal favors to gain access to something impossible to obtain through the normal channels of the central planning distributive network for “the masses.”

And overlaid on this entire socialist system of power, privilege and Communist Party-led plunder was the Soviet secret police, the KGB, spying, surveilling and threatening anyone and everyone who challenged or questioned the propaganda or workings of the “workers’ paradise.”

Communist Contradictions and the End to Soviet Socialism

It is not an exaggeration to say that everything that the Marxists said was the nature of the capitalist system – exploitation of the many by a privileged few; a gross inequality of wealth and opportunity simply due to an artificial arrangement of control over the means of production; a manipulation of reality to make slavery seem as if it meant freedom – was, in fact, the nature and essence, of Soviet socialism. What a warped and perverted twisting of reality through an ideologically distorted looking glass!

It all finally came to an end in 1991 when the privilege, plunder and poverty of “real socialism” made the Soviet system unsustainable. Indeed, by that time it was hard to find anyone in any corner of Soviet society who believed, anymore, in the “false consciousness” of communist propaganda. The Soviet Union had reached the dead-end of ideological bankruptcy and social illegitimacy. The “super-structure” of Soviet power collapsed. (See my article, “The 25th Anniversary of the End of the Soviet Union.”)

In 1899, the French social psychologist, Gustave Le Bon (1841-1931), looked at the, then, growing socialist movement at the end of the nineteenth century and the soon to be beginning twentieth century, and sadly said in his book, The Psychology of Socialism:
“One nation, at least, will have to suffer . . . for the instruction of the world. It will be one of those practical lessons which alone can enlighten the nations who are amused with the dreams of happiness displayed before their eyes by the priests of the new [socialist] faith.”
Not only Russia, but also many other countries in Eastern Europe, Asia, Africa, and Latin America have been forced to provide that “practical lesson” in the political tyranny and economic disaster that socialist society, especially in its Marxist permutation, offered to mankind.

It stands as a stark demonstration of the disastrous consequences when a society fully abandons a political philosophy of classical liberal individualism, an economic system of free markets, and an acceptance of self-interested human nature functioning within a social arrangement of voluntary association and peaceful exchange.

Let us hope that with this year marking the one-hundredth anniversary of the communist revolution in Russia mankind will learn from that tragic mistake, and come to realize and accept that only individual liberty and economic freedom can provide the just, good, and prosperous society that humanity can and should have.

Based on a presentation delivered as the John W. Pope Lecture sponsored by the Clemson Institute for the Study of Capitalism at Clemson University on March 1, 2017.
Richard M. Ebeling
Richard M. Ebeling
Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.
This article was originally published on FEE.org. Read the original article.