The NY Times reports on how well peanut growing has gone this year:

In Georgia, where nearly half of the nation’s peanuts are grown, the annual fall harvest has yielded a record amount of big, shell-filling kernels that farmers say taste better than average.

…

“I’ll just say that the farmers of Georgia have been blessed with weather conditions,” said Armond Morris, who planted about 1,000 acres near Tifton, Ga., and serves as the chairman of the Georgia Peanut Commission.

“We had rain at the right time and didn’t have but three or four days that were 95 degrees,” he said.

Although the harvest is just winding down, the national peanut crop report from October showed that more than 6.1 billion pounds will be harvested this year, compared with about 3.6 billion last year. The yields are especially good in Alabama, Florida, Mississippi and Georgia, where the main crop is a variety called runner peanuts.

So that’s good news for taxpayers right? No need to bail out struggling farmers whose crops have been ruined by drought? A good time to end farm subsidies? Unfortunately, it’s quite the opposite:

… there is still a record supply of peanuts on the market, which means farmers will not see high prices to match their yields.

Although some early contracts assured growers of close to $700 a ton, those kinds of deals are long gone, said Patrick Archer, the president of the American Peanut Council, adding that growers will be lucky to get $400.

As a result, many farmers are likely to turn to the federal government to keep the bottom from falling out of the peanut market. Instead of selling their crops right away, they will store shelled nuts in refrigerated warehouses and take government loans, betting that prices will rise within nine months and that their peanuts will bring enough to repay the loans.

If prices stay low on the open market, the government will buy the peanuts for less than it cost to produce them but at a rate that will allow farmers to recoup some of their expenses.

Sigh. Is there any market situation that doesn’t result in subsidies to agriculture?

Supporters of limited government have little to cheer about today (and Romney winning wouldn’t have changed that in my opinion), so I’m going to point out a small glimmer of hope. In Pennsylvania’s 79th district, voters elected a local finance professor and radio host named John McGinnis to the state House of Representatives. A lot of Republicans talk a good game about liberty and smaller government – “Dr. John” eats it for breakfast.

Now I’m fully aware that unconventional candidates for public office generally have their best chance for success in lower profile races. The 79th district is also solidly Republican and so McGinnis probably had an advantage over his Democratic opponent. But I grew up in the district, and it is definitely not a hot-bed of libertarian thought. So I think it’s pretty amazing that a guy who openly states that Ludwig von Mises is his favorite economist can win an election in a place that saw its best days when the railroads were dominant.

I came to know Dr. John (he has a PhD in economics) through his radio show. John had me on the show several times to preach the Gospel according to Cato. The show always began with his boisterous call to “Proclaim liberty throughout all the land!” John developed a reputation for getting under the skin of elected officials, and no politician was spared his wrath – particularly Republicans. So I was surprised when I found out that he had decided to quit his show and challenge the district’s long-standing representative in Harrisburg – the epitome of a career politician – in the GOP primaries.

In both the primary and the general election, the word “libertarian” was used as a slur against McGinnis. “He wants to legalize drugs!” the opposition would cry. “He wants to dismantle public education and other public services!” the government employees screamed. Local politicians warned that McGinnis would be ineffective because he wouldn’t bring home enough taxpayer bacon (for them to consume, of course).

Despite all that, McGinnis sent the establishment Republican packing in the primaries, and won yesterday’s general election. And he didn’t sell out his principles to do it (here in Pennsylvania, most Republicans campaigned on a promise to protect Medicare from the Democrats).

For McGinnis, however, winning the election was probably the easy part. Now he’s heading off to the giant pothole in the middle of the state known as Harrisburg. His Republican colleagues are, for the most part, as establishment as it comes. And they certainly won’t be rolling out the welcome mat. Upon learning of his victory, McGinnis told a reporter that “If I have to be the skunk at the party, I’ll be the skunk.” And he said his fear is that he will be tempted to become “an insider.”

I think Dr. John will know he’s selling out if his establishment colleagues suddenly start telling him that he smells good.

Der Spiegel, the German magazine, argues that the recent election campaign is evidence that the United States is a nation in decline. Certainly the political system is having its problems, but Der Spiegel’s prescription of going further into debt to build high-speed trains and other European follies is a dubious way to fix those problems.

The real decline is in the Republican Party, which couldn’t manage to capture the White House or the Senate despite high unemployment and other economic problems. Given the economy, this election was the Republicans’ to lose, and lose it they did. They began shooting themselves in their collective feet early in the last decade when they made immigration a big issue, thus earning the enmity of Latinos, the nation’s fastest-growing and second-most important ethnic group.

Unfortunately, our two-party system too often limits voters to a choice between a social & fiscal liberal vs. a social & fiscal conservative (or, worse, a social & fiscal liberal vs. a social conservative & fiscal liberal). A large percentage of potential voters don’t feel comfortable in either party, and the libertarian side of me thinks, or hopes anyway, that many of those “independents” are socially liberal but fiscally conservative.

By focusing on fiscal issues, the tea parties seemed to provide an alternate route, one that set social issues aside. But, as Marian Tupy notes, too many Republican candidates made social issues a major part of their campaigns, thus alienating both Democrats and independents. Romney, who was neither a true fiscal nor social conservative, didn’t help by offering an inconsistent message, as often criticizing the president for cutting budgets, such as medicare and defense, as for spending money.

So the next two years look to be the same as the last two: Democrats in the White House and controlling the Senate while Republicans hold the House. Does that mean more gridlock, with Republicans opposing any tax increases and Democrats opposing any budget cuts?

In the face of a fiscal cliff–meaning automatic budget cuts and tax increases if Congress doesn’t find another resolution–Obama hopes for a Grand Bargain in which Republicans accept some modest tax increases in exchange for some modest budget cuts. However, I suspect Republicans are immediately going to regroup for 2014 and 2016, and won’t want to commit themselves to such a bargain. Moreover, most of the push against a Grand Bargain is coming from liberals, not conservatives. So I suspect we will be seeing two more years of gridlock.

Take my issue, transportation, which Congress has to deal with again in 2014, the year the 2012 transportation bill expires. What would a Grand Bargain look like for reauthorization of the gas tax and the spending of those tax revenues? A five-cent increase in gas taxes in exchange for cuts in some of the worst examples of pork? It doesn’t seem likely; increased gas taxes would just feed the pork barrel, and any cuts in pork would probably be restored in annual appropriations. Fiscal conservatives have nothing to gain by supporting such a Grand Bargain.

Does that mean the U.S. is in decline, as Der Spiegel says? Not necessarily. Elections today are no more contentious than they were between 1876 and 1900, when several presidential elections were decided by less than a percent of the vote and at least two of the electoral college winners lost the popular vote. Politics then were dirtier, or at least as dirty, as any time in American history.

The real threat to the future of the country is not political polarization but the huge fiscal hole Congress has dug, which means the real question is whether our economy can recover enough to ever fill up that hole. The standard free-market answer is that the uncertainty created by Obama’s overregulation and inconsistent attitudes towards business will prevent such a recovery. We can only hope that this is wrong.

If they are to participate in this recovery, Republicans must drop the emphasis on social issues (which aren’t really decided at the national level anyway) and their hostility towards immigrants. I hate to think that America’s future depends on Republicans coming to their collective senses, but the alternative of Democrats suddenly becoming fiscally conservative seems even less likely.

NPR reports on the Alternative Minimum Tax:

… here’s the thing about patching the AMT: It’s expensive, which is why Congress hasn’t made the fix permanent.

I guess that depends on whether you identify with the tax collectors, or the tax payers.

Two years ago, I highlighted nine key state ballot initiatives and happily reported about a week later that voters generally chose to limit statism.

We have a similar collection of measures this year. Some of these votes — such as the decisions about higher taxes in California and power for government employee unions in Michigan — will have profound implications and perhaps even signal whether certain jurisdictions are doomed to failure.

Since I’m motivated primarily by the desire to reduce the burden of government spending and block bad tax policy, let’s look first at the key fiscal measures on this year’s ballot.

Prop 30 in California — Would impose a huge tax hike, including an increase in the state sales tax from 7.25 percent to 7.5 percent, along with three new higher income tax brackets (maxing out at more than 13 percent!) for upper-income taxpayers. The adjoining cartoon is a good summary of the issue, as is this classic bit of political humor.

Prop 38 and Prop 39 — Two additional tax hike measures, the first targeting individual taxpayers and the second targeting businesses. I’m not sure which tax-hike proposition is the worst, but they all need to be defeated for there to be any hope about California’s future.

Prop 204 in Arizona — Renewing a one-cent increase in the state sales tax, ostensibly for the education bureaucracy. Money is fungible, so this is merely a vote for bigger government.

Issue 1 in Arkansas — Imposing a half-cent increase in the state sales tax, supposedly for highway spending. Another bait-and-switch scam to trick voters into financing bigger government.

Prop 5 in Michigan — Would require a two-thirds vote of both the state house and state senate to raise any tax. Anything that makes it harder to raise taxes is also a step making it harder to boost the burden of spending.

Prop B in Missouri — Raise the cigarette tax by 73 cents per pack. Politicians in the Show Me state should kick their addiction to big government.

Constitutional Amendment Concurrent Resolution 13 in New Hampshire — A constitutional amendment to prohibit enactment of an income tax. The Granite State has been blessed by avoiding either a state sales tax or a state income tax. It’s almost a shame that there’s a First Amendment guaranteeing free speech, because otherwise I’d be tempted to outlaw even discussion of imposing an income tax.

Measure 84 in Oregon — Would repeal the state’s death tax. This should be a no-brainer. You don’t want to repeat the mistakes of New Jersey and drive productive residents to other states. But Oregon voters have demonstrated a lemming-like suicide instinct in the past.

Initiated Measure 15 in South Dakota — Increases the state sales tax from 4 percent to 5 percent. There’s no income tax, but that’s no argument for making a modest sales tax into an onerous sales tax.

Initiative 1185 in Washington — Reaffirms the state’s two-thirds supermajority requirement before the state legislature can increase taxes. Voters repeatedly have reaffirmed their support for the supermajority in the past. Let’s hope that doesn’t change now.

Now let’s shift to matters of personal freedom and look at ballot measures involving the Second Amendment and the Drug War.

Prop 114 in Arizona — Protects crime victims from being sued if they injure or kill criminals. Yes, there are examples of excessive response, but the easiest way of avoiding those situations — if you’re a criminal — is by keeping your nose clean.

Amendment 2 in Louisiana — Strengthens right to keep and bear arms. If this doesn’t pass by more than 80 percent, I’ll be disappointed.

Amendment 64 in Colorado, Measure 80 in Oregon, and Initiative 502 in Washington — All of these ballot measures end marijuana prohibition to varying degrees. Let’s hope voters take a small step in ending the War on Drugs.

These initiatives are related to fiscal policy, but they belong in a special category since they deal with the necessity of curtailing bloated and over-compensated government bureaucracies.

Prop 1 in Idaho — This measure would retain recent legislative reforms to end tenure in government schools. The only real solution is school choice, but this measure at least should make it easier to get rid of awful teachers that contribute to making the public schools both costly and ineffective.

Prop 2 in Michigan — Creates permanent negotiating advantages for already pampered government employee unions. This is the bureaucrat equivalent of Prop 30 in California, a massive transfer of wealth and power from the productive sector. If it passes, Michigan probably would be past the tipping point in its descent into stagnation and despair.

Last but not least, here are measures on random issues that are very important.

Prop 3 in Michigan — Require 25 percent of electricity to come from renewables. This will be an interesting test of whether the voters of a particular state are so clueless about economics that they are willing to voluntarily boost their own energy bills and undermine their own job prospects. I almost hope it passes just for the lesson it will teach.

Question 1 in Virginia — Limits eminent domain to public purposes. Corrupt developers and their cronies in state and local government don’t like this proposal, which naturally means it is a very good idea for those who support property rights.

Amendment 6 in Alabama, Amendment 1 in Florida, Prop E in Missouri, Legislative Referendum 122 in Montana, and Amendment A in Wyoming — These are all anti-Obamacare initiatives in some form or fashion. Continued resistance is important, even if some of these measures are only symbolic, so fingers crossed that they’re all approved.

You can find more information about state ballot initiatives and referendum here, here, here, and here.

And one final philosophical/​policy point: In an ideal world, the United States would be like Switzerland and have a much more robust version of federalism. Almost everything that happens in Washington, with the exception of national defense, should either be in the private sector or at the state and local level of government.

A big advantage of a genuinely federalist system is that competition among states would be more vigorous than it is today. So if Michigan voters enacted Prop 2 or California voters approved Prop 30, tho adverse consequences would materialize much faster, thus helping to educate people that free markets and limited government are the best policies.

Big government programs and special tax-code carve-outs often lead to corrupting ties between government officials and private interests. The Washington Post today discusses the municipal bond industry:

In just about every election, local governments put measures on their ballots asking voters to allow the sale of bonds so that municipalities can finance roads, schools or other projects. Interested parties often form campaigns to help pass or crush these initiatives.

And sometimes the investment banks that donate to those campaigns get hired to sell the bonds to investors after an initiative passes, raising the possibility that they got a leg up in the selection process because of their monetary support for the ballot bond measure — not because they offered taxpayers the best deal.

…[A] review by the Bond Buyer publication … found “a nearly perfect correlation between broker-dealer contributions to California school bond efforts in 2010 and their underwriting subsequent bond sales.”

…Jay Goldstone, [the] Municipal Securities Ruling Board’s chairman, said he’s concerned about the pattern. “There seems to be a strong relationship between contributions and underwriting business.”

The article discusses solving these problems with greater disclosure and transparency. But the real solution is to eliminate the underlying government preference that creates the influence peddling in the first place.

In this case, the federal income tax exemption for state and local bond interest should be repealed. That could be matched with a reduction in general tax rates on capital income.

As I argue here, state and local governments should dramatically scale back bond issuance. Bonds are just sneaky tax increases. State and local capital investments should be financed “pay-as-you-go,” which would cut out the costly middlemen in the finance industry.

The chart below shows that state and local bond debt has soared to more than $3 trillion. That not only represents a huge deferred tax increase, but it has also created a large playing field for special-interest cronyism. (For chart info, see here).

The housing market is soft, so this is the worst possible time to get rid of the mortgage interest deduction, right? Well, it’s not that simple.

1.) The deduction is not a subsidy to homeowners. It’s a subsidy to people who have mortgages, and then only if they itemize their taxes. Those claiming the standard deduction can’t take advantage. Paying cash for a home won’t qualify you for the deduction, either. Following a great recession fueled by would-be homeowners borrowing more than they could afford, it’s well past time for the feds to get out of the business of subsidizing home debt.

2.) Borrowing to own a home now costs homebuyers less in interest than it has historically, which means that the cash value of the mortgage interest deduction is lower than it will be under higher (future) interest rates. In other words, this particular tax-code goodie is at a historically low value to taxpayers, so why not get rid of it now?

Mitt Romney has nibbled around the edges of this idea. He would cap the mortgage interest deduction. In delivering a bit of a backhanded compliment, Yonah Freemark and Lawrence J. Vale write in the New York Times that “while Mr. Romney’s tax proposal overall may not be fair or sensible—or even mathematically logical—Democrats shouldn’t be so quick to attack any change to the mortgage interest deduction.”

Freemark and Vale would use the boost in federal revenue from ending the deduction to fund new housing programs. However, ending the mortgage interest deduction could also be used to lower overall tax rates. Mark Calabria and I chatted about the mortgage interest deduction this week for the Cato Daily Podcast.