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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Tuesday, November 30, 2004 ~ 8:56 p.m., Dan Mitchell Wrote: A federal government agency set up to crack down on money laundering and terrorist financing is of little use to law enforcement agencies... Canada is a haven for money
launderers and there are more active terrorist groups operating in the country than anywhere else in the world, a securities industry conference was told this year. The federal government estimates $17-billion
worth of criminal proceeds are laundered through Canada every year. ...Peter Lamey, a Fintrac spokesman, said the agency believes it is effective but welcomes the recommendations in the report. "We receive
millions of transaction [reports] and how we use that information, and how we share that information, is subject to a balance that is struck by the law."
Tuesday, November 30, 2004 ~ 9:15 a.m., Dan Mitchell Wrote: Business leaders say Switzerland must react rapidly to the growing phenomenon of cross-border "tax competition" or risk being left behind.
...Co-author Pascal Gentinetta said the study showed that international taxation - particularly corporate taxes - had become an "extremely
dynamic, fast-changing field" and that Switzerland could no longer afford to simply defend existing advantages. ..."As a result, the
comparative advantages that Switzerland has traditionally enjoyed are tending to diminish, particularly compared with the dynamic eastern European countries, not to mention Austria and Ireland. ...The study,
"Competition and Dynamism in Tax Policy - an international comparison of major reforms and their lessons for Switzerland", provides a systematic overview of significant trends and reform
programmes in the field of international taxation. ...The study says government spending has increased more rapidly than in any other OECD country, and no effort must be spared to reduce this as a
percentage of gross domestic product. ...The report concludes that Switzerland's "lead" in the area of company taxes has shrunk in recent
years. Tax rates send a "clear signal" to investors, so Switzerland should act to cut these taxes further.
Tuesday, November 30, 2004 ~ 8:56 a.m., Andrew Quinlan Wrote: Our low and simple taxes and our free port have made us the envy of the world. Visitors are amazed and envious of our energy and
entrepreneurship that results from that. With one budget, however, all that could change. There is an increasing trend towards "normalizing"
Hong Kong, making it more like other places. If Singapore has a VAT, why don't we? If the U.S. has a capital gains tax, why don't we? If Sweden has a green tax, why don't we? It does sound a bit like what my
mother used to say when I was a child and wanted to follow my friends into some stupidity -- "If everyone else jumped off the Tsing Ma Bridge,
would you jump off too?" ...Hong Kong has been able to meet challenges, and then some, especially because it is a low-tax place. With no natural resources beyond a hole in the water (a deep port), no
industrial hinterland for decades, and a bare bones social welfare system, the city nonetheless became the largest per capital generator of
wealth in Asia, far outstripping our South East Asian rivals. The reason was simple, the people of Hong Kong worked hard, and they did so also
for another simple reason, they were allowed to keep what they earned. The taxman did not watch their every move, record every transaction, and regulate every contract and relationship. Hong Kong's greatest
generation worked for goals that were untainted by the fear that what they worked for would be taken away. ...This seems strange from a government that pays for civil servants to send their children to study
abroad and take luxury cruises on retirement. If we give away free and discounted land for residential developments under the guise of spurring
technology development, setting up in Hong Kong, then the government will have to make it up by adding a tax to everything bought by you. Simplicity, long a hallmark of Hong Kong's taxation, will become a thing
of the past. The proposed GST will, according to revelations last week by Mr. Tang, include concessions for some taxpayers, rebates for tourists, and allowances for a variety of items. The resulting web of tax
credits, subsidies, exemptions and special cases will increase the administrative burden on tourists, business owners, and the average taxpayer immensely.
Tuesday, November 30, 2004 ~ 8:30 a.m., Dan Mitchell Wrote: Following hints last week from Italy's Prime Minister Silvio Berlusconi that he would resign unless taxes were cut, his governmental allies have
finally agreed to measures which will reduce taxes by around EUR6.5 billion next year. Under the planned tax package, Italy's five tier personal income tax system will be reduced to four brackets at 23%,
33%, 39% and 43%, meaning an effective 2% cut in the top rate of tax, which will kick in on incomes above EUR100,000 per year. While the EUR6 billion cut in income taxes and EUR500 million for corporations represents only 0.5% of Italy's GDP -- hardly a seismic shift
in fiscal policy -- it is a stunning shift in that nation's political winds. Such a reversal would not have been possible had Mr. Berlusconi not
been willing to expend political capital. In winning his re-election earlier this month, U.S. President George W. Bush proved that voters will
reward a politician who presents a bold agenda and the resolve to follow through. Mr. Berlusconi needed this victory to boost his chances of winning again in 2006. Italians have borne too heavy a tax burden for
too long and would no doubt have had little patience with a politician who reneged on promises to ease their load. ...The prime minister should
now push for larger cuts in 2006. His original plan to cut income taxes by EUR9 billion in 2006 is the next logical step and would stand a better chance at stimulating the growth he seeks. That would be true
particularly if the cuts are designed to lower the burdens on production and investment and free up entrepreneurs. ...More importantly, the cuts
were offset partly by spending reductions -- particularly in Italy's notoriously bloated public employment rolls. Mr. Berlusconi pledged to
cut 75,000 jobs through attrition over the next two years, hiring just one worker for every five who retire. Call us crazy, but if one person can do
the work that five now perform, the government might be able to do without even more of its 4.5 million civil servants.
Tuesday, November 30, 2004 ~ 7:43 a.m., Dan Mitchell Wrote: Last week, Utah federal Judge Paul G. Cassell handed a 22-year sentence to a man who beat an elderly woman to death with a log. A few
hours later, Judge Cassell sentenced a 25-year-old first-time drug offender to 55 years. If you think Judge Cassell liked sentencing a small-change drug dealer to more time than a violent killer, guess again.
The judge had no choice. Federal law demanded the sentence, despite Judge Cassell's pointed questioning if there was a "rational basis" for
sentencing Weldon H. Angelos, the father of two young children, to more time than he could sentence a hijacker, murder or rapist. ...Judge Cassell
was right to impose the draconian sentence. If he ignored federal law, he would place himself above it. Instead, Judge Cassell sentenced Angelos
as the law directed, even as he righteously hectored Congress to rewrite federal drug laws so first-time offenders don't serve more time than dangerous career criminals. The judge also urged Angelos' attorney,
Jerome H. Mooney, to appeal the sentence and, if appeals fail, seek a presidential commutation.
Monday, November 29, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: Liberals see themselves as self appointed Robin Hoods, but they are seen by red-county Americans as taking from the productive and giving to the
indolent. They look down on average Americans as misguided and too dumb to know what is good for them and their families. Since such people are unlikely to make the right decisions, a wise government must
do it for them. And of course the bigger the government, the better. An equally serious friend on the other side of the political spectrum says the
acrimony of the past four years may have been intensified by social issues, but it is the economic issues that are determining the outcome of
elections. He believes the liberal left may actually be winning on the social issues--that gay rights and stem-cell research, for example, are
trending in their direction--but that liberals have suffered a wholesale rout on their economic beliefs. They were wrong about communism (it
was an economic failure), wrong about socialism (it didn't work either), wrong about the welfare state, wrong about high taxes and government regulation of economic matters.
Monday, November 29, 2004 ~ 10:35 a.m., Dan Mitchell Wrote: Democrats discovered a provision that would have given Members of Congress access to individual tax returns. The intention was apparently
to let Congress inspect IRS performance, but the language was so sloppy that it would have allowed the intrusion into taxpayer privacy. Republicans tried to remove the language by voice vote with few
Members in attendance last week, but Democrats unsurprisingly demanded a recorded vote to extend the GOP's political embarrassment. This is what happens when no one but a few staffers really knows what
is in a bill that is 3,646 pages and more than a foot high. We remember, circa 1994, when Republicans denounced Democrats for not reading the
bills that they passed. Now the GOP is guilty of the same practice, which is a recipe for all sorts of secret pork and mayhem getting into law. ...Democrats have also learned to skewer Republicans for their
individual "earmarks," which by one account total 18,000 this year and add up to $22 billion. These pork-barrel classics -- e.g., $1 million for a
"Wild American Shrimp Initiative" -- obscure the larger truth that this year's spending bill is actually the first in years to show some restraint.
Domestic non-defense discretionary spending will rise by less than 2% in Fiscal Year 2005. But what many voters will remember instead is that Republican incumbents are as spendthrift as Democratic incumbents.
...With control of the House, Senate and White House, Republicans are now going to be held accountable for Congress's decisions. If they talk
like conservatives but spend like Democrats, voters may decide to elect the real thing.
Monday, November 29, 2004 ~ 9:15 a.m., Andrew Quinlan Wrote: Years ago, when friends or relatives would visit and marvel at our clean, state-of-the-art subway system, I'd quip, "Enjoy it; you paid for it."
Federal taxpayers were responsible for more than two-thirds, $6.4 billion, of the $9.4 billion cost of building Metro. ...Users pay only about
half of the annual cost of running Metro, much less the billions to build it. Without making a profit, Metro is hardly in a position to fix its
crumbling infrastructure or expand its failing operation. In fact, since every customer represents a loss in revenue, it fears what most businesses desire: more customers. ...In the private sector - which,
incidentally, has made America the world's biggest economic power - profits are the bottom line, creating a system where products and services are produced and sold by enterprises that survive or die on
profit, and thus a system whereby costs are contained and customers satisfied by that wonderful, almost magical force, known as self-interest.
...If there were a profit motive alive at Metro, it would not have taken four years to investigate its parking employees' million-dollars-per-year
thieving habits. A profit motive would cause managers to suggest selling customers food - at a profit - rather than arresting them for eating. It
would suggest they fire station managers who threatened customers. An enterprise that was making a profit would see an advantage in keeping equipment working and saving capital to make expansion possible.
Monday, November 29, 2004 ~ 8:50 a.m., Dan Mitchell Wrote: ...the authors properly distinguish between $33 of costs incurred by each smoker, which can be averted by not smoking, and around $7 of costs
imposed by smokers on others, which economists call "externalities." This distinction is crucial: With respect to the $33 component, decisions
about smoking are voluntary, private matters. We do not need government making those decisions for us. Externalized costs are different. Consider secondhand smoke. Some nonsmokers have illnesses
- like asthma or bronchitis - that are exacerbated by secondhand smoke. Still, those nonsmokers have an obvious remedy: Do not hang around places where smokers light up. On private property, the owner should
determine whether to admit smokers, nonsmokers, neither or both. Persons who object may go elsewhere. ...The same is true for Mr. Sloan's
other "social" costs, totaling $1.44 per pack. Basically, smokers can impose social costs upon nonsmokers because the government has decided, first, to insure the health costs of low-income and elderly
persons and, second, to fund the insurance in a manner that does not distinguish between high-risk smokers and lower-risk nonsmokers. If insurance premiums fully reflected the health risk implicit in each
policyholder's smoking habits, there would be no costs transferred from smokers as a group to nonsmokers as a group. ...It may sound ghoulish, but premature deaths from smoking can generate long-term external
benefits of lower retirement and nursing home costs. Those benefits (less any payroll taxes otherwise paid by deceased or disabled smokers) are
an offset to near-term medical outlays. "If anything," concludes Mr. Sloan, "Medicare should compensate smokers and tobacco companies, not the reverse."
Sunday, November 28, 2004 ~ 12:36 p.m., Dan Mitchell Wrote: It was a desire to play a part in the American election -- and thus world events -- that led editors from G2, the daily features section of London's
left-leaning Guardian newspaper, to mount an actual bid to influence the results. Dreamed up in a London pub, the prank was the work of people who claim that a Bushless world would be a better world. Rather than
launching their views into the ether and praying, the editors invited readers to send handwritten pro-Kerry pleas to 14,000 residents registered as independents in a single county in one swing state: Clark
County, Ohio. Reminding letter-writers that the United States' own Declaration of Independence speaks of paying "a decent respect to the
opinions of mankind," the stunt mixed tongue-in-cheek trouble-making with save-the-world sanctimoniousness. Thousands apparently followed though, though the jape appears to have backfired spectacularly: In
2000, Democratic hopeful Al Gore won Clark Country by 324 votes; this year, Bush won by more than 1,500 votes -- and outraged Americans deluged the newspaper with e-mails telling the Old World letter-writers
to please be so kind as to mind their own borders.
Sunday, November 28, 2004 ~ 12:00 p.m., Dan Mitchell Wrote: One study of 1,000 professors finds that Democrats outnumber Republicans at least seven to one in the humanities and social sciences.
That imbalance, more than double what it was three decades ago, is intensifying because younger professors are more uniformly liberal than the older cohort that is retiring. ...The nonpartisan Center for
Responsive Politics reports that in 2004, of the top five institutions in terms of employee per capita contributions to presidential candidates,
the ...top two were the University of California system and Harvard, both of which gave about 19 times more money to John Kerry than to George W. Bush. ...A filtering process, from graduate school admissions
through tenure decisions, tends to exclude conservatives from what Mark Bauerlein calls academia's "sheltered habitat." ...Academics such
as the next secretary of state still decorate Washington, but academia is less listened to than it was. It has marginalized itself, partly by political
shrillness and silliness that have something to do with the parochialism produced by what George Orwell called "smelly little orthodoxies."
Many campuses are intellectual versions of one-party nations -- except such nations usually have the merit, such as it is, of candor about their ideological monopolies. In contrast, American campuses have more
insistently proclaimed their commitment to diversity as they have become more intellectually monochrome.
Sunday, November 28, 2004 ~ 11:54 a.m., Dan Mitchell Wrote: Australia has one of the highest incidences of bracket creep and 'fiscal stealth' among member nations of the OECD, a University of Melbourne
economics professor has concluded. Presenting the results of his findings at the recent World Taxpayers and Taxpayers Australia Conference, Professor Neville Norman explained that taxpayers mistakenly believe
that they are victims of bracket creep only when pay rises push them into higher tax brackets, when in reality they are being adversely affected by
the process of fiscal stealth much more frequently. ...Endorsing the findings of Norman's report, Peter McDonald, National Director of Taxpayers Australia, commented that: "The elimination of the damaging
effects of 'creep' are long overdue and the Government has a responsibility to be honest and truthful with taxpayers. Raising taxes through deceptive means does not fit that responsibility." McDonald is
calling on the government to reduce the top rate of personal income tax to 30% in line with corporate tax, thereby encouraging taxpayers to
work longer, and making the tax system simpler and fairer. "By giving taxpayers a greater incentive to earn and retain more of what they earn
the anticipated problems of an ageing population will be eliminated," he noted.
Sunday, November 28, 2004 ~ 9:39 a.m., Andrew Quinlan Wrote: In an interview with the Irish Independent earlier this week, Ireland's new Minister for Enterprise, Trade and Employment, Mícheál Martin
suggested that a reduction in the Republic's 12.5% corporate tax could not be ruled out in the next few years if the jurisdiction shows any sign
of a decline in competitiveness. "This would not be an immediate issue, although we cannot rule it out in the future," he observed, adding that:
"Our competitors are the developed economies and we can't lose focus on that."
Sunday, November 28, 2004 ~ 9:14 a.m., Dan Mitchell Wrote: Financial Secretary Henry Tang talked up the virtues of a sales tax he's intent on inflicting on the city. He told a Chamber of Commerce crowd
that he believes the 5% surcharge on goods and services will raise between 25 and 30 billion HK dollars ($3.20 billion-$3.85 billion), helping shore up finances. Broadening the tax base, another of Mr.
Tang's stated intentions, is a worthy goal. As he said, only "about 300,000 salary earners shoulder 85% of the burden" of income taxes in
a city of 6.8 million. But it is clear that Mr. Tang intends the sales tax to be a tax hike. When asked whether he planned to lower any taxes, he
protested he might try to find ways to "compensate" the lower- and middle-classes, but was non-committal. "Some of you here would
certainly like me to promise to lower profits tax, abolish estate duty and reduce the duty on wine. I am afraid I will have to disappoint you, at least for today," he said. |
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Saturday, November 27, 2004 ~ 1:12 p.m., Dan Mitchell Wrote: U.N. secretary general Kofi Annan should either resign, if he is honorable, or be removed, if he is not. The mild-mannered Annan may not himself be corrupt. But he has
presided over no less than the largest corruption scandal in the history of the world, Oil for Food. Never has the U.N. been more disrespectable or useless. Moreover, Annan's response to the scandal has been
inadequate to the point of disgrace. That he still holds his post is testament to the culture of impunity that pervades the organization. ... He lacks the drive, and the desire, to tame the beast he inherited.
Annan is a man willingly in thrall to his employer's unaccountable and inefficient bureaucracy, and a servant of its patronage machine. To this end - protecting the U.N.'s comfortable status quo and keeping the
gravy train rolling along - he has hindered efforts to uncover the massive scale of the Oil for Food fraud, a fraud involving his own staff.
Saturday, November 27, 2004 ~ 12:36 p.m., Andrew Quinlan Wrote: Debt means nothing unless you compare it to your income or wealth. How does our national debt today compare to our national income? It is
lower than it was a decade ago, during the Clinton administration, when liberals did not seem nearly as panicked as they seem today. As a percentage of the national income, the national debt today is less than
half of what it was in 1950 and about where it was in 1940 -- back in those "earlier and simpler times." If someone were to produce a political
dictionary, "crisis" would be defined as a desire to pass a law and "national debt" would be defined as a desire to raise taxes. And the two
in combination would mean a desire to discredit the existing administration. ...tax revenues can rise, fall, or stay the same when tax rates are cut. Everything depends on what happens to income. Tax
revenues rose after the Kennedy tax cuts of the 1960s and the Reagan tax cuts of the 1980s because incomes rose. Incomes are likewise rising during the Bush administration today.
Saturday, November 27, 2004 ~ 10:50 a.m., Dan Mitchell Wrote: If an argument could be made that ID cards would be a valuable aid against terrorism, fine. But they're not. An ID card system, to cite but
one case, didn't prevent the Madrid massacre. So Mr. Blunkett touts other benefits, like reducing benefit fraud. But at a projected cost of £3.1
($5.8) billion, that'll have to be a lot of fraud. The government's real response to civil libertarians is: "If you've got nothing to hide, why
oppose?" That's not the point. A state exists for the people and is accountable to the people. Not vice-versa. At least not in free and democratic countries. Britain is, or was, freer than its Continental
neighbors precisely because the government wasn't as intrusive in peoples' lives.
Saturday, November 27, 2004 ~ 9:55 a.m., Dan Mitchell Wrote: Economics Ministers on Thursday (25 November) launched a new bid to cut EU red tape in a drive to make the regulatory environment in
Europe easier for business. Meeting in Brussels for a competitiveness council, ministers agreed to simplify existing regulations in several areas,
including environment, statistics, internal market, corporate law, social policy and health. They also agreed to scrap about 100 draft laws in the
pipeline and subject any new proposals to a "rigorous impact assessment". ...Commission President José Manuel Durao Barroso has put the EU's so-called Lisbon agenda - its goal of becoming the most
competitive economy in the World by 2010 - at the top of his priority list.
Saturday, November 27, 2004 ~ 9:00 a.m., Dan Mitchell Wrote: A regulator can commit an error by permitting something bad to happen (approving a harmful product), or by preventing something good from
becoming available (not approving a beneficial product). Both outcomes are bad for the public, but the consequences for the regulator are very
different. The first kind of error is highly visible, causing the regulators to be attacked by the media and patient groups, and to be investigated
by Congress. But the second kind of error -- keeping a potentially important product out of consumers' hands -- is usually a non-event, eliciting little attention, let alone outrage. Former FDA Commissioner
Alexander Schmidt aptly summarized the regulator's conundrum: "In all our FDA history, we are unable to find a single instance where a Congressional committee investigated the failure of FDA to approve a
new drug. But the times when hearings have been held to criticize our approval of a new drug have been so frequent that we have not been
able to count them. The message to FDA staff could not be clearer." ...If we are to balance drug safety, innovation in R&D, and the availability
and price of new medicines, we must find a way to make regulators accountable for costly errors of all kinds. One way would be to create a vigorous, independent agency ombudsman that could compel regulators
to act in the public interest. The office would have to possess the following attributes: (1) independence from the agency and the FDA commissioner; (2) access to independent expertise in relevant disciplines,
including medicine, pharmacology, science, regulation, and law; and (3) the power to levy sanctions against FDA employees found to be responsible, individually or collectively, for flawed decisions or policies
that constitute severe, avoidable errors. Americans are, literally, dying for regulatory reform. It's past time they got it.
Friday, November 26, 2004 ~ 11:57 a.m., Dan Mitchell Wrote: While the appropriations bills are not perfect, they honor the goals President Bush set last February: overall discretionary spending in
Fiscal 2005 will rise only 4%, the same as the average increase in American family income. The budget also provides substantial increases in funding for essential defense and homeland security needs. Just as the
president proposed, discretionary spending for non-security programs will rise only about 1%, which is half the rate of inflation and the lowest
rate of growth since the Republicans first took control of Congress in the mid-1990s. This is the fourth consecutive year that growth in such
spending has declined, down from 15% growth in the last budget year of the previous Administration.
Friday, November 26, 2004 ~ 11:14 a.m., Andrew Quinlan Wrote: The UK government has assured the British Virgin Islands that it is taking all steps necessary to mitigate the effects of the European Savings
Tax Directive on the jurisdiction's economy, according to Caribbean Net News. In a letter to Chief Minister Dr Orlando Smith, the UK's Paymaster General Dawn Primarolo assured him that the BVI
government will be informed promptly of any proposed amendments to the directive, which is scheduled to take effect on 1st July 2005. ...In her
letter, Primarolo wrote that the UK government would endeavour to use its influence in a bid to challenge misconceptions concerning the EU directive and its implementation, and will continue to push for adoption
of the legislation as geographically far afield as possible.
Friday, November 26, 2004 ~ 10:00 a.m., Dan Mitchell Wrote: The newly installed European Commissioner for Taxation, Laszlo Kovacs this week reiterated his opposition to proposals advanced by
France and Germany for more control to be exerted over national corporate tax rates at the European level. In an interview with the Budapest Business Journal, the former Hungarian Foreign Minister
repeated comments made during his confirmation hearing in the European Parliament last week, arguing that there is no need for a minimum EU corporate tax rate, as suggested by members of the
German and French governments. ...He added: "I believe that taxation should remain a national competence, because there are no studies proving beyond doubt that taxes are of major consideration when
investors pick a location."
Friday, November 26, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: ...the center-right opposition in Romania contains an unprecedented proposal: a flat tax of 16 percent, for both corporate and income tax,
coupled with lower compulsory social contributions. Usually, when a party with the best chance to win the parliamentary and presidential elections (scheduled for November 28) offers such a daring proposal, it
reflects a massive shift in preferences of the electorate. How is it that such a change appeared in a country characterized by the slow pace at which it has left communism behind? After the fall of communism, in
December 1989, the Social-Democratic party -inheriting the young wing of the former communist party - adopted a progressive taxation system,
based on four classical brackets. However, in recent years, this system has become less and less efficient, due to increases in taxation levels and
widespread corruption. In the years 2000-2004, the black and gray economy was constantly evaluated at 40 percent. In real terms, this means that most firms declare zero profit, to avoid taxation, preferring
to distribute the money through illegal operations. Often firms employ people with two salaries: a declared (nominal) one, at the lowest level
allowed by the law, and a real one, usually two or three times higher. ...The Alliance built its whole political program, the "Platform of
Governing for Romania" on the base of the flat tax. Submitting a macroeconomic projection of the flat tax's impact on the economy, it evaluated the budgetary revenues and expenses based on a 16 percent
tax on corporate income. The main argument was simple: while the (nominal) taxation level is at about 23-25 percent, due to evasion, the effective taxation rate is in fact 16 percent. So why not lower the
nominal tax rate to match the real one, at 16 percent, thus enlarging the taxation base? ...That the flat tax is such a major issue in the campaign
reflects a profound change in the social structure and preferences of the country. When a political force (i.e. the Alliance) believes it can win
votes with the revolutionary proposal of renouncing at the progressive taxation, maybe Romania has finally left communism behind.
Friday, November 26, 2004 ~ 8:13 a.m., Dan Mitchell Wrote: In their report, entitled "Tax System Desirable for the Declining Birthrate and Aging Population," the committee addressed inequities relating to inter-generational tax burdens. Specifics include an incremental increase in the consumption tax rate from the current 5 percent to a "double-digit figure" over the next decade. At the same time, there would be a broadening of the tax base on individuals to allow Tokyo to hike social welfare spending. Implementing these proposals would increase the overall tax burden and dampen economic activity by reducing business investments and household savings. Consider that Japan's economy recorded slow or no growth after capital-gains tax rate rose from 0% to 20% in 1990, and a national sales tax implemented in 1989 was increased during the late-1990s. By contrast, data from Holland and Ireland as well as the US and the UK indicate that reducing the tax burden can boost growth and cause beneficial changes in the structure of the economy. In all events, high rates induce evasion and avoidance that make it harder to meet revenue targets. ... Japan's policy makers might consider following the example of "supply side" economics in the 1980s in the US and the UK where sharp cuts in
income and corporate taxes brought higher economic growth. One element of this is portrayed vividly by the so-called Laffer Curve that indicates that permanent tax cuts can increase tax revenues when
households and businesses work and invest more when granted greater control over prospective earnings. One approach might be to implement a flat tax with a low marginal tax rate to replace the maximum income
tax that was recently reduced to 50 percent from 65 percent.
Thursday, November 25, 2004 ~ 12:30 p.m., Dan Mitchell Wrote: Tenth in 1999, Kansas has assumed the lofty spot as the nation's most economically free state, followed closely by Colorado and Virginia.
Idaho, at the top of the 1999 list, remains high at fourth. Rhode Island, Connecticut, California, and New York bring up the rear. ...Turning to
the states that made the biggest progress from 1999 to 2004, we found that Arizona advanced 14 places, and Colorado, Maine, Oklahoma, and Oregon each jumped 12 places. In contrast, Mississippi fell 19 places,
Alabama 14, and Illinois, Kentucky, Ohio, and South Dakota each sank 10 spots. ...We constructed an economic model that explains the level of
state annual income per capita in 2000... The regression results, robust across specifications, show that more economic freedom is associated with higher income per capita across the U.S. states. The results are
virtually identical if economic freedom rankings are substituted for economic freedom scores. The statistical analysis shows that a 10-percent improvement in a state's economic freedom score yields, on
average, about a half-percent increase in annual income per capita. ...Relative to the freest state, Rhode Island residents suffered the largest
reduction in annual income per capita due to their loss of economic freedom, $3,607, followed by Hawaii at $2,963, and New York and New Jersey at around $2,400 each. The national average was $1,161. This
might not sound like much, but over a 40-year working life at a conservative 3 percent interest rate, this translates into $87,541 that would have otherwise gone into the pocket of an average working
American. Rhode Island also had the highest effective "oppression tax," 13.17 percent, followed by Hawaii at 11.36 percent, Maine at 7.61
percent, and New York at 7.45 percent. The national average was 4.42 percent of income. State institutions have a substantial impact on income
levels across the U.S. states. Economic freedom matters significantly.
Thursday, November 25, 2004 ~ 11:49 a.m., Andrew Quinlan Wrote: More than 14 million uninsured are already eligible for public programs such as Medicaid and SCHIP. More than 15 million have incomes
exceeding $50,000 and likely could afford private coverage if they found value in it. Approximately 5.7 million are "shortterm uninsured,"
possibly between jobs or recent college graduates. ...So-called "health insurance" has come to be a very different breed of animal. Most health
insurance is based on a three-party arrangement in which a person pays a premium to an insurance company, which pays a physician or a hospital to provide a service to the consumer. It is a triangular
relationship that causes great confusion and administrative costs, and results in little accountability between the three parties. It also results in
excessive utilization as patients are insulated even from knowing the price of the services they consume. Once the premium has been paid, the services are all free or nearly so. There is no economic constraint
whatsoever on consumption of services. The only constraint is imposed by the payer through some form of rationing, which is very expensive to enforce and very intrusive on the relationship between patient and
provider. Our near-exclusive reliance on third-party payment to finance health care services has resulted in our health care system being in a
state of perpetual crisis as we lurch between panic about cost increases one year, poor quality the next, and inadequate access after that.
Thursday, November 25, 2004 ~ 10:30 a.m., Dan Mitchell Wrote: In 1997 the corporate tax in Bulgaria was 40.2 percent. At the moment it is 19.5 percent and the government wants to cut it to 15 percent from
the beginning of 2005. The personal income tax's top rate was 40 percent in 1997; it is 29 percent now and it will be cut to 24 percent in 2005 according to government plans. Thus in 2005 Bulgaria will have
one of the lowest profit and income taxes in Europe. Moreover, the Institute for Market Economy started a campaign for introducing a 10 percent flat rate for all direct taxes - corporate tax, personal income tax
and social security tax. So the tax cutting in Bulgaria will most probably continue. ...according to Eurostat, Germany collects only 0.6 percent of
GDP through the corporate tax. In Bulgaria the revenues from the corporate tax are about 3 percent of GDP. Obviously Bulgaria's lower tax rate generates more revenues than Germany's high rate with many
loopholes. But this is not a problem of the Bulgarian government - it is a decision of the German government to create such a tax system and only
the German government can change that system. If the loopholes are eliminated, the German government can introduce a corporate tax rate of 5-10 percent without any loss of revenue.
Thursday, November 25, 2004 ~ 9:54 a.m., Dan Mitchell Wrote: Just as the hubbub over France and Germany's tax harmonization proposals (aimed at strangling investment in new EU countries) has quieted down the Polish government comes up with its own idea for imposing greater fiscal burdens on small business owners in the country. ...The businessmen argue that they already pay too much. They admit also that they seriously consider emigration, because they do not believe
that their voice counts. Many of them already talk of relocating to the neighboring Slovak Republic where they would pay only 19 percent flat
income tax and where - unlike in Poland - the state tries to make country attractive for business.
Wednesday, November 24, 2004 ~ 12:03 p.m., Dan Mitchell Wrote: When Reagan sent his tax reform proposal to Congress in May 1985, it emphasized fairness, saying the state and local taxes deduction mainly
benefited those with high incomes and those in high-income states. Because the loss of revenue is large, requiring higher federal tax rates,
the result is that low-income taxpayers and those in low-income states in effect subsidize the rich. These are still valid arguments. The states that
benefit most from the state and local deduction are those with the highest taxes, which generally are those with the highest per capita incomes. Because the top federal income tax rate is 35 percent, in effect
the top state and local income tax rate is reduced by 35 percent. A state rate of 10 percent is really only 6.5 percent when federal deductibility is
taken into account. This encourages states to impose higher tax rates than they might otherwise adopt, have governments provide services that the private sector might better be able to deliver and finance such
services with deductible taxes rather than nondeductible fees that might be more efficient. Low-tax states and those without income taxes in effect underwrite these larger governments and higher taxes.
Wednesday, November 24, 2004 ~ 11:32 a.m., Dan Mitchell Wrote: ...we hope the point has been driven home that investors don't bet on countries that debase their currencies. All the more so when the nation's
leading policy makers seem blase, not to say clueless, about the matter. Treasury Secretary John Snow has been roaming the world saying that
he favors a "strong dollar" policy even as he lobbies for a weaker dollar against Asian currencies. Investors who observe what Mr. Snow does
tend to discount what he says. Mr. Snow is also fond of repeating the nonsense that exchange rates should be set by "market" forces.
However, a currency isn't just another commodity, like wheat or copper; it is a store of value. And unlike other commodities, its supply is determined by a central bank, in the U.S. by the Federal Reserve, which
has a monopoly on dollar creation. The global currency markets are dominated by a cartel of central banks, and currency values are a function of their relative monetary policies. Isn't a Treasury Secretary
supposed to know that? The larger worry is that the Bush Treasury, and perhaps Mr. Bush himself, seem to have fallen for the notion that a
country can devalue its way to prosperity. This is the patent medicine of the manufacturers' lobby, as well as the kind of economist who has done
so much for Argentina, Mexico and other nations over the years. Britain tried this in the 1970s, and had to call in Margaret Thatcher to save the
country from sinking to Third World status. The Carter Administration also tried talking down the dollar and ended up inspiring a global run on
U.S. assets. ...The Fed has been running an easy-money policy for more than two years, continuing with negative real interest rates despite such
early inflationary warnings as $50 oil, nearly $450 gold, and a 24% decline in the dollar since 2002. Mr. Greenspan certainly knows that the federal budget deficit isn't the cause of current dollar weakness,
especially since that deficit is now declining. But he probably doesn't mind if the press corps uses his remarks to blame any economic troubles on White House fiscal policy instead of blaming the Fed.
Wednesday, November 24, 2004 ~ 10:43 a.m., Dan Mitchell Wrote: In a hard-hitting column to appear in Tuesday's edition of Il Foglio newspaper, Berlusconi repeated his threat to bring down his government
if recalcitrant coalition allies refused to back his plans for income tax cuts in 2005. Berlusconi said the cuts were needed to revive a lethargic economy, but stressed the strength of the euro currency was also
weighing heavily and called on his EU partners to revise the Maastricht Treaty on which the stability pact is based. "The blessed introduction of
the single European currency has thus far produced the exact opposite result of what the euro was created for -- an asphyxiated economy and
hobbled growth under the burden of 'stupid' ties," Berlusconi wrote.
Wednesday, November 24, 2004 ~ 10:00 a.m., Dan Mitchell Wrote: Kavaric's Ministry has helped push through a 20 percent top corporate tax rate, and he assured me that by the end of next month there will be a
corporate flat tax rate of only 9 percent--one of the lowest in Europe. Furthermore, there are no capital flow restrictions, or limits on foreign
ownership of business and even banks. Furthermore, 99 percent of prices are freely determined, and foreigners are treated as nationals in all
business legislation. Foreigners can also repatriate all profits to their home nations if they wish. And privatization of key services like telecoms
and aluminum plants has already begun. With a 17 percent sales tax (except on staple products) and a top rate of personal tax of 25 percent, Montenegro now has one of the most attractive climates for foreign
investment in Europe. ...Kavaric concluded his comments to me with much optimism: "I anticipate Montenegro joining the EU within the next
decade, but probably not the next five years." To have another low tax pro-growth country within the EU will further demonstrate the benefits
of lower tax rates and make it harder for the high tax treasuries in Paris and Berlin. This has to be beneficial, not only to Montenegrins but for the rest of us as well.
Tuesday, November 23, 2004 ~ 11:17 a.m., Dan Mitchell Wrote: Social Security benefits are not guaranteed. Just like all entitlement programs, they can -- and have been -- changed by Congress. The Social
Security administration itself says so and so did the Supreme Court when it ruled, in Flemming v. Nestor, that workers and retirees have no legal
claim to benefits. Regardless of how much in taxes they have paid into the system. But here, too, a solution is at hand. Look no further than Plan Two offered by the President's Commission to Strengthen Social
Security, in 2001. This plan would allow workers to divert 4% of their payroll taxes, up to $1000, to personal accounts. Workers who decide to
open personal accounts would forego a portion of their traditional Social Security benefit -- depending on the amount of payroll taxes they diverted. That offset however does not get the system to solvency. For
that, Plan Two changes the way benefits are allowed to grow. How? You guessed it, by replacing the computation of benefits via wage indexing to
a policy under which initial benefits would grow from one cohort to the next at the rate of price increases. Thus, workers with identical real
wages would receive the same real benefit, regardless of age difference.
Tuesday, November 23, 2004 ~ 11:03 a.m., Dan Mitchell Wrote: Government aid for Hurricane Frances bought Miami-Dade County residents rooms full of furniture, new wardrobes and thousands of appliances, including microwaves, refrigerators and sewing machines, even though the brunt of the storm missed the county. With damage limited primarily to a few fallen trees and power lines, residents claimed Frances destroyed 5,260 television sets and 1,440 air conditioners, according to records from the Federal Emergency Management Agency. Disaster relief paid for lawn mowers, vacuum cleaners, space heaters and cars. FEMA paid $4,500 for one resident's funeral, even though the county medical examiner recorded no storm-related deaths. In six instances,
FEMA blamed damage on "ice/snow." ...The Labor Day weekend storm made landfall in Martin County, more than 100 miles north of Miami-Dade. ...At the Old Hickory Bar, a check-cashing and liquor store
in Liberty City, manager Eddie Thornton, who is also a landlord, said he was surprised when one of his tenants arrived to cash a $4,700 FEMA
check for damage at one of his properties. "I own the place and I know there wasn't no damage," Thornton said. "I put the shutters up." He
estimated his store has cashed as much as $500,000 in FEMA checks. ...As the cause of damage, inspectors cited "tornado-wind" for 195,909
items, although the National Weather Service recorded no tornados in the county during Frances. The top sustained winds reached 47 mph, less
than a tropical storm. Inspectors blamed "sewer backup" in 14,644 instances. The Miami-Dade County Water and Sewer Department knew of no problems.
Tuesday, November 23, 2004 ~ 10:28 a.m., Andrew Quinlan Wrote: ...on Wednesday Henry Hyde's House International Relations Committee held hearings revealing how some of the money financed terrorism.
Specifically, some of the kickbacks paid by oil buyers and humanitarian goods suppliers ended up in an account at the Rafidain Bank in Amman, Jordan, from whence cash was funneled by the Iraqi ambassador there
to the families of Palestinian suicide bombers. Saddam also gave oil vouchers to Abu Abbas, the man responsible for the 1985 hijacking of the cruise ship Achille Lauro and the murder of American Leon
Klinghoffer. Maybe now the part of our foreign policy establishment that continues to deny that Saddam supported terrorism will pipe down.
Tuesday, November 23, 2004 ~ 9:18 a.m., Andrew Quinlan Wrote: Other "golden eggs" laid by the Congressional geese include $450,000 for the Baseball Hall of Fame, $200,000 for the Dennison Railroad
Depot Museum in Ohio, $350,000 for the Rock and Roll Hall of Fame, $1.5 million for the Anchorage Museum/Transit intermodal depot in Alaska, $250,000 for the Country Music Hall of Fame, $100,000 for the
Municipal Swimming Pool in Ottawa, Kan., $35,000 for the Alabama Sports Hall of Fame, $300,000 to build the Great Falls parking garage in Auburn, Maine, and $1.5 million for departing Congressman Richard
Gephardt's archive at the Missouri Historical Society. There is no mandate in the Constitution, or anywhere else, for unnecessary and wasteful spending at any time, much less in a time of record deficits and
debt. ...If it was their own money they were spending, not ours, perhaps Congress would be more frugal. The president should use his veto and shame the Republican Congress into spending less and guarding the
taxpayer's purse. As the president said during the 2000 campaign, it isn't the government's money, it's your money.
Tuesday, November 23, 2004 ~ 9:00 a.m., Dan Mitchell Wrote: Last week the Pension Benefit Guaranty Corporation, the quasi-government agency that insures private pension plans, announced
a record deficit of $23.3 billion. ...the Bush Administration made a sensible stab at pension reform. The idea was a trade-off between granting some short-term relief to underfunded companies and then
requiring all companies to put their funding on a sound basis for the long term. But Congress flubbed the challenge and the White House caved in
an election year. ...Congress promptly dumped the long-term provisions, voted in the short-term relief and -- doubling up on the largesse -- gave a
special break to seriously underfunded plans like those in the airline and steel industry. This last provision was a truly staggering example of
short-term mindlessness. It allowed plans to ignore something called "deficit reduction contributions," which required companies with under
90% of funding requirements to close the gap over a three-to-seven year period. By permitting these companies to stretch out catch-up payments
to up to 30 years, this provision insured that funding shortfalls would grow. Since most of these companies will terminate their plans anyway,
it also sticks the PBGC with an additional multi-billion dollar burden. In other words, Congress and the White House produced a big, fat bailout for the most financially shaky companies, and some of those same
companies are now joining the queue to dump their liabilities on the feds. Meanwhile, PBGC's deficit was left to balloon, as it now has -- by $12
billion with 155 company plans terminating. ...One popular solution is to raise the premiums paid by companies -- which haven't been increased since 1994 -- along with adjusting those premiums for risk. But a
premium increase would make it more likely that healthy companies will drop out of the system, and risk-adjusted premiums give those financially
fragile companies a strong incentive to terminate their plans. The big problem is that the agency, by insuring private pension plans, has created its own moral hazard. Essentially, PBGC is writing a put option
for which any private plan that is not fully funded is in-the-money; therefore, exercising the put by dumping liabilities onto the PBGC is
attractive. Ultimately, of course, the put is written by taxpayers to the tune of tens of billions of dollars. This slow motion train wreck is almost
a perfect re-enactment of the thrift crisis in the 1980s. Back then, the government kept trotting out short-term fixes that deepened the problem
until, finally, the thrift industry collapsed, presenting taxpayers with a $200 billion bill.
Tuesday, November 23, 2004 ~ 7:30 a.m., Dan Mitchell Wrote: Eliot Spitzer's current campaign against major insurance brokers and insurance companies has reaped massive media indignation... In an era
of general acceptance of deregulation and privatization, Mr. Spitzer has introduced the world to yet a new form of regulation, the use of the criminal law as an in terrorem weapon to force acceptance of
industry-wide regulations. These rules are not vetted through normal authoritative channels, are not reviewable by any administrative process, and are not subject to even the minimal due-process
requirements our courts require for normal administrative rule making. The whole process bears no resemblance to a rule of law; it is a reign of
force. And to make matters worse, the regulatory remedies are usually vastly more costly to the public than the alleged evils. ...Since Mr. Spitzer
wins his cases in the media, where business is now all but defenseless, the best hope is for the American business community to develop its own
public voice. The free-market scholarship needed for this purpose is available, though it is rarely availed of in these fights. Too often the corporate defenders conclude, out of ignorance to be sure, that the
opposition really has the better case. But make no mistake: Eliot Spitzer represents, wittingly or not, an attack on the entire corporate
free-enterprise system. Clearly we need new or invigorated institutions to defend industries and companies publicly when they come under unwarranted or disproportionate attack. Responsible leaders of the
business community should make it a high priority to develop these capabilities before more harm is done.
Tuesday, November 23, 2004 ~ 6:45 a.m., Dan Mitchell Wrote: John McKay, an aide to Canadian Finance Minister Ralph Goodale, is urging the government to follow the tax-cutting lead of the United
States, or risk seeing economic growth eroded along with the fiscal surplus. According to the Globe and Mail, Mr McKay pointed to the tax-cutting policies that are likely to be pursued by the Bush
administration in Washington in the coming years, and argued that "we simply cannot be too far behind that." "We need to worry about
productivity - otherwise, we won't go from seven surpluses to eight. We may go to our first deficit, because the economy will shrink," he warned.
Tuesday, November 23, 2004 ~ 5:30 a.m., Dan Mitchell Wrote: The Incredibles are a family of superheroes who are forced into early retirement because their feats had incurred too much collateral damage;
lawsuits on superheroics had made the Incredibles a liability. So they were required to go into hiding, to restrain their unique powers, to conceal their genetically given talents. The fundamental moral of the
movie is that this restraint is wrong and needs to be overcome: Letting the talented earn the proud rewards of their labor, and the fruits of their
destiny, harms no one and actually helps those in the greatest need. ...it is pro-talent and pro-opportunity. It is in favor of the urge to get out
there and achieve things without apology. Within the right-left rubric of American cultural discourse, the movie is therefore rightward-tilting.
And that's why many critics on the left have decried it. ...At home, the Democrats spoke too easily of people injured by fate or economic transition or social injustice, while scanting the positive things that
people can and will do to change their own circumstances, to beat the odds, to rise above their own limitations. They had a trial lawyer as vice-presidential nominee and a candidate who had spent a lifetime in
politics achieving very little, even by the standards of the U.S. Senate. ...The truth is, there is a conservative majority in this country not
because the religious right is a majority but because Republicans have been able to corner the market on the themes of achievement, individualism, energy, and action. And they have also won over those
who disdain the politics of resentment, whining, and permanent criticism. If James Dobson represents one wing of contemporary Republicanism, Arnold Schwarzenegger represents the other. Democrats will never win
over the Dobsonites. But they can win over the blueish voters who voted red last time because the pious, do-good, elite whining of Gore and Teresa and Hillary seemed so alien to Americans' entrepreneurial,
anti-p.c., and irreverent popular culture.
Monday, November 22, 2004 ~ 11:47 p.m., Andrew Quinlan Wrote: It's become an unwelcome tradition in Italy: Prime Minister Silvio Berlusconi's annual admission that long-promised income tax cuts will
have to wait. But the latest rendition -- which came last week, after Mr. Berlusconi realized he couldn't win support for a modest EUR6 billion
cut -- may signal his understanding that other economic policy changes are overdue. Mr. Berlusconi swept into office in 2001 largely thanks to
his "contract with Italians" to reduce the country's crushing tax burden and stoke the economy. Those in the highest tax bracket -- annual
income of EUR70,000 and above -- fork over 45% of their earnings to the government. Mr. Berlusconi promised to slash taxes to stimulate economic growth. But he has run into trouble sticking to his pledge in
part because until recently, reducing government spending wasn't part of the plan. In fact, a "contract" pledge to increase pensions is one promise
the prime minister has kept. ...But waiting for better growth to arrive so you can "afford" pro-growth tax cuts gets it backward: Growth won't
come from nowhere. Mr. Berlusconi talks as if he understands the change in entrepreneurial incentives that Italy needs to jump-start its economy; that's why, rhetorically at least, he's backed important cuts in
the top marginal tax rates.
Monday, November 22, 2004 ~ 9:45 p.m., Dan Mitchell Wrote: What I propose is that we adopt a value-added tax (VAT), also known as a consumption tax, in addition to the other taxes, while adopting a rule
that says no single tax may have a double-digit marginal rate. My thinking is that with this reform, we would have all four taxes -- personal income, corporate income, payroll, and VAT, each at a rate of, say, 8
percent. Reducing the personal income tax, payroll tax, and corporate income tax rates to 8 percent each would curtail government revenue. However, I would propose abolishing all tax credits that go with these
taxes, along with most exemptions. ...From an economic perspective, having four broad-based taxes seems silly. Pure economic theory would say that you should have only one broad-based tax in the economy. With
the four-tax approach, we would be double-taxing (or triple-taxing) labor income and capital income. For example, your salary would be taxed as a payroll tax, as part of the income tax, and then when you buy
goods and services you would be taxed again through the VAT. From a political perspective, however, having four broad-based taxes with low rates would help to discourage lobbying. The incentive to lobby for an
exemption is much higher when marginal rates are 35 percent than when rates are 8 percent.
Monday, November 22, 2004 ~ 12:05 p.m., Dan Mitchell Wrote: The changing global economy has stimulated a wave of tax reform in almost every country in the Organization for Economic Cooperation and
Development, Jeffrey Owens, director of OECD's Center for Tax and Policy Administration, said Nov. 18. Owens said changes that have swept OECD countries over the past decade still are in progress in many
nations, with global integration creating tremendous pressures for countries to make their tax structures competitive. "There is a huge need
for countries to provide a competitive environment," Owens said at a conference on global tax reform sponsored by the National Tax Foundation. "Investment has become much more sensitive to tax
differentials." In an interview following his speech, Owens explained competitive pressures have led to a nearly worldwide trend toward
reducing corporate tax rates, lowering top marginal rates, and reducing tax distortions. ...he told practitioners, "I think there is a debate going
on about how you have a peaceful co-existence between national tax systems." While tax competition can be a favorable influence on the tax
policy process in individual countries, Owens said, "to be helpful, I think it has to be fair competition."
Monday, November 22, 2004 ~ 11:27 a.m., Dan Mitchell Wrote: ...the total cost of health services regulation exceeds $339.2 billion. This figure takes into account regulation of health facilities, health
professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine. Moreover, this approach allows for a calculation of some important tangible
benefits of regulation. Yet even after subtracting $170.1 billion in benefits, the net burden of health services regulation is considerable,
amounting to $169.1 billion annually. In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year. The high cost of health services
regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured. Moreover,
4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000).
The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector. This cost exceeds annual consumer expenditures on gasoline and oil in the United
States and is twice the size of the annual output of the motion picture and sound recording industries.
Monday, November 22, 2004 ~ 10:45 a.m., Andrew Quinlan Wrote: The federal government's progressive tax policies have a negative effect on individuals' willingness to start businesses and could result in
dampening entrepreneurship and innovation, Williams College economics assistant professor William M. Gentry told an American Enterprise Institute conference Nov. 12. Indeed, entrepreneurs who
successfully launch companies often must pay a "success tax" which exceeds any tax benefit the government may grant to a failed project,
Gentry said, discussing a paper he researched and wrote with R. Glenn Hubbard of Columbia Business School. The ability to use aggressive tax planning associated with self employment, such as compilation of
allowable deductions, was not seen as a major influence on individuals' decisions to launch an enterprise, Gentry said.
Monday, November 22, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: The argument for a heavily funded space agency made some sense before private enterprise got interested. Tax money and government
direction jump-started the space age, before private enterprise did, or could have. But things are different now. There is no reason that private
enterprise could not soon take over the job of placing and even fixing commercial satellites in orbit. Since 1984, the Office of Commercial Space Transportation - a division not of NASA, but of the FAA - has
licensed over 150 private flights, including those of SpaceShipOne. Indeed, NASA's Shuttle program may have done more to retard the industrialization of space in the past twenty years than anything else,
simply by distracting attention and efforts away from better technology.
Monday, November 22, 2004 ~ 8:22 a.m., Dan Mitchell Wrote: While the Chamber explained that it welcomed the government's tax reforms in 2000, which saw the introduction of GST and a reduction in
company tax, it believes that the measures did not go far enough to improve Australia's international competitiveness. ACCI chief executive Peter Hendy warned yesterday that subsequent tax reforms in other
countries threaten to leave Australia behind. "In particular, Australia's high marginal tax rates and low thresholds are uncompetitive by
international standards," observed Hendy. "This harms innovation, education and training, skilled immigration and entrepreneurship, while promoting tax avoidance and evasion," he noted.
Sunday, November 21, 2004 ~ 2:59 p.m., Dan Mitchell Wrote: Cafta is the most important free-trade agreement for Latin America since the North American Free Trade Agreement that linked Mexico,
Canada and the U.S. Together the Cafta countries -- Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and the Dominican Republic -- are the U.S.'s 13th largest trading partner. U.S. trade with
Cafta countries is larger than with Singapore or Australia. In Latin America, only Mexico is a bigger U.S. trading partner. ...as any first year
student of trade theory knows, it's access to lower-cost imports that gives trade liberalization its biggest and broadest value. Exports improve because when producers can lay their hands on the
highest-quality, best-priced inputs, they become more efficient. In her ITC testimony, Ms. Thorn noted that "GMA also supports the Cafta
because it will provide new avenues for imports of key ingredients for food processors." One such import is sugar. Under Cafta, Latin members win a market-access quota equal to 1.7% of U.S. production
after 15 years. This is a minuscule, almost symbolic, "opening" of the sugar market, but for coddled U.S. producers whose fortunes depend on
a protected market, it is apparently cause for alarm. Sugar is the commodity that has put the DR's Cafta status in jeopardy and Cafta ratification in peril. ...a nationwide campaign by U.S. sugar producers to
defeat Cafta simply because they do not want to change their antiquated program that rewards them with a price for sugar that is three times the
world market price." According to the ITC there are only about 61,000 direct sugar jobs in the U.S. But Sugar's influence in Washington suggests a body far more muscular. Price supports and protectionism
make for an enormously powerful lobby that liberally sprinkles its big bucks around political campaigns. Reformers have never had a chance against the financial might of these generous donors.
Sunday, November 21, 2004 ~ 1:09 p.m., Dan Mitchell Wrote: Anyone wanting to bring more than 10,000 euro across the EU's external borders will in future have to declare the sum, following a
political agreement by EU finance ministers on Tuesday (16 November). The move aims to reduce money laundering and combat the funding of terrorists. Cash that is not declared to customs officials will be seized.
Travellers failing to declare the cash will have proceedings started against them, according to the European Commission. ...Taxation and customs Commissioner Frits Bolkestein said that the proposals are
"designed to prevent laundered money from reaching criminals and terrorists while at the same time not unduly interfering with the legitimate traveller".
Saturday, November 20, 2004 ~ 3:30 p.m., Dan Mitchell Wrote: The European Union's Tax Commissioner-in-waiting, Laszlo Kovacs, revealed yesterday that he is in favour of harmonising the corporate tax
base across the union, although rejecting a proposal supported by the French and Germans for more centralised setting of tax rates. ...the former Hungarian foreign minister stopped short of advocating the
placing of more control over tax rates in the hands of the Commission, arguing that "fiscal competition is not damaging as such. I support a
degree of tax competition between member states. I do not see a need for community action on corporate tax rates," he commented, referring to
complaints from France and Germany that large corporate tax cuts in the new member states of Eastern Europe amounts to unfair tax competition.
Saturday, November 20, 2004 ~ 2:19 p.m., Dan Mitchell Wrote: Current unemployment systems in developed countries foster dependency on government and reduce self-sufficiency. In fact, all econometric
studies on the subject conclude the U.S. unemployment insurance system induces layoffs. The largest estimate is that during the depths of
recession the system causes 50 percent of all layoffs. ...research supports the conclusion unemployment benefits reduce the net gain in employment. For example: The probability of a jobless person finding
work rises dramatically the week before eligibility for benefits ends. The more generous benefits are relative to the worker's previous wage, the
longer the average unemployment. Comparisons of workers with jobless benefits to those without them consistently show benefits increase the average duration of unemployment. Workers offered reemployment
bonuses found work faster. ...Unlike traditional unemployment insurance programs, personal re-employment accounts can enable us to better help
the unemployed meet their career goals. One thing is certain: Continuing a mandatory monopoly entitlement program will go on causing higher unemployment and waste human resources.
Saturday, November 20, 2004 ~ 11:36 a.m., Dan Mitchell Wrote: ...the main beneficiaries of Wal-Mart's low-price policy are the poor, who could now afford products that would be out of their reach but not for
Wal-Mart, improving their lives and raising their standard of living. I was trying to make the same point that the great economist Joseph Schumpeter made about the Industrial Revolution. In his book,
"Capitalism, Socialism and Democracy," he said, "The capitalist achievement does not typically consist in providing more silk stockings
for queens, but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." ...Finally, "Frontline"
relied heavily on biased sources, such as testimony from openly protectionist organizations like the U.S. Business and Industry Council and a union representative who admits to being a disgruntled former
employee of Wal-Mart. In other cases, the report relies on hearsay evidence that no responsible newspaper would publish in order to make
its case. ...In short, "Frontline" presented a one-sided hit piece disguised as objective news reporting. Everyone responsible for it should be
embarrassed for this grotesquely unfair case of taxpayer-financed liberal propaganda.
Friday, November 19, 2004 ~ 1:25 p.m., Dan Mitchell Wrote: ...the real story emerging this week is that the White House finally seems serious about holding the line on its budgetary spending strictures -- and
won't stand for any fuzzy math either. In a letter sent Tuesday to Congressional Appropriators, White House budget chief Josh Bolten said, "The President's senior advisors would recommend he veto any bill
that exceeds the agreed upon spending limits or remains within the limits only through the use of unacceptable budgetary devices that mask the
true level of discretionary spending." Knock us over with a feather, but that sounds like a White House willing to use political capital to keep
non-defense spending growth to around 2%. ...Douglas Holtz-Eakin of the Congressional Budget Office told us that "Economic growth, which
we anticipate to be pretty robust, leads to reductions in the deficit from what was this year $413 billion, or 3.5% of GDP. And if you go forward,
you're down to about three [percent of GDP] on the baseline next year, and about 2.5 or 2.6 the year after that." In historic terms, that's getting
close to normal since the deficit has averaged a bit above 2% of GDP for the entire postwar period. "So I think it is the case that business-as-usual with tight restraint on spending will bring the deficit
down over the near term to levels that we've seen," Mr. Holtz-Eakin adds. And all with no tax increase required. As for the national debt,
that's also not a cause for alarm. ...overall federal debt as a share of GDP is estimated to be below 40% in 2005, still well below the recent
peak of 49.4% in 1993. That is easily manageable by historic standards, and in fact should begin to decline again if the economy keeps growing and annual deficits begin to shrink.
Friday, November 19, 2004 ~ 1:03 p.m., Andrew Quinlan Wrote: The main economic reason for a single, low marginal tax rate is that graduated tax rates impose rising penalties on additions to income, and
therefore on additions to national output. Punish added income and you punish added output -- economic growth. A single tax rate puts a lid on
marginal tax rates -- on the share of added earnings a worker, saver or entrepreneur gets to keep. In terms of incentives, however, there is no
clear reason to prefer a flat tax of 25 percent to progressive rates of 15, 20 and 25 percent. A flat tax is not necessarily better than a low tax. Yet
there are at least seven technical reasons for preferring a single tax rate, regardless how the tax base is defined (consumption, income or both).
These reasons have to do with making the tax system simpler, fairer, more efficient, less vulnerable to political manipulation, and less prone to tax avoidance and evasion. Friday, November 19, 2004 ~ 12:17 p.m., Dan Mitchell Wrote: As a practical matter, I do not see how Bush can do tax reform and Social Security at the same time. It will probably take four years of
concerted effort to resolve just one of these, given the protracted nature of congressional deliberations on such issues. And Bush no longer has the
luxury of letting things slide over into another term. Unless he wants his efforts to die or see his successor get the credit, Bush will have to narrow
his priorities. ...Although Bush talked frequently about his desire to reform taxes and Social Security, his statements have been exceedingly vague, almost to the point of meaninglessness. After all, who opposes
reform in principle? It's only when people have to consider specific proposals and can study their details that things get contentious. As it
stands, we don't know if Bush favors a flat-rate tax, a national retail sales tax, or some sort of simplification that may or may not require fundamental tax restructuring. For example, we could exempt the bulk
of taxpayers from filing returns - a meaningful simplification - without changing our basic tax structure. On Social Security, Bush has been
equally vague. He asked a commission to study the subject early in 2001 and it issued a report in December of that year. But Bush never embraced the report nor chose among the alternative proposals it
presented. ...I think Bush needs to decide between tax reform and Social Security reform if he wants to get something enacted before he leaves office. If he does, I think he will be forced to choose tax reform.
Although Social Security reform is desirable, there is no compelling reason to act with haste.
Friday, November 19, 2004 ~ 11:41 a.m., Dan Mitchell Wrote: Switzerland's October accession to the Schengen Treaty, which allows for a passport-free movement of people across European borders, has
been portrayed as a sure sign of better days ahead for EU-Swiss relations. But in fact, the Swiss accession was preceded by exceptional acrimony. It has exposed the EU as a bully set on destroying tax
competition in Europe and forcing all countries in its orbit into a jo...b-destroying high-tax regime. The Swiss will be allowed freedom of movement across Europe in exchange for sacrificing their tax autonomy.
The agreement shows the extent of power asymmetry between the EU and non-EU countries in Europe, and points to difficult days ahead for the independence of the Helvetian Republic. ...Switzerland's deteriorating
position vis-à-vis the EU has become apparent as a result of a dispute over taxes. Switzerland has been a place of refuge for over-taxed European citizens for decades. That presented a growing problem for
western European politicians, whose populist domestic policies resulted in out-of-control public spending and growing budget deficits. In pursuit
of more revenue, they decided to make it more difficult for European taxpayers to shelter their savings from high taxes. Switzerland resisted
the pressure to tax the savings of those Europeans who held Swiss bank accounts for 15 years. And so the EU decided to tighten the screws on the land-locked Helvetian Republic. In March 2004, Germany imposed
stringent checks on her border with Switzerland, effectively bringing traffic between the two countries to a halt. That was a departure from the casual way in which the Germans treated Swiss traffic in the past.
The German border authorities claimed ignorance, but the Swiss knew the real reasons behind the border blockade. As Jacques Strahm, who headed border authorities in the French-speaking cantons, opined, "I
think it's a way of applying pressure on Switzerland.... It could be linked to bilateral treaties." German Socialist Finance Minister Hans Eichel,
who recently made the news by attempting to bully the new members of the EU into raising their corporate taxes, confirmed the political nature
of the measure. According to Eichel, "I assume that no country in Europe wants to make its living in part by making itself into a hideout
for tax-evaders from other countries.... I assume this is also [true] of Switzerland." ...the EU uses "enlargement" as a preferred way of stifling
growing international competition. The EU is, therefore, likely to continue to tighten its suffocating embrace of the Helvetian Republic, with Norway and Iceland surely to follow. That is a bad news for both
the long-suffering taxpayers of Europe and the freedom-loving people of Switzerland.
Friday, November 19, 2004 ~ 10:30 a.m., Dan Mitchell Wrote: German deputy finance minister, Caio Koch-Weser, meanwhile complained that the Bush tax cuts were regressive, irresponsible and had failed to help economic growth. Maybe he'd feel less sour if the economy
he's responsible for had 5% unemployment instead of 10% and 4% growth instead of zero. But we digress. U.S. officials aren't helping either. Treasury Secretary John Snow poured cold water yesterday on
the prospects of U.S. efforts to prop up the dollar, and the euro jumped on the news, hitting a new high against the dollar. There is no reason for
Mr. Snow to be blasé about the dollar, but that's his problem, not Europe's. The idea persists among both the European and American ruling classes that a weak currency yields economic advantage despite a
long historical record that proves just the opposite. Friday, November 19, 2004 ~ 9:48 a.m., Dan Mitchell Wrote: In 1992, the year before the Oslo accords were signed, Palestinian GDP per capita in the territories was about $2,000. Now, 12 years and
millions of embezzled aid money later, it is $760 in the West Bank and $600 in Gaza. Since the Israeli and Palestinian societies are economically deeply intertwined, the Palestinian hopes for an economic
revival will to a large degree depend on what kind of economic policy Israel pursues. There, the bursting of the technology bubble combined with four years of intifada have brought serious economic pain. But in
the end these developments have only accentuated a structural problem long in the making. In the last 30 years, GDP per capita in the G-7 countries has risen by 82%. In Israel, it increased just 48%, a
consequence of Israel's years of unproductive socialist experimentation, overregulation, underdeveloped financial market and high transfer payments and taxes. Even excluding Israel's high military spending,
public expenditure accounts for about 46% of GDP, compared to an average of only 40% in the OECD. Since becoming finance minister, Benjamin Netanyahu has done much to reverse this trend: He twice cut
Israel's budget and slashed public-sector wages and the number of public-sector employees. He cut taxes, pushed through a pension-fund reform and started privatizing state-owned entities such as Israel's
airline and ports. Mr. Netanyahu's policies are credited with bringing about an economic turnaround after three years of recession.
Friday, November 19, 2004 ~ 9:00 a.m., Andrew Quinlan Wrote: Under most inclusionary ordinances, builders must sell 10 to 25 percent of the homes to very low, low, or moderate income households. The most
obvious result is revenue from building goes down. We conducted a study and found that in the median city in the San Francisco Bay Area, builders must forgo $345,000 in revenue for each below-market unit. In
one quarter of jurisdictions builders must forego more than $500,000 in revenue for each below market rate unit. Governments do not pay for
the cost of producing the price-controlled units, so inclusionary zoning works like a tax on builders. The size of the inclusionary tax is quite
substantial. Unfortunately builders do not just passively accept lower profits. They build fewer homes and raise prices on remaining market-rate homes. The cost of the affordable units is spread among the
remaining market-rate units. That makes all other homes less affordable. In the median Bay Area city, inclusionary zoning imposes an effective tax
on each market-rate home of $44,000. In cities such as Cupertino, Los Altos, Palo Alto, Portola Valley, and Tiburon, we estimate that inclusionary zoning adds more than $100,000 to the price of each new
home. Inclusionary zoning also causes fewer new homes to be built. In the 45 Bay Area jurisdictions that passed inclusionary zoning between 1973 and 2001, the year following the adoption of inclusionary zoning
new construction decreased an average of 31 percent.
Thursday, November 18, 2004 ~ 3:11 p.m., Andrew Quinlan Wrote: The tax code now exceeds a staggering 60,000 pages, prompting Americans to waste 6.2 billion hours just completing their returns every
year. Deciphering it costs the country $203.4 billion a year, according to the Tax Foundation. Its complexities generate additional job-killing
distortions throughout our economy. ...despite the passage of two major tax cuts in 2001 and 2003, the tax code has gotten more complex. It is
now so irredeemably complicated that even the process of cutting taxes results in ever more complexity. That's why it is time to completely scrap
the code and replace it with a system that is simple, fair, honest and flat. ...The answer, quite simply, is the flat tax. It has a single, low rate that
treats all Americans fairly and has no deductions or special-interest loopholes. The flat tax is clear, honest and easily understood, and passing a flat tax would liberate taxpayers and jump-start the economy.
Thursday, November 18, 2004 ~ 2:34 p.m., Dan Mitchell Wrote: Steve Cochrane, director of regional economics at Economy.com, a consulting firm in West Chester, Pa., who told USA Today, "It's a
perverse thing ... there's real pain, but from an economic point of view, it is a plus." Why are Florida's hurricanes a "plus"? It's simple. According
to St. Petersburg Times reporter Joni James, "Construction creates thousands of jobs, insurance provides for billions in consumer purchases,
and new facilities built to higher standards might help offset future storm-related losses." ...Using Cochrane's statement, if "from an
economic point of view, it (hurricanes) is a plus," would the country have been even better off if the entire East Coast shared Florida's
damage and destruction? If it would have been a plus for the East Coast, what about hurricane destruction for the entire nation east of the Mississippi? Almost anyone with a speck of brains would recognize that
equating economic growth with destruction is lunacy. ...in a column written by Princeton University professor Paul Krugman after the terrorist attack on the World Trade Center, "After the Horror" New
York Times (Sept. 14, 2001). He wrote, "Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an
end to the Great Depression -- could do some economic good." He went on to point out how rebuilding the destruction would stimulate the economy through business investment and job creation. Again, do the
smell test. If Krugman is right, wouldn't the terrorists have done us a bigger economic favor if they had destroyed buildings in other cities? Maybe we shouldn't be so harsh on these reporters and economists in
light of the fact that they didn't receive training at George Mason University's Economics Department, where there are no bad economists.
Thursday, November 18, 2004 ~ 1:12 p.m., Dan Mitchell Wrote: Advertising junk food on television before 9pm could be banned if proposals in the Government's Public Health White Paper, to be
published tomorrow, become law. ...A television advertising ban would apply to food and drink with high fat, salt or sugar content. This would
affect more than the usual suspects of burgers, confectionery, crisps and fizzy drinks. It might also include some soups, breakfast cereals and
convenience foods popular with children, such as fish fingers. ...Dr Reid, speaking on GMTV's Sunday Programme, said that the Government wanted to inform people's choices about health. "What people want in
today's world is as much support and assistance from the Government as possible to help them make the healthy choices that will give them a better quality of life," he said.
Thursday, November 18, 2004 ~ 12:41 p.m., Dan Mitchell Wrote: Ministers will also be tasked with handling the political hot potato of a potential eurotax. During a discussion on how the EU should be funded
between 2007-2013, they will consider proposals from the European Commission on the so-called "own resources", which includes "the
future introduction of a eurotax and changes to the so-called VAT call rate", according to the Dutch Presidency. Any proposals to introduce a eurotax are likely to be fiercely opposed by the UK.
Thursday, November 18, 2004 ~ 11:14 a.m., Dan Mitchell Wrote: American soldiers are risking their lives in Fallujah. No one would say that they don't deserve a special bonus for wearing America's uniform in
these embattled times. No one, that is, except many members of Congress -- Republican and Democrat. While these pols fall all over themselves to argue how much they support the troops, they back a
policy called "pay parity" -- which sends the message that the soldier risking his or her life in Iraq is just like any other government worker.
"Pay parity" dictates that federal military and civilian workers must get the same percentage increase in pay. The concept has governed in most
of the last 20 years of congressional appropriations, but the Bush administration has argued that a special raise is in order for the armed services. The administration's budget for fiscal year 2005 provides for
across-the-board pay increases of 3.5% for military employees and a smaller raise for federal civilian workers. But even with a war on, government employees' unions and many in Congress still make the
argument that soldiers serving in Iraq and bureaucrats at the IRS are equally important to the well-being of America. ...Colleen Kelley, president of the National Treasury Employees Union, says that ending
pay parity would send to federal employees the message "that their work is . . . not as valued, and not as vital as that of . . . military counterparts."
Thursday, November 18, 2004 ~ 6:30 a.m., Dan Mitchell Wrote: Japanese Prime Minister Junichiro Koizumi may be on the verge of making his first real macroeconomic policy mistake. Last week, the
Ministry of Finance Tax Advisory Council proposed a tax hike that would just push the economy back into recession. Worse, it would expose Mr. Koizumi as yet another Japanese prime minister who in the end is
nothing more than a puppet of the all-powerful Ministry of Finance. Before making such a mistake, Mr. Koizumi would do well to remember that tax hikes and recessions go hand-in-hand in Japan. Within a year of
the 1989 introduction of the consumption tax-compounded by an increasingly aggressive tightening of monetary policy-Japan found itself in its most severe recession in post-war history. In 1998, Prime Minister
Ryutaro Hashimoto failed to learn from history and foolishly pushed through another tax hike. Again, the economy responded like clockwork,
falling back into deep recession so quickly that it cost Mr. Hashimoto his job. ...Now is a chance for Mr. Koizumi to prove true statesmanship and
leadership. Rather than falling for yet another temporary quick-fix by abolishing the Obuchi tax rebates, what is needed is an all-around tax-reform proposal. This proposal should focus first and foremost on
giving incentives to entrepreneurs to create new growth opportunities. Japan's fiscal deficit problems can only ultimately by solved by vibrant
income and profit generation from Japanese corporations and workers. In contrast, a tax hike would only reduce spending power and promote
recession. By saying no to a tax hike and starting the process of true tax reform, Mr. Koizumi would prove his commitment to his original promise of creating a dynamic new Japan.
Thursday, November 18, 2004 ~ 5:20 a.m., Dan Mitchell Wrote: Contemporary Europe's troubling demographic particulars are by now well-known: Europe's birthrate is the lowest ever recorded during
peacetime for any major part of the planet, and the continent's current fertility rate reaches only two-thirds of the level necessary for long-term population replacement; Europe's population is also the world's
"grayest", with a median age of nearly forty years and nearly one in six citizens sixty-five years of age or older; and on current trajectories,
absent massive new influxes of immigrants, Europe's population is set to age still further and to enter into an indefinite decline. ...To appreciate
just how low Europe's birthrates are in comparison with America's, it is best to compare them state-by-state: that is to say, the fifty U.S. states
and the District of Columbia against the forty European states with readily available fertility data for the year 2000. Figure 3 shows that, despite regional variations, birth levels in America and Europe barely
intersect. The European continent's highest fertility level notoriously belongs to historically Muslim Albania-but Albania's fertility level in
2000 was lower than South Dakota's. France may have the highest level of childbearing among the EU-25, but in 2000 it ranked below forty U.S. states, including Washington, Wyoming, and Wisconsin. The U.S. state
with the lowest fertility-Vermont-would qualify as a relatively high-fertility European country today, ranking above nineteen of the EU-25. ...The outlines of the reform package required for capitalizing on
"healthy aging" in Europe are straightforward: a transition to self-financed retirement, an increase in labor force participation rates at older ages, a re-examination of vacation and work-year rules,
implementation of effective lifelong learning systems, the promotion of technology- driven innovation in health care, and a strengthening of the
framework for the financial markets that will intermediate new flows of personal retirement savings.[29] None of those changes is likely to be
socially painless or politically popular. But they offer the promise of viable and sustainable economic arrangements for an aging Europe. At the moment, the annual number of hours worked per capita is currently
over 40 percent higher in the United States than in Germany or France;[30] given current social arrangements and prospective demographic trends, that gap stands to widen still further in the next two
decades. Economic "convergence" between the United States and the EU simply cannot occur under such circumstances... It is not too much to
suggest that the greatest demographic challenge facing Europe today lies not in population aging, or population decline, or the many other
woes routinely mentioned in the standard litany of European "population problems," but instead in the unfinished and historic task of making loyal and productive European citizens out of all its
immigrants--including its Muslim immigrants.
Wednesday, November 17, 2004 ~ 10:30 p.m., Andrew Quinlan Wrote: An empirical analysis of the experiences of EU Member States, however, demonstrates that roughly half of the episodes of fiscal consolidation
undertaken in the past three decades have been accompanied by an acceleration in economic growth. These findings appear to be consistent with theories that identify a positive impact of budgetary consolidation
on consumer expectations of lower taxes in the future inducing them to raise their consumption plans, and/or on business expectations of higher
profitability enabling them to raise investment. Confidence factors may play a more prominent role in the future in the light of large unfunded
pension liabilities. Simulations using the QUEST model confirm that if appropriately designed, budgetary consolidation can contribute significantly to the goal of the Lisbon strategy in terms of raising output
and employment in the medium term. Budgetary consolidation has a slight contractionary effect on output in the short run, depending on the composition of the budgetary adjustment. However, budgetary
consolidation has a positive impact on output in the medium run if it takes place in the form of expenditure retrenchment rather than tax increases. Moreover, the effect of budgetary consolidation on output
could be reinforced, and even positive, in the short run if fiscal consolidation is combined with structural reform of factor and product markets...
Wednesday, November 17, 2004 ~ 9:45 p.m., Dan Mitchell Wrote: Unions and business associations clashed on Thursday (11 November) over controversial European Commission proposals to open up the
market in services to competition. ...The proposed Directive covers a considerable array of services, ranging from management consultancy services, advertising, travel agency services and healthcare. ...The
Commission believes that the Directive will go some way to completing the single market in services and freeing up its potential. But unions,
business associations and a host of other interested parties have very strong and often differing views on the proposed legislation, which were aired at a public hearing on Thursday in the European Parliament.
...There are two main bones of contention. The so-called "country of origin principle" which means that service providers are subject to the
laws of their country of origin rather than where the service is actually provided, has raised eyebrows. If implemented it would mean that a company established in Slovakia, for example, could provide services
anywhere else in the EU following Slovak laws.
Wednesday, November 17, 2004 ~ 7:00 a.m., Andrew Quinlan Wrote: ...a trip is unlikely to ease tensions with the Europeans, who already have made clear how they plan to adjust to four more years of Bush.
This adjustment will occur not because Europeans have suddenly fallen in love with the gun-toting, abortion-hating, hang-'em-high, antiterrorist,
toxic Texan. Far from it: Their disdain for everything from his syntax to his religiosity remains undiluted. ...European elites see the antipathy of
their citizens to the American president as a decided asset in their fight to forge the "ever closer union" for which they have been striving for
decades. It has long been the goal of France to create a counterweight to the American hegemon, a goal that can only be achieved by persuading other nations to sign on to a common foreign and security policy.
Germany, terrified of the foreign policies it has found attractive in the past when left to its own devices, has also favored a common European
foreign policy. ...Europe's anxiety at the increasing gap between the material gains flowing from the E.U. and the U.S. economic models cannot be overstated. The gap might be closed, of course, were the E.U.
to adopt reforms that bring them closer to the Anglo-Saxon model they so detest and fear. But it is now clear that Chirac and his "old Europe"
colleagues have no intention of implementing the economic reform agenda solemnly agreed to by all E.U. member states in Lisbon four years ago. Even Peter Mandelson, Blair's partner in bringing the Labour
party to accept many of Margaret Thatcher's reforms, and now an E.U. trade commissioner who was expected to carry the banner of reform from London to Brussels, tempers his calls for "more American-style
dynamism" with a warning that Europe should not emulate "the raw divisions" of U.S. society. As John Sunderland, chairman of Cadbury
Schweppes and president of the Confederation of British Industries, last week told the trade group's annual conference, "The snail's pace of change is making a mockery of the Lisbon agenda and the drive for
economic reform." Bush probably doesn't spend a lot of time worrying about the E.U.'s over-regulated, over-taxed economy, even though faster economic growth in Europe would increase American exports to that
region, and just might lessen the envy that underlies much of the hostility towards America.
Wednesday, November 17, 2004 ~ 6:33 a.m., Dan Mitchell Wrote: What I don't understand is why the government needs to subsidize a form of entertainment that is so obviously popular and profitable. If the local
politicians who compete to attract teams by throwing other people's money at them were honest, they'd say they do it for the prestige, for the
ego boost that comes from presiding over a city that has a Major League Baseball franchise. But that would be unseemly. So instead they insist
building a stadium is a wise use of public money because it will generate jobs and tax revenue. ...[Mayor] Williams portrays the stadium spending, to be covered largely by a new business tax, as an investment
that will yield $1.1 billion in economic benefits. To give you a sense of how realistic that projection is, it includes 360 new stadium-related jobs
"earning an annual total of $94 million" -- more than $260,000 a job. Even if we average in the salaries of the ballplayers, that seems like a
stretch. ...A more fundamental problem with the economic case for taxpayer-financed stadiums is the assumption that spending associated with a ballfield will be new spending, as opposed to spending shifted
from other parts of the city or the metropolitan area. If people who used to go to nightclubs in D.C. start going to baseball games instead, for
example, the city's economy won't be any stronger as a result. "Most studies find that new sports stadiums do not increase employment or
incomes," 80 economists said in a recent letter to Williams and the D.C. Council. "The reason appears to be that sports stadiums do not increase
overall entertainment spending but merely shift it from other entertainment venues." They said "a vast body of economic research"
indicates a new D.C. stadium "will not generate notable economic or fiscal benefits for the city."
Wednesday, November 17, 2004 ~ 5:00 a.m., Dan Mitchell Wrote: The UK Conservative Party has begun an extensive consultation into how the British tax system can be made fairer, and has unveiled a range
of options aimed at lifting the tax burden for both low and middle income earners. A consultation published by the Shadow Chancellor, Oliver Letwin, focuses strongly on low paid workers who have in recent
years been pushed into the tax net, and middle income individuals whose earnings have dragged them into paying the 40% top rate of income tax,
which becomes payable at £36,000. ..."By stealthily raising thresholds more slowly than the increase in earnings, Tony Blair has dragged 4.2 million more people into paying income tax, and 1.35 million more
people into paying top rate income tax," Mr Letwin argued, adding: "Part-time workers on the minimum wage are now paying tax, and deputy head teachers are paying top rate tax. A change of direction is
needed to help people on lower incomes and people trapped in top rate tax."
Tuesday, November 16, 2004 ~ 12:05 p.m., Dan Mitchell Wrote: ...European tax cuts have included meaningful cuts in individual income tax rates for the rich -- the most controversial element of Bush's
program. According to the OECD, 17 of 30 countries cut tax rates on the rich between 2000 and 2003... Among those countries with the largest rate reductions are the Netherlands, which reduced its marginal
tax rate on the wealthy from 60 percent to 52 percent; Luxembourg, where the rate fell from 47.15 percent to 38.95 percent; and Belgium, which dropped its rate from 60.5 percent to 53.5 percent. Germany's
rate fell from 53.8 percent to 51.17 percent, and in France it went from 61.25 percent to 56.09 percent. ...17 of 30 OECD countries cut corporate tax rates between 2000 and 2003 -- but this time not including
the United States, where the rate was unchanged at 39.4 percent (including state and local governments). The most dramatic reductions occurred in Germany, Iceland and Ireland. In Germany, the rate was cut
from 52 percent to 42.2 percent, a reduction of 23 percent. In Iceland, the rate fell from 30 percent to 18 percent -- a reduction of 40 percent.
And in Ireland, the corporate rate was lowered from 24 percent to 12.5 percent -- a 48 percent reduction. ...Although Bush's reduction in the top
rate on dividends received by individuals to 15 percent was highly controversial, the United States still has one of the highest tax rates on
dividends. Only eight countries have higher rates, with 21 having lower rates. Indeed, the average for all OECD countries is well below the rate here -- 46.4 percent versus 51.3 percent.
Tuesday, November 16, 2004 ~ 11:39 a.m., Dan Mitchell Wrote: Having suffered under tyranny for generations, the countries behind the former Iron Curtain have far more radical free market instincts than our
ever-compromised leaders. The exuberance in their new freedom is infectious. One of the ideas proving successful is the notion of a simple flat tax. The three Baltic nations followed the example of Russia
[Correction: The Baltics implemented flat taxes before Russia]. They have been followed by Slovakia, Ukraine and Serbia. The rates differ but
the idea is a jolt still. Croatia looks likely to follow next year. I was a guest of the Adriatic Institute of Public Policy and the two great experts
on the flat tax ideal, Alvin Rubushka and Dan Mitchell, were on their best evangelical form. ...we have experienced this in Britain recently. Margaret Thatcher, or more precisely her Chancellors, Howe and
Lawson, cut the higher income tax rates from 86 per cent to 40 per cent - to the Treasury's greater enrichment. Is this not flat earth economics?
It seems that low simple uniform taxes free people to busy themselves in trade. Businesses get on with business. They spend no time evading or devising schemes to duck tax. ...The case for low flat taxes seems
obvious. The real difficulty is in getting politicians to embolden their policy aims. It is not easy for those on the Left to act. They have an
atavistic belief their role is redistributive. Taxing the rich to help the poor sounds splendid. The reality is more squalid - more like "pretending
to tax the rich but really locking the poor in poverty".
Tuesday, November 16, 2004 ~ 10:19 a.m., Andrew Quinlan Wrote: The U.N.'s Oil for Food scandal continues to effloresce, with the latest news that Saddam Hussein skimmed an astounding $21.3 billion from
assorted kickbacks, surcharges and oil smuggling. That's more than double the previous estimates, according to a probe by the Senate Committee on Government Affairs that opened hearings on Oil for Food
yesterday. Congressional diggers have found that much more oil was smuggled out of Iraq from 1991 to 2003 than previously thought. They also report that Saddam pocketed some $2.1 billion more than anyone
thought by buying imported goods at inflated prices. Saddam's Iraq signed deals to import rotting food and other damaged goods as if they were top quality; the vendors then kicked back much of the difference to
the Iraqi government. Oil for Food was designed to help feed poor Iraqis who were suffering under international sanctions. Instead, Saddam was
able to exploit the program and sanctions generally to finance his regime and maintain power. Remarkably, Democratic Senator Carl Levin still
seems to think that sanctions were a success -- or at least he said so at yesterday's hearings. That's precisely the kind of self-delusion that Saddam was able to exploit at the U.N.
Tuesday, November 16, 2004 ~ 10:00 a.m., Dan Mitchell Wrote: Despite the hurdles, one can bet that serious tax reform will come back onto the agenda in Washington. The last decade of tax debates has
shown that both tax cuts and major tax reform ideas are popular with the general public. Tax cutting continues to be important to the electoral
success of the Republican Congress. Dynamics in the tax system will also raise the profile of reform. Tax complexity continues to spiral upwards
and the AMT will soon be hitting 30 million American households. Those dynamics may spur a tax revolt and demands for a major tax system overhaul. Also, the federal corporate income tax is headed for a train
wreck while other countries continue to cut their statutory rates, and investment capital becomes ever more globally mobile. The tax reform ingredient that is missing right now is a new generation of Republican
leaders to build on the efforts of Bill Archer, Dick Armey, and other reformers of the 1990s.
Tuesday, November 16, 2004 ~ 9:26 a.m., Andrew Quinlan Wrote: Mental health officials in South Florida blasted Rush Limbaugh on Monday, saying the conservative talk show host's offer of "free therapy"
for traumatized John Kerry voters has made a mockery of a valid psychological problem. ...The Boca Raton News reported last week that more than 30 distraught Kerry supporters in South Florida contacted the
non-profit AHA following their candidate's Nov. 3 concession to President Bush. AHA officials have diagnosed the disorder as Post Election Selection Trauma (PEST) and have scheduled the first of
several free group therapy sessions for just after Thanksgiving. ...Douglas Schooler, the Boca Raton trauma specialist who treated 20 people with hypnotherapy following Kerry's loss, said he believes many
people suffering from election-related symptoms are still afraid to step forward."The Republicans want Kerry voters to shut up and pretend
they're not feeling anything," Schooler said. "But many people have serious emotional pain over this election and it's unhealthy to stuff it down inside of you. Therapy is the best way."
Tuesday, November 16, 2004 ~ 8:42 a.m., Dan Mitchell Wrote: Large cost overruns are commonplace in government construction projects, procurement, and entitlement programs. Politicians and
officials routinely deceive taxpayers by low-balling cost estimates to win initial spending approval. Then, when programs go over budget and do not work as promised, politicians place the blame on particular
management blunders by the bureaucracy and private contractors. But the evidence indicates that cost overruns and program failure are not isolated errors; they are systematic and widespread in the federal
government. Federally funded projects often turn into debacles plagued by large cost overruns, as illustrated by a wide range of examples in
Table 1. For example, Boston's Central Artery project, the Big Dig, has been grossly mismanaged, as described by a recent Boston Globe investigation. The state government bailed out bungling Big Dig
contractors 3,200 times instead of demanding accountability. Contractors were essentially rewarded for delays and overruns with added cash and guaranteed profits. The project's estimated total cost
rose from $2.6 billion in 1985 to $14.6 billion today. ...Governments are wasteful users of resources because they tend to replace competition
with monopoly and market pricing with bureaucratic regulations. Also, since public officials do not risk their own personal funds, they are more
likely to support unsound schemes and be less interested in keeping programs on budget.
Monday, November 15, 2004 ~ 11:18 a.m., Andrew Quinlan Wrote: More than in any other election in the last half-century, Old Media -- The New York Times and CBS News, joined often but not always by The
Washington Post, other major newspapers, ABC News and NBC News -- was an active protagonist in this election, working hard to prevent the re-election of George W. Bush and doing what it could for John Kerry.
The problem for Old Media is that it no longer has the kind of monopoly control over political news that it enjoyed a quarter-century ago. And its
efforts to help John Kerry proved counterproductive. ...The ratings of the nightly newscasts have been on a downward trajectory since the 1980 campaign, as voters have been presented with other means of
following the news. New Media has emerged: talk radio, Fox News Channel, the proliferation of Internet weblogs, which together make up the blogosphere. The left liberalism that is the political faith of
practically all the personnel of Old Media is now being challenged by the various political faiths of New Media. Old Media no longer controls the
agenda. ...Memo to future Democratic nominees: You can no longer rely on Old Media to hush up stories that hurt your cause. Your friends in Old Media don't have a monopoly any more.
Monday, November 15, 2004 ~ 10:59 a.m., Dan Mitchell Wrote: After winning his Senate seat against former Vice President Walter F. Mondale in 2002, Coleman ...now is conducting what could be the most
explosive congressional investigation in years, probing the UN's fraudulent oil-for-food program in Iraq and Annan's obstruction of the
senatorial inquiry. Coleman said this week's hearings will show that "the scope of the rip-off" at the UN is "substantially more" than the widely
reported $10 billion to $11 billion in graft. But more than money is involved. These hearings also should expose the arrogance of the secretary general and his bureaucracy. ...he has refused to honor the
Senate committee's request for documents... "In seeing what is happening at the UN," Coleman told me, "I am more troubled today
than ever. I see a sinkhole of corruption." The United Nations and its secretary general are in a world of trouble.
Monday, November 15, 2004 ~ 9:57 a.m., Dan Mitchell Wrote: ...the post-election has turned on something that barely registered in the campaign. Yes, the president had referred to it in broad terms. But it had
never really featured in any of the debates, had been largely absent from the president's stump speech, and was barely debated in the press or the
blogosphere. The great missing issue? Tax reform. Or rather, a hugely ambitious attempt to transform the American tax system into a flat tax
paradise. Of all the ideas being batted around in Washington, it remains the smartest of the president's second term objectives. And if they care
about winning the next British election, the Tories will watch very closely. And, even better, follow suit. ...the Forbes-style flat tax on
incomes is the most attractive. The reason is simple. If you believe that markets are the most effective way to apportion wealth and investment,
the job of government is to stay as far out of the way as possible. That means not trying to micro-manage the economy with tax incentives for
this activity, tax write-offs for another form of business, and endless tax shelters for various corporate interests. This amounts to a passive form
of industrial policy - and it almost always increases inefficiency. By setting a single rate for all forms of income and consumption, you remove any extraneous intervention in the way the market operates. ...In
Washington, the entire lobbying industry, with its massive incentives to pour money into the political system in order to buy favorable treatment,
is entirely dependent on a complicated tax code. It's all but impossible to fight this system one loophole at a time. The powerful sum of individual
interests greatly outweighs the broader but less palpable common good. That's why, since the last major tax reform of 1986, the U.S. tax code has slowly become ever-more complex and ever-more corrupt. Walk
down K Street in D.C. or visit a major law and lobbying firm in downtown Washington, and you wll see the congealed wealth of all this corruption. Lunchtime in the capital city is a buzz of various lobbyists
securing new and intricate corprate exemptions in this part of the tax or regulatory code or another. ...a liberal also opposes punitive or
"progressive" taxation, because it means the government discriminates on the basis of personal success. If we get rid of different rates of
taxation, and we're all taxed at the same proportionate rate, the successful and hard-working still pay far more into the public coffers than the unsuccessful. They're just not penalized even further by a higher
rate.
Monday, November 15, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: Japan's Finance Minister Sadakazu Tanigaki indicated yesterday that the economy was now sufficiently strong enough for consideration to be
given to the rolling back of tax cuts passed under a previous administration. Tanigaki stated that the time is now right for a debate on partially rolling back or completely abolishing the income tax cuts
passed in 1999 under Prime Minister Keizo Obuchi, as economic conditions have changed since their implementation when the country
was "severely suffering." ...Japan is currently considering a package of fiscal reforms in order to address mounting social security expenditures
and government debt, although Prime Minister Koizumi has repeatedly said that he will not countenance tax increases while he is in office.
Monday, November 15, 2004 ~ 8:15 a.m., Dan Mitchell Wrote: The long wait for Italian Prime Minister Silvio Berlusconi to deliver on his income tax cut pledge has been lengthened by another year in a
concession to political allies concerned at the government's budget deficit, it emerged yesterday. ...Berlusconi first pledged to reduce income
taxes in 2001, although budgetary constraints have continued to thwart his plans to the give Italy's flagging economy a boost. ...One of the key features of the Prime Minster's plans to pare down income tax is a
reduction in the number of brackets from five to three, in the process cutting the top rate of income tax to 39% from the current rate of 45%.
Monday, November 15, 2004 ~ 7:41 a.m., Dan Mitchell Wrote: To what extent does a tax cut pay for itself? This question arises regularly for economists working at government agencies in charge of
estimating tax revenues. Traditional revenue estimation, called static scoring, assumes no feedback from taxes to national income. The other
extreme, illustrated by the renowned Laffer curve, suggests that tax cuts can generate so much economic growth that they completely (or even
more than completely) pay for themselves. Most economists are skeptical of both polar cases. They believe that taxes influence national income but doubt that the growth effects are large enough to make tax cuts
self-financing. In other words, tax cuts pay for themselves in part, and the open question is the magnitude of the effect. ... For conventional
parameter values, the model implies substantial feedback effects in the steady state. For example, suppose that the initial tax rates on capital
and labor are 25 percent, the production function is Cobb-Douglas, the capital share is one-third, and labor supply is inelastic. Then, in the steady state, the dynamic effect of a cut in capital income taxes on
government revenue is only 50 percent of the static effect. That is, one-half of a capital tax cut pays for itself. ...In all of the models considered here, the dynamic response of the economy to tax changes is
too large to be ignored. In almost all cases, tax cuts are partly self-financing. This is especially true for cuts in capital income taxes.
Sunday, November 14, 2004 ~ 2:15 p.m., Dan Mitchell Wrote: Japan's Finance Minister Sadakazu Tanigaki indicated yesterday that the economy was now sufficiently strong enough for consideration to be
given to the rolling back of tax cuts passed under a previous administration. Tanigaki stated that the time is now right for a debate on partially rolling back or completely abolishing the income tax cuts
passed in 1999 under Prime Minister Keizo Obuchi, as economic conditions have changed since their implementation when the country
was "severely suffering." ...Japan is currently considering a package of fiscal reforms in order to address mounting social security expenditures
and government debt, although Prime Minister Koizumi has repeatedly said that he will not countenance tax increases while he is in office.
Sunday, November 14, 2004 ~ 12:55 p.m., Dan Mitchell Wrote: The long wait for Italian Prime Minister Silvio Berlusconi to deliver on his income tax cut pledge has been lengthened by another year in a
concession to political allies concerned at the government's budget deficit, it emerged yesterday. ...Berlusconi first pledged to reduce income
taxes in 2001, although budgetary constraints have continued to thwart his plans to the give Italy's flagging economy a boost. ...One of the key features of the Prime Minster's plans to pare down income tax is a
reduction in the number of brackets from five to three, in the process cutting the top rate of income tax to 39% from the current rate of 45%.
Saturday, November 13, 2004 ~ 2:05 p.m., Andrew Quinlan Wrote: ...the Patriot Act needs to be reviewed and refined by Congress. Critics of the Act are not calling for full repeal. Only about a dozen of the 150
provisions need to be reformed; these, however, do pose singular threats to civil liberties. ...Reasonable critics of the expansive provisions of the
Patriot Act, on both sides of the aisle and in both Houses, have introduced legislation that would implement these modest changes. Far from gutting the Act, these would secure the important powers of the
law, but place modest limits on their use. For most of us who voted for the Act, what sealed the deal was the inclusion of provisions that would
require us to take a sober second look at the most contentious provisions in the Act by the end of 2005, before reauthorizing them. That time is
coming, and the Justice Department does not want to lose the emergency powers it won in the aftermath of 9/11. But Congress should resist its overtures, move forward on the sunsets, and enact additional Patriot
fixes if it believes them needed.
Saturday, November 13, 2004 ~ 1:20 p.m., Dan Mitchell Wrote: ...freedom of speech is granted selectively in Europe. There are limited restrictions on Muslim militants, even when they incite murder, but zero
tolerance for home-grown radicals. A case in point is Tuesday's court ruling in Belgium upholding an earlier decision that effectively banned
the anti-immigration and secessionist party Vlaams Blok from politics on the grounds that it is racist. ...One of the reasons parties with xenophobic views in Belgium and elsewhere in Europe have recently
been gaining popular support is that they often put their fingers on real problems that the political elite has willfully ignored. Vlaams Blok owes
its success not only to pandering to Belgian fears about immigration, but to its criticisms of Belgium's overburdened welfare state and oppressive
taxes, both issues that Belgium's federal system has rendered intractable. Leaving these serious pocketbook topics entirely to the fringe parties has
strengthened them. ...Europe seems to have learned the wrong lessons from its totalitarian past. "The road to hell is paved with good
intentions," as the saying goes. Limiting or suppressing free speech by one's political rivals has the flavor of the past that Europe has been trying, successfully on the whole, to live down.
Saturday, November 13, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: The French parliament, in an effort to fight what it calls the "obesity epidemic", is now taxing food producers and forbidding vending
machines in schools. ...Francis Giraud, 72, a member of the majority UMP party, may have thought he had contributed to fight against obesity when he presented, in the name of the Social Affairs commission
to which he belonged, an amendment which is now in the Public Health Law. The amendment requires that advertisements concerning drinks or
food containing "added sugar, fat, salt or artificial sweetener" aired on TV or radio must be accompanied by "a specific information of sanitary
nature". Nevertheless, advertisers may choose not to comply with this requirement - how gracious of the state -- but only if they give a
"contribution" to the National Institute of Health Prevention and Education. This contribution -- translation: this tax -- is calculated at 1.5
percent of the budget used to air advertisements. With those revenues, the Institute will then finance operations for nutritional information and
education. ...the state's intervention ignores individual responsibility. Make no mistake: no companies force people to eat their food or drinks.
And if a company tries to create a need for a product, each of us is free to say yes or no. Considering food companies as guilty is destroying individual responsibility and making people believe they are not
responsible for their own health and their own actions.
Friday, November 12, 2004 ~ 10:49 a.m., Dan Mitchell Wrote: Sen. Judd Gregg (R-N.H.) is open to changing or dropping controversial language in an appropriations bill (S. 2809) that could cut off U.S.
funding for the Organization for Economic Cooperation and Development, but only if opponents of the language can make a sufficient case for doing so, a Gregg aide told BNA Nov. 9. ..."Senator
Gregg's position has been that these OECD policies are hurting competition," the Gregg aide told BNA in an interview. "If people can
convince us otherwise, then we certainly would be willing to change it or take it out," the aide said. "But we haven't heard anything that is all that
convincing." ...The business community appears to be drawing battle lines, with a coalition of free-market groups lobbying hard for the language and several international business groups adamantly opposed
to pulling U.S. support for the OECD. The free-market groups say drastic measures may be needed to stop what they see as invasive OECD policies, while international groups say those drastic measures would
undermine the tax treaty process and the participation of U.S. business in the creation of international tax and fiscal policy. At issue are OECD's
efforts in recent years to list low-tax jurisdictions as tax havens and to convince those countries to share information on nonresident investors.
Those efforts have been attacked for years by free-market groups such as the Heritage Foundation and the Center for Freedom and Prosperity (CFP), both of which lobbied vigorously for the language to pull the
OECD funding. Dan Mitchell, a senior fellow at the Heritage Foundation, told BNA Nov. 9 this is merely the beginning of a concerted effort to stop OECD's tax harmonization program by striking at the
funds it gets from the United States. "This is the first skirmish," Mitchell said. "The real war starts next year." ...Mitchell said he does not believe
the tax treaty process would be affected by this and pointed out that "the purpose of this isn't to de-fund the OECD, it's to get the Fiscal Affairs
Committee to drop these tax policing efforts." Regardless of the outcome for the provision in the next several weeks, the fact that it was put in the
bill to begin with signals "a reservoir of ill will toward the OECD on Capitol Hill." With Congress likely to move more to the right following
the recent U.S. elections and a political climate likely to be focused on containing spending, "if I were a bureaucrat over at the OECD in Paris
right now, I'd be worried," Mitchell said. CFP Executive Director Andrew Quinlan told BNA Nov. 8 that he and the groups with whom he works are very encouraged by the provision's inclusion in the
appropriations bill. He acknowledged it is broad, but said that may be necessary to get rid of the OECD's efforts to get low-tax jurisdictions to reveal investor information.
Friday, November 12, 2004 ~ 10:05 a.m., Andrew Quinlan Wrote: Our free market supplies consumers with an ever-widening and ever-improving variety of goods and services. Health care is no exception. As a result, our lives are almost twice as long, healthier and more productive than those who lived a century ago. ...Having lived 32 years as a physician, I have seen that most of us as patients, consumers, and health care providers, do not want, need, or benefit from more government controls. Least of all, we do not want the socialized medicine that is destroying the health care system and economy of Canada and has not worked in Russia, Cuba, China or anywhere else. Thousands of desperate patients each year journey from Canada, and other countries with government run health care, to the United States. ...Independent studies have shown that the increased use of prescription drugs not only saves lives but also saves health care costs... we find that
only about 10.5 percent of our health care dollar goes for prescription drugs... medical research is expensive... A peer-reviewed Tufts study appearing in the Journal of Health Economics concluded that it costs
more than $800 million to develop a new drug and have it approved by the FDA.
Friday, November 12, 2004 ~ 9:37 a.m., Dan Mitchell Wrote: The untold story from last week's Republican victory was the ineffectiveness of the left's attacks on right-wing reform. Democrats
surprisingly did not launch a national campaign against partial privatization of Social Security. They did unlimber heavy artillery against radical changes in federal taxation but ended up shooting duds. This
failure was dramatized by Senate elections in the very red states of Oklahoma and South Carolina. Right up to Election Day, serious Democratic strategists saw an excellent chance to win in both states
because the Republican candidates were uncompromising reformers...
Friday, November 12, 2004 ~ 8:00 a.m., Dan Mitchell Wrote: According to the HLG [High Level Group Kok report] Europe has built a distinctive economic and social model that has combined productivity,
social cohesion and a growing commitment to environmental sustainability. In other words: capitalism with a human and green face. The HLG admits that there is no magic bullet that will deliver the higher
growth and jobs that Europe urgently needs. But it still believes that the Lisbon strategy, refocused on growth and employment in the way its report suggests, offers Europe a new frontier for that economic and
social model. ...will it help Europe to achieve its ambitious goals? I do not believe it will. The diagnosis is not that bad, but the remedies are
flawed. Let me substantiate my feeling by highlighting a few elements in the report. The HLG acknowledges the role of entrepreneurs.... It requires entrepreneurship to design new products and services and take
advantage of market opportunities to create value for customers. ...but Europe is not 'entrepreneur-minded' enough. It is not attractive enough
as a place in which to do business. There are too many obstacles for entrepreneurs... More generally I venture the thought that the 'distinctive
European model' or Rhineland model is not the solution but the problem. With its overgenerous welfare state, where the social safety net seem to
have turned into a social hammock, it is fundamentally at odds with economic dynamism and flexibility. In case of success, rewards are too
modest, while in case of failure penalties are not sufficiently severe. The peoples of Europe may be attached to their model because of the
protection it offers. But you can't have your cake and eat it. If Europe wants to stick to its model, it has to acquiesce in a loss of a fair amount of dynamism and flexibility.
Friday, November 12, 2004 ~ 7:15 a.m., Andrew Quinlan Wrote: This city, like every political capital, produces its own special breed of permanent residents who color its debate. They include Eurocrats who
run the bureaucracy; lobbyists, lawyers and consultants who feed at the Euro-trough; journalists and think-tankers who jawbone with them all.
The Brussels strain, however, is distinct from that of other major capitals in that its loyalty to the European "project" has often produced a
mind-numbing form of political correctness. In Washington, criticizing the government is a patriotic duty. Do it here and you're a Euroskeptic.
Reveal fraud or misuse of public funds in Washington and you may gain celebrity. Do it here and risk social and professional ostracism. ...The
Brussels' breed so rejects the Bush crowd that it fails to recognize that the only vision that can unite its own continent is a positive, free-market,
democratic agenda that is far more similar than different to that of the United States. You don't have to like George Bush to recognize European
interests. The dangers and opportunities for Europe in the next four years are mostly the same as those of the United States: How to stop Iran and others from going nuclear, how to stabilize the Mideast, how to
integrate China, how to spread economic growth and create jobs. ...One of Washington's great strengths is that for all of its in-breeding it constantly questions its own practices and is regularly shaken by
democratic recall. The most positive wind in this town is the arrival of parliamentarians, commissioners and others from Europe's 10 new countries who are bringing with them fresh ideas about debate,
democracy and trans-Atlantic ties.
Thursday, November 11, 2004 ~ 12:15 p.m., Dan Mitchell Wrote: Some politicians have vilified the idea of giving investment freedom to citizens, arguing that those citizens will be exposed to risks inherent in
the market. But this is political scaremongering. U.S. citizens already utilize IRAs, 401Ks, PCOs, Keoghs, SEPs and other investment options just fine, thank you. If some people are conservative investors or
managing for the short term, they direct their funds accordingly; if others are more inclined to take risks or looking at the long run, they make appropriate decisions. Consumers already know how to invest
their money -- why does the government feel the need to patronize them when it comes to Social Security? ...about two dozen countries have reformed their state-run retirement programs, including Chile, Sweden,
Australia, Peru, the U.K., Kazakhstan, China, Croatia and Poland. If citizens in these countries can handle individual savings accounts, especially citizens in countries without a history of financial freedom,
then U.S. citizens should be equally adept. At a time when the rest of the world is dropping the vestiges of state control, the United States should
be leading the way and not lagging behind. ...any system that taxes people when they are young and gives it back when they are old will have a negative impact on labor supply. People will simply work less.
Put another way: If people are in control of their own savings, and if their retirement is funded by savings rather than transfers, they will work more. And everyone is better off. These are the type of win-win
situations that politicians and policy makers should be falling over themselves to accomplish. ...Here's a proposal: Have three-quarters of employer and employee Social Security contributions (currently 12.4% of
wages, salaries and proprietors' income up to $87,900) put into an individual savings account. This would be deferred income with taxes paid when people receive their retirement benefits. The other
one-quarter of Social Security contributions would finance welfare and increase the labor supply, resulting in higher output and an increase in tax revenues. Reforming Social Security into a system of mandatory
individual savings accounts is not as radical as it sounds. The world is moving in this direction, and here in the U.S. our citizens have been dealing with individual accounts for many years...
Thursday, November 11, 2004 ~ 11:12 a.m., Dan Mitchell Wrote: ...there are now dozens of these vibrant organizations in former communist states - often staffed by people who have worked with the
major U.S. think tanks. The economic stagnation, coupled with the oppressive taxation and regulation in old Europe (France, Germany, Italy, Belgium, etc.), has energized a critical number of Europeans to try
to regain greater economic freedom. They, like their American and British counterparts, are using think tanks to promote change. It is most encouraging there now are enough of these groups in Europe that will
work together at what will become an annual meeting to promote free markets, limited government and freedom for people in all of Europe.
Thursday, November 11, 2004 ~ 10:21 a.m., Dan Mitchell Wrote: ...Sorry to interrupt the current White House euphoria, but someone ought to mention that the great American middle class didn't re-elect
President Bush so he could debase the currency. We offer this heretical thought amid the dollar's recent fall, as well as the conventional Beltway
and Wall Street wisdom that this decline must continue in order to reverse the awful, terrible, frightening -- pick your adjective -- U.S. current-account deficit. The press is reporting that even the Bush
Treasury now supports this view, privately cheering the greenback's fall... If anyone inside the Bush Administration is in fact peddling this line, we hope the President fires him. More than one White House term
has been damaged by currency crises (Nixon, Carter, Reagan II). And it's simply impossible to run a muscular foreign policy if the world starts to
lose confidence in your currency. If devaluation were the path to prosperity, Argentina would rule the world. ...it wouldn't hurt if everyone
relaxed about the trade deficit, since attempts to "correct" it will do more harm than the deficit itself. By accounting definition, the trade
deficit is the reverse of the U.S. capital surplus. This means that the U.S. is continuing to attract investment and goods, both of which are signals
of a healthy expansion that continues at a faster rate than most of the rest of the world. Germany may be able to exult in its trade surplus, but
its domestic growth remains anemic and its jobless rate high. Instead of hoping for a weaker dollar, U.S. officials would be better off coaxing
Europe and Japan to shake off their socialist and regulatory shackles and grow faster.
Thursday, November 11, 2004 ~ 9:45 a.m., Dan Mitchell Wrote: While Bush's top economic advisor, Hubbard was an unyielding proponent of the incentive power of lower tax rates to grow the
economy. It was Hubbard who pressed harder than anyone in the White House for a reduction in the multiple taxation of investment. This made excellent sense. The stock market and business investment were hard hit
by the recession Bush inherited. With the help of Hubbard, Vice President Cheney, and a number of economic advisors outside the administration,
lower taxes on individual income, small business, investor dividends, and capital gains were embraced by the president and signed in the tax bill of
June 2003. The results have been stellar. In a recent Wall Street Journal op-ed, Hubbard emphasized the positive results of lower marginal tax
rates on work, saving, and risk-taking, linking lower "success taxes" to entrepreneurship and innovation. Once again, his steadfast and
unyielding support of supply-side tax reform commends him strongly for the Fed job. As for the deficit problem, Hubbard agrees with Bush that the solution lies in maximizing economic growth, restraining
discretionary domestic spending, and reforming major entitlement programs. While little is known about Hubbard's monetary views, he certainly would not be tolerant of rising inflation. As a pro-market
economist, Hubbard would probably make ample use of financial- and commodity-market price signals to guide his monetary strategy.
Thursday, November 11, 2004 ~ 8:11 a.m., Dan Mitchell Wrote: The game's over and we're not even through its first half. That's the conclusion from Wim Kok and his group of advisers in their report on
the Lisbon Agenda's progress - or lack thereof. The former Dutch prime minister will give his assessment to the European Commission on November 3, but his not totally unsurprising findings have been leaking
out over the past couple of weeks. ...Kok certainly does not hold back any punches. His report claims, "What is at risk ... is nothing less than
the sustainability of the society Europe has built and to that extent, the viability of its civilisation." ...Just as the findings of Kok's report were
becoming public another member of the international political elite was revealing the conclusions of his study on the French labor market. Michel Camdessus, the former head of the International Monetary Fund,
claims that France suffers from a "work deficit"-- which largely explains why France has lagged behind the economic growth rates of the US and
the UK in the past 20 years. Camdessus also noted that France's unemployment rate has remained around the 8 percent level over the same period. This may be temporarily acceptable during the depths of
recession, but over the long term it has consigned a generation to waste their lives away. ...we will become a comfortable museum where our wealthier cousins from the US, Japan and China come for very pleasant
visits and thus enjoy some of the fruits of their vibrant economies. However, we Europeans will still suffer the consequences of sluggish economies, but be cushioned by a social system that encourages only a
small part of the population to work while the rest sit around with nothing to do. If that is the case then we truly will become nothing better than cheese eating vacation monkeys.
Thursday, November 11, 2004 ~ 7:30 a.m., Andrew Quinlan Wrote: Tax Commission Chairman Hiromitsu Ishi said fiscal 2005 tax reforms, now being debated for conclusion by early December, will revolve
around tax increases, ministry officials said Nov. 4. "It is important to depart from the past thinking of realizing an economic recovery with tax
cuts and/or public works spending and with it, generating tax revenue and seeking fiscal balance restoration," he said. Now, he said, "it is
important to gain market confidence through increased tax burdens." ...The paper called for widening the inheritance tax base, arguing that
the 50 percent tax should be reinforced to enhance the redistribution of wealth.
Wednesday, November 10, 2004 ~ 10:42 a.m., Dan Mitchell Wrote: Mr. Bush has been vague about what he's after, beyond naming a commission to study fundamental changes in the tax system. But I hope
the president and his commissioners will put a consumption tax at the top of their list. The more you look at America's underlying economic problems -- which begin with a propensity to consume more than they
produce, and save less than they need -- the more a consumption tax makes sense. The most interesting plan I've seen comes from Michael J. Graetz, a Yale Law School professor who presented his ideas last year in
an article titled "A Fresh Start for the U.S. Tax System." Mr. Graetz urges a national value-added tax similar to those adopted by 120
countries. It would be like a sales tax, except that it would be collected at each stage of production along the way to final retail sale. Mr. Graetz
calculates that a 14% VAT, which is a little less than the average European rate, would raise about $800 billion annually -- enough to abolish federal income taxes for any family making less than $100,000.
...A consumption tax of the sort proposed by Mr. Graetz would be simple and fair. Mr. Bush wants his tax reform to be revenue neutral, but over time an American VAT could add the revenues needed to balance the
budget. If Mr. Bush could pull off this sort of big, bold reform, he would deserve cheers even from the bluest of Blue America.
Wednesday, November 10, 2004 ~ 9:55 a.m., Andrew Quinlan Wrote: Different Americans have different and intensive preferences for cars, food, clothing and entertainment. For example, some Americans love
opera and hate rock and roll. Others have opposite preferences, loving rock and roll and hating opera. When's the last time you heard of rock-and-roll lovers in conflict with opera lovers? It seldom, if ever,
happens. Why? Those who love operas get what they want, and those who love rock and roll get what they want, and both can live in peace with one another. Suppose that instead of freedom in the music market,
decisions on what kind of music people could listen to were made in the political arena. It would be either opera or rock and roll. Rock and
rollers would be lined up against opera lovers. Why? It's simple. If the opera lovers win, rock and rollers would lose, and the reverse would
happen if rock and rollers won. Conflict would emerge solely because the decision was made in the political arena. The prime feature of political
decision-making is that it's a zero-sum game. One person or group's gain is of necessity another person or group's loss. As such, political
allocation of resources is conflict enhancing while market allocation is conflict reducing. The greater the number of decisions made in the political arena, the greater is the potential for conflict. ...While we
haven't been a perfect nation, there have been no cases of the mass genocide and religious wars that have plagued the globe elsewhere. The closest we've come was the American Indian/European conflict, which
pales by comparison. The reason we've been able to live in relative harmony is that for most of our history government was small. There
wasn't much pie to distribute politically. When it's the political arena that determines who gets what goodies, the most effective coalitions are
those with a proven record of being the most divisive -- those based on race, ethnicity, religion and region. ...The best thing the president and Congress can do to heal our country is to reduce the impact of
government on our lives. Doing so will not only produce a less divided country and greater economic efficiency but bear greater faith and allegiance to the vision of America held by our founders -- a country of
limited government.
Wednesday, November 10, 2004 ~ 8:31 a.m., Dan Mitchell Wrote: During a tour of the new member states of the European Union last week, a charm offensive by French Finance Minister Nicolas Sarkozy
failed to convince the governments of Central and Eastern Europe that cutting their corporate tax rates to attract investment is a bad idea. Since acceding to the European Union in May, many of the former
Eastern bloc countries have pursued an aggressive strategy of corporate tax cuts, bringing the average rate in the new member states down to around 20%. By contrast, the average corporate tax rate in the old
EU15 stands above 30%. ...Unsurprisingly, the new member states have not been won over by these ideas. According to an AFP report, Polish President Aleksander Kwasniewski labelled the proposals a sign of
"egoism" by the western leaders, and Hungarian Finance Minister Tibor Draskovics dismissed them as "completely unacceptable."
Tuesday, November 9, 2004 ~ 1:30 p.m., Dan Mitchell Wrote: Research by Eric Engen of the American Enterprise Institute and Jonathan Skinner of Dartmouth College, among others, concludes that a
large government share in the economy reduces growth through the large tax burdens it ultimately requires along with regulatory intrusions. In the presidential campaign, President Bush correctly identified the
substantial increase in the size of government that Sen. Kerry proposed. But the second Bush term faces challenges as well. In the near term,
forceful statements about ways to control discretionary spending would be useful. Over the longer run, the spending problem lies in the entitlement programs. The Congressional Budget Office projects that
over the next 40 years, Social Security and Medicare spending will increase to consume an additional 10% of GDP annually. This rise would be equivalent to a 50% increase in the federal government's share in the
economy. While Social Security reform is, rightly, a domestic policy priority for the president, a shift to personal accounts alone will not solve the program's funding gap. And the bigger problem lies in the
Medicare program, where fundamental reform of health-care markets to make consumers more cost-conscious (as in recently enacted Health Savings Accounts) is a vital first step. This discussion differs from the
"deficits" debate during the campaign. The federal budget deficit is simply the difference between two variables over which the president
and Congress have some control -- spending and taxes. Over time, choosing "deficit reduction" through spending restraint or raising taxes implies significant differences in future economic growth. The
Engen-Skinner study finds that a balanced-budget increase in government spending and taxes -- as deficit reduction through tax increases implies -- would reduce U.S. output growth markedly. Indeed,
closing the long-term entitlement funding gap through tax increases could reduce output growth by as much as one percentage point annually in the long run.
Tuesday, November 9, 2004 ~ 12:18 p.m., Dan Mitchell Wrote: On election night, news organizations were very hesitant to call a winner in Ohio, where Bush led all night and won by 136,483 votes. They were
less hesitant about calling Pennsylvania, where Kerry led all night and won by only 127,927 votes. Republicans should send a thank-you note to San Francisco's mayor, Gavin Newsom -- liberalism's George Wallace,
apostle of ``progressive'' lawlessness. He did even more than the Supreme Judicial Court of Massachusetts to energize the 11 state campaigns to proscribe same-sex marriage. All 11 measures passed, nine
with more than 60 percent of the vote. They passed in Oregon and Michigan, while those states were voting for Kerry. Ohio's measure, by increasing conservative turnout, may have given Bush the presidency.
Kentucky's may have saved Sen. Jim Bunning. ...Republicans should send a large spray of flowers to thank the British newspaper The Guardian. It
urged readers to write letters to residents of Ohio's Clark County -- the city of Springfield and environs -- urging them to defeat Bush. The
backfire from Ohio was so strong (e.g., one resident told The Guardian, ``If you want to save the world, begin with your own worthless corner of
it,''), the paper quickly canceled its intervention. In 2000 Bush lost Clark County to Al Gore. This year Clark was the only one of Ohio's 88 counties to support Bush after opposing him in 2000. In the wake of the unexpectedly emphatic Bush victory, Democrats got bad news from Hollywood. Instead of announcing plans to immigrate to
France or Canada, the leading entertainment industry activists solemnly pledged to intensify their already impassioned commitment to partisan
politics--thereby greatly complicating Democrats' efforts to shed their elitist image and reconnect with the American mainstream. ...If Democrats intend to compete for support in "fly-over country,"
generating fresh appeal to hardworking, religiously committed red-state voters who shop at Wal-Mart without guilt, they must escape their
identification as the party of Beverly Hills dilettantes and self-righteous celebrities. This means learning to live without Hollywood money, and
focusing less obsessive attention on fighting Ralph Nader (or other radical leaders) for a handful of high-profile endorsements on the marginal left.
Tuesday, November 9, 2004 ~ 11:45 a.m., Andrew Quinlan Wrote: Measure 37 dealt with the growing abuse of "regulatory takings." These have become a big favorite with environmentalists, who see them as a
backdoor way of stopping development even on private land. In Oregon, for instance, regulations have forbidden property owners from cutting
down their own trees or building on their own lots. The state government isn't obliged to pay a dime for these new, privately owned state parks.
Measure 37, which passed Tuesday with 60% of the vote, doesn't forbid authorities from regulating land use. But it does excuse owners from rules enacted after they bought their land or compensate them for
complying. The immediate effect will be to stop the most frivolous land-use regulations, since state and local governments can't afford the
millions of dollars it'd take to pay for all the land they "take" in this fashion.
Tuesday, November 9, 2004 ~ 10:10 a.m., Dan Mitchell Wrote: The Canadian Council of Chief Executives last week urged the government to usher in a fresh round of corporate tax cuts to help
insulate business against unfavorable underlying economic factors, and ensure that Canada maintains a competitive edge. "The time has come
for a second major round of tax reduction, this one with an initial focus on corporate taxation," the CCCE argued in its pre-budget submission
to the House of Commons Finance Committee. ...The Council noted that while Canada's headline corporate tax rate was slightly lower than that
of the United States, the effective tax rate faced by Canadian firms was in actual fact much higher. The executives also expressed concern that
the tax gap between Canada and its neighbour will continue to grow as a re-elected George W. Bush seeks to push through further tax cuts and regulatory reform. Citing data released by the IMD World
Competitiveness Yearbook, the Council observed that Canada has the fourth highest corporate tax rate of the 60 countries featured, yet ranks
33rd in terms of tax collected as a share of the economy. By comparison, Ireland, with a corporate tax rate of 12.5% is said to collect 25% more
revenue than Canada. "In today's world, high corporate taxes simply do not pay," argued the CCCE.
Monday, November 8, 2004 ~ 11:15 p.m., Dan Mitchell Wrote: The Irish economy will fare much better under the economic and international tax policies of George W. Bush than it would have done
under the proposed policies of the defeated Democratic candidate John Kerry, according to Ireland's Prime Minister Bertie Ahern. Whilst past Irish governments have traditionally aligned themselves with the
Democratic Party, Ahern observed after last week's closely contested US presidential election that the Bush victory puts Ireland in a stronger
position in terms of economic policy. "Looking at the policies in the manifestos of both candidates, had Senator Kerry been elected, US multinationals abroad would be subject to a new taxation, which would
have had a significant impact on the Irish economy. I would have begun immediately a process of lobbying to ensure such a tax would not have
been introduced," the Taoiseach explained. The United States continues to be a major contributor to the Irish economy, with investors attracted by its low 12.5% corporate tax rate.
Monday, November 8, 2004 ~ 9:45 p.m., Dan Mitchell Wrote: A bill raising the top rate of income tax for high-earning Poles received final approval from the country's parliament last week. The Senate's
approval of the measure means that the top income tax bracket will be increased to 50% from 40% on income over PLZ600,000 (EUR139,000, US$176,000), although the bill must be signed by President Aleksander
Kwasniewski before becoming law. Last month, the lower house, the Sejm, also approved the measure in a 325 to 67 vote.
Monday, November 8, 2004 ~ 2:30 p.m., Andrew Quinlan Wrote: [Barnier wrote:] "I am writing to you as the citizen of a country that helped your country secure its own independence." … The French love to take credit for helping American colonists break free from British rule. To be sure, France provided enormous and perhaps indispensable aid during the War of Independence. But a proper understanding of history requires us to recognize that French motives were entirely cynical. King Louis XVI certainly did not accept the principles of the Declaration of Independence. He regarded as abhorrent the notion that "all men are created equal." Lafayette was even branded a fugitive when he first traveled to America to help General Washington's cause. This unfortunate matter was cleared up only after the French formally decided to intervene in the conflict — a decision that was based wholly on the desire to hurt Britain rather than help America. During the final years of the war, France pressed the Americans to accept a peace agreement that would have kept New York City, the Carolinas, and Georgia within the British Empire. After Yorktown and during the actual peace talks, the French turned on their erstwhile allies and tried to limit American territorial gains. If the French had gotten their way at the Treaty of Paris, the United States would have been confined to a narrow strip of territory along the eastern seaboard — like a North American version of Chile. [Barnier wrote:] "France is actually among your best friends in the fight against terrorism." … Au contraire. At the very moment when
Bush began to speak of the need to fight a war on terror — "a new kind of war," he called it — Chirac expressed his reservations. "I don't know
whether we should use the word war," he said, standing beside Bush one week after September 11. Later, of course, there was the dispute over
Iraq. As Barnier says in the Journal, "Let us recognize without animosity that the war in Iraq deeply divided us." Okay, let us. But let's not pretend
that the animosity is over, at least not when France is demanding that the insurgent groups now murdering Iraqi civilians and killing American
troops receive a formal place at this month's international conference in Egypt. This was an astonishing demand whose only conceivable goal was
to bring further chaos to a country that already is suffering from more than enough of it. Think about it this way: Today's newspapers are full of stories about France cracking down on insurgents in the Ivory Coast,
where gangs of thugs are attacking French peacekeepers and white residents. France is hitting back hard, as it should. But how would Barnier feel if the United States suddenly said that these violent mobs
deserved the legitimacy of international recognition? Would he still call us one his country's best friends? Sunday, November 7, 2004 ~ 12:05 p.m., Andrew Quinlan Wrote: Governments should be "named and shamed" if they slow progress towards making the EU the "most competitive economy in the World by
2010". That is the recommendation of a long-awaited report on how to invigorate the EU's economic goals - the so-called Lisbon process. ...Under Mr Kok's proposals, league tables would be drawn up, ranking
each EU state according to its progress made in economic reform, in a bid to "name and shame" sluggish countries. "The European Commission should present to the Heads of State and Government and
the wider public annual updates on ... 14 key Lisbon indicators in the format of league tables with ranking (1-25), praising good performance
and castigating bad performance - naming, shaming and faming", says the conclusions of the 54 page report. ...Other key recommendations in
the report include: establishing a committee in the European Parliament to monitor progress on the Lisbon strategy, reshaping the EU budget to reflect its economic goals and improving communication about the
Lisbon strategy to citizens. ...not all groups welcomed the report. The Lisbon Council, a Brussels-based think tank, blasted the document as a
"lost opportunity". The President of the body, Paul Hofheinz said that the report, "with its weak conclusions and clear bias towards
well-organised special interests, is a vivid example of why we never get anywhere".
Sunday, November 7, 2004 ~ 10:15 a.m., Dan Mitchell Wrote: One advocate of an inheritance tax, Wang Minggao, a social scientist and expert on property and anti-corruption, cited economic data
revealing that 60% of the country's private deposits are in the hands of 20% of the population, with one million families said to possess assets
worth more than 1 million yuan (US$121,000). "The economic climate is such that it favours introducing inheritance taxation," he stated,
according to China Daily. Other advocates of an inheritance tax argue that most wealthy Chinese citizens are able to circumvent current income tax rules, and the levying of death duties will reduce the
incidence of tax evasion. ...However, with a per-capita GDP of $3,000, some argue that China is not yet ready for an inheritance tax, which should be considered when the nation is more prosperous. The cost of
implementing and administering the tax is also deemed by some to be prohibitive. "Rich people often have various forms of assets including
cash, deposits, real property, securities, etc. It would be costly to uncover all these assets and estimate their value accurately," observed Dai Peng,
an economist at the Institute of Finance and Taxation of Renmin University of China.
Saturday, November 6, 2004 ~ 11:00 a.m., Dan Mitchell Wrote: ...the report arrives under a blizzard of criticism from businesses, think tanks and political parties, and offers no new tools to push countries to
change. Economists say most EU countries urgently need to revamp many aspects of their economies, from their labor markets to their universities, to boost their ability to compete in a global economy where
Asia and the U.S. are showing greater dynamism. ...The report, presented yesterday to departing European Commission President Romano Prodi, assesses how much progress the EU has made in
pursuing its so-called Lisbon agenda, named after the host city of a summit in 2000 at which EU leaders declared they would make Europe the world's most competitive knowledge-based economy by 2010. Many
observers consider Europe to have moved further from that goal since then. The report, written by an international expert group led by former Dutch prime minister Wim Kok, recommends narrowing down the
voluminous Lisbon goals to a few policy areas in order to improve chances of achieving them. The report urges governments to cut taxes, extend retirement ages, simplify regulations and invest more in research
and development. ...Despite the efforts of Mr. Kok's group to reconcile business and labor viewpoints, Europe's political left already is mobilizing against what they see as the report's free-market medicine.
Socialist members of the European Parliament criticized the report for not calling explicitly for the protection of Europe's social-welfare system.
At the same time, business was dissatisfied by the report's perceived compromises. The European Chamber of Commerce said the report favored union and green interests. "We must rebalance and make the
economy the top priority for the years to come," said Christoph Leitl, the chamber's president.
Saturday, November 6, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: Berlin is to propose scrapping the national holiday on 3 October as part of a series of measures to boost the economy. According to German
media, 3 October, which commemorates German unification, will be moved to a Sunday. Finance minister Hans Eichel is hoping that an extra day of work will help promote more economic growth.
Friday, November 5, 2004 ~ 2:15 p.m., Dan Mitchell Wrote: The Republican party of Ronald Reagan, which followed a half-century of Democratic dominance in American politics, is consolidating its
power. The best advice I can give Europeans is: Live with it! President Bush is no fluke, and there's no wishing him away. The good news is that
Mr. Bush isn't devious or unpredictable. He's entirely open and obvious. A major theme of his campaign was that he does what he says. For example, in March 2001, he rejected the Kyoto Protocol on climate
change as "fatally flawed." For nearly four years, Europeans have acted as if Mr. Bush didn't believe what he said, or that they could apply
enough moral suasion to change his mind. Won't happen. A smarter policy would have been to find a new approach to mitigating the possibility of global warming -- one with a sounder scientific basis and a
lower economic cost. Bribing Russia to join Kyoto is not going to sway George Bush one inch. ...The American economy is growing roughly twice as fast as Europe's. President Bush's re-election will put more
pressure on EU leaders to consider adopt more business-friendly policies; it is evident that Bush's embrace of free, competitive markets, low taxes and light regulatory touch underpin the U.S.'s widening
comparative advantage in the biotech and pharmaceutical sectors. In fact, the greatest challenge Mr. Bush poses to the security of European leaders is not in foreign policy but in economics. The president's top
goals in the second term are to overhaul the U.S. tax and Social Security systems. If he succeeds, the gap between America's growth rate and Europe's will widen, and political pressure in Europe for free-market
reforms will grow.
Friday, November 5, 2004 ~ 1:30 p.m., Andrew Quinlan Wrote: Democrats: the party of the little guy. Republicans: the party of the wealthy. Those images of America's two major political wings have been frozen for generations. ...No more. Starting in the 1960s and '70s, whole blocs of "little guys"--ethnics, rural residents, evangelicals, cops, construction workers, homemakers, military veterans--began moving into the Republican column. And big chunks of America's rich elite--financiers, academics, heiresses, media barons, software millionaires, entertainers--drifted into the Democratic Party. The extent to which the parties have flipped positions on the little-guy/rich-guy divide is illustrated by research from the Ipsos-Reid polling firm. Comparing counties that voted strongly for Bush to those that voted strongly for Gore in the 2000 election, the study shows that in pro-Bush counties only 7 percent of voters earned at least $100,000, while 38 percent had household incomes below $30,000. In the pro-Gore counties, fully 14 percent pulled in $100,000 or more, while 29 percent earned less than $30,000. ... Migration of the rich and powerful to the Democrats has been so pronounced that Democratic nominee John Kerry has actually pulled in
much more money than sitting President George Bush this spring and summer. Kerry's monthly fundraising totals have routinely doubled or even tripled Bush's totals. And the money on the Kerry side has come
much more from rich individuals, while Bush has relied on flocks of small donors. So which is the party of the people now? The oldest fraud is the belief that the political left is the party of the poor and the downtrodden. The election results in California are only the
latest evidence to give the lie to that belief. While the state as a whole went for Kerry, 55 percent versus 44 percent for Bush, the various counties ranged from 71 percent Bush to 83 percent Kerry. The most
affluent counties were where Kerry had his strongest support. In Marin County, where the average home price is $750,000, 73 percent of the votes went for Kerry. In Alameda County, where Berkeley is located, it
was 74 percent Kerry. San Francisco, with the highest rents of any major city in the country, gave 83 percent of its votes to Kerry. ...This pattern is not confined to California and it is not new. There were
limousine liberals before there were limousines. The same pattern applies when you go even further left on the political spectrum, to socialists and
communists. The British Labor Party's leader in the heyday of its socialist zealotry was Clement Attlee, who grew up in a large home with servants -- and this was not the only home his family owned. Meanwhile,
Margaret Thatcher's family ran a grocery store and lived upstairs over it.
Friday, November 5, 2004 ~ 11:15 a.m., Dan Mitchell Wrote: The evidence is rolling in, and it is happy indeed if you are a shareholder, a taxpayer or even a politician looking to increase federal tax revenue.
The latest proof arrives in data compiled by Stephen Moore and Phil Kerpen for the Cato Institute. The authors compared dividend payouts for all S&P 500 companies before and after the tax cut, and not
surprisingly found that the lower rate on dividends led to ... more dividends. ...This Cato study reinforces data compiled in June from the National Bureau of Economic Research. Economists Emmanuel Saez and
Raj Chetty compared dividend payments from 1980 through the first quarter of 2004 and found "a sharp and widespread surge in dividend
distributions following the tax cut, along several dimensions." Not only did a larger proportion of public companies increase their payout in
2003, when the lower tax rate was first signaled, but 150 firms began paying dividends for the first time after the tax cut passed. "The surge in
regular dividend payments after the 2003 reform is unprecedented in recent years," the NBER authors write. All of which suggests a couple of
policy lessons. One is that this is precisely what supporters of the lower dividend rate predicted would happen. When you tax something less, you
get more of it: This is the most basic of supply-side lessons. ...It's too early to know for sure, but we'll go out on a limb and predict that 2004
will also show an increase in federal tax revenues from dividend income, despite the lower tax rate. Fifteen percent of something is better than
38.6% of nothing. Especially if the corporate alternative was buying back shares, these higher dividend payouts should produce more overall tax revenue for the federal government.
Friday, November 5, 2004 ~ 10:30 a.m., Andrew Quinlan Wrote: Whether you're black, white or polka dot, in order to take advantage of opportunities, you must be prepared. A large part of that preparation is
to get a decent K-12 education. In order for children to do well in school, there are some minimum requirements that must be met. Someone must
make them do their homework, see to it that they get a good night's rest, fix a breakfast, and make sure they get to school on time and obey
school authorities. This is not rocket science, but here's my question. Can those requirements be satisfied by a president, congressman or mayor? If
those requirements aren't met, there's little hope that a child will get the academic preparation necessary to take advantage of opportunities.
Spending more money on education cannot replace poor parenting. If it could, black academic achievement would be much higher than it is.
Friday, November 5, 2004 ~ 9:10 a.m., Dan Mitchell Wrote: The Hungarian parliament on Tuesday approved a motion tabled by a junior partner in the governmental coalition that will prevent the
reintroduction of a capital gains tax. In a bid to reconnect with its core working class vote, the ruling Socialist Party had announced earlier in
the year that consideration was being given to the reintroduction of the 25% capital gains tax, abolished in 2003. However, the proposal was widely condemned by the investment community, the Budapest Stock
Exchange and the government's coalition partner, the Free Democrats which submitted the motion. Commenting on the parliamentary vote, Finance Ministry spokesman Ferenc Pichler stated: "This means there
will not be a capital gains tax."
Friday, November 5, 2004 ~ 7:46 a.m., Dan Mitchell Wrote: German finance minister Hans Eichel admitted yesterday that the government has been disappointed by the lacklustre response to the
country's tax amnesty on undeclared foreign assets. The scheme, which Eichel hoped would bring in some EUR5 billion in tax revenues and help
plug the country's budget deficit, has yielded a relatively minor EUR378 million since its commencement on 1st January. Speaking at a tax
conference yesterday, Eichel conceded that these results are "far behind expectations", although warning that foreign account holders would not
get a second "bridge to tax honesty", as the programme has been dubbed. Under the terms of the amnesty, which some have criticised as
too harsh to tempt large numbers of disclosures, individuals pay a 25% tax on 60% on the secretly held foreign assets they declare. However, from 31st December 2004 to the amnesty scheme's end on 31st March
2005, the tax penalty rises to 35%.
Thursday, November 4, 2004 ~ 10:12 p.m., Dan Mitchell Wrote: Despite the French government's efforts to cut income tax since winning power in 2002, increases in local taxation and social levies have meant
that the tax burden on French households has actually risen over the last three years, economists have calculated. The politically independent group of economists known as CEPAP, drawn from the banking
industry, academia and the public sector, has concluded that the net tax burden on the nation's households has increased on aggregate by EUR1.5 billion, based on a study of budget bills from 2002 to 2005.
Whilst income tax on households has fallen by EUR5.9 billion as the government attempted to carry out President Chirac's 2002 election pledge to cut income tax by a total of 30% in five years, the benefit has
been more than cancelled out by social levies which have increased by EUR5.7 billion, according to CAPAP. Increases in other taxes brought the net figure to a EUR1.5 billion increase in tax.
Thursday, November 4, 2004 ~ 12:15 p.m., Dan Mitchell Wrote: Disgruntled Democrats seeking a safe Canadian haven after President Bush won Tuesday's election should not pack their bags just yet.
Canadian officials made clear on Wednesday that any U.S. citizens so fed up with Bush that they want to make a fresh start up north would have to stand in line like any other would-be immigrants -- a wait that
can take up to a year. ...There are anywhere from 600,000 to a million Americans living in Canada, a country that leans more to the left than
the United States and has traditionally favored the Democrats over the Republicans. But recent statistics show a gradual decline in U.S. citizens coming to work in Canada, which has a creaking publicly funded
healthcare system and relatively high levels of personal taxation. ...Official statistics show the number of U.S. workers entering Canada dropped to 15,789 in 2002 from 21,627 in 2000. Early indicators on
Wednesday showed little sign of this changing.
Thursday, November 4, 2004 ~ 10:34 a.m., Andrew Quinlan Wrote: Tax changes approved by Mexico's lower house of Congress reduce the corporate income tax rate from its current rate of 33 percent to 30
percent in 2005, 29 percent in 2006, and 28 percent in 2007.
Thursday, November 4, 2004 ~ 8:55 a.m., Dan Mitchell Wrote: An opinion released last week by an advocate general at the European Court of Justice (ECJ) is expected to have favourable implications for
EU taxpayers, allowing them to 'shop around' for the most favourable tax deals. Commenting on the case of a German taxpayer who had asked to be taxed in the Netherlands as a Dutch taxpayer, referring to a
tax treaty between the Netherlands and Belgium which entitles Belgian non-resident taxpayers to the same tax reductions as Dutch residents, the ECJ ruled that individuals and firms can examine an European
country's international tax arrangements and demand to be treated in line with the most favourable.
Wednesday, November 3, 2004 ~ 10:30 a.m., Dan Mitchell Wrote:
Wednesday, November 3, 2004 ~ 10:28 a.m., Dan Mitchell Wrote:
Wednesday, November 3, 2004 ~ 10:20 a.m., Dan Mitchell Wrote: A ballot measure to raise the sales tax in Los Angeles County to put 5,000 more police officers and sheriff's deputies on the streets fell short
Tuesday... The county's top law enforcement officers, Sheriff Lee Baca and LAPD Chief William J. Bratton, acknowledged late Tuesday night that Measure A appeared headed for defeat. ...In their campaign for the
sales tax increase, Baca and Bratton sought to persuade voters that, although the crime rate had fallen sharply from its peak in 1991, there
was still too much crime in Los Angeles County and still too few police officers to combat it. ...Baca and Bratton had raised more than $2.8 million for the campaign, with major contributions coming from the
union that represents Los Angeles police officers, companies that contract with the sheriff's or police departments and wealthy local businessmen. To reach voters, they relied on speeches, media interviews
and a television ad that played to the public's fear of crime. ...On the campaign trail, the county's top law enforcement officers insisted the
sales tax increase was an investment, not a cost. "How much is too much to pay for security, for safety, and for peace of mind?" Baca asked.
There was no organized campaign against the measure. Instead of putting a tax increase on the ballot, Supervisor Mike Antonovich said supervisors should make public safety their highest budget priority. The
Howard Jarvis Taxpayers Assn. complained that higher taxes would wind up as pay raises and pensions for officers. Voters Tuesday rejected a penny-on-the-dollar sales-tax increase to raise money for education, turning down a well-financed appeal for greater
investment in the state's young people. With 30 percent of precincts reporting, Initiative 884 was opposed by 798,945 voters and supported
by 454,140 - a margin of 64 percent to 36 percent. "With the current high sales tax that we have, it was a tough leap for voters to make," said
Charles Hasse, president of the Washington Education Association, the statewide teachers union that was a strong supporter of Initiative 884. ...Opponents - outspent 60-to-one - were wary of the tax bite and
dubious about the benefits, fearing the initiative would simply pump more money into faltering programs. "We're just elated that our hard
work paid off," said spokeswoman Jamie Daniels for the League of Freedom Voters.
Tuesday, November 2, 2004 ~ 12:00 p.m., Dan Mitchell Wrote: Kerry will "win" the White House. I use quotation marks because I suspect that voter fraud in states such as Florida, Ohio, Wisconsin, and Minnesota may determine the outcome. At best, I suspect the President will capture 266 electoral votes, which is four shy of the 270 needed for victory. Whether this prediction is accurate, a couple of observations are warranted. First, if Bush loses because Kerry wins Ohio, the state's Republican Party will deserve much of the blame. With the exception of Secretary of State Ken Blackwell, Ohio Republicans have been avid supporters of higher taxes and bigger government. These policies have hurt Ohio's competitiveness and caused above-average unemployment - and presumably made many voters more likely to support Kerry. Second, the Bush Administration has shot itself in the foot on many occasions by allowing far too much federal spending and senseless government intervention. Steel tariffs, farm subsidies, a new Medicare entitlement, and wasteful education spending all have undermined the US economy. Administration officials privately admit these policies were misguided, but said they were being adopted to ensure Bush's re-election. It is possible Bush will win, of course, but it is quite clear that these policies were a big mistake - both politically and economically. Even though he gave them what they wanted, left-wing voters who want to bury their snouts in the public trough are not voting for Bush. Meanwhile, quite a few conservatives and libertarians have told me that they are not voting for the President because of these egregious policy mistakes. Shifting to the legislative branch, Republicans will win at least two additional seats in the Senate. This won't compensate for the loss of the White House, but it will help ensure that a putative President Kerry will have a hard time if he tries to raise tax rates. Republicans will retain control of the House of Representatives, thanks in large part to Majority Leader Tom DeLay, who led an effort to re-draw the lines of Texas House seats. By replacing a Democratic gerrymander with a Republican gerrymander, Congressman DeLay probably shifted five seats to the GOP - which will offset the handful of losses that Republicans may suffer in the other 49 states.
Tuesday, November 2, 2004 ~ 11:07 a.m., Dan Mitchell Wrote: Tax-reform advocates, and we count ourselves among them, might want to pay attention to what happened this year in the South Carolina Senate
race. The debate there is flashing yellow, and maybe red, about the political dangers of supporting a national sales tax. Only a month ago, GOP Representative Jim DeMint was leading his competitor, State
Education Superintendent Inez Tenenbaum, by double-digits and looked like a sure winner. But that was before the Tenenbaum campaign began shooting at Mr. DeMint's support for tax reform, in particular a bill to
create a national sales tax. Democrats have been attacking on the issue ever since, and Mr. DeMint was knocked into a dead heat in the GOP-leaning state ...Ms. Tenenbaum focused her ad dollars to portray
Mr. DeMint's proposal as a big tax hike. The Democratic Senatorial Campaign Committee added accelerant with an ad featuring South Carolinians worrying about how they'd ever afford a "23% sales tax" on
medicine, groceries and homes -- all of it "on top of the 5% sales tax" that already exists. In fact, Democrats used the sales tax issue around
the country. In a new district in Texas, where Republican Arlene Wohlgemuth is giving incumbent Chet Edwards a run for his money, Democrats accused her of supporting a national sales tax "on top of the
state sales tax." In Kansas City, GOP House challenger Kris Kobach was slammed for wanting to "eliminate the home mortgage deduction"
and "add a new sales tax to almost everything you buy." And in Colorado, Senate candidate Pete Coors was hit for saying "he'd consider
a national sales tax that could be up to 30% on what we buy, raising taxes on virtually all Coloradoans." ...Our point isn't that politicians
should abandon tax reform -- far from it. Pitched and defended properly, it remains a potent issue. But reformers have to be aware of how skeptical voters have become about political promises, and so when
voters hear "national sales tax," their instinct isn't to believe that this will replace the income tax but that they will end up with both. ...One
lesson is that anyone proposing a national sales tax had better start by also proposing to abolish the 16th Amendment to the Constitution that allowed the creation of the income tax.
Tuesday, November 2, 2004 ~ 10:19 a.m., Andrew Quinlan Wrote: Campaign spending is skyrocketing. According to Larry Noble of the Center for Responsive Politics, the 2004 presidential and congressional
campaigns will collectively cost about $3.9 billion, a 30 percent increase over 2000. Noble attributes that spending to "the increase in giving by
individuals to candidates and parties." But his reasoning confuses the symptom with the disease and reflects the conventional lack of wisdom on campaign spending. The most important factor driving campaign
spending upward isn't the increase in individual campaign donations permitted by the McCain-Feingold campaign finance reform legislation. Rather, the most important factor is bigger government. The growth of
government spending fosters the growth in campaign spending. Taxes and regulations on society have increased the ambit of government at all levels. As scholarly studies have shown, increasing government activity
leads to more efforts to influence political decisions, including increased spending on campaigns. As government does and spends more, individuals try to influence government, both to advance their causes
and to protect themselves from abuse. ...So is it any wonder that several billion dollars are spent lobbying politicians during each election cycle?
The desire to gain benefits or avoid costs from regulation pushes campaign contributions upward. There is solid empirical evidence that expanding government results in increases in campaign spending.
Economist John Lott Jr. found that 87 percent of the rise in federal campaign spending between 1976 and 1994 was attributable to the $1,101 per-capita rise (in real terms) in federal government spending
that occurred over that time. The recent correlation between government spending and campaign spending is even stronger. The 30 percent increase in campaign spending since 2000 closely corresponds to
the 31 percent increase in federal government spending during the past four years. ...We will only reduce the amount of money flowing within the
tributaries of our political system by reducing the incentive for private interests to directly and indirectly support candidates and parties.
Therefore, the only plausible solution is to limit the size of government. Anything else merely treats the symptom without addressing the underlying disease of the body politic.
Tuesday, November 2, 2004 ~ 9:30 a.m., Dan Mitchell Wrote: Recent developments in Japan, Russia, and Canada suggest the international Kyoto Protocol is doomed to failure ... with or without U.S.
participation. ...Japan will have a difficult time meeting its commitments under the Kyoto Protocol. As the Japanese newspaper Yomiuri Shimbun
reported on May 17, "According to an estimate by the Economy, Trade and Industry Ministry, the amount of carbon dioxide emissions produced
as a result of Japan's consumption of energy in fiscal 2010 will increase by 5 percent over fiscal 1990 levels, despite anticipated progress in the
nation's campaign against global warming." ...The Japanese government reported in May 2004 that greenhouse gas emissions for fiscal 2002 were
7.3 percent higher than the 1990 level. Environment Minister Yuriko Koike said the Japanese government will now have to "come up with
very drastic measures" in order to meet Japan's Kyoto Protocol target of cutting emissions to 6 percent below 1990 levels by 2008-12. ...Canada
could be the next country to put national interest above rhetoric in repudiating the Kyoto Protocol. The leader of the Conservative Party, Stephen Harper, told the Canadian press on June 9 that he would scrap
implementation of the Kyoto procedures and instead introduce a bill aimed at reducing air pollution by 2010. Harper said, "Kyoto is never going to be passed, and I think we'd be better to spend our time on
realistic pollution control measures."
Tuesday, November 2, 2004 ~ 8:30 a.m., Dan Mitchell Wrote: A key positive has been the 2003 tax relief package passed by Congress and signed into law by President Bush. That measure took the reductions
in personal income tax rates passed in 2001 but due to be phased in over multiple years and fully accelerated them into 2003. Capital gains and
dividend tax rates were reduced. Small business expensing levels got a major boost. For good measure, under the 2001 law, the death tax is being phased out. What difference does any of this make? Well,
incentives for working, investing and entrepreneurship were enhanced, and these are critical to economic growth. In turn, we have seen stepped-up economic growth over the past six quarters, despite a
dramatic run-up in oil prices and continued uncertainty regarding war and terror.
Tuesday, November 2, 2004 ~ 7:47 a.m., Dan Mitchell Wrote: The flap over the U.S. Department of Education consigning 300,000 copies of "Helping Your Child to Learn History" to the trash bin is
evidence anew that the federal government should have no role in education. Illiteracy and low scores in public schools are a national scandal, but it's hard to see how federal spending improves anything. So
what do we get for all this taxpayers' money? A case in point is the teaching of history. "Helping Your Child Learn History" was a 73-page
booklet published by the Department of Education to give advice to parents of preschool through fifth-grade children. The booklet gratuitously included several favorable references to the infamous
"National Standards for United States History," even obliquely suggesting that President Bush supports those standards. ...The 271-page
result, called "National Standards for United States History," turned out to be so faulty as well as so anti-American that the U.S. Senate
denounced it by a vote of 99-to-1. Lynne Cheney, who was National Endowment for the Humanities chairwoman when the grant was given, turned into a vigorous opponent, denouncing the volume as "politicized
history," which it surely was. "National Standards" was not a narrative of past events, but was left-wing revisionism and political correctness.
Almost every event in U.S. history was described as though it had race or gender motives and effects, and all ethnic groups except white males were portrayed as oppressed and mistreated. ...students were told to
study the influence of MTV, Madonna, Murphy Brown, and Roseanne, and to read Ms. Magazine and the writings of Betty Friedan and Margaret Sanger. The 1848 feminist Declaration at Seneca Falls, N.Y.,
was mentioned six times, putting it on a par with the Declaration of Independence and making it more important than the U.S. Constitution and the Gettysburg Address. The late American Federation of Teachers
Chairman Albert Shanker said that "History Standards" was the first time a government tried to teach children to "feel negative about their own country."
Monday, November 1, 2004 ~ 10:15 p.m., Andrew Quinlan Wrote: Renate Künast, Germany's consumer protection minister, wants to save a generation of Germans from obesity-related illness. ...Künast wants
mandatory physical education and regimented school diet programs. Her plan to micromanage children's meals would even restrict the advertising
of snacks and sweets on TV shows that cater to young audiences. In her world, only the government can save ...Critics have obviously made similar conclusions from thinking Künast's half-baked strategy to slim
German youth through to its conclusion. Drawing comparisons to Nazi and Communist youth programs, Hans-Michael Goldmann of the Free Democratic Party (FDP) says this: "The whole thing raises an eerie
specter, especially talk about mandatory PE and intimidating manufacturers into 'doing the right thing'. It frightens me." Goldmann should be frightened. Food can be obtained from anywhere, and only the
one meal eaten at school could possibly be controlled. Bratwurst stands abound everywhere that serve up nothing but French fries and pork products. How will these calories be controlled? Would Künast have the
gall to propose a würst tax?
Monday, November 1, 2004 ~ 9:47 p.m., Dan Mitchell Wrote: Social security system reform is essential in Europe. The continent's population is aging far faster than the US, and immigration is seen here
with general contempt. Getting more immigrants into the labor market is not a politically feasible option for many leaders around the old continent. More important, this would just delay, not solve, the problem
-- and perhaps would make it worse as time passes. ...The vision Europe needs is Jose Piñera's. Dr. Piñera was minister in Chile in the early 1980s. At that time, he pursued an innovative pension reform that
transformed Chilean workers into "workers-capitalists". This is a metaphor Piñera likes, and for good reasons. ...In Chile, after Piñera's
reform, a worker's money is spent in a Personal Savings Account, which may be controlled directly by the worker himself. He may decide when to retire, and his pension will depend upon how much he paid during his
working life. If a worker finds the amount of the pension suitable, she just has to stop working; otherwise, she may work until a reasonable amount is reached. The pension revolution resulted in a spectacular
change in the country's savings rate, which rose from less then 10 percent in 1986 to almost 29 percent in 1996. Workers' PSAs, on average, have given a 12 percent interest rate every year, and pensions
amount to about 80 percent of the average stipend. ...Europe's current pay-as-you-go systems are unjust, impoverish people, and leave them worse off. Citizens are forced to pay more, and get low pensions. With a
Piñerian revolution, workers will no longer be a social class that the state may exploit both economically and ideologically. They will be true
capitalists who master their own future. This is precisely why European political elites want to keep them ignorant about the benefits they lose year after year.
Monday, November 1, 2004 ~ 11:12 a.m., Dan Mitchell Wrote: An Oct. 27 Kerry fact sheet boasts, "John Kerry will eliminate all the rules that allow companies to 'defer' paying taxes until they bring the
profits back to the United States. John Kerry will use the savings to cut the corporate tax rate by 5 percent - providing a tax cut for 99 percent
of taxpaying corporations." The rules in question, enacted under President Kennedy, were designed to give U.S. firms a chance of competing in foreign markets. Most major economies, unlike the United
States, don't try levying taxes on profits earned in other countries. If a French or German company sets up a branch in the unlikely tax haven
of Sweden, they only pay Sweden's 28 percent tax on profits. Under the Kerry-Edwards plan, a U.S. company in Sweden would pay that 28 percent plus another 5.25 percent to the U.S. Treasury regardless of
whether they reinvest that money in the local business (essential to any ongoing enterprise) or return it to the U.S. parent. Ironically, they call
this "part of the overall Kerry-Edwards plan to regain America's competitive edge." Such a huge increase in taxes on U.S. companies abroad would be a marvelous gift to French and German rivals. Many
U.S. corporations now operating abroad would be compelled to recharter and move their headquarters to some country less hostile to international business. Others could be easily taken over by foreign
firms, which face no such two-country taxes on one-country income. This may be the Kerry-Edwards secret plan to get France and Germany to like us more.
Monday, November 1, 2004 ~ 10:45 a.m., Dan Mitchell Wrote: This column has expressed abundant skepticism about the grandiosity of George W. Bush's foreign policy. And about his passivity about spending
(he has vetoed nothing), his enlargement of the welfare state (the prescription drug entitlement), his expansion of inappropriate federal responsibilities (concerning education from kindergarten through
12th-grade, through the No Child Left Behind Act) and his complicity in vandalizing the Constitution (he signed the McCain-Feingold bill, which rations political speech). Still, this column prefers Bush. As a registered Republican and practicing libertarian, Kerry was not my cup of tea. But would I actually choke on what he was pouring? After all,
much of President Bush's domestic record was hard to swallow. With his veto pen still in mothballs, Bush has proposed or endorsed 8.2-percent
average annual increases in non-security-related domestic spending. This outpaces even Lyndon Johnson, according to Club for Growth calculations. Could Kerry top that? Bush shocked free marketeers with
8-30 percent steel tariffs. Pakistan, a war-on-terror ally, still faces textile quotas, while last November brought barriers against Chinese bras.
Could Kerry out-protect Bush? Bush signed a Medicare drug benefit covering all seniors, regardless of income, saddling future generations with a new entitlement costing at least $534 billion through 2013 alone.
Could Kerry accelerate government any more quickly? Yes, yes, and yes. Kerry proposes $2.2 trillion in fresh spending, including health coverage
for "every child" - even Sarah Jessica Parker's. His populist rhetoric on outsourcing justifiably spooks free traders. ...Kerry and Bush differ
dramatically on taxes. Kerry voted 98 times to raise taxes, and promises to restore Clinton's top two brackets. Under Kerry, some Americans with
incomes as low as $89,237 can expect tax hikes. Bush has signed $1.9 trillion in tax relief and envisions major second-term tax simplification. Bush's approval of vouchers for Washington, D.C.'s beleaguered
government-school students and his advocacy of Social Security choice signal key reforms by 2008. ...On balance, Bush. It's not so easy to tell who's the liberal and who's the conservative anymore. You want a candidate who pumps unprecedented amounts of
money into agricultural subsidies, uses tariffs to protect some American industries and adds a whole new entitlement to Medicare? That would be
the, er, Republican, George W. Bush. You want a future President who will be hard nosed about committing U.S. troops abroad, wants to balance every new spending item with a tax hike or a spending cut
elsewhere and backs states' rights on social issues? Then go ahead and vote for the, er, Democrat, John Kerry. You think there's too little federal control over education? Vote Bush. Want to expand health-care
coverage primarily through the private sector? Vote Kerry. Confused yet? You're not the only one. For conservatives there's plenty to worry about in Bush's record. By any measure, the government is bigger, more
powerful and more intrusive than when he found it. Domestic spending has gone up at a greater rate than under any other President since Lyndon Johnson. The President hasn't found a single spending bill he
wanted to veto. And he cannot even blame Congress. His own party controls all of it. In foreign policy, conservatives have long tended to be realists, acting only in response to hard-faced national interest,
exercising prudence and caution, only reluctantly intervening in other countries' affairs. That's the kind of conservative Bush campaigned as in
2000, lambasting "nation building" in the debates and calling for fewer troops than Al Gore did.
Monday, November 1, 2004 ~ 10:00 a.m., Dan Mitchell Wrote: Voters will consider 163 initiatives and referendums in 34 states on Election Day. We haven't the space, and assume you haven't the time, to
consider them all, so here's a glimpse at some of the more consequential measures. ...Tort Reform: The medical liability reform initiatives on the
ballot in no fewer that four states -- Wyoming, Oregon, Nevada and Florida -- could be a sign that more voters are starting to connect ambulance chasers and lottery lawsuits with rising health care costs.
Measures in Wyoming and Oregon would cap non-economic damages in malpractice cases. The Nevada measure would limit contingency fees and mandate more transparency in contingency fee arrangements. It's
the Florida initiative, however, that seems to have the trial bar most worried (as measured by the millions that personal injury lawyers have
spent opposing it). Amendment 3 not only puts constitutional limits on the amount of contingency fees that lawyers could charge. It also guarantees that the injured victims, not the lawyers, get the lion's share
of any award. Imagine that. In California, Proposition 64 would change existing law to allow only government lawyers and people who have suffered an actual injury or loss to sue proprietors over unfair business
practices. Governor Arnold Schwarzenegger, who's campaigning for the measure, says it "will end the legal practice of shakedown lawsuits, in
which private lawyers file suits without any client or any evidence of harm. This turns lawyers into bounty hunters, stalking innocent small
businesses that create jobs and opportunity in California." Taxes: More than a third of this year's initiatives are in some manner related to taxes
and state budgets. Voters in Montana, Oklahoma and Colorado will decide whether to hike tobacco taxes. An initiative in Washington state would raise the sales tax by a penny and allow a new form of gambling --
"electronic scratch ticket machines." In Maine, where property-tax assessments have risen by more than 12.5% since 2002, voters will
decide whether to put some caps in place and limit future tax increases. In many cases, tax proponents are promising that the new revenue would
be dedicated to health care and schools. They're betting voters will ignore the fact that budget processes ultimately make this money fungible, and that lawmakers need checks on spending, not new revenue
streams. We hope they've underestimated the voters. Education: In Washington state, where half of all black and Latino students don't graduate from high school, the teachers unions continue their assault on
education reform. Last spring, lawmakers passed one of the mildest charter school bills in the nation. It would permit just 45 charters to
open (in a state with more than 2,200 traditional public schools) over the next six years and allow only the state's absolute worst schools to be
converted into charters. Fearful that an underprivileged child or two might flee a dreadful learning environment for an upstart charter, defenders of the public school monopoly wasted no time collecting
enough signatures and money for a ballot initiative (Referendum 55) to reverse the law.
Monday, November 1, 2004 ~ 8:16 a.m., Andrew Quinlan Wrote: EU policy makers should consider jump-starting this process by borrowing a page from the American regulator's playbook. We refer to
the common-sense approach the United States uses for regulating the private sector. Increasingly, federal and state governments have stopped
regulating prices and rights to enter an industry where there is little or no evidence of monopoly. Consumers have reaped tens of billions of
dollars of savings in the process....the EU and its member states could benefit from a re-examination of its precautionary principle, which in
essence says "it's better to be safe than sorry" when deciding whether to allow a new drug, genetically modified food, or a whole host of other
products, to be marketed. The problem with "better safe than sorry" is that it is not a practical guide to decision-making, except in its extreme
form, which would be to ban anything that entails a risk of harm. By that logic, we'd never have electricity, the automobile, the Internet, or
countless other inventions that allow our modern society to function (but each of which has risks). ...even in the case of terrorism and other hard
cases, societies cannot afford to seek totally risk-free environments. Hard choices must be made. The precautionary principle does not help
one do so in a nonarbitrary way. Balancing costs against benefits -- even though sometimes difficult and fraught with uncertainties -- at least
offers a principled approach for making these tough decisions. We do so in our every day lives; we should ask our political leaders to do no less.
Monday, November 1, 2004 ~ 7:30 a.m., Dan Mitchell Wrote: Because the assets of Mr Green's Arcadia Group are held outside the UK and controlled by his wife, a non-UK resident, Mr Green could save as
much as £115m in tax on his £460m dividend from part of his British retail empire. His family interests also control Bhs. Mr Green's Arcadia business is owned by Taveta Investments, which is in turn owned by
Taveta Limited, a Jersey-based company controlled by the Green family. This company is reported to be in the hands of his wife, Tina, who lives
with the couple's two children in Monaco. Although Mr Green will have paid corporation tax on the earnings his companies made in the UK, a
dividend paid to Taveta in Jersey would not incur a tax charge. If it was paid to a UK resident, it would be slapped with a 25 per cent bill. Lakshmi Mittal, the British-based Indian-born steel magnate who
became the UK's wealthiest man this week, is also reported to be a "non-domicile" resident in the UK. This means he claims another country as his true home and pays no tax in the UK on earnings made
elsewhere in the world. The holding company for most of his assets is in the Dutch Antilles, and he too could escape a tax bill of £275m on the £1.1bn dividend he revealed this week. The list of suspected
non-domiciles includes the curry entrepreneur Sir Gulam Noon, the Russian billionaire Roman Abramovich, a raft of Greek shipping millionaires living in London and a number of foreign footballers playing
in the Premier League. The Government estimates that some 65,000 people in Britain are non-domiciled, and 16,000 of them declared foreign earnings of £800m in 2002 on which they paid no tax. ...Jim Cousins, a
Labour MP, said tax havens should be shut down so that wealthy individuals could not use private UK companies to abscond their tax responsibilities. But opponents to change argue that encouraging
wealthy individuals to live and do business in the UK is a boost to the economy. Mr Warburton said: "You can argue that the UK economy has
benefited from these rules, because of the money they spend here and the jobs they create. They may leave if the rules were changed."
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