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The MARKET CENTER is a platform for periodic observations about economic policy, philsophy, government, and the political process. Some of the commentary will relate to tax competition issues, but this site is designed to allow a wide range of topics to be analyzed. Readers are invited to submit questions, though we cannot promise public responses to every query. Readers also have an opportunity to sign up to receive postings via email.
 

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

Observations and insights on the global fight
for economic freedom and prosperity

CF&P's Market Center Blog Archives
January 2005

 

Monday, January 31, 2005 ~ 10:47 a.m., Andrew Quinlan Wrote:
UN urges repeal of Bush tax cuts. If nothing else, the United Nations knows how to bite the hand that feeds it. This wasteful and corrupt bureaucracy takes more than $1 billion of money from US taxpayers every year, yet it goes out of its way to undermine America. The latest example comes from the UN's annual "World Economic Situation and Prospects," a report that calls for higher taxes in America. The UN's analysis is grossly inaccurate (if the UN's economic theorizing was correct, places like France and Japan would be economic power-houses rather than basket-cases). Indeed, the report would be amusing if American taxpayers did not foot the bill:

    ...there is a need to increase private savings, reduce public dissaving or do some of both in the United States. With the savings of both the public and private sectors having declined in recent years, the preferable solution would be to both encourage private sector savings and reduce the fiscal deficit. Long-term interest rates in the United States already appear likely to increase, both for cyclical reasons and because of the uncertainties associated with the imbalances, and this should stimulate savings in the short run. Additional measures will be necessary to raise the underlying savings rate over the longer term. Federal expenditures are likely to be difficult to reduce in the short run, implying that a reversal of earlier tax cuts should be part of the effort to reduce the fiscal deficit.
    http://www.un.org/esa/policy/wess/wesp2005files/wesp2005.pdf

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Monday, January 31, 2005 ~ 10:24 a.m., Dan Mitchell Wrote:
Will America become the Argentina of the 21st Century? Richard Rahn explains that the United States is slowly slipping in world freedom rankings. If this trend is not reversed, America may become like Argentina - a rich nation that becomes poor by allowing government to become too much of a burden:

    Our Founding Fathers and other political thinkers recognized that free peoples most often lose their freedoms not in one sudden blow, but by the endless erosion of liberties they once had. As a student in biology, you may have learned that if a frog is put in a pot of water slowly brought to a boil, the frog will not be aware of what is happening until it is too late. There is increasing evidence Americans, like the frog, are having their liberties slowly boiled away without realizing it. Our very disturbing drift from freedom is reflected in the 2005 edition of the Index of Economic Freedom just published by the Heritage Foundation and the Wall Street Journal. A decade ago, the U.S. was rated as the fifth-freest economy, this year it has dropped out of the top 10 to No. 12 - and we once were the role model for the world. ...The U.S. is on a government taxing, spending and, most of all, regulating, binge that in the long run is incompatible with a free and prosperous society. We now know poor societies can become prosperous within two generations as a result of free market economic policies coupled with the rule of law. We also know rich societies can quickly become poor. Look at Argentina, which was the seventh-wealthiest country on the planet in the early 1900s. Because of the socialist policies of the Peronists (i.e., excessive government spending and regulation, coupled with a decline in the rule of law) beginning in the 1930s, Argentina has become a poor country mired in crisis. Without a change in direction, the same fate eventually will befall the United States. ...Our freedoms are eroding because too many Americans fail to understand the consequences of encouraging the political class to try to protect us from all real and imagined ills - whether it be a terrorist, a disease (including eating too much and aging), bad weather, a more efficient competitor, our own personal financial stupidity or irresponsibility, or a cigarette smoker. Just remember: Every time you vote for a politician who promises to make the government do more for you, he also is saying that same government will make you less free and ultimately poorer.
    http://www.washingtontimes.com/commentary/20050129-095132-5873r.ht m

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Monday, January 31, 2005 ~ 9:58 a.m., Dan Mitchell Wrote:
Swiss reject French global tax scheme. Jacques Chirac's crazy idea of a financial tax targeted against jurisdictions that protect privacy rights has been mockingly dismissed by Swiss political and private sector leaders:

    Representatives of the Swiss government and banking industry have reacted with a mixture of anger and bemusement to French President Jacques Chirac's proposal for an international tax, including a charge on countries retaining banking secrecy, to help alleviate third world poverty. ...Chirac's proposal to impose a charge on countries which retain banking secrecy, intended to recover revenues lost from tax evasion, have [sic] provoked the ire of the Swiss, and Finance Minister Hans-Rudolf Merz ..."The French president has the right to express himself about these issues, but he has to accept the fact that we have our own policy rules and a clear policy on banking secrecy. These issues can be raised in bilateral negotiations at which we will continue to defend banking secrecy," Merz told reporters. Meanwhile, the Swiss banking industry was more scathing ..."The idea is rather bizarre and has a ring of Saint-Simon and early 19th century utopian socialism about it," Swiss Bankers Association spokesman James Nason told the news service Swissinfo. "A far better idea would be if the oh-so-pious French were to impose a tax on nasty tin-pot dictators who purchase real estate on the Côte d'Azur, topped up with a tax on French bank loans and arms sales to countries with brutally repressive regimes," remarked Mr Nason.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18736

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Monday, January 31, 2005 ~ 9:37 a.m., Dan Mitchell Wrote:
Another Republican politician puts government before taxpayers. It is sometimes hard to figure out which political party is more reprehensible. Democrats are worthy of scorn for actually believing that bloated government is a good thing. But Republicans are perhaps even more contemptible since they ostensibly understand government is wasteful, yet they oftentimes try to make it even bigger and more wasteful. The Wall Street Journal bemoans the latest example of Republican venality and/or stupidity:

    The political lust for ever-more tax revenue is a bipartisan affliction, as Indiana voters are finding out to their regret. Their reward for electing their first Republican Governor in 16 years looks like it will be a big tax increase. This pocketbook raid comes courtesy of Mitch Daniels, the former White House budget director whose victory last November also brought in GOP control of the Indiana house. (The party already controlled the senate.) He's now helping to define Republicanism in the Hoosier state by proposing a 29% tax increase, levied largely on anyone making $100,000 or more -- including married couples filing jointly and small business owners. Mr. Daniels says the tax hike, which raises the top marginal income tax rate to 4.4% from 3.4%, will last only one year, but the new Governor is also opening the door for county and city governments to levy their own income taxes. As for "temporary" tax increases, we've heard that one before -- most recently in North Carolina, where a "two-year" sales and income tax increase is now in its fourth year. ...The Governor is promising to "restrain" the growth of spending by cutting the increase in Medicaid spending to 5% a year from the expected 10%, among other proposals. But a state with a vehicle fleet so large that it has more than one automobile for every three state employees is ripe for other cutting. Notwithstanding his pleas about shared "sacrifice," Mr. Daniels is still proposing to increase spending by $600 million over the next two years.
    http://online.wsj.com/article/0,,SB110713918359940783,00.html?mod=opin ion&ojcontent=otep (subscription required)

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Monday, January 31, 2005 ~ 8:05 a.m., Dan Mitchell Wrote:
The deadly impact of nationalized health care. A new Cato Institute paper reveals the inequitable nature and deadly consequences of government-run health care. The U.S. system is far from perfect. Indeed, it is closer to a socialist model than a free-market model. But at least there is some freedom to pick doctors and obtain treatment:

    Proponents of socialized medicine point to other countries as examples of health care systems that are superior to our own. They insist that government will make health care available on the basis of need rather than ability to pay. The rich and poor will have equal access to care. And more serious medical needs will be given priority over less serious needs. Unfortunately, those promises have not been borne out by decades of studies and statistics from nations with single-payer health care. Reports from those governments contradict many of the common misperceptions held by supporters of national health insurance in the United States. Wherever national health insurance has been tried, rationing by waiting is pervasive, putting patients at risk and keeping them in pain. Single-payer systems tend to leave rationing choices up to local bureaucracies that, for example, fill hospital beds with chronic patients, while acute patients wait for care. Access to health care in single-payer systems is far from equitable; in fact, it often correlates with income-with rich and well-connected citizens jumping the queue for treatment. Democratic political pressures (i.e., the need for votes) dictate the redistribution of health care dollars from the few to the many. In particular, the elderly, racial minorities, and those in rural areas are discriminated against when it comes to expensive treatments. And patients in countries with national health insurance usually have less access to critical medical procedures, modern medical technology, and lifesaving drugs than patients in the United States.
    http://www.cato.org/pub_display.php?pub_id=3627

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Monday, January 31, 2005 ~ 7:30 a.m., Dan Mitchell Wrote:
Historical lessons of gun control. In his Townhall.com column, Doug Giles wisely notes that genocidal governments always support gun control. This is not a new argument. One organization, Jews for the Preservation of Firearms Ownership (http://www.jpfo.org/index.htm), has relentlessly explained how the Nazis and communists disarmed citizens in order to facilitate mass murder:

    ... it's a bad bad day and the potential beginning of a serious nightmare when the government forbids you to buy, or tries to take from you, your weapon. This is one of the major lessons history screams at us. ...Take Germany for example. Soon after WWI, the liberal powers thought that relieving citizens of their rifles would restore peace in the streets. ...This was relatively easy for Adolf to do. Why was his big lie easy to sell? One major reason was that the ones who were not buying his crack really couldn't do squat about it ... because, you see ... they had allowed the government to seize their weapons just a few short years prior to The Dipstick's ascent. ...How about how the Turks systematically disarmed and then slaughtered, plus or minus, one million Armenians back in the early 1900's? Or the "disarm-oppress-and kill" campaigns executed by bad leaders upon the innocent people of Cambodia, the Soviet Union, China, Sudan, Rwanda, Uganda, Indonesia, Iran, and Iraq? ...As Judge Andrew Napolitano points out in his book, Constitutional Chaos: What Happens When the Government Breaks Its Own Laws [http://www.amazon.com/exec/obidos/tg/detail/-/0785260838/townhallc om ] , nowhere in the annals of world history do an unarmed people ever fare well. Never has an act of genocide in the 20th century occurred where the citizens were packing.
    http://www.townhall.com/columnists/douggiles/dg20050129.shtml

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Sunday, January 30, 2005 ~ 5:45 p.m., Dan Mitchell Wrote:
More proof that lower tax rates work. During congressional debate last year, opponents of good tax policy said that lower tax rates don't affect behavior. They are mysteriously silent now that billions of dollars are flowing back to the US because the tax rate was slashed from 35 percent to 5.25 percent:

    Drugs manufacturer Eli Lilly has become the latest company to announce the repatriation of billions of dollars in overseas earnings under the temporary tax break legislated as part of the American Jobs Creation Act.  ...{the company reported} the expected repatriation to the United States of $8 billion of eligible overseas earnings in 2005. Under the AJCA, firms with substantial profits earned abroad are encouraged to repatriate the income at a temporary rate of tax 5.25% instead of the usual 35%, a move which lawmakers hope will spur domestic investment. Eli Lilly's announcement follows the decision by pharmaceutical firm Johnson & Johnson to repatriate $11 billion in foreign income.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18721

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Sunday, January 30, 2005 ~ 1:28 p.m., Andrew Quinlan Wrote:
Big spenders on Finance Committee contemplate tax increases. The ranking Democrat on the Senate Finance Committee and his anti-taxpayer GOP colleague are hawking proposals to substantially worsen the US tax system. They want to worsen America's worldwide tax system when most experts agree that America should be moving to a territorial system. Moreover, they want to grant the IRS substantial new powers to monitor private behavior:

    The study by Congress's Joint Committee on Taxation was done in response to a request by the senior members of the Senate Finance Committee. Finance Chairman Charles E. Grassley (R-Iowa) and ranking minority member Max Baucus (D-Mont.) praised the report, and the chairman indicated that the revenue-raising ideas in the report may find attentive ears on Capitol Hill. ...Changes in the taxation of income earned overseas by U.S. companies would raise $54.8 billion ...one area widely cited as a key element of the tax gap -- the difference between what taxpayers owe under the law and what they actually pay -- is the failure of self-employed people and small businesses to report income. The gap is estimated at more than $300 billion a year. The national taxpayer advocate at the Internal Revenue Service, Nina E. Olson, has suggested that Congress require that customers who pay those taxpayers report their payments to the IRS, much as employers and banks report wage and interest payments. The report stopped short of recommending full "third-party reporting," citing the burden that would place on payers. But it suggested that government agencies report to the IRS the payments they make.
    http://www.washingtonpost.com/wp-dyn/articles/A43013-2005Jan27.html

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Sunday, January 30, 2005 ~ 1:00 p.m., Dan Mitchell Wrote:
Foreign aid undermines economic growth in poor nations. A former World Bank economist explains why good intentions often yield bad results:

    But once the immediate needs of the victims are met, the long-term impact of foreign aid must be considered. More is not necessarily better. Aid agencies have a duty -- to recipients, donors and taxpayers alike -- to use the funds as effectively as possible. They should prevent resources being siphoned off by corrupt officials and aid contractors. They should avoid creating "backwash" effects on survivors and their fellow citizens when the flood of foreign aid crowds out potential domestic suppliers. They should strengthen, not undermine, development mechanisms and institutions. And aid agencies should not exaggerate the problems faced, or the benefits resulting from their own efforts, just to ensure a piece of the action and a continued flow of funds. Without diminishing the scale of the tragedy, the number of persons affected should be rigorously checked. There are already reports that the number of refugees in Aceh camps has been significantly inflated by local officials seeking more aid. ...If housing, food, health and education services are supplied free or below cost to refugees for prolonged periods, they may lose the motivation to return to their former jobs or seek new activities. The recently exposed abuses associated with the U.N.'s refugee program in the Palestinian territories and its Oil for Food program in Iraq should be taken as a salutary warning. ...The free goods and services given by foreign donors reduce the demand for domestic producers and distributors. They pre-empt the opportunities for indigenous enterprises to move into new markets. Incomes generated by national responses to disasters are retained domestically. And they are eventually diffused through local communities, stimulating higher employment and consumption levels. When aid programs are based largely on inputs from outside the region, many of the secondary and tertiary benefits remain overseas.
    http://online.wsj.com/article/0,,SB110679477511737651,00.html?mod=opin ion&ojcontent=otep (subscription required)

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Sunday, January 30, 2005 ~ 11:36 a.m., Dan Mitchell Wrote:
Greedy politicians want to tax boob jobs. Just when you think the politicians have come up with every possible tax, they demonstrate their ingenuity with another scheme to pick the pockets of taxpayers. The latest wrinkle (so to speak) is a tax on cosmetic surgery:

    Lawmakers trying to plump up the bottom line are considering a "vanity tax" on cosmetic surgery and Botox injections in Washington, Illinois and other states. ..."We could do Botox-for-babies parties. It might be the new thing," [Seattle Democrat] Keiser said. "Anyone who can afford the money for cosmetic procedures, I don't think they would be deterred by a little sales tax. You pay it on your lipstick." ...In September, New Jersey became the first and so far the only state to tax plastic surgery, at 6 percent. The tax is projected to bring in $25 million a year. In Illinois, the state comptroller has proposed a 6 percent tax on cosmetic surgery... The cosmetic surgery tax is a cousin to the "sin taxes" many states slap on drinking, smoking and gambling during tough budget times. ..."This is an unfair tax on women," said Haeck, editor of Plastic Surgery News. "The bulk of the people who have procedures are not financially upper-class women. They've saved hard, and this is about restoring their self-esteem."
    http://news.yahoo.com/news?tmpl=story&u=/ap/20050128/ap_on_he_me/va nity_tax_7

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Sunday, January 30, 2005 ~ 10:45 a.m., Dan Mitchell Wrote:
Democrats correctly slam Administration propaganda spending. The Bush Administration's use of taxpayer money to finance propaganda campaigns for its education and marriage initiatives is yet another example of wasteful and improper government spending. The Democrats are right to condemn this misuse of taxpayer money, though they hypocritically support subsidies for left-wing propaganda in the form of heavily-subsidized "public" radio and television:

    Separately, House Minority Leader Nancy Pelosi (D-Calif.) and nine colleagues released a report showing that the Bush administration spent more than $88 million last year on contracts with public relations firms, an increase of 128 percent over the last year of the Clinton administration. Medicare and Medicaid officials have spent the most on outside publicity firms over the past four years, the report said. ...Rep. Rosa L. DeLauro (Conn.) and four other Democrats introduced legislation yesterday that would bar funding of "covert propaganda" or material that is partisan or intended for "self-aggrandizement" or "puffery." A statement by one co-sponsor, Rep. George Miller (Calif.), cited the Gallagher contract in saying that "what we really need right now is for the administration to come clean about its propaganda campaign. The administration should disclose all publicly funded contracts signed with journalists, commentators and public relations firms to promote administration policies." Miller has asked for a Government Accountability Office probe of such contracts.
    http://www.washingtonpost.com/wp-dyn/articles/A39872-2005Jan26.html

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Saturday, January 29, 2005 ~ 1:53 p.m., Dan Mitchell Wrote:
The Brussels pot is calling the kettle black. The European Commission is criticizing member nations for slow growth, but there is plenty of blame on both sides. The member nations are guilty of bloated welfare states and high tax rates, but the European Commission often tries to make the problem worse with harmonization schemes and its misplaced focus on debt rather than the size of government:

    More than half of EU member states have serious long-term economic problems which threaten the sustainability of their public finances, the European Commission has warned. In a key economic report published on Thursday (27 January), Brussels warned that the increasing pension liabilities - as populations age - along with high levels of debt are making European public finance systems increasingly unstable. ...Progress is also lacking in two key Lisbon goals - investment in research and development in which "the EU continues to substantially lag behind the US" and employment, where it is "increasingly unlikely" that the EU will meet its targets of 70 percent employment by 2010. Ann Mettler, of the Brussels-based think-tank the Lisbon Council, drew attention to the importance of reducing today's debt levels. "I believe the current generation of leaders is guilty of something akin to serious child abuse - preferring to hide their lack of political courage behind an ever-growing pile of debt our children will spend their lifetime paying down", she said.
    http://euobserver.com/?aid=18267&rk=1

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Saturday, January 29, 2005 ~ 12:29 p.m., Dan Mitchell Wrote:
Good news from Europe. There is some positive news from Europe. The World Bank reports that "New Europe" is growing at a healthy pace, led by the "Baltic Tigers." Too bad European politicians don´t put two-and-two together and recognize that low-rate flat tax systems are the answer:

    A new report published by the World Bank shows that the new member states are fast-growing and healthy in comparison with the sluggish economies of "Old Europe". The eight new EU countries surveyed in the report - excluding Malta and Cyprus - grew at a healthy five percent in 2004, says the World Bank; well over twice the two percent managed by the EU 15. The World Bank attributes some of this performance to the three Baltic countries - Lithuania, Latvia and Estonia, the so-called Baltic tigers whose growth "outstripped Central European economies by a wide margin".
    http://euobserver.com/?aid=18268&rk=1

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Saturday, January 29, 2005 ~ 11:43 a.m., Dan Mitchell Wrote:
Bad news from Japan. Japan is trying to become the France of Asia. It seems that the government always wants to do the wrong thing. As the Wall Street Journal explains, the politicians want to compound the damage of high spending by implementing higher taxes:

    In an attempt to get out of the mess caused by 1990s Keynesian spending, the Japanese government is pointing to its resulting debt problem as a way to justify tax increases. But such increases now threaten an incipient recovery. While Tokyo hasn't put a number on the size of the future increases, the rise in taxes -- combined with new pension and social-security payments -- could shave off roughly 2% of Japanese disposable income, according to some estimates. ...Japanese officials may believe that tax increases are now the only way to deal with Japan's huge debt service costs. But it wouldn't hurt to look at how Japan got into this mess in the first place. Maybe it had something to do with the 1990s spending increases that were cheered on by Clinton Administration Treasury Secretary Robert Rubin and Deputy Treasury Secretary Lawrence Summers. ...But while there's no use now crying over the mistakes of the 1990s, the past is nonetheless instructive. Both in 1989 and 1998 the Japanese economy was driven into a slump as a result of ill-conceived tax increases. To be sure, the government isn't proposing anything nearly as drastic as the 1997 consumption-tax raise to 5% from 3%. Still, the proposed increases risk sparking a recession as consumers decided to take a holiday from spending. ...History offers many valuable lessons for Japan. While it might be too late to lament the spending mistakes that got the country where it is today, now would be a good time to remember the consequences of past tax increases that only compounded those mistakes.
    http://online.wsj.com/article/0,,SB110687707408638992,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Friday, January 28, 2005 ~ 2:45 p.m., Andrew Quinlan Wrote:
Tax competition could force lower corporate tax in America. The Wall Street Journal has a thorough article on the worldwide shift to lower tax rates. Tax competition is the driving force, and even US policy makers are being pushed in the right direction:

    European countries have been steadily slashing corporate-tax rates as they vie for foreign investment, potentially adding to pressure on the U.S. for similar cuts as it weighs a tax overhaul. Following the lead of Ireland, which dropped its rates to 12.5% from 24% between 2000 and 2003, one nation after another has moved toward lower corporate rates with fewer loopholes. The Netherlands, the second most popular European target for U.S. investment, recently joined the movement, lowering its corporate rates by three percentage points to 31.5% and simplifying its tax structure. The corporate-tax cutters of recent years stretch from Portugal, where the rate has dropped 10 points to about 27%, to Austria, down nine points to about 25%. Even Germany, which has Europe's highest rate and has bitterly opposed the plummeting tax rates elsewhere in the region, has done some dramatic trimming -- from as high as 56% six years ago, according to data from KPMG LLP, to 38.3% last year. Germany's trims leave the standard U.S. rate -- about 40% including average state taxes -- above that of every country in Europe, according to separate studies by the Organization of Economic Cooperation and Development and KPMG. ..."We are living in a global economy and we compete in a global economy, and if our corporations are competing against societies that don't tax their corporations as much, we have to consider that," says John Breaux, a former Democratic senator from Louisiana and the co-chairman of a new White House-sponsored tax-reform panel, in an interview. The European tax rivalry has accelerated with the European Union's expansion this year to include Eastern European members like Poland, which cut its corporate rates to 19% from 27% last year. ...Bush administration officials have saluted the corporate-tax cutting in Europe. Last November in London, Treasury Secretary John Snow said of the Irish government, "I applaud them and believe they ought to be emulated."
    http://online.wsj.com/article/0,,SB110687085522438730,00.html?mod=hom e%5Fpage%5Fone%5Fus   (subscription required)

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Friday, January 28, 2005 ~ 2:00 p.m., Dan Mitchell Wrote:
Has the EU leopard changed its spots? The International Herald Tribune reports that the new European Commission has a free-market attitude. But nice rhetoric does not reduce the burden of government or lower marginal tax rates. As a columnist explains in the Wall Street Journal, European politicians seem more interested in the appearance of change:

    Now that the new European Commission has been in office two months, its guiding philosophy is coming into sharper focus: The most effective way Brussels can help Europe's flagging economy is to do as little as possible. .Members of the commission have signaled in recent days a desire to decelerate the Brussels regulation-making machine. ...For years it seemed the favorite activity in Brussels was harmonization - writing laws and regulations to apply in all EU countries. Famous for its "action plans," the commission is now introducing a sort of inaction plan with a clear pro-business bent. In contrast to the previous commission led by the left-leaning Romano Prodi, the new center-right administration in Brussels does not hide its predilection for helping big business. ...When the commission does act, Verheugen said, it will be to take laws off the books. "The new commission will not hesitate to break with the past when it comes to cutting red tape and overregulation," he said. ...Barroso said Wednesday that his No.1 priority during the next five years would be attaining greater prosperity. He spoke of a "new economic dynamism" and said he would be more specific in a speech next week. ...The leftist parties in the European Parliament have vowed to keep a close eye on the commission's social and environmental record.
    http://www.iht.com/articles/2005/01/27/business/union.html

    You've got to admire the moxie, the determination, the utter indefatigability of the European Union when it comes to the economic stimulus strategy it calls the Lisbon Agenda. Like an emergency-room doctor pounding on a code-blue patient's chest, screaming, "Breathe, dammit, breathe!" EU leaders endlessly try to resuscitate what has long been diagnosed as a hopeless case. Even the words agreed upon at the Lisbon summit in 2000 (which explains the otherwise inexplicable name) have become a joke: That by 2010 Europe will transform itself into "the world's most competitive and most dynamic knowledge-based economy, capable of sustainable economic growth accompanied by a quantitative and qualitative improvement in employment and greater social cohesion." ...five years into the 10-year plan, Lisbon is getting a "relaunch." Like a desperate restaurateur hoping a new menu concept will bring in customers, the EU is repackaging the same old ingredients, and continuing to serve up the same promises it will ultimately fail to keep. Conveniently dropping the talk of overtaking the U.S. as the world's economic leader in 10 years, the relaunch focuses on 10 points. Exactly, it's a 10-point plan for growth, aimed at creating "more and better jobs in an innovative and attractive Europe." These include "attracting more people in employment," "more and better research and development," "promoting innovation and sustainability," "completing the internal market," "creating the conditions for a strong European industrial base," etc. Do we detect a pulse in the patient? It's very faint. So get ready. The commission is grabbing its defibrillator paddles for one more try.
    http://online.wsj.com/article/0,,SB110687685888338983,00.html?mod=opini on&ojcontent=otep (subscription required)

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Friday, January 28, 2005 ~ 1:11 p.m., Andrew Quinlan Wrote:
Mixed news from Mexico. Mary Anastasia O´Grady of the Wall Street Journal applauds lower tax rates in Mexico, but warns that government-sanctioned monopolies are hindering economic growth:

    ...there are major achievements. The macro news that has gone largely underreported is that this year Mexico has dramatically flattened its tax structure and continues to bring down both corporate and individual marginal tax rates. This is no small feat in a political system that that for 70 years under the PRI managed little but the refinement of populist demagoguery. Notable too is the fact that a decade after the 1994 peso crisis, the independent central bank has earned international credibility under the skillful guidance of Guillermo Ortiz. Yet despite good macro management, robust growth is unlikely to take off while monopoly pricing in key sectors -- electricity, cement, fixed-line telecommunication services and domestic air services -- hampers Mexico's competitiveness in international markets. ...For individuals, top marginal rates have been coming down since Mr. Fox put Mr. Gil Diaz at the helm. Now they are being simplified. In 2006, according to Hacienda, "a single tax rate of 25% will apply to all taxpayers with annual income up to 2.5 million pesos ($22,000)." Over that amount, there is one more tax rate of 29%. In 2007, the top marginal tax rate will move to 28%. Even Hong Kong, which boasts a "flat tax," has three rates. Hacienda has made no secret of its supply-side logic: "Tax collection efficiency gains on income and value added taxes are expected to compensate the cost of the reduction in income tax rates and the added deductions to the asset tax base." In other words, lower, flatter tax rates provide a broader base, not to mention less incentive to evade taxes or avoid more income, and therefore yields.
    http://online.wsj.com/article/0,,SB110687513368338925,00.html?mod=opini on&ojcontent=otep (subscription required)

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Friday, January 28, 2005 ~ 11:53 a.m., Dan Mitchell Wrote:
Instead of pushing global tax, French should reduce national tax. The Wall Street Journal rightly condemns Chirac's nutty idea for a global tax. The editors note that French politicians should reduce French taxes if they want more people to contribute to charity:

    There is of course no such thing as an "experimental" tax; once created it is more or less permanent, and merely increases in rate and breadth. Such a global levy has long been the dream of the United Nations, which must now depend on the contributions of sovereign governments that would prefer to spend their money on their own priorities. The Bush Administration, for example, has already pledged $15 billion from U.S. taxpayers for anti-AIDS spending. If we can nonetheless return the favor to Mr. Chirac, we'd recommend that he actually cut taxes on his fellow Frenchmen. That would help revive the anemic French economy, making that country richer and its citizens better able to donate their own money to charity.
    http://online.wsj.com/article/0,,SB110679283251137587,00.html?mod=opini on&ojcontent=otep (subscription required)

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Friday, January 28, 2005 ~ 10:22 a.m., Dan Mitchell Wrote:
Social engineering tax break for the rich. Ever wonder how the tax code became a mess? The Weekly Standard provides a good example, describing how a special tax credit for politically-correct cars actually lines the pockets of wealthy taxpayers:

    ...at the 2005 North American International Auto Show in Detroit last week was one particularly pricey concept that is a government creation: a federal tax gift to upper-class Americans buying fuel-efficient hybrid cars. While Washington played host to the presidential inauguration, 6,000 international journalists and nearly a million spectators descended on America's Motor City for a different kind of inauguration: the annual rollout of the auto industry's newest products. One of the market's hottest niches is for green vehicles like the Toyota Prius and the Honda Accord Hybrid--gasoline/electric hybrids marketed to liberal, socially-conscious buyers with six-figure incomes. In 2004, hybrid sales reached 80,000 units in the United States, mostly to "luxury-type vehicle owners, people who want to be first on their block with plasma screen TVs and all that," says Ford spokesman Dan Bedore. Limousine liberals? Call them "hybrid liberals." But unlike other, low-volume niches such as plasma TVs or high-performance sports cars, hybrid buyers will not be paying a premium for their products. In fact, they will be receiving a federal subsidy of $2,000 per car. Billed by its congressional supporters as a way to seed new technology in the fight against global warming and oil dependence, the hybrid tax break has lined the pockets of some of the richest people in America. For example, the Toyota Prius--America's best-selling hybrid at 30,000 units sold last year--is typically bought by childless couples with an annual household income of $100,000, according to Toyota's own demographic study. The car has become a status symbol among the liberal Hollywood elite. Millionaire celebrities like Cameron Diaz, Leonardo DiCaprio, Larry David, and Jack Black are all proud owners of the Prius and its $2,000 tax break. And this year, Toyota is offering its second hybrid vehicle through its luxury division, Lexus. The Lexus E330 SUV hybrid--already pre-sold to 11,000 buyers--is being gobbled up by Hybrid Liberals making $130,000 a year on average. With the Lexus SUV and other new hybrid offerings from Mercedes, Honda, and Ford, hybrid sales are expected to more than double this year to 165,000 units in the United States. That means a total federal subsidy of some $330 million to upper-income customers.
    http://www.weeklystandard.com/Content/Public/Articles/000/000/005/176ps zws.asp

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Friday, January 28, 2005 ~ 9:37 a.m., Dan Mitchell Wrote:
Foreign Secretary wants U.K. to be E.U. colony. Arguing for approval of the statist E.U. constitution, the U.K.'s Foreign Secretary warns that rejection would mean a "second status" for Britain. Yet that is the ideal scenario. The best part of the E.U. - free trade in the internal market - largely can be obtained by being part of the European Economic Area or the European Free Trade Agreement. Mr. Straw claims that the Constitution has a "British vision," but this is only true if he is talking about the pre-Margaret Thatcher Britain - in the days when the U.K. was a stagnant and socialist economy:

    The British foreign secretary has spoken out in favour of the European Constitution as the bill paving the way for a referendum comes before the parliament today (26 January). "If we reject this treaty, Britain will be isolated and weak in Europe - going cap in hand to our partners and may be forced, in time, to accept some kind of second status in Europe as others go ahead without us", Jack Straw was quoted as saying by the BBC. Mr Straw, known for his euroscepticism, suggested that the Constitution reflects "a British vision for Europe", as it gives "national governments a stronger grip".
    http://euobserver.com/?aid=18244&rk=1

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Thursday, January 27, 2005 ~ 11:00 a.m., Dan Mitchell Wrote:
Another French global tax scheme. Jacques Chirac is once again peddling has crazy idea for global taxes. In true French fashion, he even has concocted a scheme that would discriminate against jurisdictions with better tax law. Fortunately, as Chirac even admitted, US opposition makes his idea irrelevant:

    French President Jacques Chirac called for an "experimental" international tax to help fund the war against AIDS, suggesting it could be raised via a levy on airline tickets, some fuels or financial transactions. ...He suggested options including: a "contribution" on international financial transactions, a tax on aviation and maritime fuel, a tax on capital movements in or out of countries which practised banking secrecy, or a "small levy" such as a dollar on the three billion airline tickets sold every year. ...Chirac acknowledged that his proposal would be widely debated, an allusion to US opposition to any international tax, and said there was "no question" of treading on each country's right to set its own levies. ...Two years ago Chirac also raised the possibility of an international tax to help the fight against AIDS, but gave few details, while he has several times extolled the idea to help combat the negative effects of globalisation.
    http://sg.news.yahoo.com/050126/1/3q44a.html

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Thursday, January 27, 2005 ~ 10:39 a.m., Andrew Quinlan Wrote:
The "Irish Miracle". Ireland's low-tax status has generated remarkable results, including a dramatic drop in unemployment and a doubling of national living standards in just 10 years. As this Bloomberg article explains, Ireland is an example for the world showing how free-market policies can help a nation prosper:

    These days, every economic textbook should finish with four words: "Now go study Ireland." How so? Because in the past decade, the Irish economy has emerged as the most successful, and therefore the most interesting in the world. Most people are aware that the Irish have been getting richer. Last week, the Paris-based Organisation for Economic Co-operation and Development (OECD) confirmed just how much progress Ireland had made when it released figures on per capita gross domestic product (GDP), based on purchasing power parities for 2002. The list hadn't changed much since 1999, the last benchmark year, with one exception. Ireland was bumped up a slot, joining the small group of "high income" nations alongside the US, Norway, Switzerland and Luxembourg. The OECD flagged that as a "remarkable development". Let's get this straight. Ireland, which was considered one of the region's poorer nations when it joined the EU in the 1970s, is now among the five wealthiest places in the world. ...So what can Ireland teach the world about how to manage a modern economy? ...policy makes a difference. Ireland got a few big things right. It has lowered taxes.

    The corporate tax rate is just 12.5 percent, one of the lowest in the developed world. Income taxes are in line with European averages, with a top rate of 42 percent. Overall, government spending in 2003 was slightly more than 35 percent of GDP, about the same as the US and relatively low by European standards. In its 2005 report on economic freedom, the Washington-based Heritage Foundation ranked Ireland as the fifth-freest country in the world, just behind Estonia, and eight places above the US. ...The punchiest lesson of the Irish miracle is also the simplest: there are no excuses. If the Irish can work their way into the super-league of the world's wealthiest nations, there is nothing stopping others from doing so. Except maybe themselves.
    http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=2383075

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Thursday, January 27, 2005 ~ 9:11 a.m., Dan Mitchell Wrote:
The fraudulent Lisbon agenda. European Union leaders announced in 2000 that they were going to make Europe the world's most competitive economy by 2010. Since that time, Europe has fallen further behind the US and now must worry about Asia (see www.burkestichting.nl/content/en/lecturemitchell.html for more information). The Wall Street Journal explains why the Lisbon Agenda is a hollow political gesture:

    While professing to aim for long- or at least medium-term goals, it was short-term window-dressing, put forward without any thought being given to how to accomplish those goals, nearly all of which fall within national, rather than EU, competence. Some people within the council and commission will admit as much in private or semi-private settings. The trouble is, nobody wants to be against "competitiveness"; it's like being anti-children or pro-poverty. So the goals cannot be officially disavowed, although at least some officials would certainly prefer it that way. The result is a charade in which nearly everyone concerned prances about making hecatombs to the competitiveness gods while the European economy stagnates and millions are stuck without jobs or the prospect of finding one any time soon. Lisbon's biggest asset is also its biggest failing; everyone finds the agenda useful, although for different reasons. Reformers like it because it's a club with which to beat the EU and member states for their inaction; anti-reformers like it because it's a fig leaf for inaction. What neither side wants to admit is that it's a sham, and always was. It's time to come clean; the Lisbon Agenda has no clothes. Its ambition was refreshing, its goals laudable. But the political will to pursue those goals never existed, and half a decade of puny growth and rising joblessness has done nothing to change that fact. And if economic reality cannot produce the political will, increasing the volume of the rhetoric is bound to fail as well.
    http://online.wsj.com/article/0,,SB110669255577135831,00.html?mod=opini on&ojcontent=otep (subscription required)

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Thursday, January 27, 2005 ~ 7:54 a.m., Dan Mitchell Wrote:
The vanishing credibility of Chicken Little global warming alarmists. Nationalreview.com excerpts a story about the foolish and inconsistent rhetoric of environmental extremists:

    The waves of the tsunami had hardly receded before environmental alarmists linked the tragedy to . . . global warming! ...Although a few environmental activists have attempted to back away from these ludicrous and embarrassing statements, the predictability with which climate change was linked to a geological event shows the difficulty of taking climate change seriously. ...For climate alarmists, climate change has become what logicians call a "non-falsifiable hypothesis." Every weather anomaly is said to be a sign of climate change. After the near-record January 1996 blizzard hit the northeastern U.S., Newsweek ran a cover story attributing the storm to climate change. A year later, when an unusually warm winter led to early snow melt and floods in the upper Midwest, Vice President Al Gore and others attributed it to climate change. And the three hurricanes that struck Florida in close succession last summer were a bonanza for the climate-change chorus, even though serious climate scientists readily admit that ascribing today's extreme weather events to global warming is scientifically insupportable.
    http://www.nationalreview.com/issue/hayward200501250748.asp

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Wednesday, January 26, 2005 ~ 12:15 p.m., Dan Mitchell Wrote:
Job destruction leads to job creation. A free market system generates wealth and higher living standards by mercilessly encouraging the more efficient use of resources. This means many jobs are lost, leading to protectionist impulses and political demagoguery. But as Walter Williams explains, interfering with market forces is a prescription for stagnation:

    In 1858, Lyman Blake patented a shoemaking machine that ultimately destroyed jobs hand making shoes. In 1919, General Motors started selling Frigidaire. As Bradley says, "This 'electric ice box' wiped out a whole set of occupations, including ice-box manufacturers, ice gatherers, and the manufacturers of the tools and equipment needed to handle large blocks of ice." ...We could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past -- jobs such as elevator operator, TV repairman and coal deliveryman. "Creative destruction" is a discovery process where we find ways to produce goods and services more cheaply. That in turn makes us all richer. ...The last election campaign featured great angst over the loss of manufacturing jobs. The number of U.S. manufacturing jobs has fallen, but it has little to do with outsourcing and a lot to do with technological innovation -- and it's a worldwide phenomenon. During the seven years from 1995 through 2002, Drezner notes, U.S. manufacturing employment fell by 11 percent. Globally, manufacturing jobs fell by 11 percent. China lost 15 percent of its manufacturing jobs, and Brazil lost 20 percent. But guess what. Globally, manufacturing output rose by 30 percent during the same period. Technological progress is the primary cause for the decrease in manufacturing jobs.
    http://www.townhall.com/columnists/walterwilliams/ww20050126.shtml

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Wednesday, January 26, 2005 ~ 11:37 a.m., Dan Mitchell Wrote:
Social Security reform saves money. There is much discussion about the "transition cost" of creating personal retirement accounts. But while it is true that there is a cash-flow cost of financing promised benefits as payroll taxes are shifted to personal accounts, it is also true that personal accounts dramatically reduce long-term liabilities. In other words, the "transition cost" in the short-term is more than offset by "transition savings" in the long-term. This is why borrowing money as part of a reform is both prudent and reasonable (though, to be sure, the economy would benefit even more if the transition was financed in part by reducing the size of government):

    To the extent that creates a cash-flow shortage, Congress could have workers lend the federal government whatever funds are needed to pay all current Social Security benefits. In exchange for the loan, the federal government would deposit into the taxpayer's personal-retirement- accounts inflation-protected, interest-bearing long-term federal bonds backed by the full faith and credit of the United States with no restrictions on the right of the account holder to resell the bonds in secondary bond markets. Refinancing the Social Security liability in this way would not cause a short-term shock to the bond market or create upward pressure on interest rates because the government would simply issue new bonds to refinance an old debt obligation as Hamilton did. Nor would this approach threaten financial markets over the long run since the future financial obligation represented by the Social Security liability is already reflected in the current price of federal bonds, and any new forays outside retirement accounts into financial markets would be relatively small compared to the size of the economy. Since new federal bonds issued to personal retirement accounts would simply refinance an already existing liability, no net increase in federal indebtedness results. There are no "transition costs" involved. Refinancing the Social Security liability through new-issue federal bonds would not entail new debt; in fact, it would make it possible to pay off debt and leave Social Security financially sound in perpetuity.
    http://www.townhall.com/columnists/jackkemp/jk20050124.shtml

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Wednesday, January 26, 2005 ~ 10:17 a.m., Dan Mitchell Wrote:
U.S. does not have a deficit/debt crisis. Depending on the circumstances, politicians from both parties will use hysterical rhetoric to argue that America has too much government debt. The Wall Street Journal's excellent editorial page points out that America has a relatively low fiscal burden:

    Even at 38.6% of GDP in 2006, debt held by the public would remain well below the 49.4% level hit in 1993, the most recent peak year. And it would also be well below the general government debt burden in Germany (51.9% of GDP), France (42.7%) and especially spendthrift Japan (79.3%), according to statistics from Bear, Stearns & Co. Compared with other industrial nations, in short, the U.S. is in strong fiscal shape. Bear, Stearns economist David Malpass adds the cheeky point that, despite its high debt burden, Japanese interest rates are close to zero. This would tend to refute the claim -- made so often by politicians who want to raise taxes -- that deficits cause higher interest rates.
    http://online.wsj.com/article/0,,SB110670655620936242,00.html?mod=opini on&ojcontent=otep (subscription required)

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Wednesday, January 26, 2005 ~ 9:58 a.m., Andrew Quinlan Wrote:
Judicial tyranny. Ideological judges are improperly intervening in school financing debates and usurping the role of elected officials by ordering tax increases. This dark cloud might have a silver lining if the judges were improving education, but Phyllis Schlafly explains that the "spend-more-money" mentality behind these court decisions does nothing to improve education:

    On Jan. 3. the Kansas Supreme Court ordered the Kansas legislature to appropriate more money for public schools. According to the National Center for Education statistics, Kansas spends $8,206 per pupil per year, but the judges said the state must spend much more to give schoolchildren the "suitable" education guaranteed by the state constitution. The Montoy v. Kansas decision implied that the state must spend an additional $850 million or more annually on public schools. The court then suspended its final order to goad the legislature to raise taxes by a court-imposed deadline of April 12. Since when do judges tell legislatures what laws to pass and what taxes to levy? If any governmental function is (or should be) a legislative function, it is imposing taxes and spending citizen money. ...In the 1970s, activist judges were ordering schools to spend more money to achieve racial balance. The apogee of those cases was the famous Kansas City, Mo., decision, which ordered taxes levied on the people of Missouri to build the world's most expensive school. Two decades and billions of dollars later, this extravagantly equipped school is just as segregated as ever and posting test scores just as low. ...A lot of school money has been spent on litigation instead of on classrooms, but no one has proved any relation between school spending and student achievement.
    http://www.townhall.com/columnists/phyllisschlafly/ps20050124.shtml

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Wednesday, January 26, 2005 ~ 9:30 a.m., Dan Mitchell Wrote:
Another adverse effect of the new Medicare entitlement. The new drug benefit enacted in 2003 was fiscally reckless, but it also was bad health care policy. But it was bad health care policy not just for the usual reason (an expansion of third-party payment and thus a continued erosion of free-market forces), but also because the government is going to become the nation's biggest buyer of drugs. And once this happens, it is very easy for politicians to create back-door prices controls - which will adversely impact research and thus hinder the development of life-saving drugs. Doug Bandow explains in the Townhall.com column:

    ...there is an inevitable trade-off between prices and profits, and research. Giaccotto, Santerre, and Vernon explain: data "show that pharmaceutical R&D intensity changed considerably over the 50-year period, and that the changes in R&D intensity share a striking direct relation with changes in real drug prices." That doesn't mean government should pump up prices. But government should not bias decision-making the other way. Unfortunately, however, Washington is incrementally moving toward European-style price controls. When the Medicare bill goes into effect in 2006, warn Giaccotto, Santerre and Vernon, "the federal government will be purchasing or paying for nearly 60 percent of all prescription drugs in the United States." The measure bars Washington from using its market power to drive down prices. But legislators have proposed to repeal this provision. So long as the federal government is one of many buyers, the market remains generally, if imperfectly, competitive. But when Washington becomes a monopsony - that is, a monopoly buyer - government discounts look suspiciously like price controls. ...How much should drugs cost? There is no right answer. But government should not promote price controls, whether formal or informal. Warn Giaccotto, Santerre and Vernon: "While the federal government's success in exerting downward pressure on real drug prices may have benefited consumers in the short run, because lower drug prices improve access to existing pharmaceuticals, this influence has undoubtedly come at the cost of reduced levels of pharmaceutical innovation." The Medicare drug benefit is tempting Washington politicians to try to force the pharmaceutical industry to provide more drugs for less money. Alas, if the federal government regulates drug prices, Americans will pay with their health and lives.
    http://www.townhall.com/columnists/dougbandow/db20050124.shtml

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Tuesday, January 25, 2005 ~ 11:21 a.m., Andrew Quinlan Wrote:
Administration wants more power for anti-U.S. bureaucracy? The so-called Law of the Sea Treaty was rejected by Ronald Reagan more than 20 years ago because it undermined U.S. sovereignty and was based on a big-government approach. Sadly, the Bush Administration now supports this misguided scheme:

    Incredibly, even as President Bush was preparing his call for an American foreign policy that would resist tyrants - not rely on organizations they and their friends effectively control - his Administration was being committed to the ratification "as soon as possible" of a treaty that would give unprecedented power to just such an organization. The treaty in question is the UN Convention on the Law of the Sea (better known as the Law of the Sea Treaty, or LOST). It was drafted over twenty years ago at the behest of Soviet bloc and "non-aligned" nations to serve as the centerpiece of their so-called "New International Economic Order," a scheme to transfer wealth from the industrialized world to the developing one. Ronald Reagan objected to LOST's creation of a supranational agency to govern the world's oceans at the expense of U.S. sovereignty and America's capacity to utilize and assure freedom of the seas. When American concerns were ignored or simply voted down, he refused to sign the accord. The treaty has not improved with age, despite claims by its supporters that Mr. Reagan's objections have subsequently been addressed. For example, it still allows an international organization for the first time to collect revenues from American taxpayers as the price for permission to exploit the world's seabeds.
    http://www.townhall.com/columnists/frankjgaffneyjr/fg20050124.shtml

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Tuesday, January 25, 2005 ~ 10:45 a.m., Dan Mitchell Wrote:
Jurisdictional competition needed to control health care costs. Thanks to government mandates and restrictions on consumer choice, health insurance can be very high in certain states. The obvious solution is to give consumers the freedom to purchase from companies based in other states - a freedom theoretically already guaranteed by the Constitution's interstate commerce clause. This would punish state governments that impose misguided mandates, just as tax competition penalizes jurisdictions with bad tax policy. An editorial column in the Wall Street Journal explains the value of competition in health care:

    Insurance premiums vary greatly from state to state. Last month, eHealthInsurance, a leading online insurance brokerage, compared the cost of a standard family insurance policy ($2,000 deductible with a 20% co-insurance) across the nation's 50 largest cities, involving some 4,000 insurance plans and 140 insurance companies. Some results are startling. Consider: a non-employer-based family policy for four in Kansas City, Mo., costs about $170 per month while similar coverage in Boston tops more than $750 a month. Unpublished data on the small group market -- which serves smaller companies -- also suggests great variability: Similar HMO coverage for a business in New Jersey is a third more per employee than in California. Why the price difference? Many states dictate the type of services and providers. New York, for instance, requires that the services of a podiatrist be covered. It's a commonly quoted statistic that the average person walks about 150,000 miles in a lifetime. Let's hope the majority of this journey is on healthy, bunion-free feet. But should every insurance policy in the Empire State really be required to include podiatric services? Acupuncturists are mandated in 11 states, massage therapists in four, osteopaths in 24, and chiropractors in 47, driving up the price of even the most basic insurance plans. ...A remedy? ...Nothing prevents Congress...from allowing interstate sales. The foundation of such a bill would be the Constitution's Commerce Clause. Individuals and small businesses would then be able to shop around and find a low-cost policy -- an affirmation of free-market principles since interstate restrictions now leave many Americans at the mercy of a small number of local health insurance carriers. Allowing a competitive market for health insurance won't be a major budgetary expense -- but it may prove priceless to the cause of advancing market reforms to better American health care.
    http://online.wsj.com/article/0,,SB110661643244934843,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Tuesday, January 25, 2005 ~ 8:32 a.m., Dan Mitchell Wrote:
Is Bush conservative? A former Reagan speechwriter wisely asks whether the current President believes in freedom. This is a very difficult since Bush is aggressively conservative on some issues such as tax cuts and Social Security reform, but other policies - such as the growth of government - make one long for the days of Bill Clinton:

    ...the speech was in almost no way that of a conservative. To the contrary. It amounted to a thoroughgoing exaltation of the state. Bush has just announced that we must remake the entire third world in order to feel safe in our own homes, and he has done so without sounding a single note of reluctance or hesitation. This overturns the nation's fundamental stance toward foreign policy since its inception. Washington warned of "foreign entanglements." The second President Adams asserted that "we go not abroad in search of monsters to destroy." During the Cold War, even Republican presidents made it clear that we played our large role upon the world stage only to defend ourselves and our allies, seeking to changed the world by our example rather than by force. ...Compare what Bush said today with the inaugural address of Lyndon Baines Johnson and the first inaugural address of Ronald Reagan and you'll find that Bush sounds much, much more like LBJ. He as much as announced that from now on the GOP will be a party of big government. I can only hope that Chris Cox, Dana Rohrabacher, and other Republican members of Congress standing on the platform behind the president today were thinking to themselves, "Not so fast, buster." Bush may yet win critical conservative victories in this second term - notably by managing to enact private retirement accounts. But his "broader definition of liberty" makes me mighty nervous.
    http://www.nationalreview.com/comment/robinson200501201415.asp

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Tuesday, January 25, 2005 ~ 8:00 a.m., Dan Mitchell Wrote:
Political correctness at Harvard. The president of Harvard has gotten in trouble for honest intellectual inquiry. Larry Summers is a leftist of sorts, so it is somewhat amusing to see him stumble this way, but it is unfortunate that academia has become so doctrinaire. Amity Shlaes explains:

    ...the conference...did not turn out well for Mr Summers. For - as is known by now - one challenge that Mr Summers sought to address was that women today are not winning as many tenured posts in the "hard" sciences, such as advanced maths or physics, as might be expected in the post-feminist era. Another was that more males than females tend to score in the very top range of maths aptitude tests. Mr Summers also touched on the proposition that there might be a genetic difference between men and women when it came to performance in hard sciences. This last little hypothesis was enough to bring the entire educational establishment down upon Mr Summers' head. A week ago, Mr Summers issued his first apology, and he has been apologising ever since. ...Harvard - and US universities like it - tend to promulgate a set of views - global warming is a crisis; the US is to blame for the world's troubles; governments of developed nations ought to be large; and quotas or some form of affirmative action is required when it comes to the advancement of women and minorities. These same universities often shut out, or look away from, arguments that do not support these beliefs. The result is not "neo-Stalinist" monoliths - novelist Michael Crichton's description of universities in his current bestseller, State of Fear. But it is universities that are boring, provincial, shut in.
    http://www.townhall.com/columnists/amityshlaes/as20050124.shtml

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Monday, January 24, 2005 ~ 2:11 p.m., Dan Mitchell Wrote:
OECD urges higher taxes in Japan. The Organization for Economic Cooperation and Development continues to peddle the snake-oil medicine of higher taxes. The Paris-based bureaucracy just released its study on the Japanese economy and - what a surprise - it recommends more money for the government. The analysis is filled with sophomoric analysis, including the statement that, "Addressing the government's budget deficit should be an important aspect of an exit policy as it would help avoid an abrupt rise in interest rates." But if this hypothesis is accurate, why does Japan have very low interest rates even though the nation also has one of the world's biggest budget deficits and debt ratios? The study of the Japanese economy also is filled with inconsistencies that would generate a failing grade in an introductory economics class. It acknowledges that high tax rates cause rampant tax evasion, but nonetheless urges higher tax rates. It even admits that higher tax rates will hurt growth, but the OECD reflexively cannot resist the temptation to advocate higher taxes:

    Legislation passed in June 2004 to increase the pension contribution rate for the Employees' Pension Insurance from 13.6 to 18.3 per cent by 2017 may help finance rising expenditure. However, already in 2002, the proportion of pension contributions that are evaded was 37 per cent - well above the level assumed in the government's projections - and the increase in the contribution rate may further reduce participation in the system and weaken work incentives. ...fiscal consolidation...will require increases in government revenue... To increase revenue, the government should ...broaden the tax base, thus limiting the extent of tax hikes, which have negative effects on growth. Nevertheless, given the size of additional revenue that is needed, higher tax rates will be necessary, particularly for the consumption tax.
    http://www.oecd.org/document/53/0,2340,en_17642234_17642806_34287 541_1_1_1_1,00.html

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Monday, January 24, 2005 ~ 12:08 p.m., Dan Mitchell Wrote:
More evidence that lower tax rates yield big results. Two stories show the beneficial impact of lower tax rates. Tax-news.com reports that policy makers have lured $11 billion back to the US economy by lowering the tax rate on repatriated profits from 35 percent to 5.35 percent. And that is money from just one company! And the Wall Street Journal notes that we have even more evidence that lower capital gains tax rates improve economic performance and yield more tax revenue for government. When will the left understand that tax rates are a price - and that it is senseless to impose high prices on productive behavior?

    Pharmaceutical firm Johnson & Johnson has announced in a regulatory filing with the SEC that it will repatriate $11 billion in earnings held overseas as a result of the one-year tax break under the American Jobs Creation Act 2004. The new legislation, passed by Congress in October of last year, ushered in a series of new tax breaks in an attempt to stimulate domestic investment. One of the most significant of these was a one-year 'tax holiday' for US firms, allowing them to transfer earnings from foreign operations back to the United States and pay income tax at 5.35% instead of 35%.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18654

    Some people continue to believe, or at least still assert, that tax rates don't influence taxpayer behavior all that much. We therefore direct their attention to the Treasury Department's latest historical data on revenues from taxes on capital gains. ...The evidence is overwhelming...that lower rates induced more taxpayers to realize their capital gains, and thus produced more tax revenue despite the lower rates. The top capital gains rate was cut again in 2003, to 15%, and it is likely that Treasury will also report an increase in revenues in that year and in 2004 as the stock-market rebounded smartly. In each of these episodes, we should add, Congress's Joint Tax Committee predicted more or less the opposite. Wedded to its static models that underestimate the impact of behavioral incentives, Joint Tax predicted revenue losses from tax-rate cuts and revenue gains from tax-rate increases. In recent years Joint Tax has finally acknowledged some "unlocking" effect on capital gains realizations from lower rates, but it still refuses to recognize any revenue impact from faster economic growth or from a stronger stock-market that tax reductions on capital help to promote. The refusal to take control of Joint Tax has been a major failure of the GOP Congress, and should be a priority as it contemplates tax reform that President Bush has said must be "revenue neutral."
    http://online.wsj.com/article/0,,SB110651952621733465,00.html?mod=opini on&ojcontent=otep (subscription required)

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Monday, January 24, 2005 ~ 11:35 a.m., Dan Mitchell Wrote:
Grading Bush's economic agenda. Michael Boskin of Stanford University has a column in the Wall Street Journal lauding the President's pro-growth tax policy, but also warns that it is important to curtail the growth of government. He is correct to note that government spending should be reduced because it is inefficient and wasteful, not because some of the spending is financed by borrowing rather than taxes:

    President Bush deserves generally very high marks on economic policy in his first term, although there were some stumbles (e.g., too much non-defense spending growth, steel tariffs). ...what should the second-term agenda be? And how does it compare to the president's declared intentions? Start with what is, objectively, good economic policy, which should be aimed primarily at maximizing non-inflationary growth. That requires the lowest possible tax rates, continuously rigorous spending control, reform of Social Security and Medicare, regulatory and litigation reform, trade liberalization, and sound monetary policy. Thus, Mr. Bush should make the lower marginal tax rates -- so important to strengthening incentives in the economy -- permanent. Tax reform should at the very least lower them further and broaden the tax base by eliminating or combining deductions, exemptions, credits and definitions. It is not widely appreciated that, under current law, the federal tax share of GDP is scheduled to bloat over the next 20 years to almost 25%, due to real bracket creep, the alternative minimum tax, and other factors. Thus, tax cuts will be necessary to prevent a huge future tax drag on the flexibility and dynamism of the economy. ...Spending control is vital. The litmus test for acceptable spending should be whether it is necessary for government to be spending at all; if so, whether that spending should be federal, state or local; and whether the funded programs are target-effective and cost-conscious. We have a problem because so much government spending is not effective (OMB estimates that only 30% of programs have demonstrated even modest effectiveness). The spending problem may be more visible because of large budget deficits, but we would have a serious spending problem even if the budget were balanced.
    http://online.wsj.com/article/0,,SB110651961194133470,00.html?mod=opini on&ojcontent=otep (subscription required)

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Monday, January 24, 2005 ~ 10:11 a.m., Andrew Quinlan Wrote:
Federal government squanders tax dollars on special-interest subsidies. An economist at the American Institute for Economic Research explains why pork-barrel "economic development" spending is a waste of money:

    The federal government spends tens of billions of dollars every year on economic development projects. In 2001, for example, the figure was $57 billion. State and local governments spend billions more. Yet, it is not clear these huge annual expenditures, which have occurred for some four decades, have produced long-term measurable benefits. ...The stated purpose of the economic development offices is to attract new businesses and industries to communities, or keep existing businesses from migrating. They offer various inducements, including direct subsidies, tax breaks, grants, loans, and infrastructure improvements. ...Yet, the sad truth is such programs rarely have lasting benefits - for the simple reason they counter good business practices. The programs' most glaring flaw is that they increase a behavior known to economists as "rent-seeking," a euphemism for business efforts to secure government favors. Businesses pay lobbyists, lawyers and consultants large sums to help them obtain economic development funds. Unfortunately, this makes less money available for higher priorities, such as capital investment. Besides, when businesses gain government favor - as Sematech did when it got $40 million from the $295 million Texas Enterprise Fund to help finance an "Advanced Materials Research Center" in the Lone Star State -recipients gain unfair advantages over other businesses, both direct competitors and those competing indirectly for capital and workers. ...The Government Accountability Office (GAO) in Washington has tried to measure the effect of economic development programs using sophisticated econometric modeling. The agency (then called the General Accounting Office) reported nearly a decade ago, in 1996, that it was "unable to find any study" by any reputable organization "that established a strong causal linkage between a positive economic effect and an agency's economic development assistance." Yet, the spending continues.
    http://www.washingtontimes.com/commentary/20050122-103400-9337r.htm

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Monday, January 24, 2005 ~ 8:55 a.m., Dan Mitchell Wrote:
Personal retirement accounts have many benefits. An economist from the Social Security reform commission highlights a few of the economic benefits of personal retirement accounts:

    The Social Security Administration's nonpartisan Office of the Chief Actuary says that a system of private accounts could be centrally administered with annual costs of only 0.3 percent, much cheaper than the average mutual fund. These accounts would come with enforceable property rights, including the right to pass the financial assets to one's spouse and children as an inheritance. Second, personal accounts could improve work incentives. The complexities of the current system make it nearly impossible for the average person to determine how, if at all, another dollar paid to Social Security translates into higher future retirement benefits. By providing a clearer link between individuals' Social Security contributions and the benefits that employees receive, personal accounts could increase the perceived rewards for work and thus boost economic activity. Finally, personal accounts could increase national saving. We are currently poised to heap trillions of dollars of unfunded obligations on our children and grandchildren. We could reduce this burden by saving more today. ...our federal government has shown again and again that it cannot reliably save money for the future. For the past two decades, while Social Security collected more tax revenue than it has needed to pay benefits, the rest of the federal budget consumed these surpluses rather than putting them aside. That's not a flaw in Social Security, but a political reality. To ensure that these surpluses are saved and not spent, we need a "lock box" that actually works. Personal accounts would put the control of these contributions into the hands of individuals, not the government, making it much more difficult for politicians to use these funds to mask increased spending on other programs.
    http://www.washingtonpost.com/wp-dyn/articles/A28180-2005Jan22.html

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Sunday, January 23, 2005 ~ 6:02 p.m., Andrew Quinlan Wrote:
The many benefits of Social Security reform. George Will and Tom Sowell explain why it is vitally important for America's tax-and-transfer entitlement scheme to be shifted to a system of personal retirement accounts:

    One reason for reforming Social Security is that it is not in crisis compared to Medicare-Medicaid. But the best reasons rise from the philosophy of freedom: Voluntary personal accounts will allow competing fund managers, rather than a government monopoly on income transfers from workers to retirees, to allocate a large pool of money. This will enhance the economic dynamism conducive to an open society. Personal accounts will respect individuals' autonomy and competence, and will narrow the wealth gap by facilitating the accumulation of wealth -- bequeathable wealth -- by persons of modest incomes.
    http://www.townhall.com/columnists/georgewill/gw20050120.shtml

    What is different with the private retirement accounts that the President is proposing, compared to the Social Security system as it exists now? The biggest difference seems to get the least attention: With private accounts, money is invested in the economy, creating additional wealth, from which pensions can be paid. With Social Security, the money is spent as soon as it gets to Washington. Is it better to invest for the future or to keep spending the Social Security taxes now and leave it to someone in the future to figure out what to do when today's young workers retire and there is not enough money to pay them what they were promised? ...There is a legal and accounting fiction called the "Social Security Trust Fund." All that this means is that the Social Security system gets government bonds in exchange for the Social Security tax money that is being spent today instead of being saved. But you cannot spend and save the same money, no matter what accounting gimmicks you use. Government bonds are not an investment that adds to the country's wealth. They are a claim on future taxpayers. ...no matter how much money you have paid into Social Security over the years, and no matter what you were promised when you paid it, the government always has the option to pay you back only what future politicians decide they can afford, given all the other things they might prefer to spend the money on. Owning your own private pension plan means that those who owe you have to pay you what they promised. It also means that if you die without ever using it, you can leave it to your family, instead of having the government keep the money. Liberals are desperate to keep Social Security the way it is, because that means they can keep spending your money as they see fit and keep you dependent on them. That's what the welfare state is all about.
    http://www.townhall.com/columnists/thomassowell/ts20050120.shtml

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Sunday, January 23, 2005 ~ 4:32 p.m., Dan Mitchell Wrote:
France's slide to soft totalitarianism. A lecturer from the University of Paris bemoans the erosion of liberty and freedom in his native country:

    Slowly, with almost no one noticing, France is sinking into the "mild, regular and peaceful" tyranny that Alexis de Tocqueville foresaw with remarkable lucidity. It took no more than a few years for the fight against tobacco, obesity and other personal vices to come to the fore in politics and the media. President Jacques Chirac vows to be the great defender of the weak and the pioneer of a vast government drive to make the life of the French ever better. A safe, normal life! That is the new political El Dorado that the government promises us. A life rid of every kind of risk, in which "Big Mother," in Michel Schneider's phrase, takes care of everything, protects and reassures us, comforts us when we are sad and sings us lullabies when we have insomnia. ...The nanny state, French-style, is everywhere. No longer surprising are the taxpayer-funded ads on prime-time television from the Minister of Health advising citizens how to put their things away in order to avoid a bad fall, or reminders to put their glasses on to reduce the risk of household accidents. The same ministry, together with the Marxist trade union CGT-Transports, also posted posters in the Paris Metro, touting the health benefits of climbing up and down stairs. A French senator recently put forward a draft bill to create a National Prevention Agency against the "epidemic" of obesity -- as if getting fat were a communicable disease -- to be paid for by a new tax on junk food. You should also expect official warnings to be placed on chocolate bars a few months from now, as is already the case with cigarette packs... President Chirac earlier this month took the "Tyranny of the Good" another step forward, pushing a law to ensure equal pay for equal work for men and women in less than five years. Mr. Chirac is not afraid to use all possible moralist arguments to interfere with private contracts. But what about the individual's right to negotiate their own wage? Of course, in this case, Mr. Chirac has only short-term political gain -- and the female vote -- in mind. ...Much weakened by the economic crisis, the French state succeeds in stirring fears and inventing new missions to rationalize its existence. But this drift must be stemmed while there is still time. For, behind that flow of prescriptions and regulations, behind that supposedly nice striving to change man and make him healthier, if necessary against his will, the totalitarian monster against which so many men and women have fought in the history of our country is inevitably lurking.
    http://online.wsj.com/article/0,,SB110627419810632313,00.html?mod=opini on&ojcontent=otep (subscription required)

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Sunday, January 23, 2005 ~ 1:56 p.m., Dan Mitchell Wrote:
Teacher unions vs. education. The Wall Street Journal's indispensable editorial page comments on a letter-writing campaign against school reform launched by the American Federation of Teachers:

    Every op-ed writer dreams of stirring controversy, so congratulations to Stanford education scholar Terry Moe for provoking an e-mail blast with his piece on our pages last week arguing that the teachers unions need to be politically constrained if public school reform is ever going to be possible. Our e-mail server has been filling ever since with hundreds of letters professing outrage, and soon enough we found out why: One of the most powerful unions, the American Federation of Teachers, had ordered up the broadside... Whenever anyone dares to challenge the unions, they portray it as an attack on all teachers and roll out some union "activist" to pose as Miss Devoted from a second-grade classroom to express her dismay. In reality, a major goal of reformers is precisely to liberate individual teachers to do what is best for students. The unions continue to insist on rules that reward the worst teachers as much as the best, and that make it nearly impossible to fire failures.
    http://online.wsj.com/article/0,,SB110627248941932251,00.html?mod=opini on&ojcontent=otep (subscription required)

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Saturday, January 22, 2005 ~ 1:23 p.m., Dan Mitchell Wrote:
Will Montegro be the Hong Kong of Europe? Motivated by jurisdictional competition, Montenegro is seeking to become a free-market haven. Not surprisingly, the European Union is hindering economic liberalization - as is explained by the nation's Deputy Finance Minister in the Wall Street Journal:

    Montenegro adopted the euro as the country's legal tender and thereby minimized the inflation taxation of its citizens. Without that step, the central bank in Montenegro, a transitional economy with weak institutions, would have been under constant pressure to print money. The adoption of the new tax law will introduce one of the lowest corporate tax rates in Europe: a mere 9%. Capital-exchange restrictions have been eliminated and the repatriation of profits made by foreign investors in Montenegro is free. Interest rates are market determined and more than 99% of the prices are freely set. Treating foreign investors just like domestic ones, enjoying the same rights and legal protections, is intrinsic to Montenegro's privatization, investment and business regulations. In order to encourage new business development, the required starting capital for a limited liability company has been reduced to EUR1. The aluminum industry, which accounts for 60% of total exports, is in the process of being privatized. The tender for Telekom Crna Gore, the national fixed-line operator, is also already underway. ...As anywhere else in the world, the most vigorous objections to the implementation of economic freedom in Montenegro come from rent-seeking groups, monopolists, and people that benefit from state redistribution. But Montenegro also has to overcome a barrier that is peculiar to its political situation. As one of the basic preconditions for signing the Association and Stabilization Agreement with the EU, Brussels insisted on the "harmonization" of economic systems between Serbia and Montenegro. Given the fact that Montenegro wants to develop an open and service-oriented economy while Serbia wants to protect its agriculture and inherited heavy industries, the harmonization of these systems is more than just problematic.
    http://online.wsj.com/article/0,,SB110608639391629354,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Friday, January 21, 2005 ~ 12:10 p.m., Dan Mitchell Wrote:
Even the OECD recognizes the low-tax Irish miracle. The Organization for Economic Cooperation and Development has just admitted that the Ireland is now the world's fourth-richest economy. The Paris-based bureaucrats say this is a "remarkable development," but sensible people see Ireland's growth as the logical consequence of free-market tax policy:

    ...an analysis by a major international body last week ranked Ireland as the fourth wealthiest economy in the world, behind Luxembourg, Norway and the US. The rankings, compiled by the Organisation for Cooperation and Development in Europe (OECD) in conjunction with the European Union's statistical agency, were based on Gross Domestic Product (GDP) figures from 2002. The OECD described Ireland's entry into a category of high-income countries as a "remarkable development."
    http://www.belfasttelegraph.co.uk/news/story.jsp?story=601596

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Friday, January 21, 2005 ~ 11:46 a.m., Dan Mitchell Wrote:
Private charity is better than government handouts. The Cato Institute explains that government-to-government "development" aid tends to retard economic growth by boosting the size of the public sector. Private-sector aid, by contrast, is less bureaucratic and is more focused on helping needy people:

    ...disaster aid of the kind required in Asia is quite different from development aid. Egeland's "stingy" statement was sadly the first of a series of calls by those using the crisis in Asia to advocate increases in worldwide development funds. Writing about the disaster, the New York Times described Washington's overall non-military aid as a "pitiful amount." It is a mistake to conflate emergency aid and long-term development assistance. The goals of each are different, and emergency aid accounts for a small amount of the total. Of the $69 billion that rich countries gave to poor countries in 2003, for example, only 8.5 percent was for emergency and distress relief according to the Organization for Economic Cooperation and Development. The bulk of aid still goes to promote traditional aid objectives such as growth and poverty reduction. Unfortunately, foreign assistance has a poor record at promoting development. There is in fact no correlation between aid and growth and few expert inside or outside lending agencies are satisfied with the performance of aid. In practice, much aid has been inimical to growth because it has supported governments whose policies keep people impoverished in the first place. The result has been debt, not development. ...The truest measure of generosity, however, is how much individuals and private organizations voluntarily give. Former U.S. Agency for International Development official Carol Adelman found that U.S. private aid to those abroad far exceeds Washington's official development assistance. A few years ago, her "conservative estimate" put private foreign aid at three-and-a-half times U.S. development aid. The rise in aid from private U.S. entities includes foundations, churches, corporations, and private voluntary organizations like the YMCA and the Red Cross. It is safe to say that U.S. private aid still accounts for between three and four times official aid. U.S. remittances alone amounted to at least $30 billion in 2003, nearly double U.S. aid. And because private aid tends to be less bureaucratic and gets to the people it intends to help, it also tends to be much more effective than official assistance. According to Adelman, moreover, the United States contrasts sharply with the "Europeans and the Japanese [who] continue to give primarily through their governments." In this sense, the United States is, if not the most generous country in the world, very near the top of the list. And its aid is surely more helpful to the world's poor than that of other countries. It's a shame that the Asian tsunami disaster is being cynically exploited to advocate massive increases in aid that doesn't work.
    http://www.cato.org/dailys/01-19-05.html

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Friday, January 21, 2005 ~ 10:56 a.m., Dan Mitchell Wrote:
European Union budget fight focuses on symptoms rather than the disease. The myopic fixation on budget deficits in Europe is drawing attention from the much more important issue of how to control the size of government and deal with demographic changes. The Wall Street Journal explains:

    European Union finance ministers are today discussing for the second consecutive day what precise conditions might allow them to overshoot the pact's limit on annual budget deficits to 3% of gross domestic product. While we would agree that spending discipline is a great idea, the deficit limit is arbitrary and no guarantee of good policy. Moreover, the threshold has already been repeatedly crossed with impunity by euro-zone countries big and small, which is what sparked the debate about relaxing the "limit." But that prompts the question, "Why bother?" ...To bring some clarity to the debate, it is important to ask why public deficits are on the rise. Not all public debt is avoidable or necessarily bad for the economy. The U.S. deficit, for instance, which seems to worry Europeans far more than their own finances, is to a large degree a consequence of the post-bubble slowdown and being forced to carry the main burden of the war against terrorism. Some non-defense spending hikes have contributed to the deficits as well, but thanks to three rounds of tax cuts to get the economy going again, the deficits are shrinking. With a little spending restraint on the non-defense budget going forward, they will be manageable. In Europe, on the other hand, the rising public debt is mainly due to the governments' failure to react adequately to changing demographic conditions and global competition. The generous welfare states and unfunded pension and health care systems designed in boom times are now producing vicious cycles in public finance. With subsidized unemployment rising and birth rates declining, ever fewer workers are available to finance the pensions and health care costs of more and more retirees who live longer lives.
    http://online.wsj.com/article/0,,SB110599953735128159,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Friday, January 21, 2005 ~ 10:21 a.m., Dan Mitchell Wrote:
Left-wing charities make foolish anti-trade arguments. A column in the Wall Street Journal correctly mocks the protectionist arguments of leftist charities like Oxfam. Oxfam pretends to be concerned about the poor, but it seems much more interested in fighting free markets (as can be seen in their attack on tax competition (http://www.freedomandprosperity.org/Papers/oxfam/oxfam.shtml):

    The charities also say that, while rich-country trade liberalization is good for the poor countries, poor-country trade liberalization is bad for them. What is sauce for the rich goose is not sauce for the poor gander. In this fallacy, they are arguing against a mass of empirical evidence which shows that infant industry protection is often counterproductive and costly. Moreover, what postwar trade analyses show, and what the charities do not understand, is that autarkic trade barriers make domestic markets more lucrative than exports, leading therefore to an incentive bias against exports. So even when the rich-country markets are opened further, one's own trade barriers can prevent the penetration of these markets.
    http://online.wsj.com/article/0,,SB110601265307328496,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Thursday, January 20, 2005 ~ 11:13 a.m., Dan Mitchell Wrote:
Bush should apply ownership principle to education. Terry Jeffrey of Human Events rightly criticizes the Administration for its big-government approach to education issues:

    President Bush has become, quite rightly, an evangelist for the virtues of private property, speaking about an "ownership society" just about everywhere he goes. Just about everywhere, that is, except when he visits a government-owned school. Then he is a big-government man. Consider back-to-back speeches the president gave last week. On Jan. 11 in Washington, D.C., he promoted his excellent plan to create personally owned retirement accounts as a part of Social Security reform. The next day, at a public high school in suburban Virginia, he proposed new spending programs for the Department of Education's No Child Left Behind Act. ...increases in federal education spending have been huge. Bush has grown the Department of Education from $35.7 billion in fiscal 2001 (President Clinton's last budget) to $57 billion this year. Even under Republican leadership, primary and secondary education in America has remained essentially a socialist enterprise: Government owns the major means of production. ...Conservatives in Congress should fight to kill Bush's new federal education spending plan and return to the principles of the Dole platform and the U.S. Constitution. If every American family cannot instantly be given sole ownership of their children's schooling, at least they shouldn't have to pay twice for the schools the government insists on owning.
    http://www.townhall.com/columnists/terencejeffrey/tj20050119.shtml

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Thursday, January 20, 2005 ~ 9:48 a.m., Dan Mitchell Wrote:
U.S. more entrepreneurial than E.U. This is hardly a surprise, but a recent poll finds that Americans display considerably more entrepreneurship than Europeans. The article in the EU Observer cites lack of capital, but fails to mention that investors are unlikely to provide capital when misguided government policies - such as high tax rates - make entrepreneurial activity less profitable:

    The EU continues to lag behind the US when it comes to entrepreneurship, a poll published on Monday (17 January) by the European Commission shows. The survey - conducted on both sides of the Atlantic - shows that nearly twice as many Americans are thinking of setting up their own business (28 percent) than their European counterparts (15 percent). Moreover, the gap appears to be widening. The number of people thinking about starting their own firm increased by eight percent since 2003 in the US, but only by two percent in the EU. ...Encouraging entrepreneurship is a key plank of the EU's so-called Lisbon Strategy - its aim to be the most dynamic, knowledge-based economy in the World by 2010. But in this, as with many aspects of the Lisbon Strategy, the EU appears to be going backwards rather than forwards.
    http://euobserver.com/?aid=18157&rk=1

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Wednesday, January 19, 2005 ~ 11:19 a.m., Dan Mitchell Wrote:
Don't let the war on terror turn into a war on freedom. Walter Williams warns that politicians are undermining civil liberties by making financial institutions spy on customers. These so-called anti-money laundering laws are extremely costly, yet they yield almost no benefits in the war on crime and terror:

    Being too safe from terrorist attacks can be costly in at least a couple of ways. The most costly is our willy-nilly acceptance of government intrusions on our liberties and privacy in the name of security. For just one example, banks, brokerage houses, insurers and other financial institutions have been turned into state informers who must notify the Treasury Department about "suspicious" transactions. A customer's attempt to maintain financial privacy can be seen and reported as a suspicious transaction. Our financial records can be subpoenaed and examined even if there is no evidence of wrongdoing. Government officials have always wanted open access to our financial records; the war against terrorism gives them the cover to do so. Here's what might be proof: How about an amendment to the Patriot Act whereby any information gathered under its provisions cannot be used in a court of law unless it can be tied to terrorist activity? I'm guessing that few politicians and law enforcement authorities would agree to such an amendment. Most vital to the conduct of any war, including a war on terrorism, is a vibrant, flexible economy. There's a possibility that massive volumes of security regulations and massive security expenditures can weaken our economy and thereby threaten national security.
    http://www.townhall.com/columnists/walterwilliams/ww20050119.shtml

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Wednesday, January 19, 2005 ~ 10:47 a.m., Andrew Quinlan Wrote:
U.S. tax cut also yielding beneficial results. President Bush's reduction in the double-tax on dividends is reaping big rewards. Both dividends and investment are increasing, exactly as supply-theory predicted:

    The 2003 dividend tax cut is prompting US firms to pay out considerably more of their profits in the form of dividends, recent data has revealed. After US companies paid out a record $181 billion in dividend payments to investors last year, the latest estimate from Standard & Poor's predicts that this figure will be surpassed in 2005, with a 12% increase in dividends over the previous year's figures expected. Dividend payments by firms in the S&P 500 dipped significantly between 1980 and 2002, from 469 to 351, as US company bosses generally preferred to reinvest profits within the business. However, the tax cut package passed in 2003, which reduced dividend taxation for qualifying shares to 15%, was seemingly the catalyst for an almost instantaneous reversal in this trend. ...The tax cut also appears to have boosted equity income mutual funds, while specialist mutual funds have been created since 2003 to take advantage of the cut. Last year, a reported $25 billion was placed into equity income funds by investors - almost quadrupling the $6.1 billion channelled into the funds during 2002, the year prior to the tax cut.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18611

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Wednesday, January 19, 2005 ~ 9:53 a.m., Dan Mitchell Wrote:
Austrian tax cut yields solid results. Tax-News.com reports that foreign investors are plowing money into Austria now that the corporate tax rate has been reduced to just 25 percent. This means, of course, that the "cost" of the tax cut will be far lower than "static" estimates would suggest - meaning that better tax policy is a win-win situation for both the private sector and politicians:

    Figures published by an Austrian government agency have shown a marked rise in foreign investment in anticipation of the country's decision to cut its corporate income tax rate by 9% this year. According to the Austrian Business Agency, which is the national investment promotion company, there was a 30% increase in successfully concluded investment projects last year compared to 2003, a rise that has been attributed in large part to a cut in corporate tax to 25% from 34% which took effect on January 1. "The business results already reflect the positive impact of the tax reform measures which just took effect," noted Martin Bartenstein, Austrian Minister for Economic Affairs. In addition to the corporate tax cut to one of the lowest levels in the EU, the reforms also contained a number of measures designed to reduce the tax burden on multinational firms using Austria as a base for regional headquarters.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18616

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Tuesday, January 18, 2005 ~11:14 a.m., Dan Mitchell Wrote:
Market-based benefits of Swiss health care system. A Techcentralstation.com article discusses the positive features of Switzerland's competition-based health care system, which certainly seems less statist than the U.S. system:

    ...the market is the best solution for almost all areas of human activity, including the provision of health-care services. Public funding comes only when the private sector fails. What a difference when compared to the statist approach prevailing in Scandinavia, United Kingdom, Canada, Czech Republic and many other countries. Also, "public" does not inevitably mean "state". Swiss health care is extremely decentralized. Switzerland does not have any Ministry of Health. Every canton and every self-governing administration unit is in charge of its own regulation, hospital accreditation, and funding. Thus, there are 26 slightly different systems in a country with a population of 7 million. A statist bureaucrat will immediately think of the chaos that must reign there. But an economist sees a different phenomenon: competition. ...the system is primarily market-based. There are about 90 competing health-insurance companies. Patients are completely free to choose their insurance company, general practitioner, and specialist. The funding from public resources accounts for some 15 percent of the total cost. About 10 percent is covered from old-age or disability insurance. Health-insurance firms cover almost a half of the expense. About a quarter is financed by the patients in direct payments. The remaining share of the cost is divided between cantons, cities, and the federal government. There are no officials who would decide how much money should flow into the system. No bureaucrat decides, for instance, that an insurance company pays a hospital about EUR5 per hour for the use of an operating theatre. Everything is a matter of market relations between the patients, insurance companies, and health-care facilities. ...With equal costs, a system based on market prices will always be more efficient than a state-governed one with administrative prices. The money will be used more effectively. Taxpayers will not subsidize poor management of hospitals. A facility or a doctor that provides bad services will go bankrupt. Public subsidies are directed to poor patients, not to poor hospitals...
    http://www.techcentralstation.be/011105F.html

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Tuesday, January 18, 2005 ~ 10:30 a.m., Dan Mitchell Wrote:
Demographic changes increase economic damage of tax-and-transfer entitlement programs. Robert Samuelson writes in the Washington Post that entitlement programs for the elderly are becoming a huge burden for taxpayers. This problem exists because politicians in the past unfortunately chose to create government-run health and retirement schemes rather than systems based on private savings:

    The national government is increasingly a transfer mechanism from younger workers (i.e. taxpayers) to older retirees. In fiscal 2004, Social Security ($488 billion), Medicare ($300 billion) and Medicaid ($176 billion) represented 42% of federal outlays. Excluding spending that doesn't go to the elderly, the Congressional Budget Office crudely estimates that these programs pay an average of almost $17,800 to each American 65 and over. ...From 2004 to 2030, the combined spending on Social Security and Medicare is expected to rise from 7% of national income (gross domestic product) to 13%. Two-thirds of the increase occurs in Medicare. ...1935, when Congress passed Social Security, life expectancy at birth in the U.S. was 62; now it's 77. In 1965, when Congress passed Medicare, the 65-and-over population was 9% of America's total; by 2030, it's expected to be 20%.
    http://www.washingtonpost.com/wp-dyn/articles/A8100-2005Jan13.html

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Monday, January 17, 2005 ~ 12:04 p.m., Dan Mitchell Wrote:
Treasury regulators turn gold into lead. Recognizing the adverse impact of high corporate tax rates, Congress last year passed a law temporarily lowering the tax rate on foreign earnings to encourage U.S. companies to repatriate overseas profits. This law is far from perfect - Congress should have enacted a large, permanent across-the-board reduction in the corporate tax rate, but new Treasury regulations will significantly undermine the benefits of the new system by imposing Japanese-style central-planning restrictions on the use of repatriated profits. The Wall Street Journal's excellent editorial page explains:

    An estimated $500 billion in profits remain overseas in part due to a U.S. corporate tax rate of 35% that is among the highest in the industrial world. Congress cut the tax rate to 5.25% for profits repatriated this year in the hope of drawing home some $200 billion or more. But too little of that will ever make it here if the owners of that capital have to take orders from Treasury on how to invest it, as last week's 40-page "guidance" document instructs. "Expenditures that are not permitted investments" include "portfolio investments, stock redemptions, dividends and other shareholder distributions and debt instruments." That covers a lot of economically useful purposes, including balance-sheet strengthening that makes companies better able to compete. As for "permitted investments," Treasury's central planners deign to allow money to be spent on "hiring and training workers," along with "advertising and marketing" and "financial stabilization for purposes of U.S. job retention." They will also tolerate spending on acquisitions, as long as the assets are in the U.S., and to finance tort litigation, also on job-saving grounds. ...corporate managers certainly know better how to use scarce capital than Treasury gremlins who know little about the particular business. The deeper flaw in this thinking is that any distinction between labor and capital is entirely artificial. The investments that most help a company succeed will help both shareholders and workers in the long run. ...The Treasury Department never did like this one-year tax break, fearing the loss of revenue and its temporary nature. We tend to agree on the latter point, and would prefer to make the new rate permanent on all corporate profits since corporations don't really pay taxes. They merely collect them, passing along what they pay to shareholders in lower returns, workers in lower pay, or customers in higher costs. But now that the bill is law, Treasury should at least try to make the best of it. As for any alleged tax revenue loss, a tax rate of 5.25% on something is a lot better than 35% on nothing. Overseas profit can easily stay put, and if the new Treasury rules prevail a lot of it will.
    http://online.wsj.com/article/0,,SB110591648390827359,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Monday, January 17, 2005 ~ 11:37 a.m., Dan Mitchell Wrote:
Personal retirement accounts are not risky. A stock market expert explains in the Wall Street Journal that volatility in financial markets does exist, but long-term investors enjoy very high returns with very little risk. Unfortunately, as Michael Barone discusses in a Townhall.com column, politicians from both parties sometimes put short-term politics above the nation's long-term interests:

    A frequent criticism of the proposal to allow individuals to invest a portion of their Social Security contributions in private accounts is that it would subject retirees to unconscionable risks that could leave many of them in poverty. The AARP advertises that private accounts will turn "Social Security into Social Insecurity." ...From 1926 to the present, annual rates of return from the stock market have ranged within a rough band of negative 40% to positive 50%, with the average just over 10%. Clearly, an investor cannot count on a positive stock market return in any single year. But consider an investor who can put retirement money in the stock market for 25 or 35 years. For all 25- and 35-year investment periods from 1926 to 2004, investors have always earned positive rates of return. That was true even of investors who put their money in the market at the 1929 peak, just before the Great Depression. The worst return for a 25-year investor starting in 1929 was about 6%. For a 35-year investor, it was about 8%. Long-term investors can invest in the stock market with considerable confidence that they can earn a rate of return far above the 1% or 2% return afforded by the Social Security system. ...Could it be that future stock market returns will be much lower than in the past? Of course! But even if returns are only half of their historical average, younger workers are likely to be better off with private accounts. Could we suffer a depression even more devastating than that of the 1930s? In such an unlikely Armageddon scenario, poor returns on private accounts would be the least of our worries. The current pay as you go system would become even more untenable.
    http://online.wsj.com/article/0,,SB110591657261627365,00.html?mod=opini on&ojcontent=otep   (subscription required)

    Democrats want to preserve Social Security as it is, as a safety net for the elderly, and they fear the change in attitude that may come as all workers become investors. They say that taxes can always be raised a point or two because they think it's a good thing for government to take a larger share of national income and redistribute it progressively. ...Connecticut Rep. Rob Simmons, a Republican, said he is not concerned about the plight of Social Security in 2042 because "I will be dead then." Simmons, who was born in 1943, probably will be. But his constituents who turn 30 this year will turn 67 -- retirement age -- in 2042. They may not appreciate it if their congressman is indifferent about the solvency of Social Security in the year they're scheduled to retire.
    http://www.townhall.com/columnists/michaelbarone/mb20050117.shtml

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Monday, January 17, 2005 ~ 11:03 a.m., Dan Mitchell Wrote:
Media bias, Part III. Having been exposed as left-wing flacks following the Rathergate fiasco, one would think 60 Minutes would try to avoid dishonest politically-motivated segments. But the recent pro-gun control propaganda illustrates that CBS puts ideology about journalistic ethics. John Lott of the American Enterprise Institute explains:

    Ironically the day before CBS finally released its report on the 60 Minutes Memogate scandal, 60 Minutes was again stirring up fears about how terrorists would use 50-caliber rifles to attack Americans. Last year it was the semi-automatic assault-weapons ban before it expired. Sen. Charles E. Schumer (D., N.Y.) claimed the ban was "the most effective measures against terrorism that we have." Of course, nothing happened when the law expired last year. There was nothing unique about the guns that are banned under the law. Though the phrase "assault weapon" conjures up images of the rapid-fire machine guns used by the military, in fact the weapons covered by the ban function the same as any semiautomatic hunting rifle; they fire the exact same bullets with the exact same rapidity and produce the exact same damage as hunting rifles. ...For years gun-control groups have tried to ban 50-caliber rifles because of fears that criminals could use them. Such bans have not been passed these guns were simply not suited for crime. Fifty-caliber rifles are big, heavy guns, weighing at least 30 pounds and using a 29-inch barrel. They are also relatively expensive. Models that hold one bullet at a time run nearly $3,000. Semi-automatic versions cost around $7,000. Wealthy target shooters and big-game hunters, not criminals, purchase them. The bottom line is that only one person in the U.S. has been killed with such a gun, and even that one alleged case is debated. ...The worst abuse that 60 Minutes focused on was the Branch Davidians in Waco in 1993 having a 50-caliber gun. Yet, no one was harmed with the gun, and the Davidians surely had many other weapons. 60 Minutes also tried to scare people with incendiary and explosive ammunition, but the ammunition discussed is already illegal.
    http://www.nationalreview.com/comment/lott200501140924.asp

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Monday, January 17, 2005 ~ 10:11 a.m., Andrew Quinlan Wrote:
Social Security reform is a moral issue. President Bush correctly notes that lawmakers have a moral obligation to fix Social Security by creating personal retirement accounts. This reform also will have a desirable effect since it will transform millions of workers into owners of capital - which is precisely why the left is so bitterly opposed to change:

    Facing an intensifying fight over his plan to revamp Social Security, President Bush insisted on Saturday that the retirement program was in peril and he had a moral responsibility to fix it. "Saving Social Security is an economic challenge. But it is also a profound moral obligation," Bush said in his weekly radio address. He described the 70-year-old U.S. retirement system as broken and urged that it be changed to allow younger workers to divert a portion of their payroll taxes into private stock and bond accounts. ...The AARP, which represents 35 million senior citizens, is spending $5 million this month a newspaper ad campaign to beat back Bush's plan. Labor unions are also strongly opposed to it. ...many Democrats said the use of such descriptions exaggerates the problem because even under pessimistic scenarios, workers would still be paying into Social Security in 2042 and retirees would still receive benefits, although at a reduced rate.
    http://reuters.myway.com/article/20050115/2005-01-15T163859Z_01_N15 665852_RTRIDST_0_NEWS-RETIREMENT-BUSH-DC.html

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Sunday, January 16, 2005 ~ 11:15 a.m., Dan Mitchell Wrote:
Government program subsidizes bad business decisions. Politicians have an unfailing ability to take a bad situation and make it worse. Thirty years ago, they responded to the bankruptcy of some defined-benefit pension plans (which are plans that promise retired workers a specific annual payment, ostensibly financed by setting aside investments) by creating a program to bail out companies that made bad promises. This program, not surprisingly, encouraged imprudent decisions since companies knew they could pass their costs to Uncle Sam. Instead of subsidizing "moral hazard," politicians should have encouraged a shift to defined-contribution pensions, which automatically are stable since individuals own their own retirement assets. George Will explains the problem associated with the current system:

    ...the 30-year-old Pension Benefit Guaranty Corp...may be necessary, but it causes "moral hazard" and is pertinent to the debate about how to guarantee the benefits of the biggest pension system, Social Security. The PBGC is a government entity created in 1974 after some bankruptcies left thousands of retirees without pensions. The PBGC insures -- but not completely -- companies' pension funds. ...the agency's $8 billion surplus in 2001 has become a $23 billion deficit, a reversal largely the result of the airline industry's crisis, the worst of which is still to come. ...Moral hazard exists when government policy creates incentives that make bad behavior rational. One example is the policy of bailing out countries whose reckless spending policies are encouraged by banks' reckless lending. Another example is a PBGC that assumes substantial responsibility for pension promises that companies have found convenient to make. The PBGC will reduce its potential contribution to moral hazard by increasing fees paid by companies with poor credit ratings. Even more important, the administration wants the PBGC empowered to prevent financially parlous companies from making pension promises they are apt to eventually make a government burden. All this could cause some companies to abandon defined-benefit plans, in which the amount of benefits paid to a retiree is fixed in advance in accordance with the plan's formula.
    http://www.washingtonpost.com/wp-dyn/articles/A10933-2005Jan14.html

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Sunday, January 16, 2005 ~ 10:29 a.m., Dan Mitchell Wrote:
Media bias, Part II. In a column on the Rathergate scandal, Charles Krauthammer notes that CBS's forged-memo story is just the tip of the iceberg. The establishment press is overwhelmingly left-of-center:

    One particularly impartial poll, taken by the Freedom Forum in 1996, found that of 139 Washington bureau chiefs and congressional correspondents, 89 percent supported Bill Clinton in the previous election, vs. 7 percent for George H.W. Bush. The rest of America went 43 percent to 37 percent. ...The Project for Excellence in Journalism did a careful study of mainstream media stories in September and October. The numbers are stunning. To take one example, Oct. 1-14, 2004: Percent of stories about Bush that are negative -- 59 percent. Percent of stories about Kerry that are negative -- 25 percent. Stories favorable to Bush? 14 percent. Favorable to Kerry? 34 percent. That is not a difference. That is a chasm. And you do not have to be a weatherman to ascertain wind direction. When, in February 2003, Gallup asked Americans their perception of media bias, 45 percent said the media were too liberal, 15 percent said they were too conservative. That's 3 to 1. Bias spectacularly, if redundantly, confirmed by Rathergate.
    http://www.townhall.com/columnists/charleskrauthammer/ck20050114.shtml

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Sunday, January 16, 2005 ~ 9:54 a.m., Andrew Quinlan Wrote:
Young Americans reject leftism. An Opinionjournal.com column comments on the growing support for conservative policies among younger Americans:

    ...conservative organizations, ranging from gun clubs (Harvard's has more than 100 students blasting away) to impudent newspapers and magazines, are budding at schools everywhere--even at Berkeley, crucible of the 1960s' student left. And right-of-center speakers invited by these clubs are drawing large and approving crowds. "At many schools, those speeches have become the biggest events of the semester," Time magazine reports. One such talk at Duke, by conservative author and former Comedy Central host Ben Stein, attracted "a bigger crowd than the one that had come to hear Maya Angelou two months earlier." The bustle reflects a general rightward shift in college students' views. Back in 1995, reports UCLA's Higher Education Research Institute, 66% of freshmen wanted the wealthy to pay higher taxes. Today, only 50% do. Some 17% of students now value taking part in environmental programs, half of 1992's percentage. Support for abortion stood at two-thirds of students in the early 1990s; now it's just over half. A late-2003 Harvard Institute of Politics study found that college students had moved to the right of the overall population, with 31% identifying themselves as Republicans, 27% as Democrats and the rest independent or unaffiliated. "College campuses aren't a hotbed of liberalism any more," institute director Dan Glickman comments. "It's a different world." Youthful attitudes are volatile, of course, but this rightward trend may intensify. In a mock election run by Channel One, which broadcasts in public schools, 1.4 million high school students re-elected George W. Bush in a landslide, with 55% of the popular vote and 393 electoral votes--greater than the 51% of the popular vote and 286 electoral votes he actually won.
    http://www.opinionjournal.com/extra/?id=110006149

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Saturday, January 15, 2005 ~ 1:03 p.m., Dan Mitchell Wrote:
Media bias, Part I. The Weekly Standard thoroughly dissects the whitewash report produced by CBS on Dan Rather's attempt to influence the 2004 presidential elections with a story based on forged documents:

    After spending three months on an investigation that must have rung up hundreds of thousands of dollars in billable hours, the team of lawyers hired by CBS to investigate its scandalously spurious report about George W. Bush's long-ago National Guard service finally concluded last week that CBS shouldn't have aired the September 8 broadcast at all. Former attorney general Dick Thornburgh and former Associated Press chief Louis D. Boccardi, who led the investigative panel, declared that there had simply been too many questions about the veracity of the supposedly bombshell documents on which it relied. ...Stockholders in Viacom, the parent company of CBS, may want to grill network president Leslie Moonves about fiduciary responsibility. Not because CBS has been forever tainted by the scandal, though it surely has been. Simply put, there was no reason for Moonves to spend half a million dollars of the network's money on a report that could have been written for free by an intern with a dial-up Internet connection and a decent knowledge of how to use Google effectively. ...According to the report, the problem wasn't exactly that Mapes and Company perpetrated a fraud. Instead, the problem was really one of carelessness. They didn't properly establish the "chain of custody" of the documents. They didn't pay enough attention to the inability of document experts to verify those documents. And they kept on defending themselves on the air even after the controversy began swirling around the documents. "If you're looking for a villain in this story, we have one," Thornburgh said on PBS last week. "It's haste; the haste with which this program was put together short-cut a lot of the necessary vetting that had to be done in order to authenticate the whole process." This is a preposterous line of argument. The problem with the story had nothing to do with the purity or lack thereof of the reporting process--and anyway there is no such thing as a reporting process. If the documents had not been exposed as fabrications, Mary Mapes and CBS News would still have made every mistake for which they are tasked in the report--and yet they would have been garlanded, hailed, rewarded with journalism prizes. The haste for which they are now being attacked would instead have been considered wondrously aggressive competitiveness. ...The problem with the story wasn't that it was rushed to air. The problem with the story wasn't that it violated journalistic protocols. The problem was that the story was a lie based on a fraud, and a conveniently timed lie at that--coming as it did only eight weeks before the nation was to go to the polls. And the lie was laid out before the world for all to see in a matter of hours. The documents weren't exposed as possible fabrications. They were exposed as undeniable fabrications. Why is this so hard for CBS and for Thornburgh-Boccardi to accept? Because once you accept their spuriousness, you can't stop there. You have to ask the question: Why would everybody at CBS fall for such crude forgeries--forgeries so blatant that a lawyer with no particular expertise in document verification could spot them a few hours after the fact? ...On the matter of liberal bias in the mainstream media, Thornburgh and Boccardi chose to conclude that they did "not find a basis to accuse those who investigated, produced, vetted or aired the Segment of having a political bias." In this way, they sought to continue CBS's effort at plausible deniability, which was very nice of them but also profoundly stupid of them.
    http://www.weeklystandard.com/Content/Public/Articles/000/000/005/146gic rb.asp?pg=1

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Saturday, January 15, 2005 ~ 12:26 p.m., Dan Mitchell Wrote:
E.U. wants U.K. taxpayers to finance bigger share of wasteful budget. The British already are one of the biggest net contributors to the European Commission's budget. In exchange, they get nothing but wasteful bureaucracy and an absurd system of agricultural subsidies. Amazingly, the European budget commissioner wants U.K. taxpayers to send an additional $4.6 billion to Brussels every year:

    The European budget commissioner has urged the UK to give up its annual rebate worth around 4.6bn euro. In an interview in the Times on Friday (14 January), Dalia Grybauskaite said, "If other member states started to negotiate just on physical amounts of money, you are forgetting solidarity, a core policy of the European Union. If you have bad times, you have been helped. If you have good times, you help others". ...According to the Times, without the rebate, the UK would have paid 14 times as much as France or Italy to the EU.
    http://euobserver.com/?aid=18136&rk=1

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Saturday, January 15, 2005 ~ 11:18 a.m., Dan Mitchell Wrote:
Another perverse effect of foreign aid. Sally Satel explains in National Review that sending "grief counselors" to tsunami-ravaged regions is a waste of resources:

    Ganesan ...is the only psychiatrist for the country's entire eastern population of 1.3 million. Since the giant waves hit, Ganesan (who goes only by one name as is customary in his country) has been coordinating foreign aid, distributing medicine to children, and transporting corpses in his pick-up truck. What he doesn't do is therapy. "To talk about psychological needs when you've got thousands of people using one toilet in a refugee camp - it's absurd," Dr. Ganesan, 41, told a Washington Post reporter. He is right. The main issue at this stage is to ensure the physical safety, locate missing friends and family members, and disseminate accurate information. Schools opened on January 10, the end of the country's annual holiday. More than any therapy this will promote effective coping by maintaining routines for children and keeping them busy. In short, the prescription is this: Minimize disorder and plan for the future - and for the vast majority, coping will follow naturally. This kind of approach is anathema to a swath of contemporary mental-health workers. Dubbed "trauma tourists" by some mischievous colleagues of mine, they are quick to impose Western-style therapies without regard to victims' needs, their natural healing systems, or their very conception of what "mental illness" might be. "This is not what a doctor should do," says Ganesan who has tried to talk agencies out of sending grief counselors.
    http://www.nationalreview.com/comment/satel200501140730.asp

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Saturday, January 15, 2005 ~ 9:55 a.m., Andrew Quinlan Wrote:
More dirt on UN scandal. The United Nations is a thoroughly corrupt and useless organization, but there is another lesson to be learned from the oil-for-food scandal. Every international bureaucracy and government develops a cadre of parasitical "private" contractors who figure out how to milk the system for big piles of cash. This is just one way how government spending has a negative multiplier effect. The Wall Street Journal has the latest tawdry details:

    The audits -- now available at www.iic-offp.org -- demonstrate beyond a shadow of a doubt that U.N. headquarters was well aware of serious problems with the program. They also elucidate the motives the Secretariat might have had for sending out a flurry of "hush" letters threatening program contractors with legal action if they cooperated with U.S. investigators. That's because the audits shine a particularly unflattering light on the work of the companies charged with inspecting the oil and goods traded under the program -- Saybolt (oil), and Lloyd's Register and Cotecna (humanitarian imports). ...One persistent problem was billing for time that inspectors didn't spend at their posts -- some 1,800 man-days in the case of Lloyd's Register. Not surprisingly then, the audits also show consistent failure by the inspectors to fulfill their primary duty of independent, on-site verification of goods, resulting in some getting through that were later dubbed "unfit for human consumption." And what was the response of headquarters to concerns of this type? To largely brush them aside on the grounds that tackling them could, in the auditors' words, create "backlog/delays" and -- ironic, isn't it? -- "possibly bring Organization [i.e., the U.N.] into disrepute." ...Particularly troubling to investigators should be the Cotecna audit. When the Oil for Food scandal started to break early last year, Mr. Annan's office took pains to stress that his son's relationship with the Swiss inspections company ended before -- albeit just weeks before -- it won a major program-related contract. But we recently learned that was untrue, and that Kojo Annan remained on the Cotecna payroll throughout the program and until February of last year. ...Now we see that one of the audits the U.N. was hiding further calls into question its version of the Cotecna-Kojo story -- that the company won its contract by the simple virtue of being the lowest bidder. In fact, wrote the auditors, Cotecna successfully upped its asking price within days of winning the contract without triggering a competitive rebid, an outcome that was probably "not appropriate." And in November 1999 Cotecna proposed a new fee structure "exactly equal to the offer of the second lowest bidder (Intertrek Testing (UK))."
    http://online.wsj.com/article/0,,SB110557818843324880,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Friday, January 14, 2005 ~ 10:32 a.m., Andrew Quinlan Wrote:
Bush Administration may finally get tough on spending. Larry Kudlow explains a strong economy is generating more tax revenue. Combined with a small amount of budget restraint (6.1 percent spending growth - still too much), this is reducing the budget deficit. But it's not the deficit that matters; the size of government is the real economic danger. And as Kudlow (author of an excellent blog, http://www.lkmp.blogspot.com) writes in National Review, the White House finally may get serious about controlling the growth of the welfare state:

    In the first three months of the fiscal year that began last October, cash outlays by the federal government increased by 6.1 percent while tax collections grew by 10.5 percent. When more money comes in than goes out, the deficit shrinks. At this pace, the 2005 deficit is on track to drop to $355 billion from $413 billion in fiscal year 2004. As a fraction of projected gross domestic product, the new-year deficit will descend to 2.9 percent compared with last year's deficit share of 3.6 percent. ...According to the Washington Post, the Bush budget totals planned for fiscal year 2006 may be essentially unchanged from the totals for fiscal year 2005 (excluding defense and homeland security). According to reporter Jonathan Weisman, the administration's first really tough budget request (due out next month) "would freeze most spending on agriculture, veterans and science, slash or eliminate dozens of federal programs, and force more costs, from Medicaid to housing, onto state and local governments." ...Sen. Judd Gregg, the New Hampshire Republican who is the current chair of the upper chamber's budget committee and a long-time Bush ally, is set to support the administration's new budget discipline. This includes, by the way, Bush's plan to reduce Social Security benefits by replacing wage indexing with a price-level formula and extending the retirement age - one or the other, or both - in return for personal saving accounts. By the way, Treasury Secretary John Snow just completed a Wall Street tour where leading bond traders told him not to sweat the transitional costs for personal accounts. The traders said that an additional $100 billion a year over the next decade for transitional financing will be easily manageable. "A rounding error," one senior trader told Snow.
    http://www.nationalreview.com/kudlow/kudlow200501131420.asp

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Friday, January 14, 2005 ~ 10:21 a.m., Dan Mitchell Wrote:
More taxes on investors and entrepreneurs are not the answer to Social Security's problems. Amity Shlaes of the Financial Times has a Townhall.com column explaining why the Social Security problem should not be addressed by higher taxes - especially an increase in the amount of income subjected to the payroll tax. She correctly notes that a big marginal tax rate increase on small business entrepreneurs would impose European-type tax rates on a vital sector of the US economy.

    The cap - as technicians refer to it - is the earnings ceiling above which US workers' income is free of government pension taxes. Currently, workers pay into Social Security 6.2 per cent in tax on only the first $90,000 they earn. Their employer matches that, taking the total contribution to 12.4 per cent. Since the amount of pension higher earners may receive from Washington after they retire is limited, the cap makes sense. ...Here is the scenario that imperils the cap: Republicans will push for privatising a maximum share of the New Deal programme - one, or two, or four percentage points, say, out of the 6.2. ...Still, cutting such a deal would be crazy. For while the marginal tax increase involved sounds minor, it would affect not only households but also engines of small growth such as the "S corporation", a common format for many small companies. Senator Robert Bennett of Utah, an avid cap defender, started a time management company called Franklin Quest a few decades ago as an S corporation. He believes much of its very strong growth was connected with the low marginal income tax rate of 28 per cent set in 1986 by Congress and President Reagan. "Everyone assumes this is about taxing Michael Jordan or Warren Buffett," he tells me. "But really it is a massive hidden tax on small business." ...Lifting the cap would turn the US into a country that is much more heavily taxed - and therefore less enterprising. As the Nobel Prize winner Edward Prescott points out, studies comparing high-tax societies in Europe with the lower-tax US show that workers respond to the incentives supplied by marginal tax rates. Europeans in the market sector, by which Mr Prescott means the taxable private sector, work a full 50 per cent less than Americans.
    http://www.townhall.com/columnists/amityshlaes/as20050113.shtml

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Friday, January 14, 2005 ~ 9:47 a.m., Dan Mitchell Wrote:
Opponents of personal retirement accounts favor higher taxes and benefit cuts. The left demagogues against Social Security reform, asserting that President Bush's plan will not yield as many benefits as promised - at least in theory. But when pressed to say how they would fix the system, they propose huge tax increases and big benefit cuts. This creates an interesting choice: Will Americans prefer the uncertain benefits of personal accounts or the certain costs of propping up the current system?

    Democratic Strategist Bob Beckel recently proposed on Fox News that anyone with an annual income higher than about $50,000 at retirement age should get nothing from Social Security. Could Congress really do that? Yes, it could. Social Security's promises are subject to change without notice. Benefits have already been cut by raising the eligibility age to 67 and raising the amount of benefits subject to tax from zero to 85 percent. That was barely a hint of what opponents of private accounts now have in mind. Most are less candid than Beckel, yet they also advise slashing Social Security benefits for those frugal enough to save for retirement or industrious enough to keep working. Most would also increase Social Security tax rates on the same politically disfavored group. If this ever happened, frugality and industriousness would become foolhardy and therefore rare. "Saving Social Security" by Peter Diamond and Peter Orszag, for example, relies on increased taxes on higher earners for 42 percent of the hoped-for reduction in unfunded debt, yet benefits to the top 15 percent would also be cut by a third. The other half of their savings comes from "a universal legacy charge on future workers and beneficiaries, roughly half in the form of benefit reductions for all beneficiaries becoming eligible in or after 2023, and the rest in the form of ... increases in the payroll tax from 2023 onward"
    http://www.townhall.com/columnists/alanreynolds/ar20050113.shtml

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Friday, January 14, 2005 ~ 8:14 a.m., Dan Mitchell Wrote:
Teacher unions hinder education, harm children. A Wall Street Journal column explains why the National Education Association and other teacher unions automatically are a threat to quality education. And in his Townhall.com column, Tom Sowell explains one of the adverse results - kids who don't learn to think:

    The teachers unions have more influence over the public schools than any other group in American society. They influence schools from the bottom up, through collective bargaining activities that shape virtually every aspect of school organization. And they influence schools from the top down, through political activities that shape government policy. They are the 800-pound gorillas of public education. Yet the American public is largely unaware of how influential they are -- and how much they impede efforts to improve public schools. ...When the teachers unions want government to act, the reforms they demand are invariably in their own interests: more spending, higher salaries, smaller classes, more professional development, and so on. There is no evidence that any of these is an important determinant of student learning. What the unions want above all else, however, is to block reforms that seriously threaten their interests -- and these reforms, not coincidentally, are attempts to bring about fundamental changes in the system that would significantly improve student learning. ...If we really want to improve schools, something has to be done about the teachers unions. The idea that an enlightened "reform unionism" will somehow emerge that voluntarily puts the interests of children first -- an idea in vogue among union apologists -- is nothing more than a pipe dream. The unions are what they are. They have fundamental, job-related interests that are very real, and are the raison d'etre of their organizations. These interests drive their behavior, and this is not going to change. Ever.
    http://online.wsj.com/article/0,,SB110557289419624649,00.html?mod=opini on%5Fmain%5Fcommentaries (subscription required)

    Watch old newsreels of Hitler and watch the adoring and enraptured look on the faces in his audience. Then read what he said and see if it makes any sense whatever. Yet he convinced others -- and himself -- that he had a great message and a great mission. The same could be said of Lenin, of Mao, of Pol Pot, and of countless other despots, large and small, who brought devastation to the people they ruled. It is not even necessary to look solely at government leaders. Cult leader Jim Jones used the same ability to sway people's emotions and numb their brains to lead them ultimately to mass deaths in his Guiana compound. Instead of trying to propagandize children to hug trees and recycle garbage, our schools would be put to better use teaching them how to analyze and test what is said by people who advocate tree-hugging, recycling, and innumerable other causes across the political spectrum. The point is not to teach them correct conclusions but to teach them to be able to use their own minds to analyze the issues that will come up in the years ahead, which may have nothing to do with recycling or any of the other issues of our time.
    http://www.townhall.com/columnists/thomassowell/ts20050113.shtml

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Friday, January 14, 2005 ~ 7:32 a.m., Dan Mitchell Wrote:
Is Germany going to liberalize? Tax-news.com reports that Germany's socialist government is contemplating a significant reduction in the taxation of dividends and interest. When anti-market politicians are forced to consider supply-side tax cuts, this is the best proof of the liberalizing power of tax competition:

    Germany's ruling Social Democrats (SPD) announced at the weekend that they do not intend to release details on proposed tax reforms before 2006, scotching a report that the party will present tax reform proposals by the end of this year. ...However, Hans Eichel's working group on tax reform is supposedly considering unifying tax on interest and dividends at a rate of 30%, meaning a substantial cut for higher rate earners who currently pay these taxes at the top rate of income tax, which in Germany is 42%.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18528

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Thursday, January 13, 2005 ~ 12:17 p.m., Dan Mitchell Wrote:
Flat tax Godfather takes readers on a world tour. Alvin Rabushka of Stanford University's Hoover Institution helped launch the flat tax in the early 1980s. His idea hasn't taken root in America, but Dr. Rabushka explains in the Wall Street Journal that Eastern European nations are providing a great lesson about the benefits of tax reform:

    President Bush has just established another commission of nine distinguished members, but it will encounter the usual obstacles. A new round of hearings is not needed. A better approach is for the members to visit the eight countries in Central and Eastern Europe that have adopted the flat tax in the last 10 years and study their experience. Estonia was first, implementing a 26% flat tax in 1994. The relatively high rate was set to balance its budget, a requirement of its new constitution. Since then, buoyed by strong economic performance, Estonia has eliminated the corporate tax on retained earnings, taxing only distributed profits. This year the rate has been lowered to 24% and will fall to 20% in 2007. Next, in 1995, was Latvia with a 25% rate. But Russia is the big story. It took the tax reform world by storm in 2000 with a 13% flat tax, replacing its previous three-bracket system that topped out at 30%. The results: the economy has enjoyed four years of sustained growth. Real (inflation-adjusted) ruble revenue from the personal income tax rose 25.2% in 2001, 24.6% in 2002, 15.2% in 2003, and 16% in the first half of 2004. At the end of just four years, total receipts have more than doubled -- despite, or rather because of, a reduction in the top rate from 30% to 13%. ...In 2003 Serbia implemented a comprehensive 14% flat tax on personal and corporate income. Not stopping at 14%, Serbia has stated its intention to further reduce tax rates in the near future. Taking a page from Russia's playbook, Ukraine implemented a 13% flat tax in 2004, replacing five brackets ranging from 10% to 40%. Dividends and interest on bank deposits are taxed at an even lower 5% rate beginning 2005. ...In 2004 Slovakia implemented a 19% flat tax on both individual and corporate income. The measure passed by a vote of 85-48, and garnered the support of some opposition deputies. ...Georgia's Mikhail Saakashvili was inaugurated as president on Jan. 25, 2004. Five days later he stated that one of his economic priorities was to introduce a new flat-rate tax system. On Dec. 22, 2004, by an overwhelming vote of 107-11, Georgia's parliament approved a 12% flat tax on personal income, replacing the previous system of four rates from 12% to 20%. The flat tax, which took effect on Jan. 1, 2005, reduced the size and weight of the old code by 95%. ...Trajan Basecu, Bucharest's mayor, won a surprise victory as president of Romania. In his campaign he promised to work for a 16% flat tax on both personal and business income, to replace a complicated system of five rates ranging from 18% to 40% on personal income and 25% on corporate income. The first act of his new government on Dec. 29 was the adoption of the flat tax as pledged, effective Jan. 1. Opposition parties in other Eastern European countries, such as the Czech Republic and Poland, have promised to enact a 15% flat tax if they are elected. ...If the new Bush commission cannot arrange a road trip to Central and Eastern Europe to see firsthand the success of the flat tax, perhaps it might do the next best thing -- invite the finance ministers, prime ministers, and economic experts of these countries to testify.
    http://online.wsj.com/article/0,,SB110549261681023590,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Thursday, January 13, 2005 ~ 11:48 a.m., Andrew Quinlan Wrote:
Lower tax rates, not tax amnesties, are solution to tax evasion. Tax-news.com reports that Germany's tax amnesty has pulled in less than 20 percent of the revenue sought by the government. This should not be a surprise. As the Wall Street Journal explains, tax amnesty programs don't solve the problem - oppressive tax rates - that caused money to go underground:

    The German finance ministry has confirmed that revenues collected from the government's tax amnesty surpassed EUR900 million during 2004. ...revenues remained substantially lower than the optimistic EUR5 billion overall target set by Finance Minister Hans Eichel at the commencement of the amnesty. "It is always difficult to estimate the income from such a tax amnesty as no one knows how many people will take up the offer," Finance Ministry spokesman Oliver Heyder-Rentsch told Bloomberg.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18533

    Each amnesty has its own set of rules and tax rates, but the principle is the same in each case -- lower the tax rate on undeclared assets, and taxpayers, motivated by a desire to come clean or the need to liquefy assets hidden abroad, will bring the money home for fear of facing a higher rate and possible tax-avoidance penalties later. Or, to put it another way, tax rates that are too high induce people to shelter their assets from taxation. Lower the rates, and you get more revenue. It's the old Laffer curve at work again. ...A 2000 paper by Independent Institute scholar Friedrich Schneider may offer a clue. In "Dimensions of the Shadow Economy," Mr. Schneider estimates that Belgium had a black economy equal to over 22% of GDP in 1996 -- that's EUROS 40 billion a year or so that has to go somewhere. Mr. Schneider then compares the estimated size of the shadow economy with the overall tax burden and comes to the following conclusion: "[T]he higher the social security and tax burden, the larger the shadow economy." We would only add: The larger the shadow economy, the more tax money is lost and the higher taxes must go to replace the revenues that go missing. The flurry of tax amnesties around Europe mark a recognition that this problem has gotten out of hand, but they treat the symptom rather than the disease. Excessive tax rates lead to evasion and expatriation of assets. Last year's amnesties suggest that the lower the amnesty rate, the higher the tax take. Permanently lower tax rates would yield many of the benefits of the temporary tax amnesties every day of the year.
    http://online.wsj.com/article/0,,SB110548412988423298,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Thursday, January 13, 2005 ~ 9:37 a.m., Dan Mitchell Wrote:
Black politicians vs. black workers. Star Parker explains in her Townhall.com column that African-Americans would greatly benefit if Social Security was transformed into a system of personal accounts. Unfortunately, most black politicians are putting ideology above the interests of their constituents and opposing reform:

    I've just checked out, for instance, what Social Security with individual accounts would mean to a 22-year-old male currently earning $25,000 a year. The calculator reports back that, under the existing system, this individual would get at retirement an annual benefit of $16,199. It also reports that, under the Cato Institute's plan, which would allow half the Social Security tax to be diverted to an individual account, an annuity could be purchased at retirement that would provide $44,036 annual retirement income. This is almost triple the Social Security benefit. What, then, does Cummings have in mind when he says that blacks "can't afford having their money going into private savings accounts"? Isn't it exactly the opposite? It seems that blacks cannot afford to NOT do this. ...Consider that, at a mean annual household income of less than $30,000, the typical black household does not have much spare cash to save. Also consider that most black wage earners pay more in Social Security taxes than in income taxes. The 12.4 percent of every worker's paycheck that gets diverted to Social Security is really the only possible chunk of cash that might otherwise be used for saving and accumulating wealth. I can think of little that would provide a greater boon for the creation of wealth in black America than a provision that would allow black workers to divert their Social Security tax into an individually owned retirement account. ...Black politicians are, unfortunately, playing on the fears of constituents. I also talk to black citizens and I know many are afraid. They have so little experience with ownership and investing that the prospect of getting off the government plantation scares them. Simple investing is not rocket science. The fact that so many black Americans do not know the basics is all the more reason to consider this important reform. You would think that black politicians would view the prospect of wealthier and better-informed black citizens as positive. Why don't they?
    http://www.townhall.com/columnists/StarParker/sp20050111.shtml

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Wednesday, January 12, 2005 ~ 12:03 p.m., Dan Mitchell Wrote:
The US does not have a free-market health system, but other nations are even worse. Walter Williams reviews an excellent new book, "Miracle Cure," (http://www.amazon.com/exec/obidos/tg/detail/-/0936488921//103-1775376-7939 859)  that exposes many of the myths about health care - including the preposterous notion that America has a free market system:

    The recently published "Miracle Cure," by Sally Pipes, president of the San Francisco-based Pacific Research Institute, exposes health-care myths while explaining why the sometimes-touted Canadian style health care isn't the answer. ...the myth that our health-care problems derive from the fact that we have a free-market health-care system. Little can be further from the truth. The government has been the largest participant in our health-care system since the 1960s. Today, the government directly pays for 45 percent of health-care spending. Government intervenes in the form of tax subsidies and costly regulations on private insurers. Regulations imposed on medical practitioners are oppressive. According to a study by PricewaterhouseCoopers, for every four hours that a physician devotes to caring for a Medicare patient, hospital administrators spend 30 minutes on Medicare paperwork. For emergency room care, it's one hour spent on paperwork per one hour spent caring for a patient. ...Americans shouldn't imitate Aesop's dog by looking to Canada's socialized medicine as a solution to our health-care problems and lose what we have. A much smarter move is to repeal previous government-created "solutions" that have marched us nearer to socialism in the provision of medical services. In a word or two, get government out of our hospitals and doctor's offices.
    http://www.townhall.com/columnists/walterwilliams/ww20050112.shtml

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Wednesday, January 12, 2005 ~ 11:37 a.m., Dan Mitchell Wrote:
White House may side with special interests over property owners. The Wall Street Journal warns that the Administration is considering joining a legal battle to undermine private property rights. The case specifically deals with whether state and local governments should be able to abuse the power of "eminent domain" to seize private property for the benefit of big business and developers:

    On the campaign trail last year, President Bush said a priority of his second term would be to "build an ownership society, because ownership brings security, and dignity, and independence." Sounds good to us. But the rhetoric doesn't square with news that the Administration may file an amicus brief against property owners in an upcoming Supreme Court case concerning eminent domain. Never mind that there's no pressing reason for the federal government to weigh in at all on the case, Kelo v. New London, since the issue before the court is a matter of state and local authority. What's more strange, given the President's ownership agenda and stated affinity for strict constructionism, is that the Bush Justice Department would consider siding with opponents of property rights. ...eminent domain abuses continue. Just last week a federal judge in New York upheld a Village of Port Chester decision to condemn well-maintained rental properties belonging to William Boyd, a small-business owner, and transfer them to a developer with plans for a Stop & Shop parking lot. And in Norwood, Ohio, a judge has ordered Carl and Joy Gamble out of their home of 35 years to make way for office and retail construction. ...The Kelo case, which is scheduled to be argued before the Supreme Court on February 22, also involves developer-driven encroachment. A Connecticut developer in cahoots with local officials and Pfizer is seeking to raze more than a dozen homes and small businesses. ...Worried that a Bush Administration brief against land owners is in the works, the National Taxpayers Union, the Competitive Enterprise Institute and other free-market groups signed a missive sent to the White House in October. ...The letter urges the Administration to "affirm its support for property rights and refrain from filing a brief in Kelo." So far, the response has been a troubling silence.
    http://online.wsj.com/article/0,,SB110549340876823621,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Wednesday, January 12, 2005 ~ 10:47 a.m., Dan Mitchell Wrote:
Common sense trade analysis. Those who blindly worship the notion of trade surpluses may want to take the advice of Bastiat, who in the 1800s explained that a surplus could be achieved by sinking products in the middle of the ocean. Another option would be to suffer a deep recession since Americans no longer could afford to buy much, whether produced in the US or abroad:

    ...it's no surprise that rich countries very often run trade deficits. As for surpluses, 19th century economist Bastiat reminded his readers that a sure way to achieve a trade surplus would be for the country desirous of one to simply sink goods marked for export offshore. This would lead to a favorable "balance of trade," all the while insuring that imports meant to be exchanged for the sunken exports would not reach the shores of the country seemingly bent on impoverishing itself.
    http://www.nationalreview.com/nrof_comment/tamny200501100823.asp

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Wednesday, January 12, 2005 ~ 9:10 a.m., Andrew Quinlan Wrote:
Tax competition could lead to lower corporate tax rates in New Zealand. In yet another sign that tax competition is the world's most powerful force for good tax policy (yes, even more powerful than think tank treatises), the left-wing government of New Zealand is looking to lower the corporate tax rate:

    Despite pledging to keep income tax rates on hold, it has emerged that the New Zealand government has been studying ways in which the corporate tax rate could be reduced in order to make the country more competitive. ...One of these options would have cut corporate tax to 30%, matching that of Australia, in a move that the government felt would make New Zealand more competitive with its neighbour. The second option proposed cutting the corporate tax rate lower still, but introducing a payroll tax of between 5.4% and 7.2% to cover contributions to the superannuation pension fund system.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18511

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Wednesday, January 12, 2005 ~ 7:43 a.m., Dan Mitchell Wrote:
France wants to follow Japan into the industrial policy swamp. The Wall Street Journal wonders why the French would want to repeat the Japanese mistake of trying to pick winners and losers with government subsidies. This approach is doomed to failure, but the French do seem to have a knack for being on the losing side of things:

    ...last week the French president duly announced the creation of an industrial policy agency which will be provided with $2 billion over three years to boost French industry. ...The trouble with trying to pick winners and give them the funds they need to succeed lies not so much in who gives them the money as in the impossibility of knowing in advance who the winners are going to be. This is not a question of skill; the best manager in the world is as likely as not to be wrong -- about what their customers want, what they're willing to pay for it, etc. -- close to half the time. ...The private sector plays this game better than the government for two reasons. It is not because governments are "stupid" and businesses are smart; there are plenty of badly run, blundering companies in the world and there are plenty of smart public servants. No, private businesses succeed in putting profitable, innovative products on the market because: 1. Companies are sensitive to price signals; and 2. There are lots of companies and their employees competing for sales and profits. ...This leads to inefficient use of human and capital resources and deep structural problems in the economy, a la Japan 15 years ago. If Mr. Beffa wants France to adopt a Japanese model, he should consult a history book that doesn't end when the Nikkei average was at 50,000. Japan has had a long, painful hangover from the days when MITI picked the winners and a cozy corporatist arrangement greased the wheels of growth over there. The country is still trying to sort out the mess that resulted.
    http://online.wsj.com/article/0,,SB110531028164121019,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Tuesday, January 11, 2005 ~ 11:56 a.m., Dan Mitchell Wrote:
The nightmare of government-run healthcare. The United States does not have a free-market health care system. Indeed, the US system arguably is more socialist than some of the health care regimes in Europe. Nearly 50 cents of every health care dollar is paid by government, and the majority of the supposedly private health care spending is distorted by a tax preference that destroys any semblance of market-based decision-making. One of the worst features of America's quasi-socialist health-care system is the Medicare program. Designed to provide health care to the elderly, the program is both a fiscal time bomb and a nightmare of confusing regulation. As this article for the Journal of American Physicians and Surgeons explains, a doctor trying to understand the Medicare rules is more likely to get a correct by flipping a coin than by asking the government:

    In 2002, the General Accounting Office (GAO), now known as the GovernmentAccountability Office, published a study revealing that 85 percent of the time Medicare customer service representatives (CSRs) gave the wrong answer to questions posed by physicians regarding the proper way to bill Medicare so as to obtain payment. The Centers for Medicare and Medicaid Services (CMS) promised to take steps to remedy the problem. After reviewing the 2002 study, I concluded two years ago that a monkey could answer Medicare policy questions as accurately as a Medicare bureaucrat. Today, after examining the results of the GAO's follow-up study, published in July 2004, I felt compelled to find a more appropriate comparison and test subject. My search ended when a creature from the family Bufonidae volunteered his services. Covered in warts, and an avid promoter of the low-carb, bug-and-fly diet, he might, I felt, have the right stuff to participate in my GAO-like study. Under carefully controlled conditions, I rephrased the GAO's Medicare policy questions, so that the toad could provide a "yes" or "no" response by jumping to the right or left, respectively. The result: 50 percent of the time, the toad answered the questions correctly. Given the miserable performance of Medicare  bureaucrats revealed in the 2002 study, one might think that the CMS overseers would have taken some action so as to approximate the accuracy of the toad. The results of the GAO's 2004 study, however, are as follows: Ninety-six percent of the time, Medicare CSRs gave the wrong answer to questions posed by physicians regarding the proper way to bill Medicare so as to obtain payment. That is precisely 46 percent worse than the performance of the toad. ...What did the GAO conclude was the cause of such poor performance? Among other things, the GAO found that Medicare policies and regulations were so complex and confusing that neither Medicare CSRs norCMSpolicy experts could understand them. ...Consider what would happen if your local fast-food restaurant got the orders wrong 96 percent of the time. The customer-oriented free market would never tolerate such poor performance. The anti-free-market Medicare bureaucracy, however, is neither accountable to its "beneficiary/customers," nor to its slave "providers." Thus, the Medicare bureaucracy not only tolerates poor performance, but judging from the way it monitors performance, it considers accuracy and competence irrelevant.
    http://www.jpands.org/vol9no4/huntoon.pdf

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Tuesday, January 11, 2005 ~ 11:34 a.m., Dan Mitchell Wrote:
Economic Freedom. America's biggest liability is high tax rates and too much government. The solution - at least in part - is tax reform and social security reform:

    Last week the Wall Street Journal/Heritage Foundation released their annual Index on Economic Freedom, which concluded for the first time that America no longer ranks among the top 10 freest economies in the world - this despite the fact that our score remained unchanged from the previous year. Instead we fell in the ranking because while we were trending water, Chile, Australia and Iceland further opened their economies and surpassed us. America's worst index category was the "fiscal burden" of government, due to Washington's rapidly growing spending and one of the highest corporate tax rates in the world. Excessive regulation is another reason the United States failed to the make the top 10. While not mentioned specifically by the index, Social Security is a major piece of the federal government's budget, and due to the well-meaning but flawed pay-as-you-go structure of the program, Social Security reform looms as one of the greatest barriers to sound budget policy. Ironically, however, this problem also creates perhaps the greatest opportunity to expand economic freedom in our lifetimes. On this front we cannot afford to continue to put our heads in the sand. If we do nothing, we will fall behind. We are already behind. More than 20 nations have already reformed their retirement security programs, replacing pay-as-you-go systems with personal accounts that workers own and control. In fact, Chile - a nation that passed us on the index this year - was the first nation to create personal accounts. ...Another area we are falling behind is in our tax policy, despite the positive impact the 2003 tax rate reductions have had on economic growth. This year Romania and Georgia joined the "flat-tax club," bringing the number of nations in Europe to adopt the flat tax to eight. So far, Georgia has the lowest flat tax of 12 percent on corporate and personal income. Here in America, both the individual income and corporate income tax codes are in dire need of reform. We need to move further toward removing barriers to work, saving, investing and entrepreneurial risk-taking. On this front we definitely cannot afford to stand still.
    http://www.townhall.com/columnists/jackkemp/jk20050110.shtml

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Tuesday, January 11, 2005 ~ 10:29 a.m., Andrew Quinlan Wrote:
The mystery of UN "moral authority." David Frum correctly asks why anyone should pay deference to the United Nations. Even when the international bureaucracy tries to do the right thing, it is hindered by incompetence and corruption. But all too often, it doesn't even try to do the right thing?

    The helicopters are taking off and landing now in the tsunami-shattered villages and towns. The sick are being taken for treatment. Clean water is being delivered. Food is arriving. Soon the work of reconstruction will begin. The countries doing this good work have politely agreed to acknowledge the "coordinating" role of the United Nations. But it is hard to see how precisely the rescue work would be affected if the UN's officials all stayed in New York--or indeed if the UN did not exist at all. The UN describes its role in South Asia as one of "assessment" and "coordination." Even this, however, seems to many to be a role unnecessary to the plot. The Daily Telegraph last week described the frustration of in-country UN officials who found they had nothing to do as the Americans, Australians, Indonesians, and Malaysians flew missions. It will be the treasury departments of the G-7 missions that make decisions on debt relief, and the World Bank, aid donor nations, private corporations, and of course the local governments themselves that take the lead on long-term reconstruction. And yet we are constantly told that the UN's involvement is indispensable to the success of the whole undertaking. How can that be? ...In a notable interview on December 31, Clare Short, the former international development secretary, explained that the UN possessed a unique "moral authority", and without this authority, the relief effort would be in trouble because ... well, after that it gets hazy. ...Whence exactly does this moral authority emanate? How did the UN get it? Did it earn it by championing liberty, justice, and other high ideals? That seems a strange thing to say about a body that voted in 2003 to award the chair of its commission on human rights to Mummar Gaddafi's Libya. Did it earn it by the efficacy of its aid work? On the contrary, the UN's efforts in Iraq have led to the largest financial scandal in the organization's history: as much as $20 billion unaccounted for in oil-for-food funds. UN aid efforts in the Congo have been besmirched by allegations of sexual abuse of children; in the Balkans, by charges of sex trafficking. Is the UN a defender of the weak against aggression by the powerful? Not exactly. Two of this planet's most intractable conflicts pit small democracies against vastly more populous neighbouring states. In both cases, the UN treats the democracies--Israel, Taiwan--like pariahs. ...If the UN keeps failing, the answer is not to ignore its faults, but to reform or replace it. There is growing interest in some American quarters in the idea of a new international association, open only to countries that elect their leaders democratically.
    http://www.aei.org/news/newsID.21794/news_detail.asp

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Tuesday, January 11, 2005 ~ 9:55 a.m., Dan Mitchell Wrote:
German welfare state run amok. Would you like to be paid for sipping pina coladas in the warm Florida sun? Sounds too good to be true, unless you are a German welfare bum. A Wall Street Journal column reveals the absurdity of the German welfare system:

    Rolf John was living the American Dream -- German style. For several years, the unemployed ex-banker received about $2,400 a month in German welfare checks to pay for his Miami Beach apartment, living expenses and a housekeeper who also doubled as his driver. ...Such abuse can only happen in a welfare system that has spun completely out of control. One third of Germany's GDP goes to social spending -- and the trend points upward. As even Germany's punishing payroll taxes are no longer enough to pay for the country's burgeoning unemployment, welfare, health care and pension costs, the government is forced to pile on more and more debt, which has already reached 66% of GDP and keeps rising. Some 25% of the federal budget goes just to interest payments. To complain about the "entitlement mentality" among his fellow Germans, as Chancellor Gerhard Schroeder just did a few months ago, is to miss the point. For the homo oeconomicus germanicus, it makes perfect sense to demand and accept every possible government handout. After all, as long as Germans have a job, (almost 11% of the work force is without one), they are paying a lot into the system. Moreover, when living on the dole is more profitable than hard work, it is absolutely rational behavior to queue for those welfare checks. It's the system that needs fixing, not the German people. ...except for some cosmetic changes, Germany hasn't even started to tackle its huge social security problem. As in most industrialized countries, Germany's society is aging, putting enormous pressure on the country's pay-as-you-go pension system. For U.S. citizens worried sick about their country's own social security liabilities, a word of comfort: If Germans had America's Social Security system, they would consider their pension problems solved. Mandatory contributions of only 12% of gross salary? That sounds like utopia in Germany, where contributions make up around 20% of gross salary.
    http://online.wsj.com/article/0,,SB110531004968121013,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Tuesday, January 11, 2005 ~ 8:22 a.m., Dan Mitchell Wrote:
Great summary of "offshore" developments. Richard Teather of Bournemouth University in the UK has an excellent status report of the ongoing battle between "offshore" jurisdictions and the pro-harmonization bureaucrats at the OECD and EU. His analysis about the lack of a "level playing field" - even though it is the wrong level playing field - is completely correct. As he notes, persecuted low-tax jurisdictions should reject all tax harmonization schemes:

    Even if the Directive does come into force it is unlikely to destroy the offshore finance industry, even in those jurisdictions that have been pressured to implement it. Firstly, of course, it only affects investors who are resident in the EU; deposits from USA and other residents will not be affected. However even for EU investors, the Directive is full of holes and should be easily avoidable; indeed the Swiss have dubbed it the "fools' tax" because only those who do not take proper advice will be harmed by it. It is of course impossible to give firm advice at this stage, but there seem to be two main methods of avoiding the impact of the Directive: To begin with, the bank or other person paying interest is under no obligation to investigate whether or not the person to whom interest is paid is actually the beneficial owner. For example, if a bank in the Turks & Caicos Islands pays interest to a trustee based in a jurisdiction not subject to the EU's rules, then the bank will not have to deduct tax from that payment unless it is actually informed by the trustee that the beneficiary of the trust is an EU resident. Secondly, the Directive only applies to interest, not to dividends. An EU investor can therefore set up a company in the Turks & Caicos Islands and invest share capital into it. That share capital can then be deposited by the company into a bank, but provided the company is tax resident in the Turks & Caicos Islands the recipient of the interest earned (the company) will not be an EU resident and so the Directive will not apply. The EU resident individual investor will receive dividends from the company, not interest, and so again the Directive will not apply. ...The OECD members have carried out a review of their own harmful tax practices, and claim that they have removed or rendered harmless almost all of them. However this review has ignored many of the more important regimes, and is open to strong accusations of favouritism with OECD members being treated more leniently than non-members. ...The low-tax jurisdictions are therefore in a strong position against the OECD, provided they keep insisting on the "level playing field" of fair treatment for OECD members and non-members. The danger is that the OECD is trying to separate out information exchange; most of the OECD members are willing to introduce this if they can then insist that the non-members do the same. The low-tax jurisdictions must resist this move and insist that the whole package needs to be implemented before a level playing field is in place. In other words, that the OECD members must genuinely dismantle all of their harmful tax regimes before information exchange is imposed. As many of the OECD members are clearly unwilling to do this, the OECD process can be lost in the sand for many years, possibly indefinitely. In addition, the current USA government is not fully supportive of these moves by the OECD. This should make OECD sanctions, should any be imposed, less effective. ...In Europe at the moment, politicians are feeling trapped by electorates who are unwilling to pay any more tax but want better public services for what they do pay. In the UK for example, government advisers now believe that tax levels above 43% of GDP (only just above the current levels) will seriously damage their electoral prospects. With nearly half the nation's wealth, one would have thought that governments should be able to provide a few half-decent hospitals. However most of this money is creamed off by the politicians' various client groups, whether those who have become dependent on welfare payments or the armies of middle managers who have a stranglehold on the inefficient state services. In the rest of Europe the problem is even worse, with even less reform and crippling unfunded pension liabilities. What the politicians would like to do is soak the "rich" for a little more tax money, raising more funds without directly affecting any electorally significant group. Of course high taxes on savings income damages investment, reduces economic activity and jobs and ultimately makes the whole country poorer, but it is still a very tempting short-term target. Their problem is that since the last time this was tried in the 1970s, capital has become much more mobile and now can easily shelter in tax havens. Raising taxes on the rich would simply move money offshore rather than increase the government's revenue. European governments have therefore given in to the temptation for a short-term solution. Whatever the long-term effects on the economy, they would rather muzzle the tax havens to leave themselves free to raise taxes on investment capital. ...Low-tax and lightly-regulated jurisdictions like the Turks & Caicos Islands play a beneficial role of the world economy. Not only do they improve the efficiency of international capital markets, and therefore increase investment and jobs all around the world, but they also force other governments to use their tax revenues more efficiently. High-tax governments resent this and would rather stamp out such jurisdictions, leaving themselves free to raise taxes whatever the cost to the economy and long-term detriment to their citizens.
    http://www.timespub.tc/Offshore%20Finance/offshore.htm

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Tuesday, January 11, 2005 ~ 6:45 a.m., Dan Mitchell Wrote:
The left targets Ohio free-market leader. The symbolic last-ditch effort to contest the 2004 presidential election had nothing to do with George W. Bush. Instead, as Tim Carney explains for Nationalreview.com, the left wants to damage the reputation of Ken Blackwell, Ohio's free-market Secretary of State. Blackwell's sin, other than being conservative, is that he is an African-American:

    The number-one target of the protest of Ohio's vote was the most promising African-American Republican politician in the country: Ohio secretary of state Kenneth Blackwell. ...With no black Republicans in the House, Senate, or any governorships, Blackwell is the highest-ranking elected African American in the GOP. On top of that, he is a true conservative, so much so that the Ohio Republican establishment and Governor Bob Taft find him intolerably irritating. ...As a party, the Democrats need to fear Blackwell. He is skilled, conservative, and on his way up. He could be governor in a couple years and who knows where he could go from there. So Democrats have an interest in sullying his name before it gets big. ...Miguel Estrada knows how this works. Democrats, as their memos revealed, found Estrada "especially dangerous because. . . he is Latino." It's not that Dick Durbin and Pat Leahy's staff think Hispanics are inherently more "dangerous," it's that they don't want to be seen opposing one for the High Court, when all of America will be watching. He had to be stopped before then. The attack dogs of personal destruction succeeded with their preemptive strike on Estrada, and now they'll try with Blackwell. Estrada and Blackwell both suffered a particular brand of racism mostly practiced by Democrats against minorities. Democrats attacked Estrada's conservatism, saying he clearly did not represent the views of the Hispanic community, much like how Clarence Thomas is said to be not truly black because of his political philosophy.
    http://www.nationalreview.com/carney/carney200501100715.asp

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Monday, January 10, 2005 ~ 2:03 p.m., Dan Mitchell Wrote:
Trade surplus does not mean prosperity. Protectionists often assert that a trade deficit is a sign of weakness and a trade surplus is a sign of strength, but this is backwards thinking. Germany's economy is in the toilet even though they are the world's biggest exporter. And America's record trade "deficit" actually is a sign of strength since it is largely the result of two factors: America's fast economic growth, which means the US can afford to buy a lot from the rest of the world; and America's strong economy, which attracts huge amounts of foreign investment:

    ...we hope we aren't being impolite to ask -- what does an economy with a sizable trade surplus and huge exports look like? We don't need to look far. The only country that exports more than the U.S. is Germany, which conveniently has a comfortable trade surplus that stretches back as far as the eye can see. But despite being the world's leading exporter, Germany can't seem to hitch a ride on the global economic recovery. "The world economy is booming like it hasn't in 28 years but the German economy is not participating," the Ifo institute, one of that country's leading economic research centers, said in a report last month. Growth in 2004 was probably only around 1.7% and might slow to around 1.2% this year. This "recovery" follows on the heels of three years of near-total stagnation -- the longest no-growth period in German history. It's no surprise, then, that over the past four years German unemployment has risen to record levels. Just last week, Germany's labor office reported the worst job numbers since reunification. Almost 4.5 million people, or 10.8% of the work force, were unemployed in December. That's double the U.S. rate. ...the next time someone tells you how much better off Americans would be with a trade surplus and a capital-account deficit, ask them why, if a trade surplus is the key to economic strength, Germany remains caught in a mercantilist mire.
    http://online.wsj.com/article/0,,SB110531834344221239,00.html?mod=opini on&ojcontent=otep (subscription required)

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Monday, January 10, 2005 ~ 1:21 p.m., Dan Mitchell Wrote:
Wall Street Journal warns against national sales tax. Replacing the income tax with a national sales tax is a great idea in theory. But as the superb editorial page of the Wall Street Journal explains, this would be a disaster without repeal of the 16th Amendment:

    ...another tax reform hint last week was House Speaker Dennis Hastert's choice of John Linder as one of the new Members on the House Ways and Means Committee. The Georgia Republican is the leading proponent of a national sales tax to replace the income tax, and his promotion signals that Mr. Hastert may be serious about pushing such a reform. We're highly skeptical, unless Republicans think they can also repeal the Constitution's 16th Amendment that allowed the income tax; without that change, the introduction of a national sales tax means we'll inevitably get stuck with both it and the income tax.
    http://online.wsj.com/article/0,,SB110531851470021245,00.html?mod=opini on&ojcontent=otep (subscription required)

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Monday, January 10, 2005 ~ 12:30 p.m., Andrew Quinlan Wrote:
Auditors uncover massive fraud at the UN. An Associated Press story provides a brief glimpse of the waste, fraud, and abuse that is rampant at the United Nations:

    Internal audits sent to the director of the Iraq oil-for-food program uncovered extensive mismanagement of multimillion-dollar deals with contractors and fraudulent paperwork by its employees... the United Nations had refused access to congressional investigators until Volcker's panel sent them copies on Friday. A congressional aide provided the AP with copies of three of the 56 audits, including one that found that the United Nations was billed over several years for 31 days of work in June, which only has 30 days. The contention over access led some congressional investigators to accuse the United Nations of stonewalling outside investigations of alleged corruption at the program. At least five congressional probes are running separately from Volcker's. In November, Sen. Norm Coleman, R-Minn., accused Annan of trying to cover up the extent of fraud at the program and called for his resignation. ...One audit dated July 3, 2002, and addressed to Sevan examined contracts with Saybolt International BV, a Dutch company that was hired to monitor oil exports from Iraq under the humanitarian program. The report detailed billing by the company exceeding $2 million. The company inflated invoices, charged for accommodation of workers provided by the Iraqi government and exaggerated staffing and other expenses. For example, the report found that the United Nations was billed several years for 31 days of work in June, which only has 30 days. Another report from July 21, 1999, detailed possible overpayments of more than $3 million to London-based Lloyd's Register Inspection Ltd., which was hired to inspect and monitor humanitarian goods as they were imported into Iraq. The audit noted that the company billed the United Nations for agents deployed in December 1996, two months before the first contracts for the import of humanitarian supplies were issued.
    http://news.yahoo.com/news?tmpl=story&u=/ap/20050109/ap_on_re_mi_ea/ oil_for_food_investigation_15

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Monday, January 10, 2005 ~ 12:19 p.m., Dan Mitchell Wrote:
Government waste imperils national security. Even when government ostensibly is fulfilling a legitimate function such as national defense, politicians and special interest groups cannot resist the temptation to squander money. Veronique de Rugy of the American Enterprise Institute has a thorough analysis (http://www.aei.org/
publications/pubID.21483,filter.all/pub_detail.asp
) of the issue, and a recent news story is a perfect example of waste, fraud, and abuse:

    An audit of the state's spending of nearly $600 million in federal anti-terrorism funds found that some of the money was spent improperly, including to buy a trailer that was used to haul lawn mowers to "lawn mower drag races." ...One county bought 18 radios and other communication equipment from a company owned by one of its county commissioners, according to the report released Thursday. Another jurisdiction used a trailer ostensibly bought as emergency equipment to haul lawn mowers to races, the report says. ...The audit's findings mirror some of the weaknesses identified in a September report by The Dallas Morning News. The newspaper found that some cities used anti-terrorism funds to buy equipment for traffic stops, drug investigations and even community festivals.
    http://news.yahoo.com/news?tmpl=story&cid=519&u=/ap/20050108/ap_on _re_us/terrorism_spending_2&printer=1

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Monday, January 10, 2005 ~ 11:37 a.m., Dan Mitchell Wrote:
Government wastes money to promote wasting money. The "No Child Left Behind" program is a waste of money that expands the federal government's control of education. But to add insult to injury, the Administration has spent about $1 million to purchase propaganda for the bill and to investigate whether journalists are saying nice things about the legislation:

    The Education Department paid commentator Armstrong Williams $241,000 to help promote President Bush's No Child Left Behind law on the air, an arrangement that Williams acknowledged yesterday involved "bad judgment" on his part. ...Congressional Democrats immediately accused the administration of trying to bribe journalists. Williams's newspaper syndicate, Tribune Media Services, yesterday canceled his column. And one television network dropped his program pending an investigation. ...The Education Department contract, first reported yesterday by USA Today, increased criticism of the administration's aggressive approach to news management. The department already has paid Ketchum $700,000 to rate journalists on how positively or negatively they report on No Child Left Behind, and to produce a video release on the law that was used by some television stations as if it were real news. Other government agencies -- including the Census Bureau and the Centers for Disease Control and Prevention -- also have distributed such prepackaged videos, a practice that congressional auditors have described as illegal in some cases. ...Rep. George Miller (Calif.), the ranking Democrat on the House education committee, said the Williams contract "is propaganda, it's unethical, it's dangerous and it's illegal" and called it "worthy of Pravda." Committee Chairman John A. Boehner (R-Ohio) agreed to join Miller in requesting an inspector general's investigation, a spokesman said. Miller cited two Government Accountability Office opinions that the administration violated federal law with video news releases. In May, the GAO criticized the Department of Health and Human Services for using the technique to promote Medicare's new prescription drug benefit. This week, it criticized the Office of National Drug Control Policy for distributing similar reports with a contractor posing as a journalist, including a "suggested live intro" for anchors to read.
    http://news.yahoo.com/news?tmpl=story&cid=1802&u=/washpost/2005010 8/ts_washpost/a56330_2005jan7&printer=1

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Monday, January 10, 2005 ~ 9:54 a.m., Andrew Quinlan Wrote:
Telephones should be used for communication, not subsidies. Tad Dehaven of the National Taxpayers Union correctly argues that it is time to abolish the Universal Service Fund, a special tax designed to subsize politically-favored users of telecommunications services:

    The Universal Service Fund is a federal creation that uses mandatory fees (i.e., taxes) collected from telecommunications companies to subsidize services for low-income and rural customers as well as eligible schools, libraries, and rural health care providers. Conservatives call the portion of the USF given to eligible schools and libraries the "Gore tax," after its proponent Al Gore. ...the USF needs to be done away with entirely. Most free-market advocates have long considered the USF to be little more than an inefficient tax and redistribution scheme. It is difficult to understand why one subset of the population (urban residents) should be forced to subsidize the telecommunications services of another (rural residents). Beyond the higher costs (both economic and social) of living in an urban area relative to a rural area, the simple fact is that people in rural areas choose to live there. Besides, why should a single mother in New York City have to subsidize phone service for a wealthy rancher living in Montana? ...One can also point to the program's documented history of fraud and inefficiency. The same USA Today article on the USF noted that the Gambino crime family "was able to fraudulently draw millions from the universal service fund from 1996 to 2003 by controlling a Missouri rural phone firm." Finally, earlier this month the rationale for the "Gore tax" portion of the USF was severely undermined when a new study of recent international test scores revealed that students who frequently utilize computers at school tend to perform worse than their peers in math and reading. Even more incriminating was the news that the same international examination ranked American students 24th out of 29 industrialized countries in math.
    http://www.nationalreview.com/nrof_comment/dehaven200501070907.asp

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Sunday, January 9, 2005 ~ 2:29 p.m., Dan Mitchell Wrote:
EU seeks to achieve through regulation what it can't achieve in the field of competition. A Techcentralstation.com article analyzes the implications of the EU's regulatory assault against Microsoft:

    There can be no doubt that Europe wants to give the U.S. serious competition for the role of the world's economic leader. On December 20, 2004, when Judge Bo Vesterdorf of the European Court of First Instance handed the European Commission a preliminary victory in its procedural wrangling with Microsoft, the judge (by design or not) tilted the regulatory playing field strongly in favor of Europe and its recently departed antitrust czar, Mario Monti. ...But for all its regulatory prowess, Europe as a political entity remains seriously constrained from achieving the economic power it wants. It is highly dependant on the US (and its taxpayers) for providing its military defense, and Europe, which has indeed begun to understand the virtues of lower taxes for the corporate sector, cannot really break out of its high-tax and pro-regulation regime without abandoning its commitment to massive welfare state spending. That it will not do, at least not until the states of the New Europe from the east and south of the continent are able to wean political power away from France and Germany. The fact is, for all its regulatory braggadocio, Europe's superpower status is more image than reality. With the US and Asia driving world economic growth, Europe is living on borrowed intellectual and entrepreneurial resources, and in that sense is deeper in debt than the US is in fiscal terms. Europe's Microsoft victory is a major symbol of Europe's ambitions, and a foreboding of what could happen if America and Asia fail to reassert the primacy of market forces against global regulation. Maybe Europe needs to "unbundle" its commitment to 19th century socialism from its 21st century economic ambitions. If it does, the US could have a real competitor to deal with.
    http://www.techcentralstation.be/010705F.html

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Sunday, January 9, 2005 ~ 1:12 p.m., Andrew Quinlan Wrote:
Belgium taxpayers don't fall for bait-and-switch tax amnesty. Tax-news.com reports that the Belgian tax amnesty has collected far less revenue than the government expected. This is because Belgian politicians refuse to address the problem - oppressive tax rates - that caused the capital flight in the first place:

    Belgium's tax amnesty on undeclared foreign assets is expected to add around EUR300 million in revenues to the government's coffers, a source close to Finance Minister Didier Reynders revealed in a report earlier this week. ...the amount is considerably lower than the EUR850 million projected by the government at the start of the year-long amnesty... The Belgian tax amnesty allows citizens to disclose their previously undeclared assets held abroad without facing criminal sanctions, in return for paying a tax of between 6% and 9% on the declared funds. According to Reuters, Belgians hold around EUR160 billion in foreign accounts.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18494

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Sunday, January 9, 2005 ~ 10:56 a.m., Dan Mitchell Wrote:
Bush Justice Department defends rights of gun owners. In a strong defense of Constitutional rights, the Department of Justice has produced a memo explaining that the Second Amendment clearly is designed to protect the right of private gun ownership. This memo should not have been necessary since the Constitution's language clearly refers to "the right of the people to keep and bear arms." But it was necessary since ideologically-motivated judges have put personal bias above the law. The Wall Street Journal reports:

    ...Mr. Ashcroft has declared that the Second Amendment confers a broad right of gun ownership, comparable with the First Amendment's grant of freedom of speech and religion. In November 2001, he sent federal prosecutors a memorandum endorsing a rare federal-court opinion, issued the previous month by the Fifth U.S. Circuit Court of Appeals in New Orleans, that found an individual has the right to gun ownership. President Bush adopted that view as well, saying that "the Constitution gives people a personal right to bear arms," and doesn't merely protect "the rights of state militias," in an interview published days before last year's election in National Rifle Association magazines. The new Justice Department memorandum acknowledges that "the question of who possess the right secured by the Second Amendment remains open and unsettled in the courts and among scholars," but goes on to declare that "extensive reasons" support seeing it as an individual right, while there is "no persuasive basis" for taking another view. ...The Second Amendment states that "a well-regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed." The memo's authors, Justice Department lawyers Steven Bradbury, Howard Nielson Jr. and C. Kevin Marshall, dissect the amendment's language, arguing that under 18th century legal conventions, the clause concerning "a well-regulated militia" was "prefatory language" without binding force. "Thus, the amendment's declaratory preface could not overcome the unambiguously individual 'right of the people to keep and bear arms' conferred by the operative text," they write.
    http://online.wsj.com/public/article/0,,SB110505856950619585,00.html?mo d=todays%5Ffree%5Ffeature (subscription required)

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Saturday, January 8, 2005 ~ 11:10 a.m., Dan Mitchell Wrote:
Virginia taxpayers subsidize safari for bureaucrats. International bureaucracies and central governments know how to waste money, but state governments also find amazing ways to squander taxpayer funds. A Washington Times column rightly questions why government officials should be able to dip into the public trough to finance a 17-day Zimbabwe vacation:

    ...an investigation into questionable expenditures by four officials of the Virginia Department of Game and Inland Fisheries...seems to prove how totally arrogant and carefree some government employees are about spending taxpayers' money - our dollars, not theirs. In this case, no one argues that $12,000 was recently spent to outfit the four with clothing and gear for an African safari, and no one disputes that the taxpayers who received a financial slap in the face were the hunters, anglers and boaters of Virginia. They are the taxpayers who, through license purchases, supply most of the state's Game and Inland Fisheries budget. ...was a 17-day expedition to Zimbabwe, ostensibly to focus on global game management and conservation, really necessary. ...We'll wait and see if the state auditor finds fault with the $12,000 expenditure - if he does, charges should be brought - or if he says that it was just a little misunderstanding but no harm was done. Either way, the state's hunters, anglers and boaters should scratch their heads in disbelief because of the sheer gall of it all.
    http://www.washingtontimes.com/sports/20050105-121401-6549r.htm

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Saturday, January 8, 2005 ~10:34 a.m., Dan Mitchell Wrote:
The deadly impact of gun control. A Techcentralstation.com article explains that calling the police may be an effective way of dealing with the consequences of crime, but it is not a very effective way of stopping a crime. That is why gun ownership is critical for self-protection, yet ideologues want to disarm law-abiding citizens:

    According to Spelman and Brown, if the crime was reported while still in progress, the arrest rate was 35 percent. If the crime was not reported while in progress, and the victim took 60 seconds to get to a phone, the arrest rate dropped to 10 percent. Now of course making an arrest is not the same as stopping a crime in progress. If the police are called while a murder is taking place, they may (about 35 percent of the time) arrive in time to arrest the murderer, but not necessarily in time to save the victim's life. Yet even if we made the artificial assumption that every arrest meant that the crime in progress was thwarted, we see that two-thirds of the time, the police will not arrive in time to protect you. Nevertheless, the gun prohibition lobby, the District of Columbia government, and many government officials, insist that victims should not protect themselves with firearms. They must instead rely on 911. ...even if the police are alerted immediately, they still have to spend time traveling to the scene of the crime, although the victim may need help within seconds. For example, on June 5, 2002, eighty-nine year-old Lois Joyner Cannady called the Durham County, North Carolina, 911 to ask for immediate police aid. She was killed before the police arrived on the scene. Police deputies came within minutes, but the killer was long gone. Might the outcome have been different if Mrs. Cannady had reached for a gun instead of a phone? Two 80-year old women homeowners did just that, in Elbert County, Georgia. A News Channel 32 report stated that, according to Sheriff Barry Haston, "having the guns kept those women alive." Haston said, "In these two cases I'm actually glad they did because it could have been a different story if they didn't." There are many other reported cases of persons as old as Mrs. Cannady, or older, using firearms successfully for protection. When potential crime victims (i.e., everyone) consider whether to adopt particular defensive measures (locks, guns, window bars, alarms, etc.), they must make trade-offs of costs and benefits. For example, window bars might prevent a criminal from coming in, but they can also block the exit in case of a fire. For citizens to make well-informed decisions about self-defense, citizens ought to know how likely it is that the government will rescue them in an emergency. We cannot expect perfection from the police; after all, they travel by automobile or by foot, not by teleportation. We can expect that government or university researchers (many of whom are heavily subsidized by the federal government) would gather statistics directly relevant to life-or-death decisions.
    http://www.techcentralstation.com/010505H.html

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Friday, January 7, 2005 ~ 1:30 p.m., Dan Mitchell Wrote:
Will Schwarzenegger be another Reagan? Governor Schwarzenegger of California has proposed a bold agenda for much-needed economic reform in California. The Wall Street Journal notes that Schwarzenegger is doing a much better job than the governor of New York, while an article in the Weekly Standard examines the special-interest obstacles that the Terminator will have to overcome:

    After a cautious first year in office, Mr. Schwarzenegger is looking more like the risk-taker who won a recall election against the conventional wisdom. Among other things, he wants to impose formal limits on spending, overhaul the public pension system, and end the ability of Legislators to draw their own district lines. Back in New York, Mr. Pataki went on about an executive order "requiring all state agencies and authorities to begin using non-toxic cleaning products that are free of harmful chemicals." The state may be $7 billion in the red -- a topic Mr. Pataki avoided -- but at least its government buildings will be using safer window wash. State spending continues to increase faster than inflation, despite the highest state and local tax burden in the U.S., but the best Mr. Pataki could do is call for accelerating the phase out of the 2003 tax hikes that passed on his watch (and in part to pay for his earlier spending sprees). In California, on the other hand, Mr. Schwarzenegger is facing up to that state's looming $8 billion budget shortfall. He noted that state revenues have increased this year but that budget formulas in place still dictate spending more than what Sacramento takes in. To fix the problem, he's advocating a constitutional change that would require across the board spending cuts if expenditures outpace revenues. Just as important, Mr. Schwarzenegger dismissed tax hikes as a solution. "We don't have a revenue problem," he said. "We have a spending problem. We could raise taxes by billions but they would only further drive up spending by billions of dollars." All of this will be resisted by Democrats who control the state Legislature, but by setting down markers the Governor wins more bargaining leverage.
    http://online.wsj.com/article/0,,SB110506157832219700,00.html?mod=opini on&ojcontent=otep   (subscription required)

    Schwarzenegger called for four areas of reform, none of which will please liberal Democrats. This includes: ...Eliminating many of the formulas that drive state spending, and cutting spending across the board when expenses grow above revenues (in the past year, the growth in state spending has exceeded new revenue by 2-1). Potentially, this would put the governor at odds with California's Proposition 98, which commits about 40 percent of state spending to public schools. [and] ...Schwarzenegger wants to take on pension obligations for retired public employees, which have skyrocketed from $200 million four years ago to $2.6 billion last year. At stake would be changing the benefit structure for future employees in favor of private sector-styled investment accounts, with taxpayers matching an employees' regular contributions up to a certain point. ...What characteristic do those ... ideas share? Simple: each drives liberal special interests nuts. The state's public employees' union will fight pension reform; the California Teachers Association won't cooperate with education reform and tinkering with Prop. 98; California social-services lobbies will blanket the State Capitol with society's less fortunate to ward off spending cuts; Democrats won't go along with redistricting if it threatens their nearly two-thirds control of both legislative chambers--not unless they get a concession from the governor, such as easing term limits. Schwarzenegger knows this, and used it to his advantage in his speech, declaring: "Political courage is not political suicide. Ignore the lobbyists. Ignore the politics. Trust the people."
    http://www.weeklystandard.com/Content/Public/Articles/000/000/005/103us eek.asp

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Friday, January 7, 2005 ~12:16 p.m., Dan Mitchell Wrote:
German journalist exposes European misconceptions. According to a new book by Olaf Gersemann, Europeans recognize that Americans enjoy better living standards, but they think that social pathologies are the price for those higher incomes. Gersemann's book, Cowboy Capitalism: European Myths, American Reality (http://www.catostore.org/index.asp?fa=ProductDetails&pid=1441214
&method=search&t=cowboy&a=&k=&aeid=&adv=&pg=
) explains that Europeans have a greatly distorted view of American society:

    The claim that a large part of the American population can make ends meet only with the help of moonlighting falls on fertile ground among pundits and politicians who promote the view that something is profoundly wrong with U.S.-style capitalism. As John Kerry put it at the Democratic convention in Boston: "People are working weekends; they're working two jobs, three jobs, and they're still not getting ahead." In Europe, such claims are believed eagerly. Sure enough, over the last 25 years the average annual real growth rate in America was 55 percent higher than in Germany, 48 percent higher than in France and 39 percent higher than in the European Union as a whole. Still, Americans seem to suffer in the eyes of Europeans. Germany's chancellor Gerhard Schröder suggests, for instance, that in the U.S. it is not possible "for people to live in decency and dignity without having to do three jobs a day." ...Thirdly, there is a whole array of stereotypes about America that refer to living standards in the U.S. If Germans were to liberalize their economy by deregulation and cutting back big government, they would face "amerikanische Verhältnisse" (American conditions), says Michael Sommer, the country's most powerful trade union leader. American conditions, in Sommer's view, mean that "our cities will become slums, our society will be fragmented and employees will need three or four jobs to feed themselves." To be sure, Sommer does not say that American conditions would also mean more prosperity. Never since the late 1960s has the gap between per capita incomes in the U.S. on the one hand and France and Germany on the other been as big as it was in recent years. Adjusted for price level difference, the per-capita income in America in 2003 was 36 percent higher than in France and 42 percent higher than in Germany. ...in Europe's public debate there's not a single social or economic problem in America that is not squarely attributed to the country's freewheeling capitalism. Indeed, in Germany, "amerikanische Verhältnisse" has become a political code word. Even Kajo Neukirchen, widely portrayed by the media as Germany's toughest top executive, does "not want American conditions, with hiring and firing being the order of the day. Three jobs at the same time just to make a living--you don't want that and neither do I." So you'd be wrong to think that a quarter-century of sluggish economic growth and catastrophically high underemployment made Germans (or French or Italians, for that matter) willing to view America's brand of capitalism as a beacon. They instead view U.S.-style capitalism as a boogeyman, as do their political and business elites.
    http://catoinstitute.com/dailys/10-11-04.html

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Friday, January 7, 2005 ~ 10:16 a.m., Andrew Quinlan Wrote:
New Republic trashes tsunami-global warming link. Some environmental radicals have argued that the South Asia tsunami can be blamed - at least in part - on global warming. This fanciful assertion is rigorously dismantled in an article published by the New Republic. This is noteworthy because the New Republic is a leftist publication:

    ...the claim that action to slow climate change is justified by the rising toll of natural disasters--and, by extension, that reducing emissions can help stanch these rising losses--is both scientifically and morally insupportable. To minimize damage from tsunamis and the like, we need to focus not on reducing emissions but on reducing our vulnerability to disasters. ...the number of disasters affecting at least 100 people or resulting in a call for international assistance has increased from an average of about 100 per year in the late '60s to between 500 and 800 per year by the early twenty-first century. The reason is not an increase in the frequency or severity of storms, earthquakes, or similar events, but an increase in vulnerability because of growing populations, expanding economies, rapid urbanization, and migrations to coasts and other exposed regions. ...What can be done to better prepare the world--especially the developing world--for future disasters? It is absurd to suggest that reducing greenhouse gas emissions is an important part of the answer. ...Indeed, the most recent assessment of the scientifically authoritative Intergovernmental Panel on Climate Change (ipcc) found no evidence to support the idea that human-caused climate change has discernibly influenced the rapidly increasing disaster toll of recent decades. ...The example of rising sea levels provides further illustration. Scientists expect that, by 2050, average global sea levels will rise by two to twelve inches. But no research suggests that the Kyoto Protocol, or even more ambitious emissions-reduction proposals, would significantly reduce this increase. ...Those who justify the need for greenhouse gas reductions by exploiting the mounting human and economic toll of natural disasters worldwide are either ill-informed or dishonest. This is not, as Britain's Sir David King suggested, "something we can manage" by decreasing our use of fossil fuels. Prescribing emissions reductions to forestall the future effects of disasters is like telling someone who is sedentary, obese, and alcoholic that the best way to improve his health is to wear a seat belt.
    http://www.tnr.com/doc.mhtml?i=20050117&s=sarewitzpielke011 705

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Friday, January 7, 2005 ~ 10:02 a.m., Dan Mitchell Wrote:
Private foreign aid works better. Robert Sirico of the Acton Institute explains in the Wall Street Journal that private foreign aid is both larger and more effective than government-to-government transfers:

    ...in 2003, donations to foreign countries -- that is, not collected via taxes and spent by the government -- were the largest part of foreign aid, amounting to even more than government gives. Research by Carol Adelman, the leading scholar in this area, found that private aid in the year 2000 was $35 billion compared with government aid of $9.9 billion. Private giving was on the rise even before the tsunami. Foundations and individuals are increasing contributions. One reason is that it is more effective and targeted directly at the needs of the people and their communities. I know from experience that the groups involved in private giving are more agile and manage money more efficiently. In fact, Ms. Adelman and others have speculated that the trends are so strong in the direction of private giving that foreign aid is being privatized to some extent. Many of the same problems of the old-style welfare state afflict foreign aid today. Countries become dependent. Foreign aid feeds political corruption, and -- what's called the moral hazard -- rewards bad economic policies rather than encourage economic reform. Private aid, however, has nowhere near the same level of problems as government aid. It tends to go to individuals and private institutions rather than governments, so it doesn't feed corruption and the problem of moral hazard is reduced. Now we have a spectacular demonstration of the ability of private groups to respond to disaster in ways government never could. Private aid agencies responded to the tsunami victims first, doing the most difficult work, even as governments were still managing PR issues over whether they are "stingy" with others' money.
    http://online.wsj.com/article/0,,SB110497560928218403,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Friday, January 7, 2005 ~ 8:19 a.m., Dan Mitchell Wrote:
The decline and fall of France. A Techcentralstation.com columnist chronicles the ongoing collapse of the French economy. Unfortunately, the political elites benefit from bloated government and have very little incentive to liberalize:

    France has declined because it is incapable of modernising. During this period average annual economic growth went down from 3% to 1.8%, while the productivity growth declined from 4.2% per year to 1%. Consequently, France is the only developed economy in which, over a quarter of a century, the level of unemployment exceeds 9% of the active population, whereas 20% of the potential labour force has been excluded from the labour market, while the participation rate remains the lowest for the whole OECD area (58%, of which 48% for the private sector). Meanwhile public finance is completely out of control. The accumulation of deficits (4.1% of GDP in 2003) has resulted in an explosion of public debt, which will soon reach 1,000 billion euros (62% of GDP against 23% in 1980). ....there is a hard core -- consisting of politicians, civil service mandarins and union officials, including both left- and right-wing elites -- which is keen to preserve the rigid social statist system in France, which protects their jobs and status. Their consensus transcends the differences between the main political parties.
    http://www.techcentralstation.com/010405D.html

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Friday, January 7, 2005 ~ 7:30 a.m., Dan Mitchell Wrote:
Another flat tax system adopted, this time in Georgia. The global shift to tax reform continues at a rapid pace. Georgia now has a 12 percent flat tax, the lowest rate of any nation in the world (other than paradises such as the Cayman Islands, where the flat tax rate is zero). Tax competition is a major reason for this pro-growth reform:

    On December 22, 2004, by an overwhelming vote of 107 to 11, Georgia's parliament adopted a new tax code. It slashed the size and weight of the code by about 95%. Key to the new legislation is the adoption of a 12% flat income tax. Effective January 1, 2005, it replaces the previous system which taxed personal income at four rates... Adoption of the flat tax honors the pledge made by President Mikhail Saakashvili five days after his inauguration on January 25, 2004, when he stated that one of his new government's top two economic priorities was to introduce a new flat-rate tax system. The new tax code retains the former 20% profit tax rate, but cuts the rate on social insurance from 33% to 20% and VAT from 20% to 18%. ...Adoption of the flat tax in Georgia extends the list of countries that have adopted the flat tax to seven. The chronology is Estonia (1994: 26% to be reduced to 20% in 2007); Latvia (1995: 25%), Russia (2000: 13%); Serbia (2003: 14%); Ukraine (2004: 13%); and, Slovakia (2004: 19%).
    http://www.russiaeconomy.org/comments/010305.html

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Thursday, January 6, 2005 ~ 12:19 p.m., Dan Mitchell Wrote:
Schwarzenegger promotes much-needed public pension reform. California may be the next state to shift away from unstable "defined-benefit" pensions for government employees. Defined benefit systems promise - often imprudently - a specific annual payment to retirees. Defined benefit systems are better than Social Security since money is being set aside and invested so that real money will exist to finance future benefits, but there is always a danger that the system will promise more than can be delivered (what is know as having an "under-funded" plan). And there definitely is a danger that the entity controlling the money - known as Calpers in the case of California - will sacrifice the interests of workers by choosing to make investments based on political consideration. The better approach is to shift to a "defined-contribution" system based on personal accounts:

    California Gov. Arnold Schwarzenegger will urge lawmakers to pass a sweeping overhaul of the state's public pension systems, including Calpers, the nation's largest pension fund, an aide said on Wednesday. Schwarzenegger plans to use his "State of the State" address on Wednesday evening to back a plan that would scrap California's defined-benefit public pension plans in favor of defined-contribution plans similar to 401(k) retirement plans in the private sector. Critics of that partial privatization, which mirrors Bush administration moves to shift Social Security money into private accounts, call it an attempt to undercut the influence of Calpers as a corporate watchdog and curb its political activism. ...Calpers, the heavyweight California Public Employees' Retirement System, has enraged critics in corporate America, who charge that its shareholder activism has increasingly been tinged by partisan politics. ...California's Howard Jarvis Taxpayers Association is also organizing an initiative effort to put public pension reform to a statewide vote.
    http://news.yahoo.com/news?tmpl=story&cid=1896&u=/nm/20050105/us_n m/politics_calpers_dc_1&printer=1

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Thursday, January 6, 2005 ~ 11:54 a.m., Dan Mitchell Wrote:
The flat tax juggernaut. The Wall Street Journal favorably notes the amazing shift to the flat tax in Eastern Europe. This shift to better tax policy is driven by tax competition - and is precisely why the tax harmonization schemes of the OECD and EU should be vigorously resisted:

    On New Year's Day two more countries hopped on the flat-tax bandwagon -- Romania and Georgia. That brings to eight the number of nations in Old Europe that believe a flat tax is the way to a new economy. Romania's new rate of 16% applies to both personal and corporate income. It replaces five personal tax brackets ranging between 18% and 40% and a corporate rate of 25%. Georgia's flat tax is even lower: 12% on corporate and personal income. It's no accident that it trumps Russia's 13% flat tax by a hair -- President Mikhail Saakashvili wanted to boast the lowest tax rate in Europe. The Continent's flat-tax club also includes flat-tax pioneer Estonia (25% and heading down to 20% in 2007), Latvia (25%), Serbia (14%), Ukraine (13%) and Slovakia (19%). The largest opposition parties in the Czech Republic and Poland are also agitating for a flat tax and have promised to implement one if victorious at the polls. ...In the rest of the world, countries that want to stay competitive could do worse than to take a page from the Romanian and Georgian playbooks. A clean sweep of all forms of tax favoritism would wipe out a huge industry of consultants and lawyers. But eliminating all this tax-generated make-work would be a boon to economic efficiency and give most taxpayers a fairer and better deal.
    http://online.wsj.com/article/0,,SB110496441617217964,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Thursday, January 6, 2005 ~ 10:35 a.m., Dan Mitchell Wrote:
AARP puts ideology over honesty. The American Association of Retired Persons portrays itself as a lobby for senior citizens, but "left wing special interest group" is a more accurate description. As the Wall Street Journal explains, AARP routinely engages in dishonest tactics to achieve its ideological goal of making America more like France:

    Just over a year ago Republicans were fantasizing that they'd bought the senior vote with their Medicare prescription drug entitlement. We warned at the time that the GOP's "rent-a-friends in the AARP will soon return to lobbying alongside their more natural big government allies on the left." And sure enough, yesterday America's self-styled lobby for the elderly began an ad blitz assailing the Bush Administration's attempt to address the other half of the coming entitlement crack-up: Social Security. ...So here we are back to scaring grandma, never mind the facts. The AARP leadership knows that no Social Security reform would have any effect at all on current members of the 50-plus set they claim to represent; the personal accounts would be voluntary and for younger workers only. They also know that there isn't a serious Social Security reform plan anywhere that wouldn't guarantee some minimum level of benefit, or that would allow people to "gamble" their retirement savings in anything other than diversified mutual funds. ...The truth is that AARP might be able to ignore, but it can't repeal, the laws of demographics. And there is simply no way the current pay-as-you-go retirement system, with two workers supporting each retiree in 2030, is not going to require a crushing tax burden compared with a system that had 16 workers per retiree in 1950 and 3.3 today. Particularly dishonest is AARP's readiness to peddle the fiction that there is actually a "trust fund" accumulating assets to pay benefits once Social Security payments exceed payroll tax revenues around 2018. Mr. Novelli knows these "surpluses" have already been spent on other things and been converted to IOUs that will have to be financed by taxes on future workers, unless of course those liabilities are repudiated by future politicians. ...AARP rank-and-file members need to understand that the leaders speaking on their behalf are now essentially endorsing much higher taxes or lower benefits, and probably both. Personal retirement accounts are in fact the least "risky" alternative. Rather than rely on the whims of future politicians, they allow workers to build up assets that they themselves own as a property right. While individual stocks and the market itself rise and fall, over the last 60 years stocks have provided an average annual return reaching near 10%.
    http://online.wsj.com/article/0,,SB110489281596517274,00.html?mod=opini on&ojcontent=otep   (subscription required)

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Thursday, January 6, 2005 ~ 10:10 a.m., Dan Mitchell Wrote:
Even the IMF supports Romania's low-rate flat tax. In a rather surprising development, the International Monetary Fund gave its blessings to Romania's new 16 percent flat tax. This is remarkable since the IMF has been infamous for pushing higher taxes. Maybe an old dog can learn new tricks:

    "The introduction of flat income tax is in accordance with a good taxation policy and with the developments in the region," International Monetary Fund (IMF) resident representative in Romania Graeme Justice said upon an briefing with Prime Minister Calin Popescu Tariceanu at Victoria Palace [government headquarters] in Bucharest. ...The head of the Romanian government stressed that the Romanian authorities want to strengthen and capitalize the Romanian economy in the next two years so that it may face competition when joining the European Union. This tax policy, the prime minister said, is aimed at boosting Romanian investments and attracting foreign investments, especially that the Government has decided to do all it can for Romania to consolidate its position in the competition with the countries in the region.
    http://www.reporter.gr/fulltext_eng.cfm?id=50104201143

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Thursday, January 6, 2005 ~ 8:45 a.m., Dan Mitchell Wrote:
Irish and Slovak officials explain important role of better tax policy. At the Tax Foundation's annual conference in November, officials from Ireland and Slovakia discussed the role of lower tax rates and tax reform. Not surprisingly, better tax policy leads to better economic performance:

    ...what role did tax reform play in the rise of the Celtic tiger? It's difficult to disaggregate the effects of several contemporaneous and with the mutual support of policy changes, but there were some noticeable shifts and I've just mentioned three of them. Married female, labor force participation went up and very substantially, obviously releasing or realizing a new known resource. Longterm unemployment in particular fell dramatically with the tax wage between gross and take-home earnings falling, a larger gap emerged between welfare incomes and income from work. And such employed obviously would have benefited - relative on my last slide where you saw the tax burden falling on higher incomes. And that, in turn, may have induced stronger investment but stronger incentive . . . but rather the trend towards higher selfemployment could also be a national response simply to the fact that we were growing faster and there were more opportunities. The second question that was posed on the agenda we got was what has been the impact on tax revenues and tax compliance? Tax compliance - certainly lower tax rates should encourage compliance by reducing incentives to invasion...

    ...the major engine of the tax reform was the request to increase the competitiveness in a very high competition between the countries in Central and Eastern Europe to attract investment. This was clearly the major, major reason for the tax reform. ...Today in Slovakia we don't have a tax on dividends. We have no inheritance tax. We have no gift tax. And from January next year, also, the real estate transfer tax will be abolished. Also, we have a flat tax rate for the personal income... When I was talking about major impetus of the reform it was the attraction of the investment and this is how we would like to support capital inflow to Slovakia. We have only one tax on profit, which is 19% corporate income tax and there is no dividend tax. So a combination means 19% taxation and you can see the comparison with other countries. ...already today we can see two of the most important results of the reform. The first one is there's no doubt that we have significantly stronger interest from foreign investors to come to Slovakia, to visit, to discuss and many of them are already deciding for investment to Slovakia.
    http://www.taxfoundation.org/events/67/Panel1-Ireland-Poland-Slovakia.pdf

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Wednesday, January 5, 2005 ~ 12:27 p.m., Dan Mitchell Wrote:
America is a republic, not a democracy. As always, Walter Williams of George Mason University offers valuable insights. His most recent column explains that the United States is a republic - a system of government where individual rights come first and the power of government is constitutionally constrained. A democracy, by contrast, is a system based on tyranny of the majority - where two wolves and a sheep vote on what to have for lunch:

    We often hear the claim that our nation is a democracy. That wasn't the vision of the founders. They saw democracy as another form of tyranny. If we've become a democracy, I guarantee you that the founders would be deeply disappointed by our betrayal of their vision. The founders intended, and laid out the ground rules, for our nation to be a republic. ...So what's the difference between republican and democratic forms of government? John Adams captured the essence of the difference when he said, "You have rights antecedent to all earthly governments; rights that cannot be repealed or restrained by human laws; rights derived from the Great Legislator of the Universe." Nothing in our Constitution suggests that government is a grantor of rights. Instead, government is a protector of rights. In recognition that it's Congress that poses the greatest threat to our liberties, the framers used negative phrases against Congress throughout the Constitution such as: shall not abridge, infringe, deny, disparage, and shall not be violated, nor be denied. In a republican form of government, there is rule of law. All citizens, including government officials, are accountable to the same laws. Government power is limited and decentralized through a system of checks and balances. Government intervenes in civil society to protect its citizens against force and fraud but does not intervene in the cases of peaceable, voluntary exchange. Contrast the framers' vision of a republic with that of a democracy. In a democracy, the majority rules either directly or through its elected representatives. As in a monarchy, the law is whatever the government determines it to be. Laws do not represent reason. They represent power. The restraint is upon the individual instead of government.
    http://www.townhall.com/columnists/walterwilliams/ww20050105.shtml

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Wednesday, January 5, 2005 ~ 11:58 a.m., Dan Mitchell Wrote:
New York is the France of America. New York is becoming increasingly uncompetitive according to a new report (http://www.bcnys.org/whatsnew/
2004/1228jtf.htm
). Higher taxes and bloated government deserve much of the blame, though neither Republicans nor Democrats in the state seem interested in moving policy in the right direction. The Wall Street Journal comments on this dismal situation:

    Last week the Public Policy Institute of New York released a report that confirms what many in that state's business community surely suspected, even if they didn't realize things were quite so bad. Exorbitant costs for energy, employee benefits and taxes make New York one of the worst places in the country to run a business. "The burden of these high costs clearly outweighs New York's advantages, such as technology and labor force, in terms of the state's overall competitiveness," the report concludes. Among the burdens: ...New York corporate taxes per capita are fourth-highest in the U.S. and 171% above the national average. Personal income-tax rates are also among the nation's highest, especially for residents of New York City. ...Small wonder that New York's growth in private-sector jobs since 1993 is only half of the national average. Or that manufacturing employment over the same period is down by 27%, compared with the nationwide average of 15%.
    http://online.wsj.com/article/0,,SB110489289784817277,00.html?mod=opini on&ojcontent=otep

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Wednesday, January 5, 2005 ~ 11:03 a.m., Andrew Quinlan Wrote:
Legal reform already improving California's business climate. By an overwhelming margin, California voters approved a referendum to curb legal abuses by trial lawyers. As the Wall Street Journal opines, this reform is yielding positive results:

    Much of California's tort problem stemmed from its Unfair Competition Law, enacted in the 1930s to curb allegedly unfair business practices. Over the years the law morphed into an income redistribution tool for lawyers, who filed shakedown lawsuits against companies for anything they claimed was unfair to consumers. Most crazy was that the law allowed any party to sue, regardless of whether the plaintiff had been directly affected. Lawyers were actually able to file lawsuits "on behalf" of the entire citizenry of California, for example. Yet since there were very few genuine plaintiffs, average Californians never really stood to gain anything. The plaintiffs bar, however, could win huge legal fees ordered by judges who decided their cases. Many defendent businesses settled out of court to avoid the cost of going to trial. Consumers ultimately financed this extortion via higher prices for goods and services. Californians put a stop to all this in the recent election, with 59% voting to amend the law. ...In the past few weeks alone, a judge dismissed a suit against Bayer for including certain products in its "One a Day" vitamin brand that called for more than one tablet a day. The suing lawyers admitted that their "plaintiff" had never bought or used any of the products in question. Another judge dismissed a lawsuit against AT&T filed by one Daniel Banales, in which he claimed the company charged a "hidden" fee when upgrading to a new phone. Mr. Banales was not an AT&T customer. The disputed cases also offer a window into just how much cash lawyers were siphoning under the old law. A California appellate court will soon decide whether to dismiss a suit originally brought by such infamous tort lawyers as Bill Lerach against Black & Decker and Target, Wal-Mart and other retailers. Their crime? Selling Kwikset locks advertised as "Made in U.S.A." when the lock contained six screws made in Taiwan. The lower court awarded the sole "plaintiff" in the case costs plus legal fees -- or $3 million that went straight to the attorneys.
    http://online.wsj.com/article/0,,SB110471216492914879,00.html?mod=opini on&ojcontent=otep

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Wednesday, January 5, 2005 ~ 10:35 a.m., Dan Mitchell Wrote:
Blacks victimized by Social Security. The editor of National Review explains that personal retirement accounts would be particularly beneficial for African-Americans since they have lower life-spans. Moreover, personal accounts would be a way to build wealth in the black community:

    There is a direct correlation between economic status and average life span. This means that blacks, who are disproportionately poor, partly for historic reasons, tend to have shorter life spans, especially black males. The average life expectancy of a black male is roughly 68.6. The retirement age of Social Security is set under current law to eventually rise to 67. You do the math - this cannot be a good deal. According to Social Security expert David John of the Heritage Foundation, one-fifth of white males die between the ages of 50 and 70. But one-third of black males die between those ages. If you die before you reach the age of 62, you have no chance of collecting benefits, and if you die shortly thereafter, you will not recoup the payroll taxes you paid into the system. ...In the current system, if someone dies and has no wife or children, the money he has paid in simply disappears. Under reform, the beneficiary would be able to designate who receives the assets in his account, whether it is a niece or a church. The money stays in the community. This is so important because even as blacks have made up ground in terms of income - their household income has increased roughly 47 percent since 1967 - they lag badly when it comes to net worth. The median net worth for black families is only $19,000, a mere 15 percent of the same figure for white families. Blighted opportunities in the past have kept blacks from passing wealth from generation to generation. Private Social Security accounts would help address this deficit - if Democrats don't stop them. ...Opinion polls have shown that roughly 60 percent of blacks support the idea of private Social Security accounts. If only their political advocates could see the light.
    http://www.nationalreview.com/lowry/lowry200501040926.asp

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Wednesday, January 5, 2005 ~ 9:14 a.m., Dan Mitchell Wrote:
Tories finally adopt pro-taxpayer platform. An editorial in the Wall Street Journal applauds the UK Conservative Party for finally shifting back to a Thatcheresque platform of smaller government and lower taxes:

    The Conservatives have been banished to the political wilderness since Labour ended its own electoral exile in 1997. But the real drought in British politics extends back to 1990 -- when the Tories dumped Margaret Thatcher, the author of the nation's last set of truly revolutionary economic policies. That's why it was encouraging to hear the Tories (finally) last week begin to stake their claim as the party of tax cuts and reform in this year's general election. First, Oliver Letwin, shadow chancellor of the exchequer, outlined five ways the party might revamp the inheritance tax, which currently claims 40% of the deceased's net assets over £263,000 ($505,000). Housing prices in the U.K. have increased 138% over the last seven years, and Mr. Letwin said six million people now could be affected by a tax intended only for the "super-rich." The proposed options range from raising the threshold slightly to abolishing it altogether, which would cost the Treasury an estimated £3 billion a year in foregone revenues. The Tories are also targeting other taxes, including the capital-gains levy, and pledge to offset these revenue losses by excising £30 billion worth of government waste.
    http://online.wsj.com/article/0,,SB110479255064315747,00.html?mod=opini on&ojcontent=otep

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Tuesday, January 4, 2005 ~ 2:52 p.m., Dan Mitchell Wrote:
Index of Economic Freedom shows U.S. no longer one of world's 10 freest economies. An editorial in the Wall Street Journal notes that the United States has fallen from the top 10 list in the Index of Economic Freedom (http://www.heritage.org/research/features/index/chapters/Executive_Summary.pdf). This unfortunate result is mostly due to improvements in economic policy elsewhere around the globe. The annual publication explains that high tax rates are America's biggest handicap in the global economy:

    For the first time in the 11 years that the Heritage Foundation and The Wall Street Journal have been publishing the Index of Economic Freedom, the U.S. has dropped out of the top 10 freest economies in the world. In 1998, the U.S. was the fifth freest economy in the world, in 2001 it was sixth, and today it sits at 12th, tied with Switzerland. The U.S. drop in ranking is explained in part by a slightly lower score, but mostly by the good performance among its competitors. The lesson? Stand still on the highway to economic liberty and the world will soon start to pass you by. The 2005 Index, released today, ranks Hong Kong once again as the world's freest economy, followed by Singapore and Luxembourg. But it is Estonia at No. 4 that makes the point. This former Soviet satellite is a model reformer, setting the standard for how fast countries can move ahead in the realm of economic liberalization. Ireland, New Zealand, the U.K., Denmark, Iceland, Australia and Chile, all relatively recent converts to free markets, also outpace the U.S. this year. ...Most alarming is the U.S.'s fiscal burden, which imposes high marginal tax rates for individuals and very high marginal corporate tax rates. In terms of corporate taxation as an element of economic freedom, the U.S. ranks a lowly 112th out of the 155 countries scored, and its top individual tax rate ranks only slightly better at 82nd. U.S. government expenditures as a share of GDP increased less in 2003 than in 2002, but the rise since 2001 is what explains the U.S.'s decline in score over the period.
    http://www.opinionjournal.com/editorial/feature.html?id=110006109

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Tuesday, January 4, 2005 ~ 2:02 p.m., Dan Mitchell Wrote:
Racial preferences hurt minorities. An upcoming Stanford Law Review article (see http://lawreview.stanford.edu/content/SanderFAQ.pdf) rigorously demonstrates that racial preferences reduce the number of black lawyers by putting minority law students in schools where they are surrounded by more qualified students. This leads to diminished performance and higher dropout rates. Articles in the Weekly Standard and Townhall.com discuss this important new research:

    How, then, would institutions committed to affirmative action respond if it could be shown that the policy does blacks more harm than good? Richard Sander, a law professor at UCLA, is about to find out. This week the Stanford Law Review will publish his article, "A Systematic Analysis of Affirmative Action in American Law Schools." By "affirmative action" in the law schools, Sander means the racially preferential variety used in admissions, and his focus is exclusively on preferences extended to blacks, the original beneficiary group, the other such groups having been added later (and for less compelling reasons). The title of the 117-page study is as dull as Sander's conclusion is sharp. "What I find and describe," he writes, "is a system of racial preferences that, in one realm after another, produces more harms than benefits for its putative beneficiaries." Sander makes the further, riveting point that "the annual production of new black lawyers would probably increase if racial preference were abolished tomorrow." ...There is thus a "system" in place whose net effect is "to move nearly all blacks up a tier (or two) in the law school hierarchy." Only at the bottom--in the lowest-tier schools--do you find black students who are probably unqualified for any law school. The cascading effect leaves most black students "mismatched" with peers whose academic credentials (in terms of LSAT scores and UGPA) are superior. Which means, as Sander puts it, that "nearly all blacks [are placed] at an enormous academic disadvantage in the schools they attend." And so there are "mismatch effects." In their first year, about 50 percent of black law students end up in the bottom tenth of their class, and roughly two-thirds in the bottom fifth, with only 8 percent placing in the top half.
    http://www.weeklystandard.com/Content/Public/Articles/000/000/005/080by suf.asp?pg=1

    A new and provocative study on affirmative action, which will appear in the Stanford Law Review this month, is attracting such attention that there is a special click-through on the publication's Web site to field questions about it. The conclusions of the study, that racial preferences at law schools produce fewer rather than more black lawyers, is already generating controversy that is sure to only increase. The study, "A Systematic Analysis of Affirmative Action in American Law Schools," argues, using statistical analysis, that although total elimination of racial preferences would cause a 14 percent reduction in the number of blacks accepted to law school, there would be an 8 percent increase in the number of blacks actually becoming lawyers. The reason for this, according to the analysis in the 100-plus page study, is because of the improvement in grades, graduation rates, and rates in passing bar examinations that would result from color-blind admissions policies.
    http://www.townhall.com/columnists/StarParker/sp20050104.shtml

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Tuesday, January 4, 2005 ~ 11:45 a.m., Andrew Quinlan Wrote:
Only the French can cut taxes and increase the tax burden. Tax-news.com reports that the French President is promising to push for more tax cuts. But taxpayers may want to hold on to their wallets since previous tax cuts have been offset by even bigger tax increases:

    Prior to the 2002 election, Chirac promised to slash French income taxes by 30%. However, half way through the government's five-year mandate, taxes have been reduced by around 10% after the President called a one year pause to the tax cut programme to bring the deficit under control. Although acknowledging that this is "not enough," Chirac nonetheless believed that: "At half-way, we are on the right road." In a bid to unshackle French citizens and business from one of the highest tax burdens in Europe, the government is trimming inheritance tax and increasing tax breaks for those who employ people at home. ...However, these tax cuts will be offset by almost EUR3 billion in revenue-raising measure imposed on companies and households aimed at reducing the shortfall in the welfare system, effectively lifting France's tax burden to 43.7% of national income from this year's 43.6%.
    http://www.tax-news.com/asp/story/story_open.asp?storyname=18453

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Tuesday, January 4, 2005 ~ 7:00 a.m., Dan Mitchell Wrote:
Trade deficit shows America's strength. Writing in the Wall Street Journal, Art Laffer (yes, the same one that developed the "Laffer Curve" showing that excessive tax rates result in less revenue for government) explains that the so-called trade deficit results from America's strength. Simply stated, foreigners are very anxious to invest their dollars in the US economy:

    In an era of floating exchange rates the trade deficit (or more appropriately, the current account deficit) is one and the same as the capital surplus. The only way the U.S. can have a trade deficit amounting to 5.6% of GDP is if foreigners invest that amount of their capital in the U.S. It's a matter of simple accounting. But once you realize that the trade deficit is, in fact, the capital surplus you would clearly rather have capital lined up on our borders trying to get into our country than trying to get out. Growth countries, like growth companies, borrow money, and the U.S. is the only growth country of all the developed countries. As a result, we're a capital magnet. ...Whether you're an American or a foreigner the U.S. is the choice destination for capital. That's why we have such a large trade deficit.

    The only way foreigners can guarantee a dollar cash flow to invest in the U.S. is if they sell more goods to the U.S. and buy less goods from the U.S. Our trade deficit is not a sign of a structural flaw in the fabric of the U.S. economy but is instead a stark reminder of our privileged status as the most pro-growth, free market, rule of law economy the world has ever known. Why on earth any American would want to change our policies to emulate foreign policies is beyond me.
    http://online.wsj.com/search#SB110471293088514892

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Monday, January 3, 2005 ~ 11:00 a.m., Dan Mitchell Wrote:
Social Security reform saves money. Critics of personal retirement accounts say that privatization is too expensive since government will need to borrow money to finance benefits for current retirees. This is true, but it is less than the amount of money that will be needed to bail out the current system - as Robert Novak explains:

    The Democratic Party establishment is appalled at the thought of private Social Security accounts turning ordinary Americans into owners of stocks and bonds and, therefore, potential Republicans. The argument by Democrats that private accounts are too risky fails the test of history. Nobody can find a 20-year period in America when investments have not gained. Accordingly, the central argument against private accounts has become that they cost too much. If 4 percentage points of the 12.4 percent Social Security payroll tax could be invested privately, transition costs were estimated at $1 trillion. If a 6.5 percent contribution envisioned by a bill sponsored by Sen. John Sununu and Rep. Paul Ryan were permitted, the estimated cost would rise to $2 trillion. ...transition costs are "significantly smaller" than costs from doing nothing about the estimated $12 trillion liability in the Social Security system.
    http://www.townhall.com/columnists/robertnovak/rn20041230.shtml

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Monday, January 3, 2005 ~ 10:40 a.m., Dan Mitchell Wrote:
Senseless government safety rules. Tom Sowell explains that all sorts of choices involve risk. In some cases, the government senselessly infringes on the right of people to make their own judgments. He also points out that hypocrisy extends to other areas - particularly when people in other nations blithely assert that Americans are "stingy":

    The government will allow you to risk your life for the sake of recreation by sky-diving, mountain climbing or any number of other dangerous activities. But it will not allow you to risk your life for the sake of avoiding arthritis pain by taking Vioxx. There is no principle behind such differences in government policy. No one has to show that some particular medication is more dangerous than some particular recreation in order to get the medication banned while the recreational activity is allowed to go on. Businesses that conduct dangerous recreational activities are not being denounced for "corporate greed" by making money at the risk of other people's lives. But such charges are flung around regularly about pharmaceutical companies -- and are taken seriously in the media. ...One death in a boxing ring will set off loud demands to ban that sport but hundreds of deaths from boating accidents will elicit no such response. Nor are such gross double standards confined to safety issues. Americans will be denounced for greed and materialism by people from countries where individuals do not donate nearly as high a percentage of their incomes as Americans do, nor volunteer a fraction as much time to philanthropic causes as Americans do. Moreover, there will be a chorus of Americans on the left echoing the foreign charges.
    http://www.townhall.com/columnists/thomassowell/ts20041230.shtml

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Sunday, January 2, 2005 ~ 12:36 p.m., Dan Mitchell Wrote:
Reprehensible protectionism in Oklahoma. Jacob Sullum's Townhall.com column exposes the reprehensible special-interest policy of enriching morticians by preventing online casket sales. This issue currently is being contested in federal court:

    Memorial Concepts Online sells an oak coffin for about $2,000, compared to an average of around $4,000 at funeral homes in Oklahoma, where the company is based. By separating the purchase of caskets from the purchase of funeral services, Memorial Concepts can offer substantial savings, not to mention a shopping environment free of hovering morticians. But in Oklahoma, which allows caskets to be sold only by licensed funeral directors, such competition is illegal. Kim Powers and Dennis Bridges, the founders of Memorial Concepts, are fighting to overturn Oklahoma's casket cartel, arguing that it violates their rights to due process, equal protection and economic liberty under the 14th Amendment. ...Qualifying as a funeral director in Oklahoma requires two years of college courses, graduation from a mortuary science program, a one-year apprenticeship that includes the embalming of at least 25 bodies, and two exams. After all that, the applicant is deemed qualified to sell boxes. The state also mandates that caskets be sold from a "funeral establishment" that includes a "preparation room" for embalming, a "selection room" for displaying casket options, and "adequate areas for public viewing of dead human remains." These requirements leave no room for an online business such as Memorial Concepts that sells caskets directly to the public and never handles bodies.
    http://www.townhall.com/columnists/jacobsullum/js20041231.shtml

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Sunday, January 2, 2005 ~ 12:04 p.m., Andrew Quinlan Wrote:
Romania leaps forward with 16 percent flat tax. The global shift to tax reform took a big step as Romania's new government announced a 16 percent flat tax. This almost surely will be a big boost for the nation's economy and hopefully will spur additional reform in other nations:

    Romania's new centrist government on Wednesday approved a big-bang tax reform aimed at reducing the size of the black economy and boosting foreign direct investment in the European Union candidate country. The government issued an emergency decree to introduce a 16 percent flat rate for both income tax and corporate profit tax. Income tax bands now range from 18 to 40 percent, while profits are taxed at 25 percent. ..."This decision is very important for the development of Romania's economy," Prime Minister Calin Tariceanu said after the first meeting of his cabinet forged from four centrist parties after inconclusive Nov. 28 elections. He said the move was a key element for job creation and investments to allow Romania to attract more foreign capital and make it more competitive in the EU convergence process.
    http://www.reuters.co.uk/newsArticle.jhtml?type=topNews&storyID=72013 42

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Saturday, January 1, 2005 ~ 3:42 p.m., Dan Mitchell Wrote:
Americans far more generous than French or Germans. The Wall Street Journal cites international data showing that Americans donate far more for international assistance than people in other nations. Moreover, Americans wisely target the majority of their donations through the private sector where money is much more likely to actually help the less fortunate:

    Groups like the Development Assistance Committee (part of the Organization for Economic Cooperation and Development) tend to look only at "official" government aid. What this misses is that Americans have never trusted government institutions to dole out assistance. Instead, we open our wallets for private groups that are better at targeting money where it's needed, tracking projects, cutting waste -- and getting results. When it comes to this sort of giving, nobody beats Americans. According to a 2003 report from the U.S. Agency for International Development, U.S. international assistance to developing countries in 2000 was $56 billion. Yet just 18% of that was "official" government assistance. Some $33.6 billion -- or 60% -- came from the private sector. Corporations shelled out nearly $3 billion. Religious groups weighed in with $3.4 billion. Individuals provided $18 billion. To say nothing of funds from foundations, private and voluntary organizations, or universities. Cynics mark this generosity down to a U.S. tax code that encourages giving. Yet most research shows that Americans view donations as a duty. Philanthropy magazine reports a study showing the average U.S. contribution outweighs the average German or French one seven- or eight-fold.
    http://www.wsj.com/wsjgate?source=jopinaowsj&URI=/article/0,,SB110445 541229313714,00.html%3Fmod%3Dopinion%26ojcontent%3Dotep   (subscription required)

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Saturday, January 1, 2005 ~ 11:46 a.m., Dan Mitchell Wrote:
Biased panel admits gun control doesn't work, but it refuses to endorse concealed carry laws. John Lott of the American Enterprise Institute says the good news is a Clinton-appointed panel was forced to concede that gun control policies are a failure. The bad news, however, is that the panel "cooked the books" in an effort to bury evidence in favor of laws permitting law-abiding citizens to carry concealed weapons:

    Based on 253 journal articles, 99 books, 43 government publications, a survey that covered 80 different gun-control measures and some of its own empirical work, the panel couldn't identify a single gun-control regulation that reduced violent crime, suicide or accidents. From the assault-weapons ban to the Brady Act to one-gun-a-month restrictions to gun locks, nothing worked. The study was not the work of gun-control opponents: The panel was set up during the Clinton administration, and all but one of its members (whose views on guns were publicly known before their appointments) favored gun control. ...James Q. Wilson, professor of management and public policy at UCLA, was the one dissenting panelist and the only member whose views were known in advance to not be entirely pro-gun control. His dissent focused on the right-to-carry issue, and the fact that emphasizing results that could not withstand peer-reviewed studies called into question the panel's contention that right-to-carry laws had not for sure had a positive effect. Wilson also said that that conclusion was inaccurate given that "virtually every reanalysis done by the committee" confirmed right-to-carry laws reduced crime. He found the committee's only results that didn't confirm the drop in crime "quite puzzling." They accounted for "no control variables"--nothing on any of the social, demographic, and public policies that might affect crime--and he didn't understand how evidence that wouldn't get published in a peer-reviewed journal would be given such weight.
    http://www.aei.org/news/newsID.21767/news_detail.asp

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