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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Thursday, March 31, 2005 ~ 11:17 a.m., Dan Mitchell Wrote: Rep. John Linder, a Georgia Republican, has a 133-page bill to replace 55,000 pages of tax rules. His bill would abolish the Internal Revenue Service and the many billions of
tax forms it sends out and receives. He would erase the federal income tax system -- personal and corporate income taxes, the regressive payroll tax and self-employment tax, capital gains, gift and estate taxes,
the alternative minimum tax, and the earned-income tax credit -- and replace all that with a 23 percent national sales tax on personal consumption. That would not only sensitize consumers to the cost of
government with every purchase, it would destroy K Street. "K Street" is shorthand for Washington's lawyer-lobbyist complex. It exists to continually complicate and defend the tax code, which is a
cornucopia from which the political class pours benefits on constituencies. ...Corporations do not pay payroll and income taxes and compliance costs; they collect them from consumers through prices. So the 23
percent consumption tax would allow taxpayers to stop paying the huge embedded cost of corporate taxation. Linder says the director of the Congressional Budget Office told him it costs individuals and businesses
about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100. ...With no taxes on capital and labor, multinationals would,
Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America. "This," Linder says, "would unleash freedom around the globe."
Thursday, March 31, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: As an economic superpower we should be embarrassed that nations once part of the communist Soviet Union, such as Russia, Estonia,
Lithuania, Latvia and Slovakia recently replaced their outdated tax systems with a single-bracket flat tax system. These formerly backward nations are all experiencing booming economies as a result. We should
be embarrassed that the small country of Chile established a system of personal retirement accounts in 1980 that has provided real retirement
security for its citizens. We should be outraged that a few municipalities and workers in certain fields, such as teachers and railroad employees,
were allowed to opt out of Social Security while the majority of us suffer under the current broken system. Members of Congress should be even more embarrassed that they enjoy a personal retirement
account subsidized by the taxpayers, the Thrift Savings Plan, which many of them would deny the rest of us.
Thursday, March 31, 2005 ~ 10:04 a.m., Dan Mitchell Wrote: Blockbuster has dropped its billion-dollar bid for rival movie-rental chain Hollywood Entertainment. Whether such a deal might have
salvaged the brick-and-mortar video store business model, we can't say. But it's impossible to take seriously the notion put forth by the Federal Trade Commission that the merger would have resulted in
fewer choices for consumers. In case no one at the agency has noticed, the local video store isn't the only game in town. You don't have to make it a Blockbuster night, thanks to the growing number of options
for movie fans who prefer their living room to the multiplex. "Blockbuster's core movie-rental business has flopped worse than a
Ben Affleck flick," says Fortune magazine. "From a peak of $10 billion in 2001, that market shrank to $7.7 billion last year." ...Discount
retailers like Best Buy, Target and Wal-Mart, which also boasts an Internet rental service, have made DVDs and videos so dirt-cheap that buying is a viable option to renting if you plan to watch something
more than once. Movie purchases are one reason rentals have declined by 10% in the past four years. Add to this the surfeit of choices available through cable and satellite video-on-demand services, which
deliver movies directly to your TV set if you're too bothered to leave the couch. ...Blockbuster and Hollywood Entertainment first attempted a merger back in 1999, only to have the FTC scuttle the deal on the
same preposterous antitrust grounds. Six years later we can see how the agency misjudged the emerging competition. But for the commission to argue that nothing has changed in the past six years,
despite today's clearly competitive movie-video marketplace, betrays an almost willful bureaucratic ignorance. ...Republican Administrations like to claim they understand market competition better than
Democrats do, but on antitrust policy it has too often been hard to tell the difference.
Thursday, March 31, 2005 ~ 8:51 a.m., Dan Mitchell Wrote: Whether "evolving standards," the "weight of international opinion" and good ideas should determine court decisions underlies much of the
ongoing conflict over President Bush's federal court appointees. A federal court appointee who'd say his decisions are guided by the letter and spirit of our Constitution would be tagged by Democrat senators
and a few Republican senators, such as Arlen Specter, as an extremist. They'd prefer justices who share former Chief Justice Charles E.
Hughes' vision that, "We live under a Constitution, but the Constitution is what the judges say it is." Translated, that means we don't live under
the Constitution; we live under tyrannical judges. Many law professors, and others who hold contempt for our Constitution, preach that the Constitution is a living document. Saying that the Constitution is a
living document is the same as saying we don't have a Constitution. For rules to mean anything, they must be fixed. How many people would like to play me poker and have the rules be "living"? Depending
on "evolving standards," maybe my two pair could beat your flush.
Thursday, March 31, 2005 ~ 8:22 a.m., Dan Mitchell Wrote: While murder rates have been falling or have been flat for years in the rest of the country, Philadelphia's rate has been rising. Last year's
murder rate was the highest since 1993, and Philadelphia replaced Chicago, the perennial leader, as the top 10 largest city with the highest murder rate. With 85 murders in the first 88 days of 2005, the
city's murder rate is well ahead of even last year's. Mayor John Street's solution? He's doing little about fixing the city's declining arrest rates
for murder. Instead, he blames the law-abiding citizens who have permits to carry concealed handguns. He announced on Thursday that the city will deliberately begin delaying issuing new concealed handgun
permits. Gov. Rendell's proposed crime task force promises to examine the issue further. No reporters seem to have asked Street or Rendell the
obvious question: If permit-holders are the problem, how many of those 85 murders were caused by a person with a permitted concealed handgun? When I asked, the city police and mayor's office were unable
or unwilling to answer that question, but my guess is zero. ...Indeed, with 28,000 concealed handgun permit-holders in Philadelphia and more than 600,000 statewide, there was no such murder last year, or
the year before, or the year before in the entire state. Only two have been recorded since the state law started in 1989. Instead, in Philadelphia there are a number of cases such as this: Last December,
a robber shot at a deliveryman despite having taken all his money, and only then did the deliveryman use his permitted concealed handgun to wound the robber. There are dramatic cases statewide. A couple of
years ago, a serial rapist in Pittsburgh was wounded by his sixth intended victim who had a permitted concealed handgun. ...If the state's gun laws are a problem, then why has Pittsburgh's murder rate
fallen by 20 percent this year while Philadelphia's has increased? As State Rep. Dwight Evans, a Philadelphia Democrat, noted, "If Mayor
Street thinks he's going to suddenly make street violence disappear by denying law-abiding citizens their right to self-defense, he's sadly
mistaken." If Mayor Street is unwilling to protect Philadelphians by fixing the city's problems with law enforcement and lax judges, at least let law-abiding citizens protect themselves.
Wednesday, March 30, 2005 ~ 11:06 a.m., Dan Mitchell Wrote: President Jacques Chirac of France called Monday for a tax on airline fuel and tickets by the end of the year to fight epidemics including AIDS
in Africa, saying the proposal could save three million lives a year. The proposal could be a test of more far-reaching ideas backed by the French leader, including a tax on international financial transactions
to support development. France and Germany together are calling "for the creation by the end of the year, along with all countries that wish,
for a first international solidarity tax" on jet fuel and airline tickets to fund the fight against AIDS and "the great pandemics that are
decimating Africa," Chirac said. ...Chirac said he had presented the airline tax idea in talks Sunday with Prime Minister Junichiro Koizumi
of Japan and wanted to take it forward at the Group of Eight summit meeting in Scotland in July and the September session of the United Nations in New York. In January, Chirac listed a number of options
before the World Economic Forum in Davos, Switzerland, including a "contribution" on international financial transactions or a tax on capital movement in or out of countries with secretive banking
practices. Germany, Spain, Brazil and Chile support the idea, but the United States is opposed and Japan is skeptical, as is much of the international business community. The proposals are variations of the
"Tobin tax," named after the American Nobel laureate James Tobin of Yale University, who came up with the plan in 1971 to tax capital flows as a way to reduce speculation in global markets.
Wednesday, March 30, 2005 ~ 10:39 a.m., Dan Mitchell Wrote: When the price of medical care takes up just a small percentage of national income, it is hard to argue with the notion that everyone
should enjoy similar medical treatment. Sure, critics may gripe that the higher taxes needed to pay for universal health coverage may cut into economic growth a bit, but so what? A little redistribution won't
suddenly transform the United States into a failed, Soviet-style "workers' paradise." But as health costs creep up to, say, 25 percent of
national income, things get more complicated. Americans would see their tax bills more than double, while total taxes could reach 75 percent of many Europeans' income. With oppressive tax burdens and
heavy state intervention in health-already the largest sector of the economy-socialism would have crept in through the back door. ...smug Europeans, Canadians, or Japanese may think that exploding
healthcare costs are a purely U.S. problem. Certainly, the British and Canadian governments successfully wield their monopolies over healthcare to hold down both doctors' incomes and prescription drug
prices. And part of the rise in U.S. healthcare costs stems from the breakdown of the checks and balances that more centralized systems provide. (For example, Americans are several times more likely to
receive heart bypass surgery than Canadians, where the procedure is reserved for extreme cases. ...if all countries squeezed profits in the health sector the way Europe and Canada do, there would be much less
global innovation in medical technology. Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitable U.S. market. If the United States
joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt.
Wednesday, March 30, 2005 ~ 10:00 a.m., Dan Mitchell Wrote: The reality is that the U.S. has the world's biggest accumulation of savings and investments. ...Of course, more saving would be better
especially for those who haven't been able to save, and a reduction in the tax distortions that penalize liquid savings while favoring real estate would add to our growth prospects. ...Household net worth, one
good measure of savings, reached $48.5 trillion in 2004. Time deposits and savings accounts alone total a staggering $4.3 trillion, versus slow-growing credit-card debt of $800 billion. True, the U.S. is the
world's biggest debtor, but it is building assets faster than debt. Even if household assets took a hard fall, the remaining net worth would still
dwarf other countries'. On a per capita basis, counting mortgages but not houses, net financial assets total $89,800 in the U.S. versus $76,900 in No. 2 saver, Japan. ...According to the Federal Reserve's
flow of funds data, the 2004 additions to household financial assets were a net $590 billion. This was 6.8% of personal disposable income, providing a meaningful measure of the cash flow going into new
financial savings. This increased the household's financial net worth to $26.1 trillion, way above any other country's savings and plenty to fund
profitable domestic investments. If the 2004 appreciation in the value of homes and equities were also counted, the 2004 saving rate was 46% of disposable income. ...How can the U.S. have so much
aggregate savings when the government's "personal savings rate" statistic is low and has been falling? The personal savings rate doesn't
really measure saving in the real sense. It subtracts a broad measure of consumption, $8.5 trillion in 2004, from "disposable personal income,"
a subset of household cash flow, and labels the difference "personal savings." ...Fortunately, the personal savings rate doesn't have much
connection to the actual saving taking place in the economy. Basically, the income side of the equation is understated because it doesn't measure gains or cash flows to the consumer, and the consumption side
is overstated because it includes many long-lasting purchases, some of which might better be considered investments.
Wednesday, March 30, 2005 ~ 9:23 a.m., Andrew Quinlan Wrote: ...what Mr. Volcker's report reveals is an "adverse finding" against the Secretary General: That is, patterns of willful neglect, conflict of
interest and incompetence that would have any business CEO out on his ear. ...Throughout Mr. Volcker's investigation, the U.N. has steadfastly maintained that it hired Cotecna because it put in the
lowest bid--$499 per man-day rate against $600 for the next-lowest bidder. But as we have previously reported, Cotecna upped its asking price within days of winning the contract without triggering a
competitive rebid. Then too, at the time the U.N. awarded the contract to Cotecna Mr. Massey was under criminal investigation by a Swiss magistrate on money laundering charges. U.N. procurement officials
claim to have been ignorant of Cotecna's legal troubles, despite their having been the subject of a front page story in the New York Times. Yet according to the report, Mr. Annan himself had known of the
allegations against Cotecna since 1998, but had been reassured by his son that "there was not much to it." And it finds that had there been
more than a "one day inquiry" into 1999 news reports that Kojo worked for Cotecna, it is "unlikely that Cotecna would have been
rewarded renewals" of its U.N. contracts. The man who ordered that perfunctory probe, Mr. Annan's then-chief of staff Iqbal Riza, shredded potentially relevant documents last year.
Wednesday, March 30, 2005 ~ 9:16 a.m., Dan Mitchell Wrote: A switch to a flat tax in the United Kingdom would benefit taxpayers both rich and poor whilst dramatically improving the international
competitiveness of the British economy by sweeping away increasingly complex tax law and regulation, according to the Adam Smith Institute. In a new report by Richard Teather, Associate Senior Lecturer
in Tax Law at Bournemouth University, it is argued that a new flat rate of income tax levied at 22%, in tandem with a personal tax-free allowance of £12,000, would take most low income earners out of the
tax system altogether whilst boosting the after-tax earnings of those on below-average incomes by 12% and top earners by 0.5%. What's more, the study concludes that the change can be achieved without major
long-term disruption to the government's revenue flows through improved compliance, reduced incentives to shelter income from tax and higher rates of economic growth achieved by "taking the brake off
the economy."
Wednesday, March 30, 2005 ~ 7:43 a.m., Dan Mitchell Wrote: Behind this tilt is popular frustration with the failures of the 1990's, a decade of reform under governments of the right that were supposed to
catapult the region toward development. Despite the success of many of these governments in curbing inflation, that development failed to happen. Instead of decentralization and the creation of a free,
competitive economy and strong legal institutions open to all, crony capitalism and authoritarianism grew. Countries replaced inflation with new taxes on the poor, high tariffs with regional trading blocs,
and, especially, state monopolies with government-sanctioned private monopolies. ...In order to compete with economies that have undergone reform in East Asia and Europe, Latin America's left must dismantle
corporatist states that hamper enterprise among those who are not close to government and, through legal privilege, mock the notion of equality before the law. Many companies that were privatized in the
1990's (telephone service in Mexico and Argentina, and electricity in Peru) still have effective monopolies and are in cahoots with regulators. Getting rid of these privileges could help to persuade the
poor to embrace the idea of economic freedom. Significantly reducing high sales taxes that were set in times of fiscal profligacy would lift a burden from the poorest citizens. Slashing the bureaucratic
requirements that force citizens to spend up to 80 percent of their annual income if they want to set up a private company would also help to empower would-be entrepreneurs.
Tuesday, March 29, 2005 ~ 1:00 p.m., Dan Mitchell Wrote: The adoption of flat tax systems in eastern Europe - following their earlier introduction in Hong Kong and the Channel Islands - has
sparked growing interest in western Europe and the US. Advocates, led by several prominent think-tanks in western capitals, say flat taxes,
involving a single rate levied on a broad base, increase tax revenues by boosting the economy and reducing avoidance. ...This month, Poland's centre-left government announced that it would introduce a flat tax
system by 2008. The new scheme would set taxes on all personal income and corporate profits, as well as value-added tax, at 18 per cent. Even if, as is likely, the current government loses parliamentary
elections later this year, Poland is still expected to introduce a similar scheme because the opposition favours a flat tax rate of 15 per cent.
...Advocates in government view it as a means of boosting tax revenues and attracting foreign investors. In much of the industrialised world there has already been a marked trend towards flatter, or simpler tax
systems. Over the past 20 years, the number of tax bands in most countries has been drastically reduced, according to the OECD. ...Nine eastern European countries, from Estonia in 1994 to Romania and
Georgia this year, have set low, flat rates on personal income and often equally low corporate taxes. The clearest benefits are easier administration and a better understanding of tax bills. Lowering the
tax rate and broadening the base discourages tax avoidance and evasion. ...Supply-side economists argue that an economy will benefit substantially from the increased savings and investments created when
citizens are allowed to keep more of their earnings. In eastern Europe, several flat tax countries are, indeed, booming. ...In Slovakia, where
the economy has boomed with the help of foreign investment, officials say the flat tax has helped attract investors. ...Charles Robertson, an economist for ING Bank, notes that Estonia has applied a flat tax for
more than a decade without opposition. "Estonia has done incredibly well, and no political party is saying 'It is about time we tax the rich a little more'."
Tuesday, March 29, 2005 ~ 12:34 p.m., Dan Mitchell Wrote: The world's richest individuals have placed $11.5 trillion of assets in offshore havens, mainly as a tax avoidance measure. The shock new
figure - 10 times Britain's GDP - is contained in the most authoritative study of the wealth held in offshore accounts ever conducted. The study, by Tax Justice Network, a group of accountants and economists
concerned at the escalating wealth held in offshore locations, shows that the world's high-net-worth individuals earn $860 billion each year from their assets. But there is growing alarm among regulators and
campaigners because exchequers worldwide are missing out on at least $255bn of tax each year. Governments appear unable, or unwilling, to prevent the rich employing aggressive strategies to minimise their tax
liabilities.
Tuesday, March 29, 2005 ~ 11:41 a.m., Dan Mitchell Wrote: If people who commit sex crimes against children are so dangerous that they have to be registered for life after serving their sentences,
why are they let out of prison in the first place? ...It is fascinating to hear teachers say that having to "teach to the test" reduces their
ability to engage in good teaching. What they call "good teaching" is the very reason our students do so badly in international comparisons
and why colleges have to have large numbers of remedial courses to teach students what they didn't learn in school. ...In a market economy, the costs created by our decisions are explicit. In a
government-controlled economy, those costs are not explicit. This is a great advantage for government officials and a great disadvantage for
the general public, which ends up paying the costs, whether or not they are aware of what those costs are.
Tuesday, March 29, 2005 ~ 10:18 a.m., Andrew Quinlan Wrote: ...many people delude themselves into thinking that they aren't actually paying any taxes if they end up with a refund. But a refund just means
that you had too much money withheld from your paycheck. You need to be aware of the amount you really paid: withholding less any refund or plus the check you had to write to the Internal Revenue Service.
Tuesday, March 29, 2005 ~ 10:02 a.m., Dan Mitchell Wrote: The Conservatives sacked their deputy chairman, Howard Flight, because of that leaked speech. He was caught in the act of telling
supporters that a Tory government would cut spending by more than the party has let on publicly. The Conservatives' officially proposed "spending cuts" merely amount to slower spending growth, only 28%
by 2011-12 vs. the 35% in Labour plans. If they have a more "conservative" hidden agenda, they don't want anyone to know about it. The Tories' haste to abandon the legacy of Margaret Thatcher and
copy Labour's fiscal policies only underscores their lack of viability as an opposition party, much less a potential government. That's sad because there is a real need for alternatives to the current
administration's economic vision.
Tuesday, March 29, 2005 ~ 8:56 a.m., Andrew Quinlan Wrote: My research uncovered another interesting finding. Female officers are more likely to accidentally shoot people. Each 1 percent increase in the
number of white female officers in a police force increases the number of shootings of civilians by 2.7 percent. Because of their weaker physical strength, female officers have less time to decide on whether
to fire their weapon. If a man makes a mistake and waits too long to shoot a suspect who is attacking him, the male officer still has a chance
of using his strength to subdue the attacker. Female officers (as was the case in Atlanta) will lose control of the situation at that point. While
creating a more diverse police force may produce some benefits, we still shouldn't forget the differences between men and women. Just as women officers are better suited for some jobs, there are other jobs
that simply call for large men.
Tuesday, March 29, 2005 ~ 8:17 a.m., Dan Mitchell Wrote: ...our Founding Fathers fought the Revolutionary War precisely in order to stop foreign governments from telling us what our laws say.
The Declaration of Independence specifically complains that the American Revolution was justified because King George "has combined with others to subject us to a jurisdiction foreign to our
constitution, and unacknowledged by our laws." It was "We the People of the United States" who ordained and established a Constitution of
the United States, one that includes a mechanism by which only "We the People of the United States" can change it if necessary. And of
course, every federal judge and justice swears an oath to "faithfully and impartially discharge and perform all the duties incumbent upon
me...under the Constitution and laws of the United States." I fear, however, that today some judges may be departing so far from American law, American principles, and American traditions, that the
only way they can justify their rulings from the bench is to cite the law of foreign countries, foreign governments, and foreign cultures -
because there is nothing in this country left for them to cite for support. What's more, citing foreign law in order to overrule U.S. policy is
especially offensive to our constitutional democracy, because foreign lawmaking is in no way accountable to the American people.
Monday, March 28, 2005 ~ 4:30 p.m., Dan Mitchell Wrote: Suppose you were a sadist and really hated your fellow men -- what type of job would you try to get? Well, you might try to become head of
airline security for the Transportation Security Administration (TSA), where you could devise a system like the following. You would: Hire people who are wannabee drill instructors, to order passengers around
as if they were new Marine Corps recruits; Demand passengers show their IDs up to four times before boarding, even though you know IDs are easily forged; Require people to wait in long lines, even though you
know almost precisely how many people will travel through each airport each hour; Force people confined to wheelchairs or who have implants or pacemakers to go through unnecessarily lengthy,
degrading, embarrassing and intrusive physical inspections; Take away relatively harmless personal items, such as tweezers, hat pins, sewing
scissors, etc., while leaving people with items that are much more lethal in trained hands; Harass small children, elderly women, infirm individuals, and young attractive women by making them go through
difficult body motions and inappropriate touching; And finally, waste taxpayer monies by hiring excessive personnel to ask the same questions over and over or allow them to hang around doing nothing.
...If TSA would use sensible cost-benefit and probability analysis, they would put more resources into bomb and chemical detection and let us
have our pocket knives and sewing materials. But, like the French, they prefer to fight the last war. (They seem to forget that for decades before the recent use of metal detectors many people routinely carried
guns on airplanes, and despite millions of flights there were only a handful of serious incidents.) TSA, and for that matter all other law enforcement agencies, should be required to subject every rule,
regulation and procedure to strict cost-benefit analysis, as well as review by civil liberties experts. That would provide better security at lower cost, with far less harassment and intrusion. Link to this Blog Entry
Monday, March 28, 2005 ~ 12:16 p.m., Andrew Quinlan Wrote: That story has to do with the dynamism of U.S. companies and their focus on what they do best, and how these companies send overseas the
low-value work that hogs limited resources and crowds out innovation at home. The above is the flipside of the outsourcing controversy. It has to do with the messianic devotion of U.S. companies to wringing as
much efficiency as possible out of their limited resources. Importantly - as evidenced by the fact that foreign purchases of U.S. stocks more
than doubled in January to $16.5 billion - this drive for profits attracts capital. As for the current-account deficit, our export of shares in U.S.
innovators such as Google, prominent "outsourcers" like Eastman Kodak, and low-margin product importers such as Wal-Mart does not factor into current-account/trade-deficit calculations. On the other
hand, our imports of goods that are decidedly not in our economic self-interest to make does factor into the number. This explains why the current-account deficit continues to rise. This is a very positive
development. The willingness of others to make $37 DVD players for U.S. consumers means that U.S. consumers can continue to move up the economic ladder in terms of the work they do. All trade must in the
end balance. We're trading shares of Apple and Google for goods we could surely make - but only if we're willing to see our wages drop and capital inflows to companies like Apple grind to a halt. Those who
disagree need only look to Germany - a country that protects low-value jobs and runs a current-account surplus. Labor laws there repulse worldwide capital, thus cultivating a 12.4 percent rate of
unemployment. The latter insures a continued trade surplus for Germany, but only because a capital deficit makes German citizens weak consumers.
Monday, March 28, 2005 ~ 10:28 a.m., Dan Mitchell Wrote: For more than a decade Congress has obsessed over the fact that a handful of rich folks, including fund operator John Templeton, Kenneth
Dart of Dart Container and Campbell soup heir John Dorrance III were able to escape U.S. income and estate taxes by renouncing their citizenship. So in October, as part of a big corporate tax act, the
politicians took yet another shot at fleeing turncoats. ...Under the new law, which is retroactive to June 4, 2004, anyone who expatriates and has assets of more than $2 million or paid more than $620,000 in
federal income taxes over the five years before leaving is presumed to have left for tax reasons. Only certain dual citizens and minors with few ties to the U.S. can get exemptions from the ten years of tax.
Monday, March 28, 2005 ~ 9:12 a.m., Dan Mitchell Wrote: Owens is working to persuade Coloradans to suspend the limits he championed and let the state government spend $3 billion more in tax
money than TABOR would allow. Owens thus becomes another low-tax, limited-government advocate who has found those principles hard to hold onto amid a sluggish economy and a sharply diminished
flow of federal money to the states. In the past two years, Republican governors including Nevada's Kenny Guinn, Idaho's Dirk Kempthorne, Georgia's Sonny Perdue and Ohio's Bob Taft have dumped
no-new-taxes pledges to push for major new revenue and increased state spending. Perhaps the most stinging reversal for tax-limitation groups in Washington was the quick conversion of Mitchell E. Daniels
Jr. (R), who was President Bush's first budget director and an outspoken advocate of lower taxes -- until he was elected governor of Indiana last November. In his first state budget, Daniels recently
proposed a 29 percent increase in the income tax, targeted at the upper brackets. Daniels cited a $250 million revenue shortfall and said spending cuts of that size were untenable.
Sunday, March 27, 2005 ~ 1:28 p.m., Dan Mitchell Wrote: Unlike Bush, Brown has engineered a massive shift of resources from the private to the public sector. When he moved into the Treasury, the
government was spending 37.1 percent of the nation's income. Brown projects that will rise to 40.5 percent of GDP by the end of the decade. This is about twice what the US federal government takes. Throw in
another ten percentage points for state and local taxes, and Brown is still appropriating about one-third more of what his nation produces than are U.S. governments. So the chancellor has done what no other
major government has done--raise taxes, and then raise them again, shrinking Britain's competitive advantage. Meanwhile, the Bush administration lowers taxes, setting the stage for protracted, rapid
growth. The chancellor's policy might be defensible if it moved the United Kingdom ahead of the United States in important indicators.
But it hasn't. What the Treasury itself calls "a significant gap" between U.S. and U.K. productivity is widening--no surprise, since Brown has
expanded the least efficient sector of the U.K. economy, its public sector. Essentially all of the net new jobs in the United Kingdom in the past year were accounted for by the public sector, whereas 2.2 million
of the 2.4 million jobs created in the U.S. were in the private sector.
Sunday, March 27, 2005 ~ 12:09 p.m., Dan Mitchell Wrote: The French parliament adopted government reforms on Tuesday that will allow employees to work longer hours, despite fierce opposition by
trade unions who say it spells the end of the 35-hour working week. ...The changes will allow workers to increase overtime and work up to 48 hours a week if they want -- the maximum allowed by the European
Union. ...Some French workers want to work longer to increase their pay and, like some workers in Germany, agreed last year to work longer hours in an effort to save their jobs. But the trade unions say
workers will be forced to work longer hours for no extra pay and that the changes will in effect dismantle the 35-hour working week. Labor organizations say France's unemployment rate of more than 10
percent, much higher than the average in the euro zone, gives employers the chance to increase hours with no extra pay.
Sunday, March 27, 2005 ~ 10:51 a.m., Dan Mitchell Wrote: EU leaders have agreed on a plan to relaunch the EU's economic reform agenda and have called for "urgent action" to achieve their
ambitious goals. ...The new strategy is based around a three-year cycle, which begins this year and will end in 2008. Member states will submit
"national reform programmes" and "where appropriate" will appoint a "Lisbon national co-ordinator" - a Mr or Mrs Lisbon. ...But not
everyone was happy. Small business organization eurochambres described the summit as "three steps back". Paul Skehan, the Deputy Secretary-General of the organization said, "despite the creeping
economic crisis facing Europe, the Spring Summit will be written off as yet another missed opportunity, as yet another set of bland promises and bad compromises, to be forgotten as soon as the government jets
leave Zaventem airport".
Sunday, March 27, 2005 ~ 9:44 a.m., Dan Mitchell Wrote: My own published research on criminals assaulting police shows that the more likely that an assault will be successful, the more likely
criminals will be to make it. The major factor determining success is the relative strengths and sizes of the criminal and officer. In particular, when officer strength and size requirements are reduced
because of affirmative action, each one-percent increase in the number of female officers increases the number of assaults on police by 15 to 19 percent. The Atlanta-courthouse shooting simply arose from such a
case. There is a broader lesson to learn from these attacks. All three attacks took place in areas where gun possession by those who did the attack as well as civilians generally was already banned--so-called
"gun-free safe zones." Suppose you or your family are being stalked by a criminal who intends on harming you. Would you feel safer putting a
sign in front of your home saying "This Home is a Gun-Free Zone"? It is pretty obvious why we don't put these signs up. As with many other
gun laws, law-abiding citizens, not would-be criminals, would obey the sign. Instead of creating a safe zone for victims, it leaves victims defenseless and creates a safe zone for those intent on causing harm.
...Bill Landes and I have examined all the multiple-victim public shootings with two or more victims in the United States from 1977 to 1999 and found that when states passed right-to-carry laws, these
attacks fell by 60 percent. Deaths and injuries from multiple-victim public shootings fell on average by 78 percent. No other gun-control law had any beneficial effect. Indeed, right-to-carry laws were the only
policy that consistently reduced these attacks. ...Annual surveys of crime victims in the United States continually show that, when confronted by a criminal, people are safest if they have a gun. Just as
the threat of arrest and prison can deter criminals from committing a crime, so can the fact that victims can defend themselves. Gun-control advocates conveniently ignore that the nations with the highest
homicide rates have gun bans. Studies, such as one conducted recently by Jeff Miron at Boston University, which examined 44 countries, find that stricter gun-control laws tend to lead to higher homicide rates.
Russia, which has banned guns since the Communist revolution, has had murder rates several times higher than that of the United States; even under the Communists, the Soviet Union's rate was much higher. |
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Saturday, March 26, 2005 ~ 4:06 p.m., Andrew Quinlan Wrote: What the study helps illustrate is how well we've absorbed these newcomers, contrary to restrictionists' claims that immigrants "steal" jobs and are otherwise bad
for the nation's economic health. The U.S. has maintained a relatively low unemployment rate since the last recession, even as immigration has grown. The Pew report, authored by demographer Jeffrey Passel,
estimates that the illegal population grew on average by 485,000 persons per year between 2000 and 2004. Yet today's jobless rate stands at 5.4%.
Saturday, March 26, 2005 ~ 1:49 p.m., Dan Mitchell Wrote: Chancellor Gerhard Schröder and the conservative opposition leaders Angela Merkel and Edmund Stoiber agreed to jointly carry out some
fundamental reforms of the German economy. Germany is moving because it has to. Although some commentators tend to play down the country's problems and joke about seemingly unfounded German angst,
the economy is in fact in deep trouble. Since 1995 the German economy has been growing at a slower pace than any other European country -- except Moldova. And this year, Germany will again be the laggard.
...even if we took the East out of the equation, the hard truth is that the West German economy has also been growing slower than any other country in Western and Central Europe. Statists argue that Germany is
a saturated economy and that stagnation is the flip side of its past success -- the logical consequence of the fact that it has supposedly already arrived where others want to go. Nothing could be further from
the truth. Recently, Germany's per capita income has been overtaken by the U.K., France, Austria, the Netherlands and Ireland, to name only a
few. Germany's public finances are also in free fall. By the end of this year, Germany will have violated the Stability and Growth Pact for four years in a row. But, as already said, Berlin took care of that
problem by killing the pact.
Saturday, March 26, 2005 ~ 11:32 a.m., Dan Mitchell Wrote: Has Michigan Governor Jennifer Granholm hired Jacques Chirac as her new economic adviser? Among the 50 states, Michigan ranks dead
last in new jobs last year (losing 45,000), and near the bottom in income growth. So it's no surprise that Ms. Granholm is seeking a new formula
for growth and prosperity. But the Democratic Governor is touting a new taxing scheme for Michigan that looks a lot like the industrial policy model of Old Europe, where economically omniscient
governments try to pick business winners and losers -- and usually make a mess of it. The "revenue neutral" tax plan would give tax breaks to
Michigan's big three automakers and other heavy manufacturers, while shifting the burden to retailers, wholesalers, banks, insurance companies, professional services and thousands of small businesses.
Some in Michigan are dubbing the Granholm Plan the shift-and-shaft tax policy. ...Hillsdale College economist Gary Wolfstram finds that, despite the high tax rates, Michigan was only one of two states to
actually lose tax revenues in Fiscal Year 2004. The Midwestern state is a glittering example of how high tax rates can unbalance a state budget.
Friday, March 25, 2005 ~ 11:00 a.m., Andrew Quinlan Wrote: That number is $2.2 trillion, which is the difference between the current size of the Social Security "Trust Fund" ($1.7 trillion) and what it will
grow to become over merely a decade through 2014 ($3.9 trillion). More precisely, that is the amount of payroll tax revenue that workers will pay between now and 2014 that exceeds what will be spent over
that same period on retiree benefits. ...And what will happen to that surplus cash during these next 10 years? Every dime of it will be spent by politicians on current government. Not a nickel will be saved;
nothing will be invested in accounts with anyone's name on it. Instead of building assets, or contributing to an increase in net national saving and
thus investment, all of it will finance current government consumption. The reform debate so far has too often detoured into the cul-de-sac of
"transition costs" and IOUs and what's going to happen in 2041 when the Trust Fund itself is empty -- or is it really 2042? Who cares? The far
more urgent issue is how to capture today's surplus payroll tax revenue and put it to more productive use. If Social Security reform means anything, it ought to mean recapturing some or all of that money.
Friday, March 25, 2005 ~ 10:20 a.m., Dan Mitchell Wrote: If personal accounts were really an inferior choice, then few [young people] would choose them and Social Security would remain pretty
much the way it is now -- a bunch of empty promises dependent on the generosity of future taxpayers. ...Desperate critics of personal accounts,
tired of being caught fibbing about actual investment experience, have switched to hypothetical estimates of future investment returns. To make these hypothetical returns as low as possible, they first assume no
more than half is invested in the stock market. ...In the Federal Reserve Bank of St. Louis Review, Thomas Garret and Russell Rhine earned the
last word on this topic. They calculate what the return would have been to those who retired in 2003 if they had instead been allowed to invest
the money they "contributed" to Social Security in an S&P 500 index fund or 6-month CDs. Then, they compare what retirees' amortized
monthly income would have been if payroll taxes were invested with what it actually is under Social Security. What they found was that "over 99 percent of the U.S. population would have earned a greater
return by investing in the S&P 500, and over 95 percent would have earned a greater return by investing in 6-month CDs relative to the current Social Security system."
Friday, March 25, 2005 ~ 9:51 a.m., Dan Mitchell Wrote: European governments are showing their true colors. First, they gang up on the EU services directive, which was supposed to be a
cornerstone of what remains of the Lisbon Strategy. Then, over the weekend, they emasculate the Stability Pact, with France and Germany in the front seat, arguing that, after three years of running deficits
above 3% of GDP, they need even more time to bring fiscal policy under control. ...The confused reaction to the services directive, again especially in France and Germany, also reflects a disregard for
economic reality coupled with a desire to protect the status quo at all costs. The calls to review the country-of-origin principle, agreed at the
highest political level, betray either a dangerous -- but unfortunately widespread -- ignorance, or a shameful disingenuousness. The country-of-origin principle is the guiding principle behind the entire
body of internal-market legislation and its basic tenets are enshrined in the EU Treaty and have been repeatedly confirmed by the Court of Justice.
Friday, March 25, 2005 ~ 9:22 a.m., Dan Mitchell Wrote: The vast majority of the greenhouse gas effect -- perhaps 99.7 percent -- is beyond human control. There's no direct evidence the minuscule
manmade contributions of greenhouse gases to the environment are having any measurable or significant effect on global climate. In addition to the scientific shortcomings of global warming hysteria, the
economic consequences of the Kyoto Protocol can be summed up as "all costs and no benefits." The global warming treaty is estimated to
cost $100 trillion in real terms for the hypothetical prevention of a 1 degree Centigrade rise in the average global temperature. ...Mr. McCain's complaint about the Kyoto Protocol apparently boils down
solely to the treaty's exclusion of developing nations like China and India, the second- and sixth-biggest greenhouse gas emitters. Mr. McCain's call for a new treaty to include China and India is ludicrous.
Neither country can develop economically without tremendous energy-use increases. That's why they didn't sign on to Kyoto. Remember, one major reason for the rise in gas prices over the last year
is China's increased demand for oil.
Friday, March 25, 2005 ~ 8:30 a.m., Dan Mitchell Wrote: The 35 "suspected" purchases, out of 3.1 million total transactions, were allowed because background checks found no prohibiting
information. No felonies or disqualifying misdemeanors, for example. They were neither fugitives from justice nor illegal aliens. Nor had they ever disavowed their US citizenship. The FBI was alerted when these
sales took place, but the transactions weren't stopped because the law didn't prohibit them. "Suspects" didn't have to be foreigners. They may
have simply been individuals classified by law enforcement as sympathetic to militia groups or other undesirable domestic organizations. Ironically, this debate occurred as the U.S. Supreme
Court slapped down state laws that use police reports to set prison sentences because police reports are not reliable. Being on the "watch
list" would also just rely on police reports. There would be no adjudication by a judge, no trial by jury, before being placed on the list.
...Sen. Ted Kennedy was understandably upset last year and publicly complained to the Senate Judiciary committee when he was prevented from flying on an airplane because his name was placed on just such a
"watch list." Rules did not allow him to be told at the airport why he was being denied a ticket, but fortunately for him being a U.S. senator
meant the problem was solved with a few telephone calls. ...People need to remind themselves that a "watch list" is only that. It is not even
probable cause. If you had probable cause that these suspects had done something illegal, you could arrest them. Yet Sen. Carl Levin, for example, has been more solicitous of the constitutional rights of foreign
combatants held in Guantanamo to "due process" then he is to the rights of Americans. He believes Americans can lose their rights to own
a gun without an evidentiary hearing. Democrats may think that people on "watch lists" should be denied their rights to own a gun, but what is
next? Why not just make the system much "more efficient" and simply put all people "watch lists" directly in prison?
Friday, March 25, 2005 ~ 7:49 a.m., Andrew Quinlan Wrote: When America's political class debated emancipating slaves, an issue that dampened enthusiasm for the idea was the thought that these
slaves could simply walk off the plantation and integrate into the nation and live as free people. The owner/masters of today's Democratic plantation reject all attempts to roll back government and give working
Americans more choice and freedom. The response is the same whether it's personal retirement accounts or choosing where to send your kid to school. Anything reducing government control gets rejected. Ironically,
most personal-retirement-account proposals simply make this option available. But even allowing the option gives too much freedom to working Americans for the Democrats. Apparently, we're all so dumb
that not only can't we manage our own money, but we shouldn't even be given a voluntary option to do it. My elderly mom serves coffee in a local convenience store to earn a few dollars to supplement the pittance
she gets from Social Security and the few extra hundred dollars per month she started getting after my dad passed away. He worked all his life. If he could have put all the money he paid in Social Security taxes
into a retirement investment account over all those same years, my mom would be in a different situation today. However, Pelosi wouldn't have wanted my dad to have the option to keep and invest his own
money. I'm sure she would have thought that he wasn't as smart and clever as she is and shouldn't be allowed to manage his own money.
Thursday, March 24, 2005 ~ 5:17 p.m., Dan Mitchell Wrote: ...we study a panel of 57 countries over the period 1960-1992. Controlling for a host of other contributing factors we find that the
ratio of social security's pension benefits to GDP, which approximates the system's equilibrium tax rate (PEN), has adverse effects on: a. the rate of marriage net of divorce ? decreasing marriage and increasing
divorce; b. the total fertility rate; c. the private savings rate; and d. schooling attainment measures and per-capita GDP growth rates. These effects are especially large for family formation and fertility, and
in OECD countries; they are not duplicated when PEN is replaced by a benefits measure that includes other welfare programs.
Thursday, March 24, 2005 ~ 12:22 p.m., Dan Mitchell Wrote: The first part of any credible Social Security reform plan is to eliminate the actuarial deficit in the system. The system has promised to pay out,
in present value terms, $10 trillion more than it will collect in revenue. There are a number of ways of closing this gap, but with different
implications for national saving. One way is to raise payroll taxes by 50 percent to make sure that the government collects all the money it needs to pay the benefits now promised. At best, this might increase
saving for a few decades via deficit reduction, but only if Congress, in a break with its past habits, does not spend the extra revenue on non-retirement programs. Once Social Security payments caught up
with the enhanced revenue, though, the plan would forever be moving money from one set of people who would otherwise spend it--workers--to another set of people who would spend it
instead--retirees. So even in the best case, this would do little to increase national saving. Even worse would be removing the wage cap that determines both Social Security taxes and benefits. Martin
Feldstein calculated that eliminating the cap would produce very little net federal revenue. Entrepreneurs faced with a 50 percent tax rate would pay less federal income tax as well as lower payroll taxes. Much
of the lost income would have funded business fixed investment, further lowering national saving. The second way of bringing the system into
balance is to change the formula for determining benefits, in a way that gradually reduces the current growth rate in real benefits. As things now stand, there will be a 45 percent increase in Social Security
benefits, even after inflation, over the next half century. The system could be brought into balance by limiting future benefits to the level enjoyed by those retiring from the system today, while fully indexing
those benefits to inflation. ...National saving would likely rise as a result. In order to maintain the level of consumption in retirement that
the government previously promised, but could not deliver, individuals would have to gradually increase their personal saving during their working lives.
Thursday, March 24, 2005 ~ 12:00 p.m., Dan Mitchell Wrote: According to the agreement, the 3% limit still applies except -- are you ready? -- except when the excessive deficit is due to spending on the
following items (you had better write this down): education, innovation, research and development, employment, public investment, reducing debt, pension reform and such lofty and conveniently vague goals as
fostering international solidarity and achieving European policy goals. Apart from that, the stability pact remains intact. No, really. ...as soon
as the deficit limit became a problem for the governments of the two biggest euro-zone countries, the rules are immediately rewritten or, to be more precise, eviscerated. Worries that lax fiscal discipline would
prompt the European Central Bank to raise interest rates pushed two-year euro-zone government bond yields up sharply Monday. The risk that euro-zone governments might over time abandon fiscal
discipline altogether has clearly been recognized. And this would be no laughing matter.
Thursday, March 24, 2005 ~ 10:45 a.m., Andrew Quinlan Wrote: Consider the withholding of income taxes. Congress enacted automatic withholding in 1943 as a way to fill the U.S. Treasury coffers each
month and mask the true cost of federal spending. Congress explained to the public that, since the United States was busy fighting World War II, automatic withholding was necessary to fund the war effort in a
timely fashion. Congress also promised that withholding would end as soon as the war was over. That war ended 60 years ago. ...one of the most ridiculous sneak-a-taxes is the Federal Excise Tax. The Federal
Excise Tax, which is figured at 3 percent of your phone bill, was enacted in 1898 to help pay for the Spanish-American War. That war ended 107 years ago.
Thursday, March 24, 2005 ~ 9:19 a.m., Dan Mitchell Wrote: The idea that minimum wage legislation is an anti-poverty tool is simply sheer nonsense. Were it an anti-poverty weapon, we might save loads of
foreign aid expenditures simply by advising legislators in the world's poorest countries, such as Haiti, Bangladesh and Ethiopia, to legislate
higher minimum wages. Even applied to the United States, there's little evidence suggesting that increases in the minimum wage help the poor.
Plus, according to the Bureau of Labor Statistics, only 2.2 percent of working adults earn the minimum wage. The crucial question for any
policy is not what are its intentions but what are its effects? One of its effects is readily seen by putting yourself in the place of an employer
and asking: If I must pay $6.25 or $7.25 an hour to whomever I hire, does it make sense for me to hire a worker whose skills enable him to produce only $4.00 worth of value per hour? Most employers would
view doing so as a losing economic proposition. Thus, one effect of minimum wages is that of discriminating against the employment of low-skilled workers.
Thursday, March 24, 2005 ~ 9:13 a.m., Dan Mitchell Wrote: Since 2003, when the Supreme Court upheld it, McCain-Feingold has failed spectacularly in its stated goal of reining in fat-cat donors. Yet its
uncompromising language has helped to gag practically every other politically active entity--from advocacy groups to labor unions. Now the FEC is being asked to censor another segment of society, the millions of
individuals who engage in political activity online. ...An idea kicking around the FEC a few years ago would require government to calculate
the percentage of individuals' electricity bills that went toward political advocacy (we aren't joking). Another alternative would be to classify all
bloggers as journalists, seeing as how the press is about the only entity exempt from McCain-Feingold. As much we enjoy our profession, we
think a nation of journalists is overkill. One of the more exciting things about last year's elections was how the Internet galvanized voter interest and turnout--from the Howard Dean grassroots movement to
the bloggers who kept Dan Rather on his toes. Some 75 million Americans are estimated to have used the Internet to get political information in 2004. Too bad the very law that was supposed to
encourage this buzz may ultimately be its demise.
Wednesday, March 23, 2005 ~ 11:18 a.m., Andrew Quinlan Wrote: Given that the two centuries of socialists' experiments, whether by utopians, Marxists, or Fabians, always ended in economic failure and a
loss of personal liberty, why are people around the globe still proudly proclaiming themselves socialists? ..The "national socialists" caused the
death of tens of millions of people. The communists in Russia, China, Cambodia and elsewhere caused the collective deaths of more than 100 million people and impoverished billions of others. (I happened to be at
the Kremlin in Moscow in August 1992, when the Russia demographers announced they had determined there were 63 million "excess deaths"
in the Soviet Union during Josef Stalin's reign -- 1923-53.) The Third World socialists have kept their countries unnecessarily mired in poverty for a half-century. The democratic socialists gained control in
England in 1945 under Clement Attlee. As a result, the British economy was run into the ground. ...If people knew the real history of all the socialist experiments and its flawed theory, very few (other than the
delusional or mean-spirited) would be socialists.
Wednesday, March 23, 2005 ~ 10:36 a.m., Dan Mitchell Wrote: Unlike the idle rich -- hard-working, over-taxed Canadians have few places to hide from the taxman. Tax havens, like sheltering income in
the Cayman Islands or Switzerland, are out of reach for ordinary folk, so it's tough to avoid paying income taxes as Canada's highest paid CEO did for years. Magna International's founder Frank Stronach --
whose paycheque surpassed $50 million a year for the past four years, hitting a record $58.1 million in 2002 -- allegedly avoided paying millions in income taxes since 1994. How? By moving his principal
residence to Switzerland, a country that has a tax treaty with Canada that provides tax credits to avoid double taxation. ...Bottom line is the hard-driving 72-year-old -- who started Magna in a small east end
Toronto garage in the late 1950s and built it into the world's largest auto parts maker -- has long warned high taxes in Canada are chasing away talented employees and business leaders. No kidding: Tax
Freedom Day last year fell on June 28, meaning all the money earned by average families in the first six months of the year goes to pay total taxes, for a tax rate of 48.9%. For corporations, who pay only 25% of
Canada's income tax burden, with 75% paid by individuals, Tax Freedom Day falls in August, when total taxes are added up. ...Persons who sever all ties to Canada by giving up a driver's licence, health
cards, a principal residence and who live a majority of the time in another country, can avoid paying taxes in Canada unless the income is earned here, say tax officials. ...Meanwhile, Canadians have been
stashing increasing amounts of money in tax havens, with the amount of Canadian-owned assets held in offshore financial centres in 2003 at a whopping $88 billion. That's up eight-fold from $11 billion in 1990,
which has critics demanding a crackdown on Canadian firms' use of offshore financial centres to avoid paying taxes in Canada.
Wednesday, March 23, 2005 ~ 9:29 a.m., Dan Mitchell Wrote: Alan Greenspan has taken a political beating for his recent comments on fiscal policy, which isn't even his job. The more important question,
as the Federal Reserve's Open Market Committee meets again this week, is whether the Chairman and his mates have made a monetary policy blunder that is reigniting inflation. ...The Fed's mistake has been
to keep the dollar presses running at full throttle for too long. As recently as late 2003 and amid surging GDP growth, some Fed governors were still warning about the risks of "deflation." Like most
other conventional economists, the Fed gurus greatly underestimated the pro-growth impact of the Bush 2003 tax cuts. Though he began raising short-term interest rates in June 2004, Mr. Greenspan has
tolerated negative real rates for three years. This is the most accommodative monetary policy since the 1970s, and it has begun to produce a revival in inflation expectations. ...Slowly, the Fed seems to
be recognizing its mistake, as have financial markets. The latter are now anticipating an increase of 50 basis points in the short-term rates
influenced by the Fed sometime soon, rather than the usual 25. But our advice would be for the Fed to do whatever it takes to demonstrate its anti-inflation resolve, draining dollar liquidity as needed through
open-market operations, and perhaps adding a sharper and more immediate interest-rate jolt. No doubt some financial players will be caught by surprise, and both the Treasury and FDIC will have to be on
alert, but some damage now is inevitable given the Fed's anti-inflation tardiness. ...The main threat to this current expansion isn't the trade
deficit, the budget deficit, the savings rate or any of the other media fads. The real danger is a renewal of inflation that forces interest rates higher than they would otherwise have to be. As Mr. Greenspan
prepares for the end of his distinguished Fed tenure next year, surely he can't want such a policy mistake to be his final legacy.
Wednesday, March 23, 2005 ~ 8:28 a.m., Andrew Quinlan Wrote: When the Berlin Wall fell in 1989 and the Velvet Revolution came to Czechoslovakia, Mr. Klaus became finance minister in the new
democracy. He became prime minister in 1992, and later president. His market principles replaced communism with freedom and choice; he liberated prices and foreign trade, deregulated markets and privatized
state ownership of assets. Communism was dismantled and prosperity came to his country. But now President Klaus sees an unsettling new challenge: the zeal of Old Europe--France, Germany, Brussels--to
impose collective choices on New Europe--Poland, Denmark, the Czech Republic, Ireland. "Ten years ago," Mr. Klaus writes, "the dominant
slogan was: 'deregulate, liberalize, privatize.' Now the slogan is different; 'regulate . . . get rid of your sovereignty and put it in the
hands of international institutions and organizations.' " "The current European unification process is not predominantly about opening up,"
he continues, "It is about introducing massive regulation and protection, about imposing uniform rules, laws, and policies." It is about a "rush into the European Union which is currently the most
visible and the most powerful embodiment of ambition to create something else--supposedly better--than a free society."
Wednesday, March 23, 2005 ~ 7:32 a.m., Dan Mitchell Wrote: If Congress cannot control Medicaid, how can it be expected to deal with the more daunting problems of Medicare and Social Security? Last
Thursday, the Senate voted for spending. Gregg, a flinty New England Yankee not given to exaggeration, called the Senate's action a "disaster." In a half-century of watching Congress, I have never seen
anything like the unified Democratic stand against any reduction in entitlements or discretionary spending. For all their lecturing about
restoring "fiscal integrity," Democrats in both houses of Congress support only tax increases and provide no help whatsoever in cutting spending. But last Thursday's melancholy developments show that
Republicans, more than a decade after taking over Congress, cannot stand up against spending either.
Tuesday, March 22, 2005 ~ 4:13 p.m., Andrew Quinlan Wrote: Who are the trustfunders? People with enough money not to have to work for a living, or not to have to work very hard. People who can live
more or less wherever they want. The "nomadic affluent," as demographic analyst Joel Kotkin calls them. These people tend to be very liberal politically. Aware that they have done nothing to earn their
money, they feel a certain sense of guilt. At the elite private or public high schools they attend, and even more at their colleges and universities, they are propagandized about the evils of capitalism and
globalization, and the virtues of environmentalism and pacifism. Patriotism is equated with Hiterlism. ...Where can you find trustfunders? Not scattered randomly around the country, but heavily
concentrated in certain areas. Places with kicky restaurants, places tolerant of alternative lifestyles, places with lots of art galleries and organic food stores and Starbucks competitors. The heaviest
concentration is in the San Francisco Bay area... The good news for Democrats is that they have found a new source of votes and money. The bad news is that an important part of their core constituency has
the characteristic that the British Prime Minister Stanley Baldwin ascribed to the press, "power without responsibility, the prerogative of the harlot throughout the ages."
Tuesday, March 22, 2005 ~ 1:03 p.m., Dan Mitchell Wrote: When eight formerly communist countries in central Europe joined the EU last May, German Chancellor Gerhard Schröder was among the
earliest and loudest critics of their tax-cutting ways. Low tax rates "are not the way forward" for Germany's new eastern neighbors in the EU,
he warned on the eve of the Union's enlargement. Well, what a difference a year makes. Last week the German chancellor announced plans to cut the federal corporate tax rate to 19% from 25% -- which
just happens to be the corporate tax rate of Poland, one of the new EU member Mr. Schröder was so critical of last spring. ...The move will put the country in a more competitive position than euro-zone countries
such as the Netherlands, France and Italy, as the nearby chart shows. And it may well trigger a further round of tax cuts in the region, where rates have already come down in several countries since the euro's
introduction. Spooked by Germany's surprise move, the Austrian finance ministry felt obliged to immediately remind potential investors that its tax rates will remain lower even after Germany will have
implemented its cuts. While the euro has helped steer Europe to the right policy choices, last year's accession of Central and Eastern European countries made those reforms only more urgent. The flat-tax
revolution in the former communist countries has contributed much to the pressure on "Old Europe" to lower taxes as well. ...In Slovakia,
which also has a 19% tax rate, the headline rate is the one you actually pay -- no further levies payable -- and it's the rate applied to corporate
profits, wages, and VAT alike. Thanks in no small measure to the flat tax, the country is expected to become the world's biggest car producer
per capita in 2007. The Baltic countries, which pioneered the movement in Europe, are planning further cuts as well. Estonia wants to lower its rate to 20% from 24% to stay competitive. In Poland, both the
center-left government and the opposition Civic Platform are proposing flat taxes -- of 18% and 16% respectively -- ahead of elections later this
year. And in Romania, which will likely join the EU in two years, the new prime minister pushed through last December a 16% flat tax in record time to ensure it took effect Jan. 1. ...With Germany lowering its
federal corporate tax rate to below 20%, Europe's tax competition, previously restricted largely to the margins of the newly expanded EU, has invaded its very heart. Germany's move makes it more likely that
some of Europe's other critics of "new Europe's" tax-competing ways will follow suit. ...the announcement has nonetheless made economic observers sit up and take notice, for it seems to signal that the German government may
be conceding defeat in the battle over "harmful tax competition". Along with France and Belgium, the Germans have been leading the attacks
on the practices of European Union members-primarily Ireland-who charge low rates of corporate income tax. For years they have been calling for tax harmonisation among members, code for forcing low-tax
countries to raise their rates. The OECD, a club for rich countries, has also got involved: in 2000 it published a blacklist of 35 nations it identified as havens for large companies looking to shrug off their
rightful tax burden. ...Margaret Thatcher and Ronald Reagan led the way with sweeping changes to their tax codes. Back then, top marginal rates of 70-80% were not uncommon, and tax laws everywhere were
riddled with decades-worth of accumulated deductions. Mrs (now Lady) Thatcher and Reagan slashed top rates and eliminated many deductions, creating tax codes with lower marginal rates on a much
broader tax base. This, it is generally agreed by economists, is a recipe for faster economic growth, and over the past two decades continental
Europe has followed suit. That hasn't meant a lower tax burden overall. On the contrary, taxes as a percentage of GDP grew steadily throughout the OECD from the mid-1970s to 2000, falling only during
the recent recession. Now, however, tax reform may have entered a new stage. Even as the global economy recovers, its imperatives are making it harder for countries to levy taxes as they would like,
particularly on capital. Freer trade makes it much easier for companies to move to low-tax locations (it is not much good relocating your factory to Hungary if your goods face a 50% tariff going back to the
home country). And faster communications make it ever easier to locate new services abroad.
Tuesday, March 22, 2005 ~ 10:18 a.m., Dan Mitchell Wrote: 'Non-doms' or Non-Domiciled foreign individuals resident in the UK can breathe easily again, as for yet a further year the Chancellor put off any
change to the highly favourable tax regime they enjoy. ...A Treasury paper published in the April 2003 budget revealed that the Inland Revenue has 16,000 individuals on its database who declared a total
income of £800 million which stayed out of the Revenue's clutches by being remitted overseas. However, the accounting profession believes the figure is in reality much higher. Some estimates have put the annual
tax loss to the Treasury from the current tax rules at £5 billion, though others have argued the exodus of foreign workers and businesspeople resulting from a change in the rules would deprive the government of
double this amount. The concept of domicile, which is unique to the English-speaking common law jurisdictions, attaches to a person's original home country, and cannot be changed unless the person moves
their whole life, family and base to another country, with the intention of remaining there permanently. Few 'visiting' residents will therefore
have a UK domicile. Foreign investment income is exempt from tax for such individuals as long as the income is not remitted to the UK. Therefore they can safely make offshore investments knowing that the
income will be reinvested without deduction - the ideal way of turning income into capital without taxation.
Tuesday, March 22, 2005 ~ 9:03 a.m., Dan Mitchell Wrote: The Polish government has announced that it will be following the trend established by Estonia in 1991, and will be putting in place a single 18%
rate of corporate tax, income tax, and VAT. Since Estonia launched its flat tax scheme, several other countries, including Latvia, Serbia, Slovakia, Georgia, Russia and Ukraine have followed suit, causing
grave concern amongst the older members of the European Union, who have argued that they are effectively subsidising their newer counterparts' tax breaks. ...According to reports, even if the centre-left
government is toppled in this year's election, the flat tax plan is likely to go ahead, as the conservative opposition has proposed the introduction of a single 15% tax band.
Monday, March 21, 2005 ~ 3:40 p.m., Dan Mitchell Wrote: One of the most significant measures included in this week's Hong Kong budget is the proposed abolition of estate duty. "We will introduce the
relevant bill into this council for deliberation as soon as possible," said Financial Secretary Henry Tang Ying-yen. ...Hong Kong Exchanges and
Clearing belongs to the latter camp, as might be expected...[s]aid ...'The existence of a tax on assets situated in Hong Kong acts as a deterrent to the holding of Hong Kong assets. Such tax detracts from
Hong Kong's role as a centre for capital formation and a centre for the provision of financial services. It is particularly important to abolish
estate duty, as argued further below, in view of Hong Kong's large and growing role as a financial centre for Mainland China.' In fact the tax is reasonably easily avoided through the use of trusts and other
tax-planning techniques, giving rise to fears in some quarters that abolition would be negative for the professional sector in Hong Kong.
Monday, March 21, 2005 ~ 2:03 p.m., Dan Mitchell Wrote: Some conservatives say there is a ``constitutional right'' to have an up-or-down Senate vote on nominees. But in whom does this right
inhere? The nominees? The president? This is a perverse contention coming from conservatives eager to confirm judges who will stop the promiscuous discovery by courts of spurious constitutional rights. And
conservatives eager to confirm judges respectful of the Constitution's text should not read its stipulation that no nominee shall be confirmed
without a favorable Senate vote as a requirement that the Senate vote. Some conservatives oddly seem to regret the fact that the government bristles with delaying and blocking mechanisms -- separation of powers,
bicameral legislature, etc. The filibuster is one such mechanism -- an instrument for minority assertion. It enables democracy to be more than government-by-adding-machine, more than a mere counter of numbers.
The filibuster registers intensity, enabling intense minorities to slow or stop government.
Monday, March 21, 2005 ~ 12:37 p.m., Dan Mitchell Wrote: For some time, the opposition Civic Platform party in Poland has proposed a 15% flat tax on individuals and corporations to replace the
country's current income tax system. ...Elections are scheduled to be held later this year, which would permit the Civic Platform, if it emerges victorious, to implement a 15% flat tax beginning January 1,
2006. Perhaps the country will not have to wait for a new election for the flat tax. The Telegraph of the United Kingdom reported on March 16, 2005, that the ruling center-left Polish government plans to enact a
flat tax, joining the flat-tax revolution spreading throughout Central and Eastern Europe. Poland's minister of finance, Mirosaw Gronicki, is proposing an 18-18-18 solution: 18% flat rate on individuals, 18% on
corporations, and 18% value-added tax (four percentage points less than the current standard 22% rate). The personal income tax will likely
retain the current tax-free threshold. ...Poland is the largest of the new European Union countries. Its adoption of the flat tax will increase the
pressure on the remaining holdouts in the region-Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Slovenia, Belarus, and Moldova-to respond quickly in kind, and Lithuania to get serious about
slashing its high 33% rate on wages and salaries. It will certain get the attention of Germany and France, and, after that, who knows? We already know that cutting the top rate of income tax increases revenues as the incentives for evasion are reduced. Both President
Reagan and Mrs Thatcher proved that. Indeed, it was a Democrat US president, John F Kennedy, who observed more than 40 years ago the
"paradoxical truth" that "the soundest way to raise [tax] revenues in the long run is to cut rates now". But the Left's stubborn refusal to
recognise that progressive taxation has failed to help the poor, and that cutting higher rates results in the rich paying more, is facing a new
challenge. This is flat tax, an idea that is beginning to sweep around the world. ...Jersey and Hong Kong have had flat taxes since the 1940s,
but it was the little Baltic country of Estonia which, ten years ago, first broke ranks in Eastern Europe, deciding that the IMF's advice to increase graduated tax rates was uncomfortably similar to Marx and
Engels' 1848 Communist Manifesto call for "a heavy progressive or graduated income tax". Its flat income tax of 26 per cent (soon to be
reduced to 20) has resulted in economic growth now running at 6 per cent a year. Lithuania and Latvia followed suit and in 2001 President Putin introduced a 13 per cent flat personal tax rate in Russia. Tax
revenues doubled. The revolution soon spread to Serbia, the Ukraine, Slovakia, Georgia and Romania. Only this week Poland announced an 18 per cent flat tax covering income tax, corporation tax and VAT.
Monday, March 21, 2005 ~ 10:25 a.m., Dan Mitchell Wrote: Most Republican strategists -- and certainly the ones at the White House and the Republican National Committee -- believe that the growth of
the investor class is pulling American politics toward the free-market right and will continue to do so. A desire to accelerate that process is
one of the reasons President Bush wants to create an "ownership society" in which people save and invest to meet their families' health and retirement needs. ...The theory holds that people who become
stockowners -- either directly or indirectly through 401(k)s and mutual funds -- grow more likely to have, and to vote on, free-market political
views. Behind the theory stand some plausible arguments, suggestive historical coincidences, and survey data. ...As liberals have recently pointed out, conservatives have been wanting personal accounts for a
long time now. But the accounts are getting a serious hearing in Washington only now. That's not because conservatives have gotten a lot better at making their case. It's because more and more voters have
grown comfortable investing their own money and want to do more of it. ... If a reform of Social Security based on private investment passes
-- as the theory suggests it will at some point -- almost everyone will be an investor. I suspect we will then see an increasingly free-market politics. But not an eternal Republican majority: Presumably the
Democrats would at some point adapt by becoming more pro-market themselves. (In some respects, they already have.)
Sunday, March 20, 2005 ~ 1:30 p.m., Andrew Quinlan Wrote: There's no shortage of reasons to oppose rent control, a "temporary" Depression-era measure that, particularly in New York City, has
survived into the 21st century. Controls lead to the physical degradation of whole neighborhoods as landlords skimp on upkeep. They create housing shortages, drive up prices for non-rent control real
estate, and contribute to middle-class flight. But here's a nuance we hadn't thought of: It's also an invitation to smut peddlers. ...As Tom Tompkins of the Times Square Alliance recently told the New York
Times, "there's a disparity between what the porn guys will pay and what the market will bear. And it tends not to be the bigger landlords.
It's a guy who owns a three-story building, and the apartments above are rent-stabilized, so the majority of his return on the building comes
from the ground-floor retail." Result: Landlords rent space to the porn shop to meet their expenses and turn a modest profit, but the skin stores
and their customers are driving other businesses, developers and visitors away.
Sunday, March 20, 2005 ~ 10:51 a.m., Dan Mitchell Wrote: For the first time a poll has shown that a majority of French people are likely to vote against the European Constitution. The new poll,
conducted this week by the CSA Institute, has found that 51 per cent of those questioned are planning to vote against the Constitution and 49
per cent will vote 'yes', reports today's Le Parisien. According to this poll, as much as 53 per cent of French voters are likely to abstain
during the referendum, taking place on 29 May. "If the 'no' prevails, France will be in for a political cataclysm", Jacques Delors, the former
Commission President warned last night, according to the Times.
Saturday, March 19, 2005 ~ 12:03 p.m., Dan Mitchell Wrote: German Chancellor Gerhard Schröder has announced plans to cut the tax rate paid by businesses in Germany in a bid to stem the flow of
companies leaving the country and taking advantage of more favourable rates in Eastern Europe. The corporate tax rate in Germany would be cut from 25 percent to 19 percent, Mr Schröder told the
German parliament on Thursday (17 March). According to media reports, he said that Germany needed to keep up with new member states that have lower corporate tax rates. Speaking before the Bundestag, or lower house of parliament on Thursday, German Chancellor, Gerhard Schroeder called for a
significant reduction in Germany's corporate tax rate to boost growth and increase employment levels. Unveiling a package of measures which also included the broadening of a small business loan
programme, Mr Schroeder proposed that company taxes be cut from 25% to 19%. Germany is proposing to slash its corporate-tax rate, Europe's highest, intensifying world-wide competition to cut tax rates to avoid losing
business investment. The plan by Chancellor Gerhard Schroder throws the weight of the world's third-largest economy into the rate-cutting camp and reverses its efforts to make other European countries raise
rates. Germany is following the lead of comparatively small countries -- many of them new European Union members in Eastern Europe -- that have been winning away investment and jobs by racing to cut their
corporate rates. ...A steep tax cut by Germany, the most vociferous opponent of tax competition between European countries, will put pressure on other European governments, including Italy and France,
to cut their business taxes further. ...Germany's about-face on corporate taxes shows the growing economic power of the 10 countries that joined the EU last year, mostly former Communist-bloc countries
during the Cold War. Although their combined economies are only about the size of the Netherlands, the 10 newest EU members' business-friendly tax policies and flexible labor markets have greatly
increased the pressure on some of Western Europe's established economic powers, especially Germany, France and Italy, to change their tax-and-regulate ways.
Saturday, March 19, 2005 ~ 11:14 a.m., Dan Mitchell Wrote: The "Lisbon scorecard", unveiled on Thursday (17 March) by London-based think-tank CER (Centre for Economic Reform) ranks the
25 member states, plus Romania and Bulgaria in terms of progress made towards the so-called Lisbon goals. The authors conclude that whilst "it is difficult to single out a villain - no member state has
performed universally badly", Italy emerges as the "scorecard villain". ...The report paints a gloomy picture of progress made up until now
towards economic reform and awards the EU a "C" grade overall. The authors say that the original "Lisbon goal" - to become the most
competitive, knowledge-based economy in the world by 2010 - is "now embarrassing", as the EU continues to slide backwards in comparison with the US and continues to be threatened by the large and
ever-growing shadow cast by the Indian and Chinese economies. However, the need for economic reform has never been greater, if Europe - and its social model - is going to hold its head high in the
global marketplace, says the report, warning, "nobody is going to buy into the values of a declining civilisation".
Saturday, March 19, 2005 ~ 11:26 a.m., Dan Mitchell Wrote: According to the Treasury's out-turn figures, Tax Freedom Day 2005 falls three days later than it did last year. ...Said the Adam Smith
Institute's Dr Eamonn Butler: 'The only things certain in life are death and taxes, but unfortunately they come in the wrong order. And after
Chancellor Gordon Brown's budget this afternoon, the tax burden in the United Kingdom has increased yet again. Tax Freedom Day 2005 will fall on 31st May. This means that average taxpayers in Britain spend
five months of the year labouring solely to pay taxes. Average taxpayers who have been at work solidly from 1 January this year will in fact only start earning for themselves many weeks from now - at the
end of May.
Saturday, March 19, 2005 ~ 9:47 a.m., Dan Mitchell Wrote: Republicans are bragging this week about passing a stingy new budget, but old spending habits die hard. Consider the $284 billion highway bill
that passed the House last week, a 33% increase over the previous six-year spending level. "Totally inadequate," declared Oklahoma Republican James Inhofe, who vows to increase it in the Senate. He
apparently wants to get in on the House action that includes some 4,000 special projects sought by individual lawmakers, a number that grew by
1,000 or so in the final bacchanalia before the vote. These earmarks, a proliferating feature of the GOP's "fiscal conservatism," include the
likes of $7.3 million for a Vermont snowmobile trail. There's also $10 million for a parking garage at a Harlem hospital. ...The biggest winner is Transportation Chairman Don Young, who by one estimate brought
home $722 million for his state of Alaska, about $1,500 a resident. Mr. Young felt so good about the bill that he "affectionately" named it after
his wife, Lu. It's the Transportation Equity Act: A Legacy for Users, or TEA-LU. Couldn't he have just sent her flowers? ...In promoting the bill, Messrs. Hastert and Young described this higher federal spending
as an economic boon that will create some "47,500 jobs" for every $1 billion spent. But by that logic, why not spend $1 trillion on highways? They seem to have forgotten that the money has to come from
somewhere, which means it will be taken from the more productive private sector in the form of higher taxes now, or down the road (painful pun intended).
Friday, March 18, 2005 ~ 5:34 p.m., Dan Mitchell Wrote: Until Jan. 18, nobody dreamed of comparing Bob Taft to Mitch Daniels. The Ohioan with the famous Republican name is despised in his own
party as a tax increaser. In contrast, as President George W. Bush's Office of Management and Budget (OMB) director, Daniels was a tax-cutting supply-side advocate. But in his State of the State address
Jan. 18, the newly inaugurated Daniels stunned Hoosiers by proposing a one-year increase in Indiana state income taxes from 3.4 percent to 4.4 percent for people making $100,000 or more a year. ...many other
Republican leaders oppose any tax increase of any kind at any time, for one reason. It was stated for me this week by Mississippi Gov. Haley Barbour, who was deputy to Daniels in the Reagan White House.
"Raising taxes," said Barbour, "is the enemy of controlled spending." More revenue inevitably generates more government. Accordingly,
Barbour has fought all tax hikes and intends to veto an increased tax on cigarettes if it passes the Legislature.
Friday, March 18, 2005 ~ 2:45 p.m., Andrew Quinlan Wrote: Federal housing assistance is another entitlement with many of the same defects as AFDC - inefficiency, disincentives to work and chronic
dependency - and it is almost three times as expensive. Applying successful welfare reform policies to public housing programs has a tremendous potential to both improve the lives of recipients and save
taxpayers money. ...The sorry track record of government-owned housing projects has driven the shift to vouchers: Public housing units cost about 30 to 100 percent more to build than comparable privately
built units due to the program's inefficiencies, according to a National Bureau for Economic Research (NBER) study. Tens of thousands of public housing units have been razed over the last 30 years at a cost of
billions of dollars; these include some relatively new projects - in 1974, for example, the Pruitt-Igoe complex in St. Louis was demolished only 15 years after it won awards for architectural excellence. ...most
recipients pay more rent if they earn more, without any increase in housing quality. This means that housing policy effectively imposes a marginal tax on work of up to 30 percent, in addition to other taxes.
This reduces incentives to find full-time employment or better paying jobs: Participation in the labor market by households on assistance is
reduced by 5.4 to 6.8 percent, according to housing expert Will Fischer. Public housing (together with other benefits, such as welfare and food stamps) reduces the labor supply of female-headed households by 42
percent, according to economist Barbara Steinberg Schone. ...About 70 percent of poverty-level families are able to provide for their own housing without government assistance. Through work, the majority of
poor families gradually increase their incomes to rise above poverty. Welfare reform demonstrated that putting conditions on benefits is an effective first step toward this transition.
Friday, March 18, 2005 ~ 12:03 p.m., Dan Mitchell Wrote: German Chancellor Gerhard Schroeder has unveiled corporate tax cuts aimed at helping Germany's 5.2 million unemployed people back into
work. He outlined the plan to cut corporate taxes from 25% to 19% in a speech to the Bundestag, the German parliament. ...The cut in the
basic rate of corporate tax will be partly financed by a rise in dividend tax. ...Chancellor Schroeder's corporate tax cuts were at the heart of his job-creation plans because German business tax rates are among
the highest in Europe. Germany's unemployment has risen to levels not seen since the 1930s. February's jobless rate of 12.6% reflects a host of competitive ills that
has left Germany unable to hold its own in a world being shaped by a newly reconfigured Europe, an ascendant China and a highly adaptive American economy. ...The economy sputters. GDP grew at 1.4% a year
from 1992 to 2002 -- and has since been flat. A flatlined economy means too few jobs are being created, leaving many Germans to face long spells of unemployment. The German workers who are employed
are less productive than many think -- and work too little. Total productivity grew by a mere 1% a year in the 1990s, hardly enough to support Germany's high wages and crushing social overhead.
Friday, March 18, 2005 ~ 11:36 a.m., Andrew Quinlan Wrote: ...the AMT was invented by Democrats to squeeze more taxes from the rich. It does that by denying those with higher incomes deductions and
personal exemptions available to other taxpayers -- that is, by denying equal treatment under the law. Such discriminatory thievery first began as an extra 10 percent tax under President Johnson. But the modern
AMT began in 1978 under President Carter, when the alternative tax was high as 25 percent on income that excluded many itemized deductions. The AMT was reduced to 20-21 percent under President
Reagan, but subsequently raised by President Clinton to 26 percent on income between $100,000 and $175,000, and to 28 percent above that level. ...Without the Bush tax cuts, many more people would have been
subject to income tax rates above the AMT levels. As a result, they would not be "hit" or "clobbered" by the AMT, but would instead be hit
even harder by higher tax rates. ...John Podesta, formerly President Clinton's chief of staff, promises to scrap the AMT in exchange for taxing all income above the 25 percent bracket at 39.6 percent,
including dividends and capital gains. That is like asking taxpayers to jump out of a lukewarm frying pan into a blazing fire.
Friday, March 18, 2005 ~ 10:45 a.m., Dan Mitchell Wrote: Failure to implement economic reform could cost the EU around 800 billion euro, according to a new report unveiled by the European
Commission. A "staff working document" on "the economic costs of non-Lisbon" [the EU's economic reform agenda] concludes that the
combined effects of various reforms could be a growth increase of 0.75 percent per year, resulting in between seven and eight percent over ten years - or between 700 and 800 billion euro at current rates. ...The
report is likely to increase pressure on EU leaders to agree a series of package of economic reforms when they meet in Brussels next week. Heads of state and government will discuss the Commission's attempt to
relaunch the Lisbon Strategy - its ambitious goal to become the world's most competitive economy. The European Commission has launched another assault on regulation and red tape, hoping to succeed where previous initiatives have failed.
Presenting the initiative on Wednesday (16 March), Industry Commissioner Günter Verheugen said he aimed to put an end to the perception of the European Commission as a "bureaucratic monster"
and boost Europe's business environment. ...he gave examples of some of the regulations Brussels could consider scrapping, such as regulating
packaging sizes for coffee containers. "I do not think the Commission has to regulate package sizes for every single product", said the Commissioner. ...But Eurochambres, which represents 18 million
businesses across Europe, called for real action, rather than just empty rhetoric. The Secretary-General of the organisation, Christoph Leitl
said, "up to now, much has been talked about less and better regulation but little concrete action has been seen".
Friday, March 18, 2005 ~ 9:08 a.m., Dan Mitchell Wrote: The current debate about reforming Social Security reminds me of the discussions that occurred in Galveston County, Texas, in 1980, when
our county workers were offered a different, and better, retirement alternative to Social Security: They reacted with keen interest and some knee-jerk fear of the unknown. But after 24 years, folks here can say
unequivocally that when Galveston County pulled out of the Social Security system in 1981, we were on the road to providing our workers with a better deal than Franklin Roosevelt's New Deal. ...Our plan, put
together by financial experts, was a "banking model" rather than an "investment model." To eliminate the risks of the up-and-down stock
market, workers' contributions were put into conservative fixed-rate guaranteed annuities, rather than fluctuating stocks, bonds or mutual funds. Our results have been impressive: We've averaged about 6.5%
annual rate of return over 24 years. And we've provided substantially better benefits in all three Social Security categories: retirement,
survivorship, disability. ...In 1980, labor unions and some traditionally liberal Democrats provided mighty opposition. They considered taxpayer-fed Big Government programs the only secure ones, to the
exclusion of other options. However, we held meetings that included debates with Social Security officials and put it to a vote: Our workers
passed it by a 3-to-1 margin in 1981 - just in time. We got our plan in place before the U.S. Congress passed a "reform" bill in 1983 that
closed the door for local governments to opt out of Social Security. ...What has been good for Galveston County may, indeed, be good for this country.
Friday, March 18, 2005 ~ 7:20 a.m., Andrew Quinlan Wrote: New Jersey lawmakers passed a bill this week that would ban all state contract work from being performed outside the country. Acting
Governor Richard Codey is expected to sign the measure, which would be the first of its kind in the U.S. and no doubt bring joy to the hearts of
CNN's Lou Dobbs ("Outsourcing America") and protectionists everywhere. ...Prohibiting U.S. companies from utilizing workers overseas would needlessly add to the government's procurement costs
by forcing the state to entertain higher bids. That means a higher burden on taxpayers, and with Medicaid, public employee entitlements and so many other demands for budget dollars, it's hard to fathom why
policy makers would want to artificially increase government expenditures. ...And all for a measure that is bound to end up costing more local jobs than it protects. If the state contractor's costs rise
because it has to dismiss its low-cost overseas workforce, it will either have to drop the state contract, accept lower profits, or lay off other workers.
Thursday, March 17, 2005 ~ 12:30 p.m., Dan Mitchell Wrote: The European Parliament will put aside eight million euro from its budget to cover an information campaign on the EU Constitution, a budgetary committee decided on Tuesday (15 March). ...MEPs and the Parliament's officies will play the leading role in the campaign, which should have an "educational dimension" and "explain to the public how the Constitution will benefit them in their everyday lives," states the note from the Parliament's administration. ...Spanish MEP Salvador Garriga Polledo argued that "the information policy of the EU remains one of the most important tools for enhancing the democratic participation of citizens". However, his UK colleagues from the same political group oppose using public money for this purpose. The leader of the UK Conservatives
Timothy Kirkhope (EPP-ED) said the decision by the budgetary committe was "disgraceful". "No one believes that this funding is going
to be used to explain the detail of the European Constitution in an objective way, I fear that it will be a propaganda exercise advocating only the pro-Constitution view", he stated.
Thursday, March 17, 2005 ~ 11:28 a.m., Dan Mitchell Wrote: There are just two problems with mass transit. Nobody uses it, and it costs like hell. Only 4% of Americans take public transportation to
work. Even in cities they don't do it. Less than 25% of commuters in the New York metropolitan area use public transportation. Elsewhere it's far less--9.5% in San Francisco-Oakland-San Jose, 1.8% in Dallas-Fort
Worth. As for total travel in urban parts of America--all the comings and goings for work, school, shopping, etc.--1.7 % of those trips are made on mass transit. Then there is the cost, which is--obviously--$52
billion. Less obviously, there's all the money spent locally keeping local mass transit systems operating. The Heritage Foundation says, "There
isn't a single light rail transit system in America in which fares paid by the passengers cover the cost of their own rides." Heritage cites the
Minneapolis "Hiawatha" light rail line, soon to be completed with $107 million from the transportation bill. Heritage estimates that the total
expense for each ride on the Hiawatha will be $19. Commuting to work will cost $8,550 a year. If the commuter is earning minimum wage, this
leaves about $1,000 a year for food, shelter and clothing. Or, if the city picks up the tab, it could have leased a BMW X-5 SUV for the commuter at about the same price.
Thursday, March 17, 2005 ~ 9:59 a.m., Dan Mitchell Wrote: David Miller and the Bulgarian orchestra he was conducting on a tour through France were backstage after a performance of "Don
Giovanni" on the night of Feb. 11 when they received an unexpected backstage visit. "The performance was over and we were changing into
our civvies," Mr. Miller recounted, when suddenly "the place was full of police. No one was allowed to leave until they were cleared by the
police." Truth be told, the visit wasn't entirely unexpected; the ensemble had already been visited twice by the authorities in the course of their
15 previous performances of "Don Giovanni" in small towns around France. Both previous times, the police had checked the papers of the
musicians and left, apparently satisfied. This time would be different. The tour organizer, an Italian, was taken to prison for two days and is
now on trial in France on charges of illegally importing workers to the country. ...The reason for importing musicians from the east to play in
countries like France is simple: money. "The tour would've been too expensive with French musicians, so there wouldn't have been a tour at
all," Mr. Miller argues. While a company like the one conducted by Mr. Miller might charge about EUR15,000 ($20,055) for a show, a French orchestra would probably cost three times that amount, Mr. Miller
reckons -- pricing them out of the 300- to 800-seat venues they were playing, typically in towns of less than 100,000 people. "I don't feel at
all that I'm taking work away from a French musician," Mr. Miller told me. Musicians like the Bulgarians he was conducting, meanwhile, "need
the work, they don't hold out for very high fees and they play well." "Artistically," he added, "the tour was a great success." But that's not
the way the musicians' unions in Germany and France see it. Mr. Mertens, of the German union, says people like Mr. Hartung are
engaging in "unfair competition" that "jeopardizes European jobs." According to this view, orchestra directors bringing in low-wage East
European musicians to play to West European crowds are exploitative profiteers who are mistreating their workers and harming their West European counterparts at the same time. According to Mr. Mertens's
view, in other words, putting on a tour in small towns that can't afford a French opera company and giving work to eager musicians from the east in the process is a lose-lose proposition.
Wednesday, March 16, 2005 ~ 10:24 a.m., Dan Mitchell Wrote: The "Jurisdictions of Primary Concern" are those jurisdictions that are identified pursuant to the INCSR reporting requirements as "major
money laundering countries." A major money laundering country is defined by statute as one "whose financial institutions engage in currency transactions involving significant amounts of proceeds from
international narcotics-trafficking." However, the complex nature of money laundering transactions today makes it difficult in many cases to
distinguish the proceeds of narcotics trafficking from the proceeds of other serious crime. Moreover, financial institutions engaging in transactions involving significant amounts of proceeds of other serious
crime are vulnerable to narcotics-related money laundering. The category "Jurisdiction of Primary Concern" recognizes this relationship
by including all countries and other jurisdictions whose financial institutions engage in transactions involving significant amounts of proceeds from all serious crime.
Wednesday, March 16, 2005 ~ 10:02 a.m., Andrew Quinlan Wrote: Complaints about stepped-up U.S. border scrutiny since the Sept. 11, 2001, terrorist attacks are prompting many Latin American travelers to
do more than gripe: They are using places like Panama City's Tocumen International Airport as a regional hub instead of Miami, once the preferred way station for Latin fliers making connections to Europe or
North America or even destinations within the region. It is just one way in which Panama is taking advantage of the post-Sept. 11 environment
to help itself -- usually at the expense of Miami. ...In October, Spanish carrier Iberia Airlines shut down its Miami hub, which previously ferried
travelers between Central America and Europe. Iberia found too many passengers were missing connecting flights, and began flying passengers
directly to different destinations in the region on different days. "We were losing money because the new security rules turned what used to
be a very good hub into a nightmare," says Jaime Pérez Guerra, an Iberia spokesman in Madrid. To help attract carriers like Iberia, Panama approved a $12 million plan last year to remodel Tocumen
Airport and add a second runway. ...Panama's offshore bank sector already has attracted some permanent residents from Miami. After Sept. 11, some banks based in Miami that catered in part to Latinos
moved back-office and back-up operating systems to places like Panama to reduce vulnerability. Telecarrier SA, a unit of Grupo Motta, Panama's largest private conglomerate, invested $50 million to lure
back-office business from U.S. banks, airlines and retailers. Telecarrier won't divulge its client list, but says nearly a dozen customers recently
closed their Miami offices and moved to Panama. Tighter scrutiny of financial flows to the U.S. similarly helped boost deposits in Panamanian banks. Deposits here reached $38 billion last year, mainly
from offshore clients... Meanwhile, foreign bank agencies in Miami held $17.1 billion in assets as of September 2004, according to the Florida
Department of Financial Services. In September 2000, those banks held $20.6 billion.
Wednesday, March 16, 2005 ~ 9:30 a.m., Dan Mitchell Wrote: There is a way to have personal retirement accounts, or PRAs, and actually decrease the government debt. If PRAs of modest size are
combined with something called the "progressive indexing" of benefits, the government borrowing needed to finance Social Security would be
dramatically reduced. What is progressive indexing and how does it work? Under the current Social Security system, the annualized career earnings of all workers are increased by the amount wages in the whole
U.S. economy have risen over their careers. Under progressive indexing, by contrast, the average career earnings of all workers with over $113,000 per year would be increased by the amount that prices
have generally risen over their careers. ...Since wages regularly rise over 1% per year faster than prices in the U.S., the adoption of progressive indexing would dramatically improve the solvency of Social
Security and drastically reduce the government borrowings required to sustain the system. At the same time, the Social Security benefits of all workers with average career earnings below $113,000 per year would
grow in both real and nominal terms, and the Social Security benefits for workers with higher average career earnings would still keep pace with the consumer price index. ...the combined plan for progressive
indexing of Social Security benefits and PRAs of modest size would make Social Security solvent and financially self-sustaining by the end of the 75 years, according to the Chief Actuary of Social Security. No
government transfers would be required to finance this combined plan until 2030 and all such transfers would be completed by 2073. Most importantly, as calculated by the Chief Actuary of Social Security, the
combined plan would require $2 trillion less in total government borrowings than the current system for Social Security over the next 75 years.
Wednesday, March 16, 2005 ~ 8:44 a.m., Dan Mitchell Wrote: The chancellor often boasts about seven years of uninterrupted economic growth. This is far from being exceptional. The economies of
23 out of 30 members of the OECD have grown every year since 1997. Most importantly for British families, their real disposable incomes rose every year from 1983-1997, an unbroken 15-year period of rising
prosperity under Tory economic management. In its 1997 Manifesto, New Labour promised faster growth. Britain's growth rate averaged 2.8% annually from 1998-2004, but that's well below the 3.2% rate
achieved from 1980-1990 under Margaret Thatcher. It also lagged behind the growth of world output (3.6% annually) from 1998-2004. Among the world's 20 largest economies, it ranked only 12th in the
growth league since 1997. Had Britain's growth kept pace with world growth under Labour, its GDP would be 5.6% higher than it is today. Britain has performed better than Germany or France since 1997,
largely because the chancellor inherited more flexible labor and product markets created by Thatcherite reforms. But its failure to keep up with the dynamic Asian economies can be attributed, in part, to a much
lower investment/GDP ratio. The rising tax and regulatory burden imposed on British business by Mr. Brown retarded its rate of capital accumulation.
Wednesday, March 16, 2005 ~ 8:23 a.m., Dan Mitchell Wrote: Members of Congress have their own personal retirement accounts, called the federal Thrift Savings Plan. The TSP has low administrative
fees and members can choose from five different plans that vary in risk and rate of return. Contributions to the TSP are matched by taxpayers
up to five percent, and are invested in mutual funds, not one particular stock. Bush's plan will not turn the public into a bunch of moonlighting day-traders, lining up to be fleeced by Wall Street insiders.
...Congressional Democrats' opposition to allowing all U.S. workers access to economic freedom through the same investment options they currently enjoy is nothing short of immoral and dishonest. What is
worse, they are seeking a short-term political victory by pitting grandparents versus their grandchildren and purposely trying to confuse both on the facts of the Social Security crisis and the benefits of
investing.
Wednesday, March 16, 2005 ~ 7:10 a.m., Dan Mitchell Wrote: When reasonable adjustments are made, women earn just as much as men, and sometimes more. ...Women are 15 times as likely as men to
become top executives in major corporations before the age of 40. Never-married, college-educated males who work full time make only 85 percent of what comparable women earn. Female pay exceeds male
pay in more than 80 different fields, 39 of them large fields that offer good jobs, like financial analyst, engineering manager, sales engineer,
statistician, surveying and mapping technicians, agricultural and food scientists, and aerospace engineers. A female investment banker's starting salary is 116 percent of a male's. Part-time female workers
make $1.10 for every $1 earned by part-time males. ...many men outearn women by a willingness to take risky and dangerous jobs as well as work that exposes them to stress and bad weather or that
requires a transfer to an undesirable location in another city or country. Women are more likely than men to pick glamorous jobs that tend to pay less. A London School of Economics study tracking 10,000
post-1993 United Kingdom graduates from 30 universities found that males were earning 12 percent more than women. The men tended to stress salary and were more likely to take up engineering, math, and
computing. The women were more apt to seek socially oriented jobs and as undergraduates had favored majors in education and the arts.
Tuesday, March 15, 2005 ~ 11:06 a.m., Andrew Quinlan Wrote: Not only banks are rejecting customers because of the "know your customer" rules and other financial regulations. Now brokerage firms,
pawnbrokers, real estate companies and even auto dealers are subject to some of these rules, which means they often decline to deal with totally honest, responsible people who lack bank accounts and must
deal in cash. ...Many of the regulators at Treasury's Financial Crimes Enforcement Network (FinCEN) have both publicly and privately admitted these regulations do not meet reasonable cost-benefit tests and
hurt the poor, the young, the disadvantaged and legal immigrants. But these regulators feel forced to continue on this destructive path by
politicians frightened that if there is another major terrorist incident (or just ongoing drug and financial crime) they will be blamed, even if the
"solutions" they enact hurt the innocent and destroy personal liberties and do almost nothing to prevent terrorism. The regulators, like the
innocent workers and business people, are trapped. ...We are driving people into the high-cost and high-risk cash economy where criminals have easy pickings while, in fact, good public policy should be directed
toward making it easy for everybody to get into the digital economy using digital money. The solution is for the government to stop delegating its crime-fighting responsibilities to businesses. The purpose
of business is provide goods and services to satisfy the wants, needs and desires of consumers. Government's purpose is to protect person and property. History teaches that every attempt to commingle these
functions ends in disaster.
Tuesday, March 15, 2005 ~ 10:44 a.m., Dan Mitchell Wrote: European Commission President José Manuel Barroso has made a passionate plea to the citizens of Europe for their help in pushing
economic reform and boosting jobs and growth in the Union. ...And, piercing through the gloom that usually surrounds the EU's so-called Lisbon Agenda - its goal to boost Europe's flagging economy - Mr
Barroso struck an upbeat note, saying, "I am an optimist by nature. I firmly believe that the potential among European citizens is there, just
waiting to be unblocked". ...he also warned, "if Europe does not adapt, we will lose the global competition against some of our partners"... The
Commission President rejected suggestions that what was holding up economic reform in the EU was a battle between the political left and the political right - the former refusing any changes to the European
social model, the latter calling for an-enveloping focus on jobs and growth at the expense of social and environmental issues. Instead, he said, "the true cleavage is not between left and right but between
modernisers and reactionaries". Mr. Barroso punctured that happy thought yesterday in his speech before the Brussels-based nonprofit Lisbon Council with a dose of
economic reality. "Employment security is ensured by providing a sufficient quantity of available jobs . . . . There is no better guarantor of
social cohesion than full employment." Mr. Barroso is not about to retreat from his view. Responding to a question from the audience
following his speech, he said that the "real cleavage" preventing the commission from achieving meaningful reform is not between the right
and the left, but between progressives and "reactionaries." That puts the case clearly, and he should be saluted for standing four-square
behind market-based reforms, no longer yielding the moral high ground to free-market opponents.
Tuesday, March 15, 2005 ~ 9:22 a.m., Dan Mitchell Wrote: Why would the president risk his political capital on a plan that appears doomed to failure? I think the answer lies well beyond the politics of
any single reform plan. And the president may end up a winner if his call for personal accounts ultimately fails. After all, he has raised a serious issue that needs attention--the very solvency of Social
Security--which Democrats have never touched. Huge majorities of voters understand that the current system is in trouble. He will, at the very least, get credit for trying to reform the program previously
referred to as the "third rail of American politics"--even if he achieves more modest change than he now proposes. But there is a much bigger
picture. The president's real prize would be a significant realignment in party politics. ...This stunning realignment is possible by virtue of a new
class of American voters--the self-identified "investor class"--which is itself a coalition across a broad spectrum of demographic groups. ...this
response to a single question--"Do you consider yourself to be a member of the investor class?"--is a far greater determinant of how
they will vote and how they see their world than income, religion, race, marital status, or size of individual portfolio. ...Self-identified investors
comprised 46% of the total vote in 2004, a significantly higher figure than pre-election polls suggested. The group is neither dominated by the wealthy nor do members necessarily aspire to become wealthy.
According to a series of polls we did on behalf of PBS's "Wall Street Week with Fortune," this group tells us they simply are saving for a
retirement that maintains their current lifestyle and for college for their children. Importantly, their worldview remains middle class, modest, and basically conservative.
Tuesday, March 15, 2005 ~ 7:45 a.m., Andrew Quinlan Wrote: Tomorrow John Rapanos will stand before a federal judge for sentencing. The purported crime of this mid-Michigan builder is
violating the federal Clean Water Act by moving sand in a cornfield he owns and had hoped to develop. ...Mr. Rapanos' cornfield was deemed a wetland by state and federal authorities despite being surrounded by
drainage ditches mandated by county drain commissioners in the early 1900s. When I visited the site, having recently ended my tenure as director of the Michigan Department of Environmental Quality, I
confirmed that these ditches were in fact keeping the land dry. Moreover, the nearest navigable water -- the basis of federal jurisdiction over "wetlands" -- was some 20 miles away. ...Sadly,
through creative rulemaking and without explicit congressional approval, the Corps has defined "waters of the United States" as any
wetlands that might affect interstate commerce. Consequently, property owners whose land is distant from any normal understanding of "navigable waters" can find themselves targets of federal wetlands
enforcement action. ...Until 2001, the Corps used a "migratory bird rule" it had devised, under which virtually all wetlands were federally
regulated using the rationale that birds fly across state lines and use wetlands, thus contributing to "interstate commerce" in sport and
tourism. In 2001, the U.S. Supreme Court struck down the bird rule, so the Corps became more creative. It devised the equivalent of a "migratory molecule rule," whereby nearly every wetland is under
federal jurisdiction since microscopic quantities of water from any isolated wetland might conceivably reach a navigable waterway.
Monday, March 14, 2005 ~ 11:51 a.m., Dan Mitchell Wrote: It will take the EU until 2023 to reach US levels of employment, and then only if EU employment growth will exceed that of the US by 0.5%
p.a. [per annum]. Europe's employment level for 2003 was achieved by the US in 1978. ...It will take the EU until 2123 to reach US levels of
R&D investment, and then only if EU investment will exceed that of the US by 0.5% p.a. (Note: Since 1995 the average growth for the US has exceeded the EU rate.) Europe's R&D investment for 2002 was
achieved by the US in 1979. ...It will take the EU until 2072 to reach US levels of income per capita, and then only if EU income growth will exceed that of the US by 0.5% p.a. (Note: Since 1997, the average US
growth has been higher.) * Europe's income for 2003 was achieved by the US in 1985. ...It will take the EU until 2056 to reach US productivity rates per employed, and then only if EU productivity
growth will exceed that of the US by 0.5% p.a. (Note: Since 1994, the average US growth has been higher.) Europe's level of productivity for 2003 was achieved by the US in 1989.
Monday, March 14, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: Offshore financial centres have faced heavy criticism over their confidentiality practices from the EU, OECD and US. But according to
offshore lawyers, the compliance systems those jurisdictions have introduced have now put them ahead of their 'onshore' competitors ...many IFC lawyers point out that, while they may not object to a
tightening of regulation, such regulation should not be used as a battering ram to discriminate against IFCs. ...Davies says that when she
recently set up an account in the US for a client, "the almost complete lack of information we had to provide was astonishing. Had we been
setting [the account] up in Jersey, we would have had to provide a lot more information". ...In Germany, for example, little or no beneficial
information is required to set up a bank account. "If you establish a fund [in Germany], there is a certain information obligation," says
Oliver Doerfler, a tax partner at Haarmann Hemmelrath in Frankfurt. "But if you are a private individual we do not have a system where the bank has to submit certain information." ...In light of these
discrepancies, lawyers across the board question the efficacy of measures directed, at and implemented by, the IFCs. One partner of a London firm says: "If you are a terrorist opening a bank account, you
do not do it for the tax breaks."
Monday, March 14, 2005 ~ 9:44 a.m., Dan Mitchell Wrote: The biggest fear about the trade deficit is that foreigners may someday withhold their dollars (or demand higher interest rates to reinvest them)
leaving us starved for cash. Thankfully, this is more than unlikely, it's impossible. As long as we are buying more goods and services than we
sell abroad, other nations will have the dollars from that excess. They have to place those dollars, directly or indirectly, in U.S. dollar assets;
they have no choice. The exchange rate might be affected, but there cannot be a shortage of dollars in the world financial system. All dollars lead to home. They can't be eaten, and no one stuffs them into
pillowcases. Foreigners either use them to buy U.S. goods, or they invest them in dollar assets. Foreign banks invest their dollars -- to earn
interest, however small -- every day. On a day when $2 billion of trade deficit occurs, the dollars don't sit abroad: the ownership of $2 billion of
dollar assets is simply transferred from U.S. owners to foreign owners. The assets may be sold repeatedly, but whoever has the dollars at the
end of each day will hold dollar assets. Is there no reason for concern over the trade deficit? Perhaps. Foreign ownership of dollar assets could place additional demand on future U.S. workers, an inflationary
pressure if employment has already peaked. But this is not unique to the trade deficit: all financial assets -- all savings -- represent potential
claims on future production; this block, held by foreigners, comprises a small percentage of the total. And if some countries continue to sell us
much more than they buy from us, but decide to sell more of their dollar assets to other investors, that could put pressure on the dollar exchange rate.
Monday, March 14, 2005 ~ 8:30 a.m., Dan Mitchell Wrote: Recently the media discovered that the federal government had paid the conservative commentator Armstrong Williams $240,000 to promote
the No Child Left Behind education law passed during the first term of the Bush administration. Americans are right to condemn this arrangement, but we are in danger of missing a more important point.
...The federal government took money from taxpayers and spent it trying to persuade those same taxpayers of the wisdom of federal education policy. ...The Metro subway system in Washington, DC, buys
billboards urging riders to contact their local public officials and demand more spending on....the Metro. Riders who are skeptical about spending more on Metro can only wish they could force taxpayers to
fund ads for their views. A couple of years ago the governor of Ohio spent significant sums of public money on a political campaign to defeat
an initiative to offer treatment rather than prison to people charged for the first or second time with simple drug possession. Federal subsidies
for political advocacy are on the rise. The Bush administration spent $250 million on public relations during its first term. Some of that spending sought to foster support for administration policies on
Medicare prescriptions and drug enforcement efforts. In its second term, the Clinton administration devoted $128 million of public money to publicity. ...What's wrong with government advocacy funded by
taxpayers? It distorts and subverts representative democracy while abridging freedom of speech. In our government, the arrow of authority is supposed to run from the people through their representatives to the
government. The government should reflect, not determine, the desires of the people. ...the 109th Congress should be getting government (and the taxpayers) out of the business of funding political advocacy.
Monday, March 14, 2005 ~ 7:15 a.m., Andrew Quinlan Wrote: Smokers increasingly are turning to the Internet because state and local taxes in some areas account for more than half the cost of cigarettes.
People who evade cigarette taxes by buying online are part of a broader pattern in Internet commerce. According to a study last year by economists at the University of Tennessee, state and local governments
in 2003 lost an estimated $15.5 billion in taxes that went uncollected from Internet sales. ...Collecting sales taxes on goods bought from mail-order and Internet businesses has frustrated state and local
governments for more than a decade. The Supreme Court ruled in 1992 that states could not force businesses outside their borders to collect their sales taxes unless the companies have stores or headquarters in
those states. The ruling spared such businesses from having to comply with the tax codes of 45 states - and the District of Columbia - that levy
sales taxes. Many states are collaborating on a uniform tax system that would make it easier for online retailers to collect sales taxes on goods they sell. The Streamlined Sales Tax Project would let retailers
determine the proper state and local tax rates by entering the customer's ZIP code. The project has been enacted or partially enacted in 20 states.
Sunday, March 13, 2005 ~ 1:17 p.m., Dan Mitchell Wrote: Welcome behind the curtains of the campaign-finance reform movement, where ideologues plot to restrict the speech of their fellow
citizens while reserving a special free-speech zone for themselves. ...Consider a report just out from the folks over at Political Money Line,
"Campaign Finance Reform Lobby: 1994 to 2004." Ignored by the media to date, it details how the supposedly grass-roots campaign-finance reform movement has been funded over the last
decade to the tune of $140 million. Of that $140 million, the vast majority ($123 million) came not from retirees scraping together their last nickels for the cause of democracy, nor from schoolchildren
collecting deposits on cans plucked from dilapidated playgrounds. No, the money came from just eight ultra-liberal foundations (including the Ford Foundation and George Soros' Open Society Institute), the same
folks who fund: the Earth Action Network, the NOW Legal Defense and Education Fund, People for the American Way, Planned Parenthood, the Naderite Public Citizen Foundation and the Feminist Majority
Foundation. That's quite a lot of money sloshing around a movement dedicated to "getting the money out of politics." Of course, the only place these people really want to keep the money out of is their
conservative opponents' campaign war chests and the war chests of the independent groups that support them. To the reformers, reform is not
an end, it is a means to their pre-existing liberal goals. ...Payments to the media found by Political Money Line include: the $132,000 to the
Prospect, $69,000 to Public Radio International, $935,000 to the Radio and Television News Directors Foundation and more than $1.2 million to National Public Radio for items such as, in the words of the official
disclosure statements, "news coverage of financial influence in political decision making." No wonder McCain-Feingold contained a "media
exemption." The media -- on top of having their voices amplified when private citizens, labor unions and corporations are barred from speaking -- are relatively easy to write some checks to. (Millions of
bloggers, on the other hand, might be a little harder to corral -- hence the calls for a crackdown.)
Sunday, March 13, 2005 ~ 11:57 a.m., Dan Mitchell Wrote: The primary reason for sluggish European economic growth is excessive regulation, mighty tax burdens and a blind faith in the
wisdom of ever deeper bureaucracy, producing legendary European red tape. All these factors are symptoms of a lack of confidence in the free market. When we also bear in mind an ageing European population that
is used to high social standards, it is clearly time to do something about it. One approach, though not the only one, is to foster and promote tax
competition between member states, and to examine the potential of the flat tax concept. ...Now, during a few past years, the flat tax has been
gaining ground. Estonia, a Baltic country, was the first to introduce the flat tax. And, out of the blue, this tiny country has been followed by
several more, including Lithuania, Latvia, Russia and Slovakia. The striking fact is that over the period 1995 - 2000 the average growth rate of Central and Eastern European countries with the flat tax system
was 4.6%, while the average growth rate of the rest was just 2.1%. In 2001 - 2002 the average growth rate of the countries with flat taxation
was 6.4%, in comparison with mere 3.8% of non-flat-tax-countries. In 2003 the countries with flat tax grew by 7.7% compared to 3.5% for the
rest. In 2004, subsequently, flat-tax countries grew their economies by 7.3% and countries without flat tax just by 4.3%. Averaging across all
these countries, the growth rate with a flat tax is double that of countries with complex and progressive income taxation. ...In the EU,
we often hear calls for tax harmonisation, and the avoidance of "unfair tax competition". What this really means is an effort to force flexible
and successful economies like Slovakia or the Baltic states to accept higher European tax rates, to abandon one of their key competitive advantages, and consequently, to share core-Europe's sluggish
economic growth. But these countries which have successfully introduced the flat tax will not surrender it, because if they did, they would sacrifice their future prosperity and, more importantly, their
freedom to choose.
Sunday, March 13, 2005 ~ 9:34 a.m., Dan Mitchell Wrote: The annual survey of more than 1,000 Swiss citizens was carried out earlier this year by Lausanne-based research company MIS Trend. The
findings were largely similar to those in previous years. ...A growing number, 78%, up from 76%, supported the principle of banking secrecy - and 74% say Switzerland should carry on resisting any pressure to end
bank-client confidentiality.
Saturday, March 12, 2005 ~ 12:06 p.m., Dan Mitchell Wrote: The young man, I learn, is scouting opportunities up north, not in the Guatemalan capital but in the U.S. If he makes it, he will join millions
more like him who are fueling a robust U.S. economy while their own Latin homelands are stripped of precious human capital. U.S. policy makers are racking their brains trying to figure out how to get
ambitious young Latins to resist the mighty magnetic pull of U.S. economic growth. But if you spend even a little time in this country the futility of that cause becomes apparent. Opportunity is to be found
elsewhere, not here, and even the humblest Guatemalan peasant, washing clothes on a rock by the water's edge, knows it. ...Economic modernization here is creeping along at too slow a pace to satisfy the
aspirations of the best and brightest. Their motivation is strong and they find ways to slip through even today's beefed up border protections. A national poll last year by the International Organization
for Migration projected that remittances to Guatemala from abroad would be equivalent to 10% of gross domestic product in 2004, an increase of two percentage points over 2003. ...Not surprisingly, what
one finds is that while the booming Bush economy is ingesting large doses of Reaganomics, minions of the State Department, the Agency for International Development (Usaid) and the International Monetary
Fund have Latin America on a steady diet of Rubinomics and regulation. Is it any wonder that the U.S. is vigorous while its Latin stepchildren are frail and sickly? ...What brought the U.S. economy out
of a sluggish, recessionary environment inherited from the Clinton administration was Reaganomics: Cuts in marginal income tax rates, dividend taxes and capital gains taxes, have acted like smelling salts for
the investor class and this week the effects have been dramatically apparent. The U.S. economy created 262,000 jobs in February and economists are raising their estimates of 2005 U.S. economic growth.
Contrast the Reaganesque optimism that set this recovery in motion with conventional Rubinomics, theologically grounded in class warfare
and so popular with Washington's armies of economic "experts" fanned out around Latin America.
Saturday, March 12, 2005 ~ 10:36 a.m., Dan Mitchell Wrote: In an interview with Computer Weekly, Bruce Schneier, security author and chief technology officer of internet security group Counterpane,
said the programme could do more harm than good. "ID cards are a waste of money. The amount of good they will do is not nearly worth
the cost. They will not reduce crime, fraud or illegal immigration," he said. The adoption of ID cards would encourage criminals to attempt
forgeries, he said, potentially exacerbating crime rather than reducing it. "Every credential has been forged. As you make a credential more
valuable, there is more impetus to forge it. The reason identity theft is so nasty now is that your identity is so much more valuable than it used
to be. By putting in the infrastructure, we have made the crime more common. That's scary." ..."We are living in a world where governments
are looking for more control. They are looking for measures that increase control. It is being sold as security but it is really control," he
said. Schneier said that the US plans to spend £10bn on a programme to build checkpoints at airports to prevent terrorists boarding planes
are a similar waste of money. "If you had a list of people that were so dangerous you would never let them on an aircraft and £10bn, would
you build a series of checkpoints at airports just in case they happened to walk through them, or hire FBI agents to investigate those people?" he said. The chief privacy officer for the Homeland Security Department is not a supporter of a national identification card. ..."We have huge issues with
managing identification and getting identification right," Kelly added. For example, she said, there are many risks to privacy from possible
misuses of "breeder documents" - birth certificates and drivers' licenses issued by state and local agencies that are used to apply for U.S.
passports. ...Proposals for secure national ID card systems have gained supporters, but civil libertarians say any security gains would be overshadowed by the risks of "Big Brother" infringements upon
personal rights and freedom.
Friday, March 11, 2005 ~ 9:12 a.m., Dan Mitchell Wrote: British Finance Minister Gordon Brown has rejected the conclusion of an IMF assessment into the UK economy that taxes will need to rise in
order for the Chancellor to meet his fiscal objectives. ...The IMF assessment has added to a growing body of economic opinion that the Chancellor has got his sums wrong and will need to put up taxes in
order to meet his public spending commitments. ..."Debt in the UK is well below the 40% of gross domestic product ceiling we set in our fiscal rules, lower than all the major industrial countries," the
Chancellor was reported as saying this week.
Friday, March 11, 2005 ~ 8:59 a.m., Dan Mitchell Wrote: The Sarbanes-Oxley law of 2002 was hastily enacted in reaction to the highly publicized bankruptcies of Enron and WorldCom. Confirming the
proverb that haste makes waste, the remedies adopted had no connection to the causes of those financial crises. Sarbanes-Oxley was almost entirely concerned with strictly enforcing the latest "generally
accepted" accounting principles (GAAP). But bankruptcies are real events, not simply a matter of the way records are kept. Deceptive accounting by companies attempting to conceal their troubles was a
consequence of financial crisis, rather than the cause. ... The bookkeeping obsession of Sarbanes-Oxley might nonetheless be defended as helpful to stockholders were it not for the fact that
investors saw through Enron and WorldCom's exaggerated earnings and hidden debts long before accountants or federal regulators did. The stock market shoved WorldCom stock below a dollar long before any
accounting scandal was revealed; Enron stock fell 61 percent before that story broke. ...When attempting to weigh these costs of Sarbanes-Oxley against any benefits, the costs are relatively clear and
quantifiable. The supposedly offsetting benefits usually come down to just one, as The Wall Street Journal repeated -- namely, "restoring
confidence in U.S. markets." But how could a law that increases the cost and risk of doing business as a publicly traded U.S. corporation possibly improve profitability and stockholder returns? ...The
Sarbanes-Oxley law was unnecessary, inadequate and harmful. It was unnecessary because the SEC already had the authority to do everything the law demands about accounting or corporate boards.
Sarbanes-Oxley was inadequate, if not irrelevant, because it failed to deal with any fundamental institutions, laws or incentives that might have contributed to major bankruptcies in the wake of the 2001
recession. The 1968 Williams Act has made it too difficult to take over mismanaged companies, for example. And higher tax rates on dividends before 2003 helped devious managers camouflage overstated earnings
(companies can't pay dividends with bogus earnings). Sarbanes-Oxley has proven harmful to the U.S. economy, and to the value of stocks still
listed on U.S. exchanges, because it greatly increases the costs and risks of doing business as a publicly traded U.S. corporation and it increases the risks of serving as a director or officer.
Friday, March 11, 2005 ~ 8:30 a.m., Andrew Quinlan Wrote: Does outsourcing benefit the United States? You better believe it does. Free trade works both ways. Jobs coming from other countries to the
United States are called "insourced" jobs. While more jobs are outsourced from the U.S. than are insourced to the U.S., for the last 15
years insourced jobs grew by 117 percent, while outsourced jobs only grew by 56 percent. Insourced jobs account for nearly 5 percent of all private-sector jobs, and tend to be higher paying -- with salaries an
average of 31 percent higher than other private-sector jobs. Foreign-owned U.S. subsidiaries manufacturing their goods here in America account for 20 percent of all U.S. exports. What about the
decline in manufacturing jobs? Can we blame outsourcing? For the most part, no. Manufacturing now employs a smaller percentage of workers, given our dramatic increase in worker productivity. Higher
worker productivity means fewer workers required. Between 1995 and 2002, U.S. manufacturing jobs declined 11 percent -- identical to the average world decline in manufacturing employment. Yet in the last 15
years, insourced manufacturing jobs grew by 83 percent, while outsourced manufacturing jobs only grew by 23 percent. ...Outsourcing and globalization of manufacturing allows companies to reduce costs,
benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation. According to the McKinsey Global Institute, for every $1
outsourced, the economic gain to the U.S. as a whole is $1.12 to $1.14.
Friday, March 11, 2005 ~ 7:03 a.m., Dan Mitchell Wrote: The key principle to keep in mind is whose money is being invested in any accounts and by whom. The main virtue of Mr. Bush's proposal is
that it would let individuals keep some of their own payroll-tax money, investing it for higher returns rather than turning it over to Congress to
spend the way it is now. With annual payroll taxes expected to exceed annual Social Security benefits through 2018, the earlier these accounts
begin the more money can be kept out of Congress's clutches. Think of this as Al Gore's famous "lock box," except that each worker would
have his own lock and key. The same ownership principle applies to the tax-advantaged savings accounts that already exist, namely IRAs and 401(k)s. These too are funded by individuals with their own money (or
by private employers out of earnings). These contributions and any growth in assets are shielded from taxes, at least for a time, but the accounts don't receive any direct government transfer payments. A tax
exemption is not the same as a direct federal subsidy: The former lets taxpayers keep more of their own money; the latter requires dunning some taxpayers more in order to finance cash payment to others. The
"add-on" concept, on the other hand, has a long liberal pedigree going back to the George McGovern campaign of 1972. The Democratic Presidential candidate proposed a direct government payment to
Americans that was widely ridiculed as a "Demogrant." In the Social Security context, add-on accounts gained currency in the 1990s when Robert Rubin suggested them as an alternative to defeat personal
accounts financed with payroll taxes. ...GOP Congressman Clay Shaw of Florida is shopping around a proposal for add-ons financed by a refundable, $1,000 tax credit. "Refundable" is Washington-speak for
the government cutting you a check in the event you don't have enough tax liabilities to claim the credit. While the size of this entitlement would
be limited by income level, it is still a government handout. ...We wish the White House were clearer in resisting this phony compromise. Last
week Mr. Bush referred to his own accounts as an "add-on," confusing reporters as well as voters, and White House Communications Director
Dan Bartlett was just as unclear on Fox News Sunday. They'd be better off explaining that the key reform concept is whether taxpayers get to
invest their own payroll tax money rather than letting politicians spend it. Having lived through the Medicare fiasco, when sensible reform
morphed into vast new spending for the sake of a political "victory," we're frankly skeptical of private Republican assurances. Adding new
taxpayer liabilities to the ones that already exist in Social Security would repudiate the very principles Mr. Bush endorsed in his last campaign.
Friday, March 11, 2005 ~ 6:19 a.m., Dan Mitchell Wrote: The attempt to replace activist judges with judges who follow the written law affects not only the basic democratic right of the voters to
govern themselves through their elected representatives, but also whether our legal system becomes a danger to ordinary citizens and a bonanza to lawyers who turn it into a legalized extortion racket. Once
judges start disregarding the written law in favor of their own notions, ordinary citizens have no way of knowing in advance what decisions to expect from a given situation. We can read the written law but we
cannot read judges' minds. This means that there is a large and growing gray area around our laws. That large gray area is a happy hunting ground for lawyers, who can threaten individuals, businesses, and even
government agencies with frivolous lawsuits -- and get paid off to settle out of court, because nobody knows what is likely to happen in court.
...Imagine what would happen if highway signs, instead of saying "65 MPH" said "No Undue Speed" or "Prudent Driving." The lawsuits over
traffic laws alone would clog our courts to a standstill. As bad as uncertainty is to people being sued, it can be worth millions of dollars to
a slick lawyer who knows how to concoct frivolous lawsuits and extort money for settling out of court. Such lawyers head for places where there are big bucks -- "deep pockets," as they are called.
Thursday, March 10, 2005 ~ 11:34 a.m., Dan Mitchell Wrote: ...the new EU countries of Central and Eastern Europe have ...taken over Europe's economic agenda, forcing a stronger focus on low taxes,
liberalization and competition. They affected the cogs and gears of the Brussels institutional machine Tuesday, when several new countries opposed Germany's attempt to water down the EU's Stability and
Growth Pact amid fears that it would undermine the euro. ..."As a country that regained its independence 15 years ago we are cautious about reforms that lead to more federalism," said Eduards Stiprais,
Latvia's ambassador to the EU. "We want to improve the existing structures without really moving to that. I don't believe in the United
States of Europe." ...perhaps the biggest impact of the new countries is in business. After the stagnation of communism, they want to catch up
with the West and have introduced aggressively liberal market reforms, including lower taxes to lure foreign investment and promote growth. At times, their models are more China and India than Germany or
France. Estonia, Lithuania and Slovakia have each introduced a uniform low tax rate on income or profit levels. Slovakia has a 19 percent flat tax on income, capital and consumption. Hungary plans a
reform that would extend its 18 percent income tax rate to more income levels, according to Tibor Draskovics, the minister of finance. The result
is that many of the Eastern nations are now growing more than twice as fast as their wealthier but more sclerotic and higher taxing Western neighbors. ...But they are also causing a backlash by the big Western
nations, which have become more nervous and defensive since enlargement. Austria has cut tax rates to compete. But France warned the new countries last year that they must raise taxes and stop luring
away French investment and jobs.
Thursday, March 10, 2005 ~ 11:07 a.m., Dan Mitchell Wrote: The report, unveiled yesterday (8 March) by the American Chamber of Commerce and the Boston Consulting Group, shows that 26 percent of
US firms see Eastern Europe as the best region for business investment. This rate has doubled in the past year. And Eastern Europe is winning
business not just from industrial sectors such as car manufacturers but also in the service sector, especially in IT support or call-centres. US companies see Poland, the Czech Republic and Slovakia as the most
attractive labour markets in Europe - followed by the UK and Ireland, the report revealed, adding that American firms are attracted to the new member states because of low wage costs and a light regulatory
regime. The study also shows that Germany is losing out to the competition from the new member states, compounding its difficulties of high unemployment and low growth. One fifth of US companies already
active in Germany are considering moving part of their business to another European location.
Thursday, March 10, 2005 ~ 9:32 a.m., Andrew Quinlan Wrote: There's more to the deceit and dishonesty about Social Security. Congress tells us that one half (6.2 percent) of the Social Security tax is
paid by employees and the other half paid by employers. The truth of the matter is that all of it (12.4 percent) is paid by employees. You say,
"What! It says on my pay stub that I pay 6.2 percent." Let's look at it. Suppose you hire me at $6 an hour. From that $6 an hour, you must
deduct 35 cents in Social Security tax and add 35 cents of so-called employer contribution. Here's the big question: What is your hourly cost to hire me? If you said $6.35, go to the head of the class. Now comes
the bigger question. If it cost you $6.35 an hour to hire me, what must be the minimum value of my contribution to your company's output? If
you said $6.35, again, go to the head of the class. If you said that the value of my hourly output had to be $6, our agreed-upon wage, you'd be
losing money and soon would be out of business because my hourly cost would exceed my hourly output. The fiction that employees and employers each pay half of Social Security taxes has survived since
1936 for two reasons. First, it was meant to disguise the true tax imposed, and second, it promises something for nothing -- a free lunch. And, when it comes to the promise of a free lunch, employers paying
half, gullibility reigns supreme.
Thursday, March 10, 2005 ~ 9:19 a.m., Dan Mitchell Wrote: Europe's dream...feels more like a nightmare to the millions of unemployed youth living on the margins of society. The European
dream is nothing but a cruel joke to immigrants and their children trapped in the dilapidated public housing estates that tourists see for a split-second as they zoom by on the express train leading from the
Charles de Gaulle airport to central Paris. Western Europe is in decline because most middle-class voters refuse to tighten their belts in the name of the general good. Unemployment has hovered at 10% for a
quarter century, yet the reforms necessary to remedy this -- lower job-killing payroll taxes, looser laws governing hiring and firing, a more
efficient public sector -- are thwarted time and again. In some countries, like in France, these reforms are rarely even broached. And it isn't difficult to understand why: With good jobs so scarce, who on earth
would support the idea of less job security? With low levels of trust in politicians, no one dares to cut the knot. Everyone remembers what happened to former French Prime Minister Alain Juppé in 1995: His
timid reforms (and ultimately his government) were killed by a month-long strike of the French public sector. France and Western Europe in general are caught in a vicious circle, one drawn by the
solidarity aristocracy. French, as well as Italian, German and other European labor leaders have been singularly selfish -- more concerned with catering to their comfortably employed constituents than with the
growing army of unemployed. ...Most European citizens do not understand the link between strict labor laws, high payroll taxes, and unemployment. For this, they can thank their politicians, who have
generally refused to confront the public with the need for reform. Since the moderates in France have allowed the extremists to paint any loosening of labor laws as a form of Thatcherism, people are marching
in defense of a law that has in fact killed jobs -- hundreds of thousands of them.
Thursday, March 10, 2005 ~ 7:24 a.m., Andrew Quinlan Wrote: Airbus has grown dramatically since a 1992 agreement in which the U.S. allowed European government subsidies to the tune of 33% of
product-development costs. Those subsidies should have been confronted at the time but weren't for political reasons. Over the years, that's meant some $15 billion of Airbus launch aid in the form of soft
loans, according to the U.S. government. The interest rates on those loans are closely guarded secrets among European officials, and in any case the loans must be repaid only if the new product succeeds. The
French Senate made the latter point explicitly in a 1997 report, saying that launch aid "socializes" the company's risk. "Advances made to
firms need only be reimbursed if the program is successful," the report states. "In the event of failure, the public money is lost, and the advance
becomes a subsidy, a sort of insurance policy for the company against industrial risk." Some observers estimate the loans have helped Airbus
avoid as much as $35 billion in development-related debt. ...Europe's only defense is offense: It does not deny giving Airbus this money but merely claims that Boeing also benefits from federal and state tax
breaks, as well as from defense and NASA contracts. Neither argument is persuasive. On the tax front, the WTO has already struck down the U.S. Foreign Sales Corporation's scheme -- which, the EU claimed,
meant an annual savings of $200 million for Boeing -- and it is also now reviewing the law that replaced it. The EU also harps on Washington state's program to lower sales taxes on Boeing's new 7E7 by some $3.2
billion. In any case, these tax breaks on exports are similar to Europe's exempting exports from value-added tax. And even if the Washington sales-tax breaks did reach the amount the EU claims, it would take two
decades to realize -- two decades of Boeing developing, selling and delivering airplanes on its own dime. Airbus's $3.7 billion in launch aid for the A380 is already in the bank or spent.
Thursday, March 10, 2005 ~ 6:53 a.m., Dan Mitchell Wrote: The vastly more important issue is whether people who go into court should expect their cases to be decided on the basis of the law or on the
basis of the particular judge's own philosophy. The more we can keep judges' philosophy out of our legal system, the more we approach the
ideal of "a government of laws and not of men." ...Liberals have rooted for judicial activism because this activism has favored liberal causes
and liberal views on such issues as abortion, the death penalty, gay marriage, and racial quotas. But activism can be used by any judge for any purpose. When Chief Justice Roger Taney said that a black man
"had no rights which the white man was bound to respect" in the Dred Scott decision of 1857, he was turning his own personal opinion into the
law of the land. As dissenting justices in that case pointed out, free blacks had exercised legal rights, including the right to vote, even before the Constitution was written, as well as afterwards. Taney was
making law, not following law. ...Public acceptance of judicial coups has only led to increasing audacity in words and deeds by activist judges. Justice Anthony Kennedy's recent decision banning the
execution of murderers under the age of 18 was a classic case in point. It was based, he said, on "evolving standards" and a "national
consensus," as well as on what people were saying in other countries. Even if all of this were true, none of these things is statutory law, much
less the Constitution of the United States. ... Liberals understand the enduring high stakes in these judicial nominations. But do the Republicans? Republican Senators have the votes to change Senate
rules to stop Democrats from filibustering judicial nominees. But they are afraid the Democrats will become more obstructionist than ever on other Senate business. Justice Anthony Kennedy - who seems to be envious of Justice David Souter's status as the most disappointing Republican appointee - writes,
"It is proper that we acknowledge the overwhelming weight of international opinion against the juvenile death penalty." Why? Why is
that proper? I truly have no idea. Perhaps Justice Ruth Bader Ginsberg knows? In a speech in 2003, Justice Ginsberg openly expressed her
hope that America would discard its "Lone Ranger" attitude when it comes to interpreting - get this - our own Constitution. Justice Sandra
Day O'Connor - another perennial contender to unseat Souter in the most disappointing justice category - predicts that we "will find ourselves looking more frequently to the decisions of other
constitutional courts." Globalization is creating "one world," she explains, and the future challenge for the court will be to figure out how
"our Constitution" "fits into the governing documents of other nations." Justice Stephen Breyer outdoes them all. He's invoked the
rulings of the supreme courts of Zimbabwe and India and the Privy Council of Jamaica to support his rulings. "These are human beings
called judges who have problems that are similar to our own," he once said, by way of explaining his philosophy. "Why don't I read what he
says if it is similar enough?" Perhaps because what other judges do and say is of no relevance - human beings though they may be. Perhaps
because looking abroad for rulings that support your own predilections suggests that you cannot find precedent here at home to support your case? And just maybe citing foreign courts is a slippery slope from
which there is no return. Once you start fishing for convenient rulings from the supreme court of Zimbabwe, it's clear that you will look anywhere and use any rationale to rule as you see fit, regardless of what
the law, precedent, or the Constitution actually say.
Wednesday, March 9, 2005 ~ 8:12 p.m., Dan Mitchell Wrote: Last January, Slovakia became the sixth Eastern European country to adopt a flat tax, which means all income-earners pay the same rate.
Since then, Romania and Georgia have followed suit, creating a global proving ground for the concept. In the process, flat-taxers have moved Eastern Europe from a Communist backwater to an investment spring -
pressuring its higher-taxed Western neighbors to adapt to the new environment. ...Mr. Bush praised Slovakia's tax-reform efforts during a
trip there last month. "I really congratulate ... your government for making wise decisions," he said. Western Europe feels differently. To
support large governments and sizable welfare payouts, many Western European countries impose a triple-tiered tax regime of Value-Added Taxes (VAT), akin to a sales tax, high taxes on corporate revenue, and
personal tax rates that can exceed 50 percent. ...France and Germany want to harmonize tax rates within the EU, and bring flat-tax rebels
under a unified code. ..."The challenge that Western Europe has is that you have a lot of entrenched interest groups," says Waddell. "When you
try and put in place a flat tax, you take something away from somebody else." ...Flat taxes used to be the norm in Western countries. But in the
19th century, Communism founder Karl Marx listed a "heavy progressive" tax as a top priority. Soon, higher income-earners were being taxed at higher rates around the world. The irony today is that
every flat-tax country (except Hong Kong) is a former Communist nation. ...last month, a joint venture between a German transmissionmaker and Ford Motor Company announced a $395
million investment in eastern Slovakia. The flat tax is "a very important factor," for these new companies, says Kocis. Trade experts say foreign
investment has been flowing into Slovakia at a higher rate since the tax reform. In 2003, the government's trade development agency, SARIO, brought in 22 investment projects that created 7,500 new jobs. In 2004,
it brought in 47 projects worth more than 12,700 jobs.
Wednesday, March 9, 2005 ~ 12:07 p.m., Dan Mitchell Wrote: Hong Kong is actually in the midst of a major debate about its death tax system. Aware that a competitive global economy demands constant
improvements, the Hong Kong government is considering whether to abolish permanently the misguided levy. For several years now, Hong Kong has ranked as the world's freest economy. Not surprisingly, the
territory also has one of the best tax systems in the world--a simple and fair flat tax. But, Hong Kong is committed not to rest on its laurels. One
of the weaknesses in Hong Kong's current system is its death tax. Hong Kong's death tax is rather mild compared to the United States and Western Europe. And it is modest compared to its competitors in Asia.
Japan, Korea, and Taiwan for instance have estate tax rates of up to 50 percent while the territory's rates rage from 5 to 15 percent. However,
even a modest death tax is bad tax policy because of the adverse impact on saving and investment. Many experts have made pronouncements in
favor of abolishing the tax. For instance, the accounting firm Ernst & Young has urged the government to scrap the death tax arguing that the levy is no longer relevant in the country's modern economy. The
firm points out that among the 1,300 cases which attracted the tax during the past two years, only 300 resulted in the duty being paid, making the death tax very ineffective from a cost-benefit perspective.
...Tax policies that punish savings and investment are counterproductive. As such, the estate tax is one of the most destructive taxes. Because the estate tax falls on assets, it reduces incentives to
save, invest, and build wealth. Economic theory teaches that capital formation is necessary to raise wages and stimulate long-term economic growth. Therefore, the death tax almost certainly suppresses growth.
Also, like the income tax, the estate tax helps raise the tax rate on income from assets relative to income from working leading to an inefficient mix of capital and labor. Of course Hong Kong's lower rates
mean fewer distortions than exist in the United States and other developed nations, yet the economy would be better off without any distortions at all.
Wednesday, March 9, 2005 ~ 11:02 a.m., Dan Mitchell Wrote: It is painfully ironic that we should be promoting the spread of democracy abroad when democracy is shrinking at home. Over the
years, the outcomes of our elections have meant less and less, as judges have taken more and more decisions out of the hands of elected officials. Judges have imposed their own notions on everything from
school administration to gay marriage, and have ordered both state and federal agencies to spend billions of dollars to carry out policies favored
by the judges or have even ordered a state legislature to raise taxes. This naked exercise of judicial power has been covered by the fig leaf of
pretense to be "interpreting" laws and the Constitution by stretching and twisting words beyond recognition. ...Just as the late Senator Daniel Patrick Moynihan referred to our growing acceptance of
immoral behavior as "defining deviancy downward," so we have come to accept the steady erosion of democratic government as judges have defined democracy downward.
Wednesday, March 9, 2005 ~ 9:21 a.m., Andrew Quinlan Wrote: The NAACP has weighed in on the great Social Security debate. And its predictable stand tells us, yet again, how out of touch this organization
is today with the needs of African-Americans. ...One hopes that the NAACP would see as its mission to seek every possible way to help build black wealth, to encourage black ownership and to strengthen
black families. Introducing personal retirement accounts would do every one of these things, yet the NAACP is opposed. Why? ...An open and honest discussion would make clear that the
personal-retirement-account idea is a window of opportunity for low-income wage earners to become savers and wealth builders. These accounts would make available low-risk investment alternatives that
could easily double the retirement income of these working families. ...NAACP leaders are saying that personal retirement accounts are
"dangerous," and yet they choose to not mention the major dangers to which low-income workers are exposed by not having Social Security
changed. The fiscal realities of the social system are no secret. There are no funds to pay obligations at retirement for today's young workers.
...Blacks don't need welfare. Blacks need ownership, independence and freedom. We don't need more government. We need less. ...The NAACP was once at the vanguard of the civil-rights movement. That movement
began because blacks wanted freedom. Yet blacks hear today from their leaders that they are incapable of being free, that they are incapable of
taking care of themselves and their families, and that staying on the government dole is the only answer for them.
Tuesday, March 8, 2005 ~ 3:33 p.m., Dan Mitchell Wrote: Economic theory tells us that the more efficient a tax system is, the more revenue it will raise. Thus, many people have fought introduction
of a VAT here on the grounds that it would be a "money machine" that would fuel the growth of government. The Wall Street Journal routinely
rails against the VAT on these grounds. As President Reagan put it in a Feb 21, 1985, press conference, "A value-added tax actually gives a
government a chance to blindfold the people and grow in stature and size." ...Serious academic studies have concluded that the VAT cannot
be blamed for raising the overall burden of taxation even in countries where it was a new tax and not a replacement for some existing tax. Writing in the prestigious National Tax Journal in December 1985,
economist J.A. Stockfisch found no support for the view that VATs raise either the tax level or government spending. A 1990 study for the American Petroleum Institute by Diana Fuchtgott-Roth, now chief
economist for the U.S. Department of Labor, came to the same conclusion: "VAT rates and revenues have increased in OECD countries with VATs. However, these increases have been offset by a
slower growth of other forms of taxes, leaving the aggregate growth rate of taxes the same."
Tuesday, March 8, 2005 ~ 10:50 a.m., Dan Mitchell Wrote: It's time to privatize the U.S. Postal Service. We no longer need a federal agency to deliver our junk mail. The facts are plain. Even with a
locked-in monopoly, the USPS can't make ends meet. Its accounting is so murky and convoluted it makes our Enrons and WorldComs look like models of financial transparency. We mail-users - and ultimately
taxpayers - end up paying through the nose for the increasingly obsolete privilege of "universal service," i.e., six-day-a-week delivery to every
household in the nation. ...If USPS were a competitive company - as opposed to bloated federal bureaucracy - stamp prices would be falling, not rising. Despite new technology - like modern reader/sorters that
process over 30,000 pieces of mail per hour - stamp prices have risen with inflation since 1970. Imagine if the price of a phone call or sending
an e-mail rose with inflation for 30 years. ...he USPS envisions itself as a future "Commercial Government Enterprise." The postal service's website suffix was switched from dot-gov to dot-com, and the
postmaster general's title changed to "Postmaster General and CEO." But public posturing aside, what exactly does "Commercial Government Enterprise" mean? ...There is one side of private
enterprise that's enticing the USPS though. It has no qualms about jumping into markets that have been transformed by private companies, like overnight package delivery. With all its special
privileges and some expensive fancy-dance advertising, it can grab new business from the private sector. Remember, USPS is exempt from most taxes; it's free from SEC financial-reporting requirements; it can
borrow from the U.S. Treasury at favorable rates, and, most importantly, it milks the cash cow of a government-enforced monopoly on letter delivery. Having a captive monopoly market means the USPS
can cross-subsidize - that is, use profits from letter delivery to fund expansion into other lines of business. Normally this would be considered predatory monopolistic behavior, and illegal. But the postal
service is exempt from antitrust law. ...USPS is still massively oversized, and waste abounds. Forget about the Pentagon's $600 toilet-seat covers. The average postal worker earns over 25 percent more than his
private-sector, factory-worker counterpart. No wonder labor still accounts for two thirds of USPS costs, compared to about 50 percent at private delivery companies. ...Across the Atlantic, such reforms are
already underway. The European Union aims to privatize all its national postal services by 2009. Yet here, the U.S. postal service cries foul when it is faced with real market-based reforms. Furthermore,
declining mail volume, brought on by the e-mail revolution, has resulted in more than $4.5 billion in lost USPS revenue since 2000. And a long-term volume decline is just a small piece of the problem. Few
Americans realize that the USPS already has accumulated over $70 billion in unfunded liabilities - mostly money promised to employees in retirement and health benefits.
Tuesday, March 8, 2005 ~ 9:25 a.m., Andrew Quinlan Wrote: ...in a case titled Roper v. Simmons, the United States Supreme Court held, by a five to four majority, that the Eighth Amendment's
proscription of "cruel and unusual punishments" bars imposition of the death penalty on those aged between 15 and 17 years at the time they
commit a capital crime. ...The most controversial aspect of the Roper decision has been its reliance on foreign law. In recent years, the Court
has, on several occasions, bolstered its opinions by arguing that its conclusions are consistent with public opinion in countries other than the United States. This form of reasoning, which has no apparent basis
in our Constitution or statutes, seems to have come to full fruition in Roper. ...It does "lessen [the Court's] fidelity to the Constitution" when
the Court gives the actions of foreign governments priority over the text of the Constitution, the laws enacted, in this case, by the legislatures of 20 states, and the clearly expressed preferences of the
majority of Americans. With all due respect to the Court's majority, there is simply no coherent rationale for counting the "enlightened" opinion of foreign governments as a factor in Constitutional
jurisprudence. ...In reality, of course, the "international opinion" standard is appealing to some justices precisely because it gives them
unfettered discretion to pick and choose the "opinions" that should influence American law. At the end of the day, the opinions the justices are really deferring to are their own. The new standard of
"international opinion" is just one more vehicle that allows Supreme Court justices to make up the law as they go along. ...It is often said
that our government is one of laws, not of men. The Roper decision shows how far we have abandoned that vital principle. Indeed, in a sense we have turned it on its head. The Founders envisioned the
judicial branch as the guarantor that we would have a government of laws; they saw the judiciary as a bulwark against the usurpation of
authority by "men" in the other branches. See, for example, Hamilton's Federalist No. 78, where he wrote: "[T]hough individual oppression
may now and then proceed from the courts of justice, the general liberty of the people can never be endangered from that quarter." The Founders failed to foresee, unfortunately, an era in which unelected,
unaccountable judges ignore the written words of the Constitution and the laws, and impose their own policy preferences by fiat.
Monday, March 7, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: Our tax code is a mess for a reason. Special interests pay for special favors. And with 17,000 pages and counting, there's plenty of places for
our politicians to hide the kickbacks. Meanwhile, all the exemptions, deductions, exceptions and special provisions reduce the tax base, which means higher tax rates and smaller incentives for individuals and
companies to produce income. And whether the tax breaks are set in fine print or spelled out in bold type, they generally favor the rich, making our tax system less progressive than is generally believed. No
tax system is perfect, but ours is so awful that fundamental reform is the only option. Fundamental reform is not just a necessity; it's also an opportunity to stop taxing income and start taxing consumption. My
colleagues and I have been studying income and consumption taxation via computer simulations for some time now. We've found that switching from taxing wage and capital income to taxing consumption
can significantly improve economic efficiency and growth. ...When tax rates get really high, people stop working and saving altogether. At that
point, everyone can see the system's nuts. But even moderate tax rates can cause major economic distortions. Unfortunately, our tax rates, particularly on labor earnings, aren't moderate. They're high. This is
true despite recent federal tax cuts. Add together all the federal and state personal income, payroll, excise and sales taxes, and you quickly
reach effective wage tax rates of 50% -- and not just for the rich and middle class.
Monday, March 7, 2005 ~ 10:37 a.m., Andrew Quinlan Wrote: Last week the governors were in Washington seeking more handouts from Uncle Sam for programs like Medicaid. But governors don't need
Congress's help to balance their budgets. What's clear in examining state finances is that the governors who have set up pro-growth economic policies of low taxes and fiscal restraint have been able to
eliminate budget deficits. Those who have tried to tax and spend their way to prosperity still face waves of red ink. ...Democrat Bill Richardson of New Mexico, slashed income tax rates from 8 percent to
5 percent and cut the capital-gains tax. Mr. Richardson correctly notes "New Mexico cannot retain a high trained work force and jobs if our
taxes are much higher than those of our neighbors." The New Mexico economy has recovered briskly from the recession and the unemployment rate is now below the national average. ...In recent
years, voters from Alabama to Oregon have by 2-1 margins rejected tax increases to solve state overspending. Voters seem to instinctively understand raising taxes is no formula for bringing back businesses and
good-paying jobs. So far successful governors from Arnold Schwarzenegger to Jeb Bush to Bill Richardson understand that message; it has been the key to their success.
Monday, March 7, 2005 ~ 9:19 a.m., Dan Mitchell Wrote: A pan-European regulator would be the hand-maiden of full harmonization of European financial regulations, without which such a
watchdog would have no purpose. Such an encroachment on the legal and financial cultures of the member states, however, is as unnecessary as it would be impractical. Proponents of harmonization warn that the
current system leads to a "race to the bottom," in which frantic competition for increasingly mobile capital leads to a decline of regulatory standards, with dire consequences for investors. But this
argument is based on the erroneous assumption that corporations naturally prefer lower regulatory standards. To take just one example, many internationally minded companies in emerging markets consider it
a rite of passage to satisfy regulatory requirements and list their shares in the West, especially in the U.S. ...This is not to say, however, that the
more regulation the better. Recent evidence suggests reluctance among foreign companies to subject themselves to the U.S. strictures of Sarbanes-Oxley ...for many companies -- especially in Europe where the
standards of reporting and disclosure are already high -- Sarbanes-Oxley has helped tip the cost-benefit analysis away from listing in the U.S. Financial regulatory competition is one of those rare
examples where Europe has a comparative advantage vis-à-vis the U.S., one that should help Europe strike the right balance between transparency and bureaucratic burden. Convergence around best
practices found both in Europe and elsewhere is far more likely to lead to a benign and beneficial regulatory regime than a new super-regulator.
Monday, March 7, 2005 ~ 7:42 a.m., Dan Mitchell Wrote: ...forecasting methods for both snow and global warming are quite similar. And what happened with the Feb. 28 Mid-Atlantic snowstorm
tells us much about the climate of the next 100 years. Both snowstorms and global climate change are predicted by computer models. For snow,
the computer starts out with a global "snapshot" of the atmosphere, produced simultaneously, around the world, by weather balloons at 7 a.m. and 7 p.m. Eastern Standard Time. They sample temperature,
humidity, altitude and wind. Once these variables are measured, the computer goes to work, shoving moisture and heat around the planet,
creating what we call "weather." ...For both weather and climate, there are a number of different computer models. That's because we have
only a partial knowledge of how the atmosphere truly works, requiring different models to make different assumptions. For example, we know some clouds cool the surface, while others warm, but we really don't
know how much. So different models use different values, which may change their rate of projected snowfall (in the case of weather) or annual temperature (when dealing with climate). ...For the 100-year
global warming window we have dozens of climate models to choose from. So which one (if any) is right? ...Greenhouse effect theory predicts warming happens inordinately in cold, dry air in the winter and much
less in the humid summer. Over the last several decades, indeed, the largest warmings in our hemisphere are in Siberian, Canadian and Alaskan winters, where the air is coldest and driest. ...And before
getting into a snowstorm panic about this, remember the same amount of warming occurred over the 20th century. Lifespan doubled, some crop yields quintupled, and the average U.S. citizen became wealthy
beyond the wildest dreams of the historians of a century ago.
Sunday, March 6, 2005 ~ 1:45 p.m., Dan Mitchell Wrote: Marginal tax rates have significant effects on entrepreneurial entry and exit, suggesting that the formation and closure of small enterprises are
in part determined by the handling of income from these activities in the tax code. The findings show that the level of entrepreneurial entry, exit, and duration react differently to changes in marginal rates on
wage-and-salary and entrepreneurial income. Specifically, lower marginal rates on entrepreneurial income encourage more entrepreneurial entry and lower rates of exit, and lengthen the duration
of spells of activity. Similarly, higher marginal rates on wage-and-salary income also increase entrepreneurial activity as more workers switch
from wage-and-salary work to starting their own business. Importantly, however, the magnitude of the entry, exit, and duration effect is larger for marginal tax rates on entrepreneurial income than on
wage-and-salary income.
Sunday, March 6, 2005 ~ 1:30 p.m., Dan Mitchell Wrote: Kennedy's opinion, in which Justices Stephen Breyer, Ruth Bader Ginsburg, David Souter and John Paul Stevens joined, is a tossed salad
of reasons why those five think the court had a duty to do what state legislatures have the rightful power and, arguably, the moral responsibility to do. ...While discussing America's "evolving standards
of decency," Kennedy announces: "It is proper that we acknowledge the overwhelming weight of international opinion against the juvenile death
penalty." Why is that proper when construing the U.S. Constitution? He is remarkably unclear about that. He says two international conventions
forbid executions of persons who committed their crimes as juveniles. That, he thinks, somehow illuminates the meaning of the Eighth Amendment. Kennedy evidently considers it unimportant that the
United States attached to one of the conventions language reserving the right "to impose capital punishment . . . for crimes committed by
persons below eighteen years of age." The United States never ratified the other convention Kennedy cites. Kennedy the roving moralist sniffily
disapproves of that nonratification as evidence that America is committing the cardinal sin of being out of step with "the world community." ...If Kennedy represents the mainstream, it is time to
change the shape of the river. His opinion is an intellectual train wreck, but useful as a timely warning about what happens when judicial offices are filled with injudicious people.
Sunday, March 6, 2005 ~ 12:16 p.m., Dan Mitchell Wrote: In an October 2004 study in the American Journal of Epidemiology, National Cancer Institute researchers detected no persuasive evidence SBIs caused connective tissue disorders -- the allegation that ignited the SBI scare 20 years ago. Researchers reported in a December 2004 study published in Breast Cancer Research that mastectomy patients with SBIs had similar, if not
slightly less, sickness and death than mastectomy patients with other types of breast implants. ...It seems anti-implant activists would like to spread the notion science cannot establish the safety of SBIs -- a
position entirely consistent with anti-SBI crusader Sybil Niden Goldrich, who once said of SBIs on PBS television's "Frontline": "The science?
The devil with science. It doesn't matter anymore." ...Anti-implant activists and their trial lawyer allies don't want SBIs back on the market. FDA approval would essentially expose the 20-year
anti-implant campaign as junk science. The desperate activists and lawyers will, it seems, say and do anything to avoid that outcome.
Saturday, March 5, 2005 ~ 12:03 p.m., Dan Mitchell Wrote: Public television was a dubious idea even when concocted as a filigree on the Great Society. Why should government subsidize the production
and distribution of entertainment and, even worse, journalism? ...The Public Broadcasting Service recently tried an amazingly obtuse and arrogant slogan: ``If PBS doesn't do it, who will?" What was the
antecedent of the pronoun ``it"? Presumably ``culture" or ``seriousness" or ``relevance." Or something. But in a television universe that now includes the History Channel, Biography, A&E,
Bravo, National Geographic, Disney, TNT, BBC America, Animal Planet, The Learning Channel, The Outdoor Channel, Noggin, Nickelodeon and scads of other cultural and information channels, what
is the antecedent? ...The recent spat about Buster, PBS' cartoon rabbit, visiting two lesbian parents quickly became a second spat about the
Education Department's threat to stop financing Buster. But a third spat should have been about why the Education Department (a fourth spat:
Is that department necessary?) is paying for any of Buster's adventures. Is there a desperate shortage of television cartoons? Is Buster to other cartoons as Beethoven is to Bon Jovi?
Saturday, March 5, 2005 ~ 10:48 a.m., Dan Mitchell Wrote: Let me stipulate. The outcome -- an end to executions of those who committed crimes as minors -- isn't what bothers me here. There is an
argument to be made that, as per the Eighth Amendment, it is "cruel and unusual" to execute those convicted of crimes committed when they
were minors. ...But the court didn't limit its guidance to the U.S. Constitution. Kennedy wrote that the court can and should consider "the overwhelming weight of international opinion against the juvenile
death penalty," including opposition among "leading members of the Western European community." Be afraid, America. Be very afraid.
European Union countries don't simply oppose capital punishment; they also oppose life without parole and mete out notoriously short sentences for heinous crimes. In recent years, a German court essentially
sentenced a man who killed and ate another man -- the killer was so proud he videotaped everything -- to eight and a half years in prison. He is expected to walk free after five years. ...Justice Kennedy...also
referred to the U.N. Convention on the Rights of the Child that prohibited the execution of minors -- even though the United States failed to ratify that treaty.
Friday, March 4, 2005 ~ 11:04 a.m., Dan Mitchell Wrote: The VAT, for the uninitiated, is essentially a hidden sales tax that originated in France and has become a favorite of legislators around
the world because of its ability to stealthily raise large sums of revenue with a minimum of public outcry. ...like any tax a VAT removes resources from the dynamic private sector of the economy and places
them in government hands. And in Europe it has become a major enabler of the ever-expanding, slow-growth welfare state. ...starting in 1967-68 European countries began adopting the VAT en masse, and the
growth of government exploded. ...In most of the world where VATs exist, and certainly in Europe, VATs are levied in addition to, not in place of, other taxes. VATs may have the perverse effect of actually
creating political pressure for other tax increases. Why? Because they place a higher relative burden on lower-income earners who spend a higher percentage of their income on consumption. So VATs have often
resulted in calls for income tax rate increases to preserve the overall progressivity of the tax code. ...If the VAT is the solution to America's
long-run fiscal challenges, how come the balance sheets of countries that already have this tax look no better (and in most cases much worse) than ours? Our answer is because new tax revenues never result
in a happy long-run political equilibrium; they merely enable legislators to spend more here and now, before coming back for more tax revenue
later. One lesson of the Medicare fiasco is that bad Congressional ideas need to be stopped before they gather too much political momentum. We hope Mr. Thomas's fellow Republicans are telling the Chairman that
they didn't come to Washington to deliver to America the tax that helped create the European welfare state. Washington is the home of many horrible ideas. Among the very worst is one being discussed by the capital's big thinkers: a consumption tax.
...Since 1954, when France started using a VAT, the other nations of Europe also have increasingly taxed consumption. Problem is, they kept taxing income, too. The trend accelerated in the 1970s as Europe
geared up for integration and nations there decided to tap consumers to fund their ever-burgeoning welfare states. ...tax burdens in the EU have
grown over the last 30 years while the burden in the U.S. has stayed about the same. ...[The VAT] represents the camel's nose under the tent for higher taxes, bigger government, rising inflation, growing
unemployment and stifled business formation - just like in Europe and exactly the opposite of what any tax reform should achieve. As Heritage Foundation economist Daniel Mitchell recently noted, a VAT-like
consumption tax might work if, and only if, we get rid of the income tax at the same time. Don't hold your breath.
Friday, March 4, 2005 ~ 10:34 a.m., Dan Mitchell Wrote: A report by the Congressional Joint Committee on Taxation analyzing the economic effects of three separate tax cut proposals has concluded
that reductions in corporate taxation will reap greater benefits for the economy than personal tax cuts over the long-term. ...According to the
report, reductions in the rate of corporate tax would have "the greatest effect on long-term growth" by increasing the stock of productive capital which eventually leads to higher labor productivity.
Friday, March 4, 2005 ~ 9:28 a.m., Dan Mitchell Wrote: The U.S. economy is the world's most dynamic and flexible, and the federal government's system for raising revenue must not hinder the
processes generating that economic success. ...taxpayers are again confronted with great complexity. Indeed, an individual taxpayer may have difficulty even knowing his or her marginal tax rate because of the
overlapping web of deductions and exemptions and the provisions that attempt to limit those deductions and exemptions. And many taxpayers are now required to compute their liability under two systems--the
regular income tax and the alternative minimum tax. Such challenges also affect lower-income households, who face the complexities of the Earned Income Tax Credit. A simpler tax code would reduce the
considerable resources devoted to complying with current tax laws, and the freed-up resources could be used for more productive purposes.
Thus, greater simplicity would, in and of itself, engender a better use of resources. ...As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic
growth--particularly if one were designing a tax system from scratch--because a consumption tax is likely to encourage saving and capital formation. ...as the baby boom generation begins to retire in a
few years, it will become increasingly important for the nation to boost resources available in the future through greater national saving and
enhanced incentives for participation in the labor force. The tax system has the potential to contribute importantly to those goals, and, at a minimum, tax reform should not hinder the achievement of those
objectives.
Friday, March 4, 2005 ~ 8:51 a.m., Andrew Quinlan Wrote: ...the unionized share of the total U.S. labor force declined once again last year, to 12.5%, down from 12.9% a year earlier and continuing a
gradual but steady slide since 1983. The trend is even worse in the private workforce, where only 7.9% of employees now carry the union label. ...Back in their industrial heyday, unions were responding to the
needs of workers in the marketplace. As hard as labor leaders bargained with management, they also understood they had a stake in business success. Over the years, however, and especially on Mr.
Sweeney's watch, they became much less interested in the creation of private-sector jobs. Instead, they became part of the ideological left and
its regulatory and high-tax agenda. So instead of favoring oil drilling in Alaska, which would create thousands of new middle-class jobs, Mr.
Sweeney's shop leaned toward the rich liberals of the Sierra Club. And while many union members are cultural conservatives, the AFL-CIO has spent its scarce political capital fighting conservative judges. No
wonder millions of workers look at union organizers and shrug.
Friday, March 4, 2005 ~ 7:44 a.m., Dan Mitchell Wrote: The White House is pledging renewed efforts, but in order to succeed it is going to have to change its sales pitch. Part of the problem is that
Mr. Bush and his spokesmen have been promoting reform more as a kind of national forced march than as a great new opportunity for individuals to build and control their own retirement nest eggs. Donning
their green eyeshades in the traditional GOP fashion, they've talked about Social Security "solvency," "transition costs," "trust funds" and
other accounting abstractions, all in all giving reform the appeal of Marine boot camp without the expensive haircut. ...millions of Americans still believe in the fiction that their payroll taxes are being
squirreled away in a savings account in their name somewhere in the U.S. Treasury. This is largely because politicians of both parties have
spread this fantasy over the years, the better to be able to continue to spend that loot themselves to buy votes for the next election. ...Americans need to understand that as of now they have no such
property right. While politicians have made promises to pay future benefits at gradually rising levels, the Supreme Court's 1960 Fleming v. Nestor decision makes clear that such promises are not an individual
asset and that the taxes people pay today guarantee nothing at all down the road. ...The Administration's proposal to limit the accounts to no
more than four percentage points of the 12.4% payroll levy strikes us as too miserly. Senate Finance Committee Chairman Chuck Grassley is even more ungenerous, talking about two-percentage points or less.
Lower-wage workers in particular need to be offered the financial attraction of larger accounts, which would allow them to build up assets
more quickly and in a way that won't seem trivial. They also need to feel their accounts will be large enough not to be eaten up by administrative expenses.
Thursday, March 3, 2005 ~ 12:38 p.m., Dan Mitchell Wrote: Today, European social ministers will meet in Brussels, where they will, as usual, pledge to defend the "European social model." Along with
many Socialists, Greens, unions and NGOs, they fear the recently relaunched Lisbon Agenda, with its focus on economic growth and jobs,
will destroy "social" Europe. They could not be more wrong. Instead, it is their own near-Pavlovian allegiance to an outdated and ill-defined
concept of a welfare state that is impoverishing the very people they claim to defend: working men and women, immigrants, children and the unemployed. ...Instead of facing the reality of globalization, many
so-called social leaders prefer to impose an intolerable burden on Europe's young by encouraging governments to run unsustainable budget deficits in the futile hope of a painless Keynesian recovery.
These self-styled social missionaries are in fact ideologically bound to the 19th-century... Europe's sclerotic labor markets have taken an exorbitant toll on the weakest members of our society: the young,
women, low-skilled workers and immigrants. While those inside the system enjoy generous benefits and lifelong job protection, an ever-growing caste of outsiders is deprived of the professional
opportunities and economic empowerment every citizen ought to be entitled to, particularly in societies that pride themselves on "social
inclusion." But the fact is that nowhere else in the developed world are there so many groups of people so consistently deprived of the most
basic social right: holding a job and earning a living. ...The vast majority of people who claim to be the defenders of a "social" Europe have never created a single job through honest, hard-working
entrepreneurship. At public expense, they have been on generous payrolls and lifelong job protection schemes, shielded from the exorbitant taxes, collapsing pension systems and high unemployment
that ordinary people face.
Thursday, March 3, 2005 ~ 12:38 p.m., Dan Mitchell Wrote: Today, European social ministers will meet in Brussels, where they will, as usual, pledge to defend the "European social model." Along with
many Socialists, Greens, unions and NGOs, they fear the recently relaunched Lisbon Agenda, with its focus on economic growth and jobs,
will destroy "social" Europe. They could not be more wrong. Instead, it is their own near-Pavlovian allegiance to an outdated and ill-defined
concept of a welfare state that is impoverishing the very people they claim to defend: working men and women, immigrants, children and the unemployed. ...Instead of facing the reality of globalization, many
so-called social leaders prefer to impose an intolerable burden on Europe's young by encouraging governments to run unsustainable budget deficits in the futile hope of a painless Keynesian recovery.
These self-styled social missionaries are in fact ideologically bound to the 19th-century... Europe's sclerotic labor markets have taken an exorbitant toll on the weakest members of our society: the young,
women, low-skilled workers and immigrants. While those inside the system enjoy generous benefits and lifelong job protection, an ever-growing caste of outsiders is deprived of the professional
opportunities and economic empowerment every citizen ought to be entitled to, particularly in societies that pride themselves on "social
inclusion." But the fact is that nowhere else in the developed world are there so many groups of people so consistently deprived of the most
basic social right: holding a job and earning a living. ...The vast majority of people who claim to be the defenders of a "social" Europe have never created a single job through honest, hard-working
entrepreneurship. At public expense, they have been on generous payrolls and lifelong job protection schemes, shielded from the exorbitant taxes, collapsing pension systems and high unemployment
that ordinary people face.
Thursday, March 3, 2005 ~ 11:58 a.m., Andrew Quinlan Wrote Right after the November 1994 election, I wrote that "the way to tell how serious Republicans are about cutting federal spending is to watch
... the Big Four programs: farm subsidies, Amtrak, public television, and arts funding." The four are big, not in dollars, but in symbolic
value: "It's impossible for a party that professes to believe in limited government to justify the use of taxpayer dollars for any of the Big
Four, yet each has a powerful constituency." A decade later, the record is not encouraging. All four programs have survived. ...Amtrak has
been the biggest disappointment because the case for elimination is so clear. Instead, subsidies have risen by one-third since the Republicans took the House. But, now, the administration wants to slash Amtrak's
federal funding from $1.2 billion to $900 million. ...Since its advent, Amtrak has never made money. Subsidies total $30 billion. Amtrak's audited statement for fiscal 2003 (the most recent figures) show a loss
of $1.3 billion, up from $1.1 billion in 2002. Amtrak's payroll alone exceeds its ticket revenues. ...It would be cheaper, on some routes, for
the government simply to buy plane tickets for train travelers. ...I'm as sentimental about trains as the next guy, but Amtrak is tiny and creaky.
While management crows about a ridership record, Amtrak carried just 24 million people nationwide--fewer than boarded planes at the Seattle airport alone. California is the No. 1 Amtrak state, with 4 million
riders--compared with 87 million air passengers. The irony is that, while the United States preaches free-market economics, it runs a retrograde
socialist-style rail system while the rest of the world--Argentina, Poland, South Korea, Germany are just a few of the nations cited by Vranich--is
privatizing. Meanwhile, service deteriorates, and, as Vranich shows, Amtrak is vulnerable to horrific terrorist attacks.
Thursday, March 3, 2005 ~ 10:17 a.m., Dan Mitchell Wrote: Everyone talks about the need for economic growth. It is a top priority for the Barroso Commission. But does any leading politician realize
what changes need to be made? We have to move rapidly away from the European social model. Does any Western European leader have the boldness needed for this kind of sweeping reform? The European social
model, with high taxes and big public spending, is not the solution to our problems of low growth and declining living standards. On the contrary, it is the main cause of our problems. ...Unfortunately the
report just scratches the surface of the system. The main problem is that the average Western European tax pressure rose from 20-25 percent in the 1950s to 40-50 percent in the 1980s. Government became an ever
larger part of society. This is a heavy burden on all productive forces. The famous aim of the Lisbon process was to close the wealth gap with the US by 2010. Since 2000, when it was conceived, the gap has
widened. ...High taxes and high levels of social protection have created a situation in Western Europe in which few work and more people live off the state. ...Government is not the solution to our problems,
government is the problem. Government is the main obstacle standing in the way for more jobs, more companies, higher growth and thus better living standards. The direction of the reforms for a brighter
future must be the reduction of big government.
Thursday, March 3, 2005 ~ 9:07 a.m., Andrew Quinlan Wrote: European federalism is the antithesis to the American definition. Unlike the protections against a domineering central government afforded to
the United States through its framework of federalism, the European Union will be made a superstate by its constitution, removing powers from member states and concentrating many of them in Brussels.
...Trade will also suffer. Protectionist regulations are inevitable under "a united Europe." While about 19 percent of America's trade is with
the EU, the majority of that commercial relationship is based with the United Kingdom. Between 1995 and 2003, 64 percent of total U.S. investment in the EU went to the U.K. In terms of total EU investment
to the U.S., 62 percent originated in the U.K. What will happen with an increased EU veto over U.S.-U.K. trade agreements? This is not a friendly proposal. If the constitution is not rejected by one of the EU
member states, America will face increasingly difficult and strained relations with Europe. America will lose support for its global peace and security efforts and American companies will be further targeted
and regulated out of the European marketplace. ...Europe is besieged by the EU's "Yes" campaign, supported by millions of dollars of
propaganda advertising. "Yes" propaganda, among other things, is telling Europeans the constitution will create a "United States of
Europe," but this is by no means a compliment to America. The constitution could be one of the most significant blows to an important history of mutual support and alliances.
Thursday, March 3, 2005 ~ 8:51 a.m., Dan Mitchell Wrote: Dishonest Enron and WorldCom CEOs are rare among corporate executives. As such, all CEOs shouldn't be tarnished for the misdeeds of
a few any more than we'd tarnish all newspaper reporters because a few among their ranks were liars like the Boston Globe's Patricia Smith and Mike Barnicle, Jayson Blair of The New York Times, and The
Washington Post's Janet Cooke. Is a CEO worth millions of dollars to a corporation? When Jack Welch became General Electric's CEO in 1981, the stock market judged the company to be worth about $14
billion. Through hiring and firing, buying and selling, Welch turned the company around before he retired in 2001. Today, GE is worth nearly
$500 billion, making it one of the most valuable companies in the world. What's a CEO worth for providing the brains and leadership to turn a $14 billion corporation into one worth $500 billion? How about paying
just a measly one-half of a percent of the increase in value? If that were the case, Welch's total compensation would have come to nearly $2.5
billion, instead of the few hundred million that he actually received.
Thursday, March 3, 2005 ~ 7:19 a.m., Dan Mitchell Wrote: A statement from the Group issued today says, "Greens across Europe are preparing for battle against the revised Lisbon process". And
Belgian Green MEP Pierre Jonckheer said, "the new Lisbon process is extremely biased, economic considerations clearly prevail over social
and ecological objectives". "President Barroso wants to fix the problems of Europe - of which growing unemployment is the most
crucial - with solutions of the 1980s", he added. Meanwhile, President Barroso himself vigorously denied that the social and environmental aspects of Lisbon were suffering as the priority shifts to jobs and
growth. Speaking at a conference organised by the European Trade Union Confederation, Mr Barroso said, "some voices have looked critically at the importance the Commission attaches to growth and
jobs. They stress the importance of delivering results across the broad range of economic, social and environmental factors". "Let me for a moment be frank. Such views of this Commission simply fail to
understand who we are or what we stand for". "There can be no question of excluding social inclusion or the fight against poverty from
the priorities of the Commission", he added. And he concluded, "It is simply not true to suggest that we are determined to water down our green credentials in a free market soup".
Wednesday, March 2, 2005 ~ 2:23 p.m., Dan Mitchell Wrote: German Chancellor Gerhard Schröder was conveniently out of the country when the news hit yesterday that that the country's
unemployment figure rose to over 5.2 million, or 12.6%, a new post-war record. One would have to go back to 1932, the year before Hitler came to power, to find more Germans out of work. ...the government is
saying in effect is that the situation hasn't really deteriorated but instead has been much worse for a much longer period of time than
people thought. This is neither a consolation nor "the whole truth," as Economics Minister Wolfgang Clement claimed. Rather, there is additional massive unemployment hidden behind the country's
increasingly unsustainable welfare system. Including those in state-funded training and job programs, early retirement schemes and those still generously considered unable to work, the true jobless figure
is estimated to be up to nine million. After four years of stagnation, gross domestic product shrank 0.2% last quarter. In the early 1990s, Germany still was one of the three richest members in the European
Union. Now, among the pre-accession countries, only Spain, Italy, Portugal and Greece have a lower GDP per capita. ...What really needs to be done -- cutting taxes and red tape and making the labor market
more flexible -- has been discussed ad nauseam in the German media. Why is it then not being done? Simply because of a lack of political courage. Tackling issues such as Germany's iron rules on dismissals
would pit the chancellor against those 38 million who still have a job in order to help those nine million without work. Better to blame the
malaise on exogenous factors, such as euro strength or high oil prices, and promise a better tomorrow via overly optimistic growth forecasts that need constant downward revisions.
Wednesday, March 2, 2005 ~ 12:43 p.m., Dan Mitchell Wrote: Built-in unemployment around 10% is caused by two features of the European model. One is the weight of vast schemes of social insurance
financed via payroll taxes, whose cost is greater than their value to the insured wage-earner. Hence the cost of wages exceeds their value and
the demand for labor stays chronically deficient. The other, perhaps less powerful, cause is job protection. Labor laws, meaning well, make the
shedding of labor so difficult and expensive that employers are afraid of taking the risk of hiring. They either resort to short fixed-term jobs or
just make do with the staff they have. Both these features of the European model -- social insurance and job protection -- are, of course, meant to favor labor over capital. But in practice, they do the exact
opposite. They make the economy function less well, but within a sluggish, sickly environment, they favor capital. They bring about a wholly unintended hiring strike by employers (who would never ever
consciously organize one). Labor finds its economic bargaining power reduced to impotence. Companies learn to get by with stagnant or reduced payrolls, productivity rises, profits increase and wages stay flat.
Ironically, the European model does better by the corporate sector than the liberal one, and less well for its own supposed clients -- the workers.
Wednesday, March 2, 2005 ~ 11:08 a.m., Dan Mitchell Wrote: Bush particularly noted the fairness of the Russian system, which treats taxpayers equally, rather than punishing the successful merely for being
successful. ...Why so much interest in the flat tax? A key reason is that it is far more effective at raising revenue than progressive rates. With
progressive rates, it looks as if extra revenue is being extracted from the wealthy. But it is also giving them a powerful incentive to arrange
their affairs so as to minimize their tax liability or to evade taxes altogether. With a flat tax, there is much less incentive to engage in tax
avoidance or tax evasion. Also, the knowledge that everyone is being treated equally helps eliminate the culture of evasion that often becomes pervasive in high-tax countries... Consequently, it comes as no
surprise that a new study by the International Monetary Fund found that Russia's flat tax led to a substantial rise in government revenue. This was due almost entirely to a sharp increase in compliance, which
significantly raised the share of income declared on tax returns. ...The flat tax is not a cure-all for tax evasion, but as the Russian example
shows, it can help a lot. When people perceive that the tax system is fundamentally unfair, because everyone appears to be paying different tax rates despite having similar incomes, it diminishes any guilt
taxpayers may feel about underpaying their taxes. ...It also improves compliance because the IRS doesn't need to know as much about the nature and timing of taxpayers' income. Since all income is taxed the
same, they have no incentive to convert wages into capital income or shift income from one year to another, for example. Lastly, it should not be forgotten that a flat tax is the revenue-raising system most
compatible with human freedom. As University of Chicago law professor Richard Epstein recently put it, "It is no accident that every strong defender of limited government has gravitated toward the flat
tax."
Wednesday, March 2, 2005 ~ 10:41 a.m., Dan Mitchell Wrote: Mr. Howard has promised that, if elected, the Tories would relink increases in state pensions to wage growth, rather than inflation. This
would undo one of Margaret Thatcher's early reforms and seriously worsen the U.K.'s pension liabilities problem just ahead of the retirement of the Baby Boomer generation. It would also put the Tories
in the odd position of proposing to undo in Britain precisely what George Bush is attempting to accomplish in the U.S. ...what we have...is a promise to drastically increase the government's obligations to
retirees, an increase that can only be funded by higher taxes down the line. In the U.S., the Bush administration is laying the groundwork for a
Thatcherite reform to the Social Security system that for one thing would link pension increases to inflation, rather than wages. It would then go beyond that by creating personal accounts whose gains would
lower account holders' reliance on state handouts and give pensioners an asset that their heirs could inherit. So why is the Tory Party heading in the opposite direction? As the UK budget approaches, Sir Digby Jones, director-general of the Confederation of British Industry has urged Chancellor of the
Exchequer Gordon Brown to resist the temptation to raise the tax burden on the country's businesses... "There should be no hike in business taxation. The economic outlook is already uncertain and any
increase in bottom line costs will have a serious and lasting effect on investment," Sir Digby stated. ...if highly successful global companies
take the view that the UK has become hostile they will simply move their operations elsewhere," he cautioned.
Wednesday, March 2, 2005 ~ 8:26 a.m., Dan Mitchell Wrote: Brussels has reported a significant fall in business and consumer confidence in the EU economy, with a better picture in the UK and new
member states. ...The figures are bleaker for the eurozone - the 12 countries that share the euro currency - than for the rest of the EU... The sharpest decline in confidence was monitored in Germany, Spain
and Italy. Germany saw a dramatic fall, particularly as the previous survey showed the most optimistic sentiment for almost four years. The grim picture in the biggest European economy is to be reinforced by
statistics on unemployment to be released later today. According to German media, they will show that German unemployment shot up to 5.2 million in February, its highest level in 73 years. And this follows
recent figures showing that unemployment in France has topped the psychologically significant ten percent mark.
Tuesday, March 1, 2005 ~ 4:15 p.m., Dan Mitchell Wrote: The report card's grading is based on 15 objective measures of fiscal performance. Governors who have cut taxes and spending the most
receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades. Our analysis shows that states that keep tax rates low and restrain spending growth have the best
economic performance and thus the best longterm fiscal health. This year, four governors receive the grade of A: Arnold Schwarzenegger of California, Craig Benson of New Hampshire, Bill Owens of Colorado,
and Judy Martz of Montana (for grades of all governors, see http://www.cato.org/pubs/pas/pa537/governorsreportcardtable.html).
Four governors receive Fs for their poor performance in dealing with the state fiscal crisis: Bob Holden of Missouri, Bob Taft of Ohio, Edward Rendell of Pennsylvania, and James McGreevey of New Jersey.
...Yet the sad truth is that the longer most of the senior class Republican governors remained in office-the more comfortable they became in their
incumbency and the more the media praised them for "growing in office"--the less resistant they became to higher taxes and increased spending. As a result, they scored lower on the report card. The
freshman class of GOP governors has an average grade of B, higher than the senior class Republicans' average grade of C.
Tuesday, March 1, 2005 ~ 3:42 p.m., Andrew Quinlan Wrote: In a budget focus on stimulating future investment in India's economy, Finance Minister P. Chidambaram unveiled a series of cuts in personal
and corporate income tax, in addition to reductions in customs duties on certain types of capital equipment. Chief among the tax relief measures proposed by Chidambaram was a cut in corporate income tax
to 30% from the current 35%; a move that was well received by the business community, as shares on Bombay's Sensex 30 rose by 118 points, or 1.8% in the hour following the budget announcement. There
was also something for individual taxpayers to cheer about on the personal income tax front, as Chidambaram announced a realignment of the personal income tax brackets.
Tuesday, March 1, 2005 ~2:12 p.m., Andrew Quinlan Wrote: Many states and local governments are installing ticket-issuing cameras, ostensibly for safety but more likely as a clandestine tax on
driving. Take the District of Columbia as an example. It's been mounting automated-ticket cameras since 1999, and soon will have 49 that issue tickets for running red lights, plus 15 photo-radar devices
that issue speeding tickets. In 2004, the District realized $54 million in revenue from roughly half a million tickets assessed by these devices.
...automated tickets are a minor matter. But can it be wise to establish a principle that when a machine says you did something illegal, you are presumed guilty? This is an extremely dangerous idea that may
someday be applied to circumstances that are not minor. ...The next worry about ticket-issuing cameras is that they are pretty obviously intended to reach into citizens' pockets. From a practical standpoint,
the District government knows that no one can afford to take a day off from work to contest a $75 automated fine, the most common levy. It's a fabulous money-making scheme for government. Nearby Maryland
and Virginia have noticed the District's income windfall from automated ticketing and are installing the cameras like crazy. Other local governments around the country are doing the same. If the
District, Maryland, Virginia, or any other government entity wants more money from motorists, it should impose higher vehicle-registration taxes and take the political heat for doing so. Issuing people automated
fines for using the roads their taxes built in the first place is not only politically devious, it is government raising its middle finger to average
citizens. ...the company that operates the District's automated ticket devices gets a bonus when tickets issued exceed a target level. If the real goal were to reduce speeding and red-light running, the District
would be happy when the number of tickets declined, because that would mean fewer violations. Instead the program is structured to increase the number of tickets issued, because the real goal is seizing
money. ...three years ago a red-light camera was installed at the intersection of two streets called Old Georgetown Road and Edson Lane. The yellow lamp was re-timed to last only two seconds, meaning a
steady stream of drivers expecting the standard four-second yellow ended up running the light.
Tuesday, March 1, 2005 ~ 11:28 a.m., Dan Mitchell Wrote: To Europeans, "strengthening Europe" tends to mean vesting more powers in the central European Union (EU) bureaucracy in Brussels. To
Americans, "strengthening Europe" tends to mean increasing the wealth and security of the countries that make up the European continent. Euro-enthusiasts may believe these two definitions can
co-exist. But the evidence is accumulating that they cannot--that as the EU gets stronger, European nations fall further behind. ...European productivity growth should have accelerated after 1992. Instead, it
slowed--and at the same moment that U.S. productivity growth sped up. Why? The answer remains controversial--but it certainly does seem as if the advantages of the single market were more than cancelled by the
burden of heavier EU regulation. ...the high-tax countries of the European Union, like Germany, are constantly pressing for the EU to
force low-tax countries, such as Britain, to "harmonize" their tax rates with the others. Harmonization would insulate German industry from
competition in the short run. But in the long run, it threatens to condemn the whole continent to demographic disaster. The United States and Europe, and for that matter Canada, Australia and New
Zealand, share a common civilization--and share as well a long list of dangerous common enemies. The growing separation between the United States and Europe is a civilization disaster, and the attempt to
build Europe into a single state is the disaster's single most important cause. Those European politicians who seek to create a new European
identity to replace old national loyalties can succeed only by creating a new transatlantic "other"--a new American rival and antagonist--to lend emotion to their otherwise pallid bureaucratic project.
Tuesday, March 1, 2005 ~ 11:06 a.m., Dan Mitchell Wrote: President Bush's proposal though actually reduces government debt. By voluntarily joining the program and getting the benefits of the higher
returns and keeping the money, participants must agree to a reduction in future benefits that is slightly larger than the current reduction in taxes. Unfortunately, this is all being missed in the debate. A
computerized search of news stories over the last week finds over a thousand news stories mischaracterizing the reforms as causing us to go further into debt. Imagine the outcry among the press if private
companies used the government's accounting rules. Firms could reduce worker's wages today in exchange for larger pension and health care benefits in the future. Those future pension benefits that are paid more
than ten years in the future would not appear on the balance sheet, but the cut in current wages would increase reported profits. Of course, no
one would believe the claimed "profits." Similarly, no one should believe the claims of government "debt."
Tuesday, March 1, 2005 ~ 9:39 a.m., Andrew Quinlan Wrote: ...can the government kick people out of their homes or businesses simply to make way for new development? Under the Bill of Rights, the
power of eminent domain may be used only when land is needed for a public use. "Nor shall private property be taken for public use without
just compensation," the Fifth Amendment commands. A school, a post office, a right of way for a railroad -- those are the kinds of public uses
for which property owners have traditionally been made to relinquish their land. But that isn't why New London wants to tear down the 112-year-old Victorian that Susette Kelo worked so hard to renovate, or
the house at Walbach and East streets where Wilhelmina Dery has lived for all of her 87 years. The city doesn't want their land for a public facility or a new road. It simply wants the expanded tax base... In
planning commissions and redevelopment authorities nationwide, the Fifth Amendment's "public use" requirement has been ignored for years. The question now is whether five Supreme Court justices will
agree to kill off this piece of the Bill of Rights for good, or to bring it back to life.
Tuesday, March 1, 2005 ~ 8:55 a.m., Dan Mitchell Wrote: Americans are now enjoying the fruits of two centuries of individual liberty and free markets. Our standard of living is the highest in the
world, unemployment is low, productivity is up, and there is no significant inflation on the horizon. The most serious, knowable threat to continued prosperity is the rising costs of federal entitlements. Unless
Social Security, Medicare and Medicaid are reformed, the federal government's claim on the nation's economic resources will rise permanently to about 35% of GDP, a peacetime level unprecedented in
our nation's history. Financing this level of government with tax increases will create an economy that looks a lot less like the dynamic free market we enjoy today and a lot more like the sluggish, statist,
economies of Europe's welfare states, with their lower living standards and chronically high unemployment. ...President Bush's proposal places a simple choice before Congress and the public. Should we continue
Social Security as a pay-as-you-go program? Or, should we instead create a more modern Social Security system that both saves and invests? ...President Bush's proposal is the only sound way to ensure
that current surplus payroll taxes aren't spent and are instead set aside and saved. The accounts would be workers' private property to be used
exclusively to provide for their own retirement income. Ownership and control over the accounts would reside with workers, not the government. The president's personal account plan is not a radical new
idea. In the past 25 years, countries as diverse as Australia, Chile, Great Britain and Sweden have chosen to adopt similar personal account plans for their retirement systems. ...President Bush's proposal
would, of course, mean less money for the U.S. Treasury in the near-term. Critics have decried this outcome, saying it would raise the government's annual deficit. Under the president's plan, workers who
opt for personal accounts would, upon retirement, receive reduced payroll tax-financed Social Security benefits. Lowered benefits are only reasonable since such workers will contribute less to the traditional
Social Security program, and the higher returns on personal account investments will more than offset the reductions. More importantly, over the long term, personal account investment income would replace
tax-financed benefits. Government Social Security liabilities would decline, thereby lessening the tax burden on future generations. As a result, the federal government's indebtedness, honestly measured, will
not increase. |
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