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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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Sunday, July 31, 2005 ~ 11:48 a.m., Dan Mitchell Wrote: For years, privacy advocates have warned of the risks and costs of constant electronic monitoring of streets, subway stations and other sites. But events in London show
cameras have a distinct upside. They helped police identify the July 7 bombers and the apparent culprits in last week's near miss. When these gadgets mainly served to deter petty street crime, they seemed
debatable. But when the cameras help to catch terrorists bent on mass slaughter, civil liberties complaints suddenly sound pathetically trivial. ...The monitoring devices won support because they do something
terribly worthwhile: deter troublemakers. The Chicago police have found crime typically drops in a two-block radius of each camera. Introducing cameras has coincided with a steep drop in the city's homicide
rate. There have been equally striking results elsewhere. Baltimore Police Commissioner Leonard Hamm has said, "You put a camera in a location and you have immediately a 40 percent decrease in crime for six
months in that area." Cameras helped resurrect Los Angeles' MacArthur Park -- which The Los Angeles Times notes was previously "infamous for gang shootouts, dumped bodies and used hypodermic
needles." "The only people whom public cameras inhibit are criminals," Manhattan Institute analyst Heather Mac Donald wrote recently in City Journal. "They liberate the law-abiding
public." That's one reason banks, convenience stores and other businesses vulnerable to crime use them: Customers value the safety they stand to gain more than the privacy they allegedly lose. ...Like any
crime-fighting strategy, this one has to be evaluated on whether it produces tangible gains. But for the police and citizens of London, who may have been saved from further carnage by video cameras, I suspect
the debate is over.
Sunday, July 31, 2005 ~ 10:15 a.m., Dan Mitchell Wrote: The American response to tightening up after London has been reflexive and idiotic: random bag checks in the New York subways. Random
meaning that the people stopped are to be chosen numerically. One in every 5 or 10 or 20. This is an obvious absurdity and everyone knows it.
It recapitulates the appalling waste of effort and resources we see at airports every day when, for reasons of political correctness, 83-year-old
grandmothers from Poughkeepsie are required to remove their shoes in the search for jihadists hungering for paradise. The fact is that jihadist terrorism has been carried out from Bali to Casablanca to Madrid to
London to New York City to Washington by young Islamic men of North African, Middle Eastern and South Asian origin. This is not a stereotype. It is a simple statistical fact. Yes, you have your shoe-bomber, a
mixed-race Muslim convert, who would not fit the profile. But the overwhelming odds are that the guy bent on blowing up your train traces his origins to the Islamic belt stretching from Mauritania to Indonesia.
Yet we recoil from concentrating bag checks on men who might fit this description. Well, if that is impossible for us to do, then let's work backward. Eliminate classes of people who are obviously not suspects.
We could start with a little age-pruning -- no one under, say, 13, no one over, say, 60. Then we could exempt whole ethnic populations, a list that
could immediately start with Hispanics, Scandinavians and East Asians. ...reducing the pool of possible terrorists from the hundreds of millions to
the, at most, tens of thousands, we will have reduced the probability of an attack by a factor of 10,000. Those are far better odds at far less cost to us in money and effort. And infinitely less stupid. The cost of screening people at airports and subway stations is enormous. It is not simply the manpower involved in conducting the
screening. The time that people waste while waiting to get on board is very significant. The benefits of this screening are dubious. As everyone
knows, there are plenty of other potential targets. Moreover, whenever I am stuck in a long line to get through airport security, I think of what an
invitation this provides for a terrorist who wants to set off a bomb where it would cause heavy casualties.
Saturday, July 30, 2005 ~ 1:14 p.m., Dan Mitchell Wrote: Speaker Dennis Hastert had barely waited for dawn to break after the midnight Cafta vote before he directed the House to pass a $286.4
billion highway bill. He expects Mr. Bush to sign this because it is "only" $2.4 billion more than the President's 2005 veto limit, which is "only"
$28 billion more than his 2004 veto limit of $256 billion, which was "only" a 17% increase over the previous six-year highway spending
level. "Only" in Washington could spending so much money be considered an act of fiscal discipline. ...Next to this highway extravagance, the energy bill seems almost a bargain at an estimated
$66 billion or so. ...We can also say this for the bill: It doesn't pick energy winners or losers. Everyone who produces so much as a kilowatt hour is
a winner in this subsidy-fest of tax credits and new federal mandates. There's $550 million for forest biomass, $100 million for hydroelectric
production, and $1.8 billion for "clean coal." There are subsidies for wind, solar, nuclear and (despite $60 oil) even for oil and gas. Most
egregious is the gigantic transfer of wealth from car drivers to Midwest corn farmers (and Archer-Daniels-Midland) via a new 7.5-billion-gallon-a-year ethanol mandate, which will raise gas prices by
as much as a dime a gallon on the East and West coasts. Oh, and don't forget the $15 billion (a 155% increase) in federal home heating
subsidies, $100 million for "fuel cell" school buses, and $6 million for a government program to encourage people to ride their bikes... It's too
much to hope that Mr. Bush will target one of these fiascoes with his first veto; any chance of a highway veto vanished when Mr. Hastert scheduled the bill immediately after Cafta. At least the Members are
leaving town for August; too bad they plan to come back.
Saturday, July 30, 2005 ~ 11:38 a.m., Dan Mitchell Wrote: The pursuit of self-interest creates wealth. That is what changed after thousands of years of misery and poor conditions for people. Today, the
average person in the US or Europe lives better than the kings and queens of the Middle Ages. The wealth of the average Swede increased ten times between 1870 and 1970. The entrepreneurs and innovators
who created the small businesses that grew to large exporting firms wanted to produce great products and make a profit. ABB, Volvo, IKEA, Ericsson, SAAB -- there are many examples. And the living standard
increased; we now live decades longer, child mortality has dropped and literacy is total. Companies, focusing on their main aim, promoted the
general interest. In recent years, we have seen this phenomenon played out even more dramatically in South East Asia. Hundreds of millions of people have been brought form poverty to reasonable living standards.
The reason? Companies such as Nike have gone there to promote their self-interest. They want to produce good shoes at competitive prices - and make a profit. And, without making it their explicit intention, they
reduce poverty. ...[Corporate Social Responsibility] is about making companies and their owners focus on other things besides their self-interest. They should not only concentrate on producing the best
clothes, for example, but also on social matters. And they should not be allowed only to seek profit, if that is what they wish, since that is not
"responsible". Sometimes showing your customers that you are a "good company" can increase profits. But that is just a fraction of the CSR
issue. To a large extent it is about the state trying to force companies to do things the politicians want. And to an even larger extent, it is about
pressure groups trying to force companies to do what they want. But companies should do what their owners want. If that is just profit (which
you can only get by providing the best products to consumers), then so be it.
Friday, July 29, 2005 ~ 11:56 a.m., Dan Mitchell Wrote: Written by Kevin Smith of the University of Nebraska-Lincoln, "Data Don't Matter? Academic Research and School Choice" is a warped and
unfair review of the research on school choice: It's full of innuendo, misdirection, and selective omissions. The academic effects of vouchers
have been studied eight times with random-assignment methods, the gold standard of social science. But Smith, following standard procedure for
opponents of vouchers, doesn't even acknowledge the existence of most of these studies. This may be because seven of the eight studies found
statistically significant positive effects from vouchers and no significant negative effects. The eighth study also found positive effects, and only
failed to achieve statistical significance by watering down the data with unorthodox methods, some of which violate federal research guidelines.
...Smith also employs misdirection. He dismisses some positive school choice findings because the effect identified is small, but a positive effect
that is small over one year can look a lot bigger when you compound it over the twelve years students are in school. He points out that not all
voucher programs are identical, so a study finding that vouchers work in Milwaukee doesn't necessarily prove that they work elsewhere. This
clearly leads the reader to believe that the findings on voucher programs in different cities are mixed, when in fact the findings of the best studies are similarly positive across all cities.
Friday, July 29, 2005 ~ 10:30 a.m., Dan Mitchell Wrote: Silly though it may sound, there's a very sensible case for taxing unhealthy food--or, at the very least, two unhealthy substances within
food. One is saturated fat, commonly found in beef and dairy products; the other is transfatty acids, or transfat, which the food industry adds to
products during baking or frying. ...calls to impose taxes on unhealthy foods have raised mostly hackles--or worse. When Dr. Kelly Brownell,
director of the Yale Center for Eating and Weight Disorders, introduced the notion in a Times op-ed a decade ago, Rush Limbaugh called him
part of a "high-fat Gestapo" trying "to force the American people to act in the 'proper' way." When you put it that way, the idea of a "Twinkie
tax," as it has come to be known, really does sound absurdly paternalistic. If you want to load up on french fries, health risks and all,
why is that the government's business? Unfortunately, fat consumption really is the government's business in one, very literal, sense. As
taxpayers, we all bear the burden of higher medical costs--either directly, by paying for Medicare and Medicaid, or indirectly, by subsidizing employer-based health insurance (which is tax deductible). So, when
some people choose to eat poorly, we all end up bearing the financial burden for their decisions. ...The most coherent argument about health care that conservatives make is that insurance, by its very nature,
insulates people from medical bills to the point where they have little or no incentive for healthier behavior. Unfortunately, the right's preferred
solution to this problem of "moral hazard" is simply to transfer more medical bills onto individuals--a shift that punishes not only those who
have bad habits, but also those who have bad genes or simply bad luck. Taxing unhealthy foods, on the other hand, puts the financial consequences where they belong: On largely voluntary behaviors that
lead to higher medical expenses. The Twinkie tax doesn't reduce personal responsibility, which is the usual complaint you hear about big government. It increases it.
Thursday, July 28, 2005 ~ 10:55 a.m., Dan Mitchell Wrote: If Republicans fail to deliver this Congress, they'll deserve much of the blame for giving Democrats cover by failing to change the way they
account for tax cuts. Recall that Congress voted to repeal the death tax back in 2001, except that the vote was a sham. The estate tax isn't
abolished until 2010, and then only for a year. In 2011 and beyond, the tax rate returns to a confiscatory 60%. ...The explanation for this nonsense is that Congress has subordinated much of its tax-writing
function to the unelected number crunchers at the Joint Committee on Taxation (JCT). These are the staffers who tell Congress how much a
tax cut is going to "cost" in allegedly forgone revenue. These estimates are only guesses, and over the years they have tended to be wrong most
of the time. A recent study by economist Dan Clifton for the American Family Business Institute found that over 20 years the JCT has always underestimated the revenues from tax hikes, while overestimating the
revenues that are lost when taxes are cut. A classic example was former Senator George Mitchell's 1990 "luxury tax" on yachts: It passed
because the JCT claimed it would raise revenue, but the law was later repealed when the higher rate sunk the yacht market and the revenues never appeared. ...In 2001, JCT famously estimated that repeal would
cost the Treasury $600 billion over 10 years -- twice as much as the death tax actually raises. ...This year the JCT is peddling another
indefensible death-tax cost estimate: $300 billion in lost tax collections. This guess also turns a blind eye to any dynamic impact of faster economic growth, more savings, more job creation, and more capital
investment that can be anticipated once the tax is gone. ...We've just had a real world experience with lower tax rates on capital gains and dividends -- in the wake of the 2003 tax cuts -- and, much to the
astonishment of the JCT, revenues have been rolling in far more rapidly than predicted. ...Which brings us back to the latest Senate failure to get
60 votes to end a filibuster. The main fault lies not with Hillary Clinton or Chuck Schumer but with the bean counters who report to Congressional Republicans. For 10 years now the GOP has promised to
clean house at the Joint Tax Committee and put in place a staff whose predictions are at least in the same zip code of economic reality. To this
day that hasn't happened. And that is why, if the death tax survives this Congress, Republicans have only themselves to blame. Link to this Blog Entry
Thursday, July 28, 2005 ~ 9:32 a.m., Dan Mitchell Wrote: The poor are always likely to demand redistributive policies, but have a much stronger moral justification for doing so when inequality stems
from corruption and rent seeking. Yet, often these same measures that are intended to correct the effect of unfair inequality - such as progressive income taxation, extensive regulation, and large public
projects - create more scope for corruption and rent seeking. Think, for example, of tax loopholes, corruption in the allocation of public projects,
or regulations justified on the basis of the greater good but tailored to the interest of particular lobbies. What is more, those who benefit from
corruption may prefer higher taxation and more regulation, not for the sake of the poor, but because bigger governments increase the rents they can extract. As a result, high levels of government intervention,
corruption, and rent seeking may be self-sustaining. ...The first building block of our model is that the larger the resources controlled by the
government, or the more extensive the regulation of the market, the larger the scope for corruption and rent seeking. ...When there are multiple steady states, the one with bigger government (higher ? ) is
inferior in the sense that fewer resources are devoted to productive activities, while more resources are wasted in the zero-sum game of rent
seeking. ...The main message of our analysis is that redistributive and regulatory policies intended to reduce inequality or improve the fairness of economic outcomes may bring about even more opportunities for
corruption. ...a large government increases corruption and rent-seeking. Link to this Blog Entry
Thursday, July 28, 2005 ~ 8:30 a.m., Andrew Quinlan Wrote: Residents of Curtis House in New Southgate regarded Muktar Said-Ibrahim and Yasin Hassan Omar as feckless young men living
aimlessly on state benefits. ...Ibrahim is thought to have moved to New Southgate in about 2000. Omar had been a Curtis House tenant since leaving care at 18, paying rent with £88 a week housing benefit.
...Muhammad Hassan, a grocery store owner, said that he once banned Omar from his shop. "I saw him trying to steal some food," Mr Hassan
said. "I told him to leave and never to come back. He was always living off social benefit..." Link to this Blog Entry
Wednesday, July 27, 2005 ~ 11:45 a.m., Dan Mitchell Wrote: Heckelman and Knack note that market-oriented economic policies -- reflected in limited economic activity by government, protection of
private property rights, a sound monetary policy, outward orientation regarding trade and efficient tax and regulatory policies -- have been
strongly linked to faster rates of economic growth. Foreign aid is often provided in the belief that it encourages liberalizing reforms in these
areas. But the outcome of their study does not substantiate that belief. On the contrary, their results show that, on balance, aid has discouraged
policy reform over the 1980-2000 period, as measured by the economic freedom index. ...But aid can also have more pervasive unintended adverse effects on economic policy and public sector management. In
this context the authors refer to Milton Friedman, who has argued that because most aid goes to governments, it tends "to strengthen the role of
the government sector in general economic activity relative to the private sector". Aid is commonly used for patronage purposes, by subsidizing employment in the public sector, or in state-operated
enterprises, as foreign aid can provide funds for government to undertake investments that would otherwise be made by private investors. In Tanzania, for example, large and rising aid levels in the
1970s and 1980s helped sustain large government subsidies to state-owned enterprises. As high aid levels increase the rents available to those controlling the government, resources devoted to obtaining
political influence increase; thus, as Peter Bauer has noted, "a pervasive consequence of aid has been to promote or exacerbate the politicization of life in aid receiving countries". Link to this Blog Entry
Wednesday, July 27, 2005 ~ 11:01 a.m., Dan Mitchell Wrote: Senate Republicans say they have 60 votes to pass the Protection of Lawful Commerce in Arms Act, which would protect gun makers from
lawsuits claiming they are responsible for crimes committed with their products. The support includes at least 10 Democrats, which speaks
volumes about the political shift against "gun control" in recent years. The "assault weapons ban" expired with a whimper last year. State
legislatures have been rolling back firearm laws because the restrictions were both ineffectual and unpopular. Gun-controllers have responded by
avoiding legislatures and going to court, teaming with trial lawyers and big city mayors to file lawsuits blaming gun makers for murder. Companies have been hit with at least 25 major lawsuits, from the likes
of Boston, Atlanta, St. Louis, Chicago and Cleveland. A couple of the larger suits (New York and Washington, D.C.) are sitting in front of highly creative judges and could drag on for years. ...Gun makers have
yet to lose a case, but these victories have cost more than $200 million in legal bills. This is a huge sum for an industry collectively smaller than
any Fortune 500 company and that supports 20,000 jobs at most. ...Congress has every right to stop this abuse of the legal system, all the more so because it amounts to an end-run around its legislative
authority. A single state judge imposing blanket regulations on a gun maker would effectively limit the Second Amendment rights of gun buyers across the nation. Liability legislation would also send a message
that Congress won't stand by as the tort bar and special interests try to put an entirely lawful business into Chapter 11. The gun makers aren't
seeking immunity from all liability; they would continue to face civil suits for defective products or for violating sales regulations. The Senate
proposal would merely prevent a gun maker from being pillaged because a criminal used one of its products to perform his felony. Murder can be
committed with all kinds of everyday products, from kitchen knives to autos, but no one thinks GM is to blame because a drunk driver kills a pedestrian.
Wednesday, July 27, 2005 ~ 9:32 a.m., Dan Mitchell Wrote: ...the rise in the deficit "is no real problem for conservatives, who correctly view a big deficit as a deterrent on runaway spending." One
upon a time, I believed this idea, which is often called the "starve the beast" theory. The premise is that there is some level of the deficit that is
"too big," beyond which irresistible political pressure will be brought to bear on Congress to cut spending. Therefore, the "conservative"
strategy is to cut taxes any way possible so long as federal revenues go down. The increase in the deficit will force down spending, thus leading
to smaller government. ...In the 1970s and 1980s, I think this theory worked to some extent. Big deficits did put downward pressure on spending -- but not very much, because it also put on pressure to raise
taxes. Virtually all of the deficit reduction from the dozen budget deals between 1982 and 1993 came from higher revenues. To the extent that spending was cut, it was simply reprogrammed into higher spending
elsewhere. Today, I see zero evidence that deficits are putting any downward pressure on spending. ...Today, Congress cuts taxes and raises spending, too, with complete indifference to the impact on the
deficit. And President Bush refuses to veto anything, preferring rhetoric to action on the deficit. Shockingly, he is the first president since John Quincy Adams to serve a full term without a single veto. Link to this Blog Entry
Wednesday, July 27, 2005 ~ 8:13 a.m., Dan Mitchell Wrote: The Knesset Finance Committee has approved Finance Minister Benjamin Netanyahu's NIS11 billion (US$2.4 billion) package of tax
reforms, which are designed to reduce the tax burden on business and boost investment while expanding the tax base and reducing tax evasion.
The key elements of the tax reform bill include: a reduction in corporate income tax to 25% from 35% and a cut in the top rate of individual income tax to 44% from 49% starting in 2006; a cut in value added tax
to 16.5% from 17% from September 2005; and an increase in capital gains tax to 20% from 15% beginning in 2006. Link to this Blog Entry
Tuesday, July 26, 2005 ~ 10:00 a.m., Dan Mitchell Wrote: Pepsico Incorporated said on Friday that it plans to repatriate up to $7.5 billion of undistributed international earnings, which under the American
Jobs Creation Act will incur an estimated $475 million tax expense. Under the AJCA, firms with substantial profits earned abroad are encouraged to repatriate the income at a temporary rate of tax of 5.25%
instead of the usual 35%, a move which lawmakers hope will spur domestic investment. ...Other major corporates to make repatriations under the AJCA include drugs manufacturer Eli Lilly ($8bn), and
Johnson & Johnson ($11bn). According to some estimates US companies could return around $320 billion in overseas earnings to the US during the year-long tax break.
Tuesday, July 26, 2005 ~ 9:26 a.m., Dan Mitchell Wrote: Relying on unexpected revenue to keep deficits down is like hoping an unexpected arrival of alcohol will help a drunk toward sobriety. The
availability of money encourages free-spending Republicans and Democrats to find new programs, or pad old ones, for the purpose of extending their political careers. ...If taxpayers want to keep more of the
money they earn, they must also work to become less dependent on a government check. We look to government too often and to ourselves not enough. When that dynamic reverses, our need of government will be
reflected in less government. That will benefit the economy and the government more than additional revenue.
Tuesday, July 26, 2005 ~ 8:47 a.m., Dan Mitchell Wrote: Last week the House Energy and Commerce Committee approved a bill that could dramatically reduce the ranks of the uninsured and spur
general economic growth--all without costing a dime to the Treasury. The idea behind the legislation, sponsored by GOP Representative John Shadegg of Arizona, is disarmingly simple: Allow Americans to buy
health insurance from vendors in any one of the 50 states. Right now Americans who aren't lucky enough to get insurance from large employers or poor enough to qualify for Medicaid find themselves at the
mercy of the legislators and insurance commissioners of the state in which they happen to live. This can be OK in states that exercise this regulatory function judiciously. But in others, the young and working
poor find themselves effectively priced out of the market by special-interest regulations dressed up as consumer protections. New York requires every insurance policy sold there to cover podiatry.
Acupuncture coverage is mandated in 11 states, massage therapy in four, osteopathy in 24, and chiropractors in 47. There are an estimated
1,800 or so such insurance "mandates" across the country, and the costs add up. ...A 2004 study by eHealthInsurance.com found that a typical
insurance policy ($2,000 deductible, 20% co-insurance) for a family of four could be had for as little in as $172 per month in a reasonably regulated locality like Kansas City, Missouri. But in New York that
family's only option--managed care--would run $840 per month, and in New Jersey family policies run a whopping $1,200-plus. ...The best analogy for what to expect here is probably our experience with
interstate banking, which has indeed resulted in operators moving to friendly climes like Delaware and South Dakota but which has also proven nothing but a boon to consumers. A national market has allowed
the growth of big, financially stable institutions that have earned consumer trust.
Tuesday, July 26, 2005 ~ 8:03 a.m., Dan Mitchell Wrote: In the 1990s, the Republican party sought to abolish the Department of Education as an inappropriate intrusion into state, local, and family
affairs. The GOP platform was clear: "The Federal government has no constitutional authority to be involved in school curricula or to control
jobs in the market place. This is why we will abolish the Department of Education." Ever since President Carter created the Department of Education, the GOP had wanted to get rid of it. But today, with
President Bush leading the way, the GOP is embracing the idea that the federal government should play a larger role in education. ...Whenever he can, President Bush touts the huge spending increases necessary to
promote his No Child Left Behind Act (NCLB). But it's not just NCLB funding that has increased: the entire education budget has ballooned during the president's time in office. The Department of Education's
budget has grown by 82.5 percent in real terms from $34.9 billion in FY2001 to $63.7 billion in FY2005. This is the largest increase of any president since Lyndon Johnson. And President Bush's 2006 budget asks
for more of the same. ...Teachers unions have long argued that schools would improve if only they had more money. Accordingly, a politician's support for education is measured by how much money he pours into it.
This is unfortunate. The only real measure of success is not how much we are spending but whether we are getting the most bang for our bucks.
American schools are already very well-funded. Moreover, there is little evidence that additional funding would much improve the quality of education. ...From 1960 to 2000, inflation-adjusted spending on
education in the U.S. nearly tripled, yet test scores show little improvement, dropout rates are high, and a large racial achievement gap persists. Education economist Caroline Hoxby explains that public
schools today are doing less with more: school productivity -- achievement per dollar spent -- declined by 55 to 73 percent from 1971 to 1999. Meanwhile, private and charter schools are boosting student
achievement with lower expenditures per pupil than public schools. ...Trumpeting huge increases in education spending may lower the level of complaining from the NEA and other critics of President Bush's
education policies, but "historic" new federal spending is nothing for a fiscal conservative to brag about. ...The Bush administration has taken
the GOP from advocating no federal spending on education to spending like drunken sailors. It's high time for the party to sober up and remember its core principles.
Monday, July 25, 2005 ~ 2:00 p.m., Dan Mitchell Wrote: The Congressional Budget Office reports that from October through June, "net [tax] collections from individuals were up by $105 billion, or
about 18 percent. ...You might think a fan of big government like New York Times columnist Paul Krugman would be delighted. But he seems to
look for a cloud behind every silver lining. ...As for Mr. Krugman's hasty dismissal of the Laffer Curve, he has much to learn from the new paper
"Dynamic Scoring" by N. Gregory Mankiw, a recent chairman of the President's Council of Economic Advisers, and Matthew Weinzierl, also of Harvard (www.nber.org/papers/w11000). This paper uses a
well-established "neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth." The
authors explicitly "ignore any short-term effects of tax cuts that arise from traditional Keynesian channels." Assuming quite conservatively
that tax rates on labor and capital are only 25 percent, and employing a conventional model of economic growth, Mr. Mankiw and Mr. Weinzierl
find "a capital tax cut has a long-run impact on revenue of only 47 percent of its static impact. That is, growth pays for 53 percent of the
static revenue loss. A labor tax cut has a long-run impact on revenue of only 83 percent of its static impact, and growth pays for 17 percent of
the tax cut." ...Research by another former CEA chairman, Glenn Hubbard of Columbia University, emphasizes the effect of marginal tax rates on entrepreneurship. Yet another former CEA chairman, Martin
Feldstein, demonstrates income reported by high-income taxpayers is extremely sensitive to changes in marginal tax rates. ...Among other Nobel Laureates, Ed Prescott (2004) emphasizes the effect of labor taxes
on work incentives. Bob Lucas (1995) emphasizes tax incentives to invest in physical capital. James Heckman (2000) and Gary Becker (1992) emphasize how progressive tax rates weaken incentives to invest in
schooling and on-the-job training. And the optimal tax theory of James Mirrlees (1996) and Joe Stiglitz (2001) emphasizes both social welfare and tax-revenue (Laffer Curve) gains from low marginal tax rates on
highly skilled individuals.
Monday, July 25, 2005 ~ 1:17 p.m., Dan Mitchell Wrote: The big world story of the last two decades of the twentieth century was the demise of communism as an economic system and power bloc, and
with it the end of the cold war between East and West. At the same time, another story has been unfolding, not as dramatic as the ending of an entire political and economic system but still of great long-term
significance. That story is about the pre-eminent success of the Anglo-American economies (which include not just the United States but also Canada, Australia, New Zealand, Ireland and the United Kingdom)
and the relative failure of the various versions of the so-called social market economy or managed capitalism in Continental Europe and Japan. In the last dozen years or so, economies based on free trade,
private ownership, light regulation and moderate taxation have opened up what looks increasingly like a decisive lead over economies characterised by active state partnership with business and trade unions
in steering the economy, high levels of taxation and social spending, a greater role for banks than for stock markets in corporate ownership and control, and intrusive regulation of business. ...I fully expect
American ideas and practices to continue to exert in the twenty-first century the all-pervasive influence they did in the twentieth century and
to set the standards by which all societies are judged, however much they may also be resented and subject to bogus criticism. It seems unlikely that hard-working Chinese, Indians and other Asians will be
attracted to the European model.
Monday, July 25, 2005 ~ 11:56 a.m., Dan Mitchell Wrote: Does a state have the right to determine its own tax policy by offering nondiscriminatory tax incentives to businesses? Unbelievably according
to the U.S. 6th Circuit Court of Appeals the answer last fall in the case Cuno v. Daimler-Chrysler was "no." Now the subject of bipartisan
legislation in Congress and an appeal to the U.S. Supreme Court, unless overturned the ramifications of this unprecedented legal interpretation will continue growing as they radiate through the U.S. legal and
economic system. First by overturning roughly a half-century of legal precedent, the decision threatens similar incentives existing in more than
40 states. Second, it poses an economic threat to businesses already invested anticipating these incentives. Finally and most importantly, it
raises a very serious threat to America's overall global competitiveness by taking away an advantage our international competitors already use.
...The court's perception of discrimination rested on the fact a company already in Ohio would receive the investment tax credit for new manufacturing investment within Ohio but would not receive a similar
credit if it located new manufacturing outside Ohio -- hence differential tax treatment. ...If the U.S. through its courts won't allow state tax
incentives, companies will be pushed to site operations overseas in jurisdictions that can offer and will honor these incentives. While the 6th
Circuit may seek to affect movement of business across state borders, it is powerless with international ones. ...Much opprobrium has been
directed in the last few years of "Benedict Arnold companies" that move their operations overseas. It is strange the thunderous outcry against
these companies doesn't sound equally loudly against actions such as the 6th Circuit's that would encourage such moves. Congress should not
wait to see if the Supreme Court will overturn this decision, but instead take up its own bipartisan legislation and quickly put a stop to Benedict
Arnold courts and keep jobs and investment in the United States.
Monday, July 25, 2005 ~ 11:24 a.m., Dan Mitchell Wrote: One of the unheralded contrasts of our time is this: Everywhere we see the increasingly powerful effects of globalization, and yet the single most
important reality for the economic well-being of most people is their nationality. ...The older and less-noticed truth is that nations usually remain, for better or worse, the decisive force in determining the
economic condition of their citizens. The United States, Europe and Japan offer an object lesson. All face, generally speaking, the same opportunities and threats from globalization. But results vary
dramatically. Since 1995 American economic growth has averaged 3.3 percent; Europe's, 2 percent; and Japan's, 1.3 percent. (Europe refers to
the 12 countries using the euro.) Even in Europe, stark contrasts emerge. Ireland's growth averaged 7.9 percent over the decade; Germany's, 1.3 percent. ...Borders, though battered, survive and have economic
meaning. National markets do exist. One big difference is their vigor in creating local demand and jobs. Europe's sluggishness may reflect more
than high taxes and restrictive regulations. ...countries seem to succeed more when they encourage globalization. In 1990 per capita incomes in Ireland were 28 percent lower than in Germany, reports the
Organization for Economic Cooperation and Development (OECD). In 2004 the Irish were 26 percent higher.
Sunday, July 24, 2005 ~ 2:32 p.m., Dan Mitchell Wrote: The European Commission on Wednesday presented a proposal to change the Value Added Tax (VAT) rules that apply when certain
services are supplied to private consumers. The changes are designed to eliminate distortions of competition between EU businesses, and between
EU and non-EU businesses that supply services at a distance to private consumers. They should also ease the VAT burden for businesses by streamlining the current rules as between services provided to traders
and those provided to private consumers. ...Under the VAT rules as they currently stand, when a trader supplies a service to a private consumer,
the trader is responsible for applying the VAT at the rate of the country where he has his place of establishment. However, with the increasing
supply of services across borders, this rule no longer always ensures that the tax accrues to the Member State of consumption. It can also cause
problems of distortions of competition, as companies have an incentive to locate their activities in Member States with low VAT rates in order to be able to charge that rate to their customers.
Sunday, July 24, 2005 ~ 1:45 p.m., Dan Mitchell Wrote: In 1930, politicians Smoot and Hawley (both Republicans) pushed through a major tariff to protect American farmers, their legislation
becoming law when President Hoover (also a Republican) signed on the bottom line. This protectionist legislation has been identified as an important contributor to the Depression in the 1930s. Yet even with the
overwhelming evidence that Smoot-Hawley had dire economic consequences, Sen. Chuck Schumer, Democrat from New York, and Sen. Lindsey Graham, Republican from South Carolina, are offering up a fat
tariff on Chinese imports. ...The U.S. now participates in a huge trade program with China, with U.S. consumers benefiting from low prices on a broad range of consumer goods that come from that country. In
exchange, the Chinese are accumulating dollars for future purchases of U.S. goods and services. A 27 percent tariff imposed on goods from a major trading partner could have significant repercussions, perhaps
even worse than the impact of Smoot-Hawley. ...the Chinese have been accepting huge amounts of IOUs from U.S. consumers in the form of dollars that are invested in U.S. government bonds. (No folks, we don't
ship dollars to China when there is a trade deficit.) In other words, we get to consume and enjoy the fruits of Chinese labor while the Chinese don't demand that we provide them with actual goods and services in
return. Yes, some day they may wish to go shopping in the U.S. with their hoard of U.S. dollars, but in our market economy the Chinese can only
buy from willing sellers at market prices - no confiscation allowed! What about U.S. jobs? When one country performs a function better (or cheaper) than we can, we are given an opportunity to reemploy some of
our workers where we need them most. Today, those jobs can be found in healthcare, education, or the repair and upgrading of our infrastructure, via contracts to private companies and not by expanding
the direct government workforce.
Saturday, July 23, 2005 ~ 1:49 p.m., Dan Mitchell Wrote: One winner of a recent American Airlines contest says he would have been better off losing. ...Jack McCall, a New York resident who won
American's grand prize in the video category by submitting a video montage of snapshots he and his wife collected during their travels around the world, estimates that federal, state and local taxes on the
prize could amount to roughly $19,000, given the couple's probable federal tax bracket and because they live in New York City, where income taxes are high. That's equivalent to about $800 for each of the
24 tickets. And in today's cut-rate airline pricing environment, American's valuation is far more than a winner would likely pay if he or she simply bought the tickets. The result: The tax bill could be higher
than the tickets actually sell for. ...the IRS requires it to value the prizes and file 1099 tax forms at their "maximum potential value." ...Mr.
McCall says he was aware of the possibility of challenging American's valuation of the vouchers on his tax return, but he thought that tactic
was too risky. "The problem with that is that if the IRS didn't buy it, I'd be" in trouble, he says. "And if I report something different than what
American does, that's a red flag for an audit. And who wants to be audited by the IRS?"
Saturday, July 23, 2005 ~ 11:31 a.m., Dan Mitchell Wrote: Brussels has given Portugal three years to pull back its public deficit within the 3 percent of GDP red line. ...Brussels wants Lisbon to trim
down the public deficit - currently the highest in the EU - to 4.8 percent in 2006, 3.9 percent in 2007 in order to reach the forecasted 2.8 percent
in 2008. ...Under the rules, no member state can run a budget deficit - tax receipts minus public spending - greater than three percent of its gross domestic product (GDP). Let's start with the good news: Among other things, the government plans to cut public spending, something that should have been done
years ago. It wants to control social security expenditure by gradually raising the retirement age for public sector workers to 65 from 60 over
the next 10 years, limit the admission of new civil servants and press for wage moderation in the public sector. Altogether, the government hopes
to save about EUR7.9 billion until 2009. ...Unfortunately, the spending cuts are much too timid and spread over too long a period... Mr. Sócrates decided to increase all sorts of taxes in the vain hope that this
will close the budget gap. Already this month, Lisbon raised the standard value-added tax rate to 21% from 19%; the tax on oil products will
increase by 2.5 cents per liter each year between 2006 and 2008; the top marginal tax rate, for single household incomes above EUR60,000, will be raised to 42% from 40%; and the tax on tobacco will go up 15% per
year between 2006 and 2009. According to the government, these tax increases will altogether result in additional revenues of EUR7.79 billion
over the next four years. Tax increases, however, are actually the last thing that the Portuguese economy needs. With public spending already above 49% of GDP, raising taxes means the government will remain
inefficient and "fat." It will withdraw resources from families and companies and reduce incentives for individuals and firms to increase
output. Given the fact that Mr. Sócrates wants to increase public spending on those investment projects not co-financed by the EU by 15% a year, it is quite evident that the Socialist government considers the
state and not the private sector to be the economy's main engine. ...Raising the VAT to 21% will likely be the government's biggest blunder. In neighboring Spain the rate is only 16%, meaning lots of
Portuguese will cross the border every day to do their shopping in Spain, thus filling Spanish coffers instead of Portuguese ones. Sales and profits
of firms in Portugal will go down, further depressing the economy and thus tax revenues. Moreover, by raising the top tax income bracket, Portuguese companies will have an even harder time attracting skilled
workers from abroad or keeping Portuguese talent at home.
Friday, July 22, 2005 ~ 12:51 p.m., Dan Mitchell Wrote: Senator Leahy has said: "The two most activist judges we have right now are Justice Thomas and Justice Scalia, who have struck down and
thus written laws of their own in place of congressional laws more than anybody else on the current Supreme Court." One of the major
functions of the Supreme Court for more than two centuries has been to strike down acts of Congress, the President, or the lower courts when any of these exceed the authority granted to them by the Constitution.
Calling this "judicial activism" is playing games with words and befogging the real issues. When Justices Scalia and Thomas enforce the
limits set by the Constitution, that is not writing "their own new laws," no matter what Senator Leahy claims. Those who are writing their own
new laws are people like Justice John Paul Stevens, who arbitrarily expanded the Constitution's authorization of government taking of
private property for "public use" to allow the taking of private property for a "public purpose" -- which can be anything under the sun. ...in the economic area, Roberts is likely to take the view that government should get out of the way and not pick the winners and
losers; that government should work to level the playing field and trust markets to get the job done. ...President Bush's nominee already has the backing of Stan Anderson, the legal advisor to the Chamber of
Commerce, John Engler, the president of the National Association of Manufacturers, Frank Keating, the president of the American Council of Life Insurers, and Connie Mack, the former senator and pro-growth
advocate. This is the first time in anyone's memory that business has entered the judicial fray, and Judge Roberts is their first choice. Keating,
who is also the former Oklahoma governor and federal prosecutor, told me Roberts believes that "the engine of commerce comes from individual
creativity" and that Roberts "is likely to encourage enterprise through the creativity and genius of individual men and women to produce the
next generation of jobs and growth." This is a far cry from the Supreme Court of the past 70 years. As Mark Levin writes in his best-selling book
"Men in Black," the Court has so expanded the commerce clause that it has helped create a huge regulatory state where activist judges have
seized private property, taken over school systems and prisons, interceded in private-sector hiring and firing practices, ordered farm quotas and property-tax increases, and expelled God, prayer and the Ten
Commandments from the public square. Levin calls this "socialism from the bench." By all accounts, John Roberts will not go down this path.
Friday, July 22, 2005 ~ 11:37 a.m., Dan Mitchell Wrote: New York State's Medicaid program has also become a $44.5 billion target for the unscrupulous and the opportunistic. It has drawn dentists
like Dr. Dolly Rosen, who within 12 months somehow built the state's biggest Medicaid dental practice out of a Brooklyn storefront, where she claimed to have performed as many as 991 procedures a day in 2003.
...One Buffalo school official sent 4,434 students into speech therapy in a single day without talking to them or reviewing their records, according
to federal investigators. ...Medicaid has even drawn several criminal rings that duped the program into paying for an expensive muscle-building drug intended for AIDS patients that was then diverted
to bodybuilders, at a cost of tens of millions. A single doctor in Brooklyn prescribed $11.5 million worth of the drug... a yearlong investigation by
The Times found that the program has been misspending billions of dollars annually because of fraud, waste and profiteering. ...New York's Medicaid program is by far the most expensive and most generous in the
nation. It spends far more - now $44.5 billion annually - than that of any other state, even California, whose Medicaid program covers about 55 percent more people. New York's Medicaid budget is larger than most
states' entire budgets, and it spends nearly twice the national average - roughly $10,600, more than any other state - on each of its 4.2 million
recipients, one in every five New Yorkers. ...James Mehmet, who retired in 2001 as chief state investigator of Medicaid fraud and abuse in New
York City, said he and his colleagues believed that at least 10 percent of state Medicaid dollars were spent on fraudulent claims, while 20 or 30 percent more were siphoned off by what they termed abuse, meaning
unnecessary spending that might not be criminal. "So we're talking about 40 percent of all claims are questionable," Mr. Mehmet said - an
amount that would approach $18 billion a year. ...instead of reimbursing patients for a $2 bus ride to their doctor's office, or a $10 fare for a car
service, Medicaid typically pays $25 or $31 each way for these rides, and it adds up. ...In an audit released last month, the inspector general revealed that in New York City schools, 86 percent of the Medicaid
claims that were paid from 1993 to 2001 lacked any explanation for why the services had been ordered or violated other program rules. ...Among
the biggest beneficiaries of the Medicaid program have been executives of the state's nursing homes and clinics, many of whom earn substantial salaries and profits from the program. According to records obtained
from the Health Department under the Freedom of Information Law, 70 executives of nursing homes and clinics personally made more than $500,000 in 2002, the last year for which figures are available.
Twenty-five executives made more than $1 million. Even as spending by New York Medicaid has more than tripled since the late 1980's, the number of fraud investigators who guard its cash
register has fallen by half, and several of their leaders have quit or retired in disillusionment. ...Many experts say that it is likely that at least
10 percent and probably more of New York Medicaid dollars are stolen or wasted. ...New York's Medicaid program, once the pride of the Great
Society era, has become a system "that almost begs people to steal," said Michael A. Zegarelli, a senior New York Medicaid regulator until 2003...
state statistics show that the department rejected a much smaller percentage of claims in the 2004 fiscal year than its counterparts in California, Florida or Pennsylvania. ...The responsibility for prosecuting
Medicaid fraud lies with the state attorney general, Eliot Spitzer, who runs the Medicaid Fraud Control Unit. ...Mr. Spitzer's zeal in fighting corporate abuses has not been matched by his efforts in fighting
Medicaid fraud, former employees say. ...
Friday, July 22, 2005 ~ 11:04 a.m., Dan Mitchell Wrote: In 1970, Ohio had one of the lowest tax burdens in the Union--it now has one of the highest. As of 2005, the state's tax burden, as estimated by the
Tax Foundation, is 35.8% higher than it was in 1970, the largest increase in the nation over this period. ...Over the past decade alone, Ohio's state and local government direct spending per $1,000 of personal
income has risen 19.6%, by far the highest such spending growth in the region and light years beyond the 6.8% figure for all states. To finance this expansion, higher taxes have come along hand-in-hand. The
consequences have been harsh. Since 1970, Ohio's share of the nation's personal income has declined from roughly 5.3% to under 3.8% today. In
the first quarter of 2005, Ohio had the fifth highest unemployment rate in the U.S. at 6.2% versus the overall unemployment rate of 5.3%. Meager Ohio employment growth of 0.3% through the first quarter
placed the state third-to-last nationally, far behind the U.S. overall rate of 1.7%. With falling relative incomes, high unemployment and poor job
growth, it is no wonder that people are voting against Ohio with their feet. State-to-state migration shows Ohio losing residents, while total
population growth of 0.2% ranks it a dismal 47th in the nation. ...there is now a proposed constitutional Tax and Expenditure Limit (TEL) amendment to re-establish fiscal discipline for Ohio's state and local
governments. In short, Ohio's TEL initiative would limit state and local spending growth to the greater of 3.5% or the sum of inflation and population growth.
Thursday, July 21, 2005 ~ 11:13 a.m., Dan Mitchell Wrote: Ever since people were first asked about abolishing the estate tax, strong majorities have favored repeal. A Wirthlin poll in August 1999, well
before the estate tax repeal effort really got going, found that 70 percent of people favored phasing out the estate tax -- 50 percent strongly and
another 20 percent somewhat. In August 2000, a Pew Research Center poll found 71 percent of people supporting elimination of the inheritance tax -- 28 percent saying they favored it and another 43 percent saying
they strongly favored the idea. The most recent poll was done by the New York Times in March of this year. It found 76 percent of people saying that they opposed any tax on inherited assets. ...One explanation
for these poll results is that people know that wealth is not stagnant -- today's poor may be tomorrow's rich, and vise versa. This perception is
backed up by empirical research. A 1992 study published by the National Bureau of Economic Research found that between 1967 and 1977, 75 percent of people in the bottom 10 percent of the wealth distribution had
risen to a higher bracket, with 1.2 percent rising all the way to the top decile. Forty percent of those in the top decile fell to a lower one. A 1998
study published by the Brookings Institution found similar results. Between 1984 and 1994, 60 percent of those in the bottom decile of wealth rose to a higher one, including 1.4 percent who went all the way
to the top. Forty-seven percent of those in the top decile fell to a lower one.
Thursday, July 21, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: A few weeks after the Supreme Court's ruling in Kelo v. New London that local governments have more or less unlimited power to seize
private property, Connecticuters aren't the only citizens who want to make sure they can't be evicted from homes and businesses in order to make way for private economic development. A grassroots movement
has sprung up across the country. It's instructive to watch how quickly politicians can react when they want to. In Connecticut, where Democrats control both houses of the state assembly, a
Republican-sponsored bill to forbid the taking of private homes for private economic development failed as recently as three weeks ago. Yet last week Speaker of the House James Amann was quoted on the need
for a law that "offers homeowners some peace of mind." Mr. Amann represents Milford, whose aldermen recently voted unanimously to prevent the city from using eminent domain to take property for private
development. As for Governor Jodi Rell, a Republican, when we called her office a few days after the Kelo ruling, a spokesman talked about the
need "to strike a right balance between property rights and economic development." Last week, Ms. Rell issued a press release calling eminent
domain "the 21st century equivalent of the Boston Tea Party." This time, she said, "it is not a monarch wearing robes in England we are fighting;
it is five robed justices at the Supreme Court in Washington."
Thursday, July 21, 2005 ~ 10:21 a.m., Dan Mitchell Wrote: The slavery reparations shakedown lobby is gearing up for attacks on American industry. They've failed in the courts and Congress, so they're
going after weak-kneed CEOs. At the NAACP's recent annual convention, Dennis C. Hayes, its interim president, said, "Absolutely, we will be pursuing reparations from companies that have historical ties to
slavery and engaging all parties to come to the table." According to Mr. Hayes, "Many of the problems we have now including poverty, disparities in health care and incarceration can be directly tied to
slavery." ...Mr. Hayes' reparations vision strains credulity and is counter-productive to boot. Most black Americans are neither poor nor
in prison. So if poverty and incarceration are directly tied to slavery, Mr. Hayes might explain how so many blacks somehow escaped this "legacy
of slavery." For those blacks in poverty or incarcerated, what's Mr. Hayes' message to them? Is it to wait for CEOs to fork over some
reparations change and apologize for slavery? If that's the message, then those blacks who are poor are going to remain so, and those who are
lawless will continue to experience high incarceration rates. I think a better message for avoiding long-term poverty and high incarceration rates is: Graduate from high school. Get married before you have
children and stay married. Work at any kind of job, even one that starts out paying the minimum wage. Finally, do not engage in criminal behavior.
Thursday, July 21, 2005 ~ 9:55 a.m., Dan Mitchell Wrote: The Office of Research and Development at the Environmental Protection Agency is seeking outside public relations consultants, to be
paid up to $5 million over five years, to polish its Web site, organize focus groups on how to buff the office's image and ghostwrite articles
"for publication in scholarly journals and magazines." ...The contracts were awarded just months after the Bush administration came under
scrutiny for its public relations policies. In some cases payments were made to columnists, including Armstrong Williams, who promoted the federal education law known as No Child Left Behind and received an
undisclosed $240,000. In January, President Bush publicly abandoned this practice. The governmentwide public relations strategies, however, continue to include the preparation of TV-ready news reports on
government policies.
Wednesday, July 20, 2005 ~ 6:07 p.m., Dan Mitchell Wrote: While the Bush administration is celebrating the growing economy and pointing to its tax cuts as the reason for last week's news about a smaller
budget deficit, there is this one glaring reality: Spending growth under George W. Bush has been almost four times as high as it was during the same period of Bill Clinton's presidency. No two-term president in
post-war U.S. history has ever presided over a spending binge this monumental in his first six years in office. ...based on Bush's proposed
2006 budget, we are looking at a 10-year deficit of $2.6 trillion. Tax cuts didn't cause the deficit. At best, they approximately paid for themselves.
Spending is the true culprit. This story changes a bit if we use forecasts from later years as our baseline. This is because the budget office dramatically increased its forecasts for economic growth and revenue
before the recession of 2001. Talk about bad timing. Even the later forecasts, however, support the view that spending is the main culprit. And homeland security and defense aren't the problem. Even if we
amend the Clinton numbers to allow the homeland security and defense spending surges to occur, the budget would still have a surplus of around
$2 trillion with today's revenues. So the tax cuts may have cost a great deal less over time because they stimulated growth. But spending has
been so out of control that it has offset the good news on revenue. The conclusion is obvious: From the education bill to the prescription drug benefit to the war on terror, spending has spun out of control.
Wednesday, July 20, 2005 ~ 5:17 p.m., Andrew Quinlan Wrote: No matter how smart you are, you can end up looking pretty dumb if you take a test written in Chinese. But there is no excuse for English to be a
foreign language to anyone growing up in the United States. Thanks to the dedicated work of Ron Unz in California and other states, the practice of teaching Hispanic American students in Spanish under
so-called "bilingual" programs, has been shot down and the test scores of Hispanic students have gone up. For black students, getting them
away from "black English" is likewise key to improving their education and all the opportunities in later life that will depend on education.
Unfortunately, there are too many people with a vested interest in promoting "black English" and other fads that are part of the multicultural ideology.
Wednesday, July 20, 2005 ~ 3:00 p.m., Dan Mitchell Wrote: Subsidizing stadiums isn't capitalism -- it's big-money socialism. When the government subsidizes a stadium, it takes your money, decides for
you what form of entertainment is worth funding, and makes you bear part of the cost of someone else's business. Most wealthy team owners would not talk to me about their subsidies. But Jerry Reinsdorf of the
White Sox did. He told me the government "had to" fund his stadium. "I couldn't have" raised the money privately, he said. "You have to pay it
back." Welcome to the real world, Jerry. Students get loans and pay them back. So do homeowners and small business owners. You want a ballpark? Build it with your money. ...It's Robin Hood in reverse.
Politicians take money from taxpayers and give it to people like Reinsdorf and George W. Bush. (Years ago, Bush, along with his fellow owners of the Texas Rangers, got taxpayers to build the team a stadium.)
Wednesday, July 20, 2005 ~ 2:12 p.m., Dan Mitchell Wrote: Back in fiscal 1994, when Bill Clinton was president and Democrats controlled both houses of Congress, the NIH spent only $10.95 billion.
Since then, with Republicans controlling Congress, NIH spending has almost tripled. In 2000, when Bush first ran for president as a "compassionate conservative," he promised that by 2003 he would
double NIH spending from its fiscal 1998 level of $13.6 billion. He was good to his word. ...NIH suffers from bloated bureaucracy syndrome, vomiting tax dollars on unnecessary projects all over the country.
Congress needs to give it a full fiscal exam and then amputate the extremities. ...NIH is funding a yoga study at the University of California
at San Francisco (UCSF). The agency calls it a "[c]ollaboration with the Center for Integrative Medicine at UCSF and the Swami Vivekananda Yoga Anusandhana in India to establish the Center on
Yoga, Health and Meditation." This is part of what NIH calls its effort "to establish global collaborations and cross-cultural exchange among
foreign and U.S. institutions to design and implement research on complementary and alternative medicine (CAM) approaches that have emerged from traditional indigenous medical systems." In other words, it
is a form of foreign aid. ...If Congress sends President Bush an NIH budget even more bloated than the one he proposed, he should puncture
it with a veto pen. When that causes anxiety among the faculty at certain universities, and among certain members of Congress, they should lie down and do some yoga.
Tuesday, July 19, 2005 ~ 11:58 a.m., Dan Mitchell Wrote: "I still wish to pursue tax cuts," Chirac stated in a television interview marking the Bastille Day public holiday. However, he qualified his
remark by saying that France "will have to adapt to the means at our disposal". Nonetheless, he described tax cuts as a "necessity" after
reaching what were widely considered to be "excessive" levels. France's high rates of taxation have been cited by the International Monetary
Fund as one of the primary obstacles to economic growth. In its annual assessment of the economy last year, the IMF noted that "a high tax
burden and low employment rates, together with a large deficit, and an impending demographic shock cast a shadow over long-term growth
prospects." The IMF proposed a series of remedial reforms including "a steadfast reduction in public spending to eliminate budget deficits and
make room for growth-enhancing tax cuts, and an acceleration of product market reforms to increase competition".
Tuesday, July 19, 2005 ~ 10:12 a.m., Dan Mitchell Wrote: The amendment, which passed the House by voice vote, prohibits the use of federal funds for two NIMH research studies. One study, which has
cost more than $1.5 million over 15 years, examines how pigeons classify objects into categories. The other, which has cost $750,000 over five
years, assesses the effect of self-esteem of newlyweds on their marriage. ...Contrary to rumor, governmental coffers are not bottomless; money spent examining pigeons and marriage means less research on
schizophrenia, bipolar disorder, severe depression, obsessive-compulsive disorder, panic disorder, autism, etc. Three studies in recent years have
documented NIMH's failure to prioritize research for severe mental illnesses. Indeed, a 2003 study that I co-authored concluded that only
one in 17 NIMH research awards was "clinically relevant" insofar as anyone currently suffering from a severe mental illness had any
likelihood of benefiting from it. ...Now in its 19th year and at a total cost of almost $2 million, one noteworthy award fuels the quest to determine
why male Japanese quails are attracted to female Japanese quails.
Monday, July 18, 2005 ~ 1:12 p.m., Dan Mitchell Wrote: ...Republican senators -- Lindsey Graham of South Carolina and Robert Bennett of Utah -- attempted to attract filibuster-breaking Democrats by
adding pain to the reform package. Graham would raise taxes on top incomes, and Bennett would reduce benefits to the disadvantage of the rich. No Democrats climbed aboard. Graham reacted with a 2.9 percent
additional payroll tax on upper incomes that more than wipes out the Bush tax cut. Bennett reacted by completely eliminating personal accounts from his plan. Still no Democrats joined them, though these
measures immediately alienated Republicans.
Monday, July 18, 2005 ~ 11:45 a.m., Dan Mitchell Wrote: ...a big cut in the estate tax looms. Unhappy with this inevitability, estate-tax supporters have used the media to spread the false notion that
repeal will save the rich from having to "give back." ...William Gates Sr. voiced his support for the tax as "a fair payback to society for the
opportunity to do business in our marvelous economy and society." ...Gates and the pro-estate-tax lobby get the whole concept of giving back exactly backwards. ...Successful people, by virtue of being
successful, have met previously unmet market needs, saved lives, saved consumers money... Indeed, the greater a person's wealth, the more likely than not that he or she did something extraordinary that benefited
others. "Giving back?" High profits are the surest sign that someone has given back. Can the same be said for entrepreneurial failures?
Furthermore, it's not just morally wrong for the government to use the estate tax to redistribute wealth, it's also bad economic policy. Wealth by
definition is savings. When savings are confiscated for government use, entrepreneurial opportunities in need of capital go wanting in favor of immediate consumption.
Sunday, July 17, 2005 ~ 1:55 p.m., Dan Mitchell Wrote: ...a new study ("Sweden after the Swedish Model") by Mauricio Rojas, an associate professor of economic history at Lund University, calls into
doubt the continued vitality of this social concept. ...Mr. Rojas contends that Folkhemmet is a model for a bygone era, brought low by the
Swedish economic crisis of the early '90s. Only the privatization of public services and a ceiling on public spending since those days has kept the
Swedish economy afloat. That is, what success Sweden has enjoyed in the past decade has come from the progressive abandonment of the old model.Even now, over half of Sweden's GDP is soaked up by tax
revenues. This is the highest tax burden in Europe. It is thus no surprise that robust economic growth is an objective Swedes consistently fail to
achieve. Despite empirical evidence, the idea that the Swedish model is obsolete still runs counter to conventional thinking in much of Sweden today and, more broadly, many corners of Europe. But its declining
validity in today's competitive world is something Europeans would be wise to heed. If Sweden can learn to see itself through a new lens, it can
be competitive well into the future. There might be reason for optimism. Even in Stockholm, voices demanding less regulation and more free enterprise are making themselves heard. The heavy tax burden and the
welfare measures it supports is now well-acknowledged as having sapped incentives to work.
Saturday, July 16, 2005 ~ 3:02 p.m., Dan Mitchell Wrote: John Spratt, the ranking Democrat on the House Budget Committee, seems especially upset that this revenue surge isn't coming from wage
income, but rather from investment income--that is, the so-called non-withholding income tax collections, which have skyrocketed by some
30% this year. "These are typically taxes paid on one-time capital gains, bonuses, stock-options income that may not recur," he laments. Well,
sure, Congressman, the 2003 reductions in the tax rates on dividends and capital gains seem to be resulting in much higher tax revenues on . .
. dividends and capital gains. This is called the Laffer Curve effect, and we thank Mr. Spratt for validating it. If he wants those revenues to
"recur," maybe he'll even vote to make those tax cuts permanent. This revenue surge from investment income also rebuts the mantra that the
2003 tax cuts were a giveaway to the rich. Nearly half of all Americans have some kind of stock ownership, and thus have shared in these gains in investment income. And if most of the extra tax income is coming
from capital gains and dividend payments, that would have to mean that the rich in America are paying more taxes, not less, as a result of the
2003 tax cut. ...There is a looming budget problem, but it has nothing to do with the Bush tax cuts or insufficient tax revenue. It is a government
spending crisis, especially the liabilities that politicians have promised to retirees in Social Security and Medicare. The Congressional Budget
Office predicts that spending as a share of our national output based solely on current promises will surge from about 20% today, to 25% in 2025 and to 34% by 2040.
Saturday, July 16, 2005 ~ 12:21 p.m., Dan Mitchell Wrote: Egypt is introducing sharply lower rates of corporate and personal taxation from 1st July. Under the new code, which has been working its
way through the debate and drafting process since September, most companies will pay 20% tax on their profits. Under the previous tax system, industrial and export firms paid 22%, while most other
companies paid 40%. The new tax code preserves tax exemptions for profits from stock exchange investments, on dividends paid to shareholders and on interest payments from banks and bonds. ...For
individuals, the maximum tax rate is now 20% instead of 40% and the thresholds for each tax bracket have been raised.
Friday, July 15, 2005 ~ 2:10 p.m., Dan Mitchell Wrote: Beginning in the late 18th century, there was a dramatic economic turnabout in Europe. How in the world did these once poor and
backward countries break the "vicious cycle of poverty" and become wealthy, without what today's development experts say is absolutely
necessary for economic growth -- foreign aid handouts, World Bank and International Monetary Fund loans, and billions of dollars of debt forgiveness? The answer is simple: Capitalism started taking root in
Europe. Capitalism is an economic system where there's peaceable, voluntary exchange. Government protects private property rights held in goods and services. There's rule of law and minimal government
regulation and control of the economy. ...Some economic development "experts" attribute Africa's troubles to its history of colonialism. That's
nonsense, because some of the world's richest countries are former colonies, such as the U.S., Canada, Hong Kong and Australia. In fact, many of Africa's sub-Saharan countries are poorer now than when they
were colonies, and their people suffer greater human rights degradations, such as the mass genocide the continent has witnessed. One unappreciated tragedy that attests to the wasted talents of its
peoples is that Africans tend to do well all around the world except in Africa. This is seen by the large number of prosperous, professional and
skilled African families throughout Europe and the United States. Back home, these same people would be hamstrung by their corrupt governments. The worst thing that can be done is to give more foreign
aid to African nations. Foreign aid goes from government to government. Foreign aid allows Africa's corrupt regimes to buy military equipment, pay off cronies and continue to oppress their people. Many people expected great things from Africa when new independent African nations began to emerge from colonial rule in the 1960s, often
headed by leaders who had been educated in Europe and America. Unfortunately, what these new leaders brought back to Africa from the West were not the things that had made the West prosperous and
powerful but the untested theories of Western intellectuals and ideologues who had taught them. Such African leaders by and large lacked both the common sense of the African masses and the
technological and economic experience of the West. The net result was that African leaders, full of confidence because of their Western education and the adulation of the Western intelligentsia, made their
people guinea pigs for half-baked theories that had contributed nothing to the rise of the West and had contributed much to its social degeneration. ...Whatever damage European colonialism did to Africa
during its relatively brief reign, that was probably less than the damage done later by well-meaning Western would-be saviors of Africa.
Friday, July 15, 2005 ~ 12:31 p.m., Dan Mitchell Wrote: While German society groans under mass unemployment, record deficits, microscopic economic growth and astronomical national debt, the
parties are recycling yesterday's economic illusions. The slogan for this year's election campaign could be: It's the emotions, stupid! ...The still-governing Social Democrats want to increase their popularity
through an add-on tax for the rich -- in a country where the top 10% of income earners are already paying half of the total income tax. Angela Merkel, the chancellor candidate for the conservative Christian
Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), already announced that in case of an election victory she would first of all raise the value-added tax. And she would
postpone a possible reduction of the top tax rate until 2007. CDU state governors, who are quite powerful in Ms. Merkel's party, would rather increase revenues than reduce spending. ...Thus Germans will have a
choice this September between two major tax-increasing parties. ...Clinging like this to the welfare state is an entirely rational and economic decision. After all, the large majority of voters in Germany are
paid by the state, whether as civil servants, public-sector employees, pensioners, unemployment or welfare recipients. They have no interest in
a leaner state. The only question is, who will keep paying them if the productive sector continues to shrink?
Friday, July 15, 2005 ~ 10:13 a.m., Dan Mitchell Wrote: Ms. Granholm was not pleased, going so far as to denounce the op-ed as "treasonous for the state of Michigan." The authors' high crime?
Exposing Michigan as a high tax state and criticizing Ms. Granholm for wanting to raise taxes. Her choice of words was no inadvertent slip of the tongue, by the way--a Howard Dean-like temporary loss of sanity.
The Governor has used the "t" word repeatedly and has even suggested that Mr. Baxter "should be removed from office." Well, we recall that
the first time an American was accused of "treason" for opposing high taxes was when New Englanders dressed as Indians and dumped tea in
Boston Harbor. And it was America's most famous tax protester, Patrick Henry, who declared: "If this be treason, make the most of it." Ms. Granholm was born in Canada so maybe she missed this American
history. ...More troubling about Ms. Granholm's recent combustion is that she seems to believe that the problem is that the rest of the world
will find out about Michigan's high taxes, not the high taxes themselves. But Michigan's inhospitable tax climate is hardly a state secret, especially to the state residents and businesses who have to endure it.
Thursday, July 14, 2005 ~ 2:45 p.m., Dan Mitchell Wrote: The OECD has voiced concerns about the economic prospects of the eurozone if structural reforms are delayed further. The Paris-based club
of the world's 30 richest countries published its regular report on the development in the 12 member states of the European monetary union on Tuesday (12 July). The paper argues that economic growth in the
area will be half of its current level in two decades if the countries' governments fail to implement necessary reforms. It spells out lack of
integration in the services market - still "largely segmented by country" - as one of the main reasons why important growth opportunities in the
eurozone are still unexploited. ...A similar message was spelled out by UK finance minister Gordon Brown as he addressed the European Parliament's economic and monetary committee on Tuesday (12 July).
The chancellor pointed out that the EU's economies have been failing to bring the unemployed back to work, as about half of the block's 20 million jobless have been redundant for more than a year. He therefore
suggested that both national and European spending should be focused on improving education, research, innovation and life-long training in order to make citizens better prepared to change jobs in case of
restructuring in various spheres. "Only if we invest in education, infrastructure and science will we be able to compete with other emerging global players other than on lower pay", he said.
Thursday, July 14, 2005 ~ 11:14 a.m., Dan Mitchell Wrote: The United States Senate is edging closer towards a bipartisan consensus on new legislation that would permanently reduce the estate tax burden,
although it is questionable whether this will be achieved before the Congressional recess in August. According to Sen. John Kyl (R - Arizona), he and the ranking Democrat on the Finance Committee, Sen.
Max Baucus (D - Montana) have reached agreement on the "basic parameters" of an estate tax compromise which will entail a lowering of
the tax rate in combination with an increase in the estate tax threshold. However, speaking on the issue on Tuesday, Baucus was more coy on the
subject, stating that there remain many "moving parts" in the discussions, which he described as "very emotional." Nonetheless, he
hinted that an agreement may be reached before the summer recess.
Wednesday, July 13, 2005 ~ 7:00 a.m., Dan Mitchell Wrote: The government is seriously considering introducing a single, 25 percent income-tax band as part of its broader effort to boost the economy. The
rate would be the same for both individual and corporate earnings, and would be introduced on January 1, 2007, applicable to incomes earned in 2006. Should the government go ahead with the reform, which appears
likely, it will be announced by Prime Minister Costas Karamanlis in early September at the Thessaloniki International Fair, where premiers traditionally announce the government's policy for the following year.
...According to sources, introduction of the flat rate will be accompanied by a rise in the tax-exempt portion of the income to 13,000 euros. The
government, meanwhile, has already begun decreasing corporate taxes, from 35 percent to 25 percent. ...The difficulty of the task has not daunted Alogoskoufis, who believes the time is right for the flat rate
despite the lighter tax burden it would impose on individuals and companies. Any lost revenue, he believes, would be regained via an overall increase in income.
Wednesday, July 13, 2005 ~ 6:30 a.m., Dan Mitchell Wrote: Instead of copying the successful flat tax models pioneered in Eastern Europe, the program falls even short of the party's own recent tax
proposals. In March 2004, the CDU proposed scrapping most income tax loopholes and reducing the top tax rate to 36% from 42% and the lowest rate to 12% from 15%, thus returning about EUR10 billion to
taxpayers. The party also held out the possibility of cutting taxes to three rates of 12%, 24% and 36% at a later stage, which would simplify one of
the world's most complex tax systems. It would also reduce the penalty that high marginal rates impose on those who choose to work harder and boost their incomes into the top tax bracket. Now, the Christian
Democrats (and the Christian Social Union, their Bavarian sister party) still say they want to get rid of most of the tax breaks to simplify the tax
code -- a laudable goal in itself. But the top rate will be cut only to 39% to make it "revenue neutral." ...This of course ignores how marginal tax
rate cuts can stimulate economic growth and tax revenues by encouraging people to work more and leave the black economy. What's more, EUR3 billion worth of loopholes would be eliminated in 2006,
while the tax rates would be reduced only a year later -- meaning an effective tax hike in the first year of the plan. On the corporate tax front,
the Christian Democrats not only remain behind their own previous proposals but even behind the current government's position. In March, the CDU pressured German Chancellor Gerhard Schröder to agree on a
plan to cut federal corporate tax rates to 19% from 25% (regional taxes add another 13 percentage points to a company's tax bill.) Now, the Christian Democrats say they can afford only a reduction to 22%. Rather
than cutting taxes comprehensively, the Christian Democrats want to raise taxes elsewhere.
Tuesday, July 12, 2005 ~ 8:19 a.m., Dan Mitchell Wrote: Unfortunately, President Bush agreed, in part to get 12 Democratic votes in the Senate and in part because some of his advisers also fell for
the Keynesian illusion that temporary tax cuts would spur growth. So he agreed to phase in his own marginal-rate income tax cuts over several years, while passing out $500 rebate checks immediately to American
families in order to increase demand for goods and services. While this tax cut may have been a political success, it was an economic flop, as growth retreated again in 2002 after a one-time bounce. The tax cut
debate resumed in January 2003, however, as Mr. Bush decided to pursue a more supply-side course. This time he aimed his tax cuts directly at the collapse in business investment, proposing to eliminate the
double tax on dividends and to accelerate his income tax cuts at the top marginal rates. House Ways and Means Chairman Bill Thomas compromised on a 15% dividend rate but added a capital gains cut to
15% (from 20%). Almost from the very day in May of 2003 when those tax reductions became law, the U.S. has experienced a robust expansion driven by investment and productivity gains, not by consumer spending.
...One lesson in all of this is that not all tax cuts are created equal. Tax rebates and other temporary measures aimed at stimulating consumer demand don't work. Consumers aren't irrelevant, but prosperity is
created on the supply side of the economy with the incentives to produce goods or services that people want to consume. So tax cuts in marginal
rates that boost incentives to work and invest provide a much bigger bang for the buck.
Tuesday, July 12, 2005 ~ 8:02 a.m., Dan Mitchell Wrote: ...many minority groups are furious at the Supreme Court's decision last month to build on the Berman precedent and give government a green
light to take private property that isn't "blighted" if it can be justified in the name of economic development. Within a week of the Supreme
Court's 5-4 decision in Kelo v. New London, Rep. John Conyers, the ranking Democrat on the House Judiciary Committee and the longest-serving member of the Congressional Black Caucus, pronounced
himself "shocked" to be joining with conservatives in backing a bill to bar federal funds from being used to make improvements on any lands
seized for private development. ...The measure blocking federal funds passed the House by 231-189. A companion resolution condemning the Kelo decision was approved 365-33. Only 10 of the 43 members of the
Congressional Black Caucus and only two members of the Congressional Hispanic Caucus voted against the latter measure.
Tuesday, July 12, 2005 ~ 6:52 a.m., Dan Mitchell Wrote: The official declarations coming out of the G8 meetings in Scotland, as well as the raucous demonstrations surrounding those meetings, talk
about saving Africa. But, looking back over the decades and generations, Africa has been "saved" so many times that you have to wonder why it still needs saving. Desperate and tragic conditions afflict
millions in Africa today and any humane person would like to help. But the repeated failures of previous help ought to make us at least question
the particular manner in which Africa can be helped. ...Years ago, a courageous economist in India pointed out that, however helpful it was to receive food from abroad during India's famines, the long-run policy
of continually giving wheat to India was just reducing the ability of Indian farmers to grow wheat and sell it for a price that would cover
their costs. Eventually the policy of continually dumping wheat into India was stopped and today India produces so much wheat that it has been able to send some to Africa to deal with African famines. Promoting
dependency and irresponsible borrowing is not the way to help the poor internationally any more than these are ways of helping the poor at
home. Such policies benefit the bureaucracies that administer foreign aid and enable vain people to see themselves as saviors, even when they are doing more harm than good.
Monday, July 11, 2005 ~ 3:43 p.m., Dan Mitchell Wrote: Germany's opposition Christian Democrats are due to launch their election platform today, but it emerged over the weekend that they plan
to cut state unemployment insurance contributions from 6.5% to 4.5% of workers' pay, recouping the lost revenue with an increase in VAT from 16% to 18%. ...The CDU expects the VAT increase to generate
EUR16bn in extra revenue; but the Finance Ministry says that dampened consumer demand would hold back the additional revenue to just EUR13bn. The opposition parties are also expected to abolish tax breaks
for first-time homeowners. It's also likely that a conservative administration would go ahead with corporate tax cuts already planned by Chancellor Schroeder's government. The package is worth around
EUR5.3billion and would cut the basic rate of corporate tax to 19% from 25%, reducing the average tax burden on business to 32.7% from 38.7%.
Monday, July 11, 2005 ~ 12:45 p.m., Dan Mitchell Wrote: On July 1, the controversial European tax savings directive took effect. This requires 25 EU members and 15 other countries and independent
territories to institute an automatic information exchange system. This would require financial institutions to report to the citizen's home country any interest earned outside that country. Or countries may
withhold taxes on interest income at a rate that will rise to 35 percent. Yet, June 30, the day before the directive became effective, the EU Commission had the unmitigated gall to announce it would try by
amendment to make the directive even more onerous... The intended goal of the savings directive is to greatly increase the already bloated
tax coffers of France, Germany and Italy. The actual result will be costly efforts by savers, investors, lawyers, accountants and financial
institutions to develop legal ways around the directive. People will go to great lengths -- both legally and illegally -- to protect their financial
assets from punitive taxation and regulation. They will naturally seek to move such assets to locales that offer better protection and higher
after-tax returns. Even if the governments involved could collect the tax revenue, it would be dreadful economic policy. Good economists
understand that taxing capital is like destroying the "seed corn" needed for investment to create more jobs and wealth in the future. ...One can
only wonder if EU politicians and bureaucrats who push such measures to increase taxes and eliminate financial privacy are ignorant that they
are further destroying economic growth and opportunity and civil society -- or are only malicious. You can bet it is only a matter of time before greater scandals emerge about the misuse of newly available,
confidential, personal financial information by those in governments who will now be able to get their hands on it. Unfortunately, the U.S. Treasury has been largely AWOL in this battle to protect financial
privacy and the free flow of capital. Treasury Secretary John Snow has forcefully defended tax competition, but so far has not stood up to the bureaucrats in his own office of Tax Policy who failed to withdraw a
Clinton era proposal to engage in blanket sharing of sensitive tax information with the Europeans.
Monday, July 11, 2005 ~ 10:22 a.m., Dan Mitchell Wrote: Karl Marx must be rolling in his grave, and don't even ask about V. I. Lenin: Russia eliminated its inheritance tax last month. Its move comes
after January's decision by the government of Sweden, the birthplace of the modern-day welfare state, to eliminate its estate tax. Like the Russians, the Swedes have come to believe that the tax is unjust and
economically counterproductive. Russia and Sweden join Argentina, Australia, Canada, India, Mexico and Switzerland as nations that don't make death a taxable event. The U.S. now has the distinction of
imposing the most onerous death tax in the industrialized world. ...If this sounds, well, a bit communistic, it is. The third policy plank of Marx's
"Communist Manifesto" is "taxation of all inheritance." ...Mr. Bush is straining mightily to round up just eight of 44 Democratic Senators to
permanently liberate America from this confiscatory tax when repeal comes up for a vote later this month. Let's hope they can muster at least as much faith in capitalist incentives as Europe's former Marxists.
Sunday, July 10, 2005 ~ 3:00 p.m., Dan Mitchell Wrote: ...a cure for poverty has already been found. Yes, a cure! Freedom. And by freedom I mean more than just the right to buy rock 'n' roll records. I
mean the right to private property, to buy and sell, to compete for any peaceful business. And more. Free markets and free individuals - communicating, trading, praying, working, with maximum liberty and
minimum harassment from criminals or governments. ...Unfortunately, freedom is too rarely prescribed. In the cruel history of our species, those wielding political power commonly doctor up the laws to favor
themselves at the expense of the people. Africa is such a place, sadly - poor precisely because of the many despots in power. ...Dictators destroy
economies. And too often they take the aid we send to help the poor and use it to stay longer in power. Africans know this well. Asked about more
aid, a Kenyan health care worker quickly and depressingly predicted that "the aid money will go into the pockets of corrupt officials to buy their
fully loaded Mercedes-Benzes." "For God's sake, please stop the aid," Kenyan economist James Shikwati bluntly told a German weekly. "If the
West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit." ...As the late economist Peter Bauer pointed out, "The argument that aid is
indispensable for development runs into an inescapable dilemma. If the conditions for development other than capital are present, the capital
required will either be generated locally or be available commercially from abroad to governments or to businesses. If the required conditions
are not present, then aid will be ineffective and wasted." Foreign aid just doesn't work. Sending more will only make aging musicians feel good.
Saturday, July 9, 2005 ~ 10:39 a.m., Dan Mitchell Wrote: The 10th of July vote in Luxembourg will be a vote on an already dead Constitution. It was killed in France and buried in the Netherlands. But
the Prime Ministers decided at their summit on the 17th of June to continue the ratification process even though some Member States have
already said that they will not ratify the proposed Constitution. ...If the Nice treaty is to be respected, this process has already finished. We are
now acting outside official laws and regulations. Governments must cancel their ratifications - or face having to go through yet another intergovernmental conference and eventually a new convention to draft
a new - or at least - a different text.
Saturday, July 9, 2005 ~ 9:55 a.m., Dan Mitchell Wrote: German opposition leader, Angel Merkel has announced that she will seek to close a capital gains tax "loophole" if she is elected as the next
Chancellor of Germany. Speaking to Der Zeit, Mrs Merkel described the current capital gains tax law as "completely wrong" because it provided
companies with what she considers to be unnecessary tax breaks. Under tax reforms introduced in 2002 by Chancellor Gerhard Schroeder, companies which sold stakes in other groups were no longer required to
pay capital gains tax. The move was a welcome one from a business perspective because it allowed companies, particularly in the banking and insurance sector, to unravel cross-shareholdings. According to the
Financial Times, a senior member of Mrs Merkel's Christian Democratic Union revealed that the tax is likely to be reintroduced in 2007 at a rate of 20%.
Friday, July 8, 2005 ~ 7:33 a.m., Dan Mitchell Wrote: Ronald Reagan once described Amtrak as a "mobile money burning machine." Since then another $15 billion of taxpayer subsidies have
gone up in smoke. Now the allegedly tight-fisted Republicans in Congress are poised to toss Amtrak its seventh emergency bailout, this time $1.2
billion to keep the trains running next year. Since the ill-fated day in 1971 when Uncle Sam took over control of rail passenger service as a
"temporary" experiment, Uncle Sam has spent almost as much money bailing out Amtrak as it cost to put a man on the moon. All of this money
for a train service that doesn't reduce traffic congestion, doesn't cut pollution levels, doesn't save energy, and isn't integral to inter-city
travel, because so few people ride the trains. ...Amtrak has poorly served customers and taxpayers alike and is arguably the nation's worst-run
commercial enterprise. It loses $1 billion a year ($45 per rider) and that doesn't include some $10 billion in deferred maintenance costs. Every route run by Amtrak loses money, and some are horrendously
unprofitable. The long-distance route from Los Angeles to Florida loses $400 for every passenger who comes aboard. It would cost taxpayers
less if Congress purchased free discount airline tickets for every traveler. ...there's no law of economics that train service has to lose money --
although it's a pretty sure bet that a train run by the government will. A Congress serious about fiscal restraint would privatize Amtrak, lift its
indefensible monopoly status as the sole provider of rail passenger service in America, and let the market determine where and how train service can operate in the black.
Friday, July 8, 2005 ~ 7:00 a.m., Dan Mitchell Wrote: A full-blown political union in Europe is not only unlikely, it is also undesirable. Europe's cultural, political and institutional diversity should
be seen as a strength rather than a weakness because it encourages institutional competition for ideas and for mobile capital. Countries pursuing the right domestic tax, welfare and labor market policies will
be able to attract human and physical [capital] and will serve as a role model for others. Eventually, a competitive process of dynamic benchmarking will lift the tide for all members willing and able to play
the game and should result in a less regulated and more competitive European economy. By contrast, a political union would likely involve tax and welfare harmonization on a relatively high level and more rather
than less regulations.
Thursday, July 7, 2005 ~ 3:15 p.m., Dan Mitchell Wrote: Raghuram Rajan, chief economist of the International Monetary Fund, has co-authored two papers on aid with Arvind Subramanian, an IMF
colleague. Their view? There's no strong evidence that aid boosts economic growth and hence no reason to suppose that aid reduces poverty either. ...A failed aid project is not merely neutral for poverty
reduction; it exacerbates the problem. Inconsistent donors who finance the construction of six hospitals but then don't follow up with the resources to make any of them function saddle poor countries with the
worst of both worlds: bad health and bad growth rates.
Thursday, July 7, 2005 ~ 2:00 p.m., Dan Mitchell Wrote: While the national economy has robustly recovered from the recession, Michigan's economy has staggered, resulting in the Wolverine state being
tied for the highest unemployment rate in the nation. This should be no surprise considering the Tax Foundation ranks Michigan's business tax
the worst in the nation and overall business climate as 36th out of the 50 states. In response to Michigan's economic woes, Gov. Jennifer
Granholm has proposed a "revenue neutral" tax shift, borrowing $2 billion to invest directly into companies, and a budget that increases
spending and raises taxes. ...This tax shift does nothing to reduce the excessive overall tax burden on job providers. ...This additional debt does nothing to improve Michigan's attractiveness to investors, but
instead hopes the administration's handpicked experts will invest "other peoples' money" effectively. And the governor's $40.5 billion budget
increases spending $1.6 billion above last year's level and includes $300 million in tax increases. History and basic economics teaches us that Gov. Granholm's attempt to tax-spend-and-borrow Michigan to
prosperity will fail. ...Michigan has lagged behind the nation for far too long as the current governor pursues the failed ideas of more taxes, more spending, more borrowing and government attempts to pick
winners in the state's industries. The Michigan House and Senate have demonstrated a willingness to be bold as each recently passed balanced budgets which did not include Gov. Granholm's tax increases.
Across-the-board tax relief is the next necessary step to righting Michigan's economic course.
Thursday, July 7, 2005 ~ 12:45 p.m., Dan Mitchell Wrote: Between 1962 and today, American dependence on government has more than doubled and shows little sign of abatement. The growth areas
of dependency examined in the report are: welfare and medical care, housing, retirement income, education, and rural and agricultural services. The budgetary impact of dependency threatens perpetual
budget deficits and high taxes, but to focus only on the budgetary impact is to trivialize the more devastating aspects of dependency. ...Dependency on government also has the effect of reducing economic
mobility among the poor. Professor Olasky says that the dramatic progress of Asians and Cubans in recent decades demonstrates the existence of opportunities for those who are willing to conform to the
traditional work-hard-and-rise pattern by staying out of the welfare system. Easy access to welfare has made many individuals, who turned
down opportunities, believe they were better off so far as income, leisure time and family time than they would have been by accepting a low-paying job. In terms of short-run economics, many were correct.
Welfare reform during the 1990s, despite the dire predictions, moved many former welfare recipients into the world of work and upward mobility. Many who never had a job are now working and are
self-sufficient. As such, the tens of thousands of former welfare recipients who moved from welfare rolls to payrolls are proof of the inhumanity of dependency. What's more important is that these former welfare
recipients and their families have a greater sense of self-worth. Benjamin Franklin had it right when he wrote, "[T]he best way of doing good to
the poor, is not making them easy in poverty, but leading or driving them out of it." Government dependency makes poverty easy.
Thursday, July 7, 2005 ~ 11:46 a.m., Dan Mitchell Wrote: ...the Live 8 stories made for better reading. True, there were a few snarky echoes of the British columnist Peter Hitchens, who recently
wrote of how the hungry children of Africa were once again pooling their efforts to "rescue the sagging reputations of that needy and deprived
group of balding, clapped-out rock stars who still long for the crowds that once listened to them." But most others breathily quoted the pop
stars describing the concerts as "the greatest thing that's ever been organized probably in the history of the world," or anyway " le plus
grand show politico-humanitaire jamais organis é, " which amounts to more or less the same thing. There were accounts of the beautiful people
in the front rows (Boris Becker, Brad Pitt, Kofi Annan), quotes from well-known poverty authorities such as Madonna ("Are you ready,
London? Are you ready to start a revolution?"), human interest stories about impoverished Africans, and a bit of rhapsodizing about the first
Pink Floyd performance in 20 years ("they played for 20 sublime minutes"). Everyone writing about the concerts, and everyone attending,
clearly felt very good about themselves indeed. ...among those who work seriously on Africa, it has long been clear that what Africans need isn't
only cash, which can be stolen or wasted, but the opportunity to trade their way out of poverty, just as Asians did over the past several
decades. Yet the current regime of agricultural tariffs, quotas and export subsidies, whether for American cotton or European sugar, so reduces
the price of African agricultural products that African farmers cannot compete. Each European cow costs taxpayers $2.20 a day, while half the
world's population lives on less than $2 a day. ...while the need to open up agriculture to trade is so obvious to development economists that it
hardly bears repeating, the message seems not to have reached the Live 8 crowds. On the contrary, most of the concertgoers' somewhat inchoate demands revolved around the much more appealing and, frankly, much
simpler idea that the rich should give more money to the poor. Getting millions of people across Europe and the United States to support political leaders who will actually take steps to end the massive farm
subsidies -- temporarily or even permanently reducing the incomes of European and American farmers -- is really very difficult. Or, anyway, it's a lot harder than getting them to cheer when millionaire rapper
Snoop Dogg shouts that "there's a lot of rich people in the world and a lot of them are just selfish!"
Thursday, July 7, 2005 ~ 10:45 a.m., Dan Mitchell Wrote: The European Commission proposed a new directive on Tuesday (5 July) that would restructure member states' car taxation systems and abolish
car registration fees. The EU's executive recommends abolishing car registration taxes over a transitional period of five to ten years, while
increasing "annual circulation taxes and, if necessary, other taxes" in parallel so that member states' revenues are not affected by the measure.
...The EU also aims to make cars more environmentally friendly by recommending that tax brackets should be linked more strongly to the number of grams of CO2 emitted per kilometre by a given vehicle.
Under the commission's proposal, "by 31 December 2008, at least 25 percent of the total tax revenue from registration and annual circulation
taxes should derive from the CO2 based element of the taxes and this figure should rise to 50 percent by 2010". ...Brussels insists that its
proposal does not harmonise member states' tax rates, or oblige EU countries to introduce new taxes however.
Thursday, July 7, 2005 ~ 10:24 a.m., Andrew Quinlan Wrote: How many children must die before lawmakers and the courts decide to keep certain classes of sexual predators behind bars permanently?
Joseph Edward Duncan III, a registered sex offender from Fargo, N.D., is the most recent addition to the pantheon of convicted pedophiles who
have been let out of jail only to prey on other victims upon their release. ...Sentenced to 20 years, Duncan was first released after serving 14
years, violated his parole and was sent back to prison in 1997, where he remained until 2000. When he finally got out, he enrolled in college and
even made the dean's list, but soon was trolling for more victims. Duncan was arrested for videotaping and fondling a 6-year-old boy on a playground in Minnesota last July, but instead of being sent back to
prison -- or at least held without bail -- he was released on a $15,000 bond in April, then vanished. On Saturday, Duncan was arrested and charged with kidnapping 8-year-old Shasta Groene, who disappeared,
along with her 9-year-old brother Dylan, in May. Shasta's mother, 13-year-old brother, and a family friend were found bound and bludgeoned to death at the family home... Duncan is only the latest in a
long list of convicted sex offenders who have gone on to commit horrendous crimes after being released from jail. Earlier this year, convicted sex offender John Couey was arrested for the murder of
Jessica Lunsford in Florida. While Couey was living across the street from Jessica's home, he is alleged to have taken the 9-year-old from her
home, kept her hidden, sexually abused her, and then, according to his own admission, buried her alive. David Onstott, a convicted rapist out on bail for another crime, was charged just one month later with
strangling a 13-year-old girl, Sarah Lunde, near her home in Tampa. ...Men who prey on little boys, in particular, are likely to do so again and
again. Some estimates put the re-offense rate (which is different than the re-arrest rate) upwards of 80 percent, with the average pedophile likely
to commit 13 offenses before he is caught. So why should such men ever be put back on the streets? The punishment for raping a child ought to
be life in prison, period. There ought never to be a second chance for such persons. ...even if we have to build many more jails to keep such
criminals behind bars, wouldn't it be worth it to save the lives of children like Jessica, Sarah, and so many others who have died because of our failure to do so?
Thursday, July 7, 2005 ~ 8:34 a.m., Dan Mitchell Wrote: If there were a poster child for the need for economic reform in Europe, the Netherlands' disability benefit system would surely be a finalist for
the job. Some one million people -- out of a work force of 7.6 million -- collect disability benefits in Holland. ...Employers have been known to
"retire" people to the disability system to get them off their payrolls. The extensive use of the disability system has also helped keep unemployment
statistics relatively low by European standards, although the official figure has topped 7% during the current protracted recession. ...The government has been pushing the issue for years, and yet only this week
managed to squeeze through a (watered-down) reform of the system. The bill, which must still pass the Dutch upper house to come into effect as
planned next Jan. 1, would restrict eligibility for full benefits to those who are -- wait for it -- fully incapacitated and so unable to work. ...But
there's a catch. The eligibility requirements would only apply to those incapacitated after the law takes effect. All current recipients would be grandfathered under the current lenient system, meaning those one
million nonworkers will remain right where they are -- out of the work force.
Thursday, July 7, 2005 ~ 7:38 a.m., Dan Mitchell Wrote: Lotions that contain the ingredients Oxybenzone, Titanium Dioxide or Parsol 1789 block out some UVA rays. Adding a chemical called
Mexoryl offers even better protection. "It produces a product which gives us almost perfect protection against sunshine," said Dr. Vincent
DeLeo, chairman of dermatology at Columbia University. People are happily protecting themselves with Mexoryl in South America, Europe, Australia and Canada, but in the USA you are forbidden to use it. The
FDA won't approve it. It won't even say why. ...Common sense says we should use it Mexoryl. All drugs have risks as well as benefits, and Mexoryl has been in use in other countries for 13 years. It's passed many
safety tests. Yet our FDA won't even talk about it? Although Mexoryl is illegal in the United States, ABC News found it at some pharmacies.
Sometimes it was hidden. You had to ask for it. It was expensive -- $30 to $50. I don't fault the pharmacists; they're serving their customers. Big
government is the problem. The purpose of government is to protect our rights. When other people attack us, we need government for protection. ...as the Founders understood, when it comes to government, it's the
principle that's important; an unaccountable authority that can force you to accept wrinkles can force you to accept far worse. A few pence on a box of tea wasn't much either.
Wednesday, July 6, 2005 ~ 11:55 a.m., Dan Mitchell Wrote: Taxes and regulations are in many respects the financial glue that holds the European project together. Interestingly enough, while the EC
member nations continue to wrangle over the proper management of their budgetary obligations, EC President Jose Manuel Barroso announced that "we at the Commission are thinking of an idea that I
find very interesting, and that is the funds from fines imposed on companies that break competition rules could go to development aid." ...Barroso didn't mention Microsoft, the most heavily fined company in
history under Europe's competition rules. But the writing is on the wall: Microsoft (and other multinational companies, especially American ones) is a reliable cash cow for Europe, and what better way to cement
Microsoft into Europe's budget process than to link Microsoft's fines to a nebulous anti-poverty crusade? ...Because Europe's low productivity,
high taxes and abundant regulations continue to put it at a disadvantage internationally, it can only increase its power in the world by extorting
money from elsewhere: from the U.S. government if possible, and from U.S. companies for certain. If Europe would only unleash its own free market, its entrepreneurs and innovators could provide the wherewithal
to support the continent's geopolitical goals. Instead Europe seems destined to grow its government bureaucracy faster than its economic base.
Wednesday, July 6, 2005 ~ 10:30 a.m., Andrew Quinlan Wrote: There is no scientific evidence that human activity threatens to cause "sudden climate change." Even if it did, eight politicians socializing at a
Scottish golf club would be powerless to stop it unless they have some plan for depopulating the globe. George W. Bush has largely tuned out
the "global warming" siren calls -- whose true purpose are to winkle more revenue out of taxpayers. ...But take heart, because whatever
emerges at Gleneagles on this subject will be mostly lip service. Even the European stalwarts who made vows to the United Nations aren't doing much to uphold the Kyoto Protocol. They are becoming aware,
belatedly, that their limping economies won't withstand much more abuse of state powers to tax and regulate. Turning up the volume on the rhetoric aimed at placating the Greens and Naderites will have to do.
Wednesday, July 6, 2005 ~ 8:27 a.m., Dan Mitchell Wrote: Judging from the election program the Social Democrats will present today, [Schroeder's] party intends to risk its future on offering Germany
more of the same, in larger and less palatable doses. While the program pays lip service to economic reforms, it actually goes in the opposite direction. It opposes loosening Germany's strict labor laws and
one-size-fits-all collective bargaining system and instead calls for a populist tax on the rich. Singles and married couples would have to pay an additional 3% tax on annual incomes above EUR250,000 and
EUR500,000 respectively -- all in the name of "social justice," of course. This group already pays 11.2% of all income taxes even though it makes
up only 0.13% of all taxpayers and earns 5.1% of all income. Raising the top marginal tax rate to 45% from 42% most likely will do little for
government revenues. Taxpayers find ways to avoid high marginal rates, usually with unfortunate economic consequences. One way, of course, is to work less hard, which is the last thing Germany needs.
Tuesday, July 5, 2005 ~ 1:16 p.m., Andrew Quinlan Wrote:
Tuesday, July 5, 2005 ~ 11:45 a.m., Dan Mitchell Wrote: President Bush yesterday challenged EU leaders to scrap massive subsidies paid to their farmers, saying free trade with Africa would
eliminate the need for Third World aid. Mr Bush, on the eve of the G8 summit in Gleneagles, said that Europe paid "tremendous" agricultural
subsidies, and that the US was ready to drop its own payouts to American farmers if Europe had the courage to do the same. ...Asked directly if America would drop its subsidy system if the EU abandoned
the Common Agricultural Policy (CAP), Mr Bush said: "Absolutely. And I think we have an obligation to work together to do that. "Because if we
do achieve this business of free trade, and if markets in the West are opened up to countries in Africa, they could be so successful, they could
eliminate the need for aid. The benefits that have come from opening up markets - our markets to them and their markets to us - far outweigh the
benefits of aid." Mr Bush's call to scrap agricultural subsidies in the developed world follows that of Tony Blair, who recently said the system
of over-generous subsidies was "hypocrisy" that could no longer be ignored. Farmers in developed countries receive more than £150 billion
in subsidies, which Mr Blair said gives them an unfair advantage which holds back Africa's poorest nations. ...A senior source close to the British
G8 negotiating team last night welcomed Mr Bush's comments, saying he had delivered a "major challenge to the European Union". He added:
"Mr Bush has just upped the pressure. The seeds are there of a potential breakthrough." The British, he said, were last night in talks aimed at
persuading the G8 to wipe out all export subsidies in the next five years. ...A spokeswoman for ActionAid, one of the members of the Make Poverty History campaign, welcomed Mr Bush's comments. "The
subsidies have been extremely damaging and if the G8 leaders can agree to end that system it will be an important move towards making poverty history and something the billions of people who watched Live 8 are
demanding." ...Mr. Bush said that the U.S. would "absolutely" drop its system of farm subsidies if the EU eliminated its EUR40 billion a year Common
Agricultural Policy. That bold offer puts the ball in Europe's court very nicely. It also trumps the demands being made in advance of this week's Gleneagles summit for a doubling of official development aid to
sub-Saharan Africa and further debt forgiveness. Getting rid of U.S. and EU subsidies -- and the protectionism they entail -- would do far more to
address a root cause of African poverty. Namely, too many African exports, particularly farm commodities, are kept out of Western markets by tariffs, import quotas and price supports for domestic producers.
Open those markets and encourage good governance and, as history has proven over and over, you'll unlock the door for poor nations to generate wealth and free themselves from dependence on handouts. But
no one ever said it would be easy. France's rich farmers will cling tenaciously to their dole with the help of Jacques Chirac. He has made that clear to would-be reformers, led by British Prime Minister Tony
Blair. The U.S. has its millionaire mendicants as well, as efforts in Congress to defeat Mr. Bush's Central America Free Trade Agreement have made clear.
Tuesday, July 5, 2005 ~ 7:00 a.m., Dan Mitchell Wrote: The EU's latest effort to crackdown on tax evasion among its citizens is thought to be a major factor behind a substantial increase in money
flows to areas where the directive cannot reach, most notably Asian financial centres, and particularly Singapore, Hong Kong and Dubai. "We know that some of the banks in the countries with which we have
passed agreements have already flown to Singapore or Hong Kong and created some activities there. That is very clear," stated the European Commission's head of tax policy, Michel Aujean, according to Agence
France-Presse. According to the Bank of International Settlements, Singapore's total foreign deposits doubled last year to reach $157 billion.
...Aujean conceded however, that the directive is by no means watertight and opportunities are likely to be found to circumvent the new rules, precluding the need for investors to seek new, more tax friendly
locations to park their money. "It's true that this text and the equivalent agreements (with non-EU members) will leave room for a certain
number of possibilities and the banks are thinking about ways of using these possibilities," he noted. One of the most obvious 'loopholes', as
many describe it, is the fact that the provisions of the directive apply to individuals, but not to companies or trusts, and industry watchers believe
that many investors and account holders will simply choose to hold their assets in company form. Moreover, so far, the directive only covers interest income generated from bank accounts, bond coupon payments
and mutual funds holding more than 40% of their portfolio in debt securities. It leaves other forms of investment income, such as those from stock dividends and other securities, untouched.
Monday, July 4, 2005 ~ 1:56 p.m., Dan Mitchell Wrote: When Americans celebrate their freedom on Monday, not all of us will have the same freedom to celebrate it. Though about 84 million
Americans live in 19 states that allow unrestricted use of consumer fireworks, 36 million other Americans live in five states, including New York, New Jersey, and Massachusetts, where they need a permit to light
even a sparkler. ...just six people a year died in fireworks-related incidents from 2000 to 2003. And many of those deaths occurred at professional fireworks displays. In contrast, about 15 times more
children under the age of 10 drown in bathtubs each year than the total number of people re killed in fireworks accidents. Despite the fears raised by the media, fireworks deaths are not something that people
should spend much time worrying about. There is no obvious relationship over the years between fireworks use and deaths. Though almost exactly the same number of people died or were injured in 1976 and 2003,
fireworks use grew almost every year, soaring from 29 million pounds of explosives used to 221 million pounds. Ironically, the laws haven't even
produced the desired results. This may occur in part because there were few such deaths to begin with. Last year, states with bans actually had a
much higher fireworks-related death rate (.027 per million people) than states without restrictions (.012 per million). ...We can protect people
from only so much, and if we banned all the products that caused more deaths and injuries than fireworks, there would be virtually nothing left
to use. After all, what is the Fourth of July celebrating if we criminalize even the tiny risks associated with fireworks?
Monday, July 4, 2005 ~ 11:21 a.m., Dan Mitchell Wrote: ...no one would challenge the premise that there is too much poverty. Yet, why poverty exists and how to fix it is a much more difficult
question than British rock star Bono would have us believe. A front page headline the other day in the prestigious Financial Times announced
"Aid will not lift growth in Africa, warns the IMF." The International Monetary Fund and the study it published, authored by its chief
economist, cast dubious light on the effectiveness of aid in reducing poverty and producing economic growth. The study warns that aid can cause just the opposite. ...A study just published by the International
Policy Network in London reports that, despite $400 billion in aid expenditures in Africa from 1970 to 2000, the correlation between the aid and economic growth was negative. Increases in aid resulted in
worse economic performance. The general explanations for this negative correlation between aid and economic performance are that aid discourages the very activities that produce economic growth and
vitality _ savings, investment, and incentives for government policies that encourage and sustain positive economic activity.
Monday, July 4, 2005 ~11:12 a.m., Dan Mitchell Wrote: As for an overall cost estimate, W. Mark Crain of George Mason University and Thomas D. Hopkins of the Rochester Institute of
Technology prepared an estimate of regulatory costs for 2000 for the Small Business Administration (SBA). Their report assessed social and environmental costs as well as costs of economic regulations (such as
price and entry restrictions), "transfer" costs (such as farm price supports, which shift money from one pocket to another), and paperwork
costs (such as tax compliance). It found regulatory costs of $843 billion for 2000. ...Adjusting the Crain and Hopkins 2000 regulatory costs for
2004 by extrapolating the growth in regulatory costs that had occurred between 1995 and 2000 yields a rough estimate of $877 billion. ...U.S. regulatory costs exceed the entire 2002 GDP of Canada, which stood at
$725 billion. The regulatory burden also exceeded Mexico's GDP of $637 billion. Total regulatory costs of $877 billion are substantial-7.6 percent of U.S. GDP. ...Adding the $36.3 billion in administrative costs
tabulated by the Weidenbaum and Mercatus centers to the Crain and Hopkins $877 billion estimate for compliance costs brings the total 2004 regulatory burden to $913 billion.
Sunday, July 3, 2005 ~ 1:45 p.m., Dan Mitchell Wrote: What happened to the $2 billion raised with Live Aid? Moreover, over the last decade government and private charities have poured over $25
billion into Africa for seemingly little effect? In fact, Africa has had an aggregate g.d.p. reduction of about 25 percent since the Live Aid
concerts two decades ago. Without question the issue at hand is poverty in Africa, but overlooked by well meaning rockers is that as long as
tyrannical governments control the distribution of funds those targeted for relief never get it. Starvation is indeed a problem in many parts of
Africa, most especially in the Sudan. But in this nation emergency food relief sent by the U.S. and others is used as a weapon to subjugate designated enemies of the government. This has been a pattern observed
earlier in Somalia, Ethiopia and Eritrea. ...As Peter Baur, the father of development economics once noted, "foreign aid is little more than poor
people in rich countries giving money to rich people in poor countries." ...Surely this should have been learned from prior experience. Unfortunately when it comes to aid, the lessons of the past are either
ignored or are bypassed by the expression of good will.
Sunday, July 3, 2005 ~ 12:11 p.m., Dan Mitchell Wrote: According to a U.S. Department of Labor audit, the Oregon Employment Department paid out $76.3 million of taxpayers' money to fraudulent
enrollees in 2003. This means 9.5% of all of the state's unemployment insurance (UI) benefits were paid out unnecessarily. ...Employers, through the employment tax, have to bear the cost of the unemployment
insurance system. Corporations choosing to stay in Oregon pass the expense to employees in the form of lower wages and reduced benefits. Other corporations might choose to move to areas with more
company-friendly mindsets. Either way, the tax is a drain on the Oregon economy.
Saturday, July 2, 2005 ~ 2:45 p.m., Dan Mitchell Wrote: The political temptation may be great to appoint a Hispanic Justice or another woman or some other nominee selected on the basis of group
identity rather than individual qualifications. At this crucial juncture in the history of the Supreme Court, that would be needlessly repeating the
mistake that brought Sandra Day O'Connor to the High Court in the first place. The political path of least resistance would be to nominate someone who can get confirmed by the Senate without a long political
battle that would polarize the country. Another little-known "stealth" nominee like David Souter might fill the bill but the track record of
Justice Souter's disgraceful disregard of the Constitution should be enough to warn against going down that road again. Then there are the
judicial candidates with a "conservative" label but who lack the toughness and integrity to stand up to all the pressures and temptations
to go along with ideas that will win praise in the media and among the law school elites who favor liberal judicial activism.
Saturday, July 2, 2005 ~ 1:34 p.m., Dan Mitchell Wrote: EU agriculture commissioner Mariann Fischer Boel told reporters in Brussels on Thursday (30 June) that one of her goals is to see overall
agriculture spending cut. "I would like to see a decreasing trend in spending on agriculture in Europe," Ms Fischer Boel said, lending more
fuel to the fire surrounding the future of the bloc's overall budget. ...Despite a desire to reduce spending on agriculture, Ms Fischer Boel
was adamant that the EU's Common Agriculture Policy stay intact. ..."I want to maintain the agriculture policy as a common policy," said Mrs
Fischer Boel. She said co-financing is the first step towards re-nationalisation of agriculture, which she is vehemently against.
Saturday, July 2, 2005 ~ 12:11 p.m., Dan Mitchell Wrote: ...current European and G-8 proposals to tax air transport to fund development -- by charging up to EUR10 per return ticket -- could not be
more misguided. ...Some say that air transport is undertaxed. In fact, governments and infrastructure providers are making a killing from the
fees they charge airlines and their passengers. In France, for example, each 1,000 kilometers traveled by air generates a EUR67 surplus for the French budget. The same distance traveled by rail costs the French
taxpayer EUR78. The same holds true for most of Europe. Air transport is not an undertaxed industry -- in many countries our passengers pay taxes at levels comparable to alcohol and tobacco. And there is a good
case to say that we are overcharged. ...If governments are truly serious about development, there are glaring opportunities to generate billions
for aid simply by removing trade barriers. Look no further than the farm subsidies that are at the heart of the European Common Agricultural Policy. Europe spends $65 billion each year to depress the prices of
agricultural goods. The costs of this are borne by European taxpayers and farmers in developing nations. How can Europe claim any leadership on development when it subsidizes every European cow by
more than $900 a year but only invests $8 per capita in aid to sub-Saharan Africa? Reallocating just 20% of CAP's budget would add $13 billion to Europe's aid efforts.
Saturday, July 2, 2005 ~ 11:53 a.m., Dan Mitchell Wrote: Those details are contained in a federal audit that calls into question $303 million of the $741 million spent to assess and hire airport
passenger screeners for the newly created Transportation Security Administration... The audit, performed by the Defense Contract Audit Agency at the TSA's behest, spotlights scores of expenses: $20-an-hour
temporary workers billed to the government at $48 per hour, subcontractors who signed out $5,000 in cash at a time with no supporting documents, $377,273.75 in unsubstantiated long-distance
phone calls, $514,201 to rent tents that flooded in a rainstorm, $4.4 million in "no show" fees for job candidates who did not appear for
tests. ...The original contract started at $104 million. But the contract was on a "time and materials" basis, meaning that most of the costs for
the number of hours worked and services were not fixed. Pearson and government officials said they had no idea how much the contract would end up costing. Procurement experts say that such an arrangement is
less desirable than other contracts because costs can get out of control if they are not closely monitored. ...Security guards in the Virgin Islands
paid $15 and $20 an hour were billed to the government at $30 and $40 an hour. Office workers provided by Kelly Services Inc. at $20 an hour
were billed to the government at $48.07 an hour. ...At the Marriott and Millennium hotels, the government was billed $129,621.82 for long-distance phone calls without any supporting documentation. ...The
cost for the Pier 94 operation came to $662,988.51, or about $39,000 a day for more than two weeks. Auditors said the entire amount was unsubstantiated. ...The company rented six magnetometers at a cost of
$475 a day for a total of $125,400. Auditors said similar magnetometers could have been purchased for between $2,500 and $6,000 apiece.
Saturday, July 2, 2005 ~ 11:02 a.m., Dan Mitchell Wrote: The actual objective of these new energy bills, like those that came before them, is to give away the maximum amount of taxpayer's money.
President Bush is likewise eager to sign anything called an energy bill, so long as it has what it takes to placate those who contribute sufficient
money to politicians to feel entitled to feed at this trough, such as ethanol producer Archer Daniels Midland. That is why the House bill required that 5 billion gallons of corn-derived ethanol be added to the
gasoline supply annually by 2012, and why the Senate upped that to 8 billion. ...Eight billion gallons of ethanol is a drop in the bucket, and that
drop won't replace a drop of petroleum. Ethanol cannot be produced from corn without wasting huge amounts of petroleum. Petroleum is needed to fuel farm machinery, to produce fertilizer and insecticide, and
to transport the corn and ethanol by diesel truck or train. ...Even the 10 percent ethanol blend Congress is so eager to force upon us would reduce fuel economy. People would notice. Do legislators imagine that
pleasing a few corn farmers will bring them so many votes that it won't matter if they anger millions of drivers? ...If the actual point of these
energy-subsidy bills were to economize on motor fuel or reduce its cost, then the most obvious "right choice" for consumers is to never let
anyone add even a drop of corn-based ethanol to your gasoline. For Congress, the right choice would be to end all subsidies to producers of flexible fuel vehicles and end all tax subsidies for consumers of fuel
containing corn-based ethanol. The people need to encourage politicians to make the right choices, not the other way around.
Friday, July 1, 2005 ~ 1:23 p.m., Dan Mitchell Wrote: ...the ability to raise billions from enthusiastic rock fans, concerned donors and reluctant taxpayers won't eliminate poverty alone. Money
has to be well spent, and policies have to be supportive. Compassion shouldn't blind donors... Economic performance depends on effective
policies, not ethnic characteristics. High levels of debt are not a problem, as long as it is privately held. Indeed there is a positive relationship
between outstanding private debt, economic performance and poverty alleviation. This demonstrates that private borrowers have used their financial resources efficiently. Domestic bank lenders have been rigorous
in appraising private investment projects, in assessing the credit worthiness of entrepreneurs, and in protecting the interests of their depositors and bank shareholders. ...In sharp contrast, government debt
owed to foreign creditors has dampened income growth. Aid-financed, public-sector projects are approved by people without a personal stake
in their long-term success. ...Recipient-country politicians don't have to account to their own electorates when the projects are funded by foreign
taxpayers, who themselves are mostly unaware of how their money is spent abroad. Such projects invite corruption... And if their failure results in unmanageable debt in the long run, there will always be
influential voices calling for debt cancellation. So moral hazards are ignored and the unproductive cycle begins again. Rapid poverty reduction requires fast growth of incomes, not redistribution.
Friday, July 1, 2005 ~ 12:51 p.m., Dan Mitchell Wrote: Economic Freedom of North America rates economic freedom on a 10-point scale for two indexes. An all-government index captures the
impact of restrictions on freedom by all levels of government. A subnational index captures the impact of restrictions by state or provincial and local governments. ...The econometric testing shows that
a one-point improvement in economic freedom on the all-government index increases per-capita GDP by US$5,907 for US states and by US$2,975 (C$4,671, using a conversion rate of 1.57) for Canadian
provinces. On the subnational index, a one-point improvement in economic freedom increases per-capita GDP by US$4,515 for US states and by US$2,454 (C$3,853) for Canadian provinces. ...Most US states
have maintained a high degree of economic freedom and only a handful have consistently not done so. West Virginia has the worst record but Hawaii, Maine, Montana, New Mexico, North Dakota, and Rhode Island
also have consistently low levels of economic freedom in both the all-government and sub-national indexes. Their average per-capita GDP was nearly US$4,700 below the US average in 2002 and their total
growth from 1981 to 2002 is 13 percentage points below the US average of 39% total growth in real terms. This is particularly remarkable because poorer states under normal conditions will grow faster than rich
states due to the well-known and empirically verified "convergence" effect. ...The states that have consistently strong records in both indexes
are Colorado, Georgia, Delaware, North Carolina, New Hampshire, Tennessee, and Texas. Their GDP per capita was US$4,400 above the US average in 2002 and their growth from 1981 to 2002 nearly 20
percentage points higher, a remarkable achievement given that economic theory and evidence shows that richer states should grow more slowly than poorer states due to the convergence effect noted above.
Friday, July 1, 2005 ~ 12:23 p.m., Dan Mitchell Wrote: The European Union's Economic and Monetary Affairs Commissioner, Joaquin Almunia has criticised the Hungarian government after reports
earlier in the week suggested that the government is planning to make considerable cuts in taxation... On Monday, the Hungarian government proposed a five-year tax cut plan, which will cut the overall tax burden
by a total of about 1 trillion Hungarian forints (EUR4 billion) between 2006 and 2010. These cuts will entail a reduction in the top rate of value-added tax to 20% from 25% and the top rate of income tax to
36% from 38%. Germany is set to break the stability and growth pact in the next three years, the German minister for finance, Hans Eichel, has said, according
to news agency Bloomberg. The country's projected budget deficit is 3.7 percent of GDP this year, 3.4 percent in 2006 and 3.1 percent in 2007,
meaning that Germany will not stick to the 3 percent limit for the fourth, fifth and sixth consecutive years.
Friday, July 1, 2005 ~ 10:58 a.m., Dan Mitchell Wrote: Ahead of next week's G8 summit in Gleneagles, Scotland, Canadian Prime Minister Paul Martin has launched a fierce attack on the EU and
the US for maintaining high agricultural subsidies and making it difficult for poor countries to compete.
Friday, July 1, 2005 ~ 10:14 a.m., Dan Mitchell Wrote: In Montgomery County, residents may turn in fireworks without fear of being arrested or fined. Those persons desiring to take advantage of this
amnesty may turn illegal fireworks to any Montgomery County fire station on Saturday, June 25, 2005, Saturday, July 2, 2005 and Saturday, July 9, 2005 between the hours of 9 a.m. and 9 p.m. Otherwise
Montgomery County residents may contact a special "fireworks hotline" operated by County's Fire Investigations and Explosives section. The
phone number is 240.777.2263. Citizens may also call the same number to report illegal use of fireworks in Montgomery County.
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