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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Wednesday, August 31, 2005 ~ 11:12 a.m., Dan Mitchell Wrote: America has an abysmal tax system. It is politically motivated; members of Congress amend the code to reward their friends and punish their enemies. And as every taxpayer
knows, it is maddeningly complex, sometimes incomprehensible, time-consuming to comply with, and frustrating. ...The tax code has been amended 14,000 times and is 60% longer since Ronald Reagan's presidency. The
cost of compliance in terms of taxpayer time has risen 67% in the past decade and a half. Americans spend more than six billion man-hours each year filling out tax forms at a cost to the economy of $200 billion.
...A simple flat tax instead of the complex current IRS tax system would free up six billion hours a year of our time and many billions of our income dollars, which are currently expended complying with our tax
laws, to spend working harder and investing more in our communities. Such a tax reform plan meets America's goals: It is simple and understandable, applies to everyone, gets government the revenues it needs, and
would end congressional manipulation of the tax system. Most important, America needs stronger economic growth, and the flat tax would help generate it.
Wednesday, August 31, 2005 ~ 10:44 a.m., Dan Mitchell Wrote: Some Americans are demanding that the government do something about gasoline prices. Let's think back to 1979 when the government did
do something. The Carter administration instituted price controls. What did we see? We saw long gasoline lines, and that's if the gas station
hadn't run out of gas. It's estimated that Americans used about 150,000 barrels of oil per day idling their cars while waiting in line. In an effort to
deal with long lines, the Carter administration introduced the harebrained scheme of odd and even days, whereby a motorist whose license tag started with an odd number could fill up on odd-numbered
days, and those with an even number on even-numbered days. With the recent spike in gas prices, the government has chosen not to pursue stupid policies of the past. As a result, we haven't seen shortages. We
haven't seen long lines. We haven't seen gasoline station fights and riots. Why? Because price has been allowed to perform its valuable function -- that of equating demand with supply.
Wednesday, August 31, 2005 ~ 9:23 a.m., Dan Mitchell Wrote: Every year, over 60 federal departments, agencies, and commissions employ a combined staff of roughly 242,000 full-time employees to write
and enforce federal regulations. Together, they issue thousands of new rules each year. ...Regulations are, in effect, a hidden tax on Americans.
...The FY 2006 Budget requests that Congress allocate $41.4 billion for regulatory activities, up from $39.5 billion in 2005. This reflects a 4.8
percent increase in outlays directed at writing, administering, and enforcing federal regulations. The regulators' budget is growing at a faster rate than other nondiscretionary spending, which the President's
budget held to only 2.1 percent in 2006. Since 2000, the regulators' budget has grown an amazing 46 percent, after adjusting for inflation.
...why should the average citizen care about this hidden tax? It's born by big businesses, not us. Not so. Small entrepreneurs, the engine of economic growth in America, bear the greatest burden. For small
manufacturers, those employing fewer than 100 workers, the cost-per-employee of complying with workplace regulations is 68 percent higher than for large firms. Unnecessary regulatory burdens increase the
cost of hiring U.S. workers, reducing American competitiveness, hindering job growth, and sending jobs overseas.
Wednesday, August 31, 2005 ~ 8:33 a.m., Dan Mitchell Wrote: The flat tax - where all exemptions and allowances are abolished and everyone pays the same rate - is marching across Europe, just as other
ideas have conquered the Continent once every generation or so. This time, the revolution is being driven not by the loathing of communism or of some ancient regime, but by that mysterious magic of markets:
competition. A flat tax regime has been adopted in 11 countries and counting. As each citadel falls, another is forced to respond to the new-found vigour of its neighbour. Next up is Greece, where the prime
minister could announce one in a few weeks' time. Greece has unbelievably rickety public finances and the hope is that a flat tax rate of 25 per cent will revive the moribund economy, reduce evasion, attract
high earners and send revenues pouring into the coffers of Athens. But a far bigger prize for the flat-tax revolution is to come. Over in Germany...
"With her surprise move to name Germany's flat-tax guru, Professor Kirchhof, as her preferred choice for finance minister, Merkel has
regained the political initiative and stirred up a healthy debate about tax reform," writes Lorenzo Codogna, Bank of America's European
economist, in a note to clients. "If Germany turned itself into the first major Western country to adopt a flat tax, it would probably become a
much more attractive place for business investment in general." ...As you would expect, none of this appeals to Gordon Brown. He looks more and
more like one of the old Soviet leaders who would say Niet to any suggestion that communism was failing, even as the Polish shipyard workers downed tools. The Chancellor prefers to review his Red Army of
tax inspectors and officials... And in case you think that describing Mr Brown's tax collectors as an army is overdoing it, a report by the
Treasury select committee last year said there were 99,400 of them, only a couple of thousand less than the strength of the Army and much more than both the RAF and the Royal Navy.
Wednesday, August 31, 2005 ~ 7:19 a.m., Dan Mitchell Wrote: Following lobbying from unnamed groups, Brussels officials over the past few weeks have made a fresh attempt to get the Brits in line with
the rest of Europe in using the metric system, UK media report. ...The Harold Wilson government decided to go metric as early as 1965 and the UK government also agreed to the principle of metrification in 1972
when it adopted the EC act to join the EU. But in 1979 Britain was given a derogation, allowing it to delay implementation of some of the changes. Again, little happened until 2000 when it became illegal to sell
products by reference to pound, pint or gallon - with the exception of beer. In 2001, a market trader named Steven Thoburn lost a widely-reported court battle to continue labelling his bananas in pounds
and ounces. He was nicknamed the Metric Martyr, but died earlier this year of a heart attack, aged just 39. Brussels' decision to take up the
issue again is likely to spark further controversy among British citizens who are already mostly hostile to the EU. Few Brits see the point in
swapping one pint of ale to 568ml or driving 1.609km instead of 1 mile. "These damn Eurocrats must be mad if they think they can separate a
Brit from his pint", Londoner Sam Patterson told the popular British tabloid, the Sun. ...If the UK fails to act, it risks an infringement procedure at the EU Court of Justice in Luxembourg. However, a
spokesman for the Department for Transport told the Sunday Times that "The derogation says we will go to metric when we choose a date. We
are within our rights, and we have no intention of getting rid of the mile".
Tuesday, August 30, 2005 ~ 9:13 a.m., Dan Mitchell Wrote: Unemployment among America's teenagers remains stubbornly high at 16%. Even more frustrating is that the jobless rate for African-American
teens is close to 33% -- higher than during the Great Depression. ...teens and unskilled workers face barriers to entry when they attempt to join
the job market for the first time. The scandal here is that these barriers are created in large part by liberal policymakers who claim to represent
the best interests of unemployed workers. ...For decades economists have piled up studies concluding that a higher minimum wage destroys jobs for the most vulnerable population: uneducated and unskilled
workers. The Journal of Economic Literature has established a rule of thumb that a 10% increase in the minimum wage leads to roughly a 2% hike in teen unemployment. ...Minimum wage jobs are predominantly
filled by new entrants to the labor force. ...They teach people how to work: to show up on time, be courteous to customers, and use time productively. FirstJobs.org recently interviewed America's most
successful CEOs, and it is striking how many mentioned the skills they learned on their first jobs as critical to their professional success.
Without a first job, there can't be a second or third. In his classic book, "The State Against Blacks," economist Walter Williams denounced the
minimum wage as one of the most onerous forms of legal discrimination in the last quarter century. With one out of every three black teens now
legislatively priced out of the job market, we wonder how much higher the jobless rate must go before politicians understand the folly of their false compassion.
Tuesday, August 30, 2005 ~ 8:36 a.m., Dan Mitchell Wrote: ...the Transportation Security Administration is looking at new rules that would again allow passengers to carry on ...ice picks, razor blades,
martial arts throwing stars, bows and arrows, and knives under five inches long . . . which would appear to include box cutters. ...The same
Transportation Security Administration that seems to delight in taking away our tiny nail clippers — to save us from doom at 30,000 feet — now suggests it might be A-OK to bring an ice pick on board. Don't get
me wrong. I'm glad to see the TSA relax some of its ridiculous rules. Folks may soon be able to keep their shoes on while going through security, and the days of harassing travelers for using one-way tickets
may finally be over. No complaint there. ...Apparently, the TSA wants passengers to be better armed than pilots. The agency fought the proposal to permit pilots to carry firearms ...It never made much sense
that a pilot already trusted with the lives of hundreds of people on the plane and thousands more on the ground should face such laborious additional scrutiny to carry a gun. Especially considering the gun was
there only as a last-ditch defense against a maniacal mass murderer threatening to take over the plane.
Tuesday, August 30, 2005 ~ 7:59 a.m., Dan Mitchell Wrote: In comments made in the Australian media last week, Prime Minster John Howard suggested that the country's top rate of income tax is too
high ... Currently, Australia's top rate of income tax is levied at 47% ...Mr Howard indicated that there is room still for ...a cut in the top rate.
"I still think 47 is too high and I still think it probably cuts in still a little too early," Howard said in a television interview late Thursday with the
national broadcaster, ABC. "...We've also got to look after the achievers and the contributors and the wealth generators of our society...," he
added on Southern Cross radio, also on Thursday. Mr Howard's comments have been welcomed by the Australian Chamber of Commerce and Industry (ACCI) ...the ACCI's chief executive Peter
Hendy said in a statement. "ACCI stated that it was disappointing that the Budget recognised that there is a problem with the tax system but
made only a half-hearted attempt to fix it. We therefore are very pleased that the Prime Minister recognises that the top tax rate is an issue that needs examination," he added.
Monday, August 29, 2005 ~ 11:22 a.m., Dan Mitchell Wrote: ...much of the Washington establishment is shocked the deficit is falling rapidly due to surging tax revenues, despite the "massive" Bush tax cuts.
The Washington establishment was shocked back in the late 1970s when, as a result of the capital-gains rate tax cut, tax revenues went up rather than down. They were shocked again in the mid-1980s when revenues
surged despite the "massive" Reagan tax rate cuts. They were again shocked in the early 1990s when new tax revenues did not pour in after
the Bush 41 tax rate increase. In the mid-1990s, they were also shocked when the Republican Congress forced President Clinton to cut the capital-gains tax rate, and revenues soared, leading to an unanticipated
budget surplus. ...Taxes affect the willingness of people to work, save and invest which ultimately determines the growth of the economy and the number and quality of jobs produced. The government's tax revenue
estimating agencies, primarily the Joint Tax Committee of the Congress and the Office of Tax Analysis in Treasury, have poor records of tax revenue forecasting, particularly long-run, because of inadequate
behavioral and macroeconomic analysis. These forecasts drive congressional and administration decisions about how much to increase or decrease tax rates and other major tax policy issues. Bad numbers
lead to bad policy, which hurts everyone.
Monday, August 29, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: The ratio of total tax revenues as a per cent of GDP is generally used as an indicator for the overall tax burden... The French tax tax-GDP ratio
is significantly above the OECD average and the EU 15 average. It is similar as in Finland and Belgium and only Denmark and Sweden have markedly higher tax levels. Despite relatively high level of taxation
government revenues have never been sufficient to fully cover spending. ...The personal income tax has been particularly affected by redistributive objectives. The rate structure is highly progressive. ...The
top marginal rate is relatively high (48.09% and including social taxes 56.09% for taxable income up from around 48 000 euro in 2004). Among OECD countries only Denmark has a higher rate top marginal
tax rate (59%) while Sweden has a similar rate (including local taxes 56.5% for taxable income up from around 48 000 euro). ...only about half of the population pays any income tax and the shares of personal
income tax revenues in GDP and in total tax revenues is relatively low. It yields less than 7% of total taxes and around 3% of GDP which is lower than in most other developed OECD countries. ...Despite the cuts
in the statutory rate over the past decades the revenues from taxes on corporate income increased over the past decades from around 2% of GDP to around 3% of GDP. ...The French tax system appears to be very
complex, which gives rise to high costs, both for the tax administration and for tax payers. ...a tax reform agenda could have the following elements... lower top rates... cutting the corporate tax rate...
Monday, August 29, 2005 ~ 10:41 a.m., Dan Mitchell Wrote: Next month's report of the White House tax reform commission will likely stop short of advocating a complete scrapping of the tax code. But
look for it to have warm words for how well the flat tax is promoting economic growth in the more than dozen places--ranging from Ukraine
to Hong Kong--that have adopted variations of it. ...the stodgy German media are now consumed with debate over the flat tax. Berlin's left-leaning Der Tageszeitung noted that under Mr. Kirchhof's proposal
generous exemptions would mean a family of four would pay tax only on its portion of income that was over $42,000 a year. With the current German tax system now operating with 90,000 rules and 418 tax
exemptions it asked, "Isn't an understandable tax system good for all? . . . Kirchhof stands for clarity." ...In Britain, die-hard opponents of the flat
tax, such as Chancellor of the Exchequer Gordon Brown, were caught censoring portions of an internal Treasury paper on the subject that was obtained under the recently effective Freedom of Information Act. The
unexpurgated version, leaked to the Daily Telegraph, found that a flat tax would likely make Britain more attractive to foreign investors,
eliminate economic distortions and create a "mini-economic boom." The paper noted that under flat-tax systems in other European countries the
rich end up paying a larger share of total tax revenues. In flat-tax countries, taxpayers in the highest brackets move from consumption or tax-sheltered investments to more productive, taxable investments.
...Donald Trump is full of praise for Mr. Forbes's new book, "Flat Tax Revolution." Actor Clint Eastwood praises a flat tax because it would
mean "a little old lady on a home computer [could do] the work of all these thousands of bureaucrats and accountants." ...If the U.S. doesn't
adopt the flat tax it may find itself losing jobs, capital and ambitious entrepreneurs to nations with a more ambitious growth agenda. Alvin
Rabushka, a senior fellow at Stanford's Hoover Institution, believes it's only a matter of time before one an emerging economic superpower like
China or India goes the flat-tax route. His book on the subject has just been published in Chinese, with a preface by Lou Jiwei, the vice minister
of finance. If China adopted a flat tax, more than a quarter of the world's population would be filling out tax returns on the back of a postcard.
Monday, August 29, 2005 ~ 10:08 a.m., Dan Mitchell Wrote: When bureaucrats seize power, they do it not with swords but with chloroform. And this document is a power-grab by people of whom you
have never heard, the officials of the U.N. Secretariat, working in tandem with the diplomats of those countries and international organizations that would like to expand the power of the U.N. and its
various agencies over both the citizens and governments of member nations. ...its main thrust is to extend the U.N.'s power directly into
countries and over the lives of citizens, corporations and private bodies. ...The section on the environment commits governments to promoting
something called "sustainable consumption." ...a government that endorses it will limit its citizens' standard of living in line with the U.N.'s
view of its environmental sustainability. And we all know from other pronouncements that the U.N. and its agencies consider U.S. consumption to be unsustainable. ...These treaties and declarations
include enforcement mechanisms such as "monitoring" bodies. Sovereign democratic nations such as Canada have had to host delegations from the U.N. investigating whether their budgetary cuts in
welfare violate some commitment they made on welfare rights. ...the U.S. government is coming under enormous pressure to endorse this catalogue of potential interventions as a result of pressure not from
despots but from its closest democratic friends. ...The time to halt this diplomatic rake's progress is now - and to do so on the principle that
Americans are a self-governing people. If Tony Blair is prepared to surrender Britain's democratic sovereignty to either a European government or a U.N. committee, that is a matter for him and the British
people. American democracy needs no external examiners.
Monday, August 29, 2005 ~ 9:30 a.m., Dan Mitchell Wrote: In 1992, the year when I became Prime Minister, we had an inflation of more than 1,000%. We had a drop in the economy of more than 30%. We
were totally dependent on Russia. Most of our economy was state owned. Food was rationed. There was no gasoline, which means no cars in the
streets. ...We passed flat tax legislation in 1993 in order for it to become effective on 1 January of the next year. ...it helped Estonia very much.
We introduced it so quickly, because we thought it was a good method to fight unemployment. We had to encourage the people who were losing their jobs. The old fashioned dinosaur factories just closed down. We
could not keep them running. This meant that we had to encourage the people to do something for themselves which meant they had to start their own businesses. But when you have to start your own business with
a high level of taxation you will be killed. In a progressive system of taxation those who work more are taxed more. This is not encouraging people to do something. We needed to wake them up. It worked. The
immediate result was the creation of an enormous number of new working places. According to the prognoses about unemployment approximately 30% of the people were set to lose their jobs during the
following year. In reality, however, we had a very low level of unemployment, only 5 to 6%, as the result of the introduction of the flat tax, because the people just created their own businesses.
Sunday, August 28, 2005 ~ 2:45 p.m., Dan Mitchell Wrote: The most impressive speech during the recent Regional Meeting of the Mont Pelerin Society was undoubtedly Czech President Václav Klaus's
"View from a Post-Communist Country in a Predominantly Post-Democratic Europe." ...Václav Klaus is an indomitable defender of liberty, Europe's only leader in the mould of the formidable Lady
Thatcher. Though communism, the "hard version of socialism" is probably over this has not automatically led "to a system we would like
to have and live in," he said. ...He also opposed "excessive government regulation" and "huge subsidies to privileged or protected industries and
firms." He warned that Europe's social system "must not be wrecked by all imaginable kinds of disincentives, by more than generous welfare
payments, by large scale redistribution, by many forms of government paternalism." Instead, Europe has to "be based on freedom, personal
responsibility, individualism, natural caring for others and genuine moral conduct of life."
Sunday, August 28, 2005 ~ 11:30 a.m., Dan Mitchell Wrote: Many of Molokai's 6,800 residents are too young to remember Richard Nixon as their president or the gas crises of the early 1970s. But they
may soon be seeing more Nixon-era-like lines, gas shortages and even rationing. In a thoroughly misguided attempt to stem the rising price of
gas, Hawaii is set to impose Nixon-style price caps on all the islands' pumps. The law, set to take effect Sept. 1, ties the price of gas to the
wholesale price of gasoline at three price points on the U.S. mainland. ...Hawaii's sky-high gas taxes (the highest in the nation) are driving up
prices. Maui County, he explains, has the highest taxes in the state at 60 cents a gallon, compared with 29 cents a gallon in Alaska. "Subtract the
associated taxes and you will find Hawaii is not out of line at all," Mr. Barbata says. ...Economist John Rutledge of Rutledge Capital, a resident
of Maui, says Hawaii may not experience a crisis immediately, but any major event in the world could affect the market and lead to a shortage
and rationing. Mr. Rutledge warns the caps will "knock the economy down," a prediction many experts agree with, including Mr. Kalapa, who
says outside investors will steer clear of the islands, and Mr. Barbata, who says many small distributors and businesses will be hurt or, worse,
forced to close. Living in Hawaii often feels like being part of a bad social experiment. If lawmakers truly wanted to reduce gasoline prices,
they'd eliminate or drastically reduce state and county gas taxes. Instead, they continue to pass laws like the gas cap that not only will be ineffective, but will hurt Hawaii's consumers and business, and most
likely raise the price of gasoline even higher.
Saturday, August 27, 2005 ~ 1:22 p.m., Dan Mitchell Wrote: West Virginia's status as the third-fattest state, confirmed in a recent report from the Trust for America's Health... For the morbidity and
mortality experts at the Centers for Disease Control and Prevention, it also poses a puzzle: Why are West Virginians so fat? I'll hazard a guess
and say it's because they eat too much. But the CDC is not satisfied with layman's explanations. A few months ago, it sent a crack team of investigators to hunt down the source of West Virginia's obesity
outbreak. ...Upon hearing about the CDC's epidemiological odyssey, Florida State University statistics professor Daniel McGee "burst out
laughing," the Times reported. "My God," he said, "what a strange thing to do." Another statistician, the University of Wisconsin's David
DeMets, was similarly dismissive... That has not stopped [the CDC] from rounding up the usual suspects. A study in the September issue of the American Journal of Public Health, for instance, warns about fast
food "clustering" near schools. ...Although the Center for Science in the Public Interest immediately cited the study as evidence that the "food
industry targets children," the simplest explanation is that fast food restaurants tend to be located in commercial areas with many potential
customers. There was no sign of "clustering" around schools in noncommercial areas. In any case, the researchers present no evidence
that having a McDonald's or Subway near school makes students fatter. They nevertheless close their article by suggesting fast-food-free zones around schools that would "remove noxious elements in the food
environments that schoolchildren are exposed to every day" -- and, incidentally, limit the lunch options of all the adults who happen to work
or shop nearby. This is the sort of policy -- coercive, choice-restricting, and almost certainly ineffective -- that comes from treating behavior like a contagious disease.
Friday, August 26, 2005 ~ 11:38 a.m., Dan Mitchell Wrote: ...the inflows are the direct result of the Bush administration's commitment to a concept: individuals respond to incentives. ...The Bush
White House and Congress flattened the steep stair-step progressive rate structure of the income tax, lowering the top marginal rate. They cut the
tax on dividends to 15 per cent from 39.6 per cent; 15 per cent became the new (lower) top rate for capital gains. They likewise created a one-time amnesty program for companies repatriating profits. Corporate
tax revenues this year increased 42 per cent upon the year before. ...as Stephen Entin of Washington's Institute for Research on the Economics of Taxation notes, we know that the new money relates to non-wage
income -- profits of small businesses, dividends, capital gains. Taxable income increased the most where tax cuts were most dramatic. ...Growth and revenues after tax cuts are no fluke. They are not freaky or
ancillary. Low rates are the key to the progress of a market economy.
Friday, August 26, 2005 ~ 11:02 a.m., Dan Mitchell Wrote: Drug dealers and others engaged in illegal economic activity currently evade income taxes but would have to pay taxes on their purchases
under a consumption tax. The same is true for those engaged in legal economic activity who currently fail to report or pay taxes on their income. But the tax evaders also have customers, who currently pay
income taxes before using their after-tax income to make purchases. Under a consumption tax, purchasers of illegal drugs would no longer have to pay income tax but would evade the consumption tax. The
increased taxes on producers in the underground economy would be offset more or less by the reduced taxes on consumers in the underground economy. ...The trade balance would be roughly the same
whether we follow the standard approach, which implements border adjustments (relieving the tax on exports while imposing it on imports) or an alternative approach without border adjustments. Given the same
economic fundamentals in the U.S., border adjustments will strengthen the dollar, putting importers and exporters in the same competitive positions no matter which approach is adopted. Ironically, the stronger
dollar would also be good for foreigners holding dollar-denominated assets -- the very ones who have financed our recent trade deficits.
Friday, August 26, 2005 ~ 10:24 a.m., Dan Mitchell Wrote: Two decades have passed since feminists lost their battle for "comparable worth," a bureaucratic scheme that would have replaced
the free market in determining wages. ...Under comparable worth, employers would be required to rate jobs according to abstract notions
of intrinsic value based on years of education required for a given job, the level of responsibility it entailed, and working conditions involved. In
a free market, however, wages -- like prices -- are set primarily by supply and demand. Diamonds are not intrinsically more valuable than water
(which is necessary to sustain life). But diamonds are in short supply relative to demand, which is why a one-carat solitaire costs a whole lot
more than a bottle of Evian. Similarly, it may seem "unfair" that tree-trimmers earn more than day-care workers, but the relative supply
of the former compared with the latter explains the differential. ...A current member of the Supreme Court, Justice Anthony Kennedy, helped deliver the death-blow to comparable worth when he was on the Ninth
Circuit. The case involved public employees in Washington state, where it was alleged that those in job categories filled mostly by women were
paid less than those held predominantly by men. "The state did not create the market disparity and has not been shown to have been
motivated by impermissible sex-based considerations in setting salaries," wrote Justice Kennedy in a unanimous opinion from the most liberal appeals court.
Thursday, August 25, 2005 ~ 12:04 p.m., Dan Mitchell Wrote: ...government kept getting in the way. "We have had to fight every bureaucracy that exists." Silbert doesn't employ certified teachers and
drug counselors, so welfare workers tried to smother her with red tape. "If Jesus Christ walked in today and wanted to start Christianity, he wouldn't be able to do it because they say to him, 'You need two
psychiatrists, you need one social worker, somebody has to sign the things . . . '" Silbert wanted to help some of the worst-off people in
America learn to be productive citizens. The government, which typically doesn't do anything more productive with those people than lock them up, release them and lock them up again, nearly stopped her with its
complicated rules. ...In the 1920s -- the last decade before the Roosevelt administration launched its campaign to federalize nearly everything --
30 percent of American men belonged to mutual aid societies, groups of people with similar backgrounds who banded together to help members in trouble. They were especially common among minorities. Mutual aid
societies paid for doctors, built orphanages and cooked for the poor. Neighbors knew best what neighbors needed. They were better at making judgments about who needs a handout and who needed a kick in
the rear. They helped the helpless, but administered tough love to the rest. They taught self-sufficiency. ...Just as public assistance discourages the poor from becoming independent by rewarding them with fixed
handouts, it discourages the rest of us from being benevolent. This may be the greatest irony of the welfare state: It not only encourages the poor to stay dependent, it kills individuals' desire to help them.
Thursday, August 25, 2005 ~ 11:45 a.m., Dan Mitchell Wrote: Soaring oil prices have revived the old bogeyman that the world is running out of oil. ...Back in 1960, a best-selling book titled "The Waste
Makers" by Vance Packard showed that the known reserves of petroleum in the United States were only enough to last another 13 years at the current rate of usage. ...This has been a worldwide phenomenon.
At the end of the 20th century, the known reserves of petroleum in the world were more than ten times what they were in the middle of the 20th
century -- despite an ever-growing use of oil. ...Even at $60 a barrel, most of the oil that is known to exist is too costly to extract. How much
will be extracted depends on how much higher the price of oil goes -- and how much new technology can recover more oil at lower costs. What if
the government did nothing about oil prices? Rising prices would lead people to reduce their use of oil and lead producers to drain some of the more costly oil out of the ground.
Thursday, August 25, 2005 ~ 11:17 a.m., Andrew Quinlan Wrote: Imagine our surprise to learn that meanwhile in Britain -- still considered one of Europe's more advanced economies thanks to the lasting work of
the Iron Lady -- the Treasury seems to have suppressed evidence in support of a flat tax. ...The affair will further embarrass Mr. Brown, already under pressure because his fiscal policy caused a £34 billion
budget deficit last year and probably will produce a similar hole this year. Most economists expect Mr. Brown to raise taxes further to bridge
the gap. If Mr. Brown's own researchers think that going the opposite way and introducing a flat tax could create a "mini-economic boom," it's
hard to understand why a man who wants to be prime minister wouldn't take a harder look at those deleted sections.
Thursday, August 25, 2005 ~ 9:32 a.m., Dan Mitchell Wrote: Name a country with more than 100 tax laws, 90,000 tax rules, 418 tax exemptions -- a system so Byzantine that huge chunks of tax revenue are
needed just to run the system. If you guessed the U.S. or maybe Italy you guessed wrong. We're talking about Germany. But as the German election campaign heats up, a revolutionary idea has been inserted into
the political debate. Europe's biggest economy has a glimmer of hope that its progressive income tax code might be scrapped and replaced by a simple, transparent flat tax. ...Angela Merkel, whose conservative
Christian Democratic Union (CDU) has a 14-point lead in the polls over the ruling Social Democratic Party (SPD), said she wants Paul Kirchhof
to be her finance minister should she win in September. ...Mr. Kirchhof, a former constitutional court judge and university professor, is best known
for his fight against Germany's insanely complex tax system. As a judge in 1995, he struck down Germany's wealth tax, saying it was illegal for
the state to take away more than 50% of a person's income. Two years ago, he proposed that Germany do away with all tax loopholes and introduce a 25% flat tax on all forms of income for businesses and
individuals alike. "Each person only has to pay 25 cents out of each euro earned. With the rest, he is set free in the garden of liberty," he declared.
...Mr. Kirchhof said he would like to see his plans implemented as early as 2007, so that "employees won't need 12 Saturdays each year to
complete their taxes but only 10 minutes." He said that the new tax form would fit into a fortune cookie. ...Interestingly enough, Germany is
learning about the wonders a flat tax can work from its implementation in the former communist east. Lithuania, Latvia and Estonia pioneered
flat taxes in the '90s, followed by Slovakia and Romania. Russia got a big revenue increase after it adopted a 13% flat income tax in 2001. Flattening taxes in Germany would be a tremendous boost to the
country's ailing economy and would increase the pressure on Europe's other major economies to follow suit.
Thursday, August 25, 2005 ~ 8:55 a.m., Dan Mitchell Wrote: ...tuition at a typical state university is up 36% over 2002 -- at a time when consumer prices in general rose less than 9%. In inflation-adjusted
terms, tuition today is roughly triple what it was when parents of today's college students attended school in the '70s. ...factors in the cost
explosion: ...Since 1994, financial-aid payments (mostly federal loans and grants) have risen by an extraordinary 11% per year. When someone
else pays the bills, we become less sensitive to price. ...most colleges (but not community or liberal-arts colleges) have reduced the share of resources devoted to undergraduate teaching, spending more on other
things -- research, administration, student services (luxurious recreational and student centers), athletics, etc. Only about 21 cents of each new inflation-adjusted dollar per student since 1976 actually went
for "instruction." ...the ratio of staff to students has risen over time. There are now six non-teaching professionals for every 100 students, up
from three a generation ago. ...What is the solution? New forms of competition (e.g., for-profit institutions, online schooling, more use of community colleges, new approaches to certifying skills) are emerging.
State legislatures have sharply reduced their share of funding for public universities, forcing some schools to slash costs, reduce bureaucracies,
increase teaching loads, get rid of costly underutilized graduate programs and more.
Thursday, August 25, 2005 ~ 7:30 a.m., Dan Mitchell Wrote: The Breastapo are at it again, trying to dictate what American women should and shouldn't do with their breasts. On August 9 they were at the
National Press Club, speaking out against the recent FDA decision to approve marketing of silicone breast implants (under FDA negotiable conditions) for cosmetic augmentation. ...Study after study confirms
silicone implants do not cause disease. ...Throughout the 1990s, litigation against the silicone-implant industry flourished in the absence of any
scientific proof that women were made ill by implants. Dow Corning Corporation, once the biggest implant maker, filed for bankruptcy in 1995 to pay $3.2 billion to settle about 440,000 women's claims.
Considering earlier successful lawsuits, the company chose to settle and thus limit its liability, lest it go out of business altogether. To date at
least 20 studies show no evidence that implants--intact or broken--cause connective-tissue diseases. ...Fears of serious health risks amount to a
tempest in a C-Cup, as The New Republic memorably put it. Yes, there are sometimes local problems such as pain or hardening of the implant, and correcting these problems may require additional surgery. But
women who are told of these risks should be able to make informed decisions for themselves. The objections of the Breastapo are driven by feminist body politics which say that women should love their bodies as
they are, not change them to please men.
Wednesday, August 24, 2005 ~ 1:12 p.m., Dan Mitchell Wrote: Why, then, are oil prices so high? There is no esoteric reason. It is plain old supply and demand. With the economies of huge nations like China
and India developing more rapidly, now that they have freed their markets from many stifling government controls, more oil is being demanded in the world market and there are few new sources of supply.
What should our government do? We will be lucky if they do nothing. ...Price controls, arbitrary new higher gas mileage standards for cars,
"alternative energy sources," and other nostrums are sure to surface once again. The last time we had price controls on gasoline, we had long
lines of cars at filling stations, these lines sometimes stretching around the block, with motorists sitting in those lines for hours. That nonsense
ended almost overnight when President Ronald Reagan, ignoring the cries of liberal politicians and the liberal media, got rid of price controls
with a stroke of the pen. ...Today production is being held back, not by price controls, but by political hysteria whenever anyone suggests
actually producing more oil ourselves. Organized nature cults go ballistic at the thought that we might drill for oil in some remote part of Alaska
that 99 percent of Americans will never see, including 99 percent of the nature cultists. ...Nor can we drill for oil offshore, or in many places on
land, again for political reasons. Nor can we build enough refineries or even build hydroelectric dams as alternative sources of power. Many of
the same people who cry "No blood for oil!" also want higher gas mileage standards for cars. But higher mileage standards have meant lighter and more flimsy cars, leading to more injuries and deaths in
accidents -- in other words, trading blood for oil.
Wednesday, August 24, 2005 ~ 11:38 a.m., Dan Mitchell Wrote: Enter Mr. Sanford, who wants to take the $4 billion spent each year in his state on Medicaid and create "personal health accounts" that would
be used to buy private health insurance. The details are still being worked out, and the amount each individual would receive would vary by age and other factors. But in rough outline individuals would receive
about what Medicaid spends on them now -- $4,000 for most adults. Anyone who buys insurance for less would be able to pocket the difference for other health-care needs. For patients, the advantages
include the ability to shop around and buy insurance that best fits their needs. ...South Carolina would get a better handle on total Medicaid
costs, since it is responsible only for the one-time grant. The open-ended nature of the Medicaid entitlement would also cease.
Tuesday, August 23, 2005 ~ 12:47 p.m., Dan Mitchell Wrote: ...data recently released by the International Strategy and Investment Group (ISI) found that 91 companies listed on the S&P 500 have
repatriated more than $191 billion of foreign profits back to America for investment in the U.S. ...without the provision, not one of these dollars
would have been invested in America, but instead would have been invested in other countries. ...the one time repatriation provision is clearly on pace to reach the $350 billion mark as forecasted by JP
Morgan... the initial $135 billion estimate provided by the Joint Committee on Taxation (JCT) has severely underestimated the amount of money being repatriated. JCT's estimate has not only been reached, it
is now exceeded by 41 percent. ...America's prohibitive and antiquated system of "worldwide" taxation is leading to less investment and job
creation in this country. The reduction in the tax rate and the subsequent overwhelming response by US companies provides the clearest evidence
to date on the destructive nature of American international tax law. ...the United States is one of the few industrialized nations with a worldwide tax system, which places American companies at a relative
disadvantage to other countries. Concurrently, foreign corporate tax rates are continually being reduced to enhance competitiveness in the global economy and America now has the second highest corporate tax
rates in the industrialized world.
Tuesday, August 23, 2005 ~ 11:59 a.m., Dan Mitchell Wrote: ...a Treasury paper released under the Freedom of Information Act last month had key sections detailing the advantages blacked out. ...The
uncensored paper seen by The Daily Telegraph presents a more balanced picture, acknowledging that a flat tax could increase economic activity
and tax revenue, making Britain more attractive to foreign investors. It could create a "mini-economic boom" and would "eliminate
distortions", the paper says. ...The complete report says that the combined effect of savings in compliance and an increase in revenue should enable a cut in average taxes and spur further reductions in
avoidance and evasion, making the economy more attractive to foreign investors and creating a mini-boom. The most potent excised piece of the Treasury's original work is a two-page section entitled "Efficiency and compliance". The first part
says: "The driving concept behind flat taxes is the idea that the effect of eliminating distortions on the tax base is sufficiently large to enable a
lower rate to actually maintain or even increase revenues. The reduction in rates and thus, in the tax burden faced by individuals should, in
theory, stimulate further economic growth by increasing rewards." ..."The lack of credits and exemptions in a flat tax regime should lead to
a significant reduction in avoidance and evasion as potential loopholes are eliminated," it says. It goes on: "A flat rate also increases economic
efficiency by reducing policy-induced distortions and allowing the market to function more naturally, improving the overall allocation of resources and encouraging labour supply."
Tuesday, August 23, 2005 ~ 10:17 a.m., Dan Mitchell Wrote: Once a year Volker Schilling takes a break from his job as a software consultant to fill in his tax form with the help of a book he calls his "red
bible", a thick tome running to more than 4,000 pages detailing the ins and outs of the country's Byzantine fiscal laws. The annual ordeal suffered by Schilling and millions of German taxpayers could become
considerably less painful if Angela Merkel, leader of the opposition Christian Democrat party (CDU), wins next month's election. ...Paul Kirchhof, 62, seen by Merkel as a future finance minister, has called for
the sweeping away of the country's myriad allowances and multiple tax bands and their replacement by a single flat levy of just 25%. Similar schemes are widely credited with having kickstarted the economies of
several of the former communist countries of eastern Europe. "Instead of needing 12 Saturdays to fill out a tax return, the new system would
need just 10 minutes," he declared. "I want to give voters back their freedom by letting them decide what to do with their money."
Tuesday, August 23, 2005 ~ 9:32 a.m., Dan Mitchell Wrote: ...we are confronted by the dreaded social disease of nannyism, the irrepressible urge toward do-good coercion. The nannies are all around
us now, attempting to ban smoking in outdoor areas, including New York's vast Central Park, working to eliminate one schoolyard game after another, including dodge ball (too violent), tag (hurts feelings by
turning kids into targets), and just about any game with winners and losers (competition douses the cooperative ethic, and losers can be traumatized for life). ...Nannyism is a progressive affliction. When the
nannies get something from the public, they always want more - helmets for tots riding tricycles, for example. ...The obesity police also want
more. Advising people to watch calories and fat is praiseworthy. Taxing "bad" foods out of reach is not. ...California's textbook review process
routinely eliminates references to food considered bad for your health, including ketchup and butter. A photo of a birthday party was dropped because the cake seemed unhealthful.
Tuesday, August 23, 2005 ~ 8:59 a.m., Dan Mitchell Wrote: The two- and three-hour long gas lines now stretching down city blocks in many provinces in China are certainly an unwelcome reminder of the
1970s when U.S. policies caused a similar energy panic. So let's think of this as a teaching moment. In China today, many of the same Carter-era policy prescriptions for high energy prices have incited the
unprecedented gas lines. The government has imposed price controls on oil and gas in an effort to fight inflation, just as the U.S. did back then,
and in the last few weeks it has even resurrected another Carter-era gem, a "windfall petroleum profits tax" on oil and gas producers.
...Price controls that are set below the market price always exacerbate shortages, because the artificially low price causes demand to rise and
supply to fall. With the price no longer permitted to equilibrate supply and demand, consumers wind up paying not with dollars, but worse, through waiting lines and lost hours in the day. That's what beleaguered
Russians learned many times over when they waited in grocery lines for price-controlled bread and chicken and chocolates during the Soviet era. ...A windfall profits tax only discourages increases in supply by
disincentivizing further production. High profits are precisely the desirable signal that a market sends to firms to find and produce more oil and gas.
Monday, August 22, 2005 ~ 11:43 a.m., Dan Mitchell Wrote: ...the state of California won't see a cent of tax revenue from a native daughter's success. That is because Gulbis, like many prominent
California-born sports stars, has moved to establish residency in an income-tax-free state before her biggest paydays as a professional athlete. ...Gulbis, of course, is not the only sports star to leave the
Golden State in search of less-taxing lands. She is not even the only Sacramento-area golfer to have resettled in Nevada. Scott McCarron, who has spent a decade on the PGA tour and amassed more than $9
million in earnings, resides in Reno. McCarron's agent told SN&R that although the golfer moved to Reno to be closer to his wife's family, taxes
"were a consideration." The state's best-known golfer, Tiger Woods, abandoned California for the tax-free confines of Florida when he
signed a lucrative $40 million endorsement deal with Nike in 1996. With California's income-tax rate set at 9.3 percent on top earners, Woods saved himself nearly $4 million with the move. ...California is at a
"tipping point" where new taxes will drive rich residents to income-tax-free states like Nevada, Florida and Texas.
Monday, August 22, 2005 ~ 10:00 a.m., Dan Mitchell Wrote: ....A well-organized business coalition, led by pharmaceutical firms and high-technology companies, pushed hard last year to get a long-sought
tax holiday into the corporate tax bill moving through Congress... But with bipartisan backing, the business groups prevailed. Most companies
with substantial cash holdings overseas have until the end of this year to bring them home at an effective tax rate of 5.25 percent, rather than the
standard corporate tax rate of 35 percent. ...Pfizer Inc. has led the pack with a promised $37 billion repatriation. Procter & Gamble Co. intends
to bring home $10.7 billion, and Johnson & Johnson Inc. has an $11 billion plan. Schering-Plough Corp. could bring back $9 billion. This
week, Hewlett-Packard Co. announced it will repatriate $14.5 billion in the second half of the year, mainly for "strategic acquisitions," said Ryan
Donovan, an HP spokesman. ...Companies with operations in countries with corporate tax rates close to the U.S. rate had nothing to gain, since
they already can deduct taxes paid abroad from tax bills on repatriated earnings. Companies with profits in tax havens with little or no corporate income taxes stand to gain the most.
Monday, August 22, 2005 ~ 8:36 a.m., Dan Mitchell Wrote: A quiet revolution has been sweeping through the countries of the old Soviet bloc. It is the flat tax revolution, the idea that complex tax
structures can be replaced with a single tax rate applied to income, spending or corporate profits. Estonia led the way a decade ago with a flat tax rate of 26% (soon to be cut to 20%). Slovakia has the same 19%
tax rate on incomes, profits and consumer spending. Now Georgia, Latvia, Lithuania, Poland, Romania, Serbia and Ukraine have all adopted elements of the flat tax. Notably so has Russia. It has a flat tax
of 13% on personal income... Thus an idea usually associated with free-market think tanks in America is blossoming at the heart of what used to be the Soviet empire. The Greek government, led by Kostas
Karamanlis, is actively considering a 25% flat rate of income tax to replace existing rates of 15%, 30% and 40%. ...The arguments in favour
of a flat tax are straightforward and compelling. By setting a single tax rate and abolishing complex reliefs, allowances and credits, the tax system becomes simple to administer and easy to understand.
Accountants might suffer, but the rest of us would gain. If the flat tax is set at a low enough rate, the rich lose the incentive to engage in
expensive tax planning schemes. Those on low incomes can be protected with a generous tax threshold. ...The Thatcher cuts in the higher rates of
income tax led to an increase in tax revenues from the better off and a rise in the proportion of income tax paid by them. This was exactly what Professor Arthur Laffer, inventor of the Laffer curve, would have
predicted: if you cut taxes you can increase tax revenues and create a virtuous circle.
Sunday, August 21, 2005 ~ 12:19 p.m., Dan Mitchell Wrote: Dutch agriculture minister Cees Veerman, last year received around EUR190,000 for his farms in the Netherlands and France. ... Recently it
was revealed that EU farm money disproportionately benefited big agri-businesses and the aristocracy in Britain, with some wealthy landowners receiving over £500,000 in 2004. ...The figures showed that
also in Denmark, some of the nobility were strongly benefiting from EU handouts, including Prince Joachim of Denmark. The husband of EU farm commissioner Mariann Fischer Boel also received subsidies from
Brussels. ...The two-year study shows that despite the recent CAP reforms, rich regions in Germany, the UK, France and the Netherlands receive a higher proportion of the subsidies than regions in southern and
eastern Europe. ...France, as the main recipient of CAP funds, argued that there should be no change until 2013, when a current deal runs out.
Sunday, August 21, 2005 ~ 11:32 a.m., Dan Mitchell Wrote: You don't have to live next to the United States to see how hard it is to stop criminals from getting guns. The easy part is getting law-abiding
citizens to disarm; the hard part is getting the guns from criminals. Drug gangs that are firing guns in places like Toronto seem to have little
trouble getting the drugs that they sell and it should not be surprising that they can get the weapons they need as well. The experiences in the
U.K. and Australia, two island nations whose borders are much easier to monitor, should also give Canadian gun controllers some pause. The British government banned handguns in 1997 but recently reported that
gun crime in England and Wales nearly doubled in the four years from 1998-99 to 2002-03. ...since 1996 the serious-violent crime rate has soared by 69 percent; robbery is up 45 percent, and murders up 54
percent. Before the law, armed robberies had fallen 50 percent from 1993 to 1997, but as soon as handguns were banned the robbery rate shot back up, almost to its 1993 level. The 2000 International Crime
Victimization Survey, the last survey completed, shows the violent-crime rate in England and Wales was twice the rate of that in the U.S. ...Australia has also seen its violent-crime rates soar immediately after
its 1996 Port Arthur gun-control measures. Violent crime rates averaged 32-percent higher in the six years after the law was passed (from 1997 to
2002) than they did in 1995. The same comparisons for armed-robbery rates showed increases of 74 percent. During the 1990s, just as Britain and Australia were more severely regulating guns, the U.S. was greatly
liberalizing individuals' abilities to carry firearms. Thirty seven of the fifty states now have so-called right-to-carry laws that let law-abiding
adults carry concealed handguns after passing a criminal background check and paying a fee. Only half the states require some training, usually around three to five hours. Yet crime has fallen even faster in
these states than the national average.
Saturday, August 20, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: The good times keep rolling Down Under. Australia is now in its fourteenth year of uninterrupted vigorous growth, outperforming other
major developed economies. Unemployment has come down to a 28- year low of 5.1 percent today from almost 11 percent in 1992, and inflation has steadfastly remained at 2 to 3 percent since the early 1990s.
The stock market is at record-breaking levels. That Australia has been growing at a little less that 4 percent per year since the early 1990s is all
the more remarkable when you consider that its farm sector has suffered its worst drought in a century. Australia's major trading partners, moreover, have faced serious downturns in recent times: Japan has
remained mired in recession for more than a decade; East Asia experienced a financial crisis in 1997-98; and the U.S. slowed for a few years in the wake of the dotcom crash and 9/11 attacks. Why then has
Australia been so exceptional? Thank a smart mix of free-market reforms and prudent monetary and fiscal policies. By restraining the deadening hand of the nanny state and giving more play to market
forces as the most reliable generator of wealth, Australian governments have transformed the way the nation does business. ...In the late 1970s,
the free-market position was adopted by conservatives like future prime minister John Howard. But it was the traditionally socialist Labor government that ditched its old shibboleths in the mid 1980s and
implemented a reform agenda. Prime ministers Bob Hawke (1983-91) and Paul Keating (1991-96) converted the nation's protectionist mentality to the idea that living standards depend on Australians' ability
to compete in the global marketplace. From this idea flowed the agenda of tariff cuts, lower taxes, reduced union power, budget discipline, low
inflation, financial and exchange-rate deregulation, privatization of governmentowned businesses... Prime Minister John Howard has sustained and extended these reforms since his election in 1996. The
benefits have included a surge in productivity, lower interest rates, and a wider choice of goods and services at lower prices. ...With Australian
voters having recently given his government a broad majority, the hope is that he will move further in the direction of free-markets, deregulation, and tax reduction. He could cement Australia's new
prosperity, and become the antipodal offspring of his hero Ronald Reagan.
Saturday, August 20, 2005 ~ 10:15 a.m., Dan Mitchell Wrote: To hear top government officials tell it, the station has to be completed to honor solemn obligations to our 15 international partners and to gain
scientific knowledge of great importance to further travel in space. Both rationales are highly questionable. Indeed, it looks as though the United
States is bent on spending billions more dollars and at least five years of effort to complete a station that will have only minimal value... There
seems little doubt that the station has been a disastrous misallocation of resources. It has already cost $75 billion to $80 billion by some counts, and even NASA's own manager of the space station program has
acknowledged that no one would invest that kind of money in the project today. The station's planned size and capabilities have shriveled steadily
under the impact of huge cost overruns, repeated downsizings, and slowdowns in the wake of the Challenger and Columbia accidents. ...The better, but more drastic option would be to retire the shuttles
immediately and back out of the station. That would save some $40 billion over a decade or so, according to the Congressional Budget Office.
Friday, August 19, 2005 ~ 10:37 a.m., Andrew Quinlan Wrote: CDAS, our state's experiment with Consumer-Directed Attendant Support for the severely disabled, got started in 2002. ..."It gives you
your life back," Mrs. Storey told me. "I'm in control of my health now." Under a federal waiver obtained by Colorado officials, she selects the
health aides who come to her house, bypassing the provider agencies otherwise required under Medicaid rules for home- and community-based services. ...With Medicaid expenses surging faster than
almost every other budget line in almost every state, such savings are welcome news to policy makers. Taxpayers in Colorado have seen their share of Medicaid -- matched dollar for dollar with federal funds --
increase almost 33% since 2001. Another 22% jump is predicted by 2010. ...The first two years of Colorado's CDAS pilot program, by contrast, showed average monthly spending at 21% under budget
($3,925 per client allocated, $3,131 expended). While the sample is tiny, the vector is positive for once.
Friday, August 19, 2005 ~ 10:00 a.m., Dan Mitchell Wrote: There are not enough Senate votes for repeal, so the debate is now down to choosing between a 45-55 percent tax rate with a hypothetical $10
million exemption or Republican Sen. Jon Kyl's plan of a 15 percent tax rate with a $3.5 million exemption. ...the estate-planning industry is
lobbying hard against a 15 percent estate tax, which would kill its costly tax-avoidance schemes. For the few who might put economics before
politics, this is no contest. Combining huge loopholes with high marginal tax rates is the textbook definition of a foolish tax -- one that maximizes
economic distortions while minimizing revenue. ...Alicia Munnell, an economist with the Clinton Treasury, estimated the cost of collecting the
estate tax is as large as the amount collected. ...In 1987, a study in Tax Policy and the Economy by Douglas Bernheim of Stanford concluded
that "available evidence suggests that, historically, true revenues associated with estate taxation may well have been near zero, or even
negative." ...a July Congressional Budget Office (CBO) study notes, an estate tax can "lead people to invest less than they would otherwise" and
"reduce entrepreneurial efforts." ...Any estate tax higher than the tax on capital gains is socially counterproductive, hurting the economy and
overall tax receipts, while benefiting nobody except estate-tax planners.
Friday, August 19, 2005 ~ 8:52 a.m., Dan Mitchell Wrote: Angela Merkel, leader of the Christian Democrat Union (CDU), Germany's principal opposition party, has appointed a prominent
advocate of a flat tax system as a finance policy expert to her election campaign team. ...Kirchof espouses a complete overhaul of the country's tax system, and advocates sweeping away Germany's extensive system
of taxpayer subsidies and replacing it with a flat rate of income tax charged at 25%. The appointment has raised eyebrows in many quarters since Kirchof's proposals go far beyond the tax reform plans announced
by Merkel in the CDU's election manifesto. However, the move is being interpreted by observers as a statement of long term radical intent on tax and economic policy by the CDU should Merkel oust Chancellor
Gerhard Schroeder in September's election. ...An opinion poll conducted last week by Forsa placed the CDU and Bavarian sister party Christian Social Union on 43%, comfortably ahead of the ruling Social Democrats
on 29%.
Thursday, August 18, 2005 ~ 9:15 a.m., Dan Mitchell Wrote: ...58% of Americans are "very satisfied" compared to only 31% in the EU-15. Only tiny Denmark scores better. What's more, 56% of
Americans say their lives have improved in the last five years, and almost two-thirds believe the situation will improve even more in the next five. ...In the EU-15, just 45% believe the situation has improved,
and only the Irish, Swedes and British outdo Americans in reporting improvements. When it comes to optimism, nobody beats the U.S. Just 44% in Europe expect things to turn better. The Irish come closest to the
American two-thirds with 58%. Pollsters say the economy and jobs worry Europeans the most -- and with good reason. Average economic growth in Europe over the last few years has been less than half that in
the U.S. while unemployment is almost twice as high as in America. Little wonder that residents of France, Germany and Italy, whose economies are particularly feeble, are among the most pessimistic and
dissatisfied.
Thursday, August 18, 2005 ~ 8:47 a.m., Dan Mitchell Wrote: Greek Prime Minister, Costas Karamanlisis is next month set to unveil radical tax reform proposals that could see the introduction of a flat rate
of income tax on both corporate and individual income in two years' time, according to reports. The Greek press reported last month that finance minister, Giorgios Alogoskoufis had drawn up plans for a flat
rate of tax to be levied on corporate and individual income at 25%, which the government will look to introduce on January 1, 2007, applying to income earned in 2006. It is rumoured that the minister will
announce the plans at the Thessaloniki International Fair in September. ...the government is banking on the new system bringing about an increase in tax revenues by reducing the incentives for tax evasion and
making the tax system generally simpler and more efficient. National competitiveness is also likely to have been an important consideration,
given the pro-business tax reforms being carried out in some of the new EU member states. Russia, Poland, Slovakia, Latvia, Lithuania and Estonia have all introduced some form of flat tax system in recent times.
Wednesday, August 17, 2005 ~ 9:15 a.m., Dan Mitchell Wrote: ...the Congressional Budget Office has now confirmed that federal revenues will rise this year by more than $262 billion -- the largest
single-year increase in tax revenues in American history. ...at 17.5% of GDP this year, Uncle Sam's tax take is close to the 17.9% postwar average. And CBO estimates that as the economy continues to grow, the
tax take will slowly rise throughout this decade to 17.8%. ...a large share of this year's revenue gusher is coming from higher than expected capital
gains and dividend tax receipts. Non-withheld personal income tax receipts -- much of which is from capital gains and dividend income -- have exploded by one-third since 2003. This suggests that the lower tax
rates on investment income may have paid for themselves. German corporate tax revenues have undershot the government's target by over one billion euros in the first seven months of the year, according
to a leaked Finance Ministry report due to be released on Friday. The report, seen by Financial Times Deutschland, compares actual tax revenues with mid-year targets set by the government. It reveals that
revenues from corporate taxes are 1,006 million euros under expectations. ...The Finance Ministry's report expects tax revenues to be 410.6 billion euros for the entire year, an increase of 0.3% year-on-year.
Wednesday, August 17, 2005 ~ 8:51 a.m., Dan Mitchell Wrote: ...another area in desperate need of reform within the aviation marketplace is air traffic control. According to Russell Chew, chief
operating officer of the Air Traffic Organization within FAA, air traffic control is facing an $8.2 billion funding gap over the next five years.
This shortfall mainly is the result of inefficiencies inherent in the unionized, government-operated system, combined with the ongoing decrease in ticket prices. The latter effect means that revenue from the
7.5 percent tax on airline tickets continues to dry up despite surging traffic. The solution to these problems is obvious: the federal government should "commercialize" air traffic control services and
allow a private organization to manage them. Private management would be able to implement a more market-based pricing scheme and invest in new technologies to increase safety and reduce costs.
Congress's Government Accountability Office has studied air traffic control operations in 5 of the 38 countries that have commercialized operations - Australia, Canada, Germany, New Zealand, and the U.K. -
and has determined that commercialization has brought on reduced operating expenses, improved efficiency through modernization, and a drop in unit costs, all without compromising safety. ...Policymakers
claim to be concerned with creating stability in the airline industry and fostering the most favorable climate possible for passengers, yet much of
the turbulence in commercial aviation is actually caused by federal interference.
Wednesday, August 17, 2005 ~ 7:33 a.m., Dan Mitchell Wrote: Oil for Food was established in 1995, when Egyptian diplomat Boutros Boutros-Ghali was U.N. Secretary General. Earlier this year, we learned
that one of the companies that profited corruptly from Oil for Food was a Geneva-based oil trading firm called AMEP, which is run by a man named Fakhry Abdelnour, who happens to be Mr. Boutros-Ghali's
cousin. Also on the board of AMEP is Efraim Nadler, who is Mr. Boutros-Ghali's brother-in-law. Small world, right? ...Mr. Annan may have his own friends-and-family plan. On Sunday, the Times of London
reported that Kobina Annan, Ghana's ambassador to Morocco and the Secretary General's brother, is being investigated by Mr. Volcker in connection with business dealings he had with Michael Wilson. Mr.
Wilson is an Annan-family friend and former executive at the Geneva-based company Cotecna, which in December 1998 was improperly awarded a lucrative Oil for Food contract. At the time,
Cotecna employed Mr. Annan's son Kojo, whom it eventually paid as much as $484,000, largely in disguised deposits after he had left the company. ...The pattern of rampant family favors here is certainly
startling, even by political standards, and deserves to be probed as one possible reason that the U.N. failed to stop Saddam Hussein from rigging Oil for Food to serve his own purposes. Mr. Annan came to office
promising to do away with this kind of behavior. Instead, he seems to be an emblem of it.
Tuesday, August 16, 2005 ~ 10:09 a.m., Dan Mitchell Wrote: Mr. Bush, who had threatened to veto wasteful spending bills, chose instead to cave in. He did so despite the fact that in addition to a record
number of earmarks the transportation bill came with a price tag that he had once called unacceptable. The bill has a declared cost of $286 billion
over five years plus a concealed cost of a further $9 billion; Mr. Bush had earlier drawn a line in the sand at $256 billion, then drawn another
line at $284 billion. Asked to explain the president's capitulation, a White House spokesman pleaded that at least this law would be less costly than
the 2003 Medicare reform. This is a classic case of defining deviancy down. The nation is at war. It faces large expenses for homeland security. It is about to go through a demographic transition that will
strain important entitlement programs. How can this president -- an allegedly conservative president -- believe that the federal government should spend money on the Red River National Wildlife Refuge Visitor
Center in Louisiana? Or on the Henry Ford Museum in Michigan? The bill Mr. Bush has signed devotes more than $24 billion to such earmarked projects, continuing a trend in which the use of earmarks has
spread steadily each year. Remember, Republicans control the Senate and the House as well as the White House. So somebody remind us: Which is the party of big government?
Tuesday, August 16, 2005 ~ 8:45 a.m., Dan Mitchell Wrote: ...in recent weeks three normally level-headed Republican Governors -- Matt Blunt of Missouri, Rick Perry of Texas and Bob Riley of Alabama --
have signed into law legislation that protects Realtors from discount competitors. About a dozen other states have also buckled to the National Association of Realtors lobby. They've effectively become
partners in what looks suspiciously like a price-fixing scheme, whereby discounters are prevented by law from charging fees below the industry
norm of 5% to 6% of the home sales price. The financial victims of this cartel are middle-income home buyers and sellers who are required to pay brokerage fees that can easily be several thousand dollars above a
competitive market price. ...state legislatures and real estate commissions -- which happen to be populated by Realtors -- are enacting laws that make price competition illegal and thus treat Realtors as if they
are members of a closed shop union. ...state lawmakers are squashing such competition through two types of laws. First, they make it illegal for brokers to provide rebates on their commissions, which is an overt
impediment to price competition. So, for example, LendingTree.com is prevented under these laws in about 10 states from continuing its popular practice of providing several thousand dollars of rebates and
coupons at Home Depot to homeowners who use its real estate services. Discount real estate agents would also be prohibited under many of these
laws from advertising their lower prices in newspapers. The second legal device used to restrain trade are "minimum service requirements,"
which prevent real estate brokers from providing limited services to home sellers for a negotiated fee. These rules outlaw the increasingly popular choice of home sellers who contract with an agent to list their
homes for a flat fee of typically around $500, but then handle all the other aspects of the home sale themselves in order to save $5,000 to $10,000 in additional fees.
Monday, August 15, 2005 ~ 12:15 p.m., Dan Mitchell Wrote: ...the administration has an opportunity here to ...make America better able to meet intensifying competition from China, India and others.
How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this -- and so
should we. ...Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless
economic activity intended to take advantage of the code's complicated maze of deductions and to reduce taxes -- from deducting donations of old socks to making unwanted investments. The waste of brainpower --
at a time of increasing global competition -- is incalculable. The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy.
One-sixth of the private-sector employees in Washington are employed by the lobbying industry. One-half of their efforts are directed at wrangling changes in the tax code. Few people realize that our
health-care system, with its runaway costs, is, in fact, the ultimate product of the tax-code distortion in our economy. ...The economic boom
the flat tax would unleash would be stupendous, ushering in a long-term, non-inflationary expansion of historic proportions. The current expansion would pale in comparison. Once again, we would be the clear
global leader in high-tech and medical innovations -- unlike today, when our lead, thanks in no small part to the tax code, is now under increasing
assault. How would a flat tax do this? What so many "experts" can't grasp is that taxes are not only a means of raising revenue for
governments but also a price and a burden. The tax you pay on income is the price you pay for working; the tax on profits is the price you pay for
being successful, and the levy on capital gains is the price you pay for taking risks that work out. When you lower the price of good things,
such as productive work, success and risktaking, you get more of them. The flat tax does that dramatically. ...Other countries are getting the message, even if we have yet to. Hong Kong has successfully had a
variation of the flat tax for 60 years. Lithuania, Latvia and Estonia enacted flat taxes in the '90s that have been hugely successful. Russia put
in a flat tax four years ago, and revenues have more than doubled in real terms. Ukraine, Slovakia, Romania, Georgia and Serbia have also successfully enacted flat taxes. How ironic that one-time Communist
nations have been reaping the benefits of a flat tax before that bastion of free enterprise, the U.S.
Monday, August 15, 2005 ~ 12:02 p.m., Dan Mitchell Wrote: While the intent was laudable, the new regulations made no distinction between a billion-dollar large-cap company and a $75-million small-cap
one. This has made it extremely difficult for smaller companies to compete and grow in this regulatory environment. ...The compliance costs of Sec. 404 are severe. Some of our companies told us that their
auditing fees have trebled or quadrupled. A $500,000 auditing bill may be a drop in the bucket for a company with a $10 billion market-cap; for
a $100-million company, it's significant. Several suggested that the regulations threaten the very survival of their companies as independent,
publicly traded entities. And many questioned how spending such large amounts of shareholder money would benefit the shareholders enough to
justify the cost. ...The Amex has seen the impact first-hand as more than a dozen small companies delisted from the Exchange and deregistered
their securities because of the high costs of trying to comply with Sec. 404. This serves no public interest, as many of these securities are still
available for purchase on the unregulated "Pink Sheets." Sec. 404 is also making it more difficult for them to find a "Big Four" accounting firm to
audit their financials. Another CEO told us that, after 35 years with the same "Big Four" firm, the auditor informed the company that it could no
longer perform audits for him because they were concentrating on larger companies. ...SOX costs about $824,000 for companies with annual revenues under $100 million, compared with about $1.5 million for
companies with sales of $100 million to $500 million, according to a study by Financial Executives International. At the Amex, the median revenues for our companies are $57 million, which means that
compliance costs would consume nearly 1.5% of revenues, severely squeezing operating margins -- in many cases to near zero -- and depleting funds available for a reinvestment. Small companies create
jobs and drive the growth of our economy. We need to implement regulations that allow them to compete, not kill them off with red tape.
Monday, August 15, 2005 ~ 10:30 a.m., Dan Mitchell Wrote: Blair's proposals are progress, albeit from a very low baseline -- so low a baseline that the mere announcement of his intent to crack down had
immediate effect. Within three days, the notorious Sheikh Omar Bakri, a Syrian-born cleric who has been openly preaching jihad for 19 years, skipped the country and absconded to Beirut. Not only had Bakri been
allowed to run free the whole time, but he had collected more than 300,000 pounds in welfare, plus a 31,000-pound gift from the infidel taxpayers: a Ford Galaxy (because of a childhood leg injury). ...Before
departing Britain, Bakri complained that it would be unfair to have him deported from the country he reviled: ``I have wives, children, sons-in-law, daughters-in-law. It would be hard on my family if I was
deported.''
Monday, August 15, 2005 ~ 9:06 a.m., Dan Mitchell Wrote: ...Canada's public care doesn't save money. As the satirist P.J. O'Rourke once noted, "If you think health care is expensive now, wait until you see
what it costs when it's free." When adjusted for the age of its population, Canada vies with Iceland and Switzerland as the highest spender on health care among the 28 most developed nations with universal
systems. Dr. David Gratzer, a Toronto physician affiliated with the Manhattan Institute, calculates that a Canadian earning $35,000 a year pays a stunning $7,350 in health-care taxes. ...a nationwide debate on
why Canada is the only country other than Cuba and North Korea to ban private insurance and private care has finally broken out. The prohibition is viewed as bizarre in other nations with universal health
care. Sweden has long allowed private insurance for elective services. In Australia, private hospitals provide a third of the nation's capacity. In
Germany and the Netherlands, anyone above a certain income threshold is allowed to leave the public system. In Canada, the ban on private insurance results in truly loopy law. Dr. Sheldon Elman, the personal
physician for Liberal Prime Minister Paul Martin, says the system is "disastrously terrible" in key areas. "You can buy an MRI for your dog
and you cannot buy it for your daughter," he told the Montreal Gazette. ...A milestone in private health care could come this October, when the
Copeman Healthcare Center plans to open a Vancouver facility that offers an array of elective services, no waiting times, and even house calls for an annual fee of $2,300 a year. The British Columbia nurses
union denounces the clinic as "check-book medicine" and is demanding it be blocked from opening.
Monday, August 15, 2005 ~ 7:56 a.m., Dan Mitchell Wrote: The European economy appears to be regaining some momentum and the indications are that things will continue to improve in the second half
of the year, the European Commission announced yesterday. Presenting its growth figures for the second quarter of 2005, the Commission said that the euro zone had grown by 0.3%, a much stronger performance
than most analysts had expected, although weaker than the 0.5% seen in the first three months of the year. The figures were helped by some surprisingly strong economic growth from Italy, which has rebounded
from recession but were dragged down by stagnation in Germany, Europe's largest economy. The Commission also said that growth should be higher in the fourth quarter of the year (September to December),
forecasting 0.4%-0.8%.
Sunday, August 14, 2005 ~ 2:00 p.m., Dan Mitchell Wrote: Next month, the United Nations turns 60. The institution has been a colossal failure. It has never achieved its intended purpose, which was to
promote international security and peace around the world. Instead, the U.N. has become nothing short of a sprawling, ineffective bureaucracy.
...In San Francisco in 1945, the original drafters of the charter, fresh from the catastrophe of two world wars within 30 years, were hopeful and hungry to replace the League of Nations with an organization that
would support the peaceful desires of the world community. Yet they could never have anticipated the number of bureaucrats, committees, and subcommittees this organization would spawn in New York and
Geneva - much less the general lack of vision offered by the organization's leadership today. ...Now is the time for a sense of urgency to be injected into these meetings. The U.N. must streamline its staff and
take a hard look at its organizational outcomes, measures of effectiveness, and salary structure. ...The U.N. needs a secretary general who understands the status quo is failing, and that the times in which we
live demand a tough, aggressive management style. At 60, the U.N. needs a John Bolton to remind everyone of the vision of the charter's original drafters. The United States may just save the United Nations
from itself.
Sunday, August 14, 2005 ~ 12:27 p.m., Dan Mitchell Wrote: Tomorrow, when the world will celebrate International Youth Day, youngsters in Europe should receive special attention. Their continent
will soon experience a demographic crisis not seen since the Black Death decimated a large chunk of the population in the Middle Ages. ...If
current trends continue, a rapidly aging and rapidly declining population will put unprecedented stress on public finances and social security
systems. In less than 25 years, one Italian worker will have to carry the burden of supporting one retiree. By 2050, Germany will have as many
citizens over the age of 80 as youngsters under the age of 20. ...With tax burdens already at astronomical levels, Europe's brain drain will
accelerate as a highly mobile intellectual elite will simply escape the vicious cycle of sclerotic labor markets, low growth and an irreversible
deficit trap. ...Instead of setting out measures that would make a real difference in the life of Europe's youth, such as ending the ruinous practice of promoting early retirement and unsustainable pay-as-you-go
pension systems, they hide behind empty promises and taxpayer-sponsored public works programs. Against the backdrop of a staggering 18% youth unemployment rate across the EU -- 22% in
France -- the pledge to "endeavor to increase employment of young people," without listing a single concrete suggestion, sounds rather hollow.
Sunday, August 14, 2005 ~ 11:39 a.m., Dan Mitchell Wrote: Simply put, the GOP majority has been spending federal tax dollars like drunken sailors since 2001, increasing outlays by an average of 7.25
percent annually. Inflation increased by a mere 2.0 percent average in those same years. Bush has basically stepped aside, not once exercising his veto, compared to 78 vetoes by Reagan, who had to deal with
powerful Democrat majorities in the House throughout his White House years. Having a president who won't veto unleashes the big spenders. That transportation bill that Bush accepted and Young stuffed contained
more than 6,500 "earmarks' - i.e. pork barrel projects. Reagan vetoed a 1987 transportation bill with a mere 152 projects. ...As for limiting
government, the federal establishment is as complicated, duplicative and inefficient as ever, despite more than a decade of GOP majorities in Congress and several years of GOP control of both the White House and
Congress. Washington has 342 separate economic development programs, 130 programs serving the disabled, 130 programs for at-risk youth, 90 early childhood development programs, 75 programs funding
international education, cultural and training exchanges, 72 programs for assuring safe water and so on and so on and so on... Reagan
expressed the GOP's soul when he said "it is my intention to curb the size and influence of the federal establishment and to demand recognition of
the distinction between the powers granted to the federal government and those reserved to the states or to the people." Progress was slow and sometimes reversed, but Reagan kept up the pressure. Reagan's
GOP heirs are wasting his legacy.
Saturday, August 13, 2005 ~ 12:48 p.m., Dan Mitchell Wrote: On government construction jobs, federal law requires that everyone be paid "the prevailing wage." By "prevailing wage," the feds mean the
wage the bureaucrats were prevailed upon to set. The Davis Bacon Act, passed in 1935, requires every construction worker be paid exactly what
the bureaucrats decree. The real "prevailing wage" is set by the law of free exchange, of course: If you don't pay enough, no one will work for
you. Demand too much, and you won't get much construction work. Supply and demand make sure people are paid a wage that's most efficient for the most people. The Davis Bacon Act redefines the term
"prevailing wage." ...Under Davis Bacon, the government issues wage edicts that are different in every town. The wage rates are based on a
complicated formula that supposedly averages previous union and non-union wages in a given town. But, of course, the union contractors, because they're organized, are more likely to get their wage data to the
government, so the averages are skewed. ...When Chicago decided to repair the Cabrini Green housing project, people who lived in the project assumed such a big job would provide work for the unemployed young
men who grew up there. But because of Davis Bacon, every contractor had to pay high salaries -- even for the simplest jobs. So contractors, locked into paying high salaries, were not about to take a chance on
beginners. They hired the most experienced union workers they could find. They used workers who would "normally never come near our neighborhood," said aspiring construction worker John King.
Saturday, August 13, 2005 ~ 11:23 a.m., Dan Mitchell Wrote: ...among its numerous flaws is one rarely talked about: the poverty trap. The people caught in this trap are the ones receiving the RMI (Revenu
minimum d'insertion). RMI is given to people who do not have any work, but it is not an unemployment benefit. The RMI is supposed to help
"insert" beneficiaries into the work world. The problem is that if they get a job, they are likely to lose money. For example, consider a mother of
two children. If she is on welfare with RMI and other benefits and family allowances, she receives about EUR950 per month. If she were to work earning the minimum wage, she would get EUR900; most government
aid would be reduced but she would still get a little more than EUR500 euros, for a total of EUR1,400. But deducting costs for insurance, transportation, lunch and daycare for her two kids, her monthly income
would quickly go back down to EUR900. This is less than when she was on welfare. No gain, so why bother to find a job? Another example is even worse. Say a man earned EUR615 monthly from welfare. He then
worked and received EUR700 in wages and EUR175 from welfare but after deducting insurance, transportation and lunch, he only earned EUR510 per month. He lost EUR105 a month for having a job. This is
the poverty trap. No wonder there are now 1.2 million people receiving RMI compared to only 370,000 in 1989, when the program was launched. Work does not pay. ...The French social model creates
unemployment. It is set up so that most people who are receiving the RMI pension will lose money if they find a low-wage job. As a result, it is
estimated that some 1.2 million jobs for non-qualified people are vacant. ...The French social model creates poverty. It transformed a system that
was supposed to be temporary into a permanent one. Willing to work, most people are thus forced into behavioral poverty, since they are better off staying home. The example is disastrous for children who
understand their parents' situation and who are likely to reproduce behavior -- not because they are forced into poverty, but because it is how they grew up.
Saturday, August 13, 2005 ~ 10:16 a.m., Dan Mitchell Wrote: More than one-third of western Canadians surveyed this summer thought it was time to consider separation from Canada, a poll suggests.
In the survey, 35.6 per cent of respondents from Manitoba, Saskatchewan, Alberta and British Columbia agreed with the statement: Western Canadians should begin to explore the idea of forming their
own country. Albertans, at 42 per cent, were most apt to consider independence, followed by Saskatchewan at 31.9 per cent. ...Ellis noted that surprisingly, separatist sentiment appeared to run highest among
young people - 37 per cent of respondents between the ages of 18 and 29 were open to the notion of breaking away from Canada.
Friday, August 12, 2005 ~ 10:39 a.m., Dan Mitchell Wrote: Eighteen funds are said to have departed Bermuda as a result of the negative impact of the European Savings Directive, according to a
report in the Royal Gazette. While Bermuda is not directly affected by the Directive, which seeks to facilitate the sharing of information about
individuals' overseas interest income with their home states, funds domiciled in Bermuda can be adversely impacted if they have 'paying agents' located in EU member states or third party countries (such as
Switzerland) that have signed up to the legislation. "It was really a question of the goalposts moving against us in a way the industry never
ever foresaw and therefore it did not prepare," Bermuda Monetary Authority chairman Cheryl-Ann Lister was reported as noting. However, she stressed that many of the funds in question are simply moving
domicile, and are retaining administration in Bermuda.
Friday, August 12, 2005 ~ 10:17 a.m., Dan Mitchell Wrote: "A single dollar lost to corruption is a dollar too much if you're handling international public monies": With this pious utterance did United
Nations chief of staff, Mark Malloch Brown, greet the findings that the head of the U.N.'s Oil for Food program, Benon Sevan, was on the take from Saddam Hussein. Mr. Malloch Brown has a point, of course. Every
dollar of public money should be handled as a sacred public trust. But his words are hard to reconcile with the workings of today's U.N., where it
seems about the only thing top management is unwilling to do with cold cash is actually account for it. ...As it happens, Mr. Malloch Brown provides an excellent case in point. Press reports earlier this year
disclosed that he has been renting a house for $10,000 a month from tycoon George Soros, who has collaborated extensively with the U.N. Development Program, which Mr. Malloch Brown has run since 1999
and until next month is still heading, concurrently with serving since January as Mr. Annan's chief of staff. Mr. Malloch Brown has declared
that under U.N. rules it is no conflict of interest for him to rent a house from Mr. Soros, and that he is under no obligation to disclose his
personal financial affairs to the public. We are asked simply to trust him, and he has implied at U.N. press briefings that it is very bad manners to
raise the subject at all. ...around the so-called core U.N. annual budget of roughly $1.5 billion, there now orbits an asteroid belt of agencies,
programs, special initiatives and chronic drives for emergency funding, totaling billions more--great chunks of it funded by U.S. taxpayers. ...Mr.
Sevan's take, as far as Mr. Volcker was able to document, came to just over $147,000. Compared with the billions grafted out of Oil for Food
by the true pros, this is a sum so low it suggests Mr. Sevan sold himself and the U.N.'s integrity for chump change. Indeed, if Mr. Volcker's figures are in the ballpark, then Mr. Sevan as head of Oil for Food
collected less in bribes than Kofi Annan's son, Kojo, collected in payments from 1999 through 2004 from a major Oil for Food contractor, his former employer, as compensation for not competing
with their business in West Africa. ...No less disturbing is the case of Alexander Yakovlev, a humble Russian staffer in the U.N. procurement
division, who even without Mr. Sevan's advantage of running the largest humanitarian program in U.N. history managed to amass, by Mr. Volcker's estimate, more than $950,000 in illicit payments. This came to
light via the Oil for Food investigation, but it underscores the question of what might be going on in the rest of the institution.
Friday, August 12, 2005 ~ 9:46 a.m., Dan Mitchell Wrote: At first blush, Shadegg's proposal seems utterly sensible. ...You would be allowed to buy any policy sold anywhere in the country, even if it doesn't
conform to your home state's rules. So, if you live in Massachusetts, where policies tend to be relatively expensive in part because they have strict regulations, you could buy your coverage from Missouri, where
they are generally cheaper thanks to looser guidelines. Ideally, the bill's supporters say, people would shop for insurance the same way they shop
for consumer goods: online, comparing products and prices, and then deciding on the package that best suits their needs. ...Getting rid of those
regulations, of course, is precisely what Shadegg and his allies have in mind, since they think needless state regulations are responsible for
making health insurance so expensive in the first place. As proof, they cite some state rules that really do seem dubious--or, at least,
suspiciously likely to benefit certain well-connected groups of health care providers. ...Do all of these rules drive up insurance rates, particularly
for healthy people relatively unlikely to consume expensive medical services? Absolutely. ...But the best way to fix this isn't to gut existing
regulations. It's to create one big pool of beneficiaries through some kind of universal health insurance system--whether it's one that allows people
to pick from among well-regulated private health plans (like President Clinton once proposed) or one that simply bypasses insurance companies
altogether, giving consumers direct, affordable access to the doctors and hospitals they like best (like many European nations already do). Those
aren't the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they're the kind of choices Americans would appreciate most.
Friday, August 12, 2005 ~ 9:22 a.m., Dan Mitchell Wrote: The federal government used hurricane aid money to pay funeral expenses for at least 203 Floridians whose deaths were not caused by
last year's storms, the state's coroners have concluded. The deaths include a Palm Beach Gardens millionaire recovering from heart surgery who died two days before Hurricane Frances; a Miami baby not yet born
when the storm arrived; and a Port Charlotte man who died of cirrhosis and heart failure five months after Hurricane Charley. In two other
cases, coroners could find no record of the people dying. "I can't begin to tell you what these people did to get some funding," said Rebecca
Hamilton, medical examiner for Lee County, where hurricane funeral claims included a hospice patient and two people who died of cancer. "None of those cases were even remotely associated with any kind of a
hurricane." The Federal Emergency Management Agency approved a total of 319 hurricane funeral claims in Florida for $1.3 million. But most of those people died from natural ailments, suicides or accidents
unrelated to the storms, the coroners concluded. ...FEMA has refused to explain the claims... Ten people were not in Florida at the time of their
deaths, including Brant Moskowicz, 40, of Boca Raton. He died in a head-on collision Sept. 7 in Ashburn, Ga., when the driver of a Ford Ranger crossed a median and hit his Nissan Altima, according to traffic
reports.
Friday, August 12, 2005 ~ 8:45 a.m., Dan Mitchell Wrote: Remember the 1980s savings-and-loan crisis? By the time it had all played out, taxpayers were on the hook for $125 billion. Yet members of
Congress who play a central role in regulating the banks seem to be suffering from a severe case of collective amnesia when it comes to the
causes and financial consequences of the S&L debacle. ...The bill would increase federal deposit insurance to $130,000 from $100,000 per
account and double the insurance for retirement accounts to $260,000. If this sounds familiar, it is. Back in 1980 the insurance limit was raised to
$100,000 from $40,000 during the notorious "midnight maneuver" by then-Banking Committee Chairman Freddy St Germain. But the premiums banks and S&Ls paid for the extra deposit insurance weren't
risk adjusted, which meant that the drunk drivers of the banking community paid the same fees as those with perfect safety records. ...Fed Chairman Alan Greenspan...told the Banking Committee in 2003: "The
1980 increase in deposit insurance significantly increased the taxpayer cost of the bailout of the bankrupt thrift institutions." ...Raising the
deposit-insurance limit could have the undesirable effect of diverting funds away from stock ownership into low-return bank deposits. Moreover, the federal deposit-insurance system still lacks genuine
risk-based premiums. Financially sound banks are required to pay higher fees to subsidize the losses of lenders who engage in Hail Mary investing
schemes. It is precisely the absence of risk-based premiums that adds financial instability to the banking system and makes bank failures more
plausible. ...Inexcusably, Republicans in Congress, who masquerade as a fiscally conscientious group, have bought into this fantasy and are even
ready to count the modest fees that banks pay for the extra insurance as additional "revenue" to reduce the budget deficit. They choose to ignore
the several hundred billion dollars of future liabilities they are quietly stacking on the backs of taxpayers. It was precisely this kind of shady bookkeeping that led to the S&L crisis.
Thursday, August 11, 2005 ~ 11:09 a.m., Dan Mitchell Wrote: Given the state of the economy and relatively robust corporate profits, one would expect the stock market to be higher. ...one factor holding
back the market may be the Sarbanes-Oxley legislation, enacted in 2002 as a knee-jerk reaction to the corporate scandals of Enron, WorldCom
and others. Reports suggest that the cost of this legislation is extremely high just in terms of out of pocket expenses. But the intangible costs
could be far, far higher. In the May issue of the Yale Law Journal, Prof. Roberta Romano of the Yale Law School excoriates Congress for enacting legislation consisting of little more than a bunch of rehashed
proposals that had been kicking around for years, with little, if any, connection to the actual causes of the corporate scandals. She calls it
"quack corporate governance." Estimates of the cost of the legislation in terms of higher audit fees and lost productivity have risen every year, as
companies learn more about how its provisions. It is now commonly estimated to be about $15 billion per year, or about $1 million per $1 billion of sales. This estimate is pretty consistent among the
organizations that have looked at Sarbanes-Oxley carefully, including Financial Executives International, a trade group; Foley and Lardner, a Chicago law firm; and A.R.C. Morgan, a Dutch consulting company.
...Two University of Illinois accounting professors estimated last year that companies had spent 120 million hours complying with Sarbanes-Oxley and that outside auditors had spent another 12 million
hours, for a total of 132 million hours. This is equivalent to 66,000 people working for one year on nothing else. But these direct costs pale in comparison to intangible costs. Corporate executive report an
enormous amount of distraction from their core businesses as the result of Sarbanes-Oxley, and have become much more conservative in their investment strategies. Sun Microsystems CEO Scott McNealy likened the
legislation to throwing "buckets of sand into the gears of the market economy." ...The latest study looks at how the stock market reacted to
passage of Sarbanes-Oxley. University of Rochester economist Ivy Zhang found that passage of the bill wiped out $1 trillion of market capitalization. Zhang found no economic benefits to the legislation
whatsoever, a view echoed by other analysts such as UCLA securities law professor Stephen Bainbridge. Another intangible cost is the undermining of federalism. Corporate governance historically has
always been the province of state law. Now it has largely been taken over by the federal government, despite the oft-stated desire of President Bush and Republicans in Congress to respect federalism.
Thursday, August 11, 2005 ~ 10:22 a.m., Dan Mitchell Wrote: A growing disconnect between those who pay for health care and those who use it is fueling rapidly rising health care costs in the United States,
according to a new report from the Employment Policy Foundation (EPF)... health care costs in the United States are increasing at an unsustainable rate-rising nearly twice as fast as growth in the overall
economy in 2004. If such cost increases continue, health care expenditures could consume nearly one-third of our nation's output and reach $6 trillion annually by 2020. ..."These rapidly rising costs are
driven, in part, by the unique way in which most American receive their health insurance. Fully 63 percent of non-elderly Americans received their health insurance from either their or their spouse's employer in
2004," said EPF's president, Janemarie Mulvey, Ph.D. "Because most Americans with health insurance pay little compared to the actual cost of
the medical services they consume, demand for medically unnecessary services drives up prices." ...Despite recent efforts to control health care costs through higher out-of-pocket costs-copayments and
deductibles-those costs comprise little more than 10 percent of health expenditures compared to 30 percent three decades earlier. "While employees pay a share of premiums, they pay very little when they
receive care which distorts incentives," said Mulvey. "The current structure of health insurance creates a system where there are no restraints on prices and no reason for consumers to demand more
effective, less costly procedures."
Thursday, August 11, 2005 ~ 8:55 a.m., Dan Mitchell Wrote: ...the SEC under your leadership will pay greater attention to empirical evidence about both the benefits and costs of proposed new rules. Fine!
This commitment to study the probable effects of proposed new rules promises to avoid many of the types of mistakes that are embedded in current securities legislation and regulations. But this would create a
double standard between new rules and current rules: New rules would be subject to increased scrutiny. Current securities legislation and
regulations, in contrast, would get a pass, regardless of the accumulating evidence about the effects of these rules. This would also create a
regulatory ratchet that would increase the total number of regulations, both good and bad, over time. With your commitment to a market economy and a background in securities law, I cannot believe that you
would regard this as a desirable outcome. The only way to avoid a regulatory ratchet is to examine current securities legislation and rules on a periodic basis with the same scrutiny and criteria applied to
proposed new rules. This should not be an unusual burden. The budget of the SEC has doubled over the past three years, providing ample resources for increased policy analysis.
Wednesday, August 10, 2005 ~ 10:39 a.m., Dan Mitchell Wrote: ..."tax reform" has replaced "tax cuts" on the Washington agenda, and that poses dangers for taxpayers. ...The first threat is the alternative
minimum tax. The revenues from this add-on tax are expected to explode from $20 billion in 2005 to $112 billion by 2010. The administration says it wants to fix the AMT on a revenue-neutral basis --
but that means surrendering to a tax increase of about $750 billion over the next decade. The president's tax panel has similarly included rising
AMT revenues in its baseline, thereby baking a tax increase into the tax reform cake. ...A second tax threat stems from the president's panel
using static revenue scoring for tax proposals. This is not an obscure accounting issue. Static scoring will result in a reform raising too much
money if enacted because the growth benefits will not be considered as they would be with dynamic scoring. Use of static scoring also means panel proposals will be less politically viable. Consider corporate tax
changes. A reform package could include a tax rate cut in exchange for eliminating some inefficient tax breaks. A static analysis might show ending such breaks would raise enough money to reduce the corporate
rate 5 percentage points. However, we know a corporate rate cut would lose only about half the revenue a static score would indicate because of
the long-run positive growth effects. ...A third tax threat is that a revenue increase might creep into a reform package as it moves through Congress. Legislators might see tax reform as a chance to create a new
value-added tax to pay for rising entitlement costs. Unfortunately, President Bush has a record of sending reform-oriented bills to Congress that get morphed into big government bills and then signing them into
law anyway to score legislative victories. The 2002 education bill and 2003 prescription drug bill are wonderfully depressing examples. ...The president should be lauded for putting tax reform on the agenda and
assembling a distinguished reform panel. But conservative policymakers need to closely watch the process. They should reject tax increases related to AMT repeal. They should ensure Congress dynamically scores
the options proposed by the president's panel. And they should derail tax reform if it becomes a vehicle to close the budget gap rather than create a higher-growth economy.
Wednesday, August 10, 2005 ~ 10:18 a.m., Dan Mitchell Wrote: A citizen who lives in any one state can buy a toaster produced in any other state. The same citizen can also buy a lawnmower, a sofa, an
automobile or virtually any other product - regardless of the state where the product is made. This same freedom does not exist in the market for
health insurance, however. ...Laws that keep people who live in one state from buying health insurance sold in other states balkanize the health
insurance market and make it less competitive than it could be. As a result, people pay higher prices and have fewer choices than they would have if they could purchase insurance in a national marketplace.
Consumers will get some relief, however, if Congress passes a bill proposed by Rep. John Shadegg (R-Ariz.). It would allow insurers licensed in any one state to sell insurance (under the rules of that state)
to individuals and small groups residing in any other state. ...Mandated health insurance benefits are state regulations that require insurers to
cover specific services and specific providers. Currently, there are 1,823 state-mandated benefits among the 50 states, and an additional 295
mandates are now being debated in state legislatures. ...These laws mean that if people buy insurance at all, they must purchase a bloated and
expensive package of benefits designed by politicians. ...these kinds of mandated benefits hike premiums considerably, thus pricing otherwise
healthy people out of the market. In fact, studies estimate that as many as one of every four uninsured Americans has been priced out of the
health insurance market by mandates. ...Not all states have been equally bad at limiting consumer choice and raising the cost of insurance. ...Overall, there are as few as 13 mandated benefits in Idaho and as
many as 58 in Maryland and 60 in Minnesota. ...If all insurers licensed in each of the 50 states were willing to sell their products in the other 49
states, the typical consumer would have an opportunity to choose among 50 regulatory regimes. ...The Shadagg bill will allow these competing
claims to be put to the market test. Those regulations that enhance the value of insurance (for example, whose benefits exceed their costs) are
likely to win out in competition with those that do not. The law will also help better public policies replace inferior ones.
Wednesday, August 10, 2005 ~ 9:30 a.m., Dan Mitchell Wrote: ...the president signs the Energy Policy Act of 2005, and on the same day, the price of crude oil jumps nearly $2 a barrel. If that doesn't make
you want to hold your sides with laughter -- well, all right, it's not actually funny. It's ironic, that's what it is, and more than a little pitiful.
But also eye-opening. What the energy bill shows -- all 1,724 pages of it, oozing $12.3 billion in subsidies and tax breaks over the next decade -- is
the general futility of turning over economic conundrums to politicians. ..."This bill," said George Bush, in signing it, "is not going to solve our
energy challenges overnight." That's to put it mildly. The Energy Policy Act seems concocted mostly to address the needs of well-financed
interest groups... There are subsidies for the manufacture of sugar cane ethanol -- a sweet favor to the political sugar daddies of Florida,
Louisiana, Texas and Hawaii. There are also subsidies for "biomass." There is a mandate for higher consumption of ethanol and likewise $6
billion for new ethanol plants... A recent study by a Cornell agricultural specialist and a University of Colorado collaborator maintains that
ethanol is a net drain on energy supplies -- requiring 30 percent more on the front end than comes out and actually gets manufactured. Most economists wouldn't call this a very good deal. Says the Cornell
specialist David Pimentel: "The only reason we're doing this is because of politics and big money."
Wednesday, August 10, 2005 ~ 8:52 a.m., Dan Mitchell Wrote: ...the publication yesterday of Mr. Volcker's latest report on Oil for Food, which focuses chiefly on the activities of Benon Sevan, formerly
executive director of the U.N.'s Office of Iraq Program, and Alexander Yakovlev, a U.N. procurement officer. Although the report contains few
surprises, it shows in meticulous detail how Messrs. Sevan and Yakovlev benefitted to the tune of $150,000 and $950,000 respectively from various U.N. procurement-related schemes. In doing so, it provides a
vivid picture of how Mr. Annan's U.N. "works." ...What is clear is that the Secretary General intends to spin the Volcker report not as an
indictment of his tenure in office, but--and this is amazing--as another reason to endorse his reform agenda and, therefore, his continuance in
office. ...the real scandal is that Saddam Hussein was able to manipulate the Oil for Food program and bend the U.N. to his will for such comparatively tiny sums. That didn't happen because of U.N. oversight
failures; it happened because of the U.N.'s political commitment to continued dealings with Saddam, something Mr. Annan endorsed personally, both through his own diplomatic initiatives and his stalwart
defense of the prewar status quo.
Wednesday, August 10, 2005 ~ 8:32 a.m., Dan Mitchell Wrote: The scandals touching five major German companies are shaking the belief that German-style corporate management is superior to that of
other capitalist countries. It has been inferred that Germany's codecision-making system, which gives workers and shareholders almost equal supervisory roles, forces managers to be more socially responsible
and honest -- particularly in comparison to their American counterparts. In Germany, the caricature of American managers as money-grabbing
"cowboys" is widely believed. As a matter of fact, there are good reasons to believe that the German system actually provides less discipline than in U.S. corporations because the composition of
supervisory boards leads to conflicts of interest. One half of the board is stacked with former managers of the company or active managers from
"friendly" companies -- connected through cross-shareholdings or joint business interests. This cozy relationship favors solidarity between the
supervisors and those they are supposed to supervise -- but not effective control. ...The other half of the board is made up of worker representatives. This limits management's freedom to make sound
business decisions that might conflict with labor interests. After all, if the management wants to be reappointed, it needs those worker votes on the
supervisory board. This creates a paralyzing mutual dependency, a problem for which bribery is apparently sometimes seen as an easy fix.
Tuesday, August 9, 2005 ~ 11:30 a.m., Dan Mitchell Wrote: First, more Americans have jobs today than at any other time in history. Second, over the past two decades or so, the U.S. has created more than
40 million jobs -- twice as many as Europe and Japan combined. And third, the U.S. has one of the lowest jobless rates of all developed nations. ...In the past 24 months 3.5 million more Americans have found
work, which is the equivalent of a new job for every worker in the entire state of Indiana. Every single job that was lost during the bursting of the
technology bubble and stock market collapse of 2000-01 has been matched by a new job, often in a new industry. ...the bottom of the jobs recession hit in mid-2003 -- and the recovery began at the very point that
the Bush marginal-rate tax cuts were enacted into law. ...Part of the explanation for this success is that, especially compared to Europe, the U.S. has imposed fewer taxes and regulations (even though we have
plenty) that make it onerous for employers to hire and fire workers. A unique feature of the U.S. economy is that Americans move in and out of
jobs -- usually to rise up the income elevator -- at a rapid and persistent pace. This is the key to the Great American Jobs Machine, and it explains why Europe and Japan should be more like us, and not the
other way around.
Tuesday, August 9, 2005 ~ 11:04 a.m., Dan Mitchell Wrote: You are likely to be told that "Angie" is Germany's "Maggie." Like British Prime Minister Margaret Thatcher a quarter century earlier,
Merkel would be her country's first female elected leader. And like Thatcher's, Merkel's political philosophy is market-oriented conservatism. You are also likely to come across commentary from
conservatives suggesting that Merkel's election would be another nail in the coffin of the European-style social welfare state. There is no use in
liberals trying to deny that. Like it or not, globalization is opening the floodgates of competition, and around the globe it is washing away all
sorts of inefficient economic structures. Germany has more than its share of those. With its high taxes, overly protective labor laws, and bloated welfare, retirement, and healthcare systems, Europe's largest
country provides the prime example of what happens to an economy that inadequately responds to the challenge of mounting international competition: soaring unemployment and flagging income growth.
Tuesday, August 9, 2005 ~ 10:33 a.m., Dan Mitchell Wrote: Under Medicare's rules, each time a patient comes back for another treatment, a hospital qualifies for an additional payment. In effect, Palm
Beach Gardens was paid a bonus for its mistakes. Medicare's handling of Palm Beach Gardens is an extreme example of a pervasive problem that costs the federal insurance program billions of dollars a year while
rewarding doctors, hospitals and health plans for bad medicine. In Medicare's upside-down reimbursement system, hospitals and doctors who order unnecessary tests, provide poor care or even injure patients
often receive higher payments than those who provide efficient, high-quality medicine. ...Researchers at Dartmouth Medical School, who have been studying Medicare's performance for three decades, estimate
that as much as $1 of every $3 is wasted on unnecessary or inappropriate care. Other analysts put the figure as high as 40 percent. ...In 2001, the typical Medicare patient in Los Angeles cost the
government $3,152 more than a comparable patient in the District. A patient in Miami cost $3,615 more than one in Baltimore. Those disparities cannot be explained by differences in local prices or rates of
illness, said John E. Wennberg, a Dartmouth physician and an expert on geographical variations in medical care. ...Yet most high-spending states
rank near the bottom in quality of care, Medicare data show. Louisiana ranked 50th in quality yet first in Medicare spending in 2001, the most
recent year available. New Hampshire was first in quality but 47th in spending. ...Medicare "comes out of an old model of care that makes no
sense," said HealthPartners' Brainerd. "It isn't fair to those of us who do a better job, and it isn't fair to our patients who end up paying higher
out-of-pocket costs." ...Peter T. Wyckoff, executive director of the Minnesota Senior Federation, said that his and other low-cost states end
up subsidizing less efficient states. "It's the worst sort of medical welfare," Wyckoff said. "Can you imagine if Social Security were to pay
you $50,000 more because you lived in another part of the country? There would be hell to pay. There would be a revolution."
Tuesday, August 9, 2005 ~ 9:54 a.m., Dan Mitchell Wrote: ...the ABA will struggle with the Roberts rating for a simple reason: He is conservative. For that sin, the nominee may earn a split vote or worse.
That disservice was infamously done to Robert Bork in 1987, when President Reagan nominated him to the Supreme Court. Mr. Bork earned four "not qualified" votes from the ABA's 15-member committee -- an
egregious insult. In 1991, the ABA again let politics cloud its judgment when rating Clarence Thomas after the first President Bush nominated him to the Supreme Court. Two of the ABA's committee members
branded him "not qualified" -- again an outrage, given his record. Some within the ABA acknowledge that the Bork and Thomas ratings were
shamefully partisan. ...the ABA opposes even laws that prohibit adult incest -- a position that would disgust the vast majority of Americans. The ABA also advocates not just abortion on demand but federal and
state funding of it -- a position far outside the mainstream. And even in this time of war, the ABA opposes the federal law that requires universities accepting federal funding to allow the armed services to
recruit on campus. ...the ABA's "Special Committee on Gun Violence," ...advances the view (according to its Web site) that "the perception that
the Second Amendment is somehow an obstacle to Congress and state and local legislative bodies fashioning laws to regulate firearms remains a pervasive myth." This is a stunningly extreme (not to mention
misinformed) statement. ...Within the ABA there is some hushed concern about its stagnating membership and creeping irrelevance to the practice
of law. But precious few insiders are willing to recognize that the ABA is reaping what it has sown for decades: Its increasingly vocal advocacy of
an increasingly extremist agenda appeals only to a minority of the profession. The rest of us do not care for such intense political fetishism.
Tuesday, August 9, 2005 ~ 9:24 a.m., Dan Mitchell Wrote: The so-called flat tax is another hobby horse of the right that swept the nation, then got swept away. But someone forgot to tell Steve Forbes,
the amiably blank-faced magazine heir who ran for president on the issue in 1996 and 2000. Now he has a book out, "Flat Tax Revolution:
Using a Postcard to Abolish the IRS." ...The complications come in defining and calculating income. Some of the complications are unavoidable, because people and companies have complicated affairs.
The day may come when you can file your income tax on a postcard (millions come close even today, with the sorta-simple 1040EZ), but that day will never arrive for Steve Forbes. As for the unnecessary
complications, most of them were not put there by people or interest groups pushing for higher taxes and bigger government. Quite the opposite: The complications are mostly special rules for people or
companies trying to lower their taxes.
Monday, August 8, 2005 ~ 8:28 a.m., Dan Mitchell Wrote: There is a widespread popular perception that when American companies invest abroad they necessarily reduce economic activity and
employment in the United States. But in their recent study, Foreign Direct Investment and the Domestic Capital Stock (NBER Working Paper No. 11075, authors Mihir Desai, C. Fritz Foley, and James Hines
offer an alternative perspective: they conclude that greater foreign investment by U.S. multinational firms is actually linked to greater investments at home as well. ...When the foreign affiliates of U.S.
multinational corporations engage in higher capital expenditures, the American multinationals also tend to increase investment back home -- suggesting that foreign and domestic investment are complements, not
substitutes. Specifically, the authors find that "an additional dollar of foreign investment capital expenditure is associated with 3.5 dollars of
domestic capital expenditures by the same group of multinational firms, strongly suggesting a complementary relationship between foreign and
domestic investment." The common intuition is that a firm's resources are fixed, so a dollar invested abroad would necessarily mean one less
dollar available to invest at home. "Unsurprisingly," the authors acknowledge, "growing overseas activities of multinational firms have
become a source of economic insecurity for workers, managers, and tax collectors." But Desai, Foley, and Hines point out two reasons that such thinking may be misguided.
Monday, August 8, 2005 ~ 8:02 a.m., Dan Mitchell Wrote: And increasingly, politicians, when they are through slopping pork for a profession, are themselves becoming paid lobbyists - at top dollar. A
study by Congress Watch finds that 43 percent of congressmen who in recent years have left office for a job in the private sector have become
lobbyists. (So, take that term "private sector" with a grain of salt.) Lobbying is a growth industry. In the last five years, the number of paid
Washington lobbyists has doubled. And the cost of hiring professional lobbyists has also skyrocketed. ...There is no mystery here. Business is good for lobbyists because business is good prey for politicians.
..."There's unlimited business out there for us," says Robert Livingston, former Louisiana congressman and chairman of the House Appropriations Committee, now a lobbyist. "There are agencies that
love to do things and acquire new missions. People in industry better have good lobbyists or they're going to get rolled over." Now, the same
Congress that has created, empowered, and funded these predators - er, agencies - will be glad to intercede for your company. No charge. But the
prudent approach would be to hire a high-priced lobbyist (or a team of them) to get the ears of some of these congressmen, play golf, and remind them of all your company's support. Wink, wink. Nudge, nudge.
Standard-issue reformers want to dream up more regulations to impose on lobbyists and congressmen. But such regulations are generally a joke,
allowing obvious conflicts while threatening draconian punishments for things outside the legislators' or lobbyists' control. And no matter how
intricate these bureaucratic regulations become, when Congress spends trillions of dollars and exerts the kind of regulatory power to make or
break one's business, there will be lobbying. Lots of it. The biggest crock is that congressmen will tell you that everyone else is the problem - the
lobbyists, the bureaucracy, the staff, the big corporations, the unions, the courts. But with control of the purse strings, Congress is the most powerful branch of government.
Monday, August 8, 2005 ~ 7:27 a.m., Dan Mitchell Wrote: Because the administration seems unable to sell genuine triumphs as triumphs, it is forced to claim credit for recent congressional
outpourings, and argue that they represent economic progress. In a desperate and wholly unnecessary search for victories, the White House claimed paternity of the energy and highway bills. The energy bill
($12-$66 billion over the next decade, depending on the cost of mandates) will subsidize energy producers of every sort, including oil producers rolling in profits from $60 oil and corn growers whose ethanol
will cost drivers another 10 cents per gallon, while at the same time cutting benefits to the car companies that have pioneered gasoline-saving hybrid cars. Democratic congressman Ed Markey, no
wild-eyed advocate of free markets, still summed it up best: "Right now, Adam Smith is spinning in his grave so fast that he would qualify for a
subsidy in this bill as an energy source. That is how bad this bill is." And the highway bill ($286 billion over six years, up 31 percent from the last
highway bill) makes the energy bill seem like chump change. It contains so much pork, including many hundreds of millions for everything from bike paths to bridges-to-nowhere in South Carolina and to no one in
Alaska (both states homes to key committee members), that only a president who feels his economic record needs shoring up would consider
signing it. It is, after all, $28 billion above the president's veto limit of last year, a difference that only Washington politicians such as House
speaker Dennis Hastert would dare precede with the adjective "only."
Sunday, August 7, 2005 ~ 12:23 p.m., Dan Mitchell Wrote: The NCAA banned the use of American Indian mascots by sports teams during its postseason tournaments, but will not prohibit them otherwise.
...Nicknames or mascots deemed "hostile or abusive" would not be allowed on team uniforms or other clothing beginning with any NCAA tournament after Feb. 1, said Harrison, the University of Hartford's
president. ...Florida State President T.K. Wetherell blasted the NCAA and threatened legal action on Friday, the Tampa Tribune reported.
"Florida State University is stunned at the complete lack of appreciation for cultural diversity shown by the National Collegiate Athletic
Association's executive committee. ... That the NCAA would now label our close bond with the Seminole Tribe of Florida as culturally 'hostile
and abusive' is both outrageous and insulting," Wetherell said Friday in a statement. The Seminole Tribe of Florida passed a resolution in June supporting the school's use of the nickname and tribal images.
Sunday, August 7, 2005 ~ 12:06 p.m., Dan Mitchell Wrote: Public broadcasting is a classic example of welfare for the well-off. We PBS viewers are 44 percent more likely than other Americans to make
more than $150,000 a year. I enjoy PBS, but it hardly seems fair that the government demands you buy it for me. If I want to see opera, I should
pay for it myself. Why should you be taxed to pump "La Boheme" into my living room? ...Not everything on PBS is for elites only, of course.
The network is justly famous for programs like "Sesame Street." But popular programs are just that -- popular. That means they have other
ways to get money. ...PBS, on the other hand, is broadcasting by bureaucracy. This is not a good thing. We should have separation of news and state. "We wouldn't want the federal government to publish a
national newspaper, writes Boaz, "why should we have a government television network and a government radio network? If anything should
be kept separate from government and politics, it's the news and public affairs programming that Americans watch. When government brings us the news -- with all the inevitable bias and spin -- the government is
putting its thumb on the scales of democracy. It's time for that to stop."
Sunday, August 7, 2005 ~ 11:38 a.m., Dan Mitchell Wrote: ...police in the New York area began random searches of people entering subways, bus terminals and rail stations. Mass transit officials in
Washington, San Francisco and Boston are considering similar searches. It's not surprising that authorities would want to show they are "doing
something" to try to reassure nervous riders. But these kinds of searches are a tactic of dubious value. ...The haphazard searching in New York is
merely cosmetic and about as effective as a scarecrow in a field. Two weeks of random searches, at a cost of more than $1.3 million a week in police overtime, have produced no arrests or weapons confiscated, an
NYPD spokesman said. ...Random searches provide a false sense of security and divert resources from policing designed to snuff out terrorist
plots in their early stages. Giving up some privacy in return for security is unavoidable these days, but only as long as the intrusion has a realistic payoff. This search policy doesn't.
Saturday, August 6, 2005 ~ 7:00 a.m., Dan Mitchell Wrote: But as details of the measure came under closer inspection this week, the spending picture got a bit blurry. In a piece of legislative legerdemain,
Congress managed to stuff an extra $8.5 billion into the highway bill and still meet Mr. Bush's demands by requiring that the added money be
turned back to the Treasury on Sept. 30, 2009, the day the bill expires. ...Budget watchdog groups, already upset at spending they equate to highway bill robbery, say the maneuver is the crowning offense
perpetrated by a profligate Congress and exposes the administration as co-conspirators. ...critics portrayed the maneuver, known in federal budget parlance as a rescission, as a classic example of using the
calendar to mask spending excess. They doubt the money will ever be seen again, noting that Mr. Bush and many of the lawmakers responsible will no longer be in office when time runs out on the new highway plan.
"I am concerned the president is going to lose any remaining credibility on fiscal discipline if he signs it," said Pat Toomey, president of the
conservative Club for Growth, who crusaded against excessive spending in his days as a member of the House from Pennsylvania.
Saturday, August 6, 2005 ~ 6:31 a.m., Dan Mitchell Wrote: Meander through the bill's endless line items and you find a remarkable variety of ''highway" projects, many of which have nothing to do with
highways: Horse riding facilities in Virginia ($600,000). A snowmobile trail in Vermont ($5.9 million). Parking for New York's Harlem Hospital
($8 million). A bicycle and pedestrian trail in Tennessee ($532,000). A daycare center and adjoining park-and-ride facility in Illinois ($1.25
million). Dust control mitigation for rural Arkansas ($3 million). The National Packard Museum in Ohio ($2.75 million). A historical trolley project in Washington ($200,000). And on and on and on. ...it might
surprise younger readers to learn that spending discipline was once a basic Republican principle. Hard to believe in this era of bloated Republican budgets and the biggest-spending presidential administration
in 40 years -- but true. Once upon a time Republicans actually described themselves with pride as fiscal conservatives. ...Ronald Reagan was such
a Republican. He vetoed the 1987 highway bill because it included 121 earmarks and was $10 billion over the line he had drawn in the sand. ''I
haven't seen this much lard since I handed out blue ribbons at the Iowa State Fair," he said. President Bush is a great admirer of Reagan's
record in foreign affairs. Too bad he shows so little interest in following the Gipper's fiscal lead as well.
Friday, August 5, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: In times of crisis, some nations find a Ronald Reagan, a Winston Churchill or a Margaret Thatcher. If one looks closely at the increasing
political divisions in France, Germany and Italy, it is now possible to imagine a future Continental version of Mrs. Thatcher or President Reagan. In the 1970s, the U.S. and the U.K. were in crisis. Mr. Reagan
rode into Washington with vision and optimism. He supported a noninflationary monetary policy, cut tax rates and reined in spending and regulatory growth and the economy boomed. In the U.K., Margaret
Thatcher faced even tougher economic problems. Much of British industry had been nationalized under socialist governments. Welfare state spending and the unions were out of control. Britain had become
the poor man of Europe. Beginning in 1979, Mrs. Thatcher privatized industry, cut taxes, spending and regulations and broke the unions' hold on the economy. Britain went from the poorest major economy in Europe
(in terms of per capita income) to the richest, leaving Germany, France and Italy in the dust. The United States and the U.K. have had twice the
rate of economic growth of Germany, France and Italy since the early 1980s. Unemployment rates in the U.S. and U.K. are under 5 percent while Germany and France are in double digits (11.8 percent and 10.2
percent respectively). Worse yet, more than 50 percent of Germany's, and 40 percent of France's unemployed have been out of work a year or more. The comparable number for Britain is 21.4 percent and only 12.7
percent in the U.S. The divergence is increasing, not diminishing, with the U.S. growing almost 3 times faster than France, Germany and Italy
over the past four years. ...Now for the good news. Angela Merkel, who is favored to become the new chancellor of Germany this fall, and Nicolas Sarkozy, the current front-runner to replace Jacques Chirac as
French president, have both very explicitly recognized Europe's problems. ...Looking at the European political landscape, my own guess is that neither Miss Merkel nor Mr. Sarkozy will have the conditions, luck
and spine to do what Mrs. Thatcher and Mr. Reagan did. But what they may be able to do is buy a little more time for Europe until the people understand there is no constructive choice other than following the
Anglo-Saxon model of lower taxes, spending and regulation.
Friday, August 5, 2005 ~ 10:26 a.m., Dan Mitchell Wrote: Property rights are human rights to use economic goods and services. Private property rights contain your right to use, transfer, trade and
exclude others from use of property deemed yours. The supposition that there's a conflict or difference between human rights to use property and
civil rights is bogus and misguided. ...In a free society, each person is his own private property; I own myself and you own yourself. That's why it's
immoral to rape or murder. It violates a person's property rights. The fact of self-ownership also helps explain why theft is immoral. In order for self-ownership to be meaningful, a person must have ownership
rights to what he produces or earns. A good working description of slavery is that it is a condition where a person does not own what he produces. What he produces belongs to someone else. Therefore, if
someone steals my computer, he's violated my ownership rights to my computer, which I earned through my labor, and therefore my human or civil rights to keep what I produce. Creating false distinctions between
human rights and property rights plays into the hands of Democrat and Republican party socialists who seek to control our lives. If we buy into
the notion that somehow property rights are less important, or are in conflict with, human or civil rights, we give the socialists a freer hand to attack our property.
Friday, August 5, 2005 ~ 9:45 a.m., Dan Mitchell Wrote: When President Eisenhower proposed the first national highway bill, there were two projects singled out for funding. The latest version has,
by one estimate, 6,371 of these special projects, a record that some say politicians should be ashamed of. ...McCain, one of only four senators to
oppose the bill, listed several dozen "interesting" projects, including $480,000 to rehabilitate a historic warehouse on the Erie Canal and $3
million for dust control mitigation on Arkansas rural roads. His favorite, he said, was $2.3 million for landscaping on the Ronald Reagan Freeway
in California. "I wonder what Ronald Reagan would say." Reagan, in fact, vetoed a highway bill over what he said were spending excesses,
only to be overridden by Congress. Meanwhile, according to a Cato Institute analysis, special projects or "earmarks" numbered 10 in 1982,
152 in 1987, 538 in 1991 and 1,850 in 1998. The 1998 highway act set aside some $9 billion for earmarks, well under half the newest plan. ...Lawmakers were sending out press releases bragging of their
accomplishments even before the bill was passed, said Tom Schatz, president of Citizens Against Government Waste. "It's a symbol of why
everything else is out of control, not just highways." ...The highway bill is one area where the minority Democrats aren't forgotten. Rep. James
Oberstar of Minnesota, top Democrat on the Transportation Committee, listed 57 projects totaling $121 million he won for his district, from $8 million for a highway project to $560,000 for the Paul Bunyon State
Trail. Rep. Nick Rahall, D-W.Va., said in a press release that he had "used his seniority" on the Transportation Committee to gain $16
million for the eponymous Nick J. Rahall II Appalachian Transportation Institute at Marshall University. Not every lawmaker came seeking gifts. Two conservative Republicans from Arizona, Jeff Flake and John
Shadegg, wrote Young asking that the $14 million the committee was allotting to each House member for earmarks be sent instead to the state transportation department. The structure of the highway bill actually encourages members to spend money in ways only tangentially related to the bill's ostensible purpose.
Each member of Congress is essentially given a lump sum of money in the bill to do with as he pleases, and it would be naïve to expect politicians to spend that money on anything but the most eye-popping
construction projects. Some of the most glaring examples don't involve infrastructure at all, but instead are pure electoral propaganda. Young's trove includes funding for--no joke--a documentary about Alaska's
wonderful infrastructure. Of course, such enormous waste may start to look fishy even to those who benefit from it. That's why Congress talks
about the bill in terms of jobs. What gets ignored, however, is whether the bill's provisions are necessarily the best way to generate jobs. After
all, a highway bill is, by definition, going to involve construction and therefore job creation. Jobs will be created whether you build a parking lot or expand a highway.
Friday, August 5, 2005 ~ 7:29 a.m., Dan Mitchell Wrote: The current president of the Republic, Jacques Chirac, is universally laughed at. His opportunism is transparent, as are his many failures,
despite which no credible political alternative has emerged on the left. The economic ailments are also plain to see. Growth is stuck at 1.5% per
year while productivity and purchase power rise less than 1% yearly. Public debt is exploding from 58% to 68% of GDP between 2002 and 2007. The nanny-state saddles France with a EUR15 billion annual
deficit, on average. Add to that the brain drain and the expatriation of skills and businesses that flee a confiscatory fiscal and social system.
France is thus caught between a dwindling productive base and soaring collective costs. No wonder that the country has mass unemployment that has been affecting more than 10% of the population for the last
quarter of the century (23.5 % among the youth), 15% of the population living below the poverty level (including 1 million children), a steady
decline in social mobility since the 1990's and the state's chronic failure in integrating the growing and restless immigrant population. In response, France's leaders indulge in demagogy, deny reality and turn
others' successes into excuses for their failure to reform. ...The more the country sinks into crisis, the less it is capable of coming up with a clear
vision for the future. That's especially true with economic policy, which is neither socialist nor liberal but merely schizophrenic and Malthusian. So
France rails against unemployment but sanctions the "social model" that causes it; calls for reform of the State yet continues to increase public
expenditures (55% of GDP) and the number of civil servants (5 million, or 20% of the working population); signs on to the rules of the EU and euro yet repeatedly breaks them, invoking a French exception, and
indulges in protectionism.
Thursday, August 4, 2005 ~ 4:13 p.m., Dan Mitchell Wrote: ...now that Congress is home for its summer break, Americans are thankfully safe - at least for the time being. But it won't be long before
members return to Washington, ready to tax, spend, and regulate. They've done far too much of that already; so far the session has been a
disaster. Congress approved an energy bill filled with billions in subsidies and billions more in special-interest tax breaks (so much for making
permanent the president's tax-rate cuts). There's been money for almost every group with a letterhead and a lobbyist. ...More awful still is the
$286.5 billion transportation bill. It included $24 billion in purely pork barrel "special" projects. There are two groups of citizens in America.
One pays taxes. The other spends the taxes collected. There are two political parties in America. Both believe in spending every cent that can
be raised, whether through taxes, fees, loans, or something else. But for a short while, at least, the American people are safe. Congress has gone home.
Thursday, August 4, 2005 ~ 11:30 a.m., Dan Mitchell Wrote: ...three philosophers, two economists, an historian and a lawyer, all of whom subscribe to Ayn Rand's philosophy of Objectivism, have written a
book, The Abolition of Antitrust (http://www.amazon.com/exec/obidos/tg
Thursday, August 4, 2005 ~ 9:56 a.m., Dan Mitchell Wrote: "Obviously, we were wrong" could serve as the epitaph for the entire space shuttle program, which has never lived up to expectations and has
rarely justified its existence. In recent years, it has become a gold-plated Corvair--obsolete, horrendously expensive and unsafe at any speed. The cost of each launch has turned out to be 100 times greater than
originally planned. And this latest scare occurred only after NASA spent $1.4 billion to enhance safety. Yet even before Discovery lifted off, Adm.
Harold Gehman, who headed the Columbia accident investigation, said, "By any measure of `safe,' this is not safe." When the program began a
generation ago, the shuttles were supposed to make space travel routine, with weekly launches. As it happened, there have been only 114 flights
over the last 24 years, a rate of less than five annually. Worse still, two of the first 113 ended in catastrophe, meaning that on any given mission,
the shuttle has a 1-in-56 chance of not making it back in one piece. By contrast, as a Federal Aviation Administration official noted after the
Columbia accident, the commercial aviation industry operated 11 million flights in 2000 without a single death. If airlines had the same accident
rate as the shuttle program, he said, "we would lose 40 of those airplanes every day." The risk might be worth it for some bold mission to
the moon or Mars. But what purpose does the space shuttle serve at this point? It travels to the International Space Station, another expensive venture of dubious value.
Wednesday, August 3, 2005 ~ 10:35 a.m., Dan Mitchell Wrote: Competition maps the structure and logic of the Constitution, which arms rival institutions with the means and the motives to resist each
other's ambitions and encroachments. The separation of powers and bicameralism reflect that orientation. But the most pristine and consequential structural principle is federalism--a federal government of
limited, enumerated powers that leaves the states a great deal of autonomy. The Federalist Papers picture the states as independent power centers, which compete with the federal government for the
citizens' "affections." Federalism competition in this sense has withered, and the Founders may not have expected or even wanted it to last. But
federalism is competitive in a different sense: a government of limited powers compels states to compete on all the margins where the federal
government lacks the power to act. What the states compete for are the assets, talents, and affections of productive citizens and firms. Social
scientists have explicated the many advantages of federalist competition. Theorists in the tradition of Friedrich A. Hayek emphasize that competition fosters the disclosure of information (we find out what
works) and institutional learning, as states will adopt successful experiments. Other economists stress the so-called "Tiebout effect."
Given a choice, citizens will sort themselves into a jurisdiction that supplies the best mix of public goods and services at the best price. Because individual preferences vary greatly, a choice among many
differing regimes gives more people more of what they want (relative to a central regime that must accommodate a much wider range of preferences). Public choice theorists have proffered a third, especially
potent rationale--discipline in government. The business of politics, they argue, is the transfer of wealth from unorganized groups with small
stakes (taxpayers) to concentrated interests with much higher stakes. Federalism provides a defense and remedy for this ill by giving the losers an opportunity to "vote with their feet."
Wednesday, August 3, 2005 ~ 9:11 a.m., Dan Mitchell Wrote: The U.S. Homeland Security Department has been hit with a string of embarrassing internal reports of incompetence and corruption, the most
recent of which details the arrests of 146 workers and grant recipients and the identification of $18.5 million of improper spending. ...the Transportation Security Administration improperly spent hundreds of
thousands of dollars on artworks, silk flowers, state-of-the-art kitchen appliances, and fitness equipment. The TSA is a part of the Homeland Security Department. ...waste and abuse occurred in 2003 at a $19
million transportation security center under construction in Herndon, Virginia. The center, with 79 full-time employees, has seven kitchens and
a fitness center that is more than half the size of one that serves nearly 7,000 employees at the agency's headquarters, according to Skinner's report. The report alleges the agency project manager, who was not
named, told the contractor to disguise $500,000 of artwork, art consultant fees, silk plants, and furnishings. Those and other items were
described as "equipment and tools," according to the report. The report also said that to avoid spending limits on individual purchases,
transactions were routinely split into multiple purchases, for items including leather briefcases, armoires, and love seats.
Wednesday, August 3, 2005 ~ 8:52 a.m., Dan Mitchell Wrote: Spain offers a good case for European optimism. Like many of its continental neighbors, Spain was afflicted with declining labor force
participation through the mid-1990s. ...Then, in 1998, Spain flattened its tax rate in a manner similar to the U.S. tax reforms of 1986. Coupled
with labor market reforms of the previous year, Spain's labor force participation increased about 21% in the period 2000-2003, to 20 hours per week, exceeding that of Germany (18.3) and France (17.8).
Correspondingly, this increase in labor participation led to increased tax revenues. ...People respond to incentives. You don't make economic
policy for nations, you make it for people. And it's the responses of those people, when aggregated, that give us those data that we all love to
analyze. So, why did the European labor supply decrease by a third from the early 1970s to the mid-1990s? Because the marginal effective tax rate was increased to 60% from 40%. People chose to work less than
before. Consequently, tax revenues fell. You can't raise revenues by taxing people beyond their willingness to pay. ...I am especially hopeful about Germany because, frankly, it is in worse shape and it cannot
continue under the current scenario for much longer. Germany will have to act, and I expect this transformation to occur within five to 10 years.
There are indications that German political leaders are moving toward more flexible labor markets; tax reform will likely follow. A shift in
policy by Europe's largest economy -- with its strong leadership role -- will go a long way toward moving the whole EU toward an economic renewal.
Wednesday, August 3, 2005 ~ 7:08 a.m., Dan Mitchell Wrote: In the wake of the London bombings, New York City is now searching the bags of subway riders. ...Mayor Michael Bloomberg, normally a sane
fellow, has ordered that the searches be entirely random, to avoid singling out any one ethnic or religious group. So if someone fits the suicide bomber profile-young Muslim male, short hair, recently shaved
beard or mustache, smelling of flower water (a preparation for entering paradise)-the police must look away and search the nun or the Boy Scout behind him.
Tuesday, August 2, 2005 ~ 12:17 p.m., Dan Mitchell Wrote: Taxpayers can rest easier now that the denizens of Capitol Hill have gone home for their August holiday. But those worthies have left behind
a trail littered with the favors they've done for their special friends at the expense of the taxpaying masses. And in just a month, they'll be back
doing it again. ...Before recess, the House also rushed to approve two big spending bills covering who knows what. In both the highway and energy
bills the main concern was not the price tag or whether the money would be spent efficiently. It was to ensure that every member got a fair share
for his state or district. As noted in a Journal editorial, the $286.4 billion for highway projects is well over the limit set by the president. There's
pork for all, including a project in Democrat Jim Clyburn's South Carolina district widely known as the "Bridge to Nowhere." The $66
billion energy bill also was about fair shares, but mainly across the ideological spectrum. To keep enviroradicals quiet, there is money for windmills, a 19th-century technology now cluttering the landscape from
coast to coast, killing wildfowl and disturbing the neighbors. Oh yes, the flopping blades occasionally generate a few kilowatts of "renewable
energy," if the wind happens to be blowing. Apologists for all this profligacy argue that at least it "creates jobs." But none of those jobs
comes with any cost-benefit test of the type that a private venture would have to pass to get funding. Thus there is no measure of whether the money spent adds or subtracts from human well-being.
Tuesday, August 2, 2005 ~ 11:32 a.m., Dan Mitchell Wrote: In recent months, the mainstream media have suddenly taken an extraordinary interest in the distribution of income and wealth. The New
York Times and Wall Street Journal launched multi-part series on the subject, and the Los Angeles Times, Christian Science Monitor and Business Week chimed in as well. The conclusion of all these reports is
the same: the rich are getting richer than ever and the chances are falling that anyone not born into wealth will ever achieve it. Sometimes
explicitly and sometimes as subtext, it is asserted that the Bush tax cuts have worsened the distribution of income and made the non-rich worse
off. ...I believe that the timing is geared toward two things. First is to head off a final vote on abolition of the estate tax, which will come up in
the Senate this summer. (Permanent repeal has already cleared the House of Representatives.) Second is to give Democrats an issue to run on in 2006 and 2008. The problem for the Democrats is that the
American people don't believe in class warfare. They don't hate the rich because they are rich. On the contrary, they want nothing more than to emulate them. And many Americans believe that they have a good shot
at joining the ranks of the rich. The data confirm that such hopes and expectations are not unrealistic. ...The data show that although income
distribution has indeed become more unequal, the real standard of living of all income groups has risen and there is a high degree of mobility both
up and down the income ladder. As a consequence, most people believe that their living standard has improved, large percentages believe they
are living better than their parents and also that they have a good shot at becoming rich themselves. For this reason, they consistently reject
policies like the estate tax that are designed solely to soak the rich.
Tuesday, August 2, 2005 ~ 9:53 a.m., Andrew Quinlan Wrote: Police were still on high alert in London amid fears that a third terrorist cell could be plotting another strike on the capital. ...British Transport
Police have been targeting specific ethnic groups for "intelligence-led" stop-and-searches as part of their heightened security measures. BTP
Chief Constable Ian Johnston said that his officers would not "waste time searching old white ladies".
Tuesday, August 2, 2005 ~ 8:25 a.m., Dan Mitchell Wrote: The London Telegraph recently reported Mr. Blair's environment ministers proposing individual energy allotments due to global warming.
That would make Cuba, North Korea and the United Kingdom the only nations on Earth that ration fuel. ...As the Earth warmed in the last 100 years, life expectancy in developed nations doubled. ...The planetary
warming since 1900 has seen per capita real GDP increase from $4,310 to $35,790, or 830 percent in the U.S. ...It's not known if global warming
even extracts a net cost. Carbon dioxide, the emission many think the main cause for warming in recent decades, causes most agricultural plants to grow better. There are literally thousands of experiments
documenting this in refereed scientific literature. A reasonable estimate is that 5 percent to 10 percent of the global increase in agricultural yield
in the last half of the 20th century was directly due to industrial carbon dioxide emissions. ...If every nation on Earth met the Kyoto protocol, the
warming prevented would be too small to measure over 50 years. These futile attempts to diminish warming cost society dearly. In general, European nations most vocal about Kyoto have the worst economies.
Monday, August 1, 2005 ~ 11:17 a.m., Dan Mitchell Wrote: Last month Ms. Rell marked her first anniversary as Governor by signing into law a tax bill that might as well be called the "Palm Beach
Economic Development Act." The law requires that any resident of the Nutmeg State with an estate of more than $2 million pay a death tax of up to 16%--merely for the privilege of dying in Connecticut. The
legislators in Hartford hope that the tax will raise $150 million in revenue each year--money that will come in only if the legislators in Hartford are also planning to build a Berlin Wall around the state.
Otherwise, expect a stampede of retirees and family businesses out of Connecticut into the many states without a death tax, such as Florida,
which has a constitutional prohibition against estate taxes. Thanks to the Connecticut death levy, a successful small business owner with a $10 million estate can save about $1 million by packing up and heading
south. ...A 2004 National Bureau of Economic Research study--"Do the Rich Flee From High State Taxes?"--finds that states lose as many as
one of three dollars from their estate taxes because "wealthy elderly people change their state of residence to avoid high state taxes." And
that was when states imposed effective estate tax rates that were only one-third as high as they are enacting now. Under these new soak-the-rich schemes, some states could lose so many wealthy seniors
that they may actually lose revenue over time. ...Over the past 20 years about 1,000 people every day have been fleeing these high tax blue
states, for low tax red states. It's one reason the Northeast has suffered economically, and declined politically in terms of electoral votes. In New
York, about one in three tax dollars comes from those with earnings of $1 million or more. A rational policy out of Albany would be to lay down
a red carpet to encourage more rich people to move in, or at least to stay there. Instead, with its 16% estate tax, Republican Governor George
Pataki has effectively declared: "Invest anywhere but in New York." And that's why you can expect to see thousands of creative people from the Northeast whistling Dixie in the months and years ahead.
Monday, August 1, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: The point isn't simply that many terrorists take advantage of Western welfare states, the same way they take advantage of Western freedoms and Western
technology. The point is that extreme anti-social terrorist ideologies (radical Islam, in particular) seem to breed in "oppositional" cultures supported by
various government welfare benefits. ...In fact, there's a good argument that "welfare benefits + ethnic antagonism" is the universal recipe for an underclass
with an angry, oppositional culture. The social logic is simple: Ethnic differences make it easy for those outside of, for example, French Arab
neighborhoods to discriminate against those inside, and easy for those inside to resent the mainstream culture around them. Meanwhile, relatively generous
welfare benefits enable those in the ethnic ghetto to stay there, stay unemployed, and seethe. Without government subsidies, they would have to
overcome the prejudice against them and integrate into the mainstream working culture. Work, in this sense, is anti-terrorist medicine.
Monday, August 1, 2005 ~ 9:41 a.m., Dan Mitchell Wrote: Drinks companies have been ordered to use uglier men in their advertising campaigns. The Advertising Standards Authority believes
"balding" and "paunchy" men would be less likely to encourage women to drink to achieve social success. The new advertising code stresses that
links must not be made between alcohol and seduction. A campaign for popular sparkling drink Lambrini has become the first to fall foul of the
new rules. ...The industry regulator instructed the firm: "We would advise that the man in the picture should be unattractive - ie overweight,
middle-aged, balding etc. In its current form we consider that the ad is in danger of implying that the drink may bring sexual/social success,
because the man in question looks quite attractive and desirable to the girls. If the man was clearly unattractive, we think that this implication would be removed from the ad."
Monday, August 1, 2005 ~ 8:30 a.m., Dan Mitchell Wrote: This November, Colorado voters will face Referendums C and D, placed on the ballot by state legislators. With Referendum C, politicians ask
voters to throw out the caps they'd imposed on state government spending when they passed the 1992 Taxpayer Bill of Rights initiative. If passed, Referendum C slaps Coloradans with a $3.6 billion tax increase.
Referendum D goes a step further, allowing the state government to borrow still $2 billion more, which with interest could cost taxpayers more than $3 billion to pay back. Why are Referendum C and D needed?
To allow a frugal, yet cash-strapped, government to fix its crumbling schools and infrastructure? Or are these two referendums all about the
politicians' insatiable desire to spend money? ...Recently, it came to light that a sculpture entitled "Twelve Dildos on Hooks" was purchased with
$5,000 in state funds. Actually, no, I take that back: when she applied for government funding, the artist, Tsehai Johnson, changed the title of
her work to "Large Implements on Hooks." ...In most states, such scandals hardly matter. But in Colorado, what voters and taxpayers think actually does matter. Coloradans have a statewide process of
initiative and referendum, which allowed them to enact some fiscal restraint on government through the Taxpayer Bill of Rights. Without the
approval of their state's political establishment. ...Supporters of ever higher taxes and government spending (to provide ever-expanded - but
rarely useful or efficient - government services) say that the sex toy sculpture is just a red herring in the debate about Referendums C and D and government spending. ...Governor Bill Owens, whose support of C
and D has angered many taxpayers, admitted that Johnson's artwork was "offensive," and argued, "It serves as an important reminder that
whenever tax dollars are involved, government must be cautious and prudent." Nice try, Governor, but no, it serves as yet another spectacular reminder that government is neither cautious nor prudent
with our tax dollars.
Monday, August 1, 2005 ~ 8:13 a.m., Dan Mitchell Wrote: Congress may force Fannie and Freddie to reduce their mortgage portfolios substantially. Earlier this year Fed Chairman Alan Greenspan,
who supports the proposal, suggested capping their portfolios at $100 billion to $200 billion each, implying a forced divestiture of up to $1.3 trillion to other companies. Forcing financially sound companies to
divest the bulk of their assets would be unprecedented. If this were proposed for any other company, conservatives would argue it would amount to confiscating stockholders' property on a flimsy pretext. But
Fannie and Freddie are unpopular with many conservatives because of their special charters and the benefits they receive. ...Conservatives should be alarmed at the precedent this proposal would set. Once
government grants itself this power, why couldn't it eventually be applied to other companies and industries? For example, many banks and other financial companies operate under federal and state charters. Banks
receive subsidies in the form of federal deposit insurance -- taxpayer support that makes deposits a cheap source of funding -- and access to low-cost funds from the Federal Reserve. Large banks receive
preferential treatment in capital markets, because investors believe they too are too big to fail. Large banks also pose at least as much risk as
Fannie or Freddie. If government can force Fannie and Freddie to sell most of their assets, what's to keep government from later doing the same to Citigroup or Bank of America? Moreover, if government can
force the sale of assets because the owner used a subsidy to acquire them -- which seems to be an implicit justification for doing this to Fannie and
Freddie -- no one's property is safe. Subsidies are widespread and used by almost everyone. Homeowners get them through tax deductions for mortgage interest and local real estate taxes. Virtually all businesses
benefit from a direct or indirect subsidy. Once government uses a new power, it always seeks to use it again more broadly. Fannie and Freddie
could be the first targets of this power, but they would not be the last. |
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