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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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Friday, September 30, 2005 ~ 8:50 a.m., Dan Mitchell Wrote: The day before hurricane Rita hit Texas, last Friday, I saw on TV something that disturbed me. It was not the usual scene of crashing waves and hardy reporters being blown
sideways by wind gusts. It was a fat Texas guy swimming in the waves off Galveston. He'd apparently decided the high surf was a good thing to jump into, so he went for a prehurricane swim. Two cops saw him,
waded into the surf and arrested him. When I saw it the guy was standing there in orange trunks being astonished as the cops put handcuffs on him and hauled him away. ...You'd have to be crazy, in my judgment,
to decide you were going to go swim in the ocean as a hurricane comes. But in the America where I grew up, you were allowed to be crazy. ...Government has real duties in disaster. Maintaining the peace is a
primary one. But if we demand that our government protect us from all the weather all the time, if we demand that it protect us from rain and hail, if we make government and politicians pay a terrible price for
not getting us out of every flood zone and rescuing us from every wave, we're going to lose a lot more than we gain. If we give government all authority then we are giving them all power. And we will not only
lose the right to be crazy, we'll lose the right to be sane. A few weeks ago when, for a few days, some level of government, it isn't completely clear, decided no one should be allowed to live in New Orleans
after the flood, law-enforcement officers went to the home of a man who had a dry house, a month's supply of food and water, and a gun to protect himself. The police demanded that he leave. Why? He was fine. He
had everything he needed. The man was enraged: It was his decision, he said, and he was staying. It is the government's job to warn and inform. That's what we have the National Weather Service for. It is not
government's job to command and control and make microdecisions about the lives of people who want to do it their own way.
Friday, September 30, 2005 ~ 8:01 a.m., Dan Mitchell Wrote: Fear has enveloped Republicans who see themselves handing the banner of fiscal integrity to the Democrats. The GOP is losing the rhetoric war,
even though Democrats mostly push for higher domestic spending, because Republicans, while standing firm against tax hikes, have also declined to cut spending. Fearing the worst in the 2006 and 2008
elections, Republican senators who would not be expected to do so are looking to McCain to lead the party back to fiscal responsibility. The
"emergency" Medicaid bill is a classic case of how government grows and spending soars. Democratic Sen. Blanche Lincoln, concerned by
health problems of evacuees in her state of Arkansas, introduced a bill increasing Medicaid funds to the states. The Senate Finance Committee's Republican chairman, Chuck Grassley, and its ranking
Democrat, Max Baucus, drafted the scaled-down, $9 billion substitute and marked it for quick passage. No hearings, no debate, no trouble. Grassley is an Iowa farmer considered a conservative when he came to
the Senate 25 years ago. But like many lawmakers who may have stayed too long, Grassley plays the Washington game. ...another member of the Republican economy bloc -- Sen. John Sununu of New Hampshire --
responded by coolly analyzing the bill's excessive spending. Also on the floor were two other bloc members: freshman Sen. Tom Coburn of Oklahoma and McCain. Although previously out of step with his party
on tax cuts, McCain is aligned against tax increases as "a cop-out" to avoid budget trimming. Among others in the bloc are the two South Carolina senators, Lindsey Graham and Jim DeMint. Graham wants
this group to join the House's conservative Republican Study Committee in a "full frontal assault" on runaway spending. The culture of
Washington is against them, but stopping one $9 billion outlay is a start.
Friday, September 30, 2005 ~ 7:26 a.m., Dan Mitchell Wrote: How did we get here? Is this the same party that just 10 years ago insisted on dollar-for-dollar spending offsets for its $15 billion response
to the Northridge, Calif., earthquake -- with the California Republican delegation leading the charge? Where did we go wrong? And how do we convince the voters in the midterm elections that two more years of
Republican control will produce anything more than bigger government and growing deficits? ...When we refuse, in the aftermath of Katrina and Rita, to consider postponing a universal prescription drug benefit
that we could ill-afford prior to the devastation, and reject out of hand a national consensus that we reopen the infamous Highway Bill and finance the rebuilding of the bridge over Lake Pontchartrain in
Louisiana by canceling the Bridge to Nowhere in Alaska, we can hardly blame the voters for questioning our fiscal bona fides. ...Whether we
want to admit it or not, the Republican Congress's failure to discipline itself is sending us all down a flower-strewn path to financial insolvency.
That the Democrats would get us there faster should be of little consolation to anyone.
Thursday, September 29, 2005 ~ 10:59 a.m., Dan Mitchell Wrote: This includes a permitting process that is subject to endless bureaucratic delay and court challenges. The one company that is even considering
building a new refinery -- Arizona Clean Fuels Yuma -- has been trying to obtain its necessary air permits for nearly seven years. Refiners have
also had to spend some $47 billion in the past 12 years to meet the demands of, among other laws, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, the Oil
Pollution Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act. And from 2006 to 2012, refiners will be forced to comply with 14
new major environmental programs. ...The recent energy bill only makes things worse. Its new ethanol mandate, a payoff to Midwest farming interests, will involve complicated refinery changes.
Thursday, September 29, 2005 ~ 10:19 a.m., Dan Mitchell Wrote: Major reforms have enhanced the flexibility of the labour market and have improved incentives for the unemployed to seek work. ...In order
to stimulate the creation of jobs that require low skill levels, costs of low paid labour should be significantly reduced, either by cutting employers'
social security contributions for low-wage workers, or by reducing the minimum wage. ...Slovakia's combination of sound macroeconomic policies, comprehensive tax and social welfare reform, and new
regulations for the product, capital and labour markets, has resulted in an acceleration of growth over the past five years and has increased the
pace with which Slovakia is catching up to the living standards of wealthier nations. ...net employment creation in the private sector has accelerated in the past two years... The fiscal cost of this should be
funded through expenditure restraint in less urgent areas such as industrial and agricultural subsidies. ...the comprehensive 2004 tax reform has significantly improved investment incentives.
Thursday, September 29, 2005 ~ 9:43 a.m., Dan Mitchell Wrote: Romania's newly introduced flat tax has brought in more revenues and helped to reduce registered unemployment by teasing business out of the
shadow economy, Finance Minister Ionut Popescu said recently. Popescu told Reuters in an interview that fast growth and good revenues would allow the government to bring down the budget deficit
to 0.7 percent of gross domestic product from 1.5 percent foreseen last year for 2005. ..."This reflects higher budget revenues from introducing
a flat tax in January and strengthening the law against tax evasion." Romania's centrist government introduced in January a 16 percent flat corporate and income tax, replacing an 18-40 income scale and a 25
percent tax on business in a bid to limit the gray economy and spur foreign investment. ...Popescu said this strategy had worked so far,
additionally producing a spike in officially registered employment. "The flat tax triggered a steep rise in employment. In the first quarter, the
number of employees rose by 153,000, which is almost double from the same period a year ago," he said. Government figures show the jobless rate hit a 13-year low of 5.5 percent in May.
Thursday, September 29, 2005 ~ 9:30 a.m., Dan Mitchell Wrote: The space shuttle and International Space Station - nearly the whole of the U.S. manned space program for the past three decades - were
mistakes, NASA chief Michael Griffin said Tuesday. ...The shuttle has cost the lives of 14 astronauts since the first flight in 1982. Roger Pielke
Jr., a space policy expert at the University of Colorado, estimates that NASA has spent about $150 billion on the program since its inception in
1971. The total cost of the space station by the time it's finished - in 2010 or later - may exceed $100 billion, though other nations will bear some of that.
Wednesday, September 28, 2005 ~ 11:16 a.m., Dan Mitchell Wrote: What really bothers me is the orgy of spending by Republicans. It is just appalling that the recent highway bill had 5,000 "earmarks" in it. These
are almost without exception, utterly unjustified pork barrel projects. I am further appalled by President's Bush's unwillingness to use his veto
pen to maintain some semblance of fiscal discipline. He is the first president to serve a full term without vetoing anything since John Quincy Adams, who served from 1824 to 1828. ...When I complain
about this to the rapidly dwindling number of friends I have in the White House, they always tell me that it is very hard to veto bills when a
Congress controlled by your own party passes them. But this excuse is just total humbug, as the Brits might say. Franklin D. Roosevelt vetoed
a record 372 bills, every one of them passed by Congresses controlled by his party. Other Democrats have also shown no unwillingness to veto
bills passed by Democratic Congresses. John F. Kennedy vetoed 12 bills, Lyndon Johnson vetoed 16, and Jimmy Carter vetoed 13. ...The Medicare program was already bankrupt and should have been the
primary focus of Bush's reform effort. Instead, he not only ignored Medicare's looming crisis, he made it an order of magnitude worse. ...Unfortunately, President Bush's reaction to any suggestion that the
drug bill even be postponed has been outrage and the promise of a veto. "I signed the Medicare reform proudly," he said earlier this year, "and
any attempt to...take away...prescription drug coverage under Medicare will meet my veto." It would be ironic if the only bill of his presidency he absolutely should not veto became the only one he did veto.
Wednesday, September 28, 2005 ~ 10:48 a.m., Dan Mitchell Wrote: In essence, voters in the former East German states summoned up the ghosts of communism to spoil things for the rest of Germany. They
voted against reforms in Germany's lavish social-welfare system and its mind-boggling tax code. Why? Because despite all the money the west has spent on them, they're still poor. With German unemployment at
around 11%, over 19% of the work force in the east is idle, compared with 8.7% in the west. German policies have made a large proportion of
the eastern population wards of the state and fearful that reformists will dispossess them. Herren Lafontaine and Gysi exploited these fears shamelessly, preaching the same old egalitarian nonsense that the
Communists used for decades to keep captive peoples in the Soviet empire in thrall. Instead of letting the East Germans climb naturally out of poverty by exploiting their lower labor costs, CDU Chancellor
Helmut Kohl and the SPD's Mr. Schröder plied them with massive subsidies. ...The lesson is that you can't build a viable economy with subsidies and handouts. Factories and their workers must be allowed to
employ whatever natural advantages they have to gain market share. ...the German example is worth pondering as the American president and Congress discuss spending $200 billion in federal money to turn
Louisiana into a Cajun East Germany.
Wednesday, September 28, 2005 ~ 9:39 a.m., Dan Mitchell Wrote: You know spending discipline has collapsed on Capitol Hill when one of the lone voices for fiscal restraint is House Minority Leader Nancy
Pelosi. As Republicans rush to deluge the Gulf Coast with tens of billions of tax dollars to display their "compassion," Ms. Pelosi has
cleverly seized the mantle of fiscal responsibility. Last Wednesday Ms. Pelosi offered to return to the federal government $70 million for
highway bill projects targeted for her district in San Francisco -- "to help the victims of Katrina." But when House Republican leaders were
asked if they would give up their slabs of highway pork, there was not a single taker. Majority Leader Tom DeLay of Texas went so far as to
declare that, "The bill creates hundreds of thousands of jobs. It's an economic engine." By that logic we could end joblessness in America by
building even more bike paths and bridges to nowhere. With a lifetime Citizens Against Government Waste rating of "Hostile to the Taxpayer," Ms. Pelosi hardly qualifies as a fiscal conservative. But at
least she understands what the out-of-touch Beltway Republicans don't: The latest polling shows that voter support for the GOP is slipping,
especially among normally loyal Republicans, and their spending spree is one big reason. ...Our primary concern with the Katrina spend-fest is
that it puts the economy at risk by putting pro-growth tax cuts in harm's way. If the 2003 capital gains, dividend and income tax rate cuts are
cancelled, as virtually the entirety of the Democratic Party is clamoring for, we get the most destructive of all fiscal storms: a continued federal
spending buildup -- expenditures are already up 34% under President Bush in five years -- slower economic growth, and a smaller future tax base to finance federal spending promises. The new Federal Reserve
Board household wealth survey reveals that $4 trillion of new American household wealth has been created since the capital gains and dividend tax cuts were enacted. Repealing those tax cuts is the surest way to
trigger a true housing bust and reverse the stock market gains of the last two years. What Ms. Pelosi and a few other Democrats seem to be figuring out in the wake of Katrina is that Americans aren't happy with their
government throwing billions of dollars around with little if any accountability. Therefore she's laying out a legislative agenda aimed at
capturing the mantle of fiscal responsibility. ...Republicans have held the House for almost 12 years and have occupied the White House for all
but eight of the past 25 years, yet they have failed to shut off the spending valves in Washington. It was only a matter of time before Democrats ran against wasteful Republican spending. ...Republicans
were sent to Washington in the 1950s to repeal the New Deal. Voters sent them packing when it became clear they were big spenders. In the 1990s Republicans were sent to Washington to repeal the Great Society.
If they too turn out to be big spenders, they can expect a similar fate.
Wednesday, September 28, 2005 ~ 9:02 a.m., Dan Mitchell Wrote: To understand just how this affects the [Millenium Development Goals] consider how one of those goals -- reducing infant mortality -- is
affected by WHO's distorted bureaucratic priorities. Diarrhoeal diseases, which are a major source of infant mortality, received less money ten years ago than WHO spent on its own office supplies. And during the
same period, WHO spent more money for so-called "health promotion campaigns" than on combating the malaria (MDG goal 6) which kills about a million children a year, mostly in Africa. Nor are these
bureaucratic spending distortions an anomaly. In WHO's most recent budget for 2006-7, support for WHO's 140 country offices and their bureaucrats consumes $188 million scarce dollars. Of the almost $153
million allocated for arguably WHO's primary mission -- communicable disease prevention and control (MDG goals 4,5,6) -- only 42% is to be spent at the country level while 58% is spent on the WHO bureaucracy
in Geneva. "Human resources management" will take up a staggering $ 51million, while infrastructure and logistics will eat up $130 million...
The great tragedy of the MDG is that they are wedded to the UN. They offer the world's poorest, sickest and often most disheartened citizens the prospect of a world that is better in almost every respect. But as
long as the MDG are linked to an institution that carries not simply a crippling burden of corruption but whose capacities for organizing, thinking, planning, and acting are so acutely impaired, they will remain
nothing more than a prospect.
Tuesday, September 27, 2005 ~ 10:00 a.m., Dan Mitchell Wrote: There's only one place where we'd have thought you could produce anything so ludicrous as a sugar shortage, and that's the old Soviet
Union. Well, that's pretty close to what we've got. The foundation of the U.S. sugar program is a government crop loan and a guarantee that farmers can offload their sugar on Uncle Sam if market prices fall
below loan levels, which work out to 18 cents a pound for cane and 23 cents for beet sugar. Needless to say, this means the commissars in charge of the program at the U.S. Department of Agriculture strive to
keep prices high so the government doesn't get buried beneath a landslide of forfeited sugar. Thus, the department puts quotas on both domestic production and imports. The obvious problem with targeting
supply to guarantee price is that you really can't know at the beginning of the year exactly how much sugar Americans will consume. So the department derives an arcane guesstimate, and based on that sends
"marketing allotments" to domestic producers who are then supposed to deliver the "correct" amount of supply. ...The U.S. 2002 farm bill, the
protector of this big rock-candy mountain of central planning, comes up for a rewrite in 2007. The sugar producers' lobby will demand yet more bells and kazoos to keep the contraption going.
Tuesday, September 27, 2005 ~ 9:36 a.m., Dan Mitchell Wrote: Polish voters ousted the nation's scandal-prone government of former Communists in parliamentary elections Sunday, giving a broad majority
to two center-right parties that have promised tax cuts and clean government, according to exit polls. ...But following the example of German voters a week ago, Poles appeared to reject all-out cuts in state
welfare benefits, giving the most votes to Law and Justice, a party that seeks to blend free-market economics with government programs that strengthen social equality. ...Donald Tusk, the Civic Platform leader,
conceded that Law and Justice earned more votes than his party, which favored a 15 percent flat tax on incomes. Poland's Law & Justice party, which unexpectedly won yesterday's general election, may struggle to form a government with rival Citizens'
Platform because of disagreements over economic policy. ...Its proposed partner, Citizens' Platform, probably will get 123 seats, meaning neither
can govern without the support of another party. The two groups will seek to rekindle economic growth and bring down the jobless rate, the highest in the European Union, while lowering taxes and trimming the
budget deficit. ...Differences over policy may be highlighted by a further tussle between the parties in presidential elections to be held in two
weeks. The Platform's Donald Tusk leads in the polls ahead of Law & Justice's Lech Kaczynski, Warsaw's mayor and identical twin brother of party leader Jaroslaw.
Tuesday, September 27, 2005 ~ 9:12 a.m., Dan Mitchell Wrote: President Bush suggested last week that some Hurricane Katrina costs may be financed with cuts in other programs. Amtrak is an excellent
place to start. Consider that the railroad perpetuates the Orlando -- Los Angeles "Sunset Limited," a train listed in a Department of Transportation report as costing taxpayers $466 in subsidies per
passenger. ...Evidence that Amtrak is utterly dysfunctional can be found in 30 reports issued since 1997 by the Government Accountability Office, the Amtrak Reform Council and others. A misguided
Congressional response to the avalanche of negative findings is to throw more money at Amtrak, and yet Senate appropriators are willing to grant Amtrak $1.45 billion -- an all-time record -- while Senate
Democrats claimed that anything less than $1.8 billion would be "the final nail in the coffin" for the railroad. Senators Trent Lott (R-Miss.)
and Frank Lautenberg (D-N.J.) ignore Amtrak's failures and want to authorize nearly $11.4 billion for the railroad over the next six years. ...Many more Americans rely on our airline system. The
Hartsfield-Jackson Atlanta International Airport alone serves more than three times the number of passengers than does the entire nationwide Amtrak system of 512 stations. |
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Monday, September 26, 2005 ~ 11:19 a.m., Dan Mitchell Wrote: The research finds that the cost of federal regulations totals $1.1 trillion; the cost per employee for firms with fewer than 20 employees is $7,647. ...The compliance cost
per employee for small manufacturers is at least double the compliance cost for medium-sized and large firms. In the service sector, regulatory costs differ little from small to larger firms. The
disproportionality of the burden borne by small firms, identified in previous advocacy studies, is further validated in this instance. On a peremployee basis, it costs about $2,400, or 45 percent, more for small
firms to comply than their larger counterparts. ...Environmental and tax compliance regulations appear to be the main cost drivers in determining the severity of the disproportionate impact on small firms.
Compliance with environmental regulations costs 364 percent more in small firms than in large firms. The cost of tax compliance is 67 percent higher in small firms than the cost in large firms.
Monday, September 26, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: This unprecedented march to the sea has been abetted by unwise government policies that encourage living along the coast. Principal
among them: the National Flood Insurance Program. Started in 1968, federal flood insurance subsidizes development in coastal areas and other regions subject to flooding by offering insurance at bargain rates
underwritten by the government. As of last year, about 4.6 million policies were in effect with an average annual premium of $438. These premiums are nowhere near enough to cover the program's losses.
Earlier this month, Congress authorized the program to borrow $3.5 billion for Katrina-related payments, an amount most experts believe is just the beginning and few believe will be repaid by property owners.
The program not only brings big government into an area better left to private enterprise, it also achieves the opposite of its goal. By lowering
the cost of maintaining a home on flood-prone lands, it increases the populations in these areas. That in turn leads to more, and more costly, disasters.
Monday, September 26, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: If you take Margaret Thatcher's dictum that a socialist is someone who is very good at spending other people's money, then President Bush is,
er, a socialist. Sure, he has cut taxes, a not-too-difficult feat when your own party controls both houses of Congress. But spending? You really
have to rub your eyes, smack yourself on the forehead and pour yourself a large gin and tonic. The man can't help himself. ...Then there was the
big increase in agricultural subsidies. Then the explosion in pork barrel spending. Then the biggest new entitlement since Lyndon Johnson, the Medicare drug benefit. Then a trip to Mars. ...Remember when
conservatism meant fiscal responsibility? In a few years, few people will be able to. I used to write sentences that began with the phrase: "Not
since Lyndon Johnson's Great Society spending binge. . ." I can't write that any more. Johnson - the guns and butter president of liberalism's
high-water mark - was actually more fiscally conservative than the current inhabitant of the White House. LBJ boosted domestic discretionary spending in inflation adjusted dollars by a mere 33.4%. In
five years, Bush has increased it 35.1%. And that's before the costs for Katrina and Rita and the Medicare benefit kick in. Worse, this comes at a time when everyone concedes that we were facing a fiscal crunch
before Bush started handing out dollar bills like a drunk at a strip club. ...Conservatives have been quietly frustrated with Bush for a long time
now. ...If you do not cut spending to align with lower taxes, you are merely borrowing from the next generation. And if a Republican president has legitimised irresponsible spending, what chance is there
that a Democrat will get tough? This may, in fact, be Bush's real domestic legacy. All a Democratic successor has to do is raise taxes to pay for his splurge, and we will have had the biggest expansion of
government power, size and responsibility since the 1930s. What would Reagan say? What would Thatcher?
Monday, September 26, 2005 ~ 9:57 a.m., Dan Mitchell Wrote: The Congressional Joint Committee on Taxation (JCT) and the Treasury Department also estimate the revenue impacts of tax policy changes.
Their projections have similar problems. Consider the 1997 tax changes, which primarily involved a cut of 28.6% in the capital gains tax rate. According to a recent report from the American Shareholders
Association by Dan Clifton, JCT estimated that revenues would increase $7.8 billion from 1997 to 1999, but decline $28.8 billion over the next
seven years. Instead, the actual increase in federal revenues from capital gains taxes from 1997 to 1999 was more than 10 times higher -- $84
billion. What about the projected losses later on? Capital gains revenues have now grown to double their levels of 1996, just before the tax cut.
For estate taxes, JCT estimates that total repeal would cost the federal government $70 billion a year, even though the death tax now raises only $20 billion per year. Academic analyses, on the other hand,
estimate either no revenue loss or even a net gain. The methodologies used by analysts across the federal government to score the impact of
legislation still do not take into account the dynamic, pro-growth effects of policy changes. They continue to use mostly static methodologies that
assume no significant changes in behavior in response to changes in incentives.
Monday, September 26, 2005 ~ 8:47 a.m., Dan Mitchell Wrote: But that task is going to be far more difficult if Mississippi Attorney General Jim Hood and his tort lawyer pals succeed in rewriting private
insurance contracts after the hurricanes have hit. For decades private insurers have had flood exclusions in their contracts--which is one reason the federal government decided to offer its own flood insurance.
Yet Mr. Hood now says these exclusions are "unconscionable," and he is suing private insurers to cover all of Katrina's costs. Hot on his heels is
tort kingpin Dickie Scruggs, whose own home was damaged and who promises to sue the industry for what he claims are deceptive business practices. ...Mr. Hood, a Democrat who fancies himself the Eliot Spitzer
of the South, understands all this. Yet he is twisting facts and arguing that, exclusions notwithstanding, residents believed they were buying
comprehensive hurricane insurance and that private insurers therefore have a duty to cover all Katrina damages. Even assuming this confusion existed, Mr. Hood is basically holding insurers responsible for
Mississippians who didn't bother to read contracts they signed. Mr. Scruggs's claim is even more disingenuous. As only a lawyer can, he's arguing that since the wind pushed the water during the hurricane, the
flooding was in fact wind damage. This should be a legal nonstarter, given that most contracts exclude rising water no matter what the cause or circumstance. Both men are demanding that private insurers pay for
Katrina flood damage, though the companies never collected one dime of flood premiums over the years and have no such reserves.
Sunday, September 25, 2005 ~ 12:41 p.m., Dan Mitchell Wrote: Will a new fixation on egalitarianism in China take that country back to Maoism? If the hand-wringing about income inequality in China
translates into policies that will penalize hard work, talent and risk-taking, or get in the way of reform, the answer could be yes. If, on the contrary, the social resentments generated by Communist Party
corruption and cronyism are addressed, China could have a useful debate. ...The measure that the stories in China have been using -- one beloved of academics the world over -- is the United Nations
Development Program's so-called "Gini coefficient index." In the UNDP's own words, the index measures the extent to which income
distribution "deviates from a perfectly equal distribution." Zero is "perfect" egalitarianism, and the higher score you get supposedly the
worse. ...In 2003, when China began to implement its WTO reforms, its index was at 40. In 1992, when the reforms stemming from Deng Xiaoping's southern voyage started, the index was at 37.4. And in 1980,
a year after the reforms were first launched, it was at 33. This means that China's income gap has grown 36% in the last quarter century of economic reform. But, hang on, in that time China has seen not just one
of the fastest rates of economic growth in modern history, but also one of the most astonishing records of poverty reduction. By the World Bank's own estimates, the number of people living in poverty had been
reduced to 29 million in 2001, from 80 million in 1993 and 250 million when the reform process got under way in 1979. ...It is almost axiomatic
that during periods of high growth, some will improve their lot at a higher rate than others. But the lot of those at bottom also improves, in
the case of China markedly. Simply put, in order for the whole of society to advance, talent and hard work must be rewarded. Income redistribution schemes that penalize these virtues will do the opposite.
Sunday, September 25, 2005 ~ 11:14 a.m., Dan Mitchell Wrote: If you thought starting a business in France was difficult, try closing one. Last month, a French court ordered Nestlé to reopen an
unprofitable factory shut down in June. Apparently, the Swiss food giant hadn't met all of France's labor law requirements -- even though it had
offered the 427 workers in question early retirement schemes or jobs in other Nestlé plants in France. So when President Jacques Chirac asked
his cabinet Tuesday to ensure that Hewlett-Packard "fully respects" its obligations under French labor law, it was no empty threat. ...Part of
this is of course the posturing of an unpopular President trying at least to appear that he's doing something for the country's 10% unemployed.
But as the Nestlé case proves, too often this posturing is backed up by real action. France's staggering jobless rate is largely the result of a fundamental misunderstanding of capitalism. Somehow, the country's
fabled "social model" assumes that companies should operate like nonprofit organizations. But neither do entrepreneurs create jobs out of
charity nor do they lay off people out of malice -- despite French Employment Minister Gerard Larcher's calling Hewlett-Packard's plan
"brutal." It is the much-maligned drive for profit that creates growth and jobs. Labor laws that make it costly to lay off workers are not
"social"; they discourage companies from hiring. And when not even unprofitable plants can be shut down, it will hardly prompt investors, foreign or domestic, to open new ones.
Sunday, September 25, 2005 ~ 10:49 a.m., Dan Mitchell Wrote: Here's my silver-lining hope this hurricane season: George W. Bush's compassionate conservatism gets wiped out like a taco hut in the path of
a Cat. 5 storm. ...Almost by definition, people who claim to be compassionate conservatives are suggesting that other kinds of conservatives aren't. Conservatism, rightly understood, never needed
the adjective. The second problem is that compassionate conservatism necessarily demands government activism. ...In 2003, President Bush proclaimed, "We have a responsibility that when somebody hurts,
government has got to move." ...Traditional conservatism, on the other hand, considers a lean government essential to the task of fulfilling its
core responsibilities. A great many liberals in recent weeks have argued that conservative hostility to big government suggests we don't support
agencies like FEMA or fire and rescue services. This is nonsense. Every conservative I know wants firemen to put out fires. We don't, however,
want firemen asking us how our marriage is going or lecturing us about how to be more "sensitive." A fireman can't put out the fires at my house if he's at your house giving you a big hug. ...as with the rest of the money it has been working so hard to spend since George W. Bush was elected, Congress is taking its cues from the
president. First he unveiled a grandiose post-Katrina reconstruction plan, promising not only to restore New Orleans but to make it "better
and stronger" than ever. The next day, he belatedly mentioned "cutting other programs" but also said reconstruction will "cost whatever it
costs." With preliminary estimates in the area of $200 billion, that blithe attitude is not exactly reassuring. Neither is the 35 percent increase in
discretionary spending over which Bush presided in his first term; or his proud advocacy of unnecessary, unconstitutional budget busters such as the Medicare drug benefit and the No Child Left Behind Act; or his
record of zero vetoes in five years. Our president is very generous with other people's money. Worse, he is generous with the money of people
who are in no position to object, either because they are too young or because they haven't been born yet. ...Without serious spending cuts, Bush's promise of no tax hikes is a fraud. Taxes will go up, since
ultimately that's the only way to finance federal spending. It's just a question of when. ...In this context, it's hard to know whether to laugh or
cry when House Majority Leader Tom DeLay, R-Texas, announces that there's no fat left to cut in the federal budget because "we've pared it down pretty good." A little over a month ago, when House members were departing for the August break, the Republican leadership circulated a flyer listing 12
"Ideas for August Recess Events." Among these were, according to The Washington Post, "stop by a military reserve center to highlight
increased benefits," "visit a bridge or highway that will receive additional funding," or "talk up the new prescription drug benefit for
seniors." That sound you hear (is it a ka-ching?) is the sound of Republican principle melting in the hot sun of Washington, D.C. Gone is
the heady talk from the days of the Republican Revolution in 1994, when whole departments and agencies were to be eliminated. Today, the corpulent state gobbles up taxpayers' money, and it is Republicans who
declare that no "offsets" can be found for the new spending natural disasters will require. ...And now President Bush, whose greatest sin in his first term was failure to wield the veto pen, has joined
enthusiastically in the legalized looting of the taxpayer. No one has any idea how much the federal government will spend rebuilding the areas devastated by Katrina.
Saturday, September 24, 2005 ~ 10:34 a.m., Dan Mitchell Wrote: Joining the tax debate yesterday, Mr Russell said a flat personal income tax rate, funded by slashing concessions such as negative gearing, could
make Australia the headquarters of the region. ...A flat personal income tax rate - at least in alignment with the company rate of 30 per cent --
would boost Australia's competitiveness in lagging industries such as the professional services sector, Mr Russell said. "It is obviously one of the
things that will have to be considered - a (flat rate of tax with) a very general threshold," he said. ..."There is impressive evidence from
around the world that it can be done. Australia doesn't have a choice - you've got to have a competitive tax system." Mr Russell said federal Labor's reforms to company taxes had made Australia competitive
compared with countries such as China, India and Japan. Personal income tax reform would help stop out-sourcing to other countries. "To make manufacturing competitive one would need to have an effective
tax rate that matched our competitiveness. Increasingly now it is services that are becoming subject to competition," he said. ...Reigning
in upper- and middle-class welfare would also fix effective marginal tax rates, which occur where income rises and benefits are lost, acting as a
disincentive to work. Liberal backbencher Malcolm Turnbull has argued for cuts to the top rates of tax, flagging changes to fringe benefits tax.
...The party will form a research group to scrutinise options for tax reform including cutting rates and targeting concessions ahead of a summit to discuss the party's policy. A flat personal income tax rate
carried the added bonus that it would simplify the system and cut compliance costs, Mr Russell said.
Saturday, September 24, 2005 ~ 10:04 a.m., Dan Mitchell Wrote: FEMA ordered plenty of ice - but getting it to those who need it has been chaotic. ...NBC News located hundreds of trucks full of ice sitting
around the country: in Maryland, Missouri, Georgia, Tennessee, Mississippi and Louisiana. Some had been on trips to nowhere for the past two weeks. Elizabeth Palmer is a truck driver in Carthage, Mo.
"We really don't understand," said Palmer, "why FEMA is sending to all these different locations and just putting us in cold storage." Dan
Wessels' Cool Express ice company has worked with FEMA for years. He says he's never seen anything like it - only one-third of his trucks have actually unloaded the ice that FEMA ordered. ...For example, one
truck of ice left Oshkosh, Wis., on Sept. 6, and went to Louisiana. Then it was sent by FEMA to Georgia but was rerouted before it arrived to
South Carolina, then to Cumberland, Md., where it has been sitting for three days at an added cost to taxpayers so far of $9,000. Multiplied by hundreds of trucks, this sort of dispatching could mean millions of
dollars are being wasted. "From a trucking aspect, I'm happy. Keep it coming," said Wessels. "From a taxpayer aspect, it's sick." The trucks started arriving this weekend, and they're expected to keep coming through Sunday. City officials say they have no idea why the
trucks are here, only that the city has been asked to help out with traffic problems. But the truck drivers NEWSCENTER spoke to said they went
all the way down to the gulf coast with the ice -- stayed for a few days -- and then were told by FEMA they needed to drive to Maine to store it.
...The trucks can only unload 4 at a time -- so the city is allowing some of them to sit at the International Marine Terminal and at the Jetport's satellite parking lot. No one NEWSCENTER talked to has any idea
when, or even if the ice will go back to the gulf coast.
Saturday, September 24, 2005 ~ 9:23 a.m., Dan Mitchell Wrote: French president Jacques Chirac has suggested a US company should be referred to Brussels for a probe into its plan to cut 5,900 jobs in Europe
by 2008. Mr Chirac has instructed his ministers to prepare an appropriate response to Hewlett-Packard's plan and make sure the company shows "full respect" for labour laws in France, where over
1,000 jobs are to be cut. ...The plan has come across strong opposition from local politicians, pressing Paris to prevent a further increase in unemployment, which currently stands at 9.9 percent.
Friday, September 23, 2005 ~ 10:33 a.m., Dan Mitchell Wrote: Freedom House, an organization that studies countries' political systems, categorizes 103 of the world's 192 nations as either "not free" or
"partially free," meaning that the civil liberties and basic political rights of their citizens are limited or severely curtailed. More than 3.6 billion
people, or 56 percent of the world, live in such countries. Statistically, a "normal" human being in today's world is poor, lives in oppressive
physical, social, and political conditions, and is ruled by unresponsive and corrupt government. ...Rich-world assumptions about what constitutes the global norm are costly illusions. Billions of dollars have
been wasted by assuming that governments in poorer countries are more or less like those in rich ones, only a little less efficient. Despite constant
reminders that most governments in the world are unable to perform relatively simple tasks, such as delivering the mail or collecting the garbage, most recipes for how these countries should solve their
problems reflect the sophisticated capabilities taken for granted in rich countries, not the realities that exist everywhere else. Link to this Blog Entry
Friday, September 23, 2005 ~ 10:13 a.m., Dan Mitchell Wrote: This extraordinary economic performance has been driven by changes in government economic policy that have progressively given greater rein
to market forces. The transformation started in the agricultural sector more than two decades ago and was extended progressively to industry and large parts of the service sector, so that price regulation was
essentially dismantled by 2000. While price controls were being abolished, the government introduced a pioneering company law that for the first time permitted private individuals to own limited liability
corporations. ...public expenditure rose by almost 7 percentage points of GDP but is still fully 13 percentage points below the OECD weighted
average. ...foreign companies are taxed at a rate (15%) that is amongst the lowest in the world. ...some changes could also be envisaged to
personal income taxation. In this area, the system has been kept simple, with few deductions and a flat tax on income from capital. At present,
few people have sufficiently high incomes to pay the highest marginal tax rate of 45% and the average marginal tax rate is low. But, given rapid growth in incomes, this situation could change if allowances and
thresholds remain without any indexation to wages or prices, as has been the case since 1980. A strong signal of the intention of the government to continue its support for private sector entrepreneurial
activity would be to reduce top marginal income tax rates, a move that would cost little in revenue but would align China with a number of other transition countries that have found that a low tax rate
encourages the declaration of income and improves incentives for economic activity. Link to this Blog Entry
Friday, September 23, 2005 ~ 9:43 a.m., Dan Mitchell Wrote: George W. Bush is a big spender. He has never vetoed a spending bill. When Congress serves up a big slab of fat, crackling pork, Mr. Bush
responds with one big question: Got any barbecue sauce? ...Republicans have grown alarmed at federal spending. It has come to a head not only
because of Katrina but because of the huge pork-filled highway bill the president signed last month, which comes with its own poster child for
bad behavior, the Bridge to Nowhere. The famous bridge in Alaska that costs $223 million and that connects one little place with two penguins
and a bear with another little place with two bears and a penguin. ...A lot of Bush supporters assumed the president would get serious about spending in his second term. With the highway bill he showed we
misread his intentions. The administration, in answering charges of profligate spending, has taken, interestingly, to slighting old conservative hero Ronald Reagan. This week it was the e-mail of a high
White House aide informing us that Ronald Reagan spent tons of money bailing out the banks in the savings-and-loan scandal. This was startling information to Reaganites who remembered it was a fellow named
George H.W. Bush who did that. ...Mr. Bush has abandoned all rhetorical ground. He never even speaks of high spending. He doesn't argue against it, and he doesn't make the moral case against it. When
forced to spend, Reagan didn't like it, and he said so. He also tried to cut. Mr. Bush seems to like it and doesn't try to cut. He doesn't warn that endless high spending can leave a nation tapped out and future
generations hemmed in. In abandoning this ground Bush has abandoned a great deal--including a primary argument of conservatism and a primary reason for voting Republican. Link to this Blog Entry
Friday, September 23, 2005 ~ 9:23 a.m., Dan Mitchell Wrote: The Dutch government pledged billions of euros in tax cuts during Tuesday's budget announcement, in a bid to rekindle the slow burning
economy and boost its own flagging popularity ratings. Among the key measures in the EUR4.8 billion economic stimulus package, EUR2.5 billion of which will come in tax relief, is a reduction in the headline rate
of corporate tax to 29.6%, starting in 2006, down from 31.5% at present. The corporate tax rate will be nudged down further in the following year under the budget plans, to 29.1% in 2007. Meanwhile, to
help firms finance growth more easily, capital transfer tax will be abolished from next January. Link to this Blog Entry
Friday, September 23, 2005 ~ 8:59 a.m., Dan Mitchell Wrote: Markets have begun to get rattled in the last couple of days, both in fear of further damage in the Gulf region from Hurricane Rita, and in
response to the bad ideas that are starting to flow fast and furious from Congress. These include Senate Minority Leader Harry Reid's
endorsement of energy price controls (to stop "gouging"), gasoline tax increases, suspension of the new bankruptcy law, and even a revival of
the oil "windfall profits" tax. ...But the worst news is that a handful of GOP Senators think a tax increase is needed to pay for Katrina
spending. Their immediate target is the 15% rate on capital gains and dividends that was a crucial part of the wildly successful 2003 tax cuts. Those rates are set to expire in 2008, which would mean a big tax
increase back to a 35% rate on dividends, and 20% on capital gains. ...now some GOP Senators are suggesting that they should redo reconciliation and drop the capital gains and dividend tax cuts. We're
told Ohio's George Voinovich, New Hampshire's Judd Gregg and Maine's Olympia Snowe are three of the troublemakers. As ominously, Majority Leader Bill Frist's chief budget aide, Bill Hoagland, has floated
the idea on the record in this newspaper. If this is the kind of advice Mr. Frist is getting, much less listening to, he's going to have a hard time
ever becoming President. ...Someone should tell Mr. Frist about the following number: $262 billion. That's the amount of additional revenue
that the federal government will collect in the fiscal year that ends this month, a roughly 15% increase. This is the largest annual increase in
federal revenues, even after inflation, in American history. ...One large reason for this revenue boom is the lower tax rates on capital and income. Since they passed in 2003, the economy has grown at an
average rate of roughly 4%... We can understand why some Democrats would want Republicans to repudiate their own tax policies. But why Republicans would want to join in this act of masochism is a mystery. Link to this Blog Entry
Thursday, September 22, 2005 ~ 7:29 p.m., Dan Mitchell Wrote: In February 1887, President Grover Cleveland, upon vetoing a bill appropriating money to aid drought-stricken farmers in Texas, said, "I
find no warrant for such an appropriation in the Constitution, and I do not believe that the power and the duty of the General Government ought to be extended to the relief of individual suffering which is in no
manner properly related to the public service or benefit." President Cleveland added, "The friendliness and charity of our countrymen can
always be relied upon to relieve their fellow citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such
cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment
and conduct which strengthens the bonds of a common brotherhood." President Cleveland vetoed hundreds of congressional spending measures during his two-term presidency, often saying, "I can find no
warrant for such an appropriation in the Constitution." But Cleveland wasn't the only president who failed to see charity as a function of the
federal government. In 1854, after vetoing a popular appropriation to assist the mentally ill, President Franklin Pierce said, "I cannot find any
authority in the Constitution for public charity." To approve such spending, argued Pierce, "would be contrary to the letter and the spirit
of the Constitution and subversive to the whole theory upon which the Union of these States is founded." ...Here's my question: Were the
nation's founders, and some of their successors, callous and indifferent to human tragedy? Or, were they stupid and couldn't find the passages in the Constitution that authorized spending "on the objects of
benevolence"? ...Here's what James Madison said: "With respect to the two words 'general welfare,' I have always regarded them as qualified by
the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its
creators." Thomas Jefferson explained, "Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated."
Thursday, September 22, 2005 ~ 4:11 p.m., Dan Mitchell Wrote: ...stories are based on statistical studies by the Federal Reserve showing that blacks and whites have different experiences when applying for
mortgage loans -- and both stories imply that racial discrimination is the reason. ...neither study took credit histories into account. People with
lower credit ratings tend to get turned down for loans more often than people with higher credit ratings, or else they have to go where loans
have higher interest rates. This is not rocket science. It is Economics 1. Blacks in the earlier study turned out to have poor credit histories more
often than whites. ...lenders not only want to know what your current income is, they also want to know what your net worth is. Census data show that blacks with the same income as whites average less net worth.
That is not rocket science either. ...whites were turned down for mortgage loans more frequently than Asian Americans and the more recent study shows that Asian Americans are less likely than whites to
take out high-cost "subprime" loans to buy a house. Does that mean that whites were being discriminated against? Or are statistics taken
seriously only when they back up some preconception that is politically correct?
Thursday, September 22, 2005 ~ 12:02 p.m., Dan Mitchell Wrote: The flat tax... [is] the Holy Grail of public policy: One low income tax rate paid by all but the poorest wage-earners, who are exempt. No
loopholes for the rich to exploit. No graduated rates that take a higher percentage of income from people who work hard to earn more. No need for a huge bureaucracy to police fiendishly complex tax laws. ...it
has gotten its first real road test in the former Soviet bloc, where at least eight countries, from minuscule Estonia to giant Russia, have enacted
flat taxes since the mid-1990s. Most of these countries' economies are growing at a far-healthier clip than those of their neighbors to the west.
So it's no surprise that calls for a flat tax are now being heard in Western Europe, the most heavily taxed zone on the planet. ...Günther Fehlinger, president of Europeans for Tax Reform, a Vienna-based
flat-tax advocacy group, says interest has picked up noticeably since last year, when a flat tax took effect in Slovakia: That country's booming
automotive industry is luring billions in highly desirable investment away from Western Europe. ...What's driving this interest all of a sudden? It's
a competitiveness issue, says Paul Mylonas, chief economist at the National Bank of Greece. "Our neighboring countries are reducing taxes, which provides them with a more attractive business climate."
Slovakia is a case in point. The country has been intent on building an investor-friendly climate. So in 2004 it swept away 21 categories of personal income taxes, five tax brackets, and scores of exemptions and
deductions, replacing them with a flat 19% rate. ...Total foreign direct investment in Slovakia last year was $13.6 billion, a sixfold increase
since 1998. Slovakia's attractively low 19% corporate tax rate is a big draw, too. But, says Martin Bruncko, chief economic adviser to Slovak
Finance Minister Ivan Miklos, "the flat [personal income] tax has made Slovakia more attractive for highly paid expatriate employees..." Even
without pressure from the East, many Western European governments face growing complaints about the complexity of their tax regimes. France, for example, offers a bewildering 560 tax breaks. ...a flat or
streamlined tax code could still go a long way toward restoring public trust in the tax system by wiping away loopholes and cutting out mounds of red tape. Lower top rates also could stanch the flow of "tax
expatriates" -- for example, wealthy French people who move to Britain or Belgium to avoid high French income taxes. Flat-tax Europe? It won't happen overnight. But the conversation is getting under way.
Thursday, September 22, 2005 ~ 11:43 a.m., Dan Mitchell Wrote: Why not allow the Gulf to operate as a laboratory for a flat tax, with an 18% rate and no taxes whatsoever on capital investment for businesses
-- small and large? And if this works for New Orleans, as it has for so many of the former economically ravaged nations of East Europe, then
make it the law of the land. The Bush plan also provides an "urban homesteading" feature, whereby low-income families would be given a free plot of federal land in the ruined areas in exchange for a
commitment to build a home there. It's a truism that people better maintain homes that are their own property. The plan also contains what amounts to a voucher for students uprooted by Katrina. They'd be
able to use up to $7,500 for public, but also for private or religious, schools -- which has the teachers unions up in arms. Leave it to the National Educational Association to let its own monopoly interests
trump the welfare of kids, even in the wake of a disaster. ...The price tag for these proposals would be a tiny fraction of the cost of a federally
directed welfare state/public works effort, which seems to be the choice of Democrats -- and too many Republicans. Congress has already appropriated $62 billion in federal aid and another $100 billion is in the
works. That's all new spending, by the way; a better option would be to divert money from pork-barrel projects to Katrina relief. ...At least one-half of the structures in San Francisco were toppled or burned to
the ground, and a quarter million Californians left homeless, by the Great Earthquake of 1906. Within three years the city was rebuilt without any FEMA aid, Small Business Administration loans or federal
housing assistance. Similarly the Chicago Fire of 1871 razed virtually every building in the entire downtown business district (save for the famous Water Tower), while scores of outlying neighborhoods were
destroyed. As a recent report from the Foundation for Economic Education details: "Within two years this burned city had been almost completely rebuilt through private aid and initiative."
Thursday, September 22, 2005 ~ 10:39 a.m., Dan Mitchell Wrote: The government's responsibility, though, dwarfs anything done by criminals. To start, the federal government invited disaster by offering
cheap insurance. That encourages people to build on the coasts. I'm embarrassed to admit I once built a house on a beach in Westhampton, N.Y., because government insurance guaranteed I couldn't lose. When a
storm washed my house away, government paid me for my loss. It would have covered me again and again had I rebuilt. (I sold the land.) Government insurance is truly an insane policy. ...In other cases, private
enterprise tried to help, but government got in the way. Wal-Mart offered truckloads of water, but was turned away by federal bureaucrats. Dr. Jeffrey Guy, a Nashville trauma surgeon, recruited 400
doctors, nurses and first responders to help the people in New Orleans. Then FEMA gave them something to do: fill out 60-page applications that demanded photographs and tax forms. Guy received an e-mail from
an emergency room doctor in Mississippi who needed bandages, splints and medicine, and coloring books for children. Guy had them -- he'd been collecting corporate donations -- but FEMA said they needed two
state permits to transport these items from Tennessee to Mississippi. The supplies were only sent when two guys showed up with a church van and volunteered to take them -- as rogue responders without FEMA's
permission.
Thursday, September 22, 2005 ~ 10:21 a.m., Dan Mitchell Wrote: Announcing the plan, Prime Minister Ferenc Gyurcsany stated that the reforms would result in a fall in state tax revenues to just below 35% of
gross domestic product by 2010, down from the present level of 38% of GDP, and provide "security in the tax system" by ensuring that tax laws
were predictable for the next five years. Other key changes include a 5% cut in the highest bracket of value added tax to 20% and a new lower
system of taxation for artists, writers and those employed in the media in an attempt to boost the number of people legally employed in these
sectors. Meanwhile, workers earning more than 1,550,000 forints a year ($7,680) would see their taxes lowered from 38% to 36%. Those earning less would pay only 18%. The government aims to see the 18% tax
bracket widened by 2010 to include those earning up to 3 million forints.
Thursday, September 22, 2005 ~ 9:51 a.m., Dan Mitchell Wrote: Each day, as I take various pills, I realize that without those pills I might not be alive -- and, if I were, life would not be worth living. Yet those
who produce these medications are under constant attack from people who produce nothing. ...When Ronald Reagan said that the government was spending money like a drunken sailor, he apologized to the sailors,
who were after all spending their own money. ...One of the consequences of such notions as "entitlements" is that people who have contributed
nothing to society feel that society owes them something, apparently just for being nice enough to grace us with their presence. ...With various
people complaining about "price gouging" as gasoline prices rise and as higher prices are charged for other things in areas struck by hurricanes,
economist Walter Williams has coined a new term: "Tax gouging." But government is never accused of either "greed" or "gouging" -- not even
when they bulldoze people's homes in order to turn the land over to businesses that will pay more taxes.
Wednesday, September 21, 2005 ~ 11:10 a.m., Dan Mitchell Wrote: So why is the U.N. unable to reform itself? Fundamental flaws in the structure and membership of the organization make not only
management reform, but also the mission of the entire organization, highly dubious. First, the U.N. is dominated by countries that do not have a vested financial interest in efficient organization. Just eight
countries pay almost 75% of the budget. The U.S. alone contributes 22%. Common sense dictates that those who "have skin in the game,"
who have invested literally billions, have a greater interest in seeing their funds spent properly than those who do not make the same commitment. Second, the U.N. has become a jobs program for many
countries. Hiring is steeped in patronage and nepotism. This partially explains the waste that pervades U.N. operations, and means that reform that might result in a leaner organization is going to be opposed
from the outset. Reforms designed to curtail corruption will face a similarly uphill battle. ...If the U.N. is to genuinely reform itself, it needs visionary and credible leadership. Mr. Annan, whose management
failures are unambiguous, is simply too weak to muscle through an effective reform package. We should begin looking for new leadership now.
Wednesday, September 21, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: What President Bush, House Majority Leader Tom DeLay and other Republicans haven't figured out yet is that deficit spending isn't a
problem for them unless it endangers the broader conservative agenda. If it does, it will become the electoral issue. And what we're seeing is that
Katrina is swamping every goal conservatives have, from limiting government to cutting taxes to reforming entitlement programs. Katrina spending has already imperiled plans to repeal the death tax, and
Congress is already $60 billion into a spending binge. Handing out $2,000 debit cards was just the beginning. The conservative Congress has brought back the welfare state. This isn't all Katrina's fault.
Republicans have been kidding themselves for years that they are still the stewards of fiscal conservatism and limited government. The Medicare prescription drug plan is just one example. Run down the list
of the some 80 federal entitlements--including Medicare, Medicaid, farm subsidies, Pell Grants and so much more--and it becomes clear that little
has been done to take these massive programs off of spending autopilot. ...Republicans in Congress don't know how to control spending and are
at a loss as to why they even should. That's one way to govern. But if Republicans no longer believe in smaller government, why not put the Democrats back in charge?
Wednesday, September 21, 2005 ~ 8:59 a.m., Dan Mitchell Wrote: The Japanese government will complete the phasing out of an income tax cut, designed to pull the country out of recession, by 2007, although
the ruling Liberal Democrat Party (LDP) is insisting that the move is line with its pledge not to raise taxes on salaried workers. Introduced in
1999 in an attempt to kickstart the languishing economy, the temporary tax cut reduced the income tax burden at the national level on workers
by 20%, and at the local level by 15%. Late last year, with the economy showing signs of recovery, the coalition government decided to cut the
national tax cut in half in January 2006, and the local tax in half by June 2006. According to Hiromitsu Ishi, chairman of the government's Tax Commission, the remainder of these tax cuts will be abolished
completely in fiscal 2006, meaning that by March 2007, they will have been phased out in their entirety. ...Meanwhile, a senior LDP lawmaker denied last week that the party had reneged on its promise not to
increase income tax. "Increasing taxes for salaried workers and scrapping the fixed-rate income tax cut are totally different matters. I
don't think that putting the temporary tax cut back to its normal state can be called a tax increase," the lawmaker was quoted as observing.
Tuesday, September 20, 2005 ~ 10:30 a.m., Dan Mitchell Wrote: When President Bush announced last Thursday that the feds would take a lead role in the reconstruction of New Orleans, he in effect established
a new $200 billion federal line of credit. To put that $200 billion in perspective, we could give every one of the 500,000 families displaced by Katrina a check for $400,000, and they could each build a beach
front home virtually anywhere in America. This flood of money comes on the heels of a massive domestic spending build-up in progress well before Katrina traveled its ruinous path. Federal spending, not counting
the war in Iraq, was growing by 7% this year, which came atop the 30% hike over Mr. Bush's first term. Republicans were already being ridiculed
as the Grand Old Spending Party by taxpayer groups. ...It's only been 10 days since reconstruction funds were voted out of Congress, but there
are already stories of misspending. For example, the Louis Vuitton store reported selling two monographed luxury handbags for $800 each, both paid for by women with FEMA's $2,000 emergency disaster relief debit
cards. Rapacious trial lawyers are already on the hunt rounding up Katrina's victims to unleash a barrage of multimillion dollar lawsuits. Now they have been empowered by Congress to finance these lawsuits
against taxpayers . . . with taxpayer dollars. The government has just allocated $250 million for "counseling and legal services." After 9/11,
the federal government authorized tens of millions of dollars for "counseling" to traumatized families of the victims. A Republican Study
Committee audit discovered that millions went for "peace" and "diversity" workshops, a "yearlong celebration of trees, gardens and
other healing places," theater workshops, anger-management classes and multiculturalism programs to discuss "who we are and why we are
here." ...Conspicuously missing from the post-Katrina spending debate is a question for some brave soul in Congress to ask, What is the appropriate and constitutional role here for the federal government?
Before the New Deal taught us that the federal government is the solution to every malady, most congresses and presidents would have concluded that the federal government's role was minimal. One of our
greatest presidents, Democrat Grover Cleveland, vetoed an appropriation for drought victims because there was no constitutional authority to spend for such purposes. ...Alas, in the world of
compassionate conservatism, the quaint notion of limited federal power has fallen to the wayside in favor of an ethic that has Uncle Sam as first, second and third responder to crisis. FEMA, despite its woeful
performance, will grow in size and stature. So will the welfare state. Welcome to the new New Dealism of the GOP.
Tuesday, September 20, 2005 ~ 9:59 a.m., Dan Mitchell Wrote: The muddled result, with neither major party able to form a stable parliamentary majority, means that Germany will not be taking decisive
action anytime soon to reform its unwieldy welfare state, which has helped bring it 11% unemployment and zero economic growth That will not be good for the world. Germany, the third-largest economy in the
world, represents 30% of the output of the European Union. The "sick man of Europe" is likely to remain bedridden for a while longer. ...Ms.
Merkel also had trouble convincing reform-minded voters that she was offering the right medicine. Because she lacks a real power base within the CDU, she had to make compromises with the powerful leaders of
states like Bavaria, Hesse and Lower Saxony, who were suspicious of her calls for more-dramatic reforms. The final election program of the CDU was a tepid affair that proposed to cut the top rate of German
income tax to 39% from 42%. But what really got negative publicity was the CDU's decision to more than balance that with an increase in the nationwide value-added tax to 18% from 16%. In other words, Ms.
Merkel was forced to go into an election campaign promising an overall increase in taxes. ...The late economist Mancur Olson argued that the downfall of democracy would be its tendency to calcify into
special-interest gridlock. Germany's extensive welfare state has created millions of voters who fear the loss of any benefits. Combine that with voters in eastern Germany who cling to outmoded notions of state
support and you have an formidable challenge to bring about real reform.
Tuesday, September 20, 2005 ~ 9:00 a.m., Dan Mitchell Wrote: Plans to implement a flat rate for personal income, corporate income and value-added tax, as proposed by lead opposition party Civic
Platform (PO), are feasible at a level slightly higher than the 15% proposed by the party, current deputy Finance Minister Jaroslaw Neneman told a radio audience Tuesday. "We made such estimations
some time ago," Neneman said in an interview for Radio PiN. "Tax receipts levels would be sufficient with flat tax rate a little above 15%."
"It could be 15.5-16%," he added. ...Poland is slated for parliamentary elections in late September which will in all probability reome the the
leftist SLD-government from power and replace it with a coalition government led by PO and PiS. The latest polls have consistently shown those two parties capable of forming a solid majority. Unfortunately,
PiS is bitterly opposed to the PO's flat tax plan and much debate will occur in the coming months over tax policy. Greek Prime Minister Costas Karamanlis on Saturday said his government would seek bold reforms with social support in an effort to
create a more effective state that would fulfill its social task and achieve sustainable growth focused on people. ...Addressing the representatives
of the producing sector, Karamanlis said: "The world has entered a new era. An era of rapid transformations and high speeds. A revolution in
knowledge and technology is changing social and economic conditions very rapidly. We live in an era of free movement of people, ideas, goods
and capital..." "We proceed with a specific Road Plan..." Karamanlis said. These actions [include]... reducing tax factors from 2007 aiming to
further support growth... Members of the Coalition of the Left, Movements and Ecology (SYN) party, its youth organisation and town councillor Tassos Kourakis expressed their opposition to the
government's policies by unfurling two banners during Prime Minister Costas Karamanlis' inaugural speech at the 70th International Thessaloniki Trade Fair (TIF) on Friday evening. The banners read
"Profit isn't everything; people count too."
Monday, September 19, 2005 ~ 10:35 a.m., Dan Mitchell Wrote: Most poverty isn't caused by storms. Or even bad luck. Most poverty is caused by poor decision-making. Having children out of wedlock,
abusing drugs and alcohol, or putting personal pleasure above responsible action are problems much too personal to be cured by politicians and bureaucrats. Or by more money, either. Many of us have
been poor at one time or another. But those truly stuck in poverty are usually suffering from a lack of character, something no government can provide. Except perhaps by tough love. What's that? It's the love
that dares not reward or excuse bad behavior, that does not blame productive people for the poverty of those who refuse to produce, and that steps back and lets human nature do its work. People have survived
on the planet a long time, even before government programs to battle poverty. ...People's actions can be subsidized or taxed, they can preached at or ignored, but these choices cannot be legislated and the
consequences of poor choices - namely poverty - cannot be solved by bureaucrats or politicians. Government can defend the country and even
clean up after hurricanes . . . with varying results. But it cannot be our minister, our parents, our friend. That's what the rest of us are here for.
Monday, September 19, 2005 ~ 10:12 a.m., Dan Mitchell Wrote: ...Bush's efforts at damage control come with a potential cost. Having been accused of ineffectual leadership during the disaster, he is under
enormous pressure not to be seen as parsimonious with funds for aid and recovery. About $62.3 billion has been appropriated. Contracts for
rebuilding are being awarded on a "no-bid" basis. And yet the planning for successful rebuilding campaign is nowhere to be found. Though
ample amounts of federal money are needed, a spend-now, plan-later approach isn't the answer... It can create the potential for waste and lead to bad decisions on rebuilding. ...The Department of Homeland
Security's inspector general reported in May that $31 million poured into Miami after Hurricane Frances last year, even though that storm passed well to the north. The Associated Press uncovered examples of
companies as far afield as South Dakota receiving loans for businesses hit on 9/11.
Monday, September 19, 2005 ~ 9:42 a.m., Dan Mitchell Wrote: Vote counts and exit polls showed conservative challenger Angela Merkel's party leading in German parliamentary elections Sunday but
falling short of the majority she needed to form a center-right coalition as the nation's first female chancellor. ...Merkel claimed her party received a mandate from voters to form a new coalition government...
Both Schroeder and Merkel said they would talk to all parties except the new Left Party, a combination of ex-communists and renegade Social Democrats. ...The pro-business Free Democrats had 9.8 percent and the
Left Party 7.9 percent. ...Had Merkel reached a majority with the Free Democrats, they would have formed a center-right government to push through her proposals to get the economy going and cut unemployment
by making it easier for small firms to fire people, cutting payroll taxes and giving companies more flexibility to opt out of one-size-fits-all regional wage agreements. Prime Minister Helen Clark will begin meetings with minor-party leaders today in what could be a lengthy bid to form a new Centre-Left
government. Labour claimed the right to start negotiations on forming a historic third-term administration after it won 22,751 more votes than
National in a cliffhanger election on Saturday night. Labour has 40.74 per cent of the party vote, with National on 39.63%. That entitles Labour to 50 seats and National to 49. ...National leader Don Brash is
refusing to concede defeat before then, and is also not ruling out a deal with the Maori Party to keep Labour from forming a government. ...A swing towards National saw 11 Labour-held seats turn blue... National
will welcome 22 new MPs.
Monday, September 19, 2005 ~ 8:55 a.m., Dan Mitchell Wrote: The International Monetary Fund (IMF) has lowered its expectations for the EU's economic prospects, cutting the growth forecasts for four big
countries - Germany, France, UK and Italy - while presenting a more optimistic outlook for the US... In its twice-yearly report, the IMF predicted Britain would see the highest growth of the European big four
this year with 1.9 percent, but the figure is well down from the April forecast of 2.6 percent, according to the Financial Times. France follows with 1.5 percent growth predicted for 2005, as opposed to 2
percent suggested earlier. The outlook for 2006 puts the figure down from 2.2 to 1.8 percent. The IMF is not very optimistic about the chances of the new German cabinet reversing the gloomy trends,
suggesting the country's economy will grow by 0.8 percent this year (compared to an earlier estimate of 1 percent), and reversing its prediction from 1.9 percent to 1.2 percent in 2006.
Sunday, September 18, 2005 ~ 12:15 p.m., Dan Mitchell Wrote: On the plus side, the summit seems to have done no real harm: It has not further extended the authority and reach of the U.N., it has not foisted
another "protocol" or "convention" for the Senate to consider, and it has not established another significant seven-letter acronym -- er,
agency -- for U.S. taxpayers to pronounce, and especially to fund. That may be a negative accomplishment, but it is certainly a real one, especially as Secretary General Kofi Annan had envisioned the summit
as an opportunity to ...expand his own powers and require rich countries to pony up additional billions in foreign aid, among other brainstorms. It took new U.S. Ambassador to the U.N. John Bolton seven weeks of
dogged negotiation to make sure none of that happened, and for this he deserves credit. On the other hand, the diplomatic price the U.S. paid for a no-harm-done outcome was a no-reform result. ...The Bush
Administration should insist that the U.N. bureaucracy be placed under a five-year trusteeship to implement the management reforms suggested by the Volcker report. The trustees should be a handful of real
international worthies -- Mr. Volcker and his fellow commissioners Richard Goldstone of South Africa and Mark Pieth of Switzerland would fit the bill -- whose probity and good judgment are beyond dispute. The
U.S. cannot dictate such terms to the U.N., but Congress has the power to withhold American funding until such a trusteeship is established.
Sunday, September 18, 2005 ~ 11:52 a.m., Dan Mitchell Wrote: ...it's time for the politicians to admit their own role in co-piloting the airline industry into Chapter 11. ...the root of the problem for these
"legacy" carriers is the burden of pension costs. And one tantalizing option is to use bankruptcy to pass them off to the taxpayer via the
federal Pension Benefit Guaranty Corp. (PBGC). Congress created this government-run insurance system in 1974, promising to "protect workers" when companies failed. But as always with such government
guarantees, Congress only created a future "moral hazard" that is now coming due. Management and labor would agree in flush times on big
pension obligations because they knew the taxpayer was their safety net. The PBGC charges paltry premiums that in no way cover the huge
liabilities rolling in from steel, airline and retail industries. Its current deficit exceeds $23 billion, while pensions nationwide are underfunded
by an estimated $450 billion. Delta and Northwest alone could dump another $12.4 billion in unfunded liabilities on the agency, with other airlines likely to follow.
Sunday, September 18, 2005 ~ 10:34 a.m., Dan Mitchell Wrote: Unemployment stands at 5.5%, down from 7% in 2003. Germany, on the other hand, worries about a jobless rate hovering around 10%.
Romania's GDP growth, figured by the government at 4.9% in 2002, jumped to 8.3% in 2004 and is expected to come in at about 6% this year, the Central Bank says. Romania's former income tax, which once
ranged from 18% to 40%, has been replaced by a 16% flat tax. That, the government says, has led to the "discovery" of some 153,000 employees, unknown before on tax rosters.
Saturday, September 17, 2005 ~ 9:00 a.m., Dan Mitchell Wrote: From the time of the Thatcher reforms in the early 1980s, Britain has been the star economic performer among the major European nations.
The British went from having the lowest per capita income of the European big four (Germany, France, Italy and Britain) to having the highest one, but now there are signs the economic sickness in "old
Europe" is beginning to infect the British. ...Unfortunately for the British, the chancellor of the exchequer (i.e., treasury secretary) in the
Labor government, Gordon Brown, has too much of a "social market economy" streak. As a result, domestic spending and taxes have risen
rapidly, and consequently, as would be expected, economic growth has been falling to an annual rate of only 1-1/2 percent. The Europeans, including Chancellor Brown, like to talk about their "social market
economy" being superior and more humane than the freer U.S. market economy, but the facts paint a very different picture. Last year, the per
capita GDP (on a purchasing power parity basis) of Britain. was only $29,600 as compared with $40,100 in the U.S., and the British on average are about 10 percent richer than other EU members. Even the
poorest of the U.S. states, like Louisiana, Alabama and Mississippi (all hit by Katrina), have slightly higher average incomes... While Britain slowly drifts back to the overtaxed and regulated economy of the
pre-Thatcher era, its European competitors have been cutting taxes. Ireland, once a poor backwater, after radically cutting tax rates has a higher per capita income than England and the second-highest per
capita income in Europe after Luxembourg. ...If Gordon Brown and his high-spend, high-tax allies persist, Britain's economic performance will
continue deteriorating until it stagnates like Germany, Italy and France.
Saturday, September 17, 2005 ~ 8:45 a.m., Dan Mitchell Wrote: When Kirchhof submitted his proposal, it instantly drew fire from the political left. This did not come as a big surprise, but was seen as a
somewhat encouraging thing by the Frankfurter Allgemeine Zeitung, Germany's leading conservative newspaper, which stated that "massive
resistance by people representing particular interests and associations is the most certain sign that this is the right path to take." Kirchhof's
proposal, which aside from the implementation of a 25 percent flat tax called for the elimination and abolition of 481 tax subsidies and special
write-offs, resulted in a political outcry. While this was to be expected from the SPD and the Greens, even the more conservative parties balked: Neither Merkel and the CDU/CSU, nor the normally fiscally
conservative Free Democratic Party (FDP), was willing to embrace such an idea. ...Seen nationally, as well as internationally, Kirchhof's program of a flat tax coupled with significant cuts in public spending
should be embraced by all those seeking to replace Germany's current government. Germany is in dire need of a pro-growth fiscal catalyst. The reform economies in Central and Eastern Europe which have embraced
the flat tax have been attracting investment partly on the basis of this system and are growing, while Germany's economy is stagnating. Germany's ongoing lobbying efforts on the European level against tax
competition, a flat tax or broad based liberalization of labor markets and social standards make it even more difficult for Merkel and the CDU/CSU to embrace Kirchhof's agenda it domestically. Therefore, it
does not surprise that those who have the most to lose or gain on September 18 have no desire to entertain Kirchhof's notion of reducing the size of government. Every single one of Kirchhof's proposals to slash
government spending to finance a flat tax is a stick of political dynamite.
Saturday, September 17, 2005 ~ 8:16 a.m., Dan Mitchell Wrote: Trust in politicians is abysmally low around the world and most citizens say their governments do not reflect the will of the people, according to
an intriguing global survey of what influences our lives. "Who Runs Your World?" was the question put by Gallup International and the BBC
World Service to more than 50,000 people in 68 countries in what was billed as one of the biggest surveys of public opinion ever conducted. ...One of the most striking findings was international disillusionment
with politicians. They achieved extremely low confidence ratings, with only 13 percent trusting them. Two out of three people polled around the globe felt unrepresented by their governments.
Saturday, September 17, 2005 ~ 7:42 a.m., Dan Mitchell Wrote: When a Democrat is in the White House, GOP members of Congress at least give lip service to the idea of watching taxpayers' pennies, and
they'll oppose the president's pork barrel projects. But with a Republican president and Republicans in control of both houses of Congress, they become high rollers. ...the American Conservative Union called on
President Bush and the GOP leadership to cut pre-Katrina pork. As union chairman David Keene told The Washington Times, annual spending for areas outside of military expenses and homeland security
increased $303 billion between fiscal year 2001 and 2005. Those numbers belie DeLay's claim that the federal government is running at peak efficiency. ...President Bush ...doesn't have to sign off on every
pork-barrel project in GOP districts. Unfortunately, a tight rein on spending never has been high on Dubya's list. He should have vetoed the
pork-fest farm bill in his first term. But by failing to set the right tone, he enabled Capitol Hill to overspend. Link to this Blog Entry
Friday, September 16, 2005 ~ 9:40 a.m., Dan Mitchell Wrote: Economic freedom in the eight Central and Eastern European (CEE) members of the EU increased notably from 5.4 in 1995 to 6.8 in 2003.
Their economic growth rate averaged 4.62 percent per year between 1995 and 2003. The star pupil continues to be Estonia, which rose from the 75th place in 1995 to ninth place in 2003 and retained its position as
the freest country of the former Soviet bloc. Between 1995 and 2003, the new eight EU members saw their purchasing power adjusted per capita incomes rise by 44 percent. Incomes in the old 15 EU members rose by
26 percent. ...Estonia provides an excellent example of economic liberalization followed by fast economic growth and rising incomes. Estonia began to liberalize at the end of 1992. The government
eliminated import tariffs and instituted a flat income tax. Corporate taxes on reinvested profits fell to zero. ...Between 1995 and 2003, Estonian GDP per capita grew at a rate of 6.6 percent. During that
period, Estonian purchasing power adjusted per capita income rose by 78 percent. What is true of post-communist countries also applies to Western Europe. In 1987, the Irish government began the process of
economic liberalization. Taxes and spending were reduced. The standard tax rate on income fell from 35 percent in 1989 to 22 percent in 2001.
The top marginal tax rate fell from 65 percent in 1985 to 44 percent in 2001. The corporate tax rate fell from 40 percent in 1996 to 12.5 percent in 2003. In 1999, Ireland's tax revenue was 31 percent of GDP.
A comparable figure in the pre-enlargement EU was 46 percent. Ireland's economic freedom ranking rose from the 22nd place in 1985 to eighth place in 2003. Its economy grew at a compounded average
annual rate of 6 percent between 1987 and 2003. During that period, Irish purchasing power adjusted per capita income rose by 88 percent. In 1987, Ireland was, after Portugal, the poorest country in Western
Europe. In 2003, Ireland was, after Luxembourg, the richest country in the EU.
Friday, September 16, 2005 ~ 9:05 a.m., Dan Mitchell Wrote: In 2004, a long hard battle in the Mississippi Legislature over a comprehensive Tort Reform Bill came to a close, during which the same
questions arose. Opponents claimed that the bill was unnecessary, and that, even if it passed, it would not make a difference. Still, we were able
to get it through. In many respects, the bill is considered model legislation. Among other provisions, it included venue reform (so trial lawyers cannot shop around for favorable courts) and caps on
subjective noneconomic damages (such as pain and suffering). Now, a year has passed since the legislation took effect, and the Mississippi experience is instructive. Tort reform works. Prior to the legislation,
Mississippi was known as the "jackpot justice capital of America." The American Tort Reform Association had labeled certain jurisdictions
"judicial hellholes." A survey of more than 1,200 senior in-house counsels for the U.S. Chamber Commerce ranked Mississippi 50th in virtually every category of judicial system nationwide. Insurance
companies were fleeing the state. Others were refusing to write new policies. The medical field was particularly strained: Liability insurance was in many cases unaffordable, and in some cases unavailable. One
year later, the story is very different. Mass Mutual Insurance Group, St. Paul Travelers, World Insurance Co. and Equitable Life Insurance Co. are returning to Mississippi. State Farm Insurance eased its growth
restrictions for homeowners' insurance and lowered its rates on property insurance. ...Gov. Haley Barbour attributes the successful recruitment of
new business to Mississippi to the lower cost of doing business in the state. ...The CEO of one Mississippi company recently told me that his
company's legal bills were reduced by $70,000 a month as a result of the reform. Litigation expense does not produce value for most members of our society.
Friday, September 16, 2005 ~ 8:25 a.m., Dan Mitchell Wrote: For more than half a century, a well-intentioned and bloated state has only perpetuated poverty with misguided policies and regulations. And
New Delhi still hasn't learned from these mistakes. The Indian government is soon to embark on perhaps the grandest waste of taxpayers' money yet: the Rural Employment Guarantee Bill. The REGB,
recently passed in parliament with unanimous support across political parties, is supposed to provide 100 days of work in a year to every rural
household across the country that wants it. This is expected to cost around $9.1 billion, which amounts to 1.3% of GDP. And by some estimates, costs may reach four times that figure. ...The problem is that
there is no evidence that the Indian Government is capable of properly implementing any social welfare plan. Former Prime Minister Rajiv Gandhi remarked in 1987 that only 15% of the money spent by the
government actually reached its rightful recipient. ...These failures have much to do with the inefficiency of the vast Indian bureaucracy. ...The
REGB will also have economic consequences. Labor markets could be distorted at local levels if the wages paid by the scheme are more than the local rate decided by the market. ...The key to generating
employment lies in less government intervention, not more. The government needs to reform India's archaic labor laws, whose inflexibility hampers industrial growth as well as employment. In a
variety of repressive ways, firms are not allowed to enter into free contracting, and cannot manage their workforces according to market conditions. In theory, labor laws are supposed to protect workers from
being fired, but in practice such laws discourage industrial units from being set up, and hamper entrepreneurship and industrial expansion. The effect is that employment is far lower than it would have been in a
free market.
Thursday, September 15, 2005 ~ 12:22 p.m., Dan Mitchell Wrote: The alleged "fiscal stimulus" of $62.3 billion of debt-financed federal funding in the hurricane-afflicted cities is pure illusion. The notion that
replacing destroyed property will somehow boost the economy is, as economist Walter Williams reminds us, the old "broken window fallacy" exposed by Frederic Bastiat in 1848. Breaking windows may create
work for glaziers, but property owners whose windows were broken will then have less money left over to spend on something more enjoyable.
Society then has to devote scarce real resources to this unfortunate task, rather than another. ...The congressional spending spigot...is an open
invitation to waste. Federal billions may even be used to reimburse the losses of households or firms who did not purchase the heavily subsidized flood insurance. That would set a disaster-prone precedent.
Anyone who anticipated wisdom and foresight from any level of government was once again disappointed. ...a congressional task force reported that the levees that failed in New Orleans would have been raised higher and strengthened in 1996 by the
Army Corps of Engineers were it not for a lawsuit filed by environmentalists led by who else but the Sierra Club. ...According to a recent report in the Los Angeles Times, a 1977 lawsuit filed by Save the
Wetlands stopped a congressionally-funded plan to protect New Orleans with a "massive hurricane barrier." A judge found that New Orleans'
hurricane barrier would have to wait until the Army Corps of Engineers filed a better environmental-impact statement. Now, because those who would have improved hurricane protection in New Orleans were
prevented by the environmentalist rigorists, the wetlands are polluted and imperiled and New Orleans has suffered the damage that practical minds have been trying to prevent for three decades. In economists Milton and Rose Friedman's classic book "Free to Choose," they explain supply and demand. ..."Prices . . . transmit
information. . . . Suppose that a forest fire or strike reduces the availability of wood. The price of wood will go up. That will tell the
manufacturer of pencils that it will pay him to use less wood, and it will not pay him to produce as many pencils as before unless he can sell them
for a higher price. The smaller production of pencils will enable the retailer to charge a higher price, and the higher price will inform the
final user that it will pay him to wear his pencil down to a shorter stub before he discards it, or shift to a mechanical pencil. . . . Anything that
prevents prices from expressing freely the conditions of demand or supply interferes with the transmission of accurate information." ...the
disaster-driven higher price creates opportunities for people outside the area to rush in supplies. Capping profit, in a time of sudden and severe
shortage, creates a disincentive on the part of others to come in with supplies. Well before Katrina reached New Orleans, when it was still just a tropical depression off the coast of Florida, Wal-Mart was rushing
electric generators, bottled water, and other emergency supplies to its distribution centers along the Gulf coast. Nor was Wal-Mart unique.
Federal Express rushed 100 tons of supplies into the stricken area after Katrina hit. State Farm Insurance sent in a couple of thousand special
agents to expedite disaster claims. Other businesses scrambled to get their goods or services into the area. ...In both emergency times and normal times, governments have different incentives than private
businesses. ...The country does not have one dime more resources available when those resources are channeled through government. The resources are just handled less effectively by government and dispensed
in an indiscriminate way that encourages people to continue locating in the known path of predictable disasters.
Thursday, September 15, 2005 ~ 12:00 p.m., Dan Mitchell Wrote: The economic policies of the 1930s are a continuing source of myth and confusion. Many people believe that capitalism caused the Great
Depression and that President Franklin Roosevelt helped to end it. ...Such often-stated claims are incorrect. Misguided federal policies caused the downturn that began in 1929, and they prevented the
economy from fully recovering for a decade. Policy blunders by the Federal Reserve, Congress, and Presidents Herbert Hoover and Roosevelt battered the economy on many fronts. ...The Depression was a
uniquely severe contraction. ...Real output only regained its 1929 level in 1936, but then output plunged again in 1938. The unemployment rate
stayed persistently high at more than 14 percent for 10 years (1931 to 1940). By contrast, the economy recovered rapidly after a sharp contraction in 1921. Real output fell 9 percent in 1921 and
unemployment rose to 11.7 percent. But the economy bounced back with output recovering all its lost ground in 1922. Unemployment fell to 6.7 percent in 1922 and 2.4 percent in 1923. The secret to the quick
recovery was that the government generally stood aside and let the market recover by itself-wages and prices adjusted, resources shifted to new areas of growth, profits recovered, business optimism returned, and
investment rose. By contrast, government policies in the 1930s prevented the U.S. economy from recovering. ...President Hoover signed into law the Revenue Act of 1932, which was the largest peacetime tax
increase in U.S. history. The act increased the top individual tax rate from 25 to 63 percent. After his election in 1932, Roosevelt imposed further individual and corporate tax increases. The highest individual
rate was increased to 79 percent. State and local governments also increased taxes during the 1930s, with many imposing individual income
taxes for the first time. All these tax increases killed incentives for work, investment, and entrepreneurship at a time when they were sorely
needed. ...The centerpiece of the New Deal was the National Industrial Recovery Act of 1933. It created "codes" or cartels in more than 500
industries in order to limit competition. Businesses were told to cut output and maintain high prices and wages. ...Many New Deal policies raised employer costs, contributing to the extraordinarily high
unemployment of the 1930s. NIRA industry codes required high wages. The new Social Security tax increased compensation costs. New minimum wage rules reduced demand for low-skilled workers. The
Davis-Bacon Act required the payment of excessively high wages on federal contracts. Compulsory unionism and militant union tactics were encouraged under a series of laws. ...Roosevelt's antitrust crusade was
typical of his antimarket approach. The Justice Department hired hundreds of new attorneys and began a lawsuit blitzkrieg in 1938 against dozens of industries for conspiring to keep prices high. The irony
was that Roosevelt had spent his first term encouraging cartels, monopoly unionism, and other policies designed to boost prices and
production costs. ...economically, Roosevelt and his "brains trust" had no idea what they were doing. They attempted one failed intervention
after another. The Great Depression was a disaster, and sadly an avoidable one.
Thursday, September 15, 2005 ~ 10:57 a.m., Andrew Quinlan Wrote: European trade union leader John Monks reacted angrily to yesterday's statements by commission president Jose Manuel Barroso, announcing
an initiative to ditch more than 60 EU draft laws pending in the EU institutions. ...Unionists mainly object to Mr Barroso's attack on a bill
setting an obligation for employers to ensure workers' protection from exposure to sunlight. Mr Barroso referred to the bill as "a joke". The
European Parliament watered down the proposal last week, leaving it up to member states to regulate in the area. ...European companies have welcomed the de-regulation campaign and have participated in it by
sending lists of draft laws potentially harmful to their interests.
Thursday, September 15, 2005 ~ 10:24 a.m., Dan Mitchell Wrote: Canada must forge ahead with its long term plan to reduce the level of corporate taxation or risk seeing companies and jobs slip across the
border to the United States, which is continuing to seek further reductions in the tax burden on businesses and individuals, Finance Minister Ralph Goodale has warned. ...Mr Goodale told business leaders
in Quebec on Tuesday that the the country can no longer afford to ignore the issue of international tax competitiveness. "Over the next five
years, Canada's current tax-rate advantage vis-a-vis the United States will be almost totally eroded," Goodale said after a speech to the
Conseil du patronat. "This means there will be a natural tendency for investments and jobs to flow to the American side of the border," he
observed. Under plans presented in the 2005 Budget, the government wants to reduce corporate tax to 19% from 21% by 2010 and remove the corporate surtax by 2008. ...the Senate banking, trade and
commerce committee has urged the federal government to put in place a tax reform strategy by 2006 to narrow the nation's productivity gap with
the United States. The committee has suggested that the reforms should cut federal capital tax, corporate tax and individual tax for middle and
upper-income workers. It also wants to see businesses allowed to write off capital investments more aggressively. "That's not just that
Canadian workers aren't working hard, the real issue is that there is not enough capital investment per worker in our economy compared to the
United States. That all goes to the question of tax incentives," Liberal Senator Jerry Grafstein, the committee chairman, noted at a June meeting.
Thursday, September 15, 2005 ~ 8:30 a.m., Dan Mitchell Wrote: Meanwhile, other more obedient citizens and potential rescuers, as well as evacuation vehicles, medical and food supplies, even a floating
hospital, were stalled or unused as officials and politicians bickered over territory and protocol and - in an indictment that speaks for itself -
gender sensitivity concerns. ...Hundreds of firefighters who volunteered to help with Katrina relief were held up for days in Atlanta while they
took classes on sexual harassment and community relations, all courtesy of FEMA, the Federal Emergency Management Agency in charge of coordinating federal relief. At the White House, concerns about
overriding the female governor of Louisiana reportedly contributed to the decision not to take control of a national disaster that clearly had
overwhelmed state and local officials. There are other examples of such absurdities too numerous to list, but two stand out. Amtrak offered to
evacuate people from New Orleans, but city officials declined and the last train left the city - empty. ...sometimes the rules get in the way of
what is right. The rules were for Sheriff Evans to stay put until the paperwork was processed, but Evans thought lives were more important. The rules were for firefighters to take classes on sexual
harassment, and who knows how many lives didn't get saved as a result?
Thursday, September 15, 2005 ~ 8:13 a.m., Dan Mitchell Wrote: This notion goes back to the 1970s, and requires automakers to produce cars that get more miles per gallon across their entire fleet. The leading
current proposal, promoted by environmental groups and Congressional Democrats, would raise the standard to 40 mpg by 2010 from 27.5 mpg
today. This might save gas, but we know for sure it will cost lives. That's because a primary way auto companies meet CAFE standards is to reduce the weight of their cars. Auto weight fell by about 500 pounds
per vehicle after CAFE rules were introduced in 1975. Research has consistently confirmed that the lighter the vehicle the more dangerous it is in a crash because there is less survival space and less physical
structure to absorb impact. A 2001 National Research Council study concluded that CAFE contributed to 2,000 additional deaths on the highways each year. Raising the standards to 40 mpg could raise to
5,000 the number of annual CAFE-related fatalities... Under political pressure to do something, the Bush Administration proposed its own overhaul of fuel standards last month. ...CAFE won't do much more to
reduce gasoline use than higher prices are already doing. As oil prices have soared, cost-conscious drivers haven't needed politicians to tell them to look for more fuel-efficient cars. Sales of hybrids and
high-gas-mileage cars are rising, and SUV sales have fallen off the cliff. Economist Robert Crandall of the Brookings Institution, a long-time student of CAFE, has concluded that during the 1970s high gas prices
had a far greater impact on reducing fuel consumption in the U.S. than did fuel regulations.
Wednesday, September 14, 2005 ~ 11:33 a.m., Dan Mitchell Wrote: Suppose a hotel room rented for $79 a night prior to Hurricane Katrina's devastation. Based on that price, an evacuating family of four
might rent two adjoining rooms. When they arrive at the hotel, they find the rooms rent for $200; they decide to make do with one room. In my book, that's wonderful. The family voluntarily opted to make a room
available for another family who had to evacuate or whose home was destroyed. Demagogues will call this price-gouging, but I ask you, which is preferable: a room available at $200 or a room unavailable at $79?
Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster. ...Recovering from Katrina means resources will have to be moved to the Gulf Coast. I ask you, how does
one get electricians, plumbers and other artisans to give up their comfortable homes and livelihoods in Virginia and Pennsylvania and travel to Mobile and New Orleans to help in the recovery? If you said
pay them higher prices, go to the head of the class. Higher prices, along with windfall profits, are economic signals of unmet human wants. As such, they encourage producers to meet those human wants. ...There's
an important downside to these political attacks on producers. What about the next disaster? How much sense does it make for producers to make the extra effort to provide goods and services if they know they
risk prosecution for charging what might be seen as "unconscionable prices"? In a moment of national challenge, not only did politicians become champions of ignorance and prejudice while other Americans were
getting their hands dirty. But long after the hacks have milked all the political mileage from their theatrics, dozens or hundreds of gasoline
merchants around the country will be contending with subpoenas, legal fees and plea bargains for behaving like business people. In essence, they
can expect to be ground up in the wheels of legal persecution so people like Andrew Spano can hold a press conference. He's the elected executive of Westchester County, N.Y., which boasts 400 or more
gasoline stations but yet felt it necessary to target 11 with subpoenas for the fanciful crime of price gouging. Gasoline is the most visible price in
the economy, easily discernible from the roadway without even slowing down. Yet the head of the Westchester consumer protection office went on local TV and all but pronounced one station owner guilty because he
raised his posted price more than the next station down the street. Such exercises in scapegoating became epidemic last week. ...One Florida
station owner told investigators exactly why he raised prices -- because he had too many customers. For his sensible honesty, he was named in
the first lawsuit brought as part of the state's "gouging" dragnet.
Wednesday, September 14, 2005 ~ 11:21 a.m., Dan Mitchell Wrote: Whatever changes may be devised will be only the latest in an endless procession. Edward Luck, the pre-eminent academic expert on the U.N.,
writes of "the deja vu nature of U.N. reform," noting that in 1945 "before the U.N. could hold its first meeting, a number of states were
already calling for its reform." All secretaries-general have endorsed reform, but none more assiduously than Mr. Annan. Even before being
sworn in, he designated an undersecretary general as "Coordinator for United Nations Reform." This was Maurice Strong, a Canadian.
Unfortunately, Mr. Strong had to step aside in the course of the Volcker investigation when it was discovered that he had put his daughter-in-law
on the U.N. payroll and that he had business ties to Tongsun Park, the influence peddler who has been charged with receiving millions from Saddam Hussein's regime while failing to register as a foreign agent as
required by law. Lest anyone fear that Mr. Strong's departure would lead to a slackening of reform efforts, Mr. Annan announced that the task was being transferred to Deputy Secretary General Louise
Frechette. But she, too, fell foul of the Volcker committee, which criticized her for knowing about Saddam's abuse of Oil for Food but failing to include "any reference to the kickback scheme in the many
reports [she] forwarded to the Security Council." ...Why is the U.N. so insusceptible to effective reform? One reason is that its 18,000-strong
bureaucracy is run on the basis of a baroque system of affirmative action: Staff is hired according to region and nationality, not merit. To
remedy what his advisers acknowledged was a problem of "deadwood," Mr. Annan's reform package includes a request for a "one-time" buyout
of nonperforming officials in order to "refresh" the staff. But unless merit becomes the basis for hiring, new deadwood will replace old. A
deeper reason why the U.N. cannot be fixed is that it is a consortium of governments, not answerable to a citizenry. ...in the U.N. all incentives
are for governments to scratch each others' backs. ...If the U.N. cannot be fixed, what then? A false dichotomy is often drawn between the U.N.
and "unilateralism." ...The U.S. cannot abolish, expel or abandon the U.N. It can, however, focus its support on the U.N.'s valuable
humanitarian agencies while letting its political side, with its pretensions to world government, wither. It can work to build and strengthen alliances, coalitions, regional bodies and cooperation among
democracies. Through such instruments it can forge an internationalist and multilateral foreign policy that will serve the noble purposes enshrined in the U.N. Charter better than the U.N. has done for the last
60 years.
Wednesday, September 14, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: ...if we listen attentively to Sen. Edward Kennedy and the Liberal Establishment Chorus, it was government that failed the people of the
Gulf Coast when Katrina rolled down upon them. So what's this? The solution, according to Kennedy, is ... government; specifically, a Gulf Coast Redevelopment Authority ready to reinvest at least $150 billion of
taxpayer money in order "to fulfill the true promise of the American dream." ...That's one irony: government as the answer to government's
failures. ...The Gulf Coast reconstruction debate, to whose pilot light we have just applied a match, will involve choices many don't like making.
For instance, do we restore New Orleans' old residential configuration, or do we permit the marketplace to write off areas that don't work economically? Government, which builds levees, and the private sector,
which starts and operates businesses of every sort, will both have a hand in what happens. Is there genuine doubt, even so, as to who will work faster, better, more enduringly?
Wednesday, September 14, 2005 ~ 10:49 a.m., Dan Mitchell Wrote: What would we ever do without Thierry Breton and Gordon Brown? The French and British finance ministers have separately come up with
"solutions" to high fuel prices that are worthy of distinguished service awards -- from their government bureaucracies. According to Mr.
Breton, the main problem is that oil companies are making too much money. And the reason they're able to charge so much, Mr. Brown says, is that they're keeping the brakes on oil production -- presumably
because it's so darn profitable. ...This is the political equivalent of childhood tantrums. Prices serve a vital function in any market, by adjusting supply and demand. When politicians intervene, they make
trouble, usually in the form of shortages that will become permanent if higher prices are not allowed to curb demand and generate more production and substitution. ...If Messrs. Breton and Brown are serious
about interfering with this natural process, be prepared for another round of Eurosclerosis. The minister's prescriptions are especially rich
considering that it is the EU's high fuel taxes, not crude oil costs, that have for many years kept prices high. According to Fuel Lobby, a U.K.
road users' group, taxes are three-quarters of the price of a tank full of petrol. ...Fortunately, New Europe sounds a saner note. Poland, which
had a long and unhappy experience with state-administered prices, says it will cut fuel taxes. The European Commission has warned governments of member states to resist the temptation to cut taxes in an attempt to counter the effect
of surging oil prices on national economies. ..."Member states cannot give in to the temptation to cushion price rises with a unilateral tax
reduction," EU Energy Commissioner Andris Piebalgs stated ahead of a meeting of the Oil Supply Group on Friday. ...The EC's warning appears
however not to have been heeded by Hungary's Prime Minister, Ferenc Gyurcsany, who stated on Sunday that he would seek to bring forward a cut in value added tax, planned for January 2006, in order to help lower
the price of a litre of petrol by around 3% to 4%.
Wednesday, September 14, 2005 ~ 10:34 a.m., Dan Mitchell Wrote: Deputy First Minister Nicol Stephen has added his name to a growing list of politicians who believe a "flat tax" could boost the Scottish
economy. The leader of the Scottish Liberal Democrats has urged his party to consider the introduction of a single rate of income tax in the
UK. He believes the measure, introduced in countries such as Russia and Slovakia, could help create a more "entrepreneurial culture" north of
the Border. ...Stephen has called on his party to examine the radical policy. He said: "No party and its policies should stand still. We need to
be more international and learn from what works best across the world."
Wednesday, September 14, 2005 ~ 8:18 a.m., Dan Mitchell Wrote: Is it time for Canada to adopt a flat tax on income? The concept is simple enough. Multiple marginal rates of taxation are collapsed into a
single, low rate. Few deductions are permitted and most regulations, exemptions, exclusions, deductions and credits are eliminated, along with the stacks of convoluted tax codes that go with them. In most
jurisdictions that have adopted flat taxes, economic activity has increased and government revenues have risen. The lower rates spur greater investment, and also encourage greater compliance with tax
laws, which means government's tax take increases from both a rise in national production and a fall in cheating. ...Here in Canada, Alberta adopted a 10% single-rate tax on personal income in 2001. And for
those who charge that a one-rate tax is "regressive," hitting low-income workers disproportionately hard, Alberta's results provide ample
evidence to the contrary: So long as generous basic personal exemptions are maintained, low-income filers are generally the biggest winners.
Alberta shields the first $15,000 in earnings from provincial income tax, meaning anyone making less than that amount pays nothing at all. ...The top 15% of Alberta earners now pay more than two-thirds of the
province's income taxes -- up from 63% the year before the single-rate tax was introduced. And the Alberta treasury has suffered no revenue shock as a result of the new rates. ...the more Canadians know about
how well it's working in Alberta and elsewhere, the more they will be inclined to push for one. It is a worthy cause, and one which we hope will ultimately prevail.
Tuesday, September 13, 2005 ~ 12:18 p.m., Dan Mitchell Wrote: Estonia and Lithuania introduced a flat tax in 1994, with Latvia following in 1995. Russia (2001), Serbia and Ukraine (2003), Slovakia
(2004) and Georgia and Romania (2005) have followed. Outside of east Europe, a flat tax has operated in Jersey and Guernsey since 1940 and 1960 respectively, and in Hong Kong since 1947. ...Lower marginal
rates of taxation remove disincentives for work and increase disposable income among the wealth-creating sections of the economy. This stimulates investment and economic growth. Eastern European
countries with a flat tax have grown twice as fast as countries without. They have had an average annual GDP growth of 5.3 per cent, compared with only 2.6 per cent among those without.
Tuesday, September 13, 2005 ~ 11:34 a.m., Dan Mitchell Wrote: Strengthening international tax coordination between governments ...is a very valuable first step. In the longer-term, a single world tax
framework may be necessary to deal with some aspects of international tax policy... Faced with the pressures of the globalisation of capital movements and the threat that companies will relocate unless given
concessions on lower regulation and lower taxes, governments have responded by engaging in tax competition to attract and retain investment capital. Some states with limited economic options have
made tax competition a central part of their development strategy. This inevitably undermines the growth prospects of other countries, as they attract investments away from them, and has stimulated a race to the
bottom. ...governments must regain the capacity to tax their citizens as well as businesses operating within their borders, and to use the
revenues to finance ...wealth redistribution. ...The UN's second role is as host of a little known committee now called the Committee of Experts
on International Cooperation in Tax Matters. ...To date its influence appears to have been limited, but its status was upgraded in 2004, apparently in accordance with the wishes of UN Secretary General Kofi
Annan. The significance of this move is high. This is the only global committee that considers international taxation matters and could potentially form the basis of a World Tax Authority... There is a clear
need for a World Tax Authority (WTA) to monitor the impacts of fiscal policies on trade and investment patterns, and to protect national tax
policies from harmful practices. ...One organisation that has attempted to remedy the situation is the OECD, which has a considerable expertise
in this area... The most appropriate body to take on the functions of a WTA would be the United Nations, which could and should evolve its existing Committee of Experts on International Cooperation in Tax
Matters to fill this role. ...For a WTA to be successful, it would need to establish policies in the areas referred to above. Strengthening international tax cooperation is a crucial part of remedying the current imbalance between multinational business and
tax regimes that are confined to national boundaries. ...Strategies such as setting a global minimum rate of corporate taxation should be considered. ...One solution...is a World Tax Authority, which would be
developed out of the sharing of information between national tax authorities. This would monitor the impact of tax policies and protect national policies from harmful international practices, such as those
described in this briefing. Such an authority would be responsible for tackling tax competition [and] tax havens ...thereby leveling the global playing field.
Tuesday, September 13, 2005 ~ 10:27 a.m., Dan Mitchell Wrote: ...the pathways to prosperity have to be both mapped out and financed by the public sector. ...But core fiscal resources are too limited for this,
and oil-related revenues are too unpredictable. Tax reforms that would help ease the fiscal constraints have become snarled up in the political process. Mexico badly needs a fiscal framework that will allow its
development needs to be financed in an adequate, stable and predictable fashion by the different levels of government. ...Mexico's fiscal framework leaves much to be desired: Total revenues are low relative to
GDP... There is a consensus on the need for a tax reform that would broaden the base, especially for indirect taxes, and generate higher and more stable revenues.
Tuesday, September 13, 2005 ~ 9:56 a.m., Dan Mitchell Wrote: Unfortunately, since Ronald Reagan's day, American governments have tended to pay too little attention to sovereignty-sapping treaties and
institutional power-grabs by the United Nations and other multilateral organizations. To his credit, Mr. Reagan recognized the Law of the Sea Treaty for what it was intended to be by the World Federalists and
so-called non-aligned movement types who had a significant hand in shaping its supranational International Seabed Authority and related entities: a highly precedential, and undesirable, vehicle for establishing
world-government mechanisms to control the "international commons" (in this case, the oceans) at the expense of sovereign states. President
Reagan refused to agree to LOST's ratification in part because he found anathema the idea of empowering an international organization to raise its own revenues through what amount to taxes on seabed mining and
energy exploitation. Regrettably, the Bush Administration has to date chosen to overlook this and the Treaty's other adverse implications for
U.S. sovereignty, and says it supports LOST's ratification. ...Of arguably greatest importance is the U.S. refusal to empower the United Nations
to levy taxes - a step that would, as with the Law of the Sea Treaty, advance the organization's ambitions to promote world government. Globo-taxes would also eviscerate what remains in the way of American
leverage to effect real reform of the UN and to punish its misbehavior. It is estimated that one proposed tax on international currency transactions alone would be able to generate a staggering $13 trillion in
revenue. Just as Hurricane Katrina ruptured the levees protecting New Orleans, the UN's concerted assault on the barriers to further erosion of
American sovereignty threatens to swamp our freedom of action and our founding principle of "no taxation without representation." It behooves
President Bush to reject any Outcome Document that leaves the door open to globo-taxes, let alone one that endorses them outright.
Tuesday, September 13, 2005 ~ 8:23 a.m., Dan Mitchell Wrote: Apparently policymakers in Washington fell asleep during Price Theory 101. Natural disasters are supply shocks - they temporarily reduce the
supply of goods and services (production). Higher tax rates, restrictions on energy company profits, and price caps at the pumps would result in an additional supply shock by permanently reducing the efficiency,
flexibility, and productivity of the U.S. economy. At the same time, a printing-press policy at the Fed would allow more money to chase a reduced supply of goods - i.e., inflation. This witch's brew of ad hoc
neo-Keynesianism won't rebuild homes, fix highways, bring refineries back on line, or reemploy displaced workers. ...The U.S. economy is dynamic and its fundamentals are sound. Hurricane Katrina will not
change this unless policymakers in Washington respond with totally unnecessary and destructive policies that turn a temporary supply shock into a permanent outage.
Tuesday, September 13, 2005 ~ 8:14 a.m., Dan Mitchell Wrote: The amount of tax paid by Australian businesses has risen to record levels despite a cut in the company tax rate four years ago. According to
a report in The Australian, company tax payments have risen to just under A$50 billion from A$33 billion since 2002/2003. Meanwhile, tax payments by the self-employed and investors have risen by 40% to
A$22.5 billion over the past three years. ..."Clearly, the fact that corporate profits are at record levels as a share of GDP is partly
responsible," the director of the Corporate Tax Association, Frank Drenth, was quoted as observing in the report. However, it seemingly remains unclear why business tax revenues should have undergone such
a large increase, since the company tax rate was cut to 30% from 36% as a result of recent tax reforms. According to Mr Drenth, the leap shows that these reforms were not revenue neutral.
Tuesday, September 13, 2005 ~ 7:32 a.m., Dan Mitchell Wrote: It doesn't make sense now to use the blunt club of government to pluck law-abiding people from their homes against their will, when these
people survived and the city is improving, if slowly. Don't get me wrong. If I had a relative in New Orleans who wanted to stay, I would beg him
or her to leave. ...you have to figure that residents who choose to stay either are lucky enough to live in a pocket of land that is untouched by
the toxic waters, or they believe they will be better off in their damaged homes. Such determination suggests the kind of can-do spirit that it will
take to rebuild the Big Easy. Why kick these tough-as-nails citizens out? ...Residents who weathered days of stormy weather and flooding are self-sufficient folk. Those who want to stay are not asking for the
government to save them. The levees failed, the shelters were scary, law enforcement evaporated. They have little reason to rely on the government for help -- although some law enforcement would be
welcome. If they want to stay and are able to care for themselves, it is their right to do so. It is not the role of the government to force them
from their homes. Authorities instead should respect their right to self-determination. ...The feds should concentrate on evacuating water from the city -- not the residents. If the powers that be can allow
reporters to stay in the city, then surely they can allow taxpayers to stay in their homes.
Monday, September 12, 2005 ~ 9:23 p.m., Dan Mitchell Wrote: Republican Governor Sonny Perdue of Georgia, for example, issues an order imposing penalties on gasoline dealers who charge more than he
thinks they should. "I do not believe there is an energy emergency in this state," he announces -- as if Georgia is magically shielded from the
forces that drive gasoline prices in the other 49 states. In Massachusetts, Governor Mitt Romney -- a Harvard MBA who didn't make a fortune in venture capital by pretending not to understand how markets work --
takes to the microphones to denounce the alleged gouging as "white collar looting" and urges motorists to turn in offenders through a state
hotline. Another GOP governor, Missouri's Matt Blunt, excoriates gasoline "profiteering" as "both unconscionable and illegal." Even
President Bush gets into the act, demanding "zero tolerance" of lawbreakers -- a category into which he lumps looters, insurance swindlers, and poor beleaguered Joe, "price gouging at the gasoline
pump." Then there are Democrats like Governor Richard Codey of New Jersey, who vows to inflict "maximum penalties" on overcharging gas
stations, which he estimates at 1 of every 4 in his state. Senators Maria Cantwell of Washington and Carl Levin of Michigan call for something even more unwise -- a revival of gasoline price controls, like those
Richard Nixon and Jimmy Carter embraced 30 years ago. But artificial price caps will work no better now than they did in the 1970s. They won't get petroleum refined faster. They won't reduce motorists' demand
for gasoline. All they will create is shortages -- the one thing price controls invariably bring in their wake. ...There is only one rational and
efficient way to allocate a scarce commodity: through price. That is because the more a person values something, the more he is generally willing to pay for it. By charging what the market will bear -- for
gasoline or anything else -- vendors channel their product to the customers who value it the most. A mandatory cap on the price of gas may seem like kindness to the poor, but all it will do is raise demands
that can't be met. ..."If there's not enough fuel and you put a cap on," former President Bill Clinton said recently on CNN, "then what you
might do is just drop the supply even quicker, imposing greater hardship on people." He gets it. Why don't the others?
Monday, September 12, 2005 ~ 7:51 p.m., Dan Mitchell Wrote: Paris has threatened to impose an extra tax on oil firms if prices "at the pump" are not cut. French Finance Minister Thierry Breton said
yesterday (8 September) on French TF1 television that he would meet next week with representatives of the oil industry and demand "lower
prices at the pump" for citizens. Otherwise Paris would consider the possibility of taxing oil firms on profits gained from speculation, he
added. ...The move by Paris comes amid calls from the Commission to member states asking them to refrain from unilateral action on the matter. The EU executive yesterday warned member states against
offering tax cuts to sectors in their economies particularly hit by the "petrol prices crisis", as the Commission has termed the situation.
Monday, September 12, 2005 ~ 5:17 p.m., Dan Mitchell Wrote: The most widely quoted federal statistic on deprivation and need in modern America is the "poverty rate" - a measure tracking households
with annual incomes below a "poverty threshold" established at the beginning of the Johnson administration's "war on poverty" in the
1960's and adjusted over time for inflation. According to the latest poverty rate estimates - released by the Census Bureau on Aug. 30 - the
total percentage of Americans living in poverty was higher in 2004 (12.7 percent) than in 1974 (11.2 percent). ...Truth be told, the official poverty
rate not only fails to calculate trends in impoverishment with any precision, it even gets the direction wrong. ...even the most basic facts bearing on poverty alleviation confute the proposition that material
circumstances in America are harsher for the vulnerable today than three decades ago. Per capita income adjusted for inflation is over 60 percent higher today than in 1974. The unemployment rate is lower, and
the percentage of adults with paying jobs is distinctly higher. Thirty years ago, the proportion of adults without a high school diploma was
more than twice as high as today (39 percent versus 16 percent). ...The soundings from the poverty rate are further belied by information on actual living standards for low-income Americans. In 1972-73, for
example, just 42 percent of the bottom fifth of American households owned a car; in 2003, almost three-quarters of "poverty households"
had one. By 2001, only 6 percent of "poverty households" lived in "crowded" homes (more than one person per room) - down from 26
percent in 1970. By 2003, the fraction of poverty households with central air-conditioning (45 percent) was much higher than the 1980 level for the non-poor (29 percent). ...a better gauge of a household's
material deprivation is not what it earns, but what it spends. When we look at spending patterns, we immediately see a huge discrepancy between reported incomes and reported expenditures for low-income
Americans. In the Labor Department's latest Consumer Expenditure Survey (2003), the average reported income for the bottom fifth of households was $8,201, while reported outlays came to $18,492 - well
over twice that amount. ...we should recognize that America has already achieved far more success in the war against want than our sorry poverty rate can admit - and that we need much better guidance systems
for the anti-poverty battles still ahead than this one, arguably the single worst measure in our government's statistical arsenal.
Monday, September 12, 2005 ~ 12:45 p.m., Dan Mitchell Wrote: ...several countries * including Canada, Germany, Switzerland, the United States and the United Kingdom * have introduced schemes to
attract highly qualified foreigners. Tax incentives have also been used to attract highly skilled migrants. In the Netherlands, for example, highly
skilled foreigners may profit from an income tax allowance of 30%. Favourable tax schemes for immigrants also apply in Belgium, Denmark, Finland, Norway and Sweden. ...The regression analysis first
studies internal migration within Switzerland. ...Clearly, there is a positive relation between the tax differential and the migration probability. The effect is even stronger for highly qualified people, who
are apparently more attracted towards low-tax communities. ...A very robust influence of the tax burden on the share of the highly skilled among the new immigrants can be observed. Indeed, apart from the tax
burden, there is little else that is statistically significant... The most important finding of this study is that the community tax burden has a
significant impact on highly skilled migration. Both highly skilled natives and immigrants react to tax differences in a similar way, i.e. they are
more inclined to migrate to low-tax areas. This result is very robust and holds even after several factors, including qualify-of-life measures, are controlled for.
Monday, September 12, 2005 ~ 11:39 a.m., Dan Mitchell Wrote: In almost all studies, it has been found out, that the tax and social security contribution burdens are one of the main causes for the
existence of the shadow economy. Since taxes affect labor-leisure choices, and also stimulate labor supply in the shadow economy, the distortion of the overall tax burden is a major concern of economists.
...The increase of the intensity of regulations (often measured in the number of laws and regulations, like license requirements) is another
important factor, which reduces the freedom (of choice) for individuals engaged in the official economy. ...clearly demonstrates that the increase
of the tax and social security contribution burdens is by far most important single influence of the increase of the shadow economy. ...The average size of the shadow economy...of these 21 OECD countries was
16.3 [percent of GDP]. ...The first conclusion from these results is that for all countries investigated the shadow economy has reached a remarkably large size... The second conclusion is...people engage in
shadow economic activity for a variety of reasons, among most important of which we can count are government actions, most notable taxation and regulation.
Monday, September 12, 2005 ~ 10:28 a.m., Dan Mitchell Wrote: Less well known is FDR's decision to slash nondefense spending by over 20% between 1942 and 1944. Among the programs that were eliminated
entirely were FDR's own prized creations. By 1944, such pillars of the New Deal as the Civilian Conservation Corps, the National Youth Administration and the Work Projects Administration had been
abolished. In 1939 those three programs had represented one-eighth of the federal budget. Roosevelt and the Congress of his day knew what to do in an emergency. ...Harry S. Truman acted with equal decisiveness
after the Korean War began in 1950. In just one year, Truman and a Democratic Congress cut nonmilitary spending by 28%. ...One successful test to see if a democracy is mature should be its ability to establish
priorities, streamline procedures and engage in fresh, new thinking after a national emergency. While the jury is still out, I fear that the White House and Congress have decided instead to throw money at the
ravaged Gulf Coast and ignore the example of FDR and Truman. Both of them, for example, would have known exactly what to do with the nonessential parts of the $286 billion bloated highway bill that has just
been signed into law.
Monday, September 12, 2005 ~ 9:58 a.m., Dan Mitchell Wrote: A common misconception about the rebirth of Germany and Japan post-WWII is that aid under the U.S. Marshall Plan led the recoveries in
each nation. In truth, according to a study by George Mason professor Tyler Cowen, the "German Miracle" actually began with tax cuts,
before money from the United States arrived. In 1948, German citizens making above $600 were in the 50 percent tax bracket, and those making above $15,000 were in the 95 percent bracket. By 1954, the
threshold to reach the 50 percent bracket was an income of $42,000, and the 63 percent top tax bracket was reached at $250,000. Economic growth and government revenues took off amidst Germany's feverish
tax cutting. In Japan, tax cuts (while not always marginal rate cuts) occurred every year from 1950 into the 1970s on personal and/or business income. Up from the rubble, Japan's GDP rose from $16 billion
in 1952 to $300 billion in 1972. By 1974, Japanese government revenues were $63 billion, four times Japan's total GDP in 1952.
Monday, September 12, 2005 ~ 9:37 a.m., Dan Mitchell Wrote: Far more baffling is Dowd's bizarre conviction that our present government, in addition to being incompetent, is in fact limited...
President Bush has been on an historic spending spree... FEMA, having been brought under the umbrella of the Department of Homeland Security, is now part of the newest, largest, most lavishly funded
bureaucracy in US history... Nor is the Army Corps of Engineers suffering for funds, especially in Louisiana. The Washington Post reported Thursday that "over the five years of President Bush's
administration, Louisiana has received far more money for Corps civil works projects than any other state, about $1.9 billion." The problem
was, as the Post's headline put it, "money flowed to questionable projects," funneling resources away from truly essential government
services. ...The liberal columnist's kind of government -- big government -- is exactly the kind we've got. And incompetence is built into the very
idea, whether or not one's favored party is in power. When the vaults of the treasury are thrown open for anything and everything, cronyism and
absurd "public works" projects, like Alaska Congressman Don Young's notorious $231 million "bridge to nowhere," are inevitable. Politicians
perpetually seeking reelection don't have an incentive to spend your money to prepare for a disaster that probably won't happen on their watch when they could instead spend it on vanity projects certain to buy
votes.
Monday, September 12, 2005 ~ 8:22 a.m., Dan Mitchell Wrote: French presidential hopeful Nicolas Sarkozy has outlined a plan for radical tax and labour market reforms in a bid to cut persistently high
rates of unemployment and return France to stronger rates of economic growth. In a keynote speech to the centre-right Union for a Popular Movement Party conference, the former Finance Minister, now UPM
leader, declared that France needs to make a major change in direction with regard to its economic policy to help boost wealth creation, including a cut in the maximum rate of income tax to below 50% and
new laws to make the labour market more flexible. "We should set ourselves the task of bringing down our tax burden to the European average within five years. No one in France should be paying more than
50% of their wages in income tax," he stated.
Sunday, September 11, 2005 ~ 1:22 p.m., Dan Mitchell Wrote: ...the program itself was designed by members of the U.N. Security Council following protracted negotiations with the government of
Saddam Hussein. It was the Security Council, for example, that approved Saddam's right to choose the companies, contractors and middlemen with whom Iraq would do business, and through which the
entire program was corrupted. ...Mr. Annan is also on record telling the Committee he viewed Oil for Food as "a very transparent operation."
Yet as the report shows, Mr. Annan was himself complicit in covering up Iraqi violations of the sanctions regime. Specifically, Mr. Annan was
aware of the kickback issue from at least February 2001, yet "the Secretary General's quarterly reports never mentioned the emerging
problem." ...It's no coincidence, comrade, that France and Russia, as well as China (which did its own thriving business with Saddam) consistently downplayed the kickback allegations and pushed to have
the sanctions regime eased. Only the U.S. and Britain made any effort to monitor Oil for Food for fraud, although even these efforts were
lackluster until the Bush Administration came to office. ...So it was that the largest fraud ever recorded in history came about. Press reports often cite the overall size of Oil for Food at $60 billion, but Mr.
Volcker's report makes clear that the real figure was in excess of $100 billion. From this, Saddam was able to derive $10.2 billion from illicit
transactions. But the important point is that he was able to steer 10 times that sum toward his preferred clients in the service of his political
aims. None of this happened by accident. ...even now we are told that "at least" Oil for Food fed the Iraqi people when they were on the edge
of starvation, and this is accounted a U.N. success. That is false. Oil for Food offered a lifeline of cash and influence to a regime that was starving its people. The program did not corrupt the U.N. so much as
exploit its essential nature. Now Mr. Annan wants to use this report as an endorsement of his "reform" proposals. Only at the U.N. could he dare to think he could get away with this.
Sunday, September 11, 2005 ~ 12:11 p.m., Dan Mitchell Wrote: For free marketers, the idea of "government venture capital" is an oxymoron. However, one does not need to be a small-government
maverick to see the absurdity of state venture capital. Even in the eyes of those who support extensive public sector expansion, venture capital
should be the last place to spend taxpayers' money. ...In their eagerness to clone Silicon Valley and catch up with the United States in venture
capital financing, European officials fail to understand that they cannot achieve these goals by direct government intervention. First, the emergence of high-tech clusters, such as Boston Route 128 and Silicon
Valley, were not achieved through deliberate governmental design... The notion held by European policymakers that considers a lack of venture
capital financing to be "a market failure" that blocks new enterprises from taking off and that can be fixed by government venture capital
fund is doomed to have the opposite effect. Venture capital is an entrepreneurial activity. Government meddling may become a substitute for this entrepreneurial undertaking.
Sunday, September 11, 2005 ~ 11:35 a.m., Dan Mitchell Wrote: MEPs have ruled against common EU standards for the protection of workers against sunlight, suggesting individual member states should
decide on their own whether to require employers to introduce such measures or not. ...The centre-right parliamentary group (EPP-ED) has welcomed the vote. "It is foolish to make European laws on the
protection of workers against overexposure to sunshine. The situation in Greece is totally different than in Finland, for example," commented
MEP Ria Oomen-Ruijten from EPP-ED. Industry lobbies also expressed their delight over the vote. The European builders confederation suggested in a press release that its result "brings a great relief to the
craftsmen and SMEs of the construction sector in Europe. For several months, they have indeed been warning the MEPs of the nonsense of
such a directive". Small firms had been particularly concerned about the obligations - enforced by the directive - to evaluate the risks to their employees of being exposed to sunlight.
Saturday, September 10, 2005 ~ 12:04 p.m., Dan Mitchell Wrote: Our panicky, or shall we say opportunistic, solons are already using Katrina to bust through whatever spending limits they had previously set
for themselves. Following last week's $10.5 billion, Congress is set to appropriate $52 billion more this week, and not just for the Gulf Coast.
Senate Minority Leader Harry Reid has already tossed out $150 billion as a spending goal, and Republicans are saying they won't be outbid. No
one wants to be stingy, but it's time to worry when the same people who passed a $286 billion highway bill without enough money for Louisiana levees now want to throw money at everything in sight. If you think
we're being cynical, consider that it took all of two days back from recess for Democratic leaders yesterday to propose killing this year's
budget resolution. That document is hardly a fiscal straitjacket. But it is the only mechanism Congress has for putting any restraint on Medicaid and other entitlements growing by 7% to 8% a year, or triple the
inflation rate. It's a terrible sign for fiscal sanity that GOP leaders gave in yesterday and agreed to suspend "budget reconciliation" for at least
two weeks. ...The largest danger now is that Members of Congress will get in the way of this natural economic recovery by exploiting Katrina to
spend like they're back on Bourbon Street. That will tell Americans that tax increases are inevitable down the road... Which leads us to ask: Where is President Bush? ...in our system only a President can stop a
runaway Congress. Mr. Bush needs to start explaining to the country that while Washington will spend what it takes to assist the victims, he won't allow Congress to exploit this disaster to build more Alaskan
bridges to nowhere.
Saturday, September 10, 2005 ~ 11:22 a.m., Dan Mitchell Wrote: The private-sector planning began before Katrina hit. Home Depot's "war room" had transferred high-demand items -- generators,
flashlights, batteries and lumber -- to distribution areas surrounding the strike area. Phone companies readied mobile cell towers and sent in
generators and fuel. Insurers flew in special teams and set up hotlines to process claims. This planning allowed the firms to resume serving
customers in record time. Katrina shut down 126 Wal-Mart facilities; all but 14 are now open. Entergy, the power company for 1.1 million
households and businesses that lost electricity, had restored electricity by Monday to 575,000 customers, including areas of flooded New Orleans.
...Companies then focused on doing what each did best. In some cases it was simply ramping up operations, as with Black & Decker, whose employees worked Labor Day weekend to churn out extra generators. In
other cases, it was firms using their modern logistical skills to get into hard hit areas. FedEx and other delivery companies used computer
systems with designed-in flexibility to reroute vehicles and adjust flights to get in aid. FedEx has already moved more than 100 tons of relief supplies. There have already been a number of instances in which an overly inhibitive bureaucracy prevented an appropriate response to the
disaster. ...My office became so frustrated with the bureaucracy that we often turned to private companies. They responded more quickly and flexibly. After our staff visited communities to assess local needs,
Budweiser delivered truckloads of water and ice. Ford provided vehicles for search and rescue. Every company we contacted provided goods and
services without compensation. ...When first responders said they needed more flat boats to pick people out of the water, they were overwhelmed by the line of volunteers. When people at a shelter in Baton Rouge
announced they needed drinks, within hours they were flooded with more Gatorade than they could possibly use. Churches throughout Louisiana opened their doors to take in evacuees. Individuals organized
a network to open their homes to strangers, using phone trees and the Internet to link up those in need with those who care. Evacuation centers are flooded with volunteers and supplies.
Saturday, September 10, 2005 ~ 10:45 a.m., Dan Mitchell Wrote: The tax burden on the Russian economy will continue to be reduced by the equivalent of around 1% of gross domestic product annually for the
next three years, Deputy Finance Minister Sergei Shatalov revealed on Tuesday. "The government has been reducing the tax burden by about
1% of GDP annually in the past few years (excluding the influence of oil price fluctuations) and will continue to reduce it at about the same rate
in 2006-2008," Shatalov was quoted as announcing by RIA Novosti. ...Since 2002, the government has reduced and abolished turnover taxes, eliminated sales tax, cut value added tax to 18% from 20% and reduced
payroll taxes.
Friday, September 9, 2005 ~ 10:32 a.m., Dan Mitchell Wrote: ...it is the unintended consequences of federal spending through the Army Corps of Engineers that ultimately led to this disaster. As we
know, government spending changes people's incentives and behaviors. There is a chance that the billions spent on building levees over the past
several decades -- preventing New Orleans from being naturally flooded as it would have otherwise -- ultimately allowed the city of New Orleans to continue to grow even though it is under sea level. Without that
spending, people in New Orleans may have been prompted to realize that it was too risky to live there and adjusted their behavior accordingly. But this ignores an equally important issue: The federal
government was designed to have specific and limited powers with most basic government functions left to the states. The federal government
should only be in charge of delivering goods that promote the welfare of all -- public goods. National defense for instance, benefit all the states,
so the federal government should make these investments. But the benefits of preparing against and preparing to respond to natural disasters are enjoyed by the residents of a particular state, rather than
all states, so these investments should be made at the state level. ...once the emergencies have been addressed and the disaster-stricken areas are
back to normal (or as back to normal as one can hope), lawmakers at the federal and state level should take a sober look at who should be responsible for minimizing the damage of future disasters.
Friday, September 9, 2005 ~ 10:08 a.m., Dan Mitchell Wrote: The tax-free allowance means that a flat tax is still progressive, with the proportion of income taken in taxation rising with income. However,
richer taxpayers would not face higher marginal rates, which could reduce the degree of progressivity. But they would lose the tax relief from the exemptions they often benefit from the most. And a lower
marginal rate would reduce the incentive to avoid tax in other ways. Flat taxes have proved attractive to the transition economies of eastern Europe - not least because the lower rates have encouraged people to
pay taxes they previously evaded. But their merits are now under discussion in several western European countries, including Germany, where the opposition's budget spokesman is a flat tax supporter. Lower
marginal rates are seen as a way of increasing incentives to work or invest, thus boosting economic growth. Advocates claim tax revenues may even rise as a result. ...while the 1980s tax cuts reduced incentives
to avoid tax, the highest earners still have scope to shelter their incomes from the taxman. Meanwhile those on lower incomes are caught in the
tax net at less than half the minimum wage, while families with earnings of more than £50,000 a year can qualify for means-tested benefits. Even if a flat tax is difficult to achieve, a flatter system with fewer
exemptions, lower marginal rates and a simpler structure would have many benefits.
Friday, September 9, 2005 ~ 9:43 a.m., Dan Mitchell Wrote: Public schools are another area of government failure in New Orleans. Education is the only ticket into the middle class for most kids who grow
up impoverished. Yet the city has some of the worst-performing schools in the state, and this year they suffered two embarrassments. New Orleans led the state in students cheating on the state's standardized
tests; indeed, more than half of all of those caught in the state were enrolled in New Orleans public schools. And the school system's finances
were in such disarray the state nearly took control. Instead financial control was handed off to Alvarez & Marsal, a New York firm, which recently cleaned up St. Louis's school system by shuttering schools,
laying off staff and otherwise cutting waste. In New Orleans the waste wouldn't be hard to find. One problem was retired and even deceased
teachers still on the payroll. As in most districts around the nation, the obstacle to real reform in New Orleans has largely come from teachers
unions. One measure of union strength has been the city's inability to fire teachers even as schools continue to fail. ...it's time to focus on the ball
too often forgotten in education--student achievement. With New Orleans schools under water and a pressing need to get students back into school immediately, federal, state and city officials now have an
opportunity to construct an educational system from the ground up. As schools expand to accommodate the influx in this emergency, union demands should be secondary. So should certification requirements that
focus on education degrees instead of an ability to teach. Indeed, if tens of thousands of New Orleans students find themselves in what are
essentially charter schools, they will be better off--education wise--than they were before the flood.
Friday, September 9, 2005 ~ 9:21 a.m., Dan Mitchell Wrote: Hurricane Katrina has focused attention on the increasing cost of natural disasters. Some federal programs unintentionally contribute to
those losses. Federal flood insurance and U.S. Army Corps of Engineers' flood control and beach replenishment projects subsidize construction in flood-prone areas, encourage high-risk development and harm
environmentally sensitive areas. These programs should be reconsidered. ...Indeed, the Heinz Center, an environmental research institute, determined that, absent insurance and flood control programs, there
would be about 25 percent less development density in high-risk flood areas than in low-risk areas. ...Government programs should neither subsidize those who choose to live in harm's way, nor encourage
environmental destruction - but those are the results of NFIP, FEMA rebuilding loans and Corps beach restoration projects. Any development in high-risk areas should reflect its actual cost to the public and the
environment and should be borne solely by the states, localities and individuals benefiting from them. Ending the subsidies would reduce the economic, human and environmental toll of natural disasters. The federal government plans to begin doling out debit cards worth $2,000 each to adult victims of Hurricane Katrina, The Associated Press
has learned. ...Not everyone will qualify for a debit card, said Ed Conley, a spokesman for the Federal Emergency Management Agency in Houston. "For instance you may have some people who have insurance
and insurance is meeting their living expenses while they have been displaced. You have some people who may be looking at an option such as a cruise ship where all of their needs are going to be met. It is going
to vary by family," said Conley.
Friday, September 9, 2005 ~ 8:45 a.m., Dan Mitchell Wrote: ...many people believe that schools are desperately under-funded. In fact, public K-12 spending is approaching $10,000 per pupil - double
what it was three decades ago, adjusting for inflation. And total school spending is approaching $500 billion - more than we spend on national defense ($454 billion) and more than the entire GDP of Russia ($433
billion). Many people believe that teachers are horribly underpaid. In fact, the average elementary-school teacher makes $30.75 per hour, more than architects ($26.64), mechanical engineers ($29.46), and
chemists ($30.68).
Friday, September 9, 2005 ~ 8:26 a.m., Dan Mitchell Wrote: Parents' groups will receive public money to run their own schools under plans being drawn up by Ruth Kelly, the Education Secretary. Ms Kelly
told local government leaders yesterday that she intended to end their dominance of state education by inviting other groups to open and run schools. A White Paper this autumn will include radical proposals to
replace failing schools with ones run by parents, companies or charities. ...Her proposals indicated an important extension of private sector
involvement in state education, despite growing hostility from teachers' unions towards plans to open 200 academies by 2010. Academies are sponsored and controlled by businesses and other private organisations,
but funded by the Government. Ms Kelly told a Local Government Association conference in London that she planned to expand parental choice. "We need to harness all the energy and skill we can in the
provision of state education so that we can raise standards for every pupil," she said. ...The aim is to transfer power from bureaucrats to
parents, to force schools to respond more rapidly, and to overturn the Labour orthodoxy that councils should control education.
Thursday, September 8, 2005 ~ 11:00 a.m., Dan Mitchell Wrote: The European Central Bank (ECB) has warned of lower long-term growth in the Eurozone... Research by the ECB has revealed that the
bank's earlier long-term growth projections for the Eurozone, predicting growth between 2 and 2.5 percent, have been too optimistic. The ECB
figures concern long term growth, meaning "potential" growth over periods of several years independent from short-term cycles in the
economy and inflationary pressures. According to the FT, it emerged on Monday (5 September) that long-term growth in the Eurozone lies no
higher than 2 percent - and possibly even below that. ...The bank sees its changed forecasts as a call upon governments in the Eurozone to step up
structural reforms in their economies, particularly in their labour market, the FT notes.
Thursday, September 8, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: Suddenly, the flat tax is germinating in Western Europe, home to governments that generally profess the "social market economy" of high
taxes and redistribution of income. Slow growth and unemployment seems to be changing minds. The flat tax is currently the centerpiece of tax policy debate in Germany, the United Kingdom, Greece, and Italy.
...A complete roundup of Western Europe would include Denmark and Finland, where small political parties are expressing their interest in the flat tax, and Spain, where two professors who serve as economic
advisors to the prime minister have written a paper supporting a flat tax for Spain. It's too early to predict the adoption of the flat tax in any or all of these countries, but the idea has clearly taken root.
Thursday, September 8, 2005 ~ 9:52 a.m., Dan Mitchell Wrote: ...the mayhem strewn in Katrina's wake resulted from a collapse of government at all levels. But unlike the storm, which gave a mere 24
hours worth of warning, the swirling maelstrom of government incompetence and inattention that led to ruin was hiding in plain site. ...Even allowing for the severity of the disaster in question and the
inevitable foul-ups that would follow even the most exquisitely tailored emergency plans, the response from the local, state and federal government was embarrassing and outrageous. Disasters, after all, are
the sole province of the Leviathan in both its local and national varieties. Katrina's aftermath was, at the end of the day, a testament to just how unmoored the government has become from its fundamental
purpose. This unmooring, this failure to properly establish a limited set of priorities and execute them with a high degree of competence springs
from two complimentary impulses. As we have channeled the "war of all against all" into constructive political and social outlets, the government
has expanded the definition of what "protection" entails. No longer is the Leviathan responsible for our physical security, but our medical
security, our retirement security, even our mental health. It's concerned that we smoke and that we're too fat. ...Republicans of an increasingly
rare variety used to endorse the principle of a limited, prioritized government that assigned itself those tasks that only the Leviathan could accomplish, letting other agencies -- local, civil and private --
grapple with the rest. Yet with entitlement spending ballooning and egregious pork barrel spending at unprecedented highs, it's clear setting
priorities and making difficult "either/or" decisions is out of fashion.
Thursday, September 8, 2005 ~ 8:39 a.m., Dan Mitchell Wrote: MEPs have criticised the UK presidency for proposed cuts in the EU's budget for next year in key areas that would help make the bloc's
sluggish economy grow. ...During a debate on Tuesday, MEPs lashed out at the fact that a proportion of the cuts are coming in areas such as research and development, a key part of the EU's so-called Lisbon
Agenda, aimed at making the European economy more competitive. ...Representing the UK presidency, Ivan Lewis defended the cuts arguing that the budget still represented a 12 percent increase in research
spending, compared to 2005. ...For its part the European Commission strongly condemned the proposed cuts in administrative spending. "How
are we going to pay officials next year, let alone hire new staff from new and old Member States?", asked budget commissioner Dalia Grybauskaite.
Thursday, September 8, 2005 ~ 8:23 a.m., Dan Mitchell Wrote: Californian state Governor, Arnold Schwarzenegger, has warned that he will have no option but to raise taxes if voters fail to accept the tough
spending controls contained in his Proposition 76. The controversial measure, the centrepiece of the Governor's ballot agenda for the November 8 special election, would impose new spending limits across
the board, including on education and health care. ...But in a recent radio address in Sacramento on Friday, Schwarzenegger warned that the electorate's failure to accept the measures would leave him no option
but to raise taxation - reversing his hitherto tough anti-tax hike policy. "I tell people vote yes on Proposition 76 and make sure that we do
everything that we can to pass this proposition so that we force our legislators once and for all to live within their means and not to continue
spending money and to keep making promises to people that they can't keep," he stated.
Wednesday, September 7, 2005 ~ 10:30 a.m., Dan Mitchell Wrote: ...if you're one of the people the law "protects" from "price gouging," you won't fare as well. Consider this scenario: You are thirsty -- worried
that your baby is going to become dehydrated. You find a store that's open, and the storeowner thinks it's immoral to take advantage of your
distress, so he won't charge you a dime more than he charged last week. But you can't buy water from him. It's sold out. You continue on your
quest, and finally find that dreaded monster, the price gouger. He offers a bottle of water that cost $1 last week at an "outrageous" price -- say
$20. You pay it to survive the disaster. You resent the price gouger. But if he hadn't demanded $20, he'd have been out of water. It was the price
gouger's "exploitation" that saved your child. It saved her because people look out for their own interests. Before you got to the water
seller, other people did. At $1 a bottle, they stocked up. At $20 a bottle, they bought more cautiously. By charging $20, the price gouger makes
sure his water goes to those who really need it. ...Let the market work, suppliers come -- and competition brings prices as low as the challenges
of the disaster allow. Goods that were in short supply become available, even to the poor. It's the price "gougers" who bring the water, ship the
gasoline, fix the roof, and rebuild the cities. The price "gougers" save lives. In the 1970s government-applied price controls and supply rationing created a dysfunctional economy that looked like a pinball machine on
permanent tilt. Today, with few exceptions, price controls have been rejected. Auto and truck drivers would rather pay $4 a gallon for gas they can get, than have government mandate $2 a gallon for gas that's
not available. In most cases market forces in the post-Reagan period still triumph over central planning. Deregulatory actions on fuel emissions
and releases from the Strategic Petroleum Reserve have already helped oil and gas prices come way down after the initial Katrina spike. Congress is removing obstacles to energy production, including
off-shore operations. Some policymakers are even talking about abolishing the federal gas tax -- a good idea. Supply-side tax incentives are another anti-70s theme. Even before OPEC declared war in the
1970s, high marginal tax rates stifled entrepreneurship and growth. Today those rates are much lower, with President George W. Bush contributing by reducing the tax rate on investment variables like
dividends and capital gains to only 15 percent. Whereas the 1970s had a stagflation/recession bias, today's new economy has a growth bias that supports market-oriented resiliency and flexibility. According to a couple of poorly trained economists, there's a bright side to Hurricane Katrina's destruction. J.P. Morgan senior economist
Anthony Chan ...said, "Preliminary estimates indicate 60 percent damage to downtown New Orleans. Plenty of cleanup work and rebuilding will follow in all the areas. That means over the next 12
months, there will be lots of job creation which is good for the economy." Professor Doug Woodward, of the business school at the University of South Carolina, has the same vision. Professor Woodward
said, "On a personal level, the loss of life is tragic. But looking at the economic impact, our research shows that hurricanes tend to become
god-given work projects." ...Let's ask a few smell-test questions about these claims of beneficial aspects of hurricane destruction. Would there
have been even greater economic growth and job creation for our nation had Hurricane Katrina not only destroyed New Orleans, Mobile and Gulfport, but other major metropolitan areas along its path, like
Cincinnati and Pittsburgh, as well? ...Only a lunatic would answer these questions in the affirmative. Frederic Bastiat (1801-1850), a great
French economist, said in his pamphlet "What is Seen and What is Not Seen": "There is only one difference between a bad economist and a
good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." What economists Chan and
Woodward can see are the jobs and construction boom created by repairing hurricane destruction. What they can't see, and thus ignore, is what those resources would have been used for had there not been
hurricane destruction.
Wednesday, September 7, 2005 ~ 9:37 a.m., Dan Mitchell Wrote: Imagine the headlines, "Legislature Mandates Pi To Equal 3.00000 -- Some Analysts Warn Move May Spur Engineering Problems," or "King
Canute Commands Tide To Recede -- Some Analysts Warn Move May Spur Wet Footwear Problems." ...Even most people with typical journalism educations would recognize such heads and subheads as the
jokes they are, but somehow when it comes to basic economics, the laws of supply and demand, and the function of prices in a market economy
bizarrely remain subjects for public debate. ...In any locality, when the supply of a particular item is reduced with no change in demand, or the
demand for it increased with no change in supply, or supply is decreased with a demand increase, prices will go up. This is a signal to the market.
To those demanding the product, it is a signal that the supply is relatively short, and that they should perhaps rethink the level of their demand, if possible. To the suppliers, it is a signal that more of the
resources must be brought to market. In both cases, it will result in a change in behavior on both parties that will restore the balance between
supply and demand. ...When by fiat we pretend that the price has not gone up, it's like covering up the signposts, and we shouldn't be surprised when those supplying no longer attempt to increase the supply,
and those demanding can't be bothered to reduce their usage of that particular commodity. ...Similarly, if ice prices rise to the market, the
man who needs to keep his insulin cold for his diabetes treatment will place a higher value on it than the man who wants to keep his beer cold,
and will have a better chance of getting it. The man who might rent two hotel rooms for his family for additional comfort might, in the face of
appropriately higher prices, inconvenience himself and only get one, releasing one for another whole family. Katrina's impact on oil and refined products did not have to be so severe, and there are lessons to be learned for the energy debate to
come. ...the Western Gulf of Mexico stands out not as America's only offshore area with oil, but the only offshore area that doesn't face severe
federal limits on drilling. There is oil and natural gas in the Pacific, Atlantic, and eastern Gulf (which was not as badly impacted by this
particular hurricane), but these areas are subject to federal moratoria restricting drilling. Alaska also has significant oil reserves, both on and
offshore, but portions of them, including the estimated 10 billion barrels located on a small part of the Arctic National Wildlife Refuge (ANWR),
are currently subject to restrictions as well. If America was to make more sensible use of this oil, there would be greater production overall, a lower price (how much lower is subject to debate), and less
vulnerability should any one region suffer a natural disaster. ...A similar story applies to refining capacity. Due in part to costly federal
regulations, along with non-regulatory factors, refinery capacity in the US is very tight. No new refinery has been built since 1976, though investors in a proposed new facility in the Southwest are currently
navigating through the years-long approval process. Capacity expansions at existing refineries have struggled to keep pace with increasing demand, and face a large and still-growing list of regulatory
requirements. Some in industry say that the billions spent on regulatory compliance have diverted resources that would have otherwise been spent on additional expansions.
Wednesday, September 7, 2005 ~ 8:30 a.m., Dan Mitchell Wrote: Mr. Bush is going to have to recognize the obvious initial failure of the Department of Homeland Security in its first big post-9/11 test. The
President created this latest huge federal bureaucracy, against the advice of many of us, and we're still waiting for evidence that it has done anything but reshuffle the Beltway furniture. ...Mr. Bush should
name one or more people, in or out of his Administration, to sort through the ideas and avoid what will be the liberal/GOP Congressional impulse to throw money at everything. An alternative would be to name
the entire stricken area an enterprise zone for some period of time, which would offer both tax incentives and regulatory waivers to stimulate reinvestment. There's a danger here of tax breaks for floating
casinos, but the greater risk is spending $20 billion or more solely on the priorities of local politicians. ...Economic leadership also means
instructing Americans on the link between tax cutting and the economic vitality needed to fund both Katrina relief and the war on terror. Predictably, the Bush tax cuts are under attack for denying revenue to
the government and because they don't require "sacrifice" in wartime. But the truth is that federal revenues are rising by an estimated $262
billion--or roughly 14%--this year thanks to the growth that followed the 2003 tax cuts. Republicans have been far too defensive on tax cuts, and
Katrina is an opening to explain their necessity and to push for making them permanent. When all is said and done, government is ultimately just human beings -- politicians, judges, bureaucrats. Maybe the reason we are so often
disappointed with them is that they have over-promised and we have been gullible enough to believe them. Government cannot solve all our problems, even in normal times, much less during a catastrophe of
nature that reminds man how little he is, despite all his big talk.
Wednesday, September 7, 2005 ~ 7:11 a.m., Dan Mitchell Wrote: New York Sen. Charles Schumer, a member of the Judiciary Committee and an author of the Democrats' catechism regarding constitutional
reasoning, soon will be questioning John Roberts. Herewith some questions someone should ask Schumer: Does Congress have the power to require Americans to floss after brushing their teeth? Or to regulate
the amount of homework children do each night? The federal government's powers supposedly are limited because they are enumerated. As James Madison said in Federalist 45, ``The powers
delegated by the proposed Constitution to the federal government are few and defined.'' For seven decades, however, Congress has treated the Commerce Clause (``Congress shall have power ... to regulate
commerce ... among the several states'') as a license to do what it wants to do. ...Does it matter to you that the original intent of the Commerce
Clause was to ensure the free movement of goods and services among the states? Do you think that Madison, the foremost Framer of the Constitution, misunderstood the Constitution? ...if you think the
Constitution is a ``living document,'' the meaning of which changes with the sentiments of society's changing majority -- in what sense is it still a constitution?
Tuesday, September 6, 2005 ~ 3:43 p.m., Dan Mitchell Wrote: EU finance ministers are to once more discuss the controversial issue of introducing a tax on airline tickets as part of the bloc's commitment to
aid for developing countries. The UK presidency is pushing the idea of a scheme for the financing of specific development projects through a
solidarity contribution on plane tickets. ...if a tax of between EUR1 and EUR5 is put on intra-EU flights and between EUR2 and EUR10 on international flights, then the revenue raised would come to between
EUR568 million and EUR2763 million. ...The idea came to be discussed by finance ministers following a proposal by French president Jacques Chirac at the beginning of the year that there be a general air tax. The
EU Observer reports:
Tuesday, September 6, 2005 ~ 9:00 a.m., Dan Mitchell Wrote: Mr. Greenspan ...regards the free enterprise system -- its reliance on risk-taking, private markets and individual exertion -- as the bedrock of
American prosperity. This faith feeds his optimism. And there is a second sense in which Mr. Greenspan has also disclaimed credit for good economic performance. From 1979 to 1987, inflation dropped from to
4.4% from 13.3% -- the work mainly of Mr. Greenspan's predecessor... Mr. Greenspan deserves much credit. His style is paradoxical. He rigidly
embraces some principles and otherwise is hugely flexible. One principle is the significance of price stability: a condition he defines as keeping
inflation so low (generally 1% to 2%) that it doesn't affect consumer and business decision-making.
Tuesday, September 6, 2005 ~ 8:24 a.m., Dan Mitchell Wrote: The Tories are to launch a review of Britain's tax system with a view to simplifying it and possibly bringing in a "flat tax". George Osborne, the
shadow chancellor, will unveil a "special commission" on taxation this week, heralding the biggest shake-up in Tory tax policy for almost two
decades. ...The commission will be headed by a senior businessman, and will report next year on the way that such a tax system has worked in
other countries and the viability of introducing it to Britain. If a flat tax is adopted as Tory policy it will be the biggest shift since Nigel Lawson
cut the top rate of income tax to 40 per cent in 1988. ...The Tories were dismayed by the failure of their piecemeal taxation proposals at the May election and believe that a radical new approach is required.
Tuesday, September 6, 2005 ~ 7:44 a.m., Dan Mitchell Wrote: Just weeks after his appointment as U.S. ambassador to the United Nations, John Bolton has taken pen to paper and inked in almost 800
changes in a document containing nearly 40 pages of business-as-usual proposals for increasing the U.N.'s power to police the world. ...Bolton's
move is, quite literally, his own declaration of independence, clearly establishing his leadership in countering the Old Guard that has dominated the General Assembly for decades. ...Bolton has a reputation
as a "tough-minded diplomat" who knows how to get things done as well as how to stop efforts to contain America's national sovereignty.
Bolton actively opposes all international efforts to limit U.S. power and defense capability. He actively opposed Annan's efforts to declare the
U.N. as the sole legitimate entity for using force in international disputes. Indeed, he has called Annan's statements "breathtaking" in
their audacity. ...It's about time to have an "advocate for Americans' values and interests at the U.N." John Bolton's detailed editing of the
proposal for the U.N. summit means that his critics will have to either argue over each change or adopt Bolton's suggestion: a simple, two-page statement of democratic principles. Ambassador Bolton once
said that it wouldn't make a bit of difference if the world lost the top 10 floors of the U.N. Headquarters.
Monday, September 5, 2005 ~ 12:30 p.m., Dan Mitchell Wrote: The Environmental Protection Agency announced that it is waiving certain restrictions on air pollution requirements for gasoline and diesel
fuel until September 15. This will reduce delay and unnecessary cost in the fuel supply process. The EPA has also allowed retailers to sell gas
normally restricted for sale in the fall and winter, when air pollution is less of a concern. This too will help reduce prices and increase the supply
available. Moreover, the EPA, after initially restricting these waivers to the states affected, has extended them to all 50 states. This will also help
in the relief effort, as people who need to spend less on gas will have more money to give to charity. ...a new oil refinery has not been built in the United States since 1976 because of various environmental
regulations. A waiver of these rules -- combined with some political leadership -- would allow energy companies, which have plenty of money to invest in business-enhancing infrastructure, to ease the supply
bottleneck.
Monday, September 5, 2005 ~ 10:47 a.m., Dan Mitchell Wrote: French Prime Minister Dominique de Villepin has announced plans for tax reform and more work incentives in an effort to boost economic
growth. ...Central to the programme is reform of the country's tax system. The system will be simplified with the number of personal tax brackets reduced by a third to four. There will be tax cuts of up to 3.5bn
euros ($4.4bn; £2.3bn) next year with a single taxpayer earning 30,000 euros paying 15% less. ...Mr de Villepin told a news conference... "I
want it to be more attractive and easier to work in France than to live on welfare."
Sunday, September 4, 2005 ~ 1:15 p.m., Dan Mitchell Wrote: Since 1970, homebuilders have faced increasing difficulty in obtaining regulatory approval for the construction of new homes. Local residents
-- more educated, more affluent -- have had a greater ability to block new projects should they be deemed harmful to their own interests, for
example to the value of their homes. ...the physical cost of building a home as a percentage of the home price has diminished over time. In 1970 and earlier, structure costs represented about 90 percent of the
value of a home in most areas. But since 1980, the cost of land and obtaining regulatory approval has shrunk the importance of building costs as a factor in house prices. ...along a swath of the east coast
roughly approximated by Amtrak's Northeast Corridor, the non-structure component of house value exceeded 40 percent by 1990. By 2000, this pattern had spread to 27 metropolitan areas. In the San
Francisco area, an outlier among metropolitan areas, structure costs probably represent no more than 30 percent of house value. The evidence, the authors write, points toward a man-made scarcity of
housing in the sense that the housing supply has been constrained by government regulation as opposed to fundamental geographic limitations, especially in the last two or three decades. They see evidence
that judges and local government officials have become increasingly sympathetic to ...environmental concerns with new housing developments. Zoning has become more restrictive. Permitting has
declined by an estimated 37 percentage points between 1960 and today.
Sunday, September 4, 2005 ~ 11:39 a.m., Dan Mitchell Wrote: The U.S. Supreme Court recently found that the city's original seizure of private property was constitutional under the principal of eminent
domain, and now New London is claiming that the affected homeowners were living on city land for the duration of the lawsuit and owe back rent. It's a new definition of chutzpah: Confiscate land and charge back
rent for the years the owners fought confiscation. In some cases, their debt could amount to hundreds of thousands of dollars. Moreover, the homeowners are being offered buyouts based on the market rate as it
was in 2000 . ...A lawyer for the residents, Scott Bullock, responded to the letter on July 8, 2004, asserting that the NLDC had agreed to forgo
rents as part of a pretrial agreement in which the residents in turn agreed to a hastened trial schedule. Bullock called the NLDC's effort at obtaining back rent "a new low."
Saturday, September 3, 2005 ~ 11:14 a.m., Dan Mitchell Wrote: Large public bureaucracies, whether the FBI and the CIA or FEMA and the Corps of Engineers, don't talk to each other much. They are poorly
incentivized, if at all. Budgets, the oxygen of the acronymic planets, make bureaucracy's managers first responders to constant political whim. Real-world problems, as the 9/11 report noted, inevitably seem
distant and minor: "Once the danger has fully materialized, evident to all, mobilizing action is easier--but it then may be too late." ...Big public
bureaucracies are going to get us killed. They already have. One may argue that this is an inevitable result of living in an advanced and complex democracy. ...But we ought to at least recognize that our
increasingly tough First World problems--terrorism, viruses, the rising incidence of powerful natural disasters--are being addressed by a public
sector that too often is coming to resemble a Third World that can't execute. ...We should consider outsourcing some of these functions, for
profit, to the private sector. ...A public role is unavoidable and political leadership is necessary. But if we're going to live with First World
threats, such as the destruction of a major port city, let's deploy the most imaginative First World brains--in the private sector and academia--to mitigate those threats.
Saturday, September 3, 2005 ~ 10:37 a.m., Dan Mitchell Wrote: Criminologist and researcher Gary Kleck, using his own commissioned phone surveys and number extrapolation, estimates that 2.5 million
Americans use guns for defensive purposes each year. He further found that of those who had used guns defensively, one in six believed someone
would have been dead if they had not resorted to their defensive use of firearms. That corresponds to approximately 400,000 of Kleck's estimated 2.5 million defensive gun uses. Kleck points out that if only
one-tenth of the people were right about saving a life, the number of people saved annually by guns would still be at least 40,000. The Department of Justice's own National Institute of Justice (NIJ) study
titled "Guns in America: National Survey on Private Ownership and Use of Firearms," estimated that 1.5 million Americans use guns for
defensive purposes every year. ...Furthermore, the NIJ reported that half of their respondents who said they used a gun defensively also admitted
having done so multiple times a year -- making the number of estimated uses of self-defense with a gun 4.7 million times annually. Former
assistant district attorney and firearms expert David Kopel writes, ". . . [W]hen a robbery victim does not defend himself, the robber succeeds
88 percent of the time, and the victim is injured 25 percent of the time. When a victim resists with a gun, the robbery success rate falls to 30
percent, and the victim injury rate falls to 17 percent. No other response to a robbery -- from drawing a knife to shouting for help to fleeing --
produces such low rates of victim injury and robbery success."
Friday, September 2, 2005 ~ 11:24 a.m., Dan Mitchell Wrote: ...one of the best ways for state governments to maintain spending is by cutting tax rates to levels that will attract business - and thus more tax
revenue. ...Tax rates are one factor among many that entrepreneurs taken into consideration when they look to set up businesses - and if tax rates in these states were reduced, it follows that these states would
become more competitive. New Mexico's Democratic Gov. Bill Richardson made this argument in his first (2003) address to the state legislature: "We will bring New Mexico's top personal income tax rate
down to five percent in four years. After all, Texas and Nevada have no personal income tax at all. Arizona and Colorado already top out in the five percent range. The Democratic-controlled legislature heard
Richardson's call and reduced New Mexico's top income-tax rate from 8.2 to 4.9 percent over five years. They also agreed to cut the state
capital-gains tax. Richardson said, "I am convinced that by making New Mexico a more tax-friendly place for growth-oriented businesses and
entrepreneurs, the cut in rate[s] will be more than compensated for by the increase in taxpayers - and income - in that bracket." He was right.
Summer 2005 revenue estimates for New Mexico show the state will receive an additional $216 million this fiscal year, including higher personal income-tax revenues. ...Gov. Martz's successful drive to make
Montana's economy more competitive is singularly impressive. She left office after four years of aggressive tax cutting. Under her leadership, Montana's top rate of 11 percent was slashed to 6.9 percent. Cato's
authors concluded, "Martz is a rare example of a governor who left office with the state in better shape than she found it."
Friday, September 2, 2005 ~ 11:03 a.m., Dan Mitchell Wrote: America has extraordinary reserves of natural gas located right off its coasts. Unfortunately, the environmental lobby has helped maintain a
federal moratorium that puts 85% of what is known as the Outer Continental Shelf (OCS) off-limits to oil and gas production. Now is the moment to reverse this policy... According to the Minerals Management
Service, the Gulf of Mexico alone is sitting on some 232 trillion cubic feet of natural gas, not to mention about 37 billion barrels of oil. Alaska
has another 122 trillion cubic feet of natural gas and 25 billion barrels of oil. Combined with reserves along the East and West coasts, the OCS offers some 406 trillion cubic feet of natural gas. To put this in
perspective, total U.S. annual consumption is about 22 trillion cubic feet. ...Environmentalists and their political allies will object. ...But with
any luck, Hurricane Katrina will open the eyes of Senators who continue to talk about our energy needs but block any new production.
Friday, September 2, 2005 ~ 10:35 a.m., Dan Mitchell Wrote: Congress returns to work in a few days, which means that the unrestrained raiding of the public purse through wasteful and
unnecessary spending is likely to continue. ...This might be more understandable if Democrats were running the government, but that overspending is taking place under Republican leadership is something
like a virtue monitor succumbing to vice. ...Congress appears to be succumbing to an attitude that says as long as rape is inevitable; members should relax and enjoy it. ...Republicans are now engaging in
behavior identical to that of the Democrats they used to criticize when that party ran the House for 40 years. The Republican leadership is less
inclined to allow votes on bills to reduce spending, which is forcing those members still interested in protecting the public purse to attempt to cut
spending through floor amendments, a more difficult process. ...It is not enough to cut taxes, which stimulate the economy in the short term. If
spending is not similarly reduced, the economy will eventually suffer. Rep. Jeb Hensarling, Texas Republican, has correctly noted, "The deficit
is a symptom; spending is the disease. And we have to do something about the disease." ...A Republican president and a Republican Congress should not be about controlling the rate of government growth. They
should be about reducing the size, cost, reach and influence of government. Government spending at both the state and federal levels rises every year, which puts pressure on politicians to find and justify more tax
dollars. Mandatory federal spending on entitlement programs alone will soon exceed 60 percent of budget outlays, and Medicaid spending threatens the budgets of nearly every state. ...state governments and the
federal government have shown an insatiable appetite for spending. Spending on big projects and favored groups helps ensure reelection. The fact that 20 percent of taxpayers pay 80 percent of federal tax
revenues means that a majority of the public is not directly impacted by rising tax rates. ...Until the public puts a legal collar on government
spending, we will continue to have runaway taxation. It's an epidemic we must stop. Then, and only then, can we ensure a healthy economy for our grandchildren.
Friday, September 2, 2005 ~ 10:21 a.m., Dan Mitchell Wrote: Even the Bush administration has gotten in on the act by having the Justice Department and the Federal Trade Commission look for
evidence of price-gouging and believes retail and wholesale gasoline prices are "too high." Congress is planning on holding hearings on oil
company "price-gouging." In Texas, Attorney General Greg Abbott is threatening legal action against what he called "unconscionable
pricing" by hotels that took advantage of desperate people fleeing the chaos in nearby Louisiana. In Alabama, Attorney General Troy King
promises to vigorously prosecute businesses that significantly increase prices during the state of emergency. You would think that people had learned their lessons about price controls during the 1970s, though
memories have surely faded. Price controls didn't stop the cost of gasoline from rising. They just changed how we paid for them. Instead of prices rising until the amount people wanted equaled the amount
available, chronic shortages of gasoline had Americans waiting in lines for hours. Yet, the supposedly permanent shortages disappeared instantly as soon as price controls were removed. ...Higher prices today
reduce consumption and increase inventories and thus reduce how much prices will rise tomorrow. The overall increase in price will actually be
less. The possibility of higher prices when disasters strike also gives oil companies an incentive to put aside more gas to cover those emergencies. Storing gas is costly, and if you want them to bear those
costs, you had better compensate them. ...There is another downside to price regulations. Companies in states all across the country, hoping to
make a few dollars, are thinking of loading up their trucks with food, water and generators and heading down to Louisiana, Mississippi and
Alabama. The higher the prices, the faster these "greedy" companies and individuals will get their products down to desperate customers. But
their greed means less suffering. The more products delivered, the less prices will rise.
Friday, September 2, 2005 ~ 8:58 a.m., Dan Mitchell Wrote: "...it's a great idea" said Berlusconi's economic advisor, Renato Brunetta, commenting the flat tax. "The centre-right had already
included the flat tax in its programme, as a long-run measure, and has partially fulfilled it: the reduction of tax quotas goes in that direction".
Friday, September 2, 2005 ~ 8:32 a.m., Dan Mitchell Wrote: If opinion polls are a reliable indicator, Junichiro Koizumi will win his Sept. 11 gamble ...the prime minister turned against LDP reactionaries,
attacking the core institution of the party's political machine, the Japanese postal service. The system's banking and insurance arms are
vast, with $3 trillion in assets. The service provides jobs to LDP loyalists and money to invest in public projects that also win it political support.
But in so doing it misallocates huge amounts of capital what would be deployed far more efficiently by private financial intermediaries seeking
a market return. At the same time, depositors get paltry interest on their savings, so there is little capital formation. The postal service bears a lot
of the blame for Japan's economic stagnation. Mr. Koizumi's 2005 bill to begin privatizing the postal system was defeated in parliament, thanks in large part to mossbacks in his own party.
Thursday, September 1, 2005 ~ 12:05 p.m., Dan Mitchell Wrote: Ten nations--most from the former Soviet Union, including Russia itself, with its 13% rate--have embraced a flat tax. And the economies of these
countries are reaping their reward: They far outpace crusty Old Europe in GDP growth and job creation. China, Germany and Spain could be the next dominoes to fall. Mr. Forbes argues that international
competition seems to be driving the flat-tax frenzy. "Countries increasingly recognize that if they don't adopt the flat tax, they will lose
jobs, capital and their own ambitious entrepreneurs to more growth friendly nations." He shows that, in virtually all the countries with a flat
tax, government coffers overflow with tax receipts. ...Unfortunately, many Americans have lost hope that the tax code really can ever be
simplified. It is certainly true that every paralyzing regulation, carve-out, credit and deduction in the code was put there for a special-interest
reason and will be difficult to dislodge. The very influence peddlers who tanked the Forbes flat tax in 1996 will fight to preserve their fiefs when
the current system is next challenged. The flat tax is indeed what Mr. Forbes calls the ultimate "Washington versus America" battle.
Thursday, September 1, 2005 ~ 11:46 a.m., Dan Mitchell Wrote: Mr. Sanford rolled out a preliminary plan to create private Medicaid accounts that individuals would use to buy health insurance. The details
are still being worked out, and the size of each account will vary widely depending on individual circumstances. But the idea is simple: Give most
adults about what Medicaid spends on them now, approximately $4,000 a year, and let them shop around. If they find insurance for less than what's in their account, they can spend the remainder on other health
care needs. ...States can learn from one another's failures as well as successes. For many states, Tennessee is an example not to emulate. There, state officials are wrestling with a Medicaid monster gobbling up
a third of the state's budget. Though there is little doubt this is what's in store for most other states unless they act soon, the Volunteer State got
to this point faster than most by rolling out a version of HillaryCare called TennCare in the 1990s that gave expanded benefits to hundreds of thousands of people.
Thursday, September 1, 2005 ~ 11:16 a.m., Dan Mitchell Wrote: ...it is newcomers who have to pay outrageous prices for houses, while it is existing homeowners who vote for laws and policies that drive up
housing costs by obstructing the building of new homes. Those who already own their own homes are not hurt by soaring housing prices. In fact, they benefit when the value of their homes becomes several times
what they originally paid for them. Given this situation and these incentives, it is easy to understand why such things as planning
commissions, "open space" laws and "historical preservation" policies proliferate. These road-blocks to building are essentially
idealistic-sounding ways of being completely selfish. Despite much liberal rhetoric about compassion for the poor, it is precisely in such overwhelmingly liberal enclaves as those in California where high
housing costs resulting from restrictive laws have imposed the heaviest burden on lower income people.
Thursday, September 1, 2005 ~ 9:30 a.m., Dan Mitchell Wrote: KPMG will survive this "deferred prosecution" by admitting wrongdoing. But it's easy to forget amid the righteous indignation over
tax shelters with names like FLIP, BLIP, OPIS and SC2 that the legality of these tax-avoidance techniques has never really been tested. The IRS
banned each of them in the late 1990s or early 2000s, but no court has ruled on their propriety. ...Speaking on the Senate floor last month, Mr.
Levin described the distinction: "Abusive tax shelters are very different from legitimate tax shelters, such as deducting the interest paid on home
mortgage or Congressionally approved tax deductions for building affordable housing. Abusive tax shelters are complicated transactions promoted to provide large tax benefits unintended by the tax code" (our
emphasis). In other words, it's OK to avoid taxes in any of the myriad ways Congress approves of. It's abusive if Congress didn't intend it --
assuming anyone can ever figure out what Congress really intends. ...In the meantime, the finger-waggers in Congress might acknowledge their
role in creating the 6,000-page, 2.8-million-word, tax code Frankenstein that facilitates the tax-avoidance industry. President Bush's tax-reform
commission is due to report at the end of September. Here's hoping that a simple system with a low rate that encourages voluntary compliance will lead its list of recommendations.
Thursday, September 1, 2005 ~ 8:49 a.m., Dan Mitchell Wrote: California is the warning-label state. ...Most office buildings and parking garages post Prop. 65 warnings. When you fill your gas tank, there's a
warning. When you go to a department store or a restaurant, there are warnings. Ditto the grocery store, where there are warnings not just
about lighter fluid, nail polish and the effects of alcohol, but for fruits and vegetables, nuts and fish. Now, if Attorney General Bill Lockyer has
his way, you can expect warning labels for fast-food French fries and potato chips. ...As a result, consumers see so many warning signs they
can't take them seriously. ...The scary part is that there are times when consumers need to know there is a danger. As in: You shouldn't drink
this because it is poisonous. But consumers don't notice such warnings. Corash noted that sometimes "we need a way to warn consumers when there's a real hazard. Now we can't any more. You have to say: 'We
really mean it this time. This isn't like the other warnings.'" [The government] hasn't tried banning salt -- yet -- but [it] has decided to make all of us pay for a program to tell us salt is no good. But it's the
science that's no good. The federal anti-salt bureaucracy launched expensive public service announcements that warn Americans to cut back on salt. The ads intoned, ominously, "You eat more than 20 times
the salt your body needs." Eat "no more than 2,400 milligrams a day," said Dr. Jeffrey Cutler, the official behind the government's anti-salt
campaign. I feel sorry for you if you follow your government's recommendations. A maximum of 2,400 milligrams a day makes for a miserable diet. ...there isn't enough scientific research to justify the
government's anti-salt campaign, and there definitely isn't enough to justify Cutler's 2,400-milligram limit. "I can't imagine how they came up
with that number. I mean, there isn't a single bit of evidence that suggests 2,400 milligrams is better than 2,100 or 3,700," said Dr. Michael Alderman, who headed the American Society of Hypertension,
America's biggest organization of specialists in high blood pressure. He says some people should cut back on salt, but for most people, it's
pointless. Some studies have found that those who ate the least salt were four times more likely to have heart attacks. ...When there's a broad
scientific consensus behind a theory, it's quite likely -- though still not certain -- to be right. But some theories, including some backed by the government, deserve to be taken only with a grain of salt.
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