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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, March 31, 2006 ~ 11:23 a.m., Sven Larson Wrote: While American leaders have been preoccupied with sectarian strife in Iraq, the rising threat from Iran, the controversy over having the United Arab Emirates run U.S. port facilities, and plummeting
public confidence in both parties, another ominous danger has been gathering: international schemes for "innovative sources of financing" - a euphemism for global taxes. Unless prompt action is taken
by Washington, it is a safe bet that such initiatives will become a widely employed means of imposing burdensome levies on American citizens and businesses. "Globotaxes" will enable the United Nations
to fund activities, operations, and priorities - including, in all likelihood, many our government and taxpayers would otherwise oppose. No less insidious will be the effect on our sovereignty. Advocates of such
international tax schemes make no secret of their ambition to redistribute wealth and to advance their longstanding goal of world government. Friday, March 31, 2006 ~ 8:57 a.m., Dan Mitchell Wrote: The broadest measure of living standards is what consumers spend. Real consumption per person rose from $14,816 in 1980 (in 2000 dollars) to
$25,816 in 2004 -- an unprecedented gain of 74.2 percent. Can anyone really believe that all those new superstores, malls and restaurants built
since 1980 have been catering to just the richest 10 percent? Can anyone believe the top 10 percent really bought nearly all of those new houses, cars, computers and steaks? The whole idea that the America has
experienced a 25-year stagnation in typical living standards is as fanciful as the phony statistics deployed to defend it. President Kennedy was
right, "A rising tide lifts all boats." People still have to be willing to get in the boat and grab an oar. Those willing to work, learn and invest do
much better inside an American boat during a rising tide than they would sitting in an egalitarian's leaking boat, or boatless and treading water in some Franco-Euro stagnant pond. Friday, March 31, 2006 ~ 8:32 a.m., Dan Mitchell Wrote: Part of the reason that European leaders spend much time bemoaning the Continent's lack of growth and job creation is that the regulations
they pass are economically crippling. The EU regulation for the Registration, Evaluation and Authorization of Chemicals (or Reach) was drawn up with the best of intentions. People who work with hazardous
chemicals or frequently come into contact with large doses of them should be informed about them and able to protect themselves. This might be done in a targeted manner. But the EU has launched the
world's largest fishing expedition. Thousands of chemicals with no known harmful properties will have to be re-scrutinized for scrutiny's sake. The cost to industry and consumers across the globe will be in the
billions of dollars. American companies hold a 26% share of the European chemicals market, export more than $20 billion in chemicals and over $400 billion in related goods a year world-wide, and import
more than $40 billion in chemicals from Europe annually. Now they'll have to decide whether it's worth it to comply with Reach and keep doing
business with Europe. The price will be particularly steep for small to medium-size enterprises, which account for 30% of chemical sales in Europe and 37% of employment. The revenues that SMEs lose will
hamper their ability to innovate, the lifeblood of their business. Friday, March 31, 2006 ~ 8:03 a.m., Dan Mitchell Wrote: PM Calin Popescu Tariceanu announced plans to maintain the current flat tax rate to the end of his term as head of Government. "I will keep
the flat tax rate, its level and as a system too," he said, Nine o'Clock reports. However, some experts of the EC recommended that Romania
should increase, as of next year, one of the two main taxes, the VAT or the flat tax rate. The European Commissioner for Economic and Financial Affairs, Joaquin Almunia, while in Bucharest in late February,
said that lowering the taxes was not a good measure. Thursday, March 30, 2006 ~ 11:14 a.m., Yesim Yilmaz Wrote: But something else obstructs would-be reformers in Europe. This is an acute case of a particular economic complaint: the excessive protection
of insiders at the expense of outsiders. In Europe, insiders have permanent jobs with nigh-impregnable security, high wages, guaranteed pensions and a still generous welfare state that they know how to exploit.
They are more often male, middle-aged and white than female, young or from ethnic minorities. Many work in the public sector. Others, such as shopkeepers, taxi drivers, lawyers or pharmacists, are insulated from
competition by a web of regulations. Outsiders have none of these benefits. ... Worse, the few reforms that have been made have often left insiders largely untouched. France's new job contract is only for the
young—and, if the government offers more concessions, it may not even help them much—while insiders will keep all their old job security. Too many labour-law changes have created two-tier markets, with an inner
tier remaining protected but an outer one on temporary or short-term contracts. Pension reforms have often stopped when they reach sensitive bits of the public sector. And some governments have tried only to
change welfare systems and labour laws, which is necessary if unemployment is to be reduced but can also create insecurity and drive down consumer spending. They have neglected the vital accompanying
task of injecting more competition into protected industries and services, which would both create jobs and cut costs. Thursday, March 30, 2006 ~ 8:41 a.m., Dan Mitchell Wrote: The federal Energy Information Administration (EIA) has…parts of the country could see pump prices well over $3 a gallon going into summer.
Happy Memorial Day. Drivers can send their thank-you notes to Capitol Hill, which created the conditions for this mess last summer with its latest energy bill. That legislation contained a sop to Midwest corn
farmers in the form of a huge new ethanol mandate that began this year and requires drivers to consume 7.5 billion gallons a year by 2012. … Imports could help, though the domestic ethanol industry has made sure
those also come at a dear price. Ethanol imports are subject to a 2.5% tariff and a second duty of 54 cents a gallon. This is particularly unfortunate for Texas or East Coast residents, who'd benefit greatly if
they could get their ethanol (duty free) from local ports rather than pay to have it trucked across the country. But such economic sense would
defeat the purpose of a law designed not to reduce gas prices but instead to underwrite a politically powerful ethanol industry that can't survive
without giant government handouts, protectionism and the brute force of mandates. …prepare to pay more for gas. This ethanol-MTBE fiasco is just the latest example of what happens when Congress holds energy
markets hostage to narrow special interests. If Republicans on Capitol Hill wonder why their approval ratings stay low as gasoline prices rise this spring and summer, we suggest they look in the mirror. Wednesday, March 29, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: How often have we heard that illegal immigrants "take jobs that Americans will not do"? What is missing in this argument is what is
crucial in any economic argument: price. Americans will not take many jobs at their current pay levels -- and those pay levels will not rise so
long as poverty-stricken immigrants are willing to take those jobs. If Mexican journalists were flooding into the United States and taking jobs as reporters and editors at half the pay being earned by American
reporters and editors, maybe people in the media would understand why the argument about "taking jobs that Americans don't want" is such
nonsense. Another variation on the same theme is that we "need" the millions of illegal aliens already in the United States. "Need" is another
word that blithely ignores prices. If jet planes were on sale for a thousand dollars each, I would probably "need" a couple of them -- an
extra one to fly when the first one needed repair or maintenance. But since these planes cost millions of dollars, I don't even "need" one. There
is no fixed amount of "need," independently of prices, whether with planes or workers.
Wednesday, March 29, 2006 ~ 8:26 a.m., Dan Mitchell Wrote: A report published by the State Administration for Taxation at the weekend stated that tax revenues, inclusive of social security taxes,
accounted for about 20% of China's gross domestic product in 2005. This, SAT stated, compares to an average of just under 30% for developing countries and an average of about 40% for industrialised
economies. Nonetheless, the SAT report conceded that China's tax burden has been rising sharply in recent years, having grown from just under 14% in 2001. However, the report emphasises the rising tax
revenues have been driven largely by booming economic growth and foreign trade rather than by an increase in the headline level of taxation. ...Similar levels of economic growth are expected to push revenue
collection higher still in 2006, when China's tax revenue is estimated to rise 17.5% to 3.61 trillion yuan (US$450 billion).
Wednesday, March 29, 2006 ~ 7:43 a.m., Sven Larson Wrote: Britain's elderly are being neglected, poorly treated and marginalised by the country's health system, according to a shocking study published
today. The scathing report, by three Government inspectorates, criticises the "patronising and thoughtless" manner in which NHS hospitals and
care institutions treat older patients. It also identifies a catalogue of sins and omissions practised by hospitals, that are condemning the elderly to
second-class status in Britain's hospital wards. Inspectors found that many older patients went hungry because meals were taken away before they could eat them, while others suffered embarrassment through being
cared for on mixed-sex wards. There were also frequent complaints about dirty wards, the strong smell of urine from unemptied bottles and people waiting on trolleys.
Wednesday, March 29, 2006 ~ 6:55 a.m., Sven Larson Wrote: The European Commission said Thursday it would slap temporary anti-dumping duties on Chinese and leather shoe imports as of April 7 to
protect EU manufacturers from "unfair trade". The duties are to be imposed gradually over five months and will rise to 16.8 percent for
leather shoes from Vietnam and to 19.4 percent for leather shoes from China. Children's shoes are not covered by the measures. "It is important
that we act against unfair trade while encouraging legitimate and competitive from emerging economies," EU Trade Commissioner Peter Mandelson said. "We do not target China and Vietnam's natural
competitive advantages, only unfair distortions of trade," he added The commission said the duties were needed because Chinese and Vietnamese manufactures could count on state aid in the form of soft
loans, tax breaks, low rents, fuzzy accounting, overlooking doubtful accounting and export incentives.
Tuesday, March 28, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: French students apparently prefer their little worker's paradise just the way it is. The overall jobless rate in France hovers around 10 percent,
so-called "youth unemployment" is 23 percent, and in some of the Muslim-heavy suburbs, joblessness is nearly 50 percent. Some paradise.
In France, you see, companies don't grow because it's too costly to hire while it's against the law to fire. Hence, since they rarely add jobs,
French businesses under-perform, under-produce, and under-employ. ... at the heart of the French problem is a statist-run socialist economy that
is massively overtaxed and overregulated. France's public government sector, for instance, accounts for more than 50 percent of GDP. In other words, private business in France is in the minority. Added to this,
France's top personal tax rate is 48 percent, with a VAT tax of nearly 20 percent. So that means French laborers face a combined 68 percent tax
rate on consumption and investment. No wonder France has created less than 3 million jobs over the past twenty years, compared to 31 million in
the United States. Economic growth in "cowboy capitalist" America has exceeded that of France's worker paradise by nearly 50 percent.
Tuesday, March 28, 2006 ~ 8:31 a.m., Yesim Yilmaz Wrote: The real fiscal challenges lie ahead of us, however. Indeed, long-term U.S. government debt projections by the CBO have U.S. debt exploding
and spiraling out of control over the course of the 21st century if current law is not changed. Why are the long-run fiscal projections so dire?
There are essentially two reasons: The first is the retirement of the Baby Boom generation, which causes the number of retirees who receive Social Security and Medicare to rise to record levels as a share of the
population. The second is the assumption of continuing increases in the relative price of medical care. Over the past 40 years, the price of medical care has been rising a bit more than 1 percent per year more
rapidly than the prices of goods and services more generally, and this discrepancy is projected by the Medicare Board of Trustees to essentially continue into the indefinite future.
Tuesday, March 28, 2006 ~ 7:54 a.m., Sven Larson Wrote: Hungary's much-debated local business tax came under threat last week as a result of a proposal by the advocate general of the European Court
of Justice (ECJ) to scrap a similar, revenue-based tax currently applied in Italy. According to the proposal the advocate general made to the
court, the Italian tax should be annulled, as it is in conflict with the EU's Sixth Directive on VAT. Based on this proposal, the court may rule that
levying local taxes of a similar nature to VAT in the member states of the EU is illegal. "In this event, the Hungarian government might have to
pay back the local tax to companies that file suit against it, though I expect the court to introduce some limitations on reclaims," opined Péter
Oszkó, tax partner at Deloitte Rt, adding that this could create a hole in Hungary's central budget. Last week's proposal was the second delivered
in this case by the advocate general of the ECJ. The first proposal was made last March by then advocate general Francis Jacobs, in which he
stated that the imposition of Italy's regional tax on production (IRAP) is illegal.
Tuesday, March 28, 2006 ~ 7:15 a.m., Dan Mitchell Wrote: Russia's Deputy Finance Minister, Sergei Shatalov has urged the government to forge ahead with plans to trim the tax burden further,
although the Kremlin appears to be at odds with itself over a proposal to cut value added tax by a further 5%....Since 2002, the Putin administration has reduced or abolished a number of taxes, including
turnover tax, payroll taxes, sales tax, and value added tax, which has already been cut to 18% from 20%. However, the Finance Ministry is said not to be keen on a proposal to cut VAT by an additional 5% to
13%, an idea being championed by Prime Minister Mikhail Fradkov, who favours using the tax system as an instrument to promote economic growth. ...It is believed that the Finance Ministry is luke-warm on the
VAT reduction because it may fuel inflation.
Monday, March 27, 2006 ~ 10:16 a.m., Yesim Yilmaz Wrote: Ohio and Daimler-Chrysler argue there is a huge difference between tax differentials that penalize businesses in other states and tax incentives
that, rightly or wrongly, are expected to encourage more business activity in the taxing state. If location-based tax benefits are struck down
here, is there any room for states to compete on tax policy at all? Indeed several Justices honed in on this point, particularly Scalia and Souter;
the former stressing the legislative prerogatives of states, the latter focusing on the 'free choice' businesses have in claiming tax breaks and
accept the conditions attached thereto. This is an important issue, and while Ohio seemed to have the edge before the Court, the Sixth Circuit Court of Appeals came down strongly the other way. Clearly the U.S.
Federal system demands a balance between Federal taxing power and state revenue authorities. The constitution demands the free flow of commerce across state lines. Yet when the virtues of global tax
competition are increasingly obvious, it seems wildly imprudent to erect a constitutional barrier to such competition within the U.S. National
uniformity in taxation has virtues, but 'forced' harmonization of tax systems not only insulates the taxing question from politics, it drives taxes higher (there is economic as well as political wisdom in 'no
taxation without representation').
Monday, March 27, 2006 ~ 8:53 a.m., Dan Mitchell Wrote: Thomas Sowell's...unorthodox views on racial matters have made him our foremost "black conservative," but the modifier sells him way short.
He is one of the country's leading social commentators--without qualification. And his scholarship is not only voluminous but wide-ranging, covering everything from education and law to political
philosophy, migration and the history of ideas. His primary discipline, however, is economics, specifically the history of economic thought, the
subject in which he earned his doctorate from the University of Chicago in 1968 under Milton Friedman and George Stigler. ...Free-market economics, a legacy of the classical school, is thought of as an old
conservative doctrine. But Mr. Sowell explains that it was in fact one of the most revolutionary concepts to emerge in the history of ideas.
Moreover, "the thinking of the classical economist was not only a radical break from landmark intellectual figures like Plato and Machiavelli but
also from mainstream thinking to this day." The notion of a self-equilibrating system--the market economy--meant a reduced role for
intellectuals and politicians, he says. "And even today many still haven't accepted that their superior wisdom might be superfluous, if not
damaging." ...he's made mincemeat of the sloppy methodology and flaccid arguments put forward by mainstream civil right leaders and their liberal sympathizers. He has shown, empirically, that affirmative
action does not benefit poor blacks. He has shown, empirically, that political clout is not a prerequisite for ethnic economic advancement.
And most importantly, he has exposed the harmful fallacy of using racial and gender discrimination as an all-purpose explanation for statistical group disparities.
Monday, March 27, 2006 ~ 8:19 a.m., Sven Larson Wrote: Because HSA deposits are either deducted or ex-cluded from taxable income, the tax advantage depends on one's tax bracket. Higher-income
people face higher marginal tax rates. Someone in the 15 percent federal tax bracket gets less of a tax subsidy than someone in the 35 percent
bracket. But this is true of all deductions in the tax code - from home mortgages to interest payments. It is also true of the exclusion for all
other employee benefits - from pensions to day care to post-retirement health care and disability benefits. Moreover, this tax subsidy is provided
for all health coverage obtained though one's job, not just for HSAs. So allowing a tax deduction for HSA contributions merely places self-insurance on an even playing field with third-party insurance. Many
HSA critics are highly selective - complaining about the regressivity of HSA deductions while not uttering a whimper of protest over the same regressive feature of all other exclusions, including employer-paid
premiums to HMOs. The regressivity of tax subsidies for HSAs would vanish, by the way, if they were incorporated into a flat tax; but the
critics rarely mention this fact. Further, the ability to shelter funds in a tax-free growth account is a lot less attractive today - given that dividends and capital gains are taxed at 15 percent, whereas HSA
withdrawals for nonhealth-care uses are taxed as ordinary income. In general, the wealthy do not need HSAs. We developed the HSA concept because many families are not good at saving for health needs. They tend
to live pay-check-to-pay-check and do not have extra money to pay for a doctor visit when they need one. HSAs make sure that the funds are there when the health need arises.
Monday, March 27, 2006 ~ 8:00 a.m., Dan Mitchell Wrote: This month a Senate committee approved a bill sponsored by the junior senator from New York that authorizes government-funded research on
"the effects of viewing and using electronic media, including television, computers, video games and the Internet, on children's cognitive, social,
physical and psychological development." Fittingly, since Mrs. Clinton likens these diversions to a plague, the research would be overseen by
the Centers for Disease Control and Prevention. ...Mrs. Clinton already has proposed a solution: the Family Entertainment Protection Act (FEPA), which would make it a federal crime to sell anyone under age
17 video games with "mature" or "adults only" ratings. FEPA also would instruct the Federal Trade Commission to evaluate the industry
rating system, do secret annual audits of retailers, investigate "hidden" game content and collect consumer complaints about ratings and content descriptions.
Monday, March 27, 2006 ~ 7:22 a.m., Yesim Yilmaz Wrote: There are widespread claims that the Federal Deposit Insurance Corporation (FDIC), adopted in 1933, has been instrumental to the lack
of traditional depositor bank runs in recent times in the U.S. However, FDIC only covers deposits up to a limited size, which is greatly exceeded
by many large depositors. Also left unexplained is that bank-type institutions in the U.S. that have not been credibly insured, such as state
thrifts, have also rarely had traditional currency runs in recent times If deposit insurance is no longer necessary to prevent depositor runs, then
in recent times deposit insurance may have increased bank failures due to moral hazard, such as in the 1980s S&L crisis, without bringing any
benefits. ...Given the evidence cited in the introduction that deposit insurance may be welfare decreasing but beneficial to private interests,
this suggests that deposit insurance may be primarily used as a tool for rent-seeking.
Sunday, March 26, 2006 ~ 9:34 p.m., Sven Larson Wrote: A key element of Gov. Ernie Fletcher's 2005 tax package was a new gross-receipts tax. Of all the potential taxes to hang one's political future
upon, a gross-receipts tax is probably the most heinous as it applies a tax on the revenues - not profits - generated by a business. Since annual
profits are never guaranteed, where does a business owner get the money to pay a tax if he has no profit left over? To stay in business, he must
somehow find excess cash under his mattress, in a can buried out back, on his knees in front of his wealthy mother-in- law, from the dustbins of
his savings account or from a bank that will still loan him money. He wonders why Kentucky legislators hate him so much. Some may wonder who would complain about raising this new gross receipts tax by .005
percent - a nickel for every thousand dollars of sales. Ask convenience-store owners who sell thousands of gallons of gasoline every month to earn a small profit. Talk to supermarket owners who move
massive amounts of groceries and depend on thin profit margins to keep their doors open. Then listen to car dealers explain how they trade
automobiles furiously from people to dealers to auctions, trying to earn a small profit. If moving money from one hand to another was all it took to make somebody rich, bank tellers would all drive Mercedes!
Sunday, March 26, 2006 ~ 11:14 a.m., Dan Mitchell Wrote: The report...found a pattern of "questionable and excessive" practices that included boosting salaries and padding pensions surreptitiously and
in ways that have cost unsuspecting taxpayers millions of dollars. A school chief in Ocean County was paid nearly $350,000, or 65% more than he reported to the Department of Education. A Camden official
received $223,000, which included $43,000 in undisclosed bonuses, car expenses and an annuity. And a Bergen County superintendent received more than a half-million dollars in extra pay for unused sick time and
other benefits. ...By the way, those absurd superintendent contracts were negotiated by school board members chosen in elections held in April,
when no one votes. "If you think the superintendent contracts are bad," says Gregg Edwards, a former school board member who now runs New
Jersey's Center for Policy Research, "wait until you get into the teachers contracts. And it's not just the money. It's the work rules." The few who
do bother to vote for school board members -- typical turnout is 10% -- tend to be union activists and others who have direct connections to the
bureaucracy and no incentive to clean up this mess. If New Jersey is looking to reform, a good first step might be to elect school board members in November. The alternative is to keep getting scammed by
these public-sector union contracts.
Sunday, March 26, 2006 ~ 10:36 a.m., Dan Mitchell Wrote: Five months after Florida became the first state to allow citizens to use deadly force against muggers, carjackers and other attackers, the idea is
spreading. South Dakota has enacted a similar law, Indiana Gov. Mitch Daniels plans to sign such a measure today, and 15 other states are considering such proposals. Dubbed "Stand Your Ground" bills by
supporters such as the National Rifle Association, the measures generally grant immunity from prosecution and lawsuits to those who use deadly
force to combat an unlawful entry or attack. Several states allow people to use deadly force in their homes against intruders; the new measures
represent an expansion of self-defense rights to crimes committed in public. ...The idea that people should use deadly force only to defend their lives is rooted in English common law, author Richard Maxwell
Brown says in No Duty To Retreat: Violence and Values in American History and Society.
Saturday, March 25, 2006 ~ 1:31 p.m., Dan Mitchell Wrote: President Chirac stormed out of the first session of a European Union summit dominated by a row over French nationalism because a fellow
Frenchman insisted on speaking English. ...When M Seilličre, who is an English-educated steel baron, started a presentation to all 25 EU leaders, President Chirac interrupted to ask why he was speaking in
English. M Seilličre explained: "I'm going to speak in English because that is the language of business." Without saying another word,
President Chirac, who lived in the US as a student and speaks fluent English, walked out, followed by his Foreign, Finance and Europe ministers, leaving the 24 other European leaders stunned. ...President
Chirac, who recently denounced British food as the worst in the world after Finnish, has led an increasingly eccentric campaign to try to turn
back the growing dominance of English in the EU and across the world. ...Jacques Delors, the former President of the European Commission, used to ban journalists from posing questions in English in the press
room. ...At one UN summit where there was no translation, President Chirac pretended not to understand questions in English and demanded that Tony Blair, who speaks French, act as his interpreter. President
Chirac has announced plans to start a French version of CNN to promote culture. He was furious when its managers disclosed that most of the output would be in English because otherwise few would understand it.
Saturday, March 25, 2006 ~ 12:26 p.m., Sven Larson Wrote: Maine's individual income tax collections as a percent of personal income are growing faster than the national average - leading to a
widening disparity between Maine and the national average. Nationally, Maine had the 33rd highest individual income tax collections as a percent of personal income in FY 1978. By FY 2002, Maine was the 11th
highest state. Among the six New England states, in FY 2002, Maine was just one-tenth of a percentage point away from having the highest individual income tax collections as percent of personal income.
Saturday, March 25, 2006 ~ 10:19 a.m., Dan Mitchell Wrote: The centre-right European People's Party (EPP) will at its congress next week call for the "implementation" of the EU constitution, according to
a draft manifesto seen by EUobserver... The draft manifesto states that "the reforms foreseen in the constitutional treaty - which were the result
of a broad consensus between the representatives of member states, national parliaments, the European Parliament and the European Commission...need to be implemented."
Friday, March 24, 2006 ~ 9:00 a.m., Dan Mitchell Wrote: Steven J. Davis of the University of Chicago and Magnus Henrekson of the Stockholm School of Economics...estimate that a tax hike of 12.8
percentage points -- regardless of whether that tax is on what we earn (an income tax) or what we spend (a value-added tax) -- would shrink the employment-population ratio by 4.9 percentage points, cut hours
worked by 122 per year among those left working in the taxable economy and boost the size of the tax-free underground economy by 3.8 percent of GDP. ...Transfer payments and purchases impose an
immediate burden on the private economy, regardless of how they're financed. Transfer payments typically involve taking money from taxpayers who've earned it and giving it to other people on the condition
that recipients promise not to work too hard, save too much or plant too many crops. ...Government purchases of buildings, equipment, material
and land reduce the availability of those resources for private business and raise their cost. When the government hires more bureaucrats or
soldiers, that raises the cost of labor for private business. ...Ever since the highest tax rates were sharply reduced on salaries, dividends and
capital gains, there have been many more rich Americans paying much more in taxes, allowing unprecedented tax cuts for everyone else. If anyone was foolish enough to try putting that history into reverse, by
raising tax rates on high incomes and dividends, a smaller group of people with high incomes would soon pay much less in taxes, as they did before. And everyone else would pay more. Federal spending is a large
and growing problem. Trying to patch over that problem with high tax rates on high incomes would do nothing to reduce the economic burden of federal spending.
Friday, March 24, 2006 ~ 851 a.m., Dan Mitchell Wrote: In the first five months of Fiscal 2006, through February, overall revenue continued to surge, growing at an overall rate of 10.3%, or an
$81 billion increase from the year ago period, to $871 billion. That builds on the astonishing 15%, or $274 billion, revenue increase for all of
2005... The bad news continues to be federal spending, with overall government outlays up 7.6%, or $76 billion, to $1.09 trillion. Defense spending is up 7.5%, but Medicare is growing at a 10.4% pace, which
promises only to increase as the prescription drug benefit kicks in. ...Economist Michael Darda points out that overall spending has risen at a 6.6% annual pace since 2001, or more than double the 3.1% average
rate of increase between 1993 and 2000. If spending in this decade had merely stayed at the 1990s's pace, the budget would already be in surplus
by $143 billion... As for taxes, the revenue data are further proof of the success of the Bush tax cuts of 2003. The fastest way to stop this revenue
windfall, and blow an even larger hole in the deficit, would be to fail to extend the 15% tax rate on capital gains and dividends through 2010, thus assuring a huge tax increase after 2008.
Friday, March 24, 2006 ~ 8:12 a.m., Dan Mitchell Wrote: Each year the Census Bureau calculates the nation's poverty rate, based on the number of people with incomes below the official poverty line,
about $20,000 for a family of four in 2004. Since last year's poverty rate of 12.7% was essentially equal to the 1968 rate of 12.8%, it seems that
little progress has been made. But many analysts -- on the right and the left -- have pointed out that, by many other measures, poor people's
physical and material well-being is considerably better now than in the late '60s. How else to explain why so many poor now have color TV (93%) and air conditioning (50%), and own their own homes (46%)?
...That's what makes a new data series by the Census Bureau, "The Effects of Government Taxes and Transfers on Income and Poverty:
2004," so significant. ...it allows us to get a better view of the resources available to low-income Americans. ...Now we can use the correct
inflation adjustment, count the income of cohabitors and coresidents, and include the implicit income of home ownership. ...adding in government estimates of unreported income results in a market income
poverty rate of about 7.9%, not the official rate of 12.7%. ...Taking into account welfare payments, food stamps and housing assistance (noncash
benefits are presently not counted) results in a poverty rate of about 5.1% -- and even this excludes the value of Medicaid for the poor,
roughly $2,000 per person. ...the broader point must not be lost: Millions of low-income Americans are living better lives than they did before.
Friday, March 24, 2006 ~ 7:33 a.m., Sven Larson Wrote: A confluence of factors, in particular a cut in the Insurance Premium Tax, would present New Hampshire with a unique opportunity to create
jobs and emerge as a regional center for the financial services industry. Acting immediately to reduce the nominal rate of the insurance tax will
stop the exodus of insurance companies from New Hampshire, bring new companies and jobs to the state, and add to New Hampshire's growing reputation as an attractive location for the financial services industry.
Insurance companies from New Hampshire and from other states continue to relocate in states with lower insurance taxes. Cutting the insurance premium tax by one point would give New Hampshire the
lowest tax rates in the Northeast. Instead of continuing to lose insurance companies and jobs, a rate cut would add between 2700 and 3400 jobs
with an economic impact of $100- $125 million. Furthermore, given the unique nature of the insurance tax and its reciprocal provisions, even a
one-point rate cut would increase state revenues over the previous year.
Friday, March 24, 2006 ~ 7:00 a.m., Dan Mitchell Wrote: China's tax system -- not unlike the regimes in New York or California -- resembles a bowl of sloppy noodles. A mix of progressive personal
income taxes, corporate taxes, consumption taxes, value-added taxes, property taxes . . . well, you get the idea. This week, Beijing's tax authorities announced that as of April 1, new levies will be imposed on
luxury goods like yachts and golf balls, in an effort to penalize the rich and redistribute their money to the poor. Oh, and a 5% tax on wooden
chopsticks too, to slow deforestation. ...who ever said that it was wrong to get rich? Certainly not Deng Xiaoping, who called wealth glorious,
thereby firing the starting gun for China's economic miracle. Listen closely, Comrade: a flat tax is simple. It's easy to implement. It would be
easy to monitor, helping to combat rampant local corruption. It would boost tax receipts, giving more room for relief to the rural poor -- something the Party is trying to do anyway. Lower tax rates would
stimulate workers to work harder, lifting productivity. ...The political left -- meaning whatever Communist ideologues are still around -- will wail
that a flat tax is some kind of sinister plot to boost the rich at the expense of the poor. But as much of the enlightened former Soviet bloc
has learned, if you're really out to squeeze the rich, the best way to do it is to generate more rich people, and give them more incentive to report their income by keeping rates low.
Friday, March 24, 2006 ~ 6:29 a.m., Dan Mitchell Wrote: Instead of sending taxes to Washington, straining them through bureaucracies and converting what remains into a muddle of services,
subsidies, in-kind support and cash hedged with restrictions and exceptions, just collect the taxes, divide them up, and send the money back in cash grants to all American adults. Make the grant large enough
so that the poor won't be poor, everyone will have enough for a comfortable retirement, and everyone will be able to afford health care.
We're rich enough to do it. ...I have devised -- I call it simply "the Plan" for want of a catchier label -- makes a $10,000 annual grant to all
American citizens who are not incarcerated, beginning at age 21, of which $3,000 a year must be used for health care. Everyone gets a monthly check, deposited electronically to a bank account. If we
implemented the Plan tomorrow, it would cost about $355 billion more than the current system. The projected costs of the Plan cross the projected costs of the current system in 2011. By 2020, the Plan would
cost about half a trillion dollars less per year than conservative projections of the cost of the current system. By 2028, that difference would be a trillion dollars per year. ...The Plan confers personal
accountability whether the recipient wants it or not, producing cascading secondary and tertiary effects. A person who asks for help because he
has frittered away his monthly check will find people and organizations who will help (America has a history of producing such people and organizations in abundance), but that help can come with expectations
and demands that are hard to make of a person who has no income stream. Or contemplate the effects of a known income stream on the young man who impregnates his girlfriend. The first-order effect is that
he cannot evade child support -- the judge knows where his bank account is.
Thursday, March 23, 2006 ~ 8:41 p.m., Dan Mitchell Wrote: Some call the people behind the Washington-D.C.-based Center for Science in the Public Interest (CSPI) busybodies, but I call them wannabe
tyrants. ...Last year, CSPI filed a lawsuit against the Food and Drug Administration (FDA) to reduce the amount of salt in packaged foods. They also called for the FDA to mandate warning labels on non-diet soft
drinks that consumption increases the risk of obesity, tooth decay and osteoporosis. Earlier this year, CSPI announced its intent to sue Viacom Inc. and Kellogg Company for marketing junk food to children. CSPI
has long called for excise taxes on fatty foods, cars and TV sets. ...They want some of the tax revenue used to fund exercise facilities and government fitness campaigns. ...they've called for caffeine warning
labels. To deal with teenage and adult overconsumption of alcohol, they've called for doubling the tax on beer. ...CSPI's director, Michael
Jacobson, said, "We could envision taxes on butter, potato chips, whole milk, cheeses, [and] meat," adding that "CSPI is proud about finding
something wrong with practically everything." ...I'd be interested to know just how many Americans would like to see done to our food industry what was done to the tobacco industry: massive
multibillion-dollar lawsuits against food companies; massive suits against restaurants that serve too large a serving, and confiscatory taxes levied on foods and snacks deemed non-nutritious. Consumers will pay
for all of this in the form of higher food prices and fewer choices.
Thursday, March 23, 2006 ~ 6:26 p.m., Dan Mitchell Wrote: In the course of her speech, Justice Ginsburg went further than perhaps others would feel comfortable in advocating the use of foreign law; she
went ahead and compared those who oppose the use of foreign law as precedential or persuasive authority with those who were responsible for
the decision in the infamous Dred Scott case. Putting aside the fact that foreign law was in fact used to justify the Dred Scott decision...there are
very legitimate reasons for resisting the siren song of foreign law. While it is always of interest to see what foreign courts are doing, it would be
wrong for American courts to rely significantly on foreign law in shaping their own opinions. Questions of democratic legitimacy, the cherry-picking of foreign laws to validate a predetermined outcome, and
the influence of foreign laws antithetical to norms and standards employed in the United States - all make the use of foreign law more hazardous than helpful... there is a difference between acknowledging
foreign law as a basis of the American jurisprudential system and using foreign law to supplement existing American jurisprudence. The study of
foreign law can be fascinating. But just because a subject is fascinating does not mean it should be used as an instrument of American justice. While she began her speech with a politically correct rewrite of the Declaration, her main point was that she and other justices have the
authority to change the Constitution -- and use contemporary foreign laws and rulings as inspiration for doing so. "The notion that it is
improper to look beyond the borders of the United States in grappling with hard questions ... is in line with the view of the U.S. Constitution as
a document essentially frozen in time as of the date of its ratification," said Ginsburg. "I am not a partisan of that view. U.S. jurists honor the
Framers' intent 'to create a more perfect Union,' I believe, if they read the Constitution as belonging to a global 21st century, not as fixed
forever by 18th-century understandings." The problem here is that the Framers did not give judges the authority "to create a more perfect
union." If any perfecting of our Constitution is to be done, the means for doing so are spelled out in Article 5 of the Constitution itself, which authorizes two-thirds of both houses of Congress to propose
constitutional amendments and two-thirds of state legislatures to convene constitutional conventions. ...By contrast, Ginsburg believes five
justices can amend the Constitution if their personal opinions happen to coincide -- and if they can gain sufficient ideological reinforcement, if not actual authority, from foreign courts.
Thursday, March 23, 2006 ~ 8:19 a.m., Dan Mitchell Wrote: Several EU member states have questioned the ambitious economic goals the Austrian presidency has included in this week's summit
conclusions, arguing it is damaging to the EU's image when targets are not met. ...Targets for jobs and growth, investment in innovation or research as well as higher use of renewable energy sources were
originally presented as part of the so-called "Lisbon agenda," agreed in 2000. Last year it was revised and its headline goal - of Europe
becoming the most competitive economy by 2010 - was scrapped. ...this week's summit of EU leaders, beginning Thursday, is set to refer to a number of concrete economic targets... The document, seen by the
EUobserver, suggested "the EU is expected to create six million new jobs during the three-year period 2005-2007, helping to reduce unemployment from a peak of 9% at the end of 2004 by roughly 1% in
2007." ..."This remind[s] me of central planning during the communist times," commented one official.
Thursday, March 23, 2006 ~ 7:42 a.m., Dan Mitchell Wrote: Enough generations of socialist policies have now passed for us to judge their effects. They are bleak. Socialism undermines the character of a
nation and of its citizens. In simpler words, socialism makes people worse. ...Socialism teaches its citizens to expect everything, even if they
contribute nothing. Socialism teaches its citizens that they have a plethora of rights and few corresponding obligations -- except to be
taxed. And that is why the citizens of less socialist -- and more religious -- America give more charity per capita and per income than do citizens of
socialist countries. That is why Americans volunteer time for the needy so much more than citizens of socialist countries do. That is why citizens
of conservative states in America give more charity than citizens of liberal states do. The more Left one identifies oneself on the political
spectrum, the more that person is likely to believe that the state, not fellow citizens, should take care of the poor and the needy.
Thursday, March 23, 2006 ~ 7:35 a.m., Sven Larson Wrote: On expenditure, the overriding challenge is to increase both flexibility in the allocation of budgetary resources, against a backdrop of widespread
revenue earmarking in some cases, and the quality of public spending. This also requires dealing pro-actively with the future expenditure pressures associated with the ageing of the population - akin to the
OECD experience - and putting in place adequate, cost-effective social safety nets to cushion vulnerable groups against the adverse consequences of macroeconomic volatility, which remains high in the
region. ... Efforts to improve the targeting of social programmes, in particular income transfers to vulnerable social groups, and to ensure
that the target population has access to services are relatively recent in the region, but are paying off. In any case, careful empirical analysis is,
and will continue to be, needed to assess the efficiency of government spending on social programmes, an area where evidence remains predominantly anecdotal. ... On the revenue side, the main challenges are
to broaden tax bases, reducing reliance on the more distorting taxes, such as those on financial transactions and enterprise turnover and payroll, and to improve tax administration in many countries.
Thursday, March 23, 2006 ~ 6:52 a.m., Dan Mitchell Wrote: That Republicans are outspending the most reckless 1980s Democrat (and 1960s Great Society Democrats and 1940s FDR Democrats) is the
sorriest spectacle of all. ...That any Republican majority could preside over such fiscally irresponsible spending ought to be grounds for revoking their party membership. ...Republicans fear that only gobs of
money will endear them to voters in sufficient numbers to re-elect their increasingly precarious majority. Why should Republicans be re-elected
when one of the major reasons the GOP exists is to reduce the size and cost of government and free more people to do for themselves instead of restricting their liberties through costly and overreaching big
government? ...That a Republican Congress and administration are engaging in such promiscuous spending is obscene.
Wednesday, March 22, 2006 ~ 11:15 p.m., Dan Mitchell Wrote: Could it be that the French system is a failure? An anti-market, welfare state has not served France - or any other nation for that matter - well.
...the French economy has grown a paltry 1.6% a year since 2001. That's stagnation. Economic output in France, as well as Germany and Italy,
has fallen far behind that of the U.S. across the last two decades. ...firing incompetents and underperformers in France is nearly impossible. That
restriction, of course, puts French companies at a disadvantage. Their incentive to hire is undercut because they know that if they hire the wrong person, they cannot fire him or her and replace that worker with
someone better. So rather than take a chance at being stuck with a poor worker, they don't hire at all. The inevitable effect of a private sector
that can't meet its employment needs is an economy that is chained to the deck. Consequently, the jobless rate in France is 10%, more than twice
as high as America's 4.8%. It's even higher among workers younger than 26, an unbelievable 23%. In the industrial suburbs of Paris and other
cities, filled with disaffected Muslim youths, joblessness soars to 50% or more.
Wednesday, March 22, 2006 ~ 7:15 p.m., Dan Mitchell Wrote: Liechtenstein, branded an ``uncooperative'' tax haven by the Organization for Economic Cooperation and Development, won't do
away with bank secrecy, Prince Alois said. There would be no support for such a measure among the population, which would have to vote on
any change, the 37-year-old said in an interview at his castle overlooking the capital, Vaduz. Liechtenstein derives about 30 percent of its gross
domestic product from financial services. … Under pressure from the European Union, Liechtenstein last year introduced a tax on the savings of EU residents. The 15 percent tax will rise to 35 percent by 2011 and
applies to interest earned on bond-coupon payments, bank-account interest and gains from mutual funds holding 40 percent or more of their assets in debt securities. …First figures on how much has been raised for
the EU since the tax was introduced in July 2005 may be available next month, Prince Alois said. There is no sign the tax is slowing inflows of
client assets into Liechtenstein, while existing clients have probably moved their savings into tax-exempt products, he added. ``Preliminary reports from the banks show there has been growth,'' the prince said.
``Investors are sure to have shifted assets in a big way'' into stocks, hedge funds, private equity, derivatives or insurance products that are
exempt. … Liechtenstein…residents have the highest per capita income in Europe, according to a 2005 study by GfK, a German market researcher.
Wednesday, March 22, 2006 ~ 6:51 p.m., Dan Mitchell Wrote: Romano Prodi, leader of Italy's centre-left opposition coalition, has pledged to cut social security and other employee levies borne by the
nation's firms by 5% in the first months of a new government, if he defeats Prime Minister Silvio Berlusconi in April's general elections. "Our
programme foresees the cut of 5 percentage points in the first year. I hope it is possible to go further but at the moment we can't give any
assurance on this," Prodi told an employers conference, according to reports. However, with Italy continuing to struggle to keep its finances in
order, Prodi's proposals have been rubbished by his political opponents, who fear the measure would be impossible to fund. "If Prodi claims he
can reduce taxation by 5 percentage points, which requires a 10 billion euro funding, he lies, and he knows he is lying", remarked Foreign
Minister and National Alliance president Gianfranco Fini, according to the news agency AGI.
Wednesday, March 22, 2006 ~ 8:53 a.m., Dan Mitchell Wrote: The European Commission wants to include Singapore and Hong Kong, two of the world's fastest-growing financial centers, in agreements
designed to discourage European Union nationals from keeping money offshore to evade taxes, according to a commission official. The commission, the EU's executive arm, has been trying for years to clamp
down on EU citizens who aim to avoid taxes by sending money to other jurisdictions. It has persuaded member countries and territories that rely
on the EU for trade, including Jersey and Switzerland, to adopt a raft of measures in recent years. Those measures include heightened exchange of information on suspected tax evaders, and the withholding of a
portion of the money in savings accounts held by EU citizens in those countries, which is then passed to their national governments. Both Hong
Kong and Singapore have tax treaties with various EU countries that set the ground rules for what kind of assistance Singapore and Hong Kong will provide to outside tax authorities requesting information. Under
these agreements Singapore and Hong Kong require evidence that domestic taxes in Singapore and Hong Kong have been evaded before cooperation is extended to an EU nation.
Wednesday, March 22, 2006 ~ 8:41 a.m., Sven Larson Wrote: Guy Verhofstadt, Belgian prime minister, said more flexible working practices were needed. In an apparent backingof France's controversial
attempts to make the hiring and firing of young people easier, he said: "It makes no sense to keep our highest taxes on our only raw material,
our labour force. Taxes on labour in Europe are far too high." He also called for a convergence of eurozone tax rates, with a maximum and minimum permissible rate among the 12 countries that use the single
currency.
Tuesday, March 21, 2006 ~ 5:26 p.m., Dan Mitchell Wrote: … poor countries should have been catching up with rich ones for the last century or so—and that the farther behind they are, the faster the
catch-up should be. In a country that has very little in the way of infrastructure or education, new investments have the biggest rewards. This expectation seems to be confirmed by the experience of China,
Taiwan, and South Korea—not to mention Botswana, Chile, India, Mauritius, and Singapore. Fifty years ago they were mired in poverty, lacking man-made, human, technical, and sometimes natural resources.
Now these dynamic countries, not Japan, the United States, or Switzerland, have become the fastest-growing economies on the planet. … Government banditry, widespread waste, and oppressive regulations
are all elements in that missing piece of the puzzle. During the last 10 years or so, economists working on development issues have converged
on the mantra that "institutions matter." Of course, it is hard to describe what an "institution" really is. It is even harder to convert a bad
institution into a good one. … There's no point investing in a business because the government will not protect you against thieves. (So you
might as well become a thief yourself.) There's no point in paying your phone bill because no court can make you pay. (So there's no point being a phone company.) There's no point setting up an import business
because the customs officers will be the ones to benefit. (So the customs office is underfunded and looks even harder for bribes.) There's no point
getting an education because jobs are not handed out on merit. (And in any case, you can't borrow money for school fees because the bank can't collect on the loan.)
Tuesday, March 21, 2006 ~ 10:32 a.m., Yesim Yilmaz Wrote:
The authors consider a number of factors that might have contributed to high labor cost growth (and low employment growth), such as institutional differences, personal preferences, etc. They conclude that high taxes (payroll and other) are possibly the biggest culprit: The considerable cross-country variation in rates of labour market participation across Europe suggest that institutional factors, rather
than preference effects, may play the stronger role in explaining lower hours per capita in the euro area. For example, high average and marginal tax rates and unemployment benefits may impact negatively on
the incentives to engage in paid employment and/or, following a decision to work, on the choice of the number of hours to work in euro area countries, thus potentially reducing officially recorded working time.
Countries with a relatively high tax wedge (which captures the amount of social security contributions, payroll taxes, personal income tax and consumer taxes that create a wedge between real labour costs for
employers and the real take-home pay of employees) tend to record a lower level of annual hours worked per capita. Belgium, France, Italy and the Netherlands, for example, which were at the low end of the
annual hours worked per capita scale in the euro area in 2004, have particularly high tax wedges.
Monday, March 20, 2006 ~ 11:01 a.m., Yesim Yilmaz Wrote: Meanwhile, Italy announced on Friday (10 March) that it would keep its temporary ban on workers from new Europe for another three years,
until 2009, according to AP.com. But it has increased its annual quota from 85,000 to 170,000 with statistics showing that previous quotas were not filled in the past. In both France and Italy, work permits have
been almost exclusively granted to seasonal workers from new EU member states.In France, 74% of the authorisations issued in 2004 were for seasonal workers, 11% for temporary workers and only 5% for
permanent workers, while Italy granted 76 % of work permits to seasonal workers, according to European Commission statistics.
Monday, March 20, 2006 ~ 10:39 a.m., Sven Larson Wrote: Japan should raise its consumption tax to boost its revenue as a way to cut the nation's swelling public debt, the Organisation for Economic
Co-operation and Development (OECD) said on Tuesday. As the world's second-largest economy tackles its huge public debt -- the largest among
major industrial nations -- a rise in the politically sensitive consumption tax is seen as unavoidable in the near future. But many lawmakers in
Japan still have bitter memories of how the last sales tax hike in 1997 pushed a recovering economy back into the doldrums by hurting personal consumption. As a result, the question of when and by how
much the tax should be raised has been controversial. Japan's consumption tax is currently at five percent. "Japan enjoys the lowest
VAT rate in the OECD. It's at the level of 5 percent. There is going to be scope for Japan to get more revenues from the VAT tax," OECD Secretary General Donald Johnston told a news conference in Tokyo.
Monday, March 20, 2006 ~ 8:28 a.m., Dan Mitchell Wrote: Critics in academia and business journalism-and many from the corporate world itself, most of whom are reluctant to talk on the record
and thereby show "bad faith" regarding the law-have many complaints about SarbOx, from its picayune requirements to its overall cost. While
all such guesstimates should be taken with a grain of salt, one financial consulting firm, the Johnsson Group, has put the 2004 costs of SarbOx
compliance at $15 billion. The critics also argue that the law's benefits are apt to be small. ...According to a survey of companies with under $1
billion in annual revenue done by national law firm Foley and Lardner, SarbOx has more than tripled the average annual regulatory costs of being a public company in the U.S., from around $1 million pre-SarbOx
to $3.4 million in 2004. ...The costs of SarbOx compliance, while not driving anyone out of business, will siphon revenues toward legal and accounting work. That drain may, in the words of Forbes' Rich
Karlgaard, "succeed in stopping the next Enron, but...crib-kill the next Cisco, Microsoft and Starbucks" by leaving them less capital with which to expand.
Sunday, March 19, 2006 ~ 1:14 p.m., Dan Mitchell Wrote: ... that Mr. Reiner has succeeded in putting his Preschool for All initiative on the ballot, the most immediate issue for voters is not how he financed
it, but what he is selling them. The initiative sounds like a great bargain: By imposing a 1.7% tax on couples making over $800,000 ($400,000 for
individuals), it seeks to generate $2.4 billion to fund three hours of free preschool every day for California's four-year-olds. Yet even the Reiner
folks don't expect to enroll all four-year-olds in the program -- just 70% of them. However, 66% of California's four-year-olds already attend
some form of preschool. This means that $2.4 billion will fund 22,000 new kids -- about $109,000 per new preschooler, according to a recent
analysis by the Reason Foundation. For this kind of money, a lot of poor parents could put their kids through a good state college and graduate
school and still have some change left for a family field trip to the Galapagos. ...An analysis by LECG, an economic consulting firm in California, has found that the Reiner tax-hike would actually result in
more than $4 billion in general fund losses over the first five years as rich taxpayers either flee the state or report less taxable income. This
would either mean cuts in health, welfare and other programs for the poor -- or an even bigger fiscal deficit.
Sunday, March 19, 2006 ~ 1:00 p.m., Sven Larson Wrote: Offshore banking, secret financial havens, money laundering and corruption steadily corrode the foundations of the nation-state. Offshore
tax havens, spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system - eroding the tax base, weakening state
finance and undermining the legitimacy of the tax system in the eyes of ordinary citizens. Offshore havens also promote money laundering,
aiding criminal anti-social activities of all kinds, beyond the detection of national authorities. Corruption of public officials flourishes under such
conditions, in the North as in the South, further eroding the capacity of the state to operate "legally" and to command the loyalty of its ordinary citizens.
Sunday, March 19, 2006 ~ 10:41 a.m., Dan Mitchell Wrote: While the Patriot Act and National Security Agency wiretapping have received enormous attention and criticism from the mainstream media, another federal agency has been quietly gathering far more personal
information about U.S. residents than those laws ever can. And this unreported project affects thousands more people. Our inquisitive federal government has been demanding that selected U.S. residents
answer 73 nosy questions. They are threatened with a fine of $5,000 for failure to respond. ...The U.S. Constitution authorizes the government to
take an "enumeration" every 10th year in order to reapportion the seats in the U.S. House of Representatives to accord with the "respective
numbers" of each state's population. The Constitution thus authorizes a count of people; it doesn't authorize the government to find out with
whom you share your bed and board. Beginning in 1960, the 10-year census-taking significantly changed. The government began sending a long form with many questions to a limited number of people, randomly
selected, and a short form with only six questions to all remaining U.S. residents. ...The survey then gets really personal, seeking the answers to
42 questions about you and about every other person who resides in your household. Person 1 is used like a private investigator to extract the
information from everybody else, and warned that if anyone doesn't want to answer your nosy questions, you must provide the name and telephone number of such person so Big Brother can follow up. Saturday, March 18, 2006 ~ 12:21 p.m., Dan Mitchell Wrote: ...at the moment, the only real listings growth is happening overseas. Thanks for that goes to the 2002 Sarbanes-Oxley legislation, which
imposes heavy financial and legal burdens on companies that want to go public in the U.S., to the great benefit of foreign exchanges. In 2000, nine out of every 10 dollars raised by foreign companies through new
stock offerings were done in the U.S., according to data from Citigroup. NYSE CEO John Thain recently told the Senate that last year not one of the top 10 initial public offerings (IPOs) measured by market
capitalization was registered in a U.S. market. In fact, 23 out of the 25 largest IPOs in the world chose to register outside the United States,
often in London or the Deutsche Bourse. Nor is 2006 shaping up to be better. Korean retailer Lotte Shopping recently conducted the largest IPO in Korean history; its shares are trading in Seoul and London. As
Nasdaq's bid shows, U.S. exchanges aren't about to sit still while others profit from laws that stunt U.S. capital markets. American exchanges
also have plenty to gain by leveraging their unrivaled financial expertise in trans-Atlantic tie-ups. Yet at some point Congress is going to have to
decide if it really wants the U.S. to keep eating the dust of a more sophisticated global marketplace, where international companies have growing choices about where to raise money.
Saturday, March 18, 2006 ~ 11:43 a.m., Dan Mitchell Wrote: A Republican president and a Republican Congress have lost control of the federal budget and cannot resist the temptation to stop raiding the
public fisc. George W. Bush and his colleagues have become not merely the custodians of the largest government in the history of humankind, but also exponents of its vigorous expansion. The president has taken
lately to crowing that the Medicare prescription drug benefit will cover 95 percent of all drug expenditures for some of the nation's old and poor,
and is telling younger Americans they have a duty to enroll their parents in the new regime of socialized pharmaceuticals. USA Today reported last week that enrollments in welfare programs have grown 17 percent
since 2000, even though the population has increased only 5 percent. Another study shows that enhanced unemployment benefits have produced the predictable result -- longer periods of unemployment. Those
who accept the benefits stay off the job more than twice as long as those who don't. ...The welfare system actively prevents our pursuit of happiness. It discourages enterprise, innovation, risk, work, marriage,
and personal responsibility for procuring medical care, caring for loved ones and saving for the future. It outsources compassion and criminalizes common sense. Just a week ago, GOP leaders gathered in Memphis and proclaimed the party's commitment to fiscal restraint; yesterday, the restraints came off.
"All the talk in Memphis doesn't comport with reality," said Specter, savoring his victory in a leather armchair in the Senate press gallery. "I
don't have any apologies to make for this 7 billion. I'm still not satisfied." And why should he be? Yesterday was a big moment in the annals of
congressional munificence. While the Senate was increasing the government's borrowing limit and growing the budget, the House was having a little Vote-a-Rama of its own, adding goodies to a $92 billion
spending package to pay for Iraq and hurricane recovery. Meanwhile, House members, facing a 5 p.m. deadline, scrambled to submit spending requests for their pet projects to the Appropriations Committee. By day's
end, the committee had received 3,602 requests for a grand total of $14.9 billion.
Saturday, March 18, 2006 ~ 11:11 a.m., Dan Mitchell Wrote: The European Commission is encouraging its staff to walk to work or to use public transport, under plans agreed on Wednesday (15 March).
...Administration commissioner Siim Kallas described the plan as sending a strong message on environmental protection. ...The mobility plan aims
to cut the number of staff using private cars by 9% by the year 2009. ...From next year, the commission will make a 50% contribution to any
public transport season ticket. Staff members will only benefit from this offer if they give up the commission car parking rights. The European Commission employs more than 22,000 people.
Saturday, March 18, 2006 ~ 10:58 a.m., Sven Larson Wrote: The current American heath care system has a problem with incentives, or maybe more appropriately lack of incentives. As health care
consumers our consumption decisions are not clearly dictated by prices, and as a result our health care system is very inefficient and costly.
Fortunately there is hope for reform, as this past January Humana Inc. began publishing the estimated prices charged by local hospitals for several operations, tests, and examinations. This public release of the
costs for medical services, and how they differ across hospitals, marks a huge step toward fixing the flawed health care system by allowing for
more consumer decision-making. When the prices of procedures are fully available to consumers then market efficiencies can be improved leading to a lower-cost health care system.
Friday, March 17, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Here we go again. For at least the past 30 years protectionists have warned that the trade deficit will lead to ruin, but it's closer to the truth
to say this has it exactly backward: Since the mid-1980s the trade deficit has risen when the economy has grown and receded when the economy has faltered. The lowest annual U.S. trade deficit in recent times was
recorded in 1991, a recession year. ...he mirror image of a merchandise trade deficit is a capital-import surplus. When the U.S. investment climate improves -- through such policies as reducing the tax rate on
capital gains -- global investment dollars flow into the U.S. Foreigners in turn earn the dollars to pay for those investments by selling Americans
more goods and services than they buy from us. This global exchange process has been a formula for U.S. success: American workers get the auto, technology and financial services jobs that come with foreign
investment here; American consumers get the benefit of low-priced products from China and elsewhere, which raises workers' standard of living. We would all be better served by simply throwing overboard the
term "trade deficit" -- which inaccurately connotes a disadvantage or inferiority.
Friday, March 17, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: A survey of senior tax executives in 50 large UK-based companies...found that 54% placed Ireland in the top three countries for
tax competitiveness, with 50% choosing the Netherlands Luxembourg attracted the vote of 32% of the respondents, while the UK polled 14%. Belgium and Spain both scored 4% while France and Germany received
no votes. The majority (two-thirds) of the respondents expressed the view that taxation was a consideration when deciding where to locate operations, and over 70% said that tax issues have become more
important for international business planning over the past two years. ...68% of companies looked for low tax rates... 88%...looked for clarity
of interpretation of tax legislation and 84%...looked for consistency in tax-related judgements. ...only 30% were in favour of harmonised tax rates.
Friday, March 17, 2006 ~ 7:38 a.m., Dan Mitchell Wrote: The European Parliament gave the go-ahead to the newly proposed EU gender institute on Tuesday (14 March). The institute is supposed to
gather and analyse information about gender-related issues - such as equality of men and women in the labour market or in politics - and distribute it to other EU institutions. ...Ahead of Tuesday's plenary vote
by MEPs, social policy commissioner Vladimir Spidla argued equality between men and women is crucial not only politically, but also "as a key
factor to boost Europe's stance in global competition." According to a recent commission report, women still face a 15 percent pay gap compared to men, mainly because they often take lower-paid and
part-time jobs. ...British liberal MEP Sarah Ludford said there is no need for a brand new body to deal with the issue, preferring instead a special
section of the EU agency for fundamental rights, like the Anti-Racism Monitoring Centre which is part of the Vienna agency. "It seems to me
quite defensive to say that you need a separate institute to ensure that gender equality remains high on the EU political agenda," she said.
Thursday, March 16, 2006 ~ 5:11 p.m., Dan Mitchell Wrote: Canadians seeking health care continue to be plagued by long waits, according to a recent report from The Fraser Institute. Released in October 2005, Waiting Your Turn: Hospital Waiting Lists In Canada
found the median wait from the time a patient was referred by a general practitioner until the time he or she actually received treatment was 17.7
weeks. (Median wait means half of all patients waited less and half waited longer.) ...Canadians fed up with waiting months or even years for treatment are finding ways around the government-run system. CBS
News reported in a March 20, 2005 story the tale of Jane Pelton of Ottawa, mother of a teenager who was told it would take up to three years for surgery to repair a torn knee ligament. Rather than watch her
daughter wear a knee brace and suffer for three years, Pelton opted to go to a private clinic in Vancouver for surgery, which cost $3,300. Thursday, March 16, 2006 ~ 8:19 a.m., Yesim Yilmaz Wrote: Koreans may, just possibly, be learning a bit about living with global capitalism. But they are still far from loving it. Finance ministry
officials...are cooking up plans for unilateral amendment of double- taxation treaties with other countries to compel foreign investors to pay
tax in Korea, even on historical profits. Doing so could involve branding several European states as tax havens. So, while entering Korea may be
getting a little easier for foreign investors who pick their targets wisely, leaving it may be about to become much costlier - for them and for
Korea. Barriers to the exit of capital would have the same effect as those to entry: discouraging the foreign inflows needed to fulfil Seoul's stated ambition of becoming an Asian financial hub.
Thursday, March 16, 2006 ~ 8:08 a.m., Dan Mitchell Wrote: Off Paris's Boulevard Saint Germain yesterday, students from France's most famous university faced police in riot gear. ...This generation's bęte
noire is something called the "First Job Contract." That's legislation championed by Prime Minister Dominique de Villepin and passed by the National Assembly last week in a bid to reduce France's youth
unemployment rate of 23%. Make that 50% or higher for France's poor minority suburbs, which exploded last fall when out-of-work young men set hundreds of cars on fire night after night. The new law makes it more
attractive to hire people 26 years and younger by letting employers fire them more easily if things don't work out. Such special contracts are widely used elsewhere on the Continent and have proved an effective
way of getting around the European Union's rigid labor codes. ...Their idea of "revolution" these days is protecting a status quo that favors
them over their less-well-educated, poorer peers. Overall unemployment in France has been stuck at about 10% for the good part of the past two decades. Wednesday, March 15, 2006 ~ 12:19 p.m., Yesim Yilmaz Wrote: According to today's official statistics, America's investment rate has been pretty flat since the 1950s. Count intangibles, and it has been rising
steadily. In the 1950s the inclusion of intangible investments would have raised GDP by 5%. In recent years it would have lifted it by 12%. Using
yet more assumptions (this time about depreciation rates), the authors reckon that excluding intangibles may understate America's capital stock
by $3.6 trillion. Even if this is only roughly right, intangibles seem too big to ignore.
Wednesday, March 15, 2006 ~ 8:56 a.m., Dan Mitchell Wrote: Antitrust regulators at the Justice Department will soon decide whether to give a green light to a proposed $1.7 billion friendly merger between
consumer appliance giants Whirlpool and Maytag. The decision will tell us whether the Bush Administration's antitrust team is finally taking into account the 21st-century reality that American manufacturers are
competing in a global marketplace characterized by falling, not rising, prices. ...Maytag's stock price has tumbled in recent weeks as Wall Street
has raised the likelihood that the new head of the Antitrust Division, Tom Barnett, will reject the merger and fail his first major test case. If that
happens, Whirlpool and Maytag shareholders -- including thousands of pension and retirement funds -- collectively figure to lose at least $400
million in profits from their rights as owners to sell to the highest bidder. ...the main beneficiary of an antitrust injunction would be foreign
companies. Whirlpool estimates that the merger would reduce its costs by up to $400 million a year, thus widening its efficiency-lead against up-and-coming rivals from China, Korea and Europe. ...the lesson of
virtually every consumer-electronics product over the past 25 years is that only by remaining hyper-efficient and continuously chopping costs
and prices will Whirlpool retain that leadership. ...Mr. Bush can't afford to let merger decisions be dominated by the antitrust lawyers who have a
career interest in seeing the world in static market-share terms. To take one example, the lead attorney representing Whirlpool in this case wrote
many of the baffling regulations on horizontal mergers at Justice that he is now being paid handsomely to untangle.
Wednesday, March 15, 2006 ~ 8:41 a.m., Dan Mitchell Wrote: With budget time just around the corner, private sector organisations are increasing pressure on Chancellor of the Exchequer Gordon Brown to
cut corporate income tax to give the UK economy a much-needed boost in competitiveness. As part of its 2006 Budget submission, the Institute of
Directors (IoD) last week called on the Government to cut corporation tax by two per cent. ..."The corporate tax advantages once enjoyed in
the UK have slipped over the last few years and major economies such as Germany, France and Italy have all reduced their rates whilst ours has remained the same. The UK corporate tax rate is now above the
OECD average. If we are to remain competitive we must act now," [Miles Templeman, Director General of the IoD] argued. ...The British Chamber of Commerce has also called on the Chancellor to alleviate the
tax burden for business. At meeting with Brown on Friday, the BCC asked for "reassurance that the tax burden will not be increased" when
the budget is announced later this month. "...The reality is that many of our firms are now facing competition from the likes of China, India and
other emerging economies," observed Bill Midgley, President of the British Chambers of Commerce, ahead of the meeting. ...According to the BCC, the UK has dropped from having the 9th lowest corporation
tax rate a decade ago, to now having the 16th lowest. This means that British businesses are paying 10 per cent more than the average for the
EU's 10 new member states and 5 per cent more than the average for the whole of the EU. ..."In the countries where the corporation tax rate has
been reduced in the last five years, the vast majority have seen an increase in their total tax receipts, as more companies choose to invest," [Midgley] noted.
Wednesday, March 15, 2006 ~ 7:36 a.m., Dan Mitchell Wrote: Economic growth in the economic and monetary union (EMU) countries has averaged 1.3% in the seven years of the bloc's operation;
particularly disappointing have been Germany, France and Italy. Unemployment has averaged 8.7% across the bloc during this period; again the largest three economies are among the poorest performers.
Inflation has been a success, averaging only 2.1% since 1998. ...One way to judge the bank is to compare the performance of EMU countries with Sweden, the United Kingdom and Denmark, the three EU members
(before the 2004 enlargement) that are not members of the monetary bloc. Sweden had average economic growth of 2.7% during the seven years of EMU, more than double the rate of the euro-zone countries.
Unemployment averaged 5.7%, less than two-thirds of the EMU average. Inflation was 1.4%, also considerably better. Denmark's 1.5% yearly growth and unemployment at 5%, with inflation at 2.2%, compare
favorably. The U.K., too, is a standout: 2.5% growth and a 5% jobless rate. As a group, these three countries expanded by 2.2% in any given
year and kept unemployment at 5.3%, which is about the level in the U.S. Inflation for the three averaged 2%, on par with the monetary union. So,
on this comparison, the EMU's record isn't all that good. Many people argue that "blaming" the ECB for this state of economic affairs in its
member countries is unfair. The euro zone is dominated by Germany, France and Italy, whose very high taxes and a repressive regulatory climate, particularly in regard to labor markets, retard growth. But the
problem is that Denmark and Sweden are hardly low-tax or soft regulatory jurisdictions, and the United Kingdom is only modestly more favorable. So the taxation and regulatory climate is an unlikely source of
the differences in economic performance data.
Tuesday, March 14, 2006 ~ 8:32 a.m., Dan Mitchell Wrote: Until 1974, all presidents had a kind of line item veto called impoundment authority. In essence, if a president objected to a
particular appropriation he simply didn't spend the money. ...the Congressional Budget and Impoundment Control Act of 1974 entirely eliminated impoundment authority... President Bush now compounds the
error. Rather than asking for repeal of the ban on impoundment, he proposes a new procedure whereby Congress will be forced to vote on proposed budget rescissions -- formal cancellations of spending -- within
10 days. At present, it may just ignore them and the rescission fails. While the Bush proposal is undoubtedly constitutional, it is far more complicated, time-consuming and less effective than impoundment. Also,
the fact that the president has proposed no rescissions during his presidency -- as well as not vetoing even a single bill -- undermines his
argument that the lack of a line item veto is all that is necessary to get control of spending. Instead of reinventing the wheel yet again, Congress
would be better advised simply to repeal the impoundment provision of the Budget Act of 1974.
Tuesday, March 14, 2006 ~ 8:14 a.m., Yesim Yilmaz Wrote: Germany and Italy are urging Brussels to open a new front to curb cheap imports from China on the grounds that it has been shipping furniture to
the European Union at unfairly low prices. A furniture anti-dumping case could further strain trade relations between Brussels and Beijing,
following a lengthy dispute last year over Chinese textiles. It comes amid mounting concern among [classical] liberals about the growth of protectionism in Europe. European furniture makers are preparing to file
an anti-dumping complaint to the European Commission, alleging China has been selling upholstered sofas and other seats at below domestic prices. Germany and Italy together account for almost half the EU's
annual EUR117bn furniture production and the manufacturers are likely to receive their governments' backing. The furniture in the complaint represents about a fifth of that production. The pressure pits European
retailers that rely on cheap Asian imports against manufacturers demanding sanctions. It has also revealed a split among the EU's 25 member states, largely between more liberal North European countries
and Mediterranean countries where producers of footwear and other goods have been losing ground to Chinese competitors.
Tuesday, March 14, 2006 ~ 7:57 a.m., Dan Mitchell Wrote: That Republican mindset was demonstrated on the Senate floor the next day with a 75 to 25 vote to close debate on $1 billion in new spending for
home heating. The issue would have slipped by were it not for the hectoring of Sen. Tom Coburn, elected from Oklahoma in 2004 against the wishes of party elders. He told colleagues "there is very limited
authorization in the Constitution for us to be paying the heating bills of people in this country." That argument carried little weight, even with
cold-climate conservatives such as Thune, Norm Coleman of Minnesota, and Gregg and John Sununu of New Hampshire.
Monday, March 13, 2006 ~ 4:42 p.m., Yesim Yilmaz Wrote: The idea that it is somehow in the French national interest that a utility should not become owned by an Italian firm, or in the American interest
that ports be kept out of Arab hands, is one to gladden the heart of Karl Marx. His view was that ownership, and hence the power to exploit, was
all; hence socialist governments' fateful desire to nationalise the "commanding heights" of their economies. Does Britain suffer because
French firms (eg, EDF and Suez) already own large British electricity and water utilities? No: they are subject to exactly the same regulations and labour laws as any other utilities. Would the management of six
American ports give DP World control over security there? No: as with any port or airport, it is controlled by the government. The laws of the
land and the reach of state or federal agencies are unaffected. What is affected, however, is the ability of governments and of individual
politicians to use patronage at favoured firms to help their friends, to get favours in return, to support special interests such as trade unions, and,
in broad political terms, to paint themselves as patriots. Consumers aren't helped, living standards don't rise, the nation as a whole is not better off. But the political and corporate elite may well be.
Monday, March 13, 2006 ~ 2:00 p.m., Sven Larson Wrote: ...according to studies by the Texas Comptroller's office, Texas' major business tax more heavily impacts those with low incomes and less
heavily impacts those with higher incomes than does the sales tax. This is a surprise only because the sales tax is so often said to be "regressive"
and to hurt the poor. ...Too often the effects of other taxes, like the much talked about business tax, are only seen after a substantial delay, sometimes years. So advocates of increased levels of government
spending can advocate business taxes in the name of "fairness" and the pernicious effects on the economy, especially for the poor, are much
more difficult to trace. Consumption taxes are like ants at the backyard picnic - noticeable and painful. Many other taxes, especially business
taxes, are more like termites - unnoticed until our economic house is in ruins. While some would like to see the debate over whether taxes are
regressive or progressive take center stage in tax policy, it is arguable that other issues far more important are at stake. If a tax system is
supposedly progressive but destroys an economy, the poor will have far more to be concerned about than the supposed fairness of the tax system.
Monday, March 13, 2006 ~ 8:53 a.m., Dan Mitchell Wrote: ... the case for an optional federal charter rests on the character of the national and international markets in which many of the larger insurance
companies operate. Because of advances in transportation and communications, the United States is now indisputably one market in which providers of goods and services operate and compete most
efficiently--and hence with greatest benefit to the public--when they are able to offer the same products and services nationally. To compete
successfully with banks and securities firms across a broad spectrum of products and services, insurance companies must be able to respond quickly to products offered by the other industries. This may not be
possible if, before doing so, they must satisfy the requirements of fifty-one separate regulators. ... The dual-banking system, in which state and federal regulators compete to charter banks, has generally been
considered salutary for the banking industry. Banks can readily switch their charters from state to federal and back again, and many have done
so over time. The proponents of the dual-banking system argue that the regulatory -competition this encourages keeps both sets of regulators alert to changes in the economy and financial system that alter the
competitive environment for banks. Indeed, the existence of the national banking system may over time induce state bank regulators to agree to
the uniform rules structure that has thus far eluded insurance regulators. An optional federal charter will set up a similar competitive environment
in the insurance industry, improving conditions for all insurers, even those that remain state-chartered and regulated.
Monday, March 13, 2006 ~ 8:42 a.m., Dan Mitchell Wrote: The new company is the latest brainstorm of United Kingdom mogul Richard Branson, who wants to start a low-cost carrier in the mold of Jet
Blue. Aside from the Virgin brand, the new company has nothing to do with Mr. Branson's better known British airline, Virgin Atlantic. That
hasn't stopped U.S. airlines from trying to torpedo the application (and avoid more competition) on the basis of a few antiquated laws. Since the
1920s and '30s, the U.S. has limited foreign ownership in domestic airlines to a maximum of 49%, and 25% of voting rights. The rules date to the days when lawmakers considered U.S. ownership of any air fleet
to be vital to national security -- an argument that has become increasingly absurd given today's self-sufficient, high-tech military. Only last year the Transportation Department proposed new rules relaxing the
ownership requirements. ...Nonetheless, within weeks of Virgin filing its application on Dec. 8, Continental Airlines -- joined by Delta, American,
United and various unions -- filed an objection. The group is alleging that, contrary to all evidence, Mr. Branson is secretly controlling the whole show. And the U.S. airlines and unions -- no political virgins
themselves -- are demanding that the Transportation Department begin a full-fledged game of "Where's Richard?" This despite the fact that Virgin
America has already submitted more than 1,000 pages of documentation, from stockholder agreements to contracts. ...As for Virgin America, it
plans to fly out of San Francisco, has already ordered 34 aircraft, and is promising to create 3,000 new jobs. Whether it can succeed in an already
crowded U.S. market is far from clear. What is clear is that the carrier should be given the opportunity to settle the question in the sky, rather than in backrooms in Washington.
Sunday, March 12, 2006 ~ 1:41 p.m., Sven Larson Wrote: Much of the United States is well on its way to economic recovery. Even Washington state's unemployment rate has improved to a seasonally
adjusted 5.6% in November 2005, down from a high of 7.7% in April of 2002, yet the national unemployment rate was down to 5.0% in November. However, much of the public debate leading up to the 2006
Legislative Session has focused on helping larger businesses. Lawmakers often assume that what is good for the bigger firms is good for the rest of
the state. That is not always true. There are thousands of smaller businesses with less than 100 or even 50 employees that require a little
more attention, but have received little to none. Small businesses are the catalyst to economic recovery in large part because of the sheer number
of small businesses operating in Washington. According to the United States Small Business Administration, 98.1% of all businesses in Washington state qualify as small businesses (500 employees or fewer)
and they employ over 55 percent of private sector jobs. It is in the best interest of state policymakers and elected officials to create and maintain
a business climate that encourages the startup and growth of small businesses and reduces barriers to their success.
Sunday, March 12, 2006 ~ 11:27 a.m., Yesim Yilmaz Wrote: The defeat of the law meant that work in the roughly 400 ports of the 25 countries in the European Union would continue to be handled
exclusively by union members. The commission said in a statement Wednesday that national governments had "expressed their reluctance"
on part of the draft law - which the European Parliament also rejected in January. The commission said it planned to look at alternatives at the
end of April. It said Europe's ports needed help expanding to cope with a boom in shipping. The EU originally wanted to open cargo handing to
competition in ports where loading and unloading is currently run by monopoly handlers. The proposed rules would have allowed port operators to employ independent contractors to load and unload vessels
and let ship crews do the unloading themselves.
Saturday, March 11, 2006 ~ 4:00 p.m., Dan Mitchell Wrote: Take a look at the latest headlines -- or at your insurance premiums -- and it's hard to escape the conclusion that health-care prices move in
only one direction: up. But why should this be the case? After all, prices for many other goods and services have fallen over time as technology and productivity have improved. One leading theory on health-care
inflation suggests that part of the problem is that consumers don't generally spend their own money on health care. Rather, it's paid for by
"third parties" -- either by insurance paid by employers or by the government -- giving individuals little incentive to pay attention to price.
And giving doctors and hospitals little incentive to be clear about either price or quality. ...Some answers can be found by looking at the market
for medical procedures that aren't usually covered by insurance today. Take cosmetic surgery and dentistry, both widely used and available. Plenty of consumer satisfaction and no cost crisis there. Another good
example is LASIK, the revolutionary laser surgery that over the past decade has restored many former eyeglass or contact-lens wearers to near perfect sight. No doubt most readers have noticed the
advertisements and aggressive price competition for the procedure in recent years. And it turns out competition works. ...Proponents of government-run health care keep insisting that medicine is different from
everything else in the economy in being immune to market forces. But the LASIK example shows that where a market in health care is actually allowed to function, with transparent pricing and incentives to spend
wisely, the market works very well. The goal of public policy should be to make sure there's such a market across the entire health-care industry.
Saturday, March 11, 2006 ~ 3:30 p.m., Yesim Yilmaz Wrote: The Government is currently reviewing reforms that would allow French companies to utilise new tactics to derail hostile bids, including a version
of the 'poison pill' defence, which involves companies restructuring specifically to frustrate unsolicited bids. Under the plans, companies
would be able to issue warrants that could be converted into shares at a diluted price, making it more expensive to acquire a majority shareholding. In addition, there are moves to create so-called 'reciprocal'
defences, meaning that if a bid comes from a jurisdiction that allows certain 'uncompetitive' defensive measures, then the same approach should be allowed for French firms, effectively blocking the deal It is
believed the French market regulator - AMF - would have the final decision on whether the 'reciprocal' rules are applicable to various bids.
Friday, March 10, 2006 ~ 12:17 p.m., Yesim Yilmaz Wrote: With respect to outward-looking policies, both macroeconomic growth abroad and trade liberalization in services are needed. Advocating
macroeconomic policies abroad that promote growth and development may well play a particularly important role in raising exports of information-technology enabled services because estimates indicate that
exports of U.S. services rise more than one for one with growth abroad and also rise with the importing countries' level of development, as compared with goods exports. Second, more explicit and urgent
attention to services negotiations in the Doha round of multilateral trade negotiations is needed. Research suggests that global gains from
liberalizing services exceed those for agriculture and manufacturing. For some countries, including the United States, GDP gains come through
more exports. For other countries, including many developing countries, GDP increases as all sectors of the economy gain from more efficient provision of services.
Friday, March 10, 2006 ~ 8:52 a.m., Dan Mitchell Wrote: The concept of "income distribution" is fundamentally muddled. Aside from government subsidies and transfer payments, income is not
"distributed" at all. Most income is either earned or stolen. If some group's income was earned by legitimate means, then it is their income,
not "ours." To complain that 10 percent earned too large a percentage of our income is to forget that they actually earned 100 percent of their
own income. Unfortunately, the eternal ambition of Robin Hood economics is to steal money from those who earned it and "redistribute" it to those with more political clout.
Friday, March 10, 2006 ~ 8:19 a.m., Sven Larson Wrote: The nation's 16 million state and local government workers form a large, growing, and well-compensated class in society. State and local workers
earned $36 per hour in wages and benefits in 2005, on average, compared to $24 per hour for U.S. private-sector workers. Another distinction is that 42 percent of state and local workers are represented
by unions, compared to just nine percent in the private sector. Table 1 shows the number of state and local workers by budget area. The largest
area is kindergarten to grade 12 schools. The number of school teachers and administrators increased 22 percent between 1994 and 2004. By
contrast, the number of children in the public schools increased just nine percent during the period. Another fast-growing area is public safety.
Police, fire, corrections, and legal staffs have grown an average 21 percent in the past decade. One contributing factor has been the jump in state prison populations in recent years. State and local health
bureaucracies have also grown as Medicaid spending has exploded. In health and other areas, the growth in bureaucracy has been fueled by growing regulatory paperwork that has accompanied expanded federal
funding of state and local activities.
Friday, March 10, 2006 ~ 7:45 a.m., Dan Mitchell Wrote: In the era before passage of the Social Security Act in 1935, ...privately funded agencies yielded the bulk of U.S. social services, augmented by
such local public institutions as poorhouses, asylums and orphanages. ...such agencies -- and groups like the Child Welfare League of America
-- assumed that government services would be at least as good as their private, often religiously inspired predecessors, as well as more universal
in reach and standardized in approach, and thus preferable. They did not oppose government social-service spending, and, indeed, were often among its leading advocates. In any event, greater government social
service spending was certainly achieved. In terms of quality, however, it is hard to argue that things have worked out the way reformers intended.
Consider services for children. Over the past 10 years, 22 to 36 children have died each year under the watch of New York City's Administration
for Children and Families. A recent federal review of state child welfare agencies found that not a single state complied fully with federal
standards. Then there's Head Start, whose potent name, and the fact that it provides grants to local organizations in every state, has made it
immune to budget cuts. Yet a 2005 federal study involving 383 sites and 4,600 children found it led to no gains in math learning, oral comprehension or motivation to learn. ...The transition to a diminished
government role in social services would be complex, as Americans have been conditioned for several generations to view government as the provider of first resort. And the substitute for government could not be
small, volunteer-based organizations, 19th-century style -- although small, voluntary groups will, and should, always be with us. Rather, large-scale, professionally staffed brand name agencies of proven
effectiveness would be needed -- much as brand name chains of charter schools are now emerging.
Thursday, March 9, 2006 ~ 10:46 p.m., Dan Mitchell Wrote: After hurricane Katrina destroyed a lot of oil processing capacity around the Gulf of Mexico, there was -- surprise! -- less oil being processed. With
less oil being supplied -- surprise again! -- gasoline prices rose. ...It so happens that Big Government takes more money in taxes out of a gallon
of gas than Big Oil takes out in profits. But apparently somehow taxes don't raise prices. They certainly don't raise indignation from the
politicians who voted for those taxes. After the oil processing facilities were repaired and put back in operation -- yet another surprise! -- prices
came back down. Supply and demand has been doing this for centuries but apparently the word has not yet reached some politicians. ...Those who think in terms of supply and demand suggest -- do surprises never
end? -- we ought to supply more oil to meet the rising demand. But the very politicians who are noisiest about the high price of oil are the most bitterly opposed to increasing the supply.
Thursday, March 9, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: Health-care costs doubled over the decade ending in 2004, in fact reaching an all-time high measured as the share -- 16% -- of GDP; and
they continue to greatly outpace inflation. Similarly, education costs from primary levels up through college continue to grow faster than other categories of national spending. Why? Here is a bare-bones way to
think about this situation: A is the customer, B is the service provider. B informs A what A should buy from B, and a third entity, C, pays for it from a common pool of funds. Stated this way, the problem has no
known economic solution because there is no equilibrium. There is no automatic balance between willingness to pay by the consumer and willingness to accept by the producer that constrains and limits the
choices of each. ...if third-party deep pockets pay whatever is the price B charges A this year, the effect is to reinforce the incentive to raise the
price next year. Spending escalates, which leads to a demand for cost control. In health care there is increasing control over access to medical
services. Insurance companies disallow patient free choice of physicians, clinics and hospitals outside their approved network. Physicians and
medical organizations face escalating administrative costs of complying with ever more detailed regulations. The system is overwhelmed by the
administrative cost of attempting to control the cost of medical service delivery. In education, university budget requests are denied by the states who also limit the freedom of universities to raise tuition.
Thursday, March 9, 2006 ~ 7:39 a.m., Dan Mitchell Wrote: Lawsuits were filed Tuesday aimed at stopping an affluent suburban village from using the legal concept of eminent domain to take over a
privately owned golf course. ...The village's mayor said...no decision has been made on whether to proceed with a takeover of Deepdale, considered one of the finest golf courses in the country. ...The issue of
municipalities seizing property has taken on a new focus since the U.S. Supreme Court ruled 5-4 last June that eminent domain authority can be used to obtain land for tax revenue-generating commercial purposes.
Eminent domain, the right of government to take property for public use, is typically used for projects that benefit an entire community, such as
highways, airports or schools. ...The federal suit questions the village's right to seize the property through eminent domain; the state case
challenges the village's alleged abuse of zoning law to cut secret deals with private developers. ...In previous interviews [Mayor] Natiss has
said that the village takeover would "increase property values" because of the cache of having a municipal golf course open to all 1,800
residents. He said any final decisions "could be a year away." "I only do what's in the best interest of village residents," the mayor said, adding a
poll conducted several years ago found residents would favor a village golf course "as an amenity."
Thursday, March 9, 2006 ~ 7:21 a.m., Sven Larson Wrote: Does state government exist to serve the people, or is it the other way around? Too often, Michigan's political establishment behaves as if the
latter were true. With our state mired in a "one-state recession," this attitude obstructs efforts to make the changes needed to turn the economy around. Here's exhibit number one for this attitude:
Government officials who say a tax cut in one area must be "paid for" with a tax increase in another area (rather than with spending cuts). We
hear this line a lot in the current debate about eliminating the state's Single Business Tax, so let 's parse it out a bit. "Tax cuts must be paid
for" really means that the government is entitled to a certain amount of money and that amount can never be reduced. But what if we just have more government than we can afford? Michigan doesn't exist in a
vacuum. No one has to stay here, or open a business here, or keep one open. If high taxes and excessive regulations make doing business here
less profitable than other places, or more trouble than it's worth, people and businesses can and will leave. There's plenty of evidence that this is happening already.
Wednesday, March 8, 2006 ~ 11:02 a.m., Sven Larson Wrote: Institutional changes contained in the EU constitution could increase pressure for EU tax harmonisation, harming all of Europe, Slovak
finance minister Ivan Miklos has indicated. Slovakia is one of 14 countries that have ratified the EU charter, with the centre-right government led by Mikulas Dzurinda supporting it throughout the
ratification process. But Mr Miklos said on Thursday (3 March) he had changed his mind on the constitution, mainly due to the pressure that the
constitution could create towards European tax harmonisation. "I think that should the institutional changes increase the risk of taking such
steps [as tax harmonisation], we need to seriously consider whether it is good for Slovakia as well as for all Europe to carry out those changes,"
said Mr Miklos, according to TASR, the Slovak press agency. From this point of view, he added, the adoption of the EU constitution is "not in
the interest of Slovakia's further positive economic development or of the EU's competitiveness as such."
Wednesday, March 8, 2006 ~ 8:36 a.m., Dan Mitchell Wrote: William Easterly, author of The Elusive Quest for Growth and a leading authority on development, is skeptical. ...He chides the mindset of the aid
community, which is awash in plans, strategies, and frameworks to meet the very real needs of the world's poor. These exercises make sense only
in a central planning mentality in which the answer to the tragedies of poverty is a large bureaucratic apparatus to dictate quantities of different development goods and services by administrative fiat.
Top-down planning didn't make the Soviet bloc rich, and it isn't going to make poor countries rich. Easterly's views are in line with those of the
late Peter Bauer, who already in the 1970s warned that "aid" is typically not a transfer to the needy but to governments. Thus, the predominant
effect of "foreign aid" has always been to enlarge the size and scope of the state, which always ends up impairing prosperity and diminishing
liberty. Worse yet, it leads to the centralization of governmental power, since the transfers are always to the recipient country's government.
According to Bauer foreign aid inevitably diverts resources from the activity of production to the activity of "rent seeking" or attempts to
acquire governmental funds. ...Like all forms of welfare, foreign aid also enforces an attitude among aid recipients that circumstances are beyond
their own control, and therefore they must depend on begging from foreigners rather than on entrepreneurship. In doing so, foreign aid creates a giant moral hazard.
Wednesday, March 8, 2006 ~ 8:25 a.m., Dan Mitchell Wrote: Economists don't agree on much, but they do agree on this: the interest deduction doesn't do a thing for homeownership rates. If you eliminated
the deduction tomorrow, America would have the same number of homeowners... The deduction might help some people...purchase bigger homes than they otherwise would. And it certainly helps people who are
selling mansions to get a higher price. But it is hardly the democratic subsidy people think. In fact, it's patently regressive. More than 70
percent of tax filers don't get any benefit from the deduction at all. ...even among homeowners, only about half claim the deduction. And for
the 37 million individuals and couples who do, the rewards, at least on average, are surprisingly modest - just under $2,000 per return. ...the rewards are greatly skewed in favor of the moderately to the
conspicuously rich. ...according to the Joint Committee on Taxation, a little over half of the benefit is taken by just 12 percent of taxpayers, or
those with incomes of $100,000 or more. ...homeownership in the U.S. is about the same as it is in Canada, Australia and England, where interest
isn't deductible. ...If you want to increase homeownership, you have to do something so that renters become owners. But just over two-thirds of all
taxpayers, including most renters, don't itemize their deductions, generally because they don't earn enough; they simply take the "standard
deduction." The mortgage deduction doesn't help them. ...Since 1986, there have been some 15,000 amendments to the tax code, always to help some interest or other but each time distorting free-market
incentives. To an economist, when someone invests for profit, that's good. When they invest to take advantage of a tax break, that's bad. "It's
a standard canon of economics," Poterba says. It means that capital is being diverted from its best use, and the economy suffers as a result.
Tuesday, March 7, 2006 ~ 10:29 p.m., Dan Mitchell Wrote: Between 1995 and 2005, the number of murders in the United States dropped from nearly 25,000 a year to under 15,000. An American was
less likely to be murdered in 2005 than in 1960. And the total rate of criminal victimisation tumbled to its lowest level since records began in
1974. It would be rash to credit the death penalty alone for this triumph. But it would equally be wrong to deny capital punishment its share of the
credit. When crime is punished lightly, criminals feel empowered--and crime proliferates. ... In 1994, the number of executions rose above 20 a
year for the first time. Perhaps not coincidentally, 1994 was also the year in which US crime rates--led by those of New York City--began to turn
dramatically and decisively down. ... Restore the death penalty, and you restore safety. Restore safety, and everything becomes possible. Refuse
the death penalty, and the job of reimposing legal order becomes much more difficult: citizens live in fear, trust in authority and law fade.
Tuesday, March 7, 2006 ~ 12:17 p.m., Sven Larson Wrote: Imagine a scenario: The U.S. economy faces a dire threat from a low-price retail chain. If permitted to continue, the growth of this store
and others like it would sap the economy of its strength, causing thousands of smaller competitors to close, creating unemployment, and robbing people of their wealth. In response to this looming danger,
lawmakers pass legislation aimed at protecting Americans from the "high cost of low prices." Sound familiar? The year was 1936, the legislation was the Robinson-Patman Act, and the company that
supposedly was ready to "swallow" the United States was the Atlantic and Pacific Tea Company, better known as A&P. ... while history has
demonstrated that A&P hardly was a ravenous monster swallowing American grocers, the false alarms have continued. In 1953, General Motors chairman Charles "Engine Charlie" Wilson told a worried
Congress, "What's good for America is good for General Motors." A hostile press corps refashioned his statement into "What's good for
General Motors is good for America," with the usual fear and loathing of successful U.S. businesses. Now, after five decades of regulation to keep
the automaker from "gobbling up" the marketplace, GM is in real trouble. Its bonds have achieved junk status and some analysts even are
predicting bankruptcy, something that would have been unthinkable in the days when GM was the nation's largest private employer and paid the highest wages in the world. ...Today, with plants closing, the
company's stock value falling, and thousands of people in various stages of being laid off, perhaps one can begin to understand the consequences
that follow when pundits and politicians go to war against a business that is "too" successful. Unfortunately, there is a lesson here that few
people who hold positions of political authority seem to understand.
Tuesday, March 7, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: In an interview with the Financial Times, published on Friday, Mr Kovacs repeated his strong support for new legislation that will
harmonise the basis of corporate taxation, and he stated his aim to have proposals drafted by 2008 despite opposition from several member states, notably Ireland and the United Kingdom. These member states
fear that harmonisation will erode sovereignty over tax legislation and would be the first step towards a centrally-determined single European
corporate tax rate by the back door. On the other side of the argument stand France and Germany, which are seeking to limit tax competition - and a stream of companies switching investment to low-tax Eastern
European member states - by imposing a minimum corporate tax rate. However, Mr Kovacs told the FT that ..."The harmonisation of the tax base would not reduce competition. On the contrary, it would make
competition more transparent" ...Nevertheless, the Commission itself also appears not to be singing from the same hymn sheet on the vexed question of tax harmonisation. Charlie McCreevy, Ireland's former
finance minister and now the EC's Internal Market Commissioner, ...argued that Europe can be "greater still" with tax competition and
lower business rates, echoing a strongly-worded speech in Brussels last November when he remarked that "tax harmonisation is not on the agenda." ...McCreevy also used that speech to state how he is
"emphatically opposed to tax harmonisation - be it by the front door or the back".
Tuesday, March 7, 2006 ~ 8:41 a.m., Dan Mitchell Wrote: From 2003 through 2005, TIME estimates, the synfuel industry raked in $9 billion in tax credits. That means the lucky few collectively cut their
tax bills by that amount... How important is the tax credit to synfuel producers? In its latest annual report, Headwaters Inc., a Utah-based
purveyor of synfuel processes and substances, says flatly, "Headwaters does not believe that production of synthetic fuel will be profitable
absent the tax credits." ...The IRS rule for transforming coal into synfuel--and getting the tax credit--requires only that the substance be
chemically altered in some way. The alchemy that satisfies the IRS is a simple process: some plants spray newly mined coal with diesel fuel, pine-tar resin, limestone, acid or other substances--a practice that
industry critics call "spray and pray." Other operators mix coal-mining waste with chemicals, coat it with latex and blend it with untreated coal
to form briquettes. ...the whole point isn't creating a profitable new energy resource for the U.S.; it's about collecting the tax subsidy. Progress Energy Inc. of Raleigh, North Carolina, which owns electric
utilities that serve portions of the Carolinas and Florida, reported in a filing with the Securities and Exchange Commission that in 2002-04 its
synfuel-production losses added up to $400 million. No problem: the company claimed $852 million in tax credits, magically transforming a money-losing operation into a money-making business with $452 million
in profits--courtesy of the American taxpayer. ...Since 2002, the Council for Energy Independence has spent $2 million lobbying Congress to
preserve the tax credit, according to reports filed with the Senate Office of Public Records. Overall, TIME estimates, the synfuel lobby has spent more than $5 million during that same period.
Tuesday, March 7, 2006 ~ 8:23 a.m., Dan Mitchell Wrote: The time has come for Europeans to ask themselves the unthinkable: can their vaunted social model endure? ... Symptoms are not hard to find:
this is a continent of high and persistent unemployment, declining productivity growth, rapid ageing and growing fiscal strains; it is also one whose once-proud role in knowledge-creation is in decline. But in
one respect, western Europe remains pre-eminent: its states are the tax-and-spend champions of the world... What, then, are the failings of
the big state? The answers include: fiscal unsustainability; mediocrity of provision; slackening work effort; slowing productivity growth; resistance to economic adjustment; flight of valuable economic
resources; difficulties in absorbing immigrants; and even the undermining of the family. A social system that protects people from the consequences of their own decisions is rife with moral hazard: in the long
run, it changes not just behaviour but even values in a less productive direction. ... the job security provided in many countries lowers
willingness to hire. ...high taxes and the burden of regulations encourage the outflow of resources. ...high minimum wages, whether set by law,
trade unions or welfare benefits, combined with heavy taxes on work, generate high levels of unemployment of relatively unskilled people.
Monday, March 6, 2006 ~ 8:42 a.m., Dan Mitchell Wrote: ...estimating stock sales and then capital gains tax revenues is an imprecise science affected by many factors other than the tax rate. And
errors should be expected in such revenue projections. But for nearly 30 years CBO's errors have been anything but random. Starting with the
famous Steiger capital gains tax cut of 1978, and again with the cuts in 1997 and 2003, actual capital gains revenues and realizations have exceeded what the computer models predicted. CBO and the
Congressional Joint Tax Committee also advised Congress that raising the capital gains tax rate to 28% from 20% as part of the 1986 tax reform would bring in more revenue to the Treasury. Instead, capital
gains revenue fell. After the 1997 rate cut, this non-dynamic duo were also off by a country mile, or $84 billion from 1997-1999. The rationale
behind the 2003 tax cut was not to raise tax revenues, of course, but to spur investment and growth and to reverse the fall in the stock market after the dot-com crash in 2000. That is precisely what happened.
Monday, March 6, 2006 ~ 8:26 a.m., Dan Mitchell Wrote: The balance on their JCPenney Platinum MasterCard had gotten to an unhealthy level. So they sent in a large payment, a check for $6,522. And
an alarm went off. A red flag went up. The Soehnges' behavior was found questionable. And all they did was pay down their debt. They didn't
call a suspected terrorist on their cell phone. They didn't try to sneak a machine gun through customs. They just paid a hefty chunk of their
credit card balance. And they learned how frighteningly wide the net of suspicion has been cast. ...They both learned the same astounding piece
of information about the little things that can set the threat sensors to beeping and blinking. They were told, as they moved up the managerial
ladder at the call center, that the amount they had sent in was much larger than their normal monthly payment. And if the increase hits a certain percentage higher than that normal payment, Homeland Security
has to be notified. And the money doesn't move until the threat alert is lifted. ...Eventually, his and his wife's money was freed up. The Soehnges
were apparently found not to be promoting global terrorism under the guise of paying a credit-card bill. They never did learn how a large credit card payment can pose a security threat.
Monday, March 6, 2006 ~ 7:52 a.m., Dan Mitchell Wrote: ...the worst growth killer may well be California's tax system. The business tax rate of 8.8% is the highest in the West, and its steeply
"progressive" personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state's taxpayer
advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small-business owners, i.e., the people who create jobs. And things may
soon get worse, thanks to Rob Reiner, who played the liberal "Meathead" on the "All in the Family" sitcom in the 1970s and now
plays the same part in real life. He and his rich Hollywood friends have put an initiative on the state's June ballot that would add a 1.7-percentage-point income-tax surcharge on "millionaires" with
income over $400,000, with the proceeds earmarked for universal pre-school. ...All of this has contributed to the trend of wealthy taxpayers
disappearing from the state. State finance office data indicate that the number of Californians reporting million-dollar incomes fell to 25,000 in
2003 from 44,000 in 2000. That decline has cost the state $9 billion a year in uncollected tax revenues. ...migration out of the state to escape
its hefty tax premium has...played a role. Republican Assemblyman Ray Haynes notes that the average high-income individual can buy a newly built house in neighboring Nevada and pay for it just from the money
saved in a year of not paying California taxes. The state has been here before, as a new report from economist Arthur Laffer reminds us. In the
early 1990s under Republican Governor Pete Wilson, the state raised its top income-tax rate to 11%, triggering one of the worst fiscal crises in
the state's history. Tax revenue fell as high-income people fled the state... As much as the popular flight from California might be good for some
neighboring states, it's very bad news for the entire United States.
Sunday, March 5, 2006 ~ 11:43 a.m., Dan Mitchell Wrote: Would you keep going back to a restaurant that served you a bad meal? Or a barber that gave you a bad haircut? Competition makes everything
better. Why would schools be different? In the few places where vouchers have been allowed, like Milwaukee, the kids who used vouchers did better, and those who stayed in the public schools were not left behind.
How can that be? In 2001, Harvard economist Caroline Hoxby found that Milwaukee's private school vouchers made the nearby public schools (which were competing for the same students) change. "[Public] school
principals were allowed to have a lot more autonomy," she said, "They counseled teachers out of teaching altogether who really weren't
performing or showing up on the job -- they put in new back to basics curricula in some primary schools that really needed that so that reading
skills and math skills would go up." Test results at those public schools went up by 7.1 percent in math, 8.4 percent in science, and 3.0 percent in
language. Scores went up in voucher schools, too. Competition worked -- for human beings, and for public education.
Sunday, March 5, 2006 ~ 9:20 a.m., Dan Mitchell Wrote: There are two good Swedens to learn from: One is the hugely successful country that literally went from rags to riches between 1890 and 1950,
with one of the highest growth rates in the world. This was not least thanks to a tax pressure between 10 and 20 percent of GDP, a truly limited state, with open borders and very good conditions for
entrepreneurs. Or there is the Sweden that started reforming in the 1990s. Marginal tax rates were cut, markets were deregulated, the Central Bank was made independent, public pensions were cut
substantially and some free competition was allowed in health care. School vouchers were introduced -- still even controversial in the US -- and markets were deregulated, the prime example being telecom,
opening up for the development of Ericsson and a something like 75 percent decrease in the price for phone calls. This led to a higher growth
and increased prosperity for several years around the Millennium shift. But there is also another Sweden, a country that one can learn much
from, but should definitely not imitate. It is the country that introduced an extreme version of the European Social Model of a big state. The tax
pressure was raised from 20 percent in 1950 to some 50 percent in 1980. The state monopolized welfare services and social security. The labor
market was highly regulated. ...The tax pressure is still the highest in Europe. Ever since the taxes reached this level, growth has been
declining. If Sweden were a state in the US, it would be the fifth poorest. During the past 15 years, average annual growth has been 1.4 percent --
lower than the average for the US, the OECD and the EU. Employment has been developing very poorly. There are nine million people in Sweden, and some 1.5 million people of working age don't go to a job.
The unofficial total unemployment is some 20 percent. In the EU-15 between 1995 and 2003, employment grew more in 11 EU countries than in Sweden. In 2004, according to UNCTAD, only 12 countries out of 183
in the survey had a net outflow of investments -- the basis for any job creation -- and one of them was Sweden.
Saturday, March 4, 2006 ~ 5:18 p.m., Dan Mitchell Wrote: European governments are competing among themselves to introduce the most absurd taxes on airline passengers. ...The French tax is taking
center stage this week at an international conference in Paris, as President Jacques Chirac tries to persuade other countries to follow his lead. France's tax will come into force in July and range from EUR1 to
EUR40 per flight depending on distance traveled and type of ticket. It will supposedly raise EUR210 million annually for developing countries.
French Finance Minister Thierry Breton argues that the industry should pay because "airlines benefit from globalization." He misses the point:
Air transport isn't the beneficiary but the catalyst for globalization and world economic growth. ...And now let's turn to the latest absurdity from
Sweden. Stockholm plans to slap a new environmental ticket tax on air passengers, ranging from EUR10 for the cheapest trips to EUR45 for long-haul journeys, beginning as soon as July. Its stated purpose is to
discourage air travel in order to reduce emissions. However, none of the tax revenue will be invested for environmental purposes. It will simply go
into general government coffers. ...It is unfortunate that governments today see air transport as profit center rather than a vehicle (pun intended) of economic growth. It is hard to imagine a competitive
Europe in which the transport of people and goods is a constant victim of political posturing. Let's end this absurd competition.
Saturday, March 4, 2006 ~ 11:27 a.m., Dan Mitchell Wrote: In Iraq, Arabs are about 75 percent of the population, Kurds about 20 percent and Turkomen and Assyrian the balance. Religiously, Shia are
about 60 percent of the population, Sunni 35 percent with Christian and other religions making up the balance. If a majority-rule democracy
emerges, given the longstanding hate and distrust among ethnic/religious groups, it's a recipe for conflict. The reason is quite simple. Majority rule
is a zero-sum game with winners and losers, with winners having the power to impose their wills on the minority. Conflict emerges when the minority resists. The ideal political model for Iraq is Switzerland's
cantonal system. Historically, Switzerland, unlike most European countries, was made up of several different major ethnic groups -- Germans, French, Italians and Rhaeto-Romansch. Over the centuries,
conflicts have arisen between these groups, who differ in language, religion (Catholic and Protestant) and culture. The resolution to the conflict was to allow the warring groups to govern themselves. ...The
Swiss cantonal system enables people of different ethnicity, language, culture and religion to live at peace with one another. As such, Switzerland's political system is well suited to an ethnically and
religiously divided country such as Iraq.
Friday, March 3, 2006 ~ 8:47 a.m., Dan Mitchell Wrote: ...in the 13 years before 1981 there were four recessions lasting a total of 48 months. In the next 23 years--nearly twice as long--there were just
two recessions, lasting 16 months. Real annual growth in gross domestic product averaged just over 2.3% a year in the late 1960s and '70s. From 1982 to 2000 GDP grew an average of almost 3% a year. From the late
'60s until 1982, an average of 1.6 million jobs were added to the American economy each year; from 1982 through 2000 the average added was 2.3 million. There was a recession in 2002, but since the full
enactment of the Bush tax cuts in the spring of 2003, nearly five million new jobs have been created. In the '70s unemployment began to rise, growing during the Carter presidency and peaking at 10.8% in 1982 in
Reagan's second year. Reagan got it down to 5.3%, Clinton to 3.8%; today it stands at 4.7%, lower than the average for the 1970s, '80s and
'90s. ...So how did all this progress come to pass? It was in fact president Reagan's 1981 tax reductions that turned America's kaleidoscope and
began the economic revolution that has so greatly improved things over the past quarter century.
Friday, March 3, 2006 ~ 8:16 a.m., Dan Mitchell Wrote: People who think that they are getting something for nothing, by having government provide what they would otherwise have to buy in the
private market, are not only kidding themselves by ignoring the taxes that government has to take from them in order to give them the appearance of something for nothing. ...Compare the service you get at
the Department of Motor Vehicles with the service you get at Triple-A. No one who belongs to the American Automobile Association is likely to go to the DMV for a service that is also available through Triple-A.
While unions are declining in the private sector, they are expanding among government employees. Government agencies are usually
monopolies, so competition is no threat to their jobs. Taxpayers get hit with the high cost of these monopolies. There is no such thing as something for nothing. Teachers' unions fight desperately and ruthlessly
against vouchers, because they must maintain a monopoly of school children under the compulsory attendance laws. Their members stand to lose jobs if forced to compete with private schools. Monopoly is the key
to unionized teachers' job security -- at the expense of children's education as well as the taxpayers' money. Labor unions in the private sector have long been in the forefront of those pushing for higher
minimum wage laws. Usually union members already make much more than minimum wages but they need to safeguard their jobs from others who could do the same work for less. South Africa's problem is compounded by the fact that, in addition to minimum wages set above the level of many workers' productivity, the
government has passed laws making it very difficult to fire an employee. That should reduce unemployment, right? Wrong. Countries like Germany with strong job protection laws have chronically much higher
unemployment rates than countries like the United States, where the government does not impose such laws on private businesses. Making it harder to fire workers makes it more risky to hire workers in the first
place. It is easier to substitute capital for labor. South African companies "rely more on capital" than labor, according to The Economist
magazine. ...For politicians, however, killing the goose that lays the golden eggs is a viable strategy, provided that the goose doesn't die
before the next election. Provided also that people have short memories, don't connect the dots, and don't keep in mind that there is no such thing as something for nothing.
Friday, March 3, 2006 ~ 7:52 a.m., Dan Mitchell Wrote: New Zealand Finance Minister Michael Cullen hinted yesterday that he would be prepared to cut the country's 33% rate of corporate tax in
order to improve its competitiveness relative to Australia, its nearest and largest competitor. Dr Cullen told Parliament's finance and expenditure
committee that the government's review of business taxation would be considered a success if its conclusions allowed him to cut company tax.
..."We need more globally competitive firms and this budget will continue efforts towards building a more dynamic, knowledge-based economy,"
he declared. The review of business taxation forms a key part of post-election confidence-building measures with the United Future and New Zealand First Parties, and is aimed at giving better incentives for
productivity gains, and improving competitiveness with Australia.
Thursday, March 2, 2006 ~ 2:11 p.m., Yesim Yilmaz Wrote: Saving existing jobs exacts a price. Countries that impose laws aimed at easing the burdens of job loss tend to have lower per capita incomes. World Bank data indicate that many countries impose huge burdens on employers who lay off workers-the equivalent of 165 weeks of pay in Brazil, 112 in Turkey, 90 in China, 79 in India. All are poor countries. High firing costs rob economies of their vitality by discouraging companies from hiring new employees in the first place. While generous severance is helpful to the displaced workers, it makes societies poorer by slowing job creation and dragging down labor productivity. ... History has proven the power of letting global competition run its course: Many better, higher-paying jobs have been created as new ideas and technologies replace older ones. The key to the U.S. economy's future lies in maintaining a flexible labor market, where resources can flow from declining sectors to emerging ones. Innovation and entrepreneurship depend on it. Job losses and other unsettling aspects of the process can't be ignored, and society can consider policies to make economic change less burdensome. http://www.dallasfed.org/research/eclett/2006/el0602.html
Thursday, March 2, 2006 ~ 12:57 p.m., Sven Larson Wrote: Texas is blazing a new trail in welfare reform that will improve access to more than 50 different programs, while reducing administrative costs.
The state is using modern technology and private contractors to create a "one-stop" application process for Temporary Assistance for Needy
Families (TANF), Medicaid, Food Stamps, the State Children's Health Insurance Program (SCHIP), Long-Term Care and other programs. Texas' new system provides a model for privatizing the administration of
social services in other states. Furthermore, it could be the first step toward contracting with the private sector to deliver all social services -
as the Texas Workforce Commission (TWC) has successfully done with workforce development programs. Texas' new system will allow clients to enroll in multiple programs with one application they can complete by
telephone, fax, mail, the Internet or in person. Their eligibility for benefits will be determined quickly, and they can track their status through an automated phone system. Customer service operators will be
available during extended hours to assist them. Other states have established call centers or provide online applications for certain programs, but Texas is the first state to adopt such a comprehensive
reform. After several years of successful pilot projects, the new system will be gradually implemented statewide this year. The Texas Health and Human Services Commission (HHSC) determined that contracting out
data management, application processing and other administrative tasks will save $646 million over the next five years.
Thursday, March 2, 2006 ~ 8:55 a.m., Dan Mitchell Wrote: Following the French rejection last year of the EU constitution, President Jacques Chirac is to put forward plans for a "Europe of
projects" instead, including proposals to increase national sovereignty over certain tax matters, according to reports in the European media.
The French President has reportedly drawn up a list of such projects, of which around five will be presented to European leaders at various points throughout the year. Key among these is the French government's
desire for less EU interference in tax matters, sparked by the recent furore over extending reduced VAT levels, which saw Chirac thwarted in his efforts to make good an election promise by reducing VAT rates for
restaurants.
Thursday, March 2, 2006 ~ 7:15 a.m., Dan Mitchell Wrote: Ireland looked destined to replace Britain as the sick man of Europe, stuck in a set of failing economic nostrums - especially ever-bigger
government and higher taxes - it had borrowed from the British Left. But by the 1990s, Dublin had woken up to economic reality and decided not
just to follow Britain's Thatcherite lead but to go much further. As a result, in only 15 years, Ireland has gone from basket-case to Celtic tiger,
becoming one of Western Europe's few economic success stories... Britain's Labour government, under cover of much vacuous (as it turned out) pro-market economy rhetoric, was changing course, opting instead
for the failed high tax-and-spend model long favoured by France, Germany and Italy, all recent economic failures. Since becoming Chancellor of the Exchequer in 1997, Gordon Brown has presided over
the fastest, most sustained expansion in government spending and intervention since the Second World War; in stark contrast, Ireland has continued to cut taxes and reduce government. The difference between
the British and Irish economies is now startling: this year the OECD forecasts that Britain's public sector will grow to 45.4% of gross domestic product (GDP), against 35.2% of GDP in Ireland. Ireland's
flagship policy has been to slash its corporate tax to just 12.5%, which has attracted copious amounts of foreign investment; Mr Brown's claim
to fame (or infamy) is to have been the Chancellor who took Britain's overall tax burden above Germany's for the first time in living memory. The results of this growing divergence between the two economies are
entirely predictable: throughout recorded history Ireland has been poorer (often considerably so) than Great Britain; today incomes in Ireland are
now 20% higher than Britain's, and growing twice as quickly. ...Great Britain is now in the grip of a vicious feedback loop: the more tax-and-spend goes up, the more the n umber of those dependent on
government goes up and the harder it will be for any reformer to reverse course - and the faster the British economy and society will decline.
Slowly but surely, Britain is becoming trapped in a social-democratic dependency culture; the country may even have reached the critical tipping point when reversing course becomes all but impossible because
those with a vested interest in bigger government and higher taxes are too powerful to overcome.
Thursday, March 2, 2006 ~ 6:54 a.m., Dan Mitchell Wrote: Katrina was undoubtedly big. It was the most destructive natural disaster in our nation's history, with property damage expected to
approach $100 billion. The storm and resultant flooding killed about 1,330 people, making Katrina the deadliest natural event in the U.S. since Hurricane San Felipe in 1928. The flooding of New Orleans was as
challenging a natural disaster as has occurred on U.S. soil. Roughly 80 percent of the nation's 35th-largest city was under six to 20 feet of water.
So even the most competent relief effort would have been unable to protect people in the stricken area from serious hardship. The problem was that the current relief structure actually made things worse. The
main problem appears to be that complacent local officials assumed the feds were up to the job. They weren't, and nobody was ready to fill the gap. ...The knowledge, expertise and motivation required to deal
effectively with local conditions is possessed by local officials. If the federal government shouldn't run cities in normal circumstances, it
shouldn't do so in emergencies either. More than finger-pointing, we need a rational and explicit discussion apportioning responsibility among the federal, state and local governments. In most cases, the federal
government should be the last line of defense. Imagine if FEMA didn't exist, and everyone acted on the truth that the federal government is unable to function well in almost every sphere. Cities and states would
have to provide for their own people and have plans to help them in an emergency. Citizens would recognize that they have personal responsibility to protect themselves and their property. Nursing homes
and hospitals would recognize that they need to have their own evacuation plans. Homeless shelters, local governments and other aid organizations would make it part of their mission to protect the most
disadvantaged among us. We would all be safer.
Wednesday, March 1, 2006 ~ 10:13 a.m., Yesim Yilmaz Wrote: The option to levy a federal income tax that is made available to Congress does not itself imply that government will grow. ...income taxes are simply a fuel that enables the engine of government growth to start. However, the government has increased its reliance on federal income taxes over the past 90 years, the same time period in which government expenditures have increased dramatically. Personal income tax revenue as a percentage of all federal tax revenue increased from about 2 percent in 1913 to over 43 percent in 2004. Also, because of large exemptions, few people paid personal income taxes in 1913; if they did pay taxes, the rates were much lower than today. For example, in 1913 the lowest tax bracket was $0 to $20,000, with a 1 percent marginal tax rate; the highest bracket was on taxable income over $500,000, taxed at a 7 percent rate; and the personal married exemption was $4,000. In 2004 dollars, the lowest 1913 bracket and married exemption would be equal to $381,616 and $76,323, respectively, and the top 1913 bracket would be equal to a 2004 income of $10,495,000.26 Compare this with actual 2004 tax statistics: The married exemption (no children) was $6,200, the lowest tax bracket was 10 percent on taxable income up to $7,150, and the top marginal tax rate was 35 percent on taxable income over $319,100.27 Although the strength of any causality between the 16th amendment and later expansions of the income tax must be determined empirically, the strong correlation between these two events is compelling. http://research.stlouisfed.org/publications/review/06/01/GarrettRhine.pdf
Wednesday, March 1, 2006 ~ 8:13 a.m., Dan Mitchell Wrote: The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest
competitive advantage. States with the best tax systems will be most competitive in attracting new businesses and be the most effective at generating economic and employment growth. Although the market is
now global, the Department of Labor reports that most mass job relocations are from one U.S. state to another rather than to an overseas location. ...Examples of companies choosing states due to favorable tax
systems are plentiful. A recent example, from July 2005, is Intel's decision to build a multi-billion dollar chip making facility in Arizona due
to its favorable corporate income tax system. California struggles to retain businesses within its borders because Nevada provides a low tax alternative. Anecdotes such as these reinforce what we know from
economic theory, that taxes matter to businesses, and those places with the most competitive tax systems will reap the benefits of business
friendly tax climates. ...the most competitive tax systems, and the ones that score best in the SBTCI, are those that create the fewest distortions
by enforcing the most simple tax system based on broad bases with low rates.
Wednesday, March 1, 2006 ~ 7:46 a.m., Dan Mitchell Wrote: ...in the state Assembly, Democratic House Speaker William J. Murphy wants to cut the top personal income tax rate from 9.9 percent to 5.5
percent. At a February 2 press briefing, Murphy, flanked by fellow Democrats state House Majority Leader Gordon D. Fox and Finance Committee Chair Steven M. Costantino, announced a nine-part tax
package, the Taxpayer Relief Act of 2006, that is ''designed to make Rhode Island more attractive to businesses and to provide tax relief to citizens while maintaining much-needed revenue for the state.'' ...Tax
competition induces governments to lower their taxes in order to lure individuals and businesses into moving their assets across borders. ...Center-left politicians throughout the world have learned that they
can't make tax policy inside a bubble; they must lower tax rates to prevent mobile capital and the globe-trotting wealthy from skipping their
jurisdictions. Rhode Island politicians are no different. They want to prevent the migration of Rhode Island's jobs and its tax base to Massachusetts and Connecticut. They're learning they no longer have the
luxury of ruminating about how high tax rates should be. The question is how high can they be? Rhode Island's Taxpayer Relief Act of 2006 may not become law in 2006. But it is inevitable that relentless tax
competition will make lower rates a reality for Rhode Island's richest.
Wednesday, March 1, 2006 ~ 7:22 a.m., Dan Mitchell Wrote: Do state and local taxes affect relative state growth? The study finds that relative marginal tax rates have a statistically significant negative
relationship with relative state growth averaged for the period from 1961 to 1992. These results are economically significant because controlling for progressivity with greater accuracy than other
specifications uncovers the effect of taxes. Also, the growth effect of taxation appears sizable, especially when compared with the effect on
growth of initial state conditions, or the convergence effect. Aggregate marginal tax rates that are 20 percent below the national average have
the same positive effect on state growth rates as initial incomes that are 10 percent below average. Reestimating the regressions when the sample
period is split in half shows that the tax effects grow even stronger when compared with the convergence effect, which is insignificant in the latter
half of the sample. Thus, it appears that state and local taxes have temporary growth effects that are stronger over shorter intervals and a
permanent growth effect that does not die out over time, at least for the sample considered. This finding also supports the inference that part of growth is endogenous and susceptible to policy influence.
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