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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Thursday, November 30, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: The results show: considerable international variation in charitable giving as a proportion (%) of Gross Domestic Product (GDP), with the amount individuals give to charity
varying from 0.14% of GDP in France to 1.7% in the US, followed by the UK at 0.73% [and] giving tends to represent a lower proportion of GDP in countries with higher levels of personal taxation, particularly
social insurance; if social insurance payments were to rise in the future because of the needs of an ageing population, this could represent a threat to voluntary income
Thursday, November 30, 2006 ~ 8:40 a.m., Dan Mitchell Wrote: [Estonia] was the first former Soviet republic to introduce its own currency, and the first European country to adopt a flat tax system, now
widely copied in the rest of Eastern Europe. It has also become one of the most technologically advanced places on the planet. You can use your
mobile phone to pay for parking your car, buy bus tickets and check your children's school grades. More than 80% of taxpayers file their declarations online, wi-fi hot spots are ubiquitous - and free - and the
nation's most famous start-up is Skype, the Internet phone titan, which was acquired last year by eBay for $2.6 billion. That amount is slightly
more than the annual output of the entire Estonian economy 15 years ago. The economy, once a basket case, is now one of Europe's most dynamic, racing along at a 12% growth clip - faster than China. Estonia
is one of only two new European Union members to have a budget surplus, and its national debt will have all but disappeared by the end of the decade. Naturally, there are growing pains: the unemployment rate
has fallen so sharply, from 14% in 2000 to about 4% today, that businesses are scrambling to find workers. But even if growth slows a little to a more sustainable rate, Estonia could catch up with Portugal
and Greece on a per-capita basis in about a decade. ...There have been 12 governments since 1991, and increasingly there's a polarization between those who insist it's vital for Estonia to stick to its current
successful model and those who argue it's time for serious tinkering. The tax system, widely seen as a cornerstone of Estonia's success to date,
faces the biggest threat. A 26% flat income tax was introduced in 1994. The rate has since dropped to 23% and the official plan - depending on
the outcome of the next parliamentary election, in March next year - is to keep lowering it by 1% per year until 2011. It was the first of two striking
tax initiatives. In the late 1990s, Estonia startled the business community and many of its European neighbors with the second: the decision not to
tax corporate profits at all if they are reinvested rather than paid out in dividends. ...Economics Minister Edgar Savisaar, an erstwhile hero of Estonia's independence movement and leader of one of the biggest
political parties, wants to scrap the flat tax and use a more conventional progressive system that taxes the rich at higher rates than the less
well-off. "Our system is too simple," he says. ...Prime Minister Andrus Ansip, whose aim is for Estonia to become one of the five wealthiest E.U.
nations on a per-capita basis in the next 15 years. He heads a different party from that of Economics Minister Savisaar and doesn't see why
anybody should take issue with the current policies. "When the economy is growing so fast it's very difficult to complain," he says, describing life
in the country as being "like a fairy tale." ...Foreign money is pouring in and now totals more than $12 billion. Companies partly or wholly owned
by foreigners account for one-third of Estonia's total economy and more than 50% of exports.
Wednesday, November 29, 2006 ~ 9:00 a.m., Dan Mitchell Wrote: It's been years since federal agencies have screamed this loudly about fiscal discipline being imposed on them. GOP Sens. Tom Coburn of
Oklahoma and Jim DeMint of South Carolina have decided to take a stand against overspending by objecting to the nearly 10,000 earmarks, or member-sponsored pork projects, larded throughout the spending bills
Congress is currently considering. Their obstinacy has convinced the leadership of the departing Republican Congress that they probably won't
be able to pass spending bills in next month's short lame-duck session. Instead, they are likely to pass a stopgap "continuing resolution," which
will continue funding all programs at last year's level until the new Democratic Congress passes its own versions of the funding bills. Mr. Coburn says the decision not to pass earmark-stuffed catchall spending
bills could save taxpayers a cool $17 billion. All 10,000 earmarks in the pending bills will expire if they aren't passed by the end of the year. Mr.
Coburn says the decision of the congressional leadership to instead go for a continuing resolution is a sign Republicans are learning some lessons
from their stinging loss of Congress three weeks ago. "By either staying home or not voting Republican, many voters were sending a message that
they don't want to give the spending favor factory that Congress had become their stamp of approval," Mr. Coburn says. "It's time that
message was heeded." Nonetheless, the cries of pain are mounting now that it looks as if many federal agencies will have to get by until late
January or even later with the same amount of money they got last year. ...Appropriators are beside themselves that a continuing resolution that
restrains spending is on the table. Rep. Jerry Lewis, who is ending his stint as chairman of the House Appropriations Committee, calls it a
"catastrophe." A spokeswoman for Mr. Lewis's Senate counterpart, Thad Cochran, says it is "irresponsible." Overall federal spending has gone up
by 49% since 2001, but you wouldn't know it from the anguished cries of those who regard ever-higher spending as some sort of birthright. ...say
Messrs. Coburn and DeMint. "Any agency that can't figure out how to function under a one-year CR is incompetent," a Coburn spokesman tells
Congress Daily. "If appropriators took this seriously they wouldn't be wasting time earmarking and putting stoplights in their districts. The hypocrisy is astounding."
Wednesday, November 29, 2006 ~ 8:50 a.m., Dan Mitchell Wrote: President Bush says the United States should have a simpler tax system. Apparently he has found one he likes _ Estonia's. In a brief stop in the
Baltic nation on Tuesday, Bush managed to tout Estonia's flat income-tax three times. "They've got a tax system here that is transparent, open and
simple," Bush said in Tallinn after getting a look at how Estonian citizens can file their taxes online. In a toast about an hour later to Estonian
President Toomas Hendrik Ilves, Bush said, "I am amazed to be in a country that has been able to effect a flat tax in such a positive way."
And before fielding reporters' questions with Ilves, Bush again praised Estonia's approach to taxation. "I appreciate the fact that you got a flat
tax, you got a tax system that's transparent and simple," he said.
Wednesday, November 29, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: The European court of justice has ruled against making it easier for European consumers to buy alcohol and cigarettes from countries where
excise duties are low. This means that shoppers who want to take advantage of low duty rates and VAT in other states will still need to go there and bring back the goods themselves. ...So, goodbye internet sales
delivery. Hello to the old days when you had to board a P&O ferry to get cheaper Grant's whisky and Benson & Hedges. It is no surprise that the
British and Scandinavian ferry companies are delighted by the decision.
Wednesday, November 29, 2006 ~ 7:46 a.m., Dan Mitchell Wrote: While 85 million American households give away money each year to nonprofit organizations, another 30 million do not. And this distinction
goes beyond "formal" giving. Recent survey data reveal that people who fail to donate money to charities are only a third as likely as donors to
give money to friends and strangers. Non-donors are half as likely as donors to give blood. They even are less honest: Non-donors are much less likely than donors to return change mistakenly given to them by a
cashier. When it comes to charity, we are two nations. Why does Giving America behave so differently from Non-Giving America? The answer, contrary to what you might be thinking, is not income; America's
working poor give away at least as large a percentage of their incomes as the rich, and a lot more than the middle class. The charity gap is
driven not by economics but by values. ...A second core value affecting charity shows up in the belief citizens have about the government's role in
their lives. Some Americans (about a third) believe the government should do more to reduce income differences between the rich and poor -- largely through higher taxation and social spending. Others (about 40%)
do not favor greater forced income redistribution. This is a major difference in worldview -- not just about taxation, but also about the perceived duty of individuals to take personal responsibility for
themselves and others. This difference affects people's likelihood of voluntarily giving to charity. The General Social Survey shows that people who oppose government income redistribution donate four times
as much money each year as do redistribution supporters. Note that the charity gap is not due to anything the government is actually doing; rather, to what people think the government should be doing -- in other
words, nothing more than a political opinion. This fact throws a wrench into the traditional stereotype that conservatives in America are hardhearted while liberals are the compassionate ones. In the words of
one common 2004 campaign yard sign in my town, "Bush Must Go! Human need, not corporate greed." However, the General Social Survey
indicates that people who opine that government is "spending too little money on welfare" -- not a viewpoint typically associated with George
W. Bush's supposedly venal supporters -- are less likely to give food or money to a homeless person than people who oppose greater welfare spending.
Wednesday, November 29, 2006 ~ 7:40 a.m., Dan Mitchell Wrote: When passengers see six Arab men praying, talking animatedly in Arabic (a fellow passenger understood Arabic and was one of those who
contacted a flight attendant), and then boarding an airplane and sitting in different places, I wonder what goes through their minds? Is it: "I sure
don't like Muslims. Think I'll just harass and annoy them"? Or could it possibly be: "Oh dear God, this is what the 9/11 hijackers must have
looked like"? Is it discrimination? Well, of course it is. But that cannot be the end of the discussion. We are so robotic in America whenever the
word "discrimination" is used that we shut down thought and all genuflect in the direction of whoever is complaining. But the proper
question is not whether it is discrimination but whether it is justified. Of course passengers would not be nervous in the presence of six priests or
six rabbis. Neither of these groups has any history of blowing up innocent people.
Tuesday, November 28, 2006 ~ 8:13 a.m., Dan Mitchell Wrote: ...in the wake of new, heightened regulatory and listing requirements for all public companies in the U.S., we have witnessed changes in IPO
activity. Despite our strong economy and stock market, IPO dollar volume in the U.S. is well below the historical trend and below the trend and activity level in a number of foreign markets. Moreover, existing
public companies in the U.S. are deciding to forgo their public status - with its attendant regulatory requirements - and go private. This is
occurring in record numbers, at record volumes, and, as a percentage of overall public company M&A activity, is approaching levels we have not
seen in almost 20 years. ...Excessive regulation slows innovation, imposes needless costs on investors, and stifles competitiveness and job creation.
...We should remember that we cannot legislate or rule-make our way to ethical behavior, whether it be in the business world or any other endeavor. Proper corporate governance processes increase the likelihood
that well-intentioned people will do the right thing. But they do not guarantee such an outcome - and they certainly do not guarantee that unethical people will do the right thing. In my judgment, we must rise
above a rules-based mindset that asks, "Is this legal?" and adopt a more principles-based approach that asks, "Is this right?"
Tuesday, November 28, 2006 ~ 7:59 a.m., Dan Mitchell Wrote: Singapore (dpa) Faced with too few babies to replace the population, Singapore is turning to private industry for matchmaking, the
government said on Friday. The Ministry of Community Development, Youth and Sports has injected 600,000 Singapore dollars (382,000 US) to
initially spur on the private sector's efforts, replacing such longstanding matchmaking agencies as the government's Social Development Unit (SDU) which has been seeking to unite singles for decades.
Tuesday, November 28, 2006 ~ 7:46 a.m., Dan Mitchell Wrote: Congestion pricing, the idea of charging drivers for bringing vehicles into the busiest parts of Manhattan, has become a kind of holy grail for
transportation advocates and urban planners in New York - a coveted prize that has remained out of reach. A year ago, officials from a prominent civic group floated a proposal to reduce traffic by levying a $7
fee on cars and trucks driving below 60th Street, but they found themselves treated not like visionary crusaders but like bird flu patients when policy makers at City Hall said very firmly that such a change was
not on the mayor's agenda for his second term. Now a diverse array of civic and community groups - including such unlikely allies as conservative scholars and take-back-the-streets cycling advocates - are
cautiously moving to raise the subject again in the hope of overcoming the resistance of New Yorkers and their political leaders. ...the group
expects to release a revamped study in early December that will analyze the cost of clogged streets, estimated at $12 billion to $15 billion a year. A related study done with Environmental Defense, a national
environmental group, will look at the environmental costs of excess traffic and at the potential for congestion pricing to reduce traffic and
thereby cut air pollution and, as a result, illnesses like asthma. ...London's program began in early 2003 and has significantly reduced traffic and
sped up bus lines. London drivers must pay as much as $19 a day to enter the road pricing zone in the city center. They can pay in a variety of
ways, including online, by phone, by mail or at designated shops or gas stations. Cameras around the congestion zone read vehicle license plates
and feed the numbers to a computer that checks to see who paid their fees. Those who have not paid can be fined.
Monday, November 27, 2006 ~ 7:49 p.m., Dan Mitchell Wrote: Some Americans look to European countries such as France, Germany and its Scandinavian neighbors and suggest that we adopt some of their
economic policies. I agree, we should look at Europe for the lessons they can teach us. Dr. Daniel Mitchell, research fellow at the Heritage
Foundation, does just that in his paper titled "Fiscal Policy Lessons from Europe." Government spending exceeds 50 percent of the GDP in France and Sweden and more than 45 percent in Germany and Italy,
compared to U.S. federal, state and local spending of just under 36 percent. Government spending encourages people to rely on handouts rather than individual initiative, and the higher taxes to finance the
handouts reduce incentives to work, save and invest. The European results shouldn't surprise anyone. U.S. per capita output in 2003 was $39,700, almost 40 percent higher than the average of $28,700 for
European nations. Over the last decade, the U.S. economy has grown twice as fast as European economies. In 2006, European unemployment averaged 8 percent while the U.S. average was 4.7 percent. What's more,
the percentage of Americans without a job for more than 12 months was 12.7 percent while in Europe it was 42.6 percent. ...Over the last decade, the U.S. economy has grown twice as fast as European economies. In
2006, European unemployment averaged 8 percent while the U.S. average was 4.7 percent. What's more, the percentage of Americans without a job for more than 12 months was 12.7 percent while in Europe
it was 42.6 percent. ... We don't have to rely on these statistics to make us not want to be like Europeans; just watch where the foot traffic and
money flow. Some 400,000 European science and technology graduates live in the U.S. European migration to our country rose by 16 percent during the 1990s. In 1980, the Bureau of Economic Analysis put foreign
direct investment in the U.S. at $127 billion. Today, it's more than $1.7 trillion. In 1980, there was $90 billion of foreign portfolio investment --
government and private securities -- in the U.S. Today, there's more than $4.6 trillion, much of it coming from Europeans who find our investment
climate more attractive. What's the European response to its self-made economic malaise? They don't repeal the laws that make for a poor investment climate. Instead, through the Paris-based Organisation for
Economic Co-operation and Development (OECD), they attack low-tax jurisdictions. Why? To support its welfare state, European nations must have high taxes, but if Europeans, as private citizens and businessmen,
relocate, invest and save in other jurisdictions, it means less money is available to be taxed. ... The OECD member countries want the so-called
tax havens to change their laws to help them identify the earnings of their citizens. Most of all, OECD wants these countries to legislate higher
taxes so as to reduce their appeal. A suggestion that we should be more like Europe is the same as one suggesting that we should be poorer.
Monday, November 27, 2006 ~ 7:33 p.m., Dan Mitchell Wrote: ...over half of the world's population lives in some sort of democracy, but just 13 percent in full democracies, according to this study. Meanwhile,
with 55 countries falling in the worst category, almost 40 percent of people live under authoritarian rule.
Monday, November 27, 2006 ~ 6:00 p.m., Dan Mitchell Wrote: A common practise today sees millions of EU citizens crossing the border to a neighbouring country - like Poles to Slovakia, French people to
Spain or Danes to Germany - to purchase alcohol and tobacco at cheaper prices because those countries' customs duties are lower than in their
home countries. An 1992 EU law says excise duty is in general paid in the EU member state of the final destination, but there is an exception for
products "acquired by private individuals for their own use and transported by them." But the European Court of Justice (ECJ) in a landmark decision on Thursday (23 November) ruled that this exception
is not valid when the goods are delivered to their home by a third party. This is a blow to people who order alcohol and cigarettes online from
countries with cheaper duties and get the goods delivered to their door. ...Some EU member states will be relieved by the outcome of Thursday's
ruling as it saves them from potentially losing millions and maybe billions in excise duties revenues as more and more people order wine via the internet in EU countries that have no customs duty on wine.
Monday, November 27, 2006 ~ 5:16 p.m., Dan Mitchell Wrote: If this month's elections were a mandate for higher taxes, the news apparently hasn't reached Democrats in West Virginia. Immediately upon
gaining seats in the state legislature his party already dominates, Democratic Governor Joe Manchin called lawmakers into session for a quick round of tax cuts. He now expects to have moderate reductions in
corporate, franchise, personal income and grocery taxes on his desk within a few days. Not bad. But then, tax reform is long overdue in Charleston. The Tax Foundation ranks West Virginia a dismal 34th out
of 50 in state tax competitiveness. All three states bordering West Virginia to the east are more attractive for running a business: Maryland
and Pennsylvania ranked 29th and 22nd respectively, while Virginia has the 13th most competitive tax code. With more jobs shifting between
states than are moving overseas, its tax code has left West Virginia with an economy too dependent on a coal industry that's leveling mountains in
search of pockets of naturally occurring wealth. And too many of its young people go elsewhere.
Sunday, November 26, 2006 ~ 1:11 p.m., Dan Mitchell Wrote: American sugar producers aren't satisfied with supplying the most sweet-hungry population in the world. They've relentlessly sought-and
received-special favors from the federal government, turning the industry into one of the most cosseted in America today. The government guarantees producers a fixed price for domestic sugar and sets strict
quotas and tariffs for foreign sugar. Economically speaking, this has many obvious bad results. It keeps sugar prices in the U.S. at least twice
as high as the world average. It makes it harder for companies that use lots of sugar to do business here-in the past decade, an exodus of candy manufacturers from the U.S. has eliminated thousands of jobs. And
import restrictions make Third World countries poorer than they'd otherwise be. But protecting sugar also has a surprising consequence: it's hurting America's efforts to become more energy-efficient.
...Unfortunately, the ethanol produced in the U.S. comes from a less-than-ideal source: corn. Corn ethanol's "net energy balance"-the
amount of energy it yields in proportion to how much energy goes into its production-is significantly lower than that of other alternatives, and
modern corn farming isn't easy on the land. By contrast, ethanol distilled from sugarcane is much cheaper to produce and generates far more energy per unit of input-eight times more, by most estimates-than corn
does. ...The favors granted to the sugar industry keep the price of domestic sugar so high that it's not cost-effective to use it for ethanol. And the tariffs and quotas for imported sugar mean that no one can
afford to import foreign sugar and turn it into ethanol, the way that oil refiners import crude from the Middle East to make gasoline. ...Congress
has imposed a tariff of fifty-four cents per gallon on sugar-based ethanol in order to protect corn producers from competition. A recent study by
Amani Elobeid and Simla Tokgoz, scientists at Iowa State University, projected that if the tariffs were removed prices would fall by fourteen per cent and Americans would use almost three hundred million gallons
more of ethanol. ...Our current policy is absurd even by Washington standards: Congress is paying billions in subsidies to get us to use more
ethanol, while keeping in place tariffs and quotas that guarantee that we'll use less. ...Because of the ethanol tariffs, we're imposing taxes on
fuel from countries that are friendly to the U.S., but no tax at all on fuel from countries that are among our most vehement opponents.
Congressmen justify the barriers to foreign ethanol with talk of "energy security." But how is the U.S. more secure when it has to import oil from
Venezuela rather than ethanol from Brazil? These tariffs are bad economic policy, bad energy policy, and bad foreign policy.
Sunday, November 26, 2006 ~ 12:46 p.m., Dan Mitchell Wrote: Milton Friedman famously declared that the sole business of the managers of a publicly held corporation was to maximize the value of its
outstanding shares. Any effort to use corporate resources for purely altruistic purposes he equated to socialism. He proposed that corporation
law should prevent managers from straying off the reservation to join the altruists, a power now almost universally granted them by state
legislation. ...These proposals reflect, as well as anything else happening today, the inability of many commentators to distinguish between private
and public property--in other words, between a free enterprise system and socialism. Somehow large-scale business success, usually resulting in
a publicly held company, seems mysteriously to transform the nature of numerous individuals' private investments into assets affected with a
public interest. And once these corporate behemoths are "affected with a public interest," they must either be regulated by the state or they must
act as though they are owned by the public, and are therefore inferentially a part of the state. This attitude is reflected not merely by corporate activists, but by many "modern" corporate managers.
Sunday, November 26, 2006 ~ 12:15 p.m., Dan Mitchell Wrote: Like the U.S., Japan cut taxes on capital in 2003 to revive its sagging stock market. Capital gains and dividend taxes were slashed to 10%
from 20%. Investors responded by pouring into the market. That, coupled with a steady economic recovery, helped the Nikkei shoot up 40.2% last
year -- one of the best performances in Asia. But the tax incentives are scheduled to start expiring next year, triggering the commission's debate.
The pro-market Abe government wants to extend the tax holiday. Critics respond that Tokyo can't afford to do that, given its public debt burden.
Really? ...Better to keep incentives in place to grow the economy, and thus, tax receipts, rather than hike taxes and stifle growth. That's exactly
what's happening today. Japan's tax revenues could exceed 50 trillion yen this year. Corporate profits are exploding. Firms may soon pay more
in taxes than individuals do. But the good times won't last forever, and the current tax system doesn't help much. Corporate rates, at 40%, rank as some of the highest in the OECD. Tax authorities exercise an
enormous amount of discretion. Companies can't submit financial data for a tax ruling without making the information -- and their names -- public. Why put up with that kind of hassle when you can set up a
business in low-tax, investor-friendly Hong Kong or Singapore? Mr. Abe isn't agitating for a wholesale restructuring of the tax code; rather, he's more likely to tinker at the margins, like his predecessors. His
government has floated cutting corporate tax cuts to the mid-30% range from 40%, "like Europe," and putting off consumption tax hikes until 2008. That's not enough.
Saturday, November 25, 2006 ~ 11:00 p.m., Dan Mitchell Wrote: Beyond some minimum level, however, government becomes a net drain on the economy. Empirical evidence shows that as the tax burden rises
beyond a certain level, the rate of economic growth slows. As government grows, money flows to less productive projects (think "bridges to nowhere"), and taxes are increasingly used to redistribute
income through transfer payments (such as Social Security and Medicare) and to fund myriad special interest group projects. Whereas private decision-makers tend to make decisions based on economic costs and
economic benefits, elected offi cials tend to make decisions based on political costs and political benefi ts (as refl ected, for example, in votes,
campaign contributions and so forth). High tax rates reduce the incentives of taxpayers to produce, while benefi ciaries of government largesse are discouraged from additional effort. ...To maximize economic
growth, federal, state and local taxes combined should average about 23 percent of gross domestic product (GDP). Tax revenues as a share of GDP have not been at that level since 1950, and for years have averaged
between 30 percent and 34 percent of GDP. Real GDP increased at a compound growth rate of 3.5 percent per year from 1950 to 2004. If instead of rising to 30 percent and more, an average tax burden of about
23 percent of GDP had been in effect throughout the 54-year period, the growth rate would have been 5.8 percent per year.
Saturday, November 25, 2006 ~ 10:45 p.m., Dan Mitchell Wrote: ... does that mean the government should impose leave, day care, and flex-time policies on employers or make taxpayers bear the cost for the
choices women make? No! All these well-intended laws have unintended consequences, and the consequences are usually worse than the problem they were meant to solve. When governments require companies to
provide paid maternity leave and other benefits, many firms avoid hiring women. How is that good for women? ...Dodd says businesses wouldn't
suffer under his mandate because "in every study that's been done on areas of productivity, profitability and growth, 90 percent of the employers [who provide such amenities] have reported either no
negative impact or actually a positive benefit." Gee, if that's true, why do we need a government mandate? If offering paid leave and day care is
good for companies, they will offer those benefits. Some do already. But other companies think the burden of such promises would bankrupt them.
I wouldn't dismiss that concern so quickly. People who risk their own capital make better decisions than a politician who imposes policies on
others with little risk to himself. ... most countries have "family friendly" laws paid for by the taxpayers. But women in those countries pay a price.
In Europe, the unemployment rate for women is over 10 percent -- double the rate in the United States. From 1970 to 2003, employment in the United States increased 75 percent, by 58.9 million jobs. Yet in
France, Germany and Italy, where many job benefits are mandated, employment grew only 26 percent, by 17.6 million jobs. And many of those new jobs were in government! ... It's wrong for politicians to treat
women like damsels in need of rescue from the whims of employers. Women need what all of us need: the freedom to make decisions for themselves in a competitive marketplace.
Friday, November 24, 2006 ~ 11:25 a.m., Dan Mitchell Wrote: On average, the AMT is projected to increase marginal income-tax rates by 1.5 percentage points by 2010. So what should Congress do? The
complexity, high marginal rates and uneven reach of the AMT make total repeal the best option. Repeal was impossible for the Republican Congress, because it would cost more than $1 trillion over 10 years, and
those lawmakers were hooked on big government. But it should be easy to repeal the AMT and keep the budget on a sound path. Congress just
needs to reduce spending growth a bit to offset the cost of eliminating the tax. The current projected average annual growth in total outlays from
2006 to 2016 is 4.7 percent. To pay for AMT repeal under current law, growth in total outlays, including entitlements, would have to be reduced by a mere 0.4 percentage points a year. If you don't want to touch
entitlements, then you can cover the costs of AMT repeal with a reduction in discretionary spending of only 1.2 percentage points. Even with that reduction, spending in 2009 would be about 29 percent higher
than was projected in the budget outlook when President Bill Clinton left office. So the AMT can be fixed in two easy steps. First, erase it from the
tax code completely. Second, cut spending growth a modest amount.
Thursday, November 23, 2006 ~ 12:51 p.m., Dan Mitchell Wrote: Next week, Basic Books will publish an astonishing new volume by Syracuse University professor Arthur C. Brooks: Who Really Cares <http://www.aei.org/events/eventID.1431/event_detail.asp> . Prof.
Brooks reviews the vast academic literature on charitable giving and arrives at a startling conclusion: By virtually every measure, political conservatives are demonstrably more generous, more honest and more
public-spirited than political liberals. Consider for example this one fundamental liberal/conservative dividing line, the question "Do you believe the government has a responsibility to reduce income
inequality?" In a major 1996 survey, 33% of Americans gave the liberal answer, "yes"; 43% gave the conservative answer, "no." Those who
gave the conservative answer were more likely to give to charity than those who gave the liberal answer. And when they gave, they gave much more: an average of four times as much as liberal givers. Correct for
income, age and other variables, and you find that people who want government to fight inequality are 10 points less likely to give anything at all--and when they did give, they gave US$263 per year less than a
right-winger of exactly the same age earning exactly the same money. A second survey, this one conducted in 2002, found that people who believe
that "people should take care of themselves" accounted for 25% of the population--but gave 31% of America's blood. "To put this in
perspective," Brooks says, "if the whole population gave blood like opponents of social spending do, the blood supply would increase by more than a quarter. But if everyone in the population gave like
government-aid advocates, the supply would drop by about 30%."A third survey found that people who believe that the government "spends too
much on welfare" were more likely to give directions to someone on the street, return extra change to a cashier, or to give food or money to a
homeless person. A fourth found that a poor family that worked for its income donated three times as much money as a family that received an
exactly equal income from welfare. It's almost a psychological rule: The more you espouse "compassion" in your politics, the more likely you are
to be selfish in your personal behaviour. How often do we hear the generosity of Europe contrasted to the "savage individualism" of the
United States? Yet Americans give vastly more to charity: per person, more than twice as much as the Spanish, more than three times as much as the French, seven times as much as the Germans and 14 times as
much as the Italians. Despite working an average of 400 hours more per year than their European counterparts, Americans are 15 percentage points more likely to volunteer their time than the Dutch, 21 points more
likely to volunteer than the Swiss and 32 points more likely to volunteer than Germans. (Indeed, 80% of Germans never volunteer their time for any cause at all.)
Wednesday, November 22, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: ...rumors swarm around Washington that the president may be willing to raise taxes as part of a "deal" on entitlement reform. In particular, the
rumors suggest the president might be willing to get rid of the provision that caps the income level used to compute Social Security taxes and
benefits. These rumors aren't without substance; last year the president would not rule out raising the cap when asked. Doing so would raise the
marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points. The new effective rate would be five percentage points above the level when he
took office. Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53% marginal rate on entrepreneurial income. The president would thus be not just raising taxes on
entrepreneurs to well above the levels that prevailed in the Clinton administration, but to a rate higher than that which prevailed in the Carter administration. Most of the improved incentives for
entrepreneurship and work brought about under Reagan would be repealed. ...Economists differ on how much such a dramatic increase in tax rates on entrepreneurs would damage the economy. Certainly...it
would be significant. ...These are a very sophisticated group of taxpayers with both the knowledge and the means to adjust to taxation by changing
the form of business, converting income to capital gains, or other methods. A cautious estimate that enjoys wide acceptance in the tax community says that for every 1% reduction in the share of their income
they take home, high income individuals cut their taxable earnings by four-tenths of a percent. My own research from the Reagan tax cuts indicates the response by this group is higher, roughly seven-tenths of
1%. Although these numbers may seem small, when they are applied to a massive tax rate increase like this, they can have important ramifications. Remember, taxpayers will be seeing the share of income
they keep dropping from roughly 61 cents on the dollar to just 51 cents -- and that is before state taxes are figured in. This implies a decline in the
tax base of between 7% and 13%. Under the lower assumption, total federal revenues would only increase by $27 billion, with the behavioral
response of taxpayers offsetting 70% of the static revenue increase. True, Social Security tax revenues would still rise by $82 billion, but this would
be offset by a net decline in personal income taxes of $55 billion. Under the higher assumption about a behavioral response, total federal revenues would decline. While Social Security taxes would rise by $69
billion, personal income taxes would drop by $95 billion.
Wednesday, November 22, 2006 ~ 8:11 a.m., Dan Mitchell Wrote: Small-cap shares plunged, reflecting sluggish retail investor sentiment. Analysts said some wealthy retail players were concerned about the
expiry of temporary Japanese tax breaks on stock investments in 2008, which was hurting market sentiment. Preferential tax rates on capital
gains and dividends were introduced in 2003 for a period of five years to support the faltering stock market. A government panel is expected to
propose ending the tax breaks as planned, and a final panel decision will likely be made by next month. "Rich retail investors are quite sensitive
about taxes. This will have a significant impact," said Norihiro Fujito, general manager, investment research and information division at Mitsubishi UFJ Securities Co. Ltd. Fujito's view was echoed by Taizo
Nishimuro, president of the Tokyo Stock Exchange (TSE) [TSE.UL], who blamed concern about securities taxes for the recent sluggishness in the market. The Tokyo Stock Exchange said last week that uncertainty surrounding the future of certain tax breaks on securities was one of the reasons
behind recent declines in the value of shares traded on the bourse. Addressing reporters at the National Press Club in Tokyo yesterday, TSE President Taizo Nishimuro said that concerns by individual domestic
investors that the government will let the temporary tax breaks expire were also filtering through to foreign investors. The benchmark Nikkei 225 reached its lowest level in two months after yesterday's close.
"Because they think that the outlook for share prices is dark, foreign shareholders have in recent days turned from net buyers to net sellers,"
he stated. ...the capital gains tax measure is due to expire at the end of 2007, while the dividend tax cut will expire by the end of 2008, and
investors fear that the government's determination to raise its revenue take to tackle mounting budget and debt problems will mean that the tax breaks will not be renewed.
Wednesday, November 22, 2006 ~ 7:50 a.m., Dan Mitchell Wrote: In the last 10 years of his 94-year life, Friedman and his wife, Rose, dedicated themselves to school choice. They viewed school choice as a
companion to economic freedom. Through the Milton and Rose D. Friedman Foundation they enthusiastically promoted school choice as a means of liberating the poor from failing government schools. Failing
schools produced failing students, they reasoned, depriving children of the tools they would need to attain economic independence. Friedman
first proposed school vouchers in 1955, but it wasn't until 1996 that he and Rose started their foundation to take advantage of the growing interest in school choice. …The main opponents of school choice are the
teachers unions and white liberal politicians who receive their campaign contributions. They mostly send their children and grandchildren to
private schools, while condemning minority children to poorly performing government schools. How's that for "compassion" and a commitment to
helping the poor? …School choice works for the benefit of students, who ought to be the focus of education. Research shows that prior to receiving a voucher, the majority of participating students score well
below the national average on standardized tests. Statisticians and educational researchers from Harvard and the University of Houston conducted a re-analysis of the raw data compiled in an earlier study of
the Milwaukee school choice program. They found that choice students benefit academically from the program, showing significant gains in both reading and mathematics by their fourth year of participation. And,
according to John F. Witte, Troy D. Sterr and Christopher A. Thorn, who conducted the initial Milwaukee study, "the parents of choice' kids are
virtually unanimous in their opinion of the program: they love it. Parents are not only far more satisfied with their freely chosen private schools
than they were with their former public schools, they participate more actively in their children's education now that they've made the move." If
school choice becomes the norm in America, it will be Milton Friedman's real legacy and every poor child who is liberated from a failed government school will owe him a lasting debt of gratitude.
Wednesday, November 22, 2006 ~ 7:18 a.m., Dan Mitchell Wrote: It took 14 years, but science finally trumped politics Friday, with the Food and Drug Administration's lifting of its longstanding ban on
silicone-gel breast implants. Women will at last be allowed to make their own decisions about cosmetic surgery. This is especially welcome news for mastectomy patients. The FDA removed them from the market in
1992 during the reign of Commissioner David Kessler, a politically ambitious bureaucrat who was courting support from the left. The agency cited health concerns that have long since been debunked, and
silicone-gel breast implants have since been at the heart of one of the trial bar's biggest scams. Class-action lawsuits raked in billions of dollars
and drove implant makers out of the business. Dow Corning went into bankruptcy. Throughout it all, the trial bar was abetted by a gullible press, only too happy to ignore the science and play up sensationalist
stories of supposed "victims." Meanwhile, as we reported in editorials at the time, study after study showed no linkage between silicone breast
implants and cancer, lupus, the skin-hardening disease scleroderma or other serious illness. As far back as 1994, doctors at the Mayo Clinic
found "no association between breast implants and the connective-tissue diseases and other disorders" that they studied. In 1999, the Institute of
Medicine found no systemic health problems caused by implants. In 2003, an FDA advisory panel advised that the ban be removed. ...One of the ugliest aspects of the breast-implant controversy has been the
irresponsibility of the feminist movement, whose championship of a woman's right to "choose" doesn't extend to breast implants.
Tuesday, November 21, 2006 ~ 8:57 a.m., Dan Mitchell Wrote:
Tuesday, November 21, 2006 ~ 8:49 a.m., Dan Mitchell Wrote: ....let's return to the real world, where the object is growing an economy, not fertilizing Uncle Sam's giant budget beanstalk. ...Communism had
been running what might be called a 40-year demonstration study in life at one end of the Laffer Curve-what happens to economies when you tax
away pretty much everything. Freed of this utopia, the peoples of Eastern Europe now had to devise new tax regimes appropriate to nations eager-for want of a better phase-to work, save and invest. The first
former Iron Curtain country to cut its taxes was Estonia in 1994, led by Prime Minister Mart Laar, who claimed then the only economics book
he'd ever read was Milton Friedman's "Free to Choose." Estonia established a flat rate on personal incomes of 26%; two years earlier it
had abolished all import tariffs. Estonia grew. After Estonia, flat-tax regimes coursed across Eastern Europe, as listed below (bear in mind that the top rate in the U.S. is 35%): Lithuania, 33%; Latvia, 25%;
Slovakia, 19% (the former sad sack of the region, Slovakia's growing economy has become its envy); Romania, 16%; Ukraine, 13%; Russia, 13%; and Georgia, 12%. Yes, payroll taxes are often high, but unlike
here, the political impulse is to reduce the tax burden; Estonia hopes to get its flat rate down to 20% by decade's end. Even the World Bank has
noticed. In a September report on business reforms, it noted that the second most popular global reform the past few years, after easing regulations on new businesses, was "reducing tax rates and the
administrative hassle of paying taxes." ...The accounting firm KPMG's annual corporate-tax survey, released this month, took special note of
the history of corporate tax rates. The downward trend here was begun in 1985 with a corporate-rate cut in the U.K. by Reagan admirer
Margaret Thatcher. "In the past 14 years," the report says, "the average corporate tax rate of countries surveyed by KPMG declined nearly 29%,
dropping from an average of 38% to 27.1%." When Austria cuts its corporate rate to 25% from 34% and German companies started rolling across the border, German Finance Minister Peer Steinbruck accused the
Austrians-I love this phrase-of "fiscal dumping."
Tuesday, November 21, 2006 ~ 8:26 a.m., Dan Mitchell Wrote: Schumer and Bloomberg's angst centers on the latest supposed impact of the 2002 Sarbanes-Oxley reforms: the shift of capital from New York to
London. In almost the exact same words, New York Stock Exchange (NYSE) head John Thain told a meeting of the Securities Industry and Financial Markets Association last week, "If we are not careful, we will
make the U.S. less attractive to the world." ...In the last few years, the London Stock Exchange (LSE)--and, in particular, its Alternative
Investments Market (AIM), a sort of even-smaller-cap version of the NASDAQ--have been doing extremely well. This year, through late October, the London markets raised some $40 billion in initial public
offerings (IPOs), compared with $30 billion in New York. According to the Journal, among the biggest international IPOs of each of the last two years, 11 were in London and only four in New York. And a growing
trickle of American startups--which once, almost as a matter of course, listed with NASDAQ--are appearing on the AIM. ...But what the anti-Sarbanes-Oxley narrative really misses is that the shift to London is,
in fact, part of a much larger tale: the globalization of capital. Just as the second half of the twentieth century saw manufacturing freed from its
national moorings, the last few decades have seen capital become increasingly mobile, able to move in and out of markets irrespective of borders. Ironically, the globalization of capital is facilitating the
regionalization of capital markets. No longer do European companies, with investors and customers centered on the continent, need to come all the way to New York, across a workday's worth of time zones, to float
stock. Ditto with East Asia--for all the talk about London's financial rise, it is actually Hong Kong, with its easy access to Chinese companies, that
will take first place in the size of its IPOs this year. To be sure, capital doesn't flow completely freely, and national regulatory systems--including
Sarbanes-Oxley--are still a major factor. ...The day is fast emerging when globally mobile capital will pick and choose among exchanges based on a
wide set of criteria. Some will go for exchanges in countries where money is cheap and questions are few; others will go for the security that comes
with weightier regulations. In a recent op-ed in the Financial Times, American Stock Exchange Chair and CEO Neal Wolkoff wrote that Sarbanes-Oxley "has effectively created an opportunity for regulatory
arbitrage favouring the lowest-cost host nation." But, while Wolkoff considers this a bad thing, it is in fact a very good one--over time,
national exchanges will have to compete directly for listings and, in doing so, to differentiate themselves. True, some will try a lowest-cost, lightest-regulation approach, and they will win a certain amount of
attention in doing so.
Tuesday, November 21, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: A wide body of literature acknowledges the magnitude of the challenge and provides estimates of the required adjustments, often referred to as
"tax gaps." Most applied studies of tax gaps rely on an accounting framework to estimate by how much taxes have to rise to repay or
stabilise public debt, usually over several decades. While simple, this method has some drawbacks. It ignores the feedback effects of changes in taxes and public expenditure programmes on the behaviour of
economic agents (notably their labour supply and saving decisions) and ultimately growth. As a result, the tax gap approach presents tax increases and expenditure cuts as symmetrical, equivalent means of
achieving fiscal consolidation. The "tax gap" terminology may even convey the impression that increasing taxes is the natural way of
consolidating public accounts and paying back government debt. ...tax increases have costly economic consequences. ...What is more interesting
is that these costs are particularly large. Results from the model suggest that tax increases are a much more costly way to achieve fiscal sustainability when compared with spending restraint. In model
simulations, annual consumption per capita is 15% higher in 2050 if fiscal consolidation is achieved through expenditure restraint and increases in the retirement age (scenario SR) than through across the
board tax hikes (scenario TU). Tax-based strategies depress savings, capital accumulation, the capital-labour ratio and ultimately real wages. The results are obtained with conservative assumptions most of which
tend to under-estimate the distortive effects of taxation... The growth rate of the economy would be on average 0.2% of GDP higher in the 2010s in scenario SU than in scenario TU, due to stronger capital
accumulation and a far lower tax burden. This would translate into a level of real GDP per capita 5% higher in 2030 in scenario SU than in scenario TU. GDP growth would be even stronger in scenario SR,
illustrating the favourable impact on growth of balancing the PAYG system in an ageing context by increasing the retirement age and containing public spending rather than raising taxes or strongly
diminishing replacement rates. The average GDP growth rate during the 2010.s would be 0.1% higher in scenario SR than in scenario TR which relies more on tax hikes, and 0.34% higher than in scenario TU. The
cumulative impact of such differences is large: at the end of the simulation period (2050), income per head in scenario SR is 17% higher than in scenario TU. ...Model results indicate that if the large
adjustments needed to restore fiscal sustainability were made by raising taxes, the induced distortions could entail large costs for economic growth, with most of the negative feedback coming through capital
markets. The mechanism is that, if taxes are increased to finance an unchanged pension replacement rate, households have much less incentive to save and invest than if the replacement rate is reduced and
taxes kept in check. Lower savings hold back capital deepening and ultimately depress output per worker. Even though the effect of tax
increases on capital formation is large in simulation results, it may still be under-estimated because capital income is not taxed in the model. The
negative impact of taxation on labour supply is relatively modest in simulation results but is likely to be stronger in practice because, to remain tractable, the model does not embody some potentially powerful
channels: * In the model the same tax rate applies to all labour inputs. In euro area countries, tax schedules are progressive. A consequence is that
in practice the income effect will be weaker than in the model and the substitution effect will be stronger. The simulations are therefore likely to
underestimate the negative feedback from higher taxes on the number of hours worked (the intensive margin of labour supply). * While exogenous
in the model, participation (the extensive margin of labour supply) is negatively affected by taxes in practice. A large body of evidence
indicates that a higher labour tax wedge reduces participation, especially through its disincentive effect on second earners (OECD, 2006b and Jaumotte, 2003). In addition to the effects captured in the model,
tax-based consolidation strategies can also entail additional distortions via the impact of taxation on multi-factor productivity (MFP). Because
multi-factor productivity is exogenous in the model, the simulations do not incorporate the effect of taxes on investment in human capital and research and development activities. Most studies conclude that the
effect is negative and strong (Feldstein, 2006).
Tuesday, November 21, 2006 ~ 7:10 a.m., Dan Mitchell Wrote: If they were just another product, the market would work its usual magic: supply would respond to high prices and rise to meet surging
demand. But human kidneys are no ordinary commodity. Trading them is banned in most countries. So supply depends largely on the charity of
individuals: some are willing to donate one of their healthy kidneys while they are still alive (at very little risk to their health); others agree to let
their kidneys be used when they die. Unsurprisingly, with altruism the only incentive, not enough people offer. Kidneys are the subject of a
quietly growing global drama. As people in the rich world live longer and grow fatter, queues for kidneys are lengthening fast: at a rate of 7% a
year in America, for example, where last year 4,039 people died waiting. Doctors are allowing older and more sluggish kidneys to be transplanted.
Ailing, rich patients are buying kidneys from the poor and desperate in burgeoning black markets. ...In the face of all this, most countries are
sticking with the worst of all policy options. Governments place the onus on their citizens to volunteer organs. A few European countries, including
Spain, manage to push up supply a bit by presuming citizens' consent to having their organs transplanted when they die unless they specify
otherwise. Whether or not such presumed consent is morally right, it does not solve the supply problem, in Spain or elsewhere. On the other hand, if
just 0.06% of healthy Americans aged between 19 and 65 parted with one kidney, the country would have no waiting list. The way to encourage this is to legalise the sale of kidneys. That's what Iran has done. An
officially approved patients' organisation oversees the transactions. Donors get $2,000-4,000. The waiting list has been eliminated. ...having a kidney removed is as safe as common elective surgeries and even
beauty treatments (it is no more dangerous than liposuction, for example), which sets it apart from other types of living-organ donation. America already lets people buy babies from surrogate mothers, and the
risk of dying from renting out your womb is six times higher than from selling your kidney. ...a kidney market would be a big improvement on
the current, sorry state of affairs. Sellers could be checked for disease and drug use, and cared for after operations. They could, for instance,
receive health insurance as part of their payment-which would be cheap because properly screened donors appear to live longer than the average
Joe with two kidneys. Buyers would get better kidneys, faster. Both sellers and buyers would do better than in the illegal market, where much of the money goes to the middleman.
Tuesday, November 21, 2006 ~ 6:50 a.m., Dan Mitchell Wrote:
Monday, November 20, 2006 ~ 8:38 a.m., Dan Mitchell Wrote: Thatcher and Reagan represented a revolution that Milton Friedman had helped to create: a shift away from central planning and the welfare state
and toward a renewed appreciation for entrepreneurship, free markets, and limited government. The collectivist ideas that had dominated the 20th century were being replaced by a more libertarian spirit. And not
just in England and the United States. The success of the free market in Chile influenced other Latin American countries to move away from their
long tradition of interventionism and tentatively embrace markets. About a decade after Reagan's election, the Soviet empire collapsed, and many
of the new leaders in eastern and central Europe turned out to be readers of... Milton Friedman. Estonia quickly became one of the post-Soviet success stories. When its young Prime Minister Mart Laar visited
Washington, he was asked where he got the idea for his market-based reforms. Laar replied, "We read Milton Friedman and F. A. Hayek." Another successful reformer, Czech Prime Minister Vaclav Klaus, was
described as a "Friedmanite with a staff of Hayekians." No small part of Friedman's achievement was rescuing economics from the pervasive and virtually unquestioned Keynesian orthodoxy that
reigned in many places. ...It is doubtful whether Ronald Reagan could have been elected president in 1980 without the changes in public opinion produced by Friedman's work in the previous decades. ...His
decades-long campaign to promote school vouchers has been enshrined in the foundation named for him and his wife, the Milton and Rose D. Friedman Foundation for Educational Choice. He was a compassionate
conservative long before that term was coined, for the rich obviously do not need vouchers to get a decent education for their children.
Monday, November 20, 2006 ~ 8:20 a.m., Dan Mitchell Wrote: As François Mitterand discovered as early as 1981, efforts to redistribute wealth or to restrict its use will be met by "capital flight" and impending
economic collapse. In an age of global capital markets, conventional wisdom holds, wise politicians of the Left - Lula in Brazil, Sonya Gandhi
in India - can succeed only by not being so Leftist, i.e. by accommodating themselves extensively to the policies that capitalists want. The journalist
Thomas Friedman (2000) has aptly titled this the "golden straitjacket," restraining countries from pursuing anything other than policies of
economic liberalization... By one simple and direct measure, the evidence for pro-capital convergence seems clear. The Fraser Institute publishes
regularly an Index of World Economic Freedom, in which each country is assigned - by perhaps ideological, but intersubjectively and intertemporally consistent, standards - a score between zero (least
capital-friendly) and ten (most capital-friendly). Scores are available for 1980 and for 2002 for a total of 105 countries; and if we plot the net
change for each country (2002 score minus 1980 score, positive numbers thus being an indication of a pro-capital change in policy) against its 1980 score, we see: (a) that on average, countries have adopted more
pro-capital policies (the mean change is 1.05, the median 1.1) and (b) it is precisely the initially most capital-unfriendly countries that have changed
the most. ...where we would expect to see the strongest policy convergence, namely in the realm of tax competition (with investors free to move wherever capital is taxed least), evidence seems mixed (Schulze
and Ursprung 1999, 312-22): while the tax burden shifted in the 1980s and 1990s somewhat away from (more mobile) capital and toward (still largely immobile) labor, total revenue from capital taxation did not
decline. Similarly, Swank and Steinmo (2002) find that capital mobility is associated with a decrease in statutory corporate tax rates but not in the overall average tax rates.
Monday, November 20, 2006 ~ 8:00 a.m., Dan Mitchell Wrote: In 2004, the United States was home to 12 million companies, including about 9 million corporations and 3.8 million limited liability corporations
or LLCs. In that year alone, our 50 states incorporated more than 1.9 million new corporations and LLCs. …In most cases, our states have no idea who is behind the companies they have incorporated. A person who
wants to set up a U.S. company typically provides less information than is required to open a bank account or get a driver's license. In most cases, they don't have to provide the name, address, or proof of
identification of a single owner of the new company. That's because our states have been competing with each other to set up new companies faster than ever, at less cost, and with greater anonymity for the
company owners. Most U.S. states offer electronic services that incorporate a new company, and many will set up a new company in less than 24 hours. The median fee is less than $100. In Delaware and
Nevada, for an extra $1,000, an applicant can set up a company in less than an hour. Colorado, which incorporates about 5,000 new companies each month, told the Subcommittee that it now sets up 99% of its
companies by computer, without any human intervention or review of the information provided. Incorporating all these new companies generates
annual revenues totaling hundreds of millions of dollars for the states. …For decades, …the Financial Action Task Force on Money Laundering or FATF, has warned countries not to set up companies without first
finding who is really behind them. …the United States doesn't comply, and we just got formally cited for that failure in a 2006 FATF review of U.S. anti-money laundering laws. We now have two years to comply, or
we risk expulsion from FATF.
Sunday, November 19, 2006 ~ 10:00 p.m., Dan Mitchell Wrote:
Sunday, November 19, 2006 ~ 9:37 p.m., Dan Mitchell Wrote: Richard Fisher, president of the Dallas Federal Reserve, noted Monday that skilled and even semiskilled workers seem to be in increasingly short
supply throughout the country, pushing up wages. "In Texas City," he told an economic think tank in San Antonio, "they were offering a welder
in the oil patch $19 an hour at the beginning of the year. They're now offering $25 an hour, with a $100 show-up bonus . . . and a completion
bonus for your work." Fisher is among those who seem to think this is a problem. He sees a worrisome link between more jobs, higher pay and
rising inflation. We say, what's the problem? Fisher's remarks stem from the common notion that the economy basically has just two buttons, which the Fed must push to come up with the perfect mix. One button is
called "jobs." The other, "inflation." When one goes up, the idea goes, so must the other. This idea — called the Phillips curve in economics — has
entrenched itself at the Fed, in academia and on Wall Street. …the Phillips curve's fatal flaw — it doesn't reflect reality. Sometime back in the 1970s, it became obvious that the underlying idea — that the Fed
could "buy" more jobs by letting inflation rise — no longer worked. We had higher inflation and higher unemployment. Then, in the 1980s and
1990s, the exact reverse took place — the economy boomed, job growth soared and inflation fell. …Yet though the idea of the Phillips curve is one
of the most debunked in modern economics — at least two Nobel Prizes have been awarded for work that attacked its basic premises — it's harder to kill off than a vampire in a B-grade horror flick. …Inflation
results only when the Fed prints too much money for the economy to productively use, not when people get jobs.
Sunday, November 19, 2006 ~ 4:56 p.m., Dan Mitchell Wrote: America has never paid off its original national debt. In 1800, we owed about $75 million. By the 1830s it got down to as low as $33,000. After
the civil war, the debt exploded again. Ditto for WWI, WWII and WWIII (the cold war). My generation is now paying for the cold war. Do I mind? When I was a child 20,000 nuclear-tipped missiles were aimed at my
country, and now they're not. I think that's a pretty good deal. Since the national debt has never been paid off, some of that principal represents
the borrowing that was used to fight the War for Independence. Some of my taxes, and the taxes of every generation of Americans, goes towards servicing that initial loan. Did Hamilton do us wrong by devising the
financial structure of the deal? Does Adams owe us an apology for selling the bonds? Not likely. Every generation since 1776 has benefited from
that first war. There is a basic principle of financial accounting called 'matching.' It teaches that there should be some attempt to match, in
time, the benefits of revenues with the costs incurred in pursuit of those revenues. It's why businesses depreciate long-term assets over a period of
years. It's why local governments have capital budgets, funded with bonds, which they use to pay for infrastructure like roads and bridges.
Defense is a sort of infrastructure, too. It provides benefits for future generations, just like roads and bridges do. Is it some kind of rip-off that
my kid's future tax bills will include interest payments from the war against Jihadists? Not if we win.
Saturday, November 18, 2006 ~ 1:39 p.m., Dan Mitchell Wrote: It's often preached and taken as gospel that the only way black people can progress is through racial politics and government programs, but
how true is that? Let's look at it. In 1940, poverty among black families was 87 percent and fell to 47 percent by 1960. Would someone tell me
what anti-poverty program or civil-rights legislation accounted for this economic advance that exceeded any other 20-year interval? A significant chunk of that progress occurred through migration from rural
areas in the South to big Northern cities. Between 1960 and 1980, black poverty fell roughly 17 percent and fell one percent during the '70s.
Might this have been a continuation of a trend starting much earlier, or was it a miracle of the civil-rights movement or President Johnson's War on Poverty?
Friday, November 17, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: Macedonia's new conservative government plans to scrap the 15% corporate tax rate and 15%-24% personal income taxes next year and
replace them with a single 12% rate. In 2008, that will come down to 10%, matching Kyrgyzstan's flat tax as the world's lowest. The government of 36-year-old Prime Minister Nikola Gruevski, an
economist, expects that its flat tax will attract more foreign investors to Macedonia and help bring down unemployment, currently at about 36%.
"I know that where a flat tax has been introduced it usually has led to economic growth and improvement of the finances of the country,"
cabinet minister Vele Samak told South East Europe Newswire. If only such clear economic thinking were also commonplace in the newly elected U.S. Congress or among governments in Old Europe. There the
flat tax is demonized as another tax break for the rich that would increase budget deficits. The economic success of Russia, Slovakia (third quarter growth: 9.8%), Romania and other former communist countries
with flat taxes is simply ignored. As we noted in these columns earlier in the week, even the World Bank now says that simple and transparent
taxes promote tax compliance and lead to higher revenues. And it doesn't get any simpler or more transparent than a flat tax.
Friday, November 17, 2006 ~ 8:43 a.m., Dan Mitchell Wrote: Suppose the price of bread were zero. At the grocery store you'd see a line going around the block. Just like in the old Soviet economy. Well,
imagine if the price of highway access were zero-actually you don't have to imagine. Just look at the highway at rush-hour. Our reliance on gas
taxes means that drivers pay for roads when they're at the gas station, not when they're actually using them. The result is traffic congestion. And
that congestion frustrates the environmental goals of those who support higher gas taxes. The Texas Transportation Institute estimates that each
year idling cars burn 2.3 billion gallons of gas. That gas isn't taking someone to work or to a doctor's appointment, it's just wasted. If our
system were toll-based instead, motorists would pay for roads only when they actually used them. They would think more carefully before piling on
the road at rush hour. Tolling, especially the kind of variable tolling used on the 91 Express Lanes, does more than give motorists speedy and
predictable trips, it's also easier on the environment than stop-and-go traffic. But if we boosted the gas tax we'd pump more money into a system in which decisions are based more on political pull than
environmental concerns or motorists' needs. Just a couple decades ago, the federal highway bill was nearly pork-free. But the last one contained
6,000 earmarks amounting to about $25 billion. Raise the gas tax and we'll surely fund more bridges to nowhere and pork is just the beginning.
More than a quarter of every gas tax dollar funds something other than highways and even much of the money that does go to roadwork is burnt up by bureaucracy. A former federal highway administrator reckons that
federal regulations increase project costs by 30 percent. And sky-high gas taxes haven't reduced driving as much as one might expect. Joel Stewart
points out that in Europe driving accounts for 78 percent of travel, only about 10 percent less than the U.S. And the Euros are gaining on us.
Over there per capita driving has been increasing more than twice as fast as in the states. Higher gas taxes haven't spared them from pollution or
traffic congestion either. In both cases, Europeans have it worse than Americans.
Friday, November 17, 2006 ~ 8:11 a.m., Dan Mitchell Wrote: Scientific American, in its November 2006 issue, reaches a "scientific judgment" that the great Nobel Prize-winning economist Friedrich
Hayek "was wrong" about free markets and prosperity in his classic, "The Road to Serfdom." The natural scientists' favorite economist --
Prof. Jeffrey Sachs of Columbia University -- announces this new scientific breakthrough in a column, saying "the evidence is now in." To
dispel any remaining doubts, Mr. Sachs clarifies that anyone who disagrees with him "is clouded by vested interests and by ideology."
..Second, if he had studied (Friedrich) Hayek, Mr. Sachs would realize what "The Road to Serfdom" is really about, and how it is of great
relevance to Mr. Sachs's own current work, which has ironically little to do with what he wrote about in Scientific American. Hayek's great book is all about the dangers of large-scale state economic planning,
courageously written in 1944 when Soviet central planning, technocratic socialism and administrative control of the wartime economy appealed as
a peacetime model to many New Dealers, celebrity economists and policy wonks of all stripes. The countries that are now rich subsequently listened
enough to Hayek and to common sense to avoid the road to serfdom. Yet today, Mr. Sachs (in his book "The End of Poverty") is peddling his own
administrative central plan -- 449 steps in all -- to end world poverty. In his plan, the U.N. secretary-general (to whom he is an adviser) would
supervise and coordinate thousands of international civil servants and technocratic experts to solve the problems of every poor village and city
slum everywhere. Mr. Sachs is not in favor of central planning as an economic system, but he offers it as a solution, anyway, to the multifold
problems of the world's poorest people. If you want the best analysis of why the approach of Mr. Sachs and his confreres in Hollywood and the
U.N. will fail to end world poverty this time (as similar efforts failed over the past six decades), you can find it in Hayek. ...Mr. Sachs's empirical
analysis purports to show that Nordic welfare states are outperforming those states that follow the "English-speaking" tradition of laissez-faire,
like the U.K. or the U.S. Poverty rates are indeed lower in the Nordic countries, although the skeptical reader (probably an ideologue) might
wonder if the poverty outcome in, say, the U.S., with its tortured history of a black underclass and its de facto openness to impoverished but upwardly mobile immigrants, is really comparable to that of Nordic
countries. ...Lastly, let's hear from the Nordics themselves, who have been busily moving away from the social welfare state back toward laissez-faire. According to the English-speaking ideologues that
composed the Heritage Foundation/Wall Street Journal Index of Economic Freedom, Denmark, Finland and Sweden were all included in the 20 countries classified as "free" in 2006 (with Denmark actually
ranked ahead of the U.S.). Only Norway missed the cut -- barely.
Thursday, November 16, 2006 ~ 10:41 p.m., Dan Mitchell Wrote: Milton Friedman, one of the most influential economists of the past century and winner of a 1976 Nobel Prize, died on Thursday morning of
heart failure at a San Francisco area hospital, a spokeswoman for his family said. He was 94. A free-market economist, Friedman preached free enterprise in the face of government regulation and advocated a
monetary policy that called for steady growth in money supplies. His ideas played a pivotal role in informing the governing philosophies of world leaders like former British Prime Minister Margaret Thatcher and
former U.S. President Ronald Reagan.
Thursday, November 16, 2006 ~ 6:54 p.m., Dan Mitchell Wrote: A bright light descended from the sky last week and shone upon the world's economic planners. It came courtesy of the World Bank, of all
unlikely places; its toiling economists have discovered that simplified tax systems promote economic growth. In a report titled "Paying Taxes --
The Global Picture," the World Bank and its co-authors at PricewaterhouseCoopers make the case for simplifying business taxes. Burdensome rules and multiple levies, they argue, promote tax evasion
even when individual corporate tax rates are low. Make the system transparent and simple, and the private sector will pony up. It's an argument that could be made for personal income taxes, too. …The
Bank's findings echo that of the flat-tax camp; namely, simple tax regimes promote compliance and efficiency. By "simple," the Bank
doesn't just mean unifying rates; it includes making the forms easy to read, understand and file. World-wide it takes an average of 332 hours a
year for businesses to comply with tax requirements, ranging from 2,600 hours in Brazil to 325 in the U.S. to 68 in Switzerland. There's no reason
a tax form can't fit on a few pages, as in Hong Kong, or be filed over the Internet, as in Singapore. …If only the high-tax prophets at the International Monetary Fund were paying attention. In a recent working
paper, three Fund economists -- writing in a "personal" capacity -- put out an anti-flat tax screed. We don't have the space to dissect the entire
paper here, but in essence they wave away the experience of Hong Kong and Russia and argue that the pro-market signals flat taxes send won't do any good for developed nations.
Thursday, November 16, 2006 ~ 8:31 a.m., Dan Mitchell Wrote: The new Conservative leadership cites the supposed risk of provoking inflation and higher interest rates. "If faced with a choice between lower
taxes and higher mortgage rates, we'll always put stability first," says the shadow Chancellor George Osborne. But conflict here isn't inevitable,
nor the choice unavoidable. The Irish government cut its total revenues to 35.6% of GDP in 2005 from 41.8% in 1991. Over that same period, long-term interest rates dropped to 3.3% from 9.4%. The U.S. lowered its
tax ratio to 31.7% of GDP in 2004 from 35.8% in 2000, while its interest rate declined to 4.3% from 6.0%. Switzerland's government receipts-to-GDP ratio has stayed in a low 33%-36% range over the last
decade. Yet its long-term interest rate never topped 3.9% during that time -- and fell to 2.1% in 2005. …The Conservative Party has showed
how it's done before. The last time it was in power, it brought the public sector's share of GDP down to 40.6% in 1996-97 from a peak of 49.9%
in 1975-76. It did this by privatizing state companies and cutting the top income tax rate to 40% from an enterprise-killing and work-discouraging
83%. These reforms boosted economic growth and living standards. Real disposable income per head rose at an average annual rate of 2.5% from 1979 to 1997, despite two recessions. Thus the average Briton was 60%
better off at the end of the Tories' term than at its beginning. These trends have reversed since New Labour took over. The Treasury expects government expenditure to reach 43.7% of GDP this fiscal year. The
growth of disposable income per head slowed to an average annual rate of 2.2% from 1998-2005, and the latest estimates by the Office for National Statistics show a drop of 0.2% in the second quarter of 2006.
According to the World Bank, total taxes paid by British businesses, excluding labor taxes, amounted to 52.9% of their gross profits in 2004 -- well above the average level of 38.8% for high-income economies. A
Cameron government looks, on present evidence, unlikely to reverse this trend. But many Conservatives and, according to opinion polls, a substantial proportion of the general public want further tax cuts. If Mr.
Cameron really wants to ensure Tory return to power, and if he wants to make that return a success, he'd better rethink his tax policy.
Thursday, November 16, 2006 ~ 8:08 a.m., Dan Mitchell Wrote: …states also serve as laboratories of democracy in fi scal policy. Some states maintain relatively low levels of taxation and spending, while
others have much larger and ambitious state governments. Empirical evidence indicates that these varying policies have had real, measurable impacts on state poverty rates. Nationwide, both general and childhood
poverty rates dropped during the 1990s. Some states reduced poverty much more than others did; however, there are other states that in fact
suffered increases in poverty rates during the 1990s, despite the booming national economy and the general success of welfare reform. … which are better at reducing poverty: big government states or
small-government states? Using data from the U.S. Census Bureau, the pages that follow demonstrate that low-tax and -spending states enjoyed sizable decreases in poverty rates during the 1990s. High-tax and
-spending states, meanwhile, suffered increases in poverty rates. Th is study grades each state with regard to reducing both general and childhood poverty rates during the 1990s. Private-sector job growth is
the most effective antipoverty program. Citizens and policymakers who seek to reduce poverty and improve the lot of the poor should embrace policies promoting as much private-sector growth as possible. …
Although there are doubtlessly some who benefit from high state government spending, the poor do not seem to be among them. The 10 states with the lowest per capita spending enjoyed a sizable reduction in
overall poverty rates, approaching twice the national average. However, the top 10 big spenders not only failed to reduce poverty rates, but they
actually suffered an increase in poverty rates of 7.3 percent. … low-tax states saw a decline in poverty rates more than twice as large as the
average state decline (-13.7 percent decline compared with -6 percent). Poverty rates increased in the high-tax states by 3 percent.
Thursday, November 16, 2006 ~ 7:45 a.m., Dan Mitchell Wrote: So what's the problem with fish? Well, unlike domesticated animals, no one owns them. Government programs to set catch limits and so reduce
fishing effort are a constant source of friction with fishermen, who are always pushing for higher limits than regulators feel are advisable. It's
not that fishermen want to decimate their cash crop. But the system is set up to encourage them to push for whatever they can get, now. There's a
better way. Iceland has saved its fishing industry by adopting a system of individual, tradeable quotas. It's not quite the same as owning the fish,
but it's probably as close as you can get short of starting a fish farm. The quotas are an asset that can be bought and sold, and their value is
dependent on the viability of the fishery, so they give fishermen a direct financial stake in sustaining the fishery. It also takes the hair-pulling out
of the current frequent negotiations between regulators and fishermen over where to set the limits for a given year or several years. The current
U.S. law on fisheries management expires this year and must be renewed. This has occasioned a resumption of the same old fight, with fishermen
demanding that certain rules be relaxed and environmentalists pushing for a tightening of the restrictions. Why not instead sell the fisheries to
the fishermen? Set the quotas at a reasonable level, and let the fishermen themselves decide in whose hands they're worth the most. … The alternative, as three decades of command-and-control fisheries
management has shown, is a tragedy of the commons on the high seas. We don't expect to see the last fish hauled from the ocean, whatever the
models may say. But there's no question the world could be doing a better job managing that resource. The need to reauthorize the current law offers an opportunity for rights-based reform.
Wednesday, November 15, 2006 ~ 8:50 a.m., Dan Mitchell Wrote: A hike in the national minimum wage seems all but certain to become one of the first fruits of the Democrats' victories this week. Nancy Pelosi, the
presumptive Speaker of the House, has pledged to raise the minimum by over $2, to $7.25 from $5.15. And President Bush has already signaled he'd go along. At the state level, six states not only approved minimum
wage hikes in referendums this week but indexed the minimum to inflation going forward. ...Raising the minimum wage has been a hardy perennial of the left for decades now. What is striking is the degree to
which is has come to be seen as an economic free lunch. Even some reputedly unbiased economists have started to tout the view that raising the minimum wage has no discernible effect on job creation. But if this
were true, they'd be calling for a $10, $20 or even $50-an-hour minimum wage. They're not, and neither is Nancy Pelosi. That's because the law of
demand is one of the most dependable precepts of economics. It says that when the price of something goes up, demand for it goes down. An employee's wages are the price the employer pays for his services, so
raising their wages means forcing employers to pay more for workers. The price goes up and there is downward pressure on demand for workers. Other things being equal, jobs are lost.
Wednesday, November 15, 2006 ~ 8:44 a.m., Dan Mitchell Wrote: Voters were fed up with Republicans, and they had every reason to be. In 1994, the GOP swept to power on its "Contract with America" -- a
principled platform of fiscal restraint, smaller government, individual responsibility, and cleaner politics. A dozen years later, the contract
forgotten, the GOP had become an embarrassment -- a party of soaring federal budgets, gluttonous farm and highway bills, and earmarks from here to eternity. Instead of permanent tax relief and Social Security
reform, the Republicans delivered a vast new drug entitlement and the McCain-Feingold crackdown on political expression. Worst of all, the party that had held itself out as the antidote to Democratic corruption
now reeked of its own scandals. Week by week, the parade of sleazy Republicans seemed to lengthen -- Jack Abramoff, Bob Ney, Mark Foley, Duke Cunningham. Voters finally had enough. Exit polls nationwide
found that it was corruption and scandal, far more than the unpopular war in Iraq, that voters had in mind on election day.
Wednesday, November 15, 2006 ~ 7:53 a.m., Dan Mitchell Wrote: One cash-strapped Indian city has launched a unique collection service to dislodge payment from tax deadbeats: Door-to-door eunuchs. Eunuchs -
a term used in India to describe transvestites, postoperative transsexuals and hermaphrodites - traditionally make a living on tips for dancing at
weddings or for blessing newborns. They frequently refuse to leave until they are given money. ..."We are confident that their reputation and
persuasive skills will come in handy for the municipal authorities to collect taxes from defaulters," said Bharat Sharma, a revenue officer.
Only 2,000 of nearly a half-million people have been paying property tax and water supply charges to Patna's municipal authorities, and tax
collection is less than one-third of a projected tax base of $15 million, said Atul Prasad, the municipal administrator.
Tuesday, November 14, 2006 ~ 12:05 p.m., Andrew Quinlan Wrote: Karen Kerrigan, Small Business & Entrepreneurship Council: The small business and entrepreneurial sector of the economy will only
continue to flourish in the U.S., indeed worldwide, if tax burdens are low – competition is a key tool that holds governments accountable if they
desire a vibrant and growing economy. … In recent years, the OECD has been pushing for higher taxes, advocating a global tax, and hampering tax competition between nations. The OECD, along with various
countries that inflict weighty tax and social welfare burdens on their economies, do not like the idea that countries can and should compete in
terms of taxation. It appears they want all nations to impose onerous taxes and big government, so high-tax countries do not lose out in terms
of investment, jobs and economic growth. … In reality, increased global competition for labor and capital is an economic positive that serves as a
disciplining force against increasingly bloated government and excessive taxation. Global tax competition should be embraced… Nations should
be free to choose their own tax systems without interference, pushing and prodding from an international bureaucratic organization like the OECD.
U.S. tax dollars certainly should not be used to undercut sound, pro-growth tax policies implemented at home or in other nations. Pat Toomey, The Club for Growth: As you know, American taxpayers provide roughly 25 percent of the Paris-based OECD's annual budget of
about $400 million. In recent years the OECD has moved from a focus on gathering international statistics and publishing studies to a troubling
agenda of advocating for higher taxes within OECD member countries and against worldwide tax competition. The Club for Growth appreciates your efforts to hold the OECD accountable for the funds American
taxpayers so generously provide. While in the long term we question the wisdom of American tax dollars paying so much of OECD's budget, the
spending restriction you inserted in the bill at hand is very much needed and we strongly encourage Senators to stand firm in insisting on retention of the Section 577 language in conference. Inhofe Forum, Today, November 14th, 3:30 PM, 406 Dirksen Senate Office Building: Should American Taxpayers Fund Pro-Tax Increase Policies at the UN and OECD? Support grows for limiting OECD funding as more Free-Market groups, ACU, CCAGW and ASA, join the fight for more accountability at the Paris-based bureaucracy. Tuesday, October 31, 2006, Setting the record straight on OECD Funding. Friday, October 27, 2006, NTU and ATR support appropriations language restricting OECD funding for international tax harmonization schemes. Tuesday, October 24, 2006, Even the OECD admits that social welfare spending leads to less growth and higher unemployment. Monday, October 23, 2006, Paris-Based Bureaucracy may lose tax dollars because of anti-U.S. policies. Thursday, October 19, 2006, Is the OECD using U.S. tax dollars to lobby American lawmakers for bigger government? Friday, October 13, 2006, In major decisions that also damage OECD tax harmonization hopes, Hong Kong and Singapore reject expanded EU savings tax directive. Tuesday, October 3, 2006, OECD makes absurd claim about "harmful tax regimes" in member nations.
Tuesday, November 14, 2006 ~ 7:50 a.m., Dan Mitchell Wrote: ...some of the ideas [Republicans] used to stand for are alive, well and popular among voters. The most significant moral victory comes in
Michigan, where voters approved by a surprisingly lopsided 58-42 margin Proposal 2, which bars discrimination and preferential treatment "in the operation of public employment, public education or public
contracting." ...In California, four measures that would have raised taxes in an already overtaxed state went down in flames. One of them was a
300% hike in the duty on cigarettes; another a $50 per-parcel tax on landowners. Then there was Proposition 89, which would have hiked corporate taxes by 0.2 percentage points to create campaign funds for
political candidates able to raise at least $125,000 in five-dollar increments. ...For our money, however, California's dumbest proposition was numbered 87. ...it would have slapped a sliding-scale tax on
California oil producers in order to fund alternative energy sources and, supposedly, reduce dependence on foreign oil. But exactly how increasing
the cost of domestic oil was supposed to do that...was a conundrum to which supporters never gave much thought. ...Also encouraging were the nine states that passed anti-Kelo referendums, which restrict state
governments from using their powers of eminent domain to transfer property from one private owner to another. That brings to nearly 40 the number of states that have responded to the Supreme Court's infamous
2005 ruling that allowed the city of New London, Connecticut, to seize 15 homes to do the bidding of corporations and developers. ...What all this
tells us is that while voters have delivered a partisan rebuke to a party that likes to describe itself as conservative, they still believe in low taxes,
property rights and social conservatism -- so long as it is not extreme. There's a lesson here for the next crop of GOP candidates, assuming they're willing to pay attention.
Tuesday, November 14, 2006 ~ 7:23 a.m., Dan Mitchell Wrote: Macedonia will become the 10th eastern European country to adopt a flat-rate tax next year... The Macedonian government will introduce a
single rate of income and corporation tax of 12% in 2007. It then plans to lower both to 10% by 2008 to attract more foreign investment and
reduce tax evasion, according to the country's finance ministry. The new flat rate would replace a corporate tax of 15% and personal income tax
ranging from between 15% and 24%. The tax on reinvested profits will be scrapped and there will be a significant zero-taxed personal allowance. ...The most recent country to introduce a flat rate was
Romania, last year. The other eight countries to operate such a system are Estonia, Lithuania, Latvia, Russia, Serbia, Ukraine, Slovakia and Georgia. Until now, Georgia boasted the lowest flat tax at 12% but
Macedonia's move will give it the most competitive rates from 2008. The reform will also put pressure on neighbouring countries, including Greece, Albania and Bulgaria, to follow suit.
Monday, November 13, 2006 ~ 8:44 a.m., Dan Mitchell Wrote: ...the island city-state is seeking to establish itself as Asia's newest private banking hub by luring the planet's super-wealthy - and their bank
accounts - away from places such as Hong Kong and Switzerland. As an enticement, Singapore has strengthened bank secrecy laws and is allowing foreigners...who meet its wealth requirements to buy land and
become permanent residents. The goal is to attract private wealth from across Asia, as well as riches that Europeans and other Westerners are moving out of Switzerland to avoid new tax and reporting laws there.
Even many Swiss banks are beefing up their operations in Singapore to capitalize on the new business opportunities. The number of private banks operating in Singapore has nearly doubled, to 35, in the last six
years, officials say. Authorities estimate that money managed by private banks in Singapore has grown 20% each year since 2000 to more than $200 billion today. ...Singapore's foray into the wealth management
business comes as new regulations are cutting into the holdings of longtime European banking customers. Under pressure from governments to discourage tax evasion, banks in Switzerland and other
once-impenetrable financial havens - which for years have given foreign-government tax agents little cooperation - have begun withholding taxes on some accounts. Singapore's banking-friendly
regulations are attracting wealthy foreigners looking for a new tax haven. ...Singapore is taking a financial gamble in advertising an environment that is light on taxes and heavy on secrecy, some say.
Because along with good money, they warn, could also come the bad: illicit funds from terrorist groups or crime syndicates. ...Regulators in
Singapore insist that the government is not seeking to attract tax evaders and stress that the country has strong laws to pursue terrorists and
others who might try to park illegal funds there. In an e-mail, officials said they cooperated with foreign authorities investigating money laundering and terror financing. Some free trade advocates say that
Singapore is not leaving itself vulnerable. Singapore has extensive anti-money laundering laws and has a clean bill of health from international monetary regulators, said Daniel Mitchell, a tax economist
at the Heritage Foundation, a Washington-based public policy research group. "Those are not the characteristics of a rogue regime," he said.
Monday, November 13, 2006 ~ 8:27 a.m., Dan Mitchell Wrote: Bush's big-government policies have certainly transformed America, but they are not even in the same neighborhood as true limited-government
conservatism. Worse, the president, his advisors, the Republican National Committee and Republican leaders in the House and Senate have alienated the party's conservative base of activists and voters.
Compassionate conservatism first brought us the No Child Left Behind Act of 2001. NCLB further consolidated federal oversight of education in an era when local control was the mantra of conservative voters and
Republican congressional candidates. Compassionate conservatism gave us the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. A Heritage Foundation report on the Medicare trustees'
estimates finds that "Medicare's long-term debt, based on a 75-year actuarial projection, is now estimated to be $32.4 trillion. Of that
amount, $8 trillion is directly attributable to the Medicare prescription drug entitlement." The prescription drug bill is one of the largest
expansions of the entitlement state in our nation's history. Bush has further abandoned fiscal conservatism on federal spending, one of the
bedrock principles of conservative ideology. ...federal spending rose by 4.7 percent in President Clinton's first term, and 3.7 percent in his second
term. Federal spending rose 19.2 percent in Bush's first term alone. Too many Republicans in the House and Senate have enabled the compassionate conservative ruse by refusing to lead on true conservative
solutions. The flawed structures of the Social Security and Medicare programs continue to consume a larger portion of federal tax receipts and will soon go bankrupt. ...Republican candidates lose when the party
apparatus, whose goal is to win elections, abandons the conservative base, whose goal is conservative policy solutions. Just two years ago Bush and Santorum unconscionably endorsed liberal Senator Arlen
Specter (R-PA), who was in a primary race with conservative Congressman Pat Toomey. Specter won the primary, but Santorum ultimately paid the price. In this year's Rhode Island Republican Senate
primary, the RNC openly supported liberal Senator Lincoln Chafee against his more conservative opponent, Steve Laffey. Sen. Chafee is one of the most liberal members of the Senate and refused to vote for
President Bush in 2004, writing in the president's father instead, yet the RNC still paid for ads in his primary race. Rhode Island voters were not
likely to nominate or elect a conservative, but the RNC's actions were heard across the fruited conservative plain. ...Compassionate conservatism completely betrayed conservative voters and their decades
of grassroots activism. Fortunately, all is not lost for the true conservative movement. Every House and Senate seat lost this year is an opportunity for conservatives to re-educate the public on true
conservative policy solutions.
Monday, November 13, 2006 ~ 8:04 a.m., Dan Mitchell Wrote: ...there are good ways and bad ways to collect taxes. Imagine a modest-sized business - TaxpayerCo - that produces and sells consumer
goods. In Hong Kong the business pays one income tax, one labour tax, one property tax and one fuel tax totalling 29% of profits. It takes 80 hours to comply with tax requirements. Meanwhile, in Belarus
TaxpayerCo is subject to 12 taxes, including an income tax, sales tax, value added tax (VAT), transport duty, three labour contributions, land
tax, property tax, ecological tax, fuel tax and a turnover tax where taxes are paid on inputs and again on outputs. Despite many deductions and
exemptions, required payments add up to 186% of profits - which in an extreme case could lead to business failure or tax evasion. The business
would make 125 tax payments to three agencies, all by paper, and spend 1,188 hours doing so. Tax refunds would take two years to process. This complexity and delay make Belarus' tax system among the world's most
burdensome. Most companies can't afford to declare all their output, and 42% of business activity therefore goes unrecorded. ... complicated tax
systems can lead to high evasion, even when rates are low. For example, although taxes in Peru are low by Latin American standards, evasion is a problem because it takes 74 days and 53 payments to fulfil tax
requirements. In Brazil, the average business spends 455 days a year to comply with taxes - because there are, on average, 55 changes to tax
rules a day. ... high tax rates do not always lead to high tax revenues. Between 1982 and 1999 the average corporate income tax rate worldwide fell from 46% to 33%, while corporate income tax collection
rose from 2.1% to 2.4% of national income. ... A better way to meet revenue targets is to encourage tax compliance by keeping rates moderate. Russia's large tax cuts in 2001 did exactly that. Corporate tax
rates fell from 35% to 24%, and a simplified tax scheme lowered rates for small business. Yet tax revenue increased - by an annual average of 14% over the next three years. ... More recent reformers have shown
similar results. Ghana exceeded its mid-year revenue targets despite significant cuts in corporate tax rates in the last two years. Albania's
corporate tax revenue rose 21% after the rate was cut, while in Moldova it jumped 28% and in Latvia, 37%. In Romania, budget revenues grew
8% in real terms in the first quarter of 2005 relative to the same period in 2004, despite the new flat tax. Economic growth in these countries is a
factor in the increased revenues. But compliance is also up. ... Simplifying the tax regime by reducing tax rates and eliminating exemptions is the
main way to reduce corruption in tax administration. Georgia - which introduced major reductions in tax rates and simplifications to the tax
system in 2004 - has seen a drastic fall in perceived corruption of tax officials. In 2005 only 11% of surveyed businesses reported that bribery was frequent, down from 44% in 2002. That was the sharpest drop in
perceived corruption among the 27 transition economies. Romania, another major reformer in 2004, and Slovakia, which introduced large tax reforms in 2003, also saw falls in perceived corruption: from 14% to
8% of surveyed businesses and from 11% to 5%, respectively. ... Overall growth is also higher with lower taxes and better collection. And with tax
incentives aligned to encourage work, more firms and more jobs are created. One study shows a cut of one percentage point in corporate tax
rates is associated with up to a 3.7% increase in the number of firms and up to 1.1% higher employment.
Sunday, November 12, 2006 ~ 5:14 p.m., Dan Mitchell Wrote: European Commission plans to raise the minimum tax rate on alcohol on Tuesday (7 November) fell foul of EU finance ministers who could not
agree to the proposals. "We had a lively debate on the importance of beer, beer was one of the problems today," Finnish finance minister Eero
Heinaluoma said after the meeting. The commission had proposed a 31 percent increase in the minimum tax on alcohol... However, it was too much for certain countries, particularly Germany which led the field in
opposing the plans. "Germany is not against alcohol tax but Germany is against beer becoming more expensive," deputy finance minister Thomas
Mirow said, according to AP. "We have made clear that because of the sales tax raise, we have no manouevering space." Mr Mirow was
referring to the fact that German beer drinkers already face a tax hike on their tipple beginning in January.
Sunday, November 12, 2006 ~ 3:33 p.m., Dan Mitchell Wrote: One frequent, and nasty, argument against school vouchers is that they will end up resegregating public schools. It's all the nastier because the
truth is the opposite, as some new evidence shows. The liberal Urban League has charged that school vouchers -- which go mostly to minority
families -- would "subsidize segregation." And the theme has been picked up by no less than Senator Hillary Rodham Clinton, who according to
Newsday explained her opposition to school choice this way to liberal activists in the Bronx earlier this year: "First family that comes and says
'I want to send my daughter to St. Peter's Roman Catholic School,' and you say, 'Great, wonderful school, here's your voucher.' Next parent that
comes and says, 'I want to send my child to the school of the Church of the White Supremacist . . .'" Yes, she really said that. ...She can't mean
the schools in Milwaukee and Cleveland, where a new study by Greg Foster of the Milton and Rose Friedman Foundation finds that vouchers have allowed students to move to more racially integrated private
schools. The Friedman Foundation favors school choice, but its data here seem unassailable and the Foundation is challenging anyone to refute it.
The study finds that in 2003 private voucher schools in Milwaukee were 13% more racially diverse, and the Cleveland voucher schools 18% more diverse, than their public school counterparts.
Saturday, November 11, 2006 ~ 7:33 p.m., Dan Mitchell Wrote: France's 35-hour week has had "negative consequences." That's putting it mildly, but those words coming last week from French President
Jacques Chirac himself count as an admission of failure. His treasurer was more concrete. The forced leisure added EUR100 billion to the national debt, Finance Minister Thierry Breton said. That doesn't mean
the government will now scrap the law, which would require political courage. But whenever the French can't implement good economic policy at home, they usually revert to Plan B: using the European Union to
export their wrong-headed ideas across the Continent. So, at today's meeting of EU labor ministers, Paris will lead the push for Britain to drop its opt-out from an EU law that limits the average working time
within a four-month period to 48 hours a week. ...Employees in the U.K., if they so want, can clock in up to 78 hours a week. This has been a sore point for Paris ever since. The Finns, who currently hold the EU
presidency, propose a compromise: a cap of 60 hours a week over a three-month period that would only apply to Britain. Still an opt-out, but
only of sorts. British industry worries that the revised law could add more red tape and costs. And Britain's reputation is at risk.
Friday, November 10, 2006 ~ 8:55 a.m., Dan Mitchell Wrote: Congressional Democrats might want to reverse the tax cuts of 2003, but they know they can't override a presidential veto. There is no point in
appearing eager to raise taxes before the next presidential election, since doing so would just make it easier to lose in 2008. Since most tax cuts
expire in 2010 anyway, all the pro-tax Democrats need to do is to lay low, not show their hand and stall for time. The new chairman of the House Budget Committee, South Carolina's John Spratt, cleverly advised
CNBC that Democrats would focus on narrowing "the tax gap." That refers to the difference between taxes owed and taxes actually paid -- as
a result of understating income, overstating deductions and credits, not making required payments or failing to file a tax return. Who could
object to closing the tax gap? Certainly not the IRS, which deploys "tax gap" estimates as a reason to keep increasing the agency's $10.6 billion
budget. If the House Democrats are simply hoping to fund an even more aggressive and more intrusive IRS, however, the effort may not prove as popular as it sounds. ...The main thing the House Democrats need to
learn about the tax gap is that legal tax avoidance and illegal tax evasion (among those with enough income to matter to the IRS) are most enticing when marginal tax rates are high and least tempting when such
tax rates are low. Attempting to narrow the tax gap is not necessarily objectionable, so long as it isn't accomplished by trampling all over the privacy of honest taxpayers. But the only proven way to maximize
taxpayer compliance, as we learned in 1988 and 1997, is to keep the highest tax rates as low as possible.
Friday, November 10, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: At least Republicans now know where ``the bridge to nowhere'' leads: to the political wilderness. But there are three reasons for conservatives to
temper their despondency. First, they were punished not for pursuing but for forgetting conservatism. Second, they admire market rationality, and
the political market has worked. Third, on various important fronts, conservatism continued its advance Tuesday. Of course the election-turning issue was not that $223 million bridge in Alaska, or even
the vice of which it is emblematic -- incontinent spending by a Republican-controlled Congress trying to purchase permanent power. Crass spending (the farm and highway bills, the nearly eightfold increase
in the number of earmarks since 1994) and other pandering (e.g., the Terri Schiavo intervention) have intensified as Republicans' memories of
why they originally sought power have faded. ...The Iraq War, like the Alaska bridge, pungently proclaims how Republicans earned their rebuke. They are guilty of apostasy from conservative principles at home
(frugality, limited government) and embrace of anti-conservative principles abroad (nation-building grandiosity pursued incompetently). ...This year Democrats tacitly accepted much of the country's rightward
movement over the last quarter-century. They did not call for restoring the 70 percent marginal tax rates that Reagan repealed. And although Pelosi and 15 of the 21 likely chairmen of committees in the coming
Congress voted against the 1996 Welfare Reform that has helped reduced welfare rolls by roughly 60 percent, Democrats this year did not talk about repealing it. The property rights movement gained ground Tuesday
as voters in nine states passed measures to restrict governments from exercising eminent domain in order to enlarge their tax revenues. In
Michigan, opponents of racial preferences in public hiring, education and contracting easily passed their referendum, 58-42, in spite of being outspent more than three to one. In Minnesota -- the only state
Democrats have carried in each of the last eight presidential elections, but one that is becoming a swing state -- Republican Gov. Tim Pawlenty was re-elected. And come January, the number of Republicans in the
House (at least 200) will still be larger than the largest number during the Reagan years (192 in 1981-83). The country remains receptive to
conservatism. That doctrine -- were it to become constraining on, rather than merely avowed by, congressional Republicans -- can be their bridge back from the wilderness.
Friday, November 10, 2006 ~ 8:16 a.m., Dan Mitchell Wrote: When we took control, that positive Reagan vision of limited government and individual responsibility provided a great deal of discipline and
allowed us to govern accordingly. Our primary question in those early years was: How do we reform government and return money and power back to the American people? Eventually, the policy innovators and the
"Spirit of '94" were largely replaced by political bureaucrats driven by a narrow vision. Their question became: How do we hold onto political
power? The aberrant behavior and scandals that ended up defining the Republican majority in 2006 were a direct consequence of this shift in choice criteria from policy to political power. Nowhere was this turn
more evident than in the complete collapse of fiscal discipline in the budgeting process. For most Republican candidates, fiscal responsibility
is our political bread and butter. No matter how voters view other, more divisive issues from abortion to stem-cell research, Republicans have
traditionally enjoyed a clear advantage with a majority of Americans on basic pocketbook issues. "We will spend your money carefully and we will
keep your taxes low." That was our commitment. This year, no incumbent Republican (even those who fought for restraint) could credibly make that claim. The national vision--less government and lower
taxes--was replaced with what Jack Abramoff infamously called his "favor factory." One Republican leader actually defended a questionable
appropriation of taxpayer dollars, saying it was a reasonable price to pay for holding a Republican seat. What was most remarkable was not even
the admission itself, but that it was acknowledged so openly. Wasn't that the attitude we were fighting against in 1994? ...Republicans let their
fears and insecurities get in the way of important reforms. They missed the opportunity of a lifetime by failing to embrace retirement security
based on personal ownership. Instead, from both parties we heard about "saving Social Security"--to the extent we heard anything at all.
Republicans should be for reforms that free individuals and their families from failed government programs. We should not be for "saving" failed
government programs. When we took on welfare reform in 1995, we knew we were taking on a Goliath. Once we threw the first rock, we knew we had to finish the job.
Friday, November 10, 2006 ~ 7:45 a.m., Dan Mitchell Wrote: During this election season, Republican congressional leaders awarded members with a bronze bust of Ronald Reagan if they could prove they'd
hosted town halls to explain to seniors how to sign up for the newly created Medicare Part D, which created a huge new prescription-drug entitlement in an already huge entitlement program. And we wonder why
we were beaten like a rented mule on Tuesday? ...Are we going to re-emerge as the party of ideas -- or be content as assistant hirelings of big government? ...spending...requires not just a mea culpa but abject
apology. Not the politician-style -- "I'm sorry if you were offended by spending that our opponents have misinterpreted as offensive" -- but
rather: "We've overspent, badly, and it was offensive to you as well as our conservative principles. We're sorry, and we're going to do better." It
is not only the level of spending, of course, that has been offensive. It is the manner of spending. Pork-barrel earmarks, or "member projects" (as
we preferred to call them so as not to offend our own sensibilities), greatly multiplied under Republican rule. ...The Farm Bill probably provides the best example of where we've gone wrong, and what we need
to do to hew back to our first principles. During the 1990s, then-Sen. Phil Gramm accurately described U.S. farm policy as "enough to make a
Russian Commissar puke." The Republicans assembled the "Freedom to Farm Act," which, starting in 1996, put U.S. farmers on a glide path
toward an end to subsidies. Somewhere between the field and the silo, however, we became mired in the political mud. In 2002, we repealed the
Freedom to Farm Act and in its place installed the "Farm Security Act" -- those who value the adage about trading freedom for security can pause and shudder here -- with even more lavish subsidies.
Friday, November 10, 2006 ~ 7:39 a.m., Dan Mitchell Wrote: Here's one telling exit poll result: In battleground districts, only one in five voters said Republicans would do a better job to "keep government
spending under control"; almost twice as many voters said Democrats would do a better job. Yet this week a separate poll found that 59% of Americans still favor fewer government services and lower taxes
compared with 28% who favor more government services and higher taxes. "Big government conservatism" was a nice think-tank proposition;
it merely lacks support from actual voters. ... As a minority party in Congress, Republicans must operate as the party of change, not of Washington insiders willing to sign away their principles for a courthouse
or swimming pool in the home district. This doesn't mean they shouldn't work with Democrats when it makes policy sense. But they need to reclaim their fiscal conservative birthright. The Club for Growth today released new survey data that shows the Republican Party has completely lost its brand as the party of limited
government and low spending. The poll is instructive since it surveyed voter attitudes in 15 battleground districts where neither candidate suffered from personal scandal.
Friday, November 10, 2006 ~ 7:00 a.m., Dan Mitchell Wrote: When Republicans behave like Democrats, they lose. Why should people settle for counterfeits when they can have the genuine article?
...Republicans lost a significant part of their base in this election. Exit polls revealed nearly one-third of white evangelical Christians voted for
Democrats, mostly because of perceived corruption in the GOP. ...The problem for Republicans is their loss of revolutionary zeal.
Friday, November 10, 2006 ~ 6:34 a.m., Dan Mitchell Wrote: Kofi Annan has famously described the United Nations as an institution of "unique legitimacy." But when he turns over the Secretary
Generalship to South Korean Ban Ki Moon two months from now, he will be leaving behind an organization whose reputation for integrity and competence has never been lower. The latest scandal is the arrest and
indictment this week of U.N. procurement official Sanjaya Bahel on bribery charges. He's accused by federal prosecutors of steering more than $50 million worth of contracts to bidders in exchange for such
considerations as a cheap Manhattan apartment. And his alleged misdeeds may have compromised U.N. peacekeeping missions in places like Liberia, Congo and Kosovo, where a U.N. internal investigation says
favored contractors were allowed to skimp on employee salaries and pocket the money for themselves. Last year, Russian Alexander Yakovlev pled guilty in a case involving $1 million in bribes on $79 million in
contracts. And earlier this year a U.N. internal probe concluded that more than $300 million worth of contracts may have been improperly handled, either through mismanagement or outright criminality. One
person who had a cozy relationship with the U.N. procurement office, by the way, was none other than Mr. Annan's son Kojo, whose role in a firm
that benefited from Iraqi Oil for Food contracts has never been fully clarified.
Thursday, November 9, 2006 ~ 3:30 p.m., Andrew Quinlan Wrote: J. William Lauderback, The American Conservative Union: On behalf of the American Conservative Union and our hundreds of thousands of
members and supporters across the country, I write in support of language currently included in the Senate version of the FY 2007 Foreign Operations appropriations bill (H.R. 5522) that would limit the use of
U.S. funds for global tax and tax harmonization initiatives. … The language of Section 577 is essential. American taxpayers provide roughly 25 percent of the OECD's operating budget (around $85
million), and are supposed to receive in return a forum committed to the market economy along with international statistical reports. In the past,
the OECD has repeatedly overstepped its mission by advocating for higher taxes within OECD member countries and against worldwide tax competition. Examples include suggesting the U.S. adopt a value-added
tax in October 2006 and endorsing the creation of a global taxation system in May 2005. Thomas A. Schatz, Council for Citizens Against Government Waste: On behalf of the more than 1.2 million members and supporters of the
Council for Citizens Against Government Waste (CCAGW), I want to thank you [Senator James Inhofe] for attaching language to H.R. 5522, the Foreign Operations, Export Financing, and Related Programs
Appropriations Act, that would curtail funding to the Organization for Economic Cooperation and Development (OECD) for activities or projects that would interfere with a nation's ability to determine and set
its domestic tax policy. … In recent years, capital and labor have become highly mobile. With the growth of technology and free trade, the flow of
production and capital will naturally move to business-friendly, low-tax countries. This creates "tax competition," leading other nations to
restructure their tax policies to encourage growth and entrepreneurship. Unfortunately, bureaucrats from high-tax nations prefer their well-funded, job-killing welfare state and resent the pressure to lower
taxes. While the OECD may prefer anti-free market policies, U.S. taxpayers shouldn't have to support such activities. Your amendment will stop this waste of tax dollars and CCAGW encourages its retention
either in conference or in an omnibus appropriations bill. Dan Clifton, American Shareholders Association: As an investor organization, keeping U.S. businesses competitive internationally and
making this an attractive country for business is at the core of our values. Recently, the OECD suggested that the United States adopt a Value Added Tax (VAT) and increase at least a dozen other taxes. A
VAT, or any other tax increase, limits our economic growth and our investment opportunities. … What's worse is that we are paying for this misguided advice by funding 25% of the OECD budget. … We urge you
to support the language of Section 577 in H.R. 5522 to limit the reach of the OECD and keep us from paying for anti-growth tax policy advice.
Friday, October 27, 2006, NTU and ATR support appropriations language restricting OECD funding for international tax harmonization schemes. Tuesday, October 24, 2006, Even the OECD admits that social welfare spending leads to less growth and higher unemployment Monday, October 23, 2006, Paris-Based Bureaucracy may lose tax dollars because of anti-U.S. policies Thursday, October 19, 2006, Is the OECD using U.S. tax dollars to lobby American lawmakers for bigger government? Friday, October 13, 2006, In major decisions that also damage OECD tax harmonization hopes, Hong Kong and Singapore reject expanded EU savings tax directive. Tuesday, October 3, 2006, OECD makes absurd claim about "harmful tax regimes" in member nations. Thursday, November 9, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: Politicians talk about "free education," "free medicine" or "free housing," but that's nonsense. Resources are required to produce each of
them. Of course, some people received these goods at a zero price, but that doesn't mean they didn't cost someone, usually a taxpayer, something. ... trade promotes economic progress through encouraging
specialization. That's true whether the trade is between individuals, regions or countries. Specialization and trade make us dependent upon one another, but not to worry. The world's poorest people are far more
independent than we. Check out Darfur. You might see families building their own shelter, gathering their own food and heating supplies, and
making their own clothing. ... Profits direct resources to their highest value uses. Losses free misused resources for higher value uses. People
earn income by serving their fellow man. This link between serving others and income gives us incentive to develop talents and skills and become
highly valued. ... We shouldn't ignore the secondary and long-term effects of an action. For example, trade restrictions on foreign sugar that result
in higher prices for domestically produced sugar save jobs in our sugar industry. Because of those higher prices, major candy manufacturers such as Wrigley and Brach's moved to Canada and Mexico to take
advantage of lower sugar prices. That resulted in more U.S. jobs lost than were saved by the sugar trade restrictions.
Thursday, November 9, 2006 ~ 8:52 a.m., Dan Mitchell Wrote: ...these results are not typographical errors: * When asked which Party they believe would cut taxes for the middle-class 42% said the Democrats
while only 29% chose the Republicans. * When asked which Party will work toward reducing the deficit 47% chose the Democrats while only 22% chose the Republicans. * Again, when asked who will keep
government spending under control the Democrats held a 17 point edge (38% Democrats, 21% Republicans). ...This survey provides no evidence of an ideological shift among the electorate but rather a clear
repudiation of perceived Republican incompetence. 44% of the voters in these districts said the Republican Party has been incompetent and is not getting the job done for Americans. Only 17% said they think the
Republican Party is too conservative. ... The voters of these 12 swing districts have made a firm decision - they have decided the Republican
Party has discarded its core principle of fiscal conservatism along the roadside on the way to power. It is also clear that the Republican Party
currently has very little credibility with swing voters and is seen as incompetent and not getting the job done. There is no evidence that these
voters are embracing the Democrats' vision for the country. In fact, they are not at all sure what the Democrats' vision is. But they feel certain
that the Republicans have not gotten the job done and they are willing to take a chance on the Democrats.
Thursday, November 9, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: Not content at trying to stop foreigners from catering to Americans' taste for gambling, Congress is on the verge of passing a law aimed at
stopping Americans from catering to foreigners' taste for horsemeat. I generally avoid the phrase "cultural imperialism," since it's often used by
people who object to the voluntary consumption of American products by non-Americans. But when Americans want to forcibly impose their
culinary preferences on people in other countries, it fits pretty well. ... the National Horse Protection Coalition asserts, "no U.S. interests are
involved." What about the Americans who work in the plants or sell horses to them? What about the U.S. interests in fairness, tolerance,
property rights and some modicum of logic in the formulation of public policy?
Thursday, November 9, 2006 ~ 7:48 a.m., Dan Mitchell Wrote: Two years ago, I warned in these pages of the danger that the government, in response to the infamous "wardrobe malfunction" during
January's televised Super Bowl, would use the threat of fines and license-revocation to create a climate of self-censorship among
broadcasters. I take no pleasure in saying "I told you so." But the chill in the airwaves is unmistakable, and the viewing public is the biggest loser.
The most recent example involves dozens of CBS affiliates who refused to rebroadcast the documentary "9/11" for fear they would be fined for the
coarse words uttered by rescuers. This is one of many instances of broadcast licensees altering or canceling worthwhile programming out of concern about finding themselves in the Federal Communications
Commission's crosshairs. The FCC doesn't operate in a vacuum. It is responding to a degree of public unease with the content available in homes. And it is sensitive to campaigns orchestrated by interest groups
with cultural and political agendas. But America long ago determined that government's role in shaping media should be extremely limited. …two-thirds of households do not have children under 18. One could
reasonably suggest that government policy should not try to force all of broadcast TV to disregard the programming tastes and desires of two-thirds of all households. But FCC regulators do more than just
ignore these households. They are blind to the reality of today's media environment. With more than 50% of homes having Internet access and 85% subscribing to cable and satellite services, the media choice is
staggering. The average home receives 100 TV channels. Broadcast channels sit side-by-side with cable; and the under-18 cohort that the FCC focuses on so intently no longer knows the difference. Indeed, kids
watch cable significantly more than broadcast and spend time on the Internet with unlimited access to material of every description. So an FCC policy intent on ensuring that there will be nothing on broadcast TV
that is inappropriate for kids during certain hours is doomed to failure. Do the math: 85% of households have cable and satellite, leaving 15%
receiving broadcast TV only. Two-thirds of those households do not have kids under 18. Thus, the FCC appears to be basing its actions on a policy
that is relevant to 5% of households. Moreover, government efforts to regulate content are invariably riddled with unfortunate consequences.
Wednesday, November 8, 2006 ~ 5:22 p.m., Dan Mitchell Wrote: Amid many close races in yesterday's mid-term elections, there was one issue an overwhelming majority of voters agreed on: the need to limit
government's power of eminent domain following last year's despised U.S. Supreme Court Kelo ruling. Eminent domain ballot measures, restricting governments from taking private property and giving it
private entities, passed by wide margins nationwide. In the eight states with ballot measures limiting eminent domain by addressing "public use,"
all eight passed overwhelmingly. Yesterday's election, combined with earlier reforms passed by the states, raises to 35 the number of states that have limited eminent domain abuse.
Wednesday, November 8, 2006 ~ 5:12 p.m., Dan Mitchell Wrote: Democrats used to think that hardline opposition to reform was a powerful political issue. Their current silence suggests that, at the very
least, they think that other issues are more powerful. ...Several liberal groups are circulating pledges against personal accounts, benefit cuts, or
"privatization." They say that personal accounts would threaten the program. Never mind that every proposal introduced in Congress in
recent years that would make it sustainably solvent has included personal accounts. Some of the attacks on reform have backfired. AARP, the
seniors' lobby, was, to its credit, relatively honest in putting signers on record behind a tax-increase solution to the program's insolvency. (It
used the euphemism "additional contributions.") To its discredit, it ran away from the truth when Democratic candidates started facing criticism
for wanting to raise taxes. ...Tim Penny, a former Democratic congressman who now helps to lead For Our Grandchildren, says that the campaign season so far suggests to him that opposition to reform "is
not proving to be a successful wedge issue." Liberals denied Bush a second-term policy victory and drove down his numbers, but they have
not been able to make Social Security a winning electoral issue. ...The good news is that Social Security demagoguery doesn't appear to be working. That means that if Republicans gain seats a few elections from
now, or if Democrats conclude that there are no political profits to be had in joining the know-nothing caucus, reform might become possible.
The bad news is that the clock is still ticking. Since 2003, lost time has increased the net present value of a fix by $1.8 trillion. And the more time passes, the more people become retirees whose benefits are
politically untouchable. Sweden, meanwhile, has modernized its pension program to include personal accounts.
Wednesday, November 8, 2006 ~ 8:32 a.m., Dan Mitchell Wrote: Like taxes, economic regulations are burdens; and also like taxes, once regulatory burdens become heavy enough, they will drive business to
jurisdictions where it can be transacted more cheaply and efficiently. And since money moves so easily across national boundaries, trends in the
financial markets will signal when the U.S has passed the regulatory tipping point. Consider these signals, which have been reported often enough: Between 1996 and 2001, the New York Stock Exchange
averaged 50 new non-U.S. listings annually; in 2005, it was 19. In the same year, the London Stock Exchange, including its small company affiliate, the Alternative Investment Market, gained 139 new listings
while Nasdaq attracted 19. Since the end of 2004, 30 foreign companies have left the NYSE and Nasdaq. Financial capital -- the kind that finances mergers, acquisitions and new business formation -- is also
increasingly finding a more comfortable home abroad. Large offerings by Chinese, Korean and Russian companies -- involving billions of dollars --
have occurred in Hong Kong and London; meanwhile, large new foreign offerings this year by Russian aluminum producers and Kazakhstan oil and copper companies are planning to list in London. …The most obvious
answer, Sarbanes-Oxley, is not the whole story. Preceding and following Sarbox were a number of other regulatory burdens that, cumulatively,
are taking the already heavy U.S. regulatory structure over the edge. …a recent Securities Industry Association estimate that the industry spends
$25 billion annually on SEC compliance. These costs get passed along to individuals or companies that make use of the U.S. securities markets. Is
it surprising, then, that a recent study by the London Stock Exchange showed that underwriting costs in London were roughly half of those in the U.S.? …Perhaps the deep capital markets in the U.S. would have
retained their attraction to foreign companies if only one or two of these regulatory elements were in place. With all of them, many foreign companies seem to have given up on committing themselves to the U.S.
capital markets. …We should not fear, or object to, the competition of foreign markets; in fact, we should welcome it. But we shouldn't impair our own ability to compete with needless and costly regulation.
Wednesday, November 8, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: Germany's coalition last week arrived at an agreement over key company tax reforms which will reduce the overall corporate tax burden,
currently one of the highest in the world. Finance Minister Peer Steinbrueck told reporters after a working group meeting that the reforms will cut the overall corporate tax burden to a little under 30%
from the current level of almost 40%. This will be brought about largely by a cut in the 25% headline corporate tax rate, paid by large companies,
to 15% in 2008. Companies will continue to pay corporate tax at the local level at an average of about 13%. Steinbrueck hailed the agreement as "an important piece of work" that will strengthen
Germany as a centre for business. However, the proposals have been given a mixed reception from business, with many accusing the government of giving with one hand while taking away with the other.
Tuesday, November 7, 2006 ~ 8:54 a.m., Dan Mitchell Wrote: Since 1993, KPMG firms have published annual analysis of corporate tax rates around the world. In the initial survey, the rates from 23 countries
were examined. Now in 2006, the list stands at 86 countries. …The survey has recorded a consistent and dramatic reduction in corporate tax rates over that 14-year period. This reduction began in the mid-1980s in
the United Kingdom when the government of Margaret Thatcher lowered the corporate tax rate from 52 percent to 35 percent between 1982 and 1986, forcing other countries to follow suit. Once one major
industrialized economy cuts its rates, others seem compelled to do the same, in a process of international tax competition that continues and
intensifies over time. In the past 14 years, the average corporate tax rate of countries surveyed by KPMG declined nearly 29 percent (28.7), dropping from an average of 38 percent to 27.1 percent. …This
competition suggests that there must be some benefit in having low corporate taxes, and indeed it appears that countries that adopt comparatively low tax rates tend to do better in terms of growth and
inward investment than those that do not. …What this means for governments is that they have an opportunity to attract inward investment not just through low taxation, but through astute global
marketing of the benefits of siting operations in their countries. Corporations value policies that give them control and certainty, so shifts
toward long-term, business-friendly tax administration systems are likely to attract their attention.
Tuesday, November 7, 2006 ~ 8:40 a.m., Dan Mitchell Wrote: The federal government is telling several New York school districts that girls' sporting events should have cheerleaders, too. The Department of
Education's Office for Civil Rights has concluded that school districts violated the law by having cheerleaders only at boys' basketball, baseball
and softball games, and not at girls' games. Investigators interviewed school administrators and athletes in response to a complaint filed early
this year by a Binghamton-area parent. The superintendent of the Vestal Central School District says the federal agency expressed concerns about
the amount of promotion girls' sports received compared to the boys' program. He says from now on, cheerleaders will be required to perform at an equal number of girls' and boys' games.
Tuesday, November 7, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: Next week's vote will show just how many Americans are taking up the Court's challenge. No fewer than 11 states (see nearby table) have ballot
measures designed to limit government's ability to pilfer private property for someone else's private economic development. Eight initiatives would
enshrine those restrictions in state constitutions, and polls show that most are headed for victories. …At least three of these Kelo initiatives--in
California, Arizona, Idaho--also include requirements that states compensate citizens for regulations that devalue property. …As is so often the case when it comes to economic freedom, the states absent from
this debate are those with liberal legislatures on the East Coast. Politicians in New York, New Jersey and Connecticut (home of Kelo) are so addicted to the tax revenue they get by forcible property transfers to
rich developers that they refuse to act on behalf of property rights. This is one more reason for their citizens to keep fleeing these states for more
hospitable climes, much as Third World countries that fail to protect property rights watch their human capital flee.
Monday, November 6, 2006 ~ 6:15 p.m., Dan Mitchell Wrote: …an election in the sixth year of a presidency is often perilous for the president's party, a pattern that's held true in year six of the Bush era.
But Republicans have made matters worse by abandoning the reform agenda that animated their capture of Congress in 1994 and helped George Bush win the White House in 2000 and keep it in 2004. With
scarcely a fight, Republicans gave up on Social Security reform in 2005, immigration reform in 2006, and never really got started on tax reform.
Mr. Bush also cast aside the overarching theme for his domestic policy -- the Ownership Society -- without an explanation. The consequences have
been dire. Republicans have little to boast about in Mr. Bush's second term except the strong economy -- and it's largely the result of tax cuts
enacted three years ago. …Reform is appealing to voters because they sense, quite correctly, there's much in need of reform. Besides Social
Security and immigration and taxes, there's Congress itself. By skimping on congressional reform, too, Republicans made themselves all the more
vulnerable to exaggerated charges of corruption. Reform, of course, is the opposite of corruption. It's unknowable how many Senate and House seats might have been saved had Republicans championed reform. But
surely Republicans would have been better off with a program of reform to flaunt. The campaign would have been elevated.
Monday, November 6, 2006 ~ 5:02 p.m., Dan Mitchell Wrote: A report issued Monday demonstrates the priority that the international community places on fighting climate change. Oh, and then there was
that 700-page jeremiad released in London, known as the Stern review. The latter report, commissioned by the British government and overseen by former World Bank chief economist Nicholas Stern, got most of the
press. That's thanks to its claim that global warming might eliminate anywhere from 5% to 20% of world economic output "forever." And that
avoiding this catastrophe would cost "only" one in 100 dollars world-wide. It's fitting that this spook story landed just in time for Halloween. Would that the other report had received more attention,
because it's a useful reality check. We're referring to the result of a meeting of U.N. diplomats organized by Bjørn Lomborg's Copenhagen Consensus Center. Ambassadors from 24 countries -- including key
Kyoto Protocol holdouts Australia, China, India and the U.S., as well as four EU members, Canada and several developing countries -- mulled which problems they'd address first if the international community
suddenly found an extra $50 billion lying around. The point is that, in a world with scarce resources, we can't fix everything at once and thus
need priorities. The clear consensus of last weekend's meeting was that the immediate concerns of communicable diseases, sanitation and water,
malnutrition and hunger, and education rank far above speculative ones like climate change. By the way, Mr. Lomborg's group is talking about
spending a hypothetical $50 billion once, while the Stern review calls for forfeiting some $600 billion in global wealth each year . ...The Stern
review tries to pre-empt this question by arguing that the cost of climate change far outweighs the expense of avoiding it. But here the argument is
fraught with uncertainty. For starters, the authors have taken complex and still-controversial climate and economic models, attempted to integrate them, and then extrapolated the results over the next two
centuries. ...We also know that increasing the tax burden, as the Stern review advocates, hampers economic growth. This is the kind of
"unseen" activity that Bastiat pointed out, and which policy makers looking for immediate political applause tend to ignore. The same goes
for the potential benefits for cold-weather regions such as Canada, Russia and Scandinavia if temperatures rise only modestly. Lands that are now virtually uninhabitable could become productive. The Stern
report dismisses the possibility of moderate warming (meaning temperatures in 2100 would be only 2 to 3 degrees Celsius higher than in 1900) even though many climate models say this is the most likely
outcome. A scenario in which climate change doesn't lead to disaster doesn't make for very good copy. The 27-page summary begins by saying, "The current level of greenhouse gases in the atmosphere is equivalent to around 430 parts per million
(ppm) CO2, compared with only 280 ppm before the Industrial Revolution. These concentrations have already caused the world to warm by more than half a degree Celsius." More specifically, that 54 percent
increase of greenhouse gases was apparently associated with a warming of only 0.6 degrees Celsius, give or take two-tenths. Citing a 2001 survey
of "high projections" for global warming, however, the report claims that a much smaller 28 percent increase in greenhouse gases by the year
2050 could result in a "global average temperature rise" exceeding 2 degrees. Yet if we use the same rule-of-thumb now used to predict 2 to 3
degrees more global warming by 2050, the much larger increase in greenhouse gases ever since 1750-1850 should already have increased the average global temperature by at least 2 degrees. But it didn't.
...Stern's view of "sensible policies" involves a truly global system of high carbon taxes, tough regulations and generous subsidies "across both
developed and developing nations." Because "low-carbon technologies are currently more expensive than fossil-fuel alternatives," he would
heavily tax cheaper fuels and subsidize expensive ones. A high and "broadly similar price of carbon" throughout the world is apparently to
be enforced in some way by the notoriously ineffectual United Nations and World Bank.
Sunday, November 5, 2006 ~ 10:36 p.m., Dan Mitchell Wrote: Here's a job that's really for the birds: staring at dead chickens. The job is tedious, done in unpleasant places, and largely useless. But you and I
pay thousands of people to do it. A federal website for job hunters says the Department of Agriculture has "many vacancies -- nationwide" for
"bright, energetic and committed people like you to carry out its mission to protect consumers by ensuring the meat, poultry and egg supply is
safe, wholesome and truthfully labeled." So if staring at dead chickens is your idea of a good time, there is a job for you with the USDA, inspecting
poultry. And don't worry that you'll lose the job because it doesn't do much good -- how often does that cause the government to close a program? ...Twenty years ago, epidemiologist Glenn Morris was asked by
the National Academy of Sciences to evaluate the inspection system. He and other scientists concluded that it made little sense, because what the
inspectors can see isn't usually what makes people sick. A chicken could look terrible and still not make us sick. It's bacteria that make people
sick, and without a microscope, you can't see bacteria. "Birds that have no evidence of feces whatsoever may be covered with campylobacter and
salmonella," said Morris. When the inspection program began, the government assumed visible signs of disease and discolorations in the skin meant that chicken would be a danger to people. But we've known
better for years. It would make much more sense to do microbial testing: take samples off the line and put them in Petrie dishes to see what kind of
bacteria grows. So has the government stopped dead-bird watching? No. ...Although the government now does some microbial testing, the USDA
still pays inspectors to stare at every chicken. After all, that keeps all the players working. Businesses get free employees. Employees get jobs.
Unions get dues. The government gets our money. Imagine what would happen if you could watch your tax dollars as closely as the federal government watches dead chickens.
Saturday, November 4, 2006 ~ 7:15 p.m., Dan Mitchell Wrote: Experts from around the world gathering for the first Internet Governance Forum in Athens have criticised the predominant use of
English on the World Wide Web. "Some 90 percent of 6,000 languages [used today] are not represented on the Internet," said Yoshinori Imai of
Japan's Broadcasting Corporation, (NHK), at the UN-sponsored forum. Adama Samassekou, president of the African academy of languages in Mali, said linguistic diversity is to human society what biodiversity is to
nature. "I think that the digital divide is not as important as the linguistic divide. And that's the one we should be bridging in order to guarantee the
democratic governance of the Internet". Since 1998, Internet domain names and addresses have been overseen by the California-based Internet Corporation for Assigned Names and Numbers, (ICANN), under
an agreement with the US Department of Commerce. At a UN summit in Tunis last November, Washington prevented any changes in the control of the domain-name system, despite pressure by some countries for a
global body to manage the addressing system.
Friday, November 3, 2006 ~ 8:50 a.m., Dan Mitchell Wrote: The current system makes no sense at all. Beyond a brief probationary period, teachers have lifetime job security (tenure) and are virtually
impossible to dismiss even if their students learn absolutely nothing year after year. Their pay, moreover, is based entirely on a salary schedule
defined by seniority and credentials, and takes no account of whether their students are learning anything. All teachers, good and bad, are
rewarded equally -- a truly dumb idea. With this kind of reward structure, teachers are not given strong incentives to promote student learning to
the fullest, because nothing happens to them one way or the other. Good teachers do not gain from their successes; mediocre teachers suffer no
consequences for their failures. So why strive extra hard to get students to achieve? Taking it easy yields the same rewards. To make matters worse, teachers who are especially talented, skilled and effective --
qualities that employers throughout the economy are looking for -- are well aware that their superior value will only be rewarded if they leave
teaching for another career, which many of them do. Mediocre teachers, meantime, have the same lifetime security and pay as the good teachers.
And people of low quality have especially strong reason to seek out these jobs and remain in the system until retirement, because almost nowhere
else (outside government) would their poor performance be tolerated -- indeed, rewarded. The disconnect between pay and performance, then, inevitably affects the quality and motivational character of the entire
pool of people who wind up in the classroom. …In the private sector, …employees are evaluated and paid based on their performance, and dismissed if they don't do their jobs well. This is Management 101:
elementary, fundamental, essential. Only in government, of which the public schools are a part, do organizations hire employees for life and pay them without regard for their performance. …public schools, unlike
most government organizations, do have a quantifiable bottom line -- namely, student achievement, which can be measured quite reliably through standardized tests. …If incentive pay for teachers is practical,
and if it makes good sense, then why is it so rarely used? The answer has to do with politics and power, not with what is best for children. By far
the most powerful forces in the politics of education are the teachers unions, and they are opposed to incentive pay. The unions represent the
occupational interests of all their members, not just those who are good teachers, and they have a deep resistance to any form of differentiated
treatment that threatens member solidarity. Their demand is consistently for across-the-board-raises. Everyone benefits, no one surpasses anyone
else. Their vision -- if you can call it that -- is one of stultifying sameness.
Friday, November 3, 2006 ~ 8:27 a.m., Dan Mitchell Wrote: Secret plans for a multi-billion-pound package of stealth taxes on fuel, cars, air travel and consumer goods have been drawn up by the
government to combat global warming. The proposals, leaked to The Mail on Sunday, show that the Government is considering introducing a raft of hard-hitting 'eco-taxes' that will have a devastating effect on the
cost of living. Families with big cars could end up paying more than £1,000 a year extra in tax. And nearly every household in Britain will be
hit in the pocket. Most controversial of all, the documents reveal the Government is planning to grab billions of pounds of extra revenue from
motorists - without telling them. It is considering introducing a special mechanism so that whenever oil prices go down, the Government would get the cash in extra fuel tax - not the motorist.
Thursday, November 2, 2006 ~ 8:32 a.m., Dan Mitchell Wrote: The Western European economies, which I take as the living embodiments of social democracy, face a dual crunch: low rates of
economic growth and unfavorable demographics. The importance of economic growth is obvious, but rarely are the long-range implications of lower growth taken seriously. If a country grows at two percent per
annum, rather than one percent, the difference in wealth or welfare in a single year is relatively small. Over time the difference becomes very
large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. Growth laggards fall behind. If we compare a
one percentage point differential in the growth rate, and start at real income parity, we need a time horizon of 110.4 years to establish a 3:1
ratio of superiority of per capita income. If we are comparing a two percentage point boost in the growth rate we need a time horizon of only
55.5 years to establish a 3:1 superiority in per capita national income. Nobel Laureate economist Robert E. Lucas put it succinctly: "…the consequences for human welfare involved in questions like these are
staggering: once one starts to think about [exponential growth], it is hard to think about anything else." For all its virtues, social democracy
stands in danger unless Europe can boost its rates of economic growth. Even if some of the more radical social democrats may feel that "people already have enough," it is hard to imagine Europe persisting and
flourishing if it ends up as the "poor man out" and in a state of relative impoverishment. If nothing else, the most talented Europeans would
migrate elsewhere. There are already 400,000 EU researchers working in the United States, and it is not clear when they plan on returning. … Western European per capita income is now about 30 percent below that
of the United States and I see the gap widening rather than closing. It is common for the United States rate of productivity growth to be twice as
high as that of the core European nations (NB: don't be fooled by statistics of high average labor productivity levels in some countries, such as France. In part they result from limits on the creation of
low-wage jobs and they do not predict good future performance.) The relatively free Ireland continues to boom, but France, Germany, Italy and others have performed poorly. Even the Dutch economic miracle appears
to have ended.
Thursday, November 2, 2006 ~ 8:23 a.m., Dan Mitchell Wrote: Social Security was supposed to be a killer issue for Democrats this election year after they defeated President Bush's reform plans in 2005.
But suddenly the tables are turning on several Democratic candidates because of their endorsement of the tax-increase agenda of the American Association of Retired Persons, or AARP. The liberal entitlement lobby
has asked candidates around the country to fill out a questionnaire asking, "Will you support a balanced Social Security plan to continue the
program's guaranteed benefits for future generations?" That may sound innocuous, but here's how AARP defines its balanced plan on its Web site
near the above question: "AARP believes that a bipartisan plan that balances additional contributions from high income workers with modest
adjustments in future benefits can maintain guaranteed Social Security benefits for future generations." Those italics are ours, because in
Washington "additional contributions" means a tax increase. And by "high income workers," AARP can only mean anyone earning more than
$94,200, which is the 2006 income level above which the 12.4% Social Security portion of the payroll tax no longer applies. Employers and workers each pay half of the payroll levy, and the income cap already
rises each year with inflation. Thus if you make, say, $100,000 a year but live in pricey Los Angeles, tough luck; the folks at AARP think you're
rich. They supported the elimination of the income cap for Medicare's portion of the payroll tax (2.9%) as part of the Clinton 1993 tax increase, and now they want to do it for the other 12.4%. A worker earning
$150,000 would pay roughly $6,900 more each year in "additional contributions" under this AARP definition of "balance." ...Democrat
Melissa Bean--who is trying to hold her seat in an affluent district near Chicago--now claims she never supported the tax increase she plainly endorsed in answering AARP's questionnaire. And AARP is helping her
disavow her pledge by sending a letter to her district's AARP members (as well as to the districts of other vulnerable Democrats who took its pledge). The letter from AARP President William Novelli slams Ms.
Bean's opponent David McSweeney for his "ads trying to scare voters." This AARP complaint about Social Security "scare" tactics is certainly
novel, given that its own political clout has been built entirely on scaring seniors. In 2005, it paid for a TV campaign claiming President Bush
wanted to "dismantle Social Security." But see if you can follow AARP's latest logic: According to a Chicago Daily Herald interview with AARP
spokesman Dave Sloane: "The organization does believe lifting the cap on Social Security taxes and cutting future benefits may be necessary to
keep the system afloat." But then he added that to conclude that Ms. Bean supports these policies "is an outrageous leap that is not even close to the truth."
Thursday, November 2, 2006 ~ 7:51 a.m., Dan Mitchell Wrote: The Nov. 6 National Review includes a brief article by American Enterprise Institute scholar Kevin Hassett titled "Where Clinton W." The
editors easily could have devoted an entire issue to the subject. Hassett's specific topic is federal jobs, which shrank by 200,000 under Bill Clinton
but have grown by 79,000 under George W. Bush. "Strange as it sounds," Hassett writes, "Clinton's record in this particular area is
exemplary next to Bush's." Does it really sound so strange? After six years of reckless statism under Bush -- the consequences of which have
been documented in National Review articles and AEI studies, among other places -- it is now almost routine to see conservatives draw unfavorable comparisons between him and his predecessor. The
near-nostalgia for Clinton among Republicans who reviled him speaks volumes about conservative disgust with the Bush administration, which could depress turnout enough to result in a Democratic takeover of one
or both houses of Congress on Nov. 7. ...I know, I know: Bush cut taxes. But cutting taxes without restraining spending just postpones the pain, imposing a burden on future taxpayers who did not even make the
mistake of trusting Republicans. ...Federal spending as a share of GDP, which fell under Clinton to 18.5 percent, is again above 20 percent.
Discretionary spending has increased faster under Bush than it did under Lyndon Johnson, no slouch in doling out taxpayer dollars. Earmarks
have reached record levels, and the abuse of emergency spending bills is rampant. ...Far from reforming entitlement programs, the Republicans compassionately created an exorbitant Medicare drug benefit that will
add trillions of dollars to the program's long-term shortfall -- the gift that keeps on taking. Far from reducing the federal government's scope, they
have extended its reach into state and local matters such as education, abortion, marriage law and end-of-life medical decisions. Bush has either
actively sought bigger government, as with the Medicare bill and the No Child Left Behind Act, or acquiesced in it, as with transportation spending and farm subsidies. ...As the Cato Institute's William Niskanen
points out, the only extended periods of fiscal restraint since World War II occurred during the Eisenhower and Clinton administrations, when different parties controlled the executive and legislative branches.
"Government spending has increased an average of only 1.73 percent annually during periods of divided government," he writes in the October
Washington Monthly. "This number more than triples, to 5.26 percent, for periods of unified government."
Thursday, November 2, 2006 ~ 7:47 a.m., Dan Mitchell Wrote: According to the new "ABC News" poll on health care, Americans are eager to have the government force employers to provide heath
insurance... Why?! Do our employers pay for our food, clothing, or shelter? If they did, why would that be good? Having my health care tied to my boss invites him to snoop into my private health issues, and if I
change jobs, I lose coverage. Employer-paid health insurance isn't free. It just means we get insurance instead of higher salaries. I'd rather have the
cash and buy my own insurance. Companies only provide it because of a World War II-era tax break that never went away. ...insurance is a terrible way to pay for things. It's expensive and wasteful. Some years
ago, an insurance CEO said that it costs $35-$50 to process a $25 claim. Insurance burdens us with paperwork, invites cheating, and, worst of all,
creates a moral hazard that distorts incentives. The first question people ask a doctor who recommends a test is not "Do I really need that?" but
"Does my insurance cover it?" Insurance raises costs by insulating consumers from medicine's real prices. Suppose you had grocery insurance. With your employer paying 80 percent of the bill, you would
fill the cart with lobster and filet mignon. Everything would cost more because demand would rise and supermarkets would stop running sales. Why should they -- when their customers barely care about the price?
Suppose everyone had transportation insurance. The roads would be crowded with Mercedes. Why buy a Chevy if your employer pays? ...we routinely ask for insurance with low or no deductibles. This is another
bad idea. Suppose car insurance worked that way. Every time you got a little dent or the paint faded, or every time you bought gas or changed
the oil, you'd fill out endless forms and wait for reimbursement from your insurance company. Gas and mechanic's prices would quickly rise because service stations would know that you no longer cared about the
price. You'd become more wasteful: jackrabbit starts, speeding, wasted gas. Who cares? At most you're paying 20 percent of the bill.
Thursday, November 2, 2006 ~ 7:00 a.m., Dan Mitchell Wrote: The U.S. hasn't been hit by a terror attack in five years, but that hasn't stopped the insurance industry from hitting up Congress again and again
for more terror insurance subsidies. Keep this in mind the next time someone claims a new federal program will be "temporary." ...If anyone needs further evidence that TRIA deserves a proper burial, we
recommend a recent U.S. Treasury report on the terrorism risk insurance market. According to the report, the percentage of companies buying terrorism coverage has climbed to 58% in 2005 from 27% in 2003, even
as the cost of coverage has fallen to "roughly 3 to 5 percent of total property insurance coverage." ...the Treasury report explains, TRIA
"appears to negatively affect the emergence of private sector reinsurance capacity because it dilutes demand for private sector reinsurance." We'll
never know what the private sector reinsurance market is capable of so long as Uncle Sam is providing the service for free. TRIA also creates a moral hazard. By shifting coverage costs from property owners to
taxpayers, the program potentially creates higher overall costs by reducing incentives for property owners to invest in risk mitigation efforts.
Wednesday, November 1, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Senate Finance Chairman Charles Grassley is circulating a letter to regulators looking for suggestions on how to regulate hedge funds. He's
far from the only one. Connecticut Attorney General Richard Blumenthal is bidding to become the next Eliot Spitzer by doing to hedge funds what New York's AG did to the insurance industry. (Someone might want to
tell Mr. Blumenthal that if he wants to drive this rich and growing industry out of Greenwich, he should keep it up.) …So, just what is driving this push to regulate? …Today there are more than 3,000 hedge
funds, managing more than $1 trillion in assets. This growth has made them an increasingly attractive target for imperialist bureaucrats and rent-seeking politicians. Then there are the demographics. Hedge funds
by definition are open only to the rich. They have received a regulatory pass so far by limiting the number of investors in any given fund and
restricting access to those who, essentially, can afford to lose everything they put in. …This basic bargain -- stay away from small investors and
the SEC will leave you alone -- has held up pretty well for 70 years. There's little political hay to be made by arguing that millionaires need
government protection from other millionaires. But recently the bargain has shown signs of fraying. Senator Grassley cites pension-fund investments in hedge funds as one cause for concern. A large public or
private pension fund may have billions in assets, but if it gets burned by a hedge fund that goes belly up, the "little guy" could get hurt, the Senator
claims. Never mind that pension funds have been seeking out hedge funds precisely because the lighter regulatory burden has meant higher returns.
Moreover, to say that pension beneficiaries are "exposed" to hedge-fund risk is another way of saying that they are exposed to pension-fund-manager risk. …politicians follow the money, so it was
inevitable that hedge funds would become targets as they prospered. Some hedge-fund managers have floated the idea of establishing a self-regulatory entity like the NASD for their industry to keep the panting
politicians at bay. This could prove a decent hedge of its own against more-intrusive alternatives. Certainly it beats giving direct jurisdiction
over the funds to the SEC and its army of 27-year-old lawyers. Best of all would be for the Members of Congress to leave hedge funds alone and
reform the many "systemic" financial risks -- such as Fannie Mae, Social Security -- that they themselves have created.
Wednesday, November 1, 2006 ~ 8:51 a.m., Dan Mitchell Wrote: A quarter century after the Reagan revolution and a dozen years after Republicans vaulted into control of Congress, a new CNN poll finds most
Americans still agree with the bedrock conservative premise that, as the Gipper put it, "government is not the answer to our problems --
government is the problem." ...Queried about their views on the role of government, 54 percent of the 1,013 adults polled said they thought it
was trying to do too many things that should be left to individuals and businesses. Only 37 percent said they thought the government should do
more to solve the country's problems. ...When asked if the size of the federal government has increased in the past four years, 72 percent said
it had, and 86 percent said they thought federal spending had gone up during the same period. Those questions have a sampling error of plus or
minus 4.5 percent. In recent months, a growing number of conservatives have been complaining out loud about increases in the scope and cost of government, despite the GOP's grip on all the levers of power.
Wednesday, November 1, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: Half a billion dollars spent buying back hundreds of thousands of guns after the Port Arthur massacre had no effect on the homicide rate, says a
study published in an influential British journal. The report by two Australian academics, published in the British Journal of Criminology, said statistics gathered in the decade since Port Arthur showed gun
deaths had been declining well before 1996 and the buyback of more than 600,000 mainly semi-automatic rifles and pump-action shotguns had
made no difference in the rate of decline. ...In his first year in office, the Prime Minister, John Howard, forced through some of the world's toughest gun laws, including the national buyback scheme... Although
furious licensed gun-owners said the laws would have no impact because criminals would not hand in their guns, Mr Howard and others predicted the removal of so many guns from the community, and new laws making
it harder to buy and keep guns, would lead to a reduction in all types of gun-related deaths. ...The significance of the article was not who had
written it but the fact it had been published in a respected journal after the regular rigorous process of being peer reviewed, she said. |
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