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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Saturday, March 31, 2007 ~ 11:19 p.m., Dan Mitchell Wrote: Europe's booming hedge funds and private equity groups face renewed pressure to submit to tighter regulatory control, after Socialist MEPs warned that the industry's rapid
growth threatened to undermine the European Union's social achievements. ...In countries such as Germany, politicians have criticised activist investors for allegedly pursuing quick profits at the expense of the
long-term viability of companies and jobs. Several European policymakers and regulators have also warned of the risk posed by hedge funds to the stability of the financial system. Echoing these concerns, the
Socialists said yesterday that managers of hedge funds and private equity funds should submit to tighter transparency and disclosure requirements. They urged tougher rules on taxation and corporate governance.
"There should be various protection rules to prevent the crass over-exploitation of tax saving rules," the report said. Yesterday's paper also called for the introductionof "fiscal
discrimination"to prevent hedge funds from moving offshore.
Saturday, March 31, 2007 ~ 9:32 p.m., Dan Mitchell Wrote: EU environment minister Stavros Dimas wants increased European efforts to help kick-start an international post-Kyoto climate deal aimed
at limiting the world's greenhouse gas emissions. ...Environment ministers from across the world are widely expected to agree on a mandate to start negotiations to replace the UN Kyoto Protocol - the
international plan to fight global warming by limiting CO2 emissions which runs out in 2012 - at a December meeting in Bali, Indonesia, this
year. ...The EU executive is keen to get rapidly growing economies such as Brazil, China and India on the bandwagon for a global deal albeit
with a "differentiated" treatment to the already industrialised countries. He explained that from meetings with China and India, it has become
very clear that if the world's number one CO2 polluter - the US - would not sign up to the agreement, then neither will they. "We have to focus
on the US. We must be both cooperative and critical and give them the arguments in order to press the decision makers," Mr Dimas said.
Saturday, March 31, 2007 ~ 9:21 p.m., Dan Mitchell Wrote: Rudy Giuliani is the real fiscal conservative in the 2008 presidential race. ...He built New York's resurgence not just on fundamental police work, but also on
a foundation of fiscal discipline. He cut taxes and the size of government and turned an inherited deficit into a multibillion dollar surplus. Mr. Giuliani entered
office in 1994 with a $2.3 billion budget deficit handed to him by his predecessor, Mayor David Dinkins. Liberal conventional wisdom held that the
only way to close the gap was to raise taxes while cutting back on basic city services such as sanitation. The new mayor rejected this advice--in fact, he
famously threw the report recommending tax hikes in the trash! ...In his first budget address Mr. Giuliani explained that he would "cut taxes to attract jobs
so our people can work." ...Mr. Giuliani delivered, overcoming the initial resistance of the overwhelmingly Democratic City Council. He ultimately
prevailed 23 times, including cuts in sales, personal income, commercial rent and hotel occupancy taxes. ...Controlling government spending is another
pledge often made by politicians. ...Mr. Giuliani has a record they can have confidence in. His first budget cut spending for the first time in the city since
the fiscal crisis of the 1970s--and over the course of his administration he controlled the city's spending while federal government spending grew by over
40% and average state spending ballooned by over 60%. Mr. Giuliani always made fiscal discipline a priority: instructing city commissioners to cut agency
budgets even when the deficits had turned to surpluses. Mr. Giuliani set out to cut the size of city government, insisting that New York should live within its
means. New Yorkers saw their quality of life improve with more effective delivery of services while the bureaucratic ranks were being thinned by nearly
20,000--a near 20% decrease in city headcount, excluding police officers and teachers. But there are reasons to question Giuliani's pedigree. In a post on the New York Sun's political blog, Ryan Sager quotes Giuliani trashing the flat tax: "It [the flat tax] would really be a disaster and it's totally inconsistent with the movement of the Republican Congress toward giving more
responsibility to state and local government," Mr. Giuliani said on CNN's "Capital Gang," on March 9, 1996. To be sure, even good policy makers sometimes say silly things because of competing political interests. Nonetheless, it is difficult to reconcile Giuliani's recent supply-side rhetoric with his harsh 1996 statement. If he had merely expressed concern, that would be understandable, but claiming that a flat tax would be a "disaster" suggests a genuine hostility to the flagship policy goal of supply-side advocates.
Friday, March 30, 2007 ~ 9:14 p.m., Dan Mitchell Wrote: Assembly Bill 32, the "California Global Warming Solutions Act of 2006," makes California the first state in the nation to broadly limit CO2
emissions. Cosponsored by radical groups like Environmental Defense and the Natural Resources Defense Council, AB 32 establishes an overall cap on the production of CO2 and a mandatory new reporting system to
track emission levels across the state. This law will force California to ramp CO2 production back to 1990 levels by the year 2020. ...Less allowable carbon means less energy. Less available energy, coupled with
higher expected demand, means higher energy prices. Higher energy prices mean a booming market in "carbon offsets" for wealthy movie
stars and their patrons and extremely unaffordable energy for the rest of working, commuting California. ...even if one agrees that global warming is occurring and that human activities are the cause,
California's unilateral restrictions are counterproductive and will simply force businesses to leave the state. ...The first real casualty of all the
hype surrounding global warming seems to be simple economic common sense. Just a few years ago, in 1997, a Senate resolution sharply criticized proposed CO2 limits under the Kyoto Protocol, calling on
then-President Clinton not to sign it or any other international climate change agreement that ". . . would result in serious harm to the economy
of the United States." The Kyoto Protocol would have compelled the U.S. to reduce carbon dioxide emissions to 7% below 1990 levels by the
years 2008 to 2012. Adopting Kyoto-style restrictions would have cost the economy 4.9 million jobs, something Sen. Boxer and 96 of her Senate
colleagues apparently found morally, or at least politically, unacceptable. Unfortunately, with AB 32, California has adopted its own mini Kyoto,
so Sen. Boxer, Rep. Pelosi and Rep. Waxman are "all in" at a high-stakes game of tax, cap and trade. This push from the California delegation
stands American federalism on its head. Competition and innovation among the states are the driving force behind federalism, but Sen. Boxer and Speaker Pelosi hope to take an extravagantly expensive idea from
their state and force it on the rest of us, even as similarly draconian carbon restrictions are failing miserably in Europe.
Friday, March 30, 2007 ~ 8:55 p.m., Dan Mitchell Wrote: Today's EU resembles a sort of undemocratic Habsburg Empire. Its legislation is proposed by a Commission of unelected bureaucrats who
have now apparently lost control of their own staffs and who themselves are usually political outcasts from their national political systems.
Decisions on whether to adopt their often bizarre initiatives are then taken in total secrecy by the Council of Ministers or the European Council, before being rubber-stamped by the federalist parliament and
imposed on the citizens of member states, whose national legislatures can do absolutely nothing to alter their directives or regulations. Indeed, 84
percent of all legislation before national parliaments, according to the German Ministry of Justice, now simply involves implementing Brussels
diktats. All this makes European politics undemocratic at all levels, and opinion polls reflect the public's growing disillusionment. Daniel Schwammentahl of the Wall Street Journal, meanwhile, notes that politicians who favor more European centralization treat voters as obstacles to be overcome in their drive for a more powerful bureaucracy in Brussels: ...as Valéry Giscard d'Estaing, the former French President and main drafter of the constitution, said last year, rejecting his chef d'oeuvre
"was a mistake which will have to be corrected." In other words, Europeans are given a free vote as long as they vote for what the
Brussels mandarins think is best for them. In a newspaper interview last week, Ms. Merkel diagnosed a certain alienation between the EU and its
citizens, the root cause of which she located in the people's alleged impatience with the slow pace of decision making in Brussels. "To change that we need an EU constitutional treaty," she said. Come
again? The chancellor wants to fight the citizens' alienation by ignoring democratic votes that expressed that very alienation?
Friday, March 30, 2007 ~ 8:40 p.m., Dan Mitchell Wrote: Issste's pension arm currently provides retirement benefits to 580,000 individuals and like so many pay-as-you-go systems, the agency is operating in the red. With an average retirement age of 56 and retirees living longer, Issste has obligations that far outstrip its income and every year the deficit grows. In 2000, Issste's pension deficit was 10 billion pesos ($909 million). This year the government has set aside 42 billion pesos to fill the gap. By 2012 the shortfall is forecast to hit 77 billion pesos. According to the Finance Ministry, Issste's actuarial deficit in pensions is equal to over 50% of Mexican gross domestic product. Issste is a ticking time bomb. O'Grady's column then explains the new system, noting that the plan is optional for current government employees but mandatory for new hires: The centerpiece of the reform, which passed the lower house last week and is expected to pass the Senate this week, is the establishment of
worker-owned, individual accounts to replace the communal pool at Issste. There are no changes for those already retired. Current workers will have the choice of staying with the government's defined-benefit
plan and accepting gradual increases in the retirement age, or migrating to the new individual account, defined-contribution system. The new plan
differs from the pension reform for private-sector workers carried out in 1997 in that it gives those who migrate to the new system a bond, which
represents their vested rights and which will be rolled over into their new individual account. This makes the plan closer to the Chilean pension
reform than to the previous Mexican reform. Another similarity to Chile is the fact that new hires will not have the option of joining the old
system; through attrition, all government employees will eventually be owners of their pensions.
Thursday, March 29, 2007 ~ 6:23 p.m., Dan Mitchell Wrote: The bloc's economic record is mixed. This is still a Europe of wasteful farm subsidies, low growth and high unemployment, with rising
protectionism and a regulatory zeal unmatched anywhere in the free world. Yet the bad ideas tend to come from bad leaders. When the Brussels bureaucracy and dreams of creating a super-state are checked
by a vigilant media and national governments, the Europe construct itself can be market friendly. In the past two decades, the EU on balance has done more to open the door to greater competition than provide a
back door, as Margaret Thatcher feared, for welfare policies. Why? Most crucially, the 1957 Treaty of Rome was inspired by free-market principles. The EU is the world's largest zone for the free movement of
goods, capital and people. When individual countries have tried to blunt those freedoms, Brussels has often fought back with vigor. The euro, the
world's most successful currency union, has lowered interest rates, promoted internal trade by removing exchange-rate risks and--especially in the Latin countries--made it impossible for governments to inflate
their way out of trouble. Europe's diversity and growing size are also strengths. For each dysfunctional Italy, there's a booming Britain or Estonia or Denmark showing how market-friendly policies pay dividends.
In a wider Europe, good ideas squeeze out the bad. The Eastern Europeans have popularized low and flat taxes. Boom-town London is home to hundreds of thousands of Poles and Frenchmen, whose
departure is an electoral issue in their native countries, where politicians are realizing they must compete to keep their brightest at home.
Wednesday, March 28, 2007 ~ 4:30 p.m., Dan Mitchell Wrote: Senators Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) have introduced legislation which they say will protect the jobs that US
financial services companies have created in the US, by keeping the industry on an equal tax footing with its international competitors. When
foreign financial services companies earn income abroad, it's not subject to taxation until the money is brought back to the parent company at home. The law giving American companies this tax treatment here at
home is set to expire next year. The Senators' bill would make the 'Subpart F' exception for active financing income permanent, so that US firms and their workers are not disadvantaged by tax burdens their
competitors don't face. "We need to make sure that US tax rules don't make financial services companies less competitive in the world arena,
and less able to keep good-paying jobs here at home," Baucus stated. "Making this active financing provision permanent will let US companies
make business decisions on a long-term basis." "America's tax laws shouldn't handicap companies striving to lead in a very competitive
global marketplace," Hatch added. "Considerable overseas business is at stake. Salt Lake City is home to firms that would benefit from this
legislation, and Utah jobs could be hurt if US-based companies cannot fairly compete in the international marketplace." ..."When we tax US
companies working overseas, we increase their overhead and allow their competitors to undercut them," Hatch noted. "That hurts American
workers, business, our influence abroad, and - ultimately - the tax revenue we're able to collect. Renewing legislation that puts our top-notch financial companies on competitive footing is good for
business and good for our country."
Wednesday, March 28, 2007 ~ 1:33 p.m., Dan Mitchell Wrote: For generations, Europe's wealthy journeyed through mountains and valleys to quietly stash their money with Switzerland's bankers, famed for
taking their secrets to the grave. ...many of the country's detractors complain that Switzerland remains the world's prime tax haven. The European Union (http://topics.nytimes.com/top/reference/timestopics/ Second, the article notes that high-tax countries can get at least some money to return home if they remove and/or reduce the tax penalites: Several countries, including Italy and Belgium, have lured back untaxed assets held abroad by decreeing an amnesty for tax evasion. But that is not the biggest challenge. Third, tax competition is creating other havens for people seeking to avoid not only punitive taxes, but also other forms of oppression: As Swiss bankers penetrate markets abroad they are facing like-minded competitors from elsewhere in the world. Dubai and Singapore have cultivated sophisticated private banking hubs, offering discreet financial services and a tax haven aimed at luring away wealthy clients. And just as the Swiss have moved overseas, foreign banks like Citibank have flocked to Switzerland. Geneva, once a sleepy lakeshore town, now has branches of 100 foreign banks. Lastly, the article notes that Switzerland has a completely different approach from America. Unlike the US - which has a so-called Bank Secrecy Act that strips away financial privacy, Swtizerland still respects the fundamental right to privacy. Citizens are treated like adults - a relationship that is facilitated by a better tax regime: Unlike regulations in the United States, Swiss law forbids bankers from divulging information about clients or their assets, under threat of
penalty. Tax evasion is not considered a crime.
Wednesday, March 28, 2007 ~ 11:26 a.m., Dan Mitchell Wrote: There is a sad law I have noticed in my economics career: the poorer the country, the poorer the economic analysis applied to it. Sub-Saharan
Africa, which this month marks the 50th anniversary of its first nation to gain independence, Ghana, bears this out. ...Economists involved in Africa then and now undervalued free markets, instead coming up with
one of the worst ideas ever: state direction by the states least able to direct. African governments are not the only ones that are bad, but they have ranked low for decades on most international comparisons of
corruption, state failure, red tape, lawlessness and dictatorship. Nor is recognizing such bad government "racist" -- this would be an insult to
the many Africans who risk their lives to protest their own bad governments. Instead, corrupt and mismanaged governments on the continent reflect the unhappy way in which colonizers artificially created
most nations, often combining antagonistic ethnicities. Anyway, the results of statist economics by bad states was a near-zero rise in GDP per capita for Ghana, and the same for the average African nation, over
the last 50 years. ...Why was state intervention considered crucial in 1957? Africa was thought to be in a "poverty trap," since the poor could
not save enough to finance investment necessary to growth. Free markets could not get you out of poverty. The response was state-led, aid-financed investment. Alas, these ideas had already failed the laugh
test then, as the late economist P.T. Bauer pointed out. The U.S. in 1776 was at the same level as Africa today, yet it escaped the poverty trap.
The same was also true for the history of Western Europe, Australia, Japan, New Zealand and Latin America. All of these escapes from
poverty happened without a state-led, aid-financed "Big Push." In the ensuing 50 years, there have been plenty more examples of poor
countries which grew rapidly without much aid -- China and India (who each receive around half a percent of income in foreign aid) being the most famous recent examples. Meanwhile, aid amounted to 14% of total
income year in and year out in the average African country since independence. ...The cowed IMF and the World Bank never mention the words "free market" in thousands of pages devoted to ending poverty.
Even the World Bank's 2005 World Development Report "A Better Investment Climate for Everyone" doesn't mention the forbidden words.World Bank economists are so scared of offending anyone on
Africa that they recite tautologies. The press release describing the findings of the 2006 World Bank report "Challenges of African Growth"
announces: the "single most important reason" for Africa's "lagging position in eradicating poverty," finally "has been identified." It is
"Africa's slow and erratic growth." The next World Bank report may reveal that half a dozen beers has been identified as the single most important reason for a six-pack.
Tuesday, March 27, 2007 ~ 11:04 p.m., Dan Mitchell Wrote: In 1965, the average man spent 42 hours a week working at the office or the factory; throw in coffee breaks, lunch breaks, and commuting time, and you're up to 51 hours. Today, instead of spending 42 and 51 hours, he spends 36 and 40. What's he doing with all that extra time? He spends a little on shopping, a little on housework, and a lot on watching TV, reading the newspaper, going to parties, relaxing, going to bars, playing golf, surfing the Web, visiting friends, and having sex. Overall, depending on exactly what you count, he's got an extra six to eight hours a week of leisure-call it the equivalent of nine extra weeks of vacation per year. For women, time spent on the job is up from 17 hours a week to 24. With breaks and commuting thrown in, it's up from 20 hours to 26. But time spent on household chores is down from 35 hours a week to 22, for a net leisure gain of four to six hours. Call it five extra vacation weeks. And because those with lower incomes have disproportionately gained from this trend, the author mockingly asks whether they should be forced - as part of the campaign to reduce inequality - to donate unpaid labor to the "less fortunate" with more money but less free time: ...a certain class of pundits and politicians are quick to see any increase in income inequality as a problem that needs fixing-usually through some
form of redistributive taxation. Applying the same philosophy to leisure, you could conclude that something must be done to reverse the trends of
the past 40 years-say, by rounding up all those folks with extra time on their hands and putting them to (unpaid) work in the kitchens of their
"less fortunate" neighbors. If you think it's OK to redistribute income but repellent to redistribute leisure, you might want to ask yourself what-if anything-is the fundamental difference.
Monday, March 26, 2007 ~ 9:03 p.m., Dan Mitchell Wrote: Last year states cashed in on the boom times by hiking expenditures by almost 9%, according to the National Association of State Budget Officers, or three times the rate of overall inflation. This year at least a dozen states are contemplating double-digit rates of spending growth. If that happens, aggregate state budgets will be up nearly 20% in just two years. One politician tossing aside the "new Democrat" playbook of fiscal restraint is the just-re-elected Governor of Illinois, Rod Blagojevich. Mr. Blagojevich just recently announced a $60.1 billion budget loaded with $7 billion in new taxes and $16 billion in new debt -- what the Chicago Sun Times calls "the largest tax increase and biggest borrowing spree in state history."...Jennifer Granholm, the Democratic governor of another declining Midwestern industrial state, is also seeking a $1 billion-plus tax business tax increase to fund what she's calling her "invest in Michigan" budget. The state, with more last jobs than any except Hurricane-ravaged Louisiana, hopes to reward businesses that invest more funds and create more jobs in Motor City by socking them with a higher tax bill. ...Montana Gov. Brian Schweitzer wants to hike spending by nearly 15% this year; North Carolina's Mike Easley has proposed a 7.5% spending hike financed by extending "temporary" sales and income tax hikes passed during the 2001 recession; and Ed Rendell of Pennsylvania seeks a $60.3 billion budget, a $4,500 budget increase per family of four since he entered office in 2003. New Mexico is so flush with cash from the oil boom that Gov. Bill Richardson has requested a 10% hike in spending this year, including $100 million for a space launch pad ...This year's fad "investments" -- teachers pay raises, expanded Medicaid, free health care for children, all-day kindergarten, more generous aid to the universities -- are fiscal grenades likely to detonate in the next recession. Fortunately, tax competition still exists, and the states that avoid higher fiscal burdens will continue to lure jobs and capital from the states governed by more irresponsible officials: Fortunately, some states are avoiding this fiscal trap door. Arkansas and West Virginia have already enacted tax cuts with their surpluses to make
sure the money doesn't get spent on unaffordable new wish list programs. Florida, Georgia, South Carolina and Texas are also preparing major
property or income tax cuts designed to lure more people, businesses and capital down South and away from the high-tax northeast and Midwest.
Monday, March 26, 2007 ~ 8:11 p.m., Dan Mitchell Wrote: In New Mexico, anyone can work as an interior designer. But it is a crime, punishable by a fine of up to $1,000 and up to a year in prison, to list yourself on the Internet or in the Yellow Pages as, or to otherwise call yourself, an "interior designer" without being certified as such. Those who favor this censoring of truthful commercial speech are a private group that controls, using an exam administered by a private national organization, access to that title. This is done in the name of "professionalization," but it really amounts to cartelization. Persons in the business limit access by others -- competitors -- to full participation in the business. ...in Las Vegas, where almost nothing is illegal, it is illegal -- unless you are licensed, or employed by someone licensed -- to move, in the role of an interior designer, any piece of furniture, such as an armoire, more than 69 inches tall. A Nevada bureaucrat says that "placement of furniture" is an aspect of "space planning" and therefore is regulated -- restricted to a "registered interior designer." Placing furniture without a license? Heaven forfend. Will notes - quite accurately - that businesses are in favor of regulation when it means they can raise prices on consumers and/or disadvantage competitors. This is why there is a big difference between being pro-market and pro-business: It is not true that businesses, as a matter of principle, want to fend off government regulation. Businesses have a metabolic urge to make
money, which is as it should be. But when a compliant government gives them the opportunity to use government regulations to enhance their moneymaking, businesses' metabolic urge will overpower any principles
about the virtues of free (from government intervention) enterprise.
Monday, March 26, 2007 ~ 5:39 p.m., Dan Mitchell Wrote: Chancellor of the Exchequer Gordon Brown surprised many yesterday by announcing a 2% reduction in the rate of corporation tax and a 2% cut
in the basic rate of income tax, representing the first major cut in these taxes in many years. Brown has been on the receiving end of growing
criticism of his handling of the public finances and his propensity to add complexity to an already unwieldy tax system, but many of the more
cynical observers believe that the Chancellor's generosity has more to do with securing his place as the next Prime Minster than it does with giving
the UK's tax competitiveness a much-needed fillip. Taking centre-stage in what is likely to be Brown's last budget speech was the announcement that corporation tax would be cut by 2% to 28%. According to the
Chancellor, this would bring the UK's corporate tax rate below both the OECD and EU15 average. However, tax experts observe that while the Chancellor has given with one hand, he will claw back much of this lost
revenue with the other through changes in capital allowances. ...Paul Davies, UK Head of Tax at Ernst & Young noted that while the Chancellor appears to have finally woken up to the pleas of the business
community for a tax cut, the overall result of the budget is a "mixed bag of changes that may affect different taxpayers in different ways." "The
cut in the main rate of Corporation Tax is welcome, showing that the UK is once again on a competitive path. This will reassure those companies thinking of moving offshore. However, the gain from the rate
reduction will be more than clawed back by the change in plant and machinery capital allowances. As a result it is clear that the main beneficiaries of the rate cut will be in the service sector rather than the
manufacturing sector," he stated.
Sunday, March 25, 2007 ~ 11:13 p.m., Dan Mitchell Wrote: It might appear that the rich are deluded, because virtually every study of the subject has shown that money by itself does not bring happiness.
Worse yet, many charge that the wealthy accumulate money simply so they have more than others. ...These explanations for the acquisitive tendencies of the world's billionaires (and all the rest of us, for that
matter) are convenient for social critics and tax collectors, but they ignore an explanation that doesn't reflect quite so poorly on the rich: What people hunger for is not money per se, but success at creating
value. Money just tends to come along for the ride. ...Happiness and perceived success are intimately linked: If you feel very successful, you
are twice as likely to be very happy than if you don't feel very successful -- even after accounting for differences in income, as well as education,
age, race, sex, religiosity, and other characteristics. In fact, while people who feel successful earn about a third more than others, on average,
income by itself creates no happiness at all. Above the level needed to get by, money is just an expedient measure of the value we feel we create.
...as long as a fortune is earned (as opposed to stolen, squeezed from governments or otherwise extorted from citizens), pecuniary acquisitiveness is directly related to the comfort of others. ...Better than
convincing today's 946 billionaires (and the rest of us) to stop chasing filthy lucre, or looking for creative ways to confiscate it, we should
understand this wealth as an enabler of everyone's success, and through increasing philanthropy, as the fuel for social good.
Saturday, March 24, 2007 ~ 7:16 p.m., Dan Mitchell Wrote: ...countries in the higher rankings of the IPRI are primarily advanced industrialized economies, particularly Western Europe (Scandinavia) and
North America. Countries that show a weak performance with respect to property rights protection are African and Latin American nations, in
addition to the Central European nations. ...better performing countries (1st Quartile in ranking) enjoy, on average, a GDP per capita income of
more than eight times their counterparts at the lower quartile of the Index. ... citizens of countries in the top quartile in the IPRI ranking
enjoy a per capita income that is more than seven times that of their counterparts in the bottom quartile. ...the correlation between the IPRI rating and GDP per capita amounts to a value of eightynine percent.
Saturday, March 24, 2007 ~ 4:41 p.m., Dan Mitchell Wrote: ...a Washington Post editorial...takes issue with last week's first-ever appeals-court decision holding a gun-control law unconstitutional on the
ground that the Second Amendment protects the rights of individuals, as opposed to the collective rights of state militias. The Post blasts the
ruling by the D.C. Circuit as an "unconscionable campaign . . . to broadly reinterpret the Constitution so as to give individuals Second
Amendment Rights." Not according to the guys who wrote it. ...The Bill of Rights was written to protect the rights of individuals - rights such as
freedom of religion, speech and the press - not to protect the rights of states. It is absurd to suggest that in the middle of this list of individual
rights the Founding Fathers wanted to protect the right of a state to have a militia. George Mason, often called "the father of the Bill of
Rights" said that a militia is the "whole people." In other words, all 300 million people in the United States are the militia. ...James Madison,
drafter of the Bill of Rights, in Federalist No. 46, alluded to "the advantage of being armed, which the Americans possess over the people
of almost every other nation." In Europe, he noted, "the governments are afraid to trust the people with arms." ...Governments have powers. It
is individuals who have rights. The Bill of Rights were an enumeration of those individual rights to be protected from the intrusion of an oppressive government, whether it be freedom of speech, freedom of
religion or the right to bear arms.
Friday, March 23, 2007 ~ 7:55 p.m., Dan Mitchell Wrote: The European Statistics Office (Eurostat) on Tuesday published figures examining taxation in the EU from 1995 to 2005. According to the
Eurostat report, in 2005, tax revenue in the EU27 stood at 40.8% of GDP, compared with 40.4% in 2004. In the euro area, tax revenue was 41.2% of GDP in 2005, compared to 40.9% in 2004. Over a longer
period, tax revenue as a percentage of GDP in both the EU25 and the euro area were in 2005 slightly below the levels recorded in 1995. ...In 2005, Sweden (52.1%) recorded the highest ratio, followed by Denmark
(51.2%), Belgium (47.7%), France (45.8%), Finland (44.0%) and Austria (43.6%). The lowest ratios were observed in Romania (28.8%), Lithuania (29.2%), Slovakia (29.5%), Latvia (29.6%), Estonia (31.0%) and Ireland
(32.2%). ...With regard to taxes on income and wealth, Denmark (31.2%), Sweden (20.1%) and Finland (17.5%) recorded the highest ratios to GDP, compared to an EU27 average of 12.8%, while Romania
(5.3%), Bulgaria and Slovakia (both 6.1%) registered the lowest ratios. For actual social contributions, the highest ratios to GDP were observed in Germany (16.7%), France (16.4%) and the Czech Republic (15.1%),
compared to an EU27 average of 13.0%, whereas Denmark (1.1%), Ireland (4.8%) and Malta (7.2%) recorded the lowest ratios.
Friday, March 23, 2007 ~ 7:40 p.m., Dan Mitchell Wrote: In a bid to help Canadian manufacturing and processing businesses respond to the rising value of the Canadian dollar and global
competition, Flaherty announced that certain firms would be permitted to write off their capital investments in machinery and equipment acquired on or after March 19, 2007, and before 2009 using a special
two-year 50% straight-line rate. In addition, the capital cost allowance rate will increase from 4% to 10% for buildings used in manufacturing and processing, and from 45% to 55% for computers.
Thursday, March 22, 2007 ~ 4:00 a.m., Dan Mitchell Wrote: Mr. Conrad has no intention of extending the Bush tax cuts, which he voted against and whose repeal would slap the economy in 2011 with the
largest tax increase in U.S. history. But Senate Democrats don't want anyone to know this, at least not before the 2008 election. So Mr. Conrad says his budget revenue estimates "assume that Congress will
take steps to counter the effects of the expiration of tax cuts in 2010 in a manner that does not add to the nation's debt burden." How so? Well,
"this additional revenue can be achieved without raising taxes by closing the tax gap, shutting down illegal tax shelters, addressing tax havens,
and simplifying the tax code," he avers. What the Senator should have said is "Abracadabra." The 10-year revenue increase from repealing the
Bush tax cuts is something like $2 trillion, according to Congress's static-revenue models. Mr. Conrad is claiming that Congress will make
up for all of that lost revenue by chasing down such illusions as the "tax gap," which the IRS claims is the difference between the taxes people
owe and what they pay. ...All of this is really sleight-of-hand to disguise that Democrats are intent on repealing the Bush tax cuts. This would
raise the tax on capital gains to 20% from 15%, more than double the tax rate on dividends to 39.6% from 15%, and sharply increase marginal
tax rates at all levels of income. ...The market fell 200 points on the day Mr. Conrad unveiled his magic act last week.
Thursday, March 22, 2007 ~ 3:15 a.m., Dan Mitchell Wrote: If the financial pre-eminence of the U.S. is eroding, as several recent reports contend, what's really to blame? ...when you listen closely to
what foreign and U.S. business and finance people are saying, there's one central cause -- private class-action enforcement of the SEC's Rule
10b-5. ...The possibility that a company will face a class-action lawsuit if its stock price falls makes all the other problems worse. ...Sarbox is only
one feature of the U.S. regulatory system that is exacerbated by class-action risk. Boards and audit committees complain that they spend more time on legal and regulatory compliance than on the business of the
company. Managements complain that they are required to restate their financial reports for trivial reasons, and no longer have collegial relationships with either their boards or their auditors. Auditors
complain that they can no longer advise their audit clients without worrying about the loss of their independence. And managements and boards have grown more risk-averse as they contemplate the
consequences of a losing quarter. At times, it seems, the purpose of companies is to issue accurate financial reports rather than to add value
for shareholders -- and fear of unwarranted and expensive class action litigation is at the bottom of this. As one participant in the Treasury Department's conference last week exclaimed, "We announced [a
transaction] today, and I've been sued three times already!"
Thursday, March 22, 2007 ~ 12:56 a.m., Dan Mitchell Wrote: The government is paying for unemployed single parents to have massages, beauty treatments and shopping sprees to "boost their
confidence" and encourage them to attend job centre appointments. The treats, part of a programme named Big Brother..., include £30 to spend
on a day out, as well as lunch and childcare. ...A brochure describes it as a "free two-week scheme that will boost your self-esteem and
supercharge your confidence". Organisers said it would be "nice" if participants found work, but this was not vital. ...A man from Whitley
Bay, Tyne and Wear, whose teenage daughter works at a salon involved in the scheme, said: "She was baffled when she was told these women were getting treatment for nothing. They had their make-up done, they
had facials, they had their nails filed and some even had their ears pierced. "My daughter doesn't get a penny from the government and will
earn less than these single mothers get in benefits. What message does this send out?" ...Martin Callanan, a Conservative MEP for the North
East, said: "There are lots of other parents, not to mention pensioners, who would like the state to pay for their pampering. It is suspicious that
they are unable to tell us how much this is costing taxpayers."
Wednesday, March 21, 2007 ~ 2:21 p.m., Dan Mitchell Wrote: City dwellers are making huge profits out of an EU loophole that allows people who have never set foot on a farm to claim European farm
subsidies. ...Auctioneers and brokers who used to sell cattle and farm-land are now focusing their attention on selling the rights to receive
European taxpayers' money - known as entitlement trading - in what one described as a "ferocious" market with the rights to subsidies "flying off
the shelf". ...Open auctions are being held - with one in Aberdeen due next Friday - while investors are also buying the rights to subsidies over
the telephone, through brokers, through internet auction sites and inter-active trading. ...Under EU regulations, only someone classified as a farmer can buy the right to receive subsidies, but to be classifed
officially as a farmer, people need only hold a lease on a minimum of 1.7 acres for ten months of the year, and never need to visit it. Scottish
landowners are now leasing out vast tracts of rocky highland for as little as £5 an acre a year, so that investors can claim to be farmers. For each
acre you lease, you can buy annual subsidies averaging £100 an acre, but which can rise to over £1,000 an acre. A newspaper in Scotland, meanwhile, reports that one dairy farmer has figured out how to scam the system for about $2 million per year - most of which is received as a subsidy for milk that does not exist: A Scottish dairy farmer has exploited a glaring loophole in European law to annually earn the right to claim more than £1million in subsidies.
William Hamilton and Sons, of Meldrum Farm, Blairdrummond, Stirling, has taken advantage of a flaw that allows it to get handouts on almost nine times the amount of milk it produces. Under EU law, the business
will continue to qualify for the lottery-size payment annually until 2012 - even if it stops producing milk.
Tuesday, March 20, 2007 ~ 2:59 p.m., Dan Mitchell Wrote: This month, the State Department has set a new record by managing to insult the citizens of 123 different lands at one time in the "International
Narcotics Control Strategy Report: Volume II, Money Laundering and Financial Crimes." The 450-page report discusses what other countries
are doing to reduce money laundering and financial crimes, which is fine. But then the authors go on gratuitously lecturing each of the countries by
name about how they could do things "better." To understand the total hypocrisy of the State Department nags, it is important to remember that
more money laundering goes on in the United States than anywhere else, and that the U.S. is the world's biggest market for illegal drugs. The
Report…is filled with endless demands that other countries do a better job enforcing their laws, pass more laws, sign more international treaties
and engage in some practices that would be illegal and unconstitutional in the U.S. Many of the demands would not meet a reasonable cost-benefit test… Some examples: The Belgians "should strengthen the
adherence to reporting requirements by some nonfinancial entities, such as lawyers and notaries," so says State, while completely ignoring the
importance of lawyer client confidentiality. …To the Germans they say, "Amend legislation to waive the asset-freezing restrictions in the EU
Clearinghouse for financial crime and terrorism financing, so that the freezing process does not require a criminal investigation." Perhaps, the
folks at State Department forgot there are certain historical reasons why the Germans now insist on strong legal protections against a potentially abusive state. The Greeks (and others) are told, "Abolish
company-issued bearer shares, so that all bearer shares are legally prohibited." Maybe the State Department gurus were unaware that bearer shares are perfectly legal in some states in the U.S., such as
Nevada, and can serve a sound economic and personal privacy purpose. The authors say the government of Dominica "should eliminate its program of economic citizenship." But then again, maybe they were
unaware that many, if not most, countries allow permanent residency and/or citizenship (including the U.S.) to noncitizens who invest a certain
amount in their adopted homeland. …Singapore is told that it "should add tax and fiscal offenses to its schedule of serious offenses." Perhaps
again, it did not occur to the folks in State that the highly educated and prosperous citizens of Singapore are quite capable of figuring out for themselves which laws ought to be "serious offenses."
Tuesday, March 20, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: When you pool together all the combined energy it takes to drive and build a Toyota Prius, the flagship car of energy fanatics, it takes almost
50 percent more energy than a Hummer - the Prius's arch nemesis. Through a study by CNW Marketing called "Dust to Dust," the total
combined energy is taken from all the electrical, fuel, transportation, materials (metal, plastic, etc) and hundreds of other factors over the
expected lifetime of a vehicle. The Prius costs an average of $3.25 per mile driven over a lifetime of 100,000 miles - the expected lifespan of the
Hybrid. The Hummer, on the other hand, costs a more fiscal $1.95 per mile to put on the road over an expected lifetime of 300,000 miles. That
means the Hummer will last three times longer than a Prius and use less combined energy doing it.
Monday, March 19, 2007 ~ 3:11 p.m., Dan Mitchell Wrote: The European Commission has tabled a controversial bill to raise the minimum duty on diesel from 2012, aimed at stamping out so-called fuel
tourism ... Mr Kovacs's paper suggests harmonizing the minimum level of excise duties at EUR359 per 1,000 litres of diesel in 2012 and subsequently at EUR380 in 2014, something which would force 21 EU
states to increase their current rates. ...fuel tourism cost Germany - believed to be the strongest advocate of the tabled proposal - EUR1.9 billion in 2004, as excise duties represent roughly between 30 to 60
percent of the pump price and are responsible for six to 18 percent of the running costs of a road haulage business.
Monday, March 19, 2007 ~ 2:46 p.m., Dan Mitchell Wrote: The 2007 Water Quality Financing Act, passed by the House late last week, reauthorizes a loan fund that lapsed in 1994 for state and
municipal waterworks, sewage treatment, water conservation projects, etc. If it emerges from the Senate in its current form, the bill is projected
to cost $14 billion over four years, a 250% increase over current spending levels. The bill not only extends the 1931 Davis-Bacon regulations to all federal water-infrastructure projects, but also to those
funded solely by states. Economists have shown repeatedly that the artificial wage floors of Davis-Bacon freeze low-income laborers -- primarily black or Hispanic -- out of competition with their union
counterparts. Small-business contractors are especially hurt by the compliance costs. Davis-Bacon also dramatically increases the cost of government projects, amounting to a mandate for more spending -- and
all for the sole justification of satisfying the AFL-CIO. According to the Bureau of Labor Statistics, only about 18% of construction workers are unionized.
Monday, March 19, 2007 ~ 11:23 a.m., Dan Mitchell Wrote: Ireland has boomed in recent years, and it now boasts the fourth-highest gross domestic product per capita in the world. In the mid-1980s, Ireland
was a backwater with an average income level 30 percent below that of the European Union. Today, Irish incomes are 40 percent above the EU average. Was this dramatic change the luck of the Irish? Not at all. It
resulted from a series of hard-headed decisions that shifted Ireland from big government stagnation to free market growth. After years of high
inflation, double-digit unemployment rates, and soaring government debt that topped 100 percent of GDP, Irish policymakers began to cut spending in the late 1980s in a desperate bid to recover financial
stability. Irish government spending fell from more than 50 percent of GDP in the 1980s to 34 percent by 2005. For Europe that is a triumph of restraint, given that the average size of government across 25 EU
countries today is 47 percent of GDP. And Ireland has steadily reduced its tax rates. The top individual income tax rate was cut from 65 percent
in 1985 to 42 percent today. The capital-gains tax rate was cut from 40 to 20 percent in 1999. ...Ireland established a flat 12.5 percent tax rate
on all corporations - one of the lowest rates in the world, and just one-third of the U.S. rate. Low business tax rates have helped Ireland
attract huge inflows of foreign investment. ...Inspired by the Celtic Tiger, many Eastern European nations have gone one step further and installed
both low corporate taxes and simple, flat-rate taxes on individuals. ...there are now 13 nations in the "flat-tax club," including Estonia, Russia, and Slovakia.
Monday, March 19, 2007 ~10:45 a.m., Dan Mitchell Wrote: A joint study by the Brookings Institution and American Enterprise Institute found that government regulations that are supposed to save
lives actually end up killing more people. Why? Because safety laws almost always have unintended bad consequences. ...In 1972, the FDA passed a law requiring child safety caps on many medications. It was
supposed to keep kids from being poisoned by drugs like aspirin. But there is an unexpected side effect. Because safety caps are hard to get
off, some people -- particularly older people -- leave them off, and some parents, feeling safer with the cap, leave the aspirin where kids can
reach it. A study of this "lulling effect" concluded that an additional 3,000 children have been poisoned by aspirin because of the regulation.
Sunday, March 18, 2007 ~ 4:00 p.m., Dan Mitchell Wrote: ...what would happen to average worker productivity if Uncle Sam were to impose a minimum wage of $500 per hour. The correct answer is:
"The productivity of the average worker would skyrocket!" This achievement, however, would be no cause for celebration, for this higher
productivity would result chiefly from the firing of all workers incapable of producing at least $500 worth of output per hour. Measured productivity in America would jump impressively even as the US
economy tanked and most workers were cast into lasting unemployment. ...For example, if teenagers, immigrants, and other lower-skilled workers
start entering the labor force in larger numbers, they will lower the average wage rate because lower-skilled workers generally are paid lower wages than those paid to higher-skilled workers. This fall in the
average wage rate, however, does not signal that workers' fortunes are declining. In fact, in this case it is evidence of economic health: The
economy is sufficiently flexible to provide jobs to workers who haven't yet acquired valuable skills. A less-flexible economy, such as France's,
which makes it difficult for lower-skilled workers to find jobs, will not "suffer" any such fall in its average wage rate. But that fact, surely, is
small comfort to the many poor people left unemployed.
Sunday, March 18, 2007 ~ 2:18 p.m., Dan Mitchell Wrote: The German politician highlighted that Berlin "really wants to underscore the social dimension" in this third part of the declaration.
"Europe stands for a social model based on economic competition but reconciling that competition with social and ecological responsibility," he
stated. A strong social paragraph is important to France which in 2005 saw a failed referendum on the EU constitution partly due to fears that
the EU would become too [classically] liberal. But too much social talk in the declaration is disliked by free market-oriented states like the UK and the Czech Republic.
Sunday, March 18, 2007 ~ 12:56 p.m., Dan Mitchell Wrote: Re-elected last year, Ms. Granholm recently rewarded the voters by announcing some $1 billion in new fees and tax increases. ...She would
tax trucking, shopping, smoking, hunting, fishing, drinking beer and liquor, using a cell phone and, yes, even dying. ...the levies are part of what has become a vicious cycle for Michigan: Poor growth causes
lower revenues, so raise taxes, which leads to even poorer growth, so raise taxes again. The state has lost some 362,000 jobs since 2000 and
the jobless rate in December was 7.1%, second highest in the country... The national rate is 4.6%. ...per capita income in the state fell to its
lowest level in 75 years in 2005, relative to the national average. ...her budget would...pay off the teachers unions that support her with a new
$178 per pupil spending increase, most of which would be absorbed by the bureaucracy and never see a classroom. This continues the state's lack of spending restraint; between 1995 and 2007 Michigan spent an
aggregate $14 billion above the rate of inflation and state population growth, according to a Mackinac study. ...according to the Governor's own Financial Advisory Panel, the state has amassed a $35 billion
unfunded liability in its public-school health and retirement benefits. The state spends a whopping $1,200 per student per year on teacher and administrator benefits. Additional Blogs:
Saturday, March 17, 2007 ~ 2:59 p.m., Dan Mitchell Wrote: Homeowners who refuse to make their properties energy efficient will face financial penalties under drastic government plans to transform Britain into the world's first 'green' economy. ...The Government said that every new home should be 'carbon neutral' within ten years - and existing properties subject to a 'home energy audit' to assess how green they are. Critics correctly note this is a massive intrusion into the private lives of homeowners: Blair Gibbs, of the Taxpayers' Alliance, said: "It's bad enough that politicians want to take so much of our money away in tax. For them also to intrude into our homes in order to have the ability to penalise us even further is simply unacceptable." But the government is undaunted, and, in a classic case of the pot calling the kettle black, Tony Blair even has the gall to state that his totalitarian initiative is akin to the fight against fascism: People are to be encouraged to make 'more sustainable' travel choices, including greater use of public transport, walking and cycling. The Government is also to invest in solar, wind and wave power. ...Mr Blair compared the fight against climate change to the battle against fascism. Sadly, the British people cannot count on the Tories to defend individual freedom. Under the feckless leadership of David Cameron, the Conservative Party is even further to the left than Labor. The Party of Margaret Thatcher has become a hollow shell: Opposition politicians and green campaigners said the Government's proposals did not go far enough, insisting binding targets on emissions
should be annual. Tory spokesman Peter Ainsworth said: "There is a danger that the fiveyear approach will enable responsibility for failure to be shunted on from one government to another."
Saturday, March 17, 2007 ~ 12:05 p.m., Dan Mitchell Wrote: Democrats gleefully demonize oil companies, outlaw offshore drilling and, in Hillary Clinton's case, vow to expropriate profits. In that kind of
climate, why the surprise that Halliburton is moving to Dubai? ...Halliburton's pullout is the result of Democrats doing everything possible to give the company reasons to leave. Yet they don't seem to
have a clue that that's what's happening. Clinton says she is "troubled by the continued outsourcing of jobs and . . . eager to find out how the tax
code can be strengthened to encourage American companies to invest here rather than abroad." Invest in what? Democrats have effectively
taken away every opportunity that might keep Halliburton in the states. They've blue-penciled all but a small portion of the Gulf of Mexico for offshore drilling. They also have made the Alaska National Wildlife
Refuge off-limits and now want that ban permanent. Add to that Clinton's threat to confiscate the profits of companies such as Exxon, profits now being used to develop the very energy that fuels the
electricity in her microphone. ...Companies aren't people. They can't be unpatriotic, as the Democrats charge, because their substance is to represent the decisions inherent in the use of capital. Right now,
Halliburton's move reflects the fact that opportunities in energy development lie outside the U.S. Unless Democrats change the hostile business climate they've created, Halliburton's move is a warning of
more like this to come.
Friday, March 16, 2007 ~ 3:21 p.m., Dan Mitchell Wrote: Sarb-Ox ended up imposing many mandates that greatly encumber honest entrepreneurs. Home Depot co-founder Bernie Marcus recently
told IBD that his company could not have gone public as a four-store firm "in today's legal and regulatory climate." This means that Home
Depot's early investors would also have lost out if Sarb-Ox had been in place. ..The most costly provision, Section 404, forces auditors and
executives to sign off not only on the accuracy of financial statements, but also on a company's internal controls. The unaccountable Public Company Accounting Oversight Board created by the law has defined
"internal controls" very broadly, to include a firm's software and other items that have little relevance to financial statements. Some say the law
should be called the Accountants Full Employment Act. But Section 404 isn't the only costly provision. Rules for the strict "independence" of
directors on audit committees are preventing large shareholders such as venture capitalists from serving on these committees, even if they are not
part of a company's management. But these folks are often the ones with both the incentives and expertise to keep a sharp eye on management for all shareholders. ...To ensure that America remains the premiere
economy for investors and entrepreneurs, Sarb-Ox must not just be fine-tuned by regulatory agencies, but thoroughly overhauled in Congress.
Friday, March 16, 2007 ~ 1:45 p.m., Dan Mitchell Wrote: Europe's vibrant tax competition has finally reached Germany, which usually prefers to sit back and tut-tut while its neighbors cut taxes and
grow their economies. Chancellor Angela Merkel's cabinet today is expected to slash the top corporate tax rate to 29.8% (the average federal-municipal rate) from 38.7%. That's still a far cry from flat-tax
Slovakia's 19% or Ireland's 12.5%. But it would move Germany from the third-highest corporate tax rate in the OECD, after Japan and the U.S., to a more comfortable middle position. ...The Finance Ministry missed
the opportunity to simplify the tax system in one go. Getting rid of tax exemptions for corporations -- thereby broadening the tax base -- would
have been a useful move. It would have had the added benefit of giving Berlin more room to cut rates beyond the planned nine percentage points. ...Over the long run, the corporate tax cuts will likely increase
revenues by encouraging economic activity and tax compliance.
Friday, March 16, 2007 ~ 12:18 p.m., Dan Mitchell Wrote: Europe may not yet be ripe for its own tax but the new system could make use of an existing tax in the member states, part of which would be
paid directly to the EU budget. As examples of such existing taxes, Mr Lamassoure has mentioned VAT, excise duties on motor fuel for road transport, excise duties on tobacco and alcohol or taxes on corporate
profits. Several MEPs in the budgets committee floated other possible fiscal resources, such as taxes on share trading, on financial transactions or on savings. Fortunately, such a scheme presumably would require unanimity and several of the 27 European Union nations have stated that they are opposed to any tax powers for the European Commission or European Parliament.
Friday, March 16, 2007 ~ 11:28 a.m., Dan Mitchell Wrote: The European Parliament has called on the European Commission to push EU companies to show more social and environmental
responsibility wherever they operate in the world. ...The report urges the commission to strengthen the responsibility of directors of companies
with more than 1,000 employees making it mandatory for the directors to minimise any harmful social and environmental impact of the companies' activities. ...Mr Howitt said he hopes the adopted report will
forge new consensus between the NGOs and businesses, adding it was needed to develop a European CSR policy. Jurisdictions like Hong Kong and Singapore doubtlessly are pleased that America and Europe are competing to drive business to Asia
Thursday, March 15, 2007 ~ 6:41 p.m., Dan Mitchell Wrote: Power and control over the citizenry is government's mantra. The politicians' goal is to promise voters whatever they want in exchange for
votes: immediate withdrawal from Iraq, free health care, retirement supplements, welfare for poor women and children, pork barrel projects,
citizenship for illegal aliens and thousands of special credits written into the tax code. For example, President Bush's latest budget proposes to
spend $2.9 trillion to fund government next year, an increase of over 52 percent since his 2001 budget. Yet the New York Times says it contains
"shortsighted and cruel" program cuts. ...When spending alone isn't enough to purchase votes and secure power, the left manufactures crises
that don't exist, like global warming and a supposed inability for most people to purchase prescription medications. ...A look at the presidential
candidates' websites, from both parties, shows that few candidates are interested in cutting the size and scope of federal government. For most,
their issues are a laundry list of new spending and entitlements. ...No matter the issue, liberal Republicans and Democrats will advocate an
increase in taxes, spending and government control. That is their goal, not healthy and educated kids, clean air and cheap medicine. ...Only the free market, not government, can create solutions to our biggest
problems - and only if government would get out of the way, and politicians would stop promising new problems.
Thursday, March 15, 2007 ~ 4:12 p.m., Dan Mitchell Wrote: It's not surprising that Democrats Ted Kennedy and Henry Waxman are promoting something called "The Family Smoking Prevention and
Tobacco Control Act." But you'll never guess who else is thrilled by their proposal: the Marlboro Man himself. ...The answer is familiar to anyone
who knows how regulation works in the real world: The tobacco industry leader figures that any new regulation will burden its smaller rivals with
disproportionate costs and thus help preserve its own market share and profit. Wall Street certainly agrees. As Morgan Stanley Research recently
told its investment clients, "We want to emphasize that we are not concerned by the prospect of FDA tobacco regulation." It added that
FDA regulation could provide "an additional and potentially effective legal defense," and "potentially higher relative costs for smaller
manufacturers, which could help to further narrow premium versus deep-discount pricing gaps." Citigroup analysts are even more bullish:
"We believe the results" of regulation "would actually help the major cigarette manufacturers since it would entrench their position further
allowing them to maintain market share or increase it." ...This wouldn't be the first time that politicians assisted Big Tobacco in the name of
opposing it. The state Medicaid settlement was supposed to finance antismoking campaigns, but the bulk of the cash has gone to pad state budget coffers and will do so for at least another decade. The tobacco
companies merely raised their prices to finance the settlement.
Thursday, March 15, 2007 ~ 2:00 p.m., Dan Mitchell Wrote: As part of its Budget submission, the Institute of Directors (IoD) has warned the UK government that economic policy now stands at a "fork
in the road," and that the level of taxation now stands at a "tipping point" as international companies begin to seek out more tax
competitive jurisdictions in increasing numbers. The IoD argues that the UK government now faces a choice of continuing along its present path towards an economy that will mirror that of other EU economies with
large governments, or of pursuing polices that aim to reduce the size of the state towards the levels seen in the US, Australia, Ireland and Switzerland, where public spending is between 34% and 37% of GDP.
...Miles Templeman, Director General of the IoD commented: "There is nothing inevitable about a rising burden of public spending and taxation.
Other countries have achieved huge reductions in the spending to GDP ratio. The UK should take Spanish lessons. Since 1993 public spending in Spain has fallen by 10.8% of GDP - from 48.6% to 37.8% of GDP in
2007. The optimal size of Government in the UK is well below its current size. ...Unfortunately, the current size of the state in the UK is not
globally competitive." ...The Institute also called on the government to consider its previously announced proposals to simplify the capital gains
tax system and abolish inheritance tax, while calling for the proposed planning gain supplement to be abandoned.
Wednesday, March 14, 2007 ~ 3:15 p.m., Dan Mitchell Wrote: ....lobbyists visiting Capitol Hill are bound by House and Senate ethics rules that cap most individual gifts at $50 per elected official or staffer,
with an annual limit of $100 per recipient from any single source. But local governments, public universities and Indian tribes are exempt from
the limit, so they are able to shower members and their staffs with such goodies as luxury skybox tickets to basketball games and front-row concert tickets. Having members or their key aides attend such free
events in the company of glad-handing university presidents and local government officials winds up costing taxpayers a pretty penny. Much of
the explosive growth in earmarks has been directed to local governments and universities. ...Universities and colleges spent at least $75 million in
2005 on lobbying according to a study by USA Today. The Chronicle of Higher Education reports that $2 billion in grants flowed into higher
education in 2003. ...The same lobbying rules that apply to private-sector lobbyists should also apply to taxpayer-funded government lobbyists. ...Disgraced lobbyist Jack Abramoff once told me that he built his
lobbying business in such a way that all his major clients were Indian tribes and local governments, in part because he knew he could wine and dine power brokers on Capitol Hill without breaking any laws.
Wednesday, March 14, 2007 ~ 1:51 p.m., Dan Mitchell Wrote: Some French socialists have accused Switzerland of "looting" its neighbors. But the only parties guilty of "looting" are those European
governments that have set confiscatory tax rates and pushed companies and individuals to seek residence elsewhere. ...Tax harmonization in the EU, incidentally, never means lowering tax rates. When faced with
German companies moving their headquarters to Slovakia and its 19% flat tax, former German Chancellor Gerhard Schröder accused Bratislava of "un-European" behavior. To be truly European apparently
means taxing away half of people's income. ...The irony is that the surest way for EU members to discourage tax flight -- and to encourage
economic activity -- is to cut taxes. There exists thus a perfect symmetry between sound moral analysis and fiscal responsibility. Taxation need not be theft -- even in the EU.
Tuesday, March 13, 2007 ~ 5:37 p.m., Dan Mitchell Wrote: EU leaders have agreed to a somewhat stronger goal on cutting red tape in their national legislation, despite previous reluctance to commit to a
reduction of 25 percent of administrative burdens. ...The move comes after last-minute pressure from the European Commission, urging governments to make a clear commitment to cut national bureaucracy
which accounts for half of the bloc's administrative costs. ...Brussels believes red tape reduction would boost the EU economy by the equivalent of 3.5 percent of GDP and free up an estimated EUR150
billion for investment but only if national targets are included.
Tuesday, March 13, 2007 ~ 4:11 p.m., Dan Mitchell Wrote: The much-maligned defense contractor Halliburton is moving its corporate headquarters from Houston to Dubai in the United Arab
Emirates. ...Sen. Patrick Leahy, D-N.H., called the company's move "corporate greed at its worst." ...Fellow Democratic Rep. Henry Waxman, D-Calif., who chairs the House Oversight and Government
Reform Committee, which has investigated contractor fraud, is planning to hold a hearing. "This is a surprising development," he said. "I want to
understand the ramifications for U.S. taxpayers and national security."
Tuesday, March 13, 2007 ~ 12:42 p.m., Dan Mitchell Wrote: New York and several other states (California, Illinois, Massachusetts, Michigan, New Hampshire, North Dakota, Rhode Island and sometimes
in Connecticut) have an "Item Pricing Law" (IPL) requiring that, for most goods in retail stores, each item have its own individual price
sticker; in other states a simple price tag on the shelf is considered sufficient. ...Prices in IPL stores are 20 cents to 25 cents higher per item
than in non-IPL stores. ...The maximum estimate of the benefit of avoiding overcharges to consumers through IPLs is less that one cent per
item. ...The laws are a bad deal for consumers. How significant are these price differences -- about a quarter per item? The average price of the
items in our sample was about $2.50, so there is a 10% difference. This implies that prices of groceries are almost 10% higher in IPL stores. Food represents about 14% of the average family's budget. IPLs,
therefore, reduce the real incomes of families by more than 1% -- a nontrivial amount. In sum, our study shows that IPLs impose net costs on
consumers much greater than any potential benefit. Jurisdictions without them should not pass them, and jurisdictions with them should repeal
them. In New York City, where costs and so prices are already very high, consumers would greatly benefit from a 10% reduction in grocery prices.
Monday, March 12, 2007 ~ 5:00 p.m., Dan Mitchell Wrote: In the fourth quarter of 2006, total net worth - that is, everything people own minus what they owe - jumped 7.4% to $55.63 trillion. We've added
as much wealth in the last decade as we did in our nation's first 220 years. ... the average household in America owns about $487,095 worth
of stuff, free and clear. That's a big jump from recent years. As recently as 2001, average household wealth was $373,170. So in five years we've
become a third richer - a truly amazing fact. ... Unemployment, at just 4.5%, is way below its long-term average. Real incomes are rising strongly. Inflation remains tame. Company profits - a measure of how
efficient businesses are at using scarce resources - are at all-time highs. And, in addition to being richer, we live longer, healthier lives than ever.
Even people on the lowest rungs of the economic ladder have far more than they did a decade ago.
Monday, March 12, 2007 ~ 4:33 p.m., Dan Mitchell Wrote: America has it all backward. Our country's doors are open to the low-skilled while we keep out the talent that's crucial to our
competitiveness. ...The global economy is a brain game, and the nations with the best-educated work forces are the ones that win. ...there's a
talent gap that can be filled only by relaxing restrictions on foreign computer scientists, software engineers and other highly trained workers
who want jobs in the U.S. ...Much of the work in fields such as software development might still get done offshore. But that would not produce
jobs here. More critically in the long run, it would deny America a stream of capable, creative people. For many visa holders, the temporary permit
is a step toward permanent residency. Allowed to stay, they may do more than just work here. They may start their own businesses and create
work for others. ...The issue here isn't America's failure to control its borders. It's that America does too good a job of excluding some of the people it most needs.
Sunday, March 11, 2007 ~ 6:54 p.m., Dan Mitchell Wrote: Europeans once thought they had a better way - a "third way" between socialism and capitalism - that would deliver both income equality and
economic growth. But in reality, the third way delivers neither - and now Europe faces a massive, long-term problem of catching up to the U.S. This is...the basic conclusion of a study by Eurochambres, a
continentwide business think tank. It concludes that the European Union is roughly 20 years behind the U.S. in economic development. Twenty years. ...Even last year, when the EU touted its strong rebound, growth
came in at just 2.9% across the continent - compared with 3.3% in the U.S. So even with its "growth spurt," Europe lost ground. As we've
noted, the EU in 2000 made it official policy to pass the U.S. in economic development by 2010. According to Eurochambres, per capita GDP in the EU would have to grow 8% a year for the next four years to catch
up. And that assumes the U.S. stays at its 2005 level. In June 2004, Timbro, a Swedish think tank, looked at the EU and U.S. and came to a similarly shocking conclusion: Per capita incomes in Europe's 15
wealthiest nations were, on average, lower than 46 of 50 U.S. states. ...Democrats want more in the way of taxes, spending, regulation and
labor costs and less in the way of free trade - the very combination that repeated studies show has dragged down Europe's economic performance.
Sunday, March 11, 2007 ~ 2:22 p.m., Dan Mitchell Wrote: Mr. Bush will meet with Brazilian President Luiz Inácio "Lula" da Silva. The pair will sign some sort of ethanol production accord, but this is
another case of lost opportunity thanks to U.S. protectionism. Lula wants a tax cut for Americans -- that is, an end to the 54-cent-a-gallon
tariff that the U.S. imposes on Brazilian ethanol made from sugar -- and Mr. Bush agrees. But Congress's corn-ethanol lobby won't oblige. So Mr.
Bush will have to satisfy Brazilian commercial ambitions with promises of "cooperation" on research and hype about a government-led international biofuels market. We doubt Brazilians will be impressed.
Saturday, March 10, 2007 ~ 2:51 p.m., Dan Mitchell Wrote: The benefits of low taxes are on full display in Iceland, which provides an almost perfect demonstration of the Laffer Curve. From 1991 to 2001, as the corporate-tax rate fell gradually to 18% from 45%, tax revenues tripled to 9.1 billion kronas ($134 million in today's exchange rate) from just above 3 billion kronas. Since 2001, revenues more than tripled again to an estimated 33 billion kronas last year. Personal income-tax rates were cut gradually as well, to a flat rate of 22.75% this year from 33% in 1995. Meanwhile, the economy averaged annual growth rates of about 4% over the past decade. The editorial also notes that tax competition is encouraging good policy in other European jurisdictions. It is not surprising that Swiss cantons are lowering tax rates, but it is noteworthy that even the tax-loving German politicians are being forced to reduce the tax burden: In addition to Eastern Europe's flat-tax movement, there is healthy rivalry from Switzerland, where the individual cantons can set their rates
independently. Obwalden just lowered its corporate-tax rate to 6.6%, drawing criticism from the European Union, which called it an illegal subsidy. One of the biggest critics, Germany, recently announced that it
will cut its corporate-tax rate to just below 30% next year from the current rate of about 38%.
Saturday, March 10, 2007 ~ 2:30 p.m., Dan Mitchell Wrote: ...the bureaucracy hypes terrorism to justify its pork. "Terror porn" is what economist Veronique de Rugy calls it. Why "porn"? "Because porn
sells, [and] terrorism sells even better," she says. "It's great for politicians. They can campaign on the fact that they are protecting us.
They also can campaign on the fact that they're bringing more money to their states." Lots of small towns do get absurd grants for homeland
security. Lake County, Tenn., a rural county with only 8,000 people, got nearly $200,000 in homeland-security money. ..."I don't know that
terrorists will come, but I don't know they won't come," Lake County Mayor Macie Roberson told us, smiling. At least he didn't do what
Columbus, Ohio did: spend it on bulletproof vests for police dogs. ...Of course, terrorism is a real threat. But fear kills people, too. A University
of Michigan study found that an additional 1,000 Americans died in car accidents in the three months after Sept. 11, because they were afraid to fly. We need to keep risk in perspective.
Friday, March 9, 2007 ~ 12:11 p.m., Dan Mitchell Wrote: By pegging public pensions to individual earnings and overall life-expectancy rates, Sweden has given its citizens incentives to be more
productive and retire later -- and sidestepped the political paralysis that has stymied change elsewhere. Some Eastern European nations have already ditched their struggling post-Communist systems and gone
Swedish. Steps taken in countries as diverse as Brazil and Russia boast some Swedish elements. A World Bank book based on the Swedish model has been translated into Chinese. And next month, Egypt's government
will review plans to chuck the country's failing system for a Swedish version. …calculating payouts according to salaries and aging projections gives it the flexibility to accommodate revenue and
population shifts. If the economy does poorly, the thinking goes, future pension payments will go down. And the longer people in a particular
age group are projected to live, the smaller their pension payouts will be. …That approach is a break from the typical pay-as-you-go system, which
defines a guaranteed benefit in advance but often saddles the state with underfunded obligations -- particularly when times are bad. Sweden's
system "is not a good system if you want to subsidize leisure," says Edward Palmer, a professor of social-insurance economics at Stockholm's Uppsala University and a Colorado native who helped
design the plan. …It is a tough sell elsewhere in Western Europe, where many see generous pensions as a right. Other critics include the International Labor Organization, which holds that earnings-related
pensions should guarantee 40% of a person's prior average earnings. Swedes, unlike the majority of Western Europeans, get no such assurance. The system also preserves existing income inequality:
Workers who earn more get more when they retire. …The bottom line of the Swedish model: Most people will have to work harder to reap the
kinds of pensions their grandparents could take for granted. "It puts the cost of aging onto the individual, rather than onto society," says Sarah
Brooks, an Ohio State University political-science professor who has studied the plan. Last February, the World Bank endorsed the Swedish plan as a possible antidote to pension woes world-wide. Economists at
the European Central Bank followed up last fall, highlighting Sweden's approach for the 13-nation euro zone, where one-third of the population will be older than 64 by 2050. …In Poland, where a public-relations
campaign helped ensure an enthusiastic transition to a Swedish-style system in 1999, the fiscal benefits are already clear. A recent European Union report said that, despite having some of the worst demographics
on the Continent, "the long-term budgetary impact of aging in Poland is the lowest in the EU." Like Sweden, Poland mandated that a slice of
pension contributions go into private accounts similar to a 401(k), where the money is invested in mutual funds. Swedes contribute 18.5% of their
salaries to the pension system; only a small portion of that -- 2.5 percentage points -- is held in individual accounts. Poles contribute a
total of 19.52% of their gross salaries to the system, with 7.3 percentage points going into private accounts. The concept of individual accounts
has been key to selling the plan to Swedes. Sweden sends its workers statements -- mailed annually in bright orange envelopes -- showing what
they have put into their pension and what they would get at retirement. The money isn't really there for them (it is being paid to current retirees).
But advocates say seeing it expressed as an individual account should have the psychological effect of encouraging people to work longer to
win bigger benefits. It may be working. Sweden's official retirement age is 61 years old. Since the change took effect, the average age at which Swedes retire has risen to 63.
Friday, March 9, 2007 ~ 11:23 a.m., Dan Mitchell Wrote: ...the law that supposedly deregulated the airline industry still contains provisions dating from the 1930s forbidding foreign ownership and
control of domestic airlines. Over the years, ingenious lawyers have devised investment and governance formulas that would allow de facto foreign investment in domestic airlines with enough control to protect it
from management incompetence or treachery. Not one has ever been allowed to succeed. Egged on by airline pilot unions and the biggest U.S. airlines, Washington has forbidden them to do so. ...On Friday, the DOT
announced that the U.S. and European Union have initialed an agreement that creates an entirely open-entry single-market regime between the U.S. and the whole EU, including London's Heathrow
Airport. In return, the Europeans insist that the U.S. allow cross-border investment in U.S. airlines. But the Europeans, having had the DOT dash
its expectations regarding investment before, are insisting that Congress agree explicitly to liberalize EU investment in U.S. airlines. For U.S.
travelers, this is a good deal. The prospect of more competition may make existing managements and workers nervous, but travelers get to try Virgin's flashy brand of service while the new competition holds
prices down. For many airline shareholders and workers, it will allow a troubled U.S. airline to be bailed out and rebuilt, if necessary.
Friday, March 9, 2007 ~ 10:33 a.m., Dan Mitchell Wrote: NCLB's political bargain was that, in return for a big increase in federal education spending, the government would hold schools more
accountable for results in the classroom. Six years later, taxpayers have done their part. Since 2001 overall NCLB funding has risen by 34%, and
federal spending on Title I schools serving low-income students has gone up 45%. …NCLB has been much less successful in bringing pressure to
bear on states and school districts that fail to implement the law. That's especially true of the school choice provisions, which are the best way to
get the attention of the education bureaucracy. Unfortunately, the Bush Administration abandoned its voucher proposal very early in the 2001 negotiations. What passed was a watered-down version of public school
choice, which in theory allows a child in a failing school to transfer to a better public school or get free after-school tutoring from private providers. …the Education Department has too often allowed school
districts to skirt even these limited choice provisions, either by granting exemptions or looking the other way. It took a formal complaint from
the Alliance for School Choice before Secretary Margaret Spellings did anything about Los Angeles failing to notify parents of their transfer
rights as required under the law. So far she's sent the district a sternly worded letter. And the Chicago public school system, which has been
repeatedly labeled "in need of improvement" and thus should be banned under NCLB from offering its own after-school tutoring, has been given
a waiver to do exactly that. So while it would be nice if the Bush Administration enforced its own law, the larger lesson is that school
choice "lite" turns out to be no substitute for the real thing. …Some education reformers are now calling for "national standards" to address
this problem. But we tried national history standards in the 1990s, and the politicized results weren't pretty -- unless, of course, you favor a
history curriculum that downgrades the Founding Fathers while playing up the working experiences of midwives in 19th-century Nebraska.
Thursday, March 8, 2007 ~ 1:47 a.m., Dan Mitchell Wrote: The Chancellor of the Exchequer, Gordon Brown must insist on a tighter grip on public spending and borrowing to end the slide in the UK's tax
competitiveness according to one of Britain's largest business lobby groups. …Constraining real term public spending growth to 2.3% rather than 2.7% in 2007/8 and 1.6% rather than 1.9% thereafter would permit
a significant across-the-board cut in one or more major business tax rates by 2010/11, the CBI says. …The CBI's submission repeats its warning that the UK's increasingly uncompetitive tax regime is holding
back the economy and leading to companies relocating overseas. In the November 2006 CBI/MORI tax survey, 22% of companies had already relocated one or more activities abroad, and a further 17% were
considering relocation for the first time. Almost all of these firms cited the tax regime as a key factor in their decisions. Since then, more
companies from a range of sectors have announced decisions to relocate. The submission says that, "while the majority of these decisions have not
led to immediate heavy job losses in the UK, the shift to re-domicile headquarters overseas could see firms less inclined to continue their
existing operations here, or expand them in future. And regardless of the effect on employment, the impact of firms re-domiciling is unambiguously negative for the public finances." The CBI document
confirms that while many other countries have cut their corporation tax rate in recent years, the UK's has remained unchanged at 30% since 2000. Within the EU-15, the UK rate was the 3rd lowest in 1997; it is
now the sixth highest. Moreover, the CBI noted that the UK's overall business tax burden - at 10.2% of GDP - is higher than four of the country's top five trading partners, including Germany.
Thursday, March 8, 2007 ~ 12:28 a.m., Dan Mitchell Wrote: Tom and Donna (not their real names) are professional shamen. They teach classes in shamanism at a "foundation", where you can learn
"soul retrieval healing", help the dead "continue their journey into the Hereafter", and investigate "the Fairy Kingdom". These soul retrievers and Fairy Kingdom investigators also work for the NHS — where,
according to Tom's foundation profile, they "use complementary therapies to help those with mental health difficulties". Shaman therapies are not the only unorthodox treatments for which the NHS will
gladly pay. Taxpayers are also subsidising Emotional Freedom Technique (EFT) "therapy", in which, according to one NHS trust, "subtle energies" are reordered via "tapping with the fingertips to
stimulate certain meridian energy points while the client is 'tuned in' to the problem". …If EFT doesn't do the job, an NHS foot massage might
help. Reflexologists believe that each part of the foot maps to a different organ, and that massaging a particular point can treat that organ. Medical doctors think it's absurd. …Most depressing of all for the
rational taxpayer is the NHS Directory for Alternative and Complementary Medicine, which aims to promote "dowsers", "flower therapists" and "crystal healers". We've just learnt that some hospitals
are removing every third light bulb to save money, and that nurses are being paid half the minimum wage — or being asked to work for nothing
— at others. That's how bad the financial crisis has become. Meanwhile, the National Health Service is employing shaman fairy enthusiasts as
psychological counsellors, enthusiastically providing treatments invented by "an ordained minister and a personal performance coach" who thinks tapping your body can cure diabetes, promoting dowsers and crystal
healers and spending vast amounts on therapies that can't be scientifically supported.
Wednesday, March 7, 2007 ~ 11:19 a.m., Dan Mitchell Wrote: The EU is 22 years behind the US on economic growth according to a new study, with several other economic indicators showing further gaps
despite Europe's ambitious reform agenda to be praised by leaders at this week's summit. A report by Eurochambers, the Brussels-based business lobby, published on Monday (5 March) argues that the US reached the
current EU rate of GDP per capita in 1985 and its levels in employment and research investment almost 30 years ago. …according to the Eurochambers study, the EU time lag behind the US has expanded
further since 2003 when the group published its first report comparing the economic indicators on both sides of the Atlantic. …Authors of the study point out that if calculations included the latest newcomers of
Bulgaria and Romania, the gap between the EU and US would be even larger… in a bid to start catching up with the US on key Lisbon indicators, Europe would have to perform better than the States,
according to the Eurochambers study, while the latest results show the opposite: in 2006, the US registered an average GDP growth of 3.3 percent and the EU about 2.9 percent, the highest since 2000.
Wednesday, March 7, 2007 ~ 10:55 a.m., Dan Mitchell Wrote: The commissioner argues that any new "own resources system" - where Brussels raises money directly - should be "simple and very transparent."
...One way of changing the EU's financial system - supported by some in the European Parliament - would be introducing its own tax to replace
member states' donations. The idea came up several times after the bitter budgetary talks both in 2005 and previously in 1999, with for example senior French centre-right MEP Alain Lamassoure suggesting that the
EU could levy a tax on SMS and email messages.
Wednesday, March 7, 2007 ~ 10:23 a.m., Dan Mitchell Wrote: This report evaluates information available on Alabama state employee compensation, making comparisons to other states and to the private
sector. Generally, the conclusion is that Alabama state employee pay is higher than in comparable states. More importantly, it is concluded that
state employee compensation (that is, wages and employer-paid benefits) in Alabama is substantially higher than for equivalent employees in the
private sector in the state. …an analysis of comparable state and private employees (equal education, equal skill), this discrepancy in pay is
principally the result of the fact that the state, unlike the private sector, does not establish employee compensation using reliable market mechanisms. …State government employer-paid benefits are
considerably higher than in the private sector. State government employee-benefit costs are estimated at 28.5 percent compared to wages and salaries. Private employee-benefit costs are estimated at 21.9
percent of wages and salaries. Thus, the employer-paid benefit factor for state employees is nearly one third higher than that of private employees.
…State employees receive more paid time off than private employees in Alabama. On average, full-time state employees spend 10 percent fewer hours on the job for their compensation than private employees. State
employees use more than twice as many annual sick days as private employees (10.2 compared to 4.4). It is estimated that state employees spend 1,726 hours per year at work. Private employees spend an average
of 1,915 hours on the job. It is estimated that Alabama private employees are at work, on average, more than a month more each year than state employees (189 hours). Each month, the average state
employee is paid for not working approximately two days that private employees would work. As a result, the average private employee is compensated $21.41 per hour worked. The average state employee is
compensated $25.88 per hour worked, 21 percent more than the average private sector employee.
Wednesday, March 7, 2007 ~ 9:30 a.m., Dan Mitchell Wrote: European Union capital market revenues are growing by an impressive 20% a year, compared to only 7% in America. The U.S. share of global
IPOs has fallen to 16% last year from 57% in 2001, while Europe's has gone up to 63% from 33% during the same period. Many seem to see the regulatory burden of the Sarbanes-Oxley Act, such as Section 404, as a
significant reason for reduced U.S. capital market competitiveness. The detailed requirements for internal control of public companies have turned out to be extremely expensive to implement. Some in London
have gone as far as to suggest, tongue-in-cheek, erecting statues for Sarbanes and Oxley. …We should not and cannot prescribe rules for every conceivable situation. There is a difference between accountancy
and rocket science. The latter is science; the former is not and shouldn't be. …Eliminating all risk is an illusion and will lead to unwanted
consequences: less innovation and growth, a false sense of security, and reduced pressure to behave responsibly. That is why I reject the siren
calls for tougher regulation of hedge funds in Europe and why I strongly agree with the recent report of the President's Working Group on this
issue. We must not endanger the benefits hedge funds and private equity have brought. They have increased efficiency and liquidity in our capital markets while keeping company managers on their toes. Are the
regulatory hawks perhaps trying to protect weak management from shareholder activism?
Tuesday, March 6, 2007 ~ 7:28 p.m., Dan Mitchell Wrote: Conservatives have not been happy with George W. Bush. For each brand of conservatism, there is a different critique. Not so with Ronald Reagan, whom conservatives uniformly praise for various reasons. Seventy-nine percent of those in attendance at last week's Conservative Political Action Conference said they would prefer a candidate who is a Reagan Republican. Three percent would go for a G. W. Bush Republican. One gets the impression that Bush isn't even considered a conservative. But maybe Novak's confusion is because he doesn't understand conservatism. He assumes conservatives are upset about deficits and debt, when the anger is really because of wasteful government spending: Some say that Bush's budget deficits prove he is not a conservative. Novak then lists several Bush "accomplishments," most of which expand the size and scope of government. Most conservatives, for instance, presumably think that families and private institutions should be responsible for moral teachings, yet the article claims that Bush's subsidies for abstinence education are a conservative victory: He dedicated unprecedented funds to abstinence education through the Department of Health and Human Services. Bush's record on education is particularly disappointing, with record spending increases and more centralization, yet Novak claims Bush is a conservative because of a tiny school choice program (which shouldn't be operated with federal dollars anyway): He was the first president to sign a school-choice bill to give parents greater freedom in deciding where their children will be educated. Novak praises Bush for programs that ostensibly rehabilitate prisoners, but it is unclear why this is a responsibility of the federal government. Nor is there any evidence that Bush's rehabilitation strategy would work any better than the left's rehabilitation approach: He has dedicated funding to prepare prisoners for productive lives after they leave prison. Bush has increased federal spending more than twice as fast as needed to keep pace with inflation, and entitlements have been growing at three times the rate of inflation. But Novak thinks Bush is a conservative because a so-called Deficit Reduction Act that included $11 billion of savings. Yet this is the same President that added trillions of dollars of new Medicare spending by creating a prescription drug entitlement. Moreover the savings are only savings using the Washington definition – i.e., not increasing spending as fast as previously planned. After the "cuts," for instance, the Medicaid budget was projected to grow 7.6 percent annually, compared to a projection of 7.8 percent before the legislation was adopted: He signed the Deficit Reduction Act of 2005, which will curb Medicare/Medicaid spending by $11 billion over the next five years. One of the many disappointments of the Bush presidency is an increase in regulation, particularly the hugely expensive Sarbanes-Oxley legislation, yet Novak makes a completely unsupported assertion that Bush believes in deregulation: He implemented deregulation across all government agencies. Perhaps the most amazing assertion in Novak's article is that the creation of a new entitlement program is conservative. It also is interesting to note that Novak apparently believes that a program is conservative if it has popular approval. That means the looming minimum wage hike also is conservative (though not as conservative as the prescription drug entitlement since only 70 percent of Americans foolishly think that government can raise the wage level). Moreover, the assertion that the program is "under budget" is rather odd. I wonder is he would be willing to bet (akin to the Ehrlich/Simon wager) whether the program 10 years from now will cost more than projected: He signed into law prescription drug assistance for the elderly — the first and only health-care reform in modern history to win a nearly 90-percent approval rating and to come in substantially under budget. To be fair, however, Novak was certainly correct when he wrote that "President Bush has defined a new kind of conservatism." It may have nothing to do with limited
government. It may be a complete reversal of Reagan's policies, but it definitely is new (though Democrats surely can argue that they've been peddling these ideas for decades).
Tuesday, March 6, 2007 ~ 6:16 p.m., Dan Mitchell Wrote: Russia may cut its corporate profit tax rate to 20% from 24% as part of a three-year tax policy plan, Deputy Finance Minister Sergei Shatalov
stated last week. The government had previously been considering a further reduction in value added tax, currently 18%, to as low as 13%, but Shatalov said that a cut in corporate profit tax would be more likely
to stimulate economic growth and boost levels of investment. …Putin has stated many times that while the government remains committed both to simplifying tax legislation and reducing the tax burden, tax
reform must be balanced against needs of business, which requires certainty in the tax code. Since 2002, the Putin administration has reduced or abolished a number of taxes, including turnover tax, payroll
taxes, sales tax, and value added tax. According to Putin, in 2005 Russia's tax burden eased to 27.4% of GDP, from 28.7% in 2004.
Tuesday, March 6, 2007 ~ 3:11 p.m., Dan Mitchell Wrote: EU industry commissioner Guenter Verheugen has warned against hysteria in the climate change debate as the bloc considers setting
stringent new caps for greenhouse gas emissions at a summit later this week. Sounding a dissonant note amid calls to make the EU a global leader in emissions cutting over the coming decade, Mr Verheugen told
Germany's Bild am Sonntag that while climate change ought to be fought on all fronts, the EU "should not descend into hysterical action." …He
reiterated his fear - expressed most recently at EU plans to get the car industry to make cars that pollute less - that by trying to raise the environment bar within the EU, the bloc risks losing out on
competitiveness to other, less green, regions in the world. "Our most important task will be to make sure that the US, China, India and Russia are just as engaged in climate protection as we are."
Tuesday, March 6, 2007 ~ 1:11 p.m., Dan Mitchell Wrote: ...as South Carolina's state legislature now debates whether to allow parents to use a modicum of government funds to send their children to a
school of their choosing, public or private, it's difficult to accept the objections of school choice on their merits. ...Founded in 2003 by Faye
Brown, a 55-year-old retired public school teacher, Capers is one of a handful of "independent schools" that serve the state's rural poor. It
operates out of rented office space, has a total of 42 students in kindergarten through 12th grade, and makes due on an annual budget of about $160,000 a year. Nearly all of its equipment -- desks, books and
the eight iMacs in its computer lab -- were donated to the school. ...One place Capers isn't skimping, however, is academics. The school places a
heavy emphasis on reading, writing and math. As a result the school's average SAT score, 1150, is 164 points above the state average, and this
year the school expects every one of its graduates to go on to college. St. Johns High School, the public school these students would be attending if
not for Capers, has an average SAT score of 788. ...there's now a groundswell of support for broad-based school choice. In recent weeks several thousand residents have rallied at the state Capitol and
advocates have lined up bipartisan support in the Republican-controlled legislature for creating a $1,000 tax credit for middle-class parents and a
$4,500 state "scholarship" for poor kids in failing public schools that can be used to attend any school. Two years ago similar reforms were
defeated in the state House by seven votes. But school-choice supporters picked up several seats in the last election, one of which is now help by
Curtis Brantley, an African-American from rural Jasper County who picked off an incumbent in a Democratic primary last year. "It's time,"
he told me recently while sitting in his sparsely furnished office, "to try something new."
Monday, March 5, 2007 ~ 4:59 p.m., Dan Mitchell Wrote: ...the United States Government is the largest single consumer of energy in the United States. It's also one of the most inefficient energy users.
According to a 1999 report by the Alliance to Save Energy, the "federal government, consumes about 32% more energy per square foot than the
nation's building stock at large." This inefficiency costs taxpayers an estimated $1 billion a year. In Al Gore's phrase, Uncle Sam's leaving one
giant "carbon footprint." Of course, it follows from all this that the best way to make the federal government more energy efficient would be to
undertake a government-wide policy of . . . lights out, permanently. Save the environment; kill a federal program. Start, needless to say, with the
Department of Energy, operating at an annual cost of $22 billion. The U.S. Government Accountability Office reports that from 1980 to 1996 Energy frittered away more than $10 billion on programs that were
"terminated before completion." On behalf of combating climate change, America could live without DOE's Energy Hog Webgame for kids, which cost taxpayers $325,000.
Monday, March 5, 2007 ~ 3:15 p.m., Dan Mitchell Wrote: The First Amendment's guarantee of freedom of speech has complex implications, but it clearly means two things: The government cannot tell
you what to say, and it cannot tell you what not to say. That is your own business, and if you conduct it in a way the government dislikes, the
government can take a flying leap. Unless by "government" you mean the Federal Communications Commission. It operates on the assumption
that in its special realm, the First Amendment is a nonbinding resolution. ...Federal law requires TV networks to air at least three hours of educational programming aimed at children every week. Univision put
on soap operas it claimed were of educational value to kids. But the FCC disagreed and fined the network $24 million for failing to carry out its
government-imposed duties. This is just part of the agency's plan to tighten its control of what you watch. Last year, it mounted a crackdown
on indecency that raised the interesting philosophical question of how the F-word can morph from indecent to not indecent. The FCC, you see,
says F-words are not all alike. If Tom Hanks uses the term in "Saving Private Ryan," it's OK, but if Cher uses it on an awards telecast it's not.
...parents who want to shield their kids from bad language on TV already have ample means to do so -- via channel blocking and V-chips that can
be used to filter out programs with content they regard as inappropriate. The FCC says these methods are ineffective because parents don't use them. More likely, parents don't bother because they don't think the
problem is serious enough to justify the effort to shield kids from words they've already heard on YouTube. To insert the federal government is
not a way to strengthen the authority of parents but to circumvent it. ...The idea that we need the FCC to assure educational opportunities for
children is nonsense on stilts. In the first place, there are plenty of channels, from PBS to the Discovery Channel, that offer nothing but educational programming. ...In the second place, any parents truly
interested in exposing their children to intellectual stimulation are more likely to shut the TV off than turn it on. Even if more educational programming would be a good thing, what business is that of the
government? More G-rated films would be a good thing, too, but we don't force movie studios to produce them. ...Today, most viewers no longer distinguish between cable and broadcast programs. So having
different rules for each makes about as much sense as having different regulations for odd- and even-numbered channels.
Sunday, March 4, 2007 ~ 4:17 p.m., Dan Mitchell Wrote: Some Seattle school children are being told to be skeptical of private property rights. This lesson is being taught by banning Legos. A ban was
initiated at the Hilltop Children's Center in Seattle. According to an article in the winter 2006-07 issue of "Rethinking Schools" magazine, the
teachers at the private school wanted their students to learn that private property ownership is evil. ...they first explored with the children the
issue of ownership. Not all of the students shared the teachers' anathema to private property ownership. "If I buy it, I own it," one child is quoted
saying. The teachers then explored with the students concepts of fairness, equity, power, and other issues over a period of several months. At the
end of that time, Legos returned to the classroom after the children agreed to several guiding principles framed by the teachers, including
that "All structures are public structures" and "All structures will be standard sizes."
Saturday, March 3, 2007 ~ 2:37 p.m., Dan Mitchell Wrote: It has emerged that the German government may not be able to deliver the promised programme of company tax reforms agreed by the coalition
cabinet last year, as members of the Social Democratic Party (SPD) grow increasingly uneasy over the cost of the tax cuts. ...Last November, the coalition finally arrived at an agreement that would cut Germany's
corporate tax burden - one of the highest in the industrialised world - by reducing the overall corporate tax rate to a little under 30% from the
current level of almost 40%. This will be brought about 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,
which averages about 13%. ...The ruling coalition parties also agreed to introduce a 25% capital gains tax from January 1, 2009. This will
replace the current system, whereby capital gains are subject to personal income tax, which can be as high as 42%. This will apply to income from earned interest and dividends, and private investors' share sales.
Friday, March 2, 2007 ~ 8:58 p.m., Dan Mitchell Wrote: Consider the following data, released yesterday from the OECD, on the tax wedge for a single employee without children: Last year's OECD
average was 37.5%, compared with 28.9% in the U.S. And that's not the worst of it. In the 15 countries that formed the European Union before the recent enlargements, the tax wedge was a whopping 42.6%. In
France, Germany and Belgium the tax wedge is truly expropriating: 50.2%, 52.5% and 55.4%, respectively. The average employee in these three countries takes home less than half of what it costs to employ him.
Most of the money goes to the state through income and payroll taxes. Yet when EU finance ministers met this week and railed against the rising gap between wages and company profits, Europe's enormous tax
wedge didn't merit a mention. Corporate greed -- not government greed -- was blamed for the discrepancy. "It's clear that the division of the
fruits of rediscovered growth will be at the center of governments' concerns," said Luxembourg's Jean-Claude Juncker after chairing the Monday meeting. A day later, Germany's Peer Steinbrück warned that
"if [lower-income workers] have falling real incomes and profits shoot up, there is a legitimate crisis of the social market model."
Friday, March 2, 2007 ~ 5:17 p.m., Dan Mitchell Wrote: Dr. Stanley revealed that the typical millionaire spent less than $400 on their most expensive suit, and only about 1% spent more than $2,800. Only one in ten millionaires had ever spent more than $300 on a pair of shoes. Most millionaires pay a few hundred dollars or less for their watch, and $30,000 or less for their main motor vehicle. They have been married to the same person most of their adult lives. ...This is no coincidence. It is not that most millionaires are in the habit of being frugal despite their wealth: it is that they are so wealthy because they are in the habit of living so frugally. The plentiful residual income goes into savings and investments that are left to grow for decades. It is not inheritance that explains American millionaires: most inherited nothing and fewer than one fifth inherited even 10% of their wealth. The column also notes that there is a big difference between income and wealth, and explains how class-warfare policies are poorly designed: This surprising picture of America's wealthy presents class warriors with two problems. First, un-American as it might be to scapegoat and overtax the rich when they are perceived as Porsche-driving and Rolex-wearing, one can nonetheless imagine the envy that might inspire. But what is the future of class hatred in an America where, in fact, Porsche drivers and Rolex wearers have little net wealth, and the real rich are those who eat at the same restaurants and drive the same cars as most people, even when they can afford not to? ...Second, devising economic policies that would target the wealthy would be still more difficult. Higher income taxes might reduce income inequality, but it would be a sideshow to the reality that inequalities of wealth are a result of some living below their means, not unequal incomes. Unfortunately, the American left is unlikely to promote the behaviors that would lead to greater prosperity among those with lower incomes: If liberals are determined to reduce economic inequality, they would have to take lessons from Dr. Stanley and encourage generally a culture of
delayed gratification and a certain amount of self-denial - a self-reliant America of stockholders and coupon-clippers who marry and stay
married. This is the profile of America's wealthy, and a serious effort to reduce inequality would mean getting more Americans to adopt this lifestyle.
Thursday, March 1, 2007 ~ 11:46 a.m., Dan Mitchell Wrote: …the most vexing problem that highly mobile financial flows pose for governments is that when they cross borders they may take tax revenues
with them. …As companies become ever more multinational, they find it easier to shift their activities and profits across borders and into OFCs.
…Financial liberalisation—the elimination of capital controls and the like—has made all of this easier. So has the internet, which allows money
to be shifted around the world quickly, cheaply and anonymously. …tax, regulatory and other competition is healthy because it keeps bigger countries' governments from getting bloated. Others argue that OFCs
may be an inevitable concomitant of globalisation. "Even if today's OFCs were somehow stamped out, something like them would pop up to take their place," says Mihir Desai of Harvard Business School. Some
academics have found signs that OFCs have unplanned positive effects, spurring growth and competitiveness in nearby onshore economies. …International organisations have launched various initiatives to try to
get OFCs to tighten supervision, co-operate more with foreign governments to catch tax cheats and, at least in Europe, eliminate "harmful" tax practices. OFCs think such initiatives are designed to
force them out of business. The countries that set these standards "are an oligopoly trying to keep out smaller competitors. They are both players and referees in the game. How can they be objective?", asks
Richard Hay, a lawyer in Britain who represents OFCs. …the broader concern over OFCs is overblown. Well-run jurisdictions of all sorts, whether nominally on- or offshore, are good for the global financial system.
A column in the Financial Times takes an even stronger position. It notes that tax competition encourages more responsible behavior by lawmakers. It also explains that low taxes are not akin to subsidies, and points out that anti-tax competition advocates will not be satisfied until all pro-growth tax policies are exterminated: The European Commission seems to recognise no limits in its drive to impose tax harmonisation across Europe. Having issued a sanction
against Luxembourg last July for its preferential tax regime on holding companies, Brussels is now trying to put pressure on a country outside the European Union by targeting Swiss cantons' tax breaks and low
business tax rates. Such a move, if it succeeds, will hurt not only the Swiss but all taxpayers in Europe. Tax competition gives you - the entrepreneur or citizen - the opportunity to escape fiscal pressure from
your own government by moving to jurisdictions with more favourable tax regimes. It gives strong incentives for all governments to lower taxes, allowing taxpayers to keep more of their money and making
markets less distorted. Such tax competition has existed for some time in Europe and is being intensified by globalisation. Luxembourg and Switzerland, for example, can be considered in a sense to be tax havens
at Europe's heart, benefiting not just European but world taxpayers. Those benefits are being undermined by Brussels' campaign to condemn places with favourable tax regimes. …The Commission has a strange
concept of free trade. It is easy to grasp how public subsidies to business - which involve confiscating resources from some parties and giving
them to others - should be regarded as "state aid". But how can the fact that certain taxes are not levied be placed on the same footing? …This
harmonisation logic will inevitably lead EU bureaucrats to attack other regimes that benefit taxpayers, be they in the EU or outside. In Ireland,
for example, the corporate tax rate is lower than in Swiss cantons and in Estonia undistributed corporate profits are simply not taxed. When can
we expect pressure on Ireland to raise its rates or on Estonia to repeal a system that has contributed to its economic dynamism?
Thursday, March 1, 2007 ~ 10:58 a.m., Dan Mitchell Wrote: Several countries - such as the Netherlands, Denmark, Sweden, the UK and the Czech Republic - opposed the paragraph in a draft paper about
economic goals which said the functioning of the bloc's internal market "may be improved through measures at the European level on business
taxation." ...Some new member states as well as the UK supported the Czech Republic's argument that tax competition can be positive, with several delegations - including Sweden and the Netherlands which
previously supported an EU push towards a common company tax base - also asking for the suggestion to be dropped. European Union nations with low corporate tax rates objected on Tuesday to plans by EU president Germany to create a single standard
for calculating tax on profits from companies. Germany, also backed by France and eight others, asked for EU finance ministers to back a call
for corporations to follow one set of rules for calculating their tax. ...But several countries with lower corporate rates -- including new EU members from Central and Eastern Europe -- argued that their
businesses would lose out. Backed by Ireland, Britain, Sweden and the Netherlands, the EU newcomers demanded that the issue stay off the agenda of the March 8-9 EU summit as the commission plan is still at an
early stage. ...Slovak Finance Minister Jan Pociatek, one of the critics of the plan, said he was against any push for a common tax base that could
raise corporate tax rates. Slovakia has introduced a flat tax of 19 percent while Ireland's current boom can be largely attributed to its 12.5 percent tax rate -- one of the lowest in Europe.
Thursday, March 1, 2007 ~ 10:10 a.m., Dan Mitchell Wrote: In 2005 alone, foreigners increased their investment in the U.S. by $1.4 trillion, an amount larger than the entire GDP of all but seven nations.
Foreigners like our giant market, its rapid growth and, especially since the 2003 tax cuts, our higher returns on capital investment. According to
Commerce Department data, last year foreigners invested roughly $500 billion more in the U.S. than Americans invested abroad. "The United States derives substantial benefits from open trade and investment
flows," concludes the latest Economic Report of the President. Net foreign direct investment "accounts for a disproportionately high share
of U.S. exports" (19%), physical capital expenditures (10%), and R&D spending (13%). This investment also accounts for five million American jobs paying well above the national average.
Thursday, March 1, 2007 ~ 9:41 a.m., Dan Mitchell Wrote: What's so great about majority rule? Let's look at majority rule, as a decision-making tool, and ask how many of our choices we would like
settled by what a majority likes. Would you want the kind of car that you own to be decided through a democratic process, or would you prefer purchasing any car you please? Ask that same question about decisions
such as where you live, what clothes you purchase, what food you eat, what entertainment you enjoy and what wines you drink. I'm sure that if
anyone suggested that these choices be subject to a democratic process, you'd deem it tyranny. ...Our founders intended for us to have a limited republican form of government where rights precede government and
there is rule of law. Citizens, as well as government officials, are accountable to the same laws. Government intervenes in civil society
only to protect its citizens against force and fraud but does not intervene in the cases of peaceable, voluntary exchange. By contrast, in a democracy, the majority rules either directly or through its elected
representatives. The law is whatever the government deems it to be. Rights may be granted or taken away. ...In Federalist Paper No. 10, James Madison wrote, "Measures are too often decided, not according to
the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority." That's another way of
saying that one of the primary dangers of majority rule is that it confers an aura of legitimacy and respectability on acts that would otherwise be deemed tyrannical. Liberty and democracy are not synonymous and
could actually be opposites.
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