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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 Cato Institute, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Friday, February 29, 2008 ~ 3:21 p.m., Dan Mitchell Wrote: Greed is not good, say Europe's finance ministers, unless we can have 40 per cent. The state is on the march, in search of ever more cash to oil its creaking machinery. It
will even buy stolen property - in this case the client details of thousands of LGT customers, hawked by a thieving employee - if it leads to another treasure trove. ...The hunger of government for more of the
national cake is acute and it is becoming a problem. ...The underlying problem is the push and pull between competing government interests in tax co-operation and tax competition. The latter keeps tax rates down
and whatever you think of the wealthy Liechtenstein depositors, tax havens of the Irish corporate or Monaco jet-set variety are a constant worry for government ministers who want to spend more of our money.
Without the competing lure of some neighbouring fiscal paradise, Europe would certainly be a tax hell, a land of disinvestment and unemployment, governed by parasitic states and funded by an overburdened and
shrinking middle class. Those with long memories will recollect Britain in the 1970s when the top tax rate was close to 80 per cent. ...As the global economy begins to slow and corporate profits dry up,
governments will look for quick solutions to protect and enlarge the tax base. The Commission will ask for a wider mandate for tax co-operation, holding out the carrot of a bigger pot of revenue. It is the road
to economic stagnation.
Thursday, February 28, 2008 ~ 6:52 p.m., Dan Mitchell Wrote: Formula One driver Heikki Kovalainen will join McLaren teammate Lewis Hamilton as well as former world champions Alain Prost and Michael
Schumacher in moving to Switzerland to ease his tax bill, the Finn's lawyer said on Saturday. The Finn will move to Coppet to make the most of financial allowances under the Swiss tax system, lawyer Dominique
Warluzel told the Swiss news agency ATS. Schumacher, Prost, Fernando Alonso, Jacques Villeneuve and David Coulthard as well as world rally champion Sebastien Loeb live in the canton of Vaud. Hamilton and former
driver Jean Alesi live in Geneva while reigning world champion Kimi Raikkonen and Germany's Nick Heidfeld are based in Zurich.
Thursday, February 28, 2008 ~ 3:19 p.m., Dan Mitchell Wrote: In 1990 the state was $3 billion in debt. Borrowing has since grown at a compound annual rate of about 13%, and now the state is $32 billion in
the red. Throw in unfunded pensions and health benefits for retirees, and that number swells to $113 billion, or $3,400 for every man, woman and
child in the state. That's three times per capita higher than the national average, making New Jersey the nation's fourth-most indebted state.
...The real problem is tax and spend governance, by both political parties. State revenues have grown at an average annual rate of 3% over 20 years, while spending has increased by an average of 7%. And that's
despite a tax burden that is already nearly the country's highest. Mr. Corzine's predecessor, James McGreevey, jacked up the top income tax rate to 8.97% from 6.37% in 2004, giving more hedge fund managers a
reason to move to Connecticut.
Wednesday, February 27, 2008 ~ 7:11 p.m., Dan Mitchell Wrote: The list of countries that make a living out of tax evasion and related activities (essentially the same countries that consciously created, and in
some cases continue to offer, facilities, laws, regulations and institutions to facilitate money laundering) is long. The OECD lists 35 microstates
with the tax haven designation, but this excludes larger countries with strong bank secrecy laws whom the shoe fits just as well (e.g. Austria,
Switzerland, Luxembourg). ...The vast majority of European countries - all those that lose out because of the existence of these tax havens - should
unite in a determined effort to end these countries' ability to offer safety to tax evaders by granting anonymity, confidentiality and secrecy. The exact
modalities may differ from case to case. Jersey, Guernsey and the Isle of Man should simply be absorbed lock, stock and barrel into the UK, with
English laws, rules and regulations applying across the board. The special status of these strange entities is not cute; it's an enabler and facilitator of
unethical and illegal behaviour. The EU should adopt a directive on bank secrecy that would end the nefarious practices of Luxembourg and Austria. Belgian dentists will just have to get used to paying taxes.
Andorra, Monaco and Liechtenstein should be given the choice of ending bank secrecy or facing annexation (by France and (once it abandons its
bank secrecy laws) Austria respectively). Switzerland is the big prize, as unlike the other tax havens, it is a country rather than a dwarf-state and
postage-stamp curiosity, and it is outside the EU. It should be subject to sufficiently stringent economic sanctions from its neighbours (after all, it is
landlocked!) to induce it to abandon the laws, rules and regulations, including its extreme version of bank secrecy, that make it the one of the countries of choice for parking illegal or extra-legal money.
Wednesday, February 27, 2008 ~ 3:41 p.m., Dan Mitchell Wrote: The 1984 National Organ Transplant Act, which prohibits payments to organ donors or their families, creates benefits in the form of feel-good
ethical values at a huge cost of lives. That's because organs must be supplied to recipients at zero price. Huge shortages are the result, as it
would be if cars, homes, food, dental services and clothing had to be supplied at zero price. That's precisely the finding by Professors Randolph
Beard, John Jackson and David Kaserman in their article "The Failure of U.S. Organ Procurement Policy," published in the Winter 2008 edition of
the Washington, D.C.-based Cato Institute Regulation magazine. As of 2005, there were 90,000 Americans on the organ transplant waiting list that is expected to grow to 150,000 by 2015. The authors estimate that
since 1990, close to 100,000 people have already died waiting for an organ and they estimate that by 2015, that number will have grown to 196,000. Such a toll doesn't include all the pain and suffering of the
waiting patient and his family. There are a couple of factors, in addition to feel-good ethical values, that might explain the success of the ban on
organ sales. People awaiting organs are disproportionately poor, minority, disorganized, sick and unaware of the cause of their plight. The people who benefit from their plight earn a lot of money and are highly
organized. These are owners of dialysis clinics, those who receive funding for transplant research and agencies that manage organ procurement and
allocation. In fact, everyone involved in the transplant business gets paid handsomely, except the organ donor. I'd like to know what standard of
ethics justifies such a death toll and disconnect between costs and benefits.
Wednesday, February 27, 2008 ~ 11:45 a.m., Dan Mitchell Wrote: Poland's centre-right government plans to introduce a low, single-rate income tax by 2011 at the latest, Prime Minister Donald Tusk said on
Friday. ..."On Sunday we will announce a specific timetable for launching a flat tax," Tusk told radio RMF FM. "2010 seems to be the most likely
date of introducing the flat tax, 2011 is the worst case scenario." Poland now has a progressive personal income tax with three rates of 19, 30 and
40 percent. A source familiar with the matter told Reuters the flat tax would likely be set at 17 percent... Finance Minister Jacek Rostowski said
on Friday that taxes had to be lowered to ensure growth stays high in central Europe's biggest economy. Tusk led his Civic Platform to an election victory last October by attracting young, educated and urban
voters on promises of lower taxes [and] less state intervention in the economy.
Tuesday, February 26, 2008 ~ 4:11 p.m., Dan Mitchell Wrote: Finance Minister Peer Steinbrück is warning of "bilateral actions" against Liechtenstein. Such moves, Mr. Steinbrück said, could include a tax or
disclosure requirement for German wire transfers to Liechtenstein -- though that sounds like awfully unilateral bilateralism. Berlin is also threatening to block Liechtenstein's anticipated entry into Europe's
Schengen passport-free area. Mr. Steinbrück appears to be miffed that Liechtenstein isn't rolling over and letting Berlin decide which laws the
principality's banks will follow. ...Germany's spy service, the BND, paid an informant for stolen bank data that has spurred this investigation. The
evidence may not even be admissable in court. Of course, bribery abroad has only been illegal in Germany since 1999; maybe the BND still hasn't
gotten the memo. At any rate, it's not for Mrs. Merkel and Mr. Steinbrück to issue edicts about other countries' compliance with Germany's laws.
Liechtenstein's laws are up to Liechtenstein, regardless of Germany's apparent instinct for shoving little matters like sovereignty aside when they are inconvenient.
Tuesday, February 26, 2008 ~ 1:45 p.m., Dan Mitchell Wrote: When Andreas bought a new hard drive at a Munich computer shop the clerk offered it for 127 euros with a receipt or 80 euros without. He took
the lower price. Most Germans make similar deals to avoid high taxes, the film production manager said. ...Chancellor Angela Merkel has failed to
fulfill a campaign promise to simplify the tax code and reduce tax avoidance. Germans evade about 30 billion euros in taxes every year, estimated Dieter Ondracek, head of the German tax collectors' union
DStG. ...``Unfortunately, tax evasion has become a popular sport in Germany,'' Ondracek said Feb. 19 in an interview with Bloomberg Television in Berlin. Germany last year increased its top income tax rate
to 45 percent, ranking it eighth among the 27 European Union nations. Capital gains taxes of as much as 50 percent are also among the highest in Europe. ...People of more modest means can find loopholes in books
such as ``1,000 Legal Tax Tricks'' by Franz Konz, who's helped Germans cut their tax bills for 20 years. His book, published last year by Droener/Knaur, is the bestselling tax volume on Amazon.com's German
language site. Part of the issue is that German tax laws have become increasingly complicated as politicians added more and more exemptions. Since German reunification in 1990, the number of tax advisers in the
country has jumped 60 percent to 72,669, according to the latest statistics from the BStBK tax advisers' federation. ...``People feel they don't know
all the loopholes so they're constantly uneasy about paying too much tax, which prompts them to do things that are sometimes illegal,'' [Andracek]
said. ``A tax burden that's generally seen as too high and wasteful government spending'' contribute to discontent. Andreas agrees. ``It's not
about greed, it's about getting by,'' he said. ``It's not a crime if everybody does it.'' This story deserves a personal anecdote. On my first trip to Germany, for a tax reform conference in the mid-1990s, a couple of us decided to take a 30-minute cab ride from our conference center to downtown Cologne. We hailed a cab and the first thing the driver did was ask whether we needed a receipt. Not aware of Germany's national pastime of tax evasion, we must have looked confused, so the driver helpfully explained that we could save 30 percent if he got his fare "off the books." What did we decide? Well, I'll leave that to your imagination.
Tuesday, February 26, 2008 ~ 11:21 a.m., Dan Mitchell Wrote: Obama has proposed a couple of hundred billion buckaroos in new government spending along with new tax increases. But Obama may have
just been getting started. Back in December, Obama sponsored the "Global Poverty Act," a bill that proposed the following: "To require the
President to develop and implement a comprehensive strategy to further the United States foreign policy objective of promoting the reduction of global poverty, the elimination of extreme global poverty, and the
achievement of the [U.N.] Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who
live on less than $1 per day." What this bill would do, in short, is commit the United States to the U.N. declared goal that industrialized countries
should spend 0.7 percent a year of their gross domestic product on foreign aid. Over the next decade or so, that would work out to around $850 billion. ...How to pay for our penance? Economist Jeffrey Sachs, an
advocate of this idea, has a suggestion: "We will need, in the end, to put real resources in support of our hopes. A global tax on carbon-emitting
fossil fuels might be the way to begin. Even a very small tax, less than that which is needed to correct humanity's climate-deforming overuse of fossil
fuels, would finance a greatly enhanced supply of global public goods." So not only does Obama want to raise taxes on Americans making over
$250,000 a year and eliminate the $102,000 wage cap on Social Security taxes, he perhaps wants to tack on another trillion dollars in taxes to pay for dramatically increased foreign aid.
Monday, February 25, 2008 ~ 9:34 a.m., Dan Mitchell Wrote: Crooked MEPs are trousering cash meant for workers' wages, it was revealed yesterday. Some hire "ghost" staff - then claim thousands of
pounds from the £100million annual allowance. Others recycle the handout by employing unqualified relatives, a bombshell report on MEPs' expenses found. In many cases the whole £125,000 allowance is paid to
just one person on the staff. One assistant received a "Christmas bonus" worth 19 times their monthly salary. Taxpayers' money is also being
diverted to party funds, with the internal probe describing the corruption as "massive and widespread". Brussels had wanted to cover up the abuse -
but EU fraudbusters have demanded a copy of the report. Last night Lib Dem MEP Chris Davies - one of a handful of people who have seen the
audit - called it "dynamite". He said: "The allegations should lead to the imprisonment of a number of MEPs. It's embezzlement and fraud on a massive, massive scale."
Sunday, February 24, 2008 ~ 12:20 p.m., Dan Mitchell Wrote: ...the Committee on Capital Markets Regulation has presented some troubling [facts] about the competitive position of U.S. public securities
markets. ...One particularly salient indication is the growth of offerings by foreign companies in the Rule 144A market. Under that rule, U.S and
foreign companies can raise equity funds from private sources without having to register with the Securities and Exchange Commission. Between 2000 and 2005, Rule 144A offerings by foreign companies accounted for
an annual average of about 6.8 percent of the funds raised by foreign issuers through public offerings. But according to the Committee, that
figure surged to 80 percent in 2006; and although it declined to 31 percent in 2007, that was still nearly five times greater than the 2000-2005
average. It is hard to understand this increase as anything other that an effort to avoid U.S. public securities markets and the litigation risk that
those markets entail. ...Another striking fact in the Committee's new report is the growing number of American companies that have chosen to
offer their stock in initial public offerings outside the United States. The number has grown from an annual average of one-tenth of 1 percent
between 1996 and 2005, to 1.1 percent in 2006 and 4.3 percent in 2007. This indicates that even U.S companies are beginning to abandon their home market for the lower-cost and lower-risk markets abroad. ...The
decline seemed to begin after the Sarbanes-Oxley Act was passed in 2002. The London Stock Exchange advertises itself as a SOX-free zone and has experienced a boom in listings during the post-SOX era.
Saturday, February 23, 2008 ~ 3:21 p.m., Dan Mitchell Wrote: In a new City Journal essay, prominent school voucher advocate Sol Stern declares that competition and choice "may not be a panacea," and
recommends that choice supporters shift emphasis to standardizing the curriculum. He's not alone. ...Department of Education alumni William
Bennett, Chester Finn, and Diane Ravitch, all appointed under Republican administrations, now place greater emphasis on national standards than
on choice. Last month, Mr. Finn faulted Ohio's charter school system for placing "too much trust in market forces." ...Do charter schools really rely
too heavily on "market forces"? Consider some key elements of free markets: prices determined by supply and demand, private ownership of
businesses, low or no barriers to the creation of new businesses, few or no barriers to workers entering the profession, minimal regulation, the ability
of owners and investors to profit from their efforts, and payment by consumers rather than a third party. With charter schools, these features
are either grossly hobbled or absent. Yes, charter schools produce some attenuated competition and parental choice, but to imagine that those two
diluted ingredients are sufficient by themselves (or even excessive!) suggests a badly mistaken notion of what a market is. Milwaukee's voucher program has indeed helped many children, but it also falls far
short of a market. First, it is capped at 22,500 students. That's too little to justify large-scale R&D investment by education entrepreneurs. If the
market for computers were limited to 22,500 customers, Microsoft, Apple, and Dell would cease to exist. Private schools must also accept the
voucher as full payment, but such price controls are almost universally derided by economists as counterproductive. If it were not for the fact that
electronics manufacturers could once charge $1,000 for a DVD player, it would never have become possible for the units to sell for $30 today. ...It
is possible to give all families access to a free education marketplace - by dramatically expanding and liberalizing existing choice programs, or
adopting new ones, like Cato's public education tax credit proposal. But you can't expect current programs to produce free-market results in the absence of free markets.
Friday, February 22, 2008 ~ 5:00 p.m., Dan Mitchell Wrote: The corporate income tax will be cut from 18 per cent to 15 per cent, effective for the 2008 income year and come into force in the 2009 assessment year.
Friday, February 22, 2008 ~ 4:14 p.m., Dan Mitchell Wrote: It emerged this week that the Taiwanese cabinet has approved plans to reduce corporate and personal income tax rates, although the proposed
changes must still secure parliamentary approval. The cuts would see the business tax rate reduced to 17.5% (from 25%), and the personal income tax rate slashed, according to reports. No timetable has yet been
announced for the introduction of the new lower rates, but according to the International Herald Tribune, ministries likely to be affected by the
changes have been asked to revise legislation to accommodate the new rates as soon as possible.
Thursday, February 21, 2008 ~ 4:27 p.m., Dan Mitchell Wrote: Pressure grew on Liechtenstein on Tuesday to ease its bank secrecy rules in the wake of a German tax scandal centered on the Alpine tax haven.
...Angel Gurria, the secretary general of the OECD, said Liechtenstein's secrecy rules were a "relic of a different time". ...Liechtenstein's Crown
Prince Alois on Tuesday accused Germany of mounting an "attack" on the principality. He condemned as "unacceptable" Berlin's decision to
allow its BND intelligence agency to pay more than EUR4m ($5.9m, £3.7m) for bank client data allegedly stolen by a former Liechtenstein bank employee. ...Jeffrey Owens, the OECD's chief tax havens expert, said
the changes would only make a difference if Liechtenstein "were now ready to sign tax information exchange agreements with Germany and other countries". This story is troubling on many levels, particularly given Germany's ugly history of oppression. In the 1930s, Germany had draconian laws to deter citizens from having
money outside the country and - like today - it trampled on the sovereignty of its neighbors to get information (see http://switzerland.isyours.com/e/banking/
Today's controversy is motivated by greed for tax revenue rather than anti-Semitism, but the issues are similar. To what extent do nations have the right to compel other jurisdictions to act as deputy enforcers? Most reasonable people understand that there are limits on cooperation between governments. European Union nations, for instance, refuse to cooperate in extradition cases where an American might face the death penalty. Likewise, most nations would never consider helping a totalitarian regime like Saudi Arabia or Iran if it tried to persecute escaped homosexuals. The tax issue is a bit more challenging because it is easy to demagogue against wealthy people who utilize so-called tax havens (though even OECD officials get a bit squeamish when asked whether financial privacy laws should be totally abolished since even they recognize that billions of people live in nations that practice some form of religious, political, ethnic, racial, and/or sexual discrimination - not to mention all the people who live in nations that suffer from economic mismanagement, kidnapping, and/or monetary instability). The head of the OECD considers privacy to be a "relic of a different time." But why should there be a one-size-fits-all policy? Is there really no room in the world for nations that treat people with dignity and respect their privacy? If politicians from high-tax nations and bureaucracies such as the OECD get to decide, the answer is no. But hopefully Liechtenstein will stand firm against Germany's vicious bullying. After all, so long as over-burdened taxpayers have safe havens, governments face pressure to improve their tax law. And even the Financial Times was forced to acknowledge, in a schizophrenic editorial that endorsed sending spies into low-tax jurisdictions, that bad tax policy bears part of the blame: Germany's problem with evasion is partly the fault of its tax system. Although the abolition of wealth tax has improved matters, marginal
income and inheritance tax rates for high earners approach 50 per cent. Tough enforcement will never stop evasion if taxes are punitive.
Thursday, February 21, 2008 ~ 3:12 p.m., Dan Mitchell Wrote: The cost of red tape imposed on business by the government has hit £66 billion, a £10 billion rise in a year, new figures show. The British
Chambers of Commerce's burdens barometer, published annually, shows Labour is not meeting its pledge to reduce the bureaucratic burden on business. While there have been tiny reductions in minor areas, this is
balanced by the rising tide of regulation in others. ...In comparison with the £10.4 billion rise in the cost of red tape over the past year, the
government can point to only three modest reductions. ...The government is committed to a 25% reduction in the administrative burden of red tape.
Wednesday, February 20, 2008 ~ 5:55 p.m., Dan Mitchell Wrote: In 2001, Russia enacted a flat tax rate of 13%. The reform has been popular and has since been adopted by countries such as Serbia, Ukraine,
Georgia, Romania, Slovakia and Macedonia. But is the flat tax a good thing? This is the question which Gorodnichenko, Martinez-Vazquex and
Sabirianova Peter try to answer in their NBER working paper titled "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response
and Welfare Effects in Russia." It has generally been found that tax collections drastically increased after the introduction of the flat tax. This
trend, however, may not be due to the flat tax specifically. Increased GDP from 2001 until the present certainly accounts for much of the increase in
collections. Also, an increase in voluntary tax contributions or stricter enforcement may be the cause of the increase in tax collections. ..The
authors found that the flat tax lead to a significant decrease in tax evasion. This is likely due to the fact that lower marginal tax rates
decreases the incentive to avoid reporting income. Further, if there is a decrease in tax evasion, policy makers can lower the marginal tax rate
further while still collecting the same amount of revenue. ...It seems that the flat tax is not only attractive according to economic theory, but may
also work well in reality-at least in terms of reducing tax evasion.
Wednesday, February 20, 2008 ~ 5:09 p.m., Eugene Slaven Wrote: ...the U.S. is refusing to lead on one crucial issue. And it could prove costly for us all...That issue is free trade
.For decades, the U. S. led the world in
promoting it. Democrats and Republicans voted to lower tariffs and open markets; goods and services flowed more freely across borders. Look no further than NAFTA, negotiated by Republican George H.W. Bush and
enacted by Democrats
Yet even as Americans enjoy job growth, cheaper goods and low inflation, support for freetrade is losing steam. First, Congress failed to renew the president's Trade Promotion Authority. And
now, instead of signing new trade deals, Washington is letting potential pacts bog down
Benefits from free trade are real. The Institute for
International Economics, a Washington-based think tank, estimates, "the U.S. economy is now richer by about $1 trillion per year as a result of its
further integration with the world economy since 1945." The best way to keep increasing this amount is through free trade
Tuesday, February 19, 2008 ~ 7:45 p.m., Eugene Slaven Wrote: ...this story involves more than one political vulgarian's wretched excesses. It also illustrates how Republicans earned their most recent and
coming drubbings
On July 29, 2005, the House and Senate passed legislation granting Lee County's request for $10 million for "widening
and improvements for I-75" to facilitate evacuations during hurricanes. But on Feb. 19, 2005, Young had been in Bonita Springs near Fort Myers,
collecting $40,000 in campaign funds. The contributors included developer Daniel Aronoff, a prolific supporter of Republicans and owner of about 4,000 acres along Coconut Road. The value of that land would be
enhanced if Coconut Road were connected to I-75 by an interchange that would be adjacent to 1,200 of Aronoff's acres
When the legislation reached the president on Aug. 10, 2005, the language about widening I-75
had been mysteriously deleted and replaced by "Coconut Rd. interchange I-75/ Lee County." So $10 million was to be spent for a project neither the
House nor the Senate voted for, that Lee County did not want, and that someone unknown wrote into the legislation. But the Constitution says:
"Every bill ... shall have passed the House of Representatives and the Senate" before it becomes law...There are two mysteries: Who
surreptitiously perverted the will of Congress? And why is Congress not angry and eager to identify the culprit? It seems reasonable to suspect that
the answer to the first question is: Young or an agent of his. The answer, or answers, to the second question probably is, or are: Because Young is
powerful -- and perhaps also because such violations of legislative due process have been committed on behalf of other members... That fact goes
far to explain the Republicans' current and future minority status.
Tuesday, February 19, 2008 ~ 3:21 p.m., Dan Mitchell Wrote: According to reports in the regional media this week, the Vietnamese authorities are considering reducing the corporate tax rate from 28% to
25% from January 2008. The proposals were reportedly put forward by the Finance Ministry for public consultation, in addition to plans to
simplify the country's priority tax forms, and to increase tax benefits for businesses in sectors including high tech, education, health care, and the environment. Meanwhile, South Africa is considering a one-point reduction in its corporate tax rate. This is a disappointingly small step, but still a move in the right direction while politicians in America want to move in the wrong direction. According to Tax-news.com: Analysts and tax experts are expecting South African Finance Minister Trevor Manuel to cut the rate of corporate income tax in the government's
2008 budget, which is due to be announced on 20th February. Speaking at the recent a recent conference hosted by the Gordon Institute of Business
Science (GIBS) on the Economic Outlook for 2008, Billy Joubert, Tax Director at Deloitte, predicted that while Manuel would be likely to leave
personal income tax rates on hold, he could announce a 1% reduction in corporate tax.
Monday, February 18, 2008 ~ 10:08 a.m., Dan Mitchell Wrote: ...high taxes don't redistribute income, they redistribute people. For new evidence look no further than migration patterns within the United States,
as documented in a new survey by the moving company United Van Lines. ...The United Van Lines study finds that the biggest population loser last
year was Michigan, where two families moved out of the state for every new family that moved in. Americans are also fleeing New York, New Jersey, Ohio, Pennsylvania and Illinois. ...the eight states without an
income tax are stealing talent from other states. They are Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, and each one gained in net domestic migrants. ...Politicians
who think taxes don't matter might want to explain the Dakotas. North Dakota ranked second worst in out-migration last year, while South Dakota ranked in the top 10 as a destination. The two are similar in most
regards, with one large difference: North Dakota has an income tax and South Dakota doesn't. ...Nevada has no income tax. High income Californians can buy a house in Las Vegas for the amount of money they
save in three or four years by not paying California income taxes. One of the few Northeastern states that gained interstate migrants in 2007 was
New Hampshire, the only state in New England without an income tax. ...Our friends on the left say Americans are willing to pay more taxes to
get better government services, but their migration patterns reveal the opposite.
Monday, February 18, 2008 ~ 9:14 a.m., Dan Mitchell Wrote: ...if you have a favorite candidate, you should be warned that there is nothing like studying economics to make you disillusioned -- if not
disgusted -- with your political hero...If all the economic fallacies promoted by politicians were taken out of their speeches, many of those
speeches would be cut in half, at least
My own recently published book, "Economic Facts and Fallacies," deals with some of the most widely
promoted fallacies
1. Government programs are needed to create "affordable housing." (Actually, government intervention is what has made housing so unaffordable in places where even hovels are
expensive.)
4. Foreign aid helps poor countries become more prosperous. (Only if you don't look at the evidence.)
5. The rich are getting richer and
the poor are getting poorer. (It all depends on whether you are talking about flesh and blood human beings or statistical brackets.)
"Economic
Facts and Fallacies"...also brings out some facts that seldom get much attention in the media
1. The poverty rate among black married couples
has been in single digits since 1994
2. The average income of the elderly is several times their earnings, and their wealth is far higher than among
younger people
3. Just as blacks are turned down for mortgage loans more often than whites, so whites are turned down more often than Asian Americans. (What does that do to racism as an all-purpose explanation?)
Sunday, February 17, 2008 ~ 11:11 a.m., Dan Mitchell Wrote: The proposed rebate of about $600 per man, woman and child is transferred to people based upon some characteristic other than work
effort. In fact, if you've worked too hard and earned too much, you won't get a rebate. ...those resources going to the rebate recipients don't come
from the Tooth Fairy. They have to come from workers and producers. If the resources come from workers and producers who thereby receive less
for their work than they otherwise would have received, won't they in turn spend less? Of course they'll spend less, and the people who now supply
them with less will also spend less, and so on down the line. ...Whenever you observe bipartisan cooperation, hold on to your wallet and run to the basement.
Saturday, February 16, 2008 ~ 12:57 p.m., Dan Mitchell Wrote: The hottest buzzword of the day is "economic stimulus." Virtually every politician and pundit agrees the government must act quickly to forestall a
recession by increasing consumer spending. ...Any government program that wins the support of the political class and media commentators makes
me suspicious. ...to "get the economy moving," the anointed experts want the government to quickly put cash in our hands. When we rush out to
spend it, the story goes, the economy will get out of the ditch. Interesting theory, but it's hardly new, and it's been demolished many times before by
free-market economists. One problem, which George Mason University economist Russell Roberts observed, is that the money that will allegedly
be "injected" into the economy is already in the economy. So how can it be a stimulus? ...There's no lockbox with $100 billion in it. So to give
everyone a tax rebate, the government will have to borrow more money. But that only moves the cash from one part of the economy to another. As
Roberts says, "It's like taking a bucket of water from the deep end of a pool and dumping it into the shallow end." ...The other forgotten principle
is that consumption can't cause prosperity. Yes, consumer spending is 70 percent of GDP, but consumption is the result -- not the cause -- of economic growth. You can't consume what hasn't been produced.
Friday, February 15, 2008 ~ 6:17 p.m., Dan Mitchell Wrote: Hungary's timid moves to rejig its tax system will do little to stimulate its economy and its unwillingness to tackle government spending means it
will continue to lag its regional peers in the race for investment. ...The country, which was the darling of foreign investors in the early 1990s after
communism ended, has seen confidence ebb as a result of its confusing and costly tax regime. While neighbouring Slovakia, once far behind Hungary, has boomed with billions of dollars of investments, growth here
slumped to less than one percent in the third quarter of 2007 from the impact of higher taxes... Slovakia, by contrast, introduced a flat tax of 19
percent, which stimulated the economy, increased tax revenues and cut the budget deficit. ...Even before the tax rises introduced in 2006, Hungary had the third highest tax take on single workers in the OECD. At
around 51 percent, only Belgium and Germany had a higher tax take on a single taxpayer earning the average wage. ...it still pays to try and escape
the tax net. Hungary has one of the lowest employment and activity ratios in the European Union, while illegal employment is widespread. ...One
way to combat tax evasion would be to trim high marginal tax rates, said Peter Oszko, chairman and chief executive of Deloitte, a large auditing
firm, in Hungary. "The biggest problem is that a narrow layer (of the population) has an irrationally high tax burden," he said.
Thursday, February 14, 2008 ~ 7:41 p.m., Dan Mitchell Wrote: Bush has outspent Clinton by a mile. ...If we now had the lower spending levels that Bush inherited, we could extend his tax cuts, repeal the
alternative minimum tax, enact the current stimulus package, and still have a 10-year budget surplus of $1.9 trillion. And, remember, that allows
spending to be adjusted up for the Iraq war and the war against terrorists. ...It makes you sick to think about it. All that money wasted on ethanol
and bridges to nowhere has accumulated into a pile that massive. Uncle Sam ate a whopping helping of apple pie every day for seven years, and
now he is obese. This is important to bear in mind as we move forward to the general election. We don't have a deficit because of Iraq, or the tax
cuts, or the drug benefit. We have a deficit because the government grew fat. We can't fix that with tax increases. Uncle Sam must go on a diet.
Thursday, February 14, 2008 ~ 5:36 p.m., Dan Mitchell Wrote: A group of heavyweight business interests have laid out their dream tax-cut package, calling on the Government to make a bold move and cut
all personal taxes to 30 per cent or less. The group, comprising the Business Roundtable, Chambers of Commerce, Federated Farmers and the Institute of Chartered Accountants, have issued a paper calling for the
drop in tax rates as the Government prepares a three-year programme of cuts for the Budget in May. ...The group's dream package comes in the
buildup to the Budget - when Finance Minister Michael Cullen is expected to introduce a three-year programme of tax cuts. Dr Cullen has set aside
$1.5 billion for cuts but has not yet given any indication of the size of them or how widely they will apply. The group said the tax system should be
designed to promote economic growth, rather than as a tool for redistributing wealth.
Wednesday, February 13, 2008 ~ 8:11p.m., Eugene Slaven Wrote: A strategy that corporate executives routinely use to turn their stockholdings into cash while delaying payment of taxes is coming under
increased scrutiny by the Internal Revenue Service
The agency, in a technical paper issued last week, said the strategy, which has the goal of
deferring the payment of federal income tax for many years, might have some features of a questionable tax shelter
The strategy comes into play
when an executive holding a large amount of publicly traded stock that has gained in value wants to turn that stock into cash, but not immediately
pay the capital gains taxes that apply when the stock is sold
Instead, the executive agrees at a future date to sell a chunk of the stock to an investment bank, in exchange for an immediate cash payout. The
executive pays the taxes on the stock when he actually turns over the shares to the bank, typically many years later
The executives and banks
argue that the shares are technically borrowed by the bank, not sold to it, and that the transaction is thus not a sale resulting in a cash payment that is immediately subject to taxation..
Tuesday, February 12, 2008 ~ 10:57 p.m., Dan Mitchell Wrote:
renewed attention is being given to the gap between the haves and have-nots in America. Most of this debate, however, is focused on the
wrong measurement of financial well-being.
Looking at a far more direct measure of American families' economic status household consumption indicates that the gap between rich and poor is far less
than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society. The
top fifth of American households earned an average of $149,963 a year in 2006.
they spent $69,863 on food, clothing, shelter, utilities, transportation, health care and other categories of consumption. The rest
of their income went largely to taxes and savings. The bottom fifth earned just $9,974, but spent nearly twice that an average of $18,153 a year.
How is that possible?
those lower-income families have access to various sources of spending money that doesn't fall under taxable income. These sources include portions of sales of property like homes and cars
and securities that are not subject to capital gains taxes, insurance policies redeemed, or the drawing down of bank accounts. While some of
these families are mired in poverty, many (the exact proportion is unclear) are headed by retirees and those temporarily between jobs, and thus their
low income total doesn't accurately reflect their long-term financial status. So, bearing this in mind, if we compare the incomes of the top and
bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1.
Let's take the adjustments one step further.
Richer households are larger an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If
we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1.
Monday, February 11, 2008 ~ 7:15 p.m., Dan Mitchell Wrote: The time has come for the introduction of the flat tax - a tax with only one rate for personal incomes. It is a proposal that this writer has been making
for more than a decade. It already prevails in about 20 countries, including Russia, where it is reported to have resulted in a significant
growth in tax revenues. ...The exemption limit and the rate may be fixed at that level where it will be revenue-neutral. Any further rise in revenue
will come from the growth of the economy. It will make the tax structure simple and assessment and refunds quicker.
Monday, February 11, 2008 ~ 7:00 p.m., Dan Mitchell Wrote: To hear some of the presidential candidates, you'd think that health-insurance companies are the driving force behind the growing cost
of health insurance. The more likely culprits are our politicians and the laws they pass. ...For almost every health-care product or service, there
are at least two groups that want insurance to cover it: those who sell the products and services so they can get more business, and those who use
the products and services to lower their out-of-pocket costs. Both of these highly motivated groups push state legislators -- and increasingly members
of Congress -- to require insurance to cover the care. As a result, government interference in and control of the health-care system is steadily increasing -- and so is the cost of health insurance. ...mandates
almost always raise the cost of health insurance. That's because mandates require insurers to pay for care that consumers previously funded out of
their own pockets, if they purchased it at all. Although most mandates will have a relatively small impact when taken individually, it's the cumulative
effect that drives up the cost of coverage. It's like telling people they must have a "Cadillac plan" loaded with options. Cadillacs are nice, but not
everyone can afford one. And when people can't afford coverage, they join the ranks of the uninsured. ...Mandates aren't the only things driving up
the cost of health insurance. States that require insurers to accept any individual who applies, regardless of their health status, are imposing
costly burdens on health insurance. And those costs get passed on to consumers -- if they decide to keep their coverage. Before politicians jump
on the anti-health-insurance bandwagon, they should look at the role they are playing in driving up costs. Making health insurance more affordable
would be a lot easier if they would stop legislating what it has to cover.
Sunday, February 10, 2008 ~ 7:18 p.m., Dan Mitchell Wrote: Mr. Gates seems to believe that the solution is to persuade for-profit companies to meet the poor's needs by boosting the "recognition" of
corporate philanthropy. But the dossier of historical evidence to suggest this would work is as thin as Kate Moss on a diet. ...Profit-motivated capitalism, on the other hand, has done wonders for poor workers.
Self-interested capitalist factory owners buy machines that increase production, and thus profits. Capitalists search for technological breakthroughs that make it possible to get more output for the same
amount of input. Working with more machinery and better technology, workers produce more output per hour. In a competitive labor market, the demand for these more productive workers increases, driving up their
wages. The steady increase in wages for unskilled labor lifts the workers out of poverty. The number of poor people who can't afford food for their
children is a lot smaller than it used to be -- thanks to capitalism. Capitalism didn't create malnutrition, it reduced it. The globalization of
capitalism from 1950 to the present has increased annual average income in the world to $7,000 from $2,000. Contrary to popular legend, poor
countries grew at about the same rate as the rich ones. This growth gave us the greatest mass exit from poverty in world history. The parts of the
world that are still poor are suffering from too little capitalism. Foreign direct investment in Africa today, although rising, amounts to only 1% of
global flows. That's because the environment for private business in Africa is still hostile.
Sunday, February 10, 2008 ~ 2:33 p.m., Dan Mitchell Wrote: If universal coverage can work anywhere, it should be Sweden, a small, homogenous nation where poverty is virtually unknown. Yet problems
there have begun to undermine a health care system that dates back to the 1930s, when Social Democrats began to assemble a welfare state. Waiting
times for care, long a problem in Sweden and too often deadly wherever they're found, are now the longest on the Continent, says European think
tank Health Consumer Powerhouse. ...Thanks to the profit motive, private health care providers have an incentive to cut waiting times, lest they lose
customers to the competition. Government providers have no such motivation. They do have incentive, however, to ration care when demand
gets too high and costs soar. But to do so exposes "universal access" and "equal access" to be inaccurate descriptions. "Restricted access" would be more fitting.
Saturday, February 9, 2008 ~ 6:26 p.m., Dan Mitchell Wrote: UK Trade and Investment Minister Digby Jones has broken ranks with the government with regard to its plans to introduce a new tax charge on
non-domiciled UK residents, warning that the proposal threatens London's status as an international financial centre. Jones, formerly Director
General of the Confederation of British Industry (CBI), told the Financial Times in an interview published on Friday that, in his experience as the
minister responsible for promoting the UK to potential foreign investors, reaction to the government's plans was broadly negative. "It (the tax
changes) has caused people to say, 'Does this mean you don't want us?'," he stated, going on to caution that the UK was losing its "badge as the
place to come and bring your skill and work hard in the developed world". Under the government's proposals, so called 'non-doms' - UK residents
who are non-domiciled - will have to pay an annual charge of GBP30,000 to ensure that they contribute in respect of the foreign income and gains which they keep abroad and on which they do not pay UK tax. ...the
proposals have received widespread condemnation from the business and financial services community, which sees the idea as another example of
pulling up the welcome mat for foreign investors - concerns that seem to be shared by Jones. "I can give you five reasons as to why you should
invest in Britain before you go and invest anywhere else in Europe. But maybe there were seven and now there are five," he told the FT.
Friday, February 8, 2008 ~ 8:08 p.m., Dan Mitchell Wrote: ... the FDA bureaucracy "cannot even keep up with the advances in science" -- and not solely due to a lack of funding. While "the world of
drug discovery and development has undergone revolutionary change," the authors write, the FDA's "evaluation methods have remained largely
unchanged over the last half-century." (Our emphasis.) Think about that: We live amid a revolution in biology, but the FDA still thinks like it did
when Sputnik launched. ...The FDA uses rigid statistical techniques to evaluate developmental drugs, even when the lives of terminally ill patients are at stake. Many advanced immunotherapies for cancer, for
instance, are held hostage to the FDA's old models, which still insist on crude mortality rates and the large average effects detected in clinical
trials. Better metrics would include improving the quality of life or slowing the progression of tumors, or focusing on targeted populations. The
Science Board says that "there is an urgent need for developing . . . new statistical methods that are most appropriate for the data generated by
new areas of science." ...The real scandal is that these policies are the product of the FDA's institutional culture, which puts political incentives
and bureaucratic procedure above patient results. Congress and the press could do some good if they investigated that problem, but it's so much easier to say, "spend more money."
Thursday, February 7, 2008 ~ 9:13 p.m., Dan Mitchell Wrote: Few laws are so universally acclaimed as the 1993 Family and Medical Leave Act, which is based on the assumption that allowing employees
unpaid leave is cost free. It isn't, and we're glad to see the Labor Department is finally taking steps to end some abusive practices. ...A 2005 study by the Employment Policy Foundation found the law's cost to
businesses in 2004 was a not-so-cheap $21 billion. This included $5 billion in lost productivity, $6 billion to continue health benefits for employees on
leave, and $10 billion in replacement labor costs -- including wages to employees who had to work additional shifts or overtime to fill in for the
missing. ...Under current rules, an employee with a medical condition can simply fail to show up for two days before claiming leave. And since leave
can be taken a few minutes at a time, employees can show up late, leave early, or disappear for an hour without notice. This is an invitation for
misuse, especially at time-sensitive businesses (say, emergency first response or assembly lines) and many employers have lost control of their workforce. ...Many Democrats on Capitol Hill want to expand the law
even further, imposing it on businesses with fewer than 50 employees, and making companies provide paid days off. But that would only expand the
costs, and make employers even more reluctant to hire in the first place -- as in Europe.
Wednesday, February 6, 2008 ~ 8:25 p.m., Dan Mitchell Wrote: According to the Democratic consensus, too many people lack health insurance, and the liberal remedy is to protect the status quo while
expanding public programs for the uninsured. That's the opposite of a rational health policy: Not only does the current system cause unnecessary
problems for the insured, but many of the gaps in coverage owe to the way tax subsidies shortchange the uninsured, particularly working-class and
middle-income families. ...The core problem is that people who get insurance through their employers pay no income or payroll taxes on the
value of the benefit. The Treasury defines this as a "tax expenditure," meaning it's revenue the government forgoes to encourage certain
behavior. ... Estimates show that the subsidy is worth more than $3,000 for upper-income families (with higher marginal tax rates), and less than
$1,000 for those on the lower income rungs. These aren't new insights, and economists have recommended changing these incentives for decades. ...In
his 2007 State of the Union address, Mr. Bush suggested redistributing the government's health subsidies. His proposal would sever the link between
insurance and employment, shifting the deduction to individuals and capping it at $15,000 a year for a typical family. About four-fifths of the
country would do better than they do now, while the rest currently have the most gold-plated employer coverage and would still have plenty of
options. Not only would this be a relatively cost-effective way to increase coverage. It would also address the major market distortions that the employer-exclusive deduction causes, with individuals essentially
prepaying for routine costs through third-party insurance companies.
Tuesday, February 5, 2008 ~ 4:52 p.m., Dan Mitchell Wrote: To counter the current economic downturn around the globe, Socialist Party leader Jose Luis Rodriguez Zapatero, Spain's prime minister, has put
forth a raft of tax-cutting proposals. In December, Zapatero pledged to get rid of Spain's wealth tax, enacted in 1977 as a temporary measure.
With a top rate of 2.5 percent of a citizen's property and wealth per year, the tax is one of the highest in the world on wealth. Abolishing the tax,
says Zapatero, would ensure that "saving and thrift are no longer punished." ...In Germany, another stop for the Pittsburgh Symphony
Orchestra, the economic story is exactly the same. "Effective January 1st, Germany will slash its corporate rate from 38.7 percent to 29.8 percent,"
reports Reinhoudt. Explains Germany's center-left finance minister, Peer Steinbruck, regarding the tax cuts on businesses, "This corporate tax
reform will make Germany a more attractive place for investment." The bottom line is that even the left -- after watching for decades how bloated
government, high taxes and overregulation had produced high levels of unemployment and overall economic stagnation -- now understands the importance of economic incentives and a positive business climate.
Tuesday, February 5, 2008 ~ 4:12 p.m., Dan Mitchell Wrote: ...he sunk serious political capital into a bid to renew the national financial-transactions tax. The effort went down in flames in Congress,
where elected officials are finally waking up to the fact that the government can't squeeze the public forever. The death of any tax anywhere in the world is good economic news, but in a country like Brazil
it's only slightly less amazing than the fall of the Berlin Wall was to Eastern Europe. ...the government's take of the fruits of private-sector
production (GDP) is not only extraordinarily large in Brazil. This revenue grab is also highly correlated with the country's chronically anemic
economic growth in the post-military-dictatorship period. ...As disastrous as the tax defeat turned out to be for Lula, there is little mystery about
why he pursued it. His side of the aisle is marinated in the same "equality" theory of economics that motivates the U.S. left. This special brand of
populism holds that raising taxes on the most productive sectors of the economy is the way to satisfy government's unlimited appetite for more.
They have cleverly dubbed this "pay-as-you-go" fiscal conservatism, while posing before television cameras as champions of social fairness. ...In
countries where a sizeable part of the electorate is middle class and has more to lose than to gain from tax policies that punish economic
aspirations, populist pandering eventually hits a wall. Proof of this is now on display in Europe, where lowering and simplifying taxes is currently in
vogue. ...From 1988-2007, real GDP grew at an annual rate of 2.5% -- while taxes as a percentage of GDP grew at 4.8% and the tax burden per
capita grew at 3.3%. ...A more fundamental problem is that the Brazilian left still doesn't grasp the concept that lower rates and a less-convoluted
tax code would raise the incentive to work and to comply, and therefore would be likely to produce higher government revenues. Fearing a loss of
income from the failure to renew the financial transaction tax, the Lula government is now floating another tax idea -- this one raises taxes on the
financial sector. Happily, it too is facing opposition. If nothing else, Brazilians seem to have hit their limit in tax tolerance.
Monday, February 4, 2008 ~ 7:13 p.m., Dan Mitchell Wrote: Doctors are calling for NHS treatment to be withheld from patients who are too old or who lead unhealthy lives. Smokers, heavy drinkers, the
obese and the elderly should be barred from receiving some operations, according to doctors, with most saying the health service cannot afford to
provide free care to everyone. ...About one in 10 hospitals already deny some surgery to obese patients and smokers, with restrictions most
common in hospitals battling debt. ...Obesity costs the British taxpayer £7 billion a year. Overweight people are more likely to contract diabetes, cancer and heart disease, and to require replacement joints or
stomach-stapling operations. Meanwhile, £1.7 billion is spent treating diseases caused by smoking, such as lung cancer, bronchitis and emphysema, with a similar sum spent by the NHS on alcohol problems.
Cases of cirrhosis have tripled over the past decade. Among the survey of 870 family and hospital doctors, almost 60 per cent said the NHS could
not provide full healthcare to everyone and that some individuals should pay for services. One in three said that elderly patients should not be given
free treatment if it were unlikely to do them good for long. Half thought that smokers should be denied a heart bypass, while a quarter believed that the obese should be denied hip replacements. Investor's Business Daily comments on this controversy, noting that the denial of health care is a risk once government is in charge of the health care system. Moreover, the editorial explains that government-paid health care actually worsens problems such as obesity because people do not bear the cost when they behave recklessly. Of course, they will bear very steep costs if the government now cuts off health care, but this is an example of using one misguided government policy to try to fix the problems caused by another misguided government policy. Wouldn't it be preferable to just fix the underlying problem by shifting to a free-market system? The London Telegraph is reporting that the doctors believe "smokers, heavy drinkers, the obese and the elderly should be barred from receiving
some operations." Perhaps the doctors are following the lead of the National Institute for Health and Clinical Excellence, the British agency
that provides guidance on public health. In 2005, NICE proposed that the National Health Service use age as a measurement of a patient's
worthiness for treatment. ...For Britons, health care rationing isn't just a threat. It's a reality. The Telegraph says roughly one in 10 hospitals -
usually those with financial problems - now deny some surgery to smokers and the obese. On a moral level, the doctors have a point: Taxpayers
shouldn't have to subsidize care for those who make poor choices and then expect others to pay for their mistakes. But that's exactly what universal
health care does, and that's one of its primary flaws. It promises people that they'll be cared for no matter what they do to themselves. When the
consequences of bad behavior are eliminated, there's a strong incentive to behave badly. ...Proponents of forcing government health care on
Americans want voters to believe that none of this can happen here under their plan. But they can't guarantee it. All that can be known for sure is
that the U.S. will follow the same path as Britain. Bureaucrats will ration care, and those who provide it will become civil servants whose performance will more closely resemble that of DMV employees than
caring professionals.
Monday, February 4, 2008 ~ 5:37 p.m., Dan Mitchell Wrote: ...posting bail for people accused of crimes in exchange for a fee...is all but unknown in the rest of the world. In England, Canada and other countries,
agreeing to pay a defendant's bond in exchange for money is a crime akin to witness tampering or bribing a juror - a form of obstruction of justice.
...Other countries almost universally reject and condemn Mr. Spath's trade, in which defendants who are presumed innocent but cannot make bail on their own pay an outsider a nonrefundable fee for their freedom.
"It's a very American invention," John Goldkamp, a professor of criminal justice at Temple University, said of the commercial bail bond system.
"It's really the only place in the criminal justice system where a liberty decision is governed by a profit-making businessman who will or will not
take your business." ...Bail is meant to make sure defendants show up for trial. It has ancient roots in English common law, which relied on sworn
promises and on pledges of land or property from the defendants or their relatives to make sure they did not flee. America's open frontier and
entrepreneurial spirit injected an innovation into the process: by the early 1800s, private businesses were allowed to post bail in exchange for
payments from the defendants and the promise that they would hunt down the defendants and return them if they failed to appear. ...The system costs
taxpayers nothing, Mr. Kreins said, and it is exceptionally effective at ensuring that defendants appear for court. ...According to the Justice
Department and academic studies, the clients of commercial bail bond agencies are more likely to appear for court in the first place and more
likely to be captured if they flee than those released under other forms of supervision. Libertarians sometimes get accused of being utopians because of occasional debates about the degree to which things such as roads, defense, and law enforcement can be handled by the private sector. But this article is a great introduction to a thought experiment: Imagine if America's private bail system did not exist and one of Cato's legal experts proposed privatization of whatever system the government had created instead. That proposal doubtlessly would be condemned as utopian, unrealistic, impractical, and unworkable. Fortunately, that impossible idea has been successfully in place for about two hundred years. Just something to keep in mind the next time a statist tells you that something only can be done by government.
Sunday, February 3, 2008 ~ 2:03 p.m., Dan Mitchell Wrote: ...this is the same president who had been in office nearly seven years before he finally vetoed a measure because it cost too much. Or who let
non-defense discretionary spending rise nearly twice as fast as it did under Bill Clinton. Or who pushed through the biggest new entitlement program
(Medicare coverage of prescription drugs) in 40 years. ...The president's proudest domestic program is the No Child Left Behind Act, which he
hailed as a triumph. "Last year, 4th and 8th graders achieved the highest math scores on record," he said, referring to the National Assessment of
Educational Progress. "Reading scores are on the rise." Here, he dodged data suggesting that the law has done nothing to improve educational
outcomes. Since it took effect, reading scores have barely budged among 4th graders and they have fallen among 8th graders. Math scores have
risen, but not as rapidly as before. And in one international test, the Program for International Student Assessment, Americans' performance in math declined between 2003 and 2006. According to that test, says
Andrew Coulson of the Center for Educational Freedom at the Cato Institute, "U.S. students have suffered overall stagnation or decline in math, reading and science in the years since NCLB was passed."
Sunday, February 3, 2008 ~ 1:47 p.m., Dan Mitchell Wrote: State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far
ahead of private workers, a USA TODAY analysis of federal data shows. The gap is widening every year, rising by an average $1.02 an hour last year and $2.45 an hour over the past three years. ...State and local
government workers now earn an average of $39.50 per hour in total compensation, reports the Bureau of Labor Statistics (BLS). Private workers earn an average of $26.09 an hour. Benefits are a big reason for
the gap. ...From 2000 to 2007, public employees enjoyed a 16% increase in compensation after adjusting for inflation compared with 11% for private workers. The nation has 20 million state and local government
employees. About 116 million people work in the private sector. The pay gap obviously is bad news for taxpayers, but the bigger issue may be the misallocation of labor. When compensation for bureaucrats is excessive, this encourages people to migrate into government jobs. By definition, this means that they are not in the private sector, producing value for their fellow citizens. This does not mean, to be sure, that every bureaucratic position is useless and every bureaucrat is lazy (I'll resist the temptation to comment on DMV offices). And it does not mean that every private employee is a workaholic. But over the long run, the economy's performance will suffer because labor is not being used productively.
Saturday, February 2, 2008 ~ 8:36 p.m., Dan Mitchell Wrote: Up to two thirds of people claiming incapacity benefit are not entitled to the state handout, the Government's new welfare adviser warns today.
David Freud, an investment banker hired by James Purnell, the new Work and Pensions Secretary, said the disability tests used to award state aid
were "ludicrous" and could be costing billions of pounds. ...the Prime Minister plans to press ahead with the biggest shake-up of the welfare
state since its creation more than 50 years ago. More than 2.6 million people claim incapacity benefit at a cost of more than £12 billion a year to
the taxpayer. However, Mr Freud suggested that less than a third may be credible recipients while several hundred thousand work illegally on the
black market. ...Mr Freud - who has also influenced Tory welfare reform policies - launched a damning attack on the system that allows people to
claim benefit, worth up to £81.35 a week. "If you want a recipe for getting people on to IB we've got it," he said. "You get more money [than
unemployment benefit] and you don't get hassled, you can sit there for the rest of your life. It's ludicrous that the disability tests are done by people's
own GPs - they've got a classic conflict of interest and they're frightened of legal action. "The system sends 2.64 million people into a form of
economic house arrest and encourages them to stay at home and watch daytime TV. We're doing nothing for these people. ...Under his review, the
private sector is to be brought in to run large sections of the welfare system and lone parents will be encouraged to work as soon as their
children go to school. People refusing to co-operate and find a job will have their benefits "sliced" under the plan to get about 1.4 million people
back to work. The system should be in place within five years, he said.
Saturday, February 2, 2008 ~ 6:27 p.m., Dan Mitchell Wrote:
Friday, February 1, 2008 ~ 4:19 p.m., Dan Mitchell Wrote: Legal aid programs serving poor people spent federal money on booze, interest-free loans for staff, late charges on overdue bills and even lobby
registration fees. The parent organization that distributes grants to programs in all 50 states, Legal Services Corp., failed to monitor how the
money was spent by state and local legal aid officials, according to congressional investigators in a new report. It did not specify how much money was misspent but questioned use of more than $1 million in
payments. ...Congress gave the group $348.6 million for the last fiscal year. The Associated Press previously reported on extravagant spending on hotels, meals, limousines and other perks by the corporation's
presidentially appointed board of directors and top staff in the Washington headquarters.
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