 |
|
|
|
|
|
|
|
||
 |
|||||||||
|
www.freedomandprosperity.org |
|||||||||
|
|||||||||
 |
|||||||||
|
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. |
|||||||||
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The Market Center Blog |
||||||||||
|
Observations and insights on the global fight |
||||||||||
|
CF&P's Market Center Blog Archives |
||||||||||
|
Sunday, August 31, 2008 ~ 6:15 a.m., Dan Mitchell Wrote: Last week, the Government Accountability Office released a report that revealed why Washington is so broken: Democratic politicians too often act like U.S. businesses are the
enemy. The report had the unassuming title of "Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005." ...The problem was the first chart in the repot. It
showed that 60 percent to 70 percent of companies in the U.S. pay no taxes. That led to an Associated Press story with the startling headline, "Most Companies in U.S. Avoid Federal Income Taxes," and
to a frenzy of business bashing by leading Democrats. Byron Dorgan, the Democratic senator from North Dakota, said in a statement, "It's shameful that so many corporations make big profits and pay nothing
to support our country." House Speaker Nancy Pelosi piled on, arguing that the data revealed a fundamental unfairness in the U.S. system, and called for reform. ...while it is true that 60 percent to 70
percent of companies in the study paid no tax in a given year, there was a big qualification. The study focused on an Internal Revenue Service tax database that included millions and millions of companies. The
vast majority of firms in the study were tiny mom- and-pop enterprises. Why did the tiny mom-and-pop enterprises pay no taxes? Because they didn't make any money! The study reported that was the reason about 80
percent of the firms in the sample avoided taxes in a given year. How terrible of them. ...How can it be that so many small businesses made no money? Companies tended to have no profits because they had large
deductions including wages. Hot dog vendors can pay themselves a wage, in which case they have no profits but pay wage taxes, or they can take their money in profits, in which case they pay profits tax. The data
suggest they tend to do the former. Most of them do this for a simple reason: we still have double taxation of dividends. If you are a hot dog vendor in the top tax bracket and you pay yourself $100, then you
pay $35 in taxes. If you keep it as profit and then pay it to yourself as a dividend, you pay a $35 corporate tax, and then a 15 percent dividend tax on top of it. Why would anyone choose the latter? To do so
would be to pay more taxes voluntarily.
Saturday, August 30, 2008 ~ 3:19 p.m., Dan Mitchell Wrote: In the survey of 856 adults taken Aug. 4-9, Obama supporters overwhelmingly backed an economic system that "emphasizes private
property and free markets" — in other words, the capitalist model we have now. The breakdown was 59% in favor of such a system vs. only
11% against. This wasn't far behind the 64% to 10% for all respondents, and it even surpassed the 53% to 13% margin for Democrats. (The breakdown for Republicans was 75% to 7% and for McCain supporters
74% to 9%.) Conversely, Obama backers by 59% to 15% turned thumbs-down on a socialist system that "emphasizes government control
or ownership of industries and the economy." Yet, when also asked if they personally believe "the government should control or own key industries
such as health care and energy," 40% of Obama supporters said yes and 31% said no. ...On another tenet of socialism — that government should redistribute wealth and income — Obama supporters disagreed by a
margin of 52% to 28%, similar to the 50% to 29% split for Democrats. Respondents overall disagreed 62%-22%, while Republicans and McCain supporters replied no by spreads of 80%-14% and 79%-14%. Yet when
also asked if they were "willing to pay higher taxes to support more social programs," Obama supporters answered yes by a margin of 42%
to 31%. In contrast, respondents overall said, by a 55%-23% margin, that they were not willing to pay higher taxes for more social programs.
Friday, August 29, 2008 ~ 9:16 a.m., Dan Mitchell Wrote: Barack Obama's tax plan is the opposite of supply-side economics. He proposes to raise marginal rates for just about every federal tax. He also
proposes a raft of tax credits that taxpayers can receive if they engage in various government-specified activities. Moreover, the tax credits would
mostly go to those who pay little or nothing in federal income taxes. His trick is to make the tax credits "refundable." Thus, if the tax credit is for
$1,000, but the taxpayer would otherwise only pay $200 in taxes, the government would write a check to the taxpayer for $800. If the taxpayer
pays nothing in federal income taxes, the government would pay him the whole $1,000. Such credits are not tax cuts. Indeed, they should be called
The New Tax Welfare. In effect, Mr. Obama is proposing to create or expand a slew of government spending programs that are disguised as tax credits. The spending on these programs is then subtracted from the
total tax burden, in order to make the claim that his tax plan is a net tax cut overall. ...The latest Congressional Budget Office data shows the
bottom 40% of income earners already pays no income taxes. Indeed, they receive a net payment from the federal income tax system -- meaning from the taxpayers -- equal to 3.8% of all federal income taxes,
because of the refundable tax credits under current law. The middle 20% of income earners, the true middle class, pays 4.4% of federal income taxes. Overall, the bottom 60% of income earners pay less than 1% of
federal income taxes on net. When "tax credits" primarily go to this group in the form of checks from the government (rather than a
reduction in their tax burden) it is simply an abuse of the language to call the spending a tax cut. Consequently, to say, as the campaign does say,
that the candidate's tax plan is a tax cut on net -- and that it would limit taxes to 18.2% of GDP -- is grossly misleading. The Obama tax plan
would sharply increase real taxes. It also would come nowhere near to paying for the massive increases in federal spending he has proposed, including the spending that is disguised in the form of refundable tax
credits.
Friday, August 29, 2008 ~ 8:23 a.m., Dan Mitchell Wrote: New EU regulations have banned the consumption of cakes and confectionary entered at country fairs and agricultural shows
immediately after baking competitions. The chairman of Mayo County Council, Cllr Joe Mellett, said the new rules were the "death knell" for
the Irish agricultural show. "When you see things like this it's no wonder the people voted No to the Lisbon Treaty. This will be the end of the
traditional baking competition at local shows across the country, therefore impacting on local revenue. It's just ridiculous." Under the
rules adjudicators of bakery sections in local shows are only permitted to taste the traditional favourites such as apple tarts or cheese cakes. Once
the judging is over, the produce must be immediately destroyed. As a result, only bite-sized versions of the cakes will be entered in shows. ...Mr
Mellett, one of the founding members of his own local agricultural show in Swinford, said he "could not believe" the latest EU directive.
"Honestly, when I saw this first I thought it was something to do with April Fools' Day. I just couldn't imagine someone sitting down and coming up with this rule.
Thursday, August 28, 2008 ~ 11:38 a.m., Dan Mitchell Wrote: The new international tax rankings are out for 2008, and congratulations to Washington, D.C., are again in order. Our political class has managed
to maintain America's rank with the second highest corporate tax rate in the world at 39.3% (average combined federal and state). ...For the first
time, the U.S. statutory rate is now 50% higher than the average of our international competitors, continuing a long-term trend as the rest of the
world keeps reducing corporate tax rates. ...Economists argue over how much this tax penalty on corporate profits injures U.S. competitiveness
and drives capital overseas. We've long believed that it hurts a lot. And now even the folks at the Paris-based Organization for Economic Cooperation and Development (OECD) say they agree. A new OECD
study, "Taxes and Economic Growth," examines national tax burdens and their impact on growth and incomes in member countries. It
concludes that "corporate taxes are most harmful for growth, followed by personal income taxes, and then consumption taxes." The study adds
that "investment is adversely affected by corporate taxation," and that the most profitable and rapidly growing companies tend to be the most
sensitive to high business tax rates. ...The average European nation has tax rates on corporate income 10 percentage points lower than the U.S., but those countries on average raise 50% more as a share of GDP in
corporate taxes than does the U.S., according to a 2007 study by the Treasury Department. Ireland with its 12.5% rate captures a higher share
of its GDP (3.4%) in corporate taxes than the U.S. does (2.5%) with its 39.3% rate. To correct this revenue dearth, Barack Obama and Democrats in Congress are proposing to pry more tax money out of U.S.
companies that have profitable affiliates outside the U.S. Mr. Obama is also shamelessly taking the Byron Dorgan line that the problem is venal
U.S. CEOs rather than the nutty U.S. tax code. ...Every month that goes by without tax reform, America is a relatively less attractive place to do
business. Over the past 18 months, nine of the 30 most developed nations and 20 countries world-wide -- from Israel to Germany to Turkey -- have
cut their corporate tax rates. Nations are slashing rates to attract capital and jobs from the U.S., and the tragedy is that our politicians keep making it easy for them.
Thursday, August 28, 2008 ~ 10:10 p.m., Dan Mitchell Wrote: ...continental Europe has been following something like Mr. Obama's plans for spending and taxes. ...Obama economic advisers Jason Furman
and Austan Goolsbee noted that taxpayers whose incomes exceeded $250,000 would face an additional Social Security payroll tax increase of
four percentage points (in addition to a five-percentage-point increase in the top marginal income tax rate). This new payroll tax plan would affect
the top 3% of earners. The new payroll tax hike is more modest than the one Mr. Obama hinted at last fall, which might have uncapped the payroll tax entirely. But it would also do very little to shore up Social
Security, since it means that no more than 15% of Social Security's long-term funding gap would be closed. Thus, if Mr. Obama is indeed opposed to reductions in Social Security spending growth, he is
necessarily committed to large future payroll-tax or general income-tax increases. And what of those other tax increases? In May 2007, candidate Obama proposed to offset costs of his health-care plan in part by
allowing the Bush tax cuts on Americans earning over $250,000 to expire. ...In short, Mr. Obama has articulated a plan for higher federal
spending, leaving open the question of what tax increases are next. If Mr. Obama is going to increase spending, will he raise the money by higher
business taxes instead? He has already distanced himself from John McCain's call to reduce America's corporate tax rate, and he is committed to raising tax rates on successful small business owners who
pay individual as opposed to corporate income taxes. Does this mean he will raise tax burdens on individuals with annual incomes less than $250,000? In a June 26 interview on the Fox Business channel, Mr.
Obama said he wanted to roll back the Bush tax cuts for those in the top 5% of incomes -- that is, about $145,000 per year. He also voted for the
Democrats' fiscal year 2009 Budget Resolution, which would raise taxes on individuals earning $42,000 or more. ...The problem with Mr. Obama's
fiscal plans is not that that they lack vision. On the contrary, the vision is plain enough: a larger welfare state paid for by higher taxes. The
problem is not even that they imply change. The problem is that his plans are statist.
Wednesday, August 27, 2008 ~ 5:19 p.m., Dan Mitchell Wrote: A quick train trip down the coast turned into a long haul for more than 80 Amtrak passengers when their train from Los Angeles to San Diego
ran out of fuel Sunday night. ...The train, which had left Los Angeles at 8:30 p.m., didn't get there until 1:15 a.m. Monday, two hours late. A train
running out of fuel is "an unusual occurrence" and Amtrak officials will be looking into how it happened, Cole said.
Tuesday, August 26, 2008 ~ 2:09 p.m., Dan Mitchell Wrote: Greece dropped the idea of presenting the winner with a wreath and an amphora of precious olive oil long ago and instead will offer about
190,000 euros (145,600 pounds) for gold medallists at August's Beijing Olympics, 130,000 (100,000 pounds) for silver and 70,000 (53,600 pounds) for bronze. Medallists will also get a comfortable civil service
job, usually as an officer in the military, and several advertising contracts worth hundreds of thousands of euros in total. ...Figures for secretive
North Korea are not available but medallists from the communist state are celebrated as heroes, receiving perks such as apartments and state jobs with the Workers' Party.
Monday, August 25, 2008 ~ 6:16 p.m., Dan Mitchell Wrote: Sen. Obama says, "Social Security has lifted millions of seniors and their families out of poverty. Without it, nearly 50 percent of seniors would live
below the poverty line." This is a common talking point, but let's be clear on what it means: if we forced people to pay Social Security taxes all
their lives but didn't pay them any benefits, yes, nearly 50 percent of seniors would live below the poverty line. But this is a silly standard. If we
were truly "without" Social Security, we would also be without Social Security taxes, which individuals could then save on their own for
retirement. So the better question would be, "Without Social Security taxes and benefits, what would the poverty rate among seniors be?" The
answer is: about the same as the current rate. Second, Sen. Obama also says, "The underlying system is sound and the actual problem, a
projected cash shortfall over the next 75 years, is relatively small and can be readily solved. For starters, that means strengthening the program
over the long-term by returning to basic fiscal responsibility, so we're not borrowing billions from the Social Security Trust Fund." This response
doesn't make much sense, for two reasons. First, if the cash shortfall is small and can be readily solved, it shouldn't be difficult for Sen. Obama
to propose a plan to fix the whole shortfall, not just the 15 percent of it his tax increase would fix. And second, if borrowing from the Social
Security trust fund is a problem, then the problem is over $2 trillion larger than the small and readily solved one he acknowledges. ...Third,
Sen. Obama says, "The Bush privatization plan that Sen. McCain now embraces would tell 39,000 New Hampshire residents that they're on
their own, putting them at risk of falling into poverty and costing each of them more than $235,000 over their lifetimes." Leaving aside whether
Bush's plan was privatization and whether McCain embraces it, where is the math that supports the claim that it would cost people $235,000 over--this is the important part--their lifetimes? (Is $235,000 even a
correct number? I have no idea how it's being calculated, but here I'll focus on the bigger questions.) To balance Social Security going forward, we need to increase taxes or reduce benefits. Different plans may
apportion things differently between tax increases or benefit cuts, but the total amount by which we need to raise taxes or cut benefits is the same.
If we want Americans not to be hit with a $235,000 benefit cut, then they would need to be hit with a $235,000 tax increase. It appears that Sen.
Obama is counting lifetime benefit reductions under President Bush's plan, but not the lifetime tax increases that would be necessary to avoid these benefit cuts.
Sunday, August 24, 2008 ~ 5:27 p.m., Dan Mitchell Wrote: The superiority of free markets to government regulation is not based upon a magical ability of businesses or even markets to operate flawlessly
or at optimal efficiency at all times. Businesses often make huge mistakes, and we have known for centuries that markets are constantly fluctuating,
even wildly. Recently the tech bubble and now the housing bubble show that even entire segments of the market get so out of whack that we all
wind up suffering painful corrections. Markets, though, correct. Because they are ultimately tied to basic forces such as supply and demand, customer desires, and of course competition, they are anchored to real
forces within the economy as a whole. No matter how out of whack they get, the long-term trend is always going to be in the right direction. More
economic growth, satisfying customer demands, better quality at lower prices, and increased productivity and efficiency. Now consider how government regulation works. Politicians identify a goal they want to
achieve and pass a law to make it happen. Bureaucracies are created, civil servants are hired, statistics are collected (which by the time they
are actually used are out-of-date), rules and regulations are instituted, and then even more civil servants enforce those rules. ...Regulation
doesn't respond to anything but political pressure. The loudest voices and the most politically powerful shape the rules that determines who gets
what. Far from protecting the "little guy," regulations are often used to maximize the profits of particular interest groups. State and Federal laws
set minimum prices for commodities such as milk and gasoline—ensuring that competition doesn't drive down prices. "Prevailing wage" laws are used to ensure that the wages paid to workers on government projects
are much higher than wages in the private sector—ensuring that taxpayers get the minimum value for their tax dollars. ...The belief that bigger government and more regulation are magic bullets that can
correct the flaws of the marketplace is based upon the idea that politicians and bureaucrats can engineer an economy and do so for the benefit of all—pretty much the same idea that was tried under socialism.
Instead what happens is that government becomes another tool of big interest groups and the rest of us are left holding the bag.
Saturday, August 23, 2008 ~ 4:12 p.m., Dan Mitchell Wrote: Norway, which now has the highest, or closest to the highest, per capita income on the planet due to its immense oil reserves and relatively small
population, has decided to beat up on a number of poorer countries that do not have the luck to sit on a vast pool of oil. Smaller-resourced, poor
countries need to find goods and services they can provide to the rest of world so their citizens can also prosper. If a county does not have oil and
mineral wealth, vast agricultural lands, and the population to create major manufacturing industries, what is it to do? The answer is, usually
services. Creating a tourist industry can help, but there are limits to how wealthy a country can become on tourism alone. Many countries have
dealt with this problem by developing financial services' industries. When it comes to financial services, people often think of small island jurisdictions, such as Jersey, Bermuda, and Cayman, but the financial
services' business is of great economic importance to Switzerland, Ireland, the City of London, and Wall Street in New York. The Norwegians have been particularly hypocritical. Despite their enormous
wealth, they still maintain very high tax rates that discourage productive activity within the country and encourage citizens and companies to move funds to lower-tax jurisdictions. And even the Norwegian
government-controlled massive pension fund, the recipient of much of the oil revenue, has been investing in companies registered in tax havens.
The Norwegian socialists put themselves on a slippery slope when they argue for investing only in high-tax countries. Poor countries never get
rich when they have high taxes. The rich, high-tax countries became rich before they had high taxes. ...Most so-called tax havens are actually huge
global money funnels into the United States. Were the havens to be shut down, capital investment would become more expensive in the United States, and less investment means fewer U.S. jobs.
Friday, August 22, 2008 ~ 6:03 p.m., Dan Mitchell Wrote: While Obama's children enjoy the best education money can buy, he wants to deny inner-city children the education change we can believe in
— school choice. He prefers cradle-to-diploma collectivist education. ...He recently told an interviewer that he opposes school choice because
"although it might benefit some kids at the top, what you're going to do is leave a lot of kids at the bottom." Not being left behind are Obama's
daughters, who attend the private University of Chicago Laboratory Schools. There, tuition ranges from $15,528 for kindergarten to $20,445 for high school. When asked about it during last year's YouTube debate,
Sen. Obama responded that it was "the best option" for his children. They had a choice Obama would deny others.
Thursday, August 21, 2008 ~ 7:22 p.m., Dan Mitchell Wrote: Discrimination lawsuits like theirs are common today. They create nasty, unintended consequences: Older workers find it more difficult to get hired
since companies are reluctant to hire people who could become lawsuit age-discrimination bombs. I'm told some companies set aside $100,000 for legal fees and settlement money for every older worker who isn't
doing a good job. What a waste. ...American labor law clashes with reality. The government once even tried to force Hooters, that restaurant chain famous for sexy waitresses, to hire men to wait on tables. Only
after Hooters mocked the government by running ads depicting a hairy Hooters man in a skimpy waitress outfit did the EEOC lawyers drop their
case. Protecting older workers interferes with the market's "creative destruction", the dynamic process that allows businesses to grow though
constant change. That growth creates new opportunity for other workers, including older workers. ...We don't need laws against discrimination. We
need a free, competitive marketplace. Competition is better at punishing sexists, racists and "ageists" than clumsy laws. If a boss discriminated
against, say, women, he would be demolished by a competitor who obtains better workers by hiring the women the first boss turned away. If an entire group of bosses turned women away, then men's wages would
be bid up over women's, and a new competitor would defeat the discriminators by hiring only women.
Wednesday, August 20, 2008 ~ 3:45 p.m., Dan Mitchell Wrote: Schools run by private enterprise? Free iPods and laptop computers to attract students? It may sound out of place in Sweden, that paragon of
taxpayer-funded cradle-to-grave welfare. But a sweeping reform of the school system has survived the critics and, 16 years later, is spreading
and attracting interest abroad. ...In 1992, 1.7 percent of high schoolers and 1 percent of elementary schoolchildren were privately educated. Now
the figures are 17 percent and 9 percent. ...The Social Democrats strongly opposed the change as anti-egalitarian, but when they were re-elected to
power in 1994, they found it was so popular that they left it in place.
Tuesday, August 19, 2008 ~ 6:45 p.m., Dan Mitchell Wrote: …UK Health Minister, Ivan Lewis caused controversy by suggesting that "morale boosting" tax increases for the country's wealthy may be the
way forward. Writing in the Sunday Times, Mr Lewis warned that as Labour's popularity appears to be waning, it should take steps to protect
the "mainstream majority" that make up its key supporters. "Our duty is to act decisively and make tax and spending decisions that show we
understand what it is like to cope with rising food, fuel and utility bills," Mr Lewis wrote, adding that: "If as a result of the current economic
situation the only way to help hard-pressed middle-class families is to ask the higher earners to pay more, then serious consideration should be
given to that." Although the Health Minister did not specify the rate of increase that he thought would allow the government to provide
"meaningful" assistance to middle class voters, reports in the UK media in the wake of the article have suggested that he would likely favour the
suggestion put forward last month by former Parliamentary Under Secretary of State at the Department for Constitutional Affairs, and current Director of the New Local Government Network, Chris Leslie,
which would see an extra ten pence in the pound imposed on earnings of more than GBP250,000.
Tuesday, August 19, 2008 ~ 5:00 p.m., Dan Mitchell Wrote: The "windfall profits" tax is back, with Barack Obama stumping again to apply it to a handful of big oil companies. Which raises a few questions:
What is a "windfall" profit anyway? How does it differ from your everyday, run of the mill profit? Is it some absolute number, a matter of
return on equity or sales -- or does it merely depend on who earns it? ...Unfortunately, Mr. Obama's "emergency" plan, announced on Friday,
doesn't offer any clarity. To pay for "stimulus" checks of $1,000 for families and $500 for individuals, the Senator says government would
take "a reasonable share" of oil company profits. Mr. Obama didn't bother to define "reasonable," and neither did Dick Durbin, the
second-ranking Senate Democrat, when he recently declared that "The oil companies need to know that there is a limit on how much profit they
can take in this economy." ...This extraordinary redefinition of free-market success could use some parsing.Take Exxon Mobil, which on
Thursday reported the highest quarterly profit ever and is the main target of any "windfall" tax surcharge. Yet if its profits are at record highs, its
tax bills are already at record highs too. Between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes, exceeding its after-tax U.S. earnings by
more than $19 billion. That sounds like a government windfall to us, but perhaps we're missing some Obama-Durbin business subtlety. ...The point
is that what constitutes an abnormal profit is entirely arbitrary. It is in the eye of the political beholder, who is usually looking to soak some
unpopular business. In other words, a windfall is nothing more than a profit earned by a business that some politician dislikes. And a tax on
that profit is merely a form of politically motivated expropriation. It's what politicians do in Venezuela, not in a free country.
Monday, August 18, 2008 ~ 12:36 p.m., Dan Mitchell Wrote: ...for the 17th consecutive year the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same.
As a result, the overall U.S. corporate tax rate is now 50 percent higher than the OECD average. ...The U.S. continues to have the second-highest
combined federal-state corporate tax rate among industrialized countries at 39.3 percent. Only Japan has a higher overall corporate tax rate at
39.5 percent. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6
percent to 26.6 percent. Ireland's 12.5 percent corporate tax rate remains the lowest among OECD nations. The OECD data shows that nine of the
30 OECD member nations have lower corporate tax rates in 2008 than in 2007, including Canada, Germany, New Zealand, Spain, the United Kingdom, Italy, Switzerland, the Czech Republic and Iceland. Germany
made the biggest change, cutting its corporate rate 8.7 percentage points from 38.9 percent to 30.18 percent. As a result, Germany fell from having the third-highest overall rate to seventh-highest. France now
imposes the third-highest rate of 34.4 percent. Italy had the second-largest rate cut, lowering its rate 5.5 percentage points, from 33 percent to 27.5 percent. As a result, Italy dropped in the rankings from
seventh-highest to fifteenth-highest. Canada, meanwhile, dropped from fourth- to fifth-highest after cutting its overall corporate rate from 36 percent to 33.5 percent.
Sunday, August 17, 2008 ~ 11:49 a.m., Dan Mitchell Wrote: Edgar K. Browning, professor of economics at Texas A&M University, has a new book aptly titled "Stealing from Each Other." Its subtitle,
"How the Welfare State Robs Americans of Money and Spirit," goes to the heart of what the book is about. The rise of equalitarian ideology has
driven Americans to steal from one another. Browning explains that certain kinds of equality have been a cherished value in America. Equality under the law and, within reason, equality of opportunity is
consistent with a free society. Equality of results is an anathema to a free society and within it lie the seeds of tyranny. Browning entertains a
discussion about when inequalities are just or unjust. For example, college graduates earn income higher than high-school dropouts. Some people prefer to work many hours and earn more than others who prefer
to work fewer. Students who spend 25 or more hours a week on classroom preparation earn higher grades than students who spend five hours. Most would agree that these inequalities are just. There are other
sources of inequalities that are unjust, such as: when incomes result from fraud, corruption, stealing, exploitation, oppression and the like. ...Much
of the justification for the welfare state is to reduce income inequality by making income transfers to the poor. Browning provides some statistics
that might help us to evaluate the sincerity and truthfulness of this claim. In 2005, total federal, state and local government expenditures on 85
welfare programs were $620 billion. That's larger than national defense ($495 billion) or public education ($472 billion). The 2005 official poverty
count was 37 million persons. That means welfare expenditures per poor person were $16,750, or $67,000 for a poor family of four. Those figures
understate poverty expenditures because poor people are recipients of non-welfare programs such as Social Security, Medicare, private charity
and uncompensated medical care. The question that naturally arises is if we're spending enough to lift everyone out of poverty, why is there still
poverty? The obvious answer is poor people are not receiving all the money being spent in their name. Non-poor people are getting the bulk of
it. ...The disincentive effects of Social Security have reduced the GDP by 10 percent, the federal income tax (as opposed to a proportional tax) by
9 percent and past deficits by 3.5 percent for a total of 22.5 percent. He guesses that welfare programs have reduced GDP by 2.5 percent. The
overall effect of redistributionist policies has created incentives that have reduced GDP by a total of 25 percent. Without those, our GDP would be close to $18 trillion instead of $14 trillion.
Saturday, August 16, 2008 ~ 1:07 p.m., Dan Mitchell Wrote: Over international objections, a foreign-born killer of American citizens is executed in Texas. ...In 1993, Medellin confessed to participating in the
rape and murder of Jennifer Ertman, 14, and Elizabeth Pena, 16, who were sodomized and strangled with their own shoelaces. Medellin bragged about keeping one girl's Mickey Mouse watch as a souvenir of
the crime. He and four others were convicted of capital murder and sent to Texas' death row. The International Court of Justice, formerly the
World Court, ruled in 2004 that U.S. courts should review the convictions of Medellin and 50 other Mexican-born prisoners on death row because
of the alleged treaty violation. The ICJ ordered — yes, ordered — the U.S. to "provide, by means of its own choosing, review and reconsideration of the conviction and sentence of Medellin and the
others." ...The Texas Criminal Court of Appeals upheld the conviction on the grounds that Medellin hadn't complained of any violation of his
consular rights under the treaty, and therefore had waived them. Earlier this year, the Supreme Court gave the final word on Medellin's appeal. Writing the 6-3 majority opinion, Chief Justice John Roberts, whose
confirmation Sen. Obama voted against, said that a Texas court, or any American court, is not under any obligation to obey and be subservient to
any foreign court. ...Ted Cruz, solicitor general of Texas, applauded the high court's decision. ..."Had Medellin prevailed, American sovereignty and independence would have been gravely undermined."
Friday, August 15, 2008 ~ 7:23 p.m., Dan Mitchell Wrote: Avril Doyle, head of the Irish faction within the centre-right European People's Party (EPP), on Tuesday told a Brussels conference on how to
prevent the tobacco industry from lobbying EU politicians that she wants cigarettes and cigars illegal in Europe by 2025. ...Talk of banning tobacco and tobacco lobbyists came as the commission unveiled plans to
make Europeans pay a lot more for cigarettes by hiking excise taxes. Thursday, August 14, 2008 ~ 3:17 p.m., Dan Mitchell Wrote: The European Commission has suggested that the EU's current minimum excise duties on cigarettes and tobacco should be increased to reflect inflation, in a move aimed at helping to cut consumption as well as
narrow price differences across the bloc's 27 member states. "Substantial differences in tax and price levels of tobacco products lead to
considerable cross-border shopping and intra-community smuggling," EU tax commissioner Laszlo Kovacs told journalists as he was introducing the proposal on Wednesday. ...According to the current rules
dating back to 1970s, the EU's excise duties levied on cigarettes must account for at least 57 percent of the price, and must be at least €64 per
1000 cigarettes of the "most popular price category" - the prevailing brand in a country. Under the commission's blueprint, the duties would be
63 percent of the weighted average price for the rate of €90 by 2014 and applying to all cigarettes... "In countries like Denmark or Finland, the
price increase will be around 6 percent, and in countries like Poland it will be 46 percent. There is a huge difference," pointed out commissioner
Kovacs, admitting that Brussels' move will mainly create a "problem" for the member states that joined the EU most recently. ...It is expected that
the proposal will be subject to heated debate among member states, and to see the light of the day, it will have to be approved unanimously. Wednesday, August 13, 2008 ~ 6:03 p.m., Dan Mitchell Wrote: Despite its seemingly innocuous title, the Global Poverty Act would force America to adopt the U.N.'s "Millennium Development Goals" as official
U.S. policy. This means outsourcing to the United Nations all important decisions concerning the use of U.S. foreign aid dollars. Not only that,
but the fee for allowing the U.N. to play the "middle man" in our global war on poverty would be a tax of .7 percent of the U.S. Gross National Product. That's right. Barack Obama and his liberal allies such as
Senator Biden have signed on to a bill that would allow the U.N. to tax America (and Americans) an estimated $845 billion over the next 13 years. Obama's plan represents perhaps the greatest affront to our
national sovereignty since the War of 1812. Tuesday, August 12, 2008 ~ 11:51 p.m., Dan Mitchell Wrote: The EU's €45 billion a year Common Agricultural Policy (CAP) may be causing thousands of heart disease and stroke-related deaths each year
by promoting fatty foods, according to a new British study published by the World Health Organisation. Direct subsidies to farmers have led to
massive overproduction of milk and beef in Europe, with the excess food then disposed of "principally as fats hidden in processed foods," the
University of Liverpool research, published in the latest WHO journal, says. ...The scientists warn that Polish government efforts to cut aid for
fatty foods and to liberalise markets - which saw a 40 percent dip in heart disease deaths between 1990 and 2002 - are now at risk due to the country's entry into the CAP regime four years ago. Monday, August 11, 2008 ~ 8:24 p.m., Dan Mitchell Wrote: Barack Obama's newly unveiled "Emergency Economic Plan" is quite a document, sounding more like the rantings of an extremist fringe
candidate than a serious contender for the presidency. ...Take his proposal to send every family a check for $1,000. Don't worry, he assures
us, we won't have to pay for it. "Windfall profits from Big Oil" will pick up the tab — in this case. ...People shouldn't fall for such cheap, recycled
class-warfare argument. Yet many will. Sadly, it will saddle big energy companies with higher taxes and crimp their exploration and drilling budgets. That means less oil on the market and higher prices. We know
this because it has been tried before. Jimmy Carter's windfall profits tax led to a 6% drop in domestic oil output and as much as a 15% surge in oil
imports, according to the Congressional Research Service. Now, Obama wants to play it again. The rest of Obama's plan is just as nonsensical. It
would spend $50 billion on various kinds of stimulus, including $25 billion to help erase state government budget deficits. In other words,
he'll reward profligate states and punish thrifty ones. This is "stimulus" only if you think stimulus is saving government jobs.
Sunday, August 10, 2008 ~ 5:37 p.m., Dan Mitchell Wrote: Sen. Obama's call to public service is quite different from JFK's. JFK knew America was already a nation of givers and volunteers, perhaps the
most charitable and altruistic nation on Earth. Entities such as the Peace Corps would give Americans an outlet for their kindness and generosity,
an opportunity to share what the freest nation on Earth had given them. Obama will force you to share. Obama's Orwellian use of the words
"universal" and "voluntary" together is an indicator of an antithesis to capitalist society deeply rooted in his socialist associations, education and
training. ...On the surface, his plan looks just like typical bureaucratic program growth. He wants to expand Americorps to 250,000 slots and
double the size of the Peace Corps. He'll create a Clean Energy Corps to plant trees and otherwise save the Earth. It's how Obama plans to fill
those slots that's worrisome. ...Obama says that as president he will "set a goal for all American middle and high school students to perform 50
hours of service a year, and for all college students to perform 100 hours of service a year." What he doesn't say is that he'll make such
voluntarism compulsory by attaching strings to federal education dollars. The schools will make the kids volunteer. ...We already have a Salvation
Army that is truly a volunteer organization. Collective service and salvation is not a classic definition of voluntarism. What Obama has in mind is to turn America into a socialist version of the old Soviet
collectives. ...Require. Demand. Never allow. Obama's version of "voluntary" service is more appropriate for Havana than middle America. He wants to turn America's students, and even adults, into
clones of Elian Gonzalez, compelled to serve the state in ways Obama "will direct."
Saturday, August 9, 2008 ~ 11:45 a.m., Dan Mitchell Wrote: A plan by Barack Obama to redistribute American wealth on a global level is moving forward in the Senate. ...Obama's Global Poverty Act
offers us a global socialist destiny we do not want, one that challenges America's very sovereignty. ...A statement from Obama's office says:
"With billions of people living on just dollars a day around the world, global poverty remains one of the greatest challenges and tragedies the
international community faces. It must be a priority of American foreign policy to commit to eliminating extreme poverty and ensuring every child
has food, shelter and clean drinking water." These are worthy goals, but note there's no mention of spreading democracy, expanding free trade,
promoting entrepreneurial capitalism or ridding the world of despots who rule and ravage countries such as Zimbabwe and Sudan. Obama would give them all a fish without teaching them how to fish. Pledging to cut
global poverty in half on the backs of U.S. taxpayers is a ridiculous and impossible goal. His legislation refers to the "millennium development
goal," a phrase from a declaration adopted by the United Nations Millennium Assembly in 2000 and supported by President Clinton. ...We already transfer too much national wealth to the United Nations and its
busybody agencies. Obama's bill would force U.S. taxpayers to fork over 0.7% of our gross domestic product every year to fund a global war on
poverty, spending well above the $16.3 billion in global poverty aid the U.S. already spends. Over a 13-year period, from 2002, when the U.N.'s
Financing for Development Conference was held, to the target year of 2015, when the U.S is expected to meet its part of the U.N. Millennium
goals, we would be spending an additional $65 billion annually for a total of $845 billion. During a time of economic uncertainty, the plan would cost every American taxpayer around $2,500. ...In an Obama White
House, American sovereignty will become an endangered species. The Global Poverty Act is the first toe in the water of global socialism.
Friday, August 8, 2008 ~ 7:32 p.m., Dan Mitchell Wrote: His economic plan's assumptions, based on long-discredited Marxist theories, are wildly wrongheaded. ...Obama cites data showing a yawning
gap between the income of the average worker and the wealthiest 1%. He thinks it's government's job to step in and close it — "for purposes of
fairness" — by soaking the rich, among other leftist nostrums. ...such a snapshot comparison would be meaningful only if America were a caste
society, in which the people making up one income group remained static over time. Of course that's not the case. The composition of the rich and
poor in this country is in constant flux, as the income distribution changes dramatically over relatively short periods. Few are "stuck" in poverty, or
have a "lock" on wealth. Obama would discover this if only he'd put down his class-warfare manuals and look closely at the IRS' own data.
Take those megarich he vilifies — the top hundredth of a percent. According to a recent Treasury study, three-fourths of them in 1996 fell out of the group by 2005. Meanwhile, more than half of those in the
bottom income group in 1996 moved to a higher income group by 2005, with more than 5% leapfrogging to the richest quintile.
Thursday, August 7, 2008 ~ 1:17 p.m., Dan Mitchell Wrote: Before friendly audiences, Barack Obama speaks passionately about something called "economic justice." He uses the term obliquely, though,
speaking in code — socialist code. ..."Economic justice" simply means punishing the successful and redistributing their wealth by government
fiat. It's a euphemism for socialism. In the past, such rhetoric was just that — rhetoric. But Obama's positioning himself with alarming stealth to
put that rhetoric into action on a scale not seen since the birth of the welfare state. In his latest memoir he shares that he'd like to "recast" the
welfare net that FDR and LBJ cast while rolling back what he derisively calls the "winner-take-all" market economy that Ronald Reagan reignited
(with record gains in living standards for all). Obama also talks about "restoring fairness to the economy," code for soaking the "rich" — a
segment of society he fails to understand that includes mom-and-pop businesses filing individual tax returns. It's clear from a close reading of
his two books that he's a firm believer in class envy. He assumes the economy is a fixed pie, whereby the successful only get rich at the
expense of the poor. ...He's been traveling in an orbit of collectivism that runs from Nairobi to Honolulu, and on through Chicago to Washington.
Yet a recent AP poll found that only 6% of Americans would describe Obama as "liberal," let alone socialist.
Wednesday, August 6, 2008 ~ 11:54 a.m., Dan Mitchell Wrote: The last fortnight has seen President George W. Bush cave into Democratic pressure and withdraw his threatened veto of the so-called
"foreclosure-prevention" bill — despite the fact that it retains a $4-billion block-grant program for states to buy up foreclosed properties.
Congress promptly passed the flawed bill despite heroic efforts by South Carolina Senator Jim DeMint to slow it down and fix it. President Bush
claimed, rightly, that the program is a bailout for bankers not a hand up for homeowners in trouble. It is measure of Bush's political impotence
that he caved on this new government boondoggle, which not only will fail to solve the foreclosure crisis but actually will exacerbate it. ...For all
of the political distortion and regulatory wedges in the market currently that prevent the ideal solution from coming about, banks nevertheless are engaged in an unlovely, second-best arrangement that allows
homeowners to remain in their houses. If the market were allowed to work, banks and homeowners eventually would come to terms, making the best of a bad situation, and the housing market would right itself with
the minimum amount of damage possible. Once the Democrats' banker bailout begins, however, this self-correcting market process will be short
circuited, and the situation will get worse, much worse. It is crystal clear what will happen: Banks will accelerate foreclosures in order to take
advantage of the government's handout. By intervening in the market, the government, as usual, is going to make matters a whole lot worse, not better.
Tuesday, August 5, 2008 ~ 7:23 p.m., Dan Mitchell Wrote: State and local government spending has been rising three times as fast as revenue amid warnings from governors that their finances are nearing
crisis stage. As many Americans face stagnant wages, high gas prices and job uncertainty, new government figures show that state and local governments boosted spending 7.8% in the second quarter compared
with 2007 while revenue rose 2.5%. Government is on a hiring binge, too, even as private-sector jobs disappear. ...State and local governments are
on track to spend more than $2 trillion for the first time in 2008 — about 13% of the nation's gross domestic product. A key factor driving higher spending: New employees and higher compensation.
Monday, August 4, 2008 ~ 9:19 p.m., Dan Mitchell Wrote Cigarette sales have dropped by nearly 25 percent in Maryland since the state's tobacco tax doubled in January, as sticker shock apparently has
curtailed some residents' smoking and sent others across the border for better deals. Maryland lawmakers voted last fall to raise the tax to $2 a
pack to help bridge a budget shortfall and expand subsidized health care. Fiscal analysts predicted that the new rate, the sixth highest in the
nation, would cause cigarette sales to drop off, following a pattern with past increases. But the decline during the first six months of the year
significantly exceeded their projections, exacerbating Maryland's budget problems… Legislative analysts say they are looking at the degree to which Marylanders are crossing borders to buy cheaper cigarettes. It
seems to be happening to some extent. On a recent afternoon, two service stations along South Dakota Avenue NE in the District were packed with vehicles with Maryland tags, many belonging to commuters heading to
Maryland by Route 50 or the Baltimore-Washington Parkway. "The tax is not going to stop people from buying cigarettes," said Mike Brockington,
a 40-year-old Prince George's County resident, adding that he was purchasing cigarettes in the District because of Maryland's tax increase. … Maryland law seeks to limit out-of-state cigarette purchases. It is
illegal for Maryland residents to be in possession of more than two packs of cigarettes lacking stamps showing that taxes were paid in the state.
Sunday, August 3, 2008 ~ 6:54 p.m., Dan Mitchell Wrote Our infatuation with homeownership, embedded in dozens of government policies, has turned housing -- once a justifiable symbol of the American
dream -- into something of a national nightmare. … when you subsidize something, you get more of it than you otherwise would. That's our housing policy. Let's count the conspicuous subsidies. The biggest favor
the upper middle class. Homeowners can deduct interest on mortgages of up to $1 million on their taxes; they can deduct local property taxes;
profits (capital gains) from home sales are mostly shielded from taxes. In 2008, these tax breaks are worth about $145 billion. Next, government
funnels cheap credit into housing through congressionally chartered Fannie Mae and Freddie Mac. Long perceived as being backed by the U.S. Treasury, Fannie and Freddie could borrow at preferential rates;
they now hold or guarantee $5.2 trillion worth of mortgages, two-fifths of the national total. Finally, the Federal Housing Administration insures
mortgages for low- and moderate-income families that require only a 3 percent down payment. Congress's response to the present crisis is, not
surprisingly, more of the same. The legislation enacted last week adds new subsidies to the old. It creates more tax breaks; most first-time home
buyers could receive a $7,500 tax credit. It expands the lending authority of Fannie Mae and Freddie Mac. Previously, the permanent ceiling on their mortgages was $417,000; now it would be as much as $625,500.
And the FHA would be authorized to support, at much lower monthly payments, the refinancing of mortgages of an estimated 400,000 homeowners who are in danger of default. More subsidies may -- or may
not -- stabilize the housing market in the short run. But there are long-term hazards.
Saturday, August 2, 2008 ~ 5:55 p.m., Dan Mitchell Wrote While welcoming the efforts being made by the Japanese government to balance its budget by 2011, the International Monetary Fund (IMF) said
on Tuesday that consumption tax may have to be raised to curb public debt and absorb rising social security costs. "Larger fiscal adjustments
than currently envisaged by the authorities will be required to stabilize the high public debt and make room for the fiscal costs of population
aging," the IMF stated in its Article IV report on the Japanese economy. According to the Fund, with limited scope for further expenditure cuts,
future fiscal consolidation will compel the Japanese government to raise more revenues. The adding-rhetorical-insult-to-policy-injury aspect of the IMF report is the deceptive and dishonest choice of words. Higher taxes are needed to "make room for the fiscal costs of population aging," the IMF admonishes. Did the bureaucrats never consider that entitlement programs should be reformed to "make room" for the amount of available tax revenue? The IMF also writes in the report that "Expenditure cuts are nearing their limit and further fiscal consolidation will require tax measures, yet OECD data (http://www.oecd.org/dataoecd/5/51/2483816.xls) shows that government spending this year is consuming about 36 percent of GDP, which is a bigger burden than two years ago (and much bigger if compared to the size of government 20 years ago, 30 years ago, etc). Perhaps the IMF should not make such foolish statements until the government of Japan actually reduces spending rather than increasing it.
Friday, August 1, 2008 ~ 10:12 p.m., Dan Mitchell Wrote What has changed since Golden State voters ousted Gray Davis and cast their lot with Arnold Schwarzenegger's star power? Not much — except
for $41 billion in new spending. ...That fact gets us to thinking. Do we owe poor Gray Davis an apology? Maybe not for criticizing his performance, which was far from stellar. He was part of the problem that
voters thought they could solve by recalling him in 2003 and installing Schwarzenegger. But it's clear now, to give Davis his due, that recalling
him solved nothing. The state is locked in the same boom-and-bust cycle that brought Davis down. Its economy is sagging, and the jobless rate
soared to 6.9% in June, well above the national rate of 5.5%. All this trouble will only be compounded if the Democrats get their way and push
through an $8.2 billion tax increase on business and personal income. Sadly, the most tangible legacy of the Schwarzenegger era so far is its
explosive growth in state spending. It's up by $41 billion since Davis left, jumping from $104 billion in the 2003-04 budget (the last one that Davis
signed) to $145 billion in the fiscal year just ended, 2007-08. That's a 40% increase, or 33% on a per-capita basis. |
||||||||||
 |
||||||||||